8/15/2023

speaker
Operator

Good morning and welcome to the Playmaker Capital Inc. Q2 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, This event is being recorded. I would now like to turn the conference over to Playmaker Chief Operating Officer, Jake Cassaday. Please go ahead.

speaker
Jake Cassaday

Thank you and good morning, everyone. As mentioned, I am Jake Cassaday, and I am joined today by our Chief Executive Officer, Jordan Gannat, and our Chief Financial Officer, Mike Cook. Before we begin, I would like to remind you that today's call will include estimates and other forward-looking information from which our actual results could differ. Please review the cautionary language in yesterday's press release regarding various factors, assumptions, and risks that could cause our actual results to differ. Furthermore, during this call, we will refer to certain non-IFRS measures. These measures do not have any standardized meaning under IFRS and our approach in calculating these measures may differ from that of other issuers, and so these measures may not be directly comparable. Please see yesterday's press release for more information about these measures. As a reminder, this conference call is being recorded and a replay will be available on Playmaker's website. An updated investor overview presentation is also now available on the website, inclusive of Q2 details discussed here. At this time, I would like to introduce Jordan Gannat, Chief Executive Officer of Playmaker.

speaker
Jake Cassaday

Thank you, Jake. Good morning, everyone, and welcome to our second quarter 2023 earnings call. Q2 was a period of focused execution against our five strategic priorities for 2023, all aimed at better integrating our complementary businesses to drive organic revenue growth and realize efficiencies. During the quarter, our ecosystem of media and affiliate businesses refined internal processes, expanded syndication networks, enhanced video production and monetization capabilities, and extended strategic partnerships with Tier 1 advertisers and sports betting operators. Entering the sports-heavy Q3 and Q4 periods, Playmaker is better positioned than ever to drive value for fans, customers and shareholders as the number four ranked digital sports media group across the Americas and the number one regional digital sports media company in Latin America. Subsequent to the quarter end, we acquired leading Quebec sports media group La Poche Bleue to round out our Canadian wide reach. La Poche Bleue plants a flag in the Quebec market bolsters our video podcast portfolio and strengthens our direct-to-consumer segment in advance of the upcoming NHL season. Additionally, founders Maxime Lapierre and Guillaume Latendresse and managing director Louis-Philippe Doré are tremendous additions to our senior leadership team. Playmaker experienced strong engagement metrics across its owned and operated media brands in Q2 2023. During the quarter, PlayMaker's web properties generated more than 653 million sessions and its video podcast received over 5 million streams. Here are some additional highlights worth noting. The Nation Network continued to grow engagement with its lineup of video podcasts and achieved a quarterly record 5.1 million streams in Q2 2023, an increase of more than 300% over Q2 2022. In June 2023, TNN generated a monthly record 2.02 million streams, an increase of 451% over June 2022. Yardbarker attracted a monthly average of 8.9 million unique users in Q2 2023, an increase of 52% over Q2 2022. Additionally, Yardbarker generated a monthly average of 19 million web sessions during Q2 2023, an increase of 51% year over year. Football sites maintained a strong leadership position in the Brazilian market with core properties, Bola VIP Brazil, Fanaticos for Football, and Entonados Norfootball generating more than 300 million sessions in the quarter, and ranking 1st, 2nd, and 11th respectively in the June CommScore rankings. FootballSites executed numerous direct campaigns with leading iGaming and sports betting operators in Brazil during the quarter. Additionally, FootballSites activated campaigns with global advertisers across branded content articles, podcasts and video integrations, and widgets. Football Sites Q2 2023 direct sales revenue increased by 53% over Q2 2022, bolstered by an 88% year-over-year growth of the sports betting customer segment. We continue to focus on the shift in sales from programmatic to direct, and in Q2, we executed multiple long-term direct sales and partnership initiatives. Direct sales accounted for 54% of Playmaker's core media advertising sales for the period, an increase of 25% over Q2 2022. Direct sales and affiliate are growing segments of Playmaker's revenue generation, and the company continues to expand these revenue streams to maximize higher margin monetization opportunities. Our teams continue to execute at the highest level and are gearing up for the high seasons of the North American sports calendar. I'll turn the call over to Mike to discuss our financial results in more detail and then come back to wrap up the call.

