Mr. Robert Stabile reports

OPTIVA INC. REPORTS SECOND QUARTER 2023 FINANCIAL RESULTS

Optiva Inc. has released its second quarter financial results for the three-month period ended June 30, 2023.

All amounts are stated in U.S. dollars unless otherwise indicated.

Highlights:

• Revenue of $11.1-million;
• Total contract value (TCV) (1) bookings of $20.0-million;
• Gross margin of 65 per cent;
• Adjusted EBITDA (1) (earnings before interest, taxes, depreciation and amortization) loss of $300,000;
• Adjusted EPS (1) (earnings per share) loss of 21 cents;
• $13.0-million of cash.

Optiva's strategic decision to upgrade its current customer base to the cloud and invest in winning new customers requires a commitment to continue investments in its go-to-market (GTM) strategy and R&D (research and development), setting the company on a path to sustainable and profitable growth with a focus on recurring revenue. The company's focus on public and private cloud software is validated by the 60-per-cent increase in its qualified pipeline (2) since November, 2022, now reaching $300-million (of TCV), with cloud deals representing 90 per cent of the opportunities.

New entrants to the telecom market are introducing a unique dynamic where decisions are made much quicker than traditional mobile operators and speed to market is prioritized. To date, the company's strongest bookings have been primarily from existing customers. As the company looks at its growing pipeline, approximately 80 per cent of bookings are expected to come from new customers, signaling that the company's strategy is resonating. Optiva's success with more than 16 MVNO brands and ability to deploy an out-of-the-box software solution in just 90 days is an advantage over the company's competition.

(1) EBITDA, adjusted EBITDA, TCV and adjusted EPS are non-IFRS (international financial reporting standards) measures. These measures are defined in the non-IFRS financial measures section of this news release.

(2) Qualified pipeline contains revenue opportunities from new and existing customers who are deemed to have a high chance of buying the company's product or services. The customer has a defined problem and has indicated a need for a solution where Optiva's products fit. A qualified pipeline filters out opportunities undergoing prospecting and lead qualification.

In addition, the company has made significant progress toward building a stable platform for growth over the past two years, including securing upgrade deals for more than 15 customers, representing 48 per cent of last 12 months revenue and winning four new cloud customers. During the past several quarters, the company benefited from migration delays by some departing customers who chose to extend their support contracts. The company believes that the majority of the impacts of the known churn have been realized and it anticipates the second quarter marks the low for Optiva's revenue as new business wins begin to be realized in 2024.

"We remain encouraged by the growth of our sales pipeline as demand for cloud-native software is accelerating. Our GTM team, backed by our growing R&D group, continues to have robust dialogue with new market entrants and telecom providers who see new opportunities. We are confident in the team's ability to convert these into long-term customers in the coming quarters. We are committed to completing the strategic transition and look forward to sharing these successes with the market," said Robert Stabile, chairman of the board of directors and chief executive officer of Optiva.

Business highlights:

• TCV of Q2 2023 bookings totalled $20.0-million. On a trailing-12-month basis, TCV bookings totalled $83.4-million.
• Optiva and lifecell Ukraine were nominated and subsequently named as a finalist in TM Forum's 16th Annual Excellence Awards. TM Forum's prestigious awards recognize the organizations making a significant contribution to the acceleration of digital transformation throughout the industry; winners will be announced during DTW23 -- Ignite in September, 2023. Top communication service providers (CSPs) and solution providers around the globe are recognized for revolutionary work digitally transforming the telecommunications industry.
• Movil Exito selected Optiva for software-as-a-service-based (SaaS) BSS modernization on the Google Cloud platform to accelerate new revenue growth and MVNE monetization. Optiva's cloud-native BSS platform empowers Movil Exito to deliver a converged digital experience, enabling new service offerings that support innovative ways to increase profitability and drive customer loyalty by leveraging public cloud technology and automated operations.
• Optiva announced that Nova Energy, a leading energy company currently offering nationwide electricity, natural gas and broadband services, leverages Optiva BSS to launch its MVNO services in New Zealand. Optiva's BSS for MVNOs will provide Nova the flexibility to bundle mobile service with its other business lines, enabling greater agility to conceive, configure and quickly launch innovative bundled plans and packages to deliver superior customer experience.
• During the second quarter, Optiva announced the following executive appointments:
  • Mr. Stabile, who is the current chairman of the board of Optiva, was appointed to serve as CEO. Mr. Stabile has been an Optiva board member since 2017 and was previously chief financial officer of a high-growth fibre operator. His industry knowledge and relationships with customers and employees will ensure a smooth and seamless transition.
  • Mary-Lynn Oke has been appointed as CFO, effective July 1, 2023. With a proven record in financial and strategic management, Ms. Oke will manage Optiva's financial operations and play a strategic role in facilitating the company's further growth.
  • Michele Campriani was appointed as chief revenue officer. Mr. Campriani has a proven record in leading successful businesses and sales teams in the telecom industry. Mr. Campriani brings 30 years of industry knowledge and experience in strategic planning, sales and operations. He has held C-level and executive roles at Mobileum, Comptel, Empirix, Accanto Systems, Hewlett Packard and others.

