Q2 2020 Super League Gaming, Inc. Earnings Call
Good afternoon, everyone and thank you for participating in todays conference call to Scott Super League Gaming financial results for the second quarter ended June Thirtyth 2020.
Joining us today are Super League, President and CEO in hand, and see so quite amusing.
Following their remarks, well open the call for your question.
Where we go further please take note of the company's Safe Harbor statement within the meaning of the private Securities Litigation Reform Act like.
1995.
Great and provide information cautions regarding forward looking statements.
The company's remarks during today's conference call will include forward looking statements. These statements along with other information presented but does not reflect historical sorry.
Our subject to a number of risks and uncertainties actual results may differ materially from those implied by these forward looking statements.
Please refer to the company recent earnings release and to the company's reports filed with the Securities Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ.
I would like to remind everyone. That's the color will be available for replay through August 18, 2020, starting at eight P.M. Eastern standard time Tonight.
Webcast replay will also be available via the link provided in todays press release, as well and the company's website Www Dot Super League Dot com.
Now I would like to turn the call over to the President and CEO of Super League gaming and here again.
Hi, everybody good afternoon, and thank you for joining us. So let's go ahead and Die then understatement right to say what here, we're all having as always first and foremost we hope for slipped into this pandemic and I hope that you in yours remains safe and well.
It feels strange to talk about any silver lining and that's trying time for gaming and for Super League. We continue to see an acceleration of our growth strategy and it's not just because everyone is stuck at how it isn't a temporary effect, but it's been an accelerant for sure. It is because as we've discussed gaming is now means.
Stream bigger than TV, and three times larger than the global film box office and that was before cobot.
Existing gamers are played more new gamers are entering the market.
Gamers, who haven't played a while have been coming back to gaming.
NPD the marketing research firm that tracks gaming sadness study published a few weeks back the three out of every four people in the U.S. play video games and that figure has grown by over 30 million since 2018.
So, let's dig into tooth Q.
We're pleased to show strong revenue growth in our second quarter results, especially considering the ongoing caution that many advertisers are showing in the midst of the pandemic.
That itself is worth a pause.
So many companies have taken an obvious hit in revenues into Q ours is improved.
As we continue to build our sales capabilities, we are controlling our operating cost.
And just as important the input metrics indicate the overall health and engagement of our business continue to search.
As we mentioned on our last conference call and as we have seen from the results put up by so many companies in the video gaming category gaming is only thriving in spite of this environment it's powered by it.
As you know our primary source of revenue currently comes from sponsors and advertisers.
And one Q as we start to mass more AD inventory, we began to build our direct sales capability and outreach to grow our advertising revenue pipeline.
Over the last two months, we've augmented our sales team further to seize on this growth opportunity and improve our sales efficiency and we're now starting to see some of the fruits of that labor.
While our year to date revenue has improved in comparison to the prior year period, we inevitably did have advertisers to take a pause in to Q in the wake up call that everyone felt it and we were no different.
With Covance stubbornly sticking around the good news is we didnt have any canceled activations just deferrals as much of our to Q activity was tied to studios promoting new box office releases.
We expect to see those revenues later this year in early next however, our team really how so we got out in front of new advertisers and our surgeon engagement made or inventory. That's so precisely targets genocea millennial gamers, even more valuable to advertisers.
You might have seen our announcement last week that we exceeded 1 billion views on or digital channels through the first seven months of the year.
That's a 700% increase over what we did them views for the entire year of 2019.
This viewership is happening on our owned and operated channels of mind Hot and Super League Dot Com, along with our dedicated channels on snap chat Instagram tick tock, you tube and Twitch.
And as I've mentioned on prior calls.
Our rapidly expanding inventory has the ability to attract premium cpms and the 15 to 20 dollar range and sometimes higher for top quality placements and integration.
So I know what you're thinking because many of you have asked me before what does this mean and how do I modeled this so let me try to provide some more detail to help you frame the opportunity.
Views that impressions are at the top of the funnel and not every view an impression are equal nor every view and impression monetizable. So the right way to think about this is to think about our capacity.
What are we delivering against now versus our current potential as we continue to ramp up our salesforce capabilities and improve the quality of our AD products. There are lot of variables that go into advertising revenue capacity totaled monetizable inventory sell through rates and Cpms and then you add.
In the new variable the curve ball of the global pandemic, while those advertisers took a pause we needed to get our messaging and products reset for covert times as well.
We have two new sales executives at the helm, a new AD products manager AD sales planner and sales marketing manager the size of our pipeline NR deals our growth in ads is our audience and the corresponding AD inventory. So we're now catching this moving ball and it's a ball that's growing and size and it's moving faster every day. So that's all great news.
