Q1 2022 Kubient Inc Earnings Call
Good afternoon, and welcome to <unk> first quarter 2022 earnings conference call joining.
Joining us for today's call <unk>, founder Chairman and Chief Executive Officer, Chief Strategy Officer, and President, Paul <unk>, and Chief Financial Officer Joshua.
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 90 95.
During this call, we'll be making forward looking statements, including statements related to future events or our future financial performance and involve known and unknown risks uncertainties and other factors that may cause our actual results levels of activity performance or achievements to be materially different from any future results levels of activity.
Performance or achievements expressed or implied by these forward looking statements listeners should not place undue reliance on forward looking statements since they involve known and unknown risks uncertainties and other factors, which are in some cases beyond our control and which could likely won't materially affect actual results are.
Of activity performance or achievements any forward looking statements reflect 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 our operations.
Gross.
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 the call.
Furthermore, listeners are referring to the documents filed by <unk>, Inc. With the SEC, including our annual report on Form 10-K filed with the SEC on March 31, 2022, with the understanding that our actual future results may be materially different from what we expect which include these and certain other important growth factors.
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Could differ materially from those anticipated in these forward looking statements, even if new information becomes available in the future.
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On the call today management will discuss adjusted EBITDA non-GAAP financial measure.
The company's press release and filings with U S. D C. 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 in isolation from a substitute for or superior to GAAP results.
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I didn't get the performance now I'd like to turn the call over to Mr. Paul Robertson Sir. Please proceed.
Thanks, operator, and thanks to everyone, who has joined us today.
As <unk> seen from the earnings release that was issued earlier. This afternoon. We have started the year off with a strong Q1 top line figure.
For the first quarter, our net revenue was $1 $2 million, which represents a 39% increase from the prior quarter and a 76% increase year over year, marking one of the strongest quarters, we've had in a while.
The increase was a result of new customers acquired as a result of the media crossing Aqua hire.
Although we successfully delivered approximately $1 2 million in total Q1 revenue via the audience cloud and could be managed services subsequently strongly surpassing our revenue target for the quarter.
All of us that could be and are aware of the need to preserve capital, while we strategically explore M&A opportunities.
After much consideration with the council of our management team and board of directors. The goal at this time is the guide could be into a position of strength. We're the outs more closely match the ends of our balance sheet and we focus on maximizing the ROI of our existing capital.
That said, we are now actively in a mode of scaling back our expenses, including our general overhead along with our labor force for the sake of cash conservation.
Despite the encouraging topline achievement for the quarter, we recognized that the rate we were using cash to fund the business is not sustainable and optimal to grow the bottom line.
We have already begun pulling back on certain non essential position and evaluating whether other divisions within our business might be streamlined further in order to conserve the company's resources.
However, we still plan to maintain the necessary components of our organization on the development and operation side of our engineering core.
To provide additional context, we have eliminated half of our prior head count which directly translates to savings in our operating expenses and subsequently present us with more promising financial results looking ahead.
The effects of the situation in Ukraine, and unprecedented competition in the skilled labor market have all.
So played a role in the decision to maximize the productivity and efforts of our core business endeavors.
We've spent a great deal of time and energy building out an effective and proprietary solution that we think is going to properly address the overhanging fraud and efficiency related troubles plaguing the advertising market.
And as a result have decided to optimize them our employees.
To alleviate the overhead expenditures.
Nevertheless, we still plan to maintain our current client roster and existing partnerships and believe that we can still conduct operations generate strong revenues, even with a more streamlined workforce.
With the optimization of our internal units and conservation of capital, we look to aggressively continue efforts on the M&A front.
With the change in the overall financial climate, we believe that <unk> is an extremely attractive target participant for reputable companies looking to find the proper answer to lost advertising spend on fraud rate in media.
We hosted a fully built out supply side platform with the direct publisher integrations and the proprietary solution to remove the crippling AD fraud issue, which we will believe will be the direction. The AD tech industry is headed.
As such we will continue our search for synergistic businesses, both large and small that might bolster both the supply and demand side of our business with a focus on bolstering our technology offering to the public and our valued customers.
We look forward to provide further updates on our acquisition efforts when appropriate.
Beyond our continued efforts with regard to potential M&A opportunities, we've kept our focus on expanding our organic growth opportunities to provide services to the wider advertising community.
As we mentioned we are maintaining our previous client relationships and our efforts on the front of increasing the quantity and quality of partnerships has been ongoing.
We've seen new fruit come to bear on the partnerships growth front named.
Namely problematic and Yahoo, recently decided to work with <unk> as demand side partners. In addition to their current supply side integrations.
