Good afternoon, everyone. Thank you for participating in today's conference call to discuss Super League Gaming's financial results for the second quarter ended June 30th, 2019. 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 fact, 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 like to remind everyone that this call will be available for replay through August 21st, 2019, starting at 8:00 P.M. Eastern Standard Time 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 CEO of Super League Gaming, Ann Hand. Ann?
Thank you very much. Good afternoon, everyone. Thank you for joining us for our second quarterly conference call. As I expressed on our first earnings call, we have found the process of being a public company to be very empowering, and it has supercharged our approach and results, as I think you will hear today. We've had a busy second quarter continuing our momentum. Today, I will review some of our recent corporate developments and our growing position in the wider esports ecosystem, and then get into our results against the key performance indicators we laid out at the start of the year. After that, Clayton will review our financials, and we will open it up for questions. First, a quick review of some of our commercial highlights of our second quarter, as well as the past few weeks.
Early in Q2, we announced a partnership with ggCircuit, whose venue management software is used in hundreds of esports gaming centers around the world. The partnership will help us expand our base of venues to allow us to reach more gamers with a Super League-branded experience. We added Capcom's "Street Fighter V: Arcade Edition" as our fifth game title, expanding our offering into this highly attractive fighting game genre. We announced a partnership with Net Level, the first nationwide fiber network for out-of-home entertainment. The partnership allows us to further build out our movie theater footprint on the back of their infrastructure. In June, we announced the acquisition of Framerate, one of the fastest-growing social channels on Instagram, and our first acquisition since the IPO.
This is an important strategic step in our audience-building efforts with a channel that averages over 10 million video views a month, where gamers of all levels can upload their personal esports highlight reels for recognition. We announced two great personnel moves. Mark Jung, founder of IGN and former COO of Fox Digital, joined our board. Just a few weeks back, Samir Ahmed became Super League's Chief Technology Officer after time at Fandango, and most recently, IMDb, an Amazon company, as the Head of Consumer Technology. These two industry veterans will be integral to taking our platform and offerings to the next level. Today, we announced the addition of our sixth game title, Tencent's "PlayerUnknown's Battlegrounds," also known as PUBG, to our esports lineup. PUBG is one of the world's top mobile gaming titles, with over 400 million downloads and 50 million daily active users.
This means we have already reached our target of having six games in our portfolio by the end of 2019. We're not finished yet. Last week, we formally announced our rapidly expanding Super League Digital Network of digital and social channels celebrating esports and competitive gamers. I will go into this a bit more in a minute. First, let me set the table. We continue to have a great story to tell and have been actively sharing this story at investor and industry conferences, with our business partners, and with the wider financial press community.
What better proof is there that esports is going mainstream, that esports is something desirable and accessible to the 2 billion-plus gamers on the planet and not just for the elite professionals, than watching a 16-year-old amateur win $3 million in a Fortnite tournament in front of a sold-out crowd at Arthur Ashe Stadium. What we thought was even more amazing about that story than the fact that the winner received $3 million was that every other participant in the tournament, regardless of score, earned a minimum of $50,000. That could have been any teenager that any of us on this call might know.
Even as reporters and analysts prepare their stories about the growing prize pool money, the best-kept secret in the industry is that for every hour a talented gamer plays video games, he or she is consuming the same or a greater number of hours watching others' video gameplay. Super League brings not just players together, but also the audience. Let me elaborate. As many of you know, we launched our company initially to address the unmet demand and lack of infrastructure for recreational esports and community. We wanted to help gamers find each other and find their fields for competitive video gaming, no different from how I had the opportunity as a teenager to take tennis lessons, go to tennis camp, and eventually join a team.
We started with our anchor business, creating partnerships with top game publishers and physical locations, retailers like Topgolf, Cinemark Theatres, and Esports Gaming Centers, to provide in real life gaming experiences that speak to where and how Generation Z and millennials wish to spend their time, bringing gaming and esports into the real world. With the recent announcement of our Super League Digital Network, we have expanded into social media, live streaming, video-on-demand, and website-based offerings that provide gamers with multiple forms of content designed to celebrate their love of play and to support their boundless creativity. Whether through gameplay highlights, live stream esports competitions, original lifestyle series, or digital gameplay environments, Super League's audience is constantly creating, watching, and engaging, making this otherwise elusive and digitally native demographic accessible on an always-on basis.
