Earnings Call: Q2 2021

Aug 12, 2021

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Super League Gaming's financial results for the second quarter ended June 30, 2021. Joining us today are Super League's President and CEO, Ann Hand, and CFO, Clayton Haynes. Following their remarks, we'll open the call for your questions. Before we go further, please take note of the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995. The statement provides important cautions regarding forward-looking statements. The company's remarks during today's conference call will include forward-looking statements. These statements, along with other information presented that does not reflect historical facts, are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by these forward-looking statements. Please refer to the company's recent earnings release and to the company's reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ. I would also like to remind everyone that this call will be available for replay through 8:00 P.M. Eastern on August 19, 2021, starting at 8:00 P.M. Eastern tonight. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website at www.superleague.com. Now, I would like to turn the call over to the President and Chief Executive Officer of Super League Gaming, Ann Hand. Ann? Good afternoon, and thank you so much for joining us today. Every time I prepare for a new earnings call, I feel a renewed heightened level of energy. I hope that through today's call, you too get a sense for the growing excitement and confidence we feel as Super Leaguers as we march toward our vision and objectives. First, I want to remind us all why we are all here, why Super League exists, and why we believe we can be a juggernaut in the gaming and media entertainment ecosystem. First, the Metaverse is real. 40% of Gen Z prefer virtually hanging out to the real thing in real life. As a case in point, 12.3 million people attended Ariana Grande's concert last week, and that concert was in the game Fortnite. Content creation is forever democratized. Everyone can be a studio through their social channels, and even making a living doing so through creator economies. There is no better example than the fact that Roblox has turned a large number of young teen game designers into millionaires. As a result, the traditional advertising model will never be the same. The disaggregation of content, the preference for live streaming, and the ubiquity of ad blocking technology has made the 30-second primetime TV ad spot increasingly irrelevant with Gen Z and millennials. Super League is built on the back of these 3 trends. We have Metaverses. We empower creators with tools bolstered by creator economies, and we control in-game and in-stream advertising inventory, helping brands reach our elusive audience of passionate, highly engaged gamers. Let's kick off as we have some significant updates in addition to our strong 2Q 2021 financial results. First, we completed the transformational acquisition of Mobcrush on June 1st, receiving shareholder support at our annual general meeting. A material move that is perfectly aligned to the Super League business model, from who we target and what we offer, all the way through to how we monetize and the technology stack behind it. Our platform includes ad tech, broadcasting tech, Metaverse IP, mass participation tournament functionality, AI highlight capture, consumer and creator marketplaces, and a robust gaming content library. The integration is progressing, and I am thrilled to have Mike Wan, the former CEO of Mobcrush, joining us, along with other Mobcrush key leaders, to serve as our Chief Strategy Officer, offering his insights and deep advertising experience. We announce more news today, the acquisition of Bannerfy, a creator monetization and advertising technology platform that is highly complementary to our offer to both creators and advertisers. This is worth a pause. While much smaller in size to Mobcrush, this acquisition similarly checks many boxes. The technology enables digital video and live streaming creators to embed premium in-stream custom ad placements at scale for distribution to their own social media channels, namely YouTube, allowing tier 1 advertisers to receive a seamless, organic brand integration into a creator's native stream. Not only does this acquisition reinforce our mission to empower creators to monetize their fans and followers, but it also expands the size and reach of our advertising inventory. Based in the United Kingdom, Bannerfy has already onboarded a healthy roster of European gaming creators and brand partners. As Super League's first international acquisition, represents an immediate path to expanding Super League's advertising and sponsorship partner base. Great technology, a strong sales pipeline, and two exceptionally talented gentlemen who will now join our team. Aside from the obvious synergies, I want investors to know this: Bannerfy is small but mighty, it's lean. It's young but already generating revenues, this acquisition is accretive. It makes sense on every level. That lends itself to a quick sidebar on M&A. Our acquisition strategy says a lot about how we run the company. We are focused on top-line growth, a path to cash flow positive, equally building