LONG ISLAND CITY, N.Y.,
Aug. 14, 2018 /CNW/
-- Frankly Inc. (TSX VENTURE: TLK)
(Frankly or the Company), a leader in transforming local TV
broadcasters and media companies by enabling them to publish and
monetize their digital content across multiple
platforms, reported financial results for the second quarter
ended June 30, 2018. All financial
statements have been prepared in accordance with U.S. GAAP.
Second Quarter 2018 Financial Results (All amounts in U.S.
dollars)
- Revenue was flat at $5.8 million
from $5.8 million in the prior
quarter and decreased 11% from $6.5
million in the second quarter of 2017. The year over year
decrease was due to decreases in advertising revenue, usage fees,
as well as professional services fees due to less ad hoc
professional services engagements in the 2018 period.
- Net loss totaled $(1.5) million
compared to $(3.8) million in the
prior quarter and $(2.4) million in
the second quarter of 2017. The year over year decrease in net loss
of $945,000 was primarily due to an
$824,000 decrease in general and
administrative expense, a $284,000
decrease in selling and marketing expense and a $350,000 decrease in research and development
expense, all of which were primarily due to a reduction in
compensation costs, including stock-based compensation, due to the
headcount reduction related to the Company wide reduction-in-force
implemented in mid-February
2018.
- Adjusted EBITDA was $650,000
compared to adjusted EBITDA loss of $(756,000) in the prior quarter and adjusted
EBITDA loss of $(381,000) in the
second quarter of 2017 (see discussion about the presentation of
adjusted EBITDA below). The year over year increase in adjusted
EBITDA of $1.0 million was primarily
due to a decrease in net loss of $945,000 explained above.
Six Month 2018 Financial Results (All amounts in U.S.
dollars)
- Revenue decreased 10% to $11.5
million from $12.9 million in
the same period in 2017. The decrease was due to decreases in
advertising revenue, usage fees, as well as professional services
fees due to less ad hoc professional services engagements in the
2018 period.
- Net loss totaled $(5.3) million,
compared to $(3.9) million in the
same period in 2017. The increase in net loss was primarily due to
a $1.4 million decrease in revenue
discussed above, a $588,000 increase
in retention expense relating to our employee retention plan which
was rolled out in connection with the strategic investor search in
the fourth quarter of 2017 and a $542,000 increase in restructuring expense
related to the Company-wide reduction-in-force as explained above.
This was partially offset by a $241,000 decrease in general and administrative
expense, a $485,000 decrease in
selling and marketing expense and a $118,000 decrease in research and development
expense, all of which were primarily due to a reduction in
compensation costs, including stock-based compensation, due to the
headcount reduction related to the Company-wide reduction-in-force
as explained above.
- Adjusted EBITDA loss totaled $(106,000) compared to adjusted EBITDA of
$48,000 in the prior year period. The
decrease in adjusted EBITDA was due to an increase in net loss of
$1.4 million explained above,
partially offset by add-backs to net loss for the $588,000 increase in retention expense and
$542,000 increase in restructuring
expense as explained above.
- At June 30, 2018, the Company had
$1.6 million in cash and restricted
cash. Subsequent to the previous quarter end, the Company entered
into an amendment of its existing credit facility (Credit Facility)
with Raycom Media, Inc. (Raycom). Under the terms of the
amendment, Raycom would provide Frankly with an additional
$7.5 million of funding, to be paid
in installments over a six-month period, subject to Frankly's
achievement of certain operational milestones. At June 30, 2018, $4.1
million of the additional $7.5
million had been received.
Customer Agreement Update
Raycom, a significant
customer of the Company which accounted for 19% of the Company's
revenue for the six months ended June 30,
2018, is in the process of a pending merger with Gray
Television, Inc. Raycom has given the Company preliminary
notification that it intends to terminate its existing customer
agreement with the Company on or about December 31, 2018. The Company and Raycom
are currently exploring an ongoing relationship following that
date. Separately, three other of the Company's
customers, including one other significant customer which accounted
for 12% of the Company's revenue for the six months ended
June 30, 2018, have provided notice
that their current customer agreements with the Company will
terminate on or before December 31,
2018. While the Company expects to have ongoing service
relationships with one or more of these customers, no such
assurances can be made. In the aggregate, these terminations
are expected to have a material negative impact on the Company's
2019 revenues and related income (loss).
