Jul 11, 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 afternoon, ladies and gentlemen. And welcome to the theScore Third Quarter Results 2018 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 Wednesday, July 11, 2018. And now I would like to turn the conference over to James Bigg, Senior Manager of Communications.
Please go ahead.
James Bigg
Hello and good afternoon. Many thanks for taking the time to join us on today's call and webcast for theScore's fiscal 2018 Q3 results.
I'm James Bigg, theScore's Senior Manager of Communications. On the call today 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 those 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 our MD&A for Q3 fiscal 2018, which was filed on SEDAR a short while ago. With that, let me turn the presentation over to John.
John Levy
Thanks James and good afternoon to everyone. Thanks for joining us today for this review of our third quarter fiscal 2018.
It has been an exciting period for theScore for a number of reasons including the continued growth of our app user numbers on iOS platform, up 9% year-over-year, coupled with the new record for revenue generation in Q3. The launch of theScore on Bixby Home, an initiative that introduces theScore to an exciting new Android audience on Samsung devices across the United States.
The legalization of sports betting in the United States which presents its own exciting opportunities for our business. And a record month in terms of reaching sports fans through our social channels and emerging platforms, reinforcing our position as a leader in digital sports content creation and distribution.
More on that shortly. But first to look at revenue which produced our best Q3 results ever.
Revenue for the quarter grew to $7.2 million compared to $6.4 million in the same period in fiscal 2017. Revenue for the first nine months of fiscal 2018 grew to $22.6 million compared to $21.6 million, for the same period in 2017.
This growth was accomplished thanks to continued strong performances by our Canadian direct sales teams and our US programmatic businesses. EBITDA loss for Q3 improved to $44,000 versus a loss of $2.2 million for the same period in the previous year.
Just this last quarter, users on the theScore app for iOS were up 9% year-over-year. This has been a very positive ongoing trend in fiscal 2018 with the work put into our redesign during the last fiscal now paying off.
This growth was offset by our Android audience and resulted in cross platform average monthly active users of 3.9 million for Q3 which is consistent with last year. As previously discussed, we are engaged in a number of Android specific growth initiative to address this challenge, one of which we announced last week when we launched theScore on Bigby Home and more on that later.
This will see theScore news and data content served up to users on Samsung Galaxy devices including their flagship S9 and S9 plus devices across the US. Users can access theScore's content simply by swiping through to Bixby Home, the name of Samsung's personal assistant providing a taste of our great content and also a portal directly to our platforms.
This is one of a number of initiatives we are undertaking on the marketing and product side to grow on Android audience and support the great results we've seen on iOS. But before I turn things over to Benjie to take a look at some of our other products, social and emerging platform initiatives in greater detail, I want to also touch on the legalization of sports betting in the US.
As we said at that time, the Supreme Court's decision to repeal PASPA and open the way for legalized sports betting was a victory for sports fans in the US. We have been excitedly anticipating this ruling for some time and in our opinion it makes total sense.
Sports' betting has been a part of theScore DNA from running the odds on our ticker back in our television days to the in-depth wrap the sports betting related features and content we deliver in our app today. This is naturally attracted a strong audience of sports bettors to our platforms.
Clearly, this is a potentially large opportunity for us and we believe we are uniquely positioned to capitalize on it, not only do we have industry-leading expertise in creating exceptional mobile experiences, we also have a very large, highly engaged audience. Important to stress, however, that the state-by-state rollout of a sports betting, this is going to be a state-by-state rollout of sports betting and the different models being explored within each individual state means the landscape remains a fluid one.
There is still much to be worked out by state legislators as to what successful sports betting regulation will look like. And companies like ourselves need to navigate this situation carefully and strategically.
We are highly excited by this opportunity and we look forward to sharing our plans with you in due course as they evolve. I'm now going to turn things over to Benjie who will take a closer look at some of our products initiatives as well as our financial results.
Benjie Levy
Thanks John and good afternoon everyone. Product development on our sports app was largely dominated by preparing for the start of World Cup.
As part of this, we conducted a thorough overhaul of our soccer sections delivering a greater depth of stuff while also ensuring we were presenting information in the best way possible. We also added World Cups specific onboarding to the app to improve discovery of our content and to encourage users to follow the countries that matter to them.
In the first week of the tournament alone this approach helped us drive almost 1.2 million users to our world cup content. On top of this, we also worked on improving the format of our hugely powerful and popular alerts building out rich media notifications that allow us to include more information and images into breaking news alerts.
Our open rate for breaking news notifications has never been higher which is a testament to the great content being produced as well as the personalization options in our app. On to eSports and our video content which continues to draw larger audiences?
Just a few weeks ago we surpassed 300,000 subscribers on our YouTube channel with total video views across all platforms for Q3 exceeding 22 million which is growth of more than 60% year-on-year. Our team continues to uncover successful video formats and franchises that engage fans and competitive gaming across the world and we're very pleased with the growth rate here.
It was also a stellar quarter for our social content. May was actually a new record for sports fans which across our social channels with our content hitting more than 50 million users across Instagram and Facebook as our team nails it's on the ground coverage of the NBA Finals with Game 4 coverage producing a new record of 3.1 million impressions for our Instagram stories.
