RMG Networks Reports Fourth Quarter and Year End 2014 Results
Reports Fourth Quarter Adjusted Revenue(1) Growth of 32% With Stable Adjusted Gross Margins and Improved Adjusted EBITDA Compared to Prior Quarter
DALLAS, TX--(Marketwired - Mar 31, 2015) - RMG Networks Holding Corporation (NASDAQ: RMGN)
Fourth Quarter Highlights
Total adjusted revenue1 of $18.6 million increased 32% from the third quarter 2014
Adjusted EBITDA loss1 of $1.3 million represented a $0.9 million improvement from the third quarter 2014
Brought to market the first product of 'Six New Products in Six Months' initiative
Subsequent to year-end and as previously disclosed, issued $25 million in convertible preferred stock; offering was comprised of $15 million to convert entire senior debt facility and $10 million of new gross cash proceeds
Subsequent to year-end and as previously disclosed, entered into a non-binding letter of intent to sell Airline Media Networks business
RMG Networks Holding Corporation (NASDAQ: RMGN), or RMG Networks, a leading provider of technology-driven visual communications solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2014.
RMG Networks helps brands and organizations communicate more effectively using location-based video networks. The company builds enterprise video networks that empower organizations to visualize critical data to better run their business. The company also connects brands with target audiences using video advertising networks.
Robert Michelson, Chief Executive Officer, commented, "We executed well in the fourth quarter and are encouraged by our progress, as adjusted revenues grew significantly and adjusted EBITDA improved compared to the prior quarter. During the fourth quarter, we advanced a number of focused initiatives to drive new product innovation, strengthen our sales organization and enhance operational efficiency, while redirecting investments to areas of our business where we have a highly differentiated offering driving competitive advantage."
"In December, we began executing on an aggressive six month innovation plan to introduce one new solution a month into the market, in order to strengthen our portfolio of products," Mr. Michelson continued. "Our efforts remain on track and our sales pipeline2 is stronger today than it was one year ago as a result. We have also made strides with our sales organization to streamline and align sales goals across the organization."
"The recently completed financing transaction and the announcement of the proposed sale of our Airline Media Network business are two additional important steps that significantly strengthen our balance sheet, enabling us to continue funding our growth initiatives. The sale of the Airline Media network will allow us to focus our attention on our Enterprise business. In addition, we believe the capital we just raised, along with the other strategic and operational initiatives we are pursuing, will allow us to achieve our ultimate goal of sustainable profitability."
Mr. Michelson further added, "While it will still take some time for the effect of these organizational changes to impact our financial results, we are encouraged to be adding larger, more substantial deals to our pipeline2 from existing customers as well as a number of potential opportunities tied to new customers. As an organization, we are making progress to rejuvenate growth and are on a path to achieve our ultimate goal of long-term sustainable profitability."
Fourth Quarter Financial Review
RMG Networks completed the business combinations of Reach Media Group Holdings, Inc. and Symon Holdings Corporation, or Symon, on April 8 and April 19, 2013, respectively. Symon was determined to be the Predecessor Company for accounting purposes and accordingly Symon's historical financials are included for comparison in RMG Networks' "as-reported" financials. Because Symon recorded results of operations on a January 31 fiscal year and because the results of Reach Media Group Holdings, Inc. are included in Predecessor Company financials only as of the date of combination, full year 2014 results as-reported are not comparable with the Predecessor Company's results for the full year 2013. In addition, "as-reported" results include certain items and the effects of purchase accounting which RMG Networks does not believe reflect the underlying performance of its business. Therefore, for ease of comparison, the following provides adjusted results for the full year 2014 and pro forma combined results for the full year 2013 as if the companies had existed as a combined entity for the relevant periods and adjusting for the items described above.
Adjusted Results3,4
Fourth Quarter Revenue. Total adjusted revenues in the fourth quarter of 2014 were $18.6 million, a sequential increase of 32.0% from $14.1 million in the third quarter of 2014.
Adjusted Enterprise revenue of $13.1 million increased 24.4% from $10.6 million in the third quarter of 2014, driven by an increase in product sales and professional services delivered. Adjusted gross margin increased to 53.7% from 52.7% in the third quarter of 2014.
