RMG Networks Holding Corporation, or RMG Networks, (NASDAQ: RMGN) a
leading provider of Digital Out-of-Home Advertising Media and
Digital Signage technology, announced its results for the second
quarter ended June 30, 2013.
Recent Accomplishments
Over the past quarter, RMG Networks has completed the following
actions:
- Acquired and substantially integrated Symon Communications,
creating a market leader in digital signage visual communications
solutions for advertising and enterprise applications
- Combined and reorganized these management teams, creating a
public-company and growth-ready executive team and corporate
infrastructure
- Laid groundwork for international expansion by establishing
presence in SE Asia and Latin America
- Pro forma combined total and core revenues increased 14% and
22%, respectively, from Q2 2012
- Completed, on August 2, 2013, a $40 million follow-on offering
of common stock to repay debt, fund growth initiatives and fund
strategic acquisitions
Garry McGuire, CEO of RMG Networks, commented, "During the
quarter, RMG acquired and integrated a significant acquisition,
creating a market leader that is taking advantage of the explosive
growth in digital video and the shift from traditional media to
digital media. We also completed a $40M follow-on offering. Amid
this transformation, RMG recorded, on a pro forma combined basis,
strong second quarter revenue growth, demonstrating the operating
performance inherent in our business units even before most of our
growth initiatives have begun to hit full effectiveness."
Mr. McGuire concluded, "RMG's second half year priorities focus
on capturing cross-selling opportunities between our two divisions,
adding new ad inventory and inventory partners, and expanding our
geographic and vertical market presences. With our existing global
footprint, our exceptional reputation with large-enterprise
customers, our comprehensive and customizable solutions offerings,
and our strong track record of success, our mission is to be the
leader in the marketplace through organic growth, to be the
consolidator of a fragmented industry, and to deliver increasing
profitability."
Second Quarter 2013 Review
RMG Networks completed the business combinations of Reach Media
Group Holdings Group, 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 our
second quarter 2013 results as reported are not comparable with the
predecessor company's results for second quarter 2012. Therefore,
for ease of comparison, we are providing in the following results
and tables pro forma combined results for the 2013 and 2012 second
quarters as if the companies had existed as a combined entity for
the relevant periods.
Pro Forma Combined Results Total second quarter 2013 revenues
were $18.9 million, an increase of 14% from $16.6 million in the
second quarter of 2012. Included in 2012 revenue was $1.1 million
of non-recurring software development revenue. Excluding this
revenue from the prior period, second quarter 2013 revenue
increased 22%.
- Advertising revenue of $6.9 million increased 23% from $5.6
million in second quarter 2012 due to increased demand from
advertisers embracing video ad platforms.
- Product sales revenue of $5.3 million increased 35% from $3.9
million second quarter 2012 due to increasing demand from
businesses looking to utilize digital signage in their
workplace.
- Maintenance and content services revenue of $4.1 million
remained relatively flat from $4.2 million in second quarter
2012.
- Professional services revenue of $2.6 million decreased 9% from
$2.8 million in second quarter 2012. The abovementioned $1.1
million in non-recurring software development revenue is included
in the year ago revenue figure. Excluding this amount, professional
services revenue increased 49% due to greater services provided in
connection with product sales.
Operating loss was $4.5 million compared to operating income of
$0.9 million in the second quarter of 2012. This decrease is
attributable to: lower gross margin as a percentage of sales in the
current year period, resulting from lower sales of our high margin
proprietary software; the inclusion of $4.0 million in
acquisition-related costs in the quarter; increases in sales and
marketing expenses as the company invests in new sales and
marketing staff to support our growth initiatives, and higher
R&D expense.
Adjusted EBITDA was $0.8 million compared to $1.7 million in the
second quarter of 2012; the decrease was driven by the change in
product mix and the sales and marketing investments, as mentioned
above.
Reported Results Total revenue for the successor company from
April 20, 2013 through June 30, 2013 was $15.0 million; for RMG
Networks from April 1, 2013 through April 19, 2013 was $1.8
million; and for the Predecessor Company from April 1, 2013 through
April 19, 2013 was $1.4 million. This compares to Predecessor
Company's total revenue from May 1, 2013 through July 31, 2012 of
$9.5 million.
