Earnings Call Transcript - CNVS Q2 2024

Operator, Operator

Good day, everyone. Welcome to Cineverse's Second Quarter Fiscal 2024 Financial Results Conference Call. My name is Tia, and I will be your moderator for today. Currently, all participants are in a listen-only mode. We will have a question-and-answer session following management's prepared remarks. Please note that this call is being recorded. I would now like to turn the call over to your host, Gary Loffredo, Chief Legal Officer, Secretary and Senior Advisor for Cineverse. Please proceed.

Gary Loffredo, Chief Legal Officer

Good afternoon, everyone. Thank you for joining us for the Cineverse fiscal 2024 second quarter financial results conference call. The press release announcing Cineverse's results for the fiscal second quarter ended September 30, 2023 is available at the Investors section of the company's website at www.cineverse.com. A replay of this broadcast will also be made available at Cineverse's website after the conclusion of this call. Before we begin, I would like to point out that certain statements made on today's call contain forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties, and assumptions. The company's periodic reports that are filed with the SEC describe potential risks and uncertainties that can cause the company's business and financial results to differ materially from these forward-looking statements. All the information discussed on this call is as of today, November 14, 2023 and Cineverse does not assume any obligation to update any of these forward-looking statements except as required by law. In addition, certain financial information presented in this call represents 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. I'm Gary Loffredo, Chief Legal Officer, Secretary and Senior Advisor at Cineverse. With me today are Chris McGurk, Chairman and CEO; Erick Opeka, President and Chief Strategy Officer; Tony Huidor, Chief Operating Officer and Chief Technology Officer; Mark Lindsey, Chief Financial Officer; and Yolanda Macias, Chief Content Officer, all of whom will be available for questions following the prepared remarks. On today's call, Chris will discuss our second quarter fiscal 2024 highlights, the latest operational developments, outlook and long-term growth strategy. Mark will follow with a review of our results, and Erick will provide some detail on our business results and operating initiatives before opening the floor for questions. I will now turn the call over to Chris McGurk to begin.

Chris McGurk, Chairman and CEO

Thank you, Gary, and hello, everyone. Thank you for joining us today. We made great strides this quarter toward achieving our previously stated goal of dramatically reducing costs, improving margins and driving towards sustained profitability. We did this by further optimizing our more than two dozen streaming channel portfolio, culling lower-margin channels while focusing resources on higher margin, higher return performers. And then by cutting costs, as we finalize the consolidation of the eight key content and streaming acquisitions we made over the last three years. At the same time, we are also transferring a significant number of domestic employment positions to our Cineverse Services India operation, a unique competitive cost and work efficiency advantage that Cineverse enjoys versus everyone else in our space. I believe the results this quarter show significant progress towards our goal of long-term sustained profitability and also demonstrate our willingness to trade off lower-margin revenue streams for higher margins and profits in pursuit of that goal. In the quarter, we increased our total operating margin to 64% from 42%. We increased our recurring operating margin to 56% from 30% when excluding our legacy Digital Cinema Equipment business. We decreased our operating expenses by $6.3 million or 34%. We decreased our SG&A costs by $2.8 million or 29% via a reduction of 30 employment positions and tight cost controls. We have also put any management variable bonus compensation on hold until we achieve sustainable profitability. And we have significant additional positions that we plan to offshore to Cineverse Services India over the next few months beyond the 29-plus positions that we have already moved there or identified to offshore. All of that will enable us to hit our goal of $8 million in annual SG&A cuts. Cineverse Services India is a very significant advantage for us, providing a huge cost savings and work efficiency upside that we own versus our competitors, and we intend to leverage that to the fullest extent possible. As a result of all these optimization and cost savings initiatives, which significantly exceeded the revenue impact of culling lower-margin channels, we improved our operating profit by $5.3 million to $600,000 this quarter. And we increased our adjusted EBITDA by $3.7 million or 283% to $2.4 million. And we also narrowed our net loss to $400,000. That's net loss attributable to common shareholders. That's an improvement of $5.4 million. Clearly, we are on the right track towards sustained profitability and that remains our overriding focus. Mark Lindsey will next add some color to these results and speak to our cash management activities and planning. Erick Opeka will then review all of the initiatives we have in place to drive high-margin incremental revenues, including our recently announced deal with technology unicorn, Amagi and our upcoming announcements regarding AI partnerships for streaming search and discovery. Mark?

