Kubient Inc. (KBNT) is a company that has been solving some of the most significant problems facing the global digital advertising industry since its inception in 2017. The company's experienced team of marketing and technology veterans has developed the Audience Marketplace, a modular, highly scalable, transparent, cloud-based software platform for real-time trading of digital, Programmatic Advertising.
The Audience Marketplace platform gives both advertisers (ad space buyers) and Publishers (ad space sellers) the ability to use machine learning in the most critical parts of any Programmatic Advertising inventory auction, while simultaneously and significantly reducing those advertisers' and Publishers' exposure to fraud, specifically in the pre-bid environment. The company also provides unique capabilities with its proprietary pre-bid ad fraud detection and prevention, Kubient Artificial Intelligence (KAI), which has the ability to stop fraud in the critical 300-millisecond window before an advertiser spends their budget on fraudulent ad space.
The company believes that its Audience Marketplace technology allows advertisers to reach entire audiences rather than buying single impressions from disparate sources. By becoming a one-stop shop for advertisers and Publishers, providing them with the technology to deliver meaningful messages to their target audience, all in one place, on a single platform that is computationally efficient, transparent, and as safely fraud-free as possible, the company believes that its Audience Marketplace platform and the application of the platform's machine learning algorithms lead to increased Publisher revenue, lower advertiser cost, reduced latency, and increased economic transparency during the advertising auction process.
In November 2021, Kubient acquired certain assets and personnel of MediaCrossing in order to bolster its Managed Services offerings. However, throughout 2022, the company experienced an increase in customer churn stemming from MediaCrossing's legacy business. As a result, Kubient executed further cost-cutting measures, including a reduction in force, in order to reduce costs and has shifted more of its focus towards its inorganic growth strategy.
On January 12, 2023, the company received a deficiency notice from the Listing Qualifications Staff of The Nasdaq Stock Market LLC, indicating that, based upon the closing bid price of the company's common stock for the prior 30 consecutive business days, the company was not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market. Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), the company was provided with a compliance period of 180 calendar days, or until July 11, 2023, to regain compliance with the minimum bid price requirement.
Financials
For the fiscal year ended December 31, 2022, Kubient reported net revenues of $2.40 million, a decrease of 12.41% compared to the prior year. The company's net loss for the year was $13.62 million, or $0.95 per diluted share, compared to a net loss of $10.29 million, or $0.75 per diluted share, in the prior year. The company's operating cash flow for the year was negative $9.60 million, and its free cash flow was negative $9.62 million.
For the first quarter of 2023, Kubient reported net revenues of $11,750, a decrease of 99.06% compared to the first quarter of 2022. This significant decline was primarily attributable to the loss of certain customers that were acquired through the company's acquisition of MediaCrossing. The company's net loss for the quarter was $2.47 million, or $0.17 per diluted share, compared to a net loss of $3.63 million, or $0.25 per diluted share, in the prior-year period. The company's operating cash flow for the quarter was negative $2.83 million, and its free cash flow was negative $2.84 million.
Despite the revenue decline, Kubient was able to significantly narrow its net loss compared to the prior year period. This improvement was driven by substantial reductions in operating expenses. Sales and marketing expenses decreased by 45% to $735,030, technology expenses were down 55% to $519,190, and general and administrative expenses decreased by 43% to $1.24 million. These cost reductions were achieved through headcount reductions, decreased professional services costs, and lower hosting and software subscription expenses.
Liquidity
As of March 31, 2023, Kubient had $11.83 million in cash and cash equivalents and working capital of $10.52 million. The company's debt-to-equity ratio stands at 0.006, indicating a low level of debt. The current ratio and quick ratio are both 6.48, suggesting strong short-term liquidity.
Despite the recent challenges, Kubient believes its current cash on hand is sufficient to meet its operating and capital requirements for at least the next twelve months. The company continues to evaluate additional financing opportunities and believes it has access to capital resources to support its growth initiatives.
Business Overview
Kubient's primary product offering is its Audience Marketplace platform, which remains the focal point of the company's business strategy. The platform is designed to be computationally efficient, transparent, and as safely fraud-free as possible, aiming to increase Publisher revenue, lower advertiser cost, reduce latency, and increase economic transparency during the advertising auction process.
The company primarily operates in the United States digital advertising industry. However, Kubient is currently facing regulatory challenges. The company has received subpoenas from the SEC and the United States Attorney's Office for the Southern District of New York requesting information related to revenue and two of its customers. Kubient is cooperating with these investigations.
Kubient's business model and technology platform have significant potential, but the company has faced headwinds in recent years, including customer churn and compliance issues with Nasdaq's listing requirements. Investors should closely monitor the company's ability to execute on its inorganic growth strategy, maintain its technological edge, and address its regulatory challenges. The company's success will depend on its ability to capitalize on the growing demand for Programmatic Advertising while effectively managing its costs and operations.
In summary, while Kubient experienced a significant decline in revenues, the company was able to effectively manage its costs and improve its bottom line performance. The Audience Marketplace platform remains central to Kubient's business strategy as it continues to navigate the challenges in the digital advertising industry. However, the company's long-term performance and growth trajectory remain uncertain given the recent financial results and ongoing regulatory inquiries.