Full Year 2022 Tinybeans Group Ltd Earnings Call Sep 8, 2022 (Thomson StreetEvents) -- Edited Transcript of Tinybeans Group Ltd earnings conference call or presentation Tuesday, September 6, 2022 at 10:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Edward Geller Tinybeans Group Limited - Founder, CEO & Executive Director ================================================================================ Presentation -------------------------------------------------------------------------------- Edward Geller, Tinybeans Group Limited - Founder, CEO & Executive Director  -------------------------------------------------------------------------------- All right. Well, let's get started. Hi, everyone. My name is Eddie Geller, CEO of Tinybeans Group. And wherever you are, I hope you're all doing well and staying safe. Good evening for the people here in the U.S., morning, obviously, for the people in Australia. And special thank you to our current shareholders and investors and supporters out there and really believe in the Tinybeans future. Today, I'll be sharing a little bit about our FY '22 results and giving you a bit of insight as to where the company is going. So thank you for attending today. Those of you who don't know, a little bit about me. I'm a dad of 4 amazing, challenging boys and teams or men, ages are 11 through to 19. And as a parent, I along with the rest of the team at Tinybeans are on a personal mission to create something truly compelling that all parents need. We're forming a platform to really help us all and help parents raise amazing kids. We received a bunch of questions and lead up to this. (Operator Instructions) So let's jump in. So if we think about the parenting market, it's a huge market. In the U.S. alone, it's -- you can see, $934 billion. And it's -- so it's just basically -- it's illustrative of the mark of a (inaudible) and the parents and the problems looking to solve. Yes, Tinybeans is very small at present relative to this market, but it just shows you the potential of this market and just really where parents are and where they're spending today and into the future. And frankly, it's even -- gotten even more expensive clearly over the last 12 months of inflation has risen. But it's an important stat to understand because as the business continues to evolve and launch a whole revenue stream, especially in consumer, and as we doubled down this year in affiliate and product revenue, this will be an important point to keep on reminding everyone in, in terms of the market that we're in and we're growing into. If you think about the, I guess, the journey of a parent, it's long, challenging and incredibly rewarding. I speak to parents all the time, and I speak to and understand, obviously, the challenges and the opportunities. And it's really important to understand that today, yes, we serve a new parent, and yes, we serve parents up until probably the kids are 12, but we're really expanding that and also lengthening that in terms of the relationship we have within and without. So basically, what's important to understand is that as mom falls pregnant, there's a huge opportunity for us to engage her and retain her and then clearly engage her and the family as the child grows and as obviously the family develops. Stay tuned for a range of initiatives, I think, over the next 12 months you'll start to see as we look to expand in prenatal, which is something we've had a very small market in but looking to do much more of it today and into the future as we double down on content for kids that are a little bit older. So let's jump into some of the financials. So you've probably all seen this by now, no surprises from what we shared, I guess, in the 4E and results about a month ago, but the business has had a great year in FY '22 and that's the year finishing on June 30. So we hit just under USD 11 million, which is a great achievement, over 34% up in the same time 12 months early, and we had great growth both in advertising and the consumer side. The advertising business grew 56% and really outpaced the industry, which is really exciting. We've got to integrate the Red Tricycle brand into the propositions, and now we go out to advertise it with a single brand for Tinybeans. 12 months ago, if I said here, it would be 2 brands talking to advertisers, Red Tricycle and Tinybeans. So really pleased with the execution of that through the course of the last 12 months. As we've shared also earlier, I guess, about 4, 5 months ago, we started to share with the market our intention to get to cash flow positive and that's very much a commitment we have. So that's about continuing to have more modest growth in revenue and really manage our costs. I want to come back and talk about that with a bit more detail later on as well. But basically, overall, the business has done very well. We've had great growth drivers in the advertising business. Clearly, the subscription business has also grown dramatically. We've doubled our monthly recurring revenue in the last 12 months, clearly connected to the Beanstalk subscription that we launched through media. So a whole range of initiatives that we delivered on and clearly setting ourselves up for the year ahead. Another really great point, which also illustrates, I guess, the future health of the business, is around some of the contracts we're closing over $100,000. You can see last year, it was 13. We've hit 19 this year, and that will continue to be worked on and obviously grow in subsequent years to come. So let's dive into some of those metrics with a bit more color. So advertising business alone hit $9 million. It was over 30% up at the same time in the previous year. And again, I just shared earlier and in previous years, the balance of new revenue from new brands compared to existing brands is really healthy. 