Q2 2021 Chicken Soup for The Soul Entertainment Inc Earnings Call
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Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby and thank you for your patience.
Once again today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.
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Okay.
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Good day, ladies and gentlemen, and welcome to the chicken soup pretty so entertainment second quarter 2021 earnings call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow what that time is.
No one should require assistance during the conference. Please press star zero on your Touchtone telephone.
As a reminder, this conference call is being recorded.
Now I'd like to turn the conference over at their first Speaker. Mr. Taylor question, that's ellipsis IR.
Thank you operator and welcome.
With me on the call today are William J, <unk>, Chairman and Chief Executive Officer, and Chris Mitchell, Chief Financial Officer to review the second quarter 2021 results as well as provide a business update.
Following this discussion there will be a moderated Q&A session open to the participants on this 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.
Well, we're looking statements are 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 text regarding forward looking statements contained in the earnings release, which also applies to the content of this call additional risk disclosures can be found in the company's filings with the Securities and Exchange Commission.
On today's call management will make comments on certain GAAP based and non-GAAP pro forma financial information.
Non-GAAP financial measure that the company uses is adjusted EBITDA management believes that adjusted EBIDTA provides useful information in 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 is the most directly comparable GAAP measure.
For further information regarding the company's historical financial performance refer you to our filings with the SEC, including our report on Form 10-Q for the quarter ended June 32021, which was filed today.
I would now like to turn the call over to William Hanna Chairman and CEO Bill. Please go ahead.
Thank you Taylor and good afternoon, everyone welcome to our second quarter 2021 earnings call.
I'm going to provide some highlights from the quarter and update on our progress overall as well as some details on some key areas of focus as we head into the second half of the year.
Chris Mitchell, our CFO will then dive a little deeper into the financials.
We had a solid second quarter that built on the positive momentum we demonstrated in Q1, we generated strong revenue growth close the sonar deal.
Continued to expand our distribution touch points, which are now demonstrably can take contributing to our view of growth.
And we're getting a great reception from advertisers with a stellar performance at the recent upfronts.
We've also completed preparations and are ready to launch both our new chicken soup for the soul Eva streaming network.
And our new tech platforms and viewer interfaces.
Finally in June we raised $75 million in new capital to fund our growth and we're looking at ways to best deploy that strategically in support of future growth.
It's been another busy quarter with a lot of progress that positions the company even more strongly for continued growth and momentum in the months ahead.
A couple of highlights on the financials.
Reported net revenue of $22.1 million up 64% on a year over year basis adjusted.
Adjusted EBITDA was $3.2 million, which was up 19% as the business continues to scale.
Our online network revenue was up an exceptionally strong 78% and we continued to see good growth on the distribution and production side as well.
Overall, the results keep us on a solid trajectory to reach our revenue targets for the full year.
As I noted Chris will go into more detail on this in a bit.
Looking more closely at our project our progress I want to start with advertising.
We've always pursued a broad based AD strategy, leveraging three pronged three pronged sales approach, including direct sales programmatic and local partnerships.
Unlike other <unk>, we see the most upside in direct sales.
That's because we offer something that most <unk> do not a steady pipeline of original and exclusive programming that allows for upfront sales and sponsorships, while driving viewership and attracts a highly sought after audience.
Direct sales deliver higher profitability on our original content.
And we can drive even more upside by creating innovative AD formats that improve both the viewer experience.
And the visibility advertisers get on our networks about our audience.
This was our approach at the Upfronts. This year, an upfront orders are now projected to be up over 130% over last year.
We also see much larger commitments than ever before.
We're also diversifying our advertisers even further as roughly half of our top 20 commitments have come from brand new advertisers major major national advertisers, we will continue to advance the strategy and expect to see more sponsorship and integrated brand partnership opportunities moving forward.
Of course advertisers only do business with you to deliver viewers and we're making great progress there as well.
Viewership on Crackle and popcorn Flex was hot was up in the high teens in the month of June on a year over year basis.
<unk> increase when you consider the very rough comparison to 2020, when so many viewers who are stuck at home.
I'd also note that with new contact content, starting to come back across networks and platforms. There is more competition for eyeballs as well so our results reinforced the breadth and depth of our content on crackle, plus which is increasingly our competitive advantage.
In addition to the appeal of our content. We believe our viewership growth is also being driven by the expansion of distribution touch points that we've been working hard on all year.
Continued this expansion in the quarter with zoom, all more plex channels through battle Red box and follow.
Additionally, since the end of the quarter, we've added Flex X one Cox another food bow channels, another phyllo channel Vizio watch free and others, bringing our total active touch points to 50 with over 20 more on the way.
And we're not done yet in fact, we are only about half were only about half of the more than 100 touch points. We now expect to reach over time.
