YOU On Demand Holdings, Inc. (YOD) Q4 2015 Earnings Conference Call March 30, 2016 4:30 PM ET
Jason Finkelstein - Director, Strategy & IR
Bruno Wu - Chairman
Shane McMahon - Vice Chairman
Mingcheng Tao - CEO
Grace He - VP, Finance
Marc Estigarribia - Chardan Capital Markets
Good afternoon everyone and welcome to the YOU On Demand's Q4 and Full Year 2015 Investor Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. At this time, for opening remarks and introductions, I would like to turn the call over to Jason Finkelstein, Director of Strategy and Investor Relations at YOU On Demand. Please go ahead.
Thank you, operator. Good morning and good evening to all our listeners and speakers. Welcome to our fourth quarter and full year 2015 earnings conference call. Joining me today, I am pleased to have Bruno Wu, Chairman; Shane McMahon, Vice Chairman; Mingcheng Tao, CEO; and Grace He, VP of Finance.
Once all speakers have completed their prepared remarks, we will open the lines to analyst's questions and then continue the Q&A session with questions received via email, both prior to and during the call. The website of today's call will also be archived and available in the webcast and events section of the YOD corporate website for a minimum of 30 days.
We may make forward-looking statements during this call regarding the company's future performance. Actual results may differ materially from these statements due to risks and uncertainties related to the business. These risks and uncertainties are detailed from time-to-time in the management's discussion and analysis section of our corporate filings, copies of which can be obtained from the SEC or via our website. All information discussed on this call is as of today, March 30, 2016, and YOU On Demand undertakes no obligation to update any statements or expectations for prior conversations.
Regarding today's agenda, Shane will begin with opening remarks followed by Mr. Tao, our new CEO. Then Mr. Bruno will discuss the vision and strategy for the company for 2016 and beyond. And finally Grace will cover our financials. Shane, please go ahead.
Thank you, Jason and good morning everyone. The final corner of 2015 was both encouraging and eventful for YOU On Demand.
After announcing on the last earnings call a nonbinding proposal from Bruno Wu’s Sun Seven Stars, one of the biggest private media and investment companies in China, both parties working diligently and expeditiously, completed the signing of the first part of the deal agreements in a period of time of almost less than five weeks with Sun Seven Stars putting forward a $10 million investment in YOU On Demand at $2.20 per share of common stock receiving two-year warrants to purchase an additional 1.8 million shares of YOD at $2.75 per share and receiving a six-month promissory note which is automatically converted into an additional 9.2 million shares of YOD in exchange for a license rights to a large library of content controlled by Sun Seven Stars, a momentous deal on many levels.
More recently, we have revamped, refreshed and fortified our executive leadership roster with new hires for CEO, CFO, and finally, President of Ecommerce and newly crafted position for our expanded strategy.
With all that being said, I want to take this opportunity to reiterate my unrelenting passion for YOU On Demand, a company that I founded, and my intention to continue assisting this experience and capable team and pushing the boundaries and scope of the original anytime and anywhere video distribution vision, something that Bruno will speak about momentarily.
Now, I would like to turn the call over to our new CEO, Mr. Mingcheng Tao.
Thank you, Shane. First, I want to say how honored and proud I am have to be the choosing for this exciting opportunities and to be a part of such an experienced and hardworking team. I see a bright future for YOU On Demand and I'm looking for to leading the team that will be tasked with both, expanding it and then reshaping it. Through this position, I am determined to the future has while these business foundations as well as that different shareholders value to YOU On Demand is patient shareholders.
Second, I'm very pleased to be report that we are back to the strong plan, increased revenue, progressing for both, the full years at 175% growth and the quarter four versus quarter three at 241% growth, a solid indication of the business model already in place. Grace will take more to the contribution breakdown for the revenues when he speaks later.
I know that the last several years has been frustrating for our shareholders from operating growth perspective and that is an issue that there is a concern about the mix of the invest communications on behalf of YOU On Demand. Let me declare, Bruno, myself and the rest of the management team are here to emphasize that true prospects of the companies and make sure that we are communicating with you every step for the way.
As with new management team laid out of the expansion plans for our new vision of YOD, we are also review all of our distribution agreements and separating them into growth space and those that are not performing as we had hoped those that are beginning to perform and those that we are actively looking to expand and promise of the attempt to create some exclusivity with. So I'm looking forward to updating our investors on the status of those deals in the near future.
