UP Fintech Holding Ltd. Sponsored ADR Class A (TIGR) Q2 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to today's conference. Our discussions may include prediction, estimates or other information that might be considered forward-looking. While these forward-looking statements are based on our current judgments on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include a variety of factors, some of which are beyond our control. You are cautioned not to place undue reliance on these forward-looking statements. And please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements. You should also review our SEC filings for a more complete discussion of our Risk Factors. At this time, I would like to welcome everyone to the TigerLogic Second Quarter Fiscal Year 2015 Earnings Results Call. [Operator Instructions] I would now like to turn today's conference over to Brad Timchuk, CEO of TigerLogic.

Thank you, operator. It's great to be here on today's earnings call for the second quarter ended September 30, 2014. With me on the call are Thomas Lim, our CFO and Justin Garrity, our President. I'll begin by providing an overview. Tommy will then review the financial results followed by Justin discussing Postano. I'll then briefly discuss on this and we’ll open it up to Q&A at the end. As CEO of TigerLogic, I couldn’t be more excited about the opportunity to grow potential for the company. That said, I'm also keenly aware of the challenges the company is facing and we are actively addressing them. Since taking on this role in early September, I’ve been focused on meeting with customers, staff, business partners, and investors, as well as reviewing all of our financials. These conversations are important to me because it is critical to approach this role with a fresh perspective. First, I’d like to share a little bit about my background. For the past 15 years, I have been in growth leadership roles both in private and public companies, focused primarily on growing sales and developing key partnerships. I’ve worked with numerous Fortune 500 companies globally over the years including Amazon, McDonalds, American Express, Microsoft, and Google, building some of the most innovative customer engagement solutions to-date. I've planned on leverage, my deep understanding about customer engagement and life cycle management solutions to focus on accelerating our growth especially to increase recurring revenue. Today, I believe there are unique market condition that presents significant growth opportunities for TigerLogic. One example, social networks, marketing companies, and advertising agencies, compete to help brands better communicate and engage with their customers. Why is this happening? We are witnessing an era of empowered mobile and social consumers. Their voices are transparent and immediate. Brands are seeking to offer engaging and compelling experiences for their customers and prospects with the goal of increasing overall spend while also increasing loyalty. Maintaining and gaining share of your customers wealth ph with differentiating ways will only get tougher for brands to standout in this multi $100 billion marketing industry. I’ve personally been intrigued and vested in solving like challenges for brands over the past 10 years. Researching TigerLogic's portfolio, I was impressed with the stability to address these needs. I’ve had the opportunity in the past few weeks to take a closer look at our platforms, solutions, partnerships and customers. I’d like to share some key insights on gain, all of which I believe are extremely encouraging. First, our customers love TigerLogic's product. Their commitment and dedication to work with us is truly impressive. We’re not just providing software but we are really providing a long term partnership. Time and time again I’ve heard how customers rely on Postano and on this platform for essential business and marketing operations while truly loving the experience and the results they deliver. TigerLogic has a global reach with customers around the world with offices in the U.S., U.K., France and Germany. TigerLogic thinks globally and understands that business today requires an international perspective. I recently attended EurOmnis, the European Omnis developer conference. An event that has been running strong for well over a decade. This event gives developers an opportunity to exchange ideas and showcase best practices for using Omnis. The share diversity of applications developed on Omnis is