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spk02: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Loop Media's financial results for the full year 2023 and the fiscal fourth quarter ended September 30th, 2023. Joining us today are Loop's CEO, Mr. John Nierman, and the company's CFO, Mr. Neil Watanabe. By now, everyone should have access to the full year and fiscal fourth quarter 2023 earnings press release. which the company issued earlier today at approximately 4.05 p.m. Eastern Time. The release is available in the Investor Relations section of Loop's website at www.loop.tv. In addition, this call will also be available for webcast replay on the company's website. Following management remarks will open the call for your questions. Please note there are two ways to ask questions during the Q&A. One, for those on the telephone, please press star one on your telephone keypad to raise your hand. And for those on the webcast, please select ask a question in the top right corner of the screen. Enter your question and click submit. Certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that would cause actual results to differ materially for those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as the date of this call. Except if required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA, As supplemental measures of performance of our business, all non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release and form 8K furnished to the SEC.
spk01: I would now like to turn the call over to Loop's CEO, Mr. John Nierman. Thank you, and good afternoon, everyone.
spk07: We are pleased that we can announce that we ultimately managed to achieve year-on-year growth compared to fiscal 22, but we're also happy to have fiscal 23 in the rearview mirror and a new fiscal year ahead of us. It was a very challenging year on several fronts, a significantly restricted ad market, a very difficult small microcap stock market, and lessons learned from the industry understanding of our revenue model as a CTV digital out-of-home company, which led to lower growth than we were internally anticipating a year ago, and thus the subsequent adjustment around necessary cost-cutting measures. However, as a result of these challenges, we discovered very valuable data about where we believe we should invest and focus our time and resources in order to improve performance coming out of this downturn of several quarters of stagnant growth. We believe we are stronger coming out of fiscal 23 and look to capitalize on what we believe to be improved upside and growth potential ahead of us. We see a better path ahead and recovery as we progress through Q1 in our new fiscal year and believe that FY23 represented a low point in our ad demand challenges. It appears that revenue growth has normalized as we are currently already tracking well ahead of the previous three quarters in terms of top-line revenue and reduced overall SG&A expenses. More on those results when we report in February, but we started off this new fiscal year on October 1 optimistic about the year ahead, so I'm pleased to say that we are indeed experiencing positive momentum so far in Q1. Midway through the last fiscal year, we made cuts and adjustments across several aspects of our business, achieving a plan to reduce the second half of FY23 overall SG&A costs by over 20%. Part of this reduction included eliminating some non-revenue generating headcount while continuing to invest in the expansion of our revenue and ad sales teams. Our distribution footprint increased towards the end of FY23 with the addition of 25,000 partner platform screens, bringing our total loop player and partner screens to over 79,000. In addition, our monthly video impressions viewed are estimated to be over 2 billion. We have continued to have loop players in the top 20 advertising markets, as well as focus on those venues that we have learned to be the best performers, which include bars, restaurants, universities, medical offices, spas, and several other verticals. We believe that the retail media market is expected to continue to grow and increase its share of advertising spend as several industry forecasts predict. We're also optimistic about the election year and the projected record advertising spend around that. In addition, we have several revenue supply partners that we look forward to growing within the current fiscal year. With our strong pipeline of partners, our expanding distribution network, and our commitment to efficient new customer acquisition, we are encouraged about the future, and we believe the company is well-positioned to deliver revenue growth and a stronger bottom line as the advertising market improves and our distribution footprint grows. With that, I will turn the call over to Neil to take you through our financial results. Neil?
