Creatd first quarter net revenues increased 154%, year over year, exceeding company guidance.
FORT LEE, N.J., May 17, 2021 /PRNewswire/ — Creatd, Inc. (Nasdaq CM: CRTD) ("Creatd" or the "Company"), today reported financial results for its first quarter ended March 31, 2021.
Commenting on the Company's first quarter results, Creatd's founder and CEO Jeremy Frommer stated, "Creatd established a solid business foundation in 2020, fortifying operations, systems, financials, human resources, and overall infrastructure, effectively eliminating any impediment to future rapid growth and revenue expansion, and entered 2021 focused on delivering growth in both our platform and agency businesses. We are highly motivated to continue to exceed the guidance we set for 2021 which we have shown to deliver during this first quarter."
"In the first quarter of 2021, our agency business increased 73% year-over-year, generating $428,000 in revenue. We have developed a true powerhouse in the form of our Vocal Challenges, which validate our company's unique brand awareness capabilities and enhance the value provided to our agency clients, while also providing exciting new reward opportunities through cash prizes for our creator communities. The success we witnessed with our , launched in January, and the subsequent engagement shortly thereafter, has led to a number of new arrangements with ."
"Since the launch of Vocal+ in early 2020, net quarterly revenues from creator subscriptions have increased nearly tenfold from $36,000 in first quarter 2020 to $307,000 in first quarter 2021. In fact, earlier today , surpassing 25,000 subscribers, and are on track to reach our stated goal of 100,000 paid Vocal+ subscribers by year-end 2021. As we continue to enhance our platform with additional tools and communities, as well as increase the number of challenges and other monetization opportunities for creators, we see a continuation of excitement and expansion from our flourishing creator population."
"Given the performance we have experienced over the last 45 days, coupled with the , we are comfortable giving guidance of between $1 million and $1.2 million in net revenues in second quarter 2021, and between $5 and $7 million for full year 2021."
Net revenue: Net revenue for first quarter 2021 increased 154% to $744,000, as compared to the $293,000 in net revenues for first quarter 2020, and exceeded Company guidance of $660,000. The year-over-year increase in quarterly revenues is fully attributed to the steady growth of Vocal+ paid subscribers as well as growth in the Company's agency businesses, which accounted for approximately 58% of net revenues during the quarter. Agency revenues consist of revenues from Vocal for Brands, which has experienced an acceleration in revenues into the second quarter as a result of securing of new clients as well as contract renewal for existing clients, and Seller's Choice, or Managed Services, which is benefiting from an increase in monthly service fees and performance marketing revenues. First quarter gross revenues were $756,000, before adjustments due to reward payments made to Vocal+ subscribers, which includes money earned through 'reads' on subscribers' stories and Challenge rewards; gross revenues were in line with the Company's guidance range of $725,000 to $770,000.
Operating Expenses: Operating expenses totaled $6.7 million compared to the prior year first quarter operating expenses of $2.1 million. The year-over-year increase was due to the following:
a $993,000 increase in personnel compensation as a result of an increase in headcount, including the addition of corporate officer positions, as well as new hires to support the Company's growing agency businesses, business intelligence, and financial and accounting departments. Currently, Creatd's headcount totals approximately 40;
a $1.6 million increase in marketing expenditures, which will be actively managed to achieve optimum return on investment, with an eye toward continually lowering subscriber acquisition costs;
a $1.5 million in non-cash charges, including stock-based compensation to employees and consultants, and incentive-based options issued to employees;
approximately $400,000 in professional services predominantly related to a financing close and S-3; and
general ongoing operating expenses, including an increase in research and development of $193,000.
The Company's average monthly cash burn during first quarter 2021 was approximately $1.8 million, an increase of approximately $1.3 million over the prior year's average monthly cash burn. The increase is primarily due to the addition of personnel, which is expected to hold steady at this level for the foreseeable future, prepayment of R&D expenditures, full year prepayment of approximately 10% of the Company's outsourced service fees, higher than usual expenses for professional services due to financings, and a substantial increase attributed to the Company's first significant marketing campaign, an effort which is expected to be repeated throughout 2021 given its success.
