Q1 2023 Cinedigm Corp Earnings Call
With us today, we have Chris Mcgurk, Chairman and CEO .
John Canning CFO Yolanda.
Our tier Chief content Officer, Gary <unk>, our Chief operating Officer General Counsel, and President, Eric Lupica, Chief strategy Officer, and President of <unk> networks, and Tony <unk>, Chief Technology, and product officer, all of whom will be available for questions. Following the prepared remarks.
I will now turn the call over to Chris Mcgurk to begin.
Thank you Laura welcome everyone and thanks for joining us on the call today.
Before I get into this quarter's performance, which was outstanding.
We remind you as we reported in June just how strong our financial results were in our last fiscal year that ended on March 31 2022.
For the full year, we posted consolidated revenues of $56 1 million up 78% over the prior year.
The streaming revenues, leading the way.
Up in the triple digits for the year.
We generated adjusted EBITDA of $11 million for the year and net income of $1 $8 million.
We also fully eliminated all of our debt.
Those results were outstanding and we over performed versus our internal expectations and all of our businesses.
And we continue that positive trend in the first fiscal quarter of 2023 ended June 30.
Our results exceeded both our own and external analysts' consensus expectations once again.
Our strong business momentum continued with total screening revenue surging up 98% and our fiscal first quarter another record quarter, almost doubling our long term screening revenue growth target and beating our internal planned target for the quarter.
Even more impressive.
This dramatic growth was on top of triple digit growth from the prior year.
On a two year basis, we grew our screening revenues, 455% this quarter.
We continue to see massive growth in our AD supported Avon and fast screening revenues, which increased 131% versus last year.
As other players in this space scramble to put in place an advertising supported streaming strategy. We've had in our AD supported channels in operation since 2008.
<unk> continues to outperform the rest of the industry.
Our diverse portfolio of 30 targeted enthusiast streaming channels with over 60 advertising demand partners getting on our AD inventory.
Now includes 15 wholly owned and operated channels such as screen door screen box and the Dove channel and several premium third party branded channels, such as Bob Ross Channel, The Elvis Presley channel and real Madrid PV.
It's broad and diversified channel portfolio is not only driving continued strong results, but is also mitigating risk setting us apart from almost every other player in the fast growing content streaming business overall, mostly dependent on a single streaming channel or a single revenue model for success.
As I said, we also have no debt at all on the balance sheet, having fully eliminated over $50 million in debt burden since the start of the pandemic.
We achieved such a strong balance sheet, despite the multiple investments and acquisitions, we made over that period to build our business now.
Now in addition to our unique and diversified business strategy, a debt free and soon to be sustainably profitable business clearly sets us apart from almost everyone else in our space.
Our vastly increased scale and has made us an increasingly impactful player in the streaming connectivity technology business.
At 30 channels and with access to over $1 1 billion global streaming devices and every major screaming platform.
We now have one of the largest and most widely distributed screening portfolios in the business.
With 46000 films and TV episodes in our library, we now have one of the largest modern screening libraries in the world.
With full ownership of our match point technology platform, we don't fully control. What we believe is the most highly scalable video streaming and end to end content distribution platform that exists today.
These scaled up assets have now set the stage for the company to launch four key internal growth initiatives center versus <unk>.
<unk> advertising solutions.
The Senate on podcast network.
Point to point out.
<unk> multi year investments in technology streaming channels and content.
These initiatives possible as we've said previously.
The seven whole upstream acquisitions, we made over the last two years alone brought in 15, new channels 15000, new films and TV episodes and full ownership of our industry, leading match point streaming platform.
All of that on top of our triple digit organic screening growth during that period.
These new initiatives leverage our dramatically scaled up assets technology and workforce with little incremental investment.
Our match point streaming technology is an absolutely key competitive advantage for us here it gives us the ability to execute faster.
Cost with higher margins and with greater analytical insight then.
Of our competitors.
Along with international business expansion, we expect these four new initiatives will generate incremental annual high margin revenues of over $50 million at steady state.
