Total Revenue of $13.0
Million
Total Direct Operating Margin Increased to
64% from 42%
Recurring Direct Operating Margin Increased
to 56% from 30%
Operating Expenses Decreased by
$6.3 Million, or
34%
Adjusted EBITDA Increased by $3.7 Million, or 283%, to $2.4 Million
LOS
ANGELES, Nov. 14, 2023 /PRNewswire/ -- Cineverse
Corp. ("Cineverse" or the "Company") (NASDAQ: CNVS), a global
streaming technology and entertainment company, today announced its
financial results for the fiscal second quarter ended September 30, 2023 ("Q2 FY 2024").
Q2 FY 2024 Highlights (all comparisons are to the prior year
fiscal quarter ended September 30,
2022):
During the Quarter, the Company's initiatives to reduce
operating costs, optimize our streaming channel portfolio and
increase margins had a very positive impact on our financial
results. Operating costs and SG&A expenses declined markedly,
leading to significant increases in both total operating margin and
recurring operating margin excluding our legacy digital cinema
business. Operating profit, Adjusted EBITDA and Net Income
increased substantially over the prior year period as the Company's
cost reduction and margin improvement efforts more than offset the
revenue impact of optimizing our streaming channel portfolio:
- Direct operating margin increased to 64%, compared to 42%.
Excluding the impact of the Company's legacy digital cinema
equipment business, direct operating margin for recurring business
increased to 56%, compared to 30%.
- Operating expenses decreased $6.3
million, or 34%, to $12.4
million from $18.7 million,
primarily attributable to the Company's previously announced cost
reduction initiatives and streaming channel portfolio
optimization.
- SG&A expenses declined $2.8
million, or 29%, primarily driven by a reduction of 30
employment positions and tight spending controls.
- Last quarter, 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 profit increased by $5.3
million or 112% to $0.6
million of operating income from $(4.7) million of operating loss primarily due to
our initiatives to reduce costs and improve margins.
- Adjusted EBITDA increased by $3.7
million, or 283%, to $2.4
million.
- Net loss attributable to common stockholders narrowed to
$(0.4) million, or $(0.04) per share, from $(5.8) million, or $(0.65) per share.
- Total revenue was $13.0 million
versus $14.0 million, reflecting 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 52% to $3.5 million, driven by the continued success of
the company's enthusiast streaming services. Screambox horror
channel revenues increased by 356% as a result of new high-impact
programming. Total paid subscribers to our channels grew to 1.24
million, an increase of 32%.
- Advertising-based revenues declined 28% 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.
- Non-recurring revenues related to the Company's legacy digital
cinema equipment business were $2.4
million, or a decrease of 7%.
- Financial condition overview:
- Cash and cash equivalents totaled $8.6
million at September 30,
2023.
- Stockholders' equity was $45.9
million, or $3.71 per
outstanding share as of September 30,
2023.
- Digital content library valued at $26
million to $30 million in a
third-party appraisal, compared to a book value of $2.8 million at September
30, 2023.
Operational Developments During the Quarter
- Established Matchpoint Platform as a Service (PaaS) revenue
enablement mechanism including new sales and marketing
infrastructure.
- Greatly expanded MatchpointAI offerings through strategic
partnerships with next-generation technology providers to enhance
capabilities for Matchpoint customers with machine-learning and
automation tools. This includes Whip Media and automated scheduling
tool "Matchpoint MGX."
- Received recognition for developing and implementing Matchpoint
with a nomination for DEG's EnTech Innovation Award – which
recognizes a team or individual that identifies a problem and
creates a novel solution. Other nominees included executives from
Disney +, FOX Sports and NBCUniversal.
- Ramped up social medial monetization capabilities through
expanded partnership with leading YouTube network Valley Arm Media
– unlocking more opportunities to exploit channel assets.
- Launched two new premium streaming Channels – targeting highly
engaged fan audiences.
- Announced a new Matchpoint managed services partnership with
widely known, iconic "Dog Whisperer with Cesar Millan" series.
Operational Developments Subsequent to Quarter-End
- Announced an expanded partnership with Amagi – introducing a
market-defining package 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 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.
