ProntoForms Corporation

Good morning, ladies and gentlemen, and welcome to ProntoForms Corporation first quarter 2023 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 10, 2023. I would now like to turn the conference over to Dave Croucher. Please go ahead.

Thank you, Joanna. Good morning, everyone. Before we begin, I will read our cautionary note regarding forward-looking information. Certain information to be discussed during this call contains forward-looking statements within the meaning of applicable securities laws, including, among others, statements concerning the company's objectives, the company's strategy to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events results, circumstances, performance or expectations that are not historical facts. Such forward looking statements reflect management's current beliefs and are based on information currently available to management and are subject to significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Also, our commentary today will include adjusted financial measures, which are non-GAAP measures. These should be considered as a supplement to and not as a substitute for GAAP financial measures. Reconciliations between the two can be found in our management discussion and analysis, which is available on CDER.com and our website. And finally, note that because we report in U.S. dollars, all amounts discussed today are in U.S. dollars unless otherwise indicated. I'll now go through the financial highlights for the first quarter of 2023. Total revenue in Q1 2023 was $5.8 million, a 3% sequential increase from Q4 and an increase of 14% compared to Q1 2022. Recurring revenue in Q1 2023 was $5.4 million, a 3% increase from Q4 and an 11% increase from Q1 2022. Our annualized recurring revenue base, or ARR, as at March 31st, 2023 was 22.1 million, representing an increase of 2.4% sequentially and an increase of 12.6% from March 31st, 2022. Customers with greater than 100K of ARR represented 43% of our Q1 2023 ending ARR base, up from 41% a year ago. Revenue from professional services was 343,000 in Q1, an increase of 7% compared to Q4 and an increase of 128% from Q1 2022. The Q1 increase in professional service revenue relates to increased sales and delivery of larger engagements with enterprise customers. Gross margin on total revenue for the first quarter of 2023 was 86%, which is down 1% sequentially and up 2% compared to Q1 2022. Gross margin on recurring revenue in Q1 2023 was 90%, down slightly from 91% in Q4 and up from 89% in Q1 2022. Operating expenses in Q1 were $6 million even, a 13% increase from Q4 2022 and up 5% from Q1 2022. Non-GAAP loss from operations for Q1 2023 was $790,000, up from $180,000 in Q4, 2022 and down from a loss of 1.1 million in Q1 2022. As we mentioned last quarter, we expected an increase in our first quarter loss compared to Q4 with additional costs related to organizational changes and seasonality around vacation and other payroll items. We still expect steady improvement in our property for the remainder of 2023 as we optimize our investment in product and sales in a controlled manner relative to our revenue growth. Our cash balance at the end of March 31st, 2023 was 7M even up from 6.1M at December 31st, 2022 and down from 7.4M a year ago. We did not draw anything from our line of credit and we still have 1.4M available and committed through October 2024. In summary, the recent Q2 deal that we reported is the kind of deal that can get us to new growth levels. We continue to optimize our go-to-market investment with the objective of replicating similar enterprise deals to provide sustainable growth, higher growth in our ARR base. We continue to have a strong cash position to enable us to reach our growth and profitability objectives on our own. With that said, I'll pass it over to Phil.

Thanks, Dave. As Dave mentioned, we announced an increase in our ARR of about half a million in Q1. This was infinitely better than the negative number we booked last year, but still light due to the lack of any large deals. The quarter was driven by strong performance from our commercial sales group and a normal level of small enterprise add-on transactions. Nevertheless, the growth rate of our trailing 12-month ARR and the growth rate of subscription revenue and total revenue all accelerated to 13%, 10.6%, 11.5% respectively. Both gross bookings and churn were much better than last year. And as shareholders are aware, we announced a large transaction totaling $880,000 per year over three and a half years after the end of the quarter, booked at the beginning of Q2. This will help extend the acceleration in growth as we work to mature our go-to-market organization. As Dave summarized, profitability was affected by the many changes we've made in personnel and one-time legal costs. Through the first and second quarters of this year, we've been making extensive changes to our sales organization, marketing strategy, brand and product positioning, and related personnel as we retool our go-to-market strategy to complete the transition to vertically oriented enterprise sales. At the same time, we've made difficult reductions in personnel. We've also made new investments and added new personnel in our field organization to develop that critical capability. While we have a strong commitment to achieving near-term profitability, the investments we make in growth are critical in setting the stage for multi-year accelerating growth. We added two new strategic account managers in the last few weeks and strengthened our field engineering capability. We've added new systems for account targeting and SEO, all focused on making sure we're investing our sales resources in the customers where we can prove the highest ROI and create long-term contract relationships. The SaaS industry is undergoing significant retrenchment as growth rates for many companies slow and companies are all working to reach higher levels of profitability. At the same time, investors are rightly demanding higher levels of profitability. And I believe very strongly that Proniforms is well positioned to weather this storm and indeed to prosper. Our strength is based on the growing demand for companies that operate large field services organizations for increased efficiency and greater ability to meet their regulatory demands, and the need to integrate many more data sources in their field service operations. The strong ROI that our platform can deliver is the amazing foundation of referenceable global enterprises that rely on Pranaforms every day. We're also well-positioned with respect to our existing book of business. Over the past few years, we've reported elevated churn in our small business ARR, as we've been working hard to develop our enterprise business, where retention is significantly higher and contracts are much longer. We now receive a majority of our ARR from enterprise customers, and as the mix continues to shift, we expect to see lower overall churn and much more large expansion opportunities. Our four key verticals also exhibit low cyclicality that should provide good customer stability in the event that we experience a downturn in the U.S. economy. We will also see improvements in our sales and marketing economics as new reps reach quota and overall quotas rise. Finally, we'll see additional savings as long-term contracts for software and services that we can do without expire. As we told you on the last call, we're committed to driving higher rates of revenue growth and improving levels of profitability. We can achieve this by intense focus on making the right investments in customer relationships with high ROI within the verticals where we have the experience and reputation to succeed. We're excited about the kinds of global enterprises that we're engaging with and are confident of our ability to secure significant new wins. For some time, we've been making steady progress towards the repositioning our company from a horizontally oriented no-code, low-code application platform to an enterprise field service platform in four distinct vertical markets. Our medical device platform, Wynn, that we announced this quarter, is a great example of the business we're working hard to build. The customer is a global leader. A very expensive and complex product requires very sophisticated field technicians to install, maintain, and repair. The efficiencies of proper workflow and data collection and reporting can provide very high ROI for this customer, and they were willing to make a long-term commitment to its use. Medical devices is joined by heavy manufactured products, oil and gas, and utilities as the key verticals that all require sophisticated workflows oriented around complex and expensive field assets. In the last few months, we've accelerated that transition with sweeping changes to the way we market and target new accounts to make sure that all of the business we're doing with customers can drive the most value. With the completion of our market repositioning, it's become clear that our company name no longer supports the expansive vision of enterprise field service. While the automation of forms drove our entry into key markets, we long ago eclipsed that capability. Using the word form to describe our business has become a limitation. For this reason, we'll be asking shareholders to approve a change in our name to True Context with the effect in June. Some shareholders may recall that True Context was the founding name of the company many years ago. We've now come full circle to the vision that Alvaro founded the company on, whether he remembers that or not. The change will not be as we intend to retain the brand value we've earned as a leading enterprise SaaS company as we transition to the new name. We also intend to ensure that the change in name will also mark an inflection point in our transition to strong profitable growth. I'd like to ask Alvaro to make some comments on our product vision and industry engagement. Thank you, Phil.