We've said that we believe each touch point can bring us several hundred thousand viewers over time.
And in fact, what we've seen so far is approximately more than 450000, new monthly average viewers added by each of our mature touch points.
This holds has anticipated viewership should continue to grow nicely as our newer touch points mature and as we add new ones.
Keep in mind that we're also about to launch the new chicken soup for the soul streaming network and embraced the same distribution strategy with this service.
In anticipation of driving new leverage levels of viewership. We've also been very busy readying the launches of our new tech platforms and viewer experiences.
The new Crackle plus platform looks great and we will launch imminently on Vizio Smart Tvs before rolling out over the course of the next year and dozens of our other distribution touch points.
We've also launched our new popcorn Flix App on Android iOS, the web and Apple TV, just this week and intend to launch that on all remaining platforms by the end of September.
These improved.
Platforms dramatically enhance the user experience and put us on the cutting edge from a technology standpoint.
Additionally, they will help us create an even better user experience.
By increasing access to view of data and behaviors.
To help us deliver more personal at Liza adds more effectively.
Of course, all of our progress on distribution and our platform has been domestic up until now.
But we also have a significant opportunity to expand crackle plus internationally.
And I'll talk about those plans in just a moment.
First, though let's turn to our content.
In Q2, we saw success with several of our original and exclusive titles.
Continued to build on our strong pipeline.
The headline for US right now is that the second season of our hit series going from broke.
<unk> has been doing extremely well said sort of create premier to the back half of May.
Also exclusively on Crackle, we launched Sky fire, a film in which <unk> when the once dormant volcano at the worlds only volcano theme park and resort starts to Rumble.
And it has been the third most popular title on crackle since its launch a couple of weeks ago.
Led by these titles are original and exclusive content viewership showed continued strength and remain in the high teens of total AD impressions for the quarter on track with our December goal of 20% of total AD impressions.
As I noted as we drive this number higher we expect our profit margins will continue to expand.
Next up on the original content slate, we have a couple of exciting chicken soup for the solar originals premiering, including the uncommon history, a very common things, which premieres on crackle in August.
And smart home nation, which premieres on crackle in December.
In other business developments, we closed the sonar deal and are moving quickly on integrating seminars content into our screen media library.
And executing on using this content in our new programming activities.
As for the performance of productions acquired in the sonar deal we've already seen an early great success.
And the mysterious Benedix Society on Disney plus and looking ahead, we're off to a good start with the second season of the hit show hunters on Amazon Prime.
We're also starting to see the first pieces of sonar content migrated over to our own networks.
<unk> hit FX series is set to premiere on Crackle in September.
Tom Harty as the Star and more recently, we premiered our first piece of selling our content to migrate over to crackle with the temptations.
A two part mini series on the true story behind the legendary Motown musical sensation.
This program shot to number one on the Crackle network at just three weeks and it's a perfect example of the success, we expect to see from the movies and television programs, we acquired as part of the some sonar library.
And we believe it is the first of what we expect will be many success stories by the way, it's really good I would watch it I've enjoyed it.
As I've mentioned, we will also be launching our new chicken soup for the soul streaming network. Later this month with sonar content, which will provide an additional option for viewers.
Streaming network will broaden crackle pluses demographic reach by delivering the chicken soup for the soul brand inspiring uplifting and informative content, including a large selection of scripted movies and TV series as well as unscripted programming covering food home travel and other similar content.
Turning to screen media.
Also recently acquired Temple Star studded films over the last few months.
Including gold starring Zac Efron, and Susie Porter.
I'll have to been traveling through the remote desert, who stumbled across the biggest gold nugget ever found.
Naked singularity, starting John by eager and Olivia Cook with executive producers Ridley, Scott and <expletive> Wolf, which tells the story of a promising young New York City public defender.
And best Sellers, a comedy starring Aubrey Plaza, and Michael Caine, which is about a daughter's last ditch effort to save the boutique publishing house. Her father has left arm.
My wife, Amy has enjoyed that movie it's about her business the publishing business.
While fresh while fresh content on our network gets lots of attention. We also continue to move forward aggressively with our content distribution strategy.
Recently, we signed an agreement with Millennium media for screen media to exclusively distribute 15 of their movies over the next three years.
Some of you may recall that millennium is the same studio that produce the outpost until death.
Which were huge huge hits for us over the past year.
I must say to be in a position now to be able to acquire and distribute this kind of volume and quality of content is very exciting for us.
And there is just no one focused on AD supported streaming who has this production and distribution capabilities acquisition relationships, our library that matches ours.
Additionally, there have been some recent changes in the industry with regard to shortening the initial pay TV window.
