Q2 2020 Chicken Soup for The Soul Entertainment Inc Earnings Call
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[music].
Ladies and gentlemen, thank you for standing by and welcome to the chicken soup for the sole entertainment second quarter 2020 earnings call.
At this time all participants are in listen only mode. After the speakers presentation there'll be a question answer session to ask a question at that time, we'll need to press star one or your telephone.
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I'd now like to hand, the conference over to your Speaker today, Jeff What secret. Thank you Maam. Please go ahead Sir.
Thank you and welcome with me on the call today are William J., Rihanna, Chairman and Chief Executive Officer, and Chris Mitchell Chief Financial Officer.
To review the results of the 2022nd quarter is one was provided business update.
During this discussion there will be a moderate accumulate session up into the participants on the call.
During this call management will make forward looking statements forward looking statements include but are not limited to statements regarding expectations intentions and strategies regarding the future.
Included in these risks are forward looking statements based on management's current expectations and assumptions and are subject to known and unknown risks uncertainties and other factors that could cause actual results to differ materially from projected results.
Given these uncertainties listeners are cautioned not to place undue reliance on any forward looking statements contained in this conference call.
Please refer to the cautionary taxed regarding forward looking statements contained in the earnings release, which also applies to the confidence is call.
Additional risk disclosures can be town and the company's filings with Securities Exchange Commission.
As a reminder, on May 14, 2019 chicken soup for the social Entertainment created a subsidiary with Sony Pictures television watching Crackle plus.
On today's call management will make comments on certain GAAP based and non GAPP pro forma financial information of the combined company that includes crackles financial results for the relevant periods. Prior to the closing date is it the acquisition occurred on January one 2018.
Non-GAAP financial measure of the company uses is adjusted EBITDA.
Management believes that adjusted EBITDA provides useful information and that it excludes amounts that are not indicative of the company's core operating results and ongoing operations and provides a more consistent basis for comparison between periods.
The earnings release contains a reconciliation of adjusted EBITDA to net income or loss, which has the most directly comparable GAAP measure.
For further information regarding the company's historical financial performance, we refer you to our filings with the FCC, including our quarterly report on form 10-Q for the quarter ended June 30, 2020, which was filed today.
Now I'd like turn the call over 2 million <unk>, Chairman and CEO No. Please go ahead.
Thanks, Jeff Hello, everybody and thank you for joining us.
Despite the very difficult times were all living and we actually had a good very good quarter and we are seeing growing momentum as we.
Moving to the second half of the year.
Our results met or exceeded expectations with net revenue of 13.5 million and adjusted EBITDA of 2.7 million.
In fact for the six months ended June Thirtyth, our adjusted EBITDA is up over 10 times.
Compared to last year.
I'll dive deeper into the drivers of our performance at a minute.
But I'd like to start with a high level perspective.
Q2 marked the one year anniversary of the Crackle plus joint venture.
Well no ambitious endeavor ever goes exactly according to plan.
Our experience with Crackle plus has been pretty close to that.
Over the past 12 months, we've been executing on a deliberate strategy to position the company as a differentiated leader and they gave iden network space.
With a competitively advantaged business model.
The first two pieces of that strategy underpinned the results were reporting today.
And the next three pieces are just getting underway.
Our first step after forming the JV with Sony was to consolidate a large in a highly unprofitable expense structure.
Once we had the operations under control our second step was to establish a low risk.
Cost <unk> low cost programming strategy focused on high margin originals, and exclusives that we produce through partnerships or acquire through screen media.
Today's results reflect the success of the actions we've executed over the past year.
Q2, we generated an average of more than 38 million video streams per month on crackle in popcorn flex.
And behind that Stat is an important trend.
Original and exclusive content comprised over 17.5% of the total streaming hours during the quarter.
Once again.
And this time from last quarter up from 15% and up from zero a year ago.
Performance was driven by continuing demand for hits, including going from broke which was released last fall and was recently greenlit for season too.
And on point a series released earlier this year.
Weve rapidly establish crackled plus as the leading Avon platform when it comes to original an exclusive programming.
And we have grown our audience approximately 40% since we introduced such programming in October of 2019.
All of this translated into 6.6 million of gross revenue for online networks in Q2.
Were 5.4 million net of the elimination of 1.2 million of intercompany revenue that we pay to our distribution in production business.
To provide you with a bit more color online networks revenue reflected the weaker advertising environment in April and May.
Which began to strengthen strengthened towards the end of the quarter.
As weather improved and less people were streaming viewership trends fluctuated in Q2.
