Mobivity Holdings Corp. (MFON) CEO Dennis Becker on Q4 2021 Results – Earnings Call Transcript


Mobivity Holdings Corp. (OTC:MFON) This autumn 2021 Earnings Convention Name March 30, 2022 4:30 PM ET

Firm Individuals

Brett Mass – Hayden IR

Dennis Becker – Chairman and Chief Govt Officer

Lisa Brennan – Chief Monetary Officer

Convention Name Individuals

Jeff Porter – Porter Capital Administration

Bryce Daniels – Talkot Capital

Operator

Greetings, and welcome to Mobivity’s Fiscal Yr 2021 Earnings Name. At the moment, all members are in pay attention solely mode. [Operator Instructions] As a reminder, this convention is being recorded. I’d now like to show the convention over to your host, Brett Mass of Hayden IR. Please go forward.

Brett Mass

Thanks, operator. I would prefer to welcome all people Mobivity’s fiscal yr 2021 earnings name. Hosted a name as we speak are Dennis Becker, Founder, Chairman and Chief Govt Officer and Lisa Brennan, Chief Monetary Officer. Earlier than I flip the decision over to administration, I would prefer to name it with consideration to the corporate’s Protected Harbor coverage. Please be aware that sure statements made on this name shall be wanting statements that are topic to appreciable dangers and uncertainties. We warning you that such statements replicate administration’s finest judgment based mostly on components at present identified, and that the precise outcomes or occasions might differ materially. Please consult with the paperwork filed by the corporate now and again with the SEC and particularly, its most just lately filed interim report on Kind 10-Okay. These paperwork comprise and determine essential threat components and different data which will trigger precise outcomes to vary from these comprises within the forward-looking statements. Any forward-looking statements made throughout this name are being made as of as we speak. If this name is being replayed, reviewed after as we speak, the data introduced throughout this name could not comprise present or correct data. Besides as required by regulation, the corporate assumes no obligation to replace these forward-looking statements publicly, or to replace the explanations precise outcomes might differ materially from these anticipated in the forward-looking statements, even when new data turns into out there sooner or later.

At this time’s name could embody non-GAAP monetary measures, which require a reconciliation of probably the most instantly comparable monetary measures, that are calculated and introduced in accordance with GAAP and could be present in as we speak’s press launch together with our current company presentation, which can also be out there@ mobivity.com. With all that stated, I would like to show to the commentator, Becker. Dennis, the decision is yours.

Dennis Becker

Thanks Brett. And thanks everybody for becoming a member of us on our name as we speak. First, I would prefer to say how proud I’m of the workforce in Mobivity for the innovation and progress now we have achieved over the previous yr, and notably within the fourth quarter. 2021 was a yr of change within the digital advertising and marketing universe and at Mobivity. The digital advertising and marketing business was turned the other way up by stringent privateness rules, and notably to modifications in monitoring and promoting to cell phones. Mobivity has at all times been a greater answer to the numerous challenges in digital advertising and marketing. However we’re distinctive in the best way we deal with this new slate of challenges. We seize the chance introduced by these modifications and pivoted to some new thrilling verticals, whereas persevering with our growth in eating places and comfort shops. This pivot has positioned us to have the ability to obtain speedy development with greater margin and better worth of recurring income by fixing the brand new multibillion greenback downside in advertising and marketing, which is the place advertisers discover massive audiences and the way they aim them.

Merely put, our legacy enterprise drove the digital transformation for manufacturers by way of constructing audiences for SMS advertising and marketing from scratch, and for fractions of a cent per buyer. Our new enterprise line, it focuses on connecting current offline and digital audiences can usher in many {dollars} per buyer throughout a bigger and extra energetic viewers. Mobivity’s expertise empowers our prospects with 100% distinctive provide codes, good attribution and monitoring all at scale higher than another competitor. Our prospects use Mobivity expertise to achieve and interact greater than 100 million shoppers throughout greater than 40,000 areas throughout the globe. We’re executing tens of millions of digital engagements to those prospects on a month-to-month foundation. And since now we have demonstrated the unimaginable attain and the worth of our distinctive expertise, we’re positioned to attach these tens of millions of shoppers throughout 1000s of areas and types, to on-line companies like video video games, playing and streaming video throughout all platforms, together with cell phones, desktop packing containers, and gaming consoles.

