Q3 2021 Cinedigm Corp Earnings Call

Thank you for your patience the conference will be beginning in approximately two minutes and again, we want to thank you for your patience.

[music].

Welcome to Sydney Die in third quarter, 'twenty and 'twenty One earnings conference call. At this time, all participants are in a listen only mode.

Western and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note.

The conference is being recorded I will now turn the conference over there Jill Calcaterra Executive Vice President. Thank you you may begin.

Good afternoon, and thank you for joining us today on our third quarter fiscal 'twenty 'twenty One earnings conference call participating in today's call are Cinedigm to chairman and Chief Executive Officer.

Note this Chris Mcgurk.

<unk> strategy officer, and President of Showtime networks, Arago P. GAAP, President Chief Operating Officer General Counsel, Gary Loffredo, and senior Vice President Finance and accounting Cheryl O'dea already before I hand, the call over to management. Please note that on this call certain information presented contains forward looking statements. These.

Circa based on management's current expectations and are subject to risks uncertainties and assumptions potential risks and uncertainties that could cause the company's business and financial results to differ materially from these forward looking statements are described in the company's periodic reports filed with the SEC from time to time all of the information discussed on this call.

Statements from today February 'twenty, 'twenty, 'twenty, one and Cinedigm does not intend and undertakes no duty to update future events or circumstances. In addition, certain financial information presented in this call represents non-GAAP financial measures and now I'd like to turn the call over to Chris Mcgurk, Chris.

Thank you.

Jill and thanks, everyone for joining us on the call today.

Let me give an update to cover some key points about our corporate strategy and business outlook, and then I'll turn things over to Eric from a more in depth review of our streaming business results and strategy.

And Gary will cover our strong fiscal third quarter financial results and.

The remarkable progress we have made over the last few months and reducing debt and strengthening our balance sheet.

Let me emphasize at the outset that we are in the strongest position we've ever been and financially.

We have significantly reduced our debt and have plenty of ammunition ammunition on our balance sheet.

To execute our growth agenda. In addition, our equity ownership composition has changed dramatically over the last six months.

We no longer have a majority shareholder is the Chinese funds, including by some capital have reduced their ownership to less than 20%.

This ownership compensate.

A recent change in resulting in increased share liquidity has given us the flexibility to more quickly and fully execute our strategic screaming roll up acquisition strategy.

And it is also already opened up cinedigm to an entirely new wave of investors who've seen very attuned to the company's unique.

Com business narrative.

And tremendous growth prospects.

With that overview as a backdrop, let me first talk about our streaming business.

Overall, despite the impacts of COVID-19 on the advertising theatrical and DVD markets. We have had a tremendous run so far this fiscal year in particular.

Streaming only in this last third fiscal quarter, where our streaming channel revenues from our 15 channel targeted enthusiast streaming portfolio increased by 85%.

And we reached almost 23 million monthly active AD based yours.

Clearly we have solidified our position.

As a leading independent player on screening the most important and fastest growing segment of the entertainment business.

And with the cord cutting shift to streaming still dramatically and permanently accelerating due in part to the continued stay at home environment.

We remain in a very strong and unique competitive position to rapidly.

<unk> quickly grow our market share organically and also through our rollout strategy of acquiring subscale, but high potential streaming companies and an acquisition market environment, where we faced very limited competition due to our unique assets.

<unk> and streaming capabilities.

As opposed.

Most of participating directly in the so called streaming wars, where companies like Netflix and Disney and Comcast are spending billions of dollars on original content and marketing to try to build massive subscriber basis at the expensive. Each other centered on line is focused on building out a widely distributed.

Portfolio of more targeted streaming channels focused on specific enthusiast audiences like dock Youre Rama for documentary enthusiasts dog for family enthusiasm.

What are you discussing for her enthusiasm and so long across the 15 streaming channels, we've already launched and the 10 more we have.

Have in the works.

Cinedigm strategy is not competitive with the extensive subscription focused Netflix from Disney plus Peacock and all the other major media General Entertainment channel that are at war with each other for subscribers.

As Erik will explain in more detail in a minute.