But recent trends indicate that they are returning to above pre pre pandemic levels.
I'll also remind you if you're comparing online network revenues to prior periods. They are impacted not only by the recent AD environment, but also by the fact that crackle received approximately 6 million a very low margin Playstation Vue revenue every quarter.
Tell Playstation Vue with shutdown in January of this year.
Distribution and production revenue was eight and a half million, reflecting that business is growing rev share from the crime content airing on crackle.
As well as strong demand for T. Vod content in a current television environment largely devoid of fresh entertainment.
Distribution in production revenue was up over 65% compared to our first quarter.
And up nearly four times the same period a year ago.
Popular originals during the quarter included Robert the Bruce and blood and money.
Looking ahead, we believe we will continue benefiting from the strong T. Vod environment.
Just after the quarter's end on July 3rd we released the outpost.
A new exclusive movie distributed by Us.
On T. about another and in other media.
Through our deal with millennial media.
I'm excited to note that the outpost was the number one movie in America for much of the month of July.
It will be a big contributor to Q3 results.
Is not reflected in today's report.
And the long tail effect of this release will surely benefit our online networks business as the movie makes its way to crackle, where we will see higher margin flow through.
Given the current strengthened T. Vod.
We may decide to move up the release of certain other titles such as our Willie's Wonderland title and action horror film starring Nicholas Cage.
And the momentum is set to continue for our distribution and production business.
Earlier this month art, our other production company Landmark studio group announced it would be partnering with district 33 to develop in produce a new drama series Shadows in the Vineyard with award winning actors no Wiley and judiciously.
Our new other new landmark programming in the pipeline includes flagrant created by and starring Michael Rapaport. The operative starring Craig Teen Allison Safe Haven Executive produced by James Seal and brand by brand and directed by Brad Turner and trigger point. The first of a series of new action films, we plan to release.
Yes.
Although all studios brought production to a complete standstill earlier. This year, we are beginning to see activity again, it's as soon as some U.S. productions are beginning to open up in a bubble environment and some are being moved to places such as Canada, New Zealand and Australia.
With production activities beginning to restart across the industry landmark now expects to begin production on up to five movies and television series in the third and fourth quarters, including Safe Hagens Haven and trigger point.
And plans to deliver two of those five titles this year.
Additionally, our chicken soup for the sole unscripted business has three new series set to begin production by year end.
Unlike a number of networks and the current environment Crackle plus is fully programs with original and exclusive content through early 2021, including titles such as portals Grand Island more.
In fact at the recent new front presentations to the advertising community.
We announced up to 200 hours of new and original Ics and exclusive programming for Crackle plus.
This programming includes show starring Nicholas Cage Demi Moore.
Marriage, or Angus Smith and more.
In addition, our originals and exclusives deliver higher margin. Both went first aired and over their lifetime due to our ownership of all or a portion of the content.
And advertisers are asking to be associated with original and exclusive content on crackle due to the attractive demos and unique programming and because of that we've seen success monetizing some of this programming at higher rates.
Our AD booking trends in the early part of the second half are improving and we're seeing and we're also starting to see political dollars coming in.
As a new friends, we also announced two new advertising offerings, including Freeview.
Which allows the customer to engage with an interactive campaign in exchange for no ads for the rest of an episode.
We're seeing good early interest and demand for this offering.
So with our business model gaining street steam this brings me back to the deliberate strategy for Crackle talks at our next areas of focus.
With the cost structure aligned and the programming strategy in place. The next step is to further invest in our technology platform to enable us to offer audiences and advertisers and even better experience.
In fact, a key piece of ground work was late in Q2, when we purchased from Sony The near complete next generation Tech platform. They had been developing for streaming content.
Under our ownership will be accelerating completion of this integration of our combined platform with plans to deploy it in 2021.
The new platform will provide increased delivery speeds increased business intelligence significant lower significantly lower operating costs and it will allow us to fully control our technology.
Over the coming quarters, you'll also see us focus on expanding distribution and marketing of our original any exclusive content in our networks to further grow our audience.
On the former last month, we announced a major distribution expansion for crackle, plus adding fumo plex, an extended to our roster of distribution partners.
Last night, we announced silo as an additional distribution partner and we certainly expect to add others in the near future.
These deals will increase accessibility of our evolve networks from the 25 services and devices we are on today.
And set us up to launch the first crackle and popular inflicts linear channels.
Finally on the marketing front, we will be increasing our efforts to drive more viewers to our original and exclusive content through a four pronged campaign.
