SOURCE: RMG Networks Holding Corporation

RMG Networks Holding Corporation

March 31, 2014 07:00 ET

RMG Networks Reports Fourth Quarter and Full Year 2013 Results

Q4 Pro Forma(1) Revenues Increase Sequentially 37% From Q3; Pro Forma Gross Margins Improve to 47%; Demonstrated Early Positive Results From Growth Investments; Foundation in Place to Achieve Expected Accelerated Revenue and Adjusted EBITDA Generation in 2014

DALLAS, TX--(Marketwired - Mar 31, 2014) - RMG Networks Holding Corporation (NASDAQ: RMGN)

Highlights

  • Fourth quarter revenue1 of $22.5 million; full year revenue1 of $72.9 million, in line with outlook
  • Early sales momentum in SE Asia and China markets, based on 2013 investments
  • Continued investment in sales generating resources with 16 additional new sales hires in Q4, totaling approximately 50 new sales hires in 2013
  • Launched additional solutions for digital internal communications and visual supply chain
  • Further reduced debt to $8 million at year end; amended credit facility for operational flexibility
  • Launched previously announced RMG Office Network and, subsequent to quarter end, announced two new advertising partnerships with Etihad Airways and OnAir, significantly increasing media inventory

RMG Networks Holding Corporation (NASDAQ: RMGN), or RMG Networks, today announced its financial results for the fourth quarter and year ended December 31, 2013.

RMG Networks helps brands and organizations communicate more effectively using location-based video networks. The company connects brands with target audiences using video advertising networks comprised of over 200,000 display screens, reaching over 100 million consumers each month. The company also builds enterprise video networks that empower organizations to visualize critical data to better run their business.

Garry McGuire, Chief Executive Officer, commented, "RMG's fourth quarter was a very strong finish to a complex year of formation, integration and investment. We achieved revenue and gross margin increases in part because of our growth initiatives, proving out our investment strategy for the business. During the second half of 2013, we acted to extend our market leadership through an aggressive approximately $8 to 9 million investment program which reduced near-term profitability but enabled us to construct a platform of personnel, products and systems on which to drive what we believe will be significant current and future year growth. We began to derive early tangible results from these revenue-generating investments in Q4 by earning our first revenues from the SE Asia and China regions while growing our customer base in existing markets. We also further validated our unique proposition offering comprehensive place-based video network solutions globally with the launch of our RMG Office Network and winning several sizable geographic cross-sell contracts from existing Enterprise customers. As a further example of our momentum, Q4 saw an almost seven times increase in the volume of large-sized contract wins versus Q4 2012."

"The positive momentum from these investments is progressing and we will continue to support them in 2014," Mr. McGuire continued. "This year, we have already expanded our market-leading airline media business into international markets and secured our first EMEA advertising partnerships, selling advertising for Etihad Airways, the national airline of the U.A.E, and OnAir, the global provider of in-flight connectivity. Our Enterprise business launched our comprehensive visual supply chain offering and will continue to launch innovative new products throughout 2014. We expect revenue growth and EBITDA generation to begin to accelerate at mid-year 2014 as our recently-expanded sales force begins to reach traditional productivity levels. We remain focused on executing on our mission to be the global leader in intelligent visual communications."

Fourth Quarter and 2013 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 not included in Predecessor Company financials, fourth quarter 2013 results as-reported are not comparable with the Predecessor Company's results for fourth quarter 2012. In addition, our "as-reported" results include certain one-time items and the effects of purchase accounting conventions, both of which we do not believe reflect the underlying performance of our business. Therefore, for ease of comparison, we provide, in the following results, pro forma combined adjusted results for the 2013 and 2012 fourth quarters as if the companies had existed as a combined entity for the relevant periods and adjusting for the items described above.

Pro Forma Combined Adjusted Results
Fourth Quarter Revenue. Total fourth quarter 2013 revenues were $22.5 million, an increase of 6% from $21.2 million of pro forma combined revenues in the fourth quarter of 2012.

  • Media revenue, comprised primarily of advertising revenue, of $6.4 million increased 6% from $6.0 million in fourth quarter 2012 primarily due to the sale of a greater volume of advertising inventory.
  • Enterprise revenue of $16.1 million increased 6% from $15.2 million in fourth quarter 2012 primarily due to an increase in professional services revenue.

On a sequential basis, fourth quarter revenues increased 37% from $16.4 million in the third quarter of 2013.

