Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SaaS revenue in Q2 2024 grew by 2% compared to Q2 2023, with total revenue remaining steady at $10 million.
- Adjusted EBITDA increased by 18% to $2 million, marking three consecutive quarters of adjusted EBITDA margin of 20% or higher.
- Gross margin increased to $9.9 million or 50% of revenue, showing improved operational efficiencies.
- Total operating expenses decreased by 9% in Q2 2024, reflecting effective cost management.
- The company reduced its BDC Capital Facility debt from $8.3 million to $5.3 million, translating into interest savings of approximately $300,000 per year.
Negative Points
- Net income for Q2 2024 decreased by $1.8 million compared to Q2 2023, primarily due to a gain on bargain purchase recognized in the prior year.
- BDC revenue decreased by 11% due to temporary staffing constraints.
- SaaS gross margin slightly decreased to 67% from 68%, indicating some pressure on profitability.
- Customer rooftop count declined marginally by 0.2%, showing a slight reduction in customer base.
- The company faced challenges with its cloud offering, requiring continuous improvements and customer support.
Q & A Highlights
Q: Can you discuss the products that contributed to the bounce back in the Canadian market and the pipeline for rooftops in Canada?
A: The Canadian marketplace saw demand across all our brands, with Autovance being particularly in high demand. The pipeline growth is spread across all our brands, with notable demand for Autovance and DealerMine due to their profitability-driving capabilities. - Maury Marks, President, Chief Executive Officer, Director
Q: Can you elaborate on your pricing strategy for the year and any opportunities for adjustments?
A: We have consolidated and standardized our price increase policies across all brands. Additionally, we are moving our DMS customers to our per-user MSRP pricing, which is part of our transition work this year. - Maury Marks, President, Chief Executive Officer, Director
Q: Does the transition to cloud coincide with the new pricing strategy?
A: Yes, the transition to cloud coincides with the new pricing strategy, but it also impacts dealerships opting for on-prem solutions. We are making MSRP pricing consistent across all user licenses. - Maury Marks, President, Chief Executive Officer, Director
Q: How is the cloud offering being received, and what are the long-term expectations?
A: The reception is mixed; some dealerships are now more open to cloud solutions, while others prefer on-prem due to concerns about internet reliability. We aim to move more of our base to the cloud over time. - Maury Marks, President, Chief Executive Officer, Director
Q: What measures are you taking to ensure cybersecurity, especially in light of recent industry incidents?
A: We have enhanced our security posture with external expert consultations and continuous testing. Employee education on cybersecurity practices is also a key focus to prevent breaches. - Maury Marks, President, Chief Executive Officer, Director
Q: Can you discuss the impact of staffing shortages on BDC revenue and margins?
A: Staffing shortages have limited our ability to capitalize on additional revenue opportunities, though we are meeting contractual commitments. We are also working on AI projects to improve BDC efficiency and gross margins. - Maury Marks, President, Chief Executive Officer, Director
Q: Are there any early indications of the gains from AI projects in the BDC?
A: It's too early to quantify the gains, but we are optimistic about the potential improvements in efficiency and gross margins. - Maury Marks, President, Chief Executive Officer, Director
Q: How are you addressing the challenges with the cloud implementation?
A: We are continuously improving our cloud offering and staying close to our customers to address any issues. The process has had its challenges, but we are making steady progress. - Maury Marks, President, Chief Executive Officer, Director
Q: What are the long-term impacts of your profitable growth strategy?
A: Our strategy has led to three consecutive quarters of adjusted EBITDA margin of 20% or higher, enabling us to reduce debt and save on interest. This improved profitability provides us with flexibility for future capital allocation. - Maury Marks, President, Chief Executive Officer, Director
Q: What are your capital allocation options moving forward?
A: Options include increasing sales and marketing efforts, pursuing M&A, investing in high-IRR products, and increasing OEM certification investments to open up more market opportunities. - Maury Marks, President, Chief Executive Officer, Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
