Cinedigm Corp.
Q4 2020 Earnings Call Transcript

Published: 6 Jul 2020

[Operator:]

Ladies and gentlemen, thank you for standing by. And welcome to the Cinedigm Corp. Financial 2020 Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Jill Calcaterra, Executive Vice President. Thank you. Please go ahead.

[Jill Calcaterra:]

Good morning and thank you for joining us today on our fourth quarter fiscal 2020 earnings conference call. Participating in today’s call are Cinedigm’s Chairman and Chief Executive Officer, Chris McGurk; President of Cinedigm Networks, Erick Opeka and Chief Operating Officer and General Counsel and President of our Cinema Equipment Business, Gary Loffredo. Before I hand the call over to management, please note that on this call certain information presented contains forward-looking statements. These statements are based on management’s current expectations and are subject to risks, uncertainties and assumptions. Potential risks and uncertainties that could cause the company’s business and financial results to differ materially from these forward-looking statements are described in the company’s periodic reports filed with the SEC from time-to-time. All of the information discussed on this call is as of today, July 06, 2020 and Cinedigm does not intend and undertakes no duty to update future events or circumstances. In addition, certain financial information presented in this call represents non-GAAP financial measures. And now, I’d like to turn the call over to Chris McGurk. Chris?

[Chris McGurk:]

