MediaValet Reports First Quarter 2021 Results
10 min read
Vancouver, BC – May 17th, 2021 – MediaValet Inc. (TSX-V:MVP) (“MediaValet” or the “Company”), a leading provider of cloud-native enterprise digital asset management ("DAM") and creative operations software, is pleased to report its results for the three months ended March 31, 2021.
Summary of Quarterly and Annual Results
"In fiscal 2021, we're taking another big step forward in our mission to define the enterprise DAM market of tomorrow," stated David MacLaren, Founder, and CEO of MediaValet. "Fueled by accelerating, fundamental shifts over the last 12 months in cloud computing, digital transformation, and the digital workplace, the relevance, importance, and accessibility of digital assets across organizations has increased exponentially. DAM today, increasingly being drawn to the core of enterprise IT stacks as the most technologically progressive organizations are realizing that their assets transcend technologies, processes, teams, departments, and divisions. As a result, we're seeing our market opportunities expand in lockstep, leading to a record level of new customer acquisition and new pipeline creation in Q1'21. As we continue to see improving market conditions, with greenfield and vendor replacement opportunities accelerating, and we continue to execute our extensive 2021 product roadmap, we expect demand, average contract size, and win rate to continuing increasing for the foreseeable future."Continued Mr. MacLaren, "We're grateful to have a strong and growing market for our products and services at this time, and to have the financial resources to accelerate our go-to-market and strategic initiatives. In Q1'21, we began this investment; growing our various teams to expand our market reach, ramp our ability to scale and increase our capacity to execute our strategic plan. At the core of this stepped increase, we're leaning heavily into the technology that will enable us to pursue our vision for enterprise DAM. Over the past three months, we released beta versions of our audio/video intelligence (AVI) and CDN Linking modules. Both are critical components of our strategic product roadmap, building on our market-leading video and asset management platform capabilities. We believe each product release planned for this year will directly increase our total addressable market."Rob Chase, Executive Chair and CFO commented, "We are very pleased with our Q1'21 financial performance and with the progress we've made on our organic growth plan. This marks our 32nd consecutive quarter of double-digit year-on-year revenue and ARR growth since MediaValet became a standalone entity in fiscal 2014 - and we are now scaling up our operations to continue and accelerate this trend. While our Q1 growth is strong, it is important to understand the underlying fundamentals as the top-line revenue and ARR figures do not tell the whole story. In particular, the results were impacted by the strengthening Canadian dollar and by the pandemic's toll on small, tourism and hospitality customers. In constant currency, ARR actually increased 32% (versus 31% in Canadian dollars) and NNARR actually increased 29% (versus a 4% decline in Canadian dollars) over Q1'20. Underlying this increase is a record first quarter for new customer subscriptions, which increased in constant currency by 196% over Q1'20 and 21% over the previous record attained in Q1'19. We are encouraged by this momentum in new customer wins, which is due to the continuing rebound of the DAM market from COVID, and to the Company's investment in its product and strategic go-to-market initiatives. This was partially offset by increased churn due to the impact of the pandemic on certain customer segments, which included $101,000 of churn from a tourism customer due to the catastrophic loss of business they've experienced. Conversely, Q1'20 benefited from a $190,000 expansion of an existing customer and had very little churn as our annual renewal cycle completed prior to the first pandemic lockdowns. With the first full pandemic year renewal cycle behind us, we are confident that churn rates will now start returning to normal. With new customer acquisition showing strong momentum, net retention rates improving and $14.51 million of working capital, we are looking forward to reporting on our progress as we continue to execute our strategic vision."
Results of Operations
Key Financial Metrics:
- Grew revenue to $2.17 million in Q1 2021, up 26% from $1.72 million in Q1 2020, and up 3% sequentially from Q4 2020. The majority (generally 90%+) of revenue is from monthly recognition of annual SaaS subscriptions. As a result, the growth reflects increases in deferred revenue and ARR from customer acquisition, retention, and expansion through industry-leading sales and marketing strategies, and continuous new feature development and platform enhancement.
