Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our historical consolidated financial statements and the related notes included elsewhere in this report.
This report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,” and similar words. Forward-looking statements represent, as of the date of this report, our judgment relating to, among other things, future results of operations, growth plans, sales, capital requirements and general industry and business conditions applicable to us. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
OVERVIEW
Cineverse is a premier streaming technology and entertainment company with its core business operating as (i) a portfolio of owned and operated streaming channels with enthusiast fan bases; (ii) a large-scale global aggregator and full-service distributor of feature films and television programs; and (iii) a proprietary technology software-as-a-service platform for over-the-top (“OTT”) app development and content distribution through subscription video on demand ("SVOD"), dedicated ad-supported ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and audio podcasts. Our streaming channels reach audiences in several distinct ways: direct-to-consumer, through these major application platforms, and through third-party distributors of content on platforms.
The Company’s streaming technology platform, known as Matchpoint, is a software-based streaming operating platform which provides clients with AVOD, SVOD, transactional video on demand ("TVOD") and linear capabilities, automates the distribution of content, and features a robust data analytics platform.
Risks and Uncertainties
Our business and prospects are exposed to numerous risks and uncertainties. For more information, see “Item 1A. Risk Factors” in this report.
Liquidity and Capital Resources
We have incurred net losses historically. For the year ended March 31, 2025, we have net income attributable to common stockholders of $3.2 million. As of March 31, 2025, we had an accumulated deficit of $500.9 million and net cash provided by operations for the fiscal year ended March 31, 2025 was $17.4 million. Although we have positive working capital of $3.6 million as of March 31, 2025, we may continue to generate net losses for the foreseeable future.
The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025, with East West Bank ("EWB") providing for a $12.5 million Line of Credit Facility and expandable to $15.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets. The Line of Credit Facility bears interest at a rate equal to 1.25% above the prime rate, equal to 8.75% as of March 31, 2025. The Line of Credit Facility matures on April 8, 2028.
As of March 31, 2025, $0 was outstanding on the Line of Credit Facility. Under the Line of Credit Facility, the Company is subject to certain financial and non-financial covenants including terms which require the Company to maintain certain metrics and ratios, to maintain certain minimum cash on hand, and to report financial information to our lender on a periodic basis. Please see Note 7 - Debt for further information regarding the Company's Line of Credit Facility.
On April 5, 2024, Cineverse Terrifier LLC (“T3 Borrower”), a wholly-owned subsidiary of the Company entered into a Loan and Security Agreement with BondIt LLC (“T3 Lender”) and the Company, as a guarantor (the “T3
19
Loan Agreement”). The T3 Loan Agreement provides for a term loan with a principal amount not to exceed $3,666,000 (the “T3 Loan”), and a maturity date of April 1, 2025, unless extended for 120 days under certain conditions. The T3 Loan bears no interest until the maturity date other than an interest advance equal to $576,000 at the closing of the T3 Loan on April 5, 2024. The interest advance was recorded as a discount on the T3 Loan at inception and will be amortized to interest expense and increase the loan amount over its term. If the T3 Loan is extended as noted above, the T3 Loan will bear interest at a rate of 1.44% per month. The T3 Borrower may prepay the obligations under the T3 Loan, in full or in part, without penalty or premium. The proceeds under the T3 Loan Agreement were used for the funding under the Company’s distribution arrangements for the film titled Terrifier 3 (the “Film”). The T3 Loan Agreement contains customary covenants, representation and warranties and events of default. The T3 Loan, including interest of $576 thousand, was repaid in advance during the quarter ended December 31, 2024.
After the principal of the T3 Loan is paid in full, the T3 Lender will be entitled to receive 15% of all royalties earned by the Company on the Film under its distribution agreements for the Film until the T3 Lender has received 1.75 times the full commitment amount of $3,666,000, consisting of the principal amount plus interest and fees advanced to T3 Borrower ("Participation Interest"), plus any extension interest, if applicable. The T3 Loan is secured by a first priority interest in all of T3 Borrower’s rights and interest in the Film and the distribution agreements, including the proceeds to the T3 Borrower from the distribution of the Film. In April 2025, the Company paid the T3 Lender $700,000 in Participation Interest.
