Q2 2021 Super League Gaming, Inc. Earnings Call

[music].

Okay.

Good afternoon, everyone and thank you for participating in today's conference call to discuss the probably gaming's financial results for the second quarter ended June 30, but that sometimes one.

Joining us today are Super league's president and CEO and hand.

And she is Clayton Haynes.

Following their remarks, well open the call for your questions.

Before we go further please take note that the company's safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995.

The statement provides important important cautions regarding forward looking statements.

The company's remarks during today's conference call will include forward looking statements.

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

Actual results may differ materially from those implied by these forward looking statements.

Please refer to the company's recent earnings release and to the company's reports filed with Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ.

I would also like to remind everyone that this call will be available for replay through E. P. M. Eastern on August 19.2021.

A P P M Eastern Tonight.

A webcast replay will also be available via the link provided in today's press release.

Well as on the company's website at peoples Abu Dhabi Super League Dotcom.

And now I would like to try to go over to the President and CEO of Super League Gaming Ann hand Ann.

Good afternoon, and thank you so much for joining us today.

Every time I prepare for and or new earnings call I feel renewed heightened level of energy I hope that through today's call you to get a sense for the growing excitement and confidence we feel it's super leaguers as we march toward our vision and objectives.

So first I want to remind us all why we're all here why Super League exist and why we believe we can be a juggernaut in the gaming and media entertainment ecosystem.

First the meta versus real 40 per cent of Gen Z prefer virtually hanging out to the real thing in real life as a case in point $12.3 million people attended Ariana Grande concert last week and that concert was in the game Fortnite.

Content creation is forever democratized, everyone can be a studio through their social channels, and even making a living doing so through creator economies Theres no. Better example than the fact that roblox has turned a large number of young teen game designers into millionaires.

And as a result, the traditional advertising model will never be the same the disaggregation of content the preference for live streaming and the ubiquity of AD blocking technology has made the 32nd Primetime television AD spot increasingly irrelevant with Gen Z and millennials.

Super League is built on the back of these three trends, we have meta versus we empower creators with tools bolstered by creator economies, and we control and game and in stream advertising inventory, helping brands reach our elusive audience of passionate highly engaged gamers.

So let's kick off as we have some significant updates in addition to our strong <unk> 2021 financial results.

First we completed the transformational acquisition of mob crush on June 1st.

Receiving shareholder support at our annual General meeting.

A material move that is perfectly aligned to the Super League business model from who we target and what we offer all the way through to how we monetize and the technology stack behind it our platform includes AD Tech broadcasting Tech meta versus IP mass participation tournament functionality AI highlight capture.

<unk> consumer and creator marketplaces, and a robust gaming content library.

The integration is progressing and I am thrilled to have Mike one the former CEO of mob crushed joining us along with other mob crush key leaders to serve as our chief strategy officer offering his insights and deep advertising experience.

And we announced more news today the acquisition of banner Fi a creator monetization and advertising technology platform that is highly complementary to our offer to both creators and advertisers.

This is worth a pause while much smaller in size to mob crashed this acquisition. Similarly checks many boxes. The technology enabled digital video and live streaming creators to embed premium in stream custom AD placements at scale for distribution to their own social media channels, namely Youtube.

Allowing tier one advertisers to receive a seamless organic brand integration into our creators native stream.

Not only does this acquisition reinforce our mission to empower creators to monetize their fans and followers.

But it also expands the size and reach of our advertising inventory.

Based in the United Kingdom Banner Phi has already on boarded a healthy roster of European gaming creators and brand partners and it's Super League's first international acquisition represents an immediate path to expanding super likes at Super League's advertising and sponsorship partner base great.

Great technology, a strong sales pipeline and two exceptionally talented gentleman, who will now join our team.

Aside from the obvious synergies I want investors to know this banner Phi is small, but mighty and it's lane, it's young but already generating revenues and this acquisition is accretive it makes sense on every level.

And that lends itself to a quick sidebar on M&A.

Our acquisition strategy says a lot about how we run the company. We are focused on top line growth a path to cash flow positive and equally building a formidable company with a distinctive <unk> position in the media and gaming ecosystem.

We know it could be tempting to use public currency to buy just any growth any revenues, but we take our responsibility to each of you seriously.

To use our currency wisely to build an enduring enterprise that is here for the long haul. So we choose wisely, we have resisted opportunities that offered short term boost and we've walked away when we since complexity and pivots the fastest way to get where we're going is to stay focused to stay on strategy and to execute.

Now moving on you also see today, we announced the formation formation of Super League's Young Gamer network and core Gamer network offering our roster of high profile advertisers and partners elevated levels of audience engagement and awareness.

Super League's young gamers network enables unique reach to gamers under 18 and includes our properties such as mine hut, the largest minecraft server community host in North America with over 4 million registered users mine Ville and official Minecraft bedrock server, reaching over 20 million players annually.

Pixel Paradise, the recently locked first ever official Minecraft bedrock server to prioritize roleplaying.

Multiple original series on Snapchat, including taking shape, featuring minecraft gameplay, and sticks and stones featuring animal crossing.

Partnerships with a growing number of roblox game developers and media platforms.

And then expanding presence on Tictoc highlighted by the Super League gaming in mind had channels.

Recent brand partners that have been drawn to this young gamer audience that we can provide include Moose toys, Astro gaming Logitech G and D. T S sound space, all of whom participated in the company's summer Moon Jam digital music events and livestream featuring the band a J R hosted within mine.

But the hub of Super League's Minecraft community.

Then we also announced the Companys core Gamer network, presenting an opportunity to engage with gamers 18 to 34 years old, including the properties of first a notably mob crush which reaches across creators social live streaming platforms two of Nielsen verified U S audience of 85 million monthly.

As verified in December 2020.

With more than 7.7 billion annual views.

As well we have access to 200000 AI generated gameplay highlights per month, featuring many of the world's most popular titles we.

We have Super League's E Sports Invitational tournament series that we've branded Super League Arena, which is inspired more than 65 million views year to date across Twitch, Youtube and Tic Toc, featuring semi pro and top amateur players competing in titles such as league of Legends Ballarat Rocket League and more.

And then the framerate social media network comprised of eight channels across Instagram and Tic Toc featuring user generated gameplay highlights spanning more than a dozen popular games and delivering more than 30 million social video views per month.

And now add banner fight to that list as that is concentrated on this core gamer demographic as well.

Some of the recent sponsors choosing to grow awareness engagement with our 18 to 34 year old gamers through Super League include Hyundai Sega Square Enix Warner Brothers Gaming and stars.

As you can see we have a rich portfolio of products and offers with compelling kpis, which indicates the step change in our depth and reach but what matters. Most of results. So with that let's turn to two Q of course Clayton will go into this with more detail, but here are some headlines our second quarter revenues reached a record $1.1 million.

And in 'twenty, 'twenty, one up 235% compared to Q2.2020.

As well we saw increases in all primary revenue streams as well as nice balance in the distribution of revenue across the portfolio I will expand more on that in a moment.

And we should note that there is some seasonality in our business tied to new game releases. So Q2 is typically considered a softer advertising quarter with advertisers increasing spend in the second half of the year with back to school in the winter holidays.

Our margins remain healthy reporting 51% for Q2, 2021 and.

And we continue to challenge ourselves to absorb our material growth within our current infrastructure and unlock new cost savings.

Finally, we have a strong balance sheet with $31.5 million of cash on hand as of June 30th 'twenty, 'twenty, one and no debt.

So a bit more color on the revenue front.

First let's talk about our advertising business, which is predominantly service through a direct sales model.

As you know this is where the bulk of our revenues are derived and we continue to see strong trend lines.

Our pipeline of potential opportunities has increased to ask since Q1, 2021 with an average deal size north of $250000.

We historically celebrated having six figure deals in general, but recently in <unk>, we won our first deal over $500000.

And our premium in game and in stream Cpm's are holding up in the 15 to $25 range, probably the most impressive statistic is that over 70% of our deals in <unk> came from repeat advertisers and sponsors.

Roof that advertisers are coming back and they're putting more money to work with us and.

Here's a great example in July we launched an activation for Nickelodeon Patrick Star television show a popular character from the Spongebob series the.

