NEW YORK, May 30, 2019 /CNW/ -- Frankly Inc. (TSX
VENTURE: TLK) (Frankly or the Company) reported financial
results for the first quarter ended March
31, 2019. All financial statements have been prepared in
accordance with U.S. Generally Accepted Accounting Principles
(GAAP).
First Quarter 2019 Financial Results (All amounts in U.S.
dollars)
- Revenue decreased 69% to $1.9
million from $6.1 million in
the prior quarter and decreased 68% from $5.8 million in the first quarter of 2018. The
year-over-year decrease in revenue was due to a significant
decrease in license and usage fees and advertising revenues
primarily driven by terminations at the end of 2018 of the
Company's customer agreements with Raycom Media, Inc. ("Raycom")
and Gray Television, Inc. ("Gray"), who finalized their merger on
January 2, 2019, and who accounted
for 18% and 26%, respectively, of the Company's revenue for the
year ended December 31, 2018.
Separately, five other of the Company's top customers terminated
their agreements on or before December 31,
2018. In the aggregate, these terminations represented a
significant percentage of the Company's revenue and have had a
material negative impact on 2019 revenues and related net income
(loss).
- Net loss totaled $(2.0) million
compared to net income of $8.1
million in the prior quarter and net loss of $(3.8) million in the first quarter of 2018. The
sequential decrease in net loss of $10.1
million was primarily due to gain on extinguishment of debt
of $9.3 million recognized in the
fourth quarter of 2018. The year-over-year decrease in net loss of
$1.8 million was primarily due to
decreases in cost of revenue of $1.4
million, general and administrative expense of $1.6 million, and depreciation and amortization
expense of $1.1 million.
Additionally, during the quarter ended March
31, 2018, the Company incurred restructuring expense and
retention expense of $0.5 million and
$0.6 million, respectively, compared
to no restructuring expense and $0.2
million in retention expense in the quarter ended
March 31, 2019, a total decrease of
$0.9 million. Lastly, during the
quarter ended March 31, 2018, the
Company incurred interest expense, net of $0.6 million compared to no interest expense in
the quarter ended March 31, 2019.
These decreases in expenses were partially offset by the
$3.9 million decrease in revenue
discussed above.
- Adjusted EBITDA loss totaled $(1.7)
million compared to adjusted EBITDA loss of $(0.3) million in the prior quarter and adjusted
EBITDA loss of $(0.8) million in the
first quarter of 2018 (see discussion about the presentation of
adjusted EBITDA under the heading "Non-GAAP Measures" below). The
year-over-year increase in adjusted EBITDA loss of $0.9 million was primarily due to the
$3.9 million decrease in revenue
discussed above, partially offset by $3.0
million decrease in cost of revenue and general and
administrative expense discussed above. In addition, the Company
capitalized software development costs in the quarter ended
March 31, 2018 of $0.7 million compared to $0 in the quarter ended March 31, 2019. In the third quarter of 2018, the
Company fully impaired its capitalized software development costs.
As a result, beginning in the fourth quarter of 2018, the Company
no longer capitalized these costs, which consisted of employee and
contractor costs. When considering capitalized software development
costs in the 2018 period, on a comparable basis to the 2019 period,
adjusted EBITDA loss would have amounted to $(1.5) million.
- At March 31, 2019, the Company
had $2.2 million in cash.
Management Commentary
"The beginning of 2019
represented a fresh start for our company," said Frankly CEO
Lou Schwartz. "While our financial
results were impacted by certain legacy customer terminations
occurring at the end of 2018, we have turned this setback into an
opportunity to rebuild and redefine our long-term strategy. More
specifically, we fully extinguished our roughly $26 million debt obligation, bought back nearly
half our stock, and received a new infusion of equity capital, all
while significantly reducing our expenses along the way. Put
together, we are now in a strong position to drive rapid
growth and have attractive capital prospects to augment our
new strategy.
