mdf commerce inc.

Q4 2022 Earnings Conference Call

6/30/2022

spk_0: thank you for standing by
spk_1: this is that this is the conference operator welcome to the empty as commerce fourth quarter fiscal two thousand and twenty two and vests or conference call today call will provide information and commentary on the company with a focus on for the financial results for these yesterday after the market closed where we hear from luke silly are throw president and chief executive officer and deborah do molly chief financial officer if you have questions following the call you can reach and the of commerce at the address at their website w w w dot mdf commerce dot com first here a couple of health keep he notices up systems analyst normally mo for the duration of the call the call is being recorded any we expect the recording will be available on the the of commerce website later today the information into today's remarks including any forward looking statements has been prepared as of march thirty first two thousand and twenty two unless otherwise indicated mds the commerce assumes no obligation to update or revise the forward looking statements to reflect any new events or circumstances except except as may be required pursuant to securities law we remind you that today's remarks will include forward looking statements and non i f r s measures and key performance indicators that are subject to important risks and uncertainties for more information on these risks and uncertainties man i'd frs measures and key performance indicators please refer to the reader advisory at the bottom of empty of commerce's news release which is on their website and which has been filed on seat or at w w w dot c dot com the company sexual performance could differ materially from these statements of a now like the him the call over to mr so they are true please go ahead sir
spk_2: good morning everyone thanks for joining us for argue for and full year fifth go twenty two result will turn that a result we file yesterday the moment but first i want to take a bit of time to tell you about him the of commerce and palmer than the fate of our operation we're a developer and operator of digital cameras platform that the philip eight billion dollars of year of digital commerce transaction for well over five hundred thousand and user company mostly in north america march thirty first twenty two march the completion of our second year of the transformation plan that we've developed and started starting started implementing soon after i joined the company during the year we executed a significant transaction in the history of the company when we acquired periscope a leading us the he procurement vendor on august thirty first twenty twenty one this edition of technology and market coverage makes of the gum the north american leader in government procurement software as we entered a third year of our for discipline our objective out of our to further focus and simplify operation to maximize execution towards profitable growth are innovative transactional model is continuing to generate significant interest across multiple government states and agency the solution now integrated with clm contract life cycle management is already in use by three states and multiple major agency with a strong pipeline of opportunity we expect significantly increase of them processed in our system later this year one some implementation milestone are met are various customers the a procurement platform in the largest revenue stream for and the of commerce and represents nearly fifty percent of total consolidated revenue for the year with just seven months of periscope with it has grown sixty one point four percent year over year to reach fifty two point eight million he procurement represents fifty three percent of total revenue for the full cook fourth quarter of fiscal twenty two with recurring revenue representing ninety one percent of the the procurement revenue something else i want to point out is that the length of our state procurement contract is typically five years and the life cycle of an average client is over nine years those are the reason we are working to become that north american leader in a procurement because there is strong demand for digital transformation that this day than agency level the quality of those revenue is very high due to the large amount of recurring
spk_3: customers sticking his is also high and gross margins are solid for despite the platform
spk_2: during the quarter we continue to focus on evolving the periscope product into a full picture today offering it now includes the full integration of art could contract life cycle management product making it an integral part of a complete picture to pay for losing since the acquisition and integration of periscope the company has on board it over a hundred government procurement agencies
spk_3: and one seventeen contract life cycle management client
spk_2: it is notable the mention that several of the the lm when come from cross selling into major government agencies gained into the parents go back with isn't
spk_4: also worth noting
spk_2: in the new project with a major us retailer to add their inventory to the state of arkansas market place called a are by
spk_5: once completed
spk_2: state and local buyers throughout arkansas will be able to easily purchase this retailers products and services directly through a are by we are expecting to go live with this solution later this summer the various editions and improvement will contribute to increasing the amount of them that flows through our technology resulting in an increase of the convenience fees obtain on these transaction
spk_3: i'm pleased to say that the product development roadmap is on track
spk_2: we have gained over one million dollars of cost synergies and the acquisition the pipeline of opportunity that strong growing and more and more interest is generated toward our full ebro and marketplace products revenue from you prepare month in january february and march were impacted by deployment delays due in part due on the crime and to the overall tightness in or thing for both our clients and ourselves we are turning our attention now towards further simplifying the book deployments to improve scale ability and leveraging are ebro technology including markedly to capture government than an increase the number of suppliers reporting and paying the transaction they've convenience fee as a result we are confident that we are gaining momentum with those long term contract a few words on ecommerce in fiscal twenty two the unified congress platform added to significant enterprise client along with over sixty five small medium businesses and several hundred suppliers have joined our supply
