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Executives

Cory Pala – IR

Todd Oseth – President and CEO

Rich Mohr – CFO

Analysts

Jim Kennedy – Marathon Capital

Intermap Technologies Corporation (OTC:ITMSF) Q2 2014 Earnings Conference Call August 12, 2014 10:00 AM ET

Operator

Good morning. My name is Kurt and I will be your conference operator today. At this time, I would like to welcome everyone to the Intermap Technologies Corporation Second Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session.

[Operator Instructions]

Thank you, Mr. Cory Pala of Investor Relations, you may begin your conference.

Cory Pala

Thank you and good morning everyone. Thank you for joining us for our 2014 second quarter conference call. My name is Cory Pala, Investor Relations and leading the call today is Intermap President and CEO, Todd Oseth; our CFO Rich Mohr is also on the call. And today’s discussion will be in forward-looking statements and I’d like to remind everyone that some these statements are subject to risks, uncertainties and assumptions concerning future conditions and other factors. All these risks are outlined in the company’s regulatory filings which can be found on cedar.com.

Forward-looking statements may prove to be inaccurate or differ materially from actual future events and results. With that, I’ll hand off the call to Intermap President and CEO, Todd Oseth. Todd?

Todd Oseth

Great, thanks Cory and welcome to Intermap’s second quarter investor conference call. Intermap entered the quarter with $2.4 million of revenue and a negative adjusted EBITDA of $2.8 million, which was a slight improvement over our first quarter. We ended the quarter with approximately $4 million in cash. We didn’t announce any of the larger development projects that we’ve been pursuing during the quarter, while we have continuous progress with each of them.

We also continue to pursue a number of mid-sized airborne radar acquisitions in countries that requiring the elevation data. In all of our Orion Platform opportunities our software is helping to facilitate the new business by demonstrating our geospatial data can be used to create meaningful and service for our customers. Virtually none of these customers want such data, they want the answers that are created from the data.

During the second quarter, we delivered two major software products in the marketplace for the Orion Platform, GeoPro and InsitePro. Within a few weeks of the Insite introduction, we were able to announce that a major reinsurer has adopted InsitePro to be used in the developing country in Latin America.

This relationship with the top 10 reinsurer is very important to Intermap, because it shows that our flood models can be used as a risk elevation to offer insurance companies around the world. This confirmation will help us take the product to more countries and more customers worldwide.

Intermap is one of the few companies that as an ultimate product that supports flood models across the globe. In addition, during the quarter we announced an update to our AdPro advertising application that includes TAB of data. This is an industry data source that demonstrates the value of different billboard locations. This data set in addition to our elevation data and analytics capability makes AdPro a colorful tool in the out-of-home advertising space.

For spatial data infrastructure customers our investment in our software products and platforms is the cornerstone of delivering our Orion Platform. Although the underlying data that we produced with our radar platform and other sensor technologies important with our potential customers are really looking for the answers that come from the data which is where our software products come into play.

As I’ve stated before larger Orion Platform projects are very complex and require many layers of government to sign off on any given project. This makes predicting exact schedules and almost impossible task. However, we haven’t pursuing these projects for many months and sometimes for a few years.

We still believe that we can close at least one of these opportunities before the end of the year, but we just don’t know for sure the exact timing. In the meantime, our software products work in smaller environments too, and this is where we focus most of our marketing efforts.

Analytics have developed to use our World 30 elevation database or loyal to our partners imagery and location base feature sense to produce industry vertical answers, just like their AdPro product does for the out-of-home advertising billboard industry. It’s important for people to realize that the Orion Platform is not a GIS platform like ArcGIS or [indiscernible] it does however use these GIS tools to produce the geospatial datasets that are then analyzed in the Orion Platform along with many other types of data to produce an answer that satisfies a business or mission request.

Many of our customers are not GIS experts, expert to require to use GIS tools, many of our customers are experts in non-GIS fields like advertising, real estate, insurance, military operations, just to name a few. As our products mature there will some platform base, so the changes in the analytics and datasets can be implemented quickly without any GIS engineers or software programmers.

