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.