Q4 2023 Super League Enterprise Inc Earnings Call
None: [music].
Greetings and welcome to the Super League.
Operator: Greetings and welcome to the Super League. 4th quarter and full year 2023 conference call. Please note this conference is being recorded. Before we begin, I'd like to caution listeners that comments made by management during this call may include forward-looking statements within the meaning of applicable securities laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statement.
Fourth quarter and full year 2023 conference call. Please note. This conference is being recorded.
Before we begin I'd like to caution listeners that comments made by management. During this call may include forward looking statements within the meaning of applicable securities laws.
Statements involve material risks and uncertainties and actual results could differ from these projected in any forward looking statements due to numerous factors.
For a description of these risks and uncertainties. Please see Super League's financial statements and M. DNA for the fourth quarter and full year 2023, and at December 31, 2023 available on the SEDAR and Edgar.
Unknown Executive: For a description of these risks and uncertainties, please see Super League's financial statements and MDNA for the fourth quarter and full year 2023 and the December 31, 2023, available on the CDER and EDGAR. Supporting qualifications regarding forward-looking statements are also contained in Super League's earnings release distributed earlier this afternoon and also available on EdGuard. Furthermore, the content of this conference call contains time-sensitive information accurate only as of today, March 27, 2024 Super League undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call.
Important qualifications regarding forward looking statements are also contained in Super League's earnings release distributed earlier this afternoon and also available on Edgar.
Furthermore, the content of this conference call contains time sensitive information accurate only as of today March 27 2024.
Super League undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances. After the date of this call.
Ann Hand: I'd now like to turn the conference over to Ann Hand, Chief Executive Officer. Thank you very much for the kind introduction and thank you all for joining us this afternoon to hear more about Super League's progress. I'm really proud to report our Super League fourth quarter and full year 2023 financial results and provide an update on our company's tremendous operational progress. 2023 was a game-changing year for us, highlighted by record revenues, balanced sheet fortification, streamlined operations, and a materially reduced operating expense structure. And it is worth mentioning, our largest single contract in company history. Specifically related to our record revenue performance, fourth quarter revenues grew 34% year over year, a quarterly record of 9.5 million, resulting in full year 2023 record revenue of 25.1 million, an increase of 27% from full year 2022.
I'd now like to turn the conference over to Ann hand, Chief Executive Officer.
Ann Hand: Thank you very much for the kind introduction and thank you all for joining US. This afternoon to hear more about Super League's progress I'm really proud to report our Super League fourth quarter and full year 2023.
Ann Hand: Financial results and provide an update on our company's tremendous operational progress.
Ann Hand: 2023 was a game changing year for us highlighted by record revenues balance sheet quantification streamline the operation and a materially reduced operating expense structure and it is worth to mention our largest single contract in company history, specifically related to our record revenue performance fourth quarter revenue.
Ann Hand: <unk> grew 34% year over year, a quarterly record of $9 5 million, resulting in full year 2023 record again revenue of $25 1 million, an increase of 27% from full year 2022.
Ann Hand: More importantly, what became evident over the course of the year is the brands are catching onto the imperative to meet generation Z and alpha and immersive entertainment platforms.
Ann Hand: More importantly, what became evident over the course of the year is that brands are catching on to the imperative to meet generations Z and Alpha in immersive entertainment platforms. These are the next great marketing channels where brands can reach massive young audiences and speak to them in a highly customized and personalized way to ultimately drive brand preference and conversion. There's a historic template for what's going on right now in advertising. Audiences have shifted from linear TV to streaming, and now ad dollars have caught up.
Ann Hand: These are the next great marketing channels, where brands can reach massive young audiences and speak to them in a highly customized and personalized way to ultimately drive brand preference conversion.
Ann Hand: Theres a historic template for what's going on right now in advertising.
Ann Hand: This shifted from linear TV to streaming and now add dollars have caught up.
Ann Hand: Similarly, audiences moved to social media 15, 20 years ago, and those brand dollars inevitably followed. We are about to see another seismic shift as large audiences already exist on these immersive social platforms, and brands are racing to catch up. Super League offers scalable solutions through our deep strategic and creative capability, coupled with our suite of proprietary products and measurement tools that enable brands to speak this important language of 3D engagement and respond to this sizable audience migration that's moved again towards immersive platforms. Our rising numbers speak for themselves as we continue to execute in 2023. We served over 100 brands and IP owners with pretty impressive highlights, including 11 custom builds with peak engagement at times as high as 30.5 minutes. You often hear me say this is like product placement on steroids. 15 custom integrations into existing popular experiences on Roblox, Minecraft, and Fortnite, generating more than 330 million visits. Again, let's underline that.
Ann Hand: Similarly audiences move to social media 15, 20 years ago and those brand dollars inevitably followed we were about to see another seismic shift as large audiences already exist in these immersive social platforms and brands are racing to catch up.
Ann Hand: Super League offer scalable solutions through our deep strategic and creative capability, coupled with our suite of proprietary products and measurement tools that enable brands to speak. This important language of three D engagement and respond to the sizable audience migration, that's moved again towards immersive platforms.
Our rising numbers speak for themselves as we continued to execute in 2023, we served over 100 brands and IP owners with pretty impressive highlights a lot.
Ann Hand: Kevin custom built with peak engagement at times as high as 35 minutes you often hear me say this is like product placement on steroids.
Ann Hand: 15 custom integrations into existing popular experiences aren't roadblocks minecraft fortnite generating more than 330 million visits again, what's underlying that 330 million visits across 15 custom integrations.
Ann Hand: 330 million visits across 15 custom integrations. We delivered over 180 media campaigns on Roblox and Minecraft. So these are campaigns that are in that mid five to seven figures range.
Ann Hand: We delivered over 180 media campaigns on robotics and Minecraft. So these are campaigns that are in that mid five to seven figures range. They're on platform media buys that provides advertisers with large reach and often serve to amplify and drive traffic to our immersive experiences.
Ann Hand: They're on platform media buys that provide advertisers with large reach and often serve to amplify and drive traffic to our immersive experiences. Additionally, we did over 40 supportive media campaigns across video, mobile, social media, and influencer marketing to further amplify our experiences off platform. We generate 340 pieces of video content generating tens of millions of views across TikTok, YouTube, and Snap for campaign amplification. And even on the consumer side, the direct to consumer side, we had 81 million try-ons on behalf of brands promoting branded avatar items, blue chip brands such as L'Oreal, Visa, Toyota, we're just naming a tiny few here of that north of 100 sought out Super League As for key trends, investors often ask me about the importance of artificial intelligence, obviously a very hot topic these days, that can either accelerate a business success or challenge its overall model. Super League is a clear beneficiary of AI.
Ann Hand: Additionally, we did over 40 supportive media campaigns across video mobile social media and Influencer marketing to further amplify our experiences off platform.
Ann Hand: We generated 340 pieces of video content generating tens of millions of views across tick tock Youtube and snap for campaign amplification.
Ann Hand: And even in the consumer side, the direct to consumer side, we had 81 million try on on behalf of brands promoting branded avatar items.
Ann Hand: Lou Chip brands, such as L'oreal visa Toyota, where just naming a tiny few here I've got north of 100 sort of Super League as a partner.
Ann Hand: As for key trends investors, often ask me about the importance of artificial intelligence, obviously, a very hot topic. These days that can either accelerate or business success or challenge. Its overall model Super League is a clear beneficiary of eye AI, we already use the technology to accelerate our creative development process and.
Ann Hand: We already use technology to accelerate our creative development process and other operational workflows. However, we're riding other key trends as well, such as the rise of co-creation platforms like Roblox and TikTok that empower everyone to be a content creator.
Ann Hand: Other operational workflows.
Ann Hand: However, we're writing other key trends as well the rise of co creation platforms like robotics and tech talk that empower everyone to be a content creator and another mega trend is just how the next generations shift is occurring in consumer behavior. This is the first truly digitally native audience that increase.
