In the latest earnings call, Mobivity Holdings Corp. (MFON) announced significant advancements in its strategic pivot towards a Connected Rewards platform. The company, led by President Bryce Daniels and COO Kim Carlson, highlighted the successful sale of its legacy SMS marketing segment, which is expected to streamline its focus on the burgeoning market for Connected Rewards, estimated to be worth over $40 billion a year. Mobivity also reported the addition of six new brands to its platform, expanding its reach to approximately 13.6 million users and over 51 million consumers year-to-date.
Key Takeaways
- Mobivity has completed the divestiture of its SMS marketing business.
- The company has launched six new brands on its Connected Rewards platform.
- Expectations for significant revenue growth and profitability in the near future.
- Mobivity reported an average revenue of $4 to $10 per game install with high-profit margins.
- The Q3 financial report is delayed but will be filed soon.
- Optimism about achieving profitability by the first half of 2025.
Company Outlook
- Mobivity anticipates substantial revenue growth and profitability in the upcoming months.
- The company plans to provide further updates in early 2025.
Bearish Highlights
- The Q3 financial report filing has been delayed due to auditor requirements.
Bullish Highlights
- Strong performance metrics and a robust pipeline have been reported.
- High-profit margins of 60% to 70% on the Connected Rewards platform.
- Recurring revenue generated through long-term contracts with brands.
Misses
- No current earnings from consumer transactions at partner brands.
Q&A Highlights
- The SMS divestiture resulted in $300,000 upfront and potential future earnouts.
- The company is targeting profitability by the first half of 2025.
- Reduced expenses from the divestiture are expected to aid in achieving profitability.
Mobivity's transition to a pure-play Connected Rewards platform has been marked by the successful offloading of its SMS marketing business. This strategic move has provided the company with immediate cash and the potential for additional cash flow through an earn-out arrangement over the next two years. The company's business model, which hinges on the collaboration between brands, consumers, and mobile game publishers, is designed to generate recurring revenue through monthly brand impressions.
The Connected Rewards platform's performance metrics indicate a strong foundation for future growth, with the company expecting to see a substantial increase in revenue and a path to profitability. Mobivity's leadership has conveyed a positive outlook, with plans to leverage the divestiture's immediate financial benefits to improve its balance sheet and support growth initiatives. Despite the delay in filing Q3 financials, the company remains optimistic about its financial trajectory and operational efficiency, aiming to hit profitability by the first half of 2025.
InvestingPro Insights
Mobivity Holdings Corp.'s (MFON) strategic pivot towards its Connected Rewards platform comes at a critical time for the company, as revealed by recent InvestingPro data. With a market capitalization of $16.56 million, MFON is operating in a challenging financial environment. The company's revenue for the last twelve months as of Q2 2024 stood at $6.31 million, with a concerning revenue decline of 14.51% over the same period.
InvestingPro Tips highlight that MFON "suffers from weak gross profit margins," which is evident in the reported gross profit margin of 26.53% for the last twelve months. This aligns with the company's focus on improving profitability through its new business model. The tip suggesting that MFON's "valuation implies a poor free cash flow yield" underscores the importance of the company's strategic shift to enhance its financial performance.
Despite these challenges, an InvestingPro Tip notes that the "stock generally trades with low price volatility," which could provide some stability for investors as the company executes its turnaround strategy. This low volatility may be beneficial as Mobivity works towards its goal of achieving profitability by the first half of 2025.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable in assessing MFON's future prospects. Currently, there are 4 more InvestingPro Tips available for MFON, providing a deeper understanding of the company's financial health and market position.
Full transcript - MegaFon OAO (MFON) Q3 2024:
Brett Maas: Good afternoon, everyone, and welcome to Mobivity's Third Quarter 2024 Earnings Results Call. Hosting the call today are Bryce Daniels, President; and Kim Carlson, Chief Operating Officer. Before I turn the call over to management, 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 the actual results or events could differ materially. Please refer to the documents filed by the company from time to time with the SEC, and in particular, its most recently filed quarterly report on Form 10-Q and annual report on Form 10-K. 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 these 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. Today's call may include non-GAAP financial measures, which require a reconciliation to the most directly comparable financial measures which are calculated and presented in accordance with GAAP and can be found in today's press release, along with our recent corporate presentation, which is also available at mobivity.com. With that said, I'd like to turn the call over to Bryce Daniels, Mobivity's recently appointed President. Bryce, the floor is yours.
