BBTV Holdings Inc.

Good evening. Thank you for attending today's BBTV 2021 third quarter result conference call. My name is Hannah and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Nancy Gleister with BBTV. Please go ahead.

Welcome to BBTV's fiscal third quarter 2021 conference call. I'm Nancy Gleister, general counsel for BBTV. During the course of this conference call, we may provide forward-looking information and make forward-looking statements to the meaning of a applicable securities law. These are statements regarding a 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 goal-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 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. These include the risk that our assumptions may not be accurate, as well as the risk factors contained in our press release and MD&A issues 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&E issue earlier today, as well as in our filings with Canadian securities regulators on CEDAW. 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&As, which are available on our website and on CEDAW.com. I now turn the call over to BBTV's Chief Executive Officer, Shahzad Rastafi.

Good afternoon, everyone, and thank you for joining our third quarter 2021 earnings conference call. Today, myself and our newly promoted CFO, Ben Wood, will review the operations, financial results, and our outlook in the prepared remarks. And then we will answer analyst questions after that. What is BBTV? BBTV is a global creator monetization company. From individuals to global media companies, creators rely on BBTV to generate meaningful revenue for them while they focus on their core competency, content creation. We drive success for some of the largest creators in the world that are defining the culture of today and tomorrow. More than 50 million people around the world consider themselves to be content creators. And this is growing rapidly. More than 2 million of those creators consider it their profession. And there's massive and fast-growing economy that is building. As we've mentioned before, the global creator economy is now worth over $100 billion per year and growing at about 40% annually. BBTV works with thousands of creators and more than hundreds of those creators make more than 500,000 of revenue annually with BBTV and almost 50 of our creators making more than 1 million of revenue annually. The two pillars of making money in the creator economy are reach and engagement. BBTV is a global leader for both with one of the largest exclusive libraries of content reaching more than 600 million monthly unique viewers. that are spending tens of billions of minutes watching our content every month. This positions us uniquely to chapter-wide on our scale and our massive library of content. Advertising is one of the most important drivers of Plus Solutions. Advertisers trying to reach millennials and Gen Z generations are spending more in digital video than ever before, as millennials have the highest flying power amongst generations. Digital video advertising is worth about $82 billion in 2022 and is expected to grow to $185 billion by 2026 at a 40% CAGR. And we are very well positioned to capitalize on this given our reach and engagement. At the same time, we're seeing trends like Apple's privacy policy on iOS that limits platforms and advertisers' targeting capabilities, and also the near abolishment of third-party tracking tools and cookies that collect information about audiences. This all means one of the best ways to target audiences is through contextual ads. What are contextual ads? Contextual ads are the bread and butter of BGTV in the marketplace for direct advertising sales. And the tailwinds are all heading in the right direction. We have already accumulated a massive library of content with great reach, which is mainly being monetized programmatically. And this really means ads that are sold on a run-of-category basis at a much lower RPMs. As we scale our direct advertising sales solution, given that the majority of our inventory is being monetized programmatically, there is a significant upside in being able to sell the content directly to the advertisers at much higher RPMs. As direct advertising sales expand, we will see BBTV share and our gross profit growth at a much faster pace than BBTV's top line revenues. This means our growth as a business will be reflected in the growth of BBTV share and gross profit. This will further drive our profitability. Plus, solutions also include content management, mobile gaming