Ann Hand: And another mega trend is just how the next generation's shift is occurring in consumer behavior. This is the first truly digitally native audience that increasingly expects, in fact, demands, brands to first meet them in digital spaces where they commune and socialize and then transfer that brand affinity into real world preference in commerce. If we come up a little higher, game advertising is expected to be a $150 billion plus market by 2027. Roblox alone reaches 71 million active users a day with an astounding 156 minutes spent daily per user. That's larger than any other social digital platform that beats TikTok even by almost 2x.
Ann Hand: The only expects in fact demands brands to first meet them and digital spaces, where they come in and socialize and then transfer that brand affinity into real world preference and commerce.
Ann Hand: If we come up a little higher in game advertising is expected to be 150 billion plus market by 2027 roadblocks alone reaches 71 million active users a day with an astounding 156 minutes spent daily per user that's larger than any other social digital platform that beats ticked off.
Ann Hand: Even by almost two X and they have a bulk of climbing to 1 billion users. Currently robots is trading at 10 X. Their revenue our opinion is that roadblocks as a sleeping giant and this provides the potential for Super League to benefit from their success and greater secular growth.
Ann Hand: And they have a bold goal of climbing to 1 billion. Currently, Roblox is trading at 10x its revenue. Our opinion is that Roblox is a sleeping giant, and this provides the potential for Super League to benefit from their success and greater secular growth. And another way to think about the market opportunity, traditional experiential advertising, that's in real life. Experiential marketing is a $50 billion annual market in its own right. And while it offers high touch and trial, which can often lead to better conversion, think about it: you get to taste a great wine or drive a new car model, but it's challenging to scale. It's costly and very expensive.
Ann Hand: And another way to think about the market opportunity traditional experiential advertising that's real in real life experiential marketing is a $50 billion annual market in its own right.
Ann Hand: While it offers high touch and trial, which can often lead to better conversion think about it you got to taste, great wine or drive a new car model, but it is challenging to scale its costly very expensive and then there's the obvious geographic constraints.
Ann Hand: And then there's the obvious geographic constraints. As a simple example, imagine the tens of millions of potential car buyers that could test drive a BMW or a Toyota just over one weekend digitally first, without the impediment of driving distance to a local dealership, operating hours, or even just availability of test drive slots. The opportunities for immersive experiences offer so much more than a better replacement for traditional digital marketing. Immersive experiences can transform business models. Immersive digital spaces can offer scale and cost efficiency and can upend a brand's approach to R&D, learning development, supply chain and logistics, and so much more. And this is where we live, where we thrive, and why we are poised to add enterprise value to brands and IP owners, aside from just the smarter deployment of marketing dollars. So let's turn to pipeline health as a key leading indicator.
Ann Hand: As a simple example, imagine the tens of millions of potential car buyers that could test drive a BMW or a Toyota just over one weekend digitally first without the impediment of driving distance to a local dealership operating hours or even just availability of test drive slots the opportunities.
Ann Hand: For immersive experiences offer so much more than a better replacement to traditional digital marketing immersive experiences can transform business model immersive digital spaces can offer scale and cost efficiency and can up into brands approach to R&D learning development supply chain and logistics and so much more.
Ann Hand: And this is where we live where we thrive and why we are poised to add enterprise value to brands and IP owners aside from just smarter deployment of marketing dollars.
Ann Hand: So, let's turn to our pipeline health is a key leading indicator of our continued traction in growing operating leverage our Frankfurt reflected in the increase in our average deal size now approaching that $400000 range. We closed on six seven figure deals in 2023, including as I've already mentioned that largest deal in our.
Ann Hand: Our continued traction and growing operating leverage are reflected in the increase in our average deal size, now approaching that $400,000 range. We closed on six seven-figure deals in 2023, including, as I've already mentioned, that largest deal in our history with Kraft Lunchables valued at nearly $4 million across the second half of the year. We continue to have a strong repeat buying percentage in that 70% range. But more importantly, we're also continuing to diversify the breadth of our global brand and category reach as well. As I previously shared, these larger deal sizes and more predictable brand programs are shifting our business model from one that is short-term and campaign-centric to revenues that are larger and more recurring in nature, revenue streams connected to a brand's long-term strategy to interact with these social digital communities in a persistent way, just as they already do on traditional social media channels like TikTok and Instagram.
Ann Hand: History with crap lunchables valued at nearly $4 million across the second half of the year.
Ann Hand: We continue to have a strong repeat buying percentage in that 70% range, but more importantly, we're also continuing to diversify the breadth of our global brand and category and reach as well.
Ann Hand: As I've previously shared these larger deal sizes and more predictable brand programs are shifting our business model from one that is short term in campaign centric to revenues that are larger and more recurring in nature revenue streams connected to a brand's long term strategy to interact with these social digital communities and our persist.
Ann Hand: Wei just as they already do in traditional social media channels like tick tock and Instagram.
Ann Hand: As we grow and deliver on these larger programs. It verifies our unique position as the enterprise solution for brands to implement persistent omnichannel marketing and commerce across a variety of immersive platforms ultimately driving consumers back to our brands one owned and operated immersive webs.
Ann Hand: As we grow and deliver on these larger programs, it verifies our unique position as the enterprise solution for brands to implement persistent omni-channel marketing and commerce across a variety of immersive platforms, ultimately driving consumers back to a brand's own owned and operated immersive website and commerce experience. Now, it's worth reiterating how we view the brand journey, as this underpins not just how we scale and measure success but also how that business model of ours does transform over time. First, we introduce a brand to our immersive engagement offerings to help them achieve singular campaign objectives. We measure our success by the number of new brands that enter the funnel. Next, we become the immersive marketing solution of choice for a brand's various ongoing marketing campaigns. So think about this case in point: the fact that Universal Studios came back time and time again last year and kept putting money to work every time they had a new family-friendly movie release. We measure that success by repeat percentages but also larger aggregate annual brand spend. That's one of our seven-figure partners from last year.
Ann Hand: Right and commerce experience.
Ann Hand: Now it's worth reiterating how we view the brand journey and this underpins not just how we scale and measure success, but also how that business model of ours does transform overtime.
Ann Hand: First we introduced our brand to our immersive engagement offerings to help them achieve singular campaign objectives, we measure our success by the number of new brands that enter the fall next.
Ann Hand: Next we become the immersive marketing solution of choice for our brands various ongoing marketing campaigns.
Ann Hand: Think about in that case, it's the fact that Universal Studios came back time and time again last year and kept putting money to work every time they had a new family friendly movie release, we measure that success by repeat percentages, but also larger aggregate annual brands that that's one of our seven figure partners from last year.
Ann Hand: Then we guide brands to create persistent immersive strategies and presence we measure our success based on the number of larger deal sizes. Because these are now annual in nature and longer term brand programs again that is what makes those feel less like an AD model because those are easy to forecast.
Ann Hand: Then we guide brands to create persistent, immersive strategies and presence. We measure our success based on the number of larger deal sizes because these are now annual in nature and longer-term brand programs. Again, that is what makes those feel less like an ad model because those are easy to forecast, and they start to smooth out the seasonality in our business model and become revenues that feel much more recurring and predictable in nature.
Ann Hand: And they start to smooth out the seasonality in our business model and become revenues that feel much more recurring and predictable in nature.
Ann Hand: And then finally, the ultimate vision of the company is to evolve into being again, the enterprise solution and help brands build out their omnichannel immersive strategy with crossover to their own websites. We measure our success, there drew multiyear and multi platform brand spend and believe there is a potential to.