The first product is the distribution expansion, which I just discussed.
In addition to food Bowflex extended and now Fila, we expect to add at least a half a dozen more of these relationships by the end of the year.
For context on how this impacts viewership.
With each new district plate distribution platform addition, we typically see between 200 and 500000, new monthly active visitors.
Second we have a broad based in impact from our recently launched promotional PR campaign, which is strengthening our visibility.
In weekly what to watch features and better highlighting our steady drumbeat of AD supported new in original content.
We also just began a meaningfully targeted marketing campaign that pays for itself.
By utilizing our growing user base to take on larger add add deals.
Lastly, we've had great success in the past driving viewership to original content like going from broke through our social media presence and we are now doubling down on that strategy with social being a key part of promotion for every original and exclusive title.
These marketing efforts are consistent with our low cost business model and we believe that will help energize and drive viewership as we continue to grow.
One last item before wrapping up and turning the Mike over to Chris.
During the last quarter, you saw us take steps to further improve our balance sheet and financial flexibility to move on the opportunities ahead.
Our recent bond sale enabled us to replace our bank debt improves our ability and flexibility to move quickly in the fast moving marketplace.
We've also recently sold 5 billion of unregistered common stock in a private placement at a price slightly above the market to our financial partner in landmark.
Further increasing our cash resources and strengthening our relationship with this very important partner.
Wrapping up we're entering the second half of 2020 with a bright outlook for both crackle plus and our distribution in production business.
Assuming there are no significant disruptions to the AD spending recovery.
And to the resumption of production activity. We believe we are poised to deliver a significantly better second half of 2020.
Compared to the first half with strength continuing into 2021.
Growth will be driven by our strong programming lineup rapid growth growth and distribution in production and the anticipated benefits of our marketing program for Crackle plus.
We have a clear execution plant pass and building our Avon networks and are embarking on the final steps in that path.
Accelerating development of our next Gen technology and aggressively growing our audience through new distribution relationships and expanded marketing.
Overall, we see increasing opportunities to build our business both domestically and internationally.
We look forward to keeping you posted on our progress.
Over to Chris.
Thank you Bill.
On today's call I will focus on a review of our financial results and balance sheet.
Then turn to some recent financial developments and updates.
We reported gross revenue of 13.9 million in the second quarter compared to 12.2 million and a year ago period.
An increase of 12%.
Results reflected solid performance across our two segments.
Highlighted by strong growth in distribution and production.
Online networks for Crackle plus.
Generated 6.6 million in gross revenue in Q2 2020.
Paired 10 million in a year ago period.
The Q2 year over year comparison reflects a couple of factors.
First you may recall, the cracker received approximately 6 million in gross quarterly revenue from Sony's Playstation Vue service.
Which was shutdown in January of this year.
Harrison purposes, with our 2022nd quarter, approximately half of that total or $3 million, let's received over the portion of the 2019 second quarter, and which we consolidated crackle plus results.
Second as Bill noted 2020 gross revenue for online networks included 1.2 million in intercompany Rev share payments to our distribution and production business, which are eliminated in our consolidated net revenue.
Finally, the current 2020 period included the impact of this significant downturn in advertising industry spending due to cope with 19, particularly in April and May.
Distribution in production generated gross revenue of 8.5 million and Q2 compared to 2.2 million in the year ago period, an increase of nearly four times.
Growth reflects the benefits of the revenue share payments relating to original and exclusive content provided to crack will plus and a strong t. Dod environment.
Gross profit for the quarter ended June 32020 was 0.6 million or 4% of net revenue compared to 3.6 million or 30% of net revenue for the year ago period.
The key factor in the decline is the cobot 19 related impact on AD revenue at Crackle, plus which eliminated site, which limited our ability to cover our technology costs, which are fixed.
And as of Q2 2020 also includes certain depreciation expenses in cost of revenue related to the Sony Tech platform acquisition that Bill described.
Notably if you add back the noncash film library amortization expense.
Gross profit would have been 7.0 million for 51% of total net revenue as compared to 5.0 million or 44% of total net revenue in a year ago period.
We also anticipate a recovery and gross margin in the second half of the year based on the improving business trends Bill outlined.
Operating loss for the quarter ended June 32020 was 13 million compared to an operating loss of 3 million for the year ago period.
Without the film Library amortization expense included in cost of revenue.
And noncash amortization and depreciation expense the operating loss for the quarter ended June 32020 would've been 1.5 million.
Air to zero point $9 million for the year ago period.
