Yahoo Finance

Richard Burchill

Good morning, everyone and thank you for joining us on our first earnings call. Just to reiterate what Dan has said, we're excited to be a public company and looking forward to engaging with our shareholders as well as the greater investment community on a consistent basis moving forward. Let me start by saying Rezolve's business of delivering software as a service supports a powerful financial model for us that is simple, scalable and highly flexible.
We generate contracted recurring subscription revenue by licensing our brainpower suite of products to retailers and e-commerce customers. And as we scale the business, this powerful model is supportive of both high gross margins and a cost base that is extremely flexible with, and we can flex with demand.
With that being said, there are several key topics we'd like to review today, including a brief recap of our 2024 financial results, highlights of the actions we have taken to strengthen the financial position of Rezolve, as well as some thoughts on business outlook for 2025.
Recapping highlights of the second half of 2024, we entered the public markets after completing our DSPA transaction in August. We strengthened our balance sheet by clearing convertible debt instruments resulting from that transaction.
In addition to raising additional capital. We signed landmark partnerships with Microsoft and Google, thereby establishing a solid foundation to drive growth. Let me begin briefly by speaking about 2024 financial results. So we ended 2024 with revenue of $188,000 resulting primarily from an ancillary business activity.
On non-operating expenses or non-cash operating expenses, those including stock-based compensation, advisor's fees paid with shares, depreciation and amortization for the full year 2024, total $28.9 million. As a frame of reference, headcount drives approximately 50% of these cash operating expenses, with approximately 75% of that headcount.
Focus on sales and marketing and research and development with the remainder on general and admin roles. If we add back advisor's fees, pay those shares, we entered '24 with a loss of approximately $43.8 million on an adjusted EBITDA data basis. It's important to note that we did have a GAAP net loss of $172.6 million.
This included $28.9 million related to one-time non-cash items associated with the DSPA transaction. These non-cash items were primarily driven by cost-related tuitions of shares to third party advisors. Other non-cash expenses include $44.3 million. Loss on extinguishment of associated commercial debts. Promissory notes and advisory loans and a further $25 million of one time share-based compensation. Adds to that $10.6 million of interest expense.
Operating cash flow for the full year was a negative $21.6 million, with CapEx relatively low at only $3.5 million in the year. Before moving on to our business outlook, I wanted to briefly touch on the actions we've taken in the second half of 2024 and into the first quarter of 2025 in order to strengthen our balance sheets and bolster our liquidity position.
Prior to the close of the DSPA transaction, the company incurred circa $2,094 million in fixed rate convertible debts. $53.8 million of this debt was successfully converted into equity by year end 2024, leaving 40.5 million.
At the end of the year. Of this, $31 million was subsequently converted into equity in February 2025 and $3.5 million was repaid with cash. We believe the elimination of these debts from our balance sheets strengthens the company financially.
As of the end of the first quarter of 2025, the company's remaining debt on the balance sheet is comprised of $30 million of traditional interest bearing bank loans we recently secured from Berenberg, and $6 million of convertible debt and promissory notes, which will be converted to equity over the remainder of 2025.
Additionally, the company maintains a strong liquidity position to support growth and strategic initiatives with approximately $18.9 million in cash on hand as at the end of the first quarter of 2025. This compares to a monthly cash burn rate of approximately $2.2 million, primarily driven by employee-related costs as well as professional service fees.
Furthermore, this cash position is bolstered by our access up to $48.3 million shares in our e-lock equity line of credits. As we look ahead, we want to provide some thoughts on our business outlook in terms of the full year 2025. We expect to achieve a $100 million estimated annual recurring revenue target by the end of 2025, which will include both organic and acquired revenue.
Additionally, we expect cost growth, which is highly elastic and primarily driven by headcount, marketing ex expenses and hosting costs to increase in line with that revenue as we scale the organization with a focus on revenue generating roles, particularly in sales and marketing.
As a result, we now expect to achieve break even operating performance at $90 million ARR. This is an this update represents an improvement from the prior estimate of achieving break even at $100 million ARR as we plan to align our resource additions with revenue growth to position us for success.
Let me now turn the call back over to Dan to discuss the momentum we are seeing in the business at the start of 2025.

