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Q2 FY22 total revenue of $25.1 million, growth of 20.8% compared to $20.8 million in Q2 FY21
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Core platforms continue to perform:
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Unified Commerce solutions revenue grew by $1.0 million or 10.7%
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eprocurement revenue grew by $3.2 million or 40.1%
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Periscope acquisition during the second quarter is transformational for the Corporation
mdf commerce inc. a SaaS leader in digital commerce technologies, reported Q2 FY2022 financial results for its second quarter ended on September 30, 2021. Financial references are expressed in Canadian dollars unless otherwise indicated.
“Q2 fiscal 2022 was a transformational quarter for mdf commerce,” said Luc Filiatreault, CEO of mdf commerce. “As was planned for our Strategic Sourcing platform, the strategic acquisition of Periscope has expanded both our geographic footprint and technology offering, allowing us to service all types of government agencies with a full eprocurement offer and effectively positioning mdf commerce as the North American leader in public eprocurement. With just over 2 months since the acquisition, our integration efforts are on track. Our focus is on leveraging the innovative transaction fee solution which allows us to earn revenue on procurement transactions relating to everyday needs such as office and medical supplies, legal services, gas and electricity to more complex construction and infrastructure projects. This innovative model is highly scalable and has the potential to generate significant upside. While recognizing only one month of revenue from Periscope, the Q2 year-over-year revenue growth in our Strategic Sourcing platform, which we’ve rebranded as eprocurement, was 40%. Despite the marked growth over the last two years and the strong growth potential that this acquisition unlocks, the performance of our stock has unfortunately not followed suit. We see this as an opportunity to engage with our shareholders on the full potential of this strategic acquisition and mdf commerce as a whole.”
Two years into its Transformation plan, mdf commerce remains focused on growing its two core platforms, eprocurement and Unified Commerce, that are presently capitalizing on the strong market trend of accelerated digitalization. As demonstrated with the transformative acquisition of Periscope, the path to growth for eprocurement is based on a combination of M&A and organic growth, whereas the path to growth for Unified Commerce relies on organic growth. Over the past two years, mdf commerce has focused investments on scalability, as well as eliminating friction points on our ability to accelerate growth. These investments include expanded sales and marketing capabilities, product innovation, cloud migration and optimization, ongoing improvements to security as well as overall employee compensation market adjustment to retain key talent. These efforts and investments have yielded a 47.8% ($7.6M to $11.3M) Q2 growth for eprocurement from Q2 FY20 to Q2 FY22 and a 71.1% ($5.9M to $10M) growth for Unified Commerce for the same period. When looking at areas of focus, US-based eprocurement activities have grown by 114.1% ($3.3M to $7.0M) for the period spanning Q2 FY20 to Q2FY22 and a 176.9% growth ($2.4M to $6.7M) for our ecommerce activities for the same period.
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Second Quarter Fiscal 2022 Financial Results
The financial results include one month of Periscope which was acquired on August 31, 2021.
Total revenues for second quarter of fiscal 2022 reached $25.1 million, an increase of $4.3 million or 20.8% compared to $20.8 million for the second quarter of fiscal 2021. On a constant currency(1) basis, total revenue increased by $4.7 million or 23.2% compared to the second quarter of fiscal 2021. Total Q2 FY2022 revenue includes a negative fair value adjustment of $1.0 million on Periscope’s deferred revenues at the closing date of the acquisition.
Recurring revenue (MRR)(2) represents $20.0 million or 76.8% of total revenues for Q2 FY2022 compared to $15.9 million or 76.4% of total revenues for Q2 FY2021.
