Verb Technology Company, Inc. (Nasdaq:
VERB) ("VERB" or the "Company"), the leader in interactive
video-based sales enablement applications, including shoppable
livestream, today reported financial and operating results for the
quarter ending June 30, 2022, and held an earnings conference call
at 5:30 p.m. ET to discuss these results. Prepared remarks of the
management team during the conference call are provided below.
Management Prepared RemarksVERB 2022
Second Quarter Financial Results Conference
CallMonday, August 15, 2022, 5:30 p.m.
ET
Company ParticipantsRory J. Cutaia, CEOSalman
Khan, CFO
Operator:
Good afternoon and welcome to the second quarter
2022 Financial Results Conference Call for Verb Technology Company,
Inc. At this time, all participants are in a listen-only mode.
Please be advised, the call is being recorded at the Company’s
request.
On our call today are Rory J. Cutaia, CEO, and
Salman Khan, CFO.
Before we begin, I’d like to remind everyone
that statements made during this conference call will include
forward-looking statements under the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995, which involve
risks and uncertainties that can cause actual results to differ
materially. Forward-looking statements speak only as of the date
they are made, except as required by law, as the underlying facts
and circumstances may change. Verb Technology Company disclaims any
obligations to update these forward-looking statements, as well as
those contained in the Company’s current and subsequent filings
with the SEC.
I would now like to turn the call over to Rory
J. Cutaia, CEO. Rory?
Rory J. Cutaia:
Thank you moderator, and thanks to everyone for
joining us today for our Q2 2022 financial results and business
update conference call.
I’d like to use our time together today to talk
a bit about MARKET, our livestream social shopping platform, and
provide some initial reactions and data points around Shopfest,
which was the 3-day livestream shopping festival we hosted a little
over 2 weeks ago that marked the hard launch of MARKET.live. And of
course I’ll provide insights and perhaps more color on the
information contained in our second quarter 10-Q we filed today
which reflects for the most part the results of our SaaS business
for the direct sales industry.
As to MARKET, let me start by saying that we are
planning a major – at least in my opinion – a major announcement
regarding MARKET within the next 6 weeks that will include a
comprehensive update. Accordingly, my comments here today won’t
include some of the bigger going forward initiatives, though I will
provide a lot of data points on attendance, engagement, vendor
experiences, and insights into how the platform performed.
We are advised that Shopfest was the largest
livestream shopping event ever attempted in the U.S. Shopfest
consisted of 63 livestream shows over 3 days, featuring over 55
retailers on multiple channels from multiple locations across the
country and around the world. We had livestreams from Brazil,
Australia, and perhaps other countries I’m not aware of. Of the 63
shows, our MARKET team produced only 18 from studios in New York
City and Los Angeles. The 45 other livestreams were produced and
hosted by the vendors themselves from their own remote locations
using little more than their laptops and mobile devices. When you
think about scalability, this is an important statistic. I’m aware
of at least one vendor that heard about MARKET on the day before
Shopfest started and went from awareness to onboarding and
participation in Shopfest, hosting one of the more popular
livestreams - in less than 24 hours.
So let me start with the KPI’s we focused our
team on going into Shopfest, what our objectives were, and how we
measured up against those.
First and foremost, we wanted to demonstrate the
platform itself under true commercial deployment. Specifically, we
wanted to demonstrate the quality, stability, reliability,
scalability, feature set, ease of use by both vendors and shoppers,
and the overall experience we wanted to create – in fact, to curate
for all MARKET participants – an experience that would be the
unique hallmark of anyone coming to MARKET.live.
As to the build and architecture of the
platform, I believe it was apparent to all participants that MARKET
is an extremely well-conceived and executed livestream shopping
platform on par with any of the world class social media,
ecommerce, video and content delivery platforms in the world, and
in some cases – even better.