We'll further expand on all of this in his comments.
In addition, the synergies and scale benefits from recently acquired assets are enabling us to streamline our cost structure.
We fully expect to generate at least $7 $5 million in annual cost savings and achieve our aim of long term sustainable profitability, which we are absolutely committed to achieving this year.
John will provide more details on that in a minute.
I believe it's also important to point out that the long planned wind down and monetization of our legacy digital cinema business is close to completion.
And this quarter. This resulted in a revenue reduction of $4 8 million because of the timing of revenue recognition of higher digital cinema sales recognized in the first quarter of last year.
Without including digital cinema, our revenues were 38% higher than last year's quarter.
Despite this long planned wind down and much lower recognition of equipment sales. This year because of our continued hyper growth and screaming, we still expect to generate significantly higher total full year revenues in this fiscal year versus last year when as I said, our total revenues increased 78% to <unk>.
The $6 1 million as we move toward our strategic goal of $150 million in annual revenues from two to four years.
Before I turn things over to John and Eric I'd like to follow up on some points I made in my recent letter to shareholders.
Given our continued convincing financial performance and growth.
Driven by our unique diversified streaming content strategy, our debt free balance sheet and drive to sustainable profitability.
We remain as frustrated as we know you all are regarding our extremely undervalued.
Stock price.
As I said in my letter, we are concerned youre, considering a stock buyback program given what we believe is a bargain price and our stock.
In addition, we plan to keep educating the investment community about our unique screening strategy, while we keep outperforming like we did again this quarter versus consensus estimates on revenues adjusted EBITDA and net income.
And we will keep pushing back against sometimes misinformed negative sentiments about the streaming.
Content sector, and keep explaining how we have a unique and winning business model that separates us from other streaming company.
Companies are.
Our results this quarter clearly back that up as we posted a 131% advertising growth in the face of much Andrei bye.
By entertainment industry pundits about the digital AD marketplace with cinema centered again performing way higher than the rest of the industry.
Streaming remains the fastest growing segment of the entertainment business and we are incredibly well positioned and AD supported streaming the fastest growing subsegment.
Screening is clearly the future of entertainment.
Cinedigm has diversified channel strategy are huge modern screening content library, our industry, leading <unk> technology, and our stellar management team position us to not only capitalize on that future but.
But to also quickly become a high growth high margin and uniquely sustainably profitable streaming company.
With that let me turn it over to John for a more detailed review of our financial results John .
Thank you, Chris and good day everybody.
On a few first quarter highlights then I'll update you on our outlook for the year.
First let me reiterate a key point that Chris made a full year revenues were $56 $1 million last year up 78% without <unk>.
<unk> million dollars and adjusted EBITDA and $1 8 million and net income shows were outstanding results that are also set a high performance part for US. This year that said, we fully intend to generate significant total revenue growth this fiscal year as well as achieve sustainable profitability by the end of the year.
Our key first quarter financial results for the quarter ended June 32022, including <unk>.
Consolidated revenue of $13 6 million compared to $15 million in the prior year quarter as Chris mentioned the decrease in consolidated revenue of $1 4 million once because of a reduction of $4 8 million and legacy digital cinema equipment sales as the business wind down and becomes fully monetize.
Without digital cinema included our revenues were up 38% in the quarter.
It is important to note that our core business streaming revenue increased 98% to eight.
$1 million, driven by an increase of 131% and AD supported revenue and a 43% increase in subscription revenue over the prior year quarter Erick will get into the drivers can ask for.
This increase when he speaks overall content and entertainment revenue was $12 $2 million and grew by 38%.
This was by organic user growth increasing market demand for standardized extensive connected TV AD inventory and the launch of new streaming channels versus the prior year. I think it's also important to point out that <unk> total revenue and all component revenues exceeded our own internal growth plans for the quarter.
Our adjusted EBITDA was negative $2 $2 million in the current year quarter compared to positive adjusted EBITDA of $5 5 million in the prior year quarter.
