Troika Media Group, Inc. (TRKA) Q1 2022 Earnings Conference Call November 15, 2021 10:00 AM ET
Company Participants
Kevin McGrath - Investor Relations, TraDigital Marketing Group
Robert Machinist - Chairman & Chief Executive Officer
Conference Call Participants
Josh Shipley - Revere Securities
John McNamara - Emerald Partners
Dmitry Shapiro - Target Capital
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.
Operator
00:03 Good morning. My name is Paul, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Q1 Fiscal Year Twenty Twenty (One) [ph] Troika Media Group Financial Results Conference Call. At this time, all participants are in a listen only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to turn to introduce your host, Mr. Kevin McGrath.
Kevin McGrath
00:39 Good morning, thank you Paul. Good morning, everyone. Welcome to our first quarter fiscal year twenty twenty two earnings conference call. Before we begin, please take a moment to read the forward looking statements in our earnings press release issued this morning. During today's call, we make certain predictive statements that affect our current views about future performance and results. We basically these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recent Form ten Q and other filings with the SEC lists some of these important risk factors, it could cause actual results to differ from our predictions.
1:16 Today's conference call remarks will be based on some Non-GAAP financial results. We believe that Non-GAAP financial measures provide investors with useful supplemental information about financial performance of our business enabled comparison to financial results between periods where certain items may vary independent in a business performance and allow for greater transparency with respect to key metrics used by management and operating our business. Please refer to our press release for a reconciliation between GAAP and Non-GAAP results.
1:45 And with that, I will turn the call over now to Bob Machinist, our Chairman and Chief Executive Officer.
Robert Machinist
01:54 Thank you, Kevin. Good morning, everyone, and thanks to all of you for joining us to discuss a very strong first quarter in our fiscal year twenty twenty two. That we believe goes beyond a post COVID recovery. In the first quarter, we are reporting a revenue increase of one hundred and two percent to eight point three million dollars compared to the prior year quarter. This increase in revenues significantly exceeded our previously stated forecast of a sixty percent increase. We believe this is a remarkable achievement and a testament to our strong track record of retaining expanding and winning new clients. Growth was generated across our operating segments and driven by broad based contributions across our client sectors. We see clients making significant investments in marketing, particularly in digital media and experiential campaigns, areas that are growing and once the week selling. Likewise, we are making focused investments in the future of our business and plans to scale our operations efficiently in order to drive towards profitability.
03:01 On a very strong top line growth, together with our improved operating leverage is positively impacting our past profitability. Adjusted EBITDA improved seventy eight percent to a loss of approximately six hundred thousand dollars in Q1 twenty twenty two compared to the prior year quarter loss of more than two point seven million dollars as we continue to grow our top line while scaling our cost structure efficiently. We have a solid operating leverage on our expenses as we continue to see the structural benefits of the strategic cost actions taken last year. Net income was negative two point one million dollars in Q1 twenty twenty two, a forty five percent improvement compared to the prior year loss of three point nine million dollars.
3:48 Building on that momentum we saw in our business developing at the end of fiscal year twenty twenty one. We are also great start to fiscal twenty twenty two. I'd like to recognize and thank our employees across all of TMG, who have continued to show a high level of dedication and support to our clients and to one another. They are the principal reason we can report such strong results this quarter. Our people are delivering insight and execution required for the complex integration of creativity, technology and data. As we scale brands across industry sectors need to order to accelerate their business transformation journeys. As we move through October and now into November. It's also been rewarding to begin welcoming our people back to office settings and to see many of our teams together again in the places where creativity collaboration and culture are ultimately rooted and regularly renewed.
04:48 In some, our quarter speaks to a rapidly improving and strong financial performance across the key metrics of growth. Adjusted EBITDA and a significantly reduced net loss. Now turning to some of the highlights across our client portfolio, a key area that has shown renewed strengths that has been in our live events for experiential business. With the reopening of economies both existing clients and new clients have engaged us for important branding projects. Clients like Victoria's secret, F45 Fitness and E-gaming company VSPN have all launched the major experiential campaigns and we see money more in the pipeline. Our renewed business activity goes well beyond the resurgence of live events as we see significant activity across multiple sectors, including sports and entertainment, e-sports, and global online gaming operations to name by a few.
