CST: 26/08/2016 18:19:00   

RMG Networks Reports Fourth Quarter and Year End 2015 Results

169 Days ago

Reports First Positive Quarterly EBITDA in Over Two Years

DALLAS, TX--(Marketwired - Mar 10, 2016) -  RMG Networks Holding Corporation (NASDAQ: RMGN)

Fourth Quarter Highlights

  • EBITDA1 of $0.5M, first positive quarterly EBITDA since 2013
  • Total revenues of $11.8 million increased 15% sequentially
  • Product revenues increased 42% sequentially
  • Operating expenses2 decreased 17% sequentially
  • Awarded Top 20 Promising Supply Chain Solution Provider by CIOReview
  • Awarded second phase of new in-store digital signage deployment for one of RMG Networks' largest retail development projects

RMG Networks Holding Corporation (NASDAQ: RMGN), or RMG Networks™, a leading provider of technology-driven visual communications solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2015.

"During the fourth quarter, we reached a significant milestone for the company, delivering positive EBITDA for the first quarter since 2013," commented Robert Michelson, Chief Executive Officer. "This positive achievement provides the strongest evidence yet that our strategic plan is working. 2015 was a very productive year, we enhanced our leadership team, strengthened our balance sheet, innovated our product portfolio, refined our solution area focus, divested our Media business and improved effectiveness and productivity throughout the organization. In parallel, we substantially reduced our operating expenses, resulting in a cost structure that we believe can support profitable growth in the future."

"As a result of solid execution against the first full year of our strategic plan, we enter 2016 with a more sustainable model and well-positioned for growth and profitability," Mr. Michelson continued. "We are encouraged by our strong sales pipeline, as a result of a broader suite of innovative solutions and an increasingly efficient/effective sales organization. We look forward to leveraging the operational and strategic progress we made in 2015, as we continue to progress toward delivering long-term growth and sustainable profitability."

Fourth Quarter Financial Review

Financial results from RMG Networks' Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss, due to the completion of the sale of this business on July 1, 2015. Prior year results have also been adjusted to report this business as discontinued operations. As a result, the financial results below reflect the Enterprise business at RMG Networks, reported as continuing operations.

Sequential Trends

  • Total revenues in the fourth quarter of 2015 were $11.8 million, up 15.3% from the third quarter of 2015.
    • Product sales revenue of $6.3 million increased 41.7% from $4.4 million in the third quarter of 2015, driven by improved sales execution during the quarter.
    • Maintenance & content services revenue of $3.6 million decreased slightly from $3.7 million in the third quarter of 2015.
    • Professional services revenue of $1.9 million decreased 9.8% from $2.1 million in the third quarter of 2015, resulting from lower realization in the professional services organization.
  • Gross margin was 51.8% in the fourth quarter of 2015, compared to 53.3% in the third quarter of 2015, resulting primarily from a shift in sales mix, consistent with historical seasonal trends.
  • Operating expenses, excluding depreciation, amortization and stock-based compensation expenses, declined to $5.6 million in the fourth quarter of 2015 from $6.8 million in the third quarter of 2015, resulting from continued efforts to reduce the company's overall cost structure.
  • EBITDA3 was $0.5 million, improving from an EBITDA loss of $1.3 million in the third quarter of 2015, resulting from the increase in revenue and reduction in operating expenses described above.

Year-over-Year Trends 4,5

  • Total revenues of $11.8 million represented a decrease of 9.5% from $13.0 million of adjusted revenues in the fourth quarter of 2014, resulting primarily from a large sale that occurred in the fourth quarter of 2014. Maintenance revenue was also lower, resulting from the decision in 2014 to proactively "end-of-life" maintenance services on certain products, consistent with discussion in previous quarters.
  • Gross margin of 51.8% was up from an adjusted gross margin of 45.3% in the fourth quarter of 2014, due primarily to a $1.0 million write-off of obsolete inventory in the fourth quarter of 2014.
  • Operating expenses, excluding depreciation, amortization and stock-based compensation expenses, declined to $5.6 million in the fourth quarter of 2015 from adjusted operating expenses6 of $7.7 million in the fourth quarter of 2014, resulting from continued efforts to reduce the company's overall cost structure.
  • EBITDA3 of $0.5 million improved from an adjusted EBITDA loss4 of $1.8 million in the fourth quarter of 2014.