These changes will be made by standard business or mission professionals looking to solve problems that need geospatial content along with many other types of data feeds for their specific requests.

By providing the analytics platform that easily ingest to GIS content and all other types of data we’re able to address a $7 billion worldwide market compared to just under a $2 billion market for just standard vertical products. The analytics of our software applications has helped to increase the potential market for Intermap’s products dramatically. It is also a help to our channel partners who will provide services with a wage at greater value to their customers.

I would now like to hand this over to Rich for some financial details of our performance in Q2. Rich?

Rich Mohr

Thank you, Todd. As our previous noted and as Todd mentioned, total revenue for the second quarter was $2.4 million and was in line with our internal expectations, slightly greater than Q1 revenue of $2.1 million. The bottom-line for the quarter within IFRS laws of $2.5 million and an adjusted EBITDA loss of $2.8 million.

Here is some explanation on our revenue performance in Q2. To compare this current quarter with the second quarter of last year, in the second quarter of last year we were deep into the airborne collection portion of $15 million mapping services contract in Southeast Asia, which led to the recognition of $7.6 million of mapping services revenue during that quarter.

We have no similar sized contract that were in place for the first half of this year, which has had a significant impact on our total revenue year-to-date. The good news is that the contract opportunities are in the works and have been in the works for a while now. None of the contracts have been lost they are just taking a long time to close which should be expected.

So let’s put this current quarter’s revenue performance in perspective compared to the second quarter of last year. As with that one Southeast Asia mapping services contract last year where we recorded $7.6 million in revenue in Q2, the remaining balance of revenue or what I refer to as base revenue totaled $1.3 million in Q2 of last year.

If we compare this $1.3 million of base revenue during Q2 of last year, with the $2.4 million of base revenue in Q2 of this year we show an 85% increase in year-over-year revenue. So where did the 85% revenue increase come from, it came primarily from professional services work, which was up 43% and data licensing which is up 154%.

Software revenue is down slightly, but that’s because we’re no longer doing our LinkPro work has the 4G build out is pretty much completed this time. Software revenue last year included a large amount of LinkPro revenue.

Please also note that prior to this quarter; we have not released either our GeoPro server or InsitePro software applications to the market. The obvious takeaway is that we are currently in between any major mapping services contracts and this has had a significant impact on our total revenue this year.

However, outside of our mapping services work we are showing an overall year-over-year revenue improvements which is good. So let’s talk about what’s happening with mapping services. I reported in the last two quarters that we had major spatial data infrastructure opportunities or SDIs that we are pursuing on five different continents and this is still the case.

These SDIs include mapping services work, professional services, software and data licensing, which is basically our entire Orion Platform. These major SDI contracts are typically with government and are always extremely complicated. Sales cycles are typically measure in years not weeks or months.

These long sales cycles are the results of several items such as the dollar magnitude of the contracts, the political landscape of the countries we’re dealing with, the timing of annual budgets, the multiagency and more importantly the multi-levels of government required to sign off in any given project.

The complexity of the projects and finally the coordination of funding mechanism such as the bank syndicate. Please understand that all these SDI opportunities are receiving our utmost attention. We know how important they are to our overall financial performance and we remain optimistic that we will see success in this arena before the end of the current year and certainly beyond.

So other than closing a major SDI contract, our focus during the quarter remained on our software products. Q2 is the most successful quarter so far for our software development team, where the focus was on delivering new releases across our entire suite of 3DBI products and also further enhancing our development architecture to optimize future product enhancements, performance and releases.

The first significant development effort led to the product release of the next version of AdPro which included many new features and enhancements that integrated the Traffic Audit Bureau or as Todd referred to it as TAB rating, enabling our customers to maximize their investments of their out-of-home advertising campaigns.

The combination of AdPro’s proprietary technology combined with the TAB ratings data required a significant development effort to successfully pass TAB’s rigorous technical standards and their audit committee.

Next with the release of the most recent version of InsitePro, incorporating several new features and capabilities which included rep models for all parallels and all regions, fully integrated data digitalization and [indiscernible] and elevation data models.

