Q4 2023 Cineverse Corp Earnings Call
<unk> market, the movie and an incredibly cost effective way.
We promoted the film not just on screen box, but across our portfolio of channels and they are more than 70 million monthly viewers and billions of AD impressions, while bloody disgusting our in house for group created and implemented a viral marketing campaign for their huge social base of core enthusiastic and Influencers.
That was enormously successful.
The film was featured on the Howard Stern show and the New York Times people magazine and Saturday among many many others and became a viral sensation.
In essence, we created several million dollars worth of paid media buy smartly, leveraging our assets and expertise we call. This our 360 degree marketing approach and believe it will be fully applicable to the other genres, where we have a channel base and access to millions of enthusiasts and influencers such as.
Faith and family business and Asian content.
Most importantly, all of this received notice in the entertainment industry, adding to the company's positive momentum and solidifying the idea that <unk> has now become a key destination for important IP.
That's why in addition to recently announced distribution and technology deals with partners such as Gopro Tcl, we've seen a lot of new partnerships and M&A opportunities emerged in the last 90 days.
Some of these we've announced already such as the highly anticipated franchise sequel terrified three.
Which we are planning to tease to horror fans as part of the re release a clarifier to next fall.
And also the beloved Sid and Marty Krofft library, which will form the basis of a new <unk> streaming channel.
We are also close to signing a deal for distribution and channel rights for one of the most loved successful and profitable nonfiction TV brands of all time.
Also a highly valuable and recognizable children's IP library.
And also an iconic core brand and library to complement our existing core assets for all of these deals alone. We beat out competing offers from at least three major studios and a major cable conglomerate.
These time sensitive competitive opportunities are the reason we did our recent equity raise even though what we believe is significantly undervalued share price. We did not want to take on debt and we did not want to lose these properties to our studio competitors as they are a key part of the fuel for our future.
We needed the funds to invest in our future immediately and maintaining the company's momentum.
Going forward, we are committed to finding alternatives to finance content acquisitions that provide more capital and do not require us to enter the equity market again.
To that end, we've been working on developing a series of multimillion dollar off balance sheet content funds to provide financing for our film and television acquisition efforts. These would be separate funds for horror faith and family and catalog content.
There are no guarantees we will close these deals but our initial meetings at the Cannes Film Festival to sell in the first fund dedicated to horror generated very significant interest in our view.
In addition, we are looking at project specific financings for higher budget and higher profile films and TV series in return for financial participation in the projects.
Also we are in conversations with potential investors and our faith and family and horror businesses, who might also bring content to the table.
Stay tuned for more on all of these initiatives in the coming months.
Ultimately our goal is to be able to completely financed the growth of our library and content acquisitions through internal cash flow.
The second area I want to cover now is our initiative to improve margins streamline costs and generate sustained profitability.
This is the company's overarching goal.
With no long term debt and a strong pipeline of new premium content channels and technology partners. Our plan is to achieve sustainable long term profitability by the end of fiscal year 2024.
We have mobilized the company now to target more than $10 million in annual operating cost savings by SG&A cuts operating deal renegotiations that leverage our vastly increased scale and through channel portfolio optimization.
Much of these savings will come from the now nearly complete full integration of the extremes content and channel company acquisitions, we made over the last three years, including <unk> Digital media rights screen box and Duck. These acquisitions brought us multiple new streaming channels more than 15000 hours of content and <unk>.
<unk> scale.
At the same time these acquisitions brought increased operating cost that we identified as savings opportunities by a full integration.
Which we are now approaching.
For example, since late August we've already reduced our workforce by 20% with more significant savings to come.
Eric will speak to the efforts we are implementing on the revenue side to generate high margin new sources of revenue and our advertising podcasts and other businesses. However on the cost side, we're already seeing the results of our efforts take shape.
This quarter, our gross margin was 45% in our core business, excluding legacy digital cinema.
An increase of 700 basis points versus the fourth quarter of last fiscal year and much higher than our last sequential quarter.
Our direct operating expenses and SG&A decreased from last year versus a higher revenue number. We are very pleased with that progress and are committed to improving it even further.
Although competitively our gross margin percentage is higher than most of our competitors, we want to increase it further.
To that end, we're also committed to sacrificing lower margin revenues for higher margin growth and profitability as we have already called some of the underperforming channels in our portfolio. So we can focus our resources on the high performers.
