BBTV Holdings, Inc First Quarter 2022 Conference Call May 17, 2022
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BBTV Holdings, Inc
First Quarter 2022 Conference Call
May 17, 2022BBTV Holdings, Inc – First Quarter 2022 Conference Call, May 17, 2022
CORPORATE PARTICIPANTS
Nancy Glaister, General Counsel and Chief Legal Officer
Shahrzad Rafati, Founder, Chief Executive Officer, and Chair
Ben Groot, Chief Financial Officer
CONFERENCE CALL PARTICIPANTS
Adhir Kadve, Eight Capital
PRESENTATION
Operator
Good morning, ladies and gentlemen.
Thank you for attending today's BBTV Holdings to Host First Quarter 2022 Conference Call. My name is
Tia, and I will be your moderator for today's call.
I will now pass the conference over to your host, Nancy Glaister, General Counsel and Legal Officer with
BBTV Holdings. You may proceed.
Nancy Glaister
Welcome to BBTV's fiscal first quarter 2022 conference call.
I'm Nancy Glaister, Chief Legal Officer 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. These 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.
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 issued yesterday, as well
as in our latest annual information form filed on sedar.com. 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 yesterday, as well as in our AIF dated March 29, 2022, filed with Canadian securities regulators at
sedar.com. Also, our commentary today will include adjusted financial measures and ratios, which are
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1-888-562-0262 1-604-929-1352 www.viavid.comBBTV Holdings, Inc – First Quarter 2022 Conference Call, May 17, 2022
non-GAAP measures. Although the Company believes these non-GAAP financial measures and ratios
are useful in evaluating the Company, these should be considered as a supplement to and not as a
substitute for financial information prepared and presented in accordance with IFRS. Reconciliations
between the two can be found in on our earnings press release and our MD&A, which are available on
our website and on sedar.com.
Lastly, we also report on certain metrics, such as Views and RPMs. A further description of these metrics,
which are also non-GAAP measures, can also be found in our earnings press release and our MD&A.
I now turn the call over to BBTV's Chief Executive Officer, Shahrzad Rafati.
Shahrzad Rafati
Hi everyone and welcome to BBTV's first quarter 2022 analysts call.
We press-released some of our financial information earlier and posted our financial statements and
MD&A to SEDAR. As a reminder to everyone on the call today, we're a creator monetization Company
with a mission to help creators succeed by increasing their viewership and making them more money.
From individual content creators to global media companies, BBTV provides comprehensive end-to-end
solutions powered by our innovative VISO platform, which helps creators make more money while
allowing them to focus on their core competency, which is content creation.
BBTV has more than 600 million monthly unique viewers globally and in Q1 we generated 105 billion
views of video content. Over the past month, we press-released a couple of updates highlighting the
strength of the quarter for our Plus Solutions. Our continued investment into Plus Solutions has led to a
promising 69% increase in revenues for the segment year-over-year in Q1 2022, which drove a record
13% Plus Solutions contribution to total revenues this quarter, nearly doubling from 7% in Q1 of 2021.
Importantly, revenue growth is unanimous across Content Management, Direct Advertising, and Mobile
Gaming Apps, with each respectively exceeding 40% revenue growth year-over-year in Q1. We now
expect Plus Solutions revenue growth to exceed 40% on an annual basis, nearly doubling our previously
guided annual growth rates of 23%. From a Gross Profit perspective, Plus Solutions represent a record
30% to 40% of total Gross Profit contribution in Q1, up from 15% to 25% last year. This performance
across the board is the result of the decision we made to focus on our higher margin Plus Solutions,
which makes us a lot less sensitive to the short-term volatility of views.
This has given us further confidence to continue investing in our Plus Solutions to drive further growth for
this important segment of our business. For Content Management, BBTV has recently expanded and
deepened key relationships with its leading portfolio of new and existing clients, including the NBA, FOX,
Sony Pictures, Paramount Global, Univision, Riot Games, CMF, and TEGNA. It's important to highlight
that BBTV has maintained a strong retention rate of 96% this quarter for media company clients within its
Content Management division in line with historical performance, illustrating the strength of BBTV’s
solutions for some of the most recognized brands in the world.
