theScore Q3 F2016 Conference Call Presentation
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A recap of theScore's Q3 F2016 results.
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theScore Q3 F2016 Conference Call Presentation
- 1. July 14 2016 Q3 F2016
- 2. Forward looking statements All statements other than statements of historical facts included in this presentation may constitute forward-looking information and are based on the best estimates of Management of the current operating environment. These forward-looking statements are related to, but not limited to, theScore’s operations, anticipated financial performance, business prospects and strategies. Forward looking information typically contains statements with words such as ‘‘anticipate’’, ‘‘believe’’, ‘‘expect’’, ‘‘plan’’, ‘‘estimate’’, ‘intend’’, ‘‘will’’, ‘‘may’’, ‘‘should’’ or similar words suggesting future outcomes. These statements reflect current assumptions and expectations regarding future events and operating performance as of the date of February 29, 2016. 2
- 4. 4 •The second best quarter for revenue in theScore’s history. •Powerful engagement growth of our mobile applications. •Major advertising deals with new and existing brand partners in the US and Canada. •Reinforcing our flagship app as the main challenger to ESPN on mobile and further expanding our esports coverage to make us the clear leader in the space. •Taking theScore experience onto new and exciting platforms… Q3 F2016 Overview
- 5. •Quarterly revenue of $6.1M (up 94% year-over-year). •Advertising revenue up 105%. •Total revenue for nine months ended May 31 $18.9M versus $12.4 for all of F2015. 5 Q3 F2016 Overview F2013 F2014 F2015 F2016 As of Q3 F2016 Fiscal Year: September 1 – August 31
- 6. 6 Q3 F2016 Overview •Average monthly active users of theScore’s mobile apps reached 4.3 million in Q3 F2016 (up 5% year-over-year). •Average monthly user sessions of theScore’s mobile apps reached 358 million in Q3 F2016 (up 27% year-over-year). • Sports fans opening theScore’s apps 80-90 times a month EACH on average. User engagement has more than doubled in three years
- 7. 7 Q3 F2016 Overview •Advertising revenue driven by US programmatic business and Canadian direct sales. •Major six-figure deals secured with globally recognized brands across North America, including Honda, NBC and Buffalo Wild Wings.
- 8. 8 Q3 F2016 Overview •Flagship app theScore is the leading challenger to ESPN on mobile. •In one year theScore esports has grown to become the leader in competitive gaming coverage. •Company focus remains on increasing audience and engagement across our existing platforms… •...while also ensuring we’re responding to the ongoing evolution in the way sports fans consume digital media content.
- 9. 9 Q3 F2016 Overview •First ever sports media chatbot on Facebook Messenger. •Potential audience of almost one billion people globally. •theScore believes chatbot technology is potentially transformative in the way sports fans and people consume content on mobile devices.
- 10. 10 theScore – Everywhere! Mobile Apps Video & Web Messaging Social Leading in-house software development team Dynamic newsroom producing engaging & original editorial content Best-in-class mobile sports apps, delivering real-time scores, news and stats across sports and esports to 4.4 million users. Massive combined social media footprint of more than 3M sports fans, with powerful engagement ensuring theScore’s content is amplified across the social web every single day. First sports media brand with a chat bot on Facebook Messenger and an early entrant on Kik, giving theScore a way to reach the one billion plus users on messaging apps. In-house video team producing original features, interviews and highlights for esports, with theScore.com and theScoreesports.com visited by more than 5 million sports fans on mobile and desktop each month. Q3 F2016 Overview
- 12. 12 Product Updates •theScore has assembled a dedicated chatbot team. •Treating bots as their own unique platform and product offering. •Now focused on deeper features and making our chatbots more ‘conversational.’
- 13. 13 Product Updates •Added functionality for the two major summer soccer tournaments – Copa America and EURO 2016. •Achieved strong user metrics that exceeded our expectations, with 1.7 million users accessing these sections.
- 14. 14 Product Updates •Now finalizing support for the Summer Olympics in Rio. •Functionality will include team-specific medal alerts and breaking news as well as dedicated sections for men’s and women’s basketball and soccer. •Summer events bolster what is traditionally a slower season for theScore’s flagship app.
- 15. 15 Product Updates •Launched redesign of our iOS and Android apps to deliver sharper visuals. •Onboarding process also added to encourage more personalization and improve retention and engagement. •Also redesigned theScore esports’ website in response to the higher demand for desktop content by fans of competitive gaming.
