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Breaking Data Pumps Up Sports Ad Dollars Through AI

08/14/2017


TSX:BKD.V

Breaking Data (TSX:BKD.V) is a $50 million market cap technology company based in Toronto that uses Artificial Intelligence services including: semantic search, machine learning and natural language processing ("NLP"), to identify and optimize content of interest to readers in order to generate clicks and result in increased advertising revenue. 

It has used its platform to create an app it calls “BreakingSports.” It is available on both Apple IOS and Google Play. This app is able to track social media in a fully automated, real-time manner for significant sports information and events and distributes summarized information through real-time push notifications to consumers. It gets users all the latest news, scores, and stats for their favorite leagues, teams and players with real-time alerts. It can be customized to follow only specific teams or topics.

In order to further apply its optimization technology to generate ad dollars, Breaking Data bought Sports New Media Holdings, the owner of the GIVEMESPORT web site and associated Facebook pages in January 2017. Management believes integration with Breaking Data technology that gives its access to AI and other analysis will form the basis of new products and a new editorial approach.

GIVEMESPORT calls itself “one of the leading next generation sports publishers in the world, providing features, opinion and insight across the latest sporting news. (It) aims to deliver the best sports content to fans on Facebook, including breaking, domestic and global sports news on the big sporting topics!” It is one of the leading sports pages on Facebook with 26.2 million likes. Social media is becoming a bigger and bigger part of marketing budgets for sports sponsorship, with Facebook being the largest influencer, according to Nielson. With the increasing adoption of Facebook streaming of live events, it may become an even bigger portion of brand and sponsorship spending as it increasingly cannibalizes viewing on broadcast and cable TV. GIVEMESPORT’s content generates over 3.6 billion impressions, reaching over 138 million unique users, per month on Facebook alone. According to Alexa, 55% of its visitors are from the UK and 14% the US. GIVEMESPORT claims its traffic is up over 60% versus last year and that it is a top-30 UK site, and top-600 site globally according to Alexa by Amazon rankings. 

GIVEMESPORT is based in London and its specialty is news on the English Premier League, a soccer league, and arguably the most heavily followed league on the planet. The Premier League is an English professional league for 20 men's association soccer clubs and the country's primary soccer competition. It season runs from August to May possibly making ad revenues variable throughout the year. It kicked off its 2017 season last week. This league is the fourth most watched in the world. It is notorious for having the most extreme fan rioting, and enjoys a global cult following. It is the most-viewed soccer league worldwide and is broadcast in more than 200 territories comprising a potential TV audience of almost 5 billion. During the 2014-15 season, the Premier League was broadcasted into 730 million homes, where it reached three billion people according to the Broadcasters' Audience Research Board. In the 2014–15 season, the average Premier League game attendance exceeded 36,000 people and was second only the German Bundesliga's at 43,500 fans per game.

GIVEMESPORT also has content partnerships with the NFL and NBA. In July, it was selected to broadcast the PGA Championship live from Quail Hollow on August 10th - 13th to its UK audience on Facebook Live and on its website Givemesport.com. In May, it announced a partnership with McLaren Racing to market Worlds Fastest Gamer-- the world’s most intense and demanding competition for virtual racers. It continues to expand its content to encompass more sports, teams and events.

On July 31, 2017 Breaking Data released financials for the March 31, 2017 fiscal year results of Sports New Media Holdings, the London-based company that it owns, who in turn owns GIVEMESPORT.com and its related properties. After March 31, 2017, Sports New Media Holdings completed a reverse take-over transaction with Breaking Data, and Breaking Data concurrently issued stock for gross proceeds of $3.9 million through a private placement.

For the 2017 fiscal year, this company reported net advertising revenues of $4.2 million versus $3.7 million in 2016, up 14.7%. However as the year progressed, quarterly revenues accelerated. GIVEMESPORT grew 50% in the fourth quarter versus last year to $1.2 million. Q3 revenues of $1.2 million were up 21%from a year ago. Q2 revenues of $ 993,777 showed growth of 13%. In Q1 revenues declined -17% to $878,833 compared with the 2016 quarter. These results occurred before ownership by Breaking Data. Its technology is expected to further optimize revenues. Company management said it expected revenues to continue to grow on a quarterly basis throughout fiscal year 2018. In fiscal year 2017, 83% of the company’s revenues came from the UK and 9% from the US. This reflects the location of its advertising customers and not the location of its reader base. According to Socialbakers GIVEMESPORT Facebook fans are far more widespread as shown in the figure below.

For the year ended March 31, 2017, the Company had one customer responsible for approximately 33% (or $1.4 million) of total revenue. It had four customers representing over 10% of total accounts receivable for an aggregate of approximately 67% of total accounts receivable. 

Even more important than the 14% revenue growth for the year, was the growth in gross margin of 42% to 50% of revenues. Operating expenses grew 35% to $3.9 million creating a loss of $1.8 million for the year versus a loss of $1.3 million last year. The company funded the cash burn during this year by raising $1.4 million selling convertible debentures.  

After the March year ended, Breaking Data acquired Sports New Media Holdings specifically on April 11, 2017. Breaking Data acquired 100% of the company in exchange for: (i) the issuance of 18,779,601 common shares of Breaking Data; and (ii) the issuance of 367,036 stock options of Breaking Data in exchange for options of the Company (adjusted for the 10:1 reverse split). In addition, an aggregate of 1,250,000 Breaking Data shares and 625,000 warrants to purchase Breaking Data shares were issued on conversion of the 1,250,000 outstanding subscription receipts. Subsequent to the acquisition, Breaking Data completed a reverse split of its stock and issued one post-consolidation share for every ten pre-consolidation shares. On July 4, 2017, Breaking Data granted 3.76 million options to officers, directors, employees, and consultants of the company. These options are exercisable at CDN $1.90 and will expire on July 4, 2027 and vest over a period of thirty-six months. 

The company has not yet released results for the June 30, 2017 quarter when investors will have a clearer view of both finances and share count. Given its momentum in the past twelve months and further integration of AI technology, it will be interesting to see if revenues have continued to accelerate. 

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