Significant increases in page views and
monetization continues into second quarter fiscal 2017
Function(x) Inc. (NASDAQ: FNCX) (the “Company”)
today reported financial results for the three months ended
September 30, 2016.
This Smart News Release features multimedia.
View the full release here:
http://www.businesswire.com/news/home/20161122005773/en/
Function(X), Inc. - Key Performance
Indicators
Revenue for the three months ended September 30, 2016 was
$659,000 down from $922,000 for the three months ended September
30, 2015. For the same period the cash revenue for the Company’s
Publishing Segment, which we consider our core operating business,
was $371,000 down from $561,000 for the three months ended
September 30, 2015.
Net loss and diluted loss per share for the three month period
ended September 30, 2016 were $(7,553,000) and $(2.53),
respectively.
EBITDA for the Company for the three months ended September 30,
2016 was a loss of $2,693,000, which is an improvement from a loss
of $7,292,000 for the same period in 2015. EBITDA for the
Publishing Segment was a loss of $1,633,000 for the three months
ended September 30, 2016, which represents a material improvement
from the loss of $6,756,000 for such segment in the prior year.
Without expenses of $659,000, which management has determined are
operational expenses that we do not anticipate to affect the
financials going forward, the loss in EBITDA for the Publishing
Segment would have been $973,000. These unusual operational
expenses include stock compensation, costs associated with our
ongoing S-1, costs associated with the acquisition of Rant, and one
time marketing expense. Additionally, we have not included an
incremental $173,000 of cost savings that were not fully realized
in the quarter which we expect to impact our financials going
forward; giving effect to these cost savings would further reduce
the loss of $973,000 above to $800,000.
For full details on the above and other pertinent figures,
please see exhibit A and B, attached herein.
"This past quarter confirms the opportunity we believed existed
when we reshaped FNCX,” said Robert FX Sillerman, Executive
Chairman and Chief Executive Officer, “With an even stronger
October behind us I am now convinced that the path we are on is the
right one, and as such my willingness to convert my approximate
$35MM of Preferred into common stock in the near future remains
strong. The continued improvement of our operations in the quarter
and my conversion of debt to preferred equity, resulting in a
stronger balance sheet, provide the basis for us to exploit the
robust opportunity in front of us. Although we have continuing
defaults under our debentures, we are working to resolve the
matter. As our cash drain continues to decrease, I continue to
demonstrate my commitment to our efforts and fund the Company’s
needs.”
“The excitement and potential that I saw in the company as a
Board Member is coming to fruition, and the hard work and
dedication of the team will continue to drive the success of the
business and allow for us to achieve our long term goals,” said
Birame Sock, President and COO.
Our Q1 Fiscal 2017 accomplishments listed below are guided by
our overall strategy and vision, in which Function (x) is building
a highly scalable publishing platform that is designed to
efficiently create, share and monetize content across a wide range
of topics and audience. Our strategy is to invest in proprietary
technology that gives us a competitive advantage versus traditional
publishers and allows us to fully leverage the power of social
media to better reach our target audiences. Our initial properties,
Rant and WetPaint, have begun to take full advantage of our
publishing infrastructure to deliver compelling content around
sports, pop culture and entertainment. Future properties will also
be built on top of our publishing technology.
Fiscal 2017 First Quarter Highlights and Recent
Developments
- New Management Team: Appointed a
new and a highly experienced management team. Each member has had a
prior professional relationship with the Company’s Chairman and
CEO;
- Rant Acquisition: In Q1, the
Company acquired Rant, Inc., a leading digital publisher that
publishes original content in multiple different verticals, most
notably sports, entertainment, and pets. This business has been
integrated into the Company’s existing digital publishing
platform;
- Deleveraging Initiatives:
Affiliates of Function(x)’s Chairman and CEO, Mr. Sillerman, have
committed to converting approximately $35,000,000 in preferred
equity into shares of the Company’s common stock, further
illustrating Mr. Sillerman’s commitment to the Company’s
future;
- Established foundation for future
growth: Developed a streamlined headcount plan to scale the
business, implement disciplined financial controls and refine its
operating expense model and revamp its technology platform and
acquisition team intended to drive incremental growth;
- Optimized Revenue Model:
Although not reflected in the Q1 financials, the Company has
recalibrated its revenue model to achieve sustainable revenue
growth and to better align its capital and focus in the most
efficient manner possible;
- DraftDay Gaming Group: Recent
positive regulatory developments in the daily fantasy space have
increased confidence in the prospects of this business, and we are
evaluating all strategic alternatives to maximize shareholder
return;
- Key performance metrics:
Implemented daily monitoring of operating results via automated
reporting and analytics and continually refining its approach to
implementing the long-term strategy.
