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01/11 16:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite a decrease in total revenue and adjusted EBITDA, there are positive indicators such as SaaS revenue growth, improved gross margins, and expansion into new markets like K-12. The Q&A section highlighted low churn and potential for future growth in SaaS deals. However, the decline in professional services revenue and cautious revenue projections for 2025 temper expectations. Given the mixed signals, the stock price is likely to remain relatively stable over the next two weeks, resulting in a neutral sentiment.
Total Revenue $4.0 million for Q3 2025, a decrease of 12.8% compared to $4.6 million in Q3 2024. The decline was primarily due to lower professional services revenue.
SaaS Revenue $1.6 million for Q3 2025, an increase of 14.6% compared to $1.4 million in Q3 2024. This growth was driven by early successes in payables automation.
Software Maintenance Services Revenue Decreased by $42,000 or 11.9% compared to Q3 2024. This decline was expected as it pertains to support agreements for on-premise solutions.
Professional Services Revenue $1.9 million for Q3 2025, a decrease of 28% compared to $2.6 million in Q3 2024. The decline was attributed to a temporary slowdown in digital transformation work, particularly paper scanning.
Consolidated Gross Margin 64.2% for Q3 2025, an increase of 434 basis points compared to 59.8% in Q3 2024. The improvement was due to a favorable revenue mix, with increased SaaS volume and reduced professional services volume.
SaaS Margins 85.1% for Q3 2025, up from 84.3% in Q3 2024. The increase was due to higher SaaS revenue.
Professional Services Margins 40.5% for Q3 2025, down from 42.9% in Q3 2024. The decline was due to a challenging project, despite the impact of June 2025 price increases.
Storage and Retrieval Margins 71% for Q3 2025, up from 50.6% in Q3 2024. The improvement was primarily due to price increases implemented in April 2025.
Operating Expenses $2.0 million for Q3 2025, a decrease of 1.9% compared to $2.1 million in Q3 2024. The reduction was due to lower variable and share-based compensation expenses, offsetting investments in sales, marketing, and infrastructure.
Net Loss $370,000 for Q3 2025, compared to $393,000 in Q3 2024. The improvement was due to reduced operating expenses.
Loss Per Share $0.08 for Q3 2025, compared to $0.09 in Q3 2024. The improvement was due to reduced net loss.
Adjusted EBITDA $105,000 for Q3 2025, compared to $480,000 in Q3 2024. The decline was driven by reduced professional services revenue and increased SG&A investments.
Cash $3.2 million as of September 30, 2025. No year-over-year comparison provided.
Accounts Receivable $951,000 as of September 30, 2025. No year-over-year comparison provided.
Total Assets $18 million as of September 30, 2025, including $8.8 million in intangible assets and goodwill from acquisitions since 2020. No year-over-year comparison provided.
Total Liabilities $6.6 million as of September 30, 2025, including $3.6 million in deferred revenues and $1.9 million in lease liabilities. No year-over-year comparison provided.
Microfilm and Microfiche Storage Services: Expanded into temperature and humidity-controlled storage for large customers, with strong preorder volumes.
K-12 Payables Automation Solution: Launched in April 2025, fully rolling out through K-12 partner ecosystems, with 31 new SaaS deals closed recently.
Homebuilder Payables Automation Solution: Growing SaaS revenue in this market despite challenges, with customers expanding their subscriptions.
K-12 Education Market: Momentum gained with 67 school districts attending a webinar, leading to 31 new SaaS deals.
Homebuilder Market: Despite a tough year, SaaS revenue is growing, with customers increasing subscription volumes.
Digital Transformation Backlog: Rebuilt backlog to historical levels, expected to sustain operations through fiscal 2026.
AI Integration: Fully embraced AI for development, sales, and marketing, enhancing operational efficiency.
Partnership Expansion: Pursuing new partnerships to enter additional industries and markets, leveraging industry-agnostic technology.
Focus on SaaS Growth: Strategic emphasis on growing SaaS revenues and maintaining positive adjusted EBITDA.
Professional Services Revenue Decline: Professional services revenue decreased by 28% in Q3 2025 compared to the same period last year, primarily due to lower digital transformation work, especially paper scanning. This decline has significantly impacted overall revenue and adjusted EBITDA.