Super League's primary digital properties include Super League TV, a branded channel on Twitch and YouTube featuring Super League's live and digital competitions, as well as original live and video-on-demand shows, Framerate, one of the fastest-growing social video networks in gaming, with multiple channels on Instagram, Facebook, and TikTok, as well as original content series on Instagram TV and Facebook Watch, and thirdly, Minehut, a vibrant Minecraft community in which players create their own Minecraft worlds and where friends can share, socialize, and play together. This unique combination of digital and physical audiences across a wide range of game titles, ages, and skill levels, and the wider content capture that we're now collecting beyond the gameplay, positions Super League as not just a tournament operator, but a lifestyle and media company focused on capturing, generating, aggregating, and distributing content.
Gameplay itself is just one form of that content across the genre of all things esports. Traditional media companies are vertically integrated. They build studios that create entertainment content, they monetize that content in multiple ways. They air a TV show and sell ad time, or they syndicate it and sell it to other stations. They stream, they sell subscriptions, et cetera. It's the same for Super League. The fundamental drivers are creating deep community engagement through our highly contextualized local experiences that when coupled with the critical mass of large digital audiences, provides the depth and volume for content and offer monetization way beyond a classic advertising model. It's the powerful combination of those physical and digital nodes with Super League's platform at the hub that creates real leverage for a greater share of not just the customer's wallet eventually, but the advertiser's wallet as well.
Now let's talk about revenue. We are using our platform to monetize gamers, their gameplay, and the content they generate. There is a wide spectrum to how we monetize, but essentially falls into two buckets: brand partnerships and advertising, and direct-to-consumer offers. Can we sell advertising against our platform? Yes. Can we license our platform to retailers or tournament and festival operators? Yes. Can we partner with brands and publishers, as we already do, to create custom experiences for them? Yes. Can we sell consumer subscription offers and other e-commerce? The answer is yes again. Historically, our brand partnership and advertising revenue came through our Super League-owned and operated or first-party physical and digital experiences, where we attracted sponsorship from companies like Logitech and Nickelodeon, to name a couple.
Starting late last year with the ever-increasing flexibility of our platform, we started to focus on platform-as-a-service revenues with game publishers like Tencent and Capcom, retail partners like Samsung, and even existing partners like Logitech as a strategy to capture greater sponsorship and advertising dollars. This is not a pure SaaS business. These are brand partners paying for a high-quality brand presentation that offers live experiences, as well as the downstream residual reach we can now deliver them with our digital audiences. Platform-as-a-service activations typically have a higher CPM and a lower cost of revenue. Hence, they have a more material impact on our top line and a better margin profile. Let me make this a little bit more quantifiable. A typical rule of thumb is that a high-quality premium advertising buy has a CPM in the range of $25 to $35.
Super League's unique ability to target and create meaningful engagement between brands and gamers is in some cases extracting CPMs in the $40 to $45 range. With our recent material audience growth via Super League TV, Framerate, and Minehut, we'll be able to deliver major advertisers tens of millions of impressions and views, translating into larger revenues at little to no cost. While it is still early days on our content monetization, we look forward to continuing to provide more proof points of how revenue is occurring to demonstrate our potential revenue trajectory to you. As for direct-to-consumer, we continue to charge players tournament fees for premium and experiences and have about 100 gamers in a beta digital consumer subscription test. We want to find the right formula, the same way that Amazon did with Amazon Prime.
For now, our primary focus is on audience development through our physical and digital network, and we know that as our audience expands, there will be ever-increasing opportunities to monetize players, creators, and viewers through digital offers. We have created a vertically integrated platform built around the genre of esports for all gamers, and we're just in the warm-up stage. Now to our five key performance indicators. These are the same KPIs we laid out at the start of the year and are the metrics we and the board strongly feel map the trajectory and future value of the company in this early but fast-growing stage.
Two of these, the number of game titles and number of retail partner venues, bring more gamers to Super League. As we bring more players into our physical and digital experiences, we gain not only new registered users, but also more gameplay hours running through our platform. Ultimately, that drives audience right at the top of the funnel, which has an amplification effect on potential revenue and new customer acquisition. First, game titles. We began the year with 4 titles and a target of having at least 6 by the end of the year. As you know, with the addition of Capcom's Street Fighter V in Q2 and the recent announcement of Tencent's PUBG, that has enabled us to meet our 6-game title target for the full year in just 7 months. More importantly, we have a healthy pipeline of more game titles in front of us.
