SRAX
Reports Q3 2019 Vertical Sales Increase 17% Year-over-Year and Net Income of $1.4 Million
LOS
ANGELES, November 14, 2019 - SRAX, Inc. (Nasdaq: SRAX), a digital marketing and consumer data management and distribution technology
platform company, reported results for the three months ended September 30, 2019.
“SRAX
is leveraging our core technologies to develop platforms and build valuable and specific data sets,” said Christopher Miglino,
founder and CEO of SRAX. “Our platforms are gaining traction and creating synergies. In fact, sales from existing platforms
grew 11% and 17%, for Q3 2019 compared to Q2 2019 and Q3 2018, respectively, and are already benefiting from advances in BIGtoken.”
“BIGtoken
is expanding in reach and scope. As of today, we have a subscriber base of 16.3 million. To broaden and accommodate our international
subscriber base, we signed key partnerships in India and the Philippines; completed integration for international users; and started
the process to offer BIGtoken in multiple languages. Now, we are implementing more initiatives to scale subscriber growth and
launch additional offerings. After unveiling BIG Rewards™, some of the largest consumer packaged goods (CPG) brands in the
world initiated programs to offer coupons, exclusive product deals and more. Upon introducing BIG Research to gather insights
on behalf of large brands looking for global customer insights, we have signed deals with two of the largest research platforms.
Additionally, after spending the past two quarters integrating our platforms and realigning the sales process, in Q4 2019, we
expect to accelerate revenue growth driven by brands activating on our platforms to engage with consumers complemented by increased
adoption of SRAX IR.”
Q3
2019 Financial Highlights:
| |
● |
Revenue
was $1.0 million. This compares to $904,000 in Q2 2019 and $2.0 million for Q3 2018 that includes $1.2 million from SRAXmd
and other. |
| |
● |
Continuing
product sales, referred to as vertical sales, were up 11%
and 17%, respectively compared to Q2 2019 and Q3 2018. |
| |
● |
Gross
profit margin was 68%, compared to 55% in Q2 2019 and 62% in Q3 2018. |
| |
● |
Net
income was $1.4 million, compared to a net loss of $8.1 million in Q2 2019 and net income of $21.3 million, including a $23.9
million gain on sale of SRAXmd, in Q3 2018. |
| |
● |
Adjusted
EBITDA loss was $4.0 million, compared to $4.0 million in Q2 2019 and $2.9 million in Q3 2018. |
Operating
Highlights:
| |
● |
SRAX IR, 32 subscribers and 20 resellers |
| |
|
○ |
Enhanced features, adding real-time trading data, warrant management and the ability to access shareholder contact data, including email, phone number and social media links. |
| |
● |
BIGtoken, 16.3 million subscribers |
| |
|
○ |
Activated major CPG brands on BIG Rewards, a new feature that enables marketers to engage BIGtoken subscribers. |
| |
|
○ |
Partnered with ZAPGroup, one of the largest point-of-sale retail loyalty programs based in the Philippines. |
| |
|
○ |
Entered the 28 member countries of the European Union. |
| |
|
○ |
Enabled data payments for users outside of the U.S. and initiated a process to offer in multiple languages. |
| |
|
○ |
Unveiled plans to launch BIGtoken India with Yash Birla Group, one of India’s largest conglomerates. |
| |
|
○ |
Partnered with several high-profile non-profit associations to provide BIGtoken users the ability to donate their earnings. They include |
| |
|
|
■ |
American
Heart Association, the nation's oldest and largest voluntary organization dedicated to fighting heart disease and stroke;
and |
| |
|
|
■ |
HealthCorps,
founded by Dr. Mehmet Oz, dedicated to helping high-school students make better choices about their health and physical fitness. |
| |
|
○ |
Formed a strategic partnership with LiveXLive, a global digital media company focused on live entertainment, to increase each platform’s user base while generating data-based insight. |
| |
|
○ |
Signed an agreement with Blue Chip, an integrated marketing agency, to activate anonymized self-attested, transaction, location, and social media data. |
| |
● |
Corporate: |
| |
|
○ |
Changed the company name to SRAX to better reflect the company’s positioning. |
| |
|
○ |
Raised $5.5 million from a registered direct offering. |
Conference
Call:
Management
will review the results on a conference call with a live question and answer session today, November 13, 2019, at 4:30 p.m. ET/1:30
p.m. PT.
| |
● |
If
calling from the U.S. or Canada, please dial 1-877-451-6152 to access the live call and 1-844-512-2921 for the
replay, code 13695604 available until November 27, 2019. |
| |
● |
If
calling internationally, please dial 1-201-389-0879 to access the live call and 1-412-317-6671 for the replay, code 13695604. |
| |
● |
The
call will be webcast over the Internet and accessible at the company's website at https://srax.com/investors/ for
at least 90 days. |
Non-GAAP
Measures:
To
supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted
accounting principles in the United States (GAAP), we use the following non-GAAP financial measures: Adjusted net income (loss)
and Adjusted EBITDA The presentation of these financial measures is not intended to be considered in isolation or as a substitute
for, or superior to, financial information prepared and presented in accordance with GAAP. Investors are cautioned that there
are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In addition, these measures
may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.
