Good afternoon, everyone, and thank you for participating in today's conference call to discuss Loop Media's financial results for the fiscal second quarter of 2023, ended March 31st, 2023. Joining us today are Loop's CEO, Mr. Jon Niermann, and the company's CFO, Mr. Neil Watanabe. By now, everyone should have access to the fiscal second 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's 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 compared GAAP measures in accordance with the SEC rules.
You'll find reconciliation charts and other important information in the earnings press release and Form 8-K furnished with the SEC. I would now like to turn the call over to Loop's CEO, Mr. Jon Niermann.
Thank you. Good afternoon, everyone. We provided in our public filings in March that we believe that we would receive $4.5 million-$5 million in second fiscal quarter revenue, but we actually ended up at $5.4 million. While down from our fiscal first quarter, this did represent an increase of 11% year-over-year. Also, as previously disclosed in our public filings, we saw headwinds and overall digital ad spend beginning in the second half of our quarter ended December 31, 2022, and continuing into our fiscal quarter for three months ended March 31, 2023, that unfortunately ended our streak of sequential growth quarters that have occurred since fiscal year 2021. This confirmed that we are not immune to the challenges the broader macroeconomic environment presents and its impact on advertising.
Like many companies that rely on the advertising market, we continue to see industry and macro headwinds in overall digital ad spend. In addition, these headwinds were exacerbated in our second fiscal quarter by the traditional seasonality of advertising, with the January to March quarter typically being the slowest for ad sales for us and the market generally. As a result, it was a challenging quarter in which we saw our revenue and our bottom line negatively impacted. We have focused on our business and operations and how better to insulate the business from external forces and factors, and how internally to reduce the impact of advertising market downturns like we've recently experienced. We believe the recent challenges in the advertising market will make our business stronger as we look to bolster the company's direct ad sales efforts and focus on key advertising geographies and venue types.
We believe our recent growth in distribution and the extended reach of our platform has set us up for future revenue growth. We believe the streaming TV for business sector is an early-stage growth market and are encouraged by the comparisons to streaming in consumer homes and where the market was a dozen years ago as streaming started to replace cable and satellite. Despite these advertising market and macro headwinds, we delivered over 57,000 active Loop Players/partner screens across the Loop platform at the end of March 2023, which is a 5.4x the 10,500 active Loop Player/partner screens we had at the end of March 2022. This includes over 32,000 active Loop Players in our O&O platform and approximately 25,000 screens across our partner platform at the end of March 2023.
This performance continues to validate our distribution model and the appeal of our content and technology stack across various venue types and geographies, which we believe will positively impact our operating results when advertising spend begins to increase. Given recent challenges in the overall ad market, we have focused our efforts on increased efficiency and cost-cutting while still maintaining our focus on and dedication to the continued growth of our business. As a result, we have made cuts and adjustments across several aspects of our business. Part of these changes were coincidentally just the natural result of where we are in the growth cycle, with the downturn in advertising demand and other challenges reinforcing changes that we were looking to make in any event. We are implementing a plan to reduce our overall operating cost, including labor, which will be reduced by approximately 20%.
Part of this reduction included integrating our Loop Media Studios division into other parts of the business. We also renegotiated or signed content licenses to reduce average content cost and found ways to make our content license margin stronger. In fact, we saw a very positive uplift in margin toward the end of the quarter in March. I would like to briefly touch on our business model for those new to the Loop story. Simply put, Loop brings streaming TV to businesses. We distribute our content advertising inventory to digital screens located in out-of-home locations, primarily through our owned and operated streaming platform of Loop Players, which is what we refer to as our O&O network, and through screens on digital pro-platforms owned and operated by third parties, which is what we refer to as our Partner Platform.
