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Locafy Reports Fiscal Third Quarter 2024 Results

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Locafy , a software-as-a-service technology company specializing in SEO, reported fiscal third-quarter results with a focus on near-term profitability following a revamped approach and cost reduction initiatives. The introduction of a new pay-per-click SEO pricing model has gained traction, resulting in a record gross margin of 83.6%. The company expects increased sales velocity and subscription revenue opportunities from the new model. While total operating revenue decreased, cost reduction measures led to lower expenses and improved gross margins. The company is confident in its revamped product offering and go-to-market strategy and aims for steady growth and profitability in the coming quarters.

Locafy, un'azienda tecnologica che offre servizi di SEO basati su un modello software-as-a-service, ha presentato i risultati del terzo trimestre fiscale, puntando sulla redditività a breve termine dopo aver adottato un nuovo approccio e iniziative di riduzione dei costi. L'introduzione di un nuovo modello di prezzo per il pay-per-click SEO ha ottenuto successo, portando a un margine lordo record del 83,6%. L'azienda prevede un aumento della velocità di vendita e delle opportunità di ricavi da abbonamento grazie al nuovo modello. Nonostante una riduzione nel totale dei ricavi operativi, le misure di riduzione dei costi hanno portato a spese inferiori e a migliori margini lordi. L'azienda è fiduciosa nella sua offerta di prodotto rinnovata e nella strategia di accesso al mercato, e mira a una crescita costante e a una redditività nei prossimi trimestri.
Locafy, una empresa de tecnología de servicio de software especializada en SEO, ha reportado los resultados del tercer cuarto fiscal, enfocándose en la rentabilidad a corto plazo tras una revisión de enfoque y iniciativas de reducción de costos. La introducción de un nuevo modelo de precios SEO por clic ha tenido éxito, resultando en un margen bruto récord del 83.6%. La compañía anticipa un aumento en la velocidad de ventas y oportunidades de ingresos por suscripciones con el nuevo modelo. Aunque los ingresos operativos totales disminuyeron, las medidas de reducción de costos llevaron a menores gastos y mejores márgenes brutos. La empresa confía en su oferta de productos renovada y estrategia de mercado, y aspira a un crecimiento estable y rentabilidad en los próximos trimestres.
SEO 전문 소프트웨어-서비스 기술 회사인 Locafy는 비용 절감 및 새로운 접근 방식을 통해 단기 수익성에 중점을 둔 회계 연도 제3분기 결과를 보고했습니다. 새로운 클릭당 결제 SEO 가격 모델의 도입이 성공을 거두어, 사상 최고인 83.6%의 총 마진을 달성했습니다. 회사는 새 모델로부터의 판매 속도 증가와 구독 수익 기회 증가를 기대합니다. 총 운영 수익이 감소했지만, 비용 감소 조치로 경비가 줄어들고 총 마진이 개선되었습니다. 회사는 제품 제공 개편과 시장 진입 전략에 자신감을 갖고 있으며, 향후 몇 분기 동안 안정적인 성장과 수익성을 목표로 하고 있습니다.
Locafy, une entreprise technologique offrant des services logiciels comme service spécialisée en SEO, a rapporté les résultats du troisième trimestre fiscal avec un focus sur la rentabilité à court terme suite à une révision de l'approche et des initiatives de réduction des coûts. L'introduction d'un nouveau modèle de tarification SEO au clic a été couronnée de succès, résultant en une marge brute record de 83,6%. L'entreprise prévoit une augmentation de la vitesse de vente et des opportunités de revenus d'abonnement grâce au nouveau modèle. Bien que le revenu opérationnel total ait diminué, les mesures de réduction des coûts ont conduit à des dépenses réduites et à des marges brutes améliorées. Confiant dans son offre de produits révisée et sa stratégie de mise sur le marché, l'entreprise vise une croissance constante et une rentabilité dans les trimestres à venir.
Locafy, ein Technologieunternehmen, das Software-as-a-Service im Bereich SEO anbietet, hat die Ergebnisse des dritten Geschäftsquartals mit einem Fokus auf kurzfristige Rentabilität nach einer Überarbeitung der Strategie und Kostensenkungsinitiativen bekanntgegeben. Die Einführung eines neuen Preis­modells für SEO pro Klick erzielte Erfolg und resultierte in einer Rekord-Bruttomarge von 83,6%. Das Unternehmen erwartet eine erhöhte Verkaufsdynamik und Chancen für Abonnement-Einnahmen durch das neue Modell. Obwohl die gesamten Betriebserlöse zurückgingen, führten die Kostensenkungsmaßnahmen zu niedrigeren Ausgaben und verbesserten Bruttomargen. Das Unternehmen ist zuversichtlich, was das überarbeitete Produktangebot und die Markteinführungsstrategie betrifft, und strebt in den kommenden Quartalen nach stetigem Wachstum und Rentabilität.
Positive
  • The introduction of the new pay-per-click SEO pricing model has gained strong traction in multiple market sectors, leading to a record quarterly gross margin of 83.6%.