Mr. Frommer commented, "First quarter 2021 we choreographed an important transition for the Company without compromising our revenue expectations. We are near complete in establishing our permanent internal infrastructure while still carrying duplicate outsourced consulting support. As we phase out duplicate functions, which total approximately $100,000 - 200,000 in additional expenditure monthly, and our costs are reduced to a baseline level, we anticipate our efficiencies will increase and our revenues will be positively impacted. In fact, were it not for the necessity of redundancy and non-recurring cost of financings, the first quarter monthly cash burn would have been approximately $1.4 million. With the momentum we are witnessing, and assuming no changes in this baseline monthly cash burn, we believe we may exit 2021 having achieved cashflow breakeven."
Comprehensive Loss: Comprehensive loss for first quarter 2021 totaled $(6.6) million, or $(0.68) per basic and diluted share, which included several, non-cash charges, including employee bonus options issuances for 2020 performance and stock payment to consultants for past services, as well as an extraordinary increase in legal, accounting, and consulting fees related to a financing close, valuation assessments, and remaining debt conversions at the beginning of the quarter. Net of these charges, the first quarter comprehensive loss would have been approximately $(4.6) million, or $(0.42) per basic and diluted share. This compares to a comprehensive loss of $(3.0) million or $(0.96) per basic and diluted share for first quarter 2020.
Total Assets: During first quarter, total assets decreased by approximately $4.3 million to $6.4 million, as cash was used to repay approximately $1.2 million in remaining aged payables and debt, $400,000 in professional services related to financings, a $1.6 million increase in marketing spend and an increase in personnel resulting in $993,000 of additional compensation and related expenses.
Total Liabilities: Creatd reduced its total liabilities by $868,000 to $4.5 million during the quarter. The Company's remaining debt consists of $240,000 in convertible notes, of which $164,000 was repaid subsequent to March 31, 2021, and $1.5 million in notes payable of which $675,000 is a Government Payroll Protection Program ("PPP") loan that carries 1% annual interest (for which a request for loan forgiveness has been submitted) and $660,000 related to the acquisition of Seller's Choice, a liability that Creatd is litigating. The Company's accounts payable was reduced $790,000 to $1.8 million following the satisfaction of all aged payables and a portion of current payables.
Capitalization: As of March 31, 2021, Creatd had 10.9 million shares of common stock outstanding, an increase of approximately 2.2 million shares from 2020 year-end predominantly due to the conversion of Series E Preferred stock into 1.62 million common shares and the exercise of 333,000 warrants, which generated approximately $1.3 million in additional capital to the Company. The remaining increase in outstanding common stock is attributed to stock-based compensation of approximately 152,000 shares for professional services and 60,000 shares allocated to the Company's Board of Directors' Compensation plan retroactive to its reconstitution in mid-2020. The Company's fully diluted shares increased by 2.8 million during the first quarter, predominantly due to the granting of 1.8 million options from the Company's 2020 Equity Incentive Plan, 350,000 options issued to the Company's Board of Directors' Compensation plan, and 470,000 warrants issued to bankers related to the Series E private placement. Creatd's fully diluted shares total 19.9 million, of which warrants account for approximately 6.2 million shares with an average strike price of $5.20. Currently, the Company's shares held by Creatd management, Board of Directors and employees represents over 15% of the fully diluted shares.
Series E Financing: Creatd announced the closing of its $7.8 million Series E Preferred Stock and accompanying warrants on January 4, 2021. Currently 86% of Series E preferred has converted into common shares with remaining preferred shares totaling 1,088 or 264,078 equivalent common shares.
S-3 Effectiveness: The Securities and Exchange Commission declared effective the Company's Registration Statement on Form S-3, for a total of $50 million in aggregate over time.
