Cinedigm Corp

Good day, ladies and gentlemen. Today we are hosting a conference call to discuss Synodome's fiscal 2023 first quarter results. My name is Adam and I will be your conference operator. Currently, all participants are in a listen-only mode. We will have a question and answer session at the end of the call, at which time participants can press star followed by one on the telephone keypad to enter the queue. If anyone needs operator help, please press star followed by zero. Please note that this call is being recorded. Your host for today is Gary Lofredo, COO and General Counsel. Please go ahead.

Good afternoon, everyone, and welcome to Synonym's fiscal 2023 second quarter results conference call. Before we begin, I would like to point out 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, November 15th, and Synonym undertakes no duty to update it. 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. I'm Gary LaFretto, President, Chief Operating Officer, and General Counsel of Synanime. With me today are Chris McGurk, Chairman and CEO, John Canning, Chief Financial Officer, Yolanda Macias, Chief Content Officer, Eric Opica, Chief Strategy Officer and President of Synanime Networks, and Tony Huidor, Chief Technology and Product Officer. all of whom will be available for questions following the prepared remarks. I will now turn the call over to Chris McGurk to begin.

Thank you, Gary. Welcome everyone and thanks for joining us on the call today. Before getting into a recap of our strong Q2 2003 performance, which was led once again by record streaming advertising revenues, I'd like to start off by addressing the recent outstanding success of what we call our 360 degree business and promotional approach to horror, which is the hottest genre in entertainment today. CineDime has always been a leading distributor of horror content. And as the category continued to outperform in the last couple of years, we saw an opportunity to take advantage of that trend even further, particularly in streaming, where horror content is still underrepresented and fans are still being underserved. So in 2021, we acquired Bloody Disgusting, the biggest name in online horror with millions of followers. And then we acquired the Screenbox Horror Streaming Channel to further consolidate our position in that lucrative genre. And just over a year later, those investments are now paying off big time. As you've certainly read out over the past month, our acquisition and release of the very low budget and artfully crafted indie phenomenon Terrifier 2 has led to an unprecedented successful box office run and an incredible amount of buzz around the film and its iconic central character, Art the Clown. Critically acclaimed and the best reviewed horror movie in years, Terrifier 2 has generated more than $10 million at the domestic box office, despite virtually no traditional release marketing effort, increasing its box office for three straight weekends, which almost never happens with a wide release, as the film became a viral phenomenon in large part due to our extremely effective PR and social media marketing efforts via Bloody Disgusting. The New York Times lauded the film and our viral marketing efforts calling it, quote, an unexpected and unlikely hit, the little horror movie that could. Forbes was amazed that the film would likely, quote, outperform most of this year's designated award season releases. And Yahoo News called it, quote, the sleeper horror hit of the season. Released on October 6th, none of Terrifier 2's success is reflected in this second quarter earnings report, as the financial upside from the film will begin to be reported in our next fiscal quarter and beyond. However, I am focusing on this success now because it clearly underscores Cinedigm's winning business strategy in regard to enthusiast fan bases and streaming content in general. Here's how we are leveraging the film across our business. While still in theaters, on Halloween, we also launched Terrifier 2 on our ScreenBox horror streaming channel. fueled by continued heavy viral marketing by Bloody Disgusting, the film has already driven increased traffic on Screenbox of more than 250%, with subscriptions up more than 295% compared to the channel's previous high month. On November 11th, we also released the film onto transactional VOD across a wide footprint that includes Amazon Prime, iTunes, Vudu, Google Play, Microsoft, and Redbox, where it is performing extremely well and exceeding our expectations. In December, we are shipping the film in DVD and Blu-ray to Walmart and Best Buy, among many other outlets. And then after that, it will