Thanks, Jill and thanks everyone for joining us on the call today. I'll start with an overview of the business, then turn things over to Erick, the architect of our OTT streaming business, which is now clearly the centerpiece of our company and our growth story. Erick will provide a more in-depth review of all the key developments in that business and then he'll turn things over to Gary for a more financially oriented review. After that, we'll take your questions. By every measure Cinedigm put together a remarkable series of accomplishments over the last year, completing the company's business transformation by solidifying our unique position as a key player in the explosively growing OTT streaming business. Here's what we accomplished. First, we launched several new streaming channels, including Comedy Dynamics and Bambu to build our portfolio to 16 premium streaming channels, either launched or under contract to launch. We will soon be at 20 channels and plan to get to 30 in the next 18 months. This gives Cinedigm a large meaningful and growing channel share on the program guide for every key streaming platform and device. Most of these new channels will be set up in a similar fashion to our recent Bob Ross, All3 Media, which is owned by Liberty Global and Discovery Networks, Team Whistle and LiveXLive channel deals, where we partnered with established branded entertainment companies that bring huge amounts of content to the table. And then we launch with our major distribution partners like Roku and Amazon and Tubi and Samsung. That's a very high margin, high return business for us with little risk. We have a robust deal pipeline of these potential premium new partners and channels now because we have clearly established Cinedigm as the go-to independent streaming company that can employ our state-of-the-art proprietary Matchpoint technology and enormous streaming distribution platform and device reach, and a huge digital content library to help launch streaming channels across the entire global OTT ecosystem. We can do all that quickly, cost effectively and with almost ubiquitous distribution potential on every device and platform. The quality of the business partners reflected in our new channel deals clearly demonstrates that the entertainment industry now understands the advantages of doing business with Cinedigm in the exploding streaming space. Second, in the last year we generated explosive growth in our Ad-Supported Streaming business. The segment estimated to be a $27 billion market in the U.S. alone and growing at 30% a year. We grew our Ad-Supported viewership from essentially zero viewers 15 months ago to 4.5 million monthly viewers last October to 9.7 million viewers in March. That was an increase of 116% in five months. Between the end of March and the end of May, we increased our viewership to 13.2 million viewers, up another 38% in just two months, virtually tripling viewership over the trailing seven months. Our ad-based revenues last year were up 466%. We are generating these explosive results in ad-supported viewership through the growth of our premium channel portfolio and our extremely strong distribution on connected TV’s, where we have deals in place for embedded channels with key OEMs and streaming device technology companies like Samsung, Vizio, Roku and Vewd. Obviously, the stay at home environment we currently find ourselves in has also fueled this growth tremendously, creating a once in a generation catalyst that is vastly accelerating the dramatic and permanent cord cutting consumer shift to streaming that was already underway. Third, in the last year we dramatically expanded our distribution reach both in the number of streaming devices and platforms for our channels and our geographic footprint, through deals with Samsung, Vizio, Amazon IMDB, FreeCast, SelectTV and Vewd, among many, many others, we now have distribution reach into over 670 million devices and are rapidly expanding our geographical footprint overseas. Fourth, over the last year we continued to be an effective go-to distributor of independent film and TV content for premium brands like, Hallmark, Shout Factory and the NFL. We have been particularly focused on aggregating and distributing thousands of titles to the key streaming platforms like, Netflix and Amazon and Hulu, given the huge demand for premium content we are seeing from both existing and newly launched platforms that need a high volume of fresh digital content to keep pace competitively and keep up with the record cord cutting now happening around the globe. As expected in this environment, we generated tremendous results in our digital licensing business in the first quarter of fiscal year 2021, which just ended. Expect some news on that very soon. Fifth, our financial results for fiscal year 2020 clearly began to reflect the significant strides we have made to rapidly expand our streaming business. As we transition away from our legacy digital cinema business, which we expect will be largely phased out over the next two fiscal years, we are clearly scaling up to be a must have portfolio of channels, technology, content and services for every streaming platform. Our momentum continues to accelerate and we are moving to become a pure streaming company with sustainable profitability. In fiscal 2020, we grew our OTT revenue by nearly 60% and improved our adjusted EBITDA for our core business by $6 million or almost 80%, driven by the explosive growth in our channel portfolio, viewership and global distribution reach that I just described. Reflecting all of this, in the fourth quarter we generated a profit in our core business of streaming and content distribution, where our adjusted EBITDA improved by $3.5 million or up 125% over last year. We also streamlined our cost structure tremendously during the year, as we continue to transition from our legacy business to the much more operationally efficient, high margin streaming business. We reduced total operating costs by over $15 million and much of the overhead savings in that total have yet to be reflected on a full year basis, which should greatly benefit our fiscal year 2021 results. In addition, we closed many significant new deals after February 2020, with the likes of Team Whistle, Bob Ross, Vewd and Amazon IMDB among many others that were not reflected in our 2020 results at all and will generate revenues and profits in the 2021 fiscal year we're currently in. We feel extremely positive about our drive to full year profitability in fiscal year 2021 and the prospect of sustainable profits beyond as well. Finally, in the last year we made significant progress regarding China, where our long term goal is to distribute content in streaming channels bilaterally and to China and the US. By far the two biggest entertainment markets in the world with over $200 billion in combined revenues in that segment. We believe over the long term this initiative will create a unique competitive business opportunity and value proposition for the company. To that end, last year we launched a Chinese language film-based channel called Bambu into the U.S. marketplace. Additionally, during the last quarter of fiscal 2020 we closed the transaction to acquire approximately 26% of the outstanding equity of leading Chinese entertainment company Starrise Media, listed on the Hong Kong Stock Exchange in an all-stock transaction. This investment strengthened our balance sheet and more importantly gave us a boots on the ground content streaming and distribution partner in China. This arrangement will give us the unique ability to directly monetize content and launch streaming channels in both China and North America. Now let me reinforce that our overriding business focus now is our streaming business and taking full advantage with the explosive growth we see there. However, we also believe our unique positioning as a catalyst for monetizing content in launching streaming channels into China, by creating a gateway for Hollywood in Europe through Starrise Media could be a significant phase II value creation opportunity for the company down the road. In summary, we've had a remarkable year at Cinedigm. We have solidified our position as a unique independent streaming company, rapidly building on our premium channel portfolio and our streaming device platform and geographic reach, while delivering thousands of hours of digital content to the entire streaming ecosystem, which continues its unprecedented and explosive growth. Our immediate and long term financial prospects look bright. Our positive fourth quarter financial performance, our massive increase in viewership are significant cost streamlining and all the new high potential channel and distribution deals we closed after February 2020 underscore that we are on a path to profitability in this current full fiscal year that will be sustainable. Now, let me turn things over to Erick, for a deeper dive into our Streaming business. Erick?

