Q4 2021 Cinedigm Corp Earnings Call
Good day, ladies and gentlemen.
We are hosting a conference call to discuss Cinedigm is preliminary fourth quarter fiscal 'twenty 'twenty..1 result at this time all participants are in a listen only mode. We will have a question and answer session at the end of the call at which time all participants wishing to ask a question will be instructed to press star 1 on identify themselves before asking a question.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Note. This conference is being recorded.
From the conference over to your host Laura Kiernan head of Investor Relations. Thank you you may begin.
Thank you very much good afternoon, everyone and welcome to <unk> fourth quarter preliminary results call before we begin I would like to point out that certain statements made on today's call may contain forward looking statements. These statements are based on management's current expectations and are subject to risks.
Certainties and assumptions.
Risks and uncertainties that could cause the company's business and financial results to differ materially from those 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 as of today July 14th 2021.
Uh huh.
And Cinedigm does not take does not intend to update.
Until we file our 10-K him with US today, we have Chris Mcgurk, Chairman and CEO, Eric a pizza, our chief strategy officer unprecedented centered on networks, Gary Loffredo, Chief operating Officer General Counsel on President.
So on a dime and Cinedigm cinema equipment business and senior Vice President of accounting Sheryl.
Oh D Rd, who as well as the Wanda Mafia kind of content.
All of whom will be available for questions. Following the presentation.
I will now turn the call over to Mr. Chris Mccarthy again.
Thanks, Laura welcome.
Welcome everyone and thanks for joining us on the call today.
Before I begin I wanted to address the delay in filing our 10-K, which we expect will be filed very soon.
We're obviously not happy about it and we apologize.
We pledged to become much timely or in our financial reporting over the next few quarters, because we owe that to our investors. The challenges we experienced a reporting on a timely basis, partly due to our growing pains as we have made such a major transformation in our business to screening, which is growing extraordinarily fast organically.
And with 5 acquisitions that we've made over the last few months on top of that.
Given all of that we clearly need to staff up and finance to enable timely reported and we will fix that.
And we don't want this the way to take away from the fact that we had a tremendous fourth quarter perhaps.
Perhaps the best in our history.
So rest assured our results had nothing to do with the delay.
So now I'll provide an update on our corporate strategy and key investment highlights then I'll turn things over to Erik for a more in depth review of our streaming business results and.
And Gary will cover the continued remarkable progress we have made over the last few months and on.
Eliminating debt and strengthening our balance sheet.
Then we'll open the call for Q&A.
Finally, I'll provide some closing remarks.
So we're thrilled to tell you about our preliminary results, which we believe represent the best overall quarterly business results in our history.
The dramatic growth on our streaming revenues a huge shift in our overall revenue compensation composition to streaming and the strongest balance sheet, we have ever had.
This performance was made possible by the entire battle tested and capable media and technology team and centered on led by our C suite.
And who all represent the single biggest asset we havent senator or people.
To summarize where we stand now as a company.
We have successfully completed the transition of centered on permits legacy digital cinema equipment business to a high growth independent streaming entertainment channel and content company on.
Underscored by the mix in our revenue this quarter, where our streaming and digital revenues represented 75% of total revenues versus 48% in the fourth quarter last year.
And all of our key performance metrics were outstanding.
Our streaming channel revenues were up 197% year over year on.
Our AD supported streaming channel revenues were up 331% year over year.
Our subscription streaming channel revenues were up 117% year over year.
And we generated our fourth quarter in a row, where digital content sales the key streaming customers like Amazon and Hulu.
Eric will speak.
Specific results.
And more details on justice.
Well, we expect to continue this rapid growth from streaming revenues in the next fiscal quarter and beyond we will also continue to execute our successful streaming asset roll up acquisition strategy that should help drive revenues from our digital streaming business and an even more accelerated growth rate.
This will be driven by our technological capabilities, our distribution muscle a broad portfolio of streaming channels.
Our extremely strong balance sheet.
We believe our strategy puts us 1 step ahead of potential competitors as it enables us to acquire accretive independent streaming our share.
While rapidly growing the business organically, we are in an enviable competitive position as we have a multiyear track record a good digital technology innovator.
A demonstrated capability as a force and launching and managing streaming channels and distributing digital content the entire streaming ecosystem.
We are long term partners with every major media and technology player involved in streaming and have a strong track record of playing well in the sandbox with each and every 1 of them.
I believe it is also very important to note that not only is there a huge potential market for our portfolio of enthusiast streaming channels. This targeted strategy. We are implementing in our current channel portfolio portfolio itself are perfectly complementary to the big General Entertainment subscription services invest.
