Cinedigm Corp (NASDAQ:CIDM) Making A Comeback

Many investors had written Cinedigm Corp (NASDAQ:CIDM) off after the company made new 52 week lows earlier this year. However, the company surprised many after announcing that, in aggregate, Cinedigm’s over-the-top streaming channels – Dove Channel, CONtv and Docurama – have over two million app downloads and 420,000 registered users. In addition, the channels had approximately 35,000 active subscribers as of March 31, 2016, the last reporting date across all platforms. This is pretty big news and sent the shorts scrambling and shares climbed over 28% as a result.Cinedigm is an interesting company. It is a leading independent content distributor in the United States, with direct relationships with thousands of physical retail storefronts and digital platforms, including Wal-Mart, Target, iTunes, Netflix, and Amazon, as well as the national Video on Demand platform on cable television. The company’s library of films and TV 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 Scholastic, NFL, Shout Factory, Hallmark, Jim Henson and more.

Additionally, given Cinedigm’s infrastructure, technology, content and distribution expertise, the company has rapidly become a leader in the quickly evolving over-the-top digital network business. Cinedigm’s first channel, DOCURAMA, launched in May 2014, and is currently available on iOS, Roku, Xbox and Samsung, with additional platforms currently being rolled out. Cinedigm launched CONtv, a Comic Con branded channel in partnership with WIZARD WORLD, on March 3, 2015. The company’s third OTT channel, DOVE CHANNEL, launched on September 15, 2015 and is a digital streaming subscription service targeted to families and kids seeking high quality and family friendly content approved by Dove Foundation.

In the most recent quarter, CIDM reported consolidated revenues of $30.7 million, an increase of $3.0 million or 11% from the previous quarter. Non-deployment (Entertainment and Services) revenues were $17.5 million, an increase of $2.7 million or 18% from the previous quarter. Content and entertainment revenues were $14.4 million, an increase of $2.7 million or 23% from the previous quarter. Non-deployment adjusted EBITDA was $1.9 million, an increase of $2.8 million from the previous quarter.In December 2015, all three of Cinedigm’s OTT channels (Dove Channel, CONtv and Docurama) became available to Amazon Prime members as part of Amazon’s new Streaming Partners Program. With an estimated 40 million households currently using Amazon Prime, or nearly 40% of all American households, this distribution arrangement significantly expands the potential subscriber base of Cinedigm’s OTT channels. Chairman & CEO Chris McGurk said:

“We are very pleased with the accelerating momentum of our OTT business, particularly the successful launch and early consumer adoption of the Dove Channel, which has far exceeded all of our performance expectations. Our recently announced Amazon Streaming Partners Program has already been very successful and signals additional opportunities to rapidly expand our user and subscriber base across all of our channels. As we look to the future, we continue to pursue key strategic partnerships and related capital raise opportunities at the Corporate, subsidiary and OTT level to support our strategic plan.”

In addition, the company made principal payments of $48.7 million on its long-term debt arrangements and made payments (net of borrowings) under the revolving credit facility of $2.4 million in the nine months ended December 31, 2015. CFO Jeffrey Edell said of the company's results:

“The consolidated business on a revenue and EBITDA basis performed well during this quarter, while we continued to review and rationalize costs and product mix in our base business. Importantly, product returns in our base business are well within our guidelines given our more disciplined and careful approach to sales placement and returns management. We continue to make prudent investments in our OTT channels to support rapid user and subscriber growth.”

Currently trading with a market cap of just $20 million, the worst looks to be behind Cinedigm as it makes its comeback. Shares are trading at just .15x sales, 1.7x free cash flow, and the company has an enterprise value/EBITDA of just 5.1, which is quite low. We will be updating Insider Financial as soon as we know more. For continuing coverage on CIDM, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in CIDM and have not been compensated for this article.