CNVS - NASDAQ

Good day, everyone. Welcome to Cineverse’s Fourth Quarter Fiscal Year 2024 Financial Results Conference Call. My name is Cameron and I'll be your moderator for today. Currently, all participants are in a listen-only mode. We will have a question-and-answer session following management's prepared remarks. [Operator Instructions] 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 & Senior Advisor for Cineverse. Please go ahead.

Good afternoon, everyone. Thank you for joining us for the Cineverse fiscal 2024 fourth quarter and year-end financial results conference call. The press release announcing Cineverse’s results for the fiscal fourth quarter and year-end March 31st, 2024 is available at the investor 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 the information discussed on this call is as of today, July 1, 2024, and Cineverse does not assume any obligation to update any of these forward-looking statements except those required by law. In addition, certain financial information presented in this call represent non-GAAP financial measures, and we encourage you to read our disclosures and the reconciliation tables through applicable GAAP measures in our earnings release carefully as you consider these metrics. I'm Gary Loffredo, Chief Legal Officer, Secretary & Senior Advisor at Cineverse. With me today are Chris McGurk, Chairman and CEO; Erick Opeka, President and Chief Strategy 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 fourth quarter and full-year fiscal year 2024 highlights, the latest operational developments, outlook, and long-term growth strategy. Mark will follow with a review of our front results for the fiscal fourth quarter ended March 31st, 2024. And Eric 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 on this call. As we have emphasized repeatedly, fiscal year 2024 was an important transition year for the company. Having finally moved beyond any material financial impacts from our legacy digital cinema equipment business and also having established a recurring cash generating film franchise with Terrifier 2 in the prior fiscal year, we focused this year on a concerted drive towards sustained profitability to set a strong foundation for our future growth. Our full year and fourth quarter results both reflect the success of that effort. We generated vastly improved operating margins by dramatically streamlining our cost structure, optimizing our streaming channel portfolio, and focusing on higher margin new revenue streams. This resulted in positive and growing adjusted EBITDA and an accelerating trend toward positive and sustainable annual net income. Excluding key non-cash impacts and non-operating factors, most significantly the goodwill impairment that was triggered by our market capitalization being significantly below our book value, we reduced our net loss by $4.8 million, or 58% to $3.4 million for the full-year, and we were virtually breakeven on net income in this last reported quarter. We generated full-year adjusted EBITDA of $4.4 million, an increase of $4.3 million over the prior year. And we accomplished all this despite losing very significant revenues from the runoff of our legacy digital cinema equipment business and lapping the success of the horror phenomenon Terrifier 2, which also produced a very sizable upside last year. We increased our operating margins substantially to 61% from 47% in the prior year. We even hit a 79% margin in the fourth quarter. This was primarily driven by our streaming channel optimization efforts where we call lower margin channels and also from SG&A savings generated by our Cineverse Services India Operation. Cineverse Services is a unique competitive advantage for the company where we can offshore, not outsource, domestic positions to a trusted, battle-tested division of the company, generating very significant cost savings along with improved efficiencies and workflows. At this point, more than half of our total workforce is now located in India, and we intend to continue to leverage this operation by moving even more positions there from our own domestic business and also providing services for other companies. The long-term goal is to make Cineverse Services India a new profit center for the company, not just our own unique cost-saving advantage. In total, we reduced our SG&A by $8.9 million this year and will continue to identify opportunities to further streamline across all of our businesses. Importantly and fully cognizant of what we believe is a vastly undervalued stock equity price, one that triggered our goodwill impairment since it is well below book value, we began to implement our previously announced stock repurchase program subsequent to year-end. We believe that by repurchasing our significantly undervalued shares that we are taking advantage of a key value creation opportunity for the company that will prove itself as we execute our strategic growth and profitability plan. We repurchased 184,000 shares through June 30 and fully intend to continue to utilize the repurchase program to support our stock price on a go-forward basis during non-blackout periods. In just a minute, Mark will discuss our financial performance in more detail and then Eric will review our operational performance and new developments and initiatives to drive revenue and margin growth in advertising technology AI and podcasts. However, before I turn it over to them I would like to briefly touch on an initiative that our entire company is very excited about working to maximize. And that's the upcoming release of the next installment of our horror franchise phenomenon, Terrifier 3. Terrifier 2 caught the film community totally by surprise when we released it theatrically in October 2022. Produced for just $250,000, it ended up doing over $15 million at the worldwide box office, generating buzz in the New York Times, People Magazine, and on the Howard Stern Show, among many others. It was one of the best reviewed horror movies of that year and generated substantial ancillary revenues in DVD, VOD, and on our screen box, Horror Streaming Service. Our bloody disgusting horror division led the charge in marketing the movie across social media and through editorial content and other promotions in an incredibly cost-effective way. Fully leveraging our over 80 million monthly streaming viewers and all of the other assets of the company. We intend to use that very same playbook to mobilize the entire company to do the exact same thing in marketing and distributing Terrifier 3, which will be released on October 11th of this year as a wide release this time on over 2,000 screens. The difference this time is that we now really know what we have in terms of an art and fan base and market anticipation. USA Today has already named Terrifier 3 as one of the most highly anticipated horror films of 2024. And we've prepared a high-impact marketing campaign to take advantage of all that built-up anticipation, leveraging all of our unique advantages as a streaming and tech-based content company. The movie business is always highly unpredictable. However, from what we've seen of Terrifier 3 so far, we are very hopeful that if we mobilize the company like we did on Terrifier 2, we can continue to benefit from a recurring movie franchise that has an incredibly favorable risk-reward profile. We believe this franchise phenomenon can potentially provide significant and ongoing upside not just for our horror and streaming business, but also as a recurring cash cow for the company that will support our investments in content, channels, and technology. And with that, I'll now turn things over to Mark. Mark?

