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Good morning, and welcome to the Playmaker Capital, Inc.'s Q2 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.I would now like to turn the conference over to Playmaker Chief Operating Officer, Jake Cassaday. Please go ahead.
Thank you, and good morning, everyone. As mentioned, I am Jake Cassaday and I am joined today by our Chief Executive Officer, Jordan Gnat, and our Chief Financial Officer, Mike Cooke.Before we begin, I would like to remind you that today's call will include estimates and other forward-looking information from which our actual results could differ. Please review the cautionary language in yesterday's press release regarding various factors, assumptions and risks that could cause our actual results to differ. Furthermore, during this call, we will refer to certain non-IFRS measures. These measures do not have any standardized meaning under IFRS and our approach in calculating these measures may differ from that of other issuers and so these measures may not be directly comparable.Please see yesterday's press release for more information about these measures. As a reminder, this conference call is being recorded and a replay will be available on Playmaker's website. An updated investor overview presentation is also now available on the website, inclusive of Q2 details discussed here.At this time, I would like to introduce Jordan Gnat, Chief Executive Officer of Playmaker.
Thank you, Jake. Good morning, everyone, and welcome to our second quarter 2023 earnings call. Q2 was a period of focused execution against our 5 strategic priorities for 2023, all aimed at better integrating our complementary businesses to drive organic revenue growth and realized efficiencies. During the quarter, our ecosystem of media and affiliate businesses refined internal processes, expanded syndication networks, enhanced video production and monetization capabilities and extended strategic partnerships with Tier 1 advertisers and sports betting operators.Entering the sports-heavy Q3 and Q4 periods, Playmaker is better positioned than ever to drive value for fans, customers and shareholders as the #4 ranked digital sports media group across the Americas and the #1 regional digital sports media company in Latin America.Subsequent to the quarter end, we acquired leading Quebec Sports Media Group, La Poche Bleue, to round out our Canadian-wide reach. La Poche Bleue plants a flag in the Quebec market bolsters our video podcast portfolio and strengthens our direct-to-consumer segment in advance of the upcoming NHL season. Additionally, Founders, Maxim Lapierre and Guillaume Latendresse, and Managing Director, Louis-Philippe Dorais, are tremendous additions to our senior leadership team. Playmaker experienced strong engagement metrics across its owned and operated media brands in Q2 2023.During the quarter, Playmaker's web properties generated more than 653 million sessions and its video podcast received over 5 million streams. Here are some additional highlights worth noting. The nation network continued to grow engagement with its line-up of video podcast and achieved a quarterly record 5.1 million streams in Q2 2023, an increase of more than 300% over Q2 2022.In June 2023, TNN generated a monthly record 2.02 million streams, an increase of 451% over June 2022. Yardbarker attracted a monthly average of 8.9 million unique users in Q2 2023, an increase of 52% over Q2 2022. Additionally, Yardbarker generated a monthly average of 19 million web sessions during Q2 2023, an increase of 51% year-over-year. Futbol Sites maintained a strong leadership position in the Brazilian market with core properties Bolavip, Brazil, Fanaticos Por Futebol and Antenados no Futebol, generating more than 300 million sessions in the quarter and ranking 1st, 2nd and 11th, respectively, in the June Comscore rankings.Futbol Sites executed numerous direct campaigns with leading iGaming and sports betting operators in Brazil during the quarter. Additionally, Futbol Sites activated campaigns with global advertisers across branded content articles, podcasts and video integrations and widgets. Futbol Sites' Q2 2023 direct sales revenue increased by 53% over Q2 2022, bolstered by, an 88% year-over-year growth of the sports betting customer segment.We continue to focus on the shift in sales from programmatic to direct. And in Q2, we executed multiple long-term direct sales and partnership initiatives. Direct sales accounted for 54% of Playmaker's core media advertising sales for the period, an increase of 25% over Q2 2022. Direct sales and affiliate are growing segments of Playmaker's revenue generation. And the company continues to expand these revenue streams to maximize higher-margin monetization opportunities. Our team continue to execute at the highest level and are gearing up for the high seasons of the North American sports calendar.I'll turn the call over to Mike to discuss our financial results in more detail and then come back to wrap up the call.
