A Decent Performance, But We Were Hoping For A Little More

A Solid Start To The Year

Favorable Revenue Undercurrents

Hoping For More Gas To Fuel Faster Revenue Growth

Michael Kupinski

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Financial Services

Capital Markets

QuoteMedia Inc.

Investment Appraisal
 The second quarter results were mixed, with revenues lighter than expected and adj. EBITDA largely in line. Total company revenues were $19.3 million, 9.9% better than the year earlier quarter, but below our $20.1 million estimate. Management indicated that an unfavorable Canadian exchange rate accounted for a portion of the &#8220;miss&#8221;. On an exchange rate neutral basis, revenues would have increased 13%, still shy of our 15% growth estimate. A portion of the revenue shortfall was due to customers opting for cheaper exchange feed options. This trend is expected to impact the second half results as well. Notably, this is a very low margin business. As a result, the currency exchange and the lower exchange feed revenue did not meaningfully impact adj. EBITDA. Adj. EBITDA was $808,000 versus our $850,000 estimate. Figure #1 Q2 Results highlights our estimates versus the actual results.&nbsp;
Management indicated that the second half performance is expected to be in line with Q2 revenue and adj. EBITDA growth trends. This is disappointing given that we anticipated that there would be a revenue ramp in the second half. A portion of the disappointment is expected to be related to customers seeking cheaper options to the exchange feeds, which will adversely affected Corporate Quotestream and Interactive Content &amp; Data Applications businesses. We believe that another portion of the disappointment is that the company has not been successful in landing a large account. The sales of these types of accounts have a long tail. Given that this is August, we do not expect that there is such a prospect at least until the first quarter of 2024.&nbsp;
Figure #2&nbsp;Second Half Revisions highlight our revenue and adj. EBITDA revisions for the third and fourth quarters 2023. As highlighted in the Figure, we lowered our revenue growth assumption for the third and fourth quarters to 5% and 7%, respectively. We have taken lower our gross margin assumption from a range of 52.5% to 53.3% to roughly 52.0%, which represents a slight improvement from Q2 gross margins of 50.7%. We believe that G&amp;A expenses likely will trend lower due to the absence of professional fees. The company is cycling out of the added expenses from a change in auditors. Nonetheless, we expect other expenses, particularly Software Development expenses, will be higher. As a result, we are tweaking slightly lower our Q3 adj. EBITDA estimate from $860,000 to $849,000 and our Q4 estimate from $1.03 million to $925,000. Flowing through the variance of the Q2 results and our second half revisions, we are revising our full year 2023 estimates as highlighted in Figure #3&nbsp;Full Year Revisions.
Our full year 2023 revenue estimate is revised from $20.1 million to $19.3 million and our adj. EBITDA estimate is lowered from $3.57 million to $3.41 million. Using our full year 2023 estimates as a base year, we have revised lower our full year 2024 revenue and adj. EBITDA estimates. Our 2024 revenue estimate is revised from $23.3 million to $21.0 million and our adj. EBITDA estimate lowered from $4.3 million to $3.9 million. Our 2024 revisions do not anticipate that the company lands a large account, which is possible. It does appear unlikely, however, that the company will land such a prospect in the first quarter, or that there will be significant revenue contributions in that quarter if it should happen.&nbsp;
 As of June 30th, the company had $740,000 in cash and cash equivalents an increase of $262,000 from December 31, 2022 of $478,000. The company is expected to generate positive cash flow in coming quarters and have plenty of liquidity to invest in its business. We believe investments will focus on adding sales staff, building out data analytic capabilities, and expand services offerings. In our view, these investments should allow the company to be competitive with product offerings of its larger peers and support a favorable revenue growth outlook.&nbsp;
We are tweaking our price target from $0.50 to $0.44 to reflect our lowered 2024 adj. EBITDA estimate. Our revision maintains a target multiple near 14 times Enterprise Value to adj. EBITDA. Near current levels, the QMCI shares trade at 10 times EV to our 2024 adj. EBITDA estimate or below our expected adj. EBITDA growth rate near 15% in 2024 and below that of its peers currently trading near 14 times. We believe that there is a favorable risk/reward relationship and reiterate our Outperform rating.&nbsp;
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 Figure #1 Q2 Results
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/qmciq22023.jpg" style="width: 381px;height: 813px" />
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Figure #2 Second Half Revisions
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/qmci2H2023.jpg" style="width: 500px;height: 826px" />
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Figure #3 Full Year Revisions
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/qmci2023revise.jpg" style="width: 501px;height: 777px" />

QuoteMedia Inc. (QMCI)

A Decent Performance, But We Were Hoping For A Little More

Fundamental Analysis:

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A Decent Performance, But We Were Hoping For A Little More (QMCI)

A Solid Start To The Year (QMCI)

Favorable Revenue Undercurrents (QMCI)

Hoping For More Gas To Fuel Faster Revenue Growth (QMCI)

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