apps, and non-fungible tokens, also known as NFTs. Our Plus Solutions revenue stream continues to deliver more monetization opportunities to our creators while securing incremental higher margin revenue streams for BBTV. This is an area where we are focusing on and investing in to further maximize revenue growth and profitability. We are pleased with progress in our Plus revenue stream, reaching $37 million of revenue in the last 12 months, This quarter, revenue grew by 23% over the previous year. We had some great additions to Plus Solutions growth this quarter as we signed meaningful long-term content management agreements with a top three major U.S. news network and cable channel, which is now one of our top five enterprise clients. This is in addition to us also signing a leading talent agency, Three Black Dots. We also launched iRise Planetary Solutions for live events, which is already servicing some of the largest live events in the world, including the recent Fury vs. Wilder fight from premier boxing champions. Subsequent to the quarter end, we announced a significant plus solutions agreement with Slaughter. Slaughter and BBTV entered into an agreement to dedicate up to 125 million to BBTV creators to further scale creator growth and monetization opportunities for the company's existing library of creator content. As I said earlier, we have one of the largest and growing exclusive libraries of video content with engaging audiences that can be monetized through a variety of revenue streams, especially through our cost solutions. This deal is a great example of that, and it represents a 100% gross margin, which is expected to total in a single-digit million. This is a great way to showcase how we can monetize our existing library of content with no incremental cost and the transition from base to plus and high margin. It's also a great value add for the creators to invest in their content and growth, which will translate into even more revenue opportunities for us and them. Be invested in Plus Solutions and it's working. We expect that these developments will all help to expand Thought Solutions' revenue stream, BBTV share, and gross profit in future quarters. Our investment strategy is designed to grow our BBTV share of revenue and gross profit over time. We plan to add more higher margin revenue streams so that BBTV share of revenue will grow at a faster pace than our top-line revenue streams and will also pull our gross profit higher at a similar rate. In addition to our Plus Solutions performance, I'm pleased to highlight that we continue to have strong use retention of 94%, which is similar to customer retention as use times RPMs equal revenues. This gives us a great line of sight for our future revenues. We also saw robust RPM growth of 5% in contrast to some reported industry trends for the quarter. We also improved our adjusted EBITDA margin since the beginning of the year, despite continued investment in our Plus Solutions. Together, these highlights speak to our continued focus and progress on our bottom line growth and on profitability. Speaking of trends of our key metrics like views and RPMs, then we'll dive into more detail in a moment on this. There are some important trends in our state that we're watching closely, namely as viewership returns to pre-COVID levels and consumption trends continue to shift to micro content like YouTube Shorts, TikTok, and Instagram Reels. We are in early stages of finding microcontent creators, and as noted in one of our press releases in August, we have been finding YouTube Shorts creators as we believe YouTube will be one of the first platforms to enable monetization at scale for microcontent, which we expect to benefit from several quarters from now. Before I hand it over to Ben, I just want to conclude by saying that we're really excited about the progress that we're making in base and cost solutions revenue streams. And we're also encouraged that microcontent like YouTube Shorts could become another promising revenue opportunity going forward. We remain an essential source of monetization for thousands of creators globally, and we are finding new ways to generate more revenue for our creators. Remember, 100 creators on the BBTV platform make more than half a million dollars annually, and some of these creators themselves employ thousands. We are very proud of the work that we do to make creators successful now and in the future. Now I would like to turn over the call to our CFO, Ben Brut, to review the financial metrics for the quarter.