Yes.
So while it is difficult to pick a single point in time.
Our latest numbers indicate that at least 20% of our 250 to 300 million monthly views and impressions are in a state to be monetized with a supporting AD product why only 20% well. There are few factors, we do want to preserve our user experience to keep engagement high and.
We are selectively building an avenue <unk> AD inventory that maintains our premium CPM levels.
But that percentage will continue to grow as well or audience.
The current estimates of Monetizable AD inventory and applying our 15 to $25 CPM rate. It indicates that the network revenue capacity is in the tend to 16 million dollar range.
And this number is a dynamic estimate that is recalculated weekly. So ask me again in the fall any estimate of our network capacity will be different unlikely higher.
And there is one more critical variable here, our salesforce efficiency, our new and growing sales team capability and performance is nowhere near 100%, even best in class Salesforce efficiency with mature AD products is around 80% to 85%.
As the best guess, we're still ramping up and probably around 25% effectiveness right now.
That's not a bad thing, it's expected and we expect to materially continue to grow our salesforce efficiency.
The key is that we have some significant upside here, we're focused on growing our network capacity and as our sales processes mature, we will be able to capture more of our network capacity revenue.
One of the unique things about Super League that we want investors and analysts to understand is that we may be small in size, we consistently box above our weight class. There are three big things going on here I. Just gave you a way to think about or advertising revenue growth opportunity, but what makes us unique are the two additional ways the partners.
Advertisers can engage with us to drive future revenue growth for the company even.
Even though they don't necessarily relate to an AD units. So we can't model at the same way that we can model ad inventory.
The first additional type of partner revenue takes the form of creative deals and the pass you've seen US do these types of top down business development sponsorships with big brands like our Investor Lodge attack or top game publishers like 10 cents.
So now let me share a more current example.
Last week, we contracted with a large multibillion dollar public company to do a 12 day activation in the third quarter.
The deal is worth $200000.
And we'll only use about 30% of our monetizable inventory for that corresponding 12 day period.
No I'm not suggesting we can sell these top down deals across our platform all day everyday.
For now and we do need to be conservative here, but you can do the math on the potential our audience is immensely valuable.
And then there was the third type of partner revenue, which is starting to pick up steam.
In May we announced our proprietary and patented fully remote content production and broadcast platform that for now supports mass participation E sports and gaming broadcast yet the applications go beyond EA sports for much broader sports and entertainment uses.
And then a cold world at media companies are seeking new affordable and remote ways to fill the content Boyd.
We already today are working with repeat partner like top golf in Genji sports to create unique broadcast that enable them to stay connected to their fans and grow their digital audiences.
And we announced today a partnership with Greenlight go to have a virtual production platform featured on their premium marketplace that connects storytellers to production resources.
The next stages for us to turn this platform into one that is fully product ties with a web interface that is not only speaks to many conduct content production and broadcast uses but also offers a new revenue stream that could take the shape of a subscription or perhaps licensing model.
And I still haven't talked about our consumers.
Through July we beat our full year 2020 target, reaching 2.1 million registered users on our platform. So those are players.
And we are currently seen monthly active users north of 300000.
And those players it gave us a 36 million hours of game play through July versus 15 million hours of game play for the full year of 2019.
And our audience reach is beyond the players as you know from the viewership growth I have already referenced our social channels now have or 1.5 million followers, largely driven by frame rate and subscribers to our three weekly gaming lifestyle series featured on snap chat.
With this consumer growth. Some of you have asked why don't we just try to get small amounts off these consumers, even just pennies and we he did your advice.
Starting in early two Q, we began testing a micro transaction marketplace and our owned and operated mine had site.
While it is early days last quarter, we were able to generate an average basket size per paying player of over $10 a month.
Now the average is much less when you consider all of our free playing customers as well who have not yet engaged in purchasing anything in the marketplace, but at the start.
Similar to add inventory, we need to keep are finding our capabilities here to fine tune these offerings and drive more gamers into the conversion funnel, we are busy and we know what we have to do.
At this point I'm going to turn the call over to our CFO Clayton Haynes, who will provide an overview of second quarter financial results after which I will come back on with some closing remarks Clayton.
Thank you and.
Good afternoon, everyone and thank you for joining us today.
To summarize highlights for the second quarter up 2020 included an increase in total revenues of 45%.
Reflecting a significant increase in advertising and content sales revenues relative to the comparable prior year quarter.
Partially offset by slight decrease in traditional sponsorship revenues, reflecting the continued impact of Coburn 19 on brands and sponsors.
