Mobivity Q4 2023 Earnings Call Transcript

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April 16, 2024

There are 5 speakers on the call.

Operator

Good afternoon, everyone, and welcome to Mobivity 4th Quarter 2023 Earnings Results Call. Hosting the call today are Tom Aiken, Chairman of the Board and Kim Carlson, Chief Operating Officer. Before I turn the call over to 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 the management's best judgment based on factors currently known and that the actual results or events could differ materially.

Operator

Please refer to the documents filed by the company from time to time with the SEC, and in particular, its most recent filed annual report and Form 10 ks. 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 statements. Any forward looking statements made during this call are being made as of today. If the call is replayed or reviewed after today, the information presented during this call may not contain current or accurate information. Except as required by law, the company assumes no obligation to update those 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.

Operator

Today's call may include non GAAP financial measures, which require a reconciliation to the most directly comparable financial measures, which are Tom, the floor is yours.

Speaker 1

Thank you, operator, and hello, everyone. Thank you for joining us today for Mobivity's Q4 2023 earnings call and full year 2023 call as well. 2023 was a year of transition for Mobivity, where we proved the viability of our Connected Wars business and demonstrated that our programs not only work, but provide measurable value for both game publishers and brand partners far above comparable programs. We made significant steps towards completing the pivot of our business to focus on connected rewards. We significantly cut costs, we focused our product offerings and reshaped our team and directed our capital and efforts towards building the technology that is resonating in the market and generating revenue today.

Speaker 1

We closed the year running full speed and TXB. These programs have far exceeded expectations at both the game partner and is healthy, valuable and growing, which gives us confidence in continuing our growth in 2024. We fully expect the Connected Rewards business to overtake the legacy text business from a revenue perspective midway through 2024 and anticipate that growth to ramp up materially through the year. The response to our platform continues to be overwhelmingly positive from both brands and mobile game publishers. Our team has made impressive progress in expanding our brand partnerships and we've also innovated and launched new products that expand our already robust addressable market and drastically reduce our sales cycle.

Speaker 1

We remain highly optimistic about the prospects for our business and are confident in the path forward to grow

Speaker 2

grow

Speaker 1

scalable and profitable platform are already yielding positive results and we look forward to building on this further details of our continued business transformation. Kim?

Speaker 3

Thank you, Tom. Mobivity is targeting a market that annually spends over $40,000,000,000 on user acquisition and retention. Our Connected Rewards platform offers a new performance based channel that is resonating in the market. We've seen tremendous success at scale and have continued to innovate new product offerings as we feel pull from the market. It's important to emphasize the simplicity and power of what we do at Mobivity.

Speaker 3

Our Connected Rewards platform seamlessly drives consumers between brick and mortar brands and the digital environments of mobile casual games. Facilitate these interactions and get paid between $3 $7 per transaction, all while maintaining an attractive gross margin. This model is proving to be highly effective for our partners and rewarding for Mobivity. Continuing the momentum we built in 2023, in the Q1 of 2024, we launched new products with some of the largest brands in the country. These include placements inside the Chevron Fuel app, the Marathon Fuel app, Kira Sushi's app and programs with Circle K's owned media.

Speaker 3

Our results from these programs have far outpaced return on ad spend goals for our mobile game partners, demonstrating the effectiveness of our platform in driving robust and we are excited about the growth that can come from optimizing our current platform and expanding within the immediately available addressable market. As we move through 2024, we remain focused on expanding our technology partnerships to build our potential offerings, launching innovative products and quickly capitalizing on our platform's vast potential in the mobile user acquisition and retention market. Our team is dedicated to delivering exceptional results for our partners and driving growth of our Connected Reports business. With that, I'll now hand the call back to Tom for closing remarks.

Speaker 1

Thank you, Kim. We are all really excited about the progress that the company has made in 2023 and the 1st part of executing throughout the rest of the year. We've opted not to discuss financials instead directing investors to the company's public filings. I'll now open it up for Q and A.

Operator

Thank you. Ladies and gentlemen, we will now a Private Investor. Your line is open. Yes, thank

Speaker 1

you. It's Mark Patterson. Given some of the comments Tom and Kim you both made today about the current state of the business, I'm guessing the Q4 results are very meaningful for investors. But I just want to let you know, I hadn't seen the Q4 release posted yet, so I haven't been able to look at it. But I did have a couple of questions, I guess, for Kim, maybe a 2 parter.

Speaker 1

I'm wondering, Kim, I know you mentioned Chevron Marathon, I think you said I guess secondarily, how you see those partnerships contributing to the overall growth strategy of the company?

Speaker 3

Yes. Thank you for the question. You're right. We did launch new products within the Chevron and Marathon and Kurosushi apps. Specifically, they are placements with inside the branded own app.

