VersaPay Announces Q1 2019 Financial Results

- Revenues grow 90% year over year to $1.95 million in quarter -

TORONTO, May 22, 2019 /CNW/ - VersaPay Corporation (TSXV: VPY) ("VersaPay" or the "Company"), a leading provider of cloud-based invoice-to-cash solutions including electronic invoice presentment and payment, automated collections and cash application, today announced its financial results for the three-month period ended March 31, 2019.

"The first quarter was another record quarter, with total revenues growing 90% year-over-year to $1.95 million.   The biggest driver of this was ARC^TM which grew 175% year-over-year to $1.46 million," said Craig O'Neill, CEO of VersaPay. "Our recurring business (ARR) is approximately $6.56 million at the end of the quarter with ARC^TM representing approximately 70% of this figure.  This is significant because of the positive impact it has on our gross margins, which grew to 79% this quarter, up from 71% in Q1 2018."

Mr. O'Neill continued, "Our subscription backlog and professional services backlog ended the quarter at $1.10 million and $0.47 million, respectively, with new subscription sales of $0.90 million and professional services sales of $0.31 million in the quarter. We will see the majority of this backlog translate to revenue in the coming one to two quarters."

Operational Highlights for Q1:

• Strong quarter for ARC™ sales:  10 new ARC^TM contracts were signed during the quarter that represented $0.90 million in new ARR, with about 41% of sales coming through channel partners.  From a geographic standpoint, 100% of sales came from the U.S. which marked the first quarter that all sales are concentrated in the U.S.  Moreover, the Company signed professional services contracts worth approximately $0.31 million in the quarter representing the highest quarter of such sales to-date.
  
  
• High conversion of backlog to ARC™ Revenue: The Company converted approximately 89% of its ARC^TM subscription backlog (which are contractually signed but unbilled clients) as of December 31, 2018 to revenue in the quarter. With this high backlog conversion rate, the subscription backlog at the end of Q1 2019 was $1.10 million.
  
  
• New ARC™ module released: During the quarter, the Company launched a new module on the ARC™ platform that offers enhanced cash application and bank reconciliation capabilities powered by Cashbook. With the introduction of this new module, ARC™ provides a true end-to-end solution for invoice-to-cash, automating all steps in the process for all types of payments, including gathering remittance data from customers' emails and vendor websites, and reconciling bank statements with accounting books and records.
  
  
• Continued growth in ARC™ usage metrics: The usage of ARC^TM is an important indicator of the value clients are receiving from the platform and a good predictor of continued sales and revenue growth.  As at the end of the quarter, 162,560 end-customers were using ARC^TM compared to 106,746 at the end of Q1 2018, and approximately 545,000 invoices were delivered to end-customers during the quarter compared to 393,000 invoices in Q1 2018.  247,000 invoices worth $222 million were paid on ARC^TM in Q1 2019, compared to 198,000 invoices worth $157 million in Q1 2018.

Financial Highlights:

• Total Revenue for Q1 2019 increased by 90% to $1.95 million compared to $1.03 million in Q1 2018.
• Gross margin percentage for the three-month period ended March 31, 2019 was 79%, compared to 71% in Q1 2018.
• ARC^TM ARR increased to $4.57 million compared to $1.92 million in Q1 2018 and $3.30 million in Q4 2018.  This represents an increase of 138% year-over-year, and an increase of 38% quarter-over-quarter.
• PayPort^TM ARR grew to $1.99 million, bringing our total recurring revenue to a run rate of approximately $6.56 million at the end of Q1 2019, compared to $3.72 million in the prior year, an increase of 76%.
• Operating expenses from operations increased by $0.91 million to $4.32 million (Q1 2018: $3.41 million), an increase of 27% year over year.  Largest portion of the overall increase ($0.39 million or 43%) was driven by non-cash mark-to-market adjustment for share-based compensation and non-cash amortization of right-of-use assets related to the new IFRS 16 – Leases accounting standard implementation¹.  Total salaries and benefits for the Company was approximately $2.43 million in Q1 2019, an increase of $0.46 million from Q1 2018. The increase is consistent with the growth of headcount between the two periods and consistent with the growing revenue trend of the Company. IT &Infrastructure increased by $0.11 million in relation to the Company's investment in research and development activities. Offsetting the increase in the above costs is a decrease in Sales and Marketing expenses by $0.21 million due to timing. Marketing and promotion activities are expected to pick up in Q2 2019.  
• Adjusted EBITDA was a loss of $2.02 million in Q1 2019, compared to a loss of $2.27 million in Q1 2018.

