Cineverse Corp (CNVS) 2023 Q4 法說會逐字稿

Good day, everyone. Welcome to Cineverse's Fourth Quarter and Year-End Fiscal 2023 Financial Results Conference Call. My name is Matt, and I'll be your operator today. (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 and Senior Adviser for Cineverse. Please go ahead.

Good afternoon, everyone. Thank you for joining the Cineverse Fiscal 2023 Fourth Quarter and Year-end Financial Results Conference Call. The press release announcing Cineverse's results for the fourth quarter and fiscal year ended March 31, 2023, is available at the Investors Section of the company's website at www.cineverse.com. A replay of this broadcast will also be made available at Cineverse website after the conclusion of this call.

Before we begin, I would like to point out that certain statements made on today's call contain forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties and assumptions. The company's periodic reports that are filed with the SEC describe potential risks and uncertainties that can cause the company's business and financial results to differ materially from these forward-looking statements. All the information discussed on this call is as of today, June 29, 2023, and Cineverse does not assume any obligation to update any of the forward-looking statements except as required by law.

In addition, certain financial information presented in this call represents non-GAAP financial measures, and we encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics. With me today are Chris McGurk, Chairman and CEO; Erick Opeka, President and Chief Strategy Officer; Tony Huidor, Chief Operating Officer and Chief Technology Officer; John Canning, Chief Financial Officer; Yolanda Macias, Chief Content Officer; and Mark Lindsey, Executive Vice President, Finance and Accounting, all of whom will be available for questions following the prepared remarks.

On today's call, Chris will discuss fiscal year 2023 highlights, the latest operational development, outlook and long-term strategy. John will follow with a review of our results for the fiscal fourth quarter and the year ended March 31, 2023. Eric will then provide some detail on our streaming business results and operating initiatives before we open the floor for questions. I will now turn the call over to Chris McGurk to begin.

Thanks, Gary, and hello, everyone. Thank you for joining us today. Fiscal year 2023 was a milestone year for Cineverse. By the end of the year, we wound down almost 100% of our legacy Digital Cinema business and are excited to be moving forward with a new name and brand that reflects our status as a pure-play streaming technology and entertainment company. The wind down of Digital Cinema made our financial results rather lumpy over the last 2 years as we monetize the remaining assets in that business and adjusted our balance sheet as our equipment obligations diminished. However, during that same period, our core business of streaming content and entertainment grew very rapidly through a combination of organic growth and 8 acquisitions of streaming content and technology assets.

Over the last 2 fiscal years, we basically doubled the size of our core content and entertainment business, increasing revenues from $28.2 million for the fiscal year ended March 31, 2021, to a record $56 million for the fiscal year just ended. For this fiscal year, we reported consolidated revenues of $68 million, which reflects 21% year-over-year growth overall and 48% growth, cost, excluding our legacy digital equipment business.

We reported streaming revenue of $32.2 million, up 59% year-over-year and up 230% on a 2-year basis, exceeding the company's previously stated long-term goal of annual revenue streaming growth of 50% per year.

Now that Digital Cinema is essentially behind us, we do not expect to experience the lumpiness in our earnings that impacted us over the last 2 years, where we recorded $30 million in Digital Cinema revenues in what must have seemed like a random pattern to some of our investors because the revenue recognition depended on the nonlinear timing of equipment sales and accounts payable reversals. That certainly had an impact on our top line results this quarter versus our last sequential quarter and the prior year fourth quarter.

Last quarter, our fiscal Q3, we recorded $7.2 million in digital cinema revenue in Digital Cinema revenue recognition. This quarter, we had only $800,000 in total Digital Cinema revenues. In addition to the significant difference in non-core Digital Cinema revenues, in Q3, we also recognized $7.6 million in revenues from the release of Terrifier 2, which had its theatrical and online release into home entertainment in that quarter. That's $5.3 million more than the Terrifier 2 revenues we recognized in Q4. That led to the notable difference in revenues from Q3 to Q4.

Taking out those 2 timing factors, which added up to about $11.7 million, the quarter-to-quarter revenues between Q3 and Q4 look much more seasonally in line. The key takeaway is with these timing issues aside, we generated more than $40 million in revenues for the 2 quarters combined. The same holds true for the revenue comparison to Q4 of last year. We booked $6.7 million in Digital Cinema revenues last year and only $800,000 this year. Excluding these legacy revenues, Q4 revenues looked much more in line, both in terms of growth and seasonality.

We anticipate these financial comparisons will become less complicated as we move further away from the sunset of our legacy Digital Cinema business and continue to concentrate on our core streaming entertainment and technology business.

Overall, we believe our diverse business model and multiple revenue streams of paid subscriptions, advertising, content licensing, transactional, digital sales, and technology services position us very well as we continue to expand our library of premium content, effective distribution and marketing solutions and audience reach.

