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spk01: Good afternoon, everyone, and welcome to Springbix Fiscal Year 2023 Second Quarter Earnings Conference Call. I would now like to turn the call over to Springbix Investor Relations. Clarabelle and Terry, please go ahead.
spk05: Thank you. Hi, everyone, and thanks for joining our Q2 Earnings Conference Call. Joining me on the call today are Jeff Harris, our CEO, founder, and chairman, and Paul Sykes, our CFO. By now, everyone should have access to our earnings announcement. This announcement is also on our investor relations website. During this call, we'll make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors outlined in our 10-K filed with the SEC on March 28, 2023. Also during this call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results. Please refer to our earnings release on our investor relations website for a reconciliation of GAAP to non-GAAP financial measures, as well as additional context on our key operating metrics. And finally, this call in its entirety is being webcast from our investor relations website at www.investors.springbig.com. And an audio replay will be available on our website in a few hours. With that, I'd like to turn the call over to Jeff.
spk08: Thanks, Claire. And thanks to everyone for once again joining our quarterly earnings call. We had a solid second quarter in market conditions that continue to be challenging. And I continue to be impressed with the way our teams throughout the company are performing and with the progress we are making across a number of areas. During today's call, Paul and I will provide you details on our second quarter results, update you on key business initiatives, and provide guidance for the third quarter and full year 2023. Jumping right into Q2 results, I am pleased to report that we delivered revenue of $7.2 million, representing growth of 12% year over year. Although broader macroeconomic concerns continued away on marketing budgets and digital spend, we continue to see a trend whereby budget consideration for maintaining and growing existing customers, a central tenant of our platform, remains somewhat less discretionary. Growth in the second quarter was again driven by subscription revenue, which in Q2 grew 19% year-on-year. We are primarily a subscription-based vertical SaaS business, which provides predictability and increases visibility into results. We saw continued strength across all of our key performance metrics. We added 105 new customers in the quarter, maintaining the cadence of recent quarters. Our net revenue retention rate remained within our target range at 100%, despite the macro environment, and we continue to develop and launch innovative new product offerings. While we continue to invest in growing our top line, we are also focused and committed to driving leverage and are continuing to execute towards our goal of EBITDA breakeven during 2023, which is now tantalizingly close. We have two primary segments in our business, our retail and brands platforms. Our retail platform provides merchants the tools that they need to create and manage a successful digital marketing and loyalty program, along with instituting a data-driven approach to how they connect and engage with their customers. Our brands platform helps cannabis brands more easily connect directly with consumers through our retail platform. We're uniquely suited for the selling motion of directly connecting brands, retailers, and consumers. And during the first half of the year, we have seen 74 brands run an excess of 1,200 campaigns, an increase of 36% compared with last year. benefiting both the retailer by driving traffic to their store and the brand through increased awareness and influence. Since becoming a publicly listed company in June of last year, I have repeatedly talked about the three key pillars of our growth. First, a network effect that we feel is a unique and powerful flywheel between our retail and brand platforms. Second, a high growth subscription revenue component that increases predictability in our revenue stream. And third, The new initiatives and opportunities we have to monetize and leverage the fact that our platform is present in more than 3,100 retail locations and present in the smartphones of over 35 million marketable consumers. We're uniquely positioned to introduce offerings to our client base that provide meaningful growth opportunities for both our clients and spring bankers. I am as confident as ever that our strategy is sound, with feedback from our clients and partners reaffirming that we are making the right investments to capture the long-term opportunity in front of us. We continue to develop and launch innovative SaaS-based offerings to enable our clients to retain and grow their customer bases, including our most recent launch of a VIP loyalty program, Subscriptions by SpringVic. Subscriptions by SpringVic enables our retail clients to offer consumers in return for a monthly or annual subscription the opportunity to earn additional loyalty rewards, access to special promotions, and other perks as VIP subscribers. This program, operating in conjunction with other Spring Big loyalty and digital communications offerings, was launched in June, and we are already seeing meaningful interest from our clients, with several having expanded their contracts to incorporate this new offering and