Toronto, Ontario--(Newsfile Corp. - November 28, 2022) - YANGAROO Inc. (TSXV: YOO) (OTC Pink: YOOIF) ("Yangaroo", "Company"), a software leader in media asset workflow and distribution solutions, today announced its financial results for the third quarter ended September 30, 2022. The full text of the Financial Statements and Management Discussion & Analysis is available at www.yangaroo.com and at www.sedar.com. Please note that all currency in this press release is denominated in Canadian dollars.
Q3'2022 Management Commentary
Grant Schuetrumpf, CEO of Yangaroo, stated, "The third quarter of 2022 was a turn-around quarter for Yangaroo. We had a very successful 2021 with record annual revenue and the completion of an acquisition. Unfortunately, this was followed by a very tough first six months of 2022 wherein an industry wide advertising slump adversely impacted our advertising delivery volumes and subsequent sales. Fortunately, we witnessed the bottoming out of customer volumes in the third quarter of 2022 and, alongside the seasonal volume trends, what we see anecdotally are some early signs of market and volume recoveries. They include current customers now increasing their campaign releases across many industry sectors, new customer sign-ups, renewed interest from the market at recently sponsored industry conferences, and increased adoption of our new services. Our new services include our self-serve TV legal clearance platform, and our local and national TV analytics solution, with both solutions being complementary to our core service of TV and radio delivery. We also have an increase in our TV production and captioning teams that service both the advertising and long-form broadcast markets."
Mr. Schuetrumpf continued, "Our Awards and Music divisions continue to show resiliency against the current macroeconomic conditions and are tracking close to budget throughout 2022. Our continual Awards technology investment, where we are developing a brand new platform, is progressing and on track to be completed on time in the first half of 2023. This technology investment is critical to providing the necessary enhanced services and required efficiencies within the Awards business and to drive further opportunity to expand our stable of Awards Shows across the music and entertainment markets. Our music platform and services have also received technology enhancements to further improve and meet the needs of the major record labels, and independent music artists promoting their music-tracks and music-videos across the TV and radio broadcast industry's."
Mr. Schuetrumpf further added, "With the improvement of sales combined with significant cost controls implemented towards the end of the second quarter of 2022, we had our first positive earnings, from a normalized EBITDA perspective, in the third quarter of 2022."
Mr. Schuetrumpf further added, "Finally, regarding our technical covenant breach with our main lender we continue to work through amendments to the agreement. At this time, we have received another waiver for the technical covenant breach whist we continue to resolve the matter."
Dom Kizek, CFO of Yangaroo, added, "We had made significant progress with reducing our operating expenses in the second quarter of 2022 and we realized the full extent of these cost savings in the third quarter of 2022. Normalizing for non-recurring and non-cash expenses such as amortization, acquisition costs, and restructuring costs, our operating expenses totaled $1,731,861 or a decrease of $426,209 and 20% versus this time last year and a decrease of $230,021 and 12% from the second quarter of 2022."
Q3'2022 Financial Highlights
|BALANCE SHEET KPIs|
|Cash and cash equivalents||$ 349,744||$ 607,289||$ 783,159||$ 768,251|
|Working capital||$ (1,701,222)||$ (1,517,889)||$ (1,649,976)||$ 911,861|
|Liquidity||$ 639,320||$ 1,033,533||$ 1,862,483||$ 2,148,594|
|INCOME STATEMENT KPIs|
|Revenue||$ 1,733,140||$ 1,915,307||$ 1,989,042||$ 2,305,594|
|Operating expenses||$ 1,987,591||$ 2,259,186||$ 2,492,222||$ 2,611,535|
|Other expenses (income)||$ (109,995)||$ (2,133,145)||$ 94,406||$ 18,164|
|Income (loss) for the period||$ (144,456)||$ 1,789,266||$ (597,586)||$ (330,724)|
|EBITDA (loss)||$ 108,087||$ 2,047,149||$ (340,174)||$ (99,125)|
|EBITDA Margin %||6.24%||106.88%||-17.10%||-4.30%|
|Normalized EBITDA (loss)||$ 2,205||$ (42,766)||$ (259,849)||$ (164,899)|
|Normalized EBITDA Margin %||0.13%||-2.23%||-13.06%||-7.15%|
Revenue in Q3'2022 was $1,733,140 compared to $1,915,307 and $2,429,867 in the second quarter of 2022 and the third quarter of 2021, respectively.