Thanks, Sharzan. In keeping with the format we have used in prior quarters since our RPO, the comparable results for Q3 of 2020 are included in the MB&A on a pro forma basis. This includes the operations of Broadband TV Corp., the main operating entity, and BBTV Holdings. The statutory financial statements include BBTV Holdings only, which does not include the main Broadband TV Corp. operating entity for the comparable period of Q3 of 2020. The other notable presentation item I'd like to point out is that our cost of revenue includes amortization of the assets recorded as part of the purchase price allocation, or PPA, associated with BBTV Holdings acquiring Broadband TV Corp. as part of the company's IPO, which occurred during the fourth quarter of 2020. Amortization associated with the PPA in the amount of $7.2 million was recorded in cost of revenue for Q3 of 2021. It should be noted that this is a non-recurring transaction and the amortization is non-cash. Accordingly, we provide commentary on the company's gross profit and gross margin as per the statutory filings without the PPA amortization. And as introduced in Q1 this year, the metrics EBTV share and adjusted gross margin. Overall, the highlights for the third quarter include solid revenue performance for our plus solutions, a pullback in views from the record highs last year as we continue through the post-pandemic recovery period, higher RPMs as the advertising spending remains robust and our solutions mix continues to shift in a positive direction, and continued growth margin improvement. Total revenue was $113.3 million, a 6% decrease from Q3 of last year. And this can be attributed to lower views this quarter, which were down by 12% to 107 billion as a result of two main factors. The first was the end of the COVID-related lockdowns in many parts of the world, which resulted in less viewership on most forms of digital video. During the COVID-related lockdowns, viewership was amplified. If we were to compare, for example, quarterly views to a pre-COVID period, like Q3 of 2019, our views are actually up by 4%. The second factor was that there's a growing demand for microcontent, like YouTube Shorts or TikTok and Instagram Reels, and we are in the early stages of signing these creators, as their views are not currently monetized. Microcontent is an emerging format, and we expect this format to be monetized in several quarters from now. As noted in one of our press releases in August, We've been signing YouTube Shorts creators, and we believe that YouTube will be one of the first platforms to enable monetization at scale for microcontent. The lower views were partially offset by a recovery in advertising spending, as seen with higher RPMs, which grew by 5% from $0.94 in Q3 of 2020 to $0.99 in Q3 of 2021, trailing 12 months revenue with $488.7 million, period last year. Now, the breakdown of our revenue for Q3 includes base solutions revenue of $104.1 million, a decrease of 8% from Q3 of 2020, and plus solutions revenue of $9.2 million, up 23% from $7.5 million in Q3 of last year, reflecting the early benefits of our investments in our plus solutions. While there'll be some lumpiness in its ramp-up, Plus Solutions is beginning to grow our BBTV share and gross profit at a faster rate than our revenue, as we continue to unlock the value of the creators we already have in place today. Gross profit for Q3 of 2021 was $8.9 million, excluding PPA amortization, which is an increase of 2% over the same period last year, representing a gross margin of 7.9%, up from 7.2% in the third quarter last year. Gross profit, including the non-recurring and non-cash PPA amortization, was 1.8 million compared to 1.5 million in the same period last year. CBTV share, which is revenue less content creator and third-party platform fees, was 9.4 million for the third quarter of 2021, consistent with the same period last year. And our adjusted gross margin was 95.6% up from 93.2% last year. Operating expenses were 13.2 million for the quarter, or an increase of 1.9 million when compared to the same period last year. This was primarily driven by an increase in selling and marketing expenses as the company has been investing in its plus solutions, and also due to an increase in G&A expenses relating to permanent infrastructure costs incurred to support public company requirements. The net loss for the quarter was 10.5 million, including PPA amortization, compared to a loss of 7.6 million for Q3 of 2020, primarily driven by increases in our operating expenses, as noted earlier. Earnings per share for the quarter was a loss of 51 cents, based on weighted average outstanding shares of 20.7 million. And our adjusted EBITDA was a loss of 2 million, which increased from a loss of 0.7 million in the same period last year. primarily due to our investments in our Plus Solutions and higher G&A costs as a public company. With continued investment in the companies based in Plus Solutions businesses, the company continues to estimate that it will return to adjust the EBITDA profitability on an annual basis by 2022. In terms of the balance sheet, the company ended the quarter with $25.9 million in cash, which is up from $15.5 million at the end of June. primarily due to the collection of some receivables in July. Following our debt offering from this past June, our long-term debt balance is now 49.5 million as of September 30th, 2021, and has a maturity date to the year 2026. I will now turn it back to Sharzad.

