Audioboom Group (LSE:BOOM) — Q3 Results Trading Update

0:01 Good afternoon, and welcome to the AUDIOBOOM GROUP PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Stuart Last, CEO. Good afternoon, sir. Thank you, Lily. Hi, everyone. Thanks for joining the AUDIOBOOM q three investor presentation today. It was a fantastic quarter for AUDIOBOOM, so we're pleased to to walk you through some of the numbers involved and and report on the progress that we've made over the the last three months.

0:50 Short session today, thirty minutes. We're gonna focus on the numbers. So for those of you that are new to AUDIOBOOM, we'll give a a quick overview of the company and do some brief introductions. For those of you that that know us well, I think a deeper dive in into the into the numbers and and the performance metrics from q three will be super helpful for you. It really was a a great quarter, very pleased to to be with you today to talk you through that. My name is Stuart Lars. I'm the CEO of AUDIOBOOM and have been with the company since 2014. In a little bit, you'll hear from Brad Clark, our CFO. He'll walk you through and greet to deal some of the financial numbers there too. But for those of you that are new to AUDIOBOOM, just as a quick background, AUDIOBOOM is a platform that supports independent podcast creators.

1:37 We operate in a very fast growing area of media. Primarily, we operate in The US and in The UK, and The US is our our biggest territory. It's where I'm based in in New York City, and the vast majority of our revenue is coming out of The US podcast industry, which is the most mature podcast industry in the world. We are the fifth largest podcast company in in The US. Our platform is... And our our tech platform is is kind of very straightforward. It does one important thing, which is to connect content with with advertisers and with audience, and we do all three of those things at scale that allows us to monetize the content on behalf of our creator partners through our relationships and with advertisers and our monetization engine. So let's say just a quick background on the business. Obviously, you can ask us any questions and and go deeper on on that. But today, we really are gonna focus on the numbers. And as I said, it was a a fantastic q three of of twenty twenty six. So I'll walk you through those numbers.

2:43 In terms of revenue, we delivered 23,800,000 of revenue in q three, up 17% versus q three of last year. And importantly, the majority of this quarter was organic growth. Obviously, we acquired Adalicious in July 2025. So I think it is important just to to kind of state here that the majority of of this quarter has... Is really like for like and and that the most of that that growth... That revenue growth is organic. So very, very pleased with the progress we made on on the revenue side. That led us to $5,600,000 of gross profit, up 30% versus q three of twenty twenty five, and then adjusted EBITDA of 2,200,000. That is fantastic.

3:29 89 percent growth versus q of of last year. So really, you're starting to see in in there the the the gearing effect of this business model that that that we have, you know, each each particular metric growing faster than than the previous one as as that as that revenue flows through the through the business. And that's come from, you know, something we've talked about a lot over the last couple of years. The first one being that focus on the quality of revenue that we have within the business. So that really kind of comes from two areas. One is showcase our advertising marketplace that has a higher gross margin attached to that advertising product. It's very efficient. It's ad tech based. And as we'll show you on upcoming slides, showcase performed very, very well in q three and is now a much larger part of our our business, a larger contributor to that revenue than than previously was. So that's that's helping to improve that gross margin.

4:28 And then secondly, our our contracts with podcasters. We work with independent podcasters. Part of that contract is a revenue share with the podcaster, and we continue to make improvements to those podcaster contracts, making them more favorable to AUDIOBOOM, retaining more of that revenue within the business. Obviously, the podcast get paid... Gets paid for the creation of that content and for the audience that they build for that for that for that podcast. So we have to support the podcasters. You know, we support independent creators, but we are doing a better job of of making sure that those contracts are are more favorable to AUDIOBOOM. And that's led us to a good gross margin in q three of 23%, a little over 23 compared to 21% a year ago. So you can see those improvements in in revenue quality through showcase and and and stronger podcaster contracts improving that that gross margin pretty significantly in in in just a year.