Operating loss for the successor company from April 20, 2013
through June 30, 2013, was $2.9 million; for RMG Networks from
April 1, 2013 through April 19, 2013 was $2.5 million; and for the
Predecessor Company from April 1, 2013 through April 19, 2013 was
$3.1 million. This compares to Predecessor Company's operating
income from May 1, 2013 through July 31, 2012 of $1.0 million.
2013 and 2014 Outlook
RMG Networks anticipates 2013 revenue to be in the range of $76
million to $78 million compared to $68.2 million in 2012, and
Adjusted EBITDA in the range of $5 million to $6 million compared
to $7.5 million in 2012; the decrease in 2013 Adjusted EBITDA
reflects, as the company has previously disclosed, integration
costs and the company's investment in growth initiatives. For 2014,
RMG Networks is anticipating revenue in the range of $105 million
to $110 million and Adjusted EBITDA in the range of $16 million to
$18 million.
Conference Call
Management will host a conference call to discuss these results
today, Wednesday August 14, 2013 at 10:00 a.m. ET. To access the
call, please dial 888-679-8033 (toll free) or 617-213-4846 and
passcode # 82356311. The conference call will also be broadcast
live over the Internet, 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.
The Company has elected not to provide a slide presentation to
accompany this quarter's call and webcast. All participants should
call or access the website approximately 10 minutes before the
conference begins. The webcast 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: 79272126) from noon ET on August 14, 2013 until midnight
ET on August 24, 2013.
NASDAQ Listing
As a result of RMG Network's recent follow-on offering, RMG
Networks now satisfies the NASDAQ's initial listing requirement
that it have more than 300 round-lot shareholders. Accordingly, on
August 13, RMG Networks received a letter from NASDAQ, indicating
that RMG Networks is in compliance with applicable listing
standards, and that the delisting notification that RMG Networks
previously received is now closed.
ABOUT RMG NETWORKS
RMG Networks (NASDAQ: RMGN) is a global leader in the digital
signage media industry. The company delivers digital signage media
solutions for corporate networks, consumer networks, and
advertising networks, including solutions for 70% of the Fortune
500. RMG operates an Advertising Media business unit that sells
digital video advertising across a network of over 200,000 display
screens, reaching 100 million consumers each month. RMG also
operates an Enterprise Solutions business unit that provides
digital signage data visualization solutions for a variety of
application areas including contact centers, supply chain, employee
communications, hospitality, higher education, financial services,
healthcare and retail. The company is headquartered in Dallas,
Texas with offices in the United States, United Kingdom, China,
India and the U.A.E. For more information, visit
www.RMGNetworks.com.
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.
FORWARD LOOKING STATEMENT
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 potential de-listing of the company's
common stock from the Nasdaq Capital Market; the potential
liquidity and trading 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.
RMG Networks Holding Corporation
Consolidated Balance Sheets
Successor Predecessor
Company Company
June 30, January 31,
2013 2013
------------ ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 5,979,263 $ 10,203,169
Accounts receivable, net 15,918,023 9,061,229
Inventory, net 3,552,407 2,988,766
Deferred tax assets 231,383 372,618
Other current assets 882,866 686,099
------------ ------------
Total current assets 26,563,942 23,311,881
Restricted cash 80,000 0
Property and equipment, net 1,518,608 963,069
Intangible assets, net 38,624,863 2,584,443
Goodwill 31,037,564 10,972,547
Loan Origination fees 932,550 0
Other assets 288,004 112,054
------------ ------------
Total assets $ 99,045,531 $ 37,943,994
============ ============
Liabilities and Stockholders' equity
Current liabilities:
Accounts payable $ 5,099,667 $ 4,150,730
Accrued liabilities 4,035,271 1,925,901
Revenue share liabilities 3,167,458 0
Note payable - current 2,400,000 0
Deferred revenue 6,726,859 10,438,487
Capital leases 72,022 0
------------ ------------
Total current liabilities 21,501,277 16,515,118
Notes payable - non current 31,060,000 0
