Q4 2020 Kubient Inc Earnings Call
Good afternoon, and welcome to <unk> fourth quarter, and full year 2000, and 'twenty earnings Conference call.
Joining us for today's call are coupons, founder Chairman and Chief strategy Officer, and interim Chief Executive Officer, Paul Roberts, and Chief Financial Officer, Josh wife.
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 natural results levels of activity performance or achievements to be materially different from any future results.
Of activity performance or achievements expressed or implied by these forward looking statements.
Listeners should not place undue reliance on forward looking statements and stay involved known and unknown risks uncertainties and other factors, which are and some cases beyond our control and which could and likely will it materially affect actual results levels of activity performance or achievements.
Any forward looking statements reflects our current views with respect to future events and are subject to these and other risks uncertainties and assumptions relating to our operations results of operations.
Both 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 this call.
Furthermore, listeners I refer to the documents filed by QB and incorporated with the SEC, including our registration statement on form S. One day initially filed with the SEC on December 21, 2020, with the understanding that our actual future results may be materially different from what we would expect.
Which include these and certain other important risk factors.
And 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 and these forward looking statements, even if new information becomes available and the future.
Please refer to cube, QB and SEC filings, specifically its form 10-K, and 10-Q and financial results press release 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.
And the company's press release and filings with the SEC both of which are posted on the company's website you will 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 and isolation from a substitute for or superior to GAAP results.
The company encourages you to consider all measures when analyzing <unk> performance now.
Now I would like to turn the call over to Paul Roberts, Sir. Please proceed.
Thank you operator, and good afternoon, everyone.
After the market closed we issued a press release with our results for the fourth quarter and full year ended December 31 2020.
A copy of which is in the Investor Relations section of our website.
I'd like to start off by sharing how exciting at the time. This is for our company and we have experienced tremendous growth and every facet within the business.
From product development, new partnerships, a fortified balance sheet too on employee head count growth has been a common denominator with witnessed throughout <unk> and.
And encouraged by the continued support from our partners shareholders and of course our employees.
Speaking of employees I'd like to touch upon the current status and all work force.
Since the beginning of Q4 with hired over six full time employees and one independent contractor and have increased our total head count to 28.
With two additional senior team members, who have recently accepted position and plan to start in early April.
Looking ahead, we're focused on hiring additional engineers and experienced sales and business development team members to enhance our technological capabilities like our self serve DSP and to augment the number of advertisers we are plugged into our platform respectively.
We understand that our employees are the lifeblood and the backbone of our company. So were expected to be judicious and meticulous and selecting the right folks to on board in order to maintain our winning culture.
Additionally, the company continues to identify and recruit senior level sales executives for our partnerships team. These individuals would work closely with our SVP of partnership Ryan Adams and expanding our partnerships on the demand side and further developing overall revenue opportunity.
One thing to note within the criteria, we use and our on boarding process is that we specifically target seasoned well respected sales executive who will have a robust network and a book of business So to say already under their belt.
The reason for the tactical approaches that we have found it to be most effective from a go to market perspective, given how niche our industry is.
Rather than hiring a number of net new employees that are unfamiliar with the industry. It is much more effective to onboard individuals with a rich base of connections throughout the programmatic ecosystem.
Before I hand, it over to Josh to go over the financial results I'd like to briefly touch upon the status of the CEO position.
Thanks to the current success of our existing executive team as it stands.
The board of directors has not initiated a formal search for a permanent CEO.
And thankful for an incredibly talented and brilliant management team and plan to continue play my part and serving as <unk> interim CEO.
Before I provide further updates on the progress and milestones achieved and this last quarter I'd like to hand, the call over to our CFO, Josh White to walk you through the financial results for the fourth quarter and full year 2020.
Josh.
Thanks, Paul and good afternoon, everyone. Thanks for joining our call now to our financial results for the fourth quarter and full year ended December 31 and 2020.
Net revenue for the fourth quarter increased to approximately $1 1 million from 280000, and the prior quarter and from 16000 and Q4 last year.
<unk> and year over year increase and net revenue was partially due to a significant increase and overall web traffic due to COVID-19 and election related news cycles net.
