Cinedigm Corp. (NASDAQ: CIDM) today announced its financial results
for the three- and nine-month periods ended December 31, 2019.
Key Third Quarter FY 2020 Financial
Results:
- Consolidated revenues were $11.5 million- OTT/streaming
revenues were up 95% year-over-year- Strong OTT Channel revenues,
primarily Advertising Video on Demand (AVOD) revenues, drove the
majority of this growth
- Net loss to common stockholders of $2.3 million, a narrowing of
33% year-over-year, and a reduction of 63% year-over-year excluding
non-recurring charges
- Adjusted EBITDA of $2.7 million
- Total debt has been reduced $12.5 million fiscal
year-to-date
Key Business Highlights*:
- Entered into a stock purchase agreement to purchase
approximately 29% of the outstanding current common shares in
leading Chinese entertainment company Starrise Media Holdings
Limited (“Starrise”) in an all-stock transaction valued at
approximately US$68 million1.
- Overall Ad-supported streaming viewers grew from 4.5 million to
5.6 million users, up 24.4% over the quarter
- Free Ad-supported TV (FAST) monthly active users grew from 2.7
million to 3.3 million, up 23.2% over the quarter.
- Ad supported Video-on-Demand (AVOD) users grew from 1.8 million
to 2.3 million, up 27.8% over the quarter.
- Overall minutes watched in the third quarter was up 303% over
the prior year.
- Increased highly valuable, connected TV ad requests to 86% of
overall inventory mix.
- Added new distribution partner, DistroTV, bringing eight of the
Company’s popular networks to its programming roster.
- Launching two new AVOD drive services to bring additional,
premium programming to the United States in a partnership with
all3media International, the distributor of the leading independent
television production & distribution company in the United
Kingdom.
- Co-production content strategy continues to perform and produce
wins in the marketplace, with the Company more than doubling the
number of films from FY’19 to FY’20.
- Extended relationship with National Football League for Super
Bowl LIV and catalog content.
- Executed 11 content acquisition deals for both OTT and
traditional distribution business.
- Post quarter end, Vizio selected Cinedigm’s Matchpoint
Blueprint as a preferred development platform to provide video
streaming apps across Vizio SmartCast TVs. The offering will open
the door for premium content partners to quickly bring new
applications and programming to the VIZIO SmartCast platform and
provide access to diverse programming that appeals to millions of
viewers.
- Post quarter end, the Company closed on the purchase of
162,162,162 Starrise shares and issued 21,646,604 shares of Common
Stock as consideration therefor on February14, 2020, and expects to
close on the remainder of the Starrise shares as soon as
practicable.
“Our proposed investment in Starrise, which we expect to fully
close in the coming weeks, is a key step forward in our plan to
become the first fully integrated North America / China studio,”
said Chris McGurk, Cinedigm’s Chairman and CEO. “This transaction
reinforces our position as a leading distributor of premium film
and TV content in the two biggest and most important entertainment
markets in the world and strategically aligns with our efforts to
grow our OTT / streaming revenues. In addition, the strong growth
in our OTT revenues, particularly in the rapidly growing AVOD
segment is very encouraging.”
“We significantly narrowed our net loss by 63% to $1.2 million
this quarter, excluding non-recurring charges, due to our
aggressive cost and expense streamlining efforts. We have reduced
costs by over $5 million annually and have reduced interest expense
by approximately $3 million annually,” said Gary Loffredo, Chief
Operating Officer and General Counsel.
Purchase of Minority Stake in Chinese Distribution
Partner, Starrise Media
Subsequent to the end of the third quarter of fiscal year 2020,
the Company signed a definitive Stock Purchase Agreement to acquire
approximately 29% of the outstanding equity of leading Chinese
entertainment company, Starrise, from two existing holders. As
consideration, Cinedigm plans to issue to the sellers a total of
54,850,103 shares of its Class A Common Stock, par value $0.001 per
share.
The all-stock transaction, which is expected to fully close in
the first quarter of calendar 2020, is valued at approximately
US$68 million1 and is subject to certain closing conditions,
including that the Company obtain approval of its stockholders,
applicable lenders, and regulatory authorities, as applicable.
