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Edited Transcript of NTN.A earnings conference call or presentation 19-May-20 8:30pm GMT

Q1 2020 NTN Buzztime Inc Earnings Call

CARLSBAD Jun 27, 2020 (Thomson StreetEvents) -- Edited Transcript of NTN Buzztime Inc earnings conference call or presentation Tuesday, May 19, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Allen Wolff

NTN Buzztime, Inc. - Chairman & CEO

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Conference Call Participants

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* Kirsten F. Chapman

Lippert/Heilshorn & Associates, Inc. - MD and Principal

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the NTN Buzztime earnings conference call. (Operator Instructions). Please be advised today's conference is being recorded. (Operator Instructions). I would now like to hand the conference over to your host for today, Kirsten Chapman with LHA. You may begin.

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Kirsten F. Chapman, Lippert/Heilshorn & Associates, Inc. - MD and Principal [2]

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Thank you. Good afternoon, and thank you for joining us today for NTN Buzztime's First Quarter 2020 Results Conference Call and Webcast. Joining us today is CEO, Allen Wolff. Before we begin, let me remind you that during this conference call, management may make forward-looking statements about the company's plans, strategies and goals and the company's anticipated financial and other performance. Forward-looking statements, by their nature, address matters that are, to different degrees, subject to risks and uncertainties that could cause actual results to differ materially and adversely from those expressed in any forward-looking statements. Those risks and uncertainties that -- are outlined in the company's press release issued today and described in greater detail in Part 1 Item 1A, Risk factors of the company's annual report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 19, 2020, and described in other documents the company filed or files from time to time with the SEC thereafter, including in the company's current reports on Form 8-K filed with the SEC on March the 30, 2020, and on April 21, 2020. And the company's quarterly report on Form 10-Q for the quarter ended March 31, 2020, expected to be filed within the next day or 2. The forward-looking statements made today are as of the date of this call and based on current expectations. Except as required by law, the company undertakes no obligation to revise or update publicly any forward-looking statements for any reason. Now it is my pleasure to turn the call over to Allen Wolff. Please go ahead, Allen.

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Allen Wolff, NTN Buzztime, Inc. - Chairman & CEO [3]

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Thank you, Kirsten, and thank you for joining us today. I hope that everyone is safe and staying healthy during this challenging time. I would like to thank all those fighting the COVID-19 pandemic. Today, I'll share an update on our Q1 2020 results, how we are navigating through the current conditions and the impact of COVID-19 as we plan for the future. If you recall, we started 2020 focused on growing our business in an efficient manner. With the onset of COVID-19, the abrupt and substantial impact it had on the restaurant and bar industry, and therefore, on our business, we turned our focus to maintaining operations and implemented measures to further reduce costs. Today, we have 17 employees, of which, 15 have shifted to work from home and 2 gun our warehouse in the Midwest. I'd like to give a special thank you to these individuals for digging in as we navigate the challenges of 2020. I'm proud of the entire team, whose communication, commitment and execution has been fluid and seamless. First, I'll review our response to COVID-19, including prioritizing higher margin solutions and introducing out-of-venue gameplay.

I am pleased Buzztime games continue to drive engagement and play at our open venues. However, due to government shelter in place directives across the country and orders requiring the shutdown of bars, of on-site dining at restaurants and of general retail outlets about 70% of our approximate 1,400 paid sites temporarily suspended their subscriptions to our service. Therefore, our revenue has been significantly impacted since mid-March. We believe subscription suspensions peaked in late April. We are encouraged that some states started easing and lifting restrictions on restaurant and bars in early May. And the number -- a small number of our customers have proactively reinstated their billing as Buzztime is a key part of their venue offering. In addition, for those venues in states that have eased or lifted restrictions on restaurant and bars, we are beginning to end their temporary billing suspensions.

