Q3 2020 Super League Gaming, Inc. Earnings Call
Good afternoon, everyone.
Thank you for participating in todays conference call to discuss Super League gaming its financial results for the third quarter ended September Thirtyth 2020 join.
Joining us today, our Super League, President and CEO, and hand, and CFO Clayton Haynes following their remarks, well open up the call for your.
[music].
Before we go further please take note of the Companys Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995.
This statement provides important cautions regarding regarding forward looking statements. The companys remarks during today's conference call.
Well include forward looking statements. These statements along with other information presented that does not reflect historical facts are 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's recent earnings release and to the company.
Question.
Reports filed with the Securities and Exchange Commission for more information about the risk and uncertainties that could cause actual results to differ I.
I would like to remind everyone that this call will be available for replay through November 18, 2020, starting at eight P.M. Eastern standard time Tonight.
A webcast replay will also be available via the link provided in todays press release as well as the company's website at 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 and and.
Good afternoon, and thank you for joining us.
So let's get started here we are further along in what continues to be a strange and challenging year for everyone personally and professionally.
The world is not only still dealing with the pandemic in a possible resurgence, but also a great deal of ambiguity and the significant election year we.
We continue to hope for.
Turning to the pandemic and a return to calm and some degree of normalcy for everyone and.
And yet gaming continues to be one of the brightest sectors in the economy.
Sales and downloads of console video games or about to enjoy a big sales them with the new Playstation and Xbox consoles and with even wider reach we can tell.
Can you just see a surge in the very accessible mobile gaming segment, which represents 30% of all mobile downloads and 10% of the time spent on mobile devices.
On average millennials in North America spend $111.54 on games per month.
And then.
To be the first generation of lifelong gamers.
And the advent of Fiveg and more edge of cloud gaming means less lag lower latency and that will make the gamers experience and stickiness to the games. They enjoy grow more these are all good things for Super League by further democratizing.
Pettitte of gaming for the masses.
And he sports the most heightened form of competitive video gaming continues to grow in terms of participation both in players and audience.
Investors and journalists often asked me if this outpouring of engagement and gaming and the consumption of gaming related content.
Well when there was a cure for the pandemic and my reply is always the same gaming continues to solidify its position as a dominant form of entertainment bigger than TV much larger than the global phone box office and with fan bases and community is larger than most other professional sports leagues and that was already set in motion.
Prior to Cove it.
So now, let's turn to our third quarter. We told you when we reported our Twoq results that we had seen a surge of engagement on our platform further powered by sheltering in place gaming is an exceptional way to stay connected to friends and family. Even when you are not in the same home or town.
Hence in Threeq you it should be.
No surprise that we continue to see strong growth in the leading key performance indicators or capex.
The first Capex is registered players and by the end of September we reached close to 2.5 million users on our platform almost three times our year end 2019 user base.
And the year isn't done yet. Additionally, we have pushed nearly 50 million hours of game play to our platform in the first nine months of the year versus 15 million hours for the full year of 2019.
And the most critical Capex is audience, that's the top of the funnel. It was our rally cry last year to grow audience from virtually.
You can do your ROE at the start of 2019 last year, we materially exceeded our target and had 120 million views by the end of 2019.
And the first nine months of 2020, we have once again blown past our target hitting 1.4 billion views through September 15.
15 times the prior.
The level.
And even more importantly, we are making progress on monetizing this engagement Cove. It took its toll on all of US no. One was exempt and advertising froze for a bit we reposition quickly and we're pleased to show strong revenue growth in our third quarter, especially considering the ongoing caution.
Our year of advertisers and since the pandemic.
That itself is worth it.
Well so many companies have taken an obvious hit to revenues in threeq to ours more than doubled quarter over quarter as well as over year aided by a lot of positive indicators in our sales pipeline, which I will cover and including a signal.
Richard deal with Netflix.
So given sponsorship and advertising is our largest revenue stream today, let's dig into this.
We have been laying the foundation this year augmenting our sales team improving our sales efficiency building, our audience and increasing the amount of premium high CPM advertising inventory on our platform.
Aside from the obvious improvement and recognize revenue we see some other positive trends.
First the overall size of our active opportunity pipeline as of today has grown to 5.4 million.
That is doubled in size from last year from last quarter with an average deal size of approximately 70000.
Hours.
That doesn't mean, we will win all of these deals but is a good sign to see our opportunity set growing and this is a dynamic number.
