Jul 12, 2019 QuoteMedia Inc....2019/07/12 · Jul 12, 2019 Media Other OTC QMCI Rating Outperform...

Jul 12, 2019

Media

Other OTC

QMCIRating

OutperformInitiation

Current Price

$0.15Target Price

$0.25

Market Capitalization 13.345M

Shares Outstanding 90.48M

Float 36.57M

Institutional Holdings 0.00%

12-month Low/High $0.05/$0.18

Average 90-day Volume 41

Fiscal Year End Dec 30

Revenues ($ MIL)

Period 2018A 2019E 2020EQ1 2.667A 2.871AQ2 2.799A 2.970EQ3 2.812A 3.010EQ4 2.850A 3.058E 11.128A 11.909E 12.785E

EPS ($)

Period 2018A 2019E 2020EQ1 0.00A 0.00AQ2 0.00A 0.00EQ3 0.00A 0.00EQ4 0.00A 0.00E 0.00A 0.01E 0.01E

QuoteMedia Inc.A David Versus Goliath Story

Initiating coverage. We are initiating with an Outperform rating based on the company's favorable revenue and cash flow growth prospects and compelling stock valuation. The company is closely held and could be subject to Penny Stock rules. As such, the shares are considered to be suitable for speculative investors.

Why QuoteMedia? The company plays in a large market, has a scalable business model, favorable pricing ability, and is flexible to compete for business that wants customizable solutions on multiple platforms.

Attractive growth outlook. The company has a favorable pipeline of business, a high recurring revenue model, and improving margin potential. We believe our 2019 revenue and cash flow will increase at a favorable 7.0% in 2019 and 7.4% in 2020 with cash flow growth of 18.2% and 13.2% respectively.

Financial position. The company has a favorable balance sheet with $966,166 in cash as of March 31, 2019 and virtually no long term debt. It appears to be in a position to invest for organic growth and could seek small acquisitions, which could complement its product offerings and customer lists, enhancing long term growth prospects.

Stock valuation. Near current levels, the QMCI shares trade at 8.1 times EV to our 2019 adjusted EBITDA estimate and 7.1 times our 2020 estimate, or below the expected double-digit growth rate of the company's cash flow. Our price target of $0.25 is based on an Enterprise Value to 2020 cash flow and assumes a 10.1 multiple, below the company's expected cash flow growth rate.

Equity ResearchMichael Kupinski, Director of Research (561) 994-5734 [email protected]

Noble Capital Markets, Inc.Trading: (561) 998-5489 Sales: (561) 998-5491 www.noblecapitalmarkets.com

Refer to the last two pages forAnalyst Certification & Disclosures

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Investment Appraisal

The story of QuoteMedia is a classic David versus Goliath story. The company is a relatively small player in the big business of providing stock market data feeds, news and financial information, competing with such large behemoths as Bloomberg and Thomson Reuters. Each of those companies generate $5 billion plus in 2018 revenue. Comparatively, QuoteMedia's full year 2018 revenue was a modest $11 million. In our view, its small size is what makes the company attractive. It is more nimble and willing to develop customized solutions for its clients and not burdened with a huge corporate infrastructure, which gives it pricing flexibility. We believe that these attributes put the company in a position to participate in the current market dynamics, with customers desire to lower financial data feed costs and desire for more customized products and services.

While there is a large number of players in the market, we believe that the company has made the investment upfront to fund future growth, given that its software aggregates and constructs data directly from the exchange feeds. As such, the company has eliminated the need for third party data providers and is among the lower cost among its smaller rivals. In addition, its system is scalable, which should allow for improving margins as the company adds additional customers.

In the first quarter 2018, the company swung toward profitability and positive cash flow. We believe that the company is on track to continue this favorable trend for the foreseeable future. Notably, the company started off 2019 on a solid footing. Total company revenues increased 7.6% to $2.87 million and cash flow (Adjusted EBITDA) increased 46% to $0.482 million. The growth in revenues was a deceleration from the rate of revenue growth in the fourth quarter (15.1% versus 7.6%). We would note that shifts in the number of large clients and usage can significantly influence near term revenues. While our estimates anticipate revenue growth in line with the first quarter, which we believe is roughly the company's baseline growth rate, we anticipate that the company will be successful in attracting new customers going forward. Importantly, a large customer that would utilize multiple terminals could have a meaningful positive impact on revenues. Furthermore, adding customers has a positive influence on operating margins, as well.

Looking forward toward 2019, we anticipate total company revenues to increase 7.0% to $11.909 million and cash flow (Adj. EBITDA) to increase 18.2% to $2.034 million. Our revenue growth outlook reflects 4% to 5% pricing and usage growth and roughly 2% to 3% customer growth. Notably, the addition of a large customer could have a meaningful influence on the company's revenue growth given the substantial increase in terminals and usage revenues. Given the relatively high fix cost nature of its business, we anticipate that margins should improve over time, But, we are largely maintaining the company's current margins in an effort to be conservative and to reflect the prospect for investment spend to accelerate future revenue and cash flow growth. Our 2020 estimates largely reflect a similar revenue and margin trajectory as our 2019 estimates.