On May 3, 2024, the Company entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners and The Benchmark Company, LLC (collectively, the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of its Class A common stock, par value $0.001 per share (the “Common Stock”). Shares of Common Stock may be offered and sold for an aggregate offering price of up to $15 million. The Sales Agents’ obligations to sell shares under the Sales Agreement are subject to satisfaction of certain conditions, including the continuing effectiveness of the Registration Statement on Form S-3 (Registration No. 333-273098) (the “Registration Statement”) filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) on June 30, 2023 and declared effective by the SEC on January 25, 2024, and other customary closing conditions. The Company will pay the Sales Agents a commission of 3.00% of the aggregate gross proceeds from each sale of shares and has agreed to provide the Sales Agents with customary indemnification and contribution rights. The Company has also agreed to reimburse the Sales Agents for certain specified expenses. The Company is not obligated to sell any shares under the Sales Agreement and has not sold any shares through the date of this report.
In June, 2023, the Company issued and sold 2,150,000 shares of Common Stock, 516,667 prefunded warrants, and warrants to purchase up to 2,666,667 shares of Common Stock at a combined public offering price of $3.00 per share and accompanying warrant for aggregate gross proceeds of approximately $7.4 million, after deducting placement agent fees and other offering expenses in the amount of $0.6 million. The warrants have an exercise price of $3.00 per share, were exercisable immediately and will expire five years from issuance. The Company received $2.999 per share for the pre-funded warrants, with the remaining $0.001 due at the time of exercise. All 516,667 pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $0.5 thousand. All common warrants were issued as immediately exercisable and 2,654 thousand common warrants remain outstanding as of March 31, 2025.
In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B. Riley FBR, Inc. (“B. Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares. For the year ended March 31, 2024, the Company sold 176,751 shares for $1.1 million in net proceeds, after deduction of commissions and fees. The ATM Sales Agreement terminated on January 6, 2024.
The Company will continue to invest in content development and acquisition, from which it believes it will obtain an appropriate return on its investment. As of March 31, 2025 and 2024, short term content advances were $6.7 million and $9.3 million, respectively, and content advances, net of current portion were, $4.1 million and $2.6 million, respectively.
20
Our capital requirements will depend on many factors, and we may need to use existing capital resources and/or undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs. We believe our cash and cash equivalents and availability under our Line of Credit Facility as of March 31, 2025 will be sufficient to support our operations for at least twelve months from the filing of this report.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K. Management believes that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.
FAIR VALUE ESTIMATES
Goodwill
Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is tested for impairment on an annual basis or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed fair value, also known as impairment indicators.
Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations. To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.
In certain reporting periods, the Company may have the option to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount or to perform the quantitative impairment test.
Intangible Assets, net
We review the recoverability of our long-lived assets and finite-lived intangible assets, when events or conditions occur that indicate a possible impairment exists. Determining whether impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. The assessment for recoverability is based primarily on our ability to recover the carrying value of our long-lived and finite-lived assets from expected future undiscounted net cash flows. If the total expected future undiscounted net cash flows is less than the total carrying value of the assets the asset is deemed not to be recoverable and possibly impaired. We then estimate the fair value of the asset to determine whether an impairment loss should be recognized. An impairment loss will be recognized if the asset’s fair value is determined to be less than its carrying value. Fair value is determined by computing the expected future discounted cash flows.
In the years ended March 31, 2025 and 2024, no impairment charges were recorded to intangible assets.
21
REVENUE RECOGNITION
We determine revenue recognition by:
• identifying the contract, or contracts, with the customer;
• identifying the performance obligations in the contract;
• determining the transaction price;
• allocating the transaction price to performance obligations in the contract; and
• recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.