Any doubts about our ability to deliver an
extraordinary and very valuable piece of technology for our
shareholders should now be summarily erased. Everything we’ve done
up through the date of Shopfest, and everything we learned from our
trials and tribulations over the past several years, was necessary
in order to produce MARKET. We could have the best and biggest
vendors and the most impressive go-to-market growth strategies
(which I believe we do) but without a world class platform, we’d
have nothing.
By no means do I suggest that we’ve accomplished
our goals – that we’re done and walking around high-fiving each
other in the office. Quite the contrary. Now it begins. While our
success in delivering the platform has definitely injected a new,
contagious passion, energy and enthusiasm among everyone on our
team as well as among our partners, we recognize the opportunity
for value creation that MARKET represents and unlocking that value
is our number one objective - one on which we are laser-focused
individually and collectively every single day.
What we had not shared until now was how much we
had riding on the successful performance of the platform during
Shopfest and the reasons we took our time in the planning, testing,
and execution of Shopfest. And while that was a source of
frustration and ridicule from those who wanted to see it launched
commercially the day the development was completed - which I
completely understand - we knew we had to execute our plan the best
way we knew how.
When I talk about what we had riding on the
successful performance of Shopfest, I’m referring to potential
partnerships and business opportunities for meaningful growth and
scale that were all contingent on the successful performance of the
platform during Shopfest. I’ll share more on this in the MARKET
update I’ll provide in the coming weeks.
As to the overall experience we wanted to curate
for MARKET participants, it is best described as making it feel
personal – certainly interactive and social - but yet an atmosphere
where each shopper became part of a group of friends, immersed in a
conversation not only with the host – but also with each other. An
environment where no one feels like they are being sold – one where
they want to buy what their trusted host and friend has available
for purchase. Among the many things we learned was that people want
to watch and buy from a person – not a brand.
They will mark their calendars to join the group
of digital friends they form relationships with to chat and shop
every week. Those hosts that attract and encourage that environment
in their presentations outsell those that don’t by a long shot. We
saw the beginnings of these relationship forming activities during
Shopfest as we saw people in the chat recognizing one another from
previous Shopfest streams and engaging with one another on a more
personal level. Think of it like the massive growth and popularity
of Facebook Groups – but with shoppable video. That’s why we
designed and built MARKET as a destination social shopping platform
and not just a one-off livestream event plug-in for your website.
This is what makes it unique and why we believe it will succeed
where others will fail.
Our second, but equally important KPI was using
Shopfest as a vehicle to create awareness for the platform. The
reason for this is obvious – the success of the platform is tied
directly to the number of livestream events going on at any given
time where these relationships can be formed and fostered. It’s a
numbers game. The more people we have with stores on the platform,
bringing their own friends, fans and followers, the greater the
number of livestreams there will be. Revenue, of course will
follow. Our focus, at least initially, is not on the revenue itself
but on the environment and circumstances from which the revenue
will flow.
To do this we demonstrated how the platform
could accommodate multiple channels of livestreams simultaneously,
allowing viewers to choose the event and associated groups they
wanted to be part of in that moment. As there are more and more
simultaneous livestreams happening on the platform, this will
become a much more compelling and powerful draw for the platform.
We also built the platform so that it could broadcast livestreams
simultaneously in real time over multiple popular social media
platforms exposing MARKET to those audiences and drawing them into
the MARKET experience.
Here's some of the data we’ve compiled so far
about attendance on the MARKET.live feed during the 3 days of
Shopfest. I want to note that some of this data is still being
scrubbed and cross-referenced so it remains subject to
adjustment.
-
Total views on Market.live were 45,161
-
Total unique views on Market.live were 15,444 (these numbers
include those who viewed and shopped storefronts but did not watch
a livestream)
-
Total attendance for livestreams on Market.live during Shopfest was
8,511 (this number does NOT include attendees who viewed from
Facebook and other social platforms)
-
Total post-Shopfest video on demand views from storefronts on
Market.live as of almost a week ago, last Tuesday, August 9, was
3,408 – I imagine there’s probably quite a bit more since
then.