Not only is Content Management a reliable and highly recurring revenue stream, the continued success
for the business unit also opens up wider partnerships. Several of BBTV's long standing Content
Management clients have expanded beyond Content Management to more integrated partnerships, such
as the NBA Playmakers basketball culture network formed in 2016, and the Company's recent
collaboration with Paramount on the launch of the Jackass Human Slingshot mobile gaming app.
Regarding Direct Advertising Sales in Q1, we were focused on enhancing our existing relationships and
expanding relationships into broader market segments, including auto, entertainment, finance, beverage,
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health, ready-to-drink, and media streaming. Average order size increased by 63% year-over-year and
continued momentum in the first quarter along a number of fronts is positioning us well for further growth
in 2022.
In February, we launched our first Mobile Gaming App in partnership with major media company,
Paramount, for the launch of Jackass Human Slingshot, which has set new monetization records for the
division with a lifetime value more than 200% higher than any previous game.
As we mentioned, in our last earnings call, our focus has been on increasing overall monetization of our
Mobile Gaming Apps. We are very pleased that our efforts have paid off. As of the end of Q1, we have
now published a total of 15 Mobile Gaming Apps with a combined 42 million downloads and an average
rating of 4.6 out of 5 with negligible marketing spend.
In Q1 BBTV continued to progress on a number of fronts for our Web3 strategy, including key
partnerships with both creators and major media companies, most of which are existing customers which
we'll be able to highlight more in the coming months. We are encouraged by the response we've been
receiving and excited about the growth opportunities moving forward.
On the technology front, we made strong progress in the development of our Web3 solutions in
collaboration with ConsenSys, a partnership, which we announced just prior to our Q4 and fiscal earnings
call. We’re excited to roll out in the number of solutions in the coming months. For example, we activated
a proof-of-concept marketplace and we are working with it to further enhance our solutions to meet the
needs of our content creators.
In Q1 2022, views declined by 9% in comparison to Q1 2021, consistent with the declines seen in H2
2021. There are two main factors to this. The first was the end of 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. Further, if we compare the sequential change in views from Q4
2021 to Q1 2022, the seasonal change in views is in line with the sequential growth rates seen in the past
years. As the seasonal trends remain comparable, we still believe that we're in the more normalized
period of viewership consumption entering 2022.
The second factor was that there is growing demand for micro content like YouTube Shorts, TikTok, and
Instagram Reels. Micro content views are not currently monetized. We're in early stages of signing these
creators as the main focus for our content acquisition team is to onboard monetizable content creators.
We expect this format will be monetized in several quarters from now and should the RPMs for micro
content be similar to our short form content, it could represent $90 million of annual revenue upon its
activation based on our current viewership. While RPMs were down by 5% from $0.86 in Q1 '21 to $0.82
in Q1 2022, excluding YouTube Shorts viewership, RPMs increased by 16%. The monetization of
YouTube Shorts, as I mentioned earlier, will counteract the RPM decline once enabled in the coming
quarters.
In the meantime, our emphasis on Plus Solutions has made us less sensitive to viewership fluctuations as
we focus on generating incremental and higher margin revenue streams. Our churn rate continues to be
low amongst creators on the BBTV platform. In Q1, our views retention was exceptional at 98%. We
believe the inherent value of our service is clearly reflected in our retention performance. We have been
able to retain more audiences in comparison to the industry as viewership normalizes, post COVID.
Again, we're convinced that this is due to the quality of our solutions and our effectiveness in monetizing
content on behalf of our content creators.
