What changed in Banzai International, Inc.'s 10-K — 2022 vs 2023

Item 6. Reserved It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated audited financial statements and related notes included in Part II, Item 8 of this Form 10-K.

In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Factors that could cause or contribute to these differences include those discussed below and elsewhere particularly in the section titled “Risk Factors” and elsewhere in this Form 10-K. Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation.

Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding.

For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements or in the associated text.

Certain other amounts that appear in this section may similarly not sum due to rounding. 39 Overview Banzai is a Marketing Technology (MarTech) company that produces data-driven marketing and sales solutions for businesses of all sizes. Our mission is to help our customers accomplish their mission - by enabling better marketing, sales, and customer engagement outcomes.

Banzai endeavors to acquire companies strategically positioned to enhance our product and service offerings, increasing the value provided to current and prospective customers. Banzai was founded in 2015.

The first product Banzai launched was Reach, a SaaS and managed services offering designed to increase registration and attendance of marketing events, followed by the acquisition of Demio, a SaaS solution for webinars designed for marketing, sales, and customer success teams, in 2021 and the launch of Boost, a SaaS solution for social sharing designed to increase attendance for Demio-hosted events by enabling easy social sharing by event registrants, in 2023.

Our customer base included over 2,700 customers as of December 31, 2023 and comes from a variety of industries, including (among others) healthcare, financial services, e-commerce, technology and media, operating in over 90 countries. Our customers range in size from solo entrepreneurs and small businesses to Fortune 500 companies. No single customer represents more than 10% of our revenue.

Since 2021, we have focused on increasing mid-market and enterprise customers for Demio. Progress towards this is reflected in our increase in multi-host Demio customers from 14 on January 1, 2021 to 116 on December 31, 2023, an approximately 10-fold increase. We sell our products using a recurring subscription license model typical in SaaS businesses.

Pricing tiers for our main product, Demio, are based on the number of host-capable users, desired feature sets, and maximum audience size. Boost pricing tiers are based on the Demio plan to which the customer subscribes.

Reach pricing is based on the number of event campaigns a customer has access to run simultaneously or the maximum number of registrations a customer is allowed to generate per subscription period. Banzai’s customer contracts vary in term length from single months to multiple years.

Banzai generated revenue of $4.6 million and $5.3 million in the years ended December 31, 2023 and 2022, respectively. Banzai has incurred significant net losses since inception, including net losses of $14.4 million and $15.5 million in 2023 and 2022, respectively.

Banzai had an accumulated deficit of $46.8 million and of $32.4 million as of December 31, 2023 and 2022, respectively. Summary of our Merger On December 14, 2023, we consummated the Business Combination with Legacy Banzai.

Pursuant to the terms of the Merger Agreement, the Business Combination was effected through (a) the merger of First Merger Sub with and into Legacy Banzai, with Legacy Banzai surviving as a wholly-owned subsidiary of 7GC and (b) the subsequent merger of Legacy Banzai with and into Second Merger Sub, with the Second Merger Sub being the surviving entity of the Second Merger, which ultimately resulted in Legacy Banzai becoming a wholly-owned direct subsidiary of 7GC.

Upon closing the Business Combination, we changed our name from 7GC & Co. Holdings Inc. to Banzai International, Inc.

A description of the Business Combination and the material terms of the Merger Agreement are included in the Proxy Statement/Prospectus, filed by the Company with the SEC in the section entitled "Stockholder Proposal No. 1 - The Business Combination Proposal" beginning on page 92 of the Proxy Statement/Prospectus.

Operating Metrics In the management of our businesses, we identify, measure, and evaluate a variety of operating metrics, as described below. These key performance measures and operating metrics are not prepared in accordance with GAAP and may not be comparable to or calculated in the same way as other similarly titled measures and metrics used by other companies.

Measurements are specific to the group being measured, i.e. total customers, new customers, or other cohorts. We currently use these operating metrics with our Demio product.

We do not track and use these operating metrics with prior products. 40 The following table presents the percentage of Banzai’s revenue generated from Demio for the years ended December 31, 2023 and 2022 as compared to their other SaaS products.

Year Ended December 31, Year Ended December 31, Revenue % 2023 2022 Reach 4.5 % 15.0 % Demio 94.9 % 84.6 % Other 0.6 % 0.4 % Total 100.0 % 100.0 % Net Revenue Retention (“NRR”) NRR is a metric Banzai uses to measure the revenue retention of its existing customer base.