be available for additional licensing to streaming and other platforms. We are also considering other ancillary options to support and extend the film, including graphic novels, podcasts, additional editorial, documentaries, television, NFTs, and potential re-release into theatrical. All this activity across the entire entertainment spectrum is what our 360-degree approach to horror is all about, leveraging our capabilities in marketing, viral promotion, and distribution across virtually every distribution channel in the ancillary market, not just in streaming, but on traditional platforms as well. This gives horror enthusiasts the content they want, when and where they want it, in a way most of our competitors cannot do because they lack our reach, our assets, and our acumen in the genre. While we will report a more accurate assessment of the film's upside impact on our results in our next quarterly earnings report in February 2023, the tremendous success of Terrifier 2 has clearly made a compelling statement about Cinedigm's leadership and capabilities in the lucrative horror space. And we believe this will lead to more breakout titles in the future. And beyond the horror genre, we are absolutely committed to bringing this 360-degree approach to our other enthusiast genres where we have the same capabilities, including Asian content, anime, and family content. Before I move off with Terrifier 2, I would like to commend Damien Leong the multi-talented creative force behind the film for having the skill and perseverance to create this film and then turn it into such a tremendous artistic, critically acclaimed, and commercial success. He and his production partners and the entire cast and crew on the movie epitomized the true essence of independent filmmaking. And everyone at Cine9 is extremely proud to be associated with their film. Now on to our second quarter. Our results in the quarter underscore once again how Synodyme continues to perform very strongly from a financial standpoint in contrast to many other players in our sector who have faced some headwinds due in large part to their single channel and or single revenue model strategies and lack of presence in the fast growing advertising supported and fast businesses. We have a diversified business model that captures revenue streams across the entire entertainment business spectrum. subscriptions, advertising, software as a service, content aggregation, content licensing, and releasing. That sets us apart from our competitors and is driving great results. In what is seasonally our slowest quarter, the second quarter, we increased consolidated revenue by 39% compared with the previous year quarter, grew total streaming revenue by 78%, grew ad revenues 102%, our 10th straight quarter of record ad revenue growth, and we increased our paid subscriber count by 48% over the prior year quarter to 1.06 million subscribers. Our revenue and net income results exceeded the average expectations of the analysts who follow the company and exceeded our own internal expectations. Now, we generated these stellar results because Synodyme's extraordinary executive team is delivering exactly what we have promised. Having now rolled up seven streaming content and channel acquisitions, including the aforementioned bloody disgusting screen box, expanding our enthusiast channel portfolio to 30 channels, building our content library into one of the largest modern streaming libraries in the world with over 50,000 films and TV titles, and leveraging our highly automated proprietary match point distribution platform across multiple readily streams. John will cover our financial results in more detail, and Eric will delve into the early success of our key business initiatives that we launched this year to further drive the business forward, including Cineverse, our flagship channel that debuted in September with several streaming channels and thousands of hours of content across multiple genres. Cineverse is the key initiative that will drive home our goal to become the Spotify of independent streaming video content. We are very well positioned across our streaming technology and content licensing businesses heading into our seasonally best two quarters of the year. And with the success of our horror strategy and Terrifier 2 included as an additional kicker to our results, we expect to report very strong performance in the next two fiscal quarters and significant top line growth for the full year as we move closer to our goal of sustainably positive cash flow and profits. And with that, let me turn it over to John for a more detailed review of our financial results.

