Operator: Good day, everyone, and welcome to today's QuoteMedia Q2 results. [Operator Instructions] Please note, this call may be recorded. It is now my pleasure to turn today's program over to Brendan Hopkins.

Brendan Hopkins: Thank you, everyone, for joining us today. We have a brief safe harbor, and then we'll get started. Except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in the future periods to differ materially from forecasted results.

With that said, I would like to turn the call over to Dave Shworan, CEO of QuoteMedia.

David Shworan: Thank you, Brendan. Welcome, everybody. Thank you for joining us. We're pleased to announce that we've achieved a 27% increase in revenue in Q2 over Q2 of last year. Quarter-over-quarter showed a 6% increase. Needless to say, we're very pleased that we're continuing our growth curve, and we're certainly excited to see what we can achieve over the rest of this year.

We have released several of our new products and data sets to clients as we talked about last time. But we're still -- we still have a few new services to launch this year. And our goals are to have all of our hard work out the door by the end of this year.

On the customer side, we're seeing that we're speaking with many larger clients now, and many are looking to move away from our top competitors. We're projecting continued growth as the year continues and certainly hope to win some of the larger deals that are coming our way.

I'd like to now just pass the mic over to Keith Randall, he can take us through the numbers, and then we can answer any questions that you guys may have. Go ahead, Keith.

Keith Randall: Thanks, Dave, and welcome, everyone. I'll start with the income statement. Note that all comparisons are on a year-over-year basis unless otherwise noted.

Overall, we had another outstanding quarter with excellent revenue growth. Our revenue increased 27% year-over-year and 6% from Q1 2021. Breaking down our revenue. Our revenue growth was driven by a 48% increase in total Quotestream revenue, and in particular, a 55% increase in Corporate Quotestream revenue. The increase in Corporate Quotestream was primarily due to new contracts signed since the comparative period and an increase in usage for existing customers.

Additional data offerings and improved functionality have attracted new larger customers and has contributed to an increase in average revenue for our existing customers. We also continue to take advantage of new opportunities arising from customers looking for a more cost-effective solution to their data and technology needs.

Our individual Quotestream revenue was also strong, increasing by 30%. The increase in total subscribers can be attributed to new marketing efforts. The increase in average revenue per subscriber can be attributed to additional data offerings. International -- interactive content revenue, which is web display content, increased 6%, mainly due to an increase in our average revenue per customer. The launch of new products and the expansion of our data coverage have allowed us to attract larger customers to replace smaller customers lost due to the impact of COVID-19.

The new products and data coverage have also resulted in increasing the average revenue for our existing interactive content customers as they migrate to our newer products. Our cost of revenue consists of fixed and variable stock exchange fees and other data costs. It also includes amortization of capitalized development costs. Our cost of revenue increased 38% due to increased usage fees, vendor price increases and expanded data coverage.

As a result of our increased data cost and a changing revenue mix, our gross margin decreased from 48% to 43%. The change in revenue mix is due to quote -- to our Quotestream revenue growing at a higher rate than our interactive content revenue, which has higher gross margins. We do expect gross margins to improve in subsequent quarters, however, as our revenue catches up with the fixed costs associated with our new data offerings.

Our total operating expenses increased 12%, mainly due to increases in personnel costs. Sales and marketing expenses increased 17%, and software development costs increased 6% due to additional sales and development staff hired since the comparative period. G&A expenses increased 12%, primarily due to an increase in bad debt expense resulting from a large customer balance written off during the quarter. Our net loss for the quarter was $79,000, and our adjusted EBITDA was $312,000. Please refer to the reconciliation included in our press release for the calculation of adjusted EBITDA.

Turning now to our balance sheet and cash flow statement. Our cash totaled $627,000 at quarter end, which was a $209,000 increase from year-end. Our net cash flow from operations was $1.3 million, while net cash used in investing activities was $1.1 million due to increased spending on infrastructure and product development. If circumstances dictate, however, we have the flexibility to reduce our development spending to maintain a strong balance sheet and liquidity position.

Looking forward, because our revenue is recurring in nature, based on customers currently under contract, we fully expect to maintain our current revenue growth for the remainder of 2021. Thank you. And I'll now pass it back on to Dave.

David Shworan: Thank you, Keith. So I'm now happy to open up the call for any questions that you guys have. Feel free to do so.

Operator: [Operator Instructions] We will take our first question from Michael Kupinski.

