Loop Media - Earnings Call - Q4 2024

Executive Summary

• Fiscal Q4 2024 revenue declined 35% year over year to $3.73M, while gross margin ticked up to 27.6%; net loss narrowed to $(6.19)M and diluted EPS improved to $(0.07) from $(0.15) in Q4 2023.
• Cost actions reduced SG&A materially; Q4 SG&A was $4.54M vs $7.42M a year ago, and adjusted EBITDA loss improved to $(2.79)M from $(4.85)M in Q4 2023, reflecting operating efficiency initiatives despite revenue pressure.
• Management emphasized near-term technology upgrades to the Loop Player to improve ad flow and monetization, and a focus on disciplined cost management; post year-end, the company raised $5M and is pursuing a more favorable ABL facility.
• KPIs showed contraction on the O&O platform (QAUs down 25% YoY) and modest partner screens growth (+17% YoY); management is pivoting distribution to higher-yield venues and internal execution, a narrative likely to drive near-term sentiment shifts.

What Went Well and What Went Wrong

What Went Well

• Adjusted EBITDA and net loss improved despite lower revenue, driven by SG&A reductions and cost optimization: “even with approximately 30% less revenue year-over-year, we achieved a 29% improvement in our adjusted EBITDA” (Interim CFO/CEO commentary).
• Gross margin held/increased slightly in Q4 to 27.6% vs 27.5% YoY, reflecting revenue mix and licensing cost work; SG&A down 39% YoY in Q4.
• Strategic refocus: management is rolling out software upgrades to increase ad flow/productivity and shifting distribution efforts internally to lower cost and improve efficiency: “These important and exciting software upgrades are well underway… Our goal is to increase the productivity of our proprietary Loop Player”.

What Went Wrong

• Top-line pressure: Q4 revenue down 35% YoY to $3.73M amid a “material slowdown in digital advertising spend”; FY revenue down ~30% to $22.25M, citing lack of political ads and ad demand partner changes.
• O&O platform KPI contraction: QAUs fell 25% YoY to 27,811 in Q4; sequential declines through FY 2024 as distribution growth slowed while management pivoted to targeted venues.
• Liquidity tightness and leverage: cash fell to $0.82M at year-end from $3.07M; net debt rose slightly to $7.8M; legal dispute with senior lender (GemCap) necessitated emergency TRO filing in November.

Transcript

Operator (participant)

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Loop Media's financial and operating results for the full year 2024 and fiscal Q4 ended September 30, 2024. Joining us today are Loop's Interim CEO, Justis Kao, and Interim CFO, Ari Olgun. By now, everyone should have access to the full year 2024 and fiscal Q4 earnings press release, which the company issued earlier today at approximately 4:05 P.M. Eastern Time. The release is also available in the Investor Relations section of Loop's website at www.loop.tv. In addition, this call will also be available for webcast replay on the company's website. Following management remarks, there will not be a Q&A session. Certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place any reliance on any forward-looking statements which are being made only as of the date of this call.

Except as required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. The company's presentation also includes certain non-GAAP financial measures, including Adjusted EBITDA as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with the SEC rules.

You'll find reconciliation charts and other important information in the earnings press release and Form 8-K furnished to the SEC. I would now like to turn the call over to Mr. Justis Kao. Please go ahead.

Justis Kao (Interim CEO)

Thank you, and welcome everyone to our full year 2024 and fiscal Q4 earnings call. As I look back on the past fiscal year, it's no surprise that it was a transformative year filled with many significant changes for Loop Media. When I stepped up to the Interim CEO role in March, my primary focus was to work with the team and our board of directors to get our company to a cash flow positive position as quickly as possible in an effort to achieve success for the company and thus maximize shareholder returns, which is a key focus for us. It's important that I offer some context during today's call for moving forward. When we started Loop, revenue growth was the key metric, as it is for many tech and media companies.

We learned, however, that such growth had to be balanced with a strong bottom line, and over the last six months, we undertook serious measures to try to make Loop more competitive and create efficiencies around our business, which has included reducing third-party vendor costs, restructuring and eliminating unprofitable contracts with content providers, and reducing our workforce. We have worked hard and continue to work diligently to regain the confidence of our investors and shareholders, and while our top-line growth retracted, we are running a more streamlined business and are starting to move forward towards a stronger bottom line. For example, even with approximately 30% less revenue year-over-year, we achieved a 29% improvement in our Adjusted EBITDA. So even with less revenue, we believe the reduction and balancing out of expenses is moving us in the right direction.

We have historically relied heavily on third-party affiliates in the distribution of our Loop Players. In our efforts to reduce expenses, we also looked carefully at these costs around our Loop Player distribution strategy and have shifted these efforts internally, which has contributed to our overall reduction in expenses. All tech companies must constantly consider and improve their software and technology, and Loop is no different. Reducing the rate of growth and distribution in the latter part of fiscal 2024 has allowed us to review and address upgrades to our technology that are needed to improve the flow of advertisements to our Loop Players and the number of advertisements that are served to us, as well as to improve the functionality of our Loop Players for our business venue clients.

These important and exciting software upgrades are well underway, and we expect to be rolling them out across our network in the coming weeks. Our goal is to increase the productivity of our proprietary Loop Players, which will lead to increased distribution, a priority for the company going forward, and which we hope will also lead to a stronger bottom line in the coming fiscal year. As my predecessor, Jon Niermann, has said before, Loop Media has been a pioneer in the streaming-for-business CTV-for-out-of-home venues market. Pioneering requires patience and the ability to navigate inevitable obstacles like we have had to endure over the past year or more. Loop will continue to persevere as the advertising industry addresses this new category of CTV for out-of-home.