We have more than 60,000 titles in our growing library, a portfolio of 26 enthusiast streaming channels with broad distribution and an industry-leading content management and streaming technology in Matchpoint. Along with that, we hold a competitive advantage due to our investment in research and development resources in India, where we have a large team of advanced software engineers currently working on taking and our technology portfolio to an entirely different level by leveraging AI and machine learning.

We also have no long-term debt, having reduced our debt by over $50 million since 2020 and only holding a $5 million line of credit. That is a very different situation than almost all of our competitors who carry very large debt burdens. All those assets, combined with our debt advantage position gives us a solid foundation for future growth. They've also advanced our scalability and positioned us to deliver improved financial performance in the current fiscal year ending March 31, 2024.

John and Eric will get into more detail on all of that in a few minutes. While I intend to focus now on 2 important Cineverse initiatives. Our content acquisition and content financing strategy and then our initiative to significantly reduce operating costs, improve margins and achieve sustainable profitability. First, as I detailed in a recent press release, Cineverse is currently experiencing an unprecedented inflow of premium content, streaming channel and library acquisition opportunities. This has happened for 2 key reasons.

First, we fully established ourselves as an industry force in streaming, technology and content distribution. And second, the industry witnessed the tremendous success of the horror phenomenon we released called Terrifier 2, and particularly the unique way Cineverse made that success happen.

Produced for just $250,000, Terrifier 2 earned over $15 million at the box office, added hundreds of thousands of streaming viewers and paid subscribers to our Screambox horror channel and has generated over $10 million in net revenues to Cineverse so far.

In large part, this happened because the company brought to bear the full force of our assets to promote and virally market the movie in an incredibly cost-effective way. We promoted the film not just on Screambox but across our portfolio of channels and there are more than 70 million monthly viewers and billions of ad impressions while Bloody Disgusting our in-house horror group created and implemented a viral marketing campaign for their huge social base of horror enthusiast and influencers that was enormously successful.

The film was featured on the Howard Stern Show and the New York Times, People Magazine and Saturday [Night] Live among many, many others and became a viral sensation.

In essence, we created several million dollars worth of paid media by smartly leveraging our assets and expertise. We call this our 360-degree marketing approach and believe it will be fully applicable to the other genres where we have a channel base and access to millions of enthusiasts and influencers such as the faith and family business and Asian content.

Most importantly, all of this received notice in the entertainment industry, adding to the company's positive momentum and solidifying the idea that Cineverse has now become a key destination for important IP. That's why, in addition to recently announced distribution and technology deals with partners such as GoPro and TCL, we have seen a flood of new partnership and M&A opportunities emerge in the last 90 days.

Some of these we've announced already, such as the highly anticipated franchise sequel Terrifier 3, which we are planning to tease to horror fans as part of the rerelease of Terrifier 2 next fall and also the beloved Sid & Marty Krofft library, which will form the basis of a new Cineverse streaming channel.

We are also close to signing a deal for distribution and channel rights for one of the most loved, successful, and profitable nonfiction television brands of all time, also a highly valuable and recognizable children's IP library and also an iconic horror brand and library to complement our existing horror assets. For all these deals alone, we beat out competing offers from these 3 major studios in a major cable conglomerate.

These time-sensitive competitive opportunities are the reason we did our recent equity raise, even in what we believe is a significantly undervalued share price. We did not want to take on debt, and we did not want to lose these properties to our studio competitors as they are a key part of the fuel for our future. We needed the funds to invest in our future immediately and maintain the company's momentum.

Going forward, we are committed to finding alternatives to finance content acquisitions that provide more capital and do not require us to enter the equity market again. To that end, we've been working on developing a series of multimillion dollar off-balance sheet content funds to provide financing for our film and TV acquisition efforts. These would be separate funds for horror, faith and family and catalog content. There are no guarantees we will close these deals, but our initial meetings at the Cannes Film Festival to sell in the first fund dedicated to horror generated very significant interest in our view.

In addition, we are looking at project-specific financings for higher budget and higher profile films and TV series in return for financial participation in the projects. Also, we are in conversations with potential investors in our faith and family and horror businesses who might also bring content to the table. Stay tuned for more on all of these initiatives in the coming months. Ultimately, our goal is to be able to completely finance the growth of our library and content acquisitions through internal cash flow.

The second area I want to cover now is our initiative to improve margins, streamline costs and generate sustained profitability. This is the company's overarching goal. With no long-term debt and a strong pipeline of new premium content channels and technology partners, our plan is to achieve sustainable long-term profitability by the end of fiscal year 2024. We have mobilized the company now to target more than $10 million in annual operating cost savings via SG&A cuts, operating deal renegotiations that leverage our vastly increased scale and through channel portfolio optimization. Much of these savings will come from the now nearly complete full integration of the streaming content and channel company acquisitions we made over the last 3 years, including Fandor, Digital Media Rights, Screambox, and Dove.

