Total Revenue of $13.3
Million
Total Direct Operating Margin Increased to
59% from 48%
Selling, General, and Administrative
Expenses Decreased By $2.7 Million,
or 30%
Adjusted EBITDA of $1.8
Million
LOS
ANGELES, Feb. 14, 2024 /PRNewswire/ -- Cineverse
Corp. ("Cineverse" or the "Company") (NASDAQ: CNVS), a global
streaming technology and entertainment company, today announced its
financial results for the fiscal third quarter ended December 31, 2023 ("Q3 FY 2024").
Q3 FY 2024 Highlights (all comparisons are to the prior year
fiscal quarter ended December 31,
2022):
Similar to the reported results for last
quarter, the Company's initiatives to reduce operating costs,
optimize our streaming channel portfolio and increase margins
continued to have a very positive impact on our financial
results. Although revenue, operating profit, and net income
decreased due to the impact in last year's third quarter of the
runoff of the Company's legacy digital cinema business
($7.2 million in revenue, 84%
operating margin) (the "Digital Cinema" impact), last year's
theatrical success driven by the horror phenomenon Terrifier 2
($3.8 million decrease in theatrical
revenue) (the "Terrifier 2" impact), and the recognition of losses
stemming from the Company's investment in A Metaverse Company (a
$3.0 million non-cash loss) (the
"Metaverse" impact), direct operating margins improved
significantly to 59% and SG&A expenses decreased markedly by
30%. The Company generated positive adjusted EBITDA of $1.8 million in the quarter. Excluding the
$3.0 million non-cash Metaverse
impact, net income for the quarter was a positive $0.2 million. Importantly, the Company has also
secured the rights to Terrifier 3, which is scheduled for Q3 FY
2025 release, is currently filming, and was recently named by
USA Today as one of the top ten
most highly anticipated horror films of 2024.
- Total revenue was $13.3 million
versus $27.9 million, reflecting the
Digital Cinema and Terrifier 2 impacts, and the impact of our
channel portfolio optimization efforts where we have culled lower
margin channels, concentrating our resources on higher-return
performers.
- Subscription-based revenues increased 13% to $3.4 million, driven by the continued success of
the company's enthusiast streaming services. Total paid subscribers
to our channels grew to 1.4 million, an increase of 30%
year-over-year and 11% over the prior quarter.
- Advertising-based revenues declined 31% to $4.1 million, primarily due to our channel
optimization efforts, a non-recurring technical transition with a
large FAST platform partner and the continued impact of the current
economic climate on the advertising market.
- The Company's direct operating expenses decreased to
$5.5 million from $14.4 million and direct operating margin
increased to 59%, compared to 48%.
- SG&A expenses decreased $2.7
million, or 30%, primarily driven by a reduction of 34
domestic employment positions, our off-shoring initiative to
Cineverse Services India, and tight spending controls.
- In FY 2024, the Company launched Cineverse Services India
("Cineverse Services"), a new business unit that expands upon the
Company's successful India
operations to consolidate Cineverse's support operations at vastly
reduced costs. This is anticipated to help generate as much as
$8.0 million in annualized direct
operating and SG&A cost reductions when fully implemented. We
have already off-shored or identified 29 employment positions that
are moving to Cineverse Services.
- Operating income decreased by $3.0
million to $0.4 million,
primarily due to the Digital Cinema and the Terrifier 2 impacts in
the prior year.
- Net loss attributable to common stockholders was $2.9 million, or $(0.22) earnings per share, down from net income
of $4.9 million, or $0.55 earnings per share. The quarter's loss was
due to the Metaverse impact, an investment which was originally
acquired in a cashless transaction. Excluding the Metaverse impact,
net income attributable to common stockholders for the quarter was
a positive $0.2 million.
- Adjusted EBITDA decreased by $3.2
million to $1.8 million,
primarily due to the Digital Cinema and the Terrifier 2
impacts.
- Financial condition overview:
- Cash and cash equivalents of $5.5
million as of December 31,
2023.
- Stockholders' equity was $43.3
million, or $3.27 per
outstanding share as of December 31,
2023.
- Digital content library valued in FY 2024 at $26 million to $30
million in a third-party appraisal, compared to a book value
of $2.7 million as of December 31, 2023.
- The Company expanded its line of revolving line of credit
capacity from $5.0 million to
$7.5 million.
Operational Developments During the Quarter
- Announced LightningFAST – a market-defining partnership
with streaming technology leader, Amagi, that will enable Video
Service Providers to launch and scale FAST channels with minimum
effort, for maximum returns. This partnership, which means both a
combined product offering, and sales and marketing resources, is
expected to expand our Matchpoint offerings into the
Enterprise client space.