Here’s some of the data we’ve compiled so far
from the Facebook feed during the 3-days of Shopfest:
-
70,194 views from Facebook during the festival – I want to point
out that this is Facebook only and Facebook’s metrics that they use
for their algorithms. They count a view as anything over 3
seconds.
-
Notably, if we include the views after Shopfest, up to last week,
we see those numbers jump to 1,219,672. Again, I assume those
numbers are much greater now.
-
All of the numbers I just provided to you from the Facebook feed
are ONLY for the 18 shows we produced. This does NOT include the
data from the other 45 livestream shows.
-
We had 28,014 RSVPs for Shopfest, almost half of whom opted in for
text and email updates for all MARKET livestream events.
I don’t yet have confirmed engagement data
during each stream, but those who watched every stream and the
attendee counters for each stated that the vast majority of viewers
remained engaged for more than 70% of the shows’ duration and a
significant number stayed on till the end of the livestream.
While this data is still being tested and
confirmed, it looks like gross merchandise value generated during
the event will come in somewhere between $20,000 and $30,000 and
the average order size appears to be just over $80. Sales in the
stores are still continuing.
There is a ton of data that has been and
continues to be generated and we’ll be working through the best
ways to mine and analyze that data in order to calculate and report
ratios and identify trends.
Without exception, every vendor reported that
they truly enjoyed their experience with the platform and pledged
to continue their presence and participation on MARKET and most
have committed to weekly shows.
Three days ago, on Friday, we implemented a new
streamlined onboarding process that will help get vendors through
the process much more rapidly and reduce the backlog. As you will
learn in the coming weeks in my comprehensive MARKET update, this
is an important well-timed improvement.
We currently have more than 300 vendors
committed to MARKET, approximately half of which have open and
active stores and appear in the Market.live sellers list. Of the
balance that have yet to complete the onboarding process, as they
get close to completing the process we place their names in the
sellers list with the notation “coming soon”.
The onboarding process is not in any way
difficult or time consuming. However, some of the larger vendors
have multiple departments responsible for providing certain of the
information needed to complete the process. For example, the people
responsible for providing logos and designs are different than the
people responsible for uploading inventory SKUs, who are in turn
are different than the people who have access to, and are
responsible for providing banking and other financial
information.
We have a team of people who are dedicated to
helping vendors through the onboarding process and in many
instances completing it for them. I get a daily report of the
status of vendors who are lagging through the process and rest
assured we stay on top of all of them to move them through the
process as rapidly as we can. As I said before, this is a numbers
game and we appreciate how important it is to get more vendors
through the process and up and running hosting livestreams on the
platform.
Ok so let me turn to our SaaS business report.
We are, and remain the undisputed leading provider of sales
enablement applications for the direct sales industry, displacing
previous market leaders and would-be competitors, just as we said
we would when we entered the space in 2019. Beginning at the end of
the second quarter of this year, we expanded our suite of sales
enablement tools with the release of the new, innovative sales
applications I told you we had in development in prior conference
calls. These products, including verbLIVE 2.0 and Pulse, will not
only enhance our leadership position in the direct sales space, but
put us that much further ahead of the handful of would-be verb
competitors.
I’m also very happy to announce that we have
begun onboarding one of our direct sales clients to our MARKET
platform. In no way does this replace any of the sales tools to
which this client currently subscribes. Their use of MARKET
represents an entirely unique and complimentary enhancement to
their business and is perfectly suited to the direct sales industry
generally. Post launch, I fully expect more of our direct sales
clients will seek to adopt MARKET as an enhancement to their
business.
Consistent with the guidance we provided
previously, we expect to see the increased recurring SaaS revenue
from these new products in the 3rd and 4th quarter of this year and
beyond. As I have stated in our previous conference calls, our
focus has been on building the very high margin SaaS recurring
revenue component of our business and reducing the non-digital,
non-recurring very low margin legacy component of our business.
