Cineverse Corp (CNVS) 2021 Q1 法說會逐字稿

Greetings, and welcome to Cinedigm's First Quarter Fiscal Year 2021 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

At this time, I'll turn the conference over to Jill Calcaterra, Executive Vice President. Jill, you may now begin.

Good morning, and thank you for joining us today on our first quarter fiscal 2021 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, 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, August 14, 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?

Thank you, Jill, and thanks, everyone, for joining us on the call today. Given that we just had an extensive full year fiscal 2020 call a month ago, we'll try to make this one briefer. I will give an overview, and then Erick will do a deeper dive on our streaming business. After that, Gary is going to review our financial performance, and then we will take your questions.

So our results were very strong this quarter. Despite the adverse effects of the COVID-19 pandemic on the theatrical and advertising markets, we continued the strong trend from last quarter, again, posting positive core streaming and content business adjusted EBITDA with a $2.3 million or 103% increase versus the prior year quarter. This strong performance reflects the expansion of our streaming business, particularly AVOD, where revenues were up 48% versus the prior quarter ended March 31, 2020, despite the COVID-19 impacts on the overall advertising market; also from strong digital content sales from our highest digital revenue quarter in over 5 years and also from the continued positive impact of our aggressive cost streamlining efforts. Our linear ad-supported streaming viewership increased 93% to 29 million viewers in the quarter versus the previous 3 months, reflecting the expansion of our streaming channel portfolio, our reach into over 800 million streaming devices and the continued cord-cutting momentum accelerated by the current stay-at-home environment. Let me just emphasize this point again, we almost doubled the viewership of our linear ad-supported channels in just the last 3 months, with almost 30 million active viewers. If you take nothing else out of this call, please take home this point because it completely underscores our explosive momentum in the marketplace.

We also have several additional new streaming channels teed up for launch over the coming quarters that we expect will add significant revenue and profits as we move through this year and beyond. Importantly, with our streaming infrastructure now in place and now broadly recognized in the industry as top notch, as each additional channel reaches full carriage, we gain an incremental stream of recurring revenue that accelerates the monetization of our investment. Clearly, we are now uniquely well positioned to continue to capture a meaningful share of the rapidly expanding global streaming business.

Here are some of the other key business highlights from the quarter. Linear streaming minutes viewed increased 43% and on-demand plays increased 103% over the fourth quarter of fiscal 2020. As we announced last month, our key partners, Amazon, Apple, Vudu, Google, InDemand EST, Hoopla, Microsoft, Sony and Fandango, generated their strongest digital content performance levels with us in over 5 years, with over 60% year-over-year quarterly growth, driving a 35% increase in overall digital content sales billings, our highest digital sales quarter in over 5 years. We see this trend continuing as streaming content demand continues to explode across all platforms.

During the quarter, we also announced 6 additional new streaming network deals, bringing our portfolio total to 16 streaming channels under management. These include launches or channel partnership announcements with the Bob Ross Channel in partnership with American Public Media, which features the series created by the iconic painter and television celebrity Bob Ross. In just a few months, this channel has become one of the top-performing channels in our portfolio, available now on more than 68 million connected devices and recently launched on Xumo, Samsung TV Plus and Tubi; CONtv Anime, a new 24/7 linear and AVOD streaming network dedicated to streaming Japanese anime films and series, which launched on June 8; SPI International, a global provider of premium streaming networks to more than 42 million subscribers to launch and operate e-sports channel, Gametoon and fashion lifestyle network FashionBox in North America; Team Whistle, a leading sports and lifestyle media company to distribute a free ad-supported linear channel and AVOD network called Whistle TV; LiveXLive, the leader in live music streaming to develop a global LiveXLive branded music streaming channel and form an advertising and content partnership; and MyTime Film Network, a female-focused streaming movie network targeted for launch in late third quarter of fiscal 2021.

During the quarter, distribution of our new and existing channels also grew. We announced that Amazon's IMDb TV is now offering Cinedigm's free ad-supported linear channels CONtv, Dove Channel, Comedy Dynamics and Docurama. We also significantly expanded international smart TV carriage and distribution by closing deals with platform providers Vewd, Foxxum and Zeasn, extending our reach to the majority of smart TV manufacturers. And we expanded our base of signed advertising partners to 26 companies with 6 additional in negotiation.

