GlobeNewswire Inc | Aug 13, 2020 04:05PM EDT

August 13, 2020

COS COB, Conn., Aug. 13, 2020 (GLOBE NEWSWIRE) -- Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE), one of the largest operators of streaming advertising-supported video-on-demand (AVOD) networks, today announced its financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 Financial Summary

-- Gross revenue of $13.9 million, compared to $12.2 million in the year-ago period. -- Net loss of $10.0 million compared to net loss of $5.9 million in the year-ago period; $9.0 million net loss before preferred dividends, compared to $5.1 million net loss before preferred dividends in the year-ago period. -- Adjusted EBITDA was $2.7 million, compared to $1.3 million in the year-ago period. Year-to-date Adjusted EBITDA increased approximately 10x over year-to-date 2019 results. -- Online networks, which include Crackle and Popcornflix, generated $5.4 million in net revenue compared to $10.0 million in the year-ago period. The year-over-year decline reflects the absence of approximately $4.0 million in advertising revenue in the 2020 period due to the closing of Playstation Vue, the elimination of $1.2 million of intercompany revenue share payments to our Distribution & Production business, and the weaker 2020 advertising market environment. -- Distribution & Production generated $8.5 million in revenue, compared to $2.2 million in the year-ago period due to strength in the performance of Screen Medias content on Crackle Plus and TVOD revenue.

Recent Business Highlights

-- Original & Exclusive content represented 17.5% of total viewing on Crackle Plus in the quarter up from 15% last quarter and 0% