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Edited Transcript of CIDM.OQ earnings conference call or presentation 16-Nov-20 9:30pm GMT

·36 min read

Q2 2021 Cinedigm Corp Earnings Call Morristown Nov 17, 2020 (Thomson StreetEvents) -- Edited Transcript of Cinedigm Corp earnings conference call or presentation Monday, November 16, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Christopher J. McGurk Cinedigm Corp. - Chairman & CEO * Erick Opeka Cinedigm Corp. - President of Digital Networks * Gary S. Loffredo Cinedigm Corp. - COO, President of Digital Cinema, General Counsel & Secretary * Jill Newhouse Calcaterra Cinedigm Corp. - Executive VP of Corporate Marketing & Communications ================================================================================ Conference Call Participants ================================================================================ * Andrew Richard Bond Alliance Global Partners, Research Division - Equity Research Associate * Daniel Louis Kurnos The Benchmark Company, LLC, Research Division - MD & Senior Equity Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to Cinedigm's Second Quarter 2021 Earnings Conference Call. (Operator Instructions) Please note this conference -- I would now like to turn the conference over to Jill Calcaterra, Executive Vice President. Thank you. You may begin. -------------------------------------------------------------------------------- Jill Newhouse Calcaterra, Cinedigm Corp. - Executive VP of Corporate Marketing & Communications [2] -------------------------------------------------------------------------------- Good afternoon, and thank you for joining us today on our Second Quarter Fiscal 2021 Earnings Conference Call. Participating in today's call are Cinedigm's Chairman and Chief Executive Officer, Chris McGurk; President of Cinedigm Networks, Erick Opeka; and Chief Operating Officer, General Counsel and President of our Cinema Equipment business, Gary Loffredo. Before I hand the call over to management, please note that on this call, certain information presented contains 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, November 16, 2020, and Cinedigm does not intend and undertakes no duty to update future events or circumstances. In addition, certain financial information presented in this call represents non-GAAP financial measures. And now I'd like to turn the call over to Chris McGurk. Chris? -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [3] -------------------------------------------------------------------------------- Thanks, Jill, and thanks, everyone, for joining us on the call today. I'd like to give a brief update on our business performance and outlook, and then I will turn things over to Erick for a more in-depth review of our streaming business results and strategy. And then Gary will cover our financials and the significant progress we've made in strengthening our balance sheet. And after that, we'll take questions. So despite the impacts of COVID-19 on the advertising and theatrical markets and the usual seasonal slowness of our first and second quarters of the fiscal year, we've had a remarkable run so far this year and rapidly building up our streaming business and solidifying our position as a leading independent player in that space, the most important and fastest-growing segment of the entertainment business. With the advertising business now rebounding sharply and the cord-cutting shift to streaming still dramatically and permanently accelerating due to the continued stay at home environment, Cinedigm continues to be in a very strong and unique position to rapidly grow our market share and reach sustained profitability. And we are expecting another very strong performance next quarter as well, and that's our seasonally strongest quarter. Very importantly, as the streaming business consolidates, which was inevitable and is happening now as evidenced by the constant news of mergers and acquisitions in the space, Cinedigm finds itself in a perfect competitive position given our unique capabilities, technology and distribution reach to grow even faster by acquiring profitable streaming assets like our very successful Viewster acquisition and the recent announcement of our agreement to purchase The Film Detective, which will add 10,000 films and TV FSNs to our content library as well as 2 high-potential streaming channels to our rapidly expanding OTT portfolio. In a couple of minutes, Erick will describe this significant strategic opportunity for a Cinedigm streaming roll up strategy in more detail because we strongly believe it will be a key and winning factor in our future growth and performance. So overall, we dramatically expanded our streaming business this year. We established a key strategic advantage in connected TV streaming through our deals with Samsung, Roku and Vizio, among others, by launching and scaling our free ad-supported linear and on-demand channel portfolio. In this quarter last year, we had 6 channels live and 300 contract. As of today, we have 26 channels launched or under contract, led by our flagship, CONtv and the fast-growing Bob Ross Channel, and we will likely beat our goal from a 30 channel portfolio a year ahead of schedule. Our broad channel portfolio gives us a significant market share on every key streaming device and platform. When we achieve full distribution on every platform in every territory, we expect each of these channels will generate between $1 million to $2 million in high-margin annual revenues to Cinedigm. And as our channel portfolio has grown, our viewership and subscription numbers have skyrocketed. At this time