Clips & Trailers Outlook FY15-19 June 2013 DRAFT EXECUTIVE - - PowerPoint PPT Presentation

Clips & Trailers Outlook FY15-19

June 2013 DRAFT

Business Recap

• The Crackle team continues to

manage and grow Clips & Trailers content claiming business on YouTube

• Expected to generate ~$1M EBIT

per year, growing 6% y-o-y through FY2019

• YouTube partnership continues to

be rocky, requiring us to plan around a 55/45 rev share, rather than the more favorable 70/30 currently in place

• One Full Time Coordinator

(existing resource)

• Ad Ops Head Starting FY2014

(to enable manual operations on Provider channels)

EXECUTIVE SUMMARY

Worldwide US 220M Views 46M Views 90M Uniques 18M Uniques 12M Hours Viewed 2.8M Hours Viewed Worldwide US

Comscore not yet integrated WW*

23M Views 9.1M Uniques 1M Hours Viewed

Current Scale

March 2013 Comscore* and YouTube Reported Performance on both Provider Channels and UGC

*comScore reporting is in still in early phase of integration, therefore remains a work-in-progress to capture total addressable reach and match to YouTube reporting

CURRENT BUDGET AND MRP EBIT TARGETS

Steady Gross Revenue and EBIT growth anticipated in base plan:

• Assumes YouTube deal continues through FY2019 at 55/45 (upside if long term 70/30 agreement is reached).
• Flat reseller (sold by YouTube) fill rate and CPM
• One additional ad operations head is currently in plan to start FY2014, creating lift in Provider Channel inventory

(increased CPM and fill); although limited scale due to manual ad operations and no access to UGC

$2.3 $2.4 $2.6 $2.8 $2.9 $1.0 $1.1 $1.2 $1.3 $1.4 FY15 FY16 FY17 FY18 FY19 Gross Revenue (millions) EBIT (millions)

13 Million Worldwide Unique Viewers (Monthly)

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PROVIDER CHANNELS GENERATE A GLOBAL AUDIENCE

2015 FORECASTED MONTHLY AVERAGE UNIQUE VIEWERS IN PROVIDER CHANNELS

Provider Channel Uniques (mm)

6.3

3.6 2.1 0.5 0.3 0.3 ROW US LATAM UK CA AU

Provider Channels are channels operated by SPE and monetized via the Crackle CMS

• tools. US Theatrical Marketing channels drive

the bulk of Provider Channel usage. Less than 5% of usage originates via SPT Networks Channels.

Note: Assumes historical conversation rates between monthly views and monthly unique visitors to projected 2015 data

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CONTENT ID (UGC) CONTRIBUTES MASSIVE AUDIENCE

2015 FORECASTED MONTHLY AVERAGE UNIQUE VIEWERS IN PROVIDER AND UGC CHANNELS

Provider Channel Uniques (mm) UGC Channel Uniques (mm)

95 Million Worldwide Unique Viewers (Monthly)

Note: Assumes historical conversation rates between monthly views and monthly unique visitors to projected 2015 data

6.3 3.6 2.1 0.5 0.3 0.3 44.7 14.6 14.6 3.4 2.7 1.3 51.0 18.2 16.8 4.0 3.0 1.5

ROW US LATAM UK CA AU

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FINANCIAL SUMMARY

CASE 1 – BASE CASE (MANUAL AD SERVING, LIMITED)

• Minimal investment in headcount allows the group to

maintain historic growth trajectory

• Gross revenue growth projected at 6% from FY2015 –

FY2019, increasing ~$150K to $170K y-o-y

• FY2019 gross revenue target of $2.9M
• Minimal growth in operating costs, maintaining EBIT growth

at ~$75K to $85K y-o-y

• FY2019 EBIT target of $1.4M (cumulative FY2015 –

FY2019 $6.0M)

• CONSIDERATIONS:
• Minimal investment in headcount limits ability to

maximize eCPM and traffic drivers

• Requires long term revenue agreement with YouTube.

