mdf Commerce Inc
TSX:MDF
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mdf Commerce Inc
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Thank you for standing by. This is the conference operator. Welcome to the Mediagrif Interactive Technologies Q4 and Full Year 2020 Investor Conference Call. Today's call will provide information and commentary on the company with a focus on the financial results released yesterday after the close of the market. We will hear from Luc Filiatreault, Chief Executive Officer; and Paul Bourque, Chief Financial Officer. If you have questions following the call, you can go to the website in the Investor Relations section. First, here are a couple of housekeeping notices. [Operator Instructions]. This call is being recorded, and we expect that the recording will be available on Mediagrif's website today. We remind you that today's remarks will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reader advisory at the bottom of Martello's news release which is on their website and on SEDAR. The company's actual performance could differ materially from these statements. I'll now hand the call over to Mr. Filiatreault. Please go ahead, sir.
Well, good morning, everyone, and thanks for joining us for the Q4 and full year fiscal 2020 results call. So we'll turn to the results we filed yesterday in a moment. But first, I want to take a moment to tell you a bit about where MDF is and what is the current state of operations, especially in this, I guess, post-COVID scenarios. So as you all know, Mediagrif is a developer and operator of digital commerce platforms. Our platforms facilitate over $15 billion per year of e-commerce transactions for over 200,000 end user companies, mostly in North America. We're a very meaningful player in that sector. We are currently investing in 2 core growth platforms of our business and harvesting a third. The first growth platform is Strategic Sourcing. This procurement and tendering platform accounts for approximately 42% of our revenue. We are quite proud that over 3,000 government agencies and large enterprise buyers rely on our Strat Sourcing platform to procure and tender from a North America wide network of approximately 200,000 suppliers. The second growth platform is Unified Commerce, which represents about 38% of our revenue base. This platform offers end-to-end e-commerce, including supply chain for thousands of midsized and large enterprise customers globally who rely on our technology. We have a particularly strong presence in the grocery space. And like other e-commerce providers, our platforms experienced a significant surge in usage during the early days of COVID. We believe that the accelerated shift to e-commerce triggered by the pandemic will be permanent, and we plan on exploiting this opportunity. Finally, our marketplace platform is a collection of online properties that enable everything from wholesale diamond purchasing to job hunting. Collectively, these 5 local and regional properties account for approximately 20% of total revenue, but no single property represents more than 6% of our total revenue. It is our assessment that incremental investment in these small local online properties would not achieve adequate returns on invested capital. As a result, we plan to harvest earnings to maximize asset value. The management team here today joined the company in the fall of 2019. Over the past 8 months, we have undertaken to transform Mediagrif into a high-growth SaaS digital commerce company with the potential to dominate key market segments. In order to do this, we first had to prepare the company for transformation. We undertook to clarify the business, streamline and refocus operation, built a 5-year strategic plan, execute on a sales transformation plan to shore up our balance sheet. While doing all of that, we extended our Unified Commerce platform by acquiring and integrating k-eCommerce, which tripled our monthly recurring revenue for e-commerce starting in January. I am happy to report that we are now largely through the preparation phase of Mediagrif's transformation into a SaaS digital commerce company and are now entering a planned growth phase focused on monthly recurring revenue. I would like now to comment on the state of Mediagrif as we enter our growth phase. We've completed a detailed review of our revenue streams, and are pleased to report that approximately 75% of Mediagrif's total revenue are recurring. So by all common measures, we are already a SaaS company, with the majority of our revenue streams recurring and predictable. This is a fantastic base on which to build from. I wish I could show you the graph that I currently have in front of me, but it starts in January 2018 and goes all the way to May '20, and it shows that our revenue was just under $4 million -- recurring monthly revenue, sorry, was just under $4 million about 2 years ago and is now slightly above $5.2 million. So that's the first good news. Second good news is that back