With a strong team now in place, and wider yet focused especially to YOU On Demand is based ahead of us, I would now like to turn to the call over to Mr. Bruno Wu. Thank you.
Thank you, and thanks to everyone for joining our call. The Sun Seven Stars team had actually been looking into connect with YOD for several years prior to the recent deal. As the Sun Seven Stars team continue to examining and comprehend the foundation platform and services at YOD has been building over the last several years. We became more and more convinced to commit to the evolution of the YOD service.
Towards the beginning of our analysis, we simply saw a golden opportunity to marry Sun Seven Stars strong leadership position in content ownership with YOD's multi-platform distribution channels with its brand and Hollywood partnerships to shape YOD into the leading services offering to the next-generation in China's high growth paid content space. But I expect YOD to become so much more.
My vision and strategy are as follows; since my team has come in, we have been steering YOD in direction where we can leverage and optimize its current operations as a premium content VOD service providing its service only in China, but to evolve it into a global mobile driven consumer management platform for both enterprises and consumers. By establishing the world's premier multimedia social networking and ecommerce enabled network, YOD through its expanded cloud-based ecosystem of connected screens combined with strong partnerships with leading global providers would be capable of delivering a vast array of YOD branded products and services to B2B customers and end user customers, anytime, anywhere across multi-platform and devices.
Our new business structure will be segmented into four distinct service verticals, each of which will feed the growth and utility of the next through brand awareness, cross promotion, cross selling and big data mining.
The verticals are as follows; vertical number one, the Pay Content Group are YOD's traditionally subscription-based and single use transactional cloud-based services offering. This will be amplified and enhanced to include a broader spectrum of content. For these paid services, management anticipates the addition of over 100,000 movies from various producers on a revenue sharing basis. The content offering will also be expanded to include a globally marketed education content platform and a Chinese focused gaming platform that directs YOD to become a leader in the development of the online gaming ecosystem, particularly in the area of ESports and Fantasy Sports.
Vertical number two, Multi-Channel Network Group. The management is expecting the availability of over 70,000 channels of both traditional and next-generation and content programming representing all the channels of entertainment, sports, gaming and education, all provided for the first time by YOD through a fee to the viewer, advertising and a commerce supported and transactional platform enhanced with customized content packaging that utilizes proprietary and exclusive mobile-app technology, personalizing and optimizing each viewers experience.
Vertical three will be Video Commerce Group. This brand new vertical includes strategic vendor partnerships with multiple commercial product sales channels integrated into the YOD environment and providing users with user-specific tailored e-commerce functionality engineered to encourage immediate and seamless purchasing transactions. Leading this effort will be Mr. Ping Yang who have become President of YOD's newly formed e-commerce group. We introduced Mr. Ping Yang and his expertise in this area to the market last week.
And vertical number four, will be Consumer and Customer Management Group, a full service business-to-business enterprise platform solution offering database storage, analytical/global computing, deployment and application services such as Global Partnership Distribution Platform, a virtual content network operations platform; mobile app advertising, marketing and management, and analytics. This vertical will also include a punishable with global data and virtual currency exchanges offering a broad range of digital services. For example; for the customer virtual gift card management and consumer data collection; and for businesses, big data exchange systems, analysis and management.
This more diversified and robust a business model will see YOD become a total consumer management platform with both B2B and B2C solutions and offerings. And now the opportunity to not only income this model in an efficient and expeditious manner, but also to attain my level expectations of financial performance. Mrs. Mei Chen, our recently hired CFO will make sure our assets and financial resources are utilized effectively on path to achieving the vision I have laid out. In the coming weeks, investors should look for a new YOD business overview in Investors Presentation, as well as several press releases on partnership deals.
Lastly, to our current and patient investors, a priority for me this year is to communicate more consistently with all of you. We have a shared vision and expectations for this company, and account all of you as my partners in attaining those goals. I personally intend to make certain that this company brand and publicly listed securities attain the attention is due along with a fair valuation, the vision I have shared along with the concrete steps we have already taken serve as proof of my personal commitment to this gross.
With that, I would like to turn the call over to Grace for financials. Thank you everyone.
Thank you, Bruno and good morning everyone. Revenue for the twelve months ended December 31, 2015 was $4,606,000 compared to $1,963,000 for the same period in 2014, an increase of 135% year-over-year.