Our focus on like Disney plus and networks. So we are not competing with those services at all instead, we are a complementary channel offering serving super enthusiastic viewers on every key streaming device and platform.
Now I realize we have some new institutional and retail investors on this call. So I'd like to take a quick step back and provide a little background at cinedigm to level set everyone.
I think this will help put this pivotal quarters tremendous performance until the context of the larger picture.
Under an experienced senior leadership team.
<unk> has been an innovator in the digital transformation of the entertainment industry.
For 2 decades.
And over the past few years, we've transformed from a digital cinema equipment company to being a leading independent screaming company of channels and content, driven first and foremost like technological innovation.
As our digital cinema business wound down we invested significantly in growing our fan centric enthusiastic audience that consumes our 16 lives screaming enthusiasm channel while building a library of more than 35000 film and television assets.
This strategy was implemented under the direction of our Chief strategy Officer, and President of Senate on networks Miracle pick up where you were.
Hear from in just a minute.
Now the primary source of our revenues 75 per cent of the total in this fourth quarter is our streaming and digital business segment.
This business generates revenues through AD supported streaming video on demand called Avon.
Scripture streaming video on demand called desktop.
Free streaming AD supported linear television called fast and digital content sales of films and TV series to streaming service providers like Amazon net flicks Tobey and every other key platform.
And this is all delivered through our world class proprietary innovative streaming platform match point run under the leadership of Tony <unk>, Our chief Technology and product officer.
And it's all focused on brand centric enthusiast content.
Under the leadership of Yolanda M. A C is our chief content officer.
Let me conclude our transformation and under the leadership of getting on the Pretto or CLO. We recently sold a large portion of our legacy digital cinema assets to AMC entertainment for $10.8 million to be paid out in chunks over 2 years. This helped our debt reduction initiatives and I'd like to.
Report as of today all of our debt has been entirely on limited and we have the strongest balance sheet in our history.
It's almost a $50 million debt reduction towards zero balance in just 15 months, we obviously believe that it's quite an achievement.
Now I would like to quickly lay out what we view is centered on key investment highlights.
First the company is leveraging a diverse enthusiasts content streaming channel portfolio with a very loyal fan base that is focused on a huge total addressable market.
To name just a few of our launch and upcoming channels. We have an indie film label with Pandora or content with screen box and with body disgusting.
On the entertainment with the Dove channel and iconic entertainer channels, including Bob Ross and know Elvis Presley.
The total addressable market for this content is extra day estimated.
Estimated to be $3 billion per the U S enthusiast market alone, which means we now have about a 1% share of this market.
A lot of opportunity to grow our market share as we acquire the most attractive independent Uzi is content.
The streaming category is growing at a healthy double digit rate globally. According to Pwc MRI asset securities. Among many others, that's being driven by Avon in ASP on primarily digital advertising spending continues to increase and cord cutting by younger generations to subscribe to their favorite.
Content rather than to unwanted packages. It's also driven by consumer preference towards third party channels and content platforms, a rapid rise in consumption of fast content and media consumption across multiple devices and platforms and brands.
Second Cinedigm is well positioned in this changing media and entertainment landscape and we are driving growth through technological innovation, which is a major competitive advantage for us we have a world class proprietary streaming technology platform.
That enables the company to deliver great streaming experiences at massive scale, our SaaS based distribution platform match point completely automates film and television distribution, while creating and Curating new channel sustainable platforms. This technological advantage makes us the go to partner for brands can't.
<unk> companies and cable channel seeking new streaming distribution platforms.
And finally by executing on our key business initiatives, we expect to deliver sustained growth, thereby generating value for you our shareholders.
These key initiatives are focused around forming.
Okay technology.
And distribution.
Audience and financial performance metrics.
For context, we are executing on a roll up strategy by completing several content related acquisitions, enabling us to super serve consumers driving significant fast either on an asphalt growth.
Eric will speak to this further in his remarks.
For technology and distribution as I said, we've dramatically expanded our gaming streaming content business through the match point platform, which we fully control 1 of the recent acquisition of our India based technology partner Foundation television.
We plan to launch and scale, our channel portfolio by ultimately building, an umbrella or channel. We've established key partnership deals, including connected TV platforms large Oems cable companies and other tech platforms, and we are licensing film and TV content to every key player on the streaming ecosystem.
On the Amazon, Apple Netflix and Google.
Broad age.
We are growing on monthly active users significantly across our entire channel portfolio, which is key to creating long term shareholder value.
And finally for financial performance metrics, we are monetizing our legacy digital cinema business, we eliminated as of today, 100% of our debt.