  • Media revenue, comprised primarily of advertising revenue, increased 48% to $6.4 million from $4.3 million in the third quarter due to improved sales force productivity and as a result of normal advertising expenditure seasonality, which resulted in sequential gross margin improvement to 36% from 22%.
  • Enterprise revenues increased 33% to $16.1 million from $12.1 million in the third quarter, due to additional sales resources and increased sales force productivity; gross margin was comparable in both periods.

Fourth Quarter Operating loss and Adjusted EBITDA. Pro forma operating loss was $3.9 million compared to pro forma operating income of $2.4 million in the fourth quarter of 2012. This increased loss is attributable to lower advertising gross margin as a percentage of sales in the current year period, higher operational expenses in the current year period as the company invests in new sales and marketing staff to support growth initiatives and due to approximately $2.6 million of additional depreciation, amortization and stock-based compensation expense.

Adjusted EBITDA loss was $0.5 million compared to profit of $3.4 million in the fourth quarter of 2012, decreasing for the reasons described above.

On a sequential basis, Adjusted EBITDA loss improved in the fourth quarter from a loss of $1.4 million in the third quarter primarily due to higher revenues and improved gross margins.

Full Year. Total 2013 pro forma revenues were $72.9 million, an increase of 5% from pro forma revenues of $69.3 million in 2012. Pro forma operating loss was $15.4 million compared to pro forma profit of $0.7 million in 2012. Pro forma adjusted EBITDA loss was $1.9 million compared to pro forma profit of $9.2 million in 2012.

Reported Results
Fourth Quarter. Total reported revenue for the quarter ended December 31, 2013 was $19.6 million; total revenue for the predecessor company for the quarter ended January 31, 2013 was $15.2 million.

Operating loss for the quarter ended December 31, 2013 was $6.7 million; operating income for the predecessor company for the quarter ended January 31, 2012 was $2.7 million.

Full Year. Total revenue for the successor company for the period from April 20, 2013 through December 31, 2013 was $50.3 million compared to revenue from the predecessor company for the year ended January 31, 2013 of $42.5 million.

Operating loss for the successor company for the period from April 20, 2013 through December 31, 2013 was $14.6 million compared to operating income from the predecessor company for the year ended January 31, 2013 of $5.4 million.

Conference Call

Management will host a conference call to discuss these results today, Monday, March 31, 2014 at 9:00 a.m. ET. To access the call, please dial 866-700-5192 (toll free) or 617-213-8833 and passcode # 99772963. 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's 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: 96018540) from 1:00 p.m. ET on March 31, 2014 until midnight ET on April 3, 2014.

About RMG Networks

RMG Networks (NASDAQ: RMGN) helps brands and organizations communicate more effectively using location-based video networks. The company connects brands with target audiences using video advertising networks comprised of over 200,000 display screens, reaching over 100 million consumers each month. The company also builds enterprise video networks that empower organizations to visualize critical data to better run their business. 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, China, India, Singapore, Brazil and the U.A.E. 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 EBITDA. In evaluating its business, RMG Networks considers and uses Adjusted EBITDA as a supplemental measure of its operating performance, and believes that many of the company's investors use this non-GAAP measure to monitor the company's performance. This measure 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 guidance relating to future financial performance, expected operating results, such as revenue growth, and efforts to grow our business.

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 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.

1 Pro forma or pro forma combined revenues

 
 
 
RMG Networks Holding Corporation
Consolidated Balance Sheets
December 31, 2013and January 31, 2013
 