[Erick Opeka:]

Thank you, Chris. First, I want to discuss the current macro environment for streaming entertainment and once-in-a-generation transformation for both the pay television and the $70 billion TV advertising space. One of the biggest drivers that impacts our business is acceleration of cord cutting. In 2018, .just 4% of households cut the cord, last year that number rose to 7% and according to research firm Convergence Research that number will reach 9% and may even trend higher this year. Even after subscribing to general entertainment services like Netflix, Amazon Prime or Disney Plus, consumers still have ample savings and continue to subscribe to multiple special interest channels, like Cinedigm’s CONtv, the Dove Channel and many others. This trend will continue to accelerate as companies like Comcast, Dish, Apple, Amazon and others embrace adding these channels to their platforms. Next, we're seeing an unprecedented shift by consumers to the streaming first consumption profile. At the Internet Advertising Bureau NewFronts this June, Samsung noted that 58% of TV customers spend the majority of their time watching streaming video. We think this example exemplifies the rapid, broad shift to streaming and expect this percentage to continue to accelerate over the short term. Another key factor is the rise of smart TV as the next major battleground in streaming wars. The living room has always been the perfect environment for streaming, given the much higher degree of engagement versus mobile devices. However, just a few years ago a smart TV’s were not very smart, with outdated user interfaces, limited content and apps and very high prices. Today smart TVs have become usable, fast and cheap with fantastic content options. Many top manufacturers, including Samsung, LG and Vizio have baked free ad-supported linear channels or as they're known FAST channels directly into the TV operating system, effectively marketing a free basic cable alternative with every television sold. With more than 250 million sets shipping annually worldwide, it is easy to see how this business scales to hundreds of millions of users in a very short amount of time. As consumers choose free alternatives, legacy cable and satellite audiences continue their record declines. Advertisers will accelerate the reallocation of more than 70 billion of North American TV ad spend to streaming services, and soon, I believes as much as 20 billion could shift to OTT over the next 30 months. Given these market dynamics, there's never been a greater demand by both consumers as well as OEMs and platforms for channels and in particular quality ad supported channels. In addition, the financial profile of the ad supported business model is extremely appealing, as it is less capital intensive, requires less upfront and ongoing investment in content compared to the subscription video-on demand business model, and it continues to utilize and leverage our existing library of content. We believe that the transformation currently underway is a tectonic shift, much like the one that happened to the print advertising industry more than a decade ago, where tens of billions of advertising dollars shifted to digital, never to return to print and forever transforming the ad landscape. We think a similar transformation is underway for the television industry and believe we are poised to build a substantial business by becoming the leading, independent provider of streaming content, channels and services in the entire ecosystem. Our revenue model focuses on four key pillars of revenue generation and I am going to talk about them now. First, we licensed our 32,000 titled digital film and TV library to the broad ecosystem of more than 200 streaming providers in the U.S. and more than double that internationally. This includes large scale subscription companies like Amazon, Hulu and Netflix, as well as ad-supported companies like Tubi, Pluto and Xumo. Second, we provide a base of four subscription streaming services, CONtv, Dove Channel, Docurama and CONtv Anime direct to consumers via apps, as well as the broader ecosystem offering add on channels to providers such as Amazon, Comcast, Roku, Dish and others. This allows us to deliver - to deliver subscription services at scale, while avoiding the high costs of customer acquisition marketing and dramatically reduces our OpEx. Next, we distribute a portfolio of 16 FAST linear and ad-supported channels with a focus on distribution, with large scale partners and platforms. Six of these channels we own and the remainder are in partnership with third parties. Our go forward focus will be to partner with major media companies such as Chris mentioned, All3 Media, a joint venture of Discovery Communications, Liberty Global, as well as American Public Media, one of the largest public television companies. Lastly, we operate Matchpoint, a software platform that enables major media companies do all of these things I just described, essentially as a cloud-based operating system for entertainment companies that need to build streaming apps, distribute content and channels and gather critical business intelligence. After several years of successful operation and massive operational efficiencies and cost savings to Cinedigm, we are now selling the software as a service commercially. To fully realize revenues from these areas, Cinedigm has, over the last year, embarked on a four stage plan, acquire and launch channels, secure distribution, build the audience and scale monetization. First, let's discuss our results in acquiring and launching channels. At the beginning of last fiscal year, we had just four channels in operation, by the end of the fiscal year we had six