First full quarter with AVOD business Crackle Plus drives record top line results

COS COB, Conn., Nov. 14, 2019 (GLOBE NEWSWIRE) -- Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE), a growing media company building advertising-supported video-on-demand (AVOD) networks and a provider of video content for all screens, today announced its financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Financial Highlights

  • Total revenue of $17.0 million, compared to $6.6 million in the year-ago period
  • Net loss of $13.3 million; with a net loss of $12.4 million before preferred dividends, compared to a net loss of $0.2 million in the year-ago period and a net income of $0.2 million before preferred dividends
  • Adjusted EBITDA was a loss of $0.4 million, compared to positive adjusted EBITDA of $3.4 million in the year-ago period
  • Online networks, which includes Crackle, Popcornflix and Pivotshare, generated $14.4 million in revenue compared to $1.8 million in the year-ago period            

Recent Business Highlights

  • Crackle Plus delivers solid results in first full quarter
  • New Crackle original series, ‘Going From Broke’ drives unprecedented engagement
  • Launched Landmark Studio Group in partnership with entertainment industry veteran David Ozer
  • Foresight film library acquisition expands Screen Media library and enhances distribution capabilities

“Our record third quarter results show the early promise of our transformation of our company into a leading AVOD network operator,” said William J. Rouhana Jr., chairman and chief executive officer of Chicken Soup for the Soul Entertainment. “Crackle Plus is performing as expected, and our new original series ‘Going From Broke’ provides initial evidence of our growing network reach and engagement potential. We are also reinventing our distribution and production business to support our networks under a capital-light model focused on innovative studio launches, library content acquisitions and sponsor-funded original productions. We already see significant positive business momentum in the fourth quarter, where we expect to see a combination of all our primary strategic pieces in place for the first time, setting the stage for potentially significant growth in 2020.”
             
Gross profit for the quarter ended September 30, 2019 was $3.2 million, or 19% of net revenue, compared to $4.0 million, or 62% of net revenue for the year-ago period. The reduction in the percentage of gross profit was a result of an increase in online networks revenue which has a lower gross profit percentage.  

Operating loss for the quarter ended September 30, 2019 was $9.6 million compared to an operating income of $0.9 million for the year-ago period. The quarterly operating loss reflects certain non-cash or one-time expenses including $4.7 million in non-cash amortization, $1.6 million of transitional expenses related to the Crackle Plus joint venture, and $1.2 million in film library amortization. If such expenses were excluded from SG&A or cost of revenue, the company would have reported a quarterly operating loss of $2.1 million.  

Net loss was $13.3 million, or $1.11 per share, compared to a net loss of $0.2 million, or $0.02 per share in the prior-year third quarter. Excluding preferred dividends, the net loss in the third quarter of 2019 would have been $12.4 million, or approximately $1.03 per share, compared to net income of $0.2 million, or $0.02 per share last year.

Adjusted EBITDA for the quarter ended September 30, 2019 was a loss of $0.4 million, compared to $3.4 million in the same period last year.

As of September 30, 2019, the company had $6.2 million of cash and cash equivalents compared to $7.2 million as of December 31, 2018, and outstanding debt of $16.0 million as of September 30, 2019 compared to $7.9 million as of December 31, 2018.

For a discussion of the financial measures presented herein which are not calculated or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), see "Note Regarding Use of Non-GAAP Financial Measures" below and the schedules to this press release for additional information and reconciliations of non-GAAP financial measures.

The company presents non-GAAP measures such as Adjusted EBITDA and Pro Forma Adjusted EBITDA to assist in an analysis of its business. These non-GAAP measures should not be considered an alternative to GAAP measures as an indicator of the company's operating performance.

Conference Call Information

  • Date, Time: Thursday, November 14, 2019, 4:30 p.m. ET.
  • Toll-free: (833) 832-5128
  • International: (484) 747-6583
  • Conference ID: 4392318
  • A live webcast is available at http://ir.cssentertainment.com/ under the “News & Events” tab

Conference Call Replay Information

  • Toll-free: (855) 859-2056
  • International: (404) 537-3406
  • Reference ID: 4392318

ABOUT CHICKEN SOUP FOR THE SOUL ENTERTAINMENT
Chicken Soup for the Soul Entertainment, Inc. (Nadsaq: CSSE) is a growing media company building and acquiring streaming video-on-demand networks (VOD) that provide content for all screens. The company owns a majority stake in Crackle Plus, a joint venture with Sony Pictures Television, which owns and operates a variety of ad-supported and subscription-based VOD networks including Crackle, Popcornflix, Popcornflix Kids, Truli, Pivotshare, Españolflix and FrightPix. The company also acquires and distributes video content through its Screen Media subsidiary and produces long and short-form original content through Landmark Studio Group, its Chicken Soup for the Soul Originals division and through APlus.com. Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul, LLC, which publishes the famous book series and produces super-premium pet food under the Chicken Soup for the Soul brand name.