- Theatrical re-release of Terrifier 2, theatrical release of
Onyx the Fortuitous and the Talisman of Souls, Announced Terrifier
3 Theatrical Release date of Oct 25,
2024 in partnership with Bloody Disgusting.
- Expanded our subscription service offerings with the launch of
Midnight Pulp on Amazon Prime Channels, Comcast Xfinity and The
Roku Channel.
- Bloody Disgusting consumer products launched this October, with
a branded clothing line being sold in more than 600 Spencer's Gifts
retail locations nationwide.
Management Commentary
Chris
McGurk, Cineverse Chairman and CEO, stated, "Unlike many of
our competitors who only have a single streaming channel and
revenue model, 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 via eliminating channels that generate lower margin
revenues and focusing resources on higher return channels.
Implementation of this strategy, combined with a significant
reduction of $2.8 million in SG&A
drove the $6.3 million overall
operating cost reduction we achieved this quarter. That helped
generate a total direct operating margin of 64%, up from 42% last
year and exceeding our stated guidance of 45% to 50%. This also
enabled us to increase our operating profit by $5.3 million, or 112%, to $0.6 million and generate Adjusted EBITDA of
$2.4 million, up $3.7 million, or 283%. Clearly, our cost
reduction and margin improvement efforts are bearing significant
fruit, and we are far from done in this area as we drive toward our
goal of sustainable profitability."
McGurk continued, "The launch of Cineverse Services in
India, where we are in the process
of offshoring 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 improve
margins further. This is a unique competitive advantage that
Cineverse owns on the cost side of the ledger 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 improve significantly
as a result of this initiative."
Erick Opeka, President and Chief
Strategy Officer of Cineverse, added, "This quarter we doubled down
on our efforts to achieve sustainable profitability by further
winding down unprofitable channels and deals. We shuttered three
additional channels which had a demonstrable impact on margins and
EBITDA. Additionally, we continued to rationalize our headcount
through job combinations, redundant role eliminations, and the
shift of roles to our new offshore services hub in India. We
have also optimized and reduced our go forward content spend plans,
focusing on leveraging our recent acquisitions, deep library and
revenue sharing deals. All together, these will provide the base
for further margin improvements and provide a self-sustaining
channel ecosystem."
Opeka continued, "Beyond our cost containment efforts, we are
also focused on smart growth based on our extensive base of assets.
That includes leveraging one of our most valuable assets for
growth: our technology platform, Matchpoint. Our recent Amagi deal
not only validates the quality and importance of our technology
across the broader marketplace, it shows it is ready for prime
time. And while Amagi will position us well to tackle the
needs of major enterprise clients, we continue to focus our own
sales efforts among small and mid-market clients. All together,
these optimizations, combined with our growth efforts leveraging
our asset base, are the key drivers of reaching our profitability
goals by the end of this fiscal year."
Conference Call
Cineverse will host a conference call
at 4:30 p.m. ET today (Tuesday, November 14, 2023), during which
management will discuss the results of the fiscal second quarter
ended September 30, 2023. To
participate in the conference call, please use the following
dial-in numbers:
U.S.