These changes will allow us to put our own programming onto our own Avon networks more quickly while still licensing that initial window to others.
Industry updating his update is having a positive impact on the flow of product to our network without us having to sacrifice the licensing revenue associated with Taiwan.
It also enhances the marketing benefits gained from our licensed partners.
So what's next.
The answer is to continue executing on our key growth initiatives in the U S, including strategic opportunities.
While increasing our focus on building out our international business.
There have been a few key developments in recent weeks that helps spotlight, where we're going.
One of them, we announced just just a few moments ago.
These include acquiring sonar and establishing halcyon, which has set the foundation for international television production the pending launch of the chicken soup for the <unk> streaming network, which rounds out our crackle plus network offering.
The recently announced acquisition of the Crackle International trade rocks for Crackle plus from our partners at Sony which gives us trademarks in over 50 countries spanning Australia Asia, Europe, and South America.
This deal will allow us to offer all three of our key streaming networks around the globe and bring RNA or <unk>.
<unk> networks worldwide.
And most recently today the <unk> deal that we announced where we are the exclusive.
Supplier of non Israeli AI content to this new Avon experts <unk> service in Israel for those of you who don't know couchette they are the leading.
Broadcast or in Israel by far.
We are also providing them technical and operational expertise and the support of their launch.
And by supplying content and expertise, we're demonstrating two of the three legs of our value proposition to international streaming services. The third leg is our brands and we are working on opportunities to deploy our brands and services internationally.
In summary, we're now a little more than two years into our operation of Crackle, plus with transport and a network from every angle financial quality of content viewership advertising and now technologically.
We're in a great position in the financial results are showing that.
In terms of Whats next we're looking to accelerate our execution on all fronts with these priorities in mind.
Leaning into the momentum with advertisers and delivering unmatched opportunities and more innovative formats and business models.
Driving forward on our network distribution initiatives, especially as we launched the chicken soup for the sell in that payback.
Continuing to grow the original content production pipeline and leveraging our ever growing library and finally doing all of this internationally.
We're in an even stronger financial position to execute on these initiatives following our offering in July and see additional opportunities to strategically expand our business, particularly around more Eva networks and library expansion.
We expect to be in an even better position as our financial performance ramps.
And given we are growing at a faster rate year to date than we had initially anticipated we remain confident in the outlook we have for the year.
I'd like to thank the chicken soup for the soul team once again for all their hard work I'm going to turn this over to Chris who will give you some additional details on the financials.
Thank you Bill.
You've already heard our operational highlights I will focus on a review of our financial results and balance sheet.
As noted on prior calls with full ownership of Crackle plus we are now operating the business on a holistic consolidated basis.
Which is how we will continue to discuss our financial results going forward.
As a reminder, we've added a table in our MD&A section in our revenue putting them section of the 10-Q that breaks down our consolidated revenue by source that we believe to be helpful for investors.
Our financial results for the second quarter of 2021 reflect reflect further execution on our key growth initiatives, which positioned us to further build on the momentum we achieved in the first quarter.
Let's go through the second quarter results.
Starting with the results for the second quarter, we reported net revenue of $22.1 million compared to $23.2 million in the first quarter of 2021.
This compares to $13.5 million in the second quarter of the prior year for an increase of $8.6 million or roughly 64% year over year.
This year over year increase in net revenue was primarily driven by an increase in AD sales and by licensing.
As Bill mentioned, our distribution pipeline remains strong and we added nine new distribution touch points in June as well as nine more shortly thereafter that are now reflected that are not reflected in our second quarter results in.
In total we have 50 distribution touch points and remain on track with our goal of growing to 100 touch points by the end of this year.
This positions us exceptionally well to drive further growth in both viewership and AD dollars over the balance of the year.
It's worth noting that we were not able to recognize as much revenue as anticipated in the quarter related to hunters to slash or four we.
We recognize revenue on hunters two based on a percentage completion basis, and we had one episode of Flash report, where delivery was slightly delayed until the first week in July bringing.
Bringing the total number of episodes delivered in July to seven.
For the third consecutive quarter, we sold virtually all of our advertising inventory are strong dealership and high quality content continue to attract advertisers and we're seeing larger commitments than ever before while growing existing relationships and building new ones. Additionally.
Additionally, the upcoming launch of our chicken soup for the soul a bot.
Spanned our viewer demographics EBIT further can provide yet another revenue.
Avenue for advertising revenue.
AD revenue was driven by further expansion of our original exclusive content offerings coupled with.
The continued innovation and enhancements we've made to the overall ad experience.
As Bill noted we saw tremendous success at this year's Upfronts.
Which is a good indicator for continued momentum in AD revenue.
Through the rest of 2021.