  • The company's cost reduction initiatives resulted in a significant decrease in cost of sales and operating expenses, with a gross margin increase to a record 83.6%.

  • Locafy has successfully completed its product offering and go-to-market strategy revamp, focusing on targeted marketing efforts and cost structure streamlining.

  • Despite sales delays in subscription and advertising revenue segments in the fiscal third quarter, the company has seen the decline in subscription revenue end and expects growth in the coming quarters.

Negative
  • Total operating revenue decreased by 28.3% compared to the previous year, with subscription revenue declining by 36.9% and advertising revenue by 10.8%.

  • Monthly recurring revenue decreased by 34.8% compared to the previous year, signaling a shift in focus for the company's KPIs towards Monthly Recurring Revenue.

  • Net loss for the year to date was $2.1 million, compared to a net loss of $5.1 million in the comparable year-ago period.

Insights

Locafy Limited's fiscal third quarter report evidences a significant operational pivot with potential implications on future revenue streams. The shift towards a Performance-Based SEO Pricing Model represents a strategic move to cater to market demand for more accountable and outcome-oriented solutions. This new model promises scalability and improved sales velocity, which are critical for technology companies striving to attain profitability.

Despite the introduction of this novel approach, there has been a substantial decline in subscription revenue by 1.1 million or 36.9% year-over-year. While this decline ceased in January, it's essential to monitor if the new pricing strategy can reverse this trend in subsequent quarters. The increased gross margin to a record 83.6% reflects the successful cost reduction initiatives but must be balanced against a 28.3% decrease in total operating revenue to 2.9 million.

Locafy's strategic partnership with ad tech provider diDNA could enhance advertising revenue by leveraging synergies between Locafy's existing technology and diDNA's ad tech solutions. However, as advertising revenue currently constitutes a small portion of the total revenue, investors should look for material developments in this area before considering it a major growth driver.

The net loss reduction from 5.1 million to 2.1 million is a positive indicator of improved operational efficiency. Investors should track whether these cost-saving measures can be maintained without compromising growth initiatives.

The introduction of Locafy's Performance-Based SEO Pricing Model signifies a response to evolving market needs within the digital marketing space. Pay-per-click SEO models align well with client expectations for tangible results from their marketing expenditures. The traction gained in multiple market sectors with over 750,000 in potential revenue from proposals is promising. It suggests a market readiness to adopt such innovative pricing structures.

Furthermore, Locafy's realignment of core markets to focus on digital agency resellers, publishers and direct clients delineates a targeted approach to customer acquisition. The company's agility in adjusting its go-to-market strategy and streamlining operations may be seen as a strength amidst dynamic market conditions. This is particularly relevant as traditional KPIs no longer suffice and the focus has shifted towards Monthly Recurring Revenue (MRR), which has seen a decline. Therefore, the company's ability to effectively execute its updated strategy and deliver value through its SEO solutions will be important to rebuilding MRR and overall revenue growth.

