Mobivity Holdings Corp.
Q1 2021 Earnings Call Transcript

Published: 13 May 2021

[Operator:]

Greetings, and welcome to Mobivity’s First Quarter 2021 Earnings Call. At this time all participants are in listen-only mode. A question as your session will follow the formal presentation. . As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Brett Mass of Hayden IR. Please go ahead.

[Brett Mass:]

Thank you, operator. I'd like to welcome everyone to Mobivity’s first quarter 2021 earnings call. Posting the call today are Dennis Becker, Founder and Chairman Chief Executive Officer; Lisa Brennan, Chief Financial 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 are forward-looking statements which are subject to considerable risks and uncertainty. We caution you that such statements reflect management's best judgment based on factors currently known, and that the actual events or results could differ materially.

[Dennis Becker:]

Thanks, Brett. And I appreciate everyone on the phone for taking the time to join us on our call today. First, I'd like to congratulate our team at Mobivity for innovating and growing through the height of COVID. We dealt with some headwinds in the first quarter as our customers also persevered through continued closures and stay at home orders. And we supported our customers with creativity, innovation and support as they work through the financial uncertainty at the peak of the pandemic in January. Through these challenges, we first saw significant developments on the horizon. And we began ramping up our sales and marketing operations in preparation for what we predicted would be a significant increase in demand for our products and services. And we were right. Our sales pipeline has grown more than 500% in just the past few months. We predicted two key developments that we believe are certain to drive outperforming demand, growth for Mobivity’s digital loyalty and text message marketing solutions. First, a Supreme Court decision on April 1 has significantly reduced the legal risk and operating SMS marketing programs and expanded the addressable universe. Second, major moves by Apple and others to protect consumer’s privacy from third party advertisers increases the need to engage consumers directly and need perfectly served by our targeted opted and text messaging programs, where consumers subscribe for targeted promotions and offers versus having their privacy pirated by third party websites, apps and social networks.

[Lisa Brennan:]

Thanks, Dennis. I’d like to start off by addressing our cash position. We ended the first quarter with approximately $1 million in cash. And our accounts receivable was approximately $1.4 million, which we believe is sufficient to support our operations for the foreseeable future. Our decrease in cash was primarily due to slightly lower gross margins, along with lighter revenue in the quarter due to the peak of the pandemic. We also increased our sales and marketing investments during the first quarter to prepare for the expected increase in demand as Dennis described earlier. Our revenue for the first quarter of 2021 was $2.5 million, compared to $4.5 million in the first quarter of 2020, reflecting a decrease of 44% on a year over year basis. The decrease is primarily due to $1.3 million non-recurring ASC 606 revenue in the first quarter of 2020, along with lower customer usage revenues in the first quarter of 2021 as the pandemic affected the marketing budget of our largest customer. In turn, our gross profit decreased 54% to $1.4 million for the first quarter of 2021, compared to $3 million in the first quarter of 2020. Although please bear in mind that $1.2 million of revenue in the first quarter of 2020 was related to ASC 606 revenue treatment. Even the first quarter of 2020 was essentially prior to the pandemic, I would like to point out that on a sequential quarter basis, comparing the first quarter of 2021 to the fourth quarter of 2020, the revenue and gross profit declines were less dramatic.

[Dennis Becker:]

Thanks, Lisa. We're confident that the downturn in the restaurant industry is behind us. In February, restaurant sales were still almost 20% below pre pandemic levels. Yet in March, Famous Dave's Barbecue and Mobivity customer had same store sales skyrocket almost 44%. All indicators point to a strong rebound in the restaurant space, while heavy use of technology throughout the pandemic is leading the market through our solutions as they map out the new future of engaging consumers in a digital first world. Beyond the restaurant space, we're seeing accelerating progress in the convenience store market, with a growing list of prospects following our successful launch and rapid growth of SMS marketing for the world's second largest C store chain. We expect recurring revenues from this segment to grow well beyond seven figures through the year. Although we've had to endure some headwinds in our revenue performance over the past few quarters, we believe the combination of our resurging target market, changing consumer privacy dynamics, and the reduction in legal risk for SMS text messaging have created several paradigm shifting tailwinds propelling Mobivity towards another record year of growth. I continue to be amazed by our team's valiant efforts to serve and innovate for customers and markets most affected by the pandemic. It's truly energizing to see our customers finally emerge from a historic crisis poised for a strong rebound. And I've never been more optimistic for the future of Mobivity in the markets we serve. Thank you for tuning in and for your continued interest in Mobivity.

