BBTV Holdings Inc.

Good day and thank you for standing by and welcome to the BBTV 2021 First Quarter Results 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 after the session, you will need to press star 1 on your telephone or touchtone key. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Ms. Nancy Glaser, General Counsel of BBTV. Thank you. Please go ahead.

Welcome to BBTV's Fiscal First Quarter 2021 Conference Call. I'm Nancy Glaser, General Counsel for the company. During the course of this call, we will be providing forward-looking information and making forward-looking statements within the meaning of applicable securities laws which are statements regarding the company's current expectations, goals, and beliefs about future events. Any financial or other goals discussed are goals only and are not meant to be taken as future-oriented financial information or guarantees of future results or performance. All of our forward-looking statements are necessarily based on a number of assumptions and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements. including the risk that our assumptions may not be accurate. Our risks are also included in our press release and MD&A issued today. We undertake no obligation to update these forward-looking statements, except as required by law. You can read more about these assumptions, risks, and uncertainties in our press release and MD&A issued earlier today, as well as in our filings with Canadian securities regulators on CDAR. I now turn the call over to BBTV's Chair and Chief Executive Officer, Sharzad Rafati.

Thank you and thank you to everyone on the line for joining us today to review our first quarter 2021 results. Joining me today is Todd Tappan, CFO of BBTV, who will review our financials and will also participate with me on the Q&A session after our prepared remarks. My remarks will begin with an overview of the Crater Economy, and a reminder of the opportunities that we're working to exploit. And then I will review our progress towards our KPIs. Todd will review the financials, and then I will close with a general outlook prior to taking analyst questions. BBTV is a global creator monetization company that helps creators make more money from their content. From individual to global media companies, creators rely on BBTV to generate meaningful revenue for them while they focus on their core competency, content creation. BBTV helps thousands of creators around the world generate an income while entertaining and informing 600 million monthly unique viewers. Investors may ask, why do creators matter? And why is BBTV a uniquely positioned stock to generate returns from the creator economy? More than 50 million people around the world consider themselves to be content creators. And this is growing rapidly. More than 2 million of these creators consider content creation to be their profession. And there's a massive and fast-growing economy that is building. Let's put the 2 million into perspective. There are about 1.2 million e-commerce retailers in the U.S. fueling the $500 billion segment of the $4 trillion U.S. retail economy by 2022. rising almost at 50% from 2018. Digital video advertising, which is just one corner of the creator economy is expected to more than double in the same timeframe to 82 billion. And it's expected to grow to 185 billion by 2025 at a 40% CAGR. The creator economy as a whole is poised to rise at an even faster pace than the early days of e-commerce. This is in part because of the world of entertainment is anyone's game now, and the creators have the tools they need to create content right in their pocket and connect with their audiences authentically. Gamers on YouTube, beauty gurus on Instagram, or musicians and comedians on TikTok are seeing similar reach as major sports leagues and film studios as digital has leveled the playing field. And the creator economy is a powerful driver for digital revenue. as millennials and Gen Z are driving this shift. Advertisers trying to reach these generations are spending more in digital video, as millennials have the highest buying power amongst generations with an expected 15 trillion in spending by 2022. Each of the platforms in the equator economy has billions of users, and the vast majority of which are in this digital native generation who are virtually inaccessible through traditional advertising. Creators' content play a big role in buyer behavior as well, as more than half of social media and video users leverage social platforms to research products, and nearly three-quarters of them are more likely to purchase products and services based on content creators' recommendations. So what happens when one part of an economy booms, such as advertising? New revenue streams rise and flourish. That's what we are seeing in the creator economy now. The number of creators that are making six figures or more on YouTube alone has increased by 40% year over year. And consumers spend 22 billion on mobile games in the first quarter of 2021, up 25% from Q1 2020. This is a testament to BBTV's existing revenue streams, from advertising to mobile gaming apps. At the same time, non-fungible tokens, featuring sports moments are selling for hundreds of thousands of dollars each, and thousands of creators are making five figures or more annually through social commerce platforms. Advertising is often the first to follow consumer behavior, as new technologies have time and time again changed how we consume content in the areas of print, radio, TV, and the Internet. Following advertising, just like we are seeing in the digital video space, merchandise, video games, trading cards, monthly subscriptions and more have all stemmed from these new mediums. And for the first time in history, the playing field has been leveled in the entertainment industry. This is just the tip of the iceberg. And the two pillars of making money in the creator economy are reach and engagement. BBTV is a global leader for both. with 600 million monthly unique viewers and over 50 billion minutes of watch time every month. We work with thousands of content creators and we give them tools they need to reach further and make more