BLBX - NASDAQ

Good day and welcome to the Blackboxstocks Second Quarter 2022 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Stephanie Prince with PCG Advisory. Please go ahead.

Thank you, Cole. And welcome to everyone joining us today. On the call with me are Blackboxstocks CEO, Gust Kepler; and Bob Winspear, CFO. The company would like to remind everyone that various remarks about future expectations, claims and prospects made on today's call constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Blackboxstocks cautions that these forward-looking statements are subject to risks and uncertainties that may cause their actual results to differ materially from those indicated including risks described in the company's filings with the SEC. Any forward-looking statements made on this conference call speak only as of today's date, Monday, August 15, 2022. Blackboxstocks does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. A replay of today's conference call will be available through the Investor Relations section of the company's website at Blackboxstocks.com. With that, I'd like to turn the call over to Gust Kepler, CEO. Gust?

Thank you, Stephanie. I want to welcome everyone to the call. And thank you everyone for joining us today. As everyone is aware, Q1 and Q2 of this year saw continued declining GDP and inflation as high as 9%. The stock market continued to decline throughout the year and only started to rebound at the end of June. These factors created headwinds for companies in our sector, as consumers investors, and of course, E-traders are concerned about their finances. I'm happy to say we were able to adapt and make the most of a turbulent and uncertain market. We ran a spring breakout sale at the end of March that was designed to give new customers an opportunity to try our platform for only $5 for their first month. This promotion was effective and is reflected in our subscriber count. Our average subscriber count for Q2 was 6181 subscribers as compared to the 5482 subscribers in Q2 of 2021. I'll also add that we learned a lot from this promotion, which was the first of its kind for Blackbox. We are planning to run similar promotions in the future. The consumer landscape has changed for trading services like ours, and we are employing new marketing initiatives to address the current market. And that is one of the reasons that we did this promotion in March and will continue to do similar promotions in the future because things have changed significantly. Speaking to that, one of our biggest challenges in the marketing endeavors that we are doing is the plethora of new services for traders that have come along as a blade. I went over this on our last call, but I'll reiterate the bull market of 2021 spawned a multitude of new trading platforms, trading tools, scanners, discord rooms, education providers, and of course the purported market gurus. Although there are a few new products and services out there that I believe provide value to traders, is my opinion that the majority of these new would-be competitors, whether they be data providers, or trading rooms, or education services or not quality services. Nonetheless, they create confusion and clutter the social media channels that we promote our products. So we have to spend a significant amount more in marketing to get up above the noise. We have carefully tailored our recent marketing campaigns to educate new prospective members, that we are a best-in-class software and education provider and that we have a six-year history. We also always emphasize that we have extremely positive reviews on social media, including a five-star Google rating. We're confident that with our new quality tools that we're upgrading constantly our community and education services coupled with the fact that we are well capitalized. We will be able to continue to grow our user base for our core product We continue to upgrade our core product to offer our members the best possible user experience. In April, we released a mobile app for Apple and Android devices and it has been well received by our user base, especially those that had to return to the workplace after the pandemic. We are also adding new charting features and new alert types to provide our members maximum edge and the stock market and options market. In addition to the marketing, and development initiatives, I just discussed for our core product, we are also developing several new products that target new market segments that will significantly increase our total addressable market. One of these products is called Stock Nanny. It is alert system for portfolio investors, self-directed investors, it does not encompass the day trader market like our current core product, and the addressable market for this product is exponentially larger. We are also working to deploy our first version of Blackbox Pro, which caters to the pro market. We currently do not have a pricing tier for pro traders. And we are adding this as well as the onboarding system for pro traders so that we can bring on institutions and professional traders, to our platform. We are working on a crypto initiative, although we have put it third in line behind the aforementioned products because the crypto market is still less than stable at this time. So we're not at all abandoning the crypto initiative, but we're prioritizing things the way we see they should be done. In addition to investing in these new products, we've continued to purchase our shares through our stock buyback program. Today we have purchased 499,028 shares at an average price of $1.89. For a total sum of $945,000. Our total authorized share purchase under this program is up to $2.5 million. To summarize, we're still very bullish on Blackbox and feel we're very well positioned to grow our user base for our core product and create significant new revenue streams with the new products we plan to launch. I want to thank all of our shareholders for their continued support. And I'll now turn things over to our CFO, Bob Winspear so he can provide some details on our financial.