Enhanced our liquidity dramatically, we are well positioned to drive our cash flow through achievable growth targets, while we balance that objective with rapidly growth.
Top line and market share.
And with that I'll, now hand things over to Erik I'll pick up on speak to our streaming business and strategy Eric.
Thank you, Chris and thanks to everyone for joining the call today.
I'll provide you with some details in a moment, but I wanted to summarize as of June 30th we had approximately 683000 subscribers across our subscription portfolio of streaming networks. We've seen an estimated 116% increase in AD supported viewer growth over the last quarter, and we're setting new records with well.
Over 1 billion minutes consumed in the prior quarter.
We saw major increases across the board and distribution platform expansions and partnerships and this flywheel a greater distribution increase.
Increased viewership and ultimately monetization led to an estimated 197% increase in streaming revenues in the fourth quarter versus the prior year quarter.
This growth we've seen to date in the business.
Our success in executing our plan is attracting high caliber distribution platforms top advertising partners and most importantly premium branded content partners. Given this dynamic we expect to continue our accelerated growth trajectory over the next 12 months as we focus on the rapid expansion of our business.
Let me provide you with our preliminary key business highlights during fourth quarter of fiscal 'twenty 'twenty, 1 which was our quarter ended March 31, 'twenty 'twenty 1.
They relate to soon I'm networks.
First our AD supported streaming channel or Avon revenues increased an estimated 331% over the prior year quarter, and an estimated 23% sequentially over the last quarter.
Our subscription streaming channels revenues increased an estimated 117% over the prior year quarter and 65 per cent sequentially over last quarter.
Our streaming digital content licensing and sales driven by partners, such as Amazon Apple and to be recorded record digital sales billings growth for the fourth consecutive quarter in a row.
Our combined streaming and digital revenues increased an estimated 66% over the prior year quarter and 27% sequentially over last quarter.
Total streaming minutes in the quarter were approximately 1.16 billion, a new company record and were up 285% versus the prior year quarter.
Our total monthly AD supported streaming channel viewers rose to approximately $23.6 million up 248% over the prior year quarter.
Our streaming advertising demand partnerships rose 178 per cent to 64 partners up from just 23 in the prior year quarter.
Key new partner additions included Comcast Freewheel and triple lift.
On top of that we grew our film and TV library for linear streaming which is a key growth area for the company by 88% to 6591 film and TV titles up from 3502 titles in the prior year quarter.
On top of that we increased streaming platform partnerships by 82% to 31 versus 17 in the prior year quarter, including new linear distribution partnerships and increased distribution with partners like T. C. L. Roku Vizio and other key OEM and smart TV manufacturers.
Total streaming channel distribution deals increased.
Increased 170 per cent to 135 deals up from just 50 in the prior year quarter.
Total live streaming enthusiasm channels increased to 16 brands under management and lives up from 13 in the prior year quarter.
Also in the quarter, we acquired <unk>, the leading global independent film subscription streaming service with the largest collection of the independent films documentaries and international features in the market and called the Netflix for indie film by the Wall Street Journal and a streaming rabbit hole worth falling down by the New York Times.
We also acquired screen box of popular enthusiast streaming service targeting the highly lucrative horror genre and called the perfect horror streaming alternative to Netflix by Tech time to name 1 of the best streaming services for 'twenty 'twenty, 1 by PC magazine.
We also acquired the films around the World content Library, adding 150 classic feature films with perpetual licenses and remake rights into the Companys content library, along with an additional 500 hours of classic audio content.
Now, let me speak to some of our key business developments and recent announcements that's followed the end of the quarter.
And as we noted total subscribers to the company's subscription video streaming services through June 30th reached approximately 683000 active subscribers up 412% over the same period in the prior year.
Total streaming minutes in June 'twenty 'twenty, 1 reached an estimated $504.1 million the highest on record to date in the first month the company surpassed the half billion minutes streamed milestone.
We also announced the first and if T based film releases under the standard selects label dedicated to releasing limited editions of significant classic contemporary and World cinema from.
For the first month of releases standard selects has chosen to classic titles celebrating the company's strength in western and film noir.
The film the capture from 1950, and our life at stake at 1955.
The company will continue to release N F T products going forward that clearly support our streaming business.
We also were very excited to announce the upcoming launch of an exclusive Avon and linear streaming service Elvis Presley channel in partnership with Elvis Presley enterprises and authentic brands group.
Hana will feature concert films and series celebrating the king of rock and roll.
We also partnered with music television linear cable network the country network our T C N.
To expand their reach by aggressively launching them into fast and Avon into our base of distribution platforms.
