Snipp Interactive Inc.

Good morning and welcome to the SNP Interactive second quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. Following the company's prepared remarks, we will open the call for questions. Please note that today's call is being recorded. Before we begin, I'd like to remind everyone that today's call contains forward-looking statements within the meaning of applicable securities laws. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially. For discussion of these risks and uncertainties, please refer to our public filings available on CEDA and our investor relations website. We do not undertake any obligation to update any forward-looking statements made during this call except as required by law. Good morning everyone and thank you for joining us. We are pleased to report our second quarter results earlier than we typically do. This should firstly give investors the comfort that we are continuing to invest in our processes and financial systems to enable faster reporting that will also help with our end-of-year audits. The second quarter was a challenging one, especially for clients. Following my comments from the first quarter, I had spoken about our clients finding it difficult to decide on when to launch programs as they assessed conflicting signals around inflation, supply chains, and consumer sentiment, we witnessed this playing out in program launches and new bookings. With delayed program launches, our revenue growth was impacted, but we still managed to grow our revenue for the first quarter, and our half-year performance and revenue growth remained robust at about 19%. Also, the upside for the future is that our deferred revenue increased 33%, This will eventually turn into revenue as some of these pent-up programs launch. The impact of the second quarter can also be seen in our bookings that declined year-on-year. However, our backlog remains healthy and above 15 million today. As we move into the second half of the year, we are adapting to a new reality where clients are taking longer to make decisions. They have the budgets and the intent to execute with us, but uncertainty in the economy is creating hesitation around when to launch. This indecision makes timing everything. For CIP, this is where we actually win. Unlike many in our industry who require long lead times, our ability to stay diligent, flexible, and fast to market give clients the opportunity they need. We are investing the effort to keep programs launch-ready across multiple formats, so when clients are ready to move, we can activate immediately. That speed and adaptability has become one of our biggest competitive advantages in this environment. When I step back and look at the full year, our pipeline remains strong. Client retention remains excellent. We remain debt-free, have cash on hand, and the underlying drivers of the business are intact. While we may see some quarter-to-quarter variability, I remain confident in our ability to grow profitably. With that, I'd like to turn the call over to our interim CFO, Malcolm Davidson, for a more detailed look at the financials. Malcolm?

Thank you, Joe. I'm excited to join this team and to be here during this exciting time of growth and development. This quarter, we continue to invest in our financial reporting processes and systems, and we're now starting to see the positive results in our internal and external reporting. Our investment in these resources has resulted in our ability to report and file our quarterly results more than a week before your due. The results we're very proud of. As the tool mentioned, we continue to build on a solid financial and operational foundation which will set the stage for future periods. Revenue for the three months ended June 30, 2025 with $4.8 million up from $4.7 million in the same quarter last year, an increase of about 2%. Gross profit for the quarter was $2.5 million resulting in a gross margin of 52% compared to 64% in Q2 of last year. The decrease in margin is a result of our investment in campaign and operating infrastructure and in key team members. Turning to EBITDA, we reported just slightly negative to EBITDA 1.1 million compared to positive EBITDA of 0.01 in the prior quarter last year. Moving to the balance sheet, we ended the quarter with 3.8 million cash up from 3.7 at the end of Q4. Cash flow from operations for the quarter was $0.5 million, a decrease of about $0.8 million from the same quarter last year. The primary reason for the decrease was the continued investment in our infrastructure and operating platforms, campaign infrastructure, and again, key personnel. Accounts receivable at June 30th was $3.1 million compared to $3.4 million at December 31, which is consistent with the company's average account balances for receivables. Combined tax, the council's deal will sit at $6.9 million, essentially flat compared to year-end, with a much cleaner AR profile. Booking backlog, which ties policy to preferred revenue, as it represents contracted programs that have not yet been recognized. This continues to provide clear visibility to future revenue and demonstrates strong customer engagement across our product suite. The story of the second quarter is the deferred revenue that increased by $7.1 million from $5.3 million at December 31, an increase of about $1.8 million. This increase is very positive and indicates Overall, we remain focused on maintaining financial discipline while continuing to invest in the areas that are driving the long-term growth. With that, I'll turn the call back over to Atul for closing remarks.

Thanks, Markham. In summary, the first half was an interesting mix of operating environments across the two quarters, in which we still achieved 19% revenue growth. The reason being that the key driving force behind our business today is our value proposition, which continues to resonate in the market. Our platform also continues to gain traction across promotions, loyalty rebates, and our new offers and media products. Having successfully launched this media product with marquee financial institutions like Bank of America, we now raise the focus on bringing in offer content that we can monetize on the back of the 60 million audience that we have access to. Large players in the industry are beginning to notice and have been engaged with us over multiple quarters to finalize deals to access this audience via our offers and media platforms. We will be shortly announcing a new partner that is an industry leader in the couponing and incentive space. They work with about 90% of consumer product manufacturers in the U.S. and Canada, managing complex incentives, media platforms, e-com transactions, and reverse logistics, touching hundreds of millions of households, e-com orders, pharmacy scripts, and call of returns. The drink at the table, thousands of skew-based offers that we will be enabling on Swift Media's financial media network, an industry first. That should come out soon. As we look into the second half of the year, we're excited by all the organic growth opportunities that lie in front of us. In addition, there is an increasing unsolicited inbound interest in Snip and our company. We continue to evaluate all opportunities as they arise and look forward to the rest of the year. Thank you as always for your support. I'll open it up for questions. If you can raise your hand on the chat, post a question, we will try and answer it. First question is from Daniel. I'm just going to unmute you, Daniel. There you go. If you unmute yourself now, you should be able to.

