Q2 2021 SRAX Inc Earnings Call
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We've had now 10 consecutive quarters of Sequoia.
Yeah.
We've increased the number of required clients from 200 to $2.25.
We've had in Q2, we had our largest booking quarter ever we booked $11.4 million in Q2.
We increased our guidance from.
Our increased that guidance to $30 million to $32 million for the for the full year.
We're currently holding approximately $23.8 million in marketable securities and $10 million in cash on hand.
And our entire position in big token has now been registered with the SEC. So all of our shares.
Inside of what is now known as F. P. B D have been registered.
Here's a snapshot of what the business looks like without big token because as many of you know we consolidate big token because we own such a big piece of it but it has its own separate company. So what we'd like to do is break out this acquire piece on its own. So you get a sense of what the true picture.
Our business looks like.
So we had revenues of around seven seven.
$7.1 million at year over year growth of 806%.
We had gross margins of.
5940.
So 83% gross margins and adjusted EBITDA of around $1 million for now that is a.
That is a swing.
From the previous year of a negative 1569.
So almost a $3 million swing to the positive side.
So on on EBITDA and also the EBITDA is last quarter was 500000, and so youre seeing a significant <unk>.
The increase in EBITDA.
For the company. So we're really excited about this we did have noncash items inside of <unk> acquire.
Four adjustments and stock and so we have a negative net income, but that's all noncash and Mike will walk through a detailed explanation of how that works today. So you have a much better understanding of.
How we do these calculations.
Here's our supplier clients we've.
As you can see our bookings in Q2 or more than we've ever had in.
The history of the company.
We're starting we're not seeing that slow down at all.
We're continuing to have.
Significant growth.
As of into the this quarter. So we're we're continuing to experience rapid growth in this area. So we're excited about that.
And.
That's something that we think is.
Hopefully continuing.
Here's some of the major accomplishments for the quarter.
We've we grew the client base to 225 clients that have signed up for this acquired platform. We've held two conferences in the quarter, we held an LD micro in a cannabis conference in the quarter, we launched an E mail feature in SMS integration.
We launched a registered investment advisor a feature where are.
Users can search for registered investment advisors and understand.
All of their.
Understand who different registered investment advisors are and we give them their phone number email address so you can say I don't want to reach all the investment advisors in Westlake village, where I live and and from there you could then go and bring up all the registered investment advisors and you could start marketing to those people.
And maybe set up lunch with them or whatever it is to reach out to them and educate them about your company.
We filed our first of three patents are we have another patent that will be filed by the end of this month.
I have two patents filed if you remember last quarter. We said we identified three we'll have the second one files.
By the end of this quarter.
We launched Microcap stock Com.
As a site to aggregate all data around micro caps.
Yeah.
One of the big things that happened for US was big token Assuan went effective so all of our shares within.
Big token or F. P V, which is a symbol that big took and trades under were registered so we're you know.
As many of you know that had been watching this we have 159 billion shares of that stock.
And they've all been registered at this point, so we could start to monetize.
We could start to monetize that asset over over time.
So we're launching our first person event, if the world doesn't continue to fall apart.
So where we're going to shoot for that.
Uh huh.
We have a big part of <unk>.
What got accomplished this last quarter.
And the team did a really good job on this was establishing all the accounts to sell all different types of stock.
So you know there's many many different.
Places that only sell certain title at take certain stocks. So we have around I'd say five or six different relationships now and we're able to.
Use that to monetize all the stock that we have.
And.
We launched our most aggressive sprint on new offerings.
We've we implemented.
The sprint that is going to build what we think is the.
<unk> will be the most aggressive.
New feature development of this acquired platform and we're really excited about that and the team is working hard to get that done.
Now this is the piece that we're the most excited about.
Today, we're announcing that we're doing a $10 million stock buyback program.
Yeah, we think there's a disconnect between.
Our stock price and our and the quality of the business and what we're doing.
And so we're going to implement a $10 million stock buyback program.
And a lot of that money for the $10 million will come from.
Our new <unk>.
Sales of <unk> that are coming in the door and also as we start to monetize some of the <unk>.
<unk> token stuff and if if if we are able to monetize some of the big tuck in stuff.
Higher value.
Then we will obviously increase that number so our goal is to whatever we can get.
Whatever we can get for our position in F. P V D will combined with a stock that we're getting.
And sales that we're making in the marketplace, we're going to use that money to go into the.
The market and buy some stock back.
Today, we're also announcing a one time special dividend of approximately six and a half million dollars to shareholders of record on September 20th.
We will be issuing entering a nonvoting non tradable prefer that will hold approximately $6.5 million in stock from our clients.
From time to time, it's a shares are sold will pay out the proceeds to the preferred shareholders.