We also continued this strong progress subsequent to quarter end. We participated in the highly touted launch in July from NBCUniversal's Peacock digital streaming platform, where we launched hundreds of movies and TV episodes, plus 3 of our streaming channels. We also announced the partnership with Fantawild, China's largest theme park operator and the top producer of children's animation in Asia to launch a new global streaming service featuring thousands of hours of Fantawild's widely acclaimed animated series and feature films and also to distribute Fantawild's animated content outside of China. We believe this will be an incredibly valuable partnership as we introduce the Disney of China to audiences outside of China. This partnership also underscores our long-term strategy of bilaterally distributing content in streaming channels in both North America and China, by far the 2 biggest entertainment markets in the world. We are on a unique competitive position to become the go-to company to monetize content and streaming in both territories, and we believe this could be a very important phase 2 value-creation opportunity for us down the road.

During the quarter, we also announced a partnership with Bloody Disgusting. the most popular media brand in horror to launch a new horror streaming network that is set to premiere just-in-time for the Halloween season. We also announced a partnership with Quincy Newell and news company TwentyOne14 Media to launch a new urban multicultural entertainment and lifestyle network.

And our distribution expansion efforts have also continued subsequent to quarter end. We partnered with Littlstar, one of the fastest-growing and most popular streaming services to distribute Cinedigm's portfolio of linear and video-on-demand channels. Littlstar is the leading provider of premium streaming film and TV content to the gaming ecosystem, where it reaches over 110 million Sony PlayStation consoles. It also reaches hundreds of millions of additional streaming devices, including Android TVs, mobile devices and many more. With this partnership, Cinedigm's device-streaming footprint is now at over 800 million global devices.

Finally, on the technology front, we announced the partnership with Rightsline, a leading Rights Management platform, serving the needs of broad range of entertainment companies and right sellers to use Matchpoint, the company's proprietary digital content distribution platform with real-time rights management and enforcement.

So it is very clear that all this activity has built a strong foundation for both Cinedigm's future growth and our sustained core business profitability, like we have seen in the past 2 quarters, which we delivered despite the adverse impacts of the COVID-19 pandemic on the advertising and theatrical markets. As cord-cutting continues to accelerate, we believe our momentum will grow even stronger and we will continue to capture an ever-increasing meaningful share of the explosively growing streaming business, particularly now that we are clearly established as the leading independent channel, content and technology provider in this space.

So now let me turn things over to Erick for a deeper dive into our streaming business. Erick?

Thank you, Chris. Over the last quarter, we've been razor focused on executing our strategy of providing channels, content and technology services to the broader streaming entertainment marketplace.

Our emphasis has been on 5 key areas: adding high-quality channels and partners to our portfolio, expanding distribution, increasing viewership, scaling our monetization and improving our technology. I'm happy to report that despite one of the most challenging business environments in recent history, we've achieved significant results in all 5 areas.

First, on the channel partnership front. In the quarter, we brought our total current to 16 partners and subsequent to the quarter are now at 19 channels, advancing us nearly 2/3 of the way of our stated goal of 30 channels signed over the next 12 to 18 months. And our partner base reflects some of the top producers and distributors of content globally, including Discovery and Liberty Global's all3media, American Public Media, and most recently, Fantawild, the top animation producer in China and the fifth largest global theme park operator. These and other deals provide us with hundreds of millions of dollars in produced content value at no cost to us and provide a compelling differentiated channel lineup that is hard for our competitors to replicate.

On the distribution front, over the quarter, we closed deals that increased our addressable device footprint to over 675 million devices in more than 120 countries worldwide and subsequent to the quarter have reached over 800 million devices. This reach is important to both enable monetization as well as to build brand equity for the channel properties we are launching. Our team has done a fantastic job on this front.

In under a year, we have amassed a global reach that in legacy cable and satellite distribution could have taken 5 to 7 years to accomplish. On top of that, we have established ourselves as a go-to partner for free ad-supported linear channels for hardware manufacturers like Samsung, Vizio and LG, digital powerhouses like Roku and Amazon and powerful telecom giants like Comcast and DISH Networks.

