LOS
ANGELES, Aug. 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 first quarter ended June 30, 2023 ("Q1 FY 2024").
Q1 FY 2024 Highlights (all comparisons are to the fiscal
quarter ended June 30, 2022):
- Total revenues were $13.0
million, compared to $13.6
million, primarily due to a planned wind-down of
lower-margin streaming channels to focus resources on higher
performing channels and improve margins.
-
- Streaming, Digital and Podcast revenue increased 5.8% to a
record $10.5 million, primarily
driven by growth in our paid subscription streaming business, which
was up 44.7%.
-
- Digital Distribution services revenue rose 105.9% to
$3.7 million, driven by an increase
in new release titles and additional library licensing to
third-party streaming platforms.
- Total subscription revenues were $3.2
million, up 44.7%. Total subscribers to the Company's
streaming services were approximately 1.21 million, up 38%, driven
by the success of new release and library acquisitions for our
flagship enthusiast streaming services, particularly
our Screambox horror channel, and improved
performance from our documentary streaming service, Docurama,
which grew 42% during the quarter.
- Total ad-based revenue was $3.6
million, down 39.3%, primarily due to the aforementioned
planned wind-down of underperforming channels and related
businesses, and a one-time technology migration required by a key
platform partner in the quarter. The Company anticipates a return
to ad-based revenue growth subsequent to the impact of these
non-recurring events.
- The horror phenomenon Terrifier 2, released last fall,
continues to drive strong results across our entire home
entertainment distribution. The film has generated over
$11.2 million in revenue to the
Company to date. A late 2023 theatrical reissue of Terrifier 2 has
been planned, and the franchise follow-up, Terrifier 3, is targeted
for release in late 2024.
- Direct operating margin improved to 46.2%, compared to 45.9%,
in line with stated guidance for the fiscal year of 45% to
50%.
- Operating expenses declined $2.5
million or 13.6% to $15.7
million from $18.2 million,
primarily attributable to the Company's previously announced cost
reduction initiatives and streaming channel portfolio
optimization.
- Total operating loss declined by $1.9
million or 40.7% to $2.7
million from $4.6 million due
to our initiatives to reduce costs and improve margins.
- Net loss attributable to common stockholders narrowed to
$(3.6) million, or $(0.37) per share, from $(6.1) million, or $(0.69) per share.
- Financial condition overview:
-
- Cash and cash equivalents totaled $12.1
million at June 30, 2023.
- Stockholders' equity was $45.6
million, or $3.90 per
outstanding share at June 30,
2023.
- Digital content library was valued at $26 million to $30
million in a third-party appraisal, compared to a book value
of $2.9 million at June 30, 2023.
- As of August 14, 2023, the
Company had $0 long-term debt and a
$0 outstanding balance on its
$5 million revolving credit
facility.
Operational Developments Subsequent to Quarter-End
- Released MatchpointAI, Cineverse's AI-based platform and
marketplace that provides an unprecedented innovative blend of
proprietary and pre-integrated third-party AI tools to companies
looking for a premium, affordable path to scale global content
processing and delivery. MatchpointAI is a fundamental component of
Cineverse's long-term strategy and growth plan.
- Expanded partnership with Amagi to leverage Amagi CONNECT, the
premiere end-to-end FAST marketplace with global reach, where Amagi
will provide its portfolio of hundreds of FAST channels to the
flagship Cineverse streaming service and add Cineverse's portfolio
of streaming channels to the Amagi CONNECT marketplace.
- Closed three additional streaming channel and content
partnership deals with a major telecom company, broadcast group,
and a top 5 connected TV OEM.
- Bloody Disgusting consumer products is launching this October,
with a branded clothing line being sold in more than 600 Spencer's
Gifts retail locations nationwide. This new collection will be the
exclusive window display in all stores for three weeks beginning in
October.
- Announced an official Dead Space fiction podcast to launch on
the Bloody FM podcast network in partnership with leading game
publisher Electronic Arts. Dead Space was the best-selling new game
in January in the US, and the franchise has sold over 7 million
copies to date.
- Significantly expanded channel distribution, securing 16
channel placements with major distributors including Philo, SlingTV, Amazon's FreeVee, Vix, and
Samsung.
