| Paul Chang | executive |
| William Thomas Williams | executive |
| Jack Codera | analyst |
Welcome to the Brand Engagement Network Third Quarter 2024 Results Conference Call and Webcast.
[Operator Instructions]
Please be advised that today's conference is being recorded. I would now like to hand the conference over to Brand Engagement Network Investor Relations, Susan Xu. Please go ahead.
Thank you, operator, and good afternoon, everyone. Welcome, and thank you for joining BEN's Q3 2024 Earnings Conference Call.
Joining me on the call today are CEO, Paul Chang; CFO, Bill Williams; and Tina, our AI-powered assistant.
The company's Q3 financial results were disseminated this afternoon and are available on our Investor Relations website at www.investors.beninc.ai.
During this call, we'll make forward-looking statements, including statements about our business outlook, strategies and long-term goals. These comments are based on management's plans, predictions and expectations as of today, which may change over time. The company's actual results could differ materially due to a number of risks and uncertainties.
For more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in BEN's most recent annual report on Form 10-K as supplemented by the Risk Factors in its most recent quarterly report on Form 10-Q.
Forward-looking statements represent management's current estimates and the company assumes no obligation to update any forward-looking statements in the future.
As a reminder, this call is being webcast from the Investor Relations website. An audio replay will be available on the website in a few hours. With that, I'll now turn it over to Paul to share our Q3 update. Over to you, Paul.
Thank you, Susan, and thank you for joining us today.
Before diving into our results and key developments, I'd like to take a moment to share some exciting changes within our organization. In August, I had the honor of stepping into the role of CEO of BEN, a global leader in secure and reliable conversational AI solutions. Having been deeply involved in BEN's journey from the start, I am truly energized and ready to lead the company into its next stage of growth.
Our vision for the future is clear, and I'm excited to guide BEN as we continue to strengthen our market presence and expand our innovative AI solutions, transforming customer engagement. My focus remains on driving market validation for our AI solutions and scaling our deployments to deliver even greater value to our customers and shareholders.
As we move into the next phase of growth, I'm also pleased to announce that Walid Khiari, will be joining BEN as our new CFO and COO, effective November 18, 2024. With over 20 years of experience, including 15 years as a technology investment banker, Walid brings a wealth of expertise in capital raising, mergers and acquisitions, and strategic planning for leading tech companies.
Walid's deep understanding of technology sector, coupled with his expansive network, makes him the ideal leader to drive BEN's next phase of growth. I believe his strategic vision and experience will not only strengthen our financial position and expand our global presence, but also play a pivotal role in helping to integrate new acquisitions as we pursue future expansion opportunities.
At the same time, I'd like to take a moment to express my appreciation to Bill Williams, our outgoing CFO and someone I am privileged to call a friend. Bill has been a cornerstone of BEN's success and has played a critical role in shaping our financial strategy from the very beginning. His leadership, dedication and insights have been invaluable.
Although Bill's contribution will be missed, we are energized to build on the foundation he established as we lead the company into its next chapter of growth.
While this will be Bill's last earnings call as CFO, we extend our deepest gratitude for his outstanding impact and wish him the very best in his future endeavors.
Looking ahead, I want to highlight BEN's position in the evolving AI landscape with a focus on secure closed AI systems. Earlier this month, Sam Altman, the CEO of OpenAI, spoke on the shift towards closed AI models, emphasizing the need for greater safety, security, ethical standards and user privacy. At BEN, we are already at the forefront of this movement, leveraging a secure closed AI platform that gives businesses control and visibility over their data.
Our AI solutions, whether SaaS, private cloud or on premises are designed with privacy and trust at their core.
Our AI is reliable, scalable way to engage customers while maintaining strict data sovereignty. This differentiates BEN in an industry increasingly prioritizing ethical, responsible AI deployment and underscores our vision of AI that moves markets while ensuring user trust.
In Q3, we saw strong progress across our core verticals of health care, automotive, and financial services.
Our integration with Cox Automotive's Dealer.com platform was a significant milestone in the quarter for the automotive vertical. This partnership allows dealerships to leverage BEN's human-like digital assistance across multiple touch points, including apps, web browsers and life-sized kiosks, creating a seamless customer experience. The integration enhances dealership operations by automating tasks and enabling more interactive, intelligent conversation with customers.
