Q3 2022 Kubient Inc Earnings Call
Good afternoon, and welcome to <unk> third quarter 2022 earnings conference call joining us for today's call are <unk> founder Chairman and Chief Executive Officer, Chief Strategy Officer, and President, Paul Rubin, and Chief Financial Officer, Joe Schweiss following.
Our 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 1095.
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 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 involve known and unknown risks uncertainties and other factors, which are in some cases beyond our control and which could and likely will materially affect actual results levels of activity performance or achievements.
Any forward looking statements reflect our current views with respect to future events and are subject to these other risks uncertainties and assumptions relating to our operations results of operations growth strategy and liquidity. These.
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. So ethanol listeners RFA to the documents filed by <unk> incorporated with the SEC, including our annual report on Form 10-K filed with the SEC on June 32022.
With the understanding the actual actual future results may be materially different from what we expect.
Which include these and certain other important risk factors, 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 in these forward looking statements, even if new information becomes available in the future.
Please refer to <unk> SEC filings specifically its registration statement on form S. Dash. One initially filed on December 12, 2020 for a more detailed description of risk factors that may affect the companys results.
During the call today management will discuss adjusted EBITDA and non-GAAP financial measure.
In the company's press release and filings with the SEC both of which are posted on the company's website, you'll 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.
The company encourages you to consider all measures when analyzing <unk> performance now I would like to turn the call over to Paul Roberts.
Please proceed.
Thanks, operator, and thanks to everyone who joined us today.
On our last call, we focused heavily on the new implementation of our cost cutting program.
Initiative, with whom bear fruit early on and something that will show in our financial results, both sequentially and year over year in the coming quarters.
Today I'm happy to report on the effort advancements and positive developments undertaken in the previous and current quarter's centered around our proprietary technology.
Clients continue to re sign with our services utilizing the audience cloud.
Partnerships continued to evolve as new customers arrive via successful sales initiatives.
With the current economic climate brands and companies are looking further into various means that can ensure your advertising spend is funneled through channels is consistent reliable and established ROI production.
With this shift into tighter measurement of utilizing feed advertising and marketing come to more focused spend or.
More willing to turn towards services like <unk>.
We offer a safe haven for those unwilling to compromise on unproductive and wasteful advertising spend.
This mentality that brought us to create and develop our chief offering than I am.
Comparable carryforward into the changing market trends.
Receipt of leaf.
Shift towards a more conscious it's vendor is very timely recruitment.
At this time momentum is both created entirely by the progress we've made with car.
As we announced in mid October we publicly launched the car dashboard are reporting and the optimization platform that helps both media publishers and platforms better understand and manage inventory health to ensure the quality of inventory they are sending to demand platform.
The dashboard help to bridge, the gap and visibility and information provided for brands and platforms centered around problems that arise on the inventory management level specifically.
Specifically in the connected television or CTV channel.
Utilizing the power of artificial intelligence and machine learning algorithms.
Publishers are now able to easily identify what is causing inventory to remain on monetize.
Be alerted of the problem and able to take immediate action to drive increased revenue.
To this date the dashboard has already helped publishers tremendously by showing full insights inventory health draw.
Driving improvements in inventory quality.
Increasing the efficiency of AD monetization efforts for greater revenue acquisition.
The effectiveness and worthwhile nature of this offering is already showing customers a lift of 20% in revenue due to the dashboard.
With continued to fuel our development of the dashboard has been encouraging feedback we've received from several organizations within the industry at conferences.
The work, we have developed and performed with a new dashboard is reflective of our thesis which is to remain nimble and productive as.
As we've listened intently to the needs of both publishers and advertisers, while delivering an immediate accretive product.
It's with this exercise that we've had our horizons expanded even further to the capabilities high possesses beyond fraud detection and prevention.
Instead, we see it becoming the comprehensive intelligence layer that sits between the buyer and seller of digital advertising throughout several transactions.
And this key brands that are frequently worried about how their data is good.
And you could better protect their own data.
On that note, we've seen successful and sought after intelligence related features centered around the implementation of machine learning on time with the ability to incur the person hood of each user that passes through the platform.
Assisting with reading the audience cloud of fraudulent users or bonds.
Some preliminary examples of how <unk> can be augmented with the data and information to collect consists of.
Tools to do real time targeting.
Audience targeting attribution.
Site into Y media buying is not successful time for buyers and sellers and more.
We want to remind everyone that the AD tech realm still remains a nascent industry with a significant amount of white space opportunity.
To that end, we want to bet on car and continue investing and growing its portfolio of capabilities, which is why we've made the decision to hire additional engineers that can help manifest.
Incremental layers, we can add to Cai.
What are the tools can be built in conjunction with it and what other features can be placed in it.
The impetus for this move has once again been due to feedback we're garnering some partners in the space, which has been very validating.
Additionally, with the recent popularity of clean data rooms, which is where brands don't want their data out into the ecosystem anymore.
Come into effect by being the AI Decisioning that would take the data interpreted and understand what the outcome would be.