Revenue for the fourth quarter of 2015 was $1,623,000 compared to $476,000 in third quarter of 2015, a 241% quarter-over-quarter increase. The year-over-year increase in revenue of approximately $2,643,000 was attributable to an increase of revenue generated from our page video programming and content distribution services, specifically in the cable, internet protocol television or IPTV and over-the-top or OTT distribution channels. In 2015, the company entered into contracts with ten new distribution partners including four new over and OTT distribution partners.
Revenue generated from mobile and OTT channels accounted for approximately $1,597,000, 35% of total revenues for the year ended December 31, 2015. The remaining revenue was attributed to cable and IPTV distribution channels, and to a lesser extent, other content delivery services. Our gross profit for 2015 was $932,000 as compared to gross loss of $793,000 in 2014. The increase in gross profit was mainly due to an increase of revenue that outpaced increases and cost of revenue. Cost of revenues with Sun uptick on the year was attributable to the acquisition of new content to meet our increasing business demand and to a lesser extent increasing content costs related to new theatrical releases.
Our selling, general, and administrative expenses for the year ended December 31, 2015, increased approximately $778,000 or 10% to $8,237,000 compared to $7,459,000 for the year ended December 31, 2014. Salaries and personnel costs are the primary components of selling, general and administrative expenses. For the year ended December 31, 2015, salaries and personnel costs accounted for 42% of selling, general and administrative expenses. For 2015, salaries and personnel costs totaled $3,491,000, a decrease of $331,000 or 9% as compared to $3,822,000 for 2014. The decrease was primarily due to our continuous shift in resources to China as part of our long-term cost savings and operations enhancement instead.
The other major component of SG&A expenses included technology, marketing, and regulatory expenses. For the year ended December 31, 2015, these costs totaled $4,746,000, a net increase of $1,109,000 or 30% as compared to $3,637,000 in 2014. The increase was primarily attributed to increase in marketing expenses and severance payments. Our marketing spending are primary related to promotion of our direct-to-customer services on newer distribution platforms. Professional fees which are generally related to public company reporting and corporate governance expenses totaled $654,000 for 2014 and $715,000 for December 31, 2015, an increase of $62,000 or 9%. The increase in professional fees was related to transition to a new audit form in the second quarter of 2014.
Net loss was $1,963,000 for the fourth quarter 2015 compared to $2,351,000 in the comparable 2014 period. Basic and loss per share for the fourth quarter of 2015 was $0.08 as compared to $0.10 loss per share in the same quarter in 2014. Net loss for the top month ended December 31, 2015 was $8,541,000 compared to $13,024,000 in the comparable fiscal '14 period. For the twelve months ended December 31, 2015, basic and diluted loss per share was $0.34 as compared to $1.58 loss per share for the same twelve month period in 2014. As of December 31, 2015, the company had cash of approximately $3.8 million and total current assets of approximately $10.1 million. More details of YOU On Demand fourth quarter and fiscal '15 year financials can be found in our Form 10-K of our corporate filings, copies of which can be attained from the SEC or via our website.
This concludes our management teams prepared remarks. I'd like to turn the call back to the operator and open up the line for analyst's questions. Thank you.
[Operator Instructions] The first question comes from Marc Estigarribia of Chardan Capital Markets. Please go ahead.
Thank you. I just wanted to say congratulations, Shane and Grace for really building up the company to-date and passing it off to good hands. I'm sure we'll learn a lot about the business going forward from Bruno, so congratulations for taking this on. I also want to thank Jason Finkelstein for really helping us understand and keeping us posted with the developments of the company, so I just want to thank you and the company for that. A little bit I guess on the financials, we'll looking at the fourth quarter numbers, can we get just a little bit more color please on -- I think from our calculations there is $1.7 million of revenues, around $700,000 of gross profit which is around 42%, the OpEx was around $2.5 million. So we're trying to just understand what happened in the fourth quarter with that -- with the revenue pump and what's going on with the OpEx in terms of why was it so sizable in quarter? Just trying to get sort of an understanding of that and what should we -- and what we should expect for the next quarter or sort of a run rate for 2016 please.
Grace, you want to take that.
Yes, I'll take on that question. Hi Marc, thank you for your question. I think what you'll see in the fourth quarter as a very strong quarter was revenue that we've been building up throughout the year, back on-track from the third quarter. In terms of your question about OpEx, I think our OpEx has remained relatively stable throughout the year. I have mentioned on our call earlier, we have some uptick a year-over-year in advertising marketing spending which is in line with our revenue growth, as well as well as our spending and severance payments that went out in the first quarter of 2015. So I think the fourth quarter is a very strong quarter, primarily because of our revenue growth.
