SRAX Inc (SRAX) 2021 Q1 法說會逐字稿

Thanks for joining us today for the SRAX First Quarter 2021 Earnings Call. It was another record quarter for SRAX and our Sequire platform.

First, I want to cover some of the major accomplishments for the quarter. Revenue growth was up 1,400% year-over-year on a consolidated basis and 2,800% for Sequire alone. Revenue growth quarter-over-quarter was up 20% on a consolidated basis. Sequire on its own is up 31% quarter-over-quarter. We beat our guidance of $5 million in Q1 and are reaffirming our Q2 guidance of $7 million.

We continue to need to consolidate BIGtoken until we fall below certain ownership thresholds and other criteria, but on a stand-alone basis, Sequire has an EBITDA of $500,000 for the quarter. We've now seen 9 consecutive quarters of continued revenue growth for Sequire.

We've grown the number of clients that have joined the Sequire platform to 200, a 9% increase since our call just 6 weeks ago and 294% year-over-year. We're continuing to see record bookings. In Q2, we've booked $7.2 million as of this call. We anticipate that we'll exceed last quarter's bookings of $10 million. When we talk about bookings, we're talking about total contract value that is closed in the respective quarter. Most of our contracts are 12-month-long agreements, so we have good visibility into the revenue for the year. As of today, we'll recognize $19.8 million from existing contracts for the Sequire platform alone this year.

With that said, we're proud to announce an increase of our guidance for the year from $23 million to $25 million to $25 million to $27 million.

We had $13.6 million in cash and $23 million in marketable securities.

On the technology front, we launched the Sequire Audience platform, where companies can launch earnings calls, annual meetings and road shows. We did this in partnership with Zoom.

We want to break out Sequire on its own so you can take a look at how our business is doing. Revenue is up 2,800% year-over-year and 31% quarter-over-quarter, as I mentioned earlier. We're maintaining our margins at 70%. Cash OpEx increased given more data costs and growing the team to accommodate the growth we're experiencing. We have an EBITDA of $500,000 for the quarter. This is up from a loss of $1.5 million last year.

Our Sequire net income for the quarter is negative $4.6 million, which includes a onetime noncash charge of $7.7 million for our warrant exchange that took place in Q1 and $900,000 related to the FPD transaction and then offset by an increase in marketable securities. The warrant exchange was an exchange where we exchanged $2.50 warrants that expired in November of '22 for $7.50 warrants that expire in January of '22. It shortened the time frame of the warrants and got the company approximately $12 million in cash.

You can see the increase in the numbers by quarter. Last year, at this time, we had 68 clients that signed up to the Sequire platform. Now we're at 200, a nice 1-year jump. Our goal is to be at 1,000 companies within 3 years. Our notable accomplishments for the quarter start with this number. We feel like we're getting more momentum on this front, and 200 is a solid number for us. We launched the Sequire Audience product. This allows companies to launch their earnings calls, annual meetings and virtual road shows right from in the Sequire platform. We'll talk about it more in detail in a little bit, but we hired up the team; and launched our initiative around the Sequire Community, which includes a single sign-on username and password for all Sequire-hosted events. This includes all of our virtual conferences and any of -- held by our company on the Sequire platform. While it seems like it happened a long time ago, we moved BIGtoken into its own company in Q1. This is a big step for us in staying 100% focused on the Sequire platform.

In our efforts to maintain our technology advantage, we've identified 3 patents that can be filed for the Sequire platform. We know many of you are familiar with Sequire, but many of you are new to our business, so I'd like to just take a minute to talk about Sequire as -- and what we do. As a public company ourselves, we've seen what companies need in order to manage being public, and we've built the tools that can help those companies. Our platform can be broken down into 3 areas. We like to call it interpret, manage and engage.

In the interpret phase, we're helping companies understand who their shareholders are, what they're doing. And we're giving them the tools they need to understand movement of shares, who's buying, who's selling these shares at any given time. In the manage phase, we're helping companies manage their warrants, their employee options and other data around their financing alternatives. In the engage phase, we're providing companies the tools that they need in order to engage their investors. We're doing this through SMS, virtual events, surveys and emails.

