RMG Networks Blog

Continues Strong Progress on Key Strategic Initiatives; Significantly Narrows Adjusted EBITDA Loss from Continuing Operations From Prior Year

DALLAS, TX — (Marketwired) — 05/14/15 — RMG Networks Holding Corporation (NASDAQ: RMGN)

First Quarter Highlights

  • Total revenues from continuing operations1 of $9.3 million; narrowed adjusted EBITDA loss from continuing operations1, 2 to $1.6 million from$2.8 million in the first quarter of 2014
  • Enterprise products and professional services revenues up 8.3% and 5.6% year-over-year, respectively
  • Completed ‘Six New Products in Six Months’ initiative, bringing to market four additional Enterprise business solutions
  • Successfully completed a $25 million private placement, eliminating its senior debt facility and adding $9.6 million in net cash proceeds to the balance sheet
  • Subsequent to quarter-end, appointed two key hires in Jana Ahlfinger Bell, Chief Financial Officer, and Chuck Corbin, Head of North American Sales

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, 2015.

RMG Networks helps organizations communicate more effectively using location-based video networks. The company builds enterprise video networks that empower businesses to visualize critical data to better manage their operations and connect with their employees. The company also connects brands with target audiences using video advertising networks.

Robert Michelson, Chief Executive Officer, commented, “During the first quarter we continued to execute on our strategy to drive innovation, reinvigorate growth and build towards profitable operations. For the first time in the last three quarters, we narrowed the year-over-year revenue decline in our Enterprise business, demonstrating the progress we are making in returning the company to sustainable revenue growth. Further, we completed a financing transaction that strengthened our balance sheet. We also advanced a number of strategic initiatives that continue to move us along the path to growing revenue and reaching positive adjusted EBITDA in the long-term.”

“In Enterprise sales, we launched the final four products of our aggressive six month innovation plan to strengthen our portfolio of products by introducing one new solution a month for six months,” Mr. Michelson continued. “We are encouraged by the initial response to these solutions from both new and potential customers. As a result of this initiative and other actions we are taking, the volume of qualified sales pursuits are increasing, including an increase in large, more substantial sales opportunities.”

Mr. Michelson added, “We understand there is still much work to be done and it will take some time for the effect of our work to fully impact our financial results. However, as an organization, we are making progress to rejuvenate growth and are moving forward along a path to achieve our ultimate goal of long-term, sustainable profitability.”

First Quarter Financial Review

Financial results from RMG Networks’ Airline Media Networks business have been excluded from continuing operations and are reported as discontinued operations in the Consolidated Statement of Comprehensive Loss due to the pending sale of this business. There can be no assurance that this sale will occur on terms favorable to the company, or at all. Prior year results also have been adjusted to report this business as discontinued operations. As a result, the financial results below reflect the remaining business at RMG Networks, reported as continuing operations.

In addition, “as-reported” results include certain items and the effects of purchase accounting which RMG Networks does not believe reflect the underlying performance of its business. Therefore, for ease of comparison, the following provides adjusted results for the first quarter of 2015 and 2014.

Adjusted Results3, 4 
First Quarter Revenue & Gross Margin. Total adjusted revenues from continuing operations in the first quarter of 2015 were $9.3 million, a decline of 5.2% from $9.8 million in the first quarter of 2014.

  • Product sales revenue increased $0.2 million or 8.3% from the first quarter of 2014, resulting from better sales execution in the first quarter of 2015.
  • Professional services revenue increased $0.1 million or 5.6% from the first quarter of 2014, resulting primarily from improved utilization within the professional services business.
  • Maintenance & content services revenue declined $0.9 million or 19.6% from the first quarter of 2014, resulting primarily from the decision in 2014 to proactively “end-of-life” maintenance services on certain products that had the potential to become too costly to maintain and had been replaced by newer products.

Adjusted gross margin from continuing operations was 57.9% in the first quarter of 2015, compared to 56.5% in the first quarter of 2014.

First Quarter Adjusted EBITDA4. Adjusted EBITDA loss from continuing operations was $1.6 million, improving from a loss of $2.8 million in the first quarter of 2014, resulting primarily from lower operating expenses.

Reported Results
First Quarter. Total reported revenue from continuing operations for the quarter ended March 31, 2015 was $9.3 million compared to total reported revenue of $9.0 million for the same quarter last year.

Operating loss from continuing operations for the quarter ended March 31, 2015 was $4.0 million compared to an operating loss of$5.9 million for the same quarter last year.

Business Outlook

“In the first quarter, we experienced the effects of the typical seasonal patterns that impact our business,” noted Mr. Michelson. “However, with our focused sales strategy and innovative new products gaining traction in the market, we are confident our pipeline will drive the typical seasonal growth we have historically seen and increasing growth overall during the long-term. We have in front of us numerous, specific opportunities to deliver accelerated growth in the second half of 2015 and are committed to executing on them. With many of these initiatives in early stages, the visibility into the exact timing of their impact is still not clear. As such, we believe it would be premature to provide specific, near-term guidance at this time. However, we will continue, as we did in the first quarter, to rationalize our cost structure when prudent to do so particularly when costs are associated with under performing revenue generating activities. As we execute on our planned product development and sales enhancement programs, we remain optimistic about our prospects for revenue growth and developing positive adjusted EBITDA over the intermediate- and long-term.”

Conference Call

Management will host a conference call to discuss these results on Thursday, May 14, 2015 at 9 a.m. ET. To access the call, please dial 1-866-700-0133 (toll free) or 1-617-213-8831 and passcode 43826125. 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 1-888-286-8010 (toll free) or 1-617-801-6888 (passcode: 74151034) from 1 p.m. ET on May 14, 2015 until 11:59 p.m. ET on May 21, 2015.

RMG Networks and its logo are trademarks and/or service marks of RMG Networks Holding Corporation.

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