These acquisitions brought us multiple new streaming channels, more than 15,000 hours of content, and viable scale. At the same time, these acquisitions brought increased operating costs that we identified as savings opportunities via full integration, which we are now approaching. For example, since late August, we've already reduced our workforce by 20%, with more significant savings to come. Erick will speak to the efforts we are implementing on the revenue side to generate high-margin new sources of revenue in our advertising podcasts and other businesses. However, on the cost side, we're already seeing the results of our efforts to take shape.

This quarter, our gross margin was 45% in our core business, excluding legacy Digital Cinema, an increase of 700 basis points versus the fourth quarter of last fiscal year and much higher than our last sequential quarter. Our direct operating expenses and SG&A decreased from last year versus a higher revenue number. We are very pleased with that progress and are committed to improving it even further. Although competitively, our gross margin percentage is higher than most of our competitors, we want to increase it further. To that end, we are also committed to sacrificing lower-margin revenues for higher-margin growth and profitability, as we have already called some of the underperforming channels in our portfolio, so we can focus our resources on the high performers.

Unlike our competitors, we have multiple streaming chances, 26, in fact, a wide diversity of channel genres in deal structures and multiple revenue streams that allow us to undertake a true portfolio management approach to the business, whereas most of our competitors generally have only one channel in just 1 or 2 revenue streams and therefore, cannot replicate our portfolio approach. Another important initiative we are undertaking to streamline our cost structure while improving margins and efficiencies is to further leverage one of the company's most important assets, Cineverse India. We have already talked on these calls before about how our industry-leading content distribution and streaming technology platform, Matchpoint, will be a huge part of future value creation.

From a cost-efficiency standpoint, Matchpoint is unparalleled and is saving significant costs for us already. We're also planning to leverage that technology with third-party partners like our recent deal with TCL, one of the largest global TV and mobile device manufacturers. As the size of our content catalog continues to grow at a rapid pace, we are investing in developing next-generation search and discovery technology using AI, machine learning, and computer vision for the creation of enhanced contextual, metadata, and more. More news on this initiative will be coming shortly.

Our Matchpoint technology was developed by our talented team of experienced engineers from the Cineverse India Group based in Kolkata. After having worked with them for 9 years and fully owning the operation for the last 2.5 years, we are convinced that Cineverse India can play an even bigger role in the company's future. To that end, we are going to be much more aggressive in consolidating offshore in India, many of our current outsourced workflows and back office headcount in the United States through the creation of Cineverse Services India. We believe this move could potentially save the company multimillions of dollars.

Cineverse India is already a high-performing asset for the company, and we strongly believe that in addition to cost savings, this move could potentially streamline our current workflows and increase efficiencies even further. And with that, I'll now turn it over to John.

Thank you, Chris. I'll start by reviewing our financial results for the full fiscal year 2023 and briefly go over those for the fourth quarter. For the fiscal year ended March 31, 2023, Cineverse reported consolidated revenue of $68 million, an increase of 21% from $56.1 million in the prior fiscal year. Content and Entertainment accounted for more than 82% of revenue in fiscal year '23 compared to over 67% of revenue in fiscal year '22. Growth in our continuing operations was driven by organic user growth, new film performance, as Chris mentioned, increasing market demand for Cineverse's extensive connected television ad inventory, and the launch of new streaming channels versus the prior year.

Total streaming and digital revenue increased 47% to a record $40.4 million, primarily as a result of an expanded channel portfolio, increased platform distribution, advertising revenues, and paid subscriptions. Erick will provide additional detail on the operational drivers behind our financial results. Streaming revenue of $32.2 million on a stand-alone basis increased 59% over last year and 230% on a 2-year basis, exceeding our previous long-term guidance of 50% annual streaming revenue growth per year. Net loss attributable to common shareholders was negative $10.1 million or negative $1.13 per diluted share compared to net income attributable to common shareholders of $1.8 million or $0.20 per diluted share in the prior fiscal year. This was primarily due to increased operating expenses from the acquisitions we made and the winding down and subsequent decrease in revenue contributions from the legacy Cinema Equipment business.

Adjusted EBITDA was $0.1 million in fiscal year 2023 compared to adjusted EBITDA of $11 million in the prior fiscal year as a result of the increased net loss caused by an increase in total operating expenses, most of which were related to the investments, including 8 acquisitions of content, channel and technology companies we made to support the company's growth, as Chris described earlier. Increased OpEx for the Content and Entertainment segment compared to the prior year was primarily due to $8.3 million higher content licensing costs, including royalties, participation, and distribution expenses related to the continued growth in revenue noted above, as well as $2.9 million increase in expense related to DVD manufacturing and fulfillment due to the success of Terrifier 2.

Moving to the quarter. For Q4 fiscal 2023, we reported consolidated revenue of $12.5 million compared to $16.9 million in the prior year period and $27.9 million in the prior sequential quarter, Q3 of fiscal '23. Q4 is typically a weaker quarter following the peak holiday season in Q3. Q3 also saw significantly higher revenue contributions from the legacy Cinema Equipment business of $7.2 million as well as $7.6 million from the initial release of Terrifier 2. We also saw only $0.8 million in Cinema Equipment revenue in Q4 fiscal '23 compared to $6.7 million in the prior year period. As Chris noted, taking that factor into account, Q4 revenues looked much more in line with historical seasonality and growth.