money. BBTV has 500 creators making $100,000 or more and 100 creators making more than half a million annually. On top of that, we have the rights and the infrastructure to simply turn on new revenue streams. from advertising and mobile games like we do today to emerging streams like NFTs, which we announced last week. The shift in entertainment has already happened, and the money is starting to flow with BBTV at the center of it all. This is not a future economy. This is a 2021 industry, and the ship is setting sail. BBTV is the boat that you want to be on. And the technology plays a key role in what makes us appealing in the markets. from potential M&A targets to the creators themselves. Here's a small example of how our technology, data, analytics, and processes work together to make creators more money. Video titles, tags, and descriptions, which seem innocuous at first, are key to discovery and engagement of content. Our technology continuously analyzes more than 2.5 billion video assets. learning in real time exactly which words and trends attract the most viewers. Our tech automatically recommends these terms to the creators when they post new videos, which in turn translates to higher views and higher revenues. This is just one part of how we help creators make more money. And it's one of the hundreds of ways we use our data and algorithms to power success for creators. As you saw last Thursday, we made our first announcement regarding NFTs and our emerging NFT strategies. Investors should expect more announcements related to NFTs in the future, along with additional potential revenue streams as we help creators make more money from the content they produce. For fiscal 2021, we have added two non-IFRS KPIs to our MD&A. One of the two non-IFRS metrics that we have added is BBTV's share of revenue. BBTV operates on a revenue share model whereby we allocate revenue to creators and we keep a portion of it. BBTV share of revenue is a better reflection of our operations, especially as we extend revenue streams. For our base solutions, which is programmatic, we keep between 8% and 10% depending on the creator. Our plus solutions are sold directly, targeted and configured to generate ads at the value that is more than five times greater to advertisers compared to programmatic ads for our base solutions. As a result, we generate more revenue per ad and we keep a larger share of available revenue. Advertising sales via direct are incremental to base solutions ad sales. Moreover, the customers and the ad units are also different. base is sold programmatically, while direct is sold on a reserved basis directly to agencies and brands. For every dollar sold on a direct basis, gross profits for these sales are greater than 15x more profitable. Base provides the lion's share of bottom line contribution today, and we expect it will continue to provide half or more of our contribution as both our base and plus solutions grow in revenue and margin. BBTV share of revenue is a KPI that we monitor closely for operating effectiveness, and we expect to grow at a faster pace than our top-line revenue. Our second and related non-IFRS measurement is adjusted gross margin. This is simply our gross profit divided by the BBTV share. We still anticipate the adjusted gross margin should be maintained over 90%. Fluctuations will be impacted by solution mix over time. With respect to our operational KPIs, views grew to 115 billion for Q1, up 4% from 111 billion views in Q1 2020. RPMs, or revenue per thousand views, grew 12% to 86 cents, up from 70 cents in the previous year quarter. The views growth was lower this quarter as the year-over-year comparison is against the first quarter of COVID, which saw spikes in viewership due to the global lockdowns. Although views increased modestly over the last year, RPM growth was solid. Our trend rate is low amongst creators on the BBTV platform. We continue to have views retention rates greater than 95% amongst the creator base. This is similar to customer retention as the use times RPMs equals revenue, which gives us a great light on site to our future revenues. The split in total revenue for the quarter was 99 million for base solutions and 8 million for plus solutions. Performance in base category was ahead of our expectations and plus performance was in line with our expectations. Q1 2021 and 2020, had the same headcount in sales personnel across Plus Solutions. All in, both of our top line and gross margin were ahead of a consensus, as published by Bloomberg. During the quarter, we announced some key operational developments, which generates additional confidence in our outlook. First, some commercial milestones. In January, we announced expanded solutions with both Instagram and TikTok to monetize creators across these platforms. This allows us to add more creators from those platforms and allows us to extend monetization of current BBTV creators to those platforms. We're just starting the programs now and we expect this to impact future quarters. We announced multiple new creator agreements during the quarter, adding nearly 750 million monthly views to the BBTV platform across multiple segments, including sports, gaming, lifestyle, and entertainment. This adds further to our scale. We highlighted renewed partnerships with Univision and Just for Laughs for an additional term, and we also renewed our MBA Playmakers partnership with the MBA. At the end of the quarter, we continued our global expansion with our moving to India and Thailand, bringing our global reach to 30 countries and 12 languages. Now, key operational milestones. At the end of February, we announced our cross-listing on OTCQX under the symbol BBTVF, and we acquired our DTC eligibility. We did this to fulfill demand from US-based investors. To lead a disciplined M&A strategy in March, we hired a VP of Corp Dev, Blake Corbett, who's already immersed in actively developing and expanding Targetless. We have also expanded our operations in Brazil, leading to further operational efficiencies for Plus Solutions. Now I would like to turn over the call to our CFO, Todd Tappan, to review the financial metrics for the quarter.

Thank you, Sharzad. In accordance with our recent initial public offering and acquisition of RTL's share of BBTV, which occurred during the fourth quarter into December 31, 2020, we are providing Q1 2020 results on a pro forma basis, which are included in the MD&A. The pro forma basis includes the operations of Broadband TV Corp., the main operating entity, and BBTV holdings for both Q1 2021 and Q1 2020. The statutory financial statements include BBTV holdings only, which does not include the main broadband TV operating entity for Q1 of 2020, but does for Q1 2021. One notable presentation item for Q1 2021 and going forward is the amortization assets recorded as part of the Purchase Price Allocation, or PPA, associated BBTV holdings acquiring broadband TV corp. in conjunction with the buyout of RTL's share and the company's IPO. The purchase price allocation total assets recorded in intangible assets and goodwill was 368.6 million. Amortization associated with PPA in the amount of 5.8 million was recorded in the cost of revenue for Q1 2021, as the primary assets included in the company's technology and content library and agreements. It should be noted that this amortization associated with PPA recorded in cost of revenue is a non-recurring transaction and the amortization is non-cash. Accordingly, we will provide commentary on the company's gross profit and gross margin as per the statutory filings without the purchase price amortization and as introduced last quarter, the metrics of BBTV's share and adjusted gross margin. Overall, for the first quarter of 2021 compared to the first quarter of 2020, We note the following highlights. Revenue increased 16% from the same period last year, attaining $106.5 million. This was led by a 12% increase in RPMs, attaining $0.86. And gross margin, excluding amortization associated with the PPA, was 9%, comparable to the same period last year. BPTV share, which is revenue less third-party platform fees and creator share for the first quarter of 2021, was $10 million. compared to $8.8 million for the same period last year. And adjusted gross margin for Q1 2021 was 96% compared to 93% for Q1 2020. As noted, revenue was $106.5 million for the first quarter 2021, an increase of 16% over the same period last year. This was led by a 12% increase in RPMs, which were $0.86 compared to $0.77 for the first quarter last year, views were $115 billion, up 4%, compared to the same period last year of $111 million. Charling 12-once revenue was $473.5 million, an increase of 24% over the same period last year. Gross profit, including amortization, was $3.8 million, compared to $0.9 million over the same period last year. Gross profit was $9.6 million, excluding the PPA amortization, an increase of 17% over the same period last year, which was 8.2 million, representing a gross margin of approximately 9% for both periods. Excluding PPA amortization, gross margins were 9% and 8.9% for Q1-21 and Q1-20, respectively, which was up from Q4-20 of 7.6%, primarily due to more favorable revenue mix of higher margin creators during this quarter. BBTV's share was $10 million for the first quarter of 2021 compared to $8.8 million in the same period last year. An increase of 13% and adjusted gross margin was 96% compared to 93% last year. The adjusted gross margin for Q1 2021 was disproportionately higher than gross margin when compared to the same period last year, primarily due to the higher proportional revenue from base solutions in comparison to plus solutions, which carry amortization associated with app development and content production costs recorded in cost of revenue. Operating expenses were $14.7 million for the quarter, an increase of $2.3 million compared to the same period last year, primarily due to an increase in content creator promotions as well as permanent infrastructure costs not yet in place in Q1 2020 incurred to support public company requirements. The net loss for the quarter was $9.1 million, including the PPA amortization, which is an improvement over the same period last year, for which net loss was 13.5 million and included a foreign exchange loss of 4 million. EPS for the first quarter of 2021 was a negative 44 cents based on weighted average outstanding shares of 20.5 million. Adjusted EBITDA was a loss of 2.5 million compared to a loss of 2.4 million in the same period last year. In terms of the balance sheet, we ended the quarter with 11.3 million in cash, and currently have $14 million untapped of our $15 million line of credit. The convertible debt balance was $49 million as of March 31, 2021. We are currently evaluating options to refinance this debt, to which there is no pre-payment penalty. I will now turn it back to Sharjah.

Thank you, Todd. As I stressed in my opening remarks, the creator economy is emerging as a key category for online spending by brands and advertisers globally. BBTV is exceptionally well positioned within the creator economy, and we're actively investing to exploit the opportunities as they emerge. Our base solutions, which currently represent a vast portion of the revenue streams, provide efficient contribution after revenues shared with the creators. Ad revenue is highly programmatic, and our technology allows us to scale revenue efficiently with minimal effort. We also generate significantly more revenue for creators and stronger earnings leverage for BBTV by extending our revenue streams to include direct advertising, content management, mobile gaming apps, and other emerging revenue streams, such as NFTs, that we've announced last week. During 2020, we began initial investments in direct sales, which yielded positive results. In our Q4 conference call, we revealed that we were increasing investment in direct sales. There is a ramp up period associated with this and the impact of those investments will show up in the latter quarters. So what does this mean for our KPIs? We will continue to see solid top line growth in our base solutions because we continue to sign up new creators, attract views and see expansion of RPMs like we did this quarter. These dynamics help us to get to our goal of $1.4 billion of top line revenue, $300 million of BBTV share of revenue, with mid-teen levels of adjusted EBITDA margins by 2025. Over that time frame, top line grows by 2.5x and BBTV share grows by 7.5x, which is a direct result of growth across both base and plus solutions. At these levels, plus solutions would represent 30 to 40% of our overall revenue, meaning that base solutions will continue to be a key and important driver of long-term growth and profitable economics. We're building an actionable list of targets that will allow us to both add more creators and add more quality revenue stream opportunities over time. With respect to adjusted EBITDA earnings, the investments that we are making now will temporarily compress EBITDA margins in the short term, but will also accelerate the timeframe to full year positive EBITDA as early as next year. So why BBTV? BBTV is essential to thousands of creators around the world. We have a massive platform for monetization. We operate a very efficient business. BBTV is trading at an 85% discount to the medium of our peers, which makes it a great investment opportunity. We have a strong pipeline of M&A opportunities. to further empower our growth and accelerate our margins. Now that we're a public company, we have the ability to allocate capital strategically and leverage our data and relationships to further enhance our revenues and margins. I want to close by reminding investors that we're essential to the livelihood of thousands of creators around the world. We're proud that BBTV has supported these entrepreneurs and thousands of their employees across the world to make money for the content that they enjoy creating. Operator, we are ready to take analyst questions.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Kevin Krishnarant from Desjardins Securities. Your line is now open.

