Chicken Soup for the Soul Entertainment Reports Q4 and Full Year 2019 Results

Nachrichtenquelle: globenewswire
30.03.2020, 22:05  |  125   |   |   

Record net revenue driven by outperformance from Crackle Plus networks and strong results from new distribution and production business model

COS COB, Conn., March 30, 2020 (GLOBE NEWSWIRE) -- Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE), one of the largest operators of streaming advertising-supported video-on-demand (AVOD) networks, today announced its financial results for the fourth quarter and full year ended December 31, 2019.

Fourth Quarter 2019 Financial Highlights

  • Record net revenue of $24.4 million, compared to $11.6 million in the year-ago period
  • Net loss of $12.4 million compared to net income of $0.8 million in the year-ago period; $11.4 million net loss before preferred dividends, compared to $1.5 million in net income before preferred dividends in the year-ago period
  • Adjusted EBITDA was $5.8 million, compared to $5.2 million in the year-ago period
  • Online networks, which include Crackle, Popcornflix and Pivotshare generated $14.9 million in revenue compared to $1.1 million in the year-ago period

Full Year 2019 Financial Highlights

  • Record net revenue of $55.4 million, compared to $26.9 million in the year-ago period
  • Net loss of $35.0 million compared to $2.0 million in the year-ago period; $31.7 million net loss before preferred dividends, compared to $0.8 million net loss before preferred dividends in the year-ago period
  • Adjusted EBITDA was $6.0 million, compared to $10.0 million in the year-ago period
  • Online networks generated $40.0 million in revenue compared to $4.4 million in the year-ago period

“We delivered results well ahead of expectations, including record fourth quarter and full year 2019 revenue and improved fourth quarter Adjusted EBITDA, as compared to fourth quarter 2018, in what was a transformative year for the company,” said William J. Rouhana Jr., chairman and chief executive officer of Chicken Soup for the Soul Entertainment. “Our growth was driven by continued outperformance from our Crackle Plus networks, including contributions from our original content library, as well as strong early results from our new Distribution and Production business model. While the near-term environment is uncertain amid the global pandemic, we’ve seen continued momentum in the business to date and we are supported by a solid and flexible balance sheet.”

2019 Business Highlights

  • Completed the Sony/Crackle transaction, and put Crackle Plus on track for sustained profitable growth while growing viewers over 55% from May to December;
  • Launched Landmark Studio Group with industry veteran David Ozer, an example of the new distribution and production model;
  • Continued to build the valuable Screen Media library with the acquisition of the Foresight Media film library and a new international partnership with Mark Damon;
  • Produced and distributed the most successful piece of original content in the company’s history with Going From Broke; and
  • Signed new ad sales partnerships in Q4 with Crunchyroll, Xumo, and Jukin Media.

Total net revenue for the 12 months ended December 31, 2019 was $55.4 million compared to $26.9 million in the year-ago period. The increase was primarily driven by the results in our Online Networks operations area. Revenue in 2019 was generated as follows:

  • Online networks (Crackle Plus) generated $40.0 million in revenue compared to $4.4 million in the year-ago period
  • Television and film distribution generated $16.0 million, compared to $13.2 million in the year-ago period
  • Television and short-form video production generated $0.6 million, compared to $10.2 million in the year-ago period, reflecting the short-term impact of the transition to the company’s new distribution and production business model

Gross profit for the 12 months ended December 31, 2019 was $14.9 million, or 27% of net revenue, compared to $14.5 million, or 54% of net revenue for the year-ago period. The change in the percentage of gross profit resulted in part from $10.2 million of non-cash amortization of the film library in the company’s traditional distribution business, which is required by GAAP to be included in cost of revenue. Without this non-cash film library amortization expense, the gross profit would have been $25.1 million or 45% of total net revenue, which is well in excess of last year.

Operating loss for the 12 months ended December 31, 2019 was $26.1 million compared to an operating income of $0.8 million for the year-ago period. Without this film library amortization expense, the operating loss would have been $15.4 million.

Adjusted EBITDA for the 12 months ended December 31, 2019 was $6.0 million compared to $10.0 million in 2018.

As of December 31, 2019, the company had $6.4 million of cash and cash equivalents, compared to $6.2 million as of September 30, 2019, and $7.2 million as of December 31, 2018. Outstanding debt was $20.0 million as of December 31, 2019 compared to $7.6 million outstanding as of December 31, 2018.

The company will file an annual report on Form 10-K with the SEC with respect to its annual financial results.

For a discussion of the financial measures presented herein which are not calculated or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), see “Note Regarding Use of Non-GAAP Financial Measures” below and the schedules to this press release for additional information and reconciliations of non-GAAP financial measures.

The company presents non-GAAP measures such as Adjusted EBITDA and Pro Forma Adjusted EBITDA to assist in an analysis of its business. These non-GAAP measures should not be considered an alternative to GAAP measures as an indicator of the Company's operating performance.

