Audioboom Group plc (BOOM) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Audioboom Group plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Stuart Last, CEO. Good afternoon, sir.

Thank you, Lily. Hi, everyone. Thanks for joining the Audioboom Q3 investor presentation today. It was a fantastic quarter for Audioboom. So we're pleased to walk you through some of the numbers involved and report on the progress that we've made. over the last three months. A short session today, 30 minutes, we're going to focus on the numbers. So for those of you that are new to Audioboom, we'll give a quick overview of the company and do some brief introductions. But for those of you that know us well, I think a deeper dive into the numbers and the performance metrics from Q3 will be super helpful for you. It really was a great quarter. So very pleased to be with you today to talk you through that. My name is Stuart Last. I'm the CEO of Audioboom and I have been with the company since 2014. And a little bit, you'll hear from Brad Clarke, our CFO, and he'll walk you through in greater deal some of the financial numbers there, too. But for those of you that are new to Audioboom, just as a quick background, Audioboom is a platform that supports independent podcast creators. We operate in a very fast-growing area of the media. Primarily, we operate in the U.S. and the U.K. and the U.S. is our biggest territory. That's where I'm based in New York City and the vast majority of our revenue is coming out of the U.S. podcast industry, which is the most mature podcast industry in the world. We are the fifth largest podcast company in the U.S. Our platform is -- and our tech platform is kind of very straightforward. It does one important thing, which is to connect content with advertisers and with audience, and we do all three of those things at scale that allows us to monetize the content on behalf of our creator partners through our relationships and with advertisers and our monetization engine. So that's just a quick background on the business. Obviously, you can ask us any questions and go deeper on that. But today, we really are going to focus on the numbers. And as I said, it was a fantastic Q3 of 2026. So I'll walk you through those numbers. In terms of revenue, we delivered $23.8 million of revenue in Q3, up 17% versus Q3 of last year. And importantly, the majority of this quarter was organic growth. Obviously, we acquired Adelicious in July of 2025. So I think it is important just to kind of state here that the majority of this quarter is really like-for-like and the most of that growth, that revenue growth is organic. So very, very pleased with the progress we made on the revenue side. That led us to $5.6 million of gross profit, up 30% versus Q3 of 2025 and an adjusted EBITDA of $2.2 million, that is fantastic, 89% growth versus Q3 of last year. So really, you're starting to see in there the gearing effect of this business model that we have, each particular metric growing faster than the previous one as that revenue flows through the business. And that's come from something we've talked about a lot over the last couple of years. The first one being that focus on the higher-quality of revenue that we have within the business. So that really kind of comes from two areas. One, showcase our advertising marketplace that has a higher gross margin attached to that advertising product. It's very efficient. It's ad tech-based. And as we'll show you on upcoming slides, showcase performed very, very well in Q3 and is now a much larger part of our business, a larger contributor to that revenue than previously was. So that's helping to improve that gross margin. And then secondly, our contracts with podcasters. So we work with independent podcasters. Part of that contract is a revenue share with the podcaster, and we continue to make improvements to those podcaster contracts, making them more favorable to Audioboom, retaining more of that revenue within the business. Obviously, the podcaster gets paid for the creation of that content and for the audience that they build for that podcast. So we have to support the podcasters. We support independent creators, but we are doing a better job of making sure that those contracts are more favorable to Audioboom. And that's led us to a good gross margin in Q3 of 23%, a little over 23% compared to 21% a year ago. So you can see those improvements in revenue quality through Showcase and stronger podcaster contracts improving that gross margin pretty significantly in just a year. And then the second part of that gearing effect in the business is driving EBITDA, and that really comes from those platform economics that we have, the consistent OpEx. We don't need to invest heavily into the platform for that platform to house more advertising inventory, more downloads, more distribution, and that drives -- that keeps the OpEx very consistent. Brad will show you this in more detail on an upcoming slide. And then the second part, in particular, for this last quarter was the final pieces of the Adelicious integration. We bought them a year ago. We focused the early part of the integration on making sure that we are driving maximum revenue. This most recent part of the integration has been around efficiencies. We've taken headcount back from 52 post acquisition of Adelicious back down to 42. Again, that shows off the strength of this platform for making acquisitions and seeing the synergies of those acquisitions. Consistent OpEx, that's driven $2.2 million of EBITDA and an EBITDA margin of 9% for the quarter versus 6% a year ago. So everything you can see here from these positive