Intermap’s core application is our geospatial information server or what we call GeoPro Server. We finished all feature development during the quarter and the product is currently in final beta for key customers. GeoPro Server can rapidly build manage and integrate web services and web portals for a multitude of different file types from the world’s leading software vendors. We’ve designed it to provide an intuitive environment suitable for all skill levels, not just GIS professionals.

And finally, we are placing our efforts on enhancing our system architecture in total to dramatically expand the platforms analytical capabilities. This included the creation of a focused architecture group for creating a strategic infrastructure for building Intermap’s next generation of applications.

The key component of this platform is to enable applications and application developers to meet the needs of the large big data analytics market. We believe the platform will be the first geospatial and analytics integrated platform capable of scaling to 1000s of server clusters and the ability to manage ahead of hides of customer data.

So now let’s turn to review of the cash in the balance sheet. Cash at the end of the quarter was $3.9 million this was compared to $5.7 million at the end of the first quarter and $2.4 million at the end of last year. We use $1.7 million of cash in operations during the quarter outside of our cash balance at the end of the quarter, the combined balance of accounts receivable and unbilled revenue totaled $3.1 million.

Our accounts payable and accrued liabilities stayed flat at $3.9 million at the end of the second quarter when compared to the first quarter. So to wrap up this is a good time for me to repeat, a key comment that we’ve communicated many times in our prior calls. We know that our quarterly results will vary from quarter-to-quarter until the 3DBI software portion of our business grows and becomes a larger component of overall revenue.

As a result, we don’t believe that our quarterly performance is necessarily a good measure of our overall progress and we therefore always recommend that those following the company look at our financial performance on an annualized basis rather than on quarterly basis.

We remain very optimistic about our opportunities in the coming months and the financial performance that we can deliver to our investors. We do however, acknowledge that we understand our products and contract timing variations better than most of our investors as we should.

We also understand that the normal variations in our quarter-to-quarter business could lead to concern by some. But to us it’s just the pure optimism for the coming period. As always we welcome discussions with our investors to help answer any specific questions you may have. So please do not hesitate to contact either Cory or myself, if you need further clarification on any piece of our business.

That covers the financial update for the quarter and I’ll now turn the call back over to Todd for some further comments. Todd?

Todd Oseth

Thank you, Rich. Intermap started this little over three years ago and certainly we’re moving from a data provider to a company that creates software solutions that provides answer to business and critical issues. With our Q2 product releases we’ve done just what we said we would do, and our software continues to involve, customers are always asking for new requirements in new ways to use our platform.

We have a starting point to provide those answers that our business and military customers seek. Our pipeline of non-large SDI opportunities remains very strong at over $200 million. Remember our software is usable for very small implementations as well as large. Our challenge is to increase revenues and create a sustainable profitable business is always our biggest effort.

I appreciate your interest in Intermap and your patience as we’ve changed the trajectory of this business. After discussions with 100s of customers, we believe that we have a strategy that’s solid. Now it is time to bring it to market from the world to one of our investors you guys have something very special keep at it and make it happen.

I’d like to open it up for any questions at this time. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Jim Kennedy from Marathon Capital. Your line is open.

Jim Kennedy – Marathon Capital

Hi guys.

Todd Oseth

Hello Jim.

Rich Mohr

Hi Jim.

Jim Kennedy – Marathon Capital

Can you spend a little more time on the balance sheet and just kind of, I know you can’t predict some of these larger contracts, but at this rate it looks – sure looks to me like we’re going to be raising money. Also know this, that your convert note is now a short-term liability. What is the status of that and how does that play in there because, given where it is you’re showing negative working capital? So can you kind of put all that into context for us?

Rich Mohr

Yes. Jim this is Rich. From a balance sheet perspective, we talk about a lot of the – the opportunities on some of these large SDI contracts. Typically what happens if there is large SDI contracts we have very large upfront down payments on those contracts. That gives us the capability of obviously to mobilize our aircraft all the personal associated with as far as the support staff everybody else goes through. And as we said we’re certainly anticipating that to happen during the coming periods between now and the end of the year.

