Tinybeans Group Limited (TNY) Earnings Call Transcript & Summary

Thank you all for joining. I'd like to introduce Zsofi Paterson, CEO of Tinybeans; and Chantale Millard, Chairman of Tinybeans today to present the first half results. It's been a period, 6 months of transition following change in CEO and [ broader ] management team. And from their point of perspective, the guys have done a great job in tidying up, but also setting up the platform for success. And I think the key points that we focus on specifically, the retention of subscribers and the leverage of the subscriber base going forward that we think can drive real value for shareholders. I won't steal any more of your thunder, Zsofi and Chantale, but thank you very much for joining us. [Operator Instructions] Over to you, Zsofi.

Thanks, Hugh. Good morning, everyone. Thank you for joining. I'm going to take myself off camera and take us through the presentation, and then I'll pop back on and be around for any questions that come up. So click right into it. So for those new to Tinybeans, I'm not sure if there are any people new to Tinybeans on the call, but just in case there are, we are a one of leading private and safe family photo sharing apps that connect generations and turn moments into memories. We've been loved and trusted by families around the world for over 10 years. And there are a number of things that keep our business going and put us in a real position of strength moving forward. Four of them are called out on the screen today. The first, our size and scale. We have over 4 million parents and families that we reach every month across our different platforms. That includes our app, our website, our social channels and our email communications. We have diversified revenue streams, which include premium, recurring subscription revenue, advertising revenue, affiliate revenue and e-commerce revenue. And our highest growth segment is the subscription revenue, which is also the most valuable. We are a true daily-use product, where we see over 40% of our paid subscribers using Tinybeans every single day, putting us well and truly on the daily-use product category. And we have really strong engagement, retention and consequently, a really nice LTV with people sticking around 4 to 5 years and yet continuing to use the product very meaningfully through that time as well. It's been a really busy half. It's been my first half in the seat, and we've accomplished a lot while facing some real challenges. In addition to some of the financial highlights, which I'll get to in a second, we've defined and began implementing a clear company strategy focused on growing the subscription business. We've retained over 80% of annual subscribers despite a material price increase from the new Tinybeans+ pricing. We've unified a team that was lacking in clarity and direction, and we've streamlined it for efficiencies and performance gains. We've rolled out a fantastic fresh brand and visual identity and a new website that for the first time enables a funnel to drive subscriber growth. We've launched the new Android app, and we're seeing material improvement in the all-important star ratings in the Google Play Store. And we've undertaken a meaningful sales review to understand the reason for the steep decline in revenue year-on-year, and we are in the process of taking all the steps we can to try and rebuild that. It's been a really busy half. I'll move on to the financials. As we've reported, revenue has decreased to $2.76 million for the half, which was 47% down against the prior comparable period. This was primarily caused by the decline in advertising revenue, which decreased 72% PCP to $1.08 million due to minimal pipeline entering the year and the sales team rebuild required in the half. We've talked a lot about the efforts that we've taken to put us in a stronger position moving forward, and we remain committed to doing so. Conversely, subscription revenue increased 36% against the prior comparable period, up to $1.39 million, outpacing advertising revenue for the first time. Interestingly as well, the average revenue per user increased from $54 per year to $63 per year over the half, due to subscribers rolling on to and being acquired at the new pricing. We moved really quickly and effectively to reduce operating expenses by 22% against the prior comparable period, with savings being achieved primarily in head count. Cash burn for the half was $1.09 million compared to $1.51 million in the PCP, and we finished the half with a strong cash balance of $2.34 million due to strong renewals, improved collections and cash management as well as early payments from Apple for a portion of the subscription receipts in the quarter. This also included the $1.9 million capital raise from July 2023. I'll touch on a couple of additional points in the P&L. We've already covered revenue and expenses. The gross margin remains really healthy at 90%, and we reported an adjusted EBITDA position of negative $2.02 million for the half. Looking at the balance sheet. We've already covered