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spk02: Hi, everybody, and welcome to the Q2 2021 Shracks conference call. Appreciate you taking the time to join us today. We have some really good news for you today. We had another amazing quarter, probably one of our best quarters ever. In fact, it was our best quarter ever. So let me dive right into it and share some of the information. Year over year, our revenue growth was 558% consolidated and 809% Sequoia on its own. Quarter over quarter revenue growth of 41% consolidated and 46% Sequoia on its own. We beat our Q2 guidance and our Q3 revenue guidance, we're gonna set at 8.3 million. tracks 1Q performing EBITDA of 1.4 million, excluding big token. We've had now 10 consecutive quarters of Sequoia growth. We've increased the number of Sequoia clients from 200 to 225. We've had in Q2, we had our largest booking quarter ever. We booked $11.4 million in Q2. We increased our guidance to $30 to $32 million 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 FPVD 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's its own separate company. So what we like to do is break out the Sequoia piece on its own. So you get a sense of what the true picture of our business looks like. So we had revenues of around 7.1 million, year over year growth of 806%. We had gross margins of 5940. So 83% gross margins and adjusted EBITDA of around a million four. Now that is a swing from the previous year of a negative 1569. So almost a $3 million swing to the positive side. So on EBITDA and also the EBITDA is last quarter was 500,000. So you're seeing a significant increase in EBITDA for the company. So we're really excited about this. We did have non-cash items inside of Sequire for adjustments in stock. And so we have a negative net income, but that's all non-cash. 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 Sequire clients. As you can see, our bookings in Q2 were 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 this quarter. So 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 grew the client base to 225 clients that have signed up for the Sequoia platform. We've held two conferences in the quarter. We held an LD micro and a cannabis conference in the quarter. We launched an email feature and SMS integration. We launched a registered investment advisor feature where our users can search for registered investment advisors and understand who all of their... understand who different registered investment advisors are. And we give them their phone number, email address. So you can say, I, you know, I want to reach all the investment advisors in Westlake village where I live. And and from there you could, you know, 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. We have another patent that will be filed by the end of this month. And then we'll have two patents filed. If you remember last quarter, we said we identified three. We'll have the second one filed by the end of this quarter. We launched microcaps.com as a site to aggregate all data around microcaps. One of the big things that happened for us was Big Token S1 went effective. So all of our shares within Big Token or FPVD, which is a symbol that Big Token trades under, were registered. So as many of you know that have been watching this, we have 159 billion shares of that stock registered. and they've all been registered at this point. So we could start to monetize that asset over time. So we're launching our first person event if the world doesn't continue to fall apart. So we're gonna shoot for that. A big part of 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 type one, 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 so, We launched our most aggressive sprint on new offerings. We implemented a sprint that is going to build what we think will be the most aggressive new feature development of the Sequire platform. 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. So today we're announcing that we're doing a $10 million stock buyback program. We think there's a disconnect between our stock price 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 new sales that are coming in the door and also as we start to monetize some of the big token stuff. And if we are able to monetize some of the big token stuff at a higher value, then we will obviously increase that number. So our goal is to whatever we can get, you know, whatever we can get for our position in FPVD will combined with 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 market and buy some stock back. And then today we're also announcing a one-time special dividend of approximately $6.5 million to shareholders of record on September 20th. We'll be issuing a non-voting, non-tradable preferred that'll hold approximately $6.5 million in stock from our clients. From time to time as the shares are sold, we'll pay out the proceeds to the preferred shareholders. So obviously that is, we think, a very big thing. It's approximately, comes out to approximately 23 cents a share. So hopefully that, you know, hopefully 23 cents a share is a nice return for a quarter. And we'll reevaluate whether we continue to do that type of thing in the future. Now I'm going to turn the call over to Mike Malone. Mike has a very detailed review of all of our financial information. He's broken down exactly how all of the stock is held and 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.
