Cineverse Corp 8-K/A, filed Aug 15, 2023
Cineverse Corp. (CNVS)
About this 8-K/A
Cineverse Corp filed this 8-K/A on August 15, 2023, reporting on events of August 14, 2023.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
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Trading |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note
Item 2.02 Results of Operations and Financial Condition.
On August 14, 2023, Cineverse Corp. (the “Company”) issued a press release announcing its financial results for the three months ended June 30, 2023.
A copy of such press release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
The information in this Item 2.02 of Form 8-K and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits.
99.1 |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: |
August 15, 2023 |
By: |
/s/ Gary S. Loffredo |
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Name: Title: |
Gary S. Loffredo |
Exhibit 99.1
Cineverse Reports First Quarter Fiscal Year 2024 Results
LOS ANGELES, August 14, 2023 – Cineverse Corp. (“Cineverse” or the “Company”) (NASDAQ: CNVS), a global streaming technology and entertainment company, today announced its financial results for the fiscal first quarter ended June 30, 2023 (“Q1 FY 2024”).
Q1 FY 2024 Highlights (all comparisons are to the fiscal quarter ended June 30, 2022):
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Operational Developments Subsequent to Quarter-End
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Extended our line of credit with EastWest Bank, which was previously set to expire on September 15, 2023. The maturity date on this facility is now September 15, 2024. The $5.0 million facility currently has a $0 balance.
Management Commentary
Chris McGurk, Cineverse Chairman and CEO, stated, “We are making good progress toward our goals of reduced costs, improved margins and sustained profitability. Despite some continued industry headwinds during the fiscal first quarter, we were pleased to report record revenue in our Streaming and Digital business despite having fewer channels in our portfolio following our previously announced plan to realign resources in our broad 26-channel streaming portfolio toward higher performing streaming channels. As I have noted before, unlike many of our competitors who have a single streaming channel and revenue model, our large number of enthusiast streaming channels and multiple revenue streams give us the ability to manage our business as a portfolio. This provides us with a unique opportunity to improve our bottom line by eliminating channels that generate lower margin revenues. We achieved direct operating margin of 46.2% for the quarter, which is in line with our previously provided guidance range of 45% to 50% for the year. We also reduced operating costs by $2.5 million in the quarter, enabling us to narrow our operating loss by $1.9 million or a 40.7% improvement versus last year. The launch of Cineverse Services India is a key element to these cost-cutting efforts, and we expect SG&A expenses will begin to reflect the impact of the offshoring of our domestic headcount and backoffice functions in the second half of FY 2024.
“At our core, Cineverse is a technology-first company, and we are proud to have been at the forefront of innovation in the entertainment space since entering the business over 20 years ago. In recent months, we have announced notable partnerships with premiere household names such as Amagi, TCL, GoPro and Sid & Marty Krofft. Our technology was the key reason these brands chose to work with Cineverse, and we are in discussions with other high-profile potential partners, which we believe will further validate our technology.
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“We were thrilled to release MatchpointAI, offering content owners and streaming services a comprehensive suite of industry-leading AI capabilities that can eliminate expensive, time-consuming labor-intensive work preparing film and television assets for global distribution. This includes not only Cineverse’s own proprietary enterprise-grade content processing platform, Dispatch™, but also fully integrated third-party AI tools from the likes of OpenAI and VionLabs. We believe that Search and Discovery improvements are the number one demand from streaming audiences today, and we aim to become the leader in AI-based Search & Discovery for the entertainment sector and are actively pursuing opportunities that will allow us to deploy our industry-leading technology assets and solidify our position in this critical area for streaming consumers.
“We continue to pursue multiple high-margin growth channels with the support of a fortified balance sheet, no debt, and a valuable—and, we believe, underappreciated—asset in our extensive content library that carries a third-party appraised value of $26 million to $30 million, compared to the $2.9 million valuation carried on our books. In addition to the recently exciting developments on the technology side, we are also preparing for the re-release of Terrifier 2 this fall, which will include a teaser for the next installment—Terrifier 3—set for release in fall of 2024. We are confident that our 360-degree marketing approach will remain a crucial component of our theatrical and home entertainment business’ success and remain focused on executing on all our growth initiatives, bolstered by our technology and reputation within the industry, as the final wind-down of our legacy business comes to a full close by the end of this fiscal year.”
Erick Opeka, President and Chief Strategy Officer of Cineverse, said, “As we refocus the Company on profitable, sustainable growth driven by technology, we have made significant strides this quarter to reduce operating costs by eliminating unprofitable channels, expanding revenues from our content library, and setting in motion our efforts to dramatically reduce our SG&A costs over the remainder of the fiscal year, most importantly by fully leveraging our unique and trusted asset in Cineverse Services India, which provides us the opportunity to offshore, not outsource, the majority of our headcount to generate significant cost savings and workflow efficiencies. In the meantime, we have continued to aggressively expand our partnerships and revenues with our Matchpoint platform and are launching additional new revenue streams in advertising, ecommerce, retail and technology services in the current quarter. All of these initiatives are crucial steps to achieving improved margins, positive free cash flow and sustainable profitability by the end of FY 2024.”
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Guidance
The Company is reiterating its previously provided guidance for fiscal year 2024, which includes:
These guidance assumptions are based on, among other factors, the Company's existing business, current view of existing market conditions and assumptions for fiscal year 2024.
Conference Call
Cineverse will host a conference call at 4:30 p.m. ET today (Monday, August 14, 2023), during which management will discuss the results of the fiscal first quarter ended June 30, 2023. To participate in the conference call, please use the following dial-in numbers:
U.S. (Toll-Free): 1-833-470-1428
Canada (Toll-Free): 1-833-950-0062
International: Additional global dial-in numbers can be found here.
Access code: 223250
The conference call can also be accessed by webcast at the Investors section of the Company's website at https://investor.cineverse.com/events-and-presentations. Those who are unable to attend the live conference call may access the recording at the above webcast link, which will be made available shortly after the conclusion of the call.
About Cineverse
Cineverse is a global streaming technology and entertainment company with one of the world’s largest portfolios of streaming channels and content libraries, all powered by its advanced, proprietary technology platform. Cineverse currently features enthusiast brands for subscription video on demand (SVOD), advertising-based video on demand (AVOD) and free, ad-supported streaming television (FAST) channels. Cineverse entertains consumers around the globe by providing premium feature film and television series, enthusiast streaming channels and technology services to some of the world's largest media, retail and technology companies. For more information, please visit www.cineverse.com.
Safe Harbor Statement
Investors and readers are cautioned that certain statements contained in this document, as well as some statements in periodic press releases and some oral statements of Cineverse officials during presentations about Cineverse, along with Cineverse's filings with the Securities and Exchange Commission, including Cineverse's registration statements, quarterly reports on Form 10-Q and annual report on Form 10-K, are "forward-looking'' statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act''). Forward-looking statements include statements that are
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predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects," "anticipates,'' "intends,'' "plans,'' "could," "might," "believes,'' "seeks," "estimates'' or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings, or growth rates), ongoing business strategies or prospects, and possible future actions, which may be provided by Cineverse's management, are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to various risks, uncertainties, and assumptions about Cineverse, its technology, economic and market factors, and the industries in which Cineverse does business, among other things. These statements are not guarantees of future performance, and Cineverse undertakes no specific obligation or intention to update these statements after the date of this release.
For additional information, please contact:
At Cineverse
Julie Milstead
424-281-5411
investorrelations@cineverse.com
The Equity Group Inc.
Carolyne Sohn
408-538-4577
csohn@equityny.com
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CINEVERSE CORP. |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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(In thousands) |
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As of |
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June 30, |
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March 31, |
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2023 |
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2023 |
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(Unaudited) |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
12,129 |
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$ |
7,152 |
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Accounts receivable, net |
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14,711 |
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20,846 |
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Unbilled revenue |
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2,247 |
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2,036 |
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Employee retention tax credit |
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1,773 |
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2,085 |
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Prepaid and other current assets |
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7,637 |
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5,458 |
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Total Current Assets |
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38,497 |
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37,577 |
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Equity investment in A Metaverse Company, a related party, at fair value |
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5,200 |
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5,200 |
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Property and equipment, net |
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2,075 |
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1,833 |
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Intangible assets, net |
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19,188 |
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19,868 |
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Goodwill |
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20,824 |
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20,824 |
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Other long-term assets |
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2,862 |
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2,686 |
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Total Assets |
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$ |
88,646 |
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$ |
87,988 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current Liabilities |
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Accounts payable and accrued expenses |
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$ |
29,867 |
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$ |
34,531 |
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Line of credit, including unamortized debt issuance costs of $32 and $76, respectively |
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4,968 |
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4,924 |
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Current portion of deferred consideration on purchase of business |
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3,615 |
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3,788 |
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Current portion of earnout consideration on purchase of business |
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1,526 |
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1,444 |
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Operating lease liabilities |
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418 |
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418 |
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Current portion of deferred revenue |
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221 |
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226 |
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Total Current Liabilities |
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40,615 |
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45,331 |
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Deferred consideration on purchase – net of current portion |
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2,868 |
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2,647 |
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Operating lease liabilities, net of current portion |
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728 |
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863 |
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Other long-term liabilities |
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59 |
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74 |
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Total Liabilities |
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$ |
44,270 |
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$ |
48,915 |
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Stockholders’ Equity |
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Preferred stock |
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$ |
3,559 |
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$ |
3,559 |
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Common stock |
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191 |
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185 |
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Additional paid-in capital |
