Tiny Ltd.

Good morning and welcome to the tiny limited third quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise and after the speaker's remarks there'll be a question and answer session. If you'd like to ask a question during this time simply press star and the number one on your telephone keypad. If you'd like to withdraw your question please press star followed by two. Before we start we'd like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated. Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding Tiny and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management's expectation of future growth, results of operations, business performance and business prospects and opportunities. Such statements are made as of this date hereof and TANI assumes no obligation to update or revise them to reflect influence, disclosures or circumstances, except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements and information and future-oriented financial information section of the company's public filings, which include, without limitation, Tiny's MD&A and its earnings press release, issued today for additional information. I'd like to now turn the call over to the executive team from Tiny for today's earnings call.

Thank you very much. I appreciate it. Good morning, everyone. I'm excited to welcome you all to our second earnings call as Tiny, the public company. This is also our first full quarter. Mike and myself, Mike is here with me in the room. Our first full quarter with us at the helm. We've been busy at work. We're excited to tell you about everything we've been up to, and I'll just jump right in here. So some highlights to go through, uh, you know, just to be, but that was up slightly from Q2. Uh, this is really a result of an ongoing cost rationalization initiative that we've been undertaking across the entire company. Um, you know, what we've been trying to do across the portfolio was looking for opportunity, uh, within finance, uh, HR vendor consolidation. Really trying to understand where we can get smart across the portfolio and leverage our shared services. And, you know, just throughout the quarter with rationalization alone, like we believe that we're going to save over $4 million in an annualized basis. So, you know, what you're seeing here in this quarter, the early results of that, and, you know, you'll start to see the impact of that flow through pretty fulsomely or actually more And sorry, Q4 24 and in 2025. You know, we highlighted our strategic priority to repay debt and reduce our leverage ratios. And you'll see we paid down debt to the tune of $4.9 million in this quarter. You'll continue to see that come down next quarter and through 2025. And we'll highlight that a bit more in the presentation. As I mentioned last quarter, I just want to highlight some portfolio companies in each of these presentations, and we picked three here. Creative Market actually established itself as the world's largest font marketplace, and this really speaks to its evolving strategy or its continued focus on enterprise. And as we continue to add more merchants, more digital assets, make, you know, improve site experience, improve search. This is really helping us achieve that strategy. Archetype, one of the premier developers of themes in the Shopify space, launched a product called DevKit. And this really speaks to our focus on improving recurring revenue. So, you know, traditionally, the themes have been one-time purchases. And, you know, Archetype has been hard at work over the past year developing a subscription-based developer toolkit aimed at at more agency enterprise customers. And this is in the service of, you know, making Archetype the theme provider of choice through, you know, a high functioning source code availability, which essentially means you can develop themes faster, you can open stores faster, you have, you know, access to all the tools that Archetype has, and we get a subscription fee from that. And then finally, we wanted to highlight one of our acquisitions in the fund. It's been one year since we made a majority investment in Letterboxd within the tiny fund. And we're excited to note that they've exceeded 15 million members and they've grown active users by more than 62% since the acquisition. And, you know, we'll try to make a habit of highlighting some of the activities in our fund and telling you a bit more about that. just speaking quickly about revenue um you know the revenue change from q3 23 to 24 was mainly driven by uh you know project timing and a big strategic shift um and focus to more retainer work and longer term work in the digital services business one of the big strategic priorities there has been making sure we're doing higher margin work making sure we have visibility and revenue so really a lot of that shift is in the service of getting revenue that looks like that. Another change driven by the creative platform, we've made executive changes at both Dribbble and Creative Market in 2024. We've realigned strategic initiatives there. In Dribbble, we soft launched a designer marketplace, which now allows designers to transact and get project work on the site. We're very excited about that. We're very excited to show you the results of it in the coming quarters. And in creative market, again, I mentioned on the previous slide, but we're really focused on improving site experience, improving search, adding merchants, treating them well, and pursuing that enterprise strategy. The revenue decrease quarter over quarter compared to Q2 was mainly driven by the timing of that major enterprise deal in our creative platform. And as we look forward, we're busy at work on Black Friday, Cyber Monday season in our software and apps portfolio. This is traditionally the busiest time of year for us. We have a bunch of offers underway, and that's all in the service of adding merchants, selling themes, and serving our customers very well. I wanted to speak a bit about recurring revenue, and this is a big strategic focus for us, particularly in the software and app segment. As I mentioned, we're heading into BFCM. We recently merged Stamped and Repeat, and this is all in the service of moving customers into higher contract values and tying our revenue and tying our contracts more to GMV or ROI. So if you think about Stamps, You know, pursuing more of a loyalty retention revenue driving strategy. That's all in the service of getting more enterprise customers and capturing more of that. Um, we wanted to highlight again, you know, some of this growth is due to our acquisition of media net and. You know, our, our focus does remain looking at, uh, opportunities in MNA that enhance this profile for the business. I'll turn it over to Mike here who will talk through adjusted EBITDA.

Okay. Thank you, Jordan. So as you will see here, we are back to reporting adjusted EBITDA as a key metric in our overall performance. This is important to us given feedback we've heard from the market, our focus on deleveraging, and the ongoing cost rationalization program that Jordan alluded to. This is a metric that we will continue to report going forward and have expectations for growth on both on an overall dollar value on a quarter to quarter basis and on a margin basis, quarter to quarter and into 2025. Jordan touched on the cost rationalization program. It did have some impact in the financials in this quarter, but you'll largely see the impact of the program flowing through Q4 and Q1 of 2025. If you focus just for a minute on the right side of the page, you will see that the Q3 was our best quarter for adjusted EBITDA of the year so far, and we will continue to focus on margin improvement and improving this number into 2025. We've again provided detailed on our adjusted free cash flow post debt servicing, also a key metric as we continue to manage the leverage profile of the business. All the work we're doing to improve operations will also have a positive impact on free cash flow as a metric going forward. You can see where we're focused, you can see where we're trying to drive the business, and you can see an improvement and adjusted free cash flow in Q3 of 2024 against Q2 of 2024, and we expect this number to continue to increase going forward. So both what I talked about on the adjusted EBITDA and on the free cash flow is important as we continue to manage the leverage profile. We made significant repayment of debt through the course of 2024 thus far. Gross debt levels have decreased by 14% through the first three quarters, and you can expect an additional approximate $4.5 million Canadian dollars to be repaid in Q4. While on a ratio basis, the net debt to adjusted EBITDA is slightly up for the quarter. We do have some small negative impact on conversion of the gross debt levels that impact this number. Again, the overall debt repayment of $4.9 million in the quarter is ultimately what we should be focusing on here, and we'll continue to see our metrics levels increase or improve, excuse me, as adjusted EBITDA increases once we see the full impact of the cost rationalizations and our continued focus on operations and revenue, which should improve in Q4.