Content and Entertainment revenue rose 14.5% to $11.7 million, and streaming and digital revenue increased 18.7% to $7.3 million, primarily driven by increased contributions from DMR following its acquisition in March of 2022 and an 8.1% increase in base distribution revenue due to the theatrical success of Terrifier 2. Content and Entertainment gross margin improved to a record 45% in the quarter, an improvement of 700 basis points over the prior year quarter driven by targeted reductions in operating costs. As Chris mentioned, total operating expenses improved in the quarter, declining to $15.2 million from $18.4 million in Q4 fiscal year '22.

Net loss attributable to common shareholders of negative $3.2 million or negative $0.35 per diluted share compared to net loss attributable to common shareholders of negative $2.6 million or $0.30 per diluted share as a result of lower revenues. And adjusted EBITDA loss was negative $0.9 million compared to adjusted EBITDA of $3.6 million. We had $7.2 million in cash and cash equivalents on our balance sheet as of March 31, 2023. We previously announced that we completed an equity financing on June 16, raising approximately $8 million in net proceeds, and we maintain a small revolving working capital facility as additional dry powder for key content acquisitions. We have no long-term debt.

Moving to guidance. We felt it was important for us to set more specific financial targets, so the investment community can better gauge our progress in the quarters to come. We have narrowed and refined previously announced financial objectives and have outlined revenue, gross margin, and adjusted EBITDA guidance for the current fiscal year ending March 31, 2024, or our fiscal year 2024. The company expects consolidated revenue of between $62 million and $70 million for fiscal year '24, with content and entertainment revenue representing 95% or more of consolidated revenue. This compares with consolidated revenue of $68 million in fiscal year '23, with content and entertainment representing 82% of total revenue or $56 million.

While we anticipate some negative impact on margins following the sunsetting of the legacy Cinema Equipment business and ongoing investments in content, distribution, and technology, we expect gross margins of between 45% and 50% for fiscal year '24 as compared to gross margin of 47% in fiscal year '23, which includes the legacy Cinema Equipment business. Excluding that business, margin was 36%. We continue to make progress on our cost reduction initiatives and anticipate that the full effects of these savings will be realized in Q3 fiscal '24. We aim to maintain OpEx at a certain percentage of consolidated revenue on an ongoing basis to ensure that we are making prudent investment decisions in line with the growth of our business.

Adjusted EBITDA is expected to range between positive $2 million and plus the $4 million in fiscal '24, which compares to adjusted EBITDA loss of $8.6 million in fiscal '23, which excludes the legacy digital -- the legacy Cinema Equipment business. Please keep in mind these guidance assumptions are based on, among other factors, the company's existing business, current year's existing market conditions, and assumptions for fiscal year 2024. With that, I'll turn the floor over to Erick.

Thank you, John, and thanks to everyone for joining the call today. First, let me briefly discuss the current streaming business climate, and then I'll discuss our top-line streaming business results and provide some key strategic initiatives that we'll be focusing on to see the guidance John just laid out. So regarding the current operating climate. As we all know, the current macroeconomic climate has shifted companies away from the growth-at-all-cost strategies that were prevalent for most of the last decade. This has been very fun streaming as companies provide to take on Netflix and later Hulu for advertising dollars and subscribers. This is also true in specialty streaming, our arena, and many companies took on considerable debt loads to purchase assets at peak valuations.

However, as strategies have had the shift, companies are now focused on cost savings and deleveraging. Ad dollars have also taken a hit, and consumers are paring back on discretionary spending to include subscriptions. In the face of all this, I believe our diversified approach to streaming, combined with the technological ability to achieve superior margins versus our microcap peers, has and will continue to enable us to outperform in this fiscal year and 3 years to come. For example, for the Standard Media Index released just a few days ago, ad revenues were down an average of 7.4% during calendar Q1 or our fiscal Q4. However, due to the efforts of our ad ops team, our Matchpoint technology, and expanded distribution efforts, we were able to drive ad impression growth by an increase of 14.6%, a significant performance margin over the industry's prevailing rates.

And while we did see CPM and single-digit negative growth on the third-party platforms where we don't control the advertising, the part where we do directly control it, we're greatly able to outperform the market. Additionally, our portfolio and enthusiast strategy on the subscription side of the business are typically non-correlative to macro and market conditions. For example, we grew our horror service Screambox subscriptions 438% year-over-year despite a softer overall industry subscription growth rate. Our thesis is that the engagement and loyalty of enthusiast consumers that are invested in personal fandoms will ultimately lead to lower long-term churn rates and brand loyalty, as has been proven in our order-based verticals.