Our targeted enthusiast channel approach is perfectly as a perfectly complementary strategy to that of the major media General entertainment streaming channels and is in high demand from both a consumer standpoint and from all of the key streaming devices and platforms, where our device access footprint is now almost exceeded.

Needed 1 billion devices worldwide.

And while our enthusiast channel portfolio strategy, clearly fills an important market need it is a much less risky financial strategy than the major studios major media streaming more approach as it requires a fraction of the content and marketing spending.

Big General Entertainment Channel, where the major media companies are literally locked and endured I've struggled with each other to secure their from futures and.

And very importantly, the major media companies are largely ignoring this enthusiasm space because they've.

Fight each other for General Entertainment channel.

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So given our unique capabilities and the recent acquisition of many of our competitors by the major media companies. We are facing very limited competition as we build our enthusiast streaming business portfolio organically as witnessed by the extremely strong growth in.

Revenues viewers and other key streaming metrics, we had posted this quarter plus our ongoing roll up acquisition strategy to Accretively vacuum up subscale high potential screaming assets as the industry consolidates.

We have been very busy executing on this unique opportunity.

Utility to take advantage of as competitive void by accelerating our enthusiast screening channel strategy via acquisitions in the last three months, we acquired three high potential streaming companies and enthusiast categories, where we believe there is an underserved audience and there was tremendous global growth potential.

The first was the film detecting a leading streaming channel company focused on classic film and TV program and we have a library of 10000 film and television episodes.

Then we acquired Pandora called the Netflix for indie film on the Wall Street Journal and a streaming rabbit hole worst falling down by the New York.

Tons, along with another 4000 premium independent content titles.

And earlier this month, we acquired screen box called the perfect Turo screaming alternative to Netflix by Tech times and name one of the best streaming services for 2021 by PC Mac.

We are now very focused.

On integrating these assets into semi and anticipate Relaunching <unk> and key frame.

<unk> digital publication of written and video editorial content in the spring of this year.

All three of these accretive acquisitions will benefit from our distribution muscle across every key streaming platform our.

Infrastructure content library, and our match point streaming technology, which has been battle tested in the market and it was acknowledged as among the industry's best streaming solutions.

Integration with Cinedigm will result in immediate higher margin rapidly escalating advertising and subscription revenues and significant.

Rising valuations from each of these channels as well as business synergies across our entire streaming portfolio.

Clearly, we have an immediate market and competitive opportunities to accelerate our screening growth with further accretive roll up acquisitions like these and.

And we fully intend to continue to take advantage of.

In a minute Eric will review all of our key streaming metrics, where we have showed continual remark continued remarkable growth across the board. However, Amit I would just like to touch on one other point in this arena.

Our digital content sales business, where we sell content to virtually every channel provider in the screening universe.

Excluding Amazon Netflix Hulu and everyone else continues to do gangbuster business, we have.

Put up three record quarters in a row and digital sales with this fiscal third quarter up another 34% versus last year.

We see continued huge potential in the sales arena as the.

So our evolution keeps gaining ground on a worldwide basis.

At the same time as we continue to rapidly build our streaming business, we strengthened our balance sheet enormously, adding significant cash and dramatically reducing debt having.

Having fully eliminated the second lien debt and convertible debt.

Screaming existed earlier in the fiscal year, we now have only less than $5 million in recourse debt remaining on the balance sheet, including less than $3 million in the form of a very low interest revolving credit facility with east West Bank and a PPP loan in the amount of $2 2 million.

Having sold.

That little debt and having cash reserves, obviously enhances our prospects for sustained profitability going forward and gives us added capacity and firepower to execute our streaming channel growth and acquisition roll up strategy.

And we also did all of this while posting positive and growing adjusted.

EBITDA in our core business of content distribution strength.

With adjusted core business EBITDA of $1 $3 million in the quarter.

376% versus last year.

That is a very significant achievement in light of our ongoing investments to rapidly build our streaming business gained market share.

Net positive adjusted EBITDA also sets us apart from most of the other players in the streaming business.

And finally, while all of this was going on we worked through the significant and compelling change in our equity ownership composition that I mentioned at the onset of my remarks.

Now we no.

No longer have a controlling shareholder and have a much higher public share flow.