NRR calculates the change in revenue from existing customers by cohort over a period of time, after taking into account revenue lost due to customer churn and downgrades, and revenue gained due to upgrades and reactivations.

The formula for calculating NRR is: NRR = (Revenue at the beginning of a period - Revenue lost from churn, and downgrades + Revenue gained from expansion and reactivation) / Revenue at the beginning of the period. The following table presents average monthly NRR for Demio for the years ended December 31, 2023 and 2022.

Year Ended December 31, Year Ended December 31, Product: Demio 2023 2022 Average Monthly NRR 95.5 % 93.7 % Average Customer Value (“ACV”) ACV is a metric Banzai uses to calculate the total revenue that it can expect to generate from a customer in a year.

ACV is commonly used in the SaaS industry to measure the value of a customer to a subscription-based company over a 12-month period. Banzai uses ACV to segment its customers and to determine whether the value of new customers is growing or shrinking relative to the existing customer base.

Banzai uses this information to make strategic decisions about pricing, marketing, and customer retention. The formula for calculating ACV is: ACV = Total Annual Recurring Revenue (ARR) / Total Number Customers, where ARR is defined as annual run-rate revenue of subscription agreements from all customers measured at a point in time.

The following table presents new customer ACV and total average ACV for Demio for the years ended December 31, 2023 and 2022.

Year Ended December 31, Year Ended December 31, Product: Demio 2023 2022 New Customer ACV $ 1,355 $ 1,453 Total Average ACV $ 1,406 $ 1,213 Customer Acquisition Cost (“CAC”) CAC is a financial metric Banzai uses to evaluate the average cost of acquiring a new customer.

It includes marketing, sales, and other related expenses incurred while attracting and converting prospects into paying customers. CAC is a critical 41 metric for Banzai to understand the efficiency and effectiveness of its marketing and sales efforts, as well as to ensure sustainable growth.

The formula for calculating CAC is: CAC = Total Sales & Marketing Cost / Number of Customers Acquired. The following table presents CAC for Demio for the years ended December 31, 2023 and 2022.

Year Ended December 31, Year Ended December 31, Product: Demio 2023 2022 Customer Acquisition Cost (CAC) $ 1,030 $ 785 Customer Churn % Customer Churn % is the rate of customers who deactivate in a given period relative to the number of active customers at the beginning of such period or end of the prior period.

Understanding drivers of churn allows Banzai to take measures to reduce the number of customers who deactivate and increase the overall rate of customer retention. There are two types of Churn % measured: Revenue churn and Customer (or logo) churn.

The formula for calculating Churn % is: Churn % = [# or $ value of] Deactivations / [# or $ value of] Active Customers (Beginning of period). The following table presents revenue Churn and new customer (or logo) Churn for Demio for the years ended December 31, 2023 and 2022.

Year Ended December 31, Year Ended December 31, Product: Demio 2023 2022 Average Monthly Churn - Revenue 6.9 % 7.1 % Average Monthly Churn - Customer (Logo) 7.9 % 7.6 % Customer Lifetime Value (“LTV”) LTV is a financial metric Banzai uses to estimate the total revenue it can expect to generate from a customer throughout their entire relationship.

LTV helps Banzai understand the long-term value of each customer, enabling it to make informed decisions about marketing, sales, customer support, and product development strategies. It also helps Banzai allocate resources more efficiently by identifying high-value customer segments to focus on growth and retention.

The formula for calculating LTV is comprised of two metrics: Monthly Recurring Revenue (MRR) and Customer Life represented in # of months.

Calculations for these metrics on a per-customer basis, as follows: MRR = ACV / 12 Customer Life (# of months) = 1 / Churn % LTV = MRR * Customer Life (# of months) MRR is calculated by aggregating, for all customers from customer base or the group being measured during that month, monthly revenue from committed contractual amounts.

For customers on annual contracts, this represents their ACV divided by 12. The following table presents MRR, Customer Life, and LTV for Demio for the years ended December 31, 2023 and 2022.

Year Ended December 31, Year Ended December 31, Product: Demio 2023 2022 MRR (New Customers) $ 117 $ 121 Customer Life (months) 14.5 14.1 LTV (New Customers) $ 1,635 $ 1,706 42 LTV / CAC Ratio LTV / CAC ratio is a culminating metric measuring the efficiency of Sales and Marketing activities in terms of the dollar value of new business generated versus the amount invested in order to generate that new business.