Overall, we're pleased with the market response towards our Plus Solutions, in particular the growth in
Content Management, which is a highly predictable re-occurring revenue stream, and continue to garner
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a lot of interest from enterprise partners, including Fortune 500 companies. We are equally excited about
the developments in Direct Advertising Sales, Mobile Gaming Apps, as well as our strategic move into
Web3.
I'm going to hand the call over to our CFO, Ben Groot, to review our financial performance and details
and then after that, I will highlight our outlook for the business. Ben, please take it away.
Ben Groot
Thank you, Shahrzad and good morning, everyone.
Before I begin the review of our Q1 performance, I'd like to remind everyone that our cost of revenue as
presented in our results includes the amortization of the assets recorded as part of the purchase price
allocation or PPA, when BBTV Holdings acquired our main operating entity BroadbandTV Corp for our
IPO in the fourth quarter of 2020. Amortization associated with the PPA in the amount of $7.4 million was
recorded in cost of revenue for Q1 of 2022. It should be noted that this is a non-recurring transaction and
the amortization is non-cash. Accordingly, we will provide commentary on the Company's gross profit and
gross margin as per the statutory filings without the PPA amortization, as well as the metrics of BBTV
Share and Adjusted Gross Margin.
Now turning to our results, the highlights for the first quarter include: another strong quarter for our Plus
Solutions, which continues to perform extremely well, reflecting the benefit of our investments over the
past year; further improvements in our overall gross margin as our revenue mix continues to shift in a
positive direction; and an exceptionally high viewership retention rate of 98% for Q1.
Total revenue for Q1 was $98.8 million, which is 7% lower than the same quarter last year, as we are
comparing against a period with higher viewership consumption during the COVID-related lockdowns.
Additionally, we continue to see the impact of the recent growth in consumption of micro content, which
as we've talked about in previous quarters, has not yet been monetized. As usual, our first quarter
revenue is down from Q4, which is our seasonally strong quarter.
Our total views of 105 billion were down by 9% from Q1 of 2021, which is consistent with the views
consumption patterns we saw in the second half of last year. As the seasonal trends in viewership
comparing Q4 to Q1 are in line with past years, we believe we are in more normalized period of
viewership consumption entering 2022.
RPMs were down by 5% in the quarter compared to a year earlier due to the impact of YouTube Shorts
viewership, which represented about 20% of our views in the first quarter, roughly the same as in Q4.
Since YouTube Shorts is not presently being monetized, it artificially depresses the RPM figures. If we
exclude YouTube Shorts viewership, our RPMs would have grown by 16% year-over-year in the quarter.
We expect this format will be monetized in the coming quarters and as such, we consider it to be a
significant future growth opportunity. If the RPMs for micro content are similar to our short form content, it
could represent $90 million of annual revenue for us upon activation, based on the current viewership
today. We expect our RPMs to continue to trend upwards as Plus Solutions continues to scale, and as
YouTube Shorts monetization is activated.
The combined impact of the lower views in RPMs is reflected in our Base Solutions revenue, which was
down 13% to $86 million, but our Plus Solution saw strong growth with revenue up 69% from a year
earlier to $12.8 million. It now represents 13% of our total revenue and 30% to 40% of our gross profit,
both of which are new records. The growth in Plus Solutions was led by continued strong performance in
Content Management, with our Direct Sales and Mobile Gaming Apps also having strong growth in the
quarter. We were very pleased with this result and we are now expecting that our Plus Solutions revenue
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growth rate could exceed 40% on an annual basis, which is almost double our previous guidance of 23%
annual growth. While there will continue to be some lumpiness in its ramp-up, we expect Plus Solutions to
see further benefits from our investments, allowing us to grow our BBTV Share and gross profit at a faster
rate than our total revenue, as we continue to unlock the value of our existing creators. We remain
focused on higher margin Plus Solutions and we are becoming less sensitive to the short-term volatility of
views.
Our gross profit for Q1 was $9.2 million excluding PPA amortization, representing a gross margin of 9.3%.
This improved from 9.0% in the first quarter of last year due to the higher revenue mix of Plus Solutions.
