FINAL TRANSCRIPT - Score Media...FINAL TRANSCRIPT October 17, 2018 — 4:30 p.m. E.T. theScore Inc. Fourth Quarter and Year-End 2018 Results Conference Call sales for the quarter,

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FINALTRANSCRIPT

theScoreInc.

FourthQuarterandYear-End2018ResultsConferenceCall

EventDate/Time:October17,2018—4:30p.m.E.T.

Length:18minutes

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FINAL TRANSCRIPT

October 17, 2018 — 4:30 p.m. E.T. theScore Inc. Fourth Quarter and Year-End 2018 Results Conference

Call

CORPORATEPARTICIPANTSJamesBiggtheScoreInc.—SeniorManager,CommunicationsJohnLevytheScoreInc.—FounderandChiefExecutiveOfficerBenjieLevytheScoreInc.—PresidentandChiefOperatingOfficerCONFERENCECALLPARTICIPANTSNikhilThadaniMackieResearchCapital—AnalystRobGoffEchelon—Analyst

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PRESENTATION

Operator

Good afternoon, ladies and gentlemen, and welcome to theScore Fourth Quarter and

Year-End2018ResultsConferenceCall.Atthistime,alllinesareinlisten-onlymode.

Followingthepresentation,wewillconductaquestion-and-answersession.Ifatanytime

duringthiscallyourequireimmediateassistance,pleasepress*,0fortheOperator.

ThiscallisbeingrecordedonWednesday,October17,2018.

I would now like to turn the call over to Mr. James Bigg, Senior Manager of

Communications.Pleasegoahead,Mr.Bigg.

JamesBigg—SeniorManager,Communications,theScoreInc.

Thanks,Operator.Hello.Goodafternoon.Manythanks for joiningusontoday’scalland

webcast for theScore’s fiscal 2018 Q4 and year-end results. Presenting today will be theScore

FounderandChiefExecutiveOfficer, JohnLevy;andPresidentandChiefOperatingOfficer,Benjie

Levy.

Atthistime,wewouldliketocautionourlistenersthatthispresentationcontainsforward-

lookingstatements.Therearerisksthatactualresultscoulddiffermateriallyfromwhatisdiscussed,

and that certain material factors or assumptions are applied in making these forward-looking

statements.

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Any forward-looking statements contained in this presentation represent the views of

managementandarepresentedforthepurposeofassistingtheScoreshareholdersandanalystsin

understanding theScore’s financial position, objectives, and priorities and anticipated financial

performance.Forward-lookingstatementsmaynotbeappropriateforotherpurposes.

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

FormandourMD&AforQ4fiscal2018,whichwasfiledonSEDARafewmomentsago.

OurCEO,John,willnowbeginthepresentation.

JohnLevy—FounderandChiefExecutiveOfficer,theScoreInc.

Thanks,James,andgoodafternoontoeveryone.Thankyouforjoiningusforourreviewof

Q4 and the end of fiscal 2018. Let’s dive straight into some of the key highlights from the past

quarter.

Revenues forQ4grewto5.1millionversus4.8million for thesameperiodtheprevious

year,whichmeantwe finished the fiscal 2018witha total revenueof27.7million,up from26.3

millionoverfiscal2017.

EBITDAlossforfiscal2018improvedto2.4millioncomparedtoalossof5.9millionforthe

previous year. Substantially all of our EBITDA loss for the fiscal 2018 can be attributed to Q4

activities andwasdue to a combinationof increased facility, administrative, andotherexpenses,

includingexpenses relating toUSsportsbettingbusinessdevelopmentactivities,aswellasdirect

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sales for the quarter, which despite being up 6 percent year over year, were below our own

expectations.

InQ4,wesawthecontinuedgrowthoftheScoreapponiOS.Boostedbyourcoverageof

the2018FIFAWorldCup,weincreasedusersonthisplatformby12.5percent,includinggrowthof

17percentinJunealone.ThismeanttotalaveragemonthlyactiveusersoftheScoreappgrewto3.7

millionversus3.5millioninthesameperiodlastyear,up5percent,withthatiOSgrowthpartially

offsetbylowermonthlyactiveusersonAndroid.

Our flagship app has continued to reinforce its position as one of themost popular in

NorthAmericaover thepast fiscal year, andwego intoQ1withanumberof exciting initiatives,

including,first,harnessingtheconversationsaroundsportswithintheappitself;furthertestingnew

waystosurfaceandpresentnewscontentonmobile;andintroducingdedicatedfantasyandsports

bettingsections togive fansamoreholisticexperiencewhen following their favourite teamsand

theirfavouriteleagues.