5:25 And then the second part of of that gearing effect in the business is is driving EBITDA, and that really comes from those platform economics that we have, the consistent OpEx. We don't need to invest heavily into the platform for that platform to house more advertising inventory, more downloads, more distribution, and that drives... You know, that keeps the OpEx very consistent. Brad will show you this in more detail on upcoming slide. And then the second part in in particular for this last quarter was the final pieces of the Adalicious integration. We bought them a year ago. We focused the early part of the integration on making sure that we are driving maximum revenue. This most recent part of the integration has been around efficiencies. We've taken headcount back from 52 post acquisition of Adalicious back down to 42. Again, that shows off the strength of this platform for making acquisitions and seeing seeing the synergies of of those acquisition... Acquisitions.

6:27 Consistent OpEx, that's driven 2,200,000 of EBITDA and an EBITDA margin of 9% for the quarter versus 6% a year ago. So everything you can see here from these positive results, you get a deep understanding, I think, of of of why that's why that's happening and why our platform model and the focus on that high quality revenue has been so important to drive those those those strong q three results. You've seen the same mechanism, I think, in the year to date performance numbers, so 69,500,000 of of of revenue for the nine months to the end of September, up 25% year on year. Gross profit, 15,500,000, up 32% year on year, and then adjusted EBITDA of 5,500,000, up 84% year on year. So, again, in those growth metrics, you're seeing that that that same flow through the business, and we're retaining more of more of the money. Just looking again, I think just stepping back a second for q three, I think one important point is just the the the gearing... On that gearing effect is we delivered 3,500,000 more of gross revenue and 1,000,000 more of of adjusted EBITDA. So you're seeing more than 25% of that incremental revenue flowing to to EBITDA, and that's an important part of not just I think this this last quarter, but how we expect things to go

7:57 as we move forward and in the future. We do expect that incremental revenue from this point forward will drive significant EBITDA. And then we've included just the last twelve months performance just at the bottom of this slide. I won't walk you through that, but I think that just gives you a snapshot of where this business is is today. And obviously, as we go into q four and the strongest season for AUDIOBOOM, you know, we we expect this business to kind of keep moving forward and to have a a strong end to 2027... To 2026. The key parts, I think I I mentioned a little of this before, but just to go in a bit more depth on those performance drivers for for for q three. The first one is is kind of very obvious one, and this is our global distribution metric. This is the number of downloads to podcasts or views to the video versions of podcasts that that come through the platform. And we've seen significant growth on this metric over the the past year.

8:57 A year ago, q three of twenty five, the distribution number was a 130,000,000 per month following the the acquisition of of Adalicious back in in July of last year. And we've built that distribution pretty quickly ever since. So a 190,000,000 up 47% on on the year on the distribution metric. That's come from continued signing of the biggest and best podcast creators in in the world. It's come from the organic growth of the shows already in the network, and it's come from the expansion of of video podcasting, which has has become a fast growing and more important part of podcasting, that consumption of podcasts in video format primarily on YouTube.

9:46 And all of that new distribution, that growth in distribution, that's really a a proxy for the advertising inventory that we get to sell. So, you know, on average, between eight and ten advertising slots per episode, we we we get to monetize in each of those podcasts. And so that the growth of of that distribution number means more advertising inventory to sell. And generally, whatever we throw our monetization engine, the more inventory we we put into that monetization engine, that that monetization engine is very dynamic, and it and it will monetize that that that content. So the more we throw in there, the more revenue we drive. And that's obviously, you know, the the area for us of of focus is continuing to increase that that distribution so we can increase that distribution in the future through through organic means. So that's just signing new creators to the network or growing those creators that are already in the network. So that's the organic part. And then as we'll talk about later on, we we we can acquire other businesses. This industry is very fragmented. We have a platform that that can supercharge them. So just like with the proof of concept, Abolition's acquisition, we can buy other businesses, put them into the platform, put them into the monetization engine, grow that distribution number, grow the inventory, and then grow the the revenue attached to those shows. So in q three, you know, our distribution grew significantly and and is driving that that that revenue

