Brand Engagement Network Q1 2024 Earnings Report

Brand Engagement Network EPS Results

• Actual EPS: -$0.27
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Brand Engagement Network Revenue Results

• Actual Revenue: $0.05 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Brand Engagement Network Announcement Details

• Quarter: Q1 2024
• Date: 5/14/2024
• Time: After Market Closes
• Conference Call Date: Tuesday, May 14, 2024
• Conference Call Time: 5:00PM ET

Brand Engagement Network (NASDAQ:BNAI) provides conversational AI assistants. The company offers security-focused, multimodal communication, and human-like assistants. Its AI assistants are built on proprietary natural language processing, anomaly detection, multisensory awareness, sentiment, and environmental analysis, as well as real-time individuation and personalization capabilities. It serves the automotive, healthcare, and other industries through direct sales force and channel partners. Brand Engagement Network, Inc. was formerly known as Blockchain Exchange Network Inc. and changed its name to Brand Engagement Network, Inc. in April 2023. The company was founded in 2018 and is based in Jackson, Wyoming.

Brand Engagement Network Q1 2024 Earnings Call Transcript

[Operator]

Good day and thank you for standing by. Welcome to the Brand Engagement Network First Quarter 2024 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to Brand Engagement Network, Investor Relations, Ryan Flanagan. Please go ahead.

[Speaker 1]

Thank you. Hi, everyone, and thanks for joining our Q1 earnings conference call. Joining me on the call today are Michael Zaharzky, our CEO and Bill Williams, our CFO. By now, everyone should have access to our earnings announcement. This announcement is also on our Investor Relations website.

[Speaker 1]

During this call, we will make forward looking statements, including statements about our business outlook, strategies and long term goals. These comments are based on our plans, predictions and expectations as of today, which may change over time. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors outlined in our filings with the SEC, including our Form 10 ks and upcoming 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. Also, during this call, we will discuss certain non GAAP financial measures.

[Speaker 1]

These non GAAP measures are not intended to be a substitute for our GAAP results. And finally, this call in its entirety is being webcast from our Investor Relations website at www dot investors. Binninc.ai and an audio replay will be available on our website in a few hours. With that, I'd like to turn the call over to Michael. Michael?

[Speaker 2]

Thank you all for joining us today on what is Ben's first quarterly earnings call as a public company. We're thrilled to be listed on the NASDAQ under the ticker BNAI and to have the opportunity to talk about key business highlights, our strategic vision and financial results from the Q1 of 2024. Before discussing our results and exciting developments across the business, I would like to take a few minutes and provide some commentary on our financial positioning following the completion of our business combination just 8 weeks ago. Ben is currently funded by a combination of minority capital from the proceeds of the business combination and a commitment from our automotive vertical strategic partner, exclusive reseller and investor AFG Companies. We are incredibly excited about our joint work in the automotive space and our shared vision of conversational and multimodal AI solutions that we believe will transform the dealership experience both for the customer, CX, the dealership staff, productivity and dealership principles performance.

[Speaker 2]

You will hear more about these key metrics, CX, productivity and performance as we talk about organic growth of our core business. Throughout and exiting the SPAC process, Ben did not unlike many companies seeking to de SPAC enter into any forward purchase agreements or other structured financings in connection with closing, with the result being a simplified balance sheet with improved visibility into our shares outstanding and potential dilution to our stockholders. Moving forward, we believe this will allow us to explore and enter into more traditional financings without the negative effects and complexities associated with SPAC Financial Structures. I'd also like to note that our SPAC sponsor principals, Chris Gartner and Thomas Morgan Jr. Are continuing with the company as Chairman and Director respectively.

[Speaker 2]

In addition to benefiting from their deep financial experience and counsel from an operating standpoint, we view their commitment as validation of our mission, our product and our strategic direction. With that as a backdrop, we are excited to announce that with the assistance of our banking partners, we are currently assessing avenues for additional liquidity and growth capital. Bill will discuss in greater detail momentarily, but as we continue to work on improving our liquidity and capital position, we are also closely managing our internal costs to ensure our business is built for growth and scale and to last for the long term. Although many of the investors and analysts dialed in today are familiar with their story, since this is our first call as a public company, I wanted to allocate some extra time to talk through who we are and what we do. Years in the making, Ben is a B2B2C, business to business to consumer conversational AI company focused on delivering personalized customer engagement.