Importantly, we believe that the company is in a favorable financial position to support investment in its growth and possibly to seek small tuck-in acquisitions. As of March 31, 2019, the company had $0.966 million in cash and virtually no long term debt. In addition, the company's generation of positive cash flow, provides flexibility to

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QuoteMedia Inc. QMCI | CURRENT PRICE $0.15 | Outperform | 07/12/2019

invest for future enhanced revenues, possibly by adding sales staff, software development, and support staff. Furthermore, we believe that the company's strengthening financial position is a key selling point for obtaining customers. In our view, customers want to make sure that the company will be around for support and/or to complete projects, especially given the expense of moving toward a different data platform and/or service or the investment for web development.

The QMCI shares have declined 16% from recent highs on May 6, 2019. We believe that the decline reflects the deceleration in the rate of revenue growth in the company's first quarter (reported on May 15th) from the fourth quarter 2019 results. In our view, the company is poised for enhanced revenue trends as it takes share from its larger rivals.

Near current levels, the QMCI shares trade at 8.1 times enterprise value to our 2019 cash flow estimate and 7.1 times our 2020 cash flow estimate. We believe that the QMCI shares should trade more in line with its double digit cash flow growth potential. As such, we are initiating coverage of QuoteMedia with an Outperform rating and a $0.25 price target. Our price target is based on a target multiple of 10.1 to Enterprise Value to our 2020 cash flow estimate, or a multiple more in line with the company's double digit cash flow growth over the next several years. Notably, we believe that the company's cash flow growth will be at least 15%, which may support a higher target multiple. The key catalysts toward higher stock valuations, in our view, likely will be a demonstration of the company's double digit cash flow growth and an acceleration in revenue growth.

Key Investment Highlights

Superior product. QuoteMedia is different from its competitors in its ability to customize data and services and available on multiple platforms. It prides itself on providing data that is fast and accurate. The company is a one-source provider and is usually cost competitive due to low infrastructure costs.

Loyal customer base. The company reports a 93% renewal rate, providing a high recurring revenue stream.

Attractive revenue growth rate. Revenues grew at a CAGR rate of 2.16% over the last three years, 2015 to 2018, but have accelerated in the last two years. In 2018, revenues increased 17.2%. QuoteMedia's product is scalable and could lead to strong top line growth and improving operating margins without the need for significant new capital investment. We anticipate attractive growth for the foreseeable future.

Improving margins. With low variable costs, margins are expected to increase as revenues grow. In recent years, gross margins have grown from 40% to 50%. We anticipate that adjusted EBITDA margins should improve more meaningfully, from 6.2% in 2017 to 18% in 2020.

Improved financial position. The company has approximately $1 million in cash and virtually no debt. It reported positive earnings and cash flow in 2018, which is expected in 2019 and 2020.

Investment Risks

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Competitive industry. QuoteMedia faces heavy competition in an industry dominated by larger players. Financial service customers have recently begun to focus on reducing costs. Future pricing pressure is possible, if not likely. Consolidation in the finance industry could reduce the number of potential customers and put pressure on pricing.

Risk of technological change. Competitors have greater financial resources and spend more on research and development. New product development by competitors could reduce QuoteMedia sales. It will be imperative for the company to be successful anticipating changing customer needs and developing new products that are of value to customers.

Small size and float. QuoteMedia has a market capitalization near $15 million. Most of the shares are held by a small number of investors and employees. Very few shares are traded publicly. The company's small size and thin float may make it difficult for large investors to move in or out of the stock without significantly affecting the stock price. QuoteMedia shares have been, and may in the future, be subject to "penny stock" rules requiring additional risk disclosures to investors.

Industry Overview

There are a large number of players in the financial news and data feed business, including both very large and small companies. The larger companies, like Thomson or Bloomberg, offer a full suite of products, but those products may not be customizable. The company's main competitors across all product lines and client types include such companies as the following:

BarChart

Bloomberg

Ice Data Services

IHS Markit

Factset

Morningstar

Thomson Reuters

The company may also compete with the following companies in a more specialized product suite including;

Activ

Intrinio

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Interactive Broker

Money.net

Quodd

S&P Global

Xignite

Only three other companies in the financial news and data feed business are publicly traded: Factset, Morningstar and Thomson Reuters. Compared to its peers, QuoteMedia is significantly smaller. Its market capitalization of approximately $14 million is less than 1% of the average of its competitors. A similar comment could be made about its revenues, operating income and net income. On the plus side, QuoteMedia is less levered than its peers with virtually no debt as of March 31, 2019 and a debt-to-asset ratio of 0.8%. QuoteMedia's gross margin of 50% is near that of its peers, but its operating and net margins are well below its peers. We attribute the lower margins to increased operating costs for QuoteMedia given its smaller size. As indicated later in this report, we believe the company's business to be highly scalable, and believe its operating and net margins will improve as the company grows.

The overall market for financial information is expected to grow modestly, 2% annually over the next several years. In our view, there are secular headwinds for the industry given financial industry consolidation, the movement toward Index funds and away from active money management, and individual investors movement toward fund management and away from direct investing. We believe that QuoteMedia, however, has significant umbrella of opportunity to grow in the business by gaining market share. In fact, the company's small size and aggressive pricing may give it a leg up on the competition as clients seek cheaper, customizable solutions due to the pressures on its business.

