Thank you, operator. I'd like to welcome everyone to Mobivity's third-quarter 2019 earnings call.

Hosting the call today are Dennis Becker, Founder and Chairman, Chief Executive Officer; and Lynn Tiscareno, Chief Financial Officer. Before I turn the call over to management, I'd like to call everyone's attention to the Company's safe harbor statement.

Please note that certain statements made on this call will be forward-looking statements, which are subject to considerable risks and uncertainties. We caution you that such statements reflect management's best judgment based on factors currently known and that actual results or events could differ materially.

Please refer to the documents filed by the Company from time to time with the SEC and in particular its most recently filed quarterly report on Form 10-Q. These documents contain and identify important risk factors and other information that may cause actual results to differ from those contained in the forward-looking statements.

Any forward-looking statements made during this call are being made as of today. If this call is replayed or reviewed after today, the information presented during this call may not contain current or accurate information.

Except as required by law, the Company assumes no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if the new information becomes available in the future. 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 today's press release, which is also available at mobivity.com. I’d like to also remind everyone the Company adopted a new revenue recognition accounting standard, otherwise referred to as ASC 606, as of January 2018 on a modified retrospective basis.

This means the results for the reporting period beginning on or after January 1, 2018, are presented under the new revenue recognition standards or prior period amounts before January 1, 2018, are non-adjusted. With all that said, I'd like to now turn the call over to Dennis Becker.

Dennis, the floor is yours.

Thanks, Brett. And thanks, everyone, for joining us on our call today.

While the third quarter didn’t produce the acceleration of our gross revenue and net income results we had strived for, we did achieve meaningful progress that we believe continues to validate our business model and upside potential. As I described in our last quarterly update, we continue to attract growing investment in our technology from our large customers as well as name brand partners like Google and Pepsi.

The reality is that the revenue impact from these relationships is taking longer than we had expected. However, I'd like to explain why we think that top-line growth and cash flow acceleration is imminent.

Before I get into the details of our progress, though, for the third quarter, I’d like to remind everyone that our operating model has strong leverage, given we operate a recurring licensing revenue structure that historically has reached gross margins of more than 70%. We expect to begin unlocking these margins as several initiatives throughout the last year transition into upsell opportunities to existing customers.

We’re also anticipating that despite a slow start, our customer expansion and partner sales channels, such as Pepsi, will begin to impact our top-line revenue performance in a meaningful way. First and foremost, we continued to grow our recurring revenue through both existing customer growth as well as new customer wins.

Recall that our revenue model is largely structured by multiyear agreements, including licensing fees, typically based on the number of locations our customers deploy. In the past, we've framed our potential upside by the concept of achieving 100,000 locations paying an average of $1,000 per year per location to combine for $100 million in annual recurring revenues.

What’s exciting us the most is that new customer wins are seeing licensing fees as high as $2,000 per year per location. The growing visibility of the strong ROI our technology delivers, the addition of the Belly loyalty platform, and expanding product capabilities are the primary drivers to the growing pricing power we're seeing in new deal flow.

Also note that there are more than 1 million restaurant locations in the United States alone and we’ve proven through our deployments for Subway in the United Kingdom and Ireland that we can sell and deploy to international markets as well. Thus, the addressable market in just the restaurant vertical alone is vast.

And we believe that we'll be able to penetrate other markets such as grocery, convenience stores, personal care, and many more. In fact, we are currently in technical due diligence with a large international grocery brand operating thousands of locations across the globe, which could culminate into millions in annual recurring revenues and establish a key beachhead in that article.

Additionally, our existing customers continue to expand their licensing fee profile. Earlier this week, we announced the launch of our omni-channel offer and promotion management platform at all North American Subway restaurant locations.

The offers and promotions feature will allow brands to generate unique one-to-one codes that can be attached to a text message offer, receipt printed promotion, or existing marketing channels such as print ads, social media, or smartphone apps that are external to our Recurrency platform. This allows brands to turn and burn codes that tie the consumer's unique identity directly to redemptions.

Notice that when you are redeeming coupons at large grocery stores or big-box retailers that cashiers easily scan your coupons at the point-of-sale as each coupon contains a scannable code. Or note that when you visit Starbucks, you easily scan your phone at the cash register.

Smaller footprint merchants, such as franchise restaurants and other small to medium-sized merchants, have been largely left on the sidelines for this capability, given the fragmentation of point-of-sale systems and the high cost of the technology. With our offers and promotions solution, we now bridge this gap and bring the power that digital first brands enjoy in managing and deploying dynamic, personalized, and digitally driven offers online and into the brick-and-mortar space at scale for the very first time.