- 16. 16 Product Updates •Re-launch of theScore’s fantasy offering will include rebranding as well as a deeper focus on social gaming. •Will be free-to-play, ad supported, offer cash prizes and be available across North America.
- 17. Financials 17
- 18. • Q3-over-Q3 revenue growth of 94%. • Q3 Advertising revenue growth of 105%. • Growth driven by increased programmatic advertising sales in US market and direct sales in Canada. • YTD revenue growth of 101%. • YTD Advertising revenue growth of 116%. Revenue – Q3 Revenue - YTD $ 18,930 $ 9,426 $ 3,161 F2016 F2015 $ 6,125 Fiscal Year: September 1 – August 31 94% Financials – Revenue Q3 F2016 / YTD 18 101%
- 19. • Expense increases in personnel ($1.7M), mainly development and content. •Other expense increases in marketing ($0.4M), admin ($0.2M), amortization ($0.5M). Revenue Operating Expenses Adjusted EBITDA $ 10,420 $ (2,981) $ (3,228) $ 7,140 $ 3,161 Q3 F2016 Q3 F2015 $ 6,125 Fiscal Year: September 1 – August 31 94% Financials – Q3 F2016 19
- 20. • $5.2 million of tax credits recoverable. • Received Certificate of Eligibility, and expect to collect by Q1 of 2017. • DSO’s at 87 days. Cash Current Assets Working Capital $ 31,286 $ 26,568 $ 36,253 $ 40,836 Q3 F2016 Q4 F2015 $ 19,479 Fiscal Year: September 1 – August 31 $ 31,841 Financials – May 31, F2016 20
- 21. Q&A
Notas del editor
- Tom: Hello and good morning. Many thanks for taking the time to join us on today’s call and webcast for theScore’s Fiscal 2016 Q3 results. On the call today will be theScore Founder and CEO John Levy, President and Chief Operating Officer Benjie Levy, and myself, Chief Financial Officer Tom Hearne. At this time, I would like to caution our listeners that this presentation contains forward-looking statements. There are risks that actual results could differ materially from what is discussed and that certain material factors or assumptions are applied in making these forward-looking statements. Any forward-looking statements contained in this presentation represent the views of management and are presented for the purpose of assisting the theScore's shareholders and analysts in understanding the theScore's financial position, objectives and priorities and anticipated financial performance. Forward-looking statements may not be appropriate for other purposes. Additional information on items of note, theScore’s reported results and factors and assumptions related to forward-looking information, are all available in our 2015 Annual Information Form and our MD&A for Q3 2016, both of which are available on SEDAR. With that, let me turn the presentation over to John.
- John: Thanks Tom. Welcome everyone. Thanks for joining us today and allowing us to share the highlights of another great quarter.
- John: Q3 has been an impressive quarter for us here at theScore and I’d like to take this time to share some of the headline with you. From a revenue perspective we’re monetizing our user base better than ever and are well on our way to a truly record-breaking fiscal year. We continued to grow the user base and engagement within our mobile apps, reinforcing their place as a daily part of millions of sports fans’ lives. We inked a number of six figure deals with major brands in both the US in Canada, making theScore a go-to media partner for advertisers across North America. We reinforced our flagship app’s position as the leading challenger to ESPN on mobile in North America and expanded our esports coverage to establish ourselves as the clear leaders in this space. And finally – and perhaps most excitingly – as we announced on our last conference call, we expanded theScore experience beyond our apps to new platforms, giving us access to a potential audience of more than a billion people. More on that shortly.
- John: As I just mentioned, this was another great quarter for revenue growth. Quarterly revenue for Q3 was $6.1 million, which is up 94% year-over-year and represents the second best quarter for revenue in our history, just behind our traditionally strong Q1. Our total revenue for the nine months ending May 31 was $18.9 million. And to provide some context, our revenue for all of Fiscal 2015 was $12.4 million dollars. With $18.9 million already banked, we have blown past that total with a full quarter remaining.
- John: This powerful revenue growth is directly linked to two things: Firstly, the great engagement growth we continue to see within our mobile apps. Average monthly active users reached 4.3 million in Q3, which was up 5% year-over-year. These fans open theScore’s apps between 80-90 times a month on average. This creates 358 million average monthly user sessions in our apps in Q3, which was up 27% year-over-year. In just three years we’ve more than doubled our user engagement. Sports fans are opening our apps more frequently and consuming more content than ever before, which allows us to provide even greater value to our advertising partners.