last year, our streaming channels were delivering 4.5 million monthly viewers. Now that number is over 15.2 million viewers, an increase of 238%. And it looks like this month will easily exceed 16 million viewers. As we have reported, we are generating huge increases in our ad revenues as a result. And our paid subscriber numbers have also scaled up dramatically, with a 45% increase in the last 6 months. All this growth is also being driven by the massive acceleration in our device and platform reach, which is approaching nearly 900 million consumer devices globally. This number is scaling through deals with large OEMS, cable companies and technology platforms such as Sinclair Broadcast Group, Samsung, Comcast Xfinity, Roku, Amazon, Viu, Vizio and RAD among many others. The current stay at home environment has accelerated the shift to streaming, leading to a world where cord cutting is permanent. This once in a lifetime shift has had a significant impact on our digital sales business, where we license film and TV content to every key player in the entire OTT streaming ecosystem, including Amazon, Apple, Netflix and Google, among many others. In the last 2 quarters, we recorded the highest digital content sales in the company's history. Our Amazon digital sales growth alone in the last quarter was 78%. Combined with our aggressive cost streamlining efforts, which have resulted in significant annual overhead savings of over $5 million, our streaming growth will help drive the company to sustain profitability going forward. Our core OTT streaming and digital and content distribution business, adjusted EBITDA is up $2.3 million or 72% versus the prior year-to-date, and we fully expect that trend will continue. On the net income front, our results have been significantly impacted this year by the nonoperating mark-to-market of our investment in Starrise Media, which has seen a steep decline in share price. We expect that, that will reverse itself in the future as the Asian entertainment markets rebound from COVID-19 impacts. We have also made substantial progress in strengthening our balance sheet. In the current quarter, we converted $15 million in debt-to-equity at $1.50 per share. We also reduced our second lien debt to $7.6 million over time. Our total debt has been reduced by $21 million or 40% versus a year ago. These actions materially reduced annual interest expense, and we are exploring alternatives to either reduce or eliminate the remaining second lien debt within this fiscal year. So clearly, there's been great progress on all fronts. We believe this momentum will only accelerate in the next fiscal quarter, our traditionally strongest seasonal period, which ends this December 31. And with that, I will now turn things over to Erick for a deeper dive on our streaming business and our streaming asset roll-up strategy that began with the acquisition of Viewster and The Film Detective will almost immediately begin to further accelerate our business results. Erick? -------------------------------------------------------------------------------- Erick Opeka, Cinedigm Corp. - President of Digital Networks [4] -------------------------------------------------------------------------------- Thank you, Chris. First, let me discuss our streaming performance over the quarter. So despite the summer being a seasonally slow period and the ad market is still recovering from COVID-19, our OTT networks group performed incredibly well, growing at 45% year-over-year overall in the quarter. Our revenue growth was driven by 2 key trends. First, this fiscal year, we saw a 45% rise in paid subscriptions to more than 142,000 subscribers by the end of the quarter, led by our fandom streaming service CONtv, which was up 78%. Much of the rise came from our plan to grow subscriptions on our third-party partners, such as the Roku Channel, Dish Network, Amazon, Comcast and others. We expect this area to continue to deliver growth with calendar Q4 through Q1 being the 2 highest growth period for subscriptions in the year. The second key trend was the resumption of advertising growth in our linear and on-demand businesses, which prior to COVID, were our highest growth areas for the company. In the quarter, our ad-based channels revenue was up 80% year-over-year driven by more than 16.1 million ad-supported viewers, which we're estimating today as of November. We expect to see further accelerating growth into calendar Q4, driven by an overall ad market recovery, heavy election spending, seasonal holiday spending and a continued shift of dollars from traditional TV advertising towards the OTT market. During the quarter, we further expanded our signed channel portfolio to 26 total channels, 9 months ahead of schedule on our path to reaching 30 channels. During the quarter, the total number of live channels went from 9 to 12 with the launches of all 3 media so real, Sports Network, Whistle PV and women's movie network, My Time. We also had a rapid expansion of the Bob Ross Channel to 7 additional platforms and route to more than 3.2 million monthly viewer base, quite a success considering the channel only launched a few months ago. Additionally, we added another 160 million devices to our reach, and we expect to pass more than 1 billion global device reach early in 2021. One of the more remarkable things about our streaming business has been our ability to sustain a high rate of revenue growth, while improving operating and EBITDA margins in our streaming business. In the quarter, gross margins improved to 57.9% from 38.4% in the prior year. And in the current fiscal year, gross margins are up 185%, with total