Tinybeans Group Limited (TNY) Earnings Call Transcript & Summary

Thank you all for joining. We will kick off in the interest of time. I'd like to introduce Chantale Millard, who is the recently installed Chairman of Tinybeans; and Zsofi Paterson, who is the anointed CEO of Tinybeans and has very graciously joined us from a family holiday in Bali. Sorry for telling everybody where you are, Zsofi, but I do think it shows a level of commitment that most CEOs would avoid until they start. So thank you very much for joining. This is a moderated call insofar as I just need to request to ask a question and forward to you. I'll do that, just so we can manage the communication at the time. We've launched a transaction this morning to raise a minimum of $2.5 million for Tinybeans at $0.15 per share comprising a $2 million accelerated nonrenounceable entitlement offer, which is underwritten and a minimum of $500,000 on placement. We are comfortably above that offer size, and we'll look to increase the size of the placement and we'll communicate that with investors, with the intention of really positioning the business. I want still Zsofi or Chantale certainly talking about sort of how these funds will be used, but really positioning the business to execute on some near-term opportunity and invest in the platform in areas that may have missed some investment over the last 12 to 18 months. Chantale, I'll now hand over to you and then we'll go from there.

Yes, fantastic. Thank you. And welcome, everyone, and I'm very pleased to be here today and to be able to start with the capital raise this morning for Tinybeans. As you mentioned, I recently joined as the Chair of Tinybeans back in February. So I thought this is really -- I guess my interest in the business started is -- I could see a fantastic opportunity for a great business and a great product that has multiple revenue streams for both the sales channel as well as the subscription part of the business and the previous CEO and Board have been taken to a level with a really solid foundation and with some further investment and new energy and leadership, we see the real opportunity in there for us to be able to take the business to the next level of growth. So as you would be aware, I'm sure a lot of you are already investors or know a lot about the Tinybeans business. It's a huge addressable market in both the States and also here in Australia. And so there's a lot of growth opportunity for the core still to be realized by the app and also the sales growth. So really, this capital raise is for us to be able to not get the business as usual, but it's really for us to be able to invest in the core products that we've gotten to have a really laser-like focus on those 2 areas of streams of the business and particularly around us growing the subscriptions so that we can unlock that growth. So without saying any more, and I'll touch on the use of the funds, and afterwards I'm going to hand it over to Zsofi. And as [ Hugh ] mentioned, Zsofi doesn't actually start until the 17th of July and which we're all looking forward to. And -- but I'll hand over to Zsofi to talk a little bit about your background, what attracted her to Tinybeans and also some of those growth levers that she can see, I guess, from that understanding that you have to get into the business and get under the hood. But really those growth levers that she knows in these types of businesses can really move the dial. So I hand it over to you, Zsofi.

