管理層發言
Good day, everyone. Welcome to Cineverse's Second Quarter Fiscal 2025 Financial Results Conference Call. My name is Mikaya 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. 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 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 30, 2024, 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'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. And Cineverse 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 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. I'm Gary Loffredo, Chief Legal Officer and Senior Adviser at Cineverse. With me today are Chris McGurk, Chairman and CEO; and Erick Opeka, President and Chief Strategy Officer; Tony Huidor, 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 Erick 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 improvement, even without recording a single dollar of financial results from our hugely successful box office hit Terrifier 3, where we control all domestic rights in the U.S. and Canada, which we released after the close of this quarter. We grew our revenues by 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 continue 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 continued to grow significantly during the quarter, which bodes very well for our continued future success.
Mark and Erick 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 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 of Cineverse's targeted fan-based digital and social media marketing plan that leveraged our horror assets of Screambox and Bloody Disgusting. We set out to fully employ all the assets that we have 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: Folie a Deux 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 Beyoncé. 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 million to $30 million. 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 have 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 has 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 Matchpoint 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, still going, for less than a $1 million marketing spend. 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 power 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 reported 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 exhibitors.
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 for our Screambox 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.
Thank you, Chris. As Chris mentioned, we had an exceptionally strong quarter, allowing us to exceed analyst consensus guidance for revenue, net income, net income per share, and adjusted EBITDA. For our second fiscal quarter ended September 30, 2024, Cineverse reported total revenues of $12.7 million compared to $10.6 million in the prior year period, marking a 20% increase when excluding the $2.4 million of nonrecurring noncash revenues from our legacy Digital Cinema business from the prior year quarter. In addition, compared to our last quarter ended June 30, 2024, our revenues increased by $3.6 million or 40%. The 20% increase in recurring revenues in the current quarter was driven by a $0.7 million increase in streaming and digital revenue, primarily due to $1.6 million of revenue from the licensing of our Dog Whisperer with Cesar Millan content, a $0.6 million or 93% increase in our podcast and other revenue, and a $0.8 million increase in our base distribution revenue.
With the amazing performance of Terrifier 3, the continued double-digit growth of our podcast business, improved content licensing opportunities, and expected growth in our direct advertising revenues, we are expecting a material increase in revenue for our fiscal quarter ended December 31, 2024. Erick will provide additional details on the operational drivers behind our financial results. As Chris mentioned, our direct operating margin for the quarter was 51%, which exceeded our previously issued guidance of 45% to 50% for direct operating margins. Our improved direct operating margin is a direct result of our cost optimization initiatives referred to earlier. We expect our direct operating margin in future quarters to be in line with or exceed our previously stated targeted margins of 45% to 50%. SG&A expenses decreased by $0.5 million or 7% for the second quarter compared to the prior year quarter.
Again, this improvement is the result of our continued focus on cost optimization initiatives that we've been discussing over the last 1.5 years. Over the last 6 quarters, we've decreased our SG&A expenses from an average of $9.2 million per quarter for fiscal year 2023 to $6.4 million this quarter for an annualized savings of $11.4 million. For the remainder of fiscal year 2025, we expect our SG&A expenses to remain relatively flat and continue to decline as a percentage of revenue as we continue to focus on our cost savings initiatives and leveraging our offshoring opportunities in Cineverse Services India. Adjusted EBITDA for the quarter was $0.5 million compared to a negative $0.1 million for the same quarter last year when excluding the $2.4 million of prior year nonrecurring noncash revenues from our legacy Digital Cinema business discussed previously. We had $2.4 million in cash and cash equivalents on our balance sheet as of September 30, 2024 and $4.7 million outstanding on our $7.5 million working capital facility, with an additional $2.7 million of available capacity.
During the quarter, our cash flows used in operations was a negative $0.7 million, of which $0.7 million was related to investments in our content portfolio via advanced and/or minimum guaranteed payments. When excluding our content portfolio spend during the quarter, our cash flows provided by operations was breakeven. We expect to be operating cash flow positive for the full fiscal year 2025. I also want to remind everyone that our Board of Directors approved a 1-year extension of our stock repurchase program. The program to purchase 500,000 shares now expires on March 1, 2025. During the quarter, we repurchased approximately 31,000 shares under this program, bringing our fiscal year-to-date share repurchases to 215,000 shares. As we discussed last quarter, we believe our stock was significantly undervalued at less than $1 per share with a market cap that was materially lower than our book value.