SG&A spending on the networks business down 23%, and EBITDA margins are now currently at 25% and trending upwards. Our ability to deliver a high rate of growth with consistently improving margins and profitability is due to our competitive advantage driven by Matchpoint, our technology platform, which allows us to rapidly launch, operate and grow streaming channels faster, more efficiently and at far lower cost than our competitors. Based on our operating ability and the distinct competitive advantage I just noted, we believe we have a significant opportunity to leverage these distinct skills and capabilities to take advantage of the consolidation happening right now in the business and growth through a roll-up strategy, as Chris emphasized his remarks. With a focus on becoming a leading streaming portfolio company, focused on enthusiast services. The timing for the strategy could not be better, with more than 14,000 apps on Roku alone, there have never been more streaming services in the market. Many of these services are what we call enthusiast services. Streaming channels that cater to a deep interest in a given content genre area, be it animation, classic film, content geared towards women, families, et cetera. In essence, these services are highly complementary to the major services offered from Netflix, Hulu and others, where the treatment of enthusiast content is often a mile wide and an inch deep. Enthusiast services go far deeper than the majors and often have highly loyal and engaged fan bases. Many of these enthusiast services are fantastic businesses with tens to hundreds of thousands of subscribers, millions of ad impressions and thousands of titles under license. However, they face many limitations: a limited access to capital; there are some scale with excessive cost structures; or lack adequate capabilities in technology or distribution to break through in the market. Our go-forward focus for roll-ups will be simple. We'll find companies that we believe that through a migration to our technology platform and monetization and through a subsequent reduction in SG&A and third-party costs, the application of our distribution footprint, we can double their EBITDA within 1 to 2 quarters and double top line revenue within the first 12 months. We will focus on acquiring companies that fit our verticals in the fandom, family and high-end Cinedigm segments in the market. Combined with our 50% to 60% organic annual growth in our operating streaming businesses as we forecast into the future, we strongly believe that within 30 months of following the strategy, we can build a $60 million plus annual streaming business consisting of more than 0.5 million subscribers, 30 million-plus monthly ad-supported viewers and a streaming library of more than 25,000 hours of programming. We're already underway on this strategy. We've already proven that this model works with our acquisition of Viewster. In the first 16 months after acquiring it, we have more than doubled revenues and have increased EBITDA by more than 167%. And we expect to close our previously announced acquisition of Film, which will bring 2 streaming channels and nearly 10,000 film and television assets into our company over the next several weeks. Beyond this, we have developed a robust pipeline of potential opportunities that fit our model and have reconfigured the company to support at least 1 acquisition per quarter going forward. In summary, we believe that our plan consolidating and optimizing enthusiast streaming services is a highly defensible and accretive strategy that will lead to significant increases in shareholder value in a relatively short period of time. With that, let me turn this over to Gary to discuss our financial results. -------------------------------------------------------------------------------- Gary S. Loffredo, Cinedigm Corp. - COO, President of Digital Cinema, General Counsel & Secretary [5] -------------------------------------------------------------------------------- Thanks, Erick. For the second quarter of fiscal year 2021, which, along with the first quarter is seasonally slow, consolidated revenues were $7.2 million. As expected, overall revenues declined as a result of the contracted decline in our legacy digital Cinema Equipment business and the significant negative impact of COVID-19, which caused state mandated theater closures and the temporary halt of distribution of major studio releases into movie theaters. With respect to the Cinema Equipment business, the deployment contracts in this segment of our business provide for the payment of virtual print fees for up to 10 years from the date of the installation of the digital projection systems, and therefore, continue to move towards the end of the respective terms. We have planned for this expected roll-off of the virtual print fee revenue. Reflecting the shift in our business to digital and streaming, Q2 revenue for our OTT streaming channels was 47% higher than last year. AVOD channel revenue was up 44% over the prior quarter ended June 30, 2020, and up 45% over the second quarter of the prior year, despite the temporary impact of the COVID-19 pandemic on the overall advertising market. The 44% sequential quarterly revenue growth in Q2 in our AVOD channel revenue validates that our strategic shift and focus to AVOD and digital streaming is working. Our channel portfolio is growing, and our viewership is increasing rapidly. Witnessed by the 238% growth in ad-supported viewers to 15.2 million versus the prior year. We expect this ongoing shift toward our streaming business will continue over the balance of the year and drive the