theScore Inc. Second Quarter 2018 Results Conference Call ... · Quarter 2018 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation,

1

"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein."

« Bien que CNW Telbec ait fait tous les efforts possibles pour produire cet audioscript, la société ne peut affirmer ou garantir qu’il ne contient aucune erreur. CNW Telbec ne peut être tenue responsable de pertes ou profits, responsabilités ou dommages causés par ou découlant directement, indirectement, accidentellement ou corrélativement à l’utilisation de ce texte ou toute erreur qu’il contiendrait. »

FINALTRANSCRIPT

theScore,Inc.

SecondQuarter2018ResultsConferenceCall

EventDate/Time:April12,2018—8:30a.m.E.T.

Length:20minutes

2



FINAL TRANSCRIPT

April 12, 2018 — 8:30 a.m. E.T. theScore, Inc. Second Quarter 2018 Results Conference Call

CORPORATEPARTICIPANTSJamesBiggtheScore,Inc.—SeniorManager,CommunicationsJohnLevytheScore,Inc.—FounderandChiefExecutiveOfficerBenjieLevytheScore,Inc.—PresidentandChiefOperatingOfficerCONFERENCECALLPARTICIPANTSNikhilThadaniMackieResearch—AnalystRobGoffEchelon—Analyst

3



FINAL TRANSCRIPT


PRESENTATION

Operator

Good morning, ladies and gentlemen, and welcome to theScore First (sic) [Second]

Quarter2018ResultsConferenceCall.Atthistime,alllinesareinalisten-onlymode.

Followingthepresentation,wewillconductaquestion-and-answersession.

Ifatanytimeduringthiscallyourequire immediateassistance,pleasepress*,0forthe

Operator.

ThiscallisbeingrecordedonThursday,January(sic)[April]12,2018.

IwouldnowliketoturntheconferenceovertoJamesBigg.Pleasegoahead.

JamesBigg—SeniorManager,Communications,theScore,Inc.

Hello,andgoodmorning.Manythanks for taking thetimeto joinusontoday’scalland

webcast for theScore’s fiscal 2018 Q2 results. I’m James Bigg, theScore’s Senior Manager of

Communications.

Onthecall todaywillbetheScoreFounderandCEO, JohnLevy,andPresidentandChief

OperatingOfficer,BenjieLevy.

Atthistime,Iwouldliketocautionourlistenersthatthepresentationcontainsforward-

lookingstatements.Therearerisksthatactualresultscoulddiffermateriallyfromwhatisdiscussed,

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

statements.

4



FINAL TRANSCRIPT


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

Form,andaswellourMD&AforQ2fiscal2018,whichwasfiledonSEDARthismorning.

Withthat,letmeturnthepresentationovertoJohn.

JohnLevy—FounderandChiefExecutiveOfficer,theScore,Inc.

Thanks verymuch, James, and goodmorning to everyone. Thank you all for joining us

todayforthisreviewoftheQ2fiscal2018results.Andattheoutset,letmesayI’mpleasedtosay

there’slotsofgoodnewstobringtoyouandtobringyouuptodatethismorning.

Firstandforemost,someverypositiverevenuenumbers,anewrecordforQ2;secondly,

continuingencouragingusergrowthonourflagshipiOSapp;andthirdly,continuedgrowthacrossa

numberofouremergingplatforms,includingesportsvideo.

Butfirst,alookatourrevenuenumbers.We’verecordedourstrongesteverrevenuefor

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 US

programmaticbusinesses.

5



FINAL TRANSCRIPT


WealsocontinuedtoimproveourEBITDAresults.Thisquarter,weimprovedEBITDAloss

tojustover$500,000versusalossof$1.4millionforthesameperiodlastyear.

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,meanswecontinuetoclosethegap.Andwearepreciselywhereweexpectedwewould

be at this stage of the year. For the first six months of the year, we are basically at EBITDA

breakeven.