Our big push this quarter was building up the investor community. With our single sign-on initiative, investors will have access to premium investor content such as master classes, newsletters, the ability to participate in Sequire Community earnings calls, road shows and exclusive access to other content. The core to our community is the Sequire Virtual Events platform and the Sequire Audience platform. The cornerstone of our virtual platform is the LD Micro event that has been a leader in the small cap space for the past 10 years. We look forward to getting back to in-person events soon, but they'll always have an element of virtual to them in the future. And if you haven't been to an LD Micro event in the past, we look forward to having you there. We also launched a number of Sequire virtual events that are industry specific. These events are leading to a significant increase in revenue for Sequire.

As you can see from our consolidated financials, SRAX owns a lot of BIGtoken. We've invested in this company over the years, and in Q1, it took flight on its own. And it's -- now it's on its own in its own company and trading on its own.

Now I'd like to turn the call over to our CFO, Mike Malone, to give more details on the consolidated and broken-out financials.

Mike?

Thank you, Chris.

Before we review the first quarter operating results, I'd like to remind everyone that, during the quarter, we closed on the transaction to move our BIGtoken business into its own publicly traded company. Although BIGtoken is now a separate entity with a separate Board and a balance sheet, for the time being, due to consolidation accounting principles, we are required to consolidate the business and its accounts within SRAX.

As Chris mentioned earlier, we continue to see substantial revenue growth at Sequire, which drove our quarterly revenue to $5.4 million or 1,400% over prior year and [31%] over the fourth quarter of last year. Our Sequire business continues to represent the majority of our revenue growth through the continued growth of its subscription base. Revenues for the quarter finished at $4.5 million, up from $100,000 in the prior year and up 31% from last quarter.

Our profit margins continued to perform in line with expectations. For the quarter, they were 70%, which is up slightly from the prior year.

Operating expenses were $5.3 million, as compared to $4.1 million in the prior year. The increase in operating expenses for the quarter is primarily driven by increased sales and operational costs associated with the rapid expansion of the Sequire platform and its associated revenue growth.

Our resulting operating loss for the quarter was $1.5 million, as compared to an operating loss of $3.9 million. When excluding the BIGtoken business operations, we had positive operating income for the quarter of $52,000, as compared to a loss of $1.6 million; and EBITDA of $500,000, as compared to an EBITDA loss of $1.5 million over the prior year.

Now moving to a few highlights from our consolidated balance sheet. As of March 31, we had cash and marketable securities totaling $13.5 million and $18 million, respectively. And during the quarter, our debt reduction continued as our outstanding debt decreased from $9 million to $3.1 million as of March 31, 2021. And at this time, we're still working through the accounting related to the financing and transactional elements of the FPD transaction and will be including further discussion in our upcoming 10-Q.

And now I'd like to turn the call back to Chris.

(Operator Instructions)

Guys, thanks for joining us today. We're going to do Q&A now, see if anybody has any questions off of the presentation that we just gave and also the press release that [we've put out].

All right, I see a number of people have raised their hands here. First question comes to us from Mike Crawford. Mike, I will unmute you here.

Yes. Can you hear me...

Yes. (Operator Instructions)

Okay, *, 9, *, 6. So well, first, let's ask about the business. And then I have a question about the balance sheet, but on the business -- well, first of all, it's great to hear that you expect to exceed the $10 million of Sequire bookings from last quarter in this quarter. That's phenomenal, but you're also [keen] about forthcoming features to be added to the platform that you are more excited about than audience and some of the other features you've unveiled, so far. So I mean, can you say what these forthcoming features are that you're developing and when we might see them?

We have a big pipeline of stuff that's going to be released in this quarter, so I think that this is -- the best opportunity would be just to wait for those press releases come out during this quarter. I mean the stuff that we're releasing in this quarter is some of the best stuff that we've built into the platform. So you won't have to wait long.

