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, 2020. 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 information 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 within the Securities and Exchange Commission for more information about the risk and uncertainties that could cause actual results to differ. I would like to remind everyone that the call will be available for replay through August 18, 2020 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 the company's website at www.superleague.com. Now I would like to turn the call over to President and CEO of Super League Gaming, Ann Hand. Ann?

Hi, everybody. Good afternoon and thank you for joining us. So let's go ahead and dive in, understatement right to say what here we’re all having. As always first and foremost we hope for a swift into this pandemic and I hope that you and yours remain safe and well. It feels strange to talk about any silver lining in this trying time, but for gaming and for Super League we continue to see an acceleration of our growth strategy. And it's not just because everyone is stuck at home, it is in a temporary effect but it's been an accelerant for sure. It is because as we've discussed gaming is now mainstream. Bigger than TV and three times larger than the global film box office and that was before COVID. Existing gamers are playing more, new gamers are entering the market and gamers who haven't played in a while have been coming back to gaming. NPD, the marketing and research firm that tracks gaming said in a study published a few weeks back that three out of every four people in the U.S. play video games and that figure has grown by over 30 million since 2018. So let's dig into 2Q. We are pleased to show strong revenue growth in our second quarter results especially considering the ongoing caution that many advertisers are showing in the midst of the pandemic, that itself is worth a pause. While so many companies have taken an obvious hit in revenues in 2Q, ours has improved. And as we continue to build our sales capabilities, we are controlling our operating cost and just as important the input metrics that indicate the overall health and engagement of our business continue to surge. As we mentioned on our last conference call and as we…

Thank you, Ann. Good afternoon, everyone, and thank you for joining us today. To summarize, highlights for the second quarter of 2020 included an increase in total revenues of 45%, reflecting a significant increase in advertising and content sales revenues relative to the comparable prior-year quarter, partially offset by a slight decrease in traditional sponsorship revenues, reflecting the continued impact of COVID-19 on brands and sponsors. Our cost of revenue was relatively flat compared to the prior-year quarter despite a 45% increase in revenues, resulting in average margins of 64% in the second quarter of 2020 compared to 49% in the prior year quarter as we lean more into our digital experiences and offers. Our operating expenses were lower on a GAAP basis leading to a lower GAAP operating loss when compared to the prior year quarter, partially offset by an increase in sales and marketing and platform infrastructure costs as we continue to invest in the monetization of our ad inventory and in our technology platform growth. During the second quarter, we continue to be focused on monetization and cost reductions where possible. Looking closer from a revenue perspective as summarized in our earnings release filed earlier today, second quarter 2020 revenues increased 45% to $324,000 compared to $223,000 for the second quarter of 2019. The increase was primarily due to a significant increase in advertising and content sales revenue relative to the prior year quarter reflecting the impact of the build-out of our direct sales force earlier this year and our continued focus on accelerating the monetization of our growing advertising inventory and surge in engagement. This overall increase has offset in part by a slight decrease in traditional sponsorship revenue undoubtedly reflecting the continued impact of the slowdown in sponsorship activities by brands and advertisers felt across…

Thank you, Clayton. I'd like to turn now to how we see our company evolving, partly in response to the sudden changes caused by the pandemic and partly as we expand our capabilities and accelerate our growth. At its core Super League is differentiated by our mass participation fully remote content production and broadcast technology and we happen to have a focus on esports and have proven even if early days that we can attract brand partners, advertisers and the players and viewers themselves to this platform and that our community and the derivative content created is of value to a wide group of stakeholders. Two material opportunities are now emerging. The first is facilitating division we launched with, a consumer platform that creates a large diverse community of gamers along with a naturally flowing user generated content network driven by gamers for gamers. We will move the superleague.com experience to model what we have learned so well through our Minehut and Framerate properties that offer 24/7 gaming, highlights and collaboration tools for the gamers. Putting the tools in the hands of everyday gamers to enjoy more around the games they love to challenge and share more with each other and get celebrated for what they love by their community. The second material opportunity is how we can take our differentiated technology with further prioritization and turn it into an end to end platform for use by others, a compelling B2B marketplace that can speak to a wider range of content production and broadcast applications. As some of you may recall we spoke during the IPO about the longer term potential of the platform beyond esports. But we didn't imagine that we would pull that into our reality and in the year 2020 a small silver lining as I said at the start, but one with significant upside. And we have very active strategic partner - partnership discussions happening both for their commercial reach and their investment dollars to help us drive both the B2C and B2B opportunities to scale. We aren't playing for small stakes here and we know what we need to do right now add more sales capacity continue to adjust to the new environment we're all facing while accelerating our offerings. To reiterate what I said earlier we're busy and we know what we need to do. And now we'd love to take some of your questions. Operator?

