Tinybeans Group Limited (TNY.AX) Earnings Call Transcript & Summary

Good to go, guys.

Thanks, Catherine. Good morning, everyone, and welcome to Tinybeans for our FY '25 annual results presentation. I'm Chair, James Warburton and joining me today is our Managing Director and CEO, Zsofi Paterson; and Rebecca White, CFO. Zsofi will obviously take us through the presentation, but I'd just like to start by saying it's been an absolutely transformational and pivotal year for the business. We reset it 2 years ago, and I think most people will agree by seeing the results that what we've done and where we've structured the company to be today is on a much more financially sound footing. And more importantly, it has very clear and strategic direction for the future. As a Board, we're particularly encouraged by the progress made in building a subscription-led business, which is now close enough to 70% of our revenue. And at a time when privacy and social media is more important than ever before in parents' lives and children's lives, it is something that is there as a fit-for-purpose end-to-end solution. Without stealing Zsofi's thunder, a couple of sort of key financial highlights are obviously the subscription revenue growth, our gross margin our operational costs, particularly the fact that we exceeded our cost-out target, essentially 2 consecutive quarters of positive cash flow and a lot in terms of product innovation in terms of what we've done around Tinybeans+ Legacy gift cards and most importantly, the improvements in the app, which has seen us feature as App of the Day in the Apple Store in over 100 countries. So as I said, I'll hand over to Zsofi, who can take us through the presentation.

