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Item 2. Management’s Discussion and Analysis

2026-08-13 compared with 2026-02-17 · 56 added, 94 removed, 74 unchanged (67% of the section changed)

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(“Cineverse”, “us”, “our”, "we", and “Company” refers to Cineverse Corp.

and its subsidiaries unless the context otherwise requires) was incorporated in Delaware on March 31, 2000.

The Company has a long legacy in using technology to transform the entertainment industry and played a pioneering role in transitioning movie screens from traditional analog film prints to digital distribution.

Over the past several years, Cineverse has transformed itself from being a digital cinema equipment and physical content distributor to a leading independent streaming company.

Cineverse is a streaming technology and entertainment company with its core business operating as (i) a portfolio of owned and operated streaming channels with enthusiast fan bases;

and its subsidiaries unless the

context otherwise requires) was incorporated in Delaware on March 31, 2000.

Cineverse is a premier technology and entertainment company with its core streaming business operating (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 video on demand ("AVOD"), ad-supported streaming linear ("FAST") channels, social video streaming services, and audio podcasts.

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:

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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.

Through the integration of Giant Worldwide, Matchpoint has expanded its automated media services ecosystem by adding audience development, customer acquisition, and direct-to-consumer marketing capabilities supported by longstanding studio relationships and performance marketing expertise.

The Company’s Connected TV (“CTV”) monetization platform provides proprietary location-based digital advertising technology solutions that offer advertisers a targetable, measurable, and accountable way to utilize CTV media and data solutions at scale.

The Company also provides solutions for media owners, including an advertising platform for Digital Out-of-Home ("DOOH") networks that enables users to manage advertising inventory, optimize sales, and monetize unsold inventory.

We distribute products for major brands such as Hallmark, ITV, Nelvana, ZDF, Konami, NFL and Highlander, as well as international and domestic content creators, movie producers, television producers and other short-form digital content producers.

We collaborate with producers, major brands and other content owners to market, source, curate and distribute quality content to targeted audiences through (i) existing and emerging digital home entertainment platforms, including but not limited to Apple iTunes, Amazon Prime, Netflix, Hulu, Xbox, Pluto, and Tubi, as well as (ii) physical goods, including DVD and Blu-ray Discs.

Our Class A common stock, par value $0.001 per share (the "Common Stock"), is listed on The Nasdaq Stock Market (“Nasdaq”) under the symbol “CNVS.”

Financial Condition and Liquidity

As of December 31, 2025, the Company has an accumulated deficit of $(511.2) million and negative working capital of $(1.4) million.

For the three and nine months ended December 31, 2025, the Company had a net loss attributable to the Company's common stock holders of $(1.0) million and $(10.3) million, respectively.

Net cash used in operating activities for the nine months ended December 31, 2025 was $23.3 million, which included $7.9 million of incremental investment in our content portfolio via advances or minimum guarantee payouts.

As of June 30, 2026, the Company has an accumulated deficit of $515.9 million and negative working capital of $(18.9) million.

For the three months ended June 30, 2026, the Company had a net loss attributable to the Company's common stock holders of $(5.8) million.

Net cash used in operating activities for the three months ended June 30, 2026 was $1.0 million, which included $0.2 million of incremental investment in our content portfolio via advances or minimum guarantee payouts.

We may continue to generate net losses for the foreseeable future.

During the nine months ended December 31, 2025, 1.9 million warrants were exercised for net proceeds of $5.8 million.

The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025, with East West Bank (the "Line of Credit Facility") providing for borrowings of up to $12.5 million guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets.

The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025, with East West Bank (the "Line of Credit Facility") that currently provides for borrowings of up to $12.5 million guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets.

The facility includes provisions that allow for an increase in total borrowing capacity up to $15.0 million, subject to lender approval.

As of December 31, 2025, $8.3 million was outstanding on the Line of Credit Facility.

As of June 30, 2026, $11.4 million was outstanding on the Line of Credit Facility.

The Company will continue to invest in content development and acquisitions from which it believes it will obtain an appropriate return on its investment.