Net revenue for the full year, 2020 increased to approximately $2 9 million from 178000, and the same period last year the.
The increase again was primarily due to revenue generated in connection with growth and overall ad opportunities and our marketplace driven by new supply and demand partnerships.
Turning to our expenses technical.
Technology expenses from the fourth quarter increased to approximately 567000 compared to 546000 and the previous quarter and 415000 and the same period last year. The increase and technology expenses is primarily driven by an increase in travel and expense technology expenses for the full year 2020 increased to approximately.
And that's a $2 1 million from one 5.002 million 19, the increase and technology expenses was primarily due to an increase and amortization expense head count and cloud hosting and subscription costs.
General and administrative expenses for the fourth quarter increased to approximately $2 7 million compared to $1 2 million and the previous quarter.
And 513000, and the same period last year, the increase and general and administrative expenses was primarily due to an increase and compensation expenses and other G&A expenses, such as sales and marketing general and administrative expenses for the full year increased to approximately $5 2 million from 2.002 million 19, the increase and general and admin.
<unk> expenses was primarily due to increased legal and consulting and audit fees and compensation expenses.
GAAP net loss attributable to common shareholders was approximately $2 2 million or <unk> 28 loss per share compared to a net loss of $5 8 million or $1 three loss per share in the prior quarter and net loss of $1 2 million or 33 net loss per share in the same year ago period the year on.
Ever year increase and net loss was primarily due to higher noncash and other expenses of approximately 263000.
For the full year GAAP net loss attributable to common shareholders was approximately $9 6 million or $1.85 loss per share compared to $4 1 million or $1 15 loss per share and 2019, the higher net loss was due to increases and noncash other expenses operating expenses and the Dean.
Dividend related to a warrant downloads adjustment.
Turning to our current cash balance in addition to the net proceeds of $18 9 million proceeds from the follow on offering in December 2020. We received an additional $9 7 million of gross proceeds from warrant exercises as of March 24th 2021, we had approximately $32 million of cash on hand.
Yes.
Thanks to our extremely healthy cash position and we plan to leverage ports and our balance sheet in order to further scale, our workforce and continue to be underlying theme of growth for our company and that concludes my financial summary for a more detailed analysis. Please reference our annual report on form 10-K, which we plan to file this week and we'll now turn the call.
And back over to Paul who will discuss some of our major operational updates and provide a general outlook of our business Paul.
Thanks, Josh.
Before I provide a deeper dive into some of the partner wins, we were able to garner during the fourth quarter I'd like to start by reminding everyone. The importance of why we need a healthy number of partners on both the publisher and advertiser side of our marketplace and why we continue to emphasize the importance of on boarding experienced sales executive.
As I previously mentioned the digital the digital marketplace is one that is similar to the stock market on one side or on the sellers of digital advertising, which are called publisher.
These are websites mobile apps or any platform and audience and advertiser interested and reaching.
And on the other side of the transaction there are buyers of digital advertising, which we referenced as the demand side.
These are brand advertising agencies or companies that have a message they want a certain audience to see or hear.
And in effort to make this process more seamless.
<unk> has created a marketplace called the audience cloud that allows both advertisers and publishers to connect directly and transact and the most efficient way possible, giving.
Giving the advertisers are greater ROI and publishers more net revenue.
In order for Cuda and to receive the greatest ROI within this chicken and egg scenario, we need a high volume and roughly equal number of publishers and advertisers plug into our system.
Because we have been able to foster a robust portfolio of publishers from our sales effort.
We are now and need of incremental advertisers.
Which is what which is why we're instituting a strong initiative within our sales division defined advertisers that will benefit from our marketplace efficiency and fraud prevention technology.
And are willing to plug into the other side of the equation.
With that said I'm pleased to share that our direct publisher partnership count and less kubiak as and approved partner has increased to over 3400.
One of the more prominent partners that we were able to integrate within the fourth quarter with Google.
This now means that advertisers, who would like to reach any potential customers and the Google ecosystem and view that'd be the audience cloud.
This increases our available advertising opportunities tremendously and with somewhat necessary for our demand side sales team to attract direct brand advertisers.
