SILVER SPRING, Md.,
Aug. 10, 2017 /PRNewswire/ -- RLJ
Entertainment, Inc. ("RLJ Entertainment," "RLJE" or "the Company")
(NASDAQ: RLJE), today announced financial results for the quarter
ended June 30, 2017.
Second Quarter 2017 Highlights:
- Digital Channels paying subscribers increased 63% from the
second quarter of 2016 to over 550,000.
- The Digital Channels segment contribution income from
continuing operations, after direct costs and expenses increased
76.5% to $2.2 million from
$1.3 million in second quarter
2016.
- Total net revenue increased 19.3% year-over-year to
$18.8 million, driven largely by a
72.1% increase in Digital Channel revenue. Revenue for the
Wholesale Distribution segment grew 2.8%, driven by stronger
licensing deals and distribution sales.
- Gross margin increased 21.5 percentage points to 51.7% from the
second quarter of 2016 driven by (i) rapid growth in our
higher-margin Digital Channels segment and (ii) a greater number of
higher-margin licensing deals in the Wholesale Distribution
segment.
- Net loss was $1.1 million
compared to $0.2 million in the
second quarter of 2016, as the improved operating performance of
the business was more than offset by a $6.5
million increase in the fair value of stock
warrants.
- Adjusted EBITDA was $3.9 million,
an improvement of $4.3 million from
the second quarter of 2016. The improvement is primarily
attributable to the continued growth of the higher-margin Digital
Channels segment as well as stronger performance in the Wholesale
Distribution segment.
- On June 20, 2017, the Company
broadened its strategic partnership with AMC Networks, Inc. ("AMC")
to accelerate its content investments and other strategic
initiatives, expanding the AMC Tranche A Term Loan from
$13.0 million to $23.0 million and
converting interest payments entirely into common stock at a fixed
conversion price of $3.00 per share
on both the Tranche A Term Loan and the Tranche B Term Loan. AMC
also exercised $5.0 million of its
Tranche A Warrants into RLJE common stock at $3.00 per common share. Additionally, dividend
payments on the preferred stock held by Robert L. Johnson were eliminated through 100%
conversion of his preferred stock into common stock at $3.00 per share.
Robert L. Johnson, Chairman of
RLJ Entertainment, stated, "RLJ Entertainment's continued
subscriber growth across platforms is firmly establishing Acorn TV
and UMC as compelling OTT brands with strong consumer draws.
Standalone channels targeting specific audiences represent an
immediate and long-term growth opportunity. The company's plans to
increase investments in compelling content, enhanced engagement and
marketing, and widening geographic footprints are timely and
designed to generate positive returns for investors."
Miguel Penella, Chief
Executive Officer of RLJ Entertainment, stated, "We delivered
strong second quarter results through continued focused execution
on all fronts, driving both Digital Channel subscriber growth and
Wholesale Distribution revenue growth while significantly improving
our operating efficiency. Our increased investments in carefully
curated, high-value programming, intensified marketing and
broadened distribution to support the growth of our Digital
Channels are paying off. As we enter the second half of the year,
we are poised for a very strong 2017 and expect to build additional
momentum with a robust line-up of original and exclusive Digital
Channel content, very strong pipelines in our IP licensing and
wholesale business units, and incremental investments in our future
growth. As we advance our digital strategy, we are increasingly
confident in our ability to achieve our objective of one million
Acorn TV and UMC combined subscribers within the next 18 to 24
months."
Nazir Rostom, Chief Financial
Officer of RLJ Entertainment, commented, "Continued gains in
Digital Channel subscribers and a return to growth in Wholesale
Distribution resulted in expanded gross margins within both
segments as well as significantly improved EBITDA of $3.9 million. We signed a few new Wholesale
Distribution licensing deals in Q2 that helped gross margin to
exceed normal levels, and we expect a return to normal levels
(approximately 40%) for the second half of the year. For the
full year, we are increasing investments in marketing and
programming and also expect to deliver Adjusted EBITDA growth
versus last year."
