Q3 2021 Enthusiast Gaming Holdings Inc Earnings Call
Good afternoon, and welcome to the enthusiast gaming Holdings incorporated fiscal third quarter of 2021 financial results Conference call.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then too.
Please note. This event is being recorded I would now like to turn the conference over to Eric Bernacki Chief Corporate Officer. Please go ahead.
[noise]. Thank you operator, good afternoon, everyone. Thank you for joining it's easiest gaming third quarter 2021 financial results call. My name is Eric Bernacki, the Chief corporate officer of enthusiasts gaming.
With me today is our Chief Executive Officer, Adrian Montgomery, Our Chief Financial Officer, Alex Macdonald, and our Chief operating officer somebody thermally will begin with commentary on the quarter from Adrian and Alex before opening the floor to your questions before we begin I'd like to remind everyone that today's presentation contains forward looking information that involve known and unknown risks and uncertainties.
And other factors that could cause actual events to differ materially from current expectations. These statements should not be read as assurances of future performance of results such statements involved known and unknown risks uncertainties and other factors that may cause actual results performance or achievements to be materially different from those implied by such statements more complete discussion of the risks and uncertainties facing the company appear in the company's management discussion in in <unk>.
All of this with a three month period ended September 30th 2021, which are available under the company's profiles on SEDAR in Edgar as well as on the company's website enthusiasts gaming Dot Com you are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this presentation company disclaims any intention of obligation except to the extent required by law to updating.
[noise] revise any forward looking statements as a result of new information that future events or for any other reason now I will turn the call over to Adrian Montgomery C E O of enthusiast gaming Adrian.
Thank you Eric.
Good afternoon, and welcome to our third quarter 2021 financial results Conference call. It is my pleasure to once again report on the financial and operational accomplishments in the quarter and year to date and to reiterate why we believe our plan to dominate the video game and he sports fan experience.
Is on the right track.
I'd also off the top late to think all the hardworking enthusiasm to show up and give it their all every day. The outstanding results of this quarter are all because of you and we appreciate you very very much.
At the beginning of the year, we told shareholders one that revenue in gross profit with trend up throughout the year in terms of both dollars and percentages to the direct sales would increase in each subsequent quarter of the year three.
Three and that paid subscriptions would increase in each subsequent quarter.
I am extremely pleased to update shareholders today and to tell you that we are delivering on these commitments.
Revenue in the quarter grew 165% to 43.3 million from 16.3 million a year ago pro forma the acquisition of Omnia media revenue grew 37% from $31.7 million in Q3 last year.
Gross profit grew to 10.1 million.
Marking the first time in the company's history that quarterly gross profit past $10 million up from $4.1 million, just one year ago.
Gross margin improved to 23.4% in Q3 up nearly 700 basis points from the same quarter last year and up 180 basis points.
From Q2, this year and 360 points from Q1.
Or buy and build strategy continues to underpin our revenue growth and margin expansion.
Again, we communicated to shareholders in the middle of 2020 that we would dedicate the necessary resources and focus towards shifting our revenue model from a media aggregator to an integrated media content and entertainment model and in doing so meaning meaningfully improve the margin profile as <unk>.
Well and the last four quarters I'm very pleased to report that we have made incredible strides in this area.
Direct sales revenue grew to $6.8 million in Q3 up from just $1 million in Q3 last year and up 55% from just one quarter ago.
Direct sales this quarter accounted for 16% of total revenue compared with just 3% in Q3 last year.
And with the premium rates. This type of revenue commands. It has contributed a meaningful portion of the nearly 700 basis point margin improvement in the same period.
This is part of the secret sauce of our buy and build strategy. We have consistently proven that we can increase the monetization of the assets, we acquire through our unique flywheel.
By combining more touch points to our Gen Z and millennial consumers. We are increasingly recognized as a partner of choice and a one stop shop for large brands and advertisers.
Some of the partners we worked within the quarter include Americans Navy with whom we collaborated on an integrated media and esports activation.
Icy hot.
Where we work with them.
And the Shaquille O'neal Foundation on an activation that saw top E sports players team up to compete against Shaq and N B a two K.
We also began new relationships with door Dash Puma elevation pictures, Bacardi and Paramount Pictures to name a few.
As you can see we are working with a diverse group of brands across government food and beverage apparel entertainment and gaming.
One activation I am extremely proud of and everyone. At enthusiasm is proud of is the work we are doing with Lego.
And I would be remiss, if I didn't recognize the incredible creativity and execution of our content talent and sales teams for bringing this project to life.
In July the luminosity Academy was launched to push the boundaries of creativity and guide the development of young gamers across North America. After.