Media revenue of $5.5 million increased 54.4% from $3.6 million in the third quarter of 2014, primarily due to better sales execution and seasonal advertising trends. Gross margin improved to 23.3% from 21.9% in the third quarter of 2014.
On a year over year basis, total adjusted revenues in the fourth quarter of 2014 represented a decrease of 17.2% from $22.5 million of adjusted revenues in the fourth quarter of 2013.
Adjusted Enterprise revenue decreased 18.6% from $16.1 million in the fourth quarter of 2013. Adjusted Enterprise gross margin was 53.7% compared to 50.9% in the fourth quarter of 2013.
Media revenue decreased 13.8% from $6.4 million in the fourth quarter of 2013. Media gross margin was 23.3% compared to 36.1% in the fourth quarter of 2013.
Fourth Quarter Adjusted EBITDA3. Adjusted EBITDA loss was $1.3 million, improving from a loss of $2.2 million in the third quarter of 2014, due primarily to the reasons described above.
On a year over year basis, adjusted EBITDA decreased in the fourth quarter from an adjusted EBITDA loss of $0.5 million in the fourth quarter of 2013, due to the reasons described above.
During the fourth quarter of 2014, the company recorded the following non-recurring, non-cash items:
A $1.0 million write-off of obsolete inventory.
An additional $1.4 million accrual on a previously recognized loss accrual on a long-term contract, initially recorded in the second quarter of 2014. Based on revised estimates for the performance of the contract over its term, the loss is now expected to be greater than previously estimated.
Impairment charges of $20.8 million and $5.9 million related to goodwill and intangible assets, respectively, of the Enterprise Unit. The impairments are a result of a more conservative near-term forecast versus previous forecasts based off the strategies pursued by the company's new leadership. It does not reflect management's view of the long-term value of the company's Enterprise business unit.
Full Year. Total 2014 adjusted revenues5 were $61.8 million, a decrease of 15.2% from total pro forma combined revenues of $72.9 million in 2013. 2014 adjusted EBITDA loss was $11.6 million compared to a pro forma combined adjusted EBITDA loss of $1.9 million in 2013.
Reported Results
Fourth Quarter. Total reported revenue for the quarter ended December 31, 2014 was $18.4 million compared to total reported revenue of $19.6 million for the same quarter last year.
Operating loss for the quarter ended December 31, 2014 was $32.5 million compared to an operating loss of $6.7 million for the same quarter last year.
Full Year. Total reported revenue for the year ended December 31, 2014 was $57.5 million compared to total revenue for the successor company for the period from April 20, 2013 through December 31, 2013 of $50.3.
Operating loss for the year ended December 31, 2014 was $79.2 million compared to an operating loss for the successor company for the period from April 20, 2013 through December 31, 2013 of $14.6 million.
Non-Binding LOI to Sell the Airline Media Network Business
RMG Networks announced on March 19, 2015, that it has entered into discussions with certain unaffiliated third parties regarding the proposed sale of its Media business, also known as the RMG Airline Media Network. The contemplated sale does not include the RMG Office Media Network.
As a result of these discussions, RMG Networks has signed a non-binding letter of intent to sell its RMG Airline Media Network business for $5.5 million, plus the assumption of certain liabilities to an unaffiliated third party. The parties are in the process of negotiating a definitive agreement.
Issuance of Series A Convertible Preferred Stock
RMG Networks announced on March 25, 2015, the sale of $25 million in Series A Convertible Preferred Stock (the "Preferred Stock") to institutional and accredited investors (the "Financing"). The Financing closed on March 27, 2015. The Financing was comprised of $15 million from the full conversion of the company's existing senior debt facility and approximately $10 million in new capital, prior to the payment of fees and other transaction expenses. With the conversion of its senior credit facility, the company is debt free, with the exception of capital leases.