Thanks, Jordan. Good morning, everyone, and thank you for joining us today. Last night, we reported our results for the quarter ended June 30, 2023. As a reminder, all of our financial results are presented in U.S. dollars. On a pro forma basis, which includes the results of acquisitions through June 30 and excludes the results of businesses we've disposed of, revenue was $12.6 million in Q2 2023 compared to $8.3 million in Q2 2022, an increase of $4.3 million or 53%. We use adjusted EBITDA as a key measure of earnings. Adjusted EBITDA reflects our earnings before interest, taxes, depreciation, amortization, stock-based compensation, acquisition-related costs and other onetime costs. Excluding the results of our corporate segment, our operating segments produced pro forma adjusted EBITDA of $3.3 million in Q2 2023 compared to $2.6 million in Q2 2022, an increase of $700,000 or 24%. Including the results of our corporate segment, our consolidated pro forma adjusted EBITDA was $2.2 million in Q2 2023 compared to $1.6 million in Q2 2022, an increase of $600,000 or 34%.For the trailing 12 months, our pro forma revenue was $56.9 million, and our pro forma adjusted EBITDA is $15.1 million, including the cost of our corporate segment or $19.5 million, excluding the corporate segment. On an IFRS basis, we produced $12.6 million of revenue and $900,000 of operating loss in Q2 2023. In Q2 of 2022, the company produced $6.7 million of revenue and $500,000 of operating loss. It should be noted that the $900,000 of operating loss in Q2 2023 includes $2.1 million of noncash expenses related to amortization and stock-based compensation.We finished Q2 with cash of $9.7 million compared to $11.4 million at March 31. The $1.7 million decrease in our cash balance during Q2 was driven mainly by $2.6 million of positive cash flow from operating activities, offset by $4.4 million in payments made to settle contingent consideration. We finished Q2 with $10 million of available debt. And we added an additional $10 million of available credit subsequent to quarter end. We believe that available capital, combined with our cash balance and the fact that we produced positive adjusted EBITDA puts us in a strong position to continue executing on our strategy going forward.I will now turn it back over to Jordan.
Thanks, Mike. We continue to execute on our key goals for 2023 of cross-brand collaboration, integration and optimization, innovation and scale and the organic growth of Playmaker is evidence that our strategy and pace of integration deliver results. We are very excited about bringing the La Poche Bleue family into ours. And we are already seeing the synergies on the direct sales side of now having a footprint in Canada that includes the Quebec market. Our focus is now firmly shifted to the North American sports calendar that kicks off in earnest in September with the NFL. Operator, you can now go ahead and open the line for questions.
[Operator Instructions] Today's first question comes from Matthew Lee with Canaccord.
Maybe we can start on the revenue side. Your numbers were significantly better than expected and kind of bucked the usual seasonality trend in sports. Can you maybe talk to what parts of your business beat your expectations to drive that strength in the quarter?
Yes, Matt, I think the piece of our business, as we talked about in just the remarks, the TNN side of our business had an incredible quarter. We saw some strong increase, in particular, in our podcast streams, very strong results in direct campaigns and direct campaigns yield has higher revenues for same ad units that we're able to sell. Sponsorship is strong. And as well, we're continuing to see -- obviously, we continue to see the hockey segment, in particular, around Draft and Trade Deadline drive a lot of additional readers as well as listeners to our podcast, so super strong there.
Okay, great. And then, maybe you can talk about La Poche Bleue. I mean, generally, the strategy. I appreciate the strategy in the Quebec market. But do you feel like this transaction gives you the necessary assets to address that market or maybe you're perhaps looking for more?
