Chicken Soup for The Soul Entertainment Inc (CSSE) 2021 Q1 法說會逐字稿

Good day, and thank you for standing by, and welcome to the Chicken Soup for the Soul Entertainment First Quarter 2021 Earnings Call. (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, Taylor Krafchik, with Investor Relations.

Thank you, operator, and welcome. With me on the call today are William J. Rouhana, Chairman and Chief Executive Officer; and Chris Mitchell, Chief Financial Officer, to review the first quarter 2021 results as well as provide a business update. Following this discussion, there will be a moderated Q&A session open to the participants on the call.

During this call, management will make forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, intentions and strategies regarding the future. Forward-looking statements are based on management's current expectations and assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from projected results.

Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statements contained in this conference call. Please refer to the cautionary text regarding forward-looking statements contained in the earnings release, which also applies to the content of this call. Additional risk disclosures can be found in the company's filings with the Securities and Exchange Commission.

On today's call, management will make comments on certain GAAP-based and non-GAAP pro forma financial information. The non-GAAP financial measure the company uses is adjusted EBITDA. Management believes that adjusted EBITDA provides useful information and that it excludes amounts that are not indicative of the company's core operating results and ongoing operations and provides a more consistent basis for comparison between periods. The earnings release contains a reconciliation of adjusted EBITDA to net income or loss, which is most directly comparable to the GAAP measure.

For further information regarding the company's historical financial performance, we refer you to our filings with the SEC, including our report on Form 10-Q, for the quarter ended March 31, 2021, which was filed today.

I would now like to turn the call over to William Rouhana, Chairman and CEO. Bill, please go ahead.

Thanks, Taylor, and thank you all for joining us today. We have had a lot of good news to share with you recently, and I think lots more today. So let me start by recapping some of what we've gotten done over the last 5 months.

We reported results for 2020 full year that were well ahead of expectations and showed tremendous growth. We closed the largest content deal in our company's history with Sonar, adding IP rights to 372 television series, 1,825 episodes of TV and over 700 films to our already robust library. We presented brand-new original and exclusive content at the NewFronts, which includes numerous exciting and star-studded titles like Going From Broke Season 2, which by the way, is off to a good start.

We announced a new television studio called Halcyon to be led by David Ellender, which will help grow our pipeline of high-quality and owned content. We announced our new streaming -- our new AVOD streaming service, Chicken Soup for the Soul. And we took important steps to enhance and grow the distribution of our streaming services, unveiled innovative new ad experiences. And we'll be delivering a new and compelling product and user experience, both on television and mobile devices. Quite a bit has been accomplished.

But in addition to all of those key 2021 developments, I also want to remind you that in December 2020, we gained 100% ownership and control of Crackle Plus while also strengthening our relationship with Sony Pictures Television. I raised this point because the results we're reporting today reflect what is now a fully integrated consolidated business, with a strong content library and production business, operating in service through our growing Crackle Plus streaming services. Full ownership of our assets is beginning to create organizational efficiencies and EBITDA margin expansion that will drive the profitable future growth we're anticipating.

Because we are now fully integrated, you may have noticed in our earnings release that our financial discussion is now focused on total company net revenue as we had promised we would do. We'll find more color around the primary drivers of our consolidated business in our filings. But suffice it to say, our integrated model is supporting our objective of driving down our cost of revenue and other costs while positioning us for profitable growth. In addition, it's allowing more flexibility in growing our business. Chris will add more detail to all of this in his comments.

For the first quarter, we reported net revenue of $23.5 million or 75% growth on a year-over-year basis. And adjusted EBITDA came in at $4.6 million, up 130% year-over-year for the first quarter. We saw momentum across our business. We virtually sold out inventory in the quarter. And we're making great progress in delivering innovative ad formats to our viewers, including presentation credits, sponsorships and brand integrations in addition to the Jumbotron and FreeView ads we've talked about before.

These efforts continue to gain traction as we move through Q2. And combined with the great content we have coming, the new platform rollout later this quarter and our new Chicken Soup for the Soul streaming service launch, the stage is really set to build tremendous momentum throughout the year.

So there are a couple of key content performers in Q1, including these TVOD standouts. Willy's Wonderland, which outperformed our already high expectations, was the #1 horror movie on Amazon for much of the quarter and has a Rotten Tomato audience score of 74%. I always smile at that movie. It's the most amazing combination of Nicolas Cage and possessed animatronic beings.