We not only expect to beat the number, but we've also added enhancements to our platform that is enabling us in real time to start rolling out experiences ahead of formal partnerships. You will see that over the last few weeks, we have run Topgolf events across a wider range of titles, including "NBA 2K," "Rocket League," and "Super Smash Bros.," to name just a few, and expect to see that trend continue with more titles coming onto Super League's platform faster and reinforcing our unique game-agnostic position. The second metric is retail partner venues. Our earlier announcements of partnerships with Topgolf and ggCircuit Esports Gaming Centers further extended our reach with access to hundreds of locations. We ended 2018 with 46 active venues and grew to 93 total active venues through Q2.
Our target for year-end remains 200 venues, and while we have taken a brief pause on venue onboarding after aggressive growth in the first half of the year, we have more than enough available pipeline to meet our target. We are constantly testing and innovating with our partners for the offers that create the most player stickiness and revenue potential and will continue to roll out accordingly. The third metric is registered users. To be clear, these are defined as people who one way or another have engaged with our platform. Some paid, some participated in free-to-play events or wanted to learn more about us, but we know who they are and consider them part of our player database. We ended 2018 with close to 300,000 registered users that we had cumulatively built over four years of existence and had a target of doubling that number to 600,000 by year-end.
At the end of Q2, we had 509,000 users registered. Through July, I am pleased to say that we have hit 621,000 user registrations, exceeding our full year 2019 target. We are pleased with this result, as you can imagine. More game titles, more physical venues, and more digital ways to engage with our platform, notably inside of our very fast-growing Minehut gaming forum for young teens, are proving that the community and the flywheel effect is starting to kick in. For the next two metrics, gameplay hours and audience, we need to level set because when you hear the results, you will see that they're astounding. With our digital channel development, the baselines have shifted. First, let's tackle gameplay hours.
As we told many of you on the roadshow, we pushed 175,000 hours of gameplay through our platform, which was predominantly via live gaming experiences. We aim for 250,000 for 2019. Our ever-expanding digital gameplay channels that provide always-on gaming forums have now brought that total adjusted metric through Q2 2019 to 4.96 million hours. Keep in mind, the idea here isn't just about having a ton of hours. What hours mean is that is available content that we can repackage and distribute and monetize in different ways. Now let's close out with our fifth KPI and talk about audience and viewership. Registered users and gameplay hours are just about the players. Last year, we generated close to one million views across our Super League-branded Twitch and YouTube channels, a modest number for our nascent digital network.
We told you that at the end of Q1, we had generated close to half of our full-year target of 2 million. In Q2, if we had done nothing else other than just organic growth off those channels, we would have achieved our full-year target in half the time expected. We didn't just grow organically. Our inorganic growth strategy put fuel on the flame through the acquisition of Framerate and other properties, and we are currently sitting with an aggregate viewership of 5.9 million views through Q2, which through July has already grown to 11.9 million year-to-date. To that end, and because we know this is the leading KPI, which is where a lot of our performance flows, we are raising our 2019 full-year target to an aggressive 100 million views. That is starting to sound like a material sports network.
As I've been out making the circuit at investor conferences, I've had the pleasure of meeting many of you. One thing I have shared and would caution to the wider group on this call is to resist the urge to triangulate these KPIs too quickly. Every experience we offer lasts for different hours of duration. Every game title has different lengths of gameplay, and every player is different in their interest to play versus watch gameplay content. We still believe these five KPIs we are pointing to are the right ones, and we will gain significant insights as we track and grow them over time and demonstrate how they eventually translate into advertising, brand partnership, and direct-to-consumer value. That's a summary of our commercial and operational highlights during the second quarter of 2019.
At this point, I'll turn the call over to our CFO, Clayton Haynes, who will provide an overview of second quarter financial results, after which I'll come back on with some closing remarks. Clayton?
Thank you, Ann. Good afternoon, everyone, and thank you for joining us today. As summarized in our earnings release filed earlier today, second quarter 2019 revenues were $223,000 compared to $358,000 for the second quarter of 2018. As we stated on our last call, we have continued our focus in 2019 toward offering a mix of paid and free-to-play physical and digital events to build audience. We continue to see the emergence of platform-as-a-service revenue, which generally comes with a more favorable margin profile. While we reported a decline in second quarter revenue relative to the second quarter of 2018, year-to-date 2019 revenues are relatively consistent on a year-to-date basis, and we continue to see a decline in cost of revenues for the 2019 quarterly and year-to-date periods versus the comparable 2018 period.
