Good afternoon, and welcome to Kubient's first quarter 2022 earnings conference call. Joining us for today's call are Kubient's Founder, Chairman, Chief Executive Officer, Chief Strategy Officer, and President, Paul Roberts, and Chief Financial Officer, Josh Weiss. Following their remarks, we will open the call for your questions. Before we get started, I need to alert you to our safe harbor statements under the Private Securities Litigation Reform Act of 1995. During this call, we will be making forward-looking statements, including statements related to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from many future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Listeners should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could and likely will materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of our operations, growth strategy, and liquidity. These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or implied during the call.
Furthermore, listeners are referred to the documents filed by Kubient, Inc with the SEC, including our annual report on Form 10-K, filed with the SEC on March 31st, 2022, with the understanding that our actual future results may be materially different from what we expect, which include these and certain other important risk factors. We qualify all of our forward-looking statements by these cautionary statements. Also, note that the forward-looking statements on this call are based on information available to us as of today's date. Except, as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Please refer to Kubient's SEC filings, specifically its registration statement on Form S-1, initially filed on December 12th, 2020, for a more detailed description of risk factors that may affect the company's results. During the call today, management will discuss adjusted EBITDA, a non-GAAP financial measure. In the company's press release and filings with the SEC, both of which are posted on the company's website, you will find additional disclosures regarding this non-GAAP measure, including a reconciliation of this measure with its comparable GAAP measure. Non-GAAP financial measures are not intended to be considered in isolation from, a substitute for, or superior to GAAP results. The company encourages you to consider all measures when analyzing this performance. Now, I'd like to turn the call over to Mr. Paul Roberts. Sir, please proceed.
Thanks, operator, and thanks to everyone who has joined us today. As you've seen from the earnings release that was issued earlier this afternoon, we've started the year off with a strong Q1 top-line figure. For the first quarter, our net revenue was $1.2 million, which represents a 39% increase from the prior quarter and a 76% increase year-over-year, marking one of the strongest quarters we've had in a while. The increase was a result of new customers acquired as a result of the MediaCrossing, Acqui-hire. Although we successfully delivered approximately $1.2 million in total Q1 revenue via the Audience Cloud and Kubient Managed Services, subsequently strongly surpassing our revenue target for the quarter, all of us at Kubient are aware of the need to preserve capital while we strategically explore M&A opportunities.
After much consideration with the counsel of our management team and board of directors, the goal at this time is to guide Kubient to a position of strength where the outflows more closely match the inflows of our balance sheet, and we focus on maximizing the ROI of our existing capital. That said, we are now actively in a mode of scaling back our expenses, including our general overhead, along with our labor force for the sake of cash conservation. Despite the encouraging top-line achievement for the quarter, we recognize that the rate we were using cash to fund the business is not sustainable and optimal to grow the bottom line. We have already begun pulling back on certain non-essential positions and evaluating whether other divisions within our business might be streamlined further in order to conserve the company's resources.
However, we still plan to maintain the necessary components of our organization on the development and operation side of our engineering core. To provide additional context, we have eliminated half of our prior headcount, which directly translates to savings in our operating expenses and subsequently presents us with more promising financial results looking ahead. The effects of the situation in Ukraine and unprecedented competition in the skilled labor market have also played a role in the decision to maximize the productivity and efforts of our core business endeavors. We've spent a great deal of time and energy building out an effective and proprietary solution that we think is going to properly address the overhanging fraud and efficiency-related troubles plaguing the advertising market. As a result, we have decided to optimize our employees to alleviate the overhead expenditures.
Nevertheless, we still plan to maintain our current client roster and existing partnerships and believe that we can still conduct operations and generate strong revenues. Even with a more streamlined workforce. With the optimization of our internal units and conservation of capital, we look to aggressively continue efforts on the M&A front. With the change in the overall financial climate, we believe that Kubient is an extremely attractive target participant for reputable companies looking to find the proper answer to lost advertising spend on fraud-ridden media. We host a fully built-out supply-side platform with the direct publisher integrations and a proprietary solution to remove the crippling ad fraud issue, which we believe will be the direction the ad tech industry is headed.
As such, we will continue our search for synergistic businesses, both large and small, that might bolster both the supply- and demand-side of our business, with a focus on bolstering our technology offering to the public and our valued customers. We look forward to provide further updates on our acquisition efforts when appropriate. Beyond our continued efforts with regard to potential M&A opportunities, we've kept our focus on expanding our organic growth opportunities to provide services to the wider advertising community. As we mentioned, we are maintaining our previous client relationships and our efforts on the front of increasing the quantity and quality of partnerships has been ongoing. We've seen new fruit come to bear on the partnerships growth front. Namely, PubMatic and Yahoo recently decided to work with Kubient as demand-side partners in addition to their current supply-side integrations.
