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spk03: Good day and welcome to the Black Box Stocks second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Stephanie Prince with PCG Advisory. Please go ahead.
spk01: Thank you, Cole, and welcome to everyone joining us today. On the call with me are Black Box Stocks CEO Gus Kepler and Bob Winspear, CFO. The company would like to remind everyone that various remarks about future expectations, claims, and prospects made on today's call constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Black box stocks cautions that these forward-looking statements are subject to risks and uncertainties that may cause their actual results to differ materially from those indicated, including risks described in the company's filings with the SEC. Any forward-looking statements made on this conference call speak only as of today's date, Monday, August 15, 2022, Black Box Stocks does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. A replay of today's conference call will be available through the investor relations section of the company's website at blackboxstocks.com. With that, I'd like to turn the call over to Gus Kepler, CEO. Gus?
spk04: Thank you, Stephanie. I want to welcome everyone to the call and thank everyone for joining us today. As everyone is aware, Q1 and Q2 of this year saw continued declining GDP and inflation as high as 9%. The stock market continued to decline throughout the year and only started to rebound at the end of June. These factors created headwinds for companies in our sector as consumers, investors, and, of course, traders are concerned about their finances. I'm happy to say we were able to adapt and make the most of a turbulent and uncertain market. We ran a spring breakout sale at the end of March that was designed to give new customers an opportunity to try our platform for only $5 for their first month. This promotion was effective and was reflected in our subscriber count. Our average subscriber count for Q2 was 6,181 subscribers as compared to the 5,482 subscribers in Q2 of 2021. I'll also add that we learned a lot from this promotion, which was the first of its kind for Black Box. We are planning to run similar promotions in the future. The consumer landscape has changed for trading services like ours, and we are employing new marketing initiatives to address the current market. And that is one of the reasons that we did this promotion in March and will continue to do similar promotions in the future, because things have changed significantly. Speaking to that, one of our biggest challenges in the marketing endeavors that we are doing is the plethora of new services for traders that have come along as of late. I went over this on our last call, but I'll reiterate. The bull market of 2021 spawned a multitude of new trading platforms, trading tools, scanners, Discord rooms, education providers, and, of course, the purported market gurus. Although there are a few new products and services out there that I believe provide are not quality services. Nonetheless, they create confusion and clutter the social media channels that we use to promote our products. So we have to spend a significant amount more in marketing to get up above the noise. We have carefully tailored our recent marketing campaigns to educate new prospective members that we are a best-in-class software and education provider and that we have a six-year history. We also always emphasize that we have extremely positive reviews on social media, including a five-star Google rating. We're confident that with our new quality tools that we're upgrading constantly, our community and education services, coupled with the fact that we are well capitalized, we will be able to continue to grow our user base for our core product. We continue to upgrade our core product to offer our members the best possible user experience. In April, we released a mobile app for Apple and Android devices, and it has been well received by our user base, especially those They had to return to the workplace after the pandemic. We were also adding new charting features and new alert types to provide our members the maximum edge in the stock market and options market. In addition to the marketing and development initiatives I just discussed for our core product, we're also developing several new products that target new market segments that will significantly increase our total addressable market. One of these products is called Stock Nanny. It is a LERC system for portfolio investors, self-directed investors. It does not encompass the day trader market like our current core product. And the addressable market for this product is exponentially larger. We are also working to deploy our first version of Black Box Pro, which caters to the pro market. We currently do not have a pricing tier for pro traders. And we are adding this as well as the onboarding system for pro traders so that we can bring on institutions and professional traders to our platform. We are working on our crypto initiative, although we have put it third in line behind the aforementioned products because the crypto market is still less than stable at this time. So we're not at all abandoning the crypto initiative, but we're prioritizing things the way we see they should be done. In addition to investing in these new products, we've continued to purchase our shares through our stock buyback program. To date, we have purchased 499,028 shares at an average price of $1.89 for a total sum of $945,000. Our total authorized share purchase under this program is up to $2.5 million. To summarize, we're still very bullish on BlackBox and feel we're very well positioned to grow our user base for our core product and create significant new revenue streams with the new products we plan to launch. I want to thank all of our shareholders for their continued support, and I'll now turn things over to our CFO, Bob Winspear, so he can provide some details on our financials.