So to sum it up, no streaming company can ever be immune from a world in which they operate, but our diversified portfolio approach of enthusiast properties, along with our technical abilities leading to superior margin ability, means we can thrive in conditions that are going to prove challenging for our competitors, especially those that are overleveraged.

Now let's discuss some business highlights during the quarter. First, total streaming minutes in the quarter rose to approximately 3 billion, up 31% over the prior year quarter and 73% sequentially. This could be directly attributed to the expansion of our services in recent quarters with partners like Roku, Vizio, Kudo, Tubi, and Amazon. Additionally, our investment in exclusive and original content, along with premium library content, led to increased engagement and watch times, and this directly impacted growth. Total subscribers to the company's subscription video streaming services increased approximately $1.24 million, representing an increase of 28% over the prior-year quarter, in line with expectations. As noted earlier, this was mainly driven by the 4% to 38% growth in Screambox on the back of the Terrifier 2 release. The subscriber growth was partially offset by an expected seasonal decline of approximately 56,000 low-ARPU third-party subs, particularly around those, which had a minimal impact on revenue and only affected the top-line sub number.

During the quarter, we continued to optimize our streaming portfolio. Like any portfolio, we look to rebalance the composition by adding new high-profile -- high-potential concepts while eliminating unprofitable properties. In the current year, so far, we've added Fubo and GoPro to the mix, both of which we hope to launch later in the calendar year. During the quarter, we made some adjustments to our own portfolio. First, we wound down the door on the linear channels. We founded a 4 candidates for a linear format. Channel continues to live on successfully as an SVOD and AVOD service where it's thriving. We also shut down CONtv Anime, where we merged it with our much larger and more popular anime service retro pros, which came through the DMR acquisition. This allowed us to half our operation cost to improve the retro crush offering.

And lastly, we ended the relationship management with Tecan ops for the core TV streaming service. We're going to continue to evaluate channel performance and change the portfolio needed throughout the year to improve overall profitability and increase margins. We continue to expand the Cineverse podcasting business with our emphasis on one of the fastest subgenres shows, audio dramas. We've now reached more than 90 million downloads to date across more than 30 shows, and we're rapidly becoming one of the most important networks in the space. After the quarter end, we had a top 50 podcasts with Redracular, a modern take on the classic brand/or novel, and also entered into a deal with Electronic Arts to bring their $1 billion franchise bed space in the audio fiction world. We expect to see many more brands and launches like that coming this year.

We've also become a major player in the scripted podcast category. As we noted, our show Mayfair Watches Society was picked by Apple's top podcast over the last year, and we had more than 5 shows in Spotify's top 50 fiction charts. We're going to continue to scale this business with forthcoming inter-language launches of key shows and the launch of shows, including the new Living Dead Property from Georgia Mero and many more to come.

Now let me just talk about the company's 4-part strategic plan to keep revenue growth going, improve gross margins and deliver positive EBITDA while we drive innovation in the new fiscal year. On the revenue side, as I noted earlier, our goal is to continue to find and launch new partnerships, add both new channels of the portfolio, to add significant content to our family of channels, including Cineverse. So far, as Chris noted earlier, we've added some great brands at FitBedvill, including Sid & Marty Krofft's entire library, Fubo, Entrepreneur Vanadash, New African-American-oriented streaming service based on its pioneering cultural brand, Entrepreneur TV in partnership with Entrepreneur magazine, and GoPro, new action sports channel in partnership with the namespace technology brand. As Chris alluded to, we have several additional immune channels, all of which bring highly valuable, instantly recognizable IPs and brands.

Our separate key initiative is scaling up our third-party advertising and distribution business. Our goal is not only to build and operate new channels with partners but to expand the monetization for third-party channels and podcasts that need help on ad sales and distribution. This business is CapEx light with very high margins, and we're seeing incredible interest in this offering as we bring it to market. We've put in place a great team, and we're going to be making some announcements in the coming weeks on this specific effort. Third, we're going to continue to expand our subscriber base just to focus this year on the quarter, Asia, and safe and family verticals. Our goal is to expand the content of these verticals by utilizing, as Chris mentioned, off-balance sheet, risk remote vehicles to acquire and finance the concept, which will reduce the company's need for growth capital.

Our focus on driving new subscribers will be a mix of strategic partnerships with third-party platforms, hardware OEMs such as our recent TCL deal as well as focused ROI-driven customer acquisition marketing. Fourth, we're continuing to drive the expansion of Cineverse. Since we last outlined our mission of bringing to 90% of users -- of content to users they can't find on the major streamers, our bigger peers have shown exactly why this model is needed from more than 1,500 hours of shows being pulled from Disney+, Hulu and MAX, to a massive touch of Turner Classic movies, access to broad-based media choices is under attack. Given our massive library and technological prowess, we're perfectly suited to continue executing on this strategy.

