Cinedigm Corp

Welcome to Synodyne's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question 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 this conference is being recorded. I will now turn the conference over to Jill Calcaterra, Executive Vice President. Thank you. You may begin.

Thank you. Good afternoon and thank you for joining us today on our third quarter fiscal 2021 earnings conference call. Participating in today's call are Synodyme's Chairman and Chief Executive Officer, Chris McGurk, Chief Strategy Officer and President of Synodyme Networks, Eric Opica, President, Chief Operating Officer, General Counsel, Gary Lafredo, and Senior Vice President, Finance and Accounting, Cheryl Odiardi. Before I hand the call over to management, please note that on this call, certain information presented contains forward-looking statements. These statements are 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 is as of today, February 22, 2021, and Synodarm 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 for a more in-depth review of our streaming business results and strategy. Then Gary will cover our strong fiscal third quarter financial results and the remarkable progress we have made over the last few months in reducing debt and strengthening our balance sheet. Let me emphasize at the outset that we are in the strongest position we have ever been in financially. We have significantly reduced our debt and have plenty of 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 as the Chinese funds, including Bison Capital, have reduced their ownership to less than 20%. This ownership composition change and resulting increased share liquidity have given us the flexibility to more quickly and fully execute our strategic streaming roll-up acquisition strategy And it is also already opened up synonym to an entirely new wave of investors who seem very attuned to the company's unique streaming 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, and particularly 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 viewers. Clearly, we've solidified our position as a leading independent player in streaming, the most important and fastest-growing segment of the entertainment business. And with the court 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 grow our market share organically and also through a roll-up strategy of acquiring subscale but high potential streaming companies in an acquisition market environment where we face very limited competition due to our unique assets, technology, and streaming capabilities. As opposed to 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 bases at the expense of each other, Synodyne is focused on building out a widely distributed portfolio of more targeted streaming channels focused on specific enthusiast audiences. like DocuRama for documentary enthusiasts, Dove for family enthusiasts, Bloody Disgusting for horror enthusiasts, and so on across the 15 streaming channels we've already launched and the 10 more we have in the works. Synodyme Strategy is not competitive with the expensive subscription-focused Netflix and Disney Plus and Peacock and all the other major media general entertainment channels that are at war with each other for subscribers. Instead, as Eric will explain in more detail in a minute, our targeted enthusiast channel approach is 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 has now almost exceeded 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 media streaming war approach, because it requires a fraction of the content and marketing spending as the big general entertainment channels, where the major media companies are literally locked in a do or die struggle with each other to secure their streaming futures. And very importantly, the major media companies are largely ignoring this enthusiast space as they fight each other for general entertainment channel dominance. 