Prepared remarks
Good day, and thank you for standing by. Welcome to the Rezolve AI Second Half and Full Year 2024 financial review and 2025 Business Update Conference Call. All participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Michael Guido, VP of Investor Relations. Please go ahead.
Thank you, Sharon. Good morning to everyone in the U.S. and good afternoon to everyone in Europe. Welcome to Rezolve's 2024 earnings conference call where we will be discussing our second half and full year 2024 financial results, as well as providing a 2025 business update. Leading today's discussion are Dan Wagner, Rezolve's Founder and CEO; and Rich Burchill, Rezolve's CFO. We previously reported our 2024 financial results and issued an earnings release on those results, as well as a year-to-date 2025 business update on Thursday, April 24. The earnings release and SEC filings can be found on our Investor Relations website. Today's discussion will include statements that constitute forward-looking information or forward-looking statements. These statements reflect management's current beliefs and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. These factors include, but are not limited to, those discussed in our SEC filings. These statements do not guarantee future performance, and therefore undue reliance should not be placed upon them. We do not intend to update these forward-looking statements as a result of new information or future developments, except as required by law. Additionally, our discussion will include both GAAP and non-GAAP financial measures. These non-GAAP financial measures should be viewed in addition to and not as the substitute for Rezolve's reported results prepared in accordance with U.S. GAAP. All non-GAAP financial measures referenced in today's call are reconciled in our annual report on Form 20-F for the fiscal year ended December 31, 2024, to the most directly comparable GAAP measures. For more information regarding definitions of our non-GAAP measures, please see our annual report on Form 20-F for the fiscal year ending December 31, 2024, and the earnings release, which are both available on the Investors section of our website at www.rezolve.com and on the SEC's website at www.sec.gov. Finally, as a reminder, today's conference call is being recorded and the replay will be available on our Investor Relations website. At this time, I'd like to turn the call over to Dan Wagner.
Thank you, Michael. And good morning and good afternoon to everybody. I'm excited to welcome you to our first earnings call as a publicly traded company. Going public is a significant achievement for Rezolve, and I wanted to take a moment first to thank our team for their hard work and their dedication as well as our investors for their support as we look to revolutionize the e-commerce experience for consumers worldwide. As I reflect on where we find ourselves today, I believe it's important to highlight that our journey is the culmination of decades of experience our team has dedicated to advancing search, commerce and cloud technologies. Throughout our careers, we have a long history of being at the forefront of technological change and developing innovative solutions that have created value for merchants and consumers alike. I'd like to briefly highlight some of those achievements to provide greater context for why we believe we're well positioned to successfully level up commerce in a meaningful way. Early in my career, I led a team that created the first commercial online information platform, years before the concept of the World Wide Web was put forward. As a result, we were required to build our own search technologies, our own commerce technologies, as well as our own data centers, because none of those things existed prior to us creating our platform. We operated that business ultimately in 192 countries, taking payment in a variety of ways and licensed our search technology to companies such as IBM, Microsoft and Fujitsu, among others, eventually selling that business to Thomson, now Thomson Reuters, in 1999. By that time, we had become the global market leader. This experience resulted in me and my team becoming quite adept at both search and payments. I then went on to build a cloud-based commerce stack prior to the inception of Salesforce that eventually became a market leader in e-commerce spanning both Europe and the United States. That business was eventually sold to Oracle, and it serves as the foundation of its commerce cloud platform today. As a result, I became aware of the opportunities and shortfalls in e-commerce. Today my team and I find ourselves once again at the forefront of a technology revolution with AI, supported by the knowledge and experience we have gained throughout our careers at the intersection of tech and commerce, and we believe this is perhaps the most exciting opportunity yet. So let me just now introduce Rezolve AI. Having touched on our deep experience in the areas of search and commerce, I'd like to take a few minutes to provide some background as to why we founded Rezolve in the first place and the reasons we believe we are the leading solution to level up commerce, customer engagement and sales conversion in digital platforms today. Back in 2016, before the idea of AI permeated the public consciousness, we founded Rezolve AI to address the specific challenges of cart abandonment and customer attrition in e-commerce. While seven out of 10 customers visiting a physical retail store leave having purchased an item, the opposite is true in many digital stores: seven out of 10 customers leave without purchasing an item. This presents a significant challenge, but also a huge opportunity in the $30 trillion global retail sector. We believe this problem is a direct result of consumers' inability to get the right answers in a digital environment. The way we interact with e-commerce in terms of searching and filtering hasn't changed much in nearly 40 years. We applied our extensive knowledge and experience in search and commerce to solve this challenge, which by doing so, would have a material impact on our customers' revenues. We started by building our own proprietary large language model, which we call BRAiNPOWA, with the goal of creating the best salesperson on the planet. We built this foundational model specifically for digital channels, training it on over 300 billion tokens and producing a 30 billion parameter model with a focus on product catalogs. We imbued it with natural language processing to provide retailers with a better understanding of consumer intent and shopping patterns, as well as an ability to drive actionable insights in real time. In order to create the world's greatest salesperson in an AI platform, we built