Achieves Year-over-Year Revenue Growth for the
Second Consecutive QuarterNarrowed Net Loss; Achieves Positive
Quarterly Adj. EBITDA
RMG Networks Holding Corporation (NASDAQ:RMGN), or RMG, a global
leader in technology-driven visual communications, today announced
its financial results for the second quarter ended June 30, 2017.
"This was a quarter of continued progress
highlighted by year-over-year revenue growth for the second
consecutive quarter and positive Adjusted EBITDA for the third time
in the last four quarters,” commented Robert Michelson, Chief
Executive Officer. “In addition to advancing growth initiatives
within our core markets, we continue to advance our technology
roadmap, which we believe can significantly expand RMG’s
addressable market and position us to increase revenue growth over
time.”
“Our revenues during the second quarter
benefited from strong product sales and a favorable sales mix,
which drove high gross margins,” Michelson added. “Geographically,
we continued to see positive signs, particularly in the Middle East
where we closed a $530,000 contract with an existing customer to
expand its interactive digital signage solution.”
“We are very pleased with our innovation and
technology progress during the second quarter and expect to achieve
two major milestones in the third quarter. The first achievement is
an upgrade to our core enterprise software, which greatly enhances
security, performance and scalability for our largest, most data
intensive customers, Michelson noted. “Additionally, we have made
substantial progress on our next-generation technology platform,
which we have begun testing with major customers and believe will
allow us to greatly expand our market reach as we move into
2018.”
Second Quarter Financial
Review
Total revenue of $9.1 million increased 4% from
$8.7 million in the second quarter of 2016.
- Products revenue of $3.9 million increased 26% from $3.1
million in the same period last year, resulting primarily from
increased proprietary hardware sales.
- Maintenance & content services revenue of $3.4 million
declined 4% from $3.5 million in the same period last year,
resulting primarily from lower renewals in the United Kingdom and
European regions.
- Professional services revenue of $1.9 million decreased 13%
from $2.1 million in the same period last year, resulting primarily
from the mix of professional services on new orders closed during
the quarter.
1 A non-GAAP measure, we define Adj. EBITDA as
net income (loss) with adjustments for interest expense and other
income, income tax expense, gain (loss) on change in warrant
liability, gain (loss) from discontinued operations, depreciation
and amortization expenses and stock-based compensation expense. See
“About Non-GAAP Financial Measures” below and the reconciliation
table at the end of this release for more information regarding
this non-GAAP financial measure.
Gross margin of 61.9% increased from 58.3% in
the second quarter of 2016, resulting primarily from a favorable
sales mix with increased sales of higher-margin, proprietary
hardware and lower third-party hardware sales.
Total operating expenses of $6.5 million
decreased 1% from $6.6 million in the same period last year. The
company continues to manage and focus on expenses, while
strategically investing in certain areas of the business, such as
sales and marketing.
GAAP net loss was $1.2 million, or ($0.03) per
diluted share, compared to a net loss of $1.6 million, or ($0.05)
per diluted share, for the second quarter of 2016. On a non-GAAP
basis, Adj. EBITDA of $52,000 improved from a loss of $438,000 in
the same period last year.
At June 30, 2017, the company had no borrowings
and $4.8 million in unused availability under its revolving line of
credit and cash and cash equivalents of $2.2 million.
Outlook
The company reaffirms its guidance for the full
year 2017 of positive revenue growth in the single-digit percentage
range. The company expects the level of revenue growth in the
second half of 2017 to be impacted by key customer orders, timing
of the orders and aggressiveness of the rollout schedules of
certain customer projects and initiatives.
Reverse Split
RMG announced today that it will effect a
1-for-4 reverse stock split of its outstanding common stock. The
company expects this will be effective for trading purposes as of
the commencement of trading on Tuesday, August 15, 2017. The
reverse stock split was previously authorized at the RMG’s 2017
Annual Meeting of Stockholders and the company’s Board of Directors
approved a ratio within the approved range on August 1, 2017.
The reverse stock split is intended to increase
the per share trading price of RMG’s common stock to satisfy the
$1.00 minimum bid price requirement for continued listing on The
NASDAQ Capital Market. RMG’s common stock will continue to trade on
The NASDAQ Capital Market under the symbol “RMGN”. As a result of
the reverse stock split, every four pre-split shares of common
stock outstanding will become one share of common stock. The
reverse stock split will reduce the number of shares of RMG's
outstanding common stock from approximately 44.6 million shares to
approximately 11.2 million shares. The reverse split will also
apply to common stock issuable upon the exercise of RMG’s
outstanding warrants and stock options.
RMG’s transfer agent, Continental Stock Transfer
& Trust Company, which is also acting as the exchange agent for
the reverse split, will provide instructions to shareholders
regarding the process for exchanging share certificates. Any
fractional shares of common stock resulting from the reverse stock
split will be rounded up to the nearest whole post-split share and
no shareholders will receive cash in lieu of fractional shares.
