Q4 2020 Super League Gaming, Inc. Earnings Call

Okay.

Good afternoon, everyone and thank you for participating in today's conference call to discuss Super League Gaming's financial results for the fourth quarter ended December 31 2020.

Joining us today are Super league's president and CEO and hand, and CFO Clayton Haynes following their remarks, we will open the call for your questions. Before we go further please take note of the company's Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995.

The statements provides important cautions regarding forward looking statements.

Remarks during todays conference call will include forward looking statements.

These statements along with other information presented that does not reflect historical fact are subject to a number of risks and uncertainties.

I saw filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ.

On a like to remind us.

Everyone on that at this call is being recorded and will be available for replay through March one eight March 18th 2021, starting at eight P M Eastern time Tonight.

Webcast replay will also be available by dose vial link provided in today's press release as well as on the company's website at Triple double you adopt Super League Dot com.

Now I would now like to turn the call over to Mr. Two precedent in T O of Super League Gaming and head go ahead. Please.

Good afternoon, and thank you for joining us on this momentous day for our company I can't begin to tell you the palpable enthusiasm and confidence flowing from our all steps in this morning, when we shared our latest news of the proposed acquisition of Mop crush a wildly Stark contrast to one year ago, when we completed our fourth quarter.

2019 earnings call and solve the world go into Lockdown.

But that challenge that up ended the world transformed Super League for the better we saw a surge in engagement that is not only held but continuously ground and very material ways, giving us heft and critical mass.

It forced us to focus to double down on what was working and it's certainly offered us a window to explore inorganic growth. In addition to our explosive organic growth.

Before I get into today's announcement and what it means for us I Wanna table set a bit on the wider industry the trends and our positioning.

Our focus has always been to provide competitive video gaming and E Sports Entertainment for every day players of all ages and over the last year, we have leaned more and more into putting these tools into the hands of the players themselves to create and share their own gameplay and relevant content with others.

This mission speaks to the overall democratization of content creation, the Gen Z and millennials thirst to create and share and their desire to spend more and more of their day connecting and communicating in a virtual space and time and in a highly engaging and creative way.

And gaming has only an entry point, it's bigger than that Super League as a social media and entertainment platform.

Yesterday's roadblocks direct listing on the New York Stock Exchange further validated this their meta versus has similar themes to ours I say that humbly of course, we engage with large audiences of gamers and extend beyond just gameplay.

And there are three sources of value from this first the way we create a powerful marketing channel for advertisers to reach this elusive coveted audience.

Direct game or create or monetization 8-K, a direct to consumer through a shared virtual economy.

Our digital marketplace launch that we see it in the second half of 'twenty 'twenty does just that and empowers the players and creators themselves to create a diverse breadth of digital goods that speak to precisely what our community wants and allows them to participate in the economy.

And the third lane of value the massive amount of derivative content produced on platform that in itself can become a source of revenue.

So now that I have shared some key macro trends that speak to how gen Z and millennials want to create share and participate in their own content creation and how that has established a powerful business model for both the Mighty roadblocks and of course for Super League is a perfect segue to what we believe to be the most material.

Shifting and Super league's overall trajectory, providing a step function increase and not just our scale, but also our forward revenues again today, we announced our intention to acquire mob crush.

Crush as a company, we have known and admired over the last few years with great leadership and technology. They are live streaming platform used by hundreds of thousands of gaming influencers, who generate and distribute almost 2 million hours of original content annually to their own social audiences aggregating more than four points.

5 billion fans and subscribers across the most popular live streaming and social media platforms, including Twitch, Youtube Facebook Instagram Twitter and more.

Mob crush also owns mind, though one of the six exclusive official Minecraft server partners enjoyed by more than 22 million unique players annually.

So let's break this down a bit more as the two companies lineup beautifully and all of the most important ways.

First let's talk about our customers and our offers.

Super League is consistently focused on what we call the middle of the pyramid. There are 3 billion gaming enthusiasts in the world with our target being what we describe as the mid tier Gamer.

So they're highly competitive they're likely sharing their gameplay and entertainment comment content more widely they're highly engaged on.

Our offers such as frame rate Super League Arena, and Super League TV align with that segment and uniquely inside of that tier we have a growing foothold on the younger engaged gamer mainly through our owned and operated digital property might not one of the world's largest expanding online communities of minecraft players with over.

1 million monthly uniques players enjoy freemium private server hosting along with social gameplay and entertainment experiences and mob crush focuses on the same segments mob crushes free live streaming toolkit is offered to up and coming mid tier streamers that middle of the pyramid again as a way.

To build and monetize their own livestream content.

The company's mission is to enable streamers and opportunity to turn their passion and their livelihood.

This demographic aligns with Super League 16 to 34 year old demographic as well their mind Bill product is highly complementary to our mine had audience squarely focused on young avid minecraft players.

And it is exciting to think about how these segments intersect. The combined company has amassed a suite of offers that mirrored the gamer journey, the young Gamer and creator today is tomorrow's streamer tomorrow's influence or maybe even tomorrow's esports star.

So now let's dive into monetization and again I think you'll see there is great alignment.

First both firms have focused on audience development to create real heft material reach to support their primary revenue stream to date, a premium advertising model.

Media is all about scale and while both firms have reached a degree of critical mass organically and individually. The combination makes us a leader leading provider of content driven advertising solutions and event in stream and end game.