impressive. These range from the travel and expense management programs for the German government, to the high risk pregnancy information management system utilized in California. Postano, is all about innovation and enabling our customers to provide differentiating engagement experiences. With our platform, our customers are able to create customer experiences that were not possible just a few years ago. The best part is our customers see meaningful results that leave a lasting impression on their business. Our customers include top recognized brands and institutions from around the world. The interest in our premium Postano offering from Fortune 500 companies is impressive. Well, we can’t disclose the names of all our customers for [indiscernible] including contractual restrictions, our customers include top brands across industry verticals such as travel and entertainment, apparel and beauty, sports, food and beverage, and event management. Some of these are Sony Pictures, [indiscernible] BCBG, Cohen, [indiscernible] Elle 18, NFL teams including the Cardinals and Chiefs, Buffalo Wild Wings, and IMAX, the world's largest exhibition for the meetings industry. TigerLogic has a solid balance sheet with cash on hand and no debt. That being said, we currently faced many challenges including the need to grow revenues faster, the need to reduce the high cash burn rate, and improving the fundamentals of our business. I’ve been working closely with the executive team to reduce cost to get to a sustainable cash position. We’re already taking a number of steps to lower cost including taking a look at various positions and operations for sale. Among these things under review, are non-core development efforts for Omnis and Storycode digital publishing operations, for which revenues have been lower than expected and have not materially contributed to the top line. We believe these cost cutting initiatives will result in over $1 million in growth savings on an annual basis. We’re continuing to look at other areas to lower expenses and be more efficient. Now let's talk about where TigerLogic is heading. I'll simplify my vision with one word, growth. We believe we have built the right product in Postano and Omnis to address the opportunities in the respected markets. We are starting with a great set of customers but we need more, a lot more, and here is how we plan to get them. With Postano, we believe the key to growing revenue is through direct sales and partnerships. With some of our expense savings, we plan to increase our sales by prudently expanding the sales team and by focusing on key markets. We are placing a greater emphasis on partnership. This is already happening. For example, we recently announced our partnership with FISH Technologies, our leader in experiential marketing to accelerate our solutions for the event industry. FISH has already integrated our solutions into their platform and their sales team is introducing it into the prospect and customers. We also plan to leverage the growth potential with our current Postano customers. Many of our customers today request additional operating surface. During the second quarter, over half of Postano’s activity resulted from existing customers purchasing additional subscriptions and services. We believe there is more opportunity to work with our existing customers to unlock more of the potential that Postano can bring to their businesses. We increased our ASP for Postano from last quarter by approximately 20% over the prior quarter and we believe there is more room to grow with our current installed base. Omnis has explored multiple development projects in the past year or so. To enhance this offering for existing and new markets as candidly last focused. I'm now refocusing the Omnis team to concentrate on markets where its adoption is currently high. We will continue to encourage customers to upgrade to the latest version of Omnis studio so that they can adopt our latest enhancements. We plan to continue to improve Omnis for the needs of this active market. Last but not least, I'm working to enhance our communications with investors including clearly communicating our vision, strategy, and how we are addressing our challenges. As we put our operational plans in place, you should expect to see greater transparency from us about the health of the business and the opportunities we see in the market. And with that, I'll turn the call over to Tommy to review the financial results for the second quarter.