Mark Lindsey, Chief Financial Officer

Thank you, Chris. For the fiscal second quarter ended September 30, 2023, Cineverse reported total revenues of $13.0 million, which compares to $14.0 million in the prior year quarter. As Chris noted, this decrease was primarily due to the impact on our advertising revenue from the intentional elimination of certain lower-margin channels via portfolio optimization and reallocating those resources to higher-performing and higher-margin streaming properties, which is important to our goal of achieving sustainable profitability in the near-term. Subscription-based revenues increased 52% to $3.5 million, driven by the continued success of our enthusiast streaming services. For example, our Screambox channel revenues increased over 350% compared to the prior year quarter. Advertising-based revenues declined 28% to $4.1 million, primarily due to our channel optimization efforts and the continued impact of the current economic environment on advertising spend. Nonrecurring revenues related to our legacy Digital Cinema business were $2.4 million, a decline of 7% from prior year quarter. We don't expect any additional future revenues associated with this business other than nominal equipment sales. Direct operating margin for the period was 64%, an increase from 42% in the prior year quarter. When excluding the impact of our legacy Digital Cinema business, our recurring direct operating margin improved to 56% compared to 30% in the prior year quarter, which is in excess of our previously provided guidance of 45% to 50% for fiscal year 2024. Our improved direct operating margin is a direct result of our cost optimization initiatives that Chris referred to earlier. Selling, general and administrative expenses decreased $2.8 million or 29% from the prior year quarter. Again, this improvement is a direct result of the cost optimization initiatives discussed previously. We expect to gain even greater efficiencies as our offshoring efforts to Cineverse Services India gain momentum over the remainder of the fiscal year. Overall, total operating expenses decreased $6.3 million. And as a result, our net loss attributable to common stockholders narrowed to a negative $0.4 million or a negative $0.04 per diluted share, a $5.3 million and $0.61 per share improvement from the prior year quarter. Adjusted EBITDA improved $3.7 million from a negative $1.3 million in the prior year quarter to a positive $2.4 million in the current quarter. We had $8.6 million in cash and cash equivalents on our balance sheet as of September 30, 2023 and we have $5 million outstanding on our working capital facility. During the quarter, our cash flow used from operations improved by $2.2 million from a negative $5.1 million in the prior year quarter to a negative $2.9 million this quarter. Of the cash usage of $2.9 million this quarter, $4 million was related to investments in our content portfolio via advanced and/or minimum guaranteed payments, the largest being for Terrifier 3. Year-to-date, our content portfolio spend was $5.3 million. The important point here about cash is that when excluding our content portfolio spend, cash flow from operations was a positive $1.1 million this quarter. We're excited to see the impact that our cost optimization strategies had this quarter and are optimistic about their impact for the remainder of the fiscal year. In addition, we are working closely with our bank to increase the size and duration of our working capital facility, and we feel well positioned to be able to execute on our goal of achieving sustainable profitability by the end of the fiscal year. In terms of guidance, we are currently reviewing our previously issued guidance in connection with finalizing our long-range forecast that takes into account the results of our channel optimization efforts, our cost reduction initiatives, and the new revenue initiatives we are launching, such as our SaaS and managed services technology business. We will report any changes in guidance, if warranted, once we have completed this process. I also want to point out that we have a 500,000 share stock repurchase program available through March 2024. We believe that we are significantly undervalued with the stock price that has traded substantially below our current book value and we will assess the need to utilize the stock repurchase program once our trading window opens up. With that, I'll turn the floor over to Erick to discuss the market environment and our growth initiatives. Thank you.

