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MH

MOBIVITY HOLDINGS CORP. (MFON)·Q2 2023 Earnings Summary

Executive Summary

  • Q2 2023 revenue was $1.86M, essentially flat year-over-year (-0.3%), while gross margin fell 930 bps to 26.3%; operating expenses rose 2.7% YoY and net loss widened to $2.27M. Adjusted EBITDA loss increased to ($1.76M) versus ($1.15M) in Q2 2022 .
  • Management accelerated the pivot to Connected Rewards, added senior leaders across engineering, product, brand and strategy, and highlighted contracts with a major casual game publisher and an international restaurant brand; the call also disclosed an active CEO search to lead the next phase of the transformation .
  • Cash declined to $0.53M as of June 30 (from $2.58M at March 31 and $0.43M at December 31, 2022) amid continued operating losses; the balance sheet remains highly leveraged with related-party notes at 15% interest and significant current liabilities, underscoring liquidity risk .
  • No quantitative guidance was provided; management’s qualitative target is to “double our revenue run rate” as Connected Rewards scales through 2H 2023 .
  • Stock reaction catalysts: leadership transition (CEO search), new customer signings, and narrative shift to higher unit economics from Connected Rewards (bounties of $2.50–$15 vs. sub-penny SMS fees) .

What Went Well and What Went Wrong

What Went Well

  • Signed new contracts: major mobile casual game publisher (in-game rewarded play) and an international restaurant brand (on-location user acquisition); Connected Rewards with a global convenience store drove thousands of game downloads and loyalty subscribers .
  • Strengthened leadership team with experienced hires in finance (CFO), engineering, product, brand strategy, and restaurant strategy to accelerate Connected Rewards adoption .
  • Strategic message: “We are laying the groundwork to accelerate adoption… and ignite long-term growth,” and the COO reiterated confidence in doubling the revenue run rate, emphasizing higher profitability of Connected Rewards versus legacy SMS .

What Went Wrong

  • Gross margin compressed to 26.3% from 35.6% YoY and from ~43% in Q1 2023; adjusted EBITDA loss widened to ($1.76M) vs ($1.15M) in Q2 2022 .
  • Net loss increased to $2.27M (EPS -$0.03), with operating expenses up YoY (to $2.52M), despite efforts to transition to higher-margin activities .
  • Liquidity tightened: cash fell to $0.53M by quarter-end; prior filings highlighted substantial doubt about going concern absent additional capital, with high-cost (15%) related-party debt and current liabilities outpacing current assets .

Financial Results

Core P&L and Cash Metrics

MetricQ4 2022Q1 2023Q2 2023
Revenue ($USD Millions)$1.75 $1.88 $1.86
Gross Margin (%)34% 43% 26.3%
Operating Expenses ($USD Millions)N/A$3.03 $2.52
Loss from Operations ($USD Millions)N/A($2.22) ($2.03)
Net Loss ($USD Millions)N/A($2.48) ($2.27)
Diluted EPS ($USD)N/A($0.04) ($0.03)
Adjusted EBITDA ($USD Millions)N/AN/A($1.76)
Cash and Equivalents ($USD Millions)$0.43 (Dec-31-22) $2.58 $0.53

Q2 YoY and Sequential Comparison (Revenue, EPS, Margin)

MetricQ2 2022Q1 2023Q2 2023
Revenue ($USD Millions)$1.87 $1.88 $1.86
Diluted EPS ($USD)($0.03) ($0.04) ($0.03)
Gross Margin (%)35.6% 43% 26.3%

Segment Breakdown

SegmentQ2 2023 Revenue ($USD)
Company does not report segment revenuesN/A (no segment disclosure in 8-K/10-Q)

KPIs (Operational)

KPIQ4 2022Q1 2023Q2 2023
Daily game installs (growth vs Jan)N/A+900% since January N/A
Brands on Connected RewardsIncreased from 4 to 14 N/AN/A
Connected Rewards cross-promotion impressions~2M to >5M N/AN/A
ROAS/Publisher behaviorQuadrupled publishers; budgets doubling Rebuys month-over-month Positive ROAS narrative

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue run rate (qualitative)2H 2023None providedManagement aims to “double our revenue run rate” as Connected Rewards scales Raised (qualitative)