We believe our long-term business model of providing free streaming TV to businesses through our free to the user Loop Player will make the distribution growth in our O&O platform more resilient than a subscription-based business model or one that requires an end user to provide a credit card or other payment information. Our larger distribution footprint has increased our monthly video impressions viewed, which we estimate now to be over two billion, the average number of viewers estimated in each location across our O&O platform. Our new customers added during the quarter, once again, include a diverse set of businesses such as restaurants, bars, gyms, college campuses, office buildings, and various types of retail establishments. More Americans are now watching streaming TV over cable, 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 their traditional pay TV model and additional digital signage charges that go away once you get Loop. A very important strategic step that we recently took as a company is the development of our direct ad sales efforts, which are ramping up in the current fiscal quarter. The growth in our distribution referred to earlier has allowed us to make a greater push into direct sales during our current fiscal quarter, beyond our traditional sole focus on open exchange programmatic digital advertising.
Our reliance on the programmatic open exchange as our main source of revenue made us vulnerable to the dramatic downturn industry-wide in that ad sector. We are correcting that by building up our direct sales function. Direct ad sales typically result in higher CPMs for advertising inventory and better, more predictable quality of revenue. We believe the scale of our distribution platform and the premium quality of our content makes us attractive to companies wishing to advertise directly in digital media outside of the home, extending their audience reach further. In addition to these efforts, we have assembled a efficient and focused direct sales team and expect to see the result of their efforts over the course of the second half of fiscal 23.
Direct ad sales typically require a minimum threshold of distribution reach before it can be deemed scalable, and our recent distribution growth has allowed us to generate more interest from a greater number of ad sales buyers. We are pleased to say that we are at the stage of growth now, and look forward to more of an impact from direct sales in the quarters ahead and becoming less dependent on programmatic advertising demand. Turning to our sales channels, I'm happy to report that our affiliate program for the distribution of new Loop Player installations to our digital out-of-home customers performed exceptionally well during the quarter, meaningfully contributing to our 22% growth in quarterly active units from the end of the period prior.
Our affiliate program provides thousands of affiliate members nationwide with an opportunity to promote and distribute our proprietary Loop Players to out-of-home customers in return for an affiliate distribution fee. Our focus and investment in this program throughout fiscal 22 are beginning to pay off and is validating a key part of our distribution strategy. 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 and 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 the second half of 2023.
With over 32 million small to medium-sized businesses that we could target, the more than 32,000 Loop Players we currently have in circulation, along with our 25,000 partner platform screens, represent a small percentage of the opportunities that we believe are available to us. 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 wanted to remind everyone that our comparisons and variances commentary refer to the prior year's quarter, unless otherwise specified. As reported in our earnings press release, revenues for the second first quarter increased 11% to $5.4 million, compared to $4.9 million in the year-ago quarter. The increase was driven by significantly more Loop Players deployed in the market, as well as the benefit from our partner platform business launch in May 2022, offset by a general slowdown in the overall digital advertising spend due to the macroeconomic environment.
Going a layer deeper on our Loop Player penetration, as of December 31, 2022, we had approximately 26,900 quarterly active units or Loop Players in the market compared to approximately 33,000 active units as of March 31, 2023, a 22% increase in just three months. The Player growth was driven primarily by our marketing efforts and increased focus on our affiliate program. It's important to note that quarterly active units do not include any partner platform screens, which is an initiative we launched in May 2022 with one partner on 17,000 screens. Our current partner screens as of March 31, 2023, is now 25,000. Gross profit in the second quarter increased slightly to $1.36 million compared to $1.4 million in the year-ago period.
Gross margin rate was 29% compared to 34% for the year ago period. The increase in gross profit dollars was primarily driven by new contracts with reduced average content cost. When compared to the prior quarter, fiscal Q2 gross margin decreased primarily due to the lower revenue and recurring content cost. The increase in gross profit dollars was driven by increased revenues, 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 a higher operating margin. When compared to the prior quarter, gross margin percentages were relatively flat. Total SG&A expenses, excluding stock compensation and depreciation and amortization in the fiscal second quarter, were $7.8 million compared to $4.7 million for the year ago period.
The increase in SG&A was primarily due to greater marketing, customer acquisition, and retention spend. We anticipate an improvement of our operating expense leverage in the second half of our fiscal year as we seek to increase revenues while taking action to reduce the percentage of our SG&A expenses in both headcount, marketing, and operating expense efficiencies, as discussed by Jon. Net loss in the fiscal second quarter of 2023 was $9.8 million or a loss of $0.17 per share, compared to a net loss of $5 million or a loss of $0.11 per share for the comparable period in fiscal 2022. Adjusted EBITDA in the fiscal year second quarter was a loss of $5.6 million compared to a loss of $3.0 million for the same period in fiscal 2022.