After several weeks of auditions and filming in Los Angeles episode, one of the luminosity Academy Lego Technic first class was released this past weekend with 30 competitors competing for a spot in the luminosity Academy as of this morning, or almost 500000 views on Youtube and.
And just a few days with four more episodes in the season to come.
So why did Lego choose us well.
Well again, it goes back to being able to offer brands more touch points and more integrated packages than the competition, all while offering the highest level of brands safety.
Which is of Paramount concern to Lego.
The success of the Lego campaign, followed several other integrated immediate content talent any sports deals, including the first season of gamers greatest talent, which aired in Q2 of this year and was sponsored by Tiktok Unhealth cosmetics as well as our work with Universal Pictures and Walt Disney Studios to promote theatrical releases.
I would also note that not only are are integrated offerings, winning in the marketplace with brands others have taken notice as evidenced by the recent news that gamers greatest talent has been nominated for a 2021 digit a award for best gaming or esports campaign.
While we are monitoring global trends, including supply chain challenges. The direct sales pipeline remains strong into the first part of Q4 and Q1 and we continue to expect sequential growth this quarter.
Turning to paid subscribers another area of high growth for the company.
The number of paid subscribers at the end of the quarter was 207000 compared to 112000 at the end of Q3 last year, an increase of 84%.
This quarter, we added 52000 subscribers aided in part by the acquisitions of game not an addicting games.
As I have said on previous conference calls the strong growth. We are seeing is a direct result of the investment we made in queue for last year to establish a team dedicated to growing our subscription business.
From a revenue perspective, the growth areas of direct sales and subscriptions totaled $9.3 million in Q3 or about 21% of total revenue compared to just 2.6 million or 8% in Q3 last year.
This nearly three fold improvement in the mix of higher margin revenue is something we are particularly proud of we believe there is still more margin growth to come in these two areas.
Late in the quarter, we announced the Alpha release, a project G. G Cross platform Pan enthusiast gaming social network, United Gaming uniting gaming any sports fans on desktop and mobile.
Project G G will enhance the company's ability to deliver a more complete fan experience with a targeted engaged in personalized product for gamers and customers alike.
It represents a significant step towards the company's evolution to becoming a technology powered media E Sports and Entertainment company.
Project G. G Alpha will serve as a test version of the gaming social network, while offering feedback to enthusiast gaming design and user experience teams.
That's feedback and testing will assist our teams as they prepare for project G. G to transition to a beta version in 2022.
As you can see we have executed on many fronts in the quarter.
We successfully closed the game not an addicting games acquisitions in the quarter and they're integrating well into our fan and monetization flywheels.
Some have asked why these deals makes sense for enthusiast gaming and in particular, how addicting games fits in with our overall strategy.
Well.
It's all about the flywheel, which is about owning more content that can be integrated across enthusiast and luminosity properties content and talent. Let me give you an example.
Shortly after the acquisition clothes, we begin integrating addicting games.
Last week, we tested an internal cross promotional campaign, bringing together addicting games content and luminosity creators.
We created dedicated luminosity art called skins are virtual goods inside the popular casual desktop and mobile game little Big Snake.
For the past week different luminosity streamers have been playing little big Snake live during their streams on twitch and promoting the game to their fans.
Collectively little Big Snake was promoted to millions of new potential users, while also creating content at the same time.
And while today, the virtual goods being purchased within a little big Snake have no inherent value outside of the game. We now have a platform to begin developing N F T for some of our own intellectual property.
As a research demonstrates there is a marketplace for these items.
While this was just a first test we are excited about the potential cross promotional opportunities in our sights not to mention some of the sponsorship opportunities we're already working on with Addicting games properties.
We are extremely well funded to continue to execute an additional accretive acquisitions that will expand our audience reach and provided deeper more enriched fan experience.
We're just getting started and believe very much in our buying build growth strategy.
Constructed around our proprietary flywheel.
We have accomplished a lot through the first nine months of 2021, and we are confident in our team's ability to execute in queue for as we continue to.
To execute on this strategy and we will continue to deliver results I will now turn the call over to our CFO, Alex Macdonald for further commentary on our financial results Alex.
Thank you Adrian.
Once again, we have a a great quarter to present here this evening and what a quarter. It was our third quarter 2021, a few quick notes before I begin my commentary I note that our results are presented in Canadian dollars I note that our business is affected by seasonal trends in digital advertising with sequential increases each quarter throughout the year driven by <unk>.
Creasing that prices and demand, which peaks in queue for the seasonality is isolated to a media in content revenue streams. I also note that the acquisition of Omnia media occurred on August 30th 2020, the comparative financial figures relating to 232020 and the statements and MTA include approximately one month of on their results the 2021.