Bryce Daniels: Thanks, Brett, and good afternoon, everyone. We appreciate you all joining us today for Mobivity's third quarter 2024 earnings conference call. For investors new to our story, Mobivity is a marketing technology company that operates a performance marketplace, connecting brick-and-mortar brands to digital audiences, primarily within mobile casual games and vice versa. Our Connected Rewards platform redefines marketing value exchange by bridging in-person and digital environments and thereby building authentic and valuable relationships between businesses and their consumers in all possible channels. I'm pleased to report that Q3 2024 marked another period of significant progress for Mobivity's Connected Rewards platform. Most notably, we completed the divestiture of our legacy SMS marketing business, marking a pivotal moment in Mobivity's history. We are now a pure-play connected rewards company, allowing us to focus all our resources and attention on the massive addressable market for this high growth and high gross margin business. Some highlights from Q3 are the successful completion of our business transformation, resulting in Mobivity becoming a pure-play connected rewards company. Our audience reach has continued its strong growth trajectory, building on the momentum we established in previous quarters. We're seeing unprecedented strength in our pipeline and backlog, which gives us increasing confidence in our growth trajectory and achieving profitability in the next few months. Our Connected Rewards programs continue to deliver exceptional value, establishing themselves with some of the most effective channels for our partners, customer acquisition and engagement strategies. The performance metrics from our programs consistently exceed expectations, delivering strong ROI for both our brand and game publishing partners. We launched six new brands on our platform and reached about 13.6 million users with our programs. It's worth highlighting the scale of our business through the 2024 fiscal year. We've launched with marquee brands in the convenience store and quick-serve restaurant space. Year-to-date, we've reached over 51 million consumers with our programs, and we've achieved major technical milestones that will allow us to drastically grow the audience we reach. The completion of our SMS business divestiture represents the final step in our strategic transformation. The transaction provided cash at closing and will provide continued cash flow through an earn-out over the next two years. Our success continues to be driven by our proven formula. Mobivity's revenue is the product of our audience size, conversion rates and revenue per action. In Q3, we made substantial progress across all these key metrics, further validating our strategic direction. With our business now focused on Connected Rewards, we've been able to meaningfully streamline our cost structure. Revenues continue to grow, and we expect the pace of growth to increase materially through the next couple of months as we bring in new customers and complete necessary technical work to scale rapidly. Mobivity's focused approach on Connected Rewards allows us to dedicate all of our resources, innovation capabilities and management attention to scaling our Connected Rewards platform, and we're excited about the results and what we will achieve over the next few months. With that, I'll now hand the call over to Kim Carlson, our COO, for more details on our Q3 operational progress and outlook. Kim?
Kim Carlson: Thank you, Bryce. Mobivity's Connected Rewards platform continues to target a massive market of mobile user acquisition and retention, which annually spends over $40 billion. With our transition to a pure-play Connected Rewards company now complete, we are uniquely positioned to capture an expanding share of this market. Our growing pipeline and backlog are at historic highs, which we believe validates both our market approach and the value we deliver to our partners. The continued expansion of our audience reach is creating new opportunities for both our gaming and brand partners, fostering a network effect that we believe will drive sustained growth. What's particularly encouraging is the consistent performance of our programs. We're seeing strong validation that Connected Rewards is one of the most valuable channels for our partners, customer acquisition and engagement strategies, and provides value that our customers cannot get from other channels. Our focus remains on quick-serve restaurants and convenience stores, though we are now processing opportunities in other verticals like consumer packaged goods, desktop gaming and consumer discount apps. These verticals deliver fundamentally similar consumer dynamics with huge audiences. These new verticals are not necessary for us to achieve substantial growth and profitability, but are exciting levers to amplify the growth in our core verticals. With our streamlined focus on Connected Rewards, we can now accelerate our product innovation and market expansion efforts. The operational efficiency gains from this focused approach is already evident in our execution and market responsiveness. As we look ahead, our focus remains on scaling our Connected Rewards platform and breaking through some remaining technical milestones to capture the substantial growth that is in front of us. Our completed strategic transformation positions us well to capture an expanding share of the mobile user acquisition and retention market. We're more confident than ever in our future and are excited to share our progress in the coming calls. With that, I'll hand the call back to Bryce for his closing remarks.
