Quisitive Technology Solutions Inc. Reports Fiscal 2019 Fourth Quarter and Annual Financial Results and Announces Certain Preliminary 2020 First Quarter Financial Results
47% Year-Over-Year Growth
Toronto - TheNewswire - April 28 2020 - Quisitive Technology Solutions, Inc. ("Quisitive" or the "Corporation") (TSXV:QUIS), a premier Microsoft solutions provider, announced today that it has achieved annual revenue for 2019 of $18,525,288, representing 47% year-over-year (YoY) growth for 2019, with adjusted EBITDA of $1,269,240 or 7% of revenue for 2019.
"Quisitive enters 2020 in a strong cash position due to substantial 2019 YoY growth and growing recurring revenues," said Mike Murphy, Quisitive CFO. "Based on recent acquisitions and investments in our SaaS solution portfolio, the company is well positioned to capitalize on both organic and acquisition growth in 2020."
FY2019 Financial Results:
- Revenue for the year ended December 31, 2019 was $ 18,525,288 compared to $12,606,724 for the year ended December 31, 2018.
- Gross margin for the year ending December 31, 2019 was $7,937,076 or 43% as compared to $4,673,424 or 37.1% for the year ended December 31, 2018.
- Net loss for the year ended December 31, 2019 was $7,376,707 which represents a $0.08 loss per share. Included in the loss was the following:
- The Corporation incurred an earn-out settlement expense for the Quisitive, LLC earnout of $1,617,736.
- Amortization expense for the year ended December 31, 2019 was $2,423,368.
- Stock-based compensation for the year ended December 31, 2018 was $289,604.
- Depreciation expense for the year ended December 31, 2019 was $664,226.
- The Corporation also incurred acquisition related expense in the amount of $2,119,177.
Q4 2019 Financial Results:
- Revenue for the quarter ended December 31, 2019 was $5,404,860 representing 39% revenue growth over the quarter ended December 31, 2018.
- Gross margin for the quarter ended December 31, 2019 was $2,316,619 or 43% of revenue. This is a 46% increase over the gross margin of $1,584,376 or 40% of revenue for the quarter ended December 31, 2018.
- Adjusted EBITDA for the quarter ended December 31, 2019 was $323,876 or 6% of revenue. The adjusted EBITDA for Q4 would have been $784,211 or 14.5% of revenue excluding a discretionary bonus expense in the amount of $460,335 which was recorded in the quarter. This is a significant increase from the quarter ended December 31, 2018 where the adjusted EBITDA was a loss of ($730,232) or (18.7%) of revenue.
The Corporation's audited financial statements for the year and quarter ended December 31, 2019 and related management's discussion and analysis can be found on the Corporation's website and at www.sedar.ca. All figures are expressed in United States dollars unless otherwise stated.
Q4 2019 Business Highlights:
- Quisitive announced the planned acquisition of Menlo Technologies, Inc and secured funding in the form of a 12-month US$7,500,000 demand loan from an investment fund with interest accruing at a rate equal to the Bank of Montreal Prime Rate plus 8.05% per annum for acquisition and working capital.
- The Corporation partnered with Microsoft to launch On-Ramp to Azure Data, a service delivery program dedicated to helping organizations move and migrate their existing on -premises data to the Microsoft Azure Data platform.
- The Corporation completed a migration to Microsoft 365 for a major manufacturer and implemented the On-Ramp to Azure Data platform to rapidly deploy a best practice Enterprise Data Warehouse in Azure to provide enhanced business and executive reporting.
- The Corporation secured a modern data warehouse project to assist a large public utility in developing a strategy and roadmap for migrating their data estate to Microsoft Azure.
Q1 2020 Preliminary Financial Results:
Quisitive is also pleased to report certain preliminary results for 2020.
- First quarter results of operations have not been finalized; however, net revenue is expected to be approximately $10.9-11.1 million, compared to $4.0 million in Q1 2019.
- First quarter gross profit is expected to be approximately $4.1-4.3 million, compared to $1.6 million in Q1 2019.
- The Corporation expects to report Adjusted EBITDA for the first quarter of approximately $1.0-1.2 million, compared to a loss of $0.65 million in Q1 2019.
These Q1 results include the results of Menlo Technologies, Inc, which was acquired on January 2, 2020, but do not include revenue from the previously announced LedgerPay transaction that was announced on March 26, 2020. The Corporation is providing these preliminary results given the questions that many businesses are facing as a result of the ongoing COVID-19 pandemic.
"Quisitive is poised for strong growth in 2020 with our recent acquisitions and investments in innovative technologies, despite the potential global impact of the COVID-19 pandemic," said Mike Reinhart, CEO. "We are beginning 2020 from a position of financial strength and anticipate another year of substantial growth by leveraging our acquisition of Menlo Technologies, capitalizing on our investment to activate LedgerPay, and continuing to build our recurring revenues for the remainder of 2020. Our acquisition pipeline remains strong and we look forward to continuing to assess new acquisition opportunities."