Unlike our competitors, we have multiple streaming channels 26 and correct.
Wide diversity of channels genres, and deal structures and multiple revenue streams that allow us to undertake a true portfolio management approach to the business.
As most of our competitors generally have only one channel in just one or two revenue streams, and therefore cannot replicate our portfolio approach.
Another important initiative, we are undertaking to streamline our cost structure, while improving margins and efficiencies.
Further leverage.
One of the company's most important assets sooner versus India.
We have already talked on these calls before about how our industry, leading content distribution and streaming technology platform match point will be a huge part of future value creation.
From a cost efficiency standpoint match point is unparalleled as saving significant cost for us already.
We're also planning to leverage that technology with third party partners like our recent deal with Tcl one of the largest global TV and mobile device manufacturers.
As the size of our content catalog continues to grow at a rapid pace, we are investing and developing next generation search and discovery technology, using AI machine learning and computer vision for the creation of enhanced contextual metadata and more.
More news on this initiative will be coming shortly.
Our match point technology was developed by our talented team of experienced engineers from the center versus India group based in Calcutta.
After having worked with them for nine years and fully owning the operation for the last two and a half years. We are convinced that <unk> can play an even bigger role in the company's future.
To that end, we are going to be much more aggressive and consolidating offshore in India. Many of our current outsourced workflows and back office head count in the United States through the creation of Senator services India.
We believe this move could potentially save the company multi millions of dollars.
<unk>, India is already a high performing asset for the company and we strongly believe.
And in addition to cost savings this move could potentially streamline our current workflows and increase efficiencies even further.
And with that I'll now turn it over to jobs.
Thank you Chris I'll start by reviewing our financial results for the full fiscal year 2023, and briefly go over those at the fourth quarter.
For the fiscal year ended March 31, 2023 centers reported consolidated revenue of $68 million, an increase of 21% from $56 1 million in the prior fiscal year.
Content and entertainment accounted for more than 82% of revenue in fiscal year, 'twenty three compared to over 67% of revenue in fiscal year 'twenty two.
Both in our continuing operations was driven by organic user growth New film performance as Chris mentioned, increasing market demand for Senate persons extensive connected TV AD inventory and the launch of new streaming channels versus the prior year.
Total streaming and digital revenue increased 47% to a record $44 million, primarily as a result of an expanded channel portfolio increased platform distribution advertising revenues in paid subscriptions.
Eric will provide additional detail on the operational drivers behind our financial results.
Streaming revenue of $32 two.
$2 million on a standalone basis increased 59% over last year and 230% on a two year basis exceeding our previous long term guidance of 50% annual streaming revenue growth per year.
Net loss attributable to common shareholders was negative $10 1 million or negative $1 13 per diluted per diluted share compared to net income attributable to common shareholders of $1 8 million or <unk> 20 per diluted share in the prior fiscal year.
This was primarily due to increased operating expenses from the acquisitions, we made and the winding down and subsequent decrease in revenue contributions from the legacy cinema equipment business.
Adjusted EBITDA was $1 million in fiscal year 2023, compared to adjusted EBITDA of $11 million in the prior fiscal year as a result of the increased net loss caused by an increase in total operating expenses most of which were related to the investments, including eight acquisitions of content channel and technology company.
We made to support the company's growth as Chris described earlier.
Increased opex, but the content and entertainment segment compared to prior year was primarily due to $8 3 million higher content licensing costs, including royalties participation in distribution expenses related to the continued growth in revenue noted above as well as $2 $9 million increase in expense related to <unk>.
Manufacturing fulfillment.
SaaS of Terrify return.
Moving to the quarter.
For Q4 fiscal 2023, we reported consolidated revenue of $12 $5 million.
Compared to $16 9 million in the prior year period, and $27 9 million in the prior sequential quarter Q3 of fiscal 'twenty three.
Q4 is typically a weaker quarter following the peak holiday season. In Q3 Q3 also saw significantly higher revenue contributions from the legacy cinema equipment business of $7 2 million as well as $7 6 million from the initial release of terrifying.
We also saw only $8 million incentive cinema equipment revenue in Q4 fiscal 2003 compared to $6 7 million in the prior year period.