Second quarter and year-to-date 2019 cost of revenues decreased approximately 40% compared to the comparable 2018 periods due to operational efficiencies and lower direct costs associated with our revenue-generating physical and digital experiences. Second quarter 2019 operating expenses were $5.7 million compared to $3.8 million in the comparable prior year quarter. Approximately $1 million of the $1.9 million increase in operating expenses was due to higher non-cash stock-based compensation costs compared to Q2 of last year, due to the vesting of certain performance-based options and warrants upon the achievement of certain operational performance targets during the second quarter of 2019. The remaining increase was driven by higher costs for personnel, marketing, technology platform development, insurance, and other corporate costs, partially offset by lower depreciation and external professional costs.
Excluding non-cash expenses and the cost associated with now being a public company, we have kept our costs in line with prior year, focusing personnel investment on high-grading staff rather than large headcount expansion. We continue to be committed to investing in OpEx appropriately to meet the top-line and growth needs of the company. For the second quarter of 2019, we reported a net loss of $5.5 million compared to a net loss of $4 million in the second quarter of 2018. The increase in net loss was driven by the same factors cited earlier for the quarterly operating loss, offset by lower net interest expenses due to the conversion of all outstanding convertible debt upon consummation of our IPO in the first quarter of 2019.
Pro forma net loss for the second quarter of 2019, which excludes the impact of non-cash convertible debt-related interest charges, non-cash stock compensation charges, and other non-cash charges, totaled $3.8 million as compared to $2.7 million in the comparable prior year quarter. The increase in pro forma net loss was primarily due to the same operational expense fluctuation factors cited earlier. As described in our earnings release and 8-K filed with the SEC today, pro forma net income or loss is a non-GAAP measure that we believe investors can use to compare and evaluate our financial results, along with other applicable KPIs and metrics discussed by Ann earlier. 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 GAAP.
Looking at the balance sheet as of the end of the second quarter of 2019, we had $16.2 million in cash, no debt, and total shareholders equity of $20.9 million. This cash position reflects cash raised in our initial public offering, which closed on February 27th, the net proceeds from which were $22.5 million. Cash paid and the fair value of common stock issued in connection with the acquisition of Framerate totaled $1.5 million and $1 million, respectively. In connection with the accounting for the acquisition of Framerate, the company recorded intangible assets acquired and goodwill totaling $2.8 million as of June 30, 2019. With that, I will turn the call back over to Ann for some additional remarks. Ann?
Thank you, Clayton. In summary, I would say that our goal remains to grow our audience as fast as possible by expanding the number of games we offer, the footprint of venues, and the digital channels for gaining viewership. We are confident that revenue growth will accelerate as our audience continues to grow. We believe that by working with game publishers, brand partners, and retailers, we will be able to generate content and build an audience for that content through both our digital and physical experiences. Even as esports continues to attract massive investments in teams and commitments by publishers, Super League remains one of the few pure-play investment opportunities in the industry. We are well-positioned to be at the epicenter of esports growth, and we are meeting or beating all the KPIs we've outlined, and not in small ways.
Again, just to highlight, our newly adjusted audience target is 50 times what we set out at the start of the year. We had a goal for 2 million audience views, and our new target is 100 million by the end of 2019. In addition to our ongoing active investor outreach and analyst conversations, we will be participating in several investor conferences in the coming months, including Gateway, Goldman Sachs, and Lake Street in September. We expect that the combination of executing our plan, achieving our KPIs, and actively communicating these results to the investment community will result in significant shareholder value enhancement. With that, Clayton Haynes and I will now take your questions. Operator?
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star and the number one key on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. To prevent any background noise, we ask you please place your line on mute once your question has been stated. Our first question comes from Mark Argento with Lake Street Capital Markets. Your line is open.
Hi. Good afternoon, Ann. Good afternoon, Clayton. Just a couple quick ones. Obviously, a lot of success supercharging the viewership, especially with the acquisition of Framerate. When you think about 100 million viewers, which is a ton of viewers, relative to the opportunity from advertising CPM, could you just talk about how do you start to engage? How do you start to actually monetize that audience? I know you talk to a CPM of $40 or $45. I'm guessing that's a little bit of a different CPM than the CPM you could potentially get with the traditional viewership. Maybe you could just talk about that engagement and when we could see some revenue coming online from that business. I have a follow-up for Clayton after.