Ann Hand: And then finally, the ultimate vision of the company is to evolve into being, again, the enterprise solution and help brands build out their omni-channel immersive strategy with crossover to their own websites. We measure our success there through multi-year and multi-platform brand spend and believe there is a potential to participate in new revenue streams over time, such as technology licensing, first party data, and direct to consumer monetization, and we don't stop innovating. To accelerate new brand adoption through collapsed development cycles, making for just a more easily accessible entry point for new brands. We continue to productize repeatable elements of our custom experiences to convert more deeply inside of key verticals. Super League pop-ups, or also think of them as drag and drop modules that can be easily re-skinned for the use of a wide range of brands and IP owners. From turnkey fashion runways and makeup counters to kitchens and concert stages, experiential products offer scale and higher margin profiles. And let's go back to that car demo example I mentioned earlier; that was not just a hypothetical.
Ann Hand: Hey, and new revenue streams over time, such as technology licensing first party data and direct to consumer monetization.
Ann Hand: And we don't stop innovating to accelerate new brands adoption through collapsed development cycles, making for a just a more easy accessible entry point for new brands, we continue to product ties repeatable elements of our customer experiences to convert more deeply inside of key verticals.
Ann Hand: Separately pop ups or also think of them as dragon drop modules that can be easily re skin for a use of a wide berth of brands and IP owners from turnkey fashion runways. In makeup counters to kitchens in concert stages experiential products offer scale and higher margin profiles.
Ann Hand: And let's go back to that car to another example, I mentioned earlier is that was not just a hypothetical this week, we're launching a virtual drivable car demo product. We are excited to get out and start pitching that carmakers.
Ann Hand: This week, we're launching a virtual drivable car demo product. We are excited to get out and start pitching it to car makers. Finally, closing the loop on commerce, we continue to claim a leadership position in driving digital to physical commerce for brands, as proven with our programs with Chipotle, Clark's, and even Kraft Lunchables. We are currently launching a white-label loyalty and reward center to drive more connected online and offline engagement, and ultimately, again, more physical conversion and purchase for brands. So now, let's move on to some recent operating highlights.
Ann Hand: Finally closing the loop on on Commerce, we continue to claim a leadership position in driving digital to physical commerce for brands as proven with our programs with Chipotle Clarkson and even craft Lunchables. We are currently launching a white label loyalty and reward center to drive more connected online and offline engaged.
Ann Hand: And then ultimately again more physical conversion and purchase for brands.
Ann Hand: So now let's move on to some recent operating highlights as brands advancing their knowledge and imperatives to enter these new immersive marketing channels, we've implemented several key organizational enhancements to align us with escalating demand.
Ann Hand: As brands advance in their knowledge and imperatives to enter these new immersive marketing channels, we've implemented several key organizational enhancements to align us with escalating demand. This entailed optimizing the company's workflows, enhancing internal and external communications, and further iterating our team structure and responsibilities. These adaptations are a testament to the company's significant growth, having successfully executed nearly 200 immersive activations in the past year.
Ann Hand: This entailed optimizing the company's workflows enhancing internal and.
Ann Hand: External communications and further iterating, our team structure and responsibilities.
Ann Hand: These adaptations are a testament to the company's significant growth having successfully executed nearly 200 immersive activations in the past year and this organizational transformation mirrors the evolution of the market, where we have established our leadership position and it's time now to meet that increased demand that we're.
Ann Hand: And this organizational transformation mirrors the evolution of the market where we have established our leadership position, and it's time now to meet that increased demand that we're seeing from brand partners. And beyond just a realignment of the organizational structure, we continue to realize the significant operating cost reductions gained from a set of decisions we started to take over the course of really 18 months ago. We took another step in material cost reductions earlier this month with the announced sale of our Mine Hub.
Ann Hand: Seeing from brand partners.
Ann Hand: And beyond just a realignment of the organizational structure, we continue to realize the significant operating cost reductions gained from a set of decisions. We started to take over the course of really 18 months ago. We took another step and material cost reductions earlier. This month with the announced sale of our main hub business the transaction allowed us to firm.
Ann Hand: The transaction allowed us to further focus our product roadmap and streamline our already lean operation. It takes about $2.4 million of additional annualized OPEX out of our cost structure with minimal top-line impact. On the commercial side, we're expanding our offerings to consumers and brands, most notably into Fortnite with a recent partnership announced with Chartus. Chartus is a network of independent Fortnite creative developers with more than one hundred and fifty seven million monthly plays on their various Fortnite worlds and nearly one billion monthly impressions.
Ann Hand: Other focus our product roadmap and streamline our already lean operation. It takes about $2 4 million of additional annualized opex out of our cost structure with minimal top line impact.
On the commercial side, we're expanding our offerings to consumers and brands.
Ann Hand: Most notably into Fortnite with a recent partnership announced with charters charter is a network of independent Fortnite creative developers with more than 157 million monthly plays on their various fortnite world and nearly 1 billion monthly impressions together, we can provide unparalleled opportunities for <unk>.
Ann Hand: Together, we can provide unparalleled opportunities for brands to launch new Fortnite creative islands or custom integrations, just as we already do with scale and Roblox. Additionally, Super League is honored to be a part of a broad collaboration with the launch of Boombox across the Roblox platform. Boombox presents a pioneering opportunity for music labels to curate, distribute, and monetize their offerings on Roblox.
Ann Hand: That's to launch new Fortnite creative islands, or custom integrations, just as we already do with scale and roadblocks.
Ann Hand: Additionally, Super League is honored to be a part of a broad collaboration with the launch of boom box across the roadblocks platform boom box presents a pioneering opportunity for music labels to curate distribute and monetize their offerings on robotics players can share and collectively enjoying music with each instance of music playback being.
Ann Hand: Players can share and collectively enjoy music, with each instance of music playback being a monetizable event for the contributing labels and artists. Again, a new source of revenue for labels and for artists. This industry milestone was the result of a year-long collaboration with Universal Music Group, Stinger, and, of course, our partners at Roblox. We created powerful content that is not just for play but highly engaging for viewing audiences as well. Our recent announcement of a partnership with GSTV becomes a new distribution channel for our content across their national network of twenty-nine thousand fueling and convenience screens across the country, reaching one hundred and fifteen million unique adults a month. Again, taking the content we've already generated and finding new ways to further monetize it for the company. And finally, yesterday, we announced a really exciting partnership with Common Sense Networks. They are a singular leader in age-appropriate content moderation and standards for younger audiences.
Ann Hand: Monetize bull event for the contributing labels and artists again, a new source of revenue for the labels and for the artist.
Ann Hand: Industry milestone was the result of a year long collaboration with Universal Music Group Stinger and of course, our partners at Roebucks.
Ann Hand: And we create powerful content that is not just for play but highly engaging for viewing audiences as well. Our recent announcement of a partnership with G. S. T V becomes a new distribution channel for our content across their national network of 29000, fueling inconvenienced screens across the.
Ann Hand: Tree, reaching 115 million unique adult somewhat again, taking the content, we've already generated and find new ways to further monetize it for the company.
Ann Hand: And finally yesterday, we announced a really exciting partnership with common sense networks. They are singular leader and age appropriate content moderation and standards for younger audience and they offer global scale across major gaming video gaming and video platforms connecting and communicating with you.
Ann Hand: And they offer global scale across major gaming, gaming, and video platforms. Connecting and communicating with young consumers in a safe, appropriate, and compliant manner has always been a key tenet of Super League's brand. The combination of Super League's custom and scalable content experiences in immersive entertainment platforms with Common Sense Network's video channels and proprietary child-safe data and distribution tool offers an unrivaled solution, in our point of view, for the safety of young consumers.
Ann Hand: Young consumers in a safe appropriate and compliant manner has always been a key tenet of Super League's brand the combination of Super League's customized scalable content experiences and immersive entertainment platform with common sense networks video channels and proprietary child safe data and distribution.
Ann Hand: [noise] tool offers an unrivaled solution and our point of view for the safety of young consumers.
