Q3 2021 SRAX Inc Earnings Call
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Welcome to distract Q3, 2021 earnings call.
We had another amazing quarter. It tracks first I'd like to start with a list of some of our major accomplishments for the quarter.
In the third quarter, we continued to consolidate big tail gain in our financials. So we'll talk about our financials are consolidated and require on its own.
Year over year revenue growth.
With 219% consolidated at 283% supplier on its own.
Quarter over quarter revenue.
Growth was 8% consolidated and 5% supplier audits out.
We achieved our Q3 guidance with 8.31 million in revenue.
We're giving Q4 revenue guidance of $10.1 million.
Implying fiscal 2021 revenue up $31.5 million, which is at the high end of our full year revenue guidance that we gave earlier this year.
Tracks third quarter pro forma EBITDA was $1 million, excluding big token.
We had 12 quarters of consecutive sequential revenue growth and.
And we increased the number of acquire subscribers from 225 to 250.
Q3 bookings were eight.
<unk> $9 million, we saw many of the deals we're working on in July and August get pushed to Q4 when people are on vacation at the end of the summer.
But for Q4 bookings are now 12.5 million as of this call.
With a projection to hit $16 5 million in bookings for the fourth quarter.
We're holding approximately 29 million in marketable securities plus.
Plus the shares that we set aside for the dividend.
Cash on hand of $7 million.
Revenue from existing contracts for 'twenty 'twenty. Two is currently at $6 5 million without any without taking into consideration any renewals of existing clients.
So I'll start off 2022 with a great base.
While we're giving guidance for 10.1 for Q4. This includes some revenue for big token in the quarter.
This slide shows the revenue growth will require on its own and the projected revenue first acquire on its own in Q4.
Which will be $9.4 million.
As you can see we continue to see revenue growth as we add more and more companies to the platform.
While we saw an increase in revenue for the Q. We also hired up on the technical side hired on the sell side increased marketing spend and experienced a number of one time cost associated of patents and the big token transaction or.
Our goal is to continue to grow the revenue and balanced operating the company at positive EBITDA.
We booked $8 9 million in Q3, and while that's a great number is eclipsed by the current bookings in Q4 of $12.5 million with a projection that closed out the quarter with $16 5 million in bookings.
Even at its current level of 12.5, it's the most we've ever sold in one quarter.
This puts us in a great position to start out 'twenty 'twenty jail.
As of today, we're at 250 subscribers to the platform. This is a double the number of subscribers from last year.
What has to note is that we continue to see strong demand for the platform.
As you can see.
We increase the revenue from require on its own.
286% year over year.
We took was a loss.
$1.4 million for last year.
To a 1 million dollar gain for this year.
As of the end of Q3, we had 25.6 million shares outstanding.
We have a little bit of convertible debt left which Mike will talk about later and.
And we have close to 10 million warrants most of which expire.
In January of 2022, and the rest throughout 2022, so we should exit 2022 warrant free.
One of my favorite features of this acquired platform is the ability to manage all of your warrants.
This is a screenshot of our our warrants out of this acquired platform.
Many of our many of our warrants from deals we did years ago are expiring in 2022.
The current in the money warrants will bring it a little over $16 million in cash to the company in 2022.
That does not include $4 5 million warrants that expire at the end of January 2020.
2022, with a 750 strike price.
If those did get exercised they would bring in an additional $41 million in cash to the company.
But this slide is just a perfect example of the type of data that we're helping our clients manage inside this acquired platform.
Another great feature on this acquired platform is our ability to see the position of institutional funds.
Our institutional ownership has grown from 600000 shares.
In the second quarter of last year to over 5.2 million at the end of the second quarter.
This year.
Based on projections, we think ownership of institution has grown to $7 million.
For the third quarter.
It should be noted that while this is.
This is the holding of the institutional filers. We also have nine 8 million shares better in the hands of insiders and long term tracks investors.
This brings the total number of shares and institutional like hands to over 16.8 million. This leaves approximately 9 million shares in the float.
All of our success cannot be achieved without our team.
And I'd like to take this opportunity to thank our 153 employees for their contribution to the access to the success we're experiencing.
We could not accomplish this with and without.
Without you and your dedication and hard work is greatly appreciate it.
Now the number of employees, we have will change when big token and schrack separate in two different companies.