Company Striving Towards Near-Term Profitability Following Go-to-Market Approach Revamp and Cost Reduction Initiatives

New Pay-Per-Click SEO Pricing Model Gaining Strong Traction in Multiple Market Sectors

Streamlined Operations Results in Record Quarterly Gross Margin of 83.6%

PERTH, Australia, May 01, 2024 (GLOBE NEWSWIRE) -- Locafy Limited (Nasdaq: LCFY, LCFYW) (“Locafy” or the “Company”), a globally recognized software-as-a-service technology company specializing in “entity-based” search engine optimization (SEO), today reported financial results for the 2024 fiscal third quarter ended March 31, 2024. All financial results are reported in Australian Dollars (AUD).

Recent Operational Highlights

  • Announced in early April, Locafy’s new proprietary Performance-Based SEO Pricing Model allows customers to access “pay-per-click SEO.” The Company believes that this model is the first of its kind for the SEO software space. Performance-based SEO is expected to boost Locafy revenues through increased sales velocity, scalability, and its subscription revenue opportunity.
  • Since announcing the release of Locafy’s Performance Based SEO solutions, the Company has presented approximately 50 qualified proposals to customers, totaling more than $750,000 in new potential SEO services revenue. As of the date of this press release, several of these proposals have already been converted to deals.
  • In February 2024, Locafy announced a $500,000 services contract with Localista, an Australian directory business. As of the date of this press release, the Localista contract is on track to be completed during the 2024 fiscal fourth quarter. Once completed, as pursuant to the contract, Locafy will also share in any advertising revenue growth demonstrated by Localista.
  • Cost reduction initiatives resulted in cost of sales and operating expenses decreases of 59% and 47% compared to the 2023 fiscal third quarter, respectively; gross margin increased to Locafy's quarterly record of 83.6%.
  • Services revenue increased 26.6% to $126,000 from $100,000 in the comparable year-ago period. Under the revamped pricing model, the company expects these revenues to continue to grow, which is expected to drive increased subscription revenues once services are delivered.

Management Commentary
“In our 2024 fiscal third quarter, we focused on completing our product offering and go-to-market strategy revamp,” said Locafy CEO Gavin Burnett. “We listened to the feedback from our advertising and publishing clients, and successfully launched our proprietary pay-per-click SEO model for which they have indicated interest. We believe that this model allows us to improve our targeted marketing efforts and streamline our cost structure, as it can be supported by significantly leaner sales and operational teams. Even as we faced sales delays in our subscription and advertising revenue segments in the 2024 fiscal third quarter, our subscription revenue decline ended in January, and we are now poised to rebound well in the coming quarters. Also, we have successfully lowered our cost of sales and operating expenses by 59% and 47% over our 2023 fiscal third quarter, respectively, and believe that we are nearing a steady run rate and break-even profitability point for our business in the coming quarters.

“We now define our three core markets as digital agency resellers, who provide our technology to clients, publishers, who monetize their digital properties through advertising, and direct clients, who publish their online business data through our directory assets,” continued Burnett. “We are seeing significant business development success and preliminary contracts signed with clients in each market and look forward to completing the onboarding processes for early adopters in the coming months. We believe that our underlying SEO solutions have proven their effectiveness through a wealth of trials and paid engagements in recent quarters. With this product offering revamp complete, we are ready to capitalize on our technology and drive Locafy revenue that matches the value we provide. We are confident that this model will help us unlock significant growth opportunities both for clients and for our business as we head into fiscal 2025.”

2024 Fiscal Third Quarter Financial Results
Results compare the 2024 fiscal third quarter end (March 31, 2024) to the 2023 fiscal third quarter end (March 31, 2023) unless otherwise indicated. All financial results are reported in Australian Dollars (AUD).

