MDF MDF Commerce Inc

mdf commerce inc. (the “Corporation”) (TSX:MDF), a SaaS leader in digital commerce technologies, reported first quarter financial results for the three-month period ended June 30, 2023 (Q1 FY2024). All dollar amounts are expressed in Canadian dollars unless otherwise indicated.

“I am pleased with our revenue growth and our Adjusted EBITDA(2) which increased by $3.7 million compared to the first quarter of prior year, with Q1 FY2024 marking the fourth sequential quarter with positive Adjusted EBITDA(2). After factoring out InterTrade(5) revenue of $3.4 million in Q1 FY2023, since it was sold on October 4, 2022, Q1 year-over-year revenue grew by $2.2 million or 7.6%. As we advance the integration of our eprocurement offerings into a unified platform, moving steadily towards our comprehensive suite of eprocurement technology offered under Source, Contract, Procure, Connect and Shop, we remain committed to controlling costs and improving profitability”, said Luc Filiatreault, President and Chief Executive Officer of mdf commerce. “This quarter we saw an acceleration in pipeline conversion of mid-market customers, including the recent announcements that were made on our eprocurement solutions, positioning us favorably to capitalize both on the larger State contracts and on the mid-market opportunities that we believe lie ahead as public agencies digitize their procurement solutions.”

We are pleased to welcome new clients such as Anoka County (Minnesota) and Pima County (Arizona) and multiple other cities, joining over 6,500 public sector buying organizations in choosing mdf commerce eprocurement solutions. The Commonwealth of Massachusetts renewed their long-term contract for our full eprocurement offering for another five years and Maricopa Country (Arizona) will upgrade its existing suite of products. These renewals and upgrades represent strong proof points to the value of our solution to States, counties, cities, municipalities to support their procurement and is a testament to the enduring trust of our customers.

First Quarter Fiscal 2024 Financial Results

Revenues for Q1 FY2024 were $31.0 million, a decrease of $1.2 million or 3.7% compared to $32.2 million for Q1 FY2023. On a Constant Currency(3) basis, revenues decreased by $2.0 million or 6.0% compared to $33.0 million in Q1 FY2023.

Factoring out the revenue from InterTrade(5), a subsidiary that contributed $3.4 million of revenue in Q1 FY2023 and was sold on October 4,2022, Q1 year-over-year revenue grew by $2.2 million or 7.6%.

Recurring Revenue(4) grew to 79.2% of revenues for Q1 FY2024 compared 77.8% of revenues for Q1 FY2023, trending positively despite the sale of InterTrade(5) which had Recurring Revenue as a percentage of revenue in excess of 90%.

In recent quarters, we have prioritized operational efficiency and streamlined our processes, implementing significant cost reduction measures. In early Q1 FY2024, we effected a workforce reduction to lower the operating expenses, reducing our global workforce by approximately 40 people and we continued to make substantial progress in improving profitability and cash flows across all our platforms.

Net loss for Q1 FY2024 improved by $1.2 million from $6.3 million in Q1 FY2023 to $5.1 million in Q1 FY2024 and we achieved positive Adjusted EBITDA(2) of $2.6 million in Q1 FY2024, a significant improvement of $3.7 million from the Adjusted EBITDA(2) loss of $1.1 million in Q1 FY2023, marking the fourth sequential quarter with positive Adjusted EBITDA(2).

Our two core platforms, eprocurement and ecommerce (previously Unified Commerce before the sale of InterTrade) contributed to revenues of the first quarter as follows:

• The eprocurement platform generated revenues of $20.3 million, an increase of $2.4 million or 13.5% compared to $17.9 million in Q1 FY2023. The Corporation’s US-based eprocurement network represented $15.4 million for Q1 FY2024 and 76.0% of total eprocurement revenue, an increase of $2.2 million compared to $13.2 million and 73.7% for Q1 FY2023. Recurring Revenue(1) for the eprocurement platform represented $17.9 million or 88.5% of total revenue for the eprocurement platform for Q1 FY2024, compared to $16.6 million or 86.8% for Q1 FY2023.In Q1 FY2023, revenues were impacted by a $1.2 million fair value adjustment on Periscope deferred revenues at the closing date of the acquisition on August 31, 2021.

