News Column

Cinedigm Announces Third Quarter Fiscal 2014 Financial Results

February 13, 2014

Record Results Reflect Successful Integration of Gaiam Inc.’s Entertainment Unit

LOS ANGELES--(BUSINESS WIRE)-- Cinedigm Corp. (NASDAQ: CIDM) today announced financial results for the third quarter fiscal 2014 which ended December 31, 2013.

Third Quarter Highlights Include:

  • Consolidated revenues increased 60% to $34.9 million, reflecting the successful integration of Gaiam Inc.’s Entertainment Unit (“GVE”), acquired on October 21, 2013
  • Non-deployment revenues increased 146% to $22.2 million, reflecting the positive impact of GVE
  • Cinedigm Entertainment Group (CEG) revenues increased 234% to $18.8 million, reflecting the positive impact of GVE
  • Consolidated Adjusted EBITDA in the third quarter was $17.8 million, an increase of $2.6 million versus the prior year quarter of $15.2 million
  • Adjusted EBITDA from non-deployment businesses more than doubled to $5.7 million, increasing from $2.8 million in the prior year quarter
  • CEG expanded its total home entertainment distribution library of films and TV episodes to over 33,000 titles during the third quarter, and delivered over 2,500 pieces of content into the digital ecosystem
  • Subsequent to quarter-end, Cinedigm’s digital network business continued to expand through a partnership announced yesterday with Wizard World, Inc. to launch a digital channel later this year focused on the Comic Con audience

    Third Quarter Fiscal 2014 Results

    Consolidated revenues (including Phase 1 DC and Phase 2 DC subsidiaries) in the third quarter were $34.9 million, a $13.1 million or 60% increase from the prior year period. Phase 1 and Phase 2 Deployment revenues remained flat year-over-year for the three months ended December 31, 2013 as virtual print fees continue to be impacted by studio releasing decisions outside of our control. Cinedigm repaid $10 million of non-recourse debt during the quarter.

    Third quarter non-deployment revenues (excluding Phase 1 DC and Phase 2 DC subsidiaries) were $22.2 million, an increase of $13.2 million or 146% from $9.0 million in the year ago period.

    CEG revenues increased 234% to $18.8 million due to organic growth and the acquisition of GVE, which was completed on October 21, 2013. GVE contributed $10.9 million of revenues during the nine and half weeks of Cinedigm’s ownership. In addition, GVE generated approximately $2.2 million of revenues in the three weeks of October for its previous owner prior to the acquisition closing.

    Services segment revenue remained level and stable with the prior year quarter as our recurring revenue base performed as expected.

    Consolidated Adjusted EBITDA in the third quarter was $17.8 million, an increase of $2.6 million or 17.1% versus the prior year quarter of $15.2 million.

    Adjusted EBITDA from non-deployment businesses was $5.7 million during the three months ended December 31, 2013, more than doubling from $2.8 million for the three months ended December 31, 2012, also reflecting the positive results of the GVE Acquisition, as well as overall growth within CEG.

    “The acquisition of GVE has generated solid results right out of the gate,” said Chris McGurk, Chairman of the Board and CEO. “With the integration on track and nearly complete, we are focused on building our sales pipeline by leveraging our position as the largest independent physical and digital distributor of non-theatrical content into the home and mobile markets. Additionally, we are focused on the opportunity to utilize Cinedigm’s 33,000-plus film and TV episode library to expand our digital network business. Our Docurama channel and our recently announced partnership to launch a digital channel for the Comic Con audience are exciting examples of our commitment to build a leading digital network business, while further monetizing our library.”

    “We produced record non-deployment revenues and EBITDA this quarter, even as we integrated two companies and put in place significant operating synergies that we will fully recognize over the next two quarters,” said Adam Mizel, Chief Operating Officer and CFO. “The Company also signed several long-term library rights and digital licensing transactions in the quarter, as well as a significant transaction which closed prior to year end and in which cash has since been collected. However, the revenue must be amortized over the multi-year term of the contract rather than recognized immediately, as had been assumed in our recent forecast. We expect the combined company to utilize its strong market position, growing sales pipeline and first mover position in the digital networks business to accelerate growth over the next 18 months.”

