Cineverse Corp. (CNVS) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Cinedigm Corp. It is now my pleasure to turn today's meeting over to Chris McGurk, Chairman and CEO of Cinedigm. The floor is yours.

Thank you. Good afternoon, ladies and gentlemen. It is now 2:00 in the afternoon on Friday, October 23, 2020, and I would like to call the meeting to order. My name is Chris McGurk. I am the Chief Executive Officer of Cinedigm Corp., and I have the pleasure of serving as Chairman of the Board of Directors. Presenting with me is Gary Loffredo, Chief Operating Officer, President of Digital Cinema, General Counsel and Secretary of the company. I want to thank you all for joining us today at the Annual Meeting of Stockholders. We are excited to be hosting our first virtual meeting. We have stockholders attending via the web portal. And through that portal, stockholders may cast votes and submit questions germane to the meeting. We may not be able to answer every question submitted, and if not, we will address unanswered questions after the meeting. I would now like to introduce our other directors: Peter C. Brown, Chairman of Grassmere Partners, LLC and Chairman of the Nominating Committee and a member of the Compensation Committee and the Audit Committee; Tom Bu, Audit and Financial Director for Bison Capital Holding and Bison Financial Holding; Patrick W. O'Brien, Managing Director and Principal of Granville Wolcott Advisors and Chairman of the Compensation Committee and a member of the Audit Committee and the Nominating Committee; Zvi M. Rhine, Principal at Sabra Capital Partners and Chairman of the Audit Committee and a member of the Compensation Committee and the Nominating Committee; Peixin Xu, a founder and the Executive Director of Bison Capital Holding Company Limited. I shall now ask Gary Loffredo as secretary to report on the calling of the meeting.

Mr. Chairman, we mailed the proxy statement and annual report to stockholders as required by law. August 26, 2020, was set as the record date for determination of stockholders entitled to receive notice of and to vote at this meeting. As of the August 26 record date, there were 111,647,193 shares of Class A common stock outstanding and entitled to vote at this meeting. Holders of Class A common stock are entitled to 1 vote for each share held. We have at the meeting today an independent inspector of election, Jim Alden, a representative of American Election Services. I have a list of all stockholders entitled to vote at this meeting and the number of shares held by each. I have confirmed that a quorum is present. It is now time to proceed with the official business. We have set aside time for questions following completion of the official business. You will note from the proxy statement that there are 6 items of business for stockholder consideration today: one, the election of a Board of 6 directors for the ensuing year; two, a vote to approve by nonbinding advisory vote executive compensation; three, an amendment to our 2017 equity incentive plan to increase the total number of shares of Class A common stock available for issuance thereunder; four, an amendment to the company's certificate of incorporation to increase the number of shares of Class A common stock authorized for issuance; five, an amendment to the company's certificate of incorporation to grant the Board the authority to consider a reverse stock split, which would be implemented if and only if the Board decides to implement it; and six, the ratification of the appointment of EisnerAmper LLP as the company's independent auditors for the fiscal year ending March 31, 2021. The polls are now open. If you have previously returned your proxy and do not wish to change your vote, no further action is required. If you have not already voted by proxy or if you wish to change your proxy vote, please do so by clicking on the voting button on the web portal and following the instructions there. You may vote in this manner until the polls are closed. We will now consider the election of the individuals who have been nominated to serve on the Board of Directors for the ensuing year. The Board's nominees for directors are Mr. McGurk, Mr. Brown, Mr. Bu, Mr. O'Brien, Mr. Rhine and Mr. Xu.

The chair declares the nominees to be duly nominated and declares the nominations closed.

The second proposal properly brought before the meeting is to approve by nonbinding advisory vote executive compensation. The third proposal properly brought before the meeting is the amendment of the company's 2017 equity incentive plan to increase the number of shares of Class A common stock authorized for issuance under that plan. The fourth proposal properly brought before the meeting is the amendment of the company's certificate of incorporation to increase the total number of shares of Class A common stock authorized for issuance. The fifth proposal properly brought before the meeting is the amendment of the company's certificate of incorporation to grant the Board the authority to consider a reverse stock split, which would be implemented if and only if the Board decides to implement it. The sixth proposal properly brought before the meeting is the ratification of the appointment of EisnerAmper LLP as the company's independent auditors for the fiscal year ending March 31, 2021. We are now ready to vote on the 6 proposals. If you are voting online, please submit your vote at this time. [Voting]

