Good day, everyone. Welcome to Cineverse’s Fourth Quarter Fiscal Year 2024 Financial Results Conference Call. My name is Cameron and I'll 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. [Operator Instructions] 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 & Senior Advisor for Cineverse. Please go ahead.

Good afternoon, everyone. Thank you for joining us for the Cineverse fiscal 2024 fourth quarter and year-end financial results conference call. The press release announcing Cineverse’s results for the fiscal fourth quarter and year-end March 31st, 2024 is available at the investor 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 could 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, July 1, 2024, and Cineverse does not assume any obligation to update any of these forward-looking statements except those required by law. 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 through applicable GAAP measures in our earnings release carefully as you consider these metrics. I'm Gary Loffredo, Chief Legal Officer, Secretary & Senior Advisor at Cineverse. With me today are Chris McGurk, Chairman and CEO; Erick Opeka, President and Chief Strategy Officer; Mark Lindsey, Chief Financial Officer; Mark Torres, Chief People 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 fourth quarter and full-year fiscal year 2024 highlights, the latest operational developments, outlook, and long-term growth strategy. Mark will follow with a review of our front results for the fiscal fourth quarter ended March 31st, 2024. And Eric will provide some detail on our streaming business results and operating initiatives before we open the floor to questions. I will now turn the call over to Chris McGurk to begin.

Thanks, Gary, and thanks, everyone, for joining us today on this call. As we have emphasized repeatedly, fiscal year 2024 was an important transition year for the company. Having finally moved beyond any material financial impacts from our legacy digital cinema equipment business and also having established a recurring cash generating film franchise with Terrifier 2 in the prior fiscal year, we focused this year on a concerted drive towards sustained profitability to set a strong foundation for our future growth. Our full year and fourth quarter results both reflect the success of that effort. We generated vastly improved operating margins by dramatically streamlining our cost structure, optimizing our streaming channel portfolio, and focusing on higher margin new revenue streams. This resulted in positive and growing adjusted EBITDA and an accelerating trend toward positive and sustainable annual net income. Excluding key non-cash impacts and non-operating factors, most significantly the goodwill impairment that was triggered by our market capitalization being significantly below our book value, we reduced our net loss by $4.8 million, or 58% to $3.4 million for the full-year, and we were virtually breakeven on net income in this last reported quarter. We generated full-year adjusted EBITDA of $4.4 million, an increase of $4.3 million over the prior year. And we accomplished all this despite losing very significant revenues from the runoff of our legacy digital cinema equipment business and lapping the success of the horror phenomenon Terrifier 2, which also produced a very sizable upside last year. We increased our operating margins substantially to 61% from 47% in the prior year. We even hit a 79% margin in the fourth quarter. This was primarily driven by our streaming channel optimization efforts where we call lower margin channels and also from SG&A savings generated by our Cineverse Services India…

Thank you, Chris. For the fiscal fourth quarter ended March 31, 2024, Cineverse reported total revenues of $9.9 million, compared to $12.5 million in the prior year period and for fiscal year ‘24 total revenues were $49.1 million, compared to $68 million in the prior year. As a reminder, fiscal year 2023 included material non-recurring revenue of approximately $4 million related to Terrifier 2 and $12 million related to our legacy digital cinema business, which were not present in fiscal year ‘24. When excluding the impact of Terrifier 2 and digital cinema, the decrease in revenue was primarily due to the impact of 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. We are cautiously optimistic for double-digit revenue growth in fiscal year ‘25 as the economy improves, interest rates decline, and with the expected improvement in the advertising market in a political year. Subscription-based revenues increased 3% to $3.4 million for the quarter and 25% to $13.5 million for the fiscal year, driven by the continued success for our enthusiast streaming services. Advertising-based revenues declined 10% to $2.9 million for the quarter and 34% to $12.5 million for the full-year primarily due to our channel optimization efforts and the continued impact of the current economic environment on advertising spend. During the fourth quarter we hired a new SVP of advertising and we are already seeing a material improvement in our direct ad sales results. Eric will provide additional details on the operational drivers behind those financial results. As Chris mentioned, our direct operating margin for the quarter was 79%, an increase -- sorry, an increase from 48% in the prior…

Thank you, Mark. Last quarter, I discussed our progress with Matchpoint, our proprietary streaming technology platform. We continue to see strong demand for Matchpoint’s capabilities, particularly in enabling streaming companies to effectively manage and monetize their content libraries at scale on a SaaS basis. Since last quarter, additional opportunities have arisen where Matchpoint grants us a clear competitive advantage. In a very short time, we are now making significant strides in leveraging Matchpoint to meet the growing need for high-quality training material and rapidly evolving AI landscape. These large language models or LLMs, that are powering major AI company products require exceedingly larger volumes of video to teach them everything about the world around us. These LLMs need to be trained on everything from how a horse runs through the woods to a flow of pedestrians crossing a busy street intersection, or the movement and sounds of how an ocean wave crashes on a sandy beach, and so on. The most effective way of doing so requires movie and television content, which by its own nature, encompasses the full human experience in extremely high quality and consistency. By combining our vast independent film library, proprietary content distribution technology, and extensive experience as a content aggregator, we find ourselves uniquely positioned to provide these leading AI developers with the most expansive and high quality video training data sets available without the legal encumbrances hindering the major Hollywood studios. Industry research projects that the market for AI training data could reach $5 billion by 2030 with video data playing a major crucial role. We believe this presents an enormous opportunity for Cineverse, and we are actively engaged with leading LLM developers today and our extensive roster of content licensors to serve as the key supplier within the AI training data space. Over…

Perfect. We will now begin the question-and-answer session. [Operator Instructions] And the first question is from the line of Dan Kurnos with the Benchmark Company. You may proceed.

