Chicken Soup for the Soul Entertainment Reports Q4 and Full Year 2019 Results - Chicken Soup for the Soul (NASDAQ:CSSE)

COS COB, Conn., March 30, 2020 (GLOBE NEWSWIRE) -- Chicken Soup for the Soul Entertainment, Inc. CSSE, one of the largest operators of streaming advertising-supported video-on-demand (AVOD) networks, today announced its financial results for the fourth quarter and full year ended December 31, 2019.

Fourth Quarter 2019 Financial Highlights

Record net revenue of $24.4 million, compared to $11.6 million in the year-ago period
Net loss of $12.4 million compared to net income of $0.8 million in the year-ago period; $11.4 million net loss before preferred dividends, compared to $1.5 million in net income before preferred dividends in the year-ago period
Adjusted EBITDA was $5.8 million, compared to $5.2 million in the year-ago period
Online networks, which include Crackle, Popcornflix and Pivotshare generated $14.9 million in revenue compared to $1.1 million in the year-ago period

Full Year 2019 Financial Highlights

Record net revenue of $55.4 million, compared to $26.9 million in the year-ago period
Net loss of $35.0 million compared to $2.0 million in the year-ago period; $31.7 million net loss before preferred dividends, compared to $0.8 million net loss before preferred dividends in the year-ago period
Adjusted EBITDA was $6.0 million, compared to $10.0 million in the year-ago period
Online networks generated $40.0 million in revenue compared to $4.4 million in the year-ago period

"We delivered results well ahead of expectations, including record fourth quarter and full year 2019 revenue and improved fourth quarter Adjusted EBITDA, as compared to fourth quarter 2018, in what was a transformative year for the company," said William J. Rouhana Jr., chairman and chief executive officer of Chicken Soup for the Soul Entertainment. "Our growth was driven by continued outperformance from our Crackle Plus networks, including contributions from our original content library, as well as strong early results from our new Distribution and Production business model. While the near-term environment is uncertain amid the global pandemic, we've seen continued momentum in the business to date and we are supported by a solid and flexible balance sheet."

2019 Business Highlights

Completed the Sony/Crackle transaction, and put Crackle Plus on track for sustained profitable growth while growing viewers over 55% from May to December;
Launched Landmark Studio Group with industry veteran David Ozer, an example of the new distribution and production model;
Continued to build the valuable Screen Media library with the acquisition of the Foresight Media film library and a new international partnership with Mark Damon;
Produced and distributed the most successful piece of original content in the company's history with Going From Broke; and
Signed new ad sales partnerships in Q4 with Crunchyroll, Xumo, and Jukin Media.

Total net revenue for the 12 months ended December 31, 2019 was $55.4 million compared to $26.9 million in the year-ago period. The increase was primarily driven by the results in our Online Networks operations area. Revenue in 2019 was generated as follows:

Online networks (Crackle Plus) generated $40.0 million in revenue compared to $4.4 million in the year-ago period
Television and film distribution generated $16.0 million, compared to $13.2 million in the year-ago period
Television and short-form video production generated $0.6 million, compared to $10.2 million in the year-ago period, reflecting the short-term impact of the transition to the company's new distribution and production business model

Gross profit for the 12 months ended December 31, 2019 was $14.9 million, or 27% of net revenue, compared to $14.5 million, or 54% of net revenue for the year-ago period. The change in the percentage of gross profit resulted in part from $10.2 million of non-cash amortization of the film library in the company's traditional distribution business, which is required by GAAP to be included in cost of revenue. Without this non-cash film library amortization expense, the gross profit would have been $25.1 million or 45% of total net revenue, which is well in excess of last year.

Operating loss for the 12 months ended December 31, 2019 was $26.1 million compared to an operating income of $0.8 million for the year-ago period. Without this film library amortization expense, the operating loss would have been $15.4 million.

Adjusted EBITDA for the 12 months ended December 31, 2019 was $6.0 million compared to $10.0 million in 2018.

As of December 31, 2019, the company had $6.4 million of cash and cash equivalents, compared to $6.2 million as of September 30, 2019, and $7.2 million as of December 31, 2018. Outstanding debt was $20.0 million as of December 31, 2019 compared to $7.6 million outstanding as of December 31, 2018.

The company will file an annual report on Form 10-K with the SEC with respect to its annual financial results.

For a discussion of the financial measures presented herein which are not calculated or presented in accordance with U.S. generally accepted accounting principles ("GAAP"), see "Note Regarding Use of Non-GAAP Financial Measures" below and the schedules to this press release for additional information and reconciliations of non-GAAP financial measures.

The company presents non-GAAP measures such as Adjusted EBITDA and Pro Forma Adjusted EBITDA to assist in an analysis of its business. These non-GAAP measures should not be considered an alternative to GAAP measures as an indicator of the Company's operating performance.

