Q3 2021 Score Media and Gaming Inc Earnings Call
Good afternoon, and welcome to the score of fiscal year 'twenty 'twenty, 1 Q3 financial results conference call and webcast at this time.
All lines are in a listen only mode.
After the Speakers' presentation, we will open up the call for questions instructions for you to queue up will be provided at that time. Please note that the audience on today's webcast will have the ability to increase the size of the presentation screen the navigating to the maximize controls sound in the top right of the slides window.
This call is being recorded today Tuesday July.
'twenty 'twenty 1 at Fives Gerke Eastern day light time, I would now like to turn the call over to your host all of it.
Lobo Chief Financial Officer, Mr. Love of you may begin.
Thank you <unk>, Hello, and good afternoon, and thanks for joining us on today's call and webcast for the scores fiscal 2020..1 Q3 result. This is the album of out of the scores Chief Financial Officer, and joining me on the call today are the score as chairman and CEO, Jon Levy President and C. L.
Benji lately.
At this time, we will want to caution our listeners that this presentation contains forward looking statements.
There are risks that actual results could differ materially from what is discussed and that certain material factors or assumptions are applied in making these forward looking statements any forward looking statements contained in this presentation represent the views of management and are presented for the purpose of assisting the score of shareholders.
Of the analysts and understanding the score its financial position objectives, and priorities and anticipated financial performance forward looking statements may not be appropriate for other purposes. Additional information on items of note. The scores of reported results and factors and assumptions related to forward looking information.
Are all available in our financials and MD&A for Q3 fiscal 'twenty 'twenty, 1 both of which were filed on SEDAR. A few moments ago and are also available on our Investor Relations page at IR Dot score of media and gaming Dotcom, our CEO Jon Levy.
I'll begin the presentation.
Thanks, Alvin and the good afternoon to everyone.
And thank you for joining us today as we review what was a record setting third quarter, continuing our strong fiscal year.
The third quarter of fiscal 'twenty 'twenty, 1 was an incredibly productive period as we saw highlights in our media business.
Further traction for our sports betting operation and of course, the recent monumental step forward here in Canada with the legalization of single event sports betting, which clears the path for the opening of the Ontario market later this year.
We began our third quarter by completing our U S. IPO a significant company milestone the raised gross proceeds of $186.3 million U S.
We're deploying the capital towards the ongoing build out of our integrated sports media embedding platform.
Further investments in technology.
Spanning our market access footprint and to rapidly scale our team.
We continue to make progress with the licensing across several additional states where.
Where we hope to launch the score of bet in the coming months in support of our ongoing expansion across North America, we continue to make big strides in our technology development net.
The next month will Mark a major milestone with the planned deployment of our proprietary internally developed player account management system and promotion engine.
Which have been approved by G L lie and the applicable state gaming glass.
This transition moves us closer to the full vertical integration of our sports book Operation, which is foundational to our strategy to establish the score as the leading integrated provider of digital sports media and sports betting throughout North America.
I will turn my attention to our gaming business in the moment, but would.
Like to spend a bit of time touching on our media business as media is still at the heart of what we do we.
We set of new Q3 record from media revenue of $8.9 million, which was sharply up with 270 per cent gain over the prior year when sports calendar was disrupted to the coke due to COVID-19 pandemic.
Compared to the same period in 29 media revenue was up 5%.
Thereby exceeding the pre COVID-19 number.
Our media business has now generated revenue of 27.5 million to date in fiscal 2021.
This is an all time high for the first 9 months of any fiscal year in our history, demonstrating the continued health of our North American audience, the substantial reach of our platform.
And the ongoing willing willingness of leading brands to activate our audience via a range of highly successful campaigns.
We also achieved a quarterly record for our total user sessions of the 470 million up 19% from the third quarter of 2019.
This average roughly 126 sessions per user.
The highest quarterly engagement in our Companys history across the base of $3.7 million active users.
Marking a strong return to the pre COVID-19 pre COVID-19 user level.
Our sports content across social channels achieved an average monthly reach of 172 million users another quarterly record and across our E sports platforms. We react we registered an impressive 241 million cross platform video views are.
Our team is extremely proud of these results and I'm confident that our expansive audience and powerful engagement positions us well for the long term growth, particularly as we rollout the score of bet in New U S States and prepare for the launch of online sports betting and I gaming in Ontario and across Canada.
Turning to our gaming business, we generated a handle of 73 million on the score bet during the third quarter.