And year over year Ethernet relates to the sale of digital cinema equipment last year that we didn't repeat this year and didn't expect too and that business winds down.
Net loss was $6 1 million or negative <unk> <unk> per share compared to net income of $5 1 million or positive <unk> <unk> per share in the prior year quarter.
This included a nonoperating charge of $1 $3 million to the Companys investment in <unk> company, formerly known as Star is media.
We are reiterating our long term growth goals for the next two years to four years, including <unk>.
Targeting at least 50% annual revenue growth in streaming growing our annual revenue to $150 million through both organic and acquired revenue and growing the content library to 75000 titles.
We have already achieved our previously stated goals of obtaining 40 million monthly viewers and obtaining engagement of 1 billion connected TV minutes, because we achieved these growth goals one year earlier than expected. We are currently resetting these targets.
Balance sheet remains very strong with $12 million in cash and zero debt.
Before I hand off to Eric I want to provide an update on the status of our legacy digital cinema business as it nears its end of life and has always been our expectation to monetize the digital center of assets as we said with great success and our most recent fiscal year results, which reflected sales of those assets over $11 million of the <unk>.
$18 million total digital cinema revenue.
While we have some remaining systems and service, we do not expect sales at those remaining systems to contribute materially to our results. This fiscal year, nor do we expect digital cinema deployment, our services revenue anywhere near the approximately $7 million booked last year.
Both of these points underscoring the importance of looking at our core business streaming growth story.
Encumbered by the digital cinema business.
Despite all that we fully expect to generate substantial full year total revenue growth for the company this year versus last year, where our consolidated revenues were $56 1 million up 78% over the prior year.
On our last earnings call at the end of June we highlighted that our annual streaming revenue more than doubled and our fiscal year ended March 31 2022.
And we expect we expect that streaming growth engine to continue to produce 50% plus year over year annual growth for the foreseeable future, especially given our related growth initiatives, which Eric will discuss further as Chris noted, we almost doubled our growth versus that target this quarter.
Finally, we continue to reap the benefits of our acquisition strategy, having integrated seven companies in the last couple of years. Most recently with DMR, joining the Senate I'm family last March.
This strategy has also significantly increased our global head count over that same period since the pandemic began as.
As expected the synergistic effects of these combinations and subsequent integrations are already materializing throughout our cost of sales and SG&A expenses.
Dealing streamlining opportunities for cost savings and improved deficiencies.
Actually as we migrate from incumbent third party providers to our owned technology match point and negotiate better rates from vendors because of our greater scale Chris.
Chris has stated repeatedly are aimed to achieve seven $5 million in annual cost savings.
And given the pace with which we have identified and are executing against streamlining initiatives.
I'm confident that we will attain those annual savings and be sustainably profitable by year end with that I'll hand off to Erick.
Thank you John and thanks again for everyone for joining the call today, we really do appreciate you.
Your interest.
And your support.
So before we begin I want to highlight a few key developments and points about the broader streaming industry.
So as illustrated by the recent earnings calls from all the major streaming companies like Disney Paramount Global.
HBO discovery and others. There are major changes afoot with these companies collectively pacing to lose over $10 billion. This year alone many of the pivoting towards an AD based strategy to offset those losses.
It isn't just the revenue opportunity. However, this is a survival tactic.
It's rarely discussed is that many of these companies earn 60% to 70% or more of their total revenues from old fashion cable TV advertising.
Those dollars are supposed to support their ongoing streaming pivot, but in reality those AD dollars are flowing faster than ever out of cable.
We expect total advertiser spend on connected TV advertising to drive more than $22 billion in revenue next year and nearly all of that is flowing right out of the cable industry.
So in effect for these big scale streamers, you have a rapidly cannibalizing legacy legacy business that can't support the multibillion dollar losses of their emerging businesses.
No I'm not comparing Senate onto these giant behemoths.
On scale, but what I am comparing to them is on business model. If you contrast, the business model of Cinedigm youre going to see a far more promising and compelling narrative.
