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- Creatd's second quarter net revenues increased 201% over prior year
FORT LEE, N.J., Aug. 13, 2021 /PRNewswire/ -- Creatd, Inc. (Nasdaq CM: CRTD) ("Creatd" or the "Company"), the parent company of Vocal, today reported financial results for the three- and six-month periods ended June 30, 2021.
Commenting on the Company's second quarter results, Creatd's founder and CEO, Jeremy Frommer, stated, "I view this quarter as the culmination of an important first phase in our corporate history. As we have delivered positive sequential revenue growth in eight of the last nine quarters and are now at the $1 million quarterly revenue level, we have fully transitioned from the start-up phase into the commercialization and growth acceleration phase. We currently project revenues of between $1.4 and $1.6 million for the third quarter, and between $1.8 and $2 million for the fourth quarter, which brings our expected revenues for fiscal year 2021 to a little over $5 million, within our guidance range. We expect to, at minimum, double that in fiscal year 2022."
Mr. Frommer continued, "Our balance sheet has never been stronger. Our debt is modest and highly manageable, and we have a healthy cash level, with over $5 million in available working capital, consisting of cash and prepayment of third quarter product development costs. We expect to allocate a total of only $350,000 in cash toward completing the acquisitions of Dune Glow Remedy and Wobble Wedge. This number represents less than 7% of our current cash level."
"Over the last five years, our team has designed, developed, and completed the core technology of our robust platform supporting a network of creators, who have come to rely on Vocal for the visibility and numerous monetization opportunities that it provides. Of the more than 1.1 million Vocal creators, 30,000 have already opted to join Vocal+, the premium membership program offering value-additive features. More recently, Vocal has started to move into a new echelon of engagement, sitting alongside premiere platforms like Patreon, Medium, Substack, and a number of other creator-oriented communities. Vocal's digital reach totals over 150 million, with between 10 and 15 million visitors monthly, and an average time on site of nearly five minutes, which bests our primary competitors by over 50%."
As Vocal has decidedly grown, so too have our relationships with our clients, who find great value in our platform to drive brand awareness and product conversions. The commercialization of Creatd Partners, which houses our agency businesses, was further enhanced by our acquisition of WHE Agency during the third quarter and is projected to continue to yield a consistent, sequentially growing revenue stream. Additionally, the introduction of Creatd Ventures, our e-commerce pillar, provides the foundation for what we expect to be a significant revenue driver for fiscal year 2022."
"One of the keys to Creatd's future lies in an acquisition strategy that is highly synergistic to our core revenue streams of Vocal+ memberships, our agency businesses, and most recently, e-commerce. What each acquisition candidate has in common is that they have achieved a revenue plateau that would require significant investment in infrastructure to achieve and support their next level of growth. Utilizing Creatd's network, infrastructure, systems, and distribution capabilities enables our acquired companies to accelerate their revenues quickly, efficiently, and at minimal cost, while simultaneously accelerating Creatd's own growth and validating the multifunctional capability of our platform. I highly recommend reviewing our newly released Q3 2021 investor presentation, which dives deeper into these concepts and provides crucial insight into Creatd's portfolio and how our team functions."
Second Quarter and First Half 2021 Financial Highlights:
Revenue: Second quarter gross revenues totaled $1 million, before adjustments for reward payments made to Vocal+ subscribers, which includes money earned through 'reads' on members' stories and Challenge rewards. Net revenue for second quarter increased 201% to $971,000, as compared to second quarter 2020 net revenues of $323,000, and increased 31% as compared to first quarter 2021 net revenues of $744,000. The increase in second quarter revenues is greatly attributable to the steady growth of Vocal+ memberships, as well as growth in the Company's agency businesses, which accounted for approximately 50% of net revenues during the quarter. Going forward, as both Vocal+ memberships and agency revenues are projected to continue to grow, the Company expects its acquisition initiative to begin to contribute meaningfully to revenue in upcoming quarters. For the first six months of 2021, gross revenues totaled $1.8 million and net revenues totaled $1.7 million, an increase of 179% over the prior year's six-month period.
Operating Expenses: Second quarter 2021 operating expenses totaled $9.4 million compared to the previous year's second quarter operating expenses of $3.9 million and first quarter 2021 operating expenses of $6.7 million. The quarter's increase reflects the following:
- an increase in compensation due to a rise in headcount, including the addition of corporate officer positions, as well as new hires to support the Company's growing agency businesses, business intelligence, Vocal moderation, and financial and accounting staff.