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 have posted this quarter, plus our ongoing roll-up acquisition strategy to accretively vacuum up subscale, high-potential streaming assets as the industry consolidates. We have been very busy executing on this unique opportunity to take advantage of this competitive by accelerating our enthusiast streaming channel strategy via acquisitions. In the last three months, we acquired three high-potential streaming companies in enthusiast categories where we believe there is an underserved audience and there is tremendous global growth potential. The first was The Film Detective, a leading streaming channel company focused on classic film and television programming and with a library of 10,000 film and TV episodes. Then we acquired Fandor, called the Netflix for Indie Film by the Wall Street Journal, and a streaming rabbit hole worth falling down by the New York Times, along with another 4,000 premium independent content titles. And earlier this month, we acquired Screenbox, called the perfect horror streaming alternative to Netflix by Tech Times, and named one of the best streaming services for 2021 by PCmatic. We are now very focused on integrating these assets into Synodai and anticipate relaunching Fandor and Keyframe, Fandor's 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 is acknowledged as among the industry's best streaming solutions. Integration with Cinedigm will result in immediate higher margins, rapidly escalating advertising and subscription revenues, and significant rising valuations for each of these channels, as well as business synergies across our entire streaming portfolio. Clearly, we have an immediate market and competitive opportunity to accelerate our streaming growth with further accretive roll-up acquisitions like these, and we fully intend to continue to take advantage of it. In a minute, Eric will review all of our key streaming metrics, where we have showed continued remarkable growth across the board. However, 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 streaming universe, including Amazon, Netflix, Hulu, and everyone else, continues to do gangbuster business. We have put up three record quarters in a row in digital sales, with this fiscal third quarter up another 34% versus last year. We see continued huge potential in the sales arena as the streaming revolution keeps gaining ground on a worldwide basis. At the same time, as we continued to rapidly build our streaming business, we strengthened our balance sheet enormously, adding significant cash and dramatically reducing debt. Having fully eliminated the second lien debt and convertible debt that 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 so 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 rollout strategy. And we also did all this while posting positive and growing adjusted EBITDA in our core business of content distribution and streaming. With adjusted core business EBITDA of $1.3 million in the quarter, up 376% versus last year. We think that is a very significant achievement in light of our ongoing investments to rapidly build our streaming business and market share. That 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 longer have a controlling shareholder and have a much higher public share flow. Bison Capital and the Chinese funds now own less than 20 percent of our common equity, and all the convertible debt they held before has been eliminated. As I said at the onset of my remarks, this ownership change and vastly increased share liquidity 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 Fantawild, known as the Disney of China, given that it is the largest theme park operator in China and the biggest producer of premium animation in all of Asia. In addition, this change in ownership composition has opened the gates to a flood of new investors who seem very attuned to the upside potential of streaming in general and Synodyne in particular. And on that note, I would like to thank all the new investors who have discovered Synodyne, particularly the thousands of individual investors on trading and social sites like Robinhood and StockTwits. 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 major media companies. And it's very clear that many of our new individual investors that have rallied behind Cynodyne share that exact same independent and entrepreneurial spirit. We thank them and all of our shareholders for their support, and we look forward to a very successful future together. And with that, I'd like to now turn things over to Eric for a deeper dive on our streaming business and strategy.