The 12 day campaign included a Patrick start themed gameplay experience and a top 25 Roblox game Islands and delivered Big results 53 million visits to the game from over $5.6 million unique players.

Equating to over 163 years of gameplay time again, a 12 day campaign 163 years of gameplay.

And beyond direct sales, we continue to build out our programmatic advertising tech stack to automate and optimize the sale of our unused video and display inventory.

So now onto direct to consumer which accounted for 22% of our revenue mix up from 12% in the prior quarter or five X improvement and becoming a material part of our revenue growth we.

We have now three direct to consumer properties first mind Hutton, our owned and operated home for advance Minecraft creators and players recently launched a dimension of monetization going beyond the server owner or creator to focus on the 1 million strong monthly active players with products ranging from subscription to micro transaction.

<unk> for an enhanced gaming experience.

By leaning more into a player monetization strategy meinhardt can leverage insights from our second property and the highest revenue grossing one to date mindful as we explained earlier mind Bill isn't official Minecraft bedrock server focused on competitive gameplay and enjoying 2 million monthly active players.

And that leads us to our newest third consumer property pixel Paradise together with mind, though we now operate two of seven official global Minecraft bedrock servers on behalf of Microsoft and pixel Paradise is unique as it is the first server focused more so on role playing and then inclusive experienced attractive to young girl gamers.

While early days and just the first 10 days of launch pixel generated over 60000 in revenue.

Finally on the content front, we are trending to deliver over 10 billion video views this year across our digital and social platforms five times that of last year and what that validates for US is that people are enjoying the content produced by Super League and our community of creators and we have rights to this content we have.

Polk and about the early waves, we are delivering revenue from our content library through distribution partnerships with Snapchat Cox media and transmit live just to name a few.

This in itself represents about 8% of our revenue mix and it's a nascent space as we continue to explore additional channels, where our content can live so expect more growth here, but.

But of course, the harrowing pandemic offered Super League an opportunity to take our proprietary patented virtual Alice broadcast technology, a fully remote cloud based studio for high end storytellers and test the market to prove its value. This.

This emerging revenue stream technology as a service represented a very material, 25% of our revenue mix into Q and this is prior to us exploring the ways that mob crushes additional layer of multi casting technology, AI driven highlights capture and streamer monetization.

Can be further integrated into our broadcasting Tech stack. So we can service them monetize creators up and down the food chain.

And this goes beyond gaming and esports proven by our partnership with Endemol Shine to help them deliver the television show Lego Masters using virtual house, not only kept people safer at home and kept them off of the production process, but it also delivered significant cost savings to our partner.

We made tremendous tremendous progress as a company in the last quarter as we continue to build a world class gaming centric media and entertainment platform.

However, I recognize recognize we're in a stub period with mob crush we certainly have some early wins things are running smoothly, but of course, there's still a lot of optimization to be done so.

So for us what really matters. Most is looking forward based on who we are today rather than looking back.

As we now begin to leverage our combined strength.

So while we don't give formal guidance I thought you might appreciate my general sentiment regarding the second half of 2021.

And my Best estimate I think we can deliver $7 million in revenue on the back half of the year, perhaps even 8 million, but at $7 million, we believe the market and our investors will be pleased we have a good line of sight into three <unk> and our pipeline is strong and the company has never printed our half year performance like that in our history, which really goes back.

To where I started I hope you can sense the enthusiasm, we feel and why it's fun to write this year's earnings script for this quarter.

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

Yeah.

Yeah.

Thank you Anne and good afternoon, everyone. I also would like to express how excited we are to have closed the mob crush acquisition.

And how excited we are to continue the process of fully integrating with the moc Christine.

As Ed mentioned, we have already begun to see synergies as we move forward as a combined force and a gamer and creator ecosystem.

As previously reported we closed the <unk> acquisition transaction on June one 2021.

As a result Super League second quarter 2021 financial results include approximately one month of Bob crushed related operating results, including approximately one month of mob crush revenues and expenses along with the impact of other acquisition accounting related entries on the balance sheet and statement of operations, which I will summarize.

A bit later in my prepared remarks.

To summarize Super League results for the second quarter of 2021, we've recorded another record quarter of top line revenue our fourth consecutive quarter of record revenue with Q2, 2021 revenues up 38% compared to the first quarter of 2021 and more than tripled compared to the second quarter of 2000.

'twenty as we continue to see strong revenue increases across our three primary revenue streams.

Cost of revenues increased quarter over quarter due primarily to the significant increase in related revenues in the second quarter of 2021, and we posted an overall gross margin of 51% in the second quarter of 2021.

Our operating expenses also increased primarily due to higher technology platform and infrastructure costs.

Selling and marketing and G&A costs, which included significant incremental costs related to the mark crushed acquisition, leading to a higher GAAP operating loss when compared to the prior year quarter.

Diving, a little deeper into the second quarter results are summarized in our earnings release filed this afternoon second quarter 2021 revenues were $1.1 million compared to 324000 for the second quarter of 2020.

The 235% increase in revenues was driven by strong increases for all three of our primary revenue streams, including advertising and sponsorships content sales and direct to consumer revenue.

Advertising and sponsorship revenues, which includes direct sales advertising and sponsorship revenues and programmatic display and video advertising revenues increased 890% compared to the prior year quarter to 485000 up from 49000 in the second quarter of 2020.

And comprised approximately 45% of revenue for the second quarter of 2021.

Parents are 15% of revenues in the second quarter of 2020.

27% of the increase in advertising and sponsorship revenues reflects the inclusion of one month of mob crush related direct sales advertising revenues in the second quarter of 2021.

Content sales revenues increased 55% over the prior year quarter to 365000 and accounted for approximately 34% of revenue for the second quarter of 2021.

Compared to approximately 73% of revenues in the prior year quarter.

Content sales revenue was generated in connection with our curation and distribution of E Sports and entertainment content for our own network of digital channels, and our media and entertainment partner channels.

This includes the syndication and licensing of original programming content user generated content, including online gameplay and gameplay highlights and the creation of content for third parties utilizing our virtue Alice remote production in broadcast technology.

Mark precious content monetization strategy is in its early stages and provides us with potential upside that we expect to contribute to additional growth in content sales revenues in future periods.

Direct to consumer revenues, which primarily consisted of sales of digital goods and subscriptions across.

CROSSMARK crushes in Pvp minefield product and our main digital property rose 500 per cent compared to the prior year quarter to 234000 compared to 39000 in the comparable prior year quarter and accounted for approximately 22% of revenues compared to approximately 12% of revenues in the prior year.

Quarter.

The 1% of the increase in direct to consumer revenues reflects the inclusion of one month of mop crushed related minefield digital good sales revenues in the second quarter of 2021.

Second quarter 2021 cost of revenues was 533000 compared to 116000 in the comparable prior year quarter.

The increase in cost of revenues was primarily driven by the strong increase in related top line revenues in the second quarter of 2021.

The change in cost of revenues was also impacted by lower second quarter 2020 cost of revenues for certain contracted activations in the second quarter of 2020 for which we incurred lower actual costs as we transition certain projects from offline to online in response to the onset of the COVID-19 pandemic.

And ensuing shutdown.

9% of the increase in cost of revenue was due to the inclusion of one month of Mark crushed related cost of revenues in the second quarter of 2021.

As noted on previous calls cost of revenues fluctuate period to period based on the specific programs and revenue streams contributing to revenues each period and the related cost profile of our esports focused media and entertainment experiences and advertising and content sales activities occurring each period.

Second quarter 2021, operating expenses were $6.9 million compared to $4.8 million in the comparable prior year quarter.

Noncash stock compensation charges for the second quarter of 2021 increased to 561000.

<unk> to 397000 in the second quarter of 2020.

The increase in sales marketing and advertising expense was in support of the increase in revenues driving future monetization as well as increased sales personnel costs related to the acquisition of mop crush and the talented mark crushed sales team.

The increase in technology platform and infrastructure expenses was due to an increase in engineering and technology personnel costs related to the <unk> crush acquisition as well as cloud services and other technology platform costs.

The increase in general and administrative expenses was primarily due to nonrecurring mod crush acquisition related transaction costs totaling 417000, including legal audit and advisory financial and tax diligence and proxy solicitation related costs incurred in connection with the closing of the Krausz acquisition.

