Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quisitive Technology Solutions Inc (QUISF, Financial) successfully closed several large-scale deals exceeding $1 million each in Q2 2024.
- Over 90% of revenue in the first half of 2024 came from customers who have been with the company for more than one year, indicating strong customer loyalty.
- The company has seen significant pipeline growth across all AI offerings, including Copilot, with over 170 customers currently engaged in various stages of AI discussions and early-stage projects.
- Quisitive Technology Solutions Inc (QUISF) was recognized as the 2024 Microsoft Global Analytics Partner of the Year and Board International's Solution Partner of the Year for the second consecutive year.
- The company has strategically increased investments in sales capacity to enhance future organic growth, leveraging cost savings to build momentum as they enter 2025.
Negative Points
- Revenue in the global cloud solutions segment decreased by 2% from Q2 of last year, indicating some challenges in maintaining growth.
- The company had several large projects that wrapped up in the first part of Q2, which contributed to the initial revenue decrease.
- Despite the positive trends, the company still faces the challenge of ensuring customers are prepared with the appropriate infrastructure for AI integration.
- The weighted average interest rate on the company's term loan is relatively high at 7.99%, which could impact financial flexibility.
- Capital expenditures were $0.9 million in Q2 2024, with expectations of approximately $3 million for the year, indicating ongoing significant investments that could strain cash flow.
Q & A Highlights
Q: Can you dive into the better purchasing patterns from customers and what's driving your confidence?
A: Michael Reinhart, CEO: We are seeing strategic initiatives that were delayed in 2023 now back on the table. Our industry-focused approach in healthcare, manufacturing, and public sectors is allowing us to have broader conversations with customers about their overall journey, not just single initiatives. This includes helping them deploy and activate AI.
Q: Can you give us a sense of the progress customers are making with the Quisitive AI Accelerator?
A: Michael Reinhart, CEO: Customers are realizing they need to prepare their data estate and security for AI. We are seeing them activate initial use cases, such as a legislative project that enhances engagement and reduces administrative time. These scenarios are demonstrating the value of AI to our customers.
Q: Is the $1 billion monthly AI investment supporting a marketplace for 8-10% organic growth exiting 2025?
A: Michael Reinhart, CEO: Yes, we believe AI will be a growth accelerator. We are adding sales capacity and embedding AI into our services. This combination will drive growth, and we expect to see significant opportunities in 2025.
Q: How will the new Microsoft funding be accounted for, and when will we see its impact?
A: Scott Meriwether, CFO: The funding will be accounted for as contract expense and spread as we add staff. It will cover our investment needs without increasing our cost basis. We expect to see revenue impact from this funding as we build pipeline through Q3 and Q4, with revenue generation accelerating into 2025.
Q: Is the recent healthcare win with the university one of the first wins with your new products?
A: Michael Reinhart, CEO: No, we have had other wins, but this is one of the larger ones. It combines Dynamics, MazikCare, and custom AI solutions. We are seeing larger deal sizes due to our unique position and capabilities.
Q: Are you adequately staffed on the technical side to support the growth in AI business?
A: Michael Reinhart, CEO: Yes, we are developing internal talent and hiring where needed. AI is being integrated into our existing services, so we don't need a whole new workforce. We are also conducting internal training and hackathons with Microsoft to enhance our capabilities.
Q: Can you update us on the pipeline growth and its impact on managed services versus professional services?
A: Michael Reinhart, CEO: The AI pipeline is growing, with a mix of professional services and managed services. AI projects are typically custom solutions, which will drive professional services. However, we are also looking to offer AI-related managed services, such as ongoing Copilot deployments.
Q: How is the investment in PayIQ being managed and valued?
A: Scott Meriwether, CFO: The investment is reviewed annually for a more in-depth valuation, with quarterly qualitative reviews. Any significant changes will be updated as needed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
