Earnings call transcript: Tiny Ltd’s Q2 2025 Shows Strong Recurring Revenue Growth

Tiny Ltd has reported its financial results for Q2 2025, highlighting a 4% increase in pro forma revenue compared to the same quarter last year. Excluding a significant enterprise deal, organic growth was over 15%. The company has also seen a notable rise in recurring revenue, now comprising 26% of total revenue. Currently trading at $44.20, with an EXCELLENT Financial Health score according to InvestingPro, the stock rose 2.17% after the announcement. The company’s strong free cash flow yield suggests potential undervaluation, as detailed in InvestingPro’s comprehensive research report covering 1,400+ US equities.

Key Takeaways

• Recurring revenue reached 26% of total, with an annualized expectation of $64 million.
• LTM adjusted EBITDA hit $35.3 million, while free cash flow improved significantly.
• The company successfully integrated its Serato acquisition.
• Debt repayment of $5.2 million contributed to a lower leverage ratio.

Company Performance

Tiny Ltd demonstrated solid performance in Q2 2025, driven by strong growth in its digital services business and increasing recurring revenue streams. The company’s focus on operational efficiencies and cost discipline has bolstered its financial metrics, positioning it favorably against industry trends.

Financial Highlights

• Pro forma revenue: Increased by 4% YoY
• Organic growth: Over 15% excluding a large enterprise deal
• Recurring revenue: 26% of total revenue
• LTM adjusted EBITDA: $35.3 million
• LTM free cash flow: Improved to $20.9 million, up $18.9 million YoY

Market Reaction

Following the earnings announcement, Tiny Ltd’s stock rose by 2.17%, reflecting investor confidence in its recurring revenue growth and operational efficiency. Trading between its 52-week range of $31.16 to $51.05, the stock has shown resilience with a modest YTD decline of 0.62%. InvestingPro analysis indicates the stock often moves independently of broader market trends, offering potential diversification benefits. Discover more insights and 8 additional ProTips with an InvestingPro subscription.

Outlook & Guidance

Tiny Ltd remains optimistic about its future, anticipating continued improvement in adjusted EBITDA and margins. The company is committed to reducing debt and exploring acquisition opportunities, aiming to enhance shareholder value through strategic capital allocation.

Executive Commentary

• "We are committed to compounding capital at high rates of return for the near term and for the long term," stated Jordan Tope, Executive.
• "We continue to see opportunity to grow our recurring base within the portfolio," Tope added, emphasizing the company’s strategic focus on recurring revenue.
• "Closing Serato was a monumental milestone for us within Tiny," Tope noted, highlighting the significance of the recent acquisition.

Risks and Challenges

• Market saturation in digital services could limit growth.
• Economic uncertainties may impact consumer spending and business investments.
• Integration challenges following acquisitions could affect operational efficiency.
• Potential piracy issues in e-commerce platforms could impact revenue streams.

Tiny Ltd’s Q2 2025 results underscore its strong performance and strategic focus on recurring revenue and operational efficiency. While the company faces potential challenges, its proactive measures and positive market reaction indicate a promising outlook. For deeper insights into Tiny Ltd’s valuation and growth potential, access the full InvestingPro Research Report, featuring comprehensive analysis, peer comparisons, and expert recommendations.

Full transcript - Tiny Ltd (TINY) Q2 2025:

Conference Moderator: Good morning, welcome to the Tiny Limited Q2 twenty twenty five Results Conference Call. All lines have been placed on 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, statements during this call may include forward looking statements and future orientated financial information regarding and its business and disclose regarding possible expectations, 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 opportunities. Such statements are made of this date hereof, and Tiny assumes no obligation to update or revise them, except as required by applicable security laws. Such statements involve significant risks, uncertainties, and assumptions, 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 disclaimer in the slides accompanying this presentation and 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 titled 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 now like to turn the call over to our executive team from Tiny for today’s meeting. Please go ahead.