Since there are no other official items of business on the agenda for this meeting, the polls are now closed. I would now like to spend a few minutes making some brief remarks about the business of the company. The last 12 months have been an important period for Cinedigm, and we've taken many key steps during that time frame to position the company for success in the streaming landscape. I would like to briefly comment on the proposals that shareholders are voting on today and then underscore some key recent business highlights to emphasize our growing momentum. First, on the proposals, I want to strongly stress that we have no plans to conduct a reverse stock split for the foreseeable future. The motion is up for vote because it is good corporate governance to provide the Board with flexibility and optionality down the road. However, we expect our current business momentum will have a favorable effect on our stock price as it has in the past. Additionally, the recent coverage initiated by 2 independent analysts set price targets for the company in the $2 to $3.50 per share range, further supporting this view. Because of this, we believe there will be no need for a reverse split. Second, I want to congratulate and thank our Board members for their continued support during a period where we faced industry-changing COVID-19 impacts on the business and came through stronger and better positioned for growth than ever before. Now for some key business highlights. In fiscal year 2020, we dramatically expanded our streaming business, which is by far the biggest and fastest-growing global entertainment business segment. We established a key strategic advantage and connected TV streaming through our deals with Samsung, Roku and Vizio, among many others, by launching and scaling our free ad-supported linear and on-demand streaming channel portfolio. In this quarter last year, we had 6 channels live and 3 under contract. As of today, we have 25 channels launched or under contract and will likely beat our goal of a 30-channel streaming portfolio a year ahead of schedule. This broad portfolio of channels 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. As our streaming 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. Today, that number is over 15.2 million viewers, an increase of 238%. As we have reported, we are generating exponential increases in our ad revenues as a result. This growth is also being driven by the huge acceleration in our device and platform reach, which is approaching nearly 900 million consumer devices. This number is scaling up rapidly through deals with large OEMs, cable companies and technology platforms such as the Sinclair Broadcast Group, Samsung, Comcast Xfinity, Roku, Amazon, Vewd and Vizio, 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. Combined with our aggressive cost streamlining efforts, which have resulted in significant annual overhead savings of over $5 million, our growth in streaming will help drive the company to sustained profitability going forward. And we 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 $7.5 million over time. These actions materially reduced annual interest expense, and we are exploring alternatives to either reduce or fully eliminate the remaining second lien debt within the fiscal year. On the heels of our very successful and accretive acquisition of Viewster last year, this week, we also announced a deal to acquire The Film Detective, a streaming content company that brings almost 10,000 films and TV episodes and 2 streaming OTT channels into the company. With both of these acquisitions, we followed a simple formula: identify subscale OTT companies that have a defensible market niche and are EBITDA positive, and then leverage our proprietary technical and distribution infrastructure to increase monetization and viewership while cutting operating expenses. Under this model, our goal is to double the target acquisition's EBITDA in the first 6 months and revenue in the first 12 months. With potentially hundreds of streaming services around the globe that fit this approach to choose from, the time is now for Cinedigm to grow via a roll-up strategy, leveraging our extensive expertise and proprietary technology capabilities to rapidly build a scale and profitable streaming holding company. Finally, our narrative as a key player in the streaming business has broken through in the industry with the growth in our channel portfolio and distribution reach. Given that, our M&A and strategic investment activity has expanded through incoming interest in our company from both potential financial and strategic investors. In addition, the high-profile acquisition of advertising-centric streaming companies such as XUMO, Pluto and Tubi leaves Cinedigm as one of the last independent players in the space and one of the rare public plays in an incredible high-growth sector. We intend to leverage that unique position to attract quality long-term investors to the company. Again, I want to thank our Board of Directors for their continued support and guidance. I also want to thank our stockholders for their continued support and focus on our company as we navigate into a prosperous future. I'll now take any questions you might have. As I see that there are no questions, I will now turn things back over to Gary Loffredo.

Thank you, Chris. The votes on the proposals have been tabulated on a preliminary basis by American Election Services prior to the meeting. I have been advised by American Election Services that, on a preliminary basis: one, each of the directors standing for election received the majority of the votes cast and each has been elected; two, the proposals concerning say on pay, the increase in the shares under the 2017 equity incentive plan and the ratification of EisnerAmper have each received a majority of the votes cast and accordingly have been approved; and three, the proposals concerning the amendments to our certificate of incorporation have each received the majority of the votes entitled to vote at this annual meeting and accordingly have been approved. We will be reporting the final vote results in a Form 8-K to be filed within 4 business days.

Thanks, Gary. On behalf of all of the newly elected directors, I would like to express our appreciation to the stockholders for your continued support. We appreciate your interest and courtesy, and thank you for attending this meeting. As there is no other formal business to be addressed at the meeting, I now declare this meeting formally adjourned.

This concludes the meeting. You may now disconnect.