10-Q: SpringBig Reports Q3 Profit Amid Revenue Decline, Cost Cuts

SpringBig Holdings, Inc. achieved net income in Q3 2025 and improved Adjusted EBITDA, despite a continued decline in revenue and retail clients, reflecting ongoing cost management and challenging market conditions.

Summary

• SpringBig reported net income of $219,000 for the three months ended September 30, 2025, a significant improvement from a net loss of $554,000 in the prior-year quarter.
• Adjusted EBITDA increased by 117% to $889,000 for Q3 2025 and by 69% to $1.5 million for the nine months ended September 30, 2025.
• Revenue decreased by 4% to $5.871 million in Q3 2025 and by 9% to $17.221 million for the nine months ended September 30, 2025, primarily due to lower subscription revenue and client budget pressures in regulated sectors.
• The number of retail clients declined to 768 as of September 30, 2025, from 1,022 in the prior year, and net revenue retention fell to 83% from 88%.
• Operating expenses decreased by 20% in Q3 2025 and 6% for the nine months, driven by lower personnel costs, reduced offshore development, and facilities cost savings.
• Cash flows from operating activities turned positive, providing $381,000 for the nine months ended September 30, 2025, compared to a use of $1.334 million in the prior year.
• The company completed the acquisition of ViceCRM, an AI-enabled performance marketing platform, on July 31, 2025, and appointed Jaret Christopher, ViceCRM's founder, as CEO effective April 1, 2025.
• SpringBig's accumulated deficit increased to $40.1 million, and its working capital deficit grew to $2.0 million as of September 30, 2025.
• The company's common stock is now quoted on the OTCQB Venture Market after delisting from Nasdaq in September 2023.
• Disclosure controls and procedures were deemed not effective as of September 30, 2025.

Sentiment

Score: 4

Explanation: The company shows mixed results with improved Q3 profitability and strong Adjusted EBITDA growth, alongside effective cost control and positive operating cash flow. However, significant revenue and client declines, an increased year-to-date net loss, a growing accumulated deficit, and the delisting from Nasdaq present substantial challenges. Ongoing litigation and ineffective internal controls add to the risk profile, warranting a cautious outlook despite some operational improvements.

Positives

• Achieved net income of $219,000 in Q3 2025, a significant turnaround from a $554,000 net loss in Q3 2024.
• Adjusted EBITDA increased substantially by 117% in Q3 2025 to $889,000 and by 69% year-to-date to $1.5 million, indicating improved operational profitability.
• Operating expenses decreased by 20% in Q3 2025 and 6% year-to-date, demonstrating effective cost management across all major categories.
• Gross margin improved to 74% in Q3 2025 (from 73%) and to 76% year-to-date (from 73%), driven by lower messaging distribution costs and infrastructure optimization.
• Cash flows from operating activities turned positive, providing $381,000 for the nine months ended September 30, 2025, compared to a negative $1.334 million in the prior-year period.
• The number of messages distributed through the platform increased by 18% in Q3 2025 to 180 million and by 3% year-to-date to 464 million, indicating higher platform engagement.
• Acquired ViceCRM, an AI-enabled performance marketing platform, which could enhance future product offerings and strategic positioning.

Negatives

• Revenue decreased by 4% in Q3 2025 to $5.871 million and by 9% for the nine months ended September 30, 2025, to $17.221 million, primarily due to lower subscription revenue.
• Net loss for the nine months ended September 30, 2025, increased to $1.673 million from $784,000 in the prior-year period.
• The number of retail clients decreased significantly to 768 as of September 30, 2025, from 1,022 in the prior year.
• Net revenue retention rate declined to 83% for the twelve months ended September 30, 2025, from 88% in the prior year, reflecting challenging market conditions and client financial stress.
• Working capital deficit increased to $2.018 million as of September 30, 2025, from $1.806 million at December 31, 2024.
• Accumulated deficit grew to $40.1 million as of September 30, 2025.
• The company's common stock was delisted from Nasdaq and now trades on the OTCQB Venture Market.
• Disclosure controls and procedures were concluded to be not effective as of September 30, 2025, indicating material weaknesses in internal control over financial reporting.
• Ongoing litigation with former CEO Jeffrey Harris regarding his separation agreement.
• Civil investigative demand from the U.S. Attorney's Office regarding PPP Loan eligibility, with a potential contingent loss of up to $1.6 million.

