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183% Quarter-over-Quarter Revenue Increase, Positive Adjusted EBITDA, Positive Net Income, Strong Balance Sheet
Edmonton, Alberta, Canada (May 19, 2020) – OneSoft Solutions Inc. (the “Company” or “OneSoft”) (TSX-V: OSS, OTCQB: OSSIF), a North American developer of cloud-based business solutions, is pleased to announce results for the financial quarter ended March 31, 2020 (Q1 of Fiscal 2020). Please refer to the interim unaudited condensed Consolidated Financial Statements and Management’s Discussion and Analysis (“MD&A”) for the three months ended March 31, 2020 filed on SEDAR at www.sedar.com for more information.
Financial summary for Q1 ended March 31, 2020
The following table summarizes the first quarter ended March 31, 2020, compared to March 31, 2019:
Financial summary for Q1 ended March 31, 2020
- Total revenue for the quarter ended March 31, 2020 (“Q1 2020”) was $1,675,486, a 183% increase over revenue of $592,302 in the comparative quarter of the prior year. Revenue consisted of $1,616,267 of annual recurring revenue (“ARR”) and $59,219 of Other Revenue, representing increases of 180% and 284%, respectively, over the comparative quarter.
- Comprehensive income was $10,609 versus a Comprehensive loss of $967,391 for the comparable period in the prior year.
- Adjusted positive EBITDA was $250,478 compared to negative EBITDA of $669,729 for the comparable period in the prior year.
- On March 31, 2020, cash and short-term investments were $9.7 million ($10.5 million on December 31, 2019), working capital was $8.6 million ($8.2 million on December 31, 2019) and the Company has no debt.
- OneSoft tracks revenues in three categories and various buckets, as was described on pages 9-10 of the Company’s Management Discussion and Analysis (“MD&A”) for the fiscal year ended December 31, 2019:
- ARR includes revenue from SaaS Subscription, ILI Log Ingestion, Microsoft Azure and Specialized Functionality Module fees associated with the Company’s Cognitive Integrity ManagementTM (“CIM”) SaaS solution.
- Other Revenue includes Proof of Concept (“POC”) and services revenue that typically is non-recurring.
- There was no Software development project revenue in the current or comparative quarters.
The following chart summarizes some of the key financial revenue metrics followed by Management, with comparisons to prior periods, as described in the December 31, 2019 MD&A referenced above.
Operational Highlights for Q1 ended March 31, 2020
Highlights for Q1 include the following:
- On February 13, 2020, the Company announced its Innovation Lab to collaborate with Microsoft [NASDAQ:MSFT], oil and gas (“O&G”) pipeline operators and select industry vendors. Innovation Lab, which is separate from the Company’s core operations, seeks to fast-track the creation and scaling of new ideas to advance digital transformation agendas through the Company’s revolutionary machine learning and data science technology using Microsoft’s Azure cloud computing platform and services. We are now investigating various potential business development alternatives with certain clients, prospective customers and industry experts and vendors, which may result in future joint initiatives that broaden the Company’s CIM functionality, intellectual property (“IP”) and total addressable market (“TAM”) potential.
- On February 18, 2020, the Company announced the appointment of a senior O&G industry veteran as its new VP Sales, who will lead sales and marketing activities focused on senior personnel of our clients who typically drive digital transformation initiatives within their organizations.
- On February 24, 2020, the Company attended PPIM 2020, the industry's primary annual forum devoted exclusively to pigging for maintenance and inspection, pipeline integrity evaluation and repair, and presented (see video) a white paper profiling Statistical Analysis of Dig Operations to pipeline industry professionals. This white paper documents the high-value proposition of utilizing CIM to improve Repair Fraction effectiveness by optimizing dig selection criteria as part of integrity management processes.
- The Company essentially completed the on-boarding processes in Q1 2020 for the new clients who adopted CIM in 2019, which contributed $0.709 million of revenue and reduced deferred revenue by the same amount.
- Regarding product development, the Company continued to advance its SaaS products, IP and competitive moat during the quarter, including development of functionality that is considered foundational for future new products that we anticipate will address the segments of O&G pipeline infrastructure that are managed using Direct Assessment processes (rather than through collection of ILI data).
- The Company continued to engage in various POCs with potential new clients in Q1 2020, which were in various stages of progress but not completed at the quarter end. The Company’s sales funnel is increasing and remains robust, with sales activities currently underway involving prospective new clients that collectively operate more than 100,000 miles of pipeline infrastructure.
Business Disruption Due to Covid-19
While the extent of future potential business disruption due to Covid-19 cannot be known with any degree of certainty Management anticipates that business will be disrupted for at least part of 2020, but not overly threatening to the Company’s longer-term business and outlook. We believe that OneSoft is well-positioned to deal with this unusual business disruption as most of our clients and prospective customers have by now implemented procedures using on-line and video conferencing tools to minimize negative impacts caused by travel restrictions and lack of usual access to people, data and other resources they require to operate their businesses. We do not anticipate slow-down of product development or inability to service our clients, as our cloud-computing environment insulates us from the quarantine and disruptive work scenarios that have hampered businesses that depend on on-premise computing platforms and conventional office environments.
Our sales and business development activities started to return to a new “near normal” in mid-April, after prospective customers transitioned their business activities to on-line. We believe that Covid-19 may be a catalyst for future sales because some of our prospective customers now have a new appreciation for cloud computing and digital strategies that empower their employees to access critical data on-line using any web-connected device, especially while working remotely. Although we have encountered some delays in signing new clients, we anticipate that sales activities proceeding under the “new normal” conditions will ultimately be successful. Although timing and recognition of the revenue is unknown and not in our control, we expect to complete new sales in 2020.
