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spk00: Good afternoon, and welcome to QU Media's third quarter 2022 conference call. As a reminder, this call is being recorded, and all participants are in a listen-only mode. We will open the call for questions and answers following the presentation. On the call today, QU's co-founder and CEO, Kurt Marvis, chairman and co-founder, Scott Patterson, and CFO, Kevin Williams. The company would like to remind everyone that various remarks about future expectations, plans, and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. QU questions that these forward-looking statements are subject to risks and uncertainties that may cause their actual results to differ materially than those indicated, including risks described in the company's filings with the SEC. Any forward-looking statement made on this conference call speak only as of today's date, Tuesday, November 29th, 2022. And QU does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. A replay of today's call will be available on QU's website at www.qyoumedia.com. With that, I would like to turn the call over to QU Media's co-founder and CEO, Mr. Kurt Marvis. Mr. Marvis, you may go ahead.
spk02: Great. Thank you very much, Sherry, and welcome all of you on the call who are key followers and investors. It's great to have you on this afternoon. So just to repeat what was just said, as we got on the call, myself, our chairman and co-founder, Scott Patterson, and our CFO, Kevin Williams, and we'll have things open for questions at the end of the discussion here about our results. So we're super excited today to share with you the results of the quarter, which ended September 30th, 2022, which marks the end of our Q3 2022 for the QMedia business. Kevin and I will take you through some of the financial highlights and then share with you some of the activities that have driven the business growth and what we expect to happen going forward. At the end of this discussion, we'll open things up for questions. By the way, Scott, Kevin and I are all in different locations today. So if you have a specific question for one of us, please let us know when you ask it. And with that, we'll get onto the news. Hopefully some of you have already seen Uh, the release that was just put out about a half hour ago. Uh, and today we are reporting that Q3, 2022, uh, marks the highest quarter of revenue in the company's history. We recorded revenue of $7.24 million a year over year in quarterly increase of $2,519,095 or 53%. For the nine months ending September 30th, 2022. As compared to the same period last year, we have recorded total revenue of $19,362,601, representing an overall revenue increase of $11,813,688 or 156%. Obviously, we're really happy with these results. The year-over-year adjusted EBITDA For the three months ended September 30th, 2022 also improved by $514,396 or 42%. And for the nine months ended September 30th, adjusted EBITDA improved by $2,230,274 or 46%. This all of course is particularly encouraging given the significant investment that we have been making into content. and new product launches over the course of 2022. While we've not provided any formal guidance this year, we have set our own internal goals, and currently that's at approximately $28 million in total revenue for the year. This is slightly below what our original goal was and is primarily due to the lack of us being able to make what we thought was a smart move on any of the originally intended acquisitions that would have resulted in a slight boost to that overall revenue figure. I'll talk more over the course of the call about our recently announced Maxim Tech gaming acquisition and give you some more details about that. But irrespective of that, because that won't close until sometime in the month of December, it will have extremely minimal or virtually no impact on 2022 revenues. Our overall pause this year on the acquisition front has been driven by what we're all aware of the fragile and turbulent nature of the public markets throughout the course of 2022 and really over the last 18 months. And that's been coupled with our drive to become cashflow positive. Nevertheless, we're always on the lookout for highly accretive acquisitions that can help us springboard our business initiatives further and faster, similar to what we saw happen with our acquisition of Chatterbox in 2021, and what we believe will happen with the acquisition of Maxim Tech in 2023 and beyond. Nevertheless, 2022 turned out to be a year where such an acquisition did not materialize or occur. In addition, while growth is always a major priority for us, as we've noted, becoming cash flow positive is as well. This is a major goal in 2023, and we'll be carefully managing the fine line between investment into new products that can take months and in some cases years to pay off, and the focus on our large set of existing assets that have been launched and how we can maximize their ability to deliver positive financial results. This is the mindset of all management as we enter 2023, and we are very proud of the fact that we've been as conscious as possible as we possibly could while launching four new channels, and various other products like QPlay and QData in 2022 while paying a mindful eye to continuing to approve our adjusted EBITDA. I'll speak a bit more in detail about that momentarily and about how we intend to capitalize on the size and scale of our massive reach to the young India population and our continued plans to leverage this across all of our business, our projects that we've been launching to date. I'll also speak a bit more about our U.S. business which continues to deliver amazing results. But first, I'm going to have our CFO, Kevin Williams, give you just a few more financial details. So over to you, Kevin.