Reported Results
Fourth Quarter. Total reported revenue for the quarter ended December 31, 2015 was $11.8 million compared to total reported revenue of $12.8 million for the same quarter last year.

Operating loss for the quarter ended December 31, 2015 was $0.8 million compared to $32.0 million for the same quarter last year.

Full Year. Total reported revenue for the year ended December 31, 2015 was $40.6 million compared to total reported revenue of $40.0 million for the prior year.

Operating loss for the year ended December 31, 2015 was $9.8 million compared to $48.1 million for the prior year.

Amendment to Revolving Credit Facility

RMG Networks also announced today that it has entered into an amendment of its revolving credit facility, resetting the monthly consolidated EBITDA covenant levels under the facility for the remainder of 2016.

"We are pleased to have reached an agreement with our lender resetting the monthly EBITDA covenants under our revolving credit facility," commented Mr. Michelson. "This amendment provides us with additional financial flexibility as we continue executing our long-term strategic plan."

Business Outlook

"While the financial results for the fourth quarter demonstrate significant progress toward reaching our long-term goals, our business will continue to be impacted by typical seasonal patterns, which traditionally results in lower revenue levels during the first quarter of the year," noted Mr. Michelson. "We expect to continue demonstrating operational and financial progress in 2016 and with a focused sales strategy, productive sales organization, innovative new solutions and aligned cost structure, we believe we are on-track to delivering long-term revenue growth and sustainable positive EBITDA."

Conference Call

Management will host a conference call to discuss these results on Thursday, March 10, 2016 at 9 a.m. ET. To access the call, please dial 1-866-428-4719 (toll free) or 1-704-908-0405 and reference conference 54235919. 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 Networks' web site at http://ir.rmgnetworks.com/phoenix.zhtml?c=251935&p=irol-calendar. All participants should call or access the website approximately 10 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 1-800-585-8367 and entering passcode: 54235919 from 12 p.m. ET on March 10, 2016 until 11:59 p.m. ET on March 17, 2016.

© 2016 RMG Networks Holding Corporation. RMG Networks and its logo are trademarks and/or service marks of RMG Networks Holding Corporation.

About RMG Networks

RMG NETWORKS (NASDAQ: RMGN) is a worldwide leader in intelligent visual communications that help businesses increase productivity, efficiency and engagement through digital messaging. By combining best-in-class software, hardware, business applications and services, RMG Networks offers a single point of accountability for integrated data visualization and real-time performance management. The company, who values 70% of the Fortune 100 as clients, 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 certain non-GAAP financial measures as defined under SEC regulations, including Adjusted Revenue, Adjusted Gross Margin, Adjusted Operating Expenses, EBITDA and Adjusted EBITDA. In evaluating its business, RMG Networks considers and uses Adjusted Revenue, Adjusted Gross Margin, Adjusted Operating Expenses, EBITDA and Adjusted EBITDA as supplemental measures of its operating performance, and believes that many of the company's investors use these non-GAAP measures to monitor the company's performance. These measures 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.

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, compensation and other benefits derived from the sale of the Airline Media Networks business, guidance relating to future financial performance and expected operating results, such as revenue growth, our ability to achieve profitability, our position within the markets that we serve, efforts to grow our business and the impact of litigation.

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.

1 We define EBITDA as operating income (loss) plus depreciation and amortization expenses and stock-based compensation expense. GAAP operating loss was $0.8 million for Q4 2015. See "About Non-GAAP Financial Measures" below and the reconciliation tables at the end of this release for more information regarding non-GAAP financial measures used in this release.
2 Represents total operating expenses from continuing operations, excluding depreciation, amortization and stock-based compensation expenses.
3 GAAP operating loss was $0.8 million, $2.6 million and $32.0 million for Q4 2015, Q3 2015 and Q4 2014, respectively.
4 Financial results for Q4 2014 are "adjusted" to exclude the effects of purchase accounting, the impact of the impairment of a large non-recurring contract, impairment charges associated with goodwill and intangible assets, acquisition expenses and certain other items that management does not believe reflect the underlying performance of its business. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.
5 GAAP revenue, gross margin, operating expenses and operating loss was $12.8 million, 33.8%, $36.3 and $32.0 million, respectively, for Q4 2014.
6 Excludes non-cash goodwill and intangible asset impairment charges of $26.7 million in Q4 2014.

