Q2 2020 SRAX Inc Earnings Call
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Good afternoon, everyone I'd like to walk them all of you distracting second quarter 2020 conference call with US today from management are structured CEO, Christopher Miglino and CFO Michael Malone.
Chris Miglino will give an overview of the second quarter and an update on the business, Mike Malone will review the financials and turn the call back to Chris Miglino for closing remarks.
Then we will open the call for questions.
If you would like to ask questions. Today. Please join the call on the web conference only or post your questions in stock Twits under shacks.
To ask a question on the webcast you can either click the raise hand and will on you use that you can speak or you can submit your question in the chat.
Before I turn the call over to management I would like to remind you that this call may contain forward looking statements, which could be indicated by the words anticipate could enable estimate intend expect believe potential will should project and similar expressions as they relate to tracks.
Investors are cautioned that all forward looking statements involve risks and uncertainties and may cause actual results to differ from those anticipated by strikes at this time.
In addition, other risks are for more fully described and Jackson's public filings with the U.S. SCC was can be reviewed our W. W. FCC dockets.
Finally, please make note that on today's call management will refer to certain non-GAAP financial measures adjusted EBITDA as defined as earnings before interest taxes, depreciation and amortization noncash equity based compensation and changes in the fair value of derivative and warrant liabilities and certain additional onetime charges. Please refer distractions press release work.
Full reconciliation of its non-GAAP performance measures to the most comparable GAAP financial measures now does my pleasure to turn the call over to track CEO, Chris Miglino Chris.
Thank you Natalie.
Thank you everybody for joining us today.
Our present any today from what will be the first version of this acquire virtual Roadshow feature we have a lot of exciting things to discuss this quarter as we've made a lot of progress.
First we saw a significant improvements in ours acquire sales and this enabled us to recognize a 29% increase in revenues for the year and a 232% quarter over quarter.
For Q2 increase.
At the same time.
Enacted significant cost cutting measures in the queue that resulted in a 21 production, 21% reduction expenses for the Q and a 30% reduction year over year.
We continue to see.
Strengthening of our margin as more and more our revenues coming from our SaaS.
Based so acquire platform our margins increased.
To 66%.
Which are very excited about and then we've seen an increase in our EBITDA as well.
EBITDA increased approximately 35% year over year, and 18% quarter over quarter in the second quarter. We completed a 16.1 million dollar convertible debt financing that positioned us well to accommodate the growth we're experiencing most.
Notably in the in the quarter is our continuous growth in bookings for the year.
In the second quarter, we reported that we had booked over $2.5 million in.
And that pace did not slow so when we gave our call for the last quarter, we reported that we did 2.5.
In the first six weeks of the third quarter, we've booked over $4 million.
For Justice acquire platform alone and.
Close to $5 million between supplier and big token.
We had anticipated that we would see a a $3 million in bookings for the entire third quarter. So we we actually exceeded that in July alone. So very very excited about that.
Based on that we think that theres strong growth happening and based on that.
Strong growth is having on the bookings, we anticipate that we'll be able to.
Make our payments on the convertible debt debenture without having to raising additional capital with just the money, though from the bookings that we have to date.
So we have a two different distinct products inside the.
SRAX platform.
We have supplier, which we'd like to call and operating system for a publicly traded companies and we are big token as a platform that allows consumers to own and manage their own data.
So first I'm I'm going to focus a little bit abouts acquire because we have seen so much growth in that side of the business.
So so requires a an operating system for a publicly traded companies. It allows public companies to track their investors, who is buying and selling their stock and insights into those investors and it gives us the ability then to market out to those.
Shareholders.
Most notably for the quarter, we had 91 clients that have subscribed to the supplier platform.
Which were very excited about that.
Thats a significant increase in over last quarter, where we had said we had 68 clients and.
This week, we should pass the hundred.
Client Mark if not this week next.
In the quarter, we launched a few really notable advancements that we added for the ability for our clients to track institutional investors and helped our customers identify who those investors are and where they're custodian their shares so that they could be tracked intra period and between filings of 13 absent 13 geez.
