Q2 2025 Cineverse Corp Earnings Call
Thank you.
Speaker Change: Good day everyone. Welcome to Cineverse's second quarter Fiscal 2025 Financial Results conference call.
Micaiah: My name is Micaiah, and I will be your operator today.
Speaker Change: Currently, all participants are in a listen-only mode. We will have a question and answer session following management's prepared remarks.
Speaker Change: At which time, participants can press star, followed by the number 1, to ask a question. If anyone needs operator help, press star, 0. Please note that this call is being recorded.
Speaker Change: I would now like to turn the call over to your host, Gary Loffredo, Chief Legal Officer, Secretary and Senior Advisor for CineBurst. Please go ahead.
Gary Loffredo: Good afternoon, everyone. Thank you for joining us for the Cineverse Fiscal Year 2025 Second Quarter Financial Results Conference Call.
Gary Loffredo: A replay of this broadcast will also be made available at Cineverse's website after the conclusion of this call.
Gary Loffredo: Before we begin, I would like to point out that certain statements made on today's call contain forward-looking statements.
Gary Loffredo: These statements are based on management's current expectations and are subject to risks, uncertainties, and assumptions.
Gary Loffredo: The company's periodic reports that are filed with the SEC describe potential risks and uncertainties that could cause the company's business and financial results to differ materially from these forward-looking statements.
Gary Loffredo: All of the information discussed on this call is as of today, November 14, 2024.
Gary Loffredo: And Cineverse does not assume any obligation to update any of these forward-looking statements, except as required by law.
Gary Loffredo: In addition, certain financial information presented in this call represent non-GAAP financial measures, and we encourage you to read our disclosures and the Reconciliation Tables to applicable GAAP measures in our earnings release carefully as you consider these metrics.
Speaker Change: I'm Gary Loffredo, Chief Legal Officer and Senior Advisor at Cineverse.
With me today are Chris McGurk, Chairman and CEO.
Erick Opeka, President and Chief Strategy Officer.
Tony Widor, Chief Operating Officer and Chief Technology Officer
Mark Lindsey, Chief Financial Officer
Speaker Change: Mark Torres, Chief People Officer, and Yolanda Macias, Chief Content Officer.
Speaker Change: all of whom will be available for questions following the prepared remarks.
Speaker Change: On today's call, Chris will discuss our Fiscal 2025 Second Quarter Highlights.
the latest operational developments, outlook, and long-term strategy.
Speaker Change: Mark will follow with a review of our results for the fiscal second quarter ended September 30, 2024.
Speaker Change: And Erick will provide some detail on our streaming business results and operating initiatives before we open the floor to questions.
Speaker Change: I will now turn the call over to Chris McGurk to begin.
Thanks, Gary, and thanks everyone for joining us today.
Chris McGurk: We reported a very strong second quarter of growth and financial improvement.
Chris McGurk: even without recording a single dollar of financial results from our hugely successful box office hit Terrifier 3, where we control all domestic rights in the U.S. and Canada, and which we released after the close of this quarter.
Chris McGurk: We grew our revenues 20% versus last year in this quarter, excluding the impact of our legacy digital cinema business.
Chris McGurk: In addition, we grew our revenues by 40% versus our last reported quarter ended June 30th, showing strong sequential business momentum.
Chris McGurk: We also exceeded our previously stated operating goals with a margin of 51%.
continue to significantly reduce our SG&A cost.
and also generated positive adjusted EBITDA of more than $500,000.
Chris McGurk: We beat our analysts consensus guidance on every key financial metric.
Chris McGurk: Additionally, all our key operating metrics across our content licensing, technology, advertising, streaming, and podcast businesses continue to grow significantly during the quarter, which bodes very well for our continued future success.
Speaker Change: Mark and Erick will speak to all of that in just a few minutes.
Speaker Change: So now let me take some time to discuss what I know is the number one topic for most of our investors, the unprecedented success of our Terrifier horror film franchise, and what it means for Cineverse's future.
Thank you.
Speaker Change: Following the late 2022 success of our Terrifier 2 release, which surprised and shocked the film industry by achieving approximately 11 million dollars at the domestic box office,
Speaker Change: via a limited release on just a $250,000 production budget and a less than $500,000 marketing spend.
Speaker Change: which all resulted largely because of Centerverse's very targeted, fan-based, digital and social media marketing plan that leveraged our horror assets of Screambox and Bloody Disgusting
We set out...
Speaker Change: to fully employ all the assets that we had built over the past few years to devise a new marketing and distribution strategy for Terrifier 3 that would take full advantage of the powerful fan-based entertainment ecosystem we now have in place, as well as the strength of the film franchise itself.
Speaker Change: Our marketing and release plan for Terrafire 3 worked brilliantly with its performance stunning the industry even more than Terrafire 2 did.
It's released live on over 2,500 screens on October 11.
Speaker Change: amidst many mega-dollar production budget and mega-dollar marketing spend major studio releases.
Speaker Change: Terrifier 3 opened to number one at the domestic box office with almost 19 million dollars in ticket sales supplanting Joker, Falea Duke to become the top performing film in America
Speaker Change: The film has now rolled on to record more than $54 million at the domestic box office.
Speaker Change: and is now the number one performing unrated film of all time, taking over the top spot from the previous record holder, Renaissance, a film by Beyoncé.
well.