    Nine-Month Fiscal 2014 Results

    Revenues increased $11.2 million or 25% to $72.7 million during the nine months ended December 31, 2013 resulting from the organic growth in revenues in CEG, as well as the GVE Acquisition, partially offset by decreases in Deployment and Services revenues. The CEG business expanded by $13.8 million, or 115%, year over year, of which $10.9 million is directly attributable to revenues of GVE earned from October 21, 2013 through the end of our fiscal third quarter. The Company reported Adjusted EBITDA (including its Phase 1 DC and Phase 2 DC subsidiaries) of $38.8 million for the nine months ended December 31, 2013, in comparison to $42.6 million for the nine months ended December 31, 2012. Adjusted EBITDA from non-deployment businesses decreased to $3.3 million during the nine months ended December 31, 2013, from $4.8 million for the nine months ended December 31, 2012, reflecting ramp up marketing and distribution expenses in our theatrical releasing business.

    Fiscal Fourth Quarter and Second Half Fiscal 2014 Outlook

    The Company has adjusted its fiscal fourth quarter guidance and second half guidance to reflect the effect of its revenue recognition timing with fourth quarter non-deployment EBITDA guidance of $5.8-$7.3 million and total consolidated fourth quarter EBITDA guidance of $17.0-$18.5. We expect fourth quarter non-deployment revenues of $22.5-$24.5 million and total consolidated revenues of $35-$37 million. Second half non-deployment EBITDA is expected to be $12.5-$14.0 million versus $17-$18 million and consolidated EBITDA is expected to be $36.0-$38.0 million versus $41-$42 million. As noted previously, our previous and current second half guidance includes the approximately $2.2 million in revenues and associated EBITDA recognized by GVE’s prior owner in the period of October 1st-21 st, 2013.

    Adjusted EBITDA is defined by the Company for the periods presented to be earnings before interest, taxes, depreciation and amortization, other income, net, stock-based compensation, merger and acquisition costs, restructuring and transition expenses, 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 Adjusted EBITDA to U.S. GAAP net income (loss). Adjusted EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America, 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 U.S. 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 U.S. GAAP. These non-GAAP measures should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with U.S. GAAP.

    Conference Call

    Cinedigm will host a conference call to discuss its financial results at 4:30 p.m. EDT on February 13, 2014. To participate in the conference call, please dial (877) 754-5303or for international callers (678) 894-3030at least five minutes prior to the start of the call. No passcode is required. An audio webcast of the call will be accessible at http://investor.cinedigm.com/events.cfm. To listen to the live webcast, please visit the site prior to the start of the call in order to register, download and install any necessary audio software.

    For those unable to participate during the live broadcast, a replay will be available beginning February 13, 2014 at 7:30 p.m. EST, through February 20, 2014 at 11:59 p.m. EST. To access the replay, dial (800) 585-8367 (U.S.) or (404) 537-3406 (International) and use passcode: 59426115.

    About Cinedigm

    Over the past decade, Cinedigm has led the digital distribution revolution that continues to transform the media landscape. In addition to its pioneering role in transitioning movie theatres from traditional film prints to digital distribution, Cinedigm is the leading independent content distributor in the United States, with direct relationships with over 60,000 physical retail stores and digital platforms, including Wal-Mart, Best Buy, Target, iTunes, Netflix, and Amazon, as well as the national Video On Demand platform on cable television. The company’s library of over 32,000 titles and episodes encompasses award-winning documentaries from Docurama Films®, next-gen Indies from Flatiron Film Company®, acclaimed independent films and festival picks through partnerships with the Sundance Institute and Tribeca Films and a wide range of content from brand name suppliers, including National Geographic, Discovery, Scholastic, WWE, NFL, Shout Factory, Hallmark, Jim Henson and more.

    Cinedigm™ and Cinedigm Digital Cinema Corp™ are trademarks of Cinedigm Corpwww.cinedigm.com. [CIDM-F]

    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.

     

    CINEDIGM CORP.