This provides a measurement of ROI for Sales and Marketing activities. A segmented view of LTV / CAC ratio gives additional insight into the profitability of various business development activities. The formula for calculating LTV / CAC ratio is: LTV / CAC for the segment or activity being measured.

The following table presents the LTV / CAC ratio for Demio for the years ended December 31, 2023 and 2022.

Year Ended December 31, Year Ended December 31, Product: Demio 2023 2022 LTV / CAC Ratio 1.6 2.2 Analysis of the Impact of Key Business Drivers on Financial Performance Banzai strives to maximize revenue growth within a reasonable cost structure through optimizing and continuous monitoring of the key business metrics described above relative to SaaS industry benchmarks, Banzai’s direct competition, and historical company performance.

This is accomplished through a combination of increased revenue per customer (higher ACVs and NRR) on an increasing customer base, generated through efficient customer acquisition (LTV / CAC ratio) and improved customer retention (lower churn, higher customer life).

Other business activities contribute to improved performance and metrics, including but not limited to the following: • Customer Success and Onboarding, leading to maximum customer satisfaction and retention. • Product Development and Support, maximizing customer value, supporting usage and expansion revenue. • Company Initiatives, designed to improve trial experience and conversion rates, on-demand adoption, and emphasis on data to position our products as a system of automation and a system of record for our customers, supporting growth and retention. 43 Identification of Operational Risk Factors There are a number of key internal and external operational risks to the successful execution of Banzai’s strategy.

Internal risks include, among others: • Management and leadership issues: ineffective leadership, poor decision-making, or lack of direction. • Operational inefficiencies: inadequate processes and poor resource allocation may lead to decreased productivity or insufficient ROI. • Financial mismanagement: inadequate financial planning, improper accounting practices, or excessive debt can lead to financial instability. • Employee-related challenges: high turnover, lack of skilled staff, or internal conflicts can impact morale and productivity. • Technological obsolescence: failing to develop (or adapt) to new technologies in anticipation or response to changes in market trends can lead to competitive disadvantages.

External risks include, among others: • Economic factors: including economic downturns, inflation, or currency fluctuations impacting business spending and overall market conditions. • Competition: from established industry players to new entrants, eroding market share and profitability. • Legal and regulatory: changes in laws or regulations that impact operations or increase compliance costs. • Technological disruptions: from advancements in technology leading to obsolescence of existing products. • Unforeseen events: including natural disasters, geo-political instability, and pandemics, potentially impacting market demand, operational or supply chain disruption.

Analysis of the Impact of Operational Risks on Financial Performance The risk factors described above could have significant impacts on Banzai’s financial performance.

These or other factors, including those risk factors summarized in the section titled “Risk Factors” could impact Banzai’s ability to generate and grow revenue, contain costs, or inhibit profitability, cash flow, and overall financial performance: • Revenue and Sales: Internal risks from operating inefficiency or external factors, including economic downturns or increased competition, could lead to lower sales, impaired unit economics, and reduced revenue. • Costs and Expenses: Internal operating mismanagement or external factors, including supplier issues, may cause increased cost relative to revenue generation, resulting in insufficient return on investment or profit margins.

By continuing to conduct comprehensive risk monitoring and analysis on financial performance, Banzai can optimize its ability to make informed decisions and improve its ability to navigate internal and external challenges. Such activities include: identification and categorization of risks, quantification and analysis of potential severity, and development of risk mitigation strategies.

It is also important for Banzai to ensure financial reports and disclosures accurately reflect the potential impact of risks on financial performance, essential for transparent communication with investors and stakeholders. The Business Combination and Public Company Costs The Business Combination was accounted for as a reverse recapitalization.

Under this method of accounting, 7GC was treated as the acquired company for financial statement reporting purposes. Accordingly, for accounting purposes, the financial statements of Banzai represent a continuation of the financial statements of Legacy Banzai with the Business Combination 44 treated as the equivalent of Legacy Banzai issuing stock for the net assets of 7GC, accompanied by a recapitalization.

The net assets of 7GC were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Legacy Banzai in this and future reports of Banzai.

As a consequence of the Business Combination, we became the successor to an SEC-registered and Nasdaq-listed company, which required Banzai to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices.

We incurred and expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees. We are qualified as an “emerging growth company.” As a result, we have been provided certain disclosure and regulatory relief.

Our future results of operations and financial position may not be comparable to Legacy Banzai’s historical results of operations and financial position as a result of the Business Combination.

