Chris Meinerz - CFO Dennis Becker - Founder and CEO

Thank you and welcome to Mobivity's first quarter fiscal 2017 financial results conference call. We appreciate your interest in our company.

In order to be more efficient with your time, we will be reading Mobivity Safe Harbor statement following the Q&A session at the end of the call. On the call today is Mobivity's Founder, Chairman and CEO, Dennis Becker and myself Chris Meinerz, CFO.

It is now my pleasure to introduce Dennis Becker. Dennis?

Thanks, Chris, and thanks everyone for joining us on our call today. While we are pleased to report that we continued our year-over-year growth trend for the first fiscal quarter of 2017, we are particularly excited to report positive cash flows from operations.

Additionally, our net change in cash for Q1 2017 was also positive, a first for the Company without raising capital from external financing sources. Before we go over the details of our financial results, I would like to update everyone on some of our achievements and milestone this past quarter.

I am very pleased to report that the use of our technology continues to scale. We are now touching more than 8 million unique consumers per month, an increase of 56% from the same period last year and sending nearly 153 million messages per quarter, an increase of nearly 75% versus last year.

We have also ingested nearly 2.3 billion point of sale transaction into our data base to help our customers drive smarter, more personalized marketing messages to consumers. With millions of consumer engagements coupled with insights claim from billions of purchase transaction, we're continuing to prove the efficacy of our technology in pursuit of our mission to digitize the offline industry, which still constitute more than 90% of our economy.

We call that unlike e-commerce where through various tracking strategy such as cookies, offline marketers has been challenged to craft their marketing messages in a personal and targeted way that has become common amongst e-commerce brand such as Amazon. In the online world, consumer's experience display advertising such as banner ads and social media posts and direct marketing such as email that is personalized and relevant to their interest in past purchase behavior.

This is made impossible because the e-commerce marketer has full visibility of the consumers shopping behavior all the way through the point of purchase where the full purchase story has captured, resulting in massive amount data. This data is then analyzed and applied to drive consumer behavior and increased sales.

Mackenzie recently reported that this approach to data activated marketing can boost sales 15% to 20% and significantly improve the ROI on marketing spend across marketing channels. Our mission is to bring data activated marketing to brick-and-mortar brands where they can engage consumers through targeted messaging campaign via printed receipts or mobile messages and attribute those messages to point of sale data where we can prove whether or not, we are increasing consumer frequency and spend.

Our unique blend of offline data and digital marketing channels such as mobile messaging aligned with the growing number of marketers who are converting their digital and offline world views when it comes to thinking about how they allocate their marketing budgets. Gartner's 2015 to 2016 Chief Marketing Officers, Spend Survey, reported that 98% of CMOs no longer make a clear distinction between marketing online and offline and say the disciplines are merging.

About a year ago, I had described in early case study, we performed with a major national brand that showed consumers participating in a smart SMS program increased their spend by over 180%. By leveraging purchase data combined with targeted mobile messages to consumers, we were able to almost double the amount of money those customers spend.

The study concluded that as a program grew, it could translate to millions of dollars of incremental revenue to the brand and in ROI of several multiples when comparing revenue gains to the cost of licensing our technology. We recently updated the study and we were alighted by the results.

We concluded that the brand achieved in ROI of more than 3,500% since launching the program. As exceptional as these results are, we are seeing similar data from other customers.

We recently studied another client's program, one that operates in the personal care space and saw more than a 20 time ROI. Consumers seem to response to the technology as well.

One of our customers rapidly growing fast casual chain modern market, leveraged a smart receipt technology to deliver personalized nutritional messaging on their point of sale receipts, which led to an out of positive feedback from consumers on the popular social new website Rediff.com. Yielding tens of thousands of consumer upwards, coupled with thousands of positive consumer comments.

Given Rediff is the seventh most visited site on the internet, this amounted to an impressive amount of exposure of our technology. Many of the consumer comments expressed their wish the nutritional information was always available on their receipts.

We are also experimenting with another brand where consumers can forward mobile offers to their friends and in some cases there are consumers who have referred more than 100 friends to the brand's Smart SMS Program. It's our firm believe that our technology has ultimately deliver a compelling experience to the consumer and we are very pleased to see situation like these out in the market place that confirm more achieving that.

The profound results we are seeing from our technology is a tracking a growing commitment from our customers. Our top three customers have either entered into or are requesting long-term multi-year guaranteed seven figure minimum revenue contracts with some of those agreements including prepayments on minimum contract fees.

Keep in mind that last year, Mobivity did not have a single contract in place with seven figure minimum guarantees. By obtaining prepayments on minimum contract fees upon execution, we are able to contribute toward the funding of our operational working capital requirements and avoid being subject to extended payment terms ranging from 90 to 120 days to large enterprise contracts.

