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Chicken Soup for the Soul Entertainment Announces $3.1 Million in Revenue for the Second Quarter of 2018

 Reiterates Full-Year 2018 Expectations for $36 Million in Revenue and $18 Million in Adjusted EBITDA

Signs Definitive Agreement to Acquire Leading Subscription-Based Video-On-Demand Service

COS COB, Conn., Aug. 14, 2018 (GLOBE NEWSWIRE) -- Chicken Soup for the Soul Entertainment, Inc. (“CSS Entertainment”) (Nasdaq: CSSE), a growing media company building online video-on-demand (“VOD”) networks that provide positive and entertaining video content for all screens, today announced its financial results for the three- and six-month periods ended June 30, 2018.

Second Quarter 2018 and Subsequent Business Highlights 

  • Total revenue of $3.1 million, in line with expectations
  • Net loss of $1.4 million
  • Adjusted EBITDA of $400,000, in line with expectations
  • Announced a definitive agreement to acquire Pivotshare, a global subscription-based VOD service offering channels online across a variety of categories, including music, sports, religion, arts and culture, lifestyle and family
  • Launched production of a new series, The Fixer (executive produced by actor and investor Ashton Kutcher), which is aimed at helping millennials overcome their financial struggles and the issues that cause them
  • Entered into agreements with four new sponsors for The Fixer: Acorns, Chegg, Handy and Adobe
  • Completed the sale of 646,497 shares of CSS Entertainment’s Series A Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred Stock”) at a price of $25.00 per share with gross proceeds of approximately $16.2 million
  • Repurchased 74,235 shares of Class A common stock at a cost of approximately $633,000
  • Declared a special one-time dividend of $0.45 per share, totaling approximately $5.2 million, on shares of Class A and Class B common stock

William J. Rouhana, Jr., chairman and chief executive officer, stated, “Our online network business increased substantially in the first half of 2018 to nearly $1.4 million in total revenue, demonstrating the commercial appeal of our A Plus and Popcornflix networks. In the three quarters since we acquired Popcornflix, our average monthly views have exceeded 24 million per quarter compared to approximately 19 million views per quarter for the prior three quarters. Adding a global subscription-based VOD service through Pivotshare is the next important step in our VOD strategy. Pivotshare’s 25,000 subscriptions generate nearly $2.4 million in annualized revenue. As a result, our total VOD revenue will exceed $5 million annually.”

Rouhana continued, “There is no doubt that the total value of online VOD services is increasing. AMC’s acquisition of RLJ Entertainment last month for more than a quarter of a billion dollars, Sony’s current valuation of Crackle reported to be approximately $200 million, and GAIA’s market value exceeding $300 million all indicate that our Popcornflix and Pivotshare assets together have great value. We believe this is not yet fully reflected in our current market valuation.”

“The production portion of our business remains ahead of schedule compared to prior years with our latest series, The Fixer, bringing our total half-hours of TV episodes to 20 out of our total goal of 60 episodes committed for production this year,” Rouhana added. “This quarter’s television and short-form video production revenue was driven by already existing series being sold internationally. Our pipeline of additional series is growing, and we are on track to exceed commitments for more than 60 half-hour episodes. We have also begun to work on commitments to fill our 2019 pipeline.”

“We are reiterating our full-year 2018 outlook of $36.0 million in revenue and $18.0 million in Adjusted EBITDA, excluding the pending acquisition of Pivotshare that is not expected to have a material affect this year,” said Scott W. Seaton, vice chairman. “We expect our financial results in the third quarter will reflect the historical acceleration of our business as we head into the second half of the year.”

“We continued to strengthen our balance sheet in the second quarter by successfully placing a public offering of redeemable perpetual preferred stock that was oversubscribed for gross proceeds of $16.4 million,” Seaton continued. “We are pleased that the acquisition of Pivotshare was funded primarily through the issuance of additional perpetual preferred stock giving us a new acquisition currency and further increasing our cash flow and strengthening our balance sheet. We expect to generate approximately $1 million in annualized Adjusted EBITDA from cost synergies related to the acquisition, which is more than twice the amount of the dividends on the preferred shares we issued in connection with the purchase.”