Likely the largest deployment of its kind across the restaurant industry, the large-scale solution marks the shift to a true omni-channel offer management platform that will track marketing effectiveness across interactions in every phase of the customer journey, from interactive channels like in-app purchases, email and SMS promotions, to printed offers like receipt and print mailer promotions. Not only is this feature generating new revenues as an upsell to our customers, it's a key capability that puts Mobivity at the center of all promotional marketing versus only powering SMS text messaging and receipt promotions.

We believe that Subway’s adoption of this new feature is key to its market validation and strongly enhances our annual revenue per location pricing to both new and existing customers. Next, I’d like to dive into a program we've been quietly developing throughout the last year that is poised to be transformative to our revenue model.

We have built a growing list of SMS messaging campaigns for major brands such as Subway, Sonic, Red Lobster, and others, where our Recurrency platform is delivering targeted SMS text messages designed to drive higher guest spend and frequency. Today, we’re processing nearly 100 million of these SMS marketing messages every month to more than 12 million unique consumers.

Throughout the last year, we ran a number of tests where we replaced text messages with full color images or animations of products and offers instead of plain old short text description. To do this, we began utilizing two different mobile messaging technologies: multimedia messaging, or MMS, and rich communication services, or RCS.

In these tests we saw consumer response rates climb as high as 140% over plain SMS text versions of the same offer. As they say, a picture says a thousand words, and it was no surprise that consumers responded more actively to multimedia versus plain old text.

But the exciting opportunity is that multimedia messaging commands a much higher price point than legacy text messaging. In other words, merely converting our existing customer base from legacy text messaging to more effective multimedia messaging will unlock higher margin top-line revenue growth immediately.

Our gross margins have narrowed over the last few quarters as we've been subsidizing our clients' use of multimedia messaging tests. But we now expect to unlock the top-line and gross margin potential from multimedia messaging as we upsell from these trial campaigns to commercial agreements.

In fact, we are in negotiations right now with a large existing customer on a multimillion-dollar upgrade to multimedia messaging that could add seven figures of annual free cash flow to our operating model. We are very excited for the potential here and expect strong gains over the coming months as we convert existing customers as well as bring new customers onboard to our new multimedia messaging capability.

Our new Vice President of Sales, Jeff Michaels, who joined us in late May earlier this year, is quickly accelerating our progress in winning new customers. Jeff and his team recently won a large contract with Checkers & Rally's through a competitive vendor evaluation process to power their mobile customer engagement programs in over 875 of its US locations.

Checkers & Rally's is a proven brand that is aggressively expanding across the country. In recent years, Checkers has been awarded several of the industry's most prestigious awards, including Top Food and Beverage Franchise by Franchise Business Review, and Best Drive-through in America by QSR Magazine.

Checkers will utilize Mobivity's Recurrency platform to send timely, personalized mobile offers to Checkers & Rally's customers via SMS text messaging. Leveraging data, personalization, and attribution are top priorities for Checkers' digital marketing strategy.

And our Recurrency platform uniquely blends these capabilities into one cohesive platform for mobile engagement and increased guest frequency. We signed Checkers in late September and are just wrapping up the setup and deployment of their program nationwide.

We expect revenues from the new contract to start building throughout the fourth quarter and beyond. Keep in mind that we are initially deploying just our SMS text messaging technology.

And we're optimistic that expansion opportunities will develop with multimedia messaging, our receipt marketing platform, as well as our Belly loyalty solution. We've been successful expanding the annual revenue per location profile of several other customers.

And we have no reason to think we won't be successful in growing our partnership with Checkers. Finally, I’d like to provide an update on our growing partnership with Pepsi.

In May of this year, Pepsi announced the launch of the PepsiCo Food Service Digital Lab, a first-of-its-kind suite of capabilities built to connect food service operators with the company's, services, insights, and solutions best suited for their specific digital and online needs. Powered by extensive, proprietary, and syndicated research into restaurant and food ordering interactions as part of the consumer digital journey, Pepsi's Digital Lab is the first offering of its kind from a food service manufacturer.

Pepsi chose Mobivity to service the lab's digital marketing, data, and loyalty solution. Jeff Michaels and his team worked closely with Pepsi throughout the third quarter executing several sales training events and producing official Pepsi marketing materials for Mobivity's projects.

