Banzai International, Inc. (BNZI) is a leading marketing technology (MarTech) company that provides essential marketing and sales solutions to businesses of all sizes. With a focus on consolidating mission-critical, sub-scale MarTech products, Banzai is building a data-driven platform of solutions that seamlessly integrate, empowering its customers to achieve greater efficiency and effectiveness in their marketing and sales efforts.
Company Background
Banzai’s origins can be traced back to 2015, when the company was founded with the launch of its first product, Reach. This SaaS and managed services offering was designed to increase registration and attendance for marketing events. In 2021, Banzai further expanded its capabilities through the strategic acquisition of Demio, a SaaS solution for webinars tailored for marketing, sales, and customer success teams. Most recently, in 2023, the company introduced Boost, a SaaS solution for social sharing that enables easy promotion of Demio-hosted events by event registrants.
Over the years, Banzai has faced several challenges in its growth journey. In 2022 and 2023, the company issued subordinated convertible promissory notes to related parties and third parties to fund its operations, leading to a buildup of debt on its balance sheet. In 2023, Banzai had to amend the terms of these convertible notes due to being in breach of certain financial covenants. Despite these challenges, the company has continued to grow its customer base and expand its product offerings.
A significant milestone in Banzai’s history occurred in December 2023 when the company consummated a business combination with 7GC Co. Holdings Inc. This reverse merger transaction resulted in Banzai becoming a wholly-owned subsidiary of 7GC and allowed the company to become publicly traded on the Nasdaq stock exchange. This transition brought both opportunities and challenges, as Banzai had to adapt to the requirements and responsibilities of being a public company.
Customer Base and Business Model
Banzai’s customer base is diverse, spanning a variety of industries including healthcare, financial services, e-commerce, technology, and media. As of September 30, 2024, the company served over 3,900 customers across more than 90 countries, with no single customer representing more than 10% of its revenue. The company’s focus on the mid-market and enterprise segments is reflected in its growing roster of multi-host Demio customers, which increased from 14 on January 1, 2021, to 110 as of September 30, 2024.
Banzai’s business model is centered around a recurring subscription license structure, a common approach in the SaaS industry. Pricing tiers for its flagship product, Demio, are based on the number of host-capable users, desired feature sets, and maximum audience size. Boost pricing is tied to the Demio plan a customer subscribes to, while Reach pricing is determined by the number of event campaigns a customer can run simultaneously or the maximum number of registrations they are allowed to generate per subscription period. Banzai’s customer contracts vary in term length, ranging from single months to multiple years.
Financials
For the nine months ended September 30, 2024, Banzai generated revenue of approximately $3.20 million, compared to $3.50 million in the same period of the prior year. This decrease of approximately 7.2% was primarily attributable to lower Reach revenue, which declined by $44,000 due to the company’s strategic shift in focus towards its Demio product. Banzai has been actively working to revitalize its Reach product through re-engineering and expanded sales efforts.
In the most recent fiscal year (2023), Banzai reported revenue of $4.56 million, with a net loss of $14.41 million. The company’s operating cash flow (OCF) and free cash flow (FCF) for 2023 were both negative $1.55 million.
For the most recent quarter (Q3 2024), Banzai reported revenue of $1.08 million, representing a year-over-year decline of 2.7% from $1.11 million in Q3 2023. This decrease was primarily due to lower Reach product revenue, which was partially offset by growth in the core Demio product. The company’s net loss for Q3 2024 was $15.41 million, a significant increase from the $0.78 million loss in Q3 2023. This decline in net income was primarily attributed to higher operating expenses, increased interest expense, and non-recurring losses on debt extinguishment.
Despite the revenue decline, Banzai has continued to make significant investments in its operations, leading to an increase in total operating expenses of approximately 31.1% for the nine months ended September 30, 2024, compared to the same period in the prior year. This was driven by increases in salaries and related expenses, marketing expenses, audit and legal costs, and other professional services. To address these rising costs and improve profitability, Banzai recently announced a comprehensive strategic initiative, which includes a reduction of annual operational expenses by up to $9.9 million and a reduction in other expenses by up to $3.6 million by March 31, 2025. The company estimates that these measures will result in an overall improvement in net income of approximately $13.5 million annually once fully implemented.
