RMG Networks Blog

Reports first positive quarterly ebitda in over two years

DALLAS, TX — (Marketwired) — 03/10/16 — RMG Networks Holding Corporation (NASDAQ: RMGN)

Fourth Quarter Highlights

  • EBITDA1of $0.5M, first positive quarterly EBITDA since 2013
  • Total revenues of $11.8 million increased 15% sequentially
  • Product revenues increased 42% sequentially
  • Operating expenses2 decreased 17% sequentially
  • Awarded Top 20 Promising Supply Chain Solution Provider by CIOReview
  • Awarded second phase of new in-store digital signage deployment for one of RMG Networks’ largest retail development projects

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 fourth quarter and full year ended December 31, 2015.

“During the fourth quarter, we reached a significant milestone for the company, delivering positive EBITDA for the first quarter since 2013,” commented Robert Michelson, Chief Executive Officer. “This positive achievement provides the strongest evidence yet that our strategic plan is working. 2015 was a very productive year, we enhanced our leadership team, strengthened our balance sheet, innovated our product portfolio, refined our solution area focus, divested our Media business and improved effectiveness and productivity throughout the organization. In parallel, we substantially reduced our operating expenses, resulting in a cost structure that we believe can support profitable growth in the future.”

“As a result of solid execution against the first full year of our strategic plan, we enter 2016 with a more sustainable model and well-positioned for growth and profitability,” Mr. Michelson continued. “We are encouraged by our strong sales pipeline, as a result of a broader suite of innovative solutions and an increasingly efficient/effective sales organization. We look forward to leveraging the operational and strategic progress we made in 2015, as we continue to progress toward delivering long-term growth and sustainable profitability.”

Fourth 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 completion of the sale of this business on July 1, 2015. Prior year results have also been adjusted to report this business as discontinued operations. As a result, the financial results below reflect the Enterprise business at RMG Networks, reported as continuing operations.

Sequential Trends

  • Total revenues in the fourth quarter of 2015 were $11.8 million, up 15.3% from the third quarter of 2015.
    • Product sales revenue of $6.3 million increased 41.7% from $4.4 million in the third quarter of 2015, driven by improved sales execution during the quarter.
    • Maintenance & content services revenue of $3.6 million decreased slightly from $3.7 million in the third quarter of 2015.
    • Professional services revenue of $1.9 million decreased 9.8% from $2.1 million in the third quarter of 2015, resulting from lower realization in the professional services organization.
  • Gross margin was 51.8% in the fourth quarter of 2015, compared to 53.3% in the third quarter of 2015, resulting primarily from a shift in sales mix, consistent with historical seasonal trends.
  • Operating expenses, excluding depreciation, amortization and stock-based compensation expenses, declined to $5.6 million in the fourth quarter of 2015 from $6.8 million in the third quarter of 2015, resulting from continued efforts to reduce the company’s overall cost structure.
  • EBITDA3 was $0.5 million, improving from an EBITDA loss of $1.3 million in the third quarter of 2015, resulting from the increase in revenue and reduction in operating expenses described above.

Year-over-Year Trends4,5

  • Total revenues of $11.8 million represented a decrease of 9.5% from $13.0 million of adjusted revenues in the fourth quarter of 2014, resulting primarily from a large sale that occurred in the fourth quarter of 2014. Maintenance revenue was also lower, resulting from the decision in 2014 to proactively “end-of-life” maintenance services on certain products, consistent with discussion in previous quarters.
  • Gross margin of 51.8% was up from an adjusted gross margin of 45.3% in the fourth quarter of 2014, due primarily to a $1.0 million write-off of obsolete inventory in the fourth quarter of 2014.
  • Operating expenses, excluding depreciation, amortization and stock-based compensation expenses, declined to $5.6 million in the fourth quarter of 2015 from adjusted operating expenses6 of $7.7 million in the fourth quarter of 2014, resulting from continued efforts to reduce the company’s overall cost structure.
  • EBITDA3 of $0.5 million improved from an adjusted EBITDA loss4 of $1.8 million in the fourth quarter of 2014.

Reported Results
Fourth Quarter. Total reported revenue for the quarter ended December 31, 2015 was $11.8 million compared to total reported revenue of $12.8 million for the same quarter last year.

Operating loss for the quarter ended December 31, 2015 was $0.8 million compared to $32.0 million for the same quarter last year.

Full Year. Total reported revenue for the year ended December 31, 2015 was $40.6 million compared to total reported revenue of $40.0 million for the prior year.

Operating loss for the year ended December 31, 2015 was $9.8 million compared to $48.1 million for the prior year.

Amendment to Revolving Credit Facility

RMG Networks also announced today that it has entered into an amendment of its revolving credit facility, resetting the monthly consolidated EBITDA covenant levels under the facility for the remainder of 2016.

“We are pleased to have reached an agreement with our lender resetting the monthly EBITDA covenants under our revolving credit facility,” commented Mr. Michelson. “This amendment provides us with additional financial flexibility as we continue executing our long-term strategic plan.”

Business Outlook

“While the financial results for the fourth quarter demonstrate significant progress toward reaching our long-term goals, our business will continue to be impacted by typical seasonal patterns, which traditionally results in lower revenue levels during the first quarter of the year,” noted Mr. Michelson. “We expect to continue demonstrating operational and financial progress in 2016 and with a focused sales strategy, productive sales organization, innovative new solutions and aligned cost structure, we believe we are on-track to delivering long-term revenue growth and sustainable positive EBITDA.”

Conference Call

Management will host a conference call to discuss these results on Thursday, March 10, 2016 at 9 a.m. ET. To access the call, please dial 1-866-428-4719 (toll free) or 1-704-908-0405 and reference conference 54235919. 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 at least 90 days.

A telephonic replay of this conference call will also be available by dialing 1-855-859-2056 (toll free) or 1-800-585-8367 and entering passcode: 54235919 from 12 p.m. ET on March 10, 2016 until 11:59 p.m. ET on March 17, 2016.

© 2016 RMG Networks Holding Corporation. RMG Networks and its logo are trademarks and/or service marks of RMG Networks Holding Corporation.

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