Financial Performance - The company reported a net loss of $11.6 million for the six months ended September 30, 2022, with an accumulated deficit of $484.2 million[166]. - As of September 30, 2022, the company had negative working capital of $10.1 million and net cash used in operating activities of $6.3 million[166]. - Net loss attributable to common shareholders was $5.75 million for the three months ended September 30, 2022, compared to a loss of $0.27 million in the prior year, representing a change of $5.48 million (2,007%) [232]. - Net income attributable to common shareholders was a loss of $11.8 million for the six months ended September 30, 2022, compared to a profit of $4.8 million in the prior year, representing a 345% change[252]. - Adjusted EBITDA decreased by $2.0 million for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to increased operating expenses despite a $4.6 million increase in streaming digital revenue[234]. - Adjusted EBITDA decreased by $9.7 million compared to the same period in 2021, primarily due to increased operating expenses despite a $7.9 million rise in streaming digital revenue[254]. - Cash used in operating activities was $(6.3) million for the six months ended September 30, 2022, compared to $9.4 million provided in the prior year[261]. - As of September 30, 2022, cash and cash equivalents totaled $9.7 million, down from $12.6 million a year earlier[262]. Revenue and Business Segments - The company recognized revenue of $10.3 million from the sale of cinematic equipment to AMC, with total cash consideration of $10.8 million[174]. - Cinema Equipment Business revenue decreased to $2.6 million for the three months ended September 30, 2022, down 20% from $3.3 million in the same period of 2021[220]. - Content & Entertainment Business revenue increased by 66% to $11.4 million for the three months ended September 30, 2022, compared to $6.9 million in the same period of 2021[220]. - Total system revenue recognized was $0.7 million for the quarter ended September 30, 2022, compared to $2.2 million for the same quarter in 2021[220]. - Cinema Equipment Business revenue decreased by $5.5 million (57%) to $4.0 million for the six months ended September 30, 2022, compared to $9.5 million in the prior year[241]. - Content & Entertainment Business revenue increased by $7.9 million (51%) to $23.6 million for the six months ended September 30, 2022, compared to $15.6 million in the prior year[241]. - The company experienced triple-digit growth in "FAST" and TVVOD revenue, driven by new releases and top-performing titles[220]. - The company has added seven new streaming channels and five managed channel additions, contributing to the revenue increase in the Content & Entertainment Business[220]. Investments and Capital - The company raised approximately $8.0 million from a registered direct offering of 10,666,666 shares at $0.75 per share on May 20, 2020[167]. - An additional $12.4 million was raised from the sale of 5,300,000 shares under the Equity Line Purchase Agreement during the year ended March 31, 2022[171]. - As of September 30, 2022, approximately $38.0 million was available under the 2020 Shelf Registration Statement for additional capital[173]. - The company has made strategic investments in Metaverse, totaling approximately $53.3 million for a combined 26.5% interest[175][176]. Operating Expenses - Direct operating expenses for the Content & Entertainment Business increased by $4.8 million (151%) to $7.97 million for the three months ended September 30, 2022, compared to $3.17 million in the prior year[221]. - Selling, general and administrative expenses increased by $2.4 million (34%) to $9.6 million for the three months ended September 30, 2022, compared to $7.2 million in the prior year[223]. - Selling, general and administrative expenses rose by $6.2 million, a 47% increase, primarily due to $3.7 million in personnel costs from acquisitions and $1.3 million in stock-based compensation[243]. - Interest expense in the Corporate segment increased by $349 thousand (1,126%) to $380 thousand for the three months ended September 30, 2022, compared to $31 thousand in the prior year[227]. - Interest expense in the Corporate segment increased by $471,000, a 1,121% change, due to deferred and earnout consideration related to acquisitions[248]. - Depreciation and amortization expense decreased by $192 thousand (44%) to $248 thousand for the three months ended September 30, 2022, compared to $440 thousand in the prior year[225]. - Depreciation and amortization expense decreased by $585,000, a 54% change, primarily due to the conclusion of useful lives of digital cinema projection systems[246]. Deferred Revenue and Cash Flow - The ending deferred revenue balance as of September 30, 2022, was $0.3 million, with additions primarily due to cash payments received in advance of satisfying performance obligations[214]. - For the six months ended September 30, 2022, net cash provided by operating activities was primarily driven by income from operations, with a decrease in accounts payable by $5.5 million to vendors[263]. - Cash flows used in investing activities for the six months ended September 30, 2022, included purchases of property and equipment totaling $0.3 million[266]. - Cash flows provided by financing activities for the six months ended September 30, 2022, included $0.4 million in payment of notes payable and $3.6 million in proceeds from the revolving credit agreement[267]. Market Conditions and Risks - The COVID-19 pandemic has created significant volatility and uncertainty, adversely affecting the company's financial condition and results of operations[165]. - The impact of inflation on operations has not been significant to date, but future high inflation rates could adversely affect operating results[272]. - The company may continue to generate net losses due to costs associated with depreciation, marketing, and content acquisition, and may need to raise additional capital for working capital[268]. - Revenues from the Cinema Equipment Business are seasonal, with significant earnings typically during the summer and winter holiday seasons[269]. Other Information - The company’s cinema equipment business segment operates independently from its Content & Entertainment segment, with no outstanding non-recourse debt as of September 30, 2022[163]. - The company retained ownership of 355 Systems in Phase I Deployment and 320 Systems in Phase II Deployment, generating residual cash flows[195]. - The Cinema Equipment Business earns an administrative fee of approximately 5% of VPFs collected, with an additional incentive service fee of 2.5% of VPFs earned by Phase 1 DC[202]. - The company recorded a charge of $1.8 million in its investment in Metaverse for the six months ended September 30, 2022[190]. - Changes in fair value of the investment in Metaverse resulted in a loss of $0.6 million during the three months ended September 30, 2022[229]. - The company recorded a loss of $1.8 million in the fair value of its investment in Metaverse due to halted trading on the Hong Kong Stock Exchange[249]. - No impairment charge was recorded for goodwill, intangible, and long-lived assets during the six months ended September 30, 2022[187]. - The company holds a 100% equity interest in CDF2 Holdings, an unconsolidated variable interest entity, but is not the primary beneficiary[270].
Cineverse (CNVS) - 2023 Q2 - Quarterly Report