Great. Thank you. Good afternoon and appreciate all the color on the call, guys. Chris, I just want to go back to your opening comments around Terrifier 3 and then some areas where you might lean in. Obviously, it's early to kind of size that. You've given us some yardsticks, both as it relates to Terrifier 2 and obviously the expanded screens. But if there's any way for us to think about either quantitatively how much bigger and/or better this might be, and then subsequently as you mentioned, given that this is sort of a long-tailed franchise, and you've got a lot of these growth initiatives coming up, how much of that might you reinvest and what would be sort of your key priorities this year? Thanks.

That was a very long question, Dan, thank you. So Terrifier, as I said, we think, we know what we have this time. And so we've reacted accordingly in terms of developing a marketing and distribution plan that we hope is going to provide bigger returns, not just in theatrical, but also across the whole spectrum, air-pensioned, screen box, VOD, DVD, on and on and on. And I think it's important to note, even though this one was more expensive for us than the last one, we have a breakeven on this, given our plan that's well below the box office we generated in the last one. And we fully expect to generate at least as much box office revenue as the last one, and hopefully significantly more. Of course, there's a multiplier effect on that when you perform that well at the box office with the ancillaries. I'm not going to give you specific financial information, return information. We never do that in any particular property. But I think ultimately, going forward, each Terrifier that we’ve released, and hopefully, there'll be more beyond the next one, can generate enough cash for us that's comparable to one or two of the equity raises that we've done historically. And the bulk of that money will be spent back against the key initiatives we've been talking about, the second part of your question, podcast business, developing new technology and AI tools and new content and channel investments. We talked about culling channels, but we've really sort of established ourselves in the marketplace as the leading independent streaming and technology company that exists out there right now. People are looking at how well the Dog Whisperer is performing and we have conversations going on right now with some very, very high-quality entertainment people who have ideas about bigger channels -- platforms above and beyond just a single channel approach. So hopefully, we can get more or 2 of those over the line as well. So we're going to -- we'll take the money from our cash cow. And hopefully, it all works out. Again, as I said, the movie business is unpredictable, but we think with the risk/reward profile on Terrifier and the upside is far greater than the downside and we'll reinvest that money back on content and streaming channels, technology, making sure we have the best sales team in place as well as people. And so those really are our priorities going forward.

That's super helpful. Can you just dig a little bit deeper into kind of podcasts. I mean the financials this quarter suggests that and what you put in your -- in the press release showed that you guys are accelerating pretty substantially, and you gave us some more metrics around how big it is relative to the market size, but that business is growing very fast. It's been a tough area to monetize, but just help us think through your ambitions there.

Well, it hasn't been a tough area for us to monetize because, again, the risk reward profile of the podcast that we're doing, since we're not paying Joe Rogan or anybody talent, is very, very strong, and that's why we've invested in the business, and we built it so quickly. But I'll let Erick respond to the podcast question because that's an area that he manages and is particularly focused on. Erick?

Sure. So I think you're right. Historically, the podcast business had been relatively slow to mature. I think one of the things that is different about our approach is most of the networks out there are large networks that are comparably sized to us, right? So just to give context, as in the number seven range in our download range, we're kind of sandwiched in the monthly download range between Disney and NBC in terms of monthly downloads. Monetization-wise, we're newbies in terms of being at the scale where we could start to command the CPMs and premiums that the big players are. But I think our strategy is pretty simple. We're getting really good. We have a really good and experienced team. You heard in our prepared remarks, we've been leaning into the entertainment sector, advertising, entertainment around targeted entertainment verticals is a really good strategy. And one of the things that we're finding is bundling podcast with CTV and display plus activations like live events and other things, live streams. Those kinds of things are very appealing to advertisers, and it's a much easier sell than just selling CTV or just selling podcasts. And so the other thing is our shows have very deep devoted listener bases. We particularly focus on -- our biggest shows are either non-fiction or very high-quality producer-driven weekly shows. These shows, I think, are very different from a lot of the kind of talking head -- kind of talk radio style podcasts that are out there. These are engaged. We're doing with a network of 40-something shows as many as -- more than our peers that have hundreds of shows in terms of download volume. But we think the steady-state revenue out of this base is quite substantial, and we're monetizing a very small percentage of it. So this year, it's really leveraging our direct sales team, ramping up our programmatic and host red efforts pretty aggressively and really just doing more of what we've been doing, just at a bigger scale.