Distribution means nothing without viewership, and we have delivered on that front as well. Over the last quarter, we grew our linear streaming audience by 92%, increased on-demand plays by 103% and have seen minutes watched soar by more than 43%. While these numbers do reflect some benefit from the stay-at-home environment, the bigger impact has come from our execution of new channel launches with a significant viewership from day 1, like we achieved with the launch of the Bob Ross Channel, along with major prime-time programming efforts. Given we will have 2 to 3 channel launches per quarter and are in the process of major new programming push, we expect this to sustain high levels of viewership growth over the coming quarters.

Importantly, we have excelled on the monetization front. We delivered a 48% increase in ad-supported revenues in the quarter despite many of our peers posting significant declines amidst one of the worst ad quarters on historical record. Our focus was dramatically increasing our inventory and fill rates by launching new properties, expanding distribution and increasing our ad demand partners to 26 partners over the quarter. Combined with our best record on quarter for digital entertainment transactions, which were up 34%, Cinedigm has built a rare thing despite its early stages, a profitable streaming enterprise. Given the large number of forthcoming channel launches and our now-established base of advertising demand partners, we are in a fantastic position as we enter the busiest advertising period of the year. And it is important to note that a significant number of the platform and channel deals we announced in the quarter have not even been realized yet but will start to reflect in the current quarter and will come online heavily in the subsequent quarters.

Last but not least, we have made great strides on the technology front, which has been an enabling factor and competitive advantage in achieving these stated goals. In the quarter, we announced that Matchpoint, our next-generation operating system for digital distribution and streaming, expanded its automated distribution capabilities by more than 30 OTT and digital platforms. We also announced the launch of new AI-based scene analysis and data enrichment capabilities that enables us to improve discoverability on platforms, find optimal ad insertion points to increase monetization and dramatically reduce time to market. We also announced our first streaming app deployed on the Blueprint platform in partnership with Vizio and Sanctuary. We have graduated from Matchpoint being a proof-of-concept to a fully realized product, and we plan to fully exploit Matchpoint as a commercial product and are in the process of hiring sales leaders as I speak.

To sum it up, our hard work and focus on these key areas has not only led to demonstrable and tangible results, it has also laid the foundation for both short- and long-term revenue growth as we continue to execute our plan.

With that, I'll now turn the call over to Gary for a review of our financial results.

Thanks, Erick. For the first quarter of fiscal 2021, our consolidated revenues were $6 million. As expected, overall revenues declined as a result of the contracted decline in our legacy digital Cinema Equipment business and the significant negative impact of COVID on theatrical revenues. The deployment contracts in this segment of our business provide for the payment of virtual print fees for up to 10 years from the installation of the digital projection systems. We have planned for this expected roll off of virtual print fee revenue.

Reflecting the shift in our business, revenues for our OTT streaming and content distribution core businesses were up 22% over last year. This was led by our AVOD revenues, which were up 48% over prior quarter ended March 31, 2020, and 28% over the first quarter of the prior year, despite the impact of COVID-19 on the overall advertising market. Our channel portfolio is growing and our viewership is increasing rapidly, witnessed by the 93% growth in viewers to 29 million versus last quarter. But we expect this ongoing shift to our streaming business will continue to drive the transition to a much higher-margin, higher-growth business model.

Our total operating expenses decreased in the first quarter of fiscal 2021 to $8.6 million, which is a decrease of $3.9 million or 31% below the prior year. This dramatic decrease is due to our committed focus on cost rationalization and expense cutting efforts. We have and will continue to reposition our infrastructure to focus on the growing and a high-margin OTT and digital streaming business.

SG&A expenses for the first quarter were $3.8 million, which is a decrease of $5.8 million or 34% compared to the prior year. Net interest expense decreased 43% to $1.3 million for the first quarter of fiscal 2021 compared to $2.3 million for the prior year period. The decrease in net interest expense is primarily the result of our active reduction in outstanding debt balances.

Our total outstanding debt balance as of June 30, 2020, was $47 million. That's a reduction of $13 million from the debt balance as of June 30, 2019. And our total outstanding debt balance of -- as of today is even lower at $44.3 million and $12.1 million of that debt is related to the digital cinema business.

For the first quarter of fiscal 2021, consolidated adjusted EBITDA was negative $182,000 compared to $539,000 the year prior. This decrease was due to the expected reduction in the legacy Cinema Equipment business. First quarter fiscal 2021 adjusted EBITDA for the core streaming and content distribution business was $70,000, which is a $2.3 million or 103% increase from the first quarter of fiscal year 2020.