This translates to roughly 80 identified opportunities, but even more exciting we see a nice trend on repeat advertisers that now represent 37%.
Of the value of our active pipeline, so over 2 million of that $5.4 million.
In addition, the size of repeat customer opportunities has grown from $37000 for an average deal into Q to $71000 for an average opportunity or deal in threeq to this reinforces that.
Advertisers find our audience immensely valuable and are coming back to give us more advertising dollars.
And I am pleased to say that we have stepped more into premium programmatic advertising inventories since our last call. We have made an investment in video AD units and the initial pilot is showing cpms in the 10 to $15.
Dollar range and we have plans to grow that capacity. So we can further monetize more and more of our valuable impressions without adding additional cost of sales.
Finally on the advertising front, we're just scratching the surface and how we further monetize derivative content from our platform for more advertising and.
Content licensing dollars today, we have created 123 original episodes for snap chat alone and that is a social channel right. Now we have currently about 1.5 million followers, including the number one ranked show related to the game of Minecraft.
And this is a nice new revenue source.
For us in advertising stream, which generates a recurring revenue through our advertising revenue sharing arrangement with snap.
The key here is that we are seeing exciting progress and our direct sales efficiency and move toward premium programmatic. So we have significant upside as we continue to grow our network capacity and mature.
Course AD products and sales force capability.
And I would be remiss to not add that we continue to explore use cases for our patented fully remote livestream broadcast technology beyond the application of gaming this as well might generate new sources of revenue for the firm going forward.
And now to our second revenue stream, while nascent we see good promise in our ability to monetize the gaming consumer on our platform as well.
In the early days as we are building our community very similar to other social platforms, we focused on low friction user acquisition, which really meant free to play and watch entertainment.
Yeah.
That was allowing us to gain critical mass with our player and audience base starting in late two Q. This year, we began testing a micro transaction marketplace and I reported on our last call. Some promising early signs while a very small percentage of our players are spending the average basket size of paying customers was around $10.
Others per month and on a monthly active user basis, we were seeing a revenue per user in the four cents per month range over the last few months, we have grown the average basket to $11.33 per month for the paying user and we've seen a 30% jump on a mile basis to about five and a half cents revenue per.
Per user.
Later this month, we will be expanding our alpha marketplace with new products that we expect will speak to a wider segment of our player base and see more conversion in the funnel.
It's still relatively small, but we see real potential to monetize our strong base of over 2 million players and make this a more meaningful part of our revenue.
A new story in 2021 and beyond.
And even as we continue to expand our advertising inventory improve our sales efficiency and grow our direct to consumer monetization. We are still controlling our operating costs, allowing us to see revenues grow faster than expenses.
We have managed to not only redirecting.
More of our expenditure to be revenue facing but also absorb the additional operational effort that comes with more audience more users and more advertisers, while holding our cost relatively flat versus prior year at.
At this point I will turn the call over to our CFO Clayton Haynes, who will provide an overview of the third quarter.
Financial results after which I will come back on with some closing remarks Clayton.
Thank you Anne and good afternoon to everyone and thank you for joining us for today's third quarter 2020 earnings Conference call.
In summary, our Q3 2020 highlights included a.
105% increase in total revenues, reflecting a significant increase in advertising and content sales revenues relative to the comparable prior year quarter.
Our cost of revenue increased 70% from the prior year quarter, which was less than the 105% increase in total revenues.
Resulting in average margins of 54% in the third quarter of 2020 compared to 45% in the prior year quarter as we continued leading into our largely digital and online offers.
Excluding noncash stock compensation charges, our operating costs for the third quarter of two.
2020 rose a modest 10% compared to the prior year quarter, reflecting an increase in cost related to the build out of our direct salesforce as we continue to invest in the monetization of our AD inventory and an increase in platform infrastructure costs driven by the surgeon engagement during 2020.
During the third quarter of 2020, we continue to be focused on increasing monetization and cost reductions where possible.
Diving into the details from a revenue perspective as summarized in our earnings release earlier today.
Third quarter 2020 revenues increased 105% to 708.
2000, the highest revenue quarter in the company's history compared to $350000 for the third quarter of 2019.
The increase was primarily due to a significant increase in advertising and content sales revenue relative to the prior year quarter, reflecting the positive impact of the build out of our direct salesforce.
Earlier this year and our continued focus on accelerating the monetization of our growing advertising inventory and surge and engagement.
