Cineverse Corp.

Good day, everyone. Welcome to Cineverse second quarter fiscal 2025 financial results conference call. My name is Makaya, and I will be your operator today. Currently, all participants are in a listen-only mode. We will have a question and answer session following management's prepared remarks, at which time participants can press star followed by the number one to ask a question. If anyone needs operator help, press star zero. Please note that this call is being recorded. I would now like to turn the call over to your host, Gary LaFrito, Chief Legal Officer, Secretary, and Senior Advisor for Cineverse. Please go ahead.

Good afternoon, everyone. Thank you for joining us for the Cineverse Fiscal Year 2025 Second Quarter Financial Results Conference Call. The press release announcing Cineverse's results for the fiscal second quarter ended September 30th. 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 of the information discussed on this call is as of today, November 14, 2024. Inciniverse 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 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, Chief Legal Officer and Senior Advisor at Cineverse. With me today are Chris McGurk, Chairman and CEO, Eric Opica, President and Chief Strategy Officer, Tony Weidor, Chief Operating Officer and Chief Technology 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 fiscal 2025 second quarter highlights, the latest operational developments, outlook, and long-term strategy. Mark will follow with a review of our results for the fiscal second quarter ended September 30, 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. We reported a very strong second quarter of growth and financial improvements. Even without recording a single dollar of financial results from our usually successful box office hit Terrifier 3, where we control all domestic rights in the US and Canada, and which we released after the close of this quarter. We grew our revenues 20% versus last year in this quarter, excluding the impact of our legacy digital cinema business. In addition, we grew our revenues by 40% versus our last reported quarter ended June 30th. showing strong sequential business momentum. We also exceeded our previously stated operating goals with a margin of 51%. We continued to significantly reduce our SG&A costs and also generated positive adjusted EBITDA of more than $500,000. We beat our analyst consensus guidance on every key financial metric. Additionally, All our key operating metrics across our content licensing, technology, advertising, streaming, and podcast businesses continue to grow significantly during the quarter, which bodes very well for our continued future success. Mark and Eric will speak to all of that in just a few minutes. So now let me take some time to discuss what I know is the number one topic for most of our investors, the unprecedented success of our Terra Terrifier horror film franchise and what it means for Cineverse's future. Following the late 2022 success of our Terrifier 2 release, which surprised and shocked the film industry by achieving approximately $11 million at the domestic box office via a limited release on just a $250,000 production budget and a less than $500,000 marketing spend, which all resulted largely because the center versus very targeted fan-based digital and social media marketing plan that leveraged our horror assets of screen box and bloody disgusting. We set out to fully employ all the assets that we had built over the past few years to devise a new marketing and distribution strategy for Terrifier 3 that would take full advantage of the powerful fan-based entertainment ecosystem we now have in place as well as the strength of the film franchise itself. Our marketing and release plan for Terrifier 3 worked brilliantly, with its performance stunning the industry even more than Terrifier 2 did. Released wide on over 2,500 screens on October 11, amidst many mega-dollar production budget and mega-dollar marketing spend major studio releases, Terrifier 3 opened to number one at the domestic box office with almost $19 million in ticket sales, supplanting Joker to become the top performing film in America. The film has now rolled on to record more than $54 million at the domestic box office and is now the number one performing unrated film of all time, taking over the top spot from the previous record holder, Renaissance, a film by Beyonce. We accomplished this by effectively employing every asset in the Cineverse ecosystem to mobilize the horror fan base to come out and see the movie in theaters. Fully utilizing our Matchpoint technology, our streaming channel portfolio with over 80 million monthly viewers, our social media footprint, including Bloody Disgusting, and our top 10 podcast network in an incredibly cost-efficient way to build awareness and interest for an audience that then came out to see the movie in droves. Because we so effectively employed this ecosystem to identify and mobilize fans to see Terrifier 3 in theaters, we spent well under $1 million in out-of-pocket cost to market the movie, a number that has astounded the industry, particularly since we released the film among major studio releases with marketing budgets well north of $20 to $30 million. And in the case of Joker, probably more than $100 million in marketing spend worldwide on top of a reported $190 million production budget. We calculate that our ecosystem most likely created over $5 million in media value to support our movie that involved no cash outlay on our part. I've personally been involved in the release of at least 500 films in my career, both major studio releases and independent films. and the box office revenue to cash marketing spend ratio for Terrifier 3 is exponentially higher than any result I've ever seen. The performance of Terrifier 3 is truly in a class by itself, and the industry has taken note of that in a big way. We believe that the record-setting performance of Terrifier 3 is strong evidence that Cineverse's ecosystem of assets is established a potential new blueprint for releasing films theatrically in a much smarter, cost-effective, and risk-advantaged manner than anything ever attempted in this space before. We believe this can be a major advantage going forward for independent films, filmmakers, and even for the major studios if the majors choose to rethink their spending plans from the ground up, like Cineverse did for both of the Terrifier movies. Our studio competitors also do not have the powerful and complete combination of targeted streaming channels, passionate fan bases that view our channels more than 80 million times per month, wide social media footprints and influencers like Bloody Disgusting, a top 10 podcast network, and targeted match point advertising technology that we do. We just resoundingly demonstrated the power of that ecosystem to the rest of the industry by fully leveraging our integrated assets to do what almost everyone in the entertainment business thought was impossible. Open to number one and then go on to earn more than $54 million at the box office and still going for less than a $1 million marketing step. That previously unheard of feat in the movie business is creating a lot of interest from independent producers and other studios to try to generate similar theatrical performance results utilizing Cineverse's ecosystem in the same manner as Terrifier 3, not just in horror, but in other genres where we have strong footprints and fan bases like family films, female-oriented films, animation, and anime. This could create an entirely new profit line for us. And of course, we plan to utilize this successful release blueprint for Cineverse's own releases as well. Our recent announcement that we're going to distribute the remake of the controversial horror film classic Silent Night, Deadly Night, for which we have worldwide rights at the end of this year is a testament to that point. I also want to emphasize that having two really great movies in Terrifier 2 and 3 that resonated strongly with both critics and audiences alike had an overriding impact on the success of both films. So our hats are off. to director-writer Damian Leone, producer Phil Falcone, and the entire Terrifier creative team for their vision, their understanding of their audience, and their creative genius that powered these films. So what's next for Terrifier 3? The film will soon be distributed into the digital and DVD Blu-ray markets in our current fiscal third quarter with a streaming pay TV release following that. Our distribution costs for these ancillary markets are extremely small. So we expect a very high margin return and significant profits from these post theatrical channel releases. Terrifier 2 has also had a strong rebirth in digital sales due to all the activity around the release of Terrifier 3, underscoring the evergreen power of the Terrifier franchise yet again. Additionally, we're planning a Christmas reissue of Terrifier 3 in the box office with added features to attract the fan base yet again. Like every major independent and major studio, we do not disclose profitability on individual films for competitive reasons and also for participant nondisclosure reasons. However, it's obvious that Terrifier 3 will be extremely profitable and will have a very significant positive impact on our financial results beginning in our next recorded quarter. For instance, we more than recovered our total acquisition and marketing investment in the film from our share of theatrical revenues alone in just the first 48 hours of release. And we expect to book more than 20 million in theatrical revenues by December 31st, which represents our share of domestic box office which we split with theatrical visitors. On top of that, we will be recording the very significant high margin revenues from the ancillary markets that I just mentioned, plus potential revenues from our ScreenBox streaming channel in our fiscal third quarter ending on December 31st, and then in the many quarters beyond that. Suffice it to say that this film is probably the highest ROI film I've ever been involved with. And our investors will begin to see that very soon. The cash impacts from this wildly successful release will also provide a significant balance sheet upside to Cineverse. It has been our goal to achieve a sustainable self-funding balance sheet for our ongoing operations. We believe Terrifier 3 advances that agenda by miles. And as such, we have no plans to raise outside equity capital to support our current operations in the foreseeable future. And with that, I'll turn things over to Mark.