Through this transaction, Cinedigm will increase its presence
and leverage in both the Chinese and North American entertainment
markets, two of the biggest Film and Television markets in the
world with combined Film/TV revenues estimated to be approximately
US$180 billion in 2018. The pending investment in Starrise follows
the significant investment in Cinedigm by Bison Capital, a
China-based investment company with a focus on the media and
entertainment, healthcare and financial service industries. Founded
by Mr. Peixin Xu in 2014, Bison Capital has made multiple
investments in film and TV production, film distribution and
entertainment-related mobile Internet services. As a result of this
proposed transaction, Bison Capital and related entities will
increase their investment and ownership levels in Cinedigm.
*All OTT figures based on December 2019
performance data. ** YoY OTT comparisons
are between December 2018 and December 2019
1 Based on the closing price of Starrise (HK1616) of HK$1.29 per
share on February 13, 2020.
Third Quarter 2019 Financial Summary (comparing the
quarter ended December 31, 2019 vs. December 31, 2018)
Revenue was $11.5 million, a decrease of 21% compared to $14.6
million in the prior-year third fiscal quarter, due mainly to the
expected decline in the Cinema Equipment business. Overall
OTT/streaming revenues were up 95%, with OTT Channel revenues,
particularly AVOD, showing the strongest growth rate both for the
quarter and year to date.
Total operating expenses were $10.9 million, compared to $15.3
million, a decrease of $4.4 million, or 29%, which was primarily
driven by lower selling, general and administrative expenses and
lower depreciation and amortization expense. Selling, general and
administrative expenses for the third quarter of fiscal 2020 were
$3.0 million compared to $6.4 million in the year ago period, a
decrease of $3.4 million, or 53%. Amortization of intangible assets
was $589,000 for the third quarter of fiscal 2020 compared to $1.4
million in the year ago period, a decrease of $808,000, or 58%.
The Company reported a net loss of $2.2 million for the third
quarter of fiscal 2020 compared to a net loss of $3.3 million in
the third quarter of fiscal 2019. After giving effect to preferred
stock dividends of $89,000, the net loss to common stockholders was
$2.3 million, or ($0.05) per basic and diluted share, based on a
weighted average of 42,418,641 shares outstanding. In comparison,
for the third quarter of 2019, after giving effect to preferred
stock dividends of $89,000, a net loss to common stockholders was
$3.3 million, or ($0.09) per basic and diluted share based on a
weighted average of 38,033,756 shares outstanding.
For the third quarter of fiscal year 2020, Adjusted EBITDA was
$2.7 million, compared to $3.6 million in the year-ago period. The
decrease was largely due to the expected reduction in the cinema
equipment business. Adjusted EBITDA from non-cinema equipment
business was $0.6 million this quarter versus ($0.3 million) in the
prior year quarter, which was an improvement of $0.9 million, or
342%.
Adjusted EBITDA is defined by the Company for the periods
presented to be earnings before interest, taxes, depreciation and
amortization, other income, net, goodwill impairment, litigation
related expenses and recoveries, stock-based compensation,
expenses, restructuring, transition and acquisitions expenses, net,
and certain other items. Pursuant to the requirements of Regulation
G, the Company has provided a reconciliation in the tables attached
to this release of loss from continuing operations calculated in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”) to Adjusted EBITDA. Adjusted
EBITDA is not a measurement of financial performance under GAAP and
may not be comparable to other similarly titled measures of other
companies. The Company calculated and communicated Adjusted EBITDA
in the tables because the Company's management believes it is of
importance to investors and lenders by providing additional
information with respect to the performance of its fundamental
business activities. Management presents Adjusted EBITDA because it
believes that Adjusted EBITDA is a useful supplement to net loss as
an indicator of operating performance. Management also believes
that Adjusted EBITDA is an industry-wide financial measure that is
useful both to management and investors when evaluating the
Company's performance and comparing our performance with the
performance of our competitors. Management also uses adjusted
EBITDA for planning purposes, as well as to evaluate the Company's
performance because it believes that adjusted EBITDA more
accurately reflects the Company's results, as it excludes certain
items, such as stock-based compensation charges, that management
believes are not indicative of the Company's operating performance.