Thank you, Chris, and good day, everybody. I'll touch on a few second quarter highlights, then I'll update you on our outlook for the year. Before I begin, I want to reiterate that our Q2 results reported today do not reflect any of the tremendous success of TerraFire 2, which we look forward to sharing with you on our next earnings call regarding Q3 results in February. While we've previously laid out our aggressive year-over-year revenue growth and sustainable profitability expectations, we continue to stand by our intention to achieve those objectives and are making great progress on all fronts. Our key second quarter financial results for the quarter ended September 30th, 2022 include consolidated revenue of 14.0 million compared to 10.1 million in the prior year quarter, an increase of 39%. Total streaming revenue increased 78% to $8 million, driven by another record increase in ad-supported revenue of 102% and a 38% increase in subscription revenue over the prior year quarter. Eric will get into the drivers for this increase in his comments. Overall content and entertainment revenue was $11.4 million in the quarter and grew by 66% over the prior year quarter. This was driven by organic user growth, increasing market demand for Synodyne's extensive connected television ad inventory, and the launch of new streaming channels versus the prior year period. Similar to last quarter, in Q2, Synodyne once again delivered total revenue on all component revenues, which exceed our own internal growth plans for the quarter. Our adjusted EBITDA was negative $1.3 million in the current year quarter compared to a positive adjusted EBITDA of $0.7 million in the prior year quarter due to a decrease in digital cinema system sales and eligible VPF systems as we wind down that legacy business, as well as higher direct and SG&A costs immediately following Q1 acquisition activities. While our M&A strategy implicitly involves capitalizing on synergies in both revenue generation and cost savings, realizing these synergies typically lags a quarter or two. Net loss was 5.8 million, or three cents per share, compared to a net loss of 300,000, or 0.3 million, or zero dollars per share in the prior year quarter. This was also driven by the reduction in legacy digital cinema equipment sales and additionally included a non-operating charge of $.6 million for the company's investment in a metaverse company, formerly known as Star Rise Media Holdings Limited. As well as the previously mentioned increased direct and SG&A costs immediately following that Q1 acquisition activity. Our balance sheet remains very strong with just under $10 million in cash. And our only debt is a small, revolving working capital facility we just took on to provide additional dry powder for key content acquisitions like the aforementioned Terrifier 2. While we continue to monetize the remaining digital cinema assets, as we showed with great success in our most recent fiscal year results, we will continue to emphasize the importance of looking at our overall results unencumbered by the digital cinema business as it nears its end of life. Despite the digital cinema wind down, we fully expect to generate substantial full-year total revenue growth to the company this year versus last year, where our consolidated revenues were 56.1 million, up 78% over the prior year. On our last earnings call at the end of June, we highlighted that our annual streaming revenue more than doubled, and our fiscal year ended March 31st, 2022. And we expect that streaming growth engine to continue to produce 50% plus year-over-year annual growth for the foreseeable future. especially given our related updated growth initiatives, which Eric will discuss. Our M&A-driven synergistic expectations, both top line and bottom line, and streamlining initiatives are already starting to produce benefits. As both Chris and I have stated previously, we stand by our intention to achieve $7.5 million in annual cost savings in the coming several quarters. With that, I'll hand it off to Eric.