speaker
Jake

Thanks, Jordan. Good morning, everyone, and thank you for joining us today. Last night, we reported our results for the quarter ended June 30th, 2023. As a reminder, all of our financial results are presented in U.S. dollars. On a pro forma basis, which includes the results of acquisitions through June 30th and excludes the results of businesses we've disposed of, Revenue was $12.6 million in Q2 2023, compared to $8.3 million in Q2 2022, an increase of $4.3 million, or 53%. We use adjusted EBITDA as a key measure of earnings. Adjusted EBITDA reflects our earnings before interest, taxes, depreciation, amortization, stock-based compensation, acquisition-related costs, and other one-time costs. Excluding the results of our corporate segment, our operating segments produced pro forma adjusted EBITDA of $3.3 million in Q2 2023, compared to $2.6 million in Q2 2022, an increase of $700,000, or 24%. Including the results of our corporate segment, our consolidated pro forma adjusted EBITDA was $2.2 million in Q2 2023, compared to $1.6 million in Q2 2022, an increase of $600,000, or 34%. For the trailing 12 months, our pro forma revenue was $56.9 million and our pro forma adjusted EBITDA is $15.1 million including the cost of our corporate segment or $19.5 million excluding the corporate segment. On an IFRS basis, we produced $12.6 million of revenue and $900,000 of operating loss in Q2 2023. In Q2 of 2022, the company produced $6.7 million of revenue and $500,000 of operating loss. It should be noted that the $900,000 of operating loss in Q2 2023 includes $2.1 million of non-cash expenses related to amortization and stock-based compensation. We finished Q2 with cash of $9.7 million compared to $11.4 million at March 31st. The $1.7 million decrease in our cash balance during Q2 was driven mainly by $2.6 million of positive cash flow from operating activities, offset by $4.4 million in payments made to settle contingent consideration. We finished Q2 with $10 million of available debt, and we added an additional $10 million of available credit subsequent to quarter end. We believe that available capital, combined with our cash balance and the fact that we produced positive adjusted EBITDA, puts us in a strong position to continue executing on our strategy going forward. I will now turn it back over to Jordan.

speaker
Jake Cassaday

Thanks, Mike. We continue to execute on our key goals for 2023 of cross-brand collaboration, integration and optimization, innovation and scale, and the organic growth of Playmaker is evidence that our strategy and pace of integration deliver results. We are very excited about bringing the La Poche Bleue family into ours, and we are already seeing the synergies on the direct sales side of now having a footprint In Canada, that includes the Quebec market. Our focus is now firmly shifted to the North American sports calendar that kicks off in earnest in September with the NFL. Operator, you can now go ahead and open the line for questions.

speaker
Operator

Thank you very much. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Matthew Lee with Canaccord. Please go ahead.

speaker
Matthew Lee

Morning, guys. Thanks for taking my question. Maybe we can start on the revenue side. Your numbers were significantly better than expected and kind of bucked the usual seasonality trend in sports. Can you maybe talk to what parts of your business beat your expectations to drive that strength in the quarter?

speaker
Jake Cassaday

Yeah, thanks, Matt, and thanks for joining today. I think the piece of our business, as we talked about in just the remarks, the TNN side of our business had an incredible quarter. We saw some strong increase in particular in our podcast streams, very strong results in direct campaigns. and direct campaigns yield us higher revenues for same ad units that we're able to sell. Sponsorship is strong. And as well, we are continuing to see the hockey segment in particular around draft and trade deadline drive a lot of additional readers as well as listeners to our podcast. Super strong, super strong there.

speaker
Matthew Lee

Okay, great. And then maybe we can talk about La Poche Bleue. I mean, generally the strategy, you know, I appreciate the strategy and the quote-unquote market, but do you feel like this transaction gives you the necessary assets to address that market, or maybe you're perhaps looking for more?

speaker
Jake Cassaday

Hey, Matt, this is Jake. So, yeah, I think we've really sort of signaled to the market, and internally we've had a focus on, you know, finding – a great asset and I think great assets to service not only Quebec but the rest of Canada in each of the markets that we have an established footprint in. With La Poche, we feel like we've got a great head start in a key and net new market for us that's 9 million people and really services that market in a very unique way, in a relatively closed off way in some instances. So what this does is give us a really unique asset to service, not just Quebec, but also allow us to run really strong national campaigns and now can stretch across each major market in Canada. And those are revenue synergies that will go both ways as well. Being able to plug LaPosh into the direct sales efforts that we have in the rest of English Canada, as well as leverage some of the relationships that LaPosh has in Quebec for the rest of our network in Canada. So I think this is the first, it's not to suggest that it's the last, but with this, we have a brand that has a lot of loyalty and affinity with fans and is relatively early in its journey and on its curve going up. So it will continue to grow and flourish within our network. But we're certainly not closed off to other opportunities in the province as well.