in January 2018, the percentage of our recurring revenue was hovering around 60%. It's now hovering around 79%. So not only have we increased our recurring monthly revenue, but we've globally also increased the quality and the predictability of our revenue, making us truly a SaaS company. So I'll now talk about the 2 main platforms. So the Strategic Sourcing platform -- in the Strategic Sourcing platform, sorry, the recurring represents about 85% of total revenue, which we believe is close to a maximum of annual recurring revenue available to that line of business. We simply need to accelerate the growth of these predictable high gross margin revenue streams. And if you again saw that chart, unfortunately, which is in our investor presentation that I invite you to check on our website, you'll see that over the last 4 to 6 months, we've clearly seen an acceleration of our recurring revenue from the Strategic Sourcing platform. You may have seen that we've launched a new version of our MERX website. Our U.S. strategic platform websites are also doing very well under the pandemic. So strong growth happening there. Within the Unified Commerce platform, recurring revenue is currently at about 60% of total revenue. As we implement our sales transformation plan, we believe that there is some room to convert current customers to multiyear service agreements as we cross-sell and upsell new solutions and capabilities to them. We will also soon be announcing large strategic service partners that will ensure onboarding of new clients and allow us to focus on monthly recurring revenue. New Unified Commerce acquisitions that we target, like the k-eCommerce, will also most likely retain high levels of recurring revenue, which will also contribute to the increase of recurring revenue as a percentage of total revenue in this line of business. It is our objective in -- over time to maximize annual recurring revenue to similar levels as Strategic Sourcing as we accelerate growth. So I also show in that investor presentation, a similar chart for our Unified Commerce, which again shows that our recurring revenue about 2 years ago was just under $4 million per month, and we are now at about $5.2 million per month. So definitely, strong increase in e-commerce also and Unified Commerce. As we streamline operations and divest from low growth and nonrecurring revenue properties, total revenue, and sometimes adjusted EBITDA, may be temporarily impacted. For example, in Q1 2019, we -- sorry, in Q1 2020, we divested from LesPAC, which reduced total fiscal 2020 revenue by $8.8 million. However, we urge investors to follow total MRR growth in our core platforms, which we anticipate will continue to accelerate as we have seen subsequent to the end of fiscal 2020. Next, I want to turn to the balance sheet. With the close of a recent bought deal equity offering of 2.9 million shares, we raised $16 million of incremental working capital. Mediagrif now has one of the strongest balance sheet in its history. Before I turn it over to Paul to discuss in more detail our Q4 and full year 2020 financial results, I want to thank our Board, the management team and our dedicated employees for enthusiastically working through this very intensive preparation stage to Mediagrif's transformation. Now we can concentrate on maximizing shareholder value by exploiting the significant opportunities that have emerged in digital commerce and delivering on highly predictable, high-margin and profitable MRR growth. Paul, can you take us through the financial results, please?
I will, thank you, Luc. [Foreign Language]. Welcome, everyone, to our call today. I'll begin with a quick review of the highlights of our full year 2020 results. As we published yesterday, you saw that our revenue for the year were -- stood at 75.5 million -- $75.4 million compared to $83.1 million in fiscal 2019. Out of the $75.4 million, $56.4 million or 75% came from our core platforms, as Luc has just mentioned, being the Strategic Sourcing and Unified Commerce platforms, while our noncore platforms added $19.7 million on revenue during the fiscal year. The increase in revenues from our core platforms for the year came mainly from our unified commerce platform, including the k-eCommerce acquisition, a company acquired last December 3, and now integrated with our Unified Commerce platforms, which contributed $2 million to our fiscal revenues. Strat Sourcing platforms added $0.8 million in revenues, coming mainly from our U.S. government procurement solution. This increase in revenue from core platforms have been partially offset by a decrease in revenue of ASC of $0.5 million, which is mainly due to lower professional services revenue, onetime revenue. Revenues from the e-marketplaces totaled $19.7 million in fiscal 2020, and that compares to $31.3 million last year in the same quarter -- in the same year -- in the year. The decrease in revenues from our noncore activities is mainly due, again, like Luc has mentioned, to the