The market has welcomed (up about 28% at time of writing) today's trading update from Tinybeans.

The main positives being:

• cashflow positive in month of Dec
• Q3 FY23 forecast to be cashflow positive for full quarter
• Monthly active users rebuilt to over 3 million

The cashflow turn around is mainly a cost out story, with revenues still struggling, but is nevertheless welcome news.

After progressing through multiple business models, the company now plans to have a clear differentiation of a free model (supported by advertising) and a paid model (without ads and including exclusive offers).

It has been a fairly significant fall from grace for Tinybeans over the past 18 months but hopefully a cashflow sustainable base can now give them the impetus to grow.

[Previously held. Sold out at about 70 cents so feel lucky. Bought for about $1.30 so don't feel that lucky]

Tiny Beans announced their Q4 FY22 results, highlights include:

• FY22 Revenue of $10.9m (34% increase pcp)
• Advertising revenue makes up the majority of this at $9m (up 31% pcp)
• Paid subscriptions $1.5m (up 77% pcp)
• Currently there are 51K paying subscribers
• Monthly recurring revenues $166k from subscriptions
• 90% conversion rate from trial to paid subscription
• Cash balance of $4.2m
• Focus on becoming cash flow positive within 12-18months

The market wasn’t really impressed by the results. No trades were made today. They did discuss some concerns that advertising may slow due to economic conditions.

If management could continue growing and achieve cash flow positive in the near future, I think the company is looking interesting at current market cap of $8.88m USD (PS 0.80)

Tinybeans Announces Personnel Changes

Tinybeans announces the departure of a couple of senior execs, including the CFO. They don't say why they're leaving in the announcement but given they're serving out notice periods it just seems like normal movement rather than anything sinister.

Chris Motsay, Tinybeans’ Chief Financial Officer (CFO) has resigned from the Company with his last day being 22 July 2022. Chris has been instrumental in recruiting a top-class finance team and matured processes to improve financial management. The Company is considering numerous options to manage the finances going forward. The Board thanks Chris for his services to the Company. 

In addition, Rebecca Woodman, one of the existing two company secretaries will resign while David Hwang, the other company secretary will remain.

Tinybeans released their Q3 results

• Q3 revenue grew 40% to US$1.85m (PCP) this includes US$1.31m in advertising revenue (up 37%)
• Paid subscriptions grew to 48k, which at $40pm translates to US$1.92m pa
• Nasdaq listing on hold while they focus on strengthening foundations to become cash flow positive. It’s still a future plan to dual list on the Nasdaq
• Monthly active users for Q3 declined from 4.2m to 2.4 PCP due to transition from free to paid subscription.
• Trial service to paid subscription conversion of 87%

The transition from free to paid subscription has definitely muddied the numbers. This and cash burn is the most likely reason for the drop in share price. However, the company reported that they plan to maintain a positive cash balance without raising capital.

As a daily user myself (my wife makes us upload a photo of our three kids each day) we find the product to be a great way to share photos privately with family. The app is easy to use and even the grandparents and great grandparents upload and comment on photos/activities. Tinybeans have also brought out a pet category which opens up a new market opportunity.

The company is moving to become more of a marketplace where advertisers can target parents and parents can find special deals for products/services. I’m not sure how well this will work out; but I do feel they have something with their base service - private photo sharing. The US is a huge market, if they can build a base there, existing customers (parents) will advertise to new parents and subscriptions will grow organically from there.

The company is valued at US$16m market cap and expected revenue is approx $10m, this is a price to sales of 1.6x for a software based company. This is a pretty low valuation if they can grow subscriptions (currently only 48k paid users). They can do this by initially growing organically in the US and then expanding into other countries. The advertising revenue is a bonus if they can find a good balance. It’s also worth noting that more advertiser revenue will be generated as they grow users on the platform.

I have recently bought a small parcel of shares in SM and IRL.

Further to Tinybeans CR straw, the AFR is reporting Bell Potter are acting as lead manager to raise $7.5m, being $6.5m insto and $1.0m SPP. They are priced at 60 cents, which is a 5.5% discount to close price.

