BBTV Announces Q4 and Full Year 2022 Financial Results

VANCOUVER,BC, March 8, 2023 /PRNewswire/ - BBTV Holdings Inc. (TSX: BBTV) (OTCQX: BBTVF) (the "Company"), a media tech company that uses technology-enabled solutions to help content creators become more successful, today announced financial results for Q4 2022 and for the twelve month period ended on December 31, 2022.

The Management Discussion and Analysis ("MD&A"), along with full financial statements are posted and available on SEDAR at www.sedar.com. All dollar amounts are expressed in thousands of Canadian dollars except where otherwise indicated.

"The fourth quarter saw an acceleration of some important positive key operational and financial trends for the Company", said Shahrzad Rafati, Chairperson and CEO of BBTV. "While total revenues were down 22% year-over-year in Q4 2022, nearly 32% of our traffic came from YouTube Shorts, monetization of which commenced as of February 1^st 2023, and as a result of our content acquisition efforts, we expect our viewership to grow in 2023. The fourth quarter represented our largest revenue stream ever for Plus Solutions, which grew year-over-year in the quarter by 22%. Our pipeline for Content Management solutions for the quarter was the strongest ever."

KB Brinkley, CFO of BBTV commented "Our cost containment efforts have continued to show up in BBTV's Q4 results as illustrated by the sequential decline in operating costs of $1.0 million from Q3 to Q4, while our recent injection of $21.5 million of liquidity from MEP Capital positions us well to fulfill our strategic plans while accelerating our path to profitability and helping to create a buffer against potential macroeconomic risks and uncertainties."

Q4 2022 Financial and Operational Highlights:

• BBTV ended Q4 2022 with $19.5 million in cash and cash equivalents and utilized $11.7 million of its $15 million overdraft facility.
• Use of proceeds for the MEP Capital loan of $21.5 million received subsequent to year-end include repayment and cancellation of the Company's overdraft facility with HSBC. The Company's long-term debt balance was $46.8 million as of December 31, 2022 with most of that balance having a maturity in 2026.
• Management believes that the Company's current cash on hand, the sale of trade receivables pursuant to the receivables purchase agreement, and the proceeds from the recent capital injection should provide sufficient liquidity to meet its working capital requirements for the foreseeable future.
• BBTV's expenses have declined by $1.0 million from Q3 2022 to Q4 2022 primarily due to ongoing cost optimization, including overall headcount decline of 14% implemented in June 2022. The Company expects to continue to find ways to optimize expenses in the coming months.
• Google is now monetizing YouTube Shorts as of February 1, 2023, which will cascade through to BBTV in parallel. Once it becomes monetized across BBTV's entire library, it could represent meaningful incremental re-occurring revenue annually across the Company's Base Solutions at current market rates over time. Google has stated they expect to achieve comparable RPMs as other YouTube content over time.
• Since launching its YouTube Shorts acquisition strategy to further expand the monetization opportunity, BBTV's YouTube Shorts viewership has grown by over 30% quarter-over-quarter, and in the last two quarters alone, the Company increased the percentage of views coming from YouTube Shorts from 20% to 32%.
• Revenues for Plus Solutions now exceeds $50 million on an annualized basis for the first time. During the quarter, revenue growth was driven by Content Management with a 19% increase compared to Q4 of last year, and by an increase in Direct Advertising Sales of approximately 71% compared to the previous year period.
• Gross Margin Excluding PPA Amortization improved from 7.5% to 8.8% year-over-year, and this improving trend is expected to continue as the Company further scales its Plus Solutions revenues which have gross margins three to four times higher than Base Solutions. Plus Solutions now represents 13% of total revenue, and 30-40% of total Adjusted Gross Profit, up from 8% of total revenue and 20-30% of total Adjusted Gross Profit in Q4 2021. Management sees this continued growth as a strong indicator that the Company's investments in Plus Solutions are paying off, and BBTV will continue to invest in growing these revenue streams because they consistently deliver higher gross margins than current Base Solutions revenue.
• Adjusted EBITDA Margins in Q4'22 beat consensus despite the temporary headwinds when it comes to Base Solutions monetization of micro-content like YouTube Shorts and BBTV's continued OPEX investment in accelerating the ramp-up of Plus Solutions.
• Since the acquisition of Outloud Media in October 2022, BBTV has continued success in integrating the asset operationally and as a growing segment of the business.
• BBTV's Content Management offering is proven to build and grow engaged communities for the Company's clients. BBTV is uniquely positioned through its solutions to make large and established consumer brands relevant to the digital generation.

