Q2 2021 Score Media and Gaming Inc Earnings Call
On we're working we're working toward taking on additional control of our tech stack, which will allow us to further strengthen our products and our ecosystem as we enter new markets and expand our operations.
Strong performance on the score that continued in the second quarter with handle up 491% year over year and up 46 per cent compared to the first quarter.
As we evaluate our gaming performance we are extremely encouraged by the continued handle growth in New Jersey.
Second quarter handled in New Jersey rose, 195% over the prior year as we further demonstrated our ability to strategically build the user base by leveraging our differentiated product and what is a growing but highly competitive market.
Overall, our gaming business has been extremely active further positioning us for future growth.
First we launched the score Baton, Iowa, bringing our footprint of U S States in which we are now live two for <unk>.
Second we signed a market access agreement with Caesars, which allows us to launch mobile sports betting in Illinois.
This is an important agreement, which gives us access to the sixth most populous U S. State. We now have five U S market access partners, which shows the gaming industry's confidence in our company our platform and our unique business model third the score bet became an official betting operator of the PGA tour our.
Agreement with the PGA tour also positions the score to become their first official betting operator in Canada pending are enabling legislation regulation and licensing.
Throughout the quarter and going forward, our key focus remains on enhancing our sports betting business and positioning the score debt for future growth.
Key in this effort is investment in technical enhancements to the score of that platform.
We believe these efforts will serve to make our differentiated user experience, even more seamless and position the score bet to take additional share.
As we plan for the future and continue to build out our business. We achieved a significant milestone at the end of fiscal second quarter by executing our U S initial public offering on NASDAQ.
The score is successful IPO confirm long term investors widespread and growing interest in the sports betting and I gaming space.
The process, we saw a significant excitement on the part of the U S investment community and our company's long term prospects as well as a tremendous growth prospects of the entire industry.
Danny here today, we are in an excellent position to leverage our more than two decades of experience innovating and building best in class sports platforms to be a leader in developing industry and see the great opportunities, we see both in the U S and in Canada.
Ultimately, we will invest the IPO proceeds across a number of key priorities, including the expansion of our operations that continuous enhancement of our technology and products.
Pursuit of additional market access opportunities and through customer acquisition and retention activities.
The score is one of the few ways for investors to invest in a pure play mobile sports betting operator with access to emerging opportunities in both the U S and Canada and the only operator with a unique and fully integrated sports media and sports betting ecosystem.
Our U S IPO better positions the company to benefit from investors' interest in the growing North American online sports betting and I gaming industry, and we believe investors will mutually benefit over time.
Before I turn the call over to Benji I wanted to touch briefly on the Canadian online sports betting and gaming opportunity.
Overall, we are very excited by the momentum.
By the building momentum at both the federal and provincial level.
At the federal level, you'll see 2018 was introduced late last year to permit the legalization of single event sports Wagering in Canada in February the Bill overwhelmingly passed on its second reading in the house of Commons while in March. It was unanimously approved in committee. The Bill is now back in the house of Commons for its third reading with strong cross.
Arty support.
From the beginning the score has been an active participant engaged in the legislative process in late March I appeared before the House of Commons Committee to voice the company support for the Bill and the importance of a safe and regulated sports betting framework.
Parliament now works towards passing much needed betting reform in Canada, We will continue collaborating with the key stakeholders throughout this process.
Simultaneously, our home province of Ontario remains on track to implement its framework to modernize the gambling sector and allow private operators to enter in the market.
We are actively working through the public consult a process to shape Ontario's regulatory framework.
We said previously that the Canadian online sports betting and I gaming industry could represent a four to 5 billion U S business at maturity.
In addition, as the leading mobile sports media brand in Canada, we are well positioned well well positioned should single game sports betting and I gaming open up on our home turf.
As we move into the second half of our fiscal year.
Main actively engaged in the ongoing legislative process, and we're working tirelessly to position our company to benefit long term.
With that I'll now pass the call over to Benji, who will talk through some product and content initiatives.
Angie.
Thanks, John and good afternoon, everyone.
As John mentioned, we registered another record quarter across our bedding business.
We're very pleased with the progress, we're making as we broadened our footprint and increased our brand recognition our.