Thanks, Gust. And good afternoon, everybody. I'm just going to touch on some of the highlights from the earnings release. For additional information and a more complete review the financial statements, please refer to our Form 10-Q filed with the SEC today for significant greater detail. Revenues for the quarter were just under $1.4 million as compared to $1.46 for the second quarter of last year. So we were down just about 4% from last year. But we were up 10% from the first quarter of 2022, which had $1.72 million in total revenue. So we were very pleased with a quarter-over-quarter growth from that perspective. And that was driven by the higher subscriber counts that Gust had mentioned at 600, or 6181. And the promotion we ran in March of this year. For the first six months, revenues were $2.7 million compared to just about $3 million in 2021, a drop of 9.5%. As we've discussed, this is driven by lower average prices by our members and that promotion. The margins for the quarter were just a little bit lower than they were we had 64% for the quarter and 60% for the six months ended 2022 as compared to margins in the 72% range throughout 2021. That is driven by two things. One is the impact of the customers having minimal revenue from the spring breakout sale that we've talked about. And we also had some costs increases over the 2022 period. And those really related to improvements we had made in our social and audio chat features, as well as a little bit more in the expense from her data feeds. Operating Expenses have continued to increase in 2022, as compared to 2021, as we expected. Total operating expenses for the quarter were $20,68,000, as compared to $1,000,171 -- $1,000,172, in the second quarter of 2021. And just the quarter of the six months, we're looking at total of $3.78 million for the six months ended June 30, as compared to $2.1 million, the prior year, so we're up approximately $900,000 for the quarter, and $1.7 million, or $1.66 million for the six months. And so those increases are going in the 76% and 78% range, as we'd expect. So we're continuing to invest in in our operating capabilities. And if you look at the specifics behind those $900,000 of increases, for the first, for the three months ended June 30, you see about half of that, or $575,000 was related to SG&A. And that's due to additional personnel. As you know, we've been increasing our headcount to deal with especially being a public company. And still in filling that out. We also had software development costs increased by about $142,000. This quarter over the prior year. And that's obviously driven by new products that we've been talking about, as well as continuing to build out our infrastructure for our existing system. Advertising and Marketing grew up to about $526,000 for this quarter, as compared to $347,000 in the prior year, and about $300,000 for the first quarter this year. And the bulk of that increase was driven by some TV advertising that we had done for the second quarter, which cost about $153,000. And that advertising and marketing is more of a brand awareness, public relations, style of advertising as opposed to the direct marketing expense that we generally have with respect to our advertising and marketing expenditures. So that's what happened with our operating expenses. And as a result, you'll see that the operating income for the quarter was negative loss, loss of $1,168,000 for the quarter, as opposed to a small loss of $117,000 in the prior year, and for the year, to date, the first six months were about $2,190,000 in operating income loss, as compared to a slight income in the prior year. If you look at our balance sheet, our balance sheets concern is hasn't changed substantially, tend to be very, very strong. We finished up the quarter with proxy $7.1 million in cash and marketable securities, which is down about $10.4 million from $10.4 million at year end. And that drop of 3,000,372 is comprised two things. One is the negative EBITDA that we refer to driven largely by the operating losses. So we had negative EBITDA for the first six months, just about $2 million, but $1,000,009. And we also bought back $949,000 worth of our stock, as Gust had mentioned earlier in the treasury stock buybacks, but we still are. So we have a significantly strong cash and marketable securities position, which we like having in the current environment, obviously, and gives us gives us some strength moving forward. And what could be some another couple of quarters of tough economic times. We remain very excited about the balance of 2022. Certainly, with the new products that we are looking at, as well as in 2023, the new products, the expanding the functionality of what our existing system can do, as well as doing new market targeting new market segments and increasing our investment market. So with that, appreciate your time, I'd like to open it up for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Edward Woo with Ascendiant Capital. Please go ahead.

Yes, thank you for taking my question. My question is, as the market has rebounded, how you saw investor interest return? Thank you.