a formidable company with a distinctive ownable position in the media and gaming ecosystem. We know it could be tempting to use public currency to buy just any growth, any revenues, we take our responsibility to each of you seriously to use our currency wisely, to build an enduring enterprise that is here for the long haul. We choose wisely. We have resisted opportunities that offered short-term boosts, and we've walked away when we sense complexity and pivots. The fastest way to get where we're going is to stay focused, to stay on strategy, and to execute. Now moving on. You also see today we announced the formation of Super League's Young Gamer Network and Core Gamer Network, offering our roster of high-profile advertisers and partners elevated levels of audience engagement and awareness. Super League's Young Gamer Network enables unique reach to gamers under 18 and includes our properties such as Minehut, the largest Minecraft server community host in North America with over 4 million registered users; Mineville, an official Minecraft Bedrock server reaching over 20 million players annually; Pixel Paradise, the recently launched first ever official Minecraft Bedrock server to prioritize role-playing; multiple original series on Snapchat, including Taking Shape, featuring Minecraft gameplay, and Sticks and Stones, featuring Animal Crossing; partnerships with a growing number of Roblox game developers and media platforms; an expanding presence on TikTok, highlighted by the Super League Gaming and Minehut channels. Recent brand partners that have been drawn to this young gamer audience that we can provide include Moose Toys, Astro Gaming, Logitech G, and DTS Sound Unbound, all of whom participated in the company's Full Moon Jam digital music events and live stream featuring the band AJR, hosted within Minehut, the hub of Super League's Minecraft community. We also announced the company's Core Gamer Network, presenting opportunities to engage with gamers 18 to 34 years old, including the properties of, first and notably, Mobcrush, which reaches across creators' social live streaming platforms to a Nielsen-verified U.S. audience of 85 million monthly as verified in December 2020, with more than 7.7 billion annual views. As well, we have access to 200,000 AI-generated gameplay highlights per month featuring many of the world's most popular titles. We have Super League's Esports Invitational tournament series that we've branded Super League Arena, which has inspired more than 65 million views year-to-date across Twitch, YouTube, and TikTok, featuring semi-pro and top amateur players competing in titles such as League of Legends, Valorant, Rocket League, and more. The Framerate social media network, comprised of 8 channels across Instagram and TikTok, featuring user-generated gameplay highlights spanning more than a dozen popular games and delivering more than 30 million social video views per month. Now add Bannerfy to that list, as that is concentrated on this core gamer demographic as well. Some of the recent sponsors choosing to grow awareness engagement with our 18 to 34-year-old gamers through Super League include Hyundai, Sega, Square Enix, Warner Bros. Games, and Starz. As you can see, we have a rich portfolio of products and offers with compelling KPIs, which indicates the step change in our depth and reach. What matters most are results. With that, let's turn to 2Q. Of course, Clayton will go into this with more detail, but here are some headlines. Our second quarter revenues reached a record $1.1 million in 2021, up 235% compared to Q2 2020. As well, we saw increases in all primary revenue streams, as well as nice balance in the distribution of revenue across the portfolio. I will expand more on that in a moment. We should note that there is some seasonality in our business tied to new game releases, so Q2 is typically considered a softer advertising quarter, with advertisers increasing spend in the second half of the year with back to school and the winter holidays. Our margins remain healthy, reporting 51% for Q2 2021, and we continue to challenge ourselves to absorb our material growth within our current infrastructure and unlock new cost savings. We have a strong balance sheet with $31.5 million of cash on hand as of June 30th, 2021, and no debt. A bit more color on the revenue front. First, let's talk about our advertising business, which is predominantly serviced through a direct sales model. As you know, this is where the bulk of our revenues are derived, and we continue to see strong trend lines. Our pipeline of potential opportunities has increased 2x since Q1 2021, with an average deal size north of $250,000. We historically celebrated having six-figure deals in general, but recently in 3Q, we won our first deal over $500,000. Our premium in-game and in-stream CPMs are holding up in the $15-$25 range. Probably the most impressive statistic is that over 70% of our deals in 2Q came from repeat advertisers and sponsors. Proof that advertisers are coming back and they're putting more money to work with us. Here's a great example. In July, we launched an activation for Nickelodeon's The Patrick Star Show, a popular character from the SpongeBob SquarePants series. The 12-day campaign included a