a few having already launched their VIP subscriber programs. We see meaningful potential from both a revenue growth and a profitability standpoint for both our retail partners and Spring Big, as these VIP subscription programs get launched and mature over time. As discussed in previous calls, we are also expanding our offerings to beyond the cannabis market with clients including alcohol, vape, and smoke stores, and developing products that will enable our clients to offer their consumers the ability to combine the redemption of loyalty rewards with a stored payment method at the point of sale. These newer initiatives are going to take time to evolve, especially given the current macro environment, but we are confident that in time they will fuel significant growth to complement the potential we believe is present in our existing offerings. Before I hand over to Paul, who will walk through our financial results for the second quarter in detail, I do want to comment on the excellent progress we are making towards our stated goal of EBITDA break-even during the current year. Our Q2 adjusted EBITDA was a loss of $1.1 million, and with the combination of revenue growth and impact of the expense reduction initiatives, we expect a significant reduction in losses during Q3. For the second half of the fiscal year, we are expecting to generate positive adjusted EBITDA. Our Q2 performance is encouraging. Overall, we are managing our business efficiently for the factors within our control and recognize the challenging current macro and industry-specific realities. We have a rich pipeline of revenue-generating initiatives and a strong high growth subscription revenue base. With that, I'd like to turn things over to Paul, who will walk through our financial results for the second quarter in greater detail and discuss our outlook. Paul?
spk07: Thank you, Jeff, and thanks again to everyone for joining us. As mentioned, we delivered a solid result in the second quarter with further reduction in our adjusted EBITDA loss as we continue to move along the path towards profitability, a key objective for the company during the current fiscal year. I will start by providing a brief overview of our second quarter results before moving on to our guidance for the third quarter and balance of 2023. Our Q2 revenue came in at 7.2 million, representing growth of 12% year-over-year, underpinned by year-over-year subscription revenue growth of 19%. Spring Big is a vertical SaaS technology business with 79% of our second quarter and year-to-day revenue now being derived from primarily annual auto-renewing contracts compared with 73% in the first half of last year. We are seeing this percentage increase as we continue to replace excess use revenue with larger subscription contracts that are both more predictable and higher quality. Our excess use revenues reduced by 7%, a byproduct of our success in converting revenue into subscriptions. And in the current macro environment, also a sign of clients being more careful in managing expenditures within their budget. Although brands revenue reduced by 15% year over year in Q2, this was primarily due to timing of campaigns. after a strong Q1, which grew 56%, and Q3, which has started strongly. Year-to-date brands revenue has increased by 16%, and the number of campaigns has increased by 36% year over year. Our top line growth continues to be driven by strong customer demand, both in terms of new customer acquisition on the retail and brands platform, as well as expansion within the installed base. In Q2, we added 105 new customers with annualized subscription revenue of $0.9 million. And a further $1.5 million in annualized subscription revenue was added through 81 customers upgrading their subscriptions. We ended the second quarter with 1,439 discrete client platforms in use and are installed in 3,187 retail locations across the United States and Canada. We continue to see solid customer retention despite the challenging macro environment. Our Q2 net revenue retention rate would 100% consistent with the rate reported last quarter, although lower than the 114% in the year-ago period. Recall, we expect this metric to moderate to the 100% to 110% range. As we add more products and functionality to our platform, we see an ongoing opportunity to drive upsell with existing customers. The recent launch of subscriptions by Spring Big is a good example. Growth profit in Q2 was 5.7 million, representing 24% year-over-year growth. And our growth profit margin for the quarter was 80%, compared with 71% a year ago. The year-on-year improvement in growth margin of almost 900 basis points is due to higher yield in services, including an increase in mix of push notifications within our messaging volumes, which grew in total 20% year on year in Q2. Moving on to operating expenses, we remain highly focused on improving the leverage in our business while at the same time balancing this with our investments for sustainable growth. Total operating expenses in Q2 were $7.5 million, representing a 24% year-on-year reduction and a 1% reduction sequentially. Sales, servicing, and marketing expenses were 2.2 million for the quarter, representing 30% of total revenue. Sales and marketing expenses decreased by 30% year over year due to cost rationalization measures towards the end of 2022, resulting in lower employee headcount. Technology and software