Thank you, Chris. For the fiscal fourth quarter ended March 31, 2024, Cineverse reported total revenues of $9.9 million, compared to $12.5 million in the prior year period and for fiscal year ‘24 total revenues were $49.1 million, compared to $68 million in the prior year. As a reminder, fiscal year 2023 included material non-recurring revenue of approximately $4 million related to Terrifier 2 and $12 million related to our legacy digital cinema business, which were not present in fiscal year ‘24. When excluding the impact of Terrifier 2 and digital cinema, the decrease in revenue was primarily due to the impact of our advertising revenue from the intentional elimination of certain lower margin channels via portfolio optimization and reallocating those resources to higher-performing and higher-margin streaming properties, which is important to our goal of achieving sustainable profitability in the near-term. We are cautiously optimistic for double-digit revenue growth in fiscal year ‘25 as the economy improves, interest rates decline, and with the expected improvement in the advertising market in a political year. Subscription-based revenues increased 3% to $3.4 million for the quarter and 25% to $13.5 million for the fiscal year, driven by the continued success for our enthusiast streaming services. Advertising-based revenues declined 10% to $2.9 million for the quarter and 34% to $12.5 million for the full-year primarily due to our channel optimization efforts and the continued impact of the current economic environment on advertising spend. During the fourth quarter we hired a new SVP of advertising and we are already seeing a material improvement in our direct ad sales results. Eric will provide additional details on the operational drivers behind those financial results. As Chris mentioned, our direct operating margin for the quarter was 79%, an increase -- sorry, an increase from 48% in the prior year quarter, which is in excess of our previously reported guidance of 45% to 50% for fiscal year ‘24. Our improved direct operating margin is a direct result of our cost optimization initiatives referred to earlier in addition to a one-time benefit in our estimated royalty-related accruals during the fourth quarter. We expect our direct operating margin in future quarters to return to our previously stated targeted margins of 45% to 50%. SG&A expenses decreased $1 million or 13% for the quarter compared to the prior year quarter and $8.9 million or 24% for the year, compared to the prior year. Again, this improvement is a direct result of the cost optimization initiatives discussed previously. We expect our S&A expenses to remain relatively flat in the fiscal year ‘25, even with expected revenue growth as we continue to leverage off-shoring efforts in Cineverse Services India. As Chris mentioned, the company recorded a $14 million non-cash, non-recurring impairment to goodwill. The goodwill impairment was required by U.S. GAAP as a result of our market capitalization being significantly below our book value. This triggered a required impairment assessment under U.S. GAAP. Again, this is non-cash, non-recurring. Adjusted EBITDA for the quarter was $1.6 million, compared to negative $0.9 million for the same quarter last year and $4.4 million for the full-year ’24, compared to $0.1 million for the prior year reflecting the continued impact of our cost savings initiatives even in a down revenue year. We had $5.2 million in cash and cash equivalents on our balance sheet as of March 31 and $6.3 million outstanding on our working capital facility. Subsequent to year-end, we extended the maturity date of our working capital facility with East West Bank to September 2025. As you recall last quarter, we also expanded the size of our facility from $5 million to $7.5 million. We appreciate our relationship with East West Bank and the confidence they are showing by extending the maturity date and expanding the size of our facility, which increases our financial flexibility and liquidity and is a testament to our improving financial position and credit worthiness. During the year, our cash flow used in operations was $10.6 million, of which $7.8 million is related to investments in our content portfolio via advance and/or minimum guarantee payments, the largest being for Terrifier3. For the fourth quarter, our cash flow used in operations was 881,000 when excluding our content portfolio spend showing just how close we are to being sustainably cash flow positive. We expect to be operating cash flow positive for the full fiscal year 2025. I also want to remind everyone that during the fourth quarter, our board of directors approved a one-year extension of our stock repurchase program. Our stock repurchase program was approved to purchase 500,000 shares and now expires in March 1, 2025. Subsequent to year-end, we repurchased 184,000 shares under this program. With a book value of $32 million and a market cap of around $11 million, we continue to believe our stock is significantly undervalued and will continue to repurchase shares under our program during open trading windows and as cash availability permits. With that, I'll turn the floor over to Eric to discuss the market environment and our growth initiatives.