Ann Hand: Looking ahead to 'twenty 'twenty four with macro tailwind is demonstrating a nice trajectory. We are uniquely positioned to be a one stop shop and that omnichannel solution for brands entering immersive entertainment spaces.
Ann Hand: Looking ahead to 2024, with macro tailwinds demonstrating a nice trajectory, we are uniquely positioned to be a one-stop shop and that omni-channel solution for brands entering the immersive entertainment spaces. We continue to push on salesforce effectiveness and operating leverage. In fact, our top two sellers in 2023 reached about $4.5 million in annual booked revenue each.
Ann Hand: We continue to push on sales force effectiveness and operating leverage in fact, our top two sellers in 2023 reached about $4 5 million in annual booked revenue. Each that is two times the individual sales capacity or benchmark that was established in 2022.
Operator: That is two times the individual sales capacity or benchmark that was established in 2022. We look forward to another year of strong revenue growth with the trend of larger, longer-term deals driving us towards break even in the second half of the year. So, with that operator, we can move to Q&A. Thank you.
Ann Hand: We look forward to another year of strong revenue growth with the trend of larger longer term deals driving us towards breakeven in the second half of the year.
None: So with that operator, we can move to Q&A.
None: Thank you [noise] will not begin the question and answer session.
Operator: We'll now begin the question and answer session with our Super Leagues covering Analysts. Please click raise your hand on Zoom to ask a question, or if you're participating by phone, click star 1 on your telephone.
None: Super League's covering analysts please click raise hand on zoom to ask a question or if you're participating by phone click star one on your telephone keypad.
None: Our first question comes from Scott Buck. Please go ahead and limit yourself and ask your question.
Scott Christian Buck: Our first question comes from Scott Buck. Please go ahead and unmute yourself and ask your question. I have just a couple of questions from the first one. It looked like gross margin kind of moved back towards, closer to 1Q and 2Q levels during the fourth quarter. How should investors be thinking about gross margins given the shift in strategy moving forward? Clayton, do you want to take that?
Scott Christian Buck: Hi, Yeah, just a couple of questions from me first one it looks like gross margin you kind of moved back towards.
Scott Christian Buck: Closer to <unk> and <unk> levels during the fourth quarter.
Scott Christian Buck: How should investors be thinking about gross margins given the shift in strategy moving forward.
Scott Christian Buck: Clayton do you want to take that yeah, yeah, I'll take that yeah.
Clayton J. Haynes: Yeah, I'll take that. Yeah. So, thanks, Scott. Yes, certainly, as we've discussed on previous calls, margins in any particular quarter are really going to depend upon the mix of products that are contributing to revenues each quarter. I think we highlighted this in NQ3 as well.
Clayton: So thanks, Scott Yeah, certainly we've discussed.
Clayton: Calls margins in any particular quarter are really going to depend upon the mix of products that are contributing to revenues each quarter.
Clayton: I think we highlighted this in Q3 as well we took a strategic decision to take out a fairly large.
Clayton J. Haynes: We took a strategic decision to take on a fairly large program with a marquee brand that just happened to have a higher cost profile than the revenues that were generated, for example, in the prior year quarter. And so, you know, we thought that it was beneficial because it gave us an opportunity to really take on this large program and demonstrate, you know, to brands that we have the ability to kind of provide, you know, a one-stop shop for their campaign objectives. And so in Q4, that program certainly is contributing to bringing down the overall average margin. If we were to exclude that particular program, the Q4 margins would be closer to that 44 or 45% level that we saw in the prior year.
Clayton: Programmed with a marquee brand.
Clayton: But I'm just happy to have a higher cost profile than the the revenues that were generated for example in the prior year quarter.
Clayton:
Clayton: It was beneficial because it gave us an opportunity to really take on this large program and demonstrate to brands that we've got the ability to kind of provide you know a.
Clayton: One stop shop.
Clayton: Oh for sure.
Clayton: Third campaign objectives, and so in Q4, but that program certainly is contributing to bringing down the overall.
Clayton: Average margin if we were to exclude that particular program, but Q4 margins would be closer to about 44 or 45% level that we saw in the prior year quarter.
Ann Hand: Yeah, and that's one, Scott, I'd say we would do again and again. Because if you think about it, prior to that, our largest program we had run was, you know, in that kind of 1.4 range. So to do a $3.9 million program with a huge global brand, and it's an intricate program, too, because it's about online engagement. There are consumer digital monetization opportunities we've built for the brand. It's connected to physical retail and QR codes on packaging.
None: Yeah, and that's one Scott I'd say, we would do again and again, because if you think about it prior to that our largest program. We had run was you know in that kind of one four range. So to do a $3 9 million dollar program with a huge global brand and it's an inter kit program too because it it's about <unk>.
None: Online engagement there is a consumer digital monetization opportunities we built for the brand it's connected to physical retail and QR codes on packaging and so and it has a a kind of rewards loop that feeds from digital to physical and back to digital and so the.
Ann Hand: And it has a kind of rewards loop that feeds from digital to physical and back to digital. And so the power of that, you know, what I said, I think on the last call is, can you imagine if we had 10 of those deals, or 12, you know? We're talking about a $50-$60 million year for the company. So that's why operating leverage is so important and being able to hold this big program out and really use it as a way to demonstrate to large brands and agencies that we believe we are a rare company that could deliver that type of large program. And you said if you had 10 to 12 deals that size, how many deals of that size are out? You know, that's a really good question.
None: Power of that you know what I said I think on the last call. It can you imagine if we had 10 of those deals or or 12, you know, we're talking about a $50 million to $60 million a year for the company. So that's why the operating leverage is so important in being able to hold this big program out and really use it as a way to demonstrate to large brands in <unk>.
None: Agencies that we believe we are a rare company that could deliver that type of a large program.
None: And you said, if you had 10 to 12.
None: Yes.
How many deals of that size are out there.
Yeah. That's a really good question you know, it's a very fragmented ecosystem and in this case lunchables and their their agency purposes that we have a nice growing strategic relationship with we're trying to chop it up.
Ann Hand: You know, it's a very fragmented ecosystem. And in this case, Lunchables and their agency, Publicis, that we have a nice growing strategic relationship with, we're trying to cut it up. And it was being chopped up between a few different partners kind of spread out in that ecosystem.
None: And it was being chopped up between a few different partners, it's kind of spread out in that ecosystem.
Ann Hand: They're partners, for the most part, that do less revenue than us. But equally, there's a couple that are more the kind of large ad agency types. But there came a point where they looked at the complexity of that program, and they turned to us and said, "We think that you're the right company to run the whole program." So, the question that you're asking is, how many more programs out there are we getting a piece of, but not the whole kind of campaign? I would say right now, probably kind of that brand journey I talked about.
None: They're they're partners for the most part.
None: But do the less revenue than us, but equally there are there's a couple that are more kind of large kind of AD agency types, but but their.
None: There came a point where they looked at the complexity of that program and they turn to US and said we think that you are the right company to run the whole program.
None: So the question that you're asking is how many more programs out there or are we getting a piece of but not the whole kind of campaign I would say right now probably kind of that brand journey I talked about I think right now the strike zone that we're in is probably step to it.
Ann Hand: I think right now, the strike zone that we're in is probably step two. It's where brands have tasted in small ways these campaigns and are starting to consistently put dollars to work as part of all their marketing campaigns, like the universal example. And so, I think we're still in that zone where they're smaller campaigns, but I think the opportunity to use the Lunchables case study, which we plan to put out that case study here soon, I think will drive bigger investment dollars because the results speak for themselves. So, I can't totally estimate the exact dollar amount, but I really think there are two key trends.
None: That's where brands have I have a lot of them have tasted in small ways. These campaigns and are starting to consistently put dollars to work as part of all of their marketing campaigns like the Universal example, and so I think we're still in that zone, where there are smaller campaigns, but I think the.