the cash balance of $2.34 million as of 31 December, which is up from where it was 6 months prior. The accounts receivable decreased by 25% over the period due to better collection, but also lower advertising revenue. And our current liabilities increased 40% due to large annual subscription collections in quarter 2 being put to deferred revenue for future period recognition. A final note on cash. We've included the cash position as of yesterday for full transparency, and that was $1.94 million. And notice that the business expects further cash burn in future quarters. And as per our market announcement just this morning, we have secured a binding loan of $2 million from shareholders, which combined with our cash position, provides confidence to continue to execute our strategic growth plans while we continue to explore broader strategic partnerships and opportunities. Turning to the key metrics of the company, which now align better with consumer subscription businesses. Our paid subscribers remained flat over the year, ending at 52,500, which is a good result given the lack of investment in marketing and the Tinybeans+ price increase. Our monthly recurring revenue, however, increased 51% due to the Tinybeans+ rollout and price increase. The engagement metric of our daily active users over our weekly active users is super strong at 59%, putting us in the daily-use product category. Our LTV is healthy at $316, and this is just based on the monthly recurring revenue. And this helps set guardrails as we increase our investment in marketing, ensuring that our acquisition efforts are profitable and scalable. If we look at the audience metrics and numbers, we have just over 900,000 monthly active users in the Tinybeans app. That includes paid subscribers, free subscribers and their family and friends. And we have 1.25 million unique visits to the Tinybeans website, demonstrating continued strength in SEO and our content strategy. As noted in the half year highlights and hopefully, you all received the communications earlier this month, although technically not in half 1, in late January, we launched the new Tinybeans brand and website. The website now reflects and the brand now reflects the central principles of joy in connection with a visual design that is fresh, compelling and fun. Importantly, the website offers a clear articulation of who we are, why we exist and for the first time, enables a funnel to drive content web visits to the Tinybeans app. The rollout was seamlessly executed by the team, demonstrating the gains in the operating rhythm, and we supplemented when needed by talent in Australia to deliver it incredibly cost effectively and efficiently. The feedback and early results since the launch have been really positive, with initial data demonstrating a 5x increase in app downloads from the tinybeans.com, high conversion on the App Stores and higher click-through rates in our content newsletters. If you haven't already, please visit tinybeans.com, and I provided a sample of the communications and assets in the following pages for you to have a look at after this call. I'll just click through them really quickly. Here's the new landing page and website, which as you can see, is more focused on the app and makes a really clear case for our value proposition and also has a whole lot of opportunities to try and drive that subscription funnel. Here's a very small sample of some of the updated mobile app screens, which you can see a much tighter, fresher kind of visual design. And here's a sample of our newsletters, which we've made great gains in. We've really honed in on our content strategy serving custom content to the different audiences that receive our content. And the open rates and click-through rates are really, really strong, doing very well. So I'm very pleased with the progress we've made from a content perspective. Moving to look at our strategy for the next half. At the AGM in November, I shared a view over the next 2 years, where we're undertaking a reset and a turnaround after a challenging few years. At a high level, 2024 will involve a strategic and operational reset, which as we've talked about, is well underway with a strategy-defined, brand refreshed and fine-tuning of the team, where we will also be focused on investment and improving in the underlying product, technology and data and analytics capability. And all of this will then put us in a much better position to generate subscriber growth and begin to market. Looking more specifically at this half, in order to drive subscriber growth and total monthly active users, we're laser-focused on the following pillars, which I'll talk to. Acquisition at scale via marketing initiatives, subscriber activation through product initiatives and app monetization to improve in-app advertising revenue. Turning to each of those. Marketing. Tinybeans has spent very little on marketing and acquisition over the last few years, and consequently has not generated net subscriber growth. The company benefits from a strong paid organic mix with only around 20% of