11:16 strongly. The other key driver, I think, in in in q three is the performance of Showcase. So Showcase is, as I mentioned earlier, is our ad tech based marketplace. So it's very efficient. Everything runs through the the the ad tech. It it matches the supply of advertising inventory on the AUDIOBOOM side to network of advertising agencies, buyers, programmatic platforms, a whole ecosystem of advertising demand. And it does it very efficiently and has a higher gross margin than our other other revenue lines in the business. So as you can see from this chart here, a year ago, Showcase was contributing 35% of our revenue, and in the first nine months of this year, it's contributing 41 of of that revenue. So that's really helping to not just grow the the the revenue overall, but to improve the the the margin attached to that revenue. Premium is our higher price point advertising unit, and it has grown on a on a dollar basis. It's grown pretty well over the last year, obviously, as a as a contribution to the overall revenue because of Showcase's fast growth. We've seen the premium contribution dip slightly there, but still in a very healthy place and and will grow on a on a dollar basis going forward.

12:40 So I think that, you know, that the company is in a great place in terms of driving that that that revenue showcase. I think definitely has seen a... You know, is is the area where we have seen the first impact of the US midterm election spending. We see that through Showcase and saw that in September. So September was a particularly good month for for for Showcase. So higher pricing in there, higher fill rates in that advertising marketplace has helped drive showcase revenue, and we expect to see that that high demand from the US midterm election advertising continuing into October. So I'll hand you over to Brad now to to go a little deeper on the numbers, Brad.

13:27 Perfect. Thanks, Stuart. Hi, everyone. Hope you're all doing well. Yeah. Let's let's go through some of the key financial metrics that we look at here at AUDIOBOOM over the over the next few slides. And, you know, thanks for the questions that have come in already through the session, and actually quite a few of them we're gonna answer as we go through the next few slides. So questions on cash generation, on gross margin expansion, adjusted EBITDA. So, yeah, as we go through the next few slides, we're we're gonna answer a lot of those questions anyway as we as we go through as you'd expect. But, yeah, these these slides reflect a record q three, record nine months for the company. And, really, I'll reiterate what I said three months ago at the half year in July. These slides and the performance reflect a company that's financially stable, self sustainable, growing, profitable, and generating cash and prime for future growth. I said that in June, and these numbers are now backing that up.

14:24 And we're well set to execute on our targets for the full year. On the previous slides, Stuart gave you those insights to those three different revenue products that we have and the contributions that they have and how they've changed over over the last over the last year. The the one didn't call out there was Sonic, which is our platform for brands, which helps advertisers develop and execute campaigns across the podcast landscape. Gross margin on that is typically 15% agency based models, so lower gross margin versus the other two advertising products that we that we have here at AUDIOBOOM. In terms of year to date performance, let's go into that. So as we can see, you know, premium revenue has contributed. Majority of revenue historically continues to do so.

15:10 Good growth for 18% or 5,100,000 year on year for the first nine months of the year, and that reached 39... 34,900,000 for the first nine months of the year. Showcase continues to increase. As we've said, That contribution's increasing to 41%, and the revenue increased by 44% to 28,200,000 for the first nine months of the year. Sonic also recorded 4% growth to 6,100,000 for the first nine months of the year. And, because of that increasing overall revenue, increased contribution of showcase revenue, a higher gross margin, we've seen an increase in both gross profit, which has grown to 32% to 15,500,000 for the for the nine months of the year, and that gross margin has ticked up from 21 to 23%.

15:56 Will we see that expand through q four? That's that's the target for the for the for the rest of the year, and we'll come through to the, know, seasonality of the of the revenue as well. We're seasonally weighted towards the second half of the year. We have seasonality in there, which means that we, in the first half of the year, we have minimum guarantees. We we meet those minimum guarantees in the first half of the year, but because we've got seasonally stronger revenue in the second half of the year, we recoup on those MGs, and we see that coming through into... In terms of a stronger stronger gross margin. We'll see that on the next slide as well. Looking forward forward into q four in terms of revenue, we saw an increase in revenue from '3... Q three to q four last year. Why? Well, ADLICIOUS was fully plugged in and optimized in the audio room network in q four of last year, so we that step up. Sonic also delivered a good q four last year as well. In q four this year, our list is inventory well established now, be comparable year on year. Sonic, I'm expecting, churn around... Generate around naught 400,000 less revenue in q four of this year. The AUDIOBOOM business will more than make up for that gap, and importantly, it's gonna be at that higher gross margin, which takes us back to that core principle of focusing on higher gross margin revenue here at AUDIOBOOM.