Company Overview

QuoteMedia, based in Fountain Hills, Arizona, started in 1992 under the name “Genetic Futures, Inc,” and underwent a variety of name changes before settling on “QuoteMedia” in 1999. The company’s mission has been consistent since its conception - to provide clear, succinct and comprehensible data solutions to clients. With the advent of the Internet, QuoteMedia became one of the leading financial data services company to provide “real-time” market information to clients by integrating the Internet into the financial services industry. Today, QMCI is a publicly listed corporation on the OTCQB tier of the OTC markets.

QuoteMedia (QMCI) is a software developer and a preeminent provider of data solutions and market information to a variety of financial institutions including major clients like the NASDAQ Stock Exchange, Canadian Securities Exchange (CES), FIS, US Bank, and JPMorgan Chase. Its financial data and customized solutions also serves clients from public companies seeking stock information on its web sites to as small as individual

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investors. QuoteMedia provides an attractive suite of products and services to its clients including: custom financial solutions and services, interactive data and research, web content solutions, direct market data and news delivery, and white and private-labeled software and applications. A strong advantage for the company's service is that it offers clients a single source for a broad range of data, information, and services, including: ●Streaming Real-time Data Feeds●Wireless Solutions●News Feed Aggregation and Delivery●Streaming Dynamic Content●Complete Portfolio Management●Corporate Investor Relations Solutions●Internet Data and Content Provisioning●Custom Software Application Development●Research Information Supply

The company segments its clients into three types: Data Feed Services, Interactive Content and Data Applications, and Portfolio Management and Real-Time Quote Systems. Its services are largely a "software as a service" and the clients are billed on a monthly, quarterly, or yearly basis. All of the company's product lines generate recurring licensing revenue from its clients. The company reports its revenues, however, on a slightly different basis, into two general segments: Interactive Content and Data Applications and Portfolio Management Systems.

The Portfolio Management Systems is comprised of the company's mobile and desktop solutions to deliver low latency market data to both consumer and corporate clients on a private label basis. Portfolio Management Systems offers complete portfolio management systems for non-professionals and professionals under the product names QuoteStream Desktop and Mobile, QuoteStream Professional, and a Web Portfolio Management product. On a segment reporting basis, Portfolio Management Systems is further segmented into Corporate and Individual customers.

The Interactive Content and Data Applications segment of the company consists of its Data Feed Services for both its Corporate and Individual customers. This product offers streaming market data feeds and historical data from over 70 exchanges over the Internet or telecommunication lines. Importantly, the company provides real-time data feeds to individuals and to third party distributors, which result in Vendor of Record status with the exchanges. This allows significant savings for its clients, especially in exchange fees. Figures 1 & 2 illustrate the company's revenue by product and customers by product, respectively, and also include our 2019 and 2020 estimates.

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The company's most popular services are its real-time data stream and customizable and interactive reports and data. QuoteMedia’s data feed services are comprehensive, real-time streaming market data along with historical and analytical data. The focus of this service is its usability and comprehensibility. QuoteMedia also provides interactive and personalized content and data. One component of the interactive data solutions is quote modules. These modules allow users to search various data points and provides complete market data coverage. Another significant component of the interactive data QuoteMedia provides is “real-time snap quotes” – this solution provides customizable real-time quotes and market data. In addition to the previously mentioned solutions, QuoteMedia also offers charts, stock tickers and screeners, news, market statistics, financial calendars and finance calculators.

QuoteMedia also offers the software QuoteStream™ – a portfolio management system uniquely designed for clients, and can be integrated into a number of different systems including databases, portfolio and trading systems. QuoteStream™ Professional is specifically designed for use by financial services professionals. QuoteMedia offers a Web Portfolio Manager as well, a comprehensive system that allows users to track every component of their portfolio in one system. QuoteMedia also offers QuoteStream Connect™, an informative hybrid of QuoteMedia’s Data Feed Services with the Portfolio Management Systems. QuoteMedia’s wide variety of data solutions offer clients a competitive advantage – specifically through the solutions’ customizable and comprehensive services discussed above.

The company serves a diversified customer base between 3,500 to 4,000 customers across its various segment

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lines. This client base represents a broad spectrum of financial oriented businesses and companies that seek financial information on websites and are not based solely in financial centers in the U.S. or Canada. Many of its clients are public companies that seek financial information and stock price data on its websites as an investor relations function.

The company's client base is relatively sticky and, as such, the company has a relatively low churn rate, which we estimate to be roughly 12% annually. Several customers have been with the company since its inception in 2004 and the company's largest customers, JP Morgan and NASDAQ, have been with the company for more than ten years. Notably, high dollar contracts like NASDAQ and JP Morgan, tend to have longer terms. Importantly, the company's top five customers represent only 16% of total sales. Consequently, the company has a relatively high recurring revenue model.