speaker
Jake Cassaday

Yeah, and the other way I'd look at this is just sort of think of our playbook in the reverse. So think of Fanaticos Port Football. When we bought Fanaticos back in June of 2021, it was simply a Facebook page. And what we were able to do is leverage some of the strengths that we had and turned it into Somos Fanaticos, the second largest website for sports in Brazil now. La Poche is very strong. in podcasts, super strong brand, and they've got a website that isn't necessarily top of the heap, but taking the skill set that we have in how to drive traffic to websites, SEO, leveraging a strong brand that already has a built-in community. If you take a look at the Fanaticos playbook, now take that while you're not going Facebook to web, now you're going to take a fan community around audio. and you're going to begin to drive that traffic to web as well, we'll be able to increase monetization. So this is right out of the playbook of what Playmaker's team is capable of and has proven to be capable of. So that also excited us about the future opportunity for this as we head into 2024. All right, that's very helpful. I'll leave it there. Thanks, Matt. Appreciate it. Have a great rest of the summer.

speaker
Operator

The next question comes from Rob Goff with Echelon. Please go ahead.

speaker
Rob Goff

Thank you for taking my questions.

speaker
Jake Cassaday

Great to see you, Rob.

speaker
Rob Goff

Very good quarter, once again, outperforming. The first question is, you talked to the direct sales growth. Can you talk to where you see that going within the mix and just address the yield pickups? that you do see in direct versus programmatic?

speaker
Jake Cassaday

Sure. Hey, Rob, this is Jake. Yeah, I think we're really, this is one of the things that we're most enthused with across sort of the overall monetization stack that we're employing across the entire network here. You know, as stated in the materials, we saw a 25% growth of the share that direct makes up of our core media ad sales, now at 54% in the quarter. And, you know, a lot of this is coming from, you know, not only the increase of direct for what we can say is existing inventory of display and video impressions across web properties and branded content opportunities and social. It's also the result of an investment in new properties and new products. that allow for us to create premium inventory that can be made available and has been made available to advertisers. And, you know, Jordan just outlined the video podcast growth that we've seen, you know, what that affords us is the ability to provide, you know, premium sponsorship opportunities, segment sponsorship opportunity. And we're doing it at both a national scale as well as a local scale. And I think that's where we're seeing a lot of the success, particularly within the nation network is that, You know, if you're watching a show in Calgary called Barn Burner, you're going to see, you know, national and international sponsors like Betway, but you're also going to see local advertisers that want to reach the Calgary market and don't have destinations like local terrestrial radio to deploy those dollars anymore. So the inventory we're creating is almost, you know, there's a very thoughtful approach to ensure that our product roadmap leads to premium inventory being made available as we continue to scale our direct sales efforts. So, you know, I think in terms of where this could go, I think that, you know, continuing to show this level of growth year over year of the share of Direct is something that we're very happy with. You know, I think that we want to continue to expand it. We want to continue to eat up more of our available inventory with Direct. I don't have an end game in mind in terms of where that is going to land, but we're dedicated to ensure that, you know, the more and more of our inventory is serving direct clients and, you know, really taking a results oriented and, you know, conversion oriented type mindset to, uh, working with our ad partners.

speaker
Rob Goff

Thank you. When you look across web, you know, podcasts, social and newsletters is, you know, how do you see yourself balancing your organic push or your inorganic push?

speaker
Jake Cassaday

So I think one important consideration there is that none of those are mutually exclusive, right? I think where we're having a lot of success is that we have sort of individual ecosystems that include video, audio, social, and web. So when we're selling direct campaigns, we all see an insertion order, an IO with an ad partner that includes you know, each available sort of set of inventory across the property. So it's not as if we're selling exclusively, you know, this presenting sponsor on a podcast and then cutting out everything else we do for that partner. We are selling a cohesive product that includes multiple channels. And again, I think that makes us unique that we have these sort of enclosed ecosystems, whether it's you know, with full of VIP and its social presence, uh, website and, you know, burgeoning video podcast as well, but, but, you know, certainly within the nation network as well. Um, so I, I think, you know, we'll, we'll continue to focus on creating that new premium inventory in the form of video. Uh, but the key is they, they, they sort of ride together, uh, and we're going to continue to focus on, on building out each of those product streams so that we can continue to deliver, you know, more exposure, more reach across the, the overall ecosystem.