    CONDENSED CONSOLIDATED BALANCE SHEETS

    (In thousands, except for share and per share data)

           
    December 31, 2013March 31, 2013
    ASSETS (Unaudited)
    Current assets
    Cash and cash equivalents $ 18,863 $ 13,448
    Accounts receivable, net 70,341 29,384
    Deferred costs, current portion 1,878 1,238
    Unbilled revenue, current portion 5,987 7,432
    Prepaid and other current assets 12,230 6,091
    Note receivable, current portion 333 331
    Assets of discontinued operations, net of liabilities 1,876   2,279
    Total current assets 111,508 60,203
     
    Restricted cash 6,751 6,751
    Security deposits 218 218
    Property and equipment, net 144,291 170,088
    Intangible assets, net 35,284 12,799
    Goodwill 8,542 8,542
    Deferred costs, net of current portion 7,931 7,396
    Accounts receivable, long-term 1,451 1,225
    Note receivable, net of current portion 102 130
    Investment in non-consolidated entity, net 1,812
    Assets of discontinued operations, net of current portion 6,164   12,295
    Total assets $ 322,242   $ 281,459
     
     

    CINEDIGM CORP.

    CONDENSED CONSOLIDATED BALANCE SHEETS

    (In thousands, except for share and per share data)

    (continued)

           
    December 31, 2013March 31, 2013
    LIABILITIES AND STOCKHOLDERS’ DEFICIT (Unaudited)
    Current liabilities
    Accounts payable and accrued expenses $ 63,755 $ 39,777
    Current portion of notes payable, non-recourse 34,095 34,447
    Current portion of notes payable 18,275
    Current portion of capital leases 590 132
    Current portion of deferred revenue 3,463 1,844
    Current portion of contingent consideration for business combination   1,500  
    Total current liabilities 120,178 77,700
     
    Notes payable, non-recourse, net of current portion 173,797 203,462
    Notes payable, net of current portion 24,553
    Capital leases, net of current portion 5,632 4,386
    Interest rate derivatives 544
    Deferred revenue, net of current portion 12,829 10,931
    Contingent consideration, net of current portion 1,906   1,750  
    Total liabilities 338,895   298,773  
    Commitments and contingencies
    Stockholders’ Deficit
    Preferred stock, 15,000,000 shares authorized; Series A 10% - $0.001 par value per share; 20 shares authorized; 7 shares issued and outstanding at December 31, 2013 and March 31, 2013, respectively. Liquidation preference of $3,636 3,547 3,466
    Class A common stock, $0.001 par value per share; 118,759,000 shares authorized; 64,501,920 and 48,448,137 shares issued and 64,450,480 and 48,396,697 shares outstanding at December 31, 2013 and March 31, 2013, respectively 64 48
    Class B common stock, $0.001 par value per share; 1,241,000 shares authorized and issued, 0 shares outstanding at December 31, 2013 and March 31, 2013
    Additional paid-in capital 245,178 221,810
    Treasury stock, at cost; 51,440 Class A shares (172 ) (172 )
    Accumulated deficit (265,270 ) (242,466 )
    Total stockholders’ deficit (16,653 ) (17,314 )
    Total liabilities and stockholders’ deficit $ 322,242   $ 281,459  
     
           

    CINEDIGM CORP.

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands, except for share and per share data)

    (Unaudited)

     

