Good morning and welcome to the Tiny Ltd. Q3 2025 Results Conference Call. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press Star and the number one on your telephone keypad. If you wish to withdraw your question, please press Star followed by two. Before we start, we ask that you take a moment to read the disclaimer at the beginning of the slides that accompany this presentation, as it contains important information. We would also like to remind you that all amounts discussed on this call are denoted in Canadian dollars unless otherwise indicated.
Please note that statements made during this call may include forward-looking statements and future-orientated financial information regarding Tiny and its business, and disclosure regarding possible expectations, events, conditions, or results that are based on information currently available to management, which indicate management's expectation of Tiny's future growth, results of operations, business performance, and opportunities. Such statements are made as of this date hereof, and Tiny assumes no obligation to update them or revise them, except as required by applicable securities laws. Such statements involve significant risks, uncertainties, and assumptions, and are not a guarantee of the future performance or results. A number of these risks and uncertainties could cause results to differ materially from the results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information.
Please refer to the forward-looking statements disclaimer in the slides accompanying this presentation and in the company's press release issued today for additional information. We use non-IFRS financial measures to help investors understand our operating performance. Non-IFRS financial measures may not be comparable to similarly titled measures used by other companies and should be considered along with, but not as an alternative to, measures calculated in accordance with IFRS. I would now like to turn the call over to Jordan Taub, CEO from Tiny for today's earnings call. Please go ahead, Jordan.
Thank you. Good morning, everyone, and thank you for joining Tiny's Q3 earnings call. I'm joined by Mike McKenna, our CFO, as always. We are really pleased with our results this quarter, with significant improvements in adjusted EBITDA, free cash flow, free cash flow per share, and both revenue and recurring revenue. I'm also excited to announce that we completed the sale of Tiny Capital's first acquisition, which was done in 2017, a company called WeWork Remotely. We sold this business for approximately CAD 9.8 million to a strategic buyer. The sale represents a great outcome for Tiny, resulting in over 50% IRR and really demonstrates our approach to disciplined portfolio management. Serato continued to meaningfully contribute to the improvements in our financial results in the quarter, announcing its Spotify integration. They now integrate with all major streaming platforms following the recent Apple Music integration as well.
Finally, we increased our LP stake in Tiny Fund One, purchasing units at a discount to current NAV, and remain excited about the performance and growth opportunities at the fund companies, namely Letterboxd's continued momentum and Matina's US Whole Food expansion. Moving on to revenue. Total revenue for the quarter increased 16% from Q3 2024 and 8% from prior quarter. This was, of course, mainly driven by the Serato acquisition and also driven by strength in our Digital Services segment. Serato is expected to continue driving growth in Q4 given near-term roadmap and some significant pricing initiatives. Creative Platform is also stable quarter over quarter, with Dribbble Services Marketplace, GMB, growing significantly quarter over quarter. We expect this to drive future growth in transaction fees, subscriptions, and designer advertising. Sorry, I'm just waiting for the slide deck to catch up here. One moment.
All right, on to growth in recurring revenue. Recurring revenue was also driven by Serato, along with continued focus in our software portfolio, including growth at Media.net and WooCommerce. We continue to prioritize investment in growing our recurring revenue base and expect momentum to continue given our investments in roadmap and sales initiatives across Serato and the portfolio.
Okay, Jordan, if we're on to the adjusted EBITDA slide, I'll take over on this one. Apologies that the slides have been a little bit slow moving here this morning. I think the adjusted EBITDA one is up, and it's another good one for us to talk about. I'll take this one. Thanks, everybody, for joining the call this morning. This was a strong quarter for adjusted EBITDA. It was our best quarter of the year. It showed very continued strong momentum. I think a couple of key points here are really around the margin, especially when we're comparing year over year and LTM. You can see that on a year-to-date basis and on a quarterly comparative basis, we really are approaching that 20% goal that we had sort of suggested earlier in the year that we thought we could get to.
This comes from very good, strong, continued cost discipline across the portfolio, as well as meaningful improvements in operations. That, again, comes across the portfolio. Serato has obviously helped this, and Serato continues to contribute to this, positively impacting margins. I think that really the results here are really driven from the work we've been doing across the portfolio. It's great to see that we're going to be able to approach that 20% margin that we outlined for our objective, really for 2026, and we're going to get there probably in here very shortly. Very happy with the performance here, and we'll look forward to continuing to be very focused on this metric as we roll forward. On to cash flow, the free cash flow. Maybe just a couple of sort of housekeeping notes before we get into much detail here.