development expenses were $2.0 million in the quarter, representing 28% of revenue. These expenses also decreased 30% year over year, with the savings being attributable to lower expenses associated with the use of offshore contractors and a reduction in employee costs. DNA expense was $3.2 million for the quarter, representing 45% of total revenue and a 16% year-over-year reduction. The stock compensation expense in the quarter was $0.2 million, compared with $1 million in the same quarter last year, and this is the primary cause for the reduction. Excluding the non-cash stock compensation expense, our general and administrative expense increased by 8% due to incurring a full quarter impact of the additional expenses associated with being a public company. Our key earnings metric is adjusted EBITDA, as we believe this most closely equates to operating cash flow. Adjusted EBITDA loss in the second quarter was $1.1 million, representing an adjusted EBITDA margin of negative 16%. The adjusted EBITDA loss represents an improvement sequentially compared with the $1.3 million adjusted EBITDA loss in Q1 and is significantly lower than the $3.4 million adjusted EBITDA loss reported in Q2 last year. For the first six months of the fiscal year, our adjusted EBITDA loss is $2.5 million compared with $5.9 million during the same period last year. Free cash flow for the first half of the fiscal year was negative 2.8 million, comprising negative 2.6 million cash used in operations, $4.2 million repayment of our convertible note, and $4 million received from the issuance of stock in our equity raise completed at the end of May and from the exercise of stock options. I shall now turn to our updated guidance for the balance of the year. With regard to our outlook, I would include our usual caveats. Our clients continue to experience industry-specific headwinds, coupled with a slowdown in discretionary spending by consumers, given the general macro environment. Although we continue to view these issues as transitory and think the current trends do not reflect the intrinsic long-term growth rate of the industry, we have prudently considered these factors in building our guidance. For the third quarter of fiscal 2023, we expect total revenue in the range of $7.2 million to $7.5 million. We expect an adjusted EBITDA loss in the range of $0.3 to $0.7 million for the third quarter of 2023. For the full year for fiscal 2023, we expect total revenue of $29 million to $31 million, implying a 13% year-on-year growth at the midpoint, and then adjusted EBITDA loss in the range of $1.5 to $2.5 million. The implication of our full-year adjusted EBITDA guidance is that following a first-half adjusted EBITDA loss of $2.5 million, we expect to generate positive adjusted EBITDA for the second half of the year. With that, I would like to open it up for Q&A. Operator, please pose the questions.
spk01: Ladies and gentlemen, if you'd like to ask a question at this time, you will need to press star 1-1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. We have a question coming from the line of Scott Fortune with Rod MKM. Your line is open.
spk11: Yes, good afternoon, and thanks for the question. Real quick follow-up on your 23 guidance here, 29 to 31 million, and using the middle of the range gain, 13% year-over-year growth here. What is implied? I know it's a challenging cannabis market right now and the consumer spend, but what's implied in the new guidance as far as new initiatives? I know that's going to take some time to play out, but just kind of get some sense for that. And the EBITDA guidance improvement and is there additional cost efficiencies and expense savings potentially? from the initiations of that to continue to improve the savings on that side and operating leverage, just the sense of the guidance and what's in that.
spk07: Hey, thanks, Scott. Thanks for the question. It's Paul Sykes. In terms of the revenue guidance, we just feel there's a lot of uncertainty around at the moment. So in the first half of the year, we've grown 14% year on year. The midpoint of the guidance gives us 13% for the full year. Obviously, as you'll appreciate, the fourth quarter, being in any retail business, the fourth quarter is typically the largest, most important quarter of the year, particularly with all the holiday events that happen there. So we just want to be on the cautious side and we're not assuming anything changes from the current status quo. In terms of new initiatives, as you say, quite rightly, they take a while to get momentum. We've recently launched, as we said in the call, we've recently launched subscriptions by Spring Break, which we think is a really crucial initiative and potentially one that is very significant moving forward. But in that, individual consumers subscribe monthly, they pay a subscription, and obviously, although we've got clients now live with those programs, it's gonna take time to accumulate the mass of consumer subscriptions. So we see the revenue impact of that. Now a slight revenue impact coming through in 2023, but primarily the revenue impact is gonna be in 2024. In terms of the EBITDA guidance, yes, we continue to manage our costs efficiently. We continue to make some rationalizations in our expense base, and we've got a few of those that are going to come through in terms of a full quarter effect in Q3 and obviously into Q4 as well.
