Tiny Ltd.

Good morning and welcome to the tiny LTV Fiscal Year 2020 Foreign Schools Conference Call. All lights have been placed in mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Before we start, we ask you to take a moment to read the disclaimer at the beginning of the slides that accompany this presentation as it contains important information. We would also like to remind you that all amounts discussed in 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 in 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, and TINI assumes no obligation to update or revise them to reflect events, disclosures, or circumstances, except as required by applicable securities laws. Such statements involve significant risk 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 any reliance on these statements and information. Please refer to the forward-looking statements disclaimers in the slides that are accompanying this presentation in the company's press release issued today for additional information. We use non-IFRS financial measures to help investors understand our operating performance. Non-IFRS financial measures may not be comparable to similarly tiled measures used by other companies and should be considered along with, but not as an alternative to measures calculated in accordance with IFRS. I would like to now turn the call over to the executive team from Tiny for today's earnings call. Please go ahead.

Hey there, good morning. You've got Jordan Tove, CEO of Tiny here. I'm joined by Mike McKenna, our CFO. We're excited to tell you more about our 2024 financial results. So first of all, I'm really proud of the work we've done in 2024. I feel like we are really positioning ourselves well for further growth in 2025. I'm excited to share some of the highlights of the work we've done, especially as it relates to increasing cash flow, both through organic growth in certain key parts of our business and from the cost rationalization exercises that we did in Q3 2024. You're really starting to see some of the early results of those initiatives appear in our Q4 financial results. You'll see that both in improvements in operating cash flow for 2024, You know, we achieved our highest adjusted EBITDA since going public in 2023. That's 10.1 million of adjusted EBITDA. It's a 38% increase over Q3 2024. And that really does demonstrate the early results of those initiatives and really the results of our key strategic priorities. As you can see, we've demonstrated our commitment to reducing our leverage levels and repaying debt. We repaid almost 25 million net of drawings in 2024. Mike, our CFO, will talk you through a little bit more detail on our debt levels, and I'm excited to tell you about the future of our debt commitments and how we plan to reduce our leverage going forward. We also had a real strategic priority or strategic focus on recurring revenue and growing our recurring revenue. We acquired a business called Repeat in February 2024. This was a VC business that wasn't going to raise again a high amount of recurring revenue. We tucked this into our stamp business, and we feel like this is a key part of the growth going forward in that business. It's a retention marketing business. It helps us achieve our strategy of growing ACV and targeting higher ACV customers in the mid-market and enterprise. We're proud of the acquisition of Medianet, which was also a 98% recurring business in June 2024, so you'll see that affect our recurring revenue growth in the year. And finally, we acquired Wholesale Pet early on in the year. Um, and that's helping us with, uh, with our distributions as you can see, we've, you know, we did get 2.2M of distributions from the tiny fund and we do believe that that's going to improve going forward as well. Finally, you know, we've been hard at work refining our short term incentive plans as well as our long term incentive plans. We're rolling out a revised long term incentive plan that's tied to intrinsic value growth in each of our businesses. We're excited to expand our employee share purchase plan across the board, and we're really trying to create an ownership mentality and focus our CEOs on what they control and align them to really good organic growth, organic revenue growth results, as well as increasing cash flow within each of their businesses. So excited to tell you about the, you know, our highlights within revenue. In Q4, we saw some growth driven by new enterprise customers and really growing demand from businesses that are focused on AI. We completed work with some amazing companies like Suno and MidJourney. And, you know, we're proud of the growth in our digital services segment despite, you know, despite disposing of two non-core assets that were low cash flow, that were non-whole owned, we did achieve pretty good growth and actually excluding those pro forma, the growth was about 5.4 million year over year. In our software and app segment, we achieved growth driven by our anti-piracy initiatives and themes. We saw some decent growth in no commerce and we're really focusing growth in in repeat and stamped, and as I said earlier, just really focused on, you know, going after mid-market and enterprise customers and trying to grow overall ACD in that segment. Finally, in the creative platform, we're doing some strategic repositioning. We're really focused on growing our project and services revenue and dribble, focused on achieving growth in our enterprise business and increasing licensing revenue there. And finally, we had CEO changes in both of those businesses, so we're really focused on improving site experience, shop experience, and increasing transaction and marketplace revenue in both Tribble and Creative Market. Recurring revenue grew slightly from compared to Q4 2023. That was really driven by media, net, repeat, continued focus on just prioritizing our growth and recurring revenue. All of our acquisitions in TinyLDD were recurring revenue-based businesses. This remains a key focus of ours going forward, and you'll see this in the recently announced pending acquisition of Serato, and we're excited to see the results of that in our future results. Finally, you'll see the growth in 2023 was primarily driven by the full year inclusion of e-commerce, but you'll see 2025 really kind of, you know, take effect, and you'll see the acquisitions that we've made in 2024, and, you know, you'll see those results in our 2025 results as well. I'll pass it over to Mike, and he'll walk through the, the next few slides.

