Good day, and welcome to the GTN Limited Fiscal Year 2022 year-end earnings conference call. Today's conference is being recorded. Representing the company today are William Yde, Managing Director and Chief Executive Officer, and Scott Cody, Chief Financial Officer and Chief Operating Officer. Before I turn the call over to Bill, I would like to remind the listeners that this call is subject to the disclaimer and important information included in the company's year-end earnings presentation. With that, I'll turn the call over to William Yde, Managing Director and Chief Executive Officer. Bill.
Thank you. We are happy to report a solid improvement in the results for fiscal year 2022. Our revenue increased 12% despite a wide variety of economic difficulties in some of our markets. The revenue achieved for fiscal year 2022 was almost equal that of fiscal year 2020. The revenue increase led to a 22% increase in adjusted EBITDA when compared to fiscal year 2021. The government wage subsidy during this period partially hides the actual improvement in results. If the government subsidies of JobKeeper and Canada Emergency Wage Subsidy are disregarded, adjusted EBITDA increased 43% over fiscal year 2021. This is a very impressive increase. Although operating expenses increased during the period, they were still almost AUD 4 million less than fiscal year 2020 on comparative revenue. Australia revenue increased 14% over the prior year.
We felt this was a very good result, and the continued revenue rebound in Australia is most welcome as this is our largest and most profitable market. A big achievement in Australia is that during the year we were able to achieve our highest spot rates in history for TV, metro radio, and regional radio. Keeping our rates high will pay off as market demand increases. During the second half of fiscal year 2022, we began offering drone light shows in the Australian market for both advertising-supported shows and cash fee. Drone light shows involve the operation of many drones simultaneously to create images that are viewed by audiences in a manner similar to traditional fireworks shelling. Our first advertiser-sponsored event occurred at the Sydney Royal Easter Show, which was great exposure for our product. Canada revenue increased 11% compared to fiscal year 2021, 6% in local currency.
Toronto, our largest and most important market in Canada, entered the fiscal year in lockdown due to the pandemic, which led to a 4% decrease in revenue for the first six months of the fiscal year. Once the lockdowns and restrictions were lifted, our business started to perform much better, culminating in a 20% increase in revenue in local currency for second half of fiscal year 2022. Brazil once again became our fastest-growing market as revenue increased 47% compared to fiscal year 2021, 39% in local currency. Brazil revenue in local currency is just under pre-pandemic levels. We are happy with the resiliency this business has shown. United Kingdom revenue increased 4% compared to fiscal year 2021, 2% in local currency, recording its highest revenue year in history in local currency. The U.K. continues to be a meaningful contributor to the group's profitability.
Our ongoing strategy is to focus on maintaining our unparalleled network and sales infrastructure, as we believe this gives us the best opportunity to maximize revenue and profitability both now and in the future. While focusing on the current core business, which we believe has a good deal of further growth potential, we are also constantly looking for new opportunities that will complement our existing business, such as the investment in drone light shows. The drone light shows are high-impact visual messages that are supported by our high-impact audio traffic reports. Keeping a close watch on expenses helps us balance the demands of the core business with the investment for new growth opportunities while still increasing profitability. Our strong balance sheet has enabled our business to continue to be resilient regardless of market conditions.
I'll now turn the call over to Scott for a complete review of the financials and our capital management.
Thanks, Bill, and good morning, everyone. Revenue for fiscal 2022 increased 12% to AUD 160.1 million. Revenue increased in all of our operating geographies. When compared to fiscal 2021, Australia revenue increased 14%, Canada revenue increased 10%, Brazil revenue increased 47%, and UK revenue increased 4%. Revenue from our non-Australian operations benefited from favorable foreign currency movements. When measured in local currencies, Canada revenue increased 6%, United Kingdom revenue increased 2%, and Brazil revenue increased 39% compared to last fiscal year.
Adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, and amortization, adjusted to include the non-cash interest income generated by the financing component of our long-term station affiliation agreement with Southern Cross Austereo and excluding transaction costs, foreign exchange gains and losses, refinancing losses, and gains on lease forgiveness. Was AUD 17.1 million compared to AUD 14.0 million in fiscal 2021, an increase of 22%. We consider it appropriate to add the financing component of our long-term station affiliation agreement with Seven Network to EBITDA because EBITDA includes a large amount of non-cash station compensation expense related to the agreement. By including both amounts in adjusted EBITDA, we believe it provides a clearer view of the financial impact of the agreement. The adjusted EBIT increase was driven by a 12% increase in revenue for the period.