speaker
Rob Goff

Thank you. Good luck, guys.

speaker
Matthew Lee

Thanks, Rob. Appreciate it.

speaker
Operator

The next question comes from Gianluca Tucci with Haywood Securities. Please go ahead.

speaker
Gianluca Tucci

Hey, good morning, guys. Good results. Just curious to hear, like with the upcoming market opening catalysts in the U.S., Kentucky, North Carolina, and others, What are you doing in advance of that to position Playmaker for as much market capture on your affiliate side as possible?

speaker
Jake Cassaday

Thanks, Gianluca. It's a great question. So we work with our key betting operator partners in each of those markets. And each one launches in a bit of a different way. So some markets allow for pre-registration. And when they allow for pre-registration, what you're able to do is get promotions from the vetting operators where they can begin to get signups and you can deliver them signups pre-opening. And then once it opens, then it really kicks off. In the case of Kentucky, Pre-registration is currently not on the table, and they actually pushed back the opening for operators online until the end of September. Originally, when Kentucky announced their opening, they said it would be beginning of September, which they then caveated by moving the online to the end and the land-based to the beginning. So Kentucky, it's going to be more of a big bang. on the start date, which is currently scheduled for the 28th of September. North Carolina is Q1. Indications are that they'll allow preregistration. So that, again, that helps in understanding sort of the size and scope of what you have coming when the actual launch takes place. Again, we work with each one of the operators to understand what their strategies are and really what we do as an affiliate is execute on the strategies that they put forward to us because they're the ones who ultimately are deciding what type of promotions they're going to want to have in place.

speaker
Gianluca Tucci

Okay, awesome. And then on that same topic, in Brazil, has there been any update there in the Senate since the last...

speaker
Jake Cassaday

um movement down there um and uh our affiliate discussions heating up in that market so uh i would say on the take the second part first is that yet we we're we're already working with uh several operators now to optimize the right type of uh the right type of promotions that work in the brazilian market for us So that is something that we're working on, as we talked about in previous calls, about the integration between wedge and our other assets, something that we are working through as we get into Q4 and Q1 for this year and next. And in terms of the progress in Brazil, I can tell you I've been working in Latin America and in Brazil in particular for 10 years now, and Brazil is five years away from being awesome, you know, every, every year. So things do take time in Brazil right now, the, uh, the bill, the bill is working its way through what they have is called a provisional measure. It's working its way through the Senate. There are some, uh, there's some debate around the current tax regime that is being set up. Uh, and so, uh, you know, it'll just take time as things do intend to do down there to get it, uh, to get it, uh, finalized. But in the interim, the Brazil market for us remains incredibly strong. Operators are incredibly bullish on the market and are beginning to open up their wallets even more. And that's part of evidence by when you see the increase in football sites where we have an 88% increase in that segment. That's coming from markets like Brazil.

speaker
Gianluca Tucci

Okay, that's great, Culler. Thank you, guys. Keep up the good work.

speaker
Jake Cassaday

Thanks. Appreciate the support. Thank you.

speaker
Operator

The next question comes from Adir Khadve with Eight Capital. Please go ahead.

speaker
Adir Khadve

Hey, guys. Let me also add my congratulations on the quarter here. I wanted to ask about the wedge integration. We're gearing up for the NFL season here, call it, I guess, in the next couple of weeks it'll launch. And can you talk about how the wedge integration is going and how it's progressing and kind of what are your expectations for wedge as we head into, you know, the major sports league kicking off their seasons in Q3 and Q4?

speaker
Jake Cassaday

Yeah, for the North American sports calendar, there's not really much change in wedge. I mean, that wedge is already focused on the North American business. So, you know, it's just going, as I mentioned, working with the operators on the type of promotions and things that they want to see put out there. And then wedge just goes on and executes its strategy with operators as it does. In terms of the integration, our core focus of integrating wedge was into some of our other assets and with a focus on Latin America. And that's something we are continuing to work through. And as we mentioned earlier, we expect to see the beginnings of those results in Q4 and Q1 next year.

speaker
Adir Khadve

Well, thanks for that. And then just on podcasting revenues, it continues to grow. Can you give us a sense of, you know, how you can see those monetized or how you're seeing those monetization trends in podcasting? And how are you thinking about other, this medium as you kind of move it into your other properties, specifically in Latin America? And I think you guys talked a little bit about Bola VIP seeing some strength there, but any color around that would be helpful. Thanks.