Under U S. GAAP acquisition related transaction costs are required to be expensed in the period incurred.

The change also reflects an increase in intangible asset amortization charges totaling 251000 related to intangible assets acquired in connection with the mob crush acquisition.

On a GAAP basis, which includes the impact of noncash charges and credits net loss in the second quarter of 2021 was $2.3 million or <unk> <unk> per share compared to a net loss of $4.6 million or <unk> 48 per share in the comparable prior year quarter.

Net loss for the second quarter of 2021 included a gain on loan forgiveness of $1.2 million in connection with the forgiveness and extinguishment of the May 2020, PPP loan and related accrued interest previously received under the cares Act.

In addition in connection with the application of the acquisition method of accounting for the mob crush transaction the acquisition related net deferred tax liability, representing the net deferred tax assets and liabilities acquired in the merger created a source of income to utilize against Super league's existing pre merger net deferred.

Tax assets.

Accordingly, the valuation allowance on a portion of our net deferred tax asset was released.

<unk> any noncash income tax benefit of $2.8 million, which was recorded as a credit to income tax benefit in the statement of operations for the second quarter of 2021.

Excluding noncash stock compensation charges and other noncash charges and credits.

Our pro forma net loss was $5.5 million or <unk> 20 per share compared to $4.1 million or <unk> 41 per share in the comparable prior year quarter.

The quarter over quarter change, primarily reflects the increase in topline revenue and gross profit and the experience related relationships and fluctuations described earlier.

The weighted average diluted share count for the second quarter of 2021 was $27.2 million compared to $9.5 million for the second quarter of 2020.

The weighted average diluted share count for the second quarter of 2021 reflects the issuance of $12.1 million shares of the company's common stock.

Former shareholders of mop crush as merger consent as merger consideration all common stock transaction, which as I mentioned earlier closed on June one 2021.

As disclosed in our earnings release, and 8-K filed with the SEC. This afternoon pro forma net income or loss is a non-GAAP measure that we believe investors can use to compare and evaluate our financial results. Please note that our earnings release contains a more detailed description of our calculation of pro forma net loss as well as a.

Pro forma net loss with the most directly comparable financial measures prepared in accordance with U S. GAAP.

Looking at the balance sheet as of June 32021, we had $31.5 million in cash no debt and total shareholders' equity of $98.3 million.

Our current monthly Opex gross cash burn rate on a standalone basis continues to be in the $1.4 million to $1.5 million range, excluding the impact of nonrecurring cost related transaction costs.

And with the acquisition and integration of mob crush our monthly net cash burn rate is expected to be in the $1.8 million to $1.9 million range on a combined basis.

Lastly, I wanted to provide a brief summary of the preliminary impact of accounting for the mob crush acquisition on our financial statements as up and for the three months period ended June 32021.

As required we applied the acquisition method of accounting Alec.

Allocating the purchase price price, which was comprised solely of the $12.1 million shares of common stock issued as merger consideration.

The estimated fair value of assets acquired and liabilities assumed in the merger transaction.

This process resulted in approximately $18.5 million of identifiable intangible assets acquired including partner Influencer Advertiser and customer relationships as well as develop technology and trademarks.

Application of the acquisition method also resulted in non amortized goodwill totaling $44.2 million.

Amortization related to intangible assets established in connection with the acquisition of mob crush which are being amortized over estimated useful lives ranging from five to seven years was 251000 for for the one month stub period included in our consolidated results for the second quarter of 2021.

Total transaction costs included in general and administrative expense related to the acquisition of Mont crush for the three and six months period ended June 32021 were 417000 and 636000, respectively.

The estimated results in connection with the application of the acquisition method of accounting to the Mont crush acquisition are preliminary and will be finalized in accordance with the guidance and the applicable accounting standards. Although currently we do not foresee any material changes.

Again, thank you for joining us today, and I look forward to being with you all for our Q3.2021 earnings call.

With that I will turn the call back over to Ann for some additional remarks.

Thanks, Clayton our mission remains to build a community of gamers and streamers.

Through our leading edge technology, and technology empowered them to create gameplay and entertainment content that connects them to each other and to their communities.

We believe today's aspiring creators and players are tomorrow's social media Influencers in esports stars.

Keep expecting us to expand our role in the meta versus expand our audience and advertising reach and grow the opportunities to further leverage our content and technology and with that Clayton and I are happy to take your questions Cindy.

Yeah.

Thank you.

So as a reminder, if you would like to ask a question you May press star one on your telephone keypad.

To withdraw your question best upon key.

We will pause for just a moment to compile the <unk> roster.

And our first question comes from the line of.

Scott Buck.

Your line is now open.

Hi, Good afternoon, guys. Thank you for taking my questions.

First I want to apologize im jumping back and forth between a few of these so in case, you've already gone over on the call again I apologize.

I was hoping maybe you could give me a little bit more color on gross margin in the quarter.

What what drove the sequential decline and how we should think about that.

Your line item as we move through the remainder of the year.

Yes ill certainly let clayton jump in as well, but you know 51% is we think still very healthy.

We had a there was a bit of a one off circumstance that happened.

Q2 of last year, because we had an arrangement with tencent to do a host of in real life events.

And pandemic hits.

<unk> been a great partner said no problem, let's do them online and said well the cost profile of doing those deals was much lower so we were able to for the same value of the deal deliver the program.

<unk> achieved a much higher margin because of that lower cost profile and on top of it we reached really four to five X number of gamers because everybody could join from the comfort of their homes. So it was a campaign, where we still achieved.

More than be the expected number of participations in the events and just kind of got a chance to grab a really high margin deal, but that said you know we now have a much greater balance in our revenue mix between content direct to consumer and advertising and so I do think margin is one of those things that I would.

Expect you guys to be looking at a range of of staying healthy, but knowing that quarter to quarter, there might be minor fluctuations as that portfolio of revenue fluctuate.

Great. That's helpful and then second one for me.

On the advertising pipeline I'm curious, whether you're seeing any kind of new.

Right into the space, maybe industries that either having previously advertised with you guys or just you know.

<unk>.

Anyone who may just be getting into the into the esports space.

Yeah, I mean thats a good question because you know.

First of all you know we do absolutely have a lane that's about competitive esports, but because we also have a broad umbrella of of gaming centric entertainment as well.

Really have offerings that speaks to a real diverse audience of advertisers. So anyone who has been named back on esports, but still wants to get too young gamers.

Or their parents.

We still have mechanisms all of those advertisers and so I think more than the traditional esports property, we speak to a much broader range of advertisers across.

Broader set of verticals, but that said you know one of the things out of the gate that just felt so right and it's just so affirming with the mob crush merger with you know, we compared sales pipelines and what we found is that while so much is similar and the types of consumers that we target and the.

The spirit of what the brand stands for and the type of content that we elicit we had extremely complementary pipeline. So we really weren't cannibalizing each other.

What was common we both have a real strong foothold in entertainment. So when you look at Disney plus and Netflix and people like that doing new releases.

Releases.

In entertainment there was a lot of synergy, but again, we weren't chasing the same deals. But then you look at some sectors that mob crush was really strong and that we weren't as much so automotive.

Very specifically, whether it would be Hyundai or Toyota Lexus that they had a real strong foothold in automotive we had a really strong foothold and kind of more youth focused categories like toys with Mattel and Ms toys.

And then when you look at the endemic.

We work very closely with the cable puzzled publishers like the 10 cents and the you know.

Riots of the World, but then.

You know and we also obviously have logitech in Australia. You know there are investors and are still so that's very helpful. But new game title releases that was another area, where I felt that mob really had a stronger positioning getting out there and when I talked about like that large 500 K deal that we just.

Inked for three Q that is specifically tied to our new game release, and we think there is some follow on revenue to chase for that new game release game. So I'm pretty excited about how complementary I think with E sports in general.

I think you are finding that there was a narrow group who is comfortable at the professional level, but given we're focused more mainstream and on the base of the pyramid.

It's pretty hard pressed to find a vertical that isn't interested in getting into gamers because a big chunk of their segment that uses their products are gamers.