Moreover, I wanted to briefly touch upon the announcement of Google's shifting away from third party cookies.
And Fortunately this news has absolutely no effect on QB and and the way our technology operating since we leverage audience data directly from our publisher and audience partners and do not touch cookies.
In parallel to our efforts and driving new partnerships. We continue to remain focused on further developing existing one.
As a result, we were able to have a very successful 2020 campaign with our long standing partner and the associated press.
Throughout this year, we've played a pivotal role and helping the AP to optimize its internal AD operations by removing unnecessary vendors and introduced new revenue partners.
With that said I'm optimistic we will see a renewal from the associated press to continue our partnership.
In addition to the progress on the customer and partnership side. We've also gained significant traction with respect to our real time fraud prevention solution, Cai or could be and artificial intelligence.
Beyond the weasel injection fraud, which was a scheme that was tubing prominent brands and their supply and demand side platforms and the purchasing fake traffic, which was prevented by Cai at the onset of Q4, there were two recent wins and I'd like to touch upon.
First is caused accomplishment and identifying a previously undetected fraudulent and synthetic network, where since net which was designed to present web based or computer generated traffic as legitimate human traffic from premium App publishers.
Net was no ordinary fraud as it used a cloud service broker, which deployed across multiple cloud providers, such as AWS, Google and Azure without needing direct accounts.
This unique fraud affected popular mobile apps, such as the Washington Post and weather underground just to name a few and.
And prove that AD fraud criminals are getting more creative and devious with how they create fake traffic.
Nevertheless, Cai flagged and prevented the fraud within the 300 milliseconds window timeframe of a programmatic advertising auction.
The second and more recent win for Cai is in regard to our partnership with <unk> TV.
Free AD based video on demand streaming service as the platforms first premier programmatic partner to actively prevent adderall.
With over 85 million monthly viewers and the partnership with <unk> TV was not just another big win for Coogan, but also extends our own footprint across different platforms and our first desktop app partner.
Now that Kai is fully functional and commercialized as a standalone product with them ask the multitude of partners that are currently testing it.
As the industry's first pre bid fraud detection and prevention tool Ty is one of our main competitive advantages and there's currently no. Other competitor that we're aware of that's using machine learning to prevent fraud and real time before and are sold and a 300 millisecond window.
We look forward to scale, and Kai and making an impact and the soon to be 100 billion dollar fraud problem.
Moving on I will provide a brief update with respect to our self serve DSP or demand side platform.
As a reminder, a D. S. P is the system that gives buyers of digital advertising inventory, a dashboard or platform to purchase advertising and automated fashion.
We are currently and the process of fully building out the solution for advertisers to use within our platform. So they do not have to use a third party DSP. It could have more autonomy by in housing their media buying process.
Thus as I stated at the beginning of the call. We're still looking to hire additional engineers to help accelerate the delivery of our self serve DSP.
Nevertheless, we encouragingly have two partners that are assisting us and this process by testing out the current beta version.
We've garnered positive results, thus far and look forward to successfully building out the solution.
As I previously mentioned on our last call our business along with the broader digital advertising industry were adversely affected by the ramifications of COVID-19 and 2020.
However, as the number of cases continue to decrease and cities to begin to open back up we are seeing light at the end of the tunnel within the digital out of home advertising ecosystem.
We see this segment of our business trending and the right direction and we intend to provide further updates as deemed appropriate.
As many of you might have seen we issued a press release earlier this year announcing our engagement with Lake Street capital markets to provide merger and acquisition services within the AD Tech ecosystem.
The Lake Street team continues to be incredibly helpful and identifying and evaluating the correct acquisition target.
We look forward to providing any incremental updates with you, albeit the appropriate regulation fair disclosure channel if and when the time is right.
In conclusion, as we head into our first full year as a publicly traded company often unprecedented yet productive 2020, we are poised for significant success.
As I mentioned at the onset of this call. We are seeing a continued theme of growth across every facet of the company.
Beyond just head count we are witnessing progress and further development of our self serve DSP commercialization of Cai as a standalone product encouraging trends and digital out of home and a stronger relationship with new and current partners.
