CNVS Q2 FY2027 earnings call transcript, November 13, 2026

Thank you for joining us for Cineverse's second quarter fiscal year 2027 financial results conference call. The press release announcing Cineverse's results for the fiscal second quarter ended September 3rd. 30th, 2026 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 on 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 sub. 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 13th, 2026. Inciniverse does not assume any obligation to update any. of these forward-looking statements accept 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 and our earnings released carefully as you consider these metrics. I'm Gary Lafredo, Chief Legal Officer, Secretary, and Senior Advisor at Cineverse. With me today are Chris McGurk, Chairman and CEO.

Eric Opica, President and Chief Strategy Officer, Sean McCabe, Chief Financial Officer, Yolanda Macias, Chief Motion Pictures Officer, and Mark Torres, Chief People Officer, all of whom will be available for questions following... ...the prepared remarks. On today's call, Chris will briefly discuss our second quarter fiscal year 2027 business highlights. Then Sean will follow with a review of our financial results, and Eric will provide further details... ...on our two recent acquisitions. I will now turn the call over to Chris McGurk to begin.

Through these acquisitions, with ad tech and media services representing the largest factor in our more than doubling our quarterly revenue versus last year. Additionally, our successful targeted content acquisition... ...and distribution strategy continues to deliver results. The most recent example of this was the October 9th Fathom event release of Guillermo del Toro's 20th anniversary edition of Pan's Labyrinth, one of the most acclaimed films of all time, which is also... a very worthy addition to our film library and will be a profitable title as well. Combined with the continued growth of our streaming channels and podcast businesses, as well as the significant cost-saving initiatives we... continue to implement, we remain very bullish about our competitive position in the evolving entertainment, media, and technology ecosystem. As such, and given our strong forward operational and financial momentum... ...we reaffirm our full year fiscal 2027 guidance of $115 to $120 million in total revenues and $10 to $20 million in adjusted EBITDA. Adding to that forward momentum... ...this morning, which just so happens to be Friday the 13th, we announced that we have secured long-term rights to the latest feature film in the Jason Universe franchise. Bringing back to the big screen... ...one of the biggest and most successful horror film icons of all time, the legendary Jason Voorhees. This highly anticipated sequel, the 13th in the series, should be another high-impact theatrical and ancillary...

...release for us and a tremendous addition to our library as we have all rights and all media in North America for 25 years on the title. Importantly, despite the high-profile and highly-anticipated nature of this new Jason... ...franchise property, which we plan to widely release in the theatrical market, we intend to fully fund it internally with no third-party capital. That is because of the unique aspects of our theatrical business model, the low-risk, high-potential return on investment approach... ...which we employ, and also the low out-of-pocket economics of our marketing ecosystem. And, by the way, all six of our last wide film releases, including Pan's Labyrinth, will be profitable, add value to our library, and drive viewers... ...and subscribers to our streaming channels, which is our overall objective with this business. Expect a lot more news with additional specifics on the plans for this exciting, high-potential Jason franchise film release in the near future. And even before this potentially huge franchise film edition, Cineverse's film library was just valued at approximately $45 million, more than seven times higher than its current book value. That's just another indication of how we continue to believe the company's equity is vastly under... valued at present. Finally, we're very pleased to nominate Dr. Samrat Ganguly for election to our board of directors at our upcoming annual meeting of stockholders. Dr. Ganguly, a former Long...

term Apple global infrastructure leader with a distinguished decades-long technology and academic career, is the technology pioneer and founder behind our industry-leading Matchpoint platform. Dr. Ganguly is now an... AI infrastructure entrepreneur. We look forward for Dr. Ganguly, we look for Dr. Ganguly to help Cineverse plan and execute both our technology and our AI future. And with that, I'll now turn things over. Sean. Sean? Thank you, Chris. To provide a few highlights from our second fiscal quarter, revenues were $26 million, up 110% from the $12.4 million in the same quarter last year. This was primarily driven by our new... ...med tech and media services revenue streams. Our direct operating margin for the quarter was 38%. It's down from the prior quarter as of 58%, as anticipated following our Q4 acquisitions of IndyQ and Giant. This quarter's margin, however, represents a 300 basis point. Improvement over our first quarters, despite a decline in revenue during our seasonally slow period. We expect to continue to see direct operating margins improve in the second half of the year as the company benefits from seasonal and theatrical. Revenue increases and we complete our cost rationalization initiatives. Thanks to these cost rationalization initiatives and overall cost discipline, our reported SG&A for the quarter of 10.1 million is now lower than it was in the prior quarter, even after