Our cost of revenue was relatively flat compared to the prior year quarter. Despite the 45% increase in revenues, resulting in average margins, 64% in the second quarter up 2020 compared to 49% in the prior year quarter.
That's really more into our digital experience you then offers.
Our operating expenses were lower on a GAAP basis, leading to a lower GAAP operating loss when compared to the prior year quarter, partially offset by an increase in sales and marketing and platform infrastructure cost as we continue to invest in the monetization of our AD inventory.
And in our technology platform growth.
During the second quarter, we continue to be focused on monetization and cost reductions where possible.
Looking closer from a revenue perspective.
Summarized in our earnings release filed earlier today second quarter 2020 revenues increased 45%.
324000, compared to 123000 for the second quarter up 29 Pete.
The increase was primarily due to a significant increase in advertising and content sales revenue relative to the prior year quarter, reflecting the impact of the buildout of our direct salesforce cylinder this year and our continued focus on like celebrating the monetization of our growing advertising inventory and surged engagement.
This overall increase was offset in part by a slight decrease in traditional sponsorship revenue.
Obviously, reflecting the continued impact of a slowdown in sponsorships activities by brands and advertisers felt across many industries and companies as a covert 19 pandemic continue to unfold during the second quarter appoint 20.
The good news is that we have made substantial progress building abuse and oppression over the first half 2020.
And expect our advertising inventory to continue to grow so bad that advertisers and brands rebound, we are ready to take advantage of the opportunities.
As we have mentioned, we categorize our revenues into two main buckets sponsorship and advertising revenues and direct to consumer revenues.
Sponsorship and advertising revenues, which includes brand sponsorships of our owned and operated properties.
Along with our more customized brand partner programs and also includes traditional advertising in third party content licensing revenues increased by 30% to 285000 compared to 220000 in the second quarter up 29 team.
And comprised approximately 88% of revenues for the second quarter up 2020, as compared to 99% of revenues in the second quarter up 29 team.
Direct to consumer revenues, which were primarily comprised of digital goods revenues related to our mind digital property.
Accounted for approximately 12% of revenues for the second quarter up 2020, compared to one person and the second quarter of 29 Ti reflecting in part the surge in engagement across all of our digital properties during the second quarter of 2020.
We continue to emphasize free to play events and experience is consistent with our focus on increasing the volume of new gamers and spectators engaging with our unique technology platform you sports brand.
Going forward, we intend to continue to offer a combination of paid and free to play experiences with a continued focus on ramping up overall direct to consumer monetization, including sales of digital goods and micro transaction marketplaces as Ed mentioned.
Second quarter 2020 cost of revenue increased less than a three.
Less than 3% to 116000 compared to 113000 in the comparable prior year quarter. Despite the 45% increase in revenues for the same period.
But significantly lower increase in cost of revenue on a relative basis was driven by lower cost associated with our largely digital and online revenue generating activities in the second quarter up 2020, and the increase in advertising and content sales revenues in the quarter, which also have significantly.
Over associated cost compared to our physical in person experiences and events.
Cost of revenues fluctuate period to period based on the specific programs and revenue streams contributing to revenues each period and the related cost profile of our digital online in physical in person experiences and advertising in content sales activities occurring each period.
Second quarter 2020 operating results.
Including expenses.
Were 4.8 million compared to 5.6 million in the comparable prior year quarter.
The decrease was primarily due to a reduction in noncash stock compensation expenses, which decreased approximately 1.4 million 397000, as compared to 1.8 million in the second quarter of 2019.
The decrease was partially offset by an increase in sales and marketing personnel cost related to the build out and investment in our direct sales force earlier this year as we focus on the monetization of our AD inventory and premium content.
An increase in technology platform infrastructure costs, primarily related to cloud service is consistent with the surge in engagement we saw during the period.
Lastly, the impact of higher insurance costs relative to prior year.
On a GAAP basis, which includes the impact of noncash charges.
Net loss in the second quarter up 20, Tony was four point Sixmillion 48 cents per share compared to a net loss of 5.5 million or 65 cents per share at comparable far your quarter.
Excluding non cash compensation charges and other non cash charges, our pro forma net loss was 4.1 million compared to 3.7 million in a comparable prior year quarter.
As described in our earnings release, an 8-K filed with the gets you see today.
Reform and net income or loss is a non-GAAP measures that we believe investors can use to compare and evaluate our financial results along with other applicable TAPV lies in metrics discussed earlier.
Please note that our earnings release can take a more detailed description of our calculation or pro forma net loss as well that's a reconciliation of pro forma net loss with the most directly comparable financial measures prepared in accordance with.