[Speaker 2]

Deployed through human like avatars or as pure voice configurations, we provide a full stack and turnkey offering to businesses looking to improve their CX, productivity and performance metrics. Beyond simply providing digital assistance, we believe that AI solutions for businesses must deliver and complete tasks. While there are several voice companies wrapping themselves in the generative AI cloak, our teams have been working with these technologies since 2018. Our approach utilizes small footprint language models that are contained on our servers, a walled garden approach, combined with mixed technologies for data retrieval, so we can provide accurate answers to consumers. We intentionally do not use a large language model for this part of the task.

[Speaker 2]

This approach delivers precise answers without hallucination and is based on technology that is not easily emulated. Our platform is built around a powerful existing IP portfolio, complemented by our successful 2023 acquisition and integration of DM Labs spun out from renowned researchers at Korea University. Each instance of our technology is for an individual customer, ensuring data remains solely within that instance of the platform and provides the business differentiation in tune with its brand values and processes. It is truly there, their being our customer AI solution, it's their AI. Put simply, we make it easier and more affordable for companies to adopt and quickly deploy best in class conversational AI without compromising data privacy and data leakage.

[Speaker 2]

We are vertically focused on scaling in the automotive, healthcare and financial services markets, leveraging strategic partnerships to accelerate market penetration through an easy to understand solution set and pricing model. Our solution set includes multiple offering tiers. Our community cloud, which is built on shared infrastructure and allows for simple configuration. A private cloud offering that features a proprietary cloud and allows for greater complexity and concurrency, and a Citadel version that is fully ring fenced, highly specialized and purpose built for strict data security requirements and closed loop systems. With each of our offering tiers sold on a recurring revenue basis, our pricing model benefits from SaaS economics with high incremental margins.

[Speaker 2]

In a marketplace with so many avenues where AI can make meaningful contributions, deliberate focus is paramount. At Ben, we are focused on delivering use cases specifically for our target healthcare, automotive and financial services verticals. And within those verticals, the opportunities where we have identified the largest growth opportunities. In healthcare, we are focused on areas such as drug adherence, a $600,000,000,000 opportunity and in automotive, we have targeted the auto dealership experience, which spans the 18,000 new car dealerships in the U. S.

[Speaker 2]

Market and 50,000,000 new unused cars sold every year. Similarly, contact center solutions across these verticals and in financial services are opportunities of growing and significant scale, providing utility to a large consumer base that is increasingly demanding more personalized information and attention at a time when businesses are faced with labor shortages, wage gap equity and increasingly less time. I will now move on to discussing the significant progress we made across many fronts in the Q1. To start, I'd like to mention steps we have taken to operationalize our platform. We have optimized our AI modules for the cloud and as a result, we are able to deploy our AI assistance to most consumer devices via the web, preserving resources on consumer devices by minimizing on device drag.

[Speaker 2]

We strive to make it easy and accessible for all consumers to connect to and interact with our AI assistants on all of their devices. 2nd, during the National Auto Dealers Association Show or NADA in February, we revealed 5 AI assistants purpose built for the auto vertical, designed specifically to solve pressing industry challenges in the automotive space. In partnership with channel partner and Ben investor AFG Companies, these AI assistants leverage Ben's human like AI avatars as multimodal conversational resources tailored for unique purposes that assist customers as well as augment and enhance professionals to provide improved customer service interactions and experiences. We were extremely pleased with the level of engagement, positive feedback and significant pipeline contribution driven by dealer interaction with our technology. 3rd, we are pleased to announce early customer wins and new partnerships in the healthcare vertical, including MedAdvisor, a global leader of pharmacy driven patient engagement solutions that will bring Ben's AI assistant to certain pharmacies to help enhance patient outcomes.