The Financing included 250,000 shares of Preferred Stock that are mandatorily convertible into 25,000,000 shares of RMG Networks common stock, reflecting an effective transaction price of $1.00 per common share. The Preferred Stock is mandatorily convertible upon an affirmative shareholder vote approving the conversion. The company expects to file a proxy statement with the Securities and Exchange Commission ("SEC") for such purpose in the coming days and has received support agreements committing to vote in favor of approving the conversion from investors representing approximately 45% of common shares outstanding.
The Preferred Stock does not pay dividends unless the company fails to hold a meeting of its stockholders to approve the conversion of the preferred stock within 60 days of closing the Financing (or within 75 days of closing the Financing in the case of SEC review of the proxy statement for such meeting) at which point dividends begin accruing at a rate of 1% per month or portion thereof. The company is required to file a registration statement with the SEC for the common shares underlying the Preferred Stock within 30 days of closing the Financing. The Financing also carries other terms and conditions representative of a transaction of this type, the full description of which can be reviewed in documents attached to the company's filing with the SEC on Form 8-K.
The Preferred Stock was offered and sold in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Regulation D promulgated thereunder. The securities sold in the Financing have not been registered under the Securities Act, or state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements.
Roth Capital Partners served as the sole placement agent for the Financing.
Business Outlook
"In the first quarter, we expect typical seasonal patterns to impact our business," continued Mr. Michelson. "However, with our focused sales strategy and innovative new products gaining traction in the market, we are confident our growing pipeline will drive long-term growth, and that in time, we will return to delivering the financial and operational performance our shareholders expect. We have in front of us numerous, specific opportunities to deliver accelerated growth in the second half of 2015 and are committed to executing on them. With many of these initiatives in early stages, the visibility into the exact timing of their impact is still not clear. As such, we believe it would be premature to provide specific, near-term guidance at this time. As we execute on our planned product development and sales enhancement programs, we remain optimistic about our prospects for revenue growth and developing material operating leverage to produce significant adjusted EBITDA over the intermediate- and long-term to become self-sustaining."
Conference Call
Management will host a conference call to discuss these results today, Tuesday, March 31, 2015 at 9 a.m. ET. To access the call, please dial (866) 953-6856 (toll free) or (617) 399-3480 and passcode #81394350. The conference call will also be broadcast live over the Internet with an accompanying slide presentation, which can be accessed via the Investor Relations section of RMG Networks' web site at http://ir.rmgnetworks.com/phoenix.zhtml?c=251935&p=irol-calendar. All participants should call or access the website approximately 10 minutes before the conference begins. The webcast and slide presentation will be available for replay for 90 days.
A telephonic replay of this conference call will also be available by dialing (888) 286-8010 (toll free) or (617) 801-6888 (passcode:58029439) from 1 p.m. ET on Tuesday, March 31, 2015 until midnight ET on April 7, 2015.
About RMG Networks
RMG Networks (NASDAQ: RMGN) helps brands and organizations communicate more effectively using location-based video networks. The company builds enterprise video networks that empower organizations to visualize critical data to better run their business. The company also connects brands with target audiences using video advertising networks. RMG Networks works with over 70% of the Fortune 100. The company is headquartered in Dallas, Texas, with offices in the United States, United Kingdom, Singapore and the UAE. For more information, visit http://www.rmgnetworks.com.
About Non-GAAP Financial Measures
This release includes certain non-GAAP financial measures as defined under SEC regulations, including Adjusted Revenue, Adjusted Gross Margin and Adjusted EBITDA. In evaluating its business, RMG Networks considers and uses Adjusted Revenue, Adjusted Gross Margin and Adjusted EBITDA as supplemental measures of its operating performance, and believes that many of the company's investors use these non-GAAP measures to monitor the company's performance. These measures should not be considered as a substitute for the most directly comparable GAAP measures and should not be used in isolation, but in conjunction with these GAAP measures. Definitions and reconciliations between non-GAAP measures and relevant GAAP measures are set forth in the tables at the end of this press release.