As of December 31, 2025 and March 31, 2025, short-term content advances were $7.9 million and $6.7 million, respectively, and long-term content advances, net of current portion, were $9.2 million and $4.1 million, respectively.

As of June 30, 2026 and March 31, 2026, short-term content advances were $6.8 million and $7.5 million, respectively, and long-term content advances, net of current portion, were $8.5 million and $8.2 million, respectively.

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, availability under our Line of Credit Facility and ability to use our ATM as of December 31, 2025 will be sufficient to support our operations for at least twelve months from the filing of this report.

We believe our cash and cash equivalents, availability under our Line of Credit Facility and ability to use our ATM as of June 30, 2026 will be sufficient to support our operations for at least twelve months from the filing of this report.

Critical Accounting Estimates

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Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

Results of Operations for the three months ended December 31, 2025 and 2024 (unaudited) (in thousands) :

For the Three Months Ended December 31,

Results of Operations for the three months ended June 30, 2026 and 2025 (unaudited) (in thousands) :

For the Three Months Ended June 30,

As a % of Revenue

Advertising technology and services

Streaming and digital

Base distribution

Media services

Podcast and other

Other and non-recurring

Total Revenue

Streaming and digital revenue for the three months ended December 31, 2025 decreased by $2.6 million, primarily due to strong digital release revenue of $2.8 million from Terrifier 3 in the prior period.

This is partially offset by revenue growth of $1.5 million in our top channels.

Programmatic revenue decreased by $1.2 million due to reduced advertiser demand.

Base distribution revenue decreased by $21.0 million for the three months ended December 31, 2025 compared to the three months ended December 31, 2024, primarily attributable to the strong theatrical release revenue of $22.8 million from Terrifier 3 in the prior period.

This is partially offset by theatrical release revenue of $1.2 million in the current period.

Podcast and other revenue decreased by $0.8 million during the three months ended December 31, 2025, compared to same period in 2024 due to lower podcast direct advertising.

Direct Operating Expenses

For the Three Months Ended December 31,

As a % of Revenue

Direct operating expenses

The $15.9 million decrease in Direct operating expenses for the three months ended December 31, 2025 was primarily driven by lower variable costs compared to the prior year quarter, which included royalty expenses for Terrifier 3 , platform fees, freight, and fulfillment charges, offset by an increase in manufacturing costs related to Toxic Avenger.

Selling, General and Administrative Expenses

For the Three Months Ended December 31,

As a % of Revenue

Compensation expense

Corporate expenses

Share-based compensation

Marketing expenses

Other operating expenses

Selling, General and Administrative

For the three months ended December 31, 2025 compared to three months ended December 31, 2024, compensation expense decreased by $1.8 million primarily due to a lower bonus accrual.

Corporate expenses increased by $0.8 million reflecting higher professional services and legal expenses associated with strategic business and content acquisitions.

Marketing expenses increased by $2.0 million primarily due to Toxic Avenger .

For the three months ended December 31, 2024, $0.6 million Marketing expenses were included in Direct operating expenses.

Depreciation and Amortization Expense

For the Three Months Ended December 31,

As a % of Revenue

Amortization of intangible assets

Depreciation of property and equipment

Depreciation and Amortization

Amortization expense increased by $0.3 million during the three months ended December 31, 2025 compared to the prior year quarter primarily due to increased capitalized content costs.

Interest Expense, Net

For the three months ended December 31, 2025, compared with the same period in 2024, interest expense decreased by $2.1 million to $0.2 million primarily due to higher interest participation in the prior year related to the T3 Loan, which was obtained and repaid during the prior fiscal year, lower borrowings under our line of credit, and lower interest rates.

Results of Operations for the nine months ended December 31, 2025 and 2024 (unaudited) (in thousands) :

For the Nine Months Ended December 31,

As a % of Revenue

Streaming and digital

Base distribution

Podcast and other

Other and non-recurring

Other non-recurring

Total Revenue

Streaming and digital revenue for the nine months ended December 31, 2025 decreased by $1.8 million compared to the same period in 2024, primarily driven by primarily due to strong digital release revenue of $2.8 million for Terrifier 3 in the prior period.