We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP
financial measures. We believe these non-GAAP financial measures provide investors with useful supplemental information about
the financial performance of our business, enable comparison of financial results between periods where certain items may vary
independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating
our business. For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please
see the "Reconciliation of GAAP to Non-GAAP Results" table in this press release.
Adjusted
net income (loss) is defined as net income (loss) less non-cash equity-based compensation and the accretion of warrants.
Adjusted
EBITDA is defined as earnings before interest, taxes, depreciation and amortization, changes in the fair-value of derivative and
warrant liabilities and certain additional one-time charges.
About
SRAX
SRAX,
Inc. (NASDAQ: SRAX) is a digital marketing and consumer data management technology company. SRAX's technology unlocks data to
reveal brands' core consumers and their characteristics across marketing channels. Monetizing its data sets, SRAX is growing multiple
recurring revenue streams through its various platforms. Through the BIGtoken platform, SRAX has developed a consumer-managed
data marketplace where people can own and earn from their data thereby offering everyone in the Internet ecosystem choice, transparency,
and compensation. SRAX's tools deliver a digital competitive advantage for brands in the CPG, automotive, investor relations,
luxury, and lifestyle verticals by integrating all aspects of the advertising experience, including verified consumer participation,
into one platform. For more information on SRAX, visit www.srax.com.
Safe
Harbor Statement
This
press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and
uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or expressions such as "anticipate,"
"plan," "will," "intend," "believe" or "expect'" or variations of such words
and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult
to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements,
including, without limitation, statements made with respect to expectations of our ability to increase our revenues, satisfy our
obligations as they become due, report profitable operations and other risks and uncertainties as set forth in our Annual Report
on Form 10-K for the year ended December 31, 2018, and our subsequent Quarterly Reports on Form 10-Q as filed with the Securities
and Exchange Commission. All forward-looking statements involve significant risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements, many of which are generally outside the control of Social Reality
and are difficult to predict. Social Reality undertakes no obligation to publicly update any forward-looking statements, whether
as a result of new information, future events or otherwise.
Contact
Information:
Kirsten
Chapman/Mary Magnani, LHA Investor Relations, +1 415 433 3777, srax@lhai.com
SRAX,
INC.
(Formerly
Known As Social Reality, Inc.)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | |
Three Months ended | | |
Nine Months ended | |
| | |
September 30, | | |
September 30, | |
| | |
2019 | | |
2018 | | |
2019 | | |
2018 | |
| | |
| | |
(restated) | | |
| | |
(restated) | |
| Revenue | |
$ | 1,001,000 | | |
$ | 2,015,000 | | |
$ | 2,497,000 | | |
$ | 8,824,000 | |
| Cost of revenue | |
| 322,000 | | |
| 764,000 | | |
| 1,075,000 | | |
| 2,902,000 | |
| Gross profit | |
| 679,000 | | |
| 1,251,000 | | |
| 1,422,000 | | |
| 5,922,000 | |
| Operating expense: | |
| | | |
| | | |
| | | |
| | |
| General, selling and administrative expense | |
| 5,389,000 | | |
| 4,869,000 | | |
| 14,994,000 | | |
| 14,392,000 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss from operations | |
| (4,710,000 | ) | |
| (3,618,000 | ) | |
| (13,572,000 | ) | |
| (8,470,000 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| (108,000 | ) | |
| (319,000 | ) | |
| (359,000 | ) | |
| (1,241,000 | ) |
| Amortization of debt issuance costs | |
| - | | |
| (619,000 | ) | |
| - | | |
| (1,538,000 | ) |
| Total Interest Expense | |
| (108,000 | ) | |
| (938,000 | ) | |
| (359,000 | ) | |
| (2,779,000 | ) |
| Gain (loss) on sale of Assets | |
| - | | |
| 23,978,000 | | |
| 395,000 | | |
| 23,956,000 | |
| Exchange gain (loss) | |
| - | | |
| 10,000 | | |
| 14,000 | | |
| 5,000 | |
| Loss on repricing of equity warrants | |
| - | | |
| - | | |
| (342,000 | ) | |
| - | |
| Change in fair value of warrant derivative liabilities | |
| 6,227,000 | | |
| 1,839,000 | | |
| 1,390,000 | | |
| 4,549,000 | |
| Total other income (expense) | |
| 6,119,000 | | |
| 24,889,000 | | |
| 1,098,000 | | |
| 25,731,000 | |
| Loss before provision for income taxes | |
| 1,409,000 | | |
| 21,271,000 | | |
| (12,474,000 | ) | |
| 17,261,000 | |
| | |
| | | |
| | | |
| | | |
| | |
| Provision for income taxes | |
| — | | |
| — | | |
| - | | |
| — | |
| Net income (loss) | |
$ | 1,409,000 | | |
$ | 21,271,000 | | |
$ | (12,474,000 | ) | |
$ | 17,261,000 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) per share, basic and diluted | |
$ | 0.11 | | |
$ | 2.10 | | |
$ | (0.96 | ) | |
$ | 1.71 | |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average shares outstanding – basic and diluted | |
| 12,933,585 | | |
| 10,112,804 | | |
| 12,965,773 | | |
| 10,121,717 | |
SRAX,
INC.