    For the Three Months

    Ended December 31,

    For the Nine Months

    Ended December 31,

    2013     20122013    

    2012

    Revenues $ 34,885 $ 21,779 $ 72,664 $ 61,448
    Costs and expenses:
    Direct operating (exclusive of depreciation and amortization shown below) 11,013 2,119 19,558 5,595
    Selling, general and administrative 6,949 5,435 17,243 16,247
    Provision for doubtful accounts 33 72 227 226
    Merger and acquisition expenses 2,779 2,779 1,267
    Restructuring and transition expenses 1,142 1,142 340
    Depreciation and amortization of property and equipment 9,444 9,120 27,901 27,264
    Amortization of intangible assets 1,228   732   2,055   1,100  
    Total operating expenses 32,588   17,478   70,905   52,039  
    Income from operations 2,297 4,301 1,759 9,409
    Interest expense, net (5,051 ) (6,690 ) (14,507 ) (21,426 )
    Income (loss) on investment in non-consolidated entity 678 (1,812 ) 1,340
    Other income, net 23 102 269 494
    Change in fair value of interest rate derivatives 38   349   796   1,025  
    Loss from continuing operations before benefit from income taxes (2,693 ) (1,260 ) (13,495 ) (9,158 )
    Benefit from income taxes       5,019  
    Loss from continuing operations (2,693 ) (1,260 ) (13,495 ) (4,139 )
    Loss from discontinued operations (7,689 ) (524 ) (9,042 ) (389 )
    Net loss (10,382 ) (1,784 ) (22,537 ) (4,528 )
    Preferred stock dividends (89 ) (89 ) (267 ) (267 )
    Net loss attributable to common stockholders $ (10,471 ) $ (1,873 ) $ (22,804 ) $ (4,795 )
    Net loss per Class A and Class B common share attributable to common shareholders - basic and diluted:
    Loss from continuing operations $ (0.05 ) $ (0.03 ) $ (0.25 ) $ (0.09 )
    Loss from discontinued operations (0.12 ) (0.01 ) (0.17 ) (0.01 )
    $ (0.17 ) $ (0.04 ) $ (0.42 ) $ (0.10 )
     
    Weighted average number of Class A and Class B common shares outstanding: Basic and diluted 61,729,658   48,320,257   54,357,320   47,254,337  
     


    Following is the reconciliation of the Company's consolidated Adjusted EBITDA to consolidated GAAP net loss from continuing operations:

       

    For the Three Months

    Ended December 31,

    ($ in thousands)2013     2012
    Net loss from continuing operations before income taxes $ (2,693 ) $ (1,259 )

    Add Back:

    Depreciation and amortization of property and equipment 9,444 9,120
    Amortization of intangible assets 1,228 732
    Interest expense, net 5,051 6,690
    Income on investment in non-consolidated entity (678 )
    Other income, net (23 ) (102 )
    Change in fair value of interest rate derivatives (38 ) (349 )
    Stock-based compensation and expenses 750 501
    Merger and acquisition expenses 2,779
    Restructuring and transition expenses 1,142
    Allocated costs attributable to discontinued operations 206   495  
    Adjusted EBITDA $ 17,846   $ 15,150  
     

    Adjustments related to the Phase I and Phase II Deployments:

    Depreciation and amortization of property and equipment (9,018 ) (8,986 )
    Amortization of intangible assets (13 ) (13 )

    Income from operations

    (3,106 ) (3,318 )
    Intersegment services fees earned 5   6  
    Adjusted EBITDA from non-deployment businesses $ 5,714   $ 2,839  
     


    Following is the reconciliation of the Company's consolidated Adjusted EBITDA to consolidated GAAP net loss from continuing operations:

       

    For the Nine Months

    Ended December 31,

    ($ in thousands)2013     2012
    Net loss from continuing operations before income taxes $ (13,495 ) $ (9,158 )

    Add Back:

    Depreciation and amortization of property and equipment 27,901 27,264
    Amortization of intangible assets 2,055 1,100
    Interest expense, net 14,507 21,426
    Loss (income) on investment in non-consolidated entity 1,812 (1,340 )
    Other income, net (269 ) (494 )
    Change in fair value of interest rate derivatives (796 ) (1,025 )
    Stock-based compensation and expenses 1,932 1,698
    Merger and acquisition expenses 2,779 1,267
    Restructuring and transition expenses 1,142 340
    Allocated costs attributable to discontinued operations 1,208   1,503  
    Adjusted EBITDA $ 38,776   $ 42,581  
     

    Adjustments related to the Phase I and Phase II Deployments:

    Depreciation and amortization of property and equipment (27,054 ) (26,890 )
    Amortization of intangible assets (39 ) (39 )

    Income from operations

    (8,351 ) (10,921 )
    Intersegment services fees earned 16   21  
    Adjusted EBITDA from non-deployment businesses $ 3,348   $ 4,752  





    Cinedigm Contact:

    Jill Newhouse Calcaterra

    310/466-5135

    jcalcaterra@cinedigm.com

    Source: Cinedigm Corp.


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