our LLM with three key skills. First, we trained our model to have deep product and category knowledge. Second, we trained it to exhibit empathy to better connect with the customer, an attribute supported by our patent on prompt analysis. And third, we trained our LLM on key techniques of closing a sale. Importantly, unlike many solutions in the market today, we built a product suite on top of our foundational language model that e-commerce and retail customers can readily implement off the shelf to support the customer purchase journey right now. The BRAiNPOWA product suite is comprised of three market-ready solutions. First, Brain Commerce, our conversational commerce product that allows the customer to obtain a more comprehensive set of answers to any query and quickly find products in any one of 96 languages. Second, Brain Checkout, a fast checkout solution that allows customers to avoid the challenges associated with the multi-step traditional checkout flow, and also incorporates online and offline capabilities associated with triggers through geolocation. And finally, Brain Assistant, our after-sales customer service solution. As we think about our go-to-market strategy in deploying our product suite, we remain focused on three key areas to drive client acquisition and revenue growth. We believe those three key areas are necessary to create a market leader. First, direct sales, which we continue to build out. Second, strategic partnerships, which we believe can be very helpful in lead generation and the validation of our product suite. And third, acquisitions, which we believe provide us with upselling and cross-selling opportunities, as well as a fast route to market presence. When we look at our results for the last half of 2024, we built a solid foundation. With that overview of the business in mind, I'd like to recap 2024 and provide an update on how our business is trending in 2025. In the second half of 2024, we began our next chapter as a publicly traded company. We secured landmark strategic partnerships, and we strengthened our financial position, establishing a solid foundation that we believe well positions Rezolve to drive customer acquisition and revenue growth. As I mentioned, we completed our de-SPAC process in August 2024 and began trading on NASDAQ on August 16, 2024. Becoming a publicly traded company was a pivotal step for us at Rezolve as it provides us with the ability to access the capital markets, scale our organization and drive growth. During the second half of 2024, we also secured a number of strategic partnerships, none more important than those with two of the largest players in AI today, Microsoft and Google. These multi-year partnerships ensure Rezolve AI-powered solutions through our Brain Suite are available to cloud customers on both the Microsoft Azure Marketplace and on the Google Cloud platform, together providing Rezolve with access to approximately 90% of enterprise retail customers. Furthermore, these partnerships support adoption of Rezolve's Brain Suite by allowing cloud customers to credit their Rezolve subscription spend against their cloud commitments and incentivizing sales agents by attributing subscriptions to Rezolve Brain Suite against their sales quotas. We believe these partnerships with two of the leaders in AI and search validate our technology solution and provide a unique opportunity to significantly drive customer awareness and adoption. Additionally, during the second half of 2024, we announced a collaboration with Tether, the largest company in the digital asset industry, to develop a crypto payment solution that we believe will advance the use of cryptocurrency as an everyday method of payment, providing payment optionality for consumers and reducing transaction fees for merchants. Finally, as 2024 drew to a close, we took a number of measures to strengthen our financial position heading into 2025. To discuss those measures in greater detail, as well as our 2024 financial results and 2025 outlook, I'll now turn the call over to our CFO, Rich 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 look 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 BRAiNPOWA suite of products to retailers and e-commerce customers. And as we scale the business, this model supports both high gross margins and a cost base that is extremely flexible and can be adjusted 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 Rezolve's financial position, as well as some thoughts on the business outlook for 2025. Recapping highlights of the second half of 2024, we entered the public markets after completing our de-SPAC 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 online growth. Let me begin briefly by speaking about 2024 financial results. We ended 2024 with revenue of $188,000, resulting primarily from ancillary business activities. Non-operating or non-cash operating expenses, including stock-based compensation, advisor fees paid with shares, depreciation and amortization for the full year 2024, totaled $28.9 million. As a frame of reference, headcount drives approximately 50% of our cash operating expenses, with approximately 75% of that headcount focused on sales and marketing and research and development, and the remainder on general and administrative roles. If we add back advisor fees paid as shares, we ended 2024 with a loss of approximately $43.8 million on an adjusted EBITDA 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 de-SPAC transaction. These non-cash items were primarily driven by costs related to issuance of shares to third-party advisors. Other non-cash expenses included a $44.3 million loss on extinguishment of associated convertible debt, promissory notes and advisory loans, and a further $25 million of one-time share-based compensation, in addition to $10.6 million of interest expense. Operating cash flow for the full year was a negative $21.6 million with capital expenditures relatively low at only $3.5 million for 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 to strengthen our balance sheet and bolster our liquidity position. Prior to the close of the de-SPAC transaction the company incurred approximately $94 million in fixed-rate convertible debt. $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 sheet strengthens the company financially. As of the end of the first quarter of 2025, the company's remaining debt on the balance sheet comprised $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 of 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 to up to 48.3 million shares in our equity line of credit (E-LOC). 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 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 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.
