Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cineverse Corp (CNVS, Financial) achieved significant savings in SG&A, reducing costs by $1.3 million or 17% compared to the prior year.
- The company successfully offshored domestic employment positions to Cineverse Services India, resulting in substantial cost savings.
- Cineverse Corp (CNVS) reported a direct operating margin of 51%, exceeding their target range of 45% to 50%.
- The company extended its $7.5 million line of credit with East West Bank to September 2025, enhancing financial flexibility.
- Cineverse Corp (CNVS) saw a 73% year-over-year increase in viewership, with 2.26 billion minutes watched in Q2 2024.
Negative Points
- Total revenues for the quarter were $9.1 million, down from $13.0 million in the prior year period.
- The company experienced a $2 million decline in digital distribution revenue due to delays in content releases.
- Advertising revenues declined by approximately $500,000 due to channel optimization efforts.
- Adjusted EBITDA for the quarter was negative $1.4 million, reflecting continued financial challenges.
- Subscriber count decreased by approximately 3.5% sequentially, attributed to seasonal churn.
Q & A Highlights
Q: Can you explain the drop in digital distribution revenue and whether this is a one-time event or a trend we should expect going forward?
A: (Erick Opeka, Chief Strategy Officer and President) The decline was primarily due to the absence of large one-time licensing deals that occurred in the prior year. Additionally, there were delays in content releases. We expect this to be an anomaly and anticipate substantial growth in this business moving forward.
Q: Despite increased viewership and new channels, why is streaming and digital revenue at a three-year low?
A: (Erick Opeka, Chief Strategy Officer and President) The ramp-up period for our new sales teams and Matchpoint initiatives took longer than expected. We were also conservative in monetizing programmatic inventory to protect CPMs for our direct sales team. We believe we are now bouncing off the bottom of revenue and expect robust growth ahead.
Q: How much revenue can a top-earning channel like Dog Whisperer generate when fully ramped and widely distributed?
A: (Erick Opeka, Chief Strategy Officer and President) A successful channel can generate low to mid-seven figures in revenue. Dog Whisperer, with its additional licensing and consumer goods rights, is expected to be on the higher end of that scale.
Q: What gives you confidence in a rebound in monetization given the competitive landscape with giants like Netflix and Amazon?
A: (Erick Opeka, Chief Strategy Officer and President) We focus on selling comprehensive packages that include inventory, omnichannel, podcast, display, and sponsorships, which are highly valued by brands. This approach differentiates us from general entertainment streamers and protects our revenue streams.
Q: How significant is the political advertising lift expected to be for Cineverse?
A: (Erick Opeka, Chief Strategy Officer and President) We expect a 10% to 15% lift in programmatic revenue from political advertising, similar to prior election years. However, the exact impact is uncertain due to the highly targeted nature of this year's campaigns.
Q: Does your guidance include any monetization from cineSearch, and what are the plans for further OpEx reductions?
A: (Erick Opeka, Chief Strategy Officer and President) Our guidance does not yet include cineSearch monetization. We have identified 5% to 7% in OpEx savings from switching technology vendors and other infrastructure changes, which we expect to realize over the next two quarters.
Q: Can you provide more details on the expected revenue from the upcoming release of Terrifier 3?
A: (Erick Opeka, Chief Strategy Officer and President) We anticipate significant revenue from Terrifier 3, including theatrical, ESP transactions, rentals, and licensing. The wide release on over 2,200 screens is expected to generate considerable revenue, surpassing the patterns seen with Terrifier 2.
Q: What are the growth prospects for your podcast network, and how are you planning to monetize it further?
A: (Erick Opeka, Chief Strategy Officer and President) Our podcast network has seen exponential listener growth, yielding a 49% revenue surge over the last 60 days. We are currently monetizing less than 10% of our inventory directly and are in the process of changing programmatic partners to further increase revenue.
Q: How are you balancing the need for revenue growth with maintaining high CPMs in your programmatic ad sales?
A: (Erick Opeka, Chief Strategy Officer and President) We are finding a balance by being less aggressive in protecting CPMs and focusing on broad-based omnichannel packages sold by our direct sales team. This approach allows us to increase revenue while maintaining high CPMs.
Q: What are the key areas of focus for driving top-line growth at Cineverse?
A: (Erick Opeka, Chief Strategy Officer and President) We are focusing on expanding distribution of SVOD, AVOD, and fast streaming channels, growing direct ad sales, increasing licensing revenue, and developing new revenue drivers like Matchpoint and Podcast. This diversified approach will support sustainable profitability and growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