Thank you, John, and thanks for everyone for joining the call today. Before I discuss the significant progress we made during the quarter on our business objectives, I wanted to spend a few minutes clarifying Synodyme's strategic thinking in our long-term position in the market versus our peers. The promise of digital delivery of media so far has been a boon for consumer access to content. It revolutionized news and information access 25 years ago, and it changed the music industry forever 15 years ago. Today, for example, you can subscribe to several different music streaming services and have access to more than 80 million tracks and more than 5 million podcast episodes. For a while, it seemed video content would be moving in that direction. We as a company were there at the beginning of the streaming revolution that began with Apple nearly 14 years ago and helped build some of the biggest companies in the business like Netflix, Amazon Prime, and more, delivering tens of thousands of those hours to those services. But today, video streaming is mostly moving away from these broad access models like Spotify and instead moving towards massive tentpole movies, billion-dollar series extravaganzas, and a shift back towards the dreaded bundle. Our research has shown that major streaming services have simultaneously cut the size of their third-party libraries significantly, while at the same time having increased prices by up to 66% over the same period. If you think shrinkflation is bad when it comes to consumer goods, the major streamers have them beat. Users can look forward to less content, bundles that you didn't ask for at rapidly rising prices. It will make the old cable model look downright attractive. The fact we find most telling and frankly surprising is the top 10 streaming services account for just 4% of available films and series. Shockingly, 96% of all content ever made is just not readily available to consumers. This just isn't a quandary or peculiar fact. We look at it as not only a business problem, but a cultural one. The world's rich motion picture cultural heritage is at stake. And if the moves by the biggest players are any indication, it's going to get even worse. At Synodyme, we're looking at the world differently. Since we began in streaming, our focus has always been on enthusiast services. those that are vehemently passionate about a given topic, genre, or style of media. When we began on this journey, we started launching specialized channels to help fans stream their passions. With more than 30 channels and over 50,000 hours of movies and shows, we're now entertaining over 80 million people a month, and most of them at very low or no cost. Fans love this model, as exemplified this month by our successful release of Terrifier 2. We're providing access to films that speak to our audience passions, whether they be uncompromising horror, truth-speaking documentaries, or emerging talent ripe for discovery. And this is where Cineverse fits in to the mix. What if we took that 96% of film and television shows and made them all broadly available, but under that same enthusiast ethos that I described? Well, that is our vision as a company to build Cineverse into the Spotify or dare we say Google of video streaming. Our goal is to make as much of the world's content available to everyone with a focus on celebrating entertainment culture and you, the fans. Long term, that means gathering hundreds of thousands of hours of programming and then providing the world's best curation alongside the world's best next generation search tools and recommendations. Ultimately, We want you and your peers to have fun streaming your passions instead of pulling your hair out every time you search for something. But beyond being a potentially great business, there are some even bigger things at stake if we succeed at this mission. The democratization of access to media, empowering creators, sharing diverse voices, and preserving the world's cultural media heritage. We as a company are up to the task, and we hope as investors you're ready to join us on this mission as well. Now, let me tell you how we took our first steps on this journey beginning this quarter. First, we launched the 2.0 version of MatchPoint, our company's proprietary streaming operating system. That's the backbone that does everything that I just described. Much like Major League Baseball's MLBAM, which became the backbone of Disney streaming, MatchPoint 2.0 powers the entire streaming stack from content management, streaming apps, delivery, analytics, reporting, and other critical operating tasks. Our new framework is designed to be highly scalable to meet the future growth needs of our ambitions I just described, and we're currently moving every single service and every piece of content we have and have acquired onto the platform. Next, we launched Cineverse on September 15th, and while in its early stages, we have launched tens of thousands of titles across every genre and along with more than 30 linear channels. We expect to rapidly scale this service over the coming quarters. We have already signed more than 18,000 hours of additional films and series. We expect to be making big announcements soon about distribution, content, and new features and capabilities in the coming weeks and months. A big part of Cineverse is a continued support of all of our enthusiast verticals, which in addition to being robust standalone businesses, are also core verticals within the Cineverse apps as well. During the quarter, we expanded distribution with key partners, including Dish Network Sling TV, Amazon Freebie, and top out-of-home network Atmosphere. Additionally, we expanded our channels onto several streaming television providers, including new deals with Philo and Fubo. We also struck the first ever carriage deal for Cineverse on VidGo, another fast-growing virtual television provider. We expect many more of these sorts of deals in the coming quarters to grow the business. Next, we continue to expand Cinedigm's direct ad sales business through our new Cinedigm ad solutions group, having made several key hires who are already actively selling this quarter. Our ad solutions team has also fully re-engineered the ad tech stack which led to record performance in the quarter. Increasingly, we're being sought out to monetize third-party partners that have been expanding that business in earnest since embarking on it in the current quarter. To date, as evidenced by our results, we have not seen the same softness in ad revenues as seen by some other streamers. While we are obviously not immune to the macroeconomic conditions in the marketplace, we think our rapidly scaling distribution base, improved monetization, and economics growth of the third-party ad sales and our position earlier in the growth curve than our peers could mean a much smaller impact of any macro ad business downturn. Finally, I wanted to mention the significant growth of our podcasting business. Over the quarter, we expanded our total show count to 30 unique podcast series and greenlit several critical shows that launched after quarter end. Most importantly, Mayfair Watcher Society, which rose to number two on the fiction podcast charts and number 50 overall on Spotify last month. We view this business as not only a revenue driver, but also a significant testbed for IP that can be up-leveled to movies and shows and distributed broadly. We also look at this as a major base of future monetization as we expand into adjacent verticals like e-books and audio books, leveraging the vast IP and IP relationships within the Cinedigm library. All this additional distribution expansion of ad efforts led to outstanding performance in the quarter on our key business performance indicators. Total streaming minutes in the quarter rose to approximately 2.17 billion, up 78% over the prior year quarter. Our total ad-supported streaming audience, including web, mobile, social, and connected TV, increased to approximately 81.9 million average monthly viewers, up 149% over the prior year quarter. Total subscribers to the company's subscription video streaming services increased to approximately 1,060,000, representing an increase of 48% over the prior year quarter. And last, we achieved the 20 million social media subscriber milestone during the quarter and launched the company's first social content partnership with Snapchat. We think that 20 million member number is significant because of the impact it has on driving attention awareness for feature film releases, as you saw with Terrifier 2. And then lastly, we grew our cumulative podcast downloads to over 66 million downloads to date. and are in talks to potentially expand the IP of that with major partners. So overall, we put up strong KPI performance despite what has traditionally been the slow quarter for us. Looking forward with the tailwinds of TerraFire 2, expanded distribution, and a traditionally strong third quarter, we remain excited for both the near-term and long-term prospects for our streaming business. With that, let me turn things over to the operator to take your questions.

