FAB Universal Reports Third Quarter 2013 EPS of $0.35 on Revenue of $29.8 Million

Management Adjusts 2013 Guidance to Revenue of $102-$105 Million and Net Income of $19-$21 Million

Business Wire

PITTSBURGH--(BUSINESS WIRE)--

FAB Universal (NYSE MKT:FU), a worldwide distributor of digital media and entertainment, today announced financial results for the third quarter ending September 30, 2013.

“FAB Universal recorded another strong quarter, driven by continued momentum in our digital business which includes our high-margin Intelligent Media Kiosk network,” said Chris Spencer, CEO of FAB Universal. “We added over 2,400 new kiosks to our network during the quarter and now have kiosks in 40 cities across China with a total installed base of 16,820 terminals. As we continue to add high quality copyrighted content to our offerings, we expect sustained demand for our kiosks from both new licensees and consumers.”

“Based on our year to date performance, and including expected reinvestments in the licensing and kiosk business during the fourth quarter, we are adjusting our guidance for 2013 to revenue of $102-$105 million and net income of $19-$21 million for the full year. As we execute our strategy to increase our offerings of purchased digital media content across a wider set of distribution channels, now expanded to include mobile phones and subscription TV, we expect to continue to leverage FAB’s brand and capitalize on the growing importance of the media and entertainment industry in China,” concluded Mr. Spencer.

Third Quarter and Year-to-Date Financial Review

FAB Universal acquired DEI Ltd. on September 26, 2012. Therefore year-over-year comparisons of the company’s financial results largely reflect the addition of DEI.

Total revenue for the third quarter ended September 30, 2013 was $29.8 million compared $1.7 million for the third quarter of 2012 and $25.9 million for the second quarter ended June 30, 2013, a sequential increase of 15.1%. Revenue for the wholesale business unit was $14.0 million for the third quarter of 2013 compared to none in the year ago period and $14.0 million for the second quarter of 2013. Revenue for the digital business unit was $13.3 million for the third quarter of 2013 compared to $1.7 million for the third quarter of 2012 and $9.6 million for the second quarter of 2013. Revenue for the retail business unit was $2.5 million for the third quarter of 2013 compared to none in the comparable period of 2012 and $2.3 million for the second quarter of 2013.

Third quarter 2013 gross profit was $14.1 million compared to $1.0 million for the third quarter of 2012 and $11.5 million for the second quarter of 2013, a sequential increase of 22.6%. The third quarter 2013 gross margin was 47.4% compared to 55.1% for the third quarter of 2012 and 44.4% for the second quarter of 2013. The third quarter sequential increases in revenue and gross profit reflect continued rapid growth of FAB’s digital business.

Operating expenses for the third quarter of 2013 were $4.9 million compared to $5.7 million for the third quarter of 2012 and $4.0 million for the second quarter of 2013. Net Income in the third quarter ended September 30, 2013 was $7.3 million, or $0.35 per share, compared to a net loss of $5.0 million, or $0.50 per share, for the comparable period of 2012 and net income of $5.7 million, or $0.28 per share, for the second quarter ended June 30, 2013. Weighted average shares outstanding were 20.8 million for the third quarter compared to 9.7 million for the third quarter of 2012 and 20.8 million for the second quarter of 2013.

For the nine months ended September 30, 2013, FAB Universal reported revenue of $78.2 million compared to $3.5 million for the comparable period of 2012. Gross profit in the nine month period was $34.0 million compared to $2.0 million for the first nine months of 2012. Operating expenses for the nine months totaled $13.0 million compared to $8.4 million for the comparable period of 2012. Net income was $16.0 million, or $0.77 cents per share, compared to a net loss of $5.9 million, or $0.73 per share for the nine month period ended September 30, 2012.

For a more detailed discussion of the financial and other information included in this press release, please also refer to the Company’s Form 10-Q for the three month period ended September 30, 2013 that will be filed with the Securities and Exchange Commission (www.sec.gov) on November 14, 2013.

Third Quarter Earnings Conference Call

Management will host a conference call today, November 13, 2013 at 10:00am ET. During the call Chris Spencer, CEO, and John Busshaus, CFO, will discuss the quarterly operational and financial results and the outlook for the balance of 2013 before opening the call for investor questions. To participate in the conference call, please dial 1-877-407-0778 (U.S. callers); 201-689-8565 (international callers) 10 minutes prior to the call. Please reference conference ID #13572707.

A live webcast of the conference call will be available at http://www.fabuniversal.com/news-events/. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.

A telephone replay of the conference call will be available from 12:00pm ET on November 13, 2013 until 11:59pm ET November 16, 2013 and may be accessed by calling (877) 660-6853 (domestic dial-in) or (201) 612-7415 (international dial-in) and reference conference ID #13572707. An archived replay of the conference call will also be available in the investor relations section of the Company’s website.

About FAB Universal Corp.

FAB Universal Corp. is a global leader in digital media entertainment sales and distribution. FAB delivers media to its customers worldwide through Intelligent Kiosks, Retail Stores and Franchises, and online through Apple iTunes and Google Android. We distribute billions of movie, music, podcast, TV show and other digital files to consumers in 240 countries through three business units: Digital Media Services, Retail Media Sales and Wholesale Media Distribution. Sales of digital media are generated through the kiosks networks, subscription sales for mobile devices, smartphone Apps and Netflix-like subscription models. In 2011, we distributed billions of downloads of copyrighted music, video games, ringtones, ebooks, movies and podcasts to over 50 million people worldwide through iPods, iPhones, iPads, iTunes, Blackberrys, Windows Phones, Androids and many other devices and destinations. We are a publicly held, Pittsburgh based company with thousands of shareholders and a world-class team. Visit us on the web at www.fabuniversal.com, email us at contact@fabuniversal.com.

