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Locafy Reports Fiscal First Half 2024 Results

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Locafy reports a $3.6 million year-over-year decrease in operating expenses in the fiscal first half of 2024. The company highlights partnerships with diDNA and Localista, along with the launch of Hotfrog Proximity Page application. Financial results show a 28.3% decrease in total operating revenue, with subscription revenue down by 34.4%. Operating expenses decreased by 51.6%, resulting in a net loss of $1.4 million.
Positive
  • Ongoing cost reduction initiatives led to a $3.6 million year-over-year decrease in operating expenses for Locafy
  • Partnerships with diDNA and Localista, as well as the launch of Hotfrog Proximity Page application, signal Locafy's shift towards a global publisher and media organization strategy.
  • Total operating revenue decreased by 28.3%, with subscription revenue down by 34.4% in the fiscal first half of 2024.
  • Operating expenses decreased by 51.6%, including reductions in technology expenses and employee benefits.
  • Net loss for the period was $1.4 million, compared to $4.0 million in the comparable year-ago period.
Negative
  • Subscription revenue decreased by 34.4% due to billing relief provided to customers and higher customer churn.
  • Advertising revenue decreased by 28.0% compared to the previous quarter.
  • Services revenue decreased by 74.3% due to lower custom website builds.
  • Net loss was $1.4 million, indicating a financial loss for the company.

Insights

The announcement from Locafy Limited indicates a strategic pivot towards becoming a global publisher and media organization, a move that is underscored by their recent partnerships and product launches. This shift is noteworthy as it reflects the company's response to the challenges posed by search engine algorithm updates, which have significantly impacted the online search ecosystem, particularly for content-based sites. The partnerships with diDNA and Localista, as well as the launch of Hotfrog Proximity Page, are strategic efforts to diversify revenue streams and enhance the company's service offerings.

From a market perspective, the emphasis on Locafy's Article Accelerator technology suggests a focus on value-added services that can help media brands improve their search engine visibility. This technology could potentially create a competitive edge for Locafy if it successfully mitigates the adverse effects of algorithmic changes on web traffic and advertising income. However, the reported decrease in operating revenue and subscription revenue raises concerns about the company's current market position and the effectiveness of its cost reduction initiatives in driving profitability.

Locafy's financial results for the 2024 fiscal first half show a significant year-over-year decrease in operating expenses by $3.6 million, which is a positive indicator of the company's cost management efforts. However, this must be weighed against the 28.3% decline in total operating revenue and a 34.4% decrease in subscription revenue. The steady advertising revenue amidst these declines could be a sign of resilience in that income stream, although the overall revenue contraction is concerning.

The increase in gross margin to 81.4% is a strong point, reflecting improved cost efficiency. Nonetheless, the net loss of $1.4 million, although smaller than the previous year's $4.0 million, suggests that Locafy still faces challenges in achieving profitability. Investors should closely monitor the company's ability to convert its cost reduction and strategic shifts into sustainable revenue growth, especially given the decline in key performance indicators like monthly recurring revenue and total active reseller count.

Locafy's strategic partnerships and product developments are directly responding to the evolving landscape of search engine optimization (SEO). The company's Article Accelerator is designed to help publishers increase the visibility of advertorials, which is increasingly important as search algorithms continue to change. The partnership with diDNA, in particular, could expand Locafy's reach within the ad tech space, potentially driving more business to its SEO services.

The Hotfrog Proximity Page application, leveraging Yext's business listing database, represents an innovative approach to local SEO. By providing an easy-to-use platform for local businesses to create SEO-optimized landing pages, Locafy is tapping into the growing need for localized digital marketing solutions. However, the real test will be the application's adoption rate and its impact on driving traffic and revenue for Locafy's clients.

Fiscal First Half 2024 Highlighted by Ongoing Cost Reduction Initiatives Resulting in $3.6 Million Year-Over-Year Decrease in Operating Expenses

Partnerships with diDNA and Localista, Hotfrog Proximity Page Application Launch Underscore Locafy’s Shift Towards Global Publisher and Media Organization Strategy

PERTH, Australia, April 02, 2024 (GLOBE NEWSWIRE) -- Locafy Limited (Nasdaq: LCFY, LCFYW) (“Locafy” or the “Company”), a globally recognized software-as-a-service technology company specializing in local search engine marketing, today reported financial results for the 2024 fiscal first half ended December 31, 2023. All financial results are reported in Australian Dollars (AUD).