Okay. Thanks, Jordan. I'm going to start out with an overview of adjusted EBITDA. So importantly, as Jordan mentioned, Q4 was our highest level of adjusted EBITDA since becoming public. This was an increase of just over half a million dollars from our Q4 of 2023. And when you think about that on an annual basis, our EBITDA increased by about 3.6 million or 13% year over year. So pretty solid performance at the earnings level. Some driven by cost rationalization, business optimization, you know, all the things we've been talking about as strategic priorities. I think it's also important to highlight the margin profile and where that's going. So 16%. for the entire year of 2024, but importantly, a 21% margin in Q4. And so that also is pretty significantly higher than Q4 of 2023. So you can see those trends. I think we're happy to say that also we're seeing good trends at the EBITDA margin line as we sink into Q1 as well. So good trends within the business, good management of costs, and we're seeing some revenue growth all positive factors in positive adjusted EBITDA. If we want to move on to free cash flow, we can touch upon this for a minute. And as we would, I think, talk about this trend as it relates to adjusted EBITDA, certainly seeing it here as we have a bit more detail in the analyzation of the free cash flow metric. Every quarter, you know, these numbers get a little bit cleaner, right? We're having less severance costs, less non-recurring costs, you know. So this is a more true metric of the business as it relates to performance with less reliance on non-recurring numbers. And you're going to see that trend continue into Q1 and through 2025, frankly. Outside of anything probably to do with our activities in Toronto, we're going to be presenting. pretty clean numbers with less reliance on the non-recurring items, which I think is very important as we think about this as a trend, as a KPI, and also to what it means on a per share basis. So while there's an enhancement of the free cash flow line of about $2.5 million for the year, you can really see the impact of the work we've been doing In Q4, where our free cash flow was up almost $4 million in comparison to the same period of 2023. Very significant. Allows us to continue to focus on debt repayment, which is really, really important for us. As we repay debt, we also save costs on our financing costs or interest costs, so that also contributes at the same time. We know here we've made an additional $9.6 million of debt repayments this year at the beam, at the digital services level or beam. This is very important as we start to think about the debt profile and where we would like that debt profile to get to. Jordan will talk about this a little bit more as we progress here, but importantly, our debt levels down 10.2 million in the quarter. This is Frankly important, again, because that trend of debt reduction was very prominent in Q4. It was about $14.3 million net repayments for the year. We do get a little bit of impact from FX and FX movements at the digital services level debt. That debt is denominated in C dollars and generally US dollar business. However, with the strengthening of the CAD into Q1, you'll see a bit of the opposite effect. So we have some net gain into Q1 on our leverage levels as well. So you can see where the trends are. We've got the leverage metric down to three times at the end of Q4, which is obviously important and a very good trend in the right direction here on the chart on the upper right-hand side of the page here when we think about the entirety of the year. Maybe with that, I can turn it back to Jordan and talk about where we want to get this trend to go on a long-term basis and some of the plans we have in place to do so.

Yeah, I would just add that, and we've said this before and we've continued to hammer on this being a strategic priority in terms of reducing overall leverage. And it's something that's going to happen both from debt repayment and from growth in EBITDA and growth in cash flow. So I think it's important to talk about our roadmap for EBITDA growth and how we see that evolving over 2025 and beyond. If we look at this year and really just starting to see the early results of the acquisitions we made in 24, the cost rationalization initiative that we did in Q3 2024 as well, we're really pushing on organic growth across the portfolio and getting leverage from some of the cost discipline and cost management that we're doing. So we expect to see that show up in the 2025 results. You layer on the distributions and I I highlighted that we got 2.2 million of cast distributions in 2024 but we do expect it to see this increase in 2025 especially with capital fully deployed the organic growth that we're getting from from some of our our big businesses there um so we layer that on um and then we then you know we'll we're you know we recently announced this acquisition of Serato um you know we're excited for that to close we're continuing to evaluate some additional opportunities and we we do believe that 2025 um and beyond are going to surface some well-priced wonderful companies we continue to talk to businesses that are really good fit and also continue to evaluate stuff that looks like great tuck-ins for you know potentially something like serato or or even the businesses that we continue to own um especially in in e-commerce or other attractive software and recurring opportunities. So we feel like that sets us up really well for 2025 to keep paying down debt, keep looking at investing in organic growth, giving us the flexibility to look at additional acquisitions in 2025 and beyond and to reduce our leverage levels to below that two and a half times and ideally below that 2x in the mid to long term. We're excited to keep telling you about these results. We've got Q1 coming up shortly. Our AGM being held in Victoria in June is another opportunity for us to highlight some of the exciting things that we've been up to and talk about what we're excited about for 2025 and beyond. So we're excited to keep telling the story and really proud of the work we've done in 2024. So thank you. open it up for questions here.

Thank you. Again, as a reminder to everyone that has dialed in, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your questions, you can press star again. If you are called upon to ask your question or are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Thank you. We'll pause for a moment to compile the Q&A roster. And it seems that we have no questions for today. That concludes the Q&A session in today's conference call. Thank you all for your participation. You may now disconnect.