This is partially offset by growth of $1.4 million in our top channels.

Base distribution revenue decreased by $19.8 million for the nine months ended December 31, 2025, compared to the same period in 2024, primarily due to the strong theatrical release revenue of $22.8 million in the prior period.

This is partially offset by the theatrical and physical releases bringing in $2.0 million in the current period.

Podcast and other revenue declined by $1.2 million during the nine months ended December 31, 2025 compared to same period in 2024, due to lower podcast direct advertising.

For the three months ended June 30, 2026, the Company's revenue increased by $19.5 million.

Advertising technology and services and Media services revenue increased by a combined $19.4 million due to the fiscal year 2026 fourth quarter acquisitions of IndiCue Inc.

and Giant Worldwide.

Streaming and digital revenue increased by $0.6 million, primarily due to the strong advertising performance ($0.3 million) and Electronic Sell-Through ("EST") ($0.2 million) from titles such as Return to Silent Hill.

Base distribution revenue decreased by $0.7 million, primarily driven by a decline in physical sales of $0.4 million following the success of Terrifier 3 in fiscal year 2026.

Direct Operating Expenses

For the Nine Months Ended December 31,

For the Three Months Ended June 30,

As a % of Revenue

Direct operating expenses

The decrease of $16.7 million in Direct operating Expenses for the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024 was primarily driven by lower variable costs, including royalty expenses and platform fees.

The reduction also reflects higher recoupements on our content advances resulting in lower provision for royalty advance allowance.

These decreases were partially offset by increased theatrical distribution fees related to Toxic Avenger and licensor costs.

The $15.1 million increase in Direct operating expenses for the three months ended June 30, 2026 was primarily attributable to the addition of Advertising Technology revenue share and Media Services revenue in the fiscal fourth quarter.

Selling, General and Administrative Expenses

For the Nine Months Ended December 31,

For the Three Months Ended June 30,

As a % of Revenue

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Selling, General and Administrative

For the nine months ended December 31, 2025 compared to nine months ended December 31, 2024, Compensation expenses increased by $0.8 million due to increased employee headcount.

Corporate expenses increased by $1.7 million reflecting higher professional services and legal expenses associated with strategic business and content acquisitions.

Marketing expenses increased primarily due to costs associated with Toxic Avenger .

For the nine months ended December 31, 2024, $0.8 million of marketing expenses were included in Direct operating expenses.

Other operating expenses increased by $0.6 million primarily due to increased administrative costs.

For the three months ended June 30, 2026 compared to three months ended June 30, 2025, compensation expense increased by $1.1 million primarily due to an increased non-cash bonus accruals ($0.6 million) and severance ($0.3 million).

The increase in share-based compensation was attributable to incremental share-based compensation granted from fiscal fourth quarter acquisitions.

The increase in marketing expense related to the increase in spend from upcoming theatrical releases such as Air Bud Returns and Pan's Labyrinth 20th Anniversary.

Depreciation and Amortization Expense

For the Nine Months Ended December 31,

For the Three Months Ended June 30,

As a % of Revenue

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Depreciation of property and equipment

Depreciation and Amortization

Amortization expense increased by $0.8 million during the nine months ended December 31, 2025, compared to 2024, primarily due to increased capitalized content costs.

Total Depreciation and Amortization

Amortization expense increased by $1.7 million during the three months ended June 30, 2026 compared to the prior year quarter primarily due to the purchase price accounting-related intangible asset additions from our IndiCue and Giant acquisitions in the fourth quarter of fiscal 2026.

Interest Expense, Net

For the nine months ended December 31, 2025, compared with the same period in 2024, interest expense decreased by $3.0 million, primarily due to higher interest participation in the prior year related to the T3 Loan, which was obtained and repaid during prior fiscal year, lower borrowings under our line of credit, and lower interest rates.

In addition, during the nine months ended December 31, 2025, we recognized a $0.4 million discount on accrued interest provided by the T3 lender in exchange for the final payment made during the period.