Great. That's really helpful. One more for me and I'll jump back in the queue I'm curious you've had Bob question under the umbrella now for about two five months.

Curious if there's anything that you've been pleasantly surprised with or just surprised with in general as you've kind of integrated that business into yours.

Well I'm just super proud of the sales team I mean mob came with a really top notch group of salespeople.

When you merge that together with our team and then with all the properties. The two companies bring I mean, the team has been able to really when you think about it.

Just a couple of months get out of the gate and be mutually cross selling these properties and making these these sales packages larger and larger because there's just so much more reach as we've always said advertising is all about heft and so with scale. It is more of a share of advertisers wallets I'd.

I think the other thing is the technology opportunity I mean, it is early but when you look at the components of mobs broadcasting multi casting technology. The highlight you know capture that's driven off AI you look at the broadcasting Tac.

In the tournament functionality behind Super League and virtual Alice.

There is really we haven't even begun to scratch the surface of what what when you put those two tech stacks together the types of business models that could emerge I would say every time, we have a product road map conversation, it's palpable the excitement because everybody can see that there is so much bigger of a prize.

And new sources of revenue that we can't even really quite see it and then I'll I'll say it because I think it matters it may be a softer element but.

I've said this on the last call to a lot of why we've been selective on M&A is we need to prove to our investors that we can digest. This M&A that we can get the synergies out of it you know as I said in the call anybody can buy stuff. The hard part is executing against it and delivering better results.

Together than apart and you know what we knew from the beginning was because we've had a long standing relationship with mob crash for really close to five years.

They're a very known quantity as we are to them and so the culture fit the desire for the teams to get to know each other to start learning about each other's different offers.

Everybody's jobs got more fun, because theres more toys in the toy box right.

So that for me I've been a part of some very big M&A on the energy side and.

Usually at the the kind of sat her time is after the announcement.

It's kind of where the harder work begins and I think that while we still have a lot of work ahead of us and a lot more to optimize.

I really feel like this is just been about as smooth as it can be and I think we all feel as I've said more powerful together than apart.

That's kind of half the battle, one is believing and and I do think you know, giving a little bit of light personal guidance for the second half of year is I hope an indication to all of you of just how bullish I am on where this company is going together.

That's helpful. I appreciate the time guys. Thank you.

Yes.

And the next one is Jack Vander Ark.

Of Maxim group.

Please proceed hi, Ann I Clayton.

Congrats on finalizing the acquisition of mob crushing it looks like another acquisition of banner Fi.

Morning.

Couple of questions for me and I'd like to just dig into your comments earlier on the advertising segment.

If I heard you mentioned the pipeline of opportunities is up more than two times sequentially average deal size of around 250 K. But then you also mentioned you've won your first $500000 plus order. During this third quarter that we're now yeah. My question is is it a coincidence that you won your first 500 K order shortly after the mob crush acquisition.

My gut tells me no.

Then follow up there I also imagine. This is this is a ramping average order size is a trend that will not only continue but accelerate into 2022 is that a fair assessment yes.

Yes, what I would say is is that prior to mob, but we saw is that we saw strong repeat buyers. So we saw top tier advertisers continuing to want to put money to work with Super League in the sense that like you had Moose toys has now done a few activations, but that's so they kept coming back, but we were only able to service.

Smaller percent of their AD budget now when you look at that that scale that we have when that RFP comes in we're able to bid you know 500, K up to a million of that budget and so that is absolutely directly related to the power of putting Super League of mob crushed together.

Excellent Okay I appreciate the color there and then.

Switching gears to just that.

Direct to consumer.

DTC business segment.

22% of revenue.

That increase.

Up over 500% year over year off a small base, but clearly this is hyper growth mode.

Just a couple of questions on that can you provide additional color on this recent DTC revenue ramp in terms of what the specific underlying drivers are in game microtransaction subscriptions anything else you can provide there and then where do you see this trending in the.

The back half of 'twenty, one yeah. The majority of that revenue right now is coming off mine belt, which is a property that was part of the mob crush acquisition.

Up until the pixel Paradise launch it was one of only six.

Fischell Minecraft bedrock servers globally sponsored by Microsoft and the primary monetization. There is basically game passes or in game transactions, So micro transactions.

That are fed through the Microsoft marketplace, and then we receive a cut of it for operating designing in operating and maintaining that server and so it's.

It's a significant thing that we were asked by Microsoft to launch a second server. That's one pixel paradise kind of targeting a different type of minecraft player and so a different bit of a theme of game play.

But the fact that we as a.

Young company control and monetize two of the seven approved global servers is I think a significant Pat on the back for how well. The main bell team has done at really kind of delighting. This minecraft bedrock user and I should mention bedrock is is basically the software basis for <unk>.

Layers, who like to play minecraft on consoles or tablets.

And so hence it's at the specific server targeting those types of players.

Great and then just one more follow up for me.

As for your revenue outlook comments it sounds like you think it's reasonable for second half revenue.

$7 million, perhaps more.

Can you just maybe expand on this a bit further as well just given the second quarter only had a month of mob crushing it so.

7 million revenue target or so whether it's informal or formal.

Break that out between the mob Crushers core Super League and any other changes in the percentage revenue mix by segment as well.

Yeah, I mean, I I would say that you know we continue to see our advertising heft, you know play out into into revenue. So really those stats I gave about the size of pipeline. The size of average deals I think youll continue to see that the advertising revenue stream.

It still will be our primary revenue stream, although I like the diversification I see but what I would say is this I wouldnt.

I wouldn't say that it will we will be able to going forward really do hardline splits between kind of old mob crush old Super League, because especially in the advertising front, we've put it all together.

You know there is there are pitches were going out to do that as you can see in that young and core Gamer press release today arent pitches that you tell us what as you want and we are going to take the very best properties. We have as one company and we're gonna pitch you a package the taps into all of those.

So let's talk about that older core gamer that over 18 Gamer.

We're going to offer if an RFP comes in for an automotive brand, we're going to offer them opportunities to to put their they're advertising into the streams of the people using our mob crush platform to stream to their social channels Oh by the way, we're now going to also.

Offer those advertisers ways to put banner ads inside their Youtube streams of our banner Fi Influencers.

Influencers and creators, we're also going to give them advertising opportunities I'm frame rate, which is a historic Super League brand, which is our set of everyday user generated highlights that are primarily Instagram and tic toc. So that just illustrates the way that we are tapping into using kind of the <unk>.

First of all the properties between the two and I think that's why giving the my personal kind of estimate of where we're going was important as you know it really is getting even though we're only two months and it's already getting hard to delineate the old Super League and the old mob question. That's the way we want it right, we don't want to take a year.

To start to work as one team and to work with our assets as one set of assets, we want it to happen as soon as possible because that's where the the amplification kicks in and so but I do think if you think about it.

Oh My heavens, if if the first half of the year you know we delivered a couple of million in revenue short of that and we're able to deliver seven 8 million in the second half.

I've got to believe that that's going to excite investors because that means we're marching towards cash flow breakeven and I think what investors said to us early on is great kpis, but I want more I want top line, while we're giving it to them.

And I know, what theyre going to ask for next quarters.

When are you going to breakeven and so they'll way I do that is we grow the topline we keep our margins nice and healthy and 51% I think is pretty significant and good for the type of business model, wherein we keep controlling cost, but not for the sake of not growing right. So we smartly in.

Invest in costs to keep growing the top line.

Knowing that by the time, we're hitting call. It $2025.30 million, we start to feel we're moving into a sustainable cash flow positive position. So that is the rally cry of the company.

I I would argue we're young and that we shouldn't chase them breakeven for the sake of topline I hope the investors agree with me on that one and would say that we're prioritizing correctly topline right now, but you know at the end of the day it's both.

Excellent that's fantastic color and.

Again, congrats on the building momentum I'm going to hop back in the queue. Thanks.

Yeah.

And at this time. This concludes our question and answer session I would now like to try to call back to Ms. <unk> for closing remarks.

Okay, well listen first of all thank you Sandy for moderating I really appreciate we'd like to thank everyone for listening to today's call and we look forward to speaking with you at our upcoming conferences as well when we report our third quarter results in November and I guess I'd just say is.