We've also launched an online portal at www.mobivity.com/pepsi, where Pepsi customers and sales reps can obtain information and request contact and support by Mobivity representatives. I'm pleased to report that our partnership is now developing a sales pipeline and we are looking forward to accelerating revenue contributions from the partnership in the near future.

I will now turn the call over to Lynn for a more detailed view of our financial results. And then I will come back for a few summary comments.

Lynn?

Thanks, Dennis. Revenues for the third quarter of 2019 decreased 46% to $2.5 million when compared to $4.6 million in Q3 2018 on a GAAP basis.

But on a non-GAAP basis, which excludes the adjustments for ASC 606 and better describes our recurring revenues, we saw an increase in revenues to $2.7 million for the third quarter, which is a 15.7% increase compared to $2.4 million for Q3 2018. Furthermore, recurring revenues for the nine month period ended September 30 grew 34% to $7.98 million compared to $5.9 million during the same period in 2018.

We ended the third quarter of 2019 with $975,000 in cash. A large customer who typically prepays more than $2 million in annual fees every year in the August to September time frame was recently acquired and switched to a new fiscal period beginning in January 2020.

Thus we expect this prepayment to resume around that time and bolster our cash position. Dennis also mentioned earlier that our gross margins have narrowed and were down to 36% in the recent quarter, which is more than a 50% reduction from 78% gross margins in the same period in 2018.

These gross margins include the revenue adjustments we were required to make under ASC 606. When we look at gross margins excluding ASC 606, it was 42% in the recent quarter compared to 57% in the same quarter in 2018.

As Dennis described, this is a result of our subsidizing of certain customer messaging costs to drive test programs that we are confident will result in meaningful top-line growth as well as a return on our gross margin performance back to around 70% going forward. We anticipate strong cash flow gains as our gross margins improve.

Total operating expenses for the third quarter decreased 25% to $2.6 million compared to $3.4 million in the prior year quarter. Operating expenses generally decrease due to non-cash items and ASC 606 adjustments.

General and administrative costs were up in Q3 2019 compared to Q3 2018 by $524,000 due to some one-time legal expenses and an increase personnel and stock-based compensation expenses. Sales and marketing costs were down $156,000 for the third quarter when compared to Q3 2018 as we continued leveraging partner sales resources such as Pepsi to scale customer acquisition versus increasing our sales and marketing investments.

Engineering, research, and development costs decreased $1.3 million from Q3 2018 to Q3 2019, primarily from additional expenses that we're required to recognize in Q3 2018 under ASC 606. Although our net loss for the quarter increased on a GAAP basis, when backing out nonrecurring and non-cash charges, our net loss was lower, with a loss of only $1.15 million in the third quarter of 2019 compared to an adjusted EBITDA of $529,000 in 2018.

I would like to point out: this is a slight improvement sequentially from an adjusted EBITDA of $1.7 million in Q2 of this year. I’ll also add that had our gross margins performed closer to our historic average of around 70%, that our loss would have narrowed to only a few hundred thousand dollars.

Again, we expect incremental improvements to our gross margins as we sign customers to new messaging services. I will now turn the call back over to Dennis for his closing remarks.

Dennis?

Thanks, Lynn. Earlier this year, we attracted key management personnel with the addition of Jeff Michaels to lead revenue growth and Sue Marmion to run operations and ensure we scale efficiently and profitably.

Their impact really started to hit stride throughout the third quarter and we are looking forward to scaling revenues and cash flows now that they are fully ramped up. With the launch of our offers and promotions platform now powering Subway's omni-channel marketing programs, we've further cemented our Recurrency platform as a strategic component to powering all of the brand's marketing channels while increasing the revenue profile of our licensing agreements.

Adding multimedia messaging to the mix will further expand our revenue upside as well as elevate our gross margins and unlock cash flows. Add to that annual recurring licensing fees now seeing upwards of $2,000 per location per year with literally millions of locations in our target markets, and we stand firm in our belief that we can build Mobivity to a $100 million annual run rate and beyond.

More importantly, we believe eminent sales deal flow will significantly reduce our cash burn. Since launching the first incarnation of our technology and product with Subway in 2016, it has been a long and arduous path, but there is great excitement about the light at the end of the tunnel.

Special thanks to our amazing team here at Mobivity for continuing to punch well above our weight by adding more name brand customers and continuing to drive greater strategic value through our products and services. Thank you.

Hey, Dennis. Hey, Lynn.

