Chicken Soup for the Soul Entertainment Reports Q3 2020 Results
11/12/2020 - 04:07 PM
Strong performance across Online Networks and Distribution & Production businesses drives significant growth
COS COB, Conn., Nov. 12, 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 third quarter ended September 30, 2020.
Third Quarter 2020 Financial Summary
Gross revenue of $20.0 million, compared to $13.9 million in the second quarter of 2020, and $17.0 million in the year-ago period. Net loss of $13.0 million compared to a net loss of $10.0 million in the second quarter of 2020, and a net loss of $13.3 million in the year-ago period; $12.0 million net loss before preferred dividends, compared to $9.0 million net loss in the second quarter 2020, and $12.4 million net loss before preferred dividends in the year-ago period. Adjusted EBITDA of $4.2 million, compared to $2.7 million in the second quarter 2020, and a loss of $0.4 million in the year-ago period. Online Networks, which include Crackle and Popcornflix, revenue of $6.7 million compared to $5.4 million in the second quarter of 2020, and $14.4 million in the year-ago period. The year-over-year decline reflects approximately $6.2 million in advertising revenue in the year ago period from the since-shuttered Playstation Vue, and intercompany revenue share payments in the 2020 period of $1.3 million to our Distribution & Production business for the licensing of content from our sister company, Screen Media. Distribution & Production revenue of $13.3 million compared to $8.5 million in the second quarter of 2020, and $2.7 million in the year-ago period due to strength in content licensing and TVOD revenue. Recent Business Highlights
Continued to expand pipeline of Original & Exclusive content which represented 16% of average monthly streaming hours in the quarter, compared to just 2% a year ago. Online Networks delivered steady viewership throughout the quarter and sequential growth in ad impressions. The latest Crackle original series, Spides , premiered on September 17th , and drove over one million streams in its first two weeks. Distribution and Production generated strong performance driven by the #1 TVOD hit The Outpost as well as the company’s growing library of film and television content. Today the company agreed to a 30-day extension of a key decision deadline, to December 14, 2020, as the Crackle Plus joint venture partners assess the possibility of closer collaboration. “Our strong third quarter results demonstrate that we are continuing our momentum, despite the pandemic, and we are poised for a terrific end to 2020,” said William J. Rouhana Jr., chairman and chief executive officer of Chicken Soup for the Soul Entertainment. “Viewers are engaging with our differentiated and expanding Original and Exclusive content, and our Distribution and Production business generated an exceptional performance driven by one of the summer and fall’s most-watched films on VOD, The Outpost . We are now turning our focus to growing awareness of our Crackle Plus networks to scale viewership, while continuing to expand our stable of fully owned content, which will drive both future revenue opportunity and higher margins. We’ve also enhanced our balance sheet, working capital position and financial flexibility. We believe we are in an excellent position to drive greater levels of growth in 2021 as we capitalize on the robust opportunities ahead in the emerging AVOD landscape.”
Gross profit for the quarter ended September 30, 2020 was $4.5 million, or 23% of net revenue, compared to $0.6 million in the second quarter, or 4% of net revenue, and $3.2 million, or 19% of net revenue for the year-ago period. The change in the percentage of gross profit resulted in part from 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 $12.5 million or 65% of total net revenue.
Operating loss for the quarter ended September 30, 2020 was $11.3 million compared to an operating loss of $13.1 million in the second quarter 2020, and $9.6 million in the year-ago period. Without this film library amortization expense and other depreciation and amortization, operating income would have been $1.3 million.
Net loss was $13.0 million, or $1.04 per share, compared to a net loss of $10.0 million, or $0.83 per share, in the second quarter 2020, and a net loss of $13.3 million, or $1.11 per share in the prior-year third quarter. Excluding preferred dividends, the net loss in the third quarter of 2020 would have been $12.0 million, or $0.96 per share, compared to net loss of $12.4 million, or $1.03 per share for the year-ago period.
