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Tiny Ltd. Investor Presentation 2025
47831_rns_2025-04-01_a1679b23-b1af-494e-9f9b-1ac2f5769e96.pdf
Investor Presentation
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tiny
Acquisition of a Majority Interest in Serato
March 31, 2025
Cautionary Language
A final base shelf prospectus containing important information relating to the securities described in this document has been filed with the securities regulatory authorities in each of the provinces of Canada.
The final base shelf prospectus, any applicable shelf prospectus supplement and any amendment to the documents are accessible through SEDAR+. Copies of the documents may be obtained from Canaccord Genuity Corp. at [email protected].
This document does not provide full disclosure of all material facts relating to the securities offered. Investors should read the final base shelf prospectus, any applicable shelf prospectus supplement and any amendment to the documents for disclosure of those facts, especially risk factors relating to the securities offered, before making an investment decision.
Legal disclaimer
This presentation (the "Presentation") has been prepared solely for informational purposes from information supplied by Tiny Ltd. (the "Company") and is being furnished through ROTH Canada, Inc. ("Roth") and Canaccord Genuity Corp. ("Canaccord") solely for your information and does not constitute an offer to sell, or the solicitation of any offer to sell, or the solicitation of any offer to purchase securities in any jurisdiction.
Confidential Information
This Presentation is intended for authorized recipients only and includes proprietary and trade information regarding the Company and Serato Audio Research Limited ("Serato"). By accepting this Presentation, each recipient agrees that: (i) no portion of this Presentation may be reproduced or distributed in any format without the prior express written consent of the Company; (ii) it will keep confidential all information contained herein that is not already public without the express written consent of the Company; and (iii) it will not make use of the information in this Presentation in purchasing or selling securities of the Company until such time as the Company has publicly disclosed the Proposed Transaction (as defined herein). If you were provided with a copy of this Presentation by any person other than a representative of the Company, Roth or Canaccord, then it is not intended to be read by you and the copy should be destroyed.
The information presented herein: (i) has been prepared by the Company for illustrative purposes only; (ii) is provided as of the date hereof (unless otherwise specifically noted in the Presentation) and is subject to change without notice; and (iii) is not to be considered as a recommendation or invitation to make an investment in the Company. The Company, Roth and Canaccord, and their respective associates or any of their respective directors, officers, employees, partners, members, agents, professional advisers, representatives or consultants (the "Company Parties") do not: (i) make any representation, warranty or guarantee, express or implied, as to the fairness, accuracy, completeness, reliability, reasonableness or currency of the information contained in this Presentation; or (ii) undertake to provide any additional information or updates, or to correct any information or statements (including, but not limited to, forward-looking information (as described below)) in this Presentation which such Company Party becomes aware was incorrect or incomplete as of the date of this Presentation, or which subsequently becomes incorrect or incomplete due to any subsequent event or as a result of new information, future developments or otherwise. To the maximum extent permitted by law, no Company Parties will be responsible or liable whatsoever with respect to any use or reliance by any person upon any of the information contained in this Presentation.
No Investment Advice
This Presentation does not constitute and should not be construed as, an advertisement, public offering, prospectus, offering memorandum or an offer or invitation to sell or any solicitation of any offer to purchase or subscribe for any securities of the Company in Canada, the United States or any other jurisdiction. No securities commission or similar authority of Canada, the United States or any other jurisdiction has reviewed or in any way passed upon this Presentation, and any representation to the contrary is an offence. This Presentation, accordingly, should not be treated as giving investment advice and is not intended to form the basis of any investment decision. It does not, and is not intended to, constitute or form part of, and should not be construed as, any recommendation or commitment by the Company, Roth or Canaccord or any of their respective directors, officers, employees, direct or indirect shareholders, agents, subsidiaries, affiliates, advisors or any other person, or as an offer or invitation for the sale or purchase of, or a solicitation of an offer to purchase, subscribe for or otherwise acquire, any securities, businesses and/or assets of any entity, nor shall it or any part of it be relied upon in connection with or act as any inducement to enter into any contract or commitment or investment decision whatsoever. No person has been authorized to give any information or to make any representations not contained in this Presentation. Any such information or representation that is given or received must not be relied upon. Readers should not construe any portion of this Presentation as legal, tax, regulatory, financial or accounting advice and are urged to consult with their own advisors in relation to such matters.
To the extent they deem necessary, recipients of this Presentation should carry out independent investigations in order to determine their interest in participating in transactions involving the Company and its affiliates. In furnishing this Presentation to the recipient, the Company, Roth and Canaccord, and their respective advisors reserve the right to provide the same or similar information to other persons.