Michael Kupinski: That's close enough. So it's nice to start to see the revenue acceleration, and it sounds like you're on track to continue to see that in the second half. But on the other hand, the gross margins, and I'd like to just go back to that, part of -- in the first quarter, you kind of indicated that gross margins should start to see some improvement because of the absorption of some vendor price increases at the first part of the year and so forth. Can you kind of give us a little bit more color on the gross margins and your thoughts about the balance of the year?

David Shworan: Yes. Do you want me to comment, Keith, or you want to?

Keith Randall: Well, maybe you can comment in general terms, and I can then comment in specifics.

David Shworan: So I think in general terms, and you can correct me if I'm wrong, is that depending on what we sell and what kind of products we sell, there are certain higher-level exchange fees that come into play. So when we have our Quotestream application or Quotestream Connect products, data side of products that really takes off, there is increase in exchange fees that are associated. And therefore, it alters the gross margin. So that's probably what happened. And Keith, you can continue.

Keith Randall: Yes. So there's -- the revenue -- that's the revenue mix Dave was referring to, but there's also just new price increases that traditionally they have happened at the beginning of the year, but now we're finding that we -- they are continuing during the year. So we got hit with a few price increases that we weren't anticipating. So hopefully, that doesn't continue for the rest of the year. So I think it's a combination of those 2 why our gross margins remained at 43% for the first 2 quarters of this year.

Michael Kupinski: Got you. And so you indicated in your comments that you thought that there would be similar growth as you had in Q2 in the second half of the year. Can you kind of give us a little flavor of what you're seeing in the pipeline? Why wouldn't we see an acceleration from Q2 revenue growth because of the prospect of you adding additional clients and so forth? I would -- at this point, you probably have enough visibility in Q3, given your recurring revenues that you have from existing clients. Do you have -- give us a flavor of what your thoughts are on the revenue growth in Q3.

Keith Randall: I'll start and maybe, Dave...

David Shworan: Okay, go ahead. Go ahead.

Keith Randall: So I'll just start and then maybe Dave can add. So when we do our projections, we don't account for large customers. So clearly, if we land some of the larger deals that we're in discussions, that would skew the numbers higher. So our projections are basically kind of based on business as usual and what we have under contract. So maybe Dave can talk about some of the deals in the pipeline.

David Shworan: Yes. So essentially, that's true, and we are seeing projections even with just our -- we call it, kind of ham-and-eggers is the way that business is done as per usual, and the growth curve is there. The similar growth patterns is what we're seeing. But there are other discussions in the pipeline that are actual -- pretty much game-changers as far as what's going on and how we're speaking to customers, which levels of customers we're talking to, the size of contracts, the size of companies that we're talking to.

So there's certainly more of those that are coming to the table. We can see that with the kind of the shake-up in the industry as far as our top competitors -- kind of how they're changing, how they're merging, how they're moving around. It's affecting the customers, and they're coming to us, and we really are becoming one of those players in the industry now. So we're invited to the table.

We're doing RFPs, request for proposals, where we have to respond to what would it take and what would it cost to completely replace an incumbent provider at, say, a big bank or a big brokerage firm. So we're doing a lot more of those and deepened some pretty big discussions with different firms. Now as Keith said, if they hit, well, then that changes quite a bit. If we don't get them, well, then we have our growth curve that we've got. So like you said, it's really hard for us to project because one client can dramatically change our numbers.

Michael Kupinski: Is the activity more so on the Corporate Quotestream side or on the interactive content side? I mean just trying to understand because that can influence the margins. What -- where are you seeing the most activity at this point?

David Shworan: It's actually across the board. So we're seeing a lot of data, so actual data sets, raw data, data licenses, companies that want to license quote data, research data. We've got our new product lines, our new data sets. A lot of customers are coming asking about that. They can replace incumbent data sets that are more expensive. So I would say that it's a combination. We certainly are looking at a lot of Quotestream as well, but it is probably 50-50.

Michael Kupinski: And then on G&A costs, can you talk a little bit about that bad debt expense? Are you increasing the allocation for bad debt expense? What can we look for in terms of that going forward in the second half this year because obviously, the margins were a little lower than I was expecting?

Keith Randall: Yes. I think that was a one-off, that bad debt. I mean I think our bad debt provision is probably high, if anything. So that was one sort of unexpected bad debt that incurred, but I don't think it's indicative of the situation going forward.

Michael Kupinski: And what was the CapEx in the quarter? And what are you anticipating for the back half?

Keith Randall: I don't really have that figure right in front of me. I can get that to you after the call, though.

Operator: We will now take our next question from [ Jonathan Jetmundsen ].

Unknown Analyst: My question just got answered. I'm good.

Operator: Our next question is from Richard Walker.