These evolutions of partnerships are a result of contracts we signed over the past quarter, effectively plugging the ad tech company and platforms into the Audience Marketplace to better serve their clients. While we celebrate these partnerships, there is still work to be done to extract revenue and additional growth with these partners. Now I'll hand the call over to Josh, who will provide additional color on the quarter from a financial perspective. Josh?
Thanks, Paul, and good afternoon, everyone. Thanks for joining our call. Now to our financial results for the first quarter ended March 31st, 2022. Net revenues for the first quarter of 2022 were approximately $1.2 million, compared to approximately $708 ,000 in 2021. The increase in net revenues was primarily attributable to net revenues generated related to customer contracts acquired in connection with our acquisition of MediaCrossing in November of 2021. Earlier in the first quarter, we determined that it was no longer probable that we would collect payment from a customer from which we were entitled. Therefore, we ceased providing service to the customer on April 6th, 2022, while still pursuing collection of payment for the work our team had already performed.
With that said, we only recognized net revenues of approximately $48,000 from this customer in the first quarter, when in reality, we provided additional services of approximately $1.1 million. As of the second quarter, we received approximately $600,000 of payments and expect to recognize revenue in future periods related to the contract for any payments received in excess of the loss accrual, which I will discuss shortly. Turning to our expenses. Technology expenses increased to approximately $1.2 million from approximately $520,000 in 2021. The increase is primarily due to an increase in headcount costs, hosting fees, non-cash stock-based compensation, and software expenses. General and administrative expenses increased to approximately $2.2 million compared to approximately $1.3 million in the first quarter of 2021.
The increase was primarily due to increases of legal fees, including legal fees associated with the legal settlement entered into in March 2022, non-cash stock-based compensation, other professional fees, all partially offset by a reduction in state taxes. Regarding the additional line item, we recognized a loss accrual of $790,000 for media costs incurred in February and March 2022, which relate to the services performed from the aforementioned customer stated at the beginning of my remarks. GAAP net loss attributable to common shareholders was approximately $3.6 million dollar loss or $0.25 loss per share, compared to approximately $1.8 million dollars or a $0.14 loss per share in the same period last year. The reason for the decline was primarily due to the loss accrual I just discussed and the increase in expenses previously described.
Adjusted EBITDA, a non-GAAP measure, increased to approximately $3.6 million EBITDA loss, compared to an adjusted EBITDA loss of approximately $1.5 million in the same period last year. As of March 31st, 2022, the company had a cash balance of $20.7 million. That concludes my financial summary. For a more detailed analysis, please reference our Form 10-Q, which we plan to file today. I will now turn it back to Paul. Paul?
Thanks, Josh. During this period of capital conservation and consolidation of labor forces, we feel strongly that our proprietary technology, dedicated labor force, and new strategy will mitigate these temporary headwinds facing Kubient. We appreciate all of our employees, investors, and clients for your support. Now I'll turn it over to the operator for Q&A.
Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Again, star one if you would like to ask a question. Our first question comes from the line of Jack Vander Aarde with Maxim Group. Please proceed with your question.
Great. Hey, guys. Thanks for taking my questions. I appreciate the update. Paul, I'll start with a question on, I believe you mentioned in your prepared remarks you guys have eliminated half of your prior headcount, and I'm sorry, I'm bouncing around like six earnings calls tonight, so forgive me if I'm a little in and out. Can you maybe just help clarify what your existing headcount is and maybe like a rough breakout by role, what percentage R&D, ad sales and marketing, just to give me a lay of the land?
Sure. Yeah. Just to give you a more color, Jack, you know, we were really looking at the entire ecosystem and the environment right now in the finance side of the world, and we just felt it was a little reckless to spend for growth. We really wanted to bring the burn-down rate significantly, looking at, you know, the current headcount we had, what roles could potentially be duplicative, and how do we really conserve the cash that we have on hand. We think that's just a tremendous asset for us and, you know, with the environment the way it is, we don't really know what the environment would be like to go out and potentially have to raise more capital in the future. Like I mentioned, we're gonna protect that money we have on our balance sheet at all costs.
The roles that we did lose were primarily driven out of the operations side. We're looking at, you know, the sales tech and really the tech driving what we're doing day-to-day. We've kept, you know, really strong R&D resources on the tech data science side, and we're going to, you know, potentially add in the future to the sales side of the equation while, you know, maintaining and keeping our current clients happy. I apologize, I don't have right in front of me the actual breakdown that you asked for, but, you know, I can get that for you as a follow-up.
Yeah, sure. No worries there. That, that's helpful enough.
Yeah.