spk08: Thanks, Gus, and good afternoon, everybody. I'm just going to touch on some of the highlights from the earnings release. For additional information and a more complete review of the financial statements, please refer to our Form 10Q file with the SEC today for significantly greater detail. Revenues for the quarter were just under $1.4 million as compared to 1.46 for the second quarter of last year. So we were down just about 4% from last year, but we were up 10% from the first quarter of 2022, which had $1,272,000 in total revenue. So we were very pleased with a quarter-over-quarter growth from that perspective. And that was driven by the higher subscriber counts that Gus had mentioned. at 6,181 and the promotion we ran in March of this year. For the first six months, revenues were $2.7 million, compared to just about $3 million in 2021, a drop of 9.5%. As we've discussed, this is driven by lower average prices by our members and that promotion. The margins for the quarter were just a little bit lower than they were. We had 64% for the quarter and 60% for the six months ended 2022 as compared to margins in the 72% range throughout 2021. That is driven by two things. One is the impact of the customers having minimal revenue from the spring breakout sale that we've talked about. And we also had some cost increases over the 2022 period. And those really related to improvements we had made in our social and audio chat features, as well as a little bit more in the expense from our data feeds. Operating expenses have continued to increase in 2022 as compared to 2021 as we expected. Total operating expenses for the quarter were $2,068,000 as compared to $1,172,000 in the second quarter of 2021. And just about the quarter after the six months, we're looking at a total of $3.78 million for the six months ended June 30th as compared to $2.1 million the prior year. So we are up approximately $900,000 for the quarter and 1.7 million or 1.66 million for the six months. And so those increases are going in the 76 and 78% range as we'd expect. So we're continuing to invest in our operating capabilities. And if you look at the specifics behind those $900,000 of increases, for the three months into June 30th, you see about half of that, or $575,000, was related to SG&A. And that's due to additional personnel. As you know, we've been increasing our headcount to deal with the expenses of being a public company and filling that out. We also had software development costs increased by about $142,000 this quarter over the prior year. And that's obviously driven by new products that we've been talking about as well as continuing to build out our infrastructure for our existing system. Advertising and marketing grew up to about $526,000 for this quarter as compared to $347,000 in the prior year and about $300,000 for the first quarter this year. And the bulk of that increase was driven by some TV advertising that we had done for the second quarter, which cost about $153,000. And that advertising and marketing is more of a brand awareness, public relations style of advertising as opposed to the direct marketing expense that we generally have with respect to our advertising and marketing expenditures. So that's what happened with our operating expenses. And as a result, you'll see that the operating income for the quarter was a negative loss of $1,168,000 for the quarter, as opposed to a small loss of $117,000 in the prior year. And for the year to date, the first six months, we're at about $2,190,000 in operating income loss as compared to a slight income in the prior year. If you look at our balance sheet, our balance sheet hasn't changed substantially. It tends to be very, very strong. We finished up the quarter with approximately $7.1 million in cash and marketable securities, which is down about $10.4 million from $10.4 million at year end. And that drop of $3.372 million is comprised of two things. One is the negative EBITDA. that we refer to is driven largely by the operating losses. So we had negative EBITDA for the first six months of just about $2 million, but $1.9 million. And we also bought back $949,000 worth of our stock, as Gus had mentioned earlier, in a Treasury stock buyback. But we still consider we have a significantly strong cash and marketable securities position, which we like having in the current environment, obviously, and gives us some strength moving forward in what could be another couple of quarters of tough economic times. We remain very excited about the balance of 2022, particularly with the new products that we are looking at, as well as in 2023, the new products, the expanding the functionality of what our existing system can do. as well as doing new marketing, targeting new market segments, and increasing our congressional market. So with that, I appreciate your time, and I'd like to open it up for questions.
spk03: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Additionally, if you are at your computer, please use the submit a question link in your webcast viewer. And at this time, we'll pause momentarily to assemble the roster. And our first question today will come from Ed Wu with Ascendant Capital. Please go ahead.
spk06: Yeah, thank you for taking my question. My question is, as the market has rebounded, have you saw investor interest return? Thank you.