spk06: mike thank you chris overall we delivered another solid quarter of operating results as mentioned earlier we ended 2q with revenues of 7.7 million representing year-over-year growth of approximately 870 percent a revenue continues to be driven by sequoia which finished the quarter with revenues approximately 7.2 million representing year-over-year growth of approximately 800 percent at sequential quarter-over-quarter growth of 68%. Both were ahead of expectations. Our profit margins continue to grow and improve as our sequoia revenue continues to grow. On a consolidated basis, growth's 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, Sequoia represented approximately 2 million of this increase, which was driven by increases in our operations and support area to support the increase in our Sequoia platform. The remainder of the increase, or approximately 1.3 million, was attributable to Big Token's operations. Operating loss for the quarter was 1 million, which is up from the prior year by 2.2 million. And on a Sequoia standalone basis, excluding big token, Shracks reported operating income of approximately $940,000, which was up from an operating loss of 2 million in the prior year. Other loss for the quarter was approximately 5 million, which was driven by an unrealized loss with our marketable securities, which we'll cover in more detail in a few moments. Net loss attributable to Shrack shareholders was $5.7 million for the quarter, or a loss of $0.27 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 our Sequoia business, we've seen marketable 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 to a total of $34.1 million as of June 30, 2021, all while decreasing total gross debt from $10.4 million to approximately $3.1 million as of June 30, 2021. Our marketable security balance has grown significantly over the past few quarters and now is the largest item on our balance sheet. And I'd like to dive into this in a little further detail. At the end of the second quarter, we reported approximately 24 million in marketable securities. This balance represents the fair value of stock and other securities we receive as payment for our services at Sequoia. We mark to market this balance at the end of each quarter based on the quoted market prices of each of our holdings. Any changes in the fair value are recorded as an increase or decrease in the marketable securities balance on the balance sheet with a corresponding unrealized gain or loss reported in the other income section of our income statement. Due to GAAP accounting principles, our balance sheet reporting only consists of marketable securities that the company has taken legal custody and emits balances related to additional shares that are Due SHRAC is a result of anti-dilutive provisions we have in 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 $4.8 million in securities that are unrecognized as of June 30, 2021. Upon receipt of these additional shares, we'll record these as an increase in the value of our positions with our 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 the services that are paid for in securities or in stock. Now, looking at this example, a typical Sequoia contract with a $250,000 total value in 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 markable security balance with a corresponding increase in the deferred revenue balance. As we provide services during the term of the contract, in this case, radically over the year, we recognize one quarter or approximately $62,500 per quarter. And any corresponding change in the fair value of the shares during this contract period is recorded in other game laws. And with that, I'd like to turn the call back to Chris.
spk02: 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 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 first question from Catherine at B Reilly.
spk01: Hi, Chris. Thanks for taking the question. Of course. How many Sequire subscribers additionally have purchased digital marketing services from Strax? And further, how many of these companies that have come back and purchased additional digital marketing services from you guys?
spk02: I'll let Mike answer that one.
spk06: Mike, you have a. Yes, Catherine, can you can you hear me? Yeah. Yes. Apologies for that so. As of. As of today's date, let me just pull this up here. My apologies. I've got our schedule here.
spk05: I can help you with that, Mike. You need those numbers.
spk06: Yeah, maybe you could take the first part of that. I'm just pulling up my numbers here. I think we've got about 228, Randy, and then
spk02: then in terms of the managed services um i forget exactly i'm trying to find that number and uh just just for everybody knows that we've uh this is randy clark randy clark is our chief operating officer and um it's his first time on the earnings call with us but um welcome to the call randy and thank you yeah thank you so catherine um
spk05: It looks like as of today, I've 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've signed onto contracts have went on to do additional services. And of those 79, we've run 141 total campaigns. So per client, we're running right now about 1.78 campaigns per client. So I think that's the number that you're looking for.
spk01: Great. Thank you. And one more for me. giving trailing 12 months acquire bookings how much supplier revenue already is likely to be recognized in the second half of this year um again just based off of what you've already booked so catherine we've got uh um in this in the back half from what we have booked through through uh through friday approximately 13 million dollars which will bring the full year
spk06: amount to closer to 24 million just that's acquired.
spk01: Okay, great. Thank you.
spk03: You're welcome.
spk04: Hey, great. Did you
spk02: Let's see.
spk03: This is John Hickman.
spk02: Of course, John, go for it.
spk03: I have two questions. The first one is how how in a dollar amount did you liquidate any of your securities in Q2? And the second question is, can you talk to us in like, I don't know, general terms about your plan to get under the 50 percent ownership of big token in the not too distant future?
spk06: John, I can quickly address, I think, the first part of that. So, you know, it's maybe best to just think about it for the first six months. We've sold approximately 3 million, and then in the second quarter, just under a million dollars did we liquidate.
spk03: Thanks.
spk02: And then as far as, uh, our plan, there's a transit, there's something that we're working on with a big token that would put us in a position where we would, uh, um, be on consolidated. Um, and that looks imminently like it's going to happen, um, sometime in the next, you know, uh, I'd say, uh, maybe four to six weeks.
spk03: Okay, thank you.
spk02: Sure.
spk05: Chris, it looks like Todd has his hand raised.
spk02: Yes. Can you guys hear me? We can, Todd. Thank you. How are you? Thanks for joining today. I appreciate it.
spk04: Great quarter, guys. Very impressive. And my specific question, because one of my questions got asked before, Is there any metric in place that Shracks will be using when buying back shares that, I guess, maybe akin to Warren Buffett, where maybe your share price to your guys' knowledge and growth rate and what you've got in bookings might be too expensive and you would wait? Is there some kind of corridor you're looking at for the buybacks on price?
spk02: That's actually being put together right now. We have to have, you know, you have to be in the next couple of weeks, we'll have that all in place. And so we haven't defined it fully yet, but we certainly know that down here that, you know, the stock down here is trading at a market cap of three times sales. We said we'll do 30 to 32 million for the year. I think that and we've consistently hit our numbers. So if you, you know, I think that that is a highly undervalued, you know, I think that we are willing to buy it down here and take that back in because it's definitely a creative and, you know, we're seeing continued EBITDA, positive EBITDA
spk04: Chris Wanner, Okay, great Thank you Chris a second question would be on supplier bookings or supplier services. Chris Wanner, How many clients that you guys have booked are re upping for a second term is there any information on that.