First.
We made our pivot from pure subscription advertising beginning in 2018 long before many of these streaming service had even launched or even contemplated advertising.
Unlike the major streamers, our subscription businesses.
<unk> looked at in a ring fenced basis are already profitable even in their current subscale state as they continue to grow.
And with no legacy cable advertising businesses and our company.
Free to compete on price without impacting other revenue streams or cannibalizing ourselves.
We're not concerned about the large general entertainment streaming services.
Entering the space, we're not competing with them.
Much like the rise of basic cable on the 19 eighties and 19 nineties, our focus is on providing advertisers with passionate enthusiast enthusiast audiences.
At a value that helps them achieve their brand or customer acquisition goals.
Cost effectively and.
And given the rapid rise of advertising and marketing costs today that is exactly what advertisers are telling us they want and we're delivering on that mission.
And our results are showing that.
<unk> offerings are intriguing advertisers on our platform partners and the numbers continue to reflect that.
Total streaming minutes in the quarter rose to approximately $2 three 1 billion.
Up 68, 7% over the prior year quarter, our AD supported streaming audience, including web mobile social connected TV increased to approximately $89 6 million monthly viewers.
Up nearly 300% over the prior year quarter.
And total subscribers because the company's subscription video streaming services increased to 984000, representing an increase of 45% over the prior year quarter.
Our results in growth show that our strategy is scalar stream business has paid off with substantial revenue growth in other key metric growth.
We expect this trend to continue as we make considerable progress on our key initiatives.
First.
I'm glad to report that Cinedigm as soon as I am sooner versus are our big scale streaming service. The development is nearly complete for its launch in a matter of weeks.
Our focus is on getting to market before the busy fourth quarter and focusing on third party carriage deals with hardware manufacturers and other platforms, which are in negotiation.
Next let's discuss synergies Im AD solutions are direct sold advertising initiative.
We've assembled a great team with extensive experience and are in the market and there is selling today.
Early feedback from brands and agencies has been fantastic. They love the idea of being able to both discretely target a focused audience across multiple partners properties, but through one partner.
They also love our ability to do deeper integrations and campaigns beyond just programmatic ads that help them reach young and hard to reach viewers on the platforms of their choice, which are increasingly smart Tvs.
We are also in discussions with many other streaming companies to sell their advertising for them in this manner.
And we'll have more to announce on that in the near future.
Third we continue to scale, our owned and operated audio streaming business survey and podcast network.
Leveraging our experience in genre content fiction podcast is helping us find a real footing in what is now a $3 billion of your business up more than 10 X in just three years.
We're now at 25 podcasts and expect that number to increase to over 100 within the next 18 months.
Our unique bespoke model is not only resonating with advertisers, but many small publishers as well and we also expect to sign many networks and top tier podcasts with the next court within the next quarter for representation.
Selling both third party podcasts and third party SaaS channels allows us to leverage our scale infrastructure and sales team to generate high margin revenue quickly with a minimal capex investment. So that's going to be a big focus for us over the next 12 months and a key part of our drive the profitability.
Last but not least let's let's talk about match point, our proprietary streaming platform.
As we all know the stream business is the marriage of both content and technology and you can't be a true player in this game, if youre not doing both well.
With one of the largest film and TV library in the business.
<unk> affords us the ability to execute faster at lower cost and with higher margins and with greater insight than our competitors. Our platform provides us complete tech stack that fully meets the needs of a rapidly growing OTT business, providing us with an unparalleled competitive advantage that allows us to operate the <unk>.
Largest fast portfolio streaming library in the business.
Combined with one of the best management and operational teams in the industry <unk> has in place all of the elements to achieve what has been so far mostly it loosely in the nascent streaming business a high growth high margin profitable streaming company.
With that let me turn things over the operator to take your questions.
Thank you say starting today's Q&A session. If you would like to ask a question. Please press star followed by one of your telephone keypad now if you change your mind. Please press star followed by chain. We'd ask you ask one question with one follow up on when the parent to ask a question. Please ensure your phone is on mute.