(Formerly
Known As Social Reality, Inc)
CONDENSED
CONSOLIDATED BALANCE SHEETS
| | |
September 30, 2019 | | |
December 31, 2018 | |
| | |
| (unaudited) | | |
| | |
| Assets | |
| | | |
| | |
| Current assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 2,843,000 | | |
$ | 2,785,000 | |
| Accounts receivable, net | |
| 1,241,000 | | |
| 1,829,000 | |
| Prepaid expenses | |
| 866,000 | | |
| 467,000 | |
| Other current assets | |
| 301,000 | | |
| 387,000 | |
| Total current assets | |
| 5,251,000 | | |
| 5,468,000 | |
| | |
| | | |
| | |
| Property and equipment, net | |
| 205,000 | | |
| 192,000 | |
| Goodwill | |
| 15,645,000 | | |
| 15,645,000 | |
| Intangible assets, net | |
| 1,874,000 | | |
| 1,763,000 | |
| Right-of-Use Asset - Long Term Portion | |
| 429,000 | | |
| — | |
| Other assets | |
| 130,000 | | |
| 51,000 | |
| Total assets | |
$ | 23,534,000 | | |
$ | 23,119,000 | |
| | |
| | | |
| | |
| Liabilities and stockholders' equity | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Accounts payable and accrued expenses | |
| 1,594,000 | | |
| 3,575,000 | |
| Warrant Derivative liabilities | |
| 4,052,000 | | |
| 5,442,000 | |
| Other current liabilities | |
| 906,000 | | |
| — | |
| Total current liabilities | |
| 6,552,000 | | |
| 9,017,000 | |
| Long term liabilities: | |
| | | |
| | |
| Lease Obligation - Long Term Portion | |
| 295,000 | | |
| — | |
| Total liabilities | |
| 6,847,000 | | |
| 9,017,000 | |
| | |
| | | |
| | |
| Commitments and contingencies (Note 11) | |
| | | |
| | |
| | |
| | | |
| | |
| Total stockholders' equity | |
| 16,687,000 | | |
| 14,102,000 | |
| Total liabilities and stockholders' equity | |
$ | 23,534,000 | | |
$ | 23,119,000 | |
SRAX,
INC.
(Formerly
Known As Social Reality, Inc)
Reconciliation
of GAAP to Non – GAAP Results
(Unaudited)
| | |
For
the three months ended | |
| | |
As
Reported - GAAP | | |
Disc.
Products | | |
Excl.