Risks

• Trends in regulated industries, such as cannabis, and SpringBig's market size, including the total addressable market, could impact growth.
• Volatility in SpringBig's securities price due to the competitive and highly regulated industry, variations in competitor performance, and changes in laws and regulations.
• Ability to implement business plans, forecasts, and realize additional opportunities may be challenging.
• New risk factors may emerge, and management may not be able to predict all of them or assess their full impact.
• The company's ability to continue as a going concern is dependent on meeting liquidity needs through increased revenue, new customers, and strategic capital raises.
• Concentration of credit risk with one customer representing 17% of total revenues for the nine months ended September 30, 2025, and 23% of accounts receivable.
• Concentration with one vendor representing 90% of cost of goods sold for the nine months ended September 30, 2025.
• Potential contingent loss of up to $1.6 million related to the PPP Loan investigation.
• Negative publicity, whether justified or not, could tarnish the company's reputation and reduce demand for its platform.
• Intensifying competition in the cannabis market as the regulatory regime becomes more settled and new participants enter.
• Restrictive covenants in the 2024 Secured Term Notes and Convertible Notes limit the company's ability to incur additional indebtedness, incur liens, prepay other debt, pay dividends, repurchase capital stock, sell assets, or issue additional equity (outside of equity compensation plans).
• Ineffective disclosure controls and procedures could adversely affect the company's ability to record, process, summarize, and report financial information reliably.

Future Outlook

Management anticipates significant growth opportunities as more jurisdictions legalize cannabis for medical and/or adult use, intending to explore new expansion opportunities and leverage its existing business model to enter new markets. The company believes its understanding of the space and experienced sales force will enable quick entry and execution in new markets. A change in U.S. federal regulations could also open additional avenues in fintech, payments, and e-commerce. Management estimates that current liquidity and cash resources are sufficient for projected financial needs for at least the next twelve months.

Management Comments

• "We estimate that our liquidity and cash resources are sufficient for our current and projected financial needs for the next twelve months, at a minimum."
• "The decline [in revenue] was primarily attributable to lower subscription revenue, which decreased 9% year over year to $4.6 million from $5.0 million, reflecting continued pressure on client budgets in the regulated sectors."
• "Gross margin improved slightly to 74% from 73% in the prior-year quarter, driven by lower messaging distribution costs and ongoing infrastructure optimization initiatives."
• "Total operating expenses... decreased... reflecting lower spending across all major categories."
• "Net revenue retention rate was 83%... reflecting the continuing challenging macroeconomic conditions of the regulated markets, including the cannabis market and the financial stress of some of our retail clients leading to the Company having to suspend or cease some access to our platform."
• "We believe that we will have significant opportunities for growth as more jurisdictions legalize cannabis for medical and/or adult use and the regulatory environment continues to develop."
• "We intend to explore new expansion opportunities as additional jurisdictions legalize cannabis for medical or adult use and leverage our existing business model to enter new markets."
• "We believe our understanding of the space coupled with our experienced sales force will enable us to quickly enter and execute in new markets and capture new business, which we sustain via our best-in-class product offerings."
• "Further, a change in U.S. federal regulations could result in our ability to engage in additional outlets, including the fintech, payments and e-commerce space."

Industry Context

SpringBig operates in highly regulated industries, primarily the cannabis market in the U.S. and Canada, where stringent and evolving regulations restrict traditional marketing and advertising. The industry also suffers from a lack of specific data and market intelligence solutions, hindering efficient product marketing. The company faces challenging macroeconomic conditions within these regulated markets, leading to financial stress among some retail clients. Competition is expected to intensify as the legal cannabis market matures. However, further legalization and potential changes in U.S. federal regulations could open significant growth opportunities in areas like fintech, payments, and e-commerce.

