This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Greetings and welcome to Mobivity's third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brett Moss of Hayden IR. Please go ahead.
spk02: Thank you, operator. I'd like to welcome everyone to Mobivity's third quarter 2021 earnings call. Hosting the call today are Dennis Becker, founder, chairman and chief executive officer, and Lisa Brennan, chief financial officer. Before I turn the call over to management, I'd like to call everyone's attention to the company's safe harbor policy. Please note that certain statements made on this call will be forward-looking statements, which are subject to considerable risks and uncertainties. We caution you that such statements reflect management's best judgment based on factors currently known and that actual events or results could differ materially please refer to the documents filed by the company from time to time with the SEC, and in particular, its most recently filed annual report on the Form 10-K. These documents contain and identify important risk factors and other information that may cause actual results to differ from those contained in the forward-looking statement. Any forward-looking statements made during this call are being made as of today. If this call is replayed or reviewed after today, the information presented on this call may not contain current or accurate information. Except as required by law, the company assumes no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if the new information becomes available in the future. Today's call may contain or include non-GAAP financial measures, which require reconciliation to the most directly comparable financial measures, which are calculated and presented in accordance with GAAP and can be found in today's press release, along with our recent corporate presentation, which is also available at Mobivity.com. With all that said, I'd like to turn the call over to Dennis Becker. Dennis, the call is yours.
spk05: Thanks, Brett. and I appreciate everyone on the phone for taking the time to join us on our call today. I look forward to detailing our success in our current business and exciting new developments that we believe will drive substantial growth. Mobivity uniquely sits at the intersection of broad consumer reach at a time when digital advertising access to consumers is more and more valuable. Apple and other tech giants changed advertising and privacy rules earlier this year required developers to institute app tracking transparency, which ultimately meant more opportunities for consumers to opt out of tracking and advertising. This greatly disrupted the mobile advertising ecosystem. Companies' digital acquisition channels narrowed drastically. Mobivity has a massive set of actionable data that, through these changes, has become exponentially more valuable to advertisers in digital acquisition. We have begun building strong relationships with businesses outside of the convenience and restaurant space that rely on acquiring and retaining digital consumers. Mobivity brings extensive reach through millions of actionable consumer interactions, our world-class clientele who touch a large portion of consumers, and the ability to target and interact with each consumer uniquely. We have greatly expanded our efforts to capitalize on this shift in the digital advertising landscape. and we believe we're uniquely positioned to exploit it. The digital landscape for customer acquisition has changed and the addressable audience has grown. While restaurants are only spending around 5% of revenues on marketing in a day-to-day effort to get feet in the stores, the new verticals we are targeting spend upwards of 80% of revenues on marketing for customer acquisition and retention. Digital acquisition for restaurants and other brick and mortar businesses is currently a nice to have, while efficient and effective digital customer acquisition is the lifeblood for digital and mobile native businesses. This represents a must-have multi-billion dollar opportunity that we are perfectly positioned to address. It's clear that the digital audience arms race is on, and we're seeing increasing demand for utilizing Mobivity's unique technology and connectivity to millions of consumers. By utilizing Mobivity's technology, companies can offer a promotion while viewing streaming video or interacting in an online game that is redeemable at more than 40,000 restaurants and convenience store locations through their mobile phone. This is a natural extension of our existing platform that provides an elegant last mile from mobile app gameplay or online content viewing to a physical or online store redemption. We also connect to more than 20 million mobile consumers through billions of targeted point of sale and mobile transactions that serve as a lucrative consumer acquisition channel back to those same digital operators. Simply put, Mobivity is in the perfect position to monetize on these transactions as we are the connection between offline consumers, the online social and entertainment networks they love, and vice versa. Going forward, we will be focused on building and capitalizing on our position at the intersection of digital and brick and mortar, and expanding our recurring revenue model to exponentially grow our business. We have proven the value of these unique and discrete consumer interactions numerous times throughout the company's history in QSR and convenience. In 2021, we launched with the second largest convenience store in the world, and throughout the year, we've significantly grown our initial agreement into 7,000 of their locations in the U.S., We are now in discussions to expand into their Canadian and other worldwide markets. We continue to see success in convenience as we signed another large convenience store brand in the third quarter and are excited about growth prospects here that will support our business as we grow into digital and mobile native businesses. I will now turn the call over to Lisa for a more detailed view of our financial results, and then I will come back for a few summary comments. Lisa?
spk00: Thanks, Dennis. I'll kick off with our cash position. We ended the second quarter with approximately $570,000 in cash, and our accounts receivable was approximately $1.6 million, of which $900,000 is from two of our largest customers, which we have confidence will be received in Q4. Our revenue for the third quarter of 2021 was down 27% on a year-over-year basis at $2.3 million. while our gross profit was down 42% at $1.3 million. Note that the third quarter of 2020 included approximately $1.5 million in one-time development fees, which was mostly margin. Excluding this one-time development revenue, our comparable recurring revenue was up 38% in the third quarter, and our comparable gross profit was up 77%. Total operating expenses for the quarter of 2021 increased by 45% to $3.1 million compared to $2.1 million in the same period in 2020. Most of this third quarter year-over-year operating cost increase is from cost reductions in the third quarter of last year due to the COVID crisis. Additionally, we began increasing our sales and marketing investments during the nine months of this year in anticipation of the COVID recovery and our expansion into other markets. Finally, I'd like to point out that our sales and marketing expenses in the first nine months of 2021 increased to $3.0 million from $1.7 million in the first nine months of 2020. As we began to invest in expanding our sales and marketing efforts to capture the revenue growth from the recovering restaurant industry, expand into the convenience store space, and find new verticals to drive growth. In contrast to the increase in sales and marketing costs, we've reduced ERD expenses in the nine months of 2021 from $2.8 million in 2020 to $2.0 million in 2021. As we completed several product development initiatives last year and are now primarily focused on customer acquisition. I will now turn the call back over to Dennis for his closing remarks. Dennis?