Thank you, [ Hugh ] and Chantale. Lovely to be here today. Really, really excited to start this role in a few short weeks, even more excited to enjoy my holiday once we have these funds locked away. I have been one of those people using Tinybeans daily for the last nearly 3 years. We stumbled across it through a podcast, [indiscernible] podcast actually 3 years ago and decided we'd give it a go just after our first daughter was born in the height of the pandemic. And very quickly, it became a true source of joy and a very meaningful addition to our family in how we shared our moments and -- the big and small moments of our now near 3-year old, her life and our life together as a growing family. Despite finding it really valuable for us, we have been sitting here going -- by the way I mean my husband and I would both come from kind of technology, product backgrounds and been sitting here going, this could and should be so much better. The core product in and of itself and then also just the role that it has to potentially play in a parent's life as we navigate the early years of being parents. And it was really through my experience as a user and as a new parent and then my professional experience, which I'll go to in a second. That over the last few months, I had my second daughter earlier this year, had a few months off from my day job as a CEO of another business and started to really think about what I wanted to spend my next few years doing and Tinybeans kind of popped into my mind. And I thought I just think there is so much opportunity with that company. So here we are today. [indiscernible] introduced to the Board a few months ago. I have had a number of really, really good discussions with Chantale and other members of the Board and a couple of the key investors and really delighted to be taking on this role and hopefully driving a really nice narrative, the next chapter of growth for this company. I have been in the last 4 years, the CEO of a small portfolio of digital health and wellness subscription products. The big one that everyone knows and the real success story for us was Centr by Chris Hemsworth, which we fully operated and co-owned with Chris. We were part of the Quadrant Private Equity group and the holding company Fitness and Lifestyle Group, and I ran their digital arm and looked after 3 subscription products, but Centr was the biggest. So I was recruited to join that company as a CEO back in 2019, just after Centr had launched and really did a similar role there, where I replaced the founders who have done a great job in getting the partnership with Chris, kind of secured and had launched a product, but the product needed a lot of work that needed -- we needed to launch the android app to make sure we had a fully multiplatform global offering, really needed to think a lot more about the content we're creating and how to grow and drive the subscription business globally, which we did. We had a great run there, grew to several hundred thousand paying subscribers, started a capital raising process which resulted in a full sale to a New York private equity group in 2022. And I was retained over the last year to continue to manage the Australian business as a transition to the new owners in the next phase of its growth. So I was due to return back to that role next month, but here I am, and I'm very happy to be starting something afresh very, very soon. Prior to my time at Centr, I was -- I've done a few different themes. I started actually as a lawyer a DLA Piper as a commercial litigator, decided that life whilst rewarding and challenging wasn't necessarily what I wanted to spend the next 40 years doing and moved over to the States and landed with an LA-based boutique, media and digital consultancy company working with early-stage media and tech companies on -- essentially helping them grow their businesses, often working with talent as well because the other part of that business was an A list Hollywood management company. I then joined a very exciting video-based start-up that was based in Silicon Valley and had raised $140 million as you do in that market in those times to -- and join their content team, which I was part of in L.A. and I was doing that role quite happily as well when I then got asked to come back to Australia for a role with Channel 9, and I've played a senior role in the lead business development for Channel for a few years before I joined Centr in Melbourne. So feel really well positioned to be stepping into this role despite, I think, a lot of challenges with the business as it exists today. But none that I think are insurmountable, well I hope not. Maybe I just don't know yet, maybe I'm being bullish. So yes, I think there is a huge amount of opportunity in the core products. I think that the product doesn't exist today is it has a beautiful hook of something that really inherently entices people to come into every single day to share the photos that they are taking of their children. I wish we didn't take as many photos of our children as we do. But I'm afraid that seems to be something that is pervasive as a new parent. So I think that, that in and of itself is a beautiful construct and something that you can build, something you really special around. I think the challenge with the product at the moment is that some of the thinking has been a little skewy for around the core customer that they're trying to really attract around how they bring them in, how they keep them, how they commercialize them. The technology product in itself needs a bit of an uplift. It's a little clunky. There's some kind of legacy tech issues. I think the desire, the look and the feel of it also feels a little old and a little tired. And sometimes, it also just doesn't work. So a lot of those things have been improved over the last 6 months. I think there's been a refresh of the executive team who have done a nice job at kind of starting to do that work, which as a user, I can see has made a difference, which is fantastic. And so I think that one of the next key things to be really focused on is the content. I can assume a lot of content about how I should think about raising my children as it relates to their food, as it relates to their development, as it relates to potty training or sleeping or whatever it is. And again, Tinybeans should become the single source of where I go to, to get that kind of content. And today, I don't even look at the content on it because it doesn't really serve me in its current form. So I think the product and the content and the brand, which I've touched on, all need a bit of fine-tuning with a real focus on the core customer and defining who that is and then how we serve their needs. And then I think the opportunity is to then switch on very thoughtfully, some of the marketing. I think the company has done very well to get to where it is today without a huge amount of investment in marketing. I ran the business that I ran, relied a lot on performance-based marketing and the fact that they've not done any of that recently from what I can see is a real testament, again, to what the brand is and how it exists today. So I think the first 6 or so months will really be focused on the uplifting and the fine shooting of all of those elements. And then I think it becomes -- assuming we can do that effectively and successfully, I think we can then turn our minds to thinking about how else the product can serve the core customer and meet some of those needs that we have as parents, whether it is services or products or information and/or experts. I think that with the amount of data that Tinybeans has on us as parents around where I live, the kinds of things they like to do, I knew that I was pregnant, I knew I was -- when I was having a second child, it's in a really strong position to actually be able to offer up those products and services at the right time. So that's a bit of a snapshot on me, why I'm here and what I -- how I think I'm going to approach the first kind of 6 months or so or to be confirmed and validated in due course once I get started and start working with the team next month.