Thank you. Can you just dive a little bit more on the main drivers; the incremental growth fourth quarter on the top line.
Sure. I stated in our most recent 10-K report where from mobile and OTT channels comprise of 35% of our total revenues for 2015. Our mobile and OTT continues to show strong growth potential as evidence by the 164% year-over-year growth which outpace our total year-over-year revenue of 135%. We also continue to show solid cable and IPTV revenues which is not surprising given that's where the business started. And we can expect benefits from our early seed to continue to blossom. So from management side, I think our mobile driven focus does not take away resources from our big stream business, rather we see them as complementary product offerings whereby users can choose between our contents on both large and small screens.
So thank you for that. And just the -- is that more subscription or transactional one-offs? How is that measured or how should we model that for the fourth quarter in terms of…
Yes, I would say they are definitely more subscription and also we have more expanded -- I'm sorry, revenue distribution channels and we remark that in our 10-K as well including ten new distribution partners in 2015 that we started working with that.
Okay, thank you. And on the OpEx side, can you just break up a little bit on the -- I know it's mostly advertising and marketing, what percentage of that is marketing? And should we expect that OpEx to stay stable and flat for 2016?
Well, I would say it's definitely, mostly marketing and promotion as the question. And our OpEx has remained relatively stable about $2 million per quarter for the past few quarters. We will continue to of course curb OpEx spending as we ramp up the business but we're -- we call the resources to fund the company's growth, to fund future revenue growth, of course we'll be looking to put resources towards what makes money.
Great, thank you. Bruno, maybe this is a question for you on strategy in terms of the four distinct verticals. I'm sure there is a cross-promotional with the opportunity here, there is more channels involved. How does the constant play? I'm just trying to understand, I think you're bringing from what I read in the press release in the past. You're bringing content to the table as well, what is the strategy on the content in terms of distributing on your platform? Maybe some economics on acquiring the content, the content as you bring to the table instead of obviously producing it, I'm sure you're looking to buy it. So I'm just trying to understand the economics there, please.
Thanks Mark. I think this is a very important question. First of all, we're looking for the four verticals; three of the four verticals are content-oriented. Of course the pay content vertical, MCN, the multi-channel network; is internet television, and traditional television based; free content vertical if you want. So it's paid content, free content and commerce content. These are the three content verticals versus a consumer and customer management platform, and that which is the fourth vertical. So let me explain one by one what these verticals are.
First of all, in the paid content vertical, we're primarily at a current stage focusing on three clusters of pay content if you want. Number one is the movie pay content. Historically, the company has primarily focuses itself on the limited range of VOD, basically pay-per-view based content which is buying big studio titles non-exclusively for the Chinese market. Now this is good if you want a brand enhancer but it also brings a few major, major issues. Number one is we know that studios are selling content to all players in China on a non-exclusive basis and they upped the price year-after-year. Now that we don't appreciate our partnership with our good partners at the studios but if you only work on the studio content in the movie area, you're picking on rock and hard place you can never win. Besides, the major internet companies starting with WyDo, Ali Baba, and TenCent, who are spending hundreds of millions buying those content and offering them for free. So basically in China everybody is a Netflix but for free, that's why it's very difficult for these guys to make money. It may make them money overall but with the video portal; video website side of the business I think nobody has a timetable on when this division of their business will make money.
We certainly does not nearly half or not even close to a fraction of the resources that they have towards buying this studio content, therefore we have to either pay contact area or we have to shift our focus elsewhere. Have to different yourself, differentiate ourselves and put ourselves in a very sweet position in the blue ocean. That's why we mentioned that we intend to build the world's leading; if not the largest, movie cloud -- by sharing on the revenue sharing basis by beating a model that's revenue sharing, with primarily independent producers of the movies. We know that the world makes somewhat close to 40,000 titles in new movies a year, and the big studios all together, I'm not sure whether even a hundred of it, the six largest studios in new releases a year. I've not done the counting but I think it's probably safe to say it's around hundred. So it's a very, very hard job of 40,000 is a very, very small portion.