Management Changes

Corporate Governance

Legal Proceedings

• Received a civil investigative demand from the United States Attorney's Office regarding the eligibility for its Paycheck Protection Program Loan (PPP Loan) received in 2020 and forgiven in 2021. The potential contingent loss is up to $1.6 million, which is reasonably possible but not probable.
• Engaged in litigation with former CEO Jeffrey Harris stemming from his separation agreement. The company has accrued a settlement within accrued expenses and other current liabilities.

Related Party Transactions

• Jeffrey Harris (former CEO) and Paul Sykes (former CFO) participated in the January 23, 2024, debt financing transaction, purchasing 2024 Secured Convertible Notes and 2024 Secured Term Notes.
• On January 17, 2025, Jeffrey Harris sold $160,000 of 2024 Secured Convertible Notes and $40,000 of 2024 Secured Term Notes to Mark Silver, a director of the company.
• On May 7, 2025, Paul Sykes sold $25,000 of 2024 Secured Convertible Notes and $6,500 of 2024 Secured Term Notes to Mark Silver, a director of the company.
• Two current board members are related to investors who initially purchased $5.2 million in 12% Secured Convertible Notes and $1.3 million in 8% Secured Term Notes.
• Upon stepping down on March 31, 2025, Jeffrey Harris was to receive 250,000 restricted stock units, 3% and 2% of gaming customer revenue for 2025 and 2026 respectively, and a $450,000 consulting fee payable in 18 monthly installments. The company has not yet paid Mr. Harris for services or issued the RSUs and is in litigation with him.
• On May 7, 2025, Paul Sykes' separation agreement was amended, accelerating his separation date and entitling him to a revised bonus of $120,000 payable in twelve equal semimonthly installments, while unvested restricted stock units were no longer accelerated.

Stakeholder Impact

• **Shareholders**: Face potential dilution from future capital raises and convertible notes. Experience reduced liquidity and investor visibility due to delisting from Nasdaq. Subject to risks from ongoing litigation and the PPP loan investigation. Earnout shares for certain holders are contingent on stock price targets.
• **Employees**: Impacted by headcount rationalization and changes in management. Benefit from stock-based compensation plans and 401(k) matching contributions.
• **Customers**: The number of retail clients has decreased, and net revenue retention has declined, indicating challenges in customer acquisition and retention, partly due to financial stress in regulated markets.
• **Creditors**: Holders of the 2024 Secured Term Notes and Convertible Notes are secured by company assets but are subject to restrictive covenants that limit the company's financial and operational flexibility. Interest rates on these notes can increase if Adjusted EBITDA targets are not met.
• **Management**: The company has undergone significant leadership changes with a new CEO and CFO. The former CEO is involved in litigation with the company, creating potential legal and financial liabilities.

Next Steps

• Continue to evaluate the impact of FASB ASU No. 2023-09 (Improvements to Income Tax Disclosures), effective for annual reporting periods beginning after December 15, 2024.
• Continue to evaluate the impact of FASB ASU 2025-05 (Measurement of Credit Losses for Accounts Receivable and Contract Assets).
• Address the identified material weaknesses in internal control over financial reporting to ensure disclosure controls and procedures are effective.
• Resolve the ongoing litigation with former CEO Jeffrey Harris.
• Address the civil investigative demand from the U.S. Attorney's Office regarding the PPP Loan.

Key Dates

Recommendation

While SpringBig demonstrated improved profitability in Q3 2025 with a net income of $219K and strong Adjusted EBITDA growth, the overall nine-month period still shows an increased net loss and a significant decline in revenue and retail clients. The company operates in a highly regulated and challenging cannabis market, which has impacted client budgets and retention. The delisting from Nasdaq to OTCQB, ongoing litigation with the former CEO, and the disclosure of ineffective internal controls present considerable risks. The positive operating cash flow and cost management initiatives are encouraging, but the accumulated deficit and working capital deficit raise going concern questions. The future growth potential in expanding cannabis legalization is a long-term factor, but current operational and financial challenges warrant a cautious approach. A 'Hold' reflects the mixed signals and high uncertainty, suggesting investors monitor developments closely.

Keywords

Cannabis marketing, Loyalty platform, Regulated industries software, SaaS, Customer engagement, Marketing automation, SEC filing, 10-Q, Financial results, Adjusted EBITDA, OTC Markets, ViceCRM acquisition