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CSSE: Pro Forma Results Show Much Higher Profitability than Expected

By Lisa Thompson



Management filed pro forma income statements for full year 2018 and the first quarter of 2019 and a pro forma balance sheet for March 31, 2019 with Crackle.

Pro forma for 2018 the two would have generated net revenue of $92.6 million, GAAP EPS of $0.10 per share, non-GAAP EPS of approximately $1.04 per share (although we are not positive on all the one-time expenses) and an EBITDA of $26 million. Revenues would have been $18 million higher than we had initially estimated ($65 million versus $48 million) as gross billings were decided by the auditors to be counted as revenues. Initially Chicken Soup for the Soul Entertainment (CSSE) claimed that Crackle generated $15.9 million in gross billings resulting in $10.9 million in revenue for Q1 2019, but the auditors decided that gross billings for the ad business were actually revenues, and the pro forma revenue was $15.0 million.

In Q1 2019, the combined entities generated $17 million in net revenue and would have been profitable on a non-GAAP basis taking out one-time charges and stock-based compensation. Pro forma GAAP EPS is a loss of $0.32 per share, but a non-GAAP gain of $0.02. Pro forma adjusted EBITDA for the quarter was $2.7 million.

Revising Forecasts


Now we are just tweaking the Q2 2019 quarter based on Crackle actuals in Q1, and moving revenues up to $9.8 million given Crackle is combined only for half a quarter. Until we see how profits shake out we are keeping expectations low, but results could be much better in 2019.


In the 2020 May 15th to November 15th time period, Sony has to make a decision whether to keep 49% of the equity in Crackle+ or take $40 million in preferred stock from CSSE. Our assumption in forecasting is that Sony will make that decision on May 15th and will keep the equity, at which point earnings at CSSE will be reduced by minority interest. It is difficult to forecast what that portion of earnings for the Crackle+ business will be so we have guessitmated by taking out half of 30% of earnings for the year.

We are maintaining $105 million revenues for 2020 for now with upward revision possible. This assumes that the online business only grow 20% for the year, which we imagine to be conservative. Our first cut at EPS is $0.30 per share and adjusted EBITDA of $30 million, although given the pro forma adjusted EBITDA in 2018 of $26 million this could turn out to be extremely low.

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