Exhibit 99.1
Cineverse Reports Second Quarter Fiscal Year 2024 Results
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, November 14, 2023 – 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:
1
Operational Developments During the Quarter
Operational Developments Subsequent to Quarter-End
2
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.”
3
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
4
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 |
|
5
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 |
|
6
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 |
) |
7