Recent Operational Highlights

  • Announced a partnership agreement with diDNA, a leading ad tech provider for the publisher ecosystem. With this partnership, diDNA will implement Locafy’s Article Accelerator alongside diDNA’s existing advertising software to allow diDNA’s publishers to increase the prominence of advertorials within online search results for competitive keywords. The agreement will begin with a paid trial for 10-15 publishers in diDNA’s network and, if successful, will be expanded to their broader set of publishers.
  • Signed a series of commercial agreements with Localista, the largest lifestyle and travel directory in Australia and New Zealand. Through these agreements, Locafy acquired Scoop’s digital assets, agreed to provide SEO consulting services to Localista’s retained asset, and added Localista’s sales team as a reseller of Locafy’s Article Accelerator.
  • Launched Hotfrog Proximity Page, an application built in partnership with Yext. Hotfrog Proximity Page is a unique application that combines Yext’s extensive business listing database network with Locafy’s SEO technology to empower local businesses to effortlessly create for themselves one or more dynamic landing pages that are optimized for SEO performance. Hotfrog Proximity Page is expected to allow users to enhance their online presences and drive traffic to their main websites.

Management Commentary
“Our 2024 fiscal first half presented several promising opportunities for our business that inform our optimism for the rest of the fiscal year,” said Locafy CEO Gavin Burnett. “Recent search engine algorithm updates created persistent headwinds for both the existing online search ecosystem and our traditional business. Content-based sites drive revenue from advertising and affiliate commissions, and dramatic website traffic losses caused by these algorithm updates, sometimes in excess of 90% in the past 18 months, materially impacted our partners’ advertising income and budgets. These challenges reached our top resellers, dampening the expected upside from recent reseller partnerships.”

“Our Article Accelerator technology has proven very successful for media brands hoping to rapidly combat the effects of these algorithmic changes,” continued Burnett. “As we move into the second half of the year, we’ve effectively reduced our expenses and managed our lean cost structure to give us the flexibility to shift our strategy. By deploying our proprietary SEO technology and expertise, we are confident that we can reverse the fortunes of struggling content-based websites under our control. We have already started diversifying our go-to-market strategy to acquire additional digital properties and expand our publishing reach, as highlighted by our partnerships with diDNA and Localista. We believe we are on a path to becoming a global publisher and media organization that specializes in content-rich websites in high-value advertising categories. We look forward to providing updates in the coming quarters.”

2024 Fiscal First Half Financial Results
Results compare the 2024 fiscal first half end (December 31, 2023) to the 2023 fiscal first half end (December 31, 2022) unless otherwise indicated. All financial results are reported in Australian Dollars (AUD).

  • Total operating revenue decreased 28.3% to $2.0 million from $2.8 million in the comparable year-ago period.
    • Subscription revenue decreased 34.4% to $1.4 million from $2.1 million in the comparable year-ago period. Compared to the 2024 fiscal first quarter, subscription revenue decreased 19.0%. The decrease in subscription revenue was attributable to the Company continuing to extend billing relief to customers whose campaigns on our Proximity product were affected by the transition onto Locafy’s upgraded technology platform (the “Platform”), together with a higher rate of customer churn compared to previous periods.
    • Advertising revenue remained steady at $167,000 in both the current and comparable year-ago period. Compared to the 2024 fiscal first quarter, advertising revenue decreased 28.0%.
    • Data revenue decreased 4.6% to $430,000 from $451,000 in the comparable year-ago period. Compared to the 2024 fiscal first quarter, data revenue increased 1.4%.
    • Services revenue decreased 74.3% to $12,000 from $49,000 in the comparable year-ago period. Compared to the 2024 fiscal first quarter, services revenue decreased 56.9%. These decreases are due to comparatively lower custom website builds in each respective period.
  • Other income decreased 96.0% to $7,000 from $165,000 in the comparable year-ago period. The variance is attributed to the Company’s assessment (as at the respective reporting period) of the extent and likelihood of its ability to claim a Research & Development tax incentive.
  • Cost of sales decreased 64.1% to $318,000 from $888,000 in the comparable year-ago period.
  • Gross margin for the 2024 fiscal second quarter increased to 81.4% from 68.7% for the comparable year-ago period.
  • Operating expenses decreased 51.6% to $3.3 million from $7.0 million in the comparable year-ago period. This included a 56.5% decrease in technology expenses to $450,000 from $1.0 million in the comparable year ago period as a result of the Company’s ongoing efforts to upgrade its Platform, including changes to its technology stack and the reduction of third-party product subscriptions. Employee benefits expense decreased 63.6% to $1.6 million from $4.3 million in the comparable year ago period. The Company has in the intervening period significantly reduced headcount, particularly in underperforming sales regions and across all business units. New hires have predominantly been made in more “cost efficient” regions. Depreciation and amortization expense increased 45.4% to $719,000 from $494,000 in the comparable year ago period. This increase is mainly due to the higher starting cost base of capitalized development cost for fiscal 2024 compared to fiscal 2023.
  • Net loss was $1.4 million, or $1.12 per diluted share, compared to a net loss of $4.0 million, or $3.93 per diluted share, in the comparable year-ago period.

