Chicken Soup for the Soul Entertainment, Inc.

Good day and thank you for standing by. Welcome to the Chicken Soup for the Soul Entertainment 3rd Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Taylor Krasczyk from Ellipsis IR. Please go ahead, sir.

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 third quarter 2021 results, as well as provide a business update. Following this discussion, there will be a moderated Q&A session open to the participants on this call. During this call, management will make forward-looking statements. Forward-looking statements include but are not limited to statements regarding expectations, intentions, and strategies regarding the future. 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 projected results. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statements contained in this conference call. Please refer to the cautionary text regarding forward-looking statements contained in the earnings release, which also applies to the content of this call. Additional risk disclosures can be found in the company's filings with the Securities and Exchange Commission. On today's call, management will make comments on certain GAAP-based and non-GAAP pro forma financial information. The non-GAAP 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 direct comparable gap measure. For further information regarding the company's historical financial performance, we refer you to our filings with the SEC, including our report on Form 10Q for the quarter ended September 30, 2021, which was filed today. I would now like to turn the call over to William Rihanna, Chairman and CEO. Bill, please go ahead.

Thank you, Taylor. Good afternoon and welcome to our third quarter 2021 earnings call. I'm going to provide some highlights from the quarter, an update on our progress, our overall strategy, as well as details on some key areas of focus as we head into the final quarter of the year. Chris will then do a deeper dive into our financials. We delivered a strong quarter with record all-time revenue and the second-best adjusted EBITDA performance in our history. In this case, I like second-best because we're about to enter our seasonally strongest quarter, Q4. Our results show that our momentum is continuing to build and that our strategy is working. That's borne out across our strategic initiatives from the differentiated programming we are delivering through both our originals and exclusives and our rapidly growing library, to our growth in viewership, driven by rapid expansion of our network distribution, to the innovative formats we are delivering to advertisers, and finally, our execution on improving our technology, which we believe is also helping improve viewership. I'll talk about all this progress we've made in a bit more detail, but before I do, I want to mention that our momentum has so far continued into the fourth quarter. And financially, we're poised to deliver an excellent finish to the year. We're also accelerating our growth strategy as illustrated by several important announcements we've made in the last couple of days. And these include the launch of the Chicken Soup for the Soul streaming service, the launch of our Chicken Soup for the Soul television group, which consolidates our studio and distribution activities under the leadership of David Ellender, including Locomotive, our recently acquired company in India, and the retention of Michael Solomon, a prolific global television distribution executive who is joining us as a strategic advisor in building our business. Additionally, since quarter end, we've completed the rollout of the new Popcorn Flix app on all services, but more about that later. We're very excited about what we can achieve as we look to 2022 and beyond, but first let's review what's got us here. Third quarter net revenue was $29.1 million, up approximately 50% on a year-over-year basis, and 34% on a sequential quarterly basis. Earlier this year, we moved to reporting on a net basis, and while we're not calling out that adjustment regularly, I do want to mention that this quarter our gross revenue figure was $29.6 million, which was in line with expectations. This is record revenue for our company, and I believe that approaching $30 million of revenue in a quarter that is usually seasonally weaker bodes well for our future revenue potential. Revenue is being driven by continued inventory sellouts supported by strong demand for our original content and coupled with our growing content library. Adjusted EBITDA was $4.9 million, up 17% year over year, reflecting the increasing scale of our business and our cost-efficient production and distribution model, which we believe will continue to drive margin expansion over time. This quarter's performance is especially noteworthy in light of the adjusted EBITDA impacts of the significant investments we have made in expanding our streaming service distribution and creating our new tech platforms. These investments are clearly driving results, and we expect to continue reaping the benefits of them. Overall, this record quarter puts us on track to meet our full-year revenue target with our seasonally largest quarter still to come in Q4. Looking at our Crackle Plus Avod