Our strong activation around tent pole sporting events continued in the quarter highlighted by the Super Bowl and March Madness.
These major sports moments showcase our ability to execute integrated multichannel thematic campaigns that lead to customer acquisition engagement and increased bidding activity.
In connection with the Super Bowl, we registered our highest ever number of first time betters and increase of approximately 275% year over year with total event handle rising more than 500 per cent over last year.
And building on that momentum we were more than ready for our first March madness as a mobile sports book operator, the first week of the tournament, we generated our highest ever week of cash best placed.
The score bet is resonating with fans and the same authentic ways. Our media App has for years. It delivers the exceptional product experience that fans crave backed by a leading technology platform. Our product development work continues to focus on enhancing our live betting experience and further simplifying the connection between our cost.
And our sports book.
Supported by our growing team of engineers and developers are product led focus and ability to uniquely harnessed the power of media and betting is already yielding results and we will continue to differentiate us away from the competition.
Turning to our media operations, we continued our momentum from last quarter with record Q2 media revenue and engagement.
Users are increasingly interacting with our media app to stay informed and entertained during a busy and reorganized sports calendar on.
Our mobile media platform offers advertisers the ability to engage with the consistent broad audience, featuring an attractive demographic that they have been eager to reach since sportswear zone last summer.
Notably this quarter, we secured deals with returning talk to your brands, including Mcdonald's Pepsico, and BMW and signed rocket mortgage NASCAR and N B a candidate as new clients.
With the continued rise of mobile consumption amidst the fractured media landscape our company isn't an increasingly advantageous position due to our large and loyal audience. The score as a trusted source of news scores and personalized content that users rely on throughout the year on.
Our record Q2 media engagement metrics highlight the popularity and scale of our platform with user sessions growing 8% year over year to 488 million for an average of 125 sessions per month across our base of $3 9 billion monthly active users.
Strong results were achieved despite the later starts to both the NBA and NHL regular seasons.
Looking again at the Super Bowl, our media App also shined, we generated significant engagement around the game with $2 2 million users visiting the scores NFL section and spending an average of 10 and a half minutes in the app.
Super Bowl user sessions were also up approximately 15% year over year.
These metrics demonstrate our commitment to serving our audience as sports fans first which ultimately is the key driver to building authentic betting behavior and growing our uniquely integrated media and bedding business.
Product development work in the quarter also included the release of a fully rebuilt media app for Android.
Regal is focused on increasing the average performance stability and scalability.
Our esports platforms again registered impressive video views in Q2 totaling nearly $200 million.
Even with the calendar, where many esports events have yet to return we are firmly positioned as an authoritative and leading voice in this space for <unk>.
Quarter was highlighted by our broadcast of the league of legends devotee of champions, yet our first ever live event production.
The event generated more than $4 6 million impressions across all platforms and brought significant attention to our brand and production capabilities.
Through our esports offering we offer brands a unique opportunity connect with a huge and highly engaged audience.
We have continued to build out our esports sales team to take advantage of the large global opportunity in this robust industry.
Rounding out content, our social media channels continue to deliver exceptional reach and serve as a growing monetization vehicle. We've cultivated a wide social following through on innovative content strategy. Our average monthly reach across Twitter, Facebook Instagram and Tic Toc was approximately $88 million in the second quarter again, making the score one of the top rank sports media.
The outlets advertisers are taking notice.
Q2, we executed social content Activations with both Bacardi and rocket mortgage this isn't an area. We will look to build on moving forward leveraging our strong content capabilities and integrated offerings.
Now I'll turn things over to Alvin who will talk in more detail about our financials.
Thanks for that Jay.
I won't get for the financial recap of the quarter momentarily, but before doing so I wanted to provide some high level details of the U S. IPO since it closed after the end of the second quarter.
The I P O inclusive of the full exercise of the underwriters over allotment generated gross proceeds of <unk>.
Hundred and $86 $3 million from U S.
We issued an aggregate of $6 9 million class a shares a U S $27 per share now on to the financial recap of the quarter total revenue for Q2 fiscal 2021 was $5 6 million with record Q2 media revenue, partially offset by negative net gaming revenue.
