Good morning, ladies and gentlemen, and welcome to the Voxtur Q3 2024 Earnings Call. At this time, all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Monday, December 2nd, 2024. I would now like to turn the conference over to Mr. Jordan Ross. Please go ahead, sir.
Good morning, everyone. Thank you for joining us for the Voxtur 2024 Third Quarter Earnings Call, where we will discuss our financial results and business highlights. Please note that our results for the three and nine months ended September 30, 2024, were released November 28, 2024, and can be accessed on our SEDAR+ and on our website at voxtur.com. Joining me today are Executive Chairman Gary Yeoman, CEO Ryan Marshall, and unfortunately, Robin Dyson, our CFO, had an urgent and unexpected matter arise and will be unable to join the call, but will make herself available for any and all questions after today's call. We will begin with prepared remarks and then move into Q&A. If we are unable to get to your question, you are always welcome to contact me directly at jordan@voxtur.com. I will begin by going over our financial results.
After that, Ryan Marshall will provide updates as to how we are progressing towards our objectives. Before we get started, please be advised that some of the information that we will share on this call today may contain forward-looking statements. We caution you not to place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in our expectations. Further, on today's call, we will report using both IFRS and non-GAAP financial measures. We use these non-GAAP financial measures internally for financial and operational decision-making purposes, as we believe that they provide a meaningful measurement of financial performance and valuation. These non-GAAP financial measures are presented in addition to and not as a substitute for financial measures calculated in accordance with IFRS.
To see the reconciliation of these non-GAAP measures, please refer to our management discussion and analysis, which is available on SEDAR+. A replay of today's call will also be posted on our website. Finally, please note that all references to amounts or currency during today's call are to Canadian dollars unless otherwise stated. I will now provide an overview of the financial highlights for the three and nine months ended September 30, 2024, in place of Robin Dyson, but I again remind you all that she will make herself available as necessary for any follow-up questions that we may not be able to answer during today's call. As noted on the second-quarter earnings call in July 2024, the company entered into a definitive agreement to divest 50.5% of the interest of Blue Water Financial Technologies Holding Company, LLC, a subsidiary of the company.
This transaction is subject to various closing conditions, which have not yet been met, and further updates on the transaction will be provided when available. However, we are functioning and operating as if the business is still 100% owned by the company, and therefore, Ryan Marshall will also be including this in some of his updates during his portion of the call. As at September 30, 2024, management was committed to a plan to sell the controlling interest in Blue Water. Therefore, in accordance with IFRS standards, as at September 30, 2024, this business has been classified as a discontinued operation.
As such, all P&L activity related to this business for the current and prior periods has been carved out of the individual revenue and expense line items in the financial statements and has been reflected as a single line item in the presentation of each of net income loss and comprehensive loss. The Q3 MD&A presents key financial metrics for both continuing and discontinued operations. The metrics to be discussed on today's call, for the most part, will be based on continuing operations only, unless otherwise noted specifically. Revenue for continuing operations decreased to CAD 8.5 million from CAD 10.1 million for the three months ended September 30, 2024, and 2023, respectively. This decline was primarily attributable to settlement services and software and data licensing. For the nine months ended September 30, revenue decreased to CAD 25.7 million for 2024 as compared to CAD 30.7 million for 2023.
While there were declines in the software and data licensing and technology-managed service revenue streams, the decline was primarily attributable to the settlement services-related revenue. The company is actively pursuing and rebuilding these revenue streams through expansion of our client base, a new product offering, and reshaping of the business model for settlement services, and will be discussed in more detail by Ryan Marshall later on this call. Gross profit decreased to CAD 4.9 million from CAD 6.5 million for the three months ended September 30, 2024, and 2023, respectively, and decreased to CAD 14.6 million from CAD 18 million for the nine months ended September 30, 2024, and 2023, respectively. Again, these decreases are attributable to the decrease in revenues previously noted.
