Tinybeans Group Limited (TNY) Earnings Call Transcript & Summary

Hi there. Hope everyone is doing wonderful today. My name is Eddie Geller, Co-founder, CEO of Tinybeans. Hope that you're all doing wonderful at the moment. You're welcome to all our existing shareholders and investors in the U.S. and Australia. I'm excited today to share with you our results for our first quarter fiscal '22. Chris Motsay should be joining us any minute as our CFO, and he will talk through some of the financials. I'll get going, obviously, to talk about some of the high-level results and the incredible performance the company has delivered over the first quarter of FY '22. Before I get started, we'll have a Q&A session at the end. I've received some questions as people have relisted, but please feel free to drop a question into the Q&A box, and we'll get back to the end and happy to answer any questions anyone has. So we just posted these results to the ASX. And on top of that, we also posted a result -- an announcement around changes to the directors' loans. So before I get going, I just want to sort of clear the air, I guess. About a month ago, we initiated some directors' loans. They came with options that were to be issued based on, I guess, agreement between the directors and executive directors. Those options have been canceled or planned not to be issued. So again, the details of which are in that announcement, I'm happy to answer questions if anyone has at the end. But basically, in summary, the options that were meant to be issued to the directors that did loan the company money are no longer going to be issued. So with that, and again, with details on that later. Let's jump in because, obviously, there's a lot to cover today and happy to obviously get the questions later. So we delivered another record quarter. I'm really proud of that. We delivered about USD 2.54 million, and everything you'll see today is in U.S. dollars. So USD 2.54 million for the quarter. That's the July to September quarter, and that's above what we achieved in the previous quarter. So calendar Q3 is typically not as strong as other quarters, but for us, it was. We've grown continuously into the ad business and continually growing that. What's really pleasing, I was looking at some historical results. And we've -- the $2.54 million is just under what we did the entire FY '19. So the fact that we're growing the business so well just shows you the value we can deliver out there, which is the potential this business has as we scale the company. So we'll continue to deliver on a lot of the commitments we've made earlier on this year, and this is really a report card on that. So not only you'll see results that I'll talk about, but also a report card of things we've launched as well. So excitingly, we launched the whole new web property, which I'll talk about a little bit later, and that's the galvanizing of the Tinybeans, Red Tricycle, I guess, platforms into one. And that's really exciting. There's a lot to share there. I'll talk about that a little bit later. We also did fantastically well in terms of the ad business. Again, I'll talk about that shortly. Subscribers I'll talk more in detail, and we'll continue to be a wonderful partner with Apple that continues to grow. So really, really, really thrilled with the quarter. You can see, in summary, 42% in the same period 12 months earlier. And again, this shows you the potential of the platform, given, again, none of that was really done through huge amount of marketing and paid media. So again, continuously driving to our existing audience and obviously, the value prop to the market to obviously grow our business. So just to sort of break up on the revenue a little bit. The $2.54 million is the group revenue. At the present, largely that's driven by advertising revenue. You can see $2.26 million is advertising. That's about 50% up on the same time last year. Subscription revenue also grew compared to the same time last year. And again, I'll talk about this in a minute, but in terms of subscription, we're deep in transition. So there's definitely some metrics I'll share with you in a minute, but we continue to be in transition through, obviously, this baseline of being stalled transitioning the audience to this new subscription model and scaling it. So we're in the thick of it. So to the results that I'll talk about shortly are very much in the middle of it all as opposed to sort of at the start or the end. And that's the exciting bit here in terms of we're transitioning through it all. Again, I'll talk about that in a minute. Our other revenues include e-commerce and printing. And again, they're obviously the smaller revenue streams for now. But really for us, we're really thrilled the fact that the main revenue lines continue to grow, just like we've committed to the market, just like we've committed to our, I guess, our road map. And all the -- I guess, the previous investments we made in product are continuing to deliver because we're delivering results year-on-year out compared to obviously the same period the previous year. And what's wonderful is with the new launches with it comes new propositions. And with that, the ability to continue to grow the revenue in advertising and subscriptions as well. So let's unpack both. It's advertising revenues. It's been phenomenal. Our ad business is doing incredibly well. We continue to win business from existing brands, because about 70% of revenue comes from existing brands and 30% from new brands, which is really a healthy balance. So existing large brands are coming back for more. And clearly, we're winning new brands to see the value of it. Some of you may have seen when we launched our new website last week, we also launched it with a sponsor. YouTube Kids was inaugural sponsor, which is incredible to have a brand like that sponsoring the site. Again, it really demonstrates the value of the platform and the value of what we deliver to a brand like that. We also had wonderful new wins with brands like Microsoft, LEGO, which we announced earlier, Kraft and Melissa & Doug is a wonderful toy brand here in the U.S. and around the world. So we continue to grow a number of deals we're closing of USD 100,000 and continue to grow the business across not only the large national brands but also the local brands as well. And again, just to remind that we posted this a few weeks ago, but we closed our first ever $1 million contract. And what's particularly exciting about that beyond the fact that it's our first $1 million contract, it's all for 2022. And it just shows you the fact that brands they're not only signing up for the now or the short term, they're also signing up commitments for the longer term. And they're seeing the value of what this new Tinybeans beans platform can really deliver to them to be able to sign long-term commitments. And we're talking to all the brands you see in front of you for obviously more campaigns and more partnership opportunities next year. Also what's particularly exciting, we thought we'd show how strong the business is not only the quarter we just finished, but also the quarter we're in, Q2 FY '22 or Q4 calendar year. So we already have closed over USD 2.5 million in contracts, and that's only direct advertising contracts. So if you layer in other revenue streams like programmatic and clearly subscriptions, printing was the seasonal for this quarter and e-commerce, it's going to be our biggest quarter ever. And I really wanted to demonstrate the fact that we're continuing to grow, continuing to deliver on the value property brands