No Reliance
This Presentation does not purport to be comprehensive or to contain all the information that a recipient may need in order to evaluate the matters or entities described herein. Recipients are responsible for conducting their own investigations and analyses of the Company and the information contained or referred to herein and should not act solely on the basis of any information contained or referred to in this Presentation. No representation or warranty, express or implied, is given and no responsibility or liability is accepted by any person, with respect to the accuracy, fairness or completeness of this Presentation or its contents or any oral or written communication in connection with any matter described herein. In particular, but without limitation, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed for any purpose whatsoever on any projections, targets, estimates or forecasts or any other information contained in this Presentation. In addition, statements contained in this Presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. In particular, historical results should not be taken as a representation that such trends or results will be replicated in the future.
Certain information concerning Serato has been provided by it for inclusion in this Presentation. Although neither the Company nor Roth or Canaccord have knowledge that would indicate that any such information is untrue or incomplete, the Company, Roth and Canaccord have not independently verified any of this information and do not assume any responsibility for the accuracy or completeness of this information or for any failure by Serato to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to the Company.
Legal disclaimer
Third-Party Sources
This Presentation may contain quotes, information, data (including references to market, industry or peer group data) which has been obtained from or is based upon third party sources, including industry publications, reports and websites. Third party sources may state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance or guarantee as to the accuracy or completeness of included data. Although the data is believed to be reliable, neither the Company nor Roth or Canaccord have independently verified the accuracy, currency, reliability or completeness of any of the information from third party sources referred to in this Presentation or ascertained from the underlying economic assumptions relied upon by such sources. The Company, Roth, and Canaccord disclaim any responsibility or liability whatsoever in respect of any information derived from third party sources.
Forward-Looking Information
Certain information included in this Presentation may constitute "forward-looking information" within the meaning of Canadian securities law. Any statements about possible events, conditions or financial performance that are based on predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes", "intends" or "proposes" or variations of such words and phrases or stating that certain actions, events or results "may", "could", "would", "might", "target" or "will" be taken, occur or be achieved) are not statements of historical fact and may be forward-looking information and are intended to identify forward-looking information.
In particular, but without limiting the foregoing, this Presentation contains forward-looking information pertaining to the following: the proposed terms and anticipated closing (and timing for closing) of the proposed acquisition of 66% of the issued and outstanding shares of Serato (the "Proposed Transaction"); the anticipated benefits and synergies of the Proposed Transaction; the anticipated financial results of the Company and Serato on a pro forma basis; the anticipated effect of the Proposed Transaction on the Company's revenue, revenue diversification, growth and deleveraging; the future uses of the Company and Serato's creative platforms; the Company's capital allocation and investment strategies; the anticipated position of Serato in relation to technological innovation in the music industry; and the future plans of Serato, the Company and its subsidiaries.
Forward-looking information is based on the beliefs of the Company's management, as well as on assumptions and other factors, which management believes to be reasonable based on information available at the time such information was given, including but not limited to assumptions relating to the ability of the Company to complete the Proposed Transaction in accordance with the terms and timing described herein, the ability of the Company to obtain the requisite regulatory approvals (including TSX Venture Exchange approval), and the ability of the Company to realize the anticipated benefits and synergies of the Proposed Transaction.
By its nature, forward-looking information is subject to numerous known and unknown risks and uncertainties, including but not limited to the Risk Factors (defined below). You are cautioned that the assumptions used in the preparation of forward-looking information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking information. Actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking information. No assurance can be given that any of the events anticipated will transpire or occur, or if any of them do so, what benefits the Company will derive from them. Unless otherwise indicated, the information in this Presentation is current as of the date of this Presentation and the Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise unless required by law.
This Presentation should be read in conjunction with the risk factors (the "Risk Factors") described in the Company's annual information form for the year ended December 31, 2023 and the Company's management's discussion and analyses for the three and nine months ended September 30, 2024 which are available under the Company's profile on SEDAR+ at www.sedarplus.com.
Further, certain statements included in this Presentation may be considered "financial outlook" for the purposes of applicable securities laws.
Any financial outlook made in this Presentation is made solely based on information available to the Company and represents the subjective views of the Company's management and management's current estimates of future performance as of the date of this Presentation and is subject to the same assumptions, risk factors and other qualifications as forward-looking information, as set out above, and is presented solely for the purpose of conveying the current anticipated expectations of the Company and may not be appropriate for any other purposes. Accordingly, actual results may differ materially from the results contemplated by the projections contained in this Presentation, and the inclusion of such information in this Presentation should not be regarded as a representation by the Company, Roth, Canaccord, the Company Parties or any other person that the results reflected in such projections will be achieved.