Cautionary Note Regarding Forward Looking Statements
This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding the proposed sale of the Media business, guidance relating to future financial performance and expected operating results, such as revenue growth, our ability to achieve profitability, our position within the markets that we serve, efforts to grow our business and the impact of litigation.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the company's ability to raise additional capital on satisfactory terms, or at all; success in retaining or recruiting, or changes required in, its management and other key personnel; the limited liquidity and trading volume of the company's securities; Reach Media Group's ("RMG") history of incurring significant net losses and limited operating history; the competitive environment in the advertising markets in which the company operates; the risk that the anticipated benefits of the combination of RMG or Symon Holdings Corporation, or of other acquisitions that the company may complete, may not be fully realized; the risk that any projections, including earnings, revenues, margins or any other financial items are not realized; changing legislation and regulatory environments; business development activities, including the company's ability to contract with, and retain, customers on attractive terms; the general volatility of the market price of the company's common stock; risks and costs associated with regulation of corporate governance and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act); and general economic conditions.
Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
(Financial tables appear below)
RMG Networks Holding Corporation | ||||||||
Consolidated Balance Sheets | ||||||||
December 31, | December 31, | |||||||
2014 | 2013 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,076,708 | $ | 8,235,566 | ||||
Accounts receivable, net | 15,748,394 | 22,731,678 | ||||||
Inventory, net | 1,460,876 | 4,633,213 | ||||||
Deferred tax assets | 6,671 | 63,617 | ||||||
Other current assets | 1,297,893 | 2,224,547 | ||||||
Total current assets | 21,590,542 | 37,888,621 | ||||||
Property and equipment, net | 5,685,797 | 3,548,985 | ||||||
Intangible assets, net | 11,518,997 | 38,782,000 | ||||||
Goodwill | - | 28,642,398 | ||||||
Loan origination fees | 743,082 | 971,726 | ||||||
Other assets | 250,363 | 496,879 | ||||||
Total assets | $ | 39,788,781 | $ | 110,330,609 | ||||
Liabilities and Stockholders' equity (deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 4,697,464 | $ | 6,606,200 | ||||
Revenue share liabilities | 3,861,967 | 3,998,794 | ||||||
Accrued liabilities | 4,306,255 | 4,510,848 | ||||||
Loss on long-term contract | 2,648,644 | - | ||||||
Deferred revenue | 9,358,510 | 10,074,420 | ||||||
Total current liabilities | 24,872,841 | 25,190,262 | ||||||
Notes payable - non current | 14,000,000 | 8,000,000 | ||||||
Warrant liability | 1,447,308 | 4,573,123 | ||||||
Deferred revenue - non current | 1,478,041 | 990,989 | ||||||
Deferred tax liabilities | - | 6,430,853 | ||||||
Loss on long-term contract - non-current | 1,035,804 | - | ||||||
Capital leases and other | 843,030 | 392,558 | ||||||
Total liabilities | 43,677,024 | 45,577,785 | ||||||
Commitment and Contingencies | ||||||||
Stockholders' equity (deficit): | ||||||||
Common stock, $.0001 par value, (250,000,000 shares authorized; 12,467,756 and 11,920,583 shares issued, 12,167,756 and 11,920,583 shares outstanding, at December 31, 2014 and December 31, 2013, respectively.) | 1,247 | 1,192 | ||||||
Additional paid-in capital | 82,089,504 | 77,452,317 | ||||||
