VersaPay Announces Q4 and Full Year 2018 Financial Results

- Strong Revenues Driven by 104% growth in ARC -

TORONTO, April 2, 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- and twelve-month periods ended December 31, 2018.

"The fourth quarter was a record quarter in terms of revenue growth, with total revenue of $1.45 million, up 28% quarter-over-quarter and 37% year-over-year," said Craig O'Neill, CEO of VersaPay.  "This was mainly attributed to the strong growth in the ARC^TM platform where, for the twelve-month period, subscription revenue increased to $2.30 million, up from $1.13 million the year before or 104%.  ARC ARR grew to $3.30 million at the end of 2018, up 86% from the end of fiscal 2017.  ARC now represents approximately 63% of our recurring business."

Mr. O'Neill continued, "We also had an extremely strong quarter in ARC sales for Q4.  The team closed deals valued at approximately $1.48 million in new ARR, building on an already healthy backlog for future ARC revenues in the coming quarters."

Operational Highlights for Q4:

• Record quarter for ARC™ sales:  The Company achieved its strongest single sales quarter with sales of approximately $1.48 million in new ARR, with about 55% of sales coming through channel partners.  From a geographic standpoint, approximately 45% of sales came from the US. 
  
  
• Growing backlog of ARC™ ARR: The Company converted approximately 56% of its ARC backlog (ARR from signed but unbilled clients) as of September 30, 2018, to revenue in the quarter while growing its backlog to $1.82 million in ARR at the end of Q4 2018.  This signals a very healthy growth in the business, and continued revenue growth in the near term.
  
  
• Strong increases in ARC™ usage metrics: The usage of ARC 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 end of the quarter, 144,145 end-customers were using ARC™ compared to 97,059 at the end of Q4 2017, and approximately 538,000 invoices were delivered to end-customers during the quarter compared to 436,000 invoices in Q4 2017. Total invoices paid on ARC were $242 million in Q4 2018, compared to $158 million in Q4 2017.

Operational Highlights for Fiscal 2018:

• Strong ARC™ sales, particularly in the US: ARC sales for the year were approximately $3.86 million in ARR, an increase of 187% over sales in the prior year. From a geographic standpoint, approximately 71% of sales came from the US. Growth in the US can be mainly attributed to the US expansion plan embarked on in Q4 2017 which included hiring new US salespeople and increasing the company's digital marketing investment south of the border.
  
  
• ARC™ becomes VersaPay's flagship offering: Between December 31, 2017 and December 31, 2018, ARC™ contribution to the Company's revenue grew from 45% to 58%, making it VersaPay's largest revenue producer and flagship offering. As a result of this change in product mix, the Company's gross margins have increased from 67% for fiscal 2017 to 75% for fiscal 2018.
  
  
• ARC™ recurring revenue: As at December 31, 2018, ARC™ recurring revenue was $3.30 million, up from $1.78 million or 86% in the year.

Financial Highlights:

• Total Revenue for Q4 2018 increased by 37% to $1.45 million compared to $1.06 million in Q4 2017.
• Gross margin percentage for the three-month period ended December 31, 2018 was 83%, compared to 64% in Q4 2017.
• ARC ARR increased to $3.30 million compared to $1.78 million in Q4 2017 and $2.53 million in Q3 2018. This represents an increase of 86% year-over-year, and an increase of 30% quarter-over-quarter.
• PayPort^TM ARR grew to almost $1.98 million, bringing our total recurring revenue to a run rate of approximately $5.28 million at the end of 2018, compared $3.40 million in the prior year, an increase of 55%.
• Total Revenue for the year ended December 31, 2018 increased by 60% from $2.96 million in fiscal 2017 to $4.74 million in 2018.
• Gross margin percentage for the year ended December 31, 2018 was 75%, compared to 67% in fiscal 2017.
• Operating expenses for the year increased to $16.56 million (2017 - $10.13 million), an increase of 63% year over year. Included in 2018 operating expense are non-recurring M&A and restructuring activities of $0.46 million (2017 - $nil) and share-based compensation representing $0.82 million (2017 - $0.84 million). The remaining net increase in 2018 operating expense is primarily driven by the Company's investment in research and development activities, and increased sales and marketing spend consistent with the initiative to expand the direct and channel sales team in both Canada and the US. Other costs associated with higher headcount also increased during the year.
• Adjusted EBITDA was a loss of $3.51 million in Q4 2018, compared to a loss of $1.82 million in Q4 2017.
• The following is a reconciliation of Adjusted EBITDA to total comprehensive (loss) income:

	For the three months ended December 31		Years ended December 31
	2018	2017	2018	2017
	$	$	$	$
Adjusted EBITDA	(3,509,245)	(1,817,226)	(11,517,113)	(7,032,888)
Share based compensation	276,611	(279,036)	(816,803)	(839,201)
Net finance income (costs)	26,694	15,529	84,080	42,320
Amortization	(119,150)	(28,800)	(228,042)	(134,917)
Sales tax accrual	-	-	-	(145,869)
Other non-operating expenses	(302,644)	-	(457,644)	-
Net earnings from discontinued operations	-	(398,950)	-	8,516,851
Foreign currency translation differences	58,675	(11,564)	45,475	(55,863)
Total comprehensive (loss) income	(3,569,059)	(2,520,047)	(12,890,047)	350,433

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 represents ARC subscriptions that customers have contractually committed to but have not yet been billed.

Conference Call Details:

Date: Wednesday, April 3^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: Wednesday, April 10^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 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