Note: No quantitative guidance ranges provided in Q2 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2022)Previous Mentions (Q1 2023)Current Period (Q2 2023)Trend
Connected Rewards strategyPivot underway; publishers x4; brands 4→14; higher unit economics ($2.50–$15/txn) Rapid acceleration; daily installs +900%; budgets doubling; focus on ROAS Expanded use cases: UA, in‑game achievements, on‑prem; target to double revenue run rate Scaling; increased confidence
Privacy/IDFA headwindsMarket need for new channels due to Apple changes SMS permissioned network helps reach iOS users; CAC pressure elsewhere Reiterated positioning advantage via permissioned audiences Structural tailwind to CR
CompetitionUnique value vs offer walls and programmatic; brand rewards differentiated Few/no direct competitors; focus on casual gaming + QSR/C‑store Continued emphasis on differentiation Advantage maintained
Leadership & organizationAdded CRO; building gaming BD capability Promoted Kim Carlson to COO; scaling ops CEO search announced; multiple senior hires Leadership transition; deeper bench
Brand outcomesSubsidized discounts; “discount without discount” economics Zero‑media acquisition via partner-funded programs; 3–4x volume vs traditional ads Case examples (global convenience brand activation) Validated use cases

Management Commentary

  • “With the right people and the continued advancement of Connected Rewards, we are laying the groundwork to accelerate adoption of our offerings and ignite long-term growth.” — Tom Akin, Chairman .
  • “We remain committed to further developing Connected Rewards to ignite growth and double our revenue run rate… Each of these business lines is many times more profitable than our legacy text messaging business.” — Kim Carlson, COO .
  • “Demand is robust, and our pipeline and addressable market continues to grow… a formal CEO search is underway for an industry leader.” — Tom Akin .
  • “Signed contract with major mobile casual game publisher… deal with international restaurant brand… [and] Connected Rewards program… drove thousands of game downloads and acquired thousands of digital loyalty subscribers.” — Company press release .

Q&A Highlights

  • Q2 call did not include substantive Q&A; management referred listeners to the press release and 10‑Q for financials .
  • Reference themes from Q1 Q&A (for continuity):
    • Sustainability of growth and ROAS: Publishers increased budgets as Connected Rewards delivered profitable players; matching QSR/C‑store consumers to game titles is key .
    • Brand expansion and verticals: Zero‑media acquisition programs lowered CAC for brands; potential expansion to adjacent verticals (fuel, personal care) while staying focused on casual gaming + QSR/C‑store .
    • Competitive landscape: Few/no direct competitors offering real-world brand rewards integrated in-game; differentiation vs offer walls/gift cards .
    • Data leverage: Building first-party, permissioned datasets on game preferences to improve conversion, retention, and monetization via performance marketing .
    • IDFA/privacy impacts: Apple’s opt-in tracking reduced legacy targeting efficacy; CR’s permissioned brand audiences help find quality iOS users at better CAC .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2023 EPS and revenue was unavailable at time of query; comparison to estimates cannot be provided due to API request limits and likely limited coverage for OTCQB MFON [GetEstimates error].
  • In absence of consensus, investors should anchor on reported actuals and management’s qualitative trajectory (aim to double revenue run rate) .

Key Takeaways for Investors

  • The pivot to Connected Rewards continues, with new customer wins and a broadened product set (UA, in‑game achievements, on‑prem) — a narrative catalyst supported by higher unit economics (bounties of $2.50–$15 vs. sub-penny SMS fees) .
  • Despite strategic progress, Q2 fundamentals deteriorated: margin compression (26.3%), wider adjusted EBITDA loss, and net loss of $2.27M; investors should watch execution on profitability as CR scales .
  • Liquidity risk is elevated: cash fell to $0.53M at quarter-end; filings detailed substantial doubt about going concern absent additional capital, and debt carries 15% interest with equity‑settled interest features — monitor financing actions and working capital .
  • Leadership transition (CEO search) and deepening management bench could accelerate partnerships and commercialization; organizational moves are a near‑term catalyst to validate the growth narrative .
  • Near-term trading setup hinges on tangible conversion of pipeline to revenue and margin recovery; qualitative guidance (“double revenue run rate”) needs to show up in sequential growth and gross margin improvement in 2H .
  • Brand case studies (global convenience/QSR) indicate CR can deliver zero‑media acquisition at improved volumes vs. traditional channels — look for more disclosed KPI updates (install volumes, retention, ARPUs) to underwrite the thesis .
  • Absence of consensus estimates complicates beat/miss framing; focus on sequential revenue and margin trajectories and cash runway while monitoring financing and debt milestones [GetEstimates error] .

Appendices

Non‑GAAP Reconciliation (Q2 2023)

  • Adjusted EBITDA reconciliation: Net loss ($2.27M), plus stock‑based compensation $0.229M, D&A $0.037M, interest expense $0.244M → Adjusted EBITDA ($1.76M) .

Consolidated Financial Summaries (Q2 2023)

  • Revenue $1.861M; Gross profit $0.490M; Operating expenses $2.515M; Loss from operations ($2.025M); Net loss ($2.272M) .
  • Balance sheet highlights (June 30, 2023): total assets $2.60M; total liabilities $11.08M; stockholders’ deficit ($8.47M) .

Conference Call Logistics

  • Q2 2023 call held Aug 14, 2023; replay info and webcast link provided in press release .