spk04: When you say investor interest, I'm assuming you're speaking about memberships or subscriptions. And yes, we have seen a slight uptick, although turbulent markets sometimes create a little bit longer pause before people want to jump back in. But again, we are working very diligently to Make sure our messaging lets prospective new people or new members know that turbulent markets are good for trading. They're not always good for long-term investors in the short run, but they're very good for traders. Not everyone knows that, so that's one of the biggest hurdles we have to get over. So to answer your question, there has been a slight uptick in membership, but I don't think we will see a sustained or strong surge in membership. until the market proves itself to be on a continual bull run. But having said that, we are making very diligent efforts to educate prospective users that you don't have to have a bull market to make money as a trader in the market. Does that answer your question?
spk07: Yes, it does. Thank you very much. And I wish you guys good luck. Thank you. Thanks.
spk03: And our next question will come from Joe Combs with Noble Capital. Please go ahead.
spk02: Good afternoon, gentlemen. Good afternoon. I was wondering if you could give us what the quarter end total member number was, and is there any way you guys can quantify how many of the promotional sign-ups actually became full subscribers?
spk04: Yeah, Joe, that's a good question. We don't want to quantify membership at end of quarter because it's an average of promo users and we don't have a full picture of how many are remaining. But as of the end of the quarter, we retained about one-third of the promotional users by the best analytics that we used to determine that. It is an effective way to market for us and I'll answer this question with a little bit more of an informational statement. We learned we had to kind of adapt. We were a leading provider and there wasn't as much competition for such a long time. We never had to offer these very low priced promos to lower the barrier to entry. We didn't have to do it before. We experienced enormous growth and never did any sort of extreme price. We never reduced our price from the $99 down to a $5 promotion for the first month. But because the markets were turbulent and sales were down, we decided to give something new a try. And we were very, very pleased with the results. And if we do it again, which we plan to do something, maybe not the exact same type of promotion, but something similar, we think that we can really leverage the new users more so than we did this first time around because we learned so much from this type of promotion. So the bad market and the loss in subscribers or loss in growth of subscribers, was somewhat painful, but it also allowed us to pivot, adapt, and learn how to do some marketing that we never had to do before, as they say, necessity is the mother of invention. So we learned some new marketing tricks, and we're going to use them in the future, and we think that they'll be even more effective the next time around.
spk02: Great. And, I mean, when we talk about the marketing and the promotions, I mean, you know, what what do you think you guys can focus on to separate yourself and separate black box stocks from all the other services that are out there and get that into the forefront of, you know, whether it be, you know, traders and or self-directed investors minds.
spk04: I'm glad you asked that question. One of the, New video ads that we've created specifically addresses all the new services in the market and asks the viewer a question. How do you know who's really legit? Then we ask them to refer to our history. We've been live since 2016. We were founded in 2014. We let them know that we're a best-in-class service with reviews from industry peers and review sites for trading tools. We're ranked very high there, so we ask them to do their own research. And one of the things we point them to is our five-star Google review, and we have 537 Google reviews. And they're all organic from our members, not augmented by Trustpilot or services that augment And users can tell when there's reviews that are augmented by what I would call review services. So to conclude, we've asked them to look at our social media reviews, our Google reviews. We cite our history as best in class. And we ask them before they take that leap of faith on a new service to investigate them thoroughly and find out if they're really what they say they are because there's a lot of new services that are just that. They're new services. They came from a bull market run, and everyone's a genius in a bull market. Not everyone knows how to coach, educate, and shepherd a member base through turbulent markets. So we do that very well. We have the testimonials to prove it, and we're pointing to many of those in our new ad campaigns.
spk02: Okay. You did the E-Trade integration, and there's been one or two other ones in the past. Are you seeing any benefit to Black Box from these integrations?
spk04: Yes, we see a benefit. We have certain limitations as to how much we can advertise because we're dealing with corporate behemoths that have – their own compliance departments and marketing departments. Some of the integration partners are easier to work with than others. But overall, it has been a very positive thing because many of our users use E-Trade as their trading platform. So we're able to internally market to them and let them know that we now are fully integrated with E-Trade. So we have a lot of happy customers, and even if we're not allowed to put a commercial on CNBC that says we have an E-Trade integration, the word spreads through the grapevine, and traders are a very tight-knit community, especially on social media, so the word kind of spreads for us.
spk02: Okay. One more, if I may. You mentioned some of the products that, you know, in development, the stock mani and the pro version. Any idea of when those might be released?