We expect to see continued momentum in this area throughout the remainder of the year as we make further progress on our advertising strategy.
Gross profit for the second quarter of 2021 was $6.7 million or 30% of net revenue roughly flat with the prior quarter on a percentage basis.
This compares to zero point $6 million in the same period prior year or 4% of net revenue.
Operating loss for the second quarter of 2021 was $7.8 million compared to an operating loss of $13.1 million in the year ago period.
Our adjusted EBITDA for the second quarter was $3.2 million compared to $2.7 million in the same period last year, a year over year increase of roughly 19%.
The year over year increase was driven by AD sales with a rebound in the market as the impact of Covid waned continued strength in the distribution business and a strong performance by going from broke.
We are also beginning to see a return of some production revenue.
Looking at our balance sheet and liquidity position as of June 32021, the company had cash and cash equivalents of $18.4 million compared to $24.6 million at the end of the first quarter 2021, and $4.7 million at the end of the year ago period.
Please note that the closing of our common stock offering in July 2021 provided us with $75 million in gross proceeds.
We are pleased with our enhanced liquidity position, which provides us greater flexibility to pursue attractive growth opportunities in a strategic and disciplined way.
In closing we are.
Pleased with the continued momentum we saw in our business in the second quarter and excited about the opportunities we see to build on that momentum as the year unfolds.
We began accomplished a tremendous amount in a relatively short period of time.
A very busy and productive year so far.
Believe we were even more strongly positioned to further evolve their business and accelerate growth in the coming months.
With the acquisition of sonar now complete we have several key pieces in place that will enable us to utilize our new content and production capabilities.
And accelerate our international expansion, which we expect will contribute to our financial results.
In an increasingly meaningful way as they develop.
Additionally, we were particularly focused on growing viewership and streaming revenue with initiatives aimed at content to drive dealership enhancing the user experience and platform.
Distribution of our streaming networks in pursuing larger and more innovative AD formats, and marketing partnerships that will help drive higher margins overtime.
With all of these initiatives in place that continue to gain traction and enhanced platform and strengthened balance sheet provides additional liquidity. We are confident in the growth that lies ahead.
And as we work to capture that growth, we will continue to benefit from the integration of all aspects of our business, while managing expenses and risk in a disciplined way with.
With an eye on improving cash flow and profitability.
With that thank you for joining the call I'll now turn it back over to Bill.
Alright, we'll take we'll take questions now operator.
Thank you, Sir ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone is your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
The first question, we have Jason <unk> from Craig Hallum. Your line is open.
Okay.
Once again, Jason <unk> from Craig Hallum. Your line is open.
Hey, sorry about that thanks, Bill just wondering I know you don't give quarterly guidance and you've given kind of some perspective on what we should anticipate for the year. Just wondering if theres any way you can quantify the slippage of revenue from hunters and flashers I know the quarter came in a little below what we were expecting so I'm not sure if that's kind of.
If it's related to that or if there are some other factors at play.
Nope that was at those two items were the.
Sure.
So.
But look where our view of this is we're right on track for the year.
We're actually a little ahead of track for the year.
So.
Those those those two those two events are just.
They just moved from one month to the next is what happens so.
Assuming thats not all that different than what we saw with will ease back in the beginning of the year.
Yeah.
The production business in the licensing business can be lumpy.
And events can occur in those businesses that delay you from one month to the next.
From my perspective, the most important thing I saw in the numbers was 78% growth in the online networks business.
To me that was really really really a great great.
A great result for us Jason.
Got it no expectations.
Appreciate it.
To touch on on the upfront and the new fronts, you've got that in the rearview Mirror. Obviously you broke in and you brought in a lot of new advertisers relative to what we had on the platform a year ago. Just curious if you can give us kind of a summary of the response, you're getting from some of those customers and in particular kind of.
Some some feedback on what you are hearing on the new AD formats that you've introduced.
Yes. So this was another I think really good.
Good thing for the year, besides being up effectively a 133% meeting more than doubling.
Hi.
The top 20 advertisers have 11, new major companies.
And.
To me that is a really.
Very good thing I'm very pleased by that because this will this will make.
Not only does it show that.
The appeal of that there is to our networks, but what I like about it among other things it's going to vary the adds a lot and as you know in our space one of the big complaints people have as they see the same AD over and over again, not just from us but on all a box.
And it's this diversity of advertisers it is going to actually be part of the way that problem gets solved by simply having lots of ads to choose from and.
And when you see twice as many in the top 20 or I'm, sorry half of the top 20 now brand new major companies it bodes well for lots of reasons.
So I was really pleased by that.
We didn't lose any top advertisers, but we added a bunch of new ones, who who manage the muscle their way into our top 20.
Three very impressive we also made deals with every holding company.