- Further expanded MatchpointAI offerings through
strategic partnerships with Vionlabs to enable next-generation
search via cognitive AI for Matchpoint customers and
Cineverse subscribers.
- Announced a new Cineverse Matchpoint managed services
partnership for three channels with major Children's programmer 9
Story, including the beloved "Barney" and "Garfield"
franchises.
- Expanded our subscription service offerings with the launch of
Midnight Pulp on Amazon Prime Channels, Comcast Xfinity and
The Roku Channel.
- Ramped up low-cost content acquisitions, including fan favorite
"River," to boost customer retention and engagement with
increased margins.
- Bloody Disgusting consumer products launched in October,
with a branded clothing line being sold in more than 600 Spencer's
Gifts retail locations nationwide.
- Capitalized on the momentum of Bloody Disgusting Horror
Brand, with the expansion of audio business and formation of new
publishing imprint, Bloody Press.
- Welcomed Mary Ann Halford to the
Board of Directors.
Operational Developments Subsequent to Quarter-End
- Launched LightningFAST at CES 2024 – saw significant
lead generation and potential revenue generation from event.
- Debuted FAST channel Dog Whisperer with Cesar Milan FAST channel – featuring every
episode of the beloved series – on Amazon Freevee.
- Premiered Sid & Marty Krofft
Channel – featuring 50 years of iconic shows now made
available as VOD offering on Roku Channel, Cineverse, Dove Channel
and Midnight Pulp. This marks a historic re-release of the
remastered library – making the culture-defining shows available on
digital platforms for the first time thanks to Cineverse's
proprietary streaming technology, Matchpoint.
- Expanded existing credit line with East West Bank to $7.5
Million – further strengthening Cineverse's balance sheet
without equity dilution.
- Announced partnership with Google Cloud to launch
cineSearch, a conversational search & discovery (SAND)
tool for film and television content, with a public beta coming in
Spring 2024.
Management Commentary
Chris
McGurk, Cineverse Chairman and CEO, stated, "Continuing the
trend from our last reported quarter, we saw significant margin
growth this quarter resulting from our initiatives to streamline
our cost structure and optimize our streaming channel portfolio.
Direct operating margin increased to 59% versus 48% last year and
SG&A expenses decreased by $2.7
million or 30%. This was an additional $0.5 million in SG&A reductions versus our
last reported quarter. Fiscal year to date, we have reduced
SG&A by $7.9 million or
27%. Additionally, our more than two-dozen enthusiast
streaming channels and multiple revenue streams give us the ability
to manage our business as a portfolio. This provides us with a
unique opportunity to improve our profitability by optimizing our
portfolio by eliminating channels that generate lower margin
revenues and, instead, focusing resources on higher return
channels. Clearly, our cost reduction, channel optimization and
other margin improvement efforts are generating significant
positive results, and we are far from done in this area as we drive
toward our goal of sustainable profitability. In fact, excluding
the impact of the non-cash, non-operating loss recognized on our
investment in A Metaverse Company, this quarter's net income was
$0.2 million."
McGurk continued, "Cineverse Services in India, where we are in the process of
off-shoring a significant number of domestic positions to a trusted
and successful Company-owned operation, will continue to drive
further reductions in our operating expenses and sustain these
improved margins. This is a unique competitive advantage for
Cineverse that we intend to take full advantage of. Already, we
have transferred and/or identified 29 employment positions that are
moving to Cineverse Services. And, in addition to significant
additional cost savings as we move toward our goal of an
$8 million annualized reduction in
costs, we fully expect that workflows and operational efficiencies
will continue to improve significantly as a result of this
initiative."
Erick Opeka, President and Chief
Strategy Officer of Cineverse, added, "Our efforts on streamlining
continue to pay off. At 59%, our direct operating margins
signal that our business model of building deep fan bases in
popular verticals and providing scale volumes of relevant, library
and low-cost first window content is a model that works. As we have
nearly fully optimized our margins on the operating side, we
continue to focus reducing our SG&A costs to scale up the
bottom line. In the quarter, we continued to leverage both
automation and our off-shore services hub, and expect to achieve
our profitability goals over the next two quarters."