Hey, thanks for taking my question. Good afternoon. I had a question for you first, just on the gross margin. Todd, I think you'd mentioned that the gross margin went up from 7.6% to 9%. And that part of that was due to better mix of higher margin creators. Can you elaborate on that?

Certainly, when you have a large mix of creators that we have over 5000, obviously, they have different terms. So When you have a mix of those whereby BBTV has a greater share of revenue generating higher revenue in proportion to the others, naturally you're going to have a margin increase.

And so how do we think, like, are those types of creators, were they, you know, do they just happen to be signed to types of advertising, sort of types of content that seem to be resonating, you know, better in Q1 than Q4? And I guess, how do you think about that margin profile going forward over the coming quarters?

There are a variety of factors. One could be that there are more in those particular verticals that are generating more views or higher RPMs. But by and large, it also depends very much just on the content itself. What is it that people are actually viewing? So it's a little bit difficult to draw a direct correlation between anything specific from a vertical category or even a geographic category. So I think that would be a little bit of a stretch to say, but I think it's going to be more content driven. So with respect to how do we view it over the coming quarters, we, as we've talked about, do expect our gross margin to be increasing. And it increases from two factors. One is that as our content creators agreements start to mature, most of them are a one-year basis, we do expect to be able to increase our share of that take. Now, that'll take some time, naturally, because they are one year in length and getting through 5,000 plus and signing new creators all the time. That'll take some time, but we do expect that decrease over time. And then the other is, of course, the higher mix of plus solutions, which carry a higher margin in three to five times, depending on which category of that plus solution. And so as plus solutions increase in revenue and increase in the mix, that will be another factor that will continue to drive up our gross margins.

All right. Super. Thanks for that. Maybe more of a macro type question to both of you. There's been a lot of industry changes in digital advertising of late with respect to privacy and consumer tracking. And I know that doesn't necessarily impact you directly, but I'm curious if some of the market uncertainty may actually benefit you in direct sales. Like I'm guessing our marketers thinking, Hey, I've got less visibility and certainty now on audiences on, on open internet buys. I can get that audience by going direct to a publisher. you know, maybe thinking like a private deal approach, private marketplace approach. I'm wondering, you know, how you think about your direct, you know, ad sales business. And is that something that you're seeing with marketers just showing, you know, more interest?

Certainly. And I would say, by the way, on your previous question, exactly what Todd said. And, you know, I want to also add that our M&A efforts are also focused on higher margin solutions that would actually further obviously improve our margins over time. In terms of the market trend, Kevin, thank you for your question. In terms of the macro level, when you're looking at macro and equator economy, we know that video advertising has dabbled from 2018 to 2022. And that's growth from $37 billion to $82 billion. And this is expected to grow to $185 billion by 2025, which is the 40% CAGR that we mentioned earlier during our presentation. And that really speaks to two factors. One is the fact that consumption, as you look at the pandemic, the pandemic has really accelerated some of those pre-pandemic trends, which is really the consumption of content, specifically with respect to our target demographic, millennials and Gen Z. And as a result of it, you're seeing ad dollars are obviously following that trend. which is more ad dollars towards digital. And within digital, you're looking at really the most interactive format, which is digital video, where you can actually really capture more attention of that millennial and the Gen Z audience. The second is really when you're looking at, you know, the performance marketers. We are seeing more and more ad dollars that are being poured from brand dollars to performance dollars simply because of the fact that, you know, you can measure results and you would double down on actually what is really working for you as a brand and a marketer. And we're very well positioned to benefit from that because as you look at it with BBTV, not only we're actually able to target audiences and geographies and devices, but you're also making it so the actual ads are more relevant with respect to the content that they're being placed against. And because of that contextual relevancy and the fact that the actual content is also premium and brand safe, we actually have higher click-through rates than the actual what you're seeing across industry benchmarks. And we've seen that, you know, time and time again, where that has helped us with our specifically close rates, when you're looking at the app sales team and the performance of the app sales team, as well as, of course, our campaign results. And we continue to see that as a trend moving forward.

Awesome. Thanks for that. Any, just another thought there on the direct sales. I know your staff was similar year over year, Q1, Q2. Where are you at right now? Can you remind us on headcount and what your targets are still for by the end of this year?

Of course. As we mentioned, we are expecting our ad sales team. You're doubling the size of the team over H1, and we'll continue to actually grow the sales presence in the East Central and the Western markets in the U.S. And that team expansion is really expected to also allow us to help accelerate the key market penetrations for our core verticals, which is really gaming, entertainment, and music, kids, and sports. And also as it relates to categories that we're targeting, we're looking at TPG, auto, financial services, as well as the big box retail, food and beverage, travel, and QCR, which is really as the economy recovers from COVID. And this is all, if you look at, again, the target demographic that we're reaching, really our core advertising solutions include delivering very much so unique content programming plates that deliver highly targeted millennial and Gen Z audiences across mobile devices and also the connected TV space. And we really offer guaranteed access to these audiences in a variety of buying solutions while assuring that we're providing a unique opportunity to authentically reach audiences on multiple platforms.