Bison capital in the Chinese funds now own less than 20% of our common equity and all of the convertible that they held before has been eliminated.

As I said at the onset of my remarks, this ownership change and vastly increased share.

It has significant positive impacts on our ability to quickly execute our streaming roll up strategy.

At the same time, we continue to have a very strong and positive relationship with bison and the Chinese funds, who have supported us and helped us establish the relationships and access in China and Asia.

That we believe we will be able to monetize in the future to create additional shareholder value.

Key example of this is our recent content distribution and streaming channel deal with Fantle, while noticed the Disney of China, given that it is the largest theme park operator in China and the biggest producer of premium.

Animation and all of Asia.

In addition, this change in ownership composition is open the gates to a flood of new investors who've seen very attuned to the upside potential of streaming in general and so.

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And on that note I would like to thank all the new investors who have discovered Senegal.

Particularly the thousands of individual investors on trading and social sites like Robinhood and stock Twits and many other platforms that have found us are doing their diligence and seem to be just as excited about our growth prospects as we are.

We like to think that an independent and entrepreneurial spirit motivates our company.

And all of our employees as we build our streaming business amidst the established meter major media companies.

And it's very clear that many of our new individual investors that have rallied behind stanadyne share that exact same independent and entrepreneurial spirit.

Thank them and all of our shareholders.

Support and we look forward to a very successful future together.

And with that I'd like to now turn things over to Erik for a deeper dive on our screening business and strategy.

Okay.

Thank you, Chris and thanks to everyone for joining the call today.

Before I.

I dive into the numbers, let me first provide an update on the competitive environment in streaming today and how cinedigm is poised to succeed in what is shaping up to be the biggest transformative period in the history of film and television.

Day as more than a third of Americans have opted out of pay cable.

And more than $5 5 million a year.

On average flowing out of the cable ecosystem most of the major media companies and platforms are remaking themselves to compete with Netflix as they chase scale and global General Entertainment audiences in.

In the meantime, we're seeing an incredible surge in consumer engagement with what Chris and I have described as enthusiast.

<unk> services, namely services that cater to cater to a consumer's passion for a topic genre of content.

With the average number of streaming services used per household in America now approaching about seven and a half from just to a few years ago. The industry is finally able to deliver what consumers have always.

The ability to build their own custom bundle of channels that reflects their interest and passions.

On top of this the emergence of free AD supported linear and on demand channels provides consumers additional choices and breath, while giving advertisers the addressed ability and audience demographics they need.

As one.

One of the largest providers of channels and streaming content Cinedigm has quickly become one of the most important important players in this emerging streaming ecosystem our offerings enable some of the largest entertainment and platform companies in the world like Amazon Apple Comcast dish Netflix Samsung Viacom.

<unk> and Fox to fulfill on delivering the single most important thing is driving the streaming revolution freedom of choice.

So whether we're licensing movies to Netflix or providing subscription channels to comcast's Xfinity platform, replacing Bob Ross on Viacom's Pluto TV like we recently did cinedigm drives.

Rives engagement and revenue no matter the platform business model or location.

Our mission is simple we strive to entertain the world through the distribution of high quality enthusiast streaming channels and content.

That's what we do and that's our mission now.

Now, let me discuss our performance in the quarter.

Overall, our streaming business revenues increased by 80%, 85% over the prior year quarter and were up 45% sequentially over last quarter are.

Our revenue growth was predominantly driven by the rise in AD supported on demand and linear streaming.

Which was up 150% over the prior year quarter.

Building on the recovery in the AD market that began in Q2, we saw record setting streaming and AD spending driven by our robust shift to streaming.

The election spending focus on digital and a return to pre COVID-19 levels the spend during the holiday quarter.

This increase was also driven by record viewership of our AD supported channels, which increased.

Increased to approximately $22 6 million monthly active viewers up 303% over the same period in the prior year quarter, 303%.

Our users streamed an estimated 907 million minutes in the quarter, which was a new company record.

Additionally, during the quarter streaming subscribers on.

Our existing channels.

Which were channel that we had prior to all of the acquisitions.

Rose to 164000 up more than 20% sequentially over the prior quarter and more than 95% versus the same quarter in the prior year.

