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Pivotree Announces Fourth Quarter and 2023 Results

Pivotree Inc. (TSXV:PVT) (“Pivotree” or the “Company”), a leader in frictionless commerce solutions, today reported financial results for the three and twelve month period ended December 31, 2...

Business Wire

Fifth consecutive quarter of positive Adjusted EBITDA with continued investment in frictionless products

TORONTO: Pivotree Inc. (TSXV:PVT) (“Pivotree” or the “Company”), a leader in frictionless commerce solutions, today reported financial results for the three and twelve month period ended December 31, 2023. All amounts are expressed in Canadian dollars unless otherwise stated.

“We achieved a number of the objectives we set out to accomplish in 2023 including four consecutive quarters of positive Adjusted EBITDA despite PS revenue softness. Coming off a record Q4 2022, the team adjusted well to an environment of reduced project spend and I am confident we will continue to make adjustments as necessary for profitable growth.” said Bill Di Nardo, CEO of Pivotree. “ Our focus on frictionless products is bearing fruit, where we saw measurable progress with our IP based solutions through the year which we expect to continue into 2024.”

Pivotree also announced today that it has released a letter to shareholders from Bill Di Nardo, CEO. The letter can be accessed from the Company’s website at investor.pivotree.com and filed on SEDAR at www.sedar.com.

Fourth Quarter 2023 Financial Highlights

(All figures are in Canadian dollars and all comparisons are relative to the three-month period ended December 31, 2022 unless otherwise stated):

  • Total Revenue of $21.0 million, a decrease of 19.6% or a decrease of 19.8% in constant currency.
    • Total Legacy Managed Services + Managed & IP Solutions (LMS + MIPS) of $10.7 million, a decrease of 3.9%, or 4.1% in constant currency. The year-over-year decline was primarily related to the legacy managed services which was partially offset by growth from a shift of professional services to managed services, expansion within existing customers and addition of new customers.
      • Legacy Managed Services (LMS) Revenue declined 24.8% to $6.1M in Q4 2023, from $8.1M in Q1 2023
      • Managed & IP Solutions (MIPS) Revenue grew 59.2% to $4.6M in Q4 2023, from $2.9M in Q1 2023
    • Professional Services Revenue of $10.3 million, a decrease of 31.3% or 31.4% in constant currency. The year-over-year decline was primarily due to ramp down of professional services projects, which was only partially mitigated with growth through existing and new customer bookings.
  • Gross profit of $9.8 million, a decrease of 20.6% and representing 46.7% of total revenue compared to $12.4 million or 47.3% of revenue for the prior year period.
  • Net loss of $1.4 million compared to net income of $1.5 million for the prior year period largely due to the tax provision adjustment processed in the fourth quarter of the prior year
  • Adjusted EBITDA1 of $0.6 million compared to an adjusted EBITDA1 of $1.3 million for the prior year period.

1 Please refer to “Key Performance Indicators” section of this press release.
2 Please refer to “Non-IFRS Measures and Reconciliation of Non-IFRS Measures” section of this press release.

Fourth Quarter 2023 Business Highlights

  • Pivotree received recognition from multiple partners including: Syndigo Americas 2023 Partner of the Year, Stibo Systems 2023 Systems Integrator of the Year, Spryker Transformation Catalyst Award, and became a Fluent Commerce Wave Champion (Highest Partner Level).
  • Commerce saw success in winning new logos across industries including: a leading payments provider, a home improvement retailer, an oil and gas services company and a barcode vendor. Additionally, Commerce introduced several price increases across legacy services upon renewal.
  • Data Management continued to see extensions of SKU Build as well as a number of other extensions of Stibo, Informatica, Precisely, and Syndigo projects. Data won two new logos including: a leading supplier of electrical materials and a home furnishings company.
  • Supply Chain saw its best quarter of bookings in Q4 driven largely by extensions of Fluent OMS projects for existing customers. Supply Chain secured important renewals across Fluent OMS and Sterling WMS as well as extensions of Pivotree Control Tower.