Opeka continued, "With strong direct operating margins, rapidly
improving net margins and EBITDA, we have built a model that has
the potential to profitably scale. In order to drive topline
growth, we will focus on four key areas: leveraging our partnership
with Amagi to drive high-margin technology revenues, expanding our
distribution of SVOD, AVOD and FAST streaming channels to our vast
OEM and tech partner network, expanding licensing our 71,000 title
library to those same partners, and growing and driving direct ad
sales on our channels and our new ad network. We believe this
diversified approach will be the building block for a unique,
diversified streaming business with the unique nature of having
best-in-class margins and profitability. Finally, the partnership
with Google Cloud we just announced for cineSearch, an
innovative AI-based streaming movie search platform, underscores
the momentum and potential of our technology business. This
demonstrates again that Cineverse continues to be at the forefront
of the entertainment industry by applying AI technology in a
first-to-market, enhanced search feature that enables users to
search through a huge volume of films across multiple dimensions
and is unavailable on any other platform."
Conference Call
Cineverse will host a conference call
at 4:30 p.m. ET (Wednesday, February 14, 2024), during which
management will discuss the results of the fiscal third quarter
ended December 31, 2023. To
participate in the conference call, please use the following
dial-in numbers:
United States
(Local):
|
+1 404 975
4839
|
United States
(Toll-Free):
|
+1 833 470
1428
|
Canada
(Toll-Free):
|
+1 833 950
0062
|
Access code:
|
080162
|
The conference call can also be accessed by webcast at the
Investors section of the Company's website
at https://investor.cineverse.com/events-and-presentations.
Those who are unable to attend the live conference call may access
the recording at the above webcast link, which will be made
available shortly after the conclusion of the call.
About Cineverse
Cineverse's advanced, proprietary
technology drives the distribution of over 70,000 premium films,
series, and podcasts to more than 150 million unique viewers
monthly. From providing a complete streaming solution to some of
the world's most recognizable brands, to super-serving their own
network of fan channels, Cineverse is powering the future of
Entertainment. For more information, please visit
www.cineverse.com. (NASDAQ: CNVS)
Safe Harbor Statement
Investors and readers are
cautioned that certain statements contained in this document, as
well as some statements in periodic press releases and some oral
statements of Cineverse officials during presentations about
Cineverse, along with Cineverse's filings with the Securities and
Exchange Commission, including Cineverse's registration statements,
quarterly reports on Form 10-Q and annual report on Form 10-K, are
"forward-looking'' statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act'').
Forward-looking statements include statements that are predictive
in nature, which depend upon or refer to future events or
conditions, which include words such as "expects," "anticipates,''
"intends,'' "plans,'' "could," "might," "believes,'' "seeks,"
"estimates'' or similar expressions. In addition, any statements
concerning future financial performance (including future revenues,
earnings, or growth rates), ongoing business strategies or
prospects, and possible future actions, which may be provided by
Cineverse's management, are also forward-looking statements as
defined by the Act. Forward-looking statements are based on current
expectations and projections about future events and are subject to
various risks, uncertainties, and assumptions about Cineverse, its
technology, economic and market factors, and the industries in
which Cineverse does business, among other things. These statements
are not guarantees of future performance, and Cineverse undertakes
no specific obligation or intention to update these statements
after the date of this release.
For additional information, please contact:
Julie Milstead
424-281-5411
investorrelations@cineverse.com
CINEVERSE
CORP.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(In
thousands)
|
|
|
|
As of
|
|
|
|
December
31,
|
|
|
March
31,
|
|
|
|
2023
|
|
|
2023
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
5,539
|
|
|
$
|
7,152
|
|
Accounts
receivable
|
|
|
16,416
|
|
|
|
20,846
|
|
Unbilled
revenue
|
|
|
2,454
|
|
|
|
2,036
|
|
Employee retention tax
credit
|
|
|
1,672