Erick Opeka, President and Chief Strategy Officer

Good afternoon, everyone, and thank you for joining us today. I'd like to start off by sharing our financial progress, particularly in the streaming sector. Our Digital and Streaming revenue declined by 7% to $10.6 million. This stems from our strategic digital licensing and expansion of our subscription base, which was offset by a decline in ad revenues and as previously noted, the culling of multiple lower margin streaming channels. Subscription revenues have seen a considerable increase to $3.5 million, up 52% over the prior year. We reached 1.24 million subscribers, thanks to our target acquisitions for Screambox Horror channel and the Dove Channel's expansion. This progress underscores the strength and appeal of our enthusiast streaming services, and we're going to continue to focus on smart growth by optimizing retail pricing for our services, expanding distribution and pursuing bundling partnerships. Beyond that, we continue to rationalize content spending. You've seen the major streamers reduce content spend across the board and we're no exception. Going forward, we have shifted away from capital-intensive all rights acquisitions and productions to lower-cost acquisitions and minimum guarantee and revenue-sharing deals. This approach will greatly reduce our need for content investment spend. And given our other efforts noted, we'll see minimal impact to top-line revenue while boosting profitability. Ad-based revenues experienced a dip to $4.1 million, a decrease of 28% in the quarter, year-over-year. This decline aligns with the insights Chris and Mark shared earlier. We streamlined our channel portfolio, prioritized higher-margin channels and concluded the wind-down of several underperforming ones. Despite the challenges in the ad market, including a prolonged tech migration with a major FAST partner, we've navigated these waters with strategic finesse. And our partners' Marketing Make Goods have helped us bounce back with that partner, reaching pre-transition revenue levels on that platform by quarter end. If we consider some of these factors, our year-over-year impact as it relates to market softness was in our estimation, between 10% to 12% year-to-date. What we're seeing in the market is a shift from an open marketplace, pure programmatic buying from agencies and brands. And this has been due to efforts on supply path optimization to buy directly from content publishers like Cineverse. We think this is great for us and in the short term, we'll eliminate many middlemen and resellers. Our short to midterm outlook is much greater sales due to three key initiatives: First, shifting all of our open market inventory to PMP and programmatic direct deals. We estimate this will increase revenues on our existing inventory by up to 30% at higher fill rates. Second, our direct sales efforts. In this quarter, we expanded our ad team and that team is fully up to speed in market and focused on building relationships and responding to RFPs for next calendar year. Given most of the major brands and advertisers are planning out nine to 12 months, we expect to see robust results from these efforts starting at the end of this fiscal year and ramping heavily into our next fiscal year, combined with robust political ad spend in the market and the expected heavy shift from cable and satellite to connected TV, next calendar year is looking to be a breakout year on ad sales. Our strategy has evolved. We're moving away from the pursuit of high top-line revenue and KPI growth at the expense of profitability. Instead, we're focused on efficient profitable growth. Our target areas are those that we can leverage our competitive edge and scale with minimal growth capital. Digital aggregation and licensing is a prime example, taking advantage of our extensive library and technology. We're pivoting towards a more balanced licensing strategy as noticed, which we believe will unlock significant revenues from our library in the upcoming quarters. For our own streaming channels, our strategy to focus on niche markets where we can lead such as horror, thriller, faith and family and Asian content. We've been consolidating assets and optimizing our team structure to better align with this vision. Matchpoint technology remains a cornerstone of our strategy as the streaming market evolves. We're one of the few platforms capable of supporting the industry shift to various business models and distribution points. Our competitors offer only a fraction of what Matchpoint can do, and we're excited to expand on those capabilities. In the spirit of our partnership with Amagi, we've committed to bringing our innovative Matchpoint suite and content services to an even broader market. Our shared history with Amagi since 2017 has set the stage for a strategic collaboration that we think will redefine the streaming technology business. As we gear up for major technology conferences and finalize our market strategies, we're confident that this synergy will drive significant revenue growth and solidify our position as innovators in the streaming infrastructure space. We believe that the Amagi partnership could provide low eight figures of annual revenue once fully up to scale based on our internal forecast and discussions with Amagi. We believe there are substantial customers in immediate need of our solutions and expect to move quickly in the New Year to take advantage of the opportunity starting with CES. Our efforts on driving increased Matchpoint sales and partnerships go beyond the large enterprise customers target in that deal. We're going to continue to offer companies managed channel services like we're doing today with American Public Media, Comedy Dynamics, Bob Ross, Inc. Real Madrid, All3Media and most recently, Dog Whisperer and 9 Story. These partnerships provide us high-quality brands at typically far lower risk than launching our own speculative channels with no existing brand identity. I also wanted to address the timeline on channel launches in general as well as provide an update on key forthcoming channels. As the FAST market has matured and competition for valuable placement on platforms has increased, the amount of time it takes to get channels up and on platforms has increased from around two months to up to nine months depending on the platform. While this is far quicker than it ever was in the cable ecosystem, it does mean there will be longer periods between the channels announcement and launch. Additionally, when we partner with a third-party, we're dependent on those parties to produce and secure content, capture the content or remaster it to be suitable for broadcast and streaming. We don't control those elements and sometimes this can lead to delays. So these elements need to be kept in mind as we announce channel deals. As it relates to our current portfolio, we expect Dog Whisperer to launch within the current quarter. The GoPro channel is predominantly new original programming, which is great for securing carriage and advertising conversations. But longer-term production delays from our partner pushed the launch into fiscal Q4 calendar Q1. We also expect launches of Mediator and Entrepreneur in fiscal Q4 calendar Q1 as well. As it relates to Sid & Marty Krofft Channel, we're currently in the process of remastering and restoring the content in 4K. Just keep in mind, this is an extensive process as the content was in standard definition. We are pushing to have this channel live in fiscal Q4 calendar Q1, but that will be dependent on distribution conversations happening today. With Matchpoint, we're also targeting the small and medium business segment directly and have recently hired a new Head of Sales for Matchpoint with over a decade of experience targeting the exact arena that we're covering. Beyond that, we're developing new products and capabilities to allow media companies to better monetize their content and streaming services by utilizing the power of AI. This ranges from making difficult, labor-intensive and repetitive tasks, scalable and cost-effective like captioning, metadata enrichment and quality control to next-generation technologies that can help companies prepare their content for licensing to large language models, drive deep engagement with consumers and even create new content from existing libraries using AI. We expect to announce the latest fruits of our AI R&D efforts, which we've been developing for this past year over the next few weeks and months. The important thing to take away from this is that our underlying technology platform facilitates rapid, high-quality processing video to tackle the biggest challenges the world's tech giants are trying to solve with AI. So we're not only planning new product launches, but also expanding our engineering team to support these initiatives in India. The future looks bright with Matchpoint and Cineverse and we're eager to share more about our progress in the coming weeks. With that, operator, let's open it up for Q&A.

