Chicken Soup for the Soul Entertainment, Inc.

Ladies and gentlemen, hello and welcome, and thank you for joining us for today's Chicken Soup for the Soul Entertainment First Quarter 2022 Earnings Results and Red Box Entertainment Acquisition Conference Call. As a reminder, all participants are in a listen-only mode, but later you will have the opportunity to ask questions. Also, please be aware today's session is being recorded. And to get us started with opening remarks and introductions, I am pleased to turn the floor over to Investor Relations for Chicken Soup for the Soul Entertainment, Mr. Taylor Krafchick. Please go ahead, Taylor.

Thank you, Operator, and welcome. With me on the call today are William J. Ruhanna, Chairman and Chief Executive Officer for Chicken Soup for the Soul Entertainment, and Chris Mitchell, Chief Financial Officer for Chicken Soup for the Soul Entertainment, to review the first quarter 2022 results as well as provide a business update. Joining Bill and Chris on the call today is Galen Smith, Chief Executive Officer of Redbox Entertainment, to help review the proposed transaction between Check It Suit for the Soul Entertainment and Redbox Entertainment. Following this discussion, there will be a moderated Q&A session open to the participants on the 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, minutes 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. With respect to our proposed transaction with Redbox, the information provided during this call is provided by Chicken Soup for the Soul Entertainment for informational purposes only to assist interested parties in making their own evaluation with respect to the transaction. No information provided during this call is intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or approval nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities law of any such jurisdiction. No offering of securities shall be made except by means of prospectus, meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as is amended. In connection with the proposed transaction, we intend to file with the SEC a registration statement on form S4 that will include a proxy statement of Redbox and will also constitute a prospectus and information statement of Chicken Soup for the Soul Entertainment. Each hour company and Redbox may also file other relevant documents with the SEC regarding the proposed transaction. This document is not a substitute for the proxy statement, information statement, prospectus, or registration statement, or any other document that we or Redbox may file with the SEC. The definitive proxy statement information statement prospectus, if and when available, will be mailed to stockholders of our company and Redbox. For further information regarding the company's historic financial performance, financial condition, and operational and other information risks and risks, we refer you to our filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended March 31, 2022, which was filed today. We also refer you to the public filings Redbox made with the SEC. I would now like to turn the call over to Will Ruhanna, Chairman and CEO. Bill, please go ahead.

