Delivers Record Q2 Revenue, up 56%, Grows ARR 54%
Vancouver, British Columbia--(Newsfile Corp. - August 18, 2020) - MediaValet Inc. (TSXV: MVP) (the "Company"), a leading provider of enterprise digital asset management ("DAM") and creative operations software, is pleased to report its results for the three and six months ended June 30, 2020.
Summary of Quarterly Results
|3 months ended June 30,||6 months ended June 30,|
|Gross Margin %||81%||86%||82%||86%|
|% Increase / (Decrease)||13%||(35%)||16%||(32%)|
|% Increase / (Decrease)||16%||(21%)||15%||(23%)|
|Loss per share3||(0.03||)||(0.06||)||(0.07||)||(0.11||)|
|At June |
|At December 31, 2019|
|Annual Recurring Revenue ("ARR")4||$||7,266,998||$||6,501,074|
|% Increase over prior year period||54%||85%|
|Modified Working Capital ex. of Deferred Revenue and Debt||5,916,133||2,800,748|
|% Increase over prior year period||48%||90%|
|Long-term and Convertible Debt||1,000,000||3,283,199|
"We're extremely thankful for the industry that we're in and the services that we deliver," said David MacLaren, Founder and CEO. "These are challenging times for all, we're simply happy we can help organizations quickly transition to a safe, secure and reliable work-from-anywhere environment. As a result, revenue is at a record high, and we continued to see strong growth in our customer base both here at home and around the world. In June, we experienced a quick rebound in market sentiment, enabling us to generate new customer billings in excess of those achieved in Q2 last year, and we've seen improving pipeline metrics in each month since. While this was offset somewhat by increased churn amongst some of our smaller customers that were hit hardest, we're confident that our expanded product and customer success teams will be able to provide a helping hand to our customers - large and small - where necessary in the months to come."
Continued MacLaren, "Our innovation and unique approach to the DAM industry continues to differentiate us, increase our market share, and drive our business forward. Microsoft Canada's recent AI & Machine Learning Impact Award highlights the work that we're doing at the edge of DAM, enterprise video management, and creative operations. We pride ourselves on how we approach product development: taking a step back, listening to our customers, and building what's right - not just what's been done before. As we continue to lean in during these challenging economic - and personal - times, we're very excited about what the future holds for MediaValet: our team members, customers, partners and shareholders."
Rob Chase, Executive Chair and CFO, commented, "Our second quarter was a milestone for us. Not only did we continue to attain solid revenue growth, but we also significantly improved our balance sheet. With $7.13 million of warrants and convertible debentures exercised in H1 2020, we were able to repay $2 million of long-term debt, favorably modify the terms of our remaining $1 million of debt, settle our convertible debentures, and finish the quarter with $5.92 million of modified working capital. This has enabled us to continue our investment strategy, expand our team to accelerate our innovative product roadmap, ensure best-in-class service and support, and increase our go-to-market team growth potential. We're confident these investments will deliver increasing and efficient returns as the market rebounds."
Results of Operations
Key Financial Metrics:
- Grew revenue to $1.75 million in Q2 2020, up 56% from $1.12 million in Q2 2019, and up 1% sequentially from Q1 2020. For the year-to-date ("YTD") period, revenue of $3.47 million is up 64% from $2.12 million last YTD. With an average of 90% of revenue from annual subscriptions, the growth reflects the corresponding changes in deferred revenue and increasing ARR from customer acquisition, retention, and expansion. These increases in ARR are a direct result of industry-leading sales and marketing strategies, and of continuous new feature development and platform enhancements, such as Branded Portals, AI Tagging, Advanced Search, and CreativeSPACES™.
- Increased Gross Margin to $1.42 million in Q2 2020, up 48% from $0.96 million in Q2 2019, and unchanged sequentially. The YTD Gross Margin increased 57% to $2.84 million. As a percent of revenue, YTD Gross Margins were 82%, down from 86% last YTD. The Gross Margin percentage was to 81% for Q2 2020 compared to 86% in Q2 2019 and 83% Q1 2019. The reduced margin is primarily due to customers working remotely in response to COVID-19, which resulted in a significant increase in customer usage and adoption statistics. Management believes this to be a positive indication of the mission-critical nature of its Cloud DAM.
- Incurred Operating Expenses of $2.18 million in Q2 2020, a 33% increase from $1.64 million in Q2 2019, and consistent with Q1 2020. YTD Operating Expenses were $4.36 million, an increase of 40% from $3.12 million in H1 2019. The increases are primarily due to a step-level expansion of sales and marketing ("S&M"), and research and development ("R&D") as part of the Company's long-term strategy. The planned expansions are expected to increase its sales potential as the expanded S&M team ramps to full capacity, and to enable the R&D team to accelerate enterprise product development to capture market share.
- Reported a Q2 2020 EBITDA loss of $0.77 million, up 13% from $0.68 million in Q2 2019, and up 2% sequentially. The YTD EBITDA loss of $1.52 million increased 16% compared to $1.31 million last YTD. The increased loss is expected due to the step-level increase in operating expenses, which require a ramp period before impacting sales growth, and due to the impact of COVID-19 on net customer retention rates and new customer acquisition. Net customer retention rates declined below 100% in Q2 2020 with some customers being severely affected by COVID-19, and new customer wins in Q1 2020 were also well below the prior year. Conversely, as businesses began to re-open in June 2020, we saw our new customer contracts for Q2 2020 rebound to exceed the levels achieved in both Q1 2020 and Q2 2019.
