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Creatd, Inc. (VOCL)·Q3 2020 Earnings Summary

Executive Summary

  • Q3 2020 revenue was $0.425M, up 32% QoQ and >4x YoY; management said the quarter “surpassed third quarter revenues guidance by over 6%” and guided Q4 revenue to $0.55–$0.65M and FY21 revenue to ~$6M .
  • Loss from operations widened to $(7.0)M on one-time non-cash items (Nasdaq up-listing/financing costs and $3.6M performance option expense), and other non-operational charges of $(6.6)M (debt discount accretion/issuance) drove comprehensive loss to $(13.57)M; management emphasized most charges were non-recurring .
  • Mix was anchored by Managed Services (Seller’s Choice) and Vocal for Brands; Seller’s Choice contributed ~$0.183M and Vocal for Brands ~$0.166M (39% of revenue), with subscription revenue comprising the balance and deferred revenue building to $0.037M .
  • Strategic catalysts: Nasdaq up-list, $7.8M gross offering, liabilities reduced from $15.5M to $3.3M, fully diluted share count ~12.4M; guidance calls for subscriber growth (10K Vocal+ by YE20), declining SAC ($150 in Q4, $130 in Q1’21), and profitability in FY21 .

What Went Well and What Went Wrong

  • What Went Well
    • Revenue accelerated: $0.425M (+32% QoQ; >4x YoY); Vocal for Brands contract pricing rose ~30% versus Q2; Seller’s Choice added new clients late in Q3, positioning Q4 growth .
    • Balance sheet reset: liabilities fell from $15.5M (6/30) to $3.3M (9/30), supported by $7.8M gross raise and ~$11.9M conversions; shares outstanding 8.7M at 9/30; fully diluted ~12.4M .
    • Platform KPIs improved: Freemium creators reached ~810K; Vocal+ paid subscribers 7,500; SAC fell to $170 from $350 in Q2 and ~$1,000 in Q3’19; management guided to further SAC declines .
  • What Went Wrong
    • Heavy non-recurring/non-cash costs: third-party financing/up-listing charges (~$1.2M) and $3.6M performance option expense drove OpEx to ~$7.45M and loss from operations to $(7.0)M .
    • Significant other expenses: $(6.55)M mainly from accretion of debt discount/issuance costs (~$6.37M), overshadowing improved revenue trajectory .
    • External estimate noise: management addressed a third-party (DAX) “miss” report, stating they did not provide that guidance and noting adjusted loss would be $1.9M ($0.46/share) excluding one-time charges; however, official Wall Street consensus (SPGI) was unavailable for VOCL, limiting a formal beat/miss assessment .

Financial Results

MetricQ3 2019Q2 2020Q3 2020
Revenue ($USD)$91,386 $322,540 $424,814
Loss from Operations ($USD)$(1,656,532) $(3,535,000) $(7,023,864)
Other Income (Expenses), Net ($USD)$(277,488) $(607,000) $(6,551,778)
Comprehensive Loss ($USD)$(1,934,011) $(4,161,000) $(13,569,908)
Basic & Diluted Loss per Share ($)$(0.65) $(1.29) $(3.20)

Segment mix and key revenue lines (Q3 2020):

Segment / LineQ3 2020 Revenue ($USD)Contribution
Managed Services (Seller’s Choice)~$183,000 ~43% of total
Vocal for Brands$165,500 ~39% of total
Subscriptions & Other~$76,314 (derived: $424,814 − $183,000 − $165,500) ~18% (derived)

KPIs and operating metrics:

KPI9/30/20196/30/20209/30/202011/15/2020
Freemium Creator Accounts485,780 714,165 810,000 810,000
Vocal+ Paid Subscribers250 4,600 7,500 7,500
Vocal+ SAC ($)1,000 350 170 170
Deferred Revenue (Subscriptions) ($)—$5,000 (Q2) $37,000 (Q3) —

Balance sheet snapshot:

Metric12/31/20199/30/2020
Cash ($)$11,637 $2,897,385
Total Assets ($)$2,572,046 $5,722,928
Total Liabilities ($)$11,130,774 $3,320,534
Shares Outstanding (Common)3,006,362 8,653,395 (8,662,745 issued)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD)Q4 2020“Match/exceed Q3 growth” (directional) $550,000–$650,000 Raised to explicit range
Revenue ($USD)Q1 2021—$850,000–$1,050,000 New guidance
Vocal+ Paid SubscribersYE 202010,000 target “On target to exceed 10,000” Reaffirmed/raised confidence
Subscriber Acquisition Cost (SAC)Q4 2020$170 current ~$150 Lowered
Subscriber Acquisition Cost (SAC)Q1 2021—~$130 New guidance (lower)
Operating BudgetNext 2–3 quarters$600k/month ($1.8M/quarter) historical +10%–20% at most Maintained with modest increase
ProfitabilityFY 2021—Breakeven/profitability expected New target