As Chris noted taking that factor into account Q4 revenues looked much more in line with historical seasonality and growth.
Content and entertainment revenue was 14, 5% to $11 $7 million and streaming and digital revenue increased 18, 7% to $7 $3 million, primarily driven by increased contributions from DMR. Following its acquisition in March of 2022.
And an eight 1% increase in base distribution revenue due to the theatrical success of tariff clarity.
Content and entertainment gross margin improved to a record 45% in the quarter, an improvement of 700 basis points over the prior year quarter, driven by targeted reductions in operating costs as.
As Chris mentioned total operating expenses improved in the quarter declining to $15 2 million from $18 $4 million in Q4 fiscal year 'twenty two.
Net loss attributable to common shareholders of negative $3 2 million or negative 35 cents per diluted share compared to net loss attributable to common shareholders of negative $2 6 million or <unk> 30 per diluted share as a result of lower revenues and adjusted EBITDA loss was negative <unk> 9 million.
Compared to adjusted EBITDA of $3 6 million.
We had $7 2 million in cash and cash equivalents on our balance sheet as of March 31, 2023 with.
We previously announced that we completed an equity financing on June 16th raising approximately $8 million in proceeds and we maintain a small revolving working capital facility of additional dry powder for key content acquisition, we have no long term debt moved.
Moving to guidance, we felt it was important for us to set more specific financial targets. So the investment community can better gauge our progress in the quarters to come.
We have narrowed and refined previously announced financial objectives and have outlined revenue gross margin and adjusted EBITDA guidance for the current fiscal year, ending March 31, 2024, or our fiscal year 2024.
The company expects consolidated revenue of between $62 million and $70 million for fiscal year 'twenty four.
With content and entertainment revenue, representing 95% or more of consolidated revenue.
This compares with consolidated revenue of $68 million in fiscal year, 'twenty, three with content and entertainment, representing 82% of total revenue or $56 million.
While we anticipate some negative impact on margins following the sunsetting of the legacy cinema equipment business and ongoing investments in content distribution and technology, we expect gross margins of between 45 and 50% for fiscal year 'twenty four as compared to gross margin of 47% in fiscal year, 'twenty three which.
Includes the legacy cinema equipment business, excluding that business margin was 36%.
We continue to make progress on our cost reduction initiatives and anticipate that the full effects of these savings will be realized in Q3 fiscal 'twenty four.
We aim to maintain opex at a certain percentage of consolidated revenue on an ongoing basis to ensure that we are making prudent investment decisions in line with the growth of our business.
Adjusted EBITDA is expected to range between positive $2 million and positive $4 million in fiscal 'twenty, four which compares to adjusted EBITDA loss of $8 6 million in fiscal 'twenty, three which excludes the legacy digital.
The legacy cinema equipment business. Please keep in mind. These guidance assumptions are based on among other factors the company's existing business current you have existing market conditions and assumptions for fiscal year 2024 with that I'll turn the floor over to Eric.
Thank you John and thanks, everyone for joining the call today.
First let me briefly discuss the current streaming business climate, and then I'll discuss our topline streaming business results and provide some key strategic initiatives that we'll be focusing on to achieve the guidance John just laid out.
So regarding the current operating climate as we all know the current macroeconomic climate assisted companies away from the growth at all cost strategies that were prevalent for most of the last decade.
This has been very true and streaming as company designed to take on net Flix in later, Hulu and Youtube for advertising dollars and subscribers.
This was also true in specialty streaming our arena and many companies took on considerable debt loads the purchase to purchase assets at peak valuations.
However, our strategies of how to shift the companies are now focused on cost savings and deleveraging AD dollars have also taken a hit and consumers are paring back on discretionary spending.
<unk> subscriptions.
In the face of all this I believe our diversified approach to streaming combined with the technological ability to achieve superior margins versus our micro cap peers has and will continue to enable us to outperform in this fiscal year and.
And for years to come.
For example for the standard Media Index released just a few days ago AD revenues were down an average of seven 4% during calendar Q1 or our fiscal Q4.
However.
Due to the efforts of our AD ops team are match technology and expanded distribution efforts.
We were able to drive AD impression growth by an increase of 14, 6% a significant performance margin over the industry prevailing rates.
We did see CCM in single digit negative growth on the third party platforms, where we don't control the advertising.