- Increased Annual Recurring Revenue ("ARR") to $7.27 million, an increase of 54% compared to $4.73 million at June 30, 2019, and 12% from $6.50 million at December 31, 2019. The increases reflect strong existing customer expansion and retention, and new customer acquisition. The Net New ARR ("NNARR") for Q2 2020 was $0.38 million, down 37% from $0.60 million in Q2 2019 and 4% sequentially. The decreases in NNARR are due to the global economic shutdown in response to COVID-19, which resulted in a reduction in new customer contracts in H1 2020 (while Q2 2020 exceeded that of Q2 2019), and a reduction in net retention rates in Q2 2020.
- Ended the quarter with $4.70 million of cash on hand (December 2019 - $2.43 million), modified working capital (excluding deferred revenue, lease liabilities and debt) of $5.92 million (December 2019 - $2.80 million), lease liabilities of $1.09 million, and total long-term debt of $1.00 million (December 2019 - total debt of $4.46 million).
Technology and Product:
- August 13, 2020: ranked as #68 on the 2020 SaaS 1000 List of the Fastest Growing SaaS Companies, up from a ranking of #341 in 2019.
- August 11, 2020: selected by another major North American entertainment company for a $225,000 subscription to MediaValet DAM, connectors to Microsoft Azure Active Directory and Adobe Creative Cloud, including professional services covering implementation, training and support.
- July 22, 2020: recognized as winner of Microsoft Canada's AI & Machine Learning Impact Award for the customer excellence and solution innovation delivered by MediaValet with artificial intelligence in the DAM industry.
- March 19, 2020: announced that one of the Company's largest customers has expanded their DAM initiative in Q1 2020 to support additional libraries of high-value media assets throughout their business, increasing their annual license by more than $190,000.
- February 11 and 20, 2020: highlighted that MediaValet's enterprise-class solutions and innovative approach continued to drive strong growth in high-security and manufacturing sectors in fiscal 2019. High-security sectors, such as financial, healthcare, government and legal, generated 39% of total new ARR, increasing 510% over fiscal 2018. In addition, new manufacturing customer revenue grew 123% for the year and the sector now represents 14% of the Company's ARR.
- January 8, 2020: achieved record customer adoption and expansion levels in fiscal 2019, including expanded services and a three-year renewal term with one of its largest customers upon their first renewal date, and attaining 100%+ net retention of existing customer recurring revenue.
Operations and Corporate:
- June 29, 2020: Repaid $2,000,000 of senior secured long-term debt and modified terms of remaining $1,000,000 to reduce to 6% interest (from 7%) and extend the maturity to November 7, 2023 (from November 7, 2021).
- From April 1, 2020 to April 27, 2020, proceeds of $3.31 million were received from the exercise of warrants that were subject to an accelerated expiry date, 3,711,704 common shares were issued, and 331,152 warrants expired and were cancelled. The number of warrants remaining outstanding was reduced to 2,287,163 with an exercise price of $0.90.
- February 25, 2020: the Company elected to accelerate expiry of 7,133,332 warrants to April 27, 2020 (previously March and September 2022), for total potential proceeds of $6.35 million. The acceleration was triggered upon its common shares trading at greater than $1.50 for ten consecutive days. At March 31, 2020, 3,090,476 of the warrants had exercised for proceeds of $2.75 million. Total proceeds from all warrants, options and debt conversions in the quarter was $3.83 million, and a total of 4,193,453 common shares were issued.
1 Operating Expenses include Sales & Marketing, Research & Development and General & Administrative.
2 EBITDA is a non-IFRS measure that is used as a measure of profit and loss. Management believes EBITDA provides a meaningful measure for assessment of Company performance as it removes non-cash and non-operating expenses such as financing costs.
3 Per share figures have been adjusted to reflect the 15:1 share consolidation completed on September 9, 2019. Note that quarterly loss per share amounts may not aggregate to the annual amount disclosed in the annual financial statements due to rounding.
4 Annual Recurring Revenue (ARR) is a non-IFRS measure that provides an indication of future revenue and billings from customers as of the reporting date. ARR represents the sum of the annual recurring revenue from existing customer contracts or commitments as of the reporting period end date, and as such management believes ARR to be a meaningful measure for assessment of Company performance. ARR is recorded as deferred revenue when it is invoiced and is recognized in revenue evenly on a monthly basis over the contract term.
MediaValet's full financial statements and related MD&A are now available on SEDAR.
About MediaValet, Inc.
MediaValet stands at the forefront of the enterprise cloud-based digital asset management industry. Built exclusively on Microsoft Azure and available in 140 countries, 61 Microsoft data center regions, around the world, MediaValet delivers unparalleled enterprise-class security, reliability, redundancy and scalability while offering the largest global footprint of any DAM solution. In addition to providing all core DAM capabilities and local desktop-to-cloud support for creative teams, MediaValet offers industry-leading integrations into Slack, Adobe Creative Suite, Microsoft Office 365, Wrike, Drupal 8, WordPress, Hootsuite and many other best-in-class 3rd party applications.
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