Key Performance Indicators (KPIs)
Unless otherwise specified, KPI data has been recorded as of the 2024 fiscal second quarter end (December 31, 2023).

  • Monthly recurring revenue (MRR) for the 2024 fiscal second quarter was $314,000, a 32.2% decrease compared to $464,000 for the comparable year-ago period, and a 12.5% decrease compared to $360,000 for the 2024 fiscal first quarter.
  • Total active reseller count for the 2024 fiscal second quarter was 87 resellers, a 35.1% decrease compared to 134 resellers for the comparable year-ago period, and a 12.1% decrease compared to 99 resellers as of September 30, 2023.
  • Total end user count for the 2024 fiscal second quarter was 947 end users, a 25.3% decrease compared to 1,268 end users for the comparable year-ago period, and a 9.6% decrease compared to 1,048 end users as of September 30, 2023.

For more information, please see Locafy’s investor relations website at investors.locafy.com.

About Locafy
Founded in 2009, Locafy's (Nasdaq: LCFY, LCFYW) mission is to revolutionize the US$700 billion SEO sector. We help businesses and brands increase search engine relevance and prominence in a specific proximity using a fast, easy, and automated approach. For more information, please visit www.locafy.com.

About Key Performance Indicators
Locafy defines MRR as the value of all recurring subscription contracts with active entitlements as at the end of each month. MRR across a period is the average of each month’s MRR within that period.

Locafy’s recent Platform upgrade caused a significant change to the calculation of average page metrics, and Locafy management no longer views these metrics as relevant indicators of the performance of Locafy technology. The Company may introduce additional KPIs in future quarters if deemed relevant long-term indicators of performance.

Forward-Looking Statements
This press release contains “forward-looking statements” that are subject to substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this press release are forward-looking statements. Forward-looking statements contained in this press release may be identified by the use of words such as “subject to”, “believe,” “anticipate,” “plan,” “expect,” “intend,” “estimate,” “project,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and similar expressions, or by discussions of strategy, although not all forward-looking statements contain these words. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, they do involve assumptions, risks, and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors and risk factors, including those discussed in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 20-F filed with the SEC on October 11, 2023, and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

Investor Relations Contact
Tom Colton or Chris Adusei-Poku
Gateway Investor Relations
(949) 574-3860
LCFY@gateway-grp.com

-Financial Tables to Follow-

Locafy Limited
Consolidated Statement of Profit or Loss and Other Comprehensive Income

  6 months to
31 Dec 2023
AUD $
  6 months to
31 Dec 2022
AUD $
 
Revenue 2,035,683  2,839,089 
Other income 6,600  164,817 
Technology expense (450,614) (1,036,224)
Employee benefits expense (1,600,837) (4,396,441)
Occupancy expense (47,096) (60,586)
Advertising expense (132,864) (158,891)
Consultancy expense (464,789) (530,086)
Depreciation and amortization expense (719,278) (494,786)
Other expenses (42,334) (65,792)
Reversal/(Impairment) of financial assets 67,146  (259,888)
Operating loss (1,348,383) (3,998,788)
Financial cost (78,288) (45,900)
Loss before income tax (1,426,671) (4,044,688)
Income tax expense -  - 
Loss for the period after tax (1,426,671) (4,044,688)
       