First of all, this ASC 606 seems to be a very convoluted and difficult way to kind of understand the successes of the company here from a financial perspective. But one of my concerns and or thoughts is can you give me a little sense for the cash balances, the monthly burn going forward?

One could come to the conclusion that you may need to raise some capital here sooner rather than later. But then there was mention of the $2 million large customer coming in.

So I just wanted to get a sense for timing of that. Are you guys - is raising capital something that is on the agenda?

And then I have a question or two about gross margin, too, but I'll let you go with that one first.

Hey, Greg. Thanks.

Lynn, you want to take the cash flow question?

Yes. Hi, Greg.

So to answer your question regarding cash, in the near term, our growing recurring revenues and new five year contract term customers has greatly increased our prospects for obtaining some non-dilutive financing in order to [indiscernible] such as a credit line, and we are currently in the process of pursuing some of those options. Additionally, we had 40% of recurring revenue growth last year and we’re on track to continue recurring revenue growth.

So that, along with our increased sales function, we do believe we could achieve cash flow breakeven within the next year.

Okay. So you don’t see any capital raises at least in the short term?

And I would define that as the next quarter or two?

We don’t have any specific capital raises planned for the next quarter or two quarters.

Okay. On the gross margin side, Dennis mentioned 70% is kind of the target, and which you've been able to do at least on a historical basis.

One of the things that - a bit alarming is the gross margin has been contracting so much here. What is it in terms of the gross margin enhancement plan that you guys have, and I don't know if that's a Lynn question or a Dennis question.

And then I have one more question on this international grocery situation. And when do you guys think you might hear from them in terms of what that deal would look like and things of that nature?

So first, address maybe the gross margin thing.

Yes. So I'll take that one, Greg.

Yes, so basically, about - well, summer of 2018, we had the Chief Digital Officer of Subway go on a tradeshow circuit. And that was to convey a case study we had performed with Subway, where we used these multimedia messages, which contain pictures and videos, et cetera, rather than just plain old text.

And in those tests, we saw dramatic increases in consumer responsiveness. And so what we started doing with some of our other larger customers like Sonic and others is we started to run other campaigns where we would replace text messaging with multimedia messaging.

Now, that form of messaging carries a much higher cost for us. And the plan is to then sign up these customers to a new rate schedule paying for multimedia messaging, but for the last year we have been running a number of campaigns, actually, a fairly large amount of multimedia messaging volume.

I think we're on pace to hit about 100 million of these multimedia messages across their various customers this year, which I think would put us well ahead of the marketplace in being the largest multimedia messaging operator. And so we have not changed the rate schedule or the rate of these messages with our customers, as these have all been these trial campaigns.

And now these - coming out of these trials, we are in negotiations with these customers to implement new rates for multimedia messaging instead of SMS, and of course, we usually price that to conform to our historical gross margin averages. Which I think you'll notice, up until the third quarter of 2018, had always performed in the 70 percentile range for gross margin.

So we’re through the market trial, and we felt that we needed to seed the market by practicing some campaigns, and that squeezed our margins, and that's why you've seen our gross margins shrink to 40%. In other words, we've basically been charging text messaging fees for multimedia messaging services, which carry higher costs.

So in the next quarter or two, we expect a lot of these contracts to convert to multimedia messaging, which will have two positive impacts. Number one, the higher price point will move our top line, but also it will relieve the margin burden that we've endured going through all of these trial campaigns.

So in our expectation that that will get us back to 70% gross margins, and you can do that math in looking at what our cost of goods are currently, it's going to mop [ph] a lot of cash flows.

Do you expect them to do the same amount of volume from MMS versus SMS in terms of the marketing campaigns? I mean, just number of - because I think you mentioned 100 million.

Would they theoretically do 100 million MMS versus just SMS?

Yeah. I think in the near term, say the next six months to a year, multimedia messaging will be a minority of their overall volume.

But the pricing for multimedia messaging is about triple the regular text messaging. So say, 30% of the traffic will be through multimedia messaging, but the fees will be much higher, and that's just built-in top-line opportunity for us.

Over time, based on the results that we've seen - and this was publicized in a case study we did in 2018 with Subway. They saw 140% increase in consumer responsiveness to multimedia messaging.

So over time, we expect and we're encouraging the market to convert all of their traffic to multimedia messaging. For perspective, right now we're doing close to 1 billion SMS text messages a year.

So 100 million MMS messages is just starting to scratch the surface. And so that acceleration of the adoption of multimedia messaging is only going to be - provide further growth just from our existing customer base.