The headline if you remember anything remember this we've got gamers. Thank you for joining us.

Yeah.

Ladies and gentlemen. This concludes today's conference call. You may now disconnect. Thank you for your participation.

Okay.

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Good afternoon, everyone and thank you for participating in today's conference call to discuss the probably gaming's financial results for the second quarter ended June 30, that's a pinpoint.

Joining us today are Super league's president and CEO and hand, and CFO Clayton Haynes.

Following their remarks, well 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 statement provides important important cautions regarding forward looking statements.

The company's remarks during today's conference call will include forward looking statements.

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

Actual results may differ materially from those implied by these forward looking statements.

Please refer to the company's recent earnings release and to the company's reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ.

I would also like to remind everyone that this call will be available for replay through eight P. M. Eastern on August 19, 2021, starting at eight P M Eastern Tonight.

A webcast replay will also be available via the link provided in todays press release as well as on the company's website at peoples Abu Dhabi Super League Dotcom.

And now I would like to try to go over to the President and CEO of Super League Gaming Ann.

Good afternoon, and thank you so much for joining us today.

Every time I prepare for and or new earnings call I feel renewed heightened level of energy I hope that through today's call you to get a sense for the growing excitement and confidence we feel it's super leaguers as we march toward our vision and objectives.

So first I want to remind us all why we're all here why Super League exist and why we believe we can be a juggernaut in the gaming and media entertainment ecosystem.

First the meta versus real 40 per cent of Gen Z preferred virtually hanging out to the real thing in real life as a case in point $12.3 million people attended Ariana Grande concert last week and that concert was in the game for Tonight.

Content creation is forever democratized, everyone can be a studio through their social channels, and even making a living doing so through creator economies Theres no. Better example than the fact that roblox has turned a large number of young team game designers into millionaires.

And as a result, the traditional advertising model will never be the same the disaggregation of content the preference for live streaming and the ubiquity of AD blocking technology has made the 32nd Primetime television AD spot increasingly irrelevant with Gen Z and millennials.

Super League is built on the back of these three trends, we have meta versus we empower creators with tools bolstered by creator economies, and we control and game and in stream advertising inventory, helping brands reach our elusive audience of passionate highly engaged gamers.

So let's kick off as we have some significant updates in addition to our strong <unk> 2021 financial results.

First we completed the transformational acquisition of mob crush on June 1st.

Receiving shareholder support at our annual General meeting.

A material move that is perfectly aligned to the Super League business model from who we target and what we offer all the way through to how we monetize and the technology stack behind it our platform includes AD Tech broadcasting Tech meta versus IP mass participation tournament functionality AI highlight capture.

<unk> consumer and creator marketplaces, and a robust gaming content library.

The integration is progressing and I am thrilled to have Mike one the former CEO of mob crushed joining us along with other mob crush key leaders to serve as our chief strategy officer offering his insights and deep advertising experience.

And we announced more news today the acquisition of banner Fi a creator monetization and advertising technology platform that is highly complementary to our offer to both creators and advertisers.

This is worth of pods, while much smaller in size the mob crush this acquisition. Similarly checks many boxes the technology enabled digital video and live streaming creators to embed premium in stream custom AD placements at scale for distribution to their own social media channels, namely Youtube.

Allowing tier one advertisers to receive a seamless organic brand integration into a creator's native stream.

Not only does this acquisition reinforce our mission to empower creators to monetize their fans and followers.

But it also expands the size and reach of our advertising inventory.

Based in the United Kingdom Banner Phi has already on boarded a healthy roster of European gaming creators and brand partners and a Super League's first international acquisition represents an immediate path to expanding super likes at Super League's advertising and sponsorship partner base great.

Great technology, a strong sales pipeline and two exceptionally talented gentleman, who will now join our team.

Aside from the obvious synergies I want investors to know this banner Phi is small, but mighty and it's lane, it's young but already generating revenues and this acquisition is accretive it makes sense on every level.

And that lends itself to a quick sidebar on M&A.

Our acquisition strategy says a lot about how we run the company. We are focused on top line growth a path to cash flow positive and equally building a formidable company with a distinctive <unk> position in the media and gaming ecosystem.

We know it could be tempting to use public currency to buy just any growth any revenues, but we take our responsibility to each of you seriously.

To use our currency wisely to build an enduring enterprise that is here for the long haul. So we choose wisely, we have resisted opportunities that offered short term boost and we walked away when we since complexity and pivots the fastest way to get where we're going is to stay focused to stay on strategy and to execute.

Now moving on you also see today, we announced subordination formation of Super League's Young Gamer network and core Gamer network offering our roster of high profile advertisers and partners elevated levels of audience engagement and awareness.

Super League's young gamers network enables unique reach to gamers under 18 and includes our properties such as mine hut, the largest minecraft server community host in North America with over 4 million registered users mine Ville and official Minecraft bedrock server, reaching over 20 million players annually.

Pixel Paradise. The recently launched first ever official Minecraft bedrock server to prioritize roll plane.

Multiple original series on Snapchat, including taking shape, featuring minecraft gameplay, and sticks and stones featuring animal crossing.

Partnerships with a growing number of roblox game developers and media platforms.

And then expanding presence on tick tock highlighted by the Super League gaming and mine had channels.

Recent brand partners that have been drawn to this young gamer audience that we can provide include Moose toys, Astro gaming Logitech G and Dts sound space, all of whom participated in the Companys Summer Moon Jam digital music events and livestream featuring the band a Jr. Hosted within mine.

But the hub of Super League's Minecraft community.

Then we also announced the Companys core Gamer network, presenting an opportunity to engage with gamers 18 to 34 years old, including the properties of first a notably mob crush which reaches across creators social live streaming platforms two of Nielsen verified U S audience of 85 million monthly.

As verified in December 2020.

With more than seven 7 billion annual views.

As well we have access to 200000 AI generated gameplay highlights per month, featuring many of the world's most popular titles we.

We have Super League's E Sports Invitational tournament series that we've branded Super League Arena, which is inspired more than 65 million views year to date across Twitch, Youtube and Tic Toc, featuring semi pro and top amateur players competing entitles such of league of Legends Ballarat Rocket League anymore.

And then the framerate social media network comprised of eight channels across Instagram and Tic Toc featuring user generated gameplay highlights spanning more than a dozen popular games and delivering more than 30 million social video views per month.

And now add banner Phi to that list as that is concentrated on this core gamer demographic as well.

Some of the recent sponsors choosing to grow awareness engagement with our 18 to 34 year old gamers through Super League include Hyundai Sega Square Enix Warner Brothers Gaming and stars.

As you can see we have a rich portfolio of products and offers with compelling kpis, which indicates the step change in our depth and reach but what matters. Most of results. So with that let's turn to <unk> of course Clayton will go into this with more detail, but here are some headlines our second quarter revenues reached a record $1.1 million.

In 2021 up 235% compared to Q2.2020.

As well we saw increases in all primary revenue streams as well as nice balance in the distribution of revenue across the portfolio I will expand more on that in a moment.

And we should note that there is some seasonality in our business tied to new game releases. So Q2 is typically considered a softer advertising quarter with advertisers increasing spend in the second half of the year with back to school in the winter holidays.

Our margins remain healthy reporting 51% for Q2.2021 and.

And we continue to challenge ourselves to absorb our material growth within our current infrastructure and unlock new cost savings.

Finally, we have a strong balance sheet with $31.5 million of cash on hand as of June 32021, and no debt.

So a bit more color on the revenue front.

First let's talk about our advertising business, which is predominantly service through a direct sales model.

As you know this is where the bulk of our revenues are derived and we continue to see strong trend lines.

Our pipeline of potential opportunities has increased <unk> since Q1, 2021 with an average deal size north of $250000.

We historically celebrated having six figure deals in general, but recently in <unk>, we won our first deal over $500000.

And our premium and gaming in stream Cpm's are holding up in the 15 to $25 range, probably the most impressive statistic is that over 70% of our deals in <unk> came from repeat advertisers and sponsors.

Roof that advertisers are coming back and they're putting more money to work with us and.

Here's a great example in July we launched an activation for Nickelodeon Patrick Star television show a popular character from the Spongebob series the.