sale of LesPAC of $8.8 million as well as the decrease in revenues from Jobboom and Réseau Contact totaling $1.6 million, and also from a decrease in some marketplaces revenue, totaling $0.4 million, which is mainly due to some rationalization that we did last October by closing like Market Velocity that we closed last October. Gross margins reported for 2020 were at 71.4%, down slightly from the 74.9% last year. Revenues from the B2C marketplace totaled for the year, $6.5 million compared to $17 million during the corresponding period of fiscal '19. Again, the decrease came from just -- what I just mentioned in terms of LesPAC and Jobboom and Réseau Contact. Adjusted EBITDA for fiscal 2020 totaled $10.5 million, adjusted for nonrecurring costs totaling $2 million, consisting mainly of termination benefit, some professional fees with regards to the k-eCommerce acquisition, nonretention cash benefits related, again, here to k-eCommerce of $1 million -- $0.1 million and a provision for an onerous contract of the $0.2 million. Now quickly we go to the fourth quarter of fiscal 2020 results. As published yesterday, again, revenue was $18.9 million or 9.1% below last year fourth quarter of $20.8 million, primarily due to the decline in legacy nonstrategic B2C platform. As Luc just noted, this refocusing is part of our long-term strategic growth plan. Exiting Q4, monthly recurring revenue for the year -- for the fiscal 2020 were $14.9 million, and that's close to 79% of total revenue in the quarter. As we continue to shift emphasis to focus on B2B SaaS revenue, gross margin have remained relatively stable. Adjusted EBITDA for the quarter totaled $0.9 million when adjusted for nonrecurring costs totaling $0.5 million, mainly consisting of the professional fees and noncash-retention related to the k-eCommerce, and again, the $0.2 million of the provision from an onerous contract for our client. And this compared to a $3.5 million reported in Q4 2019. During the fourth quarter, Mediagrif -- we recognized a noncash goodwill impairment charge of $7.2 million against our noncore asset, legacy B2C marketplaces, as you know them, Jobboom and Réseau Contact. Again, this charge is related to its ongoing pivot to growth at Mediagrif to grow market, services by Strategic Sourcing and Unified Commerce platforms. Total loss for the year -- yes. Deferred revenue -- sorry, a proxy for SaaS booking grew 4% in the quarter to $17.8 million compared to $17.2 million for the same period of 2019. And with that, I will hand it back to Luc to discuss the outlook.
Thanks, Paul. I'd like to make a few comments about our outlook before concluding our prepared remarks. So since last fall, we've signed 220 new clients. We've added about $150,000 of MRR, capturing new MRR bookings worth about $3.5 million of total contract value. This leading indicator helps us to quantify our MRR ramp-up in the future quarters, which we intend to accelerate further by expanding the rollout of our sales transformation plan. We clearly have indication that this is working. The slope of those curves that you can check on our website is very, very revealing. Since the beginning of calendar year 2020, combined MRR for Unified Commerce and Strategic Sourcing, which I remind you, are the 2 platforms in which we're investing, has already increased 15% over last year, which we believe was influenced by global market conditions. The overall growth of MRR was partially driven by a 56% surge in e-commerce revenue due to a spike in online commerce by -- caused by the COVID-19 pandemic. Although Strategic Sourcing grew modestly at 5% during the same time frame, there was a 15% spike in demand for Mediagrif's U.S.-based e-procurement platform, which we believe was also influenced by the COVID-19. Management believes that much of the shift in preference towards digital commerce will be permanent, which should be reflected in future performance for those 2 core platforms of Unified Commerce and Strategic Sourcing. Finally, I would like to leave you with 3 key takeaways that I think summarize our transformation to date. First, by all measures, Mediagrif should be considered a profitable SaaS digital commerce company with 79% recurring revenue, over 200,000 end users. We are laser-focused on Strategic Sourcing and Unified Commerce, which already enabled billions of dollars of commerce in 2 significant market segments. Secondly, we spent the past 8 months preparing to transform Mediagrif into a lean MRR growth company, and we are in great shape now to enter the growth stage of our 5-year strategic plan. And finally, helped by the COVID-19 pandemic, we're already seeing evidence of accelerated growth in our core business. We have never been as prepared as now to exploit the opportunities that are in front of us. In comparison to some of our digital commerce peers, little of this has been recognized in the current value of the company. And with that, I would like to hand it over to the operator for further questions.