Additional information about the reverse stock
split can be found in RMG’s Current Report on Form 8-K being filed
today with the Securities and Exchange Commission (SEC), a copy of
which will be also available at www.sec.gov or in the Investor
Relations section of RMG’s website at www.rmgnetworks.com.
Conference Call
Management will host a conference call to
discuss these results on Thursday, August 3, 2017 at 9 a.m.
ET. To access the call, please dial 1-877-890-5060 (toll
free) or 1-678-967-4604 and reference conference 58633678.
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’s web site at
http://ir.rmgnetworks.com/phoenix.zhtml?c=251935&p=irol-calendar.
All participants should call or access the website approximately 5
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
1-404-537-3406 and entering passcode: 58633678 from 12 p.m. ET on
August 3, 2017 until 11:00 p.m. ET on August 10, 2017.
About RMG
RMG (NASDAQ:RMGN) goes beyond traditional
communications to help businesses increase productivity, efficiency
and engagement through digital messaging. By combining
best-in-class software, hardware, business applications and
services, RMG offers a single point of accountability for
integrated data visualization and real-time performance management.
The company 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 Adj. EBITDA, a non-GAAP
financial measure as defined under SEC regulations. In evaluating
its business, RMG considers and uses Adj. 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 measure and should
not be used in isolation, but in conjunction with this GAAP
measure. Our definition of Adj. EBITDA is set forth in footnote (1)
above, and a reconciliation between Adj. EBITDA and the relevant
GAAP measure is set forth in the table 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,
guidance relating to future financial performance and expected
operating results, such as revenue growth, our ability to effect a
reverse stock split and the timing of such split, our ability to
achieve profitability, our position within the markets that we
serve, our ability to introduce new or improved products and
services (including anticipated upgrades to our technology), our
ability to better market our products and services, our efforts to
grow our business and any implicit continuing improvement in
financial performance.
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.
© 2017 RMG Networks Holding Corporation.
RMG, RMG Networks and its logo are trademarks and/or service marks
of RMG Networks Holding Corporation.
(Financial tables appear below)RMG Networks
Holding CorporationConsolidated Balance
SheetsJune 30, 2017 and December 31,
2016(In thousands, except share and per share
information) |
|
|
|
June 30, |
|
December 31, |
|
|
2017 |
|
2016 |
|
|
|
(Unaudited) |
|
|
|
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
2,202 |
|
|
$ |
5,142 |
|
Accounts receivable,
net of allowance for doubtful accounts of $366 and $364,
respectively |
|
|
9,224 |
|
|
|
10,381 |
|
Inventory, net |
|
|
769 |
|
|
|
830 |
|
Prepaid assets |
|
|
762 |
|
|
|
762 |
|
Total current
assets |
|
|
12,957 |
|
|
|
17,115 |
|
Property and equipment,
net |
|
|
3,275 |
|
|
|
3,710 |
|
Intangible assets,
net |
|
|
5,676 |
|
|
|
6,780 |
|
Loan origination
fees |
|
|
26 |
|
|
|
66 |
|
Other assets |
|
|
188 |
|
|
|
228 |
|
Total assets |
|
$ |
22,122 |
|
|
$ |
27,899 |
|
Liabilities and
Stockholders’ equity |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
1,807 |
|
|
$ |
3,231 |
|
Accrued
liabilities |
|
|
2,158 |
|
|
|
3,392 |
|
Secured line of
credit |
|
|
— |
|
|
|
1,274 |
|
Deferred revenue |
|
|
7,778 |
|
|
|
7,327 |
|
Total current
liabilities |
|
|
11,743 |
|
|
|
15,224 |
|
Warrant liability |
|
|
59 |
|
|
|
289 |
|
Deferred revenue –
non-current |
|