And you'll see some other companies. It was announced, if you follow Synchronoss, last week, their stock was up 25% on the announcement that they had won a carrier deal with the major carriers doing multimedia messaging services for a lot of the stuff that we have been doing with Google on this new rich communication services.

So the future is multimedia messaging. Media carries a higher price tag than plain text, and so we're excited about this because it's built-in organic growth for us.

Okay. Last question, then I'll hand it off to someone else.

This international grocery, what type of transaction are you thinking about working with them? Or what type of services are they looking to get from you guys?

Then I'm done.

Yeah, so Catalina would be my analogy here. They build I think $0.75 billion [ph] revenue stream doing ads on grocery store receipts.

And they kind of built a monopoly there. You'll notice that the technology is very antiquated.

It requires an additional printer, and that's the model. It works and it creates a lot of revenue for the grocer.

And so what we've seen is we've seen a rapid decline in the Catalina deployments across the grocery space. And so the grocery space is seeking platforms like Mobivity's to operate targeted ads on their receipts.

And so this is a large grocery chain, globally deployed. They've got a couple thousand locations in the United States.

They operate I think 15,000 locations globally. And we are right now in technical due diligence, which is a very late stage in the sales cycle.

We are very excited about the prospects of working with this group. And we think we're uniquely positioned to serve this brand, given that we've - we operate I think about 2,600 locations internationally for Subway in the UK, Ireland.

We are deploying in the UAE. We have deployed in Sweden.

So this is a very large revenue opportunity for us and it's also a large beachhead into the grocery space, which we think with the decline of the Catalina model, we're well poised to take advantage of that.

Okay. Thank you.

Hi, Dennis. I was wondering whether you could just go into a little more detail about the sales function with Jeff on board.

Specifically, how many salespeople you presently have. And looking forward into 2020, given some of the prospects that you're talking about, whether you envision hiring more people?

Yes, absolutely. Thanks, Brad.

So Jeff Michaels, he just joined us a few months ago at the end of May. He came to Mobivity with about 17 years of sales leadership experience.

And he's quickly grown our revenue operations team now just through the third quarter here, grown the team to seven direct sellers just over the last couple of months that he's ramped up. Our plan is to turn up another 10 in addition to that to get us to a total of 17 direct sellers with quotas; looking to accelerate revenues over the course of the next year.

We feel strongly that the product that we've built has been ahead of the market, but now the market is catching up to us. So we're seeing strong demand, and the time is right to put a direct sales team in place.

And Jeff's really a resource we haven't had in the past. So historically, while we've really been focused on whale hunting and growing our larger existing customers like Subway, while hatching some partner channels like Pepsi, we're really excited to finally accelerate new customer acquisition with a direct sales team, and Jeff is now, as I would describe, fully ramped up.

I'm particularly excited by the fact that he was quick to win this Checkers & Rally's deal, which we expect to become revenue-bearing here very shortly as we're now in the midst of their national launch. This is a seven figure recurring opportunity that Jeff won through a pretty competitive vendor selection process.

And there are a handful of other deals that Jeff and his team have also brought to the Company that are in the late stage of the sales cycle that include one in particular that is a seven figure annual recurring deal that should close in the next 60 days. So he's made a big impact in a very short period of time.

And we're only a few deals away from getting to cash flow breakeven thanks to Jeff's efforts.

Okay. Well, that certainly sounds good.

Can I just switch into the announcement you had yesterday concerning Subway and this omni-channel deal? Is there any way you can put any sort of numbers to that?

If I read the release correctly, you're getting 30,000 stores. And obviously you are talking about rates of $1,000 to $2,000 per store, and I know Subway is early.

Is there any way you can drill down on that from a numerical perspective or it's not possible?

Well, it is early, but what I can comment on is that up until now, we have been working with our customers to operate text messaging and receipt-topped print advertising campaigns. We've also been able to add loyalty to the opportunity portfolio since acquiring Belly.

But at the same time, all these brands have historically operated the majority of their budgets running print advertising, direct mail, and then also a lot of digital media, so Facebook advertising, et cetera. And we haven't had a hook into those marketing activities until we got to this code management platform that we just built.

So the code management platform allows any brand to insert scannable codes into any form of media, whether it's print, whether it's Facebook, it's Google Map advertising. And so that moves Mobivity into a larger addressable proportion of the overall brand's marketing budget.