Conference Call Information
RLJE will hold a
conference call today at 11:30 a.m. ET to discuss these
results. To participate in the live conference call,
interested parties may dial +1.844.348.1685 (+1.213.358.0890
outside the U.S. and Canada) and
provide the conference ID number 58603604, or listen via webcast at
www.rljentertainment.com. The webcast will be archived in the
investors section of RLJE's website.
About RLJ Entertainment, Inc.
RLJ Entertainment, Inc.
(NASDAQ: RLJE) is a premium digital channel company serving
distinct audiences primarily through its popular OTT branded
channels, Acorn TV (British TV) and UMC (Urban Movie Channel),
which have rapidly grown through development, acquisition, and
distribution of its exclusive rights to a large library of
international and British dramas, independent feature films and
urban content. RLJE's titles are also distributed in multiple
formats including broadcast and pay television, theatrical and
non-theatrical, DVD, Blu-ray, and a variety of digital distribution
models (including EST, VOD, SVOD and AVOD) in North America, the United Kingdom, and Australia. Additionally, through Acorn Media
Enterprises, its UK development arm, RLJE co-produces and develops
new programs and owns 64% of Agatha Christie Limited. For more
information, please visit RLJEntertainment.com, Acorn.tv, and
UMC.tv.
Forward Looking Statements
This press release may
include "forward looking statements" within the meaning of the
"safe harbor" provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Other than statements of historical fact,
all statements made in this press release are forward-looking,
including, but not limited to, statements regarding goals, industry
prospects, future results of operations or financial position, and
statements of our intent, belief and current expectations about our
strategic direction, prospective and future results and
condition. In some cases, forward-looking statements may be
identified by words such as "will," "should," "could," "may,"
"might," "expect," "plan," "possible," "potential," "predict,"
"anticipate," "believe," "estimate," "continue," "future,"
"intend," "project" or similar words.
Forward-looking statements involve risks and uncertainties
that are inherently difficult to predict, which could cause actual
outcomes and results to differ materially from our expectations,
forecasts and assumptions. Factors that might cause such
differences include, but are not limited to:
- Our financial performance, including our ability to achieve
improved results from operations and improved earnings before
income tax, depreciation and amortization, non-cash royalty
expense, interest expense, non-cash exchange gains and losses on
intercompany accounts, goodwill impairments, severance costs,
change in fair value of stock warrants and other derivatives,
stock-based compensation, basis-difference amortization in equity
earnings of affiliate and dividends received from affiliate in
excess of equity earnings of affiliate (or Adjusted
EBITDA);
- Our expectation that subscribers, revenues and financial
performance of our digital channels will continue to grow and have
a positive effect on our liquidity, cash flows and operating
results;
- The effects of limited cash liquidity on operational
performance;
- Our obligations under the credit agreement;
- Our ability to satisfy financial ratios;
- Our ability to generate sufficient cash flows from operating
activities;
- Our ability to fund planned capital expenditures and
development efforts;
- Our inability to gauge and predict the commercial
success of our programming;
- Our ability to maintain relationships with customers,
employees and suppliers, including our ability to enter into
revised payment plans, when necessary, with our vendors that are
acceptable to all parties;
- Our ability to realize anticipated synergies and other
efficiencies in connection with the AMC transaction;
- Delays in the release of new titles or other
content;
- The effects of disruptions in our supply chain;
- The loss of key personnel;
- Our public securities' limited liquidity and trading;
or
- Our ability to meet the NASDAQ Capital Market continuing
listing standards and maintain our listing.