Additionally, our collaboration with Vybroo and Farmacia Roma offers AI-powered audio engagement, enhancing brand-consumer interaction. By combining BEN's AI assistance with Vybroo's audio platforms, we aim to provide personalized suggestions to consumers through accessible mediums like radio and streaming services.
Subsequent to quarter end, we also announced a partnership with KangarooHealth to enhance remote patient monitoring with our generative AI platform. This collaboration combines KangarooHealth monitoring devices with BEN's AI assistance, offering round-the-clock support for patients and health care providers, especially those with chronic conditions.
Building on this momentum, we are excited to announce another pivotal development after the quarter, our recent agreement to acquire Cantaneo, a leading media technology company based in Munich, Germany. The $19.5 million transaction consisting of $9 million in cash and 4.2 million common shares valued at $2.50 per share will expand our reach in the $45 billion global media technology market. Cantaneo's Mydas platform, which supports over 5,000 users and handles over EUR 5 billion in annual media spending enhances our ability to deliver intelligent, scalable, conversational AI solutions to over 1,000 global media brands. This acquisition is expected to enhance our ability to deliver intelligent, scalable, conversational AI solutions across multiple continents and further position BEN as a leader in the next generation of interactive advertising technology.
We expect the transaction to close in Q4 2024 upon receiving shareholder and regulatory approvals and upon obtaining financing to fund the acquisition that is accessible to the parties. With all these exciting developments, it's only fitting that we showcased one of our key drivers behind our success, Tina, our AI assistant.
Let's take a closer look how Tina is helping shape the future of customer engagement using our proprietary large language model and retrieval augmented generation. With that, I'd like to introduce Tina who can help answer some questions regarding our recent partnership with Cox Automotive and recent acquisition announcement of Cantaneo.
Hello. My name is Tina, an AI assistant created by Brand Engagement Network.
Hey, Tina, can you tell me a little bit about Brand Engagement Network? And what makes BEN's technology different?
Sure. Brand Engagement Network, or BEN, is a global leader in providing secure and reliable conversational AI solutions. What sets BEN apart is its commitment to data sovereignty ensuring that consumer and business data remain private and protected.
Our technology is not only secure, but also highly customized, [indiscernible] blend scalable, making it perfect for enhancing customer experiences and boosting productivity.
Thanks, Tina. Can you tell me about Cox Automotive and its collaboration with BEN?
Certainly. Cox Automotive is a leading provider in the automotive services and technology sector. They recently collaborated with BEN to integrate our AI assistance into their Dealer.com platform. This integration allows Cox Automotive to offer more personalized and interactive experience for customers through BEN's AI web assistance available on apps, web browsers and life science kiosks.
What data does Dealer.com aggregate and provide to dealers to share with consumers?
Dealer.com aggregates a variety of data, including consumer behavior insights, performance metrics from websites and advertising data. This data helps dealers understand their customers better and tailor their marketing efforts to provide more personalized experiences. With BEN's integration, this data is now cleaner, more comprehensive and accurate allowing for more effective two-way conversations between dealers and consumers.
Tina, can you tell me about Cantaneo acquisition announcement?
Certainly. BEN has agreed to acquire 100% of Cantaneo, a media technology company based in Munich, Germany. The total purchase price is $19.5 million, consisting of $9 million in cash and 4.2 million shares of BEN common stock at $2.50 per share. Cantaneo's Mydas platform manages over EUR 5 billion in annual media spending and supports over 5,000 users across 4 continents. This acquisition aims to expand BEN's global media reach and strengthen its offerings in the media technology market.
Can you tell me about Cantaneo's customers and their differentiation?
Certainly. Cantaneo's customers include major media corporations like BBC Global, NBCUniversal and Discovery Europe. They operate over 200 media channels across linear online and nonlinear formats. Cantaneo differentiates itself with a modular and highly customizable platform that supports both media buying and selling, offering a flexible and scalable cloud-based solution.
How would this merger benefit both companies and their customers?
This merger will benefit both companies and their customers by enhancing efficiencies and expanding market reach. BEN AI will optimize Cantaneo services, reducing manual processes and improving productivity. Cantaneo will gain access to the U.S. and Latin American markets offering flexible cloud-based solutions. Technologically, Cantaneo's tools will help BEN create new dynamic advertising formats, leading to more interactive and meaningful consumer experiences.
Thanks so much, Tina. I really appreciate your help.
You're welcome. I'm glad I could help.
If you have any more questions about BEN or our AI assistance, feel free to ask. I'm here to help.