3/4 of that revenue comes from existing brands. So we're not really reliant on 1 or 2 brands, but a whole host of really tier brands. And also new brands that are coming in and realizing the value of Tinybeans. So that's grown really nicely. The direct business was up 57%. But 1 important point to share, and we have shared this in the past, our programmatic revenue declined intentionally because as we're doubling down on growing the consumer revenue stream and the subscription product, we removed some of the ad placements for that value prop and that was the decline in the programmatic revenue stream. So it has benefited the business overall strategically and for customers, clearly around the subscription product and the subscription business, but it has had come with an impact in terms of the core revenue programmatic. Having said that, we are investing in a whole range of ways on the web predominantly that looking to launch in the next couple of months, actually, that will see the programmatic revenue continue to look to rebaseline and grow, but it would be outside of the realm of what the paid subscription product is about. We continue to win some great brands. I'll talk about those brands in a minute. And as I mentioned before, we continue to obviously win some of the larger contracts each year, continuing to win that with existing brands and new brands as well. A few things that are just worth mentioning is that unlike many other, I guess, companies that are out there in the advertising space or talking to, I guess, the publishers, et cetera, we are all about parenting. That's all we do. We have a ton of value to customers, to consumers. And clearly, it's all about creating the great user experience and then using that to go out there and talk to brands about what we do for them, not only about the advertising side of things, but also on the inside side of things. We talk to our consumer all the time. They're highly affluent, engaged consumer. And brands, when I understand much more them, to obviously get in front of them to obviously be able to convert transactions and drive sales. This slide is an important slide to understand the true extent of the ad platform. So previously, I've had feedback from investors that they believe sort of the web is sort of the main channel of advertising revenue. It is a channel, it's not the main channel. We have many channels around the ad platform. And this slide illustrates just the extent of the ad product that we go out there and talk to brands about all over. From basically insights I just talked about to basically all sorts of ways in which we engage with within the app and on website, on e-mail, on social and a whole range of other things within. We do a lot of custom campaigns, custom solutions for brands, et cetera. So it's pretty extensive. When we talk to brands, it's always a bespoke idea, a bespoke pitch. And yes, it's made up of a whole host of traditional elements that have proven successful. But it's often a customized package that we'll talk to brands about. So just important to understand the fact that it's not just about a handful of elements. There's lots of unique things that we can create and we do create for brands to obviously integrate their campaign goals and drive success. This is always a great slide to look at to basically demonstrate the brands and partners we've worked with. And some of these brands are existing brands and partnerships. Some of the brands we've worked with in recent years. And it's just a really impressive list of brands and relationships. And I guess it's just important to note that albeit the fact that we're small and we have a relatively small audience compared to other platforms in the industry and clearly some of these brands, they see huge value to what we do and huge value engaging with a smaller, much more targeted parent and clearly be able to drive conversion and drive engagement to their brands. So we'll continue to be able to talk to new brands, talk to these brands and continue to win business out there. Moving away from the advertising business, talking about the consumer business. That's grown really well also in the last 12 months. It clearly was predicated on the subscription strategy we launched, I guess, about a year ago. We've now double paid subscriptions. So a little over a year ago was 25,000. We're now over 51,000 paid subscribers. Monthly recurring revenues has also grown really well. So this consumer business, yes, it's small. It's growing really well the last 12 months. You can see 54% overall. But there's really so much more growth to