Conference Call Information

  • Date, Time: Monday, March 30, 2020, 4:30 p.m. E.T.
  • Toll-free: (833) 832-5128
  • International: (484) 747-6583
  • Conference ID: 9597934
  • A live webcast and replay will be available at http://ir.cssentertainment.com/ under the “News & Events” tab

Conference Call Replay Information

  • Toll-free: (855) 859-2056
  • International: (404) 537-3406
  • Reference ID: 9597934

ABOUT CHICKEN SOUP FOR THE SOUL ENTERTAINMENT

Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE) operates streaming video-on-demand networks (VOD). The company owns a majority stake in Crackle Plus, a company formed with Sony Pictures Television, which owns and operates a variety of ad-supported and subscription-based VOD networks including Crackle, Popcornflix, Popcornflix Kids, Truli, Pivotshare, Españolflix and FrightPix. The company also acquires and distributes video content through its Screen Media subsidiary and produces original long and short-form content through Landmark Studio Group, its Chicken Soup for the Soul Originals division and APlus.com. Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul, LLC, which publishes the famous book series and produces super-premium pet food under the Chicken Soup for the Soul brand name.

Note Regarding Use of Non-GAAP Financial Measures

The company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). It uses a non-GAAP financial measure to evaluate its results of operations and as a supplemental indicator of operating performance. The non-GAAP financial measure that is used is Adjusted EBITDA. Adjusted EBITDA (as defined below) is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Management believes this non-GAAP financial measure enhances the understanding of the company’s historical and current financial results and enables the board of directors and management to analyze and evaluate financial and strategic planning decisions that will directly affect operating decisions and investments. The presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or non-recurring items or by non-cash items. This non-GAAP financial measure should be considered in addition to, rather than as a substitute for, the company’s actual operating results included in its condensed consolidated financial statements.

“Adjusted EBITDA” means earnings before interest, taxes, depreciation, amortization and non-cash share-based compensation expense, and also includes the gain on bargain purchase of subsidiary and adjustments for other identified charges such as costs incurred to form the company and to prepare for the offering of its Class A common stock to the public, prior to its IPO. Identified charges also include the cost of maintaining a board of directors prior to being a publicly traded company. As the IPO has been completed, director fees will be deducted from Adjusted EBITDA going forward. Adjusted EBITDA is not an earnings measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP; accordingly, Adjusted EBITDA may not be comparable to similar measures presented by other companies. Management believes Adjusted EBITDA to be a meaningful indicator of the company’s performance that provides useful information to investors regarding its financial condition and results of operations. The most comparable GAAP measure is operating income.

A reconciliation of net loss to Adjusted EBITDA is provided in the company’s Annual Report on Form 10-K for the year ended December 31, 2019 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Reconciliation of Unaudited Historical Results to Adjusted EBITDA.

FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are subject to risks (including those set forth in the Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 30, 2020) and uncertainties which could cause actual results to differ from the forward-looking statements. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. Investors should realize that if our underlying assumptions for the projections contained herein prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections.

INVESTOR RELATIONS
Taylor Krafchik
Ellipsis
CSSE@ellipsisir.com
646-776-0886

MEDIA CONTACT
Kate Barrette
RooneyPartners LLC
kbarrette@rooneyco.com
(212) 223-0561

Tables Follow

Chicken Soup for the Soul Entertainment, Inc.  
Consolidated Balance Sheets  
    December 31,    December 31,   
    2019    2018   
ASSETS              
Cash and cash equivalents   $ 6,447,402     $ 6,451,758    
Restricted cash           750,000    
Accounts receivable, net     34,661,119       12,841,099    
Prepaid expenses     861,190       218,736    
Inventory, net     312,033       262,068    
Goodwill     21,448,106       2,537,079    
Indefinite lived intangible assets     12,163,943       12,163,943    
Intangible assets, net     35,451,951       2,971,637    
Film library, net     33,250,149       25,338,502    
Due from affiliated companies     7,642,432       1,213,436    
Programming costs, net     14,459,271       12,790,489    
Program rights, net     654,303          
Deferred tax asset, net           452,000    
Other assets, net     313,585       356,221    
Total assets   $ 167,665,484     $ 78,346,968    
               
LIABILITIES AND EQUITY              
Current maturities of commercial loan   $ 3,200,000     $ 1,000,000    
Commercial loan and revolving line of credit, net of unamortized deferred finance cost of $189,525 and $334,554, respectively     11,810,475       6,582,113    
Notes payable under revolving credit facility     5,000,000          
Accounts payable and accrued expenses     26,646,390       5,078,805    
Ad representation fees payable     12,429,838          
Film library acquisition obligations     5,020,600       2,715,600    
Programming obligations     7,300,861          
Accrued participation costs     5,066,512       1,539,139    
Other liabilities     170,106       414,506    
Deferred revenue           6,469    
Total liabilities     76,644,782       17,336,632    
               