even though we're going into this transition of audience and subscriptions behind the scenes. And that's really part of the strategy that I've shared numerous times, but I just want people to really appreciate the fact that, that business is growing and will continue to grow, whilst we are looking to grow and generate a new revenue stream that's sustainable and recurring as well to supplement the ad business. So really, the overall business in the advertising space is in really great shape. Kudos to Nina and her whole team, we're just doing so well there. Subscription revenue. So subscription revenues, $225,000 for the quarter. You can see it's marginally up on the same period last year, and that's expected because of this transition. So we have about 26,000 paying subscribers up until October 25, and that's a combination of both premium and Beanstalk because we're still going through this transition. So a key point to note that the quarter we just finished Q1 is basically a quarter of transition, and this will continue to be a quarter of transition in this quarter as well. And what that means is that we're moving from -- we have moved from a family-based subscription to an individual-based subscription, and we've also incorporated a 30-day free trial period. Prior to this, the premium model never had a 30-day free trial, just upgrade and start paying. 30-day free trial period introduces opportunity, but also reduces obviously, delays in when a person starts to obviously commit to a paid subscription. So just an important point to note through this transition. Download to paid is 14%, continues to be optimized. A few months ago, we had shared it was 23%, which is incredible. And clearly, we also shared that as the numbers grew that number would come down. 14% is still amazing. What that means is that every 100 people that signed basically download the app, 14 people are converting to a paid user. So it's really great results. And again, they'll continue to be optimized and growing it. We launched our tinybeans.com, which I'll talk about later on, and you'll see further acceleration in this quarter. So definitely expect the paid subscribers to grow. It will accelerate nicely this quarter and will continue to grow into next year. But again, I just want to point out that we're in transition and we'll share results and metrics as we see there being significant enough to obviously start to get trend lines accordingly for all of you to sort of have a better appreciation for the business. From an audience perspective, we saw a nice growth in the quarter also, again, largely organically driven. Paid Media only really began this quarter, although there's not a lot of it, but just in the test phase. One thing I do want to point out is that because of this transition, we basically consolidated both the Tinybeans and Red Tricycle platforms, audiences, of course, as well. So we definitely anticipate a decline of that active user community because of that consolidation and merging and also clearly, as we're migrating from a free subscription to a paid subscription, we're fully expecting some of those people to churn and not come back to the platform and then also expecting new users to come on board and scale with this new value prop. So but we're definitely expecting this quarter to be a decline in active users. So we'll share that when we have it. But clearly, none of that will be dependent on revenue, we see definitely growing in the quarter, like I said earlier. So just important point to appreciate the fact that this transition is all intentional and part of our strategy to build out sustainable ad business and sustainable subscription business, and we definitely see the audience adjusting accordingly. And then moving into Q3, FY '22 or the start of calendar '22, we'll start to see that audience naturally grow as new users come on board, new referrals come onboard and a whole bunch of new features we're looking to launch there as well will drive that. And then the partnership with Apple continues to be wonderful, continue to add more content to that and fully expect audience from that channel to grow. Whilst also evaluating other channels to grow the audience as well. So overall, audience is also going through some changes, but really happy with this transition that we're going through, albeit the fact that it is bumpy for -- given the free audience going to the paid audience. I'll talk a little bit more about that later on to comment on some of, obviously, the changes there. But overall, really pleased with these results so far. So moving on to some of the financial results. Chris, my partner in crime is with me here. So I'm going to hand over to him to talk through some of that. Over to you, Chris.

Yes. Thanks, Eddie. Appreciate it. Good evening, and good morning to all of our friends, colleagues, investors joining the call today. So I wanted to take you through the financial results more from an operational full P&L perspective. So if we can move on to Slide 9. Yes. So from a P&L standpoint, Eddie has already largely touched on revenue. I just wanted to add from my perspective. We're really pleased with the revenue growth this quarter. It's up 42% in total year-over-year. This is all organic growth. As you guys remember, we acquired Red Tricycle back in February 2020. This is apples-to-apples organic growth quarter-over-quarter, second quarter in a row. And we're happy with this result. And this also, as you saw in previous slides, does not really contemplate heavy growth in subscription, which we're just going on. So the plus 42% is a good result for us. It's driven by ad subscription. We will boost that in the quarters to come. From a gross margin perspective, just a little bit of a refresher, that was really flat year-over-year. Gross margin, we're over 90%. The way that we measure that in our business is we really distribute direct cost against revenue. And so that's largely on the ad side, and that's largely direct cost related to ads that are directly attributable to it, such as production costs and so on and so forth on customized ad solutions. So we expect that to continue to be robust as time goes on. From an operating expense standpoint that's increased 33% year-over-year versus first quarter last year. We are in investment mode as you'll see in the next couple of slides. And so we do have increased investments in the resources and compensation. We have variable costs that are increasing with user growth and with our product launch such as hosting. And then in general, we are beginning to incur increased general and administrative costs related to our future plans to help list to Nasdaq. So as folks who are paying attention to the company will know, we recently switched auditors to Grant Thornton, just went through a successful audit issued our annual report. But having a global auditor in place has increased some of our accounting and audit fees. We are beginning to incur costs such as Investor Relations and legal as we begin this process. And then lastly, it's just important to note that one thing that with me coming on as CFO with Grant Thornton coming on as our new auditors, we have had a chance to revisit certain policies as also we went through our audit. And so one major thing that we started doing retroactively as we issued our annual report for fourth quarter and then here in the first quarter is, we've begun capitalizing our software development costs as well for projects that meet that criteria under AASB 138, which is intangible assets. Folks who read our annual report it's $94,000 in the fourth