Looking at the balance sheet as of June 30, 2020.
6.2 million any cash approximately 60 million in working capital in total shareholders equity up 10.8 million.
This includes approximately 6 million and net proceeds from the sale of 1.85 million shares of common stock at $3.50 per share raised in a registered direct offering that closed on may 15th as previously reported.
Our June 30, 2020 balance sheet also includes 1.2 million related to the P.P.P. loan received in May which is potentially forgivable subject to certain requirements encryption area under the character that.
Our current monthly net cash burn rate continues to be in the 1.1 billion to 1.3 million range.
We continue to be focused on reduction to our cost structure and are continuing to work with our functional leaders within the organization to identify additional cost saving areas.
As an example, consistent with our ability to provide some incremental live broadcast for our customers simply digs companywide operations are now fully remote.
In this regard as of June 30, we vacated approximately 75% of our office space in Santa Monica.
I will result in significant renton fulfill these cost savings going forward.
In addition, we continue to work with existing and new platform and infrastructure service providers to reduce those costs going forward as well.
In summary in Q2, 2020, we saw a meaningful increase or advertising in content to sales revenues relative to the prior year quarter higher average margins, reflecting a largely online digital activities in the midst tend to pull good 19 environment.
While identifying areas for cost reduction balanced with our focus on the acceleration of monetization of our rapidly growing advertising inventory and investment in our growth initiatives in response to the remarkable surge in engagement during the period.
With that I will turn the call back over to and for some additional remarks yeah.
Thank you Clayton.
I'd like to turn now to how we see our company evolving partly in response to the sudden changes caused by the pandemic and partly as we expand our capabilities and accelerate our growth.
At its core Super League is differentiated by our mass participation fully remote content production and broadcast technology and we happen to haven't focused on E sports and have proven even if really days that we can attract brand partners advertisers and the players and viewers themselves to this platform and that are coming.
Study and the derivative content created is a value too wide group of stakeholders.
Two material opportunities are now emerging.
The first is fulfilling the vision, we launched with a consumer platform that creates a large diverse community of gamers along with a naturally flowing user generated content network driven by gamers for gamers.
We will move the Super League Dot com experience to model, what we've learned so well through our mine hot and frame rate properties that off for 24, seven gaming highlights and collaboration tools for the gamers.
Putting the tools in the hands of everyday gamers to enjoy more around the games, they love to challenge and share more with each other and get celebrated for what they loved by their community.
The second material opportunity is how we can take our differentiated technology with further product innovation and turned it into an end to end platform for use by others.
Compelling b to B marketplace, they can speak to a wider range of content production and broadcast applications.
Some of you may recall, we spoke during the IPO about the longer term potential of the platform beyond de sports, but we didn't imagine that we would pull that into our reality in the year 2020.
A small silver lining as I said at the start the one was significant upside.
And we have very active strategic partner to partnership discussions happening both for their commercial reach and their investment dollars to help us drive both the b to C and b to b opportunities to scale.
We are playing for small stakes here and we know what we need to do right now add more sales cat capacity continue to adjust to the new environment, We're all facing while accelerating our offerings to reiterate what I said earlier, we're busy and we know what we need to do and now we'd love to take some of your question.
Operator.
Ladies and gentlemen to ask a question on each press star one on your telephone to withdraw your question. Please press the pound or hash key.
First question comes on line of Mike Latimore from North and.
Northland Capital. Please go ahead.
But.
The electrical income on for Mike.
Oh.
What.
Do you foresee gives us a ban on keep up on video you.
Can you repeat that again, Mike there's a little echo.
Okay. So these actually follow.
What.
Do you foresee gave a ban on so God and video got it.
Yeah, no. It's a good question because we you know obviously the frame rate brand in the early days was really focused on Instagram, there's absolutely no doubt that we have started to launch ticks off channels and we're seeing really strong growth there the lions share of our frame rate views are still though happening on Instagram. So that's still the foundation.
I think what we'd probably undersold is how exciting the viewership and follow or numbers are with snap chat. So what that is it's a little different that's actually snap chat.
Hiring us in a way to to take all of that user generated content, that's coming off a frame rate and through Super League TV and were able to package in a way and so three minutes series weekly series to snap chat and that revenue is a little different because they're posting it on.
Their stories, they're able to drive much bigger inorganic you know volume of viewership and then what we do as we get an AD share office those products. So right now if I had to rank in the order of where the largest viewership is happening its number one snapshot at followed by instead.
Ram and then a tick tock would be third.
