Faded away. The saddest word in the language. In any language.” – Mark Slouka, God’s Fool
Today we take an in-depth look at the “off the radar” name that has had an interesting journey as a public company and is deep in “Busted IPO” territory. A full analysis follows.
Verb Technology Company, Inc. (VERB) is software as a service based in American Fork, Utah [SAAS] platform developer with a focus on providing video-based sales enablement offerings via subscription. The company has four revenue-generating video products and two more (video email and sales coaching app) that should start contributing to its revenue by YE21. Verb was formed as Cutaia Media Group in 2012, later merging with front company OTC Bulletin Board Global Systems Design in 2014 and simultaneously changing its name to bBooth. It began its evolution into a cloud-based interactive video sales enablement company in 2015, renaming again (to nFusz) in 2017. In 2019, the company completed a 1-for-15 reverse stock split as a condition pre-listing on NASDAQ, acquired Sound Concepts, changed its moniker to Verb and raised net proceeds of $18.5 million in a stock and warrant offering price of 3.13 $ per unit. Whichever point in its history one chooses as its true genesis, Verb is a failed IPO, with its stock trading right at $1.50 per share, which translates to a market capitalization approximately $110 million.
It should be noted that Verb has a total of 12.4 million warrants outstanding (as of June 30, 2021) at an average exercise price of $2.61.
The company breaks down its revenue into digital and non-digital.
Digital revenue comes primarily from its four subscription-based SaaS platform services and two more on the way. These products are:
verbCRM (customer relationship management) allows users (primarily lead generation and sales teams) to create, distribute, white label, and publish videos with clickable on-screen icons, allowing a potential customer to purchase a product featured in the video or make a sales appointment without having to deal with a cold (or warm) call.
verb TO LEARN is an educational version of verbCRM, which is used by companies looking to build large sales teams or educate their customers about new products or services. It can detect how long a consumer watched the video, what they clicked on, and can be modified to add gamification features that enhance the learning process.
verbLIVE is a cross between Zoom (ZM) or GoToMeeting and the Home Shopping Network, combining a video platform with Verb’s interactive video e-commerce features. Imagine streaming HSN on a laptop with a one-click buy icon (with Shopify (SHOP) e-commerce capabilities), allowing you to purchase your desired item without having to pick up a phone or leave the live stream and you’ve encapsulated the verbLIVE experience. It recently added an affiliate marketing feature and is now integrated with Salesforce (CRM) platform, making it available to all its users.
verbTEAMS is essentially a self-service verbCRM for small and medium businesses, which integrates verbLIVE and has one-click capability with Salesforce. Some of the technology in this offering comes from its September 2020 acquisition of SoloFire, a provider of sales enablement platforms for the healthcare industry.
verbMAIL allows users to create interactive videos in Microsoft Outlook (MSFT) by clicking on the icon with the same name in the Outlook toolbar. An equivalent of Google Gmail (GOOG, GOOGL) is currently under development. Although it was just released in July 2021 and is currently offered for free, a paid subscription version is expected to launch soon.
The company is also introducing Pulse, which uses AI technology and acts as a sales coach to help with the next steps in closing a specific customer. It keeps track of thousands of customer interactions and provides guidance on next steps for each of those interactions. Revenue generation from this offering is expected to begin this quarter.
In addition to these subscription-based products — which generated $5.1 million in revenue in fiscal 2020 — Verb also derives non-recurring digital revenue through the use of its apps and in-app purchases, which accounted for revenues of $1.4 million for fiscal 2020.
The non-digital segment includes revenue generated from ancillary services provided as hosting to Verb customers, including design, printing, fulfillment and shipping services. As part of the company’s 2020 cost savings initiative, these services are now outsourced to a third party. Although no longer a focus of Verb, non-digital still generated $3.5 million in revenue in fiscal 2020, a year in which this activity was negatively affected by the pandemic, as large gatherings (such as conventions) were rare.