Trigger Point, a film starring Barry Pepper, reached #7 on iTunes last month. Trigger Point is an exciting action film that follows Nicolas Shaw, a retired U.S. special operative, who is dragged back into the darkest shadows of the spy world when he's enlisted by his former partner to help find a missing colleague. Nicolas Shaw's skills will be put to the ultimate test. It's a good movie.

Senior Moment, starring William Shatner, Jean Smart and Christopher Lloyd received rave reviews and currently has an 88% audience score on Rotten Tomatoes. Senior Moment is a film about retired NASA test pilot, who loses his license after drag racing his vintage convertible around Palm Springs, forcing him to take public transportation, where he meets Caroline and learns to navigate love and life again. It's really good. I watched it last Saturday. It's a fun, fun, enjoyable movie.

As I've said, building the best AVOD has 3 parts: excellent programming and content; technology that delivers a seamless viewer experience; and data that enhances both viewer and advertiser value.

So let's turn now to our recent announcements and how they fit into our strategy, including Sonar, Halcyon and the Chicken Soup for the Soul AVOD. Content first. Sonar brings a critical mass of proven high-quality content that not only fits our desired audiences but has also provided additional international opportunities, and you'll see that in the Q1 numbers that international is starting to really matter. It has also positioned us to launch our new AVOD streaming service. The Sonar content adds a strong pipeline of high-potential television series and proven executive talent. As for its existing content, we will begin migrating the fully owned IP we acquired from the content's current platform homes and onto our Crackle Plus streaming services when the deal closes, which should happen very soon.

Last week, we announced the formation of Halcyon Television, a high-end premium scripted television studio that will be led by David Ellender, a veteran media executive, who ran Fremantle for 13 years. Halcyon has a robust drama development pipeline of more than 20 projects, embracing library-based and original IP, sourced in the U.S. and Europe. It will focus on development, financing and production in the U.S. as well as forging creative partnerships abroad.

The formation of Halcyon will help accelerate our strategy by expanding our original content development pipeline with high-end content will increase our IP rights ownership and provide a faster path to growing our international television production, distribution and network activities. As these efforts accelerate, we also continue to execute on our existing content development activities.

We introduced a new slate of original programming at the NewFronts last week that we're very excited about, including Promiseland and the second season of our big hit, Going From Broke. Promiseland is an all-access coming of age story of the 2020 NBA rookie sensation, Ja Morant, that follows him from his NBA debut all the way through his crowning as rookie of the year and shares the amazing experiences of his debut season. This is sponsored and presented by Eli Lilly.

Going From Broke Season 2, from executive producer, Ashton Kutcher, will premier on Thursday, May 20, and includes host Dan Rosensweig, CEO of Chegg, along with cohost Tonya Rapley, entrepreneur, as they help people face extreme debt -- who have faced extreme debt, overcome crippling financial struggles to become CEOs of their own line. As we announced this week, we've lined up a number of premier brand integration partners for Season 2, led by Airbnb. And of course, we're thrilled with this development.

But I also want to say, this is not a one-off. As we elevate the quality and profile of our original content, we're having more conversations with leading brands about sponsorship and integration models that drive compelling reach opportunities for the brands, new revenue and production costs to offset opportunities for us and a better experience for the viewer. In fact, we've struck 7 such partnership deals in the first quarter. And you'll see those reflected in revenue to come.

The minisodes that are currently running ahead of the official debut of Season 2 of Going From Broke are presented by TracFone. So we're pleased with the progress we've made with the quality, performance and breadth of our content in such a short period of time. Our further integrated content acquisition, production and distribution capabilities, including our streaming offerings, paired with our enormous high-quality library, put us in a new league of independent media companies, with a growing array of domestic capabilities.

Now it's time to start focusing on our international opportunities as well. We're excited to announce -- we were excited to announce last week the upcoming launch of the new Chicken Soup for the Soul AVOD streaming network. This new streaming service will give Crackle Plus 3 premier AVOD brands, Crackle, Popcornflix and now Chicken Soup for the Soul.

The new service will reflect our brand mission, what it's been since day 1, to change the world one story at a time. And it will include a large selection of scripted movies and TV shows, anchored in part by the award-winning library from Sonar, with a focus around inspiring, uplifting and informative content. The streaming service will also carry unscripted programming chronically in the lives of both history makers and everyday heroes as well as lifestyle programming, showcasing the best home, food, DIY, style and travel experts.