These evolutions of partnerships are result of contracts, we signed over the past quarter.
Effectively plugging the AD Tech company and platforms into the audience marketplace to better serve their clients.
While we celebrate these partnerships there is still work to be done to extract revenue and additional growth with these partners.
Now I'll hand, the call over to Josh who will provide additional color on the quarter from a financial perspective.
Josh.
Thanks, Paul and good afternoon, everyone. Thanks for joining our call now to our financial results for the first quarter ended March 31 2022.
Net revenues for the first quarter of 2022 were approximately $1 2 million compared to approximately 708000 in 2021. The increase in net revenues was primarily attributable to net revenues generated related to customer contracts acquired in connection with their acquisition of immediate crossing in November 2021.
Earlier in the first quarter, we determined that it was no longer probable that we would collect payment from a customer from which we were entitled Therefore, we ceased providing service to the customer on April six 2022, while still pursuing collection of payment for the work. Our team had already performed with that said, we only recognized net revenues of approximately 48.
Dollars from this customer in the first quarter when in reality, we provided additional services of approximately $1 1 million as of the second quarter, we received approximately $600000 of payments and expect to recognize revenue in future periods related to the contract for any payments received in excess of the loss accrual, which I will discuss.
Shortly.
Turning to our expenses.
Technology expenses increased to approximately $1 2 million from approximately 520000 in 2021. The increase was primarily due to an increase in head count costs hosting fees noncash stock based compensation and software expenses.
General and administrative expenses increased to approximately $2 2 million compared to approximately $1 3 million in the first quarter of 2021.
The increase was primarily due to increases in legal fees, including legal fees associated with the legal settlement entered into in March 2022 <unk>.
Noncash stock based compensation.
They are professional fees, all partially offset by a reduction in state taxes.
Regarding the additional line items, we recognized a loss accrual of $790000 for media costs incurred in February and March 2022, which relates to the services performed from the aforementioned customer stated at the beginning of my remarks.
GAAP net loss attributable to common shareholders was approximately $3 $6 million loss or <unk> 25 loss per share compared to approximately $1 $8 million or a 14 cents loss per share in the same period last year. The reason for the decline was primarily due to the loss accrual I just discussed.
And the increase in expenses previously described adjusted EBITDA, a non-GAAP measure increased to approximately $3 6 million EBITDA loss compared to an adjusted EBITDA loss of approximately $1 5 million in the same period last year.
As of March 31, 2022, the company had a cash balance of $28 $7 million that concludes my financial summary for a more detailed analysis. Please reference our Form 10-Q, which we plan to file today I will now turn it back to Paul Paul.
Thanks, Josh.
During this period of capital conservation and consolidation of Labor forces we.
We feel strongly that our proprietary technology dedicated labor force and new strategy will mitigate these temporary headwinds facing Caribbean. We appreciate all of our employees investors and clients for your support.
Now I'll turn it over to the operator for Q&A.
Thank you.
At this time, we will be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
For a start to if you would like to remove your question comes a queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Alright, again star one if you would like to ask a question.
Our first question comes from the line of Jack <unk> with Maxim Group. Please proceed with your question.
Great.
Hey, guys. Thanks for thanks for taking my questions I appreciate the update.
Paul I'll start with a question on I believe you mentioned in your prepared remarks, you get eliminated from your prior I am sorry.
Bounce around like six earnings calls Tonight. So.
Forgive me, if I'm, a little in and out but.
Can you maybe just help clarify what your head count is and maybe like a rough breakout by role what percentage R&D sales and marketing.
Give me a lay of the land.
Sure, Yes, just to give you a little more color Jack we were.
Really looking at the entire ecosystem in the environment right now on the finance side of the World and we just felt it was a little reckless to spend for growth.
So we really want to bring the burn down rates significantly looking at the current head count we had what roles could potentially be duplicative and how do we really conserve the cash that we have on hand, we think thats, a just a tremendous asset for us.
With the environment the way it is we don't really know.
What the environment would you like to go out and potentially have to raise more capital in the future. So.
Like I mentioned, we're going to protect that.
That money, we have on our balance sheet at all cost.
Yes.
Rolls that we did lose were primarily driven out of the operation side. So we're looking at the sales tax.
And really the tech driving what we're doing day to day.
We've kept really strong reset resources on the tech data science side.
And we're going to potentially add in the future to the sales side of the equation, while maintaining and keeping our current clients happy. So I apologize I don't have right in front of me. The actual breakdown that you asked for but I can get that for you as a follow up.
Yes sure.
That's helpful enough.
So I guess.
Given this market environment I think it does makes sense to pull back on opex and streamline costs.
But.
