Jan 11, 2018
Executives
John Levy - Chairman and CEO Benjie Levy - President and COO Tom Hearne - CFO
Analysts
Rob Goff - Echelon Jiang Zhang - Macquarie Nikhil Thadani - Mackie Research Capital
Operator
Good morning ladies and gentlemen, and welcome to theScore First Quarter 2018 Results Conference Call. At this time, all lines are in a listen-only mode.
Following the presentation, we will conduct a question-and-answer session. [Operator Instructions].
This call is being recorded on Thursday, January 11, 2018. And now I would like to turn the conference over to Tom Hearne, Chief Financial Officer.
Please go ahead, Tom.
Tom Hearne
Thank you. Hello and good morning everybody.
Thanks for taking the time to join us on today's call and web cast for theScore's fiscal 2018 Q1 results. On the call will be theScore founder and CEO, John Levy; President and Chief Operating Officer, Benjie Levy and myself, CFO, Tom Hearne.
At this time, I'd 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 theScore's shareholders and analysts in understanding theScore's financial position, objectives and priorities and anticipated financial performance. Forward-looking statements may not be appropriate for other uses.
Additional information of items of note, theScore's reported results and factors and assumptions related to forward-looking information are all available in our annual information form and in our MD&A for Q1 fiscal 2018, which was filed this morning on SEDAR. And with that, let me turn the presentation over to John.
John Levy
Thanks Tom and welcome everyone and thanks to everyone for joining us today for this review of the first quarter of fiscal 2018. Q1 was a quarter that we entered into with lots of exciting initiatives.
First and most important, we just launched our new flagship app. Next, we took theScore experience to new exciting platforms.
Also, we doubled down in esports, video content, which began to generate significant heat. We also continued to scale engagement and growth off platform on our social platforms, and we did all this while continuing to target positive EBITDA.
So, how did we do? Firstly, we did what we said we would do and made this the first EBITDA positive quarter in our company's history.
We achieved positive EBITDA of $0.5 million versus a loss of $4 million last year. While this is a cause to celebrate, it's only the start, and we will continue to work hard to deliver on our long term goal of being self-sustaining and a profitable company.
Revenue for the quarter was $8.4 million versus $8.5 million in the previous year. While our U.S.
programmatic and Canadian direct sales business experienced solid growth in the quarter, this was offset by lower direct U.S. sales.
As discussed on previous calls, U.S. direct sales are typically larger in scale, but less frequent than the Canadian counterparts, and Q1 was an example of this.
Now, like you, all of us are very eager to see how sports fans would respond to our newly, redesigned flagship apps, when we first introduced it at the end of fiscal 2017, and results initially have been very encouraging. In terms of raw user numbers, on iOS we twice broke records in Q1 for the most users on theScore app in a single month with both October and November setting new best ever numbers for this platform.
For the entire quarter, users for theScore app on iPhone and iPads were up 6% for the same period last year. Android users of theScore app, however, were down 11% year-over-year.
The Android platform remains a challenge, and in that we are seeing general trends that point to slower growth specific to the three sports app categories in Google Play over the past year. Overall, and as a result, our average Q1 -- in terms of monthly active users for theScore was 4.3 million versus 4.4 million last year.
Engagement, as measured by Average Monthly Users, our user sessions remained very strong with users coming to the app on average 103 times in this quarter as compared to about the same, 102 last year. So what does this tell as far as our flagship app goes.
Well for a start, we know that users have reacted very positively to the redesign. We’re seeing good growth momentum on iOS, which gives us a really positive position to build on through continued experimentation, future development, and maintaining our speed in delivering updates every two weeks to users to create the best experience possible.
On Android, we still believe that the right combination of product and growth initiatives will enable us to tackle this platform specific challenge head on by improving both acquisition and retention tactics [ph]. I am now going to turn things over to Benjie, who is going to go into more detail about our product initiatives, including our esports and emerging platforms businesses, including some very nice early results from last week pioneering launch of the fantasy sports game on Facebook's Instant Games platform.
Benjie?
Benjie Levy
Thanks John and good morning everyone. When we launched the redesign of our flagship app back in the summer, we said that this would be where the real work begins.