spk03: Thank you, John, and good afternoon, everyone. As we review our financial results, I want to remind everyone that all comparisons and variance commentary refer either to the prior year's full year or fiscal fourth quarter unless otherwise specified. In the 2023 fiscal year, revenue was $31.6 million compared to $30.8 million in the fiscal 2022. In the fiscal fourth quarter, revenues was $5.7 million compared to $12.2 million in the year-ago period. In the 2023 fiscal year, gross profits was $10.7 million compared to $11.4 million in fiscal 2022. In the fiscal fourth quarter of 2023, gross profit was $1.6 million compared to $4.6 million for the same period in fiscal 2022. Gross margin rate was 33.7 percent in the 2023 fiscal year compared to 36.9 percent in fiscal 2022. The decrease was primarily driven by revenue mix between partner platform and the O&O platform, as well as an increase in some of our fixed costs for licensing. In the fourth quarter, gross margin rate was 27.5% compared to 38.1% in the prior year quarter. The decrease was primarily driven by revenue mix, with the lower gross margin partner platform business being a higher percentage of the revenue during the fourth quarter versus a year ago. the partner platform business carries a lower gross margin but has lower investment and acquisition and marketing expense attached, ultimately resulting in similar overall operating margins to our O&O platform. Total sales, general, and administrative expenses, excluding stock-based compensation, depreciation and amortization, impairment of goodwill, and intangible assets and restriction costs in the 2023 fiscal year were $29.4 million, compared to $24.5 million for the fiscal 2022. The increase is primarily due to increased marketing spend in the first half of 2023, professional fees, and increased software and IT costs. Total sales, general and administrative expenses, excluding stock-based compensation, depreciation and amortization, impairment of goodwill, and intangible assets and restructuring costs in the fiscal fourth quarter were $7.4 million compared to $9.5 million for the same period in fiscal 2022. The decrease was primarily due to a decrease in marketing spend, payroll related and various other operating expenses, which were targeted for efficiency. We continue to focus on gaining efficiencies in SG&A, which we expect to be reflected in fiscal year 2024. Our net loss in the 2023 fiscal year was 32 point million loss or 56 cent loss per share compared to a net loss of 29.5 million or $0.61 loss per share for fiscal 2022. Net loss in the fiscal fourth quarter of 2023 was $9 million or $0.15 loss per share compared to a net loss of $14.6 million or $0.28 per loss per share for the same period in fiscal 2022. Adjusted EBITDA in the 2023 fiscal year was $15.7 million loss compared to $10.3 million loss for fiscal 2022. Adjusted EBITDA in the fiscal fourth quarter was a loss of $4.8 million compared to a loss of $3.0 million in the same period in fiscal 2022. Turning to our balance sheet and cash equivalents, we're $3.1 million on September 30, 2023, compared to $14.1 million on September 30, 2022. As of September 30, 2023, we had $7.5 million of total debt compared to $7.1 million as of September 30, 2022. In summary, we are focused on increasing our revenues, gross margin, and leveraging our expenses in line with revenues as we plan to continue to reduce the adjusted EBITDA loss on a quarterly basis. I'd like to thank everyone for listening today, and we look forward to providing further updates on our next conference call.
spk01: This concludes our prepared remarks, and we will now open it up for questions. Now we'll open the call for your questions.
spk02: As indicated at the beginning of the call, there are two ways to ask questions. One, for those on the phone, please press star one on your telephone keypad to raise your hand. To withdraw your question, simply press star one again. Two, for those on the webcast, please select ask a question in the top right corner of the screen. Enter your question and click submit. Up to three questions from those on the phone will be answered first, and as time permits, a couple of questions from the webcast will be addressed.
spk01: Our first question comes from the line of Darren Aftahi with Roth MKM.
spk02: Please go ahead.
spk06: Thanks for taking my questions, guys. Good afternoon. Just a couple if I may. On the restructuring question, costs you guys took in the quarter. You said 20% reduction. Is that a 20% reduction off that roughly $7.5 million OpEx number you reported in the quarter?
spk03: Yes, Darren. That's basically a 20% reduction quarter over quarter as it relates to SG&A. It does exclude restructuring costs that were, you know, related to some of our repositioning of, you know, some of the channels and areas of our business.
spk06: Great. Thanks. And then on Loop Ads Manager, can you kind of talk about, I think you went live with this beta on September 21st. Is that live in the market right now? And then kind of what your expectations are for, I guess, both self-serve and the local market and kind of how material this can be to your business, and will it be material in the current quarter that we're in?
spk07: It's live, yes, so we're out of beta, and we're pleased with how it's tested. It won't be material for this quarter, but we do expect that as we continue into Q2, you know, in kind of fiscal 24, it's going to become much more meaningful for us. We've had 0% local ad, and we know that that should be, you know, the double digits in terms of our mix. So we're optimistic about what that's going to be, you know, especially in the upcoming year ahead.
spk06: Great. And then two more, if I may. On your DST relationship, I know last quarter you guys announced the relationship with Microsoft and Zander. I guess, where are we in the ballgame in terms of what we kind of call the redefining of the category you're in, i.e., digital out-of-home for CTV? And are there other larger kind of players in the DSP space that you feel like will drop in the near term or maybe into early part of 2024?