This includes the much anticipated return of the empty double 8 tournament after at the cancellation last year due to the pandemic. Our team took full advantage of bleeding into the tournament to drive user acquisition and bedding interest generating March hurdle of $30.8 million of new single month record.
Now as I noted earlier, we are progressing towards transitioning our entire tech stack onto our internally developed and fully control betting platform.
From the outset, it has been of core strategic priority of ours to own and fully control our technology.
We've made great strides to that end over the past few years, while working in tight alignment with our partners at that works, whose technology and platform services have enabled us to successfully rollout to score of bad across multiple states next months. However, we plan to fully deploy our proprietary Pam and promo engine, which represent.
The major step in our tech migration and will further streamline our gaming operations.
We expect the full vertical integration of our sports book operation to be complete in the next 12 months, when we bring our risk and trading services in house.
Heading up this initiative will be Patrick J, who I'm very pleased to announce will be joining us. This fall Patrick is a highly regarded online bedding industry leader, who has nearly 30 years of experience at some of the world's largest online and retail sports book and you provide further details on this exciting news later in the presentation.
Finally, before I turn this over to Benji, who will review our product sales and development initiatives I wanted to give you a brief update on the forthcoming opportunity around sports betting and I gaming in Canada and in our home province of Ontario.
Canada.
Canada realized a significant milestone on June 22nd with the passage of Bill C 2014, and its subsequent Royal assent on June 29th Legalizing single event sports Wagering in Canada.
This legislation now paves the way for the provinces to implement their own regulated sports betting frameworks.
At the stance of the day, we believe Ontario is on track to implement its new sports betting and I gaming framework by the end of 2021, which is expected to allow private operators like the score to enter the market.
But we have long hoped for the legalization of sports betting.
It's finally happening and we couldnt be more excited by the prospect of serving fans in our home country, where our brand affinity is on matched we have already begun reinforcing our brand by Activations of Ontario, which we will accelerate in the lead up to the market opening.
With a large and passionate Canadian user base strong brand identity identity and experienced in operating of powerful mobile betting platform in the U S. We are extremely well positioned to succeed in Ontario and across the country.
<unk> is expected to offer a huge market opportunity with many industry observers, marking the province as the largest regulated sports betting market in North America by population once the once it opens this is a very exciting time and subject to regulatory approval, we expect to be ready to go when Ontario all of it.
I'll now turn it over the Benji <unk> for his comments.
Thanks, John and good afternoon, everyone.
As John mentioned are handled this quarter was highlighted by record wagering in March and the execution of another highly successful marketing push around of marquee sports event in March madness.
Our integrated marketing campaign led the score back to generate its highest ever betting weak during the first week of the tournament.
During the quarter, our product and engineering team was focused on a number of key enhancements to our proprietary wallet, including the addition of payment options that allow customers to more efficiently access and withdraw their funds.
Over the last quarter, we've improved and expanded our offerings for automated withdrawals and we are now in the process of integrating additional payment solutions in the U S and in preparation for our expected launch in Canada.
Earlier, John discussed our upcoming technology deployment, and the addition of Patrick J to oversee our sports book operations, including in house risk and trading.
As we have emphasized previously our strategic plan from the outset has been to own our full technology stack and we have been working towards that objective since even before the score of bet launched.
This strategy is underpinned by our incredibly capable in rapidly growing product and engineering team, who cut their teeth building, our leading mobile sports media platform.
The full deployment next month of our proprietary Pam system and promo engine is hugely significant as it expands our ability to more efficiently and creatively serve users across our integrated product set.
These custom built cutting edge systems will unlock additional user personalization.
Ross platform media embedding integration capabilities and platform automation, which will serve to further differentiate the score of about the best in class offering and drive both near and long term growth.
As John noted, we expect to complete the vertical integration of our sports book operations over the next year with the migration of risk and trading in House and then Patrick J. We believe we have the ideal candidate to lead our efforts.
Patrick is a highly regarded industry veteran with an impressive track record leading risk and trading services at high profile properties across the global gaming sector, including 5 years at the Hong Kong Jockey club and 6 years at Ladbrokes, Patrick will oversee our sports book operations, including the rollout of our in house risk and trading and worked cross functionally on all aspects of.
The score, but we are looking very forward to welcoming him to the team.
Our media business continues to produce record revenue and engagement numbers, new and returning brand partners are clearly eager to connect with our mobile media audience that is more engaged than ever.
Notably this quarter, we secured deals with the returning top tier brands, such as Nissan, Microsoft and Tag Hoyer.
We also side the number of new partners, including Burger King Callaway and EQ back.
