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Edited Transcript of SRAX earnings conference call or presentation 14-Aug-19 8:30pm GMT

Q2 2019 Social Reality Inc Earnings Call

LOS ANGELES Aug 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Social Reality Inc earnings conference call or presentation Wednesday, August 14, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher Miglino

Social Reality, Inc. - Co-Founder, Chairman, CEO & President

* Kirsten F. Chapman

Lippert/Heilshorn & Associates, Inc. - MD and Principal

* Kristoffer E. Nelson

Social Reality, Inc. - COO & Director

* Michael Thomas Malone

Social Reality, Inc. - CFO

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Conference Call Participants

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* David Lavigne

Trickle Research, LLC - Founder & Senior Analyst

* James Patrick McIlree

Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology

* Michael A. Kupinski

NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst

* Michael Roy Crawford

B. Riley FBR, Inc., Research Division - Senior MD, Co-Head of The Discovery Group & Senior Analyst

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Presentation

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Operator [1]

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Greetings. Welcome to SRAX Second Quarter 2019 Results Conference Call. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to Kirsten Chapman. Thank you. You may begin.

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Kirsten F. Chapman, Lippert/Heilshorn & Associates, Inc. - MD and Principal [2]

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Thank you, Sherry. Good afternoon, everyone. I'd like to welcome all of you to SRAX Second Quarter 2019 Conference Call. This call is being webcast at srax.com/investors. With us today from management are SRAX CEO, Christopher Miglino; COO, Kristoffer Nelson; and CFO, Michael Malone. Chris Miglino will give an overview of the quarter and vision for the remainder of the year. Kris Nelson will provide detail on BIGtoken. Mike Malone will review the financials and then turn the call back to Chris Miglino for closing remarks. Then we will open the call for questions.

Before I turn the call over to management, I would like to remind you that this call may contain forward-looking statements, which could be indicated by the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to SRAX. Investors are cautioned that all forward-looking statements involve risks and uncertainties that may cause actual results to differ from those anticipated by SRAX at this time. In addition, other risks are more fully described in SRAX public filings with the U.S. SEC, which can be reviewed at www.sec.gov.

Finally, please make note that on today's call, management will refer to certain non-GAAP financial measures. Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization, noncash equity-based compensation and changes in fair value of derivative and warrant liabilities and certain additional onetime items. Please note the 2018 results include SRAXmd and Reach, which were discontinued products prior to the second quarter of 2019. Please refer to SRAX full press release for reconciliation of non-GAAP performance measures to the most comparable GAAP financial measures.

Now it's my pleasure to turn the call over to SRAX CEO, Chris Miglino. Please go ahead, Chris.

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [3]

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Thank you, Kirsten. Good afternoon, everyone. Thanks for joining us today. I know you're all busy, so I appreciate you taking the time to listen in on the call.

As the need for better data insights continues to grow, the market for data management and technology continues to increase as well. We're making great progress with our different verticals and BIGtoken and are excited about the opportunities to leverage the 2 together. We continue to build our data assets through increasing adoption of our proprietary platforms. Through building what we predict will be one of the most valuable opt-in data sets in the world, we're well positioned to generate long-term revenue and value for our shareholders.

The data tools we're building have one theme and that is to create data assets that will return recurring revenue for the company. We believe that the ownership of this data and the recurring revenue nature of these data assets are key to our long-term growth in revenue.

As many of you know, we have close to 100 software developers in the company, and they are working diligently to deliver products that help us reach our goal of creating the most valuable opt-in data set in the world. Over this quarter, the team delivered many enhancements on our key products. I'll now review some of those enhancements and talk about how they're translating to recurring revenue for the company.

For those of you that are new to our story, our products are broken into 3 areas. First, we have -- our BIGtoken platform that's enabling consumers to own their own data and helping us revolutionize the way the data is purchased and used by marketers. Second, we have our SRAX IR platform that enables publicly traded companies understand key data points on their investors. Third, we have our verticals that are creating unique data sets in specific marketing areas such as shopper marketing, luxury consumers and automotive.

First, let's talk about SRAX IR. For those of you who are unfamiliar with SRAX IR, it's a platform that helps public companies understand who is buying and selling their stock while providing those companies with the tools to market to those investors directly.