    Successor
Company
December 31,
2013
    Predecessor
Company
January 31,
2013
 
Assets                
Current assets:                
  Cash and cash equivalents   $ 8,235,566     $ 10,203,169  
  Accounts receivable, net     22,731,678       9,061,229  
  Inventory, net     4,633,213       2,988,766  
  Deferred tax assets     63,617       372,618  
  Other current assets     2,224,547       686,099  
Total current assets     37,888,621       23,311,881  
Property and equipment, net     3,548,985       963,069  
Intangible assets, net     38,782,000       2,584,443  
Goodwill     28,673,156       10,972,547  
Loan origination fees     971,726       -  
Other assets     496,879       112,054  
Total assets   $ 110,361,367     $ 37,943,994  
Liabilities and Stockholders' equity                
Current liabilities:                
  Accounts payable   $ 8,009,380     $ 4,150,730  
  Revenue share liabilities     2,595,614       -  
  Accrued liabilities     4,423,896       1,925,901  
  Deferred revenue     10,074,420       10,438,487  
  Capital leases and other     117,710       -  
Total current liabilities     25,221,020       16,515,118  
Notes payable - non current     8,000,000       -  
Warrant liability     4,573,123       -  
Deferred revenue - non current     990,989       1,073,223  
Deferred tax liabilities     6,430,853       704,496  
Capital leases and other     392,558       -  
Total liabilities     45,608,543       18,292,837  
Commitment and Contingencies                
Stockholders' equity:                
  Common stock, $.0001 par value, (250,000,000 shares authorized;11,920,583 shares issued and outstanding at December 31, 2013)     1,192       -  
  Common stock - Class L, $0.01 par value, (1,000,000 shares authorized, issued and outstanding at January 31, 2013)     -       10,000  
  Common stock - Class A Non-voting, $0.01 par value, (200,000 shares authorized, 68,889 shares issued and outstanding at January 31, 2013)     -       689  
  Additional paid-in capital     77,452,317       10,149,643  
  Accumulated comprehensive income (loss)     299,618       (38,940 )
  Notes receivable - restricted stock     -       (207,025 )
  Retained earnings (accumulated deficit)     (13,000,303 )     9,736,790  
Total stockholders' equity     64,752,824       19,651,157  
Total liabilities and stockholders' equity   $ 110,361,367     $ 37,943,994  
 
 
 
RMG Networks Holding Corporation
Consolidated Statements of Comprehensive Income / (Loss) (Unaudited)
 
    Successor
Company
April 20, 2013
Through
December 31,
2013
    Predecessor
Company
February 1, 2013
Through
April 19,
2013
    Predecessor
Company
February 1, 2012
Through
January 31,
2013
 
Revenue:                        
    Advertising   $ 15,963,107     $ -     $ -  
    Products     18,488,304       2,239,236       19,185,359  
    Maintenance and content services     7,537,024       3,594,520       17,065,483  
    Professional services     8,289,212       1,323,559       6,277,549  
Total Revenue     50,277,647       7,157,315       42,528,391  
Cost of Revenue:                        
    Advertising     10,718,458       -       -  
    Products     11,974,491       1,498,135       11,581,070  
    Maintenance and content services     1,759,866       611,692       2,507,840  
    Professional services     5,232,781       861,640       4,352,611  
Total Cost of Revenue     29,685,596       2,971,467       18,441,521  
Gross Profit     20,592,051       4,185,848       24,086,870  
Operating expenses:                        
    Sales and marketing     12,681,559       1,729,871       7,760,739  
    General and administrative     12,871,283       1,739,348       7,313,398  
    Research and development     2,623,791       512,985       2,103,078  
    Acquisition expenses     2,095,250       3,143,251       380,000  
    Depreciation and amortization     4,956,622       140,293       1,111,948  
Total operating expenses     35,228,505       7,265,748       18,669,163  
Operating income (loss)     (14,636,454 )     (3,079,900 )     5,417,707  
Other Income (Expense):                        
  Warrant liability income charge     1,960,211       -       -  
  Interest expense and other - net     (3,327,148 )     (14,553 )     (66,467 )
Income (loss) before income taxes     (16,003,391 )     (3,094,453 )     5,351,240  
Income tax expense (benefit)     (3,003,088 )     (540,897 )     1,860,190  
Net income (loss)     (13,000,303 )     (2,553,556 )     3,491,050  
Other comprehensive income -                        
    Foreign currency translation adjustments     299,618       (121,144 )     2,187  
Total comprehensive income (loss)   $ (12,700,685 )   $ (2,674,700 )   $ 3,493,237  
  Net income (loss) per share:                        
Basic and diluted net income (loss) per share of Common Stock   $ (1.40 )     -       -  
Basic and diluted net income (loss) per share of Class L Common Stock           $ (2.55 )   $ 3.49  
    Weighted average shares used in computing basic and diluted net income (loss) per share of Common Stock     9,270,466       -       -  
    Weighted average shares used in computing basic and diluted net income (loss) per share of Class LCommon Stock     -       1,000,000       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       82,778  
 
 
 
RMG Networks Holding Corporation
Pro-Forma Consolidated Statements of Operations
                     
                     
    Fourth Quarter   Full Year
    2013     2012   2013     2012
                     
Revenues -                    
Advertising   6,397,833     6,010,244   23,217,226     21,635,113
Product sales   7,958,396     8,219,234   22,128,850     19,543,881
Maintenance and contect services   4,293,732     4,451,155   16,603,342     17,305,628
Professional services   3,856,565     2,565,932   10,923,217     10,832,302
              Total   22,506,526     21,246,565   72,872,635     69,316,924
                     