Q2 2018 Financial Summary 

Total revenue for the three months ended June 30, 2018 was $3.1 million compared to $793,000 in the year-ago period. The increase was primarily driven by the acquisition of Screen Media in November 2017, and the growth of online networks. Revenue was generated as follows:

  • Online networks, which include A Plus and Popcornflix, generated $725,000 in revenue in the second quarter of 2018 compared to $92,000 in the second quarter of 2017.
  • Television and film distribution generated $2.0 million in the second quarter of 2018.
  • Television and short-form video production generated $306,000 in the second quarter of 2018, compared to $701,000 in the second quarter last year. 

Gross profit for the three months ended June 30, 2018 was $1.1 million, or 39% of net revenue, compared to $472,000, or 60% of net revenue, for the year-ago period. The lower gross profit percentage results from $1.2 million of non-cash amortization of the film library in the company’s traditional distribution business, which is required by GAAP to be included in cost of goods sold. Without this non-cash charge, the gross profit would have been $2.3 million or 79% of net revenue, which is higher than last year.

Operating loss for the three months ended June 30, 2018 was $1.3 million compared to $162,000 for the year-ago period. The increased operating loss results from the same $1.2 million of non-cash amortization of the film library. Without this non-cash charge, the operating loss would have been $92,000, or slightly better than last year.

Adjusted EBITDA for the three months ended June 30, 2018 was approximately $385,000 compared to $166,000 for the year-ago period. 

Year-to-Date 2018 Financial Summary 

Total revenue for the six months ended June 30, 2018 was $9.1 million compared to $2.2 million in the year-ago period. The increase was primarily driven by the acquisition of Screen Media in November 2017, and the growth of online networks. Revenue was generated as follows:

  • Online networks, which include A Plus and Popcornflix, generated $1.4 million in revenue in the first six months of 2018 compared to $178,000 in the year-ago period.
  • Television and film distribution generated $5.3 million in the first six months of 2018.
  • Television and short-form video production generated $2.4 million in the first six months of 2018, compared to $2.0 million in the year-ago period. 

Gross profit for the six months ended June 30, 2018 was $3.8 million, or 43% of net revenue, compared to $1.4 million, or 64% of net revenue for the year-ago period. The lower gross profit percentage results from $2.6 million of the same non-cash amortization of the film library in the company’s traditional distribution business, which is required by GAAP to be included in cost of goods sold. Without this non-cash charge, the gross profit would have been $6.4 million or 74% of net revenue, which is higher than last year.

Operating loss for the six months ended June 30, 2018 was $1.4 million compared to an operating profit of $379,000 for the year-ago period. The increased operating loss results from the same $2.6 million of non-cash amortization of the film library. Without this non-cash charge, the operating profit would have been $1.2 million, which is significantly better than last year.  

Adjusted EBITDA for the six months ended June 30, 2018 was $2.1 million compared to $860,000 for the year-ago period. 

As of June 30, 2018, the company had $18.2 million of cash and cash equivalents, compared to $2.2 million as of December 31, 2017 and outstanding debt of $7.1 million as of June 30, 2018 compared to $1.5 million outstanding as of December 31, 2017.

Subsequent to quarter end in July 2018, the company’s Board of Directors declared a one-time, special dividend in the amount of $0.45 per share on its common stock, which was paid on August 10, 2018 to the stockholders of record as of the close of business on August 6, 2018.

As of June 30, 2018, the company had repurchased 74,235 shares at a cost of approximately $633,000 under a $5 million stock repurchase program authorized by the board of directors on March 27, 2018.

The company has filed a quarterly report on Form 10-Q with the SEC with respect to its financial results. 

Full Year 2018 Outlook

For the full-year 2018, the company expects to report: 

  • Revenue of approximately $36.0 million
  • Adjusted EBITDA, a non-GAAP measure, of approximately $18.0 million

For a discussion of the financial measures presented herein that 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

To participate in this event, dial in approximately 5 to 10 minutes before the beginning of the call.