Fantastic. Thanks, Zsofi. And I probably just -- and I'll just give a couple of other updates, and don't mind, going forward, you won't hear from me as much as we hear from Zsofi. First thing that, in between time at the moment, but as Zsofi touched on the exec team that are in the states. And then we've got some really good people in the exec team now. There has been some quite high turnover in the company. But in terms of the core people across product and tech and digital marketing and sales, and that will all be for Zsofi to assess the team and getting them ahead with the structure. But we have some really good people. And you would have -- if you're a user with a product, you would have seen the Tinybeans Free and Tinybeans' plus app being launched in April. And with those did come some upgrades to the speed, other functionality around loading photos and videos which I'm pleased to hear from Zsofi that she did notice the improvement. So yes, so there's been some really good work and that Tinybeans Free has really opened up a new pipeline of people to get them into the app and then to convert them onto fully paid subscribers, and we're seeing that growth in those -- the premium people sort of coming in. And on -- touching on the android, the people who recently following the business, the android app has been a problem for the business over the last couple of years. And -- but there is a new android app that's being worked on by a sort of head of product that's being launched this month. So we've only got a couple of days of mistakes for those. I am told that you're still on track though for this month, and then they'll be rolling out new features on that as well. So hopefully, that's going to unlock -- well going to unlock a whole new audience for us to be able to tap into that android market again as well. So in terms of the use of funds and all of those things, we can -- Zsofi and I are quite aligned in terms of a real focus on the core, getting the content right, getting the product right, making sure the structure is right. But there's a lot of growth opportunities still around those core products. So that really exists off of the app that obviously -- Zsofi has got a huge amount of experience in scaling. Moving together with that, we've also got the website. So we've still got averaging around 3 million users on the website each month, and then it's about how do we actually monetize those users in the right way. We've got 2.1 million people who are receiving the e-mails. Our e-mails that we've sort of 3 different e-mails and they've got open rates of between 22% and 46%, which is really, really high. And so that's proving -- so that's been sort of a part of the realignment of our sales strategy. The people are actually paying to advertise on those EDMs now that are going to people's inboxes and people opening them. And so that's starting to prove quite successful around stabilizing and growing that sales revenue because the sales -- the advertising revenue market in the States has been hit with I guess, the recessionary talk over there. So we've had to pivot a bit there to really drive that and use those customers as well. So it's really about investing in the product. As Zsofi said, then really unlocking that marketing, which will be through the use of digital marketing and potentially the use of influencers and talent and really growing that core base out in the states and also in Australia where we still think that there's huge opportunity for the product. And I think also just in the time that we're in at the moment around the charting and privacy and sharing of data, getting this app to have a really wonderful consumer experience and hooking those people in. Parents are looking even more than ever now to have a safe way to be able to share videos and dump photos and then also other tools that the app has got with their kids. So yes, so excited by the big opportunity.

Thank you Chantale and Zsofi. Just 2 quick questions that come from the floor. I'd love to be able to attribute them to people, but they come across as anonymous attendee. One question maybe for you, Chantale, which is the company increased the price of monthly subscriptions on April 19. Could you provide some insights as to the effect on current churn rate and how that plays through to use radar? I will just go into the person who's asked the question, we're not making any comments on Q4 performance. So just your take on that, Chantale?

Yes, no worries. So yes, so look, I'm sorry, we're not in April, and that price was sort of -- that was set in very much in motion I joined the Board in February. And -- but it was something that was probably -- that was overdue. So the pricing hasn't been changed, I think, for about 5 years within the business. So, so far, the churn rate, we're still sitting at a 90% renewal rate. So the churn rate actually hasn't moved that much in terms of the first couple of months, noting that sort of April was updated, then May would be the first month we had the full impact of that, but we haven't seen a lot of people drop off their subscriptions. We do have quite a big renewal event coming up in October, November. And so this is why we've got a lot of our annual subscribers coming up around October, November. And so this is why we really want to make sure that we're getting the product in the tech invested in now so that people have a really amazing user experience. So when they get over to that renewal rate, there will be even more incentive for them to roll over their subscription. So at the moment, the churn rate hasn't changed.