As of the close of business yesterday, our stock price closed at $2.68 per share, reflecting an approximate $42 million market cap which we believe is somewhat more representative of our true value. We believe that there is still material upside to our stock price based on the phenomenal results of Terrifier 3, the significant growth that we are realizing in our podcast and advertising lines of business, and our technology initiatives which are just beginning to take hold. With that, I'll turn the floor over to Erick to discuss our strategic growth initiatives.
Thank you, Mark. As we discussed last quarter, we focused on a few key strategies to drive our growth. This included expanding our streaming footprint, enhancing ad sales capabilities, opening up new distribution channels, and investing in technology that supports everything we do. This quarter, we took solid steps in each area, building a foundation that aligns with our long-term vision. Now while today's numbers don't yet capture the impact of Terrifier 3, which has performed far beyond expectations in theaters, we expect to see significant financial contributions from it through all lines of our business in the next quarter, as Chris and Mark will detail. We're excited about what Terrifier 3 represents and how it reinforces our direction for Cineverse's sustainable growth. On the streaming side, total subscribers for the quarter were approximately 1.36 million, marking a 13% increase over the prior year quarter.
During the quarter, anticipation for Terrifier 3 also fueled renewed interest in Terrifier 2 on our platforms, with Screambox subscribers growing approximately 7% in September alone. The film's viewership surged by 161% from August, reaching 1.28 million minutes viewed across all internal platforms in September. On third-party platforms like Amazon, the film has dramatically exceeded all expectations. New revenue-sharing agreements we put in place on the franchise lead to significant low 7-figure revenue streams on the title in the subsequent quarters. We expect these films to be evergreen cash cows for the company for the foreseeable future. Our FAST channels also saw remarkable growth this quarter with more than 2.32 billion minutes streamed during the quarter, up 40% over the prior year quarter. September marked the second best month ever for our Dove Channel with over 95 million minutes consumed just behind July and up over August, typically a slow month of the year for FAST.
Our Barney channel that was recently launched this year continues to perform exceptionally, reaching an all-time high in September of over 129 million minutes viewed, marking seven consecutive months of growth. Even our reality-focused channel, So... Real, also hit record monthly highs. And with programming changes, we see it on an outstanding trajectory to join our top-performing channels. Our podcast network has also become a critical piece of our revenue engagement strategy with ongoing rapid growth. Since last quarter, we've expanded to 51 podcasts, adding high-profile shows that continue to broaden our audience reach. We're thrilled to have signed the Dead Meat Podcast hosted by Chelsea Rebecca and James A. Janisse from the Dead Meat YouTube Channel with more than 6.6 million subscribers. We're also integrating podcasts into our broader Cineverse brands such as RetroCrush, hosted by TikTok personality, Malcolm Crawford, and Midnight Pulp in pre-production with Diana Prince, known for The Last Drive-In on Shudder.
Our true crime show, Creepy Places, hosted by Jon Grilz of Creepy, which attracts 1.3 million monthly downloads, is another standout. Our original podcast, Mayfair Watchers Society, has also returned for its second season after being named one of Apple's top podcasts and ranking in the top 5% of most shared podcasts on Spotify. October was a record month, with our podcast network reaching 15 million downloads and listens, placing us among the top 10 largest podcast networks globally. With this momentum, we're well positioned to achieve eight-figure annual revenues in the midterm. Ad sales also performed well with booked revenue up over 60% over Q1, underscoring our successful focus on direct ad sales and premium pricing. We’re pleased to report that we're attracting major blue-chip clients, including Paramount, Lionsgate, Disney, 20th Century Fox, FX Networks, Sony Pictures, and Activision, which were all customers during the quarter.