Gross profit as a percentage of revenue decreased to 58.7% from 64% for the three months ended September 30, 2024, and 2023, respectively, and decreased to 57% from 59% for the nine months ended September 30, 2024, and 2023, respectively. Adjusted EBITDA from continuing operations was CAD -2.1 million for the three months ended September 30, 2024, as compared to CAD -846,000 for the same period of the prior year. The decline of approximately CAD 1.2 million is primarily attributable to the decline in revenue of approximately CAD 1.6 million, offset to some extent by a reduction in operating expense. Adjusted EBITDA from continuing operations was CAD -6.4 million for the nine months ended September 30, 2024, as compared to CAD -8.7 million for the same period of the prior year. While revenue for this period declined, this was more than offset by operational savings.
I will now turn the call over to our CEO, Ryan Marshall, to provide the business updates. Ryan?
Thank you, Jordan. Good morning, everyone. Thank you for joining us today. It's an honor to address you for the very first time as the CEO of Voxtur. My journey here began just 90 days ago, and while it's been a brief period, I'm proud of the progress that we've made and fully aware of the significant challenges that we face. Over the past four to five years, Voxtur's journey has been turbulent, yet I still remain, and I believe that the story is growth, ambition, and the unique synergies that set us apart from anyone else in the industry. Our top priority has been to bring focus and clarity to Voxtur's operations. The One Voxtur initiative goes beyond being a mere message. It's about fostering alignment within our internal teams and reinforcing our reputation as a reputable, reliable, and trusted partner for our clients and employees.
Equally important has been my commitment to providing greater clarity and transparency to shareholders and key stakeholders. I recognize the importance of gathering all of the facts, understanding the context, and outlining a clear and strategic path forward. Second, we made a commitment to all of our employees and clients to provide them with a safe and stable workplace. This is vital to building a company that can sustain itself while delivering maximum value to our stakeholders. These goals required tough decisions, but what has truly inspired me is the unwavering dedication of our team. Individuals who have sacrificed personal time, taken on additional workloads, and embraced discipline to create cost-effective solutions is both an honor and a privilege to lead this remarkable group. I want to note, for IFRS purposes, we are required to report that Blue Water is a discontinued operation.
However, we continue to maintain 100% control, and it remains entirely under our management, and until that time, 100% under Voxtur. All of the numbers and forecasts that I'll be sharing today include Blue Water's revenue, expenses, depreciation, and associated management initiatives as our path forward. In the last 90 days, some of our key accomplishments. Let me outline some of the critical steps that we've taken to realign Voxtur to its true potential. Number one, we focused on profitability. We shut down all projects and initiatives that did not generate revenue or had less than an 80% probability of doing so in the next 12 months. This initiative included over six business lines under previous management and control. Furthermore, we separated our products from individual business units to remove any and all conflicts of interest to ensure that our solutions remain impartial and client-focused. Number two, we streamlined operations.
We continued consolidating corporate resources and conducting regular reviews of critical vendors to optimize our performance and our costs. By fostering synergies across business lines, we started breaking down the internal silos. Our business units no longer compete with one another or our clients. Instead, we leverage a collaborative and collective experience, talent, and contacts to empower growth and drive results.
Mitigated liabilities, number three. To date, we have successfully resolved, settled, and mitigated serious threats to the business without compromising our integrity. Our legal team has worked diligently to find alignment with even our fiercest adversaries, ensuring our vision of unity and stability remains intact. Number four, cost optimization. We've identified and began reducing our third-quarter monthly operating expenses by approximately CAD 800,000 a month once all changes have been realized. Now I'm going to go over some internal projections that I've been using to track results within the company.
I want to make note. All of my numbers include Blue Water. They are all in CAD. This also goes against my DNA, which is reporting or somehow suggesting forecasted numbers that have not occurred yet. All of the numbers that I am about to present to you are numbers that I personally have line of sight on and include Blue Water as a continued operation in 2025. In 2024, I am forecasting a total gross profit of approximately CAD 25 million-CAD 28.3 million. In 2025, if we maintain a gross profit of approximately CAD 25 million-CAD 28 million, and we achieve an 11%-15% growth rate from current signed SOWs and first quarter 2025 targeted initiatives, our gross profit will reach approximately CAD 30.3 million-CAD 33 million.