   
   
RMG Networks Holding Corporation  
Consolidated Balance Sheets  
December 31, 2015 and 2014  
(in thousands, except share and per share information)  
   
    December 31,
2015
    December 31,
2014
 
Assets                
Current assets:                
Cash and cash equivalents   $ 3,206     $ 3,077  
Accounts receivable, net of allowance for doubtful accounts of $676 and $234, respectively     10,626       13,061  
Inventory, net     1,055       1,461  
Deferred tax assets     -       7  
Prepaid assets     1,154       1,175  
Current assets of discontinued operations     -       2,811  
Total current assets     16,041       21,592  
Property and equipment, net     4,340       5,230  
Property and equipment of discontinued operations, net     -       456  
Intangible assets, net     8,988       11,519  
Loan origination fees     123       743  
Other assets     226       228  
Other assets of discontinued operations     -       22  
Total assets   $ 29,718     $ 39,790  
Liabilities and Stockholders' equity (deficit)                
Current liabilities:                
Accounts payable   $ 3,080     $ 4,350  
Accrued liabilities     4,236       3,924  
Secured line of credit     400       -  
Loss on long-term contract     616       2,649  
Deferred revenue     7,507       7,492  
Liabilities of discontinued operations     -       4,677  
Total current liabilities     15,839       23,092  
Notes payable - non-current     -       14,000  
Warrant liability     96       1,447  
Deferred revenue - non-current     1,519       1,478  
Deferred tax liabilities     18       -  
Loss on long-term contract - non-current     -       1,036  
Deferred rent and other     1,917       2,625  
Total liabilities     19,389       43,678  
Stockholders' equity (deficit):                
Common stock, $.0001 par value, (250,000,000 shares authorized; 37,182,041 and 12,467,756 shares issued; 36,882,041 and 12,167,756 shares outstanding, at December 31, 2015 and December 31, 2014, respectively.)     4       1  
Additional paid-in capital     108,237       82,090  
Accumulated other comprehensive income (loss)     (196 )     6  
Retained earnings (accumulated deficit)     (97,236 )     (85,505 )
Treasury Stock, at cost (300,000 shares)     (480 )     (480 )
Total stockholders' equity (deficit)     10,329       (3,888 )
Total liabilities and stockholders' equity (deficit)   $ 29,718     $ 39,790  
                 
                 
   
   
RMG Networks Holding Corporation  
Consolidated Statements of Comprehensive Loss  
Years Ended December 31, 2015 and 2014  
(in thousands, except share and per share information)  
   
    Years Ended December 31,  
    2015     2014  
Revenue:                
Products   $ 17,874     $ 16,061  
Maintenance and content services     14,618       16,096  
Professional services     8,110       7,793  
Total Revenue     40,602       39,950  
Cost of Revenue:                
Products     10,771       12,074  
Maintenance and content services     2,293       2,892  
Professional services     5,440       5,897  
Loss (Gain) on long-term contract     (444 )     2,732  
Total Cost of Revenue     18,060       23,595  
Gross Profit     22,542       16,355  
Operating expenses:                
Sales and marketing     9,106       12,697  
General and administrative     16,084       16,925  
Research and development     3,346       2,945  
Acquisition expenses     -       378  
Depreciation and amortization     3,756       4,830  
Impairment of goodwill and intangible assets     -       26,687  
Total operating expenses     32,292       64,462  
Operating loss     (9,750 )     (48,107 )
Other Income (Expense):                
Gain on change in warrant liability     1,351       665  
Interest (expense) and other income - net     (1,556 )     (1,619 )
Loss before income taxes and discontinued operations     (9,955 )     (49,061 )
Income tax expense (benefit)     122       (7,716 )
Total loss from continuing operations     (10,077 )     (41,345 )
Loss from discontinued operations, net of taxes     (3,994 )     (31,160 )
Gain on sale of discontinued operations, net of taxes     2,340       -  
Net loss     (11,731 )     (72,505 )
Other comprehensive loss -                
Foreign currency translation adjustments     (202 )     (293 )
Total comprehensive loss   $ (11,933 )   $ (72,798 )
  Net loss per share of Common Stock (basic and diluted):                
  Continuing operations   $ (0.36 )   $ (3.40 )
  Discontinued operations     (0.06 )     (2.56 )
  Net loss per share of Common Stock (basic and diluted)   $ (0.42 )   $ (5.96 )
Weighted average shares used in computing basic and diluted net loss per share of Common Stock     27,944,272       12,155,694  
                 