When you say investor interest, I'm assuming you're speaking about memberships or subscriptions. And yes, we have seen a slight uptick, although Turbulent Markets sometimes create a little bit longer pause before people want to jump back in. But again, we are working very diligently to make sure our messaging lets prospective new people, or new members know that turbulent markets are good for trading. They're not always good for long term investors in the short run, but they're very good for traders. Not everyone knows that that's one of the biggest hurdles we have to get over. So to answer your question, there has been a slight uptick in membership. But I don't think we will see a sustained or strong surge in membership, until the market proves itself to be on a continual bull run. But having said that, we are making very diligent efforts to educate prospective users that you don't have to have a bull market to make money as a trader in the market. Does that answer your question?

Yes, it does. Thank you very much. And I wish you guys, good luck. Thank you.

Thank you.

And our next question will come from Joe Gomes with Noble Capital. Please go ahead.

Good afternoon, gentlemen.

Good afternoon.

I was wondering if you could give us what the quarter and total member number was? And is there any way? Are you guys, quant? Can you quantify how many of the promotional signups actually became full subscribers?

Yes, Joe, that's a good question. We don't want to quantify membership at the end of the quarter, because it's an average of promo users. And we don't have a full picture of how many are remaining. As of the end of the quarter, we retain about 1/3 of the promotional users by the best get best analytics that we use to determine that. So it is an effective way to market for us. And I'll answer this question was a little bit more of informational statement, we learned we had to kind of adapt we were we were a leading provider. And there were there wasn't as much competition for such a long time, we never had to offer this very low price from a lower the barrier to entry. We didn't have to do it before we experienced enormous growth and never did any sort of extreme price. We never, we never reduced our price from the $99 down to $5 promotion for the first month. But because the markets were turbulent and sales were down, we decided to give something new a try. And we were very, very pleased with the results. And if we do it, again, which we plan to do something, maybe not the exact same type of promotion, but something similar, we think that we can really leverage the new users more so than we did this first time around, because we learned so much from this type of promotion. So the bad market and the loss and subscribers or loss and growth of subscribers was somewhat painful. But it also allowed us to pivot, adapt, and learn how to do some marketing that we never had to do before, as they say, necessity is the mother of invention. So we learned we learned some new marketing tricks and we're going to use them in the future and we think that there'll be even more effective the next time around.

Great. And I mean when we talk about the you know, the marketing and the promotions, I mean, what do you say think you guys can focus on to separate yourself separate Blackboxstocks from all the other services that are out there and get that into the forefront of, whether it be, traders and or self-directed investors’ minds?

I'm glad you asked that question. One of the new video ads that we've created specifically addresses all the new services in the market, and asks the viewer a question, how do you know who's really legit, then we ask them to refer to our history we've been live since 2016. We're founded in 2014. We, we let them know that we're a best-in-class service with reviews from industry peers. And review sites for trading tools were ranked very high there. So we ask them to do their own research. And one of the things we point them to is our five-star Google review. And we have 537, Google reviews. And they're all organic, from remembers not augmented by Trustpilot, or services that augments. And users can tell when there's reviews that are augmented by what I would call Review Services. So to conclude, we, we've asked them to look at our social media reviews, our Google reviews, we cite our history as best-in-class. And we ask them before they take that leap of faith on a new service to investigate them thoroughly and find out if they're really what they say they are, because there's a lot of new services that are just that they're new services. They came from a bull market run and everyone's a genius in a bull market. Not everyone knows how to coach educate. And Shepherd, a member base through turbulent market. So we do that very well. We have the testimonials to prove it. And we're pointing to many of those in our new ad campaigns.

Okay. And you did the E-trade integration, that has been one or two other ones in the past? Are you seeing any benefit, to Blackbox from these integrations?

Yes, we see a benefit. We have certain limitations as to how much we can advertise because we're dealing with corporate behemoth that have their own compliance departments and marketing departments. Some of the integration partners are easier to work with than others. But overall, it has been a very positive thing, because many of our users easy trade is their trading platform. So we're able to internally market to them and let them know that we now are fully integrated with the E-trade. So we have a lot of happy customers. And even if we're not allowed to put a commercial on CNBC that says we have an E-trade integration. The word spreads through the grapevine and traders are very tight knit community, especially on social media. So the word kind of spreads for us.

Okay. One more if I maybe you mentioned some of the products that you know, in development stock man in the pro version, any idea of when those might be released?