With our expenses under CAD 26.6 million once all changes are in place, Voxtur would be on track to achieve EBITDA positivity, ensuring sufficient working capital for debt service. Now, this upside potential, this shift in our title business strategy from our service-focused model to technology-driven approach has created exciting opportunities for growth and profitability in 2025. This includes the launch of Voxtur Rate Advisor, an innovative and first-of-its-kind platform for the industry. Again, these projections are based only on our core products and do not account for any upside revenue from our new offerings, such as Voxtur Rate Advisor, Voxtur Verify, Voxtur Direct, which now includes a management of AMCs, lien monitoring, and/or bundling products that we are anticipating on doing in 2025. These products show tremendous promise but require much more data for me to provide you with a reliable forecast.
Additionally, as competitors contract, we anticipate material increases in our volume from our organic and per-click products, further strengthening our position in the marketplace for 2025. In closing, I want to emphasize that while identifying problems is straightforward, executing solution requires trust, discipline, and timing. The progress we've made in the last 90 days is a foundation for a stronger, leaner, and more focused Voxtur, one that is positioned for sustained profitability and growth. I am deeply grateful for all of our employees for their tireless efforts and to our clients and shareholders for their patience and their trust. Together, we are building a Voxtur that is aligned, resilient, and ready to meet the challenges of tomorrow. Thank you, and I'll open the floor for questions.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset up first before pressing any keys. Please go ahead and press star one now if you do have any questions. And your first question will be from Mariusz Skonieczny at MicroCap Explosions. Please go ahead.
Ryan, you're talking about projections, gross profit projections. I would like to ask you about today, right now, no future as you stand. Where are you right now in terms of gross profit?
Are you asking what our gross profit is through October or through September?
No, that's past. Where's your run rate right now?
Right now.
With no new clients, nothing new.
Nothing new. So right now, we are trending total gross profit forecast ending December 31, 2024, CAD 25 million-CAD 28 million of gross profit.
Okay. So like you said, that includes Blue Water.
Yes, it does.
Okay. Could you tell me this number without Blue Water? If the business was completely gone, 100%.
The gross profit would be somewhere close to CAD 11 million, CAD 10 million-CAD 11 million of gross profit for the year without Blue Water.
But like right now, are you saying that right now Blue Water's gross profit is like CAD 11 million-CAD 15 million?
Right now, I'm not projecting. If we sold Blue Water today, I'm not projecting what the revenue with the gross profit would be from Blue Water for the fourth quarter. That's correct.
Okay. All right. So let me go back to these numbers. So you said CAD 25 million-CAD 28 million, okay, with everything. What are your expenses to operate?
For the whole operating expenses that I suggested to you will total an amount of approximately CAD 26.6 million for the year of 2025. That includes all business expenses and corporate expenses for 2025. That doesn't include the.
But right now, what's the running rate right now?
Right now, it's one. So right now, we're trending. This is now in USD because converting it to Canadian dollar gets confusing. Right now, on my models, we are tracking for December our total expenses to be approximately $1.6 million-$1.7 million a month.
Okay. That's USD, right?
Correct.
Yeah. Okay. So if I translate it to Canadian, that gives me about a little bit CAD 26 million, CAD 26 million something. So if I look at your gross profit between CAD 25 million-CAD 28 million and operating expenses of a little bit CAD 26 million, that shows me that you are EBITDA positive or neutral right now.
That shows us that we've controlled our expense. Our gross profit slightly exceeds our expenses going into 2025, based off of what I'm trending at today.
Okay. And what was, just for the reference, what was the expense number? So let's go back to USD because this is what you had. So, USD, you're saying that your operating expenses are about $1.6 million per month. What was this number in January?
Right. Let me qualify the CAD 1.647 million. So in the last 90 days, right, we've been able to identify and create a path to reduce expenses to CAD 1.647 million. The challenge that we are faced with today is every vendor that we have, we have contractual obligations to give notice to that vendor. Some of them are on annual agreements. We have severances that we are paying. We have PTO that is paid over time, right? So that CAD 1.647 million is as if we could assume and realize all of those changes going forward starting January 1, 2025.
Okay. And where were your expenses, let's say, in January?
In January.
Just so people can see the difference.
In January 2024, our total expenses in USD was $2.7 million.
Per month?
Per month.
Wow. So you went from $2.7 million to about $1.6 million. So you cut off $1 million per month of expenses in USD.