These connections are among the highest worth in the entire digital business. And now we have the potential to remodel digital advertising and marketing. I am happy to report that we started executing this pivot within the fourth quarter of final yr. We related a number of cellular gaming operators to our massive model shopper audiences and have already efficiently launched a number of packages within the first quarter of this yr. I would like to clarify in a bit extra element why we consider we’re uniquely positioned to create a priceless market on the intersection of digital and brick and mortar manufacturers. First off, we’re in a position to leverage most of our current expertise and product property with minimal new improvement prices. For instance, leveraging our unified provide answer that produces distinctive scannable coupon codes already utilized by many massive manufacturers. Customers might redeem factors earned by taking part in a online game, or watching a streaming video on-line for a pizza or $0.30 off gasoline at their nearest Circle Okay. Conversely, a burger chain might ship an SMS textual content message provide giving their prospects a free burger in the event that they obtain a cellular recreation, or a comfort model advertises a recreation in retailer and thru their web site, and provides prospects a variety of redeemable provides for making an attempt a streaming video service.

In every of those examples, Mobivity is the technological plumbing that connects offline and brick mortar shoppers to digital merchandise and vice versa. We turn into the very important gateway between shoppers’ bodily items and companies, and digital solely companies and energy promotions and provides which might be organically positioned inside current channels. Previously, we relied on a protracted gross sales cycle to get manufacturers to decide to deploying our answer, after which spend months to a yr organically constructing audiences to market to by way of SMS textual content messages and digital promotions. Beneath our new mannequin, we merely match digital and actual world audiences and driving energy shopper interplay between their respective companies. The place we used to enter a month lengthy deployment cycles previous to income manufacturing, prompt audiences between digital and actual world manufacturers want a lot shorter time to income. Moreover, our expertise has the dimensions, skill and is goal constructed to energy the interplay between shoppers and types uniquely throughout all advertising and marketing channels, and all factors of sale whether or not in retailer or on-line.

On prime of this, now we have main model purchasers similar to Circle Okay, Pepsi, Subway, and others, which implies we offer digital companies and prompt and profitable actual world secure of manufacturers with which they’ll companion. The digital first firms that we join with brick and mortar manufacturers function within the cellular gaming, cellular playing and streaming video markets, amongst others. These are quickly rising industries with huge addressable markets and priceless prospects. These partnerships will exponentially develop the addressable marketplace for our expertise. Lastly, simply as with our former mannequin, the place we predominantly generated recurring income by way of charges from SMS quantity and model areas, our new mannequin additionally drives recurring transaction charges as digital and actual world manufacturers conduct transactions, though it multiples greater greenback worth. We’re happy to report that since creating this new mannequin in This autumn of final yr, we have already achieved 4 new key partnerships with digital shopper companies which might be working reside packages with our current model prospects. These packages have delivered 1000s of shoppers from digital environments to brick and mortar manufacturers and vice versa.

We’re additionally seeing sturdy demand from further brick and mortar manufacturers and digital companions with many new offers within the pipeline. Or early velocity is supported by the truth that our current product and expertise platforms want little or no improvement to energy our new enterprise mannequin. Earlier than I hand the decision over to Lisa for a extra detailed abstract of our monetary outcomes. I’ll level out that our shift in our enterprise mannequin did require restructuring a few of our current buyer contracts to help long-term upside. We made the robust selection to just accept some short-term modifications to make sure the long-term upside of continuous relationships with key prospects. We strongly consider this can gas super upside inside our new mannequin. Whereas we’re not happy with the brief time period impression of those modifications, we’re excited that these prospects are persevering with as a Mobivity companion to assist us pioneer a revolutionary solution to join digital and brick and mortar shoppers in an period of privateness protected commerce.

