Cinedigm Corp

Welcome to Synodyne's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jill Calcaterra, Executive Vice President. Thank you. You may begin.

Thank you. Good afternoon and thank you for joining us today on our third quarter fiscal 2021 earnings conference call. Participating in today's call are Synodyme's Chairman and Chief Executive Officer, Chris McGurk, Chief Strategy Officer and President of Synodyme Networks, Eric Opica, President, Chief Operating Officer, General Counsel, Gary Lafredo, and Senior Vice President, Finance and Accounting, Cheryl Odiardi. 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, February 22, 2021, and Synodarm 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?

Thank you, Jill, and thanks, everyone, for joining us on the call today. Let me give an update to cover some key points about our corporate strategy and business outlook, and then I'll turn things over to Eric for a more in-depth review of our streaming business results and strategy. Then Gary will cover our strong fiscal third quarter financial results and the remarkable progress we have made over the last few months in reducing debt and strengthening our balance sheet. Let me emphasize at the outset that we are in the strongest position we have ever been in financially. We have significantly reduced our debt and have plenty of ammunition on our balance sheet to execute our growth agenda. In addition, our equity ownership composition has changed dramatically over the last six months. We no longer have a majority shareholder as the Chinese funds, including Bison Capital, have reduced their ownership to less than 20%. This ownership composition change and resulting increased share liquidity have given us the flexibility to more quickly and fully execute our strategic streaming roll-up acquisition strategy And it is also already opened up synonym to an entirely new wave of investors who seem very attuned to the company's unique streaming business narrative and tremendous growth prospects. With that overview as a backdrop, let me first talk about our streaming business. Overall, despite the impacts of COVID-19 on the advertising, theatrical, and DVD markets, we have had a tremendous run so far this fiscal year, and particularly in this last third fiscal quarter, where our streaming channel revenues from our 15-channel targeted enthusiast streaming portfolio increased by 85%. And we reached almost 23 million monthly active ad-based viewers. Clearly, we've solidified our position as a leading independent player in streaming, the most important and fastest-growing segment of the entertainment business. And with the court cutting shift to streaming still dramatically and permanently accelerating due in part to the continued stay-at-home environment, we remain in a very strong and unique competitive position to rapidly grow our market share organically and also through a roll-up strategy of acquiring subscale but high potential streaming companies in an acquisition market environment where we face very limited competition due to our unique assets, technology, and streaming capabilities. As opposed to participating directly in the so-called streaming wars, where companies like Netflix and Disney and Comcast are spending billions of dollars on original content and marketing to try to build massive subscriber bases at the expense of each other, Synodyne is focused on building out a widely distributed portfolio of more targeted streaming channels focused on specific enthusiast audiences. like DocuRama for documentary enthusiasts, Dove for family enthusiasts, Bloody Disgusting for horror enthusiasts, and so on across the 15 streaming channels we've already launched and the 10 more we have in the works. Synodyme Strategy is not competitive with the expensive subscription-focused Netflix and Disney Plus and Peacock and all the other major media general entertainment channels that are at war with each other for subscribers. Instead, as Eric will explain in more detail in a minute, our targeted enthusiast channel approach is a perfectly complementary strategy to that of the major media general entertainment streaming channels and is in high demand from both a consumer standpoint and from all of the key streaming devices and platforms, where our device access footprint has now almost exceeded 1 billion devices worldwide. And while our enthusiast channel portfolio strategy clearly fills an important market need, it is a much less risky financial strategy than the major media streaming war approach, because it requires a fraction of the content and marketing spending as the big general entertainment channels, where the major media companies are literally locked in a do or die struggle with each other to secure their streaming futures. And very importantly, the major media companies are largely ignoring this enthusiast space as they fight each other for general entertainment channel dominance. So, given our unique capabilities and the recent acquisition of many of our competitors by the major media companies, we are facing very limited competition as we build our enthusiast streaming business portfolio organically, as witnessed by the extremely strong growth in revenues, viewers, and other key streaming metrics we have posted this quarter, plus our ongoing roll-up acquisition strategy to accretively vacuum up subscale, high-potential streaming assets as the industry consolidates. We have been very busy executing on this unique opportunity to take advantage of this competitive by accelerating our enthusiast streaming channel strategy via acquisitions. In the last three months, we acquired three high-potential streaming companies in enthusiast categories where we believe there is an underserved audience and there