Our questions are going well, we do have some outstanding amounts that continue to roll in, so we’ve done well on that one during this, during the first half of the year and we anticipate that we’ll continue doing that in the last half of the year. And then lastly on the convertible note, Jim that note has been a current liability since it went into place in February, it’s a 12 month note that’s due in February of last year. So it’s always going to show up on the current side of that. Okay?

Jim Kennedy – Marathon Capital

All right. Well what is the status of that, it’s too meaning what?

Rich Mohr

Its maturity date, as I believe the last week in February and it either is repaid or it is converted.

Jim Kennedy – Marathon Capital

Okay, and at what price?

Rich Mohr

It’s a set number of shares, if you just give me a second…

Jim Kennedy – Marathon Capital

And no reset provisions in it?

Rich Mohr

No reset provisions. It’s the converted 12,367,054 shares.

Jim Kennedy – Marathon Capital

Okay and is that at your option?

Rich Mohr

It’s at the holder’s option.

Jim Kennedy – Marathon Capital

Okay.

Rich Mohr

The holder that has told us that they got to be repaid and convert.

Jim Kennedy – Marathon Capital

All right, okay.

Rich Mohr

And if and when one of these SDI projects come in that won’t be an issue.

Jim Kennedy – Marathon Capital

So, well I guess what I’m wondering about is that since we’re very unsure about when these are going to come in, I am sure six months ago you thought you would have one by June 30th. Here we sit at the end of August and given the cash burn the fact that no holder wants to be repaid does that put a lot of pressure on the margins if you go get your contracts or what I’m hearing is you’ve got roughly $4.5 million or so to repay and then you’ve got your working capital needs. So that doesn’t board very well for cash flow or the margins on a large project, should it occur by year end?

Rich Mohr

The contracts or the opportunities that we’re pursuing have enough margins associated with them that we could easily repay the note.

Jim Kennedy – Marathon Capital

Okay. So if we don’t get a contract by year end, how are we positioned?

Todd Oseth

Much of what happen is, Jim this is Todd. Even the smaller SDIs are software margins. So you don’t need very many of the smaller activities to generate a significant amount of dollars. So, we faced both large and small since we are unable to predict whether one of the large once happens tomorrow and/or in the next 12 months.

Jim Kennedy – Marathon Capital

No I understand we chase both we’ve been chasing both for a quite sometime now. So the small part of it obviously is not supporting the company.

Todd Oseth

Bet you.

Jim Kennedy – Marathon Capital

So, I’d love to see him come in as much as you, but that’s not been the reality here. So, I’m just wondering what is plan B if we don’t get one of these large contracts by year end?

Todd Oseth

No we just continue to push our existing strategy, we’re seeing it is giving traction and again we don’t do a whole lot of forecasting for anything for our financials. So, we believe that we’ve got our strategy we will be able to satisfy the capital needs.

Rich Mohr

And Jim we look at our pipeline, we look at our backlog. We evaluate it daily to see what’s coming in and we believe that there will be enough business in place.

Jim Kennedy – Marathon Capital

So you’re not worried about painting yourself in a corner if these contracts – if these large contracts take another year?

Rich Mohr

We evaluate our cash position daily.

Jim Kennedy – Marathon Capital

Okay, thanks guys.

Operator

[Operator Instructions] And your next your comes from the line of [Jeff Chloe] [ph] who would be Private Investor. Your line is open.

Unidentified Analyst

Yes. Hi, guys. How are you?

Todd Oseth

Good morning, good.

Unidentified Analyst

Couple of questions for you, you just mentioned the, that you feel that you’re making some good progress on some of these large contracts. Can you define that a little bit, like I understand the timing of these is very unsure. But when you say you’re making progress, I get the sense that you’re engaged with the potential customer on certain levels. Can you maybe define that a little bit more?