Patrick Star-themed gameplay experience in a top 25 Roblox game, Islands, and delivered big results, 53 million visits to the game from over 5.6 million unique players, equating to over 163 years of gameplay time. Again, a 12-day campaign, 163 years of gameplay. Beyond direct sales, we continue to build out our programmatic advertising tech stack to automate and optimize the sale of our unused video and display inventory. Now on to direct-to-consumer, which accounted for 22% of our revenue mix, up from 12% in the prior quarter, a 5X improvement, and becoming a material part of our revenue growth. We have now three direct-to-consumer properties. First, Minehut, our owned and operated home for advanced Minecraft creators and players, recently launched a new dimension of monetization, going beyond the server owner or creator to focus on the 1 million-strong monthly active players with products ranging from subscription to micro-transactions for an enhanced gaming experience. By leaning more into a prior monetization strategy, Minehut can leverage insights from our second property and the highest revenue-grossing one to date, Mineville. As we explained earlier, Mineville is an official Minecraft Bedrock server focused on competitive gameplay and enjoying 2 million monthly active players. That leads us to our newest third consumer property, Pixel Paradise. Together with 2 of 7 official global Minecraft Bedrock servers on behalf of Microsoft. Pixel Paradise is unique, as it's the first server focused more so on role-playing and an inclusive experience attractive to young girl gamers. While early days, in just the first 10 days of launch, Pixel generated over $60,000 in revenue. Finally, on the content front, we are trending to deliver over 10 billion video views this year across our digital and social platforms, 5 times that of last year. What that validates for us is that people are enjoying the content produced by Super League and our community of creators. We have rights to this content. We have spoken about the early ways we are delivering revenue from our content library through distribution partnerships with Snapchat, Cox Media, and Transmit.Live, just to name a few. This in itself represents about 8% of our revenue mix, it's a nascent space as we continue to explore additional channels where our content can live. Expect more growth here. Of course, the harrowing pandemic offered Super League an opportunity to take our proprietary patented Virtualis broadcast technology, a fully remote cloud-based studio for high-end storytellers, and test the market to prove its value. This emerging revenue stream, technology as a service, represented a very material 25% of our revenue mix in 2Q. This is prior to us exploring the ways that Mobcrush's additional layer of multicasting technology, AI-driven highlights capture, and streamer monetization can be further integrated into our broadcasting tech stack so we can service and monetize creators up and down the food chain. This goes beyond gaming and esports, proven by our partnership with Endemol Shine to help them deliver the TV show "Lego Masters." Using Virtualis not only kept people safer at home and kept them off of the production process, but it also delivered significant cost savings to our partner. We made tremendous progress as a company in the last quarter as we continue to build a world-class gaming-centric media and entertainment platform. However, I recognize we're in a stub period with Mobcrush. We certainly have some early wins. Things are running smoothly, but of course, there's still a lot of optimization to be done. For us, what really matters most is looking forward based on who we are today rather than looking back, as we now begin to leverage our combined strengths. While we don't give formal guidance, I thought you might appreciate my general sentiment regarding the second half of 2021. In my best estimate, I think we can deliver $7 million in revenue on the back half of the year, perhaps even $8 million. At $7 million, we believe the market and our investors will be pleased. We have a good line of sight into 3Q and our pipeline is strong, and the company has never printed a half-year performance like that in our history, which really goes back to where I started. I hope you can sense the enthusiasm we feel and why it's fun to write this year's earnings script for this quarter. At this point, I will turn the call over to our CFO, Clayton Haynes, who will provide an overview of second quarter financial results. After which I will come back on with some closing remarks. Clayton? Thank you, Ann, and good afternoon, everyone. I also would like to express how excited we are to have closed the Mobcrush acquisition and how excited we are to continue the process of fully integrating with the Mobcrush team. As Ann mentioned, we have already begun to see synergies as we move forward as a combined force in the gamer and creator ecosystem. As previously reported, we closed the Mobcrush acquisition transaction on June 1, 2021. As a result, Super League's second quarter 2021 financial results include approximately 1 month of Mobcrush-related operating results, including approximately 1 month of Mobcrush revenues and expenses, along with the impact of other acquisition