|
620 |
|
|
|
655 |
|
Deferred rent and
other |
|
|
1,538 |
|
|
|
1,646 |
|
Total liabilities |
|
|
13,960 |
|
|
|
17,814 |
|
Stockholders’
equity: |
|
|
|
|
|
|
Common stock, $.0001
par value, (250,000,000 shares authorized; 44,923,949 shares
issued;44,623,949 shares outstanding, at June 30, 2017
and December 31, 2016, respectively.) |
|
|
5 |
|
|
|
5 |
|
Additional
paid-in-capital |
|
|
113,836 |
|
|
|
113,510 |
|
Accumulated other
comprehensive loss |
|
|
(731 |
) |
|
|
(944 |
) |
Retained earnings
(accumulated deficit) |
|
|
(104,468 |
) |
|
|
(102,006 |
) |
Treasury Stock, at cost
(300,000 shares) |
|
|
(480 |
) |
|
|
(480 |
) |
Total stockholders’
equity |
|
|
8,162 |
|
|
|
10,085 |
|
Total liabilities and
stockholders’ equity |
|
$ |
22,122 |
|
|
$ |
27,899 |
|
RMG Networks Holding
CorporationConsolidated Statements of
Comprehensive LossFor the Three and Six Months
Ended June 30, 2017 and 2016 (In thousands,
except share and per share
information)(Unaudited) |
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
$ |
3,854 |
|
|
$ |
3,051 |
|
|
$ |
7,737 |
|
|
$ |
6,906 |
|
|
Maintenance
and content services |
|
|
3,381 |
|
|
|
3,532 |
|
|
|
6,589 |
|
|
|
6,940 |
|
|
Professional services |
|
|
1,852 |
|
|
|
2,128 |
|
|
|
3,730 |
|
|
|
3,531 |
|
|
Total
Revenue |
|
|
9,087 |
|
|
|
8,711 |
|
|
|
18,056 |
|
|
|
17,377 |
|
|
Cost of
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Products |
|
|
1,944 |
|
|
|
1,757 |
|
|
|
4,290 |
|
|
|
3,880 |
|
|
Maintenance
and content services |
|
|
391 |
|
|
|
412 |
|
|
|
800 |
|
|
|
726 |
|
|
Professional services |
|
|
1,131 |
|
|
|
1,462 |
|
|
|
2,401 |
|
|
|
2,667 |
|
|
Total Cost
of Revenue |
|
|
3,466 |
|
|
|
3,631 |
|
|
|
7,491 |
|
|
|
7,273 |
|
|
Gross
Profit |
|
|
5,621 |
|
|
|
5,080 |
|
|
|
10,565 |
|
|
|
10,104 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing |
|
|
2,398 |
|
|
|
2,034 |
|
|
|
4,534 |
|
|
|
3,896 |
|
|
General and
administrative |
|
|
2,706 |
|
|
|
3,076 |
|
|
|
5,554 |
|
|
|
6,289 |
|
|
Research
and development |
|
|
644 |
|
|
|
697 |
|
|
|
1,312 |
|
|
|
1,398 |
|
|
Depreciation and amortization |
|
|
788 |
|
|
|
790 |
|
|
|
1,562 |
|
|
|
1,609 |
|
|
Total
operating expenses |
|
|
6,536 |
|
|
|
6,597 |
|
|
|
12,962 |
|
|
|
13,192 |
|
|
Operating
loss |
|
|
(915 |
) |
|
|
(1,517 |
) |
|
|
(2,397 |
) |
|
|
(3,088 |
) |
|
Other
Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on
change in warrant liability |
|
|
— |
|
|
|
48 |
|
|
|
231 |
|
|
|
48 |
|
|
Interest
(expense) and other income – net |
|
|
(283 |
) |
|
|
129 |
|
|
|
(308 |
) |
|
|
383 |
|
|
Loss before
income taxes and discontinued operations |
|
|
(1,198 |
) |
|
|
(1,340 |
) |
|
|
(2,474 |
) |
|
|
(2,657 |
) |
|
Income tax benefit |
|
|
(12 |
) |
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
|
Total loss
from continuing operations |
|
|
(1,186 |
) |
|
|
(1,340 |
) |
|
|
(2,462 |
) |
|
|
(2,657 |
) |
|
Loss from
discontinued operations, net of taxes |
|
|
— |
|
|
|
(260 |
) |
|
|
— |
|
|
|
(260 |
) |
|
Net
loss |
|
|
(1,186 |
) |
|
|
(1,600 |
) |
|
|
(2,462 |
) |
|
|
(2,917 |
) |
|
Other
comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments |
|
|
164 |
|
|
|
(292 |
) |
|
|
212 |
|
|
|
(404 |
) |
|
Total
comprehensive loss |
|
$ |
(1,022 |
) |
|
$ |
(1,892 |
) |
|
$ |
(2,250 |
) |
|
$ |
(3,321 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.07 |
) |
|
Discontinued operations |
|
|
— |
|
|
|
(0.01 |
) |
|
|
— |
|
|
|
(0.01 |
) |
|
Net loss per share of Common Stock (basic and diluted)
|
|
$ |
(0.03 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.08 |
) |
|
Weighted
average shares used in computing basic anddiluted net loss per
share of Common Stock |
|
|
44,623,949 |
|
|
|
36,882,041 |
|
|
|
44,623,949 |
|
|
|
36,882,041 |
|
|
RMG Networks Holding
CorporationConsolidated Statements of Cash Flows