Speaker Change: We accomplished this by effectively employing every asset in the Cineverse ecosystem to mobilize the horror fan base to come out and see the movie in theaters.
Fully utilizing our MatchPoint technology.
Our streaming channel portfolio with over 80 million monthly viewers
Speaker Change: our social media footprint, including Bloody Disgusting, and our top 10 podcast network in an incredibly cost-efficient way to build awareness and interest for an audience that then came out to see the movie in droves.
Speaker Change: Because we so effectively employed this ecosystem to identify and mobilize fans to see Terrifier 3 in theaters, we spent well under $1 million in out-of-pocket costs to market the movie.
a number that has astounded the industry.
Speaker Change: particularly since we released the film among major studio releases with marketing budgets well north
Speaker Change: of $20 to $30 million, and in the case of Joker, probably more than $100 million in marketing spend worldwide, on top of a reported $190 million production budget.
Speaker Change: We calculate that our ecosystem most likely created over $5 million in media value to support our movie that involved no cash outlay on our part.
Speaker Change: I've personally been involved in the release of at least 500 films in my career.
both major studio releases and independent films.
Speaker Change: and the box office revenue to cash marketing spend ratio for Terrafire 3 is exponentially higher than any result I've ever seen.
Speaker Change: The performance of Terrifier 3 is truly in a class by itself, and the industry has taken note of that in a big way.
Speaker Change: We believe that the record-setting performance of Terrifier 3 is strong evidence that Cineverse's ecosystem of assets
Speaker Change: has established a potential new blueprint for releasing films theatrically in a much smarter, cost-effective, and risk-advantaged manner than anything ever attempted in this space before.
Speaker Change: We believe this can be a major advantage going forward for independent films, filmmakers, and even for the major studios if the majors choose to rethink their spending plans from the ground up, like Cineverse did for both of the Terrifier movies.
Speaker Change: Our studio competitors also do not have the powerful and complete combination of targeted streaming channels.
Speaker Change: passionate fan bases that view our channels more than 80 million times per month, wide social media footprints and influencers like Buddy Disgusting, a top 10 podcast network, and targeted matchpoint advertising technology that we do.
Speaker Change: We just resoundingly demonstrated the power of that ecosystem to the rest of the industry by fully leveraging our integrated assets to do what almost everyone in the entertainment business thought was impossible.
Speaker Change: open to number one and then go on to earn more than 54 million dollars at the box office and still going for less than a one million dollar market extent.
Speaker Change: That previously unheard of feat in the movie business is creating a lot of interest from independent producers and other studios to try to generate similar theatrical performance results utilizing Cineverse's ecosystem.
Speaker Change: in the same manner as Terrifier 3. Not just in horror, but in other genres where we have strong footprints and fan bases like family films, female-oriented films, animation, and anime.
This could create an entirely new profit line for us.
Speaker Change: And, of course, we plan to utilize this successful release blueprint for Centerversus' own releases as well.
Speaker Change: Our recent announcement that we're going to distribute the remake of the controversial horror film classic, Silent Night, Deadly Night, for which we have worldwide rights at the end of this year, is a testament to that point.
Speaker Change: I also want to emphasize that having two really great movies in Terrafire 2 and 3 that resonated strongly with both critics and audiences alike had an overriding impact on the success of both films.
Speaker Change: So our hats are off to director, writer Damian Leone, producer Phil Falcone, and the entire Terrifier creative team for their vision, their understanding of their audience, and their creative genius that powered these films.
Thank you.
So, what's next for Terrifier 3?
Speaker Change: The film will soon be distributed into the digital and DVD Blu-ray markets in our current fiscal third quarter with a streaming pay TV release following that.
Speaker Change: Our distribution costs for these ancillary markets are extremely small. So we expect a very high margin return and significant profits from these post-theatrical channel releases.
Speaker Change: Terrafire 2 has also had a strong rebirth in digital sales due to all the activity around the release of Terrafire 3, underscoring the evergreen power of the Terrafire franchise yet again.
Speaker Change: Additionally, we're planning a Christmas reissue of Terrafire 3 in the box office with added features to attract the fan base yet again.
Speaker Change: Like every major independent and major studio, we do not disclose profitability on individual films for competitive reasons and also for participant non-disclosure reasons.
However,
Speaker Change: It's obvious that Terrafire 3 will be extremely profitable and will have a very significant positive impact on our financial results, beginning in our next reported quarter.
Speaker Change: For instance, we more than recovered our total acquisition and marketing investment in the film from our share of theatrical revenues alone in just the first 48 hours of release.
Speaker Change: And we expect to book more than $20 million in theatrical revenues by December 31st, which represents our share of domestic box office, which we split with theatrical exhibitors.
Speaker Change: On top of that, we will be recording the very significant high-margin revenues from the ancillary markets that I just mentioned.
Speaker Change: plus potential revenues from our ScreenBox streaming channel in our fiscal third quarter.
Speaker Change: ending on December 31st, and then in the many quarters beyond that.
Speaker Change: Suffice it to say that this film is probably the highest ROI film I've ever been involved with and our investors will begin to see that very soon.
Speaker Change: The cash impacts from this wildly successful release will also provide a significant balance sheet upside to Centiverse.
Speaker Change: It has been our goal to achieve a sustainable, self-funding balance sheet for our ongoing operations.
Speaker Change: We believe Terrafire 3 advances that agenda by miles, and as such, we have no plans to raise outside equity capital to support our current operations in the foreseeable future.
