Good afternoon, everyone, thank you for participating in today's conference call to discuss Loop Media's financial results for the fiscal quarter 2023, ended December 31st, 2022. Joining us today are Loop CEO, Mr. Jon Niermann, and the company CFO, Mr. Neil Watanabe. By now, everyone should have access to the fiscal first quarter 2023 earnings press release, which the company issued earlier today at approximately 4:05 P.M. Eastern Time. The release is available in the investor relations section of Loop's website at www.loop.tv. In addition, this call will also be available for webcast replay on the company's website. Following management remarks, we'll open the call for your questions. Certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. The company's presentation also includes certain non-GAAP financial measures, including Adjusted EBITDA as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules.
You'll find reconciliation charts and other important information in the earnings press release and Form 8-K furnished to the SEC. I would now like to turn the call over to Loop CEO, Mr. Jon Niermann.
Thank you and good afternoon, everyone. The momentum from last fiscal year has carried into our first quarter, with revenue up nearly 5 x year-over-year, quarterly active units up 47% in just three months, and continued material improvements to our bottom line. Our ability to lean into marketing and convert those dollars into consistent, meaningful growth of our Loop Player footprint is a testament to our execution and deep expertise in the digital out-of-home advertising business. As this is the second earnings conference call, I want to briefly touch on our business model for those new to the Loop story, albeit in less detail than we went through last quarter. Loop is a media and martech company that focuses on digital out-of-home video streaming by curating, optimizing, and monetizing content across a network of screens at venues of all sizes.
We allow business to stream and control this content with a goal of increasing customer engagement and length of stay at their venues. This goal is accomplished through the use of our proprietary Loop Player, filled with our extensive library of licensed music and entertainment short-form content, which includes more than 100 music video channels and more than 50 non-music channels. During the quarter, we expanded our Loop Player distribution to new markets throughout the country and now have a presence in all of the top 25 U.S. metro areas. As of December 31, our quarterly active units grew 47% from September 30th to nearly 27,000 units, representing a quick and efficient return on our marketing investment. In fact, our marketing costs were up only $1.1 million year-over-year, while revenue increased by nearly $12 million for the same comparable period.
Our new customers added during the quarter include a diverse set of businesses, including restaurants, bars, gyms, college campuses, office buildings, and various types of retail establishments. As more Loop Players are distributed into the market, it validates our thesis that there is strong demand for a free ad-supported streaming service and that our go-to-market strategy with the Loop Player is working. More Americans are now watching streaming TV over cable TV, largely because they can select specific content whenever they want to watch it, as well as better economics. However, traditional streaming content of longer-form TV series and movies doesn't work in public venues, so the demand for a product like Loop that offers engaging, vibe-enhancing short-form content makes businesses eager to try our service.
We are an all-in-one solution offering all that they need in terms of appropriate content and digital signage for free, which is truly disruptive to the traditional pay TV model and additional digital signage charges that go away with Loop. The ability to customize our content quickly is another draw for businesses. We recently launched a variety of new content offerings, including channels that include major league sports highlights, African safaris, and even starscapes and cosmos. This wide range of content enables us to target such large demographic of customers. If you're a pet store, an Italian restaurant, a tire-changing location, or just about any type of retail you can think of, we can match content that enhances the customer experience, thus encouraging repeat and more frequent visits.
During the quarter, we renewed contracts with all three major music labels, Universal, Sony, and Warner, solidifying our music content offerings for years to come. It is important to note that these contracts include certain recoupable advances that are paid up front, so we will not see a further cash outflow for this content licensing like we have in our fiscal Q1. Our footprint in the digital out-of-home market is increasing because business locations have only recently had suitable streaming options made available for them, while consumers at home started transitioning nearly 10 years ago. As mentioned on our last conference call, per external reports, the digital out-of-home market is projected to reach over $33 billion by 2026. We are positioning Loop to be at the video forefront as we increase market share.
