Brand Engagement Network Inc.

Welcome to the Brand Engagement Network third quarter 2024 results conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be an analyst question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Brand Engagement Network Investor Relations, Susan Zhu. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Welcome and thank you for joining Ben's Q3 2024 Earnings Conference Call. Joining me on the call today are CEO Paul Chang, CFO Bill Williams, and Tina, our AI-powered assistant. The company's Q3 financial results were disseminated this afternoon and are available on our Investor Relations website at www.investors.com. During this call, we'll make forward-looking statements, including statements about our business outlook, strategies, and long-term goals. These comments are based on management's plans, predictions, and expectations as of today, which may change over time. The company's actual results could differ materially due to a number of risks and uncertainties. For more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements. Please see the risk factors set forth in Ben's most recent annual report on Form 10-K, as supplemented by the risk factors in its most recent quarterly report on Form 10-Q. Forward-looking statements represent management's current estimates and the company assumes no obligation to update any forward-looking statements in the future. As a reminder, this call is being webcast from the Investor Relations website. An audio replay will be available on the website in a few hours. With that, I'll now turn it over to Paul to share our Q3 update. Over to you, Paul.

Thank you, Susan, and thank you for joining us today. Before diving into our results and key developments, I'd like to take a moment to share some exciting changes within our organization. In August, I had the honor of stepping into the role of CEO of Ben, a global leader in secure and reliable conversational AI solutions. Having been deeply involved in Ben's journey from the start, I am truly energized and ready to lead the company into its next stage of growth. Our vision for the future is clear, and I'm excited to guide Ben as we continue to strengthen our market presence and expand our innovative AI solutions, transforming customer engagement. My focus remains on driving market validation for our AI solutions and scaling our deployments to deliver even greater value to our customers and shareholders. As we move into the next phase of growth, I'm also pleased to announce that Waleed Kiari, will be joining Ben as our new CFO and COO, effective November 18th, 2024. With over 20 years of experience, including 15 years as a technology investment banker, Waleed brings a wealth of expertise in capital raising, mergers and acquisitions, and strategic planning for leading tech companies. Waleed's deep understanding of technology sector coupled with his expansive network, makes him the ideal leader to drive Ben's next phase of growth. I believe his strategic vision and experience will not only strengthen our financial position and expand our global presence, but also play a pivotal role in helping to integrate new acquisitions as we pursue future expansion opportunities. At the same time, I'd like to take a moment to express my appreciation to Bill Williams, our outgoing CFO, and someone I am privileged to call a friend. Bill has been a cornerstone of Ben's success and has played a critical role in shaping our financial strategy from the very beginning. His leadership, dedication, and insights have been invaluable. Although Bill's contribution will be missed, we are energized to build on the foundation he established as we lead the company into its next chapter of growth. While this will be Bill's last earnings call at CFO, we extend our deepest gratitude for his outstanding impact and wish him the very best in his future endeavors. Looking ahead, I want to highlight Ben's position in the evolving AI landscape with a focus on secure, closed AI systems. Earlier this month, Sam Altman, the CEO of OpenAI, spoke on the shift towards closed AI models, emphasizing the need for greater safety, security, ethical standards, and user privacy. At Ben, We are already at the forefront of this movement, leveraging a secure, closed AI platform that gives businesses control and visibility over their data. Our AI solutions, whether SaaS, private cloud, or on-premises, are designed with privacy and trust at their core. Our AI is reliable, scalable way to engage customers while maintaining strict data sovereignty. This differentiates Ben in an industry increasingly prioritizing ethical, responsible AI deployment and underscores our vision of AI that moves markets while ensuring user trust. In Q3, we saw strong progress across our core verticals of healthcare, automotive, and financial services. Our integration with Cox Automotive's dealer.com platform was a significant milestone in the quarter for the automotive vertical. This partnership allows dealerships to leverage Ben's human-like digital assistance across multiple touchpoints, including apps, web browsers, and life-size kiosks, creating a seamless customer experience. The integration enhances dealership operations by automating tasks and enabling more interactive, intelligent conversation with customers. Additionally, our collaboration with Vibrew and Pharmacia Roma offers AI-powered audio engagement, enhancing brand-consumer interaction. By combining Ben's AI assistance with Vibruse audio platforms, we aim to provide personalized suggestions to consumers through accessible mediums like radio and streaming services. Subsequent to quarter end, we also announced a partnership with Kangaroo Health to enhance remote patient monitoring with our generative AI platform. This collaboration combines Kangaroo Health's monitoring devices with Ben's AI assistance, offering round-the-clock support for patients and healthcare providers, especially those with chronic conditions. Building on this momentum, we are excited to announce another pivotal development after the quarter, our recent agreement to acquire Cataneo, a leading media technology company based in Munich, Germany. The $19.5 million transaction, consisting of $9 million in cash and 4.2 million common shares valued at $2.50 per share, will expand our reach in the $45 billion global media technology market. Catenao's MIDAS platform, which supports over 5,000 users, and handles over 5 billion euros in annual media spending, enhances our ability to deliver intelligent, scalable, conversational AI solutions to over 1,000 global media brands. This acquisition is expected to enhance our ability to deliver intelligent, scalable, conversational AI solutions across multiple continents and further position Ben as a leader in the next generation of interactive advertising technology. We expect the transaction to close in Q4 2024 upon receiving shareholder and regulatory approvals and upon obtaining financing to fund the acquisition that is accessible to the parties. With all these exciting developments, it's only fitting that we showcase one of our key drivers behind their success, Tina, our AI assistant. Let's take a closer look how Tina is helping shape the future of customer engagement using our proprietary large language model and retrieval augmented generation. With that, I'd like to introduce Tina, who can help answer some questions regarding our recent partnership with Cox Automotive and recent acquisition announcement of Cataneo.