Our first question today comes from Dan <unk> from benchmark. Your line is not licensed.
Great. Thanks.
Our afternoon here I guess.
Just I wanted to follow up on a couple of things here Tonight break the one question one follow up.
Just erick.
You talked a lot about sort of monetization ecosystem and it's clear that a lot of the longer the larger guys are bleeding, a bunch of money and cost effective.
Programming.
Is gaining some momentum.
Also curious around.
And you saw the Netflix deal with Microsoft.
You talked a lot in your prepared remarks around direct versus sort of programmatic and I'm curious on how you think the ecosystem evolves from there and specifically how it relates to your kind of the evolution of your own monetization strategy. If you think that will have any impact on how you're shifting your own gameplay and in this environment.
Sure.
One of the things that's been very compelling.
To hear.
As we've had sellers out in the market.
Is.
The many layers between the platforms.
And the agencies and brands themselves.
There is too many gatekeepers so you have.
Lots of different platforms and companies out there.
And ultimately when you have companies like us, where we have a huge social footprint.
Lots of different levers that we can pull.
Custom content and other initiatives, we can do on the channels themselves branded shelves of content. None of those things are possible programmatically and with brands really striving to standout from one another.
These days just straight programmatic advertising doesn't cut it especially for brand advertisers.
That doesn't mean that that by any means I think programmatic is an important piece of everybody's marketing mix, but.
In a market where people are increasingly trying to stand out and gain attention the ability for companies to execute on these sort of multifaceted campaigns and reach discreet audience buckets not everybody wants to spend.
Right.
High double digit.
Mid mid to high double digit CPM to reach general audiences right. They want to focus and target. So I think obviously.
Being part of that mix with very targeted focused brands and channels around discrete interest areas and having the ability to execute really sort of unique and compelling campaign I think.
That is exactly the same sort of play.
That basic cable did and its rise in the 80 to 90 is to sort of compete and do more of a white glove approach vis vis what you saw with the broadcast networks. So I think a similar dynamic is approaching there and I think we've put together the right team to be able to execute that in that manner.
Got it that's Super helpful. And then just kind of follow up on the first part of my preamble I guess just around content as you guys look at the market and some of the noise that's happened bounce.
We're bouncing back off lows.
Between either incremental cost attractive M&A additional partnerships.
And really frankly just.
Where I'm going with this erick.
And Chris just around thinking about the launch pending launch of the umbrella channel.
How complete or are you guys on that front are there any other holes you'd like to sell and when you have conversations around bundling and other things.
As being maybe part of a package I guess I'm trying to gauge sort of how we're thinking about monetization of the umbrella channel and the content.
Portfolio you have as it stands today.
Yeah, so well a couple a couple of things.
If you kind of look at so we're sitting on 40 344000 titles.
I would say that.
For the average audience there is probably in that library.
While there is things for everyone in there our real focus is on the best high quality content in that library, so thats, what where we.
Are really going to be focused on four <unk> with all of that but I think.
There's probably 15000 titles that are fantastic deep.
So thats, where we will be starting.
Over the next quarter or so so from launch over the next quarter, 10% to 15000 titles will be in that service eventually everything.
We touch will be available, but that's where we're starting.
But I think look as you look at our focus and goal on content.
What's what are the drivers the drivers that people want on any streaming service you want high quality, new things that arent available anywhere else. So I think I've mentioned recently.
Between.
Our kind of flagship properties fan door.
And.
Screen box.
The goal over the next 12 months is to get to a run rate where we're doing.
And new release every week some of those will be bigger releases right like terrified that we've announced one of our big films of the quarter coming up for Halloween.
There'll be new content flowing in new films and shows coming in.
Exclusive series and things like that and then just a really deep refresh of library.
Somewhere.
Somewhere in the neighborhood of several thousand titles were going to be investing in so I think that's really that's really a key part of our strategy right and it's common sense people. When you go to a streaming service what's the first place people typically go what's new and what's trending and usually what's trending as what's new so I think.