Figures are presented in Canadian dollars, unless otherwise noted.
Legal disclaimer
Non-IFRS Financial Measures and Serato Financial Information
This Presentation refers to certain financial performance measures that are not defined by and do not have a standardized meaning under International Financial Reporting Standards (termed “Non-IFRS measures”) such as “EBITDA”, “EBITDA Margin”, “Adjusted EBITDA”, “Adjusted EBITDA Margin”, “Net Debt / Adjusted EBITDA”, “Recurring Revenue” (or “ARR”)”, “Run-Rate Revenue”, and “Run-Rate Adjusted EBITDA”. Non-IFRS measures are used by management to assess the financial and operational performance of the Company. The Company believes that these Non-IFRS measures, in addition to conventional measures prepared in accordance with International Financial Reporting Standards, enable investors to evaluate the Company’s operating results, underlying performance and prospects in a similar manner to the Company’s management. As there are no standardized methods of calculating these Non-IFRS measures, the Company’s approach may differ from those used by others, and accordingly, the use of these measures may not be directly comparable. The Non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with International Financial Reporting Standards. See Appendix “A” for disclosures pertaining to Non-IFRS measures. Additional detail on the Company’s Non-IFRS measures can be found in the Company’s management’s discussion and analyses for the three and nine months ended September 30, 2024 which is available under the Company’s profile on SEDAR+ at www.sedarplus.com.
Recipients of this Presentation should be aware that all financial information with respect to Serato is provided for illustrative purposes only and is based on unaudited figures prepared by management of Serato for the 9-month period ended September 30, 2024. There can be no assurance that such financial information is correct or may not be subject to substantial revision.
Tiny Co-Founders & Leadership
Andrew Wilkinson
CO-FOUNDER & CHAIR OF THE BOARD OF DIRECTORS
Public face of Tiny, driving deal flow via network, writing, podcast, and social media presence.
Chris Sparling
CO-FOUNDER & VICE CHAIR OF THE BOARD OF DIRECTORS
Oversees the portfolio of companies on a board level and has extensive experience both as an operating executive and investor.
Focused on strategy and identifying future areas of growth both within the existing portfolio and future acquisitions.
Jordan Taub
CHIEF EXECUTIVE OFFICER
Appointed CEO of Tiny in June 2024, coming from the role of WeCommerce CEO, and has been with Tiny/WeCommerce for three years.
Previously at Constellation Software; worked directly with the Founder and was then responsible for leading investments, strategic finance and managing a portfolio of VMS businesses.
Mike McKenna
CHIEF FINANCIAL OFFICER
Joined Tiny in July 2024; previously the CFO of Lifespeak Inc., who he successfully led through their IPO in 2021.
Led development and sale of Mobile Klinik to Telus. Brings over a decade of experience in investment banking and led the technology, media, and telecom group at Scotiabank.
Austin Singhera
VP, INVESTMENTS
Joined Tiny in September 2020 and is responsible for Tiny's M&A and other corporate development activity.
Previously worked in investment banking at Greenhill & Co. and holds a Bachelor of Commerce from the University of Victoria.
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Tiny
A Leading Technology Holding Company
TINY KEY BUSINESS UNITS
Software & Apps - WeCommerce
Recurring revenue software and digital theme businesses supporting e-commerce merchants primarily on the Shopify platform.
Q3 2024 Revenue → C$13.5M
Digital Services - Beam
A group of leading design (UX, UI), engineering, brand positioning, and marketing agencies.
Q3 2024 Revenue → C$20.3M
Creative Platform - Dribbble & Creative Market
Leading social network and marketplace for designers and digital creatives + premier online marketplace for digital assets such as fonts and templates.
Q3 2024 Revenue → C$11.1M
Tiny Fund I
Investment fund established August 2020. Tiny Ltd. is a 20% LP and 50% GP.
Founded: 2016
LTM Q3'24 Revenue: C$198M
Q3'24 Adj. EBITDA Margin(1): ~16%
Tiny Fund 1 Capital Raised: US$148M
Q3'24 ARR(1): C$39M
Tiny Ltd.