• The ecommerce platform revenues were $5.9 million for Q1 FY2024, a decrease of $3.8 million or 39.3% compared to $9.8 million for Q1 FY2023, mainly from the sale of InterTrade which had Q1 FY2023 revenues of $3.4 million, offset by $0.4 million in other revenue in Q1 FY2024 from post-closing transition services. Professional services revenues for the Orckestra solution were $1.1 million lower in Q1 FY2024 due to the completion of customer deployments which were ongoing in Q1 FY2023.Recurring Revenue(1) for the ecommerce platform was $2.6 million in Q1 FY2024 and represented 43.8% of platform revenues compared to $5.8 million or 59.6% in Q1 FY2023 which included both ecommerce and InterTrade’s Supply Chain Collaboration. The $3.2 million decrease in Recurring Revenue(1) in Q1 FY2024 as compared to Q1 FY2023, is mainly as a result of the sale of InterTrade which had Recurring Revenue(1) of $3.2 million in Q1 FY2023. InterTrade had Recurring Revenue(1) as a percentage of revenue in excess of 90%.

Overall, our emarketplaces platforms performed well in Q1 FY2024 with revenues of $4.8 million, an increase of $0.2 million or 5.1% compared to $4.6 million in Q1 FY2023. Revenues from The Broker Forum, an electronics parts marketplace, increased by $0.2 million, revenues from Carrus Technologies increased by $0.1 million, offset by a $0.1 million decrease in revenues from Jobboom mainly due to a softer labour market compared to Q1 FY2023. Recurring Revenue(1) for the emarketplaces platform represented $4.0 million or 83.9% of platform revenues for Q1 FY2024 compared to $3.6 million or 79.4% for Q1 FY2023.

Gross margin for Q1 FY2024 was $17.7 million or 57.1% compared to $18.5 million or 57.4% for Q1 FY2023.

Operating expenses totalled $20.8 million in Q1 FY2024, a decrease of $4.7 million or 18.5% compared to $25.5 million in Q1 FY2023. General and administrative expenses totalled $6.2 million in Q1 FY2024, selling and marketing expenses were $6.7 million and technology expenses were $7.9 million, compared to $7.3 million, $8.7 million, and $9.5 million respectively for Q1 FY2023. The decrease in operating expenses of $4.7 million, compared to Q1 FY2023, is mainly due to salary savings from workforce reductions, to the sale of InterTrade and to lower transaction-related costs, partially offset by higher restructuring costs of $1.2 million and lower e-business tax credits of $0.6 million partially due to the sale of InterTrade.

The Corporation improved its operating loss by $3.9 million, from $7.0 million in Q1 FY2023 to $3.1 million during Q1 FY2024, due to the decrease in operating expenses of $4.7 million explained previously, partially offset by the $1.2 million decrease in revenues.

Q1 FY2024 net loss includes an impairment loss of $0.7 million on right-of-use assets and leasehold improvements related to the Corporation’s office space reduction strategy.

Net loss was $5.1 million or $0.12 per share (basic and diluted) for Q1 FY2024, compared to a net loss of $6.3 million or $0.14 per share (basic and diluted) for Q1 FY2023, an improvement of $1.2 million. Adjusted net loss(4) was equal to Net loss for Q1 FY2024 and Q1 FY2023.

We achieved positive Adjusted EBITDA(2) of $2.6 million for Q1 FY2024, a significant improvement of $3.7 million compared to an Adjusted EBITDA(2) loss of $1.1 million for Q1 FY2023, and marking the fourth sequential quarter with positive Adjusted EBITDA(2). Higher Adjusted EBITDA(2) is mainly due to the decrease in operating expenses following workforce reductions and other cost savings initiatives, partially offset by a $1.2 million reduction in revenues and a $0.7 million impairment loss on right of use assets and leasehold improvements recorded in Q1 FY2024.

The Periscope acquisition accounting adjustment to the fair value of deferred revenues at the acquisition date resulted in a reduction of revenue of $1.2 million in Q1 FY2023. The fair value adjustment, in Q1 FY2023, also had an unfavorable impact on gross margin, operating loss, net loss, Adjusted Net Loss(4), Adjusted EBITDA (loss)(2) net loss per share (basic and diluted) and Adjusted net loss per share(4) (basic and diluted).

Summary

In Q1 FY2024, we continued to make substantial progress in improving profitability and cash flows across all our platforms. Despite some headwinds in top-line revenue growth, we prioritized operational efficiency and streamlined our processes, implementing significant cost reduction measures.

Moving forward, we remain focused on simplifying and optimizing our operations for our two core platforms, eprocurement and ecommerce. Our objective is to maintain positive Adjusted EBITDA(2) and continue to improve cash flows from operations by pursuing profitable growth.