Our team is committed more now than ever and executing our goal to transforming the multibillion dollar global advertising industry by enabling a highly efficient and transparent marketplace for advertisers and publishers and alike.
That concludes my prepared remarks.
You all for your time. This afternoon, we look forward to updating you on our progress going forward.
Now ready to open the call for your question.
Operator, please provide the appropriate instructions.
Thank you.
Ladies and gentlemen at this time, we will conduct a question and answer session.
If you would like to ask a question press star one on your telephone keypad.
A confirmation tone will indicate that your line is and the question queue.
You May press star followed by the number too.
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Once again to ask a question press star one on your telephone keypad.
Pause for a moment to pull for questions.
Our first question comes from Jack Vander <unk> with Maxim Group. Please state your question.
Great. Thanks, Hi, Paul Hi, Josh Thanks for taking my questions Alright excellent results this quarter, great to see the the growth momentum continuing.
And there's a lot of information to chew on that you guys. Just dished out so I'll try to keep it to only a couple of questions. So I guess first first question for Paul It sounds like you've already made some tremendous strides and and boosting your head count and adding senior members of that maybe.
Maybe just how should we think about your future head count additions throughout 2021 is there and maybe like a head count target on your mind and how are you prioritizing that you know your head count additions between the supply side and the demand side of the equation.
That's a great question Jack.
As of right now we plan to grow by about 50%, that's what we budgeted for this year.
With that being said, though as we onboard additional clients on both the supply and the demand side it will potentially require us to hire resources to support those clients.
On a real focus right now is on the demand side or advertiser side of the marketplace and the next few hires we have and the in the Q will be all around demand side sales.
And we also have a few partners excuse me a few people who will be joining us on the technology side as well.
Yeah.
Got it and Thats helpful color.
Okay, and and then just maybe if I switch gears quickly to to Cai. So can you just provide some further color just forgot regarding the standalone launch of Kai did I understand correctly. It has been launched officially the standalone product because I wasn't quite sure. If that was the case because it seems like a substantial opportunity and.
So anything else you can share regarding your expectations for what what Kai means to the business and the growth momentum going forward.
Sure. So Cai obviously, we feel is a revolutionary product for the entire programmatic and advertising ecosystem.
What we've been doing is learning as we introduce Kai to a lot of our partners the best way to actually integrate it into their technology.
Our team developed a product called highlight which is actually a standalone product that can be integrated into any platform using our technology to help them prevent digital ad fraud.
So as we mentioned earlier on the call. We have numerous partners testing. It now the results are very positive and very similar to the situation would try and what we do as we test and we give them real data that you could see how impactful Cai is.
The nice part Jack is that once we provide that data irrefutable.
How much we can help prevent AD fraud, because if we're stopping it before they buy it and that critical timeframe of the 300 milliseconds that means the brands are not wasting their money.
Yeah.
Understood Okay.
And then just just to be clear then if I tried to connect a qualitative aspects too.
Our revenue numbers for the fourth quarter revenue of 1.1 million it looks like which exceeded our expectations I know internally here I'm. Just wondering if you can maybe break out the drivers of that revenue with Kai and part of that or was it all audience cloud just anything you can share there.
Yes, and Q4, it was primarily audience cloud and what we saw like a lot of companies was a uptick and certain areas within the audience. So it was a very strong news cycle last year with the election with COVID-19, So we have partners, who experienced a large uptick and web.
<unk> and we were fortunate enough to be in a situation and capitalize on those relationships.
And.
Okay Awesome and then.
And I guess my next question is if I stick to revenue just expectations I know you're not providing guidance.
But given your comments around maybe the election and there seems to be a seasonal component here. So.
If you could just help me understand help us understand what to expect for the first quarter just directionally from a revenue line would you expect kind of a drop off a little bit just because of seasonal weakness.
And then ramp throughout the year or just how should we think about that.
Sure. So historically Q1 is not the strongest quarter for digital advertising, but we're confident that our partnership with Google and opening up that huge audience to our demand side and advertising partners and he's going to help us with our momentum.
The key thing we're hearing and Q4 was you don't have as much reach as we need today, so that Google partnership now opens up a huge part of the internet for us to be able to reach audience and sell digital advertising.