Turning to our balance sheet, cash and cash equivalents were $4.7 million on March 31st, 2023, compared to $7.8 million on December 31st, 2022. We are managing our cash and have taken steps toward improving the days of our outstanding accounts receivable, negotiating improved vendor payment terms, and overall good expense control. As of March 31st, 2023, we had $9.1 million of total debt, compared to $7.1 million on March 31st, 2022. We continue to exhibit strong Loop Player growth both year-over-year and quarter-over-quarter. Our commitment to marketing and expansion of our Loop Player distribution will be the primary drivers for growth and driving profitability in the future.
Despite the current market softness that Jon alluded to earlier, we plan to continue increasing penetration to our Loop Players and efficiently growing quarterly active units to be poised for growth when digital advertising spend increases. We are focused on increasing our revenues, gross margins, and controlling our expenses based on our current forecast as we plan to continue to reduce the Adjusted EBITDA loss on a quarterly basis. I'd like to thank everyone 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.
If you would like to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. Our first question comes from Darren Aftahi with Roth MKM. Your line is open.
Hey, guys. Good afternoon. Thanks. Just give me my question. Jon, maybe could you just talk about in general, it looked like your business under indexed a little worse than maybe what the broader ad environment did or at least has been reported thus far. I'm just kinda curious if you just kinda talk about the March quarter then maybe how things have trended post that in months of April and May.
Hey, Darren Aftahi. Yeah, that's why we talked about and called out the open exchange programmatic, which we're solely dependent on. You know, if you look at our growth, really last fall is kinda when we hit the scale to where we could start looking at direct. You know, it takes a little bit of the time to build that. We've kinda really got started getting into that at the end of Q2, and that's increasing towards Q3. I think that sole dependency, if you look at the overall ad market, that open exchange really took a hit, and that's where we were living. As we kind of talked about fixing that vulnerability was just a matter of our growth cycle, frankly. That's really the only way it could have gotten it that worked well up to that point.
Going forward, we can't be dependent on that. I think that will explain... Again, it doesn't matter about the platform size. When there's no ad fill coming in, the revenue's gonna take a hit like it did. We said going forward, we're more prepared to do that. To terms of just specifically, obviously, I can't talk about that, you know, where it's going, but we're always keeping an eye out for how things are shifting in the industry and any signs going forward that we could adjust to.
Just as a follow-up on direct ad sales, like, is everything in place for that to be impactful in the current quarter we're in?
Yes. It's in place, and the team is making some great progress in that area, already with some things coming across the line.
Great. Two more maybe. Your pipeline for new distribution deals, how is that looking? I believe you had 30,000 partner screens as the opportunity, and I think you said you have 25,000 live. Just kind of what's the timeframe for getting the additional five plus on the network?
In the latter part, it's really just a matter of testing and when they open up and expand. You know, if you kinda recall when we started that, we started with 5,000 and then, you know, after that we're all tested and it worked well, it increased to 17. I'd say it's very similar to this. It's just really a function of testing and the partners being ready to go and expand it. That we believe will obviously have an impact going forward. I think overall the pipeline we're pleased with. There's, as we alluded at the end of the call, there's a big green field for everybody in this industry that is looking for streaming out of home.
Some of the longer tail deals that we've been working on for a while, you know, those obviously the time for those happening could be closer. We feel good about what's in the pipeline and down the road ahead.
Last one for me. Are you guys done with your payments on your music license renewals?
Neil, you wanna jump into that?
Yeah. Those pretty much done for the next bit of time, Darren. I think we had talked on the previous conference call that we had renewed, you know, our content partner licenses in the first quarter, primarily most of them. They go for about a two-year agreement. We don't have any renewals coming up for a bit of time on the primary three that we probably referenced with you in the past.
