DALLAS, TX — (Marketwired) — 03/31/15 — RMG Networks Holding Corporation (NASDAQ: RMGN)
RMG Networks Holding Corporation (NASDAQ: RMGN), or , a leading provider of technology-driven visual communications solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2014.
RMG Networks helps brands and organizations communicate more effectively using location-based video networks. The company builds enterprise video networks that empower organizations to visualize critical data to better run their business. The company also connects brands with target audiences using video advertising networks.
Robert Michelson, Chief Executive Officer, commented, “We executed well in the fourth quarter and are encouraged by our progress, as adjusted revenues grew significantly and adjusted EBITDA improved compared to the prior quarter. During the fourth quarter, we advanced a number of focused initiatives to drive new product innovation, strengthen our sales organization and enhance operational efficiency, while redirecting investments to areas of our business where we have a highly differentiated offering driving competitive advantage.”
“In December, we began executing on an aggressive six month innovation plan to introduce one new solution a month into the market, in order to strengthen our portfolio of products,” Mr. Michelson continued. “Our efforts remain on track and our sales pipeline(2) is stronger today than it was one year ago as a result. We have also made strides with our sales organization to streamline and align sales goals across the organization.”
“The recently completed financing transaction and the announcement of the proposed sale of our Airline Media Network business are two additional important steps that significantly strengthen our balance sheet, enabling us to continue funding our growth initiatives. The sale of the Airline Media network will allow us to focus our attention on our Enterprise business. In addition, we believe the capital we just raised, along with the other strategic and operational initiatives we are pursuing, will allow us to achieve our ultimate goal of sustainable profitability.”
Mr. Michelson further added, “While it will still take some time for the effect of these organizational changes to impact our financial results, we are encouraged to be adding larger, more substantial deals to our pipeline(2) from existing customers as well as a number of potential opportunities tied to new customers. As an organization, we are making progress to rejuvenate growth and are on a path to achieve our ultimate goal of long-term sustainable profitability.”
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 included in Predecessor Company financials only as of the date of combination, full year 2014 results as-reported are not comparable with the Predecessor Company–s results for the full year 2013. In addition, “as-reported” results include certain items and the effects of purchase accounting which RMG Networks does not believe reflect the underlying performance of its business. Therefore, for ease of comparison, the following provides adjusted results for the full year 2014 and pro forma combined results for the full year 2013 as if the companies had existed as a combined entity for the relevant periods and adjusting for the items described above.
Adjusted Results(3,4)
Fourth Quarter Revenue. Total adjusted revenues in the fourth quarter of 2014 were $18.6 million, a sequential increase of 32.0% from $14.1 million in the third quarter of 2014.
On a year over year basis, total adjusted revenues in the fourth quarter of 2014 represented a decrease of 17.2% from $22.5 million of adjusted revenues in the fourth quarter of 2013.
Fourth Quarter Adjusted EBITDA(3). Adjusted EBITDA loss was $1.3 million, improving from a loss of $2.2 million in the third quarter of 2014, due primarily to the reasons described above.
On a year over year basis, adjusted EBITDA decreased in the fourth quarter from an adjusted EBITDA loss of $0.5 million in the fourth quarter of 2013, due to the reasons described above.
During the fourth quarter of 2014, the company recorded the following non-recurring, non-cash items:
Full Year. Total 2014 adjusted revenues(5) were $61.8 million, a decrease of 15.2% from total pro forma combined revenues of $72.9 million in 2013. 2014 adjusted EBITDA loss was $11.6 million compared to a pro forma combined adjusted EBITDA loss of $1.9 million in 2013.
Reported Results
Fourth Quarter. Total reported revenue for the quarter ended December 31, 2014 was $18.4 million compared to total reported revenue of $19.6 million for the same quarter last year.
Operating loss for the quarter ended December 31, 2014 was $32.5 million compared to an operating loss of $6.7 million for the same quarter last year.
Full Year. Total reported revenue for the year ended December 31, 2014 was $57.5 million compared to total revenue for the successor company for the period from April 20, 2013 through December 31, 2013 of $50.3.
Operating loss for the year ended December 31, 2014 was $79.2 million compared to an operating loss for the successor company for the period from April 20, 2013 through December 31, 2013 of $14.6 million.
RMG Networks announced on March 19, 2015, that it has entered into discussions with certain unaffiliated third parties regarding the proposed sale of its Media business, also known as the RMG Airline Media Network. The contemplated sale does not include the RMG Office Media Network.
As a result of these discussions, RMG Networks has signed a non-binding letter of intent to sell its RMG Airline Media Network business for $5.5 million, plus the assumption of certain liabilities to an unaffiliated third party. The parties are in the process of negotiating a definitive agreement.
