Cinedigm Corp.
Q4 2015 Earnings Call Transcript

Published: 30 Jun 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Cinedigm Corp. Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jill Newhouse, Executive Vice President of Corporate Communications. You may begin.

[Jill Newhouse:]

Good afternoon and thank you for joining today’s fourth quarter and full year fiscal 2015 earnings conference call. Participating in today’s call are Cinedigm’s Chairman and Chief Executive Officer, Chris McGurk; Chief Operating Officer, Adam Mizel; and Chief Financial Officer, Jeffrey Edell. 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, June 29, 2015, and Cinedigm does not intend and undertakes no duty to update future events or circumstances. In addition, certain of the financial information presented in this call represents non-GAAP financial measures. Finally, as most of you know, we are currently facing shareholder activism issues including a proposed plan to change the board of directors. We had already planned and announced prior to any activist fillings to put in place a best practices corporate governance process to enhance our board. We will address our progress on that in our comments. In the meantime, we remain focused on running the business and executing our growth plans. We look forward to ongoing discussion and engagement with our shareholders and as always appreciate their views and perspectives. With that said please note that the subject of today’s call is Company’s fourth quarter and full year fiscal 2015 earnings. We will not be taking questions on any activism issues. And now, I’d like to turn the call over to Chris McGurk.

[Chris McGurk:]

