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SI

SRAX, Inc. (SRAX)·Q3 2021 Earnings Summary

Executive Summary

  • Q3 2021 revenue rose 219% year over year to $8.313M and 8% sequentially, with consolidated gross margin expanding to 78% and adjusted EBITDA loss improving to approximately $(0.8)M; Sequire (ex-BIGtoken) generated $7.7M revenue and ~$1.0M EBITDA, demonstrating underlying profitability of the core platform .
  • Management guided Q4 2021 revenue to $10.1M and raised the full‑year revenue target to $31.5M (high end of prior $30–$32M), with implied Sequire‑only Q4 revenue of $9.4M; guidance includes a partial-quarter contribution from BIGtoken prior to expected deconsolidation .
  • Operating leverage remains evident: gross margin expanded 1,100–1,200 bps YoY (78% in Q3 vs 67% in Q3’20), while bookings accelerated into Q4 ($12.5M to date with a projection to $16.5M), and Sequire subscribers increased to 250 (up 25 QoQ) .
  • Balance sheet capacity improved: cash was $6.823M and marketable securities $18.221M at 9/30/21; including additional securities underlying the preferred and post‑quarter receipts, management referenced ~$29–$31M of securities liquidity “as of today,” supporting growth investments and capital returns via the previously announced preferred distribution program .
  • Street consensus from S&P Global for SRAX was unavailable; therefore, we cannot determine beats/misses vs estimates this quarter. Expect estimate revisions to bias upward for revenue given higher Q4 and FY targets [SpgiEstimatesError; no S&P Global mapping for SRAX].

What Went Well and What Went Wrong

What Went Well

  • Strong topline and margin expansion: revenue +219% YoY to $8.313M; consolidated gross margin rose to 78% from 67% YoY, reflecting SaaS leverage in Sequire .
  • Sequire profitability and bookings momentum: ex‑BIGtoken EBITDA ~$1.0M and Q3 bookings of $8.9M; Q4 bookings already $12.5M with a projection to $16.5M, underpinning forward growth .
  • Platform adoption and product cadence: Sequire subscribers reached 250; launched IR Website Builder, SMS communications, and VIRA (AI IR chatbot) to broaden attach rates and upsell opportunity .
    • “We will hit the high end of our 2021 guidance and are well positioned to close out 2021 strong” – CEO Christopher Miglino .

What Went Wrong

  • Consolidated adjusted EBITDA remained negative $(0.8)M despite improvement, driven by increased hiring, marketing, and one‑time costs (patents and BIGtoken transaction) that offset gross profit expansion .
  • Other income/expense remained a headwind: significant unrealized losses on marketable securities (Q3: $(3.906)M) contributed to total other expense of $(3.005)M, widening the consolidated net loss .
  • BIGtoken continued to complicate optics and reported results; while deconsolidation is expected following the BritePool transaction, near‑term P&L includes BIGtoken contribution and discontinuity around the transition .

Financial Results

Headline P&L vs prior year, prior quarter, and guidance

MetricQ3 2020Q2 2021Q3 2021Q4 2021 Guidance
Revenue ($USD Millions)$2.609 $7.700 $8.313 $10.100
Gross Margin (%)67% 81% 78% N/A
Adjusted EBITDA (Consolidated, $USD Millions)$(1.9) N/A$(0.8) N/A
EBITDA (Sequire/ex‑BIGtoken, $USD Millions)$(1.1) ~$1.4 ~$1.0 ~$? (Sequire rev $9.4M implied)
Diluted EPS ($)$(0.45) $(0.27) $(0.15) N/A

Notes: Q2 2021 revenue and EPS from earnings call; Sequire Q2 EBITDA cited by management as ~$1.4M .

Segment/Disclosure Breakdown (Q3 2021)

MetricConsolidatedSequire (SRAX less BIGtoken)
Revenue ($USD Millions)$8.3 $7.7
Gross Margin (%)78% 79%
Operating Expenses ($USD Millions)$8.1 $5.6
EBITDA ($USD Millions)$(0.79) $0.94

Key Performance Indicators

KPIQ1 2021Q2 2021Q3 2021Commentary
Sequire Subscribers (companies)~200 225 250 (+25 QoQ) Ongoing adoption momentum
Bookings ($USD Millions)N/A$11.4 $8.9 Seasonality (summer decision‑maker availability)
Q4’21 Bookings To‑Date ($USD Millions)——$12.5 (proj. $16.5) Record pace entering Q4
Renewal Rate (%)——~85% Combined platform + services basis
Deferred Revenue ($USD Millions)——$14.824 (9/30/21) Visibility to future revenue
Cash & Equivalents ($USD Millions)$13.5 cash+securities at 3/31 noted; cash $? $10 cash, $23.8 securities at 6/30 $6.823 cash; $18.221 securities at 9/30 Liquidity supports growth
Marketable Securities “as of today” ($USD Millions)—$23.8 (6/30) ~$29 (management) ; ~$31 incl preferred underlying Includes post‑quarter receipts