As you can see as this exhaustive list of both financial and business Kpis indicate we are experiencing a rapid acceleration of revenues and growth driven by a successful strategy of expanded distribution increased engagement and successful monetization of that engagement.
Given our recent deals with Youtube TV, plus recent deals with partners like Roku Vizio and Tcl now Theyre Smart TV manufacturers, we can we anticipate a substantial increase in total minutes consumed for fast and accelerated subscriber growth and are spot.
On top of that we expect considerable growth as we launched new premium networks in the vein of the Elvis Presley channel and anticipate adding 2 to 3 additional networks of that caliber within this fiscal year on.
On the monetization front, we're continuing to leverage both technological innovation and new AD demand partnerships to maximize an option to optimize revenue generation from both new and existing channel footprints.
Bind with this aforementioned low to the.
The low to mid double digit industry growth due to cord cutting and continued streaming adoption we.
We expect to maintain the current growth trajectory as we continue to execute on our plan.
With that I'd like to hand, it over to Gary.
Thank you Eric and good afternoon, everyone I'd like to cover some of our preliminary unaudited key fourth quarter results with you before we turn it over to Q&A.
Our consolidated revenues were $8.3 million, representing an increase of 6.9% versus the prior year.
A key inflection point for Cinedigm as our streaming.
Growth has now more than offset the expected and planned decline in our legacy digital cinema business revenues.
This growth was driven by <unk> 25 per cent higher content and entertainment revenues of $7.2 million and was partially offset by the expected decline in the legacy cinema equipment revenues.
Our streaming channel revenues were up 197% versus the prior year quarter, and 39% sequentially over the last quarter.
Our streaming digital revenue make up 75 per cent of the Companys total revenues in the quarter versus 48% in the prior year quarter.
We expect this trend to continue as streaming digital revenue approaches approximately 90% of our revenue base.
During the fourth quarter, we reached an agreement with AMC Entertainment for a sales plan for legacy digital cinema equipment with.
With net proceeds over the next 2 year over 2 years to the company of $10.8 million.
Over the 12 month fiscal period, we have reduced our total debt by $37.3 million.
As of March 31, 2021.
Representing a 76% reduction to a balance of $11.9 million from $49.1 million at March 31.2020.
This includes conversion of $15 million of convertible notes to equity at $1.50 per share.
As of March 31, 2021, the company had cash and cash equivalents of $16.8 million compared to $14.3 million as of March 31.2020.
On April 30th 'twenty 'twenty, 1 the company further reduced its nonrecourse legacy digital cinema equipment debt by $4.3 million.
On July 8.2021, we announced that $2.2 million of loan proceeds and the associated interest previously carried under the Paycheck protection program was entirely forgiven and eliminate.
This loan worked exactly as intended as it helped us preserve our employee base during the pandemic and now expand it as our business rapidly grows.
As of today as Chris mentioned, we further reduced our debt to zero by paying off all of our nonrecourse digital cinema prospect loan in its entirety.
Fulfilling our strategy of completely eliminating our debt balance that stood at almost $50 million at the end of the prior fiscal year in just 15 months.
We currently have ample liquidity available to us to invest in our growing business.
We reached another milestone on June 28th 'twenty 'twenty, 1 Cinedigm was selected for inclusion in the Russell Microcap Index.
But now that we have monetize some of our digital cinema assets as evidenced by our recent sales agreement for $10.8 million over 2 years with AMC entertainment, while eliminating all of our debt we are well positioned to continue to execute on both our internal and our roll up acquisition growth strategies.
Additionally, by finalizing the acquisition of our advanced streaming technology platform Foundation television and leveraging our industry, leading mass point technology. We believe we have solidified our position as the leading independent streaming.
Content Entertainment and technology company.
With Foundation T V. We have now formed a new Cinedigm, India Division to develop streaming services for Indiana, and South Asian markets. In addition to powering cinedigm as global portfolio of streaming services.
This concludes our formal update operator, please open the line for questions.
Thank you at this time, we'll be conducting a question and answer session.
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All good questions on the queue.
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1 moment, please while we poll for question.
Our first question is from Dan <unk>.
Of the benchmark company. Please state your question.
Great. Thanks, Good afternoon first off Gary and congratulations.
Relations on being debt free and it's quite a milestone it's quite of turnarounds over the last you know what it would have been 18 months I guess really here, so certainly kudos for that.
And Eric I guess from me first just on some of the trends you know look we obviously saw the headlines out of the recent Upfronts. We saw positive headlines from Roku in terms of upfront we saw that too.
