Cinedigm Corp (CIDM) 2022 Q1 法說會逐字稿

Good day, ladies and gentlemen. Today, we are hosting a conference call to discuss Cinedigm Preliminary First Quarter Fiscal '22 results. (Operator Instructions) Please note that this conference is being recorded.

I will now turn the conference over to your host, Ms. Laura Kiernan, Head of Investor Relations for Cinedigm. Please go ahead.

Thank you, John. Good afternoon, everyone, and welcome to Cinedigm's Fiscal 2022 First Quarter Preliminary Results Conference 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. Potential risks and uncertainties that could cause the company's business and financial results to differ materially from these forward-looking statements are described in the company's periodic reports filed with the SEC from time to time.

All of the information discussed on this call is as of today, September 2, and Cinedigm undertakes no duty to update it. In addition, certain financial information presented on this call represent non-GAAP financial measures.

With us today, we have Chris McGurk, the Chairman and CEO; Erick Opeka, Chief Strategy Officer and President of Cinedigm Networks; Gary Loffredo, Chief Operating Officer, General Counsel and President, Cinedigm and Cinema Equipment businesses; and Yolanda Macias, Chief Content Officer, all of whom will be available for questions following the prepared remarks.

I will now turn the call over to Chris McGurk to begin.

Thank you, Laura. Welcome, everyone, and thanks for joining us on the call today. We're going to keep our prepared remarks very brief today since we've had several updates with you recently, including the full year fiscal '21 results conference call, our presentation at Sidoti, the detailed shareholder note I sent out in advance of our annual meeting and the new investor presentation we just posted.

So this quarter, we are once again reporting record results. We're in a great position as a company, situated squarely in the middle of the fastest-growing segment of the global entertainment business, streaming.

Our streaming revenues increased 181% this quarter, including 301% growth in the all-important ad-supported streaming revenue business and we have a very strong balance sheet now with 0 debt. So there's an enormous opportunity now for Cinedigm to leverage this very strong financial and business position to continue this very rapid growth and all of it is supported by what I consider to be an exceptional management team that we continue to enhance.

We generated total revenues this quarter of just over $15 million, a 149% increase over the prior year. This was driven by our triple-digit streaming growth, which we generated despite a traditionally seasonally slow streaming quarter and also from the recognition of digital equipment revenues from our sales agreement with AMC.

That gives us great momentum heading into the next 2 quarters, which are seasonally stronger than this quarter. And we generated net income of $5.1 million or $0.03 per share this quarter, another key strong indicator of our building financial momentum. And all of our key streaming operating metrics, which Erick will review in just a minute, are shooting through the roof. So I won't steal his thunder by going through them now.

Instead, let me just comment on our management team. I believe one of Cinedigm's greatest assets is the exceptional executive team we've assembled over the last few years, and I consider it to be one of the best in the business. It's a key underlying reason for all of the quality deals and partnerships we've been announcing recently and for our business and financial success.

As a well-positioned rapidly growing company with a high potential public currency, we will continue to enhance the team by attracting high-quality industry management. Expect more announcements in that regard soon. And we also continue to enhance our Board. The recent addition of Ashok Amritraj, a vastly experienced and respected producer, filmmaker and UN Goodwill Ambassador is a very clear example of this.

Now I'll hand things over to Erick Opeka, who will speak to our streaming business and strategy. Erick?

Thank you, Chris, and thanks to everyone for joining the call today. Before I dive into our results, let me start by talking a little bit about the macro environment around streaming and the significant opportunity we're tackling.

Recently, Research and Markets, one of the top global market research firms, up their forecast for the combined global ad and subscription streaming markets to nearly $166 billion in aggregate by 2025. And beyond that, a new report by streaming research firm, nScreenMedia, forecast the free ad-supported streaming television or FAST market to double in size to over $4.1 billion in the next 24 months, which is incredible for a business that barely existed just a few years ago.

What these and other recent data points affirm is an acceleration in revenue growth in all facets of streaming models, AVOD, SVOD and FAST. This is driving considerable demand for streaming content channels and technology and Cinedigm's model as a provider of all 3 makes us a unique in-demand partner for the company's directly responsible for the global streaming revolution.