Thanks a lot. I appreciate the caller. I will hop back in the line. Thanks.

Thank you, Kevin. Your next question comes from the line of Jeff Sun from Scotiabank. Your line is now open.

Thanks, and good afternoon, both. Just back to the plus revenue and how we should think about the growth for the rest of the year. Is direct ads going to be Do you think the biggest driver of that, because I think you guys said that it will start to see some growth in the latter part of the year. So direct ads, the biggest driver, or are there others that we should think about? And then the bigger picture question, perhaps related to the announcement last week for Sharzad and the team is, Related to NFTs, like from a strategic positioning standpoint for BBTV, do you see the company playing a bigger role compared to what we've seen with your YouTube business and the creators that you have developed and marketed over the last decade or so? That's kind of the first part of that question. And maybe anything to compare and contrast how you know, that opportunity compares to what you've experienced on the YouTube and video side. Thanks.

Thank you, Jeff. Todd, I can address the base versus plus, and if you can jump in with any additional comments, that would be great, and we can then tackle the question on NFT. And those are both very good questions. When it comes to our plus breakdown, as we talked about, we have three solutions under plus, direct advertising, content management, and mobile gaming apps. And currently, Flux represents about 10%, less than 10% of the revenues. And when we look at the growth of Flux solutions, it's across all the three pillars. Of course, with direct advertising, the activation of the direct advertising is a matter of, of course, us increasing the sales force that they would then leverage our technology tools, our content library, scale and reach in providing those unique packages to the advertisers and brands. But as well as content management, this is a plus revenue stream that we've activated earlier than ad sales and is also a large contributor to our plus solutions where we work with content partners like the Univision, Just for Laughs, and the NBA and 20 Pictures. And we're very happy that we renewed our partnership with Univision and Just for Laughs, as we actually indicated in our press release. So we certainly have three very strong pillars, Jeff, within our plus solutions that will contribute to the growth of the actual plus solutions moving forward. I'll stop right there to make sure, Todd, if you have any additional comments on that portion of the question, please go ahead, and I can then address the questions on NFT.

I think you've covered it well, Sharzad. The only thing to emphasize is, as she mentioned, there's a very nice distribution of revenue across the three streams. Of the three, we do think that direct sales, as we start to ramp it, will experience higher growth rates. But, again, there's quite a bit of balance of revenue between the three.

Thank you, Todd. In terms of the NFTs, Jeff, a really good question, and we're very much excited about this announcement. As you know, NFTs are really emerging as a popular new way for creators and artists globally to monetize their intellectual property. And we now offer that as another plus revenue stream and a method to further diversify and expand monetization for the thousands of creators that we're working with. And as you know, we work with some of the world's prominent creators And they're very much so uniquely positioned to market these NFTs to our creator network, which at the end of the day, it comes down to you not only having an extension for that IP, but being able to properly market that and get that in front of the right audience. And really, this combination of the creator economy, the crypto movement, and really that proof of ownership has created this massive monetization ecosystem that And as we look at the role of BBTV in this ecosystem, obviously the very much so short-term goal, which is what we have activated, is the launch of these NFTs in terms of working with the creators and specifically matching the right creators to the right formats and the platforms and extending the monetization to fan engagement and revenue opportunity for us and the creators. But we think that as the ecosystem is evolving, we will be playing even a greater role in that. I do want to highlight that when you look at the revenue model for NFT, we do actually share revenues with the content creators after our expenses. And our margins are very much aligned with BBTV's existing plot solutions. And we will actually prioritize and activate, of course, this across the creators that we're working with. But we will prioritize the ones that have the highest engagement. But we plan on working with many.

Okay, great. Thanks, Sharza.

Thank you, Jeff.

Your next question comes from the line of Deepak Kushal from Stiefel GMP. Your line is now open.

Hi, guys. Thanks for taking my questions. Maybe just to follow up to Jeff's question on NFTs. Sharza, to what extent are you involved with the NBA and some of your enterprise partners on NFTs, or is it purely independent content creators?

Thank you, Deepak. As it relates to specifically our strategy when it comes to NFTs, and you look at the future of the NFTs, look, as Cryptocurrency obviously continues gaining widespread adoption, and we are talking about the real business here, which is kind of how you actually monetize and specifically engage with the fans. We're going to be working with all the partners, regardless whether they're independent or enterprise, because it's just another method and a natural extension of how you can actually monetize IP, and this is why we've actually kind of launched the NFT division. It was simply to be able to actually help our content creators of any size enterprise or non-enterprise to basically reach their audiences. So we definitely were not limited to independent content creators.

Okay, great. And just going back to the enterprise market, good to see the renewals with the NBA and Univision and just relapse. In terms of the trend of connecting these big enterprise brands with fans, it seems like a big opportunity. How much of the North American market for enterprises, Greenfields, and how much is already penetrated by BBTV and its competitors? What does the landscape look like?