Thank you, Ben. In the quarter, we continue to focus on expanding the impact of our plus solutions. This is a continued investment where you will see progress on all fronts. Earlier in the quarter, we strengthened our leadership in advertising sales by bringing on Martin Cash to assist with this important plus revenue stream, where we are focused on strategic deals to position BBTV's direct advertising sales business further as a prominent player in the marketplace. BBTV's competitive positioning in contextual ads and brand-based content continues to be more vital to brands and advertisers. We also focus on the continued growth of BBTV's content management revenue stream and growing the pipeline of our creators, both as it relates to enterprise and individual creators, building on the momentum that we experienced during Q3. On the mobile gaming apps front, we continue to make significant progress as illustrated by the fact that all of our apps launched today have charted in their respective categories. Our strategy is to launch more games across our content creators, reskin existing games, and add live event strategies to further improve player retention, and as a result, improve the lifetime value. All these factors will increase the value of our gains to improve monetization. Our pipeline for Q4 and next year is looking strong. We are nearing some significant milestones that I'm looking forward to sharing in the coming months. Speaking of NFTs, the opportunity is big and stretches more broadly to Web3 generally. And within that, we are building something equally big to match it, leveraging both our existing content library as well as our creator partnerships. While individual NFT drops for our creators is one strategy that we have deployed, there is also a great opportunity in Web3 platforms with scale and ease of access for our creators and fans. And this is what we're working on. We're also developing new products following today's announcement about BBTV Fast Pay, which came right on the heels of the deal with Spotter. We're additionally looking to leverage BBTV's extensive library of content and scale to add incremental bolt-on revenue to the business. Both BBTV Fast Pay and Spotter deals bring an incremental value to our creators, and we're excited to bring more to the table. We're also exploring Web2 payment solutions that make cryptocurrency part of our daily interactions with content creators. As I have remarked recently in quarterly earnings calls, we're just getting started. The deals that we announced in Q3 and immediately sequential to the quarter end are setting us up to continue these strong trajectories in higher margins plus solutions revenue streams, which is expected to be reflected in BBTV share and gross profit in the future. With that in mind, we're pleased that our Q3 adjusted EBITDA, EAT consensus, and we have growing confidence that our original guidance for the company remains intact. We will be adjusted EBITDA profitable on an annual basis next year. We're also pleased with the addition of EHAP SAMI, our new product and engineering leader. Innovation is at the core of BBTV. It's built into our solutions and our business model. EHAP is an accomplished technology leader who brings 20 years of experience to BBTV in both engineering and product leadership. We believe that BBTV has all the fundamentals to increase shareholder value, especially when compared to our peers. With 94% views retention, more than 90% adjusted gross margin, and recurring and highly reoccurring revenue growth, BBTV is making concerted efforts to see that its shareholder value appropriately reflects its industry leading position and its many growth initiatives. BBTV is a significant player in the creator economy and a leader in our category. And our ongoing development in Plus Solutions revenue streams, we have helped to make our creators increasingly successful in the short and long term. We remain proud that BBTV is directly responsible for supporting thousands of enterprises and small businesses who make their living creating content and who support thousands of employees worldwide. With that, we are now happy to take questions from panelists.