Inadditiontothegrowthofourappaudience,wealsocontinuedtogrowouraudiences

elsewhere, reaching an average of now 55million sports fans amonth via our social platforms,

includinganewsinglemonthrecordofover70millioninJune.Thesechannelsremainapowerful

brand-buildingchannelforus,andpositionusasatrueleaderindigitalsportsmediawithbest-in-

classengagementandgrowthrates.

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The success has also opened the way for new and exciting original longer-form video

contentinitiativestobecreatedandservedupacrossourplatforms,suchasthedebutoftheScore

X serieswithNBAAll-Star Lance Stephenson.And this has alreadyopenedupnew conversations

withothertoplevelathletesandteamsfortheScore—totelltheirstoriesontheScore.

Ouresportsvideocontentalsoreachednewheights inQ4,withourcontentreaching33

million viewers, growth of more than 170 percent over last year. Our YouTube channel also

smashed through the 400,000 subscriber mark, and we are now very much recognized as the

leading independentmedia outlet for competitive gaming coverage, finding ourselves nominated

forindustryawardsasaresult.

This growth and engagement around our video content has been incredible, and have

beguntoattractinterestfrombrandslookingtoengagewithfansofcompetitivegaming.

InQ4,wecontinuedtopursueopportunitiesrelatedtotheUSSupremeCourt’srepealof

ProfessionalandAmateurSportsProtectionAct,whichallowedindividualstatestobeginexploring

legalizedsportsbettingmodels.

Aspartofthis,wesecuredtheservicesofformerWynnResortsInternational Interactive

GamingChief,DavidWang.Davidbringsawealthofexperienceand is joining theScoreasSenior

Advisor.Weareverypleasedtohavehimonboard.

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Withonlythreestatesofferingfulsomeonlinesportsbetting,thecurrentmarketmaybe

limitedinscope,butwedoseeexcitingnear-termandlong-termpotentialfortheScore,thanksto

ourlargeandengagedaudienceandourexpertiseindeliveringagreatmobileexperience.

I’ll now turn things over to Benjie, whowill take a closer look at some of our product

development,content,andsocialinitiatives,aswellasourfinancials.

BenjieLevy—PresidentandChiefOperatingOfficer,theScoreInc.

Thanks, John, and good afternoon, everyone. As John touched upon, this quarter was

hugelysuccessfulintermsofgrowingthereachofourcontentandthesizeoftheScore’saudience.

Onourflagshipapp,ourWorldCupcoveragehelpeddriveusergrowth,withsoccerfans

eagerly consuming our real-time coverage from the tournament in Russia. We made significant

upgrades to our matchup pages for this tournament. We added a new timeline feature which

showcasedall keymatch incidentsataglance,aswellasplayer-specific stats like topperformers

andkeyplayers.

Thesefeatureswerethenrolledoutacrossourothersoccerleaguesintimeforthestartof

thenewEuropeanseason,makingourofferingoneofthebestforreal-timesoccerscoresandnews.

Our in-app coverageof theWorldCupwas also supportedbyour live scores, data, and

newsofferingfromourFacebookMessengerbot,withourInstantGamealsoprovidinganotherfun

way for fans to engage with the tournament. We also localized these services into French,

Portuguese,andSpanishtofurthercapitalizeontheglobalappealofsoccer.

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Duringthequarter,wealsobegantotestanumberofsocial-relatedfeatureswithinour

app.Followingsportsteamsisaninherentlysocialexperience,andwebelievethereisasignificant

opportunity for fans to connect and engage with each other around their favourite teams, live

events, and content they care about. Early results have been encouraging, and building on this

foundationwillbeoneofourfocusesduringQ1.

Audienceandengagementacrossoursocialchannelscontinuedtoleadthedigitalsports

media industry. Our growth rate and engagementmetrics comfortably beat out our peers once

again, helpingus achievea cross-platform reachofmore than55million sports fans amonthon

averageduringQ4.

This is huge brand amplification and continues to serve as a means of engaging with

existingfanswhilealsouncoveringnewones.Thisapproachisnotgoingunnoticed,andearlierthis

monthwewere announced as a finalist in the categoryof SocialMedia Teamof the Year at the

DigidayPublishingAwardsinNewYork.

Tobuildon this success,our teamalso successfully took the first steps into longer-form

originalvideoproductionunderoursportsverticalforthefirsttime.Welaunchedournewseries,

knownastheScoreX,withexclusiveaccessforourprofileofNBAstarLanceStephenson.

