Shareholder letter
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Pivotree Inc. The Frictionless Commerce Company To our shareholders, employees and customers - Q2 2025 Thanks to all of the Pivoters globally that have done extraordinary work for our clients again this quarter leading to our third straight quarter of positive adjusted EBITDA 1 and second consecutive quarter of positive net income. The revenue expansion among our largest clients is due to the quality of our delivery people and skills they bring to digital transformation. Closer look at results I am cautiously optimistic about some key leading indicators this quarter. We saw spending expansion in a number of our large core clients. Targeted marketing and sales efforts are yielding direct inbound leads especially in data cleaning. The R&D team's impact on automating data cleaning processes through machine learning, AI and robotic process automation is yielding compelling results and helping to push Managed IP Solutions (MIPS) revenue up modestly from Q1, with TCV bookings 1 showing the greatest improvements. We have started to effectively use our SKU library in the sales and delivery process which should grow into a real competitive advantage. Trailing 12-month MIPS TCV bookings 1 are $19.2 million, up 41% versus the previous 12 months ($13.6 million). We saw a significant lift in data cleaning and SKU Building requests, alongside material progress in speed, automation, and lower delivery costs. PS revenue is relatively flat quarter over quarter and year over year with promising signs in Q2 PS TCV bookings 1 at $11.3 million, up 15% vs Q1, 20% vs Q2 2024, and 6% on a trailing 12-month basis. It's too early to call it a turning point for pipeline building efforts, but bookings 1 growth is a prerequisite to revenue growth. Sustained operating discipline across delivery teams led to a step up in PS gross margins at 42%, the highest in over 3 years. I expect the PS delivery team to sustain the 40-42% GM range. The Legacy Managed Services (LMS) business revenue roll-off was accelerated by our profitable WMS business divestiture combined with the continuing trend. This was expected and built into 2024 cost adjustments, explaining unchanged gross profits and adjusted EBITDA 1 from Q1. Our adjusted EBITDA 1 was $1.7 million (10%), in line with expectations, and would have been $2.4 million 2 without the FX swing. Q2 EBITDA 1 at $3.9 million was positively impacted by the gain on sale of intangibles from the WMS business sale, we normalize our internal view closer to $1.5 million per quarter (7-10%). Normalized net income remains positive, closer to $0.3 million without one-time gains. Our cash position strengthened, climbing to $8.6 million from $6.5 million in March. We've observed renewing client confidence, with significant spend expansion among top clients 3 from 2024 to 2025 and more interest in digital transformation. Our sales pursuit teams are the busiest they've been in a while. The real test of client confidence will be the signature process, as we've seen shortening time frames lately after long, delayed selling cycles. We expect this to translate into Q4 and Q1 TCV bookings 1 . Summary: Effective operating controls and cost containment has Pivotree on a healthy and consistent EBITDA 1 track. R&D is producing valuable progress in key areas of the data cleaning process which in turn is leading to a growing pipeline of clients in our core industry segments. The entire team is working hard to convert that pipeline into signed bookings 1 and ultimately revenue, which is the only missing piece in our turnaround story. Our strengthening cash position will start to give us more options pursuing inorganic growth or investing more in our NCIB. 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) Adjusted EBITDA excluding the Loss (Gain) on foreign exchange reported within the consolidated statement of comprehensive income (3) Based on analysis of the top growth customers and its contribution to the fiscal year 2025 revenue growth inclusive of contracted work and forward looking expectation of bookings
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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
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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." 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.