Darren Aftahi, I wanted to just add color to that. I mean, it's the same as direct sales. Once you hit a certain scale, you know, as you know, we are able to do better deals. As Neil Watanabe kind of explained, redoing some of those content deals had a positive impact on the margin. In terms of where we are with content, again, we feel positive.
That's helpful. Thanks, guys.
Thank you.
Thank you. As a reminder, to ask a question, please press star one one. Our next question comes from David Marsh with Singular Research. Your line is open.
Hi, guys. Thank you for taking the questions. I think I wanted to start with the comment about about the expense reduction. I wasn't sure if I heard you correctly. I thought I heard 20% reduction in expenses, and I wasn't sure if that was tied to a reduction in force or if there were just ongoing expenses that you were able to, that you're able to target that aren't labor.
is that?
That-
Yeah, go ahead, Neil. Go ahead. You got it.
Jon's reference specifically on the 20% was related to payroll and labor, and that was not obviously the only area of expense reduction. We looked at other areas and at operations and marketing costs that, you know, we also have enacted that will be seen reflected in Q3 and Q4 in the back half of the year. There's just been an overall leveraging of expenses and, you know, with the goal of improving profitability and cash flow, et cetera.
To your answer, that 20% was specifically related to the, you know, headcount, labor reductions, partly due to what Jon had talked about in the early part of the call with the kind of reformation of our one group for content creation, et cetera, that, you know, has been sort of applied and moved into, you know, other parts of our business.
Yeah. I think also it's worth pointing out with kind of the evolution of the business, it was a good time for us to repurpose ahead and have somebody really focused on operations and diving into efficiencies and cuts there. I think we'll continue to discover some new things. To Neil's point, we're looking at several areas across the board, but that was labor specifically, that figure.
That's, that's helpful. Then could you just talk about liquidity? Obviously, the cash came down a bit with the loss during the quarter, but, can you just talk about your liquidity position and, if you feel comfortable that in terms of the position and whether or not you feel like there could need to be a capital raise or if you feel like you have what you need, you know, on hand and currently available?
You want me to take that one, Jon, or?
Yeah, go ahead, Neil.
Sure. you know, as it relates to liquidity, we obviously have clearly been focusing on, you know, improving our cash burn. Part of that starts with the operating components of, you know, increasing revenue, improving gross margin and reducing expenses. Sequentially through the remainder of the year, we certainly expect to see progress in all those areas as a result of that. In addition, you know, we are in process of, we have a credit facility, and we're in process of looking and evaluating how as our revenue grows, so does our receivables, which is basically collateral for our borrowing line.
As a result of our increased revenue that we're expecting, you know, that allows for us to, based on the normal and our current process and agreement, allows us to flex our accordion, you know, from currently where it's at a $6 million limit, you know, up to eight and then, further from there, you know, later in the year, we certainly anticipate that there'll be more borrowing capacity. That's an avenue of opportunity for us. You know, we're obviously exploring, you know, other options, you know, to evaluate capital raise. You know, we just completed our quarter.
What I can tell you is based on, you know, our forecast and our evaluation of all our cash needs, we were able to support that we have the ability to fund the operations and the budget for the next 12 months.
Yeah, that's perfect. Just kind of, just shifting gears a bit, with regard to the advertising, obviously, you know, in the last cycle, of, you know, political spend, you guys really didn't have, the screen distribution that you have now. Is political something that you think that you guys can capture? Have you had any, early indications of interest in that particular space?
Yes. We actually did benefit from that in November. I mean, it was to your point, we weren't as big then as we are now, but we saw very positive traction in that area. That is something that we're open to. It's something that works out of home. Yeah, whenever those cycles come around, we'll be ready for it.
Great. That's really helpful. Well, good luck, guys. Keep pounding away. Got a lot of faith in you.
Thanks, David. Appreciate it.
Again, to ask a question, please press star one one. There are no further questions at this time. Let's turn the call back over to Jon Niermann for closing remarks.
We appreciate it. Thank you, everybody, for taking the time to join us today. That will end our call. Appreciate you dialing in. Thank you.
Thank you. This concludes the program. You may now disconnect.