And with that, I'll turn things over to Mark.
Thank you.
Thank you.
Speaker Change: Thank you, Chris. As Chris mentioned, we had an exceptionally strong quarter allowing us to exceed analyst consensus guidance for revenue, net income, net income per share, and adjusted EBITDA.
for our second fiscal quarter ended September 30, 2024.
Cineverse reported total revenues at $12.7 million.
Speaker Change: compared to $10.6 million in the prior year period for a 20% increase when excluding the $2.4 million of non-recurring, non-cash revenues from our legacy digital cinema business.
from the prior year quarter.
Speaker Change: In addition, compared to our last quarter ended June 30, 2024, our revenues increased by $3.6 million, or 40%.
Speaker Change: The 20% increase in recurring revenues in the current quarter was driven by a $0.7 million increase in streaming and digital revenue, primarily due to $1.6 million of revenue from the licensing of our Dog Whisperer with Cesar Millan content.
Speaker Change: a 0.6 million or 93% increase in our podcast and other revenue and a 0.8 million increase in our base distribution revenue.
Speaker Change: With the amazing performance of Terrafire 3, the continued double-digit growth of our podcast business, improved content licensing opportunities, and expected growth in our direct advertising revenues, we are expecting a material increase in revenue for our fiscal quarter ended December 31, 2024.
Speaker Change: Erick will provide additional details on the operational drivers behind our financial results.
Erick: As Chris mentioned, our direct operating margin for the quarter was 51%.
Erick: which exceeded our previously issued guidance of 45-50% for direct operating margins.
Erick: Our improved direct operating margin is a direct result of our cost optimization initiatives referred to earlier. We expect our direct operating margin in future quarters to be in line with or exceed our previously stated targeted margins of 45 to 50%.
SG&A expenses decreased.
Erick: 0.5 million or 7% for the second quarter compared to the prior year quarter.
Erick: Again, this improvement is the result of our continued focus on cost optimization initiatives that we've been discussing over the last year and a half.
Erick: Over the last six quarters, we've decreased our SG&A expenses from an average of $9.2 million per quarter for fiscal year 2023 to $6.4 million this quarter for an annualized savings of $11.4 million.
for the remainder of fiscal year 2025.
Erick: We expect our SG&A expenses to remain relatively flat and continue to decline as a percentage of revenue as we continue to focus on our cost savings initiative and leveraging our offshoring opportunities in Centiverse Services India.
Erick: Adjusted EBITDA for the quarter was $0.5 million compared to a negative $0.1 million for the same quarter last year when excluding the $2.4 million of prior year non-recurring, non-cash revenues from our legacy digital cinema business discussed previously.
Erick: We had $2.4 million in cash and cash equivalents on our balance sheet as of September 30, 2024, and $4.7 million outstanding on our $7.5 million working capital facility, with an additional $2.7 million available capacity.
Erick: During the quarter, our cash flows used in operations was a negative $0.7 million, of which $0.7 million was related to investments in our content portfolio via advance and or minimum guarantee payments.
Erick: When excluding our content portfolio spend during the quarter, our cash flows provided by operations was breakeven. We expect to be operating cash flow positive for the full fiscal year 2025.
Erick: I also want to remind everyone that our board of directors approved a one-year extension of our stock repurchase program.
Erick: The program to purchase 500,000 shares now expires on March 1, 2025. During the quarter, we repurchased approximately 31,000 shares under this program, bringing our fiscal year-to-date share repurchases to 215,000 shares.
Erick: As we discussed last quarter, we believe our stock was significantly undervalued at less than $1 per share, with a market cap that was materially lower than our book value.
Erick: As of the close of business yesterday, our stock price closed at $2.68 per share, reflecting an approximate $42 million market cap, which we believe is somewhat more representative of our true value.
Erick: We believe that there is still material upside to our stock price based on the phenomenal results of Terrafire 3, the significant growth that we are realizing in our podcast and advertising lines of business, and our technology initiatives, which are just beginning to take hold.
Erick: With that, I'll turn the floor over to Erick to discuss our strategic growth initiatives. Erick?
Thank you very much. Thank you. See you.
Thank you, Mark.
Speaker Change: As we discussed last quarter, we focused on a few key strategies to drive our growth. This included expanding our streaming footprint, enhanced ad sales capabilities, opening up new distribution channels, and investing in technology that supports everything we do.
Speaker Change: This quarter we took solid steps in each area, building a foundation that aligns with our long-term vision.
Speaker Change: Now, while today's numbers don't yet capture the impact of Terrifier 3, which has performed far beyond expectations in theaters, we expect to see significant financial contributions from it through all lines of our business in the next quarter, as Kristen and Mark both detailed.
Speaker Change: We're excited about what Terrafire 3 represents and how it reinforces our direction for Cineverse's sustainable growth.
Speaker Change: On the streaming side, total subscribers for the quarter were approximately 1.36 million, marking a 13 percent increase over the prior year quarter. During the quarter, anticipation for Terrafire 3 also fued renewed interest in Terrafire 2 on our platforms.
with ScreenBox subscribers growing approximately 7% in September alone.
Speaker Change: The film's viewership surged by 161% from August, reaching 1.28 million minutes viewed across all internal platforms in September.
Speaker Change: On third-party platforms like Amazon, the film has dramatically exceeded all expectations and new revenue-sharing agreements we've put in place on the franchise will lead to significant low seven-figure revenue streams on the title in the subsequent quarters from this quarter.