During the third quarter of 2020, consistent with what we have done historically, we demonstrated the ability to win significant advertising deals with top tier media companies and.
As we look forward to our salesforce securing these types of deals in future periods build timing will vary.
As with all advertising based business models COVID-19 has had an impact in the timing and distribution of advertising revenue, but we feel we are recovering well.
We have made some.
Substantial progress in building, our views and impressions over the over the three over the first three quarters of 2020 and expect our advertising inventory to continue to grow so.
So that as advertisers and brands continue to rebound we are ready to take advantage of the monetization opportunities.
We.
We continue to categorize our revenues into two main segments, those being sponsorship and advertising revenues and direct to consumer revenues.
Sponsorship and advertising revenues, which includes brand sponsorships.
Brand sponsorships of our owned and operated properties along.
I think our more customized brand partner programs and also includes traditional advertising and third party content sales revenues increased by 98% to 677000 compared to 342000 in the third quarter of 2019 and comprised approximately 94%.
Worth of revenues for the third quarter of 2020 as compared to 98% of revenues in the third quarter of 2019.
Direct to consumer revenues, which were primarily comprised of the sale of digital goods related to our mind digital property accounted for approximately 6% of revenues for the third quarter of 2020 up.
From 2% in the third quarter of 2019, reflecting in part the surgeon engagement across all of our digital properties since the first quarter of 2020.
We continue to emphasize free to play offers consistent with our focus on increasing the volume of new gamers and spectators engaging with our proprietary technology platform.
And E Sports brand.
We continue to focus on ramping up overall direct to consumer monetization, including sales of digital goods through our micro transaction marketplace as Ed mentioned.
Third quarter 2020 cost of revenue increased 70% to 327000.
Compared to 192000 in the comparable prior year quarter, a 33% lower percentage increase than we saw in revenue for the same period.
The significantly lower increase in cost of revenue on a relative basis was driven by lower costs associated with the increase in advertising and content sales revenue.
And our largely digital and online revenue generating activities in the third quarter of 2020.
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 advertising and content sales activities and digital.
Online and or physical in person offer is occurring each period.
Third quarter 2020, GAAP operating expenses were 4.7 million slightly higher than the comparable prior year quarter.
Noncash stock compensation expenses decreased 267000.
For the two 470000 as compared to 737000 in the third quarter of 2019.
This decrease was offset by an increase in sales and marketing personnel costs related to the build out and investment in our direct Salesforce earlier this year.
An increase in technology platform infrastructure costs.
Term really related to the cloud services consistent with the surgeon engagement, we've experienced during 2020 and lastly, the impact of higher insurance related costs relative to the prior year.
On a GAAP basis, which includes the impact of non cash charges net loss for the third quarter of 2020 was four point.
$2 million or 36 cents per share compared to a net loss of $4.4 million or 52 cents per share in the comparable prior year quarter.
Excluding noncash stock compensation charges, our pro forma net loss for the third quarter of 2020 was $3.8 million or 32 cents per share compared to three.
$3.7 million or 43 cents per share in the comparable prior year quarter.
The weighted average number of shares outstanding for both GAAP and non-GAAP earnings per share was approximately 12 million shares in the third quarter of 2020 compared to approximately 8.5 million shares in the prior year quarter.
As described in our release today.
Pro forma net income or loss is a non-GAAP measure that we believe investors can use to compare and evaluate our financial results along with other applicable capesize and metrics discussed by an earlier.
Please note that our earnings release contains a more detailed description of our calculation of pro forma net loss as well as a reconciliation.
Pro forma net loss with the most directly comparable financial measures prepared in accordance with GAAP.
From a balance sheet perspective as of September 32020, we had 10.3 million in cash approximately $11.8 million in working capital and total shareholders' equity of 15 point.
$2 million.
This includes approximately $8.4 million in net proceeds from the sale of 4.98 million shares of common stock pursuant to an underwritten public offering during the third quarter as previously reported.
As of September 32020, we had 15.48 million shares outstanding.
Our current monthly net cash burn rate continues to be in the 1.2 million to 1.3 million range. We.
We continue to be focused on reductions of our cost structure and are continuing to work with our functional leaders within the organization to identify additional cost saving areas.
As previously reported we vacated approximately 75%.
Cent of our office space in Santa Monica, resulting in significant rent and facilities cost savings going forward and we continue to work with existing and new platform and infrastructure service providers to reduce those costs going forward as well.
In summary in Q3 2020, we saw the highest revenue quarter.
