RMG Networks Reports Fourth Quarter and Year End 2015 Results
Reports First Positive Quarterly EBITDA in Over Two Years
/EINPresswire.com/ -- DALLAS, TX -- (Marketwired) -- 03/10/16 -- RMG Networks Holding Corporation (NASDAQ: RMGN)
Fourth Quarter Highlights
- EBITDA(1) of $0.5M, first positive quarterly EBITDA since 2013
- Total revenues of $11.8 million increased 15% sequentially
- Product revenues increased 42% sequentially
- Operating expenses(2) decreased 17% sequentially
- Awarded Top 20 Promising Supply Chain Solution Provider by CIOReview
- Awarded second phase of new in-store digital signage deployment for one of RMG Networks' largest retail development projects
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, 2015.
"During the fourth quarter, we reached a significant milestone for the company, delivering positive EBITDA for the first quarter since 2013," commented Robert Michelson, Chief Executive Officer. "This positive achievement provides the strongest evidence yet that our strategic plan is working. 2015 was a very productive year, we enhanced our leadership team, strengthened our balance sheet, innovated our product portfolio, refined our solution area focus, divested our Media business and improved effectiveness and productivity throughout the organization. In parallel, we substantially reduced our operating expenses, resulting in a cost structure that we believe can support profitable growth in the future."
"As a result of solid execution against the first full year of our strategic plan, we enter 2016 with a more sustainable model and well-positioned for growth and profitability," Mr. Michelson continued. "We are encouraged by our strong sales pipeline, as a result of a broader suite of innovative solutions and an increasingly efficient/effective sales organization. We look forward to leveraging the operational and strategic progress we made in 2015, as we continue to progress toward delivering long-term growth and sustainable profitability."
Fourth Quarter Financial Review
Financial results from RMG Networks' Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss, due to the completion of the sale of this business on July 1, 2015. Prior year results have also been adjusted to report this business as discontinued operations. As a result, the financial results below reflect the Enterprise business at RMG Networks, reported as continuing operations.
Sequential Trends
- Total revenues in the fourth quarter of 2015 were $11.8 million, up 15.3% from the third quarter of 2015.
- Product sales revenue of $6.3 million increased 41.7% from $4.4 million in the third quarter of 2015, driven by improved sales execution during the quarter.
- Maintenance & content services revenue of $3.6 million decreased slightly from $3.7 million in the third quarter of 2015.
- Professional services revenue of $1.9 million decreased 9.8% from $2.1 million in the third quarter of 2015, resulting from lower realization in the professional services organization.
- Gross margin was 51.8% in the fourth quarter of 2015, compared to 53.3% in the third quarter of 2015, resulting primarily from a shift in sales mix, consistent with historical seasonal trends.
- Operating expenses, excluding depreciation, amortization and stock-based compensation expenses, declined to $5.6 million in the fourth quarter of 2015 from $6.8 million in the third quarter of 2015, resulting from continued efforts to reduce the company's overall cost structure.
- EBITDA(3) was $0.5 million, improving from an EBITDA loss of $1.3 million in the third quarter of 2015, resulting from the increase in revenue and reduction in operating expenses described above.
Year-over-Year Trends(4,5)
- Total revenues of $11.8 million represented a decrease of 9.5% from $13.0 million of adjusted revenues in the fourth quarter of 2014, resulting primarily from a large sale that occurred in the fourth quarter of 2014. Maintenance revenue was also lower, resulting from the decision in 2014 to proactively "end-of-life" maintenance services on certain products, consistent with discussion in previous quarters.
- Gross margin of 51.8% was up from an adjusted gross margin of 45.3% in the fourth quarter of 2014, due primarily to a $1.0 million write-off of obsolete inventory in the fourth quarter of 2014.
- Operating expenses, excluding depreciation, amortization and stock-based compensation expenses, declined to $5.6 million in the fourth quarter of 2015 from adjusted operating expenses(6) of $7.7 million in the fourth quarter of 2014, resulting from continued efforts to reduce the company's overall cost structure.
- EBITDA(3) of $0.5 million improved from an adjusted EBITDA loss(4) of $1.8 million in the fourth quarter of 2014.