"Going forward, we will continue to leverage our product suite
to pursue adjacent markets where we can realize greater scale
from our existing infrastructure and national footprint of
local broadcasters, publishers and advertisers. Our recent
acquisition of Triton's AMP business is a prime example of how
we plan to drive meaningful growth from efficient use of capital.
With the additional stations added from the Triton acquisition, we
are now serving over 1,200 radio and TV stations throughout the
U.S. and abroad. Greater scale in local markets translates into
higher yield from local advertisers who support the business
operations of TV, radio and print. Additionally, we are now
actively engaged in discussions on several potential transactions,
which would have otherwise been unlikely given the company's
previous significant debt burden. We are looking forward to making
additional transactions that fit this type of profile, which
enable us to more fully build out our digital media ecosystem
and advance our position in the market. In all, we remain
increasingly confident in Frankly's prospects for growth and
sustained profitability in the years ahead."
About Frankly
Frankly Media provides a complete suite
of digital solutions for media companies to create, manage,
distribute and monetize their content on all platforms maximizing
audience engagement and revenue potential. The company is
headquartered in New York with
offices in Atlanta. For more
information, visit www.franklymedia.com.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Non-GAAP Measures
The Company reports earnings before
interest, taxes, depreciation and amortization ("EBITDA") and
Adjusted EBITDA, which are not financial measures calculated and
presented in accordance with Generally Accepted Accounting
Principles ("GAAP") and therefore may not be comparable to similar
measures presented by other issuers. EBITDA and Adjusted EBITDA
should not be considered in isolation or as a substitute to net
income (loss) or any other financial measures of performance or
liquidity calculated and presented in accordance with GAAP. The
Company defines Adjusted EBITDA as EBITDA, adjusted to exclude
certain non-cash charges and other items that we do not believe are
reflective of our ongoing operating results. The Company utilizes
Adjusted EBITDA internally for purposes of forecasting, determining
compensation, and assessing the performance of our business,
therefore, we believe this measure provides useful supplemental
information that may assist investors in assessing an investment in
the Company.
The following unaudited table presents the reconciliation of net
loss to Adjusted EBITDA for the three months ended March 31, 2019 and 2018, respectively.
|
|
Three Months
Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
|
|
|
Net
Loss
|
|
$
(1,958,080)
|
|
$
(3,809,493)
|
Interest expense,
net
|
|
-
|
|
597,096
|
Income tax
expense
|
|
-
|
|
-
|
Depreciation and
amortization
|
|
24,708
|
|
1,147,245
|
Stock-based
compensation
|
|
14,162
|
|
235,040
|
Transaction
costs
|
|
-
|
|
24,673
|
Restructuring
expense
|
|
-
|
|
460,960
|
Retention
expense
|
|
205,632
|
|
588,099
|
Other
expense
|
|
1,273
|
|
-
|
Adjusted
EBITDA
|
|
$
(1,712,305)
|
|
$
(756,380)
|
Notice Regarding Forward-Looking
Statements
This release includes forward-looking
statements regarding Frankly and its respective businesses,
including statements with respect to the completion of the
transactions contemplated in the agreements with Raycom and SKP
America, the effect of the transactions with Raycom, SKP America,
and Triton on the Company's operations and strategy, the ability to
leverage the Company's product suite to pursue adjacent
markets and realize additional benefits from existing
infrastructure, the intention to complete additional transactions
and their effect on the Company's operations, and the Company's
growth and profitability in the future. Forward-looking events and
circumstances discussed in this release may not occur by certain
specified dates or at all and could differ materially as a result
of known and unknown risk factors and uncertainties affecting the
parties. Forward looking statements depend on certain
assumptions that management deems to be reasonable in the
circumstances, but such assumptions may prove to be incorrect and
the outcome of the subject of any forward-looking statement cannot
be guaranteed. Such assumptions are based on, among other things,
unaudited historical financial performance of acquired assets,
evaluation of market dynamics and opportunities, and contractual
obligations. Except as required by applicable securities laws,
forward-looking statements speak only as of the date on which they
are made and Frankly undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events, or otherwise.
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SOURCE Frankly Media