This quarter also marked the first time we received requests for proposals from non-entertainment brands, including Macy's, Wendy's, McDonald's, Grubhub, Frito-Lay, and Pepsi. This expansion into consumer brands broadens our revenue base and strengthens our position as a go-to platform for high-value brand partnerships. Driving this success is the growth of our C360 platform, which processed over 20 billion ad requests in October. This technology is allowing us to help our advertisers reach highly targeted audiences efficiently, delivering high-value results for our clients. Turning to Matchpoint, we continue to see strong progress. We've recently made several key hires to support growing demand and now have a low mid- to 7-figure pipeline of opportunities, including OEMs, new and existing channel platforms, content distributors, and more. We've closed some initial deals that showcase Matchpoint's potential, and these deals represent substantial infrastructure investments for our customers.
Typically, the lead time on deals to Matchpoint is about a 6- to 12-month lead time, so we anticipate seeing the real financial impact in the back half of this year and into the new fiscal year beginning in April. Additionally, we're developing shorter-cycle revenue opportunities through our Dispatch business, helping clients scale to meet the needs of FAST, AVOD, and AI licensing markets. We're actively engaged in meaningful conversations that could lead to significant new business on this front. On the technology side, cineSearch, our AI-powered content discovery tool developed with Google, is on track for a full consumer release next year. We're already in discussions with several major OEMs to license cineSearch, which opens up a promising new revenue stream if we are successful. We're also seeing opportunities to license portions of our content library for AI training. We're in discussions with multiple parties to add significant volume and value to our 66,000-title library, positioning Cineverse as a leader in AI-driven content licensing.
Looking ahead, we're doubling down on scaling SVOD, AVOD, and FAST channels with tech partnerships, expanding our content licensing, building on direct ad sales, and driving revenue through Matchpoint and podcasts. We're also developing a strong IP and franchise-driven theatrical slate that complements Terrifier, which has already redefined what's possible in indie horror. Above all, Cineverse stands out for our highly supportive model for filmmakers with fair, transparent deals and a data-driven approach to content powered by proprietary technology. This is a groundbreaking model not currently available from any major or mini-major studio. And this approach leverages our ecosystem to provide a cost-effective, risk-advantaged pathway to success. The strategies we outlined last quarter are producing real results as shown with the financial results this quarter. Our growth in streaming engagement, ad sales, podcast listenership, and tech innovation positions us for sustained profitability and growth. We look forward to building on this momentum and showing what a modern tech-enabled entertainment company can achieve. With that, operator, let's open it up for Q&A.
分析師問答
The first question comes from Dan Kurnos with Benchmark Company.
Chris, congratulations on your remarkable success in the movie industry. I'm sure you've received a lot of praise from your peers. Regarding T3, you touched on this in your prepared remarks, and I’m curious about your thoughts on it. You're set to earn significant revenue from this project. With your existing debt, how do you plan to fund further investments in content using this strategy? I know you'll elaborate more in the next quarter, but you started with Silent. Can you help us understand the implications of this success and how it might lead to new revenue streams from other films?
Yes. And thank you, Dan, for those comments. It was very nice of you. Well, look, we're still a streaming technology and content company. That's the core of what we do. And I think you saw the results this quarter, where our revenues were up 40% over the last sequential quarter, which shows that our plan is working across our base business even without Terrifier in terms of digital licensing, our technology business, the podcast business, our streaming business, and so on. So I just want to underscore that point. Our goal right now is to really take advantage of what just happened, where we sort of developed a new blueprint for releasing movies that kind of astounded the industry and turn it into another successful profit line for the company. And it's consistent with who we are because the reason why the release works so well is what I was saying in my remarks, and Erick did also, that we leveraged every element of this ecosystem that we built over the last 10 years in order to build a better mousetrap and figure out how to release a movie in an incredibly successful way with almost no out-of-pocket marketing spend.
It's just kind of astounding that we did that. So the goal now is to leverage our entire ecosystem, create a new line of business here, both with products that we acquire ourselves and then to allow other independent studios and actually majors to use our ecosystem to market and leverage their own products because they don't have all the assets that we have in place across this really fan-centric portfolio of channels, our podcast network, our ad technology, all these and our social footprint with what they're discussing. So we're sorting through properties right now. Obviously, people are knocking on our door, particularly in the horror space. You saw that we just announced Silent Night, Deadly Night, which is a classic controversial horror movie that came out in '84 and was banned from theaters. We're continuing our assault on Christmas following Terrifier 3 with Art the Clown and Santa Claus.