Outlook:

• BBTV's monetization is closely tied to the performance of YouTube. Consumer preference has shifted from long-form content to micro-content across all major platforms, and while YouTube introduced YouTube Shorts a couple of years ago to respond to consumer preferences, its monetization only began subsequent to the end of Q4 2022 on February 1, 2023. This format now represents over 32% of BBTV's viewership (up from 26% in Q3 2022 and 20% in Q2 2022). Once it becomes monetized across the Company's entire library, it could represent significant incremental revenue and gross profit to BBTV depending upon the uptake in monetization rates for YouTube Shorts. Google has stated publicly that it expects YouTube Shorts will have similar RPM rates to long-form video content over time. This also means that the Company expects the views to grow year over year; BBTV's YouTube Shorts revenue opportunity should be meaningful in the long term based on recent viewership and comparable RPMs to long form as monetization rates on Shorts revenue matures.
• Plus Solutions continues to represent significant revenue growth potential for the Company. Led by recent Content Management contract success and a growing overall pipeline for the solutions, the Company expects future growth momentum to be similar to the Company's last few quarters. Additionally, the investment in Direct Advertising Sales is beginning to yield meaningful results.
• Overall, the diversity of revenue streams, combined with improved liquidity and cost optimization programs, have positioned BBTV to weather future macro uncertainties while also accelerating towards sustained profitability.

Q4 2022 Financial Tables:

• Total revenue was down 22% year-over-year to $108 million, which was driven by Views being down 6% and RPMs being down by 21%. Base Solutions revenue was down by 26% while Plus Solutions revenue increased by 22% year-over-year. The revenue decline was primarily due to some softening in advertising spending due to the recessionary environment along with audience behavioural patterns shifting towards micro-content, which impacted RPMs. There is evidence that the pullback in views has subsided in Q4 2022 as illustrated by the fact that, while views were down by 6% year-over-year, the trend has improved since Q2 2022 (-15% in Q2 2022 and -10% in Q3 2022), and views were up 5% sequentially from Q3 2022 to Q4 2022.
• Adjusted Gross Profit¹, which is a non-GAAP financial measure and defined as Gross Profit excluding amortization associated with the purchase price allocation ("PPA") related to the initial public offering, for Q4 2022 was $9.6 million, a 8% decrease in comparison to $10.4 million reported for the same quarter last year due to the decrease in revenue across Base Solutions.
• BBTV Share¹ of revenue, which is a non-GAAP financial measure and defined as revenue less content creator and third-party platform fees, for Q4 2022 was $10.0 million, a 7% decrease compared to $10.8 million reported for Q4 2021.
• Gross Margin Excluding PPA Amortization¹, which is a non-GAAP ratio and defined as Adjusted Gross Profit¹ divided by revenue, was 8.8% in Q4 2022 up from 7.5% in Q4 2021 due to the higher revenue mix of Plus Solutions. Plus Solutions should continue to contribute to further margin expansion in future quarters. Management expects Gross Profit to grow at a faster pace than the Company's top-line revenue.
• Adjusted Gross Margin¹, which is a non-GAAP ratio and defined as Adjusted Gross Profit¹ divided by BBTV Share¹, was 95.7% for Q4 2022, comparable to 95.9% reported for Q4 2021. Adjusted Gross Margin¹ should remain stable and above 90% for the foreseeable future.
• The Net Loss in Q4 2022 was primarily driven by a non-cash goodwill impairment charge of $156.7 million. For accounting purposes, the Company did an annual impairment test as at December 31, 2022, and the $156.7 million impairment charge was recorded primarily in relation to the goodwill realized during the acquisition of BroadbandTV Corp by BBTV Holdings immediately prior to its IPO in 2020.
• The current period decrease in cash outflows from operating activities over Q4 2021 was primarily due to the changes in the timing of receipts or payments of working capital items.

The current period decrease in cash outflows from operating activities over Q3 2022 was primarily due to improved Adjusted EBITDA¹ performance.