So therefore our job lies in how do we represent the independent producers? How do we discover and recommend good movies? But most importantly, group those movies in semantic focused verticals that would appeal to everybody. Therefore, we decided to launch the four verticals in the -- in a schematic HBO manner if you wanted into family and kids, first. So family and kids, it's across the board, not only in China but worldwide, the most popular genre. And the other three are suspense/horror/scary movies, Sci Fi and action because those three together with romantic comedies are the top four genre at Millennia's in most part of the world. We take out romantic comedy because that kind of content does not travel cross border, they are very much language and culture background restricted. But the other three, we aggregate.
So in other words, we're in the middle of building a 100,000 movie strong, if not more cloud, which in size leading the world, primarily taking content to formally these four verticals so that appeal to across all and to the Millennia's and to do this on a revenue sharing basis with our content suppliers. So that's the movie content. After all you know why HBO Cinemax Showtime of the world became successful not because they were a rebroadcasters of studio content, studio content were just like teasers and they put icing on the cake. But how do we make the cake delicious and tasty is the key and that's how we -- our ability to cure it, our ability to discover and recommend content. And this also changes the model that means that we can now get into -- going forward, the original VOD model, our pay-per-view model to a monthly subscription model.
And secondly, in the pay content cloud is education. Technical, vocational, and professional education is the key. Chinese market alone 2015 size was according to official statistics is about $240 billion on size. There are not very many OTT if any. Video and multi-media based content providers to digesting this market. Certainly there are over 2000 government issued certificates and diplomas that are associated with the vocational education and professional education. So in the middle of formulating partnerships again to adjust this market for China and we intend to expand at China on this, and certainly in the pay content again, another focus that we're going to have is in the area of games. In the United States market we know that in E-Sports alone, E-Sports is quite a many times over the size of movie box office in the United States.
In China, according to administration of sports, the movie was about $40 billion on B last year, the E-Sports in the gaming area is already approaching a $30 billion but it's growing so fast, therefore we like to become the aggregator, the biggest crowd in China, and that's in China, the rest of service all, we intend to take them global. Now how do we be the biggest cloud for E-Sports game content for the Chinese market? And to be beef it up with ability for monetizing with ways like or solutions like fantasy sports is what we are focusing on and what we like to build out into '16 by formulating some key partnerships with important U.S. and European players with utilizing their experience, their know-how and their platform to monetizing Asia, starting from China. So that's cloud number one, the vertical number one, the pay content.
Number two is of course is, MCN, multi-channel networks. So you know if you want the vertical number one as smallest has here some resemblance of similarity to the Netflix approach. But number two is more like a YouTube approach, is MCN approach, multi-channel network approach with free content. Now with the middle of aggregating to punish it, thank god, more than 70,000 MCN channels into about 60 categories of inches from A to And, starting from animals and animation, all the way down to Z. So their 70 channels span over 60 categories, vertical. So they are there to capture vertical demographics. So it is our task to how do we distribute to the maximum audience? How do we segregate and capture audience on a vertical demographic basis? And how do we convert I-Boss not only into Avatar and his sponsorship revenue because it's free content but also converting into commerce revenue? And I think we have a very good solution that we can and we're going to share with all of you in due course.
But we're definitely going to build a leading -- what I call free content cloud with 70,000X primary content channels, we know there are several hundred thousand MCN channels in the space but we have already curated and picked up north of 70,000 good ones.
Cloud number three is our vertical three, is commerce cloud, Video Commerce Content Cloud. I think this will be the biggest driver in revenue in the next 24 months because revenue for cloud one and two will grow, exponentially very, very fast compared with we've been doing the past several years but commerce will grow even faster. The reason is that the -- if we can't – there is a very big trend of incoming B2B commerce into China, in big bulk merchandising and consumer products importing. If we capture -- and in the area of Shanghai free trade zone along, with one company called DIG in Shanghai free trade zone, which we intend to turn them into our partner. There are two primary free trade zones in China who are doing very well in that area; one is Shenzhen free trade zone and the other is Shanghai free trade zone.
In Shenzhen, my company acquired -- another division on my company acquired cross border trading exchange in Shenzhen which is the leader in cross border trade. But the company DIG in Shanghai alone did about last year RMB 1.3 trillion in import divided into some 90 plus verticals starting from wine, watches, cosmetics, automobiles, all consumer products in verticals. It is our intention to support these vertical operators with multiple capability enhancements through online, financing facilitation capability to media and marketing capability, to technical capability, and to the what we call placing a distribution capability to make their business grow bigger. In other words, these guys send the B2B business, we like to try their second B from Bigger to medium, from medium B to smaller B, therefore help them to enhance self-capability and increase the number of distributors and wholesalers if you want. Therefore exchange for -- on revenue sharing base, exchange for cut of their business.