Balance sheet and income statement include balances of the company, including Omnia now, let's talk about the business. We continued to deliver growth Q3 revenue was a record high 43.3 million up 165% from the reported 232020 revenue of 16.3 million. This increase was driven by our.
<unk> strategy included Omnia as well as strong organic growth in direct sales and across all three of our revenue streams of media media and content E Sports and entertainment and subscriptions Q3 revenue by source was as follows media and contents 38, 7 million subscription $2.5 million in these sports and entertainment.
$2.1 million the media in content revenue of $38.7 million compares to a 13.6 million reported in Q3 2020, an increase of 185% Q3 media in content revenue attributable to on Mia is 32 million, which is up 25% year over year Q3 medium.
In content revenue, excluding Omnia is $8.5 million, which is up to 77% year over year. The increase in Q3 media in content revenue apart from the impact of the Omnia acquisition is mainly due to one a significant increase in direct sales the majority of which are recognized in media and content total dreck.
Sales were 6.8 million in Q3, 2021, as compared to 1 million in Q3, 2020 and to a web R. P M, which was 103% higher in Q3 as compared to Q3 2022, three subscription revenue was 2.5 million up 55% from 1.6 million in Q3 2020.
The increase in subscription revenue is attributable to an increase in paid subscribers. The company had approximately 207000 paying subscribers at September 30th 2021, which is up substantially from approximately 112000 paid subscribers add that September 30th 2020, the increase in paid subscribers is 85% <unk>.
Year over year of which 51% is organic and 34% is from acquisitions. The company continues to grow the subscriber base on its existing subscription offerings and continues to offer additional subscription offerings on new platforms Q3, East sports and entertainment revenue was $2.1 million as compared to $1.1 million.
Q3, 2000, 2100 per cent increase year over year as as a result of the growth of a virtual events, such as pocket game or digital as well as increased sponsorship Ah luminosity driven by direct sales.
We are very proud of the growth in the company's top line. However, the growth on a currency adjusted basis is even greater a significant majority of our revenue is earned and measured in U S dollars, which is translated into Canadian dollars for presentation in our financial statements. The average USD to cat exchange rate in Q3 2021 33.
Which dropped to 126th in Q3 2021 had the exchange rate remained constant one thirty-three revenues in Q3 2021 would have been 2.3 million higher for a total of $45.5 million even on a pro forma basis to include the acquisition of Omnia on a constant currency measurement revenue would've been up 44% year.
Over here. These F F F X movements have a similar effect on our cost of sales in certain areas of Opex with limited that economic impact. We are proud of the significant growth in revenue, both with and without considering currency movements.
The exchange rate between the U S dollar in our presentation currency of the Canadian dollar should be monitored and considered when analyzing are forecasting results.
Gross profit was an all time record high of 10.1 million in Q3, 149% from the reported 232020 gross profit of 4.1 million our growth strategies include higher yields and higher margin revenue streams, such as direct sales and subscription direct sales and subscription revenue reached all time highs of 6.8 million in $2.5 million.
Specter of Lee, which helped drive the record gross profit direct sales and subscription now account for approximately 21% of total revenue up from approximately 8% in Q3 2023.
Gross margin for two three was 23.4% up from 16.8% in the same quarter last year pro forma omnia as we execute on our growth strategies, there's 660 basis points improvement in gross margin in one year continues to reveal the compounding effect of our business model when considering the significant.
Both in revenue over the same periods operating expenses were 21.4 million in Q3 up from 8.2 million for two 320 20 close to half of this increase is isolated to non-cash expenses of share based compensation amortization, which were $5 million and 2.4 million in Q3, respectively. A portion of this increase off.
It relates to the registration of the company with the SEC and the NASDAQ listing office in general includes items, such as insurance filing enlisting or sustaining fees. Many of these expenses began in Q2 of this year such as the required insurance and will continue for the foreseeable future.
And the first part of this year.
We made investments in our business to support anticipated growth. These investments were focused on head count reflected in salaries and wages expense on content production programmatic yield and data capabilities reflected in technology and content expense and we allocated additional resources to sports and entertainment and he's expansion.
Floating through three and while we expect the associate in line items to continue to increase over time, we do not anticipate the same level of expansion in operating expenses in the near future as was invested in the first part of this year, we have professionalize the business and it has as of today existing capacity for significant growth that.
<unk> comprehensive loss was 12.3 million, resulting in a net and comprehensive loss per share both basic and diluted of 10 cents in Q3 net cash used in operating activities was 3.8 million for Q3 significantly improved from you too and we ended the quarter with a healthy cash balance of 33.5 million.