be had in the future. And I've got this slide later, and you've probably seen me talk about it as well in the past around our absolute goal to get consumer revenue to be just as large as the advertising business in years to come. So for us, the consumer business is not just about paid subscriptions. We're also doing a whole host of investments in affiliates and driving, I guess, purchases to parents where we generate transaction fees. And 1 important point to note, which is really exciting, is that our trial to paid conversion over the course of the entire year hit 94%, which is pretty remarkable. So every 100 people that start a trial, 94% converting to a paid subscription. So our goal is to try to get as many people from -- clearly from download to registered to starter trials. So then obviously, many more can then start a paid subscription in the app and on the website. So for us, it's about continuing to optimize for those metrics to then clearly grow the subscription business and the overarching consumer business as well. We thought it would be worthwhile sharing some, I guess, real anecdotes we get from customers all the time. And we get hundreds every week from customers and positive and negative and constructive, everything in between. And it's just great that you really appreciate the impact we have to our families and parents everywhere and just how much of a motion Tinybeans creates for them. And I'm not going to go through all these. You can sort of see what they say in front of you. But like you'll be using it for 5 years and love it. Recommend to the other grandparents, happiness and shines a good deed in a wary world. Like really impactful messages that really drive our team, that really inspires our team to continue to build great things. It's not always perfect out there. We know we've had challenges on the Android app, and we definitely plan to launch a new Android app in the not-too-distant future. For example, we definitely appreciate that it's been a challenging part of the platform. But again, it's about taking feedback on managing the priorities and then making it a positive experience in the future. But this just -- we thought it would be worthwhile sharing just a few anecdotes we get from our parents every day. Let's talk a little bit more about the audience and our parents, of course. We're definitely investing in this area. And I illustrated some of these in the 4C presentation we shared a little over a month ago. But we're investing quite a bit in social, quite a bit in content. We're doubling down on family travel is a key opportunity for us and a key market segment, both from a brand perspective and probably from a consumer perspective. We've got a whole channel dedicated to it. We have riders dedicated to it. But overall, we're really excited about the potential this will have to our audience. So from a monthly active user perspective, we've just done 3 million monthly active users where we closed out the quarter. It was up in the previous quarter. As I've shared in previous announcements, our organic traffic was something that was impacted late last year. We made strides in improving that earlier this calendar year, and we've seen the fruits of that. We're not there yet. We continue to see the results of organic surge having an impact. When you're searching for content, Tinybeans is becoming much more prevalent in those results, and I'll continue to see that organic search and organic traffic grow. We've also seen results from social strategies we're employing, again, around engagement, and we're also investing in some of the new social networks like TikTok, et cetera, which we haven't done much there before. Apple continue to be a great partner of ours. There's a whole host of content we're working with them on, and it's actually gone beyond the U.S. We also post content on the platform across other parts of the world as well and that will continue to be the case to drive that partnership forward and continue to grow that engagement with parents. Some of the product highlights over the last 12 months, there's been lots and lots of product developments in the last 12 months. So this is just really a snapshot of them. We mentioned it previously, we launched the new tinybeans.com website. We've integrated the Red Tricycle systems behind the scene, the single brand. We've merged (inaudible) providers. We launched our Beanstalk subscription service, redesigned a whole host of the onboarding, which is really an important part of how parents first engage with the app, whole host of other improvements around SEO as well. I've just mentioned some of them, but behind the scenes, a whole range of SEO, I guess, developments both from a product perspective and content perspective. And that's a constant part of the muscle [other way] developing internally. So we can fully expect SEO to continue to grow in months to come and then years to come. In terms of other highlights, and we're investing in the advertising piece. I mentioned the advertising piece on the website. We've invested in a data management platform, together, more first-party data for our ability to then target parents that our advertisers want to target, again, never sharing