results, you get a deep understanding, I think, of why that's happening and why our platform model and the focus on that higher-quality revenue has been so important to drive those strong Q3 results. You're seeing the same mechanism, I think, in the year-to-date performance numbers, so $69.5 million of revenue for the nine months to the end of September, up 25% year-on-year. Gross profit, $15.5 million, up 32% year-on-year and then adjusted EBITDA of $5.5 million, up 84% year-on-year. So again, in those growth metrics, you're seeing that same flow through the business, and we're retaining more of the money. Just looking again, I think just stepping back a second for Q3, I think one important point is just the gearing -- on that gearing effect is we delivered $3.5 million more of gross revenue and $1 million more of adjusted EBITDA. So you're seeing more than 25% of that incremental revenue flowing to EBITDA, and that's an important part of not just I think, this last quarter, but how we expect things to go as we move forward and in the future. We do expect that incremental revenue from this point forward will drive significant EBITDA. And then we've included just the last 12 months performance just at the bottom of this slide. I won't walk you through that, but I think that just gives you a snapshot of where this business is today. And obviously, as we go into Q4 and the stronger season for Audioboom, we expect this business to kind of keep moving forward and to have a strong end to 2026. The key parts, I think I mentioned a little of this before, but just to go in a bit more depth on those performance drivers for Q3. The first one is kind of a very obvious one, and this is our global distribution metric. This is the number of downloads to podcasts or views to the video versions of podcasts that come through the platform. And we've seen significant growth on this metric over the past year. A year ago, Q3 of '25, the distribution number was 130 million per month following the acquisition of Adelicious back in July of last year. And we've built that distribution pretty quickly ever since. So 190 million, up 47% on the year on the distribution metric. That's come from continued signing of the biggest and best podcast creators in the world. It's come from the organic growth of the shows already in the network, and it's come from the expansion of video podcasting, which has become a fast-growing and more important part of podcasting, that consumption of podcasts in video format, primarily on YouTube. And all of that new distribution, that growth in distribution, that's really a proxy for the advertising inventory that we get to sell. So on average, between 8 and 10 advertising slots per episode, we get to monetize in each of those podcasts. And so the growth of that distribution number means more advertising inventory to sell. And generally, whatever we throw our monetization engine, the more inventory we put into that monetization engine, that monetization engine is very dynamic, and it will monetize that content. So -- the more we throw in there, the more revenue we drive. And that's obviously the area for us of focus is continuing to increase that distribution. So we can increase that distribution in the future through organic means. So that's just signing new creators to the network or growing those creators that are already in the network. So that's the organic part. And then as we'll talk about later on, we can acquire other businesses. This industry is very fragmented. We have a platform that can supercharge them. So just like with the proof-of-concept Adelicious acquisition, we can buy other businesses, put them into the platform, put them into the monetization engine, grow that distribution number, grow the inventory and then grow the revenue attached to those shows. So in Q3, our distribution grew significantly and is driving that revenue strongly. The other key driver, I think, in Q3 is the performance of Showcase. So Showcase is, as I mentioned earlier, is our ad tech-based marketplace. So it's very efficient. Everything runs through the ad tech. It matches the supply of advertising inventory on the Audioboom side to a network of advertising agencies, buyers, programmatic platforms, a whole ecosystem of advertising demand. And it does it very efficiently and has a higher gross margin than our other revenue lines in the business. So as you can see from this chart here, a year ago, Showcase was contributing 35% of our revenue. And in the first nine months of this year, it's contributing 41% of that revenue. So that's really helping to not just grow the revenue overall, but to improve the margin attached to that revenue. Premium is our higher price point advertising unit, and it has grown on a dollar basis. It's grown pretty well over the last year, obviously, as a contribution to the overall revenue because of Showcase's fast growth. We've seen the premium contribution dip slightly there, but still in a very healthy place and will grow on a dollar basis going forward. So I think that the company is in a great place in terms of driving that revenue. Showcase, I think, definitely has seen -- is the area where we have seen the first impact of the U.S. midterm election spending. We see that through Showcase and saw that in September. So September was a particularly good month for Showcase. So higher pricing in there, higher fill rates in that advertising marketplace has helped drive Showcase revenue, and we expect to see that high demand from the U.S. midterm election advertising continuing into October. So I'll hand you over to Brad now to go a little deeper on the numbers, Brad.