Speaker 3

These placements incentivize users to take an action like downloading a game in exchange for reward at the brand. For example, a discount of gas or a free item within the store. These places give game publishers a valuable placement really not found anywhere else within these large brand audiences and allows the brands to incentivize their audience and grow their audience while driving traffic and volume. So ultimately, we're creating a very sticky environment within the branded apps. Programs are amplified by communication from the brands.

Speaker 3

So the brands are pushing notifications to their app users, for example, push notification and inbox notification, signage at the store, etcetera. These partnerships are going to be core continued growth strategy as they are longer term partnerships allowing us to grow with the brands and games in our pipeline and innovate around ways we operate with the programs to increase performance. As far as just kind of part 2 of the question, as I mentioned, they are longer term contracts. They are showing tremendous app engagement. We hear from our brands that one of their pain points is growing app activity from maybe 2% to 3% to moving that to the double digit percentage and multiple double digits.

Speaker 3

Pillar for growth going forward through this year.

Speaker 1

That's great, Tim. Thanks for the color. I know you joined less than 2 years ago, but it's really been great to see the meaningful progress that Connected Rewards has had. I know it's been The transition, as I think Tom said, seems to be gone pretty well and picking up some speed. So it's really great to see and appreciate it all.

Speaker 1

Thanks.

Speaker 3

Thank you.

Operator

Your next question comes from Bruce Evans, a private investor. Your line is already open.

Speaker 1

Yes, hi. Could you expand a little bit more on the recurring revenue

Speaker 3

Go ahead, Tom.

Speaker 2

I was

Speaker 1

going to say, sure, Kim will answer that. But I do apologize. We it appears our press release is a little late getting out, but Mark was quite right. The financials are really for 2023 and don't reflect what we're doing in Connected Rewards going forward. A lot of these programs that we're talking about here were really just launched in March, April.

Speaker 1

And so they're probably going to be a little bit in the future when you're actually going to see the revenue results from that stuff. But Kim, why don't you answer Bruce's question, please?

Speaker 3

Sure. Thanks, Bruce. So our game publishers and our game marketers pay us on a fixed cost per install basis. And the growth and recurrency of that model is the more we hit or beat their return on ad spend dollars, the more they scale the revenue. And I'm happy to say that we've had a 100% fill rate on our supply, and we have game developers requesting and asking to spend more.

Speaker 3

So we're already experiencing a recurring revenue model by having a high, high retention rate of our game publishers that are paying us a steady or growing transaction fee on the CPI. And it's a matter of continuing to build the supply so that recurring revenue continues to grow.

Speaker 2

Thank you.

Operator

Your next question comes from Bob Berlacher from 45th Parallel Capital. Your line is already open.

Speaker 2

Hi, Tom. How are you, Kim? Hi. Yes. I've actually got several questions, if you'll bear with me.

Speaker 2

First, if the Connected Rewards you said is going to take over the majority of the revenues or at least eclipse the traditional legacy business by midyear, historically and I haven't seen the 4th quarter numbers. So but historically you've done $300,000,000 to $400,000,000 plus a month, basically $1,200,000,000 revenues. I would assume then that the Connected Rewards at some point here soon is going to hit that hopefully magic number of 400 $1,000 a month or more, but can you provide any details on the growth of that business going forward here? And I realize the Q1 is now behind you. So you said it started in March, hope it's continuing in April.

Speaker 2

And if you would just give us some idea of the growth trajectory for that business at least?

Speaker 1

Sure. I think Kim, I think Bryce is probably best suited to answer that question.

Speaker 4

Yes. Thanks for the question. I think a couple of things. I think as Kim mentioned first, we've built really strong relationships with these brands that inform our that provide a couple of things that inform our growth outlook. First, they're largely sustainable and longer term relationships.

Speaker 4

So we're not having to fight for the ability to run our campaigns every month. These relationships allow us to build meaningful case studies that we can then use to bring on new brands. Innings of optimizing these results. And we know there's a lot more kind of juice that we can squeeze from these campaigns by pulling a couple of kind of easy levers to increase the performance of our current programs. So when we look at the future, we feel like Mobivity is in a really good position to grow both by bringing on new customers through the case studies that we're now building with programs run at scale and optimize with our current customers such that the Connected Rewards business can overtake the legacy business.

Speaker 4

We'll have a lot more tangible to discuss there on our Q1 call, but everybody at Mobivity is feeling the excitement and we're excited about what we can build in the long term.

Speaker 2

Well, you've I think it was Kim mentioned that these programs just got really started in March April timeframe, perhaps maybe February, I don't know, but March April. And if you've signed Chevron Marathon, you said Kurosushi Circle K. Are they all and you've got more in the pipeline. How soon you said mid year, you think Q2, you're talking Q3, and that legacy business has a much lower gross margin, I assume, than the Connected Rewards business. Can you give us any indication when you might also be seeing a shot at least cash flow positive or anything like that?