We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two again to ask a question. As a reminder, if you are using a speaker phone, please remember to pick up your headset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of Kevin Krishnarate with the Stardom Group. You may proceed.

Hey there. Good afternoon, team. I've got a question for you on the direct ad sales strategy. I'm wondering if you're seeing any impact from supply chain weakness. We've heard of brands kind of softening up on spend. depending on the category that they are in. Or I'm wondering if broadband TV and YouTube is sort of seen as more of the top of the funnel awareness marketing rather than the bottom of the funnel. I'm just wondering what your thoughts are there and what you're seeing, how your conversations are going. It just is very topical right now.

Thank you, Kevin, for your question. I think, you know, there are a few trends that we're seeing, one being obviously supply chain. We're also, as you know, connected TVs on the rise. We're also seeing changes in terms of Apple's privacy policy on iOS that limits platforms and advertises targeting capabilities. as well as the near abolishment of the third-party tracking tools and cookies that really collect information. And I think with all of that said, this is one of the strongest quarters for us when you look at direct advertising with a 46% growth. And it was the highest, I would say, year-over-year growth for direct sales. And really what this means is it speaks to our position. you know, as you look at how brands and advertisers are trying to reach audiences, they need to get more creative and, you know, they would be looking at ways in terms of how they can most effectively get in front of those audiences. And I think the best way to target audiences today is through contextual advertising, which we talked about how This is about placing ads against content that is contextually relevant because ultimately it drives up much higher KPIs, whether if you're looking at click-through rates or if you're looking at viewability rates, watchability rates, which is what advertisers care about. And at BBTV, contextual ads are really the bread and butter of what we do in the marketplace, and the tailwinds are really heading in the right direction for us. And the other piece of it is, Kevin, when you look at direct advertising, there's also great upside with it. Because we've accumulated a massive library of content, which is premium content, where we are also providing it very much so premium and brand safe in a controlled environment, you know, to advertisers and agencies, which we do want to have access to. And given the fact that today a majority of our inventory is being monetized programmatically, There is also a greater offside that as we transition from, you know, base programmatic to plus direct advertising, you know, given that majority of our inventory is being monetized programmatically, there is significant offside in being able to actually sell the content directly to the advertisers and brands. So this really positions us well because, again, brands and advertisers, agencies are looking at ways where they can apply that targeting, get in front of their audiences, and where specifically the ads are as relevant as possible where they can drive results and we can provide that to them.

Super. Thanks for that, Shazad. You've definitely got a lot of things in the pipe for plus non-direct ads as well. So I just want to maybe ask a question on the modeling perhaps maybe for Ben as well. When I looked at the plus solutions, it was up in 2020 going from Q2 to Q3 and then up again in Q4. This year, there was a step down. I think obviously there's some strength that you talked to last Q3, given the pandemic and lockdown. But as you think about, maybe you can just talk about what happened sequentially this quarter. versus Q2. And then as we think about Q4, there's very good strength. I think you grew almost 40% last Q3 to Q4. How do we think about this line in Q4, just given all of the different things that you've got going on in the pipe right now?

Yeah, I can speak to that. It was a great quarter for plus solutions with a 23% growth rate. As noted in the last few earnings calls, we kind of revealed that we're investing, increasing our investment in Plus Solutions. And while there's a bit of a ramp-up period, we've already been able to benefit from this, as you noted, with the higher growth rates. And even despite that, the growth rates we're seeing for Plus Solutions this year are exceeding last year, despite having a larger base of revenue. So as you noted, direct sales up 46%, content management was up 31%. And Largely, what we expect, you know, moving forward, there'll be some lumpiness in terms of the quarterly performance compared to what we just saw in the last two quarters here. But overall, we expect that Plus Solutions will start growing our BBTV share in gross profit at a much faster rate than our revenue. And so as we go into the next few quarters, we're really confident in Plus Solutions. We expect the growth rates to remain strong in the double digits. Still expecting some lumpiness as we go through the quarters, but on an annual basis, we expect Q3's plus solution growth rate of 23% to be sustainable moving forward.

Okay, got it. So as you think Q4, the growth rate that you posted in Q3 is that rate of growth on plus sustainable into Q4 and then a couple quarters after that.

Yeah, because we're heavily advertising-driven, looking at the seasonality of the business, Q4 is always a bigger quarter. So we're expecting similar to base solutions. Typically, our revenue is around close to 30% or so in the fourth quarter. So similarly, when it comes to our plus solutions, we're expecting a similar trend, if not more.

Okay, that's helpful. Maybe just the last one, and I'll hop back in the queue. You talked about, you know, Mike's reviews, you know, TikTok, Instagram, and obviously YouTube Shorts, but I'm just wondering if there's a way you can maybe help us understand, you know, total revenue base, how much of that is not related to YouTube and might be in other platforms, you know, number one, and then, you know, what would be your second largest platform after YouTube? Thanks.

Yeah, I think we're looking at... Ben, do you want to take that question?