And (inaudible) -- okay. That would help the Sequire platform companies do better at interpreting, managing, engaging with their investors. Is that basically the idea?

Yes, a lot of room around that and around financing, around communication tools. And obvious, audience is a big feature that we completed with Zoom. So I think that all of these things together -- I mean I'm more excited about the stuff that's coming up in the next -- the rest of this quarter and then also the rest of the year.

Okay, well, I guess we'll stay tuned. Is it still around 30% of these now 200 companies on the platform are subscribing to ancillary services?

Yes, approximately.

And do you see a lot of like kind of repeat buyers there and, I guess, further (inaudible) further (inaudible)?

Yes, yes. We're at that time of evolution of the business where we're starting to see a lot of repeat business from the people that were buying media previously and are continuing to buy media now.

And then historically you've had this data-driven company where you've helped companies find insights about their businesses or reach new audiences. And I think you're doing some of that now for these companies, but primarily it's been investor outreach focused, as opposed to like reaching companies' customers or suppliers. Is that something we might see more of?

Yes. I mean that's where our data sets are. So we have a lot of data on who's willing to invest in OTC companies, who's willing to invest in NASDAQ companies, who's interested in pharma companies, technology companies and so on. So we've gathered a ton of information through all of this, and that's really why the community piece is very important to us and tying that all together with LD Micro.

[Okay]. And of the new companies that are coming on, are they still a good mix of OTC, or is it swinging more towards listed?

No. It's around half and half.

Okay. And then [just switch] gears, one last question. And then I'll turn it over, but -- okay. So thank you, Mike, for giving the cash and debt data from the end of the quarter. What about the share count, say, average for Q1 and maybe diluted shares outstanding as of today?

So the shares outstanding at the end of the quarter were approximately 23 million, and the weighted average is just over 19 million that we'll use in the calculation when you -- which will be obviously included in the Q. And then the -- on a fully diluted basis, we would add approximately additional 10 million warrants; and then approximately 1 million, 1.2 million in employee options on top of that, so you're going to get to a -- call it, a 34 million fully diluted shares.

That -- and that -- but that's warrants that have $7.50 strike price and a bunch of other warrants in-between.

Yes, the majority of which are the $7.50s. Approximately 5.5 million, 6 million of them are the $7.50s.

But on an undiluted share count basis, Mike, can you give that number?

Yes. So at the end of the quarter, we had issued an outstanding approximately 23 million shares. And then on a weighted average basis, Mike, for purposes of calculating EPS, it's just over 19 million.

Okay, I got it. And so maybe half of those 10 million warrants, [I mean, last year just not goes over $7.50 if don't] exercise. And if they do, then you'd pull in all that cash. And then I can figure out the strike on the others.

And if all the warrants got exercised, it would be around $54 million in cash.

Our next question comes to us from dave@trickleresearch.com. Dave, I will [unmute you here].

Dave? Maybe (inaudible) maybe move on.

Yes, we can move on. Okay, so I can -- Dave. (inaudible). We have cwrolstad@aspenwoodcapital.com.

(Operator Instructions)

Chris, you are unmuted right now. I see you've unmuted, but we're not hearing [anything].

All right. Maybe move on to the next one.

Okay. We have [kcapaz@intrinsicedge.com]. You are unmuted. (Operator Instructions)

(Operator Instructions) All right, well, it looks like there are some issues with getting through the computer people.

[There seem to be]. I'll just wait a little bit here.

All right. Well, we have the LD Micro conference that's coming up here in June 8 through the 11th, and we hope you all can make it. We have around 300 companies that will be presenting at that conference, and we're really excited about that. It's we're finding that there's a direct correlation between the companies that are signing up and the people that are joining the Sequire platform. We look forward to seeing you there. We hope to be back to getting in-person meetings at sometime by the end of this year with LD Micro. And there always -- like I said earlier, there will always be a virtual element to that, but we're creating this community that people can participate in person or at these different events.

So we appreciate you being with us today. We'll post this video up onto our website very shortly, so if you wanted to watch it again, you can take a look at it there.

Thank you very much.