Users of our flagship app on iOS were up 9 percent year over year, building off the 6

percentgrowthwesawinQ1,withuserscontinuingtorespondpositivelytotheredesignwhichwe

launched in the summer of last year. Though theAndroid platformdoes remain a challenge,we

finishedthequarterwithatotalmonthlyactiveusersof4.1millionaveragemonthlyusers,whichis

thesamenumberforQ2oflastyear.Usersaccessus,ourapps,onaverage85timesamonth.

As previously discussed, we are working very hard to reverse this trend on Android

through a combination of strategic product andmarketing initiatives.We are confident that we

bothhaveaclearfocusandtherightstrategytogetbacktopositivegrowthonthisplatform.There

islotsofworkgoingonbehindthescenes,andwehopetohavemoretoshareonthisverysoon.

Ontopofallthis,theteamalsoensuredweweremeetingandexceedingtheexpectations

of sports fans, A) on our flagship appwherewe added support for theOlympics for theWinter

6



FINAL TRANSCRIPT


Games and for one of the most popular tournaments, the March Madness, which we just

completed.

OurcontentteamaddedyetmoreriverstoourpopularDiscoversectionwhileincreasing

ouron-the-groundcoverageofmajorsportingevents.We’llgointomoredetailsonthisshortly.

Wecompletedatotalredesignofthescore.com,withitsprimaryobjectivetoincreaseour

webappconversions,andyou’llhearwe’vehadsuccesson thataswell.Ouremergingplatforms

team continues its great work, further improving our recently launched fantasy sports game for

FacebookInstantGamesplatform.

Whileallthiswasgoingon,we’vealsobeenkeepingaverycloseeyeonwhatappearsto

bethe imminent legalizationand legitimizationandregulationofsportsbettingacrosstheUnited

States.Weknowsportsbettingresonatesstronglywithalargepercentageofouruserbase,sowe

are interestedtoseehowthisplaysout,andareactivelyexploringhowwemightbeabletotake

advantageofthis.

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

initiatives,aswellasourfinancials.

BenjieLevy—PresidentandChiefOperatingOfficer,theScore,Inc.

Thank, John, and goodmorning, everyone. In Q2, the focus for our product team was

largelyondeliveringanevendeeperin-gamedataandstatsexperienceforourusers.

7



FINAL TRANSCRIPT


Wealsolaunchedaredesignedarticleview,offeringourusersbothlightanddarkthemes

forthefirsttimewhilealsoaddingafeaturethatallowsuserstoswipeeasilybetweennewsarticles

tocreatehigherengagement.Ourcontentteamachievedsomeimpressiveresults,recordinganew

one-dayrecordof3.5millionarticlereadsduringtheNBAtradedeadlinecoverage.

During the quarter, we also relaunched thescore.com, as John mentioned, with a new

look.Thegoalherewastocreateastrongerconnectionbetweenthelookandfeelofourappand

thewebsiteandtodrivehigherinstalls.Andintheveryearlystages,we’vealreadyseenthenumber

ofinstallscomingfromourwebsitetriple.

On top on this, both content and product did a great job at providing round-the-clock

coverageoftheWinterGamesinSouthKorea.Ourmedalalertsanddailysummariesensuredsports

fanscouldeasilystayontopofalltheaction.

With the FIFAWorld Cup on the horizon, our focus for Q3, among other things, is on

significantlyimprovingoursoccercoverage,andensuringtheScoreappistrulythetopdestination

tofollowalltheactionfromRussia.

Ontoesportsandourswitchinfocustowardsproducingoriginalvideocontentcontinues

toyieldverypositive results. InQ2, totalvideoviewsweremore than20million,up215percent

yearoveryear,withmostofthatgrowthcomingfromourYouTubechannel,whichnowhasmore

than240,000subscribers.

8



FINAL TRANSCRIPT


We’re excited and encouraged by the appetite that our growing audience has for our

content.Weareoneofthefewmediaorganizationsthat’snotonlymanagedtofindanaudience,

but is consistently seeing high engagement around our content. That gives us a great base to

continuebuildingfrom.

Stickingwithengagement,andoursportssocialplatformsalsocontinuetoserveasagreat

brand-buildingstrategy,reaching inexcessof30millionsports fansamonth. Instagramwasonce

againtheplatformdrivingthelion’sshareofthisengagement.