Those people will always be part of the <unk> family.
This is.
And the image of our of the tracks building as well.
For some of you that are new to the story and May be wondering what are we doing to make all this money. Let me give you a brief overview of supplier.
At the root is acquire is this acquire platform a platform that helps public companies, where the central tools that they need to manage being being public.
We then operate both virtual and in person investor events that bring investors together with amazing companies.
Our virtual platform is being used to operate conferences for some of the most notable investment banks in the country.
Our goal with all of these platforms helped create community.
With a group of over 9 million identified profiles.
We continue to grow our platform and are adding new features all the time.
This quarter, we added a number of innovative features features and we have a new one to share with you today.
The first feature we added is the ability for companies to launch their own IR websites for within this acquired platform.
Every company needs, an IR website, and we made it simple for our clients to do this.
At no additional cost.
To which is really the thing that should be noted here.
Built into the platform itself.
Never met a CEO.
So that has not had a question about the short interest.
We added the ability for a company to see daily bar rates and the platform and to get daily short interest reports.
Daily borrow rates are a great indication of the demand that's out there to short the stock.
The higher the Barra.
Barra rate the more people that are interested in shorting the stock itself and the less supply there is available for people to ship just short that stock. So this will give you a true indication of whether or not the company could be entering into a short squeeze or if there is naked shorting going against the stock.
Many times Ceos will say to me Oh, where have.
A lot of naked shorting against our stock and will come into the platform all see a borrow rate of 1%.
Well, that's very unlikely because they can just borrow the stock at 1% and in short the stock highly unlikely that they're doing it on a naked basis, but this is a great feature that's been added into the platform.
Today, we're announcing the beta release of Euro the virtual IR assistant that can be used by any issuer to answer any public available data on the company.
The system and just publicly available information and then utilizes AI to put it in a format that can answer questions for our current or future investor.
This chat feature can be added to any IR website and help help answer the many questions that inundate IR teams will have a release of this product in the in the morning, and you could try it for yourself.
Remember, it's a beta version and it is learning every day. So the more questions you ask it the more it learns here's an example of how it works.
Let's ask the system some questions.
As you can see.
<unk> chat with this feature on the website like any traditional chat Bob but the person you were talking to you is built with artificial intelligence and never gets tired of answering questions about the company, let's try a few basis question. So you can see how it works.
What do you do.
What was the revenue for last quarter.
Who is on your board.
Who are your analyst.
Who is the transfer agent.
Who are your investors so far.
Communicating with investors is the core feature of this acquired platform.
We've added the ability to sense text messages to your investor contacts.
This is a unique method by which to communicate with prospects, who may already be invested or may invest in the future.
While we announced the release of micro caps dot com last quarter. This quarter, we're announcing that the site has hit 200000 monthly unique visitors and has made it to the number one position on Google under the search term micro caps.
We look forward to adding a lot more content to the site.
We gather a significant amount of data on users are visiting the site and that helps us in targeting people in the future.
We've also added a number of video interviews of all many of our supplier clients and attendees to the LD Micro conference and this is a feature that we're going to be adding on a quarterly basis will be interviewing.
Companies and getting an update on their quarterly review so that people can come and visit that information right with a microcap stock com.
Live events are back and.
And we kicked this off with the LD micro event in October with over 750 attendees and person.
And with over 12000 online attendees.
These people were learning about 140 different public companies.
It was a big success and Todd is that people are ready to get back to in person events.
So our team is in the midst of planning.
All of the events, both virtual and in person for 2022, and we have a great slate of.
Stuff that we're going to be adding adding this year.
I'd now like to turn the call over to Mike Malone, who will give us an overview.
Of the financials.
Mike.
Thanks, Chris and.
Now for our financial review.
First I'll go through our revenue margin and EBIT performance for the quarter.
Then I'll move into a discussion around liquidity Mark with securities.
<unk> finished with an overview of the one time special distribution, we announced at the end of last quarter.
Revenue for the quarter was $8 3 million on a consolidated basis, which reflects an increase of 219% and eight 3% from the prior quarter.
Which was in line with our expectations.
<unk> continues to be a major driver of growth so looking at our business without big token refinish.
We finished the quarter with revenues.
Of $7 7 million, which was up 278% year over year and 5% versus the prior quarter.