Speaker 3

Yes. Maybe I'll take the first part and Bryce can talk about the cash flow positive. But to quantify, I think we're thinking about the second half of this year being the time where the Connected Rewards business eclipsed the legacy can quantify when we say midway through 2024. Bryce, do you want to talk about the being cash flow positive?

Speaker 4

Yes. I mean, I think without getting too specific, it's around the same time. You mentioned a couple of things. The gross margins are a lot better, and the numbers you mentioned from kind of a monthly basis are correct. And I think if we can overtake the legacy business with the gross margins that we're seeing, it will be kind of in parallel with overtaking the legacy business that we can see the company becoming cash flow positive.

Speaker 2

Okay. And I think it was Kim that mentioned the return on spend goals for your partners. Can you comment at all on just can you provide any metrics at all that demonstrate any kind of effectiveness of the platform in driving the user acquisition and retaining those customers at the same time?

Speaker 4

Sure.

Speaker 2

I mean, is there I mean, you have to have some measurement that I would assume you're looking at and that the clients are looking at as well. Everybody's going to have a different, I would assume return on spend.

Speaker 3

That's right. So our gaming clients that are paying us on the per transaction basis measure their results on not only the install, but how are people behaving in the game and they look return on ad spend typically benchmark after 7 days. So if we deliver an install, we're looking at how many people are watching ads or purchasing in app purchases within the game. Now game to game, those targets can vary a little bit. But essentially, because we've been retaining our gaming clients pretty much 99% to 100%, that means we're exceeding their metric of that day 7 return on ad spend, whether that is 8%, 10%, 12%, 15% as it varies by game developer, we are meeting or exceeding that.

Speaker 3

Therefore, those game developers are asking to spend more and are wanting to scale with us. So it is a very finite measurement in the game marketer world of what a measure of success looks like.

Speaker 2

So they set that return on spend So they set that return

Speaker 1

on spend contractually with you in order for you

Speaker 2

if you exceed to use your example 8% or 10% or 12% then incentives kick in. Is that how it works? You get your $3 to $7 per transaction and then there is an incentive based comp beyond that if you exceed the rows?

Speaker 3

Not contractually. What they're measuring us against is other networks. So if they're buying installs from a mobile ad network or even Facebook or or TikTok, how does Mobivity compare on a ROAS perspective? If, we are beating that, they're going to move budget from one of their other channels over to us. So it's not a secondary commercial event.

Speaker 3

It's really a path for us to really increase our transaction costs because we're performing better than our competitors.

Speaker 2

So you're not aware of what that is until they then reach out to you and say, look, you're beaten this competitor or that competitor, so we're going to throw more business at you?

Speaker 3

We see it in pretty much real time because we have access to the game developers platform performance platform. And we've also built our own internal tools to see events within the app that are getting essentially posted back to our system. So we'll know in really short order whether day 1, day 2, day 3 is on a trajectory to beat the game developers' goals. That's a nice thing about our platform is it's very transparent.

Speaker 2

And then to move on with your competitors, can you discuss that landscape in the Connected Rewards piece anyway? And just who are some of the other players? And what are Mobivity's advantages if there are some that the gaming companies are seeing?

Speaker 3

Sure. So the mobile ad network is a massive industry. If you lump everybody together, we're talking tens of 1,000,000,000 of dollars a year that mobile marketers are spending on acquisition. Our key differentiator are really twofold. 1st, we operate outside of the device identifier and data tracking ecosystem, which is what Apple has kind of turned upside down over the last 3 years by turning off the ability to really see a device ID in order to target that device for a particular ad.

Speaker 3

Because we're living in a world of SMS marketing, email marketing or in app in a brand that is not our world or our concern. I think the other piece is the core technological differentiators are a bridge between the digital and the real world. So there are other ad networks out there that put brands in games, but there's no performance metric to that. And then for us to incentivize these types of incentivized programs where we deliver real world products and incentives to users that are immediately redeemable in the app are not possible with our technology that we've built over the last 10 years operating the legacy business, which is the foundation of what we've done. So from a competitive standpoint, others are offering incentivized channels, but nobody is offering uniquely attributable, trackable and performance based programs that we are.

Speaker 3

It's important to note that the competitors do not offer a win for the game publisher and a win for the brands. It's either one or the other typically. And our programs address some of the largest problems on both groups and is a key differentiator. Our brands are seeing, as I mentioned earlier, this stickiness by putting a mobile game in the Chevron app, we're seeing it perform better than really any other tile placements they've ever had in their app. And conversely, as I've already touched on, we're delivering really great return on ad spend results for the game.