Thank you. Thank you.
Speaker Change: Our fast channels also saw remarkable growth this quarter, with more than 2.32 billion minutes streamed during the quarter, up 40% over the prior year quarter.
Speaker Change: September marked the second best month ever for our Dove channel with over 95 million minutes consumed just behind July and up over over August typically a slow month of the year for fast.
Speaker Change: Our Barney Channel that was recently launched this year continues to perform exceptionally, reaching an all-time high in September of over 129 million minutes viewed, marking seven consecutive months of growth.
Speaker Change: Even our reality-focused channel, SoReal, also hit record monthly highs, and with programming changes, we see it on an outstanding trajectory to join our top performing channels.
Speaker Change: Our podcast network has also become a critical piece of our revenue engagement strategy with ongoing rapid growth.
Speaker Change: Since last quarter, we've expanded to 51 podcasts, adding high-profile shows that continue to broaden our audience reach. We're thrilled to have signed the Dead Meat podcast, hosted by Chelsea Rebecca and James A. Janisse from the Dead Meat YouTube channel, with more than 6.6 million subscribers.
Speaker Change: We're also integrating podcasts into our broader Cineverse brands such as Retro Crush hosted by TikTok personality Malcolm Crawford and Midnight Pulp in pre-production with Diana Prince known for the last drive-in on Shudder.
Speaker Change: Our true crime show, Creepy Places, hosted by John Grylls of Creepy, which attracts 1.3 million monthly downloads, is another standout. And our original podcast, Mayfair Watcher Society, has also returned for its second season after being named one of Apple's top podcasts and ranking in the top 5% of most shared podcasts on Spotify.
Speaker Change: October was a record month with our podcast network reaching 15 million downloads and listens, placing us among the top 10 largest podcast networks globally.
Speaker Change: With this momentum, we're well-positioned to achieve eight-figure annual revenues in the midterm.
Speaker Change: Ad sales also performed well, with booked revenue up over 60% over Q1, underscoring our successful focus on direct ad sales and premium pricing. We're pleased to report that we're attracting major blue-chip clients, including Paramount, Lionsgate, Disney, 20th Century Fox, FX Networks, Sony Pictures, and Activision.
Those were all customers during the quarter.
Speaker Change: This quarter also marked the first time we received requests for proposals from non-entertainment brands including Macy's, Wendy's, McDonald's, Grubhub, Frito-Lay, and Pepsi. This expansion into consumer brands broadens our revenue base and strengthens our position as a go-to platform for high-value brand partnerships.
Speaker Change: Driving the success is the growth of our C360 platform which processed over 20 billion ad requests in October. This technology is allowing us to help our advertisers reach highly targeted audiences efficiently
delivering high-value results for our clients.
Turning the match point, we continue to see strong progress.
Speaker Change: We've recently made several key hires support growing demand and now have a low mid to seven-figure pipeline of opportunities, including OEMs, new and existing channel platforms, content distributors, and more.
Speaker Change: We've closed some initial deals that showcase MatchPoint's potential, and these deals represent substantial infrastructure investments for our customers.
Speaker Change: Typically the lead time on deals to match point is about a six to twelve month lead time, so we anticipate seeing the real financial impact in the back half of this year and into the new fiscal year beginning in April.
Speaker Change: Additionally, we're developing shorter cycle revenue opportunities through our dispatch business, helping clients scale to meet the means of fast AVOD and AI licensing markets. We're actively engaged in meaningful conversations that could lead to significant new business on this front.
Speaker Change: On the technology side, CineSearch, our AI-powered content discovery tool developed with Google, is on track for a full consumer release.
Speaker Change: next year. We're already in discussions with several major OEMs to license Cinesearch, which opens up a promising new revenue stream if we're successful.
Speaker Change: We're also seeing opportunities to license portions of our content library for AI training. We're in discussions with multiple parties to add significant volume and value to our 66,000 title library positioning Cineverse as a leader in AI driven content licensing.
Speaker Change: expanding our content licensing, building on direct ad sales and driving revenue through Matchpoint and podcasts. We're also developing a strong IP and franchise-driven theatrical slate that complements Terrifier, which has already redefined what's possible in indie horror.
Speaker Change: Above all, Cineverse stands out for our highly supportive model for filmmakers with fair, transparent deals and data-driven, money-brawl approach to content, powered by proprietary technology.
Speaker Change: This is a groundbreaking model not currently available from any major or mini-major studio, and this approach leverages our ecosystem to provide a cost-effective, risk-advantaged pathway to success.
The strategies we outlined last quarter are producing real results.
Speaker Change: as shown with the financial results this quarter and our growth in streaming engagement, ad sales, podcast listenership, and tech innovation positions us for sustained profitability and growth. We look forward to building on this momentum and showing what a modern tech-enabled entertainment company can achieve.
With that, operator, let's open it up for Q&A.
Speaker Change: Thank you. We will now begin the question and answer session. 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 1.
Speaker Change: As a reminder, if you are using a speakerphone, please remember to pick up your headset before asking a question.
We'll pause here briefly as your questions are registered.
Speaker Change: The first question comes from the mom of Dan Kernows with Benchmark Company. You may go ahead.
Speaker Change: Thanks, good afternoon. Chris, obviously, just a big congratulations on what is in.
unprecedented success.
