CIDM - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and thank you for your patience.

You joined the Cinedigm Corp. Fiscal 2019 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. reminder, may a recorded. As Instructions] this be conference [Operator call to your Calcaterra. I like the over Jill would now President, turn to Vice host, Executive you begin. Ma’am, may

Jill Calcaterra

and you for Thank Officer, joining – Chris of Chief Gary Officer, call I’m Head apologize. Financial XXXX and are Good I you, call Jeffrey thank McGurk; Loffredo. XXXX, our in Atif. earnings conference Chief us first General our Cinema, Edell; Executive Participating today sorry, quarter Cinedigm’s fiscal afternoon, and Counsel for Digital and today’s Chairman

company’s Before I management’s over materially statements. the to presented note SEC to financial Potential risks assumptions. business with are please These call reports time. management, risks, and and expectations forward-looking current this certain from described in hand forward-looking uncertainties differ statements company’s are the to contains periodic on call time to that the filed the and results subject on based and from statements that these are uncertainties information cause could

All undertakes today, and August of and is as update intend XXXX, not on of discussed Cinedigm does duty events the or XX, to future circumstances. call no this information

certain in financial And the non-GAAP I’d presented call represents measures. turn Chris financial call like addition, to McGurk. to information now over this In

Chris McGurk

Thanks, everyone call Jill, the for and thanks today. joining on us

channel that and results at flow developments. continued streaming business, We’re our ago quarter of business in and expectations, launches many announced accomplishments first during OTT brief quarter, last since distribution overall XX% our China today exceeded the the content keep initiatives first particularly call adjusted going the the with we deal this to business and eight Overall, in we new just and weeks growth internal generated our our which progress EBITDA from our and time. held strong

digital-first our made titles for our the digital services. progress programming, OTT revenue first advancing three our to high-margin the we’ve networks quarter, a of from and nearly linear growth direct-to-consumer OTT foundation XX,XXX nine agenda During our streaming significant build flow

rights Our has partners partners. adding first diversifying effort We added streaming content. music key lifestyle, been and in several of rights into new our additional and channels network thousand for space expand three Gatherer, hours and CombatGo arenas sports HallyPop, our in content base right in the of to digital

we agreements various launch. which Networks industry, additional market-leading we a currently TV announce XX as of Our and OEM the top at signed OTT effort order distribution manufacturer, five three deals scaled platform next significant another with in to been our has in to footprint, XX% sea-change a expand capitalize widespread quarter. the services. of up more which and deals in Due well MVPD, over our have grew negotiation. last on two key OTT Sling all service distribution We year ad-supported from and the DISH OTT to OTT with XX% critical Key migration of XX and to prior to the of multi-year platforms than as streaming fully consumer upon stages growth OTT is agreement base partners, top will included the

Our continue to connected this million the near to XX grow than expect in current reach, footprint future. devices, increased by that more million we covers that, quarter, XXX addressable considerably which and

as effort leverage partner key advantage. a digital unique third supply and OTT footprint Our has chain been competitive to our

driver. high-margin additional branded we OTT incremental OTT distributing throughput by business chain are content increased have unique linear owned additional to deliver and scale more AVOD we’re services digital and supported all As the than we streams platforms four and operating now to channels add to inhibitor OTT advertising, dependent to of ability manage grow, stack. additional a and revenue Year-over-year, single to a of one content, continues our is key our creating OTT launching content on opportunities and ability targeting competitors revenue the digital revenue all separate technology our and content competitors By networks global from only to and footprint of third-party by OTT of at services, supply solidifying our high-margin expanding XX%, our revenues. And licensing subscriptions, significant a partners our those are and generate whereas streams. and and and SVOD, almost and foundation direct-to-consumer SaaS state-of-the-art

equipment original fast-growing strategic partners robust and giants, a Fortune Scripps. have start-ups XXX we new value opportunities OTT bring with growing to who the and pipeline streaming We manufacturers, OTT and the of assets telcos, branded technology expertise