I’ll now flip the decision over to Lisa for a extra detailed view of our monetary outcomes. After which I’ll come again for just a few abstract feedback. Lisa?

Lisa Brennan

Thanks Dennis. Whereas we ended the yr with roughly $735,000 in money, we just lately accomplished a mortgage conversion in February of this yr that added in further $2.5 million to the stability sheet. We’re assured that our money available is enough to proceed executing on the enterprise mannequin that Dennis beforehand described. Revenues for the 12 months ended December 31, 2021 had been $8.2 million, a lower of $5 million, or 38% in comparison with $13.3 million for the 12 months ended December 31, 2020. This lower is primarily attributable to three key reductions from a big buyer from 2020 to 2021. First, there was a discount of $1.7 million of income from non-recurring engineering charges paid by this buyer in 2020 that can’t repeat in 2021. Second, we restructured certainly one of these prospects’ contracts in late 2021, which resulted in a lower in revenues of $1.7 million. And third this restructuring included one other $1.2 million that ASC 606 associated revenues booked in 2020.

Whereas the year-over-year in income impression from this buyer was unfavorable, we proceed to offer this buyer with different companies and really feel assured we’ll develop with this buyer by way of our new enterprise mannequin. Whole working bills for 2021 elevated by 22% to $12.8 million, in comparison with $10.5 million in 2020. This enhance was primarily attributable to greater gross sales and advertising and marketing investments to seize market share in 2020. We additionally incurred roughly $1.2 million in non-recurring authorized bills throughout 2020. These charges had been associated to resolving disputes involving the Phone Client Safety Act. And we really feel strongly that these prices won’t proceed now that the Supreme Courtroom has issued a landmark ruling within the Fb versus Duguid case. Lastly, I would like to deal with our gross revenue margin, our gross revenue margin for 2021 fell to 47% from 64% in 2020, primarily due to the non-recurring engineering revenues earned in 2020. It didn’t recur in 2021 and didn’t carry the identical wi-fi messaging and cloud internet hosting prices of products with — to our messaging enterprise. That stated, we’re very excited by traditionally excessive gross revenue margins being generated by our new line of enterprise which might be incomes transaction revenues at multiples of our formal cellular messaging charges, and are free from wi-fi provider transmission prices and surcharges.

I am going to now flip the decision again over to Dennis, for his closing remarks. Dennis?

Dennis Becker

Thanks Lisa. To this point, now we have seen an incredible response from our digital companions, actual world model prospects, and most significantly, shoppers. It is apparent that customers need actual world rewards whereas having fun with digital companies like video and gaming, and that digital and model companies are motivated to supply these rewards and incorporate these provides as part of their long run technique. In reality, since executing our pivot up to now few months, we have already solid partnerships with gaming operators reaching greater than 40 million players throughout cellular, PC and console platforms, all of which are actually relying on Mobivity to assist carry these players to the meals and comfort manufacturers they love and vice versa. We consider we’re powering an entire new method to promoting. And we’re excited to play a key function in constructing a priceless intersection between on-line and offline audiences. Thanks for tuning in and in your continued curiosity in Mobivity. We’ll now open up the decision for Q&A.

Query-and-Reply Session

Operator

[Operator Instructions]

Our first query is from Joe Schulte with Zero GE Capital.

Unidentified Analyst

Hey, guys, thanks for taking my name. Sure, are you able to simply speak about the way you’re interested by competitors? And the way you see competitors creating in your vertical? Thanks.

Dennis Becker

Sure, good, thanks. Thanks for the query, Joe. So sure, like the best way we take into consideration that is our mixture of patented expertise and distinctive product capabilities are on the core of our aggressive benefit right here and the way we’re interested by this new enterprise line. When you concentrate on how one can get introduced with a voucher whereas taking part in a recreation or having fun with streaming video that may very well be used immediately, at any certainly one of Circle Okay 7,000 areas or you concentrate on all these manufacturers we work with Subway 20,000 areas. So because of our patents regarding digital provides redeemed at bodily level of sale areas, now we have IP round dynamic codes printed on bodily receipts at retail, and now we have patents round textual content messaging that helps construct an actual IP portfolio round what we’re doing. Past that, it seems that textual content messaging is an ideal, ubiquitous solution to get coupons to shoppers from any surroundings.