On a consolidated basis, our margins continue to perform in line with our expectations.
For the quarter, we finished with gross margins of 78%.
Which reflects an increase of 200 basis points from the prior year.
The continued expansion in our margins in terms of absolute dollars highlights the high operating leverage our SaaS based <unk> platform.
Moving to EBITDA.
<unk> finished the quarter with adjusted EBIT loss of $800000, which reflects a $1 $1 million improvement from the third quarter of the prior year.
Excluding big token, we finished with EBITDA of approximately $1 million, reflecting an increase of $2 1 million from the third quarter of prior year.
Now moving to some key balance sheet items and liquidity.
As of September 30th we finished the quarter with cash and equivalents of approximately $7 million and marketable securities of approximately $18 million.
Including the value of the securities at the end of the quarter that underlie the preferred shares cash and securities totaled approximately $31 million.
Additionally, our debt balance decreased another $2 million during the quarter and.
And as of September 30th or total outstanding indebtedness was just over $1 billion.
Now moving to require security portfolio.
During the quarter, we saw a decrease in our balance of approximately $6 million.
From a balance at the end of the prior quarter.
Subsequently end of the quarter and through today, we received another $11 million in marketable securities to our sales activities during the quarter.
As we previously announced.
We issued $36 million in preferred shares on an as converted basis, the shareholders debenture holders and certain warrant holders as of record on September 22021.
On a quarterly basis going forward, we will make distributions from the liquidation of the underlying securities we.
We expect our first distribution to be January 31, 2022, and quarterly thereafter until the underlying securities have been fully liquidated.
With that I'll turn the call back to Chris.
Thanks, Mike.
Before we go to Q&A.
We'd like to announce a new initiative that we're embarking on.
Okay.
We're launching this track scholarship fund.
In honor of Malcolm kits Al who is a board member of <unk>.
And a dear friend of mine, who.
Who passed away way too early in his life earlier this year.
We're launching in his honor this track scholarship fund.
Malcolm loved helping smart kids.
Who may not have had the opportunity to go to the school their dreams.
Or school at all due to their economic position.
He both help them financially.
And personally mentored then.
In keeping with his dream of helping kids will be offering a number of scholarships to kids in and around our Mexicali office.
Who may not have had the opportunity to continue their education due to financial constraints.
We look forward to keeping you appraised on our efforts in this area.
I would now like to open the call to.
Q&A.
Perfect. Thank you Chris. Thank you, Mike we have a few of our analyst year to date, you ask them questions. Mike Crawford do you want to go ahead and on mute yourself and ask your question first and then please mute yourself when you're finished.
Okay. Thank you.
First do you see seasonality in the supplier bookings or is this re acceleration in the current quarter or more a function. The LD micro main event in early October or something else.
I think we're seeing a little bit of seasonality because.
No you know its hard the decision makers on what we sell it comes down to the CEO and the CFO and at the end of.
July and August against a very difficult to reach those people.
We saw this last year.
We're seeing it again this year, so we aren't seeing a little seasonality there.
And you can see that being pushed into into Q4 here.
So I don't think we have enough years under our belt to tell you that that's going to be a consistent theme.
And that's what we found is here.
Okay, so kind of related.
Renewals.
Both of the monthly subscriptions and for media data and campaigns.
We've had about 100 companies that had been on the platform for over a year. So what are you seeing on that front.
No.
So we're still seeing around an 85% renewal rate.
And for this next quarter, Mike is going to be.
Putting together some numbers that will reflect I think we have enough. We have enough data at this point to start to make a projection of what we can do into into next year based off of the renewal. So I think as we end this quarter into the fourth quarter, we will be able to get a really good luck as to what.
As to what you.
What the whole year is going to look like next year.
Okay. Thanks, and then just last one for me.
With the implied 700000 revenue for big Telco in the fourth quarter is that for the whole quarter and is there anything for bipolar.
Yes.
The bright bold transaction Hasnt closed yet we think it will either close.
Sometime this week or next week.
So there is no numbers for right one there yes, that's just all big chunky.
But the big Silicon revenue only extend till it closes and then be effectively zero after that because youre in a minority position.
Mike Yes.
Correct.
And then to touch upon the.
Implied 700, K that is for the.
For the period until we close.
Okay excellent. Thank you very much.