So this is what we intend to do with cloud number three because we are lesser interested in getting to B2C in that area although we're going to have tremendous capability, what we call B2C enhancement enabling capabilities with technical tools, marketing and so on and so forth but we do not intend to get into B2C side of business where there is lot of price cutting, lot of logistic headaches, inventory; we didn't do any of those. We just like to in-house our model on B2B at the top. And then we're getting to vertical four which is what we call consumer and custom management. I think that tomorrow media is no longer only about content management; it is more or so about customer/consumer/community management. It is how do we manage the consumers, understanding the data, and the exchange of data amounts to peer vertical demographic focused consumer groups.
So if we -- here is our philosophy, if you look at the total expenditure of media as a pyramid, the traditional media or media to-date only scratched onto the tip of the top pyramid which is advertising and fee based income. The middle part to the pyramid, I believe is commerce based so e-commerce which we get a transactional based fee, revenue sharing. Which is even bigger is the bottom of the pyramid which is data and transactional based revenue, a financial service driven revenue.
So in order to be a good manager, an operator of tomorrows digital media business, particularly mobile-driven digital media business, not only we have to understand how we look down from top of the pyramid, we believe that we're vertical content operators and we use a vertical components to capture vertical audience and adjust their needs and get e-commerce and financial revenue -- transactional revenue out of them. But we also have to understand from the point of view of placing ourselves from the bottom of the pyramid, looking up; understanding that another way of looking at this is how do we acquire users at cheaper price. So we see ourselves as a financial service and transactional service operator acquiring loyal and vertical sticky users using the cheapest method. We all know that in United States it costs quite a bit, I don't know the figure but it costs quite a bit to acquire an effective; for example, credit card user. In China this number is very high. The largest bank told me -- one of the largest banks told me that their cost is above RMB 400 which is about $60 per effective customer, active customer.
So if we can share also into that kind of expenditure of financial spending, not only by sharing the cost of acquiring a customer by the bank but also -- while banks have many, many other transactional financial services but also share their ongoing transactional revenue, I think we'll be developing much more ways of monetizing our business. So that's why we view the entire ecosystem this way if I make myself clear. The other very important thing I forgot to mention is, in that fourth vertical we intend to be built a leader in terms of -- a leader in the world in terms of distribution, in terms of numbers of users we cover.
Our current revenue is limited because of the fact that our universe is small, because that we also own a pay-per-view business only in China. So we can only cover users by several millions. In the future, by end of 2016, we intend to grow our footprint into several hundred millions, not just in China but also ex-China because I think our entire strategy of three clouds plus one platform, 3+1, will take us everywhere; as a matter of fact, we're going to play in the U.S. market as well, we're going to play in the European market as well. So we we're going to -- it is our intention to completely take YOD from a China-only company to a global player. Marc, I hope that answers your questions?
Very thorough, I really appreciate that. Thank you very much. When you said several hundred million, did you mean revenue or did you mean users?
Users and yes, and the revenues will come. We certainly hope that we can grow this from several million to seven hundred million in revenue as well. But you know…
So thanks very much for that thorough response, and it was very helpful to get the strategy on the medium-term/long-term for the company. I think the investment community will definitely welcome that. But what can we sort of expect in the short-term, is there any visibility for catalysts in the next quarter in terms of implementing this new strategy for 2016? What are the milestones that we should be looking for in the next three months, six months, to get the strategy going?
Marc, to us this is the strategy but that is more or so a plan in execution. We did not stop signing on this until after we bought into one of them but we've been planning on this for the last -- minimum three and a half to four years. So along all those four verticals, our resources are ready, we are already in the way of implementing. It is our goal to put -- to spend the next six months to entirely put this strategy in place, everything I just mentioned about. No promise but six months we want to put all of them into motion. Three months, all four sections, all four verticals into motion but six months to fully embody them with everything I just mentioned about and to keep all -- everything I just mentioned operational.
So the next twelve months, for FY 2016, there are few benchmarks we need to be looking for. One is, I think to me, personally, if I talk to Mr. Tao and the management team; there are three very, very key indicators of performance. Number one is whether these four verticals were well implemented. Number two is whether our user bases are north of 200 million users, if we fall short of 200 million users passed by end of 2016 then it's a failure. So we need to expand from several million user past into several hundred -- a couple of hundred million for this year as a management target. Number three indicator, of course, if -- yes, I like to have a good top lines, north of 100 million U.S. top lines, I could. But I like more to have a bottom line.
So if we can successfully turn the company into black and into profitability while growing the company in such a robust thick and rapid manner, meantime we need the turn the company profitable in 2016. I think it's under our management target. So these are the three indicators I am looking for to the management team for 2016.
Very helpful, I really appreciate the Bruno to just point that out. If I can throw in one more, I know that we've been on the call for a while but I wanted to throw in one more if I can. On the regulations side in China with regards to -- I know there is consent with regards to foreign consent or locally produced consent, if you can comment on that but also comment more I guess on the relationships that you have to -- basically it facilitates the strategy to be implemented and gives you an edge in terms of competitive advantage. Do you see that the same way as we do?
Yes. First of all, the soft regulation has very little effect upon YOD's business because we are -- we have completely -- or let me put it this way, we are in the way over in transforming our business into primarily what we call a B2B2C business. B2B2C business is very good for us for several reasons. Number one is, we count ourselves agnostic, we position ourselves as the king of content providing. We completely turn ourselves into being agnostic to all channels, all B2C operators; whether you are an IPTV, whether you are a MSO or cable operator, whether you are a website like WyDo, Alibaba or TenCents, whether you are a manufacturer like Huawei or Lenovo or there are 35/40 manufacturers that we like to partner with and we will. Whether you are a China Mobile or China Telecom that you want to launch 4G service, you have a video service you want like Verizon does, or T-Mobile does and you want to partner and in-house your marketability with our content. We don't care, we only -- we like to have a B2B2C model where as we settle with you, the B in the middle.
We only want to make sure that several things happen, including, number one, is our brand is being displayed to the consumer, to C. Number two, no matter what revenue happens with the consumer, we take a piece, and that's all we care. And this avoids; number one, it's a licensing and software restriction issue. Number two, is the marketing and user acquisition issue, user acquisition cost issue. Number three, is the bandwidth and network and technical supporting cost issue. So we like to be as a low cost as a virtue as we could, just like our model how we structure with the independent movie providers. So that puts us into a very, very good position in China. Of course in China it is -- there is more restriction about the percentage of foreign content, but however, the definition of foreign content varies.
For movie, I have to say that we have a very good growing channel being able to import footage to use, foreign movies into China. But for MCN content, lot of MCN contents are universal; for example, music and sports, animals and animations, and that kind of stuff is universal. But however, they won't be categorized in lot of cases with foreign content because in China we add local curation and moderation over it until we intend to formulate and alliance through what we call a virtual content operating model. In other words, we view the factual kitchen [ph] in China for TV. We're bleeding a factual kitchen for content where we -- as we work with many, many local channels and we carry them and distribute them in branded blocks. So it is almost like in United States you have the network and local affiliate model.
But this is just China. We are going to go much beyond China in in this year, as a matter of fact, by end of this year, if we have hundred million users in China we intend to have another hundred million user ex-China. So one-to-one is a go. Marc, does that answer your question?
It did very thorough, thank you very much. I really appreciate it.
Thank you. I would now like to turn the floor back over to Jason Finkelstein for further questions.
Thanks, operator. So taking time into consideration, I'm just going to follow-up with a couple of questions emailed by investors beforehand. So this question is for Mr. Tao, coming from BET TV, can you comment on IPTV, Over-the-Top, Mobile TV and Internet-Video service in China? And how they fit into YOD's Video-on-Demand strategy?
Okay. As where I believe this is a good time to be in video content and the mobile service, pretty good in China. What we think from all that you mentioned, IPTV, OTT, Mobile TV, is that it diversify content from in the market. Was it carefully into the great opportunity for YOD and therefore YOD, it found it pays to operating diversified content and focusing on the mobile devices. And when we say mobile devices, we won't be mentioning everything in focus that's more Smartphones, it is ideally using hand movement reading the contents and service that using what's right to them. It keeps on getting better and the platform and the screen size.
Thank you. For you Grace, a prior press release from December 23 of last year stated as shareholder approval for the issuance of the remaining shares to Sun Seven Stars would be seen in Q1 of 2016 or at the end of Q1 2016. Could you just give us an update on that? Grace, you're there?