If we include all had really good numbers C. P ends are kind of through the roof right now I'm. Just curious what you think sort of sustainability is particularly on the Eva side, how much you're benefiting from that what youre doing in terms of trying to create or generate more inventory on those channels and then I'll follow up after that thanks.
Sure Yeah. Thanks for your question.
So I definitely agree that so what's what's compelling for US right. Now is you know as you see you know.
As you know the there is a massive in direct correlation obviously from the the rapid rise of our available inventory to them.
No ad revenue.
For us just given the the heavy growth.
1 of the strategies that we've deployed is really to maintain what I'll characterize as value based C. P M and solid volume today, rather than command a try to command.
Our top market C. P. M. I think the strategy works out really well for us right now.
Because.
Just the sheer volume an increase of available AD inventory that we have you know it's that balance.
Balance between keeping it full.
And charging a higher rate. We think we you know we think we found on the maximize mixed by you know coming in at slightly below the market and having a higher fill rate rather than a premium seats C. P. M. At a lower fill rates, we think that that gets advertisers in and used to working with us, which will set us up well for when.
We rise raise the rates later in Q4.
So, but even even with that I think our rates are up 15% to 20%, even with us a sort of per.
Playing the volume game on the programmatic side were still up 15% to 20% on a on C. P M.
Over.
Over the same period last year at least in June that I was most recently looking at.
Got it that's helpful and that makes sense, it's kind of interesting, perhaps you guys can become sort of an outlet for those looking for inventory since we know that there are some constraints.
But some of the larger players that they've been running into in terms of avails.
Just a follow up maybe just talk about some expanded distribution opportunities that you have if youre looking at in this marketplace. It's been really interesting to see both the consolidation as well as some of the new service is really pushing hard you know like the vizio smart cash not that they haven't been around forever, but making more noise about it anyway.
So maybe talk about that and then I'll just finish off with on the International front you guys have been making a lot more noise lately, obviously getting from personnel in place.
And it looks like you're really starting to ramp operations, there I'm sure you'd love to get some more content going in that arena, but even beyond that just how should we think about international starting to become a bigger.
Contributor to the equation.
Yeah, Great Great question. So on so first on.
Sort of outlook for you know for the AD supported and fast market, which I think is a big piece of our growth that certainly the highest percentage growth for us.
See a couple a couple key trends 1 is obviously you know.
The continued shift of AD dollars from from from cable too fast and other AD supported.
I think advertisers I've I've seen lots of reports you know and this is anecdotal but that the comfort level with fast is rapidly increasing the results.
Or are coming in and they like what they see so I think youre going to see that that sort of debt that.
Long term trend is just going to continue.
The second Big thing I think is you know as.
As we see you know clearly that the market the market is starting to consolidate around some big you know the platforms and key leaders.
We're looking to players like Google.
Google.
With Google T V.
Similar to what we saw with mobile devices, how you know Google and other players like Apple had big leads domestically, but then in aggregate globally Android became the dominant platform I think there I think we are seeing sort of a shift.
And already overseas and I think we could see Google start to become a big player Amazon just given their investments in the I M. D. V. D. TV platform, we think is a big growth opportunity for us there.
And then obviously on the international side.
For Us I think.
All of the revenue you're seeing here today is predominantly domestic.
We have a little bit of international revenue, but it's it's you know.
It's very very incremental at this stage.
We think we're seeing some trends obviously Europe is at a comparable immature advertising market relative to the U S. But we are seeing markets, such as South Asia, where the sheer number of of of users and the rapid adoption of connected TV in that market as prices come.
Down in the offerings.
Lastly, improve.
We're starting to see that market become sustainable from a CPM basis.
In Latam, which has had a pretty decent AD supported environment on the mobile side for for many years and we are starting to see that market.
That market too.
To really become.
On a market with good ROI. So long term, we're going to look at those big 1 billion plus users swaps that we can start to attack a having a having a base and a team in India that knows the market knows the players and is already working on you know so.
Securing deals for us, we think that the future there is pretty bright.
In the coming quarters and years.
Great. Thanks for all the color appreciate it and parent Okay. You had us beat by a million Bucks on the top line. So it seems like a pretty good way to finish off the year.
We appreciate that comment thank you.
Our next question is from Brian Kinsinger.
At Alliance Global Partners. Please state your question.
Hey, guys, what a great quarter for streaming O T T, which by my calculation of $6 million in the fourth quarter I think it really solidifies the transformation of your company overall, so while those numbers are fantastic and believe you really hadn't even hit your stride given the AD render rates have been so low.
I think in the past so can you talk about your partnership with Maggie I said that write them on these solutions.