Thisnotonlydroveengagementonourownplatforms,butalsodrove80millionearned

mediaimpressions,asdozensofothertop-tiernewsoutlets,includingESPNandSportsIllustrated,

pickedupourscoopofwhyLance infamouslyblew inLeBron’searduring the2014playoffs.This

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wasahugelyencouragingdebutfortheScoreX,andwe’relookingforwardtoseeingmoreofthese

piecesinthecomingmonths.

Inourappwealsointroducednewcontentofferings,includingstories,anewhighlyvisual

way of presenting news and richmedia content.We’ve also further built out our already strong

sportsbettingdataandcontentofferingbyincorporatingevenmoregambling-focusedarticlesand

hiringadedicatednewseditorforthistopic.

Another focusduringQ1will be introducing increasedbetting-related content and stats

withinourapp,makingitmoreeasilyaccessiblewithinboxscoresandallowingfanstosubscribeto

betting-relatednewsanddataalertsforamorecompletein-gameexperience.

For esports, Q4 was another stellar quarter of growth. The 33 million video views we

achievedbetweenJuneandAugustwasgrowthof115percentyearoveryearasourteamcontinues

todevelopandgrowvideofranchisesthatfansofcompetitivegaminglovetoconsume.

OurYouTubechannelalsohitmorethan400,000subscribersinQ4,andwithourviewing

numbersandhourscontinuingtotrendupwards,theScoreisnowcomfortablyregardedasoneof

themostprominentesportsmediaplatforms.Infact,lastmonthwewerenamedasafinalistforthe

CynopsisMedia Awards where we’ll be going up against the likes of NBA TV’s The Starters and

TheEllenShow,amongothers,fortheprizeofBestCategory-SpecificYouTubeChannel.

I’ll now take a closer look at our financials. Q4 2018 revenue compared to Q4 2017

revenuewas5.1millionversus4.8million.

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InQ42018,expenseswere8.5millionversus7.6millionintheprioryear.Asnotedearlier,

theincreasecanbeattributedtoacombinationofincreasedfacilities,admin,andotherexpenses,

includingexpensesrelatedtoUSsportsbettingbusinessdevelopmentactivities.

As a result of these expenses and sales,whichwhile up 6 percent year over yearwere

belowourexpectation,EBITDAlossforQ4was2.4millionversusanEBITDAlossof1.9millioninQ4

fiscal2017.

We finished the quarterwith 6.3million of cash, and cash use for the quarterwas 1.5

millionversuscashuseof2.6millioninthequarterinthepreviousyear.

JamesBigg

That concludes the formal part of our presentation. Operator, we will now take any

questions.

Q&A

Operator

Thankyou.Ladiesandgentlemen,shouldyouhaveaquestion,pleasepress*,followedby

1 on your touch-tone phone. If you’re using a speakerphone, please lift your handset before

pressinganykeys.

Onemoment,please,foryourfirstquestion.

YourfirstquestionisfromNikhilfromMackieResearchCapital.Nakhil,pleasegoahead.

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NikhilThadani—MackieResearchCapital

Thanks, guys. Iwanted to goback to thebig questionof sports bettinghere. Iwas just

curiousifyou’veseensortofanyinitialsignsofincreasedengagementordownloadsoranythingof

thatsort,eventhoughwe’reonlyliveinaboutthreestatesrightnowasyoumentioned?Anysortof

earlysignsofthatthatyoucouldperhapspointto?

BenjieLevy

Hi,Nik.Ithinkoneofthemostinterestingthingswe’veseenis—Idon’tknowifyou’vehad

a chance to play with our new chat feature that we released a fewweeks ago on Android and

actuallyearlierthisweekon iOS—butoneofthethingsweknowaboutourusers isthattheyare

highly,highlyengagedandareverypredisposedtobetting.Andthathascomeout loudandclear

whenwe’vegiventhemanopportunitytoengagewitheachother.

Invariably, the dominant topic thatwe see users talking about in chat relates to sports

betting,andwhodotheyhave,andwhodotheylike,andhowareplayersperforming,andthey’re

livinganddyingoneveryplayduringthegame,andthey’retalkingaboutit.Andsointermsofinitial

signsabouthowwethinkourusersreacttothat,Ithinkitisverypositive.

NikhilThadani

Right.Andthendoyouhavetimelineforthesebetting-relatedproductenhancementsthat

youspokeaboutinyourscript?Inthenextcoupleweeks,Iimagine,right,because—

BenjieLevy

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Yeah.They’llberollingoutoverthecourseofQ1.Thisisbothfromadatasideandalsoan

editorialperspectivehelpingsurfacemorein-depthcontent,alerts,editorialthroughouttheapp.