Hello, my name is Tina, an AI assistant created by Brand Engagement Network.

Hey Tina, can you tell me a little bit about Brand Engagement Network and what makes Ben's technology different?

Sure. Brand Engagement Network, or BEN, is a global leader in providing secure and reliable conversational AI solutions. What sets BEN apart is its commitment to data sovereignty, ensuring that consumer and business data remain private and protected. Our technology is not only secure, but also highly customizable and scalable, making it perfect for enhancing customer experiences and boosting productivity.

Thanks, Tina. Can you tell me about Cox Automotive and its collaboration with Ben?

Certainly. Cox Automotive is a leading provider in the automotive services and technology sector. They recently collaborated with Ben to integrate our RAI assistance into their dealer.com platform. This integration allows Cox Automotive to offer a more personalized and interactive experience for customers through Benz AI web assistance available on apps, web browsers, and life-size kiosks.

What data does Dealer.com aggregate and provide to dealers to share with consumers?

Dealer.com aggregates a variety of data including consumer behavior insights, performance metrics from websites, and advertising data. This data helps dealers understand their customers better and tailor their marketing efforts to provide more personalized experiences. With Ben's integration, this data is now cleaner, more comprehensive, and accurate, allowing for more effective-to-weight conversations between dealers and consumers.

Tina, can you tell me about Catanel acquisition announcement?

Certainly. Ben has agreed to acquire 100% of Cataneo, a media technology company based in Munich, Germany. The total purchase price is $19.5 million, consisting of $9 million in cash and 4.2 million shares of Ben Common stock at $2.5 per share. Cataneo's Midas platform manages over 5 billion euros in annual media spending and supports over 5,000 users across four continents. This acquisition aims to expand Ben's global media reach and strengthen its offerings in the media technology market.

Can you tell me about Cataneo's customers and their differentiation?

Certainly. Cataneo's customers include major media corporations like BBC Global, NBC Universal, and Discovery Europe. They operate over 200 media channels across linear online and nonlinear formats. Cataneo differentiates itself with a modular and highly customizable platform that supports both media buying and selling, offering a flexible and scalable cloud-based solution.

How would this merger benefit both companies and their customers?

This merger will benefit both companies and their customers by enhancing efficiencies and expanding market reach. Benzei will optimize Cataneo's services, reducing manual processes and improving productivity. Cataneo will gain access to the U.S. and Latin American markets offering flexible cloud-based solutions. Technologically, Kat and Nao's tools will help Ben create new dynamic advertising formats, leading to more interactive and meaningful consumer experiences.

Thanks so much, Tina. I really appreciate your help.

You're welcome. I'm glad I could help. If you have any more questions about Ben or our AI assistants, feel free to ask. I'm here to help.

Thank you, Tina, for that valuable insight. We are excited about the prospects of the Cataneo acquisition. As a reminder, the acquisition is expected to close in Q4 2024 and is subject to closing conditions, including receipt of shareholder and regulatory approvals and obtaining financing to fund the acquisition that is acceptable to the parties. Now let's turn it over to our CFO, Bill Williams, who will walk us through our financial results for the third quarter. Bill?