And how it has already and will continue to drive stronger monetization will be on viewership and then as a result of that they better fill rates our brands returning more often to for additional campaigns.
Yeah, Yeah, Great question, yes.
So I'm.
Moggy has been 1 of the 1 of our our sort of cornerstone partners in North America I think.
<unk> is really powering the fast linear revolution globally, I think theyre managing hundreds of channels now and.
1 of the and we I think we were their first customer in North America, just to show you know.
We'd like to think we were early to the market getting getting this established but we've been building with them along the way and the Moggy 1 of the challenges you face in connected TV advertising is theres a lot of technical challenges too.
From when an AD at call is made from a consumer at their home in front of their screen to being actually able to fulfill it you need to be able to do that in record time.
That's at the heart, you know without getting too technical of what.
What the render rates mean.
In the past we had a we had struggled with with render rates.
Just simply because.
It's it's 1 of the first tackles, you have to what 1 of the first challenges you have to tackle on this business.
<unk> recently, we piloted a new technology that the Moggy.
In this in our in the prior quarter and the quarter. After the end of this fiscal year, but before the <unk>.
Up through today, So I would say you know in April may and we'd see we've seen some pretty dramatic results and our ability to rapidly render advertising what that means is our ability to capture more revenue and more AD opportunities off of the same inventory and base is really going on.
Naval us to ask.
To accelerate and win bids and opportunities so from that perspective Wow.
Yeah. So you know.
Even though we're in the slowest add period of the year, we've seen pretty dramatic results I don't have the quantified for you today, but I would say anecdotally those results are.
Ben.
On a quite impressive and we are we expect as we continue to work on that technology bolt technology with a moggie, but also I wouldn't I wouldn't discount the technology.
Our partner at spring serve.
And you know that was recently acquired by magnate that due to just how well are they are they do.
And work with connected television partners.
So between a moggie partners like.
On a spring serve and others.
We think the big opportunity for US is you know.
Not only are we scale as we're scaling inventory through new channels and scaling our footprint.
The secular trends in growth.
Yes, you know rising getting rising cpm's, increasing fill rates and improving rental rates, we have a lot of levers to squeeze a lot more revenue out of the existing business.
But when you add on all the other channels and other distribution that we're doing.
There really is a lot of growth opportunity for us here that just hasn't been fully taken.
<unk> taken advantage of yet even even with all of the success, we're demonstrating here.
So.
You have 16 channels I'm not sure how many on production you talked about the Elvis Presley channel how many of the 16 plus the ones that are in production or are being.
Built right now I've got homerun capability that you see like Bob Ross now how many can hit those peak numbers or the upper upper echelon of your revenue targets.
Well you know.
1 thing that I kind of look at this at this business you know it's on an exact parallel business, but I think it's a good comparison and broadcast there's the the dot net or did your net business that.
That business has been around.
About 8 or 9 years really at maturity.
Now if you look at what a top performing channel in that sector in that space does you know I would say, it's in the $50 million to $60 million range. So that's 8 to 10 years into it mitek.
<unk> taken this space is the top the top the top performing channels. When this business gets mature over the next 3 to 5 years will probably be you know in the in the 50 to 60 per cent range. That's what we're we're anticipating.
Of of what a top channel could do obviously, that's you know that could change depending on how the business evolves or the market evolves. So.
Our goal is to have as many channels as possible.
At what at the level I would consider a top echelon channel today, obviously, we feel Bob Ross could fit that bill.
It's the proof will be in this sustained our ability to keep growing and driving revenue, but art, but now that we really understand the dynamics and drivers of what makes these channels work.
We're really 100% focused on those types of channels now.
So I think you will see from us as we move forward, if and when we announced new channels. It.
It will be you know Bob Ross at your it'll be more more of Elvis more of Bob Ross.
And it will still take chances on startup or new conceptual ideas. If they have a good brand and good content base, but overall, we're looking for big brands.
Broadly recognizable content strong strategic partnership with major enterprises like you know like we did with authentic brands that like we do with all 3 media and American public television.
So that's going to be the par for the course going forward.
I'll speculate on Spanish.
I'm, sorry, I haven't noise in the background. It leaves me on next question in the past.
A year ago, maybe a year and a half when we first sat down you guys targeted $2 million as a successful cash channel block has changed you've learned so much can you comment today on what would be below level threshold at the successful channel for you to them.
Yeah.
Well.
It really depends if youre looking at this as a sort of a multi platform play right like as our look is put forward. So today, we have channels that are brands that both have a subscription component and AD supported component as well as a linear component might take as you know.
It is our goal going forward is you know.