None: The opportunity to use the Lunchables case study, which we plan to put out that case study here soon I think will drive bigger investment dollars because the results speak for themselves. So can't totally estimate the exact dollar amount, but I really think two key trends one is you're gonna see brands, putting bigger amounts for <unk>.
Ann Hand: One is you're going to see brands putting bigger amounts into singular campaigns to work. And secondly, it's going to become a recurring part of their marketing strategies over the course of the whole year. Great, that's helpful. And then last one for me, what's the plan going forward with a direct-to-consumer business? It feels like it's being kind of left out in the wind, I guess.
None: Gil or campaigns to work and secondly, it's going to become a recurring part of their marketing strategies over the course of the whole year.
None: Great. That's helpful. And then last one for me, what's the plan going forward with a direct to consumer business. It feels like it's being kind of left.
None: Left out in the winter I guess, yeah, you know I think they've done the right thing and not over investing in or out of the gate you know.
Ann Hand: Yeah, you know, I think we've done the right thing and not over-invested out of the gate. You know, it's hard to launch new games inside, you know, mini games inside Roblox. It's a little bit like digging for oil, a lot of speculation on what can be the most successful game world. And we also operate game worlds inside Minecraft. And so what you continue to see over the last couple of years is modest revenues in that space, kind of in the two to three million range, but not really a lot of growth. We've actually been really exploring very different strategies, ways that we can roll up perhaps existing games and almost build verticals around games. Imagine if you knew that there were three or four games inside Roblox or Minecraft that really spoke to somebody who was interested in fashion or makeup.
None: It's hard to launch new games inside you know mini games inside roadblocks, it's a little bit like digging for oil a lot of speculating on what can be the most successful game worlds and we also operate game worlds inside Minecraft and so what you've continued to see over the last couple of years is modest rep.
None: And that space kind of in the $2 million to $3 million range, but not really a lot of growth, we've actually been really exploring very different strategies ways that we can roll up perhaps existing games.
None: And almost build verticals around games, yeah, but imagine if you knew that there were three or four games inside roadblocks or minecraft that really spoke to somebody who was interested in fashion or makeup.
Ann Hand: Those could become things that we could own that already exist and have been successful. And, as well, they could be places that we could direct brands for their immersive experiences to. And inevitably, that's gonna be higher margin for us.
None: Those could become things that we could own that already exist and have success and as well they could be places that we could direct brands for their immersive experiences too and inevitably that's going to be higher margin for us and that's going to support the strategy to continue to walk margins up. So we have a point of view and an emerging strategy on it.
Ann Hand: And that's gonna support the strategy to continue to push margins up. So we have a point of view and an emerging strategy on it, but we're also just being thoughtful about the balance sheet and have prioritized for now the importance of getting to break even this year. The other opportunity with direct to consumer is that I really believe that as we help brands build out that omni-channel strategy across multiple immersive entertainment platforms like the Roblox and Fortnite of the world, we then have the chance to kind of hit point four on the brand journey, which is really about, "Okay, it's time to take a look at your website as well." And when we start to become the enterprise solution to transform their own e-commerce solution, I think that's how we can get into new revenue streams like tech licensing, as I mentioned, but also, why not get a piece of some of the consumer monetization, the royalties.
None: But we're also just being thoughtful about the balance sheet and have prioritized for now the importance of getting to breakeven this year and the other opportunity with direct to consumer is I really believe that as we help brands build out that omnichannel strategy across multiple immersive entertainment platforms like the robot.
None: <unk> is an important nights of the world. We then have the chance to kind of hitting a point for on the brand journey, which is really about okay. It's time to take a look at your website as well and when we start to become the enterprise solution to transform their owned E. Commerce solution I think that's how we can get into new rep.
None: The new streams like tech licensing that I mentioned, but also why not get a piece of some of the consumer monetization of the royalty we've even explored things like if every time I know that I'm driving somebody to download the chipotle app or food ordering app on their phone, we can structure our contracts differently.
Ann Hand: We've even explored things like, if every time I know that I'm driving somebody to download the Chipotle app or a food ordering app on their phone, we could structure our contracts differently to have us be paid for that performance, not just for the service that we provided and pulling off that immersive engagement experience, but maybe we start to build in some metrics on the backend that provide additional compensation. And again, those could start to look like consumer monetization as well.
None: <unk> to have us be paid for that performance not just for the service that we provided and pulling off that immersive engagement experience, but maybe we start to build in some some metrics on the backend that provide additional compensation and again those could start to look like consumer monetization as well so it's a.
Scott Christian Buck: So it's on our mind that there's a lot of opportunity there. We're just trying to be really smart about it because, frankly, we've seen some others in this space throw tons of money at consumer monetization, and it has not paid off. Great, that's helpful. I appreciate the time, guys. Thank you very much.
None: All in our mind that there's a lot of opportunity. There. We're just trying to be really smart about it because frankly, we've seen some others in the space throw tons of money at consumer monetization and it has not paid off.
None: Great. That's helpful. I appreciate the time guys. Thank you very much.
Thank you.
Howard Allen Halpern: Thank you. Thank you. Our next question comes from Howard Halpern, with the Taglich Brothers. Please go ahead and unmute yourself. (inaudible) Hi Ann.
None: Thank you. Our next question comes from Howard Halpern.
Howard Allen Halpern: With tablets brothers. Please go ahead and meet yourself.
Howard Allen Halpern: Uh huh.
Howard Allen Halpern: Hi, Hi, and congratulations great quarter, great year.
Howard Allen Halpern: Congratulations. Great quarter. Great year.
Ann Hand: In terms of the Lunchables campaign and what you had to build for it, building on that, how easy will it be to repeat a campaign like that or take parts of it into new campaigns that will probably provide some gross margin leverage going forward? Yeah, if I could point people back to my remarks. What I would want, aside from the size of overall deals, is for me to point everyone back to the themes that I made on productization, because that's essential, and that's something that others don't really do outside of Roblox themselves, right? I mean, we aren't just a game studio building one-off experiences that then kind of get thrown away after the campaign. What we're doing is we look at those experiences, those custom experiences that we're building, and then we see repeatable elements of them that we can build out as a product and sell over and over and over again. So think about it.
Howard Allen Halpern: In terms you talked about the Lunchables campaign, and what you had to build for it so.
Howard Allen Halpern: On that how.
Howard Allen Halpern: Easy will it be to repeat a campaign like that would take parts of it into new campaigns that will provide probably some gross margin leverage going forward, yeah that if I could point people back to my remarks what.
Howard Allen Halpern: What I would want to aside from you know the the size of overall deal I would want to point everyone back to the themes that I made on prioritization cause that's essential and that's something that the others don't really do outside of roadblocks themselves right.
Howard Allen Halpern: We aren't just a game studio building one off experiences that then kind of get thrown away after the campaign.
Howard Allen Halpern: What we're doing is we're looking at those experiences those customer experiences that we're building and then we're seeing repeatable elements of them that we can build out of the product and sell over and over and over again, so think about it we've done fashion runways and fashion experiences with H and M crop.
Ann Hand: We've done fashion runways and fashion experiences with H&M, Crocs, and Oshkosh, so we learned a lot in those campaigns. And so building out a fashion runway that we can easily reskin and deploy very quickly and go out and sell to 50 different fashion brands out there is a big idea. It's a big idea because it gives them an easier entry point, a little more reasonable of a price, and a quicker activation time. Instead of it taking two months to build your personalized, what feels very custom, bespoke runway experience, we can have that out of the gate in a couple of weeks. But also, because we've done that up front development, it does mean that those products inevitably have higher margins, so they look more like product margins. If you look at, you know, where there are really two places where the margins come down a bit when you look at it across a weighted basis.
Howard Allen Halpern: Oshkosh, So we learned a lot and those campaigns and so building out a fashion runway that we can easily re skin and deploy very quickly and go out and sell two to 50 different fashion brands out there is a big idea, it's a big idea because it gives them an easy.