Adjusted EBITDA for the quarter ended September 30, 2020 was $4.2 million, compared to $2.7 million in the second quarter 2020, and a loss of $0.4 million in the year-ago period.
As of September 30, 2020, the company had $9.2 million of cash and cash equivalents compared to $6.2 million at September 30, 2019, and outstanding debt of $34.8 million as of September 30, 2020 compared to $20.2 million as of September 30, 2019.
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: Thursday, November 12, 2020, 4:30 p.m. ET. Toll-free: (833) 832-5128 International: (484) 747-6583 Conference ID: 2772449 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 Conference ID: 2772449 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 (including tangible and intangible assets), acquisition-related costs, consulting fees related to acquisitions, dividend payments, non-cash share-based compensation expense, and adjustments for other unusual and infrequent in nature identified charges, including transition related expenses. Adjusted EBITDA is not an earnings measure recognized by U.S. 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 our performance that provides useful information to investors regarding our 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 interim report on Form 10-Q for the three and nine months ended September 30, 2020 and 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 GAAP Net Income as reported 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 EllipsisCSSE@ellipsisir.com 646-776-0886
MEDIA CONTACT Kate Barrette RooneyPartners LLCkbarrette@rooneyco.com (212) 223-0561
Tables Follow
Chicken Soup for the Soul Entertainment, Inc. Condensed Consolidated Balance Sheets September 30, December 31, 2020 2019 (unaudited) ASSETS Cash and cash equivalents $ 9,243,315 $ 6,447,402 Accounts receivable, net of allowance for doubtful accounts of $1,777,744 and $1,531,247, respectively 24,772,024 34,661,119 Prepaid expenses and other current assets 2,985,503 1,173,223 Goodwill 21,448,106 21,448,106 Indefinite lived intangible assets 12,163,943 12,163,943 Intangible assets, net 20,575,942 35,451,951 Film library, net 36,878,196 33,250,149 Due from affiliated companies 6,081,324 7,642,432 Programming costs and rights, net 20,702,405 15,113,574 Other assets, net 4,794,239 313,585 Total assets $ 159,644,997 $ 167,665,484 LIABILITIES AND EQUITY Current maturities of commercial loan $ — $ 3,200,000 Commercial loan, net of unamortized deferred finance costs of $0 and $189,525, respectively — 11,810,475 9.50% Notes due 2025, net of unamortized deferred finance costs of $1,059,401 and $0, respectively 21,040,599 — Notes payable under revolving credit facility 2,500,000 5,000,000 Film acquisition advance 10,210,000 — Accounts payable and accrued expenses 25,923,748 26,646,390 Ad representation fees payable 3,021,520 12,429,838 Film library acquisition obligations 10,609,186 5,020,600 Programming obligations 6,416,012 7,300,861 Accrued participation costs 12,894,099 5,066,512 Other liabilities 1,777,548 170,106 Total liabilities 94,392,712 76,644,782 Commitments and contingencies 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; 1,732,139 and 1,599,002 shares issued and outstanding, respectively; redemption value of $43,303,475 and $39,975,050, respectively 173 160 Class A common stock, $.0001 par value, 70,000,000 shares authorized; 4,919,195 and 4,259,920 shares issued, 4,844,960 and 4,185,685 shares outstanding, respectively 492 425 Class B common stock, $.0001 par value, 20,000,000 shares authorized; 7,813,938 shares issued and outstanding 782 782 Additional paid-in capital 96,498,618 87,610,030 Deficit (67,182,836 ) (32,695,629 ) Class A common stock held in treasury, at cost (74,235 shares) (632,729 ) (632,729 ) Total stockholders’ equity 28,684,500 54,283,039 Subsidiary convertible preferred stock 36,350,000 36,350,000 Noncontrolling interests 217,785 387,663 Total equity 65,252,285 91,020,702 Total liabilities and equity $ 159,644,997 $ 167,665,484
