JRJRQ JRjr33 Inc (CE)

Revenue Increased 4.3% Over Prior Year

Full Year Adjusted Free Cash Flow was $2.35 million for Q4

Writes off Good Will & Recognizes Other Non-Cash Charges

Company Cleans up Post-Acquisition Balance Sheet

JRjr33, Inc., doing business as JRJR Networks [NYSE MKT: JRJR] today announced financial results for its full year of 2016.

John Rochon Jr., Founder and Vice Chairman of JRJR Networks, commented, "We are pleased to announce our financial results for the full year of 2016. Sales have increased in 2016 to $144.2 million from $138.4 million in 2015 while gross profit for the full year went down less than 1% even as our cost of sales increased by over $4 million. While it has been a challenging year, the Company has shown strong resilience and we are confident the distracting issues facing the business are behind us. We will be focusing on our business and profit initiatives in 2017.

"We are reviewing several interesting opportunities that will continue to enhance the brand and business model to which we are committed. It is our continuing strategy to focus on a series of operating initiatives based on brand supremacy, sales penetration, and additional operational enhancements. Profits and Mergers & Acquisitions return to a strategic focus now that we can expect to report on a timely basis. The Company is focused on profitable revenue and intends to eliminate “zombie” revenue, revenue that looks alive but is very costly and, in fact, dead, during the course of 2017.”

Financial Highlights

For Q4 2016, gross revenue was approximately $37.7 million, compared to approximately $46.6 million in Q4 2015; a decrease of $8.9 million or 23.7%.

Gross profit for Q4 2016 was approximately $18.4 million, compared to $25.8 million in the previous year.

Gross profit margin during Q4 2016 decreased to 59.06% of total revenue, compared to 66.57% of total revenue in the same quarter a year ago.

Operating margin decreased to (47.76)% from (17.22)% compared to the same period last year; largely as a result of non-cash charges.

For the full year of 2016, sales were $144.2 million, compared to approximately $138.4 million in 2015; an increase of $5.9 million or 4.3%.

Gross profit for the full year decreased to $78.35 million, compared to $79.09 million in the previous year; a decrease of $.75 million or .95%.

Gross profit margins decreased to 65.33% from 67.85% for the previous year.

 

JRjr33, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)            

December31, 2016

December31, 2015

Assets

 

Current assets: Cash and cash equivalents 2,203,000 6,482,000 Marketable securities 389,000 5,306,000 Accounts receivable, net 3,556,000 4,828,000 Inventory, net 15,823,000 20,799,000 Other current assets 3,627,000   2,303,000   Total current assets 25,598,000 39,718,000 Assets held for sale 1,000,000 1,111,000 Restricted cash — 2,857,000 Sale leaseback security deposit 4,414,000 4,414,000 Property, plant and equipment, net 2,859,000 5,387,000 Property under capital leases, net 13,875,000 14,654,000 Goodwill 1,846,000 5,427,000 Intangibles, net 3,862,000 8,801,000 Other assets 37,000   135,000   Total assets 53,491,000   82,504,000   Liabilities and stockholders’ equity Current liabilities: Accounts payable 14,018,000 15,839,000 Related party payables 5,853,000 1,704,000 Accrued commissions 1,676,000 3,033,000 Accrued liabilities 8,028,000 7,303,000 Deferred revenue 3,706,000 2,307,000 Taxes payable 8,969,000 4,830,000 Current portion of lease obligation 15,856,000 313,000 Current portion of long-term debt 11,703,000 3,048,000 Other current liabilities 666,000   578,000   Total current liabilities 70,475,000 38,955,000 Deferred tax liability 372,000 744,000 Long-term debt, less current portion 1,830,000 12,784,000 Capital lease obligation, less current portion 283,000 16,217,000 Other long-term liabilities 2,765,000   2,864,000   Total liabilities 75,725,000   71,564,000   Commitments & contingencies Stockholders’ equity: Preferred stock, par value $0.001 per share, 500,000 authorized; -0-issued and outstanding — — Common stock, par value $0.0001 per share, 250,000,000 shares authorized; 39,348,214 and 35,718,279 shares issued and outstanding, at December 31, 2016 and December 31, 2015, respectively 4,000 4,000 Additional paid-in capital 62,390,000 58,837,000 Accumulated other comprehensive loss (2,390,000 ) (586,000 ) Accumulated deficit (76,214,000 ) (45,255,000 ) Total stockholders’ equity attributable to JRjr33, Inc. (16,210,000 ) 13,000,000 Stockholders’ equity attributable to non-controlling interest (6,024,000 ) (2,060,000 ) Total stockholders’ equity (22,234,000 ) 10,940,000   Total liabilities and stockholders’ equity 53,491,000   82,504,000      

JRjr33, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

     

Fiscal year Ended December 31,

2016

   