Results of Operations Year Ended December 31, Year Ended December 31, Year-over- Year-over- ($ in Thousands) 2023 2022 Year $ Year % Operating income: Revenue $ 4,561 $ 5,333 $ (772 ) -14.5 % Cost of revenue 1,445 1,957 (512 ) -26.2 % Gross profit $ 3,116 $ 3,376 $ (260 ) -7.7 % Operating expenses: General and administrative expenses $ 12,905 $ 9,275 $ 3,630 39.1 % Depreciation expense 7 10 (3 ) -30.0 % Impairment loss on operating lease — 303 (303 ) -100.0 % Total operating expenses $ 12,912 $ 9,588 $ 3,324 34.7 % Operating loss $ (9,796 ) $ (6,212 ) $ (3,584 ) 57.7 % Other expenses (income): SEPA commitment fee and deferred fee expense $ 3,826 $ - $ 3,826 nm GEM warrant expense 2,448 - 2,448 nm GEM commitment fee expense 2,000 - 2,000 nm Other income, net (63 ) (151 ) 88 -58.3 % Interest income (1 ) — (1 ) nm Interest expense 2,631 1,651 980 59.4 % Interest expense - related party 2,923 729 2,194 301.0 % Loss (gain) on extinguishment of debt — 57 (57 ) -100.0 % Change in fair value of warrant liability (1,807 ) — (1,807 ) nm Change in fair value of warrant liability - related party 115 — 115 nm Loss on modification of simple agreement for future equity — 121 (121 ) -100.0 % Loss on modification of simple agreement for future equity - related party — 1,602 (1,602 ) -100.0 % Change in fair value of simple agreement for future equity (208 ) 308 (516 ) -167.5 % Change in fair value of simple agreement for future equity - related party (2,752 ) 4,078 (6,830 ) -167.5 % Change in fair value of bifurcated embedded derivative liabilities (1,405 ) 254 (1,659 ) -653.1 % Change in fair value of bifurcated embedded derivative liabilities - related party (3,063 ) 607 (3,670 ) -604.6 % Change in fair value of convertible promissory notes (34 ) — (34 ) nm Total other (income) expenses $ 4,610 $ 9,256 $ (4,646 ) -50.2 % Loss before income taxes (14,406 ) (15,468 ) 1,062 -6.9 % Provision for income taxes — — — nm Net loss $ (14,406 ) $ (15,468 ) $ 1,062 -6.9 % 45 The percentage changes included in the tables herein that are not considered meaningful are presented as “nm".

Components of Results of Operations Revenue Analysis Year Ended December 31, Year Ended December 31, Year-over- Year-over- ($ in Thousands) 2023 2022 Year $ Year % Revenue $ 4,561 $ 5,333 $ (772 ) -14.5 % For the year ended December 31, 2023, Banzai reported total revenue of $4.6 million, representing a decrease of $0.8 million, or approximately 14.5%, over 2022.

This decrease is primarily attributable to lower Reach revenue which declined by approximately $0.55 million due to a shift in Banzai's focus to its Demio product and decision, which decision was reversed in 2024, to begin phasing out the Reach product. In 2024 Banzai is revitalizing its focus on the Reach product through re-engineering and expanded sales efforts.

Demio revenue was lower by $0.19 million in 2023 as compared to 2022 due to churn and lower new sales year-over-year.

Cost of Revenue Analysis Year Ended December 31, Year Ended December 31, Year-over- Year-over- ($ in Thousands) 2023 2022 Year $ Year % Cost of revenue $ 1,445 $ 1,957 $ (512 ) -26.2 % For the years ended December 31, 2023 and 2022, Banzai’s cost of revenue totaled $1.4 million and $2.0 million, respectively.

This represents a decrease of $0.5 million, or approximately 26.2%, in 2023 compared to 2022, due primarily to lower customer base and an approximately 5% lower cost per average customer, driven by lower contracted services and data licenses costs of approximately $0.3 million and $0.2 million, respectively.

Gross Profit Analysis Year Ended December 31, Year Ended December 31, Year-over- Year-over- ($ in Thousands) 2023 2022 Year $ Year % Gross profit $ 3,116 $ 3,376 $ (260 ) -7.7 % For the years ended December 31, 2023 and 2022, Banzai’s gross profit was $3.1 million and $3.4 million, respectively.

This represents a year-over-year decrease of $0.3 million, or approximately 7.7% due to the decreases in revenue of $0.8 million and decreases in cost of revenue of $0.5 million described above.