The 12 day campaign included a Patrick start themed gameplay experience and a top 25 Roblox game Islands and delivered Big results 53 million visits to the game from over $5.6 million unique players.

Equating to over 163 years of gameplay time again, a 12 day campaign 163 years of gameplay.

And beyond direct sales, we continue to build out our programmatic advertising tech stack to automate and optimize the sale of our unused video and display inventory.

So now onto direct to consumer which accounted for 22% of our revenue mix up from 12% in the prior quarter or five X improvement and becoming a material part of our revenue growth. We have now three direct to consumer properties first mine Hutton, our owned and operated home for advance Minecraft creators.

Some players recently launched a new dimension of monetization going beyond the server owner or creator to focus on the 1 million strong monthly active players with products ranging from subscription to micro transactions for an enhanced gaming experience.

By leaning more into a prior monetization strategy meinhardt can leverage insights from our second property and the highest revenue grossing one to date mindful as we explained earlier mindful as an official minecraft bedrock server focused on competitive gameplay and enjoying 2 million monthly active players.

And that leads us to our newest third consumer property pixel Paradise together with mind, though we now operate two of seven official global Minecraft bedrock servers on behalf of Microsoft and pixel Paradise is unique as it is the first server focused more so on role playing and then inclusive experience attractive to young girl gamers.

While early days and just the first 10 days of launch pixel generated over 60000 in revenue.

Finally on the content front, we are trending to deliver over 10 billion video views this year across our digital and social platforms five times that of last year and what that validates for US is that people are enjoying the content produced by Super League and our community of creators and we have rights to this content we have.

Spoken about the early waves, we are delivering revenue from our content library through distribution partnerships with Snapchat Cox media and transmit live just to name a few.

This in itself represents about 8% of our revenue mix and it's a nascent space as we continue to explore additional channels, where our content can live so expect more growth here.

But of course, the harrowing pandemic offered Super League an opportunity to take our proprietary patented virtualized broadcast technology, a fully remote cloud based studio for high end storytellers and test the market to prove its value.

This emerging revenue stream technology as a service represented a very material, 25% of our revenue mix into Q and this is prior to us exploring the ways that mob crushes additional layer of multi casting technology, AI driven highlights capture and streamer monetization.

Can be further integrated into our broadcasting Tech stack. So we can service and monetize creators up and down the food chain.

And this goes beyond gaming and esports proven by our partnership with Endemol Shine to help them deliver the television show Lego Masters using virtual <unk> not only kept people safer at home and kept them off of the production process, but it also delivered significant cost savings to our partner.

We made tremendous tremendous progress as a company in the last quarter as we continue to build a world class gaming centric media and entertainment platform.

However, I recognize recognize we're in a stub period with mob crush we certainly have some early wins things are running smoothly, but of course, there's still a lot of optimization to be done so.

So for us what really matters. Most is looking forward based on who we are today rather than looking back.

As we now begin to leverage our combined strength so.

So while we don't give formal guidance I thought you might appreciate my general sentiment regarding the second half of 2021.

And my Best estimate I think we can deliver $7 million in revenue on the back half of the year, perhaps even 8 million, but at $7 million, we believe the market and our investors will be pleased we have a good line of sight into <unk> and our pipeline is strong and the company has never printed a half year performance like that in our history, which really goes back.

Back to where I started I hope you can sense the enthusiasm, we feel and why it's fun to write this year's earnings script for this quarter.

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

Yeah.

Thank you Anne and good afternoon, everyone.

Also would like to express how excited we are to have closed the mob crush acquisition.

And how excited we are to continue the process of fully integrating with the moc Christine.

As Ed mentioned, we have already begun to see synergies as we move forward as a combined force and a gamer and creator ecosystem.

As previously reported we closed the mob crush acquisition transaction on June one 2021.

As a result Super League second quarter of 2021 financial results include approximately one month of Bob crushed related operating results, including approximately one month of mob crush revenues and expenses along with the impact of other acquisition accounting related injuries on the balance sheet and statement of operations, which I will summarize.

Later in my prepared remarks.

To summarize Super League results for the second quarter of 2021, we've recorded another record quarter of topline revenue our fourth consecutive quarter of record revenue with Q2, 2021 revenues up 38% compared to the first quarter of 2021 and more than tripled compared to the second quarter of 2002.

'twenty as we continue to see strong revenue increases across our three primary revenue streams.

Cost of revenues increased quarter over quarter due primarily to the significant increase in related revenues in the second quarter of 2021, and we posted an overall gross margin of 51% in the second quarter of 2021.

Our operating expenses also increased primarily due to higher technology platform and infrastructure costs.

Selling and marketing and G&A costs, which included significant incremental costs related to the mob crush acquisition, leading to a higher GAAP operating loss when compared to the prior year quarter.

Diving, a little deeper into the second quarter results are summarized in our earnings release filed this afternoon second quarter 2021 revenues were $1.1 billion compared to 324000 for the second quarter of 2020.

So 235% increase in revenues was driven by strong increases for all three of our primary revenue streams, including advertising and sponsorships content sales and direct to consumer revenue.

Advertising and sponsorship revenues, which includes direct sales advertising and sponsorship revenues and programmatic display and video advertising revenues increased 890% compared to the prior year quarter to 485000 up from 49000 in the second quarter of 2020.

And comprised approximately 45% of revenue sort of second quarter of 2021 as compared to 15% of revenues in the second quarter of 2020.

27% of the increase in advertising and sponsorship revenues reflects the inclusion of one month of mob crush related direct sales advertising revenues in the second quarter of 2021.

Content sales revenues increased 55% over the prior year quarter to 365000 and accounted for approximately 34% of revenue for the second quarter of 2021.

Compared to approximately 73% of revenues in the prior year quarter.

Content sales revenue was generated in connection with our curation and distribution of E Sports and entertainment content for our own network of digital channels, and our media and entertainment partner channels.

This includes the syndication and licensing of original programming content user generated content, including online gameplay and gameplay highlights and the creation of content for third parties utilizing our virtue Alice remote production in broadcast technology.

Mark precious content monetization strategy is in its early stages and provides us with potential upside that we expect to contribute to additional growth in content sales revenues in future periods.

Direct to consumer revenues, which primarily consisted of sales of digital goods and subscriptions across across mob crushes in Pvp minefield product and our mindset digital property rose 500 per cent compared to the prior year quarter to 234000 compared to 39000 and a comparable <unk>.

Our year quarter and accounted for approximately 22% of revenues compared to approximately 12% of revenues in the prior year quarter.

81% of the increase in direct to consumer revenues reflects the inclusion of one month of mob crushed related minefield digital goods sales revenues in the second quarter of 2021.

Second quarter 2021 cost of revenues was 533000 compared to 116000 in the comparable prior year quarter.

The increase in cost of revenues was primarily driven by the strong increase in related top line revenue in the second quarter of 2021.

The change in cost of revenues was also impacted by lower second quarter 2020 cost of revenues for certain contracted activations in the second quarter of 2020 for which we incurred lower actual costs as we transition certain projects from offline to online in response to the onset of the COVID-19 pandemic.

And ensuing shutdown.

9% of the increase in cost of revenue was due to the inclusion of one month of Mark crush related cost of revenues in the second quarter of 2021.

As noted on previous calls cost of revenues fluctuate period to period based on the specific programs and revenue streams contributing to revenue in each period and the related cost profile of our esports focused media and entertainment experiences and advertising and content sales activities occurring each period.

Second quarter 2021, operating expenses were $6.9 million compared to $4.8 million in the comparable prior year quarter.

Noncash stock compensation charges for the second quarter of 2021 increased to 561000 as compared to 397000 in the second quarter of 2020.

The increase in sales.

Marketing and advertising expense was in support of the increase in revenues driving future monetization as well as increased sales personnel costs related to the acquisition of Mark crush and the talented mop crushed sales team.

The increase in technology platform and infrastructure expenses was due to an increase in engineering and technology personnel costs related to the Mark crush acquisition as well as cloud services and other technology platform costs.

The increase in general and administrative expenses was primarily due to nonrecurring mob crush acquisition related transaction costs totaling 417000, including legal audit and advisory financial and tax diligence and proxy solicitation related costs incurred in connection with the closing of the <unk> acquisition.

