Executive Summary / Key Takeaways

• QuoteMedia, Inc. (OTCQB: QMCI) is a financial market data and software provider strategically shifting towards proprietary data and a broad product suite to compete with larger industry players.
• Following an unusual flat revenue quarter in Q1 2024, the company reported a return to modest 3% year-over-year revenue growth (5% FX-neutral) in Q1 2025, driven by strength in Corporate Quotestream.
• Significant investments in proprietary technology, including data aggregation, the QMod delivery system, and AI/ML analytics, are foundational to QMCI's strategy, enabling cost efficiencies and custom solutions to differentiate itself from larger, less agile competitors.
• Management anticipates a return to positive revenue growth and improved bottom-line performance in fiscal year 2025, supported by a strong pipeline of potential deals and planned reductions in development spending as major projects conclude.
• Key risks include macroeconomic sensitivity impacting client spending, intense competition from well-resourced incumbents, and the need to convert a promising sales pipeline into realized revenue to sustain growth and improve profitability.

Setting the Scene: A Niche Player's Ambition in Financial Data

QuoteMedia, Inc. operates within the competitive landscape of financial market data and related software services. The company specializes in the collection, aggregation, and delivery of both delayed and real-time financial data via the Internet, serving a diverse clientele including online brokerages, clearing firms, banks, media properties, public companies, and financial service corporations globally. Unlike some smaller players who may simply resell data, QuoteMedia has strategically invested heavily over the past several years to build its own proprietary data sets and develop a comprehensive suite of software applications. This strategic pivot is central to its ambition: to compete effectively against the industry's multi-billion dollar giants like FactSet , S&P Global , Morningstar , and Intercontinental Exchange by offering a more agile, cost-efficient, and customizable alternative.

The company's history underscores this journey. After achieving a remarkable streak of 30 consecutive quarters of year-over-year revenue growth, QuoteMedia encountered an unexpected "blip" in Q1 2024, reporting flat revenue compared to a strong prior year period. This was primarily attributed to a few medium-sized clients discontinuing services due to their own business struggles and a trend among some customers to shift to lower-cost exchange data. While challenging, management emphasized that this was an anomalous period, and the company successfully secured new contracts and expanded existing ones to largely offset the losses, demonstrating underlying business resilience and sales momentum. The Q1 2025 results, showing a return to modest growth, suggest the company is beginning to move past this temporary setback.

The Technological Engine: Proprietary Data and Agile Solutions

At the heart of QuoteMedia's competitive strategy lies its proprietary technology stack. The company has moved aggressively to aggregate data directly from sources, reducing reliance on third-party vendors. This foundational shift provides several tangible benefits. Owning and managing its data offers greater control, reduces third-party risk (such as unexpected fee increases or service terminations), and, crucially, improves potential margins as revenue growth scales without a proportional increase in data acquisition costs. Management notes that for a data set they now own, a million dollars in client spend can translate directly into a million dollars in profit, a significant advantage over reselling models.

Beyond raw data, QuoteMedia has developed key technological differentiators:

• QMod Web Delivery System: This proprietary system is designed for secure market data provisioning, ease of integration, and unlimited customization. Its SEO-ready responsive content adapts automatically for mobile and standard web pages, addressing a broad market demand.
• Broad Product Suite: The company offers a range of applications including the Quotestream family (Desktop, Mobile, Professional, Web), Interactive Content and Data APIs, and Data Feed Services. Recent development efforts have focused on new technical charting products, an integrated Quotestream web solution allowing clients to embed their own software, and paper trading capabilities.
• AI, Machine Learning, and Proprietary Analytics: Leveraging its owned data, QuoteMedia is actively working with AI and ML to develop proprietary analytics, algorithms, and scoring mechanisms. The stated goal is to process vast amounts of data to produce actionable signals and insights for clients, an area previously restricted when using third-party data.
• Custom Development Capabilities: A significant portion of the company's work involves setup, development, and customization for clients, particularly larger firms. This capability allows QuoteMedia to replace multiple incumbent vendors at client sites, offering a tailored, single-source solution. While this work results in deferred revenue recognized over the contract term (often up to five years), it signifies substantial upfront client commitment and complex integration projects.