We also launched a survey feature that allows for public companies to survey their shareholders and ask them questions about how they think management is doing or how they might view, a particular issue that the company needed to contend with do they think the company.
Should buy a company or merge how they think the management is doing do you how would they vote on a particular issue.
Weve passed the 1 million.
Shareholder Mark inside the platform.
Meaning that out of our 91 clients, we have 1 million shareholders that are represented by those.
91 companies and that a lot of those people a lot of those shareholders around half of them are.
Robin Hood traders, who we've been able to identify from some of our clients that have seen significant growth on the Robin Hood side, and we have one customer alone that saw growth from around 3000 shareholders. When we started working audits and now they have around 360000 shareholders.
Which around 250000 of them are.
Robin Hood traders and we have a few different stories like that as well.
As we mentioned in the last quarter.
We launched our stock for ads program that allows public companies to pay for supplier and a and its related services and stock. We continue to see a lot of adoption of that platform and add people wanting to interact with it and another.
The thing that we launched the platform as the ability to identify shareholders that are holding their shares on the OBO list or in street aim and we've created some intelligence that really helps the the issuer identify where those people are holding those shares.
Weve.
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The.
The institutional Investor shareholder database thing as has been.
A great addition to the platform.
We've you know we've seen a lot of companies wanting that data, even though a lot of it tends to be a little bit dated on 13, often thirteeng filings. We've added it so that our customers could see it's a now that a lot of people might be new to the story I'm going and walk you through some of the features.
That we have within supplier itself and the things that are helping us with the growth of this platform.
We have a inside the platform they have the ability to do shareholder tracking inside the shareholder tracking we can see the name of individual shareholders.
Total number of shares at a company has the number of shareholders that were added in any given period.
And the amount of shares in individual owns and the price at which they acquired those shares and then from this data. We then can extract additional information about those shareholders. So we can get there not only their name and address book and get their Facebook pages are linked in pages are Twitter pages their E mails their phone numbers.
And different ways that are because our issuers can communicate with those shareholders inside the institutional database. We've added the ability for companies to look and see who their institutional holders are how many shares they own over a period of time and then the.
Realty for issuers to then go in and search for other companies and prospect against other institutions that are investing in peers. So you can see who those people are how much they're investing in your peers and then give you phone numbers in ways that you then can communicate with them.
And then the.
We've added in the shareholder surveys. So you can launch inside the platform the ability for.
Companies just to ask questions of their shareholders. So that you that can say you know do you think we should by another company DDIC, we should merger related companies. How do you think the management of the company is doing and you can create all of these different surveys in the platform and send that out to your shareholders.
And then we have a section that allows companies to manage all their warrants and options employee option. So you can manage all of the different warrants that you have so you could see at any given time, how many warrants are out there in the marketplace and.
You can see that the or what the value of those warrants are to the company at any given time. So you can see here that this company has $21 million worth of value in the warrants that they were all exercise today and then you can run sensitivity testing and analysis around that.
Now these are just some examples aside from the.
Platform itself, we that help our customers go to market and identify different identify different traders and investors that might be interested in advertising I mean in buying stock for that company. So.
So you're looking at.
These are some banners that we've created and we are using these banners to target people that we know our investors in certain types of company and then running ads to make them aware of these different companies that are out there.
This is an example of what that might look like on stock Twits. So here you can see an AD for wrap that is showing a video of somebody getting ramped.
The video that was on CNBC and we take that put it in there and are targeting you know not everybody on stocked rich, but just the people that we know our active and are.
Out their buying a better out their buying stock. So we're sure that the media dollars that we're spending our effective and driving conversions to meet driving people to become shareholders and the company and we can see that.
In the platform, we can see the number of new shareholders that we're driving on a weekly basis for the company Here's some other examples of that media. This is inside of a inside of Facebook and inside of Twitter and Instagram. So you can see this is another client that we.
Ran a bunch of media gadson drove a lot of people to a lot of robinho traders.
This is the growth that we've seen over the last few quarters of supplier. So obviously was a new product for US we've worked hard after we sold the MD business due to build this up we started at 12 clients and we've grown that now to 91 client.