HAPPYFUNCORP
Creative MARKET
Stamped
FOURSIXTY
dribbble
KNO
Cubit
Pixel Union
ARCHETYPE
CLEAN CANVAS
METEOR
MSI
OUT OF THE SANDBOX
WWR®
Tiny Fund
AEROPRESS®
girlboss
wholesale pet.com
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Note:
(1) "Adjusted EBITDA Margin" and "Annualized Recurring Revenue (ARR)" are Non-IFRS Financial measures. See "Legal disclaimer" and "Non-IFRS Measures" for additional information.
Transaction Highlights
Tiny plans to acquire a 66% stake in Serato Audio Research Limited ("Serato"), a global leader in DJ Software
- Leader in DJ Software with Majority Recurring Revenue Business Model
- Founded in 1998, Long Track Record of Consistent Growth and Profitability
- Strong Moat with Hardware Integrations Across Largest Manufacturers
- Expected to be a Transformational Acquisition for Tiny Driving Growth and Free Cash Flow
- Tiny's ARR is expected to increase by ~68% with the Acquisition of Serato
- Strong strategic alignment between Tiny and Serato at both the asset and public company levels
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Serato At A Glance
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9
2M+
Users Globally
US$31M
Run-Rate Revenue(1,2)
~34%
Adj. EBITDA Margin(1,2)
165+
Employees
~62%
Recurring Revenue(2,3)
#1
in DJ Software Market Share(4)
Well Aligned Management Team
Continuing to Operate Post-Transaction
Notes:
(1) Serato financial information is provided solely for illustrative purposes and is based on unaudited and unreviewed figures prepared by management of Serato for the nine months ended September 30, 2024. Run-rate revenue is derived by dividing the nine-month figure by a factor of 0.75 (nine of twelve months) to arrive at an annualized amount. The actual 12-month numbers are different, and the annualized figures are to help facilitate comparability for certain metrics, but should not be relied on as showing actual Serato numbers for the LTM period. All figures are subject to adjustment in accordance with audit and other customary procedures.
(2) "Run-Rate Revenue", "Adjusted EBITDA Margin" and "Recurring Revenue" are Non-IFRS Financial measures. See "Legal disclaimer" and "Non-IFRS Measures" for additional information.
(3) Recurring Revenue is equal to Subscription Revenue.
(4) Competition & Markets Authority's estimate based on 2023 revenue.
(5) Annualized figures provided solely for illustrative purposes and to help facilitate comparability for certain metrics. Readers are cautioned that these numbers may differ materially from Serato's year-end financial statements.
serato – Proven Record of Revenue Growth
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Notes:
(1) Serato FY ending March 31th
(2) "Run-Rate Revenue" is a Non-IFRS Financial measures. See "Legal disclaimer" and "Non-IFRS Measures" for additional information.
(3) Based on total revenue for the periods indicated.
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11
Industry Leading Product Offering
serato
AUDIO RESEARCH
Approach
Industry leading brand for DJs:
- Popular software suite for DJs: perform, mix, sample, etc.
- Tiering of offerings for all DJ types from beginners to pro (Lite > Pro > Suite)
- Integrated with 90+ pieces of different hardware
Offerings
~13% (1,2)
of software revenue
Approach
Software built for modern music making:
- Digital audio work station and production tools for music creation in the studio
- Bundling decades of studio product innovation into a single subscription offering
- Cross-pollination with DJ user base
Offerings
Note:
(1) Serato financial information is provided solely for illustrative purposes and is based on unaudited and unreviewed figures prepared by management of Serato for the nine months ended September 30, 2024. All figures are subject to adjustment in accordance with audit and other customary procedures.
(2) Serato's revenue primarily consists of recurring monthly subscriptions, one-time perpetual license fees, and affiliate fees. Software revenue includes both subscription and perpetual license fees from the sales of Serato's DJ and Music Production software.
Why Serato?
A proven market leader powering the global entertainment industry for the last 25 years
Adopted by Millions
Leading DJ Software by market share with 2M+ users
- Used by many top producers & DJs including Timbaland, Disclosure, Khalil, Melo-x, DJ Jazzy Jeff, A-Trak, Diplo, Lil Jon and many more
- 100+ songs lyrics mention Serato including songs from Styles P, Mariah Carey, T-Pain and Eminem
- 30-40% estimated global market share(1)
- Deep relationships with Pioneer, Reloop, Beatport, SoundCloud, Roland, Numark, Ableton, and others
Constant Product Innovation
Further solidify market leadership in DJ Software and drive growth in Music Production
Attractive Financial Profile
High degree of visibility on revenue and stable historical margin profile
Subscription
- Monthly DJ Software and Music Production software subscriptions
- ~62% of total revenue(2)
- ~35% CAGR on number of paid subscribers since Jan 2020 to Jan 2025
Perpetual License
- Lifetime DJ Software and Music Production Subscription
Affiliate & Other
- Affiliate income generated through longstanding partnerships with hardware providers
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Notes:
(1) Competition & Markets Authority's estimate based on 2023 revenue.