It's interesting. Many companies have been coming out of the woodwork to be a part of this launch.

As we embark on this new initiative, It's important to emphasize the global power of the Chicken Soup for the Soul brand. So all of you folks who have been asking why we haven't changed the company name, I hope this helps to begin to answer that question. We have a multiyear lead in programming in the AVOD space, but we also have been building the Crackle Plus lineup. And with the lineup in place, we're focused on driving viewership by continuing to add consumer touch points and launching our new tech platform and consumer interface.

We have launched 6 new customer touch points in the quarter. In the aggregate, they have added 1.7 million monthly active viewers, which is an average of 280,000 each, exceeding our expectations, especially when you consider a number of them were launched at the end of the quarter.

We're launching our new platform this summer in partnership with VIZIO, with whom we've partnered on our remote control button, and we think that's a game changer. There are a few other key components to these changes. We've redesigned our connected TV apps with sleek new user interface, display changes that make it easier to find something to watch, better search and recommendation algorithms, more informative title display pages and a new linear experience right inside the app. It really looks great. We introduced it at NewFronts. And if you haven't seen it, I suggest to take a look at that presentation.

With our mobile apps, we're introducing a new redesign, where the app will look like and serve as a remote control for all connected devices in your home. It will include a new feed on the homepage that suggests new and relevant content to watch, helping consumers with their viewing decisions as well as a new super cast feature that allows users to browse for content on their smartphones and cast it to any connected device in their home. This is a game changer.

Behind the scenes, we're moving our ads from the client side to the server side, which will make for better ad experience by having ads stitched directly into video that is being streamed at the server and not at the client. Additionally, we're increasing our user sign-on incentives, including a new loyalty program and offering recommendations across our 3 streaming services, Crackle, Popcornflix and Chicken Soup for the Soul, will all work together on viewers behalf.

All this work is going to deliver a completely new and much more enjoyable experience for our users. As we execute on these initiatives, an underlying focus is around making more and better use of data. Understanding our viewers enables us to leverage the tech investments we've made to improve experience both for people coming to Crackle Plus and marketers seeking to reach them.

This, in turn, supports attractive CPMs for our networks and further differentiates us in the streaming landscape. A few key examples of our efforts include, home page optimization and content targeting, which will be part of our enhanced technology platform, new and unique ad experiences like Jumbotron and FreeView, which are -- which we've discussed previously and more targeted relevant engaging ad formats.

Among the many press releases we issued over the past several weeks, there's one I don't want to lose sight of. Our agreement to use TransUnion's best-in-class identity and audience solutions will allow Crackle Plus advertisers to access robust audience insights about the demographics, income and special interest of our viewers. This agreement is an example of how we plan to gain better access and make better use of data to drive success for our advertisers and relevance for our viewers.

In closing, we expect 2021 to be a year of tremendous growth. On our year-end conference call, we updated our revenue targets to $100 million. On our Sonar conference call, we suggested that, that was too low and that should be raised by single-digit millions. And now we have incremental confidence that we will even beat that further updated target by at least $5 million.

We're ready to take our business to another level as we continue to build the best AVOD. And this is just the beginning of that process. We'd like to thank everyone for joining us on the call today. We couldn't be more excited for what's ahead. We appreciate your support and our efforts to build the best streaming service in the AVOD space.

And with that said, I'd like to turn it over to Chris to give you some more details on the financials. Chris?

Thank you, Bill. As you've already heard our operating highlights, I will focus on a review of our financial results and balance sheet. And as Bill discussed, Sony converted its ownership stake in Crackle Plus to an ownership stake in Chicken Soup for the Soul, strengthening our relationship with Sony and giving us 100% ownership of Crackle Plus.

With full ownership, we're no longer required to report Crackle Plus separately from the rest of our results to Sony, which has allowed us to further integrate Crackle Plus and more efficiently manage the business from a consolidated perspective. At the same time, the integration allows us to achieve synergies and realize savings and sharing costs in areas such as content operations and marketing, all of which leads to profitable growth.

With the business now managed as one holistic consolidated operation, we're reporting our financials on a consolidated basis, as we said in our last conference call. This is the way I will discuss our financial results today. However, I would note that we have added a table in our MD&A section and our revenue footnote section of the 10-Q that breaks down our consolidated net revenue by revenue source, which we believe could be helpful for investors. With that, our financial results for our first quarter 2021 reflects the further progress we've made in executing our growth strategies, which, in turn, enabled us to build on the momentum we saw coming out of 2020.

