Q1 2024 Loop Media Inc Earnings Call

February 6, 2024

Operator: January 1st, 2023. Joining us today are Loop's CEO, Mr. John Nierman, and the company CFO, Mr. Neil Watanabe. By now, everyone should have access to the 2024 fiscal first quarter earnings press release that the company issued earlier today at approximately 4 o 5 p.m. The release is available in the Investor Relations section of Loop's website at www.loop.tv. In addition, this call will be available for webcast replay on the company's website.

Joining us today are CEO, Mr. John near mine and the company's C. F O Mr. Neil Watanabe.

By now everyone should have access to the 'twenty 'twenty four fiscal fourth quarter earnings press release.

The company issued earlier today at approximately four <unk> P M Eastern time.

The release is available in the Investor Relations section of loops website at Ww W. Dot loop Dot TV. In addition, this call will be available for webcast replay on the company's website.

Operator: Following management remarks, we'll open the call for your questions. Please note, there are two ways to ask questions during the Q&A. One for those on the phone. Please press star 1 on your telephone keypad to raise your hand, and, For those on the webcast, please select ask a question in the top right corner of the screen. Enter your question and click submit.

Following management remarks, we'll open the call for your questions. Please note there are two ways to ask questions during the Q&A.

One for those on the phone.

Please press star one on your telephone keypad to raise your hand.

And.

Two for those on the webcast. Please select ask a question in the top right corner of the screen.

And to your question and click submit.

Operator: Certain questions 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 risks and uncertainties that are described from time to time in the company's filings with the asset. Do not place undue reliance on any forward-looking statement, which is 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 statement. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA, as supplemental measures of the performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with FCC rules.

Certain questions 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 risks and uncertainties that are described from time to time in the company's filings with the S. E C.

Do not place undue reliance on any forward looking statements, which are being made only as of the date of this call.

<unk> as required by law the company undertakes no obligation to revise or publicly released.

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 <unk>.

Terrible GAAP measures in accordance with SEC rules.

John Nierman: You'll find reconciliation charts and other important information in the earnings press release and Form 8K filed with the SEC. I would now like to turn the call over to Loop's CEO, Mr. John Neer. Thank you, and good afternoon, everyone.

You'll find reconciliation charts and other important information in the earnings press release and form 8-K furnished to the FCC.

I would now like to turn the call over to loop CEO, Mr. John near Man.

Thank you and good afternoon, everyone. After three quarters of just over $5 million in revenue. We once again exceeded the $10 million quarterly revenue Mark. Unlike Q1, FY2023 our Q1 FY 'twenty four revenue contained little to.

John Nierman: After three quarters of just over $5 million in revenue, we once again exceeded the $10 million quarterly revenue mark. Unlike Q1 FY23, our Q1 FY24 revenue contained little to no political advertising spend and was purely organic revenue off our core business. Quarter over quarter growth increased 79% from 5.7 million in Q4 of FY23 to 10.2 million in Q1 of FY24. In addition to the strong revenue growth, we saw the impact of our focus on lowering operating costs and network efficiency, which resulted in a significantly reduced quarterly adjusted EBITDA loss by 69%, or $1.5 million as compared to $4.8 million in Q4 of FY23. As of December 31, 23, we had approximately 77,000 active loop players and partner screens across the loop platform, which includes 33,783 quarterly active loop players, or QAUs, across our ONOA platform, an increase of 26%, or 6,880 QAUs, over the 26,903 QAUs for Q1 FY20 and a slight decrease of 3,238 over the 37,021 QAUs for Q4 FY23, and approximately 43,000 partner screens across our partner platforms, an increase of 153%, or 26,000 over the 17,000 partner screens at the end of Q1 FY23, and 1,000 partner screens over the 42,000 partner screens announced for Q4 FY23.

No political advertising spin and was purely organic revenue off our core business.

<unk> over quarter growth increased 79% from $5 7 million in Q4 of FY2023 to $10 2 million in Q1 of FY 'twenty. Four in addition to the strong revenue growth. We saw the impact of our focus on lowering operating costs and network efficiency, which.

<unk> and a significantly reduced quarterly adjusted EBITDA loss by 69% or $1 5 million as compared to $4 8 million in Q4 2003.

As of December 30, 123, we had approximately 77000 actively players and partner screens across the <unk> platform.

This includes 33783 quarterly active loop players or QA use across our all our platform an increase of 26% or 6880 <unk> over the 26903 <unk> for Q1 FY 'twenty.

Three and a slight decrease of 3238 over the 37021 <unk> for Q4 FY2023.

Approximately 43000 partners screens across our partner platforms and increase of 153% or 26000 over the 17000 partners screens at the end of Q1, FY 'twenty, three and 1000 partners screens over the 42000 partners screen.

<unk> announced for Q4 FY2023.

John Nierman: Our QAU footprint for the first quarter of fiscal 24 was reduced as a result of natural attrition of loop players that were not immediately replaced as we transitioned 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 allow us to grow our active loop player numbers quarter on quarter and provide a more robust distribution platform for our advertising partners over time. In addition, a number of our loop players experienced downtime in late September and early October 23 as a result of an operating program update and technical issues related to outdated Wi-Fi in those venues.

Our QAD footprint for the first quarter of fiscal 'twenty four was reduced as a result of natural attrition and blue players that were not immediately replaced as we 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 loan.

Patients in venues, including convenience stores restaurants bars, and other retail establishments. We believe this targeted distribution plan will allow us to grow our active Lou player numbers quarter on quarter and provide a more robust distribution platform for our advertising partners over time.

A number of our loop players experienced downtime in late September and early October 23, as a result of an operating program update and technical issues related to outdated Wi Fi in those venues not all of those new players return to active performance in the first quarter of fiscal 'twenty four.

John Nierman: Not all of those loop players returned to active performance in the first quarter of fiscal 24. We have now entered the notoriously worst advertising quarter of the year, between January and March, where we've learned to be more conservative in our expectations. But I am optimistic about the revenue ramp for the second half of 2024 and beyond. The increased awareness of the Loop TV brand and the expansion of distribution over the past year on our platforms and screens demonstrate that our sales and marketing efforts are getting us new client wins. Our approach is to leverage our business model to continue to gain new customers on a consistent basis while focusing on the venues and markets that we know provide the best return on our investment and potential for revenue growth. Moreover, we will look to explore strategic M&A opportunities that can allow us to leverage our platforms and networks further to integrate our company vertically.

We have now entered the notoriously worst advertising quarter of the year between January and March where we've learned to be more conservative in our expectations, but I am optimistic about the revenue ramp for the second half of <unk>.

'twenty 'twenty four and beyond.

The increased awareness of the loop TV brand and the expansion of distribution over the past year on our platforms and screens demonstrates that our sales and marketing efforts are giving us new client wins, our approach is to leverage our business model to continue to gain new customers on a consistent basis, while focusing on the venues in markets that we know.

Provide the best return on our investment and potential for revenue growth.

Moreover, we will look to explore strategic M&A opportunities that can allow us to leverage our platforms and networks further to integrate our company vertically.

