Good afternoon, and welcome to the First Quarter 2019 Financial Results Conference Call for VERB Technology Company. [Operator Instructions] Please be advised, the call is being recorded at the company's request. At this time, I'd like to turn the call over to Valter Pinto, Managing Director of KCSA Strategic Communications. Valter, please proceed.

Thank you, operator. Good afternoon, and welcome to the VERB Technology Company First Quarter 2019 Financial Results Conference Call. On our call today is Rory Cutaia, CEO; and Jeff Clayborne, CFO. At the conclusion of our prepared remarks, we will open the call for live Q&A. Before we begin, I'd like to remind everyone that statements made during this conference call will include forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties that can cause actual results to differ materially. Forward-looking statements speak only as of the date they are made as the underlying facts and circumstances may change. Except as required by law, VERB Technology Company disclaims any obligations to update these forward-looking statements as well as those contained in its press release issued this morning and the risk factors contained in the company's current and subsequent filings with the SEC. I would now like to turn the call over to Rory Cutaia, CEO. Rory?

Thank you, Valter. Thank you, everyone, for joining us today for our first quarter 2019 financial results conference call, our first as a public company and our first as a newly listed NASDAQ company. On today's call, we will bring everyone up-to-date following the closing of our acquisition of Sound Concepts; and Jeff Claymore, our CFO, will provide a review of our combined top line financial results for the first quarter of 2019. I will also provide insights and perspectives into our growth and expansion plans in 2019 and beyond. I'll address specific topics that many of you have inquired about and discuss the overall state of our industry. But before doing so, I would like to take a moment to acknowledge my appreciation for everyone who has invested both their time and their hard-earned money into VERB. The passion that our stockholders display is truly humbling and a testament to the value-building opportunity we have in front of us. For the new institutional investors that participated in our recent financing, welcome to the VERB family. I will be personally reaching out to each of you to keep the lines of communication open. So today, we filed our quarterly report on Form 10-Q, and we also distributed a press release today, which will be followed by the filing of an updated Form 8-K/A. We distributed the press release, and we will file the Form 8-K/A in order to provide everyone a more complete picture of our financial performance in Q1. As many of you who watch my update videos know, we began integrating our business with that of Sound Concepts' soon after we executed the merger agreement last fall. In my experience, the success of a merger of our acquisition is most impacted by how well the integration of the…

Thank you, Rory, and good afternoon, everyone. As Rory mentioned, in conjunction with our 10-Q filing, we issued a press release today, and we will file a Form 8-K/A with a consolidated unaudited pro forma income statement and balance sheet to report the financial results of our recently completed acquisition, Sound Concepts, for the first quarter ended March 31, 2019, as compared to March 31, 2018. It's important to look at the information contained in the press release in order to get a better picture of our financial performance in Q1 2019 as our 10-Q reflects it for the most part, our cost of operations without Sound Concepts. But not the revenue results achieved by our sales team as those results are for the most part reflected on Sound Concepts' P&L as an interim step in integrating the technology teams, the sales teams and the technology platform itself. Q2 results will be different as our combined results will be wholly contained and reported in the second quarter 10-Q which will be filed on time on August 14, 2019. Highlights from the filing today include: combined revenue totaled $4 million, an increase of 44.5% as compared to $2.8 million for the same time period of the prior year; combined cost of revenue totaled $2.2 million, an increase of 68.8% as compared to $1.3 million for the same time period of the prior year; combined gross profit totaled $1.8 million, that's a 22.6% increase as compared to $1.5 million for the same time period of the prior year. On the balance sheet, on a pro forma basis, as of March 31, 2019, our cash totaled $2.5 million. Total assets were $30.5 million. Total liabilities were $8.9 million, and our total stockholders' equity was $21.6 million. Now I'd like to provide some information…