Providing brands advertisers and other consumer facing businesses with massive audience reach across the most important engagement channels and video gaming competitive events, social media and live streaming content along with in game experiences.

With this acquisition, we are building a formidable highly scalable gaming centric media and advertising platform that reaches one of the largest addressable audience of gamers in the United States.

Super League premium owned and operated and gaming video inventory, coupled with mob crushes television equivalent and AD blocker proof in stream sponsor inventory creates a sought after solution for advertisers targeting gamers.

Let's face it we all know kids, who game and when they are playing or watching their favorite streamer the room could be on fire and they wouldnt notice. It we can place brands in front of those players and viewers right then right there.

Next we both share a growing second pillar of revenue direct gamer monetization through our main hub in mind Vo properties.

I mentioned earlier mine huts early stage marketplace offering players and creators both subscription and onetime digital offerings that allow our customers to extend their server capability by cosmetic goods and then the future purchase access to new games. Similarly in mind, though players can purchase digital goods and mine.

Crafts marketplace, such as game entry fees and cosmetic skins. There is so much opportunity to significantly amplified both of these businesses through the cross marketing of our communities and the cross fertilization of our offers.

And there is a third emerging leg of revenue one that we've talked about on previous calls as somewhat pandemic powered for Super League.

But the value of our content and our proprietary technology to create and distribute content.

We already have proof points last year, we generated over $400000 of revenue syndicating, our derivative content to others like Snapchat and Cox media.

And we now have partnerships in place or pending to syndicate, our content through three O T T services.

As well we have several media companies in the mix sampling, our patented visualization and cloud based remote video production and broadcast technology.

Virtual Alice studios for their own production needs the.

The headline the tools, we created for ourselves for our own experiences have value to top tier broadcasters. Similarly, again mob crushes live streaming technology platform and proprietary AI driven gameplay highlight software.

Mass is a large amount of derivative content that when coupled with ours creates a compelling library of competitive gameplay and entertainment content.

And there's even more upside.

Imagine if we combine our live streaming technology stack together the companies can provide content producers at all levels streamers creators digital and television production companies branded content studios and more with an exciting suite of tools and capabilities designed to both for the unique.

Needs of today's production and distribution realities, and the enduring changes, resulting from the pandemic.

So collectively who do we target every day competitive gamers creators and streamers well, we can check the box on that.

What do we offer in a combined sense technology that supports the creation of competitive gameplay and live stream entertainment content check again.

How do we monetize through our premium advertising model, our direct to consumer offering and our gaming and live stream content engine and library check again.

Before I hand, it over to Clayton I wanted to quickly touch on the compelling metrics as well again I can't say enough about how joining forces it takes us to a whole new level of scale there.

The combined companies reach more than 25 million players per year 3 million players per month and with over 400000 players per day.

As well, we reach a U S viewing audience of 85 million monthly, making for a top 50 U S media property is verified by Nielsen.

Annually, we have over 7.7 billion U S video views across live streaming platforms 2 billion views on social media platforms and enables 60 million hours of gameplay on owned and operated platforms.

And another point of unique synergy collectively we generate and distribute over 200000 gameplay highlights across streaming and social channels per month.

Brands and advertisers will take notice of this expanded scale and scope.

Now I know you all want me to speak to financials as we know the priority number one is to smartly continue to drive our topline.

While we want to focus on getting the deal closed and are in the midst of completing the financial audit I can share that mob crushes unaudited revenues for 2020, we're over $6 million.

Similar to Super League mob crush responded to the pandemic with a strong recovery on.

Auditing financials will be filed with the S. E C. When required and available but this is less about looking back and more about looking forward. The combined companies have a very bright 2021 and beyond.

At this point I will turn the call over to our CFO Clayton Haynes, who will provide an overview of fourth quarter financial results after which I will come back with some closing remarks Clayton.

Yeah.

Thank you Anne and good afternoon, everyone and thank you for joining us for today's fourth quarter and year end 2020 earnings conference call.

First I would like to summarize our fiscal 2020 Cape yard results there.

Then I will move onto a summary of our Q4 and our full year 2020 financial results.

And wrap up with a brief summary of some of the details of the proposed M&A transaction, we announced today.

As you know each quarter, we provide updates on our key non financial performance indicators that we believe help investors understand and gauge the progress we are making with respect to building our business in the long term opportunity, we see in front of us.

We will continue to provide kpis, but overtime, we may focus on different metrics as our business evolves.

Currently we continue to focus and report on three primary nonfinancial Kpis the first being registered users.

Second being video views and the third being hours of engagement.

Looking at our TPI metrics as of the end of 2020, we saw dramatic increases in our audience size and level of engagement over the course of the 2020 fiscal year.

We ended 2020 with nearly 3 million registered users roughly three times the number at the end of 2019, Inc.

Easily surpassing our goal of 2 million registered users for 2020.

In 2020, we experienced over 2 billion video views, which is nearly 20 times the number in 2019 and several times the level of video views, we had targeted at the beginning of the year.

And lastly, we saw over 72 million hours of engagement, mostly gameplay across all of our platforms nearly five times debt total we saw in 2019.

We posted a strong year of CPI performance in 2020, and we look forward to continuing the trend of strong kpis performance in 2020, one, which we believe will continue to underpin and drive revenue growth.

Moving on to the fourth quarter of 2020 financial results.