- a $3.8 million increase in year-over-year marketing expenditures, and a $2.2 million increase as compared to the first quarter 2021. The increase was required to complete the launch of the Company's first marketing campaign implemented during the first half of 2021. Going forward, the Company's quarterly marketing budget is expected to decrease by $1.5 million to approximately $2.7 million. The Company expects platform-related revenues to exceed marketing spend in fiscal year 2022, effectively demonstrating the ability to operate at cash flow break-even;
- a $338,000 increase as compared to the second quarter 2020, and a $1.1 million increase as compared to the first quarter 2021, in non-cash charges related to stock-based compensation to employees and consultants, and incentive-based options issued to employees; and
- approximately $400,000 in professional services predominantly related to the closing of a financing and related SEC filings.
Comprehensive Loss: Comprehensive loss for the second quarter 2021 totaled $(8.6) million, or $(0.81) per share, and included total interest expense of $61,000 and several non-recurring, non-cash charges totaling $121,000 related primarily to the elimination of debt during the quarter. While this reflects a $4.4 million increase in comprehensive loss, the Company showed a 38% improvement on a per-share level, with a basic and diluted loss per share of $(0.81), compared to a $(1.30) loss per share in the second quarter of last year.
For the first six months of 2021, comprehensive loss totaled $(15.2) million, or $(1.49) per basic and diluted share, compared to a comprehensive loss of $(7.2) million, or $(2.28) per basic and diluted share in the prior year's six-month period. As of today, there are 13,848,000 shares outstanding.
Total Assets: On June 30, 2021, total assets were consistent with the prior first quarter, increasing marginally by approximately $169,000 to $6.6 million. Cash, accounts receivable, and prepaid expenses totaled $3.3 million, a decrease of $223,000 from the prior first quarter. Subsequent to quarter end, during July 2021, the Company received cash proceeds of approximately $4.2 million from the exercise of warrants at a price of $4.50.
Total Liabilities: The Company's total liabilities increased by approximately $2.6 million during the second quarter to $7.1 million, due primarily to the Company's mid-quarter private placement of long-term notes convertible into shares of common stock at $5.00 per share, as well as an increase in current liabilities of approximately $570,000. On June 30, 2021, the Company's short-term debt consisted of $67,000 in convertible notes, which converted into shares of common stock just after the close of the quarter, and $1.1 million in notes payable, of which $282,000 is a Government Payroll Protection Program ("PPP") loan that carries 1% annual interest and $660,000 is related to the acquisition of Seller's Choice. The Company's non-current debt consists of convertible notes totaling $2.1 million, net of debt discount and issuance costs, of which approximately 75% converted during July 2021. The Company is approaching debt-free status as its remaining debt totals approximately $1.68 million.
Capitalization: As of June 30, 2021, Creatd had 11.9 million shares of common stock outstanding, an increase of approximately 1 million shares as compared to the prior first quarter, predominantly due to the June 2021 public offering of common stock totaling 837,000 shares inclusive of exercised over-allotment. The remaining increase is attributable to a note conversion and the exercise of warrants. The Company's fully diluted shares increased by approximately 3.7 million during the second quarter, predominantly due to the two financings which occurred during the quarter. Creatd's fully diluted shares total 22.9 million, which includes 250,000 shares underlying Preferred Series E shares, 933,000 shares underlying convertible debt, 2.35 million shares underlying options (with an average strike price $7.82), and 7.6 million shares underlying warrants.
Subsequent to quarter-end, approximately 1 million warrants were exercised, generating $4.2 million in additional capital to Creatd. Currently, there are approximately 6.56 million warrants remaining with an average strike price of $4.88. Additionally, $3.5 million of debt was converted into the Company's common stock at $5.00 per share as well as the conversion of Series E Preferred shares into 144,000 common shares. As of today the Company has 13.8 million shares outstanding and a fully diluted share count of 22.9 million.
Second Quarter 2021 Operational Highlights
Public Offering of Common Shares: On June 21, 2021, Creatd announced the closing of its public offering of 750,000 shares of its common stock at an offering price of $3.40 per share. This offering is the Company's first pursuant to a "shelf" registration statement on Form S-3 (File No. 333-250982) that went effective on April 23, 2021, granting the Company the ability to raise up to a total of $50 million in aggregate proceeds.
Private Placement: On May 14, 2021, Creatd closed on a private placement of $4.7 million in principal value of convertible notes with three institutional investors. 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. Subsequent to quarter-end, $3.5 million of the notes converted into Creatd common shares at $5.00 per share.
Community Launches: During the second quarter, Vocal launched four additional owned and operated niche communities, namely: "Confessions," "Earth," "Pride," and the highly popular "Fiction." The Company plans to continue to launch new communities on Vocal to accommodate the diversified interests and needs of its expanding creator community.
New Vocal Platform Features:The Vocal Ambassador Program is the platform's first referral feature, which is designed to help the Company achieve its ambition of reaching 100,000 premium subscribers by year-end 2021. Participants of Vocal's Ambassador Program receive a unique link and are rewarded with direct payments to their Vocal Wallet each time they successfully refer someone who then upgrades to a Vocal+ premium subscription. The over 1 million Vocal creators can now participate in the Vocal Ambassador Program and be rewarded for helping to drive Vocal+ subscriptions.