The per-share metrics that we talk about, we've done these on a post-consolidated basis, even though the consolidation was done on October 1st. All the per-share metrics that you'll see in the financial results and the presentation here are done on a consolidated basis because that's the treatment of it as a post-quarter event. We've provided the free cash flow per-share metrics on a consolidated basis for both current period and the pre-periods for proper comparison. Obviously, a very significant increase on those free cash flow per-share metrics. That's a great outcome, and it's not really just driven by the consolidation. I mean, this is because of the operations.
The free cash flow numbers do not include the proceeds from the sale of We Work Remotely, but they do include the cash that came in from the trademark licensing agreement that we touched upon in Q2 and noted that we would receive the cash for in Q3. We did receive that cash. That impacts the Q3 numbers. Even when you're thinking about that Q3 2025 number of CAD 15.1 million, with some of that being impacted from the licensing agreement, obviously still a very significant increase, excuse me, over the same quarter last year as well as our previous quarter. Really strong results here. We're really happy with where the cash flow numbers are going. This was a very important part of the roadmap that we outlined at the start of the year. We're delivering on that.
As it relates to our adjusted free cash flow post-debt servicing, again, you can see a very significant increase in the numbers there. I'll get to the debt repayment later, but we've prioritized the debt repayment, and in doing so, still really enhanced our cash flow. Very much positioned well for future capital allocation opportunities and really delivering on the free cash flow metrics for our shareholders.
Thanks, Mike.
I'll turn it back to Jordan to talk about the fund for a minute.
Sounds good. As we outlined in the previous quarters, we're trying to disclose more on the fund and tell the story of some of the fund companies, given how excited we are about them and how much value we see in the fund. Quickly, year-to-date revenue increased slightly across the fund. A little bit of detail there. We're still seeing significant growth in both users and revenue at Letterboxd. This is offset by a little bit of seasonality in other fund companies, but they continue to perform well. It is also offset by some expected declines at one of our fund companies, Abstract, which was actually purchased for zero capital with the intention of winding it down over a two-year period. That is actually now coming to an end, and it is driving a lot of the offset against year-to-date revenue.
One of our significant fund companies, Aeropress, continues to innovate. They're releasing exciting new products. Last quarter, we were proud to announce that the premium was selected as one of the best inventions of the year by Tiny magazine. Given that we did repurchase some LP units at a discount to net asset value during Q3, it's important to note that we continue to view the Tiny fund as an attractive opportunity given the performance and the potential future value. We would still consider buying more fund LP units going forward, and we'll continue telling you the story of the fund and the various companies that we have invested there. I'll pass it back to Mike to give an update on debt.
Thanks, Jordan. Again, this is another place where we've really been focused over the past 12 months, or really the past 18 months since Jordan and I started working together here. I think this is a really great outcome for the business for where we are. Our net debt to Adjusted EBITDA ratio, it's improving because we're both improving our earnings, and we're also very focused on debt repayment. We repaid about CAD 10.4 million of gross debt in Q3. Following Q3, on October 2, we repaid an additional CAD 5 million of debt. You'll note the numbers as of September 30, those numbers have come down even further since the end of the quarter. I think that just, again, shows the importance of our commitment here. The rationale for this is that we do want to be well-positioned for future capital allocation opportunities.
The deleveraging has been really important for us, and we now really sort of have the flexibility to move forward. We've also noted on the chart on the top right that net debt to Adjusted EBITDA ratio, we did show the leverage that we took on to get the Serato acquisition done in Q2 of 2025. We're already down significantly from that. Again, really demonstrating our ability to effectively use our cash properly to manage the debt levels, position ourselves well for future capital allocation. More importantly, delivering on what we said we would do when we acquired Serato, which was ensure that, yes, while we were taking on some leverage, we had a path to meaningful deleveraging. We'll be continuing to focus here as we roll forward, again, continuing to position ourselves well for future opportunities.
Thank you, Mike. I'll take this last slide in terms of summarizing where we sit on our roadmap and really kind of keeping ourselves accountable to the strategic priorities and the key objectives that we set out at the beginning of the year. Really almost set out at the beginning of both mine and Mike's tenure as CEO and CFO. We made really strong commitments to increase cash flow, focus on growing recurring revenue, made commitments to reducing our debt and reducing our leverage ratios, and then really made a strong commitment to finding great acquisitions and being good capital allocators. I believe that we're continuing to execute and showing that we're hitting all of our key strategic priorities. I think this quarter really demonstrates that.