Speaker Change: in the movie industry. I'm sure you've been getting plenty of plaudits from your peers and others, but I'll just start off by saying that on T3. And you mentioned it in your prepared remarks. I'd love to have a sense from you guys.
Speaker Change: You're gonna make a boatload of cash from this thing. You have some debt, you can kind of fund additional investments and content based on that playbook.
Speaker Change: How do we think about how you're going to position the company going forward? I know you're going to talk more about it next quarter, but you started with Silent. But just help us think through what the success means and what other films could do. Like, how does this grow quickly into another revenue stream for you?
Thank you.
Speaker Change: And thank you, Dan, for those comments. It was very nice of you.
Speaker Change: Well, look, we're still a streaming technology and content company. That's the core of what we do. And I think you saw.
Speaker Change: The results this quarter for our revenues were up 40% over the last sequential quarter, show that our plan is working across our base business, even without Terrifier. In terms of digital licensing, technology business, podcast business.
Speaker Change: our streaming business, you know, so I just want to underscore that point. Our goal right now is to really...
take advantage of what just happened?
Speaker Change: where we sort of developed a new blueprint for releasing movies that kind of astounded the industry and turn it into another successful profit line for the company. And it's consistent with who we are because the reason why the release worked so well is what I was saying in my remarks and Erick did also.
Speaker Change: that we leveraged every element in this ecosystem that we built over the last 10 years.
Speaker Change: in order to build a better mousetrap and figure out how to release a movie in an incredibly successful way with, you know, almost no out-of-pocket marketing spend. It's just kind of astounding that we did that. So, the goal now...
Speaker Change: is to leverage our entire ecosystem, create a new line of business here, both with product that we acquire ourselves and then.
Speaker Change: to allow other independent studios and actually majors to use our ecosystem to market and leverage their own product because they don't have all the assets that we have in place.
across this really fan-centric
Speaker Change: portfolio of channels, our podcast network, our ad technology, you know, all these things are in our social footprint, which is disgusting. So we're sorting through properties right now. Obviously, people are knocking on our door, particularly in the horror space.
Speaker Change: You saw that we just announced Silent Night, Deadly Night, which is a classic, controversial horror movie that came out in 84 and banned from theaters. We're continuing our assault on Christmas following Terrifier 3 with Art the Clown and Santa Claus.
Speaker Change: But we've got a number of other properties that we're looking at.
Speaker Change: Some very well-known IP that people want us to consider taking out using our ecosystem. And we've had some entreaties in the non-horror space as well, in the faith and family space, and in the animation space.
Speaker Change: So, it's our goal really to turn this into an ongoing business. It's not going to be a hugely capital-intensive business for us, as we just saw with Terrafire 3.
Speaker Change: you know, coming over the next, you know, three or four months, and some of those might be releases that happen sooner rather than later.
Thank you.
Speaker Change: Got it. That's hugely helpful. Thank you. And just one last one on T3. Before I turn to Erick, how are we thinking about, you know, at this point, you have the re-release in Christmas, but you have an opportunity to decide how to maximize it, licensing, windowing, putting it on screen box. Have you thought through that yet? And, you know, do you have a plan or is that sort of TBD?
Speaker Change: That's a great question because obviously we have to we have to balance
Speaker Change: getting a big check from pay and streaming services that now are recognizing the value of the franchise. So we're actively engaged in analyzing our options in that space and we hope to make a decision on what we're going to do over the next few weeks.
Thank you.
Speaker Change: Perfect. Erick, just quickly for you, appreciate the update on the direct ads. Nice progress there. I just wanted to ask you quickly about
Speaker Change: It's been a search, and how we should think about that from kind of a long-term monetization opportunity given that we're hearing a lot of movement now in the industry around meta-tagging, kind of what to watch and buy tech.
Speaker Change: And I thought your comment on short-cycle sales was particularly interesting, given that...
Speaker Change: The industry has finally realized that they need to license more content to stem the streaming bleeding. So Avon and FAST are taking off again. Just kind of curious, you know, what you need to see there in order to develop that business line. Thanks.
Speaker Change: Sure, sure. So, you know, first I'll tackle the second part of your question on the short cycle piece. So, if you kind of look out at the marketplace,
Speaker Change: One of the biggest trends has been all of these fast platforms, which is basically every single TV.
Speaker Change: OEM manufacturer, you know the Samsungs, Vizios, and so on of the universe. All of them are really expanding their ad supported offerings to complement the fast platforms. They've most of them launched
Speaker Change: as fast only without much on-demand programming. Really, to have a rounded-out offering, everybody needs to have a mix of...
Speaker Change: Fast Channels, On-Demand Programming, and Add-On Subscriptions. So all of them are adding all of these components.
Speaker Change: What that's caused in the market is a pretty significant demand.
Speaker Change: for large volumes of ad-supported content. So number one, in addition to us controlling and owning a very large library, clearly we're rapidly expanding our efforts to distribute AVOD content ourselves.
But for Matchpoint, the real opportunity is...
You know
Speaker Change: For most players like us in the industry, the cost of rapidly delivering and scaling up content to all of these places quickly
Speaker Change: a Berlin airlift of content, if you will, is very, very expensive and has very long cycle time.
Speaker Change: Today, we can take Dispatch, one of the modules that we have in Matchpoint, and help companies
Speaker Change: very rapidly either ingest that into their own ecosystems so we can help platforms do a better job at it or we can actually help companies that, you know, normally are trying to do this with three guys in a room or using expensive outsourced services.