Thank you. As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now. We will pause for just a moment to compile the Q&A roster. The first question today comes from Dan Kernos from Benchmark. Dan, please go ahead. Your line is open.

Yeah, great. Thanks. Good afternoon. Maybe we can just start with Terrifier. Obviously, we'll call it a bloody success for you guys. I guess, you know, you're still evaluating the economic impact. Maybe either Eric or Chris, can you guys just talk through sort of the flow through to the bottom line from that movie, you know, whether it's monetized through all your different monetization channels, kind of what the blended margin of that sort of looks like. And then subsequently, you know, like, Hits are hard to come by, as we all know. And I know you guys want to expand sort of that or replicate that success. How confident are you that you can do that in either other genres or even within horror? How does this scale and how do you kind of recreate what, you know, the success?

Well, thanks, Dan. This is Chris. Let me take that question. We're never going to be explicit about the financial results. and expected financial results about any specific piece of our content, film or TV. That's not fair to the participants in the film or TV program itself. But let me just tell you that the thing that really sets Terrifier apart versus other film releases is the fact that we spent a de minimis amount of money marketing the movie, and almost all of the marketing was done virally. And I will tell you, it's probably going to reach 11 million at the box office. And on a box office to marketing ratio, it's probably one of the most successful films of all time. So clearly, without that marketing spin, the traditional marketing spin, it's going to have a disproportionately positive impact on our bottom line. You should just take that out of the equation. So you've got the theatrical piece. Then you've got screen box. We've added a substantial number of subscribers already based on the exclusive run of the film on ScreenBox, which started on Halloween. I think I told you that we were up almost 300% versus our previous best subscriber month already. You know, and at $4.99 a month. And with the content we have coming up, on Screenbox over the next few months, we think we're going to hold a substantial number of those subscribers. So that clearly is going to have a big, big impact. We're shipping a huge amount of DVDs and Blu-rays into the physical distribution market this month as well. And we just went to transactional video on demand on a number of platforms, including Vudu and Amazon Prime. And as I mentioned in my remarks, it's doing really, really well. It's outperforming what you would expect based on the box office of the film. And then we'll have additional licensing opportunities after that. And we hope to develop a whole state of ancillary content around the movie, including graphic novels, podcasts, NFTs, maybe a documentary, et cetera, et cetera, et cetera. So without getting explicit here, it's going to have a very significant impact on our revenues and a disproportionately positive impact in our bottom line because of the fact that we didn't spend millions of dollars in marketing to get the movie out there. And your second point, we're extremely encouraged that there will be more successes like Terrifier 2 in our future because we've added through these acquisitions that we've done and through our own capabilities a real expertise and an acumen in identifying what's going to work in the marketplace, in the genres, where we've released tons of movies, where we have streaming channels, where we think we have capabilities and expertise and data that our competitors don't have. So you're going to look for additional successes in horror. We think we have that same capability in anime and Asian content, and we have that same capability in

family films and uh we don't think that this is going to be a one-off event but we're going to have more successes like this in the future across the spectrum of our channels got it that's very comprehensive thanks chris i appreciate that um and then maybe also for you and or for eric i guess you know you gave some color just around the initial rollout of inverse umbrella channel I guess I'm just trying to get a sense in this market that's, you know, obviously increasingly shifting towards Avon and Fast, which shouldn't be a surprise to anybody, you know, how you're thinking about, you know, do you just want to get it out, you know, as quickly as you can? How are you thinking about the content backstop? How are you thinking about monetization in sort of a choppy CPM environment? Just help us understand sort of, you know, kind of the plans on Cineverse going forward and how you think about maximizing the opportunity you have to kind of roll out this umbrella channel.

Great. I'll let Eric answer that. But first let me just put a point here. When you talk about fast and ad supported, don't discount the fact that we just crossed a million paid subscribers this quarter. Um, because you know, we, we have a different subscriber business than, than, you know, what people think of when they think of streaming with, you know, Netflix and Disney plus spending millions and millions of dollars to acquire subs. That business for us, which we got into early on, we're spending virtually nothing to acquire those subs. So it's an extremely profitable business for us. Because we're so successful in these enthusiast verticals that we have out there, the subscriber growth is really happening organically. And that's a meaningful number of subscribers, and it's still a meaningful business for us that continues to grow. So I just wanted to point that out. But let me turn it over to Eric to answer your question about Cineverse.