We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the services provided, sales of physical products (DVD’s and Blu-ray Discs) or when the content is available for subscription on the digital platform or available on the point-of-sale for transactional and video on demand services which is when the control of the promised products and services is transferred to our customers and our performance obligations under the contract have been satisfied. Revenues that might be subject to various taxes are recorded net of transaction taxes assessed by governmental authorities, such as sales value-added taxes and other similar taxes.
Payment terms and conditions vary by customer and typically provide net 30-to-90 day terms. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer and payment for that product or service will be one year or less.
Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies. The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”) on the digital platforms, and shipment of DVDs and Blu-ray Discs. Revenue is recognized at the point in time when the performance obligation is satisfied, which is when the content is available for subscription on the digital platform, at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer. The Company considers the delivery of content through various distribution channels to be a single performance obligation.
Revenue from the sale of physical goods is recognized after deducting reserves for sales returns and other allowances. Reserves for potential sales returns and other allowances are recorded based upon historical experience. If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.
For the theatrical distribution of third-party feature movies and alternative content, distribution fee revenue and participation in box office receipts are recognized at the time a feature movie and alternative content are viewed. The Company may have the right to receive or bill a portion of the theatrical distribution fee in advance of the exhibition date, and therefore such amount is recorded as a receivable at the time of execution, and all related distribution revenue is deferred until the third-party feature movies’ or alternative content’s theatrical release date.
Principal Agent Considerations
We determine whether revenue should be reported on a gross or net basis based on each revenue stream. Key indicators that we use in evaluating gross versus net treatment include, but are not limited to, the following:
• which party is primarily responsible for fulfilling the promise to provide the specified good or service; and
• which party has discretion in establishing the price for the specified good or service.
22
Shipping and Handling
Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers. We recognize all shipping and handling costs as an expense in direct operating expenses because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.
Credit Losses
We maintain reserves for expected credit losses on accounts receivable. We review the composition of accounts receivable and analyze historical credit losses, customer concentrations, customer credit worthiness, current and forecasted economic trends and changes in customer payment patterns to evaluate the adequacy of this allowance.
Contract Assets and Liabilities
We generally record a receivable related to revenue or an unbilled revenue (contract asset) when we have an unconditional right to invoice and receive payment. Unbilled revenue includes an accrued revenue, the right to which has been earned at the period end based on completed performance. We record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if the amounts are refundable. Deferred revenue includes payments related to the sale of DVDs with future release dates or subscription dues paid in advance.
Deferred revenue that is short term in nature, carried a balance as of March 31, 2025 and 2024 of $0.2 million and $0.4 million, respectively. For the years ended March 31, 2025 and 2024, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.
Participations and Royalties Payable
When we use third-parties to distribute company owned content, we record participations payable, which represent amounts owed to the distributor under revenue-sharing arrangements. When we provide content distribution services, we record accounts payable and accrued expenses to studios or content producers for royalties owed under licensing arrangements. We identify and record as a reduction to the liability any expenses that are to be reimbursed to us by such studios or content producers.
23
Results of Operations for the Fiscal Years Ended March 31, 2025 and 2024 (in thousands, except where noted below)
Revenues
For the Fiscal Year Ended March 31,
As a % of Revenue
2025
2024
$ Change
% Change
2025
2024
Streaming and digital
$
44,408
$
37,312
$
7,096
19
%
57
%
76
%
Base distribution
28,614
5,259
23,355
444
%
37
%
11
%
Podcast and other
4,893
2,718
2,175
80
%
6
%
6
%
Other non-recurring
266
3,842
(3,576
)
(93
)%
—
%
8
%
Total Revenue
$
78,181
$
49,131
$
29,050
59
%
100
%
100
%
For the year ended March 31, 2025, the Company's revenue increased by $29.1 million. Streaming and digital revenue improved by $7.1 million, primarily due to: (i) $3.3 million license fee revenue recorded during the period related to the licensing of the Dog Whisperer and Terrifier 3 contents, and (ii) net favorable impact of other content releases' timing relative to the same period in the prior year. Further, the Company continued to see the benefits from recent years' acquisitions, such as DMR, Fandor and Bloody Disgusting, which have contributed value-accretive libraries, distribution platforms and technologies.
