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RLJ Entertainment Reports First Quarter 2018 Financial Results

Digital Channels Subscribers Increased over 44% Year-Over-YearNet Revenue Increased 34% Year-Over-Year with Growth Across All SegmentsGross Profit Increased 85% Year-Over-Year; Gross Margin Increased ... (May 10, 2018)

SILVER SPRING, Md., May 10, 2018 /PRNewswire/ -- RLJ Entertainment, Inc. ("RLJ Entertainment," "RLJE" or "the Company") (NASDAQ: RLJE), today announced financial results for the quarter ended March 31, 2018. 

RLJ Entertainment, Inc. (PRNewsFoto/RLJ Entertainment, Inc.)

First Quarter 2018 Highlights



  • Digital Channels paying subscribers increased 44.2% from the first quarter of 2017 to over 750,000. Digital Channels segment revenues increased 45.4% to $8.7 million from $6.0 million in first quarter 2017.
  • Total net revenue increased 33.8% year-over-year to $18.6 million, primarily driven by the increase in Digital Channels revenue. Wholesale Distribution segment revenue also increased 24.9% year-over-year.
  • Gross profit increased 84.6% year-over-year to $8.8 million and gross margin of 47.4% expanded 13 percentage points from 34.3% last year. These profit improvements were driven by growth in Digital Channels revenue as well as revenue growth and gross margin expansion in Wholesale Distribution.
  • Equity earnings from Agatha Christie Limited (ACL) increased 42.3% year-over-year to $0.8 million driven by ACL's film and publishing business segments.
  • Net loss was $6.5 million compared to $6.1 million in first quarter 2017, of which $3.0 million and $2.9 million, respectively, was attributable to non-cash warrant expense driven by the appreciation of the RLJE stock price.
  • Adjusted EBITDA increased substantially to $1.5 million from $0.1 million in the first quarter of 2017 primarily due to growth of (i) higher-margin Digital Channels revenue and (ii) Wholesale Distribution segment revenue and gross margin.

Robert L. Johnson, Chairman of RLJ Entertainment, stated, "As viewership continues to grow across the OTT landscape, brand differentiation becomes increasingly important. Our uniquely positioned channels offer compelling and exclusive programming that are driving sustained subscriber growth, enhancing our brand in the market and ultimately delivering incremental value to all stakeholders."

Miguel Penella, Chief Executive Officer of RLJ Entertainment, stated, "2018 is off to a terrific start. Our increased investments in unique and original content, expanded consumer awareness and broader distribution resulted in a strong first quarter. Our Digital Channel subscribers surpassed three quarters of a million.  In our Wholesale Distribution segment, digital sales led the growth as we continue to transform the business from physical to digital.  Our IP licensing segment continued to benefit from Agatha Christie's film and publishing performance.  With continued investments in Digital Channels' compelling programming, powerful marketing, and distribution expansion, every quarter brings us closer to our 1 million subscriber target.  As announced previously, Nazir Rostom, our CFO, is leaving on May 11, 2018.  The Board joins me in thanking him for his tremendous accomplishments and contributions to RLJE over the past two years. We wish him the very best in his career."

Nazir Rostom, Chief Financial Officer of RLJ Entertainment, commented, "We delivered another solid quarter of growth and margin expansion across all our segments. We are executing our strategy of growing our Digital Channel subscriptions and expanding our gross profit, which is positioning us for another great year." 

Conference Call Information
RLJE will hold a conference call today at 11:30 a.m. ET to discuss these results.  To participate in the live conference call, +1.844.348.1685 (+1.213.358.0890 outside the U.S. and Canada) and providing the conference ID number 8587108, or listen via webcast at www.RLJEntertainment.com/events/.  The webcast will be archived in the investors section of RLJE's website.