transition to a much higher margin, higher growth business model. With our OTT infrastructure, our distribution relationships and our proprietary Matchpoint technology platform, ,we believe the Film Detective acquisition once consummated, will provide significant accretive benefits and synergies, as Chris and Erick discussed. We continue to reposition our infrastructure to focus on the growing -- on growing the high-margin OTT and streaming Digital streaming businesses. Net interest expense decreased 34% to $1.2 million for the second quarter of fiscal 2021 compared to $1.8 million for the prior year. The current interest rate on our main East West Bank credit facility is only 3.75%. The decrease in net interest expense is primarily the result of our active reduction in outstanding debt balances. Our total outstanding debt balance as of September 30, 2020, is $30.9 million. That is a reduction of $20.9 million or 40% lower from the debt balance as of September 30, 2019. $12.1 million of that debt is related to the Digital Cinema business, which leaves $18.8 million of debt on the content and entertainment and corporate business. The content and entertainment corporate business debt as of September 30, 2019, was $37.7 million compared to $18.8 million as of September 30, 2020, which is $18.9 million or a 50% reduction. In the September 30 quarter, $15 million of debt was converted to Cinedigm equity at $1.50 per share. For the second quarter of fiscal year 2021, consolidated adjusted EBITDA was negative $1.1 million compared to $1.4 million in the year ago period. The decrease was due to the expected reduction in the legacy Cinema Equipment business and temporary DVD warehousing and distribution center shutdowns due to the COVID-19. Second quarter fiscal year 2021 adjusted EBITDA for the OTT streaming and digital and content distribution business was negative $963,000 compared to a negative $988,000 from second quarter of fiscal year 2020. Fiscal year-to-date adjusted EBITDA for our OTT streaming and digital and content distribution business improved $2.3 million, 72% better than last September 30, 2019. Adjusted EBITDA, which was negative $3.2 million. The $2.3 million year-to-date adjusted EBITDA improvement was due to higher-margin OTT streaming and digital revenues, which grew to 57% total content and entertainment business revenue compared to 46% in the prior year. From a liquidity standpoint, we have taken several important steps to improve our liquidity position. Our credit facility with East West Bank had a balance of $14.5 million as of March 30, 2020, and that balance has decreased to $9 million as of September 30, 2020. This balance was $18.6 million on March 31, 2019. Importantly, the East West Bank loan is an interest-only loan at 3.75%, which currently results in payments of approximately $28,000 per month. The company's second lien loans had an outstanding balance of $8.2 million as of March 31, 2020. During the 12 months ended March 31, 2020, the company paid down $2.9 million of the outstanding second lien secured loans. The second lien debt outstanding is $7.6 million as of September 30, 2020. The September -- the second lien loans bear interest at 12.75% payable 7.5% cash and 5.25% in cash or in kind at our option. The cash obligation of 7.5% results in approximately $47,000 per month. For the total monthly payments on our East West Bank and our second lien loans is less than $80,000 per month. In September, we converted an aggregate of $15 million in convertible note debt to Cinedigm common equity at $1.50 per share. The 2 convertible notes that were converted in full were held by Global Investment Bison Global and MingTai Investment LP. The notes had a principal amount of $10 million with an interest rate of 5% and a principal amount of $5 million with an interest rate of 8%. Accordingly, the notes have been extinguished. The conversion of $15 million in debt to Cinedigm equity significantly strengthens our balance sheet and reduces our annual interest expense by about $75,000 per year. Overall, from March 31, 2020, to September 30, 2020, we have reduced our debt balances by about -- by over $19 million, a 38% reduction with $15 million of the $19 million converted to common equity at $1.50 a share. On July 20, we sold 7,213,334 shares of common stock through a registered direct offering for gross proceeds of $10.8 million. Our financial results for the second quarter of 2021 fiscal year reflect our strategic focus on OTT channels and digital streaming. The consumer viewing patterns have shifted dramatically and permanently to streaming. Accelerated by the current stay-at-home environment. We are uniquely well positioned to benefit from that shift. With that, I will turn the call back to Chris. -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [6] -------------------------------------------------------------------------------- Thanks, Gary, and thanks, Erick. Clearly, we continue to power through many of the negative impacts of the COVID-19 pandemic on the entertainment business to rapidly expand our position as the leading independent player in the streaming space with quality channel, content and technology solutions for the entire explosively growing global streaming business segment. We now have 26 streaming channels in our portfolio access to almost 900 million streaming devices globally and over 16 million monthly ad-based viewers. We have a proven premium OTT technology solution with Matchpoint, and we have become a go-to streaming service provider for key players in the business. Clearly, Cinedigm has established a significant and growing set of capabilities and footprint and by far the best space in the entertainment business. Streaming, as Erick detailed, we plan to leverage that with an accretive roll up strategy of key profitable streaming assets similar to Viewster and The Film Detective acquisitions that will immediately and significantly benefit from what Cinedigm brings to the table. And we believe we're going to post some very strong results next quarter, our seasonally strongest period. And now we will take your questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- 1 (Operator Instructions) Our first question comes from Dan Kurnos with The Benchmark Company. -------------------------------------------------------------------------------- Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Senior Equity Analyst [2] -------------------------------------------------------------------------------- Nice to see the streaming momentum starting to pick up here. Let's kind of dive in a little bit on the roll-up strategy. I think it makes a ton of sense. We've seen it to be very successful, especially in kind of these market conditions. Maybe either Erick or Chris, if you could just give us your thoughts on, a, kind of what multiple range you expect you can acquire these things for? B, how the landscape has evolved to the point of, are there still a whole bunch of orphans out there? And kind of relative from a production standpoint, are these going to be larger deals? Will it be kind of chunky? Just how do we kind of think about it? And then I want to follow-up. -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [3] -------------------------------------------------------------------------------- Yes. This is Chris. Let me start, and then I'll turn it over to Erick and he can get more specific. I'm not going to comment specifically on the kind of multiples that we're looking at in these acquisitions. The only thing I will say is we feel very good about the Viewster and The Film Detective deals that we did, that we were able to find subscale assets that could benefit immediately from all of our capabilities in our technology. And also with management teams and ownership that -- particularly in the Film Detective case, wanted to participate in the upside that they saw with Cinedigm stock going forward. So as Erick said, there's 14,000 apps on Roku right now, there are tons of these smaller subscale assets out there that could immediately benefit from what we bring to the table. And we literally are going to have the opportunity to pick and choose, we believe, (technical Difficulty] forward. And obviously, we're going to go after those assets that we believe can have the biggest and immediate -- and most immediate impact from what we bring to the table. We're not talking about $30 million, $40 million, $50 million acquisitions. We're talking about acquisitions under quite a bit smaller than that, although we don't preclude anything. But I'm not going to comment on the multiple and our approach. And with that, I'll let Erick discuss in a little more detail if you want to see? -------------------------------------------------------------------------------- Erick Opeka, Cinedigm Corp. - President of Digital Networks [4] -------------------------------------------------------------------------------- Yes. So I think, clearly, we're looking -- there's a wide range of companies ranging from things that are great values up to things that are maybe market and more competitively priced. I think if we're going to be skewing somewhere towards the middle of that range. I think our focus is going to be on developing and growing what is already a robust proprietary deal flow pipeline. So I think you're going to see us getting things for reasonable valuations that applying our advantages, our technology, our distribution, we can rapidly have them achieve what we would believe to be higher valuations. So that's the general model and approach. I think there are -- look, clearly, on the extreme high end of the market, for services with millions of subscribers, we're not playing in that space today. I think we're going to be building up over time. The approach or -- we're already in preliminary planning for next fiscal year, but I would say it would be safe and conservative to say we'd like to add low 8 figures of revenue worth of acquisitions, and we have the pipeline to achieve that. So that's -- we're going to be going at it pretty aggressively. But I think we're going to be, like I mentioned during the opening remarks, 1 a quarter or so is our appetite. We think that's digestible. It won't be disruptive to company operations. So you can kind of back that out, what we're thinking in terms of scale. And I think that to your last point was in terms of available assets out there. Well, when you -- keep in mind, Cinedigm is positioning ourselves as a global footprint, not just -- we're not -- so we're not just looking at North American assets. We're looking at global assets. And there are far more services out there than there are -- I think it's a buyer's market for -- if you're patient and looking for the right assets that are a right fit for our company. -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [5] -------------------------------------------------------------------------------- And if I could just add to that, Erick. Thanks, Dan. I think the thing that really gets us excited about this is if you look around at the industry right now, there are virtually no other companies that can bring to the table what we can bring to the table at this moment for some of these smaller subscale players. We've got technology, we've got content, we've