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2021None disclosed$10.1 New
Revenue ($USD Millions)FY 2021$30–$32 $31.5 target (high end reaffirmed) Narrowed/raised target point
Sequire Revenue ($USD Millions)Q4 2021None disclosed$9.4 (implied) New
BIGtoken in Q4 GuideQ4 2021N/AIncluded until close; implied ~$0.7M Clarified mix

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2021 and Q2 2021)Current Period (Q3 2021)Trend
Platform growth and clients~200 clients; ~30% attach to services (Q1) . 225 clients; record $11.4M bookings (Q2) .250 clients; Q3 bookings $8.9M; Q4 to‑date $12.5M (proj. $16.5M) .Improving momentum; strong pipeline into Q4
New product featuresAudience/Zoom; feature pipeline (Q1) . IR/data features, patents, Microcaps.com launch (Q2) .IR Website Builder, SMS, daily borrow/short interest, VIRA IR chatbot (beta) .Accelerating product cadence/upsell
Capital returnsNone (Q1). $10M buyback; ~$6.5M preferred distribution announced (Q2) .Quarterly preferred distributions begin ~Jan 31, 2022 for Q4 liquidation proceeds .Execution phase
BIGtoken structureConsolidated for now (Q1) . Plan to deconsolidate in coming weeks (Q2) .Deconsolidation expected with BritePool; report as discontinued ops; then mark preferred to market .Resolution near‑term
Liquidity/marketable securities$13.5M cash+securities at 3/31 (Q1) . $34.1M cash+securities at 6/30; $24M securities (Q2) .$6.823M cash and $18.221M securities at 9/30; ~$29–$31M “as of today” incl preferred underlying/post‑quarter receipts .Fluctuates with receipts/mark‑to‑market

Management Commentary

  • “We achieved our Q3 guidance with $8.31 million in revenue… giving Q4 revenue guidance of $10.1 million, implying fiscal 2021 revenue of $31.5 million… at the high‑end of our full year revenue guidance” – CEO Christopher Miglino .
  • “On a consolidated basis… gross margins of 78%, an increase of 1,200 bps from the prior year… Adjusted EBITDA loss of $800,000… Excluding BIGtoken, EBITDA of approximately $1 million” – CFO Michael Malone .
  • “We’ve had 12 quarters of consecutive Sequire revenue growth and increased the number of Sequire subscribers from 225 to 250” – CEO .
  • “Revenue from existing contracts for 2022 is currently at $6.5 million… without taking into consideration any renewals” – CEO .
  • “Q4 guidance… includes some revenue for BIGtoken… projected revenue for Sequire on its own in Q4… $9.4 million” – CEO .

Q&A Highlights

  • Seasonality and bookings: Summer decision‑maker availability pushed deals into Q4; bookings accelerated to a record pace early in Q4 .
  • Renewal dynamics: Renewal rate around 85% on combined platform + services basis; management working to provide more granular renewal and spend uplift metrics next quarter .
  • BIGtoken transaction: BritePool transaction expected to drive deconsolidation; BIGtoken revenue included only until close; post‑close reported as discontinued operations and then marked as a preferred security; possible gains through P&L upon valuation .
  • Preferred distributions: First distribution targeted ~30 days after Q4 end (late Jan 2022), then quarterly thereafter, based on liquidation of the underlying securities .
  • 2022 outlook context: Existing contracts represent ~$6.5M revenue without renewals; management expects revenue “north of” 2021 levels but has not provided formal guidance .

Estimates Context

  • S&P Global consensus estimates for SRAX were unavailable this quarter (tool mapping missing), so we cannot provide a definitive beat/miss versus Street for revenue or EPS. Management met Q3 revenue guidance ($8.31M) and raised targets for Q4 ($10.1M) and full‑year ($31.5M), suggesting upward bias to revenue expectations where coverage exists .

Key Takeaways for Investors

  • Core Sequire engine is scaling: 219% YoY revenue growth, 78% gross margin, and positive ex‑BIGtoken EBITDA underscore SaaS leverage and improving unit economics .
  • Forward visibility improving: Deferred revenue of $14.8M and record Q4 bookings trajectory ($12.5M to date; projected $16.5M) support near‑term revenue momentum into 2022 .
  • Product expansion widens TAM and ARPU: New IR website builder, SMS, short interest analytics, and VIRA chatbot can drive higher attach rates and renewals (~85% renewal rate today) .
  • Structural simplification: Expected BIGtoken deconsolidation should improve clarity of SRAX’s underlying performance; thereafter BIGtoken will be a marked preferred holding .
  • Capital allocation levers: Preferred distributions commence post‑Q4; substantial warrants may provide cash inflows in 2022; marketable securities provide optionality to fund growth .
  • Watch list: Execution on Q4 guide ($10.1M), sustained bookings pace, renewal/upsell metrics disclosure, and timing/impact of BIGtoken deconsolidation are near‑term stock catalysts .