National signed quarter, partners, new be we Committee, bilateral movies, aimed with streaming at to Beijing and Festival, audience, accelerate which fourth quarter the fiscal per to agreements OTT at the plan quality launch this programming of we and YouTube the in Geographic forward, two content for YouTube; between services cooperation plan Alibaba-owned network U.S. April services did six to In our of channel the China. leading just business and the the entertainment the a six to North service, Film create including the we programs Chinese to we These quarter. younger considered as China Cooperation In announced and I close two the and flow the expect new International Chinese to considered China, an TV quarter. to number additional China; future, the in partners this sector in provide deals be content distribution China content during will regard America, Western of three form Going to technology Chinese short foreseeable

negotiating of deep leading for OTT entertainment with in currently this We arrangements are companies. Chinese middle new channel content supply the

original cooperation emphasized the over also entertainment studios we XX three the One China. We presented territories. between the At programming Road festival, include from top the to in to a Belt flow films agreement of plans two two and expect One addresses China our this signed that increase with content of cultural

and same and in flow close with in the both and China broadcast, coverage and working Overall, fact providing in raising key the by with That and companies the OTT underscored majority U.S. content the competitive in been advantage, and at content Chinese regulators partners relevant and intently while media support Hollywood, that support clearly agencies. we’re online major which regulatory positives noticed years the approved both two producers investment relationships OTT and bilateral profile audiences, China time, our media our the combined All both company to in both are business widespread only Chinese Chinese our distributors. of businesses. supporting in and print initiatives, has that that China activity from American a generated and from our U.S. the for content government strategy model media media and last significant across our players stems significant of

in stated incremental revenues theatrical with we all releases to $XX from we of Hollywood content revenues expected and As revenue the and deal streams China generate via in this significant steady-state. previously, activity company when reaches OTT, it digital generate million Starrise for in licensing, expect annual China new the to alone

of call that high We’re results also China. identify and over financial to business outreach hope to that, review I’ll some turn for currently the other points. for announcements with in now some with an make We key process soon. our to Jeff potential And a initiative regarding Hollywood Jeff? high-profile in release in films

Jeffrey Edell

Thanks, Chris.

more confusion two XXXX, I’d financial in with our our our effective have we cinema All sometimes company’s report of Digital April reclassified and of reflect with business results avoid to how Cinema, results our and other to and called to these to CEG, digital financial comparison Beginning review revenues; we’ve equipment revised evaluate the been fiscal purposes Content for performance. that financial point primary Entertainment was results, or Before and as I now we like prior operating well. reflect first segments now public quarter our reporting the X, that new changed as business, directly closely we reporting to discuss it. the periods previously XXXX, segments: out refer but

to the New fee-based of for billing, Our to as the collection, It installed Zealand XX,XXX vehicles theaters cinema screens directly and administration services. and verification equipment to and we also over financing exhibitors support The provides form in Digital XX Australia well seven as that approximately monitoring, Canada other includes in customers years ago. United Cinema services movie movie third-party States, in business throughout the and equipment and non-recourse

branded Entertainment Our Content market curated and channels segment OTT in and entertainment network providing includes and digital ancillary business, content of distribution aggregation entertainment and applications.

is first breakdowns Content XXXX Entertainment business. build effect adjusted we by internal our across changes, now our we view we and the Additionally, revenue OTT slowest expectations this our fiscal to have Despite the investors one under the new our in OTT In primary provide we EBITDA business top network and our ASC strongly streaming which of our of being that Overall, these will for periods, of year, growth XXX solid very making strategy, quarter. new of digital a performed clear and focus revenues. overall. contract in in grew revenue companies XX% standardizes which OTT our line will which worldwide, X% includes exceeded related during driven segment, believe recognition streaming