These technological capabilities enable QuoteMedia to position itself as an agile, modern alternative to larger, often perceived as antiquated, competitors. While giants like FactSet and S&P Global possess immense scale and resources, including significant R&D budgets that may enable faster innovation in areas like AI integration, QuoteMedia's focus on cost-efficient customization and a broad, internally controlled data offering allows it to win deals by providing solutions that are often quicker to deploy for bespoke needs and potentially more affordable, particularly for cost-sensitive clients or specific project requirements.

Navigating the Competitive Currents

QuoteMedia operates in a market dominated by formidable players. Its primary competitors are multi-billion dollar entities such as FactSet , S&P Global , Morningstar (MORN), and Intercontinental Exchange (ICE). These companies offer extensive data coverage, sophisticated analytics platforms, and deep integrations with financial workflows.

Compared to these giants, QuoteMedia is a much smaller player, holding an estimated 1-2% aggregate market share. Its financial performance metrics reflect this difference in scale. While specific, directly comparable TTM figures for all competitors are not available, industry data and recent performance indicate that larger peers generally exhibit higher gross and operating margins (e.g., FactSet (FDS) and S&P Global (SPGI) often exceed 50% gross margins and 30% operating margins) and significantly greater cash flow generation. QuoteMedia's TTM Gross Profit Margin stands at 45.77%, with a TTM Operating Profit Margin of -3.43% and a TTM EBITDA Margin of 9.46%. This suggests a thinner profitability profile, partly due to ongoing investments and the cost structure associated with building out its proprietary infrastructure.

However, QuoteMedia leverages its strengths to compete. Its emphasis on a single-source, proprietary data model aims to drive cost efficiencies that can improve margins with scale. Its agility and focus on custom development allow it to address specific client needs that larger, more bureaucratic organizations may struggle to accommodate quickly or affordably. Management highlights instances of replacing multiple vendors at client sites, a testament to its ability to provide integrated solutions. The trend towards lower-cost exchange data, while impacting top-line revenue for all players, also creates opportunities for QuoteMedia to offer competitive pricing, potentially saving clients significant amounts (e.g., up to 50% in some cases mentioned by management) by switching to alternative data sets it can provide.

Despite these advantages, QMCI faces vulnerabilities. Its smaller scale means lower absolute R&D spending compared to competitors, potentially leading to slower innovation in certain cutting-edge areas like the most advanced AI applications. Higher customer acquisition costs relative to larger, more established brands can also pressure margins. The stock's illiquidity is also a concern for existing shareholders seeking an exit.

Recent Performance and Financial Health (Q1 2025)

QuoteMedia's Condensed Consolidated Statements of Operations for the three months ended March 31, 2025, reflect a business beginning to recover from recent headwinds while continuing to invest. Total revenue for the quarter was $4.82 million, a 3% increase from $4.68 million in the comparative 2024 period. On an FX-neutral basis, revenue growth was stronger at 5%, indicating some impact from currency fluctuations.

Breaking down the revenue streams:

• Total Portfolio Management Systems revenue increased 8% to $2.43 million.
  • Corporate Quotestream was a key driver, growing 11% to $1.97 million, attributed to increases in both customer count and average revenue per customer.
  • Individual Quotestream revenue saw a slight decrease of 3% to $456,948, remaining flat on an FX-neutral basis.
• Interactive Content and Data APIs revenue decreased 1% to $2.39 million, growing 1% on an FX-neutral basis.

While revenue showed modest growth, profitability metrics faced pressure in Q1 2025. Cost of revenue increased significantly by 16% to $2.72 million, primarily due to higher stock exchange fees and increased amortization expenses related to capitalized internal-use software development costs. This led to a decrease in the gross margin percentage to 44% from 50% in the prior year period.

Operating expenses totaled $2.55 million, a 7% increase. Software development expenses rose 27% to $1.02 million. Management explained this increase was due to a lower percentage of development salaries being capitalized (16% in Q1 2025 vs. 25% in Q1 2024), as more development time was allocated to maintenance and activities not meeting capitalization criteria, despite a reduction in development personnel overall. General and administrative expenses decreased 13% to $704,494, benefiting from lower professional fees and a general staff reduction. Sales and marketing expenses increased 6% to $821,864.

The combined impact of increased costs and operating expenses resulted in a net loss of $499,811 for Q1 2025, a significant increase from the $28,176 net loss in Q1 2024. Basic and diluted loss per share was $0.01.