Overall from a financial statement standpoint fourth quarter 2020 highlights included an approximately three X increase in revenues.

<unk> strong growth in our advertising and content sales revenues relative to the comparable prior year quarter.

With Q4 2020 of establishing another record quarter of revenues per Super League.

Lip-sync day record quarterly revenues previously established in Q3 2020.

In addition, we continued our strong trend.

Strong margins reporting average margins of 62% in Q4 2020 compared to 50 per cent in the comparable prior year quarter. As we continued leaning into our largely digital and online offers and revenue generating activities.

From an operating expense standpoint, we saw increases in sales and marketing expenses related to the build out of our direct sales team earlier in 2020, and an increase in technology platform infrastructure costs due to the surgeon engagement across our digital properties in 2020.

Yeah.

Taking a look to any more detail on our fourth quarter 2020 results.

Summarized in our earnings release filed today.

Fourth quarter 2020 revenues increased 197 per cent to 779000 compared to 262000 in the comparable prior year quarter.

Advertising and content related revenues, which includes brand sponsorship and customize brand partner program revenues traditional advertising revenues and third party content licensing revenues comprised approximately 92% of revenues for the fourth quarter of 2020 as compared to 97 per cent of revenues for the comparable prior year quarter.

The increase in quarterly revenues was primarily driven by an increase in advertising revenues across our branded digital channels, reflecting in part the impact of the build out of our direct sales force earlier in 2020.

Significant growth in our advertising inventory and surgeon engagement during 2020.

And an increase in third party content sales revenues in connection with the curation repackaging and sale of our own and user generated content highlighted by our content sales activities with snap Inc.

Direct to consumer revenues in the fourth quarter of 2020, which were primarily comprised of digital goods revenues related to our minds on digital property.

Counted for 8% of revenues for the fourth quarter of 2020 and increased approximately seven X compared to the prior year quarter, continuing we're continuing our trend of and reflecting our focus on accelerating the increase in direct to consumer monetization.

We continue to focus on ramping up overall direct to consumer revenues, including sales of digital goods and the continued rollout of our micro transaction marketplaces as Ann mentioned earlier.

During the fourth quarter of 2020, we continued our strong trend of working with repeat customers, including our partnerships with top golf, Jim G. Logitech from Cox media as well as working with new partners, including the Indiana E Sports Development group, Moose toys and Bosch.

For the fourth quarter of 2022 customers accounted for 36% of revenues as compared to three customers accounting for 72 per cent of revenues in the prior year quarter.

As with all advertising based business models, COVID-19 had an impact on the timing of distribution of advertising revenue during 2020, but we feel but we feel we recovered and are continuing to recover well.

We have made substantial progress in building, our direct sales team and in building our views and impressions during 2020 and expect our advertising inventory to continue to grow going forward.

As advertisers and brand continued to rebound we are ready to continue taking advantage of the monetization opportunities.

As a percentage of revenue gross profit in the fourth quarter of 2020 was <unk> 62 per cent compared to 49% in the prior year quarter.

Fourth quarter 2020 cost of revenue increased to 121% from 296000 compared to 134000 in the comparable prior year quarter, representing a 39% lower percentage increase in cost of revenue than the 197 per cent increase in revenues for the same period.

So significantly lower increase in cost of revenue on a relative basis was driven by the increase in lower cost advertising and content sales revenues.

And our largely digital and online revenue generating activities in the fourth quarter of 2020.

Cost of revenues continue to 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 our digital online and or physical in person experiences occurring each period.

Fourth quarter 2020, GAAP operating expenses were $5 2 million, 8% higher than the comparable prior year quarter.

Noncash stock compensation expenses in the fourth quarter of 2020 decreased 54% to 434000 as compared to 951000 in the fourth quarter of 2019.

The decrease was offset by an increase in sales and marketing and personnel costs related to the build out and investment in our direct sales force in early 2020, as we continue to invest in the monetization of our growing AD inventory and.

An increase in technology platform infrastructure costs, primarily related to our cloud services consistent with the surgeon engagement, we experienced during 2020.

And lastly, the impact of higher public company insurance costs relative to the prior year.

On a GAAP basis, which includes the impact of noncash stock compensation charges net loss for the fourth quarter of 2020 was $4 7 million or <unk> 31 per share compared to a net loss of $4 7 million or 55 per share in the comparable prior year quarter.

Excluding non cash stock compensation charges on a pro forma net loss for the fourth quarter of 2020 was $4 3 million or 28 cents per share compared to $3 7 million or <unk> 44 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 $15 5 million shares in the fourth quarter of 2020 compared to approximately $8 6 million shares in the prior year quarter.

As a reminder, and as described in our earnings 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 kpis and metrics discussed 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 of pro forma net loss with the most directly comparable financial measures prepared in accordance with U S. GAAP.

Next let me briefly review our full year 2020 results.

In summary in fiscal year 2020, we saw a 90% increase in revenues recognized across our three primary revenue streams with a continuing trend of strong and improving margins stemming from efficiencies and lower costs revenue generating activities.

Operating expenses increased year over year, reflecting our investment in our direct sales function and increases in technology infrastructure cost in connection with a remarkable surgeon engagement across our digital properties during 2020.

These increases were partially offset by a decrease in primarily performance based noncash stock compensation charges and facilities costs.

Moving into the details for fiscal 2020 revenues totaled $2 1 million, an increase of 90% on a $1 1 million in total revenues we reported in 2019.