Accumulated comprehensive income (loss) | 6,211 | 299,618 | ||||||
Retained earnings (accumulated deficit) | (85,505,205 | ) | (13,000,303 | |||||
Treasury Stock (300,000 shares) | (480,000 | ) | - | |||||
Total stockholders' equity (deficit) | (3,888,243 | ) | 64,752,824 | |||||
Total liabilities and stockholders' equity (deficit) | $ | 39,788,781 | $ | 110,330,609 | ||||
RMG Networks Holding Corporation | ||||||||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||
Successor | Successor | Predecessor | ||||||||||||
Company | Company | Company | ||||||||||||
Twelve | April 20, | February 1, | ||||||||||||
Months | 2013 | 2013 | ||||||||||||
Ending | Through | Through | ||||||||||||
December 31, | December 31, | April 19, | ||||||||||||
2014 | 2013 | 2013 | ||||||||||||
Revenue: | ||||||||||||||
Advertising | $ | 16,507,209 | $ | 15,963,107 | $ | - | ||||||||
Products | 16,686,243 | 18,488,304 | 2,239,236 | |||||||||||
Maintenance and content services | 16,095,033 | 7,537,024 | 3,594,520 | |||||||||||
Professional services | 8,204,328 | 8,289,212 | 1,323,559 | |||||||||||
Total Revenue | 57,492,813 | 50,277,647 | 7,157,315 | |||||||||||
Cost of Revenue: | ||||||||||||||
Advertising | 12,814,119 | 10,718,458 | - | |||||||||||
Products | 12,334,834 | 11,974,491 | 1,498,135 | |||||||||||
Maintenance and content services | 2,892,245 | 1,759,866 | 611,692 | |||||||||||
Professional services | 5,896,578 | 5,232,781 | 861,640 | |||||||||||
Loss on long-term contract | 2,732,050 | - | ||||||||||||
Total Cost of Revenue | 36,669,826 | 29,685,596 | 2,971,467 | |||||||||||
Gross Profit | 20,822,987 | 20,592,051 | 4,185,848 | |||||||||||
Operating expenses: | ||||||||||||||
Sales and marketing | 18,837,363 | 12,681,559 | 1,729,871 | |||||||||||
General and administrative | 18,880,668 | 12,871,283 | 1,739,348 | |||||||||||
Research and development | 3,974,362 | 2,623,791 | 512,985 | |||||||||||
Acquisition expenses | 378,193 | 2,095,250 | 3,143,251 | |||||||||||
Depreciation and amortization | 6,805,087 | 4,956,622 | 140,293 | |||||||||||
Impairment of goodwill and intangible assets | 51,108,782 | - | - | |||||||||||
Total operating expenses | 99,984,456 | 35,228,505 | 7,265,748 | |||||||||||
Operating income (loss) | (79,161,469 | ) | (14,636,454 | ) | (3,079,900 | ) | ||||||||
Other Income (Expense): | ||||||||||||||
Warrant liability income charge | 665,324 | 1,960,211 | - | |||||||||||
Interest expense and other - net | (1,719,821 | ) | (3,327,148 | ) | (14,553 | ) | ||||||||
Income (loss) before income taxes | (80,215,966 | ) | (16,003,391 | ) | (3,094,453 | ) | ||||||||
Income tax expense (benefit) | (7,711,064 | ) | (3,003,088 | ) | (540,897 | ) | ||||||||
Net income (loss) | (72,504,902 | ) | (13,000,303 | ) | (2,553,556 | ) | ||||||||
Other comprehensive income - | ||||||||||||||
Foreign currency translation adjustments | (293,407 | ) | 299,618 | (121,144 | ) | |||||||||
Total comprehensive income (loss) | $ | (72,798,309 | ) | $ | (12,700,685 | ) | $ | (2,674,700 | ) | |||||
Net income (loss) per share: | ||||||||||||||
Basic and diluted net income (loss) per share of Common Stock | (5.96 | ) | $ | (1.40 | ) | - | ||||||||
Basic and diluted net income (loss) per share of Class L Common Stock | $ | (2.55 | ) | |||||||||||
Weighted average shares used in computing basic and diluted net income (loss) per share of Common Stock | 12,155,694 | 9,270,466 | - | |||||||||||
Weighted average shares used in computing basic and diluted net income (loss) per share of Class L Common Stock | - | 1,000,000 | ||||||||||||
Weighted average shares used in computing basic and diluted net income (loss) per share of Class A Non-Voting Common Stock | - | 68,889 | ||||||||||||