Importantly, from a liquidity standpoint, we have taken several steps to improve our liquidity position. Our credit facility with East West Bank had an outstanding balance of $14.5 million as of March 31, 2020. That balance has decreased to $10.2 million as of June 30, 2020, and we have further decreased that balance to $7.6 million as of today. To put this in perspective, the balance was $18.6 million on March 31, 2019, and today, it's $7.6 million. The company's second lien loan had an outstanding balance of $8.2 million as of March 31, 2020. We have further reduced that second lien loan in June 2020, so the outstanding balance as of today -- as of June 30, 2020, is $7.5 million. So overall, from March 31, 2019, to today, we have reduced our debt balances by over $21 million.

On May 22, we sold 10.6 million shares of common stock through a registered direct offering for gross proceeds of $8 million. On July 20, we further strengthened our balance sheet when we sold 7.2 million shares of common stock through a registered direct offering for gross proceeds of $10.8 million. Those shares were priced at $1.50 a share.

Our financial results for the first quarter of fiscal '21 reflects substantial improvement from the prior year. And we have made incredible progress in closing new channel deals and distribution deals that are not yet fully reflected in our financial results, but we believe will set us up well for future quarters. We are well positioned to take advantage of the consumer viewing patterns that have shifted dramatically and permanently to streaming.

With that, I will turn the call back to Chris.

Thank you, Gary. In summary, we have clearly powered through many of the negative impacts of the COVID pandemic on the entertainment business to rapidly extend our position as the leading independent player in the streaming space with quality channel, content and technology solutions for the entire explosively growing global streaming business segment. We posted our second consecutive quarter of profitability in our core business with a $2.3 million or 103% increase in adjusted EBITDA. We added 6 more channels to our streaming portfolio, expanded our distribution reach to over 800 million global streaming devices and increased our active viewers by 93% versus the prior 3 months during the quarter. We fully intend to keep this strong momentum going over the remainder of the year and beyond.

And with that, we will now take your questions. Operator?

(Operator Instructions)

The first question is from the line of Dan Kurnos with The Benchmark Company.

Had the update recently, so maybe just a few topics to chew on a bit here. Erick, can you help us size up Rightsline? And just how you are thinking about -- you continue to talk about commercialization of Matchpoint. I just want to understand how we think about economics and sort of -- and where that goes. And then maybe a bigger picture question. We've seen a lot of -- and I think this was mentioned last time, we've seen an incredible amount of strength in the TVOD segment of the market. Do you have any titles that can be shifted amongst the buckets to kind of maximize this high-margin opportunity? Are there any incremental partners coming to you for distribution, looking to participate in this market? And then obviously, Windows have changed significantly in terms of both pricing and length and then going to DVD. So maybe you can just talk about the impact of the TVOD mix shift on your DVD business, and ultimately, just how you think it kind of plays out over the next 12 months or so?

Sure. So first, let me talk about Rightsline. We've -- Rightsline is the leading platform for Rights Management in the entertainment industry. You have dozens and dozens of companies, major, major companies, like, all the studios, every major independent that uses to manage their rights. So our goal with Matchpoint, if you think of Matchpoint similar to like Salesforce, where Salesforce is central product, is a CRM, our central product with Matchpoint is distribution. So our goal is to plug in an interface with rights management systems, with localization companies and other tools, so companies can use us like an operating system and plug a variety of applications that will be interoperable with. So Rightsline is the best of breed in Rights Management, and we plan on interfacing and working with the best-of-breed in every category of tools that a distribution company would use. So as it relates to Matchpoint, Matchpoint -- what's beautiful about Matchpoint is, the product is fully developed and ready to be marketed and sold. We're in the process of hiring salespeople, which we hope to have online within the next 30 days or so. And the monetization opportunity there is pretty significant given Matchpoint's ability to distribute content. We've now built that system to reach -- we added 30 partners. We have the ability to deliver to more than 100 different partners in the ecosystem and use that same system to build apps. So we think just on a pure -- purely focused on the distribution point, I'll -- to put it in perspective, companies of our size typically spend upwards of $0.5 million to $1 million a year in OpEx with third-party companies. So we're going straight after that business. If you think about how many production, distribution companies are in the marketplace, hundreds and hundreds in North America and thousands globally, that's really going to be our focus in customer segment.