Now let's discuss our recent streaming-related results. Despite late spring and early summer being somewhat of a slower period of the year for streaming as people spend more time outdoors, we completely bucked that trend by delivering the company's highest streaming minutes on record, record streaming revenue growth and continued strong subscription results.

As Chris stated, our streaming channel revenues, where we operate ad-supported and subscription streaming services were up 181% over the prior year quarter. And as part of streaming channel revenues, our ad-supported streaming channel revenues increased 301% over the prior year quarter.

Subscription streaming channel revenues increased at 88% over the prior year quarter. Additionally, our streaming digital content licensing and sales business, where we provide content some of the most popular streaming platform partners in the world like Amazon, Apple, Fox, Tubi, ViacomCBS' Pluto TV and others increased 61% over the prior year quarter, the fifth record growth quarter in a row for that business.

In aggregate, our combined streaming revenues were up over 115% over the prior year quarter. This revenue growth has been impressive and has been driven by equally impressive growth in our viewership KPIs, which drive that revenue. Our total streaming minutes in the quarter increased to approximately 1.37 billion, a new company record and up 18% from the 1.16 billion in the prior sequential fourth quarter and up 386% versus the prior year quarter.

Monthly streaming minutes in June '21 reached approximately $504 million, a new company record, and up 349% versus June 2020. Total monthly ad-supported streaming channel viewers in the quarter were 22.5 million, up 186% versus 7.9 million in the prior year quarter.

Total live streaming enthusiast channel brands under contractor distribution increased to 25, up from 16 in the prior year quarter. Finally, total subscribers to the company's subscription video streaming services exceeded 679,000 subscribers at the end of June 21, up approximately 38,000 subscribers or 6% over the prior sequential quarter and up 558,000 or 450% over the prior year quarter, and this was due to continued expansion of both our third-party distribution and wholesale distribution deals.

In addition, during the quarter, we closed on the acquisition of FoundationTV and formed Cinedigm India. This acquisition provides Cinedigm a key competitive advantage as one of the few companies capable of delivering channels, content and technology services at the global scale demanded by the world's largest technology companies who happen to be our customers. It also provides us a base to enter the South Asian market, the second fastest-growing streaming market after North America.

We also announced the upcoming launch of exclusive AVOD and linear streaming service to the Elvis Presley channel in partnership with Elvis Presley Enterprises and Authentic Brands Group. The channel will feature concerts, films and series celebrating the King of Rock N' Roll. And we also announced a distribution partnership with music, television linear cable network, The Country Network. These and other recently announced deals, such as our new agreement with Robert Rodriguez in the El Rey Network illustrate an important strategic approach to our channel business.

We're helping well-known media and consumer brands and celebrities make a rapid and lucrative transition to streaming. As illustrated by the short duration from announcement to the launch of El Rey and Real Madrid TV, less than 2 weeks, we're now providing end-to-end services, scale distribution and rapid time to market that we believe are unmatched in the streaming industry.

As we add these high-profile new channel brands, rapidly expand our distribution and monetization and continue to source and acquire new premium programming, we are well positioned for significant growth in our 2 busiest quarters of the fiscal year.

With that, let me turn things back over to Chris.

Thank you, Erick. To quickly summarize, we are now in the strongest position we have ever been in financially, operationally, competitively and from a management talent standpoint.

We expect the rapid growth we generated this quarter to continue, and we will augment that organic growth by targeting smart, accretive acquisitions that accelerate our streaming momentum. The future looks very bright and we are delighted to have such a supportive investor base behind us. And with that, we'll now take your questions. Operator?

(Operator Instructions) Our first question comes from the line of Brian Kinstlinger with Alliance Global.

Great revenue and bottom line results. So first, I'm curious on Real Madrid LaLiga channel. With that season starting, I think there's been a couple of matches, have you been able to launch that in time for the start of the season? And if so, can you talk about what viewership has looked like thus far?

Yes. So we did launch the channel, launched last week. We are -- we haven't fully got in all of the streaming data. We have to aggregate from a lot of different partners. But so far, the early results have been promising. And I think the demand out there, we have an unprecedented amount of demand to carry the channel. We're only in a few locations today.

I think it does have the opportunity to become one of our top channels very quickly, just given these early results. Still early, but I think we're very pleased with even the results off of just a small distribution base off of week 1.