Fantastic. One for you, Zsofi, it's sort of a multipronged question here. Could you delve a little bit deeper into some of your insights on, and particularly based on your experience, how you change the marketing or what marketing strategies you'd use, any differentiated monetizing strategies. I'm just thinking big picture here, not diving into specific detail. And further international expansion, I know you've talked about Australia, but other English-speaking countries where -- particularly where our usage is good, you already deal with lots of multinationals. Is there the ability to extend that partnership beyond just the U.S. And I'll save the last part of that question until you've answered?

Okay. So a few things in here. Again, I see it as an outsider, someone who has used the product and thought as much as I can about it over the last few months, but not yet in it, not done a strategic plan. But my thinking is around for future marketing strategies. Look, I think we want a robust marketing plan that utilizes all the effective ways to talk to the people that we want to talk to. That can involve -- probably will involve an element of paid marketing. So across the key channels you would expect, Facebook, Google. I think you're going to want organic socials, which they already do a little bit of. I think their socials need a fair bit of work, though, as I talked about the content isn't quite on point, and I think that's reflected in currently how they're using their social channels as well. But I think that that's not a huge thing to try and fix. I do believe that there is opportunity to utilize talent and influencers in some way. There's a huge variety in ways that you can do that stemming from the kind of business that I've just led where you co-own a business with talent and they become very, very central to the brand and the marketing and the product offering down to utilizing macro influencers. There's probably something in the middle that will make sense for us. And ideally, we find a really authentic way to do that with finding people that have influenced that actually are users of the product because audiences see through that these days. So finding a way to do that authentically is going to be really important and also cost effectively. You can burn a lot of money on paying people to talk about your products that people -- the audiences see straight through. I think Chantale mentioned the great asset they had with first-party data, the 2.1 million e-mail addresses. I need to dive into them to understand them a little bit to understand them a little bit more. But that in and of itself, you've got only 55,000 people at the moment paying for the product. And yet you've got 2 million people who we can essentially communicate to. There has to be some way to better monetize and leverage that first-party data that we've got. And then the tinybeans.com website really should also be a great source of -- the content in and of itself should be something that draws people to come into to look at when they are seeking out that kind of information, and that should also act as a bit of a marketing channel real top of funnel. At the moment, there's -- they don't link very well. Despite having used the product daily for nearly 3 years, I've never once used tinybeans.com. So I think that there's a job to be done there to really assess like how to link those 2 together and make sure that all those people that are coming, the ones that the product would be relevant for, that we are able to actually convert them into, hopefully, paid Tinybeans' Plus subscribers. So that's how we'll be assessing and thinking about marketing. I think the job to be done before we start spending or really developing a really -- a marketing plan that allows to think a little bit more about brands and customer to make sure that we know who we are and what we're doing before we start to try and go out and get more people. Monetization strategy was the second part of that. At the moment, I believe that 90% of the revenue comes from advertising and most of that is on tinybeams.com and now also the newsletter. So there's obviously like a decent channel there. I think that suffered a little bit of decline. I think part of that is market, but probably part of it is also, again, slightly confused proposition, content not quite right, not entirely sure what the audience is that they're going after. So I think that there's productivity to maintain at least the revenue that there is there and then go out and grow once we've done some of that fixed up work. I've always been very big on subscription businesses. So I do think that there is a great, great opportunity, and that's what most excites me to grow and drive that subscription revenue once we've done some of the work that's needed in the core product as well. And then I think that there's probably partnership type opportunities, ways to monetize. As we partner with potential retailers, for example, there may be ways to quit the tickets there and bring in some transaction revenue, which I also think can be a nice line item to the business. So that's how I'm thinking about monetization, international expansion into other regions. I don't think I'll be thinking about that at all until again, we've done the cleanup work and the fix up work and then actually done the job that we think that we can do in Australia and the U.S. and the other low-touch regions, the other western markets, New Zealand, Canada, et cetera, that obviously utilize same language, a lot of the same and similar cultural patterns and norms as it relates to parenting. So I think like -- I don't think, I don't know yet, but I don't think that I'll be investing a huge amount in markets beyond that at this point because to do that effectively, you need true localization strategies. And today, as it exists, the Australian market can't even pay for the subscription in Aussie dollars with an Aussie price because everything at the moment is tied back to the U.S. price as that goes back to how the tech has been built and how it's been set up in the app stores. So work to be done in Australia and the U.S., especially over the first year at least. User data security. I can't comment on that. I'm not in the business. I'm sorry. Obviously, it's incredibly important in any business, especially important in this business that's dealing with kids' content and families' photos, but I'm not in a position to say anything more educated on that, perhaps Chantale might. And then the company's view on a potential U.S. listing, I'm also not in a position to comment on that at this point, but [ Hugh ] or Chantale might be in a better position.