Thanks Brad. Please refer to the company’s Form 10-Q filed with SEC this past Friday November 14, for a more detailed description of the financial results and financial statement disclosures I will be discussing on today’s call. Unless noted otherwise, the consolidated financial results I will discuss today reflect the continuing operations. First as you know, the company stock price has been trading below $1 for more than 30 consecutive business days. As a result, the company received a letter from NASDAQ, indicating that the company's closing bid price has failed to meet the minimum $1 per share requirement for continue listing on the NASDAQ capital market which we have previously disclosed in the Form 8-K filed on October 10, 2014. As noted in the 8-K, the company has been given 180 calendar days or until April 6, 2015 to regain compliance with the minimum bid price requirement. The company is actively monitoring the bid price for its common stock and is considering available options to regain compliance with the NASDAQ minimum bid requirement. Now I would like to spend a moment to clarify our revenues. We currently classify our revenue as either licensed or service revenues on our financial statements. Licenses revenue reflects sales of Runtime's for our Omnis development software. Services revenue is comprised of one support services for Omnis, two, subscriptions and services for Postano, and three, professional services for our Storycode digital publishing solutions. As Brad mentioned earlier, we are currently evaluating our Storycode digital publishing business whose revenue has not been material to TigerLogic’s overall revenue. The current Storycode team is exploring various options of continuing to offer their services outside of TigerLogic. In the footnote to our financial statements in our Form 10-Q, you will see a summary of revenue for Omnis as well as for our social and mobile platform which primarily consist of Postano revenue. As our business continues to evolve, we will continue to valuate the classification and presentation of our revenue. Now I’d like to take a moment to discuss our current revenue recognition policy for our Postano products which as stated earlier are recorded as services revenue. We generally sell subscription to our Postano platform which may range in terms from one or two months to 12 months. And we sell related professional services such as set-up, design, moderation, and creation services. Revenue from both Postano subscriptions and professional services are generally recognized ratably over the subscription terms. Now let's turn to the financial results for the quarter. For the second quarter ended September 30, 2014 net revenue was $1.8 million, an increase of 21% as compared to last year's second quarter revenue of $1.5 million. Sequentially, net revenue increased slightly overall as services revenue increased by approximately 21% or $0.2 million. This sequential increase was driven by a 57% increase in Postano revenue resulting from both the recognition of revenue from Postano subscriptions that was deferred in the prior quarter and new Postano sales offset by lower Omnis revenue this quarter. The trend in Omnis license revenue is consistent with prior year as certain large Omnis customers has annual onetime purchase agreements that occurred in the first quarter of each fiscal year. Omnis customers continue to purchase Runtime's in Q2 to upgrade their apps to the latest versions of Omnis studio but the size of those sales were lower than those in Q1. Quarterly fluctuations in Omnis license revenue is normal as sales of Runtime's is directly related to when Omnis developers upgrade their customers to the latest Omnis studio version and when the developers acquire new users for their application. Turning to net loss. Net loss from continuing operations for the second quarter ended September 30, 2014, was $2.6 million as compared to a net loss of $2 million for the second quarter of the prior fiscal year due primarily to a $0.4 million income tax benefit in the prior year, an increased personnel sell to marketing related expenditures for our Postano platform and highly legal and professional service expense in the current year. In Q2, we incurred approximately $200,000 in one time expenses related to the valuation of any proposed sale of our common stock by our largest stockholder that maybe presented to the company, as well as other strategic alternatives to the company, including payments to special legal and financial advisors engaged by the special committee of the Board formed for those purposes. On the same note, we had incurred approximately $450,000 in these one time expenses in Q1. These one time special expenses have now concluded. But the special committee and the Board will continue to review and assess any strategic alternatives that maybe presented to the company in the future. As Brad mentioned, we’re already taking a number of steps to reduce operating expenses, including headcount reductions and eliminating non-strategic operations. Again, we believe these initial actions will result in over $1 million in growth savings on an annual basis. We are actively looking at all areas of the business for additional potential cost savings. Net loss per share from continuing operations was $0.09 and $0.04 for the quarters ended September 30, 2014, and September 30, 2013, respectively. Cash balance was $12.6 million at December 30, 2014, as compared to $15.4 million at June 30, 2014. Note that the cash balance excludes $2.2 million that is being held in escrow to serve as security for our general indemnification obligations related to the sale of our MDMS business. We have recorded the $2.2 million in escrow as receivable on our balance sheet, which we anticipate receiving today. While we believe that our existing cash, cash flows, and the $2.2 million receivable will be sufficient to meet our anticipated cash needs for at least the next 12 months, we continue to actively and prudently manage our limited cash resources, and are in the process of reducing expenses. To measure our operational results, we also used a non-GAAP measure adjusted EBITDA, which is defined as EBITDA plus adjustments for other income and expenses and non-cash stock based compensation expense. Adjusted EBITDA as discussed here, and as presented in the 10-Q includes results from both continuing and discontinued operations. Adjusted EBITDA for the quarter ended September 30, 2014 was negative $2.4 million as compared to negative $0.7 million for the same period in the prior fiscal year. The decrease in adjusted EBITDA on a year-over-year basis was mainly due to the special one time expenses mentioned earlier and higher personnel sale to marketing and professional services expense offset by the increase in revenue. Please refer to the Form 10-Q, and the earnings press release issued this past Friday and posted on our website as usual, for a reconciliation of adjusted EBITDA to the nearest GAAP measures. That concludes the financial summary of our call. Now, I will turn the call over to Justin, to discuss Postano.