[Operator Instructions] Your first question comes from Amr Ezzat from Echelon Partners.
My first question is on MRR. Firstly, thanks for releasing these KPIs. They're quite helpful. You spoke some pretty impressive numbers with the growth from $4 million to $5.2 million in MRR. But I was hoping you can walk us through the $5.2 million number in more detail. Specifically, I'm assuming the recent increase is mostly due to the growth in the number of transactions as opposed to the influx of new clients you've signed. I'm assuming, obviously, that they're not all onboarded yet. So if I'm thinking about that MRR number evolving, let's say, over the next year or 2, once you guys are done on-boarding the new clients, what should we expect? I'm not sure if it was very clear, but I'm just looking to understand how much of your MRR growth is going to come from new clients that you've already signed versus like the growth in number of transactions, i.e., existing clients.
So thanks for the question, Amr. I'll try to answer as best as I can without obviously going into too much prediction. But in Strategic Sourcing, clearly, the MRR growth will come from mostly adding clients as it is not a directly related business model with consumption, and also comes from some acquisitions. We are currently covering a quite significant amount of territory with our Strategic Sourcing buyers in the U.S. We already have a very dominant position in Canada, but there's lots of white space for us to grow in the U.S. and possibly even in Europe. On the e-commerce side, however, there, it's a little bit different. Our platforms do provide us with revenue that varies with the number of transactions. And as an example, we saw our grocery platforms really perform in an extremely positive manner during COVID. We had increases of volume, which were very high during the pandemic. There are slowly -- they are slowly coming down, but as far as we can tell and we don't have the full benefit of the June numbers yet, it's still anywhere between 3 to 5x higher than it was back in, let's say, January before it all started. So obviously, our current clients are contributing to that higher RMR (sic) [ MRR ]. But we've also won a significant number of new clients, and I not -- I want to reconfirm the data point. But I think it's 45 or maybe 50 new e-commerce customers in the last -- since the beginning of the year, that, as you just mentioned, Amr, they're not probably fully onboarded yet. So we're not fully enjoying the benefit of the recurring revenue. So I can't give you exact numbers without a more specific question, maybe.
Can you give us a sense of how many of these like 45 to 50 clients are onboarded yet? And perhaps like the size or the average size of these clients relative to your existing clients?
Yes, I can answer that as best as I can. We really have 2 different products in our e-commerce. We have one that caters to medium, mostly B2B types of businesses where onboarding is a fairly short process which will usually be between, say, a few weeks and maybe 3 months at max. So in those cases, I would assume that a portion of these customers are onboarded, but they typically provide a relatively small amount of MRR revenue because it's a smaller customer. On the other end of the spectrum, we have an e-commerce platform which caters to very large retailers that have thousands and thousands of stores and lots of warehousing and use multiple channels, display their products on multiple marketplaces, et cetera. And those are obviously much longer to onboard. And they usually have a onetime fee -- service fee which is fairly high. We have signed a few of these new customers, where at least one of them is a very, very large retailer that we are in the process of onboarding. So we're not fully benefiting from the much larger MRR contribution from these customers. If all continues to go well, we should see these customers continue to grow. And as they use our platform, the business model does also include more money for us as they make more money through their websites, right?
