SpringBig Holdings, Inc. (NASDAQ:SBIG) Q1 2023 Earnings Convention Name Might 4, 2023 5:00 PM ET
Firm Members
Ryan Flanagan – Investor Relations
Jeff Harris – Chief Govt Officer, Founder and Chairman
Paul Sykes – Chief Monetary Officer
Convention Name Members
Operator
Good afternoon everybody, and welcome to SpringBig’s Fiscal Yr 2023 First Quarter Earnings Convention Name. At the moment, all members are in a listen-only mode. After the audio system’ presentation, there shall be a question-and-answer session. [Operator Instructions] As a reminder, in the present day’s name is being recorded.
I’d now like to show the convention over to your host, SpringBig’s Investor Relations, Ryan Flanagan. Sir, please start.
Ryan Flanagan
Thanks. Hello, everybody, and thanks for becoming a member of our Q1 earnings convention name. Becoming a member of me on the decision in the present day are Jeff Harris, our CEO, Founder and Chairman; and Paul Sykes, our CFO. By now, everybody ought to have entry to our earnings announcement. This announcement can be on our Investor Relations web site. Throughout this name, we’ll make forward-looking statements, together with statements about our enterprise outlook, methods and long-term objectives. These feedback are primarily based on our plans, predictions and expectations as of in the present day, which can change over time. Our precise outcomes might differ materially resulting from a lot of dangers and uncertainties, together with the chance elements outlined in our 10-Ok filed with the SEC on March 28, 2023.
Additionally throughout this name, we are going to focus on sure non-GAAP monetary measures. These non-GAAP measures will not be supposed to be an alternative choice to our GAAP outcomes. Please discuss with our earnings launch on our Investor Relations web site for a reconciliation of GAAP to non-GAAP monetary measures in addition to extra context on our key working metrics. And eventually, this name in its entirety is being webcast from our Investor Relations web site at www.buyers.springbig.com, and an audio replay shall be out there on our web site in a couple of hours.
With that, I would like to show the decision over to Jeff.
Jeff Harris
Thanks, Ryan, and thanks everybody for becoming a member of in the present day’s name. We had a really productive first quarter and I’m happy with our execution to start the yr and with our progress we’re making throughout a lot of areas. Throughout in the present day’s name, Paul and I’ll present you particulars on our first quarter outcomes, replace you on key enterprise initiatives, and supply steerage for the second quarter and full yr 2023. Leaping proper into Q1 outcomes, I’m happy to report that we delivered income on the midpoint of our steerage vary. Complete income of $7.2 million represented development of 16% year-over-year and 6% quarter-over-quarter, an acceleration in comparison with 2% year-over-year reported in This autumn. Though broader macroeconomic issues proceed to weigh on advertising and marketing budgets and digital spend, we proceed to see a pattern the place finances consideration from sustaining and rising current clients, a central tenant of our platform remained considerably much less discretionary.
Progress within the first quarter once more was pushed by subscription income, which in Q1 grew 28% year-over-year, sustaining our momentum from the prior yr. We’re primarily a subscription primarily based SaaS enterprise, which gives predictability and will increase visibility into outcomes. We noticed continued power throughout all of our key efficiency metrics with our web income retention price remaining inside our goal vary at 100% regardless of the macro surroundings and likewise noticed development within the variety of places. Whereas we proceed to put money into accelerating high line development, we’re additionally targeted and dedicated to driving leverage and are executing in direction of our aim of EBITDA breakeven throughout 2023.
Turning to the 2 major segments in our enterprise, our retail and types platforms. Our retail platform gives retailers the instruments that they should create and handle a profitable digital advertising and marketing and loyalty program, together with instituting a data-driven strategy to how they join and interact with their clients. The retail panorama throughout hashish stays difficult with a pronounced slowdown in retailer openings, inflationary pressures, tax concerns and pricing strain. Regardless of this difficult backdrop, we added 108 new retail accounts within the first quarter in keeping with our historic cadence. Our manufacturers platform, which helps hashish manufacturers extra simply join straight with customers by our retail platform, noticed continuation of the momentum we noticed exiting 2022.
We’re uniquely suited to the promoting movement of straight connecting manufacturers, retailers, and customers and through Q1 we noticed 70 manufacturers working in extra of 700 campaigns, benefiting each the retailer by driving visitors to their retailer and the model by rising consciousness and affect. In earlier earnings calls, I’ve talked in regards to the three key pillars of our development. First, a community impact that we really feel is exclusive and highly effective between our retail and types platforms; second, a excessive development subscription income element that will increase predictability in our income stream; and third, the brand new initiatives and alternatives we have now to monetize and leverage the truth that our platform is current in additional than 3,000 retail places and put in within the smartphones of over 35 million marketable hashish customers.
We’re uniquely positioned to introduce choices to our consumer base that present significant development alternatives for each our purchasers and SpringBig. At current, we’re targeted on the introduction of choose group of latest initiatives. We’ve got launched a subscriptions providing enabling our retail purchasers to supply their clients to pay a subscription-based VIP loyalty program, providing these clients to subscribe the chance to obtain particular reductions and advantages not out there to their wider buyer base. And in a fashion much like how we presently handle their loyalty applications in the present day, SpringBig will energy these subscription applications on behalf of our retail companions. We are going to share within the subscription income generated from clients enrolling into these applications.
