Q2 2024 Loop Media Inc Earnings Call

Participants

Jon Niermann; Founder, Board Member; Loop Media Inc

Justis Kao; Chief Executive Officer; Loop Media Inc

Neil Watanabe; Chief Financial Officer; Loop Media Inc

Presentation

Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss leaf Media's financial results for the 2024 fiscal second quarter ended March 31, 2024. Joining us today are least Interim CFO, just to scale former CEO and Co-Founder, Mr. John Newman, and the company's CFO, Mr. Neil Watanabe. By now everyone should have access to the 2024 fiscal second quarter earnings press release, which the Company issued earlier today at approximately 4.05 P.M. Eastern time. The release is available in the Investor Relations section of LOOP 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 filing with the SEC do not place undue reliance on any forward-looking statements which are being made only as of this 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 in the company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA as supplemental measures of performance of our business. Our non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release and Form 8K furnished to the SEC. I would now like to turn the call over to Mr. John Newman.

Jon Niermann

Thank you and good afternoon, everyone. On March 18, we announced significant changes to our organization that we believe will provide the framework to making the Company more competitive in the CTV. for business digital out of home industry, the Chairman of the Board and members of the management team determined that executing operational changes is prudent to accelerate the company's potential path to breakeven and operating profitability as part of those changes after co-founding the company and serving as CEO for the first 10 years, I have stepped down as CEO to focus my time and attention on revenue generation and other outward facing areas and excited to hand the CEO. reins over to the next generation of leader for shift from Lou.
Just to scale, Jeff, this has been an invaluable and well respected member of our team from the beginning along with other organizational changes affecting several parts of our company. We also announced the departure of our Chief Revenue Officer and our Chief Operating Officer, both of whom have since exited the company. The timing was right for changes at this level. We were very fortunate to have a team of talented and experienced executives who helped us grow from a couple of million dollars in revenue to over $30 million in a fairly short period of time.
Different people are often required for different phases of a company's evolution as we move into the next phase of our evolution. We believe it is time for the leadership and operational changes mentioned above and in our public filings, I believe we have great potential and NetIQ's executing these changes is prudent to accelerate the company's potential path to breakeven and operating profitability. We continue to believe that we are still at the beginning of the growth curve in the streaming business, CTV for out-of-home venues, market and live media is helping to lead the way pioneering requires patience and the ability to navigate inevitable obstacles like we have had to endure over the past year or more. I have and will stay engaged in the company as part of the leadership team and a member of the Board of Directors.
However, my responsibility will change to a focus on driving the revenue of our Company as well as the expansion of our distribution footprint. These are the most critical areas to address and stay focused on where the Board believes I can be of most value to the Company. And I'm pleased with the initial progress we made trying to address certain immediate needs over the past months. I'm also pleased to have a trusted coffee now at the helm of the Company, along with an incredible team that makes up the loot media family.
With that said, I would like to publicly hand over the earnings call to our new CEO. justice. Can I take it away?

Justis Kao

Just as Thank you, John.
I'm very excited to have the opportunity to work with the entire Luna team and our ongoing efforts to increase shareholder value.
Since my appointment, I focus my attention on those areas of the business where we can look to increase revenues, leverage our fixed and variable expenses and improved profitability. Certain of the changes that John referred to a short while ago and that are outlined in our 10-Q periodic report for the period ended March 31, 2024 should move us further along that path. I'm looking forward to sharing with you in the future, more of the actions that will be taken to trial and achieve our objectives.
With that, I will turn the call over to Neil to take you through our financial results. Neil?