- Launched Cineverse Services India ("CSI"), a new business unit
that expands upon the Company's previous India presence, which is anticipated to help
generate approximately $7.5 million
in SG&A cost reductions in the second half of FY 2024 through
aggressive headcount offshoring initiatives. CSI is focused on
providing customer service, quality control, operations,
accounting, information technology, administrative and other
back-office functions to support Cineverse's cost-efficient
growth.
- Began the transition plan to relocate 60+ full-time domestic
positions to CSI, which we expect will make up 75% of the
aforementioned SG&A reductions as these roles are moved over
the next 6-8 months.
- Extended our line of credit with EastWest Bank, which was
previously set to expire on September 15,
2023. The maturity date on this facility is now September 15, 2024. The $5.0 million facility currently has a
$0 balance.
Management Commentary
Chris
McGurk, Cineverse Chairman and CEO, stated, "We are making
good progress toward our goals of reduced costs, improved margins
and sustained profitability. Despite some continued industry
headwinds during the fiscal first quarter, we were pleased to
report record revenue in our Streaming and Digital business
despite having fewer channels in our portfolio following our
previously announced plan to realign resources in our broad
26-channel streaming portfolio toward higher performing streaming
channels. As I have noted before, unlike many of our competitors
who have a single streaming channel and revenue model, our large
number of 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 bottom
line by eliminating channels that generate lower margin revenues.
We achieved direct operating margin of 46.2% for the quarter, which
is in line with our previously provided guidance range of 45% to
50% for the year. We also reduced operating costs by $2.5 million in the quarter, enabling us to
narrow our operating loss by $1.9
million or a 40.7% improvement versus last year. The launch
of Cineverse Services India is a key element to these cost-cutting
efforts, and we expect SG&A expenses will begin to reflect the
impact of the offshoring of our domestic headcount and backoffice
functions in the second half of FY 2024.
"At our core, Cineverse is a technology-first company, and we
are proud to have been at the forefront of innovation in the
entertainment space since entering the business over 20 years ago.
In recent months, we have announced notable partnerships with
premiere household names such as Amagi, TCL, GoPro and Sid &
Marty Krofft. Our technology was the
key reason these brands chose to work with Cineverse, and we are in
discussions with other high-profile potential partners, which we
believe will further validate our technology.
"We were thrilled to release MatchpointAI, offering content
owners and streaming services a comprehensive suite of
industry-leading AI capabilities that can eliminate expensive,
time-consuming labor-intensive work preparing film and television
assets for global distribution. This includes not only Cineverse's
own proprietary enterprise-grade content processing platform,
Dispatch™, but also fully integrated third-party AI tools from the
likes of OpenAI and VionLabs. We believe that Search and Discovery
improvements are the number one demand from streaming audiences
today, and we aim to become the leader in AI-based Search &
Discovery for the entertainment sector and are actively pursuing
opportunities that will allow us to deploy our industry-leading
technology assets and solidify our position in this critical area
for streaming consumers.
"We continue to pursue multiple high-margin growth channels with
the support of a fortified balance sheet, no debt, and a
valuable—and, we believe, underappreciated—asset in our extensive
content library that carries a third-party appraised value of
$26 million to $30 million, compared to the $2.9 million valuation carried on our books. In
addition to the recently exciting developments on the technology
side, we are also preparing for the re-release of Terrifier 2 this
fall, which will include a teaser for the next
installment—Terrifier 3—set for release in fall of 2024. We are
confident that our 360-degree marketing approach will remain a
crucial component of our theatrical and home entertainment
business' success and remain focused on executing on all our growth
initiatives, bolstered by our technology and reputation within the
industry, as the final wind-down of our legacy business comes to a
full close by the end of this fiscal year."
Erick Opeka, President and Chief
Strategy Officer of Cineverse, said, "As we refocus the Company on
profitable, sustainable growth driven by technology, we have made
significant strides this quarter to reduce operating costs by
eliminating unprofitable channels, expanding revenues from our
content library, and setting in motion our efforts to dramatically
reduce our SG&A costs over the remainder of the fiscal year,
most importantly by fully leveraging our unique and trusted asset
in Cineverse Services India, which provides us the opportunity to
offshore, not outsource, the majority of our headcount to generate
significant cost savings and workflow efficiencies. In the
meantime, we have continued to aggressively expand our partnerships
and revenues with our Matchpoint platform and are launching
additional new revenue streams in advertising, ecommerce, retail
and technology services in the current quarter. All of these
initiatives are crucial steps to achieving improved margins,
positive free cash flow and sustainable profitability by the end of
FY 2024."
