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Forian Inc. (FORA)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $4.69M (−12% YoY) with diluted EPS from continuing operations of −$0.01; adjusted EBITDA was $0.19M. Sequentially, revenue was modestly lower vs Q2, while operating loss improved given lower OpEx and a nonrecurring contract termination benefit .
  • Guidance maintained: FY24 revenue $19–$20M and adjusted EBITDA −$0.5M to +$0.5M; management now expects FY24 revenue at the top end with Kyber included in Q4, while EBITDA range is unchanged .
  • Strategic actions: acquired Kyber Data Science (Oct 31) to expand addressable market into financial services and enhance analytics; redeemed ~$17.6M of notes and accrued interest in November, leaving $6M principal outstanding to a related party .
  • Near-term catalysts: integration of Kyber, improving sales momentum and seasonally stronger Q4; medium-term focus is breaking out of the ~$4.6–$5.4M quarterly revenue range in 2025 per management commentary .

What Went Well and What Went Wrong

What Went Well

  • Sales momentum improved with more renewals and expansions, positioning revenue to benefit in Q4 and beyond; management aims to “break out” of the recent quarterly range in 2025 . Quote: “We saw…expanded relationships and renewals…which will come into the fourth quarter and later” — Max Wygod .
  • Strong liquidity and capital allocation: cash and marketable securities of $49.4M; redeemed ~$17.6M of convertible notes and accrued interest in November, reducing debt; expect ~$0.1M gain on redemption .
  • Strategic tuck-in: acquisition of Kyber adds advanced analytics, proprietary panels, and access to financial services clients; expected to bias FY24 revenue to the top end of the range .

What Went Wrong

  • Revenue contracted 12% YoY due to customer attrition at end-2023 and reduced revenue from certain early-stage customers struggling to secure funding; adjusted EBITDA fell to $0.19M from $1.07M YoY .
  • Industry data supply chain disruptions constrained near-term upsell/cross-sell motions; Forian incurred higher information licensing and infrastructure costs to diversify sources .
  • Nonrecurring items obscure underlying cost base: Q3 included a ~$0.54M contract termination benefit; excluding it, cost of revenues and operating loss would be ~$0.5M higher, tempering the improvement in operating loss .

Financial Results

Summary Metrics (Quarterly)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD)$4,877,378 $4,777,101 $4,686,312
Diluted EPS – Continuing Ops ($)−$0.04 −$0.08 −$0.01
Adjusted EBITDA ($USD)$104,417 $78,202 $185,916
Operating Loss – Continuing Ops ($USD)$(1,772,350) $(2,970,478) $(795,829)
Cash + Marketable Securities ($USD Millions)$47.4 $48.0 $49.4
Convertible Notes + Accrued Interest ($USD Millions)~$24.0 ~$24.2 ~$24.4 (as of Q3-end)

Growth and Change

MetricQ1 YoYQ2 YoYQ3 YoYQoQ Δ Q2→Q3
Revenue (%)0% −2% −12% −1.9% (calc from $4.78M→$4.69M)
Adjusted EBITDA (%)n/an/a−83% vs prior-year Q3 ($1.07M→$0.19M) +137% (calc from $0.08M→$0.19M)

Notes:

  • Q3 included a ~$0.54M nonrecurring benefit from a contract termination; excluding it, cost of revenues and operating loss would be ~$0.5M higher .

Segment Breakdown

  • Not disclosed; Forian reports consolidated results without segment detail in the press release/8-K .

KPIs (Selected Operating Expense Lines)

KPI ($USD)Q1 2024Q2 2024Q3 2024
Cost of Revenue$1,703,357 $1,806,918 $1,402,920
Sales & Marketing$1,055,141 $1,017,659 $956,983
G&A$3,492,454 $3,665,601 $2,822,253
Litigation Settlements & Related$0 $942,311 $1,394

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$19M–$20M $19M–$20M; expect top end with Kyber included Maintained; top-end bias
Adjusted EBITDAFY 2024−$0.5M to +$0.5M −$0.5M to +$0.5M Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Data supply chain disruptionsMarket-wide interruptions reduced claims feeds; diversifying sources; added ~1B claims license; raised costs Disruptions “well past”; client appetite improving; seasonality supportive into Q4 Easing
Sales momentum & pipelineRenewals, RFPs increasing; slow upsell given data disruptions Improved wins/expansions; revenue benefit expected Q4+ Improving
Corporate development/M&AStrategic review expenses in Q2; active M&A scanning Acquired Kyber; expanding into financial services analytics Executed
Product/data capabilitiesChartis launched (Q1); Chronos data lake expansion (Q2) Kyber adds proprietary panels and financial data; strengthens predictive analytics Strengthening
Balance sheet & capital allocation~$47–48M cash+securities; notes due 2025 $49.4M cash+securities; redeemed ~$17.6M notes+interest; $6M principal remains Deleveraging

Management Commentary

  • “Revenue in the third quarter was relatively flat sequentially… we experienced increased sales wins… we will benefit from this momentum as we close out the year” — Max Wygod .
  • “Our third quarter 2024 expenses include a $0.5 million nonrecurring benefit related to the termination of one of our inbound information contracts… excluding [it], our cost of revenues and operating loss… would have been $0.5 million higher” — Michael Vesey .
  • “With the acquisition of Kyber, we expect 2024 revenues to be at the top end of our revenue range while maintaining our adjusted EBITDA within the previously provided range” — Michael Vesey .

Q&A Highlights

  • 2025 breakout trajectory: Management sees improved sales momentum excluding Kyber, with larger renewals/expansions set to flow into Q4 and 2025; aim to break out of the recent quarterly revenue range .
  • Macro/data environment: Appetite for information contracts improving; disruptions “well past”; seasonal strength into year-end supporting win rates .
  • Sales & marketing investment: Preference for efficiency over headcount expansion; Kyber brings strong talent; focus on bottom line while leveraging existing capacity .
  • Acquisition terms: Kyber characterized as a small tuck-in; to operate differently under Forian; more revenue color expected in Q1 .

Estimates Context

  • S&P Global Wall Street consensus for Q3 2024 (EPS and revenue) was unavailable at time of writing due to current SPGI data access limits. As a result, we cannot assess beats/misses versus consensus this quarter. Values would be retrieved from S&P Global if available.

Key Takeaways for Investors

  • Revenue stability with improving mix: Quarterly revenue has ranged ~$4.6–$5.4M since Q1’24; management cites improved sales momentum and expects benefit in Q4+; targeted breakout in 2025 .
  • Profitability optics: Q3 operating loss improved to ~$0.80M, aided by a ~$0.54M nonrecurring contract termination benefit; underlying cost base is higher ex-benefit, so watch sustainability into Q4 .
  • Liquidity and de-risking: $49.4M cash+securities provides ample runway; November redemption (~$17.6M) reduces debt overhang; ~$6M principal remains to a related party, notes due Sept 2025 .
  • Strategic expansion via Kyber: Adds analytics/software capabilities and financial-services clients; cross-sell potential into life sciences; supports top-end FY24 revenue guidance .
  • Cost structure and data diversification: Elevated information licensing/infrastructure costs reflect proactive diversification to mitigate industry disruptions; monitor gross/operating expense trajectory relative to sales growth .
  • Near-term setup: Seasonally stronger Q4 and easing data disruptions could aid sequential revenue, with Kyber inclusion providing incremental uplift; key to watch is conversion of pipeline wins into recognized revenue .
  • Risk factors: Continued funding challenges at certain early-stage customers and lingering industry data issues could pressure revenue and adjusted EBITDA; keep focus on contract renewals/expansions cadence .