Matt, this is Jake. So I think we're -- we've really sort of signaled to the market. And internally, we've had a focus on finding a great asset. And I think great assets to service not only Quebec, but the rest of Canada in each of the markets that we have an established footprint in. With La Poche, we feel like we've got a great head start in a key and net new market for us. It's 9 million people and really services that market in a very unique way and a relatively closed off way in some instances.So what this does is give us a really unique asset to service not just Quebec, but also allow us to run really strong national campaigns and now can stretch across each major market in Canada. And those are revenue synergies that will go both ways as well, being able to plug La Poche into the direct sales efforts that we have in the rest of English Canada as well as leverage some of the relationships that La Poche has in Quebec for the rest of our network in Canada.So I think this is the first. It's not to suggest that it's the last. But with this, we have a brand that has a lot of loyalty and affinity with fans and is relatively early in its journey and on its curve going up. So it will continue to grow and flourish within our network but we're certainly not closed off the other opportunities in the province as well.
Yes. And the other way I'd look at this is just sort of think of our playbook in the reverse. So think of Fanaticos Por Futebol. When we bought Fanaticos back in June of 2021, it was simply a Facebook page. And what we were able to do is leverage some of the strengths that we had and turned it into Somos Fanaticos the second largest website for sports in Brazil now. La Poche is very strong in podcast, super strong brand. And they've got a website that isn't necessarily top of the heap, but taking the skill set that we have in how to drive traffic to websites, SEO, leveraging a strong brand that already has a built-in community. If you take a look at the Fanaticos playbook, now take that while you're not going Facebook to web. Now, you're going to take a fan community around audio and you're going to begin to drive that traffic to web as well we'll be able to increase monetization. So this is right out of the playbook of what Playmaker's team is capable of and has proven to be capable of. So that also excited us about the future opportunity for this as we head into 2024.
The next question comes from Rob Goff with Echelon.
Very good quarter, once again outperforming. The first question is you talked to the direct sales growth. Can you talk to where you see that going within the mix and just address the yield pickup that you do see in direct versus programmatic?
Sure. Rob, this is Jake. Yes, I think we're really -- this is one of the things that we're most enthused with across sort of the overall monetization stack that we're employing across the entire network here. As stated in the materials, we saw a 25% growth of the share that direct makes up of our core media ad sales now at 54% in the quarter. And a lot of this is coming from not only the increase of direct for what we can say is existing inventory of display and video impressions across web properties and branded content opportunities in social. It's also the result of an investment in new properties and new products that allow for us to create premium inventory that can be made available and has been made available to advertisers. And Jordan just outlined the video podcast growth that we've seen. What that affords us is the ability to provide premium sponsorship opportunities, segment sponsorship opportunities.And we're doing it at both a national scale as well as a local scale. And I think that's where we're seeing a lot of the success, particularly within the nation network, is that if you're watching a show in Calgary called barnburner, you're going to see national and international sponsors like Betway. But you're also going to see local advertisers that want to reach the Calgary market and don't have destinations like local terrestrial radio to deploy those dollars anymore.So the inventory we're creating is almost -- there's a very thoughtful approach to ensure that our product road map leads to premium inventory being made available as we continue to scale our direct sales efforts. So I think in terms of where this could go? I think that continuing to show this level of growth year-over-year as a share of Direct is something that we're very happy with. I think that we want to continue to expand it. We want to continue to eat up more of our available inventory with direct.I don't have an end game in mind in terms of where that is going to land. But we're dedicated to ensure that more and more of our inventory is serving direct clients and really taking the results-oriented and conversion-oriented type mindset to working with our ad partner.
And when you look across web, podcasts, social and newsletters, how do you see yourself balancing your organic push or your inorganic push?