Thank you, Mark. Last quarter, I discussed our progress with Matchpoint, our proprietary streaming technology platform. We continue to see strong demand for Matchpoint’s capabilities, particularly in enabling streaming companies to effectively manage and monetize their content libraries at scale on a SaaS basis. Since last quarter, additional opportunities have arisen where Matchpoint grants us a clear competitive advantage. In a very short time, we are now making significant strides in leveraging Matchpoint to meet the growing need for high-quality training material and rapidly evolving AI landscape. These large language models or LLMs, that are powering major AI company products require exceedingly larger volumes of video to teach them everything about the world around us. These LLMs need to be trained on everything from how a horse runs through the woods to a flow of pedestrians crossing a busy street intersection, or the movement and sounds of how an ocean wave crashes on a sandy beach, and so on. The most effective way of doing so requires movie and television content, which by its own nature, encompasses the full human experience in extremely high quality and consistency. By combining our vast independent film library, proprietary content distribution technology, and extensive experience as a content aggregator, we find ourselves uniquely positioned to provide these leading AI developers with the most expansive and high quality video training data sets available without the legal encumbrances hindering the major Hollywood studios. Industry research projects that the market for AI training data could reach $5 billion by 2030 with video data playing a major crucial role. We believe this presents an enormous opportunity for Cineverse, and we are actively engaged with leading LLM developers today and our extensive roster of content licensors to serve as the key supplier within the AI training data space. Over the past quarter, we significantly expanded our Matchpoint sales team, bringing on Brandon Topping as our new head of Matchpoint sales. Brandon is an industry veteran with over 200-years of experience, rapidly growing SaaS businesses, and has impressive network of key relationships that will be invaluable as we focus on scaling Matchpoint. Our sales efforts have centered around dispatch, our powerful content orchestration solution, with an emphasis on enabling customers to maximize their advertising revenue. We have built a robust pipeline of promising leads and anticipate closing our first key sales from these initiatives in the very near future. I also want to provide a quick update on cineSearch, our AI-powered video search and discovery platform that I previewed last quarter. cineSearch is currently in limited beta release as we finetune the underlying models and algorithms to deliver the highest quality user experience. We've also kicked off a series of Phase 2 development sprints which are focused on adding voice-in, voice-out support enabling the service to be integrated into televisions and integrating additional metadata partners for more nuanced content recommendations. In addition, we're implementing additional integrations that will further enhance cineSearch personalization capabilities by importing a user's viewing history from key streaming services to aid the built-in machine learning capabilities. We've taken user feedback to help refine the product interface and added additional functionality that we'll be unveiling this summer. Looking ahead, we're laying the groundwork to make cineSearch available through various cloud marketplaces later this year, which will provide another avenue to drive product adoption and revenue. We're also exploring the possibility of offering the entire suite of Matchpoint products through these marketplaces and are currently in the evaluation process. Now let me provide you an update on our streaming performance and new initiatives from the past quarter. Our digital and streaming business reached $9.1 million during the quarter, up 24.7% over the prior year quarter. This was driven by growth in our subscription, podcasting, and digital distribution revenues from monetizing our 80,000 plus title library. Subscription revenues saw an increase to $3.4 million, up 3% over last year. Our overall subscriber count has reached approximately $1.44 million subs, a growth of over 16% over the prior year quarter. This was predominantly due to growth in subscribers during the quarter on Dove, Midnight Pulp, and the Retro Crush Streaming Services. We expect to see a significant increase in subscribers through the launch of Terrifier 3 in the back half of the year, as well as additional contribution for the launch