this data with advertisers, of course. They're using the data to then target the parents extensively based on all sorts of interest and profile data. Whole host of improvements around retention. I just called out the Android app. We're in the thick of redeveloping the Android app, and that's something that we're looking to launch in the early part of 2023, hopefully sooner, but now that's really what our plans are. And continue to work on key features around the app to continue to drive that retention and engagement inside the app experience. So that's sort of, I guess, a quick, I guess, summary of FY '22 at a high level from a business and operations perspective. I'm now going to jump into some of the financial results. Also, again, very similar to what we have presented earlier. So none of this is going to be that new, except I do have some additional color on some of the -- on how we see the next year sort of unpack. Diving into the P&S -- sorry, a P&L summary for FY '22 comparing to FY '21. So revenue up 34%. I mentioned that both driven by the advertising business and the subscription consumer business. Cost of goods sold definitely grew also as it related to those revenue streams going up, both from an advertising perspective and subscription cost. So clearly, when someone buys a subscription through the App Store, which transaction fees as part of the subscription, and that's what the cost of goods sold really relates to. For the last 12 months, we have increased operational expenses over the course of the year as revenue has grown. Having said that, in, I guess, probably since April, May, we started to make concerted efforts to really reduce some of those expenses, reduce some of those costs. And actually, we've taken some pretty significant steps in terms of reducing cost into the next 12 months as well around general admin and cash flows to the tune of $700,000, which is great, and we think there's probably more saved -- more money to be saved there as well. Our Q4 definitely saw some softness to the advertising revenue. The market has been impacted by the -- all sorts of market forces around inflation to supply chain, to clearly war in Europe. So we've definitely seen a slowdown of the ad business in Q4. This quarter, that slowdown is definitely still prevalent. Brands are out there still engaged and still talking about campaigns. Some have been delayed, some have been shelved and some are just starting up really depending on the brand and obviously the segment they're in. So we're playing very much a wait-and-see approach. But clearly, we felt it was important to cut some of the costs in the business to continue to drive our goal of getting to cash flow positive off the back of obviously where the business is at today. So we've reduced some of the general admin costs to allow for some of that offset into the next 12 months. But the last 12 months, overall, really happy with the results in terms of revenue growth, and clearly, some of those expenses were invested in for growth. Some of that for us need to be reviewed, and clearly, we reduced some of that into FY '23. So here's a bit of a waterfall of the cash and how the cash sort of, I guess, worked through over the last 12 months. So in July '21, we're sitting just over $2 million, a whole host of, I guess, activities through the course of the year, and we finished June at $4.23 million with clearly a capital raise in the middle. Net operating cash flows were negative $2.45 million. So roughly about $650,000 burn on average a quarter. And for us, it's about continuing to manage that and optimize for that. Cash receipts, you can see, we're over $11 million, 48% more than the same period last year. So you can see as the business has grown, clearly, the cash receipts have grown. And clearly, our ability to manage those expenses are going to be really, really important. We do see this quarter as a cash burn quarter. It's typically the largest quarter of cash burn for the year. But overall, for the course of the next 12 months, we definitely see the cash flow burn reducing on average significantly. Clearly, it's going to be around cost management. We've reduced the whole hyper cost already around some of the general admin costs as well, and we'll continue to expect revenue growth over the next 12 months. So let's talk about some of this with a bit more color. So as I said, cash burn was about $2.5 million. We definitely see this quarter being still just over $1 million cash burn. We've reduced some of the broader cost across the company, not just in admin, but in a whole range of other areas as well. And again, our goal is to continue to get to cash flow positive of current cash reserves. They're still very much our commitment and still absolutely our intent behind it. Provided some guidance on what the costs are, approximately, on average, clearly, each quarter varies. The business is still large, given 75%, 80% of it is driven by advertising. Clearly, they're still highly seasonal. We're about to start the next quarter being the biggest quarter on the course of the year. But clearly, as opposed to Q3, it's going to be the weakest revenue quarter. So some of those costs are going to be varied accordingly