John Nierman: We will continue to focus on tightening the bottom line to achieve our goal of becoming cash flow positive as soon as possible, so that could mean further cost efficiencies we will need to achieve, while still being careful not to materially dampen future upside and growth. It's always a tricky balance to accomplish that, but we plan to keep a consistent eye on it. With that, I will turn the call over to Neil to take you through our financial results. Neil.

We will continue to focus on tightening the bottom line to achieve our goal of becoming cash flow positive as soon as possible, but that could mean further cost efficiencies, we will need to be realized while still being careful not to materially dampen future upside in growth, it's always a tricky balance to accomplish that but we.

Plan to keep a consistent high on it with that I will turn the call over to Neal to take you through our financial results Neil.

Neil Watanabe: Thank you, John, and good afternoon, everyone. As we review our financial results, I want to remind everyone that all comparisons and variance commentary refer to the prior year's fiscal first quarter unless otherwise specified. For the 2024 fiscal first quarter, revenue was $10.2 million compared to $14.8 million for the same period in fiscal 2023. The current Q1 revenue does not reflect any benefit from political advertising compared to Q1 last year.

Thank you John and good afternoon, everyone. As we review our financial results I want to remind everyone that all comparisons and variance commentary referred to the prior years fiscal first quarter unless otherwise specified.

And the 2020 for fiscal first quarter revenue was $10 2 million compared to $14 8 million for the same period in fiscal 2023.

The current Q1 revenue does not reflect any benefit from political advertising compared to Q1 last year. Additionally, we have improved productivity in our revenue channels through our various initiatives as our revenue growth in the current Q1 improved significantly over the last three quarters.

Neil Watanabe: Additionally, we have improved productivity in our revenue channels through our various initiatives as our revenue growth in the current Q1 improved significantly over the last three quarters. In the 2024 fiscal first quarter, gross profit was $3.6 million compared to $5.7 million for the same period in fiscal 2023. Additionally, in the 2024 fiscal first quarter, the gross margin rate was 35.6% compared to 38.4% for the same period in fiscal 2023.

In the 2020 for fiscal first quarter gross profit was $3 6 million compared to $5 7 million for the same period in fiscal 2023.

And the 2020 for fiscal year first quarter gross margin rate was 35, 6% compared to 38, 4% for the same period in fiscal 2023. The decrease was primarily driven by revenue mix as the year ago period included a smaller portion of our partner platform business, which carries lower gross margin, but <unk>.

Neil Watanabe: The decrease was primarily driven by revenue mix, as the year-ago period included a smaller portion of our partner platform business, which carries lower gross margin but higher operating margin. Total sales, general, and administrative expenses, excluding stock-based compensation, depreciation, and amortization, impairment of goodwill, and intangible assets and restructuring costs in the 2024 fiscal first quarter were $6.2 million compared to $8.0 million for the same period in fiscal The improvement was primarily due to a reduction in digital marketing spend, resulting in lower expenditures and decreased payroll and other compensation-related expenses, partially offset by increased capital raise costs and bad debt reserve from growth in our receivable base on revenue increases. We continue to focus on gaining efficiencies in SG&A, which we expect to be reflected throughout 2024.

<unk> operating margin.

Total sales general and administrative expenses, excluding stock based compensation depreciation and amortization impairment of goodwill and intangible assets and restructuring costs in the 2020 for fiscal first quarter were $6 2 million compared to $8 8 million for the same period in fiscal 2023.

The improvement was primarily due to a reduction in digital marketing spend resulting in lower expenditures and decreased payroll and other compensation related expenses, partially offset by increased capital raised costs and bad debt reserves from growth in our receivable base on revenue increases.

We continue to focus on gaining efficiencies in SG&A, which we expect to be reflected throughout 2024.

Net loss in the 2020 for fiscal first quarter was a loss of $5 3 million or a loss of <unk> <unk> per share compared to a net loss of $5 3 million or <unk> <unk> loss per share for the same period in fiscal 2023.

Neil Watanabe: The net loss in the 2024 fiscal first quarter was a loss of $5.3 million or a loss of $0.09 per share compared to a net loss of $5.3 million or a $0.09 loss per share for the same period in fiscal 2023. Justin Ibada's net loss in the 2024 fiscal first quarter was a loss of $1.5 million compared to a loss of $1.6 million for the same period in fiscal 2023, a slight

Adjusted EBITDA in the 2020 for fiscal first quarter was a loss of $1 5 million compared to a loss of $1 6 million for the same period in fiscal 2023, a slight improvement.

Turning to our balance sheet cash and cash equivalents were $3 8 million on December 31, 2023, compared to $3 1 million on September 32023 as of December 31, 2023, we had a total net debt of $7 1 million compared to $7 5 million as of September 32023.

Overall, we continue to focus on increasing our revenues gross margins and leveraging our expenses in line with revenues as we plan to continue to reduce the adjusted EBITDA loss as we progress through the year I would like to thank everyone for listening today, we look forward to providing further updates on our next conference call.

Neil Watanabe: Turning to our balance sheet, cash and cash equivalents were $3.8 million on December 31st, 2023 compared to $3.1 million on September 30th, 2023. As of December 31st, 2023, we had a total net debt of $7.1 million compared to $7.5 million as of September 30th, 2023. Overall, we continue to focus on increasing our revenues, gross margins, and leveraging our expenses in line with revenues as we plan to continue to reduce the adjusted EBITDA loss as we progress through the year. I'd like to thank everyone for listening today.

This concludes our prepared remarks, we will now open it up for questions operator back to you.

Now we'll open the call for your questions as indicated at the beginning of the call. There are two ways SaaS questions. One for those on the phone. Please press star one on your telephone keypad to raise your hand to withdraw your question simply press.

Star one again.

For those on the webcast. Please select ask a question in the top right corner of the screen and to your question and click submit.

Up to three questions from those on the phone will be answered first and as time permits a couple of questions from the webcast will be addressed.

Operator: We look forward to providing further updates on our next conference call. This concludes our prepared remarks; we will now open it up for questions. Operator, back to you.

Our first question comes from the line of Eric Wold with B Riley. Please go ahead.

Thanks.

Operator: Now we'll open the call to your questions. As indicated at the beginning of the call, there are two ways to ask questions. One, for those on the phone, please press star 1 on your telephone keypad to raise your hand. To withdraw your question, simply press star 1 again.

Good afternoon everybody.

I appreciate taking my questions.

Two questions. The first one has three parts to it but I'm sorry, if I was trying to make it quick.

The first question is really around the.

The reduction in.

The loop players.

Operator: 2. For those on the webcast, please select Ask a Question in the top right corner of the screen, enter your question, and click Submit. Up to three questions from those on the phone will be answered first, and if time permits, a couple of questions from the webcast will be addressed. Our first question comes from the line of Eric Wold with B Riley. Please go ahead. Thanks. Good afternoon, everybody.

In the quarter.

I know you said that the net the net reduction of about 3200 sequentially.

