Fadel Partners, Inc.

('FADEL', the 'Company' or, together with its subsidiaries, the 'Group')

2024 Trading Update and FY 2025 Outlook

Fadel Partners, Inc., the developer of cloud-based brand compliance and rights and royalty management software, provides a  trading update for the year ended 31 December 2024 (FY24), based on unaudited management accounts.

FY24 Financial Highlights

●    Revenue: $13.0M (-10%, FY23: $14.5M)

○    License/Subscription and Support revenue: $9.6M (-15%, FY23: $11.4M)

○    Services revenue: $3.4M (+10%, FY23: $3.1M)

●    ARR: $9.9M (+10%, FY23: $9.0M)

●    Adjusted LBITDA: Approximately $3.9M (FY23: $1.7M)

●    Net cash at year-end: $2.4M (-20%, FY23: $3.0M)

The increase in ARR in 2024 reflects continued momentum with existing clients and new contract wins, while the decrease in U.S. GAAP revenue is attributable to a one-off timing uplift in 2H23, as first disclosed in the Company's 2023 Half Year Report RNS issued on 27 September 2023. In 2H23, a group of customers transitioned from FADEL-hosted environments to on-premise or client-hosted term licenses to align with their internal security and GDPR compliance requirements. Under the terms of these contracts, revenue was recognized in full at the time of signing in accordance with U.S. GAAP revenue recognition policies, rather than being amortized over the contract term, causing a one-time revenue uplift in 2H23. A similar timing uplift occurred in 2H24, though at a significantly lower dollar value compared to 2H23 due to fewer high-value transitions. While this migration was driven by factors outside the Company's control, we are currently not aware of any further customers transitioning from FADEL-hosted services to on-premise or client-hosted environments in the future.

The 10% increase in ARR to $9.9M highlights the Company's continued success in expanding its recurring revenue base, reflecting notable progress across both of our core offerings IPM Suite and Brand Vision (excluding PictureDesk). Over the course of 2024, the Company secured 12 new clients to these offerings, including 7 for IPM Suite and 5 for Brand Vision.

Key IPM Suite wins included one enterprise client, Sanoma; three mid-market accounts, Yoto Players, Mad Engine, and the American Hospital Association; and three lower market LicenSee contracts, Ata-Boy, Magic Jump, and Wow! Stuff. These wins demonstrate the Company's ability to address diverse customer needs across the enterprise and SMB segments.

For Brand Vision, new client wins included one of the world's largest manufacturers of audio equipment, a global leader in the apparel industry, the Los Angeles Tourism & Convention Board, L'Oréal US, and StudioRX. Additionally, the Company saw multiple expansions within its existing customer base, particularly in the adoption of enhanced content tracking capabilities.

These results have enabled us to meet our previously revised FY24 revenue forecasts, while also exceeding LBITDA and cash forecasts. The LBITDA result reflects rigorous controls on expenditures and the implementation of a cost-restructuring initiative. These measures have had a positive impact, not only on the FY24 results but also on positioning the Company for improved operational performance in FY25.

As noted above, the Company exceeded market expectations for ending net cash, closing FY24 with $2.4M. This achievement was driven by a disciplined focus on timely new business cash collections, and improvement of commercial terms through  proactive engagement with renewing customers to ensure contracts were finalized and payments received on schedule. These concerted efforts reinforced the Company's cash position going into FY25 and it is management's intent to continue these efforts going forward.

Operational Efficiency and Restructuring

During Q4, the Company conducted a comprehensive review of its operations, resulting in structural changes to the organization and significant cost reductions. The restructuring was focused upon both driving improved efficiencies as well as aligning resources with our strategic priorities.

A key area was the optimization of our Sales and Marketing and Services organizations, where we right-sized the Sales and Marketing team while ensuring an adequate and efficient allocation of resources to meet our sales goals. Additionally, we realigned certain Services resources to lower-cost locations, achieving substantial savings while maintaining our high standards of customer service. These actions are expected to lead to a year-over-year reduction in Cost of Sales (COS) and Operating Expenses in excess of $1.5M, with an annualized benefit slightly higher.