               
Equity              
Stockholders' Equity:              
Series A cumulative redeemable perpetual preferred stock, $.0001 par value, liquidation preference of $25.00 per share, 10,000,000 shares authorized; 1,599,002 and 918,497 shares issued and outstanding, respectively, redemption value of $39,975,050 and $22,962,425, respectively     160       92    
Class A common stock, $.0001 par value, 70,000,000 shares authorized; 4,259,920 and 4,227,740 shares issued, 4,185,685 and 4,153,505 shares outstanding, respectively     425       421    
Class B common stock, $.0001 par value, 20,000,000 shares authorized; 7,813,938 and 7,817,238 shares issued and outstanding, respectively     782       782    
Additional paid-in capital     87,610,030       59,360,583    
Retained (deficit) earnings     (32,695,629 )     2,281,187    
Class A common stock held in treasury, at cost (74,235 shares)     (632,729 )     (632,729 )  
Total stockholders’ equity     54,283,039       61,010,336    
Subsidiary convertible preferred stock     36,350,000          
Noncontrolling interests     387,663          
Total Equity     91,020,702       61,010,336    
Total liabilities and equity   $ 167,665,484     $ 78,346,968    
               


Chicken Soup for the Soul Entertianment, Inc.
Consolidated Statements of Operations
 
                         
    Three Months Ended December 31,    Year Ended December 31,
    2019
  2018
  2019    2018 
Revenue:                        
Online networks   $ 14,899,288     $ 1,071,526     $ 40,027,289     $ 4,411,427  
Television and film distribution     9,908,645       5,403,133       15,967,507       13,188,560  
Television and short-form video production     14,104       5,431,926       610,356       10,152,020  
Total revenue     24,822,037       11,906,585       56,605,152       27,752,007  
Less: Television & film distribution returns and allowances     (412,461 )     (339,194 )     (1,241,246 )     (892,488 )
Net revenue     24,409,576       11,567,391       55,363,906       26,859,519  
Cost of revenue     16,854,807       4,947,483       40,423,550       12,345,590  
Gross profit     7,554,769       6,619,908       14,940,356       14,513,929  
Operating expenses:                        
Selling, general and administrative     8,347,681       3,277,581       22,242,032       10,745,235  
Amortization     7,662,143       129,237       13,293,279       326,988  
Management and license fees     2,445,297       1,154,220       5,536,390       2,666,907  
Total operating expenses     18,455,121       4,561,038       41,071,701       13,739,130  
Operating (loss) income     (10,900,352 )     2,058,870       (26,131,345 )     774,799  
Interest income     (5,645 )     (18,528 )     (40,191 )     (39,058 )
Interest expense     327,654       136,097       811,017       388,036  
Loss on extinguishment of debt                 350,691        
Acquisition-related costs     232,916       168,661       3,968,289       396,793  
(Loss) income before income taxes and preferred dividends     (11,455,277 )     1,772,640       (31,221,151 )     29,028  
Provision for income taxes     28,000       295,000       585,000       874,000  
Net (loss) income before noncontrolling interests and preferred dividends     (11,483,277 )     1,477,640       (31,806,151 )     (844,972 )
Net (loss) attributable to noncontrolling interests     (97,322 )           (134,282 )      
Net (loss) income attributable to Chicken Soup for the Soul Entertainment, Inc.     (11,385,955 )     1,477,640       (31,671,869 )     (844,972 )
Less: Preferred dividends     974,272       690,131       3,304,947       1,112,910  
Net (loss) available to common stockholders   $ (12,360,227 )   $ 787,509     $ (34,976,816 )   $ (1,957,882 )
Net (loss) per common share:                        
Basic and diluted   $ (1.03 )   $ 0.07     $ (2.92 )   $ (0.16 )
                         


Chicken Soup for the Soul Entertainment, Inc.
Adjusted EBITDA
             
    Three Months Ended December 31,
    2019
  2018 
Net loss available to common stockholders, as reported   $ (12,360,227 )   $ 787,509  
Preferred dividends     974,272       690,131  
Provision for income taxes     28,000       295,000  
Other Taxes     73,940        
Interest expense, net of interest income     322,009       117,569  
Film library and program rights amortization, included in cost of revenue     6,878,959       2,802,916  
Share-based compensation expense     267,777       216,896  
Acquisition-related costs and other one-time consulting fees     232,916       (31,339 )
Reserve for bad debt & video returns     1,394,640       (68,217 )
Amortization     7,662,143        
Loss on extinguishment on debt           129,237  
Transitional Expenses     629,731        
All other nonrecurring costs     (287,839 )     293,428  
Adjusted EBITDA   $ 5,816,321     $ 5,233,130  
             
             
    Year Ended December 31,
    2019    2018 
             
Net loss available to common stockholders, as reported   $ (34,976,816 )   $ (1,957,882 )
Preferred dividends     3,304,947       1,112,910  
Provision for income taxes     585,000       874,000  
Other Taxes     460,205        
Interest expense, net of interest income     770,826       348,978  
Film library amortization, included in cost of revenue     10,683,227       6,459,431  
Share-based compensation expense     1,061,926       953,688  
Acquisition-related costs and other one-time consulting fees     3,968,289       666,793  
Reserve for bad debt and video returns     2,669,699       646,289  
Amortization     13,293,279       326,988  
Loss on extinguishment on debt     350,691        
Transitional Expenses     3,505,855        
All other nonrecurring costs     276,400       589,679  
 Adjusted EBITDA   $ 5,953,528     $ 10,020,874  
             
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