05:50 Looking ahead, we think there are some very attractive growth opportunities for TMG and the healthcare vertical, one that we already have a presence in, but believe there are many untapped opportunities. We believe the business and the strategic steps we've taken over the last few years have positioned TMG as a high value business partner to our clients. We are able to combine the power of creativity and narrative storytelling. With the benefits of data and technology and alerts delivered growth for brands across a broad range of sectors. These strategic steps are evident in our strong results and position us well going forward.
6:29 By helping clients to better understand audiences and to engage with them with greater precision and accountability. We can help brands succeed in the digital economy. We continue to carefully evaluate how to accelerate our growth strategy through a targeted and scalable M&A approach to build on existing capabilities in growth areas such as experience, commerce and technology.
06:54 We believe there are significant new growth opportunities for TMG as clients are looking for innovative and integrated solutions that harness these new technologies to grow their businesses. We will continue to focus on delivering strong results for our clients and innovating to expand the capabilities of our platform and better serve our global brands. We begin the second quarter, well positioned and the strong operating momentum and the tone of the business remains solid as we head into the fiscal year. All in, we are in a positive position from a net new business standpoint and our new business pipeline continues to be active. As such, we see fiscal year twenty twenty two as a year of strong value creation for all our shareholders. We look forward to continuing to update all of you in our progress.
07:44 This concludes my prepared remarks this morning. So now let's open the call for your questions.
Question-and-Answer Session
Operator
07:52 Certainly. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] The first question is coming from Jeff [Indiscernible] Partners. Jeff, your line is live.
Unidentified Analyst
08:21 Great. Great quarter Bob. Congratulations. I have just two quick questions. First, is this a recovery from the effect of COVID with clients we start in campaigns or is this more to the story? Is that more than the story?
Robert Machinist
8:38 Good morning, Jeff. Thanks a lot for your question. And it really, I think sets up the story of where our company has headed over the next year. We had – we aim as you well know, we were substantially penalized by COVID. So, a lot of our pickup is the recovery of previously thought about events and or programs. That gets turned on in the last five to six months. But interestingly, a significant portion of our current book of business as it's growing is coming from new business that was created during the COVID period. So, we are comfortable that we are not only going to get a balance of recovery from our historic clients, but we have the significant new clients particularly in digital gaming and the like that we saw it's significant campaigns for that are going to be continuing well into fiscal twenty two.
Unidentified Analyst
09:41 Fantastic. A second quick question again, can you give me some color on the client mix and what the pipeline looks like for the remaining twenty twenty two year?
Robert Machinist
9:52 The only I can really comment on is that the pipeline – we expect the pipeline to continue much as it has in this first quarter. And we are having a strong second quarter and we believe the pipeline is going to continue well into the winter. But most importantly, there are a number of recurring programs for some of our key clients who have decided to continue either rebrand or to take advantage of some of the digital technologies that we're implementing to advantage their programs during the next year or so. So it's a broad range of business, but I think we can – we expect this business to continue through fiscal twenty twenty two. We expect to be able to recover to pre-COVID – pre-pandemic levels and the advantage we're experiencing now is we were able to reposition our operating costs in the business during COVID, reducing force as well as getting better control of our operating expenses and we think that that'll will to a much stronger bottom line.
Unidentified Analyst
11:06 Great. Great answers. All right, great. Well quarter again, Bob, congratulations. Keep up the good work.
Robert Machinist
11:12 Thank you. Thank you very much for your support, and we look forward to talking to you as these quarters unfold.
Unidentified Analyst
11:21 Thank you.
Operator
11:23 Thank you. And the next question is coming from Josh Shipley from Revere Securities. Josh, your line is live.
Josh Shipley
11:31 Hi, good morning guys. Just have a question on if you guys are going to be recording net profit in twenty twenty two?
Robert Machinist
11:45 Another great question, we believe that our trend line leads towards recording profit in fiscal twenty twenty two. I can't tell you how much, but we are certainly operating in that direction. You can see from our numbers and from our material reduction on EBITDA basis in terms of our losses.
Josh Shipley
12:09 That's great. And just can you follow-up and touch point on any potential M&A or merger activity?
