Chicken Soup for the Soul Entertainment, Inc.

Good day, and thank you for standing by. Welcome to the Chicken Soup for the Soul Entertainment fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-answer session. To ask a question during a session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Taylor Krafchick, Investor Relations. Please go ahead.

Thank you, operator, and welcome. With me on the call today are William J. Ruhanna, Chairman and Chief Executive Officer, and Chris Mitchell, Chief Financial Officer, to review the fourth quarter and full year 2020 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. Forward-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 the projected results. Given these uncertainties, listeners are cautioned Cautions 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 gap-based and non-gap pro forma financial information. The non-gap financial measure the company uses is adjusted EBITDA. Management believes that adjusted EBITDA 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 gap measure. For further information regarding the company's historical financial performance, we refer you to our filings with the SEC including our annual report on Form 10-K for the year ended December 31, 2020, which was filed today. I would now like to turn the call over to William Ruhanna, Chairman and CEO. Bill, please go ahead.

Thank you, Taylor, and thank you all for joining us. We posted solid Q4 results and capped an important year for our company. In light of the unprecedented year that we've all been through, I think it's amazing, what our company actually accomplished. If you think about these factors, we lost a $15 million revenue customer when Sony shuttered PlayStation View at the beginning of the year. The advertising business nearly shut down in the second quarter. Nine of our movies and television series were unable to go into production because of COVID. And despite all of that, We finished 2020 with a total revenue increase of over 20% and nearly doubled our EBITDA from the prior year. Ordinarily, I'd wait to thank the people who work for our company until the end of this presentation, but in light of what they've accomplished, I want to express my sincere thanks to them, to our employees and our partners for all their support. They have been through a lot and they have excelled. Our strong 2020 results set the stage for what we believe will be a terrific year of growth in 2021. We're already off to a healthy start to the year from a viewership growth perspective, and we're continuing to ramp our pipeline of original content. We're also continuing to rapidly expand our distribution touchpoints for our AVOD networks, as we announced last week, And we have exciting developments on tap, including the launch of new tech platforms for Crackle and PopcornFlix. We set the stage for next generation viewer experiences, which we hope to deliver as we execute on our plans to build the industry's best AVOD. Before getting into all of the 2021 developments, let me first recap our Q4 and fiscal 2020 financial results and highlights. Chris, who is here with me, will speak to our financial results in more detail. Fourth quarter gross revenue totaled $20.2 million, up slightly from Q3 levels and down from $24.8 million in the last year's fourth quarter. The year-ago figure included $5.6 million of low-margin ad revenue from PlayStation View, which was shut down by Sony in early 2020. Adjusted EBITDA was approximately $2.8 million and reflects our growing percentage of fully owned content and our continued focus on cost-efficient distribution and production. I should note our Q4 revenue in adjusted EBITDA would have been higher, but under accounting rules, our successful and already profitable film, Willy's Wonderland, which we actually delivered at the very end of 2020, is instead being included in our first quarter 2021 results. The good news is that Willie's will be additive to what has been an outstanding start to the new year. More on that shortly. Our crackle plus online network gross revenue grew 35% quarter over quarter. As we benefited from strong demand for our original and exclusive content, including going from broke spies on point and Robert the Bruce, which accounted for nearly 20% of our ad impressions in the quarter. When looking at online networks, keep in mind that revenue is somewhat artificially reduced by intercompany license payments we make to our distribution and production segment for the content that airs on our networks. These payments totaled $1.7 million in the fourth quarter and $1.3 million in the third quarter, respectively. But adjustments aside, the takeaway for CracklePlus is that we generated strong sequential growth in the quarter and that absent PSU's year-ago revenue impact, we are generating year-over-year momentum as well. In fact, our December 2020 monthly results were up 16% on a like-for-like basis from December 2019. Distribution and production also generated a strong performance, up 12% year-over-year in the fourth quarter, though this performance was lower compared to the third quarter, largely due to the strong contribution from TVOD of the outpost in that period and also Willys. For fiscal 2020, gross revenue totaled $68.2 million, an increase of 20% compared to 2019, despite the previously mentioned factors in my opening comments. including the lack of new productions, PSVU, and the COVID-wracked second quarter. Net revenue was 66.4 million, up 20% compared to the prior year, and adjusted EBITDA was 11.8 million, nearly double the 6 million in 2019. In addition to solid financial performance, we also took several steps during the year to strengthen our balance sheet and enhance our liquidity position, while also putting financial and strategic partnerships in place to support our production objectives. And finally, of course, near year end, we obtained 100% ownership of Crackle from Sony, strengthening our strategic and financial relationship with Sony and facilitating our future growth. So all in all, it was a strong quarter and a productive 2020. but we think we're just starting to show