Note that there was roughly a $5 billion difference in amortization of intangibles between the quarter ended June 32020, and the prior year period.
Our operating cash flow significantly improved year over year and approach breakeven.
Coming in at approximately negative 800000.
In the 2022nd quarter compared to approximately negative 6 million and the same period last year.
Adjusted EBITDA for the second quarter was 2.7 million compared to an adjusted EBITDA of 1.3 million and the same period last year.
I'd like to briefly address the 4.3 million of other income recorded in the quarter.
This reflects a true up agreement with Sony regarding certain remaining transitional expenses tied to the one year anniversary of the crackle transaction.
Which also included a one year content agreements extension.
Looking at our balance sheet and liquidity position. The company had cash cash equivalents of 4.7 million as of June 32020, compared to 6.4 million at June 32019.
Our total commercial loan principal outstanding was $13.6 million as of June 32020.
In addition, the company had an outstanding revolving credit facility and amount of 5 million as of June 32020.
We had outstanding debt of 18.6 million with no significant maturities for several years as of June Thirtyth 2020.
We recently completed a public bond offering rated triple B by Egan Jones, which resulted in net proceeds of approximately 22000 $22 million.
The company use approximately 13.3 million of the net proceeds to repay the entirety of the outstanding principal and unpaid accrued interest under our loan agreement with patron bank.
We have broad discretion with respect to use of the remaining proceeds of the offering.
Additionally, more recently, we entered into a subscription agreement with co investments our financial partner in the landmark studio group venture.
Where we agreed to issue itself 625000 unregistered shares of common stock.
In a private placement at a price of $8 per share, which represented a modest premium to the 30 day trailing average price of our common stuff.
The transaction generated gross proceeds to the company of $5 million.
As a result of these capital initiatives, our current cash balance is over $8 million as at the close of business yesterday.
Looking ahead as bill alluded to we are increasingly confident and our ability to deliver to deliver strong performance in the second half a year relative to the first half.
While we are well aware that we continue to operate in the midst of a global pandemic.
Our confidence is supported by the strong tivo outperformance of the outposts and the benefits of an improving AD spending environment.
Including a record high week of AD sales for Crackle plus in the first week in July.
Thanks for joining I'll now turn it back over to Bill.
Thanks, Chris.
So we had a strong quarter.
And I've never been more excited about where we are and what our opportunity is.
I want to thank our chicken soup to the sole team as they have really remain steadfast through this difficult period and so you all know they will be working from home for a while longer as many companies are.
So.
We'll take some questions.
Thank you and as a reminder, ladies and gentlemen to ask a question, we'll need to press star one of your telephone.
Your question. Please press the pound key piece demo, we compile the kunaev roster.
First question comes from a lot of Dan Kurnos with the benchmark company. Your line is open.
Okay.
Great. Thanks, good afternoon.
Bill I guess, I'm, just trying to sort of understand and.
The strategy, if there's a shift that there's a way to shift between the buckets. Obviously, we've been through this I think before to a degree now even adding back the.
The intercompany to online networks, maybe a little light the TV in film distribution more than offset that and granted there's a very strong demand for t. Vod and the in the market right now so.
I guess I'm trying to understand what you think kind of the with the improvements you're seeing in the marketplace ticket in two parts. What do you think they kind of the underlying growth or trajectory is for the online networks business.
And then secondarily within kind of TV fell a TV and distribution distribution.
Are there you mentioned pulling forward some titles, but just talking about kind of the opportunity to.
Push deeper into that channel given that it is very high margin and given that a lot of major studios are doing things like.
Like putting digital films on on T., but now it feels like there's a pretty good opportunity for you guys to increase partnerships there.
Okay that that was a lot of stuff Dan.
Let me try and ticket piece at a time.
The online networks piece.
Yes, absolutely impacted by the disastrous April.
That everybody had in the business when advertising pretty much dried up.
Got much better in May and it got.
Much much better in June.
As Chris said in the last almost the last line of his speech.
We had the single best week of signing up new orders for Crackled plus in the first week of July we've ever had.
So as far as we could tell.
Things are coming back pretty strongly at least for us.
In the online networks piece.
And as we look out over the rest of the year.
We're looking at meaningful growth.
We think in Q3, and then more in Q4 in that segment, even after we deduct the payments we make to ourselves.
For the.
Content provided by the distribution and production side of the house.
On the distribution and production side, we're bullish for two reasons, one we're seeing TV AD revenues really explode. The outpost was the number one movie on T. Vod for most of July.
In fact, it's still hits number one every once it will help on I tunes and a couple of the others, it's performing extremely well.
