Brand Engagement Network Inc. (BNAI)·Q3 2024 Earnings Summary

Executive Summary

• BNAI posted minimal revenue and a wider loss: Q3 revenue was $0.05M with net loss of $(5.82)M, versus $0 in revenue and $(2.58)M net loss a year ago; EPS was $(0.16) vs $(0.12) YoY, reflecting higher public-company costs and amortization as developed technology went into service .
• Liquidity is tight and a going-concern risk exists: cash was $0.073M at quarter-end, with management citing substantial doubt about continuing as a going concern without additional financing; BNAI put a $50M SEPA in place and issued a ~$1.67M OID promissory note post-quarter to Yorkville to bridge near-term needs .
• Operationally, management highlighted expanding pilots/POCs and cost discipline, citing a 24% sequential operating expense reduction and ~$1.5M sequential operating profit improvement, though absolute losses remain large .
• Strategic catalysts: announced an agreement to acquire Cataneo GmbH for $19.5M (cash/stock) to extend into media ad-tech; expected closing was targeted for Q4 2024, contingent on financing and approvals . Appointment of Walid Khiari as CFO/COO adds capital markets and M&A expertise .

What Went Well and What Went Wrong

• What Went Well

  • Partnerships and vertical traction: integration with Cox Automotive’s Dealer.com; post-quarter, partnership with KangarooHealth for remote patient monitoring; narrative emphasized secure closed AI positioning and vertical momentum in healthcare and automotive .
  • Sequential discipline: management cited a 24% sequential operating expense reduction and ~$1.5M operating profit improvement QoQ, and better cash from operations sequentially, reflecting tightened cost controls .
  • Strategic M&A: Agreement to acquire Cataneo (profitable media technology platform with >€5B annual media spend flowing through its Mydas platform and >1,000 media brands) to expand addressable market and cross-sell AI assistants .
  • Quote: “We…are at the forefront of…secure closed AI platform…designed with privacy and trust at their core” — CEO Paul Chang .

• What Went Wrong

  • Minimal revenue and widening losses: Q3 revenue $0.05M; net loss $(5.82)M vs $(2.58)M YoY; EPS $(0.16) vs $(0.12), as public company costs and D&A rose materially .
  • Liquidity stress and going-concern: cash $0.073M at 9/30; management disclosed substantial doubt about the ability to continue as a going concern without additional capital .
  • Financing frictions: delays from certain investors under May/August private placements (aggregate past-due ~$0.96M and ~$1.25M, respectively, as disclosed) increase execution risk and near-term dilution reliance .
  • Market-related non-cash headwind: $(0.63)M change in fair value of warrant liabilities in Q3, widening the loss .

Financial Results

P&L and per-share (YoY comparison)

Balance sheet/liquidity (period-end)

KPIs and segments

• Segments: BNAI manages the business as one operating segment; no segment reporting is provided .
• KPIs: Management emphasized pilot/POC expansion rather than quantified operational KPIs; revenue recognized to date from POCs and revenue sharing remains de minimis ($0.10M YTD) - .

Notes

• Drivers of opex/d&A: YoY increases reflect higher public company costs, professional fees, personnel (incl. one-time business combination bonuses), and amortization of developed technology placed into service in Q2 2024 .

Guidance Changes

BNAI did not issue formal numerical guidance. Management focused on converting pilots to revenue, improving liquidity access, and executing on acquisition and financing plans.

Earnings Call Themes & Trends

Management Commentary

• Strategic posture: “We are already at the forefront of…secure closed AI platform that gives businesses control and visibility over their data…designed with privacy and trust at their core.” — CEO Paul Chang .
• Execution focus: “Q3 featured building momentum…productionized our AI assistants and expanded customer partnerships in POCs…For the remainder of 2024 and ’25, our focus will continue to be on performance, execution and converting pilot programs into revenue and enhanced liquidity.” — CFO Bill Williams .
• Automotive progress: “Integration with Cox Automotive’s Dealer.com platform was a significant milestone…human-like digital assistance across multiple touch points…” — CEO Paul Chang .
• M&A rationale: “The $19.5 million [Cataneo] transaction…will expand our reach in the $45 billion global media technology market…supporting over EUR 5 billion in annual media spending…” — CEO Paul Chang .

Q&A Highlights

• Cataneo acquisition fit/timing: Management has known Cataneo ~1 year; sees interactive advertising opportunity leveraging Cataneo’s Mydas platform (>5,000 users, >1,000 media brands), integrating with BEN’s scalable platform; targeted Q4 close pending financing/approvals .
• Pipeline/POCs: MedAdvisor and other pilots progressing; expanding to large pharmacy networks and pharma customers, updating use cases to fit customer needs .
• Revenue composition: “So far, all of our revenue is either SaaS or subscription revenue to our AI platform…paid…by our customers deploying our pilot solutions.” — CFO .

Estimates Context

• Wall Street consensus (S&P Global) was unavailable via our estimates tool at the time of analysis; as a result, we cannot quantify beats/misses versus consensus for revenue or EPS this quarter. Management did not provide formal guidance ranges for comparison .

Key Takeaways for Investors

• Very early revenue ramp: Q3 revenue remained de minimis while losses widened YoY; the investment debate hinges on converting pilots to paying production deployments in 2025+ .
• Liquidity/dilution overhang: Substantial going-concern risk with $0.073M quarter-end cash; reliance on the $50M SEPA and a new ~$1.67M Yorkville note underscores near-term financing needs and potential dilution .
• Sequential cost control is encouraging but insufficient alone: reported 24% opex run-rate reduction and ~$1.5M QoQ operating profit improvement, yet the absolute operating loss remains significant .
• M&A could broaden TAM and add more mature revenue streams: Cataneo’s profitable media-tech footprint (>€5B spend on platform) offers cross-sell and integration upside if the deal closes and integration is executed effectively .
• Execution checkpoints for near-term trading: (1) Closing and financing of Cataneo; (2) evidence of pilots converting to paid production (SaaS) across automotive/healthcare; (3) sustained sequential opex containment; (4) incremental capital raises and terms .
• Governance/bench strength: New CFO/COO with tech investment banking background may aid capital raising and M&A integration—timely given financing dependency .
• Risk skew remains high: warrant liability volatility, funding delays from prior private placements, and going-concern narrative keep downside risk elevated until revenue traction and financing visibility improve -.