17:15 So in terms of improvements in gross margin, reaching 23% in q three of this year. That's good improvement year on year due to that continued contract work to improve our revenue retention. Again, that seasonality point is is very important when you're looking at these numbers. So h one's seasonally quieter. We've got over 30 minimum guarantee contracts in the business that we that we have to satisfy, and typically, are on a straight line basis as well. So when you've got that seasonally quieter h one, we we have to utilize more of our gross margin to satisfy those contracts. Now we're into h two, and specifically from August onwards, revenue seasonally stronger, able to recoup on those NGs that we've trued up in h one, and you can really see that positive impact in the gross margin chart.

18:00 And, yeah, again, expect that to continue into q four so we could see that tick up slightly again as we go into q four before we see that seasonal drop on gross margin into q one of twenty seven, and that matches up to what we've seen over over the last couple of years. So, you know, key takeaway from this slide, revenue is growing well, higher gross margin product and showcase contributing more, leads to a higher gross profit and gross margin expansion. Next slide shows us OpEx in the business and our adjusted EBITDA. Very straightforward p and l. We've dealt with billions to advertisers, I. Our gross revenue payments to podcasters, which is our cost of goods sold, audience revenue retention, or our gross profit or our net revenue, if you like.

18:46 Very, very simplistic OpEx base within the company. 60% relates to salaries and commissions. 25% relates to technology costs to run the platform and deliver the ads. Remainder of costs are being listed in company, small bit of marketing, and a bit of t and e in there as well. Very, very simple. Main point is, OpEx continues to remain stable, very, very tightly controlled within the company. Final parts of the AdLicious integration have been complete in the year, meaning our OpEx base continues to be relatively fixed and stable. We've seen headcount reduced from 52 last September to 42 this September. Quarter on quarter, if you're looking at q three, costs have increased by naught 200,000. Those tech costs of running the platform serving ad impressions and bandwidth, they've increased by naught 100,000.

19:34 Commission costs for the higher revenue were naught 100,000 due to that increase in revenue recognized. So, again, really, really important exciting bit about the business model is that with that relatively fixed OpEx base, it's pleasing to see that adjusted EBITDA really showing progression, really starting to gear 3,500,000 of additional revenue, throwing off, you know, a million dollars of extra EBITDA, incremental increase of over 25%. You know, these are all really good positive metrics for the company and, hopefully, should give you confidence as investors. Minimal cash cost below the EBITDA line. There's a question about the adjusted EBITDA. There's minimal cost below the EBITDA line. If you look back at our historical reporting interims annual statements, you'll see those costs below the EBITDA line. We'll continue to report adjusted EBITDA going forwards because we do have a few costs which are outside of interest, tax, depreciation, amortization, one of which is a noncash share based payment charge.

20:29 We do put any restructuring costs through their immaterial restructuring costs, I should say, any immaterial costs of corporate work that we do, such as a strategic review earlier on this year. But simplistically, our expectation is that EBITDA is a proxy for cash generation going forward because there's immaterial cash cost below that adjusted EBITDA line. Key takeaway, we'll continue to focus on the high quality revenue. We'll control the energies that we have in the business. Gross profit will continue to increase, combined with a tightly controlled OpEx base that will gear to adjusted EBITDA and to cash generation. And then the cash slide. So, you know, that cash position can... To progress very, very positively. We continue to operate a very efficient company, enables us to be virtually certain of our collections and working capital cycle.

21:19 We can see in the chart on the left hand side the challenge on cash of dealing with onerous contracts that we had through '24 and '25. We're fully through that period now. The cash number now backs up our EBITDA growth and not just in cash at bank either. If you look at free cash for the company, I e cash plus age receivables, less age payables, that metric continues to increase as well. So free cash has increased from 7,200,000 at the end of March, 8,700,000,000 at the end of June, 10,800,000 at the end of September. So, again, that's really pleasing. And in the actual cash number that we report today of 6,700,000, we've only seen part of the impact of a strong q three. I... We generated 77% of our q three EBITDA in August and September, but we largely haven't collected on that yet as our debt to day figure rests around the eighty to ninety day mark. So that's another positive indicator for cash as well is that that will land with us over the over the coming weeks and before the end of the year.