This quarter, in our SRAX IR platform, we integrated innovative enhancements and unveiled new features that are getting great reviews from current and new users. Our Situation Room provides real-time data insights into the price that certain investors are executing stock trades, thus giving the issuers a detailed understanding of when those investors may buy and when they may sell. We added capabilities to track and manage warrants and the related documents in one location. Now users can easily monitor the impact of expirations, further they can run testing scenarios to determine what money can be raised at different levels.

One of the most innovative enhancements in the quarter is our new ability for management to access their shareholder contact data, which includes e-mail addresses, phone numbers and social media links such as a Twitter, Facebook and LinkedIn. Issuers can then directly reach and advertise to those investors from within the platform. The days of only snail mailing company info to investors are limited, and SRAX IR is providing the infrastructure needed to accomplish this new communication method.

With over 20 companies and partners on the platform, we are off to a great start. Each company pays $3,000 a month on a year-long contract to have access to the data. The company has a goal of reaching 100 customers by the end of 2019. SRAX IR is a perfect example of the type of platform that we believe will deliver long-term recurring revenue to our investors, while building one of most valuable data sets in the financial markets.

In Q2, our revenues from our vertical has grown 53% sequentially. During the quarter, we launched a new vertical SRAX Lux in partnership with one of the largest owners of media assets in the luxury area. We will target and reach luxury consumers at luxury retail stores; high-end art, music, film and fashion and sporting events. We're excited about entering this vertical and expect it to ramp in late 2019 and early 2020. Marketers are very interested in reaching the luxury consumers. And as we build this data set, we will be creating a very lucrative and recurring revenue stream for the company. Other verticals continue to show strength as we enter the busiest part of the year for advertising.

Last, but most certainly not least, during Q3, we achieved a major milestone as we began to monetize our BIGtoken subscriber base. During the second quarter, we engaged with media and consumer packaged goods brands and agencies, and these interactions have generated applications from our BIGtoken data that we had not originally envisioned or projected.

Also, this morning, we announced that we formed a joint venture with Yash Birla Group, one of India's largest conglomerates that has diversified interests in consumer and industrial products. We'll work with the Yash Birla Group to leverage their strong presence in India to bring BIGtoken to the country's 627 million active Internet users. The digital advertising market is 3 -- in India is $3.5 billion and is set a grow at a compounded annual growth rate of 32%, making it one of the largest growing digital ad markets in the world.

BIGtoken will provide the tools for Indian consumers to earn from the value of their data. It's a huge opportunity for the Indian people. It provides a new approach for the Yash Birla Group and SRAX to create value. And it expands our geographic reach, furthering our mission to become the undisputable global platform that gives people choice, transparency and compensation for their data, while building the world's most valuable opted-in data set.

Overall, BIGtoken's impact on our business is profound, particularly in light of the fact that media has entered another inflection point. In the last 30 years, the digital media industry had 2 major shifts driving massive growth: adoption of the Internet and adoption of mobile. Today, media has experienced the most flux since the '90s, caused by regulatory issues, browser policy updates, third-party cookie policy changes, consumer privacy concerns and general discontent with big tech.

Companies that solve privacy problems will win, and it's clear that proprietary data is a huge asset. As such, we believe it's especially important for us to focus on growing our data assets right now and maintain our first-mover position with BIGtoken.

As you know, we decided to raise additional capital this last week. While we do not need the capital immediately, given the current market conditions, we wanted to take the conservative approach and raise capital from existing investors who've been good holders of the stock in the past. We've raised $5.5 million and netted just over $5 million after all fees.

With that, I'll turn the call over to Kris Nelson to review BIGtoken in greater detail.

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Kristoffer E. Nelson, Social Reality, Inc. - COO & Director [4]

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Thank you, Chris. With BIGtoken, we continue to make progress, positioning ourselves for growth by introducing new features, expanding our commercial offerings and beginning to monetize in the third quarter.

At the beginning of Q2, we experienced viral growth in our subscriber base. And today, we have 15.9 million subscribers. Due to the magnitude of this growth, particularly internationally, we had to quickly shift gears from our plans of growing predictably in United States to an enthusiastic global community.