For you of $2 4 million media revenue in the quarter was $8 million compared to $6 8 million for the same period last year, representing a 17% year over year increase driven by strong growth in draft and programmatic revenue.
<unk> handle was 80, $81 6 million and gross gaming revenue was.
Oh, <unk> 4 million in the second quarter, when taking into account promotional cost and fair value adjustments on unsettled bet. This resulted in negative net gaming revenue of $2 4 million for the three months ended February 28 2021.
EBITDA loss in the quarter was $12 9 million versus an EBITDA loss of $8 6 million for the same period last year. The increase in EBITDA loss was primarily due to additional expenses incurred in connection with the expansion of our gaming operations compared to the prior year.
From a liquidity perspective pro forma for the U S IPO.
You already 28 cash balance was 262 million.
This now concludes the formal part of our presentation Christina we will now take questions from analysts.
At this time, if you'd like to ask a question. Please press Star then the number one on your telephone.
To withdraw your question press the pound key.
Hold one moment, while we compile the Q&A roster.
And your first question comes from the line of Suzanne should come on with eight capital.
Okay.
Good evening, Jeff.
Good evening.
For the first question I had was on the on the impressive handle growth this quarter.
You know obviously, it's good to see strong sequential growth and on the strong performance Nonetheless.
Can you can you touch on some of the some of the some of that from the dynamics Youre seeing in the state that you live in today.
We specifically seen strength and on which states are you seeing better than expected market share gains given your your your unique bidding and media model.
Thanks for that.
It's a good question and and the bottom line is we're really in the for states that we operate in.
Seeing it across all of them and.
Obviously, it is subject to regionalization, there are different communities in and.
And regions within each of the states and with which we are operating and we expect to see that as we expand across the U S and hopefully into Canada, but.
One of the things that we're pretty excited about was when we saw even in the mature market of New Jersey, where we've been operating the longest for US and that's you know and that's with no interruption of months and months of no sports activity because of because of the COVID-19 shutdown, but you know we we've seen.
I think we reported just under 200 per cent increase year over year in the context of of betting activity. So.
We're very excited about the growth that we're seeing within each state you know we're building this strategically and each of the states. Our approach really is no different in terms of leading with our product and and and you know leading with with this sort of whole ecosystem of the melding of the betting application and the media.
Space So.
We expect that will be sort of universal hypnos globally accepted as we rollout all across the U S and hopefully in Canada. So so so far we were very excited about the growth that we're seeing on a state by state basis.
Okay.
Thanks, no debt.
Helpful.
I wanted to touch on I gaming next.
Is this still on track for a free each two and any update on on the scope and range of offerings. Our debt that you will eventually launch on and how old and I will just be rolled out within the within your score that mobile app.
Well I'm going on I'm going to let Benji I talked about the gaming, but as you would expect when we implement product, it's usually going to be implemented in a seamless fashion with it with sort of the user first strike so.
But let me turn it over to Benji to explain in the states, where we have licenses and what our plan is with respect to the introduction of other game.
Thanks, John and thanks for your pet.
For the the short answer is yes, we are still on track for H two.
For introduction of our I gaming offering our plan is to offer on an integrated in an integrated manner with our with our mobile sports book.
And that will roll out first in New Jersey, where we have a market access agreement for I gaming with valleys.
And then we will look to grow our footprint from there one jurisdiction kind of particularly exciting for us So we'll be Ontario, where.
They're looking to rollout.
<unk> on an end sports betting on kind of to the fullest extent possible.
Okay, Okay, great. Thanks.
And last question for me is just is this more around your investment priorities now post the U S. IPO I mean, you touched on in your opening remarks.
Touched on on kind of taking more control of your technology stack can you talk a little bit about some of the specific priorities.
For for investment in technology in and is there any potential here for any any M&A to help you accelerate your your roadmap here.
I think go ahead, but I think that look I think as John said off the top it's one.
One of our biggest priorities is gonna be accelerating the growth of our team, particularly on the technology side.
You know we have been building out a big pieces of the technology stack in house.
Are there are potential opportunities to supplement that with that with strategic M&A, certainly, but it would take the kind of the right opportunity to fit in the context with what we're building.