                 
   
   
RMG Networks Holding Corporation  
Consolidated Statements of Cash Flows  
Years Ended December 31, 2015 and 2014  
(Inclusive of Discontinued Operations)  
(in thousands)  
   
    Years Ended December 31,  
    2015     2014  
Cash flows from operating activities                
Net loss   $ (11,731 )   $ (72,505 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     3,897       6,805  
Gain on sale of discontinued operations     (2,340 )     -  
Gain on change in warrant liability     (1,351 )     (665 )
Impairment of intangible assets and goodwill     -       51,109  
Impairment of long-lived assets     209       -  
Stock-based compensation     1,563       2,060  
Non-cash treasury stock     -       (480 )
Non-cash loan origination fees     756       228  
Non-cash consulting expense     320       505  
Non-cash directors' fees     31       116  
Allowance for doubtful accounts     408       -  
Deferred tax (benefit)     25       (6,991 )
Changes in operating assets and liabilities:                
Accounts receivable     2,281       7,650  
Inventory     392       3,172  
Other current assets     129       1,070  
Other assets, net     (294 )     (258 )
Accounts payable     (1,280 )     (1,863 )
Accrued liabilities     (823 )     (282 )
Deferred revenue     141       (950 )
(Gain) loss on long-term contract     (3,068 )     3,348  
Deferred rent and other liabilities     (708 )     (800 )
Net cash used in operating activities     (11,443 )     (8,731 )
                 
Cash flows from investing activities                
Proceeds from sale of discontinued operations     1,190       -  
Purchases of property and equipment     (381 )     (2,293 )
Net cash provided by (used in) investing activities     809       (2,293 )
                 
Cash flows from financing activities                
Borrowings on line of credit, net     400       -  
Proceeds from long-term debt     1,000       6,000  
Debt issuance costs     (137 )     -  
Conversion of preferred stock to common stock     (41 )     -  
Issuance of preferred stock, net of issuance costs     9,627       -  
Net cash provided by financing activities     10,849       6,000  
                 
Effect of exchange rate changes on cash     (86 )     (135 )
Net increase (decrease) in cash and cash equivalents     129       (5,159 )
                 
Cash and cash equivalents, beginning of year     3,077       8,236  
                 
Cash and cash equivalents, end of year   $ 3,206     $ 3,077  
                 
Supplemental disclosures of cash flow information:                
  Cash paid during the period for interest   $ 689     $ 1,579  
  Cash paid during the period for income taxes   $ 275     $ 187  
                 
Non-cash Supplemental information:                
  Leasehold improvements acquired through landlord allowance   $ -     $ 1,250  
  Issuance of common stock for warrants   $ -     $ 2,460  
                   
                   
 
 
RMG Networks Holding Corporation
Reconciliation of Gross Profit
Three Months Ended December 31, 2015 and 2014
(in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31, 2015
(GAAP)
  Purchase Price Accounting Adjustment   Loss on Long-Term Contract     Adjusted
(Non-GAAP)
    (Unaudited)              
Revenue:                          
  Products   $ 6,296   $ -   $ -     $ 6,296
  Maintenance and content services     3,570     -     -       3,570
  Professional services     1,893     -     -       1,893
Total Revenue     11,759     -     -       11,759
                           