So, Deepak, when we're looking at the actual content creators that we work with, we prioritize, as you know, we have our tech has already scanned more than 2.5 billion video assets, where we have actually captured real-time data on the actual content in terms of what is trending, where the consumption is occurring, and we would be prioritizing content creators that have the most amount of engagement. And currently today, as you know, when it comes to viewership and revenue penetration for BBTV, we are in low single digits. So in terms of market penetration, our opportunity is vast. And also the other part of it that you have to actually need to highlight is that we are also in a market that is growing very rapidly. The clear economy is very much so rapidly growing and evolving landscape that we are very much so well positioned in terms of benefiting from that.

Okay. Do you have any further comments on that?

No, I think you've covered it. It's just an enormously large TAM. And I think Sharzad covered a lot of those metrics on that addressable market in her opening remarks, um, which I think are relevant as well. Okay, great.

And so I think, I think in the, in the opening remarks, he said there was about 80 million, 84 million in expected digital advertising spend in 2022. Um, Out of the 50 million content creators that you've identified, what's their capture of this 80 million today, and do you have a sense of how much that influencer base can capture of the growing pie in digital advertising spend?

I mean, if you look at it, we talked about how, you know, Deepak, there are 50 million people around the world. They actually consider themselves to be content creators, right? And this is growing very much so rapidly because, yes, 2 million of these creators are specifically considered to be a full-time profession and where they're generating revenue and it's their full-time job. But you will see more and more of a transition of that because you not only are limited to advertising as a main source of revenue, but you have all of these other industries. incremental revenue sources in terms of that would actually further help with this shift of specific addressable markets. We currently today, we work with only 5,000 content creators. So the opportunity is in two folds. One, adding more creators. Two, basically extending monetization for existing creators. You know, if you think about it, with 5,000 creators, we are generating more than $450 million in revenue, and we're generating $40 million in BBTV share. So as we expand our revenue streams across more plus solutions, the impact on gross profit is 15x. And also as we add more specifically content creators, Again, that is driving your bottom line because, as you know, BASE is a profitable engine that is very much so cost-effective that it's contributing to a great share of our actual bottom line today and will continue to contribute to a great share of the actual bottom line in the future as well. So we see that as, again, it's a market that is very much so growing, and we're just at the tip of the iceberg.

Okay, thank you. That's very helpful. And then my last question, if I may, and I guess it's a bit of a follow-up to Kevin's earlier question. When we think specifically of third-party cookies and restrictions on those that are expected to come, how does that overall change in the digital advertising landscape affect your business?

When it comes to cookies, I mean, look, what is so great about BBTV is that we have that access. to data. We know the content creators. We have so much information on the content where you can actually specifically create these contextually relevant packages for the advertisers. So then you're actually making those campaigns to be more effective and then therefore you actually have better results in comparison to let's say the platform's that don't have that access, that don't have that great understanding of the content, the content creators, that now also don't have the ability to leverage cookies. You know, with BBTV, the way we actually kind of target our audiences, a lot of it is mainly driven based on content packages, vertical packages, creator packages, where you're drawing other parallels in terms of audience extensions to be able to actually deliver very much those targeted effective campaigns. So I think that definitely will have no impact on BBTV as it relates to our ability to be able to sell campaigns effectively to brands and advertisers. Because our ad units and the way we sell them is very different than programmatic ads that are sold by the platform.

Got it. And so for those platforms that don't have the access to that data and when those third-party cookies go away, I guess it would make sense.

It would mean that companies like BBTV, we have a greater ability to pick up a greater line of share of the ad spending digitally for video for content creators. That's what that means. Because you have more data, you have more specific information on the content itself and the creators.

Perfect. Looking forward to that, Dana. Thanks again for taking my question.

Thank you, Deepak.

Your next question comes from the line of Aravinda Galapantij from Canaccord, January. Your line is now open.

Good evening or afternoon, depending on where you are. Thanks for taking the questions. Sharzad, with respect to your efforts on the direct sales front, when you think about the conversations you're having with advertisers, Are the conversations more around sort of integrated brand advertising, I mean, where you basically take those brands and kind of integrate it into the content itself, or is it more sort of I think what you guys call the reach-type direct ad sales? I wanted to get a sense of where the conversations are headed as you look to ramp up that line item. And then a quick follow-up for Todd, if I may. On the gross margins, I mean, you provided some good clarity on that, on the reasons for the uptick from Q4 to Q1. I mean, it seems to have an element of seasonality when we look at last year as well. So in that backdrop, when we think about, you know, forecasting Q2, Q3, Q4, should we kind of go back to sort of the year-over-year outlook rather than build out of Q1? Just wanted to get some clarity on that as well. Thank you.