spk_6: chain network
spk_2: also worth noting over the past year one of our existing clients a multi national be to be company has implemented twenty transactional site on the orchestra technology and plans to roll out a large number of other sites with different divisions of their company over the next to you from a product innovation perspective we added an amazon market integration ability to integrate with apple pay as well as if full e r p integrated payments solution and many other improve brought up capabilities finally we've also upgraded are order management system allowing it to integrate more easily with ecommerce solution like saba five and other competitors as a result customers can now add this important feature to their existing commerce technology without the need to read platform we continue to invest in collin and significant advancements have been made in terms of our foundational investment we're entering a new phase of the transformation for and the of calmer
spk_3: these investments include cloud migration product improvement
spk_2: to not only accelerate implementation but also to add key features and functionality that better serve the needs of our customers moving forward we plan to further focus and simplify the business maximize execution towards profitable growth we are confident in their resiliency of the market segments in which we can beat the long term quality of our recurring revenue stream and our market position within those segment we can confidently navigate the emerging macro economic trends such as the global supply chain issues the war in ukraine and the global inflation and now i like to turn the call over to deborah to discuss the queue for and full year fiscal financial results in more detail
spk_7: deborah thank their can good morning everyone i'll start with the financial highlights of the fourth quarter of fiscal twenty twenty two to four revenue with thirty million compared to twenty two million the same quarter last year representing an increase of seven point nine million or thirty six percent on a constant currency basis that increases eight point two million or thirty eight percent compared to last year quarter two for recurring revenue with twenty six point one million now representing seventy eight point nine of total revenue compared to sixteen million or seventy two percent for the same quarter last year as the eat the german platform continue to represent a larger percentage of the company total revenue hi recurring revenue increases the predictability of our total revenue
spk_8: as with the case for to to and two three the revenue recognition for the quarter was unfavorably impacted by a fair value i have for as the counting a man on the bird revenue and let go back to the closing balance sheet of periscope acquisition but resulted in a one point nine million revenue reduction
spk_7: for the current quarter kearney to eat procurement platform a core platform for the company the queue for revenue with fifteen point eight million compared to eight point seven million representing an increase of seven point one million or eighty one point five percent compared to queue for last year
spk_9: the us based epoch kermit with includes periscope now represents seventy percent of total revenue for the platform for the quarter it represents the highest growth platform and to for and had revenue of eleven point one million representing growth of a hundred and fifty three percent compared to two
spk_7: for a difficult twenty twenty one to forfeit good twenty twenty two growth comes from the addition of periscope and some organic growth as we continue to onboard new government agencies as live mentioned in his opening remarks he preterm and generate strong recurring revenue as a percentage of total wreck revenue and represents ninety point four percent which is consistent with to for of the prior year a unified calmer or other core platform which includes both ecommerce and supplies and collaboration it's all revenue of nine point eight million compared to nine point seven million reported for the same quarter last year recurring revenue on the unified commerce platform represented fifty nine percent of platform revenue for the fourth quarter compared to sixty two in the same quarter of the previous year
spk_10: the corporations the plight in collaboration to loosen reported revenue of three point four million an increase of six point seven percent or point two million compared to the fourth quarter of fiscal twenty twenty one
spk_7: for a marketplace and and it had revenue four point two million compared to three point six million in the fourth quarter of the previous year the increase of point seven million it made me from increased activity than the broke reform with have been benefiting from the worldwide scarcity of certain that electronic components if we look at gross margin it with sixteen point six million or fifty five point five percent compared to thirteen point five million or sixty one percent for the fourth quarter of fiscal twenty twenty one
spk_11: the decrease in gross margin percentage is mainly due to higher total calorie expensive relating to hire headcount and higher salary hire professional few to support customer implementation and increase the whole thing licensing costs as the corporation continue that my grayson to a cloud
spk_7: the strategy operating expenses were twenty three point three million compared to sixteen point seven million in the fourth quarter of the previous year operating expenses increase in the queue for quarter primarily due to the headcount increases due to the acquisition of periscope and additional and em investment than our foundational program
spk_12: as we migrate our solution to the crowd