spk07: So the answer is positive momentum, and the answer to the last part is yes. We do anticipate more partnerships. The message is getting across. You know, we've been out there just beating the drums, Bob and team, just about TV is TV, you know, and it's part of an evolution of any business, as you know. We've used these similarities before when you go from cable to streaming, and people need to get used to what that means. So when we're offering streaming in businesses, people have to get used to out of home, not meaning billboards. So that message has certainly been heard. It is still being adopted, so there's still upside, which is good. But we do see momentum of people that are starting to recognize it and put spending towards that.
spk06: Great. And then I think, John, you may have mentioned in your prepared remarks that you kind of want to lead into establishments in the bar, restaurant, medical, spa, university, I think there are a few others. I'm curious, out of the 79,000 roughly screened you have between O&O and partner, what percentage of those verticals kind of make up that 79,000?
spk07: More than half of our O&O, I would say. I think that for us, This has been really, I think this was an important part of last year, frankly, is where do you make the most money? Where do you get the most return? And everybody wants to know that. And for us, just to get the research back, the data back, to understand where we need to put the time, the acquisition cost, to make sure that there's stickiness, they stay. We know which venues, we know which verticals are the best, at least for us. We know the ones to stay away from. So fortunately, the ones that we're calling out are a majority of our business. you know, in terms of as we, especially as we get the loop player out there, and that certainly is where we're starting to be focused.
spk01: Great. Thank you, guys. Thanks, Darren. Our next question comes from the line of Eric Wold with B. Reilly Securities.
spk02: Please go ahead.
spk04: Thank you. Good afternoon. A few questions. I guess one is, You've had about 2,000 of the 0-0 additions over the past couple quarters, the June quarter, September quarter. Do you feel this is kind of a healthy run rate as you're following the last question, kind of more intently focused on the right locations for the players, or do you see an opportunity to kind of ramp that up in the course ahead as performance improves?
spk07: Hi, Eric. That should definitely be ramped up. I think as we kind of finish the second part of the year, And we understood that revenue was largely trending where it was. We really were kind of pulling back, analyzing a little bit about where we were putting the investment. And we're starting to see that trend up and putting more funds into that. But we believe that there is a substantial amount of growth in those venues ahead of us. We barely are penetrated in this streaming for business, streaming TV market. So yeah, That's certainly where the target's going to be, but we certainly expect much, much more than that.
spk04: Understood. As you move into a political ad environment in the coming quarters, what is the position there in terms of how much you will or will not lean to that? What percentage of the locations would be
spk07: appropriate for them or opt out if they have that that show i think it's really kind of like say another kind of what percentage of the network could see a lift from from political eye placements well i think for us i guess the good news is a couple parts to that one last october november you know september we saw what it could mean to our business which was our best months ever Um, so we know that when you're coming into a presidential election year, you know, that we're anticipating, you know, some, some good activity there. Uh, we are also starting out strong here, as I alluded to in my part and the political hasn't even kicked in yet, you know, that's just pure organic. And I think that's really important to notice as well. So you've got a recovery on the organic side, coupled with, uh, what we believe will be some good political coming down the road. In terms of percentage of venues, it really is just, you know, it's a matter of choice and clearly it's targeting. And we've got the partnerships with the AI where we make sure that ads are showing where they should show and the venues are comfortable with that. So it's never really forced on people. But we do know that a good majority, especially out of home, they aren't really doesn't bother them that much. And they often opt in on that. So it's good for us. We think everything's stacked up nicely.
spk04: Perfect. Final question for me. As you look at all the changes you've made in terms of cutting out the cost, starting to see hopefully a pivot back towards stronger trends and placements, kind of Help us bridge the gap of where you are balance sheet-wise before you think you make that pivot to consistent positive cash flow and if there is a gap that needs to be filled or you think you're fine with the current balance sheet.
spk03: I think, Eric, we've made a lot of strides since the second half of this last year in sort of repositioning our expense structure. gaining efficiencies. Fourth quarter, obviously, we're a 22% reduction over the prior year, and we see that continuing and leveraging as our revenues continue to ramp in 2024. We also have some margin expansion that we clearly believe that we can achieve over 2023 as our revenues allow us to leverage some of those in addition to some of the negotiations we've done with some of the advertisers and our business partners. all said, you know, we believe that we're cutting down the cash burn, you know, each quarter and, you know, that's going to allow us to start, you know, getting to break even and then needless to say, generating cash flow on a positive adjusted even basis. So we're very encouraged that, you know, things are working in the right directions from a, you know, revenue growth, margin expansion, and, you know, being able to leverage our expense structure. So I think all of those will, you know, help, you know, not only improve the profitability, but will help, you know, our cash position as well.