We really don't want to do channels that we don't think have you now.
Mid to high 7 figure potential in the near term.
18 to 24 months.
That doesn't mean, obviously every channel we launch we'll do that but I do think that in the near term that's what we're what we're what we strive for.
I do think that.
You know 1 of the 1 of the key factors as always.
Will the channel if the channel can secure the appropriate carriage in distribution.
Then.
And those numbers are achievable I think what the market is obviously getting more competitive for carriage you know I think.
We've been a.
A.
Party, that's paving the way on proving the market. So obviously success begets competition as we've seen we see other studios and others entering the market you know, but I think our strategy.
Is too heavily differentiate ourselves and have offerings that the studios won't be unable to compete with and it can't be easily replicated by by other parties. So that's really our our model going forward and I do think that you know.
The the base of both channels, we've recently announced and we'll announce in the future sort of hit that paradigm.
Great last question I have.
It is related to the movie theaters opening you had a big order from AMC on the legacy business, obviously help clean up the balance sheet first of all how do you see that.
On order I think it was $10 million ish being recognized over the next couple of quarters. Next couple of years, you know how should we think about revenue and then outside of that order how should we think about that business going forward is it a this is the last order.
Or now that you have a no debt you'll continue to run this although it's not a focus just high level the strategy of that business.
Yeah, that'd be Gary and Gary you want to comment on that.
Yeah.
Yeah. So the the the $10.8 million from from AMC as we said will be recognized over.
2 years from the date that we that we sign the agreement.
We're not giving specific dates but it will be recognized in the quarter that we receive it.
And you know there are additional systems out there.
That we can sell and we are talking to exhibitors are we expect.
To be at Cinemark on this year and starting to talk to exhibitors about purchasing systems, obviously, they've all been.
Focus on the pandemic and now coming out of it there where we engage with those discussions and as you said the theaters are starting to open up and we expect all the movies that were.
Push off to come into movie theaters, now and in that business will come back, but you know as we've as we've said that is are we.
We planned and we expect that business to decline.
And it will continue to decline so it's not going to be you know, it's not the focus of our growing business.
Great alright, thanks, so much.
Thank you.
Our next question is from Laura Martin of Needham. Please state your question.
Hi, there can you guys hear me okay.
We can very low.
Okay.
We're very happy on my pleasure.
Thank you so the debt number.
Dan Congratulations also on my question is on normalized debt sellers think about you guys doing acquisitions going forward should we assume you'll do that was all for equity or are you willing to bring net debt up somewhat to start to lower the average cost of capital. How do you think about normalized debt level of or maybe a 1 to 2 year timeframe for starters.
Chris you want me to tackle that yeah, Yeah, if you want to but I think the short answer is it depends.
On a header.
Yeah, I think and we want we want to keep our options open. We are we have plenty of options and being being debt free gives us the option.
Depending on the acquisition if it can support from debt, we will consider that but we want to be smart about it.
Yeah, I think opportunistically.
We do as we look at the landscape out there we.
We do see.
A lot of enthusiasm for our equity I think from a from a potential from the prior deals we've done.
We would expect that you know it could be a component of future deals, but I do think the having having a having.
Having a debt.
Debt free balance sheet.
It gives us a lot of flexibility structurally to do.
And to do deals that we.
Wouldn't that have been able to do even a couple of years ago.
So frankly attracts.
It's a very attractive situation for people to be coming into.
As you know if they're looking to.
Become apart.
But on.
We'll optimize the.
The cost of capital by pulling whatever levers, we think we have to pull.
To get to optimize and improve the ROI on it on a deal.
Okay and then my second question is it's very rare to find a company that was a broad fast.
So 3 questions about that like cross ownership of so many Australian choices 1 is.
Are you were sort of writing out here on wall Street that S. THAAD will sort of relinquish consumers on consumer time to Avon are you seeing that any kind of consumer shifts as economies reopen building on that when you think about data advantages or other sort of hidden value are the upsides from owner.
In all 3 types could you sort of talk about that.
And then when I think about organic growth as you think about those 3 services over the next 12 months, which 1 do you think it's going to grow its revenue faster organically.
Yeah.
Sure sure. So you know.
You know what would be the basis of our strategy has always been to.
The consumer the ability to continue to enjoy our brands.
No matter what device no matter what their economic station is on life.
No no matter their predilection, so what we're finding with a lot of our brands and by the way. This has been our strategy since 2015.
I see a lot of companies today.
Sort of back back during their way into the AD supported we launched all of our services with the idea that.
With this this was sort of a staple.
I'd Love to say, we were the first guys thinking a little bit Hulu really set that trend years ago, and we've always loved that model.
