Positive EBITDA and quarterly revenue increased by 19%
TORONTO, ON / ACCESSWIRE / April 15, 2024 / EQ Inc. (TSXV:EQ.V) ("EQ Works" or the "Company"), a leader in AI and data driven software and solutions, announced its financial results today for the fourth quarter and the year ended December 31, 2023.
The Company is pleased to report that revenue for the fourth quarter increased by over 19% sequentially and 7% from the same period a year ago, to over $3.1 million, as client demand for data driven solutions continued to grow. Gross margin for the quarter increased to 49%, a significant improvement year over year, and as a direct result of the value generated by combining AI solutions with vital data assets and targeted media. The Company was profitable during the quarter and recorded its strongest Adjusted EBITDA in almost a decade. The Adjusted EBITDA improved to approximately $0.2 million, compared to an Adjusted EBITDA loss of $1.1 million for the same period a year ago.
Revenue for the year ended December 31, 2023, was $10 million. After years of investing in technology, data and AI driven solutions, one of the main goals in 2023 was to drive profitability. As a result, the Company reduced its focus on campaigns that did not utilize the full potential of its data and analytics offerings, discontinued lower margin campaigns and improved its Adjusted EBITDA each quarter, resulting in a positive EBITDA for the fourth quarter. Although these changes resulted in a slight decrease in revenue from the previous year, the gross margin improved to 45%, up significantly from the 37% in 2022 and the Adjusted EBITDA loss for the year was approximately $1.4 million compared to $5.3 million in 2022. The Company also recognized a one-time gain of $0.5 million due to the reversal of acquisition related transaction expenses and an impairment of goodwill and intangible assets of $3.8 million, which were related to historical acquisitions.
Over the course of the year, the Company continued to invest in Paymi, its consumer facing application, and Clear Lake, its insights and analytics dashboard. These investments helped build additional scale to our proprietary zero party data assets and continued to generate significant market interest and momentum. They also formed a strong foundation for the Company, as it turned its focus to higher margin and more recurring revenue lines of business. Early results from these investments are very positive as interest and traction are being shown from clients across multiple verticals.
"Profitability will continue to be a focus for the Company in 2024," said Geoffrey Rotstein, President and CEO of EQ Works. "With our cost structure effectively streamlined and data products and licensing solutions ready for market, we expect to see the full results of our hard work and investments materialize in 2024. Innovation continues to be at the heart of our organization, and our team is poised to use our proprietary data and technology products to drive AI solutions that deliver real business value."
Non-IFRS Financial Measures
EQ Works measures the success of the Company's strategies and performance based on Adjusted EBITDA, which is outlined and reconciled with net loss in the section entitled "Reconciliation of Net Loss for the period to Adjusted EBITDA" in the MD&A. The Company defines Adjusted EBITDA as net loss from operations before: (a) depreciation of property and equipment and amortization of intangible assets, (b) share-based payments, (c) finance income and costs, net, (d) depreciation of right-of-use assets (e) impairment of goodwill and intangible assets (f) gain from acquisition related transactions (g) restructuring costs. Management uses Adjusted EBITDA as a measure of the Company's operating performance because it provides information on the Company's ability to provide operating cash flows for working capital requirements, capital expenditures, and potential acquisitions. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in its industry.
The non-IFRS financial measure is used in addition to, and in conjunction with, results presented in the Company's consolidated financial statements prepared in accordance with IFRS and should not be relied upon to the exclusion of IFRS financial measures. Management strongly encourages investors to review the Company's consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-IFRS financial measures are not standardized, it may not be possible to compare these financial measures with other companies non-IFRS financial measures having the same or similar names. In addition, the Company expects to continue to incur expenses similar to the non-IFRS adjustments described above, and exclusion of these items from the Company's non-IFRS measures should not be construed as an inference that these costs are unusual, infrequent, or non-recurring.
The table below reconciles net loss from operations and Adjusted EBITDA for the periods presented:
Adjusted EBITDA for three and twelve months ended December 31, 2023 and 2022
| (In thousands of Canadian dollars) | Three months ended December 31, | Twelve months ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||
Net loss | (3,904 | ) | (1,428 | ) | (5,903 | ) | (6,435 | ) | |||||||||
Add: | |||||||||||||||||
Finance costs, net | 32 | (7 | ) | 66 | 46 | ||||||||||||
Depreciation of property and equipment | 8 | 13 | 35 | 67 | |||||||||||||
Depreciation of right-of-use asset | - | - | - | 6 | |||||||||||||
Amortization of intangible assets | 228 | 237 | 880 | 637 | |||||||||||||
Impairment of goodwill and intangible assets | 3,806 | - | 3,806 | - | |||||||||||||
Share-based payments | 13 | 27 | 53 | 230 | |||||||||||||
Restructoring costs | - | 20 | 122 | 117 | |||||||||||||
Gain from acquisition-related transaction | - | - | (483 | ) | - | ||||||||||||
Adjusted EBITDA | 183 | (1,138 | ) | (1,424 | ) | (5,332 | ) | ||||||||||
About EQ Works
EQ Works (www.eqworks.com) enables businesses to understand, predict, and influence customer behaviour. Using unique data sets, advanced analytics, machine learning and artificial intelligence, EQ Works creates actionable intelligence for businesses to attract, retain, and grow the customers that matter most. The Company's proprietary SaaS platform mines insights from movement and geospatial data, enabling businesses to close the loop between digital and real-world consumer actions.
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Neither the TSX-V nor its Regulation Services Provider (as that term is defined in policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements
Certain statements contained in this press release constitute "forward-looking statements". All statements other than statements of historical fact contained in this press release, including, without limitation, those regarding the Company's future financial position and results of operations, strategy, plans, objectives, goals and targets, and any statements preceded by, followed by or that include the words "believe", "expect", "aim", "intend", "plan", "continue", "will", "may", "would", "anticipate", "estimate", "forecast", "predict", "project", "seek", "should" or similar expressions, or the negative thereof, are forward-looking statements. These statements are not historical facts but instead represent only the Company's expectations, estimates, and projections regarding future events. These statements are not guarantees of future performance and involve assumptions, risks, and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed, implied, or forecasted in such forward-looking statements. Additional factors that could cause actual results, performance, or achievements to differ materially include, but are not limited to, the risk factors discussed in the Company's MD&A for the year ended December 31, 2023. Management provides forward-looking statements because it believes they provide useful information to investors when considering their investment objectives but cautions investors not to place undue reliance on forward-looking information. Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and any other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. These forward-looking statements are made as of the date of this press release, and the Company assumes no obligation to update or revise them to reflect subsequent information, events, or circumstances or otherwise, except as required by law.
EQ Inc.
Peter Kanniah, Chief Financial Officer
1235 Bay Street, Suite 401| Toronto, Ontario |M5R 3K4
[email protected]
EQ Inc.
Consolidated Statements of Financial Position
(In thousands of Canadian dollars)
| December 31, 2023 | December 31, 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 381 | $ | 1,253 | ||||
Restricted cash | 48 | $ | - | |||||
Accounts receivable | 3,962 | 3,535 | ||||||
Other current assets | 206 | 234 | ||||||
| 4,597 | 5,022 | |||||||
Non-current assets: | ||||||||
Property and equipment | 25 | 55 | ||||||
Intangible assets | 985 | 2,156 | ||||||
Goodwill | - | 2,914 | ||||||
| 1,010 | 5,125 | |||||||
Total assets | $ | 5,607 | $ | 10,147 | ||||
Liabilities and Shareholders' Equity (Deficiency) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 3,237 | $ | 3,488 | ||||
Rewards payable | 1,387 | 1,281 | ||||||
Loans and borrowings | 1,568 | 79 | ||||||
Contract liabilities | - | 60 | ||||||
| 6,192 | 4,908 | |||||||
Shareholders' equity (deficiency) | (585 | ) | 5,239 | |||||
Total liabilities and shareholders' equity (deficiency) | $ | 5,607 | $ | 10,147 | ||||
EQ Inc.
Consolidated Statements of Loss and Comprehensive Loss
(In thousands of Canadian dollars, except per share amounts)
Years ended December 31, 2023 and 2022
| 2023 | 2022 | |||||||
Revenue | $ | 9,964 | $ | 10,979 | ||||
Expenses: | ||||||||
Publishing costs | 5,450 | 6,927 | ||||||
Employee compensation and benefits | 3,768 | 4,955 | ||||||
Other operating costs | 2,223 | 4,659 | ||||||
Depreciation of property and equipment | 35 | 67 | ||||||
Depreciation of right-of-use asset | - | 6 | ||||||
Amortization of intangible assets | 880 | 637 | ||||||
Impairment of goodwill and intangible assets | 3,806 | - | ||||||
Restructuring costs | 122 | 117 | ||||||
| 16,284 | 17,368 | |||||||
Loss from operations | (6,320 | ) | (6,389 | ) | ||||
Finance income | 16 | 43 | ||||||
Finance costs | (82 | ) | (89 | ) | ||||
Gain from acquisition-related transaction | 483 | - | ||||||
Net loss | (5,903 | ) | (6,435 | ) | ||||
Total comprehensive loss | (5,903 | ) | (6,435 | ) | ||||
Loss per share: | ||||||||
Basic and diluted | (0.08 | ) | (0.09 | ) | ||||
EQ Inc.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
Years ended December 31, 2023 and 2022
| 2023 | 2022 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | (5,903 | ) | (6,435 | ) | ||||
Adjustments to reconcile net loss to net cash flows | ||||||||
from operating activities: | ||||||||
Depreciation of property and equipment | 35 | 67 | ||||||
Depreciation of right-of-use asset | - | 6 | ||||||
Amortization of intangible assets | 880 | 637 | ||||||
Share-based payments | 53 | 230 | ||||||
Unrealized foreign exchange loss (gain) | 1 | (41 | ) | |||||
Impairment of goodwill and intangible assets | 3,806 | - | ||||||
Finance costs, net | 55 | 10 | ||||||
Gain from acquisition-related transaction | (483 | ) | - | |||||
Change in non-cash operating working capital | (126 | ) | (97 | ) | ||||
Net cash used in operating activities | (1,682 | ) | (5,623 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of obligations under property lease | - | (45 | ) | |||||
Loans and borrowings | 1,568 | - | ||||||
Repayment of loans borrowings | (80 | ) | - | |||||
Proceeds from exercise of stock options | 26 | - | ||||||
Interest paid | (66 | ) | - | |||||
Net cash from (used) in financing activities | 1,448 | (45 | ) | |||||
Cash flows from investing activities: | ||||||||
Interest income received | 16 | 43 | ||||||
Increase in restricted cash | (48 | ) | - | |||||
Earn-out payout | - | (1,305 | ) | |||||
Purchases of property and equipment | (5 | ) | (21 | ) | ||||
Addition of intangible assets | (600 | ) | (600 | ) | ||||
Net cash used in investing activities | (637 | ) | (1,883 | ) | ||||
Decrease in cash | (871 | ) | (7,551 | ) | ||||
Foreign exchange gain (loss) on cash held in foreign currency | (1 | ) | 41 | |||||
Cash, beginning of year | 1,253 | 8,763 | ||||||
Cash, end of year | $ | 381 | $ | 1,253 | ||||
SOURCE: EQ Inc.