spk07: And just to add a little more color to that, Eric, and I think it's important to note that, you know, we always strive to use cash from operations as much as we can. You know, when Neil talked about a cash balance from a year ago, that was right after Uplist, and that's the most we've ever had. We've never been one of those companies that, you know, is sitting on some sort of 50 million type investment. We've managed that, to make sure that we're as careful as we possibly could be without diluting folks. And at the same time, just making sure that as revenue increases, we're using that for operations as best we can. So we feel comfortable where we are, and especially as a business is tracking, we feel good about things.
spk01: Perfect. Thank you both. Appreciate it.
spk02: Our final question comes from the line of David Marsh with Singular Research. Please go ahead.
spk05: Hey, guys. Thanks for taking the questions. Just wanted to start on the comment about Q1 kind of starting out strong. I mean, you guys obviously have a pretty tough comp. I am assuming that when you say it's starting out strong, it means relative to the rest of this past calendar year. as opposed to looking at a year-over-year comp type figure. Is that a fair assessment?
spk07: Hey, David. Yeah, I think it's fair. What we're trying to say by that is these past three quarters have been pretty flat, as you know. to kind of grow past that. We certainly want to get back to those kind of eight-figure, double-digit type of quarters, you know, and that is where we need to be. So we're not really kind of giving a specific number, but I think more to your point of it's just nice to kind of move off where we've been over the past few quarters.
spk05: Yeah, and just to follow up to that, you know, national, it's, you know, it's obviously been a big story all year. National advertising has been pretty slow. I mean, are you guys starting to see some uptick there? You know, just, you know, on the old boob tube, seeing, you know, some of the big advertisers come back a little bit like the auto manufacturers, hopefully with the strike behind them, they can get focused back on selling vehicles. But, you know, just broadly speaking, are you seeing... you know, better momentum on the national stage?
spk07: We are. We are. You know, it's certainly not, you know, fully back, as everybody well knows. But we're definitely seeing momentum on the national stage. And, you know, we're seeing it on the regional stage. And to what Darren was talking about, we're certainly hoping for it on the local stage, too.
spk05: And, you know, a big part of your transformation, I guess, honestly, 12 to 18 months, I guess, is, you know, you guys have kind of gone away from that sales platform that you had been, you know, relying upon and, you know, had talked about bringing, you know, building an internal sales force and just wanted to wonder if you could give us an update on that and just kind of talk about, you know, how that sales force is doing in terms of penetration and growing and reducing your dependence on kind of external, you know, sales assistant type operations?
spk07: I would say that we started seeing the results in the Q4, and that is continuing into this year, and I think that's what is helping us as we go into the new year. When we started having our issues back in January, it was really about being in that open exchange programmatic pretty much solely, you know, if you recall that. And we've taken... Really big steps, important steps for us just to kind of foolproof that and future-proof it a bit by having the direct sales team, by increasing, you know, by building this local platform and certainly just kind of diversifying more on the programmatic side with more direct deals in there as well. So a lot of those steps have started payoff in Q4 and lead into this new fiscal. All right.
spk05: And I'm not sure if it's a number that you guys have necessarily handy, but maybe you guys could take a look, and I don't know if you can come back to me on it. But the Q1 number last year was obviously extremely strong on the top line. Can you give me some sense of the impact of political on that? I mean, how significant that was on that revenue number?
spk07: It was a meaningful part of it. I mean, we could probably get back to you, I guess, with a little bit more, you know, in the conversation, but it certainly was a meaningful part of it. I guess what was good about it is, you know, it really tested our fill rates and our system and to make sure it worked well because we really were at capacity and it was great in that sense. So for us just to know that it works and to have a broader distribution platform, you know, keep in mind, think about the growth that we've added. that's where we're really excited about what's ahead because we know that it could potentially make an impact like that. So it was a good part of our quarter. It has not shown yet, and we still are having growth like I talked about. So we'll see what that looks like when it gets sprinkled on next year.
spk05: Great.
spk06: Sounds good. I wish you guys the best, and keep up the good work. Thanks, David. Appreciate it.
spk01: That concludes the Q&A session. Back to John Neerman for closing remarks.
spk07: Okay. Well, I'd like to thank everyone for joining the call today. We're excited about where the business is headed. Thanks again for joining us. Look forward to providing further updates on our next call. Talk then. Bye.
spk02: I'd like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's call, and you may now disconnect.
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