“We are very pleased with the results and developments we were able to achieve in 2020, not only in the fourth quarter but all year,” said Ann Hand, Chief Executive Officer of Super League Gaming. “We were able to turn challenges into opportunities and deliver very strong revenue growth. More importantly, we have transformed the company with several strategic moves, especially our proposed acquisition of Mobcrush, announced earlier today. With this acquisition we are building a formidable, highly scalable gaming-centric media and advertising platform that reaches one of the largest addressable audiences of gamers in the U.S. The revenue opportunities available through our combined advertiser solutions, as well as growth in direct gamer and content monetization, are tremendous. Super League ended 2020 with powerful financial and operating momentum, and we have built on that momentum so far in 2021. We expect 2021 to be a break-out year as we capitalize on our position in the dynamic world of competitive video gaming.”
Fourth Quarter 2020 Financial Results Q4 2020 revenue increased 197% to $779,000, compared to $262,000 in the comparable prior year quarter. Advertising and content related revenues, which includes brand sponsorships and customized brand partner programs, traditional advertising and third-party content licensing, comprised approximately 92% of revenues for the fourth quarter of 2020, as compared to 97% for the comparable prior year quarter, and increased 181% compared to the prior year quarter. The increase was primarily driven by the growth in advertising revenues on our owned and operated digital channels, reflecting the significant increase in our advertising inventory during 2020, and a significant increase in third-party content sales of our proprietary and user-generated content. Direct-to-consumer revenues comprised approximately 8% of revenues for the fourth quarter of 2020, as compared to 3% for the comparable prior year quarter, and increased significantly compared to the prior year quarter, continuing our trend of increasing direct-to-consumer monetization during fiscal year 2020. Q4 2020 cost of revenue increased 121% to $296,000 compared to $134,000 in the comparable prior year quarter, compared to the 197% increase in revenues for the same quarterly periods, due primarily to the increase in related revenues. As a percent of revenue, gross profit in the fourth quarter of 2020 rose 1300 basis points to 62% compared to 49% in the prior year quarter. The less than proportionate increase in cost of revenue was driven by the significant increase in lower cost advertising and third-party content sales revenues in the fourth quarter of 2020 compared to the prior year quarter. Total operating expense in Q4 2020 were $5.2 million compared to $4.8 million in the comparable prior year quarter. The increase was primarily due to increased selling, marketing and advertising expense in support of the increased revenue, as well as an increase in technology platform infrastructure costs, partially offset by a decrease in noncash stock compensation expense. Non-cash stock compensation charges for the fourth quarter of 2020 and 2019 totaled $434,000 and $951,000, respectively. On a GAAP-basis, which includes the impact of noncash charges, net loss in Q4 2020 was $4.7 million or $(0.31) per share, relatively flat compared to a net loss of $4.7 million or $(0.55) per share in the comparable prior year quarter. The weighted average diluted share count for the fourth quarter of 2020 was 15.5 million compared to 8.6 million for the fourth quarter of 2019. Proforma net loss for Q4 2020, which excludes the impact of noncash charges, was $4.3 million compared to $3.7 million in the comparable prior year quarter. As noted above, the change was primarily due to an increase in sales, marketing and advertising expense, as well as higher technology platform infrastructure costs, partially offset by the increase in higher margin advertising and third-party content sales revenue in the fourth quarter of 2020. Full Year 2020 Financial Results Revenue for the full year 2020 increased 90% to $2,064,000, compared to $1,084,000 for the full year 2019. Advertising and content related revenues, which includes brand sponsorships and customized brand partner programs, traditional advertising and third-party content licensing, comprised approximately 92% of revenues for the full year 2020, as compared to 97% for the full year 2019, and increased 81% year over year. The increase was primarily due to an increase in advertising revenues, driven in part by advertising programs with Netflix and Disney+, as well as a significant increase in third-party content sales of our proprietary and user generated content driven primarily by our sales activities with Snap, Inc. Direct to consumer revenues, primarily comprised of revenues generated from our Minehut digital property, increased over 300% year over year, reflecting our continued focus on the acceleration of our direct to consumer monetization. Full year 2020 cost of revenue increased 67% to $856,000 compared to $513,000 for the full year 2019, compared to the 90% increase in revenues for the same periods, due primarily to the increase in related revenues. As a percent of revenue, full year gross profit in 2020 rose 600 basis points to 59% compared to 53% in 2019. The less than proportionate increase in cost of revenue was driven by a significant increase in lower cost advertising and third-party content sales revenues in fiscal year 2020. In addition, as a result of the various shelter in place orders in connection with the global response to the COVID-19 pandemic, we reduced our physical/in-person gaming activities during fiscal year 2020, which typically have higher direct cost profiles, which to a lesser extent, also contributed to the less than proportionate increase in cost of revenue for the periods presented. Total operating expense for the full year 2020 decreased to $20.0 million compared to $21.3 million for the full year 2019. The reduction was primarily due to a decrease in noncash stock compensation expense, which totaled $2.0 million in 2020, compared to $6.2 million in 2019. Excluding stock-based compensation expense, total operating expense in 2020 was $17.9 million, up from $15.1 million in 2019. The change reflects an increase of 18% in selling, marketing and advertising expense in connection with the investment in our direct sales force, a 34% increase in technology and platform infrastructure costs due primarily to the surge in engagement across our digital properties in 2020, and a 9% increase in general and administrative expense due to an increase in corporate insurance costs and a full year of public company related costs. On a GAAP-basis, net loss for the full year 2020 was $18.7 million or $(1.64) per share, compared to a net loss of $30.7 million or $(3.89) per share for the full year 2019. In addition to the non-cash compensation charges described above, net loss for the full year 2019 included noncash interest expense related to convertible debt totaling $9.9 million. All principal and interest related to the Company’s convertible notes was automatically converted to equity upon the close of the Company’s IPO in the first quarter of 2019. The weighted average diluted share count for the full year 2020 was 11.4 million, compared to 7.9 million for the full year 2019. Proforma net loss for the full year 2020 was $16.3 million compared to $14.5 million for the full year 2019. As noted above, the change was primarily due to higher operating costs which more than offset the increase in gross profit. At December 31, 2020, the Company’s cash position totaled $7.9 million, compared to $8.4 million at December 31, 2019. Source: Super League Gaming
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