So over the Oh, yeah over the last five or six quarters and what we're noticing now is that we're starting to see significant significant acceleration of that pace, we beefed up the sales team here and we're closing deals and non stop.
In fact, we set in our press release weeks or Ben closing around a million dollars a week for around the last six weeks. So it's been a busy six weeks.
Here you can see that weve generated around 746000 in revenue in the second quarter. We book 2.5 booked in other around this is actually a little bit higher than this now are up $4 million as of today and so where are.
Ah we booked a lot of money and those are year long contracts for us acquire clients. So we'll start to see the fruits of that labor as we go in through the rest of the year, it's exceeding what we had anticipated we would do here. So we're seeing a lot of success and this is why you're starting to see an increase our margins because the.
The Mark the margins on the SaaS platform here are pretty significant and so we're starting to add those margins start to get as the revenues on that side start to get bigger and bigger you're starting to see additional you're starting to see a an increase in the margin itself. So.
We're excited that will cross around 100 a.
Companies on platform here pretty soon that's going be a big giant milestone for us.
So.
Without a you know I know this quarter is been a really big success for.
Supplier and we've had a lot of.
You know a lot of growth there, but big token at same time continues to.
You know increase their volume of companies advertising on the platform and increase the number of companies out there partnering with.
So yeah lottery dotcom as a deal that they just did and they also did a partnership with Red box, we did a deal with group and Singapore to begin monetizing our Asian Pacific a users on the platform and most notably we signed a deal with Procter and gamble fabric care, which inside the.
PNG World is the is the biggest spender of media dollars inside PNG and I don't if you've been following our story.
For a little bit.
In the last four years or so we had done around.
$30 million worth of media buying for Procter and Gamble, so bringing them into the big token platform is a significant advancement for.
The big token platform. This deal took around a year and a half to get done and we finally got it done so really excited about that they've had around $570000 revenue year to date, we have a lot of repeat business coming in here. So you got repairs repeat business from craft Tyson.
Ego additional repeat business from others like we add the.
We have the girl Scouts of America, we worked at publicists to create a consumer code research study across all the publicists agencies to educate their brands about how they should deal with.
The cobot crisis, and how willing consumers were to make changes that too there are spending habits. During the co bid crisis, which actually ended up being virally really valuable for them.
We launched what we call lightning insights, which is a a way for brands to get very quick research results from the platform and.
And.
You know typically brands would go into a research study and say look we want to 1000 people are 2000 people answer is we can get that in an afternoon from these people. So we've we've also launched something called big seasons, which was our most ambitious.
Exercise and big token for the quarter Big So token adds additional gamification two data value and and it it creates a predictable payment cycle for consumers because a lot you know we're paying consumers a once a quarter and at least this defines that those.
Consumers are getting paid one time per quarter and it gamified the entire process and it's been very successful and actually since implementing as we've seen a significant increase in the.
In the number of.
People engaging with the the platform the before I go before I go into the financials and turn it over over to Mike I'm going to Oh, Oh on second here.
I just wanted to bring out the.
The the fact that although we've talked about it a number a number of times that we are you know we're still.
We still own 31% of R.
Andy business, So M.D. is.
Still something that you know is a significant part of our business, we own 31% of it and as of as of the end of this quarter our preferred position in that business is equal to around $11.6 million. So it's.
$11.6 million that.
That we would be paid in a preferred position if that business, which sole was sold we think the businesses is doing well we have some confidentiality around it so I can't talk about what their numbers are but.
We think the businesses is doing good and if they don't sell it if they sold into the hours sold at the end of 2020, we should see approximately at a minimum the $12.1 million return on that business.
So they're all in all we think it was a pretty good quarter for us and we think we're well positioned to continue to benefit from both big token and from the from Big Tokyo and from the growth of supplier. So I'll now turn the call over.
Mike or to review some of the financials.
Thank you Chris.
And as Chris mentioned earlier, we now operate the businesses as two separate operating companies supplier in big token and beginning with this quarter. We now includes segment information revenue and profit margin within the footnotes and the Mdna section of the end of the 10-Q that we filed this past Friday.
And jumping into the quarterly results total revenue for the fourth quarter was $1.165 million compared to $904000 in the second quarter 2019, reflecting an increase of 29%.
For the first six months, we finish with 1 million 516, which is roughly 1% over the prior year.
Gross margins were 66% for both the second quarter and the first half and this compares to 54% and 50% for their respective periods in the prior year.
Operating expenses were $4 million compared to 5.1 in the second quarter 2019.
And for the first half of 2020 operating expenses were 8.1 compared to 9.6.
The primary driver the decrease in operating expenses driven by the the reduction in staffing and cost rationalization activities to be began earlier this year.
Operating loss for the quarter was $3.2 million and $7.1 million in the first half respectively. This compares to operating losses of 4.6 million, an 8.9 million for the second quarter in the first half of 2019, respectively.
Now turning to our balance sheet during the quarter, we raised approximately 14 million in gross proceeds through the sale of convertible debentures for $13 million and then we received 1 million dollar per $1 million of proceeds from it PPP loan for which we expect to receive full forgiveness and then in the coming months.
As a result of the stock for as program. We now have approximately 1.7 million in marketable securities on our balance sheet as of 630.
And then through the business that we have closed through today's date subsequent to 630, we now have approximately 5.5 million in current value of marketable securities.
And with that I'd like to turn call back to Chris.
[laughter].
Thanks, Mike.
So at this point, we'd like to turn the call over to some questions and see if anybody has questions I know that.
If you were if your dialed in on the the call you can.
Post a question and the chat or if you all are if you want to ask questions. Good and raise your hand guns see who's a.
Raise their hands here.
And it looks like we have.
A question from Mike Crawford at B., Riley, So I'm going to go and.
Hi, Mike how are you.
Hi, Chris can you hear me.
We can yes, how you doing excellent I'm. Good. Thank you. So I wanted to ask about a supplier.
Welcome.
Companies are prospecting versus peers, what data are these companies accessing to do this prospecting.
So they're looking at what are what other funds are invested in that company. So you can look at both to the filers that have filed against that company and also the companies that have met the funds that have made investments into that company. So you can say, okay, whose whose invested directly into this business.
Or who has filed that Dave made an investment in this company.
During the quarter.
So it's looking like 13, F. data or is this more no bode data from Broadridge. That's the only thing directly in to the platform. It does it does all of those things. So it it it pulls and 13 at 13G it looks that if the company did an overnight direct deal it looks like they did.
It looks the to find out if they day convertible debt deals and it looks it who those funds were that made those investments. So that you can see the number of shares that those companies may have had or have the opportunity to get and then if they did get them where did they go what custodians got them. So that then we commenced part two.
Track them intra period, just finished an overnight direct deal and then at night direct deal you issued out 2 million shares to a fund and.
So you then are you then we can start to track where those shares went and the changes on a on a day to day or week to week basis of those shares.
Okay.
Thanks, then just one final question for me.
Also regarding sequester so historically the company is done.
Has proven to be digital marketing experts and no you have.
A base of 100 companies that probably is digital marketing services. So no further their business not just maybe gain insight into their investor base or gain new investors.
So you know to what extend do you see that will comprise a component of this require ancillary services going forward and maybe first racks overall.
Yeah, that's where we're seeing a significant part of the growth is.
Not only from the companies wanting to use us to help them identify shareholders at market to shareholders, but those same public companies wanting us to help them a market their services, whether that you know b b to b or b to C and you've seen our expertise of analyzing.
Data to be able to better market.
To those consumers or to those businesses. So that's where we're seeing a big uptick in that side of the business and it's the direct correlation between the relationship with the company in understanding their cap structure that is enabling us to have that conversations with the CEO CFO chief marketing or.
For a series of those companies.
Great well, thanks very much.
All right. Thank you I appreciate it.
Let's see if anybody else has.
That's a question.
If you wanted ask a question in your online you can just hit the Theres a hand, there just hit that button and then Ah you fell to ask a question.
