News Release

Chicken Soup for the Soul Entertainment Reports Q2 2020 Results

Published on: August 13, 2020
Rising viewership of Original & Exclusive content paired with continued momentum in Distribution and Production drives strong Q2

COS COB, Conn., Aug. 13, 2020 (GLOBE NEWSWIRE) -- Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE), one of the largest operators of streaming advertising-supported video-on-demand (AVOD) networks, today announced its financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 Financial Summary

  • Gross revenue of $13.9 million, compared to $12.2 million in the year-ago period.
  • Net loss of $10.0 million compared to net loss of $5.9 million in the year-ago period; $9.0 million net loss before preferred dividends, compared to $5.1 million net loss before preferred dividends in the year-ago period.
  • Adjusted EBITDA was $2.7 million, compared to $1.3 million in the year-ago period. Year-to-date Adjusted EBITDA increased approximately 10x over year-to-date 2019 results.
  • Online networks, which include Crackle and Popcornflix, generated $5.4 million in net revenue compared to $10.0 million in the year-ago period. The year-over-year decline reflects the absence of approximately $4.0 million in advertising revenue in the 2020 period due to the closing of Playstation Vue, the elimination of $1.2 million of intercompany revenue share payments to our Distribution & Production business, and the weaker 2020 advertising market environment.
  • Distribution & Production generated $8.5 million in revenue, compared to $2.2 million in the year-ago period due to strength in the performance of Screen Media’s content on Crackle Plus and TVOD revenue.

Recent Business Highlights

  • Original & Exclusive content represented 17.5% of total viewing on Crackle Plus in the quarter up from 15% last quarter and 0% a year ago, reflecting the company’s strategic focus on original programming.
  • Continued to expand pipeline of Original & Exclusive content. Crackle Plus is fully programmed into early 2021 despite industry production delays and has announced agreements including 200 hours of new original and exclusive programming.
  • Acquired an in-process next-generation technology platform to support delivery and growth of AVOD networks from Sony for $4.6 million; acquisition will enable Chicken Soup for the Soul Entertainment to accelerate completion of platform, which will improve service and drive ongoing operating cost efficiencies beginning immediately.
  • Increased liquidity through bond issuance that raised an aggregate principal amount of more than $22.1 million after underwriters exercised their over-allotment option.

“Despite a challenging Q2 advertising market, we were able to exceed top line expectations and increase our EBITDA by 10-fold for the six months ended June 30, 2020 on a year-over-year basis. Our results are validating our differentiated business model focused on Original & Exclusive content for our AVOD networks, and acquiring and producing that content cost-effectively through our combined Distribution and Production operations,” said William J. Rouhana Jr., chairman and chief executive officer of Chicken Soup for the Soul Entertainment. “Since establishing the Crackle Plus joint venture a little over a year ago, the execution of our strategic plan is going well, and we believe we now have a solid foundation on which to implement the next stages of our growth strategy, which include accelerating the rollout of our next generation technology platform, growing viewership through increased distribution relationships, and building audience and advertising revenue. While the pandemic adversely impacted us in the quarter and continues to create uncertainties, we have adapted and now have momentum and significant tailwinds to our performance potential in the second half of 2020.”

Gross profit for the quarter ended June 30, 2020 was $0.6 million, or 4% of net revenue, compared to $3.6 million, or 30% of net revenue for the year-ago period. The change in the percentage of gross profit resulted in part from $6.4 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 revenue. Without this non-cash film library amortization expense, the gross profit would have been $7.0 million or 51% of total net revenue.

Operating loss for the quarter ended June 30, 2020 was $13.1 million, compared to an operating loss of $3.0 million for the year-ago period. Without this film library amortization expense, the operating loss would have been $6.7 million.

Net loss was $10.0 million, or $0.83 per share, compared to a net loss of $5.9 million, or $0.49 per share in the prior-year second quarter. Excluding preferred dividends, the net loss in the second quarter of 2020 would have been $9.0 million, or $0.75 per share, compared to net loss of $5.1 million, or $0.43 per share last year.