About RLJ Entertainment, Inc.
RLJ Entertainment, Inc. (NASDAQ: RLJE) is a premium digital channel company serving distinct audiences primarily through its popular OTT branded channels, Acorn TV (British TV) and UMC (Urban Movie Channel), which have rapidly grown through development, acquisition, and distribution of its exclusive rights to a large library of international and British dramas, independent feature films and urban content. RLJE's titles are also distributed in multiple formats including broadcast and pay television, theatrical and non-theatrical, DVD, Blu-ray, and a variety of digital distribution models (including EST, VOD, SVOD and AVOD) in North America, the United Kingdom, and Australia. Additionally, through Acorn Media Enterprises, its UK development arm, RLJE co-produces and develops new programs and owns 64% of Agatha Christie Limited. For more information, please visit RLJEntertainment.com, Acorn.tv, and UMC.tv.

Forward Looking Statements

This press release may include "forward looking statements" within the meaning of the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Other than statements of historical fact, all statements made in this press release are forward-looking, including, but not limited to, statements regarding goals, industry prospects, future results of operations or financial position, and statements of our intent, belief and current expectations about our strategic direction, prospective and future results and condition.  In some cases, forward-looking statements may be identified by words such as "will," "should," "could," "may," "might," "expect," "plan," "possible," "potential," "predict," "anticipate," "believe," "estimate," "continue," "future," "intend," "project" or similar words. 

Forward-looking statements involve risks and uncertainties that are inherently difficult to predict, which could cause actual outcomes and results to differ materially from our expectations, forecasts and assumptions.  Factors that might cause such differences include, but are not limited to:

  • Our financial performance, including our ability to achieve improved results from operations and improved earnings before income tax, depreciation and amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate (or Adjusted EBITDA);
  • Our expectation that subscribers, revenues and financial performance of our digital channels will continue to grow and have a positive effect on our liquidity, cash flows and operating results;
  • The effects of limited cash liquidity on operational performance;
  • Our obligations under the credit agreement;
  • Our ability to satisfy financial ratios;
  • Our ability to generate sufficient cash flows from operating activities;
  • Our ability to fund planned capital expenditures and development efforts;
  • Our inability to gauge and predict the commercial success of our programming;
  • Our ability to maintain relationships with customers, employees and suppliers, including our ability to enter into revised payment plans, when necessary, with our vendors that are acceptable to all parties;
  • Our ability to realize anticipated synergies and other efficiencies in connection with the AMC transaction;
  • Delays in the release of new titles or other content;
  • The effects of disruptions in our supply chain;
  • The loss of key personnel; or
  • Our public securities' limited liquidity and trading.

You should carefully consider and evaluate all of the information in this press release, including the risk factors listed above and in our Form 10-K filed with the Securities Exchange Commission (or SEC), including "Item 1A.  Risk Factors."  If any of these risks occur, our business, results of operations, and financial condition could be harmed, the price of our common stock could decline and you may lose all or part of your investment, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements contained in this press release.  Unless otherwise required by law, we undertake no obligation to release publicly any updates or revisions to any such forward-looking statements that may reflect events or circumstances occurring after the date of this press release.

Readers are referred to the most recent reports filed with the SEC by RLJ Entertainment. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Media Contact: 
Traci Otey Blunt, 301-830-6204
RLJ Entertainment, Inc. 
tblunt@rljentertainment.com

Investor Contact: 
Jody Burfening/Carolyn Capaccio, 212-838-3777
LHA
ir@rljentertainment.com

 

 

 

RLJ ENTERTAINMENT, INC.

Consolidated Balance Sheets

(Unaudited)

As of March 31, 2018 and December 31, 2017





March 31,



December 31,


(In thousands, except share data)


2018



2017


ASSETS









Cash


$

4,230



$

6,215


Accounts receivable, net



16,243




24,926


Inventories, net



4,307




4,448


Investments in content, net



76,553




70,483


Prepaid expenses and other assets



996




1,197


Property, equipment and improvements, net



1,106




1,185


Equity investment in affiliate



22,728




21,589


Other intangible assets, net



7,486




7,752


Goodwill



14,113




13,985


Total assets


$

147,762



$

151,780


LIABILITIES AND SHAREHOLDERS' EQUITY









Accounts payable and accrued liabilities


$

11,719



$

16,707


Accrued royalties and distribution fees



48,500




47,414


Deferred revenue



3,303




2,859


Debt, net of discounts and debt issuance costs



53,702




52,639


Deferred tax liability



3,043




2,933


Stock warrant and other derivative liabilities



16,652




13,685


Total liabilities



136,919




136,237


Commitments and contingencies (see Note 14)