In addition, we were excited to expand our mobile AD tech offering with the custom built animated launch page that debuted in may with Pepsico as our first to market Advertiser. This innovative new product offering provides another high visibility touch point for our brand partners.
We've highlighted the monthly gaming handled driven by March madness, but it also bears mentioning that this high profile of event drove significant user engagement for our media App activity was incredibly strong throughout the Ncw tournament with an average of 535000 users viewing March madness content daily generating over 235 million page views across.
The 3 weeks of the tournament.
Moving on to E sports and the impressive results. We continued to achieve we registered 241 million video views across all of these sports platforms in the quarter, our ability to generate video views at this level each quarter has solidified the score esports as a leading global media destination enticing brands such as Geico.
Who recently resigned for a 6 month campaign commitment.
Our strong media performance metrics extended the social media in the third quarter with the score of delivering our highest ever quarterly cross platform reach we grew significantly on kick talk where we added another 700000, new followers and on Instagram, where we added more than 143000 new followers. This.
This quarter, we also secured deals with Audi in Captain Morgan, who signed on for content series across social and digital were.
Now consistently monetizing our social media presence and are actively building out our digital team to broaden our content capabilities.
We've worked hard to cultivate an influential an authentic voice across social media and believe our expertise in this area will be of key growth driver moving forward I'll now turn things over to Alvin who will talk in more detail about our financials.
Thanks Benji.
Total revenue for our fiscal third quarter was $6.4 million with record third quarter media revenue, partially offset by negative net gaming revenue of 2.5 million media revenue was $8.9 million compared to the $2.4 million for the same period of last year, representing a 270 per se.
Year over year increase and of 5% increase compared to the same period in 2019.
<unk> handle was 73 million and gross gaming revenue was the negative $40000 in the third quarter.
When taking into account promotional cost and fair value adjustments on unsettled bets. This resulted in negative net gaming revenue of 2 point of $5 million EBITDA loss in Q3 fiscal 2020, 1 was $21.1 million versus an EBITDA loss of $8.7 million for the same period last year the why.
The EBITDA loss was driven primarily by additional expenses incurred in connection with the ongoing expansion of our gaming operations and costs and professional service fees related to the recently completed U S initial public offering which closed in the third quarter in terms of our liquidity position we closed the third.
Quarter with $229.1 million of cash on hand.
This concludes the formal part of our presentation, Buenos we will now take questions from analysts.
Sure.
Your first question is from Matthew Lee of Canaccord Genuity. Your line is now open.
Even in Jan.
Maybe I'll just kind of the housekeeping question here in terms of the G&A. You know can you tell me how much of that was onetime in nature.
Okay.
Sure Tom.
Sorry, John.
Scott.
So I'll turn it over all of them and get your phone on the.
Yeah, So I would say about 5 of it was onetime in nature and the rest.
There is a balance of.
You know some ongoing U S related public company costs as well as some of what you're seeing in G&A also reflects.
The overall growth of the business, including.
You know it is we continue to scale a increase in head count, which you know the the vast majority of that is related to product and engineering just given what we're continuing to do from.
A.
From a tech perspective in terms of taking on more and more of.
You know the.
The sports betting.
Platform in the house and so you know I would say you know when you back out.
When you back out the non recurring like that gives you a good sense of both the elevation in public company costs as well as just.
And the overall sort of growth in the business.
So then we should be expecting kind of an 8 to 9 million dollar per corner of G&A cadence going forward.
Yeah.
Again that you know look as we continue to invest and scale like there will.
Well, there will be other things being mindful of too but.
Yeah.
Oh, Yeah as you know, Matt we don't necessarily guide, but I think it's fair to kind of look at that as the baseline.
Great and then maybe just bigger picture.
Can you discuss at what level of handle you believe you need the reach more of that kind of make that GTR consistently positive.
Thank you why don't you talk about what our thoughts are in terms of you know we talk about scale and we talk about you know early days and in each of the states and I know, it's a little.
You know, it's difficult to anticipate without sort of specifically guiding particularly since you know where.
You know.
We're saying that we're in 4 states now.
We hope to have that doubled within the next 12 months, maybe even a little more than that in the U S.
And that's without talking specifically about Ontario, but maybe perhaps give some color around that yeah. The oldest and Matt I think you know we're not going to put a specific handled number on you know where we think that that ultimately converts I think our our view on this is that at scale.
You know, we do start to see that's the way, we do start to see that normalize.
And we're on our way there and we're starting to see that in some of the results.
On the day to day of week to week basis, but until we get to that scale. You know we are still susceptible to some of the swings in.
But at the end of the day, it's all consistent with our overall approach, which has been building slow and steady this is not about us buying market share in buying scale.
And in the market from a marketing perspective.
And ultimately as we're looking forward to the future and the opportunities that are ahead of us in jurisdictions like Ontario, We think there's.
There's the opportunity to get there in the not too distant future and do it on our own tech stack them.
With our own services.
Alright, that's perfect and then just maybe could you provide some color on the next couple of quarters in terms of you know the expected handling the market overall, given the sports calendar you know are you starting.
The C and I know you don't guide, but like similar handle overall for the industry in Q4 as you saw in Q3 would you get listed I mean look look for US. It follows the sports calendar right I mean and Q.
All of our our fiscal Q3, which we just came out of when you line up the sports calendar against our fiscal Q2 is the softer quarter fiscal Q4 is after all of the.
After NBA and NHL wrap up.
Yes, we have Olympics over the summer, but it's largely MLB and then you're getting into our fiscal Q1 in the fall you know where you know kind of our fiscal Q1 is seasonally our strongest quarter. So I think it's natural to expect handled the ebb and flow along the lines of the sports calendar.
Perfect. Thanks, I'll pass the line.
Yeah.
She asked the question he will lead the press star 1 on your telephone to withdraw your question press. The <unk> once again to ask the question. Please press star 1 on your telephone.
Your next question is from Chad Beynon Macquarie. Your line is now open.
Yes.
Hi, Thanks for taking my question wanted.
Wanted to ask about the some of the initiatives about bringing more of the tech in the house I know you guys have talked about this is the primary goal, but you are actually doing it and executing it and talked about the timeline does this change how you're thinking about long term margins for the business over time as you as the revenues and the handle start to grow.
And if you can't talk about that are the reasons why it can't be as high if not higher than what some of your peers are talking about thanks.
So I'll start out by just saying that.
First of all thanks, Chad for the question and and you know we've said right from the get go that you.
You know when we first launched.
You know building that tech stack and having control of management over that Tech stack was critical to the type of offering that that the.
We were going to deploy over time.
And you know.
It's really put us in a position where we're starting to see the the the fruits of our labor we announced today that Pam has been basically fully authorized the licensed and ready to go and we've already launched the wallet and the promotional vehicles of these are all attribute of of allowing.
Allowing us to be able to.
Provide score bet as part of this integrated omnipresent uniform offering with the score at the core right and.
You know I'll, let maybe Alvin of beds, you talk to how that improves our margins in the context of our go forward strategy.
But it also it touches every aspect of what we're doing from mark from from being a true having attractive offering for market access to you know increasing our penetration. So as we were doing within the 4 states and as we're Gonna show once we launch in Ontario.
Right to the margin that we're going to be able to which is I think the at the core of what you're asking.
And in the context of of from.
From a financial.
And in terms of what the results are but I don't know Alan do you want to talk a little bit more maybe about about you know what the financial impact of our own tech stack is in the context of our rollout.
Sure and you know I think Chad the short answer is we're not doing it for the margins, but this is a really nice side benefit of it and to your point. We do think that this is 1 of the components.
Along with just the overall philosophy of having a integrated media and betting approach, but the ownership of the tech stacks really important so what that whole experience looks like from the consumer's perspective of in terms of not just acquisition, but retention and engagement.
And sort of the frequency at which that yeah user participates in the ecosystem, but we do think it helps us.
<unk> margins at the high end of the industry just as a result of not having to pay Rev shares to tap partner so.
The short answer is yes, but that's not what why we're doing it. It's just a really nice added at the effect of owning our own Tac.
Okay that makes sense. Thanks, John Thanks, Alvin and then regarding the I gaming initiatives can you help lay out the timeline in terms of launching our gaming products and then you know once you achieve the doubling of the markets on OSB.
If you're in markets, where our gaming is currently legal.
The poor expected to legalize such as Ontario should we expect that that you'll be offering of product to your customers in those markets. Thanks.
I can I can take that 1 Chad yeah. So the the short answer is our plan is to have I gaming up and running in the fall.
And that would be in both new Jersey, where we have existing I gaming market access as well as Ontario, where the plan is to have other gaming and online sports betting.
You know available.
At the market open.
December based on the current timelines.
That like gaming, Ontario has put out subject of course to our to all regulatory approvals.
Great. Thank you very much I was supposed to look.
Thanks, Chad.