Safely planned at 55/45 rev share. 70/30 remains a possibility (low confidence)

Case Highlights Summary Financials Key Assumptions

• Organic traffic growth based on historical usage
• CPM flat and fill rate flat for projected years
• No additional fingerprinting tools
• Revenue share with YouTube at 55/45
• One additional ad operations head coming FY2014 (already in budget)
• No marketing budget requested

1 Gross revenue does not include revenue share to YouTube or SPE Theatrical; CPM is net potential reseller revenue share in ex-Crackle territories 2 Includes revenue share, operating expenses, and one-time charges

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Gross Revenue¹ US Revenue $1,012,640 $1,077,051 $1,145,805 $1,219,197 $1,297,539 Canada Revenue 201,179 213,647 226,956 241,162 256,326 UK Revenue 149,004 158,258 168,135 178,679 189,934 Australia Revenue 103,685 110,064 116,874 124,143 131,902 Latam Revenue 357,963 380,565 404,691 430,444 457,934 ROW Revenue 478,631 508,510 540,404 574,448 610,789 Total Gross Revenue $2,303,103 $2,448,095 $2,602,865 $2,768,074 $2,944,424 Operating Expenses Headcount $200,880 $195,174 $204,933 $215,179 $225,938 G&A 14,115 14,821 15,562 16,340 17,157 Marketing

• Total Operating Expenses $214,995

$209,995 $220,494 $231,519 $243,095 EBIT² $1,039,065 $1,123,810 $1,198,434 $1,278,274 $1,363,691

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FINANCIAL SUMMARY

CASE 2 – INVESTMENT CASE (PROVIDER AND UGC CHANNEL AD SERVER MONETIZATION)

• Investment in headcount allows for uplift in Provider and UGC

Channel revenue and enables future upside

• Compared to Case 1, Case 2 incurs ~$400K of additional

headcount costs per year, which leads to an increase in gross revenue of $710K, $2.7M, $3.2M, $3.4M, and $3.6M in FY2015 – FY2019, respectively

• FY2019 gross revenue target of $6.5M
• Compared to the Case 1, significant investment in headcount in

FY2015 leads to a decline in EBIT of $140K, driving an increase in EBIT of $1.0M, $1.3M, $1.3M, and $1.4M in FY2016 – FY2019

• FY2019 EBIT target of $2.8M (cumulative FY2015 – FY2019

$10.9M)

• CONSIDERATIONS:
• Heavily dependant on YouTube’s approval to allow SPT to ad

serve to UGC content. Will require XFP ad operations

• Requires long term revenue agreement with YouTube. Safely

planned at 55/45 rev share. 70/30 remains a possibility (low confidence)

Case Highlights Summary Financials

• Double organic traffic growth (2% monthly) in UGC Channels with organic traffic growth in Provider Channels based on historical usage; $350K of

gross revenue growth from FY2017 to FY 2018 and from FY2018 to FY2019

• Progressive introduction of ad resellers to Provider and UGC Channels to increase eCPM and fill rate target in US (H1 FY2015),

Canada/UK/Australia (H2 FY2015), Latam/ROW respectively (H1 FY2016); UGC Channels are targeted 4 months after entry into Provider Channels

• $30K investment in FY2015 to increase fingerprinting tools
• Revenue share with YouTube at 55/45
• Six total headcount (four additional) to enable global ad serving and reselling in Provider Channels
• Establish minimal marketing budget of $50K per year

Key Assumptions

1 Gross revenue does not include revenue share to YouTube or SPE Theatrical; CPM is net potential reseller revenue share in ex-Crackle territories 2 Includes revenue share, operating expenses, and one-time charges

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Gross Revenue¹ US Revenue $1,571,949 $1,996,254 $2,240,475 $2,375,242 $2,510,008 Canada Revenue 221,420 392,087 442,137 468,732 495,327 UK Revenue 165,114 289,483 326,053 345,665 365,278 Australia Revenue 111,991 176,374 199,256 211,241 223,227 Latam Revenue 405,076 764,078 854,969 906,396 957,823 ROW Revenue 540,873 1,566,089 1,755,817 1,861,431 1,967,044 Total Gross Revenue $3,016,423 $5,184,364 $5,818,707 $6,168,707 $6,518,707 Operating Expenses Headcount $608,580 $570,409 $598,929 $628,876 $660,320 G&A 39,282 41,246 43,308 45,473 47,747 Marketing 50,000 50,000 50,000 50,000 50,000 Total Operating Expenses $697,862 $661,655 $692,237 $724,349 $758,067 EBIT² $899,071 $2,132,949 $2,450,860 $2,607,808 $2,763,150

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APPENDIX

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FINANCIAL DETAIL

CASE 1 – BASE CASE (MANUAL AD SERVING, LIMITED)