Bryce Daniels: Thank you, Kim. In summary, Q3 was a transformative quarter for Mobivity. The completion of our SMS business divestiture, combined with the continued growth in our audience reach and record pipeline and backlog positions us as a pure-play connected rewards company with significant growth and profitability in sight. We're excited about our focused direction, and believe we are positioned well to create significant value for our shareholders. As always, we direct investors to our public filings for detailed financials. We recently filed an extension to file our 3Q financials due to our auditors need for extra time to complete the filing. Mobivity has worked diligently to complete the review on time and are frustrated by the delay. We expect the filing to be released early next week. I'll close the call with a couple of important points. Mobivity used to run the loyalty marketing business that was focused on a small addressable market and showed low gross margins. Connected Rewards is focused on a massive and active addressable market, with gross margins approaching 3x our prior business. As we said on this call, we're 100% focused on Connected Rewards today. The end of 2024 and the first few months of 2025 are an exciting time for our company. The next time we're scheduled to talk to you all is in the second quarter of 2025. And I'm excited about what we expect to achieve between now and then. In 2025, we see a clear path to Mobivity doing more revenue than it has ever done and our team is firing on all cylinders and managing every detail to make that happen. Thank you all for your continued support. Operator, please open the call for questions.
Operator: Ladies and gentlemen, we’ll now begin the question-and-answer session. [Operator Instructions] We have Jeff Porter from Porter Capital. Please go ahead.
Jeff Porter: Hey, guys. You mentioned you've got a growing backlog and a significant pipeline. Can you take me through the timing of the sale process to a major account? Is that a 1-month process, a three-month or six-month process? And what are the gating factors to getting deals closed? Because I'm assuming, you've had great ROI metrics to show people, which is why they're so interested.
Bryce Daniels: Yeah. Thanks very much for the question, Jeff. I'll answer at a high level, and then I'll pass to Kim for a little more detail. You're right that we've got a lot of data and really good metrics from the past 18 months of operating this business that really helped accelerate our sales cycle. I think one of the dynamics with brick-and-mortar brands is that it is a tough market to sell through if you don't have data. The fact that we have data now is showing that we're accelerating our kind of time from first meeting to a closed deal and a lot of cases, that's within a couple of weeks now, but it is still a couple of months sales cycle by and large. Your latter point about what are kind of the gating items from -- to getting these folks live once they sign up. We, at Mobivity, have a wide range of integrations with necessary technical partners on the brand side, folks that build the loyalty, build and maintain the loyalty platforms and also build and maintain brand apps. And it's the technical work once they've agreed to do the deal is just integrating with the different partners that our customers use. I'll pass the call to Kim -- the question to Kim to answer with any more specifics.
Kim Carlson: Yeah. Thanks, Bryce. Thanks, Jeff. I wouldn't add too much. I think Bryce said on the key points, more data on performance from the brand helps close the deals in the sales cycle because, obviously, having strong performance data case studies help these brands kind of get over the hump. And then on the integration side, Bryce mentioned, we publicly announced an integration with one of the leading loyalty technology platforms, which simply put allows the rewards that we're providing their consumers to be loaded instantaneously into the brand app. And so that is a fantastic feature. But moreover, for this question, these integration partners are providing referrals and helping open some doors, and then that integration is already complete. So the integration time is largely reduced.
Jeff Porter: Great. And just following that, could you give me an idea of what a typical business arrangement looks like between you, a brand partner and a video game company? How do we get paid in there? And what are our associated marginal costs? So I can understand sort of the economics of the model?
Bryce Daniels: Yeah. So there's three parts to a transaction on our Connected Rewards platform, right? It's the brand on one side. It's the consumer kind of at the bottom of the triangle and then it's a mobile game publisher on the other side. So we signed an agreement with a brick-and-mortar brand saying they give us a certain number of impressions every month. I would add there that one of the most exciting developments in our business is that we're able to sign these contracts in longer terms now because of the data that we have. So folks are saying, we'll deliver you x number of impressions per month for a year which is that term is exciting to us. We then place ads in all the relevant brand channels. SMS, e-mail, in-app placements, sometimes in-store signage, sometimes website placements, anywhere that a brand interacts with the customer, we place an ad, the ad will say something to the extent of download this mobile game, get a reward, add your brick-and-mortar brand, whether it's a free burger, a discount on a drink or discount on gas, something like that. The economic model is we get paid between $4 and $10 per install. So every time someone installs the game, Mobivity gets paid between $4 and $10. We reimbursed the brand for the cost of the reward. So if it's a free burger, we pay the brand for the cost of that burger. So it's a zero cost advertisement to the brand. And we clip, our take of that is the difference between what the game pays us and what the cost of reward is. Usually, that's 60% to 70%. And then our marginal costs from there in terms of technical and those types of things is very low, 1% to 2%. So Kim, if you have any details to fill in, I'll give the floor to you.