the true growth potential of the company. We continue to make rapid progress on all elements of our AVOC strategy. Our pipeline of original and exclusive content, including television series development and content acquisitions via screen media, have positioned us to air two to three new titles per month on Crackle+, and we believe we are in a position to eventually accelerate that to as many as one new title per week. We believe no one in the AVOD business is delivering original and exclusive content at a rate approaching that. With our content engine ramping, we have been increasingly focused on growing viewership. The biggest part of that effort has been expanding our roster of distribution touchpoints, including linear and cable distribution partners, digital partners, and smart TV manufacturers. After exceeding our initial targets, we announced last week an accelerated and expanded distribution rollout with plans to reach to a total of 64 consumer touchpoints and more to come as we expand our roster of networks. These touchpoints include devices like Fire TV, Roku TV, Apple TV, cable platforms like Xfinity Flex and Cox Contour, distribution platforms like Fubo, Plex, Zumo, and Philo, as well as Vizio, Samsung, and Vued. We are especially focused on that last group, and we are expanding our presence on smart TVs, including a Crackle-branded button on an expected 2.5 million Vizio SmartCast TV remote controls in 2021. Based on our experience to date, We believe that each distribution partnership has the ability to add up to 500,000 new monthly viewers over time. As these initiatives take hold, the big goal for 2021 is to enhance the experience we deliver to viewers. After acquiring the tech backbone to our networks from Sony about a year ago, we began developing new platforms for Crackle and PopcornFlix that will be introduced this year. Over time, we'll innovate on these platforms to drive new personalized viewing experiences, including homepage optimization and targeting. Ultimately, our goal is to transform CracklePlus into a home for viewers with networks and premium content serving their interests across the programming spectrum with a great solution for advertisers from enhanced audience segmentation and attractive new formats to reach our growing viewership. These strategies are all part of our mission to build the industry's best AVOD. And while a variety of players are moving into ad supported streaming, we think we are in an ideal position to create a distinct, compelling experience for viewers and advertisers. We're a pure play VOD business, a pure play AVOD, unencumbered by legacy media models, And we are the only Avon delivering a substantial amount of original content. We are not just another distribution point in many distribution points for a diversified media company or a place to repurpose investments in content from old linear networks or a spot to sell products on some e-commerce platform as our competitors are. We're positioning our networks for what we see as an escalating migration of traditional TV dollars to digital platforms. We have the brands, the distribution, and the content to attract viewers and advertisers, and we are gaining momentum. Speaking to that momentum, we're off to a great start. Crackle has seen big viewership increases in the first quarter, an early sign that our distribution expansion is yielding results. we're continuing to deliver successful and exclusive programming, such as Willy's Wonderland, which premiered on premium VOD at a $20 price point in mid-February and reached number one on Amazon and broke even after just one month. We've also seen some early positive momentum with Playing with Power, the Nintendo story, a documentary series about Nintendo's foundational role in giving rise to the video game console business. and how they would eventually take the global video game industry by storm. We have a very strong content release pipeline at ScreenMedia, as well as some great new and original content for Crackle+. So we're positioned to report a strong first quarter to you in about six weeks, including year-over-year growth in viewership and the benefits of Willys. But keep in mind, Q1 tends to be seasonally weaker, because of the ad business, especially compared to Q4. And we will be comparing year-over-year revenue that will have the last vestiges of PS view in it. So that will not have a material impact on our profitability comparisons. As we move into Q2, we expect to begin benefiting from the new programming hitting our networks. We'll be producing nine new series or movies this year, with more on the way. and we'll be acquiring as many as 20 new films. Going from Broke, season two, The Uncommon History of Very Common Things, and The Uncommon History of Very Current Things have kicked off our production this year. Among our film acquisitions are Street Gang, How We Got to Sesame Street, which recently premiered at Sundance to rave reviews, Till Death, starring Megan Fox, and other projects scheduled for this year, including Eat Wheaties, starring Tony Hale and Elizabeth Banks, and Best Sellers, starring Aubrey Plaza and Michael Caine. It's a great lineup. On the strategic front, you'll hear about the rollout of new platforms for Crackle and Popcorn Flix, and we are also working on our next Avon launch. And throughout the year, we're anticipating viewership gains resulting from our rapid distribution growth that I highlighted earlier. All in all, 2021 should be a major milestone year in which we expect to exceed $100 million in revenue, which would represent nearly 50% growth over 2020 and more than 300% over 2019, meaning that we will have grown revenue by more than three times in less than two years since first acquiring our interest in Crackle+. In summary, we're extremely pleased to be in the position that we are in after the extraordinary challenges we all experienced in 2020. Our ability to deliver a strong growth year despite those challenges gives me great confidence in what we plan to achieve in 2021 and beyond. We look forward to keeping you posted on our progress. I'll turn it over to Chris.