This impacted several initiatives and shifted priorities. We adjusted our sign-up process. Now instead of using the desktop, users are required to download the application, which generates more data, including location data, device IDs, advertising IDs and provides a richer and more immediate experience for users. While the app sign-up requirement as well as additional points of verification have slowed down our pace of registrations, the app delivered better data that will be far more valuable in the long term.

Next, we're leveraging referrals as our primary marketing tool. We have active programs to incent people to invite their friends and family to the platform. After refining these programs over the last few months, we're implementing them at scale now. If you haven't yet, search BIGtoken on YouTube, Twitter and Instagram to see the participation and engagement. Take a moment to check it out.

We're impressed by our community's creativity and enthusiasm. As a result of this, our marketing costs have been negligible. Going forward, to drive growth and acceleration in specific countries, we anticipate increasing targeted marketing spend. To engage subscribers by providing additional value and to create more partnership opportunities, we are continually introducing additional methods for our subscribers to use their data payment.

In last quarter, we announced partnerships with The ALS Association, which has celebrated its fifth anniversary of the Ice Bucket Challenge; HealthCorps; and Keep a Child Alive. We added Walmart, Xbox Live and Apple gift card options to the application, among many others.

To service subscribers across the globe, we are working on more international capabilities. Some of the tools we had in our development pipeline were accelerated to help us handle the viral growth. As such, many of our resources were diverted through this effort away from commercial and business features that were being developed. Focusing on our users will produce long-term value. We now have the tools that are capable of handling a global subscriber base. We are building scale within data segments in specific countries, reaching to commercially viable data sets for advertising scale.

Along these lines, as Chris mentioned, we announced that we entered into an arrangement with one of India's largest conglomerates, the Yash Birla Group, to launch BIGtoken in India. You may recall our announcement about Asia in May. And we're pursuing other opportunities with market leaders in countries where we've seen accelerated growth.

Finally, we recently announced that our users now have the ability to import their data from Facebook automatically into the BIGtoken platform. We will be adding a multitude of other platforms, including Amazon, Twitter, and LinkedIn. This greatly enriches our data set by providing new data and verifying the data we have. This also allows for consumers to earn from the full body of their existing data.

Moving on to our commercial growth and revenue scale. We have been actively engaged with brands and several marketing agencies to leverage BIGtoken's high-quality user data for advertising targeting, research and redemption offers. This is all done with the complete user transparency and opt-in, with value going directly to consumers.

As a business, our cost of data in research is decreasing while consumers greatly benefit. We've begun monetizing our advertising targeting data at initial scale, while we continue to grow our taxonomy to full operational size.

A few initial opportunities have emerged, and I'd like to spend a little bit more time focusing on the research capabilities of the platform. BIG was created to solve inefficiencies and inaccuracies in advertising data targeting. We've discovered the same systems we use to create data at scale and analyze its accuracy, is ideal for brand research, media measurement and advertising impact, an attribution. And this has created new partnership and revenue opportunities.

With existing market tools, creating and scaling research panels is slow and inefficient. Between 40% and 60% of survey responses are inaccurate and data set is typically limited to specific consumer responses. The BIGtoken platform can immediately scale consumer population targeted opt-in research panels with thousands of participants. In a recent activation, we reached over 45,000 people in just a few days.

The systems we use to analyze the accuracy and relevancy of a data point for media targeting will solve the accuracy problems, giving BIG research a very high level of certainty and confidence. The BIG Data graph has now 12,000 unique data points for each consumer, which include purchase transaction, location, loyalty program and historical social media data provided a very rich data insight. We believe BIGtoken is the future of brand research.

Another unique opportunity is media measurement. Content consumption has dramatically changed over the last 15 years, with consumers viewing and interacting with media on multiple screens from many different platforms. The tools for measuring viewership and consumption are no longer effective. Currently, television ad spend in the U.S., which is over $100 billion, is governed by a panel of 41,000 households, which does not consider the many devices and the unique preferences of individuals and misses the growing population of cord-cutters. This legacy measurement currency no longer holds value.

In stark contrast, BIGtoken can effortlessly scale panels to millions of people, measuring all devices and content consumed down to the individual level and include follow-on research for advertising impact in sales attribution.

This is a massive shift. We're very excited about the research and measurement capabilities of BIGtoken and are already conducting programs for brand strategy, consumer and media consumption and advertising campaign measurement. The legacy tools for consumer and media consumption and advertising measurement are now ineffective, and this is an exciting market opportunity for innovation.