As of today, including recent acquisitions the company has approximately 245.

5000 subscribers up nearly 216% over the trailing 12 months as.

As we have noted in recent releases, we plan on aggressively expanding that number over the coming months with a focus on low cost high margin third party and wholesale distribution of our subscription based channels.

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Growth was also based on the continued expansion of our services to new partners and devices, including major expansions of our channel portfolio to Viacom's Pluto TV Roku channel Red, which is a key platform on the Sony Playstation ecosystem and the weather channels local now platform and many more.

This has led to as soon as <unk> services and aggregate, reaching nearly 1 billion addressable addressable devices worldwide.

One standout performer was the Bob Ross Channel, which became a breakout performer in the latter part of 2020 with the linear channel attracting more than 6 million monthly viewers.

As of December.

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In December 2020, and having streamed to half a billion minutes between April one and December 31.

Up more than 13%, 1300% from when we launched it so typify, what we look to when we launched new channels.

During the quarter our portfolio.

<unk> grew to 15 live channels and the market up from 13 in the prior quarter.

With the launch of bloody discussing television the acquisition of Lone Star in the film detected channels, we anticipate.

Content and multinational appeal.

With our portfolio recently shifting to bigger scale global properties.

Our channel partners will also scale to reflect this emphasis as seen by our partnerships with companies like all three media, which was in the joint venture of Liberty Global and Discovery American public media and others.

As we've mentioned on prior calls one of the strongest elements of our business model and a key competitive advantages of our platform technology called.

Called match point, our platforms focus on automation and centralization of operations allows us to achieve a high rate of revenue growth with far lower opex and SG&A investments and Ark invest competitors.

Our results this quarter show, we can accomplish on this front.

In the quarter gross margins improved 13% up from 38% in the prior year and in the current fiscal year gross margins were up 17% with total quarter over quarter S. J F.

Only up 14% far outpacing revenue growth.

Last quarter, we laid out wire or increase the increasing importance of the streaming market and our technological competitive advantage gave us an opportunity to grow quickly through a roll up strategy our.

Our thesis was then and today remains simple finding acquired great streaming companies and underserved enthusiast vertical.

Can scale to millions.

<unk> of subscribers globally.

As of today, we have followed through on that mission and closed and acquired three streaming services. The film detective Sandler and screen box that exemplify that protect criteria we laid out.

These services bring in 15000 hours of streaming content well established brands in the independent classic.

<unk> and horror verticals and bring a solid base of users and subscribers for us to build out from.

We are already deepen the integration process and we are already seeing how match point provides us a huge leg up in this process, whereby we fully modernized and systemize each of the acquired services content technology and supply chain processes.

Assesses the.

The fact that we can simultaneously integrate three acquisitions at a company our size speaks volumes about the time saving advantages of our automation platform and bodes well as we build the administrative systems in parallel to continue this pace of acquisition as noted we anticipate three to four.

Additional targets per year, so long as they.

Fit our approach to the market.

In sum our strategy perfectly aligns with what consumers platforms and advertisers all need today and our technological advantage shows is not only to do it profit how to do it profitably, but also growth.

Aggressively both organically as well as through M&A.

Management team believes this will lead to significant increases in share of shareholder value rapidly. If we were able to execute a plan.

With that let me turn this over to Gary to discuss our financial results.

Thanks, Eric.

For third quarter of fiscal year 2021, consolidated revenues were $10 million.

The revenues derived from our core content and entertainment business segment increased by 8% for the three months ended December 31 2020.

Compared to the three months ended December 31 2019.

As expected the overall revenues in our legacy digital cinema equipment business declined by 71% for the three months ended December 31, 2020 compared to the three months ended December 31, 2019, due to the significant negative impact of COVID-19.

Theatres in.

Many major markets remain closed throughout the fiscal third quarter, causing the majority of major studios to move wide releases scheduled for the quarter to future dates.

We only earn a VP virtual print fee when a movie is first played on our system.

In addition, and as previously discussed.

The deployment contracts and the cinema equipment segment provide for the payment of virtual print fees for up to 10 years from the date of the installation of the digital projection systems and therefore these continue to move towards the end of their respective 10 year terms.

We have planned for this expected roll off of.