On top of this, our team also created a host of original content. This includes our viral brand Pablo video series which became our most viewed ever social video series and further served to expand our brand footprint.
This reach coupled with our hugely engaged app audience truly reinforces theScore's position as a leader in digital sports media. Like our app, our emerging platforms team was also largely focused on World Cup.
We added World Cup contests to our instant game, localizing contest in to languages including French, Portuguese and Spanish to take advantage of our global audience. World Cup contests are currently among the most successful on that platform showcasing the popularity of soccer among our non North American audience.
Localization is also a big priority for our bots for Facebook Messenger with World Cup content also proving to be a big draw. Our emerging platforms team is doing a great job of developing for these areas with high growth potential, while also expanding theScore's footprint beyond our core North American audience.
I'll now take a closer look at our financials. Q3, 2018 revenue was $7.2 million compared to $6.4 million in the prior year with the increase being driven by our Canadian direct sales and US programmatic business.
In Q3, expenses improved to $7.2 million from $7.8 million in the prior year. The reduction is mainly driven by lower marketing costs which have been found as a result of the lower spend on our eSports platform where video has been on a strong organic growth trend, as well as the promotional contest which we ran in Q3 of last year and was not repeated in the current fiscal period.
EBITDA loss for Q3, 2018 improved to $44,000 versus an EBITDA loss of $2.2 million in the prior year. EBITDA loss for the three and nine months ended May 31, 2017, I would note included an impairment loss of point $0.8 million on the disposal of a non core investment.
Turning to the balance sheet. We finished the quarter with $7.9 million of cash.
Cash generated from the quarter was $37,000 versus cash generated in the prior year of $3.6 million, noting that in the prior year we received $5.2 million in digital tax credits. And I'll turn it back to James.
James Bigg
That concludes the formal part of our presentation. Operator, we'll now take any questions.
Operator
[Operator Instructions] Thank you. All right.
So your first question comes from Nikhil Thadani of Mackie Research Capital. Please go ahead.
Nikhil Thadani
Thanks guys. John, I wanted to go back to the biggest question on everyone's mind with regards to the PASPA ruling back in May.
Completely understand that it's pretty fluid right now and there's going to be lots of things that need to be worked out. But just at a high level what's your philosophy and your approach to sort of tap into this new sort of exciting revenue stream?
John Levy
Okay, well, you're right. I mean it's very difficult for us obviously to go into any detail of what we're hoping to accomplish in specific terms.
And there's you know there are multiple approaches to our ability to get involved with sports wagering, but I got to tell you the reason we're so excited about it is we really have unique positioning in the industry in North America and also on a global basis in terms of how we're going to be approaching this market. You know we have a very engaged user base in terms of our active app users.
We also touch 40 to 50 million people through social platforms. And we know a large percentage of our users that on sports.
I mean betting on sports is a part of the sports passion that has been around forever and ever. And the market is well established.
We're talking about billions and billions of dollars on the North American basis. And the reason we're very excited about it is because we think our unique approach to how we're going to introduce sports betting is really to treat it as an aspect of entire engagement of how people look at sports.
Most of the sports betting apps that are prevalent in the UK today are really transactional based. And there are some very good ones.
I mean I don't have to tell you which they are but the likes of some of the Bet365 and the Will Hills out there have done a tremendous job in terms of being able to process and to transactions in sports wagering. But first and foremost, they really just are betting apps.
Our philosophy is that we're going to integrate that type of activity into our app specifically. And that's a really differentiated approach that everybody --and anybody else is taken to how sports betting is going to take place.
So we think that's the big opportunity for us. We think that will allow us to obviously enhance the engagement of our users to provide something that no other sports app has been able to provide.
And we think that not only is going to honestly going to work in the US even though it's going to be rollout on a very sort of state-by-state and slow basis. Hopefully in Canada at some point the Criminal Code gets repealed and sports betting are legalized there.
But we also think it gives us international opportunities too. So we're being very strategic in terms of how we approach this.
And we think we're going to be able to take full advantage of this humongous opportunity.
Nikhil Thadani
Got it. And just from our perspective from where we sit on the outside.
Is it also fair to expect that as this gets rolled out state by state aside from these benefits that you spoke about; we should also see a market improvement in an engagement and perhaps even installs and downloads and that gets rolled out right like is that a fair assumption?
John Levy
Yes, absolutely. I mean there's probably we know a high percentage of our user base that's on sports.
We know there's a much bigger universe out there that bets on sports it isn't using perhaps our app at this point in time. So once we introduce what we're going to introduce and people see how easy it is and the interface and how excited people can be about it.
We think that other people may come and it might expand our user base. And for sure with respect of the user base that we have it's going to enhance the engagement within our users.
Nikhil Thadani
Got it. And then moving on to sort of the soccer and the World Cup like we saw the news and heard Benjie's remarks in terms of how you benefited in the first week of that.
How has that sort of kept up as the World Cup has played out and from a Q4 seasonality perspective specifically how should we think about that?
