SRAX, Inc.

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.

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.

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.