Hi, My second question is on the subscription services. So can you put all the NIM, but always a number of subs during the quarter Oh has to be the section.
Subscription services.
Yeah. So you know are the stuff I'm the subscription business that we were try lane in December and January and February I started out tethered to retail.
And so what we did as soon as it was the end of March is we halted that the good news for US is we had a real small percent of our game play that was now starting to be physical based more and more of our game play in activity was happening online we were able to pivot all of the experiences.
We had planned the physical experiences to turn them into purely digital and the fact is a matter as we had higher participation rates for it but we we halted the subscription program and we really took a pivot towards direct to consumer monetization more in the form of these micro transactions and marketplaces and in many ways that was.
Responding to investors and analysts questions as I alluded to in the script to said Hey, you know, while you're still thinking about how to reset subscription because we really do believe that b to C. N b to B subscription is very much a part of our revenue future why can't you just start grabbing a little bit of revenue now.
Off the Super active base that you're having that's happening online and so that's exactly what we did and launching and the early parts of to Q. This this digital good micro transaction website, which you don't have to say you know, even though you know it's small numbers. The fact that we basically had no direct to.
Consumer revenue last year.
And that this quarter. It represents 12% of our revenue for something that was literally a concept that didn't even exist in March I. It gives us a lot of excitement for where could go up but you would see us continuing to take another step into subscription both b to C and b to B, but we definitely.
What a pause on the retail specific one because we said hey, if retail shut down there's no need for us to double down on that lets focus on the surge of engagement that we're having digitally.
Thank you.
Your next question comes online franking sometime.
Aligns Global partners. Please go ahead.
Great Hi, Thanks, so much for taking my questions I'm, just one follow up into subscription and I think you mentioned last quarter you had some key hires to help design that new digital offering of subscription can you talk about how its going what it might look like have you thought about that yet and maybe plans for re launching is that that by year end is that maybe.
Corridor.
Yeah, I mean actually I've kind of joked about pistol and decide but it's it's really a very honest statement. We hired a just rock star direct to consumer product development leader named John Boyden in late January.
And we handed him the alpha trial of subscription that was tethered to retail as soon as as Cove. It hit we got to make his job much richer and bigger because what we were able to say as look you know you now can own all of our consumer facing properties helped to create a more coal.
He says experience help us think about how do we monetize the mine up player to how do we monetize frame rate.
How do we think about subscription differently. So it's purely digital and so when I talked in the call about you know the steps we're taking with mine at monetization you know that is a step that John and another critical leader who runs our mine have property trends have taken to say, let's use this opportunity.
To kind of monetize players right, where they are and then when I'm also mentioned the new experience in face of Super League Dot com, the new offerings that will offer 24, seven gaming and ways for players to share challenges with each other and highlights that's all the much bigger work that.
John has been leading to really change the level of engagement at Super League Dot com and M. from that that launch of that new much more compelling set of offerings.
With the revenue opportunities that very likely could turn into subscription, but we actually gave him a much bigger challenge that is really can be much more transformational for the brand.
Got it and then can you talk about the virtual production going and how potential customers are reacting to this technology, maybe help us understand the timeframe, we're starting to monetize this technology.
Yeah. So so right now what we have as we do demos with the top content leadership at all the Big media companies that you know in life and they're kind of amazed their amazed that this isn't just them and then cobbling together a few other things we were a head on this one so we were already using advanced.
Technology some of them are readily available in the market for others to use some are things that are proprietary but it's the way that weve stitch them together architected them together that allows them to perform as one cohesive tool kit.
And and the lag we're talking about aren't seconds or milliseconds. So it delivers a real it's kind of a tricked out tool kit that a high and content producer can use from the comfort of their home sitting on their desktop and and offer something that really has a broadcast quality like you were sitting in.
The big content studio with all of the hardware and the cameras and so what we've gotten there's a lot of really good responses.
To to the performance of that the next step is what you're seeing is two things. One is is that were already been hired increase Stanley to use our content team now these guys I'll sit at their homes, but they're being hired by the Gen G.'s and the top golf to use these tools we've built.
And to deliver broadcast for them and these broadcaster being done also very affordably, because we don't have all the physical labor in hardware of a typical big production. So it's hard to make it if it's really affordable solution to fill the content void.
The next thing you're Gonna see is people outside of the sports hiring enough to to produce things for them and and that's when when Youve solved for mass participation EA sports, where you have thousands of players, which almost act like thousands of cameramen coming into our virtual production does all this sudden producing a gay.
I'm sure a talk show, it's pretty easy and again, you're still getting that really high quality output and a turnkey way. So that first step is you're going to see us showing off how this platform can be used biondi sports.