Guidance
The Company is reiterating its previously provided guidance for
fiscal year 2024, which includes:
- Consolidated revenues between $62.0
million and $70.0
million;
- Direct operating margin, the excess of revenues over direct
operating expenses divided by revenues, between 45% to 50%;
and
- Adjusted EBITDA between $2.0
million and $4.0 million.
These guidance assumptions are based on, among other factors,
the Company's existing business, current view of existing market
conditions and assumptions for fiscal year 2024.
Conference Call
Cineverse will host a conference call at 4:30 p.m. ET today (Monday, August 14, 2023), during which management
will discuss the results of the fiscal first quarter ended
June 30, 2023. To participate in the
conference call, please use the following dial-in numbers:
U.S. (Toll-Free):
|
1-833-470-1428
|
Canada
(Toll-Free):
|
1-833-950-0062
|
International:
|
Additional global
dial-in numbers can be found here.
|
|
|
|
|
Access code:
|
223250
|
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 is a global streaming
technology and entertainment company with one of the world's
largest portfolios of streaming channels and content libraries, all
powered by its advanced, proprietary technology platform. Cineverse
currently features enthusiast brands for subscription video on
demand (SVOD), advertising-based video on demand (AVOD) and free,
ad-supported streaming television (FAST) channels. Cineverse
entertains consumers around the globe by providing premium feature
film and television series, enthusiast streaming channels and
technology services to some of the world's largest media, retail
and technology companies. For more information, please visit
www.cineverse.com.
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:
At Cineverse
Julie Milstead
424-281-5411
investorrelations@cineverse.com
The Equity Group Inc.
Carolyne Sohn
408-538-4577
csohn@equityny.com
CINEVERSE
CORP.
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
(In
thousands)
|
|
|
|
|
As of
|
|
|
|
June
30,
|
|
|
March
31,
|
|
|
|
2023
|
|
|
2023
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
12,129
|
|
|
$
|
7,152
|
|
Accounts receivable,
net
|
|
|
14,711
|
|
|
|
20,846
|
|
Unbilled
revenue
|
|
|
2,247
|
|
|
|
2,036
|
|
Employee retention tax
credit
|
|
|
1,773
|
|
|
|
2,085
|
|
Prepaid and other
current assets
|
|
|
7,637
|
|
|
|
5,458
|
|
Total Current
Assets
|
|
|
38,497
|
|
|
|
37,577
|
|
Equity investment in A
Metaverse Company, a related party, at fair value
|
|
|
5,200
|
|
|
|
5,200
|
|
Property and equipment,
net
|
|
|
2,075
|
|
|
|
1,833
|
|
Intangible assets,
net
|
|
|
19,188
|
|
|
|
19,868
|
|
Goodwill
|
|
|
20,824
|
|
|
|
20,824
|
|
Other long-term
assets
|
|
|
2,862
|
|
|
|
2,686
|
|
Total
Assets
|
|
$
|
88,646
|
|
|
$
|
87,988
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
29,867
|
|
|
$
|
34,531
|
|
Line of credit,
including unamortized debt issuance costs of $32 and $76,
respectively
|
|
|
4,968
|
|
|
|
4,924
|
|
Current portion of
deferred consideration on purchase of business
|
|
|
3,615
|
|
|
|
3,788
|
|
Current portion of
earnout consideration on purchase of business
|
|
|
1,526
|
|
|
|
1,444
|
|
Operating lease
liabilities
|
|
|
418
|
|
|
|
418
|
|
Current portion of
deferred revenue
|
|
|
221
|
|
|
|
226
|
|
Total Current
Liabilities
|
|
|
40,615
|
|
|
|
45,331
|
|
Deferred consideration
on purchase – net of current portion
|
|
|
2,868
|
|
|
|
2,647
|
|
Operating lease
liabilities, net of current portion
|
|
|
728
|
|
|
|
863
|
|
Other long-term
liabilities
|
|
|
59
|
|
|
|
74
|
|
Total
Liabilities
|
|
$
|
44,270
|
|
|
$
|
48,915
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
Preferred
stock
|
|
$
|
3,559
|
|
|
$
|
3,559
|
|
Common
stock
|
|
|
191
|
|
|
|
185
|
|
Additional paid-in
capital
|
|
|
539,997
|
|
|
|
530,998
|
|
Treasury stock, at
cost
|
|
|
(11,608)
|
|
|
|
(11,608)
|
|
Accumulated
deficit
|
|
|
(486,033)
|
|
|
|
(482,395)
|
|
Accumulated other
comprehensive loss
|
|
|
(480)
|
|
|
|
(402)
|
|
Total stockholders'
equity of Cineverse Corp.