[Speaker 2]

Similar to our partnership with AFG Companies in the automotive vertical, which services more than 1,000 car dealerships, We believe MedAdvisor provides us a land and expand opportunity and a partnership to bring conversational AI into the pharmacy experience and to tap into the massive drug adherence ecosystem. We have also signed a pilot partnership with OSF Healthcare, an integrated health system caring for patients throughout Illinois and Michigan. We believe this partnership will address today's challenge where traditional chatbots have limited conversational skills and capacity, as well as limited base knowledge of healthcare diagnoses and protocols. OSF Health Care, which Fortune named one of the most innovative companies in 2023, possesses deep experience in industry leading patient care. Together, OSF Healthcare and Ben will develop AI assistance that provide a more dynamic, adaptive and thorough training experience for advanced practice provider, APP Primary Care Fellowship Participants.

[Speaker 2]

The partnership will also serve as an opportunity to demonstrate that conversational AI can provide an enhanced patient experience in real world healthcare. Finally, fast tracking our ability to operate in the healthcare vertical, I'm excited to announce that last week our platform achieved HIPAA compliance. HIPAA compliance reinforces Ben's commitment to protecting patient healthcare information, while also strengthening Ben's relationships with both healthcare partners and consumers and demonstrating the data security and privacy practices underpinning Ben's virtual assistance. The aforementioned partnerships in the automotive, healthcare and financial services sectors are only one tip of the spear in our multidimensional sales strategy. We are also actively pursuing exclusive reseller arrangements at targeted systems integrators and with trusted industry partners, as well as building a direct selling motion to deepen and accelerate market penetration.

[Speaker 2]

Looking ahead and before turning the call over to Bill, I would like to discuss 3 areas that we believe at Ben are key pillars of future growth. 1st, maintaining a focus on our key verticals, automotive, healthcare and financial services and specific use cases, only building assistance and modules that we can scale across those marketplaces. 2nd, accelerating market penetration by supercharging our multi dimensional sales strategy with a focus on turnkey solutions, partnerships and opportunities to embed our modules, potentially making our modules and components available to the developer community, as well as exploring inorganic growth opportunities. 3rd, continuous improvement in innovation across our portfolio of productionalized modules, enabling us to preserve our innovation gap with a differentiated offering relative to peers, all while maintaining financial discipline as we scale our business. We believe this is the roadmap to long term success and we are excited about our healthcare and automotive launches this year, delivering our product in the day to day lives of consumers.

[Speaker 2]

Overall, we see a tremendous opportunity to scale through increased market penetration in our target verticals and the conversion of several pilot programs into predictable reoccurring revenue streams. We have built momentum across key initiatives in the short time since our listing and with the transaction closed, our focus is squarely on accelerating our traction in the market, while maintaining a strategic and balanced approach to investments. With that, I'd like to turn things over to Bill, who will walk through our financial results for the Q1 and discuss our performance drivers and highlights. Bill, take it away.

[Speaker 3]

Thank you, Michael, and thanks everyone for joining us. I'll start by providing a brief recap of our Q1 results, and then I'll discuss areas of strategic focus for 2024 and our key assumptions as we pivot from pre revenue to a SaaS based recurring revenue model. Now starting with details of the quarter. As a pre revenue emerging growth company, our Q1 revenue was de minimis, reflecting initial proof of concept deployments at pilot customers. Total operating expenses for the quarter were approximately 6 $800,000 an increase of approximately $4,200,000 compared to the prior year.

[Speaker 3]

The quarter over quarter increase was primarily due to approximately $3,200,000 of transaction costs as a result of the merger. Additionally, we incurred $3,100,000 in costs associated with the DM Labs acquisition that was completed in Q2 2023 as we began to expand operationalize our AI platform in 2H2023. These incurred costs included a 1 $500,000 increase in employee related costs, a $1,000,000 increase in professional fees, dollars 200,000 increase in promotional costs, dollars 200,000 increase in research and development costs, dollars 100,000 increase in depreciation and amortization and $100,000 in insurance costs. These costs were partially offset by a decrease in stock based compensation of $2,100,000 as we issued fully vested options and warrants in Q1 2023. The DM Labs acquisition, which included acquired IP, research and technology assets transformed BIN into a full stack AI solutions platform.