as well. But really, I mean we have a positive revenue outlook for the year and really about ensuring that the cash is managed extensively and the cost to manage that connected to that. And we still see ambitious goal to continue to get to the 50-50 split of consumer and advertising revenue over the next 3 years to 2026. So the important point to note is that we're really managing the cash really, really well and managing, obviously, to understand what the market out there is doing and ensuring we have enough flex in the business to continue to get to growth, more modest growth and manage expenses accordingly. So we're in a good spot here. So that's, I guess, summarizing the financial aspects. And again, if there's any questions on that, happy to get to that later. Let's talk about some of the growth and some of the strategy moving forward. And a lot of this will be probably a repeat of what you've seen before, and it's about our ability to execute on it. So we definitely have ambitions to do a lot of things for parents. Clearly, we do a handful of things today, and really, our ambition is to really grow that in years to come, from memories to content. And we talked about that really moving into product and [filling] revenue and clearly community as well. Lifetime value increased to $186. We calculate lifetime value largely around subscriptions with a small contributor toward advertising as well. So for us, it's about continuing to grow that lifetime value in years to come, retaining that customer, making sure the customer is coming back, spending more with us and clearly looking to drive that lifetime value even higher. So this is still very much our strategy. It was a whole host of content that we're looking to continue to iterate on and really not only about engaging the parent as it relates to them in the chart, but also offering content to them as their own consumer and what we call pampering the parent as well. So the timing of this is obviously going to be dependent over the next -- in the future years, and this is where we're still heading as a company. I mentioned this before, we're still committed to get to 50-50 split between the revenue of advertising consumer. You will see definitely this year, it will be a concerted effort towards that. In the last year, it was 85-15. You'll start to see that continue to grow consumer revenue into this year and advertising revenue growth, but also the percentage of that as it relates to overall revenue will be lower. But the overall revenue will still continue to grow, and we march toward that 2026 goal of both advertising revenue, consumer revenue being 50-50. So one thing we often get asked about is sort of how you're going to grow. I mean you don't have a ton of money. Acquisition (inaudible) acquisition is often difficult and very difficult to scale. How are you going to grow? So we thought we'd put together a very short slide to give an illustrative version of our organic strategy for growth. So clearly, advocacy is vital. Parents loving the product, spreading word of mouth and telling other people about it. And that goes without saying for all the things that we talked about today and clearly, some of the quotes we get from users directly. Awareness is important. How do we get that message out to everyone else in terms of basically whether it's social, whether it's through our e-mail channel, whether through our website, whether it's through SEO, again, lots of organic means to grow that awareness. Engagement is really important. It's important 2 ways. One is clearly around the network effect and parents and grandparents telling other people about it, but also are about to launch a whole bunch of new features around referral and incentives around referrals and more ways to tell other people about the product. And clearly, if they're engaged and they both benefit from being able to have the referral. And then we're driving purchase and intent. We're launching a whole bunch of guides, the ability to have shops on the site. It won't be -- e-commerce is in like where supply chaining the product and ordering from us. It'll all be what's called affiliate-based, meaning he is a guide of our products to think about for your child or back-to-school or a birthday. They click on that product. It goes to a site. And if they purchase in a period of time, we get a transaction fee. And that's where I feel it really works. So it's all about optimizing the engagement and conversion, and that's an area that we're really looking to build a lot more of in the next 12 months. We haven't done much of it in the past. It's been a small amount. It hasn't been really a focus of ours. We're absolutely focused on now. We have a team dedicated to it now around growing the affiliate revenue substantially through that whole consumer experience. So this is -- and clearly, they do a purchase, they like it, they tell more people about it and the flywheel really start. So this is really, I guess, a very high-level view of how we see the flywheel of growth happening largely organically and continue to obviously promote the brand amongst their network and around the world. So in terms of, I guess, wrapping up where the company is at, we're