Great. Thank you, Tommy. Quarter with our Postano offering, we had a great quarter in terms of bookings, number of customers, and average sale price. Lands prefer Postano because its makes a measurable difference with our marketing and customer engagement efforts. Postano’s ability to partner with some of the world’s largest brands has been impressive. What makes Postano unique? Postano is powerful, it has the unique ability to stream in social content from over a dozen social networks within seconds from setting it up. That immediate insight is remarkable. For instance, with Postano, you can enter in the latest hash tag from a company, you’re activating on and immediately pour over the content submitted by fans across the globe from Twitter, Instagram, Line, Google Plus. It is that fast. With our latest update, Postano 2.6, the seventh major update in just a year, we made our platform even faster and more powerful. Not only can you monitor content from fans across the world in seconds, you can cure it the best of that content just as fast and projected up on a stadium screen in just seconds. This is real time, and that is what brands want. They’re tired of aggregating social content and waiting minutes, even hours sometimes for some of our competitors to share and visualize that content. Postano was extremely intuitive. We often scheduled training for our customers because they ask for it. But minutes into the training, we often hear from them that they can take it from there. Most of our customers are fluent in our platform within minutes. With our latest release, we have added features to make it even easier. In Q2, we added new features like the style editor. With the Postano style editor, brands can now create their own custom visualizations, using their unique brand elements in just a few clicks. For customers that don’t want the visual interface, we give them powerful HTML5 CSS overrides. We really have opened up the Postano platform to be customized by each of our customers unlike anything the market has seen. Postano visualizes user generated content in the most unique and engaging formats. We know that fan content is the best content to influence consumer behavior because it is authentic and positive. We also know that unless that content is attractive, it won’t connect to consumers. We have invested a lot into making attractive formats that are cinematic and editorial in nature, to truly transform fan content to consumer eyes. Brands don’t want to forget about social digital walls stuck in the background, they want the power of an on-brand digital build bar to project fan photos, videos, and messages, giving it the visual lift this content needs to truly connect. Postano has a measurable impact on our customers are buying more of it as they expand our partnership with us. We believe Postano is not a social media tool, it is a powerful fan endorsement platform. The visualizations are so attractive, that fans are competing to get their content on the big screen in stadiums, in stores, at events, and other places. Instead of using social media to complain or kill time, with Postano they are using it to try to get featured. They know they have to say something positive and remarkable to get up on the board. Postano doesn't just highlight fan content, it actually helps create positive fan behavior. Additionally, when Postano was used on our website as a social hub, our brands see higher time on site numbers and more on-site purchasing. TigerLogic has customers using Postano platform across a wide range of industries including several major league sports teams, consumer product companies and major retailers. The Postano platform empowers each brand to aggregate fan content into dynamic visualizations that match and compliment that brands unique branding - that customers unique branding. This quarter we had some incredible events powered by Postano visualizations. Just a few of these included, Essence festival over July fourth weekend in New Orleans. Essence Street Style for fashion week in New York City, people in [San Diego] [ph] festival in San Antonio Texas, Miami Fashion Week for Lycra, LA Times for the LA Food and Wine Festival, Google's Zygote 30/30 event in New York, Los Angeles and San Francisco, and many, many more events. For sports, we had multiple NFL teams use Postano starting in the pre-season and through the fall season. We continue to grow our college sports activations including multiple big five schools like, USC, and Virginia Tech. Soccer X was a massive event in the U.K. But Postano has activated throughout the event and introduced the power of Postano to multiple soccer teams from around the world. Next quarter as various sports seasons have started, we will share even more news on sports. Postano continues to grow in the retail display space. In the U.K., Ikea powered Postano visualizations in eight stores using our iPad optimized version to power large displays. William Rast promoted their products in a pop up experience, the flagship Lord & Taylor location in Manhattan. We had multiple pilot programs in the space as well with major brands. We believe that there is a lot of growth potential in the retail display market and we continue to pursue these opportunities. Many brands use Postano to activate fans through campaigns and on TV. Pokémon hosted a social hub on their website for their international and national championships. The Queen Latifah Show featured Postano live on air to feature fans around the specific cause. At Comic-Con in San Diego, IMAX used the hashtag campaign as a contest for fans to win a prize. Brands Whisky featured a video on YouTube that gained over a million views and direct event to Postano social hub featuring fan content. And Chilies used Postano to track new employees by featuring the very best social content from around their brand. Not only has there been growth in our customer base and industries, we have also established some great partnerships recently that I'd like to discuss. As Brad mentioned just two weeks ago, TigerLogic entered into an exclusive partnership with FISH Technologies, a leading experienced platform for live events. The partnership enables brands to improve event experiences by seamlessly connecting registration and budgeting with social sharing and social visualization. FISH has worked with top brands like the NFL, NBA, MLS, The Army, The Air Force and many others to create remarkable event experiences and provide real-time data insight to help these brands optimize events. With Postano, the experiences will be taken to a whole new level with the folks on social that will truly allow fans to interact with environments in innovative new ways. We have also partnered with Hyper to sport its gift making photo booth and mobile application photo. We are the only solution in the market today to offer this integration and it is another testament that Postano incorporates more social networks than any other social visualization platform. Our work with social networks continues to grow and expand. One of the most exciting partnerships is with Facebook. We were selected as an official PCS or Public Content Solutions partner. Facebook considers PCS partners as showcase companies that deliver market leading tools and services, highlighting Facebook and Instagram content. The major media companies, sports leagues and teams, and public figures. We work directly with the Facebook team and they have introduced us to new brands and accounts. I’ll now turn the time back over to, Brad.