RMG Networks Holding Corporation | ||||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||
Successor | Successor | Predecessor | ||||||||||||
Company | Company | Company | ||||||||||||
Twelve | April 20, | February 1, | ||||||||||||
Months | 2013 | 2013 | ||||||||||||
Ending | Through | Through | ||||||||||||
December 31, | December 31, | April 19, | ||||||||||||
2014 | 2013 | 2013 | ||||||||||||
Cash flows from operating activities | ||||||||||||||
Net income (loss) | $ | (72,504,902 | ) | $ | (13,000,303 | ) | $ | (2,553,556 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||
Depreciation and amortization | 6,805,087 | 4,956,622 | 140,293 | |||||||||||
Change in warrant liability | (665,324 | ) | (1,960,211 | ) | - | |||||||||
Impairment of intangible assets and goodwill | 51,108,782 | - | - | |||||||||||
Stock-based compensation | 2,060,287 | 1,876,122 | - | |||||||||||
Non-cash treasury stock | (480,000 | ) | - | - | ||||||||||
Loan origination fees | 228,644 | 829,324 | - | |||||||||||
Non-cash consulting expense | 504,750 | 175,250 | - | |||||||||||
Non-cash directors' fees | 116,464 | - | - | |||||||||||
Interest capitalized as debt | - | 135,000 | - | |||||||||||
Deferred tax (benefit) | (6,990,895 | ) | (3,059,732 | ) | (12,294 | ) | ||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Accounts receivable | 7,649,904 | (11,226,354 | ) | 2,846,332 | ||||||||||
Inventory | 3,172,337 | (1,155,725 | ) | (488,722 | ) | |||||||||
Other current assets | 1,070,132 | (650,241 | ) | (154,529 | ||||||||||
Other assets, net | (258,234 | ) | 94,802 | 12,572 | ||||||||||
Accounts payable | (1,863,429 | ) | 4,618,337 | (2,978,808 | ) | |||||||||
Accrued liabilities | (281,719 | ) | 184,623 | (767,991 | ) | |||||||||
Deferred revenue | (949,871 | ) | 5,165,359 | (372,579 | ) | |||||||||
Loss on contract | 3,347,624 | |||||||||||||
Other non-current liabilities | (799,728 | ) | ||||||||||||
Net cash provided by (used in) operating activities | (8,730,091 | ) | (13,017,127 | ) | (4,329,282 | ) | ||||||||
Cash flows from investing activities | ||||||||||||||
Acquisition of Symon Holdings Corporation | - | (209,079 | ) | - | ||||||||||
Purchases of property and equipment | (2,293,436 | ) | (2,643,574 | ) | (86,470 | ) | ||||||||
Net cash provided by (used in) investing activities | (2,293,436 | ) | (2,852,653 | ) | (86,470 | ) | ||||||||
Cash flows from financing activities | ||||||||||||||
Proceeds from debt | 6,000,000 | 3,647,863 | - | |||||||||||
Repayments of debt | - | (29,782,863 | ) | - | ||||||||||
Proceeds from sale of stock | - | 39,390,600 | - | |||||||||||
Expenses related to sale of stock | - | (274,815 | ) | - | ||||||||||
Net cash provided by (used in) financing activities | 6,000,000 | 12,980,785 | - | |||||||||||
Effect of exchange rate changes on cash | (135,331 | ) | 299,618 | (121,144 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents | (5,158,858 | ) | (2,589,377 | ) | (4,536,896 | ) | ||||||||
Cash and cash equivalents, beginning of period | 8,235,566 | 10,824,943 | 10,203,169 | |||||||||||
Cash and cash equivalents, end of period | $ | 3,076,708 | $ | 8,235,566 | $ | 5,666,273 | ||||||||
Supplemental disclosures of cash flow information: | ||||||||||||||
Cash paid during the period for interest | $ | 1,578,576 | $ | 2,081,529 | $ | 2,053 | ||||||||
Cash paid during the period for income taxes | $ | 186,509 | $ | - | $ | 150,000 | ||||||||
Leasehold improvements acquired through landlord allowance | $ | 1,250,200 | $ | - | $ | - | ||||||||
RMG Networks Holding Corporation | ||||||||||||||||||
Reconciliation of Gross Profit | ||||||||||||||||||
For the Three Months Ended December 31, 2014 | ||||||||||||||||||