Todd Oseth

Yes, this is Todd. The answer is it affects the difference reach of the customer. For instance we have one opportunity that its government has changed out two times in 12 months. So, what that means for us is that we have to go into all those layers of Rich described of the government body to get all of them to agree to find out the next day they decided to have a vault and all of them are gone. We then started the process all over again. So, we measured based upon those that are in current power and how many approvals have we received and what we mean by gaining progress is that those that are in current power, we are gaining on all of the approvals required for the project to move forward.

Unidentified Analyst

Okay. So on average how many layers of approval would you need for before the final date of one of these large contracts?

Todd Oseth

Yes. Three to five, it starts with a typical Prime Minister move down to his cabinet, moves down to the cabinet’s specific project areas, then you got to have financed you then have to find some, I mean there is not just hierarchical approvals there is also lateral approvals for many of these countries.

Unidentified Analyst

How many, when you say large contract what would you consider large in excess of what in gross revenue?

Todd Oseth

Anytime we see over $10 million, less than $0.5 billion.

Unidentified Analyst

And how many of these are you actively engaged in?

Todd Oseth

I guess five that we’re pursing.

Unidentified Analyst

And what’s the longest self-life of one of these five that you’ve been pursuing? How long have you been pursing it for?

Todd Oseth

Almost three years.

Unidentified Analyst

You just had any third-party technical reviews of any of your products, I know there is no base rate coverage on your company, are you aware of any third-party services that that are keeping track with your progress in your new products?

Todd Oseth

Not as of today, GeoPro and InsitePro just got released here in Q2, so let’s not giving somebody whole lot of chance to see it in the marketplace. AdPro there is only one or two other products that are in the out-of-home space that we really compete up against and one of them is in the out-of-home space that recently acquired. So there are to me parties like you see in the IT industry that go out and do heads up evaluations.

Unidentified Analyst

Got it. Let’s talk about your sales force for a second, can you talk about how big they are and what sort of motivation and I guess compensation structure that you’ve got in force there?

Todd Oseth

Sure, we have about 13 selling professionals of which we still have over a 100 partners around the world, so we do both direct and channel, those over 100 channel partners have just under 600 feet on the street around the world, most of which are good at selling just data. We are in the process, have been in the process over the last quarter of training them on how to sell the solution and software. That would probably take us another year as well as identifying additional partners to sell software and solutions.

Unidentified Analyst

And how are the direct 13 people compensated?

Todd Oseth

Every one of them has got a high commission basis, so they got a small base and for them to really make money is a big performance.

Unidentified Analyst

So sounds like both you guys are still pretty keen that you will be signing hopefully one or perhaps more of these large contracts before year end right?

Todd Oseth

Absolutely, I mean, the only thing at current ball is that we receive is when governments decide to revote and helps current set of workers. And that’s something we – of course have no control over, but it does with respect to that point of zero, but as a certain process over again.

Unidentified Analyst

As a shareholder and not a happy one yet from the standpoint of, what the stock price has been doing, I’m sure you guys aren’t, I think it would show a lot of – a lot of good state if we see some insider activity on the buy side of course, I mean you guys sort of comment on both of that?

Todd Oseth

Well we can’t really, I mean it’s always tough on the inner side that we’ve got a lot of blackout periods and we also maintain information that makes it very difficult for us to do those kinds of things.

Unidentified Analyst

Okay. Okay, thanks very much guys. Good luck.

Todd Oseth; Thank you.

Operator

We have no further questions at this time. I’ll turn the call back over to investor.

Cory Pala

Well thank you everyone for your patience at Intermap. We’re still very optimistic about our opportunities. We think we got the beginnings of the right platforms. We with the introduction of these products that actually gives us a chance to start to sell in the some of the smaller right opportunities as well as actual deliver on the larger arriving opportunities. I wish I could tell you that we got picked up, but it’s these are opportunities that could happen in a day or in 365 days. So we have no idea and unfortunately we’re not in control of those.

We continue to pursue on this half, we think it’s the right way to go there are very few in the industry that are providing data that actually provides solutions of how to use the data. We think that’s the winning ticket. So with that, I wish you all a good rest of the summer and we look forward to talking to you in another three months. Have a great day.

Operator

This concludes today’s conference call you may now disconnect.

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