November 13, 2012

Cinedigm Announces Second Quarter Fiscal Year 2013 Financial Results

Year over Year Revenue Growth Driven by Strong Performance in Company's Digital Cinema Installations and Content Entertainment Group

LOS ANGELES--(BUSINESS WIRE)-- Cinedigm Digital Cinema Corp. (NASDAQ: CIDM), the global leader in the digital cinema industry, today announced financial results for the second quarter fiscal 2013 ended September 30, 2012.

Quarterly Highlights Include:

  • Consolidated revenues up 7.5% to $22.6 million
  • 875 digital cinema installations, marking second highest install quarter in Company history
  • 10 independent films acquired year-to-date

Second Quarter Fiscal 2013 Results

Revenues for the second quarter of fiscal 2013 were $22.6 million, a 7.5% increase from $21.0 million in the second quarter a year ago. The increase in revenues was primarily the result of strong performance in Cinedigm's Content and Entertainment Group (CEG), including results from the New Video acquisition, which closed in April 2012. The Company also experienced the second highest installation quarter in its history in the digital cinema servicing unit; however, gains were partially offset by a temporary decline in digital cinema deployment revenues due to the impact on virtual print fees of unexpected shifts in the breadth and timing of various major studio movie releases in July and August.

In the second quarter of fiscal 2013, Adjusted EBITDA from continuing operations totaled $14.1 million, a decrease from $16.9 million in the year-ago period. Excluding Cinedigm's deployment business, Adjusted EBITDA from continuing operations was $1.2 million, an increase of 48% from fiscal Q1 and a decrease from $3.2 million in the same period a year ago. Cinedigm installed 875 digital systems in the second quarter of fiscal 2013, as compared to an all-time record of 1,455 systems installed in the second quarter of fiscal 2012. This lower level of installations accounted for approximately $2.3 million of the EBITDA difference year-on-year, partially offset by other growth. In addition, consistent with its content growth plans, the Company incurred $0.2 million of external content distribution costs as it ramped up its film releasing business in the second quarter of fiscal 2013, building toward its goal of 20-25 releases per year. These costs were incurred in advance of earning ancillary home entertainment revenues on the Company's film releases. In addition to its content distribution business, Cinedigm continues to benefit from growth in its installed systems, software license and maintenance fees, and the inherent operating leverage embedded in its business model.

"During the quarter we made significant strategic and operational strides," said Chris McGurk, Chairman and Chief Executive Officer. "As of today, we have signed 276 exhibitor partners representing over 12,200 screens -- in excess of 70% of all North American exhibitors and approximately 40% of all North American digital cinema screens -- and we are continuing our focus on overseas expansion of our core businesses. Importantly, this huge deployment footprint helps build the worldwide foundation for Cinedigm's digital cinema servicing, software and digital content distribution units, further leveraging our market leadership in each business. In the last quarter, we successfully completed the integration of New Video into Cinedigm, signed several new studio and exhibitor software licenses and have now acquired ten independent films, including several high profile titles such as Arthur Newman, starring Academy Award® winner Colin Firth and Academy Award® Nominee Emily Blunt; and Violet and Daisy, written and directed by Academy Award® winner Geoffrey Fletcher and starring James Gandolfini. We expect these titles and our entire release slate to be strong contributors to our future growth."

"As we have discussed in the past, fiscal year 2013 is a year focused on both investment and growth," added Adam Mizel, Chief Operating Officer and CFO. "Our financial progress this quarter was masked by the tremendous installation quarter we experienced last year and the impact of our continued content acquisition investments. With 875 installations this quarter, we had our second largest installation quarter ever and we expect another strong quarter of installations in Q3 as we reach the end of our deployment period. We expect Q3 and Q4 to be our strongest financial quarters of the year given the impact of the holiday on our home entertainment content sales, a number of recent content and digital aggregation acquisitions, and our strong software pipeline. We remain extremely focused on profitably growing all our core businesses and making additional strategic investments to drive shareholder returns in fiscal year 2014 and beyond."

Six-Month Fiscal 2013 Results

For the first six months of fiscal 2013, revenues from continuing operations increased 11.4% to $43.5 million as compared to $39.1 million for the same period one year earlier. Adjusted EBITDA from continuing operations year-to-date was $27.6 million, compared to $30.6 million in the first six months of the prior year. Due in part to M&A expense charges and other restructuring charges, consolidated net loss increased to $7.8 million or $0.17 per share for the first six months of the fiscal year compared to a consolidated net loss of $6.6 million or $0.14 per share in the comparable prior year period. Excluding the M&A and restructuring charges, consolidated net loss decreased to $6.2 million or $0.13 per share for the first six months of the fiscal year.

