Q1 2022 Cinedigm Corp Earnings Call

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I have your attention please.

At this time, we are just waiting another couple of minutes for participants to join in the meeting will start momentarily.

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Good day, ladies and gentlemen, today, we are hosting a conference call to discuss Cinedigm preliminary first quarter fiscal 'twenty two.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad and please note that this conference is being reported.

I'll 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 tenet.

So 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.

Are described in the Companys periodic reports filed with the SEC from time to time.

All of the information discussed on this call is as of today September.

Second and Senate undertakes no duty to update it.

In addition, certain financial information presented on this call references non-GAAP financial measures.

With us today, we have Chris Mcgurk, Chairman and CEO, Eric <unk>, Chief strategy Officer and President.

Yeah.

Gary Loffredo, Chief operating Officer General Counsel and precedent.

And as I am and cinema equipment businesses.

The London must be S chief content officer, all of whom will be available for questions.

<unk> remarks, I will now turn the call over to Christopher 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 of fiscal 'twenty, One results conference call our presentation at Sidoti the detailed shareholder note I've seen 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 screaming.

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 zero debt.

So there is an enormous opportunity now for centered on to leverage this very strong financial and business position to continue this very rapid growth in all of its 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 screaming growth, which.

Which we generated despite a traditionally seasonally slow screaming quarter and also from the recognition of digital equipment revenue is from our sales agreement with AMC.

That gives us great momentum heading into the next two quarters, which were seasonally strong stronger than this quarter.

And we generated net income of.

Five point or $1 million or.

Core <unk> per share this quarter.

Another key strong indicator of our building financial momentum.

And all of our key streaming operating metrics, which Eric will review in just a minute our shooting through the roof.

So I won't steal his thunder by going through them.

Instead, let me just comment on our management team.

I believe one of <unk> 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 have 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.

The recent addition of a shock arbitrage is vastly experienced and respected producer filmmaker and new and goodwill Ambassador is a very clear example of this.

Now I'll hand things over to Erik Lupica, who will speak to our streaming business and.

<unk> strategy Eric.

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 are tackling.

Recently research and markets are the top global market research firms.

Their forecast for the combined global AD and subscription streaming market.

Nearly $166 billion in aggregate by 2025.

And beyond that a new report by streaming research firm and screen media forecast the free AD supported streaming TV are fast market.

The double in size to over $5.0 billion in the next 24 months, which is incredible for a business that barely existed just a few years ago.

These and other recent data point to firm as an acceleration in revenue growth in all facets of streaming model Avon asphalt and fat.

This is driving considerable demand for streaming content channel and technology and sometimes model as a provider of all three makes us unique in demand partner for the company is directly responsible for the global streaming Revolution.

Now, let's discuss our recent streaming related results.

Despite late spring and early summer 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 revenue 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 boxes to be Viacom CBS is Pluto TV and others increased 61% over the prior year quarter, the fifth record growth quarter.

And our ROE 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 it's 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 $10.0 billion, a new company record and up 18% from the one $7.0 billion in the prior sequential fourth quarter.

386% versus the prior year quarter.

Monthly streaming minutes in June 'twenty one.

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 $27.0 million up 186% versus $16.0 million in the prior year quarter.

Total live streaming enthusiast channel brands under contractor distribution increased to 25 up from <unk> 16 in the prior year quarter.

Finally, total subscribers to the company's subscription video streaming services exceeded 679000 subscribers at the end of June 'twenty one.

<unk> 38000 subscribers or 6% over the prior sequential quarter and up 558000 or 460% over the prior year quarter.

And this was due to continued expansion of both our third party distribution wholesale distribution deal.

In addition, during the quarter, we closed on the acquisition of Foundation television.

And Forbes Tenet I'm, India.

This acquisition provides.

<unk> competitive advantage is 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 Eva on linear streaming service with Elvis Presley channel and partnership with Elvis Presley Enterprises, and authentic brands group. The channel will feature concert film and series celebrating the king of rock and roll.

And we also announced a distribution partnership with music TV linear cable network the country network.

These and other recently announced deals such as our new agreement with Robert Rodriguez and El Rey network illustrate.

<unk> strategic approach to our channel business.