Warrant liability 10,453,334 0
Deferred revenue - non current 785,693 1,073,223
Deferred tax liabilities 7,046,832 704,496
Deferred rent 227,504 0
Capital leases and other 553,482 0
------------ ------------
Total liabilities 71,628,122 18,292,837
------------ ------------
Commitment and Contingencies
Stockholders' equity:
Common stock, $.0001 par value, (250,000,000
shares authorized;6,285,583 shares issued and
outstanding at June 30, 2013) 629 0
Common stock - Class L, $0.01 par value,
(1,000,000 shares authorized, issued and
outstanding at January 31, 2013) 0 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 and 2012) 0 689
Additional paid-in capital 34,623,035 10,149,643
Accumulated comprehensive income (loss) 13,157 (38,940)
Notes receivable - restricted stock 0 (207,025)
Retained earnings (accumulated deficit) (7,219,412) 9,736,790
------------ ------------
Total stockholders' equity 27,417,409 19,651,157
------------ ------------
Total liabilities and stockholders' equity $ 99,045,531 $ 37,943,994
============ ============
RMG Networks Holding Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)
Successor Predecessor Predecessor
Company RMG Company Company
April 20 January 1 February 1 February 1
Through Through Through Through
June 30, April 19, April 19, July 31,
2013 2013 2013 2012
----------- ----------- ----------- -----------
Revenue:
Advertising $ 5,556,557 $ 1,661,245 $ - $ -
Products 5,069,160 - 2,239,236 7,554,343
Maintenance and
content services 2,572,555 - 3,594,520 8,375,245
Professional services 1,851,755 116,272 1,323,559 2,961,393
----------- ----------- ----------- -----------
Total Revenue 15,050,027 1,777,517 7,157,315 18,880,981
Cost of Revenue:
Advertising 3,355,883 890,789 - -
Products 3,261,492 - 1,498,135 4,295,494
Maintenance and
content services 572,433 - 611,692 1,435,208
Professional services 1,197,304 - 861,640 2,012,481
----------- ----------- ----------- -----------
Total Cost of Revenue 8,387,112 890,789 2,971,467 7,743,183
----------- ----------- ----------- -----------
Gross Profit 6,662,915 886,728 4,185,848 11,137,798
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 3,351,286 454,381 1,729,871 3,676,490
General and
administrative 2,585,983 157,626 1,739,348 3,741,025
Research and
development 806,401 89,923 512,985 1,023,521
Acquisition expenses 1,485,566 4,629,505 3,143,251 -
Depreciation and
amortization 1,292,276 8,139 140,293 651,362
----------- ----------- ----------- -----------
Total operating expenses 9,521,512 5,339,574 7,265,748 9,092,398
----------- ----------- ----------- -----------
Operating income (loss) (2,858,597) (4,452,845) (3,079,900) 2,045,400
Other Income (Expense):
Warrant liability
expense (3,920,000) (2,733,334) - -
Interest expense and
other - net (495,880) (29,986) (14,553) (56,135)
----------- ----------- ----------- -----------
Income (loss) before
income taxes (7,274,477) (7,216,166) (3,094,453) 1,989,265
Income tax expense - - (540,897) 641,527
----------- ----------- ----------- -----------
Net income (loss) (7,274,477) (7,216,166) (2,553,556) 1,347,738
Other comprehensive
income (loss) - Foreign
currency translation
adjustments 13,157 - (121,144) 49,450
----------- ----------- ----------- -----------
Total comprehensive
income (Loss) $(7,261,320) $(7,216,166) $(2,674,700) $ 1,397,188
=========== =========== =========== ===========
Net income (loss) per
share:
Basic and dilutive net
income (loss) per share
of Common Stock $ (1.16) $ (2.31)
=========== =========== =========== ===========
Basic and dilutive net
income (loss) per share
of Class L Common Stock $ (2.55) $ 1.35
=========== =========== =========== ===========
Basic and dilutive net
income (loss) per
share of Class A Non-
Voting Common Stock $ - $ - $ -
=========== =========== =========== ===========
Weighted average
shares used in
computing basic and
dilutive net income
(loss) per share of
Common Stock 6,285,583 3,124,252
=========== =========== =========== ===========
Weighted average
shares used in
computing basic and
dilutive net income
(loss) per share of
Class L Common Stock 1,000,000 1,000,000
=========== =========== =========== ===========
Weighted average
shares used in
computing basic and
dilutive net income
(loss) per share of
Class A Non-Voting
Common Stock 68,889 82,778
=========== =========== =========== ===========
RMG Networks Holding Corporation
Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 2013
(Unaudited)
Successor Predecessor Predecessor
Company RMG Company Company
April 20 January 1 February 1 February 1
Through through Through Through
June 30, April 30, April 19, July 31,
2013 2013 2013 2012
----------- ------------ ----------- -----------
Cash flows from
operating activities
Net income (loss) $(7,274,477) $ (7,216,106) $(2,553,556) $ 1,347,738
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities:
Change in warrant
liability 3,920,000 2,733,334 - -
Non-cash stock
issuance - 2,200,000 - -
Cancellation of
non-cash stock
issuance - (1,200,000) - -
Interest capitalized
as debt 60,000 - - -
Depreciation and
amortization 1,292,276 8,139 140,293 651,362
Deferred tax
provision
(benefit) - - (12,294) (88,087)
Other non-cash
expense (income),
net - - (2,054) (4,590)
Changes in
operating assets
and liabilities:
Accounts
receivable (4,412,699) (335,961) 2,846,332 936,316
Inventory (74,919) - (488,722) 747,248
Other current
assets 211,440 (38,929) (154,529) 76,503
Other assets, net (1,073) - 12,572 38,241
Accounts payable 1,708,576 45,078 (2,978,808) (1,034,322)
Accrued
liabilities 362,830 (265,198) (765,937) 136,008
Deferred revenue 330,532 - (372,579) (55,387)
----------- ------------ ----------- -----------
Net cash provided by
operating activities (3,877,514) (4,163,231) (4,329,282) 2,751,020
----------- ------------ ----------- -----------
Cash flows from
investing activities
Acquisition of
Reach Media Group
Holdings, Inc. - (21,010,000) - -
Acquisition of
Symon Holdings
Corporation (209,079) (43,476,749) - -
Purchases of
property and
equipment (172,244) - (86,470) (205,272)
----------- ------------ ----------- -----------
Net cash used in
investing activities (381,323) (64,486,749) (86,470) (205,272)
----------- ------------ ----------- -----------
RMG Networks Holding Corporation
Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 2013
(Unaudited)
(Continued)
Successor Predecessor Predecessor
Company RMG Company Company
April 20 January 1 February 1 February 1
Through through Through Through
June 30, April 30, April 19, July 31,
2013 2013 2013 2012
------------ ------------ ------------ ------------
Cash flows from
financing activities
Proceeds from
Trust Account - 80,010,661 - -
Payment for
public shares
tendered - (45,512,280) - -
Proceeds from
debt - 34,000,000 - -
Proceeds from
stock issuance - 5,000,000 - -
Proceeds from
sponsor notes
payable - 635,000 - -
Payment of
sponsor note
payable - (295,000) - -
Payment of
stockholder note
payable - (200,000) - -
Loan origination
fees - (980,000) - -
Repayments of
debt (600,000) - - -
------------ ------------ ------------ ------------
Net cash used in
financing activities (600,000) 72,658,381 - -
------------ ------------ ------------ ------------
Effect of exchange
rate changes on cash 13,157 - (121,144) 49,450
Net increase
(decrease) in cash
and cash equivalents (4,845,680) 4,008,401 (4,536,896) 2,595,198
Cash and cash
equivalents,
beginning of period 10,824,943 1,150,269 10,203,169 3,836,691
------------ ------------ ------------ ------------
Cash and cash
equivalents, end of
period $ 5,979,263 $ 5,158,670 $ 5,666,273 $ 6,431,889
============ ============ ============ ============
Supplemental
disclosures of cash
flow information:
Cash paid during
the year for
interest $ 0 $ 0 $ 2,053 $ 7,236
Cash paid during
the year for
income taxes $ 0 $ 0 $ 150,000 $ 234,000
Deferred
Underwriters' fees $ 0 $ 500,000 $ 0 $ 0
RMG Networks Holding Corporation
Pro-Forma Calculation of Adjusted EBITDA
2nd Quarter
2013 2012
---------- ----------
Reconciliation of Operating Income (Loss) to Adjusted EBITDA -
Operating Income (Loss) (5,192,227) (521,852)
Add:
Depreciation and amortization 1,342,689 1,491,784
Acquisition expenses * 4,013,757 0
Revenues that would have been recognized during the
period had the balance in deferred revenue at the
acquisition date not been required to be to be
adjusted to market value at the acquisition date in
accordance with GAAP purchase accounting guidelines 675,000 700,000
---------- ----------
Adjusted EBITDA 839,219 1,669,932
========== ==========
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Contact: For RMG Networks Holding Corporation
Investor Carolyn M. Capaccio 212-838-3777 Email Contact or
Media TallGrass Public Relations Shawn Roberts 415-305-6456
Email Contact
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