Understood. That's very helpful. In your prepared remarks, you said that you're largely completed with many of the initiatives you wanted to undertake, and now you're focused on growth, you said it's -- at least in a more eloquent way. But can you run us through any sort of major elements or milestones that are left to be completed? Are there any gaps in the management team or anything else you're looking to add, or…
Well, what -- it was mostly, I would say a reorganization of our operations, a simplification of our offering, all that integrated into one-company approach. Strangely enough, I would argue that the pandemic has helped us to accelerate that. We had -- since the beginning of the pandemic, we got into the habit of -- in the early days, we had an every-day call with the whole company. And obviously, we've kind of reduced the frequency of that now to have a once-a-week call with the whole company. So over the last 4 months, we probably had a chance to speak with the whole company something like 50x. And towards the second half of the period, this was about implementing some of those changes and giving business updates. So it may -- it would have probably taken us 3 years, if not 4 years, to have 50 meetings with the whole company. So we were able to accelerate a lot of that. We got a lot of attention in the media also over the last little while. And that attracted some very strong talent that have contacted us, many of which we were able to hire. We have hired 2 very strong leaders of sales in our e-commerce divisions, one that specializes in the SMB market and the other one in the enterprise market. And I don't think we would have been able to have these level of talent join us prior to the attention that we got during the pandemic. Management team is complete. There are no missing holes. We have what we need in order to execute. We've launched our strategic acquisition plan. We've -- we are working right now on our acquisition road map. We do have some outside help with us for that. So we're really delivering on that 5-year goal that we had identified previously, which calls to bring the company to revenues of approximately $250 million while reaching the magic 40 number where our growth rate and our EBITDA combined in percentage would go above 40. So we've already started to accelerate this quite significantly, and we're expecting that this will continue.
Okay. Maybe just on EBITDA. Like for the quarter, it came lower than 8% to 12% you spoke to during the transition period. And I'm just looking to get like some thoughts from you in general on what happened during the quarter itself relative to your expectations during your last conference call. Then perhaps, more importantly, the go-forward picture. I know you spoke to an uptick in revenues and perhaps a downtick in OpEx. Do you feel that 8% to 12% is still reasonable? Or like with what's happening, you could probably be at the higher end of that range?
We still think the 8% to 12% is reasonable. Q4 was unfortunately, really, the sort of the finishing end of a lot of stuff that was slowly decaying and had not yet have time to impact significantly any changes. So that's -- the numbers were pretty much baked. We knew we weren't going to start transforming very strongly until the post year-end or at the very late stages of year-end. If you remember, we had had our strat plan approved by our Board. It was early February. I think it was actually the 11th of February before COVID. So there's not a lot of those strategic actions other than preparing and hiring and unfortunately, spending a bit of money in order to get that preparation done, which sort of shows in our Q4 results. Q1 is obviously not completely finished, it is June 30 today, but we expect to be within that range that we announced for Q1, and we'll stick to that for now.
Great. Maybe one last one, then I'll pass the line. Well, let's say 2, then I'll pass the line. I noticed on your new presentation, one of your new clients wins in Strat Sourcing is the NHS. Are you guys actively seeking clients outside of North America? Then maybe, again, on Strat Sourcing, you can touch on the ASC performance for the quarter.
We are actively searching for clients, right? So definitely NHS was one of the very interesting wins. You might even want to look at -- there is a company, I believe, they're in Finland, they're called Messer. And there are some interesting opportunities in Europe for Strategic Sourcing. On the ASC side, the decline of revenue was mostly caused by the end of certain service contracts. We are, again, over there, too, focusing on recurring revenue, large service contract, really get into very custom solutions are not a focus. So we are temporarily seeing a reduction of revenue on ASC, but we think that, that's going to be compensated by increase of MRR gradually over time.
[Operator Instructions] The next question comes from Nick Corcoran from Acumen.
I realize that the first quarter is almost done and the last couple of quarters you had some fairly significant nonrecurring or onetime items that have impacted your EBITDA margins. I'm just wondering if you're expecting anything in the first quarter.
Paul, do you want to take a jab at that?