Can you give us a little more color behind that in terms of how you added versus how many you.

I guess removed or do not replace and then.

Part is is this kind of a one quarter flush.

Remember quarter or should we expect kind.

Natural attrition like that throughout this year and can you actually have a net gain again.

In placement in the second quarter and then the last part is just more thoughts around why that reduction was made.

Eric Wold: I appreciate you taking my questions. So I've got two kinds of questions. The first one has three parts to it, but I'll try to make it quick.

I didn't want to get some more desirable venues.

And markets.

But were these locations that were just not profitable if you're kind of thinking about all the efforts in sales around them.

Eric Wold: And the first question is really around the, You know, the reduction in the Loop player in the quarter. I know you said that the net reduction was about $3,200 sequentially. Can you give us a little more color behind that in terms of how many you added versus how many you, I guess, removed or did not replace?

Not worth having in place anymore or is it more as you can.

Take those taking equipment out and kind of more efficiently put it somewhere else.

Using the same capital.

Thanks, Eric I'll jump in on that so we have two years of data behind us now and I think thats. The most important thing.

Eric Wold: And then the second part is, is this kind of a one-quarter flush in a December quarter? Or should we expect... national attrition like that throughout this year, and can you actually have a net gain again in placement in the second quarter? And then the last part is what I think why that reduction was made.

And as we look to make sure that our bottom line is as tight as it can be we have to make sure that we're getting the best return on investment. So what we understand now is what type of venues performed the best I'm clearly not going to get into that obviously for competitive reasons, primarily but we do know in terms of our performance.

Eric Wold: I knew you wanted to get some more desirable venues and markets. But were these locations that were just... not profitable? If you kind of think about all the efforts and sales around them, are they not worth having in place anymore?

So we're going after we mentioned some of those but theyre clearly others and at the other end of that we know the ones that don't perform well. So there's a couple of things that have happened. One just like you have different technology with your phone, we're kind of in our whether it's third or fourth generation of our loop player you have different iterations each require updates if certain.

John Nierman: Or is it more so you can... take those, take that equipment out and kind of, you know, more efficiently put it, put it somewhere else, you know, using the same capital. Thanks, Eric. I'll jump in on that. So we have two years of data behind us now. I think that's the most important thing. And as we look to make sure that our bottom line is as tight as it can be, we have to make sure that we're getting the best return on investment. So what we understand now is what type of venues perform the best. I'm clearly not going to get into that, just obviously for competitive reasons primarily, but we do know, in terms of our performance, the types that we're going after. We mentioned some of those, but there are clearly others.

Venues arent strong enough to handle those updates and they don't pushing update through and theyre not generating enough airtime, it's really not worth our while to maintain those so that's kind of where we have evolved in terms of that what we'll call. The natural attrition. So we learned better on targeting but we also learned if there was a particular issue with their Wi Fi.

For example, we're not going to put the investment into replacing that player because we're not going to get the return that we want.

So the second part of your question can a net occur of course, we anticipate that we believe it will we wanted to we know well.

And but it's going to be a smarter net for us going forward. So I think there was a little bit here.

Just time kind of coming our way to understand where these players are how they are performing the different geographies when bob's dealing with advertisers. He certainly knows the markets, what they're going after and certain types of venues that they want as well. So just with all of that information. We thought it was the best time at this stage really just to kind of.

John Nierman: And at the other end of that, we know the ones that don't perform well. So there's a couple of things that have happened. One, just like you have different technology with your phone, you know, we're kind of in our, whether it's the third or fourth generation of a loop player, you have different iterations, each requiring updates.

Start pairing those out and doubling down on the venues that we believe are going to be fine. So even though we took a little hit there we're very comfortable with where we're going to be 2024 of the growth of the players.

Perfect and then I will.

So like the <unk>.

Just that.

John mentioned.

We're targeting a venue but as.

As we've learned and analyzed the productivity of the player. We found that all of the players don't perform the same geographically and so part of the original distribution was just put them out wherever we can and then as we started monitoring measuring profitability. We found that advertisers really are looking for density in certain key DMA.

John Nierman: If certain venues aren't strong enough to handle those updates, and they don't push an update through, and they're not generating enough airtime, it's really not worth our while to maintain them. So that's kind of where we have evolved in terms of that, what we'll call natural attrition. So we learned better about targeting, but we also learned if there was a particular issue with our Wi-Fi, for example, we're not going to put the investment into replacing that player because we're not going to get the return that we want. So, the second part of your question, can a net occur? Of course, we anticipate that, we believe it will, we want it to, we know it will, but it's going to be a smarter net for us going forward.

Markets and so we have been focusing more on those.

From a growth standpoint.

Overall.

We will tend to improve our profitability.

And our efforts are being cypress versus shotgun approach.

Geographic locations for that region.

Okay. That's helpful and I guess my last question is.

Maybe a shorter one.

You noted that the quarter itself did not have or had minimal.

Political ad spend benefits in it.

I know youre expecting a stronger recovery in the back half of the fiscal year.

John Nierman: So, I think there was a little bit of, you know, just time kind of coming our way to understand where these players are, how they're performing, the different geographies. When Bob's dealing with advertisers, he certainly knows the markets, what they're going after, and certain types of venues that they want as well. So, just with all that information, we thought it was the best time at this stage really just to kind of start pairing those out and doubling down on the venues that we believe are going to be fine. So, even though we took a little hit there, we're very comfortable with where we're going to be in 2024 with the growth of the players. Perfect, and I'd also like to add just that, you know, John mentioned more targeting of venues, but as we've learned and analyzed the productivity of the player, we found that all the players don't perform the same geographically, and so part of the original distribution was just putting them out, you know, wherever we could.

The kind of the Q2 typical debt or kind of.

Lower period.

What are you expecting for political ads and then I guess, how much AD spend could you have as a percent maybe or however, you want to phrase it.

In the back half of the year and.

Do all of your venues kind of have to opt in if they want to have political ad spend versus not.

It will allow them to show them or not not one or two of them.

Yes, so for that we just want to make sure. That's part of the AI that we use to make sure. The venues are in and it's not any different in content that we show to <unk>.

Family type venue et cetera. So we're very careful in terms of what adds enforcing things on people obviously so.

They always have that function not to do that but just to your first part of your question as the previous quarter of last year. When we had the 48.

A large portion of that was political advertising I think the point, we were trying to make was the $10. Two this time.

Would've been more just on the organic growth alone.

That quarter, so, which we think is a very encouraging sign for the core business. So when you start to then later on what we believe to be the future advertising, we think thats.

We think thats good.

Okay.

Helpful. Thank you guys appreciate it.

John Nierman: And then as we started monitoring, measuring profitability, we found that advertisers really are looking for density in certain key DMA markets. And so we have been focusing more on those, you know, from a growth standpoint, which overall will tend to improve our profitability. And, you know, our efforts are being more sniper versus shotgun on, you know, geographic locations for that region. Okay, that's helpful.

Our next question comes from the line of Darren <unk> with Roth MTM. Please go ahead.