quarter, $289,000 this quarter. We expect that to continue somewhat in -- through the second quarter as well as we've continued to invest in and launch on Beanstalk as a product. And then -- so that is -- it's cash out the door, which I'll get to in a second on the cash slide, but it will be run through amortization expense below EBITDA once that project gets placed in service, so to speak. So -- it's important to note before we move on here that we're also introducing, what I believe, is a new metric for the people who are following the company, which is what we call adjusted EBITDA. We used reported EBITDA in our last slide as we were formulating the metric, but this is something we expect to use going forward. It's an operational view of EBITDA. So on top of excluding the normal things that get excluded from EBITDA, interest, taxes, depreciation and amortization, this metric will also include share-based -- exclude share-based payments expense, anything that's not operational in nature. So you're talking ForEx gains and losses, you would be talking very one-off things like losses or gains on disposals of assets, any kind of impairment expense related to assets and so on and so forth. And so you'll see this metric going forward. So with this adjusted EBITDA loss, this is kind of right where we expected to be perhaps a little bit ahead, and it's something that we're going to measure and report out on going forward. And this is really the North Star inside the company from a bottom line standpoint as to how we look at the business. And so we're really pleased to share that with all of you as well. So from a bottom line standpoint, we're happy with this quarter. Going on to the next slide. So now what we've done is we've taken the adjusted EBITDA, and we have retroactively applied it to the last 5 quarters as well, including this past one, just to give you a sense as to where we are. We've said this before in previous calls, we're continually investing and putting money into the company from a forward-looking investment perspective. And from my standpoint, the chart and the table have the same data in it. But with all the features that we recently launched are in the process of launching. You can see from the slide that our expenses and cash out the door related to growth investments really are a substantial portion of the business. The core business, operating cost is much more of a run rate perspective. From an adjusted EBITDA standpoint, we do expect to run at a loss for the foreseeable future. But that loss will narrow some quarters. It really depends on the revenue that comes in. But you can see, excluding growth investments, the company can flip that switch from a variability perspective and turning to profitability. Should we choose to do so, but with so much revenue opportunity in front of us, certainly, we're focused on investing in the company on a forward-looking basis for now. So then going to the next slide, talking about cash flow for a second. This was a little bit of an unusual quarter for us from a cash standpoint. First, fiscal quarters are always a little bit unusual. When you think about -- in a business like ours, cash flow, and operating cash does tend to generally move with the P&L with adjusted EBITDA. That did not happen with us this quarter. The first quarter usually is where you see the largest disconnect of operating cash versus adjusted EBITDA. For us, this was a little bit more unusual. We had a couple of timing differences in the quarter. We had some receivables that we were expecting to collect here in the fiscal first quarter that we actually collected at the end of June, last fiscal quarter, a little bit earlier than expected. We had a couple of receivables that we expected to collect at the end of September that are getting pushed out to the beginning of October and end of October. And then as I kind of said in the first quarter, you always have a little bit of a disconnect between accrual-based accounting and cash out the door in 1Q, the cash out the door being a little heavier in 1 -- in first quarter related to operations because you're paying out things like annual sales commissions and other things that are measured annually. And so all of those things kind of contributed to operating cash flow being worse than adjusted EBITDA in the quarter. And then I also wanted to point out that with regards to all other activity, we now have capitalized software spend, which was about $290,000 in the quarter that now goes into the investing section as an outflow in our cash flow, and you'll see that going forward. From a cash standpoint, the ending balance was $1.5 million. As I said, with timing of receivables, we actually had a $200,000 receivable, literally get collected on October 1, which immediately brought the balance up to $1.7 million. From a cash burn perspective, it's a little bit higher than the average run rate for our quarters last year, which we had said it was about $400,000 per quarter. We're expecting it to be on the burn of about $500,000 in the second quarter as we continue to invest, but we're also growing and now seeing the revenue results to begin to materialize from the investments that we're making. And so Eddie, with that, I'll turn it back over to you.

Awesome. Thanks, Chris. So moving into some of the more, I guess, marketing, business, product-related activities, we thought we'd share some of the highlights there because, again, through the course of 2022, we've shared what's coming and what we're working on. So it's really exciting that a lot of these have now come to life and I guess, out in the real world, so to speak, and that's exciting for us and our team because there's so much more upside there once it's being released. So we released our new website, tinybeans.com. We launched it late last week. And then -- and I guess, so what's important to note here is that it's basically a combination of the old Red Tricycle site with the old Tinybeans site to bring the new Tinybeans. And what's particularly exciting is that there's so much value and there's so much incredible, I guess, features we're looking to create a launch of the back of this. So what you're seeing in front of you when you check tinybeans.com is really the starting point. So it's bringing the best of the memories, app experience with the content of Red Tricycle and really laying them in together. So on the left-hand side, you can see what a typical, I guess, new user would see. And that's the website, if you go to the site today, you can set up a new trial as well, sign in, if you like, check out certain sites based on the cities you're in. On the right-hand side, basically is you've logged in. So we know who you are and you'll start to see recommendations for you and your children. So it says welcome back Kyle. And basically, you'll start to see features launch very shortly where you'll have recommendations for your children. And that's particularly exciting and incredibly unique. It's not available out there. But I know a little while ago, I was talking to this to everyone really explaining it, and this is what we mean by that tailoring of content. So it's location, age of child, interest, gender, et cetera, which basically provide that tailoring piece, which will all be part of the Beanstalk subscription. So if you go to the site today and log in, if you're using, you'll see some of these features but you'll start to see a lot of these features launch in the next week, month, months to come, and it really drives value prop home. So again, what you see today is really the starting point of what our