On August 9, 2021, Creatd announced the release of one of the most requested features, 'Subscribe,' which allows the reader to follow particular creators and view their published stories in one convenient place. A "subscribe to creator" button unlocks the ability for an individual creator to build a community around their content and monetize more directly from their individualized community. This new feature also provides a new revenue stream for Creatd–a platform processing fee on the recurring monthly transactions. Subscribe is the first of a series of product enhancements designed to foster a more personalized Vocal experience, allowing users to curate their feeds with the stories and creators they want to read most. The Company expects to release a paid offering for Vocal+ members, enabling these creators to offer gated premium content to their fans and audience, along with the means to converse on-platform with them.
Acquisitions: Second quarter saw the launch of the Company's acquisition strategy to acquire controlling interest in growth businesses utilizing a combination of stock and cash. Acquisition targets are expected to be housed in either Creatd Partners (agency business) or Creatd Ventures (e-commerce business).
Agency Business Acquisitions (Creatd Partners):
WHE Agency ("WHE") is a talent management and public relations agency focused on representing and managing influencers and creators within the parenting, family, and lifestyle categories. WHE manages a talent roster includes over 55 digital influencers with a combined audience of over 50 million followers and growing, who work with brands ranging from Proctor and Gamble, Mattel, Audible, and HelloFresh.
Synergies: WHE's expertise in navigating influencer partnerships can be leveraged to provide additional opportunities to Vocal's talented creators. Additionally, WHE's influencer talent will benefit from utilizing Vocal's distribution framework as well as having access to capital and resources to leverage their personal brands for new opportunities.
Terms: 55% controlling interest in WHE in exchange for $275,000 in cash and $660,000 in Creatd stock. WHE's co-founder Tracy Willis has joined Creatd as CEO of WHE. WHE is expected to generate net revenues of $1.2 to 1.5 million over the next 12 months, from gross sales of over $6.5 million.
Closing: Acquisition completed subsequent to quarter-end, on July 20, 2021.
e-Commerce Acquisitions (Creatd Ventures):
Dune Glow Remedy ("Dune"), a direct-to-consumer brand focused on promoting wellness through its range of health-oriented beverages. First products launched in the functional beverage space: Beauty. According to Bloomberg, the functional beverage market has increased 360% since last year, versus a 9% increase for the rest of the beverage market.
Synergies: Dune will receive direct access to Creatd's resources, technology, and marketing expertise, enabling it to materially grow revenues in a cost-efficient, timely, and scalable manner.
Terms: 50.4% majority ownership in exchange for a combination of cash and stock. Upon closing, Dune's founder is expected to join Creatd's team. Additionally upon closing, Creatd will consolidate financials, which are expected to be immediately accretive to Creatd's earnings. Dune is projected to generate net revenues between $500,000 and $1 million over the next 12 months.
Closing: Memorandum of Understanding announced August 2, 2021, with transaction close anticipated during fourth quarter 2021.
Wobble Wedge®, is a multi-patented interlocking modular system of tapered shims that are adaptable to hundreds of uses. The product, which is sold both direct-to-consumer and through wholesale channels, has become a staple tool for a wide range of users including homeowners, craftspeople, hobbyists, restaurant owners, and plumbers.
Synergies: Wobble Wedge believes that joining Creatd, and leveraging Vocal's ability to effectively market new products, will significantly expand its revenue potential.
Terms: Creatd intends to acquire a 55% equity stake in Wobble Wedge, in exchange for a combination of cash and stock. Wobble Wedge's management is expected to join Creatd following the close. Additionally, upon closing, Creatd will consolidate financials, which are expected to be immediately accretive to Creatd's earnings, with projections of $1.5 to $1.7 million in net revenues over the next 12 months.
Closing: Memorandum of Understanding announced July 29, 2021, with closing anticipated during fourth quarter 2021.
Camp (previously Plant Camp) is a healthy, kid-friendly food company that launched its first product, a nutrient-rich mac and cheese, just over one year ago. Additional product launches are anticipated during fourth quarter 2021, including a nutrient-rich, kid-friendly pancake mix.
Synergies: Camp benefits from the ability to leverage the rich pool of first-party behavioral data that Vocal has cultivated through its network of over 1 million registered creators. Conversely, Creatd demonstrates that it is able to support and accelerate revenues of its very first investment, despite less than optimum early performance.
Terms: Creatd purchased an additional 56% of the membership interests in Plant Camp, LLC for a combination of cash and stock, bringing its total ownership to 89%. Created consolidated Camp's financials into our Q2 2021 reporting. This consolidation is expected to be accretive to Creatd's earnings going forward, with net revenue projections of between $500,000 and $1 million over the next 12 months.