(2) "Recurring Revenue" is considered a Non-IFRS Financial measures. See "Legal disclaimer" and "Non-IFRS Measures" for additional information.
Transaction Details & Strategic Alignment(1)
- Acquisition of 66% of Serato’s outstanding shares for US$66 million (US$100 million on 100% basis)
- ~9.6x run-rate Adj. EBITDA
-
Upfront consideration settled ~64% in cash and ~36% in shares of Tiny
-
Potential performance based earnout payment in 2027 to further align growth objectives
- Calculated as 7.0x 2026 Adj. EBITDA in excess of US$10 million (multiplied by 66% – Tiny’s ownership in Serato)
- Conditional on Serato achieving a two year revenue CAGR of 8%
- First US$15 million of the earnout is settled in cash, with any additional earnout payable in cash or shares of Tiny, at Tiny’s discretion
Strong ongoing alignment with Serato at both the public company and asset levels, and through the earnout
Maintains Tiny’s net leverage levels at ~3.1x Adj. EBITDA(2)
Earnings per share accretive in near-term and boosts quality of revenue
Note:
(1) Serato financial information is provided solely for illustrative purposes and is based on unaudited and unreviewed figures prepared by management of Serato for the nine months ended September 30, 2024. All figures are subject to adjustment in accordance with audit and other customary procedures.
(2) Information regarding Tiny following the Acquisition reflects the unaudited pro forma financial results of Tiny and Serato on a fully consolidated basis. Pursuant to the terms of the Acquisition, Tiny will acquire 66% of the issued and outstanding shares of Serato. Adjusted to reflect Tiny’s acquisition of 66% of Serato, Tiny’s net leverage ratio would be approximately 3.5x.
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Expected to be a Transformational Acquisition for Tiny
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Expected Pro Forma Impact(1,2,3,4)
~21% increase in revenue
~68% increase in ARR
Expands Adj. EBITDA Margin
Leverage levels maintained at ~3.1x
Greatly Enhanced Financial Profile Post-Transaction(1,2,3,4,5)
| tiny | tiny + serato | |
|---|---|---|
| Revenue | C$198M | ~C$240M |
| ARR | C$39M | ~C$66M |
| Software Revenue % of Total | ~27% | ~35% |
| Recurring Revenue % of Total | ~20% | ~27% |
| Adj. EBITDA | C$31M | ~C$45M |
| Adj. EBITDA Margin | ~15% | ~19% |
| Net Debt / Adj. EBITDA | ~3.2x | ~3.1x |
Additional ~C$2M – C$4M in cash flow from fund distributions
Notes:
All figures converted to C$ at relevant historical FX rates.
(1) Serato financial information is provided solely for illustrative purposes and is based on unaudited and unreviewed figures prepared by management of Serato for the nine months ended September 30, 2024. All figures are subject to adjustment in accordance with audit and other customary procedures.
(2) All Tiny figures (except for ARR) are for the LTM period ending September 30, 2024. All Serato figures are for the 9-month period ending September 30, 2024 divided by 0.75 (9 of 12 months) to present the figure on an annualized basis. The actual 12-month numbers are different, and the annualized figures are to help facilitate comparability for certain metrics but should not be relied on as showing actual Serato numbers for the LTM period. ARR for Tiny is calculated by taking the recurring revenue for the three-month period ending September 30, 2024 and multiplying it by 4. All pro forma information is presented solely for illustrative purposes only and includes various estimates that are subject to material change. Please refer to the Disclaimer for risk factors that could cause actual results to differ materially. Past performance is not indicative of future results.
(3) "Annual Recurring Revenue (ARR)", "Adjusted EBITDA" and "Adjusted EBITDA Margin" are Non-IFRS Financial measures. See "Legal disclaimer" and "Non-IFRS Measures" for additional information.