So, once more, while you’re interested by getting a proposal because you, whilst you’re taking part in your favourite online game, if that gaming writer would not must do rather a lot, in different phrases, construct some kind of couponing system or one thing to get that voucher to make use of, as a way to go to any retailer to redeem it and get prompt gratification. That is lowered friction, and we have already got all that constructed out. So in essence, our proprietary methodology to natively energy or combine with the coupon code system, level of sale gadgets throughout all these retail manufacturers, for the issues are plug and play we expect has constructed a giant first mover benefit and construct a giant path of least resistance for digital operators eager to carry actual world rewards into their ecosystems. So whereas we’re not conscious of any direct competitors that is sort of woven collectively all of this as now we have, on the identical time we’re acknowledging that this the excessive worth recreation, their premiums that these digital operators are prepared to pay to get shoppers into their digital packages, and vice versa. On the time, we’re fairly assured probably the most that we’re constructing by way of patented protected expertise and scaled product is a giant benefit for us.

Operator

Our subsequent query is from Jeff Porter, with Porter Capital Administration.

Jeff Porter

Hey, Dennis. I am making an attempt to grasp among the nuances of the pivot and form of the brand new pricing with these new prospects and the way that is going to impression gross margins and form of may give us any taste on that, and why you are assured that we will see gross margins go up pretty dramatically, with these new prospects.

Dennis Becker

Sure, hey, Jeff, thanks for the query. So it is fairly simple. Look, on a year-over-year comparable foundation, we in 2020, we had greater gross margins as a result of we had been doing quite a lot of non-recurring engineering throughout and serving to our prospects by way of COVID. So once we went into 2021 we sort of fell again to decrease gross margins as a result of in sort of the atypical enterprise or legacy enterprise of delivering textual content messages to a model’s shopper, we’re now within the recreation of serving to totally different manufacturers carry shoppers to one another’s respective companies, whether or not it is a streaming video service, making an attempt to get a comfort retailer buyer to undertake their streaming service, or strive their recreation, and vice versa. In order I discussed, in the course of the name, the premiums which might be being paid to transform and transact these shoppers, in different phrases, get any person who visits the Sonic to strive a recreation that is the place the premiums which might be paid are within the {dollars} or 10s of {dollars}, versus the place in our legacy mannequin, we’re serving to a Sonic or a Subway simply ship textual content messages to their current prospects. And people transaction charges being within the pennies. So what excites probably the most about our new line of enterprise is that we are able to now command far greater transaction charges, and that massively dilutes the messaging prices of products right down to low double digit and even single digit value of excellent ranges.

So, once more, as a hypothetical instance the streaming video operator needs to pay us a transaction price of $5. To transform a quick meals buyer to a subscriber, our value to good is de minimis provided that it is only a textual content messaging transaction that’s giving that shopper a coupon code to incent them to strive the streaming video service. So once more making $5 and having a sub penny value of products, you simply get dramatically greater gross margins than if you happen to’re working instantly with a model and their very own shoppers and charging that model, say a penny and having sub penny value of products. So there’s simply such a better premium being paid in our skill to uniquely service this gateway bringing these two audiences collectively than if we’re simply working with brick and mortars speaking to their very own viewers. Does that is sensible?

Jeff Porter

Sure, so are there two items to the income? Is there just like the consumer acquisition piece that form of like one time if we get any person to obtain a recreation or one thing? After which is there additionally we receives a commission on the coupon redemption? Or after they win tokens and are available and money them in? How does that play out?

