Tiny Ltd.

Good morning and welcome to the Tiny Limited Q1 2025 results conference call. All lines have been placed on mute to prevent any background noise and after the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, press star followed by two. Before we start, we ask you to take a moment to read the disclaimer the beginning of the slides that accompany this presentation as it contains important information we'd also 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 orientated financial information regarding tiny and its business and disclosure regarding possible events conditions or results are based on information currently available to management, which indicate management's expectation of future growth, results, results of operations, business performance, and business prospects and opportunities. Such statements are made as of this date hereof, and tiny assumes no obligation to update or revise them to reflect events, disclosures, or circumstances, except as required by applicable security laws. Such statements involve significant risks and uncertainties, are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from 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 disclaimer in the slides accompanying this presentation and 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 titled measures used by other companies and should not be considered along with, but not as an alternative to, measures calculated in accordance with IFRS. I would now like to turn the call over to the executive team from Tiny for today's earnings call. Please go ahead.

Thank you. Good morning, everyone. You've got Jordan Tobe here, CEO of Tiny. I'm joined by Mike McKenna, our CFO, and we're excited to speak to you this morning. So really proud to report our Q1 results, which showed continued momentum on all our strategic priorities. You know, first off, Tad Piper- In q1 or right at the end of q1 we announced the acquisition serato a global DJ software leader, and you know excited to announce that we actually close the transaction on may 12. Tad Piper- This this really represents an ideal tiny acquisition, I mean the the fundamentals of the business are quite strong we've seen your term organic growth opportunities. Tad Piper- You know i'll talk about it a bit more on the next slide but we're excited to get working with the team and partnering with the founders to drive long term. value and growth for Tiny and Cerato. We also announced the integration of Stamped, Repeat and NoCommerce under the new leadership of Jeremiah Prummer. Previously, he was the CEO of NoCommerce and he's done an incredible job of growing that business and marketing it and really driving value for merchants. But we're excited about the integration. We're unifying reviews, loyalty, customer insights, retention, actually a number of other features under a common data layer and using machine learning and using AI to provide increased value to merchants. So, you know, think things like, you know, tracking and increased conversion and driving revenue and actually really rethinking the entire reviews and loyalty, you know, capability and feature. So we're excited to release that product and we're excited about the near-term and long-term roadmap there. And then finally, Dribbble officially launched its project and services offering. This is really part of the strategic refocus of the business. We're generating additional transaction revenue for Dribbble through GMB that's now running through the platform. We're investing in the services platform. We continue to partner with advertisers and Along with the project and services offering, you know, this really actually drives further growth in our subscription offering. So it's something that we're focused on right now. And it's really all in the service of making Dribbble that destination where designers can, you know, basically further their career, make money, come to the site and get inspiration. So we'll continue to keep you updated on the progress there as well. And then finally, on the financial highlights, uh, you'll see a 41% increase in our adjusted EBITDA for the quarter that brings our LPM adjusted EBITDA to about 34 million. So, you know, again, really showing the continued progress of cost rationalization, focus on organic growth, um, big improvement in free cashflow generated. And, and Michael will talk a little bit more about that. And, um, you know, in terms of our debt reduction strategy and just managing cashflow and improving working capital. And then finally excited to announce a 1Million dollar distribution from tiny fund 1. and again, we'll talk a little bit more about the increased disclosure there a little bit later in the presentation, but we do expect to be on a regular cadence of dividends there. And we'll continue to get. Better and better at disclosing the performance of the fund over the coming quarters. So Serato, we are excited again to announce the closing on May 12th. Just as a reminder, and I know this was only about a month and a half ago, but this is the global DJ software leader. It has an amazing history of innovation and really is part of music and DJ culture. This is a piece of software that is mentioned in popular music. But it's also a wonderful business with amazing organic growth opportunities. It's expected to increase our recurring revenue by almost 70%, total revenue by greater than 20, and improve our adjusted EBITDA and improve our cash flow. We really do think this represents a transformational acquisition, and it is that kind of ideal platform that we look for in terms of hardware partnerships, hardware moat, even just technology. And innovation and we're just excited to keep you updated on the progress of the investment and and to partner with the management team. So, moving on to revenue. Revenue pro forma are divestitures of Frosty and 8020. We achieved 6% growth quarter over quarter, which we're very, very proud of. Digital services is actually driving quite a bit of that growth, but we also saw growth in our other platforms as well. There was some seasonality in our software and apps business compared to Q4, but Um, you know, that was, that was expected. Um, when we're comparing Q1, 24 to 25, um, you'll see some growth in digital services again. Um, you know, X, sorry, X, uh, for us, unity 20, actually we grew, uh, almost 24%. Um, so that's, that's great. And, uh, and the decrease in our creative platform is really driven by that, by that strategic shift in dribble. And there is some impact from enterprise revenue timing, especially with some bigger deals that landed in Q1. And you'll see that smooth out over the rest of the year. And then finally, you'll see some increase in the other platform, and that was driven by our acquisition of Medianet. But we're also seeing some nice organic growth in our other businesses as well, including WeWork, Promotely, and Meteor. On the recurring revenue front, we saw some slight growth year over year compared to Q1 2024, driven by our acquisition of Medianet and our continued focus on improving recurring revenue in our businesses that have it. But the big story here, obviously, is our Serato acquisition. You know, we're going to have that included in our Q2 results and in 2025. It is expected to improve the ratio of recurring revenue for Tiny overall to 27%, and we just see some amazing opportunities to improve that organic recurring revenue growth with things like improving their payment strategy, near-term development roadmap that we've been really working on in diligence, and even just in the past few days after closing the deal. So we're excited to keep reporting on our recurring revenue metric and the growth there over the coming year. I'll pass it on to Mike to go over the next slide.

