Audioboom Announces H1 2020 Financial Results: Reports 20% Revenue Growth

NEW YORK, NY — July 21, 2020 — Today Audioboom releases its 2020 H1 financial results:

• In the first 6 months of 2020, Audioboom’s revenue increased 20% to $11.8 million (H1 2019: US$9.8 million), outperforming the US podcast industry and highlighting strong resilience to Covid-19.
• Our adjusted EBITDA loss improved to $1.2 million (H1 2019: $1.4m).

Audioboom’s core revenue strategy is focused on the monetization of premium podcasts through advertising. Expanding the business is linked to three key strategic pillars:

1. Content acquisition (partnerships with independent podcasts and networks)
2. Content creation (development of owned and operated podcasts through the Audioboom Originals Network)
3. Content access (monetizing shows at external podcast networks through our in-house agency, Sonic Influencer

Covid-19

The Covid-19 (‘Covid’) pandemic impacted many aspects of the Company’s operations during the first half of 2020, with the first changes being seen in content consumption trends across Audioboom’s network. An initial 10–12% drop in downloads during the last two weeks of March can be attributed to changes in audience schedules as general travel for work purposes and commuting decreased almost entirely overnight. Listening levels recovered during April, returning to pre-Covid levels by the end of that month. Audioboom has since grown downloads and available advertising inventory across May and June, which can be attributed to the signing of new publishers to the network during this period. The creation of strong supply can be seen in our premium advertising impressions KPI, with the total for H1 2020 reaching 854 million — a 24% increase on the same period in 2019.

Advertiser demand was quickly and deeply impacted by Covid. A number of brands and agencies swiftly enacted their 30- day cancellation policies in mid-March, leading to the removal of certain pre-booked campaigns from mid-April through to the end of June. At the same time, many advertisers paused placing new business and the combined result is lower than expected revenue across Q2 2020.

A more detailed analysis of advertiser demand shows that top tier podcasts, which average more than 100 thousand downloads per episode, have been more resilient to market declines than smaller shows. The majority of brands operating in podcasting are direct response advertisers, who are able to track campaign performance at individual podcast level through promotional codes and vanity URLs and in the main they have remained committed to shows with larger audience reach that have proven sales conversions. Tier 2 shows, which average less than 100 thousand downloads per episode, have been impacted to a greater extent. Advertisers have also been significantly more risk averse, which has reduced their testing of spend on new shows, making it an extremely difficult environment in which to launch new, unproven podcasts. The Audioboom Originals Network (‘AON’) has been impacted most severely during this time from a revenue standpoint. The majority of AON shows have Tier 2 level audiences and new launches have seen softer than expected advertiser support.

The impact of low advertiser demand can be seen in our eCPM KPI, which is a measure of how we optimize our available advertising inventory. In June 2019, our eCPM was US$26.38. For Q1 2020 we reported an eCPM of US$38.40. However, in June 2020 this number was US$25.32, a reduction on our strong Q1 performance and a 4% year on year decrease.

The IAB’s Podcast Revenue Report — published in July 2020 — also highlighted the impact of Covid on the industry. Pre- Covid the IAB was projecting industry revenue growth of 30% from 2019, however, that growth forecast has been reduced to 14.7% due to the pandemic. With H1 20 revenue growth of 20%, Audioboom has outperformed the IAB’s expectation for the US podcast industry over the 2020 full year in terms of revenue growth by 36%.

Advertiser demand is increasing again as we move into Q3; new bookings are picking up pace, while Covid-related advertising cancellations are decreasing. Combined with strong inventory levels, this demand is expected to lead to further expansion of the business across the second half of the year.

Market Overview

Overall, the podcast market in the United States, which continues to be Audioboom’s main revenue generating region, remains in a growth period and has shown stronger resilience to the Covid-19 pandemic than many other sectors. The IAB’s most recent Podcast Revenue Study — released in July 2020 — projects 2020 US market revenue growth at 14.7%, downgraded from 29.6% pre-Covid.

Podcasting continues to be an active market for M&A activity with several notable transactions being announced in 2020 including:

• Spotify’s acquisition of The Ringer network
• Sirius XM’s proposed acquisition of Stitcher
• LiveXLive’s acquisition of PodcastOne
• Sirius XM’s acquisition of Simplecast

Strategic Partnerships

During the period under review, the Company established new strategic partnerships that support its sales, marketing and technology operations. As a result of these partnerships, Audioboom will be positioned to emerge from the Covid-19 pandemic in a position of strength.

Our partnership with Podsights will provide advertisers with attribution metrics, allowing them to measure the success of campaigns they run on Audioboom podcasts, and book advertising with increased confidence. In Australia, we signed a sales partnership with Australian Radio Network (ARN), who will sell advertising and sponsorships against consumption of our podcasts in Australia, our 3rd largest region.