vision and mission is and really exciting because it's come to life, and I think there's so much potential to be had there. And the feedback we've had is phenomenal. It really, I think, the design pops. And really, if you go to other sites and come back to this, it really is a reminder of this positive experience that really Tinybeans is today and will always be into the future. So we're excited by the website and really what you're seeing in front of you is really the starting point. So as we've also shared before, we're evolving the value prop. So the value prop historically for Tinybeans is about memories, obviously, around what transpires being around inspiring content, we're bringing the best of all these worlds together to really deliver on a mission and a goal of really being the go-to resource for all things parenting. So again, it's the start of the next chapter of this value prop. Yes, we see memories be a key part and content and then you'll start to see other things come to life around personalization, parental community we're looking to launch and a whole host of other things into the future, e-commerce and access to other services. So again, but it's just really, really, really exciting that it's -- the platform is there. It's launched. It was a huge project by the team, and I'm really excited and proud of the team that we put together to create this and really excited about what's to come. So there's a lot there, but really stay tuned for what's around the corner as well using the building box of what we have today. Tinybeans Ideas is basically our brand of content. So rather than being just content or articles. It's called Ideas because really when a parent explores a site, explores things for their child, their ideas in terms of what to do, how to solve things, where to go, connecting with other parents, et cetera. So it's called Ideas. We're also launching an update to our app. It's -- I think the iOS app was launched earlier on today, slightly being rolled out across the world. Android is about to be released imminently. So again, you'll start to see ideas inside the experience, whether it's the web and the app, plus the memories and other things that we've been talking about as well. So really exciting that it's come to life. You'll start to see the visual representation of it as well. And I'm again, really proud of the team that we put together to have it. So all the things we said to all of you and to the market since probably the beginning of 2022, we're delivering handsome. And we'll continue to update all of you with what we're doing and where we're heading but it's really exciting to see that the platform is doing what we said we'd do and to start -- it's early days, and the feedback has been really positive today. So just to lift an upper level and really remind up for everyone is that the market we're in is enormous, and we'll continue to grow our, I guess, entry point into the market, whether it's the advertising business, whether it's moving into e-commerce into the future, whether it's the amount of money the parent spend on their kids every day and really engaging with the millennials, wherever they are. So for us, it's about continuing to drive and win in this addressable market, whether it's advertising on subscriptions, whether it's things that, I guess, parents will book for their kids. That's a huge market we're addressing. And I think entirely whitespace that I think the Tinybeans can be the category leader in. So it's really, really exciting times. I think that the market opportunity is huge and the platform we've launched is really just the starting point of what the potential is going to be. So this slide, I know I've shared before, but I just want to remind everyone about the very intentional desire and basically plan around continuing to grow the ad business and growing a new revenue stream around consumers or accelerating the consumer revenue stream [indiscernible] consumer and subscriptions. And again, historically, it's been 85% advertising, 15% consumer. You'll see very intentional changes to that this year on our march to be 50:50 in years to come. So that's definitely our continued plan. Everything that I said here, I think this is a chart that I showed last December for the first time is all happening as we speak. And we're delivering all the things that we've said we do and the results are working because we're starting to see the results grow in the ad business, of course, like we're demonstrating, and we're going to start to see that also across the consumer revenue streams, largely around subscriptions. So as we start to think about the big bets, so when we summarized our results for FY '21, a month or two ago, and I shared the plan for FY '22, these are our 3 big areas of focus, our strategic pillars we call them. One's around enhancing the customer value propositions, obviously drive lifetime value. The second is around enabling the platform to scale across -- the platform technology and the audience. And the third is about elevating the brand, a single brand to be the go-to brand for obviously, for parents. So we're delivering. I'm not going to go through every comment here and every statement here, but all the things that I've been talking about, we're doing here right in front of you, whether it's in your website we launched, an upgraded ad serving platform we launched, and there's still more enhancements to come to there as well. And we're building out a whole range of capabilities behind the scenes as well. Migrated the subscription platform. And really, I'm at a high level, the team has really stepped up significantly. I mean we're about 70, 75 people at the moment. It's an incredible team, basically brings together a whole host of capabilities and strength and talent behind the scenes. And just to show you what we've been able to do with that team, obviously, is really quite exciting, both from a technology standpoint and clearly from a results standpoint. And we've just, again, only just beginning and the feedback we're hearing from brands is really positive, and obviously, the results are going to deliver on that. So as I sort of summarize where the business is at and move into questioning, Q&A rather, it's just an incredible time. I'm more and more excited than ever as I stand here in front of you and share with you the business, I continue to get more and more excited. Because not only is the product an incredible delivery mechanism for parents everywhere, it's the starting point of what I think is potentially enormous. There's no one out there doing this, frankly. And everyone, I think, is providing a very generic experience that I think is just not good enough anymore. I think us stepping down on privacy, us offering this personalization is really a compelling opportunity to really lead the space. And a single brand, I think, for me is very, very important for parents, so we connect the brand with parenting, an incredible team. I've already spoken about, which is this first class and audience, which is largely organic. We're going to continue to invest in and grow and clearly, obviously, over time, acquire more and the multiple revenue streams that we have and we'll continue to double down and grow. So really it's a great time. I'm excited that the first quarter has been record. I look forward to, obviously, sharing more results in the future for this quarter to be a record and obviously updating the market accordingly. So with that, let me jump into some Q&A that I've received before and then also answer the questions that everyone is posting here too.