Howard Allen Halpern: Your entry point, a little more reasonable of a price and a quicker quicker activation time instead of it taking two months to build your your personal lives what feels very custom bespoke runway experience. We can have that out of the gate and a couple of weeks, but also too because we've done that upfront development. It does mean that those products inevitably have high.
Howard Allen Halpern: Their margins so they look more like product margins. If you look at you know where our there's really two places our margins.
Howard Allen Halpern: Come down a bit.
Howard Allen Halpern: When you look at it across a weighted basis.
Ann Hand: First, sometimes we'll take on work that isn't really very high-margin, but it's because it's important because we want to be that one-stop shop. So a good example is if a brand says, I want you to build an experience, I want to buy some of your media products, but also, would you work with a couple influencers? So we'll do influencer marketing, but we know that it's going to be about a 20% margin. But it's really just to say, instead of giving us $800,000, give us the full $1 million. And then, that way, we win because it's just easy. There's just one company that's managing the whole program.
Howard Allen Halpern: Sometimes we'll take on work that really is not very high margin, but it's because it's important because we want to be that one stop shop. So a good example is if a brand says I want you to build an experience I want to buy you know some of your your media products, but also would you work with a couple of Influencers. So we'll do influencer marketing.
Howard Allen Halpern: But we know that it's going to be about a 20% margin, but it's really just to say instead of giving US you know.
Howard Allen Halpern: $800000 give us the full $1 million and then that way we win because it's just easy there's just one company that's managing the whole program and of course in the race to grab topline in the early days, we wanted that even if it came at a lower margin. The other places when we are using outside data to create the spa.
Ann Hand: And of course, in the race to grab top line, in the early days, we wanted that even if it came at a lower margin. The other place is when we are using outside depth to create bespoke experiences for us because we have limits in our game studio or we haven't productized enough that we can do them more as turnkey programs. And so those can have anywhere from 25 to 30% margin.
Howard Allen Halpern: Oak experiences for us because we have limits in our games studio or we have a product ties. It enough that we can do them Morris turnkey programs and so those can have anywhere from 25% to 30% margin. When we start to build products. Those are starting to come in at 50, 60% margin. So the more we product ties the more we really are.
Ann Hand: When we start to build products, those start to come in at 50, 60% margin. So the more we productize, the more we really aren't, again, just a game studio or a good old-fashioned digital ad agency. We are a product company and a product company that can scale because of that productized catalog that can bring brands in quicker, get campaigns deployed faster and at higher margins. And so.
Howard Allen Halpern: Again, just a game studio or a good old fashion digital AD agency, we are a product company and a product company that has that can scale because of that product types catalog that can bring brands and quicker get get campaigns, Deloitte deploy faster and at higher margins and so the.
Ann Hand: The pop-up products that I've mentioned and also the whole notion that we can stitch or bolt on a loyalty rewards component, so we can say to that brand, "Hey, we're not just done by creating a quick productized experience for you." We want to bolt that rewards loyalty program on and show that we can not only create games and incentives and loyalty inside the experience to keep people coming back and playing more, but that we can drive it to really matter where it matters most, which is your real life P&L for your brand. And so, again, the productized notion of pop-ups or drag-and-drop modules and loyalty rewards, I think, are two of the biggest things we are doing this year that change the business model, the margin profile, and the speed with which we can grow top line.
Howard Allen Halpern: The pop up products that I've mentioned and also the whole notion that we can stitch, our bolt on a loyalty rewards component. So we can say to that brand hey, we're not just done by creating a quick product types of experience for you we want to to bolt that rewards loyalty program on on.
Howard Allen Halpern: And show that we can not only create games and incentives and loyalty inside the experience to keep people coming back and playing more but that we can drive it to really matter, where it matters, most which is your real life P&L for your brand and so again the product ties notion of pop ups are a drag.
And drop modules and the loyalty rewards I think are two of the biggest things. We are doing this year that changed the business model the margin profile and the speed with which we can grow top line.
Howard Allen Halpern: Okay.
Ann Hand: Okay, and should we still see, even though you are beginning that transition to a longer term and a higher, you know, larger deal size, are we still going to see that traditional seasonality first half compared to the second half? Yeah, for sure. I mean, I think that you won't really start to see a real kind of change in the shape of that till 2025, 2026, as far as a real smoothing out.
Howard Allen Halpern: And should we still see even though you are beginning their transition to a longer term and a higher you know larger deal size are we still going to see that.
Howard Allen Halpern: Traditional seasonality you eat first half compared to the second half yeah for sure I mean, I think that you won't really start to see a real kind of change in the shape of that you know really until 2025 2026 as far as like a real smoothing out, but you know I think what you guys will see is just like I said, we had six.
Ann Hand: But, you know, I think what you guys will see is just like I said, we had six, seven-figure programs last year as compared to one the year prior, and our highest deal in 2022 was about 1.23 million. And we ended the year with 3.9 million in a single program. That's why those key leading indicators in the pipeline are so essential, because that shows the trend line of brands putting more persistent money to work, and that smooths that seasonality out. That said, you know, Q1 is looking strong. I mean, obviously, it's not going to be as strong as Q4, but as compared to the prior year same quarter, we're happy with those results. Even though Q1 is inevitably always the lowest quarter when you have a seasonality-based model.
Howard Allen Halpern: Seven figure programs last year as compared to one year prior that our highest deal in 2022 was about $1.2 million to $3 million and we ended the year with $3 9 million in a single program those that play those key leading indicators in the pipeline are so essential because that's showing the trend line.
Howard Allen Halpern: Brands, putting more persistent money to work and that Smoothes that that seasonality out that said you know Q1 is looking strong I mean, obviously, it's not going to be as strong as Q4, but as compared to prior year same quarter, we're happy with those results even though.
Howard Allen Halpern: Q1 is inevitably always the lowest quarter when you have a seasonality based model.
Ann Hand: Okay, and one last one with you saying, you know, that large deal of 3.9 million in 2023. Do you have more than enough, even if you don't have a record deal, you have more than enough substantial deals to more than cover, cover that 4 million and grow it in the second? Yeah, yeah. I mean, we, you know, managing both salesperson performance and pipeline is a weekly task at Super League. So we're constantly evaluating both the overall pipeline health. We're looking at geographic splits, salesperson splits, but also whether the overall pipeline is adequate to more than underpin.
Howard Allen Halpern: Okay, and one last one with which you're saying you know that large deal $3 9 million in 2023 do you have more than enough. Even if you don't have a record deal you have more than enough substantial deals to more than cover cover that 4 million and grow it in the second half.
None: Yeah, Yeah, I mean, we you know managing both sales person performance and pipeline is a weekly task at Super League. So we're constantly evaluating both the overload overall pipeline health, where looking at geographic splits salesperson.
None: But also is the overall pipeline adequate to more than underpinned and we're studying things like those win loss rates and you know what we tried to do is run a really smart pipeline, meaning you know by definition. If you don't upfront setup really clear rules about what can enter that pipeline and at what stage of it.
Ann Hand: And we're studying things like those win-loss rates. And, you know, what we try to do is run a really smart pipeline, meaning, by definition, if you don't upfront set up really clear rules about what can enter that pipeline and at what stage it advances in probability, you can get the idea that, you know, you're going to have a massive year, and kind of the emperor has no clothes. And so that's why we have weekly pipeline meetings every Thursday at 11 a.m. Pacific time, and we scrutinize that pipeline collectively, all of the sales and biz dev leadership. And that also allows us to intervene when we think, you know, why did we lose an RFP? And we do those postmortems as well.
None: Advances in probability you can get the idea that you know you're going to have a massive year and kind of the emperor has no clothes and so that's why we have weekly pipeline meetings every Thursday 11, a M Pacific time, and we scrutinize that pipeline collectively all of the sales and Biz Dev leadership and.