Thank you, Chris, and thanks to everyone for joining the call today. Before 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. Today, 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 global general entertainment audiences in the meantime we're seeing an incredible surge in consumer engagement with what chris and i have described as enthusiast streaming 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 for household in america now approaching about seven and a half up from just two a few years ago the industry is finally able to deliver what consumers have always wanted, the ability to build their own custom bundle of channels that reflects their interests and passions. On top of this, the emergence of free ad-supported linear and on-demand channels provides consumers additional choices in breadth while giving advertisers the addressability and audience demographics they need. As one of the largest providers of channels and streaming content, Synodyme has quickly become one of the most 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, and Fox, to fulfill on delivering the single most important thing that 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, or placing Bob Ross on Viacom's Pluto TV like we recently did. Synodyme drives 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, let me discuss our performance in the quarters. Overall, our streaming business revenues increased by 80%, 85% over the prior year quarter and were up 45% sequentially over last quarter. 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 a robust shift to streaming, the election spending focus on digital, and a return to pre-COVID levels of spend during the holiday quarter. This increase was also driven by record viewership of our ad-supported channels, which 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 channels that we had prior to all the acquisitions, rose to 164,000, 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 245,000 subscribers, up nearly 216% over the trailing 12 months. 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. Now, our 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, the Roku channel, RAD, which is a key platform on the Sony PlayStation ecosystem, and the Weather Channel's LocalNow platform, and many more. This has led to Cinedigm's services in aggregate reaching nearly 1 billion 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 2020. and having streamed a half a billion minutes between April 1st and December 31st, up more than 1,300% from when we launched it. So typifying what we look to when we launch new channels. During the quarter, our portfolio grew to 15 live channels in the market, up from 13 in the prior quarter, with the launch of Bloody Disgusting TV, the acquisition of Lone Star, and the Film Detective channels. We anticipate launching one to two new channels each quarter with our primary focus on launching strong branded properties with either exclusive or celebrity-driven 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 Altree Media, which is a 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 advantage is our platform technology. Called Matchpoint, our platform's 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 than our competitors. Our results this quarter show what 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 are up 17%, with total quarter-over-quarter SGA up only up 14%, far outpacing revenue growth. Last quarter, we laid out why our increasing importance to the streaming market and our technological competitive advantage gave us an opportunity to grow quickly through a roll-up strategy. Our thesis was then and today remains simple. Find and acquire great streaming companies in underserved enthusiast verticals that can scale to millions of subscribers globally. As of today, we have followed through on that mission and closed and acquired three streaming services, the Film Detective, Fan Door, and Screen Box, that exemplify that criteria we laid out. These services bring in 15,000 hours of streaming content, well-established brands in the independent, classic, and horror verticals, and bring a solid base of users and subscribers for us to build out from. We are already deep in the integration process, and we are already seeing how MatchPoint provides us a huge leg up in this process, whereby we fully modernize and systemize each of the acquired services, content, technology, and supply chain processes. 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 us not only how to do it profitably, but also grow aggressively, both organically as well as through M&A. The management team believes this will lead to significant increases in shareholder value rapidly if we are able to execute our 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. Theaters 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 virtual print fee when a movie is first played on a system. In addition, and as previously discussed, The deployment contracts in 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 toward 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 to streaming, third quarter revenue for our streaming channels was 85% higher than last year. AVOD channel revenue was up 150% over the prior quarter ended September 30, 2020, 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 $900,000 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 $25.4 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 31, 2020 is related to the digital cinema business, which leaves $13.3 million of debt on the content and entertainment and corporate business compared 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, and a PPP 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 $500,000 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 EastWest Bank. The East West Bank credit facility had an outstanding balance of $18.6 million on March 31, 2019. That was reduced to $14.5 million as of March 31, 2020. And that balance had decreased to $5.1 million as of December 31, 2020. As I stated, the current balance on the East West Bank today is only $2.4 million. The East West Bank loan is at an interest rate of 3.75%. So that currently results in payments of about $7,500 per month. Now the company's second lien loans. These loans had an outstanding balance of $8.2 million on March 31st, 2020. The outstanding balance on the second lien loans as of December 31st, 2020 was $6 million. In January and February of 2021, after the quarter ended, we exchanged with various holders of second lien notes 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 9th, 2021, the company prepaid all of the remaining outstanding obligations under the second lien loan agreement. The payoff amount was approximately $3.2 million. The second lien loan agreement was then terminated effective February 9th, 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 non-recourse debt related to the digital cinema business as of today is $12.1 million. As of December 31, 2020, 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 2, 2021, after the quarter ended, we sold 5.6 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 Synonym to continue the growth of our core business and to continue to execute on our 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 Synonym to 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, Synodime 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 a majority owner, which has made it much easier to quickly execute our streaming roll-up strategy while still maintaining our strong position for future monetization in Asia. This also greatly enhanced our common share liquidity and opened the gates to a whole new group of forward-thinking investors who seem to really understand the potential of the streaming space and Synanon's unique competitive position and growth prospects. The future looks very bright. And with that, we will now take your questions. Operator?