spk01: Thanks, Kurt. Before Kurt gets into a little bit more about the business, I wanted to pass on just a few more important financial details that we believe the investors will be interested in. The company concluded the quarter ended September 30th, 2022 with a cash balance of $3 million. $77,769 compared to June 30th at $4,181,414. The cash used for operating activities in the quarter is drastically down year on year and that's really primarily due to the increase in adjusted EBITDA and the collection of our trade receivables. Cash used in operating activities for the three months ended September 30th, 2022 was $818,000 compared to the cash use in the prior year of $4.4 million. Cash use in operating activities for the nine months ended September 30th was $2,973,811 compared to the same time period last year where it was $8,762,864. So a drastic decline in cash use for operating activities. I also think it's really important for investors to understand the improvements in our customer concentration risk and how much it was reduced. The company only had two customers that represented over 10% of the company's revenue in this past quarter, which is consistent with 2021. But more importantly, these top two customers' percentage of total revenue declined from 25% to 21%. This broadening of our revenue base is a testament to the number of the new advertising partners that have been brought on board over the course of this fiscal year. We also think it is important to note that all of the new channels and other recently announced business units and activities have not had any material contribution to the Q3 revenue numbers, and those still will be relatively small through Q4, and we should see the significant uplift coming from these in 2023. At the same time, the cost of launching the channels and business initiatives is very much accounted for from initial cost and launch perspective, which also sets us up in the future for improved financial results. As a company, we have just completed the 2023 financial planning cycle with a key eye on the goal that Kurt mentioned earlier in being cashflow positive in 2023. With the company exiting the quarter ended September 30th, 2022 with $3,764,000 of positive working capital, and the funds that were recently raised, we believe that we are well set up to achieve that goal. Back over to you, Kirk.
spk02: Okay, thanks very much, Kevin. One thing I'd like to add to that is that we currently have approximately 77 advertisers on our television channels in India and our broadcast channels. In addition to that, when you combine the customer base of QUSA and Chatterbox, which adds another approximately – 30 to 40 advertisers. We have over 100 different, well over 100 different advertisers that now are funding the various activities of the company. So we're really excited about having that base being a company, obviously, that's being driven by products that are offered free to our customers and are driven by advertiser support. I think today you'll find a familiar theme, and that's a big part of our strategy in the second half of 2022. And as going to become increasingly important as we shift and move into 2023, and that's to become cash flow positive business as an absolute priority for the company. This is essential, obviously, in any environment, but even more so in one that has the type of public market and overall economic challenges of the last year. We're obviously keenly aware of this, and we've been initiating and changing certain plans along the way, and we'll continue to do so as required. Clearly alongside all of that, growth is a priority to us as well. And what we're working hard on is achieving that growth with a more fiscally conservative eye towards certain projects that may take longer than others to break even or might take more capital than others to achieve. And I'll give you some examples of that in a moment. Let me give you a bit more flavor on what that looked like in Q3. And it'll also provide a glimpse into Q4 of 2022 along with a forward look into how we're treating things in 2023. The first area I want to talk about is the area of connected and smart TV channels. We remain extremely bullish on the connected TV opportunity in India. It already has and continues to change the landscape of television viewing around the world, and it's just starting to gain speed in India. We want to be a leader in this area in India, as we've seen the massive benefits that have been reaped by those who went for the prize early on in North America and around the world. I'm sure many, if not most of you, are familiar with names like the Roku Channel or Pluto TV or Tubi TV or specific TV manufacturer apps like Samsung TV+. These are becoming dominant distribution platforms for what is becoming known as fast channels, FASV. That stands for free ad-supported TV. Now, of course, what's funny about that is that's exactly the same that TV was when we had antennas on our rooftops in the 50s and 60s and got our TV for free back then before the advent of cable and satellite television. So I guess technology doesn't always change everything the way that we think it does. Nevertheless, fast TV is here to stay, and we are big proponents of the future of it in India because it's free. And we know that in India, free is the right price point for those who wish to reach the mass market, which of course we do. So now we have five channels available on up to 70 plus different television OEMs in India, including most of the biggest manufacturers and dozens of other small white label television brands. We are very early in this business and we know and everybody else knows that this is about to take off. In India, very, very, I was going to use a pun here, fast. Sorry about that. Now, what is equally important here is that these channels are much slower to grow top line revenue than typical broadcast channel due to the ad rates and initial viewership levels. But they are also much less expensive to launch and ultimately overall faster to get the cash flow break even or cash flow positive position. So I think you'll all, you know, as investors get the point here. We're looking at things that are cheaper to launch, that have less overall initial revenue, but that are faster for a path to profitability. We did intend initially on launching three additional channels