Thank you, Aranda, for your question. So in terms of direct sales and how we actually kind of, you know, productize obviously our content, you know, we obviously leverage our tools as a variety of amazing content creators and, you know, in terms of developing really highly targeted and unique content-first product offerings that really enable marketers to align their messaging with content that delivers both, of course, reach and and scale as well as brand safety. And when you're looking at the actual format, it is reach media, and we do actually kind of specifically, you know, many times have that combined with brand entertainment campaigns. And as you know, with respect to, you know, really efficiency and results, Many times, you know, you have campaigns where you have a combination of both, but mainly I would say it's coming from reach media and there is a component that is allocated to branded entertainment. And we'll see that actually continuing to grow because as you look at new ways in how you can actually make the branded entertainment and those brand integrations, again, scalable and in some ways, you know, available to more brands and agencies, obviously we will see a pickup there too. but certainly it will actually make those campaigns to be more authentic and therefore generate greater results.

And Aravinda, with regard to your question with regard to gross margin and seasonality, it's a good question, but frankly, seasonality has more of an impact on the RPM metric than it does anything else. And of course, viewership with respect to the types of things that people might be viewing during a particular period of time can whether that be a seasonal sports or holiday period or whatever that is. Frankly, the key driver in gross margin is really more around our own execution. It is more about us being able to use our size, our scale, our capabilities, the breadth of our offering to improve our margins on the base solutions and the expansion of our plus solutions, which says they gain a higher mix of revenue, also contributes to higher margins.

Great. Thank you for that. And if I may just quick follow up on some of the comments you were making, Sharzad, about the size of the market. I mean, given that you're talking about having 5,000 content partners, if the market is that large, and which means there are obviously a lot of much smaller entities that you can service, is there a case for you to consider a more basic, low-touch self-serve product that you might even have to offer at a fee, but be very incremental to your revenues with very little cost. I mean, is that a consideration when you consider that, you know, the size of that market?

So, Aravinda, I think, you know, when you're looking at particularly the long tail and, you know, the independent content creators, we certainly think that that is one way of monetizing them. You know, the reason why we like the revenue sharing model is because you're actually sharing in the success of the content creators. And as our solutions generate results, and drive results, we are obviously sharing the success of the content creators rather than having a cap on specifically the fees that you can charge them. That said, if you actually are within a certain size, we can certainly look at a model where we actually charge them on a fee basis. But currently, as you know, when content creators leverage our platform and our solutions, you know, they would actually benefit from a lift of 19% in terms of the average take-home for them annually. And that is, as Todd mentioned earlier, the average length of contract with the content creators are one year, and they are renewed. So the overall impact on the content creators are much greater than 19%. And for us to be able to actually share in that success, obviously, is a great upside. But certainly, Aravinda, there is a case to be made for self-serve for smaller creators.

Great, thank you. I'll talk to you later.

Thank you, Arvind.

Your next question comes from the line of Chris Thompson from PI Financial. Your line is now open.

Great, thanks. Sherzad, you mentioned serving ads across all devices. Can you tell us your desktop versus mobile mix right now and how you're thinking about apps and new app tracking transparency feature in terms of a base program out of business?

So, sorry, Chris, my apologies. I couldn't hear your question clearly. Would you be able to repeat your question again?

I'll pick up the line. Yeah, you mentioned serving ads across all devices. What's your device, your desktop versus mobile mix right now? And how are you thinking about Apple's new app tracking transparency feature in terms of the base program ad business?

As far as when it comes to the devices and the formats, as you all know, the majority of the consumption is occurring on mobile devices. And this is a metric that is publicly available by many platforms where you have, obviously, for example, platforms like Instagram, they're mobile only, whereas other platforms like YouTube and TikTok and Facebook and others have both a mobile and, obviously, a web version. What we are seeing is, obviously, the mobile consumption is the main driver of consumption across the board, where you're looking at 60%, 70% of the consumption. But we have seen during COVID also an increase in terms of consumption across connected TV devices. As far as our team, we are focused on selling, obviously, ads against our content where consumption takes place, which is mainly mobile devices, and we're also getting into selling connected TV devices across multiple platforms. As far as platforms offering new solutions, specifically on Apple, I can't really comment on that because, again, Again, these are new products, and, you know, you need to, you know, I think as you have access to more data, you have access to more formats, if you have access to more visibility in terms of targeting audiences, it obviously would help you better in terms of reaching that audience. And we've seen this across the board with respect to products that have been launched by Google, Apple, of course, Facebook, Instagram, and by dance with TikToks. Okay, fair enough.

Understood. And maybe just back to the plus revenue, you know, it's around 7% of total revenue today and you have aspirations to get north of 30% by 2025. But if we just look a little bit closer term, maybe the year end, what would be a kind of base or optimistic case for the percentage of your total revenue in the plus category?

Yeah, you know, Chris, I don't think we want to make really specific projections on that because we're not giving that kind of guidance. But obviously, as we have talked about, we do think that exiting the year, we'll start to see some of that growth and ramp from our direct sales business. And we will also see some of the execution that we have throughout the entire course of 2021. So as we exit the year, we think that we'll start to see some improvement in those margins. But I think we would shy away from giving you specifics there.

Okay, fair enough. And Todd, while I have you just on the gross margin, are you able to quantify the percent of content or views that's rolling off the penetration pricing this quarter and throughout the year? And also, how are you thinking about any possible churn in that content as the contracts renew? Yeah.

