Q4 2023 Loop Media Inc Earnings Call

Presentation

Operator

No, good afternoon, everyone, and thank you for participating in today's conference call to discuss leaf Media's financial results for the full year 2023 and the fiscal fourth quarter ended September 30th, 2023. Joining us today our CEO, Mr. John Newman, and the company's CFO, Mr. Neil, what time by now everyone should have access to the full year and fiscal fourth quarter 2023 earnings press release, which the Company issued earlier today has approximately 4.05 P.M. Eastern. The release is available in the Investor Relations section of Leap's website at w. w. w. dot lee dot TB. In addition, this call will also be available for webcast replay on the company's website.
Following management's remarks.
We'll open the call for your questions. Please note, there are two ways to ask questions during the Q&A. One, for those on the telephone, please press star one on your telephone keypad to raise your hand. And for those on the webcast, please select ask a question in the top right corner of the screen, enter your question, and click Submit Certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that would cause actual results to differ material materially from those reflected in the forward-looking statements. Forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the Company's filings with the SEC. do not place undue reliance on any forward-looking statements, which are being made only as the date of this call. Except as required by law, the Company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking state Company's presentation.
Also includes certain non-GAAP financial measures, including adjusted EBITDA as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release and Form eight K furnished to the SEC.
I would now like to turn the call over to Luby's CEO, Mr. John Newman.

Thank you and good afternoon, everyone. We are pleased that we can announce that we ultimately managed to achieve year on year growth compared to fiscal 22, but we're also happy to have fiscal 23 in the rearview mirror and a new fiscal year ahead of us. It was a very challenging year on several fronts. A significantly restricted ad market, a very difficult small microcap stock market and lessons learned from the industry understanding of our revenue model as a CTV. digital out of home company, which led to lower growth than we were internally anticipating a year ago and thus the subsequent adjustments around necessary cost-cutting measures. However, as a result of these challenges, we discovered very valuable data about where we believe we should invest and focus our time and resources in order to improve performance coming out of this downturn of several quarters of stagnant growth we believe we are stronger coming out of fiscal 23 and look to capitalize on what we believe to be improved upside and growth potential ahead of us.
We see a better path ahead and recovery as we progress through Q1 in our new fiscal year and believe that FY 23 represented a low point in our ad demand challenges. In fact, it appears the revenue growth has normalized as we are currently already tracking well ahead of the previous three quarters in terms of top-line revenue and reduced overall SG&A expenses more on those results when we report in February, but we started off this new fiscal year on October first optimistic about the year ahead. So I'm pleased to say that we are indeed experiencing positive momentum so far in Q1, midway through the last fiscal year, we made cuts and adjustments across several aspects of our business, achieving a plan to reduce the second half of FY 23 overall SG&A costs by over 20%. Part of this reduction included eliminating from nonrevenue-generating headcount while continuing to invest in the expansion of our revenue and ad sales team. Our distribution footprint increased towards the end of FY 23 with the addition of 25,000 partner platform screens, bringing our total Liu player and partner screens to over 79,000. In addition, our monthly video impressions viewed are estimated to be over $2 billion. We have continued to add new players in the top 20 advertising markets as well as focus on those venues that we have learned to be the best performers, which include bars, restaurants, universities, medical offices, spas, and several other verticals. We believe that the retail media market is expected to continue to grow and increase the share of advertising spend as several industry forecast predicts. We are also optimistic about the election year and the projected record advertising spend around that. In addition, we have several revenue supply partners that we look forward to growing within the current fiscal year. With our strong pipeline of partners, our expanding distribution network, and our commitment to efficient new customer acquisition. We are encouraged about the future, and we believe the Company is well positioned to deliver revenue growth and a stronger bottom line as the advertising market improves and our distribution footprint grows.
With that, I will turn the call over to Neil to take you through our financial results. Neil?
Thank you, John.