Cost of Revenues   11,999,003     10,887,128   38,667,085     33,173,716
                     
Gros Profit   10,507,523     10,359,437   34,205,550     36,143,208
                     
Operating Expenses   14,370,807     7,952,316   49,591,485     35,408,916
                     
Operating Income (Loss)   (3,863,284 )   2,407,121   (15,385,935 )   734,292
 
 
 
RMG Networks Holding Corporation
Consolidated Statements of Cash Flows
For The Year Ended December 31, 2013 and January 31, 2013 (Unaudited)
 
    Successor
Company
April 20, 2013
Through
December 31,
2013
    Predecessor
Company
February 1, 2013
Through
April 19,
2013
    Predecessor
Company
February 1, 2012
Through
January 31,
2013
 
                   
                         
Cash flows from operating activities                        
  Net income (loss)   $ (13,000,303 )   $ (2,553,556 )   $ 3,491,050  
Adjustments to reconcile net income (loss) to net cash provided by (used in)operating activities:                        
Change in warrant liability     (1,960,211 )     -       -  
Stock-based compensation     1,876,122       -       -  
Loan origination fees     829,324       -       -  
Non-cash consulting expense     175,250       -       -  
Non-cash interest expense     135,000       -       -  
Depreciation and amortization     4,956,622       140,293       1,111,948  
Deferred tax (benefit)     (3,059,732 )     (12,294 )     64,908  
Changes in operating assets and liabilities:                        
    Accounts receivable     (11,226,354 )     2,846,332       (442,329 )
    Inventory     (1,155,725 )     (488,722 )     607,540  
    Other current assets     (650,241 )     (154,529 )     109,977  
    Other assets, net     94,802       12,572       96,444  
    Accounts payable     4,618,337       (2,978,808 )     1,684,425  
    Accrued liabilities     184,623       (767,991 )     (447,933 )
    Deferred revenue     5,165,359       (372,579 )     686,801  
Net cash provided by (used in) operating activities     (13,017,127 )     (4,329,282 )     6,962,831  
Cash flows from investing activities                        
Acquisition of Symon Holdings Corporation     (209,079 )     -       -  
Purchases of property and equipment     (2,643,574 )     (86,470 )     (575,106 )
Net cash provided by (used in) investing activities     (2,852,653 )     (86,470 )     (575,106 )
Cash flows from financing activities                        
Proceeds from debt     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     12,980,785       -       -  
Effect of exchange rate changes on cash     299,618       (121,144 )     (21,247 )
Net increase (decrease) in cash and cash equivalents     (2,589,377 )     (4,536,896 )     6,366,478  
Cash and cash equivalents, beginning of period     10,824,943       10,203,169       3,836,691  
Cash and cash equivalents, end of period   $ 8,235,566     $ 5,666,273     $ 10,203,169  
Supplemental disclosures of cash flow information:                        
    Cash paid during the period for interest     2,081,529     $ 2,053     $ 19,791  
    Cash paid during the period for income taxes   $ -     $ 150,000     $ 2,061,735  
 
 
 
RMG Networks Holding Corporation
Non-GAAP Reconciliations
 
                     
                     
Reconciliation of Operating Income (Loss) to Adjusted EBITDA -    
    Fourth Quarter   Full Year
    2013     2012   2013     2012
                     
Operating Income (Loss)   (6,725,013 )   2,407,121   (19,785,414 )   734,292
Add:                    
Depreciation and amortization   1,985,002     612,677   5,822,067     4,446,041
Acquisition expenses   100,000     308,017   5,807,518     660,000
Stock-based compensation   1,318,481     100,065   1,876,122     402,565
Impairment of goodwill and intangibles   0     0   0     2,915,420
Revenues that would have been recognized in the period had the balance in deferred revenue at the acquisition date notbeen required to be adjusted to market value at the acquisition date in accordance with GAAP purchase accounting guidelines  


2,861,729
   


0
 


4,399,479
   


0
                     
              Adjusted EBITDA   (459,801 )   3,427,880   (1,880,228 )   9,158,318
                                   
                                   
                                   

Contact Information

  • Contact:
    For RMG Networks Holding Corporation
    Investor
    Carolyn M. Capaccio
    212-838-3777
    Email Contact

    or

    Media
    TallGrass Public Relations
    Nicole Plesec
    605-275-4075
    Email Contact