Base distribution revenue increased by $23.4 million mainly due to Terrifier 3 theatrical release in October 2024.
Podcast and other revenue grew by $2.2 million primarily due to revenue increases from direct advertising.
The decrease in other and non-recurring revenue related to the run-off of the Company's legacy digital cinema business. The Company does not anticipate material future revenue related to this business.
Direct Operating Expenses
For the Fiscal Year Ended March 31,
As a % of Revenue
2025
2024
$ Change
% Change
2025
2024
Direct operating expenses
$
38,776
$
19,131
$
19,645
103
%
50
%
39
%
The increase of $19.6 million in Direct Operating Expenses for the year ended March 31, 2025, compared to the same period of 2024 primarily relates to the impact of Terrifier 3. Specifically, the increase is due to the net effect of the following changes: (i) $16.9 million higher royalty expense, (ii) $0.9 million increase in marketing costs, (iii) $1.0 million theatrical distribution fees to our service provider, (iv) $1.8 million higher license participations and advertising pool impression costs, offset by (v) $1.5 million lower SaaS subscription fees.
Direct operating margin % declined from 61% for the year ended March 31, 2024 to 50% for the year ended March 31, 2025 primarily due to $3.8 million of non-recurring revenue in the prior year related to run-off of the Company's legacy digital cinema business which had a 100% direct operating margin and theatrical revenues related to Terrifier 3 that had direct operating margins lower than 50%.
24
Selling, General and Administrative Expenses
For the Fiscal Year Ended March 31,
As a % of Revenue
2025
2024
$ Change
% Change
2025
2024
Compensation expense
$
17,176
$
17,756
$
(580
)
(3
)%
22
%
36
%
Corporate expenses
3,354
3,762
(408
)
(11
)%
4
%
8
%
Share-based compensation
1,925
1,439
486
34
%
2
%
3
%
Other operating expenses
5,229
4,947
282
6
%
7
%
10
%
Selling, General and Administrative
$
27,684
$
27,904
$
(220
)
(1
)%
35
%
57
%
Selling, general and administrative expenses for the year ended March 31, 2025 decreased by $0.2 million relative to the year ended March 31, 2024, primarily due to: (i) lower compensation expense due to change in the Company's employment mix as a result of a greater investment in Cineverse Services India, and (ii) lower severance costs, offset by higher share-based compensation.
Corporate expenses declined by $0.4 million primarily decreased due to a corporate focus on reducing third-party costs due to the Company's cost-saving initiatives, including consulting and service providers and legal costs.
Depreciation and Amortization
For the Fiscal Year Ended March 31,
As a % of Revenue
2025
2024
$ Change
% Change
2025
2024
Amortization of intangible assets
$
3,226
$
3,196
$
30
1
%
4
%
7
%
Depreciation of property and equipment
571
575
(4
)
(1
)%
1
%
1
%
Depreciation and Amortization
$
3,797
$
3,771
$
26
1
%
5
%
8
%
Amortization and depreciation expense have remained relatively consistent for the year ended March 31, 2025, compared to the year ended March 31, 2024, as the Company's intangible focused investment mix has remained consistent over the past year.
Goodwill impairment
No impairment was recognized for the year ended March 31, 2025.
For the year ended March 31, 2024, the Company recognized an impairment on its carrying value of goodwill in the amount of $14.0 million following a sustained depressed share price for the Company's fiscal year 2024, which was deemed a triggering event. In accordance with the process outlined in ASC 350, the Company first determined that its finite long-lived assets were recoverable. The impairment was quantified using a market multiple approach which utilized information from comparable businesses.
Interest expense
Interest expense increased by $3.3 million to $4.4 million for the year ended March 31, 2025 primarily due to: (i) $2.7 million interest participation relating to the T3 Loan (which was obtained and repaid during the fiscal year), (ii) higher drawings on our line of credit and (ii) increased interest rates in 2024.