I wanna note that while there is positive momentum in our retail, media, and CTV ad spending vertical, we realize that we are not immune to the challenges presented by the broader macro environment. We are seeing headwinds and overall digital ad spend that started to emerge in the second half of this reporting quarter that has continued into calendar 2023. During the quarter, we also benefited from unusually strong seasonal advertising related to the political election cycle in November, which contributed to our outperformance and offset the challenging second half of our fiscal Q1. Despite those macro challenges, we continue to expect to generate meaningful revenue growth in fiscal 2023, ahead of industry trends, and believe that no business truly grows in a sequential linear fashion.
Turning to our sales channels, I'm happy to report that our affiliate program performed exceptionally well during the quarter, meaningfully contributing to our 47% growth in quarterly active units. Our focus and investment in this program throughout fiscal 2022 is beginning to pay off and is validating that our strategy is working. Although it took time for the program to gain momentum and ramp, it is now fully operational and delivering results. Another very important strategic step that we took as a company is the development of our direct sales efforts, which is starting to ramp this fiscal quarter. It's another natural evolution of our business where we focused on initial ad revenue via programmatic demand while we simultaneously grew our Loop footprint to a large enough position where we could start to generate interest for direct deals.
We are pleased to say that we are at this stage of growth and look forward to more of an impact from direct sales in the quarters ahead. Looking ahead, we believe the digital out-of-home retail media market will continue to gain an increasing share of advertising spend as several industry forecasts predict. With our strong pipeline of partners, an expanding distribution network, and our commitment to efficient new customer acquisition, we believe Loop is well-positioned to deliver another year of significant revenue growth in 2023. As mentioned on our last conference call, with over 32 million small to medium-sized businesses that we could target, the 27,000 Loop Players we currently have in circulation barely scratches the surface. With that, I will turn the call over to Neil to take you through our financial results. Neil?
Thank you, Jon, good afternoon, everyone. As we review our financial results, I want to remind everyone that our comparisons and variances commentary refer to the prior year quarter, unless otherwise specified. As reported in our earnings press release, revenues for the fiscal first quarter increased 395% to $14.8 million, compared to $3 million in the year-ago quarter. The sharp increase was driven by significantly more Loop Players deployed into the market, as well as a benefit from our Partner Platform business which was launched in May 2022. Going a layer deeper on our Loop Player penetration, as of December 31st, 2022, we had approximately 26,900 Quarterly Active Units or Loop Players in the market, compared to 18,200 active players on September 30, 2022, a 47% increase in just three months.
The player growth was driven primarily by our marketing efforts and increased focus on our affiliate program. It is important to note that the quarterly active units does not include any Partner Platform screens, which is an initiative we launched in May of 2022 with one of our partners on 17,000 screens. We're in the process of finalizing an additional approximately 13,500 screens for a total of approximately 30,500 screens across our Partner Platform business. Gross profit in the fiscal first quarter increased significantly to $5.7 million, compared to $1.6 million in the year-ago period. Gross margin rate was 38.4%, compared to 51.8% for the year-ago period.
The increase in gross profit dollars was driven by greater revenue, while the decline in gross margin rate was primarily driven by revenue mix, as the year-ago period did not include the launch of our Partner Platform business, which carries a lower gross margin but higher operating margin. When compared to the prior quarter, gross margin percentages was relatively flat. Total SG&A expenses in the fiscal first quarter were $8 million compared to $4.4 million for the year-ago period. The increase in SG&A was primarily due to greater marketing, customer acquisition, and retention spend, as well as higher public company costs related to our uplisting to the NYSE American. As a percentage of revenue, SG&A was reduced significantly to 53.4% versus 145.5% for the prior year quarter.
We expect to continue to improve our operating leverage as we significantly increase revenues while maintaining our expenses with moderate increases. Net loss in the fiscal first quarter of 2023 was $5.3 million, or a loss of $0.09 per share, compared to a net loss of $4.3 million, or a loss of $0.10 per share for the comparable period in fiscal 2022. Adjusted EBITDA in the fiscal first quarter improved to a loss of $1.6 million compared to a loss of $2.5 million for the same period in fiscal 2022. Turning to our balance sheet, cash and cash equivalents was $7.8 million on December 31st, 2022, compared to $14.1 million on September 30th, 2022.