Kim Carlson: No, I think, again, you walk through it well.
Jeff Porter: So that's a onetime fee that we earn. And then is there some recurring portion to that? Is there things in-app experience that we participate in?
Bryce Daniels: Yeah. So we think of our business as reoccurring, it's not SaaS recurring revenue, right? But the brands deliver us a certain number of impressions every month. It's our job to make sure that the consumers interact with those or the impressions interact with our ads at a predictable rate, which we think we've gotten to a good place now, and they've agreed to do that over a long period of time. So although it's not true SaaS recurring revenue, we feel good that it is reoccurring kind of month-over-month revenue. Does that answer your question, Jeff?
Jeff Porter: Right. But -- so that still means that per customer, we're just earning a onetime when they download a certain game. But can that customer download several games?
Bryce Daniels: Yeah. The customer can download as many games as they see in front of them.
Jeff Porter: Do we get anything, let's say, we're dealing with a gas retail brand and the customer is getting a discount on gasoline. Do we participate at all in that every time they go to fill up and utilize that discount? Do we participate at all?
Bryce Daniels: We do not participate in that side of our business right now. I think one of the exciting ways that our business can evolve is participating on when the brands acquire users to their loyalty platform. So let's say, Jeff, for example, you interact with an ad for a fuel brand that you're not already a member of their loyalty program. You use our offer to go get gas, and sign up for the loyalty program. There's a scenario in the future where brands would potentially pay us for driving that person to sign up for their loyalty program.
Jeff Porter: Okay. That does it for me. Thanks.
Bryce Daniels: Thanks, Jeff.
Operator: There are no further questions at this time. Ladies and gentlemen, this concludes your conference call for today -- we have one more. Apologies. This is from Mark Patterson, private investor. Please go ahead.
Unidentified Analyst: Hey, there. Thanks, Bryce and Kim. Since I didn't see any financials come out, I was just wondering if I could ask a couple of questions that you might be able to answer before your Q comes out. You mentioned the SMS divestiture and receiving some cash upfront. I think you said maybe even some earn out over a period of time. Is there any more detail you can give to that? And maybe how much you're allocating maybe to debt on the balance sheet to kind of improve the balance sheet situation? And then the second question would be, I think, Bryce, you mentioned achieving profitability in the next few months, which is super exciting for this company. I know that the GAAP results have been fairly close to your adjusted EBITDA. So I'm thinking on a cash flow basis, are you talking about sometime in the first quarter or certainly by the second quarter -- well, not certainly, but most likely by the second quarter being in a positive cash flow position as you see the runway for yourself right now?
Bryce Daniels: Yeah. Thanks, Mark. I appreciate the question. The -- so the first question on the proceeds from the SMS sale. We've announced that about 6 weeks ago, probably when that came out. So I'm comfortable commenting on the specifics there. We received about $300,000 in cash at closing for the business, and then we get paid on an earnout basis for the next two years based on how those -- how the business performs in the buyer's hands. I think it's probably a little too early to say what the use of that cash would be given that we haven't -- we have a little aisle until that next leg of cash comes in. But suffice it to say, we're -- given the opportunities in front of us and given the balance sheet of the business, and we're all motivated to make the right decisions and balance growth and get in the capital structure in the right place. To your second question about when we'll achieve profitability, I think, look, we're all very excited about where we are in Mobivity. I think the pipeline and the backlog are real and give us some real kind of concrete feelings about where we'll be. The time line on that, I'm hesitant to put any specifics around it, but I think the first half of 2025 is probably the right program to point to.
Unidentified Analyst: Great. If I could just maybe follow up 1 thing on my first part of my question related to the SMS divestiture. I guess it's two parts. The new business, which is 100% of your business now, it sounds like the revenue story is a strong ramp-up story, which is super positive. I guess part of the race to achieve cash flow -- positive cash flow or profitability also has to do with having divested a lot of the expenses that were recurring with the SMS business?
Bryce Daniels: That's correct. Yeah. We've shed a lot of kind of the expenses and then also a good portion of our legacy technology that really wasn't relevant to the Connected Rewards business going forward, which that does a couple of things for us. One is it cuts costs, just hosting and maintenance cost of technology. And second, it makes us a lot more lean in how we innovate going forward because we don't have this mountain of technology from a prior business that we have to continue to maintain.
Unidentified Analyst: Great. Thanks a lot. Appreciate.
Bryce Daniels: Thanks, Mark.
Operator: There are no further questions at this time. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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