<unk> has the potential to become the Decisioning engine of the future that allows brands to remain in control of their valuable data, while also being able to use machine learning and AI to understand in real time.
Possible advertising opportunity for their target audience.
Regarding the patent notice recon on August 19th of this year <unk> was issued a notice of allowance.
This document is delivered to a company after a U S. PTO patent examiner has determined that a patent should be issued.
In other words.
When a patent examiner has determined that all the legal requirements for patent issuance have been met.
A notice of allowance.
That said our patent attorneys are confident we will receive the final issuance for this patent before the end of the year.
I'd like to take a quick second to emphasize the difficulty of receiving a patent within the AD tech industry.
Given the relative Nascency and complexity of our industry. There are not many patents that get issued.
This one's more illustrates the compelling nature of Kai and highlights the vast potential of our solution.
All in all your organic growth, we've seen Kuban will support from our efforts on Mackay front.
We predict will result in powerful opportunities for our company and investors.
As I iterate it at the onset of my prepared remarks, we've been encouraged by several clients that have re sign their engagement with us this past quarter.
One example, I wanted to specifically highlight was with our long term partner medium mill.
Where we recently decided to shift a portion of our direct brand advertiser budget from the trade desk over to them.
This will provide <unk> with the ability to purchase ads directly on <unk> SSP, which of course has kai built into it.
We're confident that this move will give us the opportunity to provide strong data driven case studies, revealing the impact of higher efficiency advertising spend on our platforms from both the demand and supply sides of the equation.
With the transaction is expected to take place on our marketplace, where given the autonomy and controlling the AD budgets and where that spend goes.
We are envisioning there will be opportunities for direct brands to get 20% to 30% of their media buying power back due to Cai.
And look forward to sharing the results of these case studies in the near future.
This project is now currently live.
We're very pleased with our media partnership and plan to leverage several synergies with them looking ahead.
With most of the Covid related restrictions lifted we've also seen an uptick in media spend from one of our largest direct advertising clients, who is a live events and entertainment company.
The results, we were able to provide in 2022.
Let this partner to extend their media buying partnership recruiting and through 2023.
As an ongoing topic I want to note that we continue to field and look for interesting opportunities inorganically grow <unk> strength and reach in the M&A realm.
We recognize that there is still a ton of companies interested in a public vehicle amidst this turbulent time within the stock market and the economy.
There is virtually no access to cheap capital today.
As a publicly traded organization with shelf eligibility in addition to our healthy balance sheet.
Very strong core technology, a seasoned executive team.
We understand the value we can provide the private corporations that would want to leverage us in the public vehicle.
With that I'll hand, this 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 third quarter ended September 32022 net.
Net revenues for the third quarter of 2022 were approximately $482000 compared to approximately $677000 in the same period last year.
The decrease was primarily due to a decrease of net revenues associated with one of our customers as compared to the 2021 period.
Partially offset by revenues generated in the 2022 period related to customer contracts acquired in connection with our acquisition of media crossing in November 2021.
Technology expenses decreased to approximately 525000 from approximately 777000 in the same period last year.
The decrease was primarily due to a decrease in head count costs hosting fees software technology subscription expense amortization and consulting expenses.
General and administrative expenses decreased to approximately $1 1 million compared to approximately $1 5 million in the same period last year.
The decrease was primarily due to decrease in noncash stock based compensation professional services and consulting expenses.
GAAP net loss attributable to common shareholders improved to approximately $1 7 million or <unk> 12 cents loss per basic and diluted share compared to a net loss of approximately $2 3 million or 16.
Loss per basic and diluted share in the same period last year.
Adjusted EBITDA loss, a non-GAAP measure improved to approximately $1 5 million or <unk> 11 loss per basic and diluted share for the three months ended September 30, compared to an adjusted EBITDA loss of approximately $1 9 million or <unk> 13 loss per basic and diluted share in the same period last year.
As of September 32022, we continue to have a strong cash balance of approximately $16 9 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 the call back over to Paul.
Paul.
Thanks, Josh.
The landscape right now is fraught with opportunities recruitment.
We have reinforced our balance sheet and have begun capitalizing on the quality of our staff and offerings.
Excitement for what lies ahead is alive and well with our management and organization as a whole.
We intend to continue operating efficiently as a lean and mean company as a small team looking to solve very big problems.
Now I'll turn it over to the operator for Q&A.
Thank you Paul ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone handset, we ask that while pacing. Your question you. Please pickup your handset if you're listening on the speaker phone to provide optimum sound quantity. Please hold possibly poll for questions.
Thank you. Your first question is coming from Jack <unk> of the Max is great. Jack. Please proceed.
Hi, guys. This is jacqueline Erik calling in for Jack Vander already Thanks, again for taking my questions.
A couple.
Last quarter, there were some cost cutting it sounds like you guys kind of got yourself in the right spot.
And I think you mentioned there was 21 full time employees, which got you about 24 to 36 month runway I was wondering if that's still the case and then just any color on any strategic changes surrounding that at all.
Sure Great to talk to Jack and obviously I'll, let Josh comment on some of the.