Successor Company | Purchase Price Accounting Adjustment | Inventory Write-Off | Loss on Long-Term Contract | Adjusted | ||||||||||||||
(Unaudited) | ||||||||||||||||||
Revenue: | ||||||||||||||||||
Advertising | $ | 5,517,315 | $ | - | $ | - | $ | - | $ | 5,517,315 | ||||||||
Product sales | 6,709,523 | - | - | - | 6,709,523 | |||||||||||||
Maintenance and content services | 4,050,539 | 209,913 | - | - | 4,260,452 | |||||||||||||
Professional services | 2,150,505 | - | - | - | 2,150,505 | |||||||||||||
Total Revenue | 18,427,882 | 209,913 | - | - | 18,637,795 | |||||||||||||
Cost of Revenues: | ||||||||||||||||||
Advertising | 4,232,418 | - | - | - | 4,232,418 | |||||||||||||
Product sales | 4,923,141 | - | (1,028,829 | ) | - | 3,894,312 | ||||||||||||
Maintenance and content services | 681,872 | - | - | - | 681,872 | |||||||||||||
Professional services | 1,502,612 | - | - | - | 1,502,612 | |||||||||||||
Loss on long-term contract | 1,358,679 | - | - | (1,358,679 | ) | - | ||||||||||||
Total Cost of Revenue | 12,698,722 | - | (1,028,829 | ) | (1,358,679 | ) | 10,311,214 | |||||||||||
Gross Profit | $ | 5,729,160 | $ | 209,913 | $ | 1,028,829 | $ | 1,358,679 | $ | 8,326,581 | ||||||||
RMG Networks Holding Corporation | ||||||||||
Reconciliation of Gross Profit | ||||||||||
For the Three Months Ended December 31, 2013 | ||||||||||
Successor Company Three Months Ended December 31, 2013 | Purchase Price Accounting Adjustment | Adjusted | ||||||||
(Unaudited) | ||||||||||
Revenue: | ||||||||||
Advertising | $ | 6,397,833 | $ | - | $ | 6,397,833 | ||||
Product sales | 7,958,396 | - | 7,958,396 | |||||||
Maintenance and content services | 1,732,003 | 2,561,729 | 4,293,732 | |||||||
Professional services | 3,556,565 | 300,000 | 3,856,565 | |||||||
Total Revenue | 19,644,797 | 2,861,729 | 22,506,526 | |||||||
Cost of Revenues: | ||||||||||
Advertising | 4,010,559 | - | 4,010,559 | |||||||
Product sales | 4,983,711 | - | 4,983,711 | |||||||
Maintenance and content services | 314,093 | - | 314,093 | |||||||
Professional services | 2,690,640 | - | 2,690,640 | |||||||
Loss on long-term contract | - | - | - | |||||||
Total Cost of Revenue | 11,999,003 | - | 11,999,003 | |||||||
Gross Profit | $ | 7,645,794 | $ | 2,861,729 | $ | 10,507,523 | ||||
RMG Networks Holding Corporation |
Reconciliation of Gross Profit |
For The Year Ended December 31, 2014 |
Successor | |||||||||||||||||||||
Company | |||||||||||||||||||||
Year | |||||||||||||||||||||
Ended | |||||||||||||||||||||
December | Purchase | Cost | Loss on | ||||||||||||||||||
31, | Price | of | Long- | Adjusted | |||||||||||||||||
2014 | Accounting | Inventory | Revenue | Term | (Non- | ||||||||||||||||
(GAAP) | Adjustment | Write-Off | Reclassification | Contract | GAAP) | ||||||||||||||||
Revenue: | |||||||||||||||||||||
Advertising | $ | 16,507,209 | $ | - | $ | - | $ | - | $ | - | $ | 16,507,209 | |||||||||
Product sales | 16,686,243 | - | - | 1,381,459 | 987,542 | 19,055,244 | |||||||||||||||
Maintenance and content services | 16,095,033 | 839,652 | - | - | 394,565 | 17,329,250 | |||||||||||||||
Professional services | 8,204,328 | - | - | - | 687,789 | 8,892,117 | |||||||||||||||
Total Revenue | 57,492,813 | 839,652 | - | 1,381,459 | 2,069,896 | 61,783,820 | |||||||||||||||
Cost of Revenues: | |||||||||||||||||||||
Advertising | 12,814,119 | - | - | 1,381,459 | - | 14,195,578 | |||||||||||||||
Product sales | 12,334,834 | - | (1,028,829 | ) | - | - | 11,306,005 | ||||||||||||||
Maintenance and content services | 2,892,245 | - | - | - | - | 2,892,245 | |||||||||||||||
Professional services | 5,896,578 | - | - | - | - | 5,896,578 | |||||||||||||||