Fourth Quarter 2023 Results

Selected Financial Measures

 

Three months ended December 31,

Twelve months ended December 31,

 

 

 

 

 

 

 

 

2023

2022

$ Change

% Change

2023

2022

$ Change

% Change

 

$

$

$

%

$

$

$

%

Total LMS & MIPS

10,710,317

11,143,928

(433,611)

-3.9%

43,575,647

41,187,567

2,388,080

5.8%

Professional Services

10,321,007

15,019,104

(4,698,097)

-31.3%

46,230,160

60,505,911

(14,275,751)

-23.6%

Total Revenue

21,031,324

26,163,032

(5,131,708)

-19.6%

89,805,807

101,693,478

(11,887,671)

-11.7%

Results of Operations

The following table outlines our consolidated statements of loss and comprehensive loss for the three and twelve months ended December 31, 2023 and 2022.

 

Three months ended December 31,

Twelve months ended December 31,

 

2023

2022

2023

2022

 

$

$

$

$

Revenue

21,031,324

26,163,032

89,805,807

101,693,478

Cost of revenue

11,200,359

13,783,681

48,321,418

55,964,500

Gross profit

9,830,965

12,379,351

41,484,389

45,728,978

Operating expenses

 

 

 

 

General and administrative

2,910,213

3,860,358

12,231,918

15,481,120

Sales and marketing

2,235,968

2,590,421

9,877,260

9,997,599

Research and development

518,949

735,123

2,394,136

4,202,619

IT and Operations

3,447,126

3,882,543

14,581,825

15,643,150

Loss (gain) on foreign exchange

103,143

203

284,604

(531,183)

Amortization and Depreciation

1,597,263

1,366,335

6,411,507

8,621,237

Stock based compensation

181,350

127,046

860,413

925,878

Restructuring and Other

74,086

73,320

1,414,179

1,402,956

Interest

5,718

116,718

269,260

349,071

 

11,073,816

12,752,067

48,325,102

56,092,447

Income before other items

(1,242,851)

(372,716)

(6,840,713)

(10,363,469)

Other items (expenses)

-

(2)

-

-

Interest income

69,762

-

223,032

64,694

Operating loss

(1,173,089)

(372,718)

(6,617,681)

(10,298,775)

Current taxes

(168,661)

1,073,962

(565,563)

(525,437)

Deferred taxes

(46,814)

761,214

(46,814)

1,737,691

Net income (loss)

(1,388,564)

1,462,458

(7,230,058)

(9,086,521)

Other comprehensive income (loss)

-

-

-

-

Foreign translation adjustment

(572,644)

1,971,814

(904,463)

2,582,362

Comprehensive income (loss)

(1,961,208)

3,434,272

(8,134,521)

(6,504,159)

 

 

 

 

 

Income (Loss) per share - basic

(0.05)

0.05

(0.27)

(0.35)

Weighted average number of common shares outstanding - basic

26,576,306

26,600,896

26,605,913

26,180,606

Cash Flows

 

Three months ended December 31,

Twelve months ended December 31,

 

2023

2022

2023

2022

 

$

$

$

$

Cash and cash equivalents, beginning of period

8,969,128

13,844,455

17,346,028

24,570,287

Net cash provided by (used in):

 

 

 

 

Operating activities

1,091,770

3,914,309

(2,576,863)

(1,689,094)

Investing activities

(501,254)

45,208

(3,632,679)

(4,852,809)

Financing activities

(940,484)

(457,944)

(2,517,325)

(682,356)

Net increase (decrease) in cash and cash

(349,967)

3,501,573

(8,726,867)

(7,224,259)

Cash and cash equivalents, end of period

8,619,161

17,346,028

8,619,161

17,346,028

Conference Call

Management will host a live Zoom Video Webinar on Wednesday, March 27, 2024 at 8:30 am ET to discuss these fourth quarter 2023 results. The webinar can be accessed through the following registration link: https://pivotree.zoom.us/webinar/register/WN_QyIg3_HJQmWwRdXxWSL_7g.

A replay will be available approximately two hours after the conclusion of the live event and posted on https://investor.pivotree.com/.

