8-K: SpringBig Secures $8 Million Debt Financing, Repurchases Existing Convertible Notes

SpringBig Holdings, Inc. has obtained $8 million in debt financing, including convertible and term notes, to repurchase existing debt and for general corporate purposes.

Summary

• SpringBig Holdings, Inc. has secured $8 million in debt financing, consisting of a $6.4 million 8% Senior Secured Convertible Note due in 2026 and a $1.6 million 12% Senior Secured Term Loan also due in 2026.
• The proceeds will be used to repurchase the existing Senior Secured Convertible Note due in 2025 for approximately $2.9 million, with the remaining funds allocated for general corporate purposes.
• The company estimates net proceeds of $4.6 million after the repurchase and transaction costs.
• The Convertible Notes can be converted into common stock at a price of $0.15 per share.
• Interest on the Convertible Notes is payable by increasing the principal amount of the outstanding note, while interest on the Term Loan is payable in cash semi-annually.
• SpringBig anticipates 2024 operating expenses will be approximately 25% lower than in 2023.
• The company expects to generate Adjusted EBITDA margins of 12%-15% in 2024.
• For the year ended December 31, 2023, springbig expects revenue in the range of $28.0 $28.5 million and an Adjusted EBITDA loss of approximately $(3.4) million.
• For the year ending December 31, 2024, the Company expects revenue to be in the range of $29.5 $32.5 million and Adjusted EBITDA profit in the range of $3.5 $5.0 million.

Sentiment

Score: 7

Explanation: The document conveys a positive outlook due to the successful debt financing, debt repurchase, and projected profitability. However, the high interest rates and past losses temper the overall sentiment.

Positives

• The debt financing strengthens SpringBig's balance sheet.
• The repurchase of existing debt at a discount reduces liabilities.
• The company expects significant cost reductions in 2024.
• SpringBig is projecting positive Adjusted EBITDA for 2024.
• The company has launched new products, including subscription and gift card services.

Negatives

• The company has a history of Adjusted EBITDA losses, with a loss of $(3.4) million expected for 2023.
• The new debt financing includes high interest rates of 8% and 12%.

Risks

• The company's ability to achieve its projected revenue and Adjusted EBITDA targets is subject to market conditions and other factors.
• The company's relatively short operating history in a rapidly evolving industry makes it difficult to evaluate future prospects.
• Failure to develop and deploy new software or retain existing clients could harm the business.
• The company is subject to risks and uncertainties described in its SEC filings.

Future Outlook

The company expects revenue to be in the range of $29.5 $32.5 million and Adjusted EBITDA profit in the range of $3.5 $5.0 million for the year ending December 31, 2024. They also anticipate 2024 operating expenses will be approximately 25% lower than in 2023.

Management Comments

• Paul Sykes, CFO, stated that Springbig now has a much stronger and cleaner balance sheet with the capital that will enable the Company to continue to expand and deliver shareholder value.
• Paul Sykes, CFO, noted that during 2023 the company significantly improved its financial profile, significantly reducing SG&A while being able to maintain revenue growth and concluded the year achieving positive Adjusted EBITDA in December.
• Jeffrey Harris, CEO and Chairman, said the Company is in an excellent position with a sound strategy and is confident in making the right investments to add value to clients and capture long-term opportunities.
• Jeffrey Harris, CEO and Chairman, stated that with the closing of the Convertible Note and Term Loan financing, the company now has a stronger balance sheet and the capital to support future growth.

Industry Context

This announcement reflects a trend of companies seeking debt financing to restructure their balance sheets and fund growth initiatives. The focus on achieving positive Adjusted EBITDA is also a common goal for companies in the current market environment. The cannabis industry is still relatively new and rapidly evolving, so companies are looking for ways to secure their financial position.

Comparison to Industry Standards

• The debt financing secured by SpringBig is similar to other companies in the SaaS and technology sectors that are seeking capital to fund growth and operations.
• The interest rates on the convertible and term notes are relatively high, which is not uncommon for companies with a history of losses or those in high-growth industries.
• The projected Adjusted EBITDA margins of 12%-15% for 2024 are within the range of what is considered acceptable for SaaS companies, but the company will need to execute well to achieve these targets.
• The company's focus on reducing operating expenses by 25% is a positive step towards improving profitability and is a common strategy for companies looking to improve their financial health.
• Comparable companies in the SaaS space often focus on recurring revenue models and customer retention, which aligns with SpringBig's emphasis on loyalty programs and subscription services.

Stakeholder Impact

• Shareholders will benefit from the improved financial position and potential for future growth.
• Employees may experience increased job security due to the company's improved financial outlook.
• Customers will benefit from the company's continued investment in its platform and services.
• Creditors will benefit from the company's reduced debt burden and improved financial stability.

Next Steps

• The company will use the proceeds from the debt financing to repurchase existing convertible notes and for general corporate purposes.
• SpringBig will focus on reducing operating expenses and achieving its projected revenue and Adjusted EBITDA targets for 2024.
• The company will continue to develop and deploy new software and platform features to address the needs of its clients.

Key Dates

Keywords

debt financing, convertible notes, term loan, debt repurchase, adjusted EBITDA, SaaS, loyalty programs, marketing solutions, financial outlook, cannabis