Tiny Ltd.

Good morning and welcome to the Tiny Limited second quarter 2026 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 would like to ask a question during this time, simply press star one, 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 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 future-oriented financial information regarding Tiny and its business, and disclosure regarding possible expectations, events, conditions, or results that are based on information currently available to management, which indicate management's expectation of Tiny's future growth, results of operations, business performance, and opportunities. Such statements are made as of this date hereof, and TINI assumes no obligation to update or revise them, except as required by applicable securities laws. Such statements involve significant risks, uncertainties, and assumptions, 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 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 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.

Good morning, everyone. Austin here, and thanks for joining us. I'll start with what changed during the quarter and what we are focused on now. I'll then hand it to Mike to go through the detailed financials before we open it up for Q&A. When I moved into the CEO role, I wanted a clear view of where each business stood. We spent significant time going through each operating business, tested the forecast, and reviewed the cost base. That work led to cost reductions, simplifying our overall operating structure, and some difficult decisions, most of which was focused within WeCommerce and Creative Market. That is always difficult, but it gives us a more honest starting point. That reset was important, but the quarter was not only about that. Revenue was $51.6 million and adjusted EBITDA of $10.6 million, a 21% margin. ARR reached approximately $70 million, up 32% year-over-year, which now accounts for 34% of our total revenue, largely driven by the Serato acquisition. This gives our business substantially better visibility than we had a year ago. Serato shows the kind of business we want more of. 70% of its revenue is recurring, and the team continues to build upon its strong core product and partner network. At Metalab, Q2 was affected by project start timing, which we saw pick up substantially in June and continued into Q3. Letterboxd stayed on pace with its strong growth and ended the quarter with approximately 31 million members. We also know where the revenue pressure is within the organization, which we noted at the top of being e-commerce and creative market. A combination of both more competitive markets and a tougher e-commerce and market, both of which we are navigating through. On the balance sheet side, we repaid $2.1 million of debt in Q2 and another $1.6 million after the end of the quarter. Currency changes affected part of that progress. and Leverage ended the quarter at 2.8 times. From here, our focus is on continual improvement, turning more of our earnings into cash flow and lowering leverage. Alongside, we'll continue to look at potential monetizations within the portfolio where logical, while continuing to add high quality businesses to Tiny to grow the business over time. Mike, I'll hand it over to you.