Non-IFRS Measures and Reconciliation of Non-IFRS Measures

This press release makes reference to certain non-IFRS measures including key performance indicators used by management and typically used by our competitors in the technology industry. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore not necessarily comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures and technology metrics are used to provide investors with supplemental measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures, including technology industry metrics, in the evaluation of companies in the technology industry. Management also uses non-IFRS measures and technology industry metrics in order to facilitate operating performance comparisons from period to period, the preparation of annual operating budgets and forecasts and to determine components of executive compensation. The non-IFRS measures and technology industry metrics referred to in this press release include, “Recurring and Non-Recurring Revenue”, "Adjusted EBITDA" and "Free Cash Flow".

Key Performance Indicators

Due to our operating model, we recognize revenue within Total LMS & MIPS and professional services. Total LMS & MIPS Solutions, while largely based on minimum monthly recurring fees, also includes transactional and overage charges that may be variable from month to month.

Management uses a number of metrics, including the ones identified below, to measure the Company's performance and customer trends, which are used to prepare financial plans and shape future strategy. Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.

  • Annual Recurring Revenue (ARR): (Note: This will be the final period in which this metric will be reported. Subsequent MD&As will focus on the revenue segments of professional services and Total LMS & MIPS). We define Annual Recurring Revenue as the annualized equivalent value of the most recent quarter's recurring revenue of all existing Total LMS & MIPS and professional services contracts that contain a minimum committed spend with total ARR being inclusive of related overage fees, transaction volumes and customer credits as at the date being measured, and excluding any non-recurring set up fees and short-term standalone projects. The revenues captured are related to customer contracts that generally span a one to three-year contract term with most of the managed services being non-cancelable. Almost all of our customer contracts, contributing to ARR, automatically renew unless canceled by our customers. Actual ARR versus new ARR Bookings would be expected to increase with the related overage charges and through the upsell of additional services across our categories. ARR provides us with visibility for consistent and predictable growth to our cash flows. See "Non-IFRS Measures and Reconciliation of Non-IFRS Measures - Recurring and Non-Recurring Revenue" for the recurring revenue in the most recent quarter to support ARR.
  • Annual Recurring Revenue (ARR) bookings: (NOTE: This will be the final period in which this metric will be reported. Subsequent MD&As will focus on Total Contract Value Booking. This metric is defined as the new contractual bookings with existing and new customers for services that include minimum committed levels that automatically renew and generally span a one to three-year contract term. This amount does not include any projects, set up fees or overage charges. The bookings on renewals of similar services are recorded using the net incremental amounts to provide readers with revenue growth expectations. The bookings conversion to revenue will depend on the time it takes to deploy a given purchased service, which is driven by the complexity of the solution. The actual impact on revenue could vary from actuals once overage and seasonal consumption charges are captured, as they are not estimated and recorded at time of booking. The revenue conversion may also be impacted as booking will capture amendments in existing services that convert on demand services to longer term agreements with minimum commitments. It is important to note that while this is an indicator of revenue and future potential revenue, it cannot be reconciled to actual revenue recognized or industry book to bill metrics.
  • Non-Recurring Bookings: (Note: This will be the final period in which this metric will be reported. Subsequent MD&As will focus on Total Contract Value Booking). This is defined as contractual bookings with existing and new customers primarily for professional services projects but would also include one-time managed service set up fees, and short-term managed services arrangements. The conversion to non-recurring revenue will depend on the start date and ramp up with revenue being recognized through the duration of the projects, as the defined scope is delivered. The bookings amount may differ from actual revenues where the fees are based on a time and material structure.
  • Total Bookings: (NOTE: This will be the final period in which this metric will be reported. Subsequent MD&As will focus on Total Contract Value Booking. This is defined as ARR booking plus the contract value of the Non- Recurring Bookings
  • Net Revenue Retention Rate in Constant Currency: (Note: This will be the final period in which this metric will be reported). We define Net Revenue Retention Rate in constant currency for a period by considering the group of customers on our platform as of twelve months prior and dividing our ARR attributable to such group of customers at the end of the period by the ARR at the beginning of such period. By implication, this ratio excludes any ARR from new customers acquired during the period, but it does include incremental sales added to the cohort base of customers during the period being measured. The benefits of cross selling and expanding our level of integrations and support is realized when we can achieve high Net Revenue Retention Rates. We reach constant currency for the reported period by applying the average foreign exchange of the comparable period from twelve months prior to translate the reported period results.
  • Total Contract Value (TCV) Booking: (Note: This is a new metric, which will be reported by the Company going forward and it replaces the booking metrics indicated above). This is defined as the total value of the contract executed with customers by the Company in the quarter. This is a new KPI to provide improved visibility to total bookings. It is important to note that while this is an indicator of revenue and future potential revenue, it cannot be reconciled to actual revenue recognized or industry book to bill metrics due to variances to time and material estimates, transactional or overage revenue that may not appear in bookings. The TCV Booking will be reported for the professional and Legacy Managed Services (LMS) & Managed and IP Solutions (MIPS) revenue segments. For this quarter we have provided the trailing twelve months which will serve as the comparative as we begin to report the Company’s 2024 quarterly results.
  • Legacy Managed Services (LMS) Revenue: (Note: This is a new metric, which will be reported by the Company going forward.) This supplementary information will provide visibility into the revenues associated with supporting certain technology platforms in which the Company is not actively investing to grow. This metric should provide the readers with an overview of the underlying growth of the Company when these services are excluded from the results. This is a one-time segmentation for specific contracts of which the company intends to continue to report on until the revenues become less material to the overall Company’s results. Starting 2024, the quarterly results will be compared to the table provided within this document.
  • Managed & IP Solutions (MIPS): (Note: This is a new metric, which will be reported by the Company going forward.) This supplementary information will provide visibility into the revenue growth of managed services and licenses when the legacy managed services business is excluded.
  • Total LMS & MIPS: This was referred to as managed services in prior reporting and will now be referenced using the new term. This segment combines both the LMS and MPS supplementary segmentations introduced within.