Got it. Yes, cross-screen is all the rage, Erick, for sure. Last one for me, and then I'll step aside. I'll stick with you, Erick. You did give us some sizing or color around sort of the Matchpoint initiatives before. I really appreciate the update today. And it sounds like you're nearing maybe the start of the next phase. It feels a little earlier than we would have anticipated. Just kind of curious if that's the right way to think about it? And how quickly, if at all, things have changed from a scaling perspective?

Yes. So I think one of the big market impetus is pulling a lot of business forward pretty rapidly. That impetus is a market need for one of our core products, Dispatch. To give you the very high level view, Dispatch is our orchestration platform that moves large volumes of content and does a lot of processing around that content to make it ready for monetization, whether you're enriching it with metadata for targeting or dynamic advertising placement, other things that we're doing to it. Ranging from that to even the most advanced stuff we're doing in AI. There's a huge amount of demand for this as most of the OEM platforms that started out in FAST are rapidly -- with all the inventory coming on board from Amazon and Netflix, they're rapidly looking to scale up their competing AVOD offering. So there's a huge market demand to push tens of thousands of pieces of content for all of these major services, and none of them have an automated platform to do this. So we think there's a huge opportunity to pull that business forward, and so we have the right sales team, there's a huge market demand and the right product, we think that's going to accelerate things just given the -- there's a ticking clock to get everything done before the end of the year. So we think that should be very advantageous to us.

Got it. Erick, I appreciate it. Chris, sounds like some good momentum on a much better cost basis.

Thank you, Dave.

The next question is from the line of Brian Kinstlinger with Alliance Global Partners. You may proceed.

Hi, this is Kevin in for Brian. Thanks for taking our questions. First, can you talk about the adoption by streaming platforms for your newest channels such as the Dog Whisperer, Mediator and Sid & Marty Krofft? And then in addition to adoption, what about viewership?

Do you want to take that, Erick?

Yes, sure, I'll take that. So for our newest channels, I gave a little bit of a preview, I'll give you a little more color on that. So Dog Whisperer really -- we've always -- the business we've had, we've always had -- Bob Ross has sort of been the penultimate benchmark and flagship channel. So with the Dog Whisperer -- and that's really because of its evergreen nature, people watch multiple episodes or they leave it on in the background as a companion. And so one of the things that we've been looking for is what's the next service that we have that fits that bill, and we believe we have that with the Dog Whisperer. It is performing at or exceeding both Bob Ross and all of our other channels everywhere whether we placed it so far, and we think it's the right mix of content that is just bingeable and evergreen and kind of perfect as a fast play. So I can't disclose the total streaming minutes on that or any individual property. But I can say that it is -- we believe that is our new number one property if it continues to perform this way. So that's that channel. Basically, we expect 100% carriage on that channel in this -- we think it will be in this quarter, which is pretty fast for carriage distribution. Sid & Marty Krofft, we are continuing to -- we launched the first foray in the on-demand space. So we've had a couple of announcements there, as well as packaging some of the very popular shows into third-party channels. So the distribution is just really getting started on that one. It's -- the content there, while popular is -- appeals to sort of an older nostalgia audience. So we're really focusing on the platforms where that fits and matches the demo. So we're starting -- we would expect to see more traction over the next couple of quarters leading into the fall and winter. In terms of GoPro, we really just started distribution on that channel most recently. And for that channel, we've seen as all of the major platforms really have increased their demand for sports and sports related and adjacent content. That's really what GoPro is. It's really outdoor sports. So we're seeing an incredible amount of demand for that channel, we expect to have pretty considerable distribution by year-end. Mediator, same situation. Kind of fits that same bill, fits a cross section. That's kind of a fast-growing and appealing. The performance has been very strong on the platforms that we placed it. So we'll see -- we'll continue to see the ongoing distribution of that throughout the rest of the year.

Great. Thanks. Last quarter, you mentioned these new channels have the potential to add more than $10 million of annual revenue. Do you think -- do you have more confidence you can achieve this with the new channel set, less confidence? Or is your view unchanged and why?

I would say on an annualized run rate, I don't think we're going to give guidance around the portfolio in terms of dollar amount. I think we're getting too discrete on that. I would say that given the strength of Dog Whisperer and GoPro, I feel very strongly that these will be pretty big drivers in improving and continuing to improve our top line and gross margin. I would say that $10 million annualized number is probably a little further out than in this fiscal year. But I think given the mix of channels we have in new channels that we're going to be adding, I think, that kind of overall top line number is in terms of new business. In the near term, is potentially possible when you take all the new business in totality into effect.

Great. Thank you very much.

There are no further questions remaining, so I'll pass the conference back over to the management team for closing remarks.

Thanks. Thanks, operator. This is Chris. Thank you all for joining us today. And please feel free to reach out to Julie Milstead if you have any additional questions. We look forward to speaking to you all again on our next quarterly call. Thank you.

That concludes today's conference call. Thank you for your participation. You may now disconnect your line.