Adjusted EBITDA for the quarter ended June 30, 2020 was $2.7 million, compared to $1.3 million in the same period last year.

As of June 30, 2020, the company had $4.7 million of cash and cash equivalents compared to $6.4 million at December 31, 2019, and outstanding debt of $18.6 million as of June 30, 2020 compared to $20.2 million as of December 31, 2019. The company completed debt and equity financings after the end of the second quarter that increased liquidity.

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, August 13, 2020, 4:30 p.m. ET.
  • Toll-free: (833) 832-5128
  • International: (484) 747-6583
  • Conference ID: 6999674
  • A live webcast and replay will be available at under the “News & Events” tab

Conference Call Replay Information

  • Toll-free: (855) 859-2056
  • International: (404) 537-3406
  • Conference ID: 6999674

Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE) operates streaming video-on-demand networks (VOD). The company owns a majority stake in Crackle Plus, a company formed 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 original long and short-form content through Landmark Studio Group, its Chicken Soup for the Soul Originals division and 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 Annual Report on Form 10-Q for the three and six month periods ended June 30, 2020 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Reconciliation of Unaudited Historical Results to Adjusted EBITDA.”

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 March 30, 2020) 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.

Taylor Krafchik

Kate Barrette
RooneyPartners LLC
(212) 223-0561

Chicken Soup for the Soul Entertainment, Inc.     
Condensed Consolidated Balance Sheets    
    June 30   December 31    
Cash and cash equivalents   $ 4,655,317     $ 6,447,402      
Accounts receivable, net     22,573,432       34,661,119      
Prepaid expenses and other current assets     1,485,557       1,173,223      
Goodwill     21,448,106       21,448,106      
Indefinite lived intangible assets     12,163,943       12,163,943      
Intangible assets, net     25,093,057       35,451,951      
Film library, net     41,105,470       33,250,149      
Due from affiliated companies     4,996,754       7,642,432      
Programming costs and rights, net     16,418,308       15,113,574      
Other assets, net     5,303,550       313,585      
Total assets   $ 155,243,494     $ 167,665,484      
Current maturities of commercial loan   $ 3,200,000     $ 3,200,000      
Commercial loan, net of unamortized deferred finance cost of $169,219 and $189,525 respectively     10,230,781       11,810,475      
Notes payable under revolving credit facility     5,000,000       5,000,000      
Accounts payable and accrued expenses     30,041,385       26,646,390      
Ad representation fees payable     8,511,033       12,429,838      
Film library acquisition obligations     8,335,600       5,020,600      
Programming obligations     6,416,012       7,300,861      
Accrued participation costs     12,064,073       5,066,512      
Other liabilities     1,484,050       170,106      
Total liabilities     85,282,934       76,644,782      
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; 1,599,002 shares issued and outstanding, redemption value of $39,975,050     160       160      
Class A common stock, $.0001 par value, 70,000,000 shares authorized; 4,267,725 and 4,259,920 shares issued, 4,193,490 and 4,185,685 shares outstanding, respectively     426       425      
Class B common stock, $.0001 par value, 20,000,000 shares authorized; 7,813,938 shares issued and outstanding     782       782      
Additional paid-in capital     88,084,137       87,610,030      
Deficit     (54,133,136 )     (32,695,629 )    
Class A common stock held in treasury, at cost (74,235 shares)     (632,729 )     (632,729 )    
Total stockholders’ equity     33,319,640       54,283,039      
Subsidiary convertible preferred stock     36,350,000       36,350,000      
Noncontrolling interests     290,920       387,663      
Total equity     69,960,560       91,020,702      
Total liabilities and equity   $ 155,243,494     $ 167,665,484      