Jordan Tope, Executive, Tiny Limited: Thank you. Good morning, everyone. Welcome to Tiny’s q two twenty twenty five earnings call. You’ve got Jordan Tope and Mike McKenna from Tiny. I have to say that I’m proud of the continued momentum represented by our q two results.

We closed Serato, which is now included in our consolidated results for approximately half the quarter. This has, you know, allowed us to benefit from the consolidated results for q two, increasing our recurring revenue, our adjusted EBITDA, and free cash flow. We remain excited about the near term development road map within Serato and wanted to highlight the launch of Apple Music within the Serato DJ platform. This is already helping with subscription growth and will continue to benefit our organic growth going forward. We had significant improvements in our adjusted EBITDA, free cash flow year over year.

This has been a big strategic focus of Tiny for the past twelve months with LTM adjusted EBITDA improving to $35,300,000 and LTM free cash flow improving to $20,900,000 which was an increase of 18,900,000 year over year. This has helped us to continue our strategic priority of repaying debt with $5,200,000 repaid in Q2, and we will continue to focus on generating free cash flow and prioritizing deleveraging through the rest of the year. Finally, Tiny Fund One increased its net asset value to $142,000,000 throughout the quarter, driven by the strong performance of Letterboxd, which reached 21,400,000 members, an almost 50% increase year over year. We also received 500,000.0 in distributions from the fund, bringing our total fund distributions for the year to 1,500,000.0. Pro form a revenue increased by 4% compared to Q2 twenty twenty four, adjusted for dispositions of Frosty and eightytwenty.

It’s important to note the comparative quarter included a large enterprise deal in our creative platform of around $5,000,000 If we exclude this from our results for Q2 twenty twenty four, growth was over 15% in Q2 twenty twenty five. Otherwise, growth within the quarter can be attributed to continued strength in our digital services business as highlighted the additional credentials in MetaLab related to AI, landmark projects and the inclusion of half a quarter of Serato. This was offset by lower piracy recovery revenue within our ecommerce platform as this initiative is now largely complete. Recurring revenue increased significantly quarter over quarter as this is mainly driven by the inclusion of Serato given their large subscription revenue model. Recurring now makes up 26% of our total revenue, and we expect this to increase throughout the year.

We continue to see opportunity to grow our recurring base within the portfolio, and we are on track for an annualized figure of over $64,000,000 when including Serato and reflecting the performance of our other subscription businesses. Adjusted EBITDA and adjusted EBITDA margin continue to improve on every year over year comparison with LTM adjusted EBITDA reaching over $35,000,000 for 2025 for Q2 twenty twenty five. If we include Serato for the full quarter, adjusted EBITDA would have been 10,300,000.0 with margin of over 18%. We expect improvement to continue for the rest of 2025 given the initiatives we already have underway related to cost discipline and revenue growth.

Mike McKenna, Executive, Tiny Limited: Okay, Jordan. Thank you very much. I’ll take over this page here on free cash flow and talk a little bit more about this really important metric. Jordan highlighted this as really a key component of our performance. I think you’ll see by the numbers, obviously, we’ve been very focused on this, but we’ve got some very positive results here as it relates to our free cash flow as well as our free cash flow post debt servicing.

These are both metrics that we’ve introduced as KPIs for the business. And we continue to report on them. And we provided a bit more detail this quarter in terms of the quarterly comparison as well as the first half of the year comparison. So you’ll see significant improvement in these key metrics, both on the quarterly basis and through the 2025. Our free cash flow overall improved by 9,700,000.0 and adjusted free cash flow post debt servicing improved by $8,700,000 when comparing the year over year period in Q2 twenty twenty five.