And then it's a you know the other priorities are are expanding our footprint and continuing our growth across the U S and Canada.
Okay, great. Thanks, I'll pass it on.
Your next question comes from the line of Chad Beynon with Macquarie.
Hi, Good afternoon, John Benji Alvin Thanks for taking my question and congrats on the U S listing.
Thank you.
Wanted to task about the the Illinois market access deal that you guys announced in the quarter, how should we think about your urgency to strike more deals in the near term, particularly for existing states and now that you're a U S listed public company does this give you I guess more am.
Mo to strike a deal similar to what you did with Penn to maybe compensate your partner with with the with your stock is that something that could could help you strike more deals versus some of the others, who are trying to do deals I just wanted to get a sense of how we should think about this going forward. Thanks.
So I'll, let you know let me start out of some general comments and I'll turn it over to Benji can talk specifically about the Illinois situation or Chad you're absolutely right. I mean, you know part of the rationale for doing for lifting in the first place was to arm ourselves.
So that we would be better equipped to to participate and and activate our our our levels of engagement as U S markets are more and more rapidly expanding I think.
Even before we did the listing we've always been more aggressive than most in terms of our thinking about how fast things are going to open up both north and south of the border on a state by state basis, and obviously in Canada as well.
And it it obviously gets competitive but it puts us at the whole listing and having a presence on that back in and having the great partners that we have now allows us to build this momentum. It allows US you know that they do a great deal with Caesars in and in Illinois and <unk>.
More to come and you know there's you know there was announcements today about states that are opening up I think it was a maryland for one N and Arizona for another I mean, this is happening a lot quicker than a lot of people felt it was going to happen. So.
You know, we've been working very hard Benji and our teams of our access teams and and lawyers and consultants all across the U S have been engaged in this process for it.
For months and months and and now it's coming to fruition and it definitely puts us in a position.
To be able to operate in that environment and you know just at the outset I'll say you know we're in four states now and you know it.
We're hoping based on how these things are are coming to fruition and our position now to be able to do these things that we'd be hoping even outside of what's going to happen in Canada to be in the next 12 months, perhaps in double a state if not more than that than we are currently operating in and we think that's very very reasonable very practical.
Layer on Canada on top of that were you know with our home turf I mean, it's a very exciting rollout over the next not too distant future and did you want to talk a little bit about the Illinois situation.
Yeah, I mean, I think just building on what John said, Chad I you know our goal is to be a national operator, and so we are actively pursuing.
Market access arrangements.
You know in in jurisdictions across.
Across the U S.
And as for Illinois, specifically.
We're very happy with the deal we were able to reach with Caesars.
And very excited to be able to enter that market. It's the sixth biggest market in the U S.
Lots of.
Lots of hardcore sports fans, there we have a pretty good user base. There too. So we are we're getting cracking on that and are going through the regulatory process straightaway.
Great. Thanks.
And then secondly, I just wanted to ask about you know theres been a lot of focus on how the new York's Bill was finalized how many platforms. How many scans and you know it still appears to be somewhat unclear and different than what we've seen in terms of the the final product compared to other U S States I wanted to tie this back to.
To Canada do you have a sense of what the framework could look like could there still be some movement in terms of what the final product could look like is there any any consensus in terms of the number of skins. The number of platforms on the fees. Just just kind of ballpark you know what what are what to expect over the over the next.
Several months when this is finalized thanks, yeah, yeah, I can talk a bit about the you know sort of where things stand in Ontario in particular in the.
The provincial government and the regulator here the a G. C O has been actively engaged with.
With the industry really over the last 18 months and have done a phenomenal job at.
Doing this in an organized way and in a very methodical way and I think.
Are are really their goal is to create a robust competitive dynamic online gaming industry here.
We are consumer choice is.
Kind of one of their overarching principles and based.
Based on the guidance that they put out in there.
And there are consultative documents.
There, it's going to be a direct relationship between operators and the a G C O and Ah and they are not proposing that there would be any cap on the number of Oh on the number of operators, who would be able to enter the market as long as they satisfy the criteria that the a G. C. O is are you setting for us.
And so where.