networks, recent research from Kantar shows that Crackle viewer penetration increased in Q3 to 4.5% of households. while overall industry penetration decreased, and further that our viewer share compares favorably with a number of subscription streamers like ESPN Plus and Discovery Plus. 4.5% may not sound like much to you, and you might be surprised that Just Watch indicates that Apple TV has 4% penetration and Showtime 2%. I've said many times that AVOD can compete with SVOD services, and that we are working to build the best AVOD. When third parties are comparing our metrics to SVOD offerings, I consider that a good sign. We think that's a testament to three things. First, the power of our original and exclusive content. Second, the hard work we've done to increase our distribution touchpoints, which as of this quarter had increased by yet another 13 touchpoints, and we are averaging about 445,000 new monthly active viewers per touchpoint. And third, the launch of our new user interfaces for Popcorn Flix and Crackle, which Kantar pointed out, has already caused viewers to notice our improved ease of use and quality, resulting in an increase of almost 66% in our net promoter score in Q3. In fact, our total owned and operated monthly active viewers were up 33% from a year ago, thanks to additional viewers from new touchpoints. The recent launch of our new Crackle platform on Vizio Smart TVs, which will roll out to many of our other distribution touchpoints over the coming year, has started well. The old Vizio app contributed 9.9% of our overall Crackle viewership. The new Vizio app contributes 13.9% of overall viewership. That's a 40% increase. Successful video playbacks increased on Vizio from 83.5% to 96%. This provides approximately a 15% lift in viewership in all situations. It also makes our marketing campaigns 15% more impactful and efficient. Video start times improved 42% as a result of the new Vizio app, dropping to 4.4 seconds from 7.6 seconds, and it's even better on newer Vizio models. Early data shows that the upward trajectory is accelerating in the fourth quarter, all of which bodes well for our goal of increasing overall viewer time meaningfully from our new user interface. The relaunch of Popcorn Flix with a new look, improved user experience, and a ramp up in exclusive action and adventure content has also gone well. The new Popcorn Flix is now available on Fire TV, Apple TV, Roku, Android, iOS, and other platforms with enhanced app features, new search functionality and navigation, server-side ad insertion, and improved playback performance. The new Popcorn Flix is also off to a great start with viewer engagement up approximately 50% in September. In addition to these developments, the launch of our Chicken Soup for the Soul streaming service has begun This moment has been a long time coming for our company. This new streaming service features a robust collection of the best-in-home content that typically appeals to a female audience, including a significant portion of content acquired through the Sonar acquisition, as well as classic, award-winning content that we've been creating for years at Chicken Soup for the Soul. We've launched the network as a fast channel ahead of a full VOD launch scheduled for December on Vizio. And as illustrated in our press announcement, I'm especially pleased with the strong support from the broad group of partners who are getting behind this new streaming service with us. Underpinning the success of all our networks is and will continue to be our differentiated content. In Q3, we continued to deliver new original and exclusive titles and to grow our library. Our new original and exclusive content continues to generate a significant portion of overall impressions And because we do not have to pay rev share on this content, it will also positively impact our profit margins over time. For this reason, among many others, we are excited about the progress that we have made ingesting the seminar content onto our network since the acquisition. This content has been performing extremely well and driving significant ad impressions. In fact, with the addition of Sonar's content, we've already surpassed our year-end original and exclusive ad impression target, which was 20%, hitting 22% in September. One early example of content success in this area is Taboo, the hit FX series that successfully premiered exclusively on Crackle in September and has been seeing a strong initial performance as the number one content on several of our fast channels. Also, The Temptations, which is a two-part miniseries and the first piece of content from Sonar to migrate over to Crackle, has also seen initial success after shooting to number one on the Crackle Network in its first three weeks. So let's turn to our coming attractions. As I've noted on previous calls, our plan is to roll out a new piece of original and exclusive content every week in 2022, and we remain on track to meet that goal. We provide this content to all three of our streaming services. In fact, we are already making this move on Popcorn Flix, having just announced the rollout of the first original and exclusive program for that streaming service, an action-packed original