Executive Summary / Key Takeaways

• Mobivity has undergone a significant strategic transformation, divesting its legacy SMS business to become a pure-play Connected Rewards company focused on the high-growth, high-margin mobile user acquisition and retention market.
• The core investment thesis centers on the potential of the Connected Rewards platform, which leverages proprietary technology to bridge brick-and-mortar brands and digital audiences, driving measurable performance for both sides.
• Recent operational momentum, including significant audience growth, increased active programs, and a robust pipeline/backlog, signals accelerating revenue growth, particularly following key strategic partnerships and platform optimization efforts.
• While the company faces liquidity challenges and a going concern risk, management is targeting profitability in the first half of 2025, underpinned by expected material revenue growth in the Connected Rewards segment and a streamlined cost structure post-divestiture.
• Key factors to watch include the successful conversion of the pipeline, the impact of strategic technology integrations on scaling, the ability to secure necessary financing, and continued optimization of program performance to drive higher revenue per action.

Setting the Scene: A Strategic Pivot Towards Connected Value

Mobivity Holdings Corp. ($MFON), organized in 2008, has a history rooted in developing proprietary platforms for data-driven marketing, initially serving brick-and-mortar brands with tools for customer acquisition and loyalty. Its foundational technology, the RecurrencyTM platform, was designed to extract and transform messy point-of-sale (POS) data into actionable intelligence, enabling businesses to measure, predict, and influence customer behavior. Over time, this platform evolved, generating revenue through traditional Software-as-a-Service (SaaS) licensing for loyalty programs and, crucially, through its Connected RewardsTM business.

The year 2023 marked a pivotal turning point. Recognizing the significant potential of the Connected Rewards model – which enables brands to reward users with real-world products for actions taken in digital environments like mobile games – Mobivity embarked on a strategic transformation. This involved a deliberate effort to prove the viability and scalability of Connected Rewards, leading to cost reductions, a focused product offering, and a reshaping of the team and capital allocation towards this high-growth area. This strategic shift culminated on September 25, 2024, with the divestiture of the company's legacy SMS marketing business. This move positioned Mobivity as a pure-play Connected Rewards company, allowing it to dedicate all resources to what management believes is a massive addressable market with significantly higher gross margins.

Technological Edge: Bridging the Digital and Physical Divide

At the heart of Mobivity's strategy is its differentiated technology, primarily the Recurrency and Connected Rewards platforms. Recurrency's core capability lies in its ability to integrate with thousands of disparate POS systems, transforming raw transaction data into usable intelligence. This data forms the foundation for understanding customer behavior, enabling targeted marketing efforts, and, critically, providing 100% attribution of sales back to specific offers or campaigns.

The Connected Rewards platform builds upon this by creating a seamless bridge between the digital and physical worlds. It allows mobile game publishers to incentivize user acquisition and engagement by offering real-world rewards (like a free burger or a discount on gas) redeemable at brick-and-mortar locations. The technology facilitates the deployment and management of one-time use offer codes and ensures accurate attribution of redemptions across various channels (mobile, in-store, in-app).

Quantifiable benefits of this technology, as highlighted by the company, include the ability to deliver programs that consistently outpace the Return on Ad Spend (ROAS) goals for mobile game partners and perform well beyond brand partners' thresholds for driving incremental store visits and purchases. The platform operates outside the device identifier and data tracking ecosystem, a significant advantage in a privacy-conscious world impacted by changes like those from Apple (AAPL). While specific percentage improvements in data processing speed or cost reduction compared to all alternatives are not precisely quantified, management emphasizes that the technology enables uniquely attributable, trackable, and performance-based programs that competitors typically cannot offer in a single solution that benefits both game publishers and brands.

Mobivity's R&D efforts are focused on optimizing this platform, including hiring data scientists to build predictive algorithms for audience segmentation and improve campaign performance. The stated goal is to increase the revenue per action (CPI) paid by game publishers by demonstrating superior performance compared to other ad networks. This continuous optimization is expected to drive the "flywheel" of growth. The company holds nine issued patents that it believes have significant potential application, indicating an effort to build an intellectual property moat around its technology.