But we've got a number of other properties that we're looking at, some very well-known IP that people want us to consider taking out using our ecosystem. And we've had some entries in the non-horror space as well in the faith and family space and in the animation space. So it's our goal really to turn this into an ongoing business. It's not going to be a hugely capital-intensive business for us, as we just saw with Terrifier 3. And it really is an extension and supports and augments and is based on all of the assets we put in place as a technology and streaming company. So I think you're going to see more announcements about content releases coming over the next 3 or 4 months, and some of those might be releases that happen sooner rather than later.
Got it. That's extremely helpful. Just one final question about T3 before I turn to Erick. How are we approaching the re-release during Christmas? There is an opportunity to optimize its licensing and windowing, including putting it on Screambox. Have you made any decisions regarding that, or is it still to be determined?
That's a great question because, obviously, we have to balance the upside we would get from our subscriber base on Screambox versus getting a big check from pay streaming services that now are recognizing the value of the franchise. So we're actively engaged in analyzing our options in that space and we hope to make a decision on what we're going to do over the next few weeks.
Certainly. First, I'll address the second part of your question regarding the short cycle aspect. In the current marketplace, one of the most significant trends is the emergence of FAST platforms, which includes all major TV manufacturers like Samsung and VIZIO. These companies are expanding their ad-supported services to enhance their FAST offerings. Initially, many launched solely as FAST platforms with limited on-demand content. However, to provide a comprehensive service, it’s essential for them to blend FAST channels with on-demand content and add-on subscriptions, leading to a notable increase in demand for ad-supported content. Alongside our ownership of a large content library, we are also rapidly distributing AVOD content. The main opportunity for Matchpoint lies in the high costs and long timelines required for rapidly delivering and scaling content across various platforms. Our Dispatch module allows companies to quickly integrate content into their systems or assists those who are trying to scale with limited resources to profit more effectively.
Additionally, this same system is well-suited for the growing demand for AI content licensing, with potential revenues estimated between $1 billion and $5 billion over the next few years. We're actively pursuing partnerships in this area, although the technical challenges are significant. Platforms seeking training data operate on tight timelines, and without a scalable solution like Matchpoint, they struggle to address these needs. Therefore, we see a strong short to midterm opportunity in both areas, and we possess the technology to help the market capitalize on this demand. Regarding cineSearch, it’s important to note that similar to mobile phones, major television manufacturers must integrate AI features for content discovery. While larger companies may develop their own solutions, more than half of the market lacks any internal capability. In the U.S. alone, over 40 million TVs are sold each year, and this number is doubled internationally, representing a substantial market opportunity for AI-driven enhancement tools.
Our work is tailored, as each manufacturer has unique requirements and partnerships, making it more bespoke rather than a one-size-fits-all solution. We are currently engaging in multiple discussions on this front and anticipate sharing more developments next year as we progress.
Let me add my congrats on your success in the box office. Following up on the future playbook in response to the success of leveraging your ecosystem, how will you go about evaluating what I suspect is numerous independent movies and titles coming to you to determine what has the best chance of success under your platform?
Thanks, Brian, for your comment and a couple of things. We have a very exhaustive greenlighting process in place anyways that we would continue to use to evaluate any new property. But first and foremost, we would look for properties that we think we can best leverage with our system. Obviously, we have a ton of horror assets in place with Screambox and Bloody Disgusting and our history of distributing horror movies and an executive team that really knows what works and what doesn't work in that space and that's what we leveraged with Terrifier. And so we're looking at properties in the horror space specifically that we can follow the same playbook with as we did with Terrifier, properties that have online buzz like Terrifier did, known IP like Silent Night, Deadly Night that still has a fan base that will give us a leg up in launching it. And I think the other thing that’s usually important here is kind of a threshold question for any movie in my mind is whether it’s a concept or an idea that the fan base is actually going to go to a theater to see.