Private Placement: Subsequent to quarter-end, on May 14, 2021, of $4.7 million in principal value of convertible notes with an original issuance discount with three institutional investors, two of whom invested in the prior Series E preferred. The notes are convertible into shares of Creatd's common stock at $5.00 per share and come with, in aggregate, 1,090,908 warrants, exercisable at $4.50 per share. Created intends to use the gross proceeds of $4 million for general corporate purposes including an increase in its marketing and development spend.
Vocal+ Creator Subscriptions: In the first quarter 2021, subscribers to Creatd's premium subscription program, Vocal+, nearly doubled to over 20,000, as compared to 10,500 subscribers at year-end 2020. Subsequent to the first quarter, , surpassing 25,000 subscribers, and confirmed its expectations to hit its goal of 100,000 paid subscribers by year-end 2021.
Vocal Freemium: Vocal's freemium creator count grew approximately 10% during the first quarter, totaling over 900,000 creators compared to 810,000 creators by year-end 2020. Currently, the Company reports a total of 967,000 freemium Vocal creators, and expects to break one million freemium creators by the end of second quarter 2021; the expanding pool of freemium creators on Vocal has a catalyzing effect on Vocal+ adoption, working to accelerate the rate of conversion to a premium subscription.
Vocal Challenges: At its one-year mark, Vocal initiated a featuring a $20,000 grand prize, its largest to date, followed by subsequent Challenge collaborations with notable and emerging brands including Decider.com, part of the New York Post Digital Network, owned by News Corp (Nasdaq: NWS, NWSA; ASX: NWS, NWSLV,) and DTC wine subscription company, Bright Cellars; importantly, in May 2021, the Company signed its second branded collaboration with Moleskine and materially increased the prize pool. In addition, in mid-May, , owned by Fiskars Group (HEL: FSKRS), a multi-billion-dollar lifestyle brand headquartered in Finland. Year-to-date, Vocal has launched a total of 36 Challenges, which represents greater than half of the total number of Challenges launched during the full year of 2020 (59). Notable guest judges for Challenges have included Daniela Ricardi, CEO of Moleskine, Shelley Zalis, founder and CEO of The Female Quotient, and Miranda York, editor and founder of 'At the Table' magazine and author of 'The Food Almanac.' Vocal's Challenges feature remains one of the core drivers for year-over-year growth for both the subscription and agency-based businesses, working to both further enhance the value proposition for a creator to upgrade to a premium subscription, while at the same time providing brands with an even deeper way to engage with Vocal's creator and audience base.
Community Launches: Vocal resumed its launch of additional communities with the release of "FYI" and "Confessions," Vocal's 35th and 36th niche community sites. Subsequent to the end of the first quarter, Vocal launched its The Company expects to continue to launch new communities on Vocal to accommodate the diversified interests and needs of its expanding creator community.
New Vocal Monetization Feature: In February 2021, as an additional means of monetization for creators: currently, Creators can earn money: (i) every time their story is read, (ii) by competing in Challenges, (iii) by receiving 'tips' from audiences, (iv) receiving 'bonuses' from Vocal curators, (v) by collaborating on branded content campaigns through the Company's Vocal for Brands agency.
Second Creatd Partner, Untamed Photographer: At year-end 2020, Creatd introduced a new business segment focused on corporate venture opportunities, Creatd Partners, which entered into its first agreement with direct-to-consumer food brand Plant Camp. In April 2021, , Untamed Photographer, an online marketplace platform for wildlife photography. In conjunction with the Untamed Photographer launch, the Company additionally announced plans to tokenize the Untamed Photographer library, allowing its photographers and the causes they support to further monetize their unique photographs within the emerging NFT market.