Thank you, Jeff. So in closing, I want to say that I will do everything in my power to ensure that our value creation initiatives, executed by a world-class management team translate into true stockholder value. As many of you know, my interest as well as those of our management team, our Board, our Advisory Board, all of whom are shareholders, are totally aligned with those of every single stockholder. As many of you know, I invested my own money in the company. In fact, just last year, I made an investment of approximately $600,000 at a post-split price of $21.45 a share. So we're going to work real hard to deliver the results the market will recognize that we'll see reflected in a higher share price. We all want that, and I believe we can achieve it. We are extremely well positioned for a near-term future, where virtually all consumers will make buying decisions through interactive video technology, maximizing convenience and value in their buying decisions, and we will be at the forefront of it. We will continue to keep everyone informed through our periodic stockholder update videos, industry events and investor conferences. We've already committed and confirmed our attendance at several, and we'll be announcing the details of those events and conferences in the coming weeks and months. I would like to extend our gratitude to our customers, our partners, Team VERB California and Team VERB Utah, our Board of Directors and advisers and of course, you, our stockholders, our co-owners. Thank you for supporting us and fueling our fire to change the world. I look forward to continuing our dialogue with you and seeing many of you on the road. With that, I would now like to turn the call over to the operator for any questions. Operator?

[Operator Instructions] We have a question from Brian Kinstlinger with Alliance Global.

Can you talk about the mix of Sound Concepts' revenue in 1Q '19, legacy versus the sales tool? And then maybe break down the growth rates year-over-year in the sales tool versus the drop in the legacy print advertising business.

So as a comparison, so you're looking for a breakdown of the revenue mix between the traditional side and the digital side of the business for Q1 2018 -- sorry, 2019?

That's right, yes. Yes, and what the trends are looking like in each of those. I figured a legacy print is dropping pretty quickly and the new sales tool is growing pretty quickly.

Okay. Got it. Actually, the traditional revenue, we're not spending time actively marketing it like we are pushing the digital side of the business. But there was an increase from Q1 of last year to this year. We saw a $701,000 increase or 45%, which is up to $2.3 million versus $1.6 million in Q -- on a quarter-over-quarter comparison, and it's primarily due to corporate cash -- and the fulfillment business sampling. And the biggest driver there that I think is of note, which is exciting for us, is we've seen a dramatic increase, and it's primarily driven by the sampling side. The entire sampling business is driven from the application itself. So as subscribers to our application want to place an order for a sample, it's ordered through the application and sent to the fulfillment center. So we see this as a connection to the digital side of the business itself.

And Brian, this is Rory. One of the things I want to provide some clarity around is exactly what that so-called traditional business has become. Yes, we're pushing hard the growth of the digital business, and we're seeing amazing results there. And it's because the tool is that effective. Well, something about the sampling side of the business, and I'm going to refer to it as sampling as opposed to traditional. If you are a salesperson working for a direct sales business, one of the most effective ways of creating new customers and new clients is being able to give your prospects, people that you might meet on the street or in the supermarket, a sample of the product that you're selling. And when you're able to do that, what the data shows is that your conversion rates, your sales go up rather dramatically. So what we've done and what's now built into the application is the ability for a user on their cell phone using our application, when they run into someone, whether it be in the supermarket, on the street, anywhere and they talk about their business, right from their device, they could -- with a couple of button presses arrange to have a sample sent to that person. And then what happens is, it activates a drip campaign of interactive videos. So when that person receives that sample, you get notified immediately through the application based upon the way we've configured the app and coded it in conjunction with the shipping company. So as soon as you receive that sample, I know you received it. And then that sends an interactive video to you, saying, "Hey, you just got the sample. Let me know how you like it." If you've already looked at it, and you've got…

And then maybe on the digital side, I take it that 55% of revenue -- I think you said traditional was 45%. Maybe talk about the growth trends there. And I take it, it's network marketers that are driving that increased demand?

Yes, that's correct. It's definitely direct-sales-based. On the digital side, we're up $136,000 versus Q1 last year or 15%.

Digital side is up 15%?

