Earnings call transcript: Brand Engagement Network Q4 2024 sees stock slide

Brand Engagement Network Inc. (BNAI) reported its Q4 2024 earnings, highlighting a strategic shift towards streamlining operations and enhancing its AI capabilities. The company’s stock fell by 5.98%, closing at $0.383, near its 52-week low of $0.30. This represents a stark 94% decline over the past year, with particularly challenging performance showing a 62% drop in the last six months. According to InvestingPro analysis, the stock currently trades below its Fair Value, though investors should note the company’s weak financial health score of 1.02 out of 5.

Key Takeaways

• Brand Engagement Network reported a $13.5 million write-off due to terminated agreements.
• The company is investing in AI innovations, focusing on small language models.
• Stock fell by 5.98% post-earnings, reflecting investor caution.
• New partnerships in Mexico and acquisition plans aim to boost growth.
• The company is preparing an S-1 filing for additional funding.

Company Performance

Brand Engagement Network’s Q4 2024 performance was marked by a significant financial adjustment due to terminated automotive reseller agreements, resulting in a $13.5 million write-off. InvestingPro data reveals concerning financial metrics, including an EBITDA of -$16.59M and a concerning current ratio of 0.09, indicating significant liquidity challenges. The company’s market capitalization stands at $13.77M, while it focuses on streamlining operations and rationalizing investments, particularly in its Korean team, which it considers a competitive advantage. The company is also enhancing its AI capabilities, which it hopes will position it as a leader in engagement AI platforms. For deeper insights into BNAI’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: Not disclosed for the quarter.
• Earnings per share: Not disclosed for the quarter.
• Write-off: $13.5 million due to terminated agreements.

Outlook & Guidance

Brand Engagement Network is targeting expansion in media, advertising, and global markets. The company plans to build an "AI advertising tech stack" and is preparing an S-1 filing with the SEC to secure additional funding. Future guidance projects EPS losses through FY2025, with a focus on increasing revenue to $2.5 million by FY2025.

Executive Commentary

CEO Paul Cheng emphasized the company’s unique approach to AI, stating, "AI doesn’t have to rely on massive, expensive GPU heavy infrastructure to be effective." CFO/COO Walid Kiari highlighted the company’s strategic focus, saying, "We aim to become the engagement AI platform, helping companies truly engage with audiences."

Risks and Challenges

• Market volatility in the AI sector could impact future growth.
• The substantial write-off indicates potential challenges in the automotive sector.
• The need for additional funding may pose financial risks if market conditions worsen.
• Competition in AI technology remains fierce, requiring ongoing innovation.
• Data privacy and security concerns could affect AI deployment strategies.

Brand Engagement Network’s strategic focus on AI and partnerships positions it for future growth, but the immediate financial challenges and market response highlight the need for careful navigation in a turbulent industry landscape. Analysts maintain a consensus price target of $4.00, suggesting potential upside despite current challenges. InvestingPro subscribers have access to 12 additional exclusive ProTips and detailed valuation metrics that can help investors make more informed decisions about BNAI’s future prospects.

Full transcript - Brand Engagement Network Inc (BNAI) Q4 2024:

Conference Operator: Thank you for standing by, and welcome to Brand Engagement Networks Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. I would now like to hand the call over to Susan Zhu, Investor Relations. Please go ahead.

Susan Zhu, Investor Relations, Ben: Thank you, Latif, and good afternoon, everyone. Welcome and thank you for joining Ben’s Q4 and Full Year twenty twenty four Earnings Conference Call. Joining me on the call today are CEO, Paul Cheng and CFO and COO, Walid Kiari. The company’s Q4 financial results are disseminated prior to this call and are available on the 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 his 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 our Investor Relations website.

An audio replay will be available on the website in a few hours. With that, I’ll turn it over to Paul to share a Q4 update. Over to you, Paul.

Paul Cheng, CEO, Ben: Thank you, Susan. Good afternoon, and thank you all for joining us today. Before we delve into our quarterly updates, I want to address the broader AI landscape and the recent turbulence sparked by DeepSeek. The rapid rise has raised awareness on AI training and run costs, scalability and market dominance, triggering both excitement and volatility in the market. While DeepSeek’s open source model is making headlines, it merely reinforces what Ben has long championed since the beginning.