Fiscal 2013 Outlook

Cinedigm is reaffirming its fiscal 2013 guidance and expects consolidated GAAP revenues including its deployment units of $91-$97 million, and consolidated Adjusted EBITDA of $57-$59 million in fiscal 2013.

The Company is also reaffirming that it expects fiscal 2013 Adjusted EBITDA from non-deployment operations of $11.2-$12.7 million, prior to the $4.5-$5.0 million of GAAP expense impact from 8-10 movie acquisitions and additional library acquisitions. Net of the GAAP expense impact, Cinedigm expects to produce reported Adjusted EBITDA from non-deployment operations for fiscal 2013 of $6.7-$7.7 million.

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 expenses and compensation, merger and acquisition costs, 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). 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. 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. EST on November 13, 2012. The conference call can be accessed by dialing 877-754-5303 or for international callers by dialing 678-894-3030 at least five minutes prior to the start of the call. No passcode is required. The earnings call and accompanying slides will also be broadcast live over the Internet and can be accessed on the Investor Relations section of the Company's Web site 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 November 13, 2012 at 5:30 p.m. EST, through November 27, 2012 at 11:59 p.m. EST. To access the replay, dial 800-585-8367 (U.S.) or 404-537-3406 (International) and use passcode: 15481861.

About Cinedigm

Cinedigm Digital Cinema Corp. is a leader in providing the services, experience, technology and content critical to transforming movie theaters into digital and networked entertainment centers. Cinedigm's digital cinema deployment and servicing organization, state of the art distributor and exhibition software, and marketing and distribution platform for alternative content and independent films are a cornerstone of the digital cinema transformation. With the April acquisition of New Video, the world's largest aggregator of independent digital content and leading distributor of quality entertainment, CIDM has created a new full service end-to-end digital studio, enabling the Company to acquire and distribute independent films and specialty content both theatrically and via digital, mobile and home media platforms. Cinedigm™ and Cinedigm Digital Cinema Corp.™ are trademarks of Cinedigm Digital Cinema Corp. [CIDM-E]

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 DIGITAL CINEMA CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

September 30,

2012

March 31,

2012

ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 20,270 $ 17,843
Restricted available-for-sale investments 9,477
Accounts receivable, net 33,711 24,502
Deferred costs, current portion 2,199 2,228
Unbilled revenue, current portion 7,590 7,510
Prepaid and other current assets 6,200 1,121
Note receivable, current portion 635 498
Assets held for sale   214
Total current assets 70,605 63,393
Restricted cash 5,751 5,751
Security deposits 241 207
Property and equipment, net 186,869 200,974
Intangible assets, net 15,171 466
Capitalized software costs, net 5,995 5,156
Goodwill 7,101 5,765
Deferred costs, net of current portion 4,018 5,080
Unbilled revenue, net of current portion 677 617
Accounts receivable, long-term 1,040 773
Note receivable, net of current portion 424 465
Investment in non-consolidated entity, net 2,152   1,490
Total assets $ 300,044   $ 290,137
 
 
                       

CINEDIGM DIGITAL CINEMA CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(continued)

 

September 30,

2012

March 31,

2012

LIABILITIES AND STOCKHOLDERS' DEFICIT (Unaudited)
Current liabilities
Accounts payable and accrued expenses $ 39,150 $ 20,854
Current portion of notes payable, non-recourse 33,152 35,644
Current portion of capital leases 219 186
Current portion of deferred revenue 3,989 3,677
Current portion of contingent consideration for business combination 750
Liabilities as part of assets held for sale   75  
Total current liabilities 77,260 60,436
Notes payable, non-recourse, net of current portion 114,207 135,345
Notes payable 92,161 87,354
Capital leases, net of current portion 5,128 5,244
Interest rate swaps 1,105 1,771
Deferred revenue, net of current portion 11,493 11,451
Contingent consideration, net of current portion 3,094
Customer security deposits, net of current portion   9  
Total liabilities 304,448   301,610  
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 September 30, 2012 and March 31, 2012, respectively. Liquidation preference of $3,589
3,412 3,357
 
Class A common stock, $0.001 par value per share; 118,759,000 and 75,000,000 shares authorized; 48,448,137 and 37,722,927 shares issued and 48,396,786 and 37,671,487 shares outstanding at September 30, 2012 and March 31, 2012, respectively 48 38
 
Class B common stock, $0.001 par value per share; 1,241,000 and 15,000,000 shares authorized; 1,241,000 and 25,000 shares issued and 0 and 25,000 shares outstanding, at September 30, 2012 and March 31, 2012, respectively
 
Additional paid-in capital 221,293 206,348
Treasury stock, at cost; 51,440 Class A shares (172 ) (172 )
Accumulated deficit (228,985 ) (221,044 )
Total stockholders' deficit (4,404 ) (11,473 )
Total liabilities and stockholders' deficit $ 300,044   $ 290,137  
 