Launched just last September, we're already a top 10 streaming service in terms of content volume and breadth. One last point I want to mention is our commitment to technological innovation. While most of our peer companies, from the largest to the smallest, are spending their time figuring out how to build scale infrastructure and digital supply chain, something we solved more than 6 years ago, we're moving on to the next generation of capabilities and features. Our team of engineers includes talented data scientists who are attached to build the next generation of streaming technologies with a focus on solving search, discoverability and personalization streaming experience, utilizing the team learning and AI. Our long-term goal is simple.

We want to make using the service that's fun and unique an experience as the movies and the shows themselves. Cinema is deeply rooted in our company and employee DNA, and we're laser-focused on bringing that magic and collective experience of the movies to the experience at home. We can't wait to show and tell you what we've been working on later this year. With that, operator, let's open it up for Q&A.

(Operator Instructions) The first question is from the line of Dan Kurnos with Benchmark Company.

The first question for you guys is just around the content acquisition strategy. So you do the raise. I don't know if you guys are willing to comment, at least directionally, on how much of that was for Terrifier 3. But obviously, there's some incremental additions to that. And it sounds as the way that you put it, Chris, is a competitive bidding process. So maybe if you can just talk about the expected ROI on that spend timing realization? And just generically, why you guys can outbid the competition and flow it through your ecosystem at the winning bid price?

Well, those were a lot of questions all wrapped up in that, Dan, but thank you. So Terrifier 3 is a big chunk of that raise. Of all the things we got noticed in the company, as I mentioned in my remarks, the performance of Terrifier 3 I denoted across the industry. I've probably been involved in 500 or more films in my career, both big and small, across the industry, the major studios and independents I work at. And I had probably never been involved in such a high ROI zone and a film that had such a remarkable marketing spend-to-box office ratio. We spent $100,000 on marketing a movie, and the rest of it was our viral marketing campaign and it did $15 million at the box raise. So those are remarkable economics that were noticed by just about everybody in the industry.

So we ended up in a situation where there were competitive bids that reflected a lower ROI than what we achieved on a movie. But we -- so we stepped up. We paid a lot more for the movie -- this movie than we did for Terrifier 2. But remember, what we're doing is we're fostering a franchise, okay? By having Terrifier 3 and Terrifier 2, we're able to package and promote each and achieve bigger results on each one. For instance, as I mentioned, we're going to reissue Terrifier 2 next fall, and we'll have a teaser for Terrifier 3. And the biggest upside from it, Erick described, was its impact on our streaming channel, Screambox. Our subscriptions were up 438% on Screambox, and they've stuck directly attributable to Terrifier 2, and that's a real annuity for us.

So even outside of our streaming business, we target more than a 30% ROI on every acquisition that we make. And as I said, I think the most important thing that we're trying to do right now is figure out ways to finance our acquisition strategy through these off-balance-sheet vehicles that I mentioned and that Erick mentioned, and also to do single project financings where we bring in partners for higher budget projects, so we don't have to go to the equity markets like we did this time, which is principally a timing issue because all of these opportunities came together essentially at once. And we think that will be a big factor going forward to enable us to continue to bring this premium content in without diluting the company and service our channels, which is really the most important reason why we're doing this. We're willing to give away some of the upsides in traditional distribution if it drives the kind of subscribers to our channels that Terrifier 2 drove to Screambox.

Got it. That's helpful. And then just on the cost savings efforts, I think certainly, we've been looking for that inflection point. John, I don't know if I caught exactly your comments right on the timing. I don't know if you meant that the full flow-through would be next year for what Chris called out a $10 million in annualized savings. So correct me if I have that wrong. But just in general, the cadence of recognizing those savings and on a go-forward basis, as we look into next year or figure this fiscal '24, how much contribution to the top line from the new stuff versus organic growth and against that savings drives kind of the EBITDA that you've arrived at?

Sure. Let me speak to the cost savings first. So the $10 million is what we expect to realize through the fiscal year in terms of total SG&A savings based on our initiatives. However, as we continue to grow, certainly, we'll be investing against the new revenue that will commensurately go against some of that cost savings as we invest in revenue-generating folks and processes. So it will be throughout the year in terms of the cadence, but that's our goal for this year. The second part of your question, could you repeat that for me?

That pretty much encompasses it, John. I just wanted to understand the balance of some of the new stuff contributing to the revenue outlook, but also, you just drive the investments in new revenue-generating initiatives against the G&A savings. And last one, I guess, and then I'll step aside. Just for Erick, I know -- thanks for the color on the marketplace. You talked about Matchpoint a lot, sort of waiting for something for the marquee headline, anything? I know you guys are super in attack in the industry too. So is there anything to kind of think about that might be on the way for Matchpoint specifically?

Sure, sure. So I think one of the things that gets -- when we talk about Matchpoint, sometimes it can seem quite more of this what it is and what it does. But I think the best way to really think about what Matchpoint is, is to think of it as almost like an operating system combined with the supply chain for streaming. So it's an end-to-end solution. And it's really been designed to operate at an incredible amount of scale. That's part of the reason why we're working with a partner like TCL, which is the second largest TV manufacturer globally after Samsung. The scale of Matchpoint and the amount of processing that it can do on video incidentally makes it one of the most compelling platforms for next-generation technology, right? As you think about how to create large language model data sets or other things that you're going to use for new experiences for users, new user interfaces, to interactive content. You need to be able to process a tremendous amount of video audiovisual data.