Thank you, Tina, for that valuable insight.
We are excited about the prospects of the Cantaneo acquisition.
As a reminder, the acquisition is expected to close in Q4 2024 and is subject to closing conditions, including receipt of shareholder and regulatory approvals and obtaining financing to fund the acquisition that is acceptable to the parties.
Now let's turn it over to our CFO, Bill Williams, who will walk us through our financial results for the third quarter. Bill?
Thank you, Paul. I appreciate the opportunity to provide a brief update on BEN's financial progress.
Our Q3 and year-to-date results reflect BEN's continued focus on laying the foundation for future growth, product and solution development, the continued build-out in productionizing of our infrastructure, developing talent and expanding partnerships and initial customer relationships. Quarter and year-to-date revenue improved versus Q2 as we saw expanded proof-of-concept pilot and partnership activity gaining momentum with an expansion in POCs and channel partnerships since the first half of 2024 in both health care and automotive verticals.
We continue to exercise strong cost discipline with a 24% reduction compared to our Q1 and Q2 run rate. This resulted in $1.5 million or 24% sequential operating profit improvement. Class -- cash flow from operations for the quarter showed a 28% improvement sequentially compared with first half performance. Q3 also saw the positive effects of our capital raise efforts including our $50 million standby equity facility that will enable sustainable liquidity, cost-efficient access to capital and financial flexibility to fund operations and growth in the future. And importantly, we announced in October the definitive agreement signing for the acquisition of Cantaneo, which we expect to close by end of year. We believe this partnership will be earnings and value accretive for BEN shareholders.
For the balance of 2024, we remain focused on building market momentum, scaling the platform, improving access to efficient capital and liquidity and cost discipline.
While Q3 featured building momentum through operationalizing our platform and we successfully productionized and productized our AI assistance and expanded customer partnerships in POCs and attracting capital.
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. Thank you. And now I'd like to turn it back over to the operator, Daniel, for our Q&A session.
[Operator Instructions]
Our first question comes from Jack Codera with Maxim Group.
This is Jack Codera calling in for Jack Vander Aarde.
First question, can you give a little more background on the recently announced pending acquisition? How long has this been in negotiation? How did you determine it was a good fit? Any other color there would be helpful.
Sure, Jack.
So we've known Cantaneo for quite some time, I would say, almost a year. We're excited about the acquisition because it aligns with our strategic aim of expanding our global media reach, while we get to leverage Cantaneo's expertise in digital marketing. We think they -- our ability to change the landscape of creating interactive advertising and transforming how brands can engage with consumers in real time.
I think that is going to be potentially a game changer. And Cantaneo's Mydas platform already supports over 5,000 users and 1,000 media brands across 4 continents. It will integrate with our scalable platform to provide a more seamless and dynamic experience.
Okay. Yes, that makes sense. And I think you guys touched on it a little bit. I might have a follow-up question about the revenue bit. Can you give just a general update on, I think, the half dozen pilot programs such as MedAdvisor, any color on how those relationships are progressing?
Yes.
So all of our POCs and pilots are progressing.
Some have expanded into other potential customers participating in the pilots.
We are constantly updating our use cases to fit the needs of our customers and our customers' customers. And our AI platform continues to perform well in a cost-effective manner, providing valuable tool for the customers to continue to serve their customers.
So with MedAdvisor, we're working on reaching out to a few large pharmacy network customers as well as other pharma customers. And we are in constant development of new capabilities.
Okay. That's awesome to hear. And then one last question, kind of a follow-up.
I think it was mentioned in the prepared remarks. Can you give an additional color on that 50,000 in revenue? I know in the Q, it says it's related to a proof of concept and rev sharing. And I think you also mentioned that it was related to the pilot. Can you just describe how that's coming to fruition? Is it certain pilots like progressing -- they're now generating like a service revenue? Any color on that would be helpful.
So could you repeat the first part of your question? I don't know if I heard it correctly.
Yes.
Just about the actual reported revenue, I think it's 50,000, I saw in the Q, it was related to -- it says it's related to a proof of concept and revenue sharing. It seems like -- just any additional color on how that's coming to fruition would be helpful.
Yes.
So far, all of our revenue is either SaaS or subscription revenue to our AI platform, and that is paid to us by our customers who are actually deploying our pilot solutions.
[Operator Instructions]
I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating.
You may now disconnect.