Hey, guys. Thanks for taking my questions nice job on the progress John So I just wanted to make sure I heard you correctly on your last comment.

Responding to Eric's question. So if you were to strip out political a year ago, you actually grew year over year is that correct.

Yes from the core business, yes.

Got it okay.

That's helpful. And then maybe another question on the attrition of the players. So there's always the attrition of a unit and then there is revenue attrition. So it sounds like a lot of the players didn't get upgrade cycles with technology et cetera, maybe you werent.

Eric Wold: I guess my last question is, I promised it would be a shorter one. You noted that the quarter itself did not have or had minimal political ad spend benefits in it, and you're expecting, you know, a stronger recovery in the back half of the fiscal year after the kind of acute to typical debt or kind of, you know, slower period. What are you expecting for political ad spend, I guess? How much ad spend could you have as a percent, maybe, or however you want to phrase it, in the back half of the year? And, Do all of your venues kind of have to opt in if they want to have political ad spend versus not getting any kind of view allows them to show them, or not want to show them?

Yielding any kind of revenue. So I guess my question is airwave and quantify what kind of revenue impact attrition. There was with this 3200 players.

Okay.

Just based on those 3000, I think a little difficult Darren to say exactly what that would be but we know.

Not not not meaningful in the sense that we still maintain a majority of the players that are generating the revenue.

So if these it's not like they put it this way it's not like those that we lost were generating a ton of revenue and then Theyre gone.

If that's kind of your question.

Basically is very very minimal.

Those that were coming off our offshore a reason primarily and they are either not using the player like they should or theyre not the ideal location.

John Nierman: Yes. So for that, we just want to make sure, and then that's part of the AI that we use to make sure the venues are, and it's not any different than the content that we show. It's a, you know, a family-type venue, et cetera.

Or demographics, so for us it's not a bad thing, it's really just kind of part of the natural growth process and evolution.

Great.

Eric Wold: So we're very careful with, in terms of what ads we run, enforcing things on people, obviously. So they always have that function not to do that. But just to the first part of your question, the previous quarter of last year, when we had 14.8, a large portion of that was political advertising. I think the point we were trying to make was that 10.2 this time would have been more just based on organic growth alone than it was that quarter. So, which we think is a very encouraging sign for the core business. And when you start to then layer on what we believe to be the future of advertising, we think that's good. Helpful. Thank you, guys. I appreciate it. Our next question comes from a line from Darren Aftahi with Roth MKM. Please go ahead.

On your gross margin it looks like that improved I'm more curious on two things as it relates to that.

One with bringing on as large of a partners you did in the last quarter. This is sort of the first full quarter of having that partner on whatever 40 to 40000 screens one would assume based on the initial deal you did with your first partner gross margins, maybe would've been lower so I guess my.

Question is.

Is your second partner, having a different gross margin profile.

Then your first and if that has over index impact on gross profit in the quarter.

As we continue to grow distribution, our leverage grows and the opportunity to do better deals certainly happens. So any historic deal that we might have done a year and a half ago any deal that we would do today wouldn't look the same but I would say.

Yes, we see a better impact on the bottom line a better share for us.

Yes.

Lastly, darrin that even though the.

Darren Aftahi: Hey, guys, thanks for taking my questions. Nice job on the progress. John, so I just wanted to make sure I heard you correctly on your last comment that responded to Eric's question. So if you were to strip out politics a year ago, you actually grew year over year. Is that correct?

We talked about <unk>.

Expansion on.

Part of the platform it still carries.

A lower margin, but less operating expense center loop players so as we add that on it.

Higher in a quarter than what our loop players is from a sales standpoint were always going to have some of that rate percentage difference that will bring the rate down.

John Nierman: Yeah, for the core business. Yes. Okay.

Darren Aftahi: And then maybe another question on the attrition of the players. So there's always the attrition of a unit, and then there's revenue attrition. So it sounds like a lot of the players didn't get upgrade cycles with technology, etc. or maybe weren't efficient in yielding any kind of revenue.

But again the profitability as we've talked about is very similar to the partner platforms Hulu players, but mix that we talked about on the discussion around the press releases.

The reason.

For that.

That rate can sometimes be compressed a bit.

John Nierman: So I guess my question is, is there a way you can quantify what kind of revenue impact attrition there was with those 3,200 players? Um, just based on those 3,000, it's, I think, Darren, a little difficult to say exactly what that would be, but we know it's not, not meaningful in the sense that we still maintain a majority of the players that are generating the revenue. So if that's not like they put it this way, it's not like those that we lost were generating a ton of revenue, and then they're gone. So if that's kind of your question, it's basically very, very minimal.

But it is a better Rev share back to loop, Darrin, which I think is the key thing.

Got it that's helpful. If I could squeeze one more in.

Local I know you got.

<unk> launched that I think it was piloted in the quarter, we were in I don't think any.

Local revenue contributor in the quarter, maybe correct me, if I'm wrong, but I'm just kind of curious about your aspiration thoughts on prospects for local as we go into calendar 'twenty for us.

Youre right for the quarter, nothing meaningful kind of early full beta through the quarter.

Kicking in now again towards the latter half of the year. So I think youll start to see it more in the second half, but we're certainly still very optimistic about it we just want to make sure that it's working right and thats being tested which it is.

And everything from the type of images that they use as a video is it still there is just a lot of learnings that we're pulling out of the beta.

John Nierman: So those that were coming off are off for a reason primarily, and they're either not using the player like they should, or they're not the ideal location or demographic. So for us, it's not a bad thing. It's really just kind of part of the natural growth process and evolution.

We'll make it easier for us and we'll be able to then I think monetize it much better as we're going along.

Great appreciate it thank you.

Sure.

Our next question comes from the line of David Maris with singular research. Please go ahead.

Yes, hi, thanks, guys for taking the questions and congrats on the quarter I mean, it seems like some real improvements here.

Darren Aftahi: Great. On your gross margin, it looks like that improved. I'm more curious about two things that relate to that.

First a quick housekeeping.

Darren Aftahi: One, with bringing on a large number of partners, you did the last quarter; this is sort of the first full quarter of having that partner on and whatever, 42,000-42,000 screens. One would assume based on the initial deal you did with your first partner, gross margins maybe would have been lower. So I guess my question is... Does your second partner have a different gross margin profile?

What is the.

Nonrecurring expense of 257, K and how long do we expect that to be popping up in the financials.

David that isn't expected to continue we had some expenses that were related to.

Some capital raise activities that didn't.

Didn't consummate so we recorded that as a sort of a onetime.

John Nierman: then your first question, and did that have an over-indexed impact on gross profit in the quarter? As we continue to grow distribution, our leverage grows, and the opportunity to do better deals certainly happens. So any historic deal that we might have done a year and a half ago, a deal that we would do today wouldn't look the same.

That we.

Added back and that nonrecurring transaction line, but at this point.

As you can go back marching through or historic So we haven't had much of the nonrecurring so it's.

I think an isolated situation at least for that one quarter.

Okay. That's really helpful. And then just transitioning more correct.