The company's history, driven by the significant increase in our advertising and content sales revenues relative to the prior year quarter and favorable average margins, reflecting our largely online and digital activities in the quarter, all while identifying areas for cost reduction in future periods.
This was balanced with our focused on the access.
Coloration of monetization of our rapidly growing advertising inventory and investment in our growth initiatives in response to the overall surgeon engagement during the period.
With that I will turn the call back over to and for some additional remarks and.
Thanks Clayton.
I want to express how pleased I am with the progress we're making.
[laughter] seizing this opportunity in front of that this is gaining a critical mass to begin to monetize our growing audience.
The company is right now at a high level of productivity and commitment to grow shareholder value and I can see it in the energy and every meeting, especially in our weekly sales pipeline and revenue revenue its review session.
Where the hunger to win more and bigger deals is high and.
And we are only just beginning to show off how our end to end technology, enabling mass participation competitive gaming and viewing entertainment can be leveraged.
I continue to believe that one of our most unique distinction is that while we are small in size an early in our revenue story, we punch.
Above our weight with partners advertisers and the gamers themselves.
So what should you expect of us in the coming months as we try to further develop the network effect that is growing between our community of players viewers partners and content will.
We'll continue to grow our audience and engagement increase our monetizable.
Advertising inventory and sales force effectiveness.
Increase our consumer revenue per user, bringing more players and then to our monetization funnel will continue to grow our addressable market with more game titles and expanded offers.
And we'll continue to progress material strategic partner conversations that price.
That provide us commercial scale, but also a potential source of growth capital.
Our goal is clear continuing to build our large diverse and young community of gamers through engaging content and entertainment that will enable us to capture a growing share of the advertisers wallet and our consumers wallet.
And I want to close by being Crystal clear with our investors and analysts that we're playing for high Stakes here I consider it my day job to deliver transformative moves that can create real leverage and scale for the company. So with that you have our full commitment.
And we're now happy to take any questions that you might have thank you.
As a reminder to ask a question you will need to press star one on your telephone again Thats Star one and you touched on telephone to ask a question to withdraw your question press the pound key please stand by while we compile the Q and a roster.
Our first question comes from the line of Brian. Thanks.
No other lines Global your line is open.
Hi, Good evening guys. Thanks for taking my questions.
Can you talk about the two large ad campaigns or.
For the two separate large brands I think one you announced Netflix now in the second I think.
You intimated at least as much I believe with the L.D. comp range.
You made a second show.
Did both of these campaigns.
Campaigns go off and how did they perform in the customer's eyes and have you received following me follow on campaigns from these customers as well.
Yeah, absolutely. So I thought it was important in the call that we emphasize how well we're doing on the repeat side as the pipeline and certainly we do provide full performance report to all of our advertisers and we are seeing that we're outperforming on all metrics.
The night and that's hence why we're starting to see that repeat business and more importantly, it's not just the repeat business. It's the fact that the size of the deals are nearly double. So these advertisers are willing to put more dollars to work because of our outperformance we are seeing pretty consistently new business starting to flow through with.
Or a comment media related companies like a Netflix a Disney plus people, who are every week, releasing new content on their streaming platforms and they're looking for ways to to reach those desired audiences and drive them to those platforms. So we do continue to see repeat business with them.
We also just ran a very successful campaign with a toy company Monster toys were as well we over delivered on performance the agency and the company, we're very thrilled and so we're now getting excited talking to them about.
Additional toy releases that are appropriate for our different younger audiences. So we're.
I mean, it is a pretty consistent that we are outperforming and that's leading to repeat.
Great.
And then can you give us some great details for the first time I think on the pipeline 80 deals.
Can you talk about.
So many are larger than say 200000.
First thing dollars like your first two large pilots.
And then when you talk about the pipeline is that a addressable off campaigns are going to happen. In next few weeks in next few months next few quarters can you just help characterize duration.
Yeah no it's.
I always question I mean look you know we have been doing a good job of starting to see as we've been able to kind of reposition and get out in front of advertisers as we've seen advertisers start to loosen up a bit and start putting money to work again kind of in the wake of everyone kind of freezing a bit with co that we are seeing our sales cycle start to.
Good to be faster, but you know we're already selling against spring break kinda new year's campaigns. So I would say, it's it's not several years, but it's not just several weeks either it's more in the kind of you know the kind of six month range is how we're selling now that doesn't.