Speaker 2

And are you seeing any you've talked about gross margins or kind of alluded to the gross margin piece of the equation. Are you seeing any challenges that risk the profitability going forward, say 2 or 3 quarters out? If it's the Q3 that you hope to exceed the legacy business and hopefully the gross margins and potentially cash flow positive. What are your hurdles? Are there what are the challenges, I guess, in that space?

Speaker 1

Yes, maybe addressing that question, I guess, of margins, talk a little bit about pricing and the direction of how you see pricing going for the remainder of this year.

Speaker 3

Sure. So I think Bryce touched on this that the majority of the brands that we have on board right now, we're in our infant stages with those brands when it comes to optimization. So we have a lot of levers that our data team, we've hired 3, I think 3 new data scientists to look at optimization of the audience. So things like we're watching people that are clicking but not installing or maybe we're seeing certain set of people are enjoying solitaire games more than a match 3 games. So we're building the infrastructure just like a mobile ad network would with this predictive technology or predictive algorithms to segment the audience by brand.

Speaker 3

So to me, we're just starting and with some simple levers to pull on the optimization, a couple of things are going to happen. We're going to see better customer experiences for those users in the branded app, but we're also going to see better even better return on ad spend for the gaming partner, which should lead to even higher CPIs. The commercial model for gaming is pretty simple, which is put a dime in and get a quarter out. And right now, we're positive in that equation, but we expect with our optimization and ability to build these algorithms that should increase our CPI costs that the game publishers are paying us. So build the optimization, add more brands, add more gaming, create new algorithms and the whole flywheel starts to improve both from a consumer perspective and a performance which should drive our commercial terms higher.

Speaker 2

And then what is your strategy to get

Speaker 1

More sorry, Bob, can we hold on No,

Speaker 2

yes, you can go on. I'm sorry. I didn't I said, Mike, do

Speaker 1

you have anything you'd like to add to that?

Speaker 4

No, I think Kim hit the majority of it, but there's always risk to growth, but we feel really good about the health of the pipeline that we've built to date and the results from what we've achieved already in 2024. And then as Kim mentioned, gross margins really are dependent on the performance that we're delivering to game publishers. And for all the reasons Kim mentioned, we feel like there's a lot of upside in what we're doing to improve that.

Speaker 1

Yes. I think the key to realize, Bob, is this is a new channel. It's a differentiated channel, but it's really a different channel than a lot of any of our games or of our brands have done before. And the pricing is going to be something we're going to have to discover. It seems like people like our pricing now.

Speaker 1

We're seeing a lot of activity and the return on ad spend is very favorable. So we're happy to see that we're headed the right direction, but there's going to be a lot of adjustments to the process over well, daily, weekly, monthly and every quarter. So we have a lot to learn. We've learned an awful lot in 2023 on what to do right, what to do wrong. And we're excited that we've developed a product that has got some major, major brands participating and they want to continue to participate.

Speaker 1

So that's really apologize that we didn't get the financials that we had them too lined up, but that really doesn't tell the story for what's going to happen in 2024 in any

Speaker 2

case. Does that answer your question, Bob? Yes, it does. Thanks. I was just going to you my last question, I promise.

Speaker 2

You had talked about the brands, but are there and you have 4 that you've launched with it sounds like as well as potentially other smaller ones. Can you talk at all about the gaming companies, publishers, gaming publishers that you've done partnerships with?

Speaker 3

Specifically the game developed the publisher name?

Speaker 2

Yes. I was just curious just if there are any that I would that people might be familiar with, I don't know.

Speaker 3

Sure. Yes. We I'm happy and proud to say we're working with I'd say, many of the top 10 publishers out there around the world. Many are interestingly located in Western Europe and Israel actually, but and some in the U. S.

Speaker 3

But Scopely is one of our key partners. They're the makers of Monopoly Go, which was actually the mobile game of the year last year, as well as many other titles. Playtika, AppLovin, Triple Dot, Double Down Interactive, to name a few. So that's really 5 or so of the top 10. As I mentioned before, we're at 100% fill rate of our supply.

Speaker 3

So we're basically onboarding new game publishers as the supply becomes available. But we've retained those that I've mentioned. And Key is growing their spend with us as well.

Speaker 2

Great. Well, I promised that was my last, so it is. Thanks very much.

Speaker 1

Thanks Bob and thanks, everyone. Operator, are there any more questions at this point?

Operator

There are no further questions at this time. I can hand over the call to you, Tom, for closing comments. Go ahead.

Speaker 1

Great. Well, we want to thank everyone for joining the call. I want to particularly thank Kim and Bryce and their teams, respectively, for really putting us in this position where we truly have an opportunity to change the landscape for Connected Rewards. And we really look forward to updating you on the Q1 results in the remainder of this year. Thanks for participating.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.

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Mobivity Q4 2023
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