Actual results may differ materially from these estimates due to the completion of the Corporation's financial closing procedures, final adjustments, review by the Corporation's auditors and other developments that may arise between now and the time the financial results are finalized. These estimates are not a comprehensive statement of the Corporation's financial results for Q1 2020 and should not be viewed as a substitute for full financial statements prepared in accordance with International Financial Reporting Standards, and these estimates are not necessarily indicative of the results to be achieved for Q1 2020. The preliminary results provided in this press release constitute forward-looking statements within the meaning of applicable securities laws, are based on a number of assumptions and are subject to a number of risks and uncertainties. Please see the section below entitled "Forward-Looking Statements". The Corporation will provide additional discussion and analysis regarding its first quarter revenue, margin and Adjusted EBITDA when the Corporation reports it quarterly results.
Business Highlights Subsequent to 2019 Year End:
- Quisitive closed the acquisition of Menlo Technologies, Inc, a leading Microsoft partner based in Silicon Valley which over the trailing twelve months ended September 30, 2019 had generated unaudited revenues of approximately US$17.5 million and unaudited adjusted EBITDA of approximately US$2.4 million.
- The Corporation announced the signing of a cloud services agreement with a major healthcare company. Under the Agreement, Quisitive will continue its strategic partnership as the Customer's Microsoft solutions provider and will now expand services to include full managed cloud services for their Microsoft Office 365 and Dynamics 365 environment over the next three years. This is in addition to the Microsoft Azure CSP and managed services the Corporation is already providing the Customer.
- Quisitive announced the release of LedgerPay, a secure, Microsoft cloud-based payment processing and data insights product platform. LedgerPay is the only Microsoft Azure cloud-based payment processing platform to incorporate data collection and analysis with each transaction, thereby transforming payment transactions into beneficial, profitable, and actionable experiences for brick-and-mortar merchants such as grocers, quick serve restaurants and big box retailers and their customers.
- The Corporation announced a strategic partnership and LedgerPay software licensing agreement with Rev19, a merchant services and financial technology company. Terms of the agreement include a software license as well as annual license support and maintenance, and annual production support services.
Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as "COVID-19", has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The extent to which COVID-19 and any other pandemic or public health crisis impacts the Corporation's business, affairs, operations, financial condition, liquidity, availability of credit and results of operations will depend on future developments that are highly uncertain and cannot be predicted with any meaningful precision, including new information which may emerge concerning the severity of the COVID-19 virus and the actions required to contain the COVID-19 virus or remedy its impact, among others. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Corporation and its operating subsidiaries in future periods.
Conference Call Access
The Corporation will host a conference call featuring management's remarks and follow-up question and answer period.
A recording of the call will be available and posted on the Corporation's website.
To access the conference call by phone, please dial the following numbers:
Canada/United States: 1-800-319-4610
Toronto Toll: 1-416-915-3239
We will start the call promptly at 8:30am ET April 29, 2020. Please dial in 10 minutes prior to the scheduled start time and ask to join the Quisitive Technology Solutions, Inc. call.
We encourage you to access the presentation material in the Investors section of Quisitive's website at https://quisitive.com/investor-relations/.
Quisitive is a premier Microsoft solutions provider that helps enterprise organizations move, operate and innovate in the Microsoft cloud: Microsoft Azure, Microsoft Dynamics and Microsoft O365. Quisitive also provides proprietary Software as a Service ("SaaS") solutions, such as CRG emPerform (TM) and LedgerPay that complement the Microsoft platform. Quisitive serves clients globally with offices in Austin, TX; Dallas, TX; Denver, CO; Minneapolis, MN; Silicon Valley, CA; Washington, DC; Ottawa, ON; Toronto, ON; and Hyderabad, India. For more information, visit http://www.Quisitive.com and follow @BeQuisitive. TSXV: QUIS.
For further information, please contact:
Mike Murphy - Chief Financial Officer
Reconciliation of Non-GAAP Financial Measures - Adjusted EBITDA and Adjusted EBITDA as a percentage of revenue
Financial Measures and Adjusted EBITDA
There are measures included in this news release that do not have a standardized meaning under generally accepted accounting principles (GAAP) and therefore may not be comparable to similarly titled measures and metrics presented by other publicly traded companies. The company includes these measures because it believes certain investors use these measures and metrics as a means of assessing financial performance. EBITDA (earnings before interest, taxes, depreciation and amortization is calculated as net earnings before finance costs (net of finance income), income tax expense, and depreciation and amortization of intangibles) is a non-GAAP financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.