accounting-related entries on the balance sheet and statement of operations, which I will summarize a bit later in my prepared remarks. To summarize Super League's results for the second quarter of 2021, we recorded another record quarter of top-line revenues, our fourth consecutive quarter of record revenues, with Q2 2021 revenues up 38% compared to the first quarter of 2021, and more than tripled compared to the second quarter of 2020, as we continue to see strong revenue increases across our three primary revenue streams. Cost of revenues increased quarter-over-quarter, due primarily to the significant increase in related revenues in the second quarter of 2021, and we posted an overall gross margin of 51% in the second quarter of 2021. Our operating expenses also increased primarily due to higher technology, platform, and infrastructure costs, selling and marketing and G&A costs, which included significant incremental costs related to the Mobcrush acquisition, leading to a higher GAAP operating loss when compared to the prior year quarter. Diving a little deeper into the second quarter results, as summarized in our earnings release filed this afternoon, second quarter 2021 revenues were $1.1 million compared to $324,000 for the second quarter of 2020. The 235% increase in revenues was driven by strong increases for all three of our primary revenue streams, including advertising and sponsorships, content sales, and direct-to-consumer revenues. Advertising and sponsorship revenues, which includes direct sales, advertising, and sponsorship revenues, and programmatic display in video advertising revenues, increased 890% compared to the prior year quarter to $485,000, up from $49,000 in the second quarter of 2020, and comprised approximately 45% of revenues for the second quarter of 2021 as compared to 15% of revenues in the second quarter of 2020. 27% of the increase in advertising and sponsorship revenues reflects the inclusion of one month of Mobcrush-related direct sales advertising revenues in the second quarter of 2021. Content sales revenues increased 55% over the prior year quarter to $365,000, and accounted for approximately 34% of revenue for the second quarter of 2021, compared to approximately 73% of revenues in the prior year quarter. Content sales revenue is generated in connection with our curation and distribution of esports and entertainment content for our own network of digital channels and our media and entertainment partner channels. This includes the syndication and licensing of original programming content, user-generated content, including online gameplay and gameplay highlights, and the creation of content for third parties utilizing our Virtualis remote production and broadcast technology. Mobcrush's content monetization strategy is in its early stages and provides us with potential upside that we expect to contribute to additional growth in content sales revenues in future periods. Direct-to-consumer revenues, which primarily consisted of sales of digital goods and subscriptions across Mobcrush's MPVP Mineville product and our Minehut digital property, rose 500% compared to the prior year quarter to $234,000 compared to $39,000 in the comparable prior year quarter, and accounted for approximately 22% of revenues, compared to approximately 12% of revenues in the prior year quarter. 81% of the increase in direct-to-consumer revenues reflects the inclusion of one month of Mobcrush-related Mineville digital goods sales revenues in the second quarter of 2021. Second quarter 2021 cost of revenues was $533,000 compared to $116,000 in the comparable prior year quarter. The increase in cost of revenues was primarily driven by the strong increase in related top-line revenues in the second quarter of 2021. The change in cost of revenues was also impacted by lower second quarter 2020 cost of revenues for certain contracted activations in the second quarter of 2020, for which we incurred lower actual costs as we transitioned certain projects from offline to online in response to the onset of the COVID-19 pandemic and ensuing shutdown. 9% of the increase in cost of revenue was due to the inclusion of 1 month of Mobcrush-related cost of revenues in the second quarter of 2021. As noted on previous calls, cost of revenues fluctuate period to period based on the specific programs and revenue streams contributing to revenues each period and the related cost profile of our esports-focused media and entertainment experiences and advertising and content sales activities occurring each period. Second quarter 2021 operating expenses were $6.9 million compared to $4.8 million in the comparable prior year quarter. Non-cash stock compensation charges for the second quarter of 2021 increased to $561,000 as compared to $397,000 in the second quarter of 2020. The increase in sales, marketing, and advertising expense was in support of the increase in revenues driving future monetization, as well as increased sales personnel costs related to the acquisition of Mobcrush and the talented Mobcrush sales team. The increase in technology platform and infrastructure expenses was due to an increase in engineering and technology personnel costs related to the Mobcrush acquisition, as well as cloud services and other technology