this year. We pulled back on that due to ensuring that the ones that we have launched, Q Cahania, our animation channel, Q Comedy Stan, our comedy channel, Q GameX, our gaming channel, joined on the connected TVs with our broadcast channels of Q Hindi and Q Marathi. We want those all to be working on a profitable basis, and then we're going to launch more. This underscores really the operating philosophy that I want you all to take away from where we're headed. Take slightly smaller swings. Perhaps that has a little initial impact on the top line, but it's a faster path to profitability on the bottom line. In this financial climate, and perhaps in any climate, we strongly believe this is the right approach. which leads me to want to tell you more about QPlay. QPlay is our first foray into the direct-to-consumer market in India. Most of you have heard me talk about our loudspeakers. It's in reference to the approximately 125 million largely young Indians that every week come into contact with Q-branded content across our TV channels, our digital and fast and smart TV channels, on OTT platforms, app-based platforms, and mobile platforms. It remains our goal to grow this to as many as 2 million weekly views over the next six months. We know that our reach to this many people is a huge part of our future in India. And what we're now doing is dipping our toe into the direct-to-consumer waters. But how are we going to do this in a fiscally conservative way? Initially, we will promote it only via our own owned and operated channels, i.e., leveraging our loudspeaker, and in some cases through connected TV or other partnerships on a barter basis, like we recently did with a promotion around the cricket T20 games. Any of you who are familiar with the direct-to-consumer offerings know that the biggest expense is customer acquisition costs. We plan on initially defraying that through the message I just described and to test the market, see what they like, find out how to improve it, and understand everything we possibly can before putting any significant third party customer acquisition monies behind it. We believe the Q play app, which bundles all five of our current channels, all additional channels that are to come and any and all other products that could be around games or other things that will launch over time. It'll provide for both connected TV users and for mobile users, a very seamless way to get at our content in one click with no registration. The monetization of Q play hasn't even begun. And as Kevin noted, the monetization on the connected and smart TV channels is just beginning as well, but these are super important pieces of our future. And we're going to be building them responsibly from a financial point of view, which brings me to the Maxim tech digital ventures acquisition. It took us a year and a lot of convincing, but we finally got to a point where the Maxim tech founders, all agreed that both companies had something that the other one needed, and together we stood the chance of building something really big. Maxim Tech had a proven game platform that specializes in casual gaming and had every bell and whistle or has every bell and whistle imaginable across contests, leaderboards, prizing, and operational consistency across any type of mobile device. The platform has been battle-tested through partnerships with companies like Sony and Vodafone. Hopefully some of you were able to join us to get more details on it on the Live from Mumbai 2 to hear more about their amazing platform. If you weren't, that's available on our website. In addition, Maxim Tech knew how big Tier 2 and Tier 3 and rural India were to their growth, along with their audience of young kids and moms that they had for their casual games. Well, guess what? We come into contact every week with over 75 million of that exact demographic. This also ultimately fits our acquisition strategy and led to our agreement, which has three key points underneath it. One, does the company we're acquiring already have an operating business that has shown success? Maxim Tech checked that box. Two, are the founders of the company we're acquiring motivated by what happens post-acquisition to make their money? The exact same thing that we've done with the founders of Chatterbox. And three, like Chatterbox, is the overall concept, what we like to call a one plus one equals 11. This acquisition checked all of these boxes, and it took us literally the entire year of 2022 to get to a point where it made sense for both parties. In addition, as we've noted previously, and according to KPMG, India is set to become one of the world's leading markets in the gaming industry in where it's expected to cross over 450 million online gamers in 2023, which puts it only second to China. It's grown steadily over the last five years, is expected to travel in value and be a $5 billion business in 24 or 25, and driven by the rapidly growing younger population, which has smartphones, more disposable income, and an ability to play these games on their phones at will. We view this as a major opportunity for us in 2023 and beyond. We see it as an incredibly great opportunity to leverage and find out how we can use our so-called loudspeaker to its full advantage. And we really believe that the MaximTech acquisition will prove to be one that we'll view in years from now as one that made a big difference in our company. Last but not least, in 2022, I want to talk about the amazing progress at QUSA and Chatterbox. It's a big priority for us now and in 2023 to start to toot our own horn more loudly about both of these fast-growing business units that continue to grow revenue and deliver annual EBITDA. Honestly, this discussion could go on for hours to talk about the achievements of both of these teams and how they're both benefiting from the overall power of the creator-driven marketing movement. In short, digital content creators and influencers are now mainstream and and go-to components of any brand's efforts to market their products and services, particularly to a young demographic. You cannot imagine a young brand, a movie, a gaming title, an automotive brand that's targeting a younger demographic that would not put platforms like TikTok and Instagram in their first position for marketing efforts. We're seeing this daily in both businesses, and