The company believes that the stickiness for its services is largely due to its accurate and timely data, its capable and responsive support, aggressive pricing, and its flexible delivery technologies. Unlike its large competitors, which have large, legacy infrastructure, breadth of worldwide financial data, and strict business models, QuoteMedia is small, nimble and flexible enough to customize and seek smaller business customers. As such, it is not surprising that the company considers the top four reasons for winning business to be 1) price, 2) customization, 3) relationships, and 4) positive references from existing clients. Conversely, it is not surprising that the top four reasons for the company to lose business to a competitor is related to attributes of its size and breadth of financial data including 1) data coverage and depth, 2) delivery mechanisms not meeting requirements, 3) licensing and distribution limitations, and 4) price.

Given the high recurring nature of its revenues and its small size, the company was not significantly impacted by turbulence in the financial markets. Notably, in 2009 and 2010 as the stock market declined 20% and 8.05% year over year end, respectively, the company's revenues grew, albeit more slowly. In 2008, the year prior to the stock market crash, the company's revenues grew 31%. In 2009 and in 2010, the company's revenues grew more slowly, up 4% and 3%, respectively. But, more importantly, the company's revenues grew. In 2011, the company's revenues accelerated to 15% growth. Revenue growth during the 2013 and 2015 period was more problematic. Despite the fact that customers continued to grow, revenues declined. We believe that the small decline in revenues represented a cut back in the number of terminals at some key accounts, which adversely affected the revenue per customer in those years. Notably, all of the key customer metrics, including the number of customers and the price per customer, appears to be going in the right direction. Most of the company's current revenue growth is broad based and coming from Asset Management, Retail Brokers, Investor Relations and Portals.

Virtually all of the company's revenue growth comes from new clients, usage and pricing. In our view, up-selling additional services to its existing client base offers an attractive revenue opportunity for the company. As Figure 3 Breakdown of New Revenue illustrates, the company had an inconsistent performance in terms of up-selling. The industry trend towards product uptake is positive, however, given that the nature of the industry encourages customers to license more data to be competitive. In addition, while a basic customer may want stock quotes,

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news and charts, the company could expand its offerings to include SEC filings, research, fundamentals and broker ratings, for instance. Notably, the company indicated that there is an overall improving uptake of the firm's products year over year.

Client average spend is increasing.

Note: The data includes only new services added.

As indicated earlier in this report, we believe that the company has a scalable business model. This is largely due to the fact that the company has invested in the software to aggregate the data feeds from its sources. In addition, the company has a unique sales model; whereby its large industry peers have commissioned based sales staff, QuoteMedia has salary based staff. This has been a positive in developing client relationships as QuoteMedia's sales staff is not pushing products or services that the client may not need. Importantly, the company has a low turnover in its staff, which has been less than 10% annually.

Based on its largely fixed cost basis, the company has an improving margin story as it gained customers and usage increased. Figure 4 illustrates that the company significantly increased operating cash flow, or Adjusted EBITDA margins over the past several years. Adjusted EBITDA is defined as operating income plus depreciation and amortization and stock based compensation. We believe that this is a good measure to determine the company's financial performance given that cash flow will define the company's ability to invest and fund its business including research and development, capital expenditures, and acquisitions. The chart also provides our expectation for cash flow margins in 2019 and 2020. In our view, the company's Adjusted EBITDA margins should improve as it scales its business.

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Recent Results

The company reported a solid first quarter end March 31, 2019, with total revenues up 7.6% to $2.87 million and adjusted EBITDA up 46% to $0.48 million. Notably, foreign exchange rates dampened revenue growth by nearly 2%. The revenue performance reflected mixed results among the company's revenue segments. Total company revenue growth was fueled by a strong performance in its Corporate QuoteStream product, with revenues up an attractive 16%. The revenue growth in the segment reflected improved pricing and increased customers. We estimate that Corporate QuoteStream customers increased 1% from the previous quarter. The company's Interactive Content segment increased revenues 6.8% to $1.41 million, which largely reflected increase pricing. Finally, the company's Individual QuoteStream segment reported revenues declined 5.3% to $0.45 million, which reflected weakened pricing in spite of an estimated 1% increase in customers from the fourth quarter levels. We believe that the lackluster Individual QuoteStream revenues reflected management's lack of attention given the higher return potential of its other segments. Importantly, the company reported positive cash flow, continuing a favorable track record of five consecutive quarters.

Investors may have been disappointed with the latest quarter results in that the total company revenue growth of 7.6% reflected a significant deceleration from the 15.1% growth in the fourth quarter 2018. The revenue performance was in spite of the fact that total customers increased from the fourth quarter. In our view, the revenues were likely moderated by customer usage rates, which can vary quarter to quarter. In addition, while it is important to monitor total customers, the absence of a large corporate customer with multiple terminals can have a significant impact on the company's quarterly revenues. We believe that a significant customer "win" with

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multiple terminals could substantially improve the company's near term and long term revenue outlook. As such, it is not surprising that there will be lags in revenue growth from time to time, especially given the relative size of the company at this early stage of development.

Outlook

We believe that the company is constructively working on adding customers, particularly in its Corporate QuoteStream and Interactive Content segments. These segments have the most influence on both the total company revenue growth and its cash flow margins. Without clear visibility on the size of the potential corporate clients, we estimate a baseline annual revenue performance for the company between 6% to 8%. Our estimates anticipate 4% to 5% growth from usage and pricing and 2% to 3% growth in customers.