Note Regarding Use of Non-GAAP Financial Measures
The company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). It uses a non-GAAP financial measure to evaluate its results of operations and as a supplemental indicator of operating performance. The non-GAAP financial measure that is used is Adjusted EBITDA. Adjusted EBITDA (as defined below) is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Management believes this non-GAAP financial measure enhances the understanding of the company’s historical and current financial results and enables the board of directors and management to analyze and evaluate financial and strategic planning decisions that will directly affect operating decisions and investments. The presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or non-recurring items or by non-cash items. This non-GAAP financial measure should be considered in addition to, rather than as a substitute for, the company’s actual operating results included in its condensed consolidated financial statements.

“Adjusted EBITDA” means earnings before interest, taxes, depreciation, amortization and non-cash share-based compensation expense, and also includes the gain on bargain purchase of subsidiary and adjustments for other identified charges such as costs incurred to form the company and to prepare for the offering of its Class A common stock to the public, prior to its IPO. Identified charges also include the cost of maintaining a board of directors prior to being a publicly traded company. As the IPO has been completed, director fees will be deducted from Adjusted EBITDA going forward. Adjusted EBITDA is not an earnings measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP; accordingly, Adjusted EBITDA may not be comparable to similar measures presented by other companies. Management believes Adjusted EBITDA to be a meaningful indicator of the company’s performance that provides useful information to investors regarding its financial condition and results of operations. The most comparable GAAP measure is operating income.

A reconciliation of net loss to Adjusted EBITDA is provided in the company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Reconciliation of Unaudited Historical Results to Adjusted EBITDA.”

FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are subject to risks (including those set forth in the Annual Report on Form 10-K, filed with the Securities and Exchange Commission on April 1, 2019, as amended April 30, 2019 and June 4, 2019) and uncertainties which could cause actual results to differ from the forward-looking statements. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. Investors should realize that if our underlying assumptions for the projections contained herein prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections.

INVESTOR RELATIONSMEDIA CONTACT
Taylor KrafchikKate Barrette
EllipsisRooneyPartners LLC
CSSE@ellipsisir.comkbarrette@rooneyco.com
646-776-0886(212) 223-0561

Tables Follow


 

Chicken Soup for the Soul Entertainment, Inc.
Condensed Consolidated Balance Sheets

       
  September 30,  December 31, 
  2019  2018 
  (unaudited)   
ASSETS      
Cash and cash equivalents $ 6,194,964  $ 6,451,758 
Restricted cash   —    750,000 
Accounts receivable, net   27,731,931    12,841,099 
Prepaid expenses   1,117,969    218,736 
Inventory, net   291,917    262,068 
Goodwill   17,466,681    2,537,079 
Indefinite lived intangible assets   12,163,943    12,163,943 
Intangible assets, net   47,081,028    2,971,637 
Film library, net   31,997,384    25,338,502 
Due from affiliated companies   7,010,065    1,213,436 
Programming costs, net   13,961,506    12,790,489 
Program rights   826,567    — 
Deferred tax asset   —    452,000 
Other assets, net   316,878    356,221 
Total assets $ 166,160,833  $ 78,346,968 
       
LIABILITIES AND EQUITY      
Current maturities of commercial loan $ 3,200,000  $ 1,000,000 
Commercial loan and revolving line of credit, net of unamortized deferred finance cost of $188,803 and $334,554, respectively   12,611,197    6,582,113 
Accounts payable and accrued expenses   19,792,234    5,078,805 
Ad Representation fees payable   8,421,104    — 
Film library acquisition obligations   5,735,100    2,715,600 
Programming Obligations   6,005,154    — 
Accrued participation costs   1,308,575    1,539,139 
Other liabilities   5,142,105    414,506 
Deferred revenue   —    6,469 
Total liabilities   62,215,469    17,336,632 
Commitments and contingencies (Note 16)      
       
Equity      
Stockholder's Equity:      
Series A cumulative redeemable perpetual preferred stock, $.0001 par value, liquidation preference of $25.00 per share, 10,000,000 shares authorized; 1,599,002 and 918,497 shares issued and outstanding, respectively, redemption value of $39,975,050 and $22,962,425, respectively   160    92 
Class A common stock, $.0001 par value, 70,000,000 shares authorized; 4,259,920 and 4,227,740 shares issued, 4,185,685 and 4,153,505 shares outstanding, respectively   425    421 
Class B common stock, $.0001 par value, 20,000,000 shares authorized; 7,813,938 and 7,817,238 shares issued and outstanding, respectively   782    782 
Additional paid-in capital   88,077,143    59,360,583 
Retained (deficit) earnings   (20,335,402)   2,281,187 
Class A common stock held in treasury, at cost (74,235 shares)   (632,729)   (632,729)
Total stockholders’ equity   67,110,379    61,010,336 
Subsidiary convertible preferred stock (Note 17)   36,350,000    — 
Noncontrolling interests (Note 17)   484,985    — 
Total Equity   103,945,364    61,010,336 
Total liabilities and equity $ 166,160,833  $ 78,346,968 