Which for US is a first.
And I think it all just shows that the <unk>.
Gration over to over the top to Eva from broadcast and cable is just continuing to go.
Very very rapidly.
Last one for me you've got the new chicken soup Avon coming just just two parts on that as far as are there any incremental costs, we need to think about as you roll that out and then from an advertising perspective, I know that's going to appeal more to the female demographic what do you need to prove to that advertising base before they start to.
Come in then that starts to influence Upfronts next year.
Well, yes, the demographic will be improved I agree with you for from an advertiser's point of view, we're a more diverse as probably the better way of putting it from an advertiser's point of view by that that network as far as incremental costs go.
I mean, there really arent any.
Any operating cost of the sort that you that we have.
Part of the sonar transaction as you recall was to get US a lot of owned library that we could use to help launch that network.
That is happening and will in fact happen and therefore, our cost of revenue on that network will actually be lower so I think in the end Jason that network will end up.
Adding to profitability not not reducing not increasing cost.
Just simply because we're going to have a much lower cost of revenue on that network.
So that's really the way I see that one I don't think Thats, an increase I think thats an increase in profitability.
Understood. Thank you so I appreciate it.
Thank you Jason.
The next question, we have Dan <unk> from the benchmark company. Your line is open.
Great. Thanks, Good evening Bill.
I'm sure you're tired of me asking your international questions, but you have a deal.
And obviously it is a significant untapped Tam for you guys.
Maybe if you could just help us size a little bit.
Ill.
How we should think about how additive that quickly and then <unk>.
Discussed this before you've got the <unk> launch.
We've obviously seen others go.
With more of a per sub basis get the channel in there and then try to work through some DTC.
Just obviously DTC not being a big focal point for you, but still you could get point of teaser channels in there and then build out a bought if you wanted to just help us kind of how you attack the international market and especially considering that you have a bunch of cash on your balance sheet I don't know if thats, possibly one of the areas that you look.
To attack more aggressively.
Yeah. So I think the interesting thing about the announcement, we made today Dan is that okay.
<unk> is kind of a perfect example of the kind of broadcast or we want to be in business with.
We are the leader in their marketplace by far.
Have a tremendous reach.
With their existing broadcast networks and they have a sales force that's able to sell ads.
Video adds are top dollar that's what they do for a living already they have local content that they use for their network, but they are in real need of a couple of things.
One is content from outside of their country, because most broadcasters have a limited library of content.
That they could reuse and if youre going to be in the Vod space you need to have a lot of it you need to have if you're going to compete with Netflix when they come into your country. You've got to have some scale and scope that is going to make us attractive to viewer as.
Netflix with the Big Library is so.
So they need the kind of thing we have which is a lot of content that's available for Avon they need.
Technological help although people like a shed a pretty darn smart they know what they're doing they've built out a heck of a nave identified business or theyre building out an enabler export business and they are but they also have some local content that they can integrate into the network. So that it's a complete package.
Sure.
They are launching their network at the beginning of next year. So we won't have any material impact this year on the revenue, but there if you looked at their numbers and I can't I'm not going to share them with you they would be a very significant contributor to our revenue next year.
And.
I'm hopeful that Theyre right. They are certainly in a position to do what you have seen big broadcasters in this country do like Fox for example, and Viacom use their networks to drive Eva.
From our perspective, we want to partner with people, who can do that country by country.
Really the way we look at it can you.
Can you repeat your second part of your question, Dan because I think I forgot it.
Now lets finite was.
In terms of use of capital Bill obviously with the cash on the balance sheet I was curious how we think domestic versus international deployment.
Well as you can imagine the phone never stops ringing these days here with opportunities to spend our money that's for sure.
But we're pretty disciplined about the stuff as you know our view is that the things we should buy our more Eva networks, what we can do it in a way that is cost effective and I think there are a few ways to do that.
And also more libraries, where we can use the capital to reduce our cost of revenue and drive incremental EBITDA growth and there are a few ways to do that where it's really greatest if you'd give up in one package and there are a few ways to do that so we're very actively looking at a variety of things that are out there for us.
In the domestic marketplace internationally I think our best.
<unk>.
Our best approach to the international business is going to be through partnerships.
<unk>.
And those aren't kind of require the kind of capital.
I think we will deploy in the U S.
To grow our business.
More quickly and more effectively.
Got it and just one more if I could if I could we've been getting a lot of color from other players around.
Jamie.
Cohorts you guys look one of the things that come up a lot is that not everyone is Netflix people are in different lifecycle stages of their lifecycle. You guys are clearly underway to multiple touch point that you don't even have yet and so I think this needs to be viewed through a different lens, but on an apples to apples basis. If you look at the cohorts that you acquired during the pain.