Just so it turns out that our engineering team that built the products happen to be PhD data researchers on big data and work on these big problems for NCR like a decade ago on the video side. So we've really pretty rapidly adapted the technology to take advantage of this. And so one of the more compelling elements is while most partners out there are trying to just figure out how to get a basic search box to work. We're doing some pretty extensive machine learning tools to find ideal captioning points to use third-party language libraries and other tools to deeply encode metadata. So the level of things that we're doing that we initially built to make our lives easier. And we're finding the ideal tools that have really generated some market opportunities that big players are interested in. So we think that's going to be a very significant opportunity for us, I would say, pretty rapidly, just given some of the relationships and conversations we've already announced, like TCL and others, and that we're having right now.

So if you think about it, we -- Chris mentioned 9 years, we've been investing in this capability of technology for almost a decade. And really, over the last few years, it's come to a scale and endpoint where making it a market product is imminent. And I know that's something we've been talking about for years, but market forces around the needs around processing large amounts of data around video have really opened up some opportunities that we weren't even contemplating 6 months ago. So it's a pretty exciting time on that.

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

It's great to see the drop in expenses and the rightsizing of content and entertainment to be profitable in '24. Can you talk about the early traffic and/or revenue contribution from Cineverse, how long before you think there'll be a material contributor? And what is the marketing strategy that is educating the consumer about this offering?

Sure. Thanks, Brian. That's a point for Erick.

Sure, sure. So if you really think about the phases -- because we've gone through this with several different channel launches. The thesis of Cineverse, right, is it needs to be a scale product that has an incredible amount of content. So Phase 1 is just getting into the market and getting the product beyond a minimally viable product and having a base of content, number one, that fulfills the mission that we're talking about. So the good news is that's the first phase that we've been working on over the last 1.5 quarters or so, which is going from 0 to ranking in the top 10 for title count. Now that we've got the title basis in the service, we're working on a lot of the tools that fulfill the promise of what we've been talking about, right, which is that next-generation search capability and some major innovations on user interface and interaction and a few other game-changing things which we're going to be revealing over the next quarter or so.

So that piece, we think, combined with that capability to build on that piece of it. And then the second piece of it was distribution. Our strategy for Cineverse is less about us doing paid marketing, and it's more about OEM and strategic partner partnerships to get the product out there. So we've announced a couple of early partners with Vizio, TCL, and we are going to be adding more partners to that mix. We think that model is a way for us to more rapidly get the service in front of people. We will do traditional paid marketing and other things.

But we'll probably be doing that later in the year close to the calendar Q4, our fiscal Q3. So I would say meaningful revenue contribution should be coming at the back half of this year or Q3, Q4 -- fiscal Q3, Q4 as we progress through these phases of getting the service up to scale. We also have some other things that we will be doing to dramatically scale up the content offering. To me, that's the single biggest thing, right, that's the value proposition, having more choice, more channels, more assets than almost anyone else in the market, and the tools for people to use it. We think we have to have that first to be differentiated.

Great. That was super helpful. Can you quantify what percentage roughly advertising is? And how much of a headwind assuming it is one for CPMs in the quarter?

So in the prior quarter, we're making -- we've been making the evolution from being what I'd call a value player. The content that we have on most of the services -- it was not -- the Avengers and others, it was specialty and niche content. So -- but our brands have been really growing and driving a lot of recognition in the market, especially with the major streamers, stream platforms like Samsung and others. So as we've established ourselves and we've also upped the game on concentrate, we made tremendous investments in it over the last 1.5 years. That is actually -- our CPMs have actually improved significantly. We also did a major reset in January of this year. January is normally one of the worst advertising times of the year. A lot of companies basically set their CPM floors to 0 and take what they can get.

We bucked the trend and we actually raised our rates. We raised them up to 15, 16. We've run a new ad team. We have a new Head of ad sales in the company. We really wanted to establish ourselves as not a low-tier player, but as somebody who has good quality brands with great audiences and good data. And so we did that during the quarter, and we actually increased revenue during the quarter, just simply because we were aggressive on our CPMs and we established results as a specialty and premium players as opposed to a value player. So CPM, I think, going forward, as we ramp direct sales in the back half of this year, when you blend the $30 to $35 CPMs will get from direct campaigns against our 16 to 18 through most of the year '20 during the holidays, you're going to see a much higher CPM rate in the back half of the year. So I feel pretty bullish on our CPMs.

And the other thing about CPMs is advertisers pay for innovation and features and capabilities that you can't get on other platforms. So as Cineverse really starts to become a viable property in the market, I think one of the big benefits to that is, imagine if a platform has capabilities to features that you just couldn't find on any other platform, especially around ad optimization and yield and other things. Those are the kinds of things that we're developing, and I think advertisers are really going to be impressed as we roll those features out in the coming quarters.