live and 10 under contract. Subsequent to the close of the fiscal year, we launched the Bob Ross channel, which has quickly become one of the company's top performing channels and a favorite of consumers on Samsung, Roku and as of last week Tubi. Currently we now have 16 channels under contract, including deals with SPI International, a global lineal channel operator with 42 million subscribers and a global digital media company focused on live entertainment, LiveXLive. One of the industry's leading live music video streaming platform and operator of streaming music service, Slacker Radio. Finally, we did a deal with Team Whistle, a fast-growing sports, lifestyle entertainment company backed by shareholders, including Discovery Communications, Snap and Jeffrey Katzenberg WndrCo. Our short-term vision is to grow this to a portfolio of 30 ad supported networks over the next 12 to 18 months, with a focus on continuing the trend of partnering with major media entities. On the distribution front, our focus over the last fiscal year was to focus on expanding our addressable footprint. This footprint is similar to the description of cable households in that it reflects the total potential reach over time of our properties. Over the course of the fiscal year, we expanded the addressable reach of our footprint to more than 310 million devices globally. Our focus was on expanding in two areas, linear platforms for our FAST channels, as well as connected TV platform providers, both domestically and internationally. On the FAST channel front, we added or expanded with key partners, including Samsung TV Plus, the Roku channel, Vizio, Comcast, XUMO and many more. We also completed deals with three major smart TV platform providers, Vewd, Foxxum and Zeasn, dramatically expanding our international footprint and growing our international smart TV penetration to nearly all major commercially available smart TV’s. Our focus over the next 12 months will be to grow our domestic base between 50 to 60 million devices, as we continue to partner with telco, cable companies and broadband providers as they expand their OTT offerings. We will also focus on expanding our base in Latin America and India, two markets with rapidly growing base of smart TV consumers. Leveraging our addressable footprint growth, we began to focus on growing our audience during the last fiscal year, with a special emphasis on our core growth area ad-supported users. Over the course of the fiscal year, we grew our ad-supported business, our user base from approximately 2.2 million monthly active users to 9.7 million monthly active users, an increase of nearly 341%. This was heavily driven by our focus on growing FAST linear users. Linear adoption can scale incredibly quickly due to the embedded nature of FAST channels in the native operating system of smart TV’s. There's no app to install and our channels are literally a click away on the remote. This embedded nature has been instrumental to companies like Roku and others to benefit from scale user growth tied to hardware shipments, with minimal marketing costs, and Cinedigm is seeing a similar net result as more and more devices ship. As we expand this approach to an even broader selection of smart TV’s on a global basis, we expect to continue to see a growth trend that will only be accelerated as we add new channels to our existing deals. This figure is a strong proxy for sustained future revenue growth and a key driver of the implicit valuation of the company. We expect this momentum to continue into fiscal 2021, given the clear line of sight we have into a massive millions of additional viewers that we believe will approach 15 million rather quickly. Last but not least, scaling monetization is the last phase to achieving considerable and sustained revenue growth over the coming fiscal year and beyond. While the number of channels, addressable footprint and audience are the predecessor requirements of this growth, providing an adequate base and demand partners is critical. Due to the rapid growth of our user base and minutes viewed, I'm happy to report that demand for our fast growing ad and [ph] inventory has never been higher even amidst the current environment. At the beginning of our fiscal year, our audience was still nascent and we had just one demand partner. Due to rapid rise in audience and consumption, we were able to close 21 demand partner deals, including major partners such as AT&T's Xandr, Verizon Media, Beachfront Media and many more. As our growth continues subsequent to the fiscal year end, we have signed or entered into partnerships with 11 additional demand partners bringing our total to 32 partners. We also signed a deal with ad tech company SpringServe and Publica to improve our ad tech stack. Given these improvements, we expect material improvements in fill rates and CPM in this fiscal year. As our audience and consumption continue to scale, we anticipate direct ad sales partnerships to further maximize our revenue base. To sum it up, in 12 short months we increased our channel footprint by 67%, more than doubled our addressable device footprint, scaled our audience 341%, increased watch time by 77% and grew overall revenues by 59%, driven by an increase in ad revenues of nearly 468%. Given the overall industry trends, our roadmap of new channels, platforms and monetization partners, we expect these substantial gains to continue to drive increased revenues and a profitable growth trajectory over the coming quarters that will substantially increase shareholder value. We're excited to be a central player in the evolution of entertainment. With that, I'll now turn the call over to Gary for a review of our financial results.

