Apr 12, 2018
Executives
James Bigg - Senior Manager of Communications John Levy - Chairman and CEO Benjie Levy - President and COO
Analysts
Nikhil Thadani - Mackie Research Rob Goff - Echelon
Operator
Good morning ladies and gentlemen, and welcome to theScore Second 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, April 12, 2018. And now I would like to turn the conference over to James Bigg.
Please go ahead.
James Bigg
Hello and good morning. Many thanks for taking the time to join us on today's call and web cast for theScore's fiscal 2018 Q2 results.
I'm James Bigg, theScore's Senior Manager of Communications. On the call will be theScore founder and CEO, John Levy; and President and Chief Operating Officer, Benjie Levy.
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 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 annual information form and as well in our MD&A for Q2 fiscal 2018, which was filed on SEDAR this morning. With that, let me turn the presentation over to John.
John Levy
Thanks very much James and good morning to everyone. Thank you all for joining us today for this review of the Q2 fiscal 2018 results.
And at the outset, let me say I'm pleased to say there is lots of good news to bring to you and to bring you up-to-date this morning. First and foremost, a very positive revenue numbers, a new record for Q2.
Secondly, continuing encouraging user growth on our flagship iOS app. And thirdly, fees growth across a number of our emerging platforms including esports, video.
But first, I'll look at our revenue numbers. We recorded our strongest ever revenue for the second quarter hitting $7.1 million versus $6.7 million for the same period last year.
This growth was accomplished, thanks to the great performances from our Canadian direct and U.S. programmatic businesses.
We also continue to improve our EBITDA results, this quarter we improved EBITDA loss to just over $500,000 versus a loss of $1.4 million for the same period last year. Due to the well-known seasonality of our business, EBITDA loss for this quarter was anticipated but the increase in revenue, combined with the better efficiencies in running our business means we continue to close the gap and we are precisely where we expected we would be at this stage of the year.
For this first six months of the year, we are basically at EBITDA breakeven. Users of our flagship app on iOS were up 9% year-over-year building off the 6% growth we saw in Q1 with users continuing to respond positively to the redesign which we launched in the summer of last year.
Though the Android platform does remain a challenge, we finished the quarter with total monthly active users of 4.1 million average monthly users which is the same number for Q2 of last year. The users access our apps on average 85 times a month.
As previously discussed, we are working very hard to reverse this trend on Android, so a combination of strategic product [ph] and marketing initiatives. We are confident we both have the clear focus and the right strategy to get back to positive growth on this platform.
There are lots of work going on behind the scenes and we hope to have mortgage share on this very soon. On top of all this, the team also ensured we were meeting and exceeding the expectations of sports fans.
A, on our flagship app where we added support for the Olympics, for the winter games and for one of the most popular tournaments the March Madness which we just completed. Our content team added yet more rivers to our popular discover section while increasing our on the ground coverage of major sporting events.
We will go into more details on this shortly. We completed a total redesign of the score.com with its primary objective being to increase our rev app conversions and you’ll hear we have had success on that as well.
Our emerging platforms team continues its great work further improving our recently launched fantasy sports games for Facebook instant games platforms. While all this was going on we’ve also been keeping a very close eye on what appears to be the eminent legalization and legitimization and regulation of sports betting across the United States.
We know sports betting resonates strongly with large percentage of our user base, so we are interested to see how this plays out and actively exploring how we might be able to take advantage of this. I’ll now turn things over to Benjie who will take a closer look at some of our product initiatives as well as our financials.
Benjie Levy
Thanks John and good morning everyone. In Q2, the focus for our product team was largely on delivering an even deeper in game data and fast experience for our users.
We also launched a redesigned article view offering our users both lightened our themes for the first time while also adding a feature that allows users to swipe easily between news articles to create higher engagement. Our content team achieved some impressive results recording a new one-day record of 3.5 million article reads during the NBA trade deadline coverage.
During the quarter, we also relaunched the score.com as John mentioned with a new look. The goal here was to create a stronger connection between the look and feel of our app and the website and to drive higher installs and in the very early stages we’ve already seen the number of installs coming from our websites triple.