Curious deposit on the positive side your revenue was.
Outstanding at relative speaking at $1.2 million.
Pretty big jump, 76% year over year.
I think he mentioned immediate cross border with a driver a bit maybe.
Maybe.
And since they have but can you can you spell out maybe the.
Two or three key drivers of that revenue growth.
Is that something Thats sustainable.
Sure. It's a great question. So it is driven a lot by the partnerships that we're able to secure both as prior to media crossing Aqua hire along with the Aqua hire of.
Media crossing so we mentioned earlier that platforms are starting to work with <unk> on both the supply and the demand side.
Which is a very positive.
Reaction to working with us because what they're seeing is yes, we can bring them very good audience, but they also want us to clean all of that audience before they could potentially buy it. So it's a testament to our belief that the fraud prevention is a big seller of what we've built and on the media crossing side, what we're learning is that there.
Their team and being able to explain the benefits of <unk> and why removing fraud is so impactful we expect to see additional revenue come in via some of those partnerships.
Typically how it works with someone who will shift some of their budget into <unk> and they will see a greater return on that media dollar Bill then move money from different partners into <unk>.
So there's a lot of testing learning increasing budget testing learning increasing budget. So what we're seeing is the impact of sky and our audience cloud driving better results. So we are optimistic that in the future that's going to potentially drive additional revenue from existing clients.
Gotcha and then.
Just because you spelled out again in the bullet points at the press release.
Can you maybe sat and these are some big obviously big bellwether names in the industry, but can you just talk about what pub matic and what Yahoo means to your business.
Sure.
Maybe from both a a relationship perspective, and then also from in terms of material of actual revenue growth in the future.
Sure.
Relative to your overall the overall puzzle.
Yes. So if you look at AD tech as a whole there is maybe 10 real players in the industry you have the Google Amazon Yahoo. Then you go down to the <unk> to the world and the reason why these relationships are so important is because these are the platforms of choice for a lot of brands and a lot of publisher.
So when we go when we speak to a direct brand and they say well we buy all of our media through Google We buy all of our media through media math for example.
We have to be able to integrate directly into those platforms.
In order to see those revenue dollars flow through our audience marketplace.
We don't have established relationships with all of these players.
We're going to basically handcuffed ourselves from generating revenue with those partners. So if we go and talk to a large CPG or a large E Commerce company and they say we love the concept of efficiency, we love the idea of removing the fraud before I buy it.
We've already built our entire media buying on.
Google for example.
Were not integrated fully into Google, we have no way of accessing those budget.
So the fact that we did this work and it took a very long time to do but having relationships with Yahoo with <unk> with Google with media math is critical for our sales team and they go out and they talk about Cai when they talk about the audience marketplace.
Because those brands and those publishers can very easily access our platform and reap the benefits of Chi and the efficiency that we continually talk about.
Got it that makes a lot of sense and then and then Paul maybe just sticking on the topline and one last question.
You guys you guys are an emerging growth company, so I'm not sure how much seasonality plays a role here, but traditionally speaking first quarter or is it.
So quarter in the digital AD world.
Neither for the rest of this year I know you don't provide guidance, maybe just directionally comment on how you would.
Expect your revenues to kind of move.
Is it going to be lumpy or would you expect this to be a bit.
Well.
I think three years ago, Jack It would have been as predictable as the clock. The reality is with Covid and the change in spending habits. It has gotten much harder both industry wide and internally with Caribbean to kind of say, Okay. Q1 is going to look like Q Q3 is going to look like this so.
We're preparing and like I said earlier, we're kind of circling the wagons and holding onto cash in case, there are some bumpy quarters, but.
We're getting great responses from our partners on the technology that were built so we're hoping that we can get a little into a little bit more of a stabilized environment.
But I do believe with the economy. The way it is with the lingering effects of Covid, it's a little bit hard to go back to that old model of Q1's, a little soft Q4's level is strong.
But we're optimistic of what we've built and believe we're going to continue to get adoption.
Okay. That's a very helpful answer and I appreciate the.
Transparency and it sounds like it's a streamlining costs and yet still able to achieve growth.
I'm happy to hear that I appreciate I'll hop back in the queue.
Thanks Jack.
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.
Keeping gateway IR dot com.
Now I'd like to turn the call back over to Mr. Roberts for his closing remarks.
Thanks, operator, and thank you everyone for joining us today on our Q1 2022 earnings call I, especially want to take a moment bank our employees our partners our investors and customers for their continued support we appreciate your interest in <unk> and look forward to updating you on our next call.
Operator.
Thank you for joining us today for <unk> first quarter in 2022 earnings Conference call you may now disconnect.
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