OneSoft Solutions Inc.

Good morning, and thank you for joining us for OneSoft Solutions Financial Conference Call to discuss its financial results for the fiscal year ended December 31, 2023. On the call today, we have OneSoft's CEO, Duane Kushnaruk, CFO, Paul Johnston, and President and COO, Brandon Taylor. This call is being recorded. Before management discusses the results, I'd like to remind everyone that certain statements in this call may be forward-looking in nature. These include statements involving known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. For caveats about forward-looking statements and risk factors, please see OneSoft's MD&A for the year ended December 31, 2023, which can be accessed on the company's profile at CDAR and the company's website. I will now turn the call over to OneSoft's CEO, Duane Kushnaruk.

Good morning and welcome to everyone on the call. I have a few remarks before Paul Johnston reviews financial information, followed by Brandon Taylor, who will discuss operational highlights during fiscal 2023, and then we'll wrap up the call by addressing investor questions. This is our third financial results conference call, and we are assuming that most attendees today are familiar with the company. However, for those who want more detail regarding our history and progress to date, please view our Q2 2023 conference call, the link for which is accessible on the OneSoft website. Click on the investor heading, then on AGM and financial info, then Q2 earnings call as shown in this slide. I want to start by summarizing OneSoft's technology, solutions, and position in the current marketplace. OneSoft develops and markets SaaS solutions that ingest, align, and analyze big data using machine learning, data science, and cloud computing. to increase operational efficiencies and reduce oil and gas pipeline failures through better data management. We have now compiled what we believe may be the largest data lake of pipeline operational and integrity management data that includes data collected by pipeline operators over the past few decades. Our data lake contains detailed information associated with about 150,000 miles of pipelines operated by 15 of our major customers who manage 20 pipeline operations. Our solution has been strongly validated by many of the most progressive North American and global pipeline companies, including two of the industry's five super majors. Our customers have typically undergone extensive one- to three-year validation projects before committing to multi-year subscriptions to use our SIM data platform, and their experience has helped us to gain traction to become the next generation de facto standard cloud solution for oil and gas pipeline operations. We have customers in the United States, Canada, and Australia, and are pursuing sales opportunities in several regions globally, including South America, EMEA, and Asia. Our solutions assist oil and gas pipeline operators to optimize integrity management of their pipeline assets and to automate many of the functions that they must carry out. to manage and maintain regulatory compliance in operating their businesses and assets, to increase operating efficiencies and safety, and to reduce operating costs and incidents of pipeline failures. OneSoft has first mover advantage and a significant competitive moat regarding our technology and solutions. in that we are the first company worldwide to have developed and commercialized a board in the cloud solution that uses machine learning and data science to analyze big data, which assists oil and gas operators to achieve their objective of zero pipeline failures. Regarding competition for our solutions today, this is mostly legacy systems and processes that essentially depend on Excel spreadsheets to retain and analyze data. Our biggest sales challenge today is the reluctance for change management, which is typically disruptive as legacy integrity and data management systems and processes that have been used for decades are replaced with modern machine learning and data science applications. From management's perspective, fiscal 2023 progressed very nicely in accordance with our objectives and expectations. So we met the guidance we published in January of 2023. Revenue exceeded 10 million, representing 50% year-over-year revenue growth for the second consecutive year. Adjusted EBITDA, a non-GAAP measure that we define as earnings before interest, tax, stock-based comp, depreciation, and amortization, improved by $1.9 million year over year, from a loss of $2 million in fiscal 2022 to a near break-even loss of $111,000 in fiscal 2023. We also saw a significant $1.7 million swing in cash and cash equivalents year over year, wherein cash increased by half a million in fiscal 2023 compared to the decrease of 1.2 million in 2022. From a corporate perspective, we took steps to implement succession plans for the board of directors as we disclosed last year by adding a new independent director. We continue to present at various online and in-person shareholder events to promote our company and progress. And we also explored alternatives to progress value creation for shareholders. including potential scenarios to accelerate business development and revenue growth through both organic and M&A strategies. We are pleased that OneSoft was recognized by