platform costs. The increase in general and administrative expenses was primarily due to non-recurring Mobcrush acquisition-related transaction costs totaling $417,000, including legal, audit, advisory, financial and tax diligence, and proxy solicitation-related costs incurred in connection with the closing of the Mobcrush acquisition. Under U.S. GAAP, acquisition-related transaction costs are required to be expensed in the period incurred. The change also reflects an increase in intangible asset amortization charges totaling $251,000 related to intangible assets acquired in connection with the Mobcrush acquisition. On a GAAP basis, which includes the impact of non-cash charges and credits, net loss in the second quarter of 2021 was $2.3 million, or $0.08 per share, compared to a net loss of $4.6 million or $0.48 per share in the comparable prior year quarter. Net loss for the second quarter of 2021 included a gain on loan forgiveness of $1.2 million in connection with the forgiveness and extinguishment of the May 2020 PPP loan and related accrued interest previously received under the CARES Act. In connection with the application of the acquisition method of accounting for the Mobcrush transaction, the acquisition-related net deferred tax liability, representing the net deferred tax assets and liabilities acquired in the merger, created a source of income to utilize against Super League's existing pre-merger net deferred tax assets. The valuation allowance on a portion of our net deferred tax assets was released, resulting in a non-cash income tax benefit of $2.8 million, which was recorded as a credit to income tax benefit in the statement of operations for the second quarter of 2021. Excluding non-cash stock compensation charges and other non-cash charges and credits, our pro forma net loss was $5.5 million or $0.20 per share, compared to $4.1 million or $0.41 per share in the comparable prior year quarter. The quarter-over-quarter change primarily reflects the increase in top-line revenues and gross profit and the expense-related relationships and fluctuations described earlier. The weighted average diluted share count for the second quarter of 2021 was $27.2 million, compared to $9.5 million for the second quarter of 2020. The weighted average diluted share count for the second quarter of 2021 reflects the issuance of $12.1 million shares of the company's common stock to the former shareholders of Mobcrush as merger consideration in the all common stock transaction, which, as I mentioned earlier, closed on June 1, 2021. As disclosed in our earnings release and 8-K filed with the SEC this afternoon, pro forma net income or loss is a non-GAAP measure that we believe investors can use to compare and evaluate our financial results. Please note that our earnings release contains a more detailed description of our calculation of pro forma net loss, as well as a reconciliation of pro forma net loss with the most directly comparable financial measures prepared in accordance with US GAAP. Looking at the balance sheet as of June 30, 2021, we had $31.5 million in cash, no debt, and total shareholders' equity of $98.3 million. Our current monthly OpEx gross cash burn rate on a standalone basis continues to be in the $1.4 million-$1.5 million range, excluding the impact of non-recurring Mobcrush-related transaction costs. With the acquisition and integration of Mobcrush, our monthly net cash burn rate is expected to be in the $1.8 million-$1.9 million range on a combined basis. Lastly, I wanted to provide a brief summary of the preliminary impact of accounting for the Mobcrush acquisition on our financial statements as of and for the three-month period ended June 30, 2021. As required, we applied the acquisition method of accounting, allocating the purchase price, which was comprised solely of the 12.1 million shares of common stock issued as merger consideration, to the estimated fair value of assets acquired and liabilities assumed in the merger transaction. This process resulted in approximately $18.5 million of identifiable intangible assets acquired, including partner, influencer, advertiser, and customer relationships, as well as developed technology and trademarks. Application of the acquisition method also resulted in non-amortizable goodwill totaling $44.2 million. Amortization related to intangible assets established in connection with the acquisition of Mobcrush, which are being amortized over estimated useful lives ranging from five to seven years, was $251,000 for the one-month sub-period included in our consolidated results for the second quarter of 2021. Total transaction costs included in general and administrative expense related to the acquisition of Mobcrush for the three and six-month period ended June 30, 2021, were $417,000 and $636,000 respectively. The estimated results in connection with the application of the acquisition method of accounting to the Mobcrush acquisition are preliminary and will be finalized in accordance with the guidance and the applicable accounting standards, although currently we do not foresee any material changes. Thank you for joining us today, and I look forward to being with you all for our Q3 2021 earnings call. With that, I will turn the call back over to Ann for