Under U S. GAAP acquisition related transaction costs are required to be expensed in the period incurred.

Yes.

The change also reflects an increase in intangible asset amortization charges totaling 251000 related.

Related to intangible assets acquired in connection with the mob crush acquisition.

On a GAAP basis, which includes the impact of noncash charges and credits net loss in the second quarter of 2021 was $2.3 million or <unk> <unk> per share compared to a net loss of $4.6 million or <unk> 48 per share in the comparable prior year quarter.

Net loss for the second quarter of 2021 included a gain on loan forgiveness of $1.2 million in connection with the forgiveness and extinguishment of the May 2020, PPP loan and related accrued interest previously received under the cares Act.

In addition in connection with the application of the acquisition method of accounting for the mob crush transaction.

The acquisition related net deferred tax liability.

Presenting the net deferred tax assets and liabilities acquired in the merger created a source of income to utilize against Super league's existing pre merger net deferred tax assets.

Accordingly, the valuation allowance on a portion of our net deferred tax assets was released.

Resulting in a noncash income tax benefit of $2.8 million, which was recorded as a credit to income tax benefit in the statement of operations for the second quarter of 2021.

Excluding noncash stock compensation charges and other noncash charges and credits.

Our pro forma net loss was $5.5 million or <unk> 20 per share compared to $4.1 million or <unk> 41 per share in the comparable prior year quarter.

The quarter over quarter change, primarily reflects the increase in topline revenue and gross profit and the expense related relationships and fluctuations described earlier.

The weighted average diluted share count for the second quarter of 2021 was $27.2 million compared to $9.5 million for the second quarter of 2020.

The weighted average diluted share count for the second quarter of 2021 reflects the issuance of $12.1 million shares of the company's common stock.

Former shareholders of mop crush as merger consent as merger consideration and the all common stock transaction, which as I mentioned earlier closed on June one 2021.

As disclosed in our earnings release, and 8-K filed with the SEC. This afternoon pro forma net income or loss is a non-GAAP measure that we believe investors can use to compare and evaluate our financial results. Please note that our earnings release contains a more detailed description of our calculation of pro forma net loss as well as a.

Nation of pro forma net loss with the most directly comparable financial measures prepared in accordance with U S. GAAP.

Looking at the balance sheet as of June 32021, we had $31.5 million in cash no debt and total shareholders' equity of $98.3 million.

Our current monthly Opex gross cash burn rate on a standalone basis continues to be in the $1.4 million to $1.5 million range, excluding the impact of nonrecurring noncash related transaction costs.

And with the acquisition and integration of mob crush our monthly net cash burn rate is expected to be in the $1.8 million to $1.9 million range on a combined basis.

Lastly, I wanted to provide a brief summary of the preliminary impact of accounting for the Mark crushed acquisition on our financial statements as of and for the three months period ended June 32021.

As required we applied the acquisition method of accounting Alec.

<unk> the purchase price price, which was comprised solely of the $12.1 million shares of common stock issued as merger consideration.

The estimated fair value of assets acquired and liabilities assumed in the merger transaction.

This process resulted in approximately $18.5 million of identifiable intangible assets acquired including partner influence, our advertiser and customer relationships as well as develop technology and trademarks.

Application of the acquisition method also resulted in non amortized goodwill totaling $44.2 million.

Amortization related to intangible assets established in connection with the acquisition of mob crush which are being amortized over estimated useful lives ranged from five to seven years was 251000 for the one month stub period included in our consolidated results for the second quarter of 2021.

Total transaction costs included in general and administrative expense related to the acquisition of <unk> crush for the three and six months period ended June 32021 were 417000 and 636000, respectively.

The estimated results in connection with the application of the acquisition method of accounting to the mob crush acquisition are preliminary and will be finalized in accordance with the guidance and the applicable accounting standards. Although currently we do not foresee any material changes.

Again, thank you for joining us today, and I look forward to being with you all for our Q3.2021 earnings call.

With that I will turn the call back over to Ann for some additional remarks.

Thanks, Clayton our mission remains to build a community of gamers and streamers.

Through our leading edge technology, and technology empowered them to create gameplay and entertainment content that connects them to each other and to their communities.

We believe today's aspiring creators and players are tomorrow's social media Influencers in esports stars.

Keep expecting us to expand our role in the meta versus expand our audience and advertising reach and grow the opportunities to further leverage our content and technology and with that Clayton and I are happy to take your questions Cindy.

Yeah.

Thank you.

Yes.

So as a reminder, if you would like to ask a question you May press star one on your telephone keypad.

To withdraw your question press the Penske.

We will pause for just a moment to compile the <unk> roster.

And our first question comes from the line of.

Scott Bok.

Your line is now open.

Hey, good afternoon, guys. Thank you for taking my questions.

First I want to apologize im jumping back and forth between a few of these so in case, you've already gone over on the call again I apologize.

I was hoping maybe you could give me a little bit more color on gross margin in the quarter.

What what drove the sequential decline and how we should think about that.

Line item as we move through the remainder of the year.

Yes ill certainly, let clayton jump in as well, but 51%. This is we think is still very healthy.

We had a there was a bit of a one off circumstance that happened.

Q2 of last year, because we had an arrangement with tencent to do a host of in real life events.

And pandemic hits.

<unk> been a great partner said no problem, let's do them online and set said well the cost profile of doing those deals was much lower so we were able to for the same value of the deal deliver the program.

Achieve a much higher margin because of that lower cost profile and on top of it we reached really four to five X. The number of gamers because everybody could join from the comfort of their homes. So it was a campaign, where we still achieved.

More than B.

Expected number of participations in the events and just kind of got a chance to grab a really high margin deal, but that said, we now have a much greater balance in our revenue mix between content direct to consumer and advertising and so I do think margin is one of those things that I would expect you guys to be look.

<unk> at a range of of staying healthy, but knowing that quarter to quarter, there might be minor fluctuations as that portfolio revenue fluctuate.

Great. That's helpful. And then second one for me just on the advertising pipeline I'm curious, whether you're seeing any kind of new.

Youre right.

Into the space maybe.

Read that either having previously advertised with you guys or just.

Anyone who may just be getting into the into the esports space.

Yeah, I mean, it's a good question because you know.

First of all you know we do absolutely have a lane that's about competitive esports, but because we also have abroad barela of of gaming centric entertainment as well.

Really have offerings that states a real diverse audience of advertisers. So anyone who has been paying back on esports, but still wants to get too young gamers.

Or their parents.

We still have mechanisms to draw those advertisers and so I think more than the traditional esports property, we speak to a much broader range of advertisers across.

Broader set of verticals, but that said you know one of the things out of the gate that just felt so right and was just so affirming with the mob crush merger with <unk>.

Compared sales pipelines.

And what we found is is that while so much is similar and the types of consumers that we target.

The spirit of what the brand stands for and the type of content that we elicit we had extremely complementary pipeline. So we really weren't cannibalizing each other.

What was common we both have a real strong foothold in entertainment. So when you look at Disney plus and Netflix and people like that doing new.

Releases.

In entertainment there was a lot of synergy, but again, we weren't chasing the same deals. But then you look at some sectors that mob crush was really strong in that we weren't as much so automotive.

Specifically, whether it be Honda or Toyota Lexus that they had a real strong foothold in automotive we had a really strong foothold and kind of more youth focused categories like toys with Mattel and Moose toys.

And then when you look at the endemic.

We work very closely with the <unk> partial publishers like the 10 cents and the you know.

Riots of the World, but then.

You know and we also obviously have logitech in Australia. They are investors and are still so that's very helpful. But new game title releases that was another area, where I felt that mob really had a stronger positioning getting out there and when I talked about like that large 500 K deal that we just.

Inked for three Q that is specifically tied to our new game release, and we think there is some follow on revenue to chase for that new game release.

Game, So I'm pretty excited about how complementary I think with esports in general.

I think you are finding that there was a narrow group who is comfortable at the professional level, but given we're focused more mainstream and on the base of the pyramid.

It's pretty hard pressed to find a vertical that isn't interested in getting into gamers because a big chunk of their segment that uses their products are gamers.

Great. That's really helpful. One more for me and I'll jump back in the queue. I Am curious you had Bob question under the umbrella now for about two five months.