(4) Information reflects the unaudited pro forma financial results of Tiny and Serato on a fully consolidated basis. Pursuant to the terms of the Acquisition, Tiny will acquire 66% of the issued and outstanding shares of Serato. Adjusted to reflect Tiny's acquisition of 66% of Serato, the "Tiny + Serato" column would read as follows: Revenue: ~C$226M, ARR: ~C$57M, Software Revenue % of Total: ~33%, Recurring Revenue % of Total: ~25%, Adj. EBITDA: ~C$40M, Adj. EBITDA Margin: ~18%, and Net Debt / Adj. EBITDA: ~3.0x and the "Expected Pro Forma Impact" would read as follows: ~14% increase in revenue, ~45% increase in ARR and leverage levels increased to ~3.5x
(5) Software Revenue % of Total is calculated by applying Tiny and Serato's pro-rated individual software as a percentage of revenue rates (27% and 74%, respectively) to the pro-forma revenue total.
14
Compelling Transaction Rationale
Tiny can achieve operational efficiencies around pricing, payment, digital marketing attribution, and cost consolidation
- Various avenues for organic growth including mobile release (increasing top of funnel), USB export (professionals need), cloud functionality, digital marketing (minimal spend today) and other operational best practices
- Significant research & development investment in recent years
- Clear visibility in the near- and long-term on new products and features
- Longstanding contracts with hardware providers to have Serato software pre-installed on devices
- Partnerships with some of the biggest names in DJ'ing and music production
- Industry leading global market share of 30-40%(1)
- One of the most recognizable brands in DJ'ing and music production
tiny
Note:
(1) Competition & Markets Authority's estimate based on 2023 revenue.
Serato Directly Aligns with Tiny's Strategic Priorities
Making sure that Tiny continues to be a great home for wonderful businesses
Focus on recurring revenue platforms
Continue to evaluate attractive opportunities and strategic tuck-ins
Increasing cash flow through disciplined investment in organic growth and cost rationalization
$4M Annual Cost Rationalization Initiative (full impact into 2025) and strategic organic growth initiatives
Managing and reducing debt levels across the Company
11% reduction in net debt from December 31, 2023 to December 31, 2024 from scheduled and unscheduled repayments
Incentive plans aligned to organic growth and long-term Free Cash Flow
Long term incentive plan designed to align management compensation with operating company performance expected to roll out in 2025
Notes:
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Additional Transaction Details
| Transaction Summary | • US$66.0 million base consideration for a minimum of 66% of the fully diluted issued and outstanding securities of Serato
— Base consideration consists of US$42.4 million cash and US$23.6 million in Tiny shares
• Potential earnout payment in 2027 payable in cash and shares with the first US$15 million payable in cash |
| --- | --- |
| Earnout Conditions | • The earnout is conditional on Serato achieving a minimum 2-year revenue CAGR of 8%
• The earnout is determined by multiplying the amount of EBITDA generated in 2026 that is in excess of US$10 million by 7x and then again by 66% (the acquired ownership level by Tiny)
• The first US$15 million of the earnout is paid in cash, with any additional earnout payable in cash or shares of Tiny, at Tiny’s discretion |
| Acquisition Multiple | • Base consideration represents an acquisition multiple of ~9.6x on run-rate Adj. EBITDA^{(1)}
• Earnout consideration represents an acquisition multiple of 7x EBITDA growth above US$10 million through 2026 |
| Approvals | • Subject to customary closing conditions, as well as the approval of the TSX Venture Exchange and New Zealand regulatory approvals |
| Closing | • Closing expected in Q2 2025 |
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Note:
(1) Serato financial information is provided solely for illustrative purposes and is based on unaudited and unreviewed figures prepared by management of Serato for the nine months ended September 30, 2024. All figures are subject to adjustment in accordance with audit and other customary procedures. "Run-rate adjusted EBITDA" is a Non-IFRS Financial measure. See "Legal disclaimer" and "Non-IFRS Measures" for additional information.
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Appendix A
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Tiny Fund I
GENERAL PARTNER
Tiny Ltd.
Tiny Ltd. holds 20.34% LP interest
CAPITAL RAISED
US$148M
TERM
10 year, with one 1-year extension
Established in August 2020
FEES AND CARRY
- 50% owner of the general partner of Tiny Fund
- Tiny is entitled to a 50% interest in the general partner's earnings, which includes 30% carried interest after an 8% hurdle
| INITIAL ACQUISITION DATE | FUND OWNERSHIP | ACQUISITION COST | |
|---|---|---|---|
| AeroPress | August 2021 | 93.8% | US$64.7M |
| Letterboxd | September 2023 | 60.0% | US$36.0M |
| befunky | March 2022 | 85.0% | US$14.8M |
| wholesalepet@com | January 2024 | 100.0% | US$9.4M |
| girlboss | September 2020 | 75.0% | US$1.5M |
| HATERRA | July 2023 | 50.4% | US$1.3M |
| y | September 2023 | 96.0% | US$0.9M |
| Abstract | January 2022 | 70.0% | nil |
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Focus on Debt Repayment
| SEPTEMBER 30, 2024 | DECEMBER 31, 2023 | |
|---|---|---|
| Cash Position | $18.6M | $26.9M |
| Debt Outstanding | $115.0M | $131.2M |
| Net Debt | $96.4M | $104.3M |
Total debt outstanding on September 30, 2024 was $115.0 million compared to $131.2 million on December 31, 2023.