Chicken Soup for the Soul Entertainment, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

             
  Three Months Ended September 30,  Nine Months Ended September 30, 
  2019  2018* 2019  2018*
Revenue:            
Online networks $ 14,383,659  $ 1,809,689  $ 25,128,001  $ 3,339,901 
Television and film distribution   2,613,872    2,510,462    6,058,862    7,785,427 
Television and short-form video production   48,557    2,283,933    596,252    4,720,094 
Total revenue   17,046,088    6,604,084    31,783,115    15,845,422 
Less: Television & film distribution returns and allowances   (255,394)   (107,300)   (828,785)   (553,294)
Net revenue   16,790,694    6,496,784    30,954,330    15,292,128 
Cost of revenue   13,614,648    2,471,136    23,568,743    7,398,107 
Gross profit   3,176,046    4,025,648    7,385,587    7,894,021 
Operating expenses:            
Selling, general and administrative   6,371,870    2,324,632    13,894,351    7,467,654 
Amortization   4,695,522    149,596    5,631,136    197,751 
Management and license fees   1,676,303    647,603    3,091,093    1,512,687 
Total operating expenses   12,743,695    3,121,831    22,616,580    9,178,092 
Operating (loss) income   (9,567,649)   903,817    (15,230,993)   (1,284,071)
Interest income   8,997    16,883    34,546    20,530 
Interest expense   (195,881)   (133,121)   (483,363)   (251,939)
Loss on extinguishment of debt   (350,691)   —    (350,691)   
Acquisition-related costs   (1,078,637)   (182,832)   (3,735,373)   (228,132)
(Loss) income before income taxes and preferred dividends   (11,183,861)   604,747    (19,765,874)   (1,743,612)
Provision for income taxes   1,248,000    375,000    557,000    579,000 
Net (loss) income before noncontrolling interests and preferred dividends   (12,431,861)   229,747    (20,322,874)   (2,322,612)
Net (loss) attributable to noncontrolling interests   (37,473)   —    (36,960)   — 
Net (loss) income attributable to Chicken Soup for the Soul Entertainment, Inc.   (12,394,388)   229,747    (20,285,914)   (2,322,612)
Less: Preferred dividends   929,387    422,779    2,330,675    422,779 
Net (loss) available to common stockholders $ (13,323,775) $ (193,032) $ (22,616,589) $ (2,745,391)
Net (loss) per common share:            
Basic and diluted $ (1.11) $ (0.02) $ (1.89) $ (0.23)

* In accordance with ASC Subtopic 805‑50 "Transactions between entities under common control", results of operations for the 2018 period have been retrospectively adjusted for the acquisition of A Plus on December 28, 2018 to furnish comparative information as required. The effects of intra-entity transactions have been eliminated as a part of the consolidation, where applicable.

Chicken Soup for the Soul Entertainment, Inc.

Adjusted EBITDA

       
  Three Months Ended September 30, 
  2019  2018 
Net loss available to common stockholders, as reported $ (13,323,775) $ (193,032)
Preferred dividends   929,387    422,779 
Provision for income taxes   1,248,000    375,000 
Other Taxes   54,590    — 
Interest expense, net of interest income   186,884    116,238 
Film library and program rights amortization, included in cost of revenue (non-cash)   1,369,874    1,033,983 
Share-based compensation expense   303,205    243,592 
Acquisition-related costs and other one-time consulting fees   1,078,637    527,832 
Reserve for bad debt & video returns   722,729    574,355 
Amortization   4,695,522    138,551 
Loss on extinguishment on debt   350,691    — 
Transitional Expenses (a)   1,634,771    — 
All other nonrecurring costs   377,184    198,973 
Adjusted EBITDA $ (372,301) $ 3,438,271 


       
  Nine Months Ended September 30, 
  2019  2018 
Net loss available to common stockholders, as reported $ (22,616,589) $ (2,745,391)
Preferred dividends   2,330,675    422,779 
Provision for income taxes   557,000    579,000 
Other Taxes   386,265    — 
Interest expense, net of interest income   448,817    231,409 
Film library and program rights amortization, included in cost of revenue (non-cash)   3,804,268    3,656,515 
Share-based compensation expense   794,149    736,792 
Acquisition-related costs and other one-time consulting fees   3,735,373    698,132 
Reserve for bad debt & video returns   1,275,059    714,506 
Amortization   5,631,136    197,751 
Loss on extinguishment on debt   350,691    — 
Transitional Expenses (a)   2,876,124    — 
All other nonrecurring costs   564,239    296,251 
Adjusted EBITDA $ 137,207  $ 4,787,744 

(a) Represents transitional acquisition related expenses primarily associated with the Crackle Plus business combination. Costs include primarily non recurring payroll and related expenses and redundant non recurring technology costs incurred to transition the acquired business.