Operating expenses increased 10% compared to FY 2021. The largest portion of the increase was AUD 7.2 million, a 7% increase in network operations and station compensation expenses. The largest portion of this increase, AUD 5.5 million, was due to a 6% increase in station compensation. Selling, general, and administrative expenses increased AUD 6.6 million, with the largest portion of the increase due to higher selling expenses, primarily related to higher personnel costs from both commissions and bonuses earned on the increased revenue for the period, as well as expansion of sales staffing. AUD 1.8 million of the operating expense increase related to JobKeeper and the Canada Emergency Wage Subsidy, which are treated as a reduction in general and administrative expenses.
The group recorded AUD 0.7 million benefit from these programs in FY 2022 compared to AUD 2.5 million in FY 2021. Operating expenses related to the newly launched drone operations was AUD 0.7 million in FY 2022. Adjusted NPAT, which is defined as net profit after tax, adjusted to add back the tax affected non-cash amortization expense related to acquired intangible assets, increased 59% to AUD 7.4 million. The increase is primarily related to both the improved operating performance for the year as well as a AUD 0.7 million reduction in finance costs, primarily due to low amounts outstanding under our debt facility. During the pandemic, the group and its lender agreed to modify certain covenants and other terms of its debt facility.
As a condition of this relief, the company agreed to restrict distributions, including the elimination of dividends and share buybacks and other tightening of the terms of the debt facility agreement for the period of the modification. These modifications expired upon the delivery of the 31 December 2021 financials and related compliance certificate. Distributions, including dividends and buybacks, have reverted to the previous restriction of 100% of Adjusted NPAT. The group was in compliance with all its financial covenants for fiscal 2022 and continues to be so. We repaid AUD 20 million of our outstanding debt facility for FY 2022 while still maintaining a strong balance sheet without needing to raise additional capital. At 30 June 2022, we had AUD 34.8 million of cash, and our net cash balance, cash less financial liabilities, was AUD 1.2 million.
Due to the group's strong balance sheet and improved financial performance, the board has decided to declare a final dividend for FY 2022 of AUD 0.013. The dividend is unfranked. In addition, the company has announced it is resuming its share buyback that was canceled due to the economic impact of the pandemic. I will now turn the call back to William Yde for an update on fiscal 2023.
Thanks, Scott. July 2022 revenue increased 6% compared to July 2021. This increase was led by our Australia and Brazil segments, which have grown significantly over last year. UK and Canada had declines due to tough market conditions. Due to the large variable component of our station compensation agreements in the UK, the impact on profitability was mitigated compared to what similar revenue decrease would have in our other markets. August revenues for the current fiscal year are also expected to be up 6%-8% compared to August 2021. Once again, Australia and Brazil have led the growth in revenue, with each exceeding 20% or higher growth over last year. Further results are likely to be highly dependent on the economic conditions in the markets in which we operate.
However, we are pleased with the revenue performance for the first two months of fiscal year 2023. All four of our markets continue to be well-positioned with solid affiliate lineups, strong sales staff, and virtually no direct competitors. We have a strong balance sheet with ample liquidity and believe that everything is in place for strong financial performance as economic conditions improve. This ends our prepared remarks. We will now open the lines to questions.
Thank you to Bill and Scott. At this time, I would like to remind everyone in order to ask the question, press star, then the number one on your telephone keypad, and we will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Julian Mulcahy from E&P. Your line is open.
Hi, Bill. I just wonder if you could talk about the addition of inventory for the year. I see you have Australia about at 8% of inventory. I'm just wondering why you're doing that, given the sellout rates are so low, and they kind of get to 49% in the second half.
This all kind of relates back in returning back as we grow back towards normal. We used to have nine, all of the radio stations, and we dropped out of those right as the pandemic started. This roughly the spot rate that we were paying for those stations was about AUD 56 a spot. Some of those stations were recently leased by Ace Radio Broadcasters, and we were able to enter into an agreement with them to pick up those stations at a very, very minimal rate of roughly AUD 14 a spot. We believe that this increase in inventory did not cost us very much money at all, but certainly provides us for more inventory as we head into the July through December portion, which usually we have a need for inventory.
Very little additional inventory for very little additional cost from that and at very little expense, hardly any risk whatsoever. The additional costs that we have in compensation are related to we, you know, we have successfully renewed both the Nova and Smooth affiliation agreement for another period, and we have successfully renegotiated our affiliate agreement with HT&E.
with the, like, the sellout rates, I mean, it's been languishing for a while now around that sort of 50% mark. How does that? Do you think that's gonna move up much over the next year or we now have a problem with questions over the ad cycle?
Yes. Look, the sellout rate has been very high for them, very much higher in some of our peak months as demand occurs. The other thing to kind of keep in mind, Julian Mulcahy, is about 40% of this inventory is regional, which we don't have people out in the regions trying to sell this. The regional is there as an accommodation for big advertisers when they wanna reach the whole country. For instance, KFC advertises with us at quite a high level. One of the reasons they do is we cover every single one of the KFC restaurants in the entire country because we have such a large regional network. The you know, the sellout ratio for our metro stations is higher, and in the peak periods has been getting higher.