I want to be clear that the company does not have any current intent to access the equity markets for operational cash we remain of the strong opinion that the results of operations in the financial condition of enthusiasts gaming has never been stronger we have the cash the operational capacity the right strategy.
And the right leadership to continue our growth.
And the potential for growth for the company is only increasing in Q3, we acquired addicting games unlocking new markets of both casual and mobile gaming for the company. This brings with it expanded subscription capabilities e-commerce opportunities and mobile inventory for our direct sales team. It is a welcome addition to our portfolio.
I want to mention that the company is aware that other digital publishers are expressing concern regarding two three and now Q4 cpm's due to the macro effects of supply chain interruptions in labor shortages in theory supply constrained clients reduce their short term AD spend due to an inability to service incremental customer demand. However.
<unk> with that said clearly we did not see any impact in our Q3 numbers and our C. P. M has remained strong to date in queue for with Black Friday, Cyber Monday and holiday shopping still ahead of US. We are watching closely we will continue to monitor the pricing on our bidding networks and optimize if or as necessary, but we have.
No concerns at this time.
I'd like to officially welcome drew MC Reynolds of RBC capital markets, who initiated coverage in October. Thank you to drew and his team. We are very pleased to have him here to all our analysts. Thank you for the work you do an enthusiast gaming and to our shareholders. Thank you for your continued support and trust in US we will continue to work hard for.
Are you.
I will close by saying that we often describe enthusiasts gaming as owning the fan experience. This would be imagined as being part of every aspect of of gamers journey from the moment they put down the controller. However, with the acquisition of Addicting games and Susie S. Gaming now owns its very own game titles and it's very own.
Game studio when we connect our existing and future casual game titles with our roster of talent creators and Influencers, we can make magic happen and that's good for our business.
And of course.
Ladies and gentlemen, our business is the business of gaming.
Operator, I kindly turn it back to you.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speaker phone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from my Crawford would be Riley. Please go ahead.
Oh, Thank you very much Adrian.
Z a shift towards this more integrated media content entertainment.
A a business how does that affect your long term financial model.
I think it's consistent Mike with our long term financial model.
And it the result of.
Of moving away from a low margin aggregator a vibe walls selling programmatic ads.
Commoditize rates and <expletive>.
<unk> the business the way, we have continuing to shift at the way. We have will only result in you know upon successful execution the kind of growth in in margins and profit that we've that we've long talked about it. So we think it's consistent with our growth model and and you know the numbers.
Terminal state numbers at Alex's referenced in the past too.
Okay excellent and then a couple of questions on project G. G. So well worm what did you learn in the Alpha test and then two what is the subscription pricing claim for.
G G.
Hey, Mike This is Alex but we've we've learned a couple of good things in the early days of the Alpha. The reception is very good a lot of the initial learnings were on I mean, it's important but the D y and the U X.
From from the user perspective, which is a very important part of an alpha test in fact.
It could be one of the most important parts. So that's where the office focusing right now user interface user experience as far as pricing you know the way the way I look at it we haven't we haven't set it yet.
We've become much more intelligence on optimizing our subscription models for pricing, we all with with a growing number of existing subscription offerings. We've become good at at managing that I think we are going to continue.
To monitor the reception and and the the offering and the value we can bring the abusers and of course, we'll we'll we'll price accordingly, I I like where our existing subscription offerings are going they're they're moving north every few months on kind of an average basis, but anyway, we're not we're not quite price there at least we haven't announced prices after the subscription but.
But it has come.
Okay. Thank you one last question if you don't mind. So thanks for talking about that little big Snake and a little bit of your N. S. T strategy, but do you have a broader N F T or or.
Strategy to.
Sure with us.
Uhm.
<unk> nothing specific in in in the sense of of a definitive strategy as you describe what we know is N F. T. As are very very real we know because our creators.
Are.
Fully invested in them, we see this incredible intersection between M. S N F Ts in the met averse.
And we sit with this incredibly loyal incredibly large audience of people who are going to be the main denizens of that met averse, who are going to be the purchasers of those N F. Ts and we we find ourselves in an advantages position because in addition to that.
Audience, that's tailor made for both the <unk>, we also our our content factory.
And at the end of the day that is what you need to be successful with non fungible tokens, we have a ton of creators who can amplify we have a ton of content, we have a large audience and so we see them out of birds. We C. N F T's as two very very real very very positive.
Uhm trends that this company is uniquely positioned to take advantage of and so that in very short order has become another one of our key priorities to to develop them and explain as they unfold.
Excellent. Thank you very much.
Thanks, Mike.
The next question is from Robert Young was Canaccord. Please go ahead.
Hi, Good evening last quarter, you were giving us some trends around the RFP volume that you're seeing on the <unk> on the direct sales site <unk>, sorry, if I missed it but can you maybe update.