Thank you, Jill. And thanks everyone for joining us today. I’ll start by giving a general business update coupled with a discussion on our larger strategic initiatives; then I’ll review recent developments in our corporate governance; after that Adam will review Cinedigm’s base business and OTT initiatives in more depth followed by Jeff, who will review our financial results. We are pleased with our fourth quarter operating and financial results, which underscore the positive momentum in our base business. Progress continued in refilling our sales pipeline with more premium content including several new first run films. We saw strong performance at Wal-Mart year-over-year on the physical side and continued momentum in digital sales. We maintained strict fiscal discipline as we focus our capital on opportunities to drive growth and shareholder returns. Adam will get into more detail on that in a few minutes. We also continued to rapidly move ahead with our OTT business plan. We are thrilled that in aggregate across our channels, we already have achieved more than 1 million app installations. In the quarter, we launched CONtv in preview mode in March and are very pleased with our progress so far. In less than four months, we’ve achieved more than 333,000 app installations. Those installations actually exceeded our goal for the entire first year of launch ending March 2016. End users are really enjoying the service with a large amount of weekly minutes viewed and positive four to five-star app ratings on all platforms. Leveraging the underlying CONtv technology infrastructure, we are now prepping our faith and family DOVE CHANNEL for launch in late summer. We’re excited about the initial programming lineup that we announced for Dove two weeks ago as well as the alpha version of the app that has been completed. Our experiences and key learning from CONtv and Docurama have clearly enhanced our ability to launch Dove and future channels quickly and with superior quality across all major consumer platforms. And now with our momentum accelerating, we believe more than ever that the Cinedigm differentiation we have discussed many times on these calls where we can launch OTT channels faster and more economically than competitors by leveraging our library of content and our robust home entertainment infrastructure, positions us to be a true leader in the OTT business, a leading narrowcast version of Netflix. Now is a time for us to invest and move aggressively given this key competitive advantage. Just last week, Digital TV Research announced that there are soon expected to be more than 57 million subscription streaming customers in North America alone, up over 7 million from last year. In addition, OTT revenues in North America are expected to reach $20.5 billion by 2020 almost 10 times the level at the start of the decade. Clearly the opportunity to grab valuable OTT real estate is now in front of us. While many entertainment companies have announced channels that have yet to actually launch and with launch dates yet to be determined, we already have two channels launched and operating with another two scheduled to launch later this summer and fall and with several more in the [winks]. We remain absolutely committed to seizing this opportunity now to build a high growth OTT business integrated with our industry leading home entertainment business potentially worth many-many times our current trading value. Importantly, all available evidence in the entertainment space continues to support our viewpoint. Looking ahead, we believe our OTT business will continue to be a high growth engine on top of the solid recurring EBITDA contribution of our digital servicing business and the expanding EBITDA from our base content distribution business. Last week we also announced and expanded partnership with a minatory investment in the Shout! Factory our largest home entertainment customer and a leading content studio of classic TV shows and films. This deal will benefit all aspects of our business. In OTT, Shout! Factory adds a new pop culture channel to our portfolio that we will be effectively cross promote with CONtv as both channels target a similar millennial demographic. In our base business, the extension of our distribution deal for three years with Shout! ensures a long-term and growing stream of content through our entire distribution system. All in all, we’re very pleased with where the Company stands today operationally and are very excited that with Dove and Shout! we now expect to have a portfolio of four OTT channels in operation by the end of the fourth quarter. The progress I just outlined has not gone unnoticed as we continue to have a variety of conversions with potential partners interested in our OTT strategy and also focused on our position as the largest independent studio in the U.S. with a flexible releasing strategy and 50,000 films and TV episodes in our library of rights. As the only small cap public entertainment company, poised to take advantage with the shift to digital and now rapidly launching the series of high potential OTT channels, we believe that we bring strong assets to those conversions. While it is our policy not to comment on press reports like the recent ones in this area that mentioned Cinedigm, we fully appreciate the optionality currently in front of us and will continue to evaluate opportunities to make the correct value creating decisions for the Company. Now I’ll conclude by briefly addressing corporate matters. As we announced last month, with our business transformation complete and a much stronger capital structure in place, we move to enhance our board of directors to better support the Company’s fully evolved profile as a leading content distributor and over the top digital network company. To that end, we engaged Korn Ferry, a leading executive search and advisory firm to work with our nominating committee to conduct a formal search and leading [ph] process for two to four new directors including a new Non-Executive Chairman of the Board, all of this consistent with the best practices. We expect to emerge from this process with a terrific board of experienced entertainment industry leaders and shareholder representatives who can add strategic and financial insights and relationships that will help propel Cinedigm forward. We’re in the middle of this process right now and are very pleased with the interest we’ve received from potential board members who understand Cinedigm’s unique positioning and plan as well as the compelling opportunities in front of us. Thus far, we’ve identified over 60 potential candidates with relevant industry and/or financial markets expertise and have interviewed or contacted more than 30. We have also opened up the discussion to our constituents, including our activist shareholders whom we’ve invited to be part of our best practices process. As you can see, we’re undertaking a very thorough approach to identify the very best possible board members who can actively advice and support the company as we grow our business. Korn Ferry and our nominated committee are moving forward with this process as quickly as possible. Finally, I am pleased to share with you that both our banks who must approve any and all cash uses out of the ordinary course and our board, have authorized up to $5 million for a stock buyback program over the next 12 months. As we’ve noted previously, we believe our stock price is extremely undervalued currently and therefore share repurchases maybe an effective use of capital. And now, Adam will share more details about our base business and OTT. Adam?

[Adam Mizel:]

Thank you, Chris. I will first dive into greater detail on the continued rebound in our base home entertainment business and then the performance of our OTT channels. During the fourth quarter, our entertainment business continued the rebound that began in the second quarter. Our CEG revenues exceeded our expectations as we benefited from strong performance of many of our new released titles and continued stringent expense controls. Our progress in rebuilding our pipeline over the past year is beginning to impact performance as we benefited from a well received content slate and strong physical goods placement and sell-through at our main retail partners as well as continued growth in digital licensing revenues. We’re seeing these solid results and operating trends continue in our new fiscal year as we enter the seasonally slowest time of the year for our business. As an example, at Wal-Mart our largest physical sales customer, our new released placement has increased 7% from Q1 fiscal 2015 to Q1 fiscal 2016. And we’ve shown consistent growth in our catalog module replacement expanding over 31% since last October. We have increased our market share in a very competitive physical goods environment. We continue to add co-production and one-off content acquisitions into our future release pipeline. Dove’s several films from our previously announced co-production deals are either in production or have delivered, including the Christmas Tree with Denise Richards and Tom Arnold; War Pigs with Dolph Lundgren and Mickey Rourke; 4GOT10 with Danny Trejo and Vivica Fox and others. We have also announced a number of acquisitions post the fiscal year-end to fill gaps in our release fleet including Life with Robert Pattinson; Meadowland with Olivia Wilde and Luke Wilson; The Falling with Maisie Williams; Final Girl with Abigail Breslin and Wes Bentley; and of course the award winning documentary and fan favorite film A Brave Heart

