BBTV Holdings Inc.

Good day and thank you for standing by. Welcome to the BBTV 2021 second quarter results conference 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 one on your telephone keypad. If you would like to, if you would like, to withdraw your questions. If you require, I'm sorry, if you require any further assistance, you may press star zero. I would now like to hand the conference over to your speaker today, Nancy Glaister, General Counsel and Corporate Secretary. Please go ahead, ma'am.

Welcome to BBTV's fiscal second quarter 2021 conference call. I'm Nancy Glaister, General Counsel for BBTV. During the course of this conference call, we may provide forward-looking information and make 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. Forward-looking statements are statements about the future and are inherently uncertain. 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. The company's forward-looking information, including its financial outlooks, are provided to aid in understanding management's goals and expectations regarding future financial and other matters and may not be achieved. Such financial outlooks may not be appropriate for other purposes. 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, as well as the risk factors contained 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. Also, our commentary today will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not a substitute for IFRS financial measures. Reconciliations between the two can be found in our earnings press release and our MD&A, which are available on our website and on CDAR.com. I now turn the call over to BBTV's Chief Executive Officer, Sharzad Rafati.

Thank you, Operator, and thank you to everyone on the line for joining us today to review our second quarter 2021 results. Joining me today is our current CFO, Todd Tappan, along with our acting CFO-to-be and our current VP Finance, Ben Groot, who was our de facto CFO for six years prior to the IPO. We'll 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. Then we'll review the financials, and then I will close with a general outlook prior to taking analyst questions. All in, both our top line and gross profit were higher than all analyst estimates and ahead of consensus, as published by Bloomberg. We are pleased with the performance of our Plus Solutions, and it gives us confidence that the investments we are making into expanding Plus Solutions are beginning to pay off. BBTV exists for a primary one purpose, and that is to help enable creators. We have created a destructive platform that helps content creators to be more successful, increase their viewership, and make more money for their content. Our platform does a variety of things, such as content optimization, enhanced distribution, social engagement, safety and compliance, monetization, payments, and much more. Our offering is always evolving and driving more value to creators. For example, our interactive team helps creators unlock value for their audiences via mobile games, and we recently introduced NFTs as an area where we are developing and offering. There isn't a platform out there that does all the things that ours does. One of the unique things about our offering is that, as a creator, you can't just pay us a SAT fee to get access to the platform. You need to enter into a content partnership with us where you share part of your revenue with us. This creates a model of shared success whereby we want to help creators be as successful as possible because we earn part of their revenues. And it's working. That's why we have industry low trend figures because our platform works and creators stay with us. Most of our revenue are highly predictable and have high degree of recurrence to them. They're resilient as evidenced by our performance during the pandemic. BBTV's platform is powering the creator economy and helping thousands of creators drive more income while entertaining and informing the world. Our network of creators have 600 million unique viewers every month. BBTV has 500 creators making more than $100,000 a year, 100 creators making more than half a million, and 50 that generate more than $1 million in revenue annually. On average, BBTV creators earn 50 times more revenue than non-BBTV creators. What is unique about BBTV, though, is that we don't just generate revenue by helping creators be more successful. In order to get access to our platform, creators partner their content into the BBTV network, and that gives us broad rights to sell their advertising inventory and syndicate their content to other platforms. I've been asked by some investors to expand on what I think the big idea at BBTV is. The big idea at BBTV is simply that we have the best tech-enabled platform in the world to help creators become more successful. This is why we are very likely YouTube's largest enterprise video partner. Creators get a lot out of working with us, and this is why they share their revenue with us. The driving force of our vision and focus is helping them be more successful. We are filled with enormous pride that we help put food on their tables, and we are grateful to them for choosing and sticking with us. We are a purpose-driven, mission-oriented company with absolutely enormous potential. Shareholders may ask, why do creators matter, and why is BBTV a uniquely positioned stock to generate returns for the creator economy? More than 15 million people around the world consider themselves to be content creators. And this is growing rapidly. More than 2 million of these creators consider it to be their profession. And there is a massive and fast-growing economy that is building. And as we mentioned during our recent corporate update, the global creator economy is now worth over $100 billion per annum and growing at about 40% per year. Let's put that into perspective. 50 million creators are driving over $100 billion every year, powered by 2.6 billion social media users. Over the last 12 months, BBTV has generated 496 million in revenue, working with just 5,000 creators who leverage our platform to grow their viewership and make more money. And as I've said before, this is just the tip of the iceberg, and we're just getting started. Our research has shown that there are 2 million creators that are potential customers of BBTV. And while we're one of the largest companies in our category with thousands of creators on our platform, the potential to acquire new creators is substantial. The TAM is simply enormous, and we're just getting wrapped up. This industry is at its infancy, and everyone is taking notice. Recently, Facebook announced that they will be providing creators with $1 billion worth of incentives to create and distribute content on their platform. Given that BBTV is an active across all major platforms, including Facebook, we love seeing these types of developments in the industry. As I mentioned earlier, we had a strong quarter that was ahead of analysts' expectations. We are pleased with the performance of our plus solutions, and it gives us confidence that the investments that we are making into expanding plus solutions are beginning to pay off. We're just getting started here, so there could be some future lumpiness in our trajectories, but we are confident that we made the correct call here. Base solutions revenue was at $108 million, an increase of 21% from $89.5 million for Q2 2020, while plus solutions revenue was $10.1 million, up 65% from $6.1 million reported in the previous quarter. The performance in both categories was ahead of our expectations. For greater clarity for our base solutions, which is programmatic, we keep a share of revenues for the creator. Our plus solutions are sold directly, targeted, and configured to generate ads at a value that is more than five times higher to advertisers compared to the programmatic ads for our base solutions. As a result, we generate more revenue for ads 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 unit are also different. Base is sold programmatically while direct is sold on a reserved basis direct to advertisers. For every dollar sold on a direct basis, gross profit for these sales are greater than 15x more profitable. BASE continues to be a large contributor to the bottom line today, and we expect by 2025 it will provide half or more of our contribution as both our PLUS and BASE solutions grow in revenue and margins. I also want to remind everyone that we have included two non-IFRS metrics that we believe are important to our performance. First is BBTV share of revenue. BBTV operates on a revenue share model whereby we allocate revenue to creators and keep a portion of it. BBTV share of revenue is a KPI that monitors closely for operating effectiveness, and we expect it 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 BBTV share of revenue. We monitor adjusted gross margin because it is a reflection of our efficiency as we grow our plus revenue over time. We still anticipate the adjusted gross margin should be maintained at around 90%. Fluctuations will be impacted by solution mix. With respect to our operational KPIs, revenue for Q2 2021 was $118.1 million, a 24% increase over $95.6 million reported in Q2 2020. The revenue increase was led by a 41% increase in RPMs and 12% fewer views. RPMs had strong growth in Q2 2021 due to an increase in advertising spent in the quarter. This is compared to Q2 2020, which saw temporary pullbacks in advertising spent at the onset of COVID. Views declined in Q2 2021 compared to Q2 2020, when views were exceptionally high during the peak of global lockdowns, which affected consumer behavior patterns, while Q2 2021 reflected COVID recovery patterns. Our churn rate is low amongst creators on the BBTV platform. We continue to have strong views retention rates, reaching 94% amongst the creator base over the last 12 months. This is similar to customer retention as views times RPMs equals revenue, which gives us a great line of sight to our future revenues. During the quarter, we announced some key operational developments, which generated additional confidence in our outlook. In Q2 2021, the direct sales team won its first retail banking customer, along with three major CPG brands, which is the largest expansion of brand wins for the segment in a quarter so far. BBTV also recently announced the addition of Martin Cass, former president of leading advertising group Carrot and former CEO of Media Assembly as a strategic consultant to help drive direct sales growth. We signed prominent new creators in key verticals of entertainment and gaming, representing approximately 1.7 billion monthly views in addition to other signings during the quarter. BBTV onboarded a number of enterprise accounts in Q2 2021 for content management under Plus Solutions. BBTV launched a new casual mobile game for leading gaming creator, Creed. The app was number one most downloaded iPad app in the U.S. within 24 hours of launch, and the game also became the number four and number six most downloaded casual game on Android and iPhone, respectively, in the U.S. BBTV added non-fungible tokens as a new plus solution to generate a new revenue stream. An investment in a strategic partnership with Nifty's for the newly formed NFT division was also announced. We closed convertible debenture offering and refinancing transactions in the aggregate of $66.3 million, providing capital for growth initiatives, including M&A, debt reduction, and debt deferment. We have been frustrated with the share price movement over the past few months, and last month the Board decided to initiate a share buyback plan. Notwithstanding acquisitions, we believe that the best return on capital is to acquire our own shares at a huge discount to the market based on our peer multiples. Now I would like to turn over the call to our future acting CFO, Ben Good, to review the financial metrics for the quarter.