spk_7: cloud strategy acquisition related expenses restructuring cause an increase of unamortized this and expand mainly on acquired and tangible assets also increase operating expenses the operating loss was seven million during the fourth quarter of this year compared to three point three million during the fourth quarter of the previous year from a net loss perspective we read eight point seven million or twenty one cents per share basic and diluted compared to three point nine million or twelve them net loss for sarah bill a and diluted in fiscal twenty twenty one for coupons adjusted ebitda law with point eight million for the fourth quarter of fiscal twenty twenty two compared to a positive point two million the same quarter last year the accounting adjustment that i mentioned earlier on the fair value of deferred revenues up the opening bouncy data periscope with had an impact on revenue of one point nine million and queue for also unfavorably impact gross margin operating law net loss the dust the deep into and that all impact on to for we do realize that the last quarter with a bit softer than what we've anticipated but challenges we face in terms of scarcity of resources both internally and with her clients have slowed down some of our projects and had a direct impact on revenue generation additionally the opening balance sheet for value had the way one point nine million impact park that i mentioned earlier we've seen find that the labour crimes may start to loosen up with seen signs that is moving in the right to let the direction as we move as we hope that it as it does move in the right direction that will become a more normal let a level of project worm roll out at the end of the next quarter the fair value adjustment of the food revenue that husband impacting or revenue over the last few quarters will become a thing of the path and no longer negatively impact or result if i turn quickly now to the year end result for though fiscal twenty twenty two revenue for the year was one hundred and eight million compared to eighty four point seven an increase of twenty seven percent year over year on a constant currency basis the increase with thirty point three percent recurring revenue with eighty seven point nine million representing seventy seven percent of total revenue for fiscal twenty twenty two this compared to sixty four point four million and seventy six percent of total revenue for the good twenty twenty one revenue growth in total dollars as a percentage of revenue was accelerated by the acquisition of periscope revenue for the year were impacted by that deferred revenue fair bollywood dustman on periscope of five point four million for the year he procurement platform generated fifty four point eight million compared to thirty two point seven and that with twenty point one million dollar increase or sixty one percent increase over the prior year but typically within you eat procurement the us space the procurement network contributed positively to revenue growth with an increase of nineteen point two million or hundred and twenty two percent compared to circle twenty twenty one
spk_13: recurring revenue as a percentage of total revenue for a procurement with ninety one percent in queue are in fickle twenty twenty two compared to ninety two percent in fiscal twenty twenty one
spk_7: the unified climate platform generated revenues of thirty nine point six million for fiscal twenty twenty one compared to thirty seven million for fiscal three for fiscal twenty two it with thirty nine point six compared to thirty seven point three for twenty twenty one an increase of six point two percent driven by new customer contact the price the unified calmer platform
spk_14: recurring revenue at the percentage of total revenue for unified climber with fifty eight percent in fiscal twenty twenty two table in comparison to fifty nine percent for fiscal twenty twenty one professional services revenue mainly in a calmer reduces the recurring revenue as a percentage of total revenue for that
spk_7: art form he marketplaces generated fifteen point nine million for fiscal twenty twenty two compared to fourteen point seven million and fiscal twenty twenty one and again the broker forum considered three point three million revenue into the flu twenty twenty two primarily due to be increased activity that that platform has been with be on create demand for did their electronic components and related escrow services for fiscal twenty twenty two or net loss with twenty three point nine million or sixty four cents per share basic and diluted compared to a net loss of seven point six or million or thirty eight cents for therapy the can diluted for the good twenty twenty one
spk_15: the company's without include seven months of periscope acquisition
spk_7: higher acquisition related costs restructuring costs including periscope acquisition related bonus their retention bonuses and higher amortization expenses on acquired and tangible assets and right have you thought that increase the operating expenses and that good twenty twenty two compared to the prior year expenses also grew organically year over year to support the corporations revenue growth and transformation strategy these expenses included higher salary cause mainly from additional headcount in sales marketing and technology and hire professional service expensive
spk_16: in fiscal twenty twenty two operating expenses were net have a point seven million dollar salary
spk_7: the subsidy i'm sorry but as compared to three point four million in the previous year adjusted ebitda law for the year with two million dollars compared to five point seven adjusted ebitda in twenty twenty one
spk_17: again the adjusted accounting adjustment on the fair value of different revenue which was recorded at the acquisition date did have an impact on not only the revenue
spk_7: five point five five point four million for the year but also had an unfavorable impact on gross margin operating loss net loss of the for the buddha and law for sale for fiscal twenty twenty two
spk_18: would that look on turn the call back over to you