I mean, the sales cycles that long, we certainly are starting to see deal flow through and close in a 20 to 30 day sales cycle, that's kind of at the top tier of performance and then your question about deal sizes I mentioned right now the average deal size is a little over $70000 in the pipeline, but that's up from about.
<unk> 37000, I'm just in the prior quarter. So we like that trend certainly we are because we have more reach we can start going in with bigger numbers on our proposals.
So we are seeing that we're putting in more pitches and that kind of six figure range that doesn't mean that the.
The advertiser will select all the options, we put in front of them, but the power and having all that reach is now we can be a chunkier part of their spend and a lot of times in the advertising World. You know when you have small reach even if they love what you do it's just they just kind of can't manage you know tend to.
The current vendors are advertisers that they're trying to route through its a lot more work for them. So it's always a good sign that if we can take down more and more of a higher percent of a campaigns.
Dollars that we will tend to be a go to place for them to put more money to work in the future.
Great.
First question just two parter separate first can you tell US you talked about your investment in direct sales force. How many people do you have today versus the beginning of the year and then it's early in your business model, but and you see the fourth quarter generally being a seasonally strong one given the holiday season, and the need to push Edvard.
Battalions decades, and things like that.
I mean, we're certainly you know working hard to you know Condor convert deal faster deals have bigger size I mean, we don't give guidance on for Q, but you know as I alluded to in the call you know the the energy is high.
On our weekly pipeline reviews and.
Yes, there is a lot of excitement as we are seeing more and more new deals coming in with shorter fuse is on them as far as conversion so.
We continue to be very bullish on the progress that we're seeing that we started to make in Threeq, you and how that will go forward.
As far as the sales team.
So those we started the year with about three people in the sales team and we've grown that to about seven and a couple of those fts or partial Fcs because they have kind of broader roles, but with that we do have kind of a much higher percent of people and the firm.
We are now revenue facing and then I think the other important thing is you know we've always been so proud of our.
Very high quality high CPM model right and so we've always resisted.
Kind of cheap programmatic, because we don't want to bring down the valley.
Who are you have this high end inventory that we're creating but equally we know that every time, we add a premium AD unit, we don't want to howie to be adding a body against it and so what we've started to do is work with a few different companies that have effectively marketplaces for video ad.
Al units of high quality programmatic and so when I referenced starting to put some of that inventory to work in these programmatic marketplaces, where we can still get a 10 to $15 CPM. We think that is a really nice complement to our direct sales team.
Great. Thanks, so much.
Thank you. Our next question comes from the line of Allen Klee of National Securities. Your line is open.
Yes, Hi last quarter on the call you you gave a stat of how many monthly users or the run rate or monthly.
The number was I think around 275.
And then I was wondering.
Where that's run rate is now okay.
Okay. So that was a monthly active users is about 275000 monthly active users and we're seeing that number now kind of in the 400 to 500000 range.
So it continues to grow as the user base growth.
Okay and.
And the Cpms that you've been getting on average for this past quarter.
What did you say 10 to 15 or did you say specifically what it is.
Is.
Programatic AD units that were testing I mean, we tend to see you know more in the 15 to 25.
Five range for the direct sales campaigns and we've seen in some cases Cpms go as high as 40 to $50.
Okay seem to 25 high spec sales this is a good range.
So it looks like your <unk>.
If I did my math that you sold.
But you know.
Maybe some number around 5% of your inventories in the.
In the <unk> in the current quarter. So so the real question here, which is I think so.
So important for the revenue opportunity ramp up is.
How how would you can get that number.
Hi are and how we can think about the ramp of and I know you just mentioned the video programmatic but.
Is there a sense of how we can think about how how you can start selling out a much more a higher percentage of your inventory.
Absolutely. So one thing to remember is is not every viewer impression has an AD unit.
It against it right. So we talked about that a little bit on the last call. How you. You know we are continuing to add more AD inventory, but we don't want to put an AD unit against every viewer impression it would be a bad experience.
For the players, but you're absolutely right that right now, we're only really selling out about 25% I would say to 30%.
One of our AD units and a high performing sales team would be selling out kind of 85% to 90% now. So all these numbers are going to continue to be dynamic right because since our last call. We've added more AD inventory. So we want in an ideal state we watch that.
Hi quality CPM.
What we want to be selling out 80, 80, 590% of our available AD inventory, we want our AD inventory to continue to grow.
So that that overall potential dollar value grows as well and then we will repeat customers shorter sales cycles and bigger deals.
Size.
Okay and for your advertising revenue was.
For that segment is any of that.
The amount that you said, they're also related to sponsorship.
Yes advertising and sponsorship is all lumped together there.
And that's really because if you recall when we in the early days, we would run our own programs.
And then we would try to bring a sponsor end to kind of put their name across the top of it.
But now more and more.
More of our sponsorship opportunities have blended into advertising opportunities. So that theres not really have a big distinction there.
Okay. My last question is in direct consumer you mentioned.
We're going to be rolling out some some new type of things could could you comment on that a little more.
Yes, so right now when we introduced this notion of a micro transaction marketplace, specifically first in our owned and operated property called mine had dot com.
We just threw in a couple items that we thought would speak to power users of that.
Of that website.
And.
The good news is we did prove that we could attract and you know again, a growing basket size now an average of $11.33 a month speaking to that kind of real narrow segment of that Max user of the platform. So when I talk about what the advancements we are going to make for market.
So at the end of the month, we're calling it marketplace 2.0 is we're going to put in a lot more digital goods that speak to a wider range of different segments. Some of our more casual players or maybe players who are coming more for the social aspects than the gameplay aspects of the platform and so we're excited to see if we can now.
Get put in front of a wider berth of players things that can convert more people into wanting to put in their credit card and start paying.
Okay.
Just one other thing can be things that are very.
Have a real kind of.
Product or experience benefit like.
Something that maybe expand your server sites you can invite more friends into your private round to play.
It could be a way for you to back up your game play. So that you can save your different private worlds are realms or it could just be some of the things that are going to be in the next marketplace are just much more kind of social.
On the entertainment related different skins for your avatar and things like that.
If I could ask one last question sorry.
Yes.
On the subscription side.
When when could.
Could we potentially be thinking about that.
That is a revenue opportunity.
Yes, so part of the marketplace to we're looking at how we can create you X functionality.
So that there is an option for people, especially with things like expanded server plans and the ability to buy more friends or with backup servers for it to be a recurring charge.
And so that will be us.
Kind of dipping our toe into a recurring revenue stream through that that kind of monthly renewal of those features and benefits and then we still have aspirations over time to think about subscription that would be more related to premium content. So not just Europe.
Gameplay, but access to entertainment content Act.
Access maybe to an expansion of humor tools for you to spin up your own merits, so thats still in our product roadmap.
Okay. Thank you very much.
Yes.
Thank you and again to ask a question.
Six press star wanting a touchtone telephone again Thats star one when you touched on telephone to ask a question to withdraw your question press the pound.
Our next question comes from the line of.
Carter Mansbach Oh portrait your line is open.
Hi, guys good afternoon.
Okay.
Hey, So I have two questions. One is there was reports today that SDN was getting out of gaming and I'm wondering what effect that could have.
A positive way on the company and the second part is cash on hand so.
No. There are people that have been concerned that the company is going to run out of cash in the next year.
So and you maybe you guys would need to do a money raise can you address that please.
Yes, the way you see STN doing is very similar to you know where you saw a couple of years ago Turner tried.
Try to kind of make up that and invest in content for EA sports at the pace.
Fashionable level.
And so that only speaks to about 10 to 15000 professionals around the world and.
That's a very specific type of content its high cost because you're bringing people into Madison square garden or Staples Center.
It's a big production no different than like an end.
In FL game and certainly in the wake of a pandemic all types of a big live event Entertainment is on hold were operating at a very different part of the sports pyramid worry about the mid tier players and creators of content. So when I talk about the.
The tens of millions of gameplay hours running through our platform that game play that we have exclusive access to by facilitating those tournaments, we can repackage and distribute that content and a lot of different ways to monetize it.
And so one of the ways I explained is we.
Have a set of social channels some of the largest social channels on Instagram and tick tock in the gaming category.
This is where everyday gamers upload their own user generated highlight reel. So.
So it doesn't cost us anything they upload it to us for free we take that piece of content we now.
We own it and we can both post it on those social channels to drive up our following an audience. There for AD revenues, but then we can also repackage it and distributed elsewhere. So when I mentioned that we've sold 123 episodes to snap chat that to us.
Now repackaging that content and using it for other ways in fact, we have a leading position.
Really a dominant position when it comes to amateur esports highlights.
And that's very different than watching a professional tournament.
Anybody can consume that content it short form it speaks to where millennials.
US regency's spend their time, they don't just need to see super elite content their cord cutters, right and they consume short form and they like that it's highly quick and digestible and entertaining. So that's really our sweet spot on content, a very different place than what some of the big media companies were trying.
Trying to do and trying to kind of on the professional level of sports content.
As far as cash on hand goes I mean, we talked about this the other day Carter when we were having a chat.
I believe the company has proven that it can attract strategic investment.
And.
And that strategic investment wouldn't just be growth capital it would come with commercial hooks opportunities for us to really transform the company on the back of someone else's leverage someone else's global distribution and scale. We've done a really good job I think organically growing the company but.
My closing comments.
I wanted to be extremely candid about the fact that it's time now for us to take this critical mass that we build is now interesting to some pretty big powerful companies out there that it what we produce both in the community. The audience, we have it's interesting to them.
On the content that we have is interesting and abuse of them and that's where my focus really is focusing on big commercial partnerships that would bring that growth capital and that ability to really scale. The company now in that and I have bigger inorganic way, it's time to take that kind of.
Boulder next step for Super League and kind of pull us out of kind of micro cap and so thats, where our focus is we.
We think thats, the most shareholder friendly source of capital and Thats, where our focus is.
That's perfect answer so one follow up.
Over the last two calls I've now been heard you mention that.
Netflix and snapshot and I would like to though do you think as time goes on and considering that you are still small and no one really knows the company that well as that relationship grows with big big companies like a Netflix or snapshot when you come out with a press releases.
Ken do you think they will in time allow you to put their names in the release.
I know it would be wonderful if they did I mean, you know.
Right now you know you guys had asked earlier about bigger deals that we have you know we do now have five deals that are over kind.
At 200, K., we have many deals in the pipeline over 100000, so again, we like the direction and a lot of them are with these repeat customers. These big media companies and the reality is is that we're still a drop in the bucket for their kind of annual spend when you look at it collectively from a content.
Point of view, but you know that's when I talk about the bigger kind of strategic explorations I'm, having with strategic partners. It's really about more than just let us be an advertising platform are you you know I think about it all the time you think about you know whats happening with those right now well.
All telcos are either formally buying up media companies or they are creating pretty strategic partnerships with them why because content is king and if they can get that content onto their devices. It creates more stickiness to their devices to their can or offerings. You know, we're sitting on a massive amount.
Not just gaming related.
But gaming tools.
And gaming tournaments, and things that really speak to where a lot of this younger audience of gamers want to spend their time and I think that there is a lot of ways that we could show our value too.
Big strategic partners, and a really different way and whether that be media companies or other companies who are chasing this audience.
I think what we have is valuable.
Okay, great. Thanks, guys. So much for taking my questions.
Thank you our next question comes.
Steel Morrison of National Securities. Your line is open.
Hi, guys. Thanks for taking my questions a couple.
We didn't hear anything much about the VSP that I'm still.
Still progressing and was were the rubber look will look like there and then you on sales efficiency.
The.
You mentioned last time, you expected to get to like 50% efficiency.
So are you still expecting that and.
And does it do the sell side platforms no effect.
Perfect that.
Most of my questions. Thanks.
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Yeah, I mean definitely what we did talk about as you know we didn't put out a bogey on the last call for where we would get to on the next quarter with sales efficiency. What we said is look we're probably at about 20, 25% efficiency with this brand new team.
And we want that to grow and we believe that 80 85.
Percent is kind of best in class you know you're never going to sell all your ad inventory.
And that's just kind of a standard rule of thumb or benchmark that used out there.
So you know we continue again you know the metrics that we can track, our bigger deals and faster closing and selling out more.
Or of our AD inventory, but that AD inventory does continue to grow too so.
That that ball kind of keep moving so to speak.
But certainly I would say, we've improved our sales efficiency without a doubt since last quarter as evidenced by the fact that we did to act.
Plus in revenue.
So how does.
Yes, those piece figure into that that make that ratio lower over the target or.
Thanks, so much I'll say platforms yet the.
Yes, I mean, I think went from I.
I think the sell side platforms are you know as as we've been now doing some of this programmatic testing we've we've been.
Again careful to say, okay, let's really.
We have an AD product manager, who really is figure.
Figuring out where are the most valuable places the most valuable views and impressions, where we can add add inventory first what are the right pieces of AD inventory to offer up to some of those sales side platforms versus preserving them for our direct sales because they are of higher value and so I think.