Correct. And I think to give credit to the existing team, it would be better to have a reflection of what the third quarter average was rather than January, 2024. The average in USD was $1. I'm sorry. The average was $2.1 million per month during the third quarter of 2024. So we've reduced it another $600,000.
Yeah. Okay, and I looked at the previous years. I think that number was about CAD 5 million per month previous years under previous, I think, Jim Albertelli. They were like CAD 5 million a month. So that's a huge drop from about CAD 5 million to CAD 1.6 million.
I agree. Yeah. I can't comment on that. I have not reviewed that, but that is a significant savings.
What about margins, gross profit margins? Where are you trending?
So right now, we are trending to be back up between 63%-64% of our gross profit margin. We've also been very mindful that any expenses that we are reducing do not materially affect our revenue or gross profit margins.
Okay, and so give me some specifics of how were you able to attack these expenses. Give us some details. What did you do exactly?
The first thing that we had to do was identify the businesses that did not have a line of sight on generating revenue for 2025. That was the first place that we started. As a result of that, we were then able to offer a reduction in force where applicable and appropriate, both at the corporate level and supporting levels with other businesses. Second, what we did was we've identified critical vendors that are critical to our revenue, and we've essentially canceled any vendors or any other expenses that we had that we could not assign a revenue number to it. It's still ongoing.
Okay. Okay. So your growth, I mean, you pretty much with the business that you are not including that, you're pretty much on track, EBITDA neutral as we speak right now with no new clients, no new products. Is there anything else that you can do with the current state? In other words, can your revenues improve or margins improve without new clients, without new products the way it is right now?
The suggestion that I made earlier on in the call, the 11%-15% increase of revenue, gross profit, I'm sorry, the increase of gross profit is directly attributed to our current clients, the blend or the introduction between clients and other business units, which I would refer to as the SOWs that I referenced before, in addition to increasing some of our product or some of our pricing on staple products where we have never increased pricing before. We are expecting, as part of our initiatives in the first quarter of 2025, to start undergoing those initiatives where we could reliably see an 11%-15% increase in gross profit starting in 2025.
Okay. So you're saying that if you do that, again, no new clients, no new products, your gross profit, not revenues, your gross profit would go to between CAD 30 million- CAD 33 million while your expenses, operating expenses, would stay at CAD 26 million or something like that?
That's correct. That's correct. That is what I'm trying to say.
So you're saying with a slight increase, no new clients, no new products, with a slight increase, you would be on track for EBITDA between CAD +4 million-CAD + 7 million ?
Canadian. That is correct.
Yeah, yeah. Wow. Okay. Okay. And then you can also add more clients and more products like the ones that you listed on top of it.
Absolutely. That is the upside that we have going into 2025. And unfortunately, because I don't have empirical data to support some of the pipelines and some of the sales initiatives, I'm reluctant to comment on what that looks like in 2025. But absolutely, that is the upside.
I mean, do you realize how significant it is going from I'm hearing people going from we're going under, the bank is pulling the plug to now you're telling me that you're EBITDA positive right now with some increases, adjusting prices to be CAD 5 million-CAD 7 million EBITDA positive? Do you realize the significance of this?
I like to celebrate it. I'm the type of person that I hope you can appreciate. I like to celebrate it with the team when it happens. Right now, these are trends. Keep in mind, right, all of the cost savings that we have or all of the cost savings that I'm referencing right now, we're trending to. We've given notice to vendors. We've done the appropriate risks, right? There's still contractual obligations that we're working through. But in theory, the trends are extremely positive.
Okay. Now, let's talk about the debt.
Can I just?
Yeah.
I want to highlight one thing. You made a few statements there that we've never made going under, bank pulling the rug, etc. Those are things that maybe you or some of your other investors have said elsewhere. I want to make it very clear. We have never represented that, right? So it's important to distinguish the difference between things we've represented and things that you're insinuating, I guess.
Right. So my next question is about the debt because this is the main concern. So I want to know how the bank feels about just the results that you've been able to achieve.
So I can't comment on, obviously, how the bank feels, but keep in mind our first order of priority is ensuring that we have a company to come back to, making sure that we get it to a healthy state, and making sure that those that are investing in the company, our stakeholders, are equally supported and secured with our position. That's our first line. I've only been here a mere 90 days, right? So I mean, you can imagine how they feel about what we are alleging, what we are putting forth, right, the reduction in any draws that we have on bridge financing, etc. But with that being said, I mean, I can't comment on how the bank feels.