To assist with this, we have also restructured our product development group into distinct teams, including sports, content, social and community, growth, and emerging platforms. We believe we now have a great setup in team structure to continue driving us forward.
Since pushing the update live in the App Store and on Google Play, our sports team has been busy analyzing user data as well as the more qualitative feedback received through our support channels and App Store reviews, to help ensure our product roadmap continues to meet and surpass the expectations of sports fans. In the past quarter, we have brought our redesign to iPad devices, been among the first to optimize for the newly launched iPhone 10, added deeper stats for NBA and NHL, delivered smarter betting information and also made it easier for fans to access the headlines they care about.
Our focus for Q2 has been on deepening and broadening our sports coverage. We virtually completed work on our Winter Olympic session and are also working on a complete overhaul of our Golf session.
Golf is the most popular individual sport in our app, and is also a favorite among our advertisers due to its more affluent audience. So it makes perfect sense to deliver an upgrade here and offer more options for our users and advertising partners.
Our redesign also allowed us to better connect the experienced users we are seeking on our app, with the content being shared on our social media platforms, which continues to reach more than 30 million people a month. We plan on doubling down in this area over the coming months layering deeper social interaction into the app.
Our redesign also allowed us to take a fresh look at the kind of content we were offering and how we were surfacing it. Our Discover section has quickly become a popular destination for the big stories and multimedia social content doing the rounds, but also provides an area for us to showcase the same curated voice that fans love across our social channels off platform.
This has allowed us to expand into areas that didn't really fit into the old look and feel of our app. We now have Discover Rivers [ph] dedicated to popular topics like high-end sports apparel, with our Swag Watch section, as well as nostalgia pieces like Turn Back The Clock.
We have also utilized Discover to become a home for quick multimedia game recaps, trending posts from Instagram or compilations of great plays from fan favorites like LeBron or Messi. In fact, our Discover Rivers [ph] are now some of the most scrolled Rivers [ph] in just a few months after them being created.
Because we are now incorporating more third party content in our app, this has provided greater bandwidth to our in-house content team allowing them to focus on deeper and more original content. In Q1, this included an exclusive interview of Shaquille O'Neal, who talked about the 25th anniversary of his incredible rookie season.
We look forward to seeing more of this. On to esports, and as discussed on previous calls, we have refocused our priorities in recent months towards the production of original video content, developing franchises focused on storytelling around the games and outside the live events.
While our app remains the leading offering for the more hardcore fan of competitive gaming, what we wanted to do was expand our potential audience beyond the super fan, and into the domain of the more casual esports and gaming viewer. Our video approach has allowed us to do that, and in Q1 of fiscal 2018, total video views hit 18 million, up from 3.5 million for the same period in the previous year, growth of more than 400%.
Our team has created a number of popular video franchises, with a healthy number of videos now garnering at least six figure views across YouTube, Facebook, and Twitter. We now have a strong foundation, and we think there is further opportunity to build a strong and valuable audience here.
Esports is an area that has extremely high growth potential to complement what we are doing with our flagship app. Tapping this kind of potential is something our recently formed emerging platforms team has been focused on over the past few months.
Their task is to identify and develop for the platforms of the future, to ensure theScore is always one step ahead of the evolving needs of sports fans. This past quarter was particularly eventful for them.
We saw the launch in theScore for Amazon Alexa across North America, with our brand permanently featured on the packaging of Amazon's extremely popular Voice Assistant up here in Canada. We also saw the continued improvement and growth of theScore bot for Facebook Messenger.
theScore bot has quickly become the leading independent offering on this platform, and serving as a means to widen our top-up funnel and introduce more sports fans to our brand. And only last week, we continue to strengthen our relationship with Facebook through the launch of theScore fantasy for its Instant Games platform.
This was the very first fantasy sports game to launch on Facebook's instant games platform, allowing fans to challenge brands through messenger for quick and fun fantasy contest. Using some of the preexisting game mechanics of our [indiscernible] fantasy game, that we were able to develop for this platform very quickly, and we are very encouraged by the interest in the game, with more than 1.1 million users already trying out the game within a week of launch.
I will now turn things over to Tom, who will take a closer look at our financial results.
Tom Hearne
Thanks Benjie. Q1 2018 revenue compared to Q1 2017 revenue was $8.4 million versus $8.5 million.