Liquidity
Banzai has historically relied on debt financing to fund its operations, with $10.40 million in total debt as of September 30, 2024. This includes $8.79 million in convertible notes, $1.08 million in Agile term notes, and $333,000 in 1800 Diagonal convertible notes. The company has also utilized a Standby Equity Purchase Agreement (SEPA) with Yorkville Advisors, which provided additional convertible note financing of $2.50 million during the nine months ended September 30, 2024.
As of September 30, 2024, Banzai reported a cash balance of $4.26 million. The company’s debt-to-equity ratio stood at -0.47, indicating a negative equity position. The current ratio and quick ratio were both 0.17, suggesting potential liquidity challenges in meeting short-term obligations.
In September 2024, Banzai announced significant debt payoff and restructuring agreements, which will substantially improve its balance sheet. The company has agreed to write off up to $5.6 million of outstanding liabilities and restructure a further $19.2 million of its existing debt obligations. These actions are expected to significantly reduce the company’s total debt, defer principal and interest payments, and substantially lower its near-term cash needs.
Product Segments
Banzai operates two main product segments: Demio and Reach.
Demio Segment Demio is Banzai’s flagship product, accounting for 95.50% of the company’s revenue for the nine months ended September 30, 2024. It is a full-stack technology platform that marketers can leverage for live and automated video marketing content such as webinars and virtual events. The Demio product provides customers with software and a platform to host webinars and virtual events, including features like audience engagement tools, analytics, and customization options.
Key metrics for the Demio segment include: – Average Monthly Net Revenue Retention (NRR) of 96.70% for the nine months ended September 30, 2024 – New Customer Average Contract Value (ACV) of $1.47K and Total Average ACV of $1.55K for the nine months ended September 30, 2024 – Customer Acquisition Cost (CAC) of $1.51K for the nine months ended September 30, 2024, with a LTV/CAC ratio of 1.50 – Average Monthly Churn – Revenue of 5.30% and Average Monthly Churn – Customer Logo of 6.60% for the nine months ended September 30, 2024
Reach Segment The Reach product provides a multi-channel targeted audience acquisition solution to bolster engagement and return on investment for customers’ webinars, virtual events, and in-person events. Reach revenue accounted for 4.10% of the company’s total revenue for the nine months ended September 30, 2024. Banzai has been focused on its Demio product and is in the process of phasing out the Reach product. However, the company plans to revitalize its Reach product through re-engineering and expanded sales efforts in 2024.
Recent Developments and Challenges
Banzai’s financial performance has been impacted by various challenges and events in recent years. In 2023, the company completed a reverse merger with 7GC Co. Holdings Inc., which resulted in Banzai becoming a publicly traded entity on the Nasdaq Stock Market. This transition brought additional costs and responsibilities associated with being a public company, including the need to hire additional personnel and implement new processes and procedures.
Furthermore, Banzai has faced difficulties in maintaining compliance with Nasdaq’s listing requirements. In 2024, the company received multiple notices from Nasdaq regarding non-compliance with the minimum bid price, market value of publicly held shares, and minimum value of listed securities requirements. To address these issues, Banzai recently announced a 1-for-50 reverse stock split, which became effective on September 19, 2024, and is in the process of transferring its listing to the Nasdaq Capital Market.
In September 2024, Banzai implemented a 24-employee reduction in force, which is expected to reduce annual operating expenses by an additional $1.30 million starting in the fourth quarter of 2024. The company is also pursuing various financing options, including equity and debt financing, to fund its operations and growth initiatives as it works to improve its financial performance.
Future Outlook
Despite these challenges, Banzai remains committed to its growth strategy and continues to invest in product development and strategic acquisitions. The company’s focus on consolidating mission-critical MarTech products and building a comprehensive, data-driven platform of solutions positions it well to capitalize on the growing demand for integrated marketing and sales tools.
Banzai’s recent acquisition of Demio and the launch of Boost have further strengthened its product portfolio, catering to the evolving needs of its customer base. The company’s initiatives to improve operational efficiency and reduce debt levels are also expected to enhance its financial performance and position it for long-term success.
As Banzai navigates the dynamic MarTech landscape, its ability to execute on its strategic initiatives, effectively integrate acquired businesses, and maintain compliance with Nasdaq’s listing requirements will be crucial factors in determining the company’s future growth and profitability. The company’s focus on revitalizing its Reach product and expanding its core Demio offering will be key areas to watch in the coming quarters as Banzai works to return to revenue growth and improve its bottom line.
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