Gain (loss) from equity investment in Metaverse
On November 6, 2023, Metaverse's stock resumed trading on The Stock Exchange of Hong Kong Limited. During the year ended March 31, 2024, the Company sold 220,550,005 of its original 362,307,397 million shares held as of March 31, 2023, which resulted in a realized loss of $0.3 thousand during the year ended March 31, 2024. The resumption of active trading status represented renewed availability of quoted, unadjusted prices in active markets
25
for identical assets, upon which the Company can execute a sale and readily access pricing information at the measurement date. Accordingly, the Company has presented the fair value of its Metaverse shares held as of March 31, 2024 within the Level 1 grouping. The fair value of the shares held as of March 31, 2024 was $0.4 million, with associated losses of $4.3 million recognized during the fiscal year ended March 31, 2024.
During the year ended March 31, 2025, we sold our remaining 141,757,392 Metaverse shares, resulting in a gain of $0.2 million.
Employee Retention Tax Credit
The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") provided an employee retention credit that was a refundable tax credit against certain employment taxes. The Consolidated Appropriations Act (the "Appropriations Act") extended and expanded the availability of the employee retention credit through December 31, 2021. The Appropriations Act amended the employee retention credit to be equal to 70% of qualified wages paid to employees during the 2021 fiscal year.
The Company qualified for the employee retention credit beginning in June 2020 for qualified wages through September 2021 and filed a cash refund claim during the fiscal year ended March 31, 2023, in the amount of $2.5 million.
As of March 31, 2025 and 2024, the tax credit receivable of $0.1 and $1.7 million, respectively, has been included in the Employee retention tax credit line on the Company's Consolidated Balance Sheet. The Company received notification during the second quarter of fiscal year 2024 that its ERTC claim was under examination with the Internal Revenue Service ("IRS"). In April 2024, the Company received a letter from the IRS indicating that its claim had been accepted and $1.7 million was received in June 2024.
Income Tax Expense
For the year ended March 31, 2025, the Company had income tax expense of $106 thousand consisting of $62 thousand of current U.S. state income taxes, $51 thousand of current foreign income taxes, offset by the recognition of a $7 thousand deferred foreign tax benefit
Adjusted EBITDA
We define Adjusted EBITDA to be earnings before interest, taxes, depreciation and amortization, other income, net, stock-based compensation and expenses, merger and acquisition costs, restructuring, transition and acquisitions expense, net, goodwill impairment and non-recurring items.
Adjusted EBITDA is not a measurement of financial performance under GAAP and may not be comparable to other similarly titled measures of other companies. We use Adjusted EBITDA as a financial metric to measure the financial performance of the business because management believes it provides additional information with respect to the performance of its fundamental business activities. For this reason, we believe Adjusted EBITDA will also be useful to others, including its stockholders, as a valuable financial metric.
We present Adjusted EBITDA because we believe that Adjusted EBITDA is a useful supplement to net income (loss) from continuing operations as an indicator of operating performance. We also believe that Adjusted EBITDA is a financial measure that is useful both to management and investors when evaluating our performance and comparing our performance with that of our competitors. We also use Adjusted EBITDA for planning purposes and to evaluate our financial performance because Adjusted EBITDA excludes certain incremental expenses or non-cash items, such as stock-based compensation charges, that we believe are not indicative of our ongoing operating performance.
We believe that Adjusted EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net income from continuing operations and Adjusted EBITDA has been provided in the financial results. Adjusted EBITDA should not be considered as an alternative to income from operations or net income from continuing operations as an indicator of performance or as an alternative to cash flows from operating
26
activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
Following is the reconciliation of our consolidated net income (loss) to Adjusted EBITDA (in thousands):
For the Fiscal Year Ended
March 31,
2025
2024
Net income (loss)
$
3,764
$
(21,265
)
Add Back:
Income tax expense
106
10
Depreciation and amortization (1)
4,138
3,771
Interest expense
4,365
1,066
(Gain) loss from equity investment in Metaverse
(176
)
4,299
Stock-based compensation
1,925
1,439
Other expense (income), net
(135
)
(140
)
Net income attributable to noncontrolling interest
(162
)
(142
)
Goodwill impairment
—
14,025
Transition-related costs (2)
92
1,335
Adjusted EBITDA
$
13,917
$
4,398
(1) - Includes $341 of amortization included in direct operating expenses on our Consolidated Statements of Operations for the year ended March 31, 2025.