<unk> excited by the you know, they're taking it very progressive view and approach.
Yeah with respect to how to create a.
Dynamic market for online gaming.
Great I appreciate the comments best of luck. Thanks.
Thanks Roger.
Your next question comes from the line of Ben Chaiken with Credit Suisse.
Hey, How's it going.
I think there is a proposed ban on gambling inducements in Canada is how it is being referred to I guess do you view this as a tailwind to your business as <unk>.
Presumably it removes the promotional threat from peer to some degree I'm just curious on your thoughts navigating this and then.
On your thoughts about the initial strategy when the market.
Open ended up at first thanks.
I think Ben you know with respect to kind of the specifics the specific elements of what Ontario is proposing I think it's still early days in their consultative process. So.
In terms of what this will do.
What things will actually look like at the end of the day that that that's still to be determined I think from you know from our perspective it's.
It's clear that our responsible gaming is a core tenant of ours and it's something that is being focused.
You know very intently on by the regulators in Ontario, as a as a core element of the framework that they're designing so.
How that manifests itself in terms of the final regs remains to be seen but.
Obviously, that's a core commitment of ours and there is in terms of.
Timelines and how we're planning to approach the market here.
This is our home turf, Ontario is Ah is home base for the score we have a tremendous user base here and more importantly than that.
You know, we have a brand and a legacy relationship here with customers that goes back 20 years too.
Our TV business the other kids, who are watching our Sydney, Tim on our television network when they work and I was going to bed. When they were 12 years old are now 25 to 30 years old engaging with our app.
And betting on sports and we just can't wait to tell to unleash the power of that are you know when the market opens up here.
Yeah I'll try I appreciate it that's all for me thanks.
Your next question comes from the line of Matthew Lee with Canaccord Genuity.
Hi, guys. Thanks for taking my question.
I wanted to talk about the win rate in the corner I mean, you know handle was obviously excellent but I think did you or was a bit below where I thought it would be on can you maybe help me understand the drivers there and maybe do you sacrifice some of the profitability of betters as far as the growth in and handle.
So Matt you know.
Obviously, we are building this business strategically and.
You know what were excited about it obviously is the fact that you know.
Even though it's early days the wagering is going up dramatically.
But the bottom line is on what we said before is until you even on a state by state basis until you get to a critical mass you are always going to be susceptible to.
Swings in terms of the revenue generation coming out of the wagering. So.
We are completely confident that over time in each of the markets that we enter into that this is going to normalize.
Over time, and we are going to see the fruits of our labor in terms of generating all this all this wagering you know on a state by state basis. Both you know in all the states that were entered into the future ones that we're going to be entering into and up here in Canada as well. So you know we're very encouraged by what we're seeing in the short term.
And we're seeing progress towards what Youre talking about even in these early days as we move forward.
Right Okay.
And then maybe just a bigger picture question I mean, how do you guys feel about your platform against some of the larger players.
You know we can't use it in Canada, yet, but do you think that you offer better as kind of the same offering the same you know best available as maybe some of the other players and if not do you expect to be able to do so on the near term.
Well again, I think it gets back to sort of our whole differentiated you know Matt approach right I mean.
Obviously, you have to have the product you have to have the market's available we're expanding and you try to I day, you try to.
Relate to products in the markets to the to the to the to the states you're in other provinces, you're in or or even on an individualized basis, which really gets very exciting are the more and more you learn about the business anymore information you have the debate to be able to make it so easy for for your end users right to be able to to.
Debt to serve it up to them.
But the core for US is to do it in a fashion that it really speaks to how the whole integration of the betting into the into the media App and and yes, you want to happen you have to have and we will do happen. We'll have all the different markets that are available on the other platforms, but you know as we've always said, it's not good enough and on.
Our estimation just to be a betting platform. What you have to do is take this holistic approach to it and.
Satisfy all the users demands when he's in the media app when he's in our bed section when he's in a chat room and he gets the inkling that he wants to make a bet to serve it up to them very very efficiently and very seamlessly and that's something that we can do that you know that the other guys can't do and it even becomes more and more important when you.
You look at what percentage of the wagering is is growing with respect to in game.
And that's where you know on offerings, such as ours really shine so.