Thanks, Rich. We entered 2025 with a solid foundation that we believe well positions the business to acquire enterprise customers and drive revenue growth. 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 a key strategic acquisition, growth of enterprise customers adopting our AI-powered 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 merchandising solutions. This acquisition enhances Rezolve's sales force, 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 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 GroupBy. 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; Coles 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 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 gross margin contribution, we continue to expect to achieve our over $100 million ARR target by year end. Overall, I'm extremely pleased with the 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've 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. I very much thank you for your support to date. I'd now like to turn the call back to Michael.
Thanks, Dan. Prior to our call, we asked participants, including analysts and investors, to submit questions that they would like to ask 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.
Questions and answers
Can you provide additional detail as to how the Liverpool deal came about and to what extent GroupBy and Google played a role in that process? And can you elaborate on any terms of the deal?
Yes, of course. We are thrilled to announce our landmark deal with Liverpool, Mexico's premier department store chain, announced 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. The Liverpool deal is emblematic of the success in our go-to-market strategy, as Liverpool was previously a customer of GroupBy for some of its services and was upsold to our Brain Commerce product solution, which includes the SEO Studio, a product that was developed in collaboration with Google by Rezolve. Would you like some more color on that?
Great. Thanks, Dan. In terms of the deal, is the effective date live today?
Yes. The deal is live today with the SEO Studio and is being enhanced with other projects. We're working on additional initiatives together with the Liverpool team. I was just there last week with management in Mexico City.
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 progress? Secondly, where are you seeing the most traction?
We are seeing traction across all three areas of our go-to-market strategy: direct sales, partnerships, and through acquisitions. In addition to early customer adoption and usage, we continue to gain momentum in our sales pipeline across the board. While we continue to build our direct sales team, which will be a focus of investment throughout 2025, we see significant progress from our partnerships, notably with Microsoft and Google, and from our strategic acquisition, GroupBy. Regarding Microsoft and Google, we see growth in both the number of potential enterprise customers and the average size of those potential accounts. We originally estimated our customers would drive around $1 million per annum on average, but as you can see from the Liverpool win, some customers are an order of magnitude larger. Although it's early since our strategic acquisition of GroupBy, it has provided direct access to an established customer base and accelerated opportunities to upsell the Rezolve suite, highlighted by Liverpool. The momentum so far gives us enormous confidence that our partnerships and acquisition strategy have provided a launchpad to drive customer adoption at an accelerated rate and at larger deal sizes than previously estimated.
Great. Thanks, Dan.
Can you provide additional detail as to how Microsoft and Google are marketing Rezolve to potential enterprise customers and driving client wins? And what does that sales cycle look like?
The sales cycle varies by customer—sometimes it can take a number of months and sometimes be accelerated to a matter of weeks. Microsoft and Google are marketing Rezolve in a similar way. They both view Rezolve as a platform that enhances the stickiness of their services to large customers. Both are offering incentives for customers to use committed contractual funds to buy Rezolve, which decrements those cloud commitments. For example, if a customer has a $10 million a year contract with Microsoft, spending with Rezolve can be counted against that commitment. We do not pay Microsoft or Google commissions for this. It's strategic for them because they want Rezolve in their cloud services to create longer-term customer ties. They also incentivize their sales teams: if their sales reps sell Rezolve to customers, those sales can count toward the reps' quotas. This creates a strong incentive to recommend our solutions. Combined with the product's compelling ROI, we see good engagement from both partners and their customers.
Excellent. Thanks for that additional color, Dan. I want to switch gears a little bit here. Our next question comes from Scott Buck at H.C. Wainwright and focuses on M&A.