Virtual print fee revenue.

Reflecting the shift in our business the streaming third quarter revenue for our streaming channels was 85% higher than last year.

Eva channel revenue was up 150% over the prior quarter ended September 32020.

And.

And up 79% over the third quarter of the prior year, despite the temporary impact of.

COVID-19 on the overall advertising market.

Our net interest expense decreased 41% to $900000 for the third quarter of fiscal 2021.

Compared to $1 6 million for the prior year period.

The decrease in net interest expense is primarily the result of our active reduction in outstanding debt balances.

Our total outstanding debt balance as of December 31, 2020 was $25 for.

$4 million.

That is a reduction of $25 7 million or 51% lower from the debt balance as of December 31 2019.

$12 1 million of that outstanding debt balance at December.

December 31, 2020 is related to the digital cinema business.

Which leaves $13 3 million of debt on the content and entertainment and corporate business.

<unk> to $39 million as of a year earlier.

That is a $25 7 million or 66% reduction.

And as of today, the content and entertainment and corporate debt is only the east West Bank credit facility, which is $2.4 million.

A P P P loan of $2 $2 million for which we have submitted our application for forgiveness.

Third quarter fiscal 2021, adjusted EBITDA for the base distribution and OTT streaming and digital business was $1 3 million compared to negative 500000 from the third quarter of fiscal year.

2020, an increase of 376%.

From a liquidity standpoint, we have taken several important steps to improve our liquidity position.

First the credit facility with East West Bank.

The East West Bank credit facility had an outstanding balance of $18 6 million on March 31 2019.

That was reduced a $14 5 million as of March 31, 2020.

And that balance had decreased to $5 1 million as of December 31, 2020.

The state of the current balance on the East West Bank is only today is only $2.4 million.

The East West Bank loan is at an interest rate of 375%. So that currently results in payments of about $7500 per month.

Now the company's second lien loans.

These loans had an outstanding balance of $8 $2 million on March 31, 2020.

The outstanding balance on the second lien loans as of December 31st 2020 was $6 million.

In January and February of 'twenty 'twenty, one after the quarter ended we exchanged with various holders of second lien notes and an aggregate of $1 4 million shares of common stock.

For an aggregate of $2.4 million principal amount of second lien loans.

On February nine 2021, the company prepaid all of the remaining outstanding obligations under the second lien loan agreement.

The payoff amount was approximately $3 $2 million.

Our second lien loan agreement was then terminated effective February nine 2021 and is no longer outstanding.

The only recourse debt that remains as of today is the east West Bank credit facility, which is $2.4 million and the PPP loan of $2 $2 million, the nonrecourse debt related to the digital cinema business as of today is $12 $1 million.

As of December 31, 'twenty, 'twenty, we had $26 $2 million of cash on the balance sheet.

$8 $7 million of that amount relates to the digital cinema business.

On February 2nd 2021 after the quarter ended we sold five 6 million shares of common stock through a registered direct offering to a single institutional investor for gross proceeds of $7 million.

Our efforts over the past year to reduce our debt and reduce our interest expense have resulted in a strong balance sheet and cash position that will enable cinedigm to continue the growth of our core business and to continue to execute on a roll up acquisition strategy.

We have eliminated all of our convertible notes and all of our second lien debt.

We have a strong cash position to enable cinedigm take advantage of future accretive acquisitions.

And we have achieved that reduction in debt, while simultaneously growing our core business EBITDA and investing behind our rapidly growing streaming business.

With that I will turn the call back to Chris.

Thank you Gary.

In closing Cinedigm has entered calendar year 2021 in tremendous shape, we had an extremely strong quarter financially and on every key streaming growth metric.

We now have significantly reduced our debt and have a much strengthened cash position, providing the firepower to augment our remarkable organic streaming growth with smart accretive streaming channel roll up acquisitions.

We no longer have the majority of which is mitigated much easier to quickly execute our screaming rollout strategy, while still maintaining our strong position for future monetization and Asia.

This also greatly enhanced our common share liquidity and open the gates to only group of forward thinking investors, who seem to really understand the potential of the streaming space and Sudan and unique competitive position and growth prospects the.

The future looks very bright.