some additional remarks. Ann? Thanks, Clayton. Our mission remains to build a community of gamers and streamers that through our leading-edge technology empower them to create gameplay and entertainment content that connects them to each other and to their communities. We believe today's aspiring creators and players are tomorrow's social media influencers and esports stars. Keep expecting us to expand our role in the metaverse, expand our audience and advertising reach, and grow the opportunities to further leverage our content and technology. With that, Clayton and I are happy to take your questions. Cindy? Thank you. As a reminder, if you would like to ask a question, you may press star one on your telephone keypad. To withdraw your question, press the pound key. We will pause for just a moment to compile the Q&A roster. Our first question comes from the line of Scott Buck. Your line is now open. Hi, good afternoon, guys. Thank you for taking my questions. First I want to apologize, I'm jumping back and forth between a few of these, so, in case you've already gone over on the call, again, I apologize. First, I was hoping maybe you could give me a little bit more color on gross margin in the quarter. What drove the sequential decline and how we should think about that line item as we move through the remainder of the year? Yeah. I'll certainly let Clayton jump in as well, 51% is, we think, still very healthy. There was a bit of a one-off circumstance that happened 2Q of last year because we had an arrangement with Tencent to do a host of in-real-life events. Pandemic hits, Tencent being a great partner, said, "No problem. Let's do them online instead." Well, the cost profile of doing those deals was much lower. We were able to, for the same value of the deal, deliver the program, achieve a much higher margin because of that lower cost profile, and on top of it, we reached really 4 to 5x the number of gamers because everybody could join from the comfort of their home. It was a campaign where we still achieved more than beat the expected number of participations in the events and just kind of got a chance to grab a really high-margin deal. That said, we now have a much greater balance in our revenue mix between content direct to consumer and advertising. I do think margin is one of those things that I would expect you guys to be looking at a range of staying healthy, but knowing that quarter to quarter, there might be minor fluctuations, as that portfolio revenue fluctuates. Great. That's helpful, Ann. Second one for me, just on the advertising pipeline. I'm curious whether you're seeing any kind of newer entrants into the space. Maybe industries that either haven't previously advertised with you guys or just anyone who may just be getting into the esports space. It's a good question because first of all, we do absolutely have a lane that's about competitive esports, but because we also have a broad umbrella of gaming-centric entertainment as well, we really have offerings that speak to a real diverse audience of advertisers. Anyone who's been holding back on esports but still wants to get to young gamers, or their parents, we still have mechanisms to draw those advertisers in. I think more than the traditional esports property, we speak to a much broader range of advertisers across a much broader set of verticals. That said, one of the things out of the gate that just felt so right and was just so affirming with the Mobcrush merger was we compared sales pipelines. What we found is that while so much is similar in the types of consumers that we target, and the spirit of what the brand stands for and the type of content that we elicit, we had extremely complementary pipelines. We really weren't cannibalizing each other. What was common, we both have a real strong foothold in entertainment. When you look at Disney+ and Netflix and people like that doing new releases in entertainment, there was a lot of synergy, but again, we weren't chasing the same deals. You look at some sectors that Mobcrush was really strong in that we weren't as much. Automotive, very specifically, whether it be Hyundai or Toyota, Lexus, they had a real strong foothold in automotive. We had a really strong foothold in kind of more youth-focused categories like toys with Mattel and Moose Toys. When you look at the endemics, we work very closely with the game publishers like the Tencents and the Riots of the world. We also obviously have Logitech and Astro, they're investors in ours still, so that's very helpful. New game title releases, that was another area where I felt that Mob really had a stronger positioning getting out there. When I talked about that large $500K deal that we just inked for 3Q, that is specifically tied to a new game release, and we think there's some follow-on revenue to chase for that new game release game. I'm pretty excited about how complementary. I think with esports in general, I think you are finding that there was a narrow group who was comfortable at the professional level. Given we're focused more mainstream and on the base of the pyramid, it's pretty hard-pressed to find a vertical that isn't interested in getting to gamers because a big chunk of their segment that uses their products are gamers. Great. That's