- Increased Gross Margin to $1.77 million in Q1 2021, up 25% from $1.43 million in Q1 2020, and down 1% from Q4 2020. The Gross Margin percentage was to 82% for Q1 2021 compared to 83% in Q1 2020 and 85% Q4 2020. The decreases in margin percentage reflect a planned step-increase in headcount, increased customer usage and adoption due to the shift to remote working in response to COVID-19, and relative to Q4 2020, the inclusion of credits from Microsoft and from the Canadian Emergency Wage Subsidy ("CEWS").
- Incurred Operating Costs of $3.14 million in Q1 2021, a 45% increase from $2.18 million in Q1 2020, and a 45% increase sequentially. The increases are primarily due to a step-increase in research and development ("R&D"), and sales and marketing ("S&M"), as part of the Company's strategic growth plan, and relative to Q4 2020, due to the inclusion of credits from CEWS. Headcount was increased from 53 at the end of Q1 2020 to 59 at Q4 2020 and to 67 in Q1 2021. After a ramp-up period, the planned expansions are expected to impact sales growth through increased global market reach and accelerated enterprise product development.
- Reported a Q1 2021 EBITDA loss of $1.37 million, up 83% from $0.75 million in Q1 2020, and up 258% sequentially. The increased annual loss was expected and is primarily due to the step-increase in Operating Costs, which require a ramp period before impacting sales growth, the inclusion of $616,000 of CEWS credits in Q4, and due to the impact of COVID-19 on customer net retention.
- Increased Annual Recurring Revenue ("ARR") to $9.02 million, an increase of 31% compared to $6.89 million at March 31, 2020, and of 4% from $8.64 million at December 31, 2020. The Net New ARR ("NNARR") for Q1 2021 was $0.38 million, down 4% (up 29% in constant currency) from $0.39 million in Q1 2020, and a 47% (35% in constant currency) sequential decrease. The NNARR decline relative to Q4 2020 is expected due to typical first-quarter seasonality. Included in NNARR is a record first quarter for new customer acquisition, with new subscription contracts increasing by 167% (196% in constant currency) over Q1 2020 and 15% (21% in constant currency) over Q1 2019 (the previous Q1 record) and declining from Q4 by 14% (12% in constant currency) due to typical seasonality trends. The improved new customer performance reflects the continuing rebound of the DAM market from COVID, and the Company's investment in its product and go-to-market strategies. The record level first-quarter new customer sales were offset by a stronger Canadian dollar and increased churn, reflecting completion of a full year renewal cycle since the start of COVID lockdowns. This primarily impacted customers of smaller size, and in the tourism and hospitality industry. In Q1 2021, a $101,000 tourism customer churned as their business has been at a standstill since Spring 2020. Conversely, NNARR in Q1 2020 benefited from positive churn as a large customer expanded their ARR by $190,000 in the quarter.
- Ended the first quarter with $12.76 million of cash on hand (December 2020: $14.24 million), modified working capital (excluding deferred revenue, lease liabilities, and debt) of $14.51 million (December 2020: $16.10 million), lease liabilities of $0.94 million and long-term debt of $1.00 million (December 2020: total lease liabilities and debt of $1.99 million).
Technology and Product:
MediaValet has a continuous development process to enhance its DAM with incremental releases on a weekly and monthly basis. These releases include new features, fixes, and product upgrades aimed at expanding its Enterprise DAM Use-Cases and target addressable market, and at increasing its market differentiation with innovative solutions in the areas of advanced search (such as its Guided Artificial Intelligence module), audio, and video management (such as its Audio/Video Intelligence module), creative team enablement (such as its CreativeSPACESTM module), and dynamic distribution (such as its Branded Portals module). This continued commitment to product innovation and advancement has led to an increase in new customer win-rates, customer retention and expansion, and average contract value. The Company has announced a number of customer wins to provide examples of the impact of its development process, which recently included the following:
- April 20, 2021: Selected by a leading North American direct-to-customer manufacturer with over 4,000 employees with a first-year billing of $156,000 that includes an auto-renewing subscription of MediaValet's enterprise, cloud-native digital asset management platform, CreativeSPACES™ and Branded Portals; integrations with Wrike and Azure Active Directory; Advanced Artificial Intelligence; and professional services covering implementation, training, and support.