The part where we do directly control, we're greatly able to outperform the market.
Additionally, our portfolio and enthusiast strategy on the subscription side of the business.
Are typically non correlated to macro and market conditions. For example, we grew our horror service screen box subscriptions, 438% year over year. Despite a softer overall industry subscription growth rate. Our thesis is that the engagement and loyalty of enthusiast consumers that are invested in personal fan.
<unk>.
We will ultimately lead to lower long term churn rates and brand loyalty and it's been as have been proven in our horror faith verticals.
So to sum it up no streaming company can ever be immune from a world in which they operate.
But our diversified portfolio approach and busiest properties along with our technical abilities, leading to superior margin ability means we can thrive in conditions that are going to prove challenging for our competitors, especially those that are over leveraged.
Now, let's discuss the business highlights during the quarter.
First total streaming minutes the quarter rose to approximately $3 billion up 31% over the prior year quarter and 73% sequentially. This can be directly attributed to the expansion of our services in recent quarters with partners like Roku Pluto.
Pluto TV and Amazon.
Additionally, our investment in exclusive and original content, along with premium library content led to increased engagement and watch times and this directly impacted growth.
Total subscribers to the company's subscription video streaming services increased approximately 124 million, representing an increase of 28% over the prior year quarter in line with expectations. As noted earlier. This was mainly driven by the 438% growth in screen box on the back of the clarifier to release the.
Fiber growth is partially offset by an expected seasonal decline of approximately 50 6K, low ARPA third party subs.
Particularly around Gov, which had a minimal impact on revenue and the only affected the top line sub number.
During the quarter, we continued to optimize our streaming portfolio like any portfolio, we look to rebalance the composition by adding new high profile potential concepts, while eliminating unprofitable unprofitable properties.
In the current year, so far we've added through approval and gopro to mix both of which we hope to launch later in the calendar year.
During the quarter, we made some adjustments to our own portfolio.
First we wound down the doctor on a linear channels, we founded a poor candidates through linear format.
Channel continues to live on successfully is enough spot mainline service, where it's driving we also shut down con TV anime, where we merged it with a much larger and more popular anime service retro cross, which came to the DMR acquisition.
This allowed us to have our operation cost and improve the rest of the retro crush offering.
Lastly, we ended the relationship management Tech and ops for the core TV streaming service.
Going to continue to evaluate channel performance and change the portfolio as needed throughout the year to improve overall profitability and increase margins.
We continue to expand the universe podcasting business with our emphasis on one of the fastest sub genres of shows audio dramas.
We now reach more than 90 million downloads to date across more than 30 shows and rapidly becoming one of the most important networks in this space.
After the quarter end, we had a top 50 podcasts with re Dracula a modern take on the classic brand stroke are novel and also entered into a deal with electronic arts to bring their $1 billion franchise dead space in the audio fiction World.
We expect to see many more brands and launches like that come in this year. We've also become a major player in the scripted podcast category as we noted our schoemaker watching society was picked by Apple as a top podcasts.
Over the last year, and we had more than five shows in Spotify is top 50 fiction charts.
We're going to continue to scale this business with forthcoming interlanguage launches of <unk> and the launch of shows including the new living dead property from Georgia era, and many more to come.
Now let me just talk about the company for part strategic plan to keep revenue growth going improve gross margins and delivered positive EBITDA, while we drive innovation in the new fiscal year.
On the revenue side as I noted earlier, our goal is to continuing to find and launched new partnerships to add both new channels to the portfolio add significant content to our family of channels, including center versus <unk>.
So far as Chris noted earlier, we've added some great brands the brands that fit that bill, including Sid and Marty Krofft entire library.
<unk> entrepreneur Damon Dash, New African American oriented streaming service based on his pioneering cultural brands entrepreneur TV in partnership with entrepreneur magazine and Gopro New actions for channel partners partnership with the named face Technology brand.
Chris alluded to we have several additional imminent channels, all of which bring highly valuable instantly recognizable IP and brands.
Our second key initiative is scaling up our third party advertising and distribution business.
Our goal is not only to build and operate new channels with partners, but to expand the monetization for third party channels and podcasts that need help on AD sales and distribution.
This business is capex light with very high margins and we're seeing incredible interest in this offering as we bring it to market we.