John Nierman: So I think, yeah, we see a better impact on the bottom line, and a better share price. Even though we talked about expansion on the partner platform, it still carries a lower margin but less operating expense than our loop players. So as we add that on and it paces higher and a quarter higher than what our loop players are from a sales standpoint, we're always going to have some of that rate percentage difference that will bring the rate down. But again, the profitability, as we've talked about, is very similar to the partner platform's loop players, but that we talked about in the discussion or in the press releases, part of the reason for where that rate can sometimes be compressed But it is a better rev share back to Loop, Darren, which I think is the key thing. Yeah, that's helpful. And just if I could sleep in the morning, local.

<unk> fundamentals.

Last year first calendar quarter, I mean, we've kind of had like.

Advertising nuclear winter.

I'll call it.

Can you just talk about how things are pacing.

This year with one months.

Books and.

Give us a sense of what it feels like year over year.

Well I think.

As we said this quarter is always kind of odd as it starts for anyone that deals in advertising you kind of look at January and then look past that so for us we.

We don't see any kind of.

I wouldn't say the nuclear winter like you said I think you see all the signs that the advertising industry is rebounding et cetera, but.

Quite simply it's pacing as expected for us.

Okay.

That's fair.

John Nierman: I know you guys launched that, but I think it was sort of piloted in the quarter we were in. I don't think any local revenue contributed a quarter, maybe correct me if I'm wrong, but I'm just kind of curious about your aspirations, thoughts, and prospects for local as we go into calendar 24. For the quarter, nothing meaningful, kind of really full beta through the quarter, kicking in now again towards the latter half of the year. So I think you'll start to see it more in the second half. But we're certainly still very optimistic about it. We just want to make sure that it's working right and it's being tested, which it is. And everything from the type of images that they use: is it video, is it still?

And then I guess have you seen anything in terms of political at this point or is it just too early in the markets, where youre concentrated to have Susan.

Just starting to see it.

So.

We think that it definitely could be an interesting election right. So we're just kind of starting to see some of that trickle in.

Which is which is good but again second half of the year. When you start to have conventions and everything like that I think is going to be the majority of it but it's certainly starting to certainly starting to come in.

Okay.

And then just kind of lastly from me.

Just wanted to talk about gross margin I actually thought that.

John Nierman: There's just a lot of learnings that we're pulling out of the beta that will make it easier for us. And we'll be able to then, I think, monetize it much better as we go along. Great. I appreciate it.

The gross margin posted here in the first quarter was really strong.

And then your mix of players that is now.

More on the partner side versus.

The kind of <unk> side, and I, just wanted to kind of get through some color from you guys on.

Darren Aftahi: Thank you. Our next question comes from David Marsh with Singular Research. Please go ahead.

<unk> gross margin can trend.

David Marsh: Yeah, hi, thanks guys for taking the questions and congrats on the quarter. I mean, it seems like there's some real improvement here. First, some quick housekeeping.

If partner is a bit heavier component to the mix as we go forward.

No David you're you're absolutely right.

Neil Watanabe: What is the non-recurring expense of $257K, and how long do we expect that to be popping up in the financials? You know, David, that isn't expected to continue. We had some expenses that were related to, you know, some capital waste activities that didn't materialize. So, you know, we recorded that as a sort of a one-time expense that we, you know, added back in that non-recurring transaction line. But at this point, you know, as you can go back marching through our history, we haven't had much of the non-recurring. So it's, I think, an isolated situation, at least for that one quarter.

We ended Q4 with 27, 5% gross margin on a $5 million revenue numbers. So I think improving 700 basis points quarter over quarter kind of reflects that as we can get the revenue to certain levels, we can certainly leverage that.

Appropriately and going forward between the mix and some of the opportunities we're doing to rationalize relationships and negotiate better margin.

Do those type of efforts and.

Looking at we can certainly go north as obviously, the 35% that we came into Q1 so.

David Marsh: Okay, that's really helpful. And then just transitioning more to the business fundamentals. You know, last year, the first calendar quarter, I mean, we kind of had an advertising nuclear winter. I'll call it that.

It's a bit revenue contention, but I think it proves that as we get to a certain level of revenue, we can leverage the cost of goods very well and they become portions of it.

And so we get the benefit of the margin rate expansion. So.

John Nierman: Can you just talk about how things are pacing this year with one month, you know, in the books and... give us a sense of what it feels like year over year. Well, I think, as we said, this quarter is always kind of odd as it starts for anyone that deals in advertising. You kind of look at January and then look past it. So for us, you know, we don't see any kind of, I wouldn't say, nuclear winter as you said.

I think we indicated in the past so we certainly think that our opportunity for margin rate is certainly can.

Can go north of what we just posted.

Okay.

Okay. That's really helpful guys again, congrats on a corner and it's a really great.

Sequential quarter, so that's really nice to see.

Great. Thanks, David I appreciate that.

That concludes the Q&A session, Dr. John Newman for closing remarks.

John Nierman: I think you see all the signs that the advertising industry is rebounding, et cetera. Quite simply, it's pacing as expected for us. Okay, that's fair. And then, have you, I guess, seen anything in terms of politics at this point? Or is it just too early in the markets where you're concentrated to have seen it? Just starting to see it.

I just wanted to thank everyone for joining the call today and we look forward to speaking to you with an update again next quarter.

Thank you very much goodbye.

This concludes today's call you may now disconnect.

Okay.

[music].

Yes.

John Nierman: So, you know, we think that it definitely could be an interesting election, right? So we're just kind of starting to see some of that trickle in, which is good. But again, the second half of the year, when you start to have conventions and everything like that, I think is when you get a majority of it. But it's certainly starting to come in.

Yeah.

[music].

David Marsh: Okay. And then, uh, just kind of lastly for me, I want to talk about gross margin. I actually thought that the gross margin posted here in the first quarter was really strong given your mix of players that it's now, you know, more on the partner side versus the kind of you know QAU side, and I just wanted to kind of get some color on that from you guys on how this gross margin can trend if, you know, if partner is a bit heavier component to the mix as we go forward. Now, David, you're absolutely right.

Yeah.

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Neil Watanabe: You know, we ended Q4 with a 27.5% gross margin on a $5 million revenue number. So I think improving 700 basis points quarter over quarter kind of reflects that as we can get the revenue to certain levels, we can certainly leverage that appropriately and going forward, you know, between the mix and some of the opportunities we're doing to rationalize relationships and negotiate better margins, those types of efforts, and looking at, you know, we can certainly go north of, you know, obviously the 35% that we came to in Q1. So, it's a bit revenue-dependent, but I think it proves that, you know, as we get to a certain level of revenue, we can leverage the cost of goods very well, and they become portions of it fixed, and so we get the benefit of the margin rate expansion. So, I think we indicated in the past that we certainly think that, you know, our opportunity for margin rate is certainly, you know, can go north of what we just posted. Okay, that's really helpful, guys.

Yeah.

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David Marsh: Again, congratulations on the quarter. It's a really great sequential quarter, so that's really nice. Great. Thanks, David. Appreciate it.