- John: Q3 saw us secure major advertising deals with new partners, as well as running fresh and innovative campaigns with brands that already consider theScore their go-to partner to reach sports fans on mobile devices. In Canada, BMO and Honda Canada, just to mention a few, have joined the ranks of our growing sponsors. While our programmatic advertising business remains the core driver of revenue in the US, we’ve secured significant six-figure direct buys from the likes of Buffalo Wild Wings for the first time and broadcaster NBC for its coverage of the Stanley Cup playoffs. We also saw major direct buys from the likes of Acura, Miller and Porsche. To summarize, large and globally recognized brands trust theScore for our ability to create highly engaging campaigns that move the needle.
- John: And the reason brands continue to turn to theScore is because of our leadership position in mobile sports. Our flagship app is firmly established as the second most popular sports app in North America, second only to ESPN. Meanwhile, theScore esports – which we launched just over a year ago – continues to grow in terms of both our offering and audience. As a result, we are now widely recognized as the leading independent media outlet for competitive gaming in North America. Our short and long-term focus as a company remains increasing our audience and engagement on these platforms, plus the monetization of them. But we’ve always been a company that’s played at the cutting edge of digital media. We were the first sports app in the app store and the first sports media company to take esports seriously. As sports fans discover new ways to follow their favorite teams, leagues and players, theScore will be there too – something exemplified by a major product launch we undertook in Q3…
- John: In Q3 we took theScore experience to a completely new audience by launching the first ever sports chat bot for Facebook Messenger. We’re very excited about this move. We believe the emergence of chatbots has the potential to be transformative in the way people consume content on their mobile devices. The audience is already there, with active users on messaging apps already surpassing the audience on the top four social media platforms. For the uninitiated, our chatbot technology allows us to push our news and data content to any user on Messenger that signs-up to receive notifications. Messenger itself now has almost one billion users worldwide. That’s a huge potential audience for theScore to tap into, introducing our unique and highly personalized sports content to a new segment of fans. We’ve been live for just six weeks on Messenger, and for a little longer on another popular messaging app in the form of Kik. Currently, we’re focused on refining our user experience on these new platforms and building audience.
- John: Our chatbot strategy is just one facet of our core objective to ensure theScore is an integral part of sports fans lives, wherever they’re consuming digital content. Supported by our core pillars – a best in class software development team powering the deep well of content being produced by our industry leading mobile newsrooms – we’re quickly growing our reach across multiple platforms, both established and emerging. With some of the core strengths of theScore, including the powerful array of APIs that power it, and our 4 million plus installed base on our apps, we are building a global cross-platform sports data and news network. Our presence on messaging apps like Kik and Messenger is in its infancy, while we’ve also built out a powerfully engaged social media community of more than three million fans. On top of this, we have a video team that’s producing some of the best coverage of competitive gaming anywhere, coupled with a traditional web presence that provides a top experience whether the sports fan is on desktop or mobile. This is only the beginning. Our goal is truly to have ‘theScore everywhere.’ And I’ll now turn things over to Benjie who’ll provide more details about the major product development initiatives we undertook during Q3.
- Benjie: Thanks John.
- Benjie: As John touched upon earlier, this past quarter we launched theScore chatbot on messaging platforms Kik and Facebook Messenger. As an official Facebook F8 partner, we were the only sports media company involved in the development of this new way of interacting and serving content to sports fans. We now have a dedicated bots team working on the next iterations of our messaging experience. We’re treating bots as a totally independent platform and giving it the same love, care and attention as our other offerings. Immediate next steps are adding deeper features and making the chatbot a more conversational and interactive experience. We look forward to sharing more details on what’s coming next on these platforms soon, as well as exploring other platforms where a chatbot by theScore makes sense strategically.
- Benjie: Work on our flagship app, theScore, was dominated this past quarter by preparing for a busy summer of major events. We added functionality for the two big soccer tournaments - the Copa America and Euro 2016. In terms of international soccer, these tournaments are second only to the World Cup, and the initial numbers we have seen on the app reflect this. More than 1.7 million users accessed our Euro 2016 and Copa America coverage during the tournaments in France, consuming 165 million page views. Both tournaments exceeded expectations for user engagement.