Thank you, Sharzad. In accordance with our recent IPO and acquisition of RTL's share of BBTV, which occurred during the fourth quarter of 2020, we are providing Q2 of 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 Q2 of 2021 and Q2 of 2020. The statutory financial statements include BBTV Holdings only, which does not include the main broadband TV Corp operating entity for Q2 of 2020, but does for Q2 of 2021. One notable presentation item for Q2 of 2021 and going forward Is the amortization in assets recorded as part of the purchase price allocation, or PPA, associated with BBTV Holdings acquiring Broadband TV Corp. in conjunction with the buyout of RTL's share and the company's IPO? The purchase price allocation's total assets recorded in Intangibles and Goodwill was $368.6 million. Amortization associated with the PPA in the amount of $7.1 million was recorded in cost to revenue for Q2 of 2021 as the primary assets included the company's technology and the company's content creator library and agreements. It should be noted that this amortization associated with the PPA recorded in cost to revenue is a non-recurring transaction and 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 PPA amortization, and as introduced last quarter, the metrics of BBTV share and adjusted gross margin. Overall, for the second quarter of 2021 compared to the second quarter of 2020, we noted the following highlights. Revenue increased by 24% from the prior year, attaining $118.1 million. This was led by a 41% increase in RPMs, attaining 99 cents. Gross margin, excluding amortization associated with the PPA, was 7.8%, comparable to the same period last year. BBTV share, which is revenue less third-party platform fees and creator shares, was $9.7 million for the second quarter of 2021, compared to $8.4 million last year. and the adjusted gross margin for Q2 of 2021 was 94.9%, compared to 90.2% last year. As noted, revenue for Q2 of 2021 was $118.1 million, a 24% increase over $95.6 million reported in Q2 of 2020. Bay Solutions revenue was $108 million, an increase of 21% from $89.5 million for Q2 of 2020. while plus solutions revenue was $10.1 million, up 65% from $6.1 million reported in Q2 of 2020. The revenue increase was led by a 41% increase in RPMs, going from $0.70 in Q2 of 2020, which saw temporary pullbacks in advertising spend at the onset of COVID, to $0.99 in Q2 of 2021, which saw a recovery in advertising spend. Views declined by 12%, going from 126 billion in Q2 of 2020, when views were exceptionally high at the peak of global lockdowns, which affected consumer behavior patterns, to 111 billion in Q2 of 2021, which saw COVID recovery patterns. Trailing 12 months revenue was 496 million, an increase of 28% over the same period last year. Gross profit was 9.2 million, excluding PPA amortization, which is an increase of 22% over the same period last year, which was 7.6 million, representing a gross margin of approximately 7.8 and 7.9% for Q2 of 2021 and Q2 of 2020, respectively. Gross profit, including the non-recurring and non-cash PPA amortization, was $2 million compared to $0.3 million over the same period last year. ABTV share was $9.7 million for the second quarter of 2021 compared to $8.4 million in the same period last year, representing an increase of 15%. And the adjusted gross margin was 94.9% compared to 90.2% last year. Operating expenses were $14.9 million for the quarter, or an increase of $4.6 million when compared to the same period last year. However, the increase in operating expenses is only $1 million when excluding $3 million of non-recurring COVID expense offsets in Q2 of 2020, such as grants from the Canadian government and suspension of personnel bonuses, along with excluding $0.6 million of increases in non-cash items such as share-based compensation and depreciation and amortization. This increase of $1 million in operating expenses was primarily driven by investments in our plus solutions and public company-related costs. The net loss for the quarter was $4.3 million, including the PPA amortization, which was lower than the $6.4 million loss for Q2 of 2020. Earnings per share for the second quarter of 2021 was a loss of 21 cents. based on weighted average outstanding shares of 20.6 million. Adjusted EBITDA was a loss of 3.4 million, which increased from a loss of 1 million in the same period last year, but otherwise would have improved by 0.6 million in the absence of 3 million of non-recurring COVID expense offsets in Q2 of 2020, such as grants from the Canadian government and suspension of personnel bonuses. With continued investment in the company's base and plus solution businesses, the company estimates that it will reach adjusted EBITDA profitability by fiscal year 2022. In terms of the balance sheet, the company ended the quarter with $15.5 million in cash, but due to some timing differences in the collection of our receivables, an additional $11 million was collected after quarter end, replenishing the cash balance, which was more than $27 million as of July 31, 2021. Also, in accordance with our recent debt offering, our long-term debt balance was $48.1 million as of June 30, 2021, which now carries a maturity to the year 2026. I will now turn it back to Sharzen.

