Executive Summary / Key Takeaways

• SpringBig (OTCQB: SBIG), a specialized SaaS provider for the highly regulated cannabis industry, has successfully pivoted to Adjusted EBITDA profitability, achieving this milestone in late 2023 through aggressive cost management despite facing significant market headwinds.
• The company's core technology provides essential loyalty, marketing automation, and data analytics tools tailored for cannabis compliance, enabling clients to drive customer engagement and retention.
• Strategic initiatives, including new VIP subscription programs, a gift card payment option, and expansion into other regulated verticals (alcohol, vape, smoke, CBD), are expected to become meaningful revenue drivers starting in the second half of 2024.
• The recent acquisition of AI-enabled performance marketing platform VICE CRM and the appointment of its founder as CEO signal a strategic move to enhance technological differentiation and accelerate expansion beyond the core cannabis market.
• While facing ongoing market challenges, liquidity constraints, and debt covenants, management's 2024 guidance projects continued Adjusted EBITDA profitability and revenue growth driven by cost efficiencies and the ramp-up of new initiatives.

Setting the Scene: Specialization in a Complex Market

SpringBig operates at the intersection of technology and highly regulated industries, primarily serving the cannabis sector in the United States and Canada. Its core offering is a software platform providing marketing automation and customer engagement solutions, including loyalty programs, digital communications (text, email, push notifications), and data analytics. This B2B2C model creates a network effect, connecting retailers, brands, and consumers within a single ecosystem.

The company's journey to its current position includes a significant transformation through a business combination with Tuatara Capital Acquisition Corporation in June 2022, which brought it public. However, this transition occurred amidst a challenging period for the cannabis industry, marked by stringent and evolving regulations that severely restrict traditional marketing channels, coupled with broader macroeconomic pressures and increasing competition. These factors have created a difficult operating environment, necessitating strategic adjustments. SpringBig's response has been a deliberate pivot towards operational efficiency, cost control, and the development of new revenue streams beyond its core messaging services, aiming to build a more resilient and profitable business model.

Technological Foundation and AI-Driven Evolution

At the heart of SpringBig's offering is its specialized SaaS platform, designed from the ground up to navigate the unique compliance requirements of the cannabis industry. This includes features for managing loyalty programs, segmenting customer databases, and executing targeted digital marketing campaigns via SMS, email, and push notifications, all while adhering to complex state-by-state regulations. The platform's ability to integrate with point-of-sale systems is crucial, enabling seamless data flow for personalized marketing and loyalty tracking. The scale of its operations is significant, with clients distributing approximately 600 million messages annually, and over $7 billion of gross merchandise value accounted for by clients utilizing the platform in the last year, demonstrating its deep penetration into retail operations.

The company's technological differentiation lies in this niche expertise and its data-driven approach. While specific quantifiable metrics on the performance advantage of its core technology (e.g., message deliverability rates vs. general platforms) are not readily available, the platform's focus on compliance and targeted engagement within the restricted cannabis environment is a key value proposition for its clients. The recent announcement of the intent to acquire VICE CRM marks a significant step in SpringBig's technological evolution. VICE CRM is described as an AI-enabled performance marketing platform focused on optimizing ROI. While specific technical details of the AI capabilities are not provided, the stated goal is to enhance the effectiveness and efficiency of marketing campaigns, potentially offering clients more sophisticated tools for customer segmentation, campaign optimization, and ROI measurement. This move suggests an ambition to leverage artificial intelligence to deepen its technological moat and provide more advanced solutions, potentially improving campaign performance metrics for clients and strengthening SpringBig's competitive standing.

Navigating the Competitive Currents

The cannabis software market is dynamic and increasingly competitive. SpringBig faces direct competition from other cannabis-specific technology providers like Leafly (LFLY) and POSaBIT (PBIT), as well as indirect competition from broader retail technology companies like Toast (TOST) and general CRM platforms that may adapt their offerings.

SpringBig's primary competitive advantage stems from its deep specialization and compliance focus within the cannabis vertical. Its platform is built specifically to handle the regulatory complexities that generalist platforms may struggle with. This niche expertise allows SpringBig to offer highly relevant and effective solutions for cannabis retailers and brands, leading to strong customer retention within its core base and enabling capabilities like targeted campaigns based on purchasing habits. Management notes that major multi-state operators (MSOs) are among its clients and continue to expand their spend, indicating the platform's value to larger, sophisticated users. The company's focus on creating unique, 360-degree integrations with point-of-sale systems, both within and outside cannabis, is a strategic move to enhance stickiness and make its platform more integral to client operations.