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you 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 Kronos with the Benchmark Company. Please proceed.

Great, thanks. Good afternoon and congrats on the quarter, guys. Really strong traction here on streaming in particular. Maybe if we can just start there, you know, for Chris or Eric, just in terms of all the acquisitions that you've made, clearly very savvy, gaining a lot of attention from several outlets. Just curious, if maybe you could at least share with us what the trajectory is now of kind of the AVOD business post-acquisition. And since 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.

Chris, I'll answer the second part of the question and then turn it over to Eric for the first part of the question. You know, all the financial firepower that we have right now has 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 that we already made that seem to meet our criteria. So 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 a little bit more. And also, we're integrating the three right now. 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, in large part because of the MatchPoint technology that we both spoke about in our remarks. So, Eric, do you want to take the first part of the question?

Yeah. So, you know, as we look at the composition of acquisitions, you know, if you'll notice, you know, we acquired two subscription, prominently subscription-based services, and then another service that was predominantly advertising-based. You know, I think our outlook on the market is we look at in the enthusiast space, both of these are going to be vital, you know, as we look at and say we're really providing that richness and depth once people, you know, get bored with some of the bigger services and want to dive into things that are their particular interest areas. We think there's plenty of room on that front for both ad-supported as well as subscription services. So, you know, and as, you know, furthering what Chris has said, you know, we're, so our focus is looking at things that could, you know, not only when we acquire them, they are a, you know, they are either ad-based or subscription-based, 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 ConTV and Docurama and others. So think of it as, you know, a perpetual free trial when we, you know, if we and when we launch a Fandor linear and ad-supported play, that's really a way for a larger number of users to get exposed to the service, thus not only generating revenue, but reducing our customer acquisition costs. So, and then in terms of scale and size, I think, you know, you know, 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, you know, we have the balance sheet capabilities to do that now. And so I think that's a much bigger plus as we are, you know, M&A is, is, is partly strategic and partly opportunistic. And I think that helps with the opportunistic part of M&A.

You know, I think another point that, you know, a lot of these acquisition initiatives we're looking at are incomings. Sort of our, everything I talked about in my remarks and Eric did is pretty clear in the industry. And a lot of these smaller, maybe subscale streaming initiatives, asset companies, they really recognize the upside. So we're sorting through a lot of incomings as well, which makes the job larger, but a lot easier.

Yeah, I think in a way, Chris, it'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? You know, we've seen some success with other services out there and kind of pushing a linear first offering, particularly international. I know it's not, I mean, you guys are so decent, you have such a huge playgrounds domestically, but, you know, can you just give us any thoughts there if that might be an option for you guys to get, you know, bigger international viewership footprint before you push more channels that way?

Yes. So, you know, that's been a big focus, you know, it's, you know, one of the bases of for the acquisitions we made as we evaluated them on their international potential. And as we, we look at every acquisition now, you know, our, our model is, can this thing scale to, you know, millions or tens of millions of subscribers, you know, depending on the business model of how, you know, whether it's wholesale subscribers, third party or direct, can we scale up rapidly internationally as well? And so the answer with, you know, with all three of those acquisitions was a resounding yes. We saw a defined need in the market. We have already, you know, on the ad supported side, we've already been anticipating that we would be entering Europe and Asia. So we've been entering into, I think we've closed at least a half a dozen, if not more acquisitions. advertising partnership deals for those territories and our focus over the next 12 months is to match the that you know 50 plus advertiser footprint we have in north america with every dsp major dsp we're going to do that the rest of world um our and then most of our partners on the platform side you know if you look at who we're working with you know samsung tcl um all of them are international all of them are rapidly expanding internationally and all of them are pressing us to expand internationally. So I think, you know, international is going to be a huge part of, you know, the 2021 story as we continue to really dive into that.

Got it. That's super helpful, guys. Thanks, and congrats again. Really strong results.

Thank you, Dan.

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

Hi, guys. Thanks for taking my questions. Can you highlight during the December quarter how many digital channels were live? I think I heard you, but I wasn't sure, compared to the September quarter. And then if you can in any way quantify the increased adoption by partners of the channels that have been live for six months or more.

Yes, so we have 15 channels live in the market today. We actually added, so that includes the addition of Bloody Disgusting and the two film detective channels that were added in that quarter as well. That makes up the additions. In terms of the channel footprints that we have, I don't have broken out the number of devices per channel in front of me. I think I can get back to you on the overall distribution footprint by channel subsequent to the call. But I'll tell you that in terms of the scale of distribution, there's 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's a second tier of channels where some channels are still getting more distribution in smart TV. I'd say that's about the middle third of channels So we probably, over the next six to nine months, will continue to expand the distribution on those channels. I would say there's another tier of channels. I think I mentioned we cease distribution of certain channels in the portfolio. So that 15 is net of us dropping Hollypop and CombatGo which underperformed, for example. So our vision is if channels don't cut the mustard in terms of carriage, consumption, scalability, we're going to pretty ruthlessly edit them out of the portfolio. So it's much like any other portfolio of any kind of assets where you have to constantly trim the laggards. and add new things that are going to beat your top performers. So that's 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 minimal threshold of footprint.

Great. And then you talked about ad budgets getting back in the fourth quarter, and I heard some of that too through some advertising execs. I'm wondering – what you saw in terms of pricing or CPMs, you know, in the fourth quarter or even today compared to the year ago period, is it higher? Is it lower? Is it about even?