Hi, good morning. Thanks for taking my question. My first question was just around the macro environment you described. I was just wondering what levers or tactics you could take as you think about how that macro impacts your second half. Are there any initiatives you could speak to in terms of navigating it?

I think, yeah. So, you know, it's again, the funny part of the environment we are in is that it's not a recession and it's not optimism. So it's a strange in-between place that everybody seems to be stuck in. And that basically calls for flexibility as a company. Flexibility to give them the confidence that we can, you know, launch things on a dime. And that's really what the initiative is, right? To be launch ready, as I mentioned in my comments. So we're doing a lot to keep clients, you know, comfortable that, hey, we've got our budgets, you know, we can launch them as they decide to do things on a much shorter time frame than they would have been able to before. A lot more standardization of their products and pre-work that is what we're doing, which is what you can see in the deferred revenue, right? If that deferred revenue was on normal averages, our revenue would have grown substantially. It's a very simple connection. Deferred revenue becomes revenue when you launch programs. If you don't launch programs, deferred revenue continues to go higher. Why? Because clients trust us, they pay us, you know, and that money sits there until we can resonate with it.

So with the increase in deferred revenue, could you speak to the timing of kind of how you see that revenue getting booked and then I was just wondering, has there been, you know, it's nice to see that referred revenue there. So would you say there's a change in some of the conversations you're having with customers relative to quarter end and where we stand today?

That is like the million dollar question on timing, right? If I knew our revenue would have gone up another 19% this quarter. But it will eventually convert. It will convert within, you know, 12 to 14 months at the most. It could convert over the next half of the year, which is what I hope will happen. once there's clarity as to what's happening, let's see what happens with interest rates today and if that impacts clients' decision making. You know, so that's the, a different revenue typically can work between, can work up to a maximum of 14 months. Within the first 14 months, you know, it can work in the revenue. I'm hoping that actually it can work even faster given everything that's going on.

Thanks for that. And then I was wondering if you could just dig a bit deeper in terms of, you know, the different products and solutions. You know, is there anything to say, especially around the banking offerings that you have now? Just any deferring performance when you think about it from, like, a product perspective when you think about characterizing the quarter?

I don't believe, like, outside of the new products that we've launched with Smith Opels and Smith Media, right, which are very, very early stage products. We've done all the difficult work of the deals with the banks and the financial institutions and the, more importantly, the technology infrastructure, you know, connections and development with them. Now we are very much focused on selling those into the market. This deal that I just talked about is with a very, very large private equity back Omar is one of the investors in this company. You know, that's doing a deal with us. It's pretty murky. They, you know, we hope to announce that soon. It's sitting with the PR department because they want to make a big push around it. They run loads of different types of programs at retailers. So they have a lot of, as we call it, offer content. So if that starts kicking in and getting traction with the eyeballs on the other side, which are the banking clients, the customers of banking apps, all of us who bank inside our customer apps, right, we actually would have kick-started the media venture and it will also give us a lot of visibility with other brands who have been sitting on the fence, who have been testing, saying, okay, this is real now, you know. On our core products, it just continues to grow. I mean, like, Yeah, you know, you look at it quarterly, it's one thing, but, like I said, we have 19% growth for business, for products. I mean, there's nothing else for me to say.

I appreciate that. Lastly, for me, I think you mentioned unsolicited inbound interest. Like, is that an ongoing discussion that you're having, or I don't think we need to do any details here, and maybe just a comment on anything else for Gigi that you're thinking of?

Yeah, you know when market conditions start changing, people come shopping, right? Buy low, sell high, simple paradigm. So, you know, we are an asset that sits there. We've been pretty stable in building out, you know, and growing a $20-25 million asset. We don't blow up a lot of money. We have no debt. You know, we could actually extract a lot of EBITDA to the bottom line in an environment where we put together a few different types of companies. So, those conversations continue. Your bank's probably one of them. So, you know, it's just the environment, right? So, as our goal as stewards of this company is to evaluate every opportunity that makes sense for shareholders, right? And we continue to do that. It's just, you know, there are quite a few of these conversations happening now at the same time for all these reasons.

Great. I appreciate the context of the line. Thank you.

Okay, so the next question is from Sunshine. Let me just unlock you. Go ahead. I think you have to unmute yourself.