Your next question is from the fed hiking of credit Suisse. Your line is now open.
Hey, How's it going.
I'll give you the material presence of material of existing presence in Ontario through your media arm already you know in the first few months of the I gaming and OSB rollout how do you think about customer acquisition like is there.
Is there an education process, that's required for those existing customers as it promo expense just can.
Can you help us think about the strategy of at least high level and appreciating that some of the still maybe influx currently.
Yeah.
Ah Okay. So of all I'll bet.
Bert you want to lead off or go ahead.
Sure listen Ben I think Ontario's of.
It is John.
We've been talking about is the very very exciting market for us and it's not just because we have a tremendous user base, who loves our platform here, we have of brand history and the brand legacy.
You know with with the score having been in market as the first is the TV business for you know from the better part of 20 years and so you know what that brand presence allows us to do.
You know is to.
At the target the market and attack the market and the bit of a different way than we have been in the U S where.
It's been our marketing approach has been predominantly conversion based and and and and also.
The <unk> selected the digital marketing that we've done in the states up here.
Cause of that brand presence and because of the audience knows that we're able to do a lot more from our creative execution perspective. So you. So you can expect us to.
To be more active from a marketing perspective across the board because ultimately that brand.
Allows us to generate an ROI on that spend much more effectively because we're not educating people about who the score is of what the score of bed is.
People know the score here of more so than any other sports media brand in the market.
Gotcha I appreciate it that's all from me. Thank you.
Your next question is from Eddie a copy of the 8 capital. Your line is now open.
Good evening, everybody. Thanks for taking my question can.
Can you maybe just talk about like additional state Rollouts I know, Illinois with the Caesars partnership was something that was slated for <unk> 2 is that kind of still in line.
I wouldn't expect it to go live around in that timeframe.
Yeah. So the thanks for the deer, and I'm glad to have you on the call.
Our currently pursuing licensing.
In Illinois and in partnership with Caesars in front of the IGD.
I wouldn't want to put down an exact timeline on when that's going to be we're working through that process now though.
Okay, Great and just maybe kind of looking at the broader market on the regulatory side I know there's been some movement.
Several of them more states kind of.
The legalizing over the last couple of months can you just talk about some of the market of access agreements, where some of the initiatives when it comes around the additional market access the newest figures are working.
Let's say I can't get into details on confidential discussions that are ongoing on that front I mean, it is a it's been reported publicly that we've applied for a license in Virginia and also Tennessee, Maryland is an open licensing jurisdiction that's organizing for.
The or organizing to get their market opened in short order.
You know we have said publicly that we anticipate that over the course of the next Oh over the course of the next 12 months, we anticipate our footprint.
From a launch state perspective, more than doubling and so based on you know kind of what we've got line of sight into you know, we believe we're well positioned to execute on that.
Okay. That's that's helpful. That's all from me guys. Thank you very much.
Yeah.
Your next question is from David in the pattern of Cormack Securities. Your line is now open.
Oh, Hi, a couple of questions. Thank you. So I was just looking at the handles so 73 million in Q3 and Q2 was 81.6 is this just the assumption of following the sports schedule or was there some other factors that content to dip sequentially.
No I think David it's kind of consistent with my previous comment that it just kind of the the sequential sports calendar.
Okay, and then just on the 5 million of onetime costs in nature for Q3 is that primarily all related to the U S. IPO or are there some other factors at play there.
Yeah, primarily all related to the SAP here correct.
Okay.
So if we back that we took that out then the EBITDA loss of 10 of 21.1 would be 16 correct yeah.
Yeah.
Okay, and then just wondering okay. Your monthly active users of $3.7 million in the quarter, it's typically bounce around the sort of between that.
Say you know high 3.3 points, having up to 4.2 I was just wondering.
Do you think he can do you think you can take it back up the over 4 million of actually getting you know growing from here or do you think book. This is just where it's kind of set and this is where it's going to be about what we can.
But this level of user base, we can still cover in a lot of people at the bet on sports.
Well I think that the the second part of the I'll I'll take the second part first about do we think we can convert a lot of users to bet on sports and the answer is yes, and I think with respect to the first part about it.
You are correct that it kind of bounces around in that 3738 low fours range.
And we do believe very strongly that we have the the capability to grow that user base you know a lot of the things we think about from a product perspective on our on our media App.
And what we can do to continue to grow users and engagement.
We think we should translate into user growth.
The steadily over time.
Okay.
Okay, Alright, that's it from me thinking.
Thanks, David.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Yeah.
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