SOURCE: Social Reality, Inc.

Social Reality Inc., an Internet advertising company

August 13, 2015 08:35 ET

Social Reality Beats Guidance to Achieve Record Revenue and Net Income Profitability for Q2 2015

Company Provides Full Year 2015 Guidance of $30M Revenue, a 485% Increase Over 2014; Q2 Adjusted EBITDA of $1.8M; Net Income of $416k

LOS ANGELES, CA--(Marketwired - August 13, 2015) - Social Reality, Inc. (OTCQB: SCRI), an Internet advertising and platform technology company that provides tools to automate the digital advertising market, today announced second quarter 2015 financial results. Revenue for the quarter ended June 30, 2015 was $10,761,573, an increase of 3,786% over the second quarter of 2014, and a 168% increase over the first quarter of 2015.

"We are excited by the rapid growth that we are experiencing. This growth validates the synergies of the investments we made at the end of 2014. We are also very proud of the team for achieving net income profitability in the second quarter, as this has been a long-term goal for the company and adds us to a short list of profitable advertising technology companies," said Christopher Miglino, Social Reality's CEO and Chairman. "We continue to see demand in our platform, thus we are providing full-year 2015 revenue guidance of $30M, a 486% increase over 2014," added Miglino.

Second Quarter 2015 Highlights

  • Revenue of $10,761,573 represents a 168% increase over the first quarter of 2015
  • Fourth consecutive quarter-over-quarter increase in revenue
  • $1.8M in adjusted EBITDA
  • Net income of $416k
  • FY 2015 revenue guidance of $30M

Three- and six-month financial results for the period ended June 30, 2015

Revenue for the three months ended June 30, 2015, totaled $10,761,573 compared to $276,934 reported for the three months ended June 30, 2014. Revenue of $14,782,857 was reported for the first half of 2015, compared to $830,611 in the first half of 2014. Gross profit increased to $5,603,130 for the three months ended June 30, 2015, compared to $72,629 for the same period of 2014. Gross profit increased to $7,381,939 for the six months ended June 30, 2015, compared to $253,691 for the same period of 2014.

The company reported net income of $415,591 for the three months ended June 30, 2015, compared to a net loss of ($880,112) for the corresponding period of 2014. The company reported a net loss of ($1,638,870) for the six months ended June 30, 2015, compared to a net loss of ($1,567,922) for the corresponding period of 2014. For the quarter ended June 30, 2015, net income was $0.01 per diluted share, compared to a net loss of ($0.04) per share for the three months ended June 30, 2014. Adjusted EBITDA was $1,804,000 for the quarter ended June 30, 2015, compared to ($625,000) in the same period of 2014. For the first half of 2015, the net loss was ($0.06) per share, compared to a net loss of ($0.08) per share for the same period of 2014, and adjusted EBITDA was $1,094,000 for the first half of 2015, compared to ($1,076,000) in the same period of 2014. As shown in the following table, Reconciliation of Adjusted EBITDA to GAAP, the differences between net income and adjusted EBITDA are primarily composed of non-cash stock-based compensation, amortization, accretion, and interest expenses.

Balance Sheet as of June 30, 2015

Cash and cash equivalents totaled $1,515,726 on June 30, 2015. Current assets and total assets were $10,784,710 and $32,101,129, respectively, while current liabilities and total liabilities were $17,045,848 and $27,533,988, respectively. As of June 30, 2015, the company had stockholders' equity of $4,567,141, a 15% sequential increase over $3,963,032 at March 31, 2015.

About Social Reality, Inc.

Social Reality, Inc. is an Internet advertising company that provides tools to automate the digital advertising market. The company has built technologies and leveraged partner technologies that service social media and the Real Time Bidding (RTB) markets. For more information, please visit www.socialreality.com.

Forward-Looking Statements

This press release contains forward-looking statements that are based upon current expectations and involve certain risks. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including, without limitation: our ability to grow our revenues and manage our gross margins; our history of losses; our limited operating history; the terms of our financing agreement with Victory Park Management, LLC as agent for the lenders; the impact of our debt obligations on our liquidity and financial conditions; the impact of the earn out payments to Mr. Steel; our possible need for additional financing; risks associated with loss of access to the Facebook platform; risks associated with loss of access to RTB inventory buyers; the continued appeal of digital advertising; our dependence on our publishers; risks related to possible future acquisitions; the limited market for our Class A common stock; and the impact of penny stock rules on the trading in our Class A common stock, among others, all as set forth in our Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission, and our other filings with the SEC. Except for our ongoing obligations to disclose material information under the Federal securities laws, Social Reality undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

  
SOCIAL REALITY, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 
(Unaudited) 
  
  
   Three Months ended
June 30,
  Six Months ended
June 30,
 
   2015   2014   2015   2014  
                      
                      
Revenues  $10,761,573   $276,934   $14,782,857   $830,611  
Cost of revenue   5,158,443    204,305    7,400,918    576,920  
                      
Gross profit   5,603,130    72,629    7,381,939    253,691  
                      
Operating expense   4,252,752    953,202    7,162,752    1,822,607  
                      
Income (loss) from operations   1,350,378    (880,573 )  219,187    (1,568,916 )
                      
Interest income (expense)   (934,787 )  461    (1,858,057 )  994  
                      
Income (loss) before provision for income taxes   415,591    (880,112 )  (1,638,870 )  (1,567,922 )
                      
Provision for income taxes   -    -    -    -  
                      
Net income (loss)  $415,591   $(880,112 ) $(1,638,870 ) $(1,567,922 )
                      
                      
Net income (loss) per share, basic  $0.02   $(0.04 ) $(0.06 ) $(0.08 )
Net income (loss) per share, diluted  $0.01   $(0.04 ) $(0.06 ) $(0.08 )
                      