The Company believes that Adjusted EBITDA is a performance measure
and not a liquidity measure. Adjusted EBITDA should not be
considered as an alternative to operating or net loss as an
indicator of performance or as an alternative to cash flows from
operating activities as an indicator of cash flows, in each case as
determined in accordance with GAAP, or as a measure of liquidity.
In addition, adjusted EBITDA does not take into account changes in
certain assets and liabilities as well as interest and income taxes
that can affect cash flows. The Company's calculation of Adjusted
EBITDA may or may not be consistent with the calculation of this
measure by other companies in the same industry. Investors should
not view Adjusted EBITDA as an alternative to the GAAP operating
measure of net income (loss). In addition, Adjusted EBITDA does not
take into account changes in certain assets and liabilities as well
as interest and income taxes that can affect cash flows. Management
does not intend the presentation of these non-GAAP measures to be
considered in isolation or as a substitute for results prepared in
accordance with GAAP. These non-GAAP measures should be read only
in conjunction with the Company's consolidated financial statements
prepared in accordance with GAAP.
About Cinedigm
Since inception, Cinedigm (NASDAQ: CIDM) has been a leader at
the forefront of the digital transformation of content
distribution. Adapting to the rapidly transforming business needs
of today’s entertainment landscape, Cinedigm remains a
change-centric player focused on providing content, channels and
services to the world’s largest media, technology and retail
companies. Cinedigm’s Content and Networks groups provide original
and aggregated programming, channels and services that entertain
consumers globally across hundreds of millions of devices. For more
information, visit www.cinedigm.com.
[CIDM-E]
Safe Harbor Statement
Investors and readers are cautioned that certain statements
contained in this document, as well as some statements in periodic
press releases and some oral statements of Cinedigm officials
during presentations about Cinedigm, along with Cinedigm's filings
with the Securities and Exchange Commission, including Cinedigm's
registration statements, quarterly reports on Form 10-Q and annual
report on Form 10-K, are "forward-looking'' statements within the
meaning of the Private Securities Litigation Reform Act of 1995
(the "Act"). Forward-looking statements include statements that are
predictive in nature, which depend upon or refer to future events
or conditions, which include words such as "expects,"
"anticipates,'' "intends,'' "plans,'' "could," "might,"
"believes,'' "seeks," "estimates'' or similar expressions. In
addition, any statements concerning future financial performance
(including future revenues, earnings or growth rates), ongoing
business strategies or prospects, and possible future actions,
which may be provided by Cinedigm's management, are also
forward-looking statements as defined by the Act. Forward-looking
statements are based on current expectations and projections about
future events and are subject to various risks, uncertainties and
assumptions about Cinedigm, its technology, economic and market
factors and the industries in which Cinedigm does business, among
other things. These statements are not guarantees of future
performance and Cinedigm undertakes no specific obligation or
intention to update these statements after the date of this
release.