So I think one important consideration there is that none of those are mutually exclusive, right? I think where we're having a lot of success is that we have sort of individual ecosystems that include video, audio, social and web. So when we're selling direct campaigns, we will see an insertion order an IO with an ad partner that includes each available sort of set of inventory across the property. So it's not as if we're selling exclusively this presenting sponsor on a podcast and then cutting out everything else we do for that partner. We are selling a cohesive product that includes multiple channels. And again, I think that makes us unique that we have these, sort of enclosed ecosystems, whether it's with pool of VIP and its social presence website and burgeoning video podcast as well, but certainly within the nation network as well. So I think we'll continue to focus on creating net new premium inventory in the form of video. But the key is they sort of ride together. And we're going to continue to focus on building out each of those product streams so that we can continue to deliver more exposure, more reach across the overall ecosystem.
The next question comes from Gianluca Tucci with Haywood Securities.
Good results. Just curious, you hear like with the upcoming market opening catalysts in the U.S., Kentucky, North Carolina and others. What are you doing in advance of that to position Playmaker for as much market capture on your affiliate side as possible?
Thanks, Gianluca, it's a great question. So we work with our key betting operator partners in each of those markets. What -- and each one launches in a bit of a different way. So some markets allow for preregistration. And when they allow for preregistration, what you're able to do is get promotions from the betting operators where you can begin to get -- they can begin to get sign-ups and you can deliver them, sign-ups preopening. And then, once it opens, then it really kicks off. In the case of Kentucky, preregistration is currently not on the table. And they actually pushed back the opening for operators online until the end of September. Originally when Kentucky announced their opening, they said it would be beginning of September, which they then caveated by moving the online to the end and the land base to the beginning. So Kentucky, it's going to be more of a big bang on the start date, which is currently scheduled the 28th of September.North Carolina is queue one. Indications are that they'll allow preregistration. So that -- again, that helps in understanding sort of the size and scope of what you have coming when the actual launch takes place. So again, we work with each one of the operators to understand what their strategies are.And really what we do as an affiliate is execute on the strategies that they put forward to us, because they're the ones who ultimately are deciding what type of promotions they're going to want to have in place.
And then, on that same topic in Brazil, has there been any update there in the Senate since the last movement down there? And are affiliate discussions heating up in that market?
So I would say on the -- I'll take the second part first. We're already working with several operators now to optimize the right type of promotions that work in the Brazilian market for us. So that is something that we're working on as we talked about in previous calls about the integration between web and our current -- between Wedge and our other assets, something that we are working through as we get into Q4 and Q1 for this year and next. And in terms of the progress in Brazil, I can tell you, I've been working in Latin America and in Brazil, in particular, for 10 years now. And Brazil is 5 years away from being awesome every year. So things do take time in Brazil. Right now, the bill is working its way through what they have is called a provisional measure. It's working its way through the Senate. There's some debate around the current tax regime that is being set up.And so it will just take time as things do intend to do down there to get it finalized. But in the interim, the Brazil market for us is -- remains incredibly strong. Operators are incredibly bullish on the market and are beginning to open up their wallets even more. And that's part of evidenced by when you see the increase in Futbol Sites where we have an 88% increase in that segment, that's coming from markets like Brazil.
The next question comes from Adhir Kadve with Eight Capital.
Let me also add my congratulations on the quarter here. I wanted to ask about the Wedge integration. We're gearing up for the NFL season here, call it, I guess, in the next couple of weeks that will launch. And can you talk about how the Wedge integration is going and how it's progressing? And kind of what are your expectations for Wedge as we head into the major sports week kicking off their seasons in Q3 and Q4?
Yes. For the North American sports calendar, there's not really much change in Wedge. I mean the Wedge is already is focused on the North American business. So it's just going -- as I mentioned, working with the operators on the type of promotions and things that they want to see put out there and then Wedge just goes on and executes its strategy with operators as it does. In terms of the integration, our core focus of integrating Wedge was into some of our other assets and with a focus on Latin America. And that's something we are continuing to work through. And as we mentioned earlier, we expect to see the beginnings of those results in Q4 and Q1 next year.