Mike do you have any data on viewership habits retention or any of those kpis.
Yes, it's basically flat and that's why the distribution touch point strategy is so.
It's become such an important part of the future. If you look at just how well those touch points are doing you remember Dan when I first introduced this idea of couple of quarters ago I talked about how we would hope to get between 205000 monthly active viewers from each of these touch points. We've now got 10 of them operating and have an operating long enough.
So that we could actually determine what's going on in the numbers more like $4.50 every month 450000 monthly active viewers from each of these touch points.
We've got nine more of that just launched that will have an opportunity to now to continue to increase that set and we've gone from saying we were going to do 64 of these I hope you guys heard what Chris said in his part of the speech to saying, we're going to do 100.
We're continuing to expand the strategy and I believe this strategy is the growth driver for viewership. It is the single best way for us to drive viewership without overpay.
<unk> spending marketing money that doesn't make sense and we are not fighting the same fight that our competitors are fighting.
We're actually by adding these touch points, making it easier for people to find us and it's working.
To me. This is the greatest piece of news, we've had which is that this idea which is unique to us.
And these touch points continue to go where people are going is the way to drive growth is actually working and delivering and delivering big time.
It's really an inexpensive wonderful way to grow viewership.
And I'm quite happy about it.
So yeah.
Yeah.
I get that it's gotten a little bit tougher for everybody to grow their viewership because you've got less pandemic watching you've got more choices for people.
But it turns out that if you go places where people are going naturally and make it easy for them to find you they're going to watch your stuff if its good and Rcs.
Got it thanks for all the color Bill and congrats on the international one.
Thanks.
Next question is how do we have Brian Flynn from Alliance Global Partners. Your line is open.
Great. Thanks Annabel.
To your point about touch points.
Can you update us about the.
When the new Vizio Smart TV began shipping with can you remote.
That had your button on it and I think couple of quarters back when you announced that you thought this would be much bigger than the average new touch point. So can you talk about the early impact it's had on viewership.
It would be great. Thanks.
So.
It started shipping in late day, it's been shipping in June I have no idea, how many of them sold through yet.
But I guess the good news Brian is that.
That touch point is not in the numbers that I just reported.
The vizio.
Watch I guess its watch free TV.
We launched three vizio channels since the end of the second quarter.
And our Vizio are new new App, which will go live odd vizio is about.
I would say seven to 10 days away going live so the impact of the Vizio button is yet to be seen in these numbers.
And I expect a great.
Understood and then.
I wanted to touch on.
The new deal you announced today.
Should we assume the economics for you is similar to the 50.50 model that you have on other platforms. It sounds like they are getting a little bit more of the selling and the ads, but it's all your content. So just maybe talk about the economics.
Yes.
Without getting too detailed because I really don't think thats appropriate in the circumstances.
The economics are better.
Great understood lastly.
Yes, I think just the last two quarters and the new platform that is being launched.
Can you talk about when.
You think it has.
A big impact on gross margins as the system.
Better optimize these recommendations based on what you own.
Yes, so time on site really is what youre talking about time watching which is of course, one of the key things about the new.
New platforms, which is it's easier to stay on the recommendations get better we get smarter.
With the Vizio is though is the number one launch of the platform. So it's coming up in the next few the next few days to a week to 10 days somewhere in there.
You're already in.
Actually working but.
Vizio has its own way of actually launching these platforms.
So it will be still a few more days.
They will they will rollout so that by the end of the year. We're on all of the different touch points with the new with the new platform popcorn flex will actually be out ahead.
Growth, which will be on all of the new all of its platforms by the end of September Crackle will be on all of its platforms by the end of the year.
So.
I am expecting that over the course of the year, we will over the course of the second half of the year. We will see continued growth and time on site as a result of the better the better viewer experience combined.
Combined with more and more viewers from the touch point I'm thinking those two things together have a very big impact on the second half of the year.
Yes, I guess I'm thinking more bill on the gross margin.
Well, we usually talked about lowering the cost.
I'm wondering do you end the year at 35% margin potentially exit the year anyway with.
You're pushing more owned content.
And the viewership and the metrics start to change yes.
Yes so.
The answer is I think yes to your to the specific question you asked but.
I also found it fascinating to listen to Chris discussed last year's margin of 4%.
Compared to this year's margin of 30%.
We've made good progress in increasing the margin over the last year. That's for sure I think that's pretty obvious when you go from 40% to 30% to go from 30% to 35 feels very likely to meet Brian.
We'd like to get some upside even over that if we could.
But I think it's a safe bet.
It's not it's not.
It's not a wild idea that we can go from 30% to 35, where we've gone from 40% to 30.
Having for 430.
So it feels feels pretty good to me pretty likely.