Weighted average shares outstanding, basic   26,911,285    20,515,259    26,879,029    20,390,170  
Weighted average shares outstanding, diluted   29,520,556    20,515,259    26,879,029    20,390,170  
                 
                 
                 
SOCIAL REALITY, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(Unaudited) 
  
   June 30,   December 31,  
   2015   2014  
   (Unaudited)      
Assets           
            
Current assets:           
 Cash and cash equivalents  $1,515,726   $1,843,393  
 Accounts receivable, net of allowance for doubtful accounts of $103,533 and $52,338   9,124,275    3,874,620  
 Prepaid expenses   142,259    222,532  
 Other current assets   2,450    7,352  
Total current assets   10,784,710    5,947,897  
            
Property and equipment, net of accumulated depreciation of $34,460 and $25,013   18,155    27,602  
            
Goodwill/ and other intangibles   18,318,911    18,318,911  
Deferred debt issue costs   2,279,366    2,907,736  
Prepaid stock based compensation   690,793    1,008,019  
Other assets   9,194    4,804  
            
Total assets  $32,101,129   $28,214,969  
            
Liabilities and stockholders' equity           
            
Current liabilities:           
 Accounts payable and accrued expenses  $7,810,331   $2,882,120  
 Note payable - related party   2,500,000    2,500,000  
 Notes payable, current portion   1,541,000    1,350,000  
 Unearned revenue   22,640    25,295  
 Contingent consideration payable to related party - current portion   3,827,339    3,586,722  
 Put liability   1,344,538    -  
Total current liabilities   17,045,848    10,344,137  
            
Notes payable   7,131,728    7,713,014  
Contingent consideration payable to related party - long term   3,356,412    3,145,401  
Put liability   -    1,260,010  
            
Total liabilities   27,533,988    22,462,562  
            
Stockholders' equity:           
 Preferred stock, authorized 50,000,000 shares, $0.001 par value,           
  Undesignated, 49,800,000 shares, no shares issued and outstanding           
  Series 1 Preferred stock, authorized 200,000 shares, 86,000 shares issued and outstanding, respectively   86    86  
 Class A common stock, authorized 250,000,000 shares, $0.001 par value, 29,544,943 and 29,416,612 shares issued, respectively, and 27,158,080 and 27,029,749 shares outstanding, respectively   27,158    27,030  
 Class B common stock, authorized 9,000,000 shares, $0.001 par value, no shares issued and outstanding   -    -  
 Additional paid in capital   13,596,629    13,143,153  
 Accumulated deficit   (9,056,732 )  (7,417,862 )
Total stockholders' equity   4,567,141    5,752,407  
            
Total liabilities and stockholders' equity  $32,101,129   $28,214,969  
         
         
         
SOCIAL REALITY, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014 
(Unaudited) 
  
   Six Month Periods Ended
June 30,
 
   2015   2014  
Cash flows from operating activities:           
 Net loss  $(1,638,870 ) $(1,567,922 )
 Adjustments to reconcile net loss to net cash provided (used) by operating activities:           
  Amortization of stock based prepaid fees   317,226    336,834  
  Stock based compensation   446,683    147,909  
  Amortization of debt issue costs   628,370    -  
  PIK interest expense accrued to principal   176,966    -  
  Accretion of contingent consideration   451,628    -  
  Accretion of put liability   84,528    -  
  Depreciation   9,447    6,522  
  Bad debt expense   51,195    -  
 Changes in operating assets and liabilities:           
  Accounts receivable   (5,300,850 )  167,424  
  Prepaid expenses   80,273    (8,645 )
  Other current assets   4,902    (2,000 )
  Other assets   (4,390 )  (804 )
  Accounts payable and accrued expenses   4,928,211    (503,965 )
  Unearned revenue   (2,655 )  -  
            
Cash provided (used) by operating activities   232,664    (1,424,647 )
            
Cash flows from investing activities:           
 Purchase of equipment   -    (6,856 )
            
Cash used by investing activities   -    (6,856 )
            
Cash flows from financing activities:           
 Sale of common stock   -    1,273,161  
 Cost of common stock sale   -    (16,291 )
 Proceeds from warrant offering   6,921    -  
 Repayments of note payable   (567,252 )  -  
            
Cash (used) provided by financing activities   (560,331 )  1,256,870  
            
Net decrease in cash   (327,667 )  (174,633 )
Cash, beginning of period   1,843,393    1,715,264  
Cash, end of period  $1,515,726   $1,540,631  
            
Supplemental Schedule of Cash Flow Information:           
 Cash paid for interest  $462,887   $-  
 Cash paid for taxes  $-   $-  
          
          
          

Use of Non-GAAP Measure - Adjusted EBITDA

Social Reality's management evaluates and makes operating decisions using various financial metrics. In addition to the company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. Adjusted EBITDA is defined as net income before income taxes, depreciation and amortization expenses, plus stock-based compensation and interest expense. Management believes that this non-GAAP measure provides useful information about Social Reality's operating results. The tables below provide a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure. This non-GAAP measure should be considered a supplement to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Reconciliation of Adjusted EBITDA to GAAP

   Three Months Ended
June 30,
  Six Months Ended
June 30,
 
(unaudited, in thousands)  2015  2014   2015   2014  
Net income (loss)  $416  $(880 ) $(1,639 ) $(1,568 )
plus:                    
 Equity based compensation   448   251    865    485  
Adjusted net income (loss)  $864  $(629 ) $(774 ) $(1,083 )
 Interest expense   935   -    1,858    -  
 Depreciation of property, plant and equipment   5   4    10    7  
Adjusted EBITDA  $1,804  $(625 ) $1,094   $(1,076 )

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