Speaker Change: scale up and actually make a lot of money rapidly to take advantage of that.
Speaker Change: Beyond that, this same system that works incredibly well to help the existing
Speaker Change: streaming ecosystem is really also a very ideal platform to scale up for an even bigger
Speaker Change: and more voracious content demand, and that is AI content licensing.
Speaker Change: You know, there's been various reports that have said that, you know, that can be, you know, anywhere from a $1 to $5 billion business over the next few years, depending on how you look at it. But one thing is certain.
Speaker Change: The demand out there is real. We're engaged in those conversations today with a variety of partners. And two, the technical challenges with doing it are intense. These platforms that want training data want to do it in a very rapid period of time. And unless you have a scalable,
Speaker Change: platform like MatchPoint, you really can't tackle that problem. So that's really the short term to midterm opportunity. Both of these are not opportunities that are going away, but the demand for both of these is very high right now. And we have the technology to help the market actually cash in on it.
Speaker Change: So that's to that piece and then as we talk about at Cinesearch, I think the the biggest thing to point out is
You know if you look at the TV OEM space
Speaker Change: much like in mobile phones, every major television manufacturer really needs to incorporate AI features into their systems for content discovery. And, you know, some of the larger players may build or develop their own platforms.
Speaker Change: But when you have more than half the market out there of every television sold with no internal solution to this, we think that represents a very large opportunity given, you know, just in the US alone, there's something like 40 million plus.
Speaker Change: TV sold every year in the U.S. and, you know, double that number internationally, so...
Speaker Change: I think the big thing to think about is us, you know, fulfilling a pretty big market need for AI-driven customer experience tools. So what we're working on now is, you know,
Speaker Change: As you can imagine, this isn't a turnkey solution for every manufacturer. Every manufacturer has different demands. They have different partnerships with different players.
Speaker Change: So, it's less of a, you know, turnkey white label thing and more of a bespoke approach with these partners, and so, you know, we're actively engaging in a variety of conversations on that front. You know, I think we really hope to have more on that next year as that evolves.
Super helpful. Thank you so much and congrats again guys.
Thanks, Dan. Thank you.
Speaker Change: Thank you. The next question is from the line of Brian Kinstengler with Alliance Global Partners. You may proceed.
Speaker Change: Great, thanks so much and let me add my congrats on your success in the box office.
Speaker Change: Following up on the future playbook in response to the success of leveraging your ecosystem
Speaker Change: How will you go about evaluating what I suspect is numerous independent movies and titles coming to you to determine what is the best chance of success on your platform?
Thank you.
Speaker Change: Thanks, Brian, for your comment and, you know, a couple of things. You know, we have a very exhaustive green lighting process in place anyways that we would continue to use to evaluate any new property. But first and foremost, we would look for properties that we think we can best leverage with our system.
Speaker Change: You know, obviously we have a ton of horror assets in place with ScreenBox and Buddy Disgusting and our history of distributing horror movies and an executive team that really knows what works and what doesn't work in that space.
and that's what we leveraged.
Speaker Change: with Terrafire. And so we're looking at properties, you know, in a horror space specifically that we can follow the same playbook. Properties that have online buzz like Terrafire did, known IP.
Speaker Change: like Silent Night, Deadly Night, that still has a fan base, that will give us a leg up in launching it. And I think the other thing that's usually important here is kind of a threshold question for any movie.
Speaker Change: in my mind is, you know, is it a concept or an idea that the fan base is actually going to go to a theater to see?
Speaker Change: You know, what is it about the concept that is going to make that fan, you know, rush out on that first Friday to go see it, you know, so that he can, he or she, you know, can tell all their friends to be the first one to see it? And that's sort of a threshold question we ask about, you know, any, any piece of content.
Speaker Change: So again, as I said, we're looking in other verticals where we think we have strength. Children's and family content, you know, we've really built up that business.
Speaker Change: Not just with Dove, but with all of the kind of evergreen IP that we're...
are on our channels now, from Garfield to Barney.
Speaker Change: to Sid and Marty Kroft, to even, you know, Bob Ross and the Dog Whisperer, which we think is very family-friendly and very...
Speaker Change: you know, children-friendly, to anime and animation, which we've had a track record in releasing as well, and more pure family- and faith-oriented content. So, again, just to step back again, we're looking for properties
Speaker Change: that clearly we know we have assets, we have an expertise and capability and which will give us a leg up in marketing the property and properties that we know, we believe.
Speaker Change: There's gonna be a call in the fan base to go out and see it in the theater as opposed to waiting to see it at home. And we're gonna be extremely cautious.
Speaker Change: In terms of our financial commitment to any movie that we put on board, we proved the concept here that we could
Speaker Change: release a movie and open it to number one with $500,000 in cash out-of-pocket spending, you know, and an all-in investment in the piece of content at less than $5 million. And, you know, I think that's a good,
Speaker Change: That's a good model, you know, going forward from a financial standpoint, you know, as well.
Speaker Change: So, we feel really good about our positioning, we feel great about the industry response.
Speaker Change: to what we did. People are absolutely astounded by it. We feel great about the content submissions that we've seen so far, and you can expect some more announcements about movies, I think, in the next two to three months.
Speaker Change: Right, and then for titles like Silent Night, Deadly Night or any other title, how will you determine... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
your ecosystem, you can have a wider range.