Daniel Wagner

Thanks, Rich. So we entered 2025 with a solid foundation that we believe well positions the business to acquire enterprise customers and drive revenue growth, and early developments year-to-date have demonstrated clear business momentum as we successfully execute on our go to market strategy.
Some of our early successes include the completion of key strategic acquisition, the growth of enterprise customers adopting our AI powered solution, solutions, and the build out of our customer sales pipeline.
To begin, we recently announced the strategic acquisition of GroupBy, a leader in enterprise search, product discovery and merchandizing solutions. This acquisition enhances Rezolve's Salesforce, expands our customer footprint in North America, and deepens our commercial relationships with some of the most recognized brands who will gain access to our AI commerce driven solutions.
We view this acquisition as part of a greater roll up strategy that we believe will accelerate enterprise customer adoption of our brain commerce technology suite. Turning to our expanding roster of customer partnerships, we believe that the early momentum we've seen in customer adoption has been supported in large part by our strategic partnerships with Microsoft and Google, as well as our strategic acquisition of Group like.
These enterprise customers include recognized brands across the globe, such as BJ's Wholesale Club, Phoenix Suns, KFC and Ace Hardware in the United States, Kohl's supermarkets in Australia, and more recently, Mexico's premier department store chain, Liverpool, with whom we recently announced a multi-year agreement at nearly $10 million a year. Moreover, we've been encouraged by the commercial improvements our retail partners are experiencing.
Including stronger customer conversion rates, higher average order values, as well as greater omnichannel adoption with increased usage of services like click and collect.
This early momentum in customer adoption and in our product solutions ability to drive positive outcomes for commerce has translated into significant commerce activity and usage across our platform, highlighted by over $50 billion in gross merchandise value transacted through us through our platform in the first part of this year, and over $13.5 million transactions occurring year-to-date through April 19.
In addition to the successes in customer adoption and usage, we continue to expand our enterprise customer sales pipeline. It's also important to note that the average deal size we've executed or are pursuing with potential customers in our pipeline has been greater than we anticipated in previous internal estimates.
We believe this is attributable, at least in part, to our partnerships with Microsoft and Google, who are driving larger customers to us than we had previously anticipated. As a result of the early momentum. We are seeing in enterprise customer adoption, our sales pipeline, deal size, as well as group price contribution. We continue to expect to achieve over $100 million in ARR target by year end.
And overall I'm extremely pleased with the solid foundation we've built and the tremendous progress the team has made to the start of the year. But there is much to get done in terms of educating the marketplace, driving customer adoption and increasing market share. 2025 stands to be an important and exciting year for Rezolve, and I'm thrilled with the momentum we generated to date.
We are set to be one of the market leaders in this space. Our objective is to win and build a platform that dominates this category. And we very much thank you for your support to date. I'd now like to turn back the calls to Michael.

Question and Answer Session

Unidentified Company Representative

Thanks, Dan. Prior to our call, we asked participants, both including Analysts and Investors to submit questions that they would like asked to management. We have organized those questions around a few major topics, many of which were asked by multiple participants.
So let's move to the Q&A portion of our call. Our first question comes from Mike Latimore of Northland Securities and is related to the recently announced Liverpool deal. This first one is for you, Dan. Can you provide additional detail as to how the Liverpool deal came about and to what extent Group and Google played a role in that process, and can you elaborate on any terms of the deal?

Daniel Wagner

Yes, of course.
I'd like to say that we are thrilled to announce our landmark deal with Liverpool, Mexico, the country's premier department store chain on April 15. We believe the deal demonstrates the ability of our product suite to deliver tangible positive results to our enterprise customers, driving higher engagement, greater conversion, and increased revenue.
In terms of economics, these deals are typically two to three years, and this multi-year deal specifically delivers nearly $10 million annually, which is greater than the average deal size we anticipated in previous internal estimates.
We, the Liverpool deal is emblematic of the success in our go to market strategy, as Liverpool, which was a customer previously of GroupBy for some of its services, was upsold to our Brain commerce product solution, which includes the SEO studio, a product developing collaborate a product which was developed in collaboration with Google by Rezolve.
Would you like some more color on that?

Unidentified Company Representative

Great, thanks Dan. In terms of just terms of the deal, effective date, is that deal live today?