documentary, Hollywood Bulldogs, that tells the story of British stunt performers who dominated Hollywood in the 70s and 80s. In addition, Screen Media has acquired several star-studded films over the last few months. Brian Wilson, a deeply personal documentary about the genius behind the Beach Boys that premiered to rave reviews at the 2021 Tribeca Film Festival. The show features an original song by Wilson for the film, along with interviews from Bruce Springsteen, Elton John, and more. And most recently, Fast Charlie, a thriller starring Pierce Brosnan and directed by Philip Noyce, who directed Salt and Clear and Present Danger, among other great action films. It's a story of Charlie Swift, who has worked for an aging mod boss, Stan, for 20 years, and is skillfully operating as a prolific fixer and efficient hitman. Incidentally, at the AFM, we laid off about 75% of the cost of that film in five days in foreign pre-sales. Our continued focus on delivering compelling content combined with our growing viewership continues to drive strong interest from our advertisers, with our ads once again sold out in the third quarter. As you know, we believe to build the best AVOD, we need to enhance the mix of ads over time and create a combination of today's ad formats with integrations, sponsorships, and interactive ads. We believe that this approach will generate more revenue and result in a better user experience. In Q3, we had yet another two examples of our innovative integrations with the General Insurance Company, which was featured in 10 episodes of Inside the Black Box, and Verizon, which is integrated into three episodes of Smart Home Nation. Our partners are thrilled with our increased ability to target specific audiences and present the benefits that they provide to customers in real-life stories. We are now in conversations with a growing number of advertisers on integration and sponsor opportunities that can increase their visibility with the right audiences while also creating a more seamless experience for our viewers. As we look to the future, international growth is a huge opportunity for us. And we believe we now have the assets to execute on that opportunity. Following the announcement of our partnership with Cachette in Israel in August, which gives us an opportunity to build our streaming services in that market, in late October we announced we acquired a majority stake in Locomotive Global, which currently produces series for Netflix and other premium platforms in India. India is a priority market for us given its size and the awareness of the Chicken Soup for the Soul brand in that market. Locomotive has built a great business in India and has a keen eye for programming that resonates with local audiences. The acquisition gives us a profitable base to enter this key country. We expect there will be much more coming in terms of international rollout in the next few months. Our new television group, which is headed by David Ellender, the former CEO of Fremantle, is also a key piece of our overall ambitions. The new television group consolidates our TV studio activities, including Halcyon, which was formed from the Sonar acquisition, Landmark Studios, the aforementioned Locomotive, and Chicken Soup for the Soul Studios under one group. Under David's leadership, we will focus on expanding our original TV content development pipeline, increasing our IP rights ownership, facilitating the launch of additional networks, and accelerating international expansion which is a particular strength of David's. In order to further bolster our domestic and international TV efforts, we also added one more member to our team, as I touched on earlier. The addition of Michael Solomon as a strategic advisor provides us access to one of the most highly accomplished television production and distribution executives in the history of our business. He will assist us in program and library acquisitions, co-production financing and sales, and international joint ventures, among other activities. We expect that he will be an invaluable resource as we execute on our global Avon rollout. Looking ahead, we feel great about Q4 and our outlook for the full year, and we're already preparing for a much bigger 2022. We've made tremendous strides this year in increasing viewership, building advertising relationships, improving our viewer experience, and growing our content asset and production output. And we've positioned the company to begin executing on an exciting international growth opportunity. Finally, we've strengthened our balance sheet, enabling us to better deploy our deal-making capabilities to further supplement organic growth. As we've shown with Crackle+, Screen Media, Sonar, and most recently, Locomotive, we are adept at expanding our capabilities, content, and viewership through thoughtful acquisitions and partnerships that make strategic and economic sense. We've also shown the confidence we have in our business, announcing today that our board authorized a $10 million common stock buyback. With that, I'd like to thank the Chicken Soup for the Soul team once again for all their hard work, and I will turn this over to Chris, who will give additional details on the financials. Chris.