Second quarter 2023 financial results highlights:

• Revenue for Q2 2023 was $11.1-million. On a year-over-year basis, the change by revenue type included a $2.2-million decrease in support and subscription, a $2.1-million decrease in software and services, and third party software and hardware revenue remained unchanged. The year-over-year decline in support and subscription reflects the run-off of a few customers who had previously notified the company of their intentions to replace Optiva. The drop in software and services is attributed partially to minor delays in customization and deployment activities, as well as Optiva's shift toward more recurring than one-time revenues.
• Gross margin for Q2 2023 was 65 per cent, compared with 71 per cent during the same period in 2022. The decline in gross margin is primarily attributable to lower revenue from support and subscription, along with the impact of more customizations with lower margins ordered by customers that required fulfilment, compared with the previous period. Gross margins may fluctuate as the company proves out its cloud-native model and product capabilities to new and existing customers when they on board the public or private cloud in future periods.
• General and administrative expenses (G&A) decreased to nil, compared with $3.1-million during the same period in 2022. The decrease is mainly due to lower share-based compensation due to a reversal of unvested forfeited awards in the amount of $1.3-million, and lower stock price, lower head-count-related costs and lower amortization costs. Excluding share-based compensation, amortization and depreciation, G&A (general and administrative) expenses were $2.1-million in Q2 2023, compared with $2.2-million for Q2 2022.
• Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) (1) for Q2 2023 decreased to a loss of $300,000, as compared with $3.7-million during the same period in 2022, primarily driven by lower gross margin.
• Net loss for Q2 2023 was $1.3-million, compared with a net loss of $500,000 during the same period in 2022.
• The company ended the second quarter with a cash balance of $13.0-million (including restricted cash). The company consumed $1.1-million of cash in operating activities during the quarter.

Non-IFRS measures

EBITDA and adjusted EBITDA are not financial measures calculated and presented in accordance with IFRS and should not be considered in isolation or as a substitute to net income (loss), operating income or any other financial measures of performance calculated and presented in accordance with IFRS, or as an alternative to cash flow from operating activities as a measure of liquidity. The company defines EBITDA as net income (loss) excluding amounts for depreciation and amortization, other income, finance costs, finance income, income tax expense (recovery), foreign exchange gain (loss), and share-based compensation. The company defines adjusted EBITDA as EBITDA (as defined above), excluding restructuring costs, one-time provision amounts and any one-time transaction costs associated with shareholder conflict. The company believes that adjusted EBITDA is a metric that investors may find useful in understanding the company's financial position. The attached table provides a reconciliation of net income to EBITDA and adjusted EBITDA (in thousands of U.S. dollars).

Adjusted EPS is reported diluted EPS excluding the impact of change in the fair value of warrants, one-time costs (recovery) related to shareholder conflict and release of provisions.

TCV is the total contract value of all bookings closed in the period.

About Optiva Inc.

Optiva is a leader in powering the telecom industry with cloud-native billing, charging and revenue management software on private and public clouds. Its products are delivered globally on the private and public cloud. The company's solutions help service providers maximize digital, 5G, IoT (Internet of things) and emerging market opportunities to achieve business success. Established in 1999, Optiva is on the Toronto Stock Exchange.

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