[Operator Instructions] Your first question comes from the line of Mike Latimore from Northland Capital. Please go ahead.

This is actually Pavan Kumar on for Mike Latimore. What kind of effect do you foresee in case of a ban on TikTok on video views?

Could you repeat that again, Mike, there’s a little echo?

Okay. So, this is actually Pavan on for Mike, what kind of an effect do you foresee, it came of a ban on TikTok?

Got it.

On video views?

Got it, yes no, it's a good question because we obviously the Framerate brand in the early days was really focused on Instagram. There's absolutely no doubt that we have started to launch TikTok channels and we're seeing really strong growth there. The lion share of our Framerate views are still though happening on Instagram. So, that's still the foundation. I think what we probably undersold is how exciting the viewership and follower numbers are with Snapchat. So what that is it's a little different that's actually Snapchat hiring us in a way to take all of that user-generated content that's coming off of Framerate and through Super League TV and we're able to package in a way and sell three-minute series weekly series to Snapchat. And that revenue is a little different because they're posting it on their stories. They're able to drive much bigger inorganic volume of viewership and then what we do is we get an ad share off of those products. So, right now if I had to rank in the order of where the largest viewership is happening, it's number one Snapchat it's followed by Instagram and then TikTok would be third.

And my second question is on the subscription services. So, can you provide the number of subs during the quarter? How has been the reception [indiscernible] subscription services?

Yes so, the subscription business that we were trialing in December and January and February started out further to retail. And so, what we did as soon as it was the end of March is we halted that. The good news for us is we had a real small percent of our game play that was now starting to be physical based; more and more of our game play and activity was happening online. We were able to pivot all of the experiences we had planned, the physical experiences to turn them into purely digital. And the fact of the matter is we had higher participation rates for it. But we halted the subscription program and we really took a pivot towards direct-to-consumer monetization more in the form of these micro-transactions and marketplaces. And in many ways that was responding to investors and analysts questions. As I alluded to in the script who said, hey, while you're still thinking about how to reset subscription because we really do believe that B2C and B2B subscription is very much a part of our revenue future why can't you just start grabbing a little bit of revenue now of this super active base that you're having and that’s happening online. And so that's exactly what we did in launching in the early parts of 2Q this digital goods micro-transactions website. Which I have to say even though it's small numbers, the fact that we basically had no direct-to-consumer revenue last year and that, this quarter it represents 12% of our revenue for something that was literally a concept that didn't even exist in March. It gives us a lot of excitement for where it could go. But you will see us continuing to take another step into subscription both B2C and B2B. But we definitely put a pause on the retail specific one because we said hey if retail shutdown there's no need for us to double down on that. Let’s focus on the surge of engagement that we're having digitally.

Your next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please go ahead.

Just one follow-up on the subscription and I think you mentioned last quarter you had some key hires to help design that new digital offering of subscription. Can you talk about how it's going, what it might look like have you thought about that yet and maybe plans for re-launching - is that by year-end, is that maybe third quarter?