In encouraging momentum, we are seeing additional big players like Google, in addition to other partners like Microsoft, who started the CTV, OOH, or out-of-home trend with us, as previously announced last year, making progress and participating in this part of the out-of-home advertising industry. It takes time for industries to adapt, much like it did from cable TV to TV streaming in homes. Loop has not shied away from challenges in the past, and it will not do so going forward. Before I hand it over to Ari, let me just close by saying that we are confident that the measures that we have taken over the last several months and continue to take will further move us in the right direction and can yield positive results to get the company to where we know it can be and beyond.

With that, I will turn the call over to Ari Olgun, our Interim CFO, to take you through our financial results. Ari?

Ari Olgun (Interim CFO)

Thank you, Justis, and good afternoon, everyone. Before we dive into the details of Loop Media's financial results, I'd like to take a moment to introduce myself. My name is Ari Olgun, and I am honored to serve as Loop Media's Interim Chief Financial Officer. Since joining Loop in 2022 as VP Controller, I have worked closely with our team to ensure transparency, accuracy, and strategic insight in all financial matters. Prior to my role here, I built a career focused on financial leadership and innovation, serving in senior financial roles across industries ranging from media and technology to education and advertising. Throughout my career, whether as a CPA at Ernst & Young, a founder and CEO in the education sector, or a leader in publicly traded companies like TIBCO Software, I have prioritized creating value, fostering trust, and ensuring a focus on strategic and prudent financial practices.

I am committed to providing clear and accurate financial reporting. With Loop Media at a pivotal moment in its growth, I am excited for the opportunity to help guide the company towards sustained success and innovation. Now let's turn to the highlights of our fiscal year and our fiscal Q4 financial performance. Revenue. In the 2024 fiscal year, revenue was $22.3 million compared to $31.6 million in fiscal 2023. In the fiscal Q4, revenue was $3.7 million compared to $5.7 million in the year-ago period. Gross profit. In the 2024 fiscal year, gross profit was $6.0 million compared to $10.7 million in fiscal 2023. In the fiscal Q4 2024, gross profit was $1 million compared to $1.6 million for the same period in fiscal 2023. Gross margin. In the 2024 fiscal year, our gross margin rate was 26.9% compared to 33.7% in the 2023 fiscal year.

In the fiscal Q4 of 2024, our gross margin rate was 27.6% compared to 27.5% in the prior year quarter. As Justis highlighted earlier, while our fiscal Q4 revenues declined by $2 million, or 35%, compared to the same period last year, our gross margin rate actually improved. This modest improvement reflects the deliberate and focused cost optimization initiatives we have been implementing over the past few quarters, demonstrating our commitment to enhancing operational efficiency even in a challenging revenue environment. QAUs. As of September 30, 2024, we had approximately 77,000 active Loop players and partner screens across the Loop platform, including 27,811 QAUs on our owned and operated platform compared to 37,021 QAUs for the same period last year. This represents a 25% decrease compared to the Q4 of fiscal 2023.

On the partner platform side, we ended the Q4 of fiscal 2024 with approximately 49,000 partner screens, reflecting an increase of about 7,000 partner screens, or 17% compared to the Q4 of fiscal 2023. In the fiscal year 2024, total sales, general, and administrative (SG&A) expenses, excluding stock-based compensation, depreciation, amortization, loss from disposal of long-lived assets, and restructuring costs were reduced to $20.6 million, down from $29.4 million in fiscal 2023. This significant reduction of $8.8 million, or 30% year-over-year, reflects the impact of our strategic cost-cutting measures, including significant reductions in headcount, marketing, and professional administrative fees. In the Q4 of 2024, SG&A expenses decreased to $4.5 million compared to $7.4 million for the same period in fiscal 2023, representing a $2.9 million, or 39% decrease period-on-period.

This improvement in expenses is due to the cost-cutting measures the company has undertaken, reflecting our commitment to achieving better operational efficiency. Looking ahead, we will continue to prioritize disciplined cost management as we align our expenses with our strategic objectives. Net loss. In fiscal year 2024, our net loss improved to $24.5 million, or $0.33 per share, compared to a net loss of $32 million, or $0.56 per share in fiscal 2023. In the fiscal Q4 of 2024, net loss decreased to $6.2 million, or $0.07 per share, from $9 million, or $0.15 per share in the same period of 2023. Adjusted EBITDA for the 2024 fiscal year improved to a loss of $11.1 million from a loss of $15.7 million in fiscal 2023.

In the fiscal Q4, Adjusted EBITDA improved to a loss of $2.8 million compared to $4.8 million in the same period last year. These improvements in both net loss and Adjusted EBITDA, despite the challenges in revenue, continue to highlight the effectiveness of our cost management strategies. We have reduced our cash burn from operations, lowering the level of revenue that is required to become flat or break even. Turning to our balance sheet, cash and cash equivalents were $0.8 million on September 30, 2024, compared to $3.1 million on September 30, 2023. As of September 30, 2024, total net debt was $7.8 million, compared to $7.5 million as of September 30, 2023.

Additionally, subsequent to our fiscal year-end, we raised an additional $5 million, paid off, and closed out our accounts receivable facility with our previous lender, and are actively working on securing a more favorable AVL facility in the near term. Thank you for joining our call today. I'll turn it over to Justis Kao for his closing remarks.

Justis Kao (Interim CEO)

Thank you, Ari. I would like to thank everyone for joining the call today and for your continued support of Loop Media. We remain confident about where the business is heading in fiscal 2025, and I want to wish everyone a very happy holiday season. This concludes our prepared remarks. Operator, back to you.

Operator (participant)

As indicated at the beginning of the call, there will be no questions following management's remarks. Thank you for joining our call today. This now concludes our conference. You may now disconnect. Have a pleasant day everyone.