Our current global reach and depth of data makes the platform ideal for immediate research programs, while we scale to optimal size for data targeting and activation in key geographies. For media targeting, we're focused on deals with the largest brands and agencies and are making custom BIGtoken segments available to them. And as time goes on, we'll initiate deals with third-party platforms to achieve greater scale. BIGtoken is the leading edge for the new data economy. We're very excited for what the future holds.

And with that, I'll turn the call over to Mike Malone for financial review.

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Michael Thomas Malone, Social Reality, Inc. - CFO [5]

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Thanks, Kris. For Q2 2019, total revenue was $904,000, increasing 53% compared to the first quarter 2019. Vertical revenue grew 53% compared to the first quarter 2019 and 8% compared to the second quarter 2018, excluding SRAXmd and Reach, which were sold or discontinued, respectively.

Gross margins for the verticals were 54% compared to 50% in the first quarter 2019 and 30% in the second quarter of 2018, which excluded discontinued products.

Operating expenses were $5.1 million compared to $4.5 million in the first quarter of '19 and $3.7 million in the second quarter of 2018, which excluded discontinued products. The increase reflects investment in BIGtoken and our sales infrastructure.

Q2 2019 net loss of $8.1 million included a charge of $2.9 million related to a noncash warrant valuation adjustment. This compares to Q2 2018 net loss of $4 million, which included a charge of $1 million related to noncash warrant valuation adjustments as well as operations from discontinued products.

Adjusted EBITDA loss was $4 million. This compares to Q2 2018 with an adjusted EBITDA loss of $2.3 million, excluding discontinued products.

Now turning to our balance sheet. During the quarter, we raised a total of $8.8 million through various equity offerings. And as of June 30, 2019, we had $2.5 million of cash on hand in addition to being debt free. As Chris mentioned, earlier this week, we raised $5.5 million to register a direct offering.

And at June 30, 2019, there were approximately 12.5 million shares outstanding. And after this recent raise, we have approximately 13.9 million shares outstanding. We remain confident in our growth prospects across our verticals and BIGtoken, as demand for data insights continues to increase.

And now I'd like to turn the call back to Chris.

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [6]

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Thanks, Mike. The digital media industry is changing drastically. As with any industry transition, we can't predict the timing of the exact outcome, yet it is very clear that proprietary data is a huge asset to researchers, advertisers, sales and marketing and more.

We believe that we are well positioned to benefit from these changes in the market. We're seeing evidence of this need in our everyday conversations. Agencies want to meet to understand the BIGtoken data assets. And the marketers we work with recognize the need to engage in the conversation of data ownership.

And as the marketers dig deeper, they want to know how our verticals can help, and BIGtoken is opening doors to new opportunities for the whole company. As such, the lines between BIGtoken and our verticals are blurring. And to fuel our momentum, ours sales team is shifting resources towards BIGtoken.

Therefore, we are prioritizing our focus on growing our data assets right now. Our geographical expansion furthers our mission to become the undisputed platform offering everyone choice, transparency and compensation for the data, while building the most valuable opt-in data set in the world.

Before I open the call to questions, I would like to note that you can see us at several investor events. In September, we'll be at the LD Micro Summit in San Francisco and the D.A. Davidson 18th Annual Tech Conference in New York. In October, we'll be at the B. Riley Consumer & Media Conference and the LD Micro Big Apple Summit in New York.

I would now like to turn the call over to the operator for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Jim McIlree with Chardan Capital.

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James Patrick McIlree, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology [2]

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In times past, you've talked about revenue for the year between $20 million and $25 million. I was hoping you could comment on that, given all the changes that have taken place with BIGtoken over the past few months.

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [3]

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So when we -- thanks, Jim. When we first did that analysis, it was -- we weren't including the BIGtoken focus. So we're working through the numbers right now on the transactions that we've signed. We have some pretty substantial transactions that we've done for BIGtoken that are happening in the third and fourth quarter of this year. So that's why we're not making any adjustments to the guidance as of yet, because we're still processing what new transactions are coming in from the BIGtoken side of things.