However, SpringBig faces disadvantages related to scale compared to larger, more established players like Toast, which can offer broader integrations and potentially lower upfront costs due to economies of scale. While SpringBig's gross profit margin stood at 78% in Q1 2025 (TTM 74.39%), competitive analysis suggests some peers in related tech areas may have higher gross margins (e.g., LFLY around 60%, PBIT around 65%, TOST around 25% - noting these are not direct apples-to-apples comparisons across different business models and reporting periods). SpringBig's operating margins (TTM -3.14%) and net margins (TTM -12.85%) reflect its ongoing investment and cost structure, though the recent pivot to Adjusted EBITDA profitability ($0.33M in Q1 2025) demonstrates improved operational efficiency. The competitive landscape is expected to intensify as the cannabis market matures, potentially attracting larger companies with greater financial and technical resources, posing a long-term threat to SpringBig's market share and pricing power.

Recent Financial Performance: A Pivot to Profitability

SpringBig's financial performance in the first quarter of 2025 reflects both the ongoing challenges in its core market and the impact of its strategic pivot towards profitability. For the three months ended March 31, 2025, the company reported total net revenues of $5.52 million, a decrease of 14% compared to $6.40 million in the same period of 2024. This decline was primarily driven by a 14.15% year-over-year reduction in retail revenue, with subscription revenue falling 11% and excess use revenue dropping 40%. Management attributed the fall in excess use revenue to the weaker economy impacting the cannabis sector and clients limiting messaging activity to stay within subscription volumes.

Despite the revenue pressure, gross profit decreased by a more modest 8% to $4.31 million, resulting in a significant improvement in gross profit margin from 73% in Q1 2024 to 78% in Q1 2025. This margin expansion was a direct consequence of lower messaging distribution costs. Operating expenses saw a 5% year-over-year decrease to $4.74 million, largely due to substantial reductions in selling, servicing, and marketing expenses (-31%) and technology and software development expenses (-24%), reflecting the aggressive cost rationalization efforts implemented in prior periods. General and administrative expenses, however, increased by 36%, primarily due to a $0.5 million expense related to the former CEO's separation agreement.

The combination of improved gross margins and reduced operating expenses (excluding the one-time G&A item) drove a significant improvement in operational profitability. The loss from operations narrowed, and the company reported a net income of $0.75 million for Q1 2025, compared to $0.42 million in Q1 2024. It's important to note that the Q1 2024 net income included a $1.57 million gain on note repurchase, while Q1 2025 benefited from significantly lower interest expense ($0.32M vs. $0.88M). The most telling metric for operational performance is Adjusted EBITDA, which showed a profit of $0.33 million in Q1 2025, a notable improvement from $0.15 million in Q1 2024 and a continuation of the positive Adjusted EBITDA achieved in December 2023. This demonstrates that the company's cost controls have successfully translated into operational profitability.

Liquidity and Capital Structure

As of March 31, 2025, SpringBig's balance sheet reflects the challenges and recent financing activities. The company had cash and cash equivalents of $1.09 million and a working capital deficit of approximately $2.0 million. The accumulated deficit stood at approximately $39.2 million.

Cash flows used in operating activities were $0.1 million for the three months ended March 31, 2025, a significant improvement from $1.9 million used in the same period of 2024.

In January 2024, the company secured $8 million in debt financing ($6.4 million in 13% Secured Convertible Notes and $1.6 million in 17% Secured Term Notes, as amended in November 2024). These notes mature in January 2027, with interest rates potentially reducing based on achieving quarterly Adjusted EBITDA exceeding $900,000. As of March 31, 2025, the outstanding long-term debt was $8.71 million.

While management estimates that current liquidity is sufficient for the next twelve months based on projections, the going concern disclosure highlights the dependence on achieving these projections, increasing revenue, and potentially raising additional capital. The debt instruments contain restrictive covenants that limit the company's financial and operational flexibility, including restrictions on incurring additional debt, paying dividends, repurchasing stock, and issuing equity outside of the equity plan, which could impact future strategic options.