Financial details, but the reality is we all saw a huge shift in advertising number one due to Covid and then obviously number two due to the financial markets moving but.
We wanted to be proactive with the cash we have on hand and be very strategic in how we spend that money. So as you noted we did make some very hard tough cuts towards the beginning of this year.
We're starting to see some of the dust settle and brands get back into a more normalized media plan.
We have begun internally looking at where do we start to fill in some of the head count, especially on the tech side relating to Kai and then also on the business development side, where we went all the way down to two salespeople.
It's challenging to really scale and get the traction we are looking forward with those types of numbers. So.
Hopefully next quarter when we have this call again, we're going to talk about some additional head count and also some strategic news as well around Cai so with that being said, Josh. If you just want to go into a little more detail on the cost savings are where we are in.
Any further we might get will be helpful.
Yes, I mean, I don't really have much to add Paul but yes.
We did make the cuts that Paul mentioned and we are finally seeing the benefits of those cuts over the last few months.
And as Paul mentioned.
We're always looking to hire the right people in the right places and with the way the landscape has been changing we're looking forward to some good opportunities there.
Thanks, guys, that's amazing color.
If I can kind of switch gears I had a couple of questions on <unk>.
There were some press releases kind of mid October and you guys mentioned again today.
20% of on the CCTV content like 20% was a monetize.
It sounds like a really compelling value proposition I was wondering if you can speak kind of overall what that Tam is in like the connected TV market and then any color for the strategic roadmap of that solution.
Sure. So what we were hearing back from a lot of our partners is a lot of budget was moving to CTV or connected TV, which is massively.
The opportunity for us because of the fact that it's new and.
When things are new and there is a lot of money involved typically attract a lot of fraud.
So it was a really really good opportunity for us to insert Cai start to identify what's real what is it real et cetera.
But then what we started to notice also is that a lot of errors were firing within the auction marketplace.
At the end of the day connected TV is an application that sits on a device that's usually a TV that hangs on your wall.
The fact that it's somewhat of a newer channel youre going to see a lot of people setting campaigns up and properly installing the apps into the marketplaces and properly. So we see August with Cai, we're able to see okay.
This partner connected to outdoor TV or Fox television.
They're getting an error message and we met with somebody recently at a conference here in New York will programmatic Io.
And she told me that she has three full time employees were all they're doing is trying to troubleshoot the error messages that theyre getting.
So we realized that if we can make this available on our dashboard.
And very easy.
Easily help both the buying the sell side transact the publishers make upwards of 20% more using Cai using our platform. So we don't have.
Numbers right now because a lot of people on the Tam for connected TV.
We're also adding in other channels around video.
We just hear anecdotally that almost every brand is pushing more and more dollars into connected TV.
And to be an archive solution to be able to give back 20% more revenue to those app owners.
This isn't pie in the Sky type thinking this is here's actionable insights to day, very clear and concise and a dashboard that allow you to make more money.
And having this as a byproduct of this amazing Cai dashboard has just been it's been so well received.
It's good news for us.
Yes, that's amazing.
And then I had one last one.
It's exciting to hear you. It sounds like you guys are confident to get the patent by the end of the year I think I heard that right.
But I was just wondering generally.
What sort of infringement that patent is going to protect and then also I don't know if I was reading through wrong, but it sounds like maybe that is some sort of leverage on the sales front is that beneficial to you guys as well. Thank you.
It is.
When you talk about the infringement piece and we did put in our.
Press release today, there is not many companies out there that have patented technology and in digital advertising.
That we were able to develop this product. The fact that we're able to get a patent as far as we have and like we mentioned, we're basically at the final stage of approval.
We think theres going to be a lot of opportunity to look at others in the industry that are using.
Our footprint of our fingerprint, if you will and defend that vigorously.
So we have a very competent and experienced a law firm that handle this with our patent work. We also have a very strong litigation team. So not to say, we want to become litigious, but we spent a lot of time, a lot of shareholder and investor dollars into development of Kai. So we will spend and we will work very hard to defend.
What we've built.
And I think it does give us a huge advantage.
Because a lot of companies have a very black box model of how they are allegedly preventing ad fraud.
So the fact that the U S patent office looked very deeply into what we built the technology the methodology and was able to say okay. Yes.
This is.
Noteworthy enough to be protected with a patent I think thats going to be front and center and a lot of our future conversations.
That's amazing color. Thank you so much for answering all my questions. That's all I had I'll hop back in queue.
Thank you.
Thanks Jack.
Thank you very much 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 would now like to turn the call back over to Mr. Roberts for his closing remarks.
Thank you operator, and I just wanted to thank everyone for joining us today on our Q3.
2022 earnings call.
Thanks, So much I wanted to take a moment and thank our employees.
Obviously, it's been challenging times and we want to really just say, thank you again to everybody our partners, our investors and customers for their support.
We appreciate your continued interest in <unk> and look forward to updating you on our next call.
Operator.
Thank you for joining us today for <unk> third quarter 2022 earnings conference call.
Now disconnect.