The change in revenue for the quarter was driven by lower direct sales in the U.S., and as we have discussed on previous calls, where U.S. direct sales tend to be bigger campaigns and are less frequent in scope, and are complemented by our more consistent programmatic sales approach.
In Q1 2018, expenses declined to $7.8 million from $8.9 million in the prior year. The reduction is mainly driven by reduced personnel costs as well as lower marketing costs.
Marketing costs are down year-over-year, due to lower sponsorship costs in the esports base and our strategic and cost effective external discretionary spend, as we focused more investment on our social content strategy, as a way to build the company brand. Headcount on November 30, 2017 was 189 full time staff versus 215 at November 30, 2016.
The change in headcount is related principally to the change in focus of our esports group toward video content. Moving forward, we believe we have the right mix of personnel for us to meet our business goals for fiscal 2018.
EBITDA for Q1 was $500,000 versus an EBITDA loss of $400,000 in Q1 2017. As John commented, this was the first EBITDA positive quarter in the company's history, and in line with the commitment we have made to make the company profitable.
We finished the quarter with $7.4 million in the bank, cash used for the quarter was $2.7 million versus $3.9 million in Q1 2017. Q1 is traditionally our largest cash use quarter, as our large Q1 sales are usually collected in Q2.
And with that operator, we will now take some questions.
Operator
[Operator Instructions]. Your first question comes from Rob Goff from Echelon.
Please go ahead, Rob.
Rob Goff
Thank you and good morning.
John Levy
Good morning Rob.
Rob Goff
Good morning. Could you perhaps dive into the Android market in terms of why you are seeing the pressure and the declines there?
And are Android users typically recording the same number of monthly visits as would be the iOS?
Benjie Levy
Hey Rob, this is Benjie. Good morning.
Rob Goff
Hey Benjie. Good morning.
Benjie Levy
So this is a -- as John mentioned on the call, it's something that we are seeing kind of across all sports apps in general. And you know, we have a couple of working theories on why that might be dealing with some of what might be made available through some platforms like Google Now and other things on the Android platform.
But we are confident, as John said that, building on top of the redesign that we launched in September on Android, that we are going to be able to combat this with some new features and functionality in some of our marketing initiatives over the coming months. In terms of engagement on the Android platform, it’s similar to iOS.
There was never historically a big distinction between iOS and Android. Users on both platforms are very highly engaged and that -- with the 103 sessions per user per month applying pretty well across the board.
John Levy
And the only other thing I'd add Benjie is that -- hi Rob, is that -- in terms of our user feedback, we don't see sort of discrepancy between user feedback on iOS versus Android. The people that are using our new app love our new app.
This really is a platform issue that it's not new. I mean, this is something that we have been looking at over the course of the last year, and I am sure other sports, free sports apps have as well.
But what we had to do first, we get our new app out, and that's what we have done. Confirm what our testing showed last year as we were developing the app, that people, once they got through the initial shock, 'oh my god, you changed the app that I loved' and started to get exposed to sort of the new sections and the new social features and all the new content that we are bringing to the app, they are going to love it.
And that is exactly what we experienced with our iOS guys. So now that we know that that's there and we feel pretty confident about that, there are some specific options that we are looking at to address the Android issue.
And we are very confident that we are going to be able to combat that.
Rob Goff
And within quarter trending for the Android would have been relatively consistent at the 11% decrease?
Benjie Levy
Yes.
John Levy
Yes, I think so. We saw momentum on the iOS side, which was positive through the month.
We don't -- we are not talking about it individually on a month by month basis. I think we reported that we saw 6% overall quarter-over-quarter, but we saw steady acceleration during the quarter which is very encouraging on iOS.
Rob Goff
Cool. And if I might, for two more -- did you see any changes in the average session duration?
And then the second question would be a broader question, which would just be a bit more discussion perhaps on the timeline and strategies for monetization on esports and social where the momentum is great?
John Levy
So on esports and social, the timeline for monetization on that, we are starting to experiment with some monetization of that now, it's very early days, and we are very pleased with the growth in video views that we have seen from the 3.5 million to over 18 million this quarter, and that's a good start. And the momentum we are seeing is that, we want to see that increase over time for it to become a strong and meaningful revenue contributor.