AI doesn’t have to rely on massive, expensive GPU heavy infrastructure to be effective. Last July, we demonstrated how small language models, retrieval augmented generation and industry specific training can create a scalable and secure AI platform at a fraction of the cost. Unlike many large scale AI systems that rely on costly, difficult to procure, energy intensive GPUs, Ben’s platform can run efficiently on CPUs. The smaller computational footprint makes our AI more accessible, affordable and scalable, enabling businesses of all sizes to leverage it without expensive infrastructure. Ben’s approach and architecture also gives businesses the full control of customers’ AI experience, while integration with legacy applications enables the automated processes that truly drive efficiency and enhanced customer engagement.

This brings me to another critical issue shaping the AI industry, data privacy and security. The concerns surrounding deep seek are not just about AI dominance, but also about where and how user data is stored and used. Lawmakers and consumer advocates have raised alarms about foreign access to personal information and the U. S. Government is now considering banning DeepSeq AI on government devices due to national security risks.

At Ben, we’ve prioritized data security from day one. Our AI platform operates within a closed loop system, ensuring user data remains protected and never enters public training sets. This security first approach has led us to provide key insights to California Assemblymember, Carl De Maio, on his proposed bill AB three sixty four to strengthen consumer data protections. The bill would require AI and social media platforms to disclose where user data is stored, mandate explicit user consent and prohibit foreign controlled entities from handling sensitive healthcare, financial and geolocation data. This commitment to security and efficiency has guided our work at Bend, and we continue to see strong traction across key verticals.

In Q4, we reached two major milestones that positioned Bend for further growth in the automotive sector. First, we signed an agreement with Missiona, Chrysler, Dodge, Jeep and Ram, making them our first pilot dealer in the automotive sector. Since they already use Dealer.com software, which is fully integrated with our AI platform, this partnership allows us to seamlessly deploy our AI power agents, enhancing customer engagement and streamlining dealership operations. This integration allows dealerships using Dealer.com to leverage Ben’s human like AI agents across their websites, apps, web browsers and life size kiosks. We anticipate the AI agents will go live in Q2, marking a significant step forward in our expansion into the automotive sector and demonstrating value of our scalable AI power solutions in high volume customer facing environments.

Beyond our progress in automotive, we continue to execute on our broader strategic vision. Last October, we announced our agreement to acquire Cataneeo, a leading media technology company based in Germany. This acquisition is a key part of our strategy to expand Ben’s AI capabilities into global media and advertising, integrating our secure, scalable AI with Catanel’s Midas platform to enhance customer engagement and streamline ad sales and inventory management. We’ve made steady progress and Waleed will provide further details on the current status. Looking ahead to 2025, we believe Ben is well positioned for growth, continued growth in our target healthcare life sciences industry as well as new markets we are entering.

Our potential national chain clients appear interested to deploy Ben’s AI agents for mission critical tasks such as educating the public on the benefits and safety of vaccines as part of an outreach campaign. The key advantages are that the consumers will only be provided information from trusted validated sources and a campaign can scale effortlessly reaching consumers at every corner of the country. Such campaign is designed to increase our customers’ revenues, while significantly reducing the cost to run and manage the campaign. We’d like to thank our shareholders and partners for their ongoing support, and we look forward to keeping you updated on our progress this year. Now, let’s turn it over to our CFO and COO, Walid Kiari, who will walk us through our financial results from fourth quarter.

Walid Kiari, CFO and COO, Ben: Thank you, Paul. I appreciate this opportunity to introduce myself to our audience and shareholders, provide a brief financial update and share my perspectives on our M and A strategy and the announced acquisition of Catanel. I joined the company in November after a twenty year career in financial markets, including more than fifteen years as a technology investment banker working with software companies in Silicon Valley and across the world. What drew me to Ben is its highly specialized IP portfolio focused on conversational AI, 20 plus patents issued with another 20 or so pending, all focused on advancing AI human interaction. This includes innovations in user identification, personalization, image and video processing, human like interaction and gesture generation.

From this IP portfolio, the Ben team has built B2B2C solutions in the form of AI agents that can interact with their audiences in a human like fashion. These AI agents can help transform consumer engagement and elevate customer experience. Each AI agent is uniquely designed for its specific business environment and use case, ensuring that elements such as voice, tone, cadence and language and even visual appearance in multimodal applications align seamlessly with the business’s identity and goals. Ultimately, our AI agents serve as digital extensions of the brands they represent, aiming to provide businesses with the adaptability and scale to enhance engagement with their audiences. For Ben, twenty twenty four was about investing in product development and refining our go to market strategy.

Q4 saw the company continue to streamline its operations and rationalize its investments. We’ve continued to invest in our team in Seoul, Korea, which we see as a competitive advantage for Ben. Indeed, Ben has historical roots in Korea since our AI IP originally came from Korea University, which gives us access to strong local AI talent. A significant financial update at year end was the write off of $13,475,000 related to our exclusive reseller agreements in the automotive space pursuant to our termination of that agreement. Let me explain.

Ben previously issued shares of common stock to an automotive reseller pursuant to that agreement. The fair value of those shares at the date of issuance was $13,475,000 and was deferred on the balance sheet as a customer acquisition costs. That asset was to be accounted for as a reduction in transaction price as the company transfers services to the reseller over the term of the agreement. In anticipation of terminating the reseller agreement, we performed an impairment analysis and concluded that the entire asset was impaired given that there would be no future revenue associated with the reseller agreement upon termination. That’s for major updates for Q4.

As it relates to 2025, it is and will continue to be all about execution. As it relates to our M and A strategy, we are in the process of acquiring Cataneo, a transaction that was announced at the end of Q3. It can take time to do things well. To that end, we agreed to an extension with the shareholders of Cataneo at the January and have already made two installment payments, which go against the consideration for the transaction. We aim to close the acquisition in Q2.

I would like to take this opportunity to share some perspectives on our M and A strategy and explain how Catneo fits into it. Starting with what BAN is. BAN, B E N is an acronym. It stands for Brand Engagement Network. The most important letter of that acronym is E for engagement.

Our goal is to become the engagement AI platform, helping companies truly engage with audiences and go beyond simply advertising to them. And Catnau is a core building block of this strategy. Based in Munich, Germany with a global footprint, the company’s flagship product, Midas, is a software platform which provides a single plate of glass for advertisers as well as advertising agencies to schedule, operationalize and voice ads as well as manage ad inventory. Simply put, we at Ben view Cataneo as the ERP software of the ad industry. We believe that Cataneo’s twenty year plus tenure and reputation in the advertising industry matched with Ben’s dedicated engagement AI capabilities can become a strong combination for advertisers and ad agencies worldwide to create an engaged connection with their audiences.

With this first combination, Ben aims to lay the first digital brick of the new AI advertising tech stack, a stack which we intend to continue building on through both organic product development work as well as thoughtful acquisitions. In the field, we’ve expanded our partnership with Fibro, a Mexican technology firm specialized in audio messaging strategy and Grupo Siete, a large Mexican media company to extend our AI powered engagement solutions to LATAM, Latin America and Europe. These initiatives highlight AI’s transformative role in media and advertising, which align with our long term vision. We look forward to expanding our efforts globally, forging new partnerships and continuing to innovate at the intersection of AI and advertising, and we’ll share more updates on our progress during our Q1 call. Thank you.

Now, I’d like to turn it back over to the operator for Q and A.

Conference Operator: Thank Our first question comes from Jack Van der Auty of Maxim Group. Please go ahead, Jack.

Jack Van der Auty, Analyst, Maxim Group: Great. Thanks for the update, guys, and welcome to Waleed. Paul, can you maybe help us understand just quickly, we can review some of the you’ve had so many pilot programs you guys have announced during the entire course of 2024 and into 2025. Can you touch on some of the prior pilot programs? How many of them are still actively ongoing or any moving forward towards a formal contract?

Maybe, for example, some of the pharmaceutical companies you were working with. Yes, I guess I’ll start there and I’ll ask a few follow ups. Thanks.

Paul Cheng, CEO, Ben: Yes. Thanks for the question, Jack, and good to hear from you again. Yes, so I would say majority of the pilot programs, they were indeed contracts, right? They were paid engagements for customers to utilize our AI technology to ensure that it is going to deliver the sort of the promise of GenAI, and they’ve been testing it both internally and externally. What’s extended essentially the, let’s say, the pilot period has been due to, let’s say, less than ideal performance of some of the other large language models that companies have been using.

As you know, they’re prone to hallucination, providing irrelevant responses. And I think frankly that has made these businesses much more cautious about fully adopting and deploying it into production. However, we are definitely seeing signs that many of those pilot customers are now ready to move forward. So we look forward to supporting them in their initiatives to deploy AI to not just their internal use cases, but to their own external customers.

Jack Van der Auty, Analyst, Maxim Group: Okay, got it. That’s helpful. And I guess just to touch on AFG quickly here. I know that as part of the agreement there originally, they were also an investor with a, I believe, like a $6,500,000 investment every first quarter for about four years or so. Can you talk to us about just kind of what does that mean that we don’t have that investor or investment?

What have you been doing or how do you approach the capital structure, I guess, and maybe this is for Wallet as well, in, I guess, to replace that capital or what does this do for your overall, I guess, financing needs and growth investments as well? Thanks.

Paul Cheng, CEO, Ben: Sure. And I’ll defer to Waleed on that question.

Walid Kiari, CFO and COO, Ben: Very well. Thank you, Jack. Hi. Very

Jack Van der Auty, Analyst, Maxim Group: simply, as

Walid Kiari, CFO and COO, Ben: it relates to the EFG lawsuits, I’d rather not comment given the situation. However, I can tell you that as it relates to funding, we have an S-one on file with the SEC, which is currently going through the typical review process. And so we believe that with our current funding capabilities plus that S-one, that would address our financing need.

Jack Van der Auty, Analyst, Maxim Group: Okay, got you. I appreciate that. And then as far as just I suppose I don’t see any financial statements. When will the 10 ks and financial statements be available unless I’m completely missing that right now?

Walid Kiari, CFO and COO, Ben: No worries. The 10 ks will be available. It has to be published by Monday and we expect it to be there to be ready either tomorrow or Monday at the latest.

Jack Van der Auty, Analyst, Maxim Group: Okay, great. And then I guess from sort of like a general business model unit economics perspective, can we revisit kind of the general recurring revenue model of the business or that was in place in terms of like a I think you had three sort of offerings with various startup costs associated with it. And then like on a per user basis, it’s going to be it seems like there was a high margin SaaS business model and there’s three sort of categories of it. Is that still the case or just kind of where are we at with sort of how you’re going to market and how you’re strategizing and selling your assistance outside of the Cox motive, but just in general, that’d be helpful. Thanks.

Paul Cheng, CEO, Ben: Yes, I can take that and thanks, Jack. Yes, so our deployment options, all three are still in play. And I can say that most customers, especially for POCs or internal pilots, they’re going with essentially a SaaS deployment, where we have the entire software stack hosted on our cloud environment and we provide it to the users in a secure manner. For external pilots, many of our customers are looking at private cloud environment, right, especially when it comes to managing consumer data, especially anything healthcare related. There are quite strict guidelines within their organizations to ensure the highest security and privacy.

So they are looking at private cloud deployments. However, we’ve actually seen quite a bit of interest for on prem deployment from many of our potential customers. There are several reasons for that, right? One is obviously security and privacy, right? Having it in their own four walls, I think that’s most secure deployment model you have.

The second is their ability to essentially control the experience to their customers, having it deployed locally, they could manage sort of the scaling of that. And then obviously the third is the cost aspect. So because of our small footprint of our platform, they recognize that they’re able to service large number of customer engagements with relatively small server boxes. And I think that’s where they see a big advantage being able to deploy things on prem.

Jack Van der Auty, Analyst, Maxim Group: Okay, great. And then maybe Paul, just in general, I don’t know if you have the exact numbers in front of you, but maybe just help us understand where are we at with like total headcount currently? And so just the size of the organization and the opportunities you’re going after. How many people are in your sales force are there? Are you going through a direct sales channel, indirect channel as well?

Just give

Paul Cheng, CEO, Ben: us an update. It’s been

Jack Van der Auty, Analyst, Maxim Group: a little bit, I think, with all the there’s been a lot of moving parts here. So I’d just like to get a sense there.

Paul Cheng, CEO, Ben: Sure. So I would say we have a relatively focused in house sales team with deep expertise and connections in certain industries, so we depend on them. However, Jack, as you know, our go to market strategy has always been to work with partners who could help us scale. And it’s the partners that are doing the heavy lifting in terms of doing the outreach to their customers, getting engaged with them, educating them. And obviously, our sales team gets plugged in once the opportunity progresses to a certain level.

But we found that strategy really starting to pay off. And I think in 2025, that is what you’re going to see is the results of the maturing partnership between us and several partners we have, and our ability to leverage their size and resources to scale our business. And we hope that in our upcoming earnings calls that we’ll be able to highlight some of those specific examples.

Jack Van der Auty, Analyst, Maxim Group: Okay, great. And then maybe just one more question. Of the verticals you’re going after, you’ve outlined quite a few here that still remain in place, sounds like. So with automotive, healthcare, financial services, and I know there’s some other opportunities outside of that, What do you see as the biggest near term opportunities for Ben dot ai from like a revenue ramp perspective in the near term and then longer term? Thanks.

Walid Kiari, CFO and COO, Ben: Yes. I’m happy to take this question, Jack. I would say in addition to the verticals you highlighted in your question, the media and advertising space is one where we really see very, very interesting prospects for us. And as I mentioned, in the field, we’ve had some good traction from a commercial standpoint. I would say that that’s organic.

But in addition, I know we’re not supposed to talk about acquisitions that haven’t closed, but the strength of Capnoe is really among many things, its products, its people, the talents, the modularity of the software and ultimately the quality and size of its customers, all of whom are most of them I should say are in the media space and are very large companies in that space. And so it creates for us the ability to accelerate our growth in the media and advertising space. So I would add that. Not sure we can think of it as a vertical, but we might, and I would add that to the list.

Jack Van der Auty, Analyst, Maxim Group: Okay, great. And then I said that was my last question. Maybe just one more. Well, as you get more acquainted into the business and you have a little more soak time, wondering if you’re going to be thinking about what are some of the metrics maybe you’re looking at or thinking about putting together that you think would be worthwhile tracking and updating as we go here? It’s a great question.

Walid Kiari, CFO and COO, Ben: Yes, it’s a great question. And allow me to adopt an organic perspective and a dynamic perspective in that as the business evolves, these metrics will evolve. And I can’t commit to those just yet. It’s still a bit early. But as it relates to my philosophy as a CFO, I don’t think in terms of spend, I think in terms of investment.

So return on investment internally is something that I really care about. Every dollar that we spend in euro and Korean won, and I mentioned Korean won,

Conference Operator: as

Walid Kiari, CFO and COO, Ben: a way to salute our 30 people in our Korea office who do great work developing our products. All that amount all these amounts have to be accounted for with an ROI perspective. So I would say that’s from internal purposes. As it relates to outside metrics, to the point that Paul made earlier, some of our sales based on what our customers want will be on premise. So that’d be kind of traditional software license sales.

Others will want very much of a subscription model. So all the metrics typically associated with SaaS. We’ll think through items such as retention rates over time and the whole slew of SaaS metrics that I think are relevant for a softer company to highlight. And as I mentioned earlier, dynamics is the name of the game will come up with those KPIs. We have a few that we track internally.

As the company matures and we engage with more investors, we integrate companies and we develop our verticals, we will develop a whole panoply of parameters and metrics and KPIs to manage and to communicate

Jack Van der Auty, Analyst, Maxim Group: upon. Okay. I appreciate the color there and look forward to watching you guys execute and learning more I think in May with Q1. Thanks.

Walid Kiari, CFO and COO, Ben: We can’t wait. Thank you very much, Jack.

Conference Operator: Thank you. I would now like to turn the conference back to Paul Cheng for closing remarks. Sir?

Paul Cheng, CEO, Ben: Yes. Thank you. I appreciate everyone for joining our call today. As you can hear, we are very excited about 2025 and look forward to sharing our progress in the near future. Thank you.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.