I guess in, you know, given this market environment, I think it, you know, it does make sense to pull back on some OpEx and streamline costs just given the tight environment. What I do wanna point to is on the positive side, your revenue was outstanding, relatively speaking, at $1.2 million. Pretty big jump, 76% year-over-year. I think you mentioned MediaCrossing was a driver of this, maybe from the relationships they have. Can you spell out maybe the two or three key drivers of that revenue growth? Is that something that's sustainable?
Sure. It's a great question. It is driven a lot by the partnerships that we're able to secure, both, you know, prior to MediaCrossing, Acqui-hire, along with the acqui-hire of MediaCrossing. We mentioned earlier that platforms are starting to work with Kubient on both the supply and the demand side, which is a very positive reaction to working with us. Because what they're seeing is, yes, we can bring them very good audience, but they also want us to clean all of that audience before they could potentially buy it. It is a testament to our belief that the fraud prevention is a big seller of what we've built.
On the MediaCrossing side, what we're learning is that their team and, you know, being able to explain the benefits of Kubient and why removing fraud is so impactful, we expect to see additional revenue come in via some of those partnerships. Because typically how it works is someone will shift some of their budget into Kubient, and they'll see a greater return on that media dollar. They'll then move money from different partners into Kubient. It's a lot of testing, learning, increasing budget. Testing, learning, increasing budget. What we're seeing is the impact of KAI and our Audience Cloud driving better results. We're optimistic that in the future that's gonna potentially drive additional revenue from existing clients.
Gotcha. You know, just because you spelled out again in the bullet points of the press release, can you maybe and these are some big, obviously big bellwether names in the industry, but can you just talk about what PubMatic and what Yahoo means to your business, maybe from both a relationship perspective and then also from in terms of material of, you know, actual revenue growth in the future?
Sure.
How big are these two names relative to the overall puzzle?
Yep. If you look at ad tech as a whole, there's maybe, you know, 10 real players in the industry. You have the Google, Amazon, Yahoo, then you go down to the PubMatic of the world. The reason why these relationships are so important is because these are the platforms of choice for a lot of brands and a lot of publishers. When we go and we speak to a direct brand and they say, "Well, we buy all of our media through Google. We buy all of our media through MediaMath," for example, we have to be able to integrate directly into those platforms in order to see those revenue dollars flow through our Audience Marketplace. If we don't have established relationships with all of these players, we're going to basically handcuff ourselves from generating revenue with those partners.
If we go and talk to a large CPG or a large e-commerce company and they say, "We love the concept of efficiency, we love the idea of removing the fraud before I buy it, we've already built our entire media buying on Google," for example. If we're not integrated fully into Google, we have no way of accessing those budgets. The fact that we did this work and it took a very long time to do, but having relationships with Yahoo, with PubMatic, with Google, with MediaMath is critical for our sales team when they go out and they talk about KAI, when they talk about the Audience Marketplace. Because those brands and those publishers can very easily access our platform and reap the benefits of KAI and the efficiency that we continually talk about.
Got it. That makes a lot of sense. Paul, maybe just sticking on the top line, one last question. You guys are an emerging growth company, so I'm not sure how much seasonality plays a role here, but traditionally speaking, first quarter is a seasonally slow quarter in the digital ad world.
Yeah.
Maybe for the rest of this year, I know you don't provide guidance, can you maybe just directionally comment on how you would expect your revenues to kind of move? Is it gonna be lumpy or would you expect this to be a base level?
I think three years ago, Jack, it would have been as predictable as a clock. The reality is, with COVID and the change in spending habits, it's gotten much harder, both industry-wide and internally with Kubient, to kind of say, "Okay, Q1 is going to look like this. Q3 is gonna look like this." We're preparing and like I said earlier, we're kind of circling the wagons and holding onto cash in case there are some bumpy quarters. You know, we're getting great responses from, you know, our partners on the technology that we've built. We're hoping that, you know, we can get a little into a little bit more of a stabilized environment.
I do believe with, you know, the economy the way it is, with the, you know, lingering effects of COVID, it's a little bit hard to go back to that old model of, you know, Q1's a little soft, Q4 is a little strong. But we're optimistic of what we've built and, you know, believe we're gonna continue to get adoption.
Okay. That's a very helpful answer, and I appreciate the transparency, and it sounds like you guys are streamlining costs and yet still able to achieve growth. I'm happy to hear that. I appreciate the update. I'll hop back in the queue.
Thanks, Jack.
At this time, this concludes the company's question and answer session. If your question was not taken, you may contact Kubient's investor relations team at Kubient@gatewayir.com. I'd now like to turn the call back over to Mr. Roberts for his closing remarks.
Thanks, operator, and thank you everyone for joining us today on our Q1 2022 earnings call. I especially wanna take a moment to thank our employees, our partners, our investors and customers for their continued support. We appreciate your interest in Kubient and look forward to updating you on our next call. Operator?
Thank you for joining us today for Kubient's first quarter 2022 earnings conference call. You may now disconnect.