On top of this, both content and product did a great job at providing round the clock coverage of the winter games in South Korea, our Medal Alerts and daily summaries ensures sports fans can easily stand atop of all the action. With the FIFA World Cup on the horizon our focus for Q3 among other things is on significantly improving our soccer coverage and ensuring the score app is truly the top destination to follow all the action from Russia.
On to esports and our switch and focus towards producing original video content continues to yield very positive results. In Q2 total video views were more than 20 million up 215% year-over-year with most of that growth coming from our YouTube channel which now has more than 240,000 subscribers.
We're excited and encouraged by the appetite of our growing audience has to our content. We are one of the two media organizations that's not only managed to find an audience but is consistently seeing high engagement around our content.
That gives us a great pace to continue building from. Sticking with engagement, and our sports social platforms also continue to serve as a great brand building strategy reaching in excess of 30 million sports fans a month.
Instagram was once again the platform driving the lion share of this engagement. We continue to beat our peers in terms of interaction rates crossing our numbers from the same period last year.
We also began experimenting with more on the ground coverage on our social channels, sending the small 2% team to the NBA All Star weekend at Los Angeles in February. This proved extremely successful.
Over that 3-day period, theScore's 4.9% Instagram interaction rate led the industry comfortably beating the likes of ESPN and [bleaching] report for fan engagement. We also achieved 5 million more video views than ESPN and Instagram accounts for the 3 days despite their much larger overall audience.
These were effective results and showcase what the right approach to content creation can do for us. This quarter our emerging platforms team was primarily focused on further building out our instant game for Facebook Messenger which launched in January.
Since then, almost 5 million people have played theScore Fantasy and on top of other initiatives like the addition of leader boards we've also begun to integrate advertising and strategic points in the gameplay experience. Work is going to continue here with support for World Cup and Cricket coming up as well as localization into Spanish, Portuguese and French.
Meanwhile our bot for Facebook Messenger also hit the milestone of 500,000 average monthly active users in Q2 with that platform serving as another gateway into theScore's monthly income. I'll now take a closer look at our financials.
Q2 fiscal 2018 revenue compared to the same period in the prior year was $7.5 million versus $6.7 million, with the increase being driven by strong performances by Canadian direct sales and U.S. programmatic businesses.
In Q2, expenses improved to $8.6 million from $8.7 million in the prior year. The reduction is mainly driven by reduced personnel costs resulting from our transition in our esports focus as well as lower marketing costs, which has been found as a result of being more strategic and cost effective in user acquisition attracting larger volumes of high quality users at a lower cost.
EBITDA loss for Q2, 2018 improved to $518,000 versus an EBITDA loss of $1.4 million for the same period in the prior year. Just as we did in Q1, we continue to make strong year-over-year improvements to our EBITDA results which is part of our commitment to our objectives of being profitable and self-sustaining.
On the balance sheet, we finished the quarter with $7.9 million in the bank, cash generated for the quarter was $400,000 versus cash use of $2.6 million in the same period last year. We were cash flow positive for Q2 largely as a result of continued improvements in our operating performance and positive changes to our working capital.
Thank you, Benjie. This concludes the formal part of our presentation.
Operator, we’ll now take questions.
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session.
[Operator Instructions]. Your first question comes from Nikhil Thadani from Mackie Research.
Nikhil Thadani
Thanks guys. My first question would be on this potential change in the US legal sports bidding side.
Any more color that you could give us there in terms of the potential timeline in terms of the change and also in terms of what the past is sort of getting a minimum viable product will look like for you?
John Levy
So, in terms of the timing Nikhil, what we understand is that the US Supreme Court has committed to presenting their decision on the path for regulation sometime before the end of June. We’re watching it fairly closely; there is a schedule that the US Supreme court puts out with when their decisions are.
I think it’s once a month or every couple of weeks and its pretty random. So, we don’t know whether it’s this week, next week within the next couple of weeks but they have committed and there has been no change on that that the decision will be out in the spring.
So that’s a timing that everybody is gearing out for. In terms of the activity level what’s happening in the state you’ve probably seen that now they’re up to 20 or 25 of the US individual states have now put forward their existing or proposed regulations to deal with.
Sports wage range are within their own state. As you know, nobody really is certain as to what the decision will be.
