Tiny Ltd. (TINY) Q3 2026 Earnings Call Transcript

...business performance and opportunities. Such statements are made as of this date hereof, and Tiny assumes no obligation to update or revise them, except as required by applicable securities laws. Such statements involve significant risks, uncertainties, and assumptions, and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements disclaimer in the slides accompanying this presentation and in the company's press release issued today for additional information. We use non-IFRS financial measures to help investors understand our operating performance. Non-IFRS financial measures may not be comparable to similarly titled measures used by other companies and should be considered along with, but not as an alternative to, measures calculated in accordance with IFRS. I would now like to turn the call over to Austin Singera, Chief Executive Officer, for today's earnings call.

Good morning, everyone, and thanks for joining. Over the last two quarters, we've been focused on simplifying the business and returning to a more decentralized organization. That work is showing up in our profitability and cash generation. Organic revenue has broadly applied year over year, while our adjusted use-out margin improved to 25%, our best since Tiny became public over three years ago. We also brought our net leverage down to 2.3 times. Across the group, performance range mixed. Meadowland and Serato had strong quarters while WeCommerce and the creative platform continue to face revenue pressure. Just after quarter end, we also acquired Oso Cloud, an enterprise permissioning software business with 5.3 million of ARR. It's a great addition to the group and attractive purchase price. Our focus is on continuing to improve operations, Find high-quality businesses to acquire, and strengthening our balance sheet to keep TANY resilient. Michael, I'll hand it over to you to go through the financial details.