Shareholders' Equity









Redeemable convertible preferred stock, $0.001 par value, 1,000,000 shares 
     
authorized; 31,046 shares issued; 15,198 shares outstanding at March 31, 2018 
     
and December 31, 2017; liquidation preference of $17,989 at March 31, 2018 
     
and $17,997 at December 31, 2017



19,398




19,563


Common stock, $0.001 par value, 250,000,000 shares authorized, 14,564,678 
     
shares issued and outstanding at March 31, 2018; and 14,071,423 
     
shares issued and outstanding at December 31, 2017



15




14


Additional paid-in capital



134,171




132,422


Accumulated deficit



(140,786)




(133,514)


Accumulated other comprehensive loss



(1,955)




(2,942)


Total shareholders' equity



10,843




15,543


Total liabilities and shareholders' equity


$

147,762



$

151,780


 

 

 

RLJ ENTERTAINMENT, INC.

Consolidated Statements of Operations

(Unaudited)

Three Months Ended March 31, 2018 and 2017





Three Months Ended March 31,


(In thousands, except share data)


2018



2017


Revenues


$

18,582



$

13,887


Cost of sales









Content amortization and royalties



6,696




6,068


Manufacturing and fulfillment



3,086




3,052


Total cost of sales



9,782




9,120


Gross profit



8,800




4,767











Selling expenses



4,265




2,284


General and administrative expenses



5,311




4,523


Depreciation and amortization



885




873


Total operating expenses



10,461




7,680


LOSS FROM OPERATIONS



(1,661)




(2,913)











Equity earnings of affiliate



784




551


Interest expense, net



(2,291)




(1,886)


Change in fair value of stock warrants and other derivatives



(2,967)




(2,892)


Gain on extinguishment of debt






895


Other (expense) income, net



(177)




284


LOSS FROM OPERATIONS

   BEFORE PROVISION FOR INCOME TAXES



(6,312)




(5,961)


Provision for income taxes



(213)




(161)


NET LOSS



(6,525)




(6,122)


Accretion on preferred stock



(193)




(377)


NET LOSS ATTRIBUTABLE TO COMMON

   SHAREHOLDERS


$

(6,718)



$

(6,499)


Net loss per common share attributable to common shareholders:









Basic and diluted net loss per common share attributable 
     
to common shareholders


$

(0.46)



$

(1.26)











Weighted average shares outstanding:









Basic and diluted



14,467




5,164


 

 

 

RLJ ENTERTAINMENT, INC.

UNAUDITED Adjusted EBITDA

Three Months Ended March 31, 2018 and 2017



We define "Adjusted EBITDA" as earnings before income tax, depreciation, amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.  Management believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations because it removes material non-cash items that allows investors to analyze the operating performance of the business using the same metric management uses.  The exclusion of non-cash items better reflects our ability to make investments in the business and meet obligations.  Presentation of Adjusted EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance.  Management uses this measure to assess operating results and performance of our business, perform analytical comparisons, identify strategies to improve performance and allocate resources to our business segments. While management considers Adjusted EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with U.S. GAAP. Not all companies calculate Adjusted EBITDA in the same manner and the measure, as presented, may not be comparable to similarly-titled measures presented by other companies.


The following table includes the reconciliation of our consolidated U.S. GAAP net loss to our consolidated Adjusted EBITDA:




Three Months Ended March 31,


(In thousands)


2018



2017


Net loss


$

(6,525)



$

(6,122)


Interest expense



2,291




1,886


Provision for income tax



213




161


Depreciation and amortization



885




873


Basis-difference amortization in equity earnings of 
     
affiliate



125




111


Change in fair value of stock warrants and other 
     
derivatives



2,967




2,892


Stock-based compensation



689




154


Restructuring



224




(615)


Foreign currency exchange gain on intercompany 
     
accounts



7




(283)


Non-cash royalty expense



596




1,040


Adjusted EBITDA


$

1,472



$

97


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SOURCE RLJ Entertainment, Inc.

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