Benjie Levy
Listen, certainly the momentum that we've seen in the first week of World Cup has carried through. I mean we feel horrible about having four games on the call with us right now after England's heart was just broken ten minutes ago.
I had to walk through the boardroom but see listens, certainly it provides a boost to its audience and to engage with it was kind of otherwise a does a little bit of a slower summer season.
Nikhil Thadani
Got it. And just lastly there's obviously lots going on the eSports front as well.
We saw the news this afternoon about Disney and Blizzard. How should we think about your roadmap going into a fiscal 2019?
Benjie Levy
I think we've been trying a lot of things in eSports over the past 12 months. And really think we have found something quite unique with our approach from a video content perspective.
And so you'll see us double down on that approach in the coming year as we look to continue to increase our output and continue to increase our reach and video consumption. And ultimately we think that's something that's going to resonate with advertisers as they --as both endemic and mainstream advertisers are increasingly looking to get involved in eSports and we think the video approach that we've really pioneered here providing coverage that no one else does.
It's something that is potentially quite lucrative for them.
Nikhil Thadani
Got it. And did you say earlier that this sort of video views on eSports was 22 million in the quarter?
Did I hear that right?
Benjie Levy
Yes. 22 million in the quarter and that's up 60% year-over-year.
Operator
All right. Your next question comes from Rob Goff of Echelon.
Please go ahead.
Rob Goff
Thank you very much for taking the question. And surprise, surprise I'm back to the sporting side of things.
Can you give us any more clues perhaps in terms of the economic models there? Your thoughts on partnerships.
What you might have learned from your past trial with Will Hill?
Benjie Levy
Listen, I think it's too early for us to get into the specifics about kind of what model this is going to take for us because it's first of all, its early days. Second of all, it is quite fluid state-by-state in terms of how each state is going to allow participation.
So the model may not end up being kind of a one-size-fits-all approach. And so those are the details that we're currently working through right now.
I think the core though that underpins it Rob is what John was talking about before, which is we know what that right. We know our consumers bet on sports.
And we know it's a highly engaged audience and particularly around one of the biggest trend and we also know that the two biggest trends in betting right now. When you look at what's going on in the UK and elsewhere is betting on mobile and betting in game.
And those are sort of the in-game engagement and the engagements on mobile obviously are our two strongest competencies. And so well we can't get into more specifics than that we think our audience and the way they interact with our app winds up very well with how that industry is developing.
Rob Goff
Thank you. And is it fair to say that you would look to monetize primarily through your 4 million app users or to what extent would you look to monetize on betting through the 50 million sports fans on your social and emerging platforms?
Benjie Levy
Well, listen, I think like our other monetization channel in terms of advertising, the core monetization currently is where that the hardcore engagement is. Whether -- where the users are coming to us 100 plus times in a month.
I think what our reach allows us to do is to the extent that whatever the offering ends up being, being able to touch and promote that offering to that audience I think certainly is something that we would consider as part of our approach.
Rob Goff
Thank you. And with the betting and clearly the value of your subscribers has gone up.
Is that giving you thoughts to perhaps leaning on your marketing dollar more than you have been?
Benjie Levy
From the perspective of increasing our --how we use user acquisition marketing. I think look to the extent that value and ARPU per user increases, it gives us more flexibility on that front but historically that's never been-- that's not been the challenge for us.
We haven't been -- we don't currently hit our head in terms cost per user and at the end of the day paid user acquisition is only ever a small portion of our user growth. 85-90 plus percent of our user acquisition is organic.
And so to the extent that that changes by a couple of percentage points, it's possible, but it's not something that is going to move the needle dramatically.
Operator
All right. So we do have another question here from [Seth Wilson] of West Wing Capital.
Please go ahead.
Unidentified Analyst
Yes, hi, there. My question is about the Android app.
Where would you say you are -- are you set -- I'm just curious like there seems to have been some -- you're still struggling with getting that squared away. Can you --could just give us an update on what's going on there?
Benjie Levy
Listen, we've been --as John said earlier in his presentation. We got a lot of initiatives underway on Android to try and get that user base growing at the same rate that we have currently going on iOS not the least of which was our announcement this quarter recently on launching on Samsung Bixby, where we now are going to be on all available all S9 and 9 plus devices in the United States, which is about 25 or 30 million devices which is something we're very excited about it and on the vast majority of carriers we will be the default sports provided there.
So that provides us with great reach to get our brand out and to look to convert some of those users to app users. We have a number of other initiatives that are underway currently that we can't speak to yet, but it is a core focus of our engineering team moving forward and product team moving forward.
Unidentified Analyst
Okay. Are there features you've identified that you sort of think you will use it if you add them in those will address the problem it sounds like?
Benjie Levy
Yes, absolutely and it's not something that's going to get solved overnight. It's going to be a combination of elements that are going to get us there, but we're confident we're going to be able to do it.
Operator
There are no further questions at this time. Please proceed.
James Bigg
Thanks everyone for joining our Q3 conference call. We look forward to presenting to you again when we deliver our Q4 and year-end results in mid October.
Operator
Ladies and gentlemen, this concludes your conference call for today. And we thank you for participating and ask that you please disconnect your lines.