We’re additionally targeted on growing our loyalty/funds initiative, Spring Pay, the place customers of our retail purchasers can use their loyalty factors along side their most well-liked saved cost choice to finish their in-store or on-line transaction safely and securely. The retailer advantages from elevated transaction dimension because of the inclusion of loyalty rewards and SpringBig advantages by facilitating these transactions on behalf of our retail companions. Lastly, in January we introduced the primary integration with a point-of-sale resolution outdoors of the hashish trade, which permits us to increase into providing our loyalty and advertising and marketing communications platform throughout another regulated industries together with alcohol, CBD and vape shops.
Advertising and promoting to this expanded viewers has already begun and through Q1 we closed 4 new contracts in non-cannabis markets. We’re excited to shortly announce extra integrations with point-of-sale methods that service retailers and industries apart from hashish and to companion with them to deliver state-of-the-art loyalty and digital communications choices to the retail purchasers. These new initiatives are going to take time to evolve, particularly given the present macro surroundings, however we’re assured that in time they’ll gas important development to enrich the potential we imagine is current in our current choices. We proceed to take a position considerably in enhancing our core retail platform, including extra performance. We proceed to see important development in our current enterprise given the long-term development potential of the hashish trade and the distinctive energy of our platform to ship distinctive returns to our purchasers.
With that, I would wish to share an instance of how clients are leveraging our platform and why they select SpringBig. A big multi-state operator began utilizing SpringBig in a single state on a trial foundation and shortly built-in with their point-of-sale, SMS and e mail choices. Recognizing advantages and seeing early success, this multi-state operator upgraded our engagement to incorporate all states they function in accommodating their loyalty and messaging wants company-wide. As these extra states started to leverage our wealthy function set, together with using a number of pictures and movies, referrals, suggestions and status administration, and ultimately our viewers construct platform to focus on members with pointed messaging primarily based on their buying habits.
In consequence, it was shortly evident that function use was outstripping their preliminary contract and shortly led to a rise of their nationwide contract. As proof on this enlargement, a broad set of integrations and enterprise scalability delivered excessive ROI to this multi-state operator and we’re assured we are going to proceed to develop alongside this huge companion. Whereas SpringBig service is the total spectrum of purchasers from the most important multi-state operators to single location retailers, a complicated consumer, who is ready to generate substantial ROI from using our platform, is our candy spot. Wanting forward, we plan to maintain give attention to the upper finish of the market and anticipate to see incremental profit from consolidation throughout the hashish trade.
Earlier than I hand it over to Paul, who will stroll by our monetary outcomes for the primary quarter intimately, I do wish to touch upon the progress we’re making in direction of our said aim of the EBITDA breakeven throughout the present yr. Our quarter one adjusted EBITDA was a lack of $1.3 million, representing a $2 million enchancment sequentially because of the mixture of income development and the affect of the expense discount initiative carried out throughout This autumn of 2022. We anticipate our losses to proceed to scale back and imagine we’re on observe to attain our said goal. Our Q1 efficiency is very encouraging. Total, we’re managing our enterprise effectively for the elements inside our management and acknowledge the difficult present macro and trade particular realities. We’ve got a wealthy pipeline of income producing initiatives and a powerful excessive development subscription income base. I am as assured as ever that our development technique is sound with suggestions from clients and companions reaffirming that we’re making the proper investments to seize the long-term alternative in entrance of us.
With that, I would like to show issues over to Paul, who will stroll by our monetary outcomes for the primary quarter in higher element and focus on our outlook.
Paul Sykes
Thanks, Jeff, and thanks once more to everybody for becoming a member of us. As talked about, we delivered a strong outcome within the first quarter, characterised by a reacceleration of development and measured progress in direction of our said targets. I’ll begin by offering a quick overview of our first quarter outcomes earlier than transferring on to our steerage for the second quarter and stability of 2023. Our Q1 income got here in at $7.2 million, representing development of 16% year-over-year and 6% sequentially. This was underpinned by year-over-year subscription income development of 28%, a continuation of the momentum we skilled throughout 2022. As a reminder, SpringBig is a SaaS know-how enterprise with 83% of first quarter income being derived from primarily annual auto-renewing contracts in contrast with 75% a yr in the past. We’ve got seen this proportion enhance as we proceed to switch extra use income with bigger subscription contracts, that are extra predictable and of upper high quality.
A byproduct of this conversion into subscription income is a seamless discount in extra use income, which in Q1 diminished by 22% year-over-year. Model’s income grew 56% year-over-year in Q1 with robust year-on-year development within the variety of manufacturers working campaigns and the common spend per marketing campaign. Our top-line development continues to be pushed by robust buyer demand, each when it comes to new buyer acquisition on the retail and types platform, in addition to enlargement throughout the put in base. We ended the primary quarter with 1,366 discrete consumer platforms and are put in in 3,095 retail places. We’ve got in extra of 35 purchasers, who’ve an annual subscription exceeding $100,000. We proceed to see robust buyer retention regardless of the difficult macro surroundings. Our Q1 web income retention was 100% versus 105% in This autumn and 106% a yr in the past interval. Recall we anticipated this metric to average to 100% to 110% vary.