About Function(x) Inc.
Function(x) operates Wetpaint.com and Rant. Wetpaint is the
leading online destination for entertainment news for millennial
women, covering the latest in television, music, and pop culture.
Rant is a leading digital publisher with original
content in multiple different verticals, most notably in sports,
entertainment, and pets,. Function(x) Inc. is also the largest
shareholder of DraftDay Gaming Group, which is
well-positioned to become a significant participant in the
expanding fantasy sports market, offering a high-quality daily
fantasy sports experience both directly to consumers and to
businesses desiring turnkey solutions to new revenue streams.
Function(x) Inc. also owns Choose Digital, a digital
marketplace platform that allows companies to incorporate digital
content into existing rewards and loyalty programs in support of
marketing and sales initiatives. For more information,
visit www.functionxinc.com.
How Function(x) Came To Be
Previously known as Viggle and DraftDay Fantasy Sports Inc, the
genesis of Function(x) is largely due to the acquisition of
Wetpaint in December of 2013 by the Company’s predecessor Viggle,
Inc. as an audience driver for the rewards platform. Subsequently,
the main assets of Viggle were sold in February of 2016, with
exception of Wetpaint. Due to the sale of the Viggle name, the
company briefly changed its name to DraftDay Fantasy Sports, Inc
while it evaluated the future direction of the business. Realizing
that the Company had a tremendous opportunity not only DraftDay,
but with Wetpaint (with over 13MM visits per month, its patented
social distribution system and exclusive content produced with
celebrities and social influencers). As Robert FX Sillerman has
stated in the past, “Function X is often referred to in mathematics
as the largest possible number. That is the goal of the company, to
achieve the maximum results possible. The combination of Wetpaint
and Rant along with the recent positive regulatory developments in
fantasy sports positions us to achieve significant levels of
success.” Like that, a brand was born, and the Company has been
Function(x) ever since.
Forward-Looking Statements
This press release may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve
inherent risks and uncertainties that could cause actual results to
differ materially from those projected or anticipated. All
information provided in this press release is as of the date of
this release. Except as required by law, Function(x), Inc.
undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date on which the statements
are made or to reflect the occurrence of unanticipated events.
Definitions
The following definitions apply to these terms as used
throughout this press release and the exhibits:
Publishing Segments - represents Wetpaint and Rant and any
corporate expenses allocated to this segment. 2015 Rant figures
exclude revenue and corresponding expense associated with Traffic
Acquisition, but includes revenue from organic traffic.
Traffic Acquisition – Money spent to drive traffic to a
website.
EBITDA – represents net income (loss) before other income
(loss), interest expense, income taxes, and depreciation and
amortization.
Non-GAAP Financial Measures
We prepare our financial statements in accordance with generally
accepted accounting principles (“GAAP”) in the United States of
America. Within this press release, we make reference to EBITDA,
which is a non-GAAP financial measure. We include these non-GAAP
financial measures because management believes they are useful to
investors in that they provide for greater transparency with
respect to supplemental information used by management in its
financial and operational decision making.
Management uses EBITDA to convey supplemental information to
investors regarding our performance excluding the impact of certain
non-cash charges, costs associated with our borrowings and other
special items that can affect the comparability of results from
quarter to quarter. In particular, EBITDA is a key measure used by
our management and board of directors to understand and evaluate
our core operating performance and trends, to prepare and approve
our annual budget, and to develop short- and long-term operational
plans. Of note, the elimination of certain expenses in calculating
EBITDA can provide a useful measure for period-to-period
comparisons of our core business.