You should carefully consider and evaluate all of the
information in this press release, including the risk factors
listed above and in our Form 10-K filed with the Securities
Exchange Commission (or SEC), including "Item 1A. Risk
Factors." If any of these risks occur, our business, results
of operations, and financial condition could be harmed, the price
of our common stock could decline and you may lose all or part of
your investment, and future events and circumstances could differ
significantly from those anticipated in the forward-looking
statements contained in this press release. Unless otherwise
required by law, we undertake no obligation to release publicly any
updates or revisions to any such forward-looking statements that
may reflect events or circumstances occurring after the date of
this press release.
Readers are referred to the most recent reports filed with
the SEC by RLJ Entertainment. Readers are cautioned not to place
undue reliance upon any forward-looking statements, which speak
only as of the date made, and we undertake no obligation to update
or revise the forward-looking statements, whether as a result of
new information, future events or otherwise.
Media Contact:
Traci
Otey Blunt, 301-830-6204
RLJ Entertainment, Inc.
tblunt@rljentertainment.com
Investor Contact:
Jody
Burfening/Carolyn Capaccio,
212-838-3777
LHA
ir@rljentertainment.com
RLJ ENTERTAINMENT,
INC.
|
Consolidated
Balance Sheets
|
(Unaudited)
|
As of June 30, 2017
and December 31, 2016
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(In thousands,
except share data)
|
|
2017
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
12,247
|
|
|
$
|
7,834
|
|
Accounts receivable,
net
|
|
|
10,858
|
|
|
|
19,569
|
|
Inventories,
net
|
|
|
5,901
|
|
|
|
6,215
|
|
Investments in
content, net
|
|
|
65,384
|
|
|
|
60,737
|
|
Prepaid expenses and
other assets
|
|
|
1,317
|
|
|
|
798
|
|
Property, equipment
and improvements, net
|
|
|
1,268
|
|
|
|
1,336
|
|
Equity investment in
affiliate
|
|
|
17,595
|
|
|
|
16,491
|
|
Other intangible
assets, net
|
|
|
8,353
|
|
|
|
9,309
|
|
Goodwill
|
|
|
13,857
|
|
|
|
13,691
|
|
Total
assets
|
|
$
|
136,780
|
|
|
$
|
135,980
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
10,766
|
|
|
$
|
11,995
|
|
Accrued royalties and
distribution fees
|
|
|
46,883
|
|
|
|
55,614
|
|
Deferred
revenue
|
|
|
2,183
|
|
|
|
2,152
|
|
Debt, net of discounts
and debt issuance costs
|
|
|
50,629
|
|
|
|
42,053
|
|
Deferred tax
liability
|
|
|
1,803
|
|
|
|
1,715
|
|
Stock warrant and
other derivative liabilities
|
|
|
13,146
|
|
|
|
9,763
|
|
Total
liabilities
|
|
|
125,410
|
|
|
|
123,292
|
|
Commitments and
contingencies (see Note 13)
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
Redeemable convertible
preferred stock, $0.001 par value, 1,000,000 shares
authorized; 31,046 shares issued; 15,198
shares outstanding at June 30, 2017 and 30,198 shares outstanding at December 31, 2016;
liquidation preference of $17,993
at June 30, 2017 and $34,366 at December 31, 2016
|
|
|
19,872
|
|
|
|
38,708
|
|
Common stock, $0.001
par value, 250,000,000 shares authorized, 13,510,254
shares issued and outstanding at June 30,
2017; and 5,240,085 shares issued
and outstanding at December 31, 2016
|
|
|
14
|
|
|
|
5
|
|
Additional paid-in
capital
|
|
|
129,961
|
|
|
|
106,059
|
|
Accumulated
deficit
|
|
|
(134,615)
|
|
|
|
(127,388)
|
|
Accumulated other
comprehensive loss
|
|
|
(3,862)
|
|
|
|
(4,696)
|
|
Total shareholders'
equity
|
|
|
11,370
|
|
|
|
12,688
|
|
Total liabilities and
shareholders' equity
|
|
$
|
136,780
|
|
|
$
|
135,980
|
|
RLJ ENTERTAINMENT,
INC.