Unknown Analyst: Nice quarter, congratulations. Could you expand a little bit on how you compete -- I mean, you're going up against Bloombergs of the world? Is it -- I understand it's price, but is it also features that you have that others don't? Is it speed of your data? Could you just talk about that a little bit?

David Shworan: Sure. Yes. Well, it's -- I mean, it's not just Bloomberg. There's a lot of competitors out there at different levels and different styles of products or data or what clients are using. So as far as -- when it comes down to raw data, streaming quote data, level 2 data, access to research, things like that, it's -- it can be somewhat similar, right, between data providers. Because once you've got exchange data, once you're bringing in news, research, broker ratings, et cetera, et cetera, it is kind of something where it's a one-to-one switch over. So that would be price.

That would be price. It might be also other reasons why companies switch to us is because they might need more than one thing. They might need data. They might also need terminals, and they want to save money there or they want to have something that is sufficient for what they're doing. You have to realize Bloomberg terminals are very, very expensive and often have way more information or cost associated that is not required by the average user.

And then they might also need content solutions for, say, a portal, a trading system, access for providing data to retail customers, things like that. So we kind of are that kind of one-stop-shop where companies will come to us and we can tick off a lot of boxes as far as data that they might be getting from different providers, applications that they're getting from different providers. We're doing a lot of mobile work, things like that.

So there's -- it's -- I guess -- the other thing that is very, very common is that companies like to work with us because we're more responsive, I guess, where we work with the customers more like a partnership. We solve their problems. And obviously, the larger the firms that we're up against the lack of service that they get. And so that's the number one thing that we hear all the time is that when they need something or if there's some special thing, we can work through it and figure it out and deliver what they're looking for. Whereas dealing with a multibillion-dollar company, you're -- it takes months to get something done or the scale of what you need done it could take a lot of costs, et cetera, et cetera, where we can do it a lot simpler. Newer technologies, I guess, newer, faster ways of doing things. So that's our focus.

Unknown Analyst: Okay. Great. I appreciate that. And I guess as a follow-up to that, I'm assuming, and correct me if I'm wrong, that when you go in against your competitors, at least in the past, there's been a maybe perception that, hey, this is someone -- QuoteMedia is someone we haven't really heard of. We don't know a lot about them. That's going to cause some trepidation perhaps. Is that -- I'm assuming that's lessening in terms of a concern that others have. How is that progressing?

David Shworan: No, exactly. That's actually number one, right? Like we've lost million-dollar deals because a company can't trust in us yet. And that happens quite regularly. And often, I will get a phone call from, say, the CEO or whoever is doing the data acquisition side for a firm and they say, okay, so just so you know, it was between X and QuoteMedia and we have to go with X because we just can't take the risk on QuoteMedia yet.

And so that happens quite a bit. That happens more than people know. And it's very unfortunate because we can supply the product. And we have lots of customers that have said yes, and that's why we're growing and that's why we're doing well. But unfortunately, it takes a long time to build that trust and to get that name, and it's a battle. It's always a battle to get those bigger deals because the risk -- they always feel somewhat of a risk going with us, but then there's firms that say, "You know what we trust in you and we are going to go ahead," and that's -- and they are happy.

And we have had some of these larger clients for many years and constantly growing, adding more data, adding more services and actually helping us direct the growth of our company. And so now, we just have to convince the others that we are ready and you can certainly switch to us. I mean we've got redundancy, 3 data centers that run everything. We've got all kinds of failover systems and things like that. And we're always improving it, too, right? But we are really targeting to be that top-level provider that goes head-to-head against the multibillion-dollar companies.

Unknown Analyst: Okay. All right. Appreciate that. And last question, 2-parter. Is there an average length of contract either on the corporate or retail side to individual user perhaps? And also, can you talk about retention and how that's going in terms of who you have and who you don't have anymore? Percentage-wise I am talking now.

David Shworan: Yes. Yes. As far as the way our contracts work, usually, it's -- for individuals, it could be monthly use of an application. For corporate contracts, it's usually annual or 2-year or 3-year. When companies license data, it could be 3, even up to 5 years. So we have all types of levels of contracts. I guess the one-offs when somebody comes in and just needs a terminal for their own use, that could be a monthly kind of put it on your credit card type of thing. But most of our deals are annual or longer.

And we have a very high retention rate in the 90-something percent. I don't know what it is at this point. But very high retention rate, all recurring revenue and very happy customers. I don't think -- I don't know of any bigger ones that have lost -- that we've lost or that have moved or have switched. We're very good at retaining. And if there's any issues, obviously, we were -- we're jumping on it to fix and to improve and to get to that next level. We don't want to lose customers, obviously.