What is it about the concept that is going to make that fan rush out on that first Friday to go see it, so that he or she can tell all their friends to be the first one to see it? And that’s sort of a threshold question we ask about any piece of content. So again, as I said, we’re looking in other verticals where we think we have strength. Children's and family content, we’ve really built up that business not just with Dove but with all of the kind of evergreen IP that are on our channels now from Garfield to Barney to Sid & Marty Krofft, even Bob Ross and Douglas Borough, which we think is very family-friendly and very children-friendly, to anime and animation which we've had a track record in releasing as well and more pure family and faith-oriented content. So again, just to step back again, we’re looking for properties that clearly, we know we have assets, we have expertise and capability and which will give us a leg up in marketing the property and properties that we believe there’s going to be a call in the fan base to go out and see it in a theater as opposed to waiting to see it at home.
And we’re going to be extremely cautious in terms of our financial commitment to any movie that we put on board. And we proved the concept here that we could release a movie and open it to number 1 with $500,000 in cash out-of-pocket spending and an all-in investment in the piece of content at less than $5 million. And I think that’s a good model going forward from a financial standpoint as well, so we feel really good about our positioning. We feel great about the industry response to what we did. People are absolutely astounded by it. We feel great about the content submissions that we’ve seen so far. And you can expect some more announcements about movies, I think, in the next two to three months.
Great. And then for titles like Silent Night, Deadly Night or any other title, how will you determine if it will be a theatrical or a limited release? Is that title by title? Or are you realizing, given your ecosystem, you can wide release it?
We're intending to use this model to do wide-release movies. But until you actually see the movie, whether it’s in production or you're buying a finished movie, it’s tough to make that call on how wide you’re going to go. Fortunately, as I said, with Terrifier 3, we knew what we had. We saw the movie once it debuted at Fantastic Fest in Austin in August, and we knew we had a complete winner based on the critical reaction and also the fan reaction. So there’s absolutely no question about going wide with the movie. It was just a matter of getting exhibitors to realize how much upside there was, and they quickly figured that out when their theaters started selling out five weeks in advance of the release of the movie. So hopefully, we're going to pick properties that maybe don't have that level of interest and excitement but even at a fraction of that, that have sort of that built-in audience and excitement. So that we can make a really smart, informed decision about whether we go wide on how many theaters or whether we take a limited release.
Great. On cineSearch, maybe you could share a little bit about the revenue model. Is this an annual licensing model? Is it a recurring kind of SaaS model? Is it price per device if it’s on a TV? Just if you could help us understand how that’s going to be monetized, the revenue model.
Erick or Tony, do you want to take that?
Yes. I think at a very high level and, obviously, as I mentioned earlier, these are really going to be more bespoke than a pure SaaS model just due to the size and scale of these types of deals. So, but I would anticipate the deal being some combination of license fee plus variable costs, similar to you would see in other similar sort of API-driven platform models. But I do think also, there are other opportunities and ways to do this. For example, advertising-based models and other things that could modify that approach depending on the partner.
Great. My last question is revenue from podcasting grew 30% sequentially. I'm wondering, with the various non-entertainment advertisers you discussed that are coming to you with RFPs with the much stronger viewership, I'm wondering, do you expect to see even stronger yields where revenue will grow faster than viewership over the next couple of quarters? I’m just wondering how you’re thinking about that in fill rates.
Yes, our first goal was to build an audience with a strong lineup of products when we were in the chicken-and-egg situation of developing a new product. We focused on that before monetization, which has created a natural gap that allows us to grow revenue significantly. I agree that revenue growth will surpass audience growth for now. However, the success of Terrifier in the film business is attracting more interest in the podcast space, leading to larger properties wanting to join our network. While revenue growth will likely exceed audience growth in the short term, this could change quickly if we bring on some very large shows we've been speaking with. In the short run, that’s the situation, but over the long term, audience and revenue growth may align closely, or we could see substantial increases in both if we sign bigger shows. Our main focus is to maximize fill on the platform, and we are quickly hiring more salespeople and forming co-selling partnerships to help fill our inventory. This podcast business represents our biggest opportunity for scaling revenue growth outside of the film sector, and we plan to invest heavily in its growth over the next few quarters.
The next question is from the line of Jay Petschek with Corsair Capital.