Our emphasis on bringing in fresh new titles.
Refreshing our library.
Is going to be the most important thing we do over the next 12 months I think look we saw some fantastic assets out of licensing from Warner with Freddy's nightmares on screen box and some other sort of key titles that we've done of that caliber.
And we're going to continue to do that and also going to find great gems.
That.
<unk> University will be breaking so that's I hope that gives you a little context about what our emphasis is going to be.
Yes, no that is helpful. I am also curious given sort of your unique portfolio and footprint I have to imagine you're having conversations with others about being included in either packages or other things.
A lot of guys are.
To your point, there's a lot of standardized scripted content out there and you guys have some strong a strong presence in several different verticals. So I'm wondering if that's a possibility or how youre thinking about sort of partnerships in the commercialization effort.
If you have not only had so we are.
We are not precious about bundling or trying to chart our own course direct to consumer.
We've always been.
We made the decision in 2017 to say.
We're going to bundle and bundling.
And that stems back from our philosophy of.
We don't really care, how consumers find us or get to our content or joined our content.
Whether they're going to get it through a bundle through a platform they already subscribed to whether theyre going to get it from us directly whether its amazon channels or through Roku.
It doesn't matter to us we want people to be able to get it however, and whenever they want it.
And we actually think the economics.
Our actually.
More favorable to us on an opex basis and.
Profit profitability basis on those kinds of partnerships look the cable industry has a good thing going with it.
The business model may not have been the most consumer friendly.
Consumer friendly and essentially got a lot of content for at least one discrete price. We're already doing this on Dove channel and the results have been Doug went from a low low six figure to a mid to high six figure subscriber base by bundling. It works, it's going to be a big part of our strategy and I have a direct directive too.
Biz Dev folks to bundle away and so expect to see a lot more of that over the next several quarters.
From us.
Our next question today comes from Brian <unk> from Alliance Global Your line is now.
Great I got a couple first can you quantify the DMR revenue contribution and maybe if possible talk about how you're driving better monetization of that asset from an advertising perspective with your technology.
Brian This is Scott.
We're not going to get specific about DMR other than what we've said in the.
The press release, when we announced that we were targeting and I believe.
$10 million of revenues.
Jim.
A positive EBIT contribution, but beyond that we're not we're not.
Okay.
We're not going to break it out, particularly since we integrated their content and our channels into our business right now, but I'll, let <unk>.
Eric was filed in the second part of your question.
Yes.
What I will say is we are.
We have exceeded our expectations so far.
And that is especially promising.
Given.
Given that we're still.
<unk>.
We closed the deal in April .
So we're still in the final stages of integration and still bring the library haven't even put the library on all of our other streaming services yet. So we're very very pleased with the results so far.
I would say.
I'm sorry can you repeat the second part of your asked on the questionnaire.
No. It was just on advertising I think that yes, we had talked about being able to get more out of DMR through your technology and render rates I'm sure. So I was just trying to get yes is that that's happening yet.
That is like that is definitely happening.
We've moved so we have a pretty sophisticated AD tech stack.
And we've seen.
The considerable improvement.
And render rates, Phil and CPM.
Other big element as we have.
Audience extension and other revenue streams that.
We're able to fill with our direct sales business.
That didn't have a direct sales capability so.
Those two factors there.
The first factor just moving it to our stack saw a pretty dramatic lift in.
In revenue, which reflected in.
A sizable improvement in the revenue run rate.
So as Chris mentioned I think.
The numbers that we put forward, we think are quite doable, given what we're seeing already and thats before even reaping the benefits really of the full integration. So content still is flowing out in the other apps and services, which is going to drive.
More AD impressions more revenue. So overall overall, we're very very pleased very bullish on what we're going to accomplish on that front.
Okay.
Two more and then I'll get back in the queue.