Yes. And then speaking to that as well as you've talked about some on your last call. I think it's clear, Bob Ross to date has been your top revenue producing channel. You've got Real Madrid now live. You've got the Elvis channel soon to launch, I'm sure some others. First of all, how many channels do you see either live or in the pipeline that have the potential, in your view, to surpass Bob Ross? And when is the time frame on how long you think that will take?

Sure, sure. Well, look, I do think, once again, these 2, I'll call them, temple channels, El Rey and Real Madrid just launched less than -- a week ago or so. So the numbers are very preliminary. But I do think those 2 -- if we -- if these early results play out, they could be peers of Bob Ross in terms of revenue; if not, exceed Bob Ross, but we have -- obviously, we have to wait and see how they perform as they roll out more broadly.

But the early results, especially on Roku and others are extremely promising. So -- and as I look to the future and the pipeline, my perception is that there -- that we have multiple channels that could perform this well if we indeed get those launched and up into the market this fiscal year.

And then I thought you said you have 25 live branded channels. I think last quarter's number was 19, although maybe I have mistaken one of those numbers or maybe that's not apples-to-apples. So maybe just if you could quantify the live number of channels you have right now. What was it last quarter, if I had it wrong? And how many do you have in development?

Yes. So we have 3 channels. So that 25 is reflective of both live and in development. We have 22 -- I think we have 22 that are live currently. We've been launching channels pretty rapidly, as you've seen. And the turnover time is a lot quicker for channels than it's been in prior quarters.

But I would say some of them take longer to develop and launch. Others are -- others can be brought to market incredibly fast, as you saw with El Rey and Real Madrid. So our thought is that we like that model of getting them to market obviously quicker because we can start turning the revenue much faster.

Brian, if I could just add to what Erick said. This portfolio approach to the streaming business is an incredibly important part of our strategy, and it's another element that really makes us unique. There are so many folks operating in the streaming business that are completely dependent on 1 or 2 channels for their success or failure.

And we're able to attack things in a much different way with this true portfolio approach where we're constantly adding higher-quality channels. And you've seen the recent announcements we've made into the portfolio, while we're dropping underperformers. And it really is a risk advantaged way for us to tackle the business, and I think really sets us apart from almost everyone else in streaming right now.

The good old GE model dropped the top -- bottom 5%. Last question, Erick, we've talked now for a few months about stronger render rates given your new technology and partnerships. As we go to the September and December quarters, you've got higher seasonal CPMs. You've got more channels, the channels you have now are extending further.

Will we see those numbers start to break? And again, we haven't seen the numbers until the 10-Q comes out. But are these the next 2 quarters coming up that we'll see that really break out growth, not that the growth hasn't been great so far in the September and December of course for OTT and streaming. It seems like all of those things with the render rates make us set up for even much stronger September and December quarter, if I'm not mistaken.

Yes, you're right in the sense that the current quarter that we're in right now plus that we're -- we'll be closing out at the end of this month plus the next quarter are really -- and really, what's interesting is the first quarter of the year used to be seasonally slow, but we didn't really see that happen. This year earlier, we saw -- we kind of blasted through that in growth.

And this summer -- this quarter that we just reported here, we bucked the trend, which we usually see it start to drop off. We actually saw it accelerate sequentially. So I think we are -- now that we're going into multiple quarters that are the best quarters of the year and not seasonally slow. I think we -- just given what you're saying about render, our performance on rendering ads is fantastic.

We're going into the busiest and most in-demand CPM period, and buyers are incredibly interested in this inventory. Now we have fantastic channel brands and content that need no explanation to advertisers. They're already familiar with that Ray. There was a cable channel for a long time. They're already familiar with Real Madrid, #2 most popular football club in the world.

So we just don't have that sort of ramp up where people have to get used to a new brand, a new audience that we had with previous channels. And I think that's all of those things. If the audience continues to show up the way it has been, could put us in for some pretty good growth over these -- the next 2 quarters.

Our next question comes from the line of Dan Kurnos with the Benchmark Company.

Great. Really solid quarter guys. Good momentum continuing here. Maybe just to kind of follow up a little bit, I think, Erick, sort of the peaks and valleys and AVOD have been a little bit skewed by mobility.

Obviously, you guys had an excellent quarter in June. And I know it's kind of -- I mean, I guess we're technically in September here. Is there any kind of pacings or kind of update you could give us just on how sort of September quarter viewership metrics are trending at this point just to kind of get a sense of kind of the backdrop.

Yes. So far on the viewership, and once again, I'm continuously impressed with what we know to be continually slow periods. August is typically summer vacation. And what we have seen so far out of August from Bob Ross to all the other channels we have is once again record-setting results as we've seen in prior periods. So, so far, we're pacing incredibly well.

One of the things that we -- the Bob Ross documentary on Netflix, all it -- while there's a lot of controversy around it, one thing it did is to get everyone -- it's not controversy about Bob Ross, it's Bob Ross is considered the hero of the film. That's driven an incredible amount of interest in watching his content and we've borne the benefit of that.

You combine that with the new channel launches and things we have. I think we're very well poised if it's early, but if we continue to see the kinds of early results that we're very pleased with, it could set us up for a similar high rate of growth sequentially that we've seen, if not greater.

Got it. That's super helpful. And just to be clear, I guess I was going to ask about the Netflix documentary, so thanks for that color. But just kind of incrementally, if we just look at the user metrics and we sort of strip out some of the acquisitions. And by the way, I would be interested to get an update on how Pandora is performing given that it was a bit of a fixer upper, you would -- your message would be that the underlying organic growth is still continuing to accelerate while you layer on bigger channels. Is that fair?

That's a very fair assessment. Our focus is it's -- I would say the parallel would be in retail. You can grow top line by opening new stores, but if you're not growing your sales per square foot, eventually, things catch up with you.

It's the opposite case for us where not only is top line growing because we're adding new channels but we've learned how to squeeze additional revenue out of the channels we have by better programming, by better technology, improved render rates, greater fill rates, higher CPMs and finally, an investment in more content, which keeps that flywheel spinning.

So I do think all of that in aggregate. In terms of Fandor, we are on track for that service to relaunch. So we will be making announcements about that pretty soon. But even without the relaunch, we haven't been resting on our laurels. We don't break out individual channels. We only report in aggregate because we think that gives us sort of a better directional picture, given just how many services we have.

But I will say that Fandor has been growing quarter-over-quarter even though we haven't relaunched it yet. So we're very pleased with what we're seeing out of that growth, and it bodes very well for when we do relaunch it.

Awesome. And then, look, you kind of alluded to this with Real Madrid. I know it's super early, Erick, I think you said that about 10x and it's there. But in terms of expanding distribution and then the kind of, I think, the commentary that continues to be hammered home here is that you guys are moving upstream, winning bigger deals.

How important is it that you have kind of the early success that you're seeing with Real Madrid? Are those doors already kind of open for other kind of larger-scale channels? Just kind of help us through either if that accelerated if you were having those conversations or kind of some other mix of the 2?

Yes. So I would say our success -- so Real Madrid aside, which, like I said, we're pleased. It's early days, but it's growing, but it is showing the viewership that leads us to believe it's going to be as successful as some of our best channels, if not more successful.

But even before that, we've already been having both -- having considerable conversations that we think is really based on just how well we've been handling major brands. And by the way, it goes beyond just the channels we're launching, right?

We've been partners with the NFL, Hallmark and other major media companies for a very long period of time. So the company has an endemic skill in managing and monetizing brands that transcends just these recent channel launches. And I think people are really -- that really resonates with people that we have this long tenured experience in doing that and have translated that experience to now doing it in the fast linear app and AVOD space. So we have lots of active conversations with brands that are on par or even bigger than the ones that we're contemplating here today. And I think you're going to see more in that trend if we're successful the way we have been.

At this time, we have reached the end of the question-and-answer session. I will now turn the call over to Chris McGurk for closing remarks.

Thanks. So Thanks, everyone, for joining us today and for your continued interest and support in Cinedigm. Please follow-up with Laura Kiernan and the team at High Touch Investor Relations with any other questions that you may have and she can be reached at cinedigm@htir.net.

So we look forward to speaking with you again soon when we report our second quarter results. And that concludes the conference call. Thank you all.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.