18 million video views a quarter is okay from a monetization standpoint, but we are excited to drive that further and see what that really can do -- and that both on YouTube and Facebook and other platforms now, where we are also starting to get heat. In terms of average session length, that's not something we report on publicly with any kind of -- on a regular basis.
I can tell you though, one of the things that some of the new features have done is -- like for example, the AllScores tab, we see -- sometimes users coming in more frequently, but for shorter bursts of time. So -- because they are now getting all of that scoring data consolidated in one place as opposed to having to bounce around between multiple leagues.
So generally consistent, but no major changes overall.
Rob Goff
Great. Thank you very much.
Operator
Thank you. Your next question comes from Jiang Zhang from Macquarie.
Please go ahead.
Jiang Zhang
Hi, good morning guys.
John Levy
Good morning
Benjie Levy
Good morning.
Jiang Zhang
So there are two questions, first one is why is the sports user engagement metrics [indiscernible] from the overall, in terms of your reported user number?
Benjie Levy
Jiang, I think what you are commenting on is, this quarter for the first time in public quite a while, gone back to just the core score app user numbers, and took out the esports numbers. Now the esports focus is really more on video and less on just users on the app.
And so, we did put in the comparative number, and you can see how we did year-over-year, just purely on the sports app. And we had a footnote, I believe at the bottom of the press release that outlined kind of what we do and don't include, as John commented, the people that are using on the new emerging markets, we haven't included them in those numbers yet either.
Jiang Zhang
Okay. And in regards to the fantasy product, can you just help me understand how does the monetization work on the new fantasy product?
Benjie Levy
On the Instant Games. So for us, the Instant Games is interesting for two reasons.
First, this right now on Facebook Messenger is a closed program and only people who have relationships with Facebook have been invited in to-date. So there is only 70 games, we are one of the very first games.
And the scope of the audience on Facebook messenger being 1.3 billion people worldwide gives us a great opportunity to get our brand out in front of a large number of people. So it really is a two-fold approach.
One is, using it as a brand building marketing and top of funnel for us, just like we are doing with our Facebook Messenger bot. And secondly, as regards to the monetization of that platform itself, Facebook has already announced on the Instant Games that they have launched Facebook audience network, and it will be an advertising supported model there.
We have some work to do in terms of growing that audience, adding some features, but ultimately there is -- to the extent this really gets traction, which we believe it will, there is a very clear path to monetization on that platform.
Jiang Zhang
Okay. Great.
Thank you very much guys.
Operator
Thank you. And your next question is from Nikhil Thadani from Mackie Research.
Please go ahead.
Nikhil Thadani
Thanks guys and congrats on the EBITDA positive quarter. I just wanted to look out to the rest of fiscal 2018 and fiscal 2019, just at a high level, what your thoughts were in terms of the EBITDA trajectory going forward from this point out?
Benjie Levy
Nick; so I mean, obviously, one of the things that we have been focused on is continuing to grow the bottom line of the company and get ourselves in a position where we have continuous control of our own path going forward, and so getting ourselves profitable and then focusing on that for the year has been a big drive of ours. I think as we continue to grow out and you look through 2018 and into 2019, we would continue to work hard to continue that positive trend.
We don't have any specifics obviously on what we think we are going to do in 2019. Yes, we are just early into 2018, we have launched the new app, we have got a lot of emerging market products.
Got a lot of great things going on. And so we are just at this point, working hard on what we have got there, and I think we will be in a better position in a couple of quarters to probably talk more clearly on what we are going to do in 2019 and going forward.
But I think you are -- the focus of the company is positive trendlines, both revenue and EBITDA and continuing to improve the company.
Nikhil Thadani
Okay, great. And quick question for you Benjie, seems like there is a lot going on, on the new product front.
And as you look out, which is sort of the product that you think might sort of contribute to the top line, sooner than the others? Is it fair to assume that it might be esports, and just at a super high level, I know it's pretty early, but how do we think about sort of the ARPU metric on that esports products versus the existing ARPU that you have?
Benjie Levy
Nick, I think it's too early for any of the emerging platforms for us to get into any sort of specifics on that, and sort of forecasting out what an ARPU might be. I think, if you look across all of our emerging platforms right now, the one that's furthest along is esports video.
