SRAX Reports $19.3 million in Net Income and $1.91 EPS for Third Quarter 2018
LOS ANGELES, Nov. 14, 2018 /PRNewswire/ -- Social Reality, Inc. (Nasdaq: SRAX), a digital marketing and consumer data management and distribution technology platform company, reported results for the three months ended September 30, 2018 and provided guidance for 2019.
"SRAX solves data challenges for all actors in the digital advertising ecosystem by building valuable verticals around specific data sets," stated SRAX's CEO and Chairman Christopher Miglino. "During the third quarter, through the sale of our healthcare vertical, we delivered proof of concept of our strategy to build, optimize and monetize digital marketing around three integrated areas of focus: industry data verticals, social media data and BIGtoken and our consumer data product.
"Today, we believe our industry verticals and social media solutions have substantial value. To capture the tremendous opportunity these assets have, we are investing in development and sales expansion. Year to date, we have launched several new products and increased our sales team from six at the beginning of the year to 22, the majority of whom are dedicated to SRAX solutions.
"Data accuracy is the largest area of uncertainty for marketers, and we are delivering a solution that is good for both the marketer and the consumer. Our consumer-powered data management and distribution system, BIGtoken, is positioned to revolutionize advertising by offering consumers choice, transparency and compensation for their data. By gathering information directly from the source, conducting multi-layer verification and providing data security, BIGtoken can solve data accuracy challenges the market faces. We have entered open beta, hired a VP of business development to help evangelize the system, and are excited about driving BIGtoken user growth.
"Overall, we expect to deliver significant revenue growth in 2019 and are confident about achieving our projected goals," concluded Miglino.
2019 Guidance
For 2019, the company estimates revenue will be between $20 million and $25 million with gross margins between 45% and 55% for the year.
Financial Results: Third Quarter 2018 Compared to Third Quarter 2017
SRAXmd contributed 37 days of revenue in 2018, compared to a full quarter in 2017.
-- Gross revenue was $2.0 million, compared to $5.6 million in the third
quarter of 2017, which included a full quarter of SRAXmd revenue.
-- Gross margin was 62%, compared to gross margin of 56% in the year ago
quarter.
-- Operating expenses were $4.9 million, compared to $3.7 million, up due
to ongoing headcount additions in the SRAX industry data verticals.
-- Gain on sales of assets was $24.0 million, compared to none in the same
period 2018.
-- Net income was $19.3 million, or $1.91 per share, reflecting the sale of
SRAXmd, compared to a net loss of $1.0 million, or $0.13 per share, in
the third quarter of 2017.
-- Adjusted EBITDA loss was $2.8 million, compared to $93,000 in the third
quarter of 2017.
-- Cash and cash equivalents were $14.4 million at September 30, 2018,
compared to $1.0 million at December 31, 2017.
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and certain additional one-time expenses. It is not intended to represent a measure of performance in accordance with accounting principles generally accepted in the United States (GAAP). A detailed description and reconciliation of EBITDA and management's reasons for using this measure is set forth at the end of this press release.
Other Recent Corporate Highlights:
-- Sold SRAXmd, the healthcare business, for up to $52.5 million in total
consideration including $33.5 million in cash less transaction expenses,
up to $9 million in gross profit earn-out and $10 million in preferred
shares in the new SRAXmd entity, representing 31% ownership.
-- Provided updates regarding BIGtoken.com
-- Declared dividend right to shareholders and certain holders of the
company's common stock equivalents on September 17, 2018, at no
charge, a non-transferable right to receive a special dividend (also
at no charge), if and when declared, consisting of such number and
designation of the SRAX subsidiary BIGtoken, Inc.'s securities as
determined by the company's management
-- Entered closed beta and moved quickly to open beta to have users
test the ecosystem.
-- Began a contest to reward Beta testers with the unique opportunity
to earn Bitcoin for participating. To join the BIG Beta contest,
download the BIGtoken app on the Apple App Store or Google
-- Apple App Store: http://big.srax.com/app-store
-- Google Play: https://big.srax.com/google-play
-- Hired David James Stewart as vice president of business development to
drive commercial adoption of BIGtoken.com.
