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Verb Technology Company, Inc. (VERB)·Q3 2022 Earnings Summary

Executive Summary

  • Total revenue declined to $2.19M, down 24% YoY and 8% QoQ; gross margin improved to 66% from 63% YoY and 65% in Q2 as mix shifted to higher-margin digital/SaaS .
  • SaaS recurring revenue was ~$1.85M (85% of total), flat YoY and modestly below Q2’s $2.0M, pressured by fewer active reps at direct-sales customers; VERB is migrating affected clients to flat-rate pricing to stabilize recurring revenue .
  • MARKET.live early KPIs are promising: 76K shoppers acquired in ~90 days, AOV ~$98, 24% checkout conversion (37% at the 10/10 festival), with <5% returns overall; ~500 approved sellers and ~250 shows scheduled through the holidays .
  • Liquidity bolstered post-quarter by $9M financings ($4M equity Oct 25; $5M unsecured debt Nov 7) and aggressive cost cuts reducing operational cash burn to ~$(1)M/month from ~$(2.3)M/month; NASDAQ granted a 180-day extension for price compliance .
  • No S&P Global consensus estimates were available for VERB this quarter; investors should focus on trajectory of SaaS stabilization and MARKET monetization into 2023 (GMV reporting targeted by Q2 2023) .

What Went Well and What Went Wrong

What Went Well

  • MARKET.live traction: “During the first 90 days, we acquired 76,000 shoppers… AOV approximately $98… conversion… just over 24%… return rate… less than 5%” .
  • Cost structure reset: “Massive cuts… reduced our normalized operating expenses… bringing our operational cash burn down to approximately $1 million a month” .
  • Sports vertical expansion: Pittsburgh Pirates adopted verbTEAMS; MLBAM approved league-wide use—opening door to more MLB teams .

What Went Wrong

  • Top-line pressure: Total revenue fell to $2.19M vs $2.9M last year and $2.4M last quarter; non-SaaS digital weakened vs a record prior-year quarter .
  • Direct-sales headwind: “Downturn in the number of active sales reps” drove SaaS flatness; VERB is moving clients to flat-rate to remove revenue volatility .
  • Continued losses: Net loss was $(8.0)M; Modified EBITDA improved YoY but remained deeply negative, reflecting investments and launch costs for MARKET .

Financial Results

MetricQ3 2021Q2 2022Q3 2022
Total Revenue ($USD Millions)$2.90 $2.40 $2.19
Digital Revenue ($USD Millions)$2.36 $2.20 $2.02
SaaS Recurring Revenue ($USD Millions)N/A$2.00 $1.85
Non-Digital Revenue ($USD Millions)$0.54 N/A$0.17
Cost of Revenue ($USD Millions)$1.09 $0.80 $0.74
Gross Margin (%)63% 65% 66%
R&D ($USD Millions)$3.51 $1.40 $1.37
G&A ($USD Millions)$6.13 $6.60 $6.97
Modified EBITDA ($USD Millions)$(6.84) $(5.06) $(5.15)
Net Loss ($USD Millions)$(8.81) $(6.37) $(8.03)
EPS (Basic & Diluted, $USD)$(0.14) N/A$(0.08)

Segment composition (mix and drivers):

Segment DetailQ3 2021Q2 2022Q3 2022
SaaS Recurring (% of Total Revenue)64% 82% 85%
Digital Revenue (% of Total Revenue)81% 90% 92%
Non-SaaS Digital ($USD Millions)$0.51 N/A$0.17

KPIs (Q3 2022, MARKET.live):

KPIQ3 2022
Shoppers acquired76,000
Returning registered shopper rate49% (38.5% first week Nov)
Average Order Value (AOV)~$98
Conversion after cart add~24%; 37% in Coresight 10/10 festival
Return rate<5% overall; 0% in 10/10 festival
Approved sellers~500 (about half open stores)
Scheduled live shows~250 through holidays
VOD views (90 days)~20,000 (Accessories/Clothing ~50%; Health/Beauty ~20%; Food ~19%)
Device mix~50% mobile; ~48% desktop

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operational cash burnNear-term~$(2.3)M/month (negative cash from ops during intensive R&D) ~$(1.0)M/month after cuts Lowered
SaaS cost of revenueQ4+Not specifiedExpect further improvements in Q4 and beyond Improved
SaaS revenue trajectoryQ3-Q4 2022Expected increase with new products Q3 came in “virtually flat” due to fewer active reps; moving clients to flat-rate pricing to stabilize Lowered/structural change
GMV disclosure2023Not specifiedPlan to share GMV; scaling signal expected by Q2 2023 Timeline set
Nasdaq complianceH2 2022Initial 180-day windowNew 180-day extension granted (no immediate delisting/reverse split) Extension