Cost of Revenue     5,669     -     -       5,669
                           
Gross Profit   $ 6,090   $ -   $ -     $ 6,090
                           
                           
 
 
 
 
 
 
 
 
Three Months Ended
December 31, 2014
(GAAP)
  Purchase Price Accounting Adjustment   Loss on Long-Term Contract     Adjusted
(Non-GAAP)
    (Unaudited)              
Revenue:                          
  Products   $ 6,587   $ -   $ -     $ 6,587
  Maintenance and content services     4,051     210     -       4,261
  Professional services     2,145     -     -       2,145
Total Revenue     12,783     210     -       12,993
                           
Cost of Revenue     8,465     -     (1,359 )     7,106
                           
Gross Profit   $ 4,318   $ 210   $ 1,359     $ 5,887
                           
                           

Financial results from RMG Networks' Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss due to the completion of the sale of this business on July 1, 2015. As a result, these financial results reflect the Enterprise business at RMG Networks, reported as continuing operations.

 
 
RMG Networks Holding Corporation
Reconciliation of Gross Profit
Years Ended December 31, 2015 and 2014
(in thousands)
 
    Year Ended December 31, 2015
(GAAP)
  Purchase Price Accounting Adjustment   Cost of Revenue
Reclassification
  Loss on Long-Term Contract     Adjusted
(Non-GAAP)
                                 
Revenue:                                
  Products   $ 17,874   $ -   $ -   $ -     $ 17,874
  Maintenance and content services     14,618     -     -     -       14,618
  Professional services     8,110     -     -     -       8,110
Total Revenue     40,602     -     -     -       40,602
                                 
Cost of Revenue     18,060     -     -     444       18,504
                                 
Gross Profit   $ 22,542   $ -   $ -   $ (444 )   $ 22,098
                                 
                                 
    Year Ended December 31, 2014
(GAAP)
  Purchase Price Accounting Adjustment   Cost of Revenue
Reclassification
  Loss on Long-Term Contract     Adjusted
(Non-GAAP)
                                 
Revenue:                                
  Products   $ 16,061   $ -   $ 1,381   $ 988     $ 18,430
  Maintenance and content services     16,096     840     -     395       17,331
  Professional services     7,793     -     -     688       8,481
Total Revenue     39,950     840     1,381     2,071       44,242
                                 
Cost of Revenue     23,595     -     -     (2,732 )     20,863
                                 
Gross Profit   $ 16,355   $ 840   $ 1,381   $ 4,803     $ 23,379
                                 
                                 

Financial results from RMG Networks' Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss due to the completion of the sale of this business on July 1, 2015. As a result, these financial results reflect the Enterprise business at RMG Networks, reported as continuing operations.

   
   
RMG Networks Holding Corporation  
Reconciliation of Operating Loss to Adjusted EBITDA  
(in thousands)  
   
    Fourth Quarter     Full Year  
    2015     2014     2015     2014  
                                 
Operating loss   $ (763 )   $ (31,952 )   $ (9,750 )   $ (48,107 )
                                 
Depreciation and amortization     875       1,325       3,756       4,830  
Stock-based compensation     366       577       1,563       2,060  
                                 
  EBITDA   $ 478     $ (30,050 )   $ (4,431 )   $ (41,217 )
                                 
Revenues that would have been recognized in theperiod had the balance in deferred revenue at the acquisition date not been required to be adjusted to market value at the acquisition date in accordanc ewith GAAP purchase accounting guidelines    



 -
     



 210
     



 -
     



 840
 
Acquisition expenses     -       -       -       378  
Impairment of intangible assets and goodwill     -       26,687       -       26,687  
Loss on long-term contract     -       1,359       (444 )     4,803  
Cost of revenue reclassification     -       -       -       1,381  
Reorganization costs     -       -       -       579  
                                 
  Adjusted EBITDA   $ 478     $ (1,794 )   $ (4,875 )   $ (6,549 )
                                 
                                 

Financial results from RMG Networks' Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss due to the completion of the sale of this business on July 1, 2015. As a result, these financial results reflect the Enterprise business at RMG Networks, reported as continuing operations.

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