Accordingly, we believe the presentation of these non-GAAP
financial measures, when used in conjunction with GAAP financial
measures, is a useful financial analysis tool that can assist
investors in assessing our operating performance and underlying
prospects. This analysis should not be considered in isolation or
as a substitute for analysis of our results as reported under GAAP.
This analysis, as well as the other information in this press
release, should be read in conjunction with our consolidated
financial statements and footnotes contained in the Form 10-Q that
we filed with the U.S. Securities and Exchange Commission. The
non-GAAP financial measures used in this press release may be
different from the methods used by other companies. For more
information on the Non-GAAP financial measures, please see the
Reconciliation of GAAP financial measures to Non-GAAP financial
measures table in the press release
Exhibit A
2016 - All amounts shown in $ (000's)
2015 - All amounts shown in $ (000's)
Publishing Segment Cash Revenue Reconciliation
Publishing Segment Cash Revenue Reconciliation GAAP Revenue
$659 GAAP Revenue $922 - Choose Revenue 58 - Choose Revenue 198 -
DDGG Revenue 105 - DDGG Revenue 83 - Corporate Revenue 125 -
Corporate Revenue 125
Pro-Forma Revenue $371 + Rant
Revenue* 45
Pro-Forma Revenue $561 *Adjusted to
remove Revenue associated with Traffic Acquisition
Company EBITDA
Reconciliation Company EBITDA Reconciliation
GAAP Net Income ($7,517) GAAP Net Income ($7,632) + Interest
Expenses 1,651 + Rant Net Income (1,364) + Depreciation and
Amortization 687 + Interest Expenses 856 + Other (income)/expense,
net 2,485 + Depreciation and Amortization 850
EBITDA
($2,693) + Other (income)/expense, net (2)
EBITDA
($7,292)
Publishing Segment EBITDA Reconciliation
Publishing Segment EBITDA Reconciliation GAAP Net Income
($7,517) GAAP Net Income ($7,632) - Choose Net Income (401) -
Choose Net Income (485) - DDGG Net Income (752) - DDGG Net Income
26 - Viggle Net Income (36) - MyGuy Net Income (336) + Interest
Expenses 1,651 + Rant Net Income* (1,364) + Depreciation and
Amortization 560 + Interest Expenses 856 + Other (income)/expense,
net 2,485 + Depreciation and Amortization 588
EBITDA
($1,633) EBITDA ($6,756) *Adjusted to remove
Revenue/Expenses associated with Traffic Acquisition
Publishing Segment EBITDA less Identified Operational
Expenses Publishing Segment EBITDA less Identified
Operational Expenses EBITDA (as stated above) ($1,633) EBITDA
(as stated above) ($6,756) + Equity Based Comp $7 + Equity Based
Comp 4,388
- Expenses Associated with S-1
176 Adjusted EBITDA
($2,369) - One-time Signing Bonus 50 -
Severance 26 - Transaction Expense - Valuations 75 - Transaction
Expense - Legal 225 - One Time Marketing Expense 100 - Cost Savings
173
Adjusted EBITDA ($800)
Exhibit B
Function(x) Inc. CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data) (Unaudited)
September 30,2016
September 30,2015
Assets Current assets: Cash and cash equivalents $ 827 $ 537
Marketable securities - 2,495
Accounts receivable (net of allowance for
doubtful accounts of $20 at September 30, 2016 andJune 30,
2016)
383 307 Prepaid expenses 53 226 Other receivables 127 114 Other
current assets 14 110 Current assets of discontinued operations
20 39 Total current assets 1,424 3,828
Restricted cash 435 440 Property & equipment, net 1,337 1,414
Intangible assets, net 10,229 5,339 Goodwill 18,859 11,270 Other
assets 786 748 Total assets $ 33,070
$ 23,039 Liabilities, convertible redeemable
preferred stock and stockholders' equity/(deficit) Current
liabilities: Accounts payable and accrued expenses $ 9,484 $ 11,625