Yeah, so our, you know, the focus really is on partnerships at this stage. So, you know, as we announced last quarter, I think the beginning of this quarter that we're reporting here, the VidGo partnership, our expectation is to announce more partnerships where Cineverse comes bundled with OEM devices, other streaming services and platforms and so on. We think that's a cost-effective way to grow the base. The service has a great array of contents not available on other services. So we think it sells itself once you get it into the hands of consumers. So that's going to be our primary focus. Number one is leveraging those partnerships. Number two is we have a very substantial application base out in the market today. We have tens of millions of apps already out there. We can leverage that app base to drive, you know, as we update the portfolio of streaming services, having the ability for people to sample Cineverse, and if they like it, download the app from within other apps in the Cine9 family. We're going to be leveraging that. And then lastly, you know, when we have 80 million people captive across our footprint every month, heavily marketing to that audience is going to be a cost-effective way to scale and grow the sub-base. And beyond that, that doesn't mean we're not going to make traditional investments in customer acquisition. The further partnership with OEMs is not off the table. further, you know, paid marketing placement and other things to drive business in a smart way. Secondary to leveraging the assets we have will be the model.

Got it. Super helpful. Thanks. Congrats on the film and look forward to see what comes next.

Thanks, Dan. The next question comes from Brian Kintzlinger from Alliance Global Partners. Brian, your line is open. Please go ahead.

Great. Thanks so much for taking my questions and lots of exciting things to talk about. I wanted to first follow up on Terrifier 2. Maybe Eric or Chris, if you can share your plans and strategy now, maybe on an annual basis, if you've formulated it yet, given the success on plans for wide releases and smaller releases on an annual basis, is there a target yet? Is there a quarterly target? How are you thinking about that right now?

The answer, Brian, and thanks for your question, is it depends. We don't have a set plan to take movies wide like we did with Terrifier 2. It really depends on the potential of the movie. We never want the company to get into the game that the major studios and a lot of independents are in where, Um, you know, they spend so much money in marketing movies and wide release. Um, you know, with, with Terrifier 2, as a matter of fact, we took it out as an event release the first weekend and it did so well that we went wide after it, which I think was a very smart approach. We, again, we avoided the cost of going wide and, uh, more than a thousand theaters, and yet we got a great result and it's going to end up being very, very profitable for us. But I think as I, you know, in my answer to the last question, As we move forward, we're going to continue to have a very robust business releasing films in limited release and in day-and-date VOD. And we'll probably be doing one or two wider release movies, hopefully in the same way we did it with Terrorfire 2, in a smarter, much more profitable way than the traditional releasing business. So I hope that answers your question.

Yep, great. And then on Cineverse, I understand it's new, it's just been launched, and you talked clearly about the ways to monetize it. How should investors think about the timeframe when this becomes meaningful in any way you think it becomes meaningful to revenue generation? Is that a couple of quarters away? And then as platforms maybe take on Cineverse, will that... lead to churn for individual channels? Just wondering how that impacts anything.

Sorry, I missed the last part.

Well, I guess I'm curious for someone who took, if Cineverse has the Bob Ross channel, it has the Elvis channel, it has a whole variety of channels in, does that mean if I have those channels, I'm going to get rid of those agreements with Cinedigm? And so there's a little bit of canalization, but your Cineverse more than offsets that I'm just trying to think about the puts and the takes.