Closing: Acquisition completed on June 4, 2021.
Untamed Photographer: In April 2021, Creatd announced a minority investment in 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.
As Creatd has fine-tuned its investment strategy, going forward it plans to focus investments on controlling stake acquisitions.
OG Gallery: Acquired by Creatd's founders, the OG Collection is an extensive library of original artwork and imagery from the archives of some of the most iconic magazines of the 20th century. On April 29, 2021, Creatd announced an update on its plans to launch the "OG Gallery", the Company's exploratory initiative aimed at identifying opportunities to co-develop an online NFT marketplace where it could offer a selection of its own digital media assets as well as partner with other media libraries seeking to do the same. The Company is currently in discussions with partners and expects to begin development of its online NFT marketplace in the fourth quarter.
Key Leadership Hires:
- Celebrated author Erica Wagner joins Creatd as Lead Editorial Innovator: Ms. Wagner was literary editor of The Times for 17 years and is now a contributing writer for the New Statesman and consulting literary editor for Harper's Bazaar. In addition, she writes for The New York Times, The Economist, and the Guardian as well as teaches at Goldsmiths College in London. At Creatd, Ms. Wagner will principally be focused on developing Vocal's impact in the literary world and beyond to include systematizing the selection process by which creator published stories, as well as Creatd's intellectual property, can be leveraged for future transmedia production projects.
- 30-year finance veteran Rich Vinchesi appointed as Lead Acquisition Strategist: Mr. Vinchesi launched his career as an investment banker at Salomon Brothers and subsequently held executive roles for several growth companies prior to starting his consulting firm. Mr. Vinchesi's focus has been on technology companies, particularly e-commerce, CPG, and SaaS businesses, where his expertise in devising scalable business models, negotiating strategic partnerships, building-out operations, executing acquisitions, mergers and business sales, as well as early stage fund raising, has been invaluable to the success of numerous early-stage companies. Mr. Vinchesi received a B.S. from the Stern School of Business at New York University and holds an MBA from the J.L. Kellogg School of Management at Northwestern University. In his work with Creatd Partners, Mr. Vinchesi helps to steer deal origination activities, as well as the Company's execution of new venture initiatives currently in development.
- WHE Co-Founder Tracy Willis joins Creatd as CEO of WHE. Ms. Willis is a 15-year veteran in public relations and talent representation, including Vice President at Gushcloud Talent Agency, where she oversaw all digital creator talent. Ms. Willis went on to establish the WHE Agency, where she continues to represent and connect top digital influencers with leading brands and global audiences. Upon Creatd's acquisition of a controlling stake in WHE, Ms. Willis assumed the role of CEO, overseeing all daily operations and directing all talent and related brand opportunities, reporting directly to Creatd's CEO, Jeremy Frommer.
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 four business pillars: Creatd Labs, Creatd Partners, Creatd Ventures, and Creatd Studios.
For news and updates, subscribe to Creatd's newsletter: https://creatd.com/newsletter
Q3 2021 Investor Presentation: https://creatd.docsend.com/view/qwxasmy5983dfk2v
Investor Relations Contact: email@example.com
Any statements that are not historical facts and that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, indicated through the use of words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "intends," "plans," "believes" and "projects") may be forward-looking and may involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. We caution that the factors described herein could cause actual results to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. This press release is qualified in its entirety by the cautionary statements and risk factor disclosure contained in our Securities and Exchange Commission filings.
*** Financial Statements Follow ***
June 30, 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
Convertible Notes, net of debt discount and issuance costs
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
11,857,675 issued and 11,852,018 outstanding as of June 30, 2021 and
8,736,378 issued and 8,727,028 outstanding at December 31, 2020
Additional paid-in capital
Less: Treasury stock, 5,657 and 5,657, respectively
Accumulated other comprehensive income
Total Creatd, Inc. Stockholders' Equity (Deficit)
Non-controlling interest in consolidated subsidiary
Total Liabilities and Stockholders' Equity (Deficit)
Three Months ended
Six Months ended
Research and development
Stock based companies
General and administrative
Total operating expenses
Loss from operations
Other income (expenses)
Accretion of debt discount and issuance cost
Change in derivative liability
Impairment of investment
Settlement of vendor liabilities
Gain on marketable securities
Loss on extinguishment of debt
Gain on Forgiveness of debt
Other income (expenses), net
Loss before income tax provision
Income tax provision
Non-controlling interest in consolidated subsidiary
Net Income (loss) attributable to Creatd, Inc.
Net loss attributable to common shareholders
Currency translation gain (loss)
Basic and diluted loss per share
Weighted average number of common shares outstanding
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SOURCE Creatd, Inc.