Yes. Yes. I could take that one. Currently, we're not expecting major nonrecurring items. The one that will continue to be there are related to the k-eCommerce acquisition, still, the nonretention -- the noncash retention benefits, and expect that their revenue from the acquired deferred revenue that we put at fair value will still have an impact in that -- in the first quarter, definitely. So that's about the -- what we can see as nonrecurring for now -- from -- for now, yes.
And then that 8% to 12% range you talked about, would that be after those adjustments or before that those adjustments?
It would be -- well, it will be before those adjustments. Because they're going to stay there, those adjustment on the retention benefit. It's going to last for 24 months from the date of the acquisition. The nonrecognized deferred revenue is probably the last quarter that we have that. So that's going to be -- there's still $200,000 to account for that in the quarter.
And then maybe you can give any indication of what you're seeing on either the B2C side or the B2B side in terms of the trend in customer demand due to COVID. I think you said there is an initial spike that might have trailed off. Can you give some more detail on that?
What -- I wouldn't classify them into either B2B or B2C. What we certainly saw was that everything about digital commerce is -- was suddenly brought to the front, right? And there were 2 trends or 2 major trends that are happening here. The first is that people who were stuck in their homes and the only way to get stuff was to order it online and get it delivered. So that's easy enough to understand. So they were consuming a lot of goods that they had previously been consuming by physically going to wherever they wanted to buy it. So trend number one. Trend number two, we've also noticed a significant amount of new people who had never yet acquired anything online, whether it be grocery, whether it be cannabis, whether it would be just clothes. Some folks still were not fully comfortable with putting a credit card online, making a payment online. And lot of -- there's a lot of material being written about people who were just basically forced to do it because they had no other option. And they were forced for a pretty long period. It was anywhere between, say, 10 and 15, 16 weeks. And human beings get in the habit of doing -- once they start to do something for long enough, they get into the habit of it. So we think that, that trend is going to be maintained. And a lot of people crossed the line of beginning to be comfortable with e-commerce. You also mentioned -- and that talks to the consumer, but ultimately, any business sells something that is consumed by a human being. So we all have some form of a B2C impact. But clearly, everything that's digitized in terms of commercial is really being maintained at a very high pace. We even have customers in our e-commerce that, although they were in the retail business and they've announced some pretty strong restructuring measures, some of them went under bankruptcy laws. They're still using our platforms heavily, and they're reassuring us that their future is into the digital. Their future is not in the brick-and-mortar and they absolutely don't want us to make any moves or slow down. We've even seen accelerations of certain retailers on all of their digital commerce strategy in order to cope for what they see as being a major trend. So we definitely think that, that's going to continue. Although, it may not stay at the same level that it was during the peak of the pandemic. I think generally, people still like to go to the grocery store and buy their needs to have it ordered online is good. But people do also want to get out. So the trend is going to be maintained, maybe not as high, but it's there for the long run. And you saw this in many other commerce companies, think of Shopify, Lightspeed, BigCommerce, which is possibly going on an IPO soon. All of the various commerce vendors that we sometimes compete and sometimes displace are seeing similar trends.
And then what trends are you seeing in your legacy platforms like Réseau Contact or Jobboom during the [ pandemic ]?
They're quite stable. They're still contributing some good margins. We saw decreases in certain platforms during the pandemic. The ones that did decrease are back up where they were before. As you know, we have one in car parts. Cars were basically parked for 2 months. So not a lot of brakes to change, not a lot of things to fix. So that slowed down, but it's back up where it was. But generally, the 5 platforms are stable in terms of revenue and the contribution is very healthy. So we were able to put one of our managers, who's been with Mediagrif for a very long period, was present during the build-out of these platforms, so knows them very well, and he's responsible for the day-to-day management of these 5 platforms, and it's really holding the line quite well.
Great. And then the last question for me. I noticed your credit facility was reduced from $80 million to $40 million with no expansion of the midterm. Can you give any color on what your discussion with the banks had been? And when you expect that to be extended?