The decrease was primarily driven by greater marketing spend and non-recurring expenses, including costs related to our uplist to the NYSE American and payments related to music licensing fees, as Jon highlighted earlier. As of December 31st, 2022, we had $9.2 million of total debt compared to $7.1 million on December 31st, 2021. We continue to exhibit tremendous growth both year-over-year and quarter-over-quarter. Our commitment to marketing and the expansion of our Loop Players distribution will be the primary drivers for our ongoing growth and driving profitability in fiscal 2023 and beyond. Despite the current market softness that Jon alluded to earlier, we plan to continue increasing penetration of our Loop Players and efficiently growing quarterly active units to be poised for growth and improve profitability when digital advertising spend picks back up in the months ahead. I'd like to thank everybody for listening today.
We look forward to providing further updates on our next conference call. This concludes our prepared remarks. We will now open it up for questions. Operator, back to you.
We will now begin the question-and-answer session. To ask a question, you may press star one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Darren Aftahi with Roth Capital Partners. You may now go ahead.
Hey, guys. Thanks for taking my questions. Nice job on the quarter, especially the bottom line improvement. Good to see. A few if I may. First, can you just talk about the overall macro environment, maybe where you're seeing areas of weakness and perhaps strength?
Sure. Hey, Darren. I think it's something we touched on last time. I think overall, as we know, seasonality is important. Q1 calendar is always the worst of the year. In terms of cyclical advertising spend, you know, everybody plans around that. I think that overall, we still are in an area where we're excited about the growth with CTV and digital out-of-home. If you look at all the reports and the industry trends, clearly advertising has had an impact and taken a dip. For our first quarter, we had a great part where the elections did extremely well, and then, you know, towards the second half and the holiday spend, it dipped off a little bit. Other than that, it just seems to be continuing as a lot of the reports are projecting overall.
Again, we're excited kind of where the fiscal year is going to go.
Great. Can you. Neil touched on the Partner program. Can you kinda speak to your pipeline beyond your existing partner, the one you're kinda layering on, and how traction is looking there maybe for calendar 2023?
For the partner network?
Correct.
Is that what you're talking? Yeah. Just for those that aren't familiar, we have two components to the business that we touched on, the Loop Player, which is our proprietary hardware. That's one where we saw the tremendous growth, and we had a large focus of that for this quarter. For the partner network, it's where we use other people's hardware, where we launched a partner last summer, and then we started rolling and testing into this next partner that we're planning to launch. We have multiple discussions going on in that phase that we plan to roll out over the year. It's a continued area of growth for us, Darren, that we're focused on, that we see continuing to grow. It just involves certain testing that we wanna make sure is right, because it is the other hardware.
It's just gotta be a great fit before we kinda go wide. I think you'll start to see some of that coming down the pipe.
Darren, this is pretty normal, you know, when we entered the partner network, you know, in May, you know, it was a test-type environment and then quickly converted to a full rollout. We have multiple partners that were in that testing stage now, and we're certainly anticipating, you know, that to be rolled out in, you know, months to follow here.
Great. A few more for me. On cost of goods and gross margin, the figure's been pretty steady around 38% the last two quarters. I know mix influences the gross margin, but just from a modeling perspective, how should we kinda think about gross margins going forward?
You're right, Darren. I think as we talked about the partner network carries a lower gross margin rate percentage, but it has no, in essence, expenses. The flow through to profitability is certainly very close to what the Loop Players are. Our plans are to lean into growing the Loop Players because we know that that's kind of our brand and also the area of future profitability and margin expansion. That being said, we're growing the partner network as well. From a mix perspective, I think your modeling percentages that you have are still kind of in line with what we're expecting.
it's leaning more toward, you know, the Loop Players versus the partner network as far as a mix as a percentage.
