Shareholder letter
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Pivotree Inc. The Frictionless Commerce Company To our shareholders, employees and customers - Q1 2025 Thank you to all of our Pivoters for a successful transformation, commitment to client satisfaction and constant progress with our product initiatives. We achieved another record quarter with Adjusted EBITDA 1 reaching $2.0 million and we reported $232k in net income. We announced the divestiture of our WMS software business with a purchase price of $2.7M, bringing more focus to fewer products with our R&D investments moving forward. Closer look at Q1 2025 results: Revenue reached $19.2 million which is a little higher than the $17-$19 million revenue range we plan around. Excluding Legacy Managed Services (LMS), revenue was $14.8 million, with both MIPS and PS revenues increasing 8% versus the previous quarter. The $19.2 million of revenue includes more than $4 million of LMS revenue and I have indicated that you will see that number take a step down this year particularly with the sale of our legacy WMS business and the lower LMS bookings. We took projected LMS revenue declines into consideration when we initiated the op ex cuts last year and expect to maintain our new Adjusted EBITDA 1 trend moving forward with the reduced LMS revenue. TCV Bookings 1 totaled $17.5 million, down 4% from the previous quarter, but up 4.3% on a trailing 12-month basis. MIPS TCV bookings 1 were notably strong at $5.4 million, continuing the previous quarter's positive results. This represents an 85% increase year-over-year and a 17% increase on a trailing 12-month basis. These TCV bookings 1 are driven by large, multi-year contracts, which provide a stable foundation for predictable revenue. Expect the lumpy TCV bookings 1 to continue and with longer contracts expect the revenue ramp to take a while to be reflected in our results. I am really pleased to see the MIPS TCV booking 1 trend and the general mix shifting to our longer term growth potential categories. Adjusted EBITDA 1 hit a new record at $2.0 million just over 10% Adjusted EBITDA 1 margins. We expect to continue to exceed 5% Adjusted EBITDA 1 over the year barring any unexpected changes due to the impact of the US trade war. We booked a large payroll accrual in Q1 reflecting variable compensation that is trending toward a year-end payout which is great fo r company morale. Net income for Q1 was $232k which is our first reported net income since becoming public. Starting in Q3, approximately $700k/quarter in depreciation 2 will be finished, leading to a positive impact on future Net Income. Cash increased by $2.6 million in Q1 finishing with $6.5 million up from Q4 at $3.8 million, reflecting the resolution of open issues from the end of 2024 and our operating cash flow production. Q2 will also benefit from the proceeds of the WMS sale and further reduction in the diminishing restructuring accrual that is working off the balance sheet for the next couple of quarters. Trends and Observations: We started to see our first indications of the tariff impact on certain clients, particularly in seasonal retail that relies on offshore manufacturing. We have seen larger industrial manufacturing and distributors indicate they have inventory to “wait it out” and are reluctant to pass on any price hikes. Clients continue to test opportunities for more automation to reduce manual efforts and are responding favorably to insights into transaction workflows and data health. Our SKU build category is making material strides in lowering the cost and time it takes to clean and complete SKUs through automation. Our industry focus is yielding very positive results in commercializing the sale of SKUs which are being reflected in the MIPS bookings. Control Tower is now available across 5 different platforms and starting to collect and connect more transactional client data. We are getting very positive receptions from both existing clients connecting across more systems and most recently we won a brand new logo to Pivotree solely on Control Tower. Summary: Strong operational controls are driving improvement in Adjusted EBITDA 1 and cash flow. Our TCV bookings 1 mix is shifting from LMS replaced by two strong MIPS TCV bookings 1 quarters. I expect continued bottom line performance with some revenue volatility due to sharper LMS declines. I remain bullish on our more focused product initiatives and confident with our stronger cash position. 2025 will continue to be a bottom line focused production year as we continue to work on initiatives to drive topline growth. Bill Di Nardo Chief Executive Officer (1) EBITDA, Adjusted EBITDA and Total Contract Value (TCV) Bookings are Non-IFRS measures. See “Non-IFRS Measures” at the end of the letter. (2) In reference to the Amortization and Depreciation line item contained within the consolidate statement of income
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Forward-looking Information This letter contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") within the meaning of applicable securities laws. Forward-looking information may relate to the Company's future financial outlook and anticipated events or results and may include information regarding the Company's financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, bookings, taxes, dividend policy, plans and objectives. Particularly, information regarding the Company's expectations of future results, performance, achievements, prospects or opportunities or the markets in which the Company operates is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects", "budgets", "scheduled", "estimates", "outlook", "forecasts", "projects", "prospects", "strategy", "intends", "anticipates", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will" occur. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. The forward-looking information contained herein includes, but is not limited to, the proposed expansion of the Company's market position, potential acquisitions, the conversion of sales pipelines to confirmed bookings, and the achievement and maintenance of profitability metrics, such as Gross Profit, Gross Margin, EBITDA, Adjusted EBITDA, Net Income, and Comprehensive Income. Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that, while considered by the Company to be appropriate and reasonable as of the date of this letter, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to: ● our ability to execute on our growth strategies; ● our ability to create and protect unique intellectual property and enter new markets; ● the impact of changing conditions in the global e-commerce market, including (i) increasing competition and (ii) changes in approach in the e-commerce software as a service solution or infrastructure market; ● changes in the expectations, financial condition and demand of our target markets; ● changes in the expectations, competitive positioning and demand amongst major cloud providers; ● changes or increases in the difficulty of avoiding cyber or data security threats, or compliance with data security regulators that may impact our business; ● our ability to continue to execute accretive acquisitions; ● our ability to maintain and build our reputation with clients; ● our ability to achieve confirmed bookings from our sales pipeline and the risk that customers in our sales pipeline move their business to one of our competitors ● fluctuations in currency exchange rates and volatility in financial markets; ● developments and changes in applicable laws and regulations; and ● such other factors discussed in greater detail under the "Risk Factors" section of the prospectus of the Company dated October 23, 2020 (the " Prospectus "). If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in forward-looking information. The opinions, estimates or assumptions referred to above and the risk factors described in the "Risk Factors" section of the Prospectus should be considered carefully. Although the Company has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to the Company or that the Company presently believes is not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as of the date made. Forward-looking information contained in this letter represents the Company's expectations as of the date of this letter (or as of the date they are otherwise stated to be made), and are subject to change after such date. The Company disclaims any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws."
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Non-IFRS Measures and Reconciliation of Non-IFRS Measures This MD&A makes reference to certain non-IFRS measures including key performance indicators used by management and typically used by our competitors in the technology industry. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore not necessarily comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures and technology metrics are used to provide investors with supplemental measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures, including technology industry metrics, in the evaluation of companies in the technology industry. Management also uses non-IFRS measures and technology industry metrics in order to facilitate operating performance comparisons from period to period, the preparation of annual operating budgets and forecasts and to determine components of executive compensation. The non-IFRS measures and technology industry metrics referred to in this MD&A include “Total Contract Value Booking”, “EBITDA” and “Adjusted EBITDA”. Definitions of these terms, as well as reconciliation of these items to the nearest IFRS measure (where applicable), are located in Pivotree’s MD&A.