Strategic Initiatives and Future Outlook

SpringBig's future growth is heavily reliant on the successful execution and ramp-up of its strategic initiatives, coupled with a potential recovery in the broader cannabis market. The company is actively pursuing three key growth drivers:

1. Subscriptions by SpringBig (VIP Loyalty): This program, launched in the second half of 2023, allows retailers to offer paid VIP subscriptions to consumers. Management views this as a significant opportunity for recurring revenue. While early, progress is being made, with clients expanding contracts and programs launching. Meaningful revenue contribution is anticipated starting in the second half of 2024, particularly as larger clients adopt the program.
2. Gift Card Payment Option: Launched in Q4 2023, this initiative integrates payment functionality with the loyalty wallet. Like the VIP subscriptions, this is expected to begin contributing meaningful revenue in the second half of 2024.
3. Expansion Beyond Cannabis: Leveraging the platform for other regulated industries (alcohol, vape, smoke, CBD). The company has integrated with Lightspeed POS (LSPD), which serves thousands of potential clients in these verticals, and plans heavy co-marketing starting in Q2 2024. While revenue per client may be slightly lower than in cannabis, the larger addressable market offers significant long-term growth potential.

The acquisition of VICE CRM, expected to close in June 2025, and the appointment of its founder as the new CEO represent a strategic acceleration into AI-enabled marketing and a clear signal of intent to expand beyond the cannabis niche. This move aims to enhance the platform's capabilities and broaden its market reach.

Management's guidance for the full year 2024, provided in the Q4 2023 earnings call, projects total revenue in the range of $29 million to $32 million, representing approximately 10% year-on-year growth at the midpoint compared to 2023 revenue of $28.05 million. More significantly, the guidance anticipates Adjusted EBITDA profit in the range of $3.5 million to $5.0 million for the full year 2024, building on the profitability achieved in late 2023 and Q1 2025. This outlook is based on assumptions including seasonality, the expected revenue ramp from new products in the second half of the year, continued cost discipline, and some anticipated reduction in client churn.

Risks and Challenges

Despite the strategic pivot and positive Adjusted EBITDA, SpringBig faces notable risks that could impact its ability to execute its strategy and achieve its financial targets.

• Market Headwinds: The cannabis industry continues to face challenges from macroeconomic pressures, margin compression, and competition from the illicit market. These factors can strain client finances, impacting revenue and increasing collectability issues.
• Execution Risk: The success of new initiatives like VIP subscriptions, gift cards, and non-cannabis expansion is not guaranteed. Adoption rates, revenue contribution, and the effectiveness of co-marketing efforts will be critical to realizing the projected growth. Integrating VICE CRM and leveraging its AI capabilities also presents execution challenges.
• Liquidity and Financing Risk: While management projects sufficient liquidity for 12 months, the working capital deficit and accumulated losses highlight the need for continued operational profitability and potentially future capital raises. The restrictive debt covenants could limit financing options.
• Regulatory and Legal Risks: The uncertain regulatory environment for cannabis, particularly at the federal level, poses ongoing risks. The civil investigative demand regarding the PPP Loan, with a potential contingent loss of up to $1.6 million, represents a specific legal risk.
• Competition: Intensifying competition, especially from larger, well-funded companies entering the market, could pressure pricing, increase customer acquisition costs, and erode market share.
• Internal Controls: The disclosure of material weaknesses in internal control over financial reporting indicates a need for ongoing efforts to strengthen financial reporting processes.

Conclusion

SpringBig has demonstrated resilience and strategic adaptability by successfully pivoting to Adjusted EBITDA profitability in a challenging market environment. The company's core strength lies in its specialized, compliant SaaS platform tailored for the cannabis industry, which provides essential loyalty and marketing tools. While revenue growth has been pressured by industry headwinds and necessary stricter payment terms, aggressive cost controls have improved the financial profile.

The investment thesis for SpringBig now centers on its ability to leverage this newfound profitability and execute on its strategic growth initiatives. The expansion into VIP subscriptions, gift cards, and particularly the push into other regulated verticals, potentially accelerated by the AI capabilities from the VICE CRM acquisition, offer pathways to diversify revenue and tap into larger markets. Management's 2024 guidance reflects confidence in continued profitability and growth driven by these factors. However, investors must weigh this potential against significant risks, including ongoing market volatility, execution challenges for new initiatives, liquidity constraints, and intense competition. SpringBig represents a specialized technology play in a complex market, where the success of its strategic pivot and technological evolution will be key determinants of its long-term value.