¹ See further details on the new IFRS 16 – Leases accounting standard implementation in the Financial Highlights sections of the Q1 2019 Management Discussion & Analysis on SEDAR.

The following is a reconciliation of Adjusted EBITDA to total comprehensive (loss) income:

	For the three months ended March 31
	2019	2018
	$	$
		Recast
Adjusted EBITDA	(2,019,048)	(2,265,905)
Share based compensation	(420,240)	(326,852)
Net finance expense (IFRS 16)	(124,500)	-
Other finance income (costs)	23,639	17,959
Amortization - RoU assets (IFRS 16)	(215,359)	-
Amortization - other assets	(114,923)	(32,765)
Other non-operating expenses 3	-	(55,000)
Foreign currency translation differences	(19,701)	5,050
Total comprehensive (loss) income	(2,890,132)	(2,657,513)

The term Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is a non-IFRS financial measure which does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. Adjusted EBITDA provides useful information to users as it reflects the net earnings before interest, taxes, depreciation and amortization and adjusted for the effect of non-operating expenses (including M&A and non-recurring restructuring activities), share-based compensation (which includes share-based payments, restricted share units, performance share units, and deferred share units), and unusual items such as discontinued operations and sales tax accrual. Management uses Adjusted EBITDA in measuring the financial performance of the Company as this measure reflects results that are controllable by management in day-to-day operations. Management monitors Adjusted EBITDA against budget and past results on a regular basis.

The term Annualized Recurring Revenue ("ARR") is a non-IFRS measure and refers to multiplying the MRR value defined above by 12 to represent management's best estimate of forward looking 12 months of recurring revenues that the Company would earn based on the current Monthly Recurring Revenue

The term Operating Expense is the aggregation of general and administrative expenses, research and development expenses, and sales and marketing expenses.

The term Backlog for ARC^TM Subscriptions represents the annual recurring amount that customers have contractually committed to but have not yet been billed. The term Backlog for ARC^TM Professional Services represents revenue expected to be recognized in the future related to contracted non-recurring implementation services that are yet to be performed.

Conference Call Details:

Date: Thursday, May 23^rd, 2019
Time: 9:00 AM Eastern Time

Participant Dial-in Numbers:
Local – Toronto ([phone]
Toll Free – North America ([phone]
Conference ID: 03845926

Recording Playback Numbers:
Toronto ([phone]
Toll Free – North America ([phone]
Passcode: 845926 #
Expiry Date: Thursday, May 30^th 2019

A live audio webcast and archive of the conference call will be available by visiting the Company's website at http://www.versapay.com/company/investor-relations/. Please connect at least 15 minutes prior to the conference call to ensure time for any software download that may be needed to hear the webcast.

About VersaPay

VersaPay is a leading cloud-based invoice presentment and payment provider for businesses of all sizes. VersaPay's ARC^TM software-as-a-service offering allows businesses to easily deliver customized electronic invoices to their customers, to accept credit card and EFT payments and automatically reconcile payments to their ERP and accounting software. VersaPay is headquartered in Toronto, Canada and has operations in Montreal.

More information about VersaPay can be found on the Company's website at www.versapay.com or under the Company's profile on SEDAR at www.sedar.com.

Forward Looking and Other Cautionary Statements

This news release contains "forward-looking information" which may include, but is not limited to, statements with respect to the activities, events or developments that the Company expects or anticipates will or may occur in the future. Such forward-looking information is often, but not always, identified by the use of words and phrases such as "plans," "expects," "is expected," "budget," "scheduled," "estimates," "forecasts," "intends," "anticipates," or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be achieved.

These forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business. Management believes that these assumptions are reasonable. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include, among others, risks related to the speculative nature of the Company's business, the Company's formative stage of development and the Company's financial position.

Forward-looking statements contained herein are made as of the date of this news release and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results, except as may be required by applicable securities laws. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE VersaPay Corporation

John McLeod, Vice President, Marketing, VersaPay Corporation, 647-258-9406, [email protected]; Babak Pedram, Investor Relations, Virtus Advisory Group Inc., 416-644-5081, [email protected]

Related Links

www.versapay.com