[Jeffrey Edell:]

Thank you, Adam. We are pleased with our results for this quarter which continued the positive signs we saw at the time same call last time. Full year consolidated revenues were $105.5 million compared to the prior year of a $104.3 million. Full year non-deployment revenues, which is our entertainment and services segment were $57 million compared to the prior year $55.9. We reduced our non-recourse debt to $41.3 million from the recurring virtual print fee revenue stream. Revenues in our Phase I and Phase II Deployment businesses combined remained flat at $48.5 million for fiscal year 2015 compared to last year as total VPF’s, the number of Systems deployed, wide-release titles and screen utilization rates were consistent with the prior fiscal year. Revenues generated by our Services segment decreased primarily due to the expected reduction of revenues earned from activation fees to $11.9 million from $12.6 million in the prior fiscal year. We deployed Systems in Australia and New Zealand in the fiscal year ended March 31, 2014, which contributed $900,000 of non-recurring activation fee revenue on the prior year that does not exist during this fiscal year. Revenues at our CEG business increased to $45.1 million from $43.3 million in the prior fiscal year, reflecting the full year contribution of our October 2013 acquisition of GVE compared to five months of revenue from the GVE acquisition included in the prior year. Offsetting the increase in revenue were higher than anticipated returns of DVDs and Blu-Ray discs in the current year in connection with our integration of GVE that occurred mainly in the first fiscal quarter of that year -- of the year as we transferred to the new physical goods replication, distribution and fulfillment partner. In addition as we have detailed in previous calls, certain issues arising in connection with the GVE acquisition negatively impacted our results in the current fiscal year. Full year consolidated adjusted EBITDA was $47.9 million. Full year non-deployment adjusted EBITDA was $1.2 million. The reconciliation of adjusted EBITDA for the year ended March 31, 2015 also takes into account $6 million for goodwill impairment, which I’ll discuss in more details shortly, and $1.7 million of non-recurring legal and other compliance related expenses, primarily related to our ongoing litigation with Gaiam and expenses related to initiating Sarbanes-Oxley compliance and the financial systems conversion. As you saw in our press release, revenues in the fourth quarter of the fiscal year decreased compared to the same quarter of prior year because as we discussed in our prior calls, we terminated contracts with certain high-volume customers that did not substantially add to our net operating results. We also continued to experience lower demand for packaged goods due to industry-wide changes in consumer behavior. This year has been one of investment in the OTT channel business that both Chris and Adam elaborated upon earlier. This investment has mainly impacted our EBITDA rather than capitalization on the balance sheet as we build out our tracking systems unique technology, market our app and website, develop and acquire content and grow our user base. In April, we repaid the $18.2 million term loan outstanding under our recourse credit agreement with the proceeds from the convertible note offering and increased working capital on our balance sheet by the net proceeds of $28.2 million. Given the business and accounting issues with GVE acquisition that we have previously discussed, we took a hard look at carrying value of goodwill in our CEG segment and determined that we had an impairment in Q4. It’s important to note that any potential positive result with respect to our Gaiam litigation recovery is not considered by GAAP for goodwill impairment. This impairment negatively impacted our non-cash operating results and an actual cash recovery later on will have corresponding positive impact in our operating results at the time of that recovery. As you know, we spent the better portion of the year integrating GVE acquisition, restructuring our CEG business and shifting our focus to expanding the OTT channel business. Now that the GVE business is fully absorbed and we completed the process of identifying the significant redundancies, we believe that we have the right cost structure in place and expect to see operating income and cash flows from operations rebound as the full year effects of those maneuvers begin to show up in our P&L in the second half of fiscal 2016. Finally, we ended the year with $267 million of U.S. net operating losses that will begin to expire in 2020 and under GAAP, the asset value of our NOL is not reflected on our balance sheet. Although we do not provide guidance, I am pleased to say our net revenues look to be on plan for the first quarter and we exceeded analyst consensus expectations for both the quarter and the full year. As a reminder, the first quarters are seasonally slowest and our goal is to maintain positive non-deployment EBITDA. Now, I’ll turn back the call to Chris.