Well, we certainly expect to maintain our very, very high retention rates north of 95%. We've not seen anything that indicates anything but great continued reoccurring revenues from our existing content owners, as well as continuing to sign new content owners. So we'll certainly be cycling through those agreements. And as we look to improve not only revenue, those terms, but also adding new content creators not just in North America, but in new territories. And so as we continue to enter new markets in the same similar fashion, we think we'll be able to enter those territories also with more improved margins as well.

Okay. Thanks for taking my questions. I'll hop back into the queue.

Thank you, Christy. Your next question comes from the line of Sutan Sukumar from 8 Capital. Your line is now open.

Good afternoon. My first question is to you. Can you touch on a little bit of what you're seeing with respect to content consumption trends and how they're evolving as you start to lap COVID-19 trends? on some of the core platforms and beyond that, you know, what new channels or categories do you see opportunity to participate in like social, like social commerce?

For sure. And thank you for your question, Susan. And the first part of your question before categories, I want to make sure I heard that correctly. Your question was on consumption around, it was verticals. And what was the other piece of the question?

Was there on, was on the channels? Well, really want to give you, get a better sense for you on, you know, how some of the content consumption trends you're seeing today on your core platforms and then really where you see opportunity to participate in kind of newer channels or newer categories ahead like social commerce.

For sure. So when we look at actually content verticals, obviously consumption has increased across all verticals, you know, and as we talked about, The pandemic has definitely increased the pre-pandemic shift. And we were seeing that across all content verticals, you know, within music, gaming, kids, sports, across lifestyle, entertainment, all the verticals that we operate at BBCB. And, you know, certainly there is great opportunity as you're looking at vertical expansion, particularly, you know, I would actually say even within, you know, sports, we mainly have tackled, you know, basketball, basketball culture as a key vertical. We see great opportunity as further expanding that as well as, you know, really looking at new and emerging verticals. And this is obviously different across different geographies. Currently, as you know, today we operate across 30 countries and 12 languages and So we certainly, that's part of the roadmap as we look at growth. We look at not only growth across platforms and, of course, territories, but we would be looking at growth across verticals as well. But we have seen consumption trends across verticals growing very much so rapidly, all verticals. When it comes to revenue streams, you know, an expansion across revenue streams, you mentioned social commerce. Look, we're very much so laser focused on the three pillars of Plus Solutions, which is direct advertising, content management, and mobile apps. There's massive opportunity with respect to all those three pillars. We're very much so excited about the launch of the NFT division, and we believe that that would further allow us to actually help monetize IP and extend IP for us and our content creators beyond what we're doing today. But certainly, as you look into the future, and we've seen this across social commerce, we talked about how three-quarters of the people that are actually watching content online, they actually get to buy a specific product that is recommended by a content creator and an influencer online. So we definitely, and this is why we believe that we're really at the tip of the iceberg when it comes to this monetization ecosystem around greater economy. And, you know, given our reach and scale and the fact that viewership and engagement are the two key most important engagement and metrics that matter in this industry, I think we're very, very well positioned to benefit from these revenue streams.

Okay, great. That's helpful. Next, I want to touch on competitive landscape and get your thoughts on how you're seeing the competitive backdrop evolve. I'm wondering if you're seeing any new competition for new entrants or if you're seeing existing point solutions get more competitive by maybe broadening or expanding the capabilities. Yeah, just kind of curious on your thoughts there and what you're seeing.

Very good question. You know, when Todd touched on the retention rate, we have north of 95% retention rate, which is very, very, you know, kind of above industry average. And this really speaks to how our solutions are effective and that they're generating results and that the customers are happy. And as we continue to actually keep on, you know, building on our solutions and, you know, when you look at, you know, the content creators, the content creators, what we do offer them is a one-stop shop solution, you know, without the need to have to juggle multiple vendors. And these solutions are generating results. And this is why you're seeing that our retention metrics, you're seeing that in our retention rates because, you know, at the end of the day, we are generating great results and the customers are happy. And we're going to keep on seeing that as we actually add more solutions, as we actually grow and scale, you know, across our both base and plus solutions, it would make it more challenging, obviously, for others to compete with us. And that goes also to actually the solutions that we've built with respect to our technology. I touched on how, you know, we've built solutions where we've analyzed more than 2.5 billion video assets, and we are providing solutions from content discovery to collaboration to monetization to our content creators. And this, again, is going to become very difficult for others to create competing solutions because you're having this end-to-end solution that helps content creators without the need to juggle multiple vendors.

Great. Perfect. Thank you for taking my questions. I'll pass the line.

Thank you, Suzanne.

There are no further questions at this time. I will turn it over back to the speakers for any closing remarks.

Thank you so much, everyone, for joining us today. And, you know, kind of, again, we are obviously always available if you have any follow-up questions. We are very excited about the growth of the business, our results. And, again, I do want to remind all of you that, you know, we are very much so essential to the livelihood of thousands of content creators around the world. And we are very proud that we've supported these entrepreneurs and thousands of their employees across the world to actually make money from the content that they enjoy creating. And we appreciate your time and continued support and look forward to connecting in the future. Thoughts? Any final thoughts?

Nothing else for me. Thank you very much. Thank you, everyone.

All right. This concludes today's conference call. Thank you for participating. You may now disconnect.