Competitive Landscape: A Niche Disruptor in a Massive Market

Mobivity operates within the vast and competitive marketing technology landscape, specifically targeting the mobile user acquisition and retention market, estimated to be over $40 billion annually. While facing large, established players like Salesforce (CRM) and Adobe (ADBE) with broad MarTech suites, as well as companies focused on purchase data like Cardlytics (CDLX) and POS providers like Fiserv (FI), Mobivity carves out a distinct niche.

Large platforms like Salesforce and Adobe offer comprehensive marketing clouds and analytics, but Mobivity's strength lies in its specialized POS data integration and the unique digital-to-physical bridge offered by Connected Rewards. While Salesforce and Adobe boast significantly larger scale, revenue, and profitability (e.g., Salesforce's FY2024 revenue ~$34.9B, gross margin ~77%, operating margin ~19%; Adobe's FY2024 revenue ~$20B, gross margin ~89%, operating margin ~31%), Mobivity's focus on specific retail/restaurant integrations and performance-based rewards provides a differentiated value proposition. Its technology enables efficiencies in processing transaction data and generating real-time, attributable offers that larger, broader platforms may not match in this specific context.

Cardlytics leverages bank transaction data for purchase-based marketing but lacks Mobivity's direct POS integration and the ability to drive users to specific physical locations via digital incentives tied to game engagement. Fiserv provides foundational POS and payment processing, but Mobivity's Recurrency platform adds a layer of AI-driven marketing intelligence and loyalty activation directly from that data, a capability not central to Fiserv's core offering.

Mobivity's key competitive advantages, or moats, stem from its proprietary AI for anonymous customer profiling and its unique distribution channels within brand-owned media (in-app, email, SMS). This allows for highly targeted and attributable campaigns that perform exceptionally well for both sides of the marketplace. While competitors may offer incentivized channels, Mobivity claims to be uniquely positioned in offering programs that are uniquely attributable, trackable, and performance-based, creating a "win-win-win" scenario.

However, Mobivity's competitive disadvantages include its smaller scale, which can lead to higher operating costs relative to larger players, and potential limitations in the breadth of its technological ecosystem compared to giants like Salesforce. Its financial health, marked by historical losses and liquidity challenges, also presents a vulnerability compared to the robust balance sheets and cash flow generation of larger competitors. Despite these challenges, Mobivity's focused strategy and demonstrated performance within its niche position it as a potentially disruptive force in the mobile user acquisition space by offering a channel that delivers superior ROI for specific use cases.

Operational Momentum and Financial Performance

The strategic pivot has translated into tangible operational momentum. Q1 and Q2 2024 saw significant growth in the Connected Rewards business, with revenue increasing by approximately 20% quarter-over-quarter for three consecutive quarters leading up to Q3 2024. Audience reach expanded by approximately 30% in Q1 2024 (reaching over 9 million consumers) and a further 40% in Q2 2024. The number of active programs also increased by roughly 10% in Q2 2024. Management reported unprecedented strength in the pipeline and backlog in Q3 2024, which had nearly doubled from Q1 to Q2 2024.

Key strategic partnerships, such as the technical integration with Paytronix announced in Q2 2024, are expected to streamline the onboarding process for potentially thousands of new brand customers, enabling material scale in the latter half of 2024 and beyond. The company is also exploring opportunities in new verticals like CPG and desktop gaming, which could amplify growth.

Financially, the impact of the strategic shift is becoming visible, though the most recent reported period (three months ended March 31, 2025) still reflects the transition and ongoing investment. Revenues from continuing operations for the three months ended March 31, 2025, were $513,311, a significant increase from $299,234 in the same period of 2024, primarily driven by Connected Rewards growth. However, cost of revenues also increased substantially to $239,593 (from $44,934), reflecting the higher cost structure associated with scaling the Connected Rewards business. This resulted in a gross profit of $273,718 for Q1 2025.

