Kubient, Inc.

Good afternoon and welcome to Qubient's third quarter 2022 earnings conference call. Joining us for today's call are Qubient's founder, chairman, chief executive officer, chief strategy officer and president, Paul Roberts, and chief financial officer, Josh Weiss. Following their remarks, we will open the call for your questions. Before we get started, I need to alert you to our safe harbor statements under the Securities Litigation Reform Act of 1995. During this call, we will be making forward-looking statements, including statements related to future events or to our future financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. Listeners should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or implied during the call. Furthermore, listeners are referred to the documents filed by Cubion Incorporated with the SEC, including our annual report on Form 10-K filed with the SEC on June 30, 2022. With the understanding that our actual future results may be materially different from what we expected, which include these and certain other important risk factors. We qualify all of our forward-looking statements by these cautionary statements. Also note that the forward-looking statements on this call are based on information available to us as of today's date, except, as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements. even if new information becomes available in the future. Please refer to QBN's SEC filing, specifically its registration statement on Form S-1, initially filed on December 12, 2020, for a more detailed description of risk factors that may affect the company's results. During the call today, management will discuss adjusted EBITDA and non-GAAP financial measure. In the company's press release and filings with the SEC, both of which are posted on the company's website, you'll find additional disclosures regarding this non-GAAP measure, including a reconciliation of this measure with its comparable GAAP measure. Non-GAAP financial measures are not intended to be considered in isolation from or substitute for or superior to GAAP results. The company encourages you to consider all measures when analyzing its performance. Now, I would like to turn the call over to Paul Roberts. Sir, please proceed.

Thanks, Operator, and thanks to everyone who joined us today. On our last call, we focused heavily on the new implementation of our cost-cutting practice, an initiative we've seen bear fruit early on and something that will show in our financial results both sequentially and year-over-year in the coming quarters. Today, I'm happy to report on the efforts, advancements, and positive developments undertaken in the previous and current quarters centered around our proprietary technology. Clients continue to re-sign with our services utilizing the Audience Cloud. and partnerships continue to evolve as new customers arrive via successful sales initiatives. With the current economic climate, brands and companies are looking further into various means that can ensure their advertising spend is funneled through channels of consistent, reliable, and established ROI production. With this shift into tighter measurements of utilizing paid advertising and marketing comes a more focused spender. more willing to turn towards services like Kubientz. We offer a safe haven for those unwilling to compromise on unproductive and wasteful advertising spend. It's this mentality that brought us to create and develop our chief offering that I'm confident will carry us forward into the changing market trends. To say the least, the shift towards a more conscious ad spender is very timely for Kubientz. At this time, Momentum is both created and carried by the progress we've made with CHI. As we announced in mid-October, we publicly launched the CHI Dashboard, a reporting and optimization platform that helps both media publishers and platforms better understand and manage inventory health to ensure the quality of inventory they are sending to demand platforms. The Dashboard helps to bridge the gap in visibility and information provided to brands and platforms centered around problems that arise on the inventory management level, specifically in the connected TV or CTV channel. Utilizing the power of CHI's artificial intelligence and machine learning algorithms, publishers are now able to easily identify what is causing inventory to remain unmonetized, be alerted of the problem, and able to take immediate action to drive increased revenue. To this date, The dashboard has already helped publishers tremendously by showing full insights into inventory health, driving improvements in inventory quality, and increasing the efficiency of ad monetization efforts for greater revenue acquisition. The effectiveness and worthwhile nature of this offering is already showing customers a lift of 20 plus percent in revenue due to the dashboard. What's continued to fuel our development of the dashboard has been the encouraging feedback we have received from several organizations within the industry at conferences. The work we've developed and performed with the new dashboard is reflective of our thesis, which is to remain nimble and productive, as we have listened intently to the needs of both publishers and advertisers while delivering an immediate accretive product. It's with this exercise that we've had our horizons expanded even further to the capabilities CHI possesses beyond fraud detection and prevention. Instead, we see it becoming the comprehensive intelligence layer that sits between the buyer and seller of digital advertising throughout several transactions. In this case, brands that are frequently worried about how their data is being used could better protect their own data. On that note, we've seen successful and sought-after intelligence-related features centered around the implementation of machine learning on CHI with the ability to infer the personhood of each user that passes through the platform, assisting with ridding the audience cloud of fraudulent users or bots. Some preliminary examples of how CHI can be augmented with the data and information it collects consists of tools to do real-time targeting, audience targeting attribution, insight into why media buying is not successful at times for buyers and sellers, and more. We want to remind everyone that the ad tech realm still remains a nascent industry with a significant amount of white space opportunities. To that end, we want to bet on CHI and continue investing in growing its portfolio of capabilities, which is why we've made the decision to hire additional engineers that can help manifest what incremental layers we can add to CHI, what other tools can be built in conjunction with it, and what other features can be placed in it. The impetus for this move has once again been due to feedback we're garnering from partners in the space, which has been very validating. Additionally, with the recent popularity of clean data rooms, which is where brands don't want their data out into the ecosystem anymore, CHI could come into effect by being the AI decisioning that would take the data, interpret it, and understand what the outcome would be. CHI has the potential to become the decisioning engine of the future that allows brands to remain in control of their valuable data while also being able to use machine learning and AI to understand in real time the best possible advertising opportunity for their target audience. Regarding the patent notice for CHI, on August 19th of this year, Qubient was issued a notice of allowance. This document is delivered to a company after a US PTO patent examiner has determined that a patent should be issued. In other words, when a patent examiner has determined that all the legal requirements for patent issuance have been met, a notice of allowance is sent. That said, our patent attorneys are confident we will receive the final issuance for this patent before the end of the year. I'd like to take a quick second to emphasize the difficulty of receiving a patent within the ad tech industry. Given the relative nascency and complexity of our industry, there are not many patents that get issued. This once more illustrates the compelling nature of CHI and highlights the vast potential of our solution. All in all, the organic growth we see in Kubient will spore from our efforts on the CHI front. Something we predict will result in powerful opportunities for our company and investors. As I iterated at the onset of my prepared remarks, we have been encouraged by several clients that have re-signed their engagement with us this past quarter. One example I wanted to specifically highlight was with our long-term partner, MediaMath, where we recently decided to shift a portion of our direct brand advertiser budget from the trade desk over to them. This will provide MediaMath with the ability to purchase ads directly on Kubian's SSP, which of course has CHI built into it. We're confident that this move will give us the opportunity to provide strong data-driven case studies revealing the impact of higher efficiency advertising spend on our platforms from both the demand and supply sides of the equation. With the transactions expected to take place on our marketplace, we're given the autonomy in controlling the ad budgets and where the spend goes. We are envisioning there will be opportunities for direct brands to get 20% to 30% of their media buying power back due to CHI. and look forward to sharing the results of these case studies in the near future as this project is now currently live. We're very pleased with our media and math partnership and plan to leverage several synergies with them looking ahead. With most of the COVID-related restrictions lifted, we've also seen an uptick in media spend from one of our largest direct advertising clients, who is a live events and entertainment company. The results we were able to provide in 2022 have led this partner to extend their media buying partnership with Kubian through 2023. As an ongoing topic, I want to note that we continue to field and look for interesting opportunities to inorganically grow Kubian's strength and reach in the M&A realm. We recognize that there's still a ton of companies interested in a public vehicle amidst this turbulent time within the stock market and economy, where there is virtually no access to cheap capital today. As a publicly traded organization with shelf eligibility, in addition to a healthy balance sheet, very strong core technology, a seasoned executive team, we understand the value we could provide to private corporations that would want to leverage us as a public vehicle. With that, I'll hand this call over to Josh, who will provide additional color on the quarter from a financial perspective. Josh?