spk05: Thanks, Lisa. The restaurant vertical has been impacted tremendously by the COVID pandemic, and those headwinds continue to linger. These issues have hindered the restaurant industry's adoption of the digital transition. Thanks to our success winning major brands, we are uniquely positioned to monetize the intersection of billions of consumers, billions of transactions, and the digital businesses who must have efficient and effective access to customers. In just the past few months, we've already developed new sales pipeline opportunities with digital customers, including crypto, streaming video, and gaming operators, where our loyalty, perfect attribution, and unique offer code solutions bring compelling value to digital acquisition and retention challenges. We've also seen overwhelming demand from our restaurant, CPG, and C-Store customers who seek quick access to a highly relevant and large digital audience to drive sales. I applaud our team for the relentless pursuit of a new digital future, where the customer and technology assets we've built are perfectly positioned to capitalize on the multibillion-dollar intersection of digital and real-world audiences. Thank you for tuning in and for your continued interest in Mobivity. We'll now open up the call for Q&A.
spk07: Thank you.
spk06: If you would like to register a question, please press the 1 followed by the 4 on your telephone. you'll hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One more piece for the first question.
spk07: As a reminder, press the one followed by the four on your telephone keypad to register for a question.
spk06: Our first question comes from Bruce Evans, private investor. Please proceed with your question.
spk01: Hey, Dennis. How are you doing?
spk06: I'm good, Bruce. How have you been?
spk01: Good, good. I've got a question for you. Recently I played golf with one of the Indian tribes who have 27 properties around the world. And do you see any opportunity with keeping their customers involved in the odds highly change on different sporting events. Is that something that would be of interest to Mobivity?
spk04: Well, what we know is that gaming apps have exploded, allowing consumers to wager from their phone. But because of security and commerce, in other words, trading funds and things like that, the consumers need to use a full-blown smartphone app to participate, but what we also know is that from a communications perspective, in other words, letting the players or those that have placed wagers, keeping them alerted of odds and betting lines, really no effective real-time communications channel to do that. The way that most of those smartphone apps work is to use what's called push notifications, A lot of consumers have those turned off, and so I do think that text messaging could be a killer channel to help enable those types of applications to better effectively communicate with their customers.
spk01: That was my thought, because unless they have the app turned on, they don't see any live change in odds. Or something to remind them there's a game coming on, and hey, let's check that latest over-under, the latest betting line, whatever it may be.
spk04: No, I think that's another great application for text messaging in general. I think that one of the things we're trying to convey in this update is that whether people are playing games on their phones for virtual currency or for points or they're actually wagering, You know, this is a transition. This is a big transition from what, you know, historically was, you know, an on-premise and a venue-based experience. In other words, you know, consumers would have to go to the casino, go to the location to participate. And, you know, this new way of doing that through your mobile phone means you can do it from the comfort of your home or really anywhere. And what we found is that that's a huge opportunity for us to connect the real-world businesses that we've been working with, the Subways, the Sonics, you know, all these restaurants, convenience stores like Circle K where, you know, if you think about wagering in a traditional situation at a casino, you know, you get comps, you get rewards, things like that. And that's not, you know, instant gratification if somebody's playing the casinos, playing, you know, via the casino app from their home. They can't, you know, they're maybe not likely going to drive to the casino, but thanks to Mobivity, we could connect that app and that gaming situation to local businesses. So maybe they're playing and they're getting rewards and incentives where, you know, if they play enough, they get, you know, a, a foot long at Subway or a Polar Pop at Circle K or some type of instant gratification. We're seeing a lot of demand for that kind of concept where we can connect the millions of consumers that a large brand we work with reach because they're everywhere. The geographical ubiquity of these convenience stores and restaurants are everywhere, which is closer to these virtual gamers who are playing from their phones. So beyond text messaging, we think the bigger opportunity is how we can connect, you know, the everyday business to these virtual gaming opportunities. And, you know, obviously text messaging is a great way to do that. Okay.
spk01: Well, if you ever do see the need to get in touch with a large casino operator for text messaging, let me know. As I said, I just played golf with the chief, and it could be interesting.
spk04: Yeah, no, we might take you up on that.
spk01: Yeah, well, if you do, let me know. I'm always here for you, Dennis.
spk08: Appreciate it, Bruce. Thank you.
spk06: There are no further questions registered at this time. However, as a reminder, press the 1, solve by the 4 on your telephone keypad to ask a question.
spk07: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.
Disclaimer