Like I said earlier, what we're finding is that our verticals are starting to merge a little bit into the BIGtoken side of things. So you have the biggest transactions that we're closing on BIGtoken are very Shopper-marketing-oriented. And so we're finding a lot of the revenue shifting over from Shopper into the BIGtoken side. And then the research stuff that's happening, we had not planned on generating any revenue in research, but we're finding that, that's a big line item for us with some really substantial brands.

So we don't have any adjustments as of now to the -- to where the revenue might be. But as we go into the third quarter and we get some view as to how the BIGtoken revenue is going to come in, then we'll give some more insight into what those -- the revenues at the end of the year might look like and what that margin profile might look like as well, because the BIGtoken margins are significantly higher than our regular margins are.

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James Patrick McIlree, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology [4]

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It sounds like with the merging of -- the -- merging might be too a strong word, but you know what I mean, the merging of BIGtoken with the vertical. That -- the revenue that you are expecting just might be classified differently, although it would still be -- you would still expect to generate a similar level than what you had expected 3 months ago and 4 months ago. Did I -- is that what you're saying?

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [5]

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Yes, I'm saying that I think that we're still evaluating that. We're not at a point where we can say that it's going to be a lot more than that or lot less than that. We're just -- I want to see in the pipeline before we make that call, and that's why we haven't made any adjustments to it on this call. But I think that there is revenue coming in there, and we're recognizing that now and those deals are happening. So I think there is definitely opportunity. And we're going into the busier part of the year for advertising, so we're -- there is a natural uptick into the second part of the year as well.

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James Patrick McIlree, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Industrial and Consumer Technology [6]

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All right. That's helpful. Kris Nelson talked about a number of initiatives that you have in BIGtoken. And I was just wondering, the order that you presented them, Kris, is that the order that you think are the most impactful either on a revenue line or a growth line or addressable market line? I'm just wondering if there's any anything we can draw from how you laid out the different initiatives that you have underway with BIGtoken. And specifically, I'm talking about the market research, and it sounds like a white-labeling product as well.

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Kristoffer E. Nelson, Social Reality, Inc. - COO & Director [7]

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Yes. So I think market research is our leading edge. That's driving a lot of conversation now as we brought the product in and shared the technology and its capabilities. Especially through our ability to scale groups quickly and analyze data for accuracy and consistency, brands were coming to us and really bringing these initiatives forward to us, which has created whole new product sets. And so we look at that as the leading edge. That's also kicked in the ability for us to target specific offers and promotions to specific groups. Sometimes that's coupled with research, sometimes it's not. And we look at that as a new leading product set as well.

As we talked about on the call earlier, segments are scaling and that opportunity right now is targeted to specific brands and agencies, and we're building those direct relationships. As the segment population continues to scale, we'll move from those custom data sets and targeting opportunities to broader platform distribution. And so we're looking at those high-touch relationships first. We want to dig in and build out those specific relationships with advertisers and brand marketers, and we'll continue to scale beyond that.

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Operator [8]

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Our next question is from Mike Crawford with B. Riley FBR.

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Michael Roy Crawford, B. Riley FBR, Inc., Research Division - Senior MD, Co-Head of The Discovery Group & Senior Analyst [9]

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I'd just like to go back to that prior revenue guidance discussion where at one point you were looking -- you thought over $20 million of revenue for the year was a decent estimate and that was maybe even without much contribution from BIGtoken. And then, Chris, it seemed like you were saying that now the BIGtoken interest is additive. So would you say that you're more likely to then increase that guidance and have like a really -- like, I guess, monstrous second half compared to the first half? Or that it's still too early to call exactly what the second half is going to look like, so it could equally be less than $20 million for the year?

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [10]

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Yes. So the point I was trying to make earlier was that it's not additive to it, because what we're finding is that the sales team is bringing BIGtoken in our different verticals to their media-buying customers and those customers are interested in launching a number of different initiatives. So while the team was responsible for the $20 million in revenue from the year from the media perspective, we're finding that data side of the business that they're bringing to the table is getting merged into that. So I don't think it will be higher than that.

And the contribution coming in from the verticals is going to be lower, but BIGtoken is contributing. So it's going to bring us back to a level, but we just don't know how high that will be quite yet, because those deals are just starting now. All the research and the different shopper marketing campaigns are launched at the beginning of the third quarter of this year.