adding the overhead associated with two substantial acquisitions and now with revenue more than doubled since. Adjusted EBITDA for the quarter was 1.7 million, an increase of 5.4 million over the prior quarter, an increase of 1.2 million. or just last quarter. This is continued progress during our seasonally slowest quarter and also the third consecutive quarter of positive and improving adjusted EBITDA with only one theatrical release during this time period. This improvement in. Our operating performance can also be seen by the 17 million improvement in our cash flow from operations compared to the prior to date, despite an increase in content advances of $4 million net income attributable. Common stockholders for the quarter was $3.2 million, an $8.8 million improvement over the same quarter last year. In addition to the items included within adjusted EBITDA, $7 million of this increase was driven by non-recurring decrease in the valuation of our acquisition related. liabilities, which is partially offset by higher depreciation and amortization of $1.6 million driven by purchase price accounting from our Q4 acquisitions and $0.6 million in interest cost from higher utilization of our line of credit and convertible note. The second half of the year includes the U.S. midterm elections, holiday shopping season, our three theatrical releases, with more than 1.5 in theatrical marketing for these films already incurred during the first fiscal two quarters.

With these... Lists to revenue and our cost rationalization program in full swing, which has already actioned $9 million in annualized savings to date, we look ahead to an exciting second half of the year, which enables us to reaffirm our previously announced guidance of $115 to $120 million of revenue. $20 million of adjusted EBITDA for fiscal year 2027. From a liquidity standpoint, we ended the quarter with $3.6 million of cash and our line of credit still effective. Our reported networking capital as of September 30th. was negative 9.7. However, the company has the right to settle $8 million of this amount in equity. During the quarter, the company also secured a $3 million loan from Bondit for Pan's Labyrinth to better align the timing of our theatrical commitments and the relationship. So that we can maintain the pace of investment in our company's initiatives to promote growth and profitability. We have also settled the vast majority of our cash-based M&A liabilities with more than $4 million paid as of today. Only $0.4 million remaining to be paid in January. As Chris mentioned, even though the new Jason Voorhees film we will be distributing is part of one of the biggest and highest profile horror franchises, we believe we will fully fund our investment in the film's release internally and do not foresee a need for outside financing on the project. With that, I'll turn it over to Eric to discuss our operating highlights in greater detail.

So last quarter, my comments focused on our execution, integrating the acquired businesses and taking out costs. So today I want to cover four things. First, the market environment, which is building in our favor. And it's the reason we built the company the way we did. Second, how those initiatives are already showing up in our cost structure. Third, the five levers we're pulling to keep expanding margin from here. And fourth, where we stand on the cost rationalization program. And in streaming. So let me start with the market. So we see three forces converging. The first being restructuring. So as we all know, in the recent past, Lionsgate separated from stars. Comcast spinning its cable networks into Versant. And then most recently, Paramount closed its $110 billion acquisition of Warner Brothers Discovery. So there are many other examples. And everyone is either creating a separate. Or an integration. And behind each one sits years of library reversioning and redelivery that has now has to be done much faster and less costly than it was done before. The second is. AI readiness. There's a recent Adobe 2026 media survey that found nearly half of media companies are describing their content supply chain as largely linear and resource intensive. And a separate industry survey found that 94% of. Media executives expect AI to be the biggest operational change this year while most say they're not ready to deploy it at scale. So the gap between those two numbers is our market and you can't put AI on top of.