Perfect. Thanks, Stuart. Hi, everyone. I hope you're all doing well. Yes, let's go through some of the key financial metrics that we look at here at Audioboom over the next few slides. And thanks for the questions that have come in already through the session and actually quite a few of them we're going to answer as we go through the next few slides. So questions on cash generation on gross margin expansion, adjusted EBITDA. So yes, as we go through the next few slides, we're going to answer a lot of those questions anyway as we go through, as you'd expect. But yes, these slides reflect a record Q3, record nine months for the company. And really, I'll reiterate what I said three months ago at the half year in July. The slides and the performance reflect a company that's financially stable, self-sustainable, growing, profitable and generating cash and prime for future growth. I said that in June, and these numbers are now backing that up, and we're well set to execute on our targets for the full year. On the previous slide, Stuart gave you those insights to those three different revenue products that we have and the contributions that they have and how they've changed over the last year. The one we didn't call out there was Sonic, which is our platform for brands, which helps advertisers develop and execute campaigns across the podcast landscape and gross margin on that is typically 15% agency-based model, so lower gross margin versus the other two advertising products that we have here at Audioboom. In terms of year-to-date performance, let's go into that. So as we can see, premium revenues contributed majority of revenue historically continues to do so. Good growth, 18% or $5.1 million year-on-year for the first nine months of the year, and that reached $34.9 million for the first nine months of the year. Showcase continues to increase. As we've said, that contribution is increasing to 41% and the revenue increased by 44% to $28.2 million for the first nine months of the year. Sonic also recorded 4% growth to $6.1 million for the first nine months of the year. And again, because of that increase in overall revenue, increased contribution of Showcase revenue at a higher gross margin, we've seen an increase in both gross profit, which has grown to 32% to $15.5 million for the nine months of the year, and that gross margin has ticked up from 21% to 23%. Will we see that expand through Q4? That's the target for the rest of the year, and we'll come through to the seasonality of the revenue as well. We're seasonally weighted towards the second half of the year. We have seasonality in there, which means that we -- in the first half of the year, we have minimum guarantees. We meet those minimum guarantees in the first half of the year, but because we've got seasonally stronger revenue in the second half of the year, we recoup on those MG's, and we see that coming through in terms of a stronger gross margin. We'll see that on the next slide as well. Looking forward into Q4 in terms of revenue, we saw an increase in revenue from Q3 to Q4 last year. Why? Well, Adelicious was fully plugged in and optimized in the Audioboom network in Q4 of last year. So we saw that step up. Sonic also delivered a good Q4 last year as well. In Q4 this year, Adelicious inventory well established now, be comparable year-on-year. Sonic, I'm expecting to generate around $0.4 million less revenue in Q4 this year. But the Audioboom business will more than make up for that gap. And importantly, it's going to be at that higher gross margin, which takes us back to that core principle of focusing on higher gross margin revenue here at Audioboom. So in terms of improvements in gross margin, reaching 23% in Q3 of this year. That's a good improvement year-on-year due to that continued contract work to improve our revenue retention. And again, that seasonality point is very important when you're looking at these numbers. So H1 is seasonally quieter. We've got over 30 minimum guarantee contracts in the business that we have to satisfy. And typically, those are on a straight-line basis as well. So when you've got that seasonally quieter H1, we have to utilize more of our gross margin to satisfy those contracts. Now we're into H2. And specifically from August onwards, revenue is seasonally stronger, able to recoup on those MG's that we trued up in H1, and you can really see that positive impact in the gross margin chart. And yes, again, expect that to continue into Q4, so we could see that tick up slightly again as we go into Q4 before we see that seasonal drop on gross margin into Q1 of '27, and that matches up to what we've seen over the last couple of years. So a key takeaway from this slide, revenue is growing well, higher gross margin product and showcase contributing more leads to a higher gross profit and gross margin expansion. Next slide shows our OpEx in the business and our adjusted EBITDA, very straightforward P&L. We've dealt with billings to advertisers i.e., our gross revenue, payments to podcasters, which is our cost of goods sold, audience revenue retention or our gross profit or our net revenue, if you like. A very, very simplistic OpEx base within the company, 60% relates to salaries and commissions, 25% relates to technology to run the platform and deliver the ads. The remainder of costs are being listed company, a small bit of marketing and a bit of T&E in there as well. But very, very simple. Main point is OpEx continues to remain stable, very, very tightly controlled within the company. Final parts of the Adelicious integration have been complete in the year, meaning our OpEx base continues to be relatively fixed and stable. We've seen headcount reduced from 52 last September to 42 this September. Quarter-on-quarter, if you looking at Q3, costs have increased by $0.2 million. Those tech costs of running the platform serving ad impressions and bandwidth, they've increased by $0.1 million. Commission costs for the higher revenue were $0.1 million due to that increase in revenue recognized. So again, really important and exciting bit about the business model is that with that relatively fixed OpEx base, it's pleasing to see that adjusted EBITDA really showing progression, really starting to gear $3.5 million of additional revenue, throwing off $1 million of extra EBITDA, incremental increase of over 25%. These are all really good positive metrics for the company and hopefully give you confidence as investors. Minimal cash cost below the EBITDA line. There's a question about the adjusted EBITDA. There's minimal costs below the EBITDA line. If you look back at our historical reporting