The Covid-19 pandemic push towards corporate video conferencing and interactive technologies will likely continue for the foreseeable future. One company hoping to take advantage of this growth industry is Verb Technology (NASDAQ:VERB), which hopes to transforms how businesses attract and engage customers. At $1.78 at the start of Sept. 29 and a market capitalization of $119 million, VERB stock is a penny stock.
The company’s software-as-a-service (SaaS) platform is based on its proprietary interactive video technology and comprises a suite of sales enablement business software products offered on a subscription basis. It essentially combines the features of CRM applications like Salesforce (NYSE:CRM) and video applications like Zoom (NASDAQ:ZM). The company has been public since 2014 as a result of a reverse-merger transaction.
Verb’s SaaS Products
Verb has been growing in recent years. SaaS subscription revenues increased 82% in 2020 compared to the prior year. Their client size and deal size has increased substantially in recent years as the company attracts larger companies. Verb signed a major $1 million customer recently and appears to have an active sales pipeline in the works. In the first quarter of 2021, Verb added 16 new client contracts.
VerbCRM is the company’s Customer Relationship Management application for large companies. It allows customers to do things like buy products and schedule events on a calendar within a video while it plays. VerbTEAMS is designed to allow users to do things like sign up for services easily. It is integrated with verbLIVE, which is designed for e-commerce and allows companies to place interactive icons on videos. VerbLEARN uses similar technology for educational purposes.
These applications distinguish them from other CRM platforms because of their interactive features. In addition, Verb’s proprietary data collection and analytics capabilities often provide for a sales process, thereby increasing lead conversion rates.
The CRM industry size was estimated at $42 million in 2019 and is projected to reach $96 billion by 2027, according to Allied Market Research. That’s a compound annual growth rate of 11.1%. The cloud segment has garnered a large part of this growth, and this trend is expected to continue. Typical cloud deployment in a CRM environment does not require major investments in IT infrastructure, particularly at a client location.
It’s hard to find reliable statistics or projections on the interactive video based sub-segment of CRM, but the company expects it to be a dominant trend in the industry going forward.
The Financials of VERB Stock
During Q2 2021, strong growth continued in the SaaS businesses, with revenues increasing 26%. Overall revenues decreased about 10% as the company is phasing out a large legacy non-digital business that was involved in printing and fulfillment activities. These non-digital revenues still represent about a quarter of total revenues, so it may be a drag on overall revenue growth for the next 2-3 quarters.
For the first 6 months of 2021, Verb had a very high cash burn rate as R&D and SG&A were ramped up support the expected growth in the business. Cash balances stood at $6.4 million at the end of the quarter but the company was able to add $2 million to that total subsequent to the quarter from the exercise of outstanding warrants. Nonetheless, the company will likely have to access the capital markets sometime in 2022 in order to support the business, as near-term positive cash flow seems unlikely.
VERB stock is an interesting speculative stock that appears to have the right product set to provide them with ample growth opportunities for the foreseeable future. The question is, do they have the capital, or can they raise the capital to support this growth trajectory? In fact, the company’s auditors issued a “going concern” qualification in their latest 10-K.
If the company can raise capital without major dilution of current shareholders, VERB stock may be a decent long-term investment, although still somewhat risky.
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On the date of publication, Tom Kerr did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tom Kerr has worked in the financial services industry for over 25 years. Mr. Kerr has also been a contributing writer to TheStreet.com, RagingBull.com and InvestorPlace.com. He’s a CFA charterholder and obtained a B.B.A in Finance from Texas Tech University. He also created the 406dad.com kids adventure blog.