John Nierman: That concludes the Q&A session. Back to John Nierman for closing remarks. I just want to thank everyone for joining the call today, and we look forward to speaking to you with an update again next quarter. Thank you very much. Goodbye.

Operator: This concludes today's call. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? www.loopmedia.com, Good afternoon, everyone. And thank you for participating in today's conference call to discuss Loop Media's financial results for the 2024 fiscal first quarter ended December 31, 2023. Joining us today are Loop's CEO, Mr. John Nierman, and the company CFO, Mr. Neil Watanabe. By now, everyone should have access to the 2024 fiscal first quarter earnings press release. The company issued earlier today at approximately 4 o 5 p.m. The release is available in the Investor Relations section of Loop's website at www.loop.tv. In addition, this call will be available for webcast replay on the company's website.

Okay.

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Operator: And. To ask a question, please select Ask a Question in the top right corner of the screen. Enter your question and click submit.

Okay.

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Operator: Certain questions 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 risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statement, which is 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 statement. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA, as supplemental measures of the performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with FCC rules.

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Good afternoon, everyone and thank you for participating in today's conference call to discuss loop Media's financial results for the 2020 for fiscal first quarter ended December 31 2023.

John Nierman: After three quarters of just over $5 million in revenue, we once again exceeded the $10 million quarterly revenue mark. Unlike Q1 FY23, our Q1 FY24 revenue contained little to no political advertising spend and was purely organic revenue off our core business. Quarter over quarter growth increased 79% from 5.7 million in Q4 of FY23 to 10.2 million in Q1 of FY24. In addition to the strong revenue growth, we saw the impact of our focus on lowering operating costs and network efficiency, which resulted in a significantly reduced quarterly adjusted EBITDA loss by 69%, or $1.5 million as compared to $4.8 million in Q4 of FY23. As of December 31, 23, we had approximately 77,000 active loop players and partner screens across the loop platform, which includes 33,783 quarterly active loop players, or QAUs, across our ONOA platform, an increase of 26%, or 6,880 QAUs, over the 26,903 QAUs for Q1 FY20 FY23, and a slight decrease of 3,238 over the 37,021 QAUs for Q4 FY23, and approximately 43,000 partner screens across our partner platforms, an increase of 153%, or 26,000 over the 17,000 partner screens at the end of Q1 FY23, and 1,000 partner screens over the 42,000 partner screens announced for Q4 FY23.

Joining us today are CEO, Mr. John <unk> Chairman.

And the company see Alamo, Mr. Neil Watanabe.

By now everyone should have access to the 2020 for fiscal first quarter earnings press release.

The company issued earlier today at approximately four <unk> PM Eastern time.

The release is available in the Investor Relations section of loops website at Ww W. Dot loop Dot TB. In addition, this call will be available for webcast replay on the company's website.

Following management remarks, we'll open the call for your questions. Please note there are two ways to ask questions during the Q&A.

One for those on the phone.

Please press star one on your telephone keypad to raise your hand.

Ann.

Two for those on the webcast. Please select ask a question in the top right corner of the screen.

And to your question and click submit.

Certain questions 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.

Could cause actual results to differ materially from those reflected in these forward looking statements.

Forward looking statements are also subject to risks and uncertainties.

That are described from time to time in the company's filings with the S. E C.

Do not place undue reliance on any forward looking statements, which are being made only as of the date of this call.

As required by law the company undertakes no obligation to revise or publicly release the rig.

Salt 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.

Terrible GAAP measures in accordance with SEC rules.

You'll find reconciliation charts and other important information in the earnings press release and form 8-K furnished to the FCC.

I would now like to turn the call over to loop CEO, Mr. John near Man.

No political advertising spend and was purely organic revenue off our core business.

Bolted in a significantly reduced quarterly adjusted EBITDA loss by 69% or $1 5 million as compared to $4 8 million in Q4 23.

As of December 30, 123, we had approximately 77000 actively players and partner screens across the loop platform, which includes 33783 quarterly active loop players or QA use across our own our platform an increase of 26%.

6880, QA use over the 26903 <unk>.

Q1, FY 'twenty, three and a slight decrease of 3238 over the 37021 <unk> for Q4, FY 'twenty, three and approximately 43000 partner screens across our partner platforms and increase of 153%.

Our 26000 over the 17000 partners screens at the end of Q1, FY 'twenty, three and 1000 partners screens over the 42000 partners screens announced for Q4 FY 'twenty period.

Our <unk> footprint for the first quarter of fiscal 'twenty four was reduced as a result of natural attrition and blue players that were not immediately replaced as we 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.

Acacia venues, including convenience stores restaurants bars, and other retail establishments.

We believe this targeted distribution plan will allow us to grow our active Lou player numbers quarter on quarter and provide a more robust distribution platform for our advertising partners over time.

In addition, a number of our loop players experienced downtime in late September early October 23, as a result of an operating program update and technical issues related to outfit a Wi Fi in those venues not all of those new players return to active performance in the first quarter of fiscal 'twenty four.

Provide the best return on our investment and potential for revenue growth.

Neil Watanabe: The decrease was primarily driven by revenue mix, as the year-ago period included a smaller portion of our partner platform business, which carries lower gross margin but higher operating margin. Total sales, general, and administrative expenses, excluding stock-based compensation, depreciation, and amortization, impairment of goodwill, and intangible assets and restructuring costs, for the 2024 fiscal first quarter were $6.2 million compared to $8.0 million for the same period in The improvement was primarily due to a reduction in digital marketing spend, resulting in lower expenditures and decreased payroll and other compensation-related expenses, partially offset by increased capital raise costs and bad debt reserve from growth in our receivable base on revenue increases. We continue to focus on gaining efficiencies in SG&A, which we expect to be reflected throughout 2020.

Moreover, we will look to explore strategic M&A opportunities that can allow us to leverage our platforms and networks further to integrate our company vertically.

Plan to keep a consistent high on it with that I will turn the call over to Neal to take you through our financial results Neil.

And the 2020 for fiscal first quarter revenue was $10 2 million compared to $14 8 million for the same period in fiscal 2023.

In the 2020 for fiscal first quarter gross profit was $3 6 million compared to $5 7 million for the same period in fiscal 2023.

And the 2020 for fiscal first quarter gross margin rate was 35, 6% compared to 38, 4% for the same period in fiscal 2023. The decrease was primarily driven by revenue mix as the year ago period included a smaller portion of our partner platform business, which carries lower gross margin, but <unk>.

<unk> operating margin.

Neil Watanabe: Turning to our balance sheet, cash and cash equivalents were 3.8 million on December 31, 2023, compared to 3.1 million on September 30, 2023. As of December 31, 2023, we had a total net debt of 7.1 million, compared to 7.5 million as of September 30, 2023. Overall, we continue to focus on increasing our revenues, gross margins, and leveraging our expenses in line with revenues as we plan to continue to reduce the adjusted EBITDA loss as we progress through the year. I'd like to thank everyone for listening today.