[Chris McGurk:]

Thanks Jeff and thank you Adam. In summary, we’re pleased with our performance this quarter and our success in filling the release pipeline with strong content and innovative programming. We are now focused on continuing the momentum we have seen so far with CONtv, where installations are way ahead of our expectations wrapping the DOVE CHANNEL for launch in late summer and moving forward with our new OTT channel with Shout Factory. With over one million app downloads already and four channels in operation by the fourth quarter, our plan to create a diversified portfolio of digital networks is well underway. On top of that we continue to plan to launch several more narrowcast channels, each with the customized business model that maximizes the potential for success as we strive to solidify our position as a leader in this high-growth; high-margin; high-multiple business. As we have said before, our vision for this business is to have within two to three years a portfolio of 10 or more of these narrowcast channels launched and thriving, each with multiple hundreds of thousands of viewers and subscribers and generating significant new streams of advertising and subscription revenues. As you think about Cinedigm, we think it’s fair to compare our growth plans to those of Lions Gate in their early small cap days. Like Cinedigm that company grew both organically and through M&A activity, implementing an innovative and disruptive strategy and transformed itself into a tremendous industry success story. It’s also important to reference Netflix and other disruptive entertainment related technology companies like Amazon in their early years. A8nd at early stage, those companies focused on building audiences, customer affinity and top line growth, investing to build market share and solidify their competitive advantages. That is what aggressive and successful companies operating at an early stage in new businesses with dramatic upside potential do. We ask that you consider that when you view what we are doing at Cinedigm today, building a position as a leader in the highest growth, highest multiple part of the entertainment business, OTT. Together with our Digital Cinema business which continues to generate strong recurring revenues and rapidly pay down its non-recourse debt, Cinedigm is now positioned strategically as the only small cap public entertainment company poised to take full advantage of the valuation upside potential from the industry shift to digital. Form a shareholder perspective, we believe as our OTT channel scale, we can deliver rapid growth and significant higher margin recurring revenues and profits at a controlled level of investment and risk. And with that we are now happy to answer any questions you might have. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of James Marsh with Piper Jaffray. Your line is open.

[James Marsh:]

Great. Two quick questions here. First, on the app downloads, it’s great news that you have expectations. But I was hoping you guys could kind of drill down a little bit between I guess app downloads and actually signing up for SVOD and some of the metrics that you look at their kind of within the funnel whether it’s how many people actually started using the site after downloading the app or how many are active user. I’m just trying to figure out all the metrics in between kind of entering that funnel and then maybe getting down to the bottom of the funnel. And then I’ve got a follow up.

[Adam Mizel:]

Sure. James, it’s Adam. As we said in our comments, we’ve really focused in CONtv in the last 90 days in getting everyone into the top of the funnel and dealing with service and using the content and that’s where we focused on and we’ve had very high using engagements. As we mentioned more typically watching at least one movie or multiple episodes or something that total a similar time to movie and we have very active user engagement. We are now shifting literally over the next few weeks to put more and more of our content behind the paywall to add more and more advertising so that you have that much more incentive to sign up behind the paywall versus watching content with ads and providing more and more of the original programming and the live streaming and the panels from the con only to those premium subscribers. All that’s now starting to happen, so that we convert more of those 333,000 installs into paid SVOD subscribers and more of the people who sign up new, go right into the SVOD part of the funnel. That’s now just happening and we have some expectations on those metrics. So we’re going to watch to see what they turn out to be and then report back on the actuals when they happen.