spk04: Yeah, I hope to have stock NANI and beta before year end and release sometime in early 2023. The pro is a little bit different endeavor. We may do it in multiple iterations. We may do a black box pro light and then go for a much more comprehensive version on a second run. So we're internally discussing that now. But we will offer pro users access to our system with some enhanced features probably prior to year end.
spk02: Great. Thanks, guys. Looking forward to seeing how the story continues to unfold.
spk03: Thank you, Joe.
spk02: Thank you.
spk03: And our next question will come from Brian Swift with Security Research Associates. Please go ahead.
spk05: Thanks. Just to follow up to the last question, can you give us a little more color on Stock Nanny and the professional in terms of features? I mean, there are a lot of alert systems that we're used to, like with Schwab and other trading platforms. And maybe a little idea about some color on how you plan to price these products.
spk04: Sure. Thanks, Brian. Thanks, Brian. Stock Nanny is unique, in my opinion, and it's very different than any other alert system that you can set through your brokerage app. Stock Nanny allows you to download your portfolio from your brokerage and then set custom alerts based on the stocks that you want alerts on. When I say custom alerts, we use a lot of our proprietary technology that the technology that does not exist on current platforms as far as the brokerage platforms. I'll give you a for instance. We have some of the best options data out there. That's why people that use Think or Swim or people that use other brokerage platforms that have comprehensive tools of their own use black box to augment their ability to track options flow in the market. So one of the many alerts that StockMedia can provide is bullish options activity in a particular stock, which is very useful to a portfolio holder. We also have a rapid decline alert. This is a function of one of our algos for day traders. Day traders use this particular alert to short stocks intraday most of the time on a scalp type situation. But when it's applied to a portfolio holder, this can be an early alert that something's going terribly wrong even in the pre-market that they may or may not have known. So, those are two of hundreds of examples of the proprietary alerts that we feel are more comprehensive and significant to a portfolio holder. We've adapted them from what we use in our tech stack for traders to speak or to service the portfolio holder. And it integrates cleanly with any brokerage platform, allowing the user with one push of a button to download their entire portfolio into this app. As far as pricing, it's about a 12. Right now, we have it at a $12 to $15 a month price range. not more than $150 per year. And I believe strongly that this particular app, if it saves a self-directed investor $1,000 loss one time, they will never get rid of the app. It's a don't leave home without it type thing. So we're very, very excited about getting this out. And we have some unique integrations with some of the brokerages to allow people to trade right out of the alert they receive without having to log on to the brokerage system separately. How about the Pro? The Pro has a multitude of features that we don't currently offer to our Blackbox subscriber base. It's got an enhanced watch list that has all the data sets and grid features that a lot of the more quote-oriented systems have. But we also have some advanced charting tools that some of the quote medias of the world and other pro systems don't have. So what we're doing is we're combining a lot of our proprietary features with the standard data sets that other pro services use. And we feel that the combination of these proprietary features along with the standardized features in a much more user-friendly format than a lot of these current platforms offer, that's one of our strengths is we've created a very, very unique user-friendly interface. We feel the combination of those features will give us a very large audience with the pros and a large subscriber base there.
spk07: Okay. Thank you.
spk04: Thanks, Ryan.
spk03: And at this point, I would like to turn the conference back over to Bob to read any kind of webcast questions. Please go ahead.
spk08: Sure. Thank you. We have just one question here is looking for us to repeat how much stock we had bought back and how much is allowed. And so it's Through the June 30th, we have purchased $945,000 worth of stock, and that's for approximately 499,000 shares, and the total program is $2.5 million and is authorized through the end of this year. I think that's all the questions we have from the web.
spk04: You guys want to wrap it up? Again, I'd like to thank everybody for joining us. We have managed to adapt and pivot in somewhat of a turbulent market. Like I said, it's easy to be a genius and a success in the bull market in a financial technology company. But when times are tough and things are turbulent, the experience of our team traders that are in our community and our educators is has enabled us to maintain our user base to a level that allows us to continue to grow and forward our technology initiatives to create new products, better products, more enhanced products that will continue to give our users the edge in the market. And we are very excited about the new products we're going to release in 2023 and excited about the growth of our core product, which I expect Things to accelerate again. I don't have a crystal ball, but everything's cyclical. And I think even if we don't have another huge bull market, we'll be able to be back on track and growing rapidly. So with that, I'll thank everyone for their support and interest in Black Box and attending the call today. And I'll turn it back over, close out the call.
spk03: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
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