RMG Networks Blog

Launch of Largest Platform Upgrade in Five Years Supports Strategic Progress; Completed Strategic Divestiture of Airline Media Networks Business

DALLAS, TX — (Marketwired) — 08/13/15 — RMG Networks Holding Corporation (NASDAQ: RMGN)

Second Quarter Highlights

  • Product revenue increased 32% sequentially, reflecting improved sales execution
  • Maintenance revenue increased 4% sequentially, stabilizing from recent quarterly declines
  • Total revenues from continuing operations were $9.3 million
  • Launched largest software platform upgrade in over five years ahead of schedule
  • Subsequent to quarter-end, completed strategic divestiture of Airline Media Network business
  • Subsequent to quarter-end, awarded multimillion dollar contract to provide transformational retail solution, representing one of the largest project wins in RMG Networks’ history

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 second quarter ended June 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.

Robert Michelson, Chief Executive Officer, commented, “During the second quarter, we made significant progress on a number of initiatives that have advanced our strategy to reinvigorate growth. Since joining RMG Networks as CEO one year ago, we have significantly enhanced our innovative solutions offerings, refocused our strategy on specific vertical markets where we see significant growth opportunities, significantly reduced our overall cost structure, strengthened our balance sheet and bolstered our leadership team.”

“Our focus on innovative solutions that help organizations increase productivity and save money via intelligent visual communication tools continues to drive our strategy and is the key to achieving sustainable top-line growth,” Michelson added. “The launch of our software platform upgrade last month represents the most significant technological advancement our company has achieved in over five years and provides our customers with greater functionality, enhanced security and enriched visualization. With a strong foundation laid in several key areas over the last year, and a refined focus as a result of the strategic divestiture of our Airline Media Network business, we are shifting our efforts in the second half of 2015 to focus on improving sales effectiveness. I firmly believe that today we have the right sales leadership in place and a comprehensive, process-driven plan to improve sales execution.”

“I am proud to say that Q2 represented some of the first positive top-line results of these sales efforts. Continuing progress in improving sales effectiveness is evidenced by the signing of a multimillion dollar, transformational retail solution contract that we announced subsequent to the end of the quarter. This represents one of the largest project wins in RMG Networks’ history,” Michelson added. “As we execute on our sales enhancement programs, we believe the effect of our work will be evident in improving financial results going forward.”

Second 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 remaining 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 the second quarter of 2015 and 2014.

Adjusted Results1,2 
Sequential Trends. Total adjusted revenues from continuing operations in the second quarter of 2015 were $9.3 million, flat from the first quarter of 2015.

  • Product sales revenue of $4.1 million increased 31.5% from $3.1 million in the first quarter of 2015, driven by improved sales execution during the quarter. 
  • Maintenance & content services revenue of $3.8 million increased 3.9% from $3.6 million in the first quarter of 2015. The sequential increase is a positive indication that maintenance & content services revenue has stabilized from the significant slide experienced during the first quarter of 2015 as a result of the proactive decision made in early 2014 to “end-of-life” maintenance services on certain products. 
  • Professional services revenue of $1.5 million declined 41.6% from $2.6 million in the first quarter of 2015, resulting primarily from the completion of a large implementation in the first quarter of 2015. Additionally, given an increase in sales support related to pre-sales activities, the company experienced lower realization rates. 

Adjusted gross margin from continuing operations was 55.6% in the second quarter of 2015, compared to 57.9% in the first quarter of 2015, declining primarily due to a shift in sales mix and lower professional services revenue during the second quarter of 2015.

Adjusted EBITDA loss2 from continuing operations was $2.4 million, declining from a loss of approximately $1.6 million in the first quarter of 2015, resulting primarily from an increase in operating expenses. The increase in operating expenses resulted primarily from an increase in professional fees related to a number of complex, non-recurring transactions taking place during the quarter, such as the company’s divestiture of its Airline Media Networks business and its $25 million capital raise.

Year-over-Year Trends. Total adjusted revenues from continuing operations of $9.3 million decreased 16.8% from $11.2 million in the second quarter of 2014, due primarily to a large software sale that occurred in the second quarter of 2014 as well as a decline in maintenance and content services revenue resulting from the proactive decision made in early 2014 to “end-of-life” maintenance services on certain products.

Adjusted gross margin from continuing operations of 55.6% declined from 58.7% in the second quarter of 2014, resulting primarily from a large software sale that occurred in the second quarter of 2014.

Adjusted EBITDA loss2 from continuing operations of $2.4 million decreased from $0.9 million in the second quarter of 2014, due primarily to the negative revenue and gross margin variances described above.

1 The financial results associated with the company’s Airline Media Networks business for the second quarter of 2015 and 2014 and first quarter of 2015 have been removed from continuing operations and classified as discontinued operations, due to the completion of the sale of the business on July 1, 2015.

2 GAAP revenue from continuing operations was $9.3 million, $9.3 million and $8.2 million for Q2 2015, Q1 2015, Q2 2014, respectively. GAAP operating loss was $2.4 million, $4.0 million and $10.5 million for Q2 2015, Q1 2015 and Q2 2014, respectively. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results.

Reported Results
Second Quarter. Total reported revenue from continuing operations for the quarter ended June 30, 2015 was $9.3 million compared to total reported revenue from continuing operations of $8.2 million for the same quarter last year.

Operating loss from continuing operations for the quarter ended June 30, 2015 was $2.4 million compared to an operating loss from continuing operations of $10.5 million for the same quarter last year.

Business Outlook

“Over the past year, we have made tremendous operational progress in executing our turnaround strategy at RMG Networks. While we are not yet satisfied with the financial results, we believe the foundation we have laid and continue to strengthen each quarter has put us back on the right track to delivering revenue growth and generating positive adjusted EBITDA over the intermediate- and long-term,” noted Mr. Michelson. “Although we continue to make progress, the exact timing of the financial impact of these initiatives is still not clear. As such, it continues to remain premature to provide specific, near-term guidance.”

Conference Call

Management will host a conference call to discuss these results on Thursday, August 13, 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 98443784. 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: 98443784 from 1 p.m. ET on August 13, 2015 until 11:59 p.m. ET on August 20, 2015.

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

Pin It on Pinterest

Share This
Request Free Demo Contact Us