That said, we are uncertain when or if our customers will reopen or if they do, if they will continue to subscribe to our service. Thus, we are unable to forecast revenue streams with any degree of certainty because the full extent to which the COVID-19 pandemic will impact our venues and therefore, our business depends on future developments that are highly uncertain and cannot be predicted at this time. As a point of reference, we estimate if we are able to retain 70% of our venues, we could generate approximately $6 million in annualized subscription and related advertising revenue. Due to our contracted team size, we are working creatively to prioritize our development and network engagement. In development, right before COVID-19, we released an in-venue on-screen shorter game experience with Buzztime Trivia Mini Games. A 5-minute gameplay with 2.5 minutes of ad space. This version augments our longer game option. We intentionally utilized the second channel to enable segmentation for audiences attracted to the shorter engagement horizon and to explore more customization options for the future. Opportunities include additional branded experiences, competitions and pricing as well as features to inspire in-venue challenges that encourage invites and sharing.

When the effects of the pandemic began to adversely impact our business, we also took immediate action to engage our players through expanded connectivity via our mobile app to offer out-of-venue gaming. This quick transition was fruitful. We experienced an immediate spike in daily active users. More specifically, mobile gameplay from March to April is up over 100%. With this expanded connectivity radius, our daily active user engagement has increased more than 3x. While we will continue to explore out-of-venue opportunities, as businesses reopen and restrictions are lifted or eased, our primary focus will be enabling sites to drive customers in play into venues as they open for business. Although our advertising revenue tapered off at the end of Q1, we had 2.5 months of solid performance at the beginning of the year. We met our expectation to more than double our Q4 2019 programmatic advertising revenue of $80,000, as we recorded over $160,000 in programmatic advertising revenue in Q1 2020. This is a testament to the efficacy of the ad exchange and the strategy to complement subscription revenue with programmatic digital out-of-home advertising. We anticipate bringing the ad network back online in the upcoming weeks as our venues reopen for business. With regards to our hardware business, we anticipate delivering another shipment of tablets to our correctional facility partner in the upcoming months.

Given the state of the economy as a result of the pandemic, the lumpiness of tablet orders and the limited bandwidth our contracted team has to focus on this business, we believe the short-term opportunity to build the hardware business is limited. For example, Spendgo, a party to which we have sold tablets in the past, anticipates orders previously planned for 2020 being pushed into 2021. Therefore, we are exploring creative ways to monetize our inventory and the assets related to the hardware business. In addition to the impact that COVID-19 had on our 2020 first quarter results, our results were also impacted by lower site count during the quarter compared to the prior year and by the sale of our live events business in January 2020. Our Q1 2020 revenues were $2.4 million, compared to $4.8 million in Q1 2019. We reduced SG&A expense to $3.1 million in Q1 2020 from $3.5 million in Q1 2019. For Q1 2020, including noncash impairments of $800,000 for capitalized software and goodwill related to our Canadian business, net loss attributable to common shareholders was $1.2 million or $0.42 per share. This compares to a net loss attributable to common shareholders of $313,000 or $0.11 per share in Q1 2019. Unrestricted cash was $2.2 million at March 31, 2020 compared to $3.2 million at December 31, 2019. Subsequent to quarter end, in April, we received a $1.6 million loan through the CARES Act Paycheck Protection Program. The goal of the program is to maintain jobs in the small business sector, and we are using our loan proceeds for the allowable related expenses.

In our 2019 10-K, we included a statement regarding a substantial doubt about our ability to continue as a going concern through March 19, 2021. As a result of the impact of the COVID-19 pandemic on our business and taking into account our current financial condition, we believe we will have sufficient cash resources to pay forecasted cash outlays through October 2020, assuming we are able to successfully manage our working capital deficit by managing the timing of payment to our vendors, other third parties and the obligations to our lender. Additionally, we submitted our plan to regain compliance with stockholders' equity listing standard to the NYSE in late April. Finally, as we know the ability to be a stand-alone publicly traded company is extremely challenging at our size and in this environment, we are evaluating opportunities to monetize our assets and exploring all options.

In conclusion, 2020 will be a challenging year for many industries and businesses, including us and our venue partners in the restaurant and bar industry. In that regard, the benefits of our platform become more critical to our customers, influencing dining choice and increasing dwell time, thereby enhancing the guest experience. So we look forward to supporting our customers with Trivia experiences as they reopen for business. Thank you for joining us today. Please stay safe, and I look forward to connecting with each of you directly in the upcoming weeks.

Operator, you may conclude the call.

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Operator [4]

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Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.