spk11: Thanks. I appreciate the detail. And then a follow-up, kind of address the sales we lost today during this challenging timeframe. And the number of new ads, congrats, you had 105 new customers coming. Were those coming from kind of existing states or new states? And then when you look at the, you know, obviously there's a balance sheet pressure for a lot of these cannabis retailers, especially the smaller ones from that standpoint. But is this customer-based? Are you going deeper into the larger customers' MSOs and kind of update us on the churning side for these smaller customers, just a little more color on new clients and adjusting the upgrade base towards larger clients that you're focusing on?
spk07: Yes, so we're definitely going deeper into the large clients and that's reflected in upgrades where we've done in the second quarter 81 upgrades contributed 1.5 million of incremental annual revenue as opposed to 105 clients and they contributed 900,000 in incremental revenue. So that That indicates in a way how we enter clients on a relatively low base. They get used to the platform. They start using the platform. They build their database of loyalty customers. And then they typically upgrade fairly quickly. And that is what we're seeing. So we're seeing a good... A good mix across the country. I wouldn't say there's any particular states where we're getting more new client wins than others. It's across the board. Some are new clients. Some are changes in vendor and stuff like that. And they're coming to Spring Big, and then we're upgrading them. And we're certainly going deeper and expanding our relationship with the larger MSOs. In terms of your question on churn, Scott, definitely, particularly at the lower end of the spectrum with smaller retailers, obviously given the market conditions and the challenges, there is quite a reasonable amount of churn there. In dollar terms, it's not huge, but in terms of number of clients, there's churn happening at the moment.
spk11: I appreciate that. And I assume, obviously, looking at the 24, you'll continue to be within that range of adding anywhere from 80 to 120 customers. As it seems, new store licenses, new states will really start to come on board in 24. But just using that customer base, the last question is, can you dig deeper, maybe, Jeff, into kind of the recent launch of subscriptions by Spring Break, you know, Who did you launch it to? That kind of business, that potential opportunity, just kind of metrics around that and your excitement around that opportunity to drive more loyalty consumer base from that standpoint.
spk07: Yeah, I mean, the exciting thing about subscriptions by Spring Big is that it's another tool by which our retail clients can get even greater leverage and buy-in from their most loyal customers because these are customers who are going to pay a dollar subscription on a monthly or an annual basis Like exists in many, many retail sectors. And they are going to get for that subscription, the VIP status, which will give them additional discounts, additional perks. And, you know, from the retailer's perspective, will result in them ideally spending more dollars in the store. We only launched it late in June, and we've already got about eight different retail clients have signed up to launch the program. Obviously, there's a little bit of a lag between sign-up and actually getting a program live. We've got two programs already live, and in the first couple of weeks, we've got about 200 consumers already signed up. So, It's going to take time to get traction and have a significant impact on our revenues, but I think the signs from the first month or two months in the market are incredibly encouraging.
spk11: Thank you. I appreciate the cover and congrats on your pathway to get to EBIT deposits here.
spk06: Great. Thank you, Scott.
spk01: Thank you. And I see no further questions in queue at this time. I will now turn the call back over to Mr. Paul Sykes for any closing remarks.
spk07: Thank you. And thank you to everyone for attending today's call and for your continuing support of Spring Big. I think we're making good progress, particularly along our path towards profitability. And I very much look forward to being able to update you on this continuing progress in our call next quarter. Thank you and good evening.
spk01: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect. Thank you. you Thank you.
spk04: Thank you. Thank you.