Loss on long-term contract | 2,732,050 | - | - | - | (2,732,050 | ) | - | ||||||||||||||
Total Cost of Revenue | 36,669,826 | - | (1,028,829 | ) | 1,381,459 | (2,732,050 | ) | 34,290,406 | |||||||||||||
Gross Profit | $ | 20,822,987 | $ | 839,652 | $ | 1,028,829 | $ | - | $ | 4,801,946 | $ | 27,493,414 | |||||||||
RMG Networks Holding Corporation | |||||||||||
Reconciliation of Operating Income (Loss) to Adjusted EBITDA | |||||||||||
Fourth Quarter | |||||||||||
2014 | 2013 | ||||||||||
Operating income (loss) per Statements of Comprehensive Income | $ | (32,548,285 | ) | $ | (6,725,013 | ) | |||||
Revenues that would have been recognized in the period had the balance in deferred revenue at the acquisition date not been required to be adjusted to market value at the acquisition date in accordance with GAAP purchase accounting guidelines |
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|
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|
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| |||||
Depreciation and amortization | 1,406,109 | 1,985,002 | |||||||||
Acquisition expenses | - | 100,000 | |||||||||
Stock-based compensation | 577,073 | 1,318,481 | |||||||||
Impairment of intangible assets and goodwill | 26,686,933 | - | |||||||||
Write-off of obsolete inventory | 1,028,829 | - | |||||||||
Loss on long-term contract | 1,358,679 | - | |||||||||
Adjusted EBITDA | $ | (1,280,749 | ) | $ | (459,801 | ) | |||||
RMG Networks Holding Corporation | |||||||||||
Reconciliation of Operating Income (Loss) to Adjusted EBITDA | |||||||||||
Full Year | |||||||||||
2014 | 2013(6) | ||||||||||
Operating income (loss) per Statements of Comprehensive Income | $ | (79,161,469 | ) | $ | (19,785,414 | ) | |||||
Revenues that would have been recognized in the period had the balance in deferred revenue at the acquisition date not been required to be adjusted to market value at the acquisition date in accordance with GAAP purchase accounting guidelines |
|
|
| ||||||||
Depreciation and amortization | 6,805,087 | 5,822,067 | |||||||||
Acquisition expenses | 378,193 | 5,807,518 | |||||||||
Stock-based compensation | 2,060,287 | 1,876,122 | |||||||||
Impairment of intangible assets and goodwill | 51,108,782 | - | |||||||||
Write-off of obsolete inventory | 1,028,829 | - | |||||||||
Loss on long-term contract | 4,801,946 | - | |||||||||
Reorganization costs | 579,029 | - | |||||||||
Adjusted EBITDA | $ | (11,559,664 | ) | $ | (1,880,228 | ) | |||||
1 Q4 and Q3 2014 GAAP consolidated revenue was $18.4 million and $13.9 million. Q4 & Q3 2014 GAAP operating loss was $32.5 million and $18.5 million, respectively. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.
2 Pipeline does not represent contracted deals and the company makes no assurance of closing deals in the pipeline.
3 Q4 & Q3 2014 GAAP consolidated revenue was $18.4 million and $13.9 million, respectively. Q4 & Q3 2014 GAAP Enterprise revenue was $12.9 million and $10.3 million, respectively. Q4 & Q3 2014 GAAP operating loss was $32.5 million and $18.5 million, respectively. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.
4 Enterprise revenues represent Products, Maintenance and Content Services, and Professional Services revenue line items; Media revenues represent Advertising revenue line item.
5 2014 GAAP consolidated revenue was $57.5 million. GAAP consolidated revenue for the period April 20, 2013, through December 31, 2013, was $50.3 million. 2014 GAAP operating loss was $32.5 million. GAAP operating loss for the period April 20, 2013, through December 31, 2013, was $14.6 million. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.
6 Represents 2013 pro forma combined results