 
           

CINEDIGM DIGITAL CINEMA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

 

For the Three Months

Ended September 30,

For the Six Months

Ended September 30,

2012       2011 2012       2011
Revenues $ 22,609 $ 21,028 $ 43,513 $ 39,069
Costs and expenses:
Direct operating (exclusive of depreciation and amortization shown below) 2,928 1,697 5,363 3,290
Selling, general and administrative 6,306 4,071 12,199 7,481
Provision for doubtful accounts 78 154
Research and development 36 35 74 90
Merger and acquisition expenses 1,267
Restructuring expenses 340 340
Depreciation and amortization of property and equipment 9,120 8,869 18,217 17,723
Amortization of intangible assets 223   77   381   169  
Total operating expenses 19,031   14,749   37,995   28,753  
Income from operations 3,578 6,279 5,518 10,316
Interest income 3 24 22 75
Interest expense (7,281 ) (7,569 ) (14,758 ) (14,940 )
Income on investment in non-consolidated entity 631 662
Other income, net 193 385 391 431
Change in fair value of interest rate swap 255   219   676   (568 )
Net loss from continuing operations (2,621 ) (662 ) (7,489 ) (4,686 )
Income (loss) from discontinued operations 10   432   (274 ) (1,937 )
Net loss (2,611 ) (230 ) (7,763 ) (6,623 )
Preferred stock dividends (89 ) (89 ) (178 ) (178 )
Net loss attributable to common stockholders $ (2,700 ) $ (319 ) $ (7,941 ) $ (6,801 )
Net loss per Class A and Class B common share - basic and diluted:
Loss from continuing operations $ (0.06 ) $ (0.02 ) $ (0.16 ) $ (0.14 )
Income (loss) from discontinued operations $   $ 0.01   $ (0.01 ) $ (0.07 )
$ (0.06 ) $ (0.01 ) $ (0.17 ) $ (0.21 )
Weighted average number of Class A and Class B common shares outstanding: Basic and diluted 48,299,715   37,115,346   46,718,464   34,886,202  
 
 

Adjusted EBITDA

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

     

For the Three Months Ended

September 30,

($ in thousands) 2012                 2011
Net loss from continuing operations $ (2,621 ) $ (662 )

Add Back:

Amortization of capitalized software costs 277 152
Depreciation and amortization of property and equipment 9,120 8,869
Amortization of intangible assets 223 77
Interest income (3 ) (24 )
Interest expense 7,281 7,569
Other income, net (193 ) (385 )
Income on investment in non-consolidated entity (631 )
Change in fair value of interest rate swap (255 ) (219 )
Stock-based expenses (5 ) 562
Stock-based compensation 528 464
Restructuring expenses 340
Allocated costs attributable to discontinued operations   504  
Adjusted EBITDA $ 14,061   $ 16,907  
 

Adjustments related to the Phase I and Phase II Deployments:

Depreciation and amortization of property and equipment $ (8,965 ) $ (8,738 )
Amortization of intangible assets (13 ) (15 )
Income from operations (4,760 ) (6,611 )
Intersegment services fees earned (1) 898   1,702  
Adjusted EBITDA from non-deployment businesses $ 1,221   $ 3,245  
 
(1)     Intersegment revenues of the Services segment represent service fees earned from the Phase I and Phase II Deployments.
 
 
     

For the Six Months Ended

September 30,

($ in thousands) 2012                 2011
Net loss from continuing operations $ (7,489 ) $ (4,686 )

Add Back:

Amortization of capitalized software costs 527 364
Depreciation and amortization of property and equipment 18,217 17,723
Amortization of intangible assets 381 169
Interest income (22 ) (75 )
Interest expense 14,758 14,940
Other income, net (391 ) (431 )
Income on investment in non-consolidated entity (662 )
Change in fair value of interest rate swap (676 ) 568
Stock-based expenses 300 562
Stock-based compensation 1,014 918
Merger and acquisition expenses 1,267
Restructuring expenses 340
Allocated costs attributable to discontinued operations   504  
Adjusted EBITDA $ 27,564   $ 30,556  
 

Adjustments related to the Phase I and Phase II Deployments:

Depreciation and amortization of property and equipment $ (17,904 ) $ (17,510 )
Amortization of intangible assets (26 ) (27 )
Income from operations (9,404 ) (12,037 )
Intersegment services fees earned (1) 1,816   3,078  
Adjusted EBITDA from non-deployment businesses $ 2,046   $ 4,060  
 
(1)     Intersegment revenues of the Services segment represent service fees earned from the Phase I and Phase II Deployments.

Addo Communications
Traci Tsuchiguchi/Patricia Dolmatsky-Nir
310-829-5400

Source: Cinedigm Digital Cinema Corp.

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