NikhilThadani

Gotit.Andthenit’s…Iappreciatethatit’sstillprettyearlytosay,butifyouweretosort

ofguessrightnow,isyoursensethatasyourollthesenewproductsoutintermsofadinventory

and engagement and page views and what not, we should see perhaps a slightly higher-than-

expectedtrendupinQ1andQ2thaninthepast,giventhissortofinitialsportsbettingpush?Oram

Isortofextrapolatingittoomuch?

BenjieLevy

Yeah.It’stoughtospeculateonhowanyindividualfeatureisgoingtocontributetokindof

growthand impressionsandad inventory. Imean,certainlywethinkthatthefeaturesthatwe’re

rollingoutaregoingtobecompellingandhelpenhanceandcreateastickierproduct,absolutely.

NikhilThadani

Okay.Andthenintermsofthecostswiththesportsbettingsortof initiatives inQ4,are

youabletoquantifythat?Andaremostofthosecostssortofdone?Orshouldweexpectsimilar

costsgoingforwardinfiscal’19?

BenjieLevy

Listen, certainly aswe’re looking for how to participate best in this evolving landscape,

we’re going to be continuing to spend in relation to our business development activities. I can’t

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quantifythespecificamountthatwasspentinQ4,butcertainlyifyou’relookingatwhattheyear-

over-year increase is in that facilitiesandadmin line itemover theprior year, agoodchunkof it

relatestothat.

NikhilThadani

Right.Right.AndjustonelastonebeforeIpassthelinehere;intermsofthedirectsalesin

Q4,areyouabletogiveusanymorecolourastosortofwhatwasperhapsthecauseofthesoftness

thereandhowthat’slookinginQ1andpotentiallybeyond?Thanks,guys.

BenjieLevy

Noproblem,Nik.IthinkQ4—listen,itwas—whenwe’redealingwithasalesbudgetof—

we’re dealing with sales of 5.1 million for the quarter and our guys are out selling six-figure

campaigns,acouple thatyouexpect to land in thequarter thatdon’t land in thequartermakea

differencetoyouryear-endresults.Sowecertainlydon’tseeitasanythingsystemic.

Operator

Thankyou.Ladiesandgentlemen,asaremindershouldyouhaveaquestion,pleasepress

*,followedby1.

YournextquestionisfromRobfromEchelon.Rob,pleasegoahead.

RobGoff—Echelon

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Thankyouverymuch.Myquestionwouldgobacktothatoftheexpenseline.Wouldyou

saythatthisisanewrunrate?Orwouldyousaythatsomeoftheexpensestherewereonetimein

naturesoitwouldactuallystepbackdownmodestly?

BenjieLevy

I think I would expect them to step back down modestly. We’re going to continue to

spend,butQ4wasparticularlyhighintermsoftheBDactivities.

RobGoff

Anysortoffigurethatyoucouldputonthat?Ballpark?

BenjieLevy

No.Listen, I thinkaswemove forward in this landscape it’spretty fluid, right?Sowe’re

evaluating a number of opportunities in the gaming space, and kind of the spend is going to be

dictatedbyhowsomeofthoseunfoldoverthecomingmonths.

RobGoff

Okay. Thank you. And if I may, it’s great that you’re giving us the iOS users. What

percentageofyourbaseroughlywouldtheyrepresentnow?

BenjieLevy

I’dsayabout60,65percentofourbaseisiOS.

RobGoff

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Okay.AndtheperformancetrendswithiniOSandnon-iOS,Android,havebeenrelatively

similarorconsistentwithincategory?

BenjieLevy

Intermsofuserengagement,yes,correct.

RobGoff

Okay.Thankyou.

Operator

Thankyou.Therearenofurtherquestionsatthistime.Pleaseproceed,Mr.Bigg.

JamesBigg

Thanks,everyone,forjoiningusforourconferencecall.Welookforwardtopresentingto

youagainwhenwedeliverourQ1resultsinmid-January.

Operator

Ladies and gentlemen, this concludes your conference call today. We thank you for

participating,andaskthatyoupleasedisconnectyourlines.

*****

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FINAL TRANSCRIPT - Score Media...FINAL TRANSCRIPT October 17, 2018 — 4:30 p.m. E.T. theScore Inc. Fourth Quarter and Year-End 2018 Results Conference Call sales for the quarter,