Okay. Thank you, Austin. Let me start with a few of the headline numbers. Adjusted EBITDA for the quarter was $13.2 million. This is up 30% from Q3 of 2025. With an adjusted EBITDA margin of 25%. This reflects our continued focus on efficiency and cost management. And as Austin noted, we're also happy to report that our net debt to adjusted EBITDA finished the quarter at 2.3 times. Recurring revenue, 17.2 million, or 33% of total revenue, Which is up 2% year-over-year. This is largely driven by Serato and, as Austin noted, will be enhanced through the acquisition of Oso, which will take our ARR from approximately $69 million to closer to $75 million. Free cash flow was $8.6 million, or $0.29 per share. As a reminder, we now report free cash flow and segmented EVA DAW on a attributable basis, which gives you, as an investor, a clearer measure of cash generated by our underlying portfolio. From Tiny Fund 1, we received half a million in distributions. This number is consistent with distributions received in Q2. Fund revenue was US$13.7 million, up 4%, and the carrying amount of our investment in the fund was 46.3 million, up 3%. As a reminder, the financial results of the companies within Tiny Fund 1 are not reported as part of our consolidated financial results. In terms of some of the highlights, operationally, at Serato, we launched DJ for IOS in October, bringing DJ software to iPhone and iPad with support for more than 120 controllers and mixers. This is a very exciting development for the Serato business. Metalab delivered its strongest top-line quarter since 2022 with revenue up 25% from Q2 of 2026. This was supported by some key customer engagements with high-quality and longer-term customers. At Letterboxd, membership has now surpassed $33 million, which is up 42% year-over-year and has more than tripled since the Tiny Fun 1 acquired the business in 2023. Moving on to some of the detailed information about the financial results, I'll start with revenue. Third quarter revenue was $52.3 million. This is up 1% from Q2 of 2026. We saw some growth at Serato, but it was largely driven by MetaLab in the quarter. This helped offset soft results at WeCommerce and Creative Market. Compared with Q3 of 2025, our revenue was down 3% from $54 million. But when you exclude divested businesses, organic revenue was essentially flat. Looking at the segments, the standout, as we've noted, was digital services in the quarter, which grew to $19.6 million, up from $18.6 million a year ago, and 12% on an organic basis. Software and apps was at $22.1 million for the quarter, versus $23.2 million, with Toronto growing and WeCommerce still facing some top-line pressure. Over the past 12 months, our overall revenue grew 4% to $207 million from $199.6 million. And the mix of business has meaningfully shifted to more recurring revenue. Software and apps grew to $91.3 million, up from $68.5 million because the LTM period now includes a full year of Serato. On an LTM basis, digital services was $69.6 million versus $80.8 million a year ago, but that also reflects the divestitures of Frosty 8020 and Z1. Which have now been offset by MetaLab's strong performance in Q3 of 2026. On to recurring revenue, it was $17.2 million for the quarter, up 2% from a year ago, and represented 33% of total revenue, compared with 31% last year. On an LTM basis, recurring revenue was $70.2 million, compared with just $49.8 million a year earlier, and now represents 34% of LTM I'm Reven You. The step-up comes from both acquisitions and organic growth and reflects our strategy of building a more durable earnings base. Moving on to adjusted EBITDA and adjusted EBITDA margin. This was certainly the highlight of the quarter. Adjusted EBITDA was $13.2 million in Q3, the highest of the previous eight quarters, and as Austin noted, our best quarter since tiny became public over three years ago. Adjusted EBITDA grew 30% from $10.1 million in Q3 2025, as reported in our release, and 24% from $10.6 million in Q2. The margin was 25%, up 19% from a year ago, and up from 21% in Q2, albeit on slightly lower revenue. Thank you. Of note, the slide. Highlighting adjusted EBITDA margin shows Q3 at Q3 2025, excuse me, at 8.5 million. This is for comparability purposes. As we spoke last quarter about a potential bad debt expense from a single customer, we've shown the operational comparison to be relative for the actual results of our operations. On an LTM basis, adjusted EBITDA now sits at $42.9 million with a 21% margin. This is compared with $36.5 million and a 19% on the same adjusted basis in the previously comparable period. The drivers were straddles outperformance, dribble contract wins, and significant cost reductions through the portfolio. As we've noted, operational efficiencies that we've undertaken through the first half of the year have certainly started to drive margin improvement. We expect to keep our focus on cost management and efficiencies as we move forward with the objective of continuing to produce strong adjusted EBITDA and adjusted EBITDA margins. Moving on to free cash flow and free cash flow per share. Free cash flow for the quarter was $8.6 million. This represented $0.29 per share. It was compared with $13.7 million or $0.47 per share in Q3 2025, although it should be noted that Q3 2025 free cash flow and free cash flow per share was heavily impacted from a one-time gain on a licensing revenue agreement. And, importantly, when we reflect on Q3, 2026 free cash flow per share of $0.29. This is a significant improvement from our Q2 2026 free cash flow per share of just $0.02. I also want to remind everyone that we changed our framework beginning in Q1 of 2026. And we report free cash flow and free cash flow per share on an attributable basis to continue to give you a clearer and more meaningful measure of capital generated by the owned portions of the underlying portfolio. Moving on to Tiny Fund 1. Tiny Fund 1 had combined revenue of 13... Tiny Fund 1 companies, excuse me, had combined revenue of $13.7 million in Q3. This is up 4% from $13.2 million in the previously reported quarter. On an LTM basis? Tiny Fund 1 companies generated 56.1 million of revenue, which was up from 49.2 in the same previously comparable quarter period, excuse me. Two points of context. Our fund revenue is unaudited, and tiny consolidated results do not reflect the aggregate revenues, expenses, or profits of the fund's individual investments. However, we do feel it important to provide you context and view of the revenue from the companies within the fund, as well as distributions. Those distributions do flow through the tiny, as does the value of our investment on the balance sheet. As noted, we received half a million dollars of distributions in this quarter, which was consistent with Q2 and compared with a slightly lower number a year ago. The carrying amount of our investment in the fund, a 21.41% interest, was 46.3 million Canadian or 32.6 million USD as of September 30th, 2026, and this was just under a 5% increase from December 31st of 2025. Within the fund, Letterboxd membership continues to grow, as we've noted. And AeroPress also had a strong quarter, driven by a strong set of Amazon Prime days, as well as traction from new product launches. On to slide 10, which covers debt and cash and the balance sheet. Our senior debt outstanding was $103.5 million. As of September 30th, this was compared to $98.7 million at December 31st, 2025. Convertible to ventures were unchanged with a face value of $36.1 million. Cash grew significantly in the quarter to $39.5 million, which was up $8 million in the quarter and up from $29.3 million at year end. So, as you can see, the operational enhancements and efficiencies are helping to drive cash generation. Our net debt to adjusted EBITDA came in at 2.3 times, which importantly is down from 2.8 times since Q2. The improvement reflects both lower net debt and a stronger quarter of adjusted EBITDA rolling into the LTM measure. This puts us well within our target leverage of two to two and a half times and shows how far we've come since we were above three times in 2024. We will continue to monitor this ratio and continue to be committed to ensuring that We maintain a strong balance sheet, allowing us both Opportunity for future investment and ensuring that our leverage levels are within our targeted ratios as well as important levels for our investors. And lastly, on the debt side, we have no pending maturities. While we did have our convertible to venture offer out in the market, it did expire on October 28th. However, there was no pending maturity associated with it. We could look at calling those bonds again in the future. At the same time, we remain committed to our target leverage and using increased cash flow to bring leverage down. We are very pleased with the progress that we've made in this area, and we are well positioned now to again deploy capital should an opportunity arise, such as in the aforementioned Oso deal. I'll close out with a short review of our roadmap. First, we continue to maintain discussion around profitable growth. We are increasing the recurring revenue base to improve adjusted earnings durability. We're staying focused on cost efficiencies and on improving both adjusted EBITDA and free cash flow. Second, capital structure optimization. This means This means a continued review of the portfolio. The strategic decisions around value creation, and as I noted, an ongoing focus on reducing leverage and increasing financial flexibility. Third, at Tiny Fund 1, we continue to work towards revenue and NAV increases, driven by operational excellence and improved profitability, which should allow for increased distributions from the Fund 2Tiny, And continued growth of the fund companies through new product launches and distribution opportunities. And lastly, on capital allocation, we're looking to continue to strengthen the portfolio through strategic repositioning of select businesses, pursuing high-quality acquisition opportunities, as Austin noted, and again, I note the example of a recent small acquisition that is an appropriate example of opportunistic repositioning the portfolio and creating growth. To sum up the quarter, a 25% adjusted EBITDA margin, 8.6 million of free cash flow, and leverage of 2.3 times, fitting well within our objectives. We are going to continue to look to enhance the portfolio and our performance as we go forward. Now, we'll turn it over for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Amir Azat with Canaccord Genuity. Amir, your line is open. Please go ahead.