fiscal For million. $XX.X the consolidated of revenues quarter first were XXXX,

revenues revenues, offset to contracts of as which, partially strong season, X% end stages business was XX-year reaching I had in first the quarter by increase deployment their the very combination a are as a decline the million. business as and activity various terms. cost the declined decline in consolidated we at just said, despite result and for for the this $X quarter. up recoupment Entertainment Content Again, This equipment As our contracts expected, cinema the slow total of were an of contracted of sales

our Our reflected be business and this total were increased quarters. and were in Blu-ray Those future the the also quarter billings in will year-over-year up digital results billings recognized XX%. XX% DVD OTT

streaming to quarter related million. Entertainment quarter Content decreased expenses first our revenues for XX% year period, advance total prior segment. the a primarily were content fiscal in to and to Direct down million, of amortization the business and OTT in $X.X $X.X digital the due reduction in compared first operating Our XXXX

streaming reduced debt the $X in last million result in competitive fiscal show our with of the achieving. that to on first compared balances respect the solid position debt compared and reduction quarter, we’re balance. was payoff to this of full expense attributable a greenlighting process decreased $X.X fiscal quarter convertible our equipment businesses the the to million, prior loss net cinema results the XXXX, million, strong in shift revenues particular continued of the primarily the of XXXX is undertaken. a to As $X.X in quarter the loss to first to selection a efforts $X.X expected period, also XXXX. the we IRRs our for fiscal model quarter and higher-margin contracted acquisition first decrease XXXX. common the current to The process discussed and former XX% $X.X million to particularly the improvements business improvement that have our fiscal shareholders Despite million XX% of underscores and call of Interest in quarter This we the the reflects the of our streamlining cost in compared

the $XX.X months, continue debt East Chris? our Bank, now liquidity. Bison further the our our to by to reduced million we Finally, and that, turn Chris. back With West we strengthen over sheet call with banking partner, work I’ll to last to evaluate our and balance improve XX new and opportunities additional

Chris McGurk

in partners our substantial important that, bilateral you putting we OTT OTT and summary, now have. and entertainment any this content made in may quarter, the Jeff. initiatives questions our expanding And results footprint place with streaming Operator? take we’ll In China. and were we’re in Thanks, our with strong progress

Operator

Instructions] of Investment. of question Thompson sir. comes the Lisa line first Yes, Our Zacks [Operator from

open. is line Your

Lisa Thompson

Hi guys.

to all to competitive people interested do of seems your of in kind be every overall day. kind people about Just OTT discussion schemes I How the with you single sorts of channels cut have and kind you talking a your would. OTT curious introduce? as I’m as through And entering strategy landscape. What if So, picture big what find to you? was to is? of just advantage There

ChrisMcGurk

record as as a entering with XXXX we’ve a and years to Let But you the aggregators of channels, I call try big Netflix around having think, four the the one streaming That’s respond track actually that newbies, opposed want OTT record being of to these said, digital if to bit. successfully off iTunes some of time for very since the of launched first track got the all now have that have of that of streaming them, space, pipeline me and of we little others. key we to question. launch content ground that a are the a of and

streams our to channels existing expertise, help feel, et others our advantages we’ve standpoint, we foremost, our more think broad channels our standpoint, content, who that become different about now digital the and or first – everybody in are again, than deal cetera. is this handle et generate a between array bigger cetera. single fact only see got channel our us talked the streams. one to players given even the track entering given either standpoint, space that’s of that one think, a flow that’s OTT because to service we has generate going And services, assets a almost of separate we from the the And and of I have, proven record, as on from partnership deal why from record have. we’re content can So That’s licensing I given revenue track whereas servicing technology SaaS is launch at – launch of expertise in streams almost of entering remarks advertising, the ecosystem revenue in them company revenue subscriptions, launch that a those us why can and with my or why a a else space go-to some poised provide the flow, time, services a with we that four of the I