And none of that is in these numbers zero.
Not at anything you see today.
But thats not the only move we have that has that kind of potential we have five or six others coming between now and the ended the year. One we highlighted was willie's.
That one we think has the potential to be very very big and so we're trying to pull it forward for that reason.
Because there is a dearth of content in that space right now even with the studios beginning to let one or two of their ship they're bigger shows in.
They're doing it in a way that isn't entirely it really isn't competitive with what we're doing when you put a lot on Disney plus and then samanna charge $29 for it Theres a couple of a hurdles. There that you don't have to go to to buy the outpost for 999.
So we're we're really seeing great traction there and we expect that to continue.
But as importantly.
We have a plan that is also driven by production.
And that production has partnerships and you know how we do it we either sell a 100% of the cost off to sponsors or we use tax credits, where we have partnerships and we use a combination of those things to reduce risk. We have eight production is now ready to go the second half of the year.
A few of them would have gone in this quarter, if we hadnt had coding.
That is a very meaningful number quite a few of them will get done between now and ended the year and so that's going to help drive that side of the business as well.
And ultimately all that stuff will end up as exclusives and originals on crackle.
So we've got actual wind in our sales in all of those places.
Looking at the second half of the year. That's why we were so optimistic in what we said today.
We're seeing it all around us Dan.
I think that was the first half of your question. If you don't mind, giving me the second half again I'd appreciate it.
No I think thats, probably most of that I I'll just I.
I was curious since you did bring up move on on Disney plus and kind of the studios being it maybe a different price points.
I do wonder, though as you know a distributor of content. If there is a way for you guys too.
More involved with some of those partnerships.
No as as guys look to cash in on the current trends.
Yeah, I think Thats a good question and you are actually raise two different things with that question what is pricing.
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We've been charging 999, and our for our T. bad stuff, but we're going to see we're going to follow the market and raise those prices a little bit.
And the other thing about pricing is the premium pricing is lasting longer now.
As the T., but window gets extended so t., that's better than ever and it's better for venture reasons, not the least of which is the fact that there is little competition in there right now.
Other partnerships.
That's a really good question and we announced a couple of relationships last night.
One of which I'm I want to highlight with millennium, which is a phenomenal production company. You you know many of the things they've created over the years.
And they were the creators of the outpost and we have another movie coming from them called Blackbird coming I'm very soon and these are high profile movies that are particularly good in this environment for the T. Vod releases and so we are working hard to build that relationship.
Particular, and others coming so.
Yes, I agree with you.
Just a housekeeping on the comment on online networks growth, you're talking sequentially not year over year, probably for Q3 right.
Well the year over year thing, you'll have to subtract out the Playstation Vue in order to come to that number.
We're going to approach.
Where we where I think.
If the based on where we are today, we're looking like Q3 is going to be a very good quarter in online networks in Q4, even better.
There is one of the thing I didn't talk about which is really accrete I kept a critical factor we are getting political advertising now we've started writing.
Quite a few.
Political AD campaign iOS now.
I'd like to today as we were preparing for this meeting and they're both.
Just national Theres quite a bit of it thats local I think thats going to have a big impact last quarter I said I thought it might you know I predicted it would but now I can tell you it already is.
Having an impact and I think the combination of the rebound we're seeing in general and.
And the and the political advertising and it is going to service well.
Even in Q3, Dan so.
Cute Q2 is clearly an aberration.
I mean at least for the moment if the world comes to an end again, I guess it could repeat itself, but right now its.
It's aberrational as far as we can see.
Yeah political was going to be my final question Bill, but since you've already taken the floor on that one I will get back in queue and thank you for the color.
Thanks, Dan.
Thank you.
Our next question comes from the line of Thomas Forte with D.A. Davidson. Your line is now open.
Great. Thanks, So billing, Chris Hope you're doing well a statement question a follow up question. So bill for personal reasons that I think you can understand I agree we look forward to updating your AD tech.
First question then is.
I wanted to ask you, who glad you're laughing I wanted to ask you. The most common investor question I'm getting falling just the blow out successive outpost. So how does the TV AD revenue flow through your piano and then what are the different ways you monetize such popular content.
Okay. So I'll take you through the lifecycle of of the outpost.
So.
First of all the outpost is available on I would say upwards of 30 different platforms that you can either rented or or downloaded or.
And while I watch it so long as you pay streaming.
And we're seeing kind of the normal distribution of viewership across places like Amazon and I tunes and cable the which tend to be the dominant.