Operator, Operator

We will now begin the Q&A session. The first question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed.

Brian Kinstlinger, Analyst

Great. Thanks and congratulations on all the restructuring and what it means for the much stronger fundamentals that it looks like already in the quarter. Sorry, it was a lot of information on write-downs, if you could share if you provided if the gross margin of the business, excluding the legacy business. And what was the operating margin or EBITDA margin, if you will for again, the business that excludes legacy?

Chris McGurk, Chairman and CEO

This is Chris. Thanks for your comment. But I'll let Mark Lindsey go through those numbers with you. Mark?

Mark Lindsey, Chief Financial Officer

Thanks, Chris. Yes. Thanks, Brian. So the gross margin before excluding legacy was 64% this quarter and 42% prior year quarter. Excluding the legacy business, it's 56% this quarter and 30% in the prior quarter.

Brian Kinstlinger, Analyst

30% is EBITDA or operating margin?

Mark Lindsey, Chief Financial Officer

That's operating margin.

Brian Kinstlinger, Analyst

Got it. Okay. If you could elaborate on the revenue model regarding your partnership with Amagi, I'd appreciate it. Are you selling subscriptions to the Cineverse streaming content for platforms? Are they able to utilize your Matchpoint services to curate and transfer content? Additionally, you mentioned a low eight figures in terms of revenue contribution in your prepared remarks. Does this imply you expect to reach around $10 million in revenue by the end of the next fiscal year, or is that too ambitious?

Chris McGurk, Chairman and CEO

Erick, do you want to take that one?

Erick Opeka, President and Chief Strategy Officer

Sure. To address both parts, first, we're tentatively naming this FAST kit. Currently, there are numerous Amagi calls and video service providers in the market. This includes hardware manufacturers and telecommunication companies that previously missed opportunities when Tubi and Pluto were available, or lack the resources to launch a large-scale streaming platform like the Roku Channel and others. We're partnering with Amagi to provide a turnkey solution that includes applications and back-end infrastructure. Amagi has over 800 FAST channels, while we offer 70,000 hours of programming. Together, we both have monetization capabilities, enabling companies to quickly enter the market and save years of development effort. Our market assessment shows that many companies are under-monetizing relative to their market share, indicating a significant addressable market. Coupled with Amagi's 800-plus customers, this represents a substantial market opportunity. Our plan is to leverage Amagi's global sales force of 25 to 30 people who are already generating substantial revenue to expand services through this partnership. Regarding the business model, the specifics will depend on the services the partner requires. Some may prefer to handle their own content acquisitions or app development but will need our back-end infrastructure, and vice versa. The model will be customized for each partner, and I expect it to align with Amagi's SaaS-based consumption approach. Our agreement will adopt a consumption-based model determined by the services partners choose to utilize.

Brian Kinstlinger, Analyst

So you are getting share on consumption?