Daniel Wagner

Yes, the deal is live today with the SEO studio and is being enhanced with other cap. We're working on other projects together with Liverpool. I was just there actually, last week with the management in Mexico City.

Unidentified Company Representative

Perfect, thank you. Our second question comes from Yi Fu Lee of Cantor and is focused on Rezolve's sales pipeline. This one again is for you, Dan. Can you elaborate on the progress you are seeing in the sales pipeline and how each of your go to market strategies, including your partnerships with Microsoft and Google, are contributing to that to that progress, and secondly, where are you seeing the most traction?

Daniel Wagner

So we are seeing traction across all three areas of our go to market strategy, both direct sales, partnerships, and through our acquisition. In addition to our early success in customer adoption and usage, we continue to gain momentum in our go to market strategy across the Board.
While we continue to build our direct sales team, which will be a focus of investment for us throughout 2025, we are seeing significant progress in our sales pipeline from our partnerships, notably those with Microsoft and Google, as well as our strategic acquisitions, namely GroupBy. In terms of our partnerships with Microsoft and Google, we continue to see growth in terms of the number of potential enterprise customers and importantly the average size of those potential accounts.
So we'd originally forecast or estimated that our customers would drive around $1 million per annum in revenue for the company, about each customer would be about a million dollars a year customer. But as you can see from the win with Liverpool, that customer is a 10X. Of that estimate. So you can see that the value of these customers, have the potential to be significantly greater than we originally expected. And although it's been quite recent since our strategic acquisition of GroupBy.
It has provided for direct access to an established customer base that's resulted in accelerated opportunities to upsell Rezolve Suite, and of course, again, that was highlighted by the announcement with Liverpool.
Though it's early, the momentum we've generated so far gives us enormous confidence that our premier partnerships and acquisition strategy have provided the launch pad for our business to drive customer adoptions, do so at an accelerated rate and at a greater deal of sizes than previously estimated, and we believe that our strategy, now is starting to really show that it is founded on, quality, common sense, and can be built on moving forward.

Unidentified Company Representative

Tom forte, Maxim. And it's a continuation of that go to market strategy theme related specifically to partnership stand. On this question, can you provide additional detail as to how Microsoft and Google are marketing Rezolve the potential enterprise customers and driving client wins? And what does that sales cycle look like?

Daniel Wagner

Well, obviously the sales cycle will change on a per customer basis, sometimes it can take a number of months and sometimes it can be quite accelerated into a matter of weeks. But in terms of how Microsoft and Google are marketing Rezolve, they're both doing it in a very similar way, and they both see Rezolve as a platform that enhances the stickiness of their services to their customers, their large customers. So, right now, both of them are offering incentives to their customers to use committed, contractual funds.
To buy Rezolve and it would decrement those committed funds that they have to Microsoft and Google. So if a customer has a $10 million a year contract with Microsoft to provide services, if they spend any dollars with Rezolve, those come off a dollar for dollar from their commitment to Microsoft. That's great for us, of course, and we don't pay Microsoft or Google any commission.
As I said before, this is strategic for them because they want Rezolve as a product in their cloud services to create that stickiness with their customer because it obviously ties those customers in long-term to that platform.
They're also incentivizing their sales organization by providing sales incentives and also if they make sales Rezolve to respective Google or Microsoft customers, it does not, it counts towards their, sales quota. So they're not then then they're incentivized to sell our products as if they are Microsoft slash Google products.
And as a result of those those factors, you've got like a double whammy. You've got the sales organization incentivized to sell our solutions, and you've got the customers incentivized to buy our solutions because it comes off their commitment.
And of course it's a sexy product. It's a compelling product. That has a product suite that has, a real measurable ROI output and so for all of those things, we, for all those reasons we see, really good engagement from both the partners and really good engagement from their respective customers.

Unidentified Company Representative

Excellent, thanks for that additional color, Dan. I want to switch gears a little bit here. Our next question comes from Scott Buck at HC Wainwright and focuses on the topic of M&A. This one's again for you, Dan. Dan, can you walk us through your target criteria when evaluating M&A opportunities? And secondly, you discuss your approach when funding M&A transactions in terms of cash versus equity.