We're helping well known media and consumer brands and celebrities make a rapid and lucrative transitioning to streaming.

As illustrated by the short duration from announcement to the launch of El Rey and real Madrid TV.

Less than two weeks.

We're now providing end to end services scaled distribution and rapid time to market that we believe are unmatched in the streaming industry.

As we add these high profile new channel brand.

Typically expand our distribution and monetization and continue to source and acquire new premium programming, we are well positioned for significant growth in our two busiest quarters of the fiscal year.

With that let me turn things back over to Chris.

Thank you Eric.

To quickly summarize where we are.

Now in the strongest position, we have ever been in financially operationally competitively and from a management talent standpoint.

We expect our 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.

Thank you.

At this time, we will be conducting a question and answer session. If you would.

Like to ask a question. Please press star one on your telephone keypad.

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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys one.

One moment, please pull for questions.

Our first question comes from the line of Brian <unk>.

Clinker with Alliance Global you May proceed with your question.

Great. Thanks, guys.

Great Great revenue and bottom line results.

So first I'm curious.

Real Madrid La Liga channel.

With that season, starting I think theres 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.

We are we haven't.

We 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 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.

I think it does have the opportunity to become.

One of our top channels very quickly.

Just given just given these early results so early.

But I think.

We're very pleased with even the results off of just a small distribution base off of weak one.

Okay and then.

You can do that as well as you've talked about some of your last call.

I think it's clear Bob Ross to date has been your top revenue producing channel.

Real Madrid, now lie and you've got the Elvish 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 it will take.

Sure sure well look I do think.

Once again the art.

Two I'll call them.

Tentpole channels, El Rey and real Madrid, just launched.

Week ago, or so so the numbers are very preliminary but I do think those too.

If we if these early results play out that could be peers of Bob Rob in terms of revenue.

If not exceed Bob Ross, but we have obviously, we have to wait and see how they how they perform as they rollout more broadly but the early results.

Especially on on Roku and others are extremely promising.

So.

And as I look to the future in 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 ive mistaken one of those numbers or maybe that's not apples to apples.

So maybe just maybe if you could.

Quantify the live number of channels you have right now what was it last quarter, if I heard it wrong and how many do you have in development.

Yes, so we have we have.

Three channels. So that 25 is reflective of both live and in development.

<unk>.

We have 22, we I think we have 22.

That are live currently.

Ben.

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 in prior quarters, but.

I would say some of them take longer to develop and launch other.

Others are.

Others can be brought to market incredibly fast, but as you saw with El Rey and real Madrid. So.

Our thought is that we like that model of of getting them to market, obviously quicker as we can because we can start turning to revenue much faster.

Hey, Brian.

If I could just add to what Eric.

This portfolio approach to the streaming business.

It 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 one or two 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.

We're dropping underperformers.

It really is a risk advantaged way for us to tackle the business and I think really sets us apart from almost everyone else.

And streaming right now.

The good old GE model dropped the bottom 5%.

Last question.

Eric.

We've talked now for a few months about stronger rental rates, given your new technology and partnerships.

As we go to the September and December quarters, you got higher seasonal CPM.

<unk> got more channels.

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 next two quarters coming up that we'll see that really break out growth the growth hasnt been great. So far in the September and December quarters for OTT and streaming it seems like all of those things with the rental rates make guys set up for an even much stronger September and December quarter, if I'm not mistaken.

Yes.

You are right in the sense that.

Yeah.

The current quarter.

And that we're in.

Right now.

We will be closing out at the end of this month.

The next quarter or really.

And really whats interesting is.

The first quarter, there used to be seasonally slow, but we didn't really see that happened. This year earlier, we saw kind of lag to that growth and this and this.

Number 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.

Thank you.

We are now that we're going into multiple quarters that are the best quarters of the year and not seasonally slow I think.

I think we just given what you are saying about render our rent our performance on rendering ads is fantastic.

We're going into the busiest and most in demand CPM period.

Buyers are incredibly interested in inventory now we have fantastic.

Fantastic channel brands and content that need no explanation to advertisers.

You're already familiar with El Ray It was a cable channel for a long time, they're already familiar with.

Real Madrid that number too.