Well, no, so, so I think the, the, uh, the answer there is, so if you, if you really think about where, where we're going to take Cineverse, um, you know, as I described during the call, the idea there is this is, this goes far beyond synonyms 50,000 title library, right? We have a great library, but the reality is we're, we're but one piece of a vast content ecosystem. that just isn't readily available. It would be like if Spotify only had the top major labels and left off 40 million, 50 million tracks off of Spotify, it would just be an incomplete platform. So our goal really long-term is to make this platform the place where if it's not on the major streamers, it's going to be on Cineverse, right? We want to build that base up. So we're starting with our, our 50,000 titles gives us a huge leg, a huge starting point. And we added another 18,000 in licenses in the current quarter as well. So, you know, the amount of content that we've acquired and what we bring is already bigger than any other streaming services, but we, but to, you know, to make it Google or Spotify level of utility we're going to be adding hundreds of thousands of titles over the next several years. So, So in the long term, our strategy is in parallel. We still think all of these enthusiast verticals are great businesses, have different distinct use case and business models that are generating a ton of revenue by themselves. And then Cineverse is sort of a different play where we leverage the content we have, but not at the expense of the other platforms. So we think for the foreseeable future, those two business approaches can coexist. In fact, we're going to, you know, in the coming quarters, start to really kind of focus in and simplify branding and other things so that our whole ecosystem really reinforces Cineverse beyond just being 30 discrete channels, if that makes sense.

Yep. Okay. A little bit more on the micro level, speaking of enthusiasts, there's Elvis enthusiasts, there's Real Madrid enthusiasts. We haven't heard much about those channels. I'm curious because there was a lot of promise for them and there are enthusiasts proud. Can you speak to any stats on the Elvis channel, how it's played out? And then on Real Madrid, we haven't heard much about the technology there on the improvements you are making to better monetize it. That would be helpful.

Sure. So on the linear business, we don't break out any of the individual channels at the dollar level. But what I can say on both of those channels is we've seen significant strides in revenue growth on both of them since they launched. In particular, for Real Madrid, with all of the interest around World Cup and the channels programming sort of pivoting to um you know general soccer news information more information about the business in general looking at the highlights and things like that the the channel has actually done you know i know we've always had a a long-standing um issue with monetizing during games because you don't you know there's no cuts like in american football where there's a cut every 10 minutes um we have been working on the tech um we can control it and roll it out on our own apps. We're still waiting for other partners to facilitate that to have it work on there. But that doesn't mean we're not advertising on the channel. We're advertising 90% of the other time that that is on the channel and those that monetization has been effective and growing substantially. So we think, you know, both of those channels have a lot of prospects on the Elvis front. I think, you know, we had a big wave with, The initial launch of the movie and now it's really about us Sustaining that wave with new programming and content, which we're working on right now Great you talked about Advertising discussion around the market not just connected TV, but elsewhere How are you?

Seeing uh, CPMs are, is there some pressure? Is there not really? Cause there's the shift to, uh, fast and advertising supported, uh, uh, television, um, sorry, not television streaming, uh, and our fill rates just as strong right now.

Well, you know, I think the big thing to think about, you know, um, and I would, and, and I would love to compare us to in the same breath as, uh, you know, Pluto, uh, But keep in mind, Pluto, you know, has the might of Viacom, the combination of non-Pluto assets with non-specific Pluto assets. The entire Viacom, you know, interactive assets are in that mix. And that's, you know, they look like they had their first year over year revenue decline. That's just simply the law of big numbers and them being at a much further along stage in their growth curve than we are. Um, we're, you know, we're where Pluto was five or six years ago in terms of, of the growth curve. So we have a lot more growth to go before we start to hit headwinds and hard year over year comps law, big numbers type thing. Um, so that's number one. The second piece is if you kind of look where we are in the value chain for streaming, um, I actually think we're very well positioned, uh, even with any sort of macro headwinds, uh, across advertising in general. You know, as players look and say, wow, expensive brand advertising at thirty five to sixty dollars CPMs, maybe not the most cost effective move for us. But how do we still stay top of mind? And let's look at more cost effective alternatives in the spot and programmatic markets. So that's where that's where parties can really make, you know, hit 80 million people across our platform. Premium connected TV inventory and a big swath of that. and advertise against high quality movies and shows and brands, but for far less than they would be paying to Paramount or Netflix or others. So we think that said, that doesn't mean that we still have a tremendous amount of headroom. We're in the low teen CPMs on average, we think there's 30 to 40% headroom improvement, even with the macro conditions and still be competitive. And that doesn't even take into account, we've made tremendous success on the direct sales side. On the direct sales side, we had one of our best months ever in October, just a few months after we launched the service. So we think those kinds of trends all combined make us poised very well to compete in an environment where some of the biggest players are crying uncle.