The decrease of $16.2 million is due to debt repayments, net of drawings, of $19.1 million offset with foreign exchange fluctuations to debt of $2.8 million.
NET DEBT TO ADJUSTED EBITDA⁽¹⁾ RATIO
During Q4 2024, Tiny further reduced its leverage by paying down US$4.5 million, net of drawings, through a combination of scheduled and voluntary repayments.
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Note:
⁽¹⁾ "Net debt to Adjusted EBITDA" is a Non-IFRS Financial measure. See "Legal disclaimer" and "Non-IFRS Measures" for additional information.
Serato is Uniquely Positioned Amongst Its Peers
serato
- Globally recognized brand for over two decades with a loyal user base
- Used by many top DJs and producers: Timbaland, Disclosure, Khalil, Melo-x, DJ Jazzy Jeff, A-Trak, Diplo, Lil Jon and many more
Integrated with Hardware Partners
- Partnerships with some of the most popular brands in DJ'ing, who carry the Lite and Pro licenses to a vast customer base
- Serato benefits from partners' investment in promotion
- Able to maximize compatibility across numerous hardware products
Constant Product Innovation
- Multi-year product roadmap can help Serato software stay ahead of its competition
- Releasing new features
- Significant ongoing research & development investment
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Non-IFRS Measures
NON-IFRS MEASURES
Investors are cautioned that the non-IFRS measures used below should not replace net income or loss (as determined in accordance with IFRS) as an indicator of the Company's performance. These are supplemental measures management uses in managing the business and making decisions. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. These measures are not intended as a substitute for IFRS measures.
EBITDA and EBITDA Margin
EBITDA is defined as earnings (net income or loss) before finance costs, income taxes, depreciation and amortization. EBITDA is reconciled to net income (loss) from the financial statements.
EBITDA Margin is determined by dividing EBITDA by total revenue for the period.
EBITDA and EBITDA Margin is frequently used to assess profitability before the impact of finance costs, income taxes, depreciation and amortization. Management uses non-IFRS measures in order to facilitate operating performance comparisons from period to period and to prepare annual operating budgets. EBITDA and EBITDA Margin are measures commonly reported and widely used as a valuation metric.
Recurring Revenue and Annualized Recurring Revenue
Recurring Revenue consists of revenues generated through subscriptions that grant access to products and services with recurring billing cycles. The subscriptions are recognized over a time period in accordance with IFRS 15. Recurring Revenue is a part of total revenue disclosed in the financial statements, as determined in accordance with IFRS 15.
Annualized recurring revenue consists of the three month period ended September 30, 2024 recurring revenue and multiplying it by four to obtain the annualized amount.
Recurring Revenue represents revenues that are stable, and the Company expects to earn continuously. Recurring Revenue % is determined by dividing Recurring Revenue by total revenue for the year.
Recurring Revenue is frequently used to determine any indicators of future revenue growth and revenue trends. Recurring Revenue and Recurring Revenue % are measures commonly reported and widely used as a valuation metric.
Free Cash Flow, and Adjusted Free Cash Flow Post Debt Servicing
Free Cash Flow ("FCF") refers to net cash flows from operating activities before interest paid on debt facilities, and business acquisition costs. Free cash flow is also reconciled from EBITDA where it is the net of EBITDA after income taxes paid, interest paid on debt facilities and before non-cash expenses, business acquisition costs, and changes in non-cash working capital.
Adjusted Free Cash Flow Post Debt Servicing ("Adjusted FCF") refers to free cash flow net of acquisition-related compensation, non-recurring project costs, non-recurring professional fees, severance, non-recurring bad debt expense and the scheduled payments on debt facilities.