OG Gallery: Subsequent to first quarter, a new NFT art gallery focused on the tokenization, marketing and sale of digital collectibles originating from the OG collection, a library of over 100,000 original photographs, digital artwork, imagery, original documents, illustrations, and collectables by the legendary Bob Guccione, former CEO of General Media and owner of publications including Penthouse, Viva, OMNI and Longevity. Previously, the Company has successfully leveraged this collection for numerous transmedia opportunities including: the documentary film , directed by renowned documentary filmmaker Barry Avrich, which premiered at the Toronto International Film Festival in 2013; the book , written by notable film critic Glenn Kenny in 2016; and the award-winning 2015 film , directed by celebrity photographer Indrani and starring Lindsay Lohan.
Insider Buying: Creatd's executive management team and Board of Directors continue to purchase shares of the Company's common stock in the open market, year-to-date collectively purchasing approximately $62,124 (14,220 shares) at an average purchase price of $4.37. Since inception, Company insiders have purchased Creatd common shares either through the open market or by participation in private placements that have subsequently converted into common shares collectively totaling 480,000 common shares and 255,000 warrants.
Vocal Product Enhancements: Creatd released significant design and functionality enhancements to Vocal, primarily aimed toward enhancing user Engagement and supporting significant growth of Vocal's premium subscription. Updates included:
a full platform front-end redesign, featuring a more refined navigation experience for Vocal audiences aimed toward increasing creator discoverability and enriching user experience delivered ahead of schedule;
the addition of community-specific metrics, highlighting the health, safety, and user volume of both the creators and communities throughout the platform;
a new Challenge user interface;
front-end framework enhancements;
back-end framework and platform infrastructure enhancements;
integration and implementation of recurring revenue growth platform to reduce churn and optimize pricing;
fundamental accessibility improvements to comply with Web Content Accessibility Guidelines WCAG 2.0 standards;
enhanced payment experience by enabling creators to receive Creator Bonuses and Challenge rewards directly to their Vocal Wallet; and
The addition of a "Sign in with Apple" option to further streamline user experience.
About Creatd Creatd, Inc. (Nasdaq CM: CRTD) is a creator-first technology company and the parent company of the Vocal platform. Our mission is to empower creators, entrepreneurs, and brands through technology and partnership. We accomplish this through Creatd's three main business pillars: Vocal Ventures, Creatd Partners, and Recreatd. For news and updates, subscribe to Creatd's newsletter:
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Condensed Consolidated Balance Sheet
March 31, 2021
December 31, 2020
Account receivable, net
Prepaid expenses and other current assets
Total Current Assets
Property and equipment, net
Deposits and other assets
Minority investment in business
Operating lease right of use asset
Liabilities and Stockholders' Equity (Deficit)
Accounts payable and accrued liabilities
Convertible Notes, net of debt discount and issuance costs
Current portion of operating lease payable
Notes payable – related party, net of debt discount
Notes payable, net of debt discount and issuance costs
Total Current Liabilities
Operating lease payable
Total Non-current Liabilities
Commitments and contingencies
Stockholders' Equity (Deficit)
Series E Preferred stock, $0.001 par value: 20,000,000 shares authorized
1,088 and 7,738 shares issued and outstanding, respectively
Common stock, $0.001: 100,000,000 authorized shares 10,925,026 issued and 10,915,676 outstanding as of March 31, 2021 and
8,736,378 issued and 8,727,028 outstanding at December 31, 2020
Additional paid-in capital
Accumulated other comprehensive income
Less: Treasury stock, 5,657 and 5,657 shares, respectively
Total Stockholders' Equity (Deficit)
Total Liabilities and Stockholders' Equity (Deficit)
Condensed Consolidated Statements of Operations
Three Months ended
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expenses)
Accretion of debt discount and issuance cost
Change in fair value of derivative liability
Settlement of vendor liabilities
Gain (loss) on extinguishment of debt
Other income (expenses), net
Loss before income tax provision
Income tax provision
Net loss attributable to common shareholders
Other comprehensive income
Currency translation gain (loss)
Basic and diluted loss per share
Weighted average number of common shares outstanding
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SOURCE Creatd, Inc.