Neil Watanabe

Thank you, Justice, and good afternoon, everyone. As we review our financial results, I want to remind everyone that all comparisons and variances commentary refers to the prior year's fiscal second quarter unless otherwise specified. As of March 31, 2024, we had approximately 83,000 active lead players on partner screens across the loop platform, which included 32,658 QAU.s across our O&O platform versus 32,734 QA use for the prior year quarter and 33,073 QA used at the end of our last quarter ended in December 31, 2023.
This represented a decrease of 0.23% to the prior year quarter and a decrease of 3% to our prior quarter. Our partner screens count represented at the end of the second quarter was approximately 50,000 across our partner platform, an increase of approximately 26,000 partner screens or 108% increase over the year ago second quarter and an increase of approximately 7,000 partner screens or a 16% increase over our last quarter ending December 31, 2023.
Our QAU. footprint for the second quarter of fiscal 24 was reduced from the prior period as a result of natural attrition of new players that were not immediately replaced as we continue to transition to a more targeted distribution model, pivoting our focus to certain designated advertising markets and geographies as well as more desirable out-of-home locations and venues, including convenience stores, restaurants, bars, and other retail establishments.
We believe this targeted distribution plan will over time allow us to grow our QAU.s quarter on quarter and provide a more robust distribution platform for our advertising partners. Many of the more desirable markets and geographies generally experienced greater competition resulting in slower distribution growth in those markets as compared to the less desirable markets. As such, we expect the primary drivers of revenue growth going forward to be a combination of increased UA use as well as higher CPMs and advertising impressions, fill rates associated with more desirable advertising markets and geographies.
Shifting to revenue, our revenue for the three months ending March 31, 2024 was $4 million, a decrease of $1.4 million or approximately 26% from $5.4 million for the three months ended March 31, 2023.
This decrease was primarily driven by a challenging ad market environment in the second quarter of fiscal year 2024 due to one of the largest ad demand participants changing their terms of business with add publishers, which resulted in a material negative impact on our ad demand partner revenue during the latter part of the second quarter of fiscal year 2024, we worked with our demand partners and successfully integrated those changes and restored demand from this ad demand participant. Although their new algorithms do not allow the same historical frequency of ad calls and that fills. As a result, we do not expect to experience the same levels of absolute revenue previously recognized by this ad demand participant unless and until we significantly increase our distribution footprint.
Finally, our decrease in revenue for the three months ended March 31, 2024 from the three months ending March 31, 2023 was also a result of the reduction in ad demand partners in the second quarter of fiscal year 2024.
That view our new platform as a CTV platform on which CTV ad budgets can be spent as compared to the number of ad partners that viewed us as a CTV platform.
The second quarter of fiscal year 2023 CTV. advertising budgets are generally significantly higher. And thus, CTV ad demand is generally associated with higher fill rates and CPMs as compared to DOH. ad budgets and demand.
Our gross profit margin for the three months ending March 31, 2024 was $400,000, a decrease of $1.2 million or 78% from $1.6 million for the three months ended March 31, 2023. Our gross profit margin as a percentage of total revenues for the three months ended March 31, 2024, was approximately 10.4% compared to 29.4% for the three months ended March 31, 2023.
The percentage decrease was primarily driven by decreased revenue based on our decrease in revenue. Certain of our content license agreements provide for minimum license fees to be incurred. These minimum fees become an added component of cost of goods sold and reduced group gross profit margins, which negatively affect our gross margin percentages.
Our sales, general and administrative expenses for the three months ended March 31, 2024 were $5.7 billion, a decrease of $2.1 million or 27% from $7.8 million for the three months ended March 31, 2023.
The decrease in sales, general and administrative expenses was primarily due to reduction in marketing costs, professional and administrative fees, headcount sales commissions and stock compensation.
Our net loss in the 2024 fiscal second quarter was a loss of $7.6 million or $0.11 loss per share compared to a net loss of $9.8 million or a loss of $0.17 per share for the same period in fiscal 2023. Adjusted EBITDA in the 2024 fiscal second quarter was a loss of $4.5 million compared to a loss of $5.6 million for the same period in fiscal 2023. Turning to our balance sheet. Cash and cash equivalents was $2.2 million on March 31, 2024, compared to $3.8 million on December 31, 2023 as of March 31, 2024, with a total net debt of $6 million compared to $7.1 million as of December 31, 2023.
I'd like to thank everybody for listening today, and we look forward to providing further updates on our next conference call. This concludes our prepared remarks. Operator, back to you.

Question and Answer Session

Operator

As indicated at the beginning of the call, there will be no questions following management's remarks back to just this scale for closing remarks.

Justis Kao

I would like to thank everyone for joining the call today and look forward to providing further updates on our next call.

Operator

Could concludes today's conference call. Thank you for attending. You may now disconnect.