spk_2: thank them rough like the make a few comments about a report by about our performance them the outlook two years into the implementation of our strategic plan the corporation has returned to positive revenue growth through a combination of organic and the money although macro economic factors have created some headwind are operational focus on a broker morgan unified commerce has generated growth and the growth of our recurring revenue has improve the quality and predictability of overview the strategic focus for mdf for the foreseeable future continue to be on the procurement and unified commerce the simplification of our operation and execution towards profitable organic growth
spk_3: although management will continue to seek increased efficiencies the foundational investments make the they have greatly improved product performance and increase the corporations ability to scale
spk_2: a government he procurement platform which is purpose built to effectively tackle the complexity of the public sector establish his and the of commerce or the market leader in the growing us government technology market with a well developed pipeline of opportunities at state and local jurisdictions product upgrade and business model integration has improved both market access as well as revenue acceleration potential and the and commerce is well positioned for growth in the sector and plans to leverage is increasing prominent market position for that purpose the commerce business is experiencing the market had when which are reflected in modest growth over the last couple of quarters
spk_3: this is a result of more cautious deployment my current customers as well as lower pipeline development than conversion
spk_2: to address the head when management has refocus details organization effort to improve performance has implemented product upgrade that physically the order management system making the product that complimentary best of breed audience that easily connect with legacy or competitors commerce stock
spk_3: this refocus and could capitalize on one of the more pressing ecommerce challenges faced by retailer than grocers
spk_2: if the effective management of inventory and order management with an ongoing focus on profitable growth we continue to leverage integration synergy lol implementing ongoing operational efficiency that started earlier and physical twenty two with significant investment and scale ability and foundational improvement mostly behind us we believe that we have increased our capability to grow the business more effectively and profitably moving forward
spk_19: although it's not possible to for gas with certainty the corporation continue to monitor the impact of the current global macro economic market rates on our business
spk_3: on our financial condition
spk_2: and the results of operating as a macro events unfold despite that uncertainties we believe that the digital transformation the business prophecies will continue and that we will be able to benefit from this trend through our main platform our business solution and industry expertise position as well to continue supporting our customers and attract new customers that they stabilize their organization and optimize their business transaction during the and breathe on presented time finally i'm thrilled to announce a few appointments to the company board first i'd like to welcome the gps said the add new chair of the board of directors mr said he brings over thirty years of experience in technology particularly with soft company he is the chair and member of multiple boards he brings a wealth of knowledge on managing and scaling south company his experience and knowledge of the tech industry are a strong addition to the board and we'll put to contribution for the implementation of the next phase of the company five the to plan to ensure an effective and smooth transition
spk_3: the leper will remain as an active member of the board until the corporation next annual meeting in september twenty two
spk_20: i would also like to welcome mister lecter fernando
spk_2: as a new member of the board mr fernandez as ceo of to go via capital and previously cofounder and the fo of new a corporation he brings over thirty years of experience and fast growing fast technology company and in investment banking the different on they started his career in investment banking with the bank of montreal and then join pivotal in two thousand and one which was at that time a startup he was instrumental in growing it into new the a significant north american payment processor which became public and grew to a market cap of over ten billion
spk_3: the welcome pierre and welcome lester
spk_1: i'll turn it over back to catherine to open up a question thank you we will now open the line for questions if you would like to ask a question press star one on your telephone again to ask a question press star one to draw your question press the pound key please stand by while we compile the q and a roster the get and if you would like to ask questions press star one
spk_21: first question comes from ben franklin west river styx capital your line is open hey guys i just have a question on the covenants
spk_7: i'm your credit facility and appear close the bumping up against your next charge coverage ratio that's all thank you and a note were well live above are six covered six tight coverage races the know if you there
spk_22: at the other way so is that to burn and that to a capitalization and quite noisy there and up are boring base is actually based mainly on monthly recurring revenue than settle with strong recurring revenue there's no it's to their on are boring bases
spk_0: okay thank you
spk_1: thank you again if you would like to ask a question press start than the one key on your touch tone telephone
spk_2: there are no further questions over now him a call back to monsieur silly auto please go ahead sir
spk_3: oh thank you catherine and thank you all for joining us on the call today you'll find a lot more information on our company on our website
spk_23: and the dot com and of course on feet are ah at feed our that cup
spk_1: thanks again and have already
spk_0: this concludes today's conference call
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This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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