For us it is all about the product and that's why we're investing so heavily in it that's why we're hiring like crazy and quite frankly, we call ourselves a media company, but we're really a technology company and that's what of critical importance to us.
Yeah, that's great.
And then just on the media side of things I mean.
You know your sessions number was really good but.
You know monthly activity, just kind of came down a bit year over year, which surprised me because I think we have more sports going on this quarter than we did maybe a.
Q2 'twenty can.
Can you maybe elaborate on that debt.
Well I think first of all it's hovering around that 4 million average monthly users.
Yeah, you're right what excites us, though is a couple of things what the engagement of those users and in that number and don't forget because of churn theres a whole bunch of new users that come on board as well. So I think you know, Matt it's really hard to do comparator is year over year.
Because of the different niche index schedules because.
Because when sports is happening and you know even if you look at the broadcast our numbers and in terms of what what their experiences and you know in the digital landscape of continuously is growing and when you look at how we're touching.
Users on our other platforms as well it is also growing but.
We are.
We're very excited about how fast people snap back to the App after months and months of nothing happening right. So.
We expect that that's going to continue that will grow over time and one of them I think we've often said before is.
As this as we treat this whole thing is an ecosystem and as we get more and more people becoming score betters.
A high majority of all of them.
On a great proportion of whom are also media users you know as the debt.
The bedding side of our business grows and the media side of our business growth sort of this rising tide.
Floats all book, So we think that over time that that's going to be helpful. On the media side too and then the only other thing I'd say is when you look at our revenue numbers being generated on the media side.
Well you know, we're showing record numbers in Q2.
Again, that's a credit towards.
Just advertisers both on the direct side entity and the programmatic side, knowing where the engagement is and where people are so.
Our R R.
Our media universe on the App is serving us very well.
Okay. That's super helpful. Thanks, guys.
Thank you.
And your last question comes from the line of David <unk> with core Mark.
Oh, Yeah, hi, So a couple of questions maybe just first of all on the fall on.
To a previous question asks can you can you comment on what states, you're specifically doing.
Better on in terms of market share on handle so far on you know given the evolution on each day and I know, it's different but maybe you can comment on where you might be doing on a ban on them, where you are elsewhere.
I just wanted to draw on to try to yeah, I mean, I I think David really it's you know.
We're seeing good strength across the board I mean, the most recent state the.
The state, where we're newest as Iowa, but I I think in the three where we've been operating for a and in the case of Colorado, and Indiana, six plus months and and in New Jersey, you know over a year, albeit you know kind of a kind of COVID-19 stilted.
We're seeing good pick up across the board in all of those states I mean, there isn't one where you'd say oh, its a kind of necessarily outsized.
Okay.
Disclose that the gaming handler for New Jersey was up 195% in Q2 I was wondering can you disclose the actual on gaming handle number.
Yes.
No we're not breaking out the state by state numbers at this point David.
Okay.
And then just on the just on Canada. So.
I believe that so far Ontario's the only province.
It looks like Theyre going to them.
Now launch on gaming and sports betting in the near term, but maybe I'm wrong have you seen other provinces gearing up like Ontario, and planning on launching in the near term.
I think.
Think Ontario, certainly is the furthest.
The first list out front, they've been working on it for the better part of the last 18 months.
You know, we do know that all the provinces have eyes on this because they all are very interested and supportive of the amendment federally AR on the single event sports Wagering front, so whether it's in Alberta, British Columbia, Quebec, Saskatchewan.
There everybody is significantly interested in kind of having this you know this outdated law I'm on.
Amended so you.
You know what form each province is going to take how quickly they moved to implement I think those are all.
Still open questions at this point, but we do know that.
Several if not all of the provinces are kind of very interested in the outcome of this and they are all.
They all have kind of Kenai is on Ontario in terms of how they are progressing with their their framework on their model.
Okay. Okay.
Thanks.
And you have no further questions at this time.
Thank you everyone for joining our fiscal 2021 second quarter call. We look forward to speaking with you once again on when we report Q3 in mid July.
Thanks very much.
Thanks.
Thank you and this concludes today's conference call. Thank you for joining and you may now disconnect.