  • Total operating revenue decreased 28.3% to $2.9 million from $4.1 million in the comparable year-ago period.
    • Subscription revenue decreased 36.9% to $2.0 million from $3.1 million in the comparable year-ago period. Compared to the 2024 fiscal second quarter, subscription revenue decreased 8.9%. The decline in subscription revenues ceased in January 2024, forming a base from which the Company expects to grow in the coming quarters.
    • Advertising revenue decreased 10.8% to $213,000 from $239,000 in the comparable year-ago period. The Company is currently implementing advertising technology from diDNA, a leading ad tech provider, to its digital properties through the recently announced partnership between Locafy and diDNA. When combined with Locafy’s existing Keystone technology, which is also applied to these digital properties to improve search traffic, Locafy expects this initiative to drive increased revenues and higher advertising yields to produce a synergistic result for Locafy and diDNA.
    • Data revenue decreased 2.5% to $645,000 from $662,000 in the comparable year-ago period.
    • Services revenue increased 26.6% to $126,000 from $100,000 in the comparable year-ago period. The revenue in the 2024 fiscal third quarter included the recognition, on a project-complete basis, of $101,875 out of the $500,000 total contract fee in relation to the Company’s SEO consulting engagement with Localista. Management expects to complete the remaining project within the 2024 fiscal fourth quarter.
  • Other income decreased 91.0% to $26,000 from $285,000 in the comparable year-ago period. As previously reported, 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 in Australia, as was possible in prior years.
  • Cost of sales decreased 58.9% to $483,000 from $1.2 million in the comparable year-ago period.
  • Gross margin for the 2024 fiscal third quarter improved to 83.6% from 71.5% in the comparable year-ago period. This is attributable to a reduction in third party technology costs.
  • Operating expenses decreased 47.0% to $5.0 million from $9.4 million in the comparable year-ago period. This is primarily due to a significant reduction in headcount and associated costs, a reduction in third party technology costs, and the capitalization of certain R&D activities. These cost reductions resulted from technology upgrades implemented during the past 12 months, including incorporating technologies acquired from Jimmy Kelley Digital, resulting in the introduction of new SEO solutions that the Company is now bringing to market.
  • Net loss for the year to date was $2.1 million, or $1.63 per diluted share, compared to a net loss of $5.1 million, or $4.91 per diluted share, in the comparable year-ago period.

Key Performance Indicators (KPIs)
In accordance with its revamped go-to-market strategy, Locafy no longer views its traditional KPIs as adequate indicators of the long-term success of the Company’s business. Therefore, Locafy has updated its KPIs to focus on Monthly Recurring Revenue driven across the platform. Unless otherwise specified, KPI data has been recorded as of the 2024 fiscal third quarter end (March 31, 2023).

  • Monthly recurring revenue (MRR) for the 2024 fiscal third quarter was $266,000, a 34.8% decrease from the comparable year-ago period, and a 15.5% decrease compared to the 2024 fiscal second quarter.

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 total active reseller count and total end user count as relevant indicators of the performance of Locafy’s 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
(Unaudited)
 
 3 months to
31 Mar 2024
AUD $
  9 months to
31 Mar 2023
AUD $
 
Revenue911,839  2,947,522 
Other income25,641  32,241 
Technology expense(225,833) (676,447)
Employee benefits expense(721,580) (2,322,417)
Occupancy expense(27,959) (75,055)
Advertising expense(46,287) (179,151)
Consultancy expense(193,137) (657,926)
Depreciation and amortization expense(360,382) (1,079,660)
Other expenses(4,628) (46,962)
Reversal / (Impairment) of financial assets-  67,146 
Operating loss(642,326) (1,990,709)
Financial cost(19,372) (97,660)
Loss before income tax(661,698) (2,088,369)
Income tax expense-  - 
Loss for the period after tax(661,698) (2,088,369)
      
Other comprehensive income     
Items that will be reclassified subsequently to profit and loss     
Exchange differences on translating foreign operations(26,895) (9,251)
Total comprehensive profit/(loss) for the period(688,593) (2,097,620)
      
