Snipp Interactive Inc. (SPN.V) Q2 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to the Snipp Interactive Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 a discussion of these risks and uncertainties, please refer to our public filings available on SEDAR 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's conference call, wherein I had spoken about our clients finding it difficult to decide on when to launch programs as they assess 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 on revenue growth remains 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 to 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're 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 in decision makes timing everything. For Snipp, 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 gives 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, our 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?

Thanks, Atul. I'm excited to have joined the Snipp team and to be here during this exciting time of growth and development. During the quarter, we continued 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 they're due, a result we're very proud of. As Atul mentioned, we continue to build on a solid financial and operational foundation, which will set the stage for future periods. Revenue for the 3 months ended March -- sorry, June 30, 2025, was $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 EBITDA of $1.1 million compared to positive EBITDA of $0.1 million in the prior quarter last year. Moving to the balance sheet. We ended the quarter with $3.8 million in cash, up from $3.7 million 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 30 was $3.1 million compared to $3.4 million at December 31, which is consistent with the company's average account -- sorry, account balances for receivables. Combined cash, accounts receivable stood at $6.9 million, essentially flat compared to year-end with a much cleaner AR profile. Bookings backlog, which ties closely to deferred revenue as it represents contracted programs that have not yet been recognized as revenue were $15.2 million compared to $7.2 million at the end of December and $17.2 million about a year ago. This continues to provide clear visibility into future revenue and demonstrates strong customer engagement across our product suite. The story of our second quarter through 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 our customers' confirmed commitment to future campaigns that have not yet been launched. 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, Malcolm. In summary, the first half was an interesting mix of operating environments across the 2 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 product. Having successfully launched this media product with marquee financial institutions like Bank of America, we're now razor-focused 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 platform. 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 product returns. They bring to the table thousands of SKU-based offers that we will be enabling on Snipp Media's financial media network, an industry first. So 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 Snipp 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 the question, we will try and answer it.

First question is from Daniel.

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

I think -- yes. So 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 the 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 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 comfortable that, hey, Snipp's got our budgets, 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 prework 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 we launch programs. If we don't launch programs, deferred revenue continues to go higher. Why? Because clients trust us, they pay us and that money sits there until we can recognize 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 -- it's nice to see that deferred 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?

Therein lies 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 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. So that's the -- our deferred revenue typically converts between -- converts up to a maximum of 14 months. Within the first 14 months, it converts into revenue. I'm hoping that actually it converts even faster given everything that's going on.

And then, I was wondering if you could just dig it a bit deeper in terms of your different product sets and solutions. 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 -- characterize the quarter?

I don't believe -- like, outside of the new products that we launched, which is Snipp Offers and Snipp 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 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-backed. Omar is one of the investors in this company. That's doing a deal with us. It's pretty mucky. We hope to announce that soon. It's sitting with their 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 kickstarted the media venture. And it will also give us a lot of visibility with other brands who've been sitting on the fence, who've been testing, saying, okay, this is real now. On our core products, that just continues to grow. I mean, like, yes, you look at it quarterly, it's one thing. But like I said, we had 19% growth, core business, core products. I mean, there's nothing else for me to say.

Okay. I appreciate that. And lastly for me, I think you mentioned unsolicited inbound interest. Like is that an ongoing discussion that you're having or understanding that you can't speak to too many details here. And maybe just a comment on anything else strategic that you're thinking about?

Yes. When market conditions start changing, people come shopping, right? Buy low, sell high, simple paradigm. So we are an asset that sits there. We've been pretty stable in building out and growing a $20 million, $25 million asset. We don't blew up a lot of money. We have no debt. 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 is part of one of them. So it's just the environment, right? So as our goal as stewards of this company is to evaluate every opportunity that makes sense for our shareholders, right? And we continue to doing that. It's just -- there are quite a few of these conversations happening now at the same time for obvious reasons. Okay. So the next question is from [ Stanshall. ]

A question about the -- you mentioned the decrease in bookings, but we still have a pretty healthy backlog of $15 million. How are you seeing the bookings this Q3 so far? And how is the pipeline?

Well, most of our bookings in the quarter coming in the last month. So right now, the pipeline actually is decently healthy, but will it actually grow is the question, right? And we'll know -- I'll know more in the next 4 weeks. So it's too early for me to give you a sense of what Q3 bookings look like.

Okay.

And also at the end of summer and especially in this quarter, most people come back this week or the next week. So things will actually pick up in September is a very, very busy month for us from a bookings perspective.

That's great. And let's wait for Q3 results then. On the other side, do you think that this is a one-off thing because of turmoil? 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?

Well, I think our thoughts -- I mentioned this on our last conference call. It has only amplified since then. It got slightly better and then it came right back, I guess, because of summer and vacations, I guess, I don't know. But like people aren't really sure what to do. And again, I think for us, 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 moment of need based on the direction that they get from their retail partners and their customers and their retail customers, right? So we don't see this changing until something happens. I don't know, it might be the stock market crashing, it might be interest rates actually going up versus down. We don't know. I mean, it will 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 inflation coming in, not coming in, how much of it is going to -- is tariffs going to continue? 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 are increasing, even though we were cash flow positive from operations, is to allow for that.

Yes. Sorry, Atul. Definitely, yours is a $20 million market cap company with $4 million in cash and $15 million in backlog. So totally. Regarding the operating expenses, they raised a little bit. Is that due to wages, salaries; is due to our other investment in other products? And if we continue to see this decrease in revenues, are you planning on any cost-cutting strategies?

Yes, we've increased -- again, just in this environment -- like we are planning for growth, right? And we kind of have technology leverage built into our model now. I've talked about this in the past, right, expanding to new markets, investing in sales for our media and office product. 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 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 towards the $15 million mark. So at this stage, we're not planning any kind of cost cutting, because we don't see the need to do it. In fact, we are just planning for the future. So I'm not going to react on 1 quarter.

Perfect. That would be all, Atul.

I will respond to you on coffee. I know you're in town. Yes. I think at this stage, I know there are people still joining the call. Trevor, welcome. I hope you -- I can send you the recording you just joined. But I don't see any more questions, but again, happy to answer any more questions. 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 to have positive EBITDA for this fiscal year? Yes. Again, our plans were based on a certain amount of revenue being recognized. When revenue doesn't get recognized, obviously, we can't cover the cost that we've invested in, and that's why 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 a much larger use of AI a big threat? No, we don't -- the big threat of AI is if we actually don't use AI. But we've -- our entire receipt processing, machine learning platform is what AI was before AI became AI in our field for receipt processing, right? We're also investing quite significantly. I'd announced a partnership a while back with an Agentic AI company. We continue to deploy that. We've got clients who are paying us now for a lot of Agentic AI customer service bots that we have been investing in. We got invited by the Canadian government to apply for a grant. I don't know if we get the grant, but it is -- it has to do with AI. So I don't think it's much -- it's not a threat at all. It's a very massive opportunity that we continue to evaluate based on how we can make profit from it. There's a question from Thomas. We 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? 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 that 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've 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. And yes, thanks.

Thank you.