Our revenue growth estimates are based on a constant currency basis. Given that the majority of the company's customers are based in the United States and Canada, fluctuations in the U.S. Dollar can influence recognition of revenues. Figure 5 Average Revenue Per Client illustrates our revenue expectation by company segment. We would note that the company appears capable of growing revenues much faster, given that the infrastructure that it currently has should support faster revenue growth. Notably, a large customer that seeks multiple terminals for its financial data could meaningfully impact the company's growth trajectory. As such, we view our revenue growth estimate to be conservative.

Given the largely fixed cost nature of its business, we anticipate that revenue growth will have a positive impact on margins and operating cash flow over time. The company may face investments into equipment and support initially into a new contract, which could somewhat dampen the very near term margin performance. In addition, we believe that the company may seek acquisitions which could enhance the company's technology, expert staffing and customer base, potentially outside of its existing markets which are Canada and U.S. focused. Such acquisitions could influence the company's margin profile. But, we believe that it is the company's goal to gradually improve margins, particularly its Adjusted EBITDA margins, which we estimate to be 16.8% in 2019 and 18.0% in 2020.

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Financial Overview

As Figure 6 Balance Sheet illustrates, as of March 31, 2019, the company reported cash of $966,167 and virtually no long term debt. As Figure 7 Balance Sheet illustrates, the company's latest financials are a significant improvement from the company's balance sheet as of September 30, 2017, when the company reported virtually no cash and long term debt of nearly $11.3 million. In December 2017, the company entered into a Debt Exchange and Debt Forgiveness Agreements with Bravenet Web Services and Harrison Avenue Holdings, companies that were controlled by David Shworan, the President and Chief Executive Officer of QuoteMedia. As a result of the agreements, all of the company's related party debt was eliminated, roughly $12 million, and it reduced annual interest expense by roughly $1.3 million.

We believe that the improved balance sheet is a compelling selling point for potential clients. Potential customers likely would want to make sure that its vendor is reliable and has a sustainable business model before signing a long term contract for services. In addition to a sound balance sheet, the company is expected to continue to generate positive cash flow.

Based on our estimates, the company is expected to generate $2.034 million in cash flow in 2019 and $2.303 million in 2020. Capital expenditures are the largest use of cash given that the company is not expected to be a significant cash tax payer. The company is expected to have capital expenditures of $0.021 million in 2019 and $0.007 million in 2020. As such, free cash flow is expected to be very near operating cash flow. In the absence

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of acquisitions, we believe that the company's financial position will continue to improve over the next several years.

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Management Overview

The company has an experienced management team including Robert Thompson, the Chairman of the Board, Keith Randall, the Chief Executive Officer and Chief Financial Officer and Director and David Shworan, the President, Chief Executive Officer and Director.

Mr. Keith Randall, C.A. – President, CEO and CFO of QuoteMedia: Keith Randall has served as the CFO of QuoteMedia since 1999, and started his roles as CEO and President in 2018. Mr. Randall served as the Vice President from 1999 to 2018, before transitioning to his current roles. Randall is a CPA and earned a Bachelor of Commerce degree with Honors from Queen’s University in Canada in 1991.

Christian Amott – Chief Technology Officer of QuoteMedia: Christian Amott has served as CTO of QuoteMedia

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since 2003, and has led several major technological developments of QuoteMedia’s real-time market data software. Before working at QuoteMedia, Mr. Amott served as the President and CEO of nQuery Solutions. Amott earned a postgraduate diploma in Information Technology from University of Victoria in 1999.

David Shworan – CEO and Director of QuoteMedia: Mr. Shworan has served as President and CEO of QuoteMedia since 2004, and previously served as the Director of QuoteMedia from 2002 to 2004. Before assuming his roles at QuoteMedia, Shworan founded and served as CEO of Bravenet Web Services, which provides Web tools and widgets, for six years.

David Hay – Senior VP of Corporate Accounts at QuoteMedia: David Hay has served as SVP of Corporate Accounts at QuoteMedia since 2002, and also serves as the company’s Director of Sales.

Robert Thompson – Chairman of the Board: Robert J. Thompson has served as Chairman of the Board of QuoteMedia since 2000. Thompson currently serves as the Co-Founder, Chairman, and Member of Board of Managers of MyLand Company, as well as a Partner at CanAm Advisors. Previously, Mr. Thompson served as the President of BIMSI Marketing Services from 1993 to 2006 – an industrial psychology firm that offers a variety of highly advanced technologies.

Stock Valuation and Overview

As of March 31, 2019, there were 125,885 shares of Series A Redeemable Convertible Preferred Stock outstanding. The preferred stock has no dividend or voting rights and is convertible into common shares at the rate of 83.33 shares of common stock for one share of Series A Redeemable Convertible Preferred Stock. The shares are convertible should the common shares trade above $0.30 for ninety consecutive trading days.