Earnings Call Themes & Trends

TopicQ1 2022 (prior two quarters)Q2 2022Q3 2022 (current)Trend
MARKET.live launch/tractionSoft launch tests; 492 verified attendees across early events; ~12% conversion; AOV ~$48; onboarding 8–10 vendors/day; >80M social reach among top vendors Shopfest launch (63 shows); Facebook views >70K live, >1.2M post-event for produced streams; accelerated vendor interest; total digital revenue up 19% YoY 76K shoppers; AOV ~$98; 24% conversion; creators program; ~500 sellers; ~250 shows scheduled; <5% return rate Improving KPIs and ecosystem buildout
Cost structureR&D down 45% YoY; facility downsizing; marketing ROI focus R&D down 57% YoY; G&A stable; capitalized dev costs Aggressive cuts; salary reductions; burn ~$(1)M/month Tightening spend; improved unit economics
Direct-sales SaaSConsecutive SaaS growth; 74% of total revenue SaaS +23% YoY; 82% of total revenue; new products (verbLIVE 2.0, Pulse) SaaS flat as active reps declined; shift to flat-rate pricing to stabilize Stabilization actions
Sports verticalTeam onboarding; pipeline; 72% CTR at client Added teams; international prospects MLBAM approval via Pirates enhances MLB opportunity Expanding addressable base
Capital & liquidity$11M equity in Apr (Q2); asset-based advances Q2 cash $5.5M post raise; repaid advances $4M equity (Oct) + $5M unsecured note (Nov); constraints on variable-rate financings Liquidity strengthened post-quarter

Management Commentary

  • “Bringing our operational cash burn down to approximately $1 million a month… giving us a fair amount of runway into next year” .
  • “During the first 90 days, we acquired 76,000 shoppers… AOV… ~$98… conversion… just over 24%… returns… less than 5%” .
  • “Despite adding more new clients in Q3 than Q2, our SaaS revenue came in virtually flat” due to fewer active reps; moving to flat-rate pricing to remove volatility .
  • “Pittsburgh Pirates… obtained approval from Major League Baseball Advanced Media for league-wide use of our platform” .
  • “We recently selected and engaged Alantra… to work with us on these [strategic] opportunities” .

Q&A Highlights

  • Cost cuts vs MARKET execution: Management does not expect impact on ability to run festivals; marketing cuts shift toward creators and vendors bringing their followings .
  • MARKET scaling signals: Expect to begin sharing GMV and related contribution metrics by Q2 2023 as leading indicator of revenue scaling .
  • SaaS churn & pricing: Historical churn <8%; implementing flat-rate pricing to remove volatility from rep count fluctuations .
  • Sports economics: With MLBAM approval, VERB expects to “turn up the economics” on future team deals; exploring international opportunities .
  • Influencer strategy: Heavy reliance on creators’ promotion commitments to reduce VERB’s marketing spend; creators program ramping .

Estimates Context

  • S&P Global consensus estimates for revenue/EPS were unavailable for VERB this quarter due to missing mapping in the CIQ dataset. As a result, no beat/miss analysis versus Wall Street consensus can be provided. Investors should recalibrate expectations around:
    • Near-term SaaS trajectory (flat in Q3; stabilization via pricing changes) .
    • MARKET monetization pacing (GMV disclosure by Q2 2023) .

Key Takeaways for Investors

  • The mix shift toward digital/SaaS and disciplined cost cuts improved gross margin and lowered burn; liquidity strengthened post-quarter, reducing near-term financing risk .
  • MARKET KPIs (AOV, conversion, low returns) suggest high-quality demand; creators program may be a lever for low-CAC growth in 2023 .
  • Direct-sales headwinds appear transient; flat-rate pricing should stabilize SaaS revenue base and reduce volatility .
  • MLBAM approval is a tangible validation in sports and a catalyst for additional MLB teams; international team discussions continue .
  • Near-term trading may hinge on evidence of MARKET revenue scaling (GMV growth, seller/creator ramp) and sustained cash burn near ~$1M/month .
  • Medium-term thesis: if VERB can convert MARKET engagement into GMV at attractive take rates while maintaining lean opex, the path to improved EBITDA is plausible despite a small-cap capital markets backdrop .

All citations: earnings call transcript Q3 2022 [3:], 8-K press release and exhibits [2:], Q2 2022 8-K and transcript [4:] [5:], and Q3 2022 10-Q [9:*].