Wecontinuetobeatourpeers intermsof interactionrates,crushingournumbers from

thesameperiodlastyear.Wealsobeganexperimentingwithmoreon-the-groundcoverageonour

social channels, sending a small two-person team to theNBAAll-Starweekend in LosAngeles in

February.Thisprovedextremelysuccessful.

Over that three-day period, theScore’s 4.9 percent Instagram interaction rate led the

industry,comfortablybeatingthe likesofESPNandBleacherReportforfanengagement.Wealso

achieved5millionmorevideoviewsthanESPN’sInstagramaccountforthethreedays,despitetheir

muchlargeroverallaudience.

Thesewereimpressiveresults,andshowcasewhattherightapproachtocontentcreation

candoforus.

Thisquarter,ouremergingplatformsteamwasprimarilyfocusedonfurtherbuildingout

ourinstantgameforFacebookMessenger,whichlaunchedinJanuary.Sincethen,almost5million

9



FINAL TRANSCRIPT


people have played theScore Fantasy, and on top of other initiatives like the addition of

leaderboards, we’ve also begun to integrate advertising at strategic points in the game-play

experience.

WorkisgoingtocontinueherewithsupportforWorldCupandcricketcomingup,aswell

aslocalizationintoSpanish,Portuguese,andFrench.

Meanwhile, our bot for FacebookMessenger also hit themilestone of 500,000 average

monthlyactiveusersinQ2,withthatplatformservingasanothergatewayintotheScore’smarketing

funnel.

I’llnowtakeacloserlookatourfinancials.Q2fiscal2018revenuecomparedtothesame

periodintheprioryearwas7.1millionversus6.7million,withtheincreasebeingdrivenbystrong

performancesbyCanadiandirectsalesandUSprogrammaticbusinesses.

InQ2,expensesimprovedto8.6millionfrom8.7millionintheprioryear.Thereductionis

mainlydrivenbyreducedpersonnelcostsresultingfromourtransitioninouresportsfocus,aswell

as lower marketing costs which have been found as a result of being more strategic and cost

effectiveinuseracquisition,attractinglargervolumesofhigh-qualityusersatalowercost.

EBITDAlossforQ22018improvedto518,000versusanEBITDAlossof1.4millionforthe

same period in the prior year. Just aswe did inQ1,we continue tomake strong year-over-year

improvements to our EBITDA results,which is part of our commitment to our objective of being

profitableandself-sustaining.

10



FINAL TRANSCRIPT


Onthebalancesheet,wefinishedthequarterwith7.9millioninthebank.Cashgenerated

forthequarterwas400,000versuscashuseof2.6million inthesameperiod lastyear.Wewere

cash flow positive for Q2, largely as a result of continued improvements in our operating

performanceandpositivechangestoourworkingcapital.

JamesBigg

Thankyou,Benjie.Thatconcludestheformalpartofourpresentation.Operator,we’llnow

takequestions.

Q&A

Operator

Thank you. Ladies and gentlemen, wewill now begin the question-and-answer session.

Shouldyouhaveaquestion,pleasepressthe*,followedbythe1onyourtouch-tonephone.You

will hear a three-tone prompt acknowledging your request, and your questions are polled in the

orderreceived.Shouldyouwishtodeclinefromthepollingprocess,pleasepress*,followedby2.

Ifyouareusingaspeakerphone,pleaseliftthehandsetbeforepressinganykeys.Andone

moment,please,foryourfirstquestion.

Your first question comes from Nikhil Thadani fromMackie Research. Nikhil, please go

ahead.

NikhilThadani—MackieResearch

11



FINAL TRANSCRIPT


Thanks,guys.MyfirstquestionwouldbeonthispotentialchangeontheUSlegalsports

betting side. Anymore colour that you could give us there in terms of the potential timeline in

termsofthechangeandalsointermsofwhatthepathtosortofgettingaminimumviableproduct

wouldlooklikeforyou?