[Gary Loffredo:]

Thanks, Erick. As reported in our 10-K, for fiscal year 2020 consolidated revenues were $39.3 million. As expected, overall revenues declined as a result of the contracted decline in our legacy digital cinema equipment business. The deployment contracts in this segment of our business provide for the payment of virtual print fees for up to 10 years from the date of installation of the digital projection system and therefore continued to move towards the end of their respective terms. We have planned for this expected rollout - expected roll-off of virtual print fee revenue. Reflecting the shift in our business, revenues for our OTT streaming and content distribution core business were up 31% over last year. As Erick discussed, the streaming channel revenues have increased about 59%. The most explosive growth was in our ad-supported OTT business, where revenues were up 466%. We had shifted our business in anticipation of this trend and the trend is continuing in the first quarter of our fiscal 2021, starting in April 2020, as cord cutting accelerates even more due to the current stay at home environment. The total operating expenses decreased in our fiscal 2020 to $43.6 million, which is a decrease of $15.5 million or 26% below fiscal - prior fiscal year. This is primarily due to our focus on cost rationalization and expense cutting efforts. We have and continue to reposition our infrastructure to focus on growing and high margin OTT and digital streaming business. SG&A expenses for the fiscal year 2020 were $16.3 million, which is a decrease of $11.3 million compared to the prior fiscal year. Net interest expense decreased 29% to $7.2 million for fiscal 2020 compared to $10.3 million last fiscal year. The current interest rate on our main East West Bank credit facility is 3.75%. The decrease in net interest expense is primarily the result of our active reduction in outstanding debt balance. Our total outstanding debt balance as of March 31, 2020 was $49.9 million or 24% lower than it was 12 months ago. Our total outstanding debt balance as of June 30th, 2020 is $44.8 million. That is a reduction of over $20 million for the net balance as of March 31, 2019. The net loss attributable to common shareholders for fiscal 2020 was $15.1 million, a 9% improvement to fiscal year 2019. The improvement is primarily the result of higher margins, as we shift our business toward OTT streaming, our efforts to reduce and streamline our cost structure and lower interest expense on a much lower debt balance. For fiscal year 2020 adjusted EBITDA was $6 million compared to $11.7 million in the year ago period. The decrease was due to the expected reduction in the legacy cinema equipment business. Full year adjusted core streaming and content distribution business EBITDA improved by $6 million or 76%. Importantly, Q4, 2020 adjusted EBITDA for the core streaming and content business was positive $700,000. This is a $3.5 million or 125% increase from Q4, 2019. These are significant improvements trending toward profitability for full year fiscal 2021. From a liquidity standpoint, we have taken several steps to improve our liquidity position. Our credit facility at East West Bank had an outstanding balance of $14.5 million as of March 31, 2020 and that balance has decreased to $10.2 million as of June 30th, 2020. For context, this balance was $18.6 million at March 31, 2019. We also recently executed an amendment with East West Bank to extend the maturity date of this credit facility to June 30th, 2021. On April 15th, 2020, the company received $2.2 million from East West Bank pursuant to the Payroll - the Paycheck Protection Program of the CARES Act. This loan matures on April 10th, 2022 and accrues interest at 1% a year. We intend to seek forgiveness for all or a portion of the PPP [ph] loan. The company's second lien notes had an outstanding balance of $8.2 million as of March 31, 2020. During the last 12 months ended March 31, 2020, the company paid down $3.4 million of the outstanding second lien secured loans. Following another paydown agreement with the second lien lender in June 2020, the outstanding balance on the second lien debt has been further reduced to $7.5 million as of June 30, 2020. On May 22nd, we closed the registered direct offering of 10,666,000 [ph] shares of common stock priced at the market under Nasdaq rules for gross proceeds of $8 million. From March 31st, 2019 to June 30th, 2020, we have reduced our debt balances by over $20 million. While our financial results for the 2020 fiscal year reflect substantial improvement over the year from March 31, 2019 to March 31, 2020, we have made incredible progress in closing new channel deals and distribution deals since February 2020 that are not yet reflected in our financial results, but set us up for future quarters. In addition, the consumer viewing patterns have shifted dramatically and permanently to streaming, as Erick mentioned, accelerated by the current stay at home environment, we are uniquely well positioned to benefit from that shift. With that, I will turn the call back to Chris.