This increase was primarily driven by an 81% increase in sponsorship and advertising revenue, including third party content sales revenues and an increase of over 300 per cent and direct to consumer revenues in 2020.

In fiscal 2024 customers accounted for 49% of revenues compared to five customers accounting for 69% of revenues in fiscal 2019.

As a percentage of revenue fiscal year 2020, gross profit was 59 per cent compared to 53% in 2019.

Cost of revenue for fiscal 2020 was 856000.

67% from 513000 in 2019, reflecting a 26% lower percentage increase in cost of revenues compared to the 90% increase in revenues from the same 12 month period.

The significantly lower increase in cost of revenue on a relative basis was driven by the increase in lower cost advertising and third party content sales revenues and are largely digital and online revenue generating activities in fiscal year 2020.

Turning to fiscal year 2019.

On a GAAP basis total operating expenses were $20 million down slightly from $21 3 million in 2019.

For fiscal year 2020, GAAP operating expenses included $2 million in noncash stock compensation expense down from $6 2 million in 2019.

Excluding noncash stock compensation expense total operating expenses for 2020 was $17 9 million up 19% from $15 1 million in 2019.

The increase was primarily due to an increase of 18% from selling marketing and advertising expenses in connection with the investment in our direct sales force.

On a 34% increase from technology and platform development costs due primarily to the surgeon engagement across our digital properties in 2020.

And a 9% increase in general and administrative costs due to an increase in corporate insurance and a full year of other public company related costs.

Our net loss on a GAAP basis in 2020 was $18 7 million or $1 64 per weighted average diluted share compared to $30 7 million or $3 89 per weighted average diluted share in 2019.

Pro forma net loss, which excludes noncash stock compensation as well as 2019 non cash interest cost was $16 3 million in 2020 compared to $14 5 million in 2019 weighted.

Weighted average diluted share count for the full year 2020 was $11 4 million compared to $7 9 million excuse me in 2019.

From a balance sheet perspective as of December 31, 2020, we had $7 9 million in cash approximately $7 5 million from working capital in total shareholders' equity of 10 9 million on.

Our current monthly net cash burn rate continues to be on average approximately $1 $3 million per month.

We continue to be focused on reduction of our cost structure, particularly in the area of technology platform infrastructure costs in other areas as identified.

As previously reported in June 2020, we vacated approximately 75 per 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 infrastructure service providers to reduce those costs going forward as well.

Subsequent to year end as previously reported in January and February 2021, we strengthened our balance sheet closing registered direct offerings of an aggregate of $3 1 million and $2 9 million shares of our common stock raising gross proceeds of approximately $8 million and $12 million respectively.

We currently intend to use the net proceeds from the offerings from working capital and general corporate purposes, including sales and marketing activities product development capital and capital expenditures as we continue to grow the business and focus on the continued acceleration of monetization.

In summary in Q4 and fiscal year 2020, we saw the highest revenue quarter and highest annual revenues reported in the Companys history, driven by significant increases in our advertising third party content sales and direct to consumer revenues relative to prior year periods.

Underpinned by the enhancement of our direct sales force growth in advertising inventory and the flexibility of our technology platform as it relates to broadcast and proprietary and user generated content.

Fiscal 2020 also saw a favorable average margins trends, reflecting our largely online digital activities in our quarterly and full year periods, while identifying areas for cost reductions in future periods, all while balancing our focus on the acceleration of monetization of our rapidly growing advertising inventory and investment in our growth.

Initiatives in response to the overall surgeon engagement during the period.

Lastly, a few comments on our transformative M&A related announcement today and has already addressed the strategic benefits of the proposed acquisition of motto crush and I will provide some additional details with respect to the acquisition agreement.

From a structure standpoint Super League entered into an agreement and plan of merger buying them on mob frustrating Inc. Super.

For League and Super League merger so.

The merger agreement provides for the acquisition of mountain crushed by Super League pursuant to a reverse triangular merger structure with mom crush as the surviving corporation and in all common stock deal.

Upon completion of the merger mob crush will be a wholly owned subsidiary of Super League.

In accordance with the terms and subject to the conditions of the merger agreement each outstanding share of mob crush common stock and preferred stock will be canceled and converted into the right to receive <unk>.

528 shares of Super League common stock as determined in a merger agreement.

Subject to certain adjustments in other terms and conditions more specifically set forth in the merger agreement <unk> will be issuing approximately 12 6 million shares of <unk> common stock at the merger consideration.

Our proposed merger is subject to certain customary closing conditions, including being subject to obtaining approval from a majority of Super League shareholders on a special meeting that we expect to be held before the end of April 2021.

Please refer to our current report on form 8-K regarding the proposed merger that we filed with the SEC earlier today for additional information.

Thank you again for joining us today with that I will turn the call back over to Ann for some additional remarks and.

Thank you Clayton before.

Before we turn to questions, let me offer a bit more context on the key drivers that we have spoken about on previous calls that indicate the underlying health of our business model across our three revenue streams.

Highlights from our advertising model. The revenue traction continues we've talked about the health of the pipeline the importance of winning a larger share of advertiser's wallet and the value of a swifter closings and repeat deals. So far in 2021. The average size of our one deals is two times that of 'twenty two.

'twenty and over 50% is repeat business.