We put in place a great team and we're really making some announcements in the coming weeks on this specific effort.
Third we're going to continue to expand our subscriber base with a focus this year on the for Asia and in faith and family verticals. Our goal is to expand the content in these verticals by utilizing as Chris mentioned off balance sheet risk remote vehicles to acquire and finance the content, which will reduce the company's need for growth capital.
Our focus on driving new subscribers will be a mix of strategic partnerships with third party platforms hardware Oems such as our recent tcl deal as well as focus on ROI driven customer acquisition marketing.
Fourth we're continuing to drive the expansion of sand versus since we last outlined our mission of bringing the 90% of users.
Next to users they can't find on the major streamers are bigger peers have shown exactly why this model as needed.
From more than 500 hours of shows being pulled from Disney plus Hulu and Max to the massive constant Turner classic movies access to broad based media choices is under attack given our massive library and technological prowess, we're perfectly suited to continue executing on this strategy.
Launched just last September we're already a top 10 streaming service in terms of content volume and breadth.
Okay.
One last point I want to mention is our commitment to technological innovation.
While most of our peer companies from the largest to smallest are spending their time figuring out how to build scale infrastructure and digital supply chain.
We saw a more than six years ago.
Moving on to the next generation of capabilities and features our team of engineers includes talented data scientists who are tasked to build the next generation of streaming technologies with a focus on solving search discover ability and personalization streaming experience.
Utilizing machine learning and AI.
Our long term goal is simple we want to make us using our services funding unique and experience at the movies and shows himself.
Cinema is deeply rooted in our company and employee DNA and we are laser focused on bringing that magic and collective experience of the movie to the experience at home.
We can't wait to show and tell you what we've been working on later this year.
With that operator, let's open it up for Q&A.
Yeah.
If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one as a reminder, youre using a speakerphone. Please remember to pick up your handset before asking your question.
We will talk to you briefly as questions are registered.
The first question is from the line of Dan <unk> with Benchmark Company. Your line is now open.
Okay, great. Thanks.
Good afternoon.
First question for you guys is just around the content acquisition strategy.
So you do the race.
I don't know if you guys are willing to comment at least directionally on how much of that was for tariff fire three but obviously there is some incremental additions to that and it sounds as the way you put it Chris the competitive bidding process. So maybe you can just talk about.
Expected ROI on that spend tiny realization and just generically why you guys can outbid the competition and flow it through your ecosystem.
The winning bid price.
Well those were a lot of questions all wrapped up.
Dan, but thank you so.
The tariff fire.
<unk> is a big chunk.
Of that race.
Of all the things we got a notice in the company as I mentioned in my remarks, the performance of tariff prior to get noticed across the industry.
I've, probably been involved in 500 or more films in my career, both big and small across the industry at the major studios and the independents I worked at and I, probably never been involved in such a high ROI. So.
And a film that has such a remarkable marketing spend to box office ratio.
We spent $100000 in marketing that movie.
The rest of it was our viral marketing campaign.
$15 million at the box office. So those are remarkable economics.
That were noticed by just about everybody in the industry. So we ended up.
In a situation where there were competitive bids.
That reflected.
A lower ROI than what we achieved on the movie.
But we so we stepped up.
Paid a lot more for the movie. This movie then we did.
Prior to but remember what we're doing is we're fostering a franchise.
By having tariff higher three and tariff higher too.
We're able to package and promote each and achieve bigger results on each one for instance, as I mentioned, we're going to reissue terrify opportunity.
Next fall.
We'll have a teaser clarifier III.
And the biggest upside from it Eric described was its impact on our streaming channel screen box.
Subscriptions were up 438% on screen box and they stuck directly attributable.
To clarify that too.
And that's a real annuity for us so even outside of our streaming business, we target more than a 30% ROI on every acquisition that we make.
And as I said I think the most important thing that we're trying to do right now.
Is figure out ways to finance our acquisition strategy through these off balance sheet vehicles that I mentioned in the air.
Rick mentioned and also to do single project financings.
Where we bring in partners for higher budget projects. So we don't have to go to the equity markets. Like we did this time, which was principally a timing issue because all of these opportunities came together essentially at once.
And we think that'll be a big factor going forward to enable us to continue to bring this premium content.
Without diluting the company.
And service our channels, which is really the most important reason why we are doing as.