Unknown Analyst: Keep up the good work, great quarter. And the bigger you get easier it will get hopefully.

David Shworan: You bet. Thank you.

Operator: [Operator Instructions] We will take our next question from [ William Friese ].

Unknown Analyst: So my first question is a follow-up on something that someone asked. I believe it was the last conference call about acquisitions. And your comment was that you didn't think the time was right for acquisitions and that you would rather bank cash. Is that still your thoughts?

David Shworan: Yes. It's mostly about the cash, right? So when you -- when we do acquisitions, we don't want to bleed our account too high. So that's really what it's all about. So we were looking at acquisitions a little while ago, and we were actually starting to paper some contracts and do things like that. And obviously, COVID came along and it set us back and said, okay, well, we better stop and just watch what's going on. But at the same time, we wanted to grow our data sets. We wanted to expand into a bunch of new areas. We had a lot of companies coming to us for premium research, all kinds of other data that we needed to source, put together a team to collect, to calculate all kinds of algorithms and technical information that they wanted.

So we decided to go that route and spend on those types of things rather than the acquisition side. I think that as we go forward this year we'll take a look at our -- the money that's banked and certainly look at that. We just don't want to do acquisitions where it's all share price, where it's all based on shares. So having a high cash amount in the acquisition, it looks more advantageous to us. So that's why we're not proceeding with any acquisitions just right now.

Unknown Analyst: Okay. I know there are provisions in rating to repay loans that are outstanding with the significant holders. Can you tell me, is there any plan if certain metrics are met for any of these significant holders to request any loans be repaid?

David Shworan: Significant holders. Sorry, I'm not sure what that means.

Unknown Analyst: You.

David Shworan: Keith, do you know?

Keith Randall: Yes. I think he's referring to the preferred stock. Is that correct?

David Shworan: But we don't have any loans.

Keith Randall: We don't really have any loans per se. There -- we have some preferred stock. And there's provisions where a certain amount can be redeemed each quarter, but there's limits to that based on how much cash we have on hand and meeting other goals such as gross profit, so -- but there's limits to how much...

David Shworan: I think he is just referring to loans, to debt, but we haven't had any debt.

Keith Randall: Yes. We don't have any loans outstanding.

Unknown Analyst: Okay. Okay. So can you comment briefly whether -- I know it's a perennial question about the price of the stock, and there's many frustrated shareholders. Can you tell me whether or not you personally just happen to think that the shares are either priced about right for where the company is or whether they may -- you may feel they're grossly undervalued?

David Shworan: Yes. I don't know if that's something we can comment on. But certainly, with our growth and where we're going, I think that we're obviously affected by where we're listed. I think that there's -- a lot of people don't know about us. There's a lot of competition as far as stock that's available out there in the industry -- in the world. So I think essentially, it's -- we'd like to go to the next exchange. I think that's where we get higher liquidity. That's where we get the ability of having other people invest in our stock. So I think the -- being on the OTC, it's -- is hard on us. But at the same time, it's -- I don't know why -- maybe people need to see longer growth, faster growth. And I think we're now achieving that. So hopefully, people recognize what's happening with our firm.

Unknown Analyst: The main reason I asked that question was I was wondering connected with that is many times companies who feel their stock is undervalued will announce a stock buyback program. And it seems to be a win-win situation for the company because even though the buyback program is announced, there's no obligation to complete it. And any shares that are bought could be used for future acquisitions and would make a strong statement to the marketplace about the faith that you have in the stock. Any thoughts about doing it?

David Shworan: Yes. We actually -- I mean pre-COVID, we had -- we actually did announce that we were going to look at a buyback program. I think we even discussed it on one of the calls. We were going to look at acquisitions. We're going to look at buyback. There was a whole bunch of things that we were looking at. And of course, doing buyback is because the company feels that the price of the stock is -- it's better to buy it back than it is -- and we could win from that.

So it's -- as we grow dollars, as we grow our bank account, that's certainly something we're looking at now. Is it buyback? Is it acquisitions? Those are the kind of things we have to think about. One thing we're not going to do is just announce a buyback without really having an intent to do a buyback. I don't think that that's fair. I think the right thing is that we're -- we would announce a buyback, we would put together a plan, and we would act on it. So we discussed that way back, and we are certainly going to discuss it again.

Unknown Analyst: Okay. And my final question, if you have time. In the past, back in the day, you folks have said that there was no shortage of folks calling up and offering when the stock was trading at $0.03, $0.04, $0.05 a share, offering to buy the company for $0.06 or $0.07 a share. And you said those calls were pretty much a dime a dozen. And obviously, they've just dismissed as being not realistic. And I want to try to get an understanding of what is your fiduciary responsibility when you receive a phone call from someone to announce it to the shareholders that, hey, we received a -- an offer to purchase a company, and we're either looking at it or where talks are continuing or we are -- at what point was it ranged from being we just hang up on the folks because they're not credible to -- we were in discussions because it's interesting.