We will now take your questions operator.

Thank you.

To ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Our first question is from Dan Kress with the benchmark company. Please proceed.

Great. Thanks, good afternoon, and congrats on the quarter guys I really strong traction here on the streaming in particular, maybe if I can just start there.

For Chris or Eric just in terms of all the acquisitions that you've made.

Clearly very savvy, gaining a lot.

Attention from several outlets just curious.

If maybe you could at least share with us what the trajectory is now out of the APAC business post acquisition and as you guys have done such a great job with the balance sheet does it change the way that you guys are going about the acquisition.

Target evaluation does it change the potential acquisition pool, and maybe even some of the conversations given the change in the ownership structure that you were having before that might be a little bit more forward now thanks.

This is Chris I'll answer the second part of the question and then turn it over to Eric from the first part of the question.

All the financial firepower that we have right now is not yet changed the way we're looking at.

Acquisitions in the space.

We've got a very very robust list of.

Potential acquisitions like the three of them we already made.

Net seem to meet our criteria. So we're going to we're going to plow through that first because we think in each one of these instances. We found these kind of gems that existed out in the marketplace that are going to have an immediate impact on our results.

And we've got several more that we're considering right now.

Before we decide whether we want to step up step up a little bit more and also we're integrating the three right now and we want to make sure we get it right with all three but as Eric mentioned in his remarks, the integration seems to be going extremely well right now.

Part because of the <unk> technology that we built.

I spoke of our spoke about in our remarks, so Eric do you want to take the first part of the question.

Yes so.

We look at the composition of acquisitions.

If you'll notice.

We acquired two subscription predominantly subscription based services and then another service that was predominantly advertising base.

Think our outlook on the market is we look at in the enthusiast space.

Both of these are going to be vital as.

As we look at and say, we're really providing that richness and depth.

Once people you know.

Get bored with someone.

Some of the bigger services and wanted to dive into things that are there particular interest areas.

We think there's plenty of room on that front for both AD supported.

As well as subscription services.

So and as you know.

Further in what Chris has said you know we're so our focus is looking at things that could not only when we acquired them. They are a day.

Are there are either AD based or subscription, but that their business could then be easily ported to the hybrid model. That's working so well for us like we do with Dove, and <unk> and Dr. <unk> Rama and others.

So think of it as you know a perpetual free trial. When we you know if we and when we launch a fan to our linear AD supported play.

That's really a way for a larger number of users to get exposed to the service.

Not only generating revenue, but reducing our customer acquisition costs.

And then in terms of scale and size I think.

The composition of ownership change our balance sheet changes really does afford us the structural flexibility.

If we find something and we want to step up and pursue it and go bigger we have the we have the balance sheet capabilities to do that now.

And so I think that's a much bigger pluses. We are you know M&A is is coal.

Partly strategic and partly opportunistic and I think that helps with the opportunistic part of M&A.

No I think another point.

Yeah.

A lot of these acquisition initiatives, we're looking at our incoming.

Sort of are everything I talked about in my remarks, and Erika It is pretty clear in the industry and a lot of these <unk>.

Smaller maybe subscale screaming asset companies, they've got they really recognize the upside so we're sorting through a lot of incoming as well which makes the job.

Larger, but a lot easier.

Yes, I think it away, Chris that's kind of what I was getting at a little bit just given the balance sheet cleanup and also the ownership change I was just curious if you were seeing more inbound or having some easier conversations.

And then just Eric can I follow up on something that you just mentioned we've seen some success with other services out there and kind of pushing a linear first off rate, particularly in international I know, it's not you guys have some decent you have such a huge playgrounds domestically but.

Can you just give us any thoughts there.

That might be an option for you guys to get bigger international viewership footprint before you push more channels that way.

Yes so.

That's been a big focus.

One of the bases for the acquisitions, we made as we evaluated them on their international potential.

As we look at every acquisition now.

You know our model is can this thing scale too.

Millions or tens of millions of subscribers, depending on the business model of how whether it's wholesale subscribers third party or direct.

Can we scale up rapidly internationally as well and so the answer with.

With all three of those acquisitions was a resounding, yes, we saw defined need in the market. We have already on the AD supported side, we've already been anticipating.

That we.

We would be entering.

Europe and Asia, So we've been.

Entering into a I think we disclosed.

At least half a dozen if not more.

<unk> partnership deals for those territories and our focus over the next 12 months is to match the beat that.

Ft, plus advertiser footprint, we have in North America every DSP major DSP, we're going to do that the rest of world.

And then most of our partners on the platform side.

If you look at who we're working with Samsung T C L.

All of them are our international all of them are rapidly expanding internationally and all of them are pressing us to expand internationally. So I think.

International is going to be a huge part.

Of the 2021 story.

As we continue to really dive into that.

Got it that's super helpful guys, Thanks, and congrats again really a stronger result.

Thank you Dan.

Our next question is from Brian Kinsinger with Alliance Global Partners. Please proceed.

Hi, guys. Thanks for taking my questions.

Can you highlight during the December quarter, how many digital channel is where live I think I heard you, but I wasn't sure compared to the September quarter, and then if you can any way quantify the increased adoption by partners.

Channel as it had been line for six months from more.

Yes.

So.

We have 15 channels live in the market today.

We are we actually.

Italy.

Added so that includes the addition of bloody disgusting and to.

The two.

Film Detective channels that were added.

In that quarter as well that's that makes up the additions.

The number of devices per channel in front of me, we can talk I think I can give.

Get back to you on the overall distribution footprint by channel.

Subsequent to the call, but I will tell you that in terms of the scale of distribution.

You know theres different levels for different channels. Some channels are what we would characterize as a plus channels that are going to be on every single platform.

I would say for the channels that we put into that bucket.

The vast majority of those are.

Broadly distributed in North America on most of the footprint.

There is a second tier of channels, where.

Some channels are.

Still getting more distribution and smart TV.

It's about the middle third of channels. So we probably over the next.

Six to nine months, we will continue to expand the distribution on those channels.

I would say there's another there's another tier of channels I think.

You know I mentioned.

Uh huh.

We ceased distribution of certain channels in the portfolio. So that 15 is net of us dropping a holly pumping combat go which underperformed for example.

So you know our vision is it channels don't cut the mustard in terms of.

You know carriage consumption scalability, we're gonna pretty ruthlessly edit them out of the portfolio. So it's it's it's much like any other portfolio.

Any kind of assets, where you have to constantly trimmed the laggards.

And add new things that are going to beat the beat your top performers. So that's not really our focus for this year is adding more Bob Ross scale of channels.

And we're going to do that by eliminating channels that don't hit our sort of minimum threshold that footprint.

Great and then.

You talked about AD budgets getting back in the fourth quarter and and I heard.

Some of that to do with some.

Advertising execs I'm wondering.

What you saw in terms of pricing or CPM.

In the fourth quarter or even today compared to the year ago period is it higher or is it lower or is it about even.

I would I would characterize generally speaking it's about even.

To slightly higher you know I would say.

If I had to.

Estimate a number probably maybe 5% higher than the last quarter.

Now a lot of that of course was driven by a very very aggressive October and election spending.

Which is a biannual sort of scenario that happens.

And heaviest in presidential election years, but we definitely saw a nice bump out of that.

Which made up for a lot of lost ground on the year.

But then you know.

That general shifts that I've been talking about the five to 6 million viewers and have shipped out of cable the cable cancellation numbers that you hear out there those are the the trailing indicator right.

Because usually what happens is people.

Forget.

The middle to higher income individuals they have cable they maintain it maintain it and then as they realize they're not using it at all to get around the cutting it but meanwhile, the advertisers are already seeing those declines are just in the lack of viewership and audience. So.

That's one of the most important and critical driving factors are consumption is that even for people who still haven't cut the cord. They're consumption has already moved to streaming so that's being borne out in a higher demand for connected TV advertising overall and.

And I think.

Just anecdotally as we look at how things are already going in Q1, that's kind of a preview we're seeing assist.

We're seeing not the typical seasonal we do see a seasonal drop but we're not seeing it to the extent we used to see at which to me leads me to believe that these sort of sustained higher CPM higher flow.

Higher capture of AD dollars is just going to be an ongoing trend.

You know as cable TV homes go from $80 million to $83 million down to whatever the floor could be that could be $40 $50 million.

Or less.

Yeah.

I don't mean to 58% growth is fantastic obviously.

In any business.

So forgive.

Forgive me for asking it this way, but with viewership up 300% CPM rates up a little bit the election, helping AD budgets back to pre Covid and you have so many more channels than you had a year ago.

Why don't we see it and maybe it was 100 person on the on the AR on the AD budgets I'm sorry on the Avon I guess I'm wondering why revenue growth doesn't look a little bit more like viewership growth what what is the disconnect there.

Sure.

You got 34, Oh go ahead growth.

Digital sales and net number.

Percent growth number.

Right below 100% on the Eva right at a 300% in viewership so and you've got your full licensing all the different platforms, which was 34%, which pulls it down a little bit because that number and it's even of itself a 44% growth is a great number for that business.

Yeah, So all out and say so our viewers. So it's really what happens if you kind of look at that the at the scale of the model is or how.

The process works is first you have to have enough eyeballs that advertisers are interested in you're right. So we've we've clearly accomplish that the second phase of that is having enough demand partners.

Still partners to sell every last bit of your inventory that's been the work in progress you can't really do that until you have the audience right nobody wants to work with you. If you don't have an audience, you'll see come back when you build money. So you have to go through a period of time for every channel where you have to prove that you have an audience.

Good data and then go back to all the advertisers and get them to want to advertise with you even on programmatic. It goes beyond the direct selling and so you're always going to have a lag of a <unk>.

Order to two quarters and it depends on how far each channel as long in their lifecycle, where you've got a lot of audience and then the monetization follows. So if you look at it and you say all right are our viewership is up 300 ish percent.

R R.

Our revenue growth is up 150%. So what that tells me is one we've got a lot more room to improve cpm's fill rates to do more at bring Moran partners more scale and more.

More revenue so theres more headroom from that part of the business. So you know we're only halfway there if you look at it from that perspective to achieving the full potential of the footprint. We currently have and that number only gets better as you add more and more channels more and more distribution.

And so on and so forth so.

We went from basically if you look at over the last 18 months, having basically no AD business now having scale AD business that we're where we've really done a good job starting to monetize the next 18 months are going to be about.

Further.

Enhancing the monetization out of that current business. So if you look at it from that perspective, you could say well can we double our revenues again, if we did nothing else, but just more effectively our extract revenue out of adjusted basis I would say that's you know that's a fair question and I think that's one of our goals and one of the big opportunities of the company.

Great.

That was really helpful that.

The way to think about it at the end of last question I have the three acquisitions you've made.

Just take take what should investors think about in terms of.

Revenue contribution is it like adding two new channel is it much bigger than that and you know what would you be reasonably happy with you.

As you look at fiscal 'twenty.

22, and what would you be reasonably unhappy away their contribution.

For next year.

Well I'll say, we don't want so from a from our numbers, we usually don't we're not giving guidance on the channels per se, but what I will say in general of what we've been and what we've been saying overall is that when we acquire a channel we're looking at something that you know over.

Over the mid to long term.

Globally can can deliver in the $15 million to $20 million range in revenue for.

For channel now is that that means.

Fully launched fully distributed under every distribution model globally.

You know I'm, including wholesale wholesale licensing all of these other pieces, but that is that's what we talked about overall in the long term, it's an aspirational number but we're not we're not really giving particular guidance on the individual channels, one by one or or how they're going to perform.

In the short to midterm.

Thank you. This does conclude our question and answer session.

To turn the conference back over to management for closing remarks.

Yeah. This is Chris Mcgurk Bergen just in conclusion again I just want to thank all of our shareholders again for all your attention and support and again really.

All the new investors that we have the enthusiastic new investors that have found the company in.

Our commenting about it and following us and you know and read it and Wall Street pets. It's.

Robinhood and stock Twits.

We all want you to know that.

Listening to you and we're glad that we have your support and even though you're not multibillion dollar investment funds. Some of your price from commerce that you give or justice intelligent or smart.

From those types of groups, so keep talking to us and we will keep listening. Thank you all for your support and we'll talk again very soon.

Goodbye.

Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Okay.

Yeah.