Great. Thanks, so much John thank.
Thank you.
Next question, Sir we have often martell from Canaccord. Your line is open.
Hi, Thanks for taking my questions.
And your <unk> network revenue.
What are the relative sizes between crackle and popcorn flicks contribution and within that context, how big can the chicken soup for the whole service fee.
So the crackle crackle is much bigger than popcorn flex.
I would say, it's pretty much like a two thirds, one third universe Austin without being overly precise about it.
I am expecting the chicken soup for the soul.
<unk> to be as big as Crackle.
There's many reasons for that belief, but.
That's our expectation now that won't happen day, one but over time.
The.
The brand has an extremely strong brand as you guys know.
And.
It's a.
Female demographic is underserved and Eva.
So.
We're getting great response from all the distribution platforms on promoting it and building it and from advertisers and the like.
So I.
I feel I feel like that one.
Really got great potential.
Got it.
<unk>.
What does the new Crackle technology platform, enabling you to do.
Well, I mean, theres, a bunch of different things so.
The number one thing I feel as its faster loading so that's the starting point better better viewer experience.
AD insertion is switched.
So it's a better AD insertion experience.
<unk>.
When you.
Sign up for our our service using your well your phone becomes your remote control.
My case, an iPhone becomes your remote control.
You are able to.
Sign up on your phone that automatically will download onto your various television sets in your home are our three networks.
So that you don't have to go and find them on your smart Tvs or your roku devices or your <unk>.
Or you're.
Your Amazon fire device.
Hi.
When if you have a particular program you indicate you're interested in seeing because you've seen something we've marketed something to you through E mail or like when you go to your TV it will be there.
Alrighty.
Waiting for you.
It reduces friction in so many ways for people to find the things they want to watch.
An easy easily available to them it allows us.
As a company to reach out to people.
Using the E mail using the phones in a way that.
It just it's a much simpler way for people to go from.
A web based or iOS based experience to a connected TV experience because of the way it is.
The way you are able to get access on your connected devices.
Connected TV devices, but but brought it from your phone so.
So theres a series of things that I really think make a whole bunch of will make a big big Big difference.
And if that's not enough. Its also got better data analytics and I think our recommendation engine will get much stronger too.
A lot of the things that you've talked about Austin in the past.
Relating to.
Watch time, how long people stay I believe are going to be significantly positively impacted by the test.
Yes.
Okay. Thank you very much.
Youre welcome.
Next question, Sir we have Jon Hickman from Ladenburg. Your line is open.
Hey.
All my questions have been asking answered except I was just wondering out of all the new content that you kind of talked about or that's in the pipeline.
Or what's your big favorite.
Do you have another outpost in the copper there.
That's a good that's a.
A very good question.
Yes.
There are some really good movies coming we just put together a big Jack for the pay one guys.
On the stuff that's coming I think.
Maybe the one that I'm most interested in is gold, which is coming with Zac Efron Anthony Hayes.
The story I've mentioned in the script.
The two guys who are going traveling through the remote desert.
First Zac Efron movie, maybe ever kind of long time outside of the studio system.
It's a big it's a big event that we're getting this movie.
And then the millennium, Tim It's John.
Millennium deal you remember those are the guys who gave us.
Post and.
And till death, which has done really well for us. Thank you Megan Fox She did a wonderful job promoting our movie she really.
She was really all in on that but they've got some really good stuff coming the enforcer with Antonio that Darius Kate Bosworth.
The follower, which I think will be interesting.
Theres just a lot of good stuff coming in the pipeline if youre itself thoughtful blood brain fan theyre going to give you one of those next year. So pipeline looks really good in terms of the program.
In terms of the series side.
I'm just thrilled with the way going from broke season two is performed.
And.
I suspect will be.
Talking about more of that in the near future. So.
Okay. Thanks.
Thank you.
Next question from Laura Martin from Needham Your line is open.
Okay, let's start with a housekeeping one one is how I know you're close.
Point, our deal on May 24th how much of the 20 <unk>.
$22 million of revenue Whitestone on.
Oh, a very small amount this time Laura.
Mike a couple of million is that fair class less than that.
Okay, great I'll use that I have a really hard one for you.
So.
I am using and assume that the 78% growth you've cited twice as actually a proxy for your AD revenue is that fair or just your report higher AD growth year over year.
No that's right that's a fair proxy for that okay. So here's my hard question you are paying a direct sales force and you're reporting the lowest CTV AD growth in your neighborhood service of any company. That's reported so aren't we under monetizing your asset because we're paying a direct sales force and we are getting.
They are locking up this these rights too fast by selling out a 100% at a lower growth rate than anybody else. So my question is you got the best businessman I know at what point do you hold back 10% of your AD inventory and put it on programmatic platform to create a benchmark those AD salesforce that you're paying.