We are under discussions. We actually hired an external firm, and you can check that in the MD&A, which are putting together right now a complete, I would say, revisit of our credit facility. We are looking to have a credit facility, which will be more adapted to MRR growth, I would say, style SaaS MRR growth company than pure plain old 3x EBITDA margin. And we expect that to be completed probably by the end of the summer, September. So that will be in place. The reason we reduced our number from $80 million to $40 million was simply to reduce the amount of standby fees that we're paying, and we don't expect to use that money in the next little while.
The next question is a follow-up from Amr Ezzat from Echelon Partners.
Just a couple of follow-ups. Can you speak to the M&A environment and how it's evolving? I'm guessing you probably saved some money by buying k-eCommerce before the pandemic. But as you look at like beefing up like Strat Sourcing, how is the market evolving there? Are prices substantially higher than like pre-pandemic?
Well, the companies that we are looking into are all private. So it's -- until you get into pretty advanced negotiations and, unfortunately, there's no price tag directly shown anywhere. We did have some discussions with various companies prior to the pandemic, which we sort of put on hold at the early days of the pandemic, not really knowing where things would end up. We've resumed these discussions with certain of these targets. As of what I can feel now without being committal, the ones that we were looking at haven't -- we haven't seen a material price change, right? Some of them might have liked to see a price change, but it's going to be, again, in negotiations that we will either come to agreement or not. So -- but what I can say is that we are now very focused on preparing a strategy road map, which is going to be completed by the end of the summer, which will give us all of the various possibilities that we should approach. And we will be very disciplined about what do we acquire, what we pay for it, and how it integrates and fits with our strategy of increasing the coverage of the Strat Sourcing and the e-commerce.
Okay. That's helpful. And then maybe just one last one, a bit of a housekeeping item. Just looking at your technology costs, like your tax credit, you're $400,000 lower in 2020. Then you've also capitalized less software. Just thinking if you can give a sense of what we can expect for fiscal '21, sort of like the same amount. Or is that a trend that should continue?
Well, that's not necessarily a trend. I mean the year, I mean, we've been -- some of the employees, mainly on the -- what we call, Amr, it is the credit. We were -- some of the employees got fueled by the authorities. So with that, that created the impact in the year. So we don't expect that to be -- to continue on the decrease. So we've just -- we've made the adjustment that we had to do. And now we are working from that base. And obviously, we've hired a couple of people since then. So we will get those credits that are attached to those new employees as well. So we're just adjusting. We've adjusted basically FY 2020.
Okay. Then anything to read into the capitalizing less software?
No, it just happened, just happened that way. I mean you got to respect the accounting standards on that regard so that we may have more next year depending on the projects that are on the table in the various platforms.
Our next question comes from Maher Yaghi from Desjardins.
I wanted to just maybe drill down a little bit on your organic growth because when I exclude k-eCommerce and exchange rates, I think I'm close to minus 2% to minus 2.5% in B2B year-on-year. After the pandemic has begun, you mentioned that you've seen resurgence in demand for some of your commerce activities. When do you expect organic growth in B2B to turn positive sometime in 2021?
I'd be curious to look in detail at your calculation because I'm not sure I'd come to the same conclusions. But we would have to get on -- get some numbers in front of us to be able to answer that there. Paul, would you have any further comments?
Well, not at the moment. Like you say, we just -- we'll have to look at it. Well, if you remove the B2C…
Yes, just the B2B, you got increase of $0.3 million on BidNet and InterTrade, down $0.2 million on exchange rate, $0.2 million on ASC, $0.2 million on Polygon, $0.2 million in Market Velocity. It comes out to about minus 2.5%, 2.4% year-on-year without the M&A.
Yes. And obviously, like you called it and, I mean, [ MDF ] Market Velocity, we've shut down that in the year, that's $400,000 less in revenues that we've shut down that business last September. So Maher, we could look at that in detail and get back to you, no problem.