Q4 2022 Key Metrics:

• While overall views continued to trend lower, being down approximately 6% year-over-year, data shows that the COVID-related pullback in viewership appears to have subsided and begun to normalize, with views up 5% sequentially from Q3 2022 to Q4 2022, which is more favourable than the sequential seasonal decline typically seen in past years. Views retention remained strong at 98% compared to 98% for Q3 2022 and 92% in fiscal year 2022.
• While RPMs were down 21% year-over-year in Q4 2022, when excluding the monetization gap of YouTube Shorts views, RPMs were only down 7% year-over-year. This highlights that despite the recessionary environment, RPMs have remained relatively stable, particularly given that BBTV's performance is closely tied to YouTube's, which continues to be the most resilient platform for monetization in the creator economy.

Conference Call Details:
Wednesday, March 8, 2023 at 2:15pm Pacific Time / 5:15pm Eastern Time

Participant Information:
Access Code: 441927
United States: 1 844 200 6205
United States (Local): 1 646 904 5544
Canada dial-in number (Toll Free): 1 833 950 0062
Canada dial-in number (Local): 1 226 828 7575
All other locations: +1 929 526 1599
Press *1 to ask a question, *2 to withdraw your question, or *0 for operator assistance.

Please connect at least 15 minutes prior to the conference call.

To coincide with the call, an Investor Highlights presentation will be available at: https://investors.bbtv.com/events-and-presentations/default.aspx

Links to SEDAR filings, conference call recordings and press releases are available on the investor website at: https://investors.bbtv.com/

Telephonic Replay:
Access Code: 129668
US (Local): 1 929 458 6194
US Toll Free: 1 866 813 9403
Canada: 1 226 828 7578
UK (Local):  0204 525 0658
All other locations: +44 204 525 0658
March 8, 2023 20:15 ET - March 22, 2023 23:59 ET

Income Statement:

Non-GAAP Financial Measures and non-GAAP Ratios Reconciliation Tables

Adjusted EBITDA and Adjusted EBITDA Margin

BBTV Share, Adjusted Gross Profit, and Adjusted Gross Margin

BBTV Share and Adjusted Gross Profit are non-GAAP financial measures while Adjusted Gross Margin is a non-GAAP ratio. Further details on these measures are included in the "Key Metrics Definitions" section of this press release.

Free Cash Flow

Free Cash Flow is a non-GAAP financial measure. Further details on this measure is included in the "Key Metrics Definitions" section of this press release.

About BBTV
BBTV is a global media and technology company headquartered in Vancouver, Canada. The Company's mission is to help content creators become more successful. With creators ranging from individuals to global media brands, BBTV provides comprehensive, end-to-end Solutions to increase viewership and drive revenue powered by its innovative technology, while allowing creators to focus on their core competency – content creation. In December 2022, BBTV had the fourth most unique monthly viewers among digital platforms with more than 600 million globally, who consumed more than 30 billion minutes of video content [1]. (www.bbtv.com)

[1] Calculations and classifications made by BBTV based on data from Comscore's "Top 12 Countries = December 2022 comScore Video Metrix Media Trend – Multi-Platform – Top 100 Video Properties Report"; Top 12 countries represent ~50% of world's digital population.

Links to SEDAR filings, conference call recordings and press releases are available on the investor website at: https://investors.bbtv.com/

Key Metrics Definitions

The information presented within this press release includes certain financial measures such as non-GAAP financial measures, non-GAAP ratios, and supplementary financial measures, as well as a non-financial performance measure  (collectively, "Key Metrics") to assist investors in assessing the overall operating performance of the Company. These measures are provided as additional information to complement IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. They are not standardized measures under IFRS and do not have standardized meanings prescribed by IFRS, and might not be comparable to similar financial measures disclosed by other issuers. These Key Metrics are used to provide investors with supplemental information on our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use Key Metrics in the evaluation of issuers. Our management also uses Key Metrics in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.

The numbers for the Company's Key Metrics and related information are calculated using external industry data sources and/or internal company data. These measures may be different from non-GAAP financial measures or ratios or other metrics used by other companies and may not be comparable to similar meanings prescribed by other companies, limiting their usefulness for comparison purposes. Moreover, some of these adjustments or measures are provided for period-over-period comparison purposes, and investors should be cautioned that the effect of the adjustments provided herein is not indicative of the actual effect on the Company's operating results.