There are meaningful improvements in profitability, free cash flow per share, and the Serato acquisition is driving growth in recurring revenue and really profitability. We got down to our target range of net debt to EBITDA, I'd say even earlier than we had announced in the previous quarters. This was done through debt repayment, increases in cash flow, and profitability. We really do remain committed to keep deleveraging in order to give us flexibility for future opportunities and capital allocation. Now, with respect to the fund, we increased our stake in the fund. We continue to increase the transparency around the fund companies and their performance. We really are excited about the performance of the fund and the portfolio given the momentum, the growth opportunities, and the performance of those companies. Finally, we remain disciplined. We're looking for high-quality acquisitions.
We have a really strong pipeline of attractive tuck-ins and potential platform acquisitions. We are looking at our previous acquisitions like Letterboxd or Serato and some of the highest-quality businesses that we have bought over the last year, year and a half. The bar is high. We are being disciplined in looking at those, and we are excited to potentially do something over the coming quarters. Finally, we announced the implementation of our NCIB, given our view of the company's intrinsic value compared to its current market price. This is just something that is in our capital allocation toolkit, and we feel like we are in a good position given our current cash flow, current cash position, and our current balance sheet and leverage position. That wraps up a really successful quarter for us, and I will open it up to anyone who has any questions.
Thank you very much, Jordan. To ask a question, please press Star followed by One on your telephone keypad now. If you change your mind, please press Star followed by Two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Doug Taylor from Canaccord Genuity. Your line is open, Doug. Please go ahead.
Yes, thank you. Good morning. Let me start by asking a couple of questions on some of the organic growth puts and takes. You have some positive discussion points on Digital Services and some of the Software and Apps, but e-commerce and Creative Platform in general appear to continue to be a bit under pressure. You made some reference to pipeline related to enterprise deal timing and things like that. Can I get you to expand on some of those areas and when you might expect some of those businesses to flip positive here?
Thank you, Doug. Yes, I can elaborate on that. Specifically related to WooCommerce, some of that pressure is really related to decline in themes revenue driven by the kind of falloff of one-time piracy recovery. This is something that we've discussed before. We bought some of these businesses with the intention of going out, finding a significant amount of DMCAs or stores that are using our theme licenses without paying for them, and then recovering that revenue. In 2025, we had a significant amount because we were rolling through a big backlog of those. Now we're done. We are seeing some pressure in terms of revenue there, but we're working to maintain our place in the theme store and really stabilize that business going forward while also investing in the software and apps portfolio. Things like wholesale functionality or adding insight functionality.
Things like potentially NPS to our no-commerce portfolio. And then really kind of embedding AI and really, really advanced features across the portfolio into products like Stamped. You asked a question around enterprise timing in the creative platform and Creative Market specifically. These would be multi-million dollar deals to potentially replace incumbents in big multinational Fortune 500 companies. These are businesses that would use a portfolio of fonts or digital assets across their entire company, digital internal comms, etc. They're discussions that take a very long time, and they also take a lot of prep to get out the door. We've been working on this stuff throughout the year, and we're hopeful that this stuff closes in Q4 and early 2026. The pipeline remains really, really positive, but revenue has been impacted this year around timing of those deals.
If you look specifically around Q2 last year, we had a big enterprise deal for upwards of CAD 5 million - CAD 6 million, and we're waiting for another one of those, but the pipeline is good.
I mean, maybe just to summarize or put this a different way, do you feel like your results here as you're reporting them, I mean, ignoring the sale of We Work Remotely, represent a good baseline, and then enterprise deals and things like that will be additive on this, and you'll be able to return to a more regularly or easily visible organic growth profile for the business overall. Is that a fair assessment of where we stand right now?
I do feel like that. That is our intention. Honestly, when we look into 2026, of course, we're being, I'd just say we're being careful, and we don't want to get too excited, but that is a fair assessment.
Okay. I'll congratulate you on the sale for We Work Remotely, Tiny Boards. It seems like a great outcome there. Maybe I'll get you to speak to some of the other assets in that often overlooked other segment and whether there are other assets you think it might make sense to monetize. Or maybe another way I can ask this question is perhaps you can talk to the conditions that are in place here with that asset that moved you to dispose of it and whether those same conditions exist elsewhere in the portfolio.
I think I'll talk specifically about We Work Remotely, and I think it will demonstrate why we ended up selling the company. This is a business, our first acquisition. We've owned it for over eight years. We were approached by a strategic buyer. We weren't looking to sell the business. Given the value offered, the partnership with the buyer, and the outcome for the employees and the company, we felt like compared to our projected cash flow and our view of intrinsic value of the business, it was a really, really compelling case for selling the company and being able to deploy that capital into deleveraging, future acquisitions, potential NCIB. I mean, that's the kind of analysis that we undertook when we got the offer.