  • Date, Time: Tuesday, August 14, 2018, 4:30 p.m. ET
  • Toll-free: (833) 832-5128
  • International: (484) 747-6583
  • Conference ID: 3565988

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: 3565988

About Chicken Soup for The Soul Entertainment

Chicken Soup for the Soul Entertainment, Inc. is a growing media company building online video-on-demand (“VOD”) networks that provide positive and entertaining video content for all screens. The company also curates, produces and distributes long- and short-form video content that brings out the best of the human spirit, and distributes the online content of its affiliate, A Plus. The company is aggressively growing its business through a combination of organic growth, licensing and distribution arrangements, acquisitions, and strategic relationships. The company is also expanding its partnerships with sponsors, television networks and independent producers. The company’s subsidiary, Screen Media, is a leading global independent television and film distribution company that owns one of the largest independently owned television and film libraries. The company also owns Popcornflix®, a popular online advertiser-supported VOD (“AVOD”) network, and four additional AVOD networks that collectively have rights to exhibit thousands of movies and television episodes. Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul, LLC.

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 months ended June 30, 2018 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 offering circular) and uncertainties that 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 the company’s underlying assumptions for the projections contained herein prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from the company’s expectations and projections.

INVESTOR RELATIONS
James Carbonara
Hayden IR
james@haydenir.com  
(646) 755-7412

MEDIA CONTACT
Marion Janic
RooneyPartners LLC
mjanic@rooneyco.com
(212) 223-4017

 

 
Tables Follow
 
 
 
                                             
  Chicken Soup for the Soul Entertainment, Inc.
  Condensed Consolidated Statements of Operations
  (unaudited)
                                             
                    Three Months Ended       Six Months Ended
                    June 30,       June 30, 
                                             
                    2018   2017       2018    2017
                                             
                                             
  Revenue:                                    
                                             
    Online networks     $   724,717     $   91,840         $   1,386,583     $   178,150  
    Television and film distribution       2,031,818         -              5,274,965         -   
    Television and short-form video production       306,000         700,877             2,435,281         2,031,665  
                                             
            Total revenue       3,062,535         792,717             9,096,829         2,209,815  
                                             
    Less: returns and allowances       (125,645 )       -              (445,994 )       -   
                                             
            Net revenue       2,936,890         792,717             8,650,835         2,209,815  
                                             
  Cost of revenue (including $1,168,393 and $0 of non-cash                            
      amortization of film library for the three months ended June 30,                            
      2018 and 2017, respectively, and $2,622,532 and $0 for the six                            
      months ended June 30, 2018 and 2017, respectively)       1,788,416         320,717             4,891,478         794,923  
                                             
            Gross profit       1,148,474         472,000             3,759,357         1,414,892  
                                             
  Operating expenses:                              
                                             
    Selling, general and administrative (including $239,005 and $159,406                            
      of non-cash share-based compensation expense for the three months                          
      ended June 30, 2018 and 2017, respectively, and $493,200 and $292,191)                        
      for the six months ended June 30, 2018 and 2017, respectively)       2,115,264         554,905             4,314,511         814,913  
    Management and license fees        293,689         79,272             865,083         220,982  
                                             
            Total operating expenses       2,408,953         634,177             5,179,594         1,035,895  
                                             
  Operating (loss) income       (1,260,479 )       (162,177 )           (1,420,237 )       378,997  
                                             
  Interest income           3,460         3             3,621         9  
  Interest expense           (97,263 )       (576,612 )           (118,818 )       (1,052,438 )
  Acquisition-related costs       -          -              (45,300 )       -   
                                             
  Loss before income taxes       (1,354,282 )       (738,786 )           (1,580,734 )       (673,432 )
                                             
  Provision for (benefit from) income taxes       79,000         (40,000 )           415,000         159,000  
                                             
  Net loss             $   (1,433,282 )   $   (698,786 )       $   (1,995,734 )   $   (832,432 )
                                             
  Net loss per common share:                            
                                             
    Basic and diluted net loss per common share   $   (0.12 )   $   (0.08 )       $   (0.17 )   $   (0.09 )
                                             
    Weighted average basic and diluted shares outstanding       11,574,924         9,144,282             11,592,555         9,105,949  
                                             
                                             
  See accompanying notes to unaudited condensed consolidated financial statements.
   