really, I think, in a very robust place. So our strategy and our goal is to be synonymous with parenting. We still see a huge gap in the market of entirely whitespace. There's no app out there that really owns the space, the parents really start with and engage with in this area. So we still see a big opportunity to really be that app under a single brand, large addressable market I've spoken about before. We have a great audience that really love the product and love the brand, and we can grow off the back all through the growth flywheel aspects I just mentioned. And I think the multiple revenue streams is really interesting. It definitely is important as revenue streams really invest and grow. And as basically, again, in the advertising business, we're at the behest of the brand, the consumer revenue business less so, so it presents a huge opportunity in terms of how we can continue to grow and get to large lifetime value revenues off the back of what we're doing today. So with that, that sort of wraps up the presentation. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Edward Geller, Tinybeans Group Limited - Founder, CEO & Executive Director  -------------------------------------------------------------------------------- What I thought I can do now is answer a couple of questions I've received previously. (Operator Instructions) But for now, I'll just answer some of the questions I received throughout the week. So one question is, in terms of -- which financial year does Tinybeans expect to return to a return of profit? So it's a great question, very relevant. I'm sure it's on some of your minds today. I guess we're not in a position today to share the specific forecast as to when. However, we're doing all we can to continue to grow our revenues that I talked about, maintain or even reduce our costs and clearly get there quickly. As I've shared today, we're driving to get to cash flow positive as soon as we can, already having reduced over $700,000 annual noncore expenses. And once we get to that milestone, we think profitability will be next. So I can't sit here today and tell you exactly when that will be, but it's definitely going to be a, I would say, short to medium future based on us achieving the goals of obviously cash flow positive, et cetera. Thanks for the question. Other question is, what's your relationship with LEGO now? Thank you for this question as well. So over the last 12 months, LEGO has pursued a slightly different strategy this year and holiday season, focused much more on video, premium video that is, and think like YouTube in terms of premium video. So working with us has really proved quite difficult this year. Having said that, we continue to work with them and talk to them about our high trust value prop, and we're in active conversations about working together back in 2023. So still an active customer of ours, but based on their strategy this year, there wasn't a lot we could do with them in recent times. So a question, can you please talk about how you view your competitor, FamilyAlbum? Is their growth affecting you? So thank you for the question. In terms of I guess -- so for those of you who don't know, there's another app out there. It originates from Japan, called FamilyAlbum, and it's based on a memory sharing app specifically. We don't see them a lot, frankly. I would say, up until last year, they were spending quite a bit on paid media. We haven't seen them much in the space. I mean, clearly, they have an audience out there that really enjoy and use the product. But in terms of how it affects our growth, I guess, I would say summary, we're both very small companies compared to the market. I mean with 3.8 million babies born in the U.S. every year, the market is very large. And really, you can have many apps in this space to be very successful. So I certainly don't see them as a threat in terms of our growth. I see our ability to execute and leverage the audience we have and obviously ensure we have a great product to market. That's really going to be a key part of our growth strategy as we scale. All right. Well, I might -- I think that's all the questions I've received today. Unless anyone has any other questions, I might just wrap up. And clearly, if people have more questions for me, then please feel free to reach out any time and do that. But I guess I'll just wrap up and summarize. The company has come off a really great year with really great growth. We've tried lots of things. Some things work really well, some things didn't go as well as we had hoped, just like any company does. We have reset the strategy into this year ahead, continuing to build value for the parent, continue to build value for the consumer and the families to obviously keep coming back and to continue to build a wonderful business. So stay tuned for lots of new launches over the next 12 months and continue to be supportive of where the Tinybeans business is going. And as I said, if you have any more questions, let us know, but it's definitely a great time to obviously learn more about the Tinybeans business. So with that, thank you so much, everyone, again, for your support and look forward to updating the market in the future. Bye for now.