Daniel Wagner

So first of all, I mean, any, target, must fit with our model, must be part of, must be additive to our proposition. And now some acquisitions are going to be, geographic, where we might find a, an organization. That has that provides maybe site search, a bit like GroupBy in Spain, for example, right?
And by acquiring that company, we not only get customers who are on the horse and cart, we would argue versus the Model T4 that we're offering, that we can very quickly upsell to our solution, but we can do so, in a very easy, elegant way as an upgrade to their existing solution. It also gives us presence in a market that we do not currently operate.
It gives us people on the ground, all those kinds of things. And given that we are looking to become the global market leader, and we want to do that, in an accelerated way, acquiring businesses in different territories gives us a footprint in markets which otherwise we wouldn't get to for some period of time.
We prefer obviously to have to go for target customers that have established businesses, there are situations where we might find companies that have compelling technology that will be additive to what we're doing. We have not as as yet seen.
Anyone, we've not made any acquisitions in that in that area, but it's possible. And thirdly, we may make talent acquisitions where we bring on organizations that have large AI or natural language processing developers, and that will then quickly give us the resources that we need that we would otherwise have to go and source in the market which is more costly and more time consuming. Is that, would you like me to cover anything else, Michael?

Unidentified Company Representative

Yes, just in terms of the second part to that question in terms of funding the transactions and your thoughts on that.

Daniel Wagner

Yeah, I mean, look, we don't want to use cash because we don't want to use the valuable cash we're using to fund our business, so the group by acquisition was done. Using our paper, we paid a very, what we felt it was a very fair price, $55 million and we paid it in equity at about $3 a share, so we.
From a purchase price we felt we got good value and from a, from an equity from the cost of our equity, obviously we think our equity is depressed, was depressed at $3 is even more depressed currently. So we don't, we're not very comfortable about using our valuable equity for acquisitions right at this time.
However, we're still keen to carry through our strategy. So I would answer by saying that. We will use cash, where the cash is not too meaningful because we don't want to sell equity or use equity at these levels, but equity is the resource that we have the capacity to utilize, mindful, of course, of the impact it has on a shareholder dilution.

Unidentified Company Representative

Excellent, thanks, Dan. Thanks for that call. Our next question comes from Rohit Kulkarni of Roth Capital Partners and focuses on Rezolve's competitive advantage. Dan, can you discuss the factors that underpin the advantage Rezolve's proprietary LLM has versus AI solutions available in the marketplace today?

Daniel Wagner

Yes, so AI solutions, so there is this idea of boiling the ocean. You know that that that many AI players have this concept of, let's absorb everything that's out there and be the expert on everything, and then when people ask us a question, we'll be able to answer that.
That's kind of the fundamental LLM proposition today. And we were, very familiar with. With how Gen AI came about, the algorithms and so on, as I mentioned before with my background. And so when we started this approach in 2016, we had one objective to create a vertical LLM to create something very specific that would allow.
That would allow us to solve a very specific problem. So we never, we didn't come at this by saying. We didn't come, excuse me, we didn't come at this by saying we have a bag of cement and a pane of glass, and, here you are, customer, go and build yourself a skyscraper. We came out saying that we, we're going to provide a skyscraper, right, and offer apartments in that skyscraper.
So we wanted to provide a solution. To our customers' problem. And right now the majority of the AI technologies out there are building blocks that are provided to customers to build on, and the customers don't, I don't believe, fully understand what they have to build, how to build it, and what skills they need to do it, how long it's going to take, and so on and so forth. So we set out to do a number of things.
First of all is to create a language model that was sophisticated. In sales, and we had to deal with some challenges there because product catalogs have got a greater propensity to what's known as hallucinate or drift, and so we wanted to solve that problem, and an example of that would be that if, AI is not very intelligent when it comes to words. It's all using algorithms and mathematics and guesswork.
So even if the product catalogue of cosmetics and fragrances, and the fragrances are called beast or savage and the descriptions are sandalwood and blackberries and barbecue notes, we understand that that we're talking about an aftershave there, but AI doesn't. Okay, AI think it's a beast in the wood, eating blackberries, right?
So we had to solve that problem of structuring product catalogue in a way that AI could understand, and we have patented that process. That's one of the reasons why AI by Google and Microsoft have partnered with us because they have not done that, and they recognize that what we've done is pretty smart.
Then when we when a customer asks a question, we want the AI to be empathetic. I'll give you an example of that. If I ask the question, I need two AA batteries, the answer must be, here is your two AA batteries. Click here. It isn't.
Thank you for coming to our store. We've got lots of batteries, we, we've been in batteries a long time, blah blah lah. Nobody wants to hear that answer from an individual or from a from an AI generated answer. So, understanding the prompt, which was in that case an urgent, I need to dominate batteries, to another question that might be, I've got a electric toothbrush and I'm not sure whether to get a.
A disposable batteries or rechargeable batteries, that question requires a bit more of a sensitive answer than the first one. So those kind of empathetic understanding of prompts is another element of our large language model. And then the third is we have trained our language model on sales techniques. ABC will always be closing and all the other sales techniques associated with sales psychographics.
Now, as a result of those three things empathy, sales techniques, and deep products and domain expertise and the ability not to hallucinate sets our brainpower and them apart. There's nothing like it on the market in our view, or certainly something that nothing that we have come across that's on the market. And as a result, we have then built on top of that, these three-products brain checkout, Brain commerce, and Brain assistance.
That take the customers of our customers through the digital journey in an elegant and effective way. You have to always remember that our solutions are designed to replace the in-store experience online. Because in store seven out of 10 people end up buying and online seven out of 10 people don't end up buying. And if we can build the relationship that you have and the experience that you have in store into a digital environment, then we have the ability to have a massive improvement in our customers' revenues online.