We're doing a good job right now of building more video AD units in fact, you'll see us, creating and the and the product roadmap over the next couple of months a specific video portal, where we'll be able to take all this content, we're generating and drive more viewership to it and that will give us more video AD unit.
Units that we can push through those programmatic services and get that kind of 10 to $15 range and again still preserving the higher cpms for our direct sales teams efforts. When you think about what we did for Netflix when we were promoting them. It was.
Much richer than just a video AD unit or a trailer.
When when kids come into mind had dot com, they first or teleported into a virtual social lobby, where they run around and chat.
They're not game plane, yet well, we created kind of Easter egg hunt for them.
We seem that lobby to that Netflix content that we were we were marketing. We also could extract sentiment out of the chat that's like having a life focus group.
And then we still when the kids were ready to go into their private realm, we still got to show in the trailer. So it's when you come.
Combine all of those other integrations, that's why we're able it's such a deep authentic form of engagement.
So I think Thats, where we really want to have our direct sales effort focused on and then continue to create more programmatic video AD units that we can pump through these programmatic.
Stick marketplaces, and really frankly try to stay away from the kind of sub $1 CPM banner ads.
I'm in pop ups that really are real kind of turn off for the younger audience.
No doubt so just a follow on on that.
So you.
Back like the vast majority of your head.
AD revenues to be direct sales for the foreseeable future programmatic is not going to like Spike Spike way higher.
Well I mean, we'll see I mean, the fact that the last call.
It was Laura Martin from Needham, who said Hey, you know I think you could be.
Actually more programmatic and our concern has always been about you know ruining the experience and what we don't want to see is after all the hard work to build this audience and committee start to see people move away from our platform and so that did spark a set of conversations and this effort we've been making now.
Due to our product roadmap to add more quality video AD units. So I'm I'm hopeful that we'll be able to.
See programatic, but still with that Knights high CPM, you know in 2021 be a more meaningful chunk and that way, we don't have to keep adding workforce as.
I had inventory growth so.
Who knows what the balance will be next year, but I'm, it's very promising.
Okay.
Good.
Yes, I guess, so just like you know mid term question as well.
What do you think your sales force efficiency would be.
I know at a place where you could generate like a million Bucks a month in revenue.
Right.
Oh I'd be taking a total gas I'd prefer not to just.
So kind of a.
The wild number out there I mean, what I would tell you is I mentioned that you know.
Our.
Our AD inventory if it were static which it's not last quarter. If we sold everything out you know we could probably be doing about 10 to 16 million in revenue per annum.
If we kind of held at like a $20 seats average CPM now the AD inventories grow.
Since then.
And we're selling more and more so we're not selling everything out but you know it probably is about 50%.
That's probably a decent kind of way to think about it but you know again theres multiple variables to beacon.
Deterred here at that but that have to translate into that 1 million a month, which is your question. So you just you need to see US again closing deals faster size of deals getting bigger.
Keeping preserving that nice premium cpms and I do think overall pipe.
Consigned health you know that.
If you if we continue to see the pipeline, saying nice and healthy in that $5 million range. That's a good indicator as well.
Great and then last question on the video production with.
Going.
Yeah, I mean, it's interesting we've been doing yeah, we didn't play it up too much in the script.
What we have been hired to do some things that we're using as you use cases to show the flexibility of it we recently did a an.
An award show using the broadcast technology, and we are and continue to be in conversations with other uses like game shows and talk shows and.
So we're excited we continue to further product ties the tool kit and think of it is almost like a fully remote virtual production studio that has a.
Kind of a cloud based master controller. So you can run a high end quality livestream broadcast all off your laptop.
And you can be patching and talent and overlaying graphics, and sounds and doing all the cool stuff that usually those big expensive physical studios would do and because we've solved for it with gaming. That's so complex that we know that there are others, who might be interested in using this for other types of programming. So we continue.
To think that that could over time become another kind of side revenue stream when people maybe want to start licensing that product from us but.
It's early days and we think the most important thing we can do is first.
Show off those use cases and use that as a way to see if there is a.
A real market of interest for it.
Great. Thank you very much I appreciate it good luck. Thank you.
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Thank you at this time. This concludes our question and answer session I would like to turn the call back over to Ms. Han for closing remarks.
Thank you.
We'd like to thank everyone for listening in todays call. We look forward to speaking with you at upcoming conferences and when we report our fourth quarter results early next year and most importantly, we wish you all a very happy and safe fourth quarter and holiday season take care.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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