As of March 31, 2019, there were 26,372,803 common stock warrants and options outstanding. All stock warrants and options to purchase common stock were issued at exercise prices equal to or greater than the market value of the stock at the time of the grant. As of March 31, 2019, there were 102.45 million weighted average common shares outstanding, which included stock options and warrants of 11.97 million. Nearly 70% of the outstanding shares are held by corporate insiders, leaving roughly 31 million share float. But, the company is tightly held. As of March, 2019, the company had only 166 shareholders. Given the fact that the shares are closely held and there is limited share float, the company's stock may be subject to the "penny stock" rule under the Exchange Act. This may require additional risk disclosure document, disclosure of market quotations, compensation of the broker-dealer and monthly account statements showing the market values of securities held in customer's accounts. As a result of the additional documentation and disclosures, it may make it more difficult for holders to transact in the shares.

In looking at the company's stock valuation, we use an Enterprise Value to estimated Adjusted EBITDA method. Notably, this valuation methodology is somewhat new to the company given that it just recently began generating significant positive EBITDA in 2018. As such, it is not surprising that the QMCI shares trade at an enterprise-value-to-trailing EBITDA of 28 times, above the group average of 25 times.

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We believe that following the company on an Adjusted EBITDA basis, which adds back Depreciation and Amortization and stock-based compensation to Operating Income, provides a more comprehensive view of the sustainability of the company's business model in a competitive landscape, its ability to invest in its business for future growth, and its ability to seek acquisition fueled growth. In our view, positive cash flow is somewhat unique for a company of its size, which typically would trade based on revenues given its early stage development cycle.

Figure 8 Enterprise Value to Revenue chart illustrates the company's trading history based on revenues. This is the most consistent data over the course of the company's 6-year trading history since the company was not a significant positive cash flow generator until 2018. We believe that the trading valuations are inconsistent and difficult to determine trading patterns. Given the swing toward positive cash flow, we believe that this will be the valuation methodology going forward.

Near current levels, the QMCI shares trade at an Enterprise Value to our 2019 adjusted EBITDA (cash flow) estimate of 8.1 times and 7.1 times our 2020 estimate. The valuation is below our expected double digit growth rate, or 18.2% and 13.2%, respectively, in 2019 and 2020. In setting our price target of $0.25, we anticipate that the company's multiple will expand closer to its double digit cash flow growth estimates. In our view, demonstration of this favorable cash flow growth will be a key catalyst toward higher stock valuations. In addition, we believe that efforts to improve the stock price above $1 and beyond, would also improve the "investibility" of the company as it moves to increase its visibility to institutional investors. The company may consider a reverse stock split to enhance this process. In addition, acquisition fueled growth may help to accelerate its investment appeal.

While demonstration of the company's cash flow growth will be an important catalyst to the shares, we believe that an acceleration in revenue growth will be the key near term catalyst. In our view, investors are likely to focus on this metric as a catalyst given the significance in driving the company's cash flow. Based on our current estimates, we believe that the upcoming second quarter may again reflect a deceleration in the rate of revenue growth from the first quarter. Our estimates assume second quarter revenue growth to be 6.1% versus 7.6% in the first quarter. While we anticipate that operating cash flow will improve, we believe that the slower revenue growth may weigh on the shares in the very near term.

Based on our estimates, we anticipate that the second half revenue performance should improve, a reflection of the prospect of a favorable currency move and an improving client backlog. Consequently, we believe that the deceleration in revenue growth may be short lived. While we consider the shares to be rated Outperform near current levels, we encourage investors to be mindful that there may be bumps along the way toward our $0.25 price target, which is based on our current 12 to 18 month outlook.

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Company Profile

QuoteMedia, based in Fountain Hills, Arizona, provides cloud-based financial data, market news feeds, and financial software solutions. Its customers include financial service companies, online brokerages, clearing firms, banks, media portals, public corporations and individual investors. The company provides a single source solution providing products such as streaming quotes, charting, historical data, technical analysis, news and research. Information can customized and provided to multiple platforms including terminals and mobile devices.

Fundamental Analysis

In assessing the company's fundamentals, we gave the company an average rating of 3. Our score reflects above average marks for the company's market opportunity, which we believe is large. In our view, the company has significant opportunity to gain share in the market, in spite of the headwinds of a modestly growing market. We believe that the company is nimble and capable of pursuing business well beyond its current weight, so to speak. We gave favorable marks to the company's current balance sheet, which reflects a sizable cash position and virtually no long term debt. The company's score was tempered, however, by its competitive position given its relative small size to its substantially larger and well funded peers. In our view, there is a risk to changing market conditions and new products and services that may be offered by its peer group which may be capable to invest heavily into innovation. Given the large ownership by a handful of insiders, we also tempered our score for corporate governance and management. We do give substantial credit to the capabilities of the existing management team.

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GENERAL DISCLAIMERSAll statements or opinions contained herein that include the words "we", "us", or "our" are solely the responsibility of Noble Capital Markets, Inc. ("Noble") and do not necessarily reflect statements or opinions expressed by any person or party affiliated with the company mentioned in this report. Any opinions expressed herein are subject to change without notice. All information provided herein is based on public and non-public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed. No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio. The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on its own appraisal of the implications and risks of such decision.

This publication is intended for information purposes only and shall not constitute an offer to buy/sell or the solicitation of an offer to buy/sell any security mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or domicile. This publication and all information, comments, statements or opinions contained or expressed herein are applicable only as of the date of this publication and subject to change without prior notice. Past performance is not indicative of future results.