I'd say we're always evaluating the different companies in the portfolio, but we're not marketing anything in the portfolio actively at the moment, and we're not trying to sell some of those other non-core assets. Again, I mean, we're open to really strong offers that are good outcomes for these businesses and for Tiny.
Can I add something?
Go ahead, Mike.
Oh, sorry, Doug. I was, no, I was just going to add that does, you asked about the other segment, right? I think it does sort of beg the question, what do we do with, there are two businesses left in that segment now, right? Media.net or Media.net. I think as we look to the year end and Q4 and our reporting and getting through everything with the audit and stuff like that, we obviously look to reposition those into different parts of the other reporting segments, right? That way you'll get a sort of cleaner look at those businesses as we roll forward as well.
Yeah, I was going to mention that. Yeah. They would probably fit better within the software segment, and we like them. I mean, Media.net is a business that we bought about a year and a half ago. It continues to perform well. There's good organic growth there, strong margins. We have a really good leader operating that business, and there continues to be opportunity to grow within there and even look at tangential vertical market opportunities that fit alongside it. It is certainly not something that we're trying to monetize or sell at the moment.
Okay. On the other side, in terms of capital deployment, you referenced NCIB, M&A, deleveraging. You've also now taken up your Tiny Fund stake and deployed some capital into that. You're signaling pretty openly that you may look to continue to do that. I guess I want to ask how often those opportunities come up? How in control are you of your ability to do that with respect to the Tiny Fund?
We're pretty close with many of the LPs in the fund, and we talk to them on a regular basis, giving them updates on performance. We've had discussions with many LP holders about opportunities. As we kind of maintain a regular dialogue with them, these opportunities come up, and we're able to opportunistically repurchase shares because we believe in the fund.
Okay. Thank you. I'll pass the line.
As a reminder, to ask a question, please press Star followed by One on your telephone keypad. We'll pause for any more questions to come through. Our next question comes from John Koppker. Your line is open, John. Please go ahead.
Hey, good morning, guys. Or good afternoon. Good morning to you. Yeah. Great, great quarter.
Good morning. Good morning to you, John. It's early for you. We know that.
Yeah, yeah. Great, great update here. I was just curious if you had any financial figures that show on a pro forma basis the quarterly performance as if Serato were acquired, if we're looking at it on a comparable basis, considering the acquisition mid-quarter of Q2. When we're looking year over year, obviously the numbers now include in Q3 of 2025, the full quarter where you're comparing it year over year without Serato. Can you share some figures here on a pro forma basis?
Maybe I'll leave that to Mike, but it's not something that we've disclosed publicly in this release and in our MD&A, but it's certainly something that we could try to do in our next quarterly filing or at year end and give a little bit more visibility around that. It's certainly something that we've discussed internally, but Mike, maybe you can add a little bit more color.
Yeah. Look, I think the takeaway on the Serato business is that based on what we thought we were getting at the time of acquisition and what we have, the business has outperformed the forecast that we had for this year. It has also outperformed where the business was this time last year, right? We are seeing good, strong, continued growth. Obviously, we have referenced a lot of that sort of as part of the opportunity when we were marketing the transaction, marketing the equity offering around the transaction. We have seen results that, frankly, have been even better than we would have thought coming out of that deal. I think, John, that is a very positive outcome. I think they are doing some things to even sort of further tweak some of their offerings here into October and November. I think we will see continued strong results from them.
That's been a positive outcome of the transaction. If we think back to this sort of time of doing the deal, we certainly had good expectations, and they've been met and exceeded in a lot of cases. That business on its own is doing well for us now and is certainly exceeding their performance from a year ago. I think overall, strong result. It's really contributing in the areas that we have sort of suggested it would, right? It's a good margin piece, the recurring revenue piece. I think we're doing a good job of managing some of the churn in that business. We've done some work around the payment providers, the service, there's a lot of things we've been doing to work with the management team, which has continued to deliver strong results for that business.
We're excited with the future for the opportunity as well.
Maybe I'll add to that that in terms of trying to think about transparency around pro forma numbers and giving a little bit around performance of Serato and even just kind of quarter over quarter inconsistency, something to take away for potential inclusion in future quarters.
Great. Thank you.
We currently have no further questions. With that, this concludes today's call. We thank everyone for joining. You may now disconnect your lines.