YANGAROO INC. YANGAROO INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2023
(EXPRESSED IN UNITED STATED DOLLARS)
June 26, 2024
Fiscal 2023 Management's Discussion & Analysis
Introduction
Unless the context suggests otherwise, references to "the Company", "Yangaroo", or similar terms refer to YANGAROO Inc. This Management's Discussion and Analysis ("MD&A") is a discussion and review of operations, current financial position and outlook for Yangaroo and should be read in conjunction with the audited financial statements for the years ended December 31, 2023 and 2022 (the "Financial Statements"), which are prepared in accordance with IFRS Accounting Standards ("IFRS"). The information below is prepared in accordance with IFRS and is presented in United States dollars, unless otherwise noted.
Forward Looking Statements
The Company's reporting structure reflects how it manages its business and how it classifies its operations for planning and for measuring its performance. This MD&A contains assertions about the objective, strategies, financial conditions, outlook, revenue guidance, EBITDA guidance, and results of operations. These statements are considered "forward-looking" because they are based on current expectations of the Company's business, in those markets in which it operates, and on various estimates and assumptions.
These forward-looking statements describe the Company's expectations at June 26, 2024. The Company's actual results could be materially different from its expectations if known or unknown risks affect the business, or if the Company's estimates or assumptions turn out to be inaccurate. As a result, the Company cannot guarantee that any forward-looking statements will materialize. Forward-looking statements do not take into account the effects that transactions or non-recurring items, announced or occurring after the statements are made, may have on the business. The Company disclaims any intention or obligation to update any forward-looking statements, except as required by law, even if new information becomes available through future events or for any other reason. Risks that could cause the Company's actual results to differ materially from its current expectations are stated in the Risk Management section.
Use of Non-IFRS Financial Measures
The following non-IFRS definitions are used in this MD&A because management believes that they provide useful information regarding the Company's ongoing operations. Readers are cautioned that the definitions are not recognized measures under IFRS, do not have standardized meanings prescribed by IFRS, and should not be construed to be alternatives to revenues and net earnings determined in accordance with IFRS or as an indicator of performance, liquidity or cash flows. The Company's method of calculating these measures may differ from the methods used by other entities and accordingly, these measures may not be comparable to similarly titled measures used by other entities or in other jurisdictions.
EBITDA as defined by the Company means Earnings Before Interest and financing costs (net of interest income), Income Taxes, Depreciation and Amortization. EBITDA is derived from the statements of comprehensive income (loss) and can be computed as revenues less salaries and consulting expenses and property, technology, marketing, administration expenses and any non-recurring items.
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Management's Discussion & Analysis
December 31, 2023
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Normalized EBITDA as defined by the Company means EBTIDA adjusted for one-timenon-recurring items or non-cash item such as stock-based compensation expenses, foreign-exchange expenses, and gain on revaluation of contingent consideration.
EBITDA Margin and Normalized EBITDA Margin as defined by the Company means EBITDA and Normalized EBITDA, respectively, as a percentage of revenue.
Working capital as defined by the Company means current assets less current liabilities.
Liquidity as defined by the Company means cash plus available capacity in the Company's revolving credit facility.
The Company believes EBITDA, EBITDA margin, liquidity, and working capital, are useful measures because they provide information to both management and investors with respect to the operating and financial performance of the Company.
Description of Business
Yangaroo is a technology provider in the media and entertainment industry, offering a cloud-based software platform for the management and distribution of digital media content. Yangaroo's Digital Media Distribution System ("DMDS") platform is a patented cloud-based platform that provides customers with a centralised and fully integrated workflow directly connecting radio and television broadcasters, digital display networks, and video publishers for centralised digital asset management, delivery and promotion. DMDS is used across the advertising, music, and entertainment awards show markets.
YANGAROO Inc. is a publicly traded company incorporated on July 28, 1999 under the laws of Ontario as Musicrypt.com Inc. and changed to its present name on July 17, 2007. YANGAROO trades on the TSX Venture Exchange ("TSX-V") under the symbol YOO and in the U.S. under OTCPK: YOOIF.
The address of the Company's corporate office and principal place of business is 360 Dufferin Street, Suite 203, Toronto, Ontario, M6K 3G1.
Outlook and Business Update
In the fourth quarter of 2023, the Company made a strategic business acquisition by closing an acquisition transaction with Millenia3 Communications ("Millenia3") (see Section entitled "Corporate Activities" for additional information). This expansion enhances Yangaroo's advertising service capabilities with premium multi-year contracted clients and leverages Yangaroo's technology to streamline the Millenia3 service offering. Along with continuous improvements in operating income and cash flow generation compared to prior years, the Company is on a trajectory towards a notable turnaround from previous periods of losses. Sales volume and revenue also increased when adjusted for seasonality. The successful acquisition of
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Management's Discussion & Analysis
December 31, 2023
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Fiscal 2023 Management's Discussion & Analysis
Millenia3 provided a new growth engine for the Advertising Division, resulting in increased revenue compared to Q4 2022. Additionally, the Awards Division saw a 16% revenue increase compared to the same period in the prior year. The Music Division's revenue continued to decline year-over-year, primarily due to fewer audio and music video deliveries from our major record label clients. For the year ended December 31, 2023, operating income and Normalized EBITDA increased to $13,702 and $1,135,575, respectively, from an operating loss of $430,352 and Normalized EBITDA of $536,209 in 2022. This improvement was largely attributed to the lower headcount costs and reduced professional fees.
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Advertising Division
o Revenue of $2,128,768 in Q4'23 versus revenue of $2,097,353 in Q4'22
o Revenue of $5,676,770 for the year ended December 31, 2023 versus revenue of $5,302,034 in 2022 - Entertainment Group (Music & Awards Divisions)
o Revenue of $565,146 in Q4'23 versus revenue of $577,457 in Q4'22
o Revenue of $2,208,712 for the year ended December 31, 2023 versus revenue of $2,432,810 in 2022 - Normalized EBITDA
o Sixth consecutive quarter of positive Normalized EBITDA; the Company generated $211,061 of Normalized EBITDA in Q4'2023, $266,269 of Normalized EBITDA in Q3'2024, $541,952 of Normalized EBITDA in Q2'2023, $116,293 of Normalized EBITDA in Q1'2023, $833,974 of Normalized EBITDA in Q4'2022 and $1,927 of Normalized EBITDA in Q3'2022.
o Normalized EBITDA of $1,135,575 for the year ended December 31, 2023 versus revenue of $536,209 in 2022 - Finance
o Completed headcount optimization and cost control initiatives; o Completed term loan Amendment;
o Completed Millenia3 acquisition with minimum cash consideration.
The Advertising Division saw a modest increase in the volume of clients while actively seeking opportunities to expand the use of services by existing clients. Our ancillary production services, including short-form versioning for Direct Response customers and long-form digitization, continue to attract new project-based opportunities. Our closed captioning and analytics services complete a full-service offering, enabling us to integrate Millenia3 clients into our workflows and technology seamlessly. Innovation remains a priority, and with our development team, we continuously improve the DMDS platform to streamline business-to-business workflows and expand platform capabilities for enhanced self-service use. Specifically, we have focused on optimizing our TV Traffic Instruction workflow and enhancing our TV Legal Clearance offering, connecting the necessary broadcasters across North America. Our advertising platform is evolving into a comprehensive solution for managing advertising logistics across both linear and digital destinations.
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Management's Discussion & Analysis
December 31, 2023
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Fiscal 2023 Management's Discussion & Analysis
The Entertainment Group, comprising our Music and Awards divisions, maintained steady customer volumes and revenue throughout the year, experiencing no significant volatility. Both divisions are poised to benefit from our investments in technology, positioning them for future growth opportunities.
In 2023, the development team made significant progress on Yangaroo Awards v3, focusing on enhanced management features, an improved user interface, and a stronger security posture. With the adjudication components completed, the team shifted their focus to updating the submission and administration tools. Once completed, the new Awards Platform solution will be available to a wider market.
DMDS saw substantial enhancements across both the Analytics Dashboard and the Clearance platform. The integration of the Millennia3 team facilitated updates to our traffic management tools and provided more detailed flight data to destinations through our integration with WideOrbit. The Analytics Dashboard underwent major interface updates, improving visibility into traffic and occurrence data and incorporating additional advertising performance metrics from third-party providers. This is presented to the customers in a single live dashboard with downloadable reporting. Additionally, the TV Legal Clearance platform continued to evolve with enhancements to the submission and reporting components, streamlining the tracking of submissions and substantiations.
The fourth quarter of the year ended December 31, 2023 represents the sixth consecutive quarter of positive Normalized EBITDA generation, primarily driven by stabilizing our operations while maintaining exceptional service for our valued clients. This achievement reflects our strategic focus on operational efficiency and client satisfaction, ensuring consistent value and reliability. Our commitment to organic growth is unwavering as we explore various opportunities within the advertising and entertainment markets.
Our growth strategy is not limited to organic growth. We actively seek merger and acquisition opportunities that align with our vision and enhance our market position. The acquisition of Millenia3 significantly enhances Yangaroo's advertising division by expanding its capabilities and market reach. This strategic move allows Yangaroo to offer more comprehensive advertising solutions, strengthening its competitive position in the industry.
Compared to prior years, the advertising division managed modest advancements in business development and sales opportunities, demonstrating our ability to adapt in a dynamic market environment. We remain optimistic that some of the larger business development prospects will convert to sales, further strengthening our financial performance and market presence. Our comprehensive approach positions us well for continued success and expansion in both existing and new markets.
The Award Shows division remains stable year over year, with multi-year agreements and long-standing client relationships. We are preparing to advance our offering by deploying the Awards V3 platform, which allows us to offer a broader solution to cater to a larger Award Show market.
Our music division's music video distribution delivery decline has now stabilized, and we continue to build
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Management's Discussion & Analysis
December 31, 2023
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Fiscal 2023 Management's Discussion & Analysis
on expanding our music track promotional and distribution services to major music labels and independent music artists across Canada and the USA.
During the fourth quarter of 2023, the Company successfully amended its term loan facility ("Amendment"). The amendment extended the term loan maturity date to January 26, 2025 and the Company must maintain a minimum Fixed Charge Coverage Ratio and Interest-Bearing Debt to EBITDA ratio which was not required to be tested until March 31, 2024. The Company was required to maintain minimum EBITDA targets for the trailing twelve months periods in 2023.The Company continues strengthening its balance sheet by reducing debt and seeking additional sources of financing to support its business expansion.
Looking into 2024, Yangaroo remains focused on executing its growth strategy, expanding its customer base, and investing in its platform. Compared to previous years, the advertising and entertainment markets have stabilized and become more predictable. As a result, the Company is well-positioned to capitalize on organic and non-organic growth opportunities.
SELECTED ANNUAL FINANCIAL INFORMATION
The following table summarize the Company's overall performance for the year ended December 31, 2023, 2022 and 2021
2023 | 2022 | 2021 | |
Revenue | $7,885,482 | $7,734,844 | $7,727,467 |
Income/(Loss) from operations | $13,702 | ($430,352) | $117,931 |
Net income/(loss) and comprehensive | ($4,136,725) | $1,570,289 | ($53,927) |
income/(loss) for the year | |||
Normalized EBITDA* | $1,135,575 | $536,209 | $838,264 |
Basic and diluted loss per share | ($0.07) | $0.03 | ($0.00) |
Financial position | |||
Cash | $150,928 | $296,748 | $768,251 |
Total assets | $5,089,901 | $9,138,288 | $8,954,953 |
Total liabilities | $4,595,235 | $4,506,897 | $5,987,750 |
Total shareholder's equity | $494,666 | $4,631,391 | $2,967,203 |
Common shares outstanding | 62,437,140 | 62,437,140 | 60,697,140 |
- A non-IFRS measure. See "Non-IFRS financial measures" for definitions and reconciliation non-IFRS measures to the relevant IFRS measures
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Management's Discussion & Analysis
December 31, 2023
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Results of Operations for the Quarter and Year Ended December 31, 2023 and 2022
Quarter vs Quarter | Year vs Year | |||
Three Months Ended | Twelve Months Ended | |||
Dec | Dec | Dec | Dec | |
2023 | 2022 | 2023 | 2022 | |
Revenue (see breakdown below) | $2,128,768 | $2,097,353 | $7,885,482 | $7,734,844 |
Overhead Expenses | ||||
Salaries and Consulting | $1,142,841 | $1,159,941 | $4,925,803 | $5,797,801 |
Marketing and Promotion | $86,909 | $51,565 | $251,589 | $243,872 |
General & Administrative | $290,980 | $469,758 | $786,691 | $1,103,024 |
Technology & Production | $238,542 | $122,541 | $627,389 | $640,266 |
Depreciation of property and equipment | $241,535 | $219,342 | $920,877 | $811,093 |
Acquisition Fees | $6,049 | - | $6,049 | - |
Restructuring Expense | - | ($58,208) | $187,897 | $107,158 |
Government Subsidy | $165,486 | ($538,018) | $165,485 | ($538,018) |
$2,172,342 | $1,426,921 | $7,871,780 | $8,165,196 | |
Income (Loss) from Operations | ||||
($43,574) | $670,432 | $13,702 | ($430,352) | |
Other Income (Expenses) |
Interest Income
Interest Expense
Gain on Disposal of Tangible Assets Foreign Exchange Gain (Loss)
Fair Value Gain/(Loss) on Contingent Consideration
Fair Value Loss on Revaluation of Foreign Exchange Embedded Derivative
- | $31,275 | $128 | $31,431 |
($150,219) | ($91,555) | ($498,064) | ($269,716) |
$7,050 | - | $7,050 | - |
($78,350) | ($41,341) | ($119,373) | $171,542 |
($20,856) | - | ($20,856) | $2,113,887 |
($370) | ($32,361) | ($2,063) | ($32,361) |
Loss on Goodwill Impairment | ($3,513,390) | - | ($3,513,390) | - |
($3,756,139) | ($133,982) | ($4,146,568) | $2,014,783 | |
Net Income (Loss) before Income Tax | ||||
($3,799,709) | $536,450 | ($4,132,866) | $1,584,431 | |
Corporate Income Tax | ($135) | $14,142 | $3,859 | $14,142 |
Net Income (Loss) and | ($3,799,574) | $522,308 | ($4,136,725) | $1,570,289 |
Comprehensive Income (Loss) | ||||
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Management's Discussion & Analysis
December 31, 2023
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Q4'2023 Financial Highlights
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Revenue in Q4'2023 was $2,128,768 compared to $1,708,931 and $2,097,353 in the third quarter of 2023 and the fourth quarter of 2022, respectively.
o Revenue increased by $419,837 or 25% versus Q3'2023. The increase in revenue was primarily driven by higher Advertising revenue with an increase of $520,056 or 49%, slightly off-set by lower Music and Awards revenue with a decrease of $100,220 or 15%, respectively. The increase in Advertising revenue is attributed to business growth from Millenia3 acquisition and seasonality with the fourth quarter typically being the highest volume and spend period. Decrease in Music revenue is primarily attributed to seasonality as the fourth quarter typically is a slower period following a strong summer period for independent artists and music labels. Awards revenue decline is attributed to cyclicality in our customer's award show schedules which typically peak in the summer periods.
o Revenue increased by $31,415 or 1.5% versus Q4'2022. The increase in revenue is primarily attributed to higher Advertising revenue of $43,725 or 3% as well as increased Awards revenue of $42,111 or 16%. Conversely, Music revenue decreased by $65,014 or 21% during the comparison periods. - Operating expenses in Q4'2023 were $2,172,342 compared to $1,696,777 and $1,426,921 in the third quarter of 2023 and the fourth quarter of 2022, respectively.
o Operating expenses increased by $475,565 or 28% versus Q3'2023. The increase in operating expenses is primarily attributed to higher salaries with lower capitalized costs and higher technology, marketing and general & administrative expenses.
o Operating expenses increased by $745,421 or 52% versus Q4'2022. The increase in operating expenses is primarily attributed to a salary expenses. During the Q4'2022, the Company recognized a one-time employment tax credit of approximately $538,018 in the fourth quarter of 2022. This employment tax-credit is non-recurring. The increase in operating expense was partially off-set by reduced legal and professional fees in Q4'2023. - Normalized EBITDA in Q4'2023 was $211,061 in comparison to normalized EBITDA of $266,269 in the third quarter of 2023 and normalized EBITDA of $833,974 in the fourth quarter of 2022.
o Normalized EBITDA decreased by $55,208 compared to Q3'2023. The decrease is primarily attributed to higher operating expenses, partially offset by higher revenue from advertising primarily attributed to seasonality and business expansion from Millenia3 acquisition.
o Normalized EBITDA decreased by $622,913 compared to Q4'2022. The decrease is primarily attributed to one-time tax employment tax credits recognized in Q4'2022, as discussed in further detail above.
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Management's Discussion & Analysis
December 31, 2023
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Fiscal 2023 Management's Discussion & Analysis
Results of Operations
Summary of Quarterly Results
The information below has been prepared in accordance with IFRS Accounting Standards and is unaudited quarterly information
Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | |
Cash | $150,928 | $254,720 | $284,178 | $204,604 |
Working capital (deficiency) | ($1,758,949) | ($1,115,884) | ($94,749) | ($224,819) |
Liquidity | $623,506 | $975,794 | $552,960 | $781,378 |
Revenue | $2,128,768 | $1,708,931 | $2,172,530 | $1,845,253 |
Operating expenses | $2,172,208 | $1,696,777 | $1,905,839 | $2,100,123 |
Other expenses (income) | $3,756,134 | $20,217 | $ 230,473 | $109,749 |
Income (loss) for the period | ($3,799,574) | ($8,063) | $36,218 | ($364,619) |
Income (loss) per share - basic | ($0.06) | ($0.00) | $0.00 | ($0.01) |
Income (loss) per share - diluted | ($0.06) | ($0.00) | $0.00 | ($0.01) |
EBITDA | ($3,407,954) | $322,585 | $384,490 | ($13,174) |
EBITDA Margin % | (160%) | 18.88% | 17.70% | (0.71%) |
Normalized EBITDA (loss) * | $211,061 | $266,269 | $541,952 | $116,293 |
Normalized EBITDA Margin % * | 9.91% | 15.58% | 24.95% | 6.30% |
- A non-IFRS measure. See "Non-IFRS financial measures" for definitions and reconciliation non-IFRS measures to the relevant IFRS measures
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Management's Discussion & Analysis
December 31, 2023
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Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | |
Cash | $296,748 | $346,744 | $607,289 | $783,159 |
Working capital | $217,710 | ($1,701,222) | ($1,517,889) | ($1,649,976) |
Liquidity | $737,680 | $639,320 | $1,033,533 | $1,862,483 |
Revenue | $2,097,353 | $1,733,140 | $1,915,307 | $1,989,042 |
Operating expenses | $1,426,921 | $1,987,591 | $2,259,186 | $2,491,479 |
Other expenses (income) | $148,124 | ($109,995) | ($2,133,145) | $94,395 |
Income (loss) for the period | $522,308 | ($144,456) | $1,789,266 | ($596,832) |
Income (loss) per share - basic | $0.01 | ($0.00) | $0.03 | ($0.01) |
Income (loss) per share - diluted | $0.01 | ($0.00) | $0.03 | ($0.01) |
EBITDA | $816,075 | $108,087 | $2,047,149 | ($337,502) |
EBITDA Margin % | 38.91% | 6.24% | 106.88% | (16.97%) |
Normalized EBITDA (loss) * | $833,974 | $1,927 | ($42,766) | ($259,926) |
Normalized EBITDA Margin % * | 39.76% | 0.11% | (2.23%) | (13.06%) |
- A non-IFRS measure. See "Non-IFRS financial measures" for definitions and reconciliation non-IFRS measures to the relevant IFRS measures
Year ended December 31, 2023 Financial Highlights
Revenue
For the year ended December 31, 2023 revenue was $7,885,482, an increase of $150,638 over $7,734,844 in 2022. This is largely driven by increased advertising revenue, partially offset by entertainment revenue.
2023 | 2022 | $ Change | % Change | |
Advertising Division | $5,676,770 | $5,302,034 | $374,736 | 7% |
Entertainment Division | $2,208,712 | $2,432,810 | ($224,098) | (9%) |
Total Revenue | $7,885,482 | $7,734,844 | $150,638 | 2% |
- Advertising
The Company earned advertising revenue of $5,676,770 in the year ended December 31, 2023, an increase of $374,736 over the same period in 2022. The increase from the previous year is primarily attributed to additional revenue from Millenia3 acquisition, offset by a slow-down in the advertising
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Management's Discussion & Analysis
December 31, 2023
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Yangaroo Inc. published this content on 27 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 June 2024 13:43:14 UTC.