really helpful. One more for me, and I'll jump back in the queue. I'm curious, you've had Mobcrush under the umbrella now for about 2 and a half months. Curious if there's anything that you've been pleasantly surprised with or just surprised with in general as you've kind of integrated that business into yours? Well, I'm just super proud of the sales team. When you merge that together with our team and then with all the properties the two companies bring, the team's been able to really, when you think about it, in just a couple of months, get out of the gate and be mutually cross-selling these properties and making these sales packages larger and larger because there's just so much more reach. As we've always said, advertising is all about heft. With scale is more of a share of advertisers' wallets. I'd say the other thing is the technology opportunity. When you look at the components of Mob's broadcasting, multicasting technology, the highlight capture that's driven off AI. You look at the broadcasting tech and the tournament functionality behind Super League and Virtualis. We haven't even begun to scratch the surface of what, when you put those two tech stacks together, the types of business models that could emerge. I would say every time we have a product roadmap conversation, it's palpable, the excitement, because everybody can see that there's so much bigger of a prize, and new sources of revenue that we can't even really quite see yet. Then I'll say it because I think it matters. It may be a softer element, but I said this on the last call, too. A lot of why we've been selective on M&A is we need to prove to our investors that we can digest this M&A, that we can get the synergies out of it. As I said in the call, anybody can buy stuff. The hard part is executing against it and delivering better results together than apart. What we knew from the beginning was because we've had a long-standing relationship with Mobcrush, for really close to five years, they're a very known quantity as we are to them. The culture fit, the desire for the teams to get to know each other, to start learning about each other's different offers. Everybody's job's got more fun because there's more toys in the toy box, right? That for me, I've been a part of some very big M&A on the energy side, and usually the kind of sadder time is after the announcement. It's kind of where the harder work begins. I think that while we still have a lot of work ahead of us and a lot more to optimize, I really feel like this has just been about as smooth as it can be. I think we all feel, as I've said, more powerful together than apart. That's kind of half the battle won, is believing. I do think giving a little bit of light personal guidance for the second half of the year is, I hope, an indication to all of you of just how bullish I am on where this company is going together. That's helpful. I appreciate the time, guys. Thank you. The next one is Jack Vander Aarde of Maxim Group. Please proceed. Hi, Ann. Hi, Clayton. Congrats on finalizing the acquisition of Mobcrush, and looks like another acquisition of Bannerfy this morning. A couple questions from me, Ann, I'd like to just dig into your comments earlier on the advertising segment. I believe I heard you mention the pipeline of opportunities is up more than 2 times sequentially, average deal size around $250K. You also mentioned you've won your first $500,000-plus order during this 3rd quarter that we're in now. Yes. My question is it a coincidence that you won your first $500K order shortly after the Mobcrush acquisition? My gut tells me no. Follow-up there, I also imagine this is a ramping average order size is a trend that will not only continue but accelerate into 2022. Is that a fair assessment? Yes. What I would say is that prior to Mob, what we saw is that we saw strong repeat buyers. We saw top-tier advertisers continuing to want to put money to work with Super League in the sense that, like you had Moose Toys, who's now done a few activations with us, so they kept coming back, but we were only able to service a smaller % of their ad budget. Now, when you look at that scale that we have, when that RFP comes in, we're able to bid $500K up to $1 million of that budget. That is absolutely directly related to the power of putting Super League and Mobcrush together. Excellent. Okay. I appreciate the color there. Switching gears to just the direct-to-consumer or DTC business segment. 22% of revenue, that increased up over 500% year-over-year off a small base, but clearly this is hyper-growth mode. Just a couple questions on that. Can you provide additional color on this recent DTC revenue ramp in terms of what the specific underlying drivers are in game micro-transactions, subscriptions, anything else you can provide there, and then where you see this trending in the back half of 2021? The majority of that revenue right now is coming off Mineville, which is a property that was part of the Mobcrush acquisition. Again, up until the Pixel Paradise launch, it was one of only six official Minecraft Bedrock servers globally sponsored by Microsoft. The primary monetization there is basically game passes or in-game transactions, so micro-transactions that are fed through the Microsoft marketplace, and