[Chris McGurk:]

Thanks, Gary. Clearly this was a pivotal year for Cinedigm. We made tremendous progress in the OTT space, expanding our channel portfolio, growing our distribution footprint and increasing viewership exponentially. We did this through a series of agreements with real and established growing partners, like Roku and Samsung and Amazon and Vizio and Tubi and All3 Media and the Bob Ross estate, among many, many others. And we continue to work through a real and robust deal pipeline with many more of these established brands, OEMs, telcos and other key entertainment industry players that recognize the advantages Cinedigm brings to OTT and our channel expertise, our device reach our Matchpoint technology and our massive digital content delivery capabilities. As already demonstrated by our profitable fiscal year 2020 fourth quarter core business results, we expect that all of this will drive us to profitability in this full fiscal year and then sustain profitability beyond that. There exists an incredible level of energy and growth in the streaming market space. And we are fully engaged to capture a meaningful share of the market and fully capitalize on the huge opportunity in that space. That the entire Cinedigm has worked so hard to create for the company over the last few years. And with that, we’ll now take any questions you might have. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Dan Kurnos with The Benchmark Company. Your line is now open.

[Dan Kurnos:]

Thanks. Good morning. Erick, can I go back to some of the comments you made just on fill rates and CPMs? Obviously, it was challenged to start in this COVID environment and we've seen kind of a rapid recovery. How close are you to getting back towards normalized levels? And then maybe you can just talk a little bit about what you're seeing in July either on that front or from an MAU perspective?

[Erick Opeka:]

Sure. Yeah, so first of all, I'll address your point on CPMs. You know, I think we're pretty close to fully recovered. I think we're at about 90% to 95% of our pre-COVID CPM rates. That's been - you know, as I mentioned on the call - earlier in the call, adding in quite a lot of demand at this point, it means more competition than we would normally have had for the same amount of slots, which means we can charge higher CPMs. So that's been helpful. Also I think the macro environment where TV dollars are shifting into OTT is helping to buoy [ph] the OTT rates to some degree. So I think you know, overall I think as we start heading into Q3 and then the busy Q4 you know, I think even with the impact of COVID, OTT is still seeing - you know, expected to punch up year-over-year growth overall as a business. So I think that will be borne out in the CPMs. In terms of our viewership, our viewership continues to rise. We haven't fully tallied our numbers for June yet because we have to get data from third party partners. But June looks like we're on - we're continuing the same trends going forward. And you know, there is a little bit of a cyclical nature in the summer, but I think we will - you know, as people spend more time outside that may be less so this year. That said, we are adding and have multiple additional channels launching, which will all have a significant impact on the user growth, as well as you know, you saw our announcement with Bob Ross on Tubi last week. So we're going to just continue to see the current properties growing and additional user base growth in line with what we've been seeing so far. Nothing is leading me to believe it's going to be any different.