|
Consolidated
Statements of Operations
|
(Unaudited)
|
Three and Six Months
Ended June 30, 2017 and 2016
|
|
|
|
Three Months Ended
June 30,
|
|
Six
Months Ended
June 30,
|
(In thousands,
except share data)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues
|
|
$
|
18,833
|
|
$
|
15,790
|
|
$
|
32,720
|
|
$
|
33,531
|
Cost of
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Content amortization
and royalties
|
|
|
6,261
|
|
|
6,725
|
|
|
12,329
|
|
|
15,070
|
Manufacturing and
fulfillment
|
|
|
2,829
|
|
|
4,298
|
|
|
5,881
|
|
|
8,606
|
Total cost of
sales
|
|
|
9,090
|
|
|
11,023
|
|
|
18,210
|
|
|
23,676
|
Gross
profit
|
|
|
9,743
|
|
|
4,767
|
|
|
14,510
|
|
|
9,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
2,875
|
|
|
2,222
|
|
|
5,159
|
|
|
4,346
|
General and
administrative expenses
|
|
|
4,716
|
|
|
4,650
|
|
|
9,239
|
|
|
9,495
|
Depreciation and
amortization
|
|
|
904
|
|
|
645
|
|
|
1,777
|
|
|
1,269
|
Total operating
expenses
|
|
|
8,495
|
|
|
7,517
|
|
|
16,175
|
|
|
15,110
|
INCOME (LOSS) FROM
CONTINUING OPERATIONS
|
|
|
1,248
|
|
|
(2,750)
|
|
|
(1,665)
|
|
|
(5,255)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings of
affiliate
|
|
|
869
|
|
|
709
|
|
|
1,420
|
|
|
1,208
|
Interest expense,
net
|
|
|
(2,152)
|
|
|
(2,190)
|
|
|
(4,038)
|
|
|
(4,395)
|
Change in fair value
of stock warrants and other derivatives
|
|
|
(491)
|
|
|
5,993
|
|
|
(3,383)
|
|
|
(2,184)
|
(Loss) Gain on
extinguishment of debt
|
|
|
(425)
|
|
|
—
|
|
|
470
|
|
|
—
|
Other income
(expense), net
|
|
|
161
|
|
|
(757)
|
|
|
445
|
|
|
(730)
|
(LOSS) INCOME FROM
CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES
|
|
|
(790)
|
|
|
1,005
|
|
|
(6,751)
|
|
|
(11,356)
|
Provision for income
taxes
|
|
|
(315)
|
|
|
—
|
|
|
(476)
|
|
|
(41)
|
(LOSS) INCOME FROM
CONTINUING OPERATIONS,
NET
OF INCOME TAXES
|
|
|
(1,105)
|
|
|
1,005
|
|
|
(7,227)
|
|
|
(11,397)
|
LOSS FROM
DISCONTINUED OPERATIONS,
NET
OF INCOME TAXES
|
|
|
—
|
|
|
(1,179)
|
|
|
—
|
|
|
(2,252)
|
NET
LOSS
|
|
|
(1,105)
|
|
|
(174)
|
|
|
(7,227)
|
|
|
(13,649)
|
Accretion on
preferred stock
|
|
|
(379)
|
|
|
(1,164)
|
|
|
(756)
|
|
$
|
(2,290)
|
NET LOSS
ATTRIBUTABLE TO COMMON
SHAREHOLDERS
|
|
$
|
(1,484)
|
|
$
|
(1,338)
|
|
$
|
(7,983)
|
|
$
|
(15,939)
|
Net loss per common
share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.24)
|
|
$
|
(0.04)
|
|
$
|
(1.40)
|
|
$
|
(3.13)
|
Discontinued
operations
|
|
|
—
|
|
|
(0.27)
|
|
|
—
|
|
|
(0.51)
|
Basic and diluted net
loss per common share attributable to common shareholders
|
|
$
|
(0.24)
|
|
$
|
(0.31)
|
|
$
|
(1.40)
|
|
$
|
(3.64)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
6,196
|
|
|
4,373
|
|
|
5,691
|
|
|
4,373
|
RLJ ENTERTAINMENT,
INC. UNAUDITED Adjusted EBITDA Three and Six
Months Ended June 30, 2017 and 2016
|
|
|
We define "Adjusted
EBITDA" as earnings before income tax, depreciation, amortization,
non-cash royalty expense, interest expense, non-cash exchange gains
and losses on intercompany accounts, goodwill impairments,
severance costs, change in fair value of stock warrants and other
derivatives, stock-based compensation, basis-difference
amortization in equity earnings of affiliate and dividends received
from affiliate in excess of equity earnings of affiliate.