Operating Expense Analysis Year Ended December 31, Year Ended December 31, Year-over- Year-over- ($ in Thousands) 2023 2022 Year $ Year % Total operating expenses $ 12,912 $ 9,588 $ 3,324 34.7 % 46 Total operating expenses for the years ended December 31, 2023 and 2022, were $12.9 million and $9.6 million, respectively, signifying a year-over-year increase of approximately $3.3 million, or 34.7%.

This increase was due primarily to fees associated with the Business Combination and the initial public offering of our predecessor, 7GC, including the cost associated with audit, technical accounting, legal and other professional services of approximately $3.7 million, primarily offset by the loss on impairment of lease of $0.3 million.

Other Expense Analysis Year Ended December 31, Year Ended December 31, Year-over- Year-over- ($ in Thousands) 2023 2022 Year $ Year % Total other (income) expenses $ 4,610 $ 9,256 $ (4,646 ) -50.2 % For the year ended December 31, 2023, Banzai reported total other expenses of $4.6 million.

This represents a decrease of $4.6 million from the year ended December 31, 2022, when the Company reported total other expenses of $9.3 million.

The change in other expenses (income), net was primarily driven by the following: • The cost associated with the Yorkville SEPA, of $3.8 million. • GEM warrants issued as a financing expense of approximately $2.4 million. • GEM commitment fee expense of $2.0 million. • Changes in fair value of the simple agreement for future equity ("SAFEs") was a gain of $3.0 million in 2023, of which $2.8 million pertained to related party SAFEs.

This represents a net change of $7.3 million from the 2022 loss of $4.4 million, $4.1 million of which related to related party SAFEs. • Loss on modification of SAFEs was $1.7 million in 2022, $1.6 million of which was related to related party SAFEs, with no equivalent modification or resulting gain or loss in 2023. • Changes in fair value of warrant liability was a gain of $1.7 million in 2023, with a loss of $0.1 million related to related party warrant liabilities.

These warrants, both third party and related party, were issued and assumed in 2023, and as such, there was no equivalent gain or loss on warrant liabilities in 2022. • Interest expense increased by $3.2 million ($2.2 million due to related party) year-over-year to $5.6 million for the year ended December 31, 2023 ($2.9 million for related party) due to the company raising additional interest bearing debt during 2023. • Changes in fair value of bifurcated embedded derivative liabilities was a gain of $4.5 million ($3.1 million for related party) as of December 31, 2023, relative to a loss of $0.9 million in 2022.

Provision for Income Taxes Year Ended December 31, Year Ended December 31, Year-over- Year-over- ($ in Thousands) 2023 2022 Year $ Year % Provision for income taxes $ — $ — $ — nm For the years ended December 31, 2023 and 2022, Banzai’s reported provision for income tax expense was $0.0 million and $0.0 million, respectively.

There was no year-over-year increase or decrease to income tax expense. As of December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $26,705,200 and $13,043,900, respectively. As of December 31, 2022, the Company had federal and state net operating loss carryforwards 47 of approximately $15,325,300 and $9,175,400, respectively.

Federal losses of $124,500 begin to expire in 2036 and $26,580,700 of the federal losses carryforward indefinitely. State losses of $10,666,100 begin to expire in 2031 and $2,377,800 of the state losses carryforward indefinitely.

Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar provisions.

Banzai has determined, based upon available evidence, that it is more likely than not that all of the net deferred tax assets will not be realized and, accordingly, has provided a full valuation allowance against its net deferred tax asset.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss carryback potential, and tax planning strategies in making these assessments. Banzai has determined that it had no material uncertain tax benefits for the years ended December 31, 2023 and 2022.

Banzai recognizes interest accrued for unrecognized tax benefits and penalties in interest expense and penalties in operating expense. No amounts were accrued for the payment of interest and penalties at December 31, 2023, and 2022. Banzai files tax returns as prescribed by the tax laws of the jurisdictions in which it operates.

In the normal course of business, Banzai is subject to examination by federal and state jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. Our 2016 and subsequent tax years remain open to examination by the IRS. Banzai had no open tax audits with any taxing authority as of December 31, 2023.

Net Loss Analysis Year Ended December 31, Year Ended December 31, Year-over- Year-over- ($ in Thousands) 2023 2022 Year $ Year % Net loss $ (14,406 ) $ (15,468 ) $ 1,062 -6.9 % For the years ended December 31, 2023 and 2022, Banzai reported net losses of $14.4 million and $15.5 million, respectively.