We continue to focus on gaining efficiencies in SG&A, which we expect to be reflected throughout 2024.

Operator: We look forward to providing further updates on our next conference call. This concludes our prepared remarks; we will now open it up for questions. Operator, back to you.

Adjusted EBITDA in the 2020 for fiscal first quarter was a loss of $1 5 million compared to a loss of $1 6 million for the same period in fiscal 2023, a slight improvement.

Operator: Now we'll open the call to your questions. As indicated at the beginning of the call, there are two ways to ask questions. One, for those on the phone, please press star one on your telephone keypad to raise your hand. To withdraw your question, simply press Star 1 again.

Operator: 2. For those on the webcast, please select Ask a Question in the top right-hand corner of the screen, enter your question, and click submit. Up to three questions from those on the phone will be answered first, and if time permits, a couple of questions from the webcast will be addressed. Our first question comes from the line of Eric Wold with Brookline. Please go ahead. Thanks. Good afternoon, everybody.

Overall, we continue to focus on increasing our revenues gross margins and leveraging our expenses in line with revenues as we plan to continue to reduce the adjusted EBITDA loss as we progressed through the year I would like to thank everyone for listening today, we look forward to providing further updates on our next conference call.

Eric Wold: I appreciate you taking my questions. So I've got two kinds of questions. The first one has three parts to it, but I'll try to make it quick.

This concludes our prepared remarks, we will now open it up for questions.

Eric Wold: And the first question is really around the... Yeah, the reduction in the Loop player in the quarter. I know you said that the net reduction was about $3,200 sequentially. Can you give us a little more color behind that in terms of how many you added versus how many you, I guess, removed or did not replace? And then the second part is, is this kind of a one-quarter flush in a December quarter? Or should we expect... natural attrition like that throughout this year?

Operator back to you.

Okay.

Star one again.

For those on the webcast. Please select ask a question in the top right corner of the screen and to your question and click submit.

Up to three questions from those on the phone will be answered first and as time permits a couple of questions from the webcast will be addressed.

Eric Wold: And can you actually have a net gain again in placement in the second quarter? And then the last part is, just more thoughts around why that reduction was made. I knew I wanted to get to more desirable venues and markets.

Our first question comes from the line of Eric Wold with B Riley. Please go ahead.

Thanks.

Good afternoon everybody.

Eric Wold: But are these locations that we're just, not profitable? If you kind of think about all the efforts and sales around them, were they not worth having in place anymore? Or is it more as you can take that equipment out and kind of, you know, more efficiently put it somewhere else, you know, using the same capital. Thanks, Eric.

I appreciate taking my questions.

Two questions. The first one has three parts to it but I'm sorry, if I'm trying to I'm trying to make it quick.

The first question is really around the.

The reduction in <unk>.

The loop players.

In the quarter.

I know you said that you are the net the net reduction of about 3200 sequentially.

Can you give us a little more color behind that in terms of how would you added versus how many you.

I guess removed or do not replace and then.

Part is is this kind of a one quarter flush.

John Nierman: I'll jump in on that. So we have two years of data behind us now. I think that's the most important thing. And as we look to make sure that our bottom line is as tight as it can be, we have to make sure that we're getting the best return on investment. So what we understand now is what type of venues perform best. I'm clearly not going to get into that just obviously for competitive reasons primarily, but we do know, in terms of our performance, the types that we're going after. We mentioned some of those, but there are clearly others.

Remember quarter or should we expect kind.

Natural attrition like that throughout this year and can you actually have a net gain again.

In placement in the second quarter and then the last part is just more thoughts around why that reduction was made.

I didn't want to get into more desirable venues.

And markets.

But were these locations that were just not profitable if you're kind of thinking about all the efforts in sales around them.

Not worth having in place anymore or is it more as you can.

Take those taking equipment out and kind of more efficiently put it somewhere else.

Using the same capital.

Thanks, Eric I'll jump in on that so.

John Nierman: And at the other end of that, we know the ones that don't perform well. So there are a couple things that have happened. One, just like you have different technology with your phone.

Two years of data behind Us now and I think thats the most important thing.

John Nierman: You know, we're kind of in our, whether it's the third or fourth generation of a loop player, you have different iterations; each require updates. If certain venues aren't strong enough to handle those updates, and they don't push an update through, and they're not generating enough airtime, it's really not worth our while to maintain them. So that's kind of where we have evolved in terms of that, what we'll call natural attrition. So we learned better at targeting, but we also learned if there was a particular issue with our Wi-Fi, for example, we wouldn't put the investment into replacing that player because we're not going to get the return that we want. So, the second part of your question: can a net occur?

Venues arent strong enough to handle those updates and they don't push an update through and theyre not generating enough airtime, it's really not worth our while to maintain those so thats kind of where we have evolved in terms of that what we'll call. The natural attrition. So we learned better on targeting but we also learned if there was a particular issue with their Wi Fi.

For example, we're not going to put the investment into replacing that player because we're not going to get the return that we want so the second part of your question can a net occur of course, we anticipate that we believe it will we wanted to we know well.

John Nierman: Of course, we anticipate that, we believe it will, we want it to, we know it will. But it's going to be a smarter net for us going forward. So, I think there was a little bit of, you know, just time kind of coming our way to understand where these players are, how they're performing, the different geographies. When Bob's dealing with advertisers, he certainly knows the market, what they're going after, and certain types of venues that they want as well.

And but it's going to be a smarter net for us going forward. So I think there was a little bit here.

Just time kind of coming our way to understand where these players are how they are performing the different geographies when bob's dealing with advertisers. He certainly knows the markets, what they're going after and certain types of venues that they want as well. So just with all that information. We thought it was the best time at this stage really just to kind of.

John Nierman: So, just with all that information, we thought it was the best time at this stage really just to kind of start pairing those out and doubling down on the venues that we believe are going to be fine. So, even though we took a little hit there, we're very comfortable with where we're going to be in 2024 with the growth of the players. Perfect, and then I'll slide to... And just that, you know, John mentioned, you know, more targeting of venues. But as we've learned and analyzed the productivity of the player, we found that all the players don't perform the same geographically. And so part of the original distribution was just put about, you know, wherever we could.

Perfect. That's helpful and then I also like to add.

Just that.

John mentioned.

We're targeting a venue but as.

John Nierman: And then as we started monitoring, measuring profitability, we found that advertisers really are looking for density in certain key DMA markets. And so we have been focusing more on those, you know, from a growth standpoint, which overall will tend to improve our profitability. And, you know, our efforts are being more Cypher versus shotgun on, you know, geographic locations for that region. Okay, that's helpful.

Markets and so we have been focusing more on those.

From a growth standpoint.

Overall.

We will tend to improve our profitability.

And our efforts are being more cyber versus shotgun approach.

Geographic locations for that region.

Okay. That's helpful and I guess my last question.

Maybe a shorter one.

You noted that the quarter itself did not have or had minimal.

Political ad spend benefits in it.

I know youre expecting a stronger recovery in the back half of the fiscal year. After the kind of the Q2 typical debt or kind of a slower period.