[James Marsh:]

And then I guess on the DOVE CHANNEL, maybe if you could just give us a little bit more information on that. Obviously you are leveraging a lot at the same platform that you’ve put together for Docurama as well as for CONtv and using a lot of the as you mentioned the learnings from those two launches but what’s different about this launch relative to CONtv for example; maybe you can just kind of compare and contrast little bit, maybe talk about some of the unique challenges to launching that one if there are any?

[Adam Mizel:]

It’s been at lot easier; it is often the case. The first time you really do something, you always have more bumps in the road and more to learn. On the Dove side, it’s certainly a simpler offering because it’s focused on a faith and family friendly content in marketplace which has a different level of demand and expectation as a very active kind of fan boy, fan girl millennial market. The biggest difference, as we said, we really are leveraging all of the technology in the platform, so many-many of the features that we’ve been adding to CONtv like in app billing and like live streaming capability which is something we added in the last 30 days to CONtv after getting a such tremendous user interest and feedback to it, automatically then is the Dove platform, the main unique components are clearly its user interface. And in the Dove case we’ve developed a very unique and proprietary ratings engine based off -- or user rating selection engine based on how Dove rates content. So as a customer, you will be able to cross the six rating dimensions that Dove use sort of set specific dials on your recommendation and just say between one and five which is the Dove rating, I want level one on language and level two on, theme and whatever maybe. So that customer can make a very customized experience of what content they see and their family sees. And we think that’s going to be a very powerful tool for the audience that we’re targeting. So those are the kinds of the things that we’ve done in a unique way on top of that common platform.

[Operator:]

Our next question comes from the line of Andrew D’Silva with Merriman Capital. Your line is open.

[Andrew D’Silva:]

Just a few questions for everyone; I guess first off is if you’re able to -- can one of you provide a little color on where you are in regards to your dispute with Gaiam? I know you had a favorable ruling out of the Federal Court in the Central District California. The judge ruled you should settle your working capital disputes in working capital arbitration instead of going to triple A attribution first. and I am aware that Gaiam is petitioning that order, but with my understanding that judge said working capital arbitration should proceed regardless of the appeal process. So, I mean are you guys actually in working capital arbitration right now and maybe just provide a little bit of clarity on the timeline? I believe it’s supposed to be a 45-day process.

[Adam Mizel:]

As I said in our -- very little we can say, it’s very complicated ongoing legal issue, but yes, we’re in working capital arbitration.

[Andrew D’Silva:]

Okay. That’s all I wanted to know. And then moving over to CONtv, I heard your last response as far as putting up paywalls. Do you have any historical data from other companies that had an AVOD model and moved to an SVOD model and what typical conversion rates are and what we should maybe expect to bear minimum annually?

[Adam Mizel:]

I think when you’re doing a good job you would hope to get at least the low double digit percentage of your AVOD users converting to SVOD users.

[Andrew D’Silva:]

And that’s an annual metric or is that just -- is there certain I guess time horizon that you would expect to see that?

[Adam Mizel:]

I think it’s hard to know. I mean I think that’s part of the -- as we described you’re in the start up phase and you’re moving different things and strategies. But typically we would expect that we convert at least the low double digit percentages of that AVOD base into SVOD users and then we’ll keep growing our base obviously with new sign-ups and new customers. And we think we’ve put together a very compelling offering that should attract people into the SVOD service.

[Andrew D’Silva:]

Okay, got it. And then moving just quickly over to CEG, Adam, I believe in the past you’ve stated that we should expect a backlog of new deals to approximate $50 million in gross fillings this current fiscal year. Can you get a little bit more granular as to what the backlog comprises of? Is it primarily new production deals like the ones that have been announced at the VMI, Rapid Eye and Great Point Media or is it growth from new initiatives with exiting content suppliers from the catalog side of the business?