They have to exceed because theyre getting paid a salary and they are producing lower results than if you had it programmatically.
So you and I have had this debate a few types that we have.
That's really kicked it into.
Into the foreseeable future.
Ed.
There is certainly.
It's a legitimate argument.
You are making which is that there is that it's cheaper.
To do programmatic selling if it works as well.
Where we have a slight disagree but is on the.
It doesn't work as well.
And by in my opinion, we're better served by having the relationships we have with advertisers that have built through our sales force.
Feel like the fact that we are up 133% in the Upfronts year over year is partly because of that I know others have had good upfronts, but ours are really really great. I think part of the reason we have 11 new.
Major customers in the top 22 is because we've had people in the field working with the major agencies explaining to them what we do.
<unk> getting us our piece of the pie.
I think that these things are part of building a business that are required.
And.
Even I would say, even the people who talk about doing just the programmatic stuff also tend to have other ways that they monetize or try to.
But I still believe that Thats, the right way to go but thanks, a lot for saying that I am the best businessman you now because it would be hard for me to disagree with that part of your question.
I want you to go to every one of your salesmen in tile and Wall Street thinks we should go programmatic inspire all of you and get higher rates in the scatter market can you just tell them that if they don't deliver better results for you.
<unk> got all their cutting Lara.
Get you to tell us.
Im happy to I.
I am too.
Third advise you to do it.
What's going on with customer acquisition costs with all this new competition in the Olympics and the market Blah Blah blah, what's happening with your customer acquisition cost trends.
It's a great point about this platform strategy. This distribution touch point strategy, it's very inexpensive and Thats where were adding our people and that's really what I like about it. It's got it's got our customer acquisition cost I believe is low as you could possibly happen and it costs very little for us to add these touch points out and they are adding 450000 average months.
The average user every single one of them.
I don't think we can match that in any other way.
To me, it's the greatest part of what we're doing I think it's.
I am very excited about the fact that this worked.
This is Mike.
This didn't have to work, but it did and the fact that it is working and we are now doubling down on it is really and truly from my point of view one of the key differentiators between us and others and I am excited about it really and truly very excited about it.
I wasn't sure if it was going to be 200000 or 500000, its 450, now and that seems to be.
It just seems to be holding across the board and some of them are doing better some are little worse, but it's really it's working the strategy is definitely working and with nine more already launched for this quarter I'm expecting us to get to just continue to overwhelm.
Anything else that we're doing in terms of adding customers now will buy a company or two I'm sure in the next quarter or so that will add customers too.
Because it does make sense to pull together more of these viewers.
And get the economies of scale, but.
Sure.
But this is the real issue to me. This is why I am focused on on these distribution touch point. So I think they really are game changers for us in terms of how to grow in a cost effective way.
Okay, and I Shouldnt ask another one because your norm on this call is three but I'm going to ask what scale are you thinking that you. Just said you pulled together you need to buy some of our stuff.
NBC is telling me, they're not big enough to compete and straining tell me. How you feel that you are adding staff to bulk up is that an exit strategy for you to go to something bigger or you really big enough to compete in this game of monitor huge companies.
Well I think there is a short term and a long term I by the way everybody. This is the last question because we've just right out of time, but im sorry question. If that's okay.
But those of you who didn't get a question I apologize to you.
But this is the end of the time to look.
In the short term.
We're small enough so that we can get bigger enough. So that it makes a difference in terms of creating shareholder value.
And that's my number one goal here is to drive more shareholder value, we can materially grow our business.
In a sensible way.
In the near term and be much more valuable company.
And the long term.
One of the ways that value was likely to be recognized as because we become combined with somebody bigger.
Of course, you know that as well as I do.
But I'm still in the mode in the mode of building.
And growing materially so that we can continue to increase the value of our company to our shareholders and then I am certain that at some point, we'll decide hey, we have to be soft part of something bigger and we should say, yes to all the people will call. It all the time instead of call back another time.
So.
I think thats the answer.
Okay, sorry, I took so much time that's okay.
Anyway look with what's been going on in the World I want to make sure that I don't forget to thank our entire team and our sales team included for all the hard work that they've done.
Through through Covid.
Like most other Ceos I know I'm worried about the impact of Delta that variant and what is going to mean.
We were going to come back to the office starting right. After labor day, I doubt, we're going to do that anymore.
Hopefully, we're all going to be.
Better.
We're all going to be in a better spot in the next couple of months, but in the meantime, I just want to thank all our people they've been doing a wonderful job.
And thank you all for attending the call and I look forward to talking to you all again soon.
Thanks, everybody.
Thank you so much presenters ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
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