[Speaker 3]

With the integration work complete, our 2024 focus is on laying the foundation across several key areas, including products, infrastructure, talent, partnerships and initial customer relationships. We have initially focused on profitable growth in the auto, healthcare and financial services sectors with plans to expand into consumer and industrial verticals in the future. Throughout this journey, we are mindful of the need for efficiency, profitability and liquidity. Our revenue and profit model prioritizes recurring revenue and is primarily SaaS based across our public and private cloud solutions with software licenses for our Citadel deployments. We believe we have a capital light and efficient cost structure relative to our peers, With CapEx consisting primarily of capitalized internal development costs and no investment in hardware or appliances, as kiosk costs are passed through or financed by our customers.

[Speaker 3]

Additionally, we employ a variable cost structure, leveraging our needs at AWS with a scaled approach. Finally, we achieved efficiency gains through combined offshore and near shore product development centered around our South Korea based development team that was onboarded with our 2023 DM Labs acquisition. Now to provide some insights into our sales motion, I want to share an example of our product use case in healthcare. For a healthcare group suffering from poor patient medication adherence, which is a common challenge across the pharmaceutical industry, we have been able to identify problem areas and have defined our success by addressing them through operational and financial KPIs. By utilizing our bid healthcare AI avatar processing capabilities, we ensure that patients receive support and guidance about proper medication adherence, driving bottom line savings and top line growth for both pharmacies and pharma manufacturers.

[Speaker 3]

From a standing start, we believe we have developed a robust sales pipeline and are seeing early conversions, which we expect to ramp in the second half of twenty twenty four and further accelerate in 2025. We have signed 3 pilot programs, which we believe will generate projected ACV of approximately $1,000,000 As we transform transition from a pre revenue business throughout 2024, we are building a foundation of balanced financial discipline. With a focus on profitable growth, but also efficiency, cost containment and meeting liquidity needs, we will increasingly emphasize and measure and report progress on bookings, pipeline, customer lifetime value, monthly and annual recurring revenue, new logos, customer acquisition costs and growth rate sustainability as key measures of our success. And of course, we'll incorporate sound financial fundamentals as measured by margins, operating expense leverage, EBITDA, free cash flow and liquidity. To summarize our financial strategy, it is focused on momentum, platform scaling and cost discipline.

[Speaker 3]

Our 5 year partnership with AFG in the auto vertical drives commercial traction and includes a $6,500,000 annual capital commitment representing $32,500,000 over the 2024 to 20 4th to 20 and the resources to properly scale the platform. To optimize cash burn, we have implemented strict cost controls, ensuring cost discipline as we pursue logos and profitable growth. Now, I'll hand it back to Michael for closing remarks.

[Speaker 2]

Thanks, Bill. We are focused on bringing AI solutions that deliver tangible benefits to our B2B2C customers, driving superior customer experience, enhanced productivity and measurable performance. We have a unique and differentiated approach to AI, emphasizing safety and privacy that meets the regulatory and compliance requirements of businesses through human like conversational avatars and voice capabilities. Looking ahead, our priorities for 2024 are accelerating market penetration and executing in our target verticals, scaling our operating platform and ensuring we have the resources necessary to supercharge our journey. I would also like to take this opportunity to thank the entire Bend team around the world for their hard work.

[Speaker 2]

It takes a team to win and I believe we have assembled the best in the industry. I'm very excited about the opportunity in front of us. Thank you for your time. And with that, I'd like to open up to Q and A. Operator?

[Operator]

I'm showing no questions in the queue at this time. If you have any questions that you would like to ask, please reach out to the Ben team through their Investor Relations website. This concludes today's conference call. Thank you for participating. You may now disconnect.