We're willing to give away some of the upside in traditional distribution if it drives the kind of subscribers to our channels that tariff prior to growth to screen box.
Got it.
Thanks, Chris and then just on the cost savings efforts.
I think certain.
We've been looking for that inflection point, John I don't know if I caught exactly your comments right on the timing I don't know if you meant that the full flow through would be next year for what Chris called out $10 million in savings annualized savings. So correct me if I have that wrong.
In general the cadence of recognizing those seething.
On a go forward basis, as we look into next year.
This fiscal 'twenty four how much contribution to the topline from the new stock versus.
Organic growth and against that savings drives kind of the EBITDA that you've arrived at.
Sure, let me speak to the cost savings first so the $10 million is what we expect to realize through the fiscal year in terms of total SG&A savings.
Based on our initiatives.
However, as we continue to grow certainly we'll be investing against that new revenue.
That will.
Commensurately go against some of that cost savings as we invest in revenue generating.
Folks.
Processes so.
So it will be throughout the year in terms of the cadence.
But that's our that's our goal for this year. The second part of your question could you repeat that for me.
Pretty much encompasses it John I just wanted to understand the balance of some of the new stuff contributing to the revenue outlook, but also.
You would just address state investments.
New revenue generating initiatives against <unk>.
G&A savings.
And last one I guess and then I'll step aside.
Just for Eric.
Thanks for the color on the marketplace.
Talk about that quite a lot.
Sort of waiting for something sort of marquee headline anything I know you guys are cheaper.
In the packaging industry. So is there anything that kind of think about that might be on the way for match point specifically.
Sure sure. So I think one of the things that get.
When we talk about match point.
Sometimes it can seem quite a more if that's what it is and when it does but I think the best way to really think about what match point is.
Think of it as almost like an operating system.
Combined with the supply chain for streaming so it's an end to end solution.
And it's really been designed to operate that is an incredible amount of scale.
Part of that's part of the reason why we're working with a partner like Tcl, which is the second largest TV manufacturer globally after Samsung.
The scale of match point on the amount of processing that it can do on video.
Incidentally makes it one of the most compelling platforms for next generation technology rights as you think about.
How to create large language model datasets or other things that youre going to use for.
New experiences for users new user interfaces to interactive content do you need to be able to process a tremendous tremendous amount of video audio visual data.
Just the signs up and our engineering team that built the product happen to be.
Phd data researchers on big data.
And worked on these big problems for MTR like a decade ago.
Video side, so we've really pretty rapidly adapting the technology to take advantage of this.
One of the more compelling elements as well.
While most partners out there are trying to figure out how to get a basic search box to work.
We're doing some pretty pretty extensive.
Machine learning tools to find.
Ideal captioning point too.
<unk> third party.
Language libraries, and other tools too.
Too deeply and code metadata, so the level of things that we're doing.
Scott we initially built to make our lives easier. We're finding are the ideal pool that have have really generated some some market opportunities that big players are interested in so we think thats going to be a very significant opportunity for us.
I would say pretty rapidly just given some of the relationships and conversations we've already announced like Tcl and others in.
And that we're having right now so.
If you think about it.
Chris mentioned nine years, we've been investing in <unk>.
Capability technology for almost a decade and really with the last few years.
It has come to a scale and an endpoint where.
Making it a market product.
Is.
Imminent.
And I know, that's something that we've been talking about for years, but market forces around.
The needs around processes take large amounts of data around video.
Have really opened up some opportunities that we werent, even contemplating six months ago. So it's a pretty exciting time on that.
Also super helpful. Thanks, everyone appreciate it.
Okay.
Thank you for your question.
Next question is from the line of Brian <unk> with Alliance Global Partners. Your line is now open.
Great.
You can see the drop in expenses and the right sizing of content and entertainment to be profitable in 'twenty four.
Can you talk about the early traffic and or revenue contribution from sooner versus how long before you think there'll be a material contributor and what is the marketing strategy that is educating consumers about this offering.
Sure. Thanks, Brian .
That's.
One for Eric.
Sure sure so so.
If you really think about the phases, because we've gone through this with several different channels want.
Launches.
The thesis and center versus right is it needs to be a scale product that has an incredible amount of content.
So phase one is just getting into the market and getting getting the product beyond a minimally viable product and having.
Our base of content.
Number one that fulfills on the mission that we're talking about so the good news is that the first phase that we've been working on over the last quarter and a half or so which is going from zero to.
Ranking in the top 10 for title Count.
Now that we've got the title basis in the in the service we're working on a lot of the tools that fulfill the promise of what we've been talking about right, which is that next generation search capability.
And.
Some some major innovations on.
User interface and interaction.
And a few other game changing things, which we're going to be revealing.
Over the next quarter or so.
So that piece, we think combined with.
That capability fulfills on that piece of it and then the second piece of it was distribution.
Our strategy for <unk> is less about us.
<unk> paid marketing and it's more about OEM.
And strategic partner partnership to get the product out there.
We've announced a couple early partners with good go PCL and we are going to be.
Adding more partners to that mix, we think that model as a way to for us to.
Rapidly get the service in front of people, we will do traditional paid marketing and other things.
We'll probably be doing that later in the year close to calendar Q4, our fiscal Q3.
So I would say meaningful revenue contribution should be coming at the back half of this year or.
Q3 Q4.
Fiscal Q3 Q4.
As we progressed through these phases of getting getting the service up to scale.
We also have some.
Other.
Other things that we will be doing to dramatically scale up the content offering to me that that's.
The single biggest thing right that that's.
The value proposition is having more choice more channels more assets there.
Than almost anyone else in the market and the tools for people to use it. We think we have to have that first to be differentiated.
Great that was super helpful.
Can you quantify what percentage of roughly advertising gains and how much of a headwind assuming it is one where <unk>.
In the quarter.
So in the prior quarter.
We're making we've been making the evolution from being.
What I would call.
A value player.
Our content.
That we had on most of the services.
Yeah.
Not the Avengers and others, it was specialty and niche content.
So, but our brands have been really growing and driving a lot of recognition in the market, especially with the major streamers.
Streaming platforms like Samsung and others. So as we've established ourselves and we've also upped the game on pumps aren't ready we've made tremendous investments over the last year and a half.
That is actually a CPM has actually improved significantly.
We also did a major reset in January of this year.
January is normally one of the worst advertising times of the year.
A lot of companies basically set their CPM floors to zero and take what they can get.
We bucked the trend that we actually raised our rates, we raise them up to 15 16.
A new AD team, we have a new head of AD sales in the company, we really wanted to establish ourselves as not a low tier player, but as somebody has good quality brands with great audience and good data and so we did that during the quarter.
And we actually increased revenue during the quarter.
Simply because we were aggressive on our CPM and we established ourselves as a specialty and premium players close to a value player. So CPM I think going forward as we ramp direct sales in the back half of this year.
When you blend.
Of the 30% to $35 CPM, we'll get from direct campaigns against our.
At 16 to 18 through most of the year 'twenty during the holidays youre going to see a much higher CPM rate in the back half of the year.
So I feel pretty bullish on our CPM and the other thing about Etfs is advertisers pay for innovation and features and capabilities that you can't get on other platforms. So on <unk> really starts to become a viable property in the market I think one of the big one of the Big Bend.
Fits to that is.
Imagine.
Platform.
Capabilities with features that you just couldn't find on any other platform, especially around AD optimization and yield and other things or other kinds of things that we're developing and I think advertisers are really going to be impressed as we as we roll those features out in the coming coming quarters.
That's really helpful, but if I could ask a follow up.
On your <unk>.
Digital and streaming business has.
It has been posting exceptional growth, but this quarter, we only posted 18, 7% growth when the slowest in a very long time for you if that's not CPM.
It sounds like what was the rationale for this quarter that had a slow year over year growth rate, which accounts for seasonality.
Sure well.
To clarify on the advertising side keep in mind, we have two types of deals where we're generating advertising deals where we control the inventory and.
And there are deals where we rely on third parties to sell the sell that inventory. So if you think about us.
We are compared to the <unk> and others of the world, we're not anywhere near their scale. So we have more opportunity to grow and there's more room on growth on the upside.
Major players are already at scale, who you'll do deal a lot more with pre sold.
Advertising those players saw a hit in.
In Q1, most of the platforms that we rely on to sell the inventory. They just didn't see the volume on the platforms that we saw.
So net net we saw.
I think we.