Thanks, Mike.
Thanks, Mike.
Jon Hickman do you like to add.
We'll go next.
And it looks like Youre still muted there.
Hey, how about now.
Perfect how are you John.
Could you.
Review for Us.
The whole big token bright pool, and then your exit out of that.
What said.
What's the timing again, and how is that going to look afterwards.
From a line item courting view.
Yes.
And from a timing perspective.
We're hoping to have the transaction closed out this week.
What happens to our position as we move into a preferred position nonvoting preferred thats just converged straight into common with now.
No teeth or anything in it and.
So that puts us in a position where we would move what is going to be around.
Almost a 40% ownership in the company into a preferred position that good.
That cant ever convert more than $4, 99% at any given time.
So that.
In that scenario, we then no longer need to consolidate.
And we'll hold that on an equity method on our books.
Yes.
So your ownership goes from 40% down to 5%.
We will still own 41, 40%, but it'll go into a preferred that can never convert into more than 5% at any given time. So if we were to start selling that position, we will convert $4, 99% and then.
And then sell those shares and then convert again.
Okay until we were through approximately I think its 36%.
And what that does is it takes us kind of impacts our affiliate status and our need U R.
I need to file what we're doing and how we're selling so if we can remark remove ourselves from being an affiliate we no longer need to file when we're taking action in the marketplace.
So.
So it is like.
Come the first quarter of next year you won't have.
You won't have those revenues and you won't have those expenses in your P&L.
Correct that's correct.
Yes.
Correct, that's correct Jonathan.
When we deconsolidation, assuming there'll be close the transaction in the coming week.
We will we will.
Report, we will start to report the.
Big token operations in our fourth quarter.
<unk> as a discontinued operations, but will still will still show that.
On our P&L.
For the period and then thereafter.
Physician will just be.
In that preferred position will mark that to market.
Oh really that's how you'll do it.
It won't be their P&L it'll be your.
You Mark the preferred market on your balance sheet, but.
What the line item on your P&L will be a percentage of their.
Like net income or no no well.
We're still working on some of the details there. So I think what you're referring to is if we if we fall below consolidation, we still might be considered to be able to have significant influence on the business and thereby have to report our position in the equity method, but to what Chris was describing is we're going to move into preferred where we would fall below the ability to significantly influence.
<unk>.
Big tokens. So we would just have our position and our normal holding similar to how we have marketable securities on our on our on our books.
Sure.
Okay.
Sure.
Okay, and then you said that you expect to make your first for <unk>.
Dividend distribution.
This quarter, you said that.
It will be 30 days after the close of the quarter. So so at the end of the quarter. We set aside those securities and just began liquidating them. The beginning of this quarter and at the end of every quarter.
Shortly thereafter about 30 days, we'll make a distribution based upon what we've what we saw okay. So that would be late January early February of next year that's right.
Okay.
Okay.
My other questions were already answered so I guess, that's it for me. Thanks, Thanks, John Thanks, John.
Thank you John.
Next we have Gymnic Hillary Jim if you'd like you on mute.
Okay. Thank you.
Hey, Jim hear me now.
How're you doing.
Great. Thank you.
I just wanted to follow up on the prior question.
So.
When you move big token to your to your balance sheet.
Youre going to mark that to market. So while you have a substantial gain to report of that gain flow through the income statement next quarter is that right.
Yes.
That's correct.
<unk> got as Chris mentioned is can be in a preferred so there's going to be some valuation work that we need to do on that it might not exactly be the the value of the underlying common shares but.
But in concept you're correct.
Understood. Thank you.
Also I think.
You were asked about renewal rates and I, just want to make sure I understand what youre putting in the in.
In the numerator and denominator, so a renewal would be.
What additional media buying or additional subscription or what are you defining.
As a renewal.
Okay.
Well, we're doing both Jim so where we've actually broken it down.
As a as a platform service.
So we're taking both into consideration because we said when we are selling as we sell it as a as a combined service we don't sell them separately.
So we're 85% of those people are renewing their services.
And can you characterize the dollar amounts that they're renewing at so for instance, if.
If the first time they are a customer they buy make up a number of $10000 worth of services. The next time around they buy the same amount.
Lesser amounts or greater amount.
I don't think we have the exact statistics available on right now, but we can get that for you and.
And have it available for the next call as well.
