SpringBig Holdings, Inc. (SBIG) is a market-leading software platform providing customer loyalty and marketing automation solutions to retailers and brands, primarily in the cannabis industry. The company has leveraged its deep expertise in loyalty marketing to develop solutions that address the key challenges faced by retailers and brands, including those in the highly regulated cannabis market.

Business Overview

SpringBig's platform enables its clients to increase brand awareness, engage customers, improve retention, and access actionable consumer feedback data to improve marketing. The company's clients can use its loyalty marketing, digital communications, and text/email/push marketing solutions to drive new customer acquisition, customer spend, and retail foot traffic. SpringBig serves approximately 1,200 retail and brand clients across more than 2,600 distinct retail locations in North America. Its clients distribute more than 570 million messages annually, via text, push or email, and in the last year, more than $7.9 billion of gross merchandise value was accounted for by clients utilizing its platform.

Financials

For the fiscal year 2023, SpringBig reported annual revenue of $28,050,000, a decrease of 5% compared to the prior year. The company's annual net income was -$10,233,000, and its annual operating cash flow and free cash flow were -$3,976,000 and -$4,327,000, respectively.

In the fourth quarter of 2023, the company generated revenue of $6,800,000, representing a 1% year-over-year increase and a 1% sequential decline. SpringBig's gross profit for the quarter was $4,800,000, with a gross margin of 70%. The company's adjusted EBITDA loss for the fourth quarter was $200,000, a significant improvement compared to the $3,200,000 loss in the same period of the prior year.

Quarterly Performance and Guidance

For the first quarter of 2024, SpringBig expects total revenue in the range of $6,400,000 to $6,700,000 and an adjusted EBITDA profit in the range of $200,000 to $400,000. For the full year of 2024, the company expects total revenue in the range of $29,000,000 to $32,000,000, representing approximately 10% year-over-year growth at the midpoint, and an adjusted EBITDA profit in the range of $3,500,000 to $5,000,000.

Subscription Revenue and Retention

SpringBig derives the majority of its revenue from recurring subscription contracts, which accounted for 79% of total revenue in 2023, up from 73% in the prior year. The company grew its subscription revenues by 14% year-over-year to $22,300,000 in 2023, and by 10% year-over-year in the fourth quarter. SpringBig's net revenue retention rate, a measure of the growth in its recurring subscription revenue, excluding the impact of new client acquisitions, was 97% in 2023, compared to 105% in the prior year.

Operational Highlights

During 2023, SpringBig added 396 new clients, maintaining a steady pace of 30 to 35 new clients per month. However, the company also experienced some client churn, particularly among smaller, financially challenged customers, leading to the suspension of service for non-paying clients. This churn impacted the company's reported revenues.

SpringBig has also been focused on developing and launching innovative product offerings to enable its clients to retain and grow their customer bases. These initiatives include the launch of subscriptions by SpringBig, which allows retail clients to offer consumers the opportunity to earn additional loyalty rewards, access special promotions, and other perks as VIP subscribers. The company has 13 clients that have expanded their contracts to incorporate this offering, and six have already launched their VIP subscriber programs with more than 1,800 consumers already subscribing.

Another key initiative launched in the fourth quarter is the company's offering of a unique gift card payment option that can be used by consumers as a method of payment in-store directly from their existing loyalty wallet, enabling them to combine the use of loyalty points and prepaid gift cards.

Expansion into New Verticals

While SpringBig's primary focus has been on the cannabis industry, the company is also exploring opportunities to expand its loyalty and messaging communications platform into other regulated industries, such as alcohol, vape, smoke, and CBD. The company has already secured approximately 10 contracts in this non-cannabis category and is optimistic about the growth potential in this area.

Liquidity

In January 2024, SpringBig secured $8,000,000 of debt financing, consisting of a $6,400,000 8% secured convertible note and a $1,600,000 12% secured term loan. The proceeds were used to repurchase the company's existing $5,200,000 secured convertible note, including associated warrants, for $2,900,000, resulting in a $1,573,000 gain on the note repurchase. The new debt financing has strengthened SpringBig's balance sheet and provided the company with the capital to continue its expansion and deliver shareholder value.

As of March 31, 2024, SpringBig had $1,668,000 in cash and cash equivalents and a working capital deficit of $1,362,000. The company's current annual run rate is expected to result in a year-over-year reduction of approximately 30% in operating expenses from 2023 to 2024.

Risks and Challenges

SpringBig operates in a highly regulated industry, which can present challenges in terms of navigating complex and evolving regulations. The company also faces competition from other marketing and loyalty platforms, both within the cannabis industry and in the broader regulated industries it is targeting. Additionally, the company's financial performance is tied to the overall health of the cannabis market, which has experienced some macroeconomic headwinds and financial stress on its clients.

Conclusion

SpringBig is well-positioned to capitalize on the growing demand for customer loyalty and marketing solutions in the cannabis industry and beyond. The company's innovative product offerings, such as its VIP subscription programs and gift card payment options, demonstrate its ability to adapt to the needs of its clients and drive long-term growth. While the company has faced some challenges in the current macroeconomic environment, its recent debt financing and focus on operational efficiency have strengthened its financial position and positioned it for future success. As SpringBig continues to expand its reach and diversify into new verticals, investors should closely monitor the company's progress and its ability to execute on its strategic initiatives.