spk05: Chris Wanner, i've got that information, Chris. Todd, so it looks like, and this is all time today for going back to the beginning of really last year. So we've sold 228 clients. 79 of those have entered into managed service agreements, averaging around 178, which is answering Catherine's question. But overall, 36% of our managed services clients have come back. to renew, add on, or contract for additional services. So we're seeing strong numbers. However, we really, at this time last year, started to really hit our stride. So this next quarter and the following quarter are going to be huge for us in terms of measuring renewal and retention because almost 100% of our contracts are annual and they're just starting to expire.
spk04: Excellent Thank you Randy Thank you Chris look forward to more great stuff in the future thanks.
spk02: Thanks a lot Todd appreciate the support.
spk05: yeah you're welcome.
spk02: let's see. Jim are you there James I could see the phone I could see your phone number there.
spk07: Hello, hello. Hey, Chris.
spk06: Chris. Hello? Hey, Jim. We can hear you. This is Mike. I don't know if Chris is... Yeah.
spk07: I'm just wondering, can you talk a little bit about the big token position? Obviously, you can sell in the open market now, but I'm sure you've considered a a dividend of those shares as well, similar to what you're doing with the portfolio. Can you talk about your philosophy on big token and what your monetization strategy is?
spk02: Yeah, we've looked at that. We've looked at the idea of divining them out, but we'd have to do it similar to the way that we are doing this. this dividend that we are doing this quarter, where it would have to be a preferred share where we sell it on our own and then pay those dividends out to the shareholders. I mean, the piece, it's worth right now something like $750 million. and uh so i mean it's it's a crazy valuation um for this but yes we've you know contemplated uh doing that and uh that it'll make our lives a lot easier uh to get below a point where we we don't have to consolidate all of this information and we can just be much clearer on the you know, we could just be much clearer on the true value of the company.
spk07: Got it. Thank you. And one of the things on the Sequoia business, can you talk about subscription pricing, if there's 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 non-subscription revenue part of Sequire. I know that's partly driven by whatever programs companies have during the period, but maybe if you can talk about over a seasonal trend, if there is a seasonal impact, if there is any in Q3 and 4, and then also, you know, the longer-term trend of what you think the non-subscription revenues of Sequire look like.
spk02: Randy, you want to take that?
spk05: So we've definitely seen, you know, quarter over quarter increase now for eight straight quarters. And 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 and our projections and working with finance on our numbers, you know, out for the next four quarters, we see this growth continuing, especially on the managed services side. But in the numbers of subscriptions, we've got very aggressive goals for Sequire. where we want to get to, you know, we're at 228 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, there's, you know, almost unlimited cap of the number of companies that we can ultimately bring into our platform, you know, up to the total number of companies that are publicly held. I'm not sure if that gives you the exact number because we haven't forecasted into 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 were kind of blown away.
spk07: Got it. I look at this business and Jekyll and Hyde way, I mean, on the positive side, You can imagine where the revenue per subscriber continues to grow as you add more services. But on the negative side, you can think of, well, they've gone after the low-paying fruits. And so the incremental customers would have less revenue for not subscription, but the demand of services revenues. You seem to be implying that it's the former, not the latter, that there's still a lot of room to grow the revenue per subscriber. customer. Is that you know, hear that correctly?
spk05: Absolutely. Yeah, we're we're excited about the you know, the number of 36%, I think was a number that I have that we've had 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 James Meeker & at a very aggressive pace and we're keeping the business that we've managed to to bring on board, so we continue that formula, which is kind of what i'm charged with the CEO managing. James Meeker & The sales and operations side of the business we keep that trend and I don't see the growth slowing down for a long, long time.
spk07: James Meeker & that's great thanks a lot appreciate the answers, thank you. James Meeker & you're welcome.
spk00: Great Chris I think that's all we have we do have one other question that came in which i'll 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 shares 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 this. Chris, do we still have you? Randy, are you there? Can you maybe fill in and answer that? I can read it again if you need me to.
spk05: Yeah, if you don't mind. It looks like Chris may have lost his connection. Yeah, actually, there.
spk02: I'm back. My son must be taking a break on his Fortnite expertise right now. Well, I kind of answered this before. We've registered those shares now. The shares have now been registered. Tom Preston- Which was a big undertaking to get them all all registered and now we have the ability to to start to monetize. Tom Preston- To start to monetize this so that is that something that's you know that will start looking at it. Christopher McConkey, out for the remainder of this year, so you know, the thing that I was talking about in the previous quarters, was that we had to get the shares registered, which I actually thought would take a little bit longer than it actually did. Christopher McConkey, So we're just we're excited about that now. Christopher McConkey, Hopefully, that answers the question.
spk00: Erica Connolly, Great Thank you Chris.
spk02: Yep, and I appreciate everybody taking the time to come. I just wanna give our analysts one more chance if anybody has another question before we leave. No, okay. And I wanna thank Mike and Randy and Morgan for 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.
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