That's really helpful, but if I can ask for a follow-up. Your digital and streaming business has been posting exceptional growth. But this quarter, you only posted 18.7% growth, one of the slowest in a very long time for you. If that's not CPMs, it sounds like what was the rationale for this quarter that had a slow year-over-year growth rate, which accounts for seasonality?

Sure. Well, so to clarify on the advertising side, keep in mind, we have 2 types of deals where we're generating advertising. There are deals where we control the inventory. And then there are deals where we rely on third parties to sell that inventory. So if you think about us, we are compared to the Tubes, Plutos, and others of the world, we're not anywhere near their scale, so we have more opportunity to grow. There's more room for growth on the upside. Bigger players were at scale who deal a lot more with presold advertising. Those players saw a hit in Q1.

Most of the platforms that we were low to sell the inventory, they just didn't see the volume on the platforms that we saw. So net-net, we saw those -- I think we -- if -- I don't have the exact number in front of me, but we were high double digits -- sorry, high teens or more on the ad side. But when you take into account third parties who aren't at scale, those parties were down in that quarter. I think everything has rebounded since then. But I think as we scale up our owned inventory and inventory that we sell for other people, it will be less impacted by macro ad market conditions, and it will be more in our control as that pie shifts back towards more us selling than them selling.

That makes it a lot more clear. And then you discussed clearly Terrifier 2 and 3. Can you talk about the timing of the actual releases in general in fiscal '24 and how that might impact your results? Maybe timing, meaning.

Yes. We haven't formalized the release schedule, but we've got probably 3 more theatrical releases between now and October, and we're talking about the October to December time frame for a reissue of Terrifier 2, which I mentioned, where we're going to add material for Terrifier 3 on it. And we think it will do quite well because as you recall, last October, we really didn't know what we had when we first released Terrifier. Now we know what we've got. We've got a core franchise that has great awareness right now and an iconic character and art deco who a lot of people are comparing to Jason Boris or Freddie Kroger. So we're really focused on maximizing that reissue, setting up the release of Terrifier 3 in the following year. And we'll probably have 2 more theatricals or day-and-day theatrical and VOD releases in the first calendar quarter of next year, our fourth calendar quarter.

And those will be limited releases I take it initially other than Terrifier instead of national releases. And then you'll see where that goes or not.

Pardon? I don't understand.

New theatrical. I mean China is what I'm talking about. Yes, the escalations, but you have some that are nationally or widely really, sorry, I should use the term versus a limited release, so we take it for now, Terrifier will be...

Yes. We consider every release on a case-by-case basis. As I said, I think one of our huge competitive advantages now is that we figured out with Terrifier 2, how to like turn the machine on so that we can take a film out on our 1,000 screens. It's been virtually nothing in marketing and getting the kind of results we got on Terrifier 2. So we have one film in the works for the fall that I think is going out in the 80 screens and other core films. We've got an animated film called Warrior King that we're trying to fit in the schedule and that will probably go out between 500 and 1,000 screens. And on Terrifier 2, the reissue, it will probably be -- we haven't set that maybe 1,500 screens. And we think on Terrifier 2, we can go out wide on 3,000 screens.

I've been quoted in the industry, and I've been in the industry for too long in saying that the theatrical leasing business would be a great business if you didn't have to spend any money on marketing. Well, I think we figured out how to do that with Terrifier 2, and that is going to be a big competitive advantage for us, particularly since the primary reason we're doing all this, as I said, is to drive subscribers and viewers to our channels, which creates subscriptions and viewership and annuity going forward. So I think we've got a great model which is one of the reasons why we did the equity raise because we need to put more content into that model now.

Great. Last question, the first time you've given revenue guidance, it sounds from Erick's remarks that the third part of the business has come back a little bit. Can you talk about kind of how you think about seasonality? Clearly, the third quarter is your strong this quarter, but maybe just high-level seasonality as you think about the revenue guidance and how we should think about it.

Yes. I think -- just specifically in terms of next quarter is a quarter that's very similar this quarter in terms of percentage of the year. The third fiscal quarter by far is the strongest quarter. And the other quarters, there's not that much disparity between them, except for me to say that both in our streaming business and in our content business, they're not as strong as the fourth quarter. So maybe we can give you some more information on the historical performance of our content distribution in our streaming business quarter-to-quarter to give you a better sense of progress. And we update that because obviously, (inaudible) our streaming business has become a bigger percentage of our revenues. You should probably look at next quarter in pretty much the same way you looked at this quarter.

There are no additional questions waiting at this time. So I'll pass the conference back to the management team for any closing remarks.

Yes, this is Chris. Well, thank you all for joining us today. And please feel free to reach out to Julie Milstead or our Investor Relations firm, the Equity Group, with any additional questions you might have. We look forward to speaking to you all again on our next quarterly call in August. Thank you very much.

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.