On those transfer still trying to grow and have you talk a little bit about the repeat activity with you know existing customer savvy helpful too.
Great, it's somebody or I can take that question.
<unk>. Your first question on RFP volume very consistent with the momentum that we saw in the previous quarter's Q4 is very alive and one for US you know great momentum out their average number or Pete Rfps are actually higher than what we've seen in the last quarter. So very pleased about that so you're a second.
Question on repeat clients look we as we mature a sales team and our relationship with the advertisers you know, we're having ongoing dialogues with some of these brands, where it's not repeat campaign for a quarter, but it's it's starting to become repeat business is where you know, it's it's more than a quarter.
Long and that we're very pleased with that some of the big brands that you know a brief covered in his remarks, our our brands that are huge fortune 500 companies and you know if they're becoming repeat clients of enthusiast gaming for inventory.
Okay Yeah.
No sorry, that's Robert I think that you know if you if you look at the growth in in the business in terms of the number of films titles, we promoted G fuel as an important to repeat customer July expanding through other proctor and gamble names H.
B O tick Tock. These are all big Big names and they're all officially repeat customers. So we're feeling <unk> excited that that's our value proposition has been validated by some of these household names who have said you're delivering for us in your delivery Roy for Us and that's a key part of our momentum right now.
Alright, so like a repeat customer would be bigger than I like summer sudden longer duration. So there's a longer duration contracts or or is it or what you're trying to say just to give you a more visibility under spend over time.
Yeah, I could I could pick that one so it's a combination of all the above and more for because you know with the when you're in queue for one of the other things that happens is you know some of the advertisers started planning for 2022.
So the advantage for us as we're not only are we have in queue for conversations while we're having 2022 conversations and you know in addition to the RFP volume the average or if the dollar value sides is also increasing.
Again, that's another healthy sign for us and we're super excited about that especially from these big brands that even just mentioned.
Okay and then in the past you you've talked in the past about the the AD inventory that you have that's applicable to the direct sales model I think it was a very small percentage of your AD volume.
Maybe you could get update us on that and he can give us some revenue percentages, but how much would that revenue percentage represent in your AD volume.
Sure so effectively that that metrics, hey, Robyn, Alex again, and that that metrics always been pissed off you know.
Our our our very first formula here and that was 10% of the inventory at 10 times. The price. So if you look at the programmatic <unk> media content of course, a good chunk of that 6.8 as in there, but those numbers should be equal to programmatic in the direct should one day become equal in fact they.
Direct should one day exceed so we're still at quite a low percentage like we're still certainly sub three but that direct sales number as it grows you know that's slowly climbing up a good chunk of the way, they're actually though but what we're also finding is also in that direct sales as we move media, we're doing combined packages. So as we move media.
We also moves sponsorship for luminosity as part of the package. We also move sponsorship for the entertainment assets such as rising stars gamers greatest talent. There's a navy was a perfect example, so anyway. So so it's it's not a direct correlation now we see direct sales as a bigger uhm bigger than just.
Per cent of inventory, but to answer the original question is still sub three but it is growing.
I would also add to that story, Rob I would also add to that and again. This is another thing that we're proud of when we executed beyond me a transaction one of our main theses as you will recall is that that video pre Rowley inventory, because it's skewed Gamer U S <unk> the it.
Was among the more undervalued video inventory on the on the Internet and certainly when we took in Omnia, we took in a whole whole bunch more inventory, but when we talk about the Navy and we talk about door dash and we talked about Samsung and we talk about Disney and H B O.
A big component of these campaigns and many and in almost all cases is access to that you tube pre role and access to that video inventory and the clients love It and it's just a nice validation that our investment thesis is has been proven correct. They can't get enough of that you see the inventory.
And is a key part of all our integrated offerings.
Okay. Thanks, a lot and one last question just on the subscription ads I was trying to untangle the contribution from addicting and game not cause I assume that this quarter in front of project G. G would be a lower corner first for sub Bachelor doesn't it seems like you had 52000. So is there a way to understand is there some project.
G G and there is it just the organic business and how much comes in from Addicting, a game now and then I'll pass line.
Ah No problem. This is Alex again, I knew you would ask that Rob. So we've provided the number it's in the M. B a at about 35000 from acquisitions. The percentages. So the of the 85 I think I mentioned this apartment he's gonna be 85% year over year growth, 51% is organic and 34% is from.
<unk> acquisition and the exact number is provided for in the N B a it is.
Well I'm not going to school for now and keep the time, but it's it's there and that's the perfect breakdown, 51% organic 34% growth from acquisitions, Okay, and I don't think we're there for that project.