Starting first with the results for the first quarter. We reported net revenue of $23.2 million compared to $20.2 million in the fourth quarter of 2020, which was an increase of nearly 15% sequentially, even though the fourth quarter is typically the strongest quarter of the year due to seasonality. This compares to $13.2 million in the first quarter of the prior year, for an increase of $10 million or roughly 75% year-over-year. This year-over-year increase in net revenue was primarily driven by a $7.9 million increase in international revenues resulting from licensing of international rights to international distribution partners for several titles, including Going From Broke, Heroes of Lucha Libre and On Pointe.

The increase also includes a $4.2 million increase in TVOD, an Internet streaming revenue that was primarily driven by the strong performance of Willy's Wonderland Skyfire, and Senior Moment as well as an increase in AVOD-related direct sales. These increases were partially offset by lingering COVID-19-related softness in the areas of video distribution and theatrical revenues as well as the absence of PS Vue and PS Vue-related revenue this year.

By the end of the first quarter of 2021, our streaming services had substantially rebounded to pre-pandemic levels, our distribution pipeline remains strong and the outlook to resume production improved, position us well for the remainder of the year. As we've noted on prior calls, Q1 2021 will be the last quarter in which our year-over-year comparisons are distorted due to having PS Vue in our prior year results.

We sold virtually all of our advertising inventory again in Q1 as campaigns from larger advertisers remained strong and viewers remained engaged. Further, our CPMs also continued to improve driven by our strong content offerings and coupled with innovation and enhancements we have made to the overall ad experience. We expect to see continued momentum in this area throughout the remainder of the year.

Gross profit for the first quarter 2021 was $7.0 million or 30% of net revenue compared to $5.9 million in the fourth quarter of 2020 or 28.5% of net revenue. This compares to $3.3 million in the same period prior year or 25.2% of net revenue. Excluding noncash film library amortization expense, gross profit in the first quarter would have been $13.9 million or 60% of total revenue as compared to $8.2 million or 62% of total net revenue in the prior year period.

Operating loss for the first quarter 2020 was $5.8 million compared to an operating loss of $10 million in the year ago period.

Our adjusted EBITDA for the first quarter was $4.6 million compared to $2 million in the same period last year, a year-over-year increase of roughly 124%.

Looking at our balance sheet and liquidity position. As of March 31, 2021, the company had cash and cash equivalents of $24.6 million compared to $14.7 million at the end of the fourth quarter 2020 and $7.1 million at the end of the year ago period. The first quarter cash balance reflects our strengthened balance sheet and enhanced liquidity position following the closing of our common stock offering in January 2021.

In closing, we're pleased with the continued momentum we saw in our business in the first quarter and excited about the opportunities we see to build on that momentum as the year unfolds. We've accomplished a tremendous amount in a relatively short period of time, positioning us really well to evolve the business and further accelerate growth in coming months.

To that end, we're particularly focused on growing viewership with initiatives aimed at enhancing the user experience and platform, growing distribution of our streaming services and pursuing larger and more innovative marketing partnerships.

With all of these initiatives in place and a significantly more robust content pipeline, we are confident in the growth that lies ahead. And as we work to capture that growth, we will continue to take advantage of our ability to integrate all aspects of our business and to manage expenses and risk in a disciplined way, with an eye on improving cash flow and enhancing flexibility of the balance sheet.

Thank you for joining. I'll now turn it back over to Bill.

Thanks, Chris. Operator, we'll take questions now.

(Operator Instructions) First question comes from Tom Forte with D.A. Davidson.

So first off, Bill, congrats on the quarter. So one question, one follow-up. (technical difficulty) state of reopening in various parts of the U.S. I was curious to find out how your local ad sales are doing right now.

They're doing -- first of all, Tom, thank you. Local ad sales are doing well. I mean there is generally an upbeat tempo in that part of the business as well. That lagged the international -- I mean the national direct sales for a while, but I think it's coming back. So the reopening is starting to have an impact.

Great. And then for my follow-up question, talk about fully flesh out your strategy on having multiple (technical difficulty) . So today, the Chicken Soup for the Soul, Crackle and Popcornflix, fully fleshed out. Do you envision having more? And then from (technical difficulty) point, to the extent that you have these specific AVODs, can you quantify the potential accretion of CPM rates? Meaning does this give you the ability (technical difficulty) more than 10% ?