Yeah, you can kick it off. I can fill it in.

Yeah, of course. So, Kevin, as far as the platforms, as you know, kind of as a company, we're quite diversified across all of our content creators, geographies, territories, and also we work with a number of platforms, given that Google is actually by far the largest and the most sophisticated when it comes to monetization of video. We don't actually break down specifically revenue or advertising revenue by platform, but we are very excited about the growth of actual microcontent. with YouTube Shorts because, as we know, we always try to listen to and, you know, we always actually follow, you know, how industry evolves. And, you know, with YouTube Shorts, this is definitely an emerging trend that is going to drive viewership and consumption in the coming quarters. And, you know, with any new format, monetization always follows eyeballs. And we're excited about the potential monetization associated with microcontent in the coming quarters, which we believe is going to be in several quarters from now.

Okay, great. Thanks a lot, and I'll jump back in the queue. Thanks.

Thank you, Mr. Krishnarasamy. The next question is from the line of Adir Kade with eight capitals. You may proceed.

Great. Thanks for taking my question, guys. I just wanted to ask about the actual creators. You know, all of these initiatives that you guys are undertaking, how are the creators responding to them? Are they kind of enthusiastic about it? How is their general reception to all these cool things that you guys are doing for them?

Yeah, Amir, thank you so much for your question. When you look at, you know, overall, like as a creator economy, the creators, the landscape has evolved because if you look at it, you know, you have massive supply of content. You know, when you look at, for example, YouTube, you have more than 500 hours of content that gets deployed on the platform every minute. And then at the same time, you know, when you look at specifically the landscape is quite fragmented with more and more platforms. You look at TikTok, you look at Instagram, Facebook, YouTube, Spotify, all sorts of like obviously a variety of different platforms, you know, whether if you're watching video content or, you know, audio. And it's become more difficult to connect with audiences. So to be able to actually kind of help these creators expand their reach, be able to actually monetize that reach effectively is what they need. And I think the other part of it is, you know, you have a whole variety of different vendors that creators can work with, which at the end of the day, the creators, they really want to focus on their core competency, which is content creation. And they don't want to be struggling and working with a series of different vendors. So working with BBTV, what they did is really a one-stop shop that helps them really drive monetization for their IT and really extend that IT to a variety of different ways. So when we look at these new initiatives, which we are very excited about, as we touched on from NFTs to Fastway in terms of our financial solutions, they're all great opportunities that allow these content creators to really connect with their friends, engage with their friends, and monetize that engagement. And I think another piece of this is, at the end of the day, when you look at where the company is expanding, we're really doubling down on our plus solutions, and we're doubling down on higher margin businesses that would actually help with the growth of our gross profit and the BBTV share. And as a result of it, you would actually see a higher growth across BBTV share and gross margin in, obviously, the coming quarters. And Squatter is actually a really good example of this. I mean, you know, what we did with Squatter, and we've announced just recently, which really spoke to how, you know, the value of our extensive library of content, because we already have acquired rights to some of the most engaging content, and, you know, it's one of the largest libraries of content worldwide. And with really no additional operating costs, what you're doing is you're actually converting your base to plus solutions at a higher margin, which really just all goes to your gross profit and your EBITDA. So I think, you know, not only are we driving value for our content creators, but these revenue streams are also helping accelerate the growth of BBTV.

and it will assure that we would actually get to be adjusted a bit of profitable on an annual basis next year which we're very excited about that's very helpful thank you very much um just maybe one more technical question just from the platform perspective you know you've been talking about being able to monetize youtube shorts uh moving forward do you find that you'll require a lot of investment in order to do that or is it kind of just plug and play youtube shorts you'll be able to monetize it immediately or will it require some investment into the actual platform to do this?