Okay. All right, and just my last question is, do you plan to continue with the sale of Blue Water?
So right now, like I mentioned earlier on in the call, right, we have a couple of different models that we're tracking. I'm suggesting, because it seems to be top of mind with every investor that texts me, phones me, they find me on email, they're most concerned about the Blue Water transaction and if it doesn't go through what our position is. That was the model that I shared with you on today's earnings call. Simultaneously, we have a few different models that we are tracking. One of them does include the disposition of Blue Water and how that impacts our growth going forward. All of them end in a very similar result, right, with gross profit slightly exceeding our expenses. But it also starts to change the trajectory of our growth models that we have in 2025.
So maybe in another call, we can discuss what the other models look like, but we are fully prepared to deal with either disposing of Blue Water, not disposing of Blue Water, or finding another strategic partnership or selling another non-strategic asset. So we're tracking all of them simultaneously in parallel.
Okay. Thank you. I don't have any further questions. I think I asked more questions than I ever did on a conference call.
Awesome. Thank you, Mariusz.
Thank you. Ladies and gentlemen, a reminder to please press star one if you do have any questions. Next question will be from Dan Milic at Inference Point. Please go ahead, Dan.
Yes, hi. Thanks, Ryan, for taking the call. Just wanted to maybe get some thoughts around the pipeline, RPTA, some of the sort of the ongoing projects and the backlog. Maybe anything that you've sort of learned in the past 90 days that you can share, that'd be great. Thank you.
Awesome. Thank you, Dan. So I think you're referencing RPTA. RPTA has not been fully recognized or included in my forecast or my projections only because I don't have a clear line of sight. I do believe that it is occurring. I am more confident than ever today that it is. Effective two weeks ago, you could find publicly that the government did post an RFI, RFP on the project. So you could see that it is progressing. It appears that responses are due by January 11th, and so we should hear sometime shortly after that how the results of that are. As it relates to some of the other projects, there's a few of them that we are hyper-focused on. As I mentioned before, we have transitioned from our title business, which was more service-focused, and we are now driving a technology-driven approach, still focusing on the industry itself.
As an example, Voxtur Rate Advisor and Voxtur Verify, right, where those were internal products before, we've now opened that up to all of the clients and the distribution channels of the other business units that support title agents. My revenue projections that I'm trending on, that I'm using internally, do not reflect what those numbers could potentially look like only because I don't have a clear line of sight. I'm not looking at an SOW as I sit here today for any meaningful amounts. I think maybe in another unit of time, what we could do is we could do another demo day, and I could publish those videos for all of the investors and shareholders to take a look at again.
Thank you for that. And maybe just as a follow-up, the Blue Water, I'd love for the business to stay 100% Voxtur's, but that's just a personal sort of thing. Just wanted to see how on prior calls or interviews with the management there, Blue Water as a conduit was sort of the main concept or play that was supposed to be leveraged. Can you maybe just talk about is that the idea going forward with the SuperTransfer and sort of having the platform be the primary sort of technology that you would leverage for Voxtur, or has that shifted with everything that's going on?
Thanks, Dan. So again, as we sit here today, the disposition of Blue Water is still unknown. So we're operating as if we still control 100% of it. I am personally 100% vested with the Blue Water team, right? I support them, right? I will bend over backwards to make sure that we move that company forward in a meaningful way if it's with Voxtur or if it's without. I do believe in the products. I do believe that SuperTransfer, along with TPR Flow and a lot of other key integrations, that is still very much of focus for Voxtur and for Blue Water. And we continue to go down that path. I mean, in 2025, if we keep the business, then I can genuinely say from this position that that is going to be a meaningful part of our revenue going forward.
Thank you for that, and all the best.
Thank you, sir.
At this time, gentlemen, it appears we have no further questions. Please proceed.
Thank you all. Just wanted to say we appreciate your dedication, your support, and we look forward to executing and showing you even further, more positive results on a go-forward basis. So I'd just like to say thank you for dialing in today, and we look forward to sharing more, hopefully, more positive news in the not-so-distant future. Thank you.
Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we ask that you please disconnect your lines.