Can you talk about how the first couple of months of the Elvish channel has been received compared to other channels that you've launched and then if you had any luck and distributed in a channel to the three big guys, Roku, Pluto and <unk>, which I think initially.
We're reluctant, but maybe things have changed given all the hoopla around all this.
Yeah. So so two pieces first on the reception reception has been fantastic.
Our our biggest performer.
We believe has been in the Amazon ecosystem I can't I can't give that much more specifics than that due to.
We can't really discuss how its quantity the quantitative side and performing on specific platform, but I would say.
On <unk>, it's been quite a strong performer and that performance and then other places obviously done well, it's done well too I think it's done did well in the Directv.
Sling TV ecosystem, so for anybody who is on the fence.
Just looking at what the numbers look like.
What would have to question.
Sitting on that fence, given what we've seen so far so.
<unk>.
Im not going to comment publicly on where those conversations are aren't but I would say, let's say the numbers.
The success that we've had on some pretty big and important platforms.
People definitely reconsidering.
Theyre delay or wait wait wait and see stance and there were enacted.
Great one more question and I'll get back in the queue on the cost side, you've talked about $7 $5 million of cost cuts opex.
Opex increased sequentially.
Can you talk about where the investments in opex or being made and then where will we see them come out is that opex or cost of goods.
Or will that those cuts be reinvest in other ways to grow the business.
I'll, let John John can speak more in depth I would say on the streaming side.
A lot of the Opex was reflected in.
Increase in Opex on OTT was.
US picking up DMR number one.
And then number two the full weight.
Ah.
A lot of that Opex.
Is being pushed into our deals and being renegotiated. So youll see some savings in cost benefit around the integration there that which wasn't fully realized in that quarter. The other is content investment short term content licenses.
Particularly for our flagship services, we did spend more this year on short term licenses as we've.
Steered those towards.
The gap between new release and longer term investments. So I think thats, just a short term sort of investment.
In OTT and then obviously, we picked up more people.
And as we streamline the organization cost.
And some of those people are hitting the expense or the opex side.
They work on creating the streaming services when the operation of those services. So some of that will also we will get some benefit there as we complete the integration.
And Jonathan.
Do you want to add.
No that's it.
And that's pretty much most of it I mean, erick covered without getting too specific but yes as mentioned in our comments. We are head count grew pretty dramatically through the course of the last couple of years and we're now we're in the natural backend evolution of the M&A process of streamlining and finding efficiencies in <unk>.
Just getting better at what we do so youll see when you look at that SG&A a good portion of that was people related costs just from acquired heads.
There was probably a little blip in professional services.
To support the integration process, but those those savings are real and expected and were starting to see them already as we March through even Q2, so far.
Great. Thank you.
Our next question today comes from Scott Buck from H C. Wainwright. Your line is now open.
Hi, Good morning, everyone. Thank you for taking my question first one on the <unk> launch can you speak to what the internal expectations are and what kpis you'll be pointing.
Investors too.
Okay.
Sure.
So we are in.
Ms of Kpis I think.
If you kind of look at how we.
Whenever we launch something first.
First phases.
Distribution touch points part two is as the users that come from the distribution touch points. The third is.
The average the advertising kpis.
How are we doing on impressions and growth there and then ultimately it is.
Financial So I think the early stages and you'll be looking at.
How well are we securing distribution, what's the footprint look like.
And so that's what we're really going to be focusing on.
These launches.
I think this is a this is a app based launch as opposed to a SaaS based launch. So there is a little bit longer of a ramp versus a fast channel, which kind of likes up immediately.
So I think youre going to be looking at.
Several quarters of building as it gets some material footprint under it.
Great. That's helpful and then I am curious on the longer term target.
$150 million of revenue.
Basically a $50 million run rate today, what should we think about organic versus inorganic in that incremental $100 million and then if you could speak to what the pipeline looks like for our on the inorganic side would be would be great.
Sure so on the organic side.
As we as we laid out I think those four initiatives between.
Center versus direct AD sales podcast thing.