Robert Machinist
12:17 As you know when we did our IPO, which was effective I think April nineteen or April twenty of this year. A significant rationale for our going public was to make sure that we had a mix of consideration available to maximize our M&A activities. The first thing we did was the acquisition of redeem, which was in the crypto NFT space, which we have added to our family of technology that we're delivering to our clients, we then brought in a very strong digital technology team who was now operating Troika labs and we would expect some significant and additional material transactions to occur during the fiscal year period.
Josh Shipley
13:07 Great, guys. Really appreciate it.
Robert Machinist
13:10 Thank you.
Operator
13:13 Thank you. And the next question is coming from John McNamara from Emerald Partners. John, your line is live.
John McNamara
13:21 Good morning. Thanks for taking the question, nice quarter. Can you tell us a little bit about what you're seeing on the NFT side of the business with the acquisition of the team and specifically are you having success engaging with your global brands on developing opportunities for that side of the business?
Robert Machinist
13:44 Thanks again for your question and really when you're developing a business that didn't really exist, a year ago. You get some very interesting experiences. The answer, a long winded answer is, yes. It, we are doing a broad range of NFT proposed programs or a number of our major clients. Clearly in the sports and entertainment space. NFTs can play a very significant role. We expect to continue to be able to have a series of announcements over the next three to six months that I think will be appropriate for shareholders, understanding of how we're able to take advantage and use this technology to enhance our clients to reach to their constituencies. So I'm excited about it and we started off with an exciting program for [Indiscernible] foods and the late spring couple of months after we completed our IPO, and we will continue to have significant NFT undertakings for a broad range of client.
John McNamara
14:54 Okay. Thanks next question. Thanks to answering that. I'll get back in queue.
Robert Machinist
14:59 Thanks, John.
Operator
15:02 Thank you. [Operator Instructions] And the next question is coming from Dmitry Shapiro from Target Capital. Dmitry, your line is live.
Dmitry Shapiro
15:20 Yes. Hi. Congratulations on a great quarter. I just wanted to follow-up on Jeff's question. Do you expect the strong growth to continue into the future quarters as well? And if so what specific initiatives do you think will drive this growth?
Robert Machinist
15:40 Thank you, Dmitry. I think that as I answered when I adjust – address Jeff's initial questions in this. We not only have our traditional clients with whom we've had as long as fifteen year relationships. When they turned back on their programs, which happened starting in late June through the end of the summer into this fall now. There are multiple seven figure branding engagements that are taking place. Simultaneously, we have added substantially to our footprint both in the esports arena, as well as the digital gaming arena.
16:22 And we see no reason for abatement of growth in any of those sectors during this forthcoming time, I think, as you may have all seen for our client points that with whom we developed a very broad range campaign featuring the quarterback debris, points that was just selected as one of the two companies for New York State for digital gaming. So, we expect clients, like points back to really drive a significant amount of growth for us. Over the ensuing quarters and we see no reason to expect that growth to abate during this time.
Dmitry Shapiro
17:07 Got it. Thank you. And I also had kind of a broader question. What would you say you apart from your competition in the space?
Robert Machinist
17:20 We think that there is an opportunity and which we're starting to demonstrate now that strategic unified agency approach is as a boutique provider of these branding and digital technology solutions. Said there aren't that many firms structured quite the way we are and where we've have had a very broad base of long-term relationships, particularly in the sports and media space.
17:59 So, I think that big agencies can't be nearly as reflective both in terms of being responsive to client needs as well as our cost structure is far more attractive in terms of delivering high quality, particularly digital and technology based solutions. In a very competitive marketplace.
Dmitry Shapiro
18:27 Got it. Thank you so much. Congratulations on a great quarter again.
Robert Machinist
18:32 Thank you very much. And really appreciate you are being the supporting shareholder of our company.
Operator
18:39 Thank you. There were no other questions in queue at this time. I would now like to hand the call back to Bob Machinist for any closing remarks.
Robert Machinist
18:50 I want to thank you for your interest in Troika Media and for taking the time to participate in our call today. I look forward to reporting more and interesting results as well as keeping you as our shareholder base and our friend community up to date on what we consider – we believe will be our aggressive acquisition strategy that will help substantially our brand as we go forward in the marketplace this year. So, thank you, again, and look forward to reporting on next quarter.
Operator
19:26 Thank you, Ladies and gentlemen, This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.
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