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Michael Roy Crawford, B. Riley FBR, Inc., Research Division - Senior MD, Co-Head of The Discovery Group & Senior Analyst [11]

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Okay. Thank you. That makes -- that's helpful. And previously, you had also talked about an interesting kind of a toolbar like add-on that could potentially block ads that consumers are not getting paid for from showing up on their mobile screens, though I think development of that particular application was maybe taking a backseat to some of these more market-leading projects that you have. Is that still the case? Or is that something that we should, like, expect soon?

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [12]

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Yes. It's on the radar. The viral growth that we had at the beginning of the quarter, of the second quarter certainly had an impact on that development. The team was working 24/7 just to make sure everything was up and running. And so a lot of -- that's what Kris was saying, and a lot of those initiatives got pushed back a little bit, because when you went from 0 to hundreds of thousands of people signing up every day, it was quite a change. And so some of those things have gotten pushed back, but we're certainly -- is on the drawing board and designed out to be built along with many other features.

So we have a lot of developers that work within the company, and they're constantly going from sprint to sprint. So we have a bunch of stuff that is being developed now that is revenue-generating-centric, so things that the advertisers that we're cutting deals with want. And so we're implementing those things first, because they have revenue behind them. And then once we're done with those things, then we're going to bring in some additional things. And we'll look to bring in partnerships with additional ad blockers. And our biz dev teams have been talking to some of the other ad blocking companies to partner with them within the BIGtoken ecosystem so that we can leverage their installed base already.

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Michael Roy Crawford, B. Riley FBR, Inc., Research Division - Senior MD, Co-Head of The Discovery Group & Senior Analyst [13]

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Okay. And then I know the company doesn't break out specifically where the user -- or the people that have opted in are located geographically. But I think at one point, you may have commented that around half or at least half were U.S.-based. Is that an accurate statement?

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [14]

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I don't think I ever said that unless me and you're having a beer somewhere. But I think that we haven't broken that up out in the marketplace, but it's -- in order to attract the likes of the big corporate 100, 500 customers that we're attracting to the platform, you have to have scale in the United States. And so we have what it takes to make that happen. But certainly, we're getting exposure in other markets, and that's why we cut the deal with -- to grow into China. We didn't have any presence there, but we hope to. India, we cut the deal with the Birla Group to be able to service the customers that are there and to help grow it.

So yes -- and we have a lot of other markets like that. We have conversations going across South America for users and also in Southeast Asia. And so you'll -- you should expect to see additional partnerships in each of those markets with very substantial companies.

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Michael Roy Crawford, B. Riley FBR, Inc., Research Division - Senior MD, Co-Head of The Discovery Group & Senior Analyst [15]

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Okay. And then last question is on this joint venture with Yash Birla. Is there a financial contribution the company is making or will be disclosed?

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [16]

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They're bringing -- they own around 10 publicly traded companies and a number of privately traded companies and they have a number of interests in a lot of entertainment assets inside of India. So we're leveraging their marketing capabilities and their know-how with the advertising agencies inside of India. So they're bringing the -- they're bringing marketing and sales to the table, and we're bringing tech. So that's the partnership. And if at some point if we -- if they want to contribute additional capital, we'll certainly entertain that. But it's more from a partnership perspective. And we've known them for long time. We know they have the capability to do this. And we're excited to get them started.

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Operator [17]

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Our next question is from David Lavigne with Trickle Research.

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David Lavigne, Trickle Research, LLC - Founder & Senior Analyst [18]

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So I'm still trying to get my arms around this revenue transition a little bit. So it sounds to me like if we get through the end of the year, if we're transitioning maybe sort of out of the verticals and more into BIGtoken, which is kind of -- seems like maybe the path it was going to go. If we do get to the end of the year and we have more than $20 million revenues, is it reasonable to assume, though, that, that $20 million or $18 million or $17 million or whatever is, would likely carry a better margin than had that occurred in the traditional verticals then?

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [19]

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Yes, for sure, because we're -- even though the margin is up and -- even though the margin is up to 55% over, I believe it was, 30-something percent the year before, we're -- the products that we're building now are much more SaaS-based. BIGtoken can be seen as a like SaaS-based platform, where you build it once, you acquire the data, and then it could be sold multiple times again and again, and the cost of that process isn't as high.