If you look at the historic brand partner deals that we've done, we've been able to give them that high-quality engagement experience. That premium experience with our physical events is what usually would garner that kind of a higher CPM. Because every brand partner wants that kind of higher volume, lower CPM reach as well, we could go out and we could deliver that audience through influencers and in other ways to give them that aggregate package. Now that we have those digital channels ourselves, we don't have to go out and buy that reach, which is a classic strategy that most brand partner deals employ. We actually can deliver a perfect, beautiful target. For example, in our current program right now with Sony Pictures around "Angry Birds 2," they're trying to reach a Minecraft group of kids.
We have a few 100,000 kids registered to our Minehut platform engaging in gameplay. We can promote that brand activation directly to them and give them that perfect bullseye target and deliver all those millions of impressions and video views as part of our package through our own proprietary channels. What it means out of the gate is that now with us already owning all of that vast growing digital audience, we can now package much bigger deals to brand partners. The value of those deals are going to be higher. The gross margin on those deals are going to be better because we have that audience already built into our platform and can reach them. We haven't even gotten into the advertising side of things.
When you think about the fact that in just a couple weeks' time, we were able to generate for, say, Sony, 4 million impressions, 1 million video views. Imagine if in that same Minehut channel, we were dropping other just forms of just traditional advertising content, a banner ad, maybe a screen takedown. You're right. That's going to be a lower CPM range than what we've been able to get. That is just a whole additional source of advertising that we've just begun to scratch the surface on. Just like most other models will tell you out there, once you have that meaningful critical mass of audience, there's a lot of ways to monetize them. Let's not even forget that ultimately, we want to convert that audience into being direct-to-consumer paying subscribers as well.
All right. That's a helpful color there. Then Clayton, just wanted to get your feeling on the balance sheet relative to cash needs. I think you said cash was just over $16 million at the end of the quarter. You guys look like you consumed roughly $5 million. I know I think about $ a million and a half of that was for the acquisition. What's run rate cash consumption, at least the way you're looking at the model for the next few quarters, and relative to when you can start to see some kind of uptake and hopefully some of the ad revenue here starting to flow?
Sure. On a monthly basis, we're still running our cash burn rate at a little over $1 million per month, so $3.3 million-$3.4 million a quarter. That's consistent with the trend that we recorded after the first quarter of 2019.
Do you go.
I guess dovetailing back to my question for Ann. How quickly, I guess, can you see or potentially start to see engagement from selling ads and generating some type of revenue off of those impressions?
Yeah
just given how immense they are at this point?
Yeah. It's a good question. We don't provide guidance, what I would say is that when we're starting to look at generating 10, 20 million views a month, we're now accelerating all of our plans for that type of advertising revenue. Originally, we thought that was going to be more a part of our 2020 revenue story, I believe that before the end of the year, we'll be able to at least be able to demonstrate some tangible examples of ways that we're able, now that we have that critical mass, to actually get into a very different type of revenue stream. To be frank, we wouldn't have gotten there if we were still sitting on that incremental kind of one to two million views. This is a step change in viewership. That should mean that we're pulling forward that advertising revenue much faster.
Great. Thanks, guys.
Thank you.
Sure.
Our next question comes from the line of Ilya Grozovsky with National Securities. Your line is now open.
Great, thanks. Obviously, the registered users are ahead of plan. What is the thought process to when you will begin charging a premium from some of the users for the premium service? Thanks.
When I talked a little bit about that very small beta test that's happening right now inside of our Minehut business, that is where we are charging this small pilot of players anywhere from $5-$15 additional dollars a month to give them access to additional tools to enhance their gameplay. We believe just as well when we talk about Framerate, the fact that all those amateur players out there are giving us their own user-generated highlight content, and we've already started to design some additional tools or services to allow them, much like the typical revenue model or business model that you see for game publishers, more of a freemium approach. For free, you get a certain level of services, and then when you want to upgrade into a new expanded type of tool. We still have every intention of launching consumer subscription offers.
We're pleased that we're already in that piloting of this first one. Our goal was to make sure that by the end of the year, we had a consumer subscription offer launched. We told the markets very transparently that we didn't expect to be doing that until the second half of the year. Right now, we are on track for that.
Okay, what's the timing on the game launches, the new ones you've signed?
That really depends on the game publisher strategies that are tied to other marketing programs that they have. You should expect that in the October timeframe, you'll see Street Fighter V and PUBG spinning up. I do want to say that even though we talk about that six-game title target that we've already met for the year, you could argue right now we're already north of 10 game titles because we're already, as I mentioned, doing things with NBA 2K. There's a very hot new game called Paladins that we ran a pretty exciting experience for Topgolf around. You'll continue to see us move into more sports titles, more mobile titles, more fighting genre titles. In fact, if you just get on superleague.com right now, you're going to see two unique things we're doing.
First is you're going to see Super League offering their own Super League-branded experiences across these 10 or so titles. More importantly, you're going to see a pretty extensive experience directory that is a home for all esports experiences happening across tons of different physical and digital locations. We want Super League to be that home base that allows players to find great esports experiences and find each other. The other thing you'll see is that we're even becoming a portal for parents. We're telling parents about where there are esports scholarship opportunities for their kids. They're small things, but those small feature sets that we're bringing are bringing more people to our Super League site and also hopefully bringing more gamers together locally.
Okay, thanks.
Thank you. Once again, ladies and gentlemen, if you have a question at this time, please press the star and the number one key on your telephone keypad. Our next question comes from the line of Michael Latimore with Northland Capital Markets. Your line is open.
Hey, Rae. Thanks. Congratulations on all the momentum this year. On the higher viewership number, you talked a little bit about the advertising opportunity there. How does that sort of flow through to the platform-as-a-service opportunity? Does it accelerate anything or just increase the opportunities?
Yeah. I was kind of getting at this a little bit with Mark Argento's question. If you think about it, when you look at somebody like a Sony hiring us for the Angry Birds activation or a Capcom hiring us for Street Fighter V, when we now go out and package together those platform-as-a-service deals, we are now able to deliver them anywhere from 5 to 10x the type of audience target we were originally pitching them for. The more audience you bring to those packages, the higher dollar amount those are worth. That audience is now one of the biggest sales tools we have as we go in and talk to these brand partners to escalate or increase the size of those deals.
It could mean that a deal that usually we would've priced at $150,000 with maybe a margin of call it 40% is now a deal that can be priced at, say, $300,000 with a 50 or 60% margin. Again, we now have this built-in audience. It's directly related.
On the Tencent partnership, can you elaborate a little bit on that? Did they reach out to you? Did you reach out to them? Is there any sort of new nuance here because it's more mobile-focused? Just a little more color would be great.
Yeah, absolutely. Of course, we have great relationships with all the publishers, because we're now in a position where we can start ingesting titles faster, you could argue many of them have over the last couple of years were waiting for us to be ready, and now we are. Obviously, Tencent is the largest game publisher in the world. It's not a small thing for us to be able to say that we have now joined in a commercial and business partnership with them, you know that they have access to tons of titles. What we like about PUBG is it's allowing us to get another game genre under our belt because certain types of players prefer different types of genres. Absolutely, it's about as well the fact that we want to add another mobile title. We run Fortnite mobile events.
We run Clash Royale mobile events. We want that third title because the trend is that increasingly, mobile gaming is becoming more and more competitive. You really can play in a pretty heightened competitive game just off your phone. It's also super accessible. We want people to be able to be gaming with us from anywhere that they are, to be able to walk into one of our venues and decide very conveniently to join into a game. Having more mobile titles as well as adding more genres is a big piece of our strategy.
Of course, as I've mentioned to you guys before, we also really do try to think as well about not just having game titles specific to genres, but also games that people grow from and into, because we want you to establish a relationship with Super League that transcends your interest in just one game title. We want to know that that Minecraft kid can grow into being one of our Fortnite players or maybe one of our PUBG players.
Great. Then you hired a new, I guess, CTO effectively.
What are some of his priorities over the next 12 months?
It's a great question because this is just one of the most excited hires that I've had in my career. We have really for about 12 to 18 months been really thinking through what we need this position to be. One of the core things it is it's a real partnership with our Chief Product Officer and founder, David Steigelfest. We knew we not only wanted the smartest technologist in the room or in the company, but we wanted somebody who had squarely been in consumer-facing businesses. A good example is just the other day. It was Samir driving the conversation about ways we can more quickly start monetizing advertising revenue off of our digital channels.
Because he's not just a classic CTO in the back office, he's actually been central into driving the strategies of ways to monetize massive consumer digital audiences, just like he did at IMDb, just like he did at Fandango. Very candidly, this is only his fourth week, and I've noted to many people I've talked to about it's rare to see someone have the kinds of impact he's had in just the first month on the job. He's definitely in the top five of people that I've just witnessed be decisive, confident, and add real value in such a time. I just couldn't be more pleased with this hire, and all of the leadership team and board feels the same.
Great. Just last one. Clayton, what should we have stock-based comp and then D&A for the third quarter?
I'm sorry, the second part of your question was?
Just the stock-based comp and then the depreciation and amortization number for the third quarter.
Okay. With respect to stock-based comp for the second half of 2019, that's going to trend at around $1.3 million in expense based upon current outstanding grants and awards. From a depreciation and amortization, it should be relatively consistent on a quarterly basis with what we reported in Q2 2019.
Yeah. Thank you.
Thank you. Our next question comes from the line of Michael Brcic with National Securities. Your line is open.
Yeah. Hi. I've got some questions. If they're too long or just too many, just cut me off. First of all, from the IPO, the preferreds converted. Was there a six-month lockup on that?
Yes, there was, and those weren't preferred stock. That was common and converted. Everybody on our cap table was subject to the same lock-up period.
Got it. Great. I'm trying to think of ways of monetizing things and can you offer tournaments or whatever you want to call it that have even small cash prizes? It's sort of interesting, even on the poker sites or whatever, for a very small amount of money, a lot of people will play. Is that legal, or is that turning to gambling, or have you looked at it? Does it make any sense?
Yeah, absolutely. Originally, we had focused cash prizing more around our youth program and in the form of college scholarships. We just recently started doing some testing with cash prizes. Now, Super League has a pretty high code of conduct and a pretty high bar on sportsmanship. What we've resisted is anybody can go and just throw a giant cash prize at something and claim that they got millions of users. We didn't want to buy our way to user registration. We wanted it to be legitimate, valid, targeted customers that we were going for. No gimmicks on how we've gone and built that registered user base. We did recently do a couple events with Topgolf where we tested small cash prizes. We also do charge tournament fees, players pay to enter them, and we have seen some good results from it.
What we like to do is try to have a good mix of a little bit of cash plus some other kind of swag to keep the experience also socially positive. It isn't illegal. It's something that we have recently started to try out and see how we get different types of results.
Yeah. Also, maybe the paid subscribers can get into a number of tournaments for free or something like that.
Exactly. That's one of the ideas we're testing for the paid subscription.
Do the tournaments have or is that a viable thing where you can actually maybe have a halftime show with some highlights of other stuff and ads and things like that? Maybe that's another way you can look at monetizing stuff.
Exactly. Historically, when we've taken down that physical screen in that venue, we've been able to drop different types of sponsor placement. Maybe it's a Logitech ad. Now imagine that we could have 10 Topgolfs participating in a set of events, but all the other Topgolf could be still watching those events, and seeing that there's a battle on that given night between Houston and Dallas Topgolf. We can also take all that content we're amassing, gameplay content and those highlight reels, and we can start to package up weekly highlight shows that we can allow to be distributed to physical and digital channels beyond just our Super League experiences. You've got it exactly right. Right now, to date, the majority of the ways that we have monetized content is running gameplay and then dropping brand sponsorship around it.
The direction we're going now is we still do that, but way beyond gameplay, we can be capturing content supplied to us at no cost by the users themselves and packaging it and distributing it in a whole host of different ways to a much wider network of physical and digital locations.
Great. Finally, the drop in revenue, you said it had to do with timing of brand and media sponsorship activities. Can you go a little bit deeper into that? Was it delays and why, or was it someone didn't re-up? Just give us a bit more color on that.
Yeah. No, it's purely a function of timing and revenue recognition requirements. We have contracted revenues, but of course, we have to adhere to accounting policies and recognize that revenue as those programs advance. It really does speak to the fact that this is what we've historically been, is a brand partner and sponsor revenue stream company, those things are a little lumpy and are tied to the completion of those events. It's a timing thing.
Great. Well, thank you very much. Appreciate it.
Thank you.
Thank you. I'm not showing any questions at this time. This concludes our question and answer session. I would now like to turn the call back over to Ms. Hand for closing remarks.
Thank you. We want to thank everyone for listening to today's call. We look forward to speaking with you at our upcoming conferences. Continue to keep your eyes out for great press. We're really proud of all the advancements we've made in just six months of being public, and we know there's a lot more excitement to come. We'll speak to you when we report our third quarter results. Thank you again for joining us.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.