And extracting some partnership in SaaS revenue out of match point.
We.
We expect the steady state.
To generate upwards of $50 million.
So if you combine that with the current run rate of the company.
That gets US gets you about two thirds of the way there we think the remainder of that comes from.
<unk> organic growth off of the platform and then will come from also from inorganic growth or M&A.
While we're not we can't talk specifically about any.
Targets are ideas, we probably have one of the largest.
Pipelines of opportunities that led to the deals we did prior to.
Ed.
Prior to the start of this from.
From February April through.
December of the preceding year.
So we think.
We think the next phase for us once market conditions improve.
We have plenty of ideas and opportunities to look at again, we think the difference now being.
There is there's obviously a downside.
Two our equity our equity price not being where we'd like it to be but neither is most other targets. We were looking at right. We think we've got fair valuation. So I think there is a lot more that we can do there, but I think we need to in the short term, we're going to be focusing more on just these launches organic.
And then when market conditions dictate.
We'll consider more M&A.
Great. That's very helpful. I appreciate the time today guys. Thank you.
Thank you.
Our next question comes from Lee <unk> from Joseph Gunnar Your line is now open.
Hi, Good afternoon, gentlemen, two quick general industry questions. The first one is the Walmart deal with Paramount plus does that have any impact with your distribution labor with them and then secondly have you noticed any impact from macroeconomic pressures in general thanks.
Yes.
Take that well go ahead Kristen.
I'll answer the second piece and then Erick can answer the first piece the Walmart parallel piece.
I think our results speak for themselves I mean, I said in my remarks that.
We're concerned about the digital AD market, we've seen that with some of the bigger services everything alright sales were up 131% in the quarter.
And we see the momentum continuing over the rest of the year, particularly with all of the spending.
Spending that will be done.
For the midterm so.
The only impact that we've seen from macroeconomic.
Reasons, and we think it's for no. Good reason because we have explained is the impact on our stock prices, we've been hit or with a lot of the other technology media streaming microcap stocks.
That's it in terms of the business.
We're moving ahead on all fronts, we've exceeded all of our internal expectations as we said.
For the full year last year and for this quarter and.
We don't see any issue with both becoming sustainably profitable by the end of this year as we said with the cuts that John mentioned.
It also hitting that target of $150 million.
And revenues in Erick explain the components of how we are going to get there. So for US it's full steam ahead.
<unk>.
We haven't really experienced any business headwinds.
Eric do you want to take the first question about Walmart and Paramount.
Yes.
That has really no no impact on any relationships, we have with Walmart today.
I think.
In general it represents.
Walmart.
Big scale streamers partnering with big scale.
<unk>.
I think to be expected given their cut their competitive place with Amazon looking to offer something but I think.
For us it's it's a good model to emulate.
With the appropriate partners for our brands. So great. Great example is previous prior to us owning it <unk> one of our brands had a partnership.
With Costco.
Costco members got a discounted bundle.
For movies and so one of the things that we look at is.
As you know can we can we reinitiate those kinds of partnerships.
With either <unk> with the sort of appropriate retailer.
Theatrical or other partner.
And I think thats something that were working very hard on.
Because it's a good idea and it affords scale. This is how almost every.
Studio streaming service has got to subscriber and revenue numbers that they are at today and.
Think.
With a big scale and unique offering.
We have we think theres opportunities, maybe not Walmart scale, but we think its still big scale with some of the partners that we're looking at so.
But yes, it's so if anything I would say, it's a direction. We're also going in.
Thank you there are no further questions at this time I would like to turn the conference back over to Chris Mccann for closing remarks.
Thank you again, thank you everyone for joining us today and for your interest in Senator.
Please follow up with Laura Kiernan and the team at high touch Investor Relations with any questions. You may have you can reinsure centered on at H T I R.
Yes.
We look forward to speaking with you again, when we report our second quarter results for the fiscal year 2023 in November .
<unk>.
Yeah.
That concludes todays Pentagon Costco you may now disconnect your lines.