So that was a 2-part question, Tom. So let's take -- let try to take it one part at a time. Do I anticipate having more? Maybe, but that is really -- that really depends on a few different issues. But for now, the focus is on really driving these 3. We think these 3 are a complete package with a male-oriented Popcornflix, a female-oriented Chicken Soup for the Soul network, a general presentation network. We think that a couple of these networks, if not all 3 of them, can travel the globe. We see them as really great opportunities, all of them. We think we've got an unusual amount of content that relates to each of them.

So we feel great about the portfolio of networks that we've now put on the field. And we get access to other people's networks in different ways, sometimes through ad representation agreements and otherwise as a way of having an even more diversified group of growing networks that we take a share of. But for now, the focus is on these 3. And it will remain there, absent something that causes me to make a decision that's different, which would be an opportunity. So that's part one.

Part two, the CPM growth, there's already too much demand. We're not the only ones seeing this right now as the ad agencies and advertisers are moving much more rapidly now towards OTT from broadcast and cable. And we're -- what we talked about today with those 7 or 8 different presentation-type sponsorships that I talked about, those are way more than $10 more, Tom, than what we normally get because those presentation credits come with a fixed kind of charge that -- if you're going to present an entire series or an entire tray or any show on our network, you're asking for special treatment, and that requires special payment. I don't know how else to put that.

And as we've been growing that part of the business, in addition to the normal ads you see, we're growing revenue by monetizing our viewership in a way that's much less intrusive presented by, as you'll see in Promiseland or as you can see on Going From Broke Season 2, sponsorship is a very different thing for a viewer. It's great for the advertisers. They get credit for delivering an ad-free experience to the viewer. But it's great for both parties and great for us. It's more profitable.

So I've been saying for a while, as you know, that we're going to continue to innovate in the way we bring advertising to the network. This is just another example of it, and there's much more of this coming. But each of these ways we innovate are going to take into account the fact that we want to give more value to our advertisers and make it a better experience for our viewers. So this -- it's not about a 10% increase. It's about a seismic change in the way you think about advertising and monetize viewership. It's very exciting.

Our next question comes from Dan Kurnos with The Benchmark Company.

Yes. Bill, probably the most complete quarter you've put together to date. It looks like it's all starting to come together, coming up aces for you guys. I guess the question that I have for you first on international since we didn't really get to talk about that too much on the Sonar call, I kind of left it open-ended and didn't really come up. It was just can you talk about monetization mechanism, how quickly you think you can pursue that opportunity? And what you think kind of the initial TAM is out of the gate?

Yes. These are good questions, Dan. And by the way, thank you for that comment. You've been around with us from the very beginning. So you've seen the history of the company. And it is the most complete quarter we've ever put together. It's an astounding quarter. But there's going to be much better through the rest of the year. This is just the beginning of what's going to be a great year for us.

The international opportunity is really developing much more quickly than I had anticipated. And I think part of it is a direct result of the launch of the Chicken Soup for the Soul AVOD. We have been hearing from quite a few companies -- quite a few media companies around the world about rolling that network out in their markets. I think the ideal way for us to do an international business is in partnership, I think probably country by country with major media companies, especially broadcasters who are looking to change the way -- to basically give their businesses a longer life as they try to deal with the reality of their -- in their own markets of people migrating.

We can deliver it to an international partner basically AVOD in a box. Here, you provide us the marketing and the sales, use your advertising sales force, use your own existing broadcast network to market the existence of these AVOD channels and drive people to a business you own a piece of. That's the ideal mechanism for going in international from my point of view. If we can make that work, Dan, then we can accelerate this very, very rapidly because what we have to do on-site is reduced to the minimum amount of operational activity.

And I think this is a model that's been used by a number of very big media companies. In fact, one of the A&E, I believe, really kind of rolled out their entire international strategy on this basis. And that, as we all know, is a huge success. I think that's replicable in AVOD. Probably, we were the fastest because what's the key element in all of this? Content. You've got to have the content. We've got the check, we've got the content, we're going to have the data.

Marketing and sales are local activities, and that's where we need -- that's where we'll need help. Now that's one way this may go. I don't expect us to launch our own units in various countries without partners. But there's also a possibility we might do a much bigger deal with a partner across the world.