is tremendous global growth potential. The first was The Film Detective, a leading streaming channel company focused on classic film and television programming and with a library of 10,000 film and TV episodes. Then we acquired Fandor, called the Netflix for Indie Film by the Wall Street Journal, and a streaming rabbit hole worth falling down by the New York Times, along with another 4,000 premium independent content titles. And earlier this month, we acquired Screenbox, called the perfect horror streaming alternative to Netflix by Tech Times, and named one of the best streaming services for 2021 by PCmatic. We are now very focused on integrating these assets into Synodai and anticipate relaunching Fandor and Keyframe, Fandor's digital publication of written and video editorial content, in the spring of this year. All three of these accretive acquisitions will benefit from our distribution muscle across every key streaming platform, our infrastructure, content library, and our match point streaming technology. which has been battle tested in the market and is acknowledged as among the industry's best streaming solutions. Integration with Cinedigm will result in immediate higher margins, rapidly escalating advertising and subscription revenues, and significant rising valuations for each of these channels, as well as business synergies across our entire streaming portfolio. Clearly, we have an immediate market and competitive opportunity to accelerate our streaming growth with further accretive roll-up acquisitions like these, and we fully intend to continue to take advantage of it. In a minute, Eric will review all of our key streaming metrics, where we have showed continued remarkable growth across the board. However, I would just like to touch on one other point in this arena. Our digital content sales business where we sell content to virtually every channel provider in the streaming universe, including Amazon, Netflix, Hulu, and everyone else, continues to do gangbuster business. We have put up three record quarters in a row in digital sales, with this fiscal third quarter up another 34% versus last year. We see continued huge potential in the sales arena as the streaming revolution keeps gaining ground on a worldwide basis. At the same time, as we continued to rapidly build our streaming business, we strengthened our balance sheet enormously, adding significant cash and dramatically reducing debt. Having fully eliminated the second lien debt and convertible debt that existed earlier in the fiscal year, we now have only less than $5 million in recourse debt remaining on the balance sheet, including less than $3 million in the form of a very low interest revolving credit facility with East West Bank and a PPP loan in the amount of $2.2 million. Having so little debt and having cash reserves obviously enhances our prospects for sustained profitability going forward and gives us added capacity and firepower to execute our streaming channel growth and acquisition rollout strategy. And we also did all this while posting positive and growing adjusted EBITDA in our core business of content distribution and streaming. With adjusted core business EBITDA of $1.3 million in the quarter, up 376% versus last year. We think that is a very significant achievement in light of our ongoing investments to rapidly build our streaming business and market share. That positive adjusted EBITDA also sets us apart from most of the other players in the streaming business. And finally, while all of this was going on, we worked through the significant and compelling change in our equity ownership composition that I mentioned at the onset of my remarks. Now we no longer have a controlling shareholder and have a much higher public share flow. Bison Capital and the Chinese funds now own less than 20 percent of our common equity, and all the convertible debt they held before has been eliminated. As I said at the onset of my remarks, this ownership change and vastly increased share liquidity has significant positive impacts on our ability to quickly execute our streaming roll-up strategy. At the same time, we continue to have a very strong and positive relationship with Bison and the Chinese funds, who have supported us, and helped us establish the relationships and access in China and Asia that we believe we will be able to monetize in the future to create additional shareholder value. Key example of this is our recent content distribution and streaming channel deal with Fantawild, known as the Disney of China, given that it is the largest theme park operator in China and the biggest producer of premium animation in all of Asia. In addition, this change in ownership composition has opened the gates to a flood of new investors who seem very attuned to the upside potential of streaming in general and Synodyne in particular. And on that note, I would like to thank all the new investors who have discovered Synodyne, particularly the thousands of individual investors on trading and social sites like Robinhood and StockTwits. and many other platforms that have found us are doing their diligence and seem to be just as excited about our growth prospects as we are. We like to think that an independent and entrepreneurial spirit motivates our company and all of our employees as we build our streaming business amidst the established major media companies. And it's very clear that many of our new individual investors that have rallied behind Cynodyne share that exact same independent and entrepreneurial spirit. We thank them and all of our shareholders for their support, and we look forward to a very successful future together. And with that, I'd like to now turn things over to Eric for a deeper dive on our streaming business and strategy.