Operating expenses remain substantial relative to revenue. For Q1 2025, total operating expenses were $2.33 million, leading to a loss from operations of $2.06 million. Sales and marketing expenses increased to $880,654 (from $681,482), driven by consulting fees and payroll, reflecting investment in growth. Engineering, research, and development decreased slightly to $804,448 (from $947,135), primarily due to lower payroll. General and administrative expenses increased to $639,631 (from $338,065), though the stated reason in the 10-Q (decrease in legal/payroll) appears contradictory to the numbers. Interest expense rose significantly to $631,333 (from $397,472) due to increased debt balances, including related party notes and convertible notes.

The company reported a net loss from continuing operations of $2.70 million for the three months ended March 31, 2025. The discontinued SMS operations contributed a net income of $111,755 in Q1 2025, compared to a loss of $134,479 in Q1 2024, reflecting the sale process. The total net loss for Q1 2025 was $2.59 million.

Liquidity remains a critical challenge. As of March 31, 2025, Mobivity had cash of only $291,732 and a working capital deficit of $6.51 million. The company used $2.04 million in cash from operating activities in Q1 2025. The accumulated deficit stands at a significant $142.80 million.

Outlook and Path to Profitability

Despite the current financial constraints, management expresses increasing confidence in the company's growth trajectory and path to profitability, primarily driven by the momentum in the Connected Rewards business. The outlook is underpinned by the strong pipeline and backlog, the expected impact of strategic integrations like Paytronix, and ongoing platform optimization.

Management anticipates the pace of revenue growth to increase materially through the coming months as new customers are brought online and technical scaling work is completed. A key milestone is the expectation for the Connected Rewards business to overtake the legacy SMS business from a revenue perspective midway through 2024 (clarified as the second half of 2024).

Crucially, management is targeting achieving profitability in the next few months, with the first half of 2025 cited as the likely timeframe. This outlook is based on the anticipated revenue acceleration from Connected Rewards, coupled with the streamlined cost structure resulting from the SMS divestiture and the transition to a 100% remote workforce (which has reduced rental expenses).

Looking further ahead, management sees a "clear path to Mobivity doing more revenue than it has ever done" in 2025, driven by the focused execution on the Connected Rewards platform. The underlying assumptions include the continued ability to convert the robust pipeline, the successful scaling enabled by technical integrations, and the ongoing improvement in program performance leading to higher revenue per action from game publishers.

Risks and Challenges

The investment thesis is subject to several significant risks and challenges. The most immediate is the substantial doubt about the company's ability to continue as a going concern due to historical losses and insufficient working capital. The ability to secure necessary financing on favorable terms is paramount and not assured.

Operational risks include the successful conversion of the large pipeline and backlog into revenue, which depends on completing technical integrations with brand partners and maintaining program performance. While performance has been strong, the competitive landscape is intense, and maintaining a superior ROAS for game publishers is crucial for continued budget allocation.

Legal risks include ongoing TCPA litigation, which could result in material exposure, although the outcome of the pending case is uncertain.

Internal control deficiencies, specifically the lack of sufficient finance staff for optimal segregation of duties and oversight, raise the possibility of material misstatements in future financial reporting.

Finally, dependence on a few large customers (two customers accounted for 85% of Q1 2025 revenue) presents a concentration risk.

Conclusion

Mobivity is undergoing a fundamental transformation, shedding its legacy business to focus entirely on the promising Connected Rewards platform. This strategic pivot is driven by the platform's high-growth, high-margin profile and its unique ability to bridge the digital and physical worlds for brands and game publishers. Recent operational metrics and a robust pipeline suggest accelerating revenue growth, positioning the company for a potential inflection point where Connected Rewards eclipses its former business and drives the company towards profitability in the first half of 2025. The core investment thesis hinges on the successful execution of this strategy, leveraging its differentiated technology and strategic partnerships to capture market share in the massive mobile user acquisition space. However, significant liquidity constraints and the associated going concern risk remain critical challenges that require successful financing efforts. Investors must weigh the demonstrated operational momentum and the potential of the Connected Rewards model against the immediate financial hurdles and execution risks inherent in this transformative phase.