For the three months ended June 30, 2026, compared with the same period in 2025, interest expense increased by $0.8 million to $0.6 million, primarily due to a $(0.4) million reduction in interest expense recognized in the prior-year period resulting from a discount on accrued interest provided by a financing arrangement for the film Terrifier 3 in exchange for an expedited final payment, as well as higher average outstanding borrowings under the Line of Credit Facility during the current quarter.

Adjusted EBITDA

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Following is the reconciliation of our consolidated net (loss) income to Adjusted EBITDA (in thousands):

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

Net (loss) income

Income tax expense

Three Months Ended

Income tax (expense) benefit

Depreciation and amortization (1)

Interest expense

Change in fair value of acquisition-related deferred consideration

Change in fair value of acquisition-related earnout consideration

Stock-based compensation

Other expense (income), net

Net income attributable to noncontrolling interest

Other (income) expense, net

Net loss attributable to noncontrolling interest

Acquisition-related costs

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Adjusted EBITDA

(1) - Includes $129 thousand and $344 thousand of amortization included in direct operating expenses on our Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2025, respectively, and $85 thousand and $256 thousand for the three and nine months ended December 31, 2024, respectively.

(1) - Includes $44 thousand and $85 thousand of amortization included in direct operating expenses on our Condensed Consolidated Statements of Operations for the three months ended June 30, 2026 and 2025, respectively.

Changes in our cash flows were as follows (in thousands):

For the Nine Months Ended December 31,

Net cash (used in) provided by operating activities

For the Three Months Ended June 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net Change in Cash and Cash Equivalents

For the nine months ended December 31, 2025, net cash used in operating activities was primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization and stock-based compensation, and other changes in working capital.

Specifically, the adjustments are primarily driven by net cash outflows related to content advances made to partners for which initial expenditures are generally recovered within six to twelve months and operating prepayments and a decrease in accounts payable and accrued expenses.

Cash used in investing activities is primarily related to expenditures towards long-lived intangible and fixed assets, along with strategic acquisitions.

Cash flows from financing were primarily attributable to proceeds under the Line of Credit Facility, net of payments, and proceeds from common stock warrant exercises.

For the three and nine months ended December 31, 2024, net cash used in operating activities was primarily driven by loss from operations, excluding non-cash expenses such as depreciation, amortization, reserve for credit losses and stock-based compensation, including capitalized content spend and other changes in working capital.

For the three months ended June 30, 2026, net cash used in operating activities was primarily attributable to the Company's loss from operations, excluding non-cash expenses such as depreciation and amortization, stock-based compensation, fair value adjustments related to acquisition-related deferred and earnout consideration, as well as changes in working capital.

Working capital changes were primarily driven by an increase in accounts receivable resulting from the timing of customer collections, partially offset by an increase in accounts payable, accrued expenses, and other liabilities.

Operating cash flows are typically seasonally lower during the first two fiscal quarters and higher during the third and fourth fiscal quarters, primarily due to revenues generated during the holiday season.

Cash used in investing activities primarily reflected expenditures for long-lived assets and internally developed software.

Cash provided by financing activities was primarily attributable to net borrowings under the Line of Credit Facility and proceeds from the issuance of common stock under the Company's ATM program, partially offset by shares withheld to satisfy employee tax withholding obligations, cash paid to acquire a noncontrolling interest, and payments of deferred consideration.

For the three months ended June 30, 2025, net cash used in operating activities was primarily attributable to the Company's loss from operations, excluding non-cash expenses such as depreciation, amortization, and stock-based compensation, as well as changes in working capital.

Working capital changes were primarily driven by cash outflows related to content advances made to partners, for which initial expenditures are generally recovered within six to twelve months, operating prepayments, and decreases in accounts payable and accrued expenses.

Cash used in investing activities primarily reflected expenditures for long-lived intangible assets and property and equipment.

Cash provided by financing activities was primarily attributable to net borrowings under the Line of Credit Facility.

Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements other than as discussed in Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, Basis of Presentation and Consolidation and Note 3 - Other Interests to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, we hold a 100% equity interest in CDF2 Holdings, which is an unconsolidated variable interest entity (“VIE”), which wholly owns Cinedigm Digital Funding 2, LLC;

however, we are not the primary beneficiary of the VIE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis