YANGAROO INC. YANGAROO INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
QUARTERLY ENDED MARCH 31, 2024
(EXPRESSED IN UNITED STATED DOLLARS)
June 26, 2024
Q1 2024 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.
Normalized EBITDA as defined by the Company means EBTIDA adjusted for one-timenon-recurring
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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
We are thrilled to report significant advancements in the first quarter of 2024. Operating income have shown considerable improvements compared to the prior year's operating losses, with increased sales volume and revenue after adjusting for seasonality. This growth is largely attributable to the successful acquisition of Millenia3, which provided a new growth engine for the Advertising Division. For the three months ended March 31, 2024, operating income and normalized EBITDA increased to $17,369 and $237,582, respectively, from an operating loss of $254,870 and normalized EBITDA of $116,293 in Q1'2023. This improvement was largely attributed to the lower headcount costs and reduced general & administrative fees, offset by higher marketing and technology expenses.
The Advertising Division experienced an increase in delivery volumes and sales per customer, indicating the market's continuous recovery in advertising creative production and campaign volumes. The Music
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March 31, 2024
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Division's revenue increased year-over-year, primarily due to higher new music video deliveries from major record labels and music audio deliveries. While the Awards Division saw a slight decline compared to the same period last year due to the timing of our award show customers, we expect to recover and exceed the prior year's revenue for the Awards Division in 2024. This optimistic outlook is bolstered by our strategic investments in technology, which enhance the value of our services and drive future business growth.
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Advertising Division
o Revenue of $1,524,568 in Q1'2024 versus revenue of $1,434,590 in Q1'2023 - Entertainment Group (Music & Awards Divisions)
o Revenue of $398,063 in Q1'2024 versus revenue of $410,663 in Q1'2023 - Normalized EBITDA
o Seventh consecutive quarter of positive Normalized EBITDA; the Company generated $237,582 of Normalized EBITDA in Q1'2024, $211,061 of Normalized EBITDA in Q4'2023, $266,269 of Normalized EBITDA in Q3'2023, $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.
The Advertising Division experienced a modest increase in the volume of clients while actively seeking opportunities to expand service usage among 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 seamless integration of Millenia3 clients into our workflows and technology.
Technology development remains a priority, with substantial enhancements to DMDS, particularly in the Analytics Dashboard and Clearance platform. The integration of the Millenia3 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 significant interface updates, improving visibility into traffic and occurrence data, and incorporating additional advertising performance metrics from third- party providers. Our advertising platform is evolving into a comprehensive solution for managing advertising logistics across both linear and digital destinations.
The Entertainment Group, which includes our Music and Awards divisions, maintained steady customer volumes and revenue throughout the year, with no significant volatility. Both divisions are well-positioned to benefit from our investments in technology, setting the stage for future growth opportunities.
The Award Shows division remains stable year over year, supported by multi-year agreements and longstanding client relationships. The development team has made significant progress on Awards v3, focusing on enhanced management features, an improved user interface, and a stronger security posture. With the adjudication components completed, the team has now shifted their focus to updating the submission and administration tools, enabling us to offer a broader solution to cater to a larger Award Show market.
Our Music Division saw a slight increase in music video distribution deliveries. We continue to expand our
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March 31, 2024
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music track promotional and distribution services, targeting major music labels and independent artists across Canada and the USA.
The three months ended March 31, 2024, mark the seventh consecutive quarter of positive normalized EBITDA, driven primarily 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. While our commitment to organic growth remains unwavering as we explore opportunities within the advertising and entertainment markets, our growth strategy also extends beyond organic growth. We are actively seeking merger and acquisition opportunities that align with our vision and enhance our market position.
Results of Operations for the Three Months Ended March 31, 2024 and 2023
Quarter vs Quarter | ||
Three Months Ended | ||
Mar | Mar | |
2024 | 2023 | |
Revenue (see breakdown below) | $1,922,631 | $1,845,253 |
Overhead Expenses |
Salaries and Consulting
Marketing and Promotion
General & Administrative
Technology & Production
Depreciation of property and equipment and ROU assets and intangible assets
Restructuring Expense
Income (Loss) from Operations
Other Income (Expenses)
$1,185,402 $1,233,466
$80,715$48,419
$196,328$312,842
$222,604$134,383
$220,213$232,500
- $138,513
$1,905,262 $2,100,123
$17,369 ($254,870)
Interest Expense
Foreign Exchange Gain/(Loss)
Fair Value Gain on Revaluation of Foreign Exchange Embedded Derivative
Net Income (Loss) before Income Tax
Corporate Income Tax
Net Income (Loss) and Comprehensive Income (Loss)
($118,977) ($118,796)
$90,278($19,445)
$28,845$28,491
$146 ($109,750)
$17,515 ($364,620)
$1,950-
$15,565 ($364,620)
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Q1 2024 Management's Discussion & Analysis
Q1'2024 Financial Highlights
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Revenue in Q1'2024 was $1,922,631 compared to $1,845,253 and $2,128,768 in the first quarter of 2023 and the fourth quarter of 2023, respectively.
o Revenue increased by $77,378 or 4% versus Q1'2023. The increase in revenue was primarily driven by higher Advertising revenue and Music with an increase of $89,978 or 6% and $16,686 or 6%, respectively, slightly off-set by lower Awards revenue with a decrease of $29,287 or 20%. The increase in Advertising revenue is attributed to business growth from Millenia3 acquisition and the increase in Music revenue is attributed to higher new music video deliveries from major record labels and music audio deliveries.
o Revenue decreased by $206,137 or 10% versus Q4'2023. The decrease in revenue is primarily attributed to lower Advertising revenue of $49,645 or 3% as well as decreased Awards revenue of $193,603 or 62%, off-set by higher Music revenue with an increase of $37,111 or 15%. The decrease in Advertising revenue is attributed to seasonality with the fourth quarter typically being the highest volume and spend period. Awards revenue decline is attributed to cyclicality in our customer's award show schedules which typically peak in the summer periods. - Operating expenses in Q1'2024 were $1,905,262 compared to $2,172,342 and $2,100,123 in the fourth quarter of 2023 and the first quarter of 2023, respectively.
o Operating expenses decreased by $267,080 or 12% versus Q4'2023. The decrease in operating expenses is primarily attributed to lower marketing, general & administrative and technology expenses.
o Operating expenses decreased by $194,861 or 9% versus Q1'2023. The decrease in operating expenses is primarily attributed to headcount and general & administrative expenses, partially off- set by increased marketing and technology expenses. - Normalized EBITDA in Q1'2024 was $237,582 in comparison to normalized EBITDA of $116,293 in Q1'2023 and normalized EBITDA of $211,061 in Q4'2023.
o Normalized EBITDA increased by $121,289 compared to Q1'2023. The increase is primarily attributed to higher revenue from Advertising and Music and lower operating expenses from salary and general & administrative fees.
o Normalized EBITDA increased by $26,521 compared to Q4'2023. The increase is primarily attributed to the improved operating income, as a result of the Management's operation optimization strategy.
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March 31, 2024
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Q1 2024 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
Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | |
Cash | $207,998 | $150,928 | $254,720 | $284,178 |
Working capital (deficiency) | ($1,810,041) | ($1,758,949) | ($1,115,884) | ($94,749) |
Liquidity | $521,092 | $623,506 | $975,794 | $552,960 |
Revenue | $1,922,631 | $2,128,768 | $1,708,931 | $2,172,530 |
Operating expenses | $1,905,262 | $2,172,208 | $1,696,777 | $1,905,839 |
Other expenses (income) | ($146) | $3,756,134 | $20,217 | $230,473 |
Income (loss) for the period | $15,565 | ($3,799,574) | ($8,063) | $36,218 |
Income (loss) per share - basic | $0.00 | ($0.06) | ($0.00) | $0.00 |
Income (loss) per share - diluted | $0.00 | ($0.06) | ($0.00) | $0.00 |
EBITDA | $356,705 | ($3,407,954) | $322,585 | $384,490 |
EBITDA Margin % | 18.55% | (160%) | 18.88% | 17.70% |
Normalized EBITDA (loss) * | $237,582 | $211,061 | $266,269 | $541,952 |
Normalized EBITDA Margin % * | 12.36% | 9.91% | 15.58% | 24.95% |
- 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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Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | |
Cash | $204,604 | $296,748 | $346,744 | $607,289 |
Working capital | ($224,819) | $217,710 | ($1,701,222) | ($1,517,889) |
Liquidity | $781,378 | $737,680 | $639,320 | $1,033,533 |
Revenue | $1,845,253 | $2,097,353 | $1,733,140 | $1,915,307 |
Operating expenses | $2,100,123 | $1,426,921 | $1,987,591 | $2,259,186 |
Other expenses (income) | $109,749 | $148,124 | ($109,995) | ($2,133,145) |
Income (loss) for the period | ($364,619) | $522,308 | ($144,456) | $1,789,266 |
Income (loss) per share - basic | ($0.01) | $0.01 | ($0.00) | $0.03 |
Income (loss) per share - diluted | ($0.01) | $0.01 | ($0.00) | $0.03 |
EBITDA | ($13,174) | $816,075 | $108,087 | $2,047,149 |
EBITDA Margin % | (0.71%) | 38.91% | 6.24% | 106.88% |
Normalized EBITDA (loss) * | $116,293 | $833,974 | $1,927 | ($42,766) |
Normalized EBITDA Margin % * | 6.30% | 39.76% | 0.11% | (2.23%) |
- A non-IFRS measure. See "Non-IFRS financial measures" for definitions and reconciliation non-IFRS measures to the relevant IFRS measures
Revenue
For the three months ended March 31, 2024 revenue was $1,922,631, an increase of $77,378 over the same period in 2023 and a decrease of $206,137 from the previous quarter (Q4'2023 - $2,128,768).