We very clearly expect it to expand as the market grows. The market grew, I think, something like 8% last year. We grew, I think, 14%. You have to kinda anticipate where the market's going and prepare for that. We're still operating at extremely reasonable levels of expense. We've got better and more inventory prepared for the July through December period that we're expecting to be a decent period.
Right. Okay. Just remind us, you know, how the business typically travels during sort of weakness in the economy in terms of advertising.
Look, the July through December is almost equal every year to the January through June period, with June being our highest month of all time and the October, November, December being very high periods. July, August are weak. January, February are weak. April's weak. Each one of them has their weak months. All in all, each, they also both have their strong months. Walking into October, November, December, we are extremely encouraged because we finished both July and August, you know, pretty close to 30% ahead of where we were last year. We know that the demand is returning, and our rates are higher. We should be able to produce a pretty good first half.
Okay. With the U.K., so U.K., you know, down on last year, but the last year's sort of half was quite elevated. It was just like that one-off blip, and it's back to a normal run rate on a half by half basis.
U.K.'s having a couple of things because the model is different than our others. It's strictly a cost per thousand, which is dictated by the agencies in the market. They don't have the ability to get more than what they have. If the people listening to radio, let's say it's $1,000 or 1,000 people, and it drops to 900 people, you have 10% less listeners, and you're gonna get 10% less revenue. Part of that drop was the listeners listening to commercial radio dropped in proportion to what was listening to the BBC. Now, just coincidentally, the book after the financial year ended, our audiences increased back up. We're hoping that that will come back.
The other problems occurring in Great Britain are obviously massive inflation, you know, the concerns over, you know, the neighboring war with Russia, you know, all kinds of issues. Great Britain's not having its best time. As we say, the U.K. market, because it's a variable cost market, when it's down for certain, our costs, you know, go down significantly. It doesn't hurt as much as the other two markets.
Okay. Canada, is it now totally clear in terms of all the markets are open, your sales people are out knocking on doors again?
Yeah. The markets are totally back open. As you can see, we had a really strong second half of the year there. July, the market in Canada in July was extraordinarily weak compared to where we were getting. So our July month in Canada was down. We don't expect that to be a long-term impact. The key category in almost all of our markets that we're missing is the auto. As you know, autos have been in short supply, and people aren't advertising. Auto brand is usually one of our very top categories. In Canada, pre-pandemic, we were getting about 26% of our revenue from the auto industry. Currently right now we're sitting at about 4%-5%.
We expect the auto industry to come back. We don't think the auto industry is over. I actually personally believe the auto industry will become a heavier advertiser because everybody's gonna be switching from petrol-driven cars to electric cars. Everybody's gonna be producing more electric cars. There's gonna be more demand to try to create brand awareness. We think in not too distant future auto advertising will be significantly higher. Certainly we don't think the auto industry is over, but it's weak. In Brazil and Australia and Canada, virtually every market is virtually every market's down AUD 5 million in Australian currency and revenue. Canada is even more. We had in Canada we had AUD 9 million in auto advertising in 2019.
That currently we have about something like AUD 500,000 now. As you can see, we're doing pretty good in the other categories, and we believe auto will bounce back. When it does, we should be able to see a pretty big spring in our numbers quite easily.
Cool. Just finally on the drone operation, how significant do you think that can become?
It's significant in a number of ways. Number one, it's very complementary to what we are. We're short message audio, and this is short message video. What the drone business does that no other business, no other advertising platform can do is it ensures the audience is watching it. When 500 drones go up in the air, it makes a spectacular display. Everybody stops, they get their phones out, and they start filming it, and they recirculate it on social media. It expands the revenue that we normally get. Two things happen. If we do a drone show, like we did with the Royal Easter Show this year, which was our first show, one, we get revenue from an advertiser on it.
That advertiser also, the event and the advertiser, may also buy additional radio time, traffic time from us to promote the show. We got revenue coming in saying, "Hey, you know, come out to the Royal Easter Show tonight. You can see a spectacular drone light show like you've never seen in Australia before," blah, blah. We promote people coming and doing it. We get revenue for doing that, and we get revenue from the advertiser for putting his ad in the thing. The Royal Easter Show was put on by Moccona Coffee. It was very, you know, a very beautiful show. Everybody loved it. Most of the people said it was the best part of the whole Royal Easter Show. But event.