Places that people consume them on demand paid for video.
And.
We will see that come through in.
In the month of July and August.
And even I think probably into September at which point, we will be.
Selling Dvds.
There were huge there are very big DVD orders on.
The outpost as well.
And.
And that will probably run a month or two before you will be able to see the outpost on Netflix paid a substantial amount for that privilege.
And then when that's over it will come to crackle.
Popcorn flex and be exclusively available only on our networks.
As a result of that progression.
We will make a very large amount of money on that movie.
Over the course of the next several quarters.
[music].
Many many multiples of what we paid for it and the producer will make more money too because they the way that those deals are structured they have a share of the back ended we do so.
It will be a highly profitable exercise in all of those various.
Channels of distribution.
And most movies go through at least three of the floor, Tom So T. Vod DVD.
And quite a few go right to Avon.
Without an svod deal because as five these days is way more.
Discriminating in what they are willing to take.
They don't make with that is not their own staff.
By the way is way, where I hope we will be someday.
Where we have less library, and more and more of our own content.
But thats quite a way into the future. So it goes through that lifecycle and that is.
That is would pretty much every every acquired program goes through and even the produced programs tend to go through the same lifecycle depending on.
Who the partner SAR.
The first few productions that we have.
Lined up now.
Our mostly divided between us and a foreign partner.
US being the sole U.S. holder foreign partner controlling all foreign rights.
And a very significant amount of the budgets of each of our upcoming shows is covered by tax credits in places like Louisiana, Georgia, Canada.
And others.
And so those in those cases, we will control the domestic rights completely free and clear.
And those will probably go.
Onto our online networks very rapidly.
Quickly then they'll go through the other through the process that we take most movies through.
That help you.
It does so now for my follow up and then I'll get back into queue. So I wanted to frame. It. This way there can you talked about this but I want to frame. It. This way so on its earnings call Roque, who suggested TV advertising spending may not recover until 2021. So can you provide your thoughts on TV advertising spending market over that timeframe and what are the implicate.
Since for chicken soup for the soul.
Well based on what we're seeing the TV advertising market at least that we have as rebounded.
So.
I can't say from our own personal experience that we're seeing what they just said.
We are.
I mean, we America you all May remember that we came out of Q1.
Virtually sold out.
And the way, it's looking right now.
Q3 looks like it could have as it could be similarly.
Positioned to Q1 and Q4.
It would be.
[music].
We just raising price will be raising prices, we've taken the highest CPM deals in our history in the last month.
And we are starting to spend money aggressively on growing viewership because we know.
That we have the advertising demand for the viewers when we deliver them.
So I don't know why I'm not sure the context in which Roque, who said that about the television advertising market, Tom and I don't really know that I'm smart enough to tell you what will happen to TV in general.
But I can tell you are business has bounced back.
Wonderful heard I'll get back into queue for more follow ups. Thanks.
Thank you.
Thank you and our next question comes from a lot of Lisa Thompson with Zacks investment Research. Your line is now people.
Hi, good afternoon guys.
Lisa so.
So I didn't I I met as to what's your outlook last night from already problem.
Well I.
I want to understand a little bit about the economics, though of.
What happens when you don't have that theatrical distribution.
Do you how much do you make like putting it in theaters versus.
Hi, this is doing with Citi.
We are working.
Methodology.
So for us Lisa the absence of a theatrical option is actually a big advantage.
Because by and large.
We are happy when in a theatrical release, we breakeven.
Based on the costs.
And take advantage of the promotion and publicity to drive sales in the ancillary markets.
In this in this situation that we're in now where the T. Vod providers can't really expect that.
Because there are no theaters.
Very few.
We have the ability to go straight to TV side without that expense.
And to market more effectively in a more targeted way are the t. lot availability.
As just less expensive.
So the returns are much higher skipping the theatrical window.
And at least for now.
The big advantage.
In the normal course of running the business, we do limited theatrical releases in order to them to have it.
To generate awareness and then follow with a t. Vod release and on DVD release.
Sometimes a at Svod release in some time and always at Avon release.
And by the way that's one of the recent produces come to US today. Just so you all understand that we can guarantee them a prominent release of their programming on a major hey, Vod network ours.
And so when we compete with other people to obtain programming today in the screen media side of our business.
We've got something that very few of our competitors.
A way to guarantee that they will that produces we'll see meaningful revenue from this window.
Which increasingly we are the only ones you can go through to get to it because of the purchase.
Of.
Pluto and to be and move to and zoom out.
You people as we might call them.