Okay, thanks, Jordan. I'll start off with adjusted EBITDA. And we are again reporting a strong quarter for adjusted EBITDA performance for the second quarter in a row. This has been a significant area of focus for us as the management team. And as investors know, is viewed as a strong KPI for the business overall. So we're very pleased with the progress that we've made in this area. Our adjusted EBITDA increased 41% when you look at the prior period. And when we adjust for those divestitures that Jordan mentioned, it's actually up 63%. compared to Q1 of 2024 so pretty significant increase again really driven by the cost rationalization initiatives the continued focus on organic growth it's just a strong you know overall focus on operating performance and so starting to see those results uh come through um I mentioned the overall margin and again you know a margin again of above 20 in the quarter This is up from about 14% in Q1 of 2024. So we're really continuing to focus on that margin stability. We're seeing improvement across the portfolio, and we're going to be able to maintain that through Q2. And you'll obviously see that increase with the acquisition of Serato and the Serato inclusion in Q2, given the nature of that business. Okay. So if we move on to Adjusted free cash flow. Again, another metric that we've got a lot of focus on internally as a management team. And obviously, you know, to again highlight to investors the importance of this area of focus. We're getting, we're seeing very significant Margin expansion here or increase overall in our free cash flow, 168% on the quarterly basis. But I think the biggest thing to draw attention to in and around the adjusted free cash flow, and we show this on a post debt servicing level. So you can see obviously there's plenty of room for the debt servicing that's required. It's just the smoothness of the quarter and in the context of even comparing to a year ago or even a quarter ago, We did talk about this trend of less adjustments into some of the KPI calculations, and we're seeing that trend flow through, and we're going to be able to see this continue through 2025. We will always continue to have business acquisition costs quarter to quarter, year over year, given that's really the sort of core focus of our growth and the opportunities ahead of us. But just as it relates to the ongoing adjustments to these metrics, adjusted EBITDA, adjusted free cash flow, I think you're seeing quite a bit of smoothness in the numbers now through Q1, and that will continue into Q2. And again, as these numbers continue to be enhanced, We'll obviously have more opportunity for capital redeployment, whether that be to continue to repay debt or look for other growth initiatives. I'll turn it back to Jordan now to talk briefly about the tiny fund one and some new disclosure that we provided in this quarterly overview.