Thank you, Paul. I appreciate the opportunity to provide a brief update on Ben's financial progress. Our Q3 and year-to-date results reflect Ben's continued focus on laying the foundation for future growth, product and solution development, the continued build-out and productionizing of our infrastructure, developing talent, and expanding partnerships and initial customer relationships. Quarter and year-to-date revenue improved versus Q2 as we saw expanded proof of concept, pilot, and partnership activity gaining momentum with an expansion in POCs and channel partnerships since the first half of 2024 in both healthcare and automotive verticals. We continue to exercise strong cost discipline with a 24% reduction compared to our Q1 and Q2 run rate. This resulted in 1.5 million or 24% sequential operating profit improvement. Cash flow from operations for the corridor showed a 28% improvement sequentially compared with first half of performance. Q3 also saw the positive effects of our capital raise efforts, including our $50 million standby equity facility that will enable sustainable liquidity, cost-efficient access to capital, and financial flexibility to fund operations and growth in the future. And importantly, we announced in October the definitive agreement signing for the acquisition of Captain Mayo, which we expect to close by end of year. We believe this partnership will be earnings and value accretive for VIN shareholders. For the balance of 2024, we remain focused on building market momentum, scaling the platform, improving access to efficient capital and liquidity, and cost discipline. While Q3 featured building momentum through operationalizing our platform and we successfully productionized and productized our AI assistance and expanded customer partnerships and POCs and attracting capital, for the remainder of 2024 and 2025, our focus will continue to be on performance, execution, and converting pilot programs into revenue and enhanced liquidity. Thank you, and now I'd like to turn it back over to the operator, Daniel, for our Q&A session.

Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Jack Codera with Maxim Group. Your line is open.

Hi, thank you. This is Jack Codera calling in for Jack Vandorati. Thanks for taking my question. You know, first question, can you give a little more background on the recently announced pending acquisition? You know, how long has this been in negotiation? How did you determine it was a good fit? Any, you know, any other color there would be helpful.

Sure, Jack. So we've known Catnail for quite some time, I would say almost a year. You know, we're excited about the acquisition because it aligns with our, you know, strategic aim of expanding our global media reach while we get to leverage Catnail's expertise in digital marketing. We think... You know, our ability to change the landscape of, you know, creating interactive advertising and transforming how brands can engage with consumers in real time. I think that is going to be potentially a game changer. You know, and Cat's Nails Midas platform already supports over 5,000 users and 1,000 media brands across four continents. It will integrate with, you know, our scalable Gen AI platform to provide a more seamless and dynamic experience.

Okay. Yeah, that makes sense. And, you know, I think you guys touched on a little bit. I might have a follow-up question about the revenue bit. But can you give just a general update on, you know, I think the half-dozen pilot programs, such as MedAdvisor, Any color on how those relationships are progressing? Thank you.

Yes. So all of our POCs and pilots are progressing. Some have expanded into other potential customers participating in the pilots. We are... constantly updating our use cases to fit the needs of our customers and our customers' customers. And our AI platform continues to perform well in a cost-effective manner, providing a valuable tool for the customers to continue to serve their customers. So With MedAdvisor, we're working on reaching out to a few large pharmacy network customers as well as other pharma customers, and we are in constant development of new capabilities.

Okay. That's awesome to hear. And then one last question, kind of a fall. I think it was mentioned in the prepared remarks. Can you give an additional color on that, that 50,000 in revenue? I know in the queue, it says it's related to a proof of concept and rev sharing. And I think you also mentioned that it was related to the pilot. Can you just describe, you know, how that's, how that's coming to fruition? Is it, you know, certain pilots like progressing to the, they're now generating like a service revenue, any color on that, that would be helpful.

I'm sorry, could you repeat the first part of your question? I don't know if I heard it correctly.

Yeah, just about the actual reported revenue. I think it's $50,000. I saw on the queue it was related to – it says it's related through a proof concept in revenue sharing. It seems like – just any additional color on how that's coming to fruition would be helpful.

Yes. So far, all of our revenue – is either SaaS or subscription revenue to our AI platform. And, you know, that is paid to us by our customers who are actually deploying our pilot solutions.

Okay, thank you. Yeah, that answers the question. Thanks again for answering my questions, and congrats on the progress.

Thanks, Jack. Thank you. Again, to ask a question, please press star 11 on your telephone and wait for your name to be announced. Again, that is star 11 to ask a question. I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.