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CIDM: FY 2019 Q1 Shows Continued OTT Growth and Debt Reduction

08/23/2018
By Lisa Thompson

NASDAQ:CIDM

READ THE FULL CIDM RESEARCH REPORT

Cinedigm Corp.'s (NASDAQ:CIDM) revenues for the quarter ending June 30, 2018 came in slightly above expectations at $13.1 million versus $15.2 million a year ago, declining 14%. $7.1 million came from the legacy projector business and $6.0 million from content distribution and streaming. The legacy business continued to decline from $9.8 million in Q1 2018 to $7.1 million in Q1 2019 (down 27%) as studios started to fulfill their payment obligations.

The content business grew 9% to $6.0 million from $5.5 million, making the second quarter of growth in a row. Within this group, OTT grew, while distribution was somewhat steady. Distribution generated $3.8 million of the $6 million and OTT (both company owned and distribution for others) was $2.2 million. The company did not give last year’s revenue numbers for those segments for comparison. Management was heartened by the fact that despite industry trends that point to declining physical distribution, its gross billings for DVD Blu-ray in Q1 (which is the total value of disks shipped before returns or revenue share), was up 65%. We attribute this to Cinedigm gaining market share in a consolidating industry. In addition, its OTT streaming business, which includes company-own channels, had gross billings (the total revenue generated by the content before Cinedigm calculates its share) up 30%.

Cinedigm’s addressable footprint of devices reached 435 million, up 19 million, or 5% sequentially, in the June quarter. The OTT platform grew to 95 partners, up 33% over the prior year and 19% sequentially. During the quarter key deals included a multi-year agreement with DISH Networks and Sling TV as well as signed agreements with a market-leading streaming OEM manufacturer, two of the top five scaled ad-supported OTT platforms and another top three MVPD. These deals will be announced when they are launched.

Gross margin was up one percentage point, while gross margin dollars continue to fall as the digital cinema business revenues fall. Total operating expenses declined $2 million and the operating loss was $439,000 versus $896,000 a year ago. Expenses were down primarily due to the $2.3 million reduction on depreciation and amortization of property and equipment. This line item will continue to go down going forward.

Interest expense declined $1.3 million because of financial restructuring and paying off debt. During the June quarter, debt was reduced by another net $4.3 million. Non-recourse debt, attributable to the digital cinema business declined $8.1 million and the remaining debt increased $3.8 million.

For the quarter, the company had a net loss to common stockholders $3.4 million versus a loss of $5.2 million in the year ago quarter.

The EPS loss in Q1 2018 was $0.09 per share versus a loss of $0.48 per share a year ago. Shares outstanding increased to 37.6 million from 10.9 million a year ago. As of August 9, 2018, the shares outstanding were down to 35.1 million.

Subsequent News

Earlier this month Cinedigm renewed its distribution deal with the Crown Media Family Networks, parent company of the Hallmark Channel, Hallmark Movies & Mysteries, and Hallmark Movies Now. Cinedigm has been its exclusive distributor for the past six years and sales have grown significantly in the past two years. Digital wholesale revenue increased 15% in the first six months of 2018. Gross revenue dollars for Hallmark are up 324% year over year for the first six months of 2018 at Walmart, while unit sales there increase 315%. Its Royal Wedding Collection, the movie Campfire Kiss, and The Country Love Triple Feature sold for Mother’s Day boosted sales. Hallmark should have a strong second half due to the release of 25 films in Q4 of which 19 are for the Christmas season.

Today Cinedigm announced its first original scripted series. It will be about Emily “Mickey” Hahn, a writer for New Yorker magazine in the 30s who wrote about China. Mark Yellen Productions and Rosenbloom Entertainment will partner with Cinedigm on this series. It will be produced in Shanghai and Hong Kong starting in 2019 and there are plans to distribute it worldwide.

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