Thanks, Mike. You know, really, really excited to start sharing a little bit more information. So this is the first quarter that we're actually disclosing the revenue for Tiny Fund One. And as a reminder, you know, Tiny Fund One, we're about a 20% LP holder or GP. Like, you know, we get carry on an asset by asset basis. And Tiny Fund One owns majority stakes in some amazing businesses like Letterboxd, Aeropress, BeFunky, Matina. So it's a priority of ours to keep telling you more about this fund, keep showing you the distributions, report on the revenue, and keep pushing on where we can give you more information. So you can see our quarter over quarter compared to prior year, we have an increase of about 13%. We're pushing 17 or we're at about 17 million of revenue in Q125. You'll see our combined on an unaudited revenue. of about 66 million for 2024 compared to 55.5 for 2023. That's an increase of 19%. And then finally on the distributions, I'll note that in 2024 we were less frequent, so there's some lumpiness, but in 2025 we're expected to be on a more regular cadence. We're excited to keep reporting on you know, these results, especially as it relates to revenue and the actual distributions we're getting as a 20% LP and as part of the GP if and when we are getting our carry. And we'll just keep you updated and keep improving. I'll pass it back over to Mike to just give an update on our debt.

Yeah, thanks, Jordan. And another obviously strong financial indicator that we've been focused on again as management and for our investors is certainly trying to improve the net debt to adjust the EBITDA ratio. I think as everyone understands and focused on that in two areas, both kind of debt repayment and enhancing our earnings profile. These numbers are obviously pre the Serato acquisition, but on a consolidated basis post Serato. Our overall leverage levels are not really going to change that much. I think so we had got ourselves in a great position to do that transaction. We were able to finance it in a very strategic fashion while continuing to maintain our net debt to adjusted EBITDA levels. And I think that's really important given how much we've highlighted that. That's part of our focus. Also, Serato will continue to enhance the EBITDA profile and the cash flow profile. and even some of the financing that we've taken on for that acquisition will be able to be repaid relatively quickly. So, you know, when we started these conference calls a few quarters back, you know, we were up in the sort of 3.2 times range, you know, happy report that at the end of Q1, our leverage levels were at 2.7 times. Excuse me. And this is very getting very close to the target. that we'd identified of getting sort of down to 2.5 times, and again, both through debt repayment and improvement in the earnings profile. So we're going to keep focused on this. We're getting some flexibility to redeploy capital. Obviously, as we've just seen with the Serato acquisition, and we're going to continue to maintain flexibility to, again, look for more opportunities to redeploy capital, whether it be through growth opportunities, but more importantly, just to make sure that we're maintaining the Leverage levels we've talked about and getting ourselves down to that goal of 2.5 times or less. OK, so that's it for that and I'll turn it back to Jordan to finish up. Talk a little bit about the world map and where we're going to go for the rest of 2025.

Thank you Mike. So just a quick update and and we put we put this slide up and it was only two weeks ago in our 2024 results I wanted to give a quick update on where we sit on this roadmap. And I, I mean, even before we start, like, I mean, I'm just, I'm just excited about the progress we've made to date around improvements in adjusted EBITDA, free cashflow, uh, improving our leverage ratios, um, hitting on our, on our strategic priority and like really our long-term vision of, of owning and acquiring wonderful businesses and announcing and closing the acquisition of Serato. So, um, I'm just proud of the work that our team has done, so I wanted to highlight that. And then, you know, as we look at the roadmap for EBITDA growth and improving our performance, so you can see that improvement in Q1, you can see that the impact of our cost discipline and our focus on margin improvement and, you know, all the things we said about increasing cash flow started to show up in the results. And we still think that there's more work to do, but you'll continue to see that through 2025. You can see those tiny fund one distributions in Q1. Quite a nice increase from Q4 2024. We're excited to keep that coming and keep reporting on it and telling you more about the fund. And then finally, you'll see the results of Serato included from May 12th and beyond. And we are going to, you know, we're excited to have that enhance our recurring revenue, our overall revenue, our adjusted EBITDA. And as Mike said, as we continue to pay down debt, as we continue to increase cash flow, it just gives us more flexible capital allocation opportunities. So we continue to evaluate tuck-in and platform opportunities. We continue to, you know, look at paying down debt to just give us flexibility. And we're excited for what 2025 brings us. So thank you.