Noble accepts no liability for loss arising from the use of the material in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Noble. This report is not to be relied upon as a substitute for the exercising of independent judgement. Noble may have published, and may in the future publish, other research reports that are inconsistent with, and reach different conclusions from, the information provided in this report. Noble is under no obligation to bring to the attention of any recipient of this report, any past or future reports. Investors should only consider this report as single factor in making an investment decision.

IMPORTANT DISCLOSURESThis publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or discussed to another party, without the written consent of Noble Capital Markets, Inc. ("Noble"). Noble seeks to update its research as appropriate, but may be unable to do so based upon various regulatory constraints. Research reports are not published at regular intervals; publication times and dates are based upon the analyst's judgement. Noble professionals including traders, salespeople and investment bankers may provide written or oral market commentary, or discuss trading strategies to Noble clients and the Noble proprietary trading desk that reflect opinions that are contrary to the opinions expressed in this research report.

The majority of companies that Noble follows are emerging growth companies. Securities in these companies involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Noble research reports may not be suitable for some investors and as such, investors must take extra care and make their own determination of the appropriateness of an investment based upon risk tolerance, investment objectives and financial status.

Company Specific DisclosuresThe following disclosures relate to relationships between Noble and the company (the "Company") covered by the Noble Research Division and referred to in this research report. The Company in this report is a participant in the Noble Capital Markets Support Program (the "Program"), which includes research coverage; Noble receives compensation from the Company for such participation. No part of the Program compensation was, is, or will be directly or indirectly related to any specific recommendations or views expressed by the analyst in this research report. The Company has attended Noble investor conference(s) in the last 12 months. Noble intends to seek compensation for investment banking services and non-investment banking services (securities and non-securities related) within the next 3 months. Noble is not a market maker in the Company.

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FUNDAMENTAL ASSESSMENTThe fundamental assessment rating system is designed to provide insights on the company's fundamentals both on a macro level, which incorporates a company's market opportunity and competitive position, and on a micro/company specific level. The micro/company specific attributes include operating & financial leverage, and corporate governance/management. The number of check marks that a company receives is designed to provide a quick reference and easy determination of the company's fundamentals based upon the following five attributes of the company (weighting reflects the importance of each attribute in the overall scoring of company’s fundamental analysis):

Attribute Weighting

Corporate Governance/Management 20%

Market Opportunity Analysis 20%

Competitive Position 20%

Operating Leverage 20%

Financial Leverage 20%

For each attribute, the analysts score the company from a low of zero to a high of ten based upon the analysis described below. The final rating and resulting check marks is a result of dividing the overall score (out of 100%) by ten.

Rating Score Checks

Superior 9.1 to 10 Five Checks

Superior 8.1 to 9 Four & A Half Checks

Above Average 7.1 to 8 Four Checks

Above Average 6.1 to 7 Three & A Half Checks

Average 5.1 to 6 Three Checks

Average 4 to 5 Two & A Half Checks

Below Average 3 to 3.9 Two Checks

Below Average 2 to 2.9 One & A Half Checks

Low Quality 0 to 1.9 One Check

While these are the attributes currently used for the analyst's fundamental analysis, the attributes and weighting may be reviewed, updated with additional attributes, and/or changed in the future based on discussions with the analysts and recommendations from the Director of Research.

Following is the description of each attribute in the fundamental analysis.

Corporate Governance/ManagementWe believe that a review of corporate governance and assessment of the senior management are important tools to determine investment merit. Good corporate governance aligns management with the interests of stakeholders. As such, analysts are to rank the company on the basis of good corporate governance principles that may include rules and procedures, board composition and staggered term limits, rights and responsibilities, corporate objectives, monitoring of actions and policies, and accountability. In addition, analysts will assess issues with controlling shareholders and whether decisions have been made in the past that were in the interests of all shareholders. In addition, management will be assessed based on industry experience, expertise, and/or track record.High ranking example: Board and management that is aligned with the interests of shareholders with incentives based on stock price appreciation and with an experienced management team known for exceptional shareholder returns.Low ranking example: Concentrated ownership without independent directors that do not necessarily align with all shareholders' interests.

The Market Opportunity AnalysisIn this review, the analyst assesses the company's macro environment as a measure of understanding the industry. Factors considered include the size and growth potential of the industry under various economic conditions, the emerging demands in the market, technological benefits/disruptions, competition, geographical opportunities, and customer demands/needs, and an assessment of supply and distribution channels. In addition, the analyst will review legal and regulatory trends, as well as potential shifts in consumer or social behavior and natural environment changes.

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High rank example: A company in an industry that is growing revenues well above GDP rates (which are on average 2% plus) and/or may have unmet or under-served needs in a rapidly growing market opportunity.Low rank example: A mature industry that is in secular decline and likely to grow below GDP rates.

Competitive PositionThe evaluation of the company's competitive position is another macro environment attribute designed to measure the relevance, market share, position and value proposition, and sustainable differentiations of the company and its products/services within its industry. Ease of entry into the industry and the ability of other well-funded players to potentially enter the market would be determined. As such, the assessment would consider the company's strengths and advantages of its products/services against weaknesses and limitations. This may include the company's current brand awareness, pricing and cost structure, current market strategies and geographic penetration that may affect demand for its products/services. In addition, the company's competitors would be evaluated.High rank example: An analyst would consider the company's product to be superior to its competitors and that should allow the company to gain market share.Low rank example: A company with a "me-too" product that does not have any significant technology advantages in an industry that has low barriers to entry.