Curious if there's anything that you've been pleasantly surprised with or just surprised you then general as you've kind of integrated that business into yours.

I'm just super proud of the sales team I mean mob came with a really top notch group of salespeople.

When you merge that together with our team and then with all the properties. The two companies bring I mean, the team has been able to really when you think about it and just a couple of months get out of the gate and be mutually cross selling these properties and making these these sales packages larger and larger because there just <unk>.

So much more reach as we've always said advertising is all about heft and so with scale is is more of a share of advertiser's wallet I'd.

I'd say the other thing is the technology opportunity I mean, it is early but when you look at the components of mobs broadcasting multi casting technology. The highlight capture that's driven off AI you look at the broadcasting Tac and the tournament functionality behind <unk>.

League and virtual Alice.

There is really we haven't even begun to scratch the surface of what.

When you put those two tech stacks together the types of business models that could emerge I would say every time, we have a product road map conversation, it's palpable the excitement because everybody can see that there is so much bigger of a prize and new sources of revenue that we can't even really quite see it and then I'll I'll say it.

I think it matters it may be a softer element but.

I said this on the last call to a lot of why we've been selective on M&A is we need to prove to our investors that we can digest. This M&A that we can get the synergies out of it you know as I said in the call anybody can buy stuff. The hard part is executing against it and delivering better results.

Else together than apart.

And what we knew from the beginning was because we've had a long standing relationship with mob crushed for really close to five years there.

They're a very known quantity as we are to them and so the culture fit the desire for the teams to get to know each other to start learning about each other's different offers.

Everybody's jobs got more fun, because theres more toys in the toy box right.

And so that for me I've been a part of some very big M&A on the energy side and.

Usually at the the kind of sat her time is after the announcement.

It's kind of where the harder work begins and I think that while we still have a lot of work ahead of us and a lot more to optimize.

I really feel like this is just been about as smooth as it can be and I think we all feel as I've said more powerful together than apart.

That's kind of half the battle, one is believing and and I do think giving a little bit of light personal guidance for the second half year is I hope an indication to all of you of just how bullish I am on where this company is going together.

That's helpful. I appreciate the time guys. Thank you.

And the next one is Jack Vander Ark.

Of Maxim group.

Please proceed hi, and.

Congrats on finalizing the acquisition of mob question it looks like another acquisition of banner Fi.

Good morning.

Couple of questions for me and I'd like to just dig into your comments earlier on the advertising segment.

If I heard you mentioned the pipeline of opportunities is up more than two times sequentially average deal size around 250, K. But then you also mentioned you've won your first $500000 plus order. During this third quarter that we're now my question is is it a coincidence that you won your first 500 K order shortly after the mob crush acquisition.

My gut tells me no.

Then follow up there I also imagine. This is this is a ramping average order size is a trend that will not only continue but accelerate into 2022 is that a fair assessment.

Yes, what I would say is is that prior to <unk>, but we saw is that we saw strong repeat buyers. So we saw top tier advertisers continuing to want to put money to work with Super League in the sense that like you had Moose toys has now done a few activations with us so they kept coming back, but we were only able to service.

Smaller percent of their AD budget now when you look at that that scale that we have when that RFP comes in we're able to bid you know 500, K up to a million of that budget and so that is absolutely directly related to the power of putting Super League of mop crushed together.

Excellent Okay I appreciate the color there and then.

Switching gears to just the direct to consumer.

<unk> business segment.

22% of revenue.

That increase.

Up over 500% year over year off a small base, but clearly this is hyper growth mode.

Just a couple of questions on that can you provide additional color on this recent DTC revenue ramp in terms of what the specific underlying drivers are in game microtransaction subscriptions anything else you can provide there and then where do you see this trending.

Back half of 'twenty, one yes, the majority of that revenue right now is coming off mine belt, which is a property that was part of the mob crush acquisition.

Again up until the pixel Paradise launch it was one of only six official minecraft bedrock servers globally sponsored by Microsoft.

And the primary monetization there is basically game passes or in game transaction, So micro transactions.

That are fed through the Microsoft marketplace, and then we receive a cut of it for operating designing in operating and maintaining that server and so it's.

It's a significant.

Saying that we were asked by Microsoft to launch a second server. This one pixel paradise kind of targeting a different type of minecraft player and so a different bit of a theme of game play.

But the fact that we as you know.

Young company control and monetize two of the seven approved global servers is I think a significant Pat on the back for how well. The main bell team has done at really kind of delighting. This minecraft bedrock user and I should mention bedrock is is basically the software basis.

For players, who like to play Minecraft on consoles or tablets.

And so hence it's a specific server targeting those types of players.

Great and then just one more follow up for me.

As for your revenue outlook comments. It sounds like you think it's reasonable for second half revenue of around $7 million, perhaps more.

Can you just maybe expand on this a bit further as well just given the second quarter only had a month of mob crushing it so.

The $7 million revenue target or so whether it's informal or formal.

Break that out between a mob crushers core Super League and.

Any other changes in the percentage revenue mix by segment as well.

Yeah, I mean, I I would say that we continue to see our advertising heft.

Play out into into revenue so really those stats I gave about the size of pipeline. The size of average deals I think youll continue to see that the advertising revenue stream.

It still will be our primary revenue stream, although I like the diversification I see but what I would say is this I wouldnt.

I wouldn't say that we will be able to going forward really do hardline splits between kind of old mob crush old Super League, because especially in the advertising front, we've put it all together.

There is there are pitches were going out to do that as you can see in that young and core Gamer press release today arent pitches that you tell us what age you want and we are going to take the very best properties. We have as one company and we're gonna pitch you a package the taps into all of those.

So let's talk about that older core gamer that over 18 Gamer, we're going to offer if an RFP comes in for an automotive brand, we're going to offer them opportunities to to put there.

They're advertising into the streams of the people using our mob crush platform to stream to their social channels.

The way, we're now going to also offer those advertisers ways to put banner ads inside their Youtube streams of our banner Fi <unk>.

Influencers and creators, we're also going to give them advertising opportunities I'm frame rate, which is a historic Super League brand, which is our set of everyday user generated highlights that are primarily Instagram and tic toc. So that just illustrates the way that we are tapping into using kind of the <unk>.

First of all the properties between the two and I think that's why giving the my personal kind of estimate of where we're going was important as it.

Is it getting even though we're only two months and it's already getting hard to delineate the old Super League and the old mob question. That's the way we want it right. We don't want to take a year to start to work as one team and to work with our assets as one set of assets, we want it to happen as soon as possible because that's where the the amplification kicks in.

And so but I do think if you think about it.

My heavens, if if the first half of the year you know we delivered a couple of million dollars in revenue short of that and we're able to deliver seven 8 million in the second half.

I've got to believe that that's going to excite investors because that means we're marching towards cash flow breakeven and I think what investors said to us early on is great kpis, but I want more I want top line, while we're giving it to them.

And I know, what they're going to ask for next.

When are you going to breakeven and so the way I do that is we grow the topline we keep our margins nice and healthy and 51% I think is pretty significant and good for the type of business model, wherein we keep controlling cost, but not for the sake of not growing right. So we smartly in.

Invest in costs to keep growing the top line.

Knowing that by the time, we're heading call. It $2025.30 million, we start to feel we're moving into a sustainable cash flow positive position. So that is the rally cry of the company.

I would argue we're young and that we shouldn't chase.

Breakeven for the sake of top line I hope the investors agree with me on that one and would say that we're prioritizing correctly top line right now, but you know at the end of the day it's both.

Yeah.

Excellent that's fantastic color.

Again, congrats on the building momentum I'm going to hop back in the queue. Thanks.

And at this time. This concludes our question and answer session I would now like to turn the call back to Ms. Chen for closing remarks.

Okay, well listen first of all thank you Sandy for moderating I really appreciate we'd like to thank everyone for listening to today's call and we look forward to speaking with you at our upcoming conferences as well when we report our third quarter results in November and I guess I.

Say as the headline if you remember anything remember this we've got gamers. Thank you for joining us.

Yeah.

Ladies and gentlemen. This concludes today's conference call. You may now disconnect. Thank you for your participation.