As it relates to TVOD, so we absolutely think that, that -- the resurgence there, we're taking advantage of it. We don't necessarily need to redeploy content into that channel. Once you are in the TVOD window, with rare exception, the content is permanently in that window. So for us, maximizing the revenue comes from increasing the flow of content into the company, which we have some pretty significant plans in play right now to do so over the coming quarters. And then 2, we are really focused on taking the catalog that we currently own and maximizing the value with promotion and placement with all of the streaming partners. So the lift that we are seeing, it's 2 pieces to it: one is, obviously, having the eyeballs, which are there; and then 2 is making sure our content gets in front of those eyeballs, which is leveraging our dozen years of working experience with the core TVOD segment there. So I think that we are doing very well on that front, and we are going to continue to push those promotions throughout the busy coming quarter.

Got it. That's helpful. And then just maybe one more 2-parter on the distribution front. You guys have done a good job of expanding distribution. Just curious if there are any major distribution deals left to do that you see? And then I know that you guys always highlight U.S. and China, but obviously, there was the opportunity ex then internationally to expand distribution. And I'm just curious if there's any progress on that front.

Yes. So well, there's really 2 buckets here to talk about. One is domestically, which the segments where we are not fully -- we have not fully realized yet but are starting to make inroads are in the legacy cable distribution. We've already made several deals over the last 12 months, including Comcast and Dish Network, Sling, and we will be adding -- our goal is to add additional players. If you think -- if you look down the list and see the number of players we're not working with, that's a pretty fertile ground of growth in some of the highest consumption areas out there today. It would be foolish to write off the place where most of the living room consumption is still happening today despite all of everything we are talking about here on streaming. And then also subsequent to that, the virtual MVPD universe, the Philos, the YouTube TVs, Hulu's TV platform and so on, those represent tens of millions of subscribers that we are currently not reaching with our linear channel. So our goal is to expand into those.

But the bigger opportunity is internationally, where we today have a very small footprint. We have made some big inroads that deals with platform players like Samsung, Zeasn and others, but I would expect that to be our big focus. Europe is probably 24 months behind maturity of their AVOD consumer market relative to the U.S., and we think there's massive opportunities in Europe; we are focusing on deals in that territory.

And then lastly, as you look at the smart TV market, there's about 250 million to 260 million smart TVs shipped globally. In the past, emerging markets or markets like LatAm and India were not huge smart TV providers, they were predominantly mobile-first territories. That has dramatically shifted over the last 24 months, where those markets are now with smart TVs getting into the hundreds of dollars for very big screens. The consumers are opting to purchase those and connect on the Internet. So we think those are huge growth opportunities for us. We have content, rights, and channels for those territories that aren't even exploited yet, and our focus is going to be on adding those territories heavily in the second half of this year.

Our next question is from the line of Brian Kinstlinger with Alliance Global Partners.

Great. You said that ad-supported revenue increased 48%, clearly, the drivers being more channels and expanded distribution. And my guess is given COVID, this likely understates the potential of these channels. Is there a way to quantify how ad pricing and demand partially offset this growth, which I assume was the case?

Sure. I don't specifically have the broader industry stats in front of me, but I can tell you, historically, if you look at the quarter that we are talking about here, the beginning part of that quarter was probably some of the worst declines in ad CPMs and fill rates, historically. So I think it's safe to ballpark at least 25% to 30% decline we could have seen in CPMs, if not higher, and certainly, fill rates substantially lower. So flying into that headwind, we just -- our mission was just to ram right through it with adding demand partners, adding a sheer massive increase in available inventory and just start blowing channel launches out into that environment. And so I can't really benchmark you a number of what we could have done had there been, though, -- had COVID not had an impact per se. But I can say CPMs were 25% to 30% lower and fill rates, in some cases, were potentially half of -- 50% lower than they would have been for a portion of the period for some of the channels we have. So massive impact. And I think -- I'm really proud of what the team did despite the most challenging ad quarter since 2008. And -- but I think the opportunity here is when you look at what this means, we're seeing with the lack of sports and with the acceleration of ad dollars from traditional television to OTT, big moves and big plays in growth are possible. And in fact, we've seen right now, probably 90% to 95% return to normal CPMs, and our fill rates are historically higher than they were even pre-COVID due to some really hard work and the addition of all those demand partners we've been talking about.