the TSX Venture Exchange as one of the top 10 performers driving growth across the technology sector in 2023. OSS share price increased by about 72% from December 22 to December 23. This chart shows the evolution of data miles being ingested into the company's SIM platform, which is key to understanding the company's revenue growth under its SAS recurring revenue business model. The first line in the table shows the aggregate miles of pipeline operated by our customers who have entered into SAS agreements. The second line in the table and the top blue line in the graph shows the pickable miles for which customers will ingest data into SIM. The third line in the table, the bottom green line in the graph, shows the pickable miles for which data has been ingested into SIM and generated revenues. The fourth line in the table shows the percentage of data miles for which any revenue was generated. And this also provides a glimpse into revenue that we expect will occur in future periods. The fifth line in the table shows the estimated SIM SAS revenue based on a per data mile subscription basis. These figures exclude service and other revenue. We anticipate that our annualized data mile revenue, which started at about $100 per data mile in 2017, will continue to increase as we add more SAS modules that our customers require to optimize their operations. The difference between the blue and green lines represents the future revenue opportunity from current SAS contracts that is expected to occur as more data is loaded into SIEM by customers. To put OneSoft's market share and opportunities into perspective, 260,000 miles operated by our customers represents about 9% of the total oil and gas pipelines in the USA today. And 135,000 SAS subscription miles represent about 21% of the pickable miles in the USA today. I also want to note that the U.S. oil and gas pipeline infrastructure represents approximately 60% of these assets that exist globally, and it is our belief that CIM has global opportunity. I will now pass the call to Paul Johnston, OneSoft CFO, to review the company's Q4 and fiscal 2023 financial information. Paul?

Thank you, Duane. I am Paul Johnston and I am OneSoft's CFO. I will present the financial results for Q4 and the fiscal year ended December 31st, 2023. All figures reported today are in Canadian dollars. I wish to highlight the progress OneSoft has made in growing revenues over the past seven and a half years. This chart illustrates revenue increasing sequentially quarter over quarter. We're extremely proud that our SIM solution and IAM operations have produced a compound annual growth rate of 43.5% over the last seven and a half years and by 51% in fiscal 23 over fiscal 22. The majority of our revenue is annual recurring revenue or ARR. In the last two years, ARR has been 79% and 83% of total revenue. This is due to our customers signing multi-year contracts with us, which generally have terms three years or longer and due to near zero churn in our customer base. In Q4 2023, revenue was $2.9 million and it increased by 732,000 or 33.4% over Q4 2022. The addition of new SIM customers and by existing customers expanding their use of SIM, drove $670,000 of the increase. IM operations revenue also grew, increasing by $54,000. Gross profit increased by $694,000, or 44%. The increase was due to the higher sales volume, which generated $523,000 of additional gross profits. A moderation in direct costs provided a further $171,000 of gross profit and allowed the gross margin to increase to 77% from 71%. Operating expenses net of cost capitalized increased by $140,000. The company has increased the number of staff since last year and wage increases have been selectively granted. Marketing expenses increased $70,000 order over quarter. General and administrative costs were unchanged from Q4 last year. Software development costs declined in the quarter due to staff being highly engaged with functionality requirements requested by existing customers and the implementation of SIM with a large new customer. Despite this, further progress was made on our risk, crack management, bending strain, and external corrosion SIM modules. Other expenses increased $205,000. In September, the company awarded $2,729,000 restricted share units to selected staff to ensure staff retention and further link employee productivity and innovation to shareholder value. This grant added $210,000 in additional stock-based compensation costs and was the largest single driver causing other expenses to rise. Due to the much higher sales revenue, the gross profit increase of $694,000 and more moderate increases in expenses and other expense, the company reduced its quarterly loss by $349,000 from $624,000 in Q4 2022 to $275,000 in Q4 2023. I now direct my remarks to the financial results for the year ended December 31st, 2023. Revenue for the year increased by 51% or $3.5 million from $6.9 million last year to $10.4 million this year. The addition of new customers and greater use of SIM by existing customers generated $2.4 million of the increase. Revenue from the IAM operations increased by $785,000 as it was acquired on June 30th, 2022, resulting in six months of revenue being included last year and 12 months of revenue this year. More favorable foreign exchange rates added another $320,000. Gross profit increased by 