As we add extra merchandise and performance to our platform, we see an ongoing alternative to drive upsell as clients leverage each our retail and types platforms. The brand new yr has began very strongly on this regard with some important upgrades. Gross revenue in Q1 was $5.8 million representing 28% year-on-year development and our gross revenue margin for the quarter was 81% in contrast with 73% a yr in the past. The year-on-year enchancment in gross margin of virtually 800 foundation factors is because of increased yield in companies, together with an rising mixture of push notifications inside our messaging volumes and better contribution from model income, which carries a lighter value profile.
Transferring on to our working bills, we stay extremely targeted on bettering the leverage in our enterprise whereas on the identical time balancing this with our investments for development. In Q1, we benefited from the complete quarter of decrease run price bills following a collection of initiatives we carried out in November, together with a workforce discount by a mix of layoffs and attrition to scale back prices, drive effectivity, and subsequently speed up our path to profitability. Complete working bills in Q1 had been $7.5 million, representing a 24% sequential discount or 16%, excluding the affect of the extra million {dollars} provision for uncertain receivables taken in This autumn. Yr-on-year complete working bills in Q1 elevated by solely 3%.
Gross sales, servicing and advertising and marketing bills had been $2.5 million for the quarter, representing 35% of complete income. Gross sales and advertising and marketing bills decreased by 15% year-over-year because of the aforementioned value rationalization leading to decrease worker prices. Expertise and software program growth bills had been $2.3 million within the quarter, representing 32% of complete income. Bills decreased 12% year-over-year with financial savings being attributable to decrease bills related to offshore contractors and a slight discount in worker prices. G&A expense was $2.8 million for the quarter, representing 39% of complete income and 57% development year-over-year. This development is because of the extra bills related to being a public firm, together with will increase in administrators and officers’ insurance coverage premiums and better authorized and audit associated prices.
Our key earnings metric is adjusted EBITDA as we imagine this most intently equates to working money circulate. Adjusted EBITDA loss within the first quarter was $1.3 million, representing an adjusted EBITDA margin of destructive 19%. The adjusted EBITDA loss was on the midpoint of our steerage and represents a major enchancment sequentially in comparison with the $3.3 million adjusted EBITDA loss in This autumn of 2022. Free money circulate was destructive $1 million in Q1 comprising $0.4 million money offered by operations, $1.5 million money outflow regarding the compensation of our convertible notice and $0.1 million obtained from the train of inventory choices. We obtained $2 million regarding a refundable worker retention payroll tax credit underneath the CARES Act throughout the quarter.
Turning to our stability sheet. We ended the quarter with $2.6 million in money, money equivalents and marketable securities and $3.2 million in receivables. Earlier than offering our up to date steerage, I want to replace you on our proposed fairness elevate. We filed a preliminary prospectus on Kind S-1 on April the twentieth and anticipate finishing the elevate within the quantity of as much as $5 million previous to the tip of Might. With regard to our outlook, I would come with our traditional caveat. Whereas new states proceed to open and challenge licenses, hashish finish markets proceed to expertise trade particular headwinds the place in sure mature markets throughout the nation, a glitter product continues to have a destructive affect on retail pricing coupled with a cloth slowdown in discretionary spending by customers given the overall macro surroundings. Though we proceed to view these points as transitory and suppose that present tendencies don’t mirror the intrinsic development price of the trade, we have now prudently thought of these elements in constructing our steerage.
For the second quarter of fiscal 2023, we anticipate complete income within the vary $7.3 million to $7.6 million, implying a midpoint, a 15% year-over-year development and 4% sequential development. We anticipate an adjusted EBITDA loss within the vary of $900,000 to $1.2 million for the second quarter of 2023. For the total yr of fiscal 2023, we’re reaffirming our income steerage of $31 million to $34 million and adjusted EBITDA loss within the vary of $3 million to $1.5 million. The implication of our Q2 and full yr steerage is that H1 adjusted EBITDA loss shall be within the vary $2.2 million to $2.5 million with nearly all of our losses arising on this first half of the yr. And thereafter for the second half of the yr, we anticipated adjusted EBITDA being within the vary of $0.7 million revenue to $0.5 million loss. We reiterate our expectation of reaching the important milestone of constructive adjusted EBITDA throughout the present fiscal yr.
And with that, I want to open it up for Q&A. Operator, please pull for questions.
Query-and-Reply Session
Operator
Operator
I am exhibiting no questions right now. I will flip the decision over to Jeff Harris, CEO, for any closing remarks.
Jeff Harris
Thanks all very a lot for becoming a member of our Q1 convention name. Sit up for speaking with everyone subsequent quarter. Have an ideal night everybody. Thanks.
Operator
Thanks. Women and gents, this does conclude in the present day’s convention name. Thanks all for taking part. It’s possible you’ll now disconnect. Have an ideal day.