Management Commentary
"Our second quarter results were
largely in line with our expectations, and we are now beginning to
see the positive effects of our greater cost reduction initiative
which we began back in February," said CEO Lou Schwartz. "In fact, our second quarter
operating expenses were down nearly $1.9
million from last year, and we also achieved positive
adjusted EBITDA of $650,000 during
the quarter. Looking ahead, we remain confident in our
ability to achieve our near-term goal of being operating cash flow
breakeven in the fourth quarter of this year, although the
terminations of certain customer agreements will have an impact our
ability to sustain this achievement into future periods."
Management Changes
Effective August 13, 2018 Melissa Hatter, Chief Operating
Officer, has resigned from her position at Frankly to pursue other
opportunities. To ensure a smooth transition, Ms. Hatter will
continue to serve as an advisor to Frankly through the end of
August 2018. Concurrently,
Benj Smith, VP of Operations, has
been promoted to SVP of Customer Success and will assume the
majority of the responsibilities of the role.
About Frankly
Frankly (TSX VENTURE: TLK) builds an
integrated software platform for media companies to create,
distribute, analyze and monetize their content across all of their
digital properties on web, mobile and TV. Its customers
include NBC, ABC, CBS and FOX affiliates. The Company is
headquartered in New York. To
learn more, visit www.franklyinc.com.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Non-GAAP Measures
The Company reports earnings before
interest, taxes, depreciation and amortization ("EBITDA") and
Adjusted EBITDA, which are not financial measures calculated and
presented in accordance with Generally Accepted Accounting
Principles ("GAAP") and therefore may not be comparable to similar
measures presented by other issuers. EBITDA and Adjusted EBITDA
should not be considered in isolation or as a substitute to net
income (loss) or any other financial measures of performance or
liquidity calculated and presented in accordance with GAAP. The
Company defines Adjusted EBITDA as EBITDA, adjusted to exclude
certain non-cash charges and other items that we do not believe are
reflective of our ongoing operating results. The Company utilizes
Adjusted EBITDA internally for purposes of forecasting, determining
compensation, and assessing the performance of our business,
therefore, we believe this measure provides useful supplemental
information that may assist investors in assessing an investment in
the Company.
The following unaudited table presents the reconciliation of net
loss to Adjusted EBITDA for the three and six months ended
June 30, 2018 and 2017,
respectively.
|
|
Three Months
Ended June 30,
|
|
Six Months
Ended June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
(1,459,521)
|
|
$
(2,404,109)
|
|
$
(5,269,014)
|
|
$
(3,907,928)
|
Interest expense,
net
|
|
599,003
|
|
646,943
|
|
1,196,099
|
|
1,257,148
|
Income tax
expense
|
|
-
|
|
-
|
|
-
|
|
-
|
Depreciation and
amortization
|
|
1,265,999
|
|
1,092,626
|
|
2,413,244
|
|
2,159,357
|
Stock-based
compensation
|
|
96,848
|
|
284,006
|
|
331,888
|
|
512,172
|
Loss on disposal of
assets
|
|
12,823
|
|
-
|
|
12,823
|
|
-
|
Transaction
costs
|
|
54,019
|
|
-
|
|
78,692
|
|
-
|
Restructuring
expense
|
|
81,250
|
|
-
|
|
542,210
|
|
-
|
Retention
expense
|
|
-
|
|
-
|
|
588,099
|
|
-
|
Other
expense
|
|
-
|
|
-
|
|
-
|
|
27,017
|
Adjusted
EBITDA
|
|
$
650,421
|
|
$
(380,534)
|
|
$
(105,959)
|
|
$
47,766
|
Notice Regarding Forward-Looking
Statements
This release includes forward-looking
statements regarding Frankly and its respective businesses,
including statements with respect to expected customer agreement
terminations and the timing therefor, the potential for ongoing
service relationships with customers and potential impacts on
revenue in 2019, the ability to break-even on an operating
cash-flow basis and the ability to create value for
shareholders. Forward-looking events and circumstances
discussed in this release may not occur by certain specified dates
or at all and could differ materially as a result of known and
unknown risk factors and uncertainties affecting the parties.
Forward looking statements depend on certain assumptions that
management deems to be reasonable in the circumstances, but such
assumptions may prove to be incorrect and the outcome of the
subject of any forward-looking statement cannot be guaranteed. Such
assumptions are based on, among other things, ongoing negotiations
with customers and current operating performance.
Except as required by applicable securities laws, forward-looking
statements speak only as of the date on which they are made and
Frankly undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events, or otherwise.
View original
content:http://www.prnewswire.com/news-releases/frankly-reports-second-quarter-2018-financial-results-300697019.html
SOURCE Frankly Inc.