subscribers coming from paid channels with a healthy cost to acquire. However, we've not been able to drive scalable acquisition. Over the next half, we'll be implementing new channels, including affiliate marketing, partnerships, niche sponsorships and if possible, ambassador or influencer programs. Affiliate marketing offers a flexibility as well as a cost-effective method to have Tinybeans promoted in publications and generate leads. We see partnerships with highly aligned ecosystem brands as another way to get in front of more people within our core target demo of new or expecting first-time moms. And we're looking at select sponsorship opportunities, particularly in Australia, to test these out. Many of these require product support to enable, which the team has been hard at work on in the first few months of the half. In addition to new channels, we'll be upweighting investment and implementing new strategies across existing channels to better drive subscriber growth. This includes diversifying and testing new creative and user-generated content across performance media channels; optimizing our always-on lifestyle marketing and ensuring our programs are behavioral, timely and insight based; building domain authority for new parent content; honing in on our content strategy and our SEO; and building out referral programs to incentivize subscribers to refer their friends, which is behavior that's already happening organically, and we need to find a way to bring that into the app. Moving on to the key area of product -- the key focus areas of product over this half. We know that once a subscriber uploads photos and adds family members, they have a high propensity to convert to a paid subscriber or continue to use Tinybeans within its free limits for several months or years. However, we see a steep drop-off with many new subscribers failing to take their first action and not coming back in subsequent weeks or months after they sign up. And as we increase our marketing efforts, this leaky bucket becomes even more important to address. To improve this, we'll be optimizing the onboarding and welcome app screens, improving the first-time experience in-app, making it simpler and cleaner to begin engaging and improving our customer life cycle journeys and communications to bring people back in. Other product initiatives in the half include addressing legacy performance and stability issues with the app and influencing subscriber acquisition to improve our monthly recurring revenue with a focus on web acquisition and annual plans, which have declined since the Tinybeans price increase. Moving to advertising and monetization. The introduction of Tinybeans+ allows the company to earn both advertising and subscription revenue from subscribers. However, less than 15% of ad revenue last half was derived from the app due to poor ad units, low CPMs and decreased direct sell-through. The goal this half is to improve the in-app ad units in order to command premium CPMs, meet client briefs for video and enable stronger direct sell-through. Of course, we must balance this with the need to optimize the UI to support the primary goal of growing the subscriber business. We are also continuing to focus on people, process and platform-based sales initiatives to rebuild the sales revenue and brand trust. To wrap up, it's been a busy and challenging but really productive first half of the year and my first 6 months in the seat. We've demonstrated a bias for action and a good ability to execute strategically and operationally with some good wins across product, brand, strategy and people. Moving into the second half, we are building momentum, laying foundations and beginning to invest for growth. We're putting our heads down and getting on with the job and thank our shareholders for their continued support.

Thank you, Zsofi. I'll open the floor to any questions.

Graeme?

Well done. A tough gig. Going forward, in terms of the cash you've -- further cash burn -- well, are we looking at a cash flow breakeven position in the next 6 months? Or is it too early to tell?

We will not be looking at a cash flow breakeven position in the next 6 months.

Okay. Cool.

But I think it's important to say we've got a pathway to get to that cash flow breakeven point. We're not willing to say what that is, but the modeling is on that way, Graeme. So yes, it's not forever.

No, no. No, fair comment. Okay. That's good as long as we understood. Clear understanding. Yes, you've made some fantastic improvements. That's for sure in clarification of the whole exercise. Good work.

Thanks, Graeme. We appreciate it.

Thanks, Graeme. Are there any other questions? Okay. Well, I think everybody's got a busy morning. If you do have any other questions, please feel free to come through to myself at Bell Potter or directly to the company after the call. But thank you very much, Zsofi and Chantale, for your time. And we'll look forward to getting an update next quarterly.

Thanks, Hugh.

Thanks, everyone, for joining.

Thank you.

Thank you. Bye.

Thank you. Bye-bye.

Bye.