And good afternoon, everyone. As we review our financial results, I want to remind everyone that all comparisons and variance commentary refer either to the prior year's full year or fiscal fourth quarter unless otherwise specified.
In the 2023 fiscal year, revenue was $31.6 million compared to $30.8 million in fiscal 2022 in the fiscal fourth quarter revenues was $5.7 million compared to $12.2 million in the year ago period. In the 2023 fiscal year, gross profits was $10.7 million compared to $11.4 million in fiscal 2022. In the fiscal fourth quarter of 2023, gross profit was $1.6 million compared to $4.6 million for the same period in fiscal 2022. Gross margin rate was 33.7% in the 2023 fiscal year compared to 36.9% in fiscal 2022. The decrease was primarily driven by revenue mix between partner platform and O&O platform as well as an increase in some of our fixed costs for licensing in the fourth quarter, gross margin rate was 27.5% compared to 38.1% in the prior year quarter. The decrease was primarily driven by revenue mix with the lower gross margin partner platform business being a higher percentage of the revenue during the fourth quarter versus a year ago, partner platform business carries a lower gross margin, but has lower investment and acquisition and marketing expense attached, ultimately resulting in similar overall operating margins to our O&O platform.
Total sales general and administrative expenses, excluding stock-based compensation, depreciation and amortization, impairment of goodwill and intangible assets and restructuring costs in the 2023 fiscal year were $29.4 million compared to $24.5 million for fiscal 2022. The increase was primarily due to increased marketing spend in the first half of 2023, professional fees and increased software and IT costs.
Total sales, general and administrative expenses, excluding stock-based compensation, depreciation and amortization, impairment of goodwill and intangible assets and restructuring costs in the fiscal fourth quarter were $7.4 million compared to $9.5 million for the same period in fiscal 2022. The decrease was primarily due to a decrease in marketing spend, payroll related and various other operating expenses, which were targeted for efficiency. We continue to focus on gaining efficiencies in SG&A, which we expect to be reflected in fiscal year 2024. Our net loss in the 2023 fiscal year was $32 million loss or $0.56 loss per share compared to a net loss of $29.5 million or $0.61 loss per share for fiscal 2022. Net loss in the fiscal fourth quarter of 2023 was $9 million or $0.15 loss per share compared to a net loss of $14.6 million or $0.28 per loss per share for the same period in fiscal 2022 adjusted EBITDA in the 2023 fiscal year was $15.7 million loss compared to $10.3 million loss for fiscal 2022. Adjusted EBITDA in the fiscal fourth quarter was a loss of $4.8 million compared to a loss of $3 million in the same period in fiscal 2022 .22 Our balance sheet and cash equivalents were $3.1 million on September 30th, 2023, compared to $14.1 million on September 30, 2022. As of September 30, 2023, we had $7.5 million of total debt compared to $7.1 million as of September 30th, 2022.
In summary, we are focused on increasing our revenues, gross margin and leveraging our expenses in line with revenues as we plan to continue to reduce the adjusted EBITDA loss on a quarterly basis.
I'd like to thank everyone for listening today, and we look forward to providing further updates on our next conference call. This concludes our prepared remarks, and we will now open it up for questions.

Question and Answer Session

Operator

Now we'll open the call for your questions.
As indicated at the beginning of the call, there are two ways to ask questions. One, for those on the phone, please press star one on your telephone keypad to raise your hand. To withdraw your question, simply press star one again, two for those on the webcast, please select ask-a-question in the top right corner of the screen, enter your question and click submit three questions from those on the phone will be answered first and as time permits.
A couple of questions from the webcast. Will be addressed. Our first question comes from the line of Darren Aftahi with Roth MK. Please go ahead.

Thanks for the questions, guys. Good afternoon. So if I may, on the restructuring costs you guys in the quarter, is that a 20% reduction? Is that a 20% reduction of that? Roughly $7.5 million? Our OpEx number is reported in the quarter.

You're hearing that some basically a 20% reduction quarter over quarter as it relates to on U.S. generic. And it does exclude the restructuring costs that we're on it related to some of our repositioning, some of the channels and areas of our business.

Great, thanks. And then on a loop Ad Manager, can you kind of talk about I think you went live with this data on September 21st. Is that live in the market right now and it's kind of what your expectations are, or I guess both self-self-serve and local market and kind of how material this can be to your business?

And will it be material in the current quarter that we're in? It's live. Yes. So we're out of beta and we're pleased with how it's tested. It won't be material for this quarter, but we do expect that as we continue into Q2 and kind of fiscal 24, it's going to become much more meaningful for us. We've had a 0% local ad, and we know that that should be in the double digits in terms of our mix. So we're optimistic about what that's going to be, especially in the upcoming year ahead.