supply chain that still moves by hand. So the third is scale. U.S. connected TV advertising expected to reach approximately 38 billion this year and political spend for the quarter that we just for the current quarter. It was about 2.7 billion in this cycle, more than double the 22 midterms. And Omdia expects global CTV ad revenue to double again to 81 billion by 2030. So there's more channels, more versions, more ad decisionings, more need for ad. Execution and software in volumes that manual operations just can't keep up with. So all three point to the same requirement, a platform that automates and orchestrates how content and advertising move and interact. So that's match point. And we believe it's the best in this class. And these acquisitions gave us the customer scale and monetization level to put that all the work. An example that scales, you can see it in our SG&A over the past. Year, we added more than 120 people. We took on operations in Poland through these acquisitions, expanded our team in India, absorbed these two new businesses and carried the full marketing amount behind our theatrical slate. But despite all of that cost base, SG&A. Came in at 10.1 million. That's a million three below the same quarter a year ago and roughly a million and a half behind the first quarter of fiscal 27. So and that was with revenue seasonally lower by four point six million. Meanwhile.

Just an even a triple to 1.7 million. So our direct operating margin expanded 300 basis points despite the lower revenue. And so we've built the company to work this way and it's starting to show up ahead of our strongest seasonal quarters. So we're going. Keep pressing on margin because that's where the next step up in EBITDA is going to come from. And there's five levers that we're focused on. The first is price. Our subscription services on third-party platforms had not been substantially repriced since before COVID. But between late October and last week, we raised prices across every single service with increases averaging 25 to 40%. We expect a meaningful lift in subscription revenue that will far outweigh any temporary churn. Second, our ad supported footprint. We're intending to double our podcast network revenue over the next six to nine months. And we're also putting our apps and bloody disgusting to work, driving film views and ad impressions across our own properties. So really ramping the ad footprint on. those properties. Third, automation. During the quarter, a major broadcaster became our first scale enterprise customer running fully automated on match point. That work carried software margins and because the workflow is now. Built every subsequent order from that customer is going to carry this to our giant are moving into this model next. And this is the margin transition we described last quarter is now starting to show up in real workflows and for.

Fourth, where the work's getting done. We have close to 200 people across India, Poland, Moldova. Poland is expected to double and is moving into a larger facility. And over time, the majority of the work and the hiring and our tech business is going to be in those regions. Poland also is a beachhead in Europe, which is a very small part of our revenue today and won't stay that way. And then the last is technology. We launched a new version of IndieQ platform during the September quarter. That's already driving margin expansion, and we believe it can be a meaningful contributor in the second half. I'm going to leave the specifics there as the design is proprietary, but it is working demonstrably well. And on Vaudeo. The technical trials have gone very well. We've signed four-scale supply and demand customers during the trial, and we expect a wide rollout beginning in our fiscal fourth quarter. Now on to the cost rationalization program. So we expanded it by another... Another million to 14 million annualized with over 9 million implemented. Some of that will be organizational, but most of what's remaining is contractual. So we have existing long-term... Technology agreements with cloud providers and other partners. Those contracts set the timing, and that's why much of the remaining savings left is going to land in the third and fourth quarters. And we expect to exit the fiscal year at that full 14 million run rate. Normal attrition.

Shifting roles to our offshore campuses are going to add further benefit next fiscal year, and put together SGN growth should stay very modest even as revenue continues to ramp. A few highlights from streaming where the same discipline applies. Our total minutes in the period grew 8% year over year to 4 billion, 4.05 billion, and 36% excluding three channels that wound off during the quarter. Dove delivered its most watched quarter on record. Up 80% to 854 million minutes with its audience up 43% and minutes per viewer up 26%. People aren't just finding Dove, they're staying on Dove. And the Dog Whisperer and Yu-Gi-Oh! channels also. set records. And our Midnight Pulp Cult channel grew 280% on its co-pilot launch. On subscription, our flagship Cineverse channel hit another all-time high, up 60%. Year-over-year and growing every month since January 25. Retro Crush set a new high as well. Roku subscribers across our channels are up 62% over the year. We ended the quarter at 1.44 million subscribers. up around 2%. With repricing in place, our focus for the coming year is revenue and margin prescriber, not subscriber counts for its own sake. So put simply, the market is moving towards automation and we own the best in class, state of the art platform. The cost base is set. The margin levers are in motion. And then this back half is bringing the political advertising as Chris previewed, plus our film slate and strongest seasonal quarters. We are exactly where

Line of Laura Martin with Needham and Co. Your line is open. Please go ahead.

Thank you very much.