And six figure deals represent over 35 per cent of the deal opportunities we are pursuing maintaining all the while our premium C. P. M. In the 15 to $20 range.

For Super League direct to consumer business, while early we have some strong indicators as well through February we have grown to $3 4 million registered users and as I mentioned 1 million monthly unique users and in that same month. The average user spent approximately 11 five hours on our platform.

We like the trends on player monetization as well our average purchase size is holding up at 10% to $12, albeit we still have a small percentage of players who have become buyers with our freemium model, but we are improving it and optimizing it.

A proof point are very smart smart smart nimble and light marketing investment accounts for over 30% of our new user registrations in the month of February at a mere customer acquisition costs or CAC of less than 20 cents per new user.

And on the content front are slipped pivot to more quickly monetize our content library and our proprietary content technology became a meaningful tranche of revenue in 2020 with a good outlook ahead.

We delivered 290 episodes of original content across Snapchat, and Instagram five times the amount of content. We produced in all of 2019 and through February we continue them and them, having produced 54, new episodes I mentioned the revenue we generated off of those content syndication deal.

But the margin profile is strong as well the average episode CS margins in the 75 per cent range, how do we achieve that well it comes back to the power of virtual all studios our content is formatted for easy syndication using our highly flexible and affordable technology platform.

On our last earnings conference call I laid out some of the strategic goals for the coming months number one to continue to grow our audience and engagement number two to increase our monetize a bowl advertising inventory.

<unk> three to further optimize our revenue per user and customer acquisition costs on the direct to consumer front.

For two expand our cervical market through new offers and.

And number five to make progress on inorganic growth either through strategics or M&A activity.

I hope you agree that through our intended acquisition of mob crush we've now taken the business up several notches.

The combined company will continue to build on our compelling value proposition of gameplay and entertainment platform.

Gaming centric media an advertising solution.

And a player create or virtual economy.

I've, often said that one of our most unique distinction is that while we are small in size and early in our revenue story, we punch above our weight with partners advertisers and the gamers themselves well in our view, we are about to jump away class or two.

And now we would be delighted to take your questions operator.

Yeah.

Thank you to ask a question you will need to press Star and then the number one on your telephone keypad again that is star one on your telephone keypad.

Piece on by while we compile the Q&A roster.

And for your first question comes from the line of Brian Kinst Linger with Alliance Global Partners go ahead. Please.

Great. Thanks, so much I.

I assume I'm crushed generates all of its revenue through advertising.

So how much is programmatic versus direct sales and then maybe you can talk about the impact on the cash burn as you burned 16 million in each of the last two years cause mob question prove that burn by itself or does it increase that burns.

Yeah, I mean, certainly with all M&A activity, you're always looking for both the topline amplification as well as the potential synergies that can be borne out of the cost and the infrastructure. We do have very highly complementary businesses as I already laid out and while we do believe there will be.

Additional cost synergies by bringing those companies together I think the part that we think is the biggest grab we'll be able to take on the cost side, Brian is going to be the infrastructure cost because when you think about as both being entirely cloud based companies and having the kind of surge of engagement that we're having that is one of the biggest line items on our cost.

Sure. So we're super excited to see what kind of synergies we can gain from that obviously, we're in the midst of an audit. So we can't get into specifics about that you know it was important for me to be able to show you a little bit about the shape of the top line, but we really just need to work through the next week or two get the audit completed and then we'll be able to file that information and have.

That full transparency with all of you as far as the topline goes it's it's correct. It's fair to say that it's primarily AD revenue.

Much like ours, but I have to tell you. The minefield business is a valuable business in itself. It's highly complementary as I said to our main hub business and again I'd like the audit to make its way through but it does represent a decent enough amount of that 6 million unaudited revenue number that I mentioned.

To make it you know a material leg of revenue going forward. So advertising is still number one for both of us, but we see real really nice traction and growth on the direct to consumer side.

Just to be clear, there's these direct sales not programmatic.

So yes. So thank you for clarifying yes, so they do have a direct sales arm as do we which is the primary reason in way that we get that kind of high C. P. M. Because we offer that high deep engagement that said when you look at their video inventory and increasingly hours, we have been testing some.

Programmatic video models, and we are seeing kind of 10 to $12 C. P. EMS off that so when our direct sales is not selling out that video inventory, we're able to supplement it with programmatic. We think we can apply that same opportunity to some of the video inventory inside of of mob crushes Adam.

Tori as well what we want to do the key is on programmatic is while there is some minimal amounts of testing we're doing on display programmatic. We all know that that kind of ruins customer experience and and it's a low CPM model you know what we want is we want more and more video units and if we can fill in.

Some of that programmatically and smartly. So we don't have to add a direct sales force person every time, we expand out of AD inventory as long as it's good content, we're up for that so yes, I would say right now the companies are primarily driven off direct sales, but we're excited about where video programmatic could go.

And then last question you said about $6 million revenue Super League is about $2 million in 2020 roughly.

I didn't do the math, but I assume your kpis are higher, but maybe I'm wrong, but I didnt look too closely and if they are what are they doing differently in terms of.

Execution that S. L that are Super League can learn and maybe hasnt been doing.

Yeah no. Good question again, so I mean, our Kpis. That's why we took the time to really kind of separate them out because they're not completely apples to apples. So when we talk about the fact that we're able to now reach 85 million Americans in the U S. A lot of that is on the back of the streamers social reach right.