[Dan Kurnos:]

Got it. Very helpful. And then you know, you guys have outlined the channel strategy here. Without getting more specific on explicitly the roadmap, as you guys continue to add content, I think the next logical question is, when are you able to go back to the distributors and have conversations about you know, more premium placement. And so you know, how do you think those two fall into lockstep? And do you anticipate any near-term benefits or is that still more of a long-term battle, as you've kind of build out the platform?

[Erick Opeka:]

So we've had great - the team has had great success securing strong placement for our channels. You know, as I mentioned on the linear side, first off, the amount of channels in the ecosystem today is relatively small. There's, tops, a few hundred channels out there. So unlike, say, the iOS or other app stores where there's tens of millions of choices one click away, in the linear environment there's just a few hundred choices that the OEMs don't plan on adding you know, hundreds and hundreds more. But I think we're going to continue to maintain a large share of the dial. So from that perspective, we're getting a tremendous amount of placement just by being - just by being part of that footprint. And the second of course is our direct marketing relationships with the various OEMs has been incredibly solid. Take a look on Samsung's or just look on Tubi and you'll see the amount of attention we're getting for Bob Ross for example and some of the other channels we have. So I think we're already getting that placement. I think that will - the trend will continue to improve even more as we bring in even bigger partners than we've had in the past.

[Dan Kurnos:]

Got it. Super helpful. And then maybe just on the film side. The Outpost has obviously outperformed everyone's expectations. I think it's been sort of a surprise winner. Maybe you can just talk about the economic benefit there? And then just what you're seeing in the environment for more content, obviously on the channel side you're looking to partner, but just any thoughts you can give us on sort of what's available. Kind of what you're looking at, how aggressive you can be especially with production still kind of handcuffed at the moment?

[Erick Opeka:]

Chris, did you want to take that one.

[Chris McGurk:]

Well, you're kind of on a roll, Erick, so why don’t you keep going.

[Erick Opeka:]

Sure, sure. So yeah, The Outpost, I think, look, I'm a veteran myself, and I think The Outpost is one of those films that just you know, resonates with people, no matter where you are on the spectrum. And we think those are the kinds of films that, you know, us as a company being an independent, it gets to take chances and risks on that, you don't see out of the major studios anymore. As everybody is trying to make films that appeal to all four quadrants and every demographic, they tend to get watered down and you miss films like this. So we're proud to be a company that has the ability to bring films like The Outpost and others in that vein to broad markets. You know, we think the economics of the film releasing business are strong, as borne out by the results that we're seeing. Retail remains an incredibly strong footprint, as does in-home rentals getting access to first-run films and television series at home, when you can't go to the theater is a very compelling opportunity. And I think we're going to continue to push those. Our transactional numbers for example show - in the last quarter have shown a dramatic upswing. And I think that trend reflects people's desire to watch and rent great new films at homes that they might have otherwise spent on theatrical, about [ph]

[Chris McGurk:]

If I could just add to what Erick said, in my remarks I talked about how we're focusing more and more on our base content distribution business and aggregating and distributing digital content, particularly given the huge opportunity right now with all the cord cutting that's going on in the stay at home environment. And we've seen some tremendous results over the last three months in that business. In terms of our digital distribution revenues and you know, we hope to report some real positives in that area very soon. Thank you.

[Operator:]

Thank you. Our next question comes from Brian Kinstlinger with Alliance Global. Your line is now open.

[Brian Kinstlinger:]

Great, thanks. Nice results in the streaming business. Can you talk about how viewership and ad revenue have ramped, particularly in the last few channel launches? And then maybe if you could also go over the sales cycle and penetration timing you see into those streaming platforms?

