Earnings call transcript: Tiny Ltd reports strong Q4 2024 EBITDA growth

Tiny Ltd. (TINY) reported its highest adjusted EBITDA since going public, with a substantial increase in its financial performance for Q4 2024. The company achieved an adjusted EBITDA of $10.1 million, representing a 38% increase compared to the same quarter in the previous year. According to InvestingPro data, the stock is currently trading at $37.39, with a market capitalization of $4.67 million. Despite the positive EBITDA results, InvestingPro analysis indicates the company is trading at a high EBITDA valuation multiple.

Key Takeaways

• Tiny Ltd. achieved its highest adjusted EBITDA since going public.
• The company reduced its leverage ratio to 3x by the end of Q4.
• Strategic acquisitions and operational improvements drove financial performance.
• The stock price increased by 3.54% following the earnings announcement.

Company Performance

Tiny Ltd. demonstrated robust performance in Q4 2024, achieving a 38% increase in adjusted EBITDA compared to Q3 2024. The company’s annual EBITDA also saw a 13% year-over-year increase, amounting to $3.6 million. This growth was driven by strategic acquisitions and operational enhancements, positioning Tiny Ltd. favorably in the digital services and software sectors.

Financial Highlights

• Adjusted EBITDA: $10.1 million, up 38% year-over-year
• Annual EBITDA: $3.6 million increase, 13% year-over-year
• Q4 EBITDA margin: 21%
• Full-year EBITDA margin: 16%
• Debt reduction: $10.2 million in Q4

Outlook & Guidance

Looking forward, Tiny Ltd. aims to reduce its leverage ratio to below 2.5x and eventually under 2x. The company expects the results of 2025 to reflect the impact of its 2024 acquisitions. Management continues to focus on organic growth, cost management, and evaluating additional acquisition opportunities.

Executive Commentary

CEO Jordan Toews highlighted the company’s achievements, stating, "We achieved our highest adjusted EBITDA since going public in 2023." Toews also emphasized the company’s strategic focus, saying, "We’re really trying to create an ownership mentality and focus our CEOs on what they control."

Risks and Challenges

• Market volatility: Fluctuations in market conditions could impact financial performance.
• Integration of acquisitions: Successfully integrating recent acquisitions remains crucial.
• Competitive pressures: Increased competition in digital services and software sectors.
• Economic conditions: Broader macroeconomic pressures could affect consumer spending.
• Regulatory changes: Potential changes in regulations may impact operational strategies.

Tiny Ltd.’s strong financial performance and strategic initiatives position the company for continued growth, with a positive outlook for 2025.

Full transcript - Tiny Ltd (TINY) Q4 2024:

Conference Call Moderator: Good morning, and welcome to the Tiny Ltd. Fiscal Year twenty twenty four Schools Conference Call. All lines have been placed in mute to prevent any background noise. And after the speakers’ remarks, there will be a question and answer session. Before we start, we ask you to take a moment to read the disclaimer at the beginning of the slides that accompany this presentation as it contains important information.

We would also like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated. Please note that statements made during this call may include forward looking statements and information in future oriented financial information regarding Tiny and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management’s expectation of future growth, results of operations, business performance and business prospects and opportunities. Such statements are made as of this date hereof, and Tiny assumes no obligation to update or revise them to reflect events, disclosures or circumstances, except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today.

Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward looking statements disclaimers in the slides that are accompanying this presentation in the company’s press release issued today for additional information. We use non IFRS financial measures to help investors understand our operating performance. Non IFRS financial measures may not be comparable to similarly filed measures used by other companies and should be considered along with, but not as an alternative to measures calculated in accordance with IFRS. I would like to now turn the call over to the executive team from Tiny for today’s earnings call.

Please go ahead.

Jordan Toews, CEO, Tiny Ltd.: Hey there. Good morning. You’ve got Jordan Toews, CEO of Tiny here. I’m joined by Mike McKenna, our CFO. We’re excited to tell you more about our 2024 financial results.

So first of all, I’m I’m really proud of the work we’ve done in 2024. I feel like we, are are really positioning ourselves well for further growth in 2025. I’m excited to share some of the highlights of the work we’ve done, especially as it relates to increasing cash flow both through inorganic growth in certain key parts of our business and from the cost rationalization exercises that we that we did in ’20 in q three twenty twenty four. You’re really starting to see some of the early results of those initiatives appear in our q four financial results. You’ll see that both in improvements in operating cash flow for 2024.