- Benjie: At the same time, we have also been preparing for arguably the biggest sporting event on Earth – the summer Olympics in Rio. We’ll be providing deep coverage of the event. Users will be able to sign-up for medal alerts and breaking news for their favourite countries, with dedicated sections for men’s and women’s soccer and basketball. We believe we’ll be providing the best mobile-first coverage of the Olympics anywhere and this, coupled with the two soccer tournaments, provides a great opportunity to generate strong numbers during a typically quieter season for our flagship app.
- Benjie: Our esports product development team has been equally busy. We launched a redesign of theScore esports’ iOS and Android apps, delivering sharper visuals and a look that better complements our best-in-class coverage of competitive gaming. We also added onboarding to our app to increase personalization and retention, as well as the ability to follow specific tournaments. This was followed by a redesign of theScore esports on web in response to the higher demand for desktop content by esports fans. This has all served to reinforce theScore esports position as a recognized leader in competitive gaming media – a space which continues to show tremendous growth potential on a global scale. Our immediate focus for esports moving forward is to continue adding deeper coverage of more games, as well as exploring international expansion into fertile markets.
- Benjie: Meanwhile, our fantasy sports team is ramping-up for the upcoming re-launch of our free to play daily fantasy sports game. The new game will still be free-to-play and offer real cash prizes, but it will be rebranded under a new name and focus on socially powered gameplay. It’ll be ad-supported – a core area of expertise at our company – and be available in every US state and across Canada at launch. I’ll now turn things over to Tom, who will provide more details around our financial performance during Q3.
- Tom: Thanks Benjie.
- Tom: Q3 FY2016 revenue, compared to Q3 FY2015 revenue, grew from $3.2 million to $6.1 million, an increase of 94%. In the same time, advertising revenue grew from $3.0 million to $6.1 million, an increase of 105%. For the first 9 months of FY 2016 revenue grew from $9.4 million to $18.9 million, an increase of 101%. In the same time, advertising revenue grew from $5.8 million to $18.9 million, an increase of 116%. Our app user base continues to be more engaged. Engagement grew by 27% in Q3 FY2016 compared to the same quarter last year. We also continue to execute very well in Canadian direct sales and in our US programmatic sales programs. In Q3 FY2016, Canadian ad revenue grew 60% year over year, while US ad revenue grew 120% year over year.
- Tom: In Q3 FY2016, expenses grew from $7.1 million to $10.4 million. The growth is mainly driven by our investments in our new product initiatives, with the expansion of our esports and fantasy applications. We also saw some increase in our score product line expenses with the reduction of tax credits related to the Ontario Digital Media Tax program and reduced capitalization of development costs given the more mature nature of the product line. Generally, our expense increases are a combination of the hiring of additional product development staff, as well as increasing direct marketing spend. In Q3 FY2016, personnel costs increased to $4.6 million compared to $2.9 million in FY2015. For the first nine months of FY2016, personnel costs increased to $13.6 from $7.7 million in FY2015. Headcount at May 31, 2016 was 204 full time staff, versus 156 at May 31, 2015. Expense increases are higher than the increase in personnel given that staffing increases were mainly in the more expensive areas like product development and sales, combined with lower accruals for Ontario digital media tax credits and a reduction in capitalized development with the maturing of theScore application. Also contributing to expense growth was an additional $0.4 million of direct marketing ($1.6 million for the first six months). Most of the increase was related to marketing and expanding our brand in esports. Admin and overhead costs increased by $0.2 million ($1.7 million in the first nine months) associated with the recruiting of new hires and additional office space. Adjusted EBITDA loss for Q3 FY2016 was $3.0 million versus $3.2 million in FY2015. The decrease is due to increased revenues offset by the investments we are making in esports and fantasy as we build these businesses by expanding our product offerings and creating more market awareness of our products.
- Tom: We finished the quarter with $19.5 million in the bank. Cash use for the quarter was 3.3 million. Working capital at quarter-end was $26.6 million, as we have $5.8 million of accounts receivables and $5.2 million in tax credits recoverable in our current assets. We recently received our certificate of eligibility for the tax credits recoverable, and have made the appropriate filings with CRA with the goal of collected the $5.2 million before the calendar year. (and with that, operator, we will do Q&A).