got the infrastructure, we've got our distribution muscle, and we also have a public currency that a lot of these companies find very attractive. And we think that really gives us an edge in going out there and being able to be really discerning and pick those assets out and bring them into the Cinedigm family that we really think have the biggest chance to have explosive growth, both from a revenue and an EBITDA standpoint. -------------------------------------------------------------------------------- Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Senior Equity Analyst [6] -------------------------------------------------------------------------------- Yes. That's really helpful. And Chris and Erick, that makes a ton of sense, right? I would imagine with the infrastructure you just mentioned that you're going to, as you said, get pretty meaningful synergies out of the gate. And therefore, on a synergized basis, I imagine most of these will be highly accretive from a cash flow perspective. So maybe Erick, since you did bring up kind of just a global perspective, maybe you can answer this, I was going to ask a question about CPMs, since it sounds like they mostly turned the corner and started improving in September, and we've certainly heard from other players in the space kind of the uniqueness of having a streaming-only option as opposed to being forced into a bundle. And so I don't know if that characterization fits outside of domestic or maybe some of the more mature European markets, but I'd love to get your perspective on how pricing is kind of also providing a tailwind right now if it is? -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [7] -------------------------------------------------------------------------------- And just can you clarify pricing as it relates to... -------------------------------------------------------------------------------- Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Senior Equity Analyst [8] -------------------------------------------------------------------------------- CPMs on your OTT business? -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [9] -------------------------------------------------------------------------------- Yes, yes, sure. Yes. No, I think coming -- as I mentioned earlier, coming off of the ad market didn't really start recovering in full force until July. But as you can imagine, demand in July and August are pretty low from a programmatic basis. So we really started to see the upward tick in CPMs and volume at the end of the quarter. So the quarter really, I would say the first 2/3 of the quarter still had some of the depressed levels. I would say that fast forward to today, we are not only fully recovered, CPMs are, I would say, at a premium to where they were year-over-year. I would say, volumes filled are far greater. I think -- so if you kind of extrapolate out from there and say, well, we were still able to punch up 80% year-over-year growth despite all of that, I think it bodes very well for what happens when we -- as we're seeing -- I think the monetization side of streaming, you see a lot of stocks getting hammered over stay at home versus not stay at home. But I think the real big driver is having a robust advertising market and that advertising market is going to be advertising and streaming. No matter how many hours of streaming there are or aren't, the more hours of streaming, the more revenue comes in. The streaming hours dip slightly. We'll still see a net and dramatic improvement in CPMs because there'll be less CPMs available. So I continue to remain bullish, mostly on the market dynamics and the prospects for a broader recovery because the segments like travel, automotive, to some extent, entertainment are not spending -- or they're still not spending. So if we're seeing these results in OTT, and we're missing a bunch of segments. I think it really bodes well for the growth rates that we're going to see in the future. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Next question comes from Brian Kinstlinger with Alliance Global Partners. -------------------------------------------------------------------------------- Andrew Richard Bond, Alliance Global Partners, Research Division - Equity Research Associate [11] -------------------------------------------------------------------------------- This is Andrew Bond calling in for Brian. Just wanted to know how many channels do you have live today versus ones that are in development? -------------------------------------------------------------------------------- Erick Opeka, Cinedigm Corp. - President of Digital Networks [12] -------------------------------------------------------------------------------- Yes. So this is Erick here. So we have 12 channels live today in the market. And then we have 26 under contract. Out of those 26, we're anticipating at least 2 to 3 launching per quarter until we hit that until we hit that full number. -------------------------------------------------------------------------------- Andrew Richard Bond, Alliance Global Partners, Research Division - Equity Research Associate [13] -------------------------------------------------------------------------------- Okay. Great. And then as you continue to build your footprint with channels that have been launched, could you talk about the sales cycles and getting additional platforms to stream your content? -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [14] -------------------------------------------------------------------------------- Sure. So I think if we kind of look to Bob Ross as a good example, which has basically been -- its journey started