-- Named George Stella vice president of SRAXshopper to fuel growth in the
CPG vertical.
Conference Call
Management will review the results on a conference call with a live question and answer session today, November 14, 2018, at 4:30 p.m. ET/1:30 p.m. PT.
-- If calling from the United States or Canada, please use Dial-In Numbers:
1-877-407-9716 to access the live call and 1-844-512-2921 for the
replay, code 13684813 available until November 28, 2018.
-- If calling internationally, please dial 1-201-493-6779 to access the
live call and 1-412-317-6671 for the replay, code 13684813.
-- 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.
About SRAX
Social Reality, Inc. (NASDAQ: SRAX) is a digital marketing and consumer data management and distribution technology platform company. SRAX's technology delivers the tools to unlock data to reveal brands and content owners' core consumers and their characteristics across marketing channels. Through its blockchain identification graph technology platform, BIG (www.bigtoken.com), SRAX is developing a consumer-powered data marketplace where people can own and sell access to their data thereby users choice, transparency, and compensation. SRAX's technology and tools deliver a digital competitive advantage for brands in the CPG, automotive, sports 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, 2017, 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, LHA Investor Relations, +1 415 433 3777, srax@lhai.com
SOCIAL REALITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
2018 2017
---
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $
14,423,573 $
1,017,299
Accounts receivable, net 969,110 4,348,305
Prepaid expenses 448,784 468,336
Other current assets 417,813 300,898
Total current assets 16,259,280 6,134,838
Property and equipment, net of
accumulated depreciation 153,619 154,546
Goodwill 15,644,957 15,644,957
Intangibles - net 1,832,323 1,642,760
Other assets 451,145 28,598
Total assets $
34,341,324 $
23,605,699
===
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable and
accrued expenses $
2,475,229 $
5,010,815
---
Total current liabilities 2,475,229 5,010,815
Secured convertible debentures, net 2,943,109 1,711,146
Total liabilities 5,418,338 6,721,961
Commitments and contingencies (Note
13)
Stockholders' equity
Preferred stock, authorized
50,000,000 shares, $0.001 par
value, no shares issued or
outstanding at September 30, 2018
and December 31, 2017,
respectively
Class A common stock, authorized
250,000,000 shares, $0.001 par
value, 10,183,330 and 9,910,565
shares issued and outstanding at
September 30, 2018 and December
31, 2017, respectively 10,183 9,911
Class B common stock, authorized
9,000,000 shares, $0.001 par
value, no shares issued or
outstanding at September 30, 2018
and December 31, 2017,
respectively
Common stock to be issued 879,500
Additional paid in capital 37,343,937 37,143,033
Accumulated deficit (8,431,134) (21,148,706)
Total stockholders' equity 28,922,986 16,883,738
Total liabilities and
stockholders' equity $
34,341,324 $
23,605,699
===
SOCIAL REALITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018
(Unaudited)
Three Months ended Nine Months ended
September 30, September 30,
---
2018 2017 2018 2017
---
Revenues $
2,015,391 $
5,554,182 $
8,823,592 $
16,861,449
Cost of revenue 763,610 2,454,919 2,902,179 8,378,247
Gross profit 1,251,781 3,099,263 5,921,413 8,483,202
Operating expense
General, selling and administrative
expense 4,869,232 3,659,202 14,414,279 11,395,454
Write-off of non-compete agreement 486,750
Restructuring costs 377,961
Total operating expense, net 4,869,232 3,659,202 14,414,279 12,260,165
Loss from operations (3,617,451) (559,939) (8,492,866) (3,776,963)
Other income (expense)
Interest income (expense) (318,942) (338,010) (1,240,485) (668,583)
Amortization of debt issuance costs (726,716) (133,224) (1,531,963) (898,932)
Total interest expense (1,045,658) (471,234) (2,772,448) (1,567,515)
Gain on sale of assets 23,978,389 23,978,389