So one of the questions was, can you provide some color on the 3,500 new subscribers that we announced, I guess, a few weeks ago, what the makeup of those users are, where they part of beta group, et cetera? So the 3,500 paying subscribers is really a combination of some existing free members and some new paid members. They're not connected to any sort of prior beta group of Beanstalk. We did run some tests early on in the year around Beanstalk, around content. That's sort of unrelated to this, and it was a pretty small subscription base, the 3,500 is really make up a bit of some free and some new users of the -- again, the people that signed up from fresh Beanstalk, free trial experience. Do you have an update on the subscriber conversion metrics of Beanstalk? [indiscernible] 23% last time, what's the latest? As I shared before, 14% is really we're at today and its initial conversion figure. We're really happy with that, but it's early days. So we'll continue to invest and iterate on that, continue to obviously figure out ways in which more people will start a free trial and then clearly convert to a paid and as obviously, more results are available, we'll share that with the market. We have another question on cash burn on basically -- and I know Chris highlighted this already, and I just sort of reiterate to make sure everyone's clear around the cash burn for the quarter. So Q1, we had higher cash burn than I think maybe some would have expected. And what are our feelings about that and what our feelings about potential cash burn for this current quarter. So as Chris already pointed out, it was obviously a higher cash burn for the quarter for a whole bunch of reasons around cash delays and obviously increasing cost. But as the revenue continues to grow, we're obviously positive about how cash burn will continue, which is why we feel this quarter will be about $0.5 million cash burn. The revenue is growing, the costs will continue to iterate and evolve as we continue to invest in the platform, but really we expect about $0.5 million cash burn for this current quarter. Another question around the website and some of the ad experience on the website. Is there any feedback we're having around the ad experience from consumers? Some of the ads you may seem a little bit large, can we share any feedback? So basically, the new website has some new standard banner ad sizes based on industry standards. We'll continue to test different units. So if you go to the web, your desktop, you'll see some units. If you go to a mobile where you'll see different units. And we're testing a whole range of different units. What's wonderful about this new platform is that we have new units we can now offer advertisers we didn't have before. And as we go out to talk to these advertisers on these units, we'll obviously get feedback. Obviously, you drive that inside the experience and we get feedback from consumers as well. But those units give us an opportunity to offer more value to brands, generate more revenue, et cetera. So that's one example of what we said before by this upgraded ad experience. It's not just about the data behind the scenes. We'll also deliver value through the different ad units we're testing both on mobile, web and desktop. Another question about Apple's iOS ad tracking and whether or not that's impacted our business? Do we feel that's going to impact our business moving forward, et cetera? So with Apple's iOS ad tracking updates, there's definitely been a small impact to our programmatic revenues. Having said that, so much of our revenue is directly driven, right? We work with brands directly, both our national and local, we're able to leverage the audience that we have and the value that we deliver these brands. It's overall been still growth in the business. So the great thing in our business is that we're not very reliant on the programmatic world. There is a programmatic revenue stream that's fairly small considering. And also, we sell direct to brands using programmatic channels. So we don't have to be, I guess, at the behest of open market and certain CPMs programmatically that basically are impacted by the fact that the users not being tracked with these ad changes. So yes, it's a small impact, but relatively small, and you can see those changes happen, I think, in about April, May, and our ad business has continued to grow. So I'm really happy with that. Another question about what are we doing about our long-time users who're upset there is no longer free option and how much negative feedback have we received around that? So for those of you that don't know, haven't seen -- so clearly, we announced to, I guess, our audience on the market that we're migrating from a free experience to paid experience. We've received feedback. We clearly expected feedback, of course, that users are unhappy that some users unhappy that we're moving from free to paid. And basically, that's a challenge for them. So we definitely received some feedback. I would say it's small overall. Some of those people have been upset and angry and then they go to the app stores and post 1-star reviews. And again, we expected that as part of it. On a positive, we've had, obviously, feedback and people love the product and obviously going through the paid trial and converting. So there's no, I guess, offering where we're grandfathering a certain audience to a free experience forever as part of it. Everyone is looking to be migrated to the single subscription. And we feel $5 a month, [ $40 a year ] is highly basically -- is great value. It's incredibly inexpensive for an unlimited product. There's no company in the world that gives unlimited storage at a cost, right, even the biggest companies in the world. And we all know them, you have to pay a monthly and annual fee for the use of storage, right? And yes, there's a free version that they had, but for us, we really felt it important to have a paid product that offers much more value than just memories and really worthwhile preparing to pay for. So that's really, I guess, the way we thought about the subscription strategy. All right. So with that, the other questions I received -- we received earlier. Now we've got some questions basically through the people obviously on the call. On the momentum you've seen in the subscription business, what's the channel that they've been acquired -- could you share customer acquisition cost? It's a great question. So at the moment, most of the users have come to a subscription are still from our free experience and basically people that are just download the app called from largely organic channels. We are doing some paid acquisition at the moment. Like I said earlier, we're in a testing phase. We don't have at the moment a customer acquisition cost to share publicly. We're in a testing phase and once the testing phase completes, and we get some numbers that will summarize that we'll start to share that with the market. So hopefully, that won't be too far away. But at the moment, we're just not in a position to do that, given that we've just started the process of that subscription strategy and a testing plan with different channels of paid media. Another question. How the announcement of Neighborhood and partnership with YouTube Kids work together with your subscription business ambitions? It's a great question. So the Neighborhood is basically our label for our parenting community. It's