EQ Inc. Reports Third Quarter Financial Results
*Revenue increases 65% for the quarter and 15% year over year *
*TORONTO, ON / ACCESSWIRE / November 18, 2020 / *EQ Inc. (TSXV:EQ) ("EQ Works" or the "Company"), a leader in geospatial data and intelligence, announced its financial results today for the third quarter ended September 30, 2020.
Revenue for the third quarter was approximately $2.9 million, which increased over 65% from the previous quarter and increased by 15% when compared to the third quarter of 2019. This revenue growth was the result of new data engagements entered into during the quarter and the overall continued growth in the business. Gross margin for the quarter was 50%, significantly stronger than the previous quarter and up substantially from the same period a year ago. Adjusted EBITDA loss for the quarter was approximately $0.1 million, a significant improvement from the loss of $0.6 million experienced in the previous quarter.
The Company continued to show growth from both its data and advertising divisions. A continued focus on driving business results from data and analytics, artificial intelligence, predictive modelling and machine learning has continued to generate interest and demand for the Company's products. Data revenue for the quarter increased by 81% compared to the same period a year ago and 64% sequentially, as demand continued to increase for the proprietary data solutions.
Business conditions continued to improve throughout the quarter, as clients reinvested in their business and engaged with the Company.
*Highlights for the Third Quarter ended September 30, 2020*
· Data revenue increased by 81% compared to the same period last year and 64% sequentially;
· Gross margin increased to 50% for the three months ended September 30, 2020 compared to 42% for the same period in 2019 and 37% sequentially;
· Cash balance at the end of the quarter was $4.7 million and net working capital was $3 million;
· Operating line of credit with one of Canada's major banks was increased to $1.6 million;
· Extension was awarded to EQ for a multi-year engagement with a leading Canadian university;
· U.S. expansion with one of the world's largest book publishers to help launch 10 new titles nationally across the United States; and
· 33 new clients during the first nine months of the year.
"I am extremely proud of how well our team performed during the quarter and excited to see the continued momentum as we push into the fourth quarter" said Geoffrey Rotstein, President and CEO of EQ Works. "Our performance this quarter was the direct result of our team working with our clients to make sure our products delivered the business results they needed. Understanding and engaging with customers has never been more important and our proprietary data platform provides these insights."
Subsequent to quarter-end, The Company granted 165,000 stock options to directors and employees of the Company. These stock options are exercisable at CDN $ 1.35 per stock option and will expire on November 15, 2025. These stock options vest over a period of thirty-six months following the grant date and are governed by the terms and conditions of the Company's stock options plan. Following this grant of stock options, the Company has a total of 4,273,667 stock options outstanding representing approximately 7.3% of the outstanding common shares of the Company.
*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 income (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 income (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, and (e) transaction costs of acquisition. 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 nine months ended September 30, 2020 and 2019*
*(In thousands of Canadian dollars)* *Three months ended September 30,* *Nine months ended September 30,* 2020 2019 2020 2019
Total comprehensive loss (627) (327) (2,228) (1,154)
Add:
Finance costs, net 133 123 382 314
Transaction costs of acquisition - - 23 -
Depreciation of property and equipment 18 13 53 40
Amortization of intangible assets 71 11 153 33
Share-based payments 277 45 411 87
Depreciation of right-of-use asset 17 42 52 127
*Adjusted EBITDA* (111) (93) (1,154) (553)*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 ability to adjust to customer needs in light of COVID-19, the delivery of acceleration notices to the holders of Warrants and the exercise of the Warrants by holders, 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 three and nine months ended September 30, 2020. 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
*416-260-4326*
1235 Bay Street, Suite 401 | Toronto, Ontario | M5R 3K4
press@eqworks.com
www.eqworks.com
*EQ Inc.
Unaudited Condensed Consolidated Statements of Financial Position
(In thousands of Canadian dollars)*
*September 30, 2020* *December 31, 2019*
*Assets*
*Current assets:*
Cash
$ 4,651 $ 3,691
Accounts receivable
3,107 2,060
Other current assets
194 197
7,952 5,948
*Non-current assets:*
Property and equipment
115 102
Right-of-use asset
94 146
Intangible asset
1,141 537
Goodwill
1,260 535
2,610 1,320
*Total assets*
*$ * *10,562* *$ * *7,268*
*Liabilities and Shareholders' Equity*
*Current liabilities:*
Accounts payable and accrued liabilities
$ 2,535 $ 1,705
Lease liability
70 70
Loans and borrowings
1,893 -
Contract liabilities
107 24
Earn-out
364 256
4,969 2,055
*Non-current liabilities:*
Lease liability
36 88
Loans and borrowings
80 1,603
116 1,691
Shareholders' equity
5,477 3,522
*Total liabilities and shareholders' equity*
*$ * *10,562* *$ * *7,268* *EQ Inc.
Unaudited Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
(In thousands of Canadian dollars, except per share amounts)
Three and nine months ended September 30, 2020 and 2019*
*Three months ended September 30,* *Nine months ended September 30,*
*2020* *2019* *2020* *2019*
Revenue
$ 2,851 $ 2,479 $ 6,775 $ 6,092
Expenses:
Publishing costs
1,437 1,434 3,788 3,241
Employee compensation and benefits
1,309 767 3,175 2,205
Other operating expenses
493 416 1,377 1,286
Depreciation of property and equipment
18 13 53 40
Depreciation of right-of-use asset
17 42 52 127
Amortization of intangible assets
71 11 153 33
3,345 2,683 8,598 6,932
*Loss from operations*
*(494* *)* *(204* *)* *(1,823* *)* *(840* *)*
Transaction costs of acquisition
- - (23 ) -
Finance income
4 1 27 10
Finance costs
(137 ) (124 ) (409 ) (324 )
Loss before income taxes
(627 ) (327 ) (2,228 ) (1,154 )
Total Comprehensive loss
(627 ) (327 ) (2,228 ) (1,154 )
Loss per share:
Basic and diluted
(0.01 ) (0.01 ) (0.04 ) (0.03 )*EQ Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
Nine months ended September 30, 2020 and 2019*
*2020* *2019*
Cash flows from operating activities: Net loss (2,228) (1,154) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation of property and equipment 53 40 Depreciation of right-of-use asset 52 127 Amortization of intangible assets 153 33 Share-based payments 411 87 Unrealized foreign exchange loss (gain) (23) 5 Finance costs, net 406 310 Change in non-cash operating working capital (263) - Net cash used in operating activities (1,439) (552)
Cash flows from financing activities: Repayment of loans and borrowings - (1,534) Repayment of obligations under property lease (139) (127) Loans and borrowings 80 200 Issuance of promissory notes - 1,717 Proceeds from private placement - 180 Share issuance costs - (4) Proceeds from exercise of warrants 3,658 280 Proceeds from exercise of stock options 114 1 Interest paid (3) (240) Net cash from financing activities 3,710 473
Cash flows from investing activities: Interest income received 5 2 Investment in GIC - (30) Acquisition of Juice Mobile (850) - Purchases of property and equipment (64) (28) Addition of intangible asset (425) (250) Net cash used in investing activities (1,334) (306)
Increase (decrease) in cash 937 (385)
Foreign exchange gain (loss) on cash held in foreign currency 23 (5)
Cash, beginning of the period 3,691 584
*Cash, end of the period* *$4,651* *$194**SOURCE: *EQ Inc.
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