I have no comment on the U.S. listing piece, Zsofi. There is definitely no intention for the company. I guess I had one side of each coin. But very much focused on leveraging what there is for everybody's benefit. There is a good West's shareholder base in the business. And to be fair, they already did a great job in engaging with U.S. investors, and they see the upside and use the product and so on and looking to grow that over time. But the vast majority of the register is still Australian based, and that's the way it will stay for the time being. Chantale, do you want to comment on use of data security and then we will...

Yes. Look, definitely. So we've sort of -- in probably my second or third month or in my fourth month, that we deep dived, had a deep session with the internal tech team and our head of product over there. So -- and they have -- yes, they've got high levels of security in the way that they've set up the system. They've also had a very detailed external party come and do a test on all of the systems and penetration testing with testing all of the [indiscernible], all of everything trying -- I guess, all the things they do to try and break in just recently as well. So look, it's a huge -- it's very high on the agenda. We discussed it most Board meetings and the tech team are on to it. It's part of everything that we build at Tinybeans. So to my knowledge, there's never been any doubt of, touchwood, data breaches, but it's a very high need [indiscernible] down.

Fantastic. Just one for probably the less initiated table, and maybe I'll hand this over to Zsofi to talk about. Just the difference between Tinybeans as an app and other photo sharing apps or social platforms? Just for the [indiscernible] because I think what I've picked up is there are actually a few on the call, but is up-to-date on what Tinybeans is. And then the final question, I'll just jump to that as well. You've got -- had considerable experience with influencers in a previous life with Centr. You talked a little bit about where you see the opportunities, just potential opportunities. Could you go into a little bit more detail because I think it's one of the things that a lot of investors have queried over time is, is there an ability to leverage influencers with Tinybeans. Does that have to be users? Or is it other people? What your views just at a high level may be about that as well?

Yes. So the competitive landscape, which I've looked at in a very surface level way. I believe that there are 1 or 2. There's one out of the U.K. called , I think it's FamilyAlbum, something similar to that -- FamilyAlbum, which is the other one that is often talked about in forums when -- in parent forums or social communities when people are posting and say, "I want a solution for this. What do you use?" I think the product is actually a nice-looking product as it exists today. They don't have a huge presence in Australia. They haven't branded or marketed it. And I also don't think that they're super prevalent in the U.S. From what I can tell, it's quite a U.K.-focused business and product offering. But certainly, that's a known competitor in the market that boasts of millions of users. I imagine they're free users. I don't believe that they're paying. So that would be the one that I think we'd be looking out at, and I'll be diving into a little bit deeper to understand if there are differences in the kind of product offering or pricing strategy once they get into the business. I think -- and I can see the question as well that specifically around some of the native apps that people might use like Google Photos or Apple Photos. And yes, some families use them. I think some of the barriers there, they are for an Apple Photo user, it relies on everyone in your family, having an Apple device, which isn't necessarily always the case. So that can be a limitation with some of those native based products. And I think sometimes you also have like my parents in law, don't use the app as often, they actually get their e-mails and then they click into the e-mails, and they are looking at it and consuming that on tinybeans.com. So getting anyone to actually download an app is in and of itself like a job to be done because people have at fatigue downloading and learning and using another one can be a problem. I think the key thing, like in terms of just like anecdotally, the feedback I sometimes hear from people because my husband and I have been big advocates of Tinybeans. And the thing we here is, "Oh, we just use WhatsApp." And I say to them, "Oh, interesting." And so they have multiple groups that they use to share photos of their kids. The photos go everywhere in their photo album, aggregated or organized in any way. So like I think that, that's again, that just comes down to how we want to build this brand and position it in market because I think sometimes the actual benefits of using a product like this haven't been marketed or told very well. So that, again, will be a job to be done as we think about really like the core value proposition. So yes, there are competitors in the market. Obviously, there are the big operating systems that have native products. They don't cater specifically, though, for the solution that we're trying to build here nor do they have all the adjacencies and the content that I believe and I hope that there's an opportunity to really dive into as well in this world. So that's how I think about the competitive landscape. And the final question around talent and influencers. Yes, as I said, I think that there's great opportunity to utilize talent and influencers. Again, it's just what -- how we choose to do that, when we choose to do that and what we hope to get out of it as well. You can use them to help build brands and awareness or you can use them more -- some of the more digitally native talent to really help drive like the funnel and help the acquisition. And I made the comment that ideally, you do find people that are true users of it. This doesn't really make sense to me using people or talking about people or working with people that at least, they need to fall in that early parenting stage, I believe. I think otherwise, it's just a brand spokesperson. But I think part of the reason that the Board were interested in me was -- I'm putting words in your mouth, but I'm a user of this and I'm deeply in this space and in this category. And I do think that like it would be -- I don't know, I could be surprised, I could change my mind on this, not sure. But I do think that like finding a genuine link is going to be important or it's someone that we introduced to the product that then goes on to use it, I think. And yes, a lot of experience working with talent out of the states, a lot of relationships with the major agencies in the states as well. And then some experience in Australia with talent here and companies that do a lot of that influence and marketing here as well. So something that I'll be excited to dive into to try and find ways that we can do that, again, cost effectively and purposely to drive the business.