Summary of consolidated results

Financial HighlightsIn thousands of Canadian dollars, except number of shares and per share data	Q1FY2024		Q4FY2023		Q1FY2023
Revenues	31,004		31,231		32,196
Recurring Revenue(1)	24,557		24,444		26,023
Gross margin	17,713		17,546		18,496
Operating loss	(3,054	)	(5,034	)	(6,975	)
Net loss	(5,115	)	(3,995	)	(6,323	)
Adjusted Net Loss(4)	(5,115	)	(4,175	)	(6,323	)
Adjusted EBITDA(2) (loss)	2,640		2,191		(1,085	)
Net loss per share (basic and diluted) (in $)	(0.12	)	(0.09	)	(0.14	)
Adjusted Net Loss per share(4) (basic and diluted) (in $)	(0.12	)	(0.09	)	(0.14	)
Basic and diluted weighted average number of shares outstanding (in thousands)	43,971		43,971		43,971

Reconciliation of net earnings (loss), EBITDA(2) (loss) and Adjusted EBITDA(2) (loss)

In thousands of Canadian dollars	Q1		Q4		Q1
	FY2024		FY2023		FY2023
Net loss	(5,115	)	(3,995	)	(6,323	)
Income tax recovery	(284	)	(1,237	)	(669	)
Depreciation of property and equipment and amortization of intangible assets	847		950		967
Amortization of acquired intangible assets	3,098		3,116		2,966
Amortization of right-of-use assets	813		817		559
Finance expenses	256		298		623
EBITDA(2) (loss)	(385	)	(51	)	(1,877	)
Gain on disposal of a subsidiary	-		(180	)	-
Foreign exchange loss (gain)	1,428		169		(607	)
Share-based compensation	141		(1	)	221
Restructuring costs	1,421		1,621		271
Transaction-related costs	35		633		907
Adjusted EBITDA(2) (loss)	2,640		2,191		(1,085	)

Reconciliation of net earnings (loss) and Adjusted net loss(4)

In thousands of Canadian dollars, unless otherwise noted	Q1		Q4		Q1
	FY2024		FY2023		FY2023
Net loss	(5,115	)	(3,995	)	(6,323	)
Gain on disposal of a subsidiary	-		(180	)	-
Adjusted net loss(4)	(5,115	)	(4,175	)	(6,323	)
Weighted average number of shares outstanding:
Basic and diluted (in thousands)	43,971		43,971		43,971
Net loss per share – basic and diluted (in $)	(0.12	)	(0.09	)	(0.14	)
Adjusted net loss per share – basic and diluted (4) (in $)	(0.12	)	(0.09	)	(0.14	)

Reconciliation of revenues on a Constant Currency basis(3)

In thousands of Canadian dollars	Q1FY2024		Q1FY2023		Var.$		Var.%		Q1FY2024		Q4FY2023		Var.$		Var.-%
Revenues	31,004		32,196		(1,192	)	(3.7	)	31,004		31,231		(227	)	(0.7	)
Constant Currency impact	-		804		(804	)	-		-		(115	)	115		-
Revenues in Constant Currency(3)	31,004		33,000		(1,996	)	(6.0	)	31,004		31,116		(112	)	(0.4	)

(1) Recurring Revenue and Monthly Recurring Revenue (“MRR”) are key performance indicators. Refer to section “10 - Non-IFRS Financial Measures and Key Performance Indicators” of the Management’s Discussion and Analysis (MD&A) for the first quarter ended June 30, 2023.

(2) EBITDA, Adjusted EBITDA (loss) and Adjusted EBITDA margin are non-IFRS financial measures. Refer to section “10 - Non-IFRS Financial Measures and Key Performance Indicators” of the MD&A for the first quarter ended June 30, 2023.

(3) Certain revenue figures and changes from prior period are analyzed and presented on a Constant Currency basis and are obtained by translating revenues from the comparable period of the prior year denominated in foreign currencies at the foreign exchange rates of the current period. Refer to section “10 - Non-IFRS Financial Measures and Key Performance Indicators” of the MD&A for the first quarter ended June 30, 2023.

(4) Adjusted net earnings (loss) and Adjusted net earnings (loss) per share (basic and diluted) are non-IFRS financial measures. Refer to section “10 - Non-IFRS Financial Measures and Key Performance Indicators” of the MD&A for the first quarter ended June 30, 2023.

(5) InterTrade Systems Inc. (InterTrade), a wholly-owned subsidiary of the Corporation, our Supply Chain Collaboration solution was sold on October 4, 2022. For comparative purposes, the Corporation has provided information on the disposed entity prior to the sale, by excluding Q1 FY2023 revenue for InterTrade which was $3.4 million and Recurring Revenue (1) of $3.2 million.