The third step you're going to see is what I mentioned at the end how do we now turn this into something that is so product ties that has a really elegant you acts on the front of it that it literally could become something that people could license from US we think that that's a real big opportunity.
And so we're really accelerating our efforts and taking that next step that we think is on the product technology Road map is let's use it for ourselves no different than everything else. We've done we were the first users of it now it's time to further product ties it for use of others and they use by others can be to further.
Our penetration into east sports and building community, but it might also have wider applications not just in sports and entertainment, but even beyond entertainment categories like education and others.
But the key is is that it doesn't change the fact that we're still marching down our vision of being a brand that aggregates a community of everyday gamers and has a way to monetize the loved the derivative content that comes out of that E Sports Committee.
Great question, a quick one can you just a comment to the size of your <unk> direct sales force and your plans.
Well, what count would you like they do you think is achievable by year end and indirect sales force.
Yeah, So right now we're sitting with.
Six to seven Fts and you know when I was talking earlier about all these different variables I mean, we're right now you know, let's say right now, we're saying that about 20% of our total views and impressions are monetizable, meaning they have a an AD product placed against them, maybe the right suites.
But there is about 50% you know at some point you don't want to be jamming advertising through the whole experience, but you know the topline will continue to grow the total views and impressions will begin to product thais or or put AD products into more and more of those total available views and impressions. So I I think that what you will.
See by year end is is probably a doubling of our sales force I think more importantly to what you'll see is that the overall shape of the company more and more of our head count is going to be revenue generating and revenue focused and so I think it's the percentage of staff to that have Uh huh.
And in generating revenue and focusing on the type line will be inline with what we think investors should be expecting from us.
Great. Thanks, so much.
Your next question comes from the line that Alan you from National Securities. Please go ahead.
Hi, I apologize I joined the Cold Leach if you talked about this but.
Hmm within your selling advertising on your sites can you talk about.
The progress you've had in terms of how much of your inventory yourself anyway.
Advertising rates, you've been getting and your thoughts of maybe how it's.
Oh on through the quarter and maybe how it looks in July thank you.
Yes, so so I'll give you two kind of sets of data points, so a little bit of what I talked about Allen and I'm glad to say it again, because there's a lot of movie numbers. There. So right now when you look at the fact that we achieved 1 billion views through the first seven months of the year. If you look at them or what does that mean you know.
In July what we did about 250 to 300 million monthly views are impressions.
And you know you and I have talked before about well what does that mean, how do I model that and so if we look right now at our rate card and our AD products catalog about 20% of those 250 to 300 million monthly Vsan impressions have an AD product against it with the dollar amount with a real CP.
Rate against it so.
So that is is what we're kind of now you know sharing with you guys is an indication of what is the capacity what's the real revenue capacity of all these season impressions.
Now why is it only 20% right now well some of it as I was referring to earlier you know we want quality AD products were not going to just jam AD products against every viewing impression or oral term people away from our platform. So were being thoughtful about how we're integrating those and for user.
Experience, but also because we do want to maintain that high CPM level now.
We've talked on calls before that you know 15, $20 Cpms is kind of our standard for most of our quality placements. You know we've never had that Programatic commoditized kind of sub one dollar CPM model I'm until we want to preserve that too, but if you just look at 20% of.
Hundred 50 to 300 million monthly views you apply a 15 to call it $25 CPM rate that means that the current month network revenue capacity isn't that kind of you know the current years is about 10 to 16 million. So you know we've delivered you know 300.
Okay of revenue for the quarter, but the annual kind of upside is more in that tend to 16 million range and so you know, but our audience is going to keep growing and we're going to keep.
We're going to keep adding AD products, and so that will have a higher and higher percentage of those total views and impressions that we can sell against and then the other factor is well then how good our guys at selling right do we have enough deals in the pipeline. So in a perfect world, where we were selling out all of that network capacity. That's that's the public.
Central for the revenue now the second example, I gave.
Does kind of give you a little bit of a current state picture you had said tell me a little bit more about July so I'm going to focus a little bit more on a real real time Threeq. You example, but again I think it's worth repeating we just had a big media company. One that you all know and probably love who has just <unk>.
To deal with us to for 12 days.
To eat up about 30% of our available capacity, so not all of it not 100%, but just about 30% of what's available and they're going to pay is 200 K for just those 12 days.
So again, it's another way for you to to stop understandable, how just if Super League sat with the current volume of viewership. They had now and they continue to product ties more to get a richer pipeline of these types of bigger premium seats CPM deals now lets presumed their sales force it through.