Earnings per share     
Basic loss per share(0.51) (1.63)
Diluted loss per share(0.51) (1.63)
      


Locafy Limited
Consolidated Statement of Financial Position
 
 As at
31 Mar 2024
AUD $
(unaudited)
  As at
31 Dec 2023
AUD $
(audited)
  As at
30 Jun 2023
AUD $
(audited)
 
Assets        
Current assets        
Cash and cash equivalents484,590  724,581  3,174,700 
Trade and other receivables1,011,347  868,492  1,288,513 
Other assets523,506  453,763  356,782 
Total current assets2,019,443  2,046,836  4,819,995 
Non-current assets        
Property, plant and equipment286,419  317,618  380,018 
Right of use assets245,539  268,558  314,596 
Intangible assets4,652,855  4,022,887  3,720,272 
Total non-current assets5,184,813  4,609,063  4,414,886 
Total assets7,204,256  6,655,899  9,234,881 
         
Liabilities        
Current liabilities        
Trade and other payables1,853,108  1,289,251  2,507,573 
Borrowings271,600  271,600  301,600 
Provisions214,082  226,547  214,465 
Accrued expenses379,464  357,776  512,611 
Lease liabilities124,795  120,287  85,165 
Contract and other liabilities132,529  139,120  152,211 
Total current liabilities2,975,578  2,404,581  3,773,625 
Non-current liabilities        
Lease liabilities237,011  269,500  332,578 
Provisions32,656  33,559  48,271 
Accrued expenses90,450  90,450  90,450 
Total non-current liabilities360,117  393,509  471,299 
Total liabilities3,335,695  2,798,090  4,244,924 
Net assets3,868,561  3,857,809  4,989,957 
         
Equity        
Issued capital48,398,895  47,805,798  47,930,486 
Reserves2,774,951  2,696,635  2,404,933 
Accumulated losses(47,305,288) (46,644,624) (45,345,462)
Total equity3,868,558  3,857,809  4,989,957 
         


Locafy Limited
Consolidated Statement of Cash Flows
(unaudited)
 
 3 months to
31 Mar 2024
AUD $
  9 months to
31 Mar 2024
AUD $
 
Cash flows from operating activities     
Receipts from customers (inclusive of GST)653,810  2,492,938 
Payments to suppliers and employees (inclusive of GST)(869,017) (4,183,032)
R&D Tax Incentive and government grants-  561,501 
Financial cost(19,372) (97,660)
Net cash used by operating activities(234,579) (1,226,253)
      
Cash flows from investing activities     
Purchase of intellectual property(483,422) (1,673,644)
Maturity of term deposit-  40,000 
Net cash used by investing activities(483,422) (1,633,644)
      
Cash flows from financing activities     
Proceeds from issue of shares567,632  567,632 
Payment for share issue costs(45,747) (291,333)
Repayment of borrowings-  (30,000)
Leasing liabilities(27,981) (55,937)
Net cash from financing activities493,904  190,362 
      
Net decrease in cash and cash equivalents(224,097) (2,669,535)
Net foreign exchange difference(15,894) (20,575)
Cash and cash equivalents at the beginning of the period724,581  3,174,700 
Cash and cash equivalents at the end of the period484,590  484,590 
      

FAQ

What new pricing model has Locafy introduced?

Locafy introduced a new pay-per-click SEO pricing model, believed to be the first of its kind in the SEO software space.

What record gross margin did Locafy achieve?

Locafy achieved a record quarterly gross margin of 83.6%.

What happened to subscription revenue in the fiscal third quarter?

Subscription revenue decreased by 36.9% compared to the previous year but saw a decline end in January 2024.

How did Locafy reduce expenses?

Cost reduction initiatives led to a decrease in cost of sales and operating expenses by 59% and 47%, respectively.

What change did Locafy make to its Key Performance Indicators (KPIs)?

Locafy updated its KPIs to focus on Monthly Recurring Revenue driven across the platform.

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