We think it opens the tent broadly to consumers to experience and discover the brand and the content.
And so we look at for example, we have fast linear channels that allow users to to sample our brands and content I kind of I call. It kind of reminds me of another era, when H B O would have the free H B O weekend, I recall very fondly from being you know a teenager decades ago.
That expose you the brand lets you sample it and then for free and then let you subscribe. So I think that's sort of lineage of sampling brand exposure really does a fantastic job for not only elevating the brands and putting the brands in front of you know I would for example, docudrama.
Dove <unk> TV. These are on our house brands that.
On the tens of millions to hundreds of millions of people when they turn on their smart Tvs around North America are exposed to the brand daily as their browsing through the channels that they are sampling the content. So.
So I think that piece of it is undeniably a great lift I.
I think we like to maintain the subscription side, 1 I think the recurring.
On a predictable revenues, especially on a distributed strategy.
It really provides a nice smoothing effect against the seasonality of the AD supported business.
And we do have the ability to push users back and forth between those buckets I.
I do think that 1 area that I do agree with your debt.
And that we and we're investing more this year is in our platform and data.
And that's predominantly because we do think having that direct consumer relationship provides you that granularity of data and insights that you can't get from distributed channels and properties are in that ecosystem or through licensing. So you know.
To answer your question about which platform. We were most excited about for this next year.
We're really excited about <unk>, which we acquired in January of this year.
I think you know as you know.
With Warner Media.
You know having shut down film struck a few years ago.
We really think that that space.
Is underserved.
And globally could be quite a substantial audience.
We're not looking at it just domestically right. We're looking at it through the lens of how will this service work in South Asia, how will it work in Latin America, and so we're we're really going to be pushing hard for every enthusiast service that we launch for it to have a global footprint and in the last bid on that is we think a.
You know our premium blue chip.
Global cinema.
Streaming service.
It could have very significant potential if we were to enter into a telco distribution deals and other deals in territories, like India, and Malaysia and others. So we think that provides just a really significant growth opportunity.
So.
That's the 1 I'm, probably most excited about but I wouldn't say the dove Dove is no slouch just given how.
The dynamics of the family audiences that we've seen really uptake and we're making a lot of content investments in that brand and channel over the next year.
Thank you very much.
Thank you Laura.
We have reached the end of the question and answer session I will now.
On the call back over to Chris.
Closing remarks.
Thank you.
First thanks to Laura Bryan and Dan for those questions they were great.
So.
Again, thanks, everybody for joining us today and for your interest in cinema.
As I stated in my remarks.
This quarter's preliminary results I think clearly demonstrate that we've completed our multi year transformation to become a leading independent screaming company of channels and content and all of that Leverages, our industry, leading digital technology and independent content distribution capabilities.
As part of this transformation, we've made huge progress in transitioning our mix of revenue with streaming digital revenue is now making up 75 per cent of the total that trend is expected to continue towards nearly 100% of our revenues in the coming months and years.
As Eric stated, we expect to see very rapid growth ahead on screening category.
Additionally, not only is there a huge potential market for our portfolio of enthusiastic moving channels we have.
Have an enviable competitive position as this strategy and our channels are perfectly complementary to the Big General Entertainment subscription services like Disney plus and networks.
This along with our relatively low content and marketing costs in the AD supported business plus partnering with and launching established brands like Ross and Elvis Presley enable cinedigm to take a portfolio approach to our channel business not betting the ranch on any 1 mega channel, but adjusting our portfolio based on <unk>.
Our response in a very efficient high margin manner.
Cinedigm represents a unique investment proposition.
Weighted squarely in the middle of the best part of the business growing rapidly both organically and via our roll up acquisition strategy and we also have a huge opportunity as Eric mentioned to grow very meaningfully overseas.
And I want to again emphasize that we're fully committed to fixing our time with this issue.
We're appreciative of our investors patients we're confident.
But our preliminary numbers reflect our very strong results and are extraordinarily pleased about the state of our business being on 100% debt free.
While growing our streaming business like wildfire.
Finally, I want to thank our amazing team that's centered on them from making this performance all possible not only the leadership team, including Gary Eric Yolanda, Tony and Cheryl, but also every team on board member that has worked so hard on extraordinarily challenging conditions over the last couple of years I want to sincerely. Thank all of our team members.
For the record as well as our long term investors, who have patiently watched our business transformation unfold and now finally Orion.
Please follow up with work here and the team at high touch Investor Relations with any other questions. You may have she can be reached at cinedigm.
H T I R Dot net.
Look forward to speaking with you again soon thank you all.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.