As we began the exit from the legacy business
which represented a large portion of our total revenue, investors
that focused solely on the company’s top line revenue
misinterpreted the growth the company was actually experiencing in
our SaaS business. I once again urge you to focus on the SaaS
revenue component of our business and not on the revenue from a
business line we have repeatedly stated we are exiting. For
example, just last year, in Q2 of 2021, the legacy non-digital
revenue represented 24% of our total revenue. In Q1 of this year it
represented 20% of our total revenue and in Q2 of this year it
represents just 10% of our total revenue. As our digital revenue
continues to grow, the legacy business low margin revenue becomes a
smaller and smaller component of overall revenue.
The release of these products also marked the
beginning of the next phase of major operational cost reductions
we’ve implemented as first reported in Q4 of 2021 and that
continued in Q2 of this year.
You might recall that R&D expense, which had
been the biggest component of our operating expense, was down 22%
in Q4 over Q3 2021. We then reported a substantially greater and
additional reduction in R&D expense of 42% in Q1 2022 over Q4
2021. And for the 2nd quarter of this year we’re reporting an
additional reduction of 13% from Q1. Specifically, R&D expenses
for Q2 are $1.4M, down from $3.2M in the same period last year,
representing a 57% reduction.
The additional revenue from the newly introduced
sales enablement applications, and the revenue we expect to
generate from our new verticals, including MARKET, together with a
new pricing model we’re about to introduce to our direct sales
clients that will better align our interests with theirs creating a
true win/win, coupled with these continuing cost reductions, give
us confidence in our ability to achieve positive EBITDA and reduce
our reliance on the capital markets.
I’m going to leave further discussion of our
SaaS business results to our CFO Salman Khan so as not to take
additional time on this call. Let me briefly touch on our new
professional sports unit vertical. As I discussed in our previous
earnings calls, in Q4 2021, we launched our professional sports
unit built on our verbTEAMS sales enablement platform. We started
with the announcement of the Pittsburgh Penguins in Q4 2021, and
since then, we’ve added many new professional sports teams to the
platform and built an impressive sales pipeline of professional
sports teams both in the U.S. and in other countries.
In addition to the Pittsburgh Penguins, we
announced the Florida Panthers, the Phoenix Suns, and the Detroit
Pistons, and we expect many more announcements. It is my continuing
expectation that some of these teams will adopt MARKET as part of
their fan engagement strategies.
I’ll turn it over to our CFO Salman Khan for
more detail around our reported financial performance.
Salman?
Salman Khan:
Thank you, Rory, and good afternoon, everyone.
I’d like to review our financial performance as reported in our
Form 10-Q filed today, August 15, for the second quarter ended June
30, 2022. I may reiterate and/or provide more color around some of
the data points Rory shared with you.
The following compares the Company’s results of
operations for the second quarter of 2022 with the second quarter
of 2021.
-
Total digital revenue was $2.2 million, an
increase of 19% from the same period last year
-
SaaS recurring revenue, a component of Total
digital revenue, was $2.0 million, an increase of 23% over the same
period last year.
-
Total Digital Revenue as a percentage of
Total revenue was 90%, compared with 76% for the same
period last year.
-
SaaS recurring subscription revenue as a percentage of
Total revenue was 82%, compared with 67% for the same
period last year.
-
Total revenue was $2.4 million, up 0.3% from the
same period last year
-
Cost of revenue was $0.8 million, down 25% from
the same period last year, reflecting planned cost reductions and a
continuing shift towards the Company’s digital business and away
from the lower margin non-digital business.
- Gross margin was
65% compared with 53% for the same period last year, reflecting the
systematic transition of our low margin non-Digital business and
increase in our Digital revenue. Our Digital gross margin was 72%
compared to 69% for the same period last year.
- Capitalized software
development cost was $6.5 million on June 30, 2022. I want
to remind everyone that following the successful completion and
launch of MARKET.live, we expect to amortize the capitalized
software development cost as a non-cash charge to cost of revenue
over the 36-month period from third quarter of 2022 onward.