Regulatory Influence on OneSoft Future Sales is Positive
The global O&G pipeline infrastructure continues to age, and regulatory compliance for U.S. operators in particular, where OneSoft is currently focusing sales efforts, is becoming more stringent as mandated by the U.S. regulator, the Pipeline and Hazardous Materials Administration (“PHMSA”). We believe that existing regulatory and revised compliance requirements that will apply in the future are becoming more opportunistic for OneSoft. The new “Mega Rule” was scheduled to take effect on July 1, 2020 but some requirements were relaxed to December 31, 2020 in response to Covid-19 disruptions. The Mega Rule mandates, amongst other requirements, that pipeline operators adopt more sophisticated ILI data management and analyses capability, which is squarely in CIM’s sweet spot to address. More pipeline infrastructure will need to be operated within federal compliance standards in the future, including requirements to adopt ILI data analyses for these pipelines. Additionally, certain pipeline inspection and maintenance standards and operating guidelines pertaining to ILI data management and analysis that were only recommended practices in the past will become mandatory to maintain regulatory operational compliance in the future.
Pursuit of New Visions and Opportunities Through OneBridge Innovation Lab
The Company announced establishment of its Innovation Lab in February 2020, to collaborate with clients, prospective customers and industry experts and vendors in pursuit of new visions and opportunities. We are investigating projects with several third parties with the objective of advancing them to a proof of concept stage, and potentially to full product development and commercialization. These projects have the potential to increase the Company’s total addressable market and generate incremental revenue by adding new functionality to the CIM platform and by launching CIM technology into new industries.
Sales and Revenue
Our highest priority in 2020 is to sign new clients using our “land and expand” growth strategy to expand our foundation and opportunity to increase future revenues. Management anticipates that ARR will double in 2020 over 2019, as a result of some current clients increasing use of our solutions by on boarding their regional affiliate operations, and through addition of new clients. Management’s key objective is to focus on growing annual recurring revenue, as we believe this metric is a key factor used in determining the value of SaaS companies.
Corporate Development and Outlook
Management will continue to focus on increasing shareholder value, by advancing the Company’s intellectual property and by addressing the multiple factors that we believe enhance value for shareholders of SaaS companies. We will continue to improve awareness of our Company and investment opportunity by increasing our participation in various on-line investor and industry conferences, road show events (when those become practical to resume) and other initiatives that target Canadian and U.S. investors, particularly with those who have specific interest in microcap companies that focus on artificial intelligence, machine learning, SaaS, and environmental, social and governance themes.
Given the Company’s strong balance sheet with $9.7 million of cash and short-term investments, no debt, current cash burn rate and strong sales pipeline, we believe the Company is well-funded to pursue our business and strategies, with no requirement to raise additional capital.
Please refer to the MD&A for the quarter ended March 31, 2020 filed on SEDAR for further information and details.
NOTE: OneSoft Solutions Inc. will hold its Annual and Special Meeting of shareholders on Wednesday, May 20, 2020 at 1:00 p.m. (Edmonton time; 3:00 p.m. Eastern Time) via webcast at https://global.gotowebinar.com/register/224279867 and telephone access at (647) 497-9386 using access code 922-536-798. Shareholders who wish to attend should plan to log in and register 15 minutes prior to the start of the meeting.
ON BEHALF OF THE BOARD OF DIRECTORS
ONESOFT SOLUTIONS INC.
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This news release contains forward-looking statements relating to the future operations and profitability of the Company and other statements that are not historical facts. Forward-looking statements are often identified by terms such as “may”, “should”, “anticipate”, “expects”, “believe”, “will”, “intends”, “plans” and similar expressions. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking information is provided to deliver information about management's current expectations and plans relating to the future. Investors are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions.
In respect of the forward-looking information and statements the Company has placed reliance on certain assumptions that it believes are reasonable at this time, including expectations and assumptions concerning, among other things: interest and foreign exchange rates; planned synergies, capital efficiencies and cost-savings; applicable tax laws; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services; the efficacy of its software; our interpretation based on various industry information sources regarding the total miles of pipeline in the USA and globally, which segments are piggable; our understanding of metrics, activities and costs regarding evaluation, inspection and maintenance is in alignment with various industry information sources and costs of performing pipeline evaluation, inspection and maintenance in the USA are representative of those in the rest of the world, are reasonably accurate; the success of growth projects; future operating costs; that counterparties to material agreements will continue to perform in a timely manner; that there are no unforeseen events preventing the performance of contracts; and that there are no unforeseen material development or other costs related to current growth projects or current operations. Accordingly, readers should not place undue reliance on the forward-looking information contained in this press release. Since forward-looking information addresses future events and conditions, such information by its very nature involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to many factors and risks. These include but are not limited to the risks associated with the industries in which the Company operates in general such as: costs and expenses; interest rate and exchange rate fluctuations; competition; ability to access sufficient capital from internal and external sources; and changes in legislation, including but not limited to tax laws.
Readers are cautioned that the foregoing list of factors is not exhaustive. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release, and the Company undertakes no obligation to update publicly or to revise any of the included forward-looking statements, whether because of new information, future events or otherwise, except as expressly required by Canadian securities law.
This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities within the United States. The securities to be offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act or other laws.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
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