Deferred revenue 682 637 Current portion of loans payable, net
8,853 8,996 Common stock warrant liability 1,500 - Current
liabilities of discontinued operations 2,830
2,851 Total current liabilities 23,349 24,109 Loans payable,
less current portion - 19,716 Deferred revenue 3,229 3,429 Common
stock warrant liability 10 10 Other long-term liabilities
929 951 Total liabilities 27,517 48,215
Series A Convertible Redeemable Preferred
Stock, $1,000 stated value, authorized 100,000 shares,issued and
outstanding -0- shares as of September 30, 2016 and June 30,
2016
- - Commitments and contingencies Stockholders'
equity/(deficit):
Series B Convertible Preferred Stock,
$1,000 stated value, authorized 50,000 shares, issued
andoutstanding -0- shares as of September 30, 2016 and June 30,
2016
- -
Series C Convertible Redeemable Preferred
Stock, $1,000 stated value, authorized 100,000 shares,issued and
outstanding of 33,175 and 3,000 shares as of September 30, 2016 and
June 30, 2016,respectively
33,912 4,940
Series D Preferred Stock, $1,000 stated
value, authorized 150 shares, issued and outstanding -0-shares as
of September 30, 2016 and June 30, 2016
- -
Series E Convertible Preferred Stock,
$1,000 stated value, authorized 10,000 shares, issued
andoutstanding 4,435 and -0- shares as of September 30, 2016 and
June 30, 2016, respectively
7,600 -
Common stock, $0.001 par value: authorized
300,000,000 shares, issued andoutstanding 3,056,353 and 3,023,753
shares as of September 30, 2016 and June 30, 2016,respectively
3 3 Additional paid-in-capital 410,995 409,765 Treasury
stock, 10,758 shares at September 30, 2016 and June 30, 2016
(11,916 ) (11,916 ) Accumulated deficit (435,650 ) (428,380 )
Accumulated other comprehensive income - (361 ) Noncontrolling
interest 609 773 Total stockholders'
equity/(deficit) 5,553 (25,176 ) Total
liabilities and stockholders' equity/(deficit) $ 33,070 $
23,039
Function(x) Inc. CONSOLIDATED STATEMENTS OF
OPERATIONS (amounts in thousands, except share and per share
data) (Unaudited) Three Months Ended
September 30, 2016 2015 Revenues $ 659 $ 922
Selling, general and administrative expenses (4,040 )
(7,700 ) Operating loss (3,381 ) (6,778 ) Other expense:
Other (expense)/income, net (2,485 ) 2 Interest expense, net
(1,651 ) (856 ) Total other expense (4,136 ) (854 )
Net loss before provision for income taxes (7,517 ) (7,632 )
Income tax expense - -
Net loss from continuing operations $ (7,517 ) $ (7,632 )
Net loss from discontinued operations (36 ) (5,780 )
Net loss (7,553 ) (13,412 ) Accretion of Convertible
Redeemable Preferred Stock 22 74 Undeclared Series C
Convertible Redeemable Preferred Stock Dividend (494 ) (307 )
Add: Net loss attributable to non-controlling interest 283
168 Net loss attributable to Function(x) Inc. common
stockholders $ (7,742 ) $ (13,477 ) Net loss per common
share - basic and diluted: Continuing operations $ (2.52 ) $ (6.46
) Discontinued operations $ (0.01 ) $ (4.85 ) Net loss per share
attributable to Function(x) Inc. common stockholders - basic and
diluted $ (2.53 ) $ (11.31 ) Weighted average common shares
outstanding - basic and diluted 3,053,796
1,191,434 Net loss $ (7,553 ) $ (13,412 ) Other
comprehensive income, net of tax: Unrealized loss on available for
sale securities (289 ) - Reclass of available for sale securities
to Consolidated Statements of Operations 650 -
Other comprehensive income 361 -
Comprehensive loss $ (7,192 ) $ (13,412 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161122005773/en/
For Function(x):Investors:Michelle
Lanken, 212-231-0092Chief Financial
Officermlanken@functionxinc.comorMedia Relations:IRTH
CommunicationsRobert Haag, 866-976-4784Managing Partner