That's great. And I might just add, Zsofi as well, just in terms of the product of Tinybeans. So we are the only photo sharing app that also does -- have content, and I completely agree with Zsofi that in terms of that content being monetized properly and being on point is not quite there yet. And -- but it also does those organization tools for people who use it. They're really important because as it's -- when you've got to WhatsApp group, if you want to find a photo from what was that day, where is it. You just going actually just scroll through that. Someone's birthday on that date, all the pop up -- the memories and photos pop up from that time. There's little keepsake notifications in there as well about, I guess, when someone walked for the first time and all of those sort of things. So it's a really good almost baby book chronology that you can actually scroll back to very easily and find memories. It does also give you a little pop-ups of, I guess, memories as well from a year ago and gives you a little collage of the photos. But I think also a big attraction is that because it's through the app and it's been stored in the secure Tinybeans site is you're not clogging up your phone with all of the photos as you do on some of those. They might be in your camera that you can actually then delete them off your phone so that you're not using up all your storage. So I've heard that from quite a few users as well because it actually gets stored in the Tinybeans site. So -- but I think a lot of these benefits haven't been marketed to their full potential. It has really just been around the privacy and the photo sharing and content. But pulling it all together, I think there's a really powerful product in there that's going to be different to what's out in the market at the moment.

Fantastic. To finish off, because there's somebody that's on the call who's too shy to even ask this question. So they WhatsApp me. Where do you see the business as somebody you know, Zsofi. Where do you see the business in 5 years? I'm not talking about financial projections, so even user projections. What does success look like in 5 years for you guys?

Look, I want this to be a product that is used and loved by hundreds of thousands of people around the world. I think if you build something that provides utility and joy, then you're going to have a really good business off the back of it. So that's as broad as I'm going to be at the moment.

That's a good answer. Chantale?

Yes, look, I think it's same. I think realizing -- unlocking the opportunity that a lot of people have really supported and stuck by the products and can see the opportunity. And for me, yes, being able to grow that subscription pack base up to the -- I'll say 1 million users, but hundreds of thousands will do that. But just having almost as a must have for new parents and just, yes, just tapping right into that market and growing it up. I think, that will be exciting.

Fantastic. Well, look, thank you. We've taken a bit more time than we intended. So thank you very much, Chantale d Zsofi for everybody else's benefit. The books will remain open overnight as we've got a number of U.S. investors to come back to us. If you do have any questions, please speak to Bell Potter adviser, but the deal is nicely covered and it's a good outcome for the new board management to execute on their strategy. So again, thank you, Chantale. Thank you, Zsofi. Thank you all for joining. Have a good afternoon.

Thanks, everyone, for your time.

Bye-bye.

Thanks. Bye.