BBTV Share, which is revenue less content creator and third-party platform fees, was $9.6 million and our
Adjusted Gross Margin was 95.6%, comparable to the first quarter last year.
Operating expenses were $15.4 million for the quarter or $0.7 million higher than the same period last
year due to a higher non-cash share-based compensation. Operating expenses would have otherwise
declined year-over-year highlighting our ongoing operational efficiencies as we scale.
Due to our higher OpEx investments in Plus Solutions, coupled with lower Base Solutions revenue
resulted in Adjusted EBITDA loss of $3.7 million for Q1. The Adjusted EBITDA margin declined by only
1.3% year-over-year despite the monetization gap for micro content and our continued OpEx investments
to accelerate the ramp-up of Plus Solutions.
In terms of the balance sheet, we ended the quarter with $21.6 million in cash and our long-term debt
balance was $52.5 million with a maturity in 2026.
I will now turn it back to Shahrzad.
Shahrzad Rafati
Thank you, Ben.
I would like to itemize some of the activities that we're working on to scale our revenues and increase our
margins. We will continue to concentrate most of our activities on Plus Solutions where margins are
higher and opportunities are increasing.
When it comes to Content Management, in addition to the continued expansion of new and existing
media companies and creator clients, we're continuing to focus on tailoring our Content Management
services to consumer brands, which will significantly expand the addressable market for our solutions.
This builds upon some initial work we have done with clients like Shopify.
Looking forward as it relates to Direct Advertising sales and what we're doing, we are focused on the
migration of ad dollars from linear, such as TV, to digital audiences. Our objective is to present the
exclusive reach of our young demographic to traditional TV buyers and package our premium content
offering. Secondly, we're focused on signing strategic deals with agencies to further increase order size
and increase the volume of orders.
With the utility of cookies declining further in the first half of 2022, advertisers are looking to engage
directly with consumers, particularly to contextual advertising. BBTV has the rights and insights into the
content and has developed unique first party datasets. It is our ability to exclusively access that first party
data and to build highly targeted and effective contextual advertising campaigns that sets us apart. This is
a key driver for our Direct Advertising pipeline.
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Finally, brands are spending more with diverse media companies to reach multicultural audiences of all
generations. Given BBTV's offering for this audience, the Company is very well-positioned to benefit from
this share.
When it comes to Mobile Gaming Apps, we continue to see progress in increasing the lifetime value of
our users across the board. In Q1 2022, we increased the average user value significantly. While we
already leverage our unique competitive advantage for organic user acquisition, we have also begun to
test user acquisition for Jackass Human Slingshot and we are currently achieving a positive return on ad
spend. As a result, we are focused on building games with higher lifetime value.
With our scale and expertise, we're uniquely positioned to empower the growth of Web3’s creator
economy and we're exploring this opportunity now and moving forward.
BBTV is continuing to progress on a number of fronts for our Web3 strategy, including key partnerships
with both creators and major media companies as I mentioned earlier, most of which are existing
customers. We will be providing creative marketing and content management solutions and other tools to
empower creators who lack the knowledge or expertise to expand their IT and presence into Web3. From
conceptualization and design to packaging to promotion across the right channels and audiences, our
approach for our creators will be comprehensive to drive the best results for them. With BBTV's end-to-
end solutions, deep relationships, and high-performance team and expertise, we will apply our existing
strengths to the Web3 creator economy. This will also further strengthen and deepen our relationship with
content creators very similar to what we've done to our other Plus Solutions.
With respect to M&A, we remain engaged on several fronts and we will ensure that any transactions that
we do in the future are accretive to current share price levels.
I would like to quickly touch on our Base Solutions before I conclude. The viewership scale and revenue
streams associated with the base solutions business continue to attract high-quality creators, which is a
powerful funnel for our Plus Solutions. We have spent the past 17 years continuously automating and
optimizing this business to the point that now where it operates with minimal costs. The scale and
efficiency affords us the opportunity to invest in new higher-margin revenue streams and services that
add value for creators and shareholders alike.