JohnLevy

Yeah.Sointermsofthetiming,Nikhil,whatweunderstandisthattheUSSupremeCourt

hascommitted topresenting theirdecisionon thePASPA regulation sometimebefore theendof

June.We’rewatchingitfairlyclosely.

There isaschedulethattheUSSupremeCourtputsoutwithwhentheirdecisionsare. I

thinkit’swhat,Benj,everyonceamonthoreverycoupleofweeks?

BenjieLevy

Yeah.Itvaries.

JohnLevy

It’sprettyrandom.Sowedon’tknowwhether it’sthisweek,nextweek,withinthenext

coupleofweeks.Buttheyhavecommittedandthere’sbeennochangeonthatthatthedecisionwill

beoutinthespring.Sothat’sthetimingthateverybody’sgearingupfor.

Intermsoftheactivitylevel,what’shappeningintheStates,you’veprobablyseenthatI

thinknowthey’reupto20or25oftheUSindividualstateshavenowputforwardtheirexistingor

12



FINAL TRANSCRIPT


proposed regulation to deal with sports wagering within their own state. As you know, nobody

reallyiscertainastowhatthedecisionwillbe.

NikhilThadani

Mm-hmm.

JohnLevy

What’s interesting is that I think in Vegas they actually have betting lines onwhat the

decision’s going to be in terms of whether PASPA is going to be repealed or not, or partially

repealed.

Theintelligencethatwe’regettingreallyisnodifferentthanwhatwe’vebeenhearingall

along.Wethinkthere’sastronglikelihoodthatit’sgoingtoberepealed,perhapsinitsentirely,and

morethanlikely,partially.Ifit’sinitsentirety,then,asyouknow,thatit’sopenonastate-by-state

basis.SoIthinkthat’swhateverybodyispositioningthemselvesfor,andIthinkthat’swhypeople

areprettyexcitedaboutit.

Fromourposition,thisissomething,Nikhil,we’vebeeninterestedinandbuildingtowards

sincethedaywelaunchedtheTVnetworkin1995byhavingoddsonthetickerandalwaysbeing

realandauthentic,assportswageringispartoftheengagementandtheexcitementthatfanshave

with respect towatchingsports.We’vealsodonesome internalworkandsomesurveysover the

lastnumberofyearsastowhatthepropensityisofouruserbasetobetonsportsortoplayfantasy

ortojustevenbetwiththeirfriends,butparticularlytobetonsportsbecause,asyou’reaware,a

13



FINAL TRANSCRIPT


lotofthatactivityeventhoughit’snot legal intheStates,except inNevadaandnot inCanadaas

wellwhereitcertainlyisgrey,alotofpeopleparticipateinthatbywageringoffshore.

So when we surveyed our own user base, without giving out specific percentages, we

know that a highpercentageof our users bet on sports. That’s no surprise tous. So I thinkwhy

we’reexcitedisthatwethinkthere’sanopportunityforustoparticipateifthisdoesbecomelegal

inoneformorafashionallacrossNorthAmericaandperhapsinternationallyaswell.

So there’s lotofavenues in forus.We’renotat thispoint reallyprepared to talkabout

specifics of it, but rest assured that it’s something that’s high on ourminds and something that

we’relookingatandthinkingaboutonaregularbasis.

NikhilThadani

Right.Andjusttofollowonthatalittlebit,Iguessitdependsonwhattheactualchanges

are,butwouldsortofsomekindofbettingproductforesportsfallintoyourpotentialroadmapas

well?

JohnLevy

Ithinkthat’sprobablyalikelihoodaswell.Yeah.Imeanwe’relookingatproductthat’sout

therenowintheesportsworldwherepeoplearebettingonit.SoIthinkoneoftheadvantagesthat

wehaveisthatwe’rebuildingthatbrand,we’rebuildingthesamesortofcrediblepresenceinthat

communitythatwehaveinthesportscommunity,andIthinkthere’sastronglikelihoodthatifthis

14



FINAL TRANSCRIPT


opensuptherewillbesportsbettingoresportsbettingaswell.Andwe’reperfectlypositionedto

takeadvantageofthattoo.