This streamlined cost base is structured to drive more efficiency in achieving revenue growth targets, at the same time maintaining high standards of client service and operational efficiency. The resultant cost reductions from the restructuring also bolsters the Company's financial position, creating improved cash runway to sustain operations through to breakeven.

Market Commentary and Outlook for FY25

The Company is confident in its ability to capture growth opportunities across key verticals by both upselling to its existing customer base and securing new logo business and thereby building on its 10% growth in ARR achieved in FY24.

Looking ahead, in FY25 we expect to achieve:

●    Continuing increase in ARR Growth

●    Significant improvement in LBITDA reflecting the benefits of our cost-reduction program and continued growth expectations.

●    Sufficient net cash to fund operations. Additionally, we expect to renew our current credit line in Q2-25, which would provide access to an additional $1M, none of which is outstanding as of today.

The strategic measures undertaken in FY24 provide a solid platform to continue our ARR growth in FY25 while ensuring the business operates efficiently and prudently within its available resources.

Board Reorganization

In support of the management team's initiatives to improve operating efficiencies, the board has restructured itself to be leaner, and more effective in its support of the executive management. Effective January 31, 2025, Ken West will step down from the Board. We wish to thank Ken for his many years of service to FADEL both prior to the IPO, and after the IPO as Chairman. His support and commercial advice to the management team during that time was much valued and will be missed.

Joe Gruttadauria has, in addition to his board duties, taken on the operating role of Interim Head of Sales to work directly with sales team and Tarek Fadel to drive new business growth. Joe has a wealth of career-long senior Enterprise B2B sales experience in the Software industry, and the Company is extremely pleased that Joe has stepped into this new role.

As a result of this additional role, Joe is no longer deemed to be an independent director. Accordingly, Sally Tilleray will now chair the Remuneration Committee in Joe's place, as well as the Audit Committee. The Chairman, Simon Wilson, has joined both these committees to assist Sally.

By restructuring the board to be leaner and to provide additional support to the executive team, the Company believes these steps to be helpful in achieving the overall goals of the business in 2025 and beyond. In line with this strategy, there is no current intention to appoint a further non-executive director to the board.

Strategic Options

In January 2025 the Company engaged a U.S. investment bank to explore strategic options for the business, aiming to unlock additional value for shareholders. For inquiries related to this process or expressions of interest, please contact Oaklins DeSilva & Phillips LLC. Messages can be directed to Joanna Stone via email ([email protected]).

While the Board continues to see value and long-term growth potential in the organization, it believes engaging an investment bank to explore a full range of strategic options is a prudent additional step to ensure the best possible outcomes for our shareholders.

The Group's full year audited results for the year ended 31 December 2024 are expected to be announced in late April 2025.

This announcement contains inside information for the purposes of the retained UK version of the EU Market Abuse Regulation (EU) 596/2014 ("UK MAR").

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About FADEL Partners Inc.

FADEL is a developer of cloud-based brand compliance and rights and royalty management software, working with some of the world's leading licensors and licensees across media, entertainment, publishing, consumer brands and hi-tech/gaming companies. The Group combines the power of rights management and content compliance with sophisticated content services, AI-powered visual search and image and video recognition.

FADEL has two main solutions, being IPM Suite (for rights and royalty management for publishing and licensing) and Brand Vision (an integrated platform for Brand Compliance & Monitoring that includes Digital Asset Management, Digital Rights Management, AI-Powered Content Tracking, and a Content Aggregation platform with over 100 million Ready-to-License Images).

The Group's main country of operation is the United States, where it is headquartered in New York, with further operations in the UK, France, Lebanon, Jordan and India.

For more information, please visit the Group's website at: www.fadel.com.