Non-GAAP Ratios contained in this press release are:

"Adjusted Gross Margin" means Adjusted Gross Profit divided by BBTV Share; and

"Adjusted EBITDA Margin" means Adjusted EBITDA divided by revenue.

"Gross Margin Excluding PPA Amortization" means Adjusted Gross Profit divided by revenue.

Non-GAAP Financial Measures contained in this press release are:

"Adjusted EBITDA" means net earnings or loss, as applicable, before finance expenses, income tax expense (recovery), amortization and depreciation, share-based compensation, unrealized and realized gains or losses due to foreign exchange, transaction-related costs, and certain other items as set out in the reconciliation table;

"BBTV Share" means revenue less content creator and third-party platform fees;

"Adjusted Gross Profit" means gross profit plus amortization associated with intangible assets acquired as part of the Business Combination Transaction;

"Free Cash Flow" means cash flows from (used in) operating activities less purchases of property and equipment and purchase or development of intangible assets;

See the financial tables above for a reconciliation of the non-GAAP ratios and non-GAAP financial measures.

Supplementary Financial Measures

Supplementary Financial Measures contained in this press release are:

"Advertising Revenue" means the revenue generated from advertising sales from the Company's owned and licensed video on demand content across digital platforms, rights management revenue from advertising sales on video on demand content, and in-app advertising on Mobile Gaming Apps.

"RPMs" or "Revenue per one thousand video Views" means the Advertising Revenues for every thousand Views generated by the Company's owned and licensed digital content. The Company does not provide a reconciliation for RPMs as there are no directly comparable IFRS measures for the components that make up RPMs.

"Gross Margin" means gross profit divided by revenue.

We monitor Advertising Revenue and RPMs to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. These measures are also used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Unless the context otherwise requires, the Company believes that readers should consider the applicable metrics to be indicative of engagement and monetization trends that are key factors that affect the Company's revenue. The Company may or may not update these metrics based on the Company's determination of applicability, circumstance, relevance or other considerations.

Non-Financial Performance Measures

Views are one of BBTV's non-financial performance measures and are defined as the number of views, in billions, of the Company's owned and licensed digital video content on various platforms, notably YouTube, for the stated period. The presentation of Views is reliant on certain third-party industry data and therefore is not comprehensive and may exclude views of the Company's content on certain platforms or in geographies whereby such data sources are unable to or do not track such information. Trends in Views affect revenue and financial results by influencing the Company's volume of salable media inventory, RPMs, as well as its product offerings, expenses and capital expenditures.

While Views are reported using reasonable judgments and estimates of the audience and its engagement with its content for the applicable period of measurement, there are certain challenges and limitations in measuring the usage of its content across its audience. Such challenges and limitations may also affect the Company's understanding of certain details of its business. For example, the methodologies used to measure the Company's Views and RPMs (see "Supplementary Financial Measures" above) may be susceptible to algorithm, calculation or other technical or human errors, and following an acquisition or strategic transaction, certain data may be, among other things, integrated, analyzed and reported differently by the Company than it was by the target or the strategic partner. Moreover, the Company's or its data provider's business intelligence tools may experience glitches or fail on a particular data backup or upload, which could lead to certain customer activity not being properly included in the calculation of Views and RPMs. Although the Company typically attempts to address and correct any such failures and inaccuracies relatively quickly, its reported Views and RPMs are still susceptible to the same and its estimations of such metrics may be lower or higher than the actual numbers.

Forward Looking Statements:

This press release contains "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws (collectively, "forward-looking information"). Forward-looking information is not information about historical facts but instead represents the Company's intentions, beliefs, plans, goals, objectives and strategies regarding future events and results, and includes certain financial outlooks.   Financial outlooks are provided to aid in understanding management's goals and expectations regarding future financial matters, and, for all the reasons set out below, may not be achieved.  Such financial outlooks may not be appropriate for other purposes. Forward-looking information contained in this press release includes statements that as a result of our content acquisition efforts, we expect our viewership to grow in 2023; our recent injection of $21.5 million of liquidity from MEP Capital will allow us to fulfill our strategic plans while accelerating our path to profitability and helping to create a buffer against potential macroeconomic risks and uncertainties; management believes that the Company's current cash on hand, the sale of trade receivables pursuant to the receivables purchase agreement, and the proceeds from the recent capital injection should provide sufficient liquidity to meet its working capital requirements for the foreseeable future; the Company expects to continue to find ways to optimize expenses in the coming months; Google is now monetizing YouTube Shorts as of February 1, 2023, which will cascade through to BBTV in parallel; once YouTube Shorts become monetized across BBTV's entire library, it could represent meaningful incremental and significant re-occurring revenue and gross profit annually across the Company's Base Solutions at current market rates over time, depending upon the uptake in monetization rates for YouTube Shorts; Gross Margin Excluding PPA Amortization improved year-over-year, and this improving trend is expected to continue as the Company further scales its Plus Solutions revenues; BBTV is uniquely positioned through its solutions to make large and established consumer brands relevant to the digital generation;  the Company expects views to grow year over year;  Plus Solutions continues to represent significant revenue growth potential for the Company; BBTV will continue to invest in growing its Plus Solutions revenue streams; led by recent content management contract success and a growing overall pipeline for the solutions, the Company expects future growth momentum to be similar to the Company's last few quarters; revenue opportunity is meaningful based on recent viewership and comparable RPMs to long form; overall, the diversity of revenue streams, combined with improved liquidity and cost optimization programs, have positioned BBTV to weather future macro uncertainties while also accelerating towards sustained profitability; Plus Solutions should continue to contribute to further margin expansion in future quarters; and Management expects Gross Profit to grow at a faster pace than the Company's top-line revenue.  Forward-looking information is necessarily based on a number of estimates and assumptions that the Company considered appropriate and reasonable as of the date such information is given, including but not limited to the assumptions that industry growth trends in views and RPMs will improve and the Company's growth plans will not change in any material respect; its internal financial forecasts and models, including its estimates of costs and revenue, are accurate; the monetization of YouTube Shorts will improve RPMs, views and revenue potential over time, with RPMs for YouTube Shorts having similar RPM rates to long-form video content over time;  the Company will continue to acquire significant content management clients resulting in the  Company's Plus Solutions revenue continuing to grow as expected and to show gross margins 3-4 times higher than its Base Solutions;  RPMs and views will increase; that BBTV will continue to acquire new content partners of the same nature and type and at least at the same rate or better than it has historically; the Company's business will otherwise expand;  the Company will continue to implement cost reductions; our content providers and our strategic and other partners will perform as contractually required; we will be able to seamlessly enter into new markets and diversify to new platforms; we will be able to increase our sales of advertising inventory as planned; we will be able to obtain and maintain financing on acceptable terms on a timely basis; our assumptions regarding foreign exchange rates and other matters are correct; and that there will be no changes in general industry, market and economic conditions adverse to the Company. Forward-looking information is subject to known and unknown risks, uncertainties, and other factors, many of which are beyond the Company's control, that may cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the risk that the Company's assumptions on which its forward-looking information is based may not be accurate; the effect of competition; that the Company has a history of losses and negative cash flow; the Company may not become profitable as anticipated by management or at all; the Company's need for additional capital, which is not assured; the Company's significant reliance on its relationship with YouTube; the impact of the continuing COVID-19 pandemic and of economic uncertainty;  the risks of potential claims of infringement by the Company or its content providers of third party intellectual property and other rights; changes in laws and regulations; future market and other trends may fail to meet or exceed historical trends or current expectations; failure of the Company to realize significant distribution on new platforms or at all; as well as other factors discussed in the Company's Final Long Form Prospectus dated October 22, 2020, its Annual Information Form dated March 29, 2022 and in our MD&A dated March 8, 2023 each filed on sedar at www.sedar.com and in the Company's other filings with the Canadian securities regulatory authorities at www.sedar.com. The Company does not undertake any obligation to update any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

Contacts:

Media Relations
Mark Funston,
Head of Marketing and PR,
778-288-4950 
[email protected]

Investor Relations 
[email protected] Ron Shuttleworth
Partner 
Oak Hill Financial Inc
(647)–500–7371
[email protected]

BBTV-F

SOURCE BBTV Holdings Inc.

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