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Frankly Reports Second Quarter and Six Month 2019 Financial Results

NEW YORK , Aug. 29, 2019 /CNW/ -- Frankly Inc. (TLK.V) (OTCQX:FRNKF) (Frankly), a multi-platform engagement, monetization and data company, reported financial results for the second quarter and six months ended June 30, 2019 . All financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

Second Quarter 2019 Financial Results (All amounts in U.S. dollars)

  • Revenue increased ­­83% to $3.4 million from $1.9 million in the prior quarter and decreased 40% from $5.8 million in the second quarter of 2018. The sequential increase in revenue was due to approximately $526,000 revenue generated from the acquisition of AMP on May 10, 2019 as well as a $1.0 million increase in advertising revenue primarily due to the signing of a large national advertising client at the end of the first quarter of 2019. See below for discussion on increase in revenue sharing expense included in cost of sales associated with our national advertising program during the same period, which offset the increase in advertising revenue noted above. The increase in national advertising revenue from the large advertising client noted above was partially offset by decreases in national advertising revenue with clients wherein we report revenues on a net basis (no revenue sharing expense is recognized within cost of sales) as well as a decrease in local advertising revenue. The year-over-year decrease in revenue was due to the customer terminations at the end of 2018 as discussed in previous filings.
  • Net income totaled $12.8 million compared to net loss of $(2.0) million in the prior quarter and net loss of $(1.5) million in the second quarter of 2018. The sequential and year-over-year increase in net income was primarily due to a gain on extinguishment of debt of $14.7 million recognized in the second quarter of 2019 in connection with a debt settlement and share repurchase transaction with Raycom, which closed on May 30, 2019 .
  • Adjusted EBITDA loss totaled $(1.5) million compared to adjusted EBITDA loss of $(1.7) million in the prior quarter and adjusted EBITDA of $650,000 in the second quarter of 2018 (see discussion about the presentation of adjusted EBITDA under the heading "Non-GAAP Measures" below). The sequential decrease in adjusted EBITDA loss was primarily due to the acquisition of AMP on May 10, 2019 which provided approximately $150,000 of Adjusted EBITDA during the period from May 10, 2019 to June 30, 2019 . Although there was a $1.0 million increase to advertising revenue as discussed above, this was offset in full by a $1.0 million increase in revenue sharing expense. The year-over-year increase in adjusted EBITDA loss was primarily due to the customer terminations at the end of 2018 as discussed in previous filings.

Six Month 2019 Financial Results (All amounts in U.S. dollars)

  • Revenue decreased 54% to $5.3 million from $11.5 million in the same period in 2018. The decrease in revenue was due to the customer terminations at the end of 2018 as discussed in previous filings.
  • Net income totaled $10.9 million , compared to a net loss of $(5.3) million in the same period in 2018. The increase in net income was primarily due to a gain on extinguishment of debt of $14.7 million recognized in the second quarter of 2019 in connection with a debt settlement and share repurchase transaction with Raycom, which closed on May 30, 2019 .
  • Adjusted EBITDA loss totaled $(3.3) million compared to adjusted EBITDA loss of $(106,000) in the prior year period. The increase in adjusted EBITDA loss was primarily due to the customer terminations at the end of 2018 as discussed in previous filings.
  • At June 30, 2019 , the Company had $2.2 million in cash and cash equivalents and $1.1 million in cash from the private placement in attorney trust.

Management Commentary
"Frankly continues to make solid progress on our growth strategy to build one of the largest unwired digital networks in the world," said Company CEO Lou Schwartz . "By enhancing our multiscreen video capabilities, including through our acquisition of Vemba, adding marquis brands like CNN and Vice Media, and leveraging our engagement tools for first-party data collection, the number of sites served through our software and services platform will continue to see increased value from the scale of our footprint. Our significant sequential topline growth during the quarter is indicative of the traction we're gaining through our multi-pronged strategy, and we expect to see continued improvements throughout the balance of the year.  Today we serve over 1,200 sites, touch over 100 million monthly active users, and reach over 75% of U.S. households. Going forward, we will continue to focus on three critical pillars of organic and acquisition growth: reach, technology and first-party data, which will enable one-to-one real-time interactions between consumers and brands."

Other Matters
The Company voluntarily de-registered its common shares with the SEC on April 1, 2019 . As a "reporting issuer" in Canada that is no longer an "SEC Issuer" under Canadian securities laws by virtue of having a class of securities registered with the SEC, the applicable GAAP for the Company's financial statements is IFRS, rather than US GAAP. The Company is in the process of transitioning to IFRS to meet this requirement but until the transition is complete, the Company has continued to present and file financial information using US GAAP and has submitted an application for exemptive relief with Canadian securities regulatory authorities in order to be permitted to continue to present and file financial information using US GAAP up to and including the third quarter of 2019. Until the exemptive relief is granted, or, if not granted, until the Company files financial statements presented using IFRS (and if applicable, audited in accordance with Canadian generally accepted auditing standards), the Company expects to be noted as in default of its filing obligations. Based on discussions with the applicable regulatory authorities, the Company does not currently anticipate any trading restrictions resulting from this notation. The Company will update the market upon any material changes with respect to or resulting from the application. The presentation of financial information using US GAAP is consistent with financial reporting in prior periods, and the Company does not believe the financial information presented under US GAAP is materially different than it would be as presented under IFRS.

About Frankly
Frankly Media provides a complete suite of digital solutions for media companies to create, manage, distribute and monetize their content on all platforms maximizing audience engagement and revenue potential. The company is headquartered in New York with offices in Atlanta , Toronto and Bangalore . For more information, visit www.franklymedia.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, 2019 and 2018, respectively. 



 Three Months Ended June 30, 


 Six Months Ended June 30, 



2019


2018


2019


2018










Net Income (Loss)


$     12,817,322


$  (1,459,521)


$  10,859,242


$  (5,269,014)

Interest expense, net


-


599,003


-


1,196,099

Income tax expense


-


-


-


-

Gain on extinguishment of debt


(14,651,644)


-


(14,651,644)


-

Depreciation and amortization


136,343


1,265,999


161,051


2,413,244

Loss on disposal of assets


-


12,823


-


12,823

Stock-based compensation


9,701


96,848


23,863


331,888

Transaction costs


147,455


54,019


147,455


78,692

Restructuring expense


-


81,250


-


542,210

Retention expense


-


-


205,632


588,099

Other expense


-


-


1,273


-

Adjusted EBITDA


$      (1,540,823)


$       650,421


$  (3,253,128)


$      (105,959)










Notice Regarding Forward-Looking Statements
This release includes forward-looking statements regarding Frankly and its respective businesses, including statements with respect to transitioning to presenting financial reporting using IFRS, the expected effects of being noted in default of disclosure obligations under Canadian securities laws and the Company's growth and profitability in the future. 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, historical financial performance, evaluation of market dynamics and opportunities, discussions with regulatory authorities and interpretation of securities regulatory instruments, and contractual obligations. 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.

Cision

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SOURCE Frankly Media


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