Release Date: April 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- QuoteMedia Inc (QMCI, Financial) increased its revenue close to $1.5 million in 2023.
- Adjusted EBITDA exceeded $3 million in the last year, showing financial improvement.
- The company has successfully expanded its proprietary datasets, reducing reliance on third-party data sourcing.
- QuoteMedia Inc (QMCI) has become a key provider of data and financial products to some of the largest companies in the industry.
- The company has a comprehensive library of products and services, including data delivery systems, web content solutions, and Quotestream product suite.
Negative Points
- The process of creating proprietary datasets was costly, requiring significant investment and focus from large teams.
- Total Quotestream revenue increased by only 2%, with individual Quotestream revenue decreasing by 11% due to a decline in subscribers and the impact of the Canadian dollar.
- Operating expenses increased by 14% for the year, primarily due to additional personnel hired for expansion objectives.
- Net income for the year was $362,000, a decrease from $444,000 in 2022, mainly due to higher-than-normal expenses.
- Cash balance decreased by $136,000 from the previous year-end, and net cash used in investing activities was $3.3 million, primarily due to spending on infrastructure and product development.
Q & A Highlights
Q: Can you describe the competition that is out there? Are you seeing more competition from the smaller players? Or do you feel like you're picking up the prospect, is that you'll pick up share from them? Or do you feel like the larger players in the industry have gotten more price sensitive and have become a little bit more aggressive on their pricing strategies?
A: There's every level of competition. Smaller players often have weaker datasets and usually get very small contracts. Our true competition is with multi-billion-dollar providers. We are now fully competitive against them. If there are smaller third parties that use those providers, they will be a target of ours to then go to that firm and say, you no longer need to use FactSet data, we can do a better deal for you, we can create a better partnership for you. And you can deliver QuoteMedia data and compete against FactSet.
Q: In terms of the revenue outlook, do you anticipate that revenues will accelerate from the 8% growth that you had in 2023 because you have all the feature sets and so forth and now look like you might be able to have a much more competitive offering?
A: We're hoping for great revenue growth. We have a lot of prospects on the go because of bringing on these larger firms. By having our own datasets, which has been the focus for a few years now, it just gives us a lot of power. We now can negotiate any type of a deal that we need to negotiate. We're now away from all of that. We're now on our own data. Our clients are all on our own data now, which is phenomenal. And so that should give us a lot of power of negotiation and should allow us to close bigger and bigger deals without restriction.
Q: Is the level of high investments that you had elevated level of investments because you were doing these -- your own datasets, are those now behind the company? And if so, can you kind of give us your thoughts in terms of margins, both on the gross margin basis and maybe on an adjusted EBITDA margin basis, what the impact might be from the fact that you may not be making these investments in 2024?
A: The margins will continue to grow on all these datasets now because we no longer have to pay based on usage of data. We now have gone down the path and done the spend and are continuing the people spend and all of that for this data -- these datasets. And so the margins will now grow tremendously. So for example, if somebody comes and buys all of our fundamental data and spend $1 million, our cost is almost zero on top of that, right? So it's almost all profit at this point. So that's phenomenal with what we've achieved. We might continue to -- we're going to continue to go down some other datasets, some more proprietary interesting datasets. We're going to go down some more path. But the major stuff that we've achieved this year and in the last year -- last couple of years really is full release of all of this data, is now really good for margins.
Q: What was the professional fees in the fourth quarter? Can you kind of give me a sense of what the impact was from the accounting change, that sort of thing on a dollar basis?
A: I don't have the fourth quarter's professional fees right in front of me, but -- so we changed our auditing firm in January of '23. So there is some overlap fees involved with that. So we're being built by both our old auditors and our new auditors during the transition phase. So that resulted in higher-than-normal auditing fees. Now I don't think those fees are going to go back to the levels we saw in previous years just because of the landscape out there with auditing, that the standards that they have to abide by in order to do these audits. They're always changing and they want more and more evidence. So I don't think our professional fees are, like I say, are going to go down that much, but they will normalize and they won't be as much as in 2023.
Q: In terms of the first quarter, can you kind of give us a sense whether or not revenue growth is going to be faster than the 2023 levels, like the 8% you delivered? Or do you think that you're still looking at roughly 8% until you kind of get in land additional larger scale business?
A: In the short term, we're looking at similar revenue growth but depending on timing of closing on contracts, et cetera. It all depends on the closing of these larger deals, right? And that's always happened, is you work on something and you project that it could close in the next six months and it takes nine. But that's the difficulty of our projections, even when we sit around the table and do our own projections, we say well, if that closes and that closes and that closes, well, then our projections have blown out of the water. So it's a difficult thing, but there are large contracts in discussions. There are things in the works. There are trips planned to meet all of these firms and sit at the table with 30 people and determine how we can replace six or seven different vendors for them and save them money and create -- produce better product. So it's just a matter of closing. And then, we will exceed what we think.
Q: With even the 8% growth though, you would still expect to see margin improvement in 2024?
A: Yeah, yeah.