Okay, thanks Austin. I'll get into some of the financial results now in a bit more detail. Starting with revenue, the Q2 2026 total revenue was $51.6 million. This was a 3% increase over Q2 of 2025 and also represented a 3% increase when measured on a constant currency basis. Looking at the highlights of the composition. Software and apps grew from $18 million up to $22.4 million, primarily driven by Serato. Digital services revenue came in at $16 million. This was down from $19.6 million in Q2 of 2025. It really does reflect a tough comparable. Q2 2025 On the creative platform, revenue came in at $11.5 million versus $10.3 million a year ago. This benefited from a significant contract win at Dribbble in the quarter. On an LTM basis, revenue was $208.7 million. This was up 9%. From the comparable period of $192.4 million. The LTM digital services comparison was also impacted by the divestiture of Frosty, AD20, and Z1, along with that outperformance in the first half of 2025 that we've noted. Again, we expect a strong second half based on momentum in Q2 of 2026. Moving on to recurring revenue. This is a key metric we track closely as a proxy for the durability and quality of our revenue base. In Q2, 2026, it reached 17.4 million, up 32% from 13.2 million in Q2 of 2025. Serato is the primary driver here, and as Austin noted, a significant amount of that revenue comes from subscriptions. were also actively investing in the product roadmap and partnerships to sustain that growth year over year. On an LTM basis, recurring revenue was 69.8 million versus 42.8 million a year ago. This importantly points to greater annualized recurring revenue for the business overall, which now stands at 69.6 million, growing 32% year over year. The ARR trajectory reinforces our strategic focus. We want a larger portion of tiny consolidated revenue-based and subscription-based where it makes strategic sense, helping to underpin a strong long-term outlook. Moving on to adjusted EBITDA and adjusted EBITDA margin. The adjusted EBITDA for Q2 of 2026 was 10.6 million. This represented a margin of 21%. On an LTN basis, adjusted EBITDA was 38.2 million. This was up from 35.3 million in the Q2 2025 LTN period. Performance again, largely driven by Serato. Dribble contract wins and the continued cost discipline across the portfolio, which we have referenced and will continue to help us drive margin going forward. LTM margin expanded from 18% to 19%, a modest but meaningful improvement. Given the significant cost rationalizations that we implemented at the end of Q2 of 2026, We expect this will drive further margin improvement going forward. On a related topic, as we have continued to focus on enhancing our disclosure, we have added segmented EBITDA to our disclosure framework for the quarter as part of our ongoing commitment to provide further operation and financial clarity where possible. Further detail is provided in the MD&A. Moving on to free cash flow and free cash flow per share, again as a reminder in Q1 of 2026, we enhanced some of our disclosure to report free cash flow and free cash flow per share on an attributable basis. Again, we believe this gives investors a clearer and more meaningful picture of the capital generated by our underlying portfolio net of debt service obligations. LTM free cash flow was 13.4 million or 46 cents per share compared to 18.6 million or 70 cents per share in the Q2 2025 period. The changing cash flow primarily reflects the timing of contract related payments, income tax installments, and some working capital movements near the end of the quarter. Moving on to the fund. Recall, this is a separate vehicle from our consolidated results, and we report this on an unaudited basis to give investors further visibility into the portfolio. Q2 fund revenue was in US dollars $13.2 million. This is a 15% increase over Q2 of 2025. LTM fund revenue was $55.5 million, again in U.S. dollars, versus $48.4 million in the previous period. Tiny's NAV for the fund was $46.4 million Canadian, which represented a 4% increase from year end. Distributions to Tiny from the fund were again strong. 0.5 million in Q2 and have equated to 2.8 million on an LTM basis. Key portfolio highlights in the fund include Letterboxd surpassing 30.7 million registered members. This number is up 185% since our acquisition in September of 2023. Matina, our Yerba Mate brand, now leads the Whole Foods energy category with 1.8 times the volume of the second place contributor. Turning now to the balance sheet, as of June 30th, 2026, senior debt outstanding was $105.9 million. and our total cash and cash equivalents were $31.6 million, slightly up from $29.3 million at year end. While our net debt to adjusted EBITDA ratio does stand just slightly above our target range of 2 to 2.5, we are making progress. Austin noted some debt repayments both in the quarter and following the quarter and it continues to show that we remain committed to debt repayment. This is a priority within capital allocation. And importantly, as we think about the balance sheet, we have no pending maturities. We've maintained some capital structure flexibility through the extension of the convertible to venture offer. And overall, our objective here is to ensure we have the proper capital structure in place to continue on the longer term journey of capital allocation. Now turning to our roadmap. We have four strategic priorities that are on track. Profitable growth, capital structure optimization, momentum within tiny fund, and disciplined capital allocation. These are all important as we think about our day-to-day operations. In summary, Q2 was a quarter of continued execution against these strategic priorities, alongside a disciplined look at the portfolio and the value through an ongoing asset review. We're well positioned to head into Q3 and we look forward to updating you again on our progress next quarter. With that, we should turn it over to questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. As a reminder, if you would like to ask a question, please press star one to raise your hand. Your first question comes from the line of Richard Baldry with Roth Capital. Richard, your line is open. Please go ahead.

Right. Thanks. Can you maybe talk a little bit more in depth about the review of the WeCommerce operation? I'm sort of curious, there was a pretty large bad bet hit of about $4.1 million in the quarter. Was that related to that? You can talk about the scale of the costs that you think you'll – operational sort of savings you think you've identified exiting Q2. Thanks.

Thanks, Richard. Good morning. It's Mike. Austin will touch on some of the discussion points around e-commerce, and then I will finish off with a couple points around clarification of a couple points on the financials.

So I guess separating those two questions, one was around the bad debt, the other is just the broader write down on the intangibles side. So we took a pretty We have a clear view of the forecasts that were previously put in place. And I think the first six months of this year have definitely introduced more uncertainty in what that looks like. But I think what we do know is Shopify remains the core platform for net new merchants. We play a really big role within that third party ecosystem. We're quite confident that will be a place where merchants go to over the long term and we are navigating through the changes within that end market at this moment. We think we have taken out a very substantial amount of costs this quarter, which we'll start to see more of the flow-through of FREX over the coming quarters. But we do feel quite confident about that business over time that we are navigating through a bit of choppy waters on it. Mike, do you want to touch on the bad debt? It was in a different area of the business.

Yeah, exactly. And it was in two different areas. Richard, there was a minority investment that was on the balance sheet from a number of years ago that was written down based on performance. And then there was some review of some age receivables in another area of the business. So those two items were not necessarily related to e-commerce. But certainly a lot of the things you'd see in the statements this quarter around severance costs, As an example, that was more related to WeCommerce as part of this structural reset that we undertook in that area.