Annual Recurring Revenue, Bookings and Net Revenue Retention Rate for the three and twelve months ended December 31, 2023 are as follows:

The ARR, ARR Bookings, Non-Recurring Bookings and Net Revenue retention rate will be discontinued in all 2024 MD&A reports.

 

Three Months Ended
December 31

 

YoY Change

 

Twelve Months Ended
December 31

 

YoY Change

 

2023

2022

 

Change

% Change

 

2023

2022

 

Change

% Change

 

 

 

 

 

 

 

 

 

 

 

 

Total ARR (1)

41,396,468

48,786,824

 

(7,390,356)

-15.1%

 

N/A

N/A

 

N/A

N/A

YTD ARR Bookings

1,043,907

872,727

 

171,180

19.6%

 

4,025,908

4,321,354

 

(295,446)

-6.8%

YTD Non-Recurring Bookings

12,286,022

20,457,472

 

(8,171,450)

-39.9%

 

45,091,085

69,050,148

 

(23,959,063)

-34.7%

YTD Total Bookings

13,329,929

21,330,199

 

(8,000,270)

-37.5%

 

49,116,993

73,371,502

 

(24,254,509)

-33.1%

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue Retention Rate in Constant Currency (1)

70.3%

98.8%

 

-28.5%

N/A

 

N/A

N/A

 

N/A

N/A

Adjusted EBITDA

Adjusted EBITDA is used by management as a supplemental measure to review and assess operating performance and provide a more complete understanding of factors and trends affecting our business. Management believes that Adjusted EBITDA is a useful measure of operating performance and our ability to generate cash-based earnings, as it provides a relevant picture of operating results by excluding the effects of financing and investing activities which removes the effects of interest, depreciation and amortization expenses as non-cash items that are not reflective of our underlying business performance, and other one-time or non-recurring expenses. The Company defines Adjusted EBITDA as net income (loss) excluding taxes, interest and finance costs, amortization and depreciation, restructuring and other, and share based compensation. Management believes that these adjustments are appropriate in making Adjusted EBITDA an approximation of cash-based earnings from operations before capital replacement, financing, and income tax charges. Adjusted EBITDA does not have a standardized meaning under IFRS and is not a measure of operating income, operating performance or liquidity presented in accordance with IFRS and is subject to important limitations. The Company's definition of Adjusted EBITDA may be different than similarly titled measures used by other companies.

The following table reconciles Adjusted EBITDA to net loss for the periods indicated:

 

Three months ended December 31,

Twelve months ended December 31,

 

2023

2022

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