Unidentified Company Representative

Excellent Dan. Thanks for that color. I want to move to the financial model and Outlook, and we've received a number of questions for our CFO Rich, which are, I would say almost universal amongst analysts, with the first regarding expense growth, and Rich, I know you've touched on some of these, but maybe you could dive a bit more, the question is, as you scale the organization and ramp revenue throughout the year. Can you discuss the areas of investment and levels of increased expense needed to support this growth?

Richard Burchill

Yeah, sure, so just I mean just to reiterate, we are highly elastic we've spent several years flexing our cost base and I would say we're pretty good at it, so as the underlying business continues to gain traction and grow, we will see some costs of sales, increases along with sales and marketing expense as we grow those teams, to generate sales.
But it is important to reiterate, that we do not see any meaningful step change in any of our cost buckets. So we will grow costs but we'll grow costs in line with revenue.
And we expect to scale relatively quickly given the operational leverage inherent in the business model and thus believe we're both well positioned from a liquidity standpoint to get through this initial startup period that we're in, and that we feel that we feel will be relatively brief prior to achieving break even, which we expect to do at the at or around the $80million to $90million the $90 million ARR level.

Unidentified Company Representative

A perfect rich and that sort of our last question here that that dovetails into our last topic which is again something that was highly requested which is related to the profitability outlook. And you've touched on this a little bit rich but just to put a finer point on it.
Question is Rich, given that your staff's business model should have a significant amount of operating leverage, how are you thinking about the level of annual recurring revenue at which the company is able to achieve operating profitability. Now I know you've mentioned this, Rich, but maybe if you could put a finer point on this as well.

Richard Burchill

Sure, so the SaaS model, certainly puts Rezolve in a good position, to achieve break even, profitability with from relatively modest growth or modest revenue, should I say. Achieving profitability, which we view as a measure of adjusted EBITDA, is what we think is the first of multiple milestones which will accomplish over the 12 to 24 month period. As I've mentioned, we expect to reach just a little bit down a break even.
At the $90 million level, we have initially, targeted $100 million, but given the flexibility we have in our cost base, we are confident that we will do it at $90 million. Now just to caveat that that breakeven will depend on sales mix, direct versus channel partners, etc. And also, will be contract specific, but at this juncture, we believe that that $90 million ARR is a sensible number to pin and break even on.

Unidentified Company Representative

Excellent, thanks for those comments, Dan and Rich, and thanks for your the answers to your questions. I also want to thank everyone, for joining this call. We really appreciate you taking the time to staying with to being with us today. Please feel free to reach out, contact us with any questions. We look forward to speaking with you all again in the near future.
Thank you.