And same with SRAX IR. Just SRAX IR alone, if we get to 100 companies, which is the goal by the end of the year, you're talking about $300,000 a month in recurring revenue with a 90% margin. So that alone is, I think, worth more than the market cap of the company as it stands today. And then you add on top of that whatever we -- the value that we're building inside of BIGtoken and then you add on top of that whatever value we have in the other assets that are not recognized on our balance sheet, like our 30% ownership in the md business, I think that we're at a point where this -- the company has a lot of value.

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David Lavigne, Trickle Research, LLC - Founder & Senior Analyst [20]

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Is the -- can you talk about a little bit about the sales process for IR? Will that be broader question to deal with here?

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [21]

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No, no. We mentioned...

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David Lavigne, Trickle Research, LLC - Founder & Senior Analyst [22]

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Because I was just kind of wondering how you go about it.

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [23]

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So we -- a lot of the referrals are coming in from other people that are on the platform already or from IR firms and from our direct sales team. And the way it works is we tell them that we can help them with understanding who their shareholder base is. And then we show them the platform. We show them how we use it to understand who's buying and selling and what prices they're buying and selling at. And it's invaluable data at the end of the day for a publicly traded company. Just to even understand who is selling is really important. And how many shares they have left is important for a CEO, a CFO to understand. And so we show them all the tools around that.

And the new stuff that we've built in there is the ability -- on a NOBO list, you can pull a NOBO list, you can get a name and an address. And we've created it so now you can get a e-mail, a phone number, a LinkedIn profile, a Twitter profile and the Facebook profile of that consumer. So as a CEO, if I see somebody has 50,000, 100,000 shares, I can connect with them on LinkedIn and I can send them a message directly and say, "Look, I see you own a lot of stock in the company. If you'd like to have a phone call with us, let us know." And we've automated that process to make those invites happen within the LinkedIn environment. And just adding all of the -- in the latest release -- Dave, we should reconnect and do another presentation of it. But there's So many additions that have happened, even since the last time that you and I have talked about it. But there is -- that's -- we just go through and show the CEO the -- or the CFO the platform and how we use it, and that's the sales process. And then we typically give them a 3-month free period to get launched, because it takes a couple of months to get data into the platform. And at first, doesn't have as much value as it does 2 months in. So we give them the ability to get a couple of months for free and then they start paying after that, and it just becomes invaluable for them.

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David Lavigne, Trickle Research, LLC - Founder & Senior Analyst [24]

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Do you have any sense of whether the price point -- I mean -- originally, I don't want to say it was random. But is the price point seemed to be in the right place? Or do you feel like that's...

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [25]

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Yes, it -- yes, I think that it gets rid of the really small cap companies and it brings in companies that can afford to make it happen. And we're finding we have a couple of billion dollar companies that are using the platform, so it's not all small cap stuff. And we're just, and we're -- and I just want to point out, we're building a massive database of public company investors, and that is invaluable. That's an invaluable data set.

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David Lavigne, Trickle Research, LLC - Founder & Senior Analyst [26]

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Agreed. On the OpEx piece, it sounds like you still aren't spending a great deal of money in terms of marketing BIGtoken or maybe it's just how we're defining marketing. But is most -- but there did sound like there was a pretty sizable increase in OpEx because of BIGtoken. Is that largely development stuff then?

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [27]

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Yes. There was -- even though we haven't spent that much money, I think it was like -- something like $180,000 or so in marketing for the quarter. And -- but we also -- we have a cost of money that we paid out to the consumers. So we paid out some money to the consumers on the platform. That's an expense. And we did -- and we have hired up additional resources on the programming side to build out the new features like the stuff that Mike was talking about earlier.

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Operator [28]

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(Operator Instructions) Our next question is from Michael Kupinski with Noble Financial.

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Michael A. Kupinski, NOBLE Capital Markets, Inc., Research Division - Director of Research and Senior Media & Entertainment Analyst [29]

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I kind of want to drill down back on BIGtoken. I know that you're trying to monetize the subscribers that you have now. And I was just trying to benchmark this, because I would imagine that advertisers are really going to be focused on North American subscribers and probably not internationally. Tell me if I'm wrong about that. And I was just wondering if you could just kind of frame for me what are -- what is the opportunity at this stage at the 15.9 million subscribers that you have, what are the monetization opportunity that you have. And then if you could talk a little bit about what is the number of subscribers that you would like to see in North America before you could really hit your stride in terms of monetizing the numbers of subscribers that you have.