[Operator:]

Thank you. And our first question comes from Brad Gold with All Gold Consulting. Please proceed with your question.

[Unidentified Analyst:]

Dennis, hey, how are you?

[Dennis Becker:]

I'm good. Brad, how have you been?

[Unidentified Analyst:]

Pretty good. Thanks. I was just wondering whether you might be able to put a little meat on the bones and talk about rather than percentages, talk about the number of accounts that you're potentially having the pipeline, potential size of the accounts and some indication of how much time that you think it takes to turn these accounts around me from coming into the pipeline to whether you actually are going to be signing deals? And I guess the last question would be you say it's a record year of growth, can you expand on that a little bit more?

[Dennis Becker:]

Yeah, and I think the latter is related to the first part of your question. So, we have, no guarantees, but we have bigger sales pipeline than we've had before. I think one of the things that might be confusing about the first quarter, that's not obvious, I'd like to point out is that, our services are typically paid for out of the marketing budgets of these brands, particular franchise brands, like the subways of the world and whatnot. So, they usually form those budgets as a percentage of sales, that's usually done the year prior. So, in other words throughout, say, 2019, they're accumulating their marketing budget for execution in 2020. And so, we were able to defend against some of the initial impacts of the pandemic in the middle of 2020, because we were still being paid for out of budgets from 2019, arguably. So, then as those budgets waned, because sales were down for so many brands in the thick of the pandemic, you see a lag time kind of there in Q4 Q1 and so that impact our -- the performance of a number of customers. At the same time, February is when things started rebounding, and brands started formulating their plans to bounce back quickly. So, we've got right now about a dozen brands that are all six figure to seven figure ARR upside brands. We're seeing sales cycles I would use the example the major convenience store chain that we won in the fourth quarter. That's a seven-figure customer now, in terms of ARR, that was about a 90-day sales cycle. So, we think the sales cycles are going to contract. We think that with the new legislature -- the Supreme Court ruling, de-risking SMS text marketing, coupled with the clear and obvious benefits of digital engagement that were made throughout the pandemic, brands are going to move much more quickly.

[Unidentified Analyst:]

Okay, so that all sounds great. So, you're saying record your growth, you're talking about not number of clients, you're talking about revenue growth?

[Dennis Becker:]

Right, the majority of our revenue growth this year will come from new client acquisition. We did have a bit of a downturn in revenues from existing clients just because we accommodated decreasing their usage when budgets were tight, December through February. So, we expect that existing customer run rate to rebound. But, of course, that would just get us back to kind of par on what we did last year. Our goal this year is to continue the strong growth rate. Again, no guarantees. But what we do see, with just the market situation from the TCPA, Supreme Court ruling to the issues that digital advertising is having now that the 100 and some odd billion-dollar, digital advertising markets under threat with all of new privacy rules, that the markets really coming our way, our pipeline is accelerated in the last 60 days a lot faster than I've ever seen. It's still heavily slanted towards larger brands. And so, to your direct question about customer count, we're still talking in the, say, a couple dozen customer wins this year, with large ARR profiles being the current targets that are the dominant portion of our sales pipeline. But, of course, we expect that to expand as well kind of towards the end of the year. But in terms of getting done, achieving our goal for this year, which is to beat last year's performance, it's really about the couple of dozen brands that have all gotten into our pipeline over the last 60 days, seeing sales cycles 60 to 90 days, and sale to revenue timelines of 30 to 60 days there. So, if we can get that done, and we can win a reasonable proportion of that pipeline, we should be able to get to our goal.

[Unidentified Analyst:]

Okay, sounds good. Thank you.

[Dennis Becker:]

Appreciate it, Brad. Thanks.

[Operator:]

. And there are no further questions over the phone lines at this time. I'll now turn the call back to you.

[Dennis Becker:]

All right. Very good. I appreciate everyone joining us on our call today. Appreciate the questions and we're looking forward to a strong year here.

[Operator:]

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.