No zero zero, no, but again.
This also is you know that's a healthy number and a healthy growth number 207000 subscribers certainly it speaks to a pretty disciplined acquisition strategy and and one of the criteria. We evaluate quite quite methodically is we we want to.
The subscription potential in the assets that we buy either they have no subscription, but they're right for subscription or they have a bunch of subscribers that we can bring in.
To the enthusiasm gaming model.
We get that recurring revenue, we get that lifetime value, but we can also migrate them to G. G G and other places as we go forward, So addicting games and game not to have had strong base level subscription businesses, we brought them in.
And it's only upside from here.
Thanks, a lot guys.
Thanks, Rob.
The next question is from Jeff fan with Scotiabank. Please go ahead.
Good afternoon everybody.
Last quarter, I think I'm on the financial side.
There was some references to turning EBITDA positive and not being around the corner. Just wondering if he can give us a bit of an update on that is that still the case.
On the sales and advertising pipeline.
I think I missed the answer to the previous question did you give any kind of quantifiable metrics cause last quarter.
I think age when you gave us the.
The number of Rfps per week that you were seeing and I guess the point there was that what we're seeing a lot of momentum compared to what you saw earlier in the year.
Cause I'm momentum continued or is that volume just kind of stay consistent over the last few months.
Uhm and then just to get the final question is just on on supply chain why do you think you're not seeing the impact is it because of the the.
The the mix of.
Advertisers that you have just wondering why you're not seen thanks.
Yeah.
Thanks, Jeff I think to go through those questions in order. The net loss you just did net loss in this quarter.
Is the smallest it's ever been and I think given our revenue profile it points to it points to EBITDA positivity being around the corner as we've said and and certainly you know the the the pace at which were were growing gross profits to go from 8 million $10 million in a court.
There is an encouraging sign for that as well again, we have an ability if you know to be EBIT, a positive tomorrow, we could not investing G. G. We could not invest in some of the people we could not have made some key hires to grow our direct sales.
[noise] team in in the United Kingdom, et cetera, et cetera, and we could manage a very nice EBIT a positive business, but the growth is is in front of us we see it every day and we want a position ourselves to take advantage of it. So I believe the adjusted net loss Alex was was sub for 3.3 dollars.
Nine three pointing.
Yeah, depending how you calculate it excluding amortization of Stock-based free.
Net cash used in Aprea Kashers and operations was a 3.8 was 3.8, so 33 million Bucks in the bank. So it's pretty soon so we feel like we're training in the right direction, but we also have these other opportunities that were uniquely situated to and as the merdivorous becomes more and more of a topic of conversation is <unk>.
N F Ts become more and more real and there's lots of macro points again, we sit at the intersection of a lot of these trends in so you know what will will capitalize on on physician Earth R ourselves for growth, but that that would be the answer to that question in terms of the.
[noise] momentum, we see in queue for we see strong momentum in queue for in terms of the number of our a T is yes somebody did answer that a little earlier, but he's more than happy to answer it again number yeah, hi, Jeff that's done, but I can I can quickly recap the answers from earlier you know.
Four Q4 on average we're seeing about 15 rfp's.
In a week again that number fluctuates, but on average it is a very good RFP volume number. In addition to that also the average RFP amount, but we're seeing is higher than what we saw in two three again another great positive news for us. So we're definitely capitalizing on both of those I think the red.
The questions you know in terms of overall Q forces.
Supplies sure either I'm sorry.
I mean, you know on the supply chain I I would say based on the momentum we're seeing where it. It's it's almost a non issue for us I mean, a great momentum that we're seeing from all sorts of different advertisers you know some of the brands, we mentioned repeat clients like H B O. Lego G fuel metallic is being left with the names that we work with.
No no disruption to us and we're not bothered by it at all.
Thanks, and if I may just pull up.
Maybe a question for Adrian Phase Clinton recently, two announced that there to the military Spock.
Wondering if you're at a high level just to kind of compare contrast, how.
How do you see your business compare to.
Something like that.
[noise] well I I think it's exciting for our industry. The phase is coming to join us in the capital markets I think there's a lot of excitement around that brand.
I think obviously, they're commanding evaluation, which is commensurate with the growth.
That we all see in the industry and and good for them I think it's nothing but positive big fan of theirs and what they've built.
Luminosity is unexciting esports organization, we play against Phase our call of duty team plays against their call of duty team we compete.
In that vertical but again, we're we're the only ones who are building across the fan experience so over and above luminosity versus phase. There are are owned and operated websites. There are are you tube platform. There is.
Is our pocket game or events that are held around the world and virtually there are.