Reported Results
Fourth Quarter. Total reported revenue for the quarter ended December 31, 2015 was $11.8 million compared to total reported revenue of $12.8 million for the same quarter last year.
Operating loss for the quarter ended December 31, 2015 was $0.8 million compared to $32.0 million for the same quarter last year.
Full Year. Total reported revenue for the year ended December 31, 2015 was $40.6 million compared to total reported revenue of $40.0 million for the prior year.
Operating loss for the year ended December 31, 2015 was $9.8 million compared to $48.1 million for the prior year.
Amendment to Revolving Credit Facility
RMG Networks also announced today that it has entered into an amendment of its revolving credit facility, resetting the monthly consolidated EBITDA covenant levels under the facility for the remainder of 2016.
"We are pleased to have reached an agreement with our lender resetting the monthly EBITDA covenants under our revolving credit facility," commented Mr. Michelson. "This amendment provides us with additional financial flexibility as we continue executing our long-term strategic plan."
Business Outlook
"While the financial results for the fourth quarter demonstrate significant progress toward reaching our long-term goals, our business will continue to be impacted by typical seasonal patterns, which traditionally results in lower revenue levels during the first quarter of the year," noted Mr. Michelson. "We expect to continue demonstrating operational and financial progress in 2016 and with a focused sales strategy, productive sales organization, innovative new solutions and aligned cost structure, we believe we are on-track to delivering long-term revenue growth and sustainable positive EBITDA."
Conference Call
Management will host a conference call to discuss these results on Thursday, March 10, 2016 at 9 a.m. ET. To access the call, please dial 1-866-428-4719 (toll free) or 1-704-908-0405 and reference conference 54235919. 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 at least 90 days.
A telephonic replay of this conference call will also be available by dialing 1-855-859-2056 (toll free) or 1-800-585-8367 and entering passcode: 54235919 from 12 p.m. ET on March 10, 2016 until 11:59 p.m. ET on March 17, 2016.
© 2016 RMG Networks Holding Corporation. RMG Networks and its logo are trademarks and/or service marks of RMG Networks Holding Corporation.
About RMG Networks
RMG NETWORKS (NASDAQ: RMGN) is a worldwide leader in intelligent visual communications that help businesses increase productivity, efficiency and engagement through digital messaging. By combining best-in-class software, hardware, business applications and services, RMG Networks offers a single point of accountability for integrated data visualization and real-time performance management. The company, who values 70% of the Fortune 100 as clients, is headquartered in Dallas, Texas, with additional offices in the United States, United Kingdom and the United Arab Emirates. For more information, visit 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, Adjusted Operating Expenses, EBITDA and Adjusted EBITDA. In evaluating its business, RMG Networks considers and uses Adjusted Revenue, Adjusted Gross Margin, Adjusted Operating Expenses, EBITDA 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, compensation and other benefits derived from the sale of the Airline Media Networks 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; the ability of the company to maintain its Nasdaq listing; the competitive environment in the markets in which the company operates; the risk that the anticipated benefits of 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) We define EBITDA as operating income (loss) plus depreciation and amortization expenses and stock-based compensation expense. GAAP operating loss was $0.8 million for Q4 2015. See "About Non-GAAP Financial Measures" below and the reconciliation tables at the end of this release for more information regarding non-GAAP financial measures used in this release.
(2) Represents total operating expenses from continuing operations, excluding depreciation, amortization and stock-based compensation expenses.
(3) GAAP operating loss was $0.8 million, $2.6 million and $32.0 million for Q4 2015, Q3 2015 and Q4 2014, respectively.
(4) Financial results for Q4 2014 are "adjusted" to exclude the effects of purchase accounting, the impact of the impairment of a large non-recurring contract, impairment charges associated with goodwill and intangible assets, acquisition expenses and certain other items that management does not believe reflect the underlying performance of its business. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.
(5) GAAP revenue, gross margin, operating expenses and operating loss was $12.8 million, 33.8%, $36.3 and $32.0 million, respectively, for Q4 2014.