something that we're going to invest much more into the future. It's not something that's available today publicly. There's still some work that we want to do to make sure it's a really beautiful product that's going to be part of the value that the parents are willing to pay for. And that may be most probably will be released only early 2022 calendar year. There's a lot on our plate at the moment with the transition and the platform we've just launched that we really want to bet in. So we'll look to -- look to launch some of these Neighborhood features, the parenting community features into early 2022. So a lot of the modeling and expectations we have on subscriptions will be largely predicated on the memories piece and the personalization around content piece. In terms of working with brands like YouTube Kids. It's an opportunity for us. So YouTube Kids obviously advertise on our platform. They're trying to target parents to basically encourage their kids to use YouTube Kids. And we see that augmenting the value prop. So in the future, as we have Neighborhood and Parents in there, we'll have, I guess, video that basically is served by advertisers, and that will be inside the experience as well and YouTube Kids could be an advertiser in there. Again, far more tasteful, far more integrated and we see that as part of the experience. Again, in all the research that we've seen around subscriptions, there is nothing to suggest that the parents don't want advertising at all. The feedback we've seen, especially around content. The memories piece is one thing. The content business, and you see all the content companies in the world have advertising around it and most of them actually have paid subscription businesses, we see them working hand-in-hand. So you're paying subscriber, you're seeing content, whether it's video or written and there'll be advertising around that. And we definitely, for us, want to drive a wonderful ad experience that offers tailoring and personalization to you. So it's relevant. So if you have a 2-year-old child. You want to see advertising relevant to your 2-year-old child, not just basically random ads served up to you because you're just any other user. And I think there's that balance we want to create this really highly valuable experience that parents pay for, but also a really native ad experience together. And that's one of the reasons why we want to obviously launch Neighborhood when we're in a better spot. Can you speak to the strategy on maximizing lifetime value? So at a high level -- it's a great question. At a high level for us, one of our strategic pillars is to grow lifetime value, of course, is to really engage our audience to drive more value to them and offer more services and products. And if you think about the strategy of trust that we garner and the ability to obviously offer them and encourage a parent to share information about their child to get personalization of content, based on their content, we can then recommend other things like products and services, we're all about driving lifetime value of that customer. So the customer starts with us as a guest, I guess, potentially. They're coming to the site, look to sign up a trial. Tell us a little bit about their child and over time, we'll look to obviously add much more value. So that's why we feel confident that the strategy around a deeper relationship with an existing parent or existing family to basically continue to offer all sorts of products and services is a huge business to be had, and we know how much we spend on our kids. I for one know how much I spend on each one of my kids as they've grown up. And there's no reason why once we have this relationship with the parent to offer this personalization piece, we can offer more things to them and grow lifetime value. I don't have any metrics in front of me now and worthwhile sharing, but that is a significant strategy for us, like I've talked about strategic pillar, and this platform we just launched is the starting point of that. With the recent Facebook whistleblower issues, have you seen any step up in advertiser wanting to migrate more ad dollars to Tinybeans or has anything changed in the existing pipeline of advertiser base that you could share? It's a great question. So I guess as it relates to the Facebook whistleblower issues, I'm not sure if there's a direct link to when that obviously has happened over the last month or so, and we're seeing more inbound inquiries because of it. I think for us, we will just continue to see increase in brands wanting to work with us because obviously, the value prop we deliver and the fact that we have this relationship with our parents and families that they can't -- obviously, it was very difficult for them to get on other platforms. And I guess given the 70-30 metric, where 70% of existing brands coming back, 30% new brands, and we're obviously talking to brands for 2022. We're definitely seeing more brands interested with our platform. And also the fact that it's a single brand. We no longer have to go to these advertisers and go, "Oh, like Tinybeans does this or trustful does this and here are the opportunities to work together." We have a single brand, a single experience that can now invest in and see value when one obviously, grow together. I fully expect, though, it will continue, and I think brands will see value in a private experience that basically have this really trusted, I guess, relationship with parents to do more with us. So watch this space. We're fully expecting the ad business to continue to grow and hopefully accelerate into next year and beyond even more given the, I guess, the challenges that other platforms are having specifically around how they deal with data, privacy, trust, et cetera. Another question. It looks like your cap raise is coming as you have 1 quarter of cash left, can you comment? So I guess, basically, based on the data we've just shared, we don't feel we have 1 quarter of cash left. We're looking to have about $0.5 million of cash burn this quarter. That will, I guess, if you look at the -- how much cash in the bank and look at, I guess, what will burn this quarter, we'll finish at about 1 -- just over [ 1.2 ] something like that for this coming quarter. As far as the cap raise is concerned, the Board is exploring a range of options on how we should explore, I guess, capitalizing the company. There's nothing that's been set in stone for now. And we basically continue to drive the business forward, continue to obviously evaluate things all the time with respect to cash, revenue. Obviously, the balance of all those 2 things, that's something the Board is always considering and we're evaluating a variety of different options. But for now, we're comfortable with the cash in bank today as it relates to obviously the cash burn this quarter. Fantastic new site. Well done. Thank you so much. I appreciate the feedback. Can you speak to the changes around the directors' loans? So yes, great question. So basically, the main change around the directors' loans were when we announced the directors' loans, I guess, about a month or so ago, it was basically a loan to the company priced at a 5-day VWAP to, I guess, the signing date and basically connected to options that would be issued basically 1 in every 2. So for every $2 that was loaned, you get 1 option at that VWAP price. That was the original terms, I guess, when we announced late