For more information: Jill Newhouse Calcaterra
Cinedigm jcalcaterra@cinedigm.com
310-466-5135
Tables Follow
CINEDIGM CORP. CONDENSED CONSOLIDATED
BALANCE SHEETS
(In thousands, except for share and per share
data)
|
December 31, 2019 |
|
March 31, 2019 |
ASSETS |
(Unaudited) |
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
14,474 |
|
|
$ |
17,872 |
|
Accounts receivable, net |
40,902 |
|
|
35,510 |
|
Inventory, net |
598 |
|
|
673 |
|
Unbilled revenue |
1,682 |
|
|
2,336 |
|
Prepaid and other current assets |
9,458 |
|
|
8,488 |
|
Total current assets |
67,114 |
|
|
64,879 |
|
Restricted cash |
1,000 |
|
|
1,000 |
|
Property and equipment, net |
9,442 |
|
|
14,047 |
|
Right-of-use assets |
1,765 |
|
|
— |
|
Intangible assets, net |
7,518 |
|
|
9,686 |
|
Goodwill |
8,701 |
|
|
8,701 |
|
Other long-term assets |
171 |
|
|
526 |
|
Total assets |
$ |
95,711 |
|
|
$ |
98,839 |
|
LIABILITIES AND DEFICIT |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued expenses |
$ |
80,985 |
|
|
$ |
68,707 |
|
Current portion of notes payable, including unamortized debt
discount of $690 and $1,436 respectively |
38,310 |
|
|
43,319 |
|
Operating lease liabilities |
926 |
|
|
— |
|
Current portion of deferred revenue |
1,640 |
|
|
1,687 |
|
Total current liabilities |
121,861 |
|
|
113,713 |
|
Notes payable, non-recourse, net of current portion and unamortized
debt issuance costs and debt discounts of $955 and $1,495
respectively |
11,604 |
|
|
19,132 |
|
Operating lease liabilities, noncurrent |
918 |
|
|
— |
|
Deferred revenue, net of current portion |
1,338 |
|
|
2,357 |
|
Other long-term liabilities |
127 |
|
|
205 |
|
Total liabilities |
135,848 |
|
|
135,407 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ deficit |
|
|
|
Preferred stock, 15,000,000
shares authorized; Series A 10% - $0.001 par value per share; 20
shares authorized; and 7 shares issued and outstanding at December
31, 2019 and March 31, 2019. Liquidation preference of $3,648 |
3,559 |
|
|
3,559 |
|
Common stock, $0.001 par
value; Class A stock 60,000,000 shares authorized at December 31,
2019 and March 31, 2019; 41,105,917 and 36,992,433 shares issued
and 39,792,081 and 35,678,597 shares outstanding at December 31,
2019 and March 31, 2019, respectively |
40 |
|
|
36 |
|
Additional paid-in
capital |
375,489 |
|
|
368,531 |
|
Treasury stock, at cost;
1,313,836 Class A common shares at December 31, 2019 and March 31,
2019 |
(11,603 |
) |
|
(11,603 |
) |
Accumulated deficit |
(406,378 |
) |
|
(395,814 |
) |
Accumulated other
comprehensive income |
35 |
|
|
10 |
|
Total stockholders’ deficit of
Cinedigm Corp. |
(38,858 |
) |
|
(35,281 |
) |
Deficit attributable to
noncontrolling interest |
(1,279 |
) |
|
(1,287 |
) |
Total deficit |
(40,137 |
) |
|
(36,568 |
) |
Total liabilities and
deficit |
$ |
95,711 |
|
|
$ |
98,839 |
|
|
|
|
|
|
|
|
|
CINEDIGM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except for share and per share
data)
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenues |
$ |
11,512 |
|
|
$ |
14,643 |
|
|
$ |
31,556 |
|
|
$ |
41,465 |
|
Costs and expenses: |
|
|
|
|
|
|
|
Direct operating (excludes depreciation and amortization shown
below) |
5,726 |
|
|
5,246 |
|
|
13,425 |
|
|
12,287 |
|
Selling, general and administrative |
2,997 |
|
|
6,425 |
|
|
13,834 |
|
|
19,455 |
|
(Recovery) provision for doubtful accounts |
(5 |
) |
|
113 |
|
|
321 |
|
|
1,245 |
|
Depreciation and amortization of property and equipment |
1,594 |
|
|
2,074 |
|
|
4,977 |
|
|
6,239 |
|
Amortization of intangible assets |
589 |
|
|
1,397 |
|
|
2,178 |
|
|
4,187 |
|
Total operating expenses |
10,901 |
|
|
15,255 |