(6) Excludes non-cash goodwill and intangible asset impairment charges of $26.7 million in Q4 2014.
RMG Networks Holding Corporation
Consolidated Balance Sheets
December 31, 2015 and 2014
(in thousands, except share and per share information)
December 31, December 31,
2015 2014
-------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 3,206 $ 3,077
Accounts receivable, net of allowance for
doubtful accounts of $676 and $234,
respectively 10,626 13,061
Inventory, net 1,055 1,461
Deferred tax assets - 7
Prepaid assets 1,154 1,175
Current assets of discontinued operations - 2,811
-------------- --------------
Total current assets 16,041 21,592
Property and equipment, net 4,340 5,230
Property and equipment of discontinued
operations, net - 456
Intangible assets, net 8,988 11,519
Loan origination fees 123 743
Other assets 226 228
Other assets of discontinued operations - 22
-------------- --------------
Total assets $ 29,718 $ 39,790
============== ==============
Liabilities and Stockholders' equity
(deficit)
Current liabilities:
Accounts payable $ 3,080 $ 4,350
Accrued liabilities 4,236 3,924
Secured line of credit 400 -
Loss on long-term contract 616 2,649
Deferred revenue 7,507 7,492
Liabilities of discontinued operations - 4,677
-------------- --------------
Total current liabilities 15,839 23,092
Notes payable - non-current - 14,000
Warrant liability 96 1,447
Deferred revenue - non-current 1,519 1,478
Deferred tax liabilities 18 -
Loss on long-term contract - non-current - 1,036
Deferred rent and other 1,917 2,625
-------------- --------------
Total liabilities 19,389 43,678
-------------- --------------
Stockholders' equity (deficit):
Common stock, $.0001 par value, (250,000,000
shares authorized; 37,182,041 and
12,467,756 shares issued; 36,882,041 and
12,167,756 shares outstanding, at December
31, 2015 and December 31, 2014,
respectively.) 4 1
Additional paid-in capital 108,237 82,090
Accumulated other comprehensive income
(loss) (196) 6
Retained earnings (accumulated deficit) (97,236) (85,505)
Treasury Stock, at cost (300,000 shares) (480) (480)
-------------- --------------
Total stockholders' equity (deficit) 10,329 (3,888)
-------------- --------------
Total liabilities and stockholders' equity
(deficit) $ 29,718 $ 39,790
============== ==============
RMG Networks Holding Corporation
Consolidated Statements of Comprehensive Loss
Years Ended December 31, 2015 and 2014
(in thousands, except share and per share information)
Years Ended December 31,
2015 2014
-------------- --------------
Revenue:
Products $ 17,874 $ 16,061
Maintenance and content services 14,618 16,096
Professional services 8,110 7,793
-------------- --------------
Total Revenue 40,602 39,950
Cost of Revenue:
Products 10,771 12,074
Maintenance and content services 2,293 2,892
Professional services 5,440 5,897
Loss (Gain) on long-term contract (444) 2,732
-------------- --------------
Total Cost of Revenue 18,060 23,595
-------------- --------------
Gross Profit 22,542 16,355
-------------- --------------
Operating expenses:
Sales and marketing 9,106 12,697
General and administrative 16,084 16,925
Research and development 3,346 2,945
Acquisition expenses - 378
Depreciation and amortization 3,756 4,830
Impairment of goodwill and intangible assets - 26,687
-------------- --------------
Total operating expenses 32,292 64,462
-------------- --------------
Operating loss (9,750) (48,107)
Other Income (Expense):
Gain on change in warrant liability 1,351 665
Interest (expense) and other income - net (1,556) (1,619)
-------------- --------------
Loss before income taxes and discontinued
operations (9,955) (49,061)
Income tax expense (benefit) 122 (7,716)
-------------- --------------
Total loss from continuing operations (10,077) (41,345)
Loss from discontinued operations, net of
taxes (3,994) (31,160)
Gain on sale of discontinued operations, net
of taxes 2,340 -
-------------- --------------
Net loss (11,731) (72,505)
Other comprehensive loss -
Foreign currency translation adjustments (202) (293)
-------------- --------------
Total comprehensive loss $ (11,933) $ (72,798)
============== ==============
Net loss per share of Common Stock (basic
and diluted):
Continuing operations $ (0.36) $ (3.40)
Discontinued operations (0.06) (2.56)
-------------- --------------