About mdf commerce inc.

mdf commerce inc. (TSX:MDF) enables the flow of commerce by providing a broad set of software as a service (SaaS) solutions that optimize and accelerate commercial interactions between buyers and sellers. Our platforms and services empower businesses around the world, allowing them to generate billions of dollars in transactions on an annual basis. Our eprocurement, ecommerce and emarketplaces solutions are supported by a strong and dedicated team of approximately 650 employees based in Canada, the United States, Ukraine and China. For more information, please visit us at mdfcommerce.com, follow us on LinkedIn or call at 1-877-677-9088.

Forward-Looking Statements

In this press release, “mdf commerce”, the “Corporation” or the words “we”, “our” and “us” refer, depending on the context, either to mdf commerce inc. or to mdf commerce inc. together with its subsidiaries and entities in which it has an economic interest.

This press release is dated August 8, 2023, and unless specifically stated otherwise, all information disclosed herein is provided as at June 30, 2023 and for the first quarter of fiscal 2024.

Certain statements in this press release and in the documents incorporated by reference herein constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause mdf commerce’s, or the Corporation’s industry’s actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any of the Corporation’s statements. Such factors may include, but are not limited to, risks and uncertainties that are discussed in greater detail in the “Risk Factors and Uncertainties” section of the Corporation’s Annual Information Form as at March 31, 2023, as well as in the “Risk Factors and Uncertainties” section of the MD&A for the first quarter ended June 30, 2023 and elsewhere in the Corporation’s filings with the Canadian securities regulators, as applicable.

Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “anticipates”, “intends”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negatives of these terms or other comparable terminology. These statements are only predictions. Forward-looking statements are based on management’s current estimates, expectations and assumptions, which management believes are reasonable as of the date hereof, and are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and are accordingly subject to changes after such date. Undue importance should not be placed on forward looking statements, and the information contained in such forward-looking statements should not be relied upon as of any other date. Actual events or results may differ materially. We cannot guarantee future results, levels of activity, performance or achievement. We disclaim any intention, and assume no obligation, to update these forward-looking statements, except as required by applicable securities laws.

Additional information about mdf commerce, including the Corporation’s interim condensed consolidated financial statements as at June 30, 2023 and 2022, MD&A for the first quarter ended June 30, 2023 and its latest Annual Information Form as at March 31, 2023 are available on the Corporation’s website www.mdfcommerce.com and have been filed with SEDAR+ at www.sedarplus.com.

Non-IFRS Financial Measures and Key Performance Indicators

The Corporation’s unaudited interim condensed consolidated financial statements for the three-month periods ended June 30, 2023 and 2022 have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, through the application of accounting principles that are compliant with International Financial Reporting Standards (“IFRS”). The unaudited interim condensed consolidated financial statements do not include all of the information required for complete financial statements under IFRS, including the notes.

The Corporation presents non-IFRS financial measures and key performance indicators to assess operating performance. The Corporation presents Adjusted net earnings (loss)(4), Adjusted net earnings (loss) (4) per share, net earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”) (2) , Adjusted EBITDA (loss) (2), Adjusted EBITDA margin(2), and certain Revenues presented on a Constant Currency basis(3) as a non-IFRS financial measures and Recurring Revenue(1) and Monthly Recurring Revenues (“MRR”)(1) as key performance indicators.

These non-IFRS measures and key performance indicators do not have standardized meanings under IFRS and are not likely to be comparable to similarly designated measures reported by other corporations. The reader is cautioned that these measures are being reported in order to complement, and not replace, the analysis of financial results in accordance with IFRS. Management uses both measures that comply with IFRS and non-IFRS measures, in planning, overseeing and assessing the Corporation’s performance. Certain additional disclosures including the definitions associated with non-IFRS financial measures as well as a reconciliation to the most comparable IFRS measures, and key performance indicators have been incorporated by reference and can be found in the MD&A for the first quarter ended June 30, 2023, as presented in the section “10 - Non-IFRS Financial Measures and Key Performance Indicators”. The MD&A for the first quarter ended June 30, 2023, is available on SEDAR+ at www.sedarplus.com and on the Corporation’s website www.mdfcommerce.com under the Investors section.

Conference call for First quarter fiscal 2024 financial results

Date: Wednesday, August 9, 2023Time: 9:00 a.m. Eastern Daylight Time

To dial-in: 1 833 630-1956 or 412 317-1837 (for international)Live webcast: Click here to register

For further information:

mdf commerce inc.Luc Filiatreault, President & CEO Toll free: 1-877-677-9088, ext. 2004Email: luc.filiatreault@mdfcommerce.com

Deborah Dumoulin, Chief Financial Officer Toll free: 1-877-677-9088, ext. 2134Email: deborah.dumoulin@mdfcommerce.com