And then you switch over to Serato and sort of the growth areas. What do you think the sustainability or extensibility of those growth drivers are near term? And then maybe broadly speaking, You talk about the efficiencies you're still seeing from bringing some AI-type optimization tools into service internally. Thanks.

Sure. So on Serato, we're continuing to see a shift of younger gen leaning towards, I'd say, digital digital products like DJing than they might have historically to something like a piano. And so that has provided a really nice base of continual expansion of the customer base as well as we have two core subscription tiers within that business one of which has substantially more features and we're continuing to see more and more customers move to that side so we're seeing a really nice base of net new ads as well as upgrades into our higher tier plan so We feel quite positive about the outlook of that business. Sorry, what was the second part of the question there?

The question about using AI tools internally to improve efficiencies, operations.

So we have seen a meaningful improvement on that front. I'd say there was some part of which flowed through on cost reductions that we were able to see this quarter. I'd say more specifically, though, that brings us key data and information across the entire organization in a much more centralized way that helps our decision-making at Parent. I think we have a long way to still go on what's possible with the tools that are evolving almost every day at this point, but we are seeing a very positive impact. Mike, anything else you want to add on that?

I think it's a focal point for us, right? It's a focal point, Richard, as you mentioned, in the services business, in digital services. It's a focal point for the team at Serato in terms of creating operational efficiencies in their design and engineering work. And we're also employing a number of Thank you. Thank you.

might be a difficult question to answer, but just broadly speaking, how much do you think of of Austin's time spent on really portfolio optimization sort of thing about M&A type work versus the operations of the underlying companies? And is that shifting? So the backdrop is, you know, are you more focused on working the portfolio or the operating entities and how is that going to evolve? Thanks.

I think it's partly an evolving topic From the earlier days of Tiny, what worked really, really well is being a decentralized organization. And part of the changes we made this quarter was going back to being that where head office can really be focused on net new acquisitions. That said, there was a number of areas where it made sense for us to spend time this quarter on making adjustments, which we highlighted. But I think we want to be in a place where head office is really focused on Great, thanks. As a reminder, if you would like to ask a question, please press star one to raise your hand.

Your next question comes from the line of Rob Young with Canaccord Genuity. Rob, your line is open. Please go ahead.

Hi, just a quick question. A lot of expenses in the quarter, but you still looks like you repaid debt in the quarter and then noted that you made some voluntary repayment after the quarter. So I'm just curious about your intent in the near term around Deployment of capital. Is the pay down of the debt going to take on a bigger priority now, or is that just a one-time thing?

Hey, Rob. Good morning. It's Mike. Thanks for the question. I mean, look, I think we can consistently say over the last six quarters that we've been focused on this. We're trying to manage this against the earnings base, this as a matter of... Capital Deployment. As you know, we have an NCIB open. We've been buying back some shares because there's been probably some opportunities there where the shares are undervalued in the market. So it's really a matter of sort of how do we balance this against other opportunities to deploy capital, right? And certainly there will be instances where we can be voluntarily repaying you know smaller amounts of debt and I think those should be highlighted because you know we're taking the steps to ensure that we're managing those balances right so again it's going to be evaluated against all priorities again if we could find if we were able to find a you know an acquisition we want to be also positioned to do that right and so you know managing the balance sheet to ensure that we're Okay, and then just a

Small questions. You noted the indirect interest in SpaceX through XAI through Metalab Ventures Fund 1. I'm just curious about how that's accounted for. Is that at book value or is that current value or is there an opportunity to monetize that for the benefit of Tiny's balance sheet? And then I'll pass the mic. Thanks.

Thanks. It's evolving, Rob. It's a new situation, right? The genesis of the Metalab Venture Fund has traditionally been a partnership fund where they've done work with growth clients, made some investments themselves out of that fund. There's obviously some success now coming from that. Is there an opportunity for some of those dollars to flow back to tiny? Absolutely. Again, the decisions will be made at the appropriate time to whether or not to monetize those shares and then ultimately what to do with those use of proceeds. But yes, there will be an opportunity for some of those dollars to flow back to tiny. We are clear that we are only a 14.1% beta partner in that fund. There are other partners in that fund who will also benefit from this. But it's great to see that there's, again, good return on capital that's been allocated. We're showing some there in the Metalab Venture Fund. We're obviously showing that with opportunities in the Tiny Fund. And this is part of the greater situation of ensuring that we're and allocating capital into unique opportunities and creating return for our shareholders. So there will be some return. But again, we want to make sure that we're also understanding that it's somewhat modest as it relates to flow back to the tiny shareholders because we are only a 14% GP holder in that fund, or excuse me, LP holder in that fund.

Okay, understood. Thanks for taking the questions.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.