[Adam Mizel:]

What we’ve talked about it in the past, our new coproduction partnerships and customers that will be delivering us predominately movies that come on television for distribution. And so we described our expected annual revenues out of those guys. And I think we still are focused on making that happen. And what you see is -- and that’s part of where you use one-off acquisitions to supplement what we’re doing. Some guys will deliver exactly what we think; someone would be slower in delivering movies because it takes longer than make up and we then go out and acquire other content if we see holes in our release pipeline. So that’s what we’re focused and driving and making it happen and so far the first couple of quarters we’ve been pretty close to plan. We’ve got some holes to fill for the back half of the year.

[Andrew D’Silva:]

And then Jeff, as far as timing of revenue goes from those production deals, do you know when we should expect that to meaningfully start hitting the top line? I mean has it already begun or is it more of a fiscal third and fourth quarter event for ‘16 obviously? And also little bit clarity what operating margins are expected to be from production deals, are they meaningfully higher than typical catalog operating margins?

[Jeffrey Edell:]

Yes, they’re going to be higher than the catalog operating margins, so we expect them to be several points higher. And in terms of the hitting of those, those will hit in Q3 and mainly Q4 of this year; we will see that and then into the following fiscal year.

[Andrew D’Silva:]

Okay, so expect the back half of the year ramp from that; got it. And then last question, can someone just provide a little clarity on Shout! the media deal, like what were the terms and also the investment itself? It doesn’t seem to sync with other deals or partnerships at least when you look out it off hand other partnerships you’ve announced in the past. It seems to augment either your content or distribution for OTT channels. This seems like you already have the existing relationship with Shout! and you already provide them distribution. So I am just trying to get my hands around what the value add is and investment for you guys going forward?

[Chris McGurk:]

Yes, this is Chris. We can’t disclose the specifics of the deal other than what you probably saw in the press release. But as we said, we thought this was a really-really good deal for the Company, but what we consider to be a pretty minimal investment. We’ve extended our distribution deal with them for another three years. We now are going to own a piece of the company. They’re profitable and they’re growing; they’re operating in a space that’s very similar to a lot of the content in our library already and also what we’re doing with CONtv kind of this classic television and classic film programming is the type of content. It’s like naked night or TV LAN [ph] that’s very appealing to a millennial audience and more and more appealing. So, there is obviously going to be large crossover with what we’re doing in CONtv. We already have an existing AVOD OTT channel. And I think both parties believe what with our expertise in this space and our track record at launching channels and our relationships with all of the platforms, I think both parties agree that we can take the channel they have right now, flip it into our premium model and really turbo-charge it. And again because the pop culture content is very similar, there is very similar audience to what we have on CONtv. We think there are very large promotional and marketing synergies between CONtv and Shout! TV. So that’s the strategic rationale for doing the deal. And we believe we’re able to accomplish all that at a very minimal investment but with an investment that’s going to generate we believe a nice return for us in and of itself.

[Operator:]

Our next question comes from the line of Matthew Brooks with Macquarie Capital. Your line is open.

[Matthew Brooks:]

I have got a few questions. The first one, you mentioned how original content was very important to CONtv. I am just looking for any thoughts you’ve got on how you plan to have original content with Dove and perhaps what those shafts; [ph] I’ve looked at some of the content to have there. I can see how advertizing supported [indiscernible] sure about subscriber supported?