|
|
|
45,626
|
|
|
|
40,337
|
|
Deficit attributable to
noncontrolling interest
|
|
|
(1,250)
|
|
|
|
(1,264)
|
|
Total equity
|
|
|
44,376
|
|
|
|
39,073
|
|
Total Liabilities
and Equity
|
|
$
|
88,646
|
|
|
$
|
87,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CINEVERSE
CORP.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(In thousands,
except per share data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months
Ended June 30,
|
|
|
|
2023
|
|
|
2022
|
|
Revenues
|
|
$
|
12,980
|
|
|
$
|
13,590
|
|
Operating
expenses
|
|
|
|
|
|
|
Direct
operating
|
|
|
6,987
|
|
|
|
7,356
|
|
Selling, general and
administrative
|
|
|
7,888
|
|
|
|
9,818
|
|
Depreciation and
amortization
|
|
|
822
|
|
|
|
1,000
|
|
Total operating
expenses
|
|
|
15,697
|
|
|
|
18,174
|
|
Operating
loss
|
|
|
(2,717)
|
|
|
|
(4,584)
|
|
Interest
expense
|
|
|
(295)
|
|
|
|
(133)
|
|
Decrease in fair value
of equity investment in Metaverse, a related party
|
|
|
-
|
|
|
|
(1,256)
|
|
Other expense,
net
|
|
|
(504)
|
|
|
|
(14)
|
|
Net loss before income
taxes
|
|
|
(3,516)
|
|
|
|
(5,987)
|
|
Income tax
expense
|
|
|
(20)
|
|
|
|
—
|
|
Net
loss
|
|
|
(3,536)
|
|
|
|
(5,987)
|
|
Net income attributable
to noncontrolling interest
|
|
|
(14)
|
|
|
|
(18)
|
|
Net loss attributable
to controlling interests
|
|
|
(3,550)
|
|
|
|
(6,005)
|
|
Preferred stock
dividends
|
|
|
(88)
|
|
|
|
(88)
|
|
Net loss
attributable to common stockholders
|
|
$
|
(3,638)
|
|
|
$
|
(6,093)
|
|
|
|
|
|
|
|
|
Net loss per share
attributable to common stockholders:
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.37)
|
|
|
$
|
(0.69)
|
|
Diluted
|
|
$
|
(0.37)
|
|
|
$
|
(0.69)
|
|
Weighted average shares
of common stock outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
9,879
|
|
|
|
8,771
|
|
Diluted
|
|
|
9,879
|
|
|
|
8,771
|
|
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 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 June 30,
|
|
|
|
2023
|
|
|
2022
|
|
|
|
(Unaudited)
|
|
Net
Loss
|
|
$
|
(3,536)
|
|
|
$
|
(5,987)
|
|
Add
Backs:
|
|
|
|
|
|
|
Income tax
expense
|
|
|
20
|
|
|
|
-
|
|
Depreciation and
amortization
|
|
|
822
|
|
|
|
1,000
|
|
Interest
expense
|
|
|
295
|
|
|
|
133
|
|
Stock-based
compensation
|
|
|
409
|
|
|
|
980
|
|
Decrease in fair value
of equity investment in Metaverse, a related party
|
|
|
-
|
|
|
|
1,256
|
|
Provision for doubtful
accounts
|
|
|
-
|
|
|
|
3
|
|
Other expense,
net
|
|
|
36
|
|
|
|
14
|
|
Net income attributable
to noncontrolling interest
|
|
|
(14)
|
|
|
|
(18)
|
|
Adjustments:
|
|
|
|
|
|
|
Transition-related costs
|
|
|
468
|
|
|
|
175
|
|
Mergers and
acquisitions costs
|
|
|
-
|
|
|
|
207
|
|
Adjusted
EBITDA
|
|
$
|
(1,500)
|
|
|
$
|
(2,237)
|
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multimedia:https://www.prnewswire.com/news-releases/cineverse-reports-first-quarter-fiscal-year-2024-results-301900134.html
SOURCE Cineverse Corp.