We achieved our highest adjusted EBITDA since going public in 2023. That’s 10,100,000 of adjusted EBITDA. It’s a 38% increase over Q3 twenty twenty four. And that really does demonstrate the early results of those initiatives and and really the the results of our of our key strategic priorities. As you can see, we’ve we’ve demonstrated our commitment to reducing our leverage levels and repaying debt.

We repaid almost 25,000,000 net of drawings in 2024. Mike, our CFO, will talk you through a little bit more detail on our debt levels, and, I’m excited to tell you about the future of our of our debt commitments and, and how we plan to reduce our leverage going forward. We also had a real strategic priority or strategic focus on on recurring revenue and growing our recurring revenue. We acquired a business called Repeat in February 2024. This was a a VC business that wasn’t going to raise again, high amount of recurring revenue.

We tucked this into our stamp business, and we feel like this is a key part of the growth going forward in that business. The retention marketing business, it’s it helps us achieve our strategy of growing ACV and and targeting higher higher ACV customers in the mid market and enterprise. We’re proud of the acquisition of MediaNet, which was also a 98% recurring business in June 2024. So you’ll see that, affect our recurring revenue growth in the year. And finally, we acquired Wholesale Pet early on in the year, and that’s helping us with, with our distributions.

As you can see, we’ve you know, we did get 2,200,000.0 of distributions from the Tiny Fund, and and we do believe that that’s going to improve going forward as well. Finally, you know, we’ve been hard at work refining our short term incentive plans as well as our long term incentive plans. We’re rolling out a revised long term incentive plan that’s tied to intrinsic value growth in each of our businesses. We’re excited to expand our employee share purchase plan across the board. And, you know, we’re really trying to create an ownership mentality and focus our CEOs on what they control and align them to really good organic growth, organic revenue growth results as well as increasing cash flow within each of their businesses.

So excited to tell you about the, you know, our our highlights within revenue. In q four, we saw some growth driven by by new enterprise customers and really growing demand from businesses that, that are focused on AI. We completed work with some amazing companies like Suno and Midjourney, And, you know, we’re proud of the growth in our digital services segment despite despite disposing of two noncore assets that were that were low cash flow, that were non wholly owned. We did achieve pretty good growth. And actually excluding those pro form a, the growth was about, was about 5,400,000 year over year.

In our software and app app segment, we achieved growth driven by driven by our anti piracy initiatives and themes. We saw some decent growth in no commerce, and we’re really focusing growth in, in repeat and stamped. And and as I said earlier, just really focused on, you know, going after mid market and enterprise customers and and trying to grow overall ACV in that segment. Finally, in the creative platform, we’re doing some strategic repositioning. We’re really focused on growing our project and services revenue in Dribbble, focused on achieving growth in our enterprise business and and and increasing licensing revenue there.

And finally, we we had CEO changes in both of those businesses. So we’re really focused on improving site experience, shop experience, and increasing transaction and marketplace revenue in both dribble and creative market. Recurring revenue grew slightly from compared to q four twenty twenty three. That was really driven by MediaNet repeat continued focus on continued focus on on just prioritizing our growth in recurring revenue. All of our acquisitions in tiny Ltd were recurring revenue based businesses.

This remains a key focus of ours going forward, and you’ll see this in the recently announced pending acquisition of Serato, and we’re excited to see the results of that in our in our our future, in our future results. Finally, you’ll see the growth in 2023 was primarily driven by the full year inclusion of ecommerce, but, you’ll see 2025 really really kind of, you know, take effect, and and you’ll see the acquisitions that we’ve made in 2024. And, you know, you’ll see those results in our 2025 results as well. I’ll pass it over to Mike, and, he’ll walk through the the next few slides.

Mike McKenna, CFO, Tiny Ltd.: Okay. Thanks, Jordan. I’m gonna start out with an overview of adjusted EBITDA. So importantly, as Jordan mentioned, Q4 was our highest level of adjusted EBITDA since the time has become public. This was an increase of just over half a million dollars from our q four of twenty twenty three.

And when you think about that on an annual basis, our EBITDA increased by about 3,600,000.0 or 13% year over year. So pretty strong performance at the earnings level, some driven by cost rationalization, business optimization, you know, all the things we’ve been talking about as strategic priorities. I think it’s also important to highlight the margin profile and where that’s going. So 16% for the entire year of 2024, but importantly, a 21% margin in q four. And so that also is pretty significantly higher than q four of twenty twenty three.

So you can see those trends. I think we’re happy to say that also we’re seeing good trends at the EBITDA margin line as we think into q one as well. So good trends within the business, good management on good management of costs, and we’re seeing some revenue growth, all positive factors in positive adjusted EBITDA.