22:20 I guess finally from me on on cash, it's great to have the support of our partners at HSBC to, you know, have that overdraft that we have for any working capital requirements, plus also the $10,000,000 RCF as well, which will enable us to, you know, execute that disciplined m and a plan, which we've referenced again today. So, yeah, as I said, start these slides. They reflect a record first nine months of the year for the company. All metrics are very, very positive. We're financially stable, self sustainable, growing, profitable, generating cash, prime for future growth. You know, we'll keep pushing through q four. Look forward to speaking to you in January, but for now, back to Stuart. Thank you, Brad. That was all very positive, very encouraging, and great to see in in in that level of of detail.

23:10 So, like, as we we look forward in just the the last slide from me, I think we're in q four now, as Brad has already said, seasonally very strong in terms of revenue. You know, the reason being it's it's the Thanksgiving Black Friday season in The US. NFL and Premier League Soccer drives advertising revenue for us and then obviously Christmas season also. So we expect it again to be a strong season for us. And, obviously, this time, we have the midterm elections in The US that I said we were already seeing some positive benefit from, which will continue through October. So the the rest of, you know, the rest of 2026 is is looking good. Martin w, I think, asked a a question here about our bookings level so far. So we're just over $90,000,000 of of booked revenue at this moment with, you know, ten weeks or so of the of the year to go. So we're in a great position to deliver everything. And as you'll have seen today, the the guidance, the market expectation for the year was was upgraded to to to $7,700,000 as we obviously are trading ahead of that through the the first nine months of the year. So outlook for the the rest of 2026 looking very positive.

24:34 And then just to... I think just to restate, you know, our our focus for 2027 onwards, the longer term goal for this company is to continue to to focus growth through our m and a strategy. So we had a successful proof of concept with the Adalicious acquisition, you know, added 50%, you know, revenue to the Adalicious content slate just by plugging it into the AUDIOBOOM platform. And then as we've shown today, meaningful synergies on on the cost side as well. So it's a a great proof of concept at a low level for for what our platform can can do through m and a. And we can expect to to kind of continue that focus over the coming years with a goal to, you know, hit a revenue number above 200,000,000 and an EBITDA number above 40,000,000 in in in in 2030. We think that's gonna take between three and and four meaningful transactions.

25:30 And as Brad said earlier, we have the commitment for a revolving credit facility of $10,000,000 to support to support that growth path and and that and that strategy. The the podcast industry is is very fragmented. We do think there's an opportunity to be the consolidator. Our platform business is is is perfect, as I said before, to pick up podcast networks, podcast studios, podcast platforms of other types, put them on top of our platform, supercharge them, and and drive that distribution and and inventory number that I showed you earlier to to maximize revenue growth. We see a lot of businesses out there in this podcast space that hit something of a ceiling around the $15,000,000 revenue mark. They don't own and operate their own technology.

26:21 They struggle to scale beyond that $15,000,000 number. So that's the kind of the ballpark that we're we're we're looking in that that level of business. We'll be disciplined. We'll make sure that we are, you know, buying and looking to buy the the right ones that they're accretive to this business and they fit our acquisition strategy well. So that's the goal for us. That's that's what what we're signing up for as as as a management team to take this business towards that 200,000,000 and and $40,000,000 EBITDA number through through that acquisition goal. So that's the long term. The short term future looks bright for for q four twenty twenty six. The company is in the best ever position that that it's been in. We have a model that works, a model that gears heavily to EBITDA and then to cash, and we continue to to grow very strongly.

27:14 So thank you for joining us today. Thank you for the questions that we have answered. Few of those as as as we've gone along. Yeah. AUDIOBOOM and the AUDIOBOOM team have done an incredible job over the the last three months, and we'll continue to do so for the rest of the year. So good to see you all, and we'll have some more news for you in the coming months. Thank you. That's great. Thank you for updating investors today. If I please ask investors not to close this session as you'll now be automatically redirected provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.