- March 1, 2021: announced continued wins in the manufacturing sector, which totaled $186,000 in new contract value signed in Q4 2020, growing the vertical to 15% of ARR. While MediaValet has not verticalized its offering or go-to-market strategy, it has proven to be able to adapt to the nuances of specific verticals like the manufacturing sector. At the same time, the need for Enterprise DAM Platforms is industry agnostic and management believes these wins are testament to the applicability of its Enterprise DAM Use-Case across all verticals.
Operations and Corporate:
- During the first quarter, the Company began to implement its Fiscal 2021 growth plan, increasing its headcount, expanding its direct and channel go-to-market initiatives, and bolstering its investment in R&D to accelerate its product roadmap. While the Company had attained a breakeven level of new and recurring sales by the end of Fiscal 2020, management believes it can attain a leadership position within a larger long-term market by increasing its operational investment levels. With its growth capital in place, the Company will continue increasing its Operating Costs throughout the fiscal year, with an emphasis on R&D and S&M.
- Subsequent to quarter-end, on April 15, 2021, the Company issued 37,000 stock options to new hires with an exercise price of $2.54 per share and issued 90,552 shares upon exercise of employee stock options with an average strike price of $1.16. The options granted have a term of five years, and a vesting term of three equal installments on the first three annual anniversary dates from the grant date.
- On May 13, 2021, announced MediaValet has received conditional approval to graduate to the Toronto Stock Exchange, and it's intent to complete the listing by the end of June 2021, at which time its common shares will be de-listed from the TSX Venture Exchange. The Company will continue under the trading symbol "MVP".
1 The Company defines Operating Costs to include Sales & Marketing, Research & Development, and General & Administrative expenses, which aligns with the expenses included in EBITDA. This is a non-IFRS measure and represents operating expenses less share-based compensation and depreciation.2 EBITDA is a non-IFRS measure that is used as a measure of profit and loss. Management believes EBITDA provides a meaningful measure for the assessment of Company performance as it removes non-cash and non-operating expenses such as financing costs.3 Annual Recurring Revenue (ARR) is a non-IFRS measure that provides an indication of future revenue and billings from customers as of the reporting date. ARR represents the sum of the annual recurring revenue from existing customer contracts or commitments as of the reporting period end date, and as such management believes ARR to be a meaningful measure for assessment of Company performance. ARR is recorded as deferred revenue when it is invoiced and is recognized in revenue evenly on a monthly basis over the contract term at the US dollar exchange rate in effect at the time of invoicing. The average US dollar exchange rate of ARR was C$1.3157 at March 31, 2021, C$1.3313 at December 31, 2020 and C$1.3271 at March 31, 2020.MediaValet's full financial statements and related MD&A are now available on SEDAR.
About MediaValet, Inc.
MediaValet stands at the forefront of the enterprise, cloud-native, software-as-a-service digital asset management and creative operations industries. Built exclusively on Microsoft Azure and available across 61 Microsoft data center regions in 140 countries around the world, MediaValet delivers unparalleled enterprise-class security, reliability, redundancy, compliance, and scalability: while offering the largest global footprint of any DAM solution. In addition to providing enterprise cloud-native DAM capabilities at a global scale, desktop-to-server-to-cloud support for creative teams, and overall cloud redundancy and management for all source, WIP, and final assets, MediaValet offers industry-leading integrations into Slack, Adobe Creative Suite, Microsoft Office 365, Workfront, Wrike, Drupal, WordPress, and many other best-in-class 3rd party applications.