at the beginning of this fiscal year. We're -- I would characterize Bob Ross as at probably 70% of fully distributed. So if you kind of -- with the impact of COVID, where things took a little bit longer to move forward in some -- with some platforms and things just due to people adapting to a stay-at-home environment early on in our fiscal year, which began in April 1. So we're looking at 6 months to get to about 70%. So I think by the end of the fiscal year, we'll be well over 90%. So what we saw this year, with everything going on, it's taken about a year for a very strong channel to get full distribution. I would say Bob Ross would be on the higher end with the most demand. So I would say you could probably go up to 18 months to 24 months to get that same type of distribution for maybe a less popular channel. But we think that's pretty adequate when you compare it to cable television distribution, where full distribution takes took 5 to 7 years. So it's far less than half the time, maybe about 1/3 of the time that it would have taken for a cable channel. So the cycle to full revenue generation is pretty -- is relatively quick, although it does take some patience. -------------------------------------------------------------------------------- Andrew Richard Bond, Alliance Global Partners, Research Division - Equity Research Associate [15] -------------------------------------------------------------------------------- Right. Okay. That's great color. And can you quantify the trailing 12-month revenue and adjusted EBITDA of Film Detective? And is this a licensing model? And are there cost synergies involved? -------------------------------------------------------------------------------- Erick Opeka, Cinedigm Corp. - President of Digital Networks [16] -------------------------------------------------------------------------------- We're not currently describing. We're not breaking out the revenues on the Film Detective. But in terms of synergies, we think they're substantial. As I detailed in our acquisition remarks, there's really -- there's 3 key buckets that we can really enhance the distribution -- the revenue and the earnings potential of these properties. One is distribution, right? We have several hundred distribution outlets and our terms just due to our larger size relative to our partners are going to be more favorable. So we're going to have some immediate increased distribution. Two, will be on the technology side, given that Matchpoint is a proprietary platform with all of the benefits that has incurred a lot of cost that are spent on third-party vendors, licensors will be eliminated. Additionally, because Matchpoint is an automation platform, in some of our acquisitions that we do, there will be potential for overhead reductions and SG&A reductions, depending on the platform. We'll look at that on a case-by-case basis. Obviously, with some acquisitions, there is a net benefit by bringing in relationships and capabilities, which is definitely the case with Film Detective and their knowledge of film and content libraries and the ability to extract value of those is fantastic. So we're actually adding brain power to the company. And then the last bucket, of course, is on the monetization side, where our monetization engine applied to these, we have extremely strong monetization of both SVOD and AVOD that we can bring to there on all these parties. So we -- as we look to Film Detective, as we mentioned earlier, looking at doubling EBITDA within a few quarters, doubling revenue, 12 to 18 months is sort of the benchmark we look at on every acquisition that we look at. And by the way, we are only focused today on accretive acquisitions from the get-go and leveraging these sort of improvements to further enhance the profitability of the assets that we pick up. -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [17] -------------------------------------------------------------------------------- This is Chris. If I could just add to what Erick said, Phil Hopkins, who was the CEO and Founder of the Film Detective, and now he's going to be the President of The Film Detective inside the Cinedigm family, has done an amazing job in building that business, and he's probably the best in the business in identifying classic film and TV content. And he has done a really good job in identifying additional libraries and additional streaming assets that we could maybe bring into this roll-up strategy. So he's actively working with us to help implement the roll-up strategy along with Erick and Gary. And I think I just want to emphasize that point because we -- Erick said this, we think one of the great things about this strategy. Is we're able to bring executive talent into the company that can really help accelerate our agenda and Phil Hopkins is a perfect example of that at The Film Detective. -------------------------------------------------------------------------------- Andrew Richard Bond, Alliance Global Partners, Research Division - Equity Research Associate [18] -------------------------------------------------------------------------------- Perfect. That's all great color. And lastly, I'm sorry if I missed this, but can you also estimate how the pressure on the advertising market has impacted your revenue? And are you seeing any recovery in the market as the economy is slowly improving? -------------------------------------------------------------------------------- Erick Opeka, Cinedigm Corp. - President of Digital Networks [19] -------------------------------------------------------------------------------- Yes. So as we look at -- from the first quarter and about half of