FYE March 31st, FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Gross Revenue US Revenue $1,012,640 $1,077,051 $1,145,805 $1,219,197 $1,297,539 Canada Revenue 201,179 213,647 226,956 241,162 256,326 UK Revenue 149,004 158,258 168,135 178,679 189,934 Australia Revenue 103,685 110,064 116,874 124,143 131,902 Latam Revenue 357,963 380,565 404,691 430,444 457,934 ROW Revenue 478,631 508,510 540,404 574,448 610,789 Total Gross Revenue $2,303,103 $2,448,095 $2,602,865 $2,768,074 $2,944,424 % Growth 6.3% 6.3% 6.3% 6.3% 6.4% Net Revenue (Less YouTube Share) US Revenue $556,952 $592,378 $630,193 $670,558 $713,646 Canada Revenue 110,649 117,506 124,826 132,639 140,979 UK Revenue 81,952 87,042 92,474 98,274 104,464 Australia Revenue 57,027 60,535 64,281 68,279 72,546 Latam Revenue 196,880 209,311 222,580 236,744 251,864 ROW Revenue 263,247 279,680 297,222 315,947 335,934 Total Net Revenue $1,266,707 $1,346,452 $1,431,576 $1,522,440 $1,619,433 % Gross Margin 55.0% 55.0% 55.0% 55.0% 55.0% Net Revenue (Less SPE/Theatrical Share) Revenue Share with SPE Theatrical $12,647 $12,647 $12,647 $12,647 $12,647 Total Net Revenue (Ex-SPE Theatrical) $1,254,060 $1,333,805 $1,418,929 $1,509,793 $1,606,786 % Gross Margin 54.5% 54.5% 54.5% 54.5% 54.6% Operating Expenses Headcount 200,880 195,174 204,933 215,179 225,938 G&A 14,115 14,821 15,562 16,340 17,157 Marketing

• Total Operating Expenses

$214,995 $209,995 $220,494 $231,519 $243,095 % Gross Margin 9.3% 8.6% 8.5% 8.4% 8.3% Incremental One-Time Expenses Fingerprinting Tools

• Total One-Time Expenses

$0 $0 $0 $0 $0 EBIT $1,039,065 $1,123,810 $1,198,434 $1,278,274 $1,363,691 % Gross Margin 45.1% 45.9% 46.0% 46.2% 46.3%

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FINANCIAL DETAIL

CASE 2 – INVESTMENT CASE (PROVIDER AND UGC CHANNEL AD SERVER MONETIZATION)

FYE March 31st, FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Gross Revenue US Revenue $1,571,949 $1,996,254 $2,240,475 $2,375,242 $2,510,008 Canada Revenue 221,420 392,087 442,137 468,732 495,327 UK Revenue 165,114 289,483 326,053 345,665 365,278 Australia Revenue 111,991 176,374 199,256 211,241 223,227 Latam Revenue 405,076 764,078 854,969 906,396 957,823 ROW Revenue 540,873 1,566,089 1,755,817 1,861,431 1,967,044 Total Gross Revenue $3,016,423 $5,184,364 $5,818,707 $6,168,707 $6,518,707 % Growth 39.2% 71.9% 12.2% 6.0% 5.7% Net Revenue (Less YouTube Share) US Revenue $864,572 $1,097,940 $1,232,261 $1,306,383 $1,380,504 Canada Revenue 121,781 215,648 243,175 257,803 272,430 UK Revenue 90,812 159,216 179,329 190,116 200,903 Australia Revenue 61,595 97,006 109,591 116,183 122,775 Latam Revenue 222,792 420,243 470,233 498,518 526,802 ROW Revenue 297,480 861,349 965,699 1,023,787 1,081,874 Total Net Revenue $1,659,033 $2,851,400 $3,200,289 $3,392,789 $3,585,289 % Gross Margin 55.0% 55.0% 55.0% 55.0% 55.0% Net Revenue (Less SPE/Theatrical Share) Revenue Share with SPE Theatrical $32,100 $56,796 $57,191 $60,631 $64,072 Total Net Revenue (Ex-SPE Theatrical) $1,626,933 $2,794,604 $3,143,097 $3,332,157 $3,521,217 % Gross Margin 53.9% 53.9% 54.0% 54.0% 54.0% Operating Expenses Headcount 608,580 570,409 598,929 628,876 660,320 G&A 39,282 41,246 43,308 45,473 47,747 Marketing 50,000 50,000 50,000 50,000 50,000 Total Operating Expenses $697,862 $661,655 $692,237 $724,349 $758,067 % Gross Margin 23.1% 12.8% 11.9% 11.7% 11.6% Incremental One-Time Expenses Fingerprinting Tools 30,000

• Total One-Time Expenses

$30,000 $0 $0 $0 $0 EBIT $899,071 $2,132,949 $2,450,860 $2,607,808 $2,763,150 % Gross Margin 29.8% 41.1% 42.1% 42.3% 42.4%