Grace, your line is open.
All right, we'll come back to that, she maybe on mute. Bruno, thank you for laying out the plan. When can shareholders expect an update on all the existing deals that they've already heard off over the last several years, just in general?
We are still in the mid of examining and trying to understand what announcement is being made and to substantiate that. If some of the announcements are there, we need to do at some point in time make clarifications on that. So we're seeing it in the middle of figuring this out. But certainly we're spending lot more time in figuring out how do we execute deals that are pertinent and relevant to our strategy of implementing the new business model with four verticals. But going forward I think we -- it is our general attention to make less announcements, certainly we need to keep very open and transparent communication to shareholders, we like to bundle multiple silos of information if they fit into same category; for example, building vertical one, building vertical two, as a category. And we like to also do a better job explaining to shareholders about this is part of the vertical one building; for example, just part of vertical four building and why we are doing this; short but sweet and concise to make sure that communicate -- we communicate to the investors so they are on par and updated with what we do.
Yes, I know investors appreciate short and concise. Shane, can you provide some color on your current role and involvement in YOU On Demand as it relates to other interests and events, investors may have seen you participating in publicly.
Let me read through that question once. First off, YOU On Demand is my baby and the company couldn't be in better hands in this with Bruno and the team that we're assembling now. As Bruno mentioned, it's three, maybe even four years ago we tried to do a deal together, it didn't come to fruition but sometimes things are just about timing and this is the right time. So the timing was correct what you're now seeing, as the company, YOU On Demand is going to have a complete metamorphosis as Bruno went through very diligently and much laid out the plans of what's happening. So we couldn't be more excited about with the direction of the company but specifically, the speed at which things are going to happen because again, to reiterate with Bruno said, Sun Seven Stars, independently has been working on this strategy for about three plus years now. So the ball has been rolling, they've been gearing up, getting things ready, and now the fact that we have YOU On Demand coming together with Sun Seven Stars, again we're extremely poised for growth and speed to get there. So that's extremely exciting. If you're referring to my involvement with WWE, again that's full support of the YOU On Demand Board and I have capacity to do both.
Great, thank you. Two more questions. Grace, are you there now?
Yes, apologies for that line earlier.
No problem, I'm just going to repeat that question one more time for our investors. So prior press release from December 23, 2015 stated that shareholder approval for the issuance of the remaining shares to Sun Seven Stars would start in Q1 2016 which we're obviously at the end of, can you just give us a brief update on that?
Sure, Jason. And for no other reasons than timing logistics I believe the company will seek shareholder approval for these share sometime in the second quarter. As we've stated in our most recent 10-K report, the first part of the transaction was funded in the first quarter.
Okay, thank you. And Bruno, finally, with the recent hire as CFO, and now President of Commerce, are there plans or is there any need to hire additional headcount in the U.S. or China and what about the need for capital expenditures, briefly?
Yes, we have to -- it's all about people, it's about capable people. You know Mr. Tao ran -- in order management we hire what we believe the best in industry. If I'd reiterate for -- I can reiterate for the investors who have not fully read the press releases, Mr. Tao ran BEST TV which is to now the China's number one, if not the world number one IPTV operator with 40 million users, a very, very profitable. It merged into our group, now well north of 100 billion in market cap. Ming who joined us, used to be Chief Technology Officer for Cisco, I may be wrong with some details but in that area. And who ran before joining us, China's largest across border website, cross border e-commerce website as CEO. May who joined us was Financial Controller for Microsoft, China, and being in the important positions was various biggest IT companies worldwide for for the China region. We intend to beef up and hire more headcounts, and we're in the middle of doing this right now through Mr. Tao, and the team to strengthen every vertical and every department we deal.
So the capital needs, yes, we will be looking for more capital expenditure needs but certainly we try to minimize it by turning ourselves into a shed and virtual model as much as possible. And certainly the company is backed financially by the Sun Seven Stars Group who had no debt and the cash strong. But yes, we will be looking for us, more capital needs in the months to come.
Great. While I think that is a good place to stop at this point. I want to thank management, I want to thank Mark Rubio [ph] from Charlene Capital Market, and all the investors participating and listening to the call today. I want to wish Shane good luck this weekend. Please get her home safe, Shane. And we will host our Q1 2016 earnings call in about 45 days from now in mid-May. Thank you very much.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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