RMG Networks Blog

Continues Strong Progress on Key Strategic Initiatives; Further Reduces Quarterly Cash Operating Expenses(1); Significant Narrowing of Adjusted EBITDA Loss(1)

DALLAS, TX — (Marketwired) — 11/12/15 — RMG Networks Holding Corporation (NASDAQ: RMGN)

Third Quarter Highlights

  • Total revenues1 of $10.2 million increased 9% sequentially
  • Product revenues1 increased 10% sequentially
  • Professional Services revenue1 increased 38% sequentially, reflecting increased realization rates
  • Cash operating expenses1 reduced 10% sequentially
  • Announced multimillion dollar contract to provide transformational retail solution
  • Experienced strong customer acceptance following the launch of largest software platform upgrade in over five years
  • Completed strategic divestiture of Airline Media Network business

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 third quarter ended September 30, 2015

RMG Networks helps businesses increase productivity, efficiency and engagement through digital messaging. By combining best-in-class software, business applications, services and hardware, RMG Networks offers a single point of accountability for integrated data visualization and real-time performance management.

“In the third quarter, we saw solid progress in our strategy to reinvigorate growth and build towards achieving sustainable profitability,” commented Robert Michelson, Chief Executive Officer. “During the quarter, our Enterprise revenues increased 9% sequentially, and for the first quarter since Q1 2014, revenues remained stable on a year-over-year basis. In addition to increasing revenue, we also further reduced our overall cost structure, positioning us closer to generating positive EBITDA.”

“During the third quarter, we increased sales in the U.S., our largest market, on a year-over-year basis for the first time in almost two years,” Mr. Michelson continued. “Globally, we increased new sales orders per sales person by over 90% versus the same quarter last year. We also brought to market the largest enhancement to our software platform in over 5 years, are delivering on our goal of diversifying away from contact center solutions and won several large contracts from high profile clients. Our introduction of new, innovative solutions that help organizations increase productivity and reduce costs is driving much of this progress.”

Michelson added, “This quarter marks the end of my first year with the company. It has been a productive year for RMG Networks, and I believe we are a much stronger company today than we were a year ago. Over the past several quarters, we have significantly enhanced our leadership team, strengthened our balance sheet, rationalized our cost structure and refined our focus with the strategic divestiture of our Airline Media Network business. Today, our sales and pipeline trends are encouraging, and we have a broader suite of solutions for an increasingly efficient and effective sales organization to sell. I believe that we can further reduce our cost structure and capitalize on growth opportunities in our pipeline. I also expect that the effect of our work will be evident in improving financial results going forward.”

Third 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.

In addition, “as-reported” results include the effects of purchase accounting, the impact of a large non-recurring contract and certain other items that management does not believe reflect the underlying performance of its business. Therefore, for ease of comparison, the following provides adjusted results for 2015 and 2014.

Adjusted Results2,3
Sequential Trends. Total adjusted revenues from continuing operations in the third quarter of 2015 were $10.2 million, up 9.2% from the second quarter of 2015.

  • Product sales revenue of $4.4 million increased 9.6% from $4.1 million in the second quarter of 2015, driven by improved sales execution during the quarter.
  • Maintenance & content services revenue of $3.7 million decreased slightly from the second quarter of 2015.
  • Professional services revenue of $2.1 million increased 38.1% from $1.5 million in the second quarter of 2015, as a result of improved productivity and realization rates.

Adjusted gross margin from continuing operations was 53.3% in the third quarter of 2015, compared to 55.6% in the second quarter of 2015, declining primarily due to a shift in sales mix consistent with typical seasonality.

Cash operating expenses from continuing operations declined to $6.8 million in the third quarter of 2015 from $7.6 million in the second quarter of 2015, resulting from continued efforts to reduce the company’s overall cost structure.

Adjusted EBITDA loss from continuing operations was $1.3 million, improving from a loss of $2.4 million in the second quarter of 2015, resulting primarily from an increase in revenue and reduction in operating expenses.

Year-over-Year Trends. Total adjusted revenues from continuing operations of $10.2 million were flat compared to the third quarter of 2014. This represents the first time since the first quarter of 2014 that revenues have not substantially declined on a year-over-year basis.

Adjusted gross margin from continuing operations of 53.3% improved slightly from 52.6% in the third quarter of 2014.

Adjusted EBITDA loss from continuing operations of $1.3 million increased slightly from $1.1 million in the third quarter of 2014.

Reported Results
Third Quarter. Total reported revenue from continuing operations for the quarter ended September 30, 2015 was $10.2 million compared to total reported revenue from continuing operations of $10.0 million for the same quarter last year.

Operating loss from continuing operations for the quarter ended September 30, 2015 was $2.6 million compared to operating income from continuing operations of $0.2 million for the same quarter last year.

Revolving Credit Facility

As was recently announced, the company entered into new $7.5 million revolving credit facility with Silicon Valley Bank. The credit facility has a scheduled maturity date of October 13, 2017.

The credit facility was undrawn at the time of closing, and the company intends to use the new credit facility as needed to finance future growth and meet working capital needs. Availability under the credit facility is tied to a borrowing base formula. Borrowings under the credit facility will bear interest at a floating rate equal to the prime rate plus 1.25% or 2.25% per annum, depending on whether certain conditions are satisfied.

Business Outlook

“We continue to make tremendous operational progress in executing our financial turnaround strategy at RMG Networks. While we are not yet satisfied with our results, we believe the foundation we have laid and the progress we continue to make each quarter have put us on the right track toward delivering revenue growth and generating positive adjusted EBITDA over time,” noted Mr. Michelson. “Although we expect we can achieve profitability by increasing revenue and reducing our operating costs, the exact timing remains difficult to predict. We are, however, confident that we are getting closer to our ultimate goal of reaching long-term sustainable profitability.”

Conference Call

Management will host a conference call to discuss these results on Thursday, November 12, 2015 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 69276759. 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 1-404-537-3406 and entering passcode: 69276759 from 12 p.m. ET on November 12, 2015 until 11:59 p.m. ET on November 19, 2015.

© 2015 RMG Networks Holding Corporation. RMG Networks and its logo are trademarks and/or service marks of RMG Networks Holding Corporation.

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