Speaker Change: We're intending to use this model to do wide-release movies, but...
Speaker Change: You know until you actually see the movie whether it's in production or you're you're buying a finished movie It's up to it's tough to make that call
Speaker Change: you know, how wide you're going to go. You know, fortunately, as I said, with Terrafire 3,
Speaker Change: We knew what we had, we saw the movie, once it debuted at Fantastic Fest in Austin in August, we knew we had it.
Speaker Change: complete winner based on the critical reaction and also the pan reaction. So there's absolutely no question about going.
Speaker Change: you know, wide with the movie. It was just a matter of getting exhibitors to realize how much upside there was, and they quickly figured that out when their theater started selling out five weeks in advance.
of the release of the movie.
Speaker Change: So hopefully we're going to pick properties that maybe don't have that level of interest and excitement, but even at a fraction of that, that have sort of that built-in audience and excitement so that we can make a really smart, informed decision about...
Speaker Change: Whether we go wide on how many theaters or whether we take a limited release
Thank you.
Great. I'm going to search.
Speaker Change: Maybe you could share a little bit about the revenue model. Is this an annual licensing model? Is it a recurring kind of SAS model? Is it price per device if it's on a TV? If you could help us.
understand how that's going to be monetized, the revenue model.
Okay, Erick or Tony, you want to do that?
Thank you.
Speaker Change: Yeah, I think at a very high level and obviously, you know, as I mentioned earlier, these are really going to be more bespoke than a pure SAS model just due to the size and scale of these types of deals.
Speaker Change: So, you know, but I would anticipate the deal being some combination of license fee plus, you know, plus, you know, variable costs, similar you would see in other other similar sort of
you know, API-driven
Speaker Change: platform models, right? But I do think also, you know, there are there are other opportunities and ways to do this. For example, you know, advertising based models and other things that, you know, could
modify that approach depending on the partner.
Great.
My last question is...
Revenue from podcasting grew 30% sequentially.
Speaker Change: I'm wondering, with the various non-entertainment advertisers you discussed that are coming to you with RFPs, with the much stronger viewership, I'm wondering...
Speaker Change: Do you expect to see even stronger yields where revenue will grow faster than viewership over the next couple of quarters? I'm just wondering how you're thinking about that until, Rach.
Yep, yep. So, you know, we...
You know, I think our first goal was to build...
Speaker Change: When you're in the chicken and egg scenario of building a new product, our first goal was just to build audience with a great lineup of products.
Speaker Change: And so we really did that first before focusing on monetization. So, you know, that leads to a natural monetization gap where, you know, you have a lot of headspace to grow revenue
Speaker Change: So, I think you're right, your comment that revenue growth will outpace
audience growth.
Speaker Change: You know, success begets, in the film business, obviously, success begets more interest.
Speaker Change: And even in the podcast space, the success of Terrifier is opening doors to much larger properties and agencies that represent larger podcast properties that wanna join our network.
Speaker Change: So, you know, while I'll say I think in the short term, the audience or the revenue growth will outpace.
Speaker Change: the audience growth. That can also change very quickly if, you know, there's some very, very large shows.
Speaker Change: that we've been in dialogue with that want to join the network as well.
Speaker Change: So, in the short term that's the case, but I think in the longer term, you know, they'll either pace neck and neck or we may have big surges of audience.
and Inventory Growth.
if we do sign some bigger shows.
So, our real focus, though, is to maximize fill.
Speaker Change: on this platform. You know, we're rapidly hiring up, you know, salespeople to help sell that faster. We've been doing, you know, co-selling partnerships with a variety of people to help fill the inventory in the short term.
Speaker Change: So, I think, you know, our number one goal, this is our, you know, our biggest real opportunity of scaling revenue growth in the short term outside of the film business is the podcast business. So, we're going to put a lot of energy and effort into growing that over the next few quarters.
Great, thanks again.
Thanks, Brent.
Speaker Change: The next question is from Milan of J. Pesek with Corsair Capital. You may proceed.
Thank you very much.
Speaker Change: Thank you, hey guys, great quarter, we've seen it, we're celebrating it, and I think the...
Speaker Change: The promotion of Terrifier not only has highlighted what you can do in the film business, but has raised obviously Cineverse's capabilities all along.
Speaker Change: I will get to a question, but away from Terrafire, which was great. You know, revenues up, margins up, operating costs down. That seems like a pretty good combination we're getting close to.
Don't you break even.
Speaker Change: We're still at, amazingly to me, only a $45 million market cap, about a $50 million enterprise value.
Speaker Change: and I think one reason why is because people were worried that you'd run out of cash and have to do a dilute of financing as was done maybe a year ago and glad to hear you emphasize that.
Speaker Change: You're not going to need cash. I mean, this Terrafire is a real boon. And I guess there'll be another real chance of it from Terrafire 4 as well in a couple years.
Speaker Change: in any case that's a lot of statement my question because I think the other two
gentleman asked good questions about the opportunity space.
Speaker Change: The data AI business, you know, I'm a little bit enthralled with that idea the amount of
Speaker Change: Spending that's going on right now to improve AI is amazing, but what sets you apart? You know why you know you're not the biggest company out there. You have a big library Yes, but compared to the Disney's and Warner Brothers and Universal's why wouldn't the data?
AI guys get their data from video from those folks.
Speaker Change: I think I know the answer, but I'd like to hear it again and probably helpful to others.