speaker
Jake Cassaday

Yeah. I think, you know, if you were to, sort of read through whether it's IAB or other industry reports that are providing sort of macro data on the global ad markets. Audio podcast continues to be, you know, one of the strongest, if not the strongest growing portion of overall digital spend. You know, we're seeing this both from a direct perspective and being able to bring to advertisers something that's truly unique and having that, you know, one-to-one connection between an audience member and, you know, talent. that has, you know, either local relevance or broader relevance. So being able to sell those segment sponsorships is truly differentiated and unique. But we are also seeing it, you know, we partner with a group called ACAST that, you know, supports our distribution of podcasts but also manages all the dynamic ad insertions or what you'd see as sort of pre-roll or mid-roll, similar to what you'd see on a YouTube video but in the audio format. And we see strength there as well. That would be more reflective of sort of programmatic buys, but it is a little bit more hand to hand in the podcast space and ACAST is a great partner for us in that capacity. So we're seeing it as we continue to grow the network. We continue to increase the number of streams that we have in high value channels like YouTube, iTunes, Spotify, et cetera. Monetization is, you know, increasing in lockstep with our streams. But also as you get to sort of critical scale, particularly in a market like Canada, where we've quickly become, you know, a leading independent voice, not just for hockey, but for sports in a shifting media landscape here. that scale commands even further premiums. And, you know, we're seeing that in certain markets as well. So it certainly will continue to be a playbook that we will leverage in other markets. You know, we have several video podcasts operational now and, you know, in market from a sales perspective in Mexico and Brazil and Chile as well. And, you know, we continue to use that playbook and see it as a growing segment of the overall business.

speaker
Adir Khadve

Thanks, I saw the test line.

speaker
Jake Cassaday

Thanks, Adir.

speaker
Operator

As a reminder, to ask a question, you may press star then one. The next question comes from Sid Dilary with Cormark. Please go ahead.

speaker
Sid Dilary

Hey, morning, guys. Thanks for taking my question. Just looking at your affiliate business here, obviously performed well ahead of our expectations. Are you seeing any headwinds related to the current macroeconomic environment? We know that gambling has historically remained relatively resilient during past economic downturns, but are you seeing any challenges in converting the user into a depositing customers on your partner's website, just given the shrink in discretionary wallet here?

speaker
Jake Cassaday

We haven't. We haven't seen anything like that to date with there being a more complicated process other than seasonality. There are fewer bettors in Q2 and Q3, which is in the North American market simply because the sports calendar is lighter. The number of sports bettors who are signing up as net new is fewer. We have no indications to believe that in when we head into September and into Q4, that there'll be any change in what we've seen in previous years.

speaker
Sid Dilary

Okay, that's a great comment. Thanks, guys. And then just one last one on the pipeline here. I know you recently acquired LaPosh Blue, which obviously seems to complement your current asset portfolio. Are you seeing any other opportunities for platform acquisitions in the near term?

speaker
Jake Cassaday

We've always got our eyes open. I think as we have talked about previously, the two areas of M&A that are important for us were net new geographies. And Quebec sort of satisfies that. It was a gap we had in Canada, something we look at. So there are other geographies where we'd love to find more tuck-ins that fill gaps in them. But the big one is can we find can we find more U.S. audience, right? You know, Yardbarker has done an incredible job of nearly tripling its audience since we acquired it. However, the U.S. is really, really big. And similar to in Brazil, where we have three properties in Brazil, we have one core property in the U.S. And, you know, Brazil is an example of 200 million people. We have two core and one growing with Bola VIP and Somos Fanaticos. We'd love to have a sister brand, a sister asset in the U.S., akin to the size of Yard Barker, but not easy to find, and certainly not easy to find in the way that we've been able to acquire businesses. We're very, very sensitive on making sure that we acquire things very well. So we continue to look, and obviously that would be a fantastic acquisition if we could find it.

speaker
Sid Dilary

Okay, thanks, Ash. Great call there. I'll pass the money. Great. Thanks. Appreciate it.

speaker
Operator

This concludes our question and answer session. I would now like to turn the conference back over to Jake Cassaday for closing remarks.

speaker
Jake Cassaday

Thank you very much. As there are no further questions at this time, this concludes today's call. As always, we thank you for your continued interest in Playmaker and for your participation today. Hope everyone enjoys the rest of their summer. You may now disconnect. Thank you.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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