Uh, I, I would, I would characterize generally speaking, it's about even, um, to slightly higher. You know, I would say if I had to, you know, uh, estimate a number of probably maybe 5% higher in the last quarter, um, Now, a lot of that, of course, was driven by a very, very aggressive October and election spending, which, you know, 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 shift that I've been talking about, the five to six million, you know, viewers that have shifted out of cable, the cable cancellation numbers that you hear out there, those are the trailing indicator, right? Because usually what happens is people kind of forget, you know, middle to higher income individuals, they have cable, they maintain it, and then as they realize they're not using it at all, they get around to cutting it. But meanwhile, the advertisers are already seeing those declines and just in the lack of viewership and audience. So, you know, that's one of the most important and critical driving factors of consumption is that, you know, even for people who still haven't cut the cord, their consumption has already moved to streaming. So that's being borne out in higher demand for connected TV advertising overall. And I think, you know, just anecdotally as we look at how things are already going in Q1 as kind of a preview, we're seeing not this typical – we do see a seasonal drop, but we're not seeing it to the extent we used to see it, 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, you know, cable TV homes go from 82, 83 million down to whatever the floor could be, you know, that could be 40, 50 million or less.

You know, I don't mean to 58% growth is fantastic, obviously in any business. So forgive me for asking it this way, but the 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, and maybe with 100% on the ad budgets, sorry, on the AVOD, I guess I'm wondering why revenue growth doesn't look a little bit more like viewership growth. What is the disconnect there?

Sure. You've got 34% growth in digital sales in that number, 58% growth number.

Right, 100% on the AVOD, right? 300% on viewership.

Yeah, and you've got licensing all the different platforms, which was 34%, which pulls it down a little bit, but that number in and of itself, the 34% growth is a great number for that business.

Yeah, so I'll add and say, So it's really what happens if you kind of look 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, right? So we've clearly accomplished that. The second phase of that is having enough demand partners and fill 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. They'll say, come back when you build an audience. So you have to go through a period of time for every channel where you have to prove that you have an audience, get data, and then go back to all the advertisers and get them to want to advertise with you. Even on programmatic, it goes beyond direct selling. And so you're always going to have a lag of, you know, a quarter to two quarters, and it depends on how far each channel's along in their life cycle, where... You've got a lot of audience, and then the monetization follows. So if you look at it and you say, all right, our viewership is up 300-ish percent. Our revenue growth is up 150 percent. So what that tells me is, one, we've got a lot more room to improve CPMs, fill rate, to bring more ag partners and more scale and more revenue. So there's more headroom from that part of the business. So 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 ag business to now having a scale-add business that 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 extract revenue out of the existing basis? I would say That's a fair question, and I think that's one of our goals and one of the big opportunities of the company.

Great. Yeah, that was really helpful, the way to think about that at the end. Last question I have, three acquisitions you've made. What should investors think about in terms of revenue contribution? Is it like adding two new channels? Is it much bigger than that? What would you be reasonably happy with? As you look at fiscal 22, what would you be really unhappy with their contribution for next year?

Well, I'll say we don't. So from a from a number, we usually don't we're not giving guidance on the channels per se. But what I'll 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, you know, deliver in the 15 to $20 million range in revenue for channel. Now is that, that means fully launched, fully distributed under every distribution model, you know, globally, you know, including wholesale, wholesale licensing, all these other pieces. But that is, you know, that's what we talked about overall in the longterm is an aspirational number. But we're not really giving particular guidance on the individual channels one by one or how they're going to perform in the short to midterm.

Thank you. This does conclude our question and answer session. I would like to turn the conference back over to management for closing remarks.

Yeah, this is Chris McGurk. And just in conclusion, again, I just want to thank all of our shareholders again who are all your attention and support. And again, really thank all the new investors that we have, the enthusiastic new investors that have found the company and, you know, are commenting about it and following us and, you know, on Reddit and Wall Street Bets and Robin Hood and StockTwits. We all want you to know that we're listening to you and we're glad that we have your support. And even though you're not multi-billion dollar investment funds, Some of the advice and comments that you give are just as intelligent and smart as we get from those type of groups. So keep talking to us, and we'll 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.