Dan, can you walk us through your target criteria when evaluating M&A opportunities? And secondly, can you discuss your approach when funding M&A transactions in terms of cash versus equity?
Any acquisition target must fit with our model and be additive to our proposition. Some acquisitions will be geographic, for example buying an organization that provides site search—similar to GroupBy in another market—where we can upsell them to our solution quickly and elegantly. This gives us presence in markets we don't currently operate in and provides people on the ground. We prefer to target recurring customers that have established businesses. There are situations where we might find companies with compelling technology that would be additive; we haven't pursued many of those yet, but it's possible. Third, we may make talent acquisitions to bring on organizations with strong AI or natural language processing teams, which would accelerate our capability versus hiring in market. In short, we're focused on targets that provide customers, technology, geographic presence, or talent that helps us scale faster and more efficiently.
Yes, just in terms of the second part of that question, how are you thinking about funding transactions?
We prefer not to use significant cash for acquisitions because we want to preserve cash to fund the business. The GroupBy acquisition was paid using our stock; we paid what we felt was a fair price—$55 million paid in equity at roughly $3 per share. From a purchase price perspective, we felt we got good value. At the same time, we are mindful of shareholder dilution and the current market price of our equity, so we are cautious about using equity when our share price is depressed. We will use cash where the absolute amount is not material or where it's the right strategic fit, but equity is the primary resource we can utilize, subject to considerations around dilution and timing.
Can you discuss the factors that underpin the advantage Rezolve's proprietary LLM has versus AI solutions available in the marketplace today?
Many AI players have a generalist approach—trying to ingest everything and be an expert on everything. When we started in 2016, our objective was different: create a vertical LLM focused on solving a specific problem for e-commerce. We built a language model sophisticated in sales and tailored to product catalogs, because product catalogs can cause hallucination or drift in general-purpose models. For example, fragrance and cosmetic product descriptions can confuse models that are not taught to understand product taxonomy. We solved that by structuring product catalogs in a way the model can understand, and we have patented that process. Another differentiator is empathy: when a customer asks "I need two AA batteries," the correct reply is to facilitate the purchase immediately. A different, more consultative prompt requires a different tone. Our model understands prompt intent and can respond empathetically and appropriately. Third, we trained the model on sales techniques—techniques designed to close sales and optimize conversion. Combined—deep product and domain expertise, empathy, and sales techniques—our BRAiNPOWA LLM is designed to avoid hallucination and drive conversion. On top of that foundation, we've built three products—Brain Checkout, Brain Commerce, and Brain Assistant—that guide customers through the digital journey, effectively recreating the in-store purchasing experience online. If we can replicate the in-store relationship and experience online, we can substantially improve our customers' online revenues.
Excellent. Thanks for that color. I want to move to the financial model and outlook. We've received a number of questions for Rich, which are almost universal among analysts, the first regarding expense growth. Rich, can you dive a bit more into the areas of investment and levels of increased expense needed to support growth?
Yes. To reiterate, our cost base is highly elastic. We've spent several years flexing costs and we are experienced at managing them. As the underlying business gains traction and grows, we will see increases in cost of sales along with sales and marketing expenses as we grow those teams to generate sales. However, we do not see any meaningful step change in any of our cost buckets. We will grow costs in line with revenue. We expect to scale relatively quickly, given the operational leverage inherent in the SaaS model, and we believe we are well positioned from a liquidity standpoint to get through this initial startup period, which we expect to be relatively brief prior to achieving breakeven, which we expect to do around the $80 million to $90 million ARR level.
Thanks, Rich. That dovetails into the last topic, profitability outlook, which many asked about. Given that your SaaS model has significant operating leverage, how are you thinking about the level of ARR at which the company can achieve operating profitability?
The SaaS model puts Rezolve in a good position to achieve break-even profitability from relatively modest revenue growth. Achieving profitability, which we view in terms of adjusted EBITDA break-even, is one of our near-term milestones. As I mentioned earlier, we expect to reach adjusted EBITDA break-even at about the $90 million ARR level. We had initially targeted $100 million, but given the flexibility in our cost base we are confident we can achieve breakeven closer to $90 million. That said, breakeven will depend on sales mix, direct versus channel partners, contract specifics, and other factors, but $90 million ARR is a sensible benchmark at this point.
Excellent. Thanks for those comments, Dan and Rich, and thanks to everyone for joining this call. We really appreciate you taking the time to be with us today. Please feel free to reach out and contact us with any questions. We look forward to speaking with you all again in the near future. Thank you.