Thank you, Ben. 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 with the creator economy, and we are actively investing to unlock the opportunities as they emerge. Our base solutions, which currently represent a vast portion of our revenue streams, provide efficient contributions after revenues shared with creators. Ad revenue is highly programmatic, and our technology allows us to scale revenue efficiently with minimal effort. We can also generate significantly more revenue for creators and a 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 earlier this year. We believe that the investments that we're making in our plus solutions will continue to have positive impact on our performance. Although we're in early stages of our investment, we're already beginning to see some positive impact on performance. And in general, we should see continued accelerating trajectories in plus revenues. Our base solutions remain a key driver to our overall revenue growth. And we will also see solid top line growth in our base solutions because we continue to sign up new creators, attract views, and see expansion of RPMs. We're also increasingly attentive to our bottom line as we scale. As a result, we are working hard with creators to create efficiencies amongst various revenue streams to maximize profit margins. This is why we're confident that we should be adjusted EBITDA positive next year. These dynamics help us to get us to our goal of $1.4 billion of top-line revenue, $300 million of BBTV share of revenue, with mid-teens' level of adjusted EBITDA margins by 2025. Over that time frame, top-line grows by 2.4x, and BBTV share grows by 7.5x, which is the direct result of growth across base and plus solutions organically. By 2025, we expect that plus solutions would represent 30% to 40% of overall revenue, with base solutions comprising the remaining revenues. Notwithstanding the gross margin ratio, base revenue is extremely efficient to generate because the platform is almost entirely automated for both creators and BBTV. In fact, next month, we're planning to demoing our platform to investors and showcasing how easy it is to use for creators to increase their views and generate more revenue. When it comes to M&A, 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. Our NFTs minority investment was a small pace of where we would like to take our acquisition strategy in the future. For us, it's all about accretive transactions with higher margin revenue streams and growing profitably. So why BBTV? It's proven that the creator economy is large and fast growing. BBTV is essential to thousands of creators around the world. We have massive platform for monetization, and we are very efficient at generating revenue, in particular within our base solutions. We operate a very efficient platform. We have already generated $20 million in BBTV share in the first half of the year, with our two strongest quarters to come, and our adjusted gross margin is around 90%. 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 our margins. In comparison to our peers, despite being one of YouTube's largest partners, despite extending our reach to TikTok, Instagram, and Facebook, despite having operations in 12 countries, despite having massive scale of 600 million unique viewers, Despite consistently surpassing analyst consensus and this quarter all analyst forecasts, our comparative share price value is ranked the lowest amongst our peers. Needless to say anymore, but our shares at the current level are a bargain for investors. I want to close by reminding investors, like I did for the previous quarter, that we're essential to the livelihood of thousands of content creators around the world. We are 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.

Thank you, ma'am. As a reminder, to ask a question, you will need to press star 1 on your telephone keypad. To withdraw your questions, you may press the pound key. Please stand by while we compile the Q&A roster. And speakers, our first question from Jeffrey Fan of Scotia Bank. He may now ask your question.

Thank you. Good afternoon, everyone. I've got a couple here. Sharzad, your comment about being EBITDA positive for 2022, can you just clarify whether that's referring to the full year or if you're just talking about a specific quarter? Sure.

Hi, Jeff. Thanks so much for your question. We're referring to the full year.

Full year. I guess if we can just get some more clarification around that then, because what are the operating cost assumptions for next year? Because I guess the expectation, I think, on the street is that you'd still be minus $9 or $10 million. on EBITDA, and there was an expectation that would be an investment in sales and other areas to grow your plus. So is this all revenue-driven, or is this cost? Can you just elaborate a little bit on that? Thanks.

Yeah, I would actually jump in, and Ben, you can definitely please do. Jeff, when it comes to actually specifically adjusted EBITDA, as we know, we've continued investment in our base and plus solution businesses. The company obviously estimates that we actually have this adjusted EBITDA profitability in FY 2022. And it's a combination of operating leverage that comes with, you know, base solutions. As you know, base solutions is a profitable engine that, you know, again, allows us to really scale it across existing and new platforms, verticals, and territories. And, you know, a significant portion of the actual office is us investing in our plus solutions. You know, we did announce this during our prior earnings call that we're investing in our plus solutions that have three to four times higher margin than base. And we're seeing great results already, as we've actually indicated during the results, 65% increased Q2 over Q2. So that's really where the company is investing in terms of our plus solutions. And as we've indicated, there is a ramp of associated with respect to seeing results with respect to plus solutions. And we will see those results in the later quarters and, of course, in 2022. And with that, this is why we're going to actually leverage, you know, we're going to really benefit from both the operating leverage that comes from BASE and also the investments that we are currently making in our plus solutions. Ben, do you have anything to add to that?

No, I think you summarized it quite well. I think the only other point to highlight is when you were talking about operating leverage, we're certainly seeing that improve at a faster rate than in the past. Just notably, if you look at Q1, As a percentage of revenue, our OpEx is around 13.8%, and just quarter over quarter, that dropped by over 1%. It's at 12.6% in Q2. So, as Sharza noted, it's a function of both, but certainly when we look at some of our operating leverage and the scale that we're reaching with the platform, it's improving at a faster rate.

So, you're expecting to keep operating costs relatively flat then from 2021 to 2022?

There will still be still investment going into 2022 as we continue to ramp up our plus solutions. But as a percentage of revenue, we expect there to be improvement in our operating leverage.

Okay. That's great. That's helpful. And one last one for me. In terms of your cash on hand, can you just help us think about the balance in your priorities between acquisition opportunities? You talked a little bit about that. funding your own business growth versus share buyback?