Subway publicly -- it's publicly known -- operates a $500 million marketing budget. And we've been taking chunks of that by offering new solutions like text messaging and receipt advertising.

With code management, it now makes our product platform applicable to the full universe of all of their other advertising channels. And so it creates an immediate addressable market for upselling and cross-selling as our code management platform now can help them drive smarter marketing in all areas of how they are reaching consumers.

Okay. But if I understand what you're saying, and then I'll ask one more slight question, is that there's not like a charge per store in this deal.

Is that fair to say?

I can't comment on how we're charging, but we are charging. We did add to the revenue profile of our relationship with Subway, and this is a capability that will require additional fees to be paid by new customers.

Okay. And my last question is obviously there's a lot going on.

There's a lot of new business that you are vying for. Is there anyway going into 2020 at the end of the next quarter where you would be able to give some sort of guidance as to what revenues possibly could be before the year starts or we're not at that point yet?

I don't think that we're at the point for specific guidance. I can say, though, that the - we've got three opportunities right now.

One that's in the very late stage that's going to add at least $3 million of annual recurring revenue, and it's in the negotiation phase right now. And so we have finally gotten through Jeff's direct sales efforts a handful of deals that are in the short-term pipeline that can drive double-digit impact to our top line.

And also going back to just the leverage, we think that the cash flows from these new deals is also going to be pretty dramatic in turning us to cash flow positive. If you look at the adjusted EBITDA number for us, which is more - a better depiction of cash burn, it was about $1.2 million for the quarter.

So a deal or two in the seven figure ballpark with high cash flow contributions is going to turn us cash flow positive. But we're not quite there yet in looking at what specifically the overall top-line revenue outlook for 2020 is.

Okay. Thanks very much.

Yes. I wonder if you could clarify something for me.

You talked about the annual $2-million-plus renewal fee being pushed out until I think you said January? When does that - does your annual contract, has that already been renegotiated or does that get pushed out as well?

That's a great question and something we probably should have highlighted earlier. So this is not in any way a reflection of the customer situation.

They are in a contract through 2021. It's just merely payment terms.

And we historically have offered a slight discount for this annual payment. And that it's one of the benefits that we are getting right now or are enjoying in that the pre-payment's not happening, so the discount is not happening.

So that unlocks some revenue for us. But the term of the agreement runs through 2021.

Okay. And have you - also on the multimedia part of the business, have the terms for that been established as far as with Subway or are you still negotiating that?

They agreed to what pricing that you had inferred to?

Yeah. I can't comment specifically on where we're at in the finalization of terms, but the - I can say that just the market rate for multimedia messaging is much higher than SMS.

There are other companies in the space that can perform multimedia messaging not at the scale that we can and not in the way that we do it, connecting to the point of sale and connecting with coupons. But the market rate is pretty set.

And you could probably reference that if you went to Twilio or a few others and looked up what multimedia messaging costs versus SMS. It's quite higher.

Well, just trying to get an idea as to the timing of when we'll start seeing that reflected as far as quarters going forward. You indicated that your margins are going to start moving up sequentially, but how soon will that start?

Is it going to start this quarter or first quarter next year?

Yeah. According to our plan, it will start reflecting no later than the first quarter of next year.

We also brought on a real savvy operator in Sue Marmion earlier this year; took over our operations. And aside from just the multimedia messaging being higher margin, she's also implemented some other operational improvements that also are reducing our cost of goods.

So all of that is coming to fruition right now. I think we're pretty confident with our plan that a material improvement in gross margin will be reflected no later than the first quarter.

Okay. And I guess lastly, you talked about Pepsi.

And can you give us a little bit more color on how close you are to really starting to see that fruits of that relationship?

Yes. We have a public-facing portal now at mobivity.com/pepsi.

It's a very visible relationship now. That just launched in the last 30 days.

We’ve completed a series of national sales training sessions over the last 60 days, and I can say that we have also started to book business. So we have closed some new contracts here in partnership with Pepsi just recently.

Okay. Well, thank you.

I just had one accounting thing. I noticed that your accounts payable are up like $1 million versus where they were at year end.

Is that strictly from your revenue growth? Or is there something extraordinary in there?

We had some higher legal fees this year and the cost of goods on some of the multimedia messaging was higher. So - and then it's just been some accounts payable management, but nothing out of the ordinary.

Just I think it's, to your point, a little bit - predominantly associated with just the higher revenue run rate. And we had some marketing activities in the third quarter that we executed on, too, that still have some lingering payables.

Okay. Well, thank you.