Interactive Video CRM and Webinar Marketplace
The company’s products are used in more than 60 countries, encompassing approximately 48 languages and more than 150 enterprise-level customers. With its suite of SaaS sales enablement products, Verb competes with CRM vendors such as Salesforce, Microsoft, Oracle (ORCL), SAP (SAP), and Adobe (ADBE). That said, Verb’s management (which generated $6.5 million in digital revenue in fiscal 2020) is extremely confident that its products are superior to the competition, calling others’ video offerings ” bolted” and devoid of Verb’s interactive clickable calls to action. , which are available on both desktop and mobile devices without the need to download any video players or programs.
The company’s verbLIVE solution competes with products from video webinar giants such as Zoom, Cisco (CSCO) WebEx and GoToMeeting, but has the built-in advantage of live interactive e-commerce capabilities when the video conferencing endgame is the sale. Verb estimates that its addressable markets are extremely large and likely to grow at a rapid pace during the 2020s. Video conferencing is expected to reach $50 billion by 2026; CRM software is expected to be an $80 billion business by 2025; boosted by the pandemic, live e-commerce reached around $120 billion in 2020; and e-learning is expected to hit $375 billion by 2026.
Citing the explosion of live shopping in China – around 500 million purchases through this medium in 2020 – and the increase in the number of live viewers in the United States – doubling to 27.9 billion hours in 2020 – as well as its partnerships with Microsoft and Salesforce as validations of its model, management is very optimistic about the future. And to be sure, downloads for its products in 2Q21 were up 75% year over year to 2.2 million and SaaS recurring revenue was up 26% year over year. previous year (and 10% sequentially during 1Q21) to reach $1.6 million. Social Selling News ranked it first among companies that provide direct selling apps.
In the third quarter, downloads rose to three million, from 2.2 million in the second quarter and 1.6 million in the same period a year ago, as the company reported revenue of 2.9 million. dollars for the quarter.
That’s the good news.
The bad news is that the company is burning through a significant amount of cash. In 1H21, Verb generated total revenue of $4.9 million, but lost $13.6 million, R&D expenses of $6.1 million and G&A expenses of $13.9 million of dollars that exceeded gross profit by $2.6 million. Although management plans to focus on monetizing its platform in the near future – which means less R&D spending – its G&A spending will likely continue its upward trajectory as its efforts to build brand awareness grow. Indeed, general and administrative expenses reached $20 million in the third quarter, compared to $14.2 million for the same period last year, as the company invested in growth initiatives and the costs of R&D were still on an upward trajectory.
Review and analysts’ comments:
The 1H21 performance left Verb with $6.4 million in cash and de minimis debt on June 30, 2021 – and that was after the company raised net proceeds of $14.1 million at 1, $60 per share in a March 2021 secondary. He had to return to the capital markets to remain a constant concern and to that end entered into an ATM with Truist Financial in August to sell up to 18 million dollars of common stock.
At the end of the third quarter, Verb recorded total assets of $35.9 million against total liabilities of $21.1 million. Two weeks ago, the company deposit a prospectus supplement that it can sell up to an additional $30 million of its common stock through a “at the market” or ATM share issuance program.
Only two analyst firms I can find have tracked Verb and they haven’t sounded off on the company in months. Ladenburg Thalmann is listed as having a buy rating and price target of $3.15 on VERB, while Alliance Global Partners has the same rating with a price target of $4.00.
There has been no insider activity in the company’s stock since 2019.
Verb’s case is no different than a biotech company that has brought its first potential blockbuster therapy to market and investors are hoping its launch trajectory will avoid the need for additional funding. The difference is that with the biotech company, it can usually access the debt markets once it enters the commercial stage. In Verb’s case, his only alternative – given his current cash haemorrhage – is more dilutive trips to the equity markets.
Its technology and products could help transform the market and the American consumer seems ripe to embrace this live e-commerce medium, but it can be argued that Verb will have to dilute its stakeholders by 50-100% or more before generating a positive cash flow. . As such, we’ll be keeping an eye on Verb with the idea of revisiting this interesting name when its cash flow outlook improves.
The biggest enemy of plain language is insincerity.-George Orwell