Erick Opeka, President and Chief Strategy Officer

So there will be direct builds for a variety of services. For content-based deals, we will likely adopt a revenue share-based model. Regarding the market perspective, as previously discussed, the sales cycle involves partners launching and building applications to bring them to market. Typically, we observe a deal cycle lasting about a quarter or two, depending on the partner and the complexity of the deal. Implementation will follow that. We believe the next fiscal year will focus on ramping up to our expected steady state once this business gains traction. We are entering our fiscal Q4 with the anticipation that many in the market will want to leverage a strong advertising market this year, leading to numerous engagements around the middle of the year to capture ad revenue for calendar Q3 and Q4. We expect to see some results in the next fiscal year, although reaching the full eight-figure target may take longer. However, we anticipate material progress by mid-next year.

Brian Kinstlinger, Analyst

Great. And then separately, you touched on having your direct ad sales team, I think, in place is what you said, Erick. Can you talk about the progress? Has there been a contribution? How long does it take before you see the impact of that team building relationships and driving higher-margin ad sales?

Erick Opeka, President and Chief Strategy Officer

It's really a three-stage process. The first stage is where we were until just a few months ago, primarily relying on an open marketplace for programmatic sales, allowing anyone to buy and sell our inventory. Since mid to late summer, we have been transitioning from that model to focus on programmatic direct and private marketplace deals with agencies, brands, and DSPs. This transition has been in progress since midyear, and we've made significant advancements. For a direct sales team to be effective in the market, they must sell to a higher tier rather than an open programmatic model, hence our focus on moving everything upstream. At the same time, we've expanded our direct sales team. The sales cycle for most brands and agencies typically spans six to nine months. There are some immediate opportunities in the latter part of this year and early Q1, but the significant results from our efforts should begin to appear towards the end of our fiscal Q4. Over the last quarter, we have executed a few successful campaigns for clients like Ancestry and Jack in the Box, and we are currently receiving a steady flow of RFPs. I anticipate that next year will be quite strong.

Brian Kinstlinger, Analyst

Great. One last question, I'll get back in the queue. I think you were very clear on your plans for content acquisition costs come down like everyone else in the industry, are there any known significant cash content costs you see in the near term that you can call out? And should we expect the cash flow cost outside of the P&L to be nominal? Or there will still be some bits and pieces here and there of cash content costs?

Chris McGurk, Chairman and CEO

We went through our state of high-profile spending over the last quarter. As Erick mentioned, with Terrifier, spending we did, and Dog Whisperer. And I think you're going to see a real narrowing of our spend continue for at least the next six months.

Daniel Kurnos, Analyst

Thanks. Good afternoon. Chris and Erick, the whole channel portfolio balancing is something you are both familiar with. I know, Chris, you’ve highlighted this before, and so has Erick. This isn't a significant change. It seems like the scale might be a bit larger than we initially anticipated for the quarter, but as Erick explained, once we reach fiscal Q4, some things will come back online. Additionally, the profitability of the portfolio has greatly improved. I want to ensure I understand the figures correctly. It appears to be around a $2 million incremental call on the revenue side, and please correct me if I'm mistaken. I'm trying to grasp how all the planned initiatives will play out. If we exclude the legacy revenue you mentioned in today’s quarter and also set aside the base distribution business, you're still looking at approximately $10 million in revenue from subscription advertising and some licensing and digital areas that you aim to expand. So, I’d like to know how much you anticipate that business will grow before we discuss the software SaaS aspects that I want to touch on afterwards.

Chris McGurk, Chairman and CEO

There are several things to cover. First, regarding the channel portfolio optimization, although I have addressed it in previous calls, this quarter marks a significant impact on our financials because we made some cuts to channels midway through the last quarter. The effects are more pronounced now. We won’t be able to provide a detailed answer during this call, as Mark Lindsey mentioned, we are currently assessing the impact of our channel optimization efforts and developing a long-term forecast while incorporating the new revenue opportunities that Erick mentioned. This is an ongoing process. It might be more productive to discuss this further offline. I’m not sure if Erick or Mark would like to add anything else, but that’s my current perspective. Erick?

Erick Opeka, President and Chief Strategy Officer

No, there's nothing to add. It's too early.

Chris McGurk, Chairman and CEO

Yes. We have a couple of tech deals that we anticipate announcing in the next few weeks, which we cannot discuss on this call. These will also have an impact, and that's why we are being very careful and strategic as we examine our long-range forecast. We are confident that we will continue to reduce costs significantly. Cineverse India presents a huge upside for us, enabling us to transfer jobs at only 10% to 15% of domestic costs while achieving better workflows and efficiencies. This is not outsourced to a third party; rather, it’s being offshored to our own division that has performed exceptionally well. We expect significant additional savings that will further enhance our margins, forming the basis of the plan we are currently developing.