It was a great quarter, and we’re celebrating our achievements. The promotion of Terrifier has showcased what can be accomplished in the film industry and has enhanced Cineverse’s capabilities overall. While I’ll ask a question unrelated to Terrifier, which was impressive, our revenues have increased, our margins have improved, and our operating costs have decreased. This combination looks promising as we approach breakeven. Surprisingly, we still have a market cap of only $45 million and an enterprise value around $50 million. One reason for this may be concerns about running out of cash and facing a dilutive financing, similar to what happened a year ago. I appreciate your clarification that cash isn’t a concern. The success of Terrifier is significant, and we can expect another opportunity with Terrifier 4 in a few years. Now, regarding my question, which follows the insightful inquiries made by the other two gentlemen about the opportunity space: I’m quite fascinated by the data AI business.
The level of investment in AI right now is remarkable. What distinguishes you from others? You’re not the largest company out there; while you have an extensive library, compared to Disney, Warner Bros., and Universal, why wouldn't the data AI companies source their data from them? I believe I have an idea of the answer, but I would appreciate you reiterating it, as it may benefit others as well.
That's a good question, Jay. And I'll let Erick answer that more specifically in a second, but it has to do with our technological capabilities and our capability over the years that we've demonstrated in acquiring, assimilating and distributing vast amounts of content across the spectrum and we’ve probably done more of that than anybody in the business. But I just want to thank you for your support and your question; we really appreciate it. I just want to say that at the onset. And then I'll turn it over to Erick and let him specifically answer the question on AI data capability.
If you examine the AI licensing landscape, you'll see several challenges. While there have been deals announced related to AI in studios, these mainly involve developing internal marketing tools. Major licensing deals are still scarce for various reasons. One significant issue involves guilds, unions, and talent rights in the upper echelons of the industry, along with intellectual property rights concerning these large franchises, making it challenging for studios to pursue licensing. In the independent and global markets, these limitations are not as prevalent. AI training models require a high level of content diversity, including independent works, documentaries, foreign films, and TV shows, rather than just studio content, which could bias the models. Regarding our competitive advantage, we operate on a massive scale and have extensive experience delivering large amounts of content to the streaming ecosystem over the past 15 years.
Our automation platform enables us to meet the specific and demanding needs of AI models. For any studio or company with a large library attempting this task today, the costs of using traditional third-party services or internal solutions are often prohibitive. Current licensing prices could consume 60% to 80% of revenue, making this model unsustainable without significant scale. Dispatch can ingest content and deliver it for a fraction of the cost of more expensive methods. Our longstanding presence in the industry, from our role as an Apple aggregator helping to build iTunes to our diverse library that aligns with industry needs, alongside our scalable platform tailored for the AI landscape, positions us as a highly qualified player in supporting growth in this sector. I hope this provides clarity on the matter.
It does and I think it’s obviously a very big opportunity given the size of your firm today. To license out a few million dollars a year is huge to you at this size. Just following up on that, as you talked about your ability to get it in the right whatever metadata form or whatever you call it for AI ingestion or analysis. But to license out your library today, do you have to spend any significant sums to get your library in shape? Or you’ve already done that?
The main concept behind Matchpoint is that we establish a partnership with the licensor, who then provides our highest-quality source content into Matchpoint. After that, it goes through quality control, mastering, and preparation. Once that file is integrated into Matchpoint, it never needs to be delivered again, and Matchpoint can deliver it in multiple formats. Regardless of the specific requirements from our AI partners, Matchpoint is designed to meet those specifications. As Erick mentioned, companies licensing video for data typically do not license just a few titles; they often order an average of 10,000 hours or more. This is why, as Erick pointed out, large studios cannot scale their operations effectively because they rely on third-party vendors, who typically charge between $500 and $1,500 for each file delivery. If the revenue earned from licensing a title for training is lower than that cost, it becomes unfeasible. In contrast, the cost of using Matchpoint for delivery is significantly lower. Therefore, we can deliver 10,000 movies with a single click, without any human intervention, in any format that our partners require. This capability is our unique advantage with Matchpoint, allowing us to distribute our own library and potentially serve other companies wishing to license to AI firms.
Great. Thank you. Well, I look forward to continued improvement in the core line, the new line of business promoting movies sort of individually on top of the Terrifier franchise and all the metaverse and metasearch, etcetera, etcetera. So thank you and congrats on Terrifier again.
Thank you, Jay. That is the plan and thank you.