Net loss per share of Common Stock (basic
and diluted) $ (0.42) $ (5.96)
Weighted average shares used in computing
basic and diluted net loss per share of
Common Stock 27,944,272 12,155,694
============== ==============
RMG Networks Holding Corporation
Consolidated Statements of Cash Flows
Years Ended December 31, 2015 and 2014
(Inclusive of Discontinued Operations)
(in thousands)
Years Ended December 31,
2015 2014
-------------- --------------
Cash flows from operating activities
Net loss $ (11,731) $ (72,505)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 3,897 6,805
Gain on sale of discontinued operations (2,340) -
Gain on change in warrant liability (1,351) (665)
Impairment of intangible assets and goodwill - 51,109
Impairment of long-lived assets 209 -
Stock-based compensation 1,563 2,060
Non-cash treasury stock - (480)
Non-cash loan origination fees 756 228
Non-cash consulting expense 320 505
Non-cash directors' fees 31 116
Allowance for doubtful accounts 408 -
Deferred tax (benefit) 25 (6,991)
Changes in operating assets and liabilities:
Accounts receivable 2,281 7,650
Inventory 392 3,172
Other current assets 129 1,070
Other assets, net (294) (258)
Accounts payable (1,280) (1,863)
Accrued liabilities (823) (282)
Deferred revenue 141 (950)
(Gain) loss on long-term contract (3,068) 3,348
Deferred rent and other liabilities (708) (800)
-------------- --------------
Net cash used in operating activities (11,443) (8,731)
-------------- --------------
Cash flows from investing activities
Proceeds from sale of discontinued
operations 1,190 -
Purchases of property and equipment (381) (2,293)
-------------- --------------
Net cash provided by (used in) investing
activities 809 (2,293)
-------------- --------------
Cash flows from financing activities
Borrowings on line of credit, net 400 -
Proceeds from long-term debt 1,000 6,000
Debt issuance costs (137) -
Conversion of preferred stock to common
stock (41) -
Issuance of preferred stock, net of issuance
costs 9,627 -
-------------- --------------
Net cash provided by financing activities 10,849 6,000
-------------- --------------
Effect of exchange rate changes on cash (86) (135)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents 129 (5,159)
Cash and cash equivalents, beginning of year 3,077 8,236
-------------- --------------
Cash and cash equivalents, end of year $ 3,206 $ 3,077
============== ==============
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest $ 689 $ 1,579
Cash paid during the period for income
taxes $ 275 $ 187
Non-cash Supplemental information:
Leasehold improvements acquired through
landlord allowance $ - $ 1,250
Issuance of common stock for warrants $ - $ 2,460
RMG Networks Holding Corporation
Reconciliation of Gross Profit
Three Months Ended December 31, 2015 and 2014
(in thousands)
Three
Months
Ended Purchase
December Price Loss on
31, 2015 Accounting Long-Term Adjusted
(GAAP) Adjustment Contract (Non-GAAP)
----------- ----------- ----------- -----------
(Unaudited)
Revenue:
Products $ 6,296 $ - $ - $ 6,296
Maintenance and content
services 3,570 - - 3,570
Professional services 1,893 - - 1,893
----------- ----------- ----------- -----------
Total Revenue 11,759 - - 11,759
----------- ----------- ----------- -----------
Cost of Revenue 5,669 - - 5,669
----------- ----------- ----------- -----------
Gross Profit $ 6,090 $ - $ - $ 6,090
=========== =========== =========== ===========
Three
Months
Ended Purchase
December Price Loss on
31, 2014 Accounting Long-Term Adjusted
(GAAP) Adjustment Contract (Non-GAAP)
----------- ----------- ----------- -----------
(Unaudited)
Revenue:
Products $ 6,587 $ - $ - $ 6,587
Maintenance and content
services 4,051 210 - 4,261
Professional services 2,145 - - 2,145
----------- ----------- ----------- -----------
Total Revenue 12,783 210 - 12,993
----------- ----------- ----------- -----------
Cost of Revenue 8,465 - (1,359) 7,106
----------- ----------- ----------- -----------
Gross Profit $ 4,318 $ 210 $ 1,359 $ 5,887
=========== =========== =========== ===========
Financial results from RMG Networks' Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss due to the completion of the sale of this business on July 1, 2015. As a result, these financial results reflect the Enterprise business at RMG Networks, reported as continuing operations.