Yeah.
Got you and that and that was actually and that's actually a nice segue into my next question was going to be regarding your you're at your partners I think he said.
3400 and.
And publisher customers that you reach now and that includes Google.
One is that correct I'll start with that and then I have a follow up sure.
So there is a initiative called ads TXT, which allows publishers to indicate to digital advertisers, whose any approved buyer of that audience.
So if you want to work for example, with and ESPN you have to have a listing within their ads TXT file.
So the number that we referenced is how many publishers lift kubiak as and approved seller of their traffic. So that's a critical piece and enabling us to go out and bring brand dollars to those publishers. So without that ads TXT listing youre going to have a very hard time actually buying that traffic.
Okay.
Understood, Okay, and and then just again, you've kind of touched upon it but it's such a such a powerful name and are in the world. Google What just can you talk more specifically on what kind of doors. This does open up to you specifically and I'm sure. It gets your name out there it's kind of like a nice.
Convenient way of advertising as well for free and to have them as a partner.
And just anything you can what kind of doors and it does open up that didn't exist to you and we're out of reach to you earlier this year.
It really opens up more doors on the advertiser side.
We have a philosophy, where advertisers want to reach an audience of one at scale. They want to reach a specific consumer and a and a certain environment with a certain message now that we have this reached through the connection to Google's platform. We now have just.
A huge audience, where we can go out and actually reach more people for our brand partners.
If you think about a typical brand they want to reach different demographics and not everybody is going to live on ESPN or Fox news or N P or theyre going to be and different parts of the web and our partnership with Google now gives US you know it.
I can't continue to say enough how much of a additional reach it provides.
Yeah.
Fantastic and then just maybe maybe I'll just add one more question and then I'll I'll hop into queue. Yeah. You you guys have accumulated a pretty solid cash position at this point a lot of dry powder, there and given you do have plans to be acquisitive and he did mentioned some comments about acquisitions.
But maybe how should we think about.
You're prioritizing of what you're looking for and an acquisition without giving a specific company names or anything like that just what are some like general factors that are playing into your acquisition search.
The great question Jack and.
We're looking at not only what is the market doing today, but what is the programmatic and.
And what does the ecosystem look like and five and 10 years from now.
I believe that having a direct integration with publishers is going to be a huge asset going forward, especially when you have the battle of Google with all of the identity.
And and the attribution problems, where Google is basically saying, we're going to have our own identity solution by the name of flock and you have the trade desk and pre bid thing we'd like to use you.
I'd like to point out.
We really don't want to get involved and that battle, but what we want to do is plug and directly to as many publishers as possible. So that we can connect as many brands directly and not have to worry about these issues around audience identity. So.
So if we can connect directly to a lot of publishers.
I think there'll be a very good opportunity for us either on an SSP and AD exchange or something of that nature, who has large scale on the publisher side for an acquisition there.
I also would be interested in the demand side, who has those direct advertisers using our platform to connect directly into the programmatic ecosystem because our entire thesis is a efficient transparent fraud free market and if we can connect the two of those parties together using our proprietary technology I think it's a win for both sides.
Excellent that's very helpful. I appreciate the additional color again, congrats on the strong results and I look for it and to 2021 and wish you the best Thanks. Thanks Jack.
And just a reminder, task and question Press Star one on your telephone keypad.
Formation tone will indicate that your and Q and you get press star two to remove yourself from queue. Thank you.
Ladies and gentlemen at this time. This concludes the company's question and answer session. If your question was not taken you may contact <unk> Investor Relations team.
At QB and at Gateway IR Dot com.
I'd now like to turn the call back over to Mr. Roberts for his closing remarks.
Right.
Thanks, Diego and <unk>.
Thank you everyone for joining us today on our Q4 and full year 2020 earnings call.
Again, I, especially want to thank our employees partners investors and customers for their support and we appreciate your continued interest and cooling and look forward to updating you on our next call.
Operator.
Thank you. Thank you for thank you for joining us today on QB and its fourth quarter and full year 2000, and 'twenty earnings Conference call. You May now disconnect. Thank you.