So I think if you take a look at the market dynamics, we're going into a strong growth where there's a lot of excitement about OTT and pricing going into the heavy holiday quarter. I think we're going to be very well poised, even despite everything that's going on.

And that was partially leading to my second question about how the market in July and August really has seen. It sounds like fill rates are better at a minimum and maybe CPMs doing a little bit better. So will we see that significant increase in revenue in -- sequentially? Or will it take to the fourth quarter until we see the benefits on the income statement and revenue for those trends, and I assume with the more channels that you are releasing?

Right. Well, we really don't give guidance. But I would say, systemically, if you kind of look at the trends around each of those things, we will definitely see continued growth and improvement in every quarter, and we will definitely see -- our -- the holiday quarter could represent about 40% of the ad markets revenue. So I would say both of those things combined will show some very strong sequential growth going forward.

Great. Last question. I heard, I think, that you now, with the 3 launched, have 19 streaming channels in the marketplace. Where do you -- first of all, how many channels do you have that haven't launched that you have announced? And then how many do you expect to be fully launched by the end of the calendar year?

Thanks. Yes. So to clarify, that number is under contract, right, either signed with distribution rights or channels that are launched. So we've only launched about 8 of those 19 channels so far. So I think a lot of the future potential is in subsequent quarters to this one that we are talking about today. Our goal is to stand up 2 to 3 per quarter. That gives us enough room to market, to focus on doing a good job on the launch, get as much distribution as we can at launch. So we've got a lot in the hopper for future quarters. And as we see what happened, a lot of what was driven in this quarter was by new channel launches, headed by Bob Ross, which leveled up our consumption and viewing by more than 1/3 and subsequently revenue is being driven heavily by that. So we think the new channel launches drive significant revenue. And we think that our portfolio, our goal is to get up to 30, we think that's a good steady state. Now we think on most of these major platforms that we're talking about on the linear side, they are going to be steady state between 200 to 300 channels. So our goal is -- it's a big one. That's to hold to maintain 7% to 10% of the dial on OEM devices is, I think, a pretty big goal considering we think this is what eats basic cable in the future. So if you are thinking about the long-term implications of that, that means Cinedigm as a company is trying to control 7% to 10% of the future basic cable dial. It's a heady goal, but one that we're more than capable of achieving given the technology and growth we've -- and partner interest we've seen so far.

And Erick -- if I can interrupt, Erick. Can you just explain -- give further explanation on once we launch a channel, that doesn't mean we are done. Life cycle, Bob Ross, we launched on one distribution outlet, but then we continue over months to distribute it further and that's an ongoing process.

Yes. That's -- and I think that's a critical point. Thanks for that clarification, Gary. Much like in cable distribution, I mentioned earlier during our comments that in cable distribution, it could take 5 to 7 years to get full carriage of a linear channel. We are short-circuiting that to -- our goal is to get full freight distribution within 12 months of launch. So we don't -- it's not like we flip a switch and every channel is live when it goes live. We may launch with 1 partner or 2 partners. Given we have dozens of partners, it takes a little bit of time. There's technical onboarding, there's contract expansions and so forth that -- and other considerations, technical considerations and other things. But it takes several quarters from when a channel is announced. It takes a quarter to 2 quarters to launch it, and then it takes several quarters to fully realize its full potential in terms of revenue generation and footprint.

Our goal is always to launch on as many scaled partners as we can at launch to maximize revenue at launch. But even after launch, demand partners don't light up revenue flow to the channel with the partner. They test it out. They get familiar with the demographics and they incrementally increase their spend with the channel. So that takes 30 to 90 days as well. So from an announcement to a fully realized revenue-generating machine, it could take 12 to 18 months. That doesn't mean it takes 12 to 18 months to generate revenue, but what it does indicate is from when you launch -- much like any new enterprise, from when you launch a channel to when it's throwing off its maximum cash potential, it's going to take several quarters at a minimum, but up to 12 to 18 months. So I think that's an important thing to note. It's dramatically faster than cable, and it's going into a high-growth segment. So that accelerates things. But I think it's important for people to realize and have some understanding of the revenue-generating cycle out of these channels.

At this time, we've reached the end of our question-and-answer session for today. I will now hand the floor back to Chris McGurk for closing remarks.

I just want to thank everyone, again, for joining us on the call today. We appreciate your interest and your support very much. These are exciting times for the company, and we look forward to talking to you again very soon. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.