Yes, I hope to have Stock Nanny and Beta before year end and released sometime in early 2023. The Pro is a little bit different endeavor, we may do it in multiple iterations, we may do a Blackbox pro light and then go for a much more comprehensive version on a second run. So we're internally discussing that now. But we will offer Pro users access to our system with some enhanced features probably prior to year-end.

Great, thanks, guys. Looking forward to seeing applicants the story continues to unfold.

Thank you, Joe.

And our next question will come from Brian Smith with Security Research Associates. Please go ahead.

Thanks. Just a follow up to the last question. Can you give us a little more color on Stock Nanny and in the professional in terms of features and I mean, there are a lot of alert systems with that we're used to like at Schwab and other trading platforms, and maybe a little idea about some color on how you plan to price these products.

Sure, thanks, Brian. Stock Nanny is unique in my opinion. And it's very different than any other alert system that you can set through your brokerage app. Stock Nanny allows you to download your portfolio from your brokerage and then set custom alerts based on the stocks that you want alerts on. When I say custom alerts, we use a lot of our proprietary technology that the technology that does not exist on current platforms. As far as the brokerage platforms, I'll give you a for instance, we have some of the best options data out there. That's why people that use Thinkorswim or people that use other brokerage platforms that have comprehensive tools of their own, use Blackbox to augment their ability to track options flow in the market. So one of the one of the many alerts that Stock Nanny can provide is bullish options activity in a particular stock, which is very useful to a portfolio holder. We also have a rapid decline alert. That is a function of one of our algos. For day traders, day traders use this particular alert to short stocks, intraday most of the time on a scalp type situation. But when it's applied to a portfolio holder, this can be an early alert that something's going terribly wrong even in the pre-market that they may or may not have known. So those are two, hundreds of examples of the proprietary alerts that we feel are more comprehensive and significant to a portfolio holder. We've adapted them from what we use in our tech stack for traders to speak or to service the portfolio holder. And it integrates cleanly with any brokerage platform, allowing the user with one push of a button to download their entire portfolio into this app. As far as pricing, it's about $12. Right now, we have it at $12 to $15 a month. price range, not more than $150 per year. And I believe strongly that this particular app, if it saves a self-directed investor $1,000 loss one time, they will never get rid of the app. Don't leave home without it type thing. So we're very, very excited about getting this out. And we have some unique integrations with some of the brokerages to allow people to trade right out of there. Right out of the alert they received without having to log on to the brokerage system separately.

About the Pro?

The Pro has a multitude of features that we don't currently offer to our Blackbox subscriber base. It's got an enhanced watch list that has all the data sets and grid features that a lot of the quote, more quote oriented systems have. But we also have some advanced charting tools that some of the quote medias of the world and other pro systems don't have. So what we're doing is we're combining a lot of our proprietary features with a standard data set that other pro services use. And we feel that the combination of these proprietary features along with the standardized features in a much more user-friendly format than a lot of these current platforms offer. That's one of our strengths as we created a very, very unique user-friendly interface. We feel the combination of those features will give us a very large audience with the pros and have a large subscriber base there.

Okay, thank you.

Thanks, Brian.

And at this point, I would like to turn the conference back over to Bob to read any kind of webcast questions. Please go ahead.

Thank you. We have this one question here is looking for us to repeat. How much stock we bought back and how much as allowed. And so, through the June 30, we have purchased $945,000 worth of stock. And that's for approximately 499,000 shares. And the total program is $2.5 million is authorized through the end of this year. I think that's all the questions we have from the web. Gust will be going to wrap it up.

Again, I'd like to thank everybody for joining us. We have managed to adapt and pivot in somewhat of a turbulent market. Like I said, it's easy to be a genius and a success in a bull market in a financial technology company. But when times are tough, and things are turbulent, the experience of our team traders, that are in our community and our educators has enabled us to maintain our user base to a level that allows us to continue to grow and forward our technology initiatives to create new products, better products, more enhanced products, that will continue to give our users the edge in the market. And we are very excited about the new products going to release in 2023. And excited about the growth of our core product, which I expect things to accelerate again. I don't have a crystal ball, but everything's cyclical. And I think even if we don't have another huge bull market, we'll be able to be back on track and growing rapidly. So with that, I'll thank everyone for their support and interest in Blackbox and attending the call today. And I'll turn it back over to close it out the call.