Early ramping up it's getting more and more effective all those variables mean, we should be starting to grab more and more of that Max capacity. So there's just a ton of upside right now as far as the revenue we can be generating with the capacity we have right now.
That's very helpful. Thank you and then you Matt you mentioned that.
Back on your real estate and you're going to get for some savings from that would you be able to quantify that.
Yeah, Yeah. So you know when Clinton said that we cut back 75%, what we did as we just hung onto a small little studio upstairs, where we had some hardware and needed some storage space and we figured that hey, if the world comes back on again, we're gonna stay a fully remote as a company. This is our new way of being by.
We might need a small space for a conference table from time to time. It is a month to month lease and it's very low cost. So it seemed like kind of a low risks to just kind of keep that space for now, but all in and we're looking at you know 350, K. plus of annual savings by getting.
In rid of our main headquarters space and then all of the associated cost with that and including that you know there's no real travel t. any expense going on right now as well the next big believer that we're gonna be pulling on caustic Clayton alluded to is we are you know when you have surges of engagement it means.
It all sudden your infrastructure costs go up but we've been out in front of that renegotiating with service providers to say, yeah. We may have doubled up the amount of activity and server space that we need out there in the cloud, but then we've been using as leverage to renegotiate those contracts and bring those costs down. So that's the next kind of chunky area of cost that were.
Marketing.
That's great and I'm, sorry to assess but up your three income statements could well segments could could you just say, what's what's the revenues were for each one of them.
Sure.
Yes, sure I I think you're just asking about the breakdown for the quarter and so 88% of the total comprised our sponsorship and advertising.
Revenues, and 12% where are a direct to consumer revenues.
Andrew Thanks.
Yeah, I'm, sorry, and then just taking a look at a at the break down though that traditional sponsorship revenue. The bulk of that is what we historically would refer to as our subcommittee Sir.
Okay. Thank you I appreciate it.
Sure.
Once again to ask a question. Please press Star then the number one on your telephone to answer your question press the pound or hatch.
Your next question comes from line of warm or Needham and company. Please go ahead.
Hi, there I'm just a couple of questions and one is on you have this great signed backlog, which represents like to full months of your third quarter on no or your second quarter number I think I've thought about doing some kind of backlog I can find back lots of easier model is looking forward. If this is why their strategic objective.
To.
He that big backlog that really a SaaS revenue number that's my first and then my second it is on advertising parish ability. So my question is you have all these warmest engagements in K P eyes, but they're going on monetize and they arent recoverable next week because the AD units are perishable so.
Why not use like sell side platform or put some of this stuff programmatically because trade desk and millicom are doing $30 CPM units for a lot of the video kinds of units you guys have a better demo. So why is it better to slowly higher painstakingly four or five and six employees while all of this.
Advertising inventory is perishable and disappearing rather than go out to these existing platforms. It actually is job is to monetize advertising units like this and use those thanks, yeah Yep. So fantastic questions I'll take your last one for so we have not found the programatic people in the.
$30 CPM range, we've found them more in the pennies on the dollar range, but I will certainly kind of heat your point because what we are doing like right. Now for example in mine Hot.
As you know when I talk about how do you enhances AD products well, we are starting to build video into mine Hot we are starting to build in direct links that so there's some things that higher spending now we're still getting high cpms and they're just for some more basic product placements just like the 200000.
Dollar 12 day deal I, just mentioned, but we are adding even more features and that can really attract those and so we will certainly we do do some testing of programmatic in mine Hot we kind of take some of our real low end inventory and use services here and there to test what the balance our we pay.
Finally made about 30 K in revenue doing that last month in July. So we'll continue to its it's small, but but what we have been trying to do to that point is just really preserve those high quality placements for direct sales because we have not found that we can.
Get $30 Cpms for those quality placements that we're going to really diminish that value and your it's a great point that its perishable, it's really about making sure that we don't forward sat kind of a lower market rate for the future AD inventory, but all certainly you know look into trade desk specific.
Okay, and if you have any other recommendations on the side because you're right. There's a lot of inventory out there not getting used and we have no problem as long as it doesn't impact the user experience and doesn't start to pull down our overall weighted cpms. There's no reason that we can't try pushing more of that inventory out.
Through those services. Your second question I think is a is a great one too because you know I've run a lot of sales teams and there's a lot of leading indicators of revenue and a lot of it is about your backlog. It's about the health of your pipeline the size of deals how quickly are deals moving through.
The sales cycle and so maybe you know all give some thought to can we start to introduce some more information.