RMG Networks announced on March 25, 2015, the sale of $25 million in Series A Convertible Preferred Stock (the “Preferred Stock”) to institutional and accredited investors (the “Financing”). The Financing closed on March 27, 2015. The Financing was comprised of $15 million from the full conversion of the company–s existing senior debt facility and approximately $10 million in new capital, prior to the payment of fees and other transaction expenses. With the conversion of its senior credit facility, the company is debt free, with the exception of capital leases.
The Financing included 250,000 shares of Preferred Stock that are mandatorily convertible into 25,000,000 shares of RMG Networks common stock, reflecting an effective transaction price of $1.00 per common share. The Preferred Stock is mandatorily convertible upon an affirmative shareholder vote approving the conversion. The company expects to file a proxy statement with the Securities and Exchange Commission (“SEC”) for such purpose in the coming days and has received support agreements committing to vote in favor of approving the conversion from investors representing approximately 45% of common shares outstanding.
The Preferred Stock does not pay dividends unless the company fails to hold a meeting of its stockholders to approve the conversion of the preferred stock within 60 days of closing the Financing (or within 75 days of closing the Financing in the case of SEC review of the proxy statement for such meeting) at which point dividends begin accruing at a rate of 1% per month or portion thereof. The company is required to file a registration statement with the SEC for the common shares underlying the Preferred Stock within 30 days of closing the Financing. The Financing also carries other terms and conditions representative of a transaction of this type, the full description of which can be reviewed in documents attached to the company–s filing with the SEC on Form 8-K.
The Preferred Stock was offered and sold in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder. The securities sold in the Financing have not been registered under the Securities Act, or state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements.
Roth Capital Partners served as the sole placement agent for the Financing.
“In the first quarter, we expect typical seasonal patterns to impact our business,” continued Mr. Michelson. “However, with our focused sales strategy and innovative new products gaining traction in the market, we are confident our growing pipeline will drive long-term growth, and that in time, we will return to delivering the financial and operational performance our shareholders expect. We have in front of us numerous, specific opportunities to deliver accelerated growth in the second half of 2015 and are committed to executing on them. With many of these initiatives in early stages, the visibility into the exact timing of their impact is still not clear. As such, we believe it would be premature to provide specific, near-term guidance at this time. As we execute on our planned product development and sales enhancement programs, we remain optimistic about our prospects for revenue growth and developing material operating leverage to produce significant adjusted EBITDA over the intermediate- and long-term to become self-sustaining.”
Management will host a conference call to discuss these results today, Tuesday, March 31, 2015 at 9 a.m. ET. To access the call, please dial (866) 953-6856 (toll free) or (617) 399-3480 and passcode #81394350. 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 . 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: 58029439) from 1 p.m. ET on Tuesday, March 31, 2015 until midnight ET on April 7, 2015.
RMG Networks (NASDAQ: RMGN) helps brands and organizations communicate more effectively using location-based video networks. The company builds enterprise video networks that empower organizations to visualize critical data to better run their business. The company also connects brands with target audiences using video advertising networks. 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, Singapore and the UAE. For more information, visit .
This release includes certain non-GAAP financial measures as defined under SEC regulations, including Adjusted Revenue, Adjusted Gross Margin and Adjusted EBITDA. In evaluating its business, RMG Networks considers and uses Adjusted Revenue, Adjusted Gross Margin 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.
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 the proposed sale of the Media 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; 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.
(Financial tables appear below)
(1) Q4 and Q3 2014 GAAP consolidated revenue was $18.4 million and $13.9 million. Q4 & Q3 2014 GAAP operating loss was $32.5 million and $18.5 million, respectively. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.
(2) Pipeline does not represent contracted deals and the company makes no assurance of closing deals in the pipeline.
(3) Q4 & Q3 2014 GAAP consolidated revenue was $18.4 million and $13.9 million, respectively. Q4 & Q3 2014 GAAP Enterprise revenue was $12.9 million and $10.3 million, respectively. Q4 & Q3 2014 GAAP operating loss was $32.5 million and $18.5 million, respectively. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.
(4) Enterprise revenues represent Products, Maintenance and Content Services, and Professional Services revenue line items; Media revenues represent Advertising revenue line item.
(5) 2014 GAAP consolidated revenue was $57.5 million. GAAP consolidated revenue for the period April 20, 2013, through December 31, 2013, was $50.3 million. 2014 GAAP operating loss was $32.5 million. GAAP operating loss for the period April 20, 2013, through December 31, 2013, was $14.6 million. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.
(6) Represents 2013 pro forma combined results
For RMG Networks Holding Corporation
Brett Maas / Rob Fink
646-536-7331 / 646-415-8972
or
Julie Rasco
800-827-9666
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