this quarter, we saw quite an impact on streaming, advertising. I think what has really driven the rebound has been as advertisers have seen TV audiences, the continued decline due to cord-cutting, particularly on cable, and there's the real lack of addressability, we've seen the shift from television to streaming accelerate at a far greater rate. So that acceleration of the limited dollars that were being spent plus reopening has -- with local markets plus an increase in spending around the election and now finally going into the holiday season, we still punched up an 80% year-over-year rate of growth despite all of the other headwinds I described. So we think there's -- while there may be some a little bit of bumpiness in the next quarter or 2 in the industry overall, we think the streaming piece of it will have the least impact, in fact, has already returned to growth as you look at some of those, I think we see the entire streaming industry on the ad side is trending to be 15% to 20% based on some analysts that we've reviewed. We're dramatically overperforming because we have been focused on adding new monetization partners at a very steady clip. So we remain incredibly bullish on this business. We think we're heading into Q4, which is going to be calendar Q4, which is a fantastic period of the year for us. Q1 is cyclically the slowest quarter, but then we're a dual revenue model business. So we typically see our subscription surge in Q1 -- calendar Q1, our fiscal Q4. So we have that sort of dual revenue model that allows us to offset any seasonal seasonalities that we might see. But I think the sheer number of channels that we're launching and the increased monetization efforts that we've had, we should see a pretty strong quarters coming up. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Our next question is from Dan Kurnos with The Benchmark Company. -------------------------------------------------------------------------------- Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Senior Equity Analyst [21] -------------------------------------------------------------------------------- I just wanted to follow-up really quickly on 2 housekeeping things that are probably just wrong information out there. Chris, just on the Starrise piece, there's nothing in your mind that indicates that there's anything fundamentally off. It's just literally the closing of the production in Hong Kong China that's been challenging there. And then Gary, on the movie side of the equation, the projector side, it feels like the vaccine is actually good news. So there's a shot that you have with the kind of the inventory you have and sort of getting that at least a little bit back on track from a monetization standpoint. If you guys could just address those 2 things, I'd appreciate it. -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [22] -------------------------------------------------------------------------------- Yes. Thanks, Dan. This is Chris. I'll take the Starrise question, as you pointed out and let Gary talk to the second one. Yes, there's really nothing other than the downtick in the whole marketplace, the shutdown over in China from COVID that we believe has impacted the Starrise shares, and we fully expect as they begin to sell their pretty huge inventory of television programming into the marketplace that in the COVID effects begin to wear off, then you'll see a rebound in the stock price going forward. So you're absolutely right. There's no operating issue from our standpoint. Gary? -------------------------------------------------------------------------------- Gary S. Loffredo, Cinedigm Corp. - COO, President of Digital Cinema, General Counsel & Secretary [23] -------------------------------------------------------------------------------- Yes. And on the digital cinema business, you're right that movie exhibitors have experienced a very tough 6 months. So many major studio releases have been pushed back. And as you know, we earn a VPF each time a movie is initially shown at a movie theater. So these studio releases have been rescheduled for 2021. So we will make up that revenue in 2021. Movies may pass through the theaters a lot quicker. So instead of a movie staying at a movie theater for 4 weeks and stays for 2 weeks and recycles for a new movie coming in, which is good for us because we earn a VPF each time that movie plays, the first time it plays in the movie theater. So the quicker they recycle through the more turns we get in VPF. And as far as selling the equipment, we were in talks with certain exhibitors to purchase the equipment early this year, but those talks were put on hold as the exhibitors strengthened their balance sheet, raised capital and get through this pandemic. So you're right, in 2021, there should be a much better outlook for theaters. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- We have reached the end of the question-and-answer session. At this time, I'd like to turn the call back over to Chris McGurk for closing comments. -------------------------------------------------------------------------------- Christopher J. McGurk, Cinedigm Corp. - Chairman & CEO [25] -------------------------------------------------------------------------------- Thank you, operator. I just want to thank Dan and Andrew for their questions. Those are great questions, and everyone else on the call for your support and your attention and your interest in the company. And we're really looking forward to talking to you again in a couple of months. So thank you all, and keep focused on us. All right. Goodbye. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.