Let's see here.
Okay I have a question here.
From a.
Steve So I, Steve Howard.
Not only.
[noise], yes.
Oh, Yeah, we plan to sorry, yeah.
Yeah.
Okay. So.
All right well, Steve you got to we can't hear you when you walk away from your computer.
I think the question was.
A question around on how we're doing on big token.
And what the.
Potentially what's happening with the big token invest.
So so.
Well you have obviously been a big part of business.
You know privacy couldn't be more.
No issue than it is right now I mean, we've had add more.
Issues around.
Obviously I come up in Maine.
[laughter] in.
Business than before every order so.
Where.
No. We're we're finding that.
Its a.
But it's definitely something that is of importance to the market, where we think theres a big opportunity for big token to do something on its own and you know really be.
Be it potentially a you know do some kind of strategic and positioning and that where you know we're exploring a bunch of things with big token right now and I think that all.
Everybody ill will learn about some decisions, we make about that and the in the next.
I'm not going after two months.
So somebody on the chat as had asked a question and a they're asking.
You know, what's the status of the SRAX rights expiring on 12 31 2020 in the M.D. payouts for the $10 million, so and the MD payout was Ah that was they earn out that they had that the from that we are supposed to get around a year ago, if they hit certain numbers, which I didnt.
Hit those numbers are you still they still owe us a you know we still have our preferred position in that company. So we still are are owed the money if they sell the business I'm. So we anticipate that that'll happen. Some I'm here in the future <unk>. We you know we hope that.
They are benefit from the covert economy here, where you know that businesses focused around helping pharmaceutical companies reach certain factors without salespeople and to use.
Very good data targeting to reach those people so I am.
So we think that business is well positioned and could really be.
Make a lot of money here in the future, but and as far as the rights got Oh that we'd be attributed to this the.
The strategic thing that I, just mentioned a little bit ago. So sometime in the in the month and a half to two months from now I think the YOD much clearer understanding of what's happening there.
Let's see I.
Thank God.
Somebody saying it what's the value of having a million.
Vactor theres knee platform and this acquire platform itself well or the value of.
Being in this acquire platform is having that many users in this acquired platform is that we can learn a lot about who investors are and how much.
How what type of stocks they are investing in and what kind of people are in that and what kind of companies and that targeting at that date. Yeah that is glean from from all of that enables us to really to be a lot more successful and.
Targeting additional new investors and that's really band our that's been our expertise for the last 10 years and so I just think that you know the more data we have in there the more we learn from it and yeah. We have a bunch of machine learning, we've set up against that data.
That just feeds us back amazing targeting capabilities that really work and we see a when we start targeting the right investor There's for the right type of company Youre really sit you're really starting to see.
Uh huh.
Sure its platform and when you have a KP I that is saying look if I spent money on marketing and can I drive additional shareholders and at a platform and you see that haven't week to week.
That's very valuable and that's why we're yeah. That's why we're at that success in Spain.
You have seen more companies content and it's not a company is that our spending with us, but we're starting to see a lot of additional companies existing customers reach stat and spend more in.
In the same platform.
So if anybody else has any any questions we can.
And just raise your hand in the room.
Well.
Oh.
Answer any questions they might have.
All right well. Thank you very much for a for joining us today I. Appreciate you taking the time to join the call in here a little bit about as what we're doing Oh, we have one more question how its fans as well.
Second.
Let's say in it.
So thank you very much for joining us today and.
And.
You know if there's any questions that you guys have that we didn't answer here. Please get in touch and we'd be happy to set up a call with you and let you know yeah I try to answer any questions. We didnt answer here today. So we appreciate we think we're in a good spot. We think the company is well positioned we worked hard to.
To get here.
Like we said in our press release, we really feel like we're at a tipping point with the business and that you know where we're seeing ourselves.
Kind of getting to a point, where so requires really a well well position to continue to take off or just said you know watched us at the beginning with 100 companies, we think that there's thousands and thousands of companies that could be on this platform.
So thank you very much for joining us today and we appreciate that.
I have to be here.
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