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 a new audience that we had with previous channels and I think thats all of those things.

If.

If the audience continues to show up the way it has been could could could put us in for some some pretty good growth.

The.

Next few quarters.

Alright, great. Thanks, so much guidance.

Thank you okay.

Yes.

Our next question comes from the line of Dan her notes with the benchmark company.

Proceed with your question.

Great. Thanks, Good afternoon, really solid quarter, guys nice to see the momentum continuing here.

Maybe just to kind of follow up a little bit I think Eric sort of the peaks and valleys in Avon has been a little bit.

Skewed by mobility, obviously, you guys had an excellent quarter in June and I know, it's kind of I guess, we are technically in September here.

Is there any kind of pacings are kind of update you could give us just on how.

The September quarter viewership metrics are trending at this point.

Just to kind of get a sense of.

The backdrop.

Yeah. So.

So.

So far.

On the viewership and once again.

I am continuous continuously impressed with.

What we know to be continually slow period.

Rguest is typically.

Summer 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 record setting results.

As we've seen in prior periods so.

So far we're pacing incredibly well.

One of the things that we are.

Bob Roth documentary on Netflix.

All it and while it's a lot of controversy around it one thing it did as it get everyone.

Controversy about Bob <unk>.

Bob Ross is considered the hero of the film.

That's driven an incredible amount of interest in watching as content and.

And we've formed the benefit of that you combine that with the new channel launches and things we have I think we are.

We're very well poised.

It's early but if we continue to see the kinds of early results that we're very pleased with it.

It could set us up for Tim.

Similar a similar high rate of growth sequentially that we've seen if not greater.

Got it.

Super helpful and just to be clear I guess.

I'm 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 <unk> 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.

I would say the parallel would be and in retail you can grow top line by opening new stores, but if your if youre not growing your sales per square foot eventually things catch up with you.

Opposite case for us were not only.

Topline growing because were adding.

Adding new channels, but we've learned how to squeeze.

Additional revenue out of the channels, we have like better programming.

By better technology improved vendor right.

Greater fill rates higher CPM and finally.

In investment and more content, which keeps that flywheel spinning. So I do think all of that in aggregate in terms of <unk>.

We are on track for.

That <unk>.

Service to relaunch, so we will be making announcements about about that.

Soon.

But even without the relaunch, we havent been resting on our laurels.

We don't breakout individual channel, we only reported an 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 <unk> has been has been growing.

Quarter over quarter, even though we haven't 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 re launch it.

Awesome and then look you kind of alluded to this with real Madrid I know, it's Super early Erik I think you said that about 10 times in its fair.

But in terms of expanding distribution and then.

I think the.

The commentary that continues to be hammered home here is that you guys are moving upstream winning bigger deal.

How important is it that you have kind of the early success that youre seeing with around Madrid are those doors already kind of open.

For other kind of larger scale channels, just kind of help us through either that accelerated if you are having those conversations.

Or kind of some other mix of the two.

Yep.

So I would say our success, so real Madrid, aside which like I said, we're pleased it's early days, but it is growing.

It is.

<unk>.

The viewership that leads us to believe it's going to be.

<unk>.

As successful as some of our best channel if not more successful.

But even before that we've already been having both having considerable conversations that.

That we think.

It's really based on the on just how well we've been handling major brands and by the way. It goes beyond just the channels were launching right we've been partners with.

We've got NFL.

Mark.

Other major media companies.

For a very long period of time so.

The company has endemic skill.

In managing and monetizing brand that transcends just that 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 and now doing it in the in the fast linear app enabled space.

So we have lots of active conversations with brands that are on par or even bigger than the ones that were.

We're contemplating here today, and I think youre going to see more in that trend.

Or if we're successful the way we have been.

Perfect. Thanks for all the color guys I appreciate it and congrats again.

Thanks, Dan.

Yeah.

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.

So thanks, everyone for joining us today and for your continued interest and support and Senator.

Please follow up with Laura Kiernan and the team at high touch Investor Relations.

Any other questions that you may have and she can be reached at cinedigm.

At <unk> Dot net.

Centered on.

H R.

<unk> dot 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.

You for your participation.

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Okay.

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