Other comprehensive income      
Items that will be reclassified subsequently to profit and loss      
Exchange differences on translating foreign operations 17,644  (7,438)
Total comprehensive profit/(loss) for the period (1,409,027) (4,052,126)
       
Earnings per share      
Basic loss per share (1.12) (3.93)
Diluted loss per share (1.12) (3.93)
       

Locafy Limited
Consolidated Statement of Financial Position

 6 months to
31 Dec 2023
AUD $
  Year to
30 Jun 2023
AUD $
 
Assets     
Current assets     
Cash and cash equivalents724,581  3,174,700 
Trade and other receivables868,492  1,288,513 
Other assets453,763  356,782 
Total current assets2,046,836  4,819,995 
Non-current assets     
Property, plant and equipment317,618  380,018 
Right of use assets268,558  314,596 
Intangible assets4,022,887  3,720,272 
Total non-current assets4,609,063  4,414,886 
Total assets6,655,899  9,234,881 
      
Liabilities     
Current liabilities     
Trade and other payables1,289,251  2,507,573 
Borrowings271,600  301,600 
Provisions226,547  214,465 
Accrued expenses357,776  512,611 
Lease liabilities120,287  85,165 
Contract and other liabilities139,120  152,211 
Total current liabilities2,404,581  3,773,625 
Non-current liabilities     
Lease liabilities269,500  332,578 
Provisions33,559  48,271 
Accrued expenses90,450  90,450 
Total non-current liabilities393,509  471,299 
Total liabilities2,798,090  4,244,924 
Net assets3,857,809  4,989,957 
      
Equity     
Issued capital47,805,798  47,930,486 
Reserves2,696,635  2,404,933 
Accumulated losses(46,644,624) (45,345,462)
Total equity3,857,809  4,989,957 
      

Locafy Limited
Consolidated Statement of Cash Flows

 6 months to
31 Dec 2023
AUD $
  6 months to
31 Dec 2022
AUD $
 
Cash flows from operating activities     
Receipts from customers (inclusive of GST)1,837,481  2,743,777 
Payments to suppliers and employees (inclusive of GST)(3,312,368) (4,753,048)
R&D Tax Incentive and government grants561,501  164,817 
Financial cost(78,288) (45,900)
Net cash used by operating activities(991,674) (1,890,354)
      
Cash flows from investing activities     
Purchase of intellectual property(1,190,222) (1,161,145)
Purchase of property, plant and equipment-  (2,171)
Maturity of term deposit40,000  - 
Net cash used by investing activities(1,150,222) (1,163,316)
      
Cash flows from financing activities     
Payment for share issue costs(245,586) - 
Repayment of borrowings(30,000) (6,500)
Leasing liabilities(27,956) (10,936)
Net cash from financing activities(303,542) (17,436)
      
Net decrease in cash and cash equivalents(2,445,438) (3,071,106)
Net foreign exchange difference(4,681) (7,438)
Cash and cash equivalents at the beginning of the period3,174,700  4,083,735 
Cash and cash equivalents at the end of the period724,581  1,005,191 


FAQ

What partnerships did Locafy announce in the fiscal first half of 2024?

Locafy announced partnerships with diDNA, a leading ad tech provider, and Localista, the largest lifestyle and travel directory in Australia and New Zealand.

What is the purpose of the Hotfrog Proximity Page application launched by Locafy?

The Hotfrog Proximity Page application, developed in partnership with Yext, enables local businesses to create dynamic landing pages optimized for SEO performance.

How did Locafy manage its expenses in the fiscal first half of 2024?

Locafy reduced operating expenses by 51.6% by decreasing technology expenses, employee benefits, and headcount in underperforming sales regions.

What was the net loss reported by Locafy for the fiscal first half of 2024?

Locafy reported a net loss of $1.4 million, or $1.12 per diluted share, compared to $4.0 million in the comparable year-ago period.

How did the total operating revenue change in the fiscal first half of 2024?

Total operating revenue decreased by 28.3% to $2.0 million from $2.8 million in the comparable year-ago period.

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