Great. And then two more, if I may. On your DSO, clearly relationship. I know last quarter; you guys announced the relationship with Microsoft and Zander. I guess, where are we in the ball game in terms of the way we kind of call the three defining of the category or in, i.e., digital out of home for CTV. some pain? Or are there other larger kind of players in the DSP space? Do you feel like will drop in the near term or maybe into early part of 24.

So the answer is positive momentum in the last part is yes, we do anticipate more partnerships. The message is getting across and we've been out there just beating the drums, Bob, and team just about TV is TV now. And it's part of an evolution of any business as you know, we've used these similarities before when we go from cable to streaming and people need to get used to what that means. So when we are offering streaming and businesses we people have to get used to out of home, not meaning billboards. So that message has certainly been heard is still being adopted. So there's still upside, which is good, but we do see momentum of people that are starting to recognize it and put spending towards that.

Great. And then I think, John, you made mention in your prepared remarks that you kind of want to lead into establishments in the bar restaurant medical spas University. I think there are a few others.

I'm curious out of the 79,000 roughly screens you have between O&O and partner, what percentage of those verticals to kind of makeup that 79,000 more than half of our oh, no, I would say I think that for us, this has been really I think this is important part of last year, frankly, is where do you make the most money for do you get the most return and everybody wants to know that. And for us, just to get the research back, the data back to understand where we need to put the time the acquisition costs, it makes sure that their stickiness, they stay. We know which venues we know which verticals are the best, at least for us. We know the ones to stay away from. So fortunately, the ones that we're calling out are majority of our business in terms of as we especially as we get the new player out there. And that certainly is where we're starting to be focused.

Great. Thank you, guys.
Extend.

Operator

Our next question comes from the line of Eric Wold with B. Riley Securities. Please go ahead.

Thank you. Jackson, you've had a few questions I guess one, you had about 12 wells in the O&O additions over the past couple of quarters, the June quarter and September quarter. Do you feel this is kind of a healthy run rate as you kind of following the last question, kind of more intently focused on the right locations for the players, or do you see an opportunity to ramp that up in the quarters ahead.

As performance improves, higher advance should definitely be ramped up. And I think as we kind of finish the second part of the year, and we understand that revenue was largely trending where it was. We really were kind of pulling back analyzing a little bit about where we're putting the investment that we're starting to see that trend up and putting more funds into that. But we believe that there is it's a substantial amount of growth in those venues ahead of us. We've barely penetrated in this streaming for business streaming TV market. So that's certainly where the target is going to be, but we certainly expect much, much more than that.

And then as you move into your political ad environment in the coming quarters. I guess what is the position there in terms of how much you will win out lean to that kind of what percentage of the locations, I guess would be appropriate for them or opt out if they have that much, I think is really going to see another round of what percentage of the network could see a lift from product line placements.

I think for us, I guess the good news is a couple of parts to that one last October, November September, we saw what it could mean to our business and which was our best month ever. So we know that when you're coming into a presidential election year that we're anticipating a sudden some good activity there. And we're also starting out strong here, as I alluded to in my part. And the political hasn't even kicked in yet. That's just pure organic. And I think that's really important to notice as well. So you've got a recovery on the organic side, coupled with what we believe will be some good political coming down the road.
Yes, in terms of percentage of venues, it really is just, you know, it's a matter of choice and clearly it's targeting, and we've got the partnerships with the AI. where we make sure that ads are showing where they should show, and the venues are comfortable with that. So it's never really forced on people, but we do know that a good majority, especially out-of-home, they are ARCs. That really doesn't bother me that much, and they often opt in on that. So it's good for us. We think everything's stacked up nicely.

Perfect. And then final question for me.
As you look at kind of the changes you've made in terms of cutting out the cost, starting to see, hopefully a pivot back towards stronger trends and placements kind of help us maybe bridge the gap of where you are balance sheet-wise before you think you make that pivot to consistent positive cash flow? And if there is a gap that needs to be filled? Or do you think you're fine of the current balance sheet?

And I think, Eric, on we've made a lot of strides as some since the second half of this last year and sort of repositioning in our expense structure on gaming inefficiencies, fourth quarter obviously were 22% reduction over the prior year, and we see that continuing and leveraging on as our revenues continue to ramp in 2024, we also have them there's some margin expansion that we clearly believe that we can achieve over 2023 as our revenues allow us to leverage some of those in addition to some of the negotiations we've done with some of the advertisers and our business partners. So on all said, we believe that we're cutting down the cash burn each quarter, and that's going to allow us to start them getting to breakeven. And then needless to say, generating cash flow and positive adjusted EBITDA basis. So we're very encouraged that Tom things are working in the right directions from a revenue growth, margin expansion and being able to leverage our expense structure. So I think all of those will help them not only improve the profitability, but will help on our cash position as well.