though it will continue to grow in importance for more mainstream media spend. Chatterbox and the recently acquihired in 2022 Chatter Social have been executing campaigns for companies like Spotify, Costa Coffee, and HP that are trying to attract younger consumers. Chatterbox also, as many of you know, represents influencers for what we call Chatter Represent. We now have over 80 influencers that we're directly managing through Chatter Represent. And they've been featured in magazines like Vogue India and at events like New York Fashion Week. Our own Chatterbox founder, Pranay Swarup, was recognized this year in Business World as a top 40 under 40 leader. And we beefed up the management team and the staff at Chatterbox in India and are continuing to have very, very strong growth and profitability across the board. Meanwhile, QUSA continues to have an equally and maybe more astonishing year. Glenn Ginsberg and his team will deliver over 40 campaigns this year that include campaigns for over a dozen movies that were number one at the box office on their opening weekends. You know, we've done a lot of work behind making that audience show up at theaters. The movie studios are now entrusting us to promote their biggest brands. And this year we've done titles like Top Gun, Jackass, The Woman King, many others that are major franchises for the studios, along with major gaming franchises like Call of Duty. We also did our first automotive campaign this year for Hyundai, which has already led to repeat business from them. And we've also gotten into computer products with brands like Transformers and Peppa Pig. Our list of clients continues to grow with companies like Paramount, Disney, Hasbro, Activision, Hyundai, and many, many more. And best of all, the team is constantly delivering strong gross margins and annual profitability. So we're extremely bullish on the progress being made across the board at both Chatterbox and QUSA. You'll be hearing more about each of those on a regular basis as we move forward. And we expect them both to grow in size and profitability as business units in 2023 and beyond. In addition to all of that, they ultimately bring us closer to the influencers themselves, which enhances our ultimate ability to be strongly connected to the core creators that drive all of our major business initiatives at QU Media. So I think my final note is this. Many shareholders were questioning our recent financing, the timing of it, the terms, et cetera. And my answer to all of you is this. None of us can predict the future. Certainly what's happened over the last 18 months in the overall markets, but particularly in the small and micro capital world, has been shocking and surprising and disappointing, particularly to those of us like ourselves here at QU Media that have fast-growing businesses like ours that are showing results. But it is the way it is. One thing we've learned and know at Q Media is that we're certain that we have no power over the overall markets and their trajectories. This financing in many ways was both an insurance policy against an uncertain future in the markets and an ability for us to execute and operate and build a critical gaming asset in Maxim Tech that we believe will be a core part of our business going forward. This required a relatively small amount of capital to ensure that we can properly do that, build those assets that we've already launched, and have a correct balance of growth and cash preservation until the company is self-generating through its own business efforts, something we expect to happen quite soon. These things are never easy decisions. And keep in mind, all management, myself, Scott, Kevin, and all employees are all shareholders too. And we do these things carefully, considering all the pluses and minuses on an overall basis before we make a decision to move. The same considerations were true with our move to hold off on any uplisting to NASDAQ in 2022 or some other senior market this year. The timing just simply was not right to do that. With all that said, we're super proud of the achievements that have gone on so far this year. And our progress is irrefutable. We continue to believe that we are building the foundation of an amazing business that can ride the wave of the creator economy in general, and the massive opportunity of what will be happening in the country of India with its population of 650 million people, 25 years of age and young or younger. and 850 million 35 and younger. It's literally the youngest country on the planet Earth and it consumes digital content, short form video in numbers that are only surpassed by China and in some categories will soon eclipse even China. So we head towards the end of 2022 with tremendous confidence and enthusiasm and a strong focus on delivering increasingly successful bottom line results along the way. Most of all, All of us in the company want to thank you for your belief and support and what we're working on here day and night to accomplish, and we do take your support to heart. Now over to any questions you may have, and please remember to designate if your question is for me, Scott, or Kevin. Over to the moderator.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate the line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We will pause for a brief moment to poll for any questions. And as a reminder, it was star 1 to ask a question. I do not see any questions at this time. Do you have any closing comments?
spk02: Wow, I can't believe we've stumped them all. Well, I'll just say again, we're extremely grateful for all of you that are shareholders in the company. Like you, we're all disappointed in the current share price. But I think if you guys know anything about me and us as a company is we never give up. And we have plans to see our share price move up dramatically over the coming year and years and have all the faith in what we're doing as a business and company pay off. So appreciate all of your support and look forward to announcing our Q4 results at the end of February and having a great start to 2023. So wish you all the best for the holiday period that's coming upon us, and look forward to speaking to you all soon.
spk00: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you again for your participation.
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