Thank you, Taylor, and thank you, everybody, for joining us this morning. As you know, we have a big call today, and we're going to start with our Q1 results, which we'll go through quickly, and then we'll go into the acquisition of Redbox Entertainment. which is a combination of two really beloved brands with a shared vision of disrupting the digital ecosystem. It's a perfect fit, really. It's a complimentary fit that's really hard to imagine. Because of the fit, the deal will take our company to a new level. We'll scale much more quickly, and we couldn't be more excited about this. I may sound like I'm not excited, but we've been up quite a lot of the last few days, and I'm tired. But we've got a lot to talk about today. Galen Smith, the Redbox CEO, is with us, and he'll be working on the Q&A with me, and he'll also have a little bit of something to say about the deal. So on to the first quarter. We grew our first quarter by 26% year-over-year to $29.2 million, a little bit higher than we thought, but good. And adjusted EBITDA came in right on target at $3.7 million. We continue to drive viewership growth and retention. We really have done well with our new tech platform, We've got strong advertiser interest, and I think the switch from broadcasting cable to AVOD continues with advertisers. We're capitalizing that with Salesforce, which really is second to none, and also through a growing ad rep partnership business, which I think we'll probably talk about in the next call because we don't have a lot of time today. On the viewership front, we continue to roll out our distribution touchpoint strategy. That is really working. We had sequential quarterly growth in CracklePlus viewership of over 11.5%, and I think it's continuing from what I can see even into this quarter. We've got tremendous growth on Vizio, which has actually become almost as big as Amazon Fire for us as a result of, I think, the very good tech we have there. We launched our Samsung tech, and that's also going well. We've made progress in a couple of other key areas and we've grown, as you know, we're at 70 touch points and we're going to 90 by the end of the year. We've made terrific progress in the library, again, in the first quarter. Owned an original exclusive content to 27% of our total viewership, an all-time high. We actually had a month in the 30s there. It's clearly going in the right direction. Our production capabilities, increase we are we're now going to have more than one original and exclusive content piece each year this year every week this year you know that was our original goal we're probably going to get closer to two by the time we exit the year it's a real benefit to us for our viewers and as well as to our bottom line since that's our highest margin product excuse me um so that's a quick overview of q1 it was a very good quarter everything is right on track I wouldn't change a thing about what our expectations are for the year. So let's turn to the big news of the day, this transformational acquisition that we've made. We put some slides, I guess you can access these on the webcast, if you are on that, and I'll run through them. So slide number five, which is entitled Chicken Soup Entertainment to Combine with Redbox Entertainment, kind of sets the groundwork for this. This is a big scaled platform now of content production and distribution. And I think we've really refined our target today, which is the value conscious consumer. I'm sure many of you will We'll reflect upon that when you get a chance and realize that in an era of inflation and possible recession, value-conscious consumers are likely to express themselves in different ways, some of which we've already seen. But what we're going to end up with now is a leading independent, integrated, direct-to-consumer media platform where we interact with consumers in many, many places, like the kiosks, TVOT, et cetera. And it will deliver premium entertainment at a good value for people. I think it's really the right place at the right time. Turning to slide four, or I guess it's page six, you can see the rationale for what we've done here. We've got two great brands coming together. Two great brands coming together. And we think that the complementary nature of our assets is really hard to duplicate. We've got our content library. We have our great Salesforce. We have our AVOD networks. Redbox has the marvelous kiosk system that spans the United States. It has a TVOD business, PVOD business, free live TV business, which is basically a fast business. And when you put those assets together, you actually have a very complete ad-supported video-on-demand type business. It really isn't anybody else who has anything quite like this. Clearly a transformative deal. I think it's right in line with consumer demand. And I expect that there'll be some great synergies, as you'll hear, that will come from this. On page seven, we talk about the transaction terms. So you guys know, we've done a number of transactions to build the company. In every case, We start with the strategic rationale. If the acquisition makes strategic sense, we are going to try and complete it. Of course, we also try to make great financial deals. On slide five here, you're going to see that this is the right business fit. We know that. The transaction itself, I think, is very well thought through because what it really does is it solves a problem that Redbox had of liquidity. and puts the new combined company in a very strong position, we'll acquire 100% of Redbox. It's an all-stock transaction. Redbox shareholders will receive a little over 4.6 million shares of our Class A common stock. We will assume $320 million or approximately of Redbox debt. Pro forma ownership of the company will be 76%. Chicken soup for the soul shareholders, 23%. Redbox shareholders, Our new lender, HPS, who I really look at as a partner, will own 4.5% of the combined company. We've taken Redbox's credit facility and really dealt with the issues that were caused by their SPAC transaction. We've extended it. We've added $80 million of additional working capital via a new revolving credit facility. The new term loan and the new credit facility will mature in five years in the term loan case, two and a half years in the revolving credit case. We have the right to pick interest if we need to for the first 18 months. And as Chris will tell you somewhat gleefully, there are no financial covenants in the transaction for the first two years. As you know, I like flexibility. I like us to be protected. And I believe with the extension, the new capital, the pick interest option, and the no covenants. We've really put the company in a position that we can do what we need to do over the next couple of years to recognize all of our synergies, grow the business, have a recovery, and move on from there. In terms of the deal itself, we are the majority shareholder of Chicken Soup for the Soul, who happens to be speaking, has approved the deal, as has the majority shareholder of Redbox. So we expect to go through the regulatory process quickly, with customary closing conditions, but we'll get this deal closed in the second half of 2022, and both Galen and I are really committed to doing it as quickly as we can. We wanna bring these companies together as fast as possible because we're excited about what we see. So, let's move on to slide six. Or actually slide seven, I guess is where we're at now. This is a quick summary for those of you who may not know us of who we are. Our Crackle Plus business is comprised primarily of three big streaming services, Crackle, Chicken Soup for the Soul, and Popcorn Flix. We've been building our viewership through our Touchpoint strategy. We have more than 90 deals in place by the end of the year. Our recently relaunched user experience is really helping cement viewership. We've assembled a huge library of movies and TV shows, over 14,000 movies, over 24,000 episodes of television. Got a highly unusual asset there for an independent AVOD. Much of our content is wholly owned, and we're producing more of that every day. That's, of course, our most profitable content. Over a quarter of our ad impressions are generated by our original and exclusive content, and that's, once again, our most profitable. Not pictured on the slide is our very strong, fully capable ad sales force. That sales force is really second to none. They're doing a wonderful job in the marketplace. I'm going to turn it over to Galen to talk to you about Redbox and its position in the market and anything else that he'd like to talk about.