What are you expecting for political ads and then I guess, how much AD spend could you have as a percent maybe or however, you want to phrase it.

The back half of the year and.

Do all of your venues.

To opt in if they want to have political ad spend versus not.

Kind of view allow them to show them or not might want to show them.

John Nierman: Yes. So for that, we just want to make sure, and then that's part of the AI that we use to make sure the venues are, and it's not any different than content that we show, you know, a family-type venue, et cetera. So we're very careful in terms of what ads and forcing things on people, obviously. So they always have that function not to do that.

Yes, so for that we just want to make sure. That's part of the AI that we use to make sure the venues arent and it's not any different in content that we show.

Our family type venue et cetera. So we're very careful with in terms of what adds enforcing things on people obviously so.

They always have that function not to do that but just to your first part of your question as the previous quarter of last year. When we had the 48.

John Nierman: But just to the first part of your question, the previous quarter of last year, when we had 14.8, a large portion of that was political advertising. I think the point we were trying to make was that 10.2 this time would have been more just based on organic growth alone than it was that quarter. So, which we think is a very encouraging sign for the core business. And when you start to then layer on what we believe to be the future of advertising, we think that's good. Helpful. Thank you, guys.

A large portion of that was political advertising I think the point, we were trying to make was the $10. Two this time.

Would've been more just on the organic growth alone and that was that quarter. So which we think is a very encouraging sign for the core business. So when you start to then later on what we believe to be the future advertising, we think that.

We think thats good.

Okay.

Helpful. Thank you guys appreciate it.

Darren Aftahi: Appreciate it. Our next question comes from a line from Darren Aftahi with Roth MKM. Please go ahead.

Sure.

Our next question comes from the line of Darren <unk> with Roth MTM. Please go ahead.

Darren Aftahi: Hey guys, thanks for taking my questions. Nice job on the progress. Jon, so I just wanted to make sure I heard you correctly on your last comment that responded to Eric's question. So if you were to strip out politics a year ago, you actually grew year over year. Is that correct? Yeah, for the core business. Okay.

Hey, guys. Thanks for taking my questions.

Job on the progress John So I just wanted to make sure I heard you correctly on your last comment that responding to Eric's question. So if you were to strip out political a year ago, you actually grew year over year is that correct.

Yes from the core business, yes.

Darren Aftahi: And then maybe another question on the attrition of the players. So, there's always the attrition of a unit, and then there's revenue attrition. So, it sounds like a lot of the players didn't get upgrade cycles with technology, etc., or maybe weren't efficient in yielding any kind of revenue. So, I guess my question is, is there a way you can quantify what kind of revenue impact attrition there was with those 3,200 players? Um, just based on those 3,000, it's, I think, a little difficult, Darren, to say exactly what that would be, but we know it's not, not meaningful in the sense that we still maintain a majority of the players that are generating revenue. So it's not like they put it this way, it's not like those that we lost were generating a ton of revenue and then they're gone. So if that's kind of your question, it's basically very, very minimal.

Got it okay.

That's helpful. And then maybe another question on the attrition of the player. So theres always the attrition of a unit and then the revenue.

Revenue attrition so it sounds like a lot of the players didn't get upgrade cycles with technology et cetera, maybe you werent.

Yielding any kind of revenue. So I guess my question is there a way to quantify what kind of revenue impact attrition. There was with this 3200 players.

Okay.

Just based on those 3000.

A little difficult Darren to say exactly what that would be but we know.

Not.

Not not meaningful in the sense that we still maintain a majority of the players that are generating the revenue.

If these it's not like they put it this way it's not like those that we lost were generating a ton of revenue and then Theyre gone.

Thats kind of your question.

Basically it's very very minimal.

John Nierman: So those that are coming off are off for a reason primarily, and they're either not using the player like they should, or they're not in the ideal location or demographic. So for us, it's not a bad thing. It's really just kind of part of the natural growth process and evolution.

Those that were coming off our offshore a reason primarily and they are either not using the player like they should or theyre not the ideal location.

Or demographics, so for us it's not a bad thing, it's really just kind of part of the natural growth process and evolution.

Darren Aftahi: Great. On your gross margin, it looks like that has improved. I'm more curious about two things as it relates to that. One, with bringing on a large number of partners, you did the last quarter; this is sort of the first full quarter of having that partner on and whatever 42,000, 43,000 screens. One would assume based on the initial deal you did with your first partner, gross margins maybe would have been lower. So I guess my question is, Does your second partner have a different gross margin profile? then your first question, and did that have an over-indexed impact on gross profit in the quarter? As we continue to grow distribution, our leverage grows, and the opportunity to do better deals certainly arises. So any historic deal that we might have done a year and a half ago, a deal that we would do today wouldn't look the same.

Great.

On your gross margin it looks like that improved more curious on two things as it relates to that one with bringing on as large of a partners. You did the last quarter. This is sort of the first full quarter of having that partner on whatever $42 40000 screens, one would assume based on the.

Initial deal you did with your first partner gross margins, maybe would've been lower so I guess my question is.

Is your second partner, having a different gross margin profile.

Then your first and did that have over index impact on gross profit in the quarter.

As we continue to grow distribution, our leverage grows and the opportunity to do better deals certainly happens so any historic deal or we might have done a year and a half ago any deal that we would do today wouldn't look the same.

John Nierman: So I think, yeah, we see a better impact on the bottom line, a better share for us. Even though we talked about expanding on the partner platform, it still carries a lower margin but less operating expense than our loop players. So as we add that on and it paces higher and a quarter higher than what our loop players are from a sales standpoint, we're always going to have some of that rate percentage difference that will bring the rate down. But again, the profitability, as we've talked about, is very similar to the partner platform's loop players. But mix that we talked about in the discussion or in the press releases, part of the reason why that rate can sometimes be compressed a bit.

Yes, we see a better impact on the bottom line a better share for us.

Good morning Darren.

Even though the.

We talked about expansion.

The expansion on the part of the platform it still carries.

A lower margin, but less operating expense than our loop players so as we add that on it.

<unk> higher in the quarter than what our loop players is from a sales standpoint were always going to have some of that rate percentage difference that will bring the rate down.

But again the profitability as we've talked about is very similar to the partner platforms only players, but mix that we talked about on the discussion around the press releases.

Part of the reason.

For where that rate.

Sometimes the compressed a bit.

John Nierman: But it is a better rev share back in the loop, Darren, which I think is the key thing. Yeah, that's helpful. And just if I could sleep one more in, um.., local. I know you guys launched that. I think it was sort of piloted in the quarter we were in. I don't think any local revenue contributed a quarter. Maybe correct me if I'm wrong, but I'm just kind of curious about your aspirations.

But it is a better Rev share back to loop, Darrin, which I think is the key thing.

Got it that's helpful. If I could squeeze one more.

Local I know you guys launched.

It was sort of piloted in the quarter, we were in I don't think any.

Local revenue contributor in the quarter, maybe correct me, if I'm wrong, but I'm just kind of curious about your aspiration.

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