All the businesses that we're building, which go far and beyond building and esports organization or a lifestyle brand and so we've purposefully taken on a bigger mandate because connecting those fans through that flywheel.
Is exciting for us and gives us a unique differentiator with our customers as well as.
Gives us a diversity of asset mix, which is important again and I think phase is fantastic I don't know if phase in Lego work together, but building a kid's esports Academy with Lego and luminosity definitely.
[noise] works we have.
We have one of the most popular female fan sites in the world being the Sims resource and we can work with Elf cosmetics and and so we appeal to a broad swath.
Of demographics through our purpose full building up our asset mix and again addicting games is such an incredible opportunity for us to enter the casual gaming market I don't know about anyone in the U S. But if you typed the word games into.
To your browser up here Uhm Addicting games is the first name that Pops up so that just gives you. An example of the strength of the Addicting games brand shows you guys that know what they're doing so again diversity of asset mix makes us different one stop shop makes us different.
Different demographics, but all that being said the excitement that phases, creating in the public market south of the border can only be good for industry and I wish them the very very best.
Great. Thanks, guys in the record.
Thank you.
The next question is from Brian can Slinger with Alliance Global Partners. Please go ahead.
Great. Thanks, so much nice quarter two questions. The first sorry, I joined late if you said this but in terms of Ah Gee Gee do you give an update on when the plan hard lunches or is that unknown right now.
Hey, Brian This Alex no we do not we didn't get well we didn't give an updated.
Consistent 2022 were in Alpha right now no change off it's only been out for you.
You know a couple of weeks and where we did say was that what we're learning in Alpha is focused primarily on U X D y.
That's the initial feedback with getting which is very valuable part of the alpha testing, but other than that we still have an eye to you know for the 2022 and that's what we said no change.
You said early 2022 is that when you said.
Yes.
Okay.
And I'm not sure you would track this on the programmatic site, if you'd be able to but is there a vertical breakdown of who you're advertisers are on the direct sales side.
You know, maybe maybe 10% Entertainment 10, you know I'm not I'm not sure necessarily but if you could provide any.
The top you know vertical that would be wonderful.
[noise], we're pretty well diversified and that's and and you know there's obviously the biggest macroeconomic bucket of of endemic versus non and done that.
But it is three in particular, you know we did work with government food and beverage apparel entertainment and of course.
Uhm, so pretty well diversified and and quite honestly, there's a lot of new brands.
Coming in this case I think one of our biggest customers right now state farm insurance you wouldn't have thought that state farm insurance would be a big gaming you need sports customer, perhaps a year ago, but here. They are today any more specifics on that Thunder.
Oh no. The only thing I would add is that you know certainly we also have a ton of room to grow across all these vertical and break into new vertical. So the way that we're at war with ourselves being one is you know not necessarily on dominating one vertical, but rather expanding our coverage and footprint across the.
The different geographies uhm cute success, there, we haven't really verticalize trousdale statements else approach yet, but it is across the board at this point and we're seeing huge success across all verticals.
Yeah.
I'm doing my questions from my point might be that you just aren't.
Seeing a lot of advertising to begin with with companies are facing shortages. You mean state farm doesn't have a shortage for example, right. So that was what I was trying to figure out but thank you I agree. Brian. This is Alex I I wanted just add quickly I agree because we also look at it like we're not anywhere close to capacity <expletive> right. So it could be that we are seeing.
But it's it's hit it under the under the growth Yeah.
<unk>, maybe we don't know, but you're right a lot of our verticals don't have exposure a demo as less exposure and and we're not even close to capacity, so who knows maybe the growth rate it would've been.
An extra 5% higher without it but alright, we can do is stomach you're just that you know if you remember our commentary a couple of quarters ago, where we didn't see certain vertical like we didn't see hospitality and we didn't see certain where where it goes in the market, but now you know I I I wouldn't say there is a vertical that we you know we're not seeing is not participating asleep.
Or lettuce, where we play.
Great. Okay. Thank you.
The next question is from Derek Soderbergh was callers. Please go ahead.
[laughter], Hey, guys I joined the call late as well. So my apologies. If this has been covered so you guys have a nice contribution from working with the Biden campaign back in 2020 did you benefit at all from recent political campaigns, whether it be in Canada. The U S anywhere else you know.
Do you expect the contribution to direct sales from political campaigns and the upcoming 2022 elections in the United States it'd be great. If you could just talk about that opportunity for you guys.
Yeah no. Thanks, Thanks for the question certainly as as as we've discussed we we did a significant amount of work for one presidential campaign in 2020, I think it was extremely well received we've had conversation.
<unk> at the state level at the national level with respect to 2022, which is exciting but nothing firm to announce their obviously given when that election cycle happens, we did not do anything in in the Canadian elect.
<unk> however.
We did a number because of the work we did in the presidential campaign, we did a number of really cool work campaigns with the AD council around vaccine awareness and other things and so there was a direct link between the presidential campaign in the fall and and the.
Stuff, we did with the AD Council, which we were really proud of we're in the mix for 2022, which is cool and will report on on that when.
When we get closer.
Got it got it and then I did want to ask about direct sales you guys are seeing some nice growth. There are you talking about Ah repeat customers. Your customers are seeing D. R O y a.
Those investments you know at the same time, it's still a very small portion of the marketing budget of your customers. So I guess I'm wondering what sort of holding them back from doing like a 50 million dollar deal with you guys and and would you have the inventory our capacity to handle a direct sales deal of that magnitude.
The short answer is there anyone around here has said no to a 50 million dollar deal wouldn't last long of enthusiast gaming [laughter], including myself I think that.
<unk> what I can tell you is that in a very short amount of time.
5010 thousand dollar tests campaigns have turned into 100000 dollar campaigns have journey into 500007 figure campaigns and as advertisers have gotten more and more comfortable with with with really understanding this space.
They've upped their budget significantly and presumably of taking money away from traditional media to put it to to to this world as well as the fact that when we get in front of him. The fact that we are a one stop shop. The fact that we can put their logo on aluminum.
City Jersey, and create programming like the Lego Academy that gets half a million views in a couple of days on Youtube and we can get the biggest gamers the world invested in promoting their product on stream when we can wrap ourselves around our customer.
<unk> in a way that no one else can that is seeing an increase in the amount of money that they are willing to spend.
I think that you know as companies like Pepsi and KFC developed in House E sports departments as as this industry matures at such a fast rate. The 50 million dollar deal is definitely out there and the <unk>.
Fact that we can service any demographic male female competitive sports content creation live event virtual event, we can integrate casual games into a value proposition, we can integrate content activation like gamers greatest <unk>.
<unk>, we can do all those things we can be a one stop shop and we can take that money from those customers. So that's why we're pretty excited about where we're going with this.
Got it thanks guys.
Scuse me. The next question is from drew MC rentals with RBC capital markets. Please go ahead.
Yeah. Thanks, very much just one follow up for me and it gets it's related to kind of previous comments and then it seems like.
It doesn't matter, where you are out there there's there's a gaming strategy that's being launched by a lot of players out there. So I think people are recognizing I think the segment you're in more and more as the days go on so just wanted to talk on the M&A side, just what you're seeing in terms of.
Valuations out there and then take it with you Adrian that talked about you know your room in a criteria obviously looking for in some situations a subscription component can you just elaborate on just generally what you're you're emanated criterion.
At the moment.
Thanks true and I believe this is your could be his first ever yeah, well, that's you and Alex. So that's this is the inaugural question from our V. C. We appreciate it.
We as we've said from the outset, we're connecting gamers through our communities.
Content creators and experiences where community based company and we want as many fan communities as we can and so the first.
Criteria for us is buying from an emanate perspective fan communities.
We want them to be in game titles or game genres that we're not currently dominant in that would be a second criteria. We want to feel good that there is a certain evergreen nature to the type of content.
That they produce that would be another criteria subscription direct sales or other two criteria that we look at very very carefully as.
As well as video inventory, if we see a fan community that's performing well.
That has a very very small percentage of its ads as video ads, we get really really excited those would be other criteria that we look for Alex would you care to expand yeah sure. Some some of the quantitative we look for a significant amount of.
Tier one traffic, which is typically you asked account in western Europe that monetize is of the highest rates. So we look for trends in that obviously, we look for what we see is undermonetized AD units in inventory. The viewership translator mentioned are very important on a quantitative basis is their viewership growing up as of.
Course important.
But I I really focus on is is the genre that there and in the game titled That's easier said is there an evergreen is that growing the the they're kind of micro environment that they exist and is there macro is is that growing engagement with like an engagement the more the more in the higher the engagements that.
That's you know repeat visits time on site time on platform those point to better subscription possibilities uhm. The user experience data, we loved data with data comes things like per cent registered users. So we look at that I mean, those are those are some of the top.
Give me it you're giving a R for Friday Playboy Wink.
Uhm, it's extremely my Grandma.
[laughter] that you can see we have also we have quite a list we have quite yeah.
<unk> I I don't want you to give all of that away. So it will stop there, but nice to see the momentum it and the resilience of the business I think that's in contrast to a lot of other companies out there thanks very much.
Thank you drew.
This concludes our question and answer session and the confidence is also now concluded. Thank you for attending today's presentation. You may now disconnect.
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