spk01: Good afternoon, everyone, and welcome to Springbix Fiscal Year 2023 Second Quarter Earnings Conference Call. I would now like to turn the call over to Springbix Investor Relations. Clarabelle and Teri, please go ahead.
spk05: Thank you. Hi, everyone, and thanks for joining our Q2 Earnings Conference Call. Joining me on the call today are Jeff Harris, our CEO, founder, and chairman, and Paul Sykes, our CFO. By now, everyone should have access to our earnings announcement. This announcement is also on our investor relations website. During this call, we'll make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors outlined in our 10-K filed with the SEC on March 28, 2023. Also during this call, we will discuss certain non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for our GAAP results. Please refer to our earnings release on our investor relations website for a reconciliation of gap to non-gap financial measures, as well as additional context on our key operating metrics. And finally, this call in its entirety is being webcast from our investor relations website at www.investors.springbig.com, and an audio replay will be available on our website in a few hours. With that, I'd like to turn the call over to Jeff.
spk08: Thanks, Claire, and thanks to everyone for once again joining our quarterly earnings call. We had a solid second quarter in market conditions that continue to be challenging, and I continue to be impressed with the way our teams throughout the company are performing and with the progress we are making across a number of areas. During today's call, Paul and I will provide you details on our second quarter results, update you on key business initiatives, and provide guidance for the third quarter and full year 2023. Stepping right into Q2 results, I am pleased to report that we delivered revenue of $7.2 million, representing growth of 12% year-over-year. Although broader macroeconomic concerns continued away on marketing budgets and digital spend, we continue to see a trend whereby budget consideration for maintaining and growing existing customers, a central tenet of our platform, remains somewhat less discretionary. Growth in the second quarter was again driven by subscription revenue, which in Q2 grew 19% year on year. We are primarily a subscription-based vertical SaaS business, which provides predictability and increases visibility into results. We saw continued strength across all of our key performance metrics. We added 105 new customers in the quarter, maintaining the cadence of recent quarters. Our net revenue retention rate remained within our target range at 100%, despite the macro environment, and we continue to develop and launch innovative new product offerings. While we continue to invest in growing our top line, we are also focused and committed to driving leverage and are continuing to execute towards our goal of EBITDA breakeven during 2023, which is now tantalizingly close. We have two primary segments in our business, our retail and brands platforms. Our retail platform provides merchants the tools that they need to create and manage a successful digital marketing and loyalty program along with instituting a data-driven approach to how they connect and engage with their customers. Our brands platform helps cannabis brands more easily connect directly with consumers through our retail platform. We're uniquely suited for the selling motion of directly connecting brands, retailers, and consumers. And during the first half of the year, we have seen 74 brands run an excess of 1,200 campaigns, an increase of 36% compared with last year. benefiting both the retailer by driving traffic to their store and the brand through increased awareness and influence. Since becoming a publicly listed company in June of last year, I have repeatedly talked about the three key pillars of our growth. First, a network effect that we feel is a unique and powerful flywheel between our retail and brand platforms. Second, a high growth subscription revenue component that increases predictability in our revenue stream. And third, The new initiatives and opportunities we have to monetize and leverage the fact that our platform is present in more than 3,100 retail locations and present in the smartphones of over 35 million marketable consumers. We're uniquely positioned to introduce offerings to our client base that provide meaningful growth opportunities for both our clients and spring bankers. I am as confident as ever that our strategy is sound, with feedback from our clients and partners reaffirming that we are making the right investments to capture the long-term opportunity in front of us. We continue to develop and launch innovative SaaS-based offerings to enable our clients to retain and grow their customer bases, including our most recent launch of a VIP loyalty program, Subscriptions by SpringVic. Subscriptions by SpringVic enables our retail clients to offer consumers in return for a monthly or annual subscription the opportunity to earn additional loyalty rewards, access to special promotions, and other perks as VIP subscribers. This program, operating in conjunction with other Spring Big loyalty and digital communications offerings, was launched in June, and we are already seeing meaningful interest from our clients, with several having expanded their contracts to incorporate this new offering, and a few