2015

Revenue 144,245,000 138,352,000 Program costs and discounts   (24,322,000 )   (21,795,000 ) Net revenues 119,923,000 116,557,000 Costs of sales   41,499,000     37,466,000   Gross profit 78,424,000 79,091,000 General and administrative expense 40,943,000 41,245,000 Distributor expense 37,384,000 36,696,000 Selling expense 18,682,000 15,944,000 Share based compensation expense 147,000 (116,000 ) Depreciation and amortization 2,508,000 2,214,000 Loss (gain) on sale of assets 464,000 (657,000 ) Impairment of goodwill and intangibles 6,719,000 192,000 Loss on extinguishment of debt 1,904,000 — Impairment of assets held for sale   —     3,329,000   Operating loss (30,327,000 ) (19,756,000 ) Gain on marketable securities (12,000 ) (189,000 ) Gain on acquisition of a business — (3,625,000 ) Interest expense, net   4,172,000     2,588,000   Loss from operations before income tax provision (34,487,000 ) (18,530,000 ) Income tax provision   447,000     349,000   Net loss (34,934,000 ) (18,879,000 ) Net loss attributable to non-controlling interest   3,975,000     5,783,000   Net loss attributed to JRjr33, Inc.   (30,959,000 )   (13,096,000 ) Basic and diluted loss per share: Weighted average common shares outstanding 36,580,892 33,478,601

Loss per common share attributable to common stockholders, basic and diluted

$ (0.85 ) $ (0.39 )       Net loss (34,934,000 ) (18,879,000 ) Interest, net 4,172,000 2,588,000 Income tax expense 447,000 349,000 Depreciation and amortization   3,072,000     2,778,000   EBITDA (26,813,000 ) (13,164,000 ) Capital market expenses 445,000 1,155,000 M&A expenses 1,335,000 1,420,000 M&A infrastructure expense 2,365,000 2,992,000 Other EBITDA Adjustments   10,315,000     3,293,000   Adjusted EBITDA   (12,353,000 )   (4,304,000 )  

This news release includes information on Adjusted EBITDA, which is a non-GAAP financial measure as defined by SEC Regulation G. Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period growth. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management team.

Adjusted EBITDA is a non-GAAP financial measure. We calculate adjusted EBITDA by taking net income, and adding back the expenses related to interest, income taxes, depreciation, and amortization, stock compensation expenses, non-cash compensation, deferred rent, inventory write-off adjustments, gains/losses in relation to the sale of an asset, asset impairment costs such as goodwill or other identifiable intangible impairment, asset fair value adjustments, and debt forgiveness expenses, as each of those elements are calculated in accordance with GAAP. Adjusted EBITDA should not be construed as a substitute for net income (loss) (as determined in accordance with GAAP) for the purpose of analyzing our operating performance or financial position, as Adjusted EBITDA is not defined by GAAP. A reconciliation is provided above in this press release.

About JRJR Networks (www.jrjrnetworks.com)

JRJR Networks is a growing platform of direct-to-consumer brands. Within JRJR Networks, each company retains its separate identity, sales force, product line and compensation plan, while JRJR Networks seeks synergies and efficiencies in operational areas. JRJR Networks companies currently include The Longaberger Company, a 42­year old maker of hand-crafted baskets and other home decor items; Tomboy Tools, a direct seller of tools designed for women; Agel Enterprises, a global seller of nutritional products in gel form as well as a skin care line, operating in 50 countries; Paperly, which offers a line of custom stationery and other personalized products; Uppercase Living, which offers a line of customizable vinyl expressions for display on walls in the home; Kleeneze, a 95­year old UK­based catalog seller of cleaning, health, beauty, home, outdoor and a variety of other products, and Betterware, a UK­based home catalog seller. JRJR Networks also includes Happenings, a lifestyle publication and marketing company.

Cautionary Note Regarding Forward-Looking Statements:

This press release contains forward­looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," or "will" or the negative of these terms or other comparable terminology and include statements regarding the opportunities under review and the continued enhancement of the brand and business model. These forward­looking statements are based on management's expectations and assumptions as of the date of this press release and are subject to a number of risks and uncertainties, many of which are difficult to predict that could cause actual results to differ materially from current expectations and assumptions from those set forth or implied by any forward-looking statements. Important factors that could cause actual results to differ materially from current expectations include, among others, our ability to expand leadership activities in support of our sales, our ability to continue to grow, our ability to integrate the entities that we have acquired, our ability to strengthen our internal controls and the other risks outlined under "Risk Factors" in our Annual Report on Form 10-K for our fiscal year ended December 31, 2015 and our other filings with the SEC, including subsequent reports on Forms 10-Q and 8-K. The information in this release is provided only as of the date of this release, and we undertake no obligation to update any forward-looking statements contained in this release on account of new information, future events, or otherwise, except as required by law.

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JRJR NetworksInvestor Relations:Brenton Bakerbrenton.baker@jrjrnetworks.com