Speaker Change: That's a good question, John. I'll let Erick answer that more specifically in a second, but it has to do with our
Speaker Change: technological capabilities and our capability over the years that we've demonstrated in acquiring, assimilating, and distributing vast amounts of content across the spectrum. And we've probably done more of that than anybody in the business. But I just, I want to thank you for your support and your question. And I'm going to turn it back over to you, Erick, if you have any questions.
Speaker Change: And, you know, we really appreciate it. I just want to say that at the onset. And then I'll turn it over to Erick and let Erick specifically answer the question on AI data capability. Erick.
Erick: Sure, sure. Well, I think if you look at the AI licensing landscape...
Speaker Change: You know, there's a couple of challenges that, you know, you've seen deals announced
with AI being used in studios.
Speaker Change: But really it's been more of to develop, you know, internal tools for marketing. What we haven't really seen is a major licensing deal out and there's a couple reasons for that. One is
Thank you. Thank you.
Speaker Change: I think the issue with guilds and unions and talent at the top echelon of the space, as well as IP rights and other things,
Speaker Change: for some of these multi-billion dollar franchises that make it incredibly difficult.
Speaker Change: for the studios to do licensing. You know, they're signatories to all kinds of agreements and other things. In the independent space and more broadly in the global space, there isn't those same limitations. When you think about these AI training models,
Thank you. Bye.
They actually want a high degree of diversity. They want...
Speaker Change: high-quality content, they want independent content, they want documentaries, they want foreign films, they want foreign TV shows. So it actually
Speaker Change: They do not want to blanket and only license studio content because...
Speaker Change: that will skew the models in one direction. So I think the dynamics of what they need, which is this diverse set of information and data, makes this market highly beneficial for independence.
The second piece, why us versus anyone else.
is very simple, the idea of scale.
You know
Speaker Change: We've been in the business of delivering massive amounts of scale content into the streaming ecosystem.
Speaker Change: We've delivered literally millions of assets out into the streaming ecosystem over the last 15 years.
Speaker Change: and we now have an automation platform that allows us to not only.
deliver this at scale.
Speaker Change: but do the pre-processing or work that's required to meet the very specific and very intensive needs of AI models that
Speaker Change: You know, if any one of these studios or companies that have a big library try to do this today,
Speaker Change: The high cost of using third-party traditional services or trying to do it internally is cost-prohibitive and, you know, at the pricing levels...
Speaker Change: for licensing today eats up, you know, anywhere from 60 to 80 percent of the revenue generated. So it's just not a sustainable model unless you have a big-scale system. So that's where dispatch really comes in, you know.
Speaker Change: If we ingest this content and literally we can scale up and deliver for an infinitesimally small fraction of what it would cost somebody to do it through one of these more expensive systems.
our leadership in the space.
Speaker Change: that we've been doing this for 15 years. You know, we were an Apple aggregator, helped them build iTunes up, and helped all the others do it.
are
Speaker Change: are diverse library that actually fits what these guys want. And then lastly, a scalable platform designed to do exactly what the AI environment wants. Those three factors together make us, you know,
Speaker Change: probably the most qualified company in the space to help support that growth.
So that's, I hope that answers your question.
Speaker Change: It does, and I think it was obviously a very big opportunity given the size of your firm today to license out a few million dollars a year is huge to you.
Speaker Change: Just following up on that, as you talked about your ability to get it in the right
Speaker Change: whatever metadata form or whatever you call it for AI ingestion or analysis, but to license out your library today, do you have to spend any significant sums to get your library in shape or you've already done that?
I'll let Tony, Tony Guadaro, start you.
Speaker Change: Tony Huida are on the call for that but you know
Go ahead, Tony.
Tony Huida: I'll take that question. So the underlying sort of premise of MatchPoint is we do a deal with the licensor and they deliver our highest quality source into MatchPoint.
It then undergoes QC and, you know, mastering and prep.
Tony Huida: We then take that file and it sits inside a match point.
Tony Huida: And from that point on, they never need to deliver the file again, and MatchPoint can deliver a thousand different ways. So regardless of what any of these AI partners' requirements are, MatchPoint was designed to deliver to that spec. So to Erick's point,
Speaker Change: These companies, when they're licensing video for data, they're not licensing 50 movies or 100.
Speaker Change: They're each orders on average of 10,000 hours or more, you know in the tens of thousands of hours, right? So this is why to Eric's point this won't scale for the big studios because they're using third-party vendors
Speaker Change: who are generally charging, you know, $500 to $1,500 per file delivery.
Speaker Change: and the revenue to license a title for training is far less than that, it's just not sustainable. Whereas for MatchPoint, our cost to actually use MatchPoint and deliver is measured significantly less than that.
Speaker Change: And so we could deliver 10,000 movies at a click of a button without a single human touching a single file.
Speaker Change: and in any flavor that any partner wants. And that is our secret sauce and that is the competitive advantage that we have with MassPoint where we can use that to deliver our own library and potentially even deliver on behalf of other companies who are looking to license to the ag companies.
Great, thank you.
Thank you.
Speaker Change: Well, I look forward to continuing to improve in the core line, the new line of business promoting movies sort of individually on top of the Terrifier franchise and all the metaverse.
MetaSearch, etc, etc. So, thank you and congrats on.
One terrifier again. Thank you, Jeff.
Thank you, Jay. That is the plan.