having already launched their VIP subscriber programs. We see meaningful potential from both a revenue growth and a profitability standpoint for both our retail partners and Spring Big, as these VIP subscription programs get launched and mature over time. As discussed in previous calls, we are also expanding our offerings to beyond the cannabis market with clients including alcohol, vape, and smoke stores, and developing products that will enable our clients to offer their consumers the ability to combine the redemption of loyalty rewards with a stored payment method at the point of sale. These newer initiatives are going to take time to evolve, especially given the current macro environment, but we are confident that in time, they will fuel significant growth to complement the potential we believe is present in our existing offerings. Before I hand over to Paul, who will walk through our financial results for the second quarter in detail, I do want to comment on the excellent progress we are making towards our stated goal of EBITDA break-even during the current year. Our Q2 adjusted EBITDA was a loss of $1.1 million, and with the combination of revenue growth and impact of the expense reduction initiatives, we expect a significant reduction in losses during Q3. For the second half of the fiscal year, we are expecting to generate positive adjusted EBITDA. Our Q2 performance is encouraging. Overall, we are managing our business efficiently for the factors within our control and recognize the challenging current macro and industry-specific realities. We have a rich pipeline of revenue-generating initiatives and a strong high growth subscription revenue base. With that, I'd like to turn things over to Paul, who will walk through our financial results for the second quarter in greater detail and discuss our outlook. Paul?
spk07: thank you jeff and thanks again to everyone for joining us as mentioned we delivered a solid result in the second quarter with further reduction in our adjusted ebitda loss as we continue to move along the path towards profitability a key objective for the company during the current fiscal year i will start by providing a brief overview of our second quarter results before moving on to our guidance for the third quarter and balance of 2023. Our Q2 revenue came in at 7.2 million, representing growth of 12% year-over-year, underpinned by year-over-year subscription revenue growth of 19%. Spring Big is a vertical SaaS technology business with 79% of our second quarter and year-to-day revenue now being derived from primarily annual auto-renewing contracts compared with 73% in the first half of last year. We are seeing this percentage increase as we continue to replace excess use revenue with larger subscription contracts that are both more predictable and higher quality. Our excess use revenues reduced by 7%, a byproduct of our success in converting revenue into subscriptions. And in the current macro environment, also a sign of clients being more careful in managing expenditures within their budget. Although brands revenue reduced by 15% year over year in Q2, this was primarily due to timing of campaigns. after a strong Q1, which grew 56%, and Q3, which has started strongly. Year-to-date brands revenue has increased by 16%, and the number of campaigns has increased by 36% year over year. Our top line growth continues to be driven by strong customer demand, both in terms of new customer acquisition on the retail and brands platform, as well as expansion within the installed base. In Q2, we added 105 new customers with annualized subscription revenue of $0.9 million. And a further $1.5 million in annualized subscription revenue was added through 81 customers upgrading their subscriptions. We ended the second quarter with 1,439 discrete client platforms in use and are installed in 3,187 retail locations across the United States and Canada. We continue to see solid customer retention despite the challenging macro environment. Our Q2 net revenue retention rate was 100% consistent with the rate reported last quarter, although lower than the 114% in the year-ago period. Recall, we expect this metric to moderate to the 100% to 110% range. As we add more products and functionality to our platform, we see an ongoing opportunity to drive upsell with existing customers. The recent launch of subscriptions by Spring Big is a good example. Gross profit in Q2 was 5.7 million, representing 24% year-over-year growth. And our gross profit margin for the quarter was 80%, compared with 71% a year ago. The year-on-year improvement in gross margin of almost 900 basis points is due to higher yield in services, including an increase in mix of push notifications within our messaging volumes which grew in total 20% year on year in Q2. Moving on to operating expenses, we remain highly focused on improving the leverage in our business while at the same time balancing this with our investments for sustainable growth. Total operating expenses in Q2 were $7.5 million, representing a 24% year-on-year reduction and a 1% reduction sequentially. Sales, servicing, and marketing expenses were 2.2 million for the quarter, representing 30% of total revenue. Sales and marketing expenses decreased by 30% year over year due to cost rationalization measures towards the end of 2022, resulting in lower employee headcount. Technology and software development