[Adam Mizel:]

I think as we’ve talked a little bit about in the past, there is a combination of original programming strategies. We have clearly first and foremost is the virtual Con experience or [light of the Comic Cons] and then we split it thereafter. We have significant interest from this audience in seeing whether it’s panels, pods play contest, other kinds of events that go on at the CONs where they can’t otherwise access them. In addition, there is a natural algorithm relative to pretty low cost original programming ideas along the line the Last Fan Standing game show that we did and other things like that that grow out of the people personalities and talent is already at the Con. So that’s one bucket of things. And then there are interesting opportunities for us to work with other production companies and who are creating things for our audience like we do with Fight of the Living Dead and other things we’ve talked about with other studios who are supporting their ongoing big franchises in between movies where we’re very natural distribution point to get to the audience that wants to see that content. And so we’re working on a variety of those fronts, so we can acquire certainly rights for CONtv and often because of our entire distribution infrastructure all market and all media distribution rights. So in addition to monetizing on CONtv we can exercise the windowing strategy and distribute that content through other physical and digital outlets at the right of time.

[Matthew Brooks:]

That sounds very good. I guess my question wasn’t clear enough. I understand how that works, the CONtv. I wonder how it works with Dove; I didn’t get Last Fan Standing et cetera, like how does that work?

[Adam Mizel:]

I think for the Dove Channel, there will initially be less original programming but that’s less of what that audience is demanding they are looking for safe and family friendly content. But I think over time, one can think of various review shows, talk shows, interview shows with talent with people in that space and that community that are relevant to that audience. And then over time you could imagine as that business grows, one can create one’s own series whether it’s digital short web series that fit in that or more online television like drama series that fit that audience. We’re having some conversations with some very interesting production companies who do that already who are looking for digital outlets for their content as they look at new means and new media. So I think there is a little bit of both but it is going to be more traditional in the original programming sense in Dove Channel that would be in CONtv.

[Matthew Brooks:]

And for Shout! you are mentioning that some of the CONtv content would go to that channel; you would get some other original content for that one as well?

[Adam Mizel:]

No, It’d be different, I’m sorry. I don’t think there is very much overlap between Dove and CONtv; there is between CONtv and some things that we do on the Shout! channel and I think there may be opportunities to cross market content share originals, do different things there; I think the Dove Channel clearly is very different audience.

[Matthew Brooks:]

Another question on separate part of the business, on the systems business. Can you make any comments about some of the system to roll out, sort of rollup after first 10 years; could you make any comments about the residual economics of that and any thoughts you might have on the new laser product that’s being launched over the next five years to 10 years you can probably see a rollout of laser projection in the cinema industry which would mean that some of the older systems would be out of date?

[Adam Mizel:]

A couple of things

[Matthew Brooks:]

And the last question was on the buyback. You would’ve had some spare capacity -- you had a forward right agreement, forward purchase agreement as part of the convertible issue. You are going to use $14 million of that and the rest of it could have been used to buy back shares. I’m just wondering why you didn’t buy back more than the $5 million as sort of discussed today.

[Chris McGurk:]

I’m not sure -- are you talking, there’s two different situations here. There’s the $14 million that we did as part of the debt repurchase, the debt issuance rather and then there’s another $5 million that we’ve announced today as an additional repurchase.

[Matthew Brooks:]

Correct, the other one you did the original convertible offer, I think you had set aside more than $14 million for that and then it came less than you expected.

[Chris McGurk:]

Yes, we dropped the money onto our balance sheet, is what we did. So, I’m not sure what your point is. It would have been less than the $28.5 million that we dropped on the balance sheet in working capital.

[Matthew Brooks:]

I guess the question is whether – like if you think the stock is very cheap and you got the cash from the convertible issue and you don’t need it to roll out these channels, then why wouldn’t you signal to the market how cheap the stock is and buy back more stock?

[Chris McGurk:]

Well, I think as I mentioned in my comment, we were restricted by our banks that have to approve any use of cash outside of the normal course and they were comfortable with $5 million level.

[Operator:]

I’m showing no further questions, I’d like to turn the call back to management for further remarks.

[Chris McGurk:]

Yes, this is Chris. I’d just like to say on behalf of Jill, Jeff, Adam, myself and everybody at Cinedigm, we want to thank you all for your continued interest and support. And we look forward to talking to you in a month and a half on our next call. So thank you all.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, you may all disconnect. Everyone have a great day.