Daniel Kurnos, Analyst

I’m trying to understand the baseline. You’re clearly making a strong profit with your tech pivot, and that doesn’t mean you’re stepping away from streaming or advertising. I want to get a sense of where we stand now. It seems like this is the new baseline, so there's not much more to come off based on what you’ve shared. With this more profitable base, there will be upside from the advertising changes that Erick mentioned regarding the ad sales model, as well as new channels, which are yet to be determined. Additionally, as you mentioned, Chris, the Amagi deal looks like a precursor to a broader tech initiative that I assume is on the way. Does Amagi provide you with additional tools or enhanced capabilities? How do you plan to reinvest or broaden your toolset in relation to leveraging Matchpoint Technology?

Chris McGurk, Chairman and CEO

Erick or Tony, you want to take that?

Erick Opeka, President and Chief Strategy Officer

I believe the most significant advantage we have is that Amagi is a major player in the streaming and FAST markets, backed by a substantial global sales team that can promote our product much more quickly than we could assemble a comparable team. Additionally, Amagi contributes a valuable portfolio of over 800 channels and has established strong customer relationships, particularly with larger enterprises, which is an area we are currently not as strong in. These resources will significantly enhance our efforts, although we remain focused on the small and mid-market segments as well. Overall, I think Amagi will enable us to generate revenue much more rapidly than we would by solely targeting the smaller markets.

Tony Huidor, Chief Operating Officer and Chief Technology Officer

Just to add to that, I think one way of looking at it is most of the big media companies have been investing in FAST. That's where the immediate opportunity is. But now as all the big studios have released their own stand-alone services, having applications available to the consumer has become an important part of everyone's strategy. And that's the area where we have a head start. We've developed Matchpoint over the last eight years, specifically for servicing apps and video on demand. And that's where we see the rest of the industry moving, using FAST as kind of the entry point, but really expanding into next-generation services where it's a map or larger catalogs of direct video-on-demand content.

Daniel Kurnos, Analyst

Given that the actor strike has concluded, there is an expectation that content spending will begin to rise next Spring. However, it may take some time to pick up, possibly at a lower level than in previous years when the streamers were overly enthusiastic. I'm curious about how this may influence your initiatives, whether related to traditional streaming or Matchpoint. Does this serve as a catalyst for the market? Or does it alter your approach, considering market changes in advertising focus? Right now, it leans more towards direct PG, but could it shift back to a more open PMP in a healthier environment with improved visibility, notwithstanding potential economic impacts?

Erick Opeka, President and Chief Strategy Officer

We are focusing on acquiring finished products rather than producing new content, aside from a few projects like Terrifier 3, which we had already secured a waiver for before the strike concluded. Our strategy is more about acquiring and licensing titles than making significant investments in large theatrical releases, with Terrifier being an exception and other promising investments we are committed to. Overall, production will play a smaller role in our business moving forward.

Yolanda Macias, Chief Content Officer

Erick is absolutely right. I just wanted to add that the strike allows for our new releases, for talent to be able to promote them and to affect their social media. So everything Erick just explained is absolutely correct in terms of our content strategy, but it really unlocked that valuable talent promotion tool.

Chris McGurk, Chairman and CEO

I also think Dan, kind of philosophically, we've positioned ourselves as an artist-friendly independent studio that puts the artists first. And I think Terrifier was an example of that to the industry where we released an unrated uncut movie because we wanted to bring the Director's vision to audiences in the U.S. And people notice that. And that's been our philosophy. And if anything, that these strikes emphasize is that the major studios don't particularly put artist friendly at the top of their list of things that they want to be known for. I think in a weird way, the strike actually helped our position in the industry because we were waving a flag for paying artists and treating artists the right way, bringing their labors of love to the audiences around the world all along. So I think from a philosophical standpoint and a positioning standpoint, it helps us as well.

Daniel Kurnos, Analyst

Okay, I appreciate all of the color guys, thanks very much.

Chris McGurk, Chairman and CEO

Great. Thank you, operator. And this is Chris again. Thank you all for joining us today, and feel free to reach out to Julie Milstead with any additional questions you might have. We look forward to speaking to you all again on our next quarterly call. Thank you very much.

Operator, Operator

That concludes today's conference call. Thank you. You may now disconnect your lines.