of our Cineverse branded service on Amazon channels in the coming months. Terrifier 2 added approximately several hundred thousand subscribers upon launch, and we anticipate exceeding that number with the highly anticipated third installment of the franchise due to improvements in our release strategy during this release. Ad-based revenues experienced a dip to $2.9 million, a decrease of 10% over the prior year. This decline reflects the impact from channel portfolio optimization as discussed earlier, as well as the macro impact on programmatic due to a large amount of inventory released in the beginning of the year that have hurt CPMs and fill rate. This, however, was offset by a 62% increase in podcasting related revenues, which reached 765,000 during the quarter. Given we have just started our efforts to scale monetization in that business on top of a very large user base of more than 12 million listeners per month, we believe this vertical will not only offset some of the short-term programmatic CTV softness, but will also be the fastest growing part of our ad business in the second-half of this year. Additionally, we continue to shift our ad revenue mix away from open market programmatic to programmatic guaranteed, private marketplace, and direct advertising deals. We now have strong sales leadership in place and a national sales team with a robust pipeline, and we expect to see the fruits of these efforts drive revenue growth over the next several quarters. During the quarter, we continue to focus on achieving sustainable profitability in streaming, and we continue to exceed our gross margin targets, reaching 59% in our streaming business. We expect to further improve those margins as we further optimize our content spend and also make changes to our vendor and operating relationships. We still think there's another $1.2 million to $1.5 million in additional operating expense reductions we can make over the next few quarters. Both of these changes, we believe, will keep operating margins firmly at or above our target range of the mid-50s for the streaming business. At those levels, we expect to maintain positive operating income as the fruits of our sales focus initiatives bear out. On the distribution front, we made considerable progress expanding the reach of both our audio and video content during the quarter. We secured carriage agreements for the Dog Whisperer channel with nearly all major hardware manufacturers and fast streaming services in North America and expect to achieve a 100% coverage within the next quarter. The channel has outperformed our top channels by up to 40% on key platforms, and we expect it will quickly become one, if not our highest revenue fast channel. We plan to fully localize and distribute this channel globally as various territorial rights revert to us in the coming quarters. We also achieved initial contractual placements for the Sid & Marty Krot Channel and GoPro and given the strong market demand for both retro content and sports programming we expect significant distribution expansion by the end of the year. Additionally our kids vertical has seen tremendous success with nearly 45 million streamed in its first month. We anticipate further growth in this business are developing new advertising products focused on monetizing kids and family content. On the direct sales front, as noted, we tripled the size of our direct advertising sales force with experienced executives, and in the quarter closed major campaigns with focus features, Amazon Prime Video, SimpliSafe Home Security, 20th Century Fox, Master Class, A24 Studios, and many more. We expect to see a significant percentage of our inventory shift to higher margin direct sales over the next few quarters, particularly in Q2 and Q3. Additionally, we're expanding our sales team to handle the rapidly growing footprint of our podcast network, which currently ranks number seven in North America in terms of download volume at 12 million monthly downloads. We believe there is significant revenue upside in this business that we'll be able to realize as we focus on increasing monetization of the next several quarters. In summary, we continue to make exciting progress across our technology, streaming, and content initiatives. With the growing demand for AI training data, the expansion of our Matchpoint sales team, the ongoing development of cineSearch, successful launch and distribution of new channels and verticals, and our focus on direct sales and podcast monetization, we're well positioned to drive significant growth and value creation We look forward to sharing further updates on these fronts in the coming quarters. With that, operator, let's open it up for Q&A.