But the international opportunity is real. I'm not going to get into any more detail in that for the moment, Dan, because I believe this is something that we'll be able to talk about in future quarters with much more detail. But it's a real opportunity. It's coming much faster than I anticipated, and we're ready for it, which is a great news because we are done with the basics here in the U.S. of the new platform, access to data. And of course, we put together a 4-year lead in content in the AVOD space.

Got it. That's helpful, Bill. I look forward to hearing more on that front. And then, look, you made a point to really call out advances in sponsorship. Obviously, people are starting to take notice that you're a critical mass in content. We're now through -- or into the NewFronts, we've got the upfronts. We've got 18 other fronts, it seems like this year.

But the conversation you're having with advertisers now, can you just talk about kind of the tenor of those conversations and whether you're getting either longer commitments? I know advertisers are reluctant to commit anything, they can't cancel tomorrow right now. But longer commitments, bigger commitments, kind of brand expansion, just help us get a little bit more granularity on what seems like a positively developing story.

Yes. I think The way to think about this is to go back to that point I made about the nature of advertising on AVOD beginning to change. These presentation credits are just the beginning of an evolution, I think, in some ways back to the future really and back to hallmark hall of fame type stuff, where advertisers are going to want to take credit for delivering great content but in an even better way for AVOD viewers.

And I see that being expanding into bigger relationships with advertisers to sponsor entire, I want to say, subchannels or trays on our networks because they know that getting access to this inventory is going to be very competitive. First of all, in a world where as we know, 50% of the hours that are being streamed are being streamed on SVODs, where there's no ad opportunity at all. So you've got 50% less of what used to be a bigger pie that you've got to get access to if you're an advertiser. And you want to do it in a way that's value-add to the viewer so that they like you more.

I think you're going to see a number of these presentation-type relationships grow in scale and scope. And that's what I think is another part of the very great part about OTT. We can do things very differently than they can on broadcast networks. And I see this -- there's an increasing amount of interest in that among advertisers, having a longer term relationship against the whole category of content, which is relevant to their world. And we're pushing that in earnest.

Got you. And if I could squeeze just one more in. I know it's been a little bit likely, but just on the COGS comment that you made, Bill. I think it's really important. Roku brought up expanded gross margins at the Roku Channel just based on the fact that they're seeing a lot more people willing to sell content rather outright rather than go rev share. I think that's kind of a critical component. And if we pull out the nonsense amortization in your COGS, it was a really healthy margin again in Q1.

So how do we think about how that kind of trends over time? And how much more does that -- how much more leverage do you think you have in that line? Because we're just trying to get a sense of the sort of underlying profitability here.

I think we're not done by any stretch of the imagination. The drivers have always been the same as we've talked about this. One is the original and exclusive content, which continues to perform really well and grows an overall amount; and the other is owned library. And I keep coming back to 0 is a great cost of revenue. When you own IP, your cost of revenue is -- you own instead of rent, and it's a much better model for us. We're going to continue to grow the owned IP portion of what we present. And that will continue to drive margins in the direction we want them to be driven in.

And I think the other thing to be aware of, and Chris made this point in his speech. The integration now that we're able to drive across our entire business, we're sharing content, ops, costs. We're sharing marketing costs now across the business. We don't have to keep the pristine separation we had when we had a potential 49% partner in Crackle Plus that required us to track things in a very -- in a not integrated way.

But the other thing about that to understand is we are able to integrate the revenue growth as well. And so you're going to see in some of the future quarters that the sponsorships that there are inside of these reductions are driven exactly by the fact that we have the Crackle Plus networks. And that combination is going to allow us to increase gross margin and grow revenue at the same time.

So this whole thing is coming together the way it's supposed to now. All parts of this plan are starting to get knitted together in a way that's driving margin, allowing us to reduce cost because we were able to keep certain costs lower because we've been able to integrate the various parts of the business into one. And that's contributed to a much higher EBITDA than people expected in this quarter. And frankly, as we -- than we expected, the business is working extremely well. So thanks for asking that question.

Our next question comes from Austin Moldow with Canaccord.

The first one is on the Chicken Soup for the Soul network. When does that launch? And how many distribution platforms were beyond? And can you talk more generally about go-to-market strategy there and, I guess, how you'll be leveraging the publishing entity to ramp viewers and such?

First of all, Austin, welcome. We saw your research report this morning. And we appreciate your involvement in our work, in our effort to make this a bigger company. And so thank you for that.

The Chicken Soup for the Soul network has just got so many different things going on at the same time. In terms of the launch strategy, it's pretty simple. We're going to start with a few linear channels and -- particularly on VIZIO, where, as you know, we've got our Crackle button coming, but that Crackle button is going to lead you to a world which will include Crackle and Popcornflix and the Chicken Soup for the Soul networks ultimately.

And we'll start with some linear channels to start to get people used to the content. We'll move to -- in addition to those linear channels to AVOD towards the end of the year, and then it will go across all of the 37 platforms that we currently have Crackle on. And we're pushing to put Popcornflix on. It will be available on all of those platforms, which, of course, means that we're going to be telling you at some point, we're going to more than 61 because you guys can multiply 37 times 3, I know that. So we'll be expanding our consumer touch points over time. So in terms of reach and launch, that's the plan.

In terms of what it means in terms of opportunity, the Chicken Soup for the Soul brand has been around for -- since 1993. We've sold 1 billion books around the world, hundreds of millions in the United States. There are 40 million households in the U.S. which have a Chicken Soup for the Soul book on a book shelf. Probably most of you have one in your house. You may or may not know, but you do. The books continue to sell at a great pace, and it's a loved brand, a trusted brand.

What that means is advertisers trust us, want to be involved with us. They like our programming. And that's really -- that makes them great allies in the way we roll out the business. And much of what I talked about in the last answer, about individual subsets of our networks being susceptible to presentation type credits, it doesn't take a lot of imagination to think, well, if we're going to have a food and a travel and a home section on each of the Chicken Soup for the Soul AVOD networks, that there's a natural sponsorship opportunity for that entire line of content for different major companies.

So we've got an opportunity here, which I believe is how this will come out, to really engage in meaningful long-term relationships with sponsors that are very different than the up-and-down nature of the spot and dot business that advertisers -- most people think of when they think about the advertising-driven content businesses. So there's really a big opportunity to advance this model and do it in a different way, Austin. So we're excited about it.

Got it. Okay. Can you speak to the trajectories of user growth and maybe time spent across Crackle Plus?

Yes. I'd say that user growth is good but almost irrelevant. I've been arguing for a couple of years, that's not really the primary metric. I did want everybody to understand that the strategy of rolling out these new touch points is actually coming out the way we thought it would. In fact, we said it was going to be 200,000 to 500,000 new monthly active viewers. The range is actually quite a bit broader than that. And some of the more developed ones have hit over 1 million monthly active viewers. The less developed ones that are only open a couple of weeks are much lower numbers. But on average, it was 280,000 over the first 6 of the quarter.

But the time spend is a critical, critical thing because it's really -- you need more time to have more ad impressions. And you do need to sell ad impressions despite being -- we're hoping that we'll be selling more presentations than just ad impressions in the future. And there, we were weak because our tech wasn't as good as it needed to be. Our recommendation engine wasn't as good as it needed to be. And it's -- all of that's about to change with our new tech platform, which I think you may have seen at the NewFronts. If not, you should take a look at that video. And that's really where we expect to make the big improvements over the remainder of the year by very much improving the amount of time spent overall. And really, that's a key thing for us to accomplish this year. That's the best way for us to grow viewership in the way I mean that phrase. So yes -- thanks, Austin.

Got you. And yes, one last quick one. Of the library, what portion is owned content?

The -- which portion is owned? Is that what you asked me?

Yes. I guess of the available titles.

Okay. Well, 2,000 movies, 2,000 TV episodes out of 11,000 total of available movies and 22,000 total available TV episodes, that's the way to look at it.

Our next question comes from Brian Kinstlinger with Alliance Global.

I'll only ask 1 question. It might be 2 parts so we can get some other...

Brian...

Yes. Hello. Can you hear me?

You were on mute. You were on mute.

We can hear you, Brian.

We couldn't hear you. Thank you, Brian.

Okay. I'm new to iPhone. I'm kidding. I'm only going to ask one question. You're constantly adding new original exclusive titles. You've acquired a huge amount of content recently. Where are you? And I'm sure the technology platform you're putting in is going to help this. But where are you in the evolution to optimizing owned content versus license content, especially through recommendations? And where is that long-term mix? And where are you right now?

Yes. So we're at the very beginning of the process, which is why the answer to Dan's question about margin at 60%, is it going to get better? The answer is yes.

We're at the very beginning, Brian. We just acquired the second half of our own content, right? Actually, we haven't even finished. We'll close the Sonar deal, as I said, very soon. And then we will have doubled the amount of owned or long-term distributed content. And that, of course, will dramatically affect our ability to lower cost of revenue.

But we're not done with either the production or the acquisition on a daily basis of film and TV series nor are we done with acquiring libraries because we are the most logical acquirer of any library that has AVOD views. We can continue to put that -- we can continue to make that much more valuable to us.

And further, as you know, we're targeting one new original or exclusive piece of content every week beginning in 2022, which means that we will have ramped up both the distribution side from 10 to 20 movies, the production side with partners to another 20 movies -- another 20 series. And we'll acquire 10-or-so additional things on an ad hoc basis over the course of the year.

So we're going to continue to ramp up our new and original content that's coming through. We're going to continue to ramp up library ownership. It's the very beginning of that exercise, and it will drive cost of revenue down even further.

Great. Great results.

Thanks.

I think, operator, this is going to be our last question. So...

Our last question will be from Jason Kreyer with Craig-Hallum.

So Bill, we've spent the last few quarters talking about this content pipeline that you build up and obviously starting to see that in the financials. It's just more on the production and distribution side. At what point does that pipeline of titles start to hit Crackle Plus?

And then I know you don't like to comment on the viewership trends of things, but how does that impact your business when all these titles move over to Crackle? I mean what are the metrics that you're looking for to kind of gain that mind share?

So you have made this point, Jason, I mean, very well over the last few months as I read your work. There has been -- there is this -- the content is kind of like a leading indicator, as you've sort of pointed out. And as it comes on at an increasing level, we're going to have increasing viewership just because of the quality of the content continuing to improve.

And there is a pipeline now that's pretty inevitable. I don't know exactly how many new movies we're bringing on. I think it was something like 9 or 10 that we announced in the NewFronts and another dozen or so series that we announced. But that's not really the end of the process. That's the beginning of it.

We're already seeing lots of new content come on, like Going From Broke Season 2, which, by the way, was the #4 show on the network when I looked yesterday. By the way, it hasn't premiered. What's up right now are these 10 minisodes that are presented by TracPhone or SmartTrack or somebody. And those minisodes are sort of like a preliminary to the real premier of the season, which is May 20.

That kind of content is going to continue to come at a pace that drives viewership, just like Going From Broke Season 1 did. And it's going to be supplemented by the stuff that's in the pipeline, things like The Outpost and Willy's, that will be here next year. And that combination is going to -- I think, be a very powerful driver of additional viewership.

I also think, though, that the new tech and the recommendation engine and the incorporation of data will also have a very big impact on time, on site. And -- but the nice thing is we're coming from a great place. We're starting from a base that is really good, a solid base now, far -- I think, far in excess of what people really expected. And we're going to go up from here.

So there's every reason to be very excited about where we are and our ability to grow this. We are in a unique spot. I think we can -- it's nice to see our kind of competitors now admitting that you do need original and exclusive content in the AVOD business. We've only been saying that for 4 years all by ourselves, but it is clearly right. It has a big impact on the business. It is one of the key elements of that 3-legged stool I talked about. So it's -- go ahead. You got one more.

Well, I mean, just correct me if I'm wrong, but we've been talking about this mix shift towards profitability. And then as some of these titles move over to Crackle Plus, I would think that, that's another positive mix shift for profitability. I don't believe there's a lot of cost of revenue attached to those titles once they hit Crackle. Am I incorrect there?

No. You're absolutely right. It's another good driver of this cost of revenue down, gross margin up, EBITDA up. So grow viewership, drive cost revenue down. That's what we said this year was about. We've done both already in the first quarter, I think, far in excess of what people would have expected. I see it continuing over the rest of the year. Growing viewership at an accelerating pace, driving cost of revenue down, it means a bigger and much more profitable business.

And hopefully, we'll be able to continue to tell you each time we get on one of these calls that the future we see is even brighter than the future we saw before, as we've done the last 3 times we've done this. So I think that's where we are.

Well, thank you, everybody, for joining us today. As we -- as you know, we're very excited about our business. I think you can probably tell that by these comments. And we look forward to giving you more information as time goes on. Thanks for joining us.

Thank you. And this concludes today's conference call. Thank you for your participation, and you may now disconnect.