And that also allows us to intervene when we think that you know why did we lose an RFP and.
None: And we do those postmortems as well. So we're always ahead of that challenge, but I think we've done a pretty good job. The last few years as indicated by our performance of of being a very pragmatic in how we do that and making sure we intervene quickly and win more more business.
Ann Hand: So we're always ahead of that challenge. But I think we've done a pretty good job the last few years as indicated by our performance of being very pragmatic and how we do that, and making sure we intervene quickly and win more business. Thanks, and keep up the great work.
Thanks, and keep up the great work. Thank you Howard.
Jack Vander Aarde: Thank you, Howard. Thank you. And our next question comes via telephone. And that question comes from Jack van der Aarde with Maxim Group. Please stay. Okay, great.
None: Thank you and our next question comes via telephone and that question comes from Jack Vander <unk> with Maxim Group. Please state your question.
Yeah.
Jack Vander Aarde: Okay, great. Congrats on the strong finish the year and they should taking my questions.
Ann Hand: Congratulations on the strong finish this year in. Thanks for taking my question. You know, Ann, on the sales team front of things, you highlighted the top two sellers each achieved four and a half million in sales roughly. That's pretty impressive progress for the whole year. Do you still have eight direct sales professionals, and maybe just can you remind us how you're thinking about plans and goals for your S&M team hiring and productivity ramp? Thanks.
Jack Vander Aarde: And on the sales team front of things you highlighted top to each other's each achieved four and a half million of sales roughly.
Jack Vander Aarde: That's pretty impressive progress for the full year do you still have each direct sales professionals in and maybe just can you remind us how youre thinking about plans and goals with your estimate M team hiring and productivity ramp. Thanks.
Ann Hand: Yeah, no, it's a great point. So we have eight sellers, but keep in mind, we also have a couple of business development partners. So when we look at that Lunchables program, it kind of takes a couple people. You've got the strategic sale. And then, at the end of the day, there still has to be a seller who takes that deal over the kind of final line and also executes that program. That reorganization was important because what we realized when we pushed that reorganization in place towards the end of last year was that our salespeople were too tied up with executing things. And so there were really two factors going on with, well, why weren't all of our sellers selling at that kind of new benchmark?
None: Yeah, no. It's a great point, so we have eight sellers, but keep in mind. We also have a couple of business development partner. So when we look at that Lunchables program. It kind of takes a couple of people you've got the strategic sale and then at the end of the day there still has to be a seller who takes that deal over the the kind of final line.
None: And also execute that program that reorganization was important because what we realized when we pushed that reorganization in place towards the end of last year is that our salespeople were too tied up executing things and so there's really two factors going on with well why R&R ourselves all of our sellers selling at that that Kai.
None: New benchmark you know one is is that we had to reorganize to take a lot of execution off of their plate and really create a team that can manage the brand and the production of all the things to deliver that campaign. So that the the seller can turn right back around and just get out chasing new deals.
Ann Hand: One thing is that we had to reorganize to take a lot of execution off of their plate and really create a team that can manage the brand and the production of all the things to deliver that campaign so that the seller can turn right back around and just get out chasing new deals. But the other thing is, and this really leads to your good question, is that there is a ramp-up time. It's a different kind of sale.
None: But the other thing is and it really leads to your good question as you know there's a ramp up time, it's a different kind of sale and we're not just transactional as selling a media buy on Youtube.
Ann Hand: We're not just transactionally selling a media buy on YouTube, right? We're educating brands on this new space. They come to us and say, "What is Roblox?"
None: Right.
None: It is a where we're educating brands on this new space they come to us and say what is roadblocks and we spend time first just being that real strategists to help them understand what is the landscape of these immersive platforms and so we are coming in in a different way and there is a learning curve and we do.
Ann Hand: And we spend time first just being that real strategist to help them understand what the landscape of these immersive platforms is, and so we are coming in in a different way. And there is a learning curve.
Ann Hand: And we do think that it takes a good seller, you know, really at least four months and up to six months to really be in a position where they can sell these very strategic kinds of products, which is quite different than probably what they were historically selling in the digital media landscape. That said, you know, we've kind of made a decision that, you know, people like myself and Clayton and Matt are present. We're out every day selling. We've got again, great business development leaders and people like, you know, Zach and Rhiannon and others. And we've kind of, in a good way, lost some patience for saying, look, we've got to get people up that curve faster.
None: Think that it takes a good seller you know really at least four months and up to six months to really be in a position where they can sell these very strategic kind of products, which is quite different than probably what they were historically selling in the digital media landscape that said.
We've kind of made a decision that you know people like myself and Clayton and matter, a precedent where out everyday selling we've got again, great business development leaders and people like you know Zach and Rhiannon and others and we've kind of in a good way lost some patients for say look.
None: We've got to get people up that curve faster and if it is a strategic sell then we need to teach those people to be strategic sellers, when you're being given a $3 $9 million program by Kraft and Google says they want to hand, it to somebody that that's been.
Jack Vander Aarde: And if it is a strategic sell, then we need to teach those people to be strategic sellers. When you're being given a $3.9 million program by Kraft and Publicis, they want to hand it to somebody that's built trust and transparency. You know, that's a risk in some ways to take on a smaller company, and so we're committed to continually kind of evaluate and shake it up as required. Okay, great. I appreciate the color there. And then, you know, just switching gears to M&A, you've closed a few acquisitions in recent history. I think Mellon was the most recent back in May of 2023.
None: That's built trust.
None: Transparency.
None: Yeah, that's a that's a risk in some ways to take on a smaller company and so we're we're committed to continuing to kind of evaluate and shake it up as required.
None: Okay.
None: Okay, Great I appreciate the color there and then just switching gears to M&A.
None: You've closed a few acquisitions in recent history I think melon was the most recent back in May of 2023, and then you recently divested the minor business. This year. So can you just touch on the M&A front, a bit further and whether youre looking at any other strategic moves and.
Ann Hand: And then you recently divested the Minehut business this year. So can you just touch on the M&A front a bit further and whether you're looking at any other strategic moves? And you know, if so, what would fill the gaps even further for you? If there's anything there, just any color there would be helpful in terms of M&A.
None: If so what what what would fill the gaps even further for you if there's anything there.
None: Any color there would be helpful on M&A. Thanks.
Ann Hand: Yeah, and I have talked openly about this historically. So I'm not saying anything new. We have a history of being acquisitive. And what's happened is, I think, increasingly, just over the last six months alone, to me, it's felt very palpable how much the M&A conversations continue to kind of heat up, so to speak. Now, some of that is because it is a very fragmented ecosystem underneath the titans, like the Roblox.
None: And and I have talked openly about this historically, so I'm not saying anything new we have a history of being acquisitive.
None: And what's happened is is I think increasingly just over the last six months alone to me it felt very palpable.
None: How much the M&A conversations continue to kind of heat up so to speak now some of that is because it is a very fragmented ecosystem underneath the titans like the roadblocks as its a lot of kind of mom and pop businesses and you know we've all been swimming in this lane for anywhere from five to 10 years Super.
Ann Hand: It's a lot of kind of mom and pop businesses. And we've all been swimming in this lane for anywhere from 5 to 10 years, Super League, the longest of many, but our financials are out there as a public company. And so a lot of the companies that approach us are maybe doing about half our revenue, or a third of our revenue. And so they can see that we are larger.
None: The longest of many but our our our financials are out there as a public company and so a lot of the companies that that approaches are may be doing about half our revenue or a third of our revenue and so they can see that we are larger and so we got a lot of inbounds, saying I'd love to get to.
Ann Hand: And so we get a lot of inbound calls saying, I'd love to get to know you guys better, or maybe we already collaborate with them. We already partner with them, and they want to get into that M&A conversation. And I think it's inevitably because, you know, there is a real market opportunity here. I mean, this is one of those things where it's like a game of musical chairs.