Chicken Soup for the Soul Entertainment, Inc.   
Condensed Consolidated Statements of Operations  
    Three Months Ended June 30   Six Months Ended June 30  
Online networks   $ 5,360,693     $ 10,009,078     $ 14,386,403     $ 10,744,342    
Distribution and Production     8,537,956       2,202,451       13,630,745       3,992,685    
Total revenue     13,898,649       12,211,529       28,017,148       14,737,027    
Less: returns and allowances     (378,109 )     (241,047 )     (1,252,535 )     (573,391 )  
Net revenue     13,520,540       11,970,482       26,764,613       14,163,636    
Cost of revenue     12,933,545       8,321,994       22,843,935       9,954,095    
Gross profit     586,995       3,648,488       3,920,678       4,209,541    
Operating expenses:                          
Selling, general and administrative     7,052,776       4,700,424       13,892,673       7,522,481    
Amortization and depreciation     5,241,415       729,991       10,446,143       935,614    
Management and license fees     1,352,054       1,195,520       2,676,461       1,414,790    
Total operating expenses     13,646,245       6,625,935       27,015,277       9,872,885    
Operating loss     (13,059,250 )     (2,977,447 )     (23,094,599 )     (5,663,344 )  
Interest expense     333,903       146,359       663,028       287,482    
Acquisition-related costs           2,258,801       98,926       2,656,736    
Other non-operating income, net     (4,331,409 )     (12,024 )     (4,337,847 )     (25,549 )  
Loss before income taxes and preferred dividends     (9,061,744 )     (5,370,583 )     (19,518,706 )     (8,582,013 )  
Provision for (benefit from) income taxes     18,000       (253,000 )     67,000       (691,000 )  
Net loss before noncontrolling interests and preferred dividends     (9,079,744 )     (5,117,583 )     (19,585,706 )     (7,891,013 )  
Net (loss) income attributable to noncontrolling interests     (43,889 )     513       (96,743 )     513    
Net loss attributable to Chicken Soup for the Soul Entertainment, Inc.     (9,035,855 )     (5,118,096 )     (19,488,963 )     (7,891,526 )  
Less: preferred dividends     974,272       797,981       1,948,544       1,401,288    
Net loss available to common stockholders   $ (10,010,127 )   $ (5,916,077 )   $ (21,437,507 )   $ (9,292,814 )  
Net loss per common share:                          
Basic and diluted   $ (0.83 )   $ (0.49 )   $ (1.79 )   $ (0.78 )  

Chicken Soup for the Soul Entertainment, Inc.     
Adjusted EBITDA    
    Three Months Ended June 30    
Net loss available to common stockholders   $ (10,010,127 )   $ (5,916,077 )    
Preferred dividends     974,272       797,981      
Provision for income taxes     18,000       (253,000 )    
Other taxes     51,240       50,465      
Interest expense     333,903       146,359      
Film library and program rights amortization     6,407,283       1,563,268      
Share-based compensation expense     229,273       275,097      
Acquisition-related costs           2,258,801      
Reserve for bad debt and video returns     812,741       218,111      
Amortization and depreciation     5,496,972       729,991      
Other non-operating income, net     (4,331,409 )     (12,024 )    
Transitional expenses     2,239,876       1,241,353      
All other nonrecurring costs     469,392       162,901      
Adjusted EBITDA   $ 2,691,416     $ 1,263,226      
    Six Months Ended June 30    
Net loss available to common stockholders   $ (21,437,507 )   $ (9,292,814 )    
Preferred dividends     1,948,544       1,401,288      
Provision for income taxes     67,000       (691,000 )    
Other Taxes     104,651       331,675      
Interest expense     663,028       287,482      
Film library and program rights amortization     8,902,115       2,434,394      
Share-based compensation expense     474,108       490,944      
Acquisition-related costs     98,926       2,656,736      
Reserve for bad debt & video returns     2,534,336       518,514      
Amortization and depreciation     10,701,700       935,614      
Other non-operating income, net     (4,337,847 )     (25,549 )    
Transitional expenses     4,353,345       1,241,353      
All other nonrecurring costs     656,340       187,056      
Adjusted EBITDA   $ 4,728,739     $ 475,693      

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Source: Chicken Soup for the Soul Entertainment, Inc.