Our two core platforms contributed to revenue growth for the second quarter as follows:
The eprocurement platform generated revenues of $11.3 million, an increase of $3.2 million or 40.1% compared to $8.0 million in Q2 FY2021. The US-based eprocurement network, which includes revenues from Periscope for one-month post-acquisition, contributed positively to revenue growth with an increase in total revenues of $3.2 million or 84.2%, compared to Q2 FY2021. The US-based solutions Bidnet and Periscope benefited from both additional buying agencies, and from higher transaction rates. Revenues for Periscope for the quarter were $2.4 million, net of a $1.0 million fair value adjustment on Periscope deferred revenues at the closing date of the acquisition. Recurring revenue (MRR)(2) for the eprocurement platform represented 93.1% of platform revenues for Q2 FY2022 compared to 93.0% for Q2 FY2021.
The Unified Commerce platform, which includes both ecommerce and Supply Chain Collaboration solutions, generated revenues of $10.0 million for Q2 FY2022, an increase of $1.0 million or 10.7% compared to revenues of $9.1 million for Q2 FY2021. A combination of organic growth and increased transaction volumes from existing clients contributed to an increase in revenues of $0.6 million for the Orckestra solution, $0.3 million for k-ecommerce solution and $0.1 million for the Supply Chain Collaboration solution. Recurring revenue (MRR)(2) for the Unified Commerce platform represented 57.4% of platform revenues for Q2 FY2022 compared to 58.4% for Q2 FY2021.
The emarketplaces platform generated revenues of $3.8 million for Q2 FY 2022, an increase of $0.1 million or 3.5% compared to revenues of $3.7 million for Q2 FY2021. The net increase is mainly due to Jobboom, contributing $0.2 million in revenue in the second quarter of fiscal 2022, primarily due to an active Canadian job market.
Gross margin for the Q2 FY2022 was $14.3 million or 56.9% compared to $13.8 million or 66.7% for Q2 FY2021. The decrease in the gross margin percentage is due to the increased cost of revenues mainly from increased headcount, higher salaries and increased professional fees to support customer implementations and deployments which have lower margins than right of use revenues, and higher hosting and licences costs directly related the Corporation’s transition to a cloud-based strategy.
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For Q2 FY2022 total operating expenses were $23.1 million, compared to $13.9 million in Q2 FY2021.
General and administrative expenses totalled $10.4 million in Q2 FY2022, $6.6 million higher compared to $3.8 million in Q2 FY2021. The increase in professional fees of $5.1 million includes $4.6 million acquisition-related costs for the acquisition of Periscope. Salary and related expenses increased by $0.8 million, share-based compensation expense was $0.2 million higher related to the Corporation’s stock-option plan and licenses costs increased by $0.1 million.
Selling and marketing expenses totalled $6.5 million during Q2 FY2022, $1.8 million higher compared to $4.7 million in Q2 FY2021. The increase is mainly attributable to increased salary and related expenses of $0.8 million, to higher amortization expenses of $0.5 million mostly related to Periscope acquisition, to higher transaction-based fees of $0.2 million and to an increase of $0.1 million in promotional activities costs.
Technology expenses totalled $6.1 million during Q2 FY2022, $0.8 million higher compared to $5.4 million in Q2 FY2021. The increase is mainly attributable to an increase of $1.4 million in salary and related expenses and to higher professional services costs of $0.3 million. These increases are partly offset by higher capitalized internally developed e-business tax credits of $0.8 million and to a $0.2 million decrease in amortization expense.
The Corporation recorded an operating loss of $8.8 million during Q2 FY2022, compared to operating loss of $0.1 million in Q2 FY2021. Acquisition-related costs for the acquisition of Periscope and restructuring costs respectively totalled $4.6 million and $0.6 million. Operating expenses for the second quarter of the previous year included a federal wage subsidy in the context of COVID-19 of $1.4 million. During the second quarter of fiscal 2022 we continued investing in people and foundational upgrades as we aim to accelerate future growth, improve our scalability by simplifying and accelerating project implementation and the integration of new acquisitions, ultimately enabling us to capitalize on emerging market conditions.
Net loss was $ 6.3 million or $0.19 net loss per share basic and diluted in Q2 FY2022, compared to a net loss of $0.6 million or $0.04 net loss per share basic and diluted in Q2 FY2021.
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