Free Cash Flow and Adjusted Free Cash Flow Post Debt Servicing are frequently used by securities analysts and investors when valuing a business and its underlying assets. It provides a basis to evaluate how much cash is available to repay debt and to reinvest in the Company, which is an important indicator of financial strength and performance.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA removes unusual, non-recurring, non-cash or non-operating items from EBITDA such as gains, losses or costs associated with the acquisition or disposal of businesses, share of loss from associates, fair value changes in investments, stock-based payments. The Company believes Adjusted EBITDA provides improved continuity with respect to the comparison of its operating performance over a period of time. Adjusted EBITDA is reconciled to net income/(loss) from the financial statements.
Adjusted EBITDA Margin is determined by dividing Adjusted EBITDA by total revenue for the year.
Adjusted EBITDA and Adjusted EBITDA Margin is frequently used by securities analysts and investors when evaluating a company's ability to generate liquidity from its core operations. It provides a basis to evaluate profitability and performance trends by excluding items that the Company does not consider to be controllable or reoccurring activities for this purpose, along with non-cash items which is an industry standard. Adjusted EBITDA and Adjusted EBITDA Margin are measures commonly reported and widely used as a valuation metric.
Non-IFRS Measures (Cont'd)
NON-IFRS MEASURES
Investors are cautioned that the non-IFRS measures used below should not replace net income or loss (as determined in accordance with IFRS) as an indicator of the Company's performance. These are supplemental measures management uses in managing the business and making decisions. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. These measures are not intended as a substitute for IFRS measures.
Net Debt and Net Debt to Adjusted EBITDA
Net Debt is determined by subtracting cash from debt outstanding.
Net Debt to Adjusted EBITDA is a ratio determined by dividing Net Debt by Adjusted EBITDA.
Run-Rate Revenue and Run-Rate Adjusted EBITDA
Run-rate revenue is derived by dividing the nine months ended September 30, 2024 revenue by a factor of 0.75 (nine of twelve months) to arrive at an annualized amount.
Run-rate adjusted EBITDA is derived by dividing the nine months ended September 30, 2024 adjusted EBITDA figure by a factor of 0.75 (nine of twelve months) to arrive at an annualized amount
Non-IFRS Measures (Cont'd)
| Q3'24 ARR (Tiny) | ||
|---|---|---|
| Recurring revenue | C$9.8M | 21% |
| Non-recurring revenue | C$36.9M | 79% |
| Total Q3 2024 revenue | C$46.7M | 100% |
| Q3'24 recurring revenue | C$9.8M | |
| Annualized | 4x | |
| Q3'24 ARR | C$39.2M | |
| Run Rate Revenue (Serato) | ||
| --- | --- | |
| For the nine months ended September 30, 2024 | C$31.8M | |
| Annualized for the entire year | 0.75 | |
| Run rate | C$42.4M | |
| Average foreign exchange rate, nine-months ended September 30, 2024 | 1.36 | |
| Run rate | US$31.2M | |
| Adjusted EBITDA Margin (Serato) for the nine months ended September 30, 2024 | ||
| --- | --- | |
| Net income | C$5.5M | |
| Income tax expense | C$2.5M | |
| Depreciation and amortization | C$0.8M | |
| Interest expense | C$0.3M | |
| EBITDA | C$9.1M | |
| Adjustments(1) | C$1.6M | |
| Adjusted EBITDA | C$10.7M | |
| Revenue | C$31.8M | |
| Adj. EBITDA Margin | 34% |
Note:
(1) Adjustments include unusual, non-recurring, non-cash or non-operating items such as unrealized foreign exchange gains/losses and research & development tax credits.
| Recurring Revenue (Serato) | |
|---|---|
| Recurring revenue | C$19.9M |
| Non-recurring revenue | C$11.9M |
| Total revenue for the nine-months ended September 30, 2024 | C$31.8M |
| % recurring | 62% |
Non-IFRS Measures (Cont'd)
LTM Adjusted Revenue and EBITDA (Tiny)
| Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Trailing Total | |
|---|---|---|---|---|---|
| Adjusted EBITDA | C$7M | C$7M | C$7M | C$10M | C$31M |
| Revenue | C$47M | C$51M | C$49M | C$51M | C$198M |
| % Margin | 16% |
Net Debt to Adjusted EBITDA (Tiny)
| Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | |
|---|---|---|---|---|
| Total debt | C$115.0M | C$121.1M | C$135.8M | C$131.2M |
| Cash | C$18.7M | C$22.5M | C$25.9M | C$27.2M |
| Net debt | C$96.4M | C$98.7M | C$110.2M | C$104.3M |
| Trailing Adjusted EBITDA | C$30.5M | C$31.8M | C$31.5M | C$27.4M |
| Net debt to Adjusted EBITDA Ratio | 3.2x | 3.1x | 3.5x | 3.8x |