Yeah, so I think as it relates to Jeff, when it comes to specifically the use of funds, as you mentioned, the company ended the quarter with $15.5 million in cash. And due to some timing differences, the collection of the receivables were at $11 million extra. So we will end with a cash balance of $27 million as of July 31st. And in terms of use of proceeds, It is putting that towards working capital and M&A. And, you know, we obviously are going to look at specifically ROI. You know, working capital, as Ben indicated, is really investing in plus solutions where we have three to four times higher margin. And we are already seeing the benefits of that. And as it relates to the share buyback, look, we will very likely not acquire shares unless we absolutely can't find a better use for our funds. But we are very much so confident that the stock will go in the right direction as the company performs. And we are already seeing that based on the announcement that we had with YouTube Shorts yesterday and the performance of the stock. associated with that. So we're very happy. The fundamentals of the business are performing really well. So we hope that we don't need to use it, but we have that in place. And it was a decision that was made by the board.

Great. Thank you both. I'll pass the line.

And speakers, our next question from Kevin Krishnarant of the Hardin. You may ask your question.

Hey guys, this is E calling on behalf of Kevin. So I have a couple questions. The first one is, you know, the creator economy has obviously been very strong. How do you look at competition? Is there anything new that you're seeing?

A really good question on the creator economy. I think one of the things that I do like to highlight as it relates to the overall opportunity, as of June 10th, the global creator economy is estimated to have grown to $104 billion. And I think this is very significant, especially when you're looking at the macro level in terms of the number of content creators. You have 50 million content creators around the world that consider themselves to be content creators. And this is really growing rapidly. You know, you kind of look at a subset of that 50 million, 2 million of those creators, they consider this to be their profession. And, you know, when you look at, you know, announcements like the ones that we saw with Facebook with, you know, $1 billion in terms of investment in supporting the creators. in terms of creating more content. You know, you look at with YouTube Shorts, there was $100 million fund associated with that. These are all great initiatives and updates that we're seeing in the industry that really speaks to how the creator economy is growing so rapidly. And I think, you know, to put that into perspective, you know, you look at the 2 million content creators, you have about 1.2 million e-commerce retailers in the U.S. that are fueling a half a trillion dollar segment of the $4 trillion segment of the retail economy and you know when you look at the the creator economy is very much comparable to that because you know the audiences you know the potential for it in terms of the number of users you know today you have 3.6 billion people that are using social media and that number is actually projected to increase to 4.4 billion by 2025 um so those are all very important I think trends that we need to really pay attention to that are driving this economy. And as I said during our last earnings call and today earlier, we're really at the tip of the iceberg. Because when you look at the monetization associated with this level of engagement, this massive audience, advertising is just one of the pillars. You know, and you're looking at advertising growing at a rate of 40%. So we are very much so excited about, you know, this fast and growing economy. And I think when you look at BBTV's scale, you know, we have 5,000 content creators that are now generating, you know, you look at our June LPM figures, 496 million in revenue. And our share revenue, obviously, is more than $40 million. And that gives us a massive baseline for monetization. So given the size, the number of creators, the scale that we have with respect to our viewership, and specifically the number of unique viewers that are watching our content, which is now more than 600 million unique viewers.

Thanks, Old Color. Is there anything you may be able to add in terms In terms of competition?

In terms of, sorry, I missed that.

In terms of competition.

Did you say compensation? I'm sorry, my apologies. I didn't hear that.

Competition. So like with competitors. Is there anything you're seeing?

Yes, sorry. Yes, yes. Sorry, I heard competition. My apologies. In terms of the actual, you know, the players in the industry, you know, if you look at it in comparison to, you know, all the peers, the median, like that EV to total revenue multiple for our peers are over the last 12 months, you know, we're significantly undervalued based on our BBTV's revenues and also BBTV's share of our operations. You know, when you're comparing, for example, BBTV's revenue multiple to our peers, you no matter how you want to slice it, our stock is trading at less than a tenth the multiple of the peers. And just to give you a bit of color, for example, on a top-line perspective, we're actually trading at around 0.3x EV2 revenue. When you look at our peers, the peers are actually trading at the median of nearly 20x. And when you compare that to our share of revenue, we're trading at 3.8x multiple while our peers are trading at 30x. And I think to give you a little bit of color, you look at the trade desk. I mean, the trade desk, there are platforms that provide advertisers the ability to actually place ads programmatically alongside a variety of different formats, including video, which is very much so comparable to what BBTV does with respect to both our programmatic and direct advertising solutions with respect to video. Trade Desk's revenue, if you look at June LTM, that was only two and a half times more than BBTV, where if you're looking at BBTV's market cap, we are 418 times smaller. And I think another example would be Enthusiast Gaming. You look at Enthusiast Gaming, their LTM revenue was only one quarter of BBTV's. They have 22% margins. But BBTV's market cap is over six times smaller, which really speaks to, you know, the opportunity for the investors given, you know, look at our, if you look at our scale, you know, if you look at our growth rates, our retention rates, more than, you know, 90%, 94% based on our LTM, which gives us a great line upside to our revenues. It really makes BBTV a very attractive opportunity for the investors.

Got you. Thanks for that. Just to follow up, so when you sign up new creators, where do you bring them from? Are those mostly independent creators that haven't worked with anyone before? Or are you bringing them over from your competitors?