Dennis Becker

Sure, we expect it creates a not only a onetime transaction, the place we have gotten say a quick meals shopper to strive a recreation or a streaming video service or one thing else. As a result of we are able to additionally on the opposite aspect, carry that model, say it is a comfort retailer chain, and so they’re providing $0.20 off gasoline if you happen to check out a brand new streaming video service. After which as soon as that shopper tries the streaming video service, or the cellular recreation, or the PC or Xbox recreation, we additionally carry that comfort retailer into the gaming surroundings. So there are different provides and reductions and whatnot that they’ll proceed to take pleasure in, as a result of we all know they got here from that model. And now the digital operator being the gaming firm, say, for instance, can hold that shopper coming again to the sport as a result of they know they’ll earn ongoing provides and promotions again to the model. So there is a transactional element of this, but in addition a pleasant lengthy tail of recurring transaction charges that come from each profitable transaction.

Jeff Porter

Is the playing/ gaming vertical, just like the DraftKings, FanDuel is — are these potential members on this universe?

Dennis Becker

Completely, we expect that any digital enterprise which due to the $200 billion promoting business that is being dramatically impacted proper now, I imply, the best way that all of them received whether or not once more, whether or not it is digital playing, digital gaming, leisure, streaming video, contests, they’ve all used digital promoting networks to fish out prospects, and that entire infrastructure has been constructed to the tune of greater than $200 billion of promoting yearly on the again of this type of privateness invasion, the place the advert networks observe shoppers, as they use their telephone, and so they swap between apps. They swap between on-line banking to their social networking app, Fb, et cetera. Promoting is follows the buyer route, that is being turned off nearly in a single day. In reality, I believe that is exemplified with Fb’s announcement, which is now Meta, earlier this yr that they count on these modifications to impression their gross sales to the tune of $10 billion. So all these digital operators, once more, whether or not it is gaming, or playing, et cetera want to seek out new channels, they should discover methods to get again to getting audiences effectively.

And since we’re already serving all of those manufacturers, I imply, a comfort retailer, sees 1000 shoppers, on common, a day per location. So when you concentrate on our buyer Circle Okay that estimation would imply 7 million individuals go to a Circle Okay every day. And so once more, we expect that is relevant to any business, who’s making an attempt to entry massive audiences to accumulate prospects and in a few of these different verticals, past gaming and streaming video as much as playing and past that, that is the place we’re actually enthusiastic about these buyer acquisition, premiums could be as excessive as $300 – $400 per transaction.

Operator

Our subsequent query is from Bryce Daniels with Talkot Capital.

Bryce Daniels

Hey, Dennis, Lisa, thanks for the decision. I believe it is thrilling what is going on on right here. Simply sort of rapidly, are you able to describe somewhat extra sort of nuts and bolts like if I am, the place I am interacting with Mobivity in my relationship with digital recreation? And the way and what a part of just like the tech connection, you guys Mobivity powers? Somewhat extra sort of element that might be nice.

Dennis Becker

Certain. We’re doing various campaigns. That is accelerating the place the important thing innovation is coupling actual world prompt gratification to shoppers for participating in digital promoting experiences. So one instance is how we introduced a handful of our manufacturers like Checkers and Rally’s and Circle Okay, into gaming experiences for varied cellular video games. And everybody’s performed cellular video games, whether or not it is Sweet Crush, or Tetris, or what have you ever. And what I imply by that is that customers taking part in these cellular video games, in lots of circumstances, they play these video games to progress within the recreation, they’re paying for that development utilizing in app purchases, they’re paying cash to get to the subsequent degree, et cetera. However quite a lot of video games now are additionally giving these players reward factors. And so a well timed instance proper now, reside marketing campaign we’re working as the place players can use these factors they earned by taking part in the sport to obtain reductions on gas at any of the 7,000 Circle Okay areas throughout America. So these players are taking part in video games, they’re incomes factors, after which they’re turning these factors in. And thru a easy textual content message from the sport, after they’ve turned of their factors, they obtain this voucher that they’ll take to any of the 7,000 North American Circle Okay areas and obtain $0.20 off a gallon of gasoline.