We prepare and release quarterly unaudited and annual audited financial statements prepared in accordance with IFRS. We also disclose and discuss certain non-GAAP financial information, used to evaluate our performance, in this and other earnings releases and investor conference calls as a complement to results provided in accordance with IFRS. We believe that current shareholders and potential investors in our Corporation use non-GAAP financial measures, such as Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues, in making investment decisions about our Corporation and measuring our operational results.
The term "Adjusted EBITDA" refers to a financial measure that we define as earnings before certain charges that management considers to be non-operating expenses and which consist of interest, taxes, depreciation, amortization, stock-based compensation (for which we include related fees and taxes), acquisition-related expenses and listing expense. Adjusted EBITDA as a percentage of revenues divides Adjusted EBITDA for a period by the revenues for the corresponding period and expresses the quotient as a percentage.
Management considers these non-operating expenses to be outside the scope of Quisitive' ongoing operations and the related expenses are not used by management to measure operations. Accordingly, these expenses are excluded from Adjusted EBITDA, which we reference to both measure our operations and as a basis of comparison of our operations from period-to-period.
Management believes that investors and financial analysts measure our business on the same basis, and we are providing the Adjusted EBITDA financial metric to assist in this evaluation and to provide a higher level of transparency into how we measure our own business. However, Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues are non-GAAP financial measures and may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues should not be construed as a substitute for net income determined in accordance with IFRS or other non-GAAP measures that may be used by other companies, such as EBITDA. The use of Adjusted EBITDA and Adjusted EBITDA as a percentage of revenues does have limitations. As these acquisition-related expenses charges may continue as we pursue our consolidation strategy, some investors may consider these charges and expenses as a recurring part of operations rather than expenses that are not part of operations.
Cautionary Note Regarding Forward Looking Information
Neither TSX Venture Exchange nor its Regulation Services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements: Some statements in this news release contain forward-looking information. These statements include, but are not limited to, statements with respect to proposed activities, consolidation strategy and future expenditures. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. Such factors include, among others the limited history of operations, lack of profitability, availability of financing, the need for additional financing and the timing and amount of expenditures, information pertaining to strategy, plans, or future financial performance, such as statements with respect to future revenues, EBITDA, cash flows and other statements that express management's expectations or estimates of future performance, the anticipated timing of future cash flow and positive EBITDA, ability to successfully execute on consolidation strategies, the failure to find economically viable acquisition targets, funding for internally developed technology solutions, client retention and attrition, client demands, reliance on key personnel, economic spending in the IT industry and technological changes in the IT industry.
These forward-looking statements are based on reasonable assumptions and estimates of management of the Corporation at the time such statements were made. Actual future results may differ materially as forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors, among other things, include: changes in technology, customer markets and demand for the Corporation's services; the efficacy of the Corporation's software and product offering; sales and margin risk; acquisition and integration risks; dependence on economic and market conditions including, but not limited to, access to equity or debt capital on favourable terms if required; changes in market dynamics including business relationships and competition; information system risks; risks associated with the introduction of new products; product design risk; risks related to the Corporation being a holding company; environmental risks; customer and vendor risks; credit risks; tax and insurance related risks; risks of legislative changes; risks relating to remote operations; key executive risk; risk of litigation risks; risks related to contracts with third party service providers; risks related to the enforceability of contracts; risks related to the COVID-19 pandemic; risks related to the economy generally; the limited operating history of the Corporation; reliance on the expertise and judgment of senior management of the Corporation; risks related to proprietary intellectual property and potential infringement by third parties; risks relating to financing activities including leverage; risks relating to the management of growth; increased costs associated with the Corporation becoming a publicly traded company; increasing competition in the industry; risks relating to energy costs; reliance on key inputs, suppliers and skilled labour; cyber-security risks; risks related to quantifying the Corporation's target market; risks related to industry growth and consolidation; fraudulent activity by employees, contractors and consultants; conflicts of interest; risks related to the cost structures of certain projects; risks relating to certain remedies being limited and the difficulty of enforcement of judgments and effect service outside of Canada; risks related to future dispositions; sales by existing shareholders; the limited market for securities of the Corporation; price volatility of the common shares of the Corporation; no guarantee regarding use of available funds; currency fluctuations; and those factors described under the heading "Risks Factors" in the company's management discussion and analysis available on SEDAR. Although the forward-looking statements contained in this news release are based upon what management of the company believes, or believed at the time, to be reasonable assumptions, the company cannot assure shareholders that actual results will be consistent with such forward-looking statements, as there may be other factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking statements and information. There can be no assurance that forward-looking information, or the material factors or assumptions used to develop such forward-looking information, will prove to be accurate. The Corporation does not undertake any obligations to release publicly any revisions for updating any voluntary forward-looking statements, except as required by applicable securities law.
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