Disc Products | |
| ($s
in '000s) | |
Sept
30, 2019 | | |
June
30, 2019 | | |
Sept
30, 2018 | | |
QoQ | | |
YoY | | |
Sept
30, 2019 | | |
June
30, 2019 | | |
Sept
30, 2018 | | |
QoQ | | |
YoY | | |
Sept
30, 2019 | | |
June
30, 2019 | | |
Sept
30, 2018 | | |
QoQ | | |
YoY | |
| Net
Revenue | |
| 1,001 | | |
| 904 | | |
| 2,015 | | |
| 11 | % | |
| -50 | % | |
| - | | |
| - | | |
| 1,161 | | |
| n/m | | |
| -100 | % | |
| 1,001 | | |
| 904 | | |
| 855 | | |
| 11 | % | |
| 17 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cost
of revenue | |
| 322 | | |
| 411 | | |
| 764 | | |
| -22 | % | |
| -58 | % | |
| - | | |
| - | | |
| 225 | | |
| n/m | | |
| -100 | % | |
| 322 | | |
| 411 | | |
| 538 | | |
| -22 | % | |
| -40 | % |
| Gross
Profit | |
| 679 | | |
| 493 | | |
| 1,252 | | |
| 38 | % | |
| -46 | % | |
| - | | |
| - | | |
| 935 | | |
| n/m | | |
| -100 | % | |
| 679 | | |
| 493 | | |
| 317 | | |
| 38 | % | |
| 115 | % |
| Margin
% | |
| 68 | % | |
| 55 | % | |
| 62 | % | |
| 1330
bps | | |
| 574
bps | | |
| n/a | | |
| n/a | | |
| 81 | % | |
| n/m | | |
| n/m | | |
| 68 | % | |
| 55 | % | |
| 37 | % | |
| 1329
bps | | |
| 3081
bps | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating
expense | |
| 5,389 | | |
| 5,114 | | |
| 4,869 | | |
| 5 | % | |
| 11 | % | |
| 5 | | |
| - | | |
| 931 | | |
| n/m | | |
| -99 | % | |
| 5,383 | | |
| 5,114 | | |
| 3,938 | | |
| 5 | % | |
| 37 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating
Income | |
| (4,710 | ) | |
| (4,620 | ) | |
| (3,617 | ) | |
| 2 | % | |
| 30 | % | |
| (5 | ) | |
| - | | |
| 4 | | |
| n/m | | |
| -239 | % | |
| (4,704 | ) | |
| (4,620 | ) | |
| (3,621 | ) | |
| 2 | % | |
| 30 | % |
| less: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Equity
based compensation | |
| 424 | | |
| 316 | | |
| 595 | | |
| 34 | % | |
| -29 | % | |
| - | | |
| - | | |
| - | | |
| n/m | | |
| n/m | | |
| 424 | | |
| 316 | | |
| 595 | | |
| 34 | % | |
| -29 | % |
| Depreciation
and amortization | |
| 306 | | |
| 276 | | |
| 173 | | |
| 11 | % | |
| 77 | % | |
| - | | |
| - | | |
| 54 | | |
| n/m | | |
| -100 | % | |
| 306 | | |
| 276 | | |
| 118 | | |
| 11 | % | |
| 159 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Adjusted
EBITDA | |
| (3,980 | ) | |
| (4,028 | ) | |
| (2,850 | ) | |
| -1 | % | |
| 40 | % | |
| (5 | ) | |
| - | | |
| 58 | | |
| n/m | | |
| -109 | % | |
| (3,974 | ) | |
| (4,028 | ) | |
| (2,908 | ) | |
| -1 | % | |
| 37 | % |
| | |
For the three months ended | | |
| |
| | |
September 30, 2019 | | |
June 30, 2019 | | |
September 30, 2018 | | |
QoQ | | |
YoY | |
| Net Income / (Loss) | |
| 1,409,000 | | |
$ | (8,098,000 | ) | |
$ | 21,271,000 | | |
| n/m | | |
| -93% | |
| Plus: | |
| | | |
| | | |
| | | |
| n/m | | |
| n/m | |
| Equity based compensation | |
| 424,000 | | |
| 316,000 | | |
| 595,000 | | |
| 34% | | |
| -29% | |
| Interest (income) expense | |
| 108,000 | | |
| 183,000 | | |
| 938,000 | | |
| -41% | | |
| -88% | |
| Depreciation and amortization | |
| 306,000 | | |
| 276,000 | | |
| 173,000 | | |
| 11% | | |
| 77% | |
| Change in Fair Value of Warrant Liability | |
| (6,227,000 | ) | |
| 2,876,000 | | |
| (1,839,000 | ) | |
| n/m | | |
| 239% | |
| Financing Costs | |
| - | | |
| 342,000 | | |
| (11,000 | ) | |
| -100% | | |
| -100% | |
| Gain on Sale | |
| - | | |
| 77,000 | | |
| (23,978,000 | ) | |
| -100% | | |
| -100% | |
| Other (income)/ expense | |
| - | | |
| - | | |
| 1,000 | | |
| n/m | | |
| -100% | |
| Adjusted EBITDA | |
$ | (3,980,000 | ) | |
$ | (4,028,000 | ) | |
$ | (2,850,000 | ) | |
| 1% | | |
| -40% | |