I think we can turn it over for questions now.

Thank you very much. To ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. In preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Max Ingram from Canaccord. Your line is open. Please go ahead.

Hey, good morning, and thanks for taking my questions. My first one's on the growth. So pro forma, the non-core asset sale growth was positive. That's a return to growth following a couple more muted quarters. So I was hoping you could talk to us a bit about what you're seeing from customer conversations, especially with, you know, all the stuff going on in the macro. I'm curious to see what, to get a sense of what you're seeing. Cause you know, that's sort of, it's nice to see the growth and I'm just curious what's driving that.

Yeah. Um, so, so, so big growth driven primarily by digital services and it's, and I, I wouldn't be lying if we didn't see the same uncertainty and, and, you know, that we're not hyper aware of what's going on in the world, but I would say we haven't seen that impact our overall growth in that segment. And, and we continue to see strong pipeline. And I think that's really a testament to, um, the strength of the brand, the business, the work that we're doing and, and really the work that we've been doing around diversifying our customer base from. know like listen we were we were primarily more focused two or three years ago on startups and and now we've got startups you know medium-sized enterprise fortune 500 um we're kind of focusing on vertical so you know that diversification has helped us and we filled up the pipeline we focused on retainer work so you're really starting to see some of that in our results um i will say that there is you know, a little bit more softness in the e-commerce space. But I think, you know, with the recent announcement of tariff reductions and, you know, starting to see some of those trade deals happen, I think more recently we've seen people breathe a little bit easier and our merchants are telling us that. But we're working with our merchants to make sure that, like, we're good partners for the long term and, you know, just servicing them and making sure that we can help them during potentially tough times.

Thanks, that's really helpful. My second question is on the streamlining of operation or the integration of operations of stamp, repeat, and no commerce. Are there more opportunities for this in the future with other portfolio companies? Just curious your thoughts.

I would say... Yes, I would say it's not, it's not our, you know, it's not our strategy as a matter of principle, but there, but there are some businesses and we're talking like, let's say, you know, two or three, especially in the Econ portfolio that might make sense to, to get together and use resources and, and potentially save money or, or even just have, you know, synergy on the data side. So, um, There are opportunities, but there, but it's, it's, you know, I wouldn't say it's material.

Right. Okay. That makes sense. And then my last one, nice to see the disclosure on the fund performance. Um, I don't know if you're able to disclose this, but I'd just be curious on maybe some of the standout performers in the fund.

Um, I, I can say that letterbox continues to be a standout performer. Um, the growth is impressive. I, I, I don't want to, I don't want to skirt around, uh, potentially disclosing what I'm not supposed to, but, um, We're looking to get more out there on the fund and I'm happy to highlight that Letterboxd continues to be a standout performer. We continue to see really amazing user growth engagement. You'll see, you know, I think three days ago they are in Cannes and they just launched or they just announced the launch of their video store rental platform shows remains a top priority. So we continue to be excited about that one. I mean, we're excited about many of the businesses there, but that's really a standout performer.

Great. Thanks for the colour, and I'll pass the line.

Thanks, Max.

Thanks, Max. As a reminder, to ask a question, please press star or about one on your telephone keypad. We currently have no further questions. At this point, I'd like to conclude today's call. Thank you very much for joining. You may now disconnect your lines.