interims annual statements, you'll see those costs below the EBITDA line. We'll continue to report adjusted EBITDA going forward because we do have a few costs which are outside of interest, tax, depreciation and amortization, one of which is a noncash share-based payment charge. We do put any restructuring costs through there immaterial restructuring costs, I should say, any immaterial costs of corporate work that we do such as the strategic review earlier on this year. But simplistically, our expectation is that EBITDA is a proxy for cash generation going forward because there's immaterial cash cost below that adjusted EBITDA line. Key takeaway, we'll continue to focus on high-quality revenue. We'll control the MG's that we have in the business. Gross profit will continue to increase, combined with a tightly controlled OpEx base that will gear to adjusted EBITDA and to cash generation. And then the cash slide. So that cash position continues to progress very, very positively. We continue to operate a very efficient company, enables us to be virtually certain of our collections and working capital cycle. We can see in the chart on the left-hand side, the challenge on cash of dealing with onerous contracts that we had through '24 and '25. We're fully through that period now. The cash number now backs up our EBITDA growth and not just in cash at bank either. If you look at free cash of the company, i.e., cash plus aged receivables, less aged payables, that metric continues to increase as well. So free cash has increased from $7.2 million at the end of March $8.7 billion at the end of June, $10.8 million at the end of September. So again, that's really pleasing. And in the actual cash number that we report today of $6.7 million, we've only seen part of the impact of a strong Q3, i.e., we generated 77% of our Q3 EBITDA in August and September, but we largely haven't collected on that yet as our debtor day figure rests around the 80- to 90-day mark. So that's another positive indicator for cash as well is that, that will land with us over the coming weeks and before the end of the year. I guess finally from me on cash, it's great to have the support of our partners at HSBC to have that overdraft that we have for any working capital requirements, plus also the $10 million RCF as well, which will enable us to execute that disciplined M&A plan, which we've referenced again today. So yes, as I said, start these slides, they reflect a record first nine months of the year for the company. All metrics are very, very positive. We are financially stable, self-sustainable, growing, profitable, generating cash, prime for future growth. We'll keep pushing through Q4. Look forward to speaking to you in January. But for now, back to Stuart.

Thank you, Brad. That was all very positive, very encouraging and great to see in that level of detail. So look, as we look forward and just the last slide from me, I think we're in Q4 now, as Brad has already said, seasonally very strong in terms of revenue. The reason being it's the Thanksgiving Black Friday season in the U.S., NFL and Premier League soccer drives advertising revenue for us and then obviously, the Christmas season also. So we expect it again to be a strong season for us. And obviously, this time we have the midterm elections in the U.S. that I said, we are already seeing some positive benefit from, which will continue through October. So the rest of 2026 is looking good. Martin W, I think, asked the question here about our bookings level so far. So we're just over $90 million of booked revenue at this moment with 10 weeks or so of the year to go. So we're in a great position to deliver everything. And as you'll have seen today, the guidance, the market expectation for the year was upgraded to $7.7 million as we obviously are trading ahead of that through the first nine months of the year. So outlook for the rest of 2026 looking very positive. And then I think just to restate our focus for 2027 onwards, the longer-term goal for this company is to continue to focus growth through our M&A strategy. So we had a successful proof of concept with the Adelicious acquisition, added 50% revenue to the Adelicious content slate just by plugging it into the Audioboom platform. And then as we've shown today, meaningful synergies on the cost side as well. So it's a great proof of concept at a low level for what our platform can do through M&A. And we can expect to kind of continue that focus over the coming years with a goal to hit a revenue number above $200 million and an EBITDA number above $40 million in 2030. We think that's going to take between three and four meaningful transactions. And as Brad said earlier, we have the commitment for a revolving credit facility of $10 million to support that growth path and that strategy. The podcast industry is very fragmented. We do think there's an opportunity to be the consolidator. Our platform business is perfect, as I said before, to pick up podcast networks, podcast studios, podcast platforms of other types, put them on top of our platform, supercharge them and drive that distribution and inventory number that I showed you earlier to maximize revenue growth. We see a lot of businesses out there in this podcast space that hit something of a ceiling around the $15 million revenue mark. They don't own and operate their own technology. They struggle to scale beyond that $15 million number. So that's the kind of the ballpark that we're looking in that level of business. We'll be disciplined. We'll make sure that we are buying and looking to buy the right ones that they're accretive to this business and they fit our acquisition. strategy well. So that's the goal for us. That's what we're signing up for as a management team to take this business towards that $200 million and $40 million EBITDA number through that acquisition goal. So that's the long term, the short term, the future looks bright for Q4 2026. The company is in the best ever position that it's been in. We have a model that works, a model that gears heavily to EBITDA and then to cash, and we continue to grow very strongly. So thank you for joining us today. Thank you for the questions that we've answered a few of those as we've gone along. Audioboom and the Audioboom team have done an incredible job over the last three months, and we'll continue to do so for the rest of the year. So good to see you all, and we'll have some more news for you in the coming months. Thank you.

That's great. Thank you for updating investors today. I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure will be greatly valued by the company.