I think if Bell Potter can get them away at that price they've done very well given that the SP has been in a ever steepening freefall in recent months. Even if they raise the full amount away I question whether this gives them sufficient runway to get to cashflow positive. Don't forget a chunk of this is effectively shareholders being asked to make good on the recently announced director loans on which they're earning 13% interest. It's a messy picture right now...

Apart from the director loan there's something else about the Tinybeans disclosure that gives pause.  They disclosed the cash balance as at 30 Sep AFTER the loan as USD$1.7m, so BEFORE the director loan that equates to about AUD$1.3m.  Cash as at 30 Jun was AUD$2.9m - so their cash burn in one quarter was $1.6m versus $2.4m of total burn in FY21.  That's in a quarter where they had record revenue.  Revenue isn't cash but it's the closest proxy we have.  They'll need a pretty spectacular Q2 if they're aiming to avoid another capital raise, particularly given Q3 is traditionally soft.

Given that, if I wasn't a shareholder I'd probably be thinking 13% interest plus options doesn't really compensate them for the risk...but I am a shareholder so I think it's borderline criminal.

[Held IRL]

“Tinybeans will move from its current model—a free experience for parents, with the option of upgrading to the paid “Premium” memories photo sharing subscription product—to an initial free trial experience. On completion of the initial free trial period, subscribers can transition into the new, more comprehensive subscription model.”

and

“Tinybeans expects a small reduction of monthly active users in the short term based on this change, however, expects no reduction of advertising revenues as it relates to this.”

The new model is called Beanstalk. I get it, they want to grow the subscribers, this is what all software companies want, and need. The change from a freemium model may have more of an impact than the company expects, although not to the existing paid subscribers as they will simply be migrated to the new Beanstalk.

This will be one to watch as the change happens in Q4/21.   

‘Beans is looking to list on the NASDAQ. With a current market cap of 56M this would make them a tiny, tiny bean.

Tinybean has been available on an over the counter basis in the US for about a year but now has bigger aspirations. This is aligned with the company subscription growth and US market growth strategy – almost 100% of revenue now comes from NAM.

To facilitate this change the company has had to change auditors.

Record Results for Q2 FY21 – Operating Cashflow Positive...157% Revenue Growth on PCP, 167% Improvement in Operating EBITDA and 5m Registered Users

Q2-FY21 Highlights

? Revenue in Q2 of AUD $3.13M, an increase of 157% on Q2-FY20, and 25% (+28% in USD) on the prior quarter

? Record performance in Free Cashflow of -$16k, 97% up on PCP and 98% up on Q1, used to fund growth investments of $933k to build further scale

? EBITDA for Q2 was -$124K, 63% improvement on Q1. Excluding growth investments, TNY delivered its second positive operating EBITDA profit of $809k (83% up on Q1-FY21)

? Subscription revenue of $291k, an increase of 4% on Q2-FY20 with total paid subscriptions reaching over 23k

? Registered users reached 5M, growth of 35% on Q2-FY20. Monthly Active Users grew to over 4.8M, growth of 253% on Q1-FY20 and a staggering 21% on the previous quarter.

? Advertising wins from both new and existing partners including Apple TV+, Netflix, Amazon, Walmart & Reckitt Benckiser

? Net operating cash flow turned positive $96k, with cash receipts $3.16m, +48% on previous quarter. Net cash balance $4.46m at Dec 31st – Tinybeans is well capitalized to fund its accelerated growth strategy.

DISC~I hold

The review has the headlines: 

Doubling Advertising revenue!

Annualized NPS of 70!

3.6M registered users!

Digging deeper, there are some uncomfortable facts:

1) Going by the figures, Q2 2020 advertising revenue has grown only 22% yoy.

2) Monthly active users for Q2 2020 grew 25% yoy.   

Going by these figures, revenue growth for 2021 will fall well below 50% I believe.  I thikn the share price is banking on significantly higher growth.

I AM OUT.