|
|
34,735 |
|
|
43,413 |
|
Income (loss) from
operations |
611 |
|
|
(612 |
) |
|
(3,179 |
) |
|
(1,948 |
) |
Interest expense, net |
(1,618 |
) |
|
(2,593 |
) |
|
(5,713 |
) |
|
(7,860 |
) |
Other expense, net |
(1,019 |
) |
|
(12 |
) |
|
(1,187 |
) |
|
(40 |
) |
Loss from operations before
income taxes |
(2,026 |
) |
|
(3,217 |
) |
|
(10,079 |
) |
|
(9,848 |
) |
Income tax expense |
(136 |
) |
|
(55 |
) |
|
(210 |
) |
|
(194 |
) |
Net loss |
(2,162 |
) |
|
(3,272 |
) |
|
(10,289 |
) |
|
(10,042 |
) |
Net (income) loss attributable
to noncontrolling interest |
(7 |
) |
|
14 |
|
|
(8 |
) |
|
38 |
|
Net loss attributable to
controlling interests |
(2,169 |
) |
|
(3,258 |
) |
|
(10,297 |
) |
|
(10,004 |
) |
Preferred stock dividends |
(89 |
) |
|
(89 |
) |
|
(267 |
) |
|
(267 |
) |
Net loss attributable to
common stockholders |
$ |
(2,258 |
) |
|
$ |
(3,347 |
) |
|
$ |
(10,564 |
) |
|
$ |
(10,271 |
) |
Net loss per Class A common
stock attributable to common stockholders - basic and diluted: |
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
$ |
(0.05 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.27 |
) |
Weighted average number of Class A common stock outstanding: basic
and diluted |
42,418,641 |
|
|
38,033,756 |
|
|
40,745,114 |
|
|
37,793,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Following is the reconciliation of our consolidated net loss to
Adjusted EBITDA:
|
|
Three Months Ended December 31, |
($ in
thousands) |
|
2019 |
|
2018 |
Net loss |
|
$ |
(2,162 |
) |
|
$ |
(3,272 |
) |
Add Back: |
|
|
|
|
Income tax expense |
|
136 |
|
|
55 |
|
Depreciation and amortization of property and equipment |
|
1,594 |
|
|
2,074 |
|
Amortization of intangible assets |
|
589 |
|
|
1,397 |
|
Interest expense, net |
|
1,618 |
|
|
2,593 |
|
Other expense, net |
|
777 |
|
|
366 |
|
Stock-based compensation and expenses |
|
178 |
|
|
361 |
|
Net loss attributable to noncontrolling interest |
|
(7 |
) |
|
14 |
|
Adjusted EBITDA |
|
$ |
2,723 |
|
|
$ |
3,588 |
|
|
|
|
|
|
Adjustments related to the Cinema Equipment Business |
|
|
|
|
Depreciation and amortization of property and equipment |
|
$ |
(1,475 |
) |
|
$ |
(1,942 |
) |
Amortization of intangible assets |
|
(11 |
) |
|
(11 |
) |
Stock-based compensation and expenses |
|
— |
|
|
(3 |
) |
Income from operations |
|
(600 |
) |
|
(1,895 |
) |
Adjusted EBITDA from
non-cinema equipment business |
|
$ |
637 |
|
|
$ |
(263 |
) |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Following is the reconciliation of our consolidated net loss to
Adjusted EBITDA:
|
|
Nine Months Ended December 31, |
($ in
thousands) |
|
2019 |
|
2018 |
Net loss |
|
(10,289 |
) |
|
(10,042 |
) |
Add Back: |
|
|
|
|
Income tax expense |
|
210 |
|
|
194 |
|
Depreciation and amortization of property and equipment |
|
4,977 |
|
|
6,239 |
|
Amortization of intangible assets |
|
2,178 |
|
|
4,187 |
|
Interest expense, net |
|
5,713 |
|
|
7,860 |
|
Other expense, net |
|
1,536 |
|
|
394 |
|
Stock-based compensation and expenses |
|
367 |
|
|
763 |
|
Net loss attributable to noncontrolling interest |
|
(8 |
) |
|
38 |
|
Adjusted EBITDA |
|
$ |
4,684 |
|
|
$ |
9,633 |
|
|
|
|
|
|
Adjustments related to the Cinema Equipment Business |
|
|
|
|
Depreciation and amortization of property and equipment |
|
$ |
(4,612 |
) |
|
$ |
(5,844 |
) |
Amortization of intangible assets |
|
(34 |
) |
|
(34 |
) |
Stock-based compensation and expenses |
|
7 |
|
|
(8 |
) |
Income from operations |
|
(2,650 |
) |
|
(8,824 |
) |
Adjusted EBITDA from
non-cinema equipment business |
|
$ |
(2,605 |
) |
|
$ |
(5,077 |
) |
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