We have seen great traction from that, from a user perspective over the past 12 months. And there is also sort of a very clear formula for how content like that can get monetized on platforms like YouTube and Facebook.
So that's something, as I mentioned, that we are starting to experiment with now, and as that audience continues to grow, we will have more to say about it. In terms of the other emerging platforms, kind of our messenger bot, our Instant Games, I mean, which literally just launched last week or -- Alexa, which also just launched, the voice platform which was launched in the quarter.
It's too early for us to say. What I can say though, is that our advertising partners are starting to show initial interest.
They like to be associated with innovative platforms and approaches. We already have -- as part of some of our digital buys.
In Canada, some advertiser is showing interest in Alexa. Advertisers expressing interest about how they can get involved in esports.
And so, the areas that we are pursuing, from a product development perspective, it's not just a -- it's just like we do with our app, with the outset -- we are not jus building products for product sake, we have an eye on what the business model is here for these things, and it just takes a little bit of time for the product to develop, before we can start to introduce meaningful monetization.
John Levy
The only thing I'd add to that Benjie, is with respect to esports; it's a very interesting scenario, because this is clearly not one of the 'build it and they will come,' they are already coming. Our advertisers have been hounding us for the better part of the last year, to be able to create a vehicle for them to address and attack this market.
We started with the app, built it up and built our brand up, became the reputable brand within esports. We are working very hard to continue with that pattern.
And now we found some heat in these franchises and the videos that we are creating. And there is two sides of this product, one is, the industry is not a fad, it's not going away, it's clear.
Esports is here, it's here to stay, and the market is global, and we have created a brand that is leading the way with respect to that. The other side of the coin is, advertisers are dying to get into it.
So we feel very excited about the prospect of making that connection. And I think the other interesting thing we talk about a lot here is, we have seen a lot of people get involved in esports.
A lot of people throwing a lot of money at it, and now people backing away from it; because they are blowing their brains out, they haven't figured it out properly, they haven't addressed it in a reasonable, logical fashion, and that's what we are doing. So yes, it's taking a little while for us to put the pieces together, but the pieces are clearly there, and we are very excited about our ability, as compared to anybody else's to be able to unlock that.
So we are very excited about that. And there is other opportunities out there, that we haven't even talked about, that are part of our roadmap.
And I am not talking about way distant future, but in the course of the next quarters or six months, nine months a year, that we think we are better positioned and better placed than any other sports media company to take advantage of. And we don't go into a lot of detail, we haven't talked about it, but there is lots of other opportunities out there, in the sports, where all the sports people are pretty fanatical and love to get involved.
So that's something that I think is very exciting prospect for us as well.
Nikhil Thadani
Great. Thanks guys.
And just one last one, I was wondering if there is an update on the CFO replacement process. We are certainly going to miss working with you Tom.
Just wondering if there was further update on that? Thanks guys.
John Levy
Well first of all, thank you for bringing that up; because if you hadn't, I was going to, and this is the last I guess quarterly conference call that we are going to have with Tom with us; as everybody knows, because we announced Tom is moving on to looking at other projects, and yes we are in the hunt for a replacement, our next CFO. If anybody is listening, and wanting to send their resume, we are doing [indiscernible] calls here.
It's not going to save us any money, but any way -- bottom line is, we are well into the process, and more importantly, I want to wish Tom, all the best in his future endeavors, and I want to thank Tom for helping us get where we are today. As you can hear from our enthusiasm, we think the company is well positioned.
At this point, the platform is well developed. We are about to unleash some very-very exciting opportunities for us, and Tom is very helpful in helping us to get there.
So I personally want to thank you, on behalf of my family and on behalf of the company for all this you have done over the course nine years, which seems like was just yesterday. So thank you very much.
Tom Hearne
Appreciate that. Thank you.
Operator
Thank you. There are no further questions at this time.
I will now turn it back over to closing remarks.
John Levy
All right, great. Well thank you everybody for joining our Q1 conference call.
We look forward to presenting to some of you this morning at our annual general meeting that will be at our office here on King Street and then our Q2 results, which will be presented in mid-April.
Operator
Ladies and gentlemen, this concludes today's conference call. We thank you for participating, and we ask that you please disconnect your lines.