Other non-operating income (expense) 9,758 4,498
Total other income (expense) 22,942,489 (471,234) 21,210,439 (1,567,515)
Income (loss) before provision for
income taxes 19,325,038 (1,031,173) 12,717,573 (5,344,478)
Provision for income taxes
Net income (loss) $
19,325,038 $
(1,031,173) $
12,717,573 $
(5,344,478)
===
Net (loss) income per
share, basic and diluted $
1.91 $
(0.13) $
1.26 $
(0.67)
===
Weighted average shares outstanding,
basic and diluted 10,112,804 8,115,790 10,121,717 8,008,717
SOCIAL REALITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018
(Unaudited)
Nine Months ended September 30,
2018 2017
---
Cash flows from operating activities:
Net income (loss) $
12,717,573 $
(5,344,478)
Adjustments to reconcile net loss to net cash used by
operating activities:
Stock based compensation 1,756,795 947,968
Gain on sale of SRAXmd (23,978,389)
Amortization of debt issue costs 325,791 515,082
Amortization of debt discount 1,206,172 383,850
PIK Interest expense accrued to principal 51,323
Write-off of non-compete agreement 486,750
Provision for bad debts (8,600) (181,702)
Depreciation expense 30,730 14,240
Amortization of intangibles 512,308 358,698
Changes in operating assets and liabilities:
Accounts receivable 1,816,668 1,377,870
Prepaid expenses (196,929) (209,007)
Other assets (119,462) 12,762
Accounts payable and accrued expenses (3,005,533) (721,272)
Unearned revenue 67,516
Cash used in operating activities (8,942,876) (2,240,400)
Cash flows from investing activities:
Purchase of equipment (29,803) (97,287)
Development of software (701,871) (454,368)
Proceeds from SRAXmd 22,980,824
Cash provided by (used in) investing activities 22,249,150 (551,655)
Cash flows from financing activities:
Proceeds from the issuance of common stock, net 3,820,001
Proceeds from the issuance of common stock in
conjunction with warrant exercised 100,000
Repayments of note payable and PIK interest (3,996,928)
Proceeds from secured convertible debentures, net 2,136,629
Net cash provided by financing activities 100,000 1,959,702
Net increase (decrease) in cash and cash equivalents 13,406,274 (832,353)
Cash and cash equivalents, beginning of period 1,017,299 1,048,762
Cash and cash equivalents, end of period $
14,423,573 $
216,409
===
Supplemental schedule of cash flow information:
Cash paid for interest $
758,767 $
649,199
Cash paid for taxes
$
$ -
Supplemental Schedule of noncash financing activities:
Common stock issued for preferred stock
conversion and vesting grants
$ $
52
Vesting of common stock award $
150,000
$
Issuance of placement agent warrants
$ $
249,028
Issuance of common stock to be issued, issued
now $
879,500 $
100
Shares issued for convertible note
conversions $
300,000
$
SOCIAL REALITY, INC.
NON-GAAP TO GAAP RECONCILIATION
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018
(Unaudited)
Social Reality's management evaluates and makes operating decisions using various financial metrics. In addition to the company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. Adjusted EBITDA is defined as income from operations before depreciation and amortization expenses, stock-based compensation and one-time financing and transaction expense. Management believes that this non-GAAP measure provides useful information about Social Reality's operating results. The tables below provide a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure. This non-GAAP measure should be considered a supplement to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP.
For the
Three Month Period Ended
September 30,
2018 2017
Net Income or (loss) $
19,325,038 $
(1,031,173)
plus
Equity Based compensation 594,985 326,641
Adjusted net loss $
19,920,023 $
(704,532)
(Gain) or loss on sale of assets (23,978,389)
Interest Expense 1,045,658 471,234
Other non-operating expenses (9,758)
Depreciation and amortization 172,838 140,551
Adjusted EBITDA $
(2,849,628) $
(92,747)
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