But -- okay. So let's put that aside. When you look at your revenue run rate in the B2B and you put -- with k-eCommerce still running at, let's say, 1.6, 1.8x revenue -- $1.8 million of revenue on a quarterly run rate after the deferred revenue is removed, do you expect to have a sustainable organic growth rate in B2B in 2021 right now?
If you look at the -- if we could -- I wish we'd had a video call, I'd show you this. We've been very used to doing a lot of work on Teams lately, and I miss it now, as much as it was hard to get used to it. Our MRR growth in Strat Sourcing and e-commerce had been, combined, it's over 15% since the beginning of the year. That's the material change. That's what's happening. And there's obviously a lot of amount of cleanup that was done during fiscal '20, LesPAC, MVI, IPT and others, which were small properties. So if you just look at the total revenue, yes, you're -- of course, you're probably right. But that's not -- that's that transformation that we're going through. And I'm definitely expecting that we will see total growth unless there would be something I'm not seeing right now throughout 2021.
Okay. So when you're talking about total growth, that's consolidated revenue, including B2C and B2B, you expect that to be positive -- turning positive sometime in 2021? Is that what you're…
Yes. Yes. And if you -- maybe one thing to be careful, the B2B versus B2C is not something we're going to continue to separate. It's really not meaningful for us. And the -- there are -- the 2 properties that were classified as B2C are very small in the mix of things. And these are the Réseau Contact and Jobboom, which together, that's what, maybe 2%, 3% of our total revenue. So nothing very meaningful.
Okay. And in terms of the gross margin, as you mentioned, like you're still running through some of the cost increase and cleaning up stuff. And if I remove maybe some of the onetime items that you had in the quarter when it comes to k-eCommerce, your gross margins, do you expect them to be around the level that they are right now? Or should increase to the high 60s, into the low 70s in 2021?
Paul, what -- I don't have that answer in front of me directly. Would you have a comment, maybe?
Yes. Yes. But the gross margin are already into that range of that. They were a bit lower in the Q4, but for the year, we're at 70 -- I think I've mentioned that earlier, 71% versus 74% last year. And k-eCommerce has a different profile in terms of cost of revenue where there's agencies or people servicing their clients. But we should be within that range of 74%, 75% next year, yes? Go back to where we were. I mean that's a couple of items, like you say in the year that have reduced that margin a bit. But we should be back into those numbers in FY '21, definitely.
Okay. That's a good pickup there that you'll see. Okay. And my last question is generally on the market and in e-commerce. You're definitely -- there's definitely more demand and -- but also a lot of companies are trying to get on that trend and try to grab a piece of that action, I guess. But how are you positioning your assets in the States versus Canada to be able to benefit from that trend? Is it more working with consultants who are implementing these solutions for the company that will let you to -- will let you win share? Or you have to go direct and talk to the actual companies in order to win share?
Well, we're already starting to -- one -- certainly, nobody can underestimate the fact that Mediagrif was very poor in terms of its sales capacity. And that's one of the major things we worked on in the last 6 to 8 months and try -- in definitely improving and increasing our presence. So that in itself is helping. It's creating a lot more awareness in the various markets that we're in. And we obviously now have the firepower to track and follow-up on the various requests that we get through some of our web properties. And as I also indicated, we are in the process of signing large service partners so that we -- because in order for us to scale, I wouldn't want to have to hire a whole bunch of professional services that will run around and do some implementations. So we should be seeing some of these partners come up in the, I would certainly think, in the summer time frame where we'll be disclosing those various partners, which will add a little bit of sales capacity because they often have a trusted relationship with some of their customers, but mostly add a capacity to deliver and onboard customers much faster.
There are no further questions. You may proceed.
Okay. Well, I guess we'll thank everyone for being on the call. And we -- thank you, operator. Thank you all for joining. You can find a lot more information on our website. Go on the Investor Relations section, and you'll see our latest presentation that we are going to use to meet the various investors who might request to meet us in the next few weeks. Thank you very much again.
Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.