Operating LeverageSimplistically, operating leverage is determined by the operating income relative to changes in revenue. The analyst will calculate the impact on sensitivity on gross margins and variable costs to determine operating leverage. The analyst will take into account the ability of the company to cut fixed and variable costs in a challenged revenue environment and technological changes that may impact operating expenses. In addition, the analyst is to assess corporate strategies that include capital investment, which may be required for sustainable revenue growth, marketing expenses, and the company's ability to attract and retain talent and/or employees. The analyst should focus on the revenue opportunity and determine the price elasticity of demand for the company's products or services. In other words, the analyst is to rank the company based on improved operating margins going forward on an absolute and relative basis.High rank example: A company that has improving margins for the foreseeable future, with significant price elasticity.Low rank example: A company that is in a challenged revenue environment with a fixed cost structure and limited ability to cut costs, indicating an outlook for declining margins.

Financial LeverageA strict definition of financial leverage is total debt divided by total shareholder's equity. Financial leverage analysis is to determine the company's ability to improve shareholder value by means of utilizing its balance sheet to grow organically or to acquire assets. Analysts may look at the company's debt to cash flow leverage ratio, interest coverage ratios, or debt to equity ratios. In addition, the interest rate environment and the outlook for interest rates are a factor in determining the company's ability to manage financial leverage. Finally, the analyst is expected to determine the ability to service the debt given the industry and/or company profile, such as cyclicality, barriers to entry, history of bankruptcy, consistency in revenue and profit growth, or predictability in sales and profits and large cash reserves. The analyst is expected to take into account capital intensity of the company and the anticipated of capital allocation decisions.High rank example: A company with predictable and growing revenue and cash flow with modest debt levels. This may indicate that the company could improve shareholder value through growth investments, including acquisitions, using debt financing.Low rank example: A company in a cyclical industry in a late stage economic cycle that has above average debt leverage and is in an industry that has a history of financial challenges, including bankruptcies. ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCEDirector of Research. Senior Equity Analyst specializing in Media & Entertainment. 34 years of experience as an analyst. Member of the National Cable Television Society Foundation and the National Association of Broadcasters. BS in Management Science, Computer Science Certificate and MBA specializing in Finance from St. Louis University. Named WSJ 'Best on the Street' Analyst six times. FINRA licenses 7, 24, 66, 86, 87.

CONTINUING COVERAGEUnless otherwise noted through the dropping of coverage or change in analyst, the analyst who wrote this research report will provide continuing coverage on this company through the publishing of research available through Noble Capital Market's distribution lists, website, third party distribution partners, and through Noble’s affiliated website, channelchek.com.

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WARNINGThis report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate for any recipient particular investment objectives, financial situation or particular needs. Prior to making any investment decision, recipients should assess, or seek advice from their advisors, on whether any relevant part of this report is appropriate to their individual circumstances. If a recipient was referred to Noble Capital Markets, Inc. by an investment advisor, that advisor may receive a benefit in respect of transactions effected on the recipients behalf, details of which will be available on request in regard to a transaction that involves a personalized securities recommendation. Additional risks associated with the security mentioned in this report that might impede achievement of the target can be found in its initial report issued by Noble Capital Markets, Inc.. This report may not be reproduced, distributed or published for any purpose unless authorized by Noble Capital Markets, Inc..

RESEARCH ANALYST CERTIFICATIONIndependence Of ViewAll views expressed in this report accurately reflect my personal views about the subject securities or issuers.

Receipt of CompensationNo part of my compensation was, is, or will be directly or indirectly related to any specific recommendations or views expressed in the public appearance and/or research report.

Ownership and Material Conflicts of InterestNeither I nor anybody in my household has a financial interest in the securities of the subject company or any other company mentioned in this report.

NOBLE RATINGS DEFINITIONS % OF SECURITIES COVERED % IB CLIENTS

Outperform: potential return is >15% above the current price 86% 25%

Market Perform: potential return is -15% to 15% of the current price 16% 2%

Underperform: potential return is >15% below the current price 0% 0%

NOTE: On August 20, 2018, Noble Capital Markets, Inc. changed the terminology of its ratings (as shown above) from "Buy" to "Outperform", from "Hold" to "Market Perform" and from "Sell" to "Underperform." The percentage relationships, as compared to current price (definitions), have remained the same.

Additional information is available upon request. Any recipient of this report that wishes further information regarding the subject company or the disclosure information mentioned herein, should contact Noble Capital Markets, Inc. by mail or phone.

Noble Capital Markets, Inc.225 NE Mizner Blvd. Suite 150Boca Raton, FL 33432561-994-1191

Noble Capital Markets, Inc. is a FINRA (Financial Industry Regulatory Authority) registered broker/dealer.Noble Capital Markets, Inc. is an MSRB (Municipal Securities Rulemaking Board) registered broker/dealer.Member - SIPC (Securities Investor Protection Corporation)

Report ID: 10853

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