And then just on podcasting revenue, it continues to grow. Can you give us a sense of how you can see those monetize or how you're seeing those monetization trends in podcasting? And how are you thinking about other this medium as you kind of move it into your other properties, specifically in Latin America. And I think you guys talked a little bit about Bolavip seeing some strength there. But any color around that would be helpful.
Yes. I think if you were to sort of read through whether it's IAB or other industry reports that are providing sort of macro data on the global ad markets. Audio podcast continues to be one of the strongest, if not the strongest growing portion of overall digital spend. We're seeing, this both from a direct perspective and being able to bring to advertisers something that's truly unique and having that one-to-one connection between an audience member and talent that has either local relevance or broader relevance.So being able to sell those segment sponsorships is truly differentiated and unique. But we are also seeing it. We partnered with a group called Acast that supports our distribution of podcasts, but also manages all the dynamic ad insertions or what you see as sort of pre-roll or mid-roll similar to what you'd see on a YouTube video, but in the audio format.And we see strength there as well. That would be more reflective of sort of programmatic buys. But it is a little bit more hand to hand in the podcast space and Acast is a great partner for us in that capacity. So we're seeing it as we continue to grow the network, we continue to increase the number of streams that we have in high-value channels like YouTube, iTunes, Spotify, et cetera. Monetization is increasing in lockstep with our streams.But also as you get to sort of critical scale, particularly in a market like Canada, where we've quickly become a leading independent voice, not just for hockey, but for sports in a shifting media landscape here, that scale commands even further premiums. And we're seeing that in certain markets as well. So it certainly will continue to be a playbook that we'll leverage in other markets. We have several video podcasts operational now and in market from a sales perspective in Mexico and Brazil and Chile as well. And we continue to use that playbook and see it as a growing segment of the overall business.
[Operator Instructions] The next question comes from Sid Dilawri with Cormark.
Just looking at your affiliate business here, obviously, performed well ahead of our expectations. Are you seeing any headwinds related to the current macroeconomic environment? We know that gambling has historically remained relatively resilient during past economic downturns. But are you seeing any challenges in converting that user into depositing customers on your partner's website just given the shrink in discretionary wallet here?
We haven't. We haven't seen anything like that to date with there being a more complicated process than seasonality. So seasonality, there are fewer betters in Q2 and Q3, which is in the North American market simply because the sports calendar is lighter. So the number of sports betters who are signing up as net new is fewer. And -- but we have no indications to believe that in -- when we head into September and into Q4 that there'll be any change in what we've seen in previous years.
And then just one last one. On the M&A pipeline here, I know you recently acquired La Poche Bleue, which obviously seems to complement your current asset portfolio. Are you seeing any other opportunities for platform acquisitions in the near term?
We've always got our eyes open. I think as we have talked about previously, the 2 areas of M&A that are important for us were net new geographies in Quebec sort of satisfies that. It was a gap we had in Canada, something we look at. So there are other geographies where we'd love to find more tuck-ins that fill gaps in them. But the big one is can we find more U.S. audience, right? Yardbarker has done an incredible job of nearly tripling its audience since we acquired it. However, the U.S. is really, really big. And similar to in Brazil, where we have 3 properties in Brazil, we have one core property in the U.S. and Brazil as an example of 200 million people. We have 2, core and 1 growing with Bolavip and Somos Fanaticos.We'd love to have a sister brand, sister asset in the U.S. akin to the size of Yardbarker, but not easy to find and certainly not easy to find in the way that we've been able to acquire businesses. We're very, very sensitive on making sure that we acquire things very well. So we continue to look and that would be -- obviously, that would be a fantastic acquisition if we could find it.
This concludes our question-and-answer session. I would now like to turn the conference back over to Jake Cassaday for closing remarks.
Thank you very much. As there are no further questions at this time, this concludes today's call. As always, we thank you for your continued interest in Playmaker and for your participation today. I hope everyone enjoys the rest of their summer. You may now disconnect. Thank you.