From a liquidity perspective, cash and cash equivalents decreased by $412,128 during the quarter, ending at $173,191 as of March 31, 2025. Net cash provided by operating activities was $125,768, primarily influenced by non-cash adjustments and changes in working capital. Net cash used in investing activities was $537,896, driven by capitalized application software costs ($523,599) and equipment purchases.

The company operates with a working capital deficit ($4.02 million at March 31, 2025), although this includes a substantial deferred revenue balance ($1.89 million total, with $1.53 million current). Management believes existing cash and operating cash flow will be sufficient for at least the next 12 months, but acknowledges that executing the business plan may require additional financing.

Outlook and Strategic Trajectory for 2025

Management expresses optimism for fiscal year 2025, anticipating a return to positive revenue growth and improved bottom-line performance. This outlook is primarily based on the strength of the sales pipeline and revenue already under contract. The significant deferred revenue balance ($1.89 million total at March 31, 2025, with $5.60 million in remaining performance obligations for contracts over one year) represents work completed for clients that will be recognized over time, providing a degree of visibility into future recurring revenue.

Key strategic initiatives for the remainder of 2025 include:

• Product Expansion and Improvement: Adding more features and data to existing products, releasing newer versions, and leveraging AI tools where possible for automation.
• Market Penetration: Maintaining focus on marketing Quotestream to brokerage firms and expanding into the investment professional market with Quotestream Professional.
• Data Feed Growth: Continuing to grow the Data Feed Services client base, particularly through adding major new international data coverage and new data delivery products.
• Enterprise Deployments: Increasing sales of Interactive Content and Data APIs, especially for large-scale enterprise clients, leveraging the QMod system.
• Trade Integration: Continuing the priority on new deployments of trade integration capabilities that allow Quotestream applications to interact with brokerage back-end systems.
• Proprietary Data Sets: Creating new proprietary data sets, analytics, and scoring mechanisms by aggregating data directly from sources, aiming to offer unique products and potentially lower costs.

Importantly, management intends to reduce development spending as a percentage of revenue as major development projects initiated over the past few years near completion. This shift, combined with anticipated revenue growth from pending deals, is expected to drive bottom-line improvement in 2025. While Q4 2024 revenue was expected to be relatively flat depending on deal closures, the Q1 2025 results and management commentary reinforce the expectation for a stronger performance throughout 2025.

Risks to the Thesis

While the outlook is positive, several risks could impact QuoteMedia's trajectory. Adverse macroeconomic conditions, including inflation and slower growth, could dampen demand for financial data services and lead clients to further reduce spending or delay decisions. The intense competition from much larger, better-resourced players poses a constant threat, particularly as exchanges offer lower-cost data alternatives and incumbents invest heavily in advanced technology like AI. The company's ability to successfully close larger deals in its pipeline is critical to realizing anticipated growth; delays or failures in securing these contracts could impact revenue targets. Furthermore, the identified material weaknesses in internal control over financial reporting, specifically the lack of segregation of duties, present an operational risk that needs to be addressed to ensure financial reporting integrity. The need for potential additional financing to fully execute the business plan introduces the risk of dilution or unfavorable terms depending on market conditions.

Conclusion

QuoteMedia stands at a pivotal point, seeking to leverage years of strategic investment in proprietary technology and data to accelerate growth and improve profitability. The Q1 2025 results, while showing a net loss, also marked a return to revenue growth after a challenging prior quarter, suggesting the company is beginning to regain momentum. The core investment thesis hinges on QuoteMedia's ability to successfully position its agile, cost-efficient, and customizable solutions as a compelling alternative to the offerings of larger, more established competitors.

The significant pipeline of potential deals, particularly with larger firms, and the substantial deferred revenue balance provide a foundation for management's optimistic outlook for 2025. As major development projects wind down, a planned shift in focus towards distribution and sales, coupled with anticipated cost controls, is expected to drive bottom-line improvement. Investors should monitor the company's progress in converting its pipeline into realized revenue, the trajectory of its gross and operating margins as scale increases, and its ability to effectively manage the risks posed by macroeconomic factors and intense competition. The success of its proprietary technology and its ability to continue innovating will be key determinants of QuoteMedia's long-term potential in the dynamic financial data market.