Legal Notice

Legal Notice Regarding Forward-Looking Statements: "Forward-looking Statements" as defined in the Private Securities litigation Reform Act of 1995 may be included in this news release. These statements relate to future events or our future financial performance. These statements are only predictions and may differ materially from actual future results or events. We disclaim any intention or obligation to revise any forward-looking statements whether as a result of new information, future developments or otherwise. There are important risk factors that could cause actual results to differ from those contained in forward-looking statements, including, but not limited to risks associated with changes in general economic and business conditions, actions of our competitors, the extent to which we are able to develop new services and markets for our services, the time and expense involved in such development activities, the level of demand and market acceptance of our services or changes in our business strategies.

                 
FAB UNIVERSAL CORP AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
ASSETS

September 30,

2013

December 31,

2012

CURRENT ASSETS:
Cash $   43,575,330 $   19,671,937
Accounts receivable, net 10,264,310 [1] 6,927,045 [1]
Advances to suppliers, net 81,500 154,770
Inventory 6,552,797 5,207,008
Deferred tax assets, current 2,537,494 1,771,799
Other current assets     293,724       979,021  
Total current assets 63,305,155 34,711,580
 
Property, and equipment, net 16,482,771 16,720,637
Goodwill 61,538,155 60,652,957
Intangible assets, net 24,730,658 27,875,748
Deferred tax assets, non-current 5,237,776 3,346,166
Long-term deposits     39,476,943       24,488,131  
Total assets $   210,771,458   $   167,795,219  
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term bank loans $ 1,797,849 $ 2,072,619
Accounts payable 7,451,436 6,471,270
Accrued expenses 2,932,105 3,077,785
Deferred revenue, current 13,094,805 8,250,402
Taxes payable 2,804,354 1,603,821
Due to related parties 122,184 41,341
Other payable     1,956,728       1,910,378  
Total current liabilities 30,159,461 23,427,616
 
Long-term deposits from customers 2,359,053 2,474,604
Deferred revenue, non-current 24,978,957 7,923,450
Long-term payables     -       39,204  
Total liabilities 57,497,471 33,864,874
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock - [2] - [2]
Common stock 20,806 [3] 20,469 [4]
Additional paid-in capital 207,716,509 206,786,139
Accumulated other comprehensive income 3,772,701 1,384,365
Accumulated deficit     (58,236,029 )     (74,260,628 )
Total stockholders' equity     153,273,987       133,930,345  
Total liabilities and stockholders' equity $   210,771,458   $   167,795,219  
 
[1]   net of $14,000 allowance
[2] $.001 par value, 10,000,000 shares authorized, 290 shares issued and outstanding
[3] $.001 par value, 200,000,000 shares authorized, 20,805,860 shares issued and outstanding
[4] $.001 par value, 200,000,000 shares authorized, 20,468,860 shares issued and outstanding
 
                 
FAB UNIVERSAL CORP AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
 
   

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2013       2012 2013       2012
Revenue $   29,751,523 $   1,745,015 $   78,245,155 $   3,462,498
Cost of Revenue     15,661,462       784,226       44,285,593       1,446,422  
Gross Profit     14,090,061       960,789       33,959,562       2,016,076  
 
OPERATING EXPENSES
Selling expenses 1,392,280 84,507 3,368,451 181,106
General and administrative 3,032,927 4,095,442 8,150,717 5,582,699
Consulting fees 378,578 1,491,591 1,309,170 2,452,027
Research and development     83,388       73,337       223,927       209,086  
Total Expenses     4,887,173       5,744,877       13,052,265       8,424,918  
Income (loss) from continuing operations     9,202,888       (4,784,088 )     20,907,297       (6,408,842 )
 
OTHER INCOME (EXPENSE):
Gain on disposal of assets - - - 6,000
Interest income 27,079 132 55,638 217
Interest (expense) (66,523 ) (160 ) (109,677 ) (160 )
Other income (expense)     (7,458 )     (876 )     (62,428 )     (1,779 )
Total Other Income (Expense)     (46,902 )     (904 )     (116,467 )     4,278  
Income (loss) from continuing operations before income taxes 9,155,986 (4,784,992 ) 20,790,830 (6,404,564 )
 
Income tax expense 1,864,547 52,352 4,766,231 52,352
       
Net income (loss) from continuing operations 7,291,439 (4,837,344 ) 16,024,599 (6,456,916 )
 
Net income from discontinued operations, net of tax - (113,929 ) - 178,276
       
Net Income (loss) 7,291,439 (4,951,273 ) 16, 024,599 (6,278,640 )
 
Other comprehensive income
Foreign currency translation gain 354,277 337,560 2,388,336 337,560
       
COMPREHENSIVE INCOME (LOSS) $   7,645,716   $   (4,613,713 ) $   18,412,935   $   (5,941,080 )
 

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

FROM CONTINUING OPERATIONS

$   0.35   $   (0.50 ) $   0.77   $   (0.73 )

BASIC AND DILUTED INCOME PER COMMON SHARE

FROM DISCONTINUED OPERATIONS

    0.00       (0.01 )     0.00       0.02  
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE $   0.35   $   (0.51 ) $   0.77   $   (0.71 )

BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

    20,805,860       9,724,735       20,741,007       8,861,498  
 

Contact:
Investor Relations:
LHA
Stephanie Prince/Jody Burfening
212-838-3777
sprince@lhai.com

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