It's a combination of both. I mean, look, you basically have specifically three different groups of creators. There are creators that haven't worked with anyone in the past. you have the creators that are emerging creators. Remember that the pie is also growing. You know, if you look at it, 15 million is the total pie, 2 million, they consider themselves, for that to be their profession, which is our time. But there are folks that, you know, there are small that are emerging and then their content creators are working with other players in the landscape. But I do want to highlight that if you're looking at our retention rate for views, we have a 94% retention rate. with respect to our LTM for the last 12 months. So obviously this is because our platform, we have such a strong platform that helps these content creators with a variety of different solutions. So they don't have to actually go to six or seven different vendors to be able to help them with content discovery, content optimization, distribution, monetization. We are really that one-stop shop that helps them grow their views and make more money. And this is why we have such high retention rates. And as we actually keep on building our solutions and offering more of our solutions from base to plus to our content creators, the solutions are going to keep on getting stickier, which means that we can actually even improve our retention rates even further. even though they're very strong.

Got you. So last one for me. I think there's a press release coming out yesterday saying that ABTV's monthly view generation from YouTube short. So how do you think about RPM and view generation of YouTube short versus the average long video?

So you're talking about how do I view? Sorry, if you repeat that question one more time, that would be great.

So how do you think about the RPM and view generation of YouTube short versus the average long form video on YouTube? Is there anything you may be able to share?

Yeah, for sure. Absolutely. It's a really good question. You know, look, when we're looking at, you know, just as YouTube Shorts, as you know, it's one of the emerging formats and, you know, really short form content is what is driving engagement across a variety of different platforms, whether if you're looking at Instagram Reels or if you're looking at TikTok or if you're looking at YouTube Shorts, which is now in more than 100 countries and generating, you know, 15 billion daily views. You know, and as you know, always, you know, monetization really always follows eyeballs. And when you're looking at specifically, you know, with YouTube Shorts, YouTube Shorts is currently, you know, as we actually are reporting, you know, our numbers on viewership, specifically, we are not including YouTube Short videos. Because, you know, as platforms launch new formats, not all formats are immediately monetizable, which really... speaks to the potential for monetization. So BBTVs, as we actually get to, again, monetize those views, it means that obviously the company is going to be generating more revenue. But currently, those views are not in the views that we actually are publicly available views. They do not include YouTube Shorts. And again, I do want to highlight that as you look at monetization, given that it always follows viewership, with more than you think about it, 15 billion daily views, you know, this is a very desirable format for brands and advertisers. And, you know, as a company, we always look at strategically expanding our partnerships with platforms and the content creators, you know, that really have massive potential for monetization. And I think YouTube Shorts is really key to helping, you know, that continuous expansion of that creator economy that we just talked about. And we are very much so excited also about taking our relationship with YouTube to new heights as also was mentioned by YouTube's chief business officer during our press release yesterday.

Thanks. I'll pass the line.

And speakers, our next question from Aravinda Galapati of Canaccord. You may ask your question.

Thanks for taking my questions. Two from me, and I'll ask them back to back. So very good growth, obviously, on the plus solutions. I was wondering if you can kind of break down where the growth is coming from. I suspect it's predominantly direct ad sales, but I was wondering if there was a component that was meaningful from some of the other plus solutions elements as well, mobile, apps, or enterprise. That was my first question. And secondly- You know, given the movement in PLUS solutions, you know, I wanted to understand sort of the gross profit margin changes. I know it was essentially flat year over year, went from 7.9% to 7.8%, or if you look at the BBTV take rate, the sort of 3.8 to 8.7%. I would have thought that given the higher margins of PLUS, you would have seen some traction in that margin. I was wondering if you can kind of clarify that for us as well.

Thank you. Yeah, absolutely. I guess going on your first point in terms of just talking about our breakdown of Plus Solutions, at the moment we're not yet breaking our Plus Solutions out in further detail. But as you noted, you know, when it comes to direct sales, that's certainly one of them that we're making investments. And certainly as we grow our direct sales team, it'll be reflected in our Plus Solutions growth rate. And also, as noted the last quarter, there's also a ramp-up period associated with plus solutions. So we expect to see more and more of an impact towards the end of the year and, of course, throughout 2022. But when looking at our growth in plus solutions and the impact on margin, there's a few factors here that impact that. First, mainly being that our creators have different margins under our base solutions. And as a result, changes in our creator mix each quarter can impact our overall margins. So in the case of Q2, it resulted in a lower margin, while in Q1, it resulted in a higher margin. So this will fluctuate with varying performance of the different creators each quarter, similar to what we've seen in past quarters. But also second, when we look at our solutions revenue mix between base and plus, It was more favorable, obviously, this quarter with a higher percentage of plus solutions. It was about 9% this quarter versus 7% last quarter. But you have to keep in mind, it still remains less than 10% of our overall revenue. So its impact on our gross margins aren't yet as meaningful. And I guess third, finally, when we look at plus solutions, they do have three to four times higher margins than our base solutions. And we have several revenue streams within Plus Solutions with varying margins as well. So the revenue mix, even within Plus Solutions, can impact the margins just the same way that creator mix impacts our base solution margins. So as we continue to ramp up our Plus Solutions, we expect the gross margin will improve with more consistency as it becomes a larger percentage of our revenue mix.