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539,997 |
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530,998 |
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Treasury stock, at cost |
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(11,608 |
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(11,608 |
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Accumulated deficit |
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(486,033 |
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(482,395 |
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Accumulated other comprehensive loss |
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(480 |
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(402 |
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Total stockholders’ equity of Cineverse Corp. |
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45,626 |
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40,337 |
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Deficit attributable to noncontrolling interest |
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(1,250 |
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(1,264 |
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Total equity |
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44,376 |
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39,073 |
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Total Liabilities and Equity |
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$ |
88,646 |
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$ |
87,988 |
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7
CINEVERSE CORP. |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
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(In thousands, except for per share data) |
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(Unaudited) |
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For the Three Months |
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2023 |
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2022 |
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Revenues |
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$ |
12,980 |
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$ |
13,590 |
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Operating expenses |
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Direct operating |
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6,987 |
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7,356 |
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Selling, general and administrative |
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7,888 |
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9,818 |
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Depreciation and amortization |
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822 |
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1,000 |
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Total operating expenses |
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15,697 |
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18,174 |
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Operating loss |
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(2,717 |
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(4,584 |
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Interest expense |
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(295 |
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(133 |
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Decrease in fair value of equity investment in Metaverse, a related party |
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- |
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(1,256 |
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Other expense, net |
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(504 |
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(14 |
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Net loss before income taxes |
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(3,516 |
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(5,987 |
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Income tax expense |
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(20 |
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— |
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Net loss |
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(3,536 |
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(5,987 |
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Net income attributable to noncontrolling interest |
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(14 |
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(18 |
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Net loss attributable to controlling interests |
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(3,550 |
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(6,005 |
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Preferred stock dividends |
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(88 |
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(88 |
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Net loss attributable to common stockholders |
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$ |
(3,638 |
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$ |
(6,093 |
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Net loss per share attributable to common stockholders: |
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Basic |
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$ |
(0.37 |
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$ |
(0.69 |
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Diluted |
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$ |
(0.37 |
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$ |
(0.69 |
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Weighted average shares of common stock outstanding: |
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Basic |
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9,879 |
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8,771 |
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Diluted |
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9,879 |
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8,771 |
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Adjusted EBITDA
We define Adjusted EBITDA to be earnings before interest, taxes, depreciation and amortization, stock-based compensation expense, merger and acquisition costs, restructuring, transition and acquisitions expense, net, goodwill impairment and certain other items.
Adjusted EBITDA is not a measurement of financial performance under GAAP and may not be comparable to other similarly titled measures of other companies. We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, we believe Adjusted EBITDA will also be useful to others, including our stockholders, as a valuable financial metric.
We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net income (loss) from continuing operations as an indicator of operating performance. We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors. We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.
We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net income (loss) from operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to income (loss) from operations as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
Following is the reconciliation of our consolidated net loss to Adjusted EBITDA (in thousands):
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For the Three Months |
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2023 |
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2022 |
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(Unaudited) |
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Net Loss |
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$ |
(3,536 |
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$ |
(5,987 |
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Add Backs: |
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Income tax expense |
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20 |
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- |
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Depreciation and amortization |
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822 |
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1,000 |
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Interest expense |
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295 |
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133 |
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Stock-based compensation |
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409 |
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980 |
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Decrease in fair value of equity investment in Metaverse, a related party |
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- |
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1,256 |
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Provision for doubtful accounts |
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- |
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3 |
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Other expense, net |
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36 |
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14 |
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Net income attributable to noncontrolling interest |
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(14 |
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(18 |
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Adjustments: |
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Transition-related costs |
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468 |
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175 |
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Mergers and acquisitions costs |
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- |
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207 |
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Adjusted EBITDA |
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$ |
(1,500 |
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$ |
(2,237 |
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