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2020 / Q2 2020)Current Period (Q3 2020)Trend
Subscription growth & SACVocal+ introduced; Q1 revenue $293k and deferred revenue; Seller’s Choice >50% of Q1 revenue . Q2 revenue $323k; reverse split/uplisting prep .7,500 Vocal+; SAC fell to $170; plan for $150 in Q4 and $130 in Q1’21; target >10k YE20 .Accelerating subs; improving unit economics
Sales force expansionNo material disclosure.Sales team quadrupled to eight; senior hires for Brands and Seller’s Choice; focus on higher-margin accounts and larger brand budgets .Expanded go-to-market
Branded content pricing & pipelineBuilding pipeline; brand collaborations; Q2 setup for Q3/Q4 growth .Vocal for Brands ~39% revenue; ~30% price increase vs Q2; pipeline broadening to large CPG/innovation budgets .Pricing power improving; pipeline broadening
Balance sheet/financingQ1: operating expense cuts; uplisting preparations; S-1 for ~$8M .$7.8M gross offering; debt/equity conversions; liabilities down to $3.3M; Facebook marketing line to $1.5M .De-risked; marketing funding support
Platform scale & moderation600k+ creators; best-in-class tools; compliance focus .~810k freemium creators; ~10M monthly visitors; moderation, UX upgrades; roadmap for utility patents .Scaling; continued product moat

Management Commentary

  • CEO: “We believe Creatd is prepared to scale revenues and that our Vocal platform is the driving force that will deliver profitability during fiscal year 2021.”
  • CFO: “Comprehensive loss…~$13.6M, inclusive of approximately $11M of non-cash charges, the majority of which are non-recurring…operating expenses…$7.4M…other non-operational expenses ~$6.6M” .
  • COO: “I have quadrupled the Sales Team…shifting to higher margin opportunities…expanding focus to include larger companies…with Vocal crossing 10 million monthly unique visitors” .
  • President: “We don’t sell our users’ or creators’ data…we moderate every story…multiple monetization opportunities…best-in-class editor” .

Q&A Highlights

  • Subscription momentum and value proposition: Management underscored a freemium-to-premium strategy, platform safety, and monetization tools (tips, challenges), positioning Vocal+ to exceed 10K paid subscribers by YE20 .
  • Pipeline visibility: COO targets larger brands and higher-margin deals; confidence in ~$0.6M Q4 and ~>$0.85M Q1 revenues supported by broadened outreach across categories (health, tech, entertainment) .
  • Capital structure: Management options strike $8.55; first significant warrant exercise level $4.50; average strike prices options $23.67, warrants $5.63; full cash exercise would yield ~$17.5M .
  • Competitors: Platform differentiates via second-mover advantage, integrations (e.g., YouTube, SoundCloud), and collaboration ethos; moderation and UX cited as advantages .
  • Estimates “miss” clarification: CEO stated Creatd did not provide the guidance cited by third-party DAX and noted excluding one-time charges Q3 loss would be $1.9M ($0.46/share), an improvement YoY .

Estimates Context

  • S&P Global consensus for VOCL was unavailable due to missing CIQ mapping; we attempted retrieval but could not access estimates for revenue or EPS for Q3 2020, Q4 2020, FY 2020, FY 2021 (SpgiEstimatesError: Missing CIQ mapping for ticker ‘VOCL’) [functions.GetEstimates error].
  • Without official consensus, formal beat/miss cannot be determined; management claimed Q3 revenue surpassed internal guidance by >6% and provided explicit revenue ranges for Q4 and Q1’21 .

Key Takeaways for Investors

  • Momentum improving: Revenue growth is broad-based (subscriptions, branded content, services) with rising contract prices and an expanded salesforce supporting Q4/Q1 guidance .
  • Unit economics trending positive: SAC down to $170 with glide path to $150/$130; deferred subscription revenue rising; Vocal+ scale is the core flywheel .
  • Balance sheet reset reduces risk: Liabilities compressed to $3.3M; conversions and offering expanded share base and liquidity; potential ~$17.5M cash from in-the-money exercises if stock appreciates .
  • Near-term trading: Expect stock sensitivity to subscriber adds, branded content wins, and confirmation of Q4/Q1 revenue ranges; watch for dilution optics versus growth trajectory .
  • Medium-term thesis: Path to FY21 profitability hinges on sustaining subscription growth, scaling branded content/managed services with higher margins, and maintaining OpEx discipline .
  • Risk monitor: Non-recurring charges largely behind, but further financing for marketing and acquisition activity could alter cash burn; execution in enterprise brand pipeline is key .
  • Catalysts: Quarterly subscriber updates, branded content case studies, Seller’s Choice client additions, and patent/feature launches can bolster narrative and valuation .

Appendix: Source Documents

  • Q3 2020 8-K and press release, financial statements, and presentation .
  • Q3 2020 earnings call script (Nov 17, 2020) .
  • Q2 2020 press release and uplisting details .
  • Q1 2020 press release, shareholder letter, and presentation .