-
Research and development expenses
were $1.4 million, as compared to $3.2 million for the same period
last year, reflecting a 57% decrease due to planned cost
reductions. R&D expenses were down 13% over the first quarter
of 2022.
-
General and administrative expenses were $6.6
million as compared to $6.5 million for the same period last year.
G&A expenses were down 7% from the first quarter of 2022
primarily due to the implementation of planned cost reductions
offset by planned increases in labor costs due to the launch of
MARKET.
-
Modified EBITDA1 improved by $2.2
million, or 30%, when compared with the same period last year.
EBITDA is a non-GAAP measure and I refer you to our press release
distributed today for more information and greater specificity
around our Modified EBITDA analysis.
Now, let me share the financial results for the six months ended
June 30, 2022 in comparison with the same period in 2021.
-
Total SaaS recurring subscription revenue was $4.0
million, an increase of 30% from the same period last year.
-
Total digital revenue was $4.3 million, an
increase of 19% from the same period last year.
-
Total revenue was $5.1 million, up 3.5% from the
same period last year, reflecting strong SaaS recurring revenue
growth offset by the Company’s strategic decision to continue to
wind down its lower margin non-digital business.
-
Cost of revenue was $1.8 million, down 23% from
the same period last year, reflecting planned cost reductions and a
shift towards the Company’s digital business and away from the
lower margin non-digital business.
-
Research and development expenses
were $3.0 million, as compared to $6.1 million for the same period
last year, reflecting a 51% decrease due to planned cost
reductions.
-
General and administrative expenses were $13.6
million, a decrease of 2% from the same period last year primarily
due to the implementation of planned cost reductions offset by
planned increases in labor costs due to the launch of
MARKET.
-
Modified EBITDA1 improved by $3.2
million, or 23%, when compared with the same period last year. Once
again, EBITDA is a non-GAAP measurement and I refer you to our
press release distributed today for more information and greater
specificity around our Modified EBITDA analysis.
-
Cash totaled $5.5 million as of June 30, 2022,
compared with $0.9 million on December 31, 2021. In April 2022, the
Company completed a registered direct offering with institutional
investors, which resulted in gross proceeds of $11.0 million.
-
Subsequent to quarter end, we repaid in full all advances
on future receipts, reducing current debt service
payments and cash burn by up to $1.5 million per
quarter.
I’d now like to turn the call back over to the
Operator for Q&A.
1 Management considers our core operating
performance to be that which our managers can affect in any
particular period through their management of the resources that
affect our underlying revenue and profit generating operations that
period. Non-GAAP adjustments to our results prepared in accordance
with generally accepted accounting principles (“GAAP”) are itemized
below. You are encouraged to evaluate these adjustments and the
reasons we consider them appropriate for supplemental analysis. In
evaluating Modified EBITDA, you should be aware that in the future
we may incur expenses that are the same as or similar to some of
the adjustments in this presentation. Our presentation of Modified
EBITDA should not be construed as an inference that our future
results will be unaffected by unusual or non-recurring items. In
addition to our results under GAAP, we present Modified EBITDA as a
supplemental measure of our performance. However, Modified EBITDA
is not a recognized measurement under GAAP and should not be
considered as an alternative to net income, income from operations,
or any other performance measure derived in accordance with GAAP or
as an alternative to cash flow from operating activities as a
measure of liquidity. We define Modified EBITDA as net income
(loss), plus interest expense, depreciation and amortization,
share-based compensation, financing costs and changes in fair value
of derivative liability.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,374 |
) |
|
$ |
(11,812 |
) |
|
$ |
(13,363 |
) |
|
$ |
(20,157 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
395 |
|
|
|
400 |
|
|
|
804 |
|
|
|
814 |
|
Share-based compensation |
|
|
1,317 |
|
|
|
1,264 |
|