Thanks for that, Ben. And just a quick follow-up, you know, perhaps related to that. I think in the last quarter, you provided some color on the size of the direct ad sales team. I think you mentioned it was going from 5 to 10. I was wondering if there's an update there and also perhaps a target for year-end with respect to the expansion of the direct ad sales team. Thank you.

Yeah, when it comes to the ad sales team, just given the overall size relative to Plus Solutions as part of the business, we're not breaking out necessarily headcount separately from that aspect of the business. But overall, looking at the whole company, We grew our overall headcount by about 9%, or it was about, I think, around 35% in headcount overall. So certainly growing overall, and the majority of those investments are in our plus solutions and supporting being a public company.

Excellent. Thank you.

And our next question from Chris Thompson of BiFinancial. You may ask your question.

Oh, great. Thanks, Ben. Just while we have you on the gross margin, can you just revisit that penetration pricing? How far are you through, I guess, churning the deal pricing that you were promoting last year?

Right. Yeah, I think when you look at our base solutions, right now by far the biggest contributor to our gross profit. And this will continue to be the case for the next few years. So when it comes to our penetration pricing and also margin expansion, it makes sense for us to not only focus on not only growing our high margin plus solutions, but also looking into ways to improving our penetration pricing and our base solution margins as well. So we have several initiatives in the works to address just that. And given that we have over 5,000 creators with varying dates of contract renewals, you know, each of them are typically about one year in length, we'll start seeing more meaningful impact as a result of that on our overall margins going into 2022.

Okay, that's helpful. And hey, Sherzad, just on the plus business, I know you're not really breaking out the segments, but just on the NFT business, you know, you took a minority investment in Nifty's Are you going to publish your NFTs on that site or are you going to build your own marketplace? Can you provide any insight into the strategy timing and maybe internal base case revenue expectations for NFTs over the next couple of years, blue sky?

Yeah, for sure. When it comes to NFTs, we don't look at NFTs as just a fan engagement tool. We actually do look at NFTs as a fan engagement tool. So it's not an instrument of speculation, which as you see for some of the other companies, And as it relates to our strategy, we made this priority investment in Nifty as they are the first social non-fungible token platform. But we plan on working with all the engagement platforms out there as we work with a variety of different content creators across different formats. And to add just to your question, I mean, look, as we work with some of these most prominent content creators that are very much so uniquely positioned to market NFTs through their actually vastly you know, obviously offer a following and the number of, you know, specifically subscribers to their channels, you know, we're very, very positioned to be actually benefit from that fan engagement and to be able to offer them these NFTs. And what we've done is we were prioritizing, obviously, specifically the content creators that have the most following, the most engagement, but it doesn't mean that we don't actually have plan on scaling that across a much larger group of creators across the 5,000 creators that we're working with. But certainly, you know, I think, you know, it goes back to, you know, when you look at the marketplace, the marketplace trading volume is around $2.5 billion for the first half of 2021, which is up 1,800%. And I think we're very well positioned, you know, knowing that we're working with some of these biggest content creators to really launch these NFTs and monetize their IP through a variety of different plus solutions, including NFTs.

And when do you think we can expect any product launches in NFC space?

We have a very strong pipeline, and you definitely are going to hear more on that later this year.

Okay, fine. And then just on the acquisition front, you've got Blake over there helping you with M&A. He's been in the saddle for a while now. I'm sure you had a pipeline that you were reviewing before you solved your debenture, your balance sheet situation. That's all behind you now. you know, what's the pipeline look like? Do you have any LOIs that are coming near term? And, you know, what's kind of the smack bracket, given you've got, you know, 20 or $25 million cash on a balance sheet?

Yeah, definitely. I mean, you know, we got Blake, we're very happy. The MA team is definitely very busy, active, engaged. And, you know, as I mentioned to you, we have a very strong pipeline. And I think what really gives us even a competitive advantage is that, you know, we have, we're sitting on so much data insights in terms of consumption. We have relationships obviously with the content creators and our focus is really looking at the creative acquisitions that are going to be driving and accelerating the growth across those higher margin solutions, which is really, we're looking at direct advertising, of course, as one of the verticals, you know, and mobile gaming apps on an operated content that all have, higher margin solutions. And I think leveraging, again, there's nothing that we can actually share with you right now at this moment, but there's more to that. And we'll definitely hear about it through our announcements. But we certainly are making good progress. We're very happy with, you know, we have a massive data set and strong relationships.

Okay. Well, thanks for taking my questions. And I know you guys are all frustrated with the stock price, but just keep doing what you're doing. Lay up these nice quarters and that'll get solved in the near term. Thanks again.