Thanks, Paul, and good afternoon, everyone. Thanks for joining our call. Now to our financial results for the third quarter ended September 30th, 2022. Net revenues for the third quarter of 2022 were approximately $482,000 compared to approximately $677,000 in the same period last year. The decrease was primarily due to a decrease of net revenues associated with one of our customers as compared to the 2021 period, partially offset by revenues generated in the 2022 period related to customer contracts acquired in connection with our acquisition of Media Crossing in November 2021. Technology expenses decreased to approximately $525,000 from approximately $777,000 in the same period last year. The decrease was primarily due to a decrease in headcount costs, hosting fees, software technology subscription expense, amortization, and consulting expenses. General and administrative expenses decreased to approximately $1.1 million compared to approximately $1.5 million in the same period last year. The decrease was primarily due to decrease in non-cash stock-based compensation, professional services, and consulting expenses. GAAP net loss attributable to common shareholders improved to approximately $1.7 million, or a 12-cent loss per basic and diluted share, compared to a net loss of approximately $2.3 million, or $0.16 loss per basic and diluted share in the same period last year. Adjusted EBITDA loss, a non-GAAP measure, improved to approximately $1.5 million or $0.11 loss per basic and diluted share for the three months ended September 30th compared to an adjusted EBITDA loss of approximately $1.9 million or $0.13 loss per basic and diluted share in the same period last year. As of September 30, 2022, we continue to have a strong cash balance of approximately $16.9 million. That concludes my financial summary. For a more detailed analysis, please reference our Form 10-Q, which we plan to file today. I will now turn the call back over to Paul. Paul?