Okay.
Can you give us a projection of how many supplier customers you expect to have at the end of the year.
Well, we gave when we gave our IDE.
Our goal of being at a thousand within three years and that was.
You know.
Less than a year ago.
So we're.
We're looking.
Looking to be at a thousand within three years, so if we gain.
If we could do the same if we could double again like we did this last year and then double again now that will get us there.
Yes.
I guess I was trying to.
Reconcile the additional bookings that are.
The increased bookings that you're seeing in Q4 relative to Q3.
And trying to put that into a subscriber.
Number as well.
Has that increased bookings imply greater than.
Q3 number of incremental subscribers.
Not necessarily because a lot of a lot of services or additional services beyond the number of subscribers and it's also coming from existing subscribers as well.
So while those.
Those bookings are coming in is.
It could be from a lot of people that have already become subscribers in the past.
And are re upping on other services.
So we're seeing kind of.
A snowball effect of that because you have a lot of new deals that are happening, but yet you have a lot of new people that are adding additional.
Services on top of what they already have.
And I and we will have that number ready for you for the next call.
Understood Okay.
I see what youre getting at.
And then my luck.
Yes go ahead, no I was just going to add to that just to say that we still.
We're still early in the in the renewal cycle.
We could have a significant number of rules renewals coming up in the fourth quarter. So we will feel better about the estimates will be throughout there and when we get through that cycle.
Right right Okay.
And then my last one is can you just characterize the acquired customer base.
Broadly speaking, so I'm trying to kind of get a feel for.
Yeah, the let's say the average or median market cap.
Listed versus unlisted.
Health care versus tech anything along those lines just to get a better feel for what the customer base looks like.
Well, we started our journey down the road with the small cap market right and that's that's really where we're focused right now.
Now, we're starting to move upstream and we're signing up a lot larger companies and a lot of the features that we've added to the platform in the last six months or are kind of table stakes for the larger cap companies.
It is helping us win a lot of that business out there. So I'd say that we're probably around <unk>.
60, 40 now on the the smaller cap side.
That's gone up the smaller companies have gone up a little bit more and I think that has a lot to do with.
LD micro in the amount of business network closing from the companies and LD micro it's really driving a lot of success.
And having that relationship with the with the companies as far as industry I don't have that broken down for you but.
We have a.
Our data analysts actually working on all of that information and we will we will try to break that out for you on the next call.
Alright, that's great. Thanks, a lot I appreciate it thanks, Jim what is Janet thanks for joining us today.
Thanks, Tim Chris and Mike We have a few questions leftover that were written and get started on those.
The first one is with all the cash you have on hand will you look to do any acquisitions.
We're highly focused on just building on our own and just.
Continuing to.
Increase the size of our tech team to build the ideas that we have.
That's not to say that if we saw something interesting that we wouldn't consider anything that really.
Where with Enel.
Nose to the grindstone on doing what we need to do.
To continue to grow and build our own our own tack on the platform and we have we have plenty of stuff. That's planned out for for this year that is a that are all.
Really big initiatives.
And.
So focusing on acquisitions I think would be just a distraction for us.
So it's not something we're looking for if it was presented to US then.
Then we.
Could think about it.
Thank you. The next one is do you offer a free option for new Ipos.
Now to date, we haven't done that.
Some of our competitors offer free.
Services and I don't know, if they're counting that in their numbers or not but as far as known people are signing up but we.
We do not offer a free.
Sign up option.
Because we have we have hard data costs associated with the platform. We're not just scraping <unk> data. So it's a it's a little bit different.
Right.
We may be something that we could potentially consider in the future.
Yes.
Great and then the next one is what revenue do you think you'll do in 2022.
Well like I said earlier when.
I think one of the analyst.
Was asking towards that but we haven't given that number out yet, but I'd say, we go into 2022 it's somewhere between $25 million to $30 million range already locked up and then you know.
Nobody sold anything for for.
For 2022, we start off there and so.
So I think we can definitely do north of what we've done this year for sure.
Okay.
Awesome I think that's all we have.
Okay.
All right everybody. Thank you very much really appreciate the time and I appreciate you attending the <unk>.
Our earnings call and if you are an investor we appreciate your support.
And I look forward to the next earnings call with you. Thank you very much.
Okay.
Goodbye.