That those purchases have pretty much locked out.
Independent producers from.
Real access to meaningfully Vod revenue. So we're sitting in a very good position in terms of acquiring new programming.
And we are and we're at right now we have the advantage of not having to do the theatrical releases when when the theatrical release business comes back we'll go back to releasing limited theatrical releases using that primarily to promote.
Awareness of our movies.
And.
Business will go back to the way it was it was a good business before it will be a good business then right now it just happens to be a great business.
So how does this all teams cure like algorithm because I knew that you know in the past when you went and that 2 million on a horrible the or something.
Exactly how many people to expect that we're going to watch it because you had all this data on at all.
This all tools now what's the way things are functioning.
We will.
Pay more for certain moving.
Since you're making more.
What we could I'd, rather pay less [laughter] and make more if that's okay with all of you.
Okay. So that's the plan and take advantage of the fact that.
You can't if you're.
If you're if you go to another distributor you can't count on as broad and access to the marketplace as we can give you.
At the at least I went all the pay the same amount as the other guys and have the advantage of.
Being able to put things on our own network, ultimately and generate meaningful revenue.
So no we're not upping the amount we're paying because we think the marketplace is giving us a greater return we're sharing that return with our producers, where we're all going to make more money.
And I think we're all better off for it.
Okay, great well I'm I'm, obviously, you're not going to tell us how much the outposts has made so far so.
Well I really a lot.
It's a lot oh, good I like it.
Okay, well look forward to next quarter. Thank you that's my question.
Thanks Lisa.
Thank you and our next question comes from a lot of Joseph Best Besecker with him or your line is now.
Good afternoon guys.
And Joe how are you doing I'm doing well lots been covered.
And.
I think Tom.
I'd say from Davidson is really getting back into queue, maybe I'll still question from him.
So either from back and I can tell you that already okay. There from I can see him on there [laughter] there from did a call several weeks ago.
On the state of Eva and they did this detailed analysis.
Oh, the growth of advertisers across all the bugs.
And particularly mentioning about Amazon.
And it looked like they were taking that.
Part D var business a lot more seriously.
Than they were.
Prior.
The heat you're probably talking about.
Really gave a lot of examples in the.
Have you seen a meaningful change in.
The type of advertisers.
And does that Halo effect from some of the other move outs help you.
And then last time I did ask you about political.
Women have a follow up to that when you're done here.
You know.
I don't know Joe we are getting the biggest campaigns, we've ever gotten right now, okay, well, usually you're doing the campaign second Oh.
Im sorry, I wasn't talking about political campaign focused by that time I bet advertising campaign okay.
I'm advertisers, we are getting the biggest ones we've ever gotten okay.
And and they're at pretty there are a good cpms higher than we've seen before I don't know if that's a halo effect of other guys coming into the space. I mean, we did have a really good new front presentation. We worked very hard on it. We were on we were presented the same day as road COO and who.
And Samsung and to be so we were in good company that day, and we announced over 200 hours of original and exclusive content and we announced the two new AD units unit approaches that we.
We are pushing hard on one being this freeview.
And it where you watch one interactive and you don't have to watch anymore for the rest of the.
The show, which we consider to be really great for consumers and for advertisers higher lead higher engagement completely provable engagement and.
The consumer gets to watch less ads and we make more money I mean, that's the let's say the Holy Trinity.
Sorts growth.
And when the political.
Let's say one thing about Amazon catch up because I really if you don't mind I'd like to no no sure sure I want to filibuster for a minute Amazon is a great partner to us in many ways, it's really interesting.
Because their attitude about at least this business is that they can exist as I MDB network and also as a platform.
The Amazon fire platform and they very much so.
Support our original and exclusive content strategy so much so.
As a.
Give us marketing and promotion if we give them early access to our content. This contrasts with ROE COO, who does none of that.
And it's one of the reasons we are so.
So careful to make sure that raghu stays a smaller percentage of our overall business.
Then it would otherwise be without management.
There are two very different types of companies that can have those platforms and both of them are under attack from the smart TV guys, who are frankly, the easiest way for consumers to get to OATI and who are taking increasing market share. So we see this market spreading out in terms of distribution and having.
Many many more ways to get to the customer.
And that question about Amazon is really an interesting one because it opens of so many different different things to be for people to be aware of sorry, I took a slowing or is that a that out. Thank you and then on the political which is the question I asked on last call now you said you're definitely seeing it.
Does it matter to you.
Or can you give me some kind of split as to the breakdown of where you have in what you expect to have on national versus regional and does that matter to the if if if some of its regional and are there different is they're different margins and that type of thing.
