OneSoft Solutions Inc.

Good morning and thank you for joining us for OneSoft Solutions financial conference call to discuss its financial results for the second fiscal quarter of 2024, ended June 30th, 2024. On the call today, we have OneSoft CEO, Duane Kushneruk and CFO, Paul Johnson. Following the presentation, there will be a question and answer session. Participants on the webcast may submit a question in writing using the form in the lower section of the webcast frame. Please be advised that this conference is being recorded. Before management discusses the results, I'd like to remind everyone that certain statements on 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 31st, 2023 and Q2 ended June 30th, 2024, which can be accessed on the company's profile on CDAR Plus and on the company's website. I will now pass the call over to OneSoft's President and COO, Brandon Taylor.

Thanks, Gayle Ann. Good morning, everyone, and welcome to the call. During this meeting, we're going to provide a very brief update on operations and cover our Q2 2024 results. Then going to spend the majority of this call and discussion around the pending sale of OneSoft to Earth. It was announced two weeks ago to review our rationale and the process that we went through and take Q&A. I have a few remarks before Paul Johnson reviews the financial information, and Duane's going to lead the conversation and discussion about the sale of the company. Then we'll wrap up by addressing investor questions. We are assuming that attendees of today's meeting are familiar with our company, so we're going to dispense with any of the history of the business. However, for those who may want more detail regarding our history and progress to date, You can please log on to our website at www.onesoft.ca. If you want a quick summary of our company's history and progress, review our first conference call on Q2 of 2023 report, the link of which is accessible as shown here on this slide under investor heading and AGM and financial information. Now just a little bit about the Q2 24 Operational highlights. The team has been, product development has been continuing to work on a number of fronts. We've progressed our technology and product roadmaps. We continue to work closely with our customers' implementations and new module rollouts. And then after a long sales cycle, we finalized a SIEM contract with our first South American customer and commenced the implementation with Accenture. who will be trained to support other customers in Central and South America. And then we're really pleased to bring all of our employees together in an in-person meeting in June of this year, which is something we try to do every 12 to 18 months. And then over the course of a few days, we had the opportunity to conduct a SWOT analysis which was really an analytical approach to consider all of the items and tasks that are open and on the table and planned and consider the company's strengths, the weaknesses and opportunities and threats to kind of address those. And then we reviewed feedback that we've been aggregating from customers and then our customer facing employees and where we're seeing any potential need to basically reprioritize our roadmap, et cetera. Putting all of that information together really helped us assess and kind of determine go-forward priorities and alternatives. And part of that feedback went into the process we'll talk about later in this call. This meeting was particularly useful to Gardner, a lot of that valuable, which basically let us finalize what we call our market check, and you're going to see slides related to that. I will now pass the call to Paul Johnson, who will provide a summary of Q2 financial information.

Thank you, Brandon. All figures reported today are in Canadian dollars. I will comment on the graphs in the first column, which portray the financial results of Q2 2024. On a comparative basis, revenue in Q2 2024 increased $609,000 or 24% over Q2 2023. Of our 17 SIM customers, three customers were new since Q2 last year, and they generated $527,000 in new revenue. Fourteen customers generated $415,000 in additional revenue, and the revenue from four customers decreased due to timing changes in their patterns of SIM use. The revenue from our IM operations group decreased $263,000. Looking at the upcoming projects this group has, We believe this is a timing difference and projects to be completed later this year should generate revenue at least equal to that earned last year. Gross profit increased 25% due to the increase in revenue and the gross margin was identical to last year at 76%. Operating expenses have not been pictured graphically in this column, but we comment as follows. Operating expenses have increased $329,000 primarily due to the addition of new staff and an across-the-board cost of living adjustment that saw the salaries of all staff increase 2.5%. We continue to face high demands from our customers for increased SIM functionality, and our addressing that demand through additions to the company headcount are assisting in driving higher revenue. Other expenses increased $203,000, of which the majority portion of this was due to the increase in share-based compensation expense caused by restricted share units granted last year to select staff, which caused this expense line to increase by $289,000. The net loss for the quarter was $615,000 as compared to $558,000 in Q2 2023. Higher staff costs and non-cash expenses absorbed the increase in gross profit and caused the net loss to be higher. I will now comment on the graph in the second column, which reflect the results of the six months ended June 30th, 2024 and 2023. Revenue increased 1,307,028%. Analyzing the revenue increase, new customers generated $941,000 in new revenue and the increased use of SIM by our existing customers generated $732,000 in additional revenue. Similar to the Q2 2024 revenue summary, IM operations revenue was down $210,000 compared to last year, but a number of projects should complete by year-end, which should result in revenues equal to or slightly higher than last year. The company has not suffered any churn in its customer base this year. Gross profit increased by $1,093,000 due to the higher sales revenue and the gross margin increased by 2.2% to 75.6%. The net loss increased by $133,000 on a comparative basis. Operating expenses increased $930,000 in the period. Of this, an increase in staff count and higher salaries for existing staff increased expense by $505,000. Also in 2024, the company incurred $410,000 in gauging external legal, accounting, and tax advisors who assisted management to analyze different opportunities where one soft was the acquisition or investment target. The earth transaction detailed in our press release of August the 12th was one of these and discussion of that is on today's agenda. Other expense rose by $297,000 in this period where higher stock-based compensation was a major contributor to the increased loss. One of the company goals is to generate positive cash flow in the year. Looking at the adjusted EBITDA charts on the upper right-hand side of the screen, one can see that in Q2, 2024, the company experienced a $17,000 adjusted EBITDA loss. And in the six month period in 2024, the loss on the same basis was $261,000. Both results are an improvement over last year and are trending towards the stated management objectives. Next slide. We wish to show this slide as it shows our steady progress of increasing revenue by quarter with the Q2 2024 revenue, which is on the right-hand side of the chart, being the highest column. Over the 32 quarters shown here, we have averaged 13.6% compound quarterly revenue growth. We wish to comment on our cash flow. In the six months ended June 30th, 2024, we point out the significant amount of non-cash expense, which totaled $1,204,000 and which is in near proximity to the net loss. Changes in operating assets and liabilities generated cash of $1,289,000, which was driven by the increase of $1,813,000 in deferred revenue. as almost all our SIM customers pay their annual SIM contracts upon signing their initial contract or upon the anniversary of the contract when the upcoming year's fees are paid. In summary, in the six months ended June 30, 2024, the company generated $942,000 cash, which increased cash balances to $5,750,000 at period end. We wish to make a few comments on the guidance we published in February of 2024. While revenue has increased over last year, there were several delays in the signing of new customers, which included the new customer in South America. Management believes the opportunities it expected to close have only been delayed, not lost, and management believes they should sign new customers in the second half of the year to increase revenue. As well, Our current customer base are adopting new SIM functionality, and this is a source of new revenue. Other customers are expanding SIM usage to additional operating divisions in their companies, while others are increasing their pipeline miles to acquisition. For these factors, management believes the guidance revenue target remains achievable, and therefore revenue guidance is not being changed at this time. In a similar vein, the guidance for net loss and adjusted EBITDA are not being revised provided the new provided the revenue guidance can be achieved this will bolster the company earnings which will drive the achievement of these two metrics i will now pass the call to dwayne kushner to talk about the pending sale of one soft thanks paul good morning everyone i would like to discuss the recently announced transaction with earth