Management believes Adjusted EBITDA to be a meaningful indicator of
our performance that provides useful information to investors
regarding our financial condition and results of operations because
it removes material non-cash items that allows investors to analyze
the operating performance of the business using the same metric
management uses. The exclusion of non-cash items better
reflects our ability to make investments in the business and meet
obligations. Presentation of Adjusted EBITDA is a non-GAAP
financial measure commonly used in the entertainment industry and
by financial analysts and others who follow the industry to measure
operating performance. Management uses this measure to assess
operating results and performance of our business, perform
analytical comparisons, identify strategies to improve performance
and allocate resources to our business segments. While management
considers Adjusted EBITDA to be an important measure of comparative
operating performance, it should be considered in addition to, but
not as a substitute for, net income and other measures of financial
performance reported in accordance with U.S. GAAP. Not all
companies calculate Adjusted EBITDA in the same manner and the
measure, as presented, may not be comparable to similarly-titled
measures presented by other companies.
|
|
The following table
includes the reconciliation of our consolidated U.S. GAAP net loss
to our consolidated Adjusted EBITDA:
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
(In
thousands)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net loss
|
|
$
|
(1,105)
|
|
|
$
|
(174)
|
|
|
$
|
(7,227)
|
|
|
$
|
(13,649)
|
|
Interest
expense
|
|
|
2,152
|
|
|
|
2,190
|
|
|
|
4,038
|
|
|
|
4,395
|
|
Provision for income
tax
|
|
|
315
|
|
|
|
—
|
|
|
|
476
|
|
|
|
41
|
|
Depreciation and
amortization
|
|
|
904
|
|
|
|
645
|
|
|
|
1,777
|
|
|
|
1,269
|
|
Basis-difference
amortization in equity earnings of affiliate
|
|
|
114
|
|
|
|
128
|
|
|
|
225
|
|
|
|
256
|
|
Change in fair value
of stock warrants and other derivatives
|
|
|
491
|
|
|
|
(5,993)
|
|
|
|
3,383
|
|
|
|
2,184
|
|
Stock-based
compensation
|
|
|
358
|
|
|
|
301
|
|
|
|
512
|
|
|
|
610
|
|
Restructuring
|
|
|
423
|
|
|
|
—
|
|
|
|
(192)
|
|
|
|
—
|
|
Loss from discontinued
operations
|
|
|
—
|
|
|
|
1,179
|
|
|
|
—
|
|
|
|
2,252
|
|
Foreign currency
exchange gain on intercompany accounts
|
|
|
(192)
|
|
|
|
827
|
|
|
|
(475)
|
|
|
|
824
|
|
Non-cash royalty
expense
|
|
|
476
|
|
|
|
550
|
|
|
|
1,516
|
|
|
|
1,038
|
|
Adjusted
EBITDA
|
|
$
|
3,936
|
|
|
$
|
(347)
|
|
|
$
|
4,033
|
|
|
$
|
(780)
|
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/rlj-entertainment-reports-second-quarter-2017-financial-results-300502429.html
SOURCE RLJ Entertainment, Inc.