Yes, it's up 15% versus Q1 of last year.

Got it. And then as we think about 2019, the remaining 3 quarters in the trajectory and given all the capital now that you have and increased focus on digital, how should we think about the growth rates? Similar to what we're seeing right now? Or do we expect to see an acceleration based on that new marketing campaign and the push you're making?

It's Rory again, Brian. So if we look at the growth of the digital business over last quarter, there's actually 40%. The differential as with respect to the growth a year ago, it was because we had some change in customers. So what we -- even though we had some revenue drop off from some customers on the digital side a year ago, we moved and made up for it, and that's the 15% over last year. But over the last quarter, which I think is a more relevant number, that's when we combined the platforms and we began selling as a joint team, that's up 40%. So I just want to make sure that we provide some clarity around that. And yes, I do expect that to continue. By the way, the platform wasn't finished and completed until sometime in January. We began selling together. So when we start seeing full quarters of the combined team working and the marketing plans that we've now initiated, yes, I think we have every reason to believe that, that growth is going to continue and even accelerate.

And that growth, you're talking about 40% year-over-year or sequentially?

That's 40% over the last quarter.

Got it. So sequentially, got it. And then can you maybe describe the addressable market on the network marketing side? And maybe how, at least at Sound Concepts and now as a combined business, the sales cycle, how long is that sales cycle on average for a customer?

Well, with respect to the addressable market, on a worldwide -- on a global basis, there a little over 100 million people involved in the direct sales space. So it's a large, large, large industry. We have right now a small percentage of that, so there's an enormous, enormous opportunity for growth in that space. And as I said, and as I described, we've got the killer application for anybody in that space. So we've got every reason to believe that our market share will grow. By the way, none of the other big players are in that space. So we will very quickly become the dominant player, if we're not already now and then continue to grow. And your other question, yes?

Well, the other question was, as sales cycle, both on -- as you sell to a network marketer and then maybe how their ROI -- how they're seeing ROI?

They see ROI almost immediately. With respect to the sales cycle, it varies. So if we were starting today, then we wouldn't expect to see revenue from a new prospect for sometimes as much as 6 to 7 months. Sometimes, it's dramatically sooner. We've had -- we've seen some of those deals close in a week. But there's still configuration time. These are white label products. For large enterprise, where we're bringing on tens of thousands of users at a time. But because we didn't just start today, we've got a fairly robust pipeline of deals already closed. So we don't have to wait 7 months to begin seeing revenue. You'll see it now with Q2 and Q3 and Q4 as the deals that we've signed already and continue to sign, we'll just keep rolling.

Great. Last question. On the large CRM platforms, maybe discuss when you expect those large software companies that have been working with your product will begin offering your technology as part of their solution as an upgrade to their customers? And as a result, would suggest -- I would think that means revenue generation from those businesses. So maybe talk about the timing of that and how that's going?

It's going pretty well. We've got the product now that is in testing. It's a brand-new very sophisticated yet super simple product to use. We've redesigned the interface. We've brought in people from Apple and Snapchat to help design it, make sure that it was cutting-edge and user-friendly, fun to use, feature-rich, especially on the analytics side. And that is the part that will be integrated in these other platforms. When testing is finished, and I guess we're probably another several weeks away, then we'll begin the integration that will take us a good couple of months minimum. And then we'll see it deployed. Now internally, we've got great expectations for what we expect to see there. But if you were to look at our projections for the year, we're only expecting 5% of our revenue is going to come from that. So substantially, more in 2020. But as we get that product out, we'll keep everyone up-to-date enough to speed as to what we expect that to generate. But we're looking at it very, very conservatively because what we're going to do is make sure that we very much under promise and very much over deliver, and that's what we're intending to do. Appreciate it. Thanks for your interest. Thanks for your questions.

Thank you. Ladies and gentlemen, we don't have any time for any further questions. That concludes today's conference call. All parties may disconnect. Have a great day.