Cineverse Corp. Q2 FY26 Results

Our year-over-year comparison reflects differences in the timing of revenue recognition related to content licensing transactions. In the prior-year period, we recognized $1.6 million from a distribution agreement for our Dog Whisperer streaming channel. This year, we closed a significant licensing agreement for The Toxic Avenger Unrated during the quarter, totaling approximately $1.1 million, for which revenue will be recognized in future periods. Excluding the effect of these timing differences, our results reflect solid performance across our core business lines. Operating margin expanded to 58%, an increase of 7 percentage points over the prior-year quarter. Adjusted EBITDA and net income were affected by planned investments in our wide-release film business and our Technology group, and we expect these investments to contribute to future growth. We also continue to benefit from cost efficiencies through our Cineverse Services India operations. The Toxic Avenger Unrated, released on August 29th, did not perform as well as we had hoped at the box office. However, our campaign has helped generate significant returns for the film in the ancillary markets, particularly in VOD, physical goods and licensing. With an all-in acquisition and marketing release investment of less than $5 million, we expect the film will be profitable, with an IRR conservatively projected at over 40%. We own the domestic distribution rights for the film in perpetuity, and believe it is a great addition to our library. This performance also underscores the low risk/high potential return profile of our theatrical film portfolio strategy. Prior to quarter end, we also announced that we will be releasing the 20th anniversary edition of Pan’s Labyrinth, the Academy Award winning masterpiece from acclaimed director Guillermo del Toro. Next May, to kick off the campaign for a Fall 2026 release, we plan to take the film back to the Cannes Film Festival, where it received the longest standing ovation in the history of the Festival upon its premiere in 2006. With a multi-year distribution window for this extraordinary film, we also believe it will be another strong addition to our library of rights. And our content library of over 66,000 titles recently received an updated independent valuation of $45 million, significantly above the $3.2 million book value recorded at quarter end. We also continue to rapidly build out our pipeline of Matchpoint™ technology partnerships with major studio players and recently closed four of those deals. We continue to move aggressively forward with MicroCo, our microdrama joint venture with Banyan Ventures. Expect additional significant announcements of our progress in both those businesses soon.”

This quarter, we continued to execute on our strategy to grow Cineverse as both a technology and entertainment leader while maintaining a disciplined focus on profitability. Our Matchpoint™ platform achieved significant momentum, adding over 20 new customers in the last 100 days and entering a pilot program with a major Hollywood studio. We are also in active discussions with many others across the industry, who are seeking platforms that can accelerate integration, improve automation, and meaningfully reduce operating costs. This growing adoption validates our technology leadership and positions us to scale efficiently. We are also evaluating strategic partnerships that could further accelerate expansion, while maintaining our focus on financial discipline and operating leverage. Our microdrama platform business, preliminarily named MicroCo, continues to advance ahead of plan. We have assembled an exceptional leadership team with experience, having managed more than 50 million streaming subscribers, producing over 30 long-running television series, and overseeing billions of dollars in content revenue. Development is underway on our first slate of MicroCo projects and shows for launch next year, supported by a significant investment commitment from a leading venture capital firm. We believe MicroCo can become a meaningful contributor to future growth, and we are managing its development with the same emphasis on cost control and return on investment that guides our core operations. At the same time, we are maintaining best-in-class gross margins in our streaming and distribution business by rationalizing SG&A through targeted efficiencies, and leveraging our India-based technology and operations teams to lower costs and improve productivity. These actions, combined with a disciplined content and release strategy, support continued margin improvement and stronger cash-flow performance. Our focus remains clear: to build a scalable, high-margin digital entertainment company that combines innovative technology with efficient content monetization. We are encouraged by the growing interest from leading Hollywood partners in our release model and technology platforms, and we remain committed to disciplined execution and long-term value creation for our shareholders.”