RMG Networks Holding Corporation
Reconciliation of Gross Profit
Years Ended December 31, 2015 and 2014
(in thousands)
Year Ended Purchase Cost of
December Price Revenue Loss on
31, 2015 Accounting Reclass- Long-Term Adjusted
(GAAP) Adjustment ification Contract (Non-GAAP)
---------- ---------- ---------- ---------- ----------
Revenue:
Products $ 17,874 $ - $ - $ - $ 17,874
Maintenance and
content services 14,618 - - - 14,618
Professional
services 8,110 - - - 8,110
---------- ---------- ---------- ---------- ----------
Total Revenue 40,602 - - - 40,602
---------- ---------- ---------- ---------- ----------
Cost of Revenue 18,060 - - 444 18,504
---------- ---------- ---------- ---------- ----------
Gross Profit $ 22,542 $ - $ - $ (444) $ 22,098
========== ========== ========== ========== ==========
Year Ended Purchase Cost of
December Price Revenue Loss on
31, 2014 Accounting Reclass- Long-Term Adjusted
(GAAP) Adjustment ification Contract (Non-GAAP)
---------- ---------- ---------- ---------- ----------
Revenue:
Products $ 16,061 $ - $ 1,381 $ 988 $ 18,430
Maintenance and
content services 16,096 840 - 395 17,331
Professional
services 7,793 - - 688 8,481
---------- ---------- ---------- ---------- ----------
Total Revenue 39,950 840 1,381 2,071 44,242
---------- ---------- ---------- ---------- ----------
Cost of Revenue 23,595 - - (2,732) 20,863
---------- ---------- ---------- ---------- ----------
Gross Profit $ 16,355 $ 840 $ 1,381 $ 4,803 $ 23,379
========== ========== ========== ========== ==========
Financial results from RMG Networks' Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss due to the completion of the sale of this business on July 1, 2015. As a result, these financial results reflect the Enterprise business at RMG Networks, reported as continuing operations.
RMG Networks Holding Corporation
Reconciliation of Operating Loss to Adjusted EBITDA
(in thousands)
Fourth Quarter Full Year
2015 2014 2015 2014
--------- --------- --------- ---------
Operating loss $ (763) $ (31,952) $ (9,750) $ (48,107)
Depreciation and amortization 875 1,325 3,756 4,830
Stock-based compensation 366 577 1,563 2,060
--------- --------- --------- ---------
EBITDA $ 478 $ (30,050) $ (4,431) $ (41,217)
--------- --------- --------- ---------
Revenues that would have been
recognized in theperiod had the
balance in deferred revenue at
the acquisition date not been
required to be adjusted to
market value at the acquisition
date in accordanc ewith GAAP
purchase accounting guidelines - 210 - 840
Acquisition expenses - - - 378
Impairment of intangible assets
and goodwill - 26,687 - 26,687
Loss on long-term contract - 1,359 (444) 4,803
Cost of revenue reclassification - - - 1,381
Reorganization costs - - - 579
--------- --------- --------- ---------
Adjusted EBITDA $ 478 $ (1,794) $ (4,875) $ (6,549)
--------- --------- --------- ---------
Financial results from RMG Networks' Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss due to the completion of the sale of this business on July 1, 2015. As a result, these financial results reflect the Enterprise business at RMG Networks, reported as continuing operations.
Contact:
For RMG Networks Holding Corporation
Investor
Brett Maas / Rob Fink
646-536-7331 / 646-415-8972
Email Contact
or
Media
Julie Rasco
800-827-9666
Email Contact
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