Thank you. And we have our next question from Adhir Kadvi of 8 Capital. You may ask your question.

Thanks, guys. Good evening. Good afternoon, I guess, in Vancouver. But I know you guys mentioned, you know, targeting some of the COVID-impacted industries like travel and hospitality and just maybe in the overall, you know, macro environment. Can you guys maybe speak to how advertisers are coming back, whether those industries are coming back, and just overall, just anything on the macro that you can touch on?

For sure. I think, you know, when you're looking at our growth strategy, we definitely are going to be looking at continuing to focus on selling it to categories that, as you said, you know, that, you know, even during pandemic and post-pandemic are thriving. And that includes CPG, auto, financial services, as well as big box retail, food and beverages and luxury. Those are really the categories as the economy recovers from COVID. And, you know, if you look at kind of exactly kind of how what we are offering to specifically these brands and agencies, we're expanding our direct advertising team, as we touched on, and we'll continue to grow the sales presence, of course, in the United States. And, you know, given that we have very much so an extended offering across a variety of different industries, verticals from gaming entertainment music kids and sports that gives us a great advantage to be able to offer leverage the massive library of content that we have to really deliver audiences to this unique content programming space with richer data and inform audiences and i think one of the trends that we're also seeing that i'd like to highlight is that look because of the pandemic the size of the teams at these agencies have actually reduced. So really we're focused on, you know, very much just simplifying the buying and the planning experience for our clients. And, you know, as you can kind of see that the resources at agencies are quite squeezed everywhere, and that simplicity is going to go a long way. And the other trend, you know, high level, I think, you know, is the access to cookies, which we know that, you know, with the depreciation of cookies announced by all the major players, now advertisers are also looking at engaging directly with players like BBTV that have the rights to the content and have that richer and unique data sets and insights on their content. And this really is going to help us inform advertisers and really achieve the targeted audiences and generate and improve efficiency as it relates to the KPIs that matter. And I don't know if that answered your question with respect to kind of that blue sky.

Oh, definitely. Definitely it does. Thank you. And then just on the YouTube shorts, you guys said, you know, monetization follows eyeballs, but it takes a little bit of time to kind of ramp up that monetization. In terms of the YouTube shorts specifically, do you think, or can you maybe give us a very, you know, high level timeline maybe on as to when you could potentially see that? Because, you know, 5.5 billion monthly views is a pretty good sizable chunk. So I'm just wondering, maybe just high level, if you could provide, you know, when you could potentially see, are we thinking, you know, two quarters, three quarters, anything around that would be great.

So I hear we're obviously not in a position to share that, but certainly I think, you know, what we want to highlight is that this really gives us, you know, it goes back to the topic of how we have such a massive baseline for monetization because at the end of the day, ad dollars always follow eyeballs, right? And, you know, with 15 billion daily views, really, this is very much a desirable format for brands and agencies. And as I mentioned earlier, we really kind of, as a company, always look at strategically expanding those partnerships to the platforms, allow our content creators to expand their IP, their distribution across new formats. Within these platforms, So definitely, this is something that we don't have a specific timeline to share with you, but we're very excited about growing our baseline that gives us that massive opportunity for monetization.

Fair enough. Thank you. That's it for me. Thank you very much.

And ma'am, we have a follow-up question from Jeffrey Fan of Scotiabank. He may ask you a question.

Thank you. I just want to follow up on the answer regarding the mix of your base views that's causing the base margins to be lower. Can you elaborate on that a little bit? Because as investors, how do we make sure that the positive that's coming from plus isn't going to be offset by these types of mix issues within the base? that's causing your margins to be not as strong as one would anticipate based on the plus results.

Yeah, definitely. And I think really you'll start to see that the more plus solutions becomes a larger percentage of our overall revenue. I think right now, just because it's less than 10% of our overall revenue, it doesn't have as much of a meaningful impact on our overall margins. But, you know, we can certainly look at historical quarters in terms of how our margins evolved even when plus was even smaller to give you an idea of sort of, you know, plus or minus how the margin can move based on our creator mix. But certainly moving forward, we're not only looking at ensuring that we expand further into our high margin plus solutions, but we're also looking at expanding our base solution margins. So I don't think that will be a significant concern as we go into 2022, but that's something certainly as you see plus solutions ramp up where that margin expansion will become more prominent.

Okay, thank you.

And that would be our last question for this call. I would now like to turn the call over to Ms. Shirzad Rapati. You may have your closing comments.

Thank you. I just really wanted to close by reminding all of our shareholders that, like I did from the previous quarter, that we are very much so essential to the livelihood of thousands of creators around the world. And we are very proud that BBTV has supported these entrepreneurs and thousands of their employees across the world to make money from their content that they enjoy creating. And we truly thank your support, and obviously we'd be happy to take any additional questions during one-on-ones in the coming days. Thank you very much.

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

Thank you.