Two distribution partnerships — with Pandora and Amazon Music — will put our shows in front of 145 million potential new listeners.

In the UK, Audioboom is now an official partner of The Podcast Show. This will be a major podcast focused event launching in Spring 2021 which will increase our exposure to UK-based podcasters, advertisers and listeners.

A partnership with Triton Digital, and the extension of our work with Voxnest, will provide Audioboom with audience data and insights that will power our sales operation, deepen our relationship with advertisers and agencies, and give our podcast partners a clearer understanding of how their audience listens.

Triton Digital Partnership and Metrics

Audioboom’s strategic partnership with Triton Digital provides a detailed consumption measurement platform that is certified by the Interactive Advertising Bureau in the United States. As well as providing transparent and verified metrics to our advertising and brand partners, the measurement service enables a more detailed level of insight into listening trends across our podcasts. Key insights that highlight Audioboom’s position as a global leader in podcasting include;

• Audioboom podcasts are downloaded more than 74 million times each month globally
• 21 million unique listeners consume an Audioboom podcast each month
• Audioboom shows are downloaded 40 million times in the US and 12 million times in the UK per month
• Triton Digital’s measurement service also provides data for their monthly Podcast Reports — a set of regional rankers for podcasts and networks. Audioboom placed as the 6th largest podcast publisher in the United States and the largest international podcast publisher in Australia in June’s reporting period, while many Audioboom podcasts appeared in the Top 200 show ranker.

Independent Podcast Partnerships

Audioboom acquired exclusive sales rights with several major podcast publishers during the period, and renewed partnerships with many of its leading independent podcasters. New signings include Tiny Meat Gang (ranked as the 60th biggest podcast in the US in Triton Digital’s Podcast Report), ID10T with Chris Hardwick (a successful, long-running show formerly known as Nerdist), and Coffee Convos with Kail Lowry & Lindsie Chrisley.

Notable major partnership renewals included; Morbid (the 30th biggest show in the United States in Triton Digital’s Podcast Report), No Such Thing As A Fish, and Casefile (the second largest show in Australia and the 42nd ranked show in the US as per the Triton Report). All renewals for top tier podcast partners are for 24 months.

Audioboom Originals Network

The Company continues to focus on the growth of its in-house production unit, which develops content for the Audioboom Originals Network at a higher gross margin than our independent podcast partnership business. Additionally, the unit develops branded content treatments, provides production services to a number of other podcasts and produces the acclaimed F1: Beyond The Grid Podcast.

New shows launched into the Audioboom Originals Network in the first half of 2020 include Life’s Little Mysteries, Here’s The Sitch, Noise Cancelling, For All Moms and Truth Vs Hollywood. What Makes A Killer, Never Thought I’d Say This and An Hour Or So With Sue Perkins returned for new seasons, while established weekly shows like The 45th, It’s Happening and Blank Check continued successfully.

Our production unit adapted quickly and nimbly to the logistical challenges that Covid presented. Production studios in our New York City offices were closed in mid-March, and on-location recording has not been possible during this time. It is commendable that the unit has delivered high quality production across new and returning shows whilst working remotely and without access to production facilities.

However, the medium-term growth of AON has been impacted by the pandemic. Several planned show launches for 2020 were postponed until later in the year or early 2021, reducing planned inventory levels and therefore revenue potential. Expansion plans for 2020 included the launch of production facilities in Los Angeles as well as investment in a number of senior production roles — these plans will now be delayed until Q1 2021 at the earliest, creating a knock-on effect of delays to new show launches over the next 18 months.

We are very excited for upcoming show launches planned for H2 2020 including Huddled Masses (from the production team behind the Audioboom Original Dead Man Talking), Dance Moms and Crime Weekly (a co-production with Main Event Media).

Sonic Influencer Marketing

Audioboom’s in-house agency specialising in podcast advertising continued its positive momentum as it entered its second full year of operations. Sonic is part of the Audioboom Group but operates as a distinct and separate brand. Sonic once again materially contributed to the Group’s revenue in H1 20. Sonic is focused on the third pillar of Audioboom’s strategic growth strategy — accessing content at external podcast networks and monetising this through advertising.

During the first half of 2020, nineteen brands utilised the Sonic Influencer Marketing platform and accessed inventory across 184 podcasts outside of the Audioboom network.

Financial Review

Group revenue in the first half of 2020 increased by 20% year on year to US$11.8 million (H1 2019: US$9.8 million). Adjusted EBITDA loss (earnings before interest, tax, depreciation, amortisation, share based payments and material one- off items) improved by 15% to US$1.2 million (H1 2019 loss: US$1.4 million). Total loss for the period significantly improved to US$2.0 million (H1 2019 loss: US$2.8 million). Despite the challenges posed by Covid, the Company delivered year-on- year revenue growth ahead of the wider podcast market.

Gross margin remained fairly consistent with 2019 at 21% (year to 31 December 2019: 22%). Audioboom has a mix of revenue streams, contributing different gross margins. Direct revenue, where advertising is placed on third party podcasts via the Audioboom sales teams, yielded a 21% gross margin in H1 2020. The Audioboom Originals Network contributed a 47% gross margin in H1 2020, and the higher associated gross margin means this is a key area of focus going forward for the Company. Sonic Influencer Marketing contributed a 14% gross margin.

Cost control continues to be of upmost importance, ensuring that the resources of our lean and efficient Company are aligned to our operational demands and allow our excellent 38 members of staff to continue to deliver growth. Cash collection has continued to improve once again, despite increasing revenue volume, thanks to our efficient internal processes and good relationships with our customers, yielding a new record low debtor days of 58 at 30 June 2020 (30 June 2019: 78). Creditor payments continue to be in line with our contractual payment obligations, with trade payables and accrued costs of US$4.2 million.

On 7 February 2020, the Company announced that it had entered into a US$4 million secured loan facility arrangement (the “Facility”) with SPV Investments Limited (“SPV”), a special purpose vehicle owned by Michael Tobin, the Company’s Chairman, and Candy Ventures sarl, the Company’s largest shareholder. Historically, the growth of Audioboom has been financed by the issue of equity with consequential dilution to the Company’s shareholders, and the Board believes that the expectation of potential equity issues has had a negative impact on the Company’s share price. The Facility should provide sufficient funding through to forecast sustainable positive cash generation on a monthly basis. To date, US$0.5 million of the loan has been drawn down and we will continue to prioritise limiting further draw-downs to when absolutely necessary as we continue to approach break even.

The separate US$4 million content funding facility with SPV, announced on 17 June 2019, has continued to decrease pressure on capital required to secure high revenue producing podcasts. This provides minimum revenue guarantees to certain leading content partners of the Company with Audioboom paying 8% of the net advertising revenue (after paying the content partner its share) received by Audioboom, in relation to those podcasts to SPV. The second guarantee of US$1.75 million was provided in January 2020 and as at 30 June 2020, the amount currently remaining available under the guarantee facility was approximately US$2.6 million.

Operating cash outflow before working capital movements is marginally ahead of H1 2019 at US$1.7 million (H1 2019: US$1.8 million). Net cash used in operating activities was US$1.7 million (H1 2019: US$3.8 million) as the Company continued to fulfil a number of material recoupable advance payments to retain existing and attract new podcast partners. This has been offset by continued over-performance on debtor collections, leading to a US$1.7 million decrease in trade debtors since 31 December 2019. Further improved working capital management can be identified when comparing the cash burn rate. Excluding recoupable content partner advances paid (H1 2020: US$0.8 million, H1 2019: US$1 million), 2019 fundraising (US$5.5 million) and 2020 SPV loan drawn down (US$0.5 million), H1 2019 saw a net cash burn of US$2.7 million, which decreased to US$1.4 million in H2 2019 and again further to US$0.9 million in H1 2020.

Formal Sale Process Update

In 2020, Audioboom retained Raine as financial adviser in relation to examining strategic options for the Company, and subsequently established a formal sale process pursuant to the Takeover Code. The process is ongoing and the Board, management and Raine remain engaged with a number of interested parties.

Outlook

The strong growth recognized in H2 2019 has continued into 2020 with impressive performance, despite the impact of Covid-19 on the whole advertising industry. Continued cost control and working capital management, new partnerships, and the continued growth of our creative content operation will enable us to continue our progress as the pandemic subsides.

I am delighted to report that Audioboom’s growth story continues in 2020, despite the immense challenges the sector has seen from the Covid-19 pandemic. Revenue growth for the period of 20% highlights a business model that continues to prove itself. Once again Audioboom is outpacing the industry, with revenue for the period growing 36% faster than is expected for US podcast industry over the 2020 full year per the Interactive Advertising Bureau’s (‘IAB’) 2020 Podcast Revenue Report.

Alongside the revenue growth, cost control measures implemented in the face of the pandemic delivered a reduced EBITDA loss and a reduced overall loss for the period. Our reduced cash burn and the US$4 million loan facility provided in February 2020 by our Chairman and largest shareholder is expected to provide sufficient headroom to fund the Company through to sustainable positive cash flow generation on a monthly basis.

The most severe impact of Covid-19 was felt in May and June, however, July and August bookings are displaying signs of rebounding with advertiser demand increasing from previous lows. I am confident that Audioboom’s expansion will continue in the second half of 2020 and I look forward to updating shareholders regarding future developments.

I would like to take this opportunity to thank the management team and staff for their continued hard work and commitment during a challenging period and look forward to the second half of the year with renewed optimism.

Stuart Last

Chief Executive Officer

Audioboom