I think it's not muted. It doesn't feel too muted.

Hello, I'm Rania. I'm going to unmute myself. from this side. A question about the, you mentioned the decrease in bookings, but we still have a pretty healthy backlog of 50 million. How are you seeing the bookings, this Q3 so far, and how is the pipeline?

Well, most of our bookings in the quarter come in in the last month. So, right now, the pipeline actually is decently healthy, but will it actually grow is the question, right? And we know, I'll know more in the next four weeks. It's too early for me to give you a sense of what the future will look like.

Okay.

And also, at the end of summer, especially in this quarter, most people come back, you know, this week or the next week. So, things will actually pick up in September. It's a very, very busy month for us, from August to September.

That's great. Let's wait for Q3 results then. On the other side, do you think that this is a one-off thing because it's on-wall or is this going to continue in the near future with all the volatility that we've seen in the market, companies deferring CapEx uncertainty for sure? What's your thoughts from your conversations with your clients?

But I think I thought, you know, I mentioned this on our last conference call. It has only amplified since then. It got slightly better and then it came right back, you know, I guess because of some more indications, I guess, I don't know. But, like, people aren't really sure what to do. And, again, I think products, we now understand that's the environment we have to operate in. And we are taking steps to make sure that clients continue to feel comfortable that they have the flexibility to change things around at the last minute, based on the direction that they get from their retail partners and their customers, their retail customers, right? So, you know, we don't see this changing until something happens, you know, I don't know, it might be the stock market crashing, it might be, you know, interest rates actually going up versus down. We don't know. I mean, it would be good to know whether we're going into a recession or not and then people can make their plans quite easily in our business. Is the recession coming in, not coming in? How much of it is, you know, is that going to be new? Who knows? But all we can do is plan to not know and that's what we are doing now. Part of the investments we made with our operating costs increasing, even though we were cash flow positive from operations, is to allow for that.

Yeah, definitely. Right. Sorry at all. Definitely what is this? 20 million market cap companies with 4 million in cash and 50 million in backlog. So, totally. Regarding the operation expenses, they raised a little bit. Is that due to wages, salaries? Is it due to our other investment in other products? And if we continue to see... these decreasing revenues, are you planning on any cost-cutting strategies?

Yeah, we've increased, again, you know, just in this environment, like we are planning for growth, right? And we kind of have technology leverage built into our model now. Talked about this in the past, right? Expanding to new markets, you know, investing in sales for our media and offers products. So, we have our own cash that we've generated sitting on our balance sheet. We want to put it to good use. And therefore, we have been investing in the right, you know, right resource spread to help us do that for that future. And I don't think we're going to stop doing that. The whole idea is to ramp the company from where we are today to a, you know, towards the 50 million mark. So, at this stage, we're not planning any kind of cost cutting because we don't feel the need to do it. In fact, we're just planning for the future, so I'm not going to react on one quarter.

Perfect. That would be all, Atul. Thank you very much, and I will cut the line.

Thank you, and I will respond to you on coffee. I know you're on time, so... Oh, yeah.

Okay, yeah, sure. Thank you.

Yeah, I think at this stage, I know that people should join in the call. If ever welcome, I hope you, I can send you the recording if you just join. But I don't see any more questions, but again, happy to answer any more questions. Oh wait, I see two in the chat. Okay, the first question, two questions from AP. Can you explain in more detail why the EBITDA was negative? It's a big difference. Do you expect a positive EBITDA for this physical year? Yeah, again, you know, our plans were based on a certain amount of revenue being recognized. When revenue doesn't get recognized, you know, obviously we can't cover the cost that we've invested in. And that's where EBITDA was negative. We expect it to be positive for the rest of the fiscal year. We certainly hope to grow profitably, which is EBITDA is the metric that we track. And that's the plan. The second question you had is, is there... much larger use of AI are a big threat. No, we don't, you know, the big threat of AI is that we actually don't use AI. But we've, you know, our entire machine learning platform is what AI was before AI became AI in our field for machine processing, right? We're also investing quite significantly. I've announced a partnership of Dialback with an agentic AI company. We continue to deploy that. We've got clients who who are paying us now for a lot of agentic AI customer service bots that we have been investing in. We were invited by the Canadian government to apply for a grant. I don't know if we get the grant, but it has to do with AI. So I don't think it's much of a threat at all. It's a very massive opportunity that we continue to evaluate based on how we can make profits from it. There's a question from Thomas V. Looking ahead to 2026, past some of the macroeconomic noise, how do you see the growth and margin profile of the company evolving as you ramp? You know, I said this before, right? Like, our base case is a 15% to 20% growth rate at a 55% to 60% margin. And that's the plan We have, based on the capital that we have access to, with no plans to go raise external money unless there is a significant transformational opportunity. And that's what we stayed true to and that's what we continue to plan around. Okay, so at this stage, it looks like there are no more questions. Thank you, everybody. We will be in touch for the next quarter.