I would like to wrap up by touching on a couple of exciting developments on the new customer front. As mentioned before, we are well along our way with new brands such as Red Lobster, HoneyBaked Ham and Marco's Pizza along with increasing traction with Regis and Fantastic Sam's.

These customer engagements now have our product operating beyond the QSR space and into new verticals such as casual dining and personal care. I am excited to report that we are closing in on a beachhead into another vertical, the convenient store segment.

With negotiations to launch a trial in more than 1,000 convenient stores across the United States. We have also attracted a ample of opportunities with very large channel partners including a major beverage plan where we are exploring a large scale reseller and old partner sales opportunities.

With the right partnership structure and increasing interest from key players already serving our closet vertical markets, we believe the healthy mix of direct and indirect sales, end marketing tack ticks could accelerate our growth. I’ll now turn the call over to Chris for a more detailed review of our financial results and then I’ll come back for a few summary comments.

Chris?

Thanks Dennis. For the Company's fiscal quarter ended March 31st, 2017, Mobivity recorded record revenues of 2.1 million, a 15% increase over the prior year.

This improvement is attributed to continuing growth in our revenues contracted with large enterprise customers. Net cash elevated from operating activities increased to 237,000 in Q1 of 2017, a 155% turnaround as compared to a 428,000 use of cash in Q1 2016.

Net change in cash for the quarter ended March 31, 2017 was a positive 18,000, the first positive net change in cash in the Company's history without financing from external sources. Cash and cash equivalents totaled 2.2 million as of March 31, 2017.

Gross margin was 74% in Q1 2017 as compared to 78% in Q1 2016. The decrease in gross margin is principally due to higher SMS and application cost as they relate to the increase in revenues.

General and administrative expenses decreased 47,000 or 4% during the first quarter of 2017 compared to the same period in 2016. The decrease in general and administrative expenses was primarily due to decreases in personal expenses and share based compensation expenses.

Sales and marketing expenses decreased 40,000 or 3% during Q1 2017, compared to the same period in 2016. The decrease was primarily due to lower share based compensation expense.

Engineering, research and development expenses increased 240,000 or 69% during the three months ended March 31, 2017 compared to the same period of 2016. The increase was primarily due to an increase in personal related cost as compared to 2016 to support the Company's growth.

Operating loss for the first quarter of 2017 was 1.3 million compared to 1.4 million in the corresponding period in the prior y. Comprehensive loss for Q1 2017 were $0.04 per diluted share compared to 1.4 million or $0.05 per diluted share in Q1 2016.

Non-GAAP adjusted net loss, a non-GAAP metric was 920,000 for Q1 2017 compared to 794,000 loss in Q1 2016. I'd now like to turn the call back over to Dennis for his closing remarks.

Dennis?

Thanks Chris. The first quarter of 2017 is up to a very good start for Mobivity and we look to maintain this momentum throughout the remainder of this fiscal year.

With a robust and growing sales pipeline, good partnership opportunities and product offerings that demonstrate significantly repeatable return on investment. Mobivity is poised to capitalize on a market leading position.

Additionally, through fundamental balance sheet management and strong cost controls of cash used in operations coupled with increasing term commitments and favorable payments terms from key customers, we look forward to continued improvements in cash flow as we grow revenue. We appreciate your continued interest in our company and look forward to sharing our ongoing progress with you.

Operator, you can now open up for questions.

Thank you. I’d like to thank you all for your time on today’s call and your interest in Mobivity.

Before we close, I’d like to read our Safe Harbor statement. On this call management personnel’s prepared remarks contained forward-looking statements which are subject to risks and uncertainties and management made additional forward-looking statements during the Q&A session.

Therefore, the Company claims protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by our forward-looking statements as a result of certain factors and not limited to general economic and business conditions, competitive factors, changes in business strategy or development of our plans, the ability to attract and retain qualified personnel and changes in the legal and regulatory requirements.

In addition, any projections as to the Company’s future performance represent management’s estimates as of today, May 16, 2017. Mobivity assumes no obligation to update these projections in the future as market conditions change.

The Company has filed its 10-Q with the SEC on March 31, 2017, and also issued a press release announcing financial results for the fiscal year 2016. Participants on the call, who may not have already done so, may wish to look at these documents as they provide a summary of the results discussed on this call.

Today’s call may include non-GAAP financial measures which require a reconciliation to the most directly comparable financial measures which are calculated and presented in accordance with GAAP and can be found in this week's press release which is also available at mobivity.com. This concludes Mobivity’s first fiscal quarter 2017 financial results conference call.

Thank you.