Q1 2024 | Q1 2023 | $ Change | % Change | |
Advertising Division | $1,524,568 | $1,434.590 | $89,978 | 6% |
Entertainment Division | $398,063 | $410,663 | ($12,600) | -3% |
Total Revenue | $1,922,631 | $1,845,253 | $77,378 | 4% |
- Advertising
The Company earned advertising revenue of $1,524,568 in the current quarter, an increase of $89,978 over the same period in 2023 and a decrease of $49,645 versus the previous quarter (Q4'2023 - $1,574,213). The increase from the previous year is primarily attributed to additional revenue from Millenia3 acquisition, offset by a slow-down in the advertising industry and corresponding decline in our customer volumes. The decrease in Advertising revenue as compared to the previous quarter is a result of lower customer volumes driven by seasonality.
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Management's Discussion & Analysis
March 31, 2024
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Q1 2024 Management's Discussion & Analysis
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Entertainment
The Company earned entertainment revenue of $398,063 in the current quarter, representing a decrease of $12,600 over the same period in 2023 and a decrease of $156,491 versus the previous quarter (Q4'23 - $554,554). The decrease from the prior quarter is primarily attributed to seasonal activity in Awards, slightly offset by higher volumes amongst Music customers.
Operating Expenses
Q1 2024 | Q1 2023 | $ Change | % Change | |
Salaries and consulting | $1,185,402 | $1,233,466 | ($48,064) | -4% |
Marketing and promotion | $80,715 | $48,419 | $32,296 | 67% |
General and administrative | $196,328 | $312,842 | ($116,514) | -37% |
Technology development | $222,604 | $134,383 | $88,221 | 66% |
Depreciation of property and | $220,213 | $232,500 | ($12,287) | -5% |
equipment | ||||
Restructuring | - | $138,513 | ($138,513) | -100% |
Total operating expenses | $1,905,262 | $2,100,123 | ($194,861) | -9% |
Total operating expenses for the three months ended March 31, 2024 were $1,905,262, a decrease of $194,861 over the prior year period and an increase of $267,080 from the previous quarter (Q4'2023 - $2,172,342).
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Salaries and Consulting
Salaries and consulting expense for Q1'2024 was $1,185,402 representing a decrease of $48,064 over the same period in the prior year and an increase of $42,561 from the previous quarter (Q4'2023 - $1,142,841). The Management will continue focus on operational optimizations in the fiscal year of 2024. - Marketing and Promotion
Marketing and promotion expense for the three months ended March 31, 2024 was $80,715, representing an increase of $32,296 versus the prior year period and a decrease of $6,194 versus the prior quarter (Q4'2023 - $86,909). The increase from the previous year period is primarily resulting from higher marketing and sales activities as the company revamp for business growth and development. - General and Administrative
General and administrative expenses for the three months ended March 31, 2024 were $196,328 representing a decrease of $116,514 over the same period in the prior year and a decrease of $94,652
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March 31, 2024
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from the previous quarter (Q4'2023 - $290,980). The decrease from the prior year quarter and previous quarter is primarily related to lower professional services fees as they were related to restructuring matters.
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Technology Development
Technology development expense for the three months ended March 31, 2024, was $220,604 representing an increase of $88,221 over the same period in the prior year and a decrease of $15,938 from the previous quarter (Q4'2023 - $238,542). The increase from the prior year quarter is primarily attributed to higher cost from third-party software, hardware and cloud requirements.
Net Income and Comprehensive Income
The Company generated net income and comprehensive income of $15,565 in the current quarter, an increase of $380,186 from the same period in the prior year (Q1'2023 - net loss of $364,620) and an increase of $3,815,139 versus the previous quarter (Q4'2024 - net loss of $3,799,574). Excluding a onetime goodwill impairment loss of $3,513,390 recognized in Q4'2023 (details were provided in the note 9 of 2023 annual financial statements), the increase from the prior year quarter and previous quarter was due to the continuous improvement of operating margin and favorable foreign exchange movement as at the quarter ended March 31, 2024. Details are provided in the "Results of Operations for the Quarter Ended March 31, 2024 and 2023".
Normalized EBITDA
The Company defines EBITDA as net income or loss before interest, income taxes and amortization. Normalized EBITDA removes fair value adjustment of convertible debt, fair value adjustment of contingent consideration, restructuring expenses, stock options expenses, foreign exchange gains and losses, and impairment loss on Goodwill from EBITDA. Management uses these measures in managing the business and making operational decisions. EBITDA and normalized EBITDA are not intended as substitutes for IFRS measures.
For the three months ended March 31, 2024, the Company's normalized EBITDA was $237,582 representing an increase of $121,289 over the same period in the prior year (Q1'2023 - $116,293) and an increase of $26,521 from the previous quarter (Q4'2023 - $211,061). The increase in normalized EBITDA versus the prior year and prior quarter is primarily attributed to the improved operating income, as a result of the Management's operation optimization strategy.
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Management's Discussion & Analysis
March 31, 2024
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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.