So obviously that is a we think a very big thing. It's approximately comes out to approximately 23 cents a share.
So hopefully that you now hopefully 23 cents a share is a is a nice return for it for a quarter and we'll reevaluate whether we continue to do that thing that type of thing in the future.
Now I'm going to turn the call over to.
Mike Malone, Mike has some very detailed.
Review of all of our financial information he has broken down exactly how all of the.
The stock.
Is how all the stock is held in an owned.
And so I'm going to let Mike walk you through that and also Mike will give you a little bit more explanation on the dividend itself and how it works.
Mike.
Thank you Chris.
Overall, we delivered another solid quarter of operating results.
As mentioned earlier, we ended <unk> with revenues of $7.7 million representing year over year growth of approximately 870%.
Our revenue.
<unk> to be driven by acquired which finished the quarter with revenue of approximately $7.2 million representing year over year growth of approximately 800%.
Our sequential quarter over quarter growth of 68%.
Both were ahead of expectations.
Our profit margins continue to grow.
And improve as required revenue continues to grow.
On a consolidated basis gross margin was 81%.
As compared to 66% in the prior year.
Operating expenses finished at $7.3 million for the quarter, which is up $3.3 million from prior year.
Yeah.
So quiet represented approximately $2 million of this increase which was driven by increases at our operations and support area to support the increase in our <unk> platform.
The remainder of the increase or approximately $1.3 million was attributable to big tokens operations.
Operating loss for the quarter.
It was $1 million, which is up from the prior year by $2.2 million.
And on this acquired Standalone basis, excluding big token.
<unk> reported operating income of approximately $940000, which was up from an operating loss of $2 million in the prior year.
Although loss for the quarter was approximately $5 million, which was driven by an unrealized loss with our marketable securities.
Which I'll cover more detail in a few moments.
Net loss attributable to <unk> shareholders was $5.7 million for the quarter.
Or a loss of 27.
Guidance per basic and diluted share weighted average shares outstanding basic and diluted were $23.6 million.
Now moving to highlights from our balance sheet.
As a result of the strong performance from what's required business, we've seen our marketable we see market improvements in our balance sheet.
Over the past year, we've grown our cash and marketable security balances from a total of $6.3 million.
Total of 34 point.
$1 billion.
As of June 32.
2021.
All while decreasing total gross debt from $10.4 million to approximately $3.1 million as of June 32021.
Our marketable security balance has grown significantly over the past few quarters and is now our largest.
That was the largest item on our balance sheet.
And I'd like to dive into this a little further detail.
At the end of second quarter, we reported approximately $24 million in marketable securities.
This balance represents the fair value of stock and other securities we receive is payment.
For services that you acquire.
We mark to market to spell up at the end of each quarter.
Based on quoted market prices of each of our holdings.
Any changes in the fair value recorded as an increase or decrease in the marketable securities balance on.
On the balance sheet with a corresponding unrealized gain or loss reported in other income section of our income statement.
Due to GAAP accounting principles are balance sheet reporting only consists of marketable securities that the company has taken legal custody in the midst balances related to additional shares that are due.
<unk> result of anti dilutive provisions, we haven't many of our contracts and shares.
That are due from our customers related to contracts that were recently signed.
In total this represents an additional four points 8 million in securities.
That are unrecognized as of June 32021.
Upon receipt of these additional shares we will record these as an increase in the value of our positions with a corresponding unrealized gain on our marketable security balances.
Now another question that we often receive is around how we recognize revenue that we derive from from.
The services that are paid for securities Woodstock.
Now looking at this example, a typical supplier contract with a $250000.
Total value on a one year term.
The total revenue recognized over the contract term is fixed based upon the total contract value agreed upon with signing of the contract.
And upon receipt of the shares which are contractually due upon signing of the contract we record the value of the securities in our marketable security balance.
With a corresponding increase in the deferred revenue balance.
As we provide services during the term of the contract.
In this case ratably over the year, we recognize one quarter or approximately 62.5000.
<unk> thousand per quarter.
And any corresponding change in the fair value of the shares during his contract period is recorded in other gain loss.
And with that I'd like to turn the call back to Chris.
Thanks, Mike.
Now, we'll do Q&A.
We have some of our analysts on the line here with US today, and we'll do some Q&A from the analyst and then.
And then we will.
Open the questions to some of our shareholders that submitted their questions to us over the last few days.
Hey, Catherine.
We have our we have our first question from Katherine.
At <unk>.
B Riley.
Hi, Chris Thanks for taking the question.
Subscriber additions.
Digital marketing services from Johns and further.
And purchased additional congestion.
Digital marketing services.
Thanks, guys.