One other instance is the place we have got a restaurant model that is utilizing their viewers, their app viewers, their e mail subscribers, their textual content message program subscribers, and providing their viewers their restaurant viewers incentive a free burger, in the event that they obtain a cellular recreation. After which as soon as the buyer efficiently downloads the sport, they go to the App Retailer, they go to the Google Play Retailer to obtain the sport, our expertise mechanically detects that and detects that it got here from that burger chain, after which sends that shopper a textual content message with a coupon code for his or her free burger or their free rooster sandwich that they’ll use immediately, at any of that manufacturers 1,000 areas throughout America. So once more, that is the opposite aspect the place the model is utilizing the true world viewers to assist digital publishers like recreation operators purchase prospects. After which sort of as a final instance, I used right here — and we’re starting to experiment with new promoting merchandise. So once more, I discussed there’s about $200 billion, with a B plus spent on cellular promoting, the place we have all skilled it or testing ESPN sports activities scores, or we’re utilizing on-line banking or utilizing no matter app we’re utilizing Fb, and we see adverts. And it is a huge business. What we’re doing there’s the place we are able to carry these actual world rewards into these promoting experiences, so that customers get much more than simply getting one other visible impression. So for instance, possibly they’re taking part in a recreation on their cell phone a pop up advert, it is a free recreation. So these free video games use promoting to monetize and help the sport. If we see an advert pop up, that permits the gamer to get a free milkshake at any a Sonic’s 3,600 areas throughout America, in the event that they click on on the advert, and as with all different examples, as soon as that shopper clicks on the advert, they take a look at the advert, they’re then receiving a easy textual content message once more, with that digital coupon code expertise from Mobivity, in order that they’ll immediately get that prompt gratification and present up at any Sonic and get their milkshake the identical day that they skilled that advert unit. So these are sort of all examples of a few of these actual world packages we’re already working.

Bryce Daniels

That is attention-grabbing. And is it truthful to consider sort of identical to the addressable market query is being our core restaurant comfort market remains to be there. And we’re simply including the entire market of digital gaming, playing, that the whole lot you talked about, is that sort of the suitable means to consider the addressable market?

Dennis Becker

Sure, completely. And I believe that additionally highlights one other attention-grabbing level is that once we take into consideration the friction that we have skilled simply promoting this as a product to the restaurant and comfort retailer business, for his or her use instantly they’re going through quite a lot of challenges. Labor prices, provide chain, and so over time, it has been a slower roll than we anticipated. And that is once more, the place this premium and all of us skilled it. In reality, I simply experiences this weekend. I received my child a contented meal. And there was the entire completely happy meal was branded Tremendous Mario Kart, the toy was Tremendous Mario Kart. And that is simply an instance, in on a regular basis life the place that is already occurring, the place these digital manufacturers needs to faucet the true world experiences of shoppers to accumulate prospects for themselves. And so we expect that that is one thing that what we’re doing now could be bringing a giant acceleration to that. And to your level, we now, our worth proposition to these eating places, comfort retailer markets that we’re already serving, it will get that win-win to function a catalyst to assist these manufacturers transfer extra rapidly to digital adoption. As a result of the Tremendous Mario Kart et cetera are prepared to pay such a better premium, it could possibly additionally relieve quite a lot of that monetary friction that the brick and mortar business has had historically to increasing on, entering into a majority of these packages. So I assume in abstract, whereas earlier than we go to a model and say, hey, try to be doing digitally must be speaking direct to your prospects, we are able to now go to them and say, this is a program the place you can begin digitally participating your prospects with a companion from the digital business gaming streaming video. And due to the premium that is there to become involved in these interactions. It subsidizes the restaurant or comfort shops bills, a minimum of initially. So it actually relieves quite a lot of friction and will get manufacturers working extra rapidly, which we expect what we have been spending quite a lot of time placing collectively a giant pipeline of restaurant and C- retailer manufacturers. We expect this can make that pipeline transfer quicker.

Bryce Daniels

Sure, attention-grabbing. Fascinating, actually thrilling stuff to see. Recognize it. Thanks, guys.

Operator

We’ve reached the tip of the question-and-answer session. This concludes as we speak’s convention. And chances are you’ll disconnect your strains at the moment. Thanks in your participation.



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Mobivity Holdings Corp. (MFON) CEO Dennis Becker on Q4 2021 Results – Earnings Call Transcript

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