60% to $7.8 million from $4.9 million this period last year, driven by the higher sales volume and proportionally reduced direct costs. The gross margin rose to 75% of sales from 71% last year. Operating expenses increased by $954,000, or 13.5%. Salaries and employee benefits were higher due to an increase in staff complement, salary increases, and higher accruals for year-end incentives. Marketing expenses increased due to more production trials and benefit analysis being conducted, and higher sales travel expense promoting our products to potential customers. Higher accruals for professional fees for the annual audit and related issues caused G&A expenses to rise. Expenses capitalized as software development decreased by $168,000 in 2023 as staff were engaged developing software enhancements for our existing customers, implementing a large new customer, and that two new products having completed their development in earlier periods. Other expenses increased by $367,000 or 45%. The aforementioned grant of restricted share units and other grants caused stock compensation to increase by $310,000. This was the largest contributor to expense increase in this group. The net loss decreased by 54% to $1.4 million from $3 million last year. The higher sales revenue and gross profit were the primary factors causing the reduction in the net loss. On this slide, we're showing our adjusted EBITDA. Many people like to use adjusted EBITDA as a proxy for a company's ability to generate cash. In Q4 2023, the company generated positive EBITDA of $162,700, as compared to negative EBITDA in the comparative period of $744,000. In fiscal 2023, the company's negative EBITDA was $111,000, an improvement of $1,847,000 from the negative EBITDA in 2022 of $1,959,000. More on cash flow a little later in this presentation. Looking at her statement of financial position, cash was $462,000 higher this year than last year. Trade accounts receivable continue to be collected promptly. Prepaid expenses, which are primarily for marketing purposes in 2024, also rose slightly. The company's only debt was the acquisition price payable of $235,000 at that year end. This will be paid in two equal installments on June 2024 and June 2025. Working capital at year-end was $1,522,000 versus $1,429,000 as at December 31, 2022. The company believes its cash of $4.9 million and expected future cash receipts are sufficient to finance company operations and there will be no need to incur additional financing unless a special situation such as an acquisition or merger opportunity were to arise. This page is a summarization of the company's cash flow in 2023 and 2022. We first point out the large amount of non-cash expenses recorded in both years, and you can read the composition of those values. On the next line, The company generated cash from its operating assets and liabilities. In 2023, it increased the cash it had invested in accounts receivable and prepaid expenses, and it also increased the balances of or borrowings from its accounts payable and deferred revenue. In 2023, these four items combined to generate cash of $514,000. The cash generated from operating activities is the sum of these items. In fiscal 2023, cash from operating activities was positive $538,000, an improvement from fiscal 2022 of $1.4 million. Next, we review investing activities. In fiscal 2023, investing activities consumed cash of $420,000 primarily consisting of $223,000 being invested into new software functionality and $188,000 in payments to reduce the debt owed on the acquisition of IAM operations. In 2023, financing activities generated $338,000. This was due to employees exercising stock options to acquire 711,000 shares of the company. In total, the company generated cash flow of $455,000 in fiscal 2023. This was in sharp contrast to fiscal 2022 when the company consumed $1.2 million, an improvement in cash generation of $1.6 million. We now move to reviewing the guidance we provided for our company in 2023. We presented guidance in January 2023 that revenue of $10.1 million would be realized in 2023. That value was exceeded in fiscal 2023, in which $10,392,000 of revenue was recorded. The guidance value for the net loss for 2023 was $1,297,000. The company's net loss in 2023 was actually $1,367,000, which we would suggest is very close to the 2023 guidance value. Lastly, the guidance value for adjusted EBITDA was a loss of $28,000. The actual result was a loss of $111,000, which, while more than predicted, is a value we believe is reasonably close to the guidance value. We would also point out that cash at the end of 2023 was $4,854,000, which exceeded the 2023 guidance value for cash of $4,040,000. Looking ahead to 2024, guidance is the recording of $15 million to $16 million in revenue. a net loss of $435,000 to $178,000, and adjusted EBITDA of positive $1,650,000 to $1,900,000. We look forward to reporting on our progress on achieving those values in our first quarter reports for 2024, which will be released in May 2024. Please refer to our fiscal 2023 financial statements, management discussion and analysis and annual information form published on CDAR Plus for more information. This concludes my review of the financial results. I will now turn the meeting over to Brandon Taylor, President and COO of OneSoft for operational remarks. Thanks, Paul.