Perfect. We will now begin the question-and-answer session. [Operator Instructions] And the first question is from the line of Dan Kurnos with the Benchmark Company. You may proceed.

Great. Thank you. Good afternoon and appreciate all the color on the call, guys. Chris, I just want to go back to your opening comments around Terrifier 3 and then some areas where you might lean in. Obviously, it's early to kind of size that. You've given us some yardsticks, both as it relates to Terrifier 2 and obviously the expanded screens. But if there's any way for us to think about either quantitatively how much bigger and/or better this might be, and then subsequently as you mentioned, given that this is sort of a long-tailed franchise, and you've got a lot of these growth initiatives coming up, how much of that might you reinvest and what would be sort of your key priorities this year? Thanks.

That was a very long question, Dan, thank you. So Terrifier, as I said, we think, we know what we have this time. And so we've reacted accordingly in terms of developing a marketing and distribution plan that we hope is going to provide bigger returns, not just in theatrical, but also across the whole spectrum, air-pensioned, screen box, VOD, DVD, on and on and on. And I think it's important to note, even though this one was more expensive for us than the last one, we have a breakeven on this, given our plan that's well below the box office we generated in the last one. And we fully expect to generate at least as much box office revenue as the last one, and hopefully significantly more. Of course, there's a multiplier effect on that when you perform that well at the box office with the ancillaries. I'm not going to give you specific financial information, return information. We never do that in any particular property. But I think ultimately, going forward, each Terrifier that we’ve released, and hopefully, there'll be more beyond the next one, can generate enough cash for us that's comparable to one or two of the equity raises that we've done historically. And the bulk of that money will be spent back against the key initiatives we've been talking about, the second part of your question, podcast business, developing new technology and AI tools and new content and channel investments. We talked about culling channels, but we've really sort of established ourselves in the marketplace as the leading independent streaming and technology company that exists out there right now. People are looking at how well the Dog Whisperer is performing and we have conversations going on right now with some very, very high-quality entertainment people who have ideas about bigger channels -- platforms above and beyond just a single channel approach. So hopefully, we can get more or 2 of those over the line as well. So we're going to -- we'll take the money from our cash cow. And hopefully, it all works out. Again, as I said, the movie business is unpredictable, but we think with the risk/reward profile on Terrifier and the upside is far greater than the downside and we'll reinvest that money back on content and streaming channels, technology, making sure we have the best sales team in place as well as people. And so those really are our priorities going forward.

That's super helpful. Can you just dig a little bit deeper into kind of podcasts. I mean the financials this quarter suggests that and what you put in your -- in the press release showed that you guys are accelerating pretty substantially, and you gave us some more metrics around how big it is relative to the market size, but that business is growing very fast. It's been a tough area to monetize, but just help us think through your ambitions there.

Well, it hasn't been a tough area for us to monetize because, again, the risk reward profile of the podcast that we're doing, since we're not paying Joe Rogan or anybody talent, is very, very strong, and that's why we've invested in the business, and we built it so quickly. But I'll let Erick respond to the podcast question because that's an area that he manages and is particularly focused on. Erick?

Sure. So I think you're right. Historically, the podcast business had been relatively slow to mature. I think one of the things that is different about our approach is most of the networks out there are large networks that are comparably sized to us, right? So just to give context, as in the number seven range in our download range, we're kind of sandwiched in the monthly download range between Disney and NBC in terms of monthly downloads. Monetization-wise, we're newbies in terms of being at the scale where we could start to command the CPMs and premiums that the big players are. But I think our strategy is pretty simple. We're getting really good. We have a really good and experienced team. You heard in our prepared remarks, we've been leaning into the entertainment sector, advertising, entertainment around targeted entertainment verticals is a really good strategy. And one of the things that we're finding is bundling podcast with CTV and display plus activations like live events and other things, live streams. Those kinds of things are very appealing to advertisers, and it's a much easier sell than just selling CTV or just selling podcasts. And so the other thing is our shows have very deep devoted listener bases. We particularly focus on -- our biggest shows are either non-fiction or very high-quality producer-driven weekly shows. These shows, I think, are very different from a lot of the kind of talking head -- kind of talk radio style podcasts that are out there. These are engaged. We're doing with a network of 40-something shows as many as -- more than our peers that have hundreds of shows in terms of download volume. But we think the steady-state revenue out of this base is quite substantial, and we're monetizing a very small percentage of it. So this year, it's really leveraging our direct sales team, ramping up our programmatic and host red efforts pretty aggressively and really just doing more of what we've been doing, just at a bigger scale.

Got it. Yes, cross-screen is all the rage, Erick, for sure. Last one for me, and then I'll step aside. I'll stick with you, Erick. You did give us some sizing or color around sort of the Matchpoint initiatives before. I really appreciate the update today. And it sounds like you're nearing maybe the start of the next phase. It feels a little earlier than we would have anticipated. Just kind of curious if that's the right way to think about it? And how quickly, if at all, things have changed from a scaling perspective?

Yes. So I think one of the big market impetus is pulling a lot of business forward pretty rapidly. That impetus is a market need for one of our core products, Dispatch. To give you the very high level view, Dispatch is our orchestration platform that moves large volumes of content and does a lot of processing around that content to make it ready for monetization, whether you're enriching it with metadata for targeting or dynamic advertising placement, other things that we're doing to it. Ranging from that to even the most advanced stuff we're doing in AI. There's a huge amount of demand for this as most of the OEM platforms that started out in FAST are rapidly -- with all the inventory coming on board from Amazon and Netflix, they're rapidly looking to scale up their competing AVOD offering. So there's a huge market demand to push tens of thousands of pieces of content for all of these major services, and none of them have an automated platform to do this. So we think there's a huge opportunity to pull that business forward, and so we have the right sales team, there's a huge market demand and the right product, we think that's going to accelerate things just given the -- there's a ticking clock to get everything done before the end of the year. So we think that should be very advantageous to us.

Got it. Erick, I appreciate it. Chris, sounds like some good momentum on a much better cost basis.

Thank you, Dave.

The next question is from the line of Brian Kinstlinger with Alliance Global Partners. You may proceed.

Hi, this is Kevin in for Brian. Thanks for taking our questions. First, can you talk about the adoption by streaming platforms for your newest channels such as the Dog Whisperer, Mediator and Sid & Marty Krofft? And then in addition to adoption, what about viewership?

Do you want to take that, Erick?

Yes, sure, I'll take that. So for our newest channels, I gave a little bit of a preview, I'll give you a little more color on that. So Dog Whisperer really -- we've always -- the business we've had, we've always had -- Bob Ross has sort of been the penultimate benchmark and flagship channel. So with the Dog Whisperer -- and that's really because of its evergreen nature, people watch multiple episodes or they leave it on in the background as a companion. And so one of the things that we've been looking for is what's the next service that we have that fits that bill, and we believe we have that with the Dog Whisperer. It is performing at or exceeding both Bob Ross and all of our other channels everywhere whether we placed it so far, and we think it's the right mix of content that is just bingeable and evergreen and kind of perfect as a fast play. So I can't disclose the total streaming minutes on that or any individual property. But I can say that it is -- we believe that is our new number one property if it continues to perform this way. So that's that channel. Basically, we expect 100% carriage on that channel in this -- we think it will be in this quarter, which is pretty fast for carriage distribution. Sid & Marty Krofft, we are continuing to -- we launched the first foray in the on-demand space. So we've had a couple of announcements there, as well as packaging some of the very popular shows into third-party channels. So the distribution is just really getting started on that one. It's -- the content there, while popular is -- appeals to sort of an older nostalgia audience. So we're really focusing on the platforms where that fits and matches the demo. So we're starting -- we would expect to see more traction over the next couple of quarters leading into the fall and winter. In terms of GoPro, we really just started distribution on that channel most recently. And for that channel, we've seen as all of the major platforms really have increased their demand for sports and sports related and adjacent content. That's really what GoPro is. It's really outdoor sports. So we're seeing an incredible amount of demand for that channel, we expect to have pretty considerable distribution by year-end. Mediator, same situation. Kind of fits that same bill, fits a cross section. That's kind of a fast-growing and appealing. The performance has been very strong on the platforms that we placed it. So we'll see -- we'll continue to see the ongoing distribution of that throughout the rest of the year.

Great. Thanks. Last quarter, you mentioned these new channels have the potential to add more than $10 million of annual revenue. Do you think -- do you have more confidence you can achieve this with the new channel set, less confidence? Or is your view unchanged and why?

I would say on an annualized run rate, I don't think we're going to give guidance around the portfolio in terms of dollar amount. I think we're getting too discrete on that. I would say that given the strength of Dog Whisperer and GoPro, I feel very strongly that these will be pretty big drivers in improving and continuing to improve our top line and gross margin. I would say that $10 million annualized number is probably a little further out than in this fiscal year. But I think given the mix of channels we have in new channels that we're going to be adding, I think, that kind of overall top line number is in terms of new business. In the near term, is potentially possible when you take all the new business in totality into effect.

Great. Thank you very much.

There are no further questions remaining, so I'll pass the conference back over to the management team for closing remarks.

Thanks. Thanks, operator. This is Chris. Thank you all for joining us today. And please feel free to reach out to Julie Milstead if you have any additional questions. We look forward to speaking to you all again on our next quarterly call. Thank you.