Verb Technology Company, Inc.

Good afternoon, and welcome to the third quarter 2021 financial results conference call for Verb Technology Company, Inc. At this time, all participants are in a listen-only mode. Please be advised, the call is being recorded at the company's request. On our call today are Rory J. Kataya, CEO, and Jeff Claiborne, CFO. Before we begin, I'd like to remind everyone that statements made during this conference call will include forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties that can cause actual results to differ materially. Forward-looking statements speak only as of the date they are made, except as required by law, as the underlying facts and circumstances may change. Verb Technology Company disclaims any obligations to update these forward-looking statements, as well as those contained in the company's current and subsequent filings with the SEC. I would now like to turn the call over to Rory J. Kataya, CEO. Rory?

Thank you. And thanks to everyone for joining us today for our third quarter 2021 financial results and business update conference call. So let me begin by welcoming so many new shareholders, individuals, institutions, and family offices that have recently become VIRB shareholders. And of course, a special welcome to our long-term shareholders, so many of whom have been with us for years and with whom we've shared this amazing journey from a scrappy pre-revenue startup with a big dream and vision for the future of sales technology to where we are today, a well-respected, NASDAQ-listed, socially conscious company at the forefront of the technology driving the biggest shift in consumer buying behavior since Amazon began selling more than books. And yeah, we're still scrappy. You know, we fondly refer to all of you as the longs. And for all of you longs, I'm about to share some information with you that's going to make your day. But for those of you who've taken a short-sighted approach to verb investing, well, you might want to tune out now as your day is about to take a turn for the worse. So let me start with the headline. We've had a record-breaking quarter, and our digital revenue is up 30% this quarter over last. In fact, it's been an amazing quarter for us across several metrics, which Jeff will cover later in the call. And with the upcoming launch of Marketplace and Verve TV, among other things, which I'll talk about today, We believe 2022 and beyond will drive revenue to levels beyond that which even the most optimistic among you project, representing a value creation opportunity that will be hard to beat. Anyone who has followed me or our company over the past several years knows that we have been predicting the technological convergence of entertainment and shopping that would begin manifesting itself through a coming shift and consumer buying behavior toward interactive video-based e-commerce. You'd also know that we have been actively developing, patenting, and refining the technology that would drive that shift. Last year, I said that the recognition by sales professionals that video went from a nice-to-have feature for sales and marketing to essential table stakes. was evidence that the convergence of entertainment and shopping we predicted was no longer a mere possibility, but rather a certainty. Particularly as the data coming out of China around live stream shopping began to emerge, such as $425 million in product sales generated through a single live stream, more than $75 billion of live stream sales generated in a single day, and the fact that more than half a billion people purchased products through live stream shopping events in China last year, one third of whom reportedly attended the live stream shopping event as a preferred form of entertainment. Talk about right place, right time. It's just beginning here in the US. As even over just the past three months, we're seeing more and more consumer brands looking for live stream and interactive video-based shopping solutions and major, major social media platforms testing their own versions of shop, shoppable video. Though I think many consumers may still look to them as the best destination for funny cat videos. Now, now imagine that rather than attending a single live stream or shoppable video event there was a centralized online destination where shoppers could explore scores of shoppable live stream events and over time thousands across numerous product and service categories being hosted by people from all over the world always on 24 7 where shoppers could communicate with the host asking questions about products in real time to an on-screen chat visible to all shoppers that even allows shoppers who've invited their friends and family to join them there to share the experience, to communicate directly with each other in real time. And then as and when that impulse by propensity we all have kicks in, simply click on a non-intrusive, totally in-video overlay and place items and your on-screen shopping cart for purchase, all without interrupting the video. And then as easily as flipping through videos on any of the popular social media sites, spend the next several hours visiting any number of other shoppable events to meet up and chat with friends, old and new, and together watch, shop, and chat with the hosts. discover new products and services, and quite simply become part of an immersive, entertaining shopping experience. And all the while, your shopping cart follows you seamlessly from event to event, shoppable video to shoppable video, host to host, product to product. So what I've just described is certainly extraordinary. And for all of our current shareholders, congratulations. It's real, and now just weeks away from completion and final testing, and you own it. Introducing Marketplace, VIRB's new social shopping platform. Look, as the pioneer and original innovator of interactive shoppable video, we have now reimagined the online e-commerce shopping experience. Our research, including extensive new industry data, confirms that consumers have grown bored with looking at static images and reading reviews when making purchase decisions. Undeniably driven in large part by the pandemic, consumers have now developed a preference for online shopping over traditional retail. And look, they're drawn to those outlets that provide a social, interactive, fun, entertaining experience. Our marketplace business model is a simple but next level B2B play. We provide a multi-vendor platform with a single follow-me style unified shopping cart and robust e-commerce capabilities with the tools for consumer brands, big box brick and mortar stores, boutiques, influencers, and celebrities to connect with their clients, customers, their fans, followers, and prospects by providing a unique, interactive, social shopping experience that will keep them coming back and engaged for hours. Notably, and a big differentiator, it also provides an online meeting place for friends and family to meet, chat, shop, and enjoy a fun, immersive shopping experience in real time together from anywhere and everywhere in the world. Marketplace will provide vendors with extensive business building analytics capabilities not available on and not shared by operators of other social media sites who regard that information as valuable proprietary property. All vendors on Marketplace will retain this valuable intelligence for their own unlimited use. Marketplace allows vendors an opportunity to reach not only the shoppers that they invite to the site from their own client and contact lists, but also Those shoppers who come to the site independently who will discover these vendors as they jump in and out of many other shoppable events hosted simultaneously on Marketplace 24-7 from around the world. Our vendor-friendly revenue model will consist of SaaS recurring revenue as well as a share of revenue generated through sales on the platform. Marketplace will also incorporate a modified version of our VIRB live attribution technology, allowing vendors who so choose to leverage extremely powerful built-in affiliate marketing capabilities. Non-vendor visitors to the site can search for those vendors that have activated the attribution feature for their events and actually get paid when people they referred to that vendor purchase products or services during that vendor shopping event. We expect that this feature unique to Marketplace will drive many more shoppers who will be referred from all over the world, producing a cross pollination effect, enhancing the revenue opportunities for all Marketplace vendors, while also creating an attractive income generating opportunity for anybody with a contact list. Marketplace is an entirely new platform built wholly, independently, and separate from our VIRB live sales platform, representing what we believe is the state of the art of shoppable video technology. It utilizes an ultra-low latency private global CDN network that we control, allowing us to deliver the highest quality experience and platform performance capabilities. We also believe that Marketplace will expose vendors to our entire suite of sales enablement products, such as Verve Mail, among others, driving through cross-selling revenue opportunities. As we near completion and testing the new platform on time next month, we've been actively working on vendor, partnership, sponsorship, influencer, celebrity, and other relationships from Marketplace that we expect will grow rapidly. exponentially over time. We have also been working on several pre-launch initiatives that we refer to as mega events to help kickstart and boost awareness of marketplace. We expect that these events will be hosted by well-known influencers and celebrities and sponsored by retailers and consumer brands. Due to the limitations caused by the ongoing supply chain issues many US retailers are experiencing, We've recently shifted the focus of these mega events to digital products, such as NFTs, among other things. Okay, so let me talk about something else. A natural extension of Marketplace and built alongside it is something new that we call Verve TV. VerbTV, launching in 2022, is where you'll find shoppable entertainment. Whereas Marketplace is a social shopping experience, VerbTV is a destination for those seeking commercial-free television content, such as concerts, game shows, sports, including esports, sitcoms, podcasts, special events, news, including live events, and other forms of video entertainment that is all Interactive and shoppable. Verb TV represents an entirely new distribution channel for all forms of content by a new generation of content creators looking for greater freedom to explore the creative possibilities that a native interactive video platform can provide for their audience. We believe content creators will also enjoy far greater revenue opportunities through the native e-commerce capabilities the platform provides to sponsors and advertisers who will enjoy real-time monetization, data collection, and analytics. Through Verve TV, sponsors and advertisers will finally be able to accurately measure the ROI from their marketing spend instead of relying on decades-old, imprecise viewership information. Those of you who are fans of the popular business pitch show, Two Minute Drill, on Amazon Prime and Bloomberg TV, will be excited to know that a shoppable version of the 12 episodes of the upcoming season three will be featured on Verve TV. Each episode is a fast-paced reality show where five to six entrepreneurs competing for $50,000 in cash and prizes have two minutes to impress the judges with the best investor pitch. And, yep, I'm one of the judges on the show. Expected to air in early 2022, Verve TV viewers will be able to click on screen and purchase the products and services of the contestants featured on the show, among others. other contemplated interactive features. Dave Meltzer, the creator of the show and co-founder of Sports One Marketing and the former CEO of the renowned Lee Steinberg Sports and Entertainment Agency has signed on with VIRB to produce other interactive and shoppable entertainment for VIRB TV. Turning to our existing revenue streams, including those that comprise the remarkable results we achieved in the third quarter, I'm pleased to report that we continue to expand the target demographic and business verticals for our sales enablement platform. VIRB Teams has been the choice of many notable companies for medical equipment and other sales in the life sciences sector. VIRB clients in that vertical include such notable names as Philips, Olympus, and Boston Scientific, among many others. Since last quarter, we've seen VIRB Teams expand beyond life sciences into professional sports. You may have seen the recent press release announcing the adoption of our interactive video platform by the Pittsburgh Penguins sports franchise as a tool to enhance ticket sales. The response to that announcement from the sports industry was extraordinary, and we expect to announce several other sports franchises, both in the U.S. and beyond, who we expect will use our platform for ticket and merchandise sales, as well as enhance interactive fan engagement experiences. VIRB CRM, which has historically been our bread and butter product, has now been enhanced to incorporate and work seamlessly with VIRB Live, our live stream sales application, coupled with Team Attribution and Pulse, our new AI, BI feature, as well as VIRB Learn. This product feature set has allowed us to attract many of the biggest names in the direct sales space and command a bigger share of direct sales market, putting more and more distance between us and every other would-be competitor in the space. As VIRB is already the platform of choice in that industry, in 2022, we're bringing an even greater focus on delivering the best customer service and support in that industry, including a recently launched professional services division to provide the level of customization some of the largest global enterprises in the world require for their sales enablement infrastructure. Our professional services division represents a new and lucrative revenue stream for our direct sales software vertical. And as we await the imminent release of VerbMail Pro, the enterprise version of the integration of our interactive video feature set into Microsoft Outlook, as well as the forthcoming release of VerbMail for Google's Gmail, We're already seeing interest for large-scale adoption by universities, well-known nonprofit organizations, and believe it or not, as well as the armed services. We talked at length over this past year about our ongoing growth through acquisition strategies, which are ongoing and will certainly continue into 2022 and beyond. However, in the coming weeks, I expect to announce the details of an acquisition that we believe is not only highly accretive, but comprises several key strategic elements of our marketplace and Verve TV growth initiatives. You know, many of you reach out to me after seeing one of my almost weekly appearances on a business TV show, investor conference, or podcast to say how excited I seem about the future of the business and the company. Well, Now you know why. Over the years, as we moved from startup phase to commercialization phase, we faced down the challenges inherent in all software development. But we've also had our successes and conquests, all of which provided the valuable lessons that still lie ahead undiscovered by any new would-be competitors. Yet nothing we've done to date more accurately represents the true culmination of everything we've learned over the years as a team, and as a company at Marketplace and Verve TV, which individually and together represent enormous value creation opportunities for our shareholders, value that we believe has the potential to be exponentially greater than it is today, and in my opinion, represents a greater growth and value creation opportunity than honestly almost any other opportunity I've seen in a long while. And I've had to keep a tight lid on it. unable to share it for a variety of reasons, except among my highly motivated and exceptionally bright and talented team, and more recently, among the partners we've engaged who are as excited as we are to be part of the next truly big thing. Okay, so let me give you some high-level third quarter numbers, and then Jeff will provide more of the details from our Form 10Q filing for the three-month period into September 30th and contrast them with prior periods. Okay, so here's some Q3 data points. In Q3, we added 16 new client contracts with a combined minimum contract value of $1.1 million, which constitutes a new record for our company for new contracts executed in a single quarter. Our combined digital revenue in Q3 was $2.4 million, an increase of 30% over Q2 and up 28% year over year. Digital revenue, the main focus of our building business initiatives, now represents more than 81% of our total combined revenue. That's up from 64% for the same period last year and up from the 76 we reported in Q2 2021. Our SaaS Recurring digital revenue in Q3, which is a component of combined digital revenue, was approximately $1.9 million, an increase of 15% over Q2 and up 25% year over year. Non-SAS digital revenue, the other component of combined digital revenue, was over $500,000, an increase of 42% year over year and up 144% over Q2. Total combined revenue in Q3 was $2.9 million. Up from the $2.4 million, we reported in Q2 and includes the $1.9 million in recurring SaaS digital revenue. That is up 25% and non-SaaS digital revenue. That is up 42% year over year. Total user downloads stand at 3 million as of September 30th, and that's up from the 2.2 million as of June 30, we reported in Q2, and more than 88% of the 1.6 million in the same period last year. Okay, a couple of other interesting data points. Cash totaled $3.7 million as of September 30th, 2021, compared with 1.8 million on December 31st, 2020. Our ongoing operating cash requirements through the third quarter to support our growth initiatives were met very easily through modest periodic draws on the ATM, which were conducted in a very responsible manner to ensure investors' interests were protected. This represented our lowest cost of capital. But since the business has continued to demonstrate impressive quarter-over-quarter sustainable growth, we've become more attractive to providers of alternative financing structures, including credit facilities, on what appear to be very attractive terms, which we intend to explore as we move forward through the fourth quarter. And now, I'd like to turn the call over to Jeff Claiborne, our Chief Financial Officer, for a more detailed review of our financial results. Jeff?

Thank you, Rory, and good afternoon, everyone. I'd like to review our financial performance as reported in our Form 10-Q filed today, November 15th, for the quarterly period ending September 30, 2021. I may reiterate and or provide more color around some of the data points Rory shared with you. The following represents a company's results of operations for Q3 2021 as contrasted with Q3 2020 and Q2 2021 respectively. Total digital revenue of approximately $2.4 million was up 28% over the same period last year and up over the 30% we reported in Q2 2021. Total SaaS recurring revenue, a component of total digital revenue, was $1.8 million, up 25% over the same period last year and up 15% over Q2 2021. Total other digital revenue, a component of total digital revenue, was $510,000. up 42% over the same period last year, and up 144% over Q2 2021. Past recurring revenue as a percentage of total digital revenue was 78%, compared with 80% for the same period last year, and down over the 88% reported in Q2 2021. The decrease in our staff digital mix this quarter is actually an extremely welcome development, as it is attributed to a record-breaking sales quarter in which we executed 16 new client contracts, representing an aggregate of $1.1 million in minimum contract value, a new record for our company. New SAS contracts typically also produce an increase in non-SAS digital revenue, such as digital design fees that we are permitted to recognize as the work is completed quickly after the execution of new client contracts during the quarter. The digital design work associated with all new Q3 contracts generated an increase in our non-SAS digital revenue, which produced an increase in net revenue as a percentage of total digital revenue. As I just mentioned, we added 16 new client contracts with a guaranteed base value of 1.1 million. What I'd like to highlight is that those contracts are expected to generate annual recurring revenue of approximately 500,000. However, those numbers do not include the expanded revenue We historically generate and expect to recognize from existing clients who have recently launched and those that are about to launch Verve Live with attribution, as well as Pulse and Learn, which we believe could add as much or more than an additional $1 million in annual recurring revenue. And obviously, none of this includes the revenue we expect to add during 2022 for Marketplace, Verve TV, and Verve Mail, among other as-of-yet unannounced initiatives. Total combined revenue of approximately $2.9 million was slightly up versus the same period last year, which consists of the $1.8 million in recurring SAS revenue that is up 25% and non-SAS, other digital, that is up 42%. Research and development expenses were $3.5 million, compared with the $2.4 million for the same period last year, with the increase attributed to the development of VRB-Y, VRB's new attribution feature, product enhancements to VRB-CRM, for Pulse, the Microsoft Outlook integration, and a forthcoming new marketplace platform, among other, as of yet, unannounced features and products. We continue to pursue the cost reductions within development we discussed in prior earnings calls that have been planned for the year end as we move from R&D mode to maintenance mode for many of our products. While we may likely see some of that savings offset by increases in marketing expenses, associated with the up-and-coming launches of Marketplace and Vert TV, if the company is successful in the execution of certain planned Marketplace mega events, Lori referenced earlier, those expenses might easily be offset by the potential new and additional revenue those events may generate. Additional information around product development expense is that we've made tremendous progress towards the completion of the Marketplace. And as such, we've capitalized $2.3 million in development expense that will be depreciated over three years. Dual administrative expenses were $6.1 million, compared with $6.7 million for the same period last year, with a decrease in spending attributed to lower stock compensation expense of $1.3 million. Now let me share the financial highlights for nine months ended September 30th. Total digital revenue of approximately $6 million was up 20% year over year. Total SAS recurring revenue, a component of total digital revenue, was 4.9 million, up 29% year-over-year. Fast recurring revenue as a percentage of total digital revenue, which remains our focus, was 82%, compared with 77% for the same period last year. Research and development expenses were 9.6 million, compared with 5.3 million for the same period last year. With the increases attributed to the development of VIRB Live, VIRB's new attribution feature, product enhancements to VIRB CRM, VIRB Pulse, the Microsoft Outlook integration, and the forthcoming new Marketplace platform, among other, as of yet, unannounced features and products. General and administrative expenses were 20 million, compared with the 14.2 million at the same period last year, with increases attributed to labor-related costs to support our growth, professional services, marketing expenses, as well as expenses related to solo buyer operations following the acquisition. As of September 30th, 2021, Total assets were 35.9 million, total liabilities were 21.5 million, and total stockholders' equity was 14.4 million. The company successfully converted all remaining preferred shares into shares of the company's common stock. As a result, there are no shares of preferred stock and associated rights outstanding, and our cap table reflects a clean capital structure comprised of one class of common shares. As of today, There are 70,470,415 shares of our common stock issued and outstanding. Of the total number of common shares issued and outstanding, approximately 6.1 million shares or approximately 8.7% are owned or controlled by management and the board members. I'd now like to turn the call over to the operator for Q&A. Operator?