Q3-2021 (April, May, and June) software revenues were $766,000, a slight increase over Q3-2020 ($760,000), but less than Q3-2019 ($1,039,000). Three factors explain the change in revenues, the ongoing Covid-19 pandemic has created a buyer's market and has reduced the number of listings, UI's largest client ($500,000 in annual revenue) has decided to produce in-house their own websites. Annual revenues from this Colorado client is now around $100,000. Third, UI has been able to acquire new clients.
Immersolution's business remained steady with revenues slightly less than the previous quarter ($355,000 - $370,000).
The impact of the largest client reducing its sales has shown up in the overall growth of revenues derived from Canada. For the first nine months of the current fiscal year 36% of all revenues were derived from Canada that is 5% more the same period last fiscal year. Since August 25, 2021, around 70% of all postings on the Gallery section of UI's website were produced by Quebec-based photographers.
Operating expenses for the quarter totalled $971,000. Operating expenses were adjusted downwards because UI decided to transfer $100,848 in wages from operating expenses to direct costs. $971,000 or $1,072,000 is more than Q2-2021 ($684,000), Q1-2021 ($622,000) and Q1 2019 ($587,000 - pre Covid-19). The largest contributing factor to the increase in operating expenses is salary and benefits. For Q3-2021, Q2-2021 and Q1-2021 salaries were $581,000 ($480,000 +$100,848), $341,000 and $252,000. For Q3-2020, Q2-2020 and Q1-2020, salaries were $269,000, $262,000 and $293,000. Also for Q3-2021 and Q2-2021, UI received, from the Canadian government, wage subsidies in the amounts of $145,000 and $71,000.
For the first nine months of the current fiscal year, UI achieved $2,981,000 in revenues, $171,000 less than the first nine months of the previous fiscal year. For the same two periods, operating expenses plus direct costs have increased by $323,000. UI is no longer a growing profitable business.
Looking forward
Fourth quarter service and software revenues will be boosted by the acquisition of EGP TechnoVirtuel and maybe UI will be profitable again and back on the growth path.
With the acquisition of EGP, UI has now integrated three verticals, the sale of cameras and equipment, the sales of software and service revenues from real estate photo agencies (REPA). EGP has integrated in the price of shooting a property, the cost of an immersive 3D tour, the doll house, the floor plan and UiMEET3D. I am not sure about website hosting services. EGP collects the fee from the real estate broker or the agency. The fee will vary depending on the size of the house and the type of property. The starting price for a shoot is around $125. In UI's income statement ±$100 will probably be posted as service revenues and ±$25 as software revenues.
UI's strategy is to allow real estate brokers to get familiar with UI's products and to recognize the added benefits that UiMEET3D can bring to their businesses. In the coming months, UI will attempt to strike deals with real estate agencies. The unanswered question is will real estate agencies adopt UiMEET3D's monthly fee payments plus a fee based on the number of minutes?
According to the
Organisme d'autorglementation du courtage immobilier du Quebec, there are 5,760 residential real estate brokers and 856 Real estate agencies located in the province of Quebec. There are roughly one agency per 10,000 inhabitants (856 / 8,500,000). If UI signs up 100 real estate agencies at an average monthly fee of $75, that would add $90,000 in recurring annual revenues. UI is also planning on collecting a fee based on the number of minutes spent on UiMEET3D.
Prospects Software. It has been more than six months, since UI and Prospects Software signed a Letter of Intent. The Letter of Intent has not yet been transformed into a formal contract. Hopefully, investors will get news before the end of the year.
In order to purchase additional REPAs, UI has $2,000,000 in cash, will likely be able to borrow an additional $2,000,000 and could issue shares. If in the coming months, UI deploys $4,000,000 and issues 12,000,000 shares, UI could add ±$2,800,000 in additional annual service revenues. Under this scenario, the number of shares will be 167,500,000, the cash on the balance sheet will level off at $500,000, the debt will be $4,000,000. The market valuation would reach $18,500,000 ($0.11 X 167,600,000) add the debt of $4,000,000 and deduct $500,000 in excess cash, and the enterprise value is around $22,000,000.
If UI is successful in its acquisition strategy, by 2023, UI's revenues could reach $9,000,000 - $10,000,000 and operating cash flows would be around $1,500,000 range, more if the number of listings increases and UiMEET3D catches on.
If operating cash flows reaches $1,500,000, then the cash flow yield is 6.8% ($1,500,000 / $22,000,000) or the cash flow ratio is 14.6 ($22,000,000 / $1,500,000). At a share price of $0.15 the CFY is 5.2% and the CFR is 19; at $0.20 the CFY is 4.1% and the CFR is 24.6%.