Dependence on Backlog and Pipeline: The company is relying heavily on its backlog and pipeline to recover digital transformation work to historical levels. Any disruption in closing deals or delays in the pipeline could adversely affect future revenue.
Market Challenges in Homebuilding Sector: The homebuilding sector, a key market for the company, has faced a tough year in 2025. This could limit growth opportunities for SaaS revenue in this segment.
Public Education Funding Uncertainty: Although the company has moved beyond earlier uncertainty around public education funding, any future disruptions in this area could impact the adoption of its K-12 payables automation solution.
Increased Investments in SG&A: The company has increased investments in sales, marketing, and infrastructure, which have reduced adjusted EBITDA. If these investments do not yield expected returns, it could strain financial performance.
Challenging Professional Services Margins: Professional services margins decreased to 40.5% in Q3 2025 from 42.9% last year, partly due to a particularly challenging project. This could impact profitability if similar challenges persist.
Revenue Decline in 2025: The company expects 2025 revenues to be less than 2024 revenues, driven by weakness in professional services in the first three quarters of the year. This poses a risk to overall financial stability.
Digital Transformation Work: The backlog of orders will bring digital transformation work back to historical levels and carry the company beyond the end of the second quarter of fiscal 2026, even without closing another major deal. The pipeline is strong, and the goal is to build a longer runway of backlog while expanding other revenue streams.
Storage and Retrieval Services: Expansion into microfilm and microfiche storage with temperature and humidity-controlled environments is underway. Preorder volumes are already coming in, and this new offering is expected to generate revenue starting in Q4 2025 and contribute through next year and beyond.
SaaS Business Growth: SaaS revenue in the homebuilder market segment is expected to grow despite challenges in 2025. Expansion potential is evident, with customers increasing their subscription levels. In K-12 education, the payables automation solution is rolling out fully, with significant customer interest and new orders. The company has a strong pipeline and is pursuing new partnerships to open additional industries and markets.
Financial Outlook for 2025 and 2026: 2025 revenues are expected to be less than 2024 revenues due to weakness in professional services in the first three quarters. However, SaaS revenues are expected to grow, and positive adjusted EBITDA will be maintained. Q4 2025 SaaS revenues are anticipated to exceed Q4 2024 levels, and fiscal year 2026 SaaS revenues are expected to surpass 2025 levels. Adjusted EBITDA for 2025 will be reduced by more than half compared to 2024 due to increased investments in sales and marketing, with returns expected in late 2025 and beyond.
The selected topic was not discussed during the call.
Despite a decrease in total revenue and adjusted EBITDA, there are positive indicators such as SaaS revenue growth, improved gross margins, and expansion into new markets like K-12. The Q&A section highlighted low churn and potential for future growth in SaaS deals. However, the decline in professional services revenue and cautious revenue projections for 2025 temper expectations. Given the mixed signals, the stock price is likely to remain relatively stable over the next two weeks, resulting in a neutral sentiment.
The earnings call presents a mixed picture. While there is optimism about SaaS growth and improved margins for professional services, the overall financial performance is weak, with significant declines in revenue and adjusted EBITDA, increased expenses, and a net loss. The revised financial outlook also indicates lower revenue expectations, further contributing to a negative sentiment. The Q&A session highlights some positive developments, but uncertainties remain, especially in entering new verticals. These factors suggest a likely negative stock price reaction over the next two weeks.
The earnings call revealed several concerns: a decline in total revenue and professional services revenue, increased net loss and operating expenses, and reduced EBITDA due to increased investments. Although SaaS revenue and margins improved, uncertainties in guidance, economic factors, and competition pose risks. The lack of a share repurchase program and unclear management responses in the Q&A further dampen sentiment. Despite some positive developments, such as record contract values, the overall sentiment is negative due to the financial challenges and uncertainties highlighted.
The earnings call reflects concerns over financial performance, with a net loss increase and decreased total revenue, despite some SaaS growth. Regulatory issues and competitive pressures add to uncertainties. The Q&A section highlights unclear management responses and market headwinds affecting customer implementations. While there are strategic investments and revenue growth expectations, the lack of clear guidance and increased expenses suggest a negative sentiment, likely leading to a stock price decrease in the short term.
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