If I don't have the exact number in front of me, but we were high high double digits I'm.
Im sorry high teens.
Or more on the AD side, but when you take into account third parties.
Who arent that scale those parties were down in that quarter I think everything's rebounded since then but.
I think as we scale up our owned.
Inventory and inventory that we sell through other people will be less it will be less impacted by.
Macro and market conditions.
And it'll be more in our control.
Is that pie shift back towards more of us selling them selling yet.
Yes.
Makes you a lot more clear. Thank you and then you discussed clearly tariffs higher two and three can you talk about the timing of that.
<unk> releases in general in fiscal 'twenty, four and how that might impact your results.
Maybe timing meaning.
Yes, we haven't we haven't formalized any.
Formalized release schedule, but we've got probably three more theatrical releases.
Between now and October and we're talking about the October to December timeframe for a reissue of.
Clarifier too.
Which I mentioned, where we're going to add material for tariffs higher three on it we think it will do quite well because.
As you recall.
Last October we really didn't know what we have when we first released tariffs higher.
Now we know what we've got we've got a.
A horror franchise that has great awareness right now.
And iconic characters are declining.
People are comparing two adjacent voorhees or Freddie Krueger.
We're really focused on maximizing that reissue setting up the release of prior three of the following year.
And we'll probably have two more theatrical or day and date Fiat trickle in.
Releases.
The first calendar quarter of next year, our fourth quarter.
And those will be limited releases I take it initially other than terrify here instead of National releases, and then Youll see what that because these are no.
Pardon I understand new theatrical release I'm, just trying to understand what I'm talking yes, theatrical releasing but but you have some that are nationally are widely released sorry, I should use the term versus a limited release, but we take it for non tariff and then it will be yes.
We consider every release on a case by case basis as I said I think one of our huge competitive advantages now is that we figured out with tariff higher too.
Ill turn the machine on so that we can take a film out on either Andrew or a thousand screens.
And virtually nothing in marketing and get the kind of results. We got onto referred to so we have one film in the works for the fall of other things going on.
These screens and other horror film.
We've got an animated film called Warrior King that we're trying to fit in the schedule and that'll probably go out and between 501000 screens.
Yes.
Clarifier to reissue it will probably be.
We haven't set that maybe 2500 screens and we think Ontario prior truly can go out wide.
3000 screens.
<unk> quoted in the industry and I've been in the industry too long.
And saying that theatrical releasing business would be a great business. If you didn't have to spend any money on marketing.
Well I think we figured out how to do that.
And that is going to be a big competitive advantage for us, particularly since the primary reason we're doing all of this as I said this to drive subscribers and viewers to our channels, which creates and subscriptions and viewership on annuity going forward. So I think we've got a great model.
Which is one of the reasons why we did the equity raise because we need to put more content into that model.
Great last question. Thanks for taking all my questions. The first time, you've given revenue guidance challenge for and Eric's remarks that the third party business has come back a little bit can you talk about kind of how you think about seasonality clearly the third quarter is your strongest quarter, but maybe just high level seasonality as you think about.
The revenue guidance and how we should think about it.
Okay.
Yes, I think.
Yes.
Just specifically in terms of next next quarter is a quarter that is very similar to this quarter in terms of percentage of the year.
The third fiscal quarter by far and away the strongest quarter.
And the other quarters.
There's not that much disparity between them, except for me to say that both on our streaming business in our content business theyre not our strongest first quarter. So.
Maybe we can get you some more information on the historical performance of our content distribution and our streaming business quarter to quarter.
To give you a better guidance.
Okay.
And we update that because obviously at this stage and exchanges our streaming businesses become a bigger percentage of our.
Of our revenues.
Yeah.
Great. Thanks, so much but I think.
Sure you should probably look at next quarter.
And pretty much the same way you looked at this quarter.
Okay.
Thank you for your question.
There are no additional questions waiting at this time, so I'll pass the conference back to the management team for any closing remarks.
Yes. This is Chris.
Well. Thank you all for joining us today and please feel free to reach out to Julien those debt or our investor relations firm the equity group with any additional questions. You might have we look forward to speaking to you all again.
On our next quarterly call in August Thank you very much.
That concludes the conference call. Thank you for your participation you may now disconnect your lines.
Well again.
On our next quarterly call in August .