Thank you, James, and thank you, Rebecca, for being here with us, and thank you all for joining this morning. We know it's hard to come by time during August. For those of you newer to our story, Tinybeans combines technology with a deep understanding of family needs and digital privacy to make parenting more joyful, simple and meaningful. Our beloved family photo sharing platform is loved and trusted by millions of families around the world who use us daily to safely save, preserve and share their precious family moments. Starting with the highlights. As James mentioned, '25 has been a transformative year for Tinybeans, a year where we delivered on our commitment to build a subscription-led business and made significant improvements to our bottom line. It was a year of transformation, execution and discipline. We grew annual recurring revenue by 12% to USD 3.3 million with ARR now accounting for 69% of total revenue. We improved EBITDA by 60%, driven by overachieving our USD 2 million cost-out target and bringing OpEx down by 33% year-on-year. And we reduced our operating cash burn by 64%, delivering 2 consecutive quarters of positive operating cash flow to June 30. Our FY '25 performance has been driven by a strategic reset we commenced almost 2 years ago, which is now complete. You can see the improving operational performance of the business over this time reflected in some of our key metrics. And importantly, we are now on a path to profitable, sustainable growth. The business continues to boast high gross margins and as a SaaS business is highly scalable. Over the year, we refreshed the Board and leadership team with the majority of senior management now in Australia. We made an important change to localize our product development to Australia under an experienced Chief Product Officer, and we also brought on a terrific CFO in Rebecca White. We invested heavily in product and partnership-led growth, which we'll cover more shortly. As a consumer subscription business, our most important core metrics remain strong. Paid subscribers sit at 51,000 with net growth in H2 and continuing into July this year. Our LTV and ARPU have remained strong at USD 355 and USD 75, respectively. We have nearly 900,000 people using our app every month. And retention is excellent at 93% and daily engagement of our paid subscribers remains high. Importantly, our subscribers love our product and 93% recommend it to other friends and family. You can see the trend charts on this page. Net subscribers over H2 is growing as we fine-tune our growth engine and begin to see our marketing investments drive results. Churn sits at 7%, down 33% since '24, driven by strong engagement and retention. And our average revenue per user is $75, up 40% since '23 due to plan mix, pricing and the continued U.S. SKU. Over the year, we thought deeply about the role that Tinybeans plays in family lives and how we continue to find ways to add more value via our product suite to ultimately drive engagement, retention and revenue growth. After a seamless transition of our product development to a new team in Australia, we invested heavily in our road map, improving core user experience, addressing long-standing bugs and rightsizing enforcement limits. I'm happy to say the product is in the best shape it has been, which is reflected in the all-important App Store ratings and reviews. We launched Tinybeans gift cards and the important Legacy plan in June. The Legacy plan enables us to monetize the large volume of free users who have used Tinybeans in the past and wish to preserve some of their benefits. It will also help us to further reduce churn by capturing people who no longer want to actively share but want to maintain their journals. We are well on our path to evolve from a private photo sharing app to the global family memory platform, which I'll cover more in the strategy overview shortly. In '25, we strengthened our position as the go-to platform for new parents with a step change in our marketing efforts. As James mentioned, we received global platform recognition being featured as Apple's App of the Day in over 100 countries, underscoring our continued relevance and quality product experience. We secured major distribution partnerships in the U.S. and EU, which drove acquisition and brand awareness. From the latest data we received from Babylist, this has resulted in a 25% increase in brand awareness amongst Babylist customers. We launched the Tiny Moments creative platform with campaigns across BVOD, paid digital media, influencers and popular podcasts. And we gained media coverage across many of Australia's leading outlets, demonstrating thought leadership in the privacy space as well as partnerships with youth outlets such as the Daily Aus and Nine's Babytalk to build trust and reach. As you can see across our delivery, results and subscription metrics, our lean global team is engaged, motivated and firing. Turning to a summary of our financials with full financials in the appendix. We had total revenue of USD 4.82 million, down 11% due to the strategic shift away from advertising compounded with challenging U.S. market conditions. Advertising in line with product strategy, however, continues to play an important role, and we successfully won and delivered campaigns with LEGO DUPLO, Paramount Pictures and Wesfarmers' OnePass. Importantly, our ARR was up 12% to USD 3.3 million following our strategic focus on subscription-led growth. Gross margin remained healthy at 87%. Operating expenses down 33% with over $3 million of costs taken out. Adjusted EBITDA improved 60% and operating cash flows down 64%. On a multiyear view, since we commenced the strategic reset, our results demonstrate the improved operating leverage we now have through disciplined cost management and a shift to high-margin recurring revenue. As we mentioned, ARR has increased 57% when compared to '23. EBITDA loss reduced by $2.2 million or 60%, and I'm pleased to say it's the healthiest it has been in the company's recent history. And operating cash flows reduced by $1.8 million in light of reduced OpEx and investment in product development. With these improved metrics, Tinybeans is now well positioned for sustainable growth. Shifting to our strategy. Over the past year, we've been thinking deeply and critically about how we build something defensible, scalable and valuable that leverages our strengths and considers market trends. We believe we have the opportunity to build and become the leading flat family memory platform, evolving from a niche baby sharing app to a platform that caters to family needs at different life stages, both digitally and physically. Our focus on privacy and trust, multigenerational connectivity and the digital physical offering give us defensibility against the major tech platforms and competitive advantage against the niche players. Our future strategy is focused on subscriber-led revenue growth and monetization with the cost base now reset. So what does that mean for the next year? In the short term, it means offering subscription plans that suit different family needs. Tinybeans free for people to get started with a low barrier to entry. Tinybeans+, our primary subscription plan, which unlocks benefits. Tinybeans+ Legacy recently launched, finally unlocking a way for us to monetize age-free users and coming soon, Tinybeans+ Family for families or groups that want more uploads, more storage and eventually more smart features. The evolution of our subscription plans is a tried and tested strategy to monetize and further grow the important lifetime value metric. Next, it's launching our personalized in-app photo store during Q2. The physical photo market is worth $3.8 billion and is growing. With families already using Tinybeans to safely preserve, share and curate their family photos, being able to offer them more premium photo albums, calendars and merchandise is a very natural extension. The photo store will enable our users to create beautiful albums and calendars from their phones within minutes, breaking the time and effort barrier that exists across many of the larger platforms. Thanks to the investment we have made this year in transitioning our CRM to Braze, we will have the opportunity to really personalize the experience, putting offers to them just before, for example, grandma's 80th birthday or Father's Day. It's really powerful. Development has begun, and we're on track to launch this pre-holidays. We expect this to become a material revenue stream over the next 2 years. We made great progress with our marketing efforts over '25 and we'll continue to invest in building brand relevance and awareness, accelerating user acquisition and driving premium plan adoption. We'll continue to utilize media and brand partnerships, influencer marketing, PR and thought leadership, paid media channels and the important life cycle marketing to scale and monetize our subscribers, reinforcing Tinybeans as a privacy-first platform trusted by modern families. To wrap up, we've completed the reset, delivered a stronger '25 and have the strategy, product and team in place for profitable, sustainable growth for our shareholders in '26 and beyond. Over the next year, we are focused on cementing Tinybeans as a global family memory platform, driving both organic growth and exploring inorganic opportunities to own this space. Thank you for your continued support. Rebecca, James and I are now happy to answer questions. Cath, are there any questions in the log?

No, not yet.

Okay. We'll give it a couple of minutes.

I'll ask one while we wait. How are you seeing the general advertising landscape? And how are your partners going in the U.S.