AndtheonlyotherthingIwouldaddisthatourwholeapproachtothisthingisprobably

goingtobealittlebitdifferentthanhowtraditionalsportsbettingtakesplace.Andwejustthinkit’s

partoftheengagementandtheexcitementthatpeoplehaveincomingtoourapp.Andwethink

there’saroadforustointegrateitinaveryefficientwayintowhatwedo.

NikhilThadani

Right.Gotcha.Andhowshouldwethinkaboutthecoststructure inthebackhalfofthis

fiscalyear?ShouldthingskindofremainrelativelyinlinewiththecoststructurethatwehadinQ2?

BenjieLevy

Withoutgivingspecificguidance,ifwelookatkindofwhatourcoststructurehasbeenfor

thepastcoupleofquarters,wedon’tseeanymaterialvariationsfromthat.

NikhilThadani

Gotit.AndjustonelastonebeforeIpasstheline;ontheCFOisthereanynewstoshare

onthatfront?Thanks,guys.

BenjieLevy

Notatthemoment.Thesearchisongoing.It’saveryrobustprocessforus.Themeetings

withcandidatesareongoing,andwe’llprovideanupdatewhenwehavenewstoshare.

NikhilThadani

15



FINAL TRANSCRIPT


Super.Thankyou.

Operator

Thankyou.YournextquestionisfromRobGofffromEchelon.Rob,pleasegoahead.

RobGoff—Echelon

Thankyouverymuch,andgoodmorning.MyquestionwouldfollowonNikperhapsonthe

bettingside.Assumingthatthere isapproval,would itbemoreofa6-monthor12-monthbefore

wesawevidenceofwhatyourstrategymightbe?

BenjieLevy

On the sportsbetting side, I think,Rob, it’s going tobe…assuming thedecision comes

downbeforeJuneandit’sapositivedecision,whatyou’rethengoingtoseeiseachstateintheUSis

goingtohavetofigureouttheirapproach.Somearedoingworknowonthatandwithplaceholder

legislationonwhattheywilldodependingonvariouspermutationsofaSupremeCourtdecision,so

it’sfairtosaythattherewouldsomeperiodoftimeafterthatdecisioncomesoutbefore—notjust

thatwe’re kind of outwith our strategy for howwe’re going to participate, but for how various

statesaregoing tohandlekindof regulationandpromotionof it in their respective jurisdictions.

Andit’sgoingtobeabitofapatchwork,Ithink.

But I think there’s also various different ways that we can participate, and it doesn’t

necessarilyneedtobeunifiedthesameexperienceineachstate.SoIthinkwe’remonitoringitvery

16



FINAL TRANSCRIPT


closely,buttherewillbesomerolloutperiodafteradecisioncomesoutforthistoreallyburninfor

usandeverybody.

RobGoff

Okay.Thankyou.AndifImay,anotherone.Couldyoudiscussyouractionstoturnaround

theAndroid user declines? Is the issuemore a factor of fewer newusers or gross adds?Or is it

higherchurn?Orisitsomebalanceofthetwo?

BenjieLevy

Whatwe’reseeing largely is it’san issuethatappearstobefromourdatathatwehave

affectingabroadswathofsportsappsacrosstheboard.Andforus,thenumberonegoalishowdo

weincreaseourtopoffunnel?Howdowegetmoreusersinthedoor?Becauseweconsistentlysee

thattherehaven’tbeenmaterialchangestoretentionorengagement?It’showdowecontinueto

acquirenewusers,andoureffortsarefocusedlargelyonthat.

RobGoff

Okay.Thankyou.

Operator

Therearenofurtherquestions.Iwillnowturnitbackoverforclosingremarks.

JamesBigg

Thankyou,everyone,forjoiningourQ2conferencecall.Welookforwardtopresentingto

youagainwhenwedeliverourQ3resultsinmid-July.

17



FINAL TRANSCRIPT


Operator

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

participating,andweaskthatyoupleasedisconnectyourlines.

*****

Documents

theScore Inc. Second Quarter 2018 Results Conference Call ... · Quarter 2018 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation,