By Lisa Thompson, Senior Analyst, Zacks SCR
XTM (OTC:XTMIF) had a year of high growth despite the almost impossible environment resulting from the Canadian government’s aggressive response to the COVID pandemic. With restaurants forced to shut down in-person dining for most of the year, it was remarkable what the company achieved during this time. However, with the full removal of restrictions in Ontario and the rest of Canada in March, we expect real gains for XTM in 2022. That, combined with entry to the US market, should prove to be an exceptional growth year for the company. We are expecting revenues to grow 324% to $10 million this year. Certainly, the government’s actions delayed much progress until March, and as most revenues are recurring, it sets back forecasts.
We look forward to Q2 with a full quarter of a fully opened hospitality sector in the Canadian market and the gradual onboarding of new US customers. We think the gating factor to growth is currently the sales effort. Currently the company’s sales are being led by the senior management team, whilst they refine the sales process. We expect more dedicated salespeople will be added in Canada to start and then added in the US based on results in Canada.
In 2021, XTM reported that the gross dollar value (GDV) loaded on its platform was $153.9 million, an increase of 410% from $30.2 million in 2020. Active users at year end were 40,997, up 250% from 11,705 at the end of 2020. XTM signed up 732 new locations for its Tips Today program during the year.
Total revenues for the year were $2.4 million versus $853,000 in 2020, an increase of 179%. The sources of revenue broke down as follow: Transaction revenue (which consists of interchange, ATM, and transfer fees) was $1,128,000, an increase of $669,000 or 146% from $459,000 in 2020. Card revenue (which consists of procurement and fulfillment of Today debit cards to the clients for use by cardholders) was $610,000 in 2021, up 104% from $299,000. Program Management revenue (which primarily consists of licensing technology to adjacent markets) was $643,000 for fiscal 2021, an increase 581% from $94,000. The increase was due mainly to the roll out of the 2.0 platform at the tail end of fiscal 2020, a version which provides greater scalability and adaptability to different uses that could be white-labeled in other verticals.
Q1 2022 Earnings Results
Net revenues for Q1 2022 at XTM were $796,623 versus $254,079 a year ago, up 214% and slightly down from Q4 due to in-person dining being shut down for January and February. Gross margin was down significantly year over year to 14.4% from 28.8% last year. This was mainly due to a significant increase in Card revenue which is lower margin as current pricing is structured more as a cost recovery, and some duplication of platform costs as XTM continues to migrate its clients from its legacy 1.5 platform to its current 2.0 platform. Management expects to complete the migration in early Q3 2022. Gross margin is also greatly affected by the amount of program management revenue in the quarter as that revenue is booked at 100% margin. Gross margin dollars increased 56% to $114,384 from $73,217 a year ago.
Operating expenses were $1.6 million, up $600,000 from last year. The majority of the increase was in salaries and benefits as the employee count increased by ten people since last year, followed by consulting costs. The pretax loss was $1.5 million this year and $890,000 last. Other income was an expense of $62,784 compared to income of $3,000 last year. $66,000 was spent in the quarter to exploring potential M&A transactions and is non-recurring. The net loss was $1.5 million this year compared to $887,000 last year resulting in a loss per share of $0.009 versus $0.007. The average share count increased 38% during that time, mainly from an oversubscribed private placement in Q4 2021.
On March 31, 2022, XTM had $6.4 million in cash, $7.1 million in working capital and $347,000 in debt. The decline in the cash balance since December 31 was due in part to issuance of a US$500,000 short-term promissory note to a strategic partner, World Data Solutions. XTM also had negative cash flow (ex-changes in working capital) and free cash flow of $4.0 million for the year ended December 31, 2021 and $1.5 million for the first quarter of 2022. Adjusted EBITDA was a negative $4.0 million for 2021 and a negative $1.4 million for Q1 2022.
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