expenses were $2.0 million in the quarter, representing 28% of revenue. These expenses also decreased 30% year over year, with the savings being attributable to lower expenses associated with the use of offshore contractors and a reduction in employee costs. DNA expense was $3.2 million for the quarter, representing 45% of total revenue and a 16% year-over-year reduction. The stock compensation expense in the quarter was $0.2 million, compared with $1 million in the same quarter last year, and this is the primary cause for the reduction. Excluding the non-cash stock compensation expense, our general and administrative expense increased by 8% due to incurring a full quarter impact of the additional expenses associated with being a public company. Our key earnings metric is adjusted EBITDA, as we believe this most closely equates to operating cash flow. Adjusted EBITDA loss in the second quarter was $1.1 million, representing an adjusted EBITDA margin of negative 16%. The adjusted EBITDA loss represents an improvement sequentially compared with the $1.3 million adjusted EBITDA loss in Q1 and is significantly lower than the $3.4 million adjusted EBITDA loss reported in Q2 last year. For the first six months of the fiscal year, Our adjusted EBITDA loss is $2.5 million, compared with $5.9 million during the same period last year. Free cash flow for the first half of the fiscal year was negative 2.8 million, comprising negative 2.6 million cash used in operations, $4.2 million repayment of our convertible note, and $4 million received from the issuance of stock in our equity raise completed at the end of May and from the exercise of stock options. I shall now turn to our updated guidance for the balance of the year. With regard to our outlook, I would include our usual caveats. Our clients continue to experience industry-specific headwinds, coupled with a slowdown in discretionary spending by consumers, given the general macro environment. Although we continue to view these issues as transitory and think the current trends do not reflect the intrinsic long-term growth rate of the industry, we have prudently considered these factors in building our guidance. For the third quarter of fiscal 2023, we expect total revenue in the range of $7.2 million to $7.5 million. We expect an adjusted EBITDA loss in the range of $0.3 to $0.7 million for the third quarter of 2023. For the full year for fiscal 2023, we expect total revenue of $29 million to $31 million, implying a 13% year-on-year growth at the midpoint, and an adjusted EBITDA loss in the range of $1.5 to $2.5 million. The implication of our full-year adjusted EBITDA guidance is that following a first-half adjusted EBITDA loss of $2.5 million, we expect to generate positive adjusted EBITDA for the second half of the year. With that, I would like to open it up for Q&A. Operator, please poll for questions.
spk01: Ladies and gentlemen, if you'd like to ask a question at this time, you will need to press star 1-1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Nice to be here. I have a question coming from the line of Scott Fortune with Rod MKM. Your line is open.
spk11: Yes, good afternoon, and thanks for the question. Real quick follow-up on your 23 guidance here, $29 to $31 million, and using the middle-range gain, 13% year-over-year growth here. What is implied? I know it's a challenging cannabis market right now and the consumer spend, but what's implied in the new guidance as far as new initiatives? I know that's going to take some time to play out, but just kind of get some sense for that. And the EBITDA guidance improvement and is there additional cost efficiencies and expense savings potentially? from the initiations of that to continue to improve the savings on that side in operating leverage, just the sense of the guidance and what's in that.
spk07: Hey, thanks, Scott. Thanks for the question. It's Paul Sykes. In terms of the revenue guidance, we just feel there's a lot of uncertainty around at the moment. So in the first half of the year, we've grown 14% year on year. The midpoint of the guidance gives us 13% for the full year. Obviously, as you'll appreciate, the fourth quarter, being in any retail business, the fourth quarter is typically the largest, most important quarter of the year, particularly with all the holiday events that happen there. So we just want to be on the cautious side and we're not assuming anything changes from the current status quo. In terms of new initiatives, as you say, quite rightly, they take a while to get momentum. We've recently launched, as we said in the call, we've recently launched subscriptions by Spring Break, which we think is a really crucial initiative and potentially one that is very significant moving forward. But in that, individual consumers subscribe monthly. They pay a subscription. And obviously, although we've got clients now live with those programs, it's gonna take time to accumulate the mass of consumer subscriptions. So we see the revenue impact of that. Now a slight revenue impact coming through in 2023, but primarily the revenue impact is gonna be in 2024. In terms of the EBITDA guidance, yes, we continue to manage our costs efficiently. We continue to make some rationalizations in our expense base, and we've got a few of those that are going to come through in terms of a full quarter effect in Q3 and obviously into Q4 as well.
