RMG Networks Blog

Enterprise Revenue Increased 7% YoY on an Adjusted Basis(1,2) With Sequential Margin Expansion, Media Revenue(1) Decreased as Expected With Broader Q1 Out-Of-Home Advertising Market Softness, Top-Line Momentum Building Into Q2 as Growth Investments Demonstrate Further Traction, Continue to Expect Accelerated Revenue and Adjusted EBITDA Generation in Second Half 2014

DALLAS, TX–(Marketwired – May 8, 2014) – RMG Networks Holding Corporation (NASDAQRMGN)

Quarter Highlights

  • First quarter consolidated revenue of $12.6 million, on an adjusted basis1,2, comprised of $10.1 million in adjusted Enterprise revenue1,2 and $2.5 million in Media revenue
  • Launched enhanced Visual Supply Chain solution expanding suite of visual communications solutions
  • Completed installation of the RMG Office Network and generated initial network revenues
  • Generated initial EMEA advertising bookings and added two EMEA airline partnerships with Etihad Airways and OnAir
  • South East Asia and China regions generated initial Enterprise revenues; Middle East continued strong growth
  • Cross-selling initiatives continued to gain traction with two global customers signing contracts spanning multiple geographies

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 first quarter ended March 31, 2014.

RMG Networks helps brands and organizations communicate more effectively using location-based video networks. The company connects brands with target audiences using video advertising networks comprised of over 200,000 display screens, reaching over 100 million consumers each month. The company also builds enterprise video networks that empower organizations to visualize critical data to better run their business.

Garry McGuire, Chief Executive Officer, commented, “RMG Networks marked a number of significant achievements in Q1 as we continue to execute our long term plan. First quarter financial results were mixed, in some part due to macro trends. However, the early successes of our 2013 growth investments that we saw begin in late 2013 persisted into Q1 and are continuing into Q2. In our Enterprise business, our offices in new and newly expanded geographies are delivering positive results, our newly expanded sales force is gaining traction and our cross-selling initiatives are paying off in incremental deals from existing customers across geographies and across product solutions. Though recognized revenues were down in our Media unit for the quarter, we booked a 20%+ increase in new contracts in the quarter versus last year, booked our first media contracts in Europe, recognized the first revenues on our Office Network and announced advertising partnerships with two new international airline partners.”

“With 2014 off to a promising start, we remain focused on driving execution and generating returns on our growth investments. RMG Networks has built a platform of personnel, products and solutions designed to advance our market leadership and the unique value proposition of offering comprehensive place-based video networks. The traction we are gaining reinforces our confidence in our strategy. We expect Q2 revenue to build toward a strong sequential increase and for accelerated revenue growth and EBITDA generation to begin at mid-year 2014 as our recently-expanded sales force begins to reach productivity. RMG Networks is focused on executing on our mission to be the global leader in intelligent visual communications.”

First Quarter and 2013 Financial Review

RMG Networks completed the business combinations of Reach Media Group Holdings, Inc. and Symon Holdings Corporation, or Symon, on April 8 and April 19, 2013, respectively. Symon was determined to be the Predecessor Company for accounting purposes and accordingly Symon’s historical financials are included for comparison in RMG Networks’ “as-reported” financials. Because Symon recorded results of operations on a January 31 fiscal year and because the results of Reach Media Group Holdings, Inc. are not included in Predecessor Company financials, first quarter 2014 results as-reported are not comparable with the Predecessor Company’s results for first quarter 2013. In addition, our “as-reported” results include certain items and the effects of purchase accounting which we do not believe reflect the underlying performance of our business. Therefore, for ease of comparison, we provide, in the following results, adjusted results for the 2014 first quarter and pro forma combined results for the 2013 first quarter as if the companies had existed as a combined entity for the relevant periods and adjusting for the items described above.

Adjusted and Pro Forma Combined Results(3) 
First Quarter Revenue. Total first quarter adjusted 2014 revenues were $12.6 million, a decrease of 16% from $15.0 million of pro forma combined revenues in the first quarter of 2013.

  • Adjusted Enterprise revenue of $10.1 million increased 7% from $9.4 million in the first quarter of 2013, due to continued sales momentum from expanded sales teams and geographic presence. Adjusted Enterprise gross margin was 57.5% compared to 60.0% in the first quarter of 2013, decreasing year over year due to sales mix but increasing sequentially from the 50.9% demonstrated in the fourth quarter of 2013.
  • Media revenue of $2.5 million decreased 54% from $5.6 million in the first quarter of 2013, primarily due to soft demand in the out-of-home advertising sector, as has been reported by other out-of-home advertising companies. The softness experienced in the first quarter resulted from, among other items, a shift in advertising dollars to Olympic broadcast TV coverage. Adjusted Media gross margin was (16.8)% compared to 31.0% in the first quarter of 2013, due primarily to significantly lower revenue failing to cover fixed costs of sales. We expect full year media gross margins to normalize as sales increase above our fixed costs in future quarters and first quarter shortfalls are recovered.

On a sequential basis, adjusted revenues decreased as expected in the first quarter to $12.6 million from $22.5 million in the fourth quarter of 2013, consistent with historical seasonality in the business.

First Quarter Operating loss and Adjusted EBITDA. Adjusted operating loss was $8.3 million compared to pro forma operating loss of $2.6 million in the first quarter of 2013. This increased loss is attributable to lower advertising revenue and gross margin in the current year period, higher operating expenses in the current year period resulting from investments made during the second half of 2013 in new sales and marketing personnel to support growth initiatives and approximately $2.1 million of additional depreciation, amortization and stock-based compensation expense.

Adjusted EBITDA loss was $5.3 million compared to pro forma combined adjusted EBITDA loss of $0.8 million in the first quarter of 2013, decreasing for the reasons described above.

Reported Results
First Quarter. Total reported revenue for the quarter ended March 31, 2014 was $11.8 million; total revenue for the predecessor company for the period from February 1 to April 19, 2013 was $7.2 million.

Operating loss for the quarter ended March 31, 2014 was $8.5 million; operating income for the predecessor company for the period from February 1 to April 19, 2013 was $3.1 million.

Growth Outlook

Though the company expects to see some continued near term weakness in the out-of-home advertising market, we continue to expect that the sales investments we made in the second half of 2013 will drive accelerated second half 2014 revenue and that we will achieve 20+% year-over-year adjusted revenue growth. Revenue growth will lead to increasing operating leverage and the company expects to generate positive adjusted EBITDA for the full year 2014.

Conference Call

Management will host a conference call to discuss these results today, Thursday, May 8, 2014 at 9:00 a.m. ET.

To access the call, please dial 866-271-5140 (toll free) or 617-213-8893 and passcode # 11531526. 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 90 days.

A telephonic replay of this conference call will also be available by dialing 888-286-8010 (toll free) or 617-801-6888 (passcode: 65336145) from 1:00 p.m. ET on May 8, 2014 until midnight ET on May 12, 2014. 

Pin It on Pinterest

Share This
Request Free Demo Contact Us