Chicken Soup for the Soul Entertainment, Inc. Condensed Consolidated Statements of Operations (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Revenue: Online networks $ 6,652,562 $ 14,383,659 $ 21,038,965 $ 25,128,001 Distribution and Production 13,318,050 2,662,429 26,948,795 6,655,114 Total revenue 19,970,612 17,046,088 47,987,760 31,783,115 Less: returns and allowances (608,861 ) (255,394 ) (1,861,396 ) (828,785 ) Net revenue 19,361,751 16,790,694 46,126,364 30,954,330 Cost of revenue 14,840,851 13,614,648 37,684,786 23,568,743 Gross profit 4,520,900 3,176,046 8,441,578 7,385,587 Operating expenses: Selling, general and administrative 9,301,550 6,371,870 23,194,223 13,894,351 Amortization and depreciation 4,576,742 4,695,522 15,022,885 5,631,136 Management and license fees 1,936,175 1,676,303 4,612,636 3,091,093 Total operating expenses 15,814,467 12,743,695 42,829,744 22,616,580 Operating loss (11,293,567 ) (9,567,649 ) (34,388,166 ) (15,230,993 ) Interest expense 659,803 195,881 1,322,831 483,363 Loss on extinguishment of debt 169,219 350,691 169,219 350,691 Acquisition-related costs — 1,078,637 98,926 3,735,373 Other non-operating income, net (43,445 ) (8,997 ) (4,381,292 ) (34,546 ) Loss before income taxes and preferred dividends (12,079,144 ) (11,183,861 ) (31,597,850 ) (19,765,874 ) Provision for income taxes 26,000 1,248,000 93,000 557,000 Net loss before noncontrolling interests and preferred dividends (12,105,144 ) (12,431,861 ) (31,690,850 ) (20,322,874 ) Net loss attributable to noncontrolling interests (73,135 ) (37,473 ) (169,878 ) (36,960 ) Net loss attributable to Chicken Soup for the Soul Entertainment, Inc. (12,032,009 ) (12,394,388 ) (31,520,972 ) (20,285,914 ) Less: preferred dividends 1,017,691 929,387 2,966,235 2,330,675 Net loss available to common stockholders $ (13,049,700 ) $ (13,323,775 ) $ (34,487,207 ) $ (22,616,589 ) Net loss per common share: Basic and diluted $ (1.04 ) $ (1.11 ) $ (2.83 ) $ (1.89 )
Chicken Soup for the Soul Entertainment, Inc. Adjusted EBITDA Three Months Ended September 30, 2020 2019 Net loss available to common stockholders $ (13,049,700 ) $ (13,323,775 ) Preferred dividends 1,017,691 929,387 Provision for income taxes 26,000 1,248,000 Other taxes 97,466 54,590 Interest expense 659,803 195,881 Film library and program rights amortization 8,020,638 1,369,874 Share-based compensation expense 346,773 303,205 Acquisition-related costs — 1,078,637 Reserve for bad debt and video returns 1,538,449 722,729 Amortization and depreciation 4,960,074 4,695,522 Other non-operating income, net (43,445 ) (8,997 ) Loss on extinguishment on debt 169,219 350,691 Transitional expenses — 1,634,771 All other nonrecurring costs 472,322 377,184 Adjusted EBITDA $ 4,215,290 $ (372,301 ) Nine Months Ended September 30, 2020 2019 Net loss available to common stockholders $ (34,487,207 ) $ (22,616,589 ) Preferred dividends 2,966,235 2,330,675 Provision for income taxes 93,000 557,000 Other Taxes 202,117 386,265 Interest expense 1,322,831 483,363 Film library and program rights amortization 16,922,753 3,804,268 Share-based compensation expense 820,881 794,149 Acquisition-related costs 98,926 3,735,373 Reserve for bad debt & video returns 4,072,785 1,241,243 Amortization and depreciation 15,661,774 5,631,136 Other non-operating income, net (4,381,292 ) (34,546 ) Loss on extinguishment on debt 169,219 350,691 Transitional expenses 4,353,345 2,876,124 All other nonrecurring costs 1,128,662 564,240 Adjusted EBITDA $ 8,944,029 $ 103,392