|
|
2,618 |
|
|
|
3,666 |
|
Interest expense |
|
|
642 |
|
|
|
596 |
|
|
|
1,398 |
|
|
|
1,104 |
|
Change in fair value of
derivative liability |
|
|
(1,024 |
) |
|
|
2,445 |
|
|
|
(2,162 |
) |
|
|
1,945 |
|
Other (income)/ expense |
|
|
(19 |
) |
|
|
(20 |
) |
|
|
45 |
|
|
|
(74 |
) |
Debt extinguishment, net |
|
|
- |
|
|
|
(91 |
) |
|
|
- |
|
|
|
(1,030 |
) |
Other non-recurring |
|
|
- |
|
|
|
- |
|
|
|
126 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total EBITDA adjustments |
|
|
1,311 |
|
|
|
4,594 |
|
|
|
2,829 |
|
|
|
6,425 |
|
Modified
EBITDA |
|
$ |
(5,063 |
) |
|
$ |
(7,218 |
) |
|
$ |
(10,534 |
) |
|
$ |
(13,732 |
) |
About VERBVerb Technology
Company, Inc. (Nasdaq: VERB), the market leader in interactive
video-based sales applications, transforms how businesses attract
and engage customers. The Company’s Software-as-a-Service, or SaaS,
platform is based on its proprietary interactive video technology,
and is comprised of a suite of sales enablement business software
products offered on a subscription basis. Its software applications
are used by hundreds of thousands of people in over 100 countries
and in more than 48 languages. VERB’s clients include large
sales-based enterprises as well as small business sales teams,
including the sales and marketing departments of professional
sports teams. MARKET.live is VERB’s multi-vendor, multi-presenter,
livestream social shopping platform at the forefront of the
convergence of ecommerce and entertainment. With approximately 150
employees and contractors, the Company is headquartered in Lehi,
Utah, and also maintains offices in Newport Beach, California.
For more information, please visit:
verb.tech.
Follow VERB here:VERB on
Facebook: facebook.com/VerbTechCoVERB on
Twitter: twitter.com/VerbTech_CoVERB on
LinkedIn: linkedin.com/company/verb-techVERB on
YouTube: youtube.com/channel/UC0eCb_fwQlwEG3ywHDJ4_KQMARKET –
our livestream social shopping platform: market.liveSign up for
E-mail Alerts here: ir.verb.tech/news-events/email-alerts
FORWARD-LOOKING STATEMENTSThis
communication contains “forward-looking statements” as that term is
defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve risks and uncertainties and
include, without limitation, any statement that may predict,
forecast, indicate or imply future results, performance or
achievements, and may contain words such as “anticipate,” “expect,”
“project,” “plan,” or words or phrases with similar meaning.
Forward-looking statements contained in this press release relate
to statements regarding the Company's progress towards achieving
its strategic objectives. Forward-looking statements are based on
current expectations, forecasts and assumptions that involve risks
and uncertainties, including, but not limited to (i) the COVID-19
pandemic and related public health measures on our business,
customers, markets and the worldwide economy; (ii) our plans to
attract new customers, retain existing customers and increase our
annual revenue; (iii) the development and delivery of new products,
including verbLIVE and MARKET; (iv) our plans and expectations
regarding software-as-a-service offerings; (v) our ability to
execute on, integrate, and realize the benefits of any
acquisitions; (vi) fluctuations in our quarterly results of
operations and other operating measures; (vii) increases in
competition; and (viii) general economic, market and business
conditions. If any of these risks or uncertainties materialize, or
if any of our assumptions prove incorrect, our actual results could
differ materially from the results expressed or implied by these
forward-looking statements. For additional information regarding
the risks and uncertainties that may cause actual results to differ
materially from those expressed in any forward-looking statement,
our investors are referred to our filings with the Securities and
Exchange Commission, including our Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q. All forward-looking statements in
this press release are based on information available to us as of
the date hereof, and we do not assume any obligation to update the
forward-looking statements provided to reflect events that occur or
circumstances that exist after the date on which they were made,
except as required by law.
Investor Relations
Contact:888.504.9929investors@verb.techMedia
Contact:855.250.2300,
ext.107info@verb.tech
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