We have over 600 million unique viewers and one of the largest repositories of content and data in the
world. Although our investments in this mature sector are minimal compared to the time and efforts that
we're putting into Plus Solutions, including Web3, I want to recognize that Base Solutions are essential to
our scaling efforts. We have exciting things occurring in Base Solutions and we will talk about them in the
near future.
I want to conclude by saying that we have a very strong business model that is really valuable to the
creators and make us sticky. Our business model and technology are highly scalable and extensible.
We're able to continuously add new revenue streams at minimal expense, and we have proven that our
business model delivers meaningful cash flow. We have the balance sheet and the operating cash flow
available to us to establish BBTV on the forefront of the Web3 transition that many of our creators are
looking for, and based on our recent announcements, we are already investing in.
This is an exciting time for BBTV. If I would leave you with one thing to think about regarding our stock,
we have almost $22 million of cash on our balance sheet, and we have one of the most viewed libraries
of creator content in the world, which according to comScore is nearly two times that of Disney. Right
now, our stock is trading at less than 2x cash. We're excited about the future, our business is strong, and
I believe that we're allocating capital in a way that maximizes the value for our Company and our
shareholders.
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We can now open it up for questions.
Operator
Absolutely. We will now begin the Q&A session.
The first question is from the line of Adhir Kadve with Eight Capital. You may proceed.
Adhir Kadve
Thanks for taking my questions, and good morning Shahrzad and Ben.
Can you give us a sense of the investments that you're making in your Direct Sales team? I know last
quarter you guys mentioned that you wanted to grow headcount there by 30%, so maybe give us a sense
of where you are in that hiring cycle.
Shahrzad Rafati
Hi, there. How are you doing? Thanks for the question.
We obviously have seen significant growth across our Plus Solutions and that's across all segments,
including Direct Advertising. We have expanded the team. We don't actually, as you know, share
breakdown but we've had great success and expanding a team, and obviously, our focus is specifically
key regions in the U.S., from the East Coast to Central to the West Coast. We're certainly on track and
we're seeing this in our growth rates of more than 40% for Ad Sales, and of course, 69% across all Plus
Solutions.
Adhir Kadve
Okay. great. Then just maybe one more on content creation.
That seemed to be one of the areas of outsized strength that you guys saw, and you kind of touched on
this, but maybe you can give us a little bit more color on the sense of the pipeline for newer clients, some
new clients that you can maybe onboard on to the solution? Can you give us some additional color on
that?
Shahrzad Rafati
Of course. Really good question.
We had a really strong quarter, as we announced; not only we've renewed key partnerships like Univision
and FOX, but we also signed deals in different regions. For example, Riot Games was our expansion into
APAC region, as well as signing up specifically new content creators across all the regions that we're
operating in. As you know, we operate in 28 different countries. We also have expanded our solutions.
For example, on the Plus side, we're offering more 360 solutions, specifically to any brands or media
company in this case. We tested for example, on the Content Management side our solutions with brands
like Shopify and that has given us the confidence to further expand that with other partnerships.
We also are looking at existing clients and growing existing clients across new solutions. I think NBA
Playmakers is a—NBA is a great example of that, in terms of how we grew that partnership across a
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variety of different solutions. We did the same thing with Paramount with the launch of the mobile apps
with Paramount. We're seeing this across all the regions that we're operating in.
Adhir Kadve
Okay, great. Thanks for all the color, guys. I’ll pass the line.
Shahrzad Rafati
Thank you.
Operator
Thank you. There are no additional questions at this time. I will pass it back to the Management team for
any further remarks.
Shahrzad Rafati
This is great. Maybe we just give it a couple more seconds for any additional questions, and if not, we can
definitely have it closed.
Operator
That concludes today's conference call. Thank you. You may now disconnect your line.
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