Thank you, Justin. Now I’d like to briefly discuss our Omnis business. Omnis has a proven history over the past 25 years. It has a very loyal customer base with 100s of 1000s of end-users utilizing Omnis based applications ranging from complex ERP systems to real estate administration tasks to inventory tracking system. The variety of applications and industries using the Omnis development software is impressive. Omnis product innovations are being developed in cooperation with a strong user community. As I mentioned, I recently returned from the European Omnis developer conference where I saw loyal and dedicated group of developers and business partners exchanging experiences and test driving new ideas. The momentum of adoption of the Studio 6 release continues to be strong with our installed base. Our customers are upgrading our applications to take advantage on the mobile feature we built into the latest release and we’re also encouraged that new customers have been attracted to Omnis Studio. We are continuing to work with our installed customer base to further develop and enhance our products to meet the requirements. At this time, I’d like to bring the presentation part of the call to an end. In summary, we believe TigerLogic has made substantial progress over the past quarter. We still have work to do, I believe with our new team and our focus on accelerating growth and reducing cash front, TigerLogic will continue to make substantial progress in the coming quarters. Now, before we open the Q&A session, Tommy will provide a few traditional guidelines.

Thanks Brad. Number one, as a matter of company policy, we are not giving you financial guidance with respect to future periods and therefore please limit your questions to historical financial results. Secondly, as a matter of company policy, we do not comment on personnel or employment matters. Operator, we can now begin the Q&A session. Thank you.

[Operator Instructions] We do have a question from the line of Eric Anderson from Hartford Financial.

So far, if you could tell us with regard to Postano, how important is the sports vertical market? And with all the various protocols that you’re involved in, what's the experience at offering the highest adoption rates in the shortest amount of time?

Yeah I'll answer that. This is Justin. The sports vertical is extremely important to us for a couple of reasons. One is, the growth there is incredible. So we’re seeing a lot of activity in sports. So the adoption rate there is much faster as sports team and sports brands are much more kind of in tuned to feature fan content, it's something that they naturally have been doing for years. So just by them turning the cameras from something that they shoot the audience with the camera panning the audience, to something where people are taking their own selfies that the natural transition for those sports teams to make and the brands and stadiums. So, we’re seeing a lot of adoption there, and the fans there just love it. Add a partnering with Toshiba, and LA at Staple Center, really innovative area down in the Staple Center there featuring up Postano content with Toshiba. And areas like that that just really make a fan content come to life. In terms of other verticals, I would say sports is the fastest adoption, but we’re seeing very high rates of adoption as well in fashion. And that's traditionally been very strong for Postano. We’re seeing a lot with CPG and campaigns, and some other areas that are really exciting us in the retail space where we’re seeing a lot of interest in social as part of displays in store.

Is the adoption within those sports market secured more towards one type of sport versus another, like hockey versus basketball or baseball?

I think we're seeing it pretty strong across all the sports. I think any sport has a stadium with a big screen, has been a natural place for Postano to be featured in. But we've even taken that to the next level this year even with Golf, the LPGA tournament, we’re part of. We put up - we erected with the production company, social towers throughout the course. So where there isn't a big screen looming over a stadium, we’re able to erect social towers for golf courses, tailgate parties and other things like that. So I think, we’re starting to see a lot of innovation in sports with sports that traditionally haven't had a lot of featured fan content. They're really gravitating towards that as well.

All right. Appreciate you taking my questions.

We have no further questions.

Well, I’d like to thank everyone for joining the call, and certainly look forward to future communications and updates in future quarters. Thank you.

Ladies and gentlemen, we thank you for your participation in today's conference call. You may now disconnect your lines.