David Shworan: Yes. No, and that's where it would actually go to shareholders. That's where we would tell shareholders and announce and all of that. So we have not hit that point yet with any firms. So the point -- the thing is like, say, a year ago, somebody would contact us and want to purchase us, and we would start to look at it. We would do due diligence. We would crunch numbers. We would go back and forth. And I've spent hundreds of hours with all these firms talking about them acquiring us.

And if we can't find a fit or something that is beneficial to shareholders, then it's not worth continuing. So essentially, yes, of course, we have a fiduciary duty, that's what it's all about. And we will certainly bring something to shareholders if it crosses our plate. Sometimes something crosses our plate, and it looks pretty good, but then it falls through and -- or something happens where it just doesn't work. And so that's why there's nothing that goes to shareholders is because it never got to that point.

Operator: We'll take our next question from Michael Kupinski.

Michael Kupinski: I appreciate that. I kind of want to go back, Dave, to another question -- something you had talked about. The average revenue increased per customer. And of course, you would assume that because you're offering new products and stuff like that. I was just wondering if you can add a little bit color on the new contracts that might have been signed. How much of the revenue growth in the quarter was derived from whether it be price increases and new usage versus new contracts in the quarter?

David Shworan: Keith, go ahead.

Keith Randall: I don't have the exact breakdown of like -- so if I understand you correctly, so you want to know like how much was new -- based on new products and how much was the sort of organic growth, just increased usage for existing customers?

Michael Kupinski: Yes. In particular, you indicated that you had new contracts signed in the quarter. And I'm wondering in terms of your overall number of subscribers, as that overall number increased in the quarter? Or -- because I would assume as new clients increase, you would have some expenses associated with that, which would kind of depress margins a little bit and -- versus any new product offerings and usage, which would be, I would assume, carry higher margins.

And so I'm just trying to get a flavor of what the margin suppression might have been by just having large amount of new subscribers. Was the amount of new subscribers larger than what it was in the first quarter? Or are you growing subscribers? Are they the same and you're just seeing usage in new product offerings enhance revenue? Just kind of get a flavor of what that might be.

Keith Randall: Yes. We're seeing both actually. So we're seeing increase in the number of new clients. And then we're seeing increase in the number of subscribers for our existing clients as well as for the existing clients the -- an increase in average revenue per client as we add new data or new products. They'll take on new data, which increases their average price per subscription.

Michael Kupinski: Got you. But -- and Keith, you don't have like a breakdown to say that of the 55% growth in Corporate Quotestream 10% of that came from new clients and the 40% came from new products and increased usage and so forth?

Keith Randall: Well, sometimes it's hard to distinguish between the 2 because we've had some large new clients that we signed towards the end of 2020. So they're new clients. But also during that time, their usage has increased as well, right? So it's a blend of the 2, really.

David Shworan: Yes. Just to add to that, Michael, it's very -- it's not like -- I guess, our business is somewhat where a company will come to us and they might start with something or they might start with a bit of a lower level of something and then grow. So a customer doesn't -- it's rare for a customer to come to us and say, "Okay, we're just going to spend everything. We're switching everything." So they start with pieces or they start with so many users or they -- it's this -- it's kind of a phased approach. That's typically how a client will work with these bigger firms, and then they will grow.

And so there's all this ramp-up and there's -- and the contract is all based on that. So it's based on how many users, how many eyeballs, how much data is being used, and it kind of grows. And so that's kind of the trend of a larger customer until they either maxed out or they flatlined as far as their number of users or whatever. But that's why we have these growth curves that could be not from this -- the quarter that signed, but maybe the previous quarter or the one before that because that growth is happening for those customers.

Operator: It appears we have no further questions at this time. I will now turn the program back to the presenters.

David Shworan: Thank you. I appreciate that. Okay, well, thanks, everybody, for joining us. And obviously, if you have future questions, we're here to answer. And so reach out to Brendan Hopkins, bhopkins@quotemedia.com. And he can set up a call with me or Keith or we can go back and forth, whatever. But we're certainly happy to answer any questions, and we're certainly looking forward to the rest of this year. And going forward, everything is rolling, and it's all head down here, and we're putting out a lot of new product. So thanks, everybody. Have a good day.

Operator: This does conclude today's program. Thank you for your participation, and you may disconnect at any time.