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [30]

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The first thing that I think you're asking was is the amount of -- like what are opportunities in the revenue? Like are we -- what are we seeing as different opportunities across different markets? And the reason -- and not only U.S., right? The reason we're partnering with people in India, with people in China, with people in Southeast Asia, people in South America is because boots on the ground are important to the sales process. We have consumers in those markets, and we want partners that can bring expertise with the agencies and with the brands that are working in those markets.

Now from a Fortune 500 perspective, we are selling campaigns globally to those people, not only in the United States. So when we're talking to them about research, they're saying, "Okay. Can you launch these questions in Brazil? Can you launch these questions in Mexico? Can you launch these questions in North America?" So these are different questions as it relates to the audience.

Then on the revenue side, we're -- on the revenue side, we never -- we didn't anticipate that the research piece was going to be so valuable. And what we are finding is that the advertisers, in order to get a panel of people like Kris was mentioning earlier, like a Nielsen panel, is driven by only so many households. We have the ability to launch into millions of households at the same time. So instead of being limited to 50,000 people, we can then -- we can come to market for an advertiser and create a panel of millions of people. And brand marketers are willing to pay a monthly fee for each person that joins a panel. So they'll pay us a certain amount of money for each person that joins into a certain type of panel for a brand and then answers questions about that brand and gives insights about that brand, scans barcodes if they buy that product, takes pictures of receipts if they buy those products. There is a lot of opportunity there, which we had not anticipated when we launched the platform. But we're getting a lot of deals along those lines.

And as far as the number of people that we'd like to see, we had a massive viral growth. It's kind of -- we've grown like another million since we had our massive viral growth. And now we're going to -- I think we'll kick back into it as we start to launch in each of these individual markets, I think we'll start to see growth come back again. So a short-term goal would be to get to 20 million. I think that would be a really big accomplishment for the entire platform. Now keep in mind, we have not spent barely any money on marketing. This has all been consumer-to-consumer viral growth. And so our goal is to continue to incentivize those people to keep that growth going, and we're creating initiatives around that.

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Operator [31]

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Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the conference back over to Chris for closing remarks.

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Christopher Miglino, Social Reality, Inc. - Co-Founder, Chairman, CEO & President [32]

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Thanks, everybody. I appreciate you taking the time to join us today.

The digital media industry is changing a lot. As with any industry transition, you can -- we can't predict the timing of the exact outcome, but it's really clear to us that proprietary data is a huge asset to researchers, advertisers, sales and marketing and more. We believe that we're really well positioned to benefit from the changes in the market. We're seeing evidence that -- of this need in our everyday conversations. Agencies want to meet to understand the BIGtoken data assets. And marketers we work with recognize the need to engage in the conversation of data ownership.

And as marketers dig deeper, they want to know how our verticals can help and BIGtoken is opening doors to new opportunities for the whole company. As such, the lines between BIGtoken and our verticals are blurring, like we just talked about. And to fuel our momentum, our sales team is shifting resources towards BIGtoken. We're prioritizing our focus on growing our data assets right now. We think that's a very important value proposition for the company. The asset of data itself is invaluable. Our geographical expansion furthers our mission to become the undisputed platform, offering everyone choice, transparency and compensation for their data, while building what we think is the most valuable opt-in data set in the world.

And I think that's a really important thing to focus on, is we are building a data set that is invaluable, not only -- like not only is it an invaluable data set, but we're building a data set that is opted in from consumers that have said, "Yes, you can market to me. Yes, you can advertise to me. And yes, I'll participate in that." So that's a really important piece to the entire equation.

So we're going to be at a few investor conferences coming up. We're doing the LA (sic) [LD] Micro Summit in San Francisco. We're going to be at the D.A. Davidson 18th Annual Tech Conference in New York in September. And then in October, we'll be at the B. Riley Consumer & Media Conference and the LD Micro Big Apple Summit in New York.

I would now like to turn the call back over to the operator. Thank you.

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Operator [33]

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Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.