Now the overall health of the pipeline, which again is is one more piece of data just like today trying to introduce the you know how much of this you know that's great. All these these billion views, but but so what what can I monetize you know maybe that's another lever that we can introduce to help you guys think a little bit more.
For adult how can you start to see trajectory and our revenue forecast.
Super helpful. Thanks, So much huh.
Yeah. Thank you.
Your next question comes from the line of Bill Morrison from National Securities Go ahead.
Hi, Thanks for taking my questions I'm just a few.
First of all if you're saying <unk> direct sales force how long does it take to get.
Correct.
People you know seven.
Them up to a full.
Well productivity, so that you would be monetizing.
But a million Bucks a month hope how long would that take.
And then how long would it take four.
You know your sales force to ramp up to the same growth rate of your.
Pressure.
First question.
Yes, so I think that deep.
The.
Team.
Three of the six came on in the last 40 to 60 days.
The good news is it's that same team that was able to bring over the line. This 200000 dollar 12 K deal for a three Q. So that tells me that they are already kind of in gear and that they are getting out in front of.
Advertisers and selling those monetizable units at a pretty premium level I mean, that's a that's a pretty high CPM rate for that 12 day activation. So so I don't think the ramp period is long I think to your second part of the question. I think the question is is we will have to find that.
Right balance of how many AD products do we want to pack into an experience. So I mentioned earlier the right now about 20% of our views and impressions are monetizable. They have an AD product or unit against it and I would I think that most people would tell you it would be a mistake to make 100% of that.
Monetizable that that would drastically damage the user experience and what you'd see a decline in both usage and engagement and also corresponding you know CPM level.
That we haven't really figured out we're gonna have to push into that as our audience continues to grow as our products continue to grow mean, our offerings. That's gonna open up more inventory more places, we can add AD units and as I was saying the lore earlier, we can upgrade the quality of those AD units, but I'd be guessing if I tried.
Right now and say, how many what percent of our total views and impressions as the ideal percentage that that we should be selling out and fully monetizing I did mentioned in the call. It that you know hey, our sales team is new and ramping up and a high performing sales Ah advertising sales team.
As usually at about 80% to 85% efficiency. There's no such thing is perfection and I just kind of pick the number and said you know we're at 25, 30%.
But I think that we probably only have Ah Ah Ah you know two month window to really start to see the pipeline to conversions and the team operating maybe at that next tier efficiency, that's more like 50% or more.
It sounds reasonable and then.
Premier has.
Well for another opportunity you see PEO that mean, you're not going to have your own ad platform.
Sure.
Well what are your plans there.
After you get your own direct sales force.
Yeah, So we're building our own AD products today.
And to our owned and operated and even our properties on Instagram. So we're controlling those units were selling against them and to Laura's earlier question, we've been testing and small ways. Some programatic.
You know buys there none of that's changed some mirror is still a strategic advisor to the company. He was able to really do a tremendous amount of work over the last year to really create a true platform that has not just the functionality for the 100 per.
Yes, and virtual remote broadcast capability. That's one piece, we really build out and the tech stack and a lot more automation in the way that we can deploy E sports tournaments and experiences at scale and then the third part is the E. Commerce part it's been building in those ecommerce components into the platform.
Arm as well and so we've we've we've gotten that TAC Foundation in place I'm. He's recruited a top notch set up a senior leaders inside the technology team and for now all we're really doing is in some ways instead of having a unique product and a unique tech role.
Our founder is really holding the the joint Kinda title of Chief platform Officer, because that's where we are now we now have a fully operating platform, but I'm excited that Samir I'm very much wanted to stay on in an advisory capability because when I talk about things like will what's next like the big idea of how.
Having eight A. web based b to B marketplace for our content production platform. Those are the kinds of things that I'm gonna have his additional time in mind share on to really accelerate.
That a lot faster.
Okay. Thank you very much for it over.
Okay.
At this time. This concludes our question and answer session I would now like to turn the call back over to Mr. Chen for closing remarks.
Yeah. Thanks, everybody so much for listening I am we look do look forward to speaking with you at upcoming conferences and we report third quarter I mean look I mean, our whole worlds were turned upside down into Q. The way that the Super League teams responded the way we were able to still grab a decent chunk of revenues to too.
Really keep the or focused and efficient I.
It's not fun, what any of us have been living through but I really think all in all when when I think about how blurry and scary points were for everyone in the world into Q I look at our performance and I feel that that we did a pretty darn good job, but but our focus is topline growth.
And so you're going to continue to see us proving to you that we can take that surge of engagement and we can turn it into real dollars.
Stay safe.
Ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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