So when it comes to content acquisition here, it really comes down to, you know, having, you know, specifically the rights to the content. And I think as we've announced earlier in August, we have been onboarding content creators that are producing specifically short-form content. And we've announced we've accumulated at this point, you know, in the press release it was 5.5 billion. Obviously these numbers have grown and increased. So it would be a combination of, existing content creators that are producing new formats and shorter form content and it would be also onboarding content creators that are exclusively creating short form content. So really the pie of content creators are going to grow because you're not just limited to creators that are creating longer form but also at this It basically removes barrier of entry to content creators that may only be good at creating content that is less than a minute long, and we're excited about that. But given the fact that we already work with, you know, thousands of content creators, and many of them are producing, you know, short-form content, there would be no necessarily additional objects associated with existing content creators that we're working with.

Yeah, and to add to that a bit further, we've already had the infrastructure, like when it comes to our solutions and whatnot, we're already getting the relevant data and reporting from YouTube when it comes to YouTube Shorts. So there's no step up required when it comes to activating the monetization. Our infrastructure already has that capability.

That's great. Appreciate that. And then just maybe last one, and then I'll pass the line here.

Actually, the tick, maybe to add to that, the tick, the back end, all of that works. It doesn't explicitly format agnostic.

Okay, yeah, that's what I was kind of getting at. Thank you. And maybe last one, and then I'll pass the line. Just on M&A, M&A has been some part of the story for a couple of quarters now. Can you maybe talk about what the pipeline looks like, what you guys are looking at, and what the rest of it looks like?

Yeah, absolutely. I think when it comes to our M&A strategy, it's really focused on accretive acquisitions that are really thriving and accelerating growth across our higher-margin solutions. So the key sectors really out here include their own and operated content, which is really high-margin, simple meat and potato targets. And then you have the advertising tech, which is fast revenue marketing technology that helps accelerate the growth of our direct sales, that really helps amplify our capability when it comes to our market positioning and the data and the insights that we capture in what we provide to brands and agencies. And we are also looking at the sectors for fan engagement, again, within Creator Economy, which is direct access to fans, its tools and tech and first-party data, as well as really broadening the BBQD tech stack and the data and insights that we capture that really supports everything that we do, especially our plug solutions. So that's really, those are the priorities for the company, and we have a deep pipeline of potential targets to really complement our existing strengths in these areas and to really continue growing our flex solutions offerings that's amazing charlotte ben thank you for the answers i'll pass the line thank you here thank you mr codway the next question is from the line of chris thompson with pi financial you may proceed great thank you

Do you think they might continue to trend downward for the next several quarters as eyeballs switch into the microcontent area?

Sorry, Chris, can you repeat your question? I didn't hear the first half of your question.

Yeah, the number of views this quarter, were they softer than you guys anticipated, you know, at the end of last quarter? And do you think they're going to continue to trend downward over the next several quarters as eyeballs switch to microcontent?

We actually don't provide guidance, Chris, as you know, but we believe that, you know, if you look at viewership, there are two factors that have been outlined earlier that are driving this. One is that, you know, you're really coming out of COVID, so the viewership is compared to, like, really the height of COVID where consumption increased. But if you were to actually compare our viewership figures to pre-COVID levels, actually, the numbers were up by 4%. So I think that is one factor. And the other factor is, as you highlighted, is short-form content and the growth of short-form. And we believe that, obviously, the short-form content viewership will increase over time. And as we said, you know, the monetization of that, monetization always follows eyeballs, and we will see that activated in several quarters of months.

Okay, let me try one more.

I'll just ask about these. Sorry, I was just going to add to that. I think what we're seeing too is just largely looking at our views, growth rates, is right now we're still comparing to COVID periods where there is either a resurgence or a recovery in viewership in previous years. And so the comparative period is much higher than what a standard year would look like. So over the long run, we certainly expect that generally our views and RPMs would increase, which is why we're sort of making the comparison to a pre-COVID period, just to highlight that we're moving that component from it. Our views are continuing to grow.