then we receive a cut of it for designing and operating and maintaining that server. It's a significant thing that we were asked by Microsoft to launch a second server. This one, Pixel Paradise, kind of targeting a different type of Minecraft player, and so a different bit of a theme of gameplay. The fact that we, as a young company, control and monetize two of the seven approved global servers is, I think, a significant pat on the back for how well the Mineville team has done at really kind of delighting this Minecraft Bedrock user. I should mention, Bedrock is basically the software basis for players who like to play Minecraft on consoles or tablets. Hence it's a specific server targeting those types of players. Great. Then just one more follow-up for me. As for your revenue outlook comments, sounds like you think it's reasonable for second half revenue of around $7 million, perhaps more. Can you just maybe expand on this a bit further as well, just given the second quarter only had a month of Mobcrush in it. This $7 million revenue target or so, whether it's informal or formal, break that out between maybe Mobcrush versus Core Super League and any other changes in the % revenue mix by segment as well. Yeah. I would say that we continue to see our advertising heft play out into revenue. Really, those stats I gave about the size of pipeline, the size of average deals, I think you'll continue to see that the advertising revenue stream still will be our primary revenue stream, although I like the diversification I see. What I would say is this, I wouldn't say that we will be able to, going forward, really do hard line splits between kind of old Mobcrush, old Super League because, and especially in the advertising front, we've put it all together. There are pitches we're going out to do that, as you can see in that young and core gamer press release today, aren't pitches that you tell us what age you want. We are going to take the very best properties we have as one company. We're going to pitch you a package that taps into all those. Let's talk about that older core gamer, that over 18 gamer. If an RFP comes in for an automotive brand, we're going to offer them opportunities to put their advertising into the streams of the people using our Mobcrush platform to stream to their social channels. By the way, we're now going to also offer those advertisers ways to put banner ads inside their YouTube streams of our Bannerfy influencers and creators. We're also going to give them advertising opportunities on Framerate, which is a historic Super League brand, which is our set of everyday user-generated highlights that are primarily Instagram and TikTok. That just illustrates the way that we are tapping into using kind of the force of all the properties between the two. I think that's why giving my personal kind of estimate of where we're going was important is, even though we're only 2 months in, it's already getting hard to delineate the old Super League and the old Mobcrush. That's the way we want it, right? We don't want it to take 1 year to start to work as one team and to work with our assets as one set of assets. We want it to happen as soon as possible because that's where the amplification kicks in. I do think if you think about it, my heavens, if the first half of the year we delivered a couple million in revenue, short of that, and we're able to deliver $7 million-$8 million in the second half, I've got to believe that that's going to excite investors because that means we're marching towards cash flow break even. I think what investors said to us early on is, "Great KPIs, but I want more. I want top line." Well, we're giving it to them. I know what they're going to ask for next, which is, when are you going to break even? The way I do that is we grow the top line. We keep our margins nice and healthy, and 51%, I think is pretty significant and good for the type of business model we're in. We keep controlling cost, but not for the sake of not growing, right? We smartly invest in cost to keep growing the top line, knowing that by the time we're hitting, call it $20 million, $25 million, $30 million, we start to feel we're moving into a sustainable cash flow positive position. That is the rally cry of the company. I would argue we're young and that we shouldn't chase break even for the sake of top line. I hope the investors agree with me on that one and would say that we're prioritizing correctly top line right now. At the end of the day, it's both. Excellent. That's fantastic color. Again, congrats on the building momentum. I'm going to hop back in the queue. Thanks. At this time, this concludes our question and answer session. I would now like to turn the call back to Ms. Hand for closing remarks. Okay. Well, listen, first of all, thank you, Cindy, for moderating. I really appreciate it. We'd like to thank everyone for listening to today's call, and we look forward to speaking with you at our upcoming conferences as well when we report our third quarter results in November. I guess I'd just say as a headline, if you remember anything, remember this, we've got gamers. Thank you for joining us. Ladies and gentlemen, this concludes today's conference call. 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