That's still reach it still counts, it's still what advertisers want and it's highly relevant but it is using our or our business partners in the middle of those great streamers to reach that audience. So it's leveraging their kind of social you know reach and scale them. When we talk about the debt.

Mine craft businesses that we have you know mindful is able to reach 22 million users per year through the Minecraft server system mine, how does its own owned and operated properties. So when I talk about the $3 4 million registered users that we have and many of them are on mine hut, we own that customer.

100 per cent and fully and so that owned and operated property you know I think mob crush would say, it's very exciting to them because if they can package that kind of reach their getting through their streamers reach and then couple it with the owned and operated they believe that they can get a much greater share of advertiser wallet we.

We feel the same we offer brands and advertisers really deep engagement and Hey, we've had good growth in through that good growth. We certainly are now giving them kind of enough critical mass to be interested as you know very similar to the Netflix deal I talked on the last call, but now imagine we can package with it all of that.

Final reach those eyeballs off of that streaming audience. So I think those are the differences between the company I think what what they've done well is by leveraging that reach of their streamer base, they're just able to go in and to grab a much bigger share of advertiser wallet. We've been on our journey of doing it we certainly have proof points over the last six months of.

It now you put that together it really is a one plus one equals 345 for both sides of the house. So that's what we're excited about I mean, Mike the CEO and I have known each other for years and we've always sat down and had talks about our businesses and look at you know you're you're trying to to to jumping and create.

Business models around are really you know emerging category, but he has tremendous vision and experience and the monetization of of online kind of streaming game of related content. Its a great complement to us and the biggest thing for US. Both is when we talk now and as we've seen our business models converge.

More and more there was a magic moment when we started these discussions where we realize not only where our business model is beautifully aligned but as I alluded to media is all about scale you put our reaches together or deep engagement together our player bases together and it really does ample.

Everything that we do.

Maybe one last one and then I'll get back in the queue, because I have others.

No secret the AD market seasonal in the first quarter is almost over and typically in the med AD market weaker than the fourth quarter.

Oh, you too small for seasonal seasonality impact you or debt not the case.

Yeah, it's a little different the gaming industry, you're absolutely right that for Q is is always typically the advertiser world strong the gaming industry benefits a bit because theres a lot of new game launches in one queue, but.

But I do think that right now we don't see extreme seasonality you know I think what you've seen more of in our you know our progress last year is that we are continually improving quarter on corner now that doesn't mean, it's always going to be perfectly that way in a stair step.

But you know what what Mike would say if he were on the call is that sometimes he sees a little bit of a dip into Q because he's been writing a bit of that the game publisher, new new game release wave in.

In one queue.

But I think that between the two of us will be able to smooth that out.

Great I'll get back in the queue with my other two questions.

Yeah.

Sure.

Yeah.

And for your next question comes from the line of Allen Klee with Maxim Group. Your line is open.

Yes, Hi could you tell us what you're thinking what your plans are for potentially rolling out subscriptions in 2021.

Yeah. So we do have already a subscription model inside mind hut.

When people are participating on our marketplace they can choose.

On a monthly purchase to upgrade their server capability. So it's it's it's small but we do have the mechanism for subscription.

As well as those one time digital good purchases and for.

For the most part inside mindful for their direct to consumer model. It is those onetime purchases of player entry fees or or cosmetic purchases.

But what I am excited about is if you think about subscription in a bigger sense you know right now mob crushes a a free tool kit.

When do you start to look at some of the broadcast technology that we have inside virtual our studios. We believe there could be a really interesting play there to put some of that technology into their suite of tools and offerings and perhaps create and upgrade more of a freemium model work, where those kind of highest <unk>.

Ranking streamers are looking for an advanced set of content production and broadcast tools. So we believe that it's a worthy exploration to see what is the role inside mob crush force subscription because we know the market likes recurring revenue and then continue to expand subscription inside our own.

Super League properties as well.

So and then there's always licensing technology to Alan So you know right. Now you know we have as I mentioned, you know big named media companies, who are trying out our virtual all studios product for their own production needs and it's not about gaming and esports. So we believe that there could be as well technology licensing.

Opportunities very similarly, there could be technology licensing opportunities on the mob crush side of things with their great stream or mid tier streamers toolkit and and if those things occur those could take the shape is as some kind of monthly subscription type model more of like a b to b or <unk>.

Label model.

Okay. How do you think about as people get back to needed the opportunity for you to start doing.

Brick and mortar type of events you had prior to the pandemic and what that could potentially represent.

Yeah, I mean look from I spent a lot of my career and retail my my Dad was a franchisee and owned a lot of restaurants, and I grew up working them and them and you know, we're rooting for that brick and mortar operator, and we still enjoy our great partnerships with top golf and cinemark theaters and others. So.

When they're ready to come back I believe theyre going to need us more than ever as a new way to bring foot traffic back in and and try to reach a younger audience and end use their spaces and try to optimize that capacity in as many ways as possible.

I have said, though on previous calls I think we'll do it a little differently now we've advanced the tech enough that we really don't need to be as hands on with it. So if that retail partners interested in pop up esports experiences or other types of entertainment I think that's another retail licensing subscription.

Type model, where we can offer them to pay some kind of toll gate or monthly fee to use our technology to drive more people into their venues I like that that was always the original vision of the retail model was at some point, we just really lot day brick and mortar owner do the heavy lifting as far as.