|
|
|
|
2,085
|
|
Content
advances
|
|
|
8,477
|
|
|
|
3,724
|
|
Other current
assets
|
|
|
1,678
|
|
|
|
1,734
|
|
Total Current
Assets
|
|
|
36,236
|
|
|
|
37,577
|
|
Equity investment in A
Metaverse Company, a related party, at fair value
|
|
|
1,276
|
|
|
|
5,200
|
|
Property and equipment,
net
|
|
|
2,065
|
|
|
|
1,833
|
|
Intangible assets,
net
|
|
|
18,727
|
|
|
|
19,868
|
|
Goodwill
|
|
|
20,824
|
|
|
|
20,824
|
|
Content advances, net
of current portion
|
|
|
3,153
|
|
|
|
1,421
|
|
Other long-term
assets
|
|
|
943
|
|
|
|
1,265
|
|
Total
Assets
|
|
$
|
83,224
|
|
|
$
|
87,988
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
26,987
|
|
|
$
|
34,531
|
|
Line of credit,
including unamortized debt issuance costs of $69 and $76,
respectively
|
|
|
4,931
|
|
|
|
4,924
|
|
Current portion of
earnout and deferred consideration on purchase of
business
|
|
|
4,064
|
|
|
|
5,232
|
|
Operating lease
liabilities
|
|
|
440
|
|
|
|
418
|
|
Current portion of
deferred revenue
|
|
|
246
|
|
|
|
226
|
|
Total Current
Liabilities
|
|
|
36,668
|
|
|
|
45,331
|
|
Deferred consideration
on purchase, net of current portion
|
|
|
2,639
|
|
|
|
2,647
|
|
Operating lease
liabilities, net of current portion
|
|
|
531
|
|
|
|
863
|
|
Other long-term
liabilities
|
|
|
59
|
|
|
|
74
|
|
Total
Liabilities
|
|
$
|
39,897
|
|
|
$
|
48,915
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
Preferred
stock
|
|
$
|
3,559
|
|
|
$
|
3,559
|
|
Common
stock
|
|
|
192
|
|
|
|
185
|
|
Additional paid-in
capital
|
|
|
542,482
|
|
|
|
530,998
|
|
Treasury stock, at
cost
|
|
|
(11,978)
|
|
|
|
(11,608)
|
|
Accumulated
deficit
|
|
|
(489,341)
|
|
|
|
(482,395)
|
|
Accumulated other
comprehensive loss
|
|
|
(417)
|
|
|
|
(402)
|
|
Total stockholders'
equity of Cineverse Corp.
|
|
|
44,497
|
|
|
|
40,337
|
|
Deficit attributable to
noncontrolling interest
|
|
|
(1,170)
|
|
|
|
(1,264)
|
|
Total equity
|
|
|
43,327
|
|
|
|
39,073
|
|
Total Liabilities
and Equity
|
|
$
|
83,224
|
|
|
$
|
87,988
|
|
CINEVERSE
CORP.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(In thousands,
except for per share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended December 31,
|
|
|
For the Nine Months
Ended December 31,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
Revenues
|
|
$
|
13,276
|
|
|
$
|
27,882
|
|
|
$
|
39,268
|
|
|
$
|
55,478
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
|
|
5,464
|
|
|
|
14,411
|
|
|
|
17,097
|
|
|
|
29,859
|
|
Selling, general and
administrative
|
|
|
6,373
|
|
|
|
9,107
|
|
|
|
21,088
|
|
|
|
29,016
|
|
Depreciation and
amortization
|
|
|
1,012
|
|
|
|
924
|
|
|
|
2,787
|
|
|
|
2,908
|
|
Total operating
expenses
|
|
|
12,849
|
|
|
|
24,442
|
|
|
|
40,972
|
|
|
|
61,783
|
|
Operating income
(loss)
|
|
|
427
|
|
|
|
3,440
|
|
|
|
(1,704)
|
|
|
|
(6,305)
|
|
Interest
expense
|
|
|
(291)
|
|
|
|
(367)
|
|
|
|
(781)
|
|
|
|
(880)
|
|
Loss from investment
in Metaverse, a related party
|
|
|
(3,043)
|
|
|
|
—
|
|
|
|
(3,761)
|
|
|
|
(1,828)
|
|
Employee retention tax
credit
|
|
|
—
|
|
|
|
2,025
|
|
|
|
—
|
|
|
|
2,475
|
|
Other income
(expenses), net
|
|
|
147
|
|
|
|
(76)
|
|
|
|
(331)
|
|
|
|
(82)
|
|
Net (loss) income
before income taxes
|
|
|
(2,760)
|
|
|
|
5,022
|
|
|
|
(6,577)
|
|
|
|
(6,620)
|
|
Income tax benefit
(expense) expense
|
|
|
24
|
|
|
|
—
|
|
|
|
(12)
|
|
|
|
—
|
|
Net (loss)
income
|
|
|
(2,736)
|
|
|
|
5,022
|
|
|
|
(6,589)
|
|
|
|
(6,620)
|
|
Net income
attributable to noncontrolling interest
|
|
|
(41)
|
|
|
|
(8)
|
|
|
|
(94)
|
|
|
|
(35)
|
|
Net (loss) income
attributable to controlling interests
|
|
|
(2,777)
|
|
|
|
5,014
|
|
|
|
(6,683)
|
|
|
|
(6,655)
|
|
Preferred stock
dividends
|
|
|
(87)
|
|
|
|
(88)
|
|
|
|
(263)
|
|
|
|
(264)
|
|
Net (loss) income
attributable to common stockholders
|
|
$
|
(2,864)
|
|
|
$
|
4,926
|
|
|
$
|
(6,946)
|
|
|
$
|
(6,919)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.22)
|
|
|
$
|
0.55
|
|
|
$
|
(0.59)
|
|
|
$
|
(0.78)
|
|
Diluted
|
|
$
|
(0.22)
|
|
|
$
|
0.55
|
|
|
$
|
(0.59)
|
|
|
$
|
(0.78)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
of common stock outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,828
|
|
|
|
8,945
|
|
|
|
11,678
|
|
|
|
8,854
|
|
Diluted
|
|
|
12,828
|
|
|
|
8,945
|
|
|
|
11,678
|
|
|
|
8,854
|
|
Adjusted EBITDA
We define Adjusted EBITDA to be
earnings before interest, taxes, depreciation and amortization,
stock-based compensation expense, merger and acquisition costs,
restructuring, transition and acquisitions expense, net, goodwill
impairment and certain other items.
Adjusted EBITDA is not a measurement of financial performance
under GAAP and may not be comparable to other similarly titled
measures of other companies. We use Adjusted EBITDA as a financial
metric to measure the financial performance of the business because
management believes it provides additional information with respect
to the performance of its fundamental business activities. For this
reason, we believe Adjusted EBITDA will also be useful to others,
including our stockholders, as a valuable financial metric.
We present Adjusted EBITDA because we believe that Adjusted
EBITDA is a useful supplement to net income (loss) from continuing
operations as an indicator of operating performance. We also
believe that Adjusted EBITDA is a financial measure that is useful
both to management and investors when evaluating our performance
and comparing our performance with that of our competitors. We also
use Adjusted EBITDA for planning purposes and to evaluate our
financial performance because Adjusted EBITDA excludes certain
incremental expenses or non-cash items, such as stock-based
compensation charges, that we believe are not indicative of our
ongoing operating performance.
We believe that Adjusted EBITDA is a performance measure and not
a liquidity measure, and therefore a reconciliation between net
income (loss) from operations and Adjusted EBITDA has been provided
in the financial results. Adjusted EBITDA should not be considered
as an alternative to net income (loss) from operations as an
indicator of performance or as an alternative to cash flows from
operating activities as an indicator of cash flows, in each case as
determined in accordance with GAAP, or as a measure of liquidity.
In addition, Adjusted EBITDA does not take into account changes in
certain assets and liabilities as well as interest and income taxes
that can affect cash flows. We do not intend the presentation of
these non-GAAP measures to be considered in isolation or as a
substitute for results prepared in accordance with GAAP. These
non-GAAP measures should be read only in conjunction with our
consolidated financial statements prepared in accordance with
GAAP.
Following is the reconciliation of our consolidated net (loss)
income to Adjusted EBITDA (in thousands):
|
|
For the Three Months
Ended December 31,
|
|
|
For the Nine Months
Ended December 31,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Net (loss)
income
|
|
$
|
(2,736)
|
|
|
$
|
5,022
|
|
|
$
|
(6,589)
|
|
|
$
|
(6,620)
|
|
Add
Backs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
(benefit) expense
|
|
|
(24)
|
|
|
|
—
|
|
|
|
12
|
|
|
|
—
|
|
Depreciation and
amortization
|
|
|
1,012
|
|
|
|
924
|
|
|
|
2,787
|
|
|
|
2,908
|
|
Interest
expense
|
|
|
291
|
|
|
|
367
|
|
|
|
781
|
|
|
|
880
|
|
Stock-based
compensation
|
|
|
183
|
|
|
|
658
|
|
|
|
1,092
|
|
|
|
3,855
|
|
Loss from equity
investment in Metaverse, a related party
|
|
|
3,043
|
|
|
|
—
|
|
|
|
3,761
|
|
|
|
1,828
|
|
Employee
retention tax credit
|
|
|
—
|
|
|
|
(2,025)
|
|
|
|
—
|
|
|
|
(2,475)
|
|
Provision for
doubtful accounts
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
54
|
|
Other (income)
expense, net
|
|
|
(147)
|
|
|
|
76
|
|
|
|
2
|
|
|
|
82
|
|
Net income
attributable to noncontrolling interest
|
|
|
(41)
|
|
|
|
(8)
|
|
|
|
(94)
|
|
|
|
(35)
|
|
Transition-related costs
|
|
|
259
|
|
|
|
15
|
|
|
|
1,094
|
|
|
|
371
|
|
Mergers and
acquisitions costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
207
|
|
Adjusted
EBITDA
|
|
$
|
1,840
|
|
|
$
|
5,035
|
|
|
$
|
2,846
|
|
|
$
|
1,056
|
|
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SOURCE Cineverse Corp.