None: You guys better or maybe we already have collaborated with them, we already partner with them and they want to get into that M&A conversation and I think it's inevitably because you know.
None: There is a real market opportunity here I mean, this is one of those things where it's like a game of musical chairs and if you don't if you sit back and wait you might just miss out on taking a really dominant position and so we continue to explore M&A and we will continue to be acquisitive as long.
Ann Hand: And if you don't, if you sit back and wait, you might just miss out on taking a really dominant position. And so we continue to explore M&A, and we'll continue to be acquisitive as long as we know that it helps us deliver on the path to break even this year and deliver a top playing group. So we really want these things to come in the door already break even or slightly profitable. And then when we execute on that M&A, we can, you know, grow more synergies on both the cost and top line. The kinds of things that help us.
None: As we know that it it helps us deliver on the path to breakeven this year and deliver topline growth. So we really want these things to come in the door already breakeven or slightly profitable and then when as we execute on that M&A. We can you know grow more synergies on both the cost and tops.
None: Line perspective.
None: The kinds of things that help us one is more games studio capacity you know I mentioned earlier, you know when you said Mellon well melon brought in a pipeline of custom worlds they were building for Chipotle and others.
Ann Hand: One is more game studio capacity. You know, I mentioned earlier when you said Mellon. Well, Mellon brought in a pipeline of custom worlds they were building for Chipotle and others.
Ann Hand: But it also increased that capacity so we don't have to outsource as much. We don't want to say no to a program, but we're inevitably going to have lower margins if we outsource. So game studio capacity is a good thing. But I wouldn't say that we would stop there. What we really want on top of it is more product and more tech because that's how we create more of a moat, more defensibility with the unique way we are positioned as this kind of real company that does have a tech and product backbone behind the also great creative capability that we've built out. That's how we win big programs.
None: But it also lifted that capacity. So we don't have to outsource as much we don't want to say no to a program, but we're inevitably going to have lower margins. If we outsource. So game studio capacity is a good thing I wouldn't say that we would stop there and what we really want on top of it is more product and more tech.
None: Because that's how we create more of a moat more defensibility with the unique way we are positioned as this this kind of truly a company that does have a tech and product backbone behind B also great creative capability that we have.
None: Build out and that's how we win big programs, we can do both and the more that we bought or built our own product and tech the more we solidify that leading position and the way to take down bigger programs.
Jack Vander Aarde: We can do both. And the more that we've bought or built our own product and tech, the more we solidify that leading position and the way to take down bigger programs. Okay, great. And just maybe one more for me, in case I missed it. It would be helpful.
None: Okay, Great and just maybe just one more for me.
None: I missed it it would be helpful and I understand you don't provide formal guidance, but it would be helpful. Just to get some added color on maybe the near term outlook and then just kind of more notably your longer term outlook.
Ann Hand: And I understand you don't provide formal guidance, but it would be helpful just to get some added color on maybe the near term outlook and then, just kind of, more notably, your longer term outlook. Are you able to reiterate your long term target over the next few years for that 100 million plus revenue and, you know, significant gross margin? Yeah, yeah, I mean, the proof points for the margin expansion.
None: Able to reiterate your long term target over the next few years for that $100 million plus revenue and significant gross margin expansion. Thanks, Yeah, Yeah, I mean, the the the proof points for the margin expansion. That's why I pointed back with Howard back to that product as the intro of new products and further.
Ann Hand: That's why I pointed back with Howard to that product is the introduction of new products and further productization of experiences. That's where we're going to continue to get that march up to north of 50% and higher. And then, and that's essential, right?
None: Desertion of experiences, that's where we're going to continue to get that March up to north of 50% and higher and then and that's essential right. Because again that gives US also operating leverage it means that things take us a fraction of the time to deliver our brands campaign. So it has a multiplier effect, but equally as far as top.
Ann Hand: Because again, that gives us operating leverage. It means that it takes us a fraction of the time to deliver a brand's campaign. So, it has a multiplier effect, but equally, as far as the top line is concerned, our rally cry is still to hit that 100 million over the next few years. And I do think that that will come through organic and inorganic growth. And I don't think it takes a lot for us to be able to achieve that. We aren't giving guidance because we just never really do.
Line, a rally cry is still to hit that $100 million over the next few years and I do think that that comes through organic and inorganic growth.
None: And I don't think it takes a lot for.
None: For us to be able to achieve that we arent, giving guidance because we just never really do but what I will say is that the board approved plan is a another in our opinion material step change in revenue for this year, but to the earlier question as well it will as we plan it will have that continued.
Ann Hand: But what I will say is the board-approved plan is another, in our opinion, material step change and revenue for this year. But to the earlier question as well, it will, as we plan, have that continued seasonality that is much the way you guys and your analyst coverage have distributed our revenues historically. Okay, great. Well, again, congrats on the strong momentum. We'll hop back in the queue.
None: The seasonality of.
None: That is much as the way you guys and your analyst coverage have distributed our revenues historically.
None: Okay, great well again, congrats on the strong momentum I'll hop back in the queue. Thanks. Thanks Jack.
Jack Vander Aarde: Thanks, Jack. Thank you. And we've reached the end of our question and answer session. I would like to turn the floor back over to Ann for any further questions.
None: Thank you and we have reached the end of our question and answer session I would like to turn the floor back over to Ann for any further comments.
Ann Hand: Alright, well in closing I would like to first just put a bit of a spotlight on my Dear friend and longtime colleague David Stifled fast.
Ann Hand: All right. Well, in closing, I would first just put a bit of a spotlight on my dear friend and longtime colleague, David Steigelfest. He is a director and co-founder of Super League.
Ann Hand: He is a director and co founder of Super League.
Ann Hand: You know, when you look at the more focused product strategy that we have taken on over the last 12 months, and especially the last six, coupled with the recent sale of Minehut, it offers an opportunity for David to explore new endeavors that tap more deeply into his platform expertise and entrepreneurial thirst. I will just say very personally, oh, the laughs and, in some ways, a few of the tears or maybe laughter with tears we've had as we took a company that was about esports events and movie theaters and found a business model that really has really been starting to work these last couple years. And in many ways, it does feel like a new and different company because it is.
Ann Hand:
You know when you look at the more focused product strategy that we have taken on over really the last 12 months and especially the last six coupled with the recent sale of mine hut. It offers an opportunity for David to explore new endeavors that tap more deeply into this platform expertise.
Ann Hand: And entrepreneurial thirst I will just say very personally oh, the laughs and in some ways a few of the the tiers or maybe laughter with tears. We've had him as we took a company that was about E sports events and movie theaters and found a business model.
Ann Hand: But really it's been really been starting to work the last couple of years and in many ways. It does feel like it at a new and different company because it is so for those reasons you know with the shift in product strategy again to sale of mine had we're excited for him to have a chance to go quench that.
Ann Hand: So for those reasons, you know, with the shift in product strategy, again, the sale of Minehut, we're excited for him to have a chance to go quench that entrepreneurial thirst elsewhere. He will be leaving us at the end of the month, but his dedication, exceptional loyalty, super smart, quick-wittedness has been essential in helping us build the culture that we have and develop and guide the growth of the company. And his footprint will be forever a part of the company. And with that, I encourage you to visit superleague.com to immerse yourself in our capabilities and all the great brand work we do.
Ann Hand: No real thirst elsewhere, he will be leaving us at the end of the month, but his dedication and exceptional loyalty Super Smart quick witted has been essential in helping us build the culture that we have and develop and guide the growth of the company and his footprint will be forever, a part of the company.
Ann Hand: And with that I encourage you to visit Super League Dotcom tumors yourself with our capabilities and all the great brand work, we do and we wish you a great day and thank you as always for your continued interest in the company.
Operator: We wish you a great day and thank you, as always, for your continued interest in the company. Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation. Goodbye.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.
Ann Hand: Goodbye.