RMG Networks Blog

Substantial Year-Over-Year Improvement in Operating Loss by $0.9 Million Delivers Strong Progress on Key Strategic Initiatives

DALLAS, TX — (Marketwired) — 08/11/16 — RMG Networks Holding Corporation (NASDAQ: RMGN)

Second Quarter Highlights

  • Operating loss of $1.5 million narrowed by $0.9 million year-over-year; Adj. EBITDA1 loss of $0.4 million narrowed by $2.0 million year-over-year
  • Total revenue of $8.7 million decreased 7% year-over-year
  • Operating expenses decreased 27% year-over-year
  • Signed strategic sales partnership with Manhattan Associates, a global best-in-class provider of technology solutions to the supply chain and distribution industry
  • Significantly strengthened executive management team with the addition of George Clopp as Chief Technology Officer and Jerry Rosen as Global Chief Marketing & Creative Officer

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, 2016.

“During the second quarter, we continued to deliver tangible progress against our strategic initiatives, while also delivering substantially improved Adjusted EBITDA over last year,” commented Robert Michelson, Chief Executive Officer. “We are excited about the meaningful progress we made in expanding our third-party sales channels, finalizing agreements with two new third-party sales channel partnerships, including Manhattan Associates. We anticipate these relationships will supplement our sales growth plans and help expand our sales pipeline.”

“We also significantly strengthened our executive management team with the addition of George Clopp, Chief Technology Officer, and Jerry Rosen, Global Chief Marketing & Creative Officer,” continued Michelson. “The addition of George and Jerry are meaningful to our organization, as they each bring a breadth of leadership, accomplishments and innovative ideas to their positions. They are highly engaged to further our focus on leading with innovative products and solutions and bringing those offerings to the market in a cost-efficient and compelling way to reach both new and existing customers around the globe.”

“In North America, we drove sequential revenue growth in the second quarter, representing encouraging progress. The positive results in North America were partially offset by challenges experienced in our international business that delayed the timing of some orders, in part due to the impact of oil pricing on the macroeconomic environment in the Middle East and the economic uncertainty created by Brexit in the U.K. and Europe,” continued Michelson. “The mix of second quarter revenue, led by stronger professional services revenue, drove strong gross margin and material improvement in Adjusted EBITDA. We remain optimistic about our outlook as we enter the second half of 2016.”

Second Quarter Financial Review

Total revenue of $8.7 million was flat sequentially compared to the first quarter of 2016, and decreased 7% from $9.3 million in the same quarter last year.

  • Products revenue of $3.1 million decreased 25% from $4.1 million in the second quarter of 2015, resulting primarily from delayed timing on certain orders and generally lower international sales orders as a result of a challenging macroeconomic environment.
  • Maintenance & content services revenue of $3.5 million remained relatively flat as compared to the second quarter of 2015.
  • Professional services revenue of $2.1 million increased 19% from $1.8 million in the second quarter of 2015, resulting primarily from increased realization within our professional services organization.

Gross margin was 58.3% compared to 71.4% in the second quarter of 2015, as reported under U.S. GAAP. On a non-GAAP basis, excluding a $1.5 million net gain recorded on a non-recurring long-term contract in the second quarter of 2015, gross margin improved from 55.6% in the same quarter last year, driven by a favorable sales mix, resulting primarily from an increase in professional services revenue.

Total operating expenses were $6.6 million, a 27% decrease from $9.0 million in the same quarter last year, resulting primarily from the company’s cost rationalization efforts in 2015.

GAAP operating loss of $1.5 million improved from a loss of $2.4 million in the same quarter last year, resulting primarily from lower operating expenses, partially offset by a net gain recorded on a non-recurring long-term contract in the second quarter of 2015. On a non-GAAP basis, Adj. EBITDA loss of $0.4 million narrowed from a loss of $2.4 million in the same quarter last year.

Prior year 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. As a result, the financial results above reflect the Enterprise business at RMG Networks, reported as continuing operations.

Business Outlook

“We remain optimistic about the long-term financial prospects of the business, as the core geographical U.S. business continues to perform well, offset by the uncertainty associated with Brexit in the U.K. and oil prices in the Middle East. We believe that our strategic positioning in conjunction with our experienced leadership team positions the company for profitability. We remain focused on continuing to build on the key strategic initiatives of our multi-year strategic plan. We do recognize that we are still impacted by quarter to quarter fluctuations that are inherent in our sales delivery and business model,” concluded Michelson. “We are investing in and improving our business continually with a focus on long-term, sustainable growth, which we believe best serves our customers and our shareholders. We have established a track record of continued strategic progress and improvement in financial results and are encouraged by the trajectory our business is on for 2016 and beyond.”

Conference Call

Management will host a conference call to discuss these results on Thursday, August 11, 2016 at 9 a.m. ET. To access the call, please dial 1-877-890-5060 (toll free) or 1-678-967-4604 and reference conference 54202038. 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 or 1-404-537-3406 and entering passcode: 54202038 from 12 p.m. ET on August 11, 2016 until 11:59 p.m. ET on August 18, 2016.

1 A non-GAAP measure, we define Adj. EBITDA as operating income (loss) plus depreciation and amortization expenses and stock-based compensation expense. We have also excluded the impact of a $1.5 million net gain recorded on a non-recurring long-term contract in the second quarter of 2015. See “About Non-GAAP Financial Measures” below and the reconciliation tables at the end of this release for more information regarding non-GAAP financial measures used in this release.

© 2016 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