Conference Call Information

Date, Time: Monday, March 30, 2020, 4:30 p.m. E.T.
Toll-free: (833) 832-5128
International: (484) 747-6583
Conference ID: 9597934
A live webcast and replay will be available at http://ir.cssentertainment.com/ under the "News & Events" tab

Conference Call Replay Information

Toll-free: (855) 859-2056
International: (404) 537-3406
Reference ID: 9597934

ABOUT CHICKEN SOUP FOR THE SOUL ENTERTAINMENT

Chicken Soup for the Soul Entertainment, Inc. CSSE operates streaming video-on-demand networks (VOD). The company owns a majority stake in Crackle Plus, a company formed with Sony Pictures Television, which owns and operates a variety of ad-supported and subscription-based VOD networks including Crackle, Popcornflix, Popcornflix Kids, Truli, Pivotshare, Españolflix and FrightPix. The company also acquires and distributes video content through its Screen Media subsidiary and produces original long and short-form content through Landmark Studio Group, its Chicken Soup for the Soul Originals division and APlus.com. Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul, LLC, which publishes the famous book series and produces super-premium pet food under the Chicken Soup for the Soul brand name.

Note Regarding Use of Non-GAAP Financial Measures

The company's consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). It uses a non-GAAP financial measure to evaluate its results of operations and as a supplemental indicator of operating performance. The non-GAAP financial measure that is used is Adjusted EBITDA. Adjusted EBITDA (as defined below) is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Management believes this non-GAAP financial measure enhances the understanding of the company's historical and current financial results and enables the board of directors and management to analyze and evaluate financial and strategic planning decisions that will directly affect operating decisions and investments. The presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or non-recurring items or by non-cash items. This non-GAAP financial measure should be considered in addition to, rather than as a substitute for, the company's actual operating results included in its condensed consolidated financial statements.

"Adjusted EBITDA" means earnings before interest, taxes, depreciation, amortization and non-cash share-based compensation expense, and also includes the gain on bargain purchase of subsidiary and adjustments for other identified charges such as costs incurred to form the company and to prepare for the offering of its Class A common stock to the public, prior to its IPO. Identified charges also include the cost of maintaining a board of directors prior to being a publicly traded company. As the IPO has been completed, director fees will be deducted from Adjusted EBITDA going forward. Adjusted EBITDA is not an earnings measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP; accordingly, Adjusted EBITDA may not be comparable to similar measures presented by other companies. Management believes Adjusted EBITDA to be a meaningful indicator of the company's performance that provides useful information to investors regarding its financial condition and results of operations. The most comparable GAAP measure is operating income.

A reconciliation of net loss to Adjusted EBITDA is provided in the company's Annual Report on Form 10-K for the year ended December 31, 2019 under "Management's Discussion and Analysis of Financial Condition and Results of Operations – Reconciliation of Unaudited Historical Results to Adjusted EBITDA."

FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are subject to risks (including those set forth in the Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 30, 2020) and uncertainties which could cause actual results to differ from the forward-looking statements. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. Investors should realize that if our underlying assumptions for the projections contained herein prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections.

INVESTOR RELATIONS
Taylor Krafchik
Ellipsis
CSSE@ellipsisir.com
646-776-0886

MEDIA CONTACT
Kate Barrette
RooneyPartners LLC
kbarrette@rooneyco.com
(212) 223-0561

Tables Follow

Chicken Soup for the Soul Entertainment, Inc.
Consolidated Balance Sheets
	December 31,			December 31,
	2019			2018
ASSETS
Cash and cash equivalents	$	6,447,402		$	6,451,758
Restricted cash		—			750,000
Accounts receivable, net		34,661,119			12,841,099
Prepaid expenses		861,190			218,736
Inventory, net		312,033			262,068
Goodwill		21,448,106			2,537,079
Indefinite lived intangible assets		12,163,943			12,163,943
Intangible assets, net		35,451,951			2,971,637
Film library, net		33,250,149			25,338,502
Due from affiliated companies		7,642,432			1,213,436
Programming costs, net		14,459,271			12,790,489
Program rights, net		654,303			—
Deferred tax asset, net		—			452,000
Other assets, net		313,585			356,221
Total assets	$	167,665,484		$	78,346,968

LIABILITIES AND EQUITY
Current maturities of commercial loan	$	3,200,000		$	1,000,000
Commercial loan and revolving line of credit, net of unamortized deferred finance cost of $189,525 and $334,554, respectively		11,810,475			6,582,113
Notes payable under revolving credit facility		5,000,000			—
Accounts payable and accrued expenses		26,646,390			5,078,805
Ad representation fees payable		12,429,838			—
Film library acquisition obligations		5,020,600			2,715,600
Programming obligations		7,300,861			—
Accrued participation costs		5,066,512			1,539,139
Other liabilities		170,106			414,506
Deferred revenue		—			6,469
Total liabilities		76,644,782			17,336,632


Equity
Stockholders' Equity:
Series A cumulative redeemable perpetual preferred stock, $.0001 par value, liquidation preference of $25.00 per share, 10,000,000 shares authorized; 1,599,002 and 918,497 shares issued and outstanding, respectively, redemption value of $39,975,050 and $22,962,425, respectively		160			92
Class A common stock, $.0001 par value, 70,000,000 shares authorized; 4,259,920 and 4,227,740 shares issued, 4,185,685 and 4,153,505 shares outstanding, respectively		425			421
Class B common stock, $.0001 par value, 20,000,000 shares authorized; 7,813,938 and 7,817,238 shares issued and outstanding, respectively		782			782
Additional paid-in capital		87,610,030			59,360,583
Retained (deficit) earnings		(32,695,629	)		2,281,187
Class A common stock held in treasury, at cost (74,235 shares)		(632,729	)		(632,729	)
Total stockholders' equity		54,283,039			61,010,336
Subsidiary convertible preferred stock		36,350,000			—
Noncontrolling interests		387,663			—
Total Equity		91,020,702			61,010,336
Total liabilities and equity	$	167,665,484		$	78,346,968

Chicken Soup for the Soul Entertianment, Inc.
Consolidated Statements of Operations


	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
Revenue:
Online networks	$	14,899,288		$	1,071,526		$	40,027,289		$	4,411,427
Television and film distribution		9,908,645			5,403,133			15,967,507			13,188,560
Television and short-form video production		14,104			5,431,926			610,356			10,152,020
Total revenue		24,822,037			11,906,585			56,605,152			27,752,007
Less: Television & film distribution returns and allowances		(412,461	)		(339,194	)		(1,241,246	)		(892,488	)
Net revenue		24,409,576			11,567,391			55,363,906			26,859,519
Cost of revenue		16,854,807			4,947,483			40,423,550			12,345,590
Gross profit		7,554,769			6,619,908			14,940,356			14,513,929
Operating expenses:
Selling, general and administrative		8,347,681			3,277,581			22,242,032			10,745,235
Amortization		7,662,143			129,237			13,293,279			326,988
Management and license fees		2,445,297			1,154,220			5,536,390			2,666,907
Total operating expenses		18,455,121			4,561,038			41,071,701			13,739,130
Operating (loss) income		(10,900,352	)		2,058,870			(26,131,345	)		774,799
Interest income		(5,645	)		(18,528	)		(40,191	)		(39,058	)
Interest expense		327,654			136,097			811,017			388,036
Loss on extinguishment of debt					—			350,691			—
Acquisition-related costs		232,916			168,661			3,968,289			396,793
(Loss) income before income taxes and preferred dividends		(11,455,277	)		1,772,640			(31,221,151	)		29,028
Provision for income taxes		28,000			295,000			585,000			874,000
Net (loss) income before noncontrolling interests and preferred dividends		(11,483,277	)		1,477,640			(31,806,151	)		(844,972	)
Net (loss) attributable to noncontrolling interests		(97,322	)		—			(134,282	)		—
Net (loss) income attributable to Chicken Soup for the Soul Entertainment, Inc.		(11,385,955	)		1,477,640			(31,671,869	)		(844,972	)
Less: Preferred dividends		974,272			690,131			3,304,947			1,112,910
Net (loss) available to common stockholders	$	(12,360,227	)	$	787,509		$	(34,976,816	)	$	(1,957,882	)
Net (loss) per common share:
Basic and diluted	$	(1.03	)	$	0.07		$	(2.92	)	$	(0.16	)

Chicken Soup for the Soul Entertainment, Inc.
Adjusted EBITDA

	Three Months Ended December 31,
	2019			2018
Net loss available to common stockholders, as reported	$	(12,360,227	)	$	787,509
Preferred dividends		974,272			690,131
Provision for income taxes		28,000			295,000
Other Taxes		73,940			—
Interest expense, net of interest income		322,009			117,569
Film library and program rights amortization, included in cost of revenue		6,878,959			2,802,916
Share-based compensation expense		267,777			216,896
Acquisition-related costs and other one-time consulting fees		232,916			(31,339	)
Reserve for bad debt & video returns		1,394,640			(68,217	)
Amortization		7,662,143			—
Loss on extinguishment on debt		—			129,237
Transitional Expenses		629,731			—
All other nonrecurring costs		(287,839	)		293,428
Adjusted EBITDA	$	5,816,321		$	5,233,130


	Year Ended December 31,
	2019			2018

Net loss available to common stockholders, as reported	$	(34,976,816	)	$	(1,957,882	)
Preferred dividends		3,304,947			1,112,910
Provision for income taxes		585,000			874,000
Other Taxes		460,205			—
Interest expense, net of interest income		770,826			348,978
Film library amortization, included in cost of revenue		10,683,227			6,459,431
Share-based compensation expense		1,061,926			953,688
Acquisition-related costs and other one-time consulting fees		3,968,289			666,793
Reserve for bad debt and video returns		2,669,699			646,289
Amortization		13,293,279			326,988
Loss on extinguishment on debt		350,691			—
Transitional Expenses		3,505,855			—
All other nonrecurring costs		276,400			589,679
Adjusted EBITDA	$	5,953,528		$	10,020,874

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