I'll, let Mike answer that one.
Mike you have.
Yes, Catherine can you can you hear me yes.
Yes.
Yes.
Apologies for that so.
As of.
As of today's date, let me just pull this up here my apologies.
Scott.
Our schedule here.
And.
I can help you with that Mark you meet those numbers.
Yes, maybe you could take the first part of that I am just pulling up my numbers here I think.
We've got about $2.28, Randy and then and then in terms of the managed services I forget it because I'm trying to find that number.
And Jason.
Just for everybody knows.
This is Randy Clark, Randy Clark Who's our Chief operating officer, and his first time on the earnings call with us.
Welcome to the call Randy.
Thank you.
Yeah. Thank you so Catherine.
It looks like as of today, we got our numbers updated through today, we've got 228 total platform accounts.
And of those 228.79 of those have entered into managed services agreements with us.
So basically that's around 35% of the companies that we have signed on to contracts that went on to do.
Additional services.
And of those 79, we ran 141 total campaigns.
So per client, we're running right now about $1.78.
Campaigns for our clients.
So.
I think thats the number that youre looking for.
Great. Thank you and one more for me.
Given trailing 12 months supplier booking how much acquired revenue R&D is likely to be recognized in the second half of this year.
Again, just based off of what you've already booked.
So Catherine we've got.
Yeah.
In this in the back half from what we have booked through Friday, approximately $13 million, which will bring the full year amount to closer to $24 million assets acquired.
Okay, great. Thank you.
Youre welcome.
Okay great.
Did you.
I'd say I think <unk>. This is Jon Hickman of course, Sean go for it.
I have two questions. The first one is how how India dollar amount did you liquidate any of your securities in Q2.
And the second question is can you talk to if you like.
I don't know.
General terms about your plan to get under the 50%.
Ownership of big token.
And then not too distant future.
John I can I can quickly address I think the first part of that so.
It may be best to just think about it for the first six months, we sold approximately $3 million and then in the in the second quarter just under $1 million did we did we liquidate.
Okay.
And then as far as our.
Our plan there is a trans out there is something that we're working on with the big token that would put us in a position where we would.
Beyond consolidated.
And that looks imminently like it's going to happen.
Sometime in the next.
Uh huh.
I would say.
Maybe four to six weeks.
Okay. Thank you.
Sure.
Chris It looks like Todd hazardous Andres.
Yes can you guys hear me.
Todd. Thank you how are you thanks for joining us I appreciate it great quarter guys very impressive.
And my specific question because one of my questions got asked before is there any metric in place that <unk> will be using when buying back shares that.
Yes, maybe I can do Warren Buffett, where maybe your share price to your guidance.
<unk> growth rate and what you've got in bookings might be too expensive and you would wait is there some kind of corridor youre looking at for the buyback.
On price.
That's actually.
Being put together right now.
So.
We have to have you have to be.
And then in the next couple of weeks, we'll have that all in place and.
And so we haven't defined it fully yet, but we certainly know that down here that you know this is the stock down here is trading at a mall.
Cap of three times sales.
Yeah, what we said, we'll do 30% to $32 million for the year I think that and we've consistently hit our numbers.
The view.
Yeah, I think that that is.
Highly undervalued.
I think that we are willing to buy it down here and taken that back in because it's definitely accretive accretive and we're seeing continued EBITDA.
A positive EBIT.
Okay, great. Thanks, Chris a second question would be an acquirer of bookings our supplier services.
How many clients that you guys have booked or re upping or a second <unk>.
<unk>.
Is there any information on that.
I've got that information Chris.
Todd So it looks like and this is this is all time today for going back to the beginning of a really last year.
So we've sold 228 client 79 of those have entered into managed service agreements averaging around 178 with Joseph answering Catherine's question with overall, 36% of our managed services clients have come back.
It renew add on or contract for additional services, so were seeing strong numbers.
However.
Where we really at this time last year started to really hit our stride. So this next quarter in the following order are going to be huge for us in terms of measuring renewal and retention because almost 100% of our contracts are annual and Theyre just starting to expire.
Excellent.
Thank you Randy Thank you, Chris look or to mortgage stuff in the future. Thanks.
Thanks, a lot of time and appreciate the support.
Welcome.
Let's see.
Jim are you there James I can see a phone I could see your phone number there.
Hello, Hey, Chris.
Okay.
Chris.
Hello, Hey, Jim we can hear you <unk>.
As Mike already for Christmas.
Hey, I'm just one can.
Can you talk a little bit about the the big choke and position.
Obviously, you can sell on the open market now but.
I'm sure you've considered.
A dividend.
Of those shares as well similar to what Youre doing with the portfolio can you talk about your philosophy on VIX, So Kevin what your monetization strategies.