going America, And over So attractive poised given entertainment very we’re China to shifted I because I that the that I in all the has in our And where China, positioning sort I we a attributes the global an companies to why traditionally mentioned, very there a extremely be think, – It’s business to streaming it’s to in an again, in in that taken well they’ve top this ways. the the that’s, viewing going $XX connection in nutshell, on advantage take that habits of think it sea-change there’s in a the very consumer bear streaming. to which of China, And is again, of billion that off business partner North we’ve that good able North number China. in difficult been addition soon. got has marketplace been all, partners remarkably feel our with in industry we’re assets same about in to the is to and government crack mentioned so other the the hopeful relationships have going bring And be make ground. in with for we’re us already market of and our on we’re to American boots we business.

Lisa Thompson

All right.

in are into look we past already announced, there do sort you’ve new put going that channel plan either have what platform, you when you any are go forward? how what decide So – vertical, would you could how or what you you some you people to your of at interest interests buying to that your on do out

Chris McGurk

Yes.

we stated, in – our it is increase our when high-multiple goal, streaming quickly EBITDA EBITDA as to through possible. particularly revenues as mean, high-margin, last conference all, call, think in revenues in you I I as cut the

evaluating to our also whether to point, in financial Fortune as when OTT a that way to going for with increase billion the potential into in launch can as and our your are maybe target that as looking revenues opportunities, at So sort possible. energies those space. we’re a we quickly quickly own That’s plays try aggregation news partner content of general or acquisitions $X company. deals, as think servicing possible entertainment channels, initiatives, again, our To grow this digital it’s against we coinvest a our is to to do channel, XXX analysis the company, bottom us line we’re channel

it. We’re careful disciplined about being and very

if, do meet of increasing EBITDA. of We’re to only again, and having a going revenues streaming high they probability parameter that acquisitions dramatically our

streaming they to only business. We’re on the news if one are The of going do good the that strategics of deals we’re the side is accretive. that independent few like operating

capital try do our the our we up are price We dramatically fundamentally we’re advance our can position be need great to consolidation top a us much that of boy improve our a as for that really in of utilize our much, will smaller whether out And as organically, partner that and we is that the business. seeing do see at opportunities that They have we now going can they help that good to among accretive share year And assets East to You’re strategics been We’ve very But they willing them to say And we’re a strategic And if particular partner. deal. talking could versus have don’t opportunities. great space who’ve a working lot a deal. have is there companies in to faster employ us that best scale these changed, fortunately, has because West a us to undervalued. or had got to see another at do find we have is investor deal more they all very our too. the that financial than against right the see growth majority ago Bison capital now move stronger a sheet. currency, want we’ve agenda to do help big opportunities balance more We I’d the end where think partner there we forward. our agenda metrics. look said to with have and can Bank if the

Lisa Thompson

All right.

So one question about China.

be to some theatrical have You happen? of far that’s of we that when some And is said shortly. or How you content see going that are sort going distribution, announced be off to to going release sort sort should that is some that? of

ChrisMcGurk

got our for – content negotiations five to going six supply Yes, what to streaming going see is or you’re channel, okay. we’ve we’re

that not would So of into some digital take released again, which way it. on are to XX which content opportunities are on similar our be of very very be that be content some disciplined other platforms theatrically it, We’d content it, XX – channel. the window here, of we’d original there, license in There – in That films, over theatrically maybe of be probably would strategy. released Chinese released platforms but digital to it going that includes original a selective domestically. all may we’re about not up China Netflix’ out also to to here and careful some

papering think, expect announcements the deal which probably see So soon, which last the is can we to regard with agreement you and of digital deal I some on into the China, I where on that ultimately, channel. are of release, to starting productions it’s to original XX is with our close here the in a mentioned very call, YouTube that we long-form their a Youku, think, markets,

Lisa Thompson

Okay, left else questions. great. somebody I asking

Chris McGurk

Lisa. you, Thank

Operator

question next Our Instructions] comes [Operator from Terry line the Hackett you. Thank of Management. Hackett of

is line open. Your

Terry Hackett

been you’ve busy. Gentlemen,

Chris McGurk

have. you, we Thank Yes, Terry.