last month, I think. What the changes are is that the loan is still in place, but basically the directors have agreed to swap out the options with just basically a traditional interest rate of 12%. So there's no options to be issued. There's no options to basically be, I guess, push through the AGM for approval, all that's being canceled. And it's just basically a standard loan that we post evaluating the market, we felt it was appropriate that's basically 12% on the money and paid from the day in which it was created to the day in which it's basically paid back and I guess, open evaluation. But the main thing is really around the options. Next one. Well done on the new app experience, looks fantastic. There seems to be a number of speed-related issues that could cycle traffic on the website, what resources are being put in place to look at this? Great question and great observation. So it's something that we're looking at every day. It's not just the performance, but we're looking at a whole range of things that we're basically optimizing for based on mobile web, based on desktop web. There's also things where we're making some changes on around app pages, which is basically their accelerated mobile loading pages that Google has. So all these things, tweaks are being done after go-live. So obviously, the site went live last week. And every day, there are more enhancements and changes being had and more things we're looking at. So we're looking at all sorts of metrics like bounce rate, how long they're on the page for, how long the page take to load. So I guess from a resources perspective, we've got a web team dedicated to the web, and they're making changes daily and releasing them as they create them. So it's one of those things where. For us, we wanted to create the platform and launch the platform and then iterate on a daily basis because as we get feedback and as we obviously learn, there's a whole bunch of enhancements we want to make. So it's a constant and fully expect the site to continue to be optimized and continue, obviously, increase the performance of and the speed of as we go on a daily basis. Are you in a position to tell us about the kind of churn you're seeing? After the 30-day trial, what percentage of users are dropping off? So unfortunately, I'm not able to tell you a number. But where -- I mean I will say 2 things though. It's above industry standard and it's above what we had expected. So I'm not quite yet able to give you a number because we're just wanting to finish off a bunch of testing we're doing and making sure that the number is sustainable rather than give you a number that's going to obviously change. But we're really happy with it. It's better than we had hoped and something that I'm hoping to share with the market in the next 30 days. But for now, I don't have a number to share. When will the force conversion take place? So I presume that link is related to the subscription business where we say force conversion. So I guess we put up the paywall in early October for the, I guess, the free users that from a certain date, they had to -- I think it was October 4 from memory, they had to start a 30-day free trial. So I guess we'll start to see a lot of those results in early November. Don't forget -- not everyone starts that day. Some start a few days later, some start a week later. So definitely through November, though, we'll start to see significant data in terms of what that initial conversions are going to be. But one thing I do want to point out is that it's really just the initial conversion. There's a whole host of features we're looking to obviously launch and then be able to offer users that maybe didn't start with the initial offer to start a trial. There's a whole bunch of things we're looking to use as tactics to then be able to start them up in November and December and January. So yes, there's going to be a good lift of conversions through November, but it's not the end of it. It's really just evolving to continue to drive that conversion as we go. But we definitely see, just definitely expect to see November jump their subscriptions because of, obviously, the initial movement into the hard paywall in October. The question around if we could divide the 70 headcount, annualized cost is about USD 124,000 per head. Can you expand here on this? So I guess I'll do a couple of comments, and I don't know, Chris, you can probably add to that as well. I guess my comment is the headcount for us is an important metric, clearly, I mean, our biggest cost base of people. But really, it's really quite varied, obviously, the capability and seniority of the team, right? So basically, you've got engineers to marketers, to people in sales and everyone included beyond that. So I feel that basically, if you think about because as it relates to the headcount, we're in a reasonable position. The other thing also to just bear in mind is that it's quite -- it's a very active, I guess, employment market at the moment. And it's really difficult to attract talent and clearly retain talent. Probably remember articles like the great resignation, where a lot of people did not look for jobs last year, but they're making it up for this year. And it's -- so we're competing with other companies and massive companies of all sorts of our money and perks to people all the time. And when you have amazing people, they tend to want to be obviously targeted by recruiters. So we work really hard to build an incredible culture to obviously retain our people. We clearly have to look after them and compensate them accordingly. But then when we're after looking to recruit new talent, we also need to pay market and obviously ensure that we're competitive as well. So it's not an exact science as far as like our optimization for that cost line because you want talent that really valuable. Talent in terms of like what they're going to deliver, you have to look after them. That's absolutely clear as day. And again, it's a competitive market out there. We'll continue to obviously optimize and build a wonderful brand that parents and obviously, employees want to come and work for us. Chris, any additional comment to that?

Yes. Thanks so much, Eddie. Yes, it's a welcome comment. So no great secret public information that's available. If you go on LinkedIn and you go to Tinybeans and you see the number of people that are here. It says we have 63 employees, which is public information. So if you approximate that as our head count, that's not -- it's not far off from a calculation standpoint. A couple of comments. We did have some temporary resources in the first quarter as it relates to the product launch with the install. So the staff costs are probably a little bit on the high side of what we would expect going forward. When you talk about the variable comp component. But then in addition, we're always evaluating employees coming on board and what the market salaries are. And we do the best we can, and it's very different based on every department as Eddie had kind of alluded to finance and professionals are on the higher end. Technology and engineers are on the higher end, and then there's other departments that are not as high, and some of them are very variable in nature, like our sales force. So we're always paying attention to and we don't think the range of where we are from an average cost per employee is outside of the market. I hope that was helpful.