spk11: Thanks. I appreciate the detail. And then a follow-up, kind of address the sales velocity during this challenging timeframe. And the number of new ads, congrats, you had 105 new customers coming. Were those coming from kind of existing states or new states? And then when you look at the, you know, obviously there's a balance sheet pressure for a lot of these cannabis retailers, especially the smaller ones from that standpoint. But is this customer base, are you going deeper into the larger customers, MSOs, and kind of update us on the churning side for these smaller customers, just a little more color on new clients and addressing the upgrade base towards the larger clients that you're focusing on?
spk07: Yes, so we're definitely going deeper into the large clients and that's reflected in upgrades where we've done in the second quarter 81 upgrades contributed 1.5 million of incremental annual revenue as opposed to 105 clients and they contributed 900,000 in incremental revenue. So that That indicates, in a way, how we enter clients on a relatively low base. They get used to the platform. They start using the platform. They build their database of loyalty customers. And then they typically upgrade fairly quickly. And that is what we're seeing. So we're seeing a good... A good mix across the country. I wouldn't say there's any particular states where we're getting more new client wins than others. It's across the board. Some are new clients. Some are changes in vendor and stuff like that. And they're coming to Spring Big, and then we're upgrading them. And we're certainly going deeper and expanding our relationship with the larger MSOs. In terms of your question on churn, Scott, definitely, particularly at the lower end of the spectrum with smaller retailers, obviously given the market conditions and the challenges, there is quite a reasonable amount of churn there. In dollar terms, it's not huge, but in terms of number of clients, there's churn happening at the moment.
spk11: I appreciate that. And I assume, obviously, looking at the 24, you'll continue to be within that range of adding anywhere from 80 to 120 customers. As it seems, new store licenses, new states will really start to come on board in 24. But just using that customer base, the last question is, can you dig deeper, maybe, Jeff, into kind of the recent launch of subscriptions by Spring Break, you know, Who did you launch it to? That kind of business, that potential opportunity, just kind of metrics around that and your excitement around that opportunity to drive more loyalty consumer-based from that standpoint.
spk07: Yeah, I mean, the exciting thing about subscriptions by Spring Big is that it's another tool by which our retail clients can get even greater leverage and buy-in from their most loyal customers. Because these are customers who are going to pay a dollar subscription on a monthly or an annual basis. Like exists in many, many retail sectors. And they are going to get for that subscription, the VIP status, which will give them additional discounts, additional perks. And, you know, from the retailer's perspective will result in them ideally spending more dollars in the store. We only launched it late in June, and we've already got about eight different retail clients have signed up to launch the program. Obviously, there's a little bit of a lag between sign-up and actually getting a program live. We've got two programs already live, and in the first couple of weeks, we've got about 200 consumers already signed up. So, It's going to take time to get traction and have a significant impact on our revenues, but I think the signs from the first month or two months in the market are incredibly encouraging.
spk11: Thank you. I appreciate the cover, and congrats on your pathway to get to EBIT deposits here.
spk06: Great. Thank you, Scott.
spk01: Thank you. And I see no further questions in queue at this time. I will now turn the call back over to Mr. Paul Sykes for any closing remarks.
spk07: Thank you. And thank you to everyone for attending today's call and for your continuing support of Spring Big. I think we're making good progress, particularly along our path towards profitability. And I very much look forward to being able to update you on this continuing progress in our call next quarter. Thank you and good evening.
spk01: Ladies and gentlemen, at the conference for today, thank you for your participation. You may now disconnect.
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