We’ve also provided the free cash flow metrics per share, which highlight this important financial KPI down to the shareholder level. You’ll also see very significant improvement in those metrics at the per share basis. Importantly, we’ve enhanced our overall free cash flow while continuing to be committed to debt repayment with available cash flow as well as ongoing evaluation of potential acquisition opportunities. The acquisition of Serato and the ongoing cost discipline that we’ve enacted through operational efficiencies and tremendous excellence will continue to improve cash flow through 2025. I’ll move on now to some highlights about the performance of the Tiny Fund I.

Again, in this quarter, you’ll see enhanced detail on the financial performance and the carrying value of the Fund. We will continue to aim to provide financial and operating highlights for the Fund and individual companies as highlighted here in Q2 by a comparative period overview of both revenue and Tiny Fund I distributions for Q1 twenty twenty five and the 2025, both compared to the similar period in 2024. We’ve also noted an increase in the carrying value of Tiny Fund one this quarter, up by $13,200,000 And as we move on to some operational highlights, Jordan touched on earlier some of the success at Letterbox. We’ve also seen again good performance at AeroPress with continued new product development and opportunities to continue to enhance the portfolio as the market opportunity expands. In this quarter, AeroPress launched the Clear XL, which is the latest evolution in its popular AeroPress Clear with a now larger 20 ounce capacity.

Moving on to an overview of the debt position and cash. One of the important things we wanna highlight here is that through the course of the last series and number of quarters, with our continued commitment to debt repayment, we’ve been able to ensure that we’re maintaining our leverage ratio in a much more manageable fashion. We still remain focused on getting the target leverage ratio below 2.5 through debt repayment and natural deleveraging through improvement in adjusted EBITDA. However, it is important to note that the 2.8 times at the end of Q2 twenty twenty five on a pro form a basis with Serato includes the convertible debt that we did take on to do the transaction, to finance the transaction, excuse me, as well as some additional debt through our operating facility, which is available for acquisitions. And so we’re still at 2.8 times at the end of the quarter, which is a significant highlight in terms of our commitment to this metric.

If you compare that to where we were as a business at the 2023, our leverage levels have come down significantly, and it shows that we can get us down to that 2.5 or below target that Jordan and I have referenced a number of times. I’ll turn it back to Jordan to highlight the rest of the year roadmap

Jordan Tope, Executive, Tiny Limited: and finish up the call. Thank you, Mike. So to summarize here, again, I really just wanted to say how proud I am of the of the continued progress and momentum of the business. There has been significant improvement in adjusted EBITDA, free cash flow, and these are all things that we’ve discussed at our AGM and throughout the quarters in our financial update calls around driving free cash flow growth, especially on a per share basis. I’m proud to announce that free cash flow increased to $20,900,000 from $2,000,000 in the comparative year.

This will continue to improve throughout 2025. We’re excited to keep you updated on the improvements with Serato and with the rest of the portfolio. We remain committed to improving our leverage ratios and improving sorry, and repaying debt. That leverage ratio will continue to come down throughout the year, giving us flexibility for future capital allocation, reducing our interest expense, increasing our free cash flow, and allowing us further flexibility for other capital allocation decisions. We will continue to improve our fund disclosure and provide insights into the portfolio within the fund.

We expect to continue to get distributions from the fund throughout the rest of the year. And we’re also continuing to evaluate additional net asset value changes or increases based on the performance of the fund. And and we’re again, we’re we’re excited about the prospects of our of our major of our major investments within the fund, and we’re excited to tell you about them. And then finally, you know, closing Serato was a monumental, you know, milestone for us within Tiny. We are extremely excited about the acquisition.

I just got back from a trip to New Zealand to to see the management team and and go over our investment thesis and talk about the plans for the rest of the year. We’re excited about the the rest of the features and product enhancements that are coming out and, working with that team, and we’ll continue to keep you updated on the performance. And finally, as always, we continue to evaluate additional acquisition opportunities, and we are committed to compounding capital at high rates of return for the near term and for the long term. So thank you, everyone.

Conference Moderator: You very

Mike McKenna, Executive, Tiny Limited: much. We it up to ask a question?

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