(Inclusive of Discontinued Operations)Six Months
Ended June 30, 2017 and 2016(In
thousands)(Unaudited) |
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2017 |
|
|
2016 |
|
|
Cash flows from
operating activities |
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,462 |
) |
|
$ |
(2,917 |
) |
|
Adjustments to
reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
1,562 |
|
|
|
1,609 |
|
|
Gain on change in
warrant liability |
|
|
(231 |
) |
|
|
(48 |
) |
|
Loss from disposal of
fixed assets - net of accumulated depreciation |
|
|
75 |
|
|
|
— |
|
|
Stock-based
compensation |
|
|
326 |
|
|
|
610 |
|
|
Non-cash loan
origination fees |
|
|
39 |
|
|
|
34 |
|
|
Non-cash directors’
fees |
|
|
43 |
|
|
|
31 |
|
|
Allowance for doubtful
accounts |
|
|
(14 |
) |
|
|
— |
|
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
|
Accounts
receivable |
|
|
1,053 |
|
|
|
1,910 |
|
|
Inventory |
|
|
52 |
|
|
|
57 |
|
|
Other current
assets |
|
|
(13 |
) |
|
|
202 |
|
|
Other assets, net |
|
|
40 |
|
|
|
10 |
|
|
Accounts payable |
|
|
(1,403 |
) |
|
|
(793 |
) |
|
Accrued
liabilities |
|
|
(1,258 |
) |
|
|
(1,006 |
) |
|
Deferred revenue |
|
|
491 |
|
|
|
223 |
|
|
Loss (gain) on
long-term contract |
|
|
— |
|
|
|
(350 |
) |
|
Deferred rent and other
liabilities |
|
|
(107 |
) |
|
|
(182 |
) |
|
Net cash used in
operating activities |
|
|
(1,807 |
) |
|
|
(610 |
) |
|
Cash flows from
investing activities |
|
|
|
|
|
|
|
Purchases of property
and equipment |
|
|
(107 |
) |
|
|
(140 |
) |
|
Net cash used in
investing activities |
|
|
(107 |
) |
|
|
(140 |
) |
|
Cash flows from
financing activities |
|
|
|
|
|
|
|
Borrowings on line of
credit |
|
|
— |
|
|
|
700 |
|
|
Payments on line of
credit |
|
|
(1,274 |
) |
|
|
— |
|
|
Net cash provided by
(used in) financing activities |
|
|
(1,274 |
) |
|
|
700 |
|
|
Effect of exchange rate
changes on cash |
|
|
248 |
|
|
|
(284 |
) |
|
Net decrease in cash
and cash equivalents |
|
|
(2,940 |
) |
|
|
(334 |
) |
|
Cash and cash
equivalents, beginning of period |
|
|
5,142 |
|
|
|
3,206 |
|
|
Cash and cash
equivalents, end of period |
|
$ |
2,202 |
|
|
$ |
2,872 |
|
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
|
Cash paid
during the period for interest |
|
$ |
12 |
|
|
$ |
105 |
|
|
Cash paid
during the period for income taxes |
|
$ |
— |
|
|
$ |
77 |
|
|
RMG Networks Holding
CorporationReconciliation of Net Loss to Adj.
EBITDAThree and Six Months Ended June
30, 2017 and 2016(In
thousands)(Unaudited) |
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss |
$ |
(1,186 |
) |
|
$ |
(1,600 |
) |
|
$ |
(2,462 |
) |
|
$ |
(2,917 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations, net of taxes
|
|
- |
|
|
|
260 |
|
|
|
- |
|
|
|
260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
continuing operations |
|
|
|
(1,186 |
) |
|
|
(1,340 |
) |
|
|
(2,462 |
) |
|
|
(2,657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense and other (income) - net |
|
|
283 |
|
|
|
(129 |
) |
|
|
308 |
|
|
|
(383 |
) |
Income tax
benefit |
|
|
|
|
(12 |
) |
|
|
- |
|
|
|
(12 |
) |
|
|
- |
|
Gain on
change in warrant liability |
|
|
- |
|
|
|
(48 |
) |
|
|
(231 |
) |
|
|
(48 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss |
|
|
|
|
(915 |
) |
|
|
(1,517 |
) |
|
|
(2,397 |
) |
|
|
(3,088 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
788 |
|
|
|
790 |
|
|
|
1,562 |
|
|
|
1,609 |
|
Stock-based
compensation |
|
|
|
179 |
|
|
|
289 |
|
|
|
326 |
|
|
|
610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adj.
EBITDA |
|
|
|
$ |
52 |
|
|
$ |
(438 |
) |
|
$ |
(509 |
) |
|
$ |
(869 |
) |
Contact:
Investor
Brett Maas/Rob Fink
646-536-7331/646-415-8972
ir@rmgnetworks.com
or
Media
Gloria Lee
972-744-3958
gloria.lee@rmgnetworks.com
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