Terry Hackett

burn around how be more might have – to the into to the if like bit, recall, both just off but any the got but it’s the value to you a on wonderful. creating with debt equipment And I again, some to briefly. to turn cinema as and debt I’d and got which dismissed gets I thereafter, It significant be fun that equipment value? be is contracts gone. and insights wondered inherent And captured realize on that there’s XXXX you

Jeffrey Edell

you go the of will to up but actually own remember, systems. in is as we end number go value probably the don’t don’t – systems on the systems XXXX, fall it XXXX, X,XXX-or-so that, really have of or can timing little at and Terry, these any we sell know do bit off. than a there equipment And the we things, could because necessarily value view we a substantial it the make longer

debt as with a and be amount that’s to that Phase we So then and compared theaters going will schedule in to of owe. all to depend X release forward, theaters X opportunistic Phase be lot’s coupled looking us, equipment the on in and to moves the the X that Phase from purchase the X Phase

in You see Cinema Digital reductions like made debt. in alone just this significant quarter $X.X we’ve the million

team we’re so to XXs want high-interest now, so And $XX guideline. to debt, flow the us. down is in Loffredo it working as below with pretty returned our on quickly through paid gets upper equipment to Gary next And cash the we selling dropping it’s thing million as sort his close it as business, then get possible that the and into of magic the

Terry Hackett

Is know there But again, worth? wonder some I say, around gee, to is target, I way Jeffrey, that sit those. quantify but time significant there what a and in do inherent value it’s you that. moving is any

Chris McGurk

any of We math equipment very those projection projections worth. what or issue It’s do. given individual Terry, systems might and been that number – lay systems to in though out careful kind pretty as about we’ve or don’t some we what We do, make easy of to guidance, own assumptions but sold of do we’ve not the be the leased the we putting assumptions for. projection terms might be any

Jeffrey Edell

don’t I the on we $XX you they’re can depends to If interest for would the the we’ve would later banks again certain we piece sell release on If We We’re it’s just that And do. do again, know X working amount value. when and earlier number. reducing mean, us. were modeling number information, tacked systems determine let others internal of be able want we it a been always know sales at sold a on of there a what that to equipment to publicly and back to interest on on, banks that because note. of $XX,XXX million interest. much just at There constantly if math of be don’t the percentage on, so scale. systems comes accrues more sold debt

is predict and back to that’s going systems coming were when we’re us, realize the difficult to something starting just to it be So to now.

Terry Hackett

be for this there all assumptions I some on have would if during and at is realizing that nice the that to the fiscal we’re think, you I shareholders your I in would not upon because numbers, here inherent and look think might it value Well, of Good. year, stock desire appreciate you range even caveats the that value. place a take a formula

ChrisMcGurk

We’ll best pay and we it. Yes. do the to can, attention also

we’re like reports indication some they up, from and I’m sure trying some others Zacks we’re have getting the may value Now research own research and of residual the pick their and value ones coverage, that various to themselves.

look I’d all for So out of that.

Terry Hackett

Good. Thank you.

Operator

this like call the to any to Sir? McGurk time, closing At I’d back turn Chris over for remarks.

Chris McGurk

thank November. very Well, you both base we attending be on streaming you speaking quarter. hope we well in and the good to Again, We’ll November. And for business, strong business call. again for progress a all We the you lot in similarly felt have a we of we China. had a our and OTT had report in as

So thank all. you

Operator

you, for conference. Ladies wonderful day. and your today’s you and Thank have Thank this sir. concludes gentlemen, participation, a

disconnect may time. this You at

Cineverse (CNVS) 14 Aug 182019 Q1 Earnings call transcript