(Toll-Free):
|
+1 404 975
4839
|
Canada
(Toll-Free):
|
+1 833 470
1428
|
International:
|
Additional global
dial-in numbers can be found on the CNVS site
|
Access code:
|
610027
|
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
|
|
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2023
|
|
|
2023
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
8,620
|
|
|
$
|
7,152
|
|
Accounts receivable,
net
|
|
|
12,377
|
|
|
|
20,846
|
|
Unbilled
revenue
|
|
|
2,423
|
|
|
|
2,036
|
|
Employee retention tax
credit
|
|
|
1,672
|
|
|
|
2,085
|
|
Content
advances
|
|
|
7,860
|
|
|
|
3,724
|
|
Other current
assets
|
|
|
1,550
|
|
|
|
1,734
|
|
Total Current
Assets
|
|
|
34,502
|
|
|
|
37,577
|
|
Equity investment in A
Metaverse Company, a related party, at fair value
|
|
|
4,482
|
|
|
|
5,200
|
|
Property and equipment,
net
|
|
|
2,072
|
|
|
|
1,833
|
|
Intangible assets,
net
|
|
|
19,143
|
|
|
|
19,868
|
|
Goodwill
|
|
|
20,824
|
|
|
|
20,824
|
|
Content advances, net
of current portion
|
|
|
2,617
|
|
|
|
1,421
|
|
Other long-term
assets
|
|
|
1,052
|
|
|
|
1,265
|
|
Total
Assets
|
|
$
|
84,692
|
|
|
$
|
87,988
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
25,804
|
|
|
$
|
34,531
|
|
Line of credit,
including unamortized debt issuance costs of $32 and $76,
respectively
|
|
|
4,904
|
|
|
|
4,924
|
|
Current portion of
deferred consideration on purchase of business
|
|
|
3,742
|
|
|
|
3,788
|
|
Current portion of
earnout consideration on purchase of business
|
|
|
82
|
|
|
|
1,444
|
|
Operating lease
liabilities
|
|
|
432
|
|
|
|
418
|
|
Current portion of
deferred revenue
|
|
|
273
|
|
|
|
226
|
|
Total Current
Liabilities
|
|
|
35,237
|
|
|
|
45,331
|
|
Deferred consideration
on purchase, net of current portion
|
|
|
2,868
|
|
|
|
2,647
|
|
Operating lease
liabilities, net of current portion
|
|
|
645
|
|
|
|
863
|
|
Other long-term
liabilities
|
|
|
59
|
|
|
|
74
|
|
Total
Liabilities
|
|
$
|
38,809
|
|
|
$
|
48,915
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
Preferred
stock
|
|
$
|
3,559
|
|
|
$
|
3,559
|
|
Common
stock
|
|
|
192
|
|
|
|
185
|
|
Additional paid-in
capital
|
|
|
542,212
|
|
|
|
530,998
|
|
Treasury stock, at
cost
|
|
|
(11,978)
|
|
|
|
(11,608)
|
|
Accumulated
deficit
|
|
|
(486,477)
|
|
|
|
(482,395)
|
|
Accumulated other
comprehensive loss
|
|
|
(414)
|
|
|
|
(402)
|
|
Total stockholders'
equity of Cineverse Corp.
|
|
|
47,094
|
|
|
|
40,337
|
|
Deficit attributable to
noncontrolling interest
|
|
|
(1,210)
|
|
|
|
(1,264)
|
|
Total equity
|
|
|
45,883
|
|
|
|
39,073
|
|
Total Liabilities
and Equity
|
|
$
|
84,692
|
|
|
$
|
87,988
|
|
CINEVERSE
CORP.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(In thousands,
except for per share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months
Ended September 30,
|
|
|
|
For the Six
Months
Ended September 30,
|
|
|
|
2023
|
|
|
2022
|
|
|
|
2023
|
|
|
2022
|
|
Revenues
|
|
$
|
13,012
|
|
|
$
|
14,006
|
|
|
|
$
|
25,992
|
|
|
$
|
27,596
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
|
|
4,646
|
|
|
|
8,092
|
|
|
|
|
11,633
|
|
|
|
15,448
|
|
Selling, general and
administrative
|
|
|
6,827
|
|
|
|
9,641
|
|
|
|
|
14,715
|
|
|
|
19,459