Jordan Toews, CEO, Tiny Ltd.: K?

Mike McKenna, CFO, Tiny Ltd.: If we wanna move on to free cash flow and touch upon this a minute. And as we would, I think, talk about this trend as it relates to adjusted EBITDA, certainly seeing it here as we have a bit more detail in in in the annualization of the free cash flow metric. Every quarter, you know, these numbers get a little bit clear. Right? We’re having less severance cost, less nonrecurring cost.

You know? So this is a more true metric of the of the business as it relates to performance with less reliance on nonrecurring numbers. And you’re gonna see that trend continue into q one and out through 2025, frankly, Outside of anything probably to do with our acronyms on Serato, we’re going be presenting pretty clean, know, picking numbers with less reliance on the nonrecurring items, which I think is very important as we think about this as a trend, as a KPI, and also to what it means on a per share basis. So while there’s an enhancement of the free cash flow line of about $2,500,000 for the year, you can really see the impact of the work we’ve been doing, in q four where our free cash flow was up, you know, almost over 4,000,000 doll almost $4,000,000, excuse me, in comparison to the same period of 2023. Very significant.

Allows us to continue to focus on debt repayment, which is really, really important for us. And, you know, as we repay debt, you know, we also save save costs on our on our financing costs or interest costs, so that also contributes, at at the same time. We note here, we’ve made an additional $9,600,000 of debt repayments this year at the beam at the the the digital services level or or beam. This is very important as we start to think about the debt profile and where we would like that debt profile to get to. Jordan will talk about this a little bit more as we progress here.

But, importantly, our debt levels, down 10,200,000, in the quarter. This is frankly important, again, because that trend of debt reduction, was was very prominent in q four. It was about $14,300,000 net repayments for the year. We do get a little bit of impact from FX and FX movements, at the digital services level, debt. That that debt is denominated in in in fee dollars generally U.

S. Dollar business. However, with the strengthening of the CAD into Q1, you’ll see a bit of the opposite effect. So we have some net gain into Q1 on our leverage levels as well. So you can see where the trends are.

We’ve got the leverage metric down to three times at the end of q four, which is obviously important and a very good trend in the right direction here on the chart on the upper right hand side of the page here when we think about the entirety of the year. Maybe with that, I can turn it back to Jordan and talk about a little bit about where we wanna get this trend to go on a long term basis and some of the some of the the plans we have, in place to do so.

Jordan Toews, CEO, Tiny Ltd.: Yeah. I would I would just add that that and we’ve and we’ve said this before, and we continue to hammer on on, you know, this being a strategic priority in terms of reducing overall leverage. And it’s something that’s going to happen both from debt repayment and from growth in EBITDA and growth in cash flow. So I think it’s important to talk about our road map for for EBITDA growth and how we see that evolving over 2025 and beyond. So, you know, if we if we look at this year and really just starting to see the early results of the acquisitions we made in ’24, the cost rationalization initiative that we did in Q3 twenty twenty four as well, we’re really pushing on organic growth across the portfolio and getting leverage from some of the cost discipline and cost management that we’re doing.

So we expect to see that show up in the 2025 results. You layer on the distributions, and I highlighted that we got 2,200,000 distributions in 2024, but we do expect it to see this increase in 2025, especially with capital fully deployed, the organic growth that we’re getting from from some of our our big businesses there. So we layer that on. And then we then you know, we’ll we’re you know, we recently announced this acquisition of Serato. You know, we’re excited for that to close.

We’re continuing to evaluate some additional opportunities, and we we do believe that 2025 and beyond are going to surface some well priced wonderful companies. We continue to talk to businesses that are really good fit and also continue to evaluate stuff that looks like great tuck ins for, you know, potentially something like Serato or or even the businesses that we continue to own, especially in in ecommerce or other attractive software and recurring opportunities. So we feel like that sets us up really well for 2025 to keep paying down debt, keep looking at investing in organic growth, giving us the flexibility to look at additional acquisitions in 2025 and beyond and to reduce our leverage levels to below that 2.5 times and ideally below that two times in mid to long term. So we’re excited to keep telling you about these results. We’ve got Q1 coming up shortly.

Our AGM being held in Victoria in June know, is another opportunity for you for us to highlight some of the exciting things that we’ve been up to and and talk about what we’re excited about for 2025 and beyond. So, we’re excited to keep telling the story and, really proud of the work we’ve done in 2024. So thank you.

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