Great. Those details are super helpful. Last question I have, it's a smaller piece of your business, but nonetheless a focus to grow and create and monetize. 66 million downloads on podcasting is pretty impressive. I know it's early. You've got 30 podcasts. Talk about where you hope to add content there. And how do I think about revenue from that contribution, either on a go-forward basis or an existing basis on that type of download, if you are able to share?

Yeah, so we haven't broken out that business specifically in terms of revenue, but I will tell you that it's now – You know, at these volumes, it's certainly, you know, at a full year run rate is a multimillion dollar business for us at this stage of the game. We think the implications, you know, obviously it's an ad-based business today. We think two key ways of monetizing in the short term, obviously, it's, and we're having a tremendous amount of success direct selling that inventory. Um, what's unique is while we have connected TV inventory and, you know, people can hit it programmatically if they want to do, you know, a 360 campaign of, uh, web app, um, connected TV, uh, social and podcast in a specific content vertical, we have the ability to do that. And that, you know, a great example is in this last quarter. um you know well while we were writing the horror wave let's not forget there were tons of other fantastic horror movies as well and they were all advertising with us so i think that's that kind of a model and approach that 360 degree approach that we talk about how we can turn things into turn properties into hits like we did terrifier also works for us to be able to monetize for ourselves and for other people uh leveraging all those different assets So that's the immediate impact on podcasting. The longer term vision is if we're generating new IP, normally when you develop movies and shows, you have a team of development people burning cash, trying to create ideas, pitching ideas, sometimes banging their head against the wall. With us, we go from concept into production in a matter of weeks and months. And if the show's a hit, we have the opportunity to turn that into into movies and shows with a proven track record in the marketplace and a built-in fan base. So we think there's an opportunity long term to not only produce these things ourselves, but potentially work with much bigger partners upstream as we prove the value in creating and generating IP.

Thanks so much for answering all my questions.

Thanks, Brian.

The next question comes from Terry Hackett from Hackett Management. Terry, please go ahead. Your line is open.

Good morning, gentlemen. I'd like to stay on the macro scale here with a couple of thoughts and questions. First of all, management is to be congratulated. I don't think the market appreciates how important your pivot was a few years ago to aggregating the channels and the genres. It was a great move, and I think you've effectuated it very well. Nor do I think they understand how the wind down of the system sales has distorted the revenue side of things. So I was wondering, when are we done with having to compare system sales to revenue, and we can just basically deal with NUCO and what it is doing so well? And the second thing is that you've talked about the 7.5 million in cost savings over the last two quarters. And if you look at that, um, and divided by the number of shares, and if you look at your great revenue gains, uh, that you've had and will have, it just seems to me the crossover point on positive cashflow and income has got to be in the very near horizon. And, uh, So good job, and I just kind of get a macro feel of what you said. Thanks, Chris.

Yeah, thank you, Terry. Those are all really good points. And I agree that our investors need to continue to wake up to some of the points that you've made, and I think what you're going to see over the next couple of quarters should get everybody's attention. And yes, I think it was a smart move that we launched this enthusiast business years ago, because we viewed it as sort of perfectly complimentary to what was going on at a macro level in streaming with Netflix and Disney and everything else. So we're not really competing with those services. And I think the second thing that we did that was very smart, as we talked about, is, you know, led by Eric and Tony Weidor, we made a pivot into the ad-supported business and the fast business back in 2017 when everyone was just still focused on subscription. And that obviously is paying huge, huge dividends. We're still going to have some impact from digital cinema over the rest of this fiscal year, but I think in the next fiscal year, it's going to be totally behind us and we won't have to worry about that complication going forward. And I think your point on the cost savings is very well taken. We made some of those cuts this quarter. Our performance this quarter doesn't fully reflect the cuts that we've already made in the operational streamlining, but you're going to see more and more of it impact our results starting next quarter. And I think hopefully people will be surprised and excited by how our financial performance is really coming together on both the top and the bottom line starting with next quarter. So thank you for those comments and questions, Terry.

Since there are no further questions, I would like to turn the conference back over to Chris McGurk for closing remarks.

Thank you, operator. Again, thanks, everyone, for joining us today and for your continued interest in Synodyme. Please follow up with Julie Milstead with any other questions you may have. You can reach her at InvestorRelations at Synodyme.com. We look forward to speaking with you again when we report our third quarter results for the fiscal year 2023 in February.

This concludes today's call. Thank you very much for your attendance.