Revenue decreased by $182,168 or 10% versus Q2'2022. This decrease in revenue was primarily due to lower Advertising division sales of $185,074 offset by an increase in Entertainment division (Music and Awards) sales of $2,907. The decrease in the Advertising division revenue is largely attributed to a decrease in our clients advertising and marketing budgets. The increase in Awards revenue is attributed to seasonality in our customer's award show schedules. Music promotion did not have any material change in revenue over the comparable periods.
Revenue decreased by $696,727 or 29% versus Q3'2021. The decrease in revenue is primarily attributed to lower Advertising division sales of $606,270 as well as decreased Entertainment division sales of $90,457. The primary factors affecting advertising sales in the current quarter were an expectation of a recession in the United States and Canada, which adversely impacts our customers' marketing and advertising budgets, inflationary environment adversely impacting consumer spending power, and the macro-environment and supply chain issues adversely impacting inventory in the automotive and other manufacturing industries.
Operating expenses in Q3'2022 were $1,987,591 compared to $2,259,186 and $2,405,178 in the second quarter of 2022 and the third quarter of 2021, respectively.
Operating expenses decreased by $271,595 or 12% versus Q2'2022. The decrease in operating expenses is primarily attributed to a reduction in headcount, and lower general and technology expenditures as we realize synergies from the DMS acquisition.
Operating expenses decreased by $417,587 or 17% versus Q3'2021. The decrease in operating expenses is primarily attributed to the reduction of headcount and other general and administrative expenditures as we aim to become cash-flow positive, EBITDA positive, and strengthen our balance sheet.
Normalized EBITDA in Q3'2022 was $2,205 in comparison to normalized EBITDA loss of $42,766 in the second quarter of 2022 and normalized EBITDA of $338,401 in the third quarter of 2021. Compared to the second quarter of 2022, we undertook a head count reduction program in response to the realization of efficiencies achieved by the DMS integration as well as other external market factors. The decrease in normalized EBITDA relative to the prior year quarter is primarily attributed to the lower sales in advertising and entertainment, along with higher salary adjustments, some additional but temporary consulting expenses, as well as higher general and administrative expenses, all attributed primarily from the acquisition of DMS and ongoing investment for necessary improvements to our technology platform.
In accordance with the terms of our loan facility, Yangaroo must maintain certain covenants and financial ratios that require non-IFRS financial measures, including Fixed Charge Coverage Ratio and Funded Debt to EBITDA. Yangaroo was not in compliance with these term facility covenants as of September 30, 2022.
Subsequent to quarter-end, we received a waiver of the breach of the financial covenants from our lender for the third quarter ended September 30, 2022. As a result of the breach of the term facility financial covenants we have reclassified the full amount of the term facility as a current liability as of September 30, 2022 and will continue to present the liability as current until we successfully amend the term loan, receive a waiver of the covenant breaches for a period of 12-months in advance, or re-attain compliance of the breached financial covenants. We are currently in discussions with the lender regarding revising certain terms and conditions of our current term facility in order to bring us into compliance with the agreement. It is our intention to provide a further update regarding these discussion as soon as practicable.
Yangaroo is a software leader in media asset workflow and distribution solutions for advertising, music, and awards industries. YANGAROO's patented Digital Media Distribution System is a leading secure business to business cloud-based solution that incorporates production services, traffic, clearance, delivery, analytics, and secure API integration for the industries various video and audio work-flow challenges.
YANGAROO has offices in Toronto, New York, and Los Angeles. YANGAROO trades on the TSX Venture Exchange (TSX-V) under the symbol YOO and in the U.S. under OTCBB: YOOIF.
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Cautionary Note Regarding Forward-looking Statements
This news release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "could", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will", "project", "should" or similar words, including negatives thereof, suggesting future outcomes.
Forward looking statements are subject to both known and unknown risks, uncertainties and other factors, many of which are beyond the control of YANGAROO, that may cause the actual results, level of activity, performance or achievements of YANGAROO to be materially different from those expressed or implied by such forward looking statements, including but not limited to: the use of proceeds of the offering, receipt of all necessary approvals of the offering, general business, economic, competitive, political and social uncertainties; negotiation uncertainties and other risks of the technology industry. Although YANGAROO has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended.
Forward-looking statements are not a guarantee of future performance and involve a number of risks and uncertainties, some of which are described herein. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause YANGAROO's actual performance and results to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Any forward-looking statements are made as of the date hereof and, except as required by law, neither YANGAROO assumes no obligation to publicly update or revise such statements to reflect new information, subsequent or otherwise.
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