Yes, I mean actually I kind of joked about this a little on the side, but it's really a very honest statement. We hired a just rock star direct-to-consumer product development leader named John Boyden in late January and we handed him the alpha trial of subscription that was tethered to retail. As soon as COVID hit, we got to make his job much richer and bigger because what we were able to say is look. You now can own all of our consumer facing properties help to create a more cohesive experience, help us think about how we monetize the Minehut player to? How do we monetize. Framerate? How do we think about subscription differently so it's purely digital. And so, when I talked in the call about the steps we’re taking with Minehut monetization that is a step that John and another critical leader who runs our Minehut property trend has taken to say let’s use this opportunity to kind of monetize players right where they are. And then I've also mentioned the new experience and face of superleague.com, the new offerings that will offer 24/7 gaming and ways for players to share challenges with each other and highlights that's all the much bigger work that John has been leading to really change the level of engagement at superleague.com. And from that - that launch of that new - much more compelling set of offerings will be revenue opportunities that very likely could turn into subscription. But we actually gave him a much bigger challenge that is really can be much more transformational for the brand.

And then can you talk about the virtual production booth and how potential customers are reacting to this technology and maybe help us understand the timeframe for starting to monetize this technology?

Yes. So right now what we have is we do demos with the top content leadership, but at all the big media companies that you know and love and they're kind of amazed. They're amazed that this isn't just zoom and then cobbling together a few other things. We were ahead on this one. So we were already using advanced technologies some of them are readily available in the market for others to use. Some are things that are proprietary, but it's the way that we've stitched them together architected them together that allows them to perform as one cohesive toolkit. And the lag we're talking about are seconds they're milliseconds. So it delivers real - it's kind of a tricked out toolkit that a high end content producer can use from the comfort of their home sitting on their desktop and offer something that really has a broadcast quality like you were sitting in the Big Content studio with all of the hardware and the cameras. And so, what we've gotten is a lot of really good responses to the performance of that. The next step is what you're seeing is two things. One is that we're already being hired increasingly to use our content team. Now, these guys all sit at their homes, but they're being hired by the Gen Gs and the top GAFs to use these tools we've built and to deliver broadcasts for them and these broadcasts are being done also very affordably because we don't have all the physical labor and hardware of a typical big production. So, it's hard to make it really affordable solution to fill the content void. The next thing you're going to see is people outside of eSports hiring us to produce things for them. And that's when you…

Last question, a quick one. Can you just comment the size of your direct sales force and your plans where - what count would you like that do you think is achievable by year-end in direct sales force?

So right now we're sitting with six to seven FTEs and when I was talking earlier about all these different variables I mean we're right now - let's say right now we're saying that about 20% of our total views and impressions are monetizable meaning they have an ad product placed against them. Maybe the right sweet spot there is about 50%, at some point you don't want to be jamming advertising through the whole experience, but the top line will continue to grow the total views and impressions will begin to productize or put ad products into more and more of those total available views and impressions. So, I think that what you'll see by year-end is probably a doubling of our sales force. I think more importantly to what you'll see is that the overall shape of the company, more and more of our head count is going to be revenue-generating and revenue-focused and so I think it's the percentage of staff to that have a hand in generating revenue and focusing on the pipeline will be in line with what we think investors should be expecting from us.

Your next question comes from the line of Allen Klee from National Securities. Please go ahead.

I apologize I joined the call late. If you talked about this but within your selling advertising on your sites can you talk about the progress you've had in terms of how much of your inventory you're selling and the advertising rates you've been getting and your thoughts of maybe how it's gone through the quarter and maybe how it looks in July? Thank you.

So, I'll give you two kind of sets of data points. So, a little bit of what I talked about Allen and I'm glad to say it again because there's a lot of moving numbers there. So, right now when you look at the fact that we achieved 1 billion views through the first seven months of the year if you look at them well what does that mean in July what we did about 250 million to 300 million monthly views or impressions and you and I have talked before about well, what does that mean? How do I model that? And so if we look right now at our rate card and our ad products catalog about 20% of those 250 million to 300 million monthly views and impressions have an ad product against it with the dollar amount, with the real CPM rate against it. So that is what we're kind of now sharing with you guys is an indication of what is the capacity, what sort of revenue capacity of all these views and impressions. Now, why is it only 20% right now? Well, some of it as I was referring to earlier we want quality ad products, we're not going to just jam ad products against every view and impression or it will turn people away from our platform. So, we're being thoughtful about how we're integrating those for user experience but also because we do want to maintain that high CPM level. Now, we've talked on calls before that $15, $20 CPMs is kind of our standard for most of our quality placements. We've never had that programmatic commoditized kind of sub $1 CPM model. And so we want to preserve that too, but if you just look at 20% of 250 million to…

And then you mentioned that you cut back on your real estate and you're going to get some savings from that. Would you be able to quantify that?

So when Clayton said that we cut back 75%, what we did is we just hung on to a small little studio upstairs where we had some hardware and needed some storage space and we figured that hey if the world comes back on again we're going to stay fully remote as a company. This is our new way of being, but we might need a small space for a conference table from time to time. It is a month-to-month lease and it's very low cost. So it seemed like kind of a low risk to just kind of keep that space for now. But all in, we're looking at $350,000 plus of annual savings by getting rid of our main headquarters space and then all of the associated costs with that and including that there's no real travel T&E expense going on right now as well. The next big lever that we're going to be pulling on costs that Clayton alluded to is we are when you have surges of engagement it means that all of a sudden your infrastructure costs go up. But we've been out in front of that renegotiating with service providers to say yeah we may have doubled up the amount of activity and server space that we need out there in the cloud but then we've been using that as leverage to renegotiate those contracts and bring those costs down. So that's the next kind of chunky area of cost that we're targeting.

And I am sorry to ask this but of your three income statements could - well, segments, could you just say what the revenues were for each one of them?

You want to answer that?

Yes, sure. I think you're just asking about the breakdown for the quarter and so 88% of the total comprised our sponsorship in advertising revenues and 12% were our direct-to-consumer revenues. And then just taking a look at the breakdown of that traditional sponsorship revenue with the bulk of that is what we historically would refer to as our supplement to surface.

[Operator Instructions] Your next question comes from the line of Laura Martin from Needham & Company. Please go ahead.

Just maybe a couple questions. And one is you have this great signed backlog which represents like two full months of your third quarter and your second quarter number. Have you guys thought about doing some kind of backlog like a signed backlog so the easier model is looking forward is this is why their strategic objectives is to have the big backlogs that really effects the revenue number? That’s my first. And then my second is on advertising perishability. so my question is you have all these enormous engagements in KPIs but they’re going on monetize and they are recoverable next week because the ad units are perishable, so how do you - why not use like a sell-side platform or put some of this stuff programmatically because Trade Desk and Rubicon are doing $30 CPM units for a lot of the video kinds of units that you guys have a better demo. So, why is it better to slowly hire [indiscernible] taking the four, five and six employees while all of this advertising inventory is perishable and disappearing rather than go out to these existing platforms and actually job is to monetize advertising units like this and use those? Thanks.

So, fantastic questions, I'll take your last one first. So we have not found the programmatic people in the $30 CPM range. We found them more in the pennies on the dollar range, but I will certainly kind of heed your point because what we are doing like right now for example in Minehut is when I talk about how do you enhance those ad products, where we are starting to build video into Minehut, we are starting to build in direct links. So, there’re some things that higher spending that we’re still getting high CPMs in there just for some more basic product placements just like the $200,000 12-day deal I just mentioned, but we’re adding even more features then that can really attract us, and so we will certainly - we do some testing of programmatic in Minehut. We kind of take some of our real low-end inventory and use services here and there to test what the bounds are. We probably made about $30K in revenue doing that last month in July. So, we’ll continue to - it’s small, but what we have been trying to do to that point is just really preserved those high quality placements for direct sales because we have not found that we can get $30 CPMs for those quality placements that we’re going to really diminish that value and it's a great point that it's perishable. It's really about making sure that we don't forward that kind of a lower market rate for the future ad inventory. But I’ll certainly look into trade desk specifically and if you have any other recommendations on the side because you're right there is a lot of inventory out there not getting used and we have no problem as long as it doesn't impact the user experience and doesn't start to pull down our overall weighted CPMs, there is no reason that we can't try pushing more of that inventory out through those services. Your second question I think is a great one too because I've run a lot of sales teams and there's a lot of leading indicators of revenue and a lot of it is about your backlog it's about the health of your pipeline the size of deals how quickly are deals moving through the sales cycle. And so maybe I'll give some thought to, can we start to introduce some more information about the overall health of the pipeline which again is one more piece of data just like today trying to introduce the how much of this - that's great all of these billion views, but so what can I monetize, maybe that's another lever that we can introduce to help you guys think a little bit more about how can you start to see trajectory in our revenue forecast.

Your next question comes from the line of Bill Morison from National Securities. Please go ahead go ahead.

Just a few. First of all, if you're staying direct sales force how long is it take to get these current sales people seven of them up to a full productivity so that you would be monetizing like about a million bucks a month. How long would that take and then how long would it take for your sales force to ramp up to the same growth rate of your impressions? First question.

Yes. So I think that the team three of the six came on in the last 40 to 60 days. The good news is it's that same team that was able to bring over the line this $200,000 12K deal for 3Q. So that tells me that they are already kind of in gear and that they are getting out in front of advertisers and selling those monetizable units at a pretty premium level. I mean that's a pretty high CPM rate for that 12-day activation. So I don't think the ramp period is long. I think to your second part of the question I think the question is we will have to find that right balance of how many ad products do we want to pack into an experience. So I mentioned earlier that right now about 20% of our views and impressions are monetized while they have an ad product or unit against it. And I would - I think that most people would tell you it would be a mistake to make 100% of that monetizable that would drastically damage the user experience and would see a decline in both usage and engagement and also corresponding CPM level that we haven't really figured out. We're going to have to push into that as our audience continues to grow as our products continue to grow meaning our offerings that's going to open up more inventory more places we can add ad units and as I was saying to Laura earlier, we can upgrade the quality of those ad units, but I'd be guessing if I try to pick a number right now and say how many, what percent of our total views and impressions is the ideal percentage that we should be selling out and fully monetizing. I did mention in the call that hey, our sales team is new and ramping up and a high performing sales advertising sales team is usually at about 80% to 85% efficiency. There's no such thing as perfection and I just kind of picked a number and said we're at 25%, 30%. But I think that we probably only have two-month window to really start to see the pipeline, the conversions and the team operating maybe that next tier of efficiency that's more like 50% or more.

Good. Sounds reasonable. And then Samir Ahmed left one or for another opportunity, your CTO, does that mean you're not going to have your own ad platform or what are your plans there after you get your own direct sales force ramp?

Yes. So we're building our own ad products today into our owned and operated and even our properties on Instagram. So, we're controlling those units. We're selling against them and to Laura's earlier question, we've been testing in small ways some programmatic buys there. None of that's changed. Samir is still a strategic advisor to the company. He was able to really do a tremendous amount of work over the last year to really a true platform that has not just the functionality for the 100% virtual remote broadcast capability that's one piece. We really build out in the tech stack a lot more automation in the way that we can deploy e-sports tournaments and experiences at scale. And then the third part is the e-commerce part. It's been building in those e-commerce components into that platform as well. And so we've gotten that tech foundation in place. He has recruited a top notch of senior leaders inside the technology team. And for now all we're really doing is in some ways instead of having a unique product and a unique tech role, our founder is really holding the joint kind of title of Chief Platform Officer because that's where we are now, we now have a fully operating platform. But I'm excited that Samir very much wanted to stay in an advisory capability because when I talk about things like well what's next like the big idea of having a web-based B2B marketplace for our content production platform, those are the kinds of things that I'm going to have his additional time and mindshare on to really accelerate that a lot faster.

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.

Yes. Thanks everybody so much for listening and we do look forward to speaking with you at upcoming conferences when we report third quarter. I mean look I mean, our whole world returned upside down in 2Q. The way that the Super League teams responded, that way we were able to still grab a decent chunk of revenues to really keep the works focused and efficient, it’s not fun any of us have been living through. But I really think all in all when I think about how blurry and scary points were for everyone in the world in 2Q I look at our performance and I feel that we did a pretty darn good job. But our focus is top line growth and so you're going to continue to see us proving to you that we can take that surge of engagement and we can turn it into real dollars. Stay Safe.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.