It doesn't matter and the reason it doesn't matter is because the cpms are about the same.
Yeah.
The breakdown it so far we're getting more local them are getting national actually I think the national guys are coming later.
I mean, I think they have to have their conventions, you know and then they'll really start to do this stuff.
But the local guys are out there already and we're also getting a bunch of interesting advertising on referendums, which I find so.
Expect to see that so it's.
It's coming from all different directions, and there's quite a bit of it.
Well, congratulations I think things are starting to come together and it's fun to watch.
Thank you Joe I really appreciate your support and hope you're doing okay. Thank you.
Thank you and again, ladies and gentlemen, as remind us if you would like to ask a question. Please press star one of the telephones will join question. Please post the pound key.
Our last question comes from the line of Thomas Forte with the follow up with D.A. Davidson. Your line is open.
Okay, Great. So bill Joe did take one of my question, So I'm going to come up with another one here right. So I had two follow ups. So follow up number one why did you talk about the ability for anybody to exploit the Facebook boycott Andorra track traditional social networking advertisers to Ada Hey, Vod.
Our data suggests the advertisers that are reported to be boycotting Facebook our advertising on EBIT for the first time and in some instances those there were already using hey, Vod are putting more AD impressions on evolve. So I have one follow up after that one.
You know time I don't know for sure because nobody comes and says Hey, I want to advertise on your network because I want to advertise on Facebook.
It sounds like they call you up and tell you that.
But we do have some new advertisers and as I said earlier some of these campaigns have gotten bigger and it could be and maybe in your research probably proves it.
That that this is a positive for us for the time being but you know it's one of several positives you know the as we've said before political is a positive right now that's probably a positive. There's also the fact that sports or it's weird, what's going on with sports programming and viewing and.
Most of the broadcasters are complaining about the lack of ratings.
I don't know exactly what that means.
But maybe it's because of sports fans are not satisfied with these truncated seasons without people in the stands maybe it's just not sports them anymore, but we're still seeing people come to us looking for those for the audience they used to find it sports.
So there's a variety of different things that seem to be going on.
That are driving the business.
In the advertising side.
Wonderful hard so final question. So I wanted to ask another question I get from investors a lot how does the monetization for example from going from broke compare with the outposts and then in general what's the significance of having a second season for going from broke.
Okay.
That's interesting.
I guess in absolute terms, the outposts will make us more money than going from broke it.
No question about that.
But in on relative terms going from broke was the single best performing series financially in the history of Crackle.
So.
But I think that mostly has to do with the scale of the production costs and and.
The scale of the various channels in which you can exploit.
A movie like the outpost.
And and the fact that we choose to take a series like going from broke and put it.
On our own network immediately and drive meaningful return.
That there's a variety of reasons that that's that's the case.
Going for broke season, two is a great thing for a lot of reasons, we know there's a built in audience for it.
But we also have seen that whenever a series comes back to crackle for a second season. The first season comes right back to life and viewership jobs and you get a second chance to make a lot of money. So maybe in the end, we'll find out that with multiple seasons, assuming maybe there could be more than two.
We'll see the economics of going from broke equal to or greater than the outpost.
Series have always had a.
Economic life that as measured in years, when they are successful and the cumulative effect of those years.
Can be very meaningful, whereas movies generate much more money immediately.
And and then over a period of time, they tend to tail off.
So it I think the X. I don't think we're around long enough yet to give you a complete economic comparison between going from broken the outpost, but if going from broke continues to be made for season after season.
It will ultimately probably do better than the outpost it.
But that would mean it was a hit for many years.
That was very helpful. Thank you bill.
You're welcome.
Alright, thank you.
I think that was last question I want to thank you all for joining US today. We appreciate it one of the things that we've been talking about with people and it didn't come up on this call is the impact of the linear expansion that we're going to see in the next little bit of time as you out you all know our linear channels are launching.
For the first time, what we've seen.
In the linear channel businesses that you get many many more hours of viewing typically from a viewer much less engagement, but many more hours and so we're looking for an uptick from that from the rollout of our own linear networks. That's one other factor that's making us bullish about the next few months.
And of course, our marketing is likely to grow our monthly active year is quite considerably so.
We are really excited about where we are.
I'm I'm grateful, we feel that we made it through this period, which I really did not.
I really did not know what to expect in April and May.
But we have bounced back and we have been lucky enough to have a great ballast in the in the distribution in production business. So.
So things are good here and thanks for coming today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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