Great. Thanks. Next question. Well done on a wonderful quarter. Would you mind giving some insights into the 1.4 million Tinybeans users that have been converted to paid subscribers? Are they largely [indiscernible] Memories and engaging on the app. So one thing to point out, it's a great question, and it's great to potentially clear this up. So the 1.4 million users are all family members across the Tinybeans' Memories. They were the people that basically engage on the app experience that included grandparents, aunts and uncles, et cetera, et cetera. So they're all families. Now in the move to a paid subscription, not every one of them yet are basically a target to a paying customer, right? Because if you're a parent, you've invited 20 family members, you may be 21 users in this number, but only 1 potential paying subscriber at present. So it's really the funnel of parents that are looking to be converted or a single parent, right, because it's a single subscription. So there's a number of families, if you will, to compare, that's really looking to basically convert to in this initial, I guess, transition period. Having said that, I shared this sort of earlier, all those users are potential subscribers. Over time, as we add more features of those family members and grandparents will start to pay for. So for example, I'm not going to spend a lot of time on this because I know we're kind of over time. But for example, there will be an experience for grandparents to access grandparent content relevant to their grandchildren's age. They can access a grandparent in community to access other grandparents about things and challenges that they may be interested in. So don't feel the fact that if they're not converted in the next 30, 60, 90 days, that's it. Yes, that's the parenting side that we'll start off with and I say we'll still obviously go after those people and attract them and try and convert them in 3 months, 6 months and beyond. But as we launch new services and offer more value to these other family members, we see them potential to engage because there's still. Family members are still active on the platform. Again, you don't have to move to a payment subscription to engage the platform, you can still look at your old memories and see them all as well. So it's just an important point to know the differences there. The product work is especially great for new parents at some point, prior to first child, they can start with baby book memories, prebirth, so that you're ready to share when a baby is born. What are you doing to capture new parents at this critical juncture just prior to first baby being born? It's a wonderful question. Typically, new parents sign up to Tinybeans when they just have the baby, again largely organic, parents are basically telling other parents. Having said that, as I shared earlier, we have started some paid media and some testing around that. And the key target, the demographic is new parents who we just had the baby. We're also planning to work with other companies and other partnerships around parents that are pregnant. We have registry with baby registry is another key part of it. So definitely expect to see partnerships that we'll be able to drive value around where you are pregnant, you start a baby registry and you also get a Tinybeans subscription as part of that. So definitely watch this space probably more into 2022. But definitely, our goal is to have other channels of acquisition, and clearly, to your point, focusing on new parents when it comes to them first realizing that they're pregnant, start a registry. Just got a couple more, and then we'll wrap up here. What's our strategy in terms of driving the user base toward the 72 million consumer target. It's important [indiscernible] advertisers who want us to see increase customer base. I love the question. Thank you so much for the question. It's a very, very vital piece for us. That to go after this incredible, I guess, audience, millennial audience that are living on their devices from the moment they wake up to the moment they go to sleep. And it's really going to be 3 channels. One is organic. So clearly, it's really cementing our current audience, giving value to them and obviously, ensuring that basically that they love it so much and create utility, but they tell more people about it, and we'll be investing in referral opportunities, tell a friend, invite your friends, invite other parents, et cetera. That's one strategy. The second is definitely going to be advertising and paid media. So working in different channels to go after these markets. But currently, these users are non-Tinybeans users, they're not working with us at the moment. Don't know about the brand at all. But clearly, that's basically a second channel for us. And the third is partnerships. So I guess I gave a small example of the registry, but there are many partners out there. I mean Apple is another one, there's content partners. There's all sorts of partners that we're looking to go after in the maternity space as well. So third is partnerships. So a very intentional, I guess, strategy around the 3, I guess, channels to market. We're going to obviously test different ways to do things and obviously look to go after it accordingly. I think the first one of is the biggest upside because, obviously, our success today has been largely parents bought the product and told other parents about it. So we're definitely going to hone in on that. So we've got some thinking and some plans around referring and gamification and rewarding users for inviting other people, et cetera, because there's no best way to market the product than hearing it from someone else. So again, that's in our road map for 2022, but we definitely see other channels to supplement that. Can you somewhat connect to the education market that must have some highest LTV opportunities in this space? So not specifically education. As I said, we're definitely keen to grow LTV and our lifetime value and obviously, engagement with the parent. Our vision is to really create this experience where they start with Tinybeans and there's all sorts of things we offer them based on them and their children. So whether it's basically what's to do this weekend, whether it's "Hey, we know your child is 3 years old. Here is a subscription to ABC Mouse for all sorts of literacy or other services." So we definitely see opportunities to integrate third-party platforms and products. It won't happen in the short term, but that's how we see growing LTV extensively. Will the NASDAQ listing involved a capital raise? In short, our plan is yes. I mean clearly, there's still some work we need to do to get to the uplist done. We're marching forward to that. We released obviously 2-year order accounts, which is a key criteria. It's a key aspect of that. Plus, we've obviously moved auditors to help us as part of the uplist. We're now putting together documentation as part of that uplist process. So we're in the thick of it. And in order to be uplisted, in order to attract U.S. investors, we definitely want to have a liquid market here under obviously, us being dual-listed with an [ ADR ]. So in order to create a liquid market here, we definitely plan to raise capital. When and how is obviously still to be worked out. It's something we have shared with the market. We want to do this financial year still, and we're marching forward on that. All right. Last question and then we'll wrap up. Is there going to be a link on how people invite other people, how people are going to introduce other people to the site? So at the moment, there are some very basic ways in which in the app, you can invite other people to the service. It's quite hidden. It's something we did many years ago. It's basically there and some people use it, but we really need to rehash it and revitalize and bring it to life. So that's some of the work we want to do into early '22 in that first channel of that organic word-of-mouth channel. And we feel that the fact that your parents will be able to see value in what we do and obviously invite others. We're particularly excited about the neighborhood or the video experience because it's a parenting experience and a parenting community. So parents, obviously, in the platform, the value of the community is to invite other parents to it, and you'll have feature to be able to invite other moms or dads that you now and invite them to the experience as well. So we definitely feel that given the newer features looking to launch where you're not limited by your child's memories with a family, you're inviting them to only you'll be able to see other features on the platform that you want to obviously invite others and connect them to the platform to see value as well. And that's why we really want to work hard to build an incredible experience that parents are willing to pay for. And yes, yes, you will have to pay to get into this parenting community, but it's going to be so valuable. And for $5 a month or $40 a year, it will be a fraction in terms of the value you generate as a parent. All right. I know we're over time. So with that, I'm going to wrap up and really say thank you. Thank you to all of you. Thank you for your time today. Thanks for, I guess, being interested in our story and following the company. We're at incredible phase and are looking forward to sharing with you lots of exciting updates and results into the future. So with that, thanks, Chris. Thank you all, and enjoy your evening and enjoy the rest of the day in Australia wherever you are. Bye-bye.