What’s interesting is that I think Vegas they actually have betting lines on what the decision is going to be in terms of whether that was going to be repealed or not or partially repealed. The intelligence that we're getting really is no different that we’ll be hearing all along.
We think there is a strong likelihood that it’s going to be repealed perhaps in its entirety and more than likely partially. If it’s in its entirety that as you know that’s open on a state-by-state basis.
So, I think that’s what everybody is positioning themselves for and I think that’s why people are pretty excited about it. From our position, you know this is something that we’ve been interested and building since the day we launched the TV network in 1995 by having [indiscernible] and always being real and authentic as sports wagering is part of the engagement and the excitement that fans have with respect to watching sports.
We’ve also done some internal work and some surveys over the last number of years as to you know what the propensity is of our user base to bet on sports or to play fantasy or to just even bet with their friends. But particularly to bet on sports because as you’re aware a lot of that activity even though it’s not legal in the space except in Nevada and in Mountain [ph] Canada as well is certainly is grey.
A lot of people participated in that by wagering offshore. So, when we surveyed our own user base, we without giving out specific percentages we know that a high percentage of our users bet on sports.
That’s no surprise to us, so I think why we’re excited is that we think there is an opportunity for us to participate if it does become legal in one form or fashion all across North America and perhaps internationally as well. So, there is lots of avenues in for us.
We're not at this point really prepared to talk about specifics of it. But rest assured that it's something that's high on our minds and something that we are looking at and thinking about on a regular basis.
Nikhil Thadani
Right. And just to follow on that a little bit.
I guess it depends on what the actual changes are, but with sort of some kind of betting products for esports fall into your potential roadmap as well?
John Levy
Nikhil Thadani
Right, got you. And how should we think about the cost structure in the back half of this fiscal year?
Should things kind of remain relatively in line with the cost structure that you had in Q2?
John Levy
Without giving specific guidance, if we look at kind of what our cost structure has been for the past couple of quarters, we don't see any material variations from that.
Nikhil Thadani
Got it. And just one last one before I pass the line on the CFO was there any news to share on that front.
Thanks guys.
John Levy
Not at the moment. The search is ongoing, it's a very robust process for us.
The meetings with candidates are ongoing and we'll provide an update when we have news to share.
Operator
Thank you. Your next question is from Rob Goff from Echelon.
Rob, please go ahead.
Rob Goff
Thank you, very much and good morning. My question with follow on Nikhil perhaps on the betting side.
Assuming that there is approval would it be more of a six months or 12 months before we saw evidence of what this strategy might be?
John Levy
On the sports betting side, I think Rob, it's going to be -- assuming the decision comes down before June, and it's a positive decision. what you are then going to see is each state in the U.S.
is going to have to figure out their approach. Some are doing work now on that, and with placeholder legislation on what they will do depending on various permutations of supreme court's decision.
So, it's fair to say that there would be some period upon after that decision comes out. Not just that work we're kind of with our strategy for how we're going to participate, but for how various states are going to handle kind of regulation and promotion of it in their respective jurisdiction.
Then it's going to be a bit of a path work I think but I think there is also various different ways that we can participate and it doesn’t necessarily [be] the same experience in each state. So, I think we’re monitoring it very closely but there will be some roll out period after the decision comes out for this to really burden [not for us and them as well].
Rob Goff
Okay, thank you. And another one, could you discuss your actions to turn around the Android user declines?
Is the issue more a factor of fewer new users or gross adds or is this higher turn or is it some balance of the two?
John Levy
What we’re seeing largely is it's an issue that appears to be from our data that we have effecting a broad swap of sports apps across the board and for us the number one goal and what we’ve seen is how do we increase our top of funnel, how do we get more users in the door because we consistently see that there hasn’t been material changes to retention or engagement, it's how do we continue to acquire new users and our efforts are focused largely on that.
Operator
Thank you. There are no further questions, I will now turn it back over for closing remarks.
John Levy
Thank you everyone for joining us for the conference call. We look forward to presenting to you again when we deliver our Q3 results in July.
Operator
Ladies and gentlemen this concludes today’s conference. We thank you for participating and we ask that you please disconnect your lines.