At the very end, you know, it gets their attention and then it make a little me time, morphs into a big cup of coffee, steaming cup of coffee, and then it shows the Moccona logo at the end. That's kind of what it is. It's an advertising platform that's exactly like our other platform. It uses the show to grab their attention. Everybody's watching. When you see the video of the Royal Easter Show, the entire audience is filming, the entire audience is watching, and they see the ad. That's the advantage. Coupling that with our radio gives us a selling advantage to what we know we have. There's great synergy. The shows by themselves have a very large margin, and we should be able to be profitable.
We're just getting to the point where we can do a lot of shows because first goal of this year was to get some drones, get all the approvals, do a couple shows, then acquire more drones so we can do bigger shows. We have acquired the drones now, and we'll start in the second half of this first half. We'll start doing some bigger shows with profit. Every show's gonna be a little different depending on how many people are looking at it and how many people are watching, how many might recirculate. We estimate that the profitability per show can be between AUD 50,000 and AUD 100,000 per show. If you...
We're not quite there yet in terms of volume, but if you can do, you know, a show per week on each one of these, you know, your EBITDA should accreted EBITDA should be somewhere between AUD 2.5 million and AUD 5 million. We're gonna be doing these in both Canada, and we're gonna be doing them in Australia as well. Again, it's spectacular. Gets every advertiser's interest. It's hard to be in advertising and not interested. Allows us to talk to them more. Allows us to create another angle of profitability, and it also makes our advertising that we already got out there stick a little bit better. It gives us another driver for gathering additional revenue. It's like I say, there's lots of synergy. It's not a new business.
It's exactly what we do. We're using the same business model that we did with radio. You know, we're giving it to the venues free as long as we get to put an ad in there. Most people, instead of paying, you know, AUD 300,000-AUD 400,000 a day for a big show, will be getting it free from us.
Sure. Okay. Thanks, Bill.
Thanks.
Sure. Thank you, Julian. Your next question comes from the line of Mike Younger from Prime Value. Your line is open.
Yeah. Thanks very much. Bill, I was keen to get an understanding of how the Australian revenues that you saw in July and into August, how close they are to pre-COVID, because you had a 30-odd% uplift in the same time a year ago. Just how far away from pre-COVID are you there?
We're getting very much closer. What my goal was for was to get back to 2019 levels. That's my primary goal. I felt like we were probably two years away from that. But based on the way that we're starting out, I feel that we're ahead of that schedule. We may not be quite back to 2019 levels yet, but I think that we're definitely, you know, closing in on it. To answer your question, in July we were actually ahead of 2020 levels and fairly close, about 90% of 2019 levels. The same for August of this year.
We're pretty close to 2020 levels.
Yeah. Okay, great. With the OpEx side, as you mentioned, you've renewed smoothfm, you've cut a new deal with HT&E, and I guess they've acquired Grant Broadcasters in that regional area. What does this all mean for-
Yeah.
The Australian OpEx for fiscal 2023?
It means we'll pay slightly more for our regional inventory, but it's just AUD a few hundred thousand more for that. We have included all of the regional inventory we had before. It's important for us because we do have really the largest coverage of the regional markets in Australia. It's a big contributor to us, you know, getting the big advertisers around the country.
Right. As we think about CapEx in Australia for fiscal 2023, what kind of growth should we expect coming through?
From CapEx?
No, no. Operating expenditure.
Scott, I think you pretty much hold the line on the budget on that. You might wanna answer that one.
Sure. Yeah. Look, it's gonna obviously increase like it always does. It probably, you know, be probably mid-single digits% because you're gonna have most likely additional costs from the drone operations, and you're gonna have additional costs from compensation. You'll have additional costs, hopefully from the, you know, the small variable portion for the commissions and bonuses. Everything else should be fairly stable, you know. You know, obviously be a little bit of inflationary pressure 'cause there's inflationary pressure everywhere. I would say probably, you know, you'd probably plan around mid-single digits%.
Yeah. Great. Thanks, Scott. Then I guess on the CapEx side, we did see that tick up with the move into the drone market. What should medium-term CapEx look like for the business now?
I would say it's hard. You know, it's a kind of moving target because you don't know when the rebuilds are gonna come up, are still the biggest portion of it. But I would say AUD 5-6 million max would be the kind of that probably the range.
Great. Thanks very much, guys.
Hopefully it'll be lower.
Great. Thank you, Mike. As a reminder, if you would like to ask a question, please press star one on your telephone keypad, and we will pause just for any final questions. There are no further questions at this time. I would like to hand back over to Bill for closing statements.
Thank you. We appreciate you guys for participating in our conference call. Despite the economic challenges and lingering effects of the pandemic, we are confident about the future. We retain an excellent management team, a strong balance sheet. We've implemented strategic cost reductions and launched new growth initiatives, and we feel like we're positioned favorably to capitalize on the future advertising recovery. We look forward to speaking to you again after the happier fiscal 2023 results. Thank you.
This concludes today's conference call. You may now disconnect.
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