|
|
Depreciation and
amortization
|
|
|
953
|
|
|
|
984
|
|
|
|
|
1,775
|
|
|
|
1,984
|
|
Total operating
expenses
|
|
|
12,426
|
|
|
|
18,717
|
|
|
|
|
28,123
|
|
|
|
36,891
|
|
Operating income
(loss)
|
|
|
586
|
|
|
|
(4,711)
|
|
|
|
|
(2,131)
|
|
|
|
(9,295)
|
|
Interest
expense
|
|
|
(195)
|
|
|
|
(380)
|
|
|
|
|
(490)
|
|
|
|
(513)
|
|
Decrease in fair value
of equity investment in
Metaverse, a related party
|
|
|
(718)
|
|
|
|
(572)
|
|
|
|
|
(718)
|
|
|
|
(1,828)
|
|
Other income (expense),
net
|
|
|
26
|
|
|
|
8
|
|
|
|
|
(478)
|
|
|
|
(6)
|
|
Net loss before income
taxes
|
|
|
(301)
|
|
|
|
(5,655)
|
|
|
|
|
(3,817)
|
|
|
|
(11,642)
|
|
Income tax
expense
|
|
|
(16)
|
|
|
|
-
|
|
|
|
|
(36)
|
|
|
|
-
|
|
Net
loss
|
|
|
(317)
|
|
|
|
(5,655)
|
|
|
|
|
(3,853)
|
|
|
|
(11,642)
|
|
Net income attributable
to noncontrolling interest
|
|
|
(40)
|
|
|
|
(9)
|
|
|
|
|
(53)
|
|
|
|
(27)
|
|
Net loss attributable
to controlling interests
|
|
|
(357)
|
|
|
|
(5,664)
|
|
|
|
|
(3,906)
|
|
|
|
(11,669)
|
|
Preferred stock
dividends
|
|
|
(88)
|
|
|
|
(88)
|
|
|
|
|
(176)
|
|
|
|
(176)
|
|
Net loss
attributable to common stockholders
|
|
$
|
(445)
|
|
|
$
|
(5,752)
|
|
|
|
$
|
(4,082)
|
|
|
$
|
(11,845)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.04)
|
|
|
$
|
(0.65)
|
|
|
|
$
|
(0.37)
|
|
|
$
|
(1.34)
|
|
Diluted
|
|
$
|
(0.04)
|
|
|
$
|
(0.65)
|
|
|
|
$
|
(0.37)
|
|
|
$
|
(1.34)
|
|
Weighted average shares
of common stock outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,376
|
|
|
|
8,845
|
|
|
|
|
11,118
|
|
|
|
8,808
|
|
Diluted
|
|
|
12,376
|
|
|
|
8,845
|
|
|
|
|
11,118
|
|
|
|
8,808
|
|
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 to
Adjusted EBITDA (in thousands):
|
|
For the Three
Months
Ended September 30,
|
|
|
|
For the Six
Months
Ended September 30,
|
|
|
|
2023
|
|
|
2022
|
|
|
|
2023
|
|
|
2022
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
Net
Loss
|
|
$
|
(317)
|
|
|
$
|
(5,655)
|
|
|
|
$
|
(3,853)
|
|
|
$
|
(11,642)
|
|
Add
Backs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
16
|
|
|
|
-
|
|
|
|
|
36
|
|
|
|
-
|
|
Depreciation and
amortization
|
|
|
953
|
|
|
|
984
|
|
|
|
|
1,775
|
|
|
|
1,984
|
|
Interest
expense
|
|
|
195
|
|
|
|
380
|
|
|
|
|
490
|
|
|
|
513
|
|
Stock-based
compensation
|
|
|
499
|
|
|
|
2,218
|
|
|
|
|
909
|
|
|
|
3,198
|
|
Decrease in fair value
of equity investment in Metaverse,
a related party
|
|
|
718
|
|
|
|
572
|
|
|
|
|
718
|
|
|
|
1,828
|
|
Provision for doubtful
accounts
|
|
|
-
|
|
|
|
44
|
|
|
|
|
-
|
|
|
|
47
|
|
Other (income) expense,
net
|
|
|
(26)
|
|
|
|
(8)
|
|
|
|
|
148
|
|
|
|
6
|
|
Net income attributable
to noncontrolling interest
|
|
|
(40)
|
|
|
|
(9)
|
|
|
|
|
(53)
|
|
|
|
(27)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition-related
costs
|
|
|
368
|
|
|
|
182
|
|
|
|
|
835
|
|
|
|
357
|
|
Mergers and
acquisitions costs
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
207
|
|
Adjusted
EBITDA
|
|
$
|
2,366
|
|
|
$
|
(1,292)
|
|
|
|
$
|
1,005
|
|
|
$
|
(3,529)
|
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/cineverse-reports-second-quarter-fiscal-year-2024-results-301988198.html
SOURCE Cineverse Corp.