                                 
      Three Months Ended June 30,       Six Months Ended June 30,  
      2018     2017
      2018   2017  
                                 
  Net loss as reported   $   (1,433,282 )   $   (698,786 )       $   (1,995,734 )   $   (832,432 )  
                                 
  Provision for (benefit from) income taxes       79,000         (40,000 )           415,000         159,000    
                                 
  Interest expense, net of interest income (a)       93,804         576,609             115,198         1,052,429    
                                 
  Film library amortization, included in cost of revenue (non-cash)       1,168,393         -              2,622,532         -     
                                 
  Share-based compensation expense        239,005         159,406             493,200         292,191    
                                 
  Acquisition-related costs and consulting fees, related to Screen Media     50,000         -              145,300         -     
                                 
  Bad debt expense       52,519         -              140,151         -     
                                 
  Amortization of leasehold improvements       13,033         -              26,066         -     
                                 
  Organization costs and directors costs (b)       -          169,028             -          188,745    
                                 
  Nonrecurring costs       122,276         -              122,276         -     
                                 
    Adjusted EBITDA   $   384,748      $    166,257         $   2,083,991      $    859,933    
                                 
                                 
  (a) Includes non-cash amortization of debt discounts and amortization of deferred financing costs of $14,290 and $849,640 for the six month periods ended June 30, 2018 and 2017, respectively.   
                           
  (b) Includes the costs incurred to form our Company and to prepare for the offering of our common stock to the public. This includes the costs of maintaining a board of directors prior to being a publicly traded company.  
                     


                           
  PART I: FINANCIAL INFORMATION  
                           
  Item 1: Financial Statements            
                           
  Chicken Soup for the Soul Entertainment, Inc.  
  Condensed Consolidated Balance Sheets  
                           
                June 30,     December 31,  
                2018     2017  
                 (unaudited)           
                           
  ASSETS
         
                           
  Cash and cash equivalents $   18,208,439       $   2,172,046  
  Restricted cash       629,975           -   
  Accounts receivable, net     7,615,198           8,058,352  
  Prepaid expenses      247,345           228,145  
  Inventory, net       477,123           368,964  
  Intangible asset - video content license     5,000,000           5,000,000  
  Prepaid distribution fees     1,749,178           1,892,806  
  Other intangible asset     125,000           125,000  
  Popcornflix film rights and other assets     7,174,548           7,163,943  
  Film library, net       23,992,541           22,655,645  
  Due from affiliated companies     6,743,535           6,128,629  
  Programming costs, net     8,879,282           7,651,145  
  Other assets, net     320,627           298,133  
                           
      Total assets $   81,162,791       $   61,742,808  
                           
  LIABILITIES AND STOCKHOLDERS' EQUITY
         
                           
  Senior secured notes payable under revolving line of credit to related party  $   -        $   1,500,000  
  Senior secured term loan and revolving line of credit to third party lender, net of            
    unamortized deferred finance cost of $301,051 and $0, respectively     7,115,616           -   
  Accounts payable and accrued expenses     1,418,991           1,002,536  
  Accrued programming costs     48,833           375,761  
  Film library acquisition obligations     2,240,600           663,400  
  Accrued participation costs     2,526,033           2,620,417  
  Other liabilities       105,382           144,533  
  Deferred tax liability, net     625,000           257,000  
  Deferred revenue     900,000           515,000  
                           
    Total liabilities     14,980,455           7,078,647  
                           
  Commitments and contingencies            
                           
  Stockholders' equity            
                           
  Series A cumulative redeemable perpetual preferred stock, $.0001 par value, liquidation             
    preference of $25.00 per share, 10,000,000 shares authorized; 600,000 and 0 shares issued             
    and outstanding, respectively, redemption value of $15,000,000 and $0, respectively     60           -   
  Class A common stock, $.0001 par value, 70,000,000 shares             
    authorized; 3,798,454 and 3,746,054 shares issued,  3,724,219             
    and 3,746,054 outstanding, respectively     379           374  
  Class B common stock, $.0001 par value, 20,000,000 shares             
    authorized; 7,817,238 and 7,863,938 shares issued and outstanding,            
    respectively       782           786  
  Additional paid-in capital     46,471,079           32,324,500  
  Retained earnings     20,342,765           22,338,501  
  Class A common stock held in treasury, at cost (74,235 shares)     (632,729 )         -   
                           
     Total stockholders' equity     66,182,336           54,664,161  
                           
        Total liabilities and stockholders' equity $   81,162,792       $   61,742,808  
                           
  See accompanying notes to unaudited condensed consolidated financial statements.  
                           

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Chicken Soup for the Soul Entertainment, Inc.