Austin, Mike, good morning, and congrats on a great quarter. Maybe if we could start with digital services. It was probably the biggest positive surprise for us this quarter. Can you walk us through what changed operationally at MetaLab during the quarter? How broad-based the improvement was across clients? Then how we should be thinking about the sustainability of that performance going forward?

Sure. Thanks for the question. I can start there. Yeah, that's correct. Metalub had its strongest quarter since 2022. I was up 25% sequentially in the quarter as well in terms of revenue. We're generally seeing larger client engagements, better utilization across the board, and also ramp up of some significant new clients. And we noted some of those marketing names in the press states as well. In terms of Sustainability in the coming quarters. It does remain a project business, so timing matters. Our focus is on building those enterprise relationships and converting those into sustainable work, and that's been the case over the last several quarters. Again, strong quarter, I wouldn't exactly extrapolate it into every quarter going forward, but we're quite happy about the progress so far.

Understood, then this is like specifically like one larger client that contributed, from my understanding?

It's not. It's just generally, again, broad engagement across many larger enterprises.

Fantastic. Then the magnitude of the improvements from the cost-cutting exercise exceeded our expectations. Can you walk us through? How much of that reset is now reflected in the run rate and whether there are still additional efficiencies to come through over the next couple of quarters?

I can start to make you jump in. I believe most of that from an operational perspective flowing into the results for the quarter is largely done. I'd say we're, again, kind of shared in my remarks, continually looking at areas within the business, but I'd say largely most of that work is behind us.

Yeah, I think that's the right way to characterize it. We'll always be continuing to look at ways to optimize, but the large amount of that work OMR is finished and has been finished for the year. And again, not necessarily sort of run rate because it'll always be the sort of balance of Some of those operational efficiencies against a couple of businesses that are facing somewhat of decline, maybe under pressure on the revenue side. So there is a bit of a balance there as it relates to the run rate. But look, we're very happy with the progress overall. And as you know, through our conversations, we've been very focused on that EBITDA margin percentage in that metric. And so we're certainly pleased with. I'm not going to suggest it's going to be 25% every quarter, but we're working towards that as a benchmark.

Fantastic. And if I could just follow up there, and I know you guys don't disclose the Cerato profitability separately, but maybe you could give us some color directionally at least. When I look at the 10 points year-on-year EBITDA margin expansion in software and apps, Is the lion's share of that driven by the eCommerce cost resets, or is there a meaningful sort of Serato operating leverage as well that we did see come through?

I can start. For this specific quarter, it is a combination of both. So, this would reflect the meaningful changes we did make within the WeCommerce department that we noted in the previous quarter as well, and since we have acquired Serrano that has been a meaningful contributor, overall market improvement, I don't think we've specifically disclosed a contribution by those two items. But we are seeing strong operating leverage within Serata and we expect that to continue the revenue base.

Okay, thank you. Congrats again.

I think that's a good summary, and we noted as well, like, just there's some excitement around Sorago for Q4 with the most recent launch, and, you know, we'll be looking forward to updating everybody about that in more detail on the Q4 call.

Fantastic. Congrats again. I'll pass the line.

As a reminder, if you would like to ask a question, please press star 1 to raise your hand. We have reached the end of our Q&A session. I will now turn the call back to Mike McKenna, Chief Financial Officer, for closing remarks.

Okay, we would like to thank everybody for joining, and thanks to those on the line who came with questions, and we look forward to reconvening with everyone following our Q4 results, and hopefully again delivering on some exciting opportunities and progress. Thanks to everyone for their time and for their support.

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