(2) - Primarily employee severance costs and expenses associated with the wind-down of our legacy Digital Cinema operations.
Recent Accounting Pronouncements
See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies to our Consolidated Financial Statements included herein.
Cash Flow
Changes in our cash flows were as follows (in thousands):
For the Fiscal Year Ended
March 31,
2025
2024
Net cash provided by (used in) operating activities
$
17,411
(10,592
)
Net cash used in investing activities
(635
)
(531
)
Net cash (used in) provided by financing activities
(8,002
)
9,138
Net Change in Cash and Cash Equivalents
$
8,774
$
(1,985
)
As of March 31, 2025 and 2024, we had cash and cash equivalents of $13.9 million and $5.2 million, respectively.
Cashflows for the current fiscal year
For the year ended March 31, 2025, the change in net cash provided by operating activities was primarily driven by a net income of $3.8 million, increases from the Company's operating assets and liabilities ($7.0 million), and add-backs relating to non-cash items, particularly: (i) depreciation and amortization of $3.8 million, and (ii) stock-based compensation of $1.9 million.
Cash used in investing activities of $0.6 million were driven by the acquisition of long-lived assets, partially offset by cash received from the sale of Company shares in Metaverse.
27
Cash used in financing activities of $8.0 million was primarily due to the net $6.4 million repayments of the Line of Credit Facility, repayment of our $3.1 million T3 Loan (which was obtained during the 2025 fiscal year), $0.4 million net payment of deferred acquisition consideration, $0.6 million final earnout payment and $0.2 million used to repurchase outstanding shares.
Cashflows for the previous fiscal year
For the year ended March 31, 2024, the change in net cash used in operating activities was primarily driven by a net loss of $21.3 million and decreases from the Company's operating assets and liabilities ($11.5 million), offset by the non-cash goodwill impairment charge of $14.0 million, depreciation and amortization of $3.8 million, and the non-cash change in the valuation of the Company's investment in Metaverse which is recognized in earnings ($4.3 million).
Cash flows used in investing activities of $0.5 million were driven by the acquisition of long-lived assets, partially offset by cash received from the sale of Company shares in Metaverse.
Cash flows provided by financing activities were driven by issuance of the Company's Class A common stock in the first quarter of fiscal year 2024 ($8.5 million) and a net increase of $1.4 million funds, following the Company's expansion of its revolving line of credit from $5.0 million to $7.5 million in February 2024.
Contractual Obligations
The following table summarizes our significant recognized contractual obligations as of March 31, 2025 ( in thousands ):
Payments Due
Contractual Obligations
Total
2026
2027
2028
Operating lease obligations
$
482
$
200
$
210
$
72
In addition, the Company presents its unrecognized commitments to content partners in the notes to the Financial Statements, Note 8 - Commitments and Contingencies .
Seasonality
The timing of movie and streaming content releases can have a significant effect on our results of operations, and the results of one quarter are not necessarily indicative of results for the next quarter or any other quarter. While our business benefits from the winter holiday season, we believe the seasonality of the movie and streaming landscape, is becoming less pronounced as the motion picture studios are releasing movies somewhat more evenly throughout the year.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements. In addition, as discussed further in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies and Note 3 - Other Interests to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns CDF2; however, we are not the primary beneficiary of the VIE.
Impact of Inflation
The impact of inflation on our operations has not been significant to date. However, there can be no assurance that a sustained high rate of inflation in the future would not have an adverse impact on our operating results.
28