Yes.
We've looked at that.
We've looked at the idea of a dividend of them out, but we'd have to do it similar to the way that we are are doing this.
This dividend that we are doing this quarter, where I would have to be a preferred share where we are.
So it on our own.
And then.
Hey, there's a tie those dividends out to the shareholders.
The piece.
The it's worth right now.
Something like $750 million.
And.
So I mean, it's it's a crazy valuation.
For this but yes, we have.
Contemplated.
Doing that.
And that it'll make our lives a lot easier.
To get below a point, where we we don't have to consolidate all of this information and we can just be.
A much clear on.
The.
We can just be much clear on.
The true value of the company.
Got it thank you and one other thing.
This acquired business.
Can you talk about subscription.
Pricing, if theres been any change or if you're contemplating any change and then secondly.
If you can talk about what you think the trend is going to be on the on the non subscription revenue part of supplier I.
I know that.
Partly driven by whatever programs companies have during this period, but.
Maybe if you can talk about.
A seasonal trend if there is a seasonal impact if there is any in Q3 or four.
And then also the longer term trend of what you think the <unk>.
Non subscription revenue just acquired looked like.
Randy you want to take that.
So we've definitely seen quarter over quarter increase now or.
Eight straight quarters, and we're we're definitely well on our way to continuing that this quarter and I think we'll see that in Q4 as well.
So I don't see.
We're just at the tip of the iceberg in terms of the amount of revenue that we can grow within this business.
So from my standpoint in our projections and working with finance on our numbers out for the next four quarters, we see this growth continuing.
Especially on the managed services side.
But in the numbers of subscriptions, we got very aggressive goals for just acquire.
We're where we want to get too.
<unk> hundred 28, now we'd like.
To add at least 50 subscribers per quarter.
That's kind of what we're modeling ourselves after right now and really theirs.
Almost unlimited cap the number of companies that we can ultimately bring into our platform.
Up to the total number of companies that are publicly held so.
I'm not sure if that gives you the exact number because we haven't forecasted in 2022, yet but for the remainder of this year, we had to go in and revise our numbers actually make them higher because.
The goals that we originally set for ourselves, where we were kind of blown away.
Got it.
I look at this business and.
Jacqueline Hi Wei.
On the positive side.
You can imagine where the revenue per subscriber continues to grow as we add more services, but on the negative side you can think of.
They've gone after the low hanging fruit and so the incremental customers would have.
Less.
The less revenue.
For subscription, but the ancillary managed services revenue you seem to be implying that.
The former not the latter and that Theres still.
A lot of room to grow the revenue per car.
Customer is that did I hear that correctly.
Absolutely Yeah. We're we're excited about the number of 36% I think it was a number that I have that.
Half of our managed services clients that have come back and added more dollars to their spin.
And that doesn't include the new clients that we're bringing on so we're growing at a very aggressive pace and we're keeping the business that we've managed to bring on board. So we continue that formula which is kind of what I'm charge, where the CLO managing the sales and operations side of the business, we keep that trend.
I don't see the growth slowing down for a long long time.
That's great.
Thanks, a lot I appreciate the answers thank you.
Youre welcome.
Great Chris I think that's all we have we do have one other question that came in which I will go ahead and read off.
We had a question from Mark that says on the last earnings call. Chris mentioned the plan of monetizing a large portion of big token chairs and provided a timeline of three to six months, which is right about now is this still the plan and can you. Please explain how you plan on doing that.
Chris <unk>.
Randy are you there can you maybe fill in and answer that I can read it again, if he naming him.
Yes, if you don't mind.
Like Chris May have lost his connection.
Sure I actually there I'm I'm back.
My son must be taken a break on has a fortnight expertise right now.
Yeah.
Well, it's I kind of answered this before a like we we've registered those shares now shares have now been registered.
Which was a big undertaking I got them all all registered and now we have the ability to to start to monetize.
To start to monetize those.
So that is a that's something that's.
That will start looking at it.
Turns out for the remainder of this year.
So.
The thing that I was talking about in the previous quarters was that we had to get these shares registered which I actually thought it would take a little bit longer than it actually did.
So we're just we're excited about that now.
Hopefully that answers the question.
Great. Thank you Brad.
Yeah, and I appreciate everybody, taking the time to come I just wanted to give our analysts Walmart chance if anybody has a another question before we.
Before we leave.
Okay.
And I want to thank Mike and and.
And Randy and Morgan floor.
Working on the call today, and also Kenya who's on our team I. Appreciate your help thank you very much and all the analysts. Thank you very much for participating and asking all these questions.
We look forward to seeing you again in the.
And.
Goodbye.