And just add a little more color to that, Eric. And I think it's important to note that, you know, we always strive to use cash from operations as much as we can when Neil talks about a cash balance from a year ago. It was right after up less than that's the most we've ever had. We've never been one of those companies that are sitting on some sort of $50 million type investment. And we've managed that to make sure that we're as careful as we possibly can be without diluting folks than the same time, just making sure that as revenue increases, we're using that for operations as best we can. So we feel comfortable where we are, and especially as the business is tracking, we feel good about things.

Perfect. Thank you. I appreciate it.

Operator

Our final question comes from the line of David Myers with Singular Research. Go ahead.

Hey, guys. Thanks for taking the questions. Just from the start on the on the comment about Q1 kind of starting off strong. I mean, you guys obviously have a pretty tough our comp. I am assuming that when you said starting out strong it means relative to the rest of this past calendar year, Tom, as opposed to still looking at a year-over-year comp type figure. Is that a fair assessment, David?

Yes, I think it's fair. What we're trying to say by that is these past three quarters have been pretty flat, as you know. So to kind of grow past that it we certainly want to get back to those kind of eight figure double digit type quarters, you know, and that's that is our that is where we need to be. So we're not really kind of giving a specific number. But I think more to your point of it's just nice to kind of move off where we've been over the past few quarters.

Yes. And just to follow up to that national. It's obviously been a big story all year, national advertisers and pretty slow. I mean, are you guys starting to see some uptick there?
Yes, on the on the on the old group to see in some the big advertisers come back a little bit like the auto manufacturers. Hopefully, we'll see a strike behind them. They can get focus back on selling vehicles. But just broadly speaking, you're seeing better momentum on the national stage?

We are we are using it. It's certainly not going to be fully back as everybody well knows, but we're definitely seeing momentum on the national stage.
And so we're seeing it on the regional stage and to what Darren was talking about, we're certainly helping board on the local stage there and a big part of your transformation, I guess the US funds 12 to 18 months.

I guess as you guys are there kind of gone away from that the sales platform that you had been reliant upon and you had talked about bringing and building an internal sales force. And just wanted to wonder if you could give us an update on that? And just kind of talk about, you know, how that sales force is doing in terms of penetration and growing and reducing your dependence on kind of external sales assistant type operations.

I would say that we started seeing the results in the Q4 and that is continuing into this year. And I think that's what is helping us as we go into the new year, when we started having our issues back in January, it was really about being in that open exchange programmatic pretty much solely, no, if you recall that and we've taken and really big steps are important steps for us just to kind of full proof that and future-proof it a bit by having the direct sales team by increasing by building this local platform and certainly just kind of diversifying more on the programmatic side with more direct deals in there as well. So a lot of those steps have started to pay off in Q4 and lead into this new fiscal.

And I'm not sure if it's a number that you guys have necessarily handy, but maybe you guys could take a look and I don't know if it's going to come back to me on it, but on the Q1 number last year is obviously extremely strong on top line can you give me some sense of the impact of political on that and how significant that was on that revenue number?

It was a meaningful part of it. I mean, we could probably get back to, I guess with a little bit more in early conversation, but it certainly was a meaningful part of it.
I guess what was good about it is it really tested our fill rates that are in our system and to make sure it works well because we really weren't capacity. It was it was great in that sense. So for us just to know that it works and to have a broader distribution platform. Keep in mind, think about the growth that we've added on with, that's where we're really excited about what's ahead because we know that it could potentially make an impact like that. So it was it was a good part of our quarter. So it has not shown yet, and we still are having growth, like I talked about. So we'll see what that looks like when it gets sprinkled on next year.

Sounds good, but I wish you guys best and keep up the good work Pexeva. Appreciate it.

Operator

Concludes the Q&A session back to John Newman for closing.

Okay. Well, I'd like to thank everyone for joining the call today. We are excited about where the business is headed, and thanks again for joining us and look forward to providing further updates on our next call. Talk them back.

Operator

I'd like to thank our speakers for today's presentation, and thank you all for joining us.
This now concludes today's call, and you may now correct, no, yes, yes, yes, yes.