[Erick Opeka:]

Sure. So I think that the key thing to note here as we talk about partnering and launching channels with larger companies, bigger brands, bigger entities is the caliber of channels that we're bringing to market. They mature much more quickly and they result in a much faster cycle time to revenue generation, than, say a brand that is unknown and takes a while to build up or content that is not otherwise potentially known to consumer. So we'll use - if you take a look at Bob Ross for example, that channel launched on Samsung in April. We secured and we have since added three additional distribution outlets, and including Tubi as recently as last week. So you know, as we look at those are some big core scale platforms that are really driving - are going to be driving substantial users and revenue. We're seeing on the revenue rates and the CPM rates, a scale - you know, normally it would take 30 to 60 days for demand partners to get familiar with the brands, start to ramp volume. We're doing a better job reselling that in before launch and then working it up through the first 30 to 60 days. So we actually start to see a pretty rapid - a rapid rise to our - sort of our safe CPM rate, as well as the audience base. Now Bob Ross, the Bob Ross channel has as of today is - has the largest percentage of all of our channels in terms of viewership and that's with you know, less than 70 days in market and with only around 25% of distribution footprint. So I think that's - that really kind of shows how quickly the cycle, which, you know, previously the cycle for us was quite longer. But I think given we've reached critical mass on demand partners, critical mass on the distribution footprint, we have deals in place with all these partners, so it's quite easy to get deals and amend our deals to bring the channel to new places. So I would say, our sort of benchmark now is from launch to - from announced to launch, we're typically looking at about 90 days, sometimes less, from launch to full scale monetization, probably within two to three quarters. But we're seeing that in some cases compress. Let me know if that's…

[Brian Kinstlinger:]

Yes, okay. Great. And then you had a quick comment on it, but maybe you guys could talk about the timeline you see and plan to shift from what's mostly a programmatic advertising model to a direct sales effort, which obviously has better economics?

[Erick Opeka:]

Sure. Well, I think for us the direct sales model is attractive, but you have to really have the appropriate amount of scale [ph] to make it cost effective. So we think within the next 12 months, over the next 12 months, to kind of bridge between us hiring direct salespeople, we'll likely partner with somebody who specializes in direct ad selling. A good example is, if you look at one of our peers Tubi, even Tubi when they launched in Australia, they just announced last week, they're leveraging Foxtel to do their ad sales. So we think we can find a similar arrangement. And in North America you know, it could be one of our current partners and we're evaluating other partners, as well to potentially do that.

[Brian Kinstlinger:]

Great. Lastly, you had some recent PR about Matchpoint recently. Can you just highlight what the new functionality for that platform is and how it further differentiates you?

[Erick Opeka:]

Sure. Well, you know, as we look at the rapid growth of the streaming industry and the sheer volume of outlets, I think there's now about 600 viable global outlets, plus if you count all the prior distribution outlets, like cable, satellite and everything else, companies like ourselves, major media companies to distributors like ourselves and others, rights holders have a massive challenge of pushing tens of thousands of hours monthly out into that ecosystem. It's incredibly costly and very difficult to bring to market quickly. So Matchpoint, we enable companies to do that at dramatic savings to what they're currently spending in a dramatically faster way. And in that same system they can also build and launch their streaming channels and apps. And we have a beautiful analytics layer that lays on top of it that allows them to make critical business decisions. So it really is, as I mentioned previously, kind of an operating system for any company that wants to monetize their content in the streaming space. So we think there's tremendous prospects and we've seen incredible results on our own business as reflected in our current results.

[Operator:]

Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Chris McGurk, CEO for new closing remarks.

[Chris McGurk:]

Thank you. So thanks, everyone, for your support and really your patience with us as we transform ourselves into a streaming company over the last couple of years. I think all the progress that we've reported on this call and our results in the fourth quarter in the last fiscal year really underscore why we did that transformation. I think it's very clear. So thank you all and we'll talk again soon.

[Operator:]

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program. And you may now disconnect.