You know marketing the event they know their customer better than anyone getting people there, making sure. It's a great experience not Super League doing it from afar and so I think the with the vaccinations getting underway when we come back to retail will have a much cleaner model with a stronger margin profile.

Okay. My last question is somewhat philosophical book.

You're currently monetize.

A small fraction of.

The digital viewers that you have and I know that you get.

A high premium for that.

How do you think about.

The opportunity of expanding it with with programmatic in technology, where even if you don't get the high CPM getting something.

For something that Youre getting nothing for it could it could actually be quite meaningful potential potentially on on such a large user base that you've created so any thoughts on that yeah. I mean this is youre right. Its philosophical I mean, we we so protected no different than a lot of our digital platforms out.

They're in the early days it was all about let's let's you know a free model, let's get as many people onto the platform as possible really focused that you know number one priority is a great experience right. We didn't want him to quickly try to monetize it because we didn't want to turn them off from the experience and and and you know we know like gamers value that.

<unk> they they value their community.

And so with that you know, we've really tried to be careful about where we introduce AD inventory and make sure that it is improving the overall experience and I think the Netflix deal that I spoke about in the last call is a perfect example of that I mean kids were having a ball and the unique gameplay experience that we created they were watching cooled trailers.

You know they werent just seen Netflix logos everywhere.

Now that said your question about programmatic I think it really goes back to I, just don't want us to become a company that overly leans into display.

Display it's annoying for all of US right and so I think the key is is that video is is engaging and fun and I think the key for us will be to find more and more video inventory that we can put into our combined systems now. The good news is is that mob crush has that you know when a stream or is it.

Dreaming, you know they can opt in to participate and the advertising economy by saying, Yeah, you know I'm happy to promote Red Bull and that is on AD unit that Red Bull is paying for and it is a premium AD unit and so it's more about that type of programmatic debt we really.

On to focus on going forward and remember, it's got that add block technology to it as well and so we can guarantee to that brand or advertiser that they they're they're getting what they're paying for but I do want to just be careful about programmatic and turn it on smartly and I really want it to be focused on video units, where you can see $10.

C. P M and look I have no doubt between the the capability at mob crash and Mike's talents and what we've worked so hard to build organically I think we're going to be able to really look at how do we preserve premium CPM, but to your point sell out a heck of a lot more of those units.

Okay. Thank you very much.

And your next question will come from Bill Morrison with National Securities. Your line is open.

Hi, Martha.

Can you hear me I can hear you bill.

Hi, Ann.

Great.

Great quarter on lots of interesting stuff going on just on the merger itself. So could you remind me.

Waving entity as Bob crush and.

Roughly you're going to issue.

12 million shares.

Sure.

Yes.

Yes, that's correct that is correct.

Okay. Good.

Sales of our sales team side.

Can you give me the relative league sides of both sales teams and like the relative efficiency of both in and also then.

You know who's tools are more advanced for advertising and is there any.

Plans for having like a programmatic direct platform not using.

Sell side platform.

So those are my main questions. Thanks.

Yeah.

Definitely on the mob crush side on your last point there have been some some tech that's been built to kind of create a little bit more of a again I don't want to use the term programmatic, but something that is a little bit more rinse and repeat or ways that you.

Others can kind of take that inventory and sell it for us without us having to continue to build up the direct sales team and so there are some explorations going on that I.

I would say again for the part I'm most of the advertising.

<unk> to date for both firms are coming from that direct side, though as far as the the teams go we find them very synergistic certainly mob crush has a very seasoned team direct sales team. You know, we just started building up our direct sales team about a year ago.

Ours is really been focused a lot on youth and brands and advertisers trying to find to use gaming and so in some ways, we've really kind of starting to dominate in that vertical. So you think about the repeat business. We continue to do with Moose toys, even the Disney plus and the Netflix deals we're targeting young gamers that was.

Family friendly new releases, so it's kind of nice as we've kind of been building out that lane and.

Okay.

Yeah.

Oh Dear.

Hello, Ed.

Yeah.

Yeah.

Okay.

Okay.

And on either.

Okay. So it sounds like she may have dropped just send her a quick note to that effect should be dialing back end shortly.

Okay. Okay.

Did you have any other questions or biller.

So that's quick weighted maybe you could help me so what's the relative size of the teams.

And then you know you were talking about getting to like an efficiency level.

It was like a.

Short term goal.

How is that on both sides.

Hum.

Is it my understanding in terms of the size of the teams I believe.

On the mob per side I believe it's in the nine to.

10 range and then on the Super League side, that's in there.

The five to six range.

And then in <unk>.

Terms of the sales efficiency I know and has spoken about that in the past in terms of levels that we might want to get too.

I'm not.

I had a chance to dive into the sales efficiency sort of on the mop price side just yet.

We continue to work towards trying to you know to build up our sales force efficiency over time.

Okay. Good I'll jump back into the queue appreciate it.

Yeah.

Yeah.

I'm back sorry, guys.

Okay.

Hello.

Hi, Ann.

I was just curious.

On the on the sales efficiency on the Super League side, how close are you to the 50%.

Yeah.

That's kind of where we left the.

Yeah, and I'm I, you know I.

You know the best estimate I have for you on that right now Bill is that we're kind of in that kind of 25 to kind.

20 to 25 per cent range.

What we're finding is is that when brands are wanting to do business with us I guess, it's a good thing because a lot of these deals are coming in and the kind of six figure range, but it means they're doing full take downs right and then we'll have kind of quiet periods, where we don't have that full takedown happening as we've talked about kind of like 80%.

Is like you know a really super high efficiency high performing team and we're still kind of trying to March up that curve I think what's going to be exciting is when we sit down and.

And really work with the the mob crush sales team and again a lot of this under Mike's leadership to really look at you know their efficiency metrics because.

On want to quote those right now on this quote them, but look at what we can learn from each other how we can align across verticals.

How we can combine most importantly, our ad inventory.

So when they're going out and selling something to you know a red bull or and Anheuser Busch they should be packaging all of our age appropriate add content with it just like we should see packaging, they're younger AD inventory against some of our younger verticals. So I I I just look forward to the next call where I can start to share.

With you what we see as the combined entity and how we're performing against it but it's just a little too soon for me to report on it.

Okay, great. Congrats on the on the transaction. Thank you. Thank you were Super excited we looked at a lot of companies.

And over the last year and book.

Boy a lot of them I think we would have gotten on the call on you guys would've said this feels like a pivot.

And it is a wonderful moment when you see that both of us have been refining and refining our business model is as we've known each other our offices are just a few blocks away from each other in Santa Monica before we both gave them up and to see us finally converged to a point, where there's so much alignment it just felt to both to.

Both companies like it was a match made in Heaven.

Yes.

It seems like that to me Congrats Inc.

Thanks, Nick.

And if you could just double check my my recollection on on the size of my person sales team.

Mob crashes sales team is more in the 10 person so debt. So there are about two <unk>.

And I would say they've just you know that they've been at it longer.

Very seasoned group of people.

And it just again super complementary.

Okay.

Again, if you would like to ask a question Press Star then the number one on your telephone keypad.

Okay.

And for our last question, we have Brian singer.

With Alliance Global partners.

I have two more things, it's kind of a follow up to that talking about fill rates.

On ads.

In the past about three quarters ago, maybe even two you talked about all the inventory and the potential represents per AD revenue what are the day I guess impediments to fill rates and when do you see that inflection point I mean to Alan's point, you've got your top 50 in terms of you you were talking about show when is that inflection point.

And when you can start to get stronger.

Stronger fill rates yeah.

Yeah, I mean, that's what we achieved when we combine right. So announcing today is the first step out of the gate you know when we start to to go forward and tell you know advertisers. The added halfway can bring by putting it together, it's just almost self fulfilling that we're going to grab you know a bigger share.

Wallet, you know more repeat business, because we become a go to for them.

One of the go to places one of the rare kind a gaming centric advertising solutions for them.

So I do think that once we start seeing us putting out packages together, we're going to see all of those health metrics go the right right way better sell through rates you know preserving that good P. M. A C. P. M. Certainly continuing you know repeats in bigger and bigger average deals.

So that's that's what we're so excited we're chopping at the debt to start doing them and so I think it's I think it's inevitable. We've already you know bringing them under a confidentiality brought that sales team together and the enthusiasm you know these are hunters by nature you know.

The enthusiasm.

In the call when they were realizing sharing pipeline and talking about the opportunities. If we became a combined company, where we're materials. So I think that you'll start to see by the time, we're reporting next already proof points of us selling more faster and bigger deals, but the good news is we were already starting to improve.

On the sales effectiveness metrics on our own right.

Talked about 50% of our deals this year Super League alone are repeat deals.

You know, we're already trending with a higher overall deal size.

But as you and Bill said now lets you know put our money, where our mouth is and start showing that we leave no impression behind right that we can sell out more and more of that and if we can smartly fill in programmatic I'm all for it.

I, absolutely want to be able to scale. This model and I think there's a smart way to do programmatic without suppressing our overall CPM rate.

Lastly on to that to another point you just mentioned are in.

And three Q you had two questions.

Ran rather large campaigns I believe it was Netflix and Disney plus and not that I'm sure.

Where those customers at least that ran large campaigns and three to the same customers that where your two debt represented 36 per cent of revenue in the fourth quarter.

So certainly we continue to have more deals in the pipeline with both of those customers are the nice thing is for US is that the larger customers that we had and for Q like Snapchat.

And other kind of big name media companies I think show that we're starting to have the you know we don't just that it wasn't a one time fluke solution for Netflix right that day.

And their competition are coming back to us as a go to for their next kind of appropriate releases that are targeting that type of audience. So no. It was not just the.

The same kind of basket of customers. It was new customers, but it was all but that same kind of heft of the ones that we talked about in <unk> and like I said, you know the the little bit of Ted but I can share about <unk> 50 per cent repeat them and so that is inevitably from that pool of people that we've talked to.

For last year.

Okay. Thanks very much.

Hey.

Excuse me speakers I'm not showing any further questions at this.

This concludes our question and answer session I would now like to turn the call back over to MS. HANDE for closing remarks.

Okay, well other than me, losing connection for a debt I want to thank you for joining the call today again, it's a fantastic day for Super League and a really bright for sure in the future going forward just the company couldnt be more static and we're just so I'm excited to join forces with with them.

Crush folks and their great brand.

We look forward to speaking to you at our upcoming conferences.

And when we report our first quarter results in May stay safe.

Ladies and gentlemen. This concludes today's teleconference. Thank you for participating you may now disconnect your lines.

Yes.

Okay.

Okay.

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