Hey, Neil and Darren, let me add a little more perspective to that. I think this is where growth is important, as you start to grow our footprints and getting to the level that we are, you know, we certainly have a little more influence in terms of the type of deals that we do. Lots of times those deals will have better margins as you start to grow. I'm sure you're aware of that, but it's worth pointing out. We're starting that stage where we think that'll have a positive impact.
Could I dovetail on that one, Jon? Your comment, and I guess maybe it's given in another question, but I saw the cash usage in the quarter. Can you quantify the upfront licenses, and maybe this is in the queue. I saw you put that out. I haven't got to it yet. As you think about content costs, you know, your business has ramped very rapidly over a 12- 18-month period. Like, do you have the ability to negotiate better content licensing deals going forward, even in real time, given how fast you've grown, or are you still too small of an entity to have that kind of leverage?
No, we do. Thanks for the clarifying question. That's what I was trying to get at earlier. Let me point out a couple of things there. You know, it's basically for the music side, as we mentioned, that there's an upfront and then you can recoup that back. Really, that's the only type of content that we have that type of relationship deal. The others are more of a rev share type of arrangement. As we grow the pipeline, clearly there's more leverage in terms of that share. I think that's on both of those fronts is going to be beneficial for us in quarters to come. It's an investment that we made on the music side to review everything initially, and that's going to pay off for us as we start to roll through the quarters.
All the other content is just pure rev share. That just, I would believe, gets better as we scale.
Great. Is there a quantifiable amount on the upfront license?
No. No, I mean, we don't, we don't disclose that part of the contract.
Got it. Just let me ask you another way. How much of the, of the upfront is actually recoupable on a percentage basis? Like, if you executed on all your KPIs.
A majority. About all. I can say that.
Fair enough. That's a good answer. I won't beat a dead horse. Two more for me, and then I'll pass it on. cash OpEx. I know you had some one-time last quarter with the uplisting and whatnot, $8 million sort of cash OpEx. I guess, how do we think about that as the business scales? said another way, like how fast could that $8 million scale and where are the kind of biggest areas of investment? Is that a pretty locked down number that has kind of marginal growth with new revenue?
I think, Darren, as you mentioned in our first quarter, we did have some non-recurring expenses related to, you know, our uplist and some contract renewals relative to the content amounts. That amount was about $3 million of the increase quarter-over-quarter. As we go forward, that continues to leverage and will be reduced as far as that cash burn amount that is from normal recurring. From your perspective, I think, you know, we had some one-time in nature incremental costs in Q1, and those, you know, start reducing significantly as we, you know, start pacing down the rest of the quarters. I think, the recurring OpEx you'll see clearly reducing each quarter as we pace along throughout 2023.
Got it. Just one last one for me. The 8,700 new QAUs in the quarter, I think, Jon, you spoke a little bit in terms of mix. I'm just kinda curious what verticals maybe you're over indexing, perhaps where you're seeing more momentum and traction, and then perhaps where are some other areas where you feel like you could make more traction.
That's why we called out some of those in the in the script. You know, we're really seeing it across the board. We're seeing it in bars and restaurants, all types of retail. Think of any type of retail, whether it's a tattoo parlor, an auto dealer, tire change, et cetera. We've had a nice bump in gyms, and we've added more college campuses that we're excited about, which is a focus area for us. The key thing that I wanted to call out really are those top 25 markets, because those are just obviously appealing for advertisers. As that footprint grows, we are very excited about what that could mean. That has been really where that delivery has been, and that's where our focus is gonna continue to be.
C-store, grocery, retail, medical, you name it.
Great. Appreciate you taking my questions. Keep up the good work.
Thanks, Darre n.
This concludes our question and answer session. I would like to turn the conference back over to Jon Niermann for any closing remarks.
I would like to thank everyone for joining the call today, as well as our team who continues to commit themselves to bringing this business to its next phase of growth. We're excited about where business is heading. I look forward to providing further updates on our next call. Take care, and thank you for joining.