Yeah, no, I totally understand that. I'm just trying to gauge whether we should be modeling base revenue down so there's not a negative surprise next quarter, but I'll move on. Maybe on the RPMs, I'll try another one. Typically, ad spend is seasonally hot in Q4 for the holiday season. Do you think RPM should increase kind of like they did last year from Q3 to Q4?

Yeah, when it comes to Our RPMs, we've seen pretty solid robustness in its growth. Q2 certainly was higher than normal because of the comparative period. Again, Q2 of 2020 last year, is probably the peak period of pullback in advertising spend. So the growth rate was a lot higher in Q2 this year relative to Q3. But when it comes to RFQM's growth, we still expect it'll continue to rise. Certainly when you're looking at Q4, when it comes to our revenue, we're still expecting it to be about around 30% or so of the annual revenue.

Okay, that's helpful. And Maybe, I don't know if you were clear on this, but the $125 million spotter deal, did that all happen after Q3? I mean, is that just starting in Q4? And what's the cadence of, you know, I mean, how would you expect that $125 million to kind of fall over the next kind of key orders, or is it a longer-term thing?

We've actually already decided on $18 million. Go for it, Ben.

Yeah, we've deployed 18 million over the last year or so previously, and that was sort of under unstructured terms. And so the deal was signed in Q4. It was delayed a little bit from Q3, mainly because we had an opportunity to up-size the deal. It just took a little bit longer. And so certainly, you know, as we go into the future right now, it's not an annual commitment, but as our creator base grows, you look at our cost of revenue, what we pay to our creators on an annual basis, it's north of 400 million. That as that grows, that there's always sort of an opportunity to continue to expand opportunities, whether it's with water or other partnerships. But when looking at the cadence or rollout, we expect to be able to unlock most of this by the end of next year.

Okay, that's helpful. Just last, for me, maybe back to Ben on your OpEx. You know, you guys had a bit of a step function this year in G&A and sales and markets. Investment in your contributions there. How should we think about OpEx growth in 2022?

Yeah, I can't really comment too much on 2022 other than the fact that it's another year of Plus Solutions. We're really excited about wrapping that up further and we're already seeing that just with the first few quarters of this year. But overall, I think looking at our operating leverage, it's improved throughout the year, even though we've been investing in our Plus Solutions. So, you know, from Q1, As a percentage of revenue, our FX was about 14%, and as a Q3, it's about a little less than 12%. So even as we've been investing and ramping up, our operating leverage has already been improving, and we expect that to continue into next year and beyond.

Okay, good stuff. Thanks a lot for taking my questions.

Yeah, and also, of course, we're going to get to adjusted EBITDA profitability on an annual basis next year. So even if we're investing in the investment and thought solutions, we will be achieving adjusted EBITDA profitability next year.

Thank you, Mr. Thompson. Once again, to ask a question, press star 1. Again, to ask a question, press star 1. There are no additional questions waiting at this time, so I will pass the conference over to the management team for closing remarks.

Thank you, everyone, for your questions. I do want to highlight that we're an industry leader in the equator economy and benefiting from several tailwinds, as we mentioned during the call, whether it being contextual targeting with brands and agencies or the growing NFT opportunity or the new meaningful way that we touched on to unlock gross profit and EBITDA from programs like PBTV's FastPay, partnerships like the ones with Flutter, and future monetization opportunities like what we touched on. on microcontent with YouTube Shorts. and other formats. And further, we will be scaling our strong performance and high margin-plus solutions. We're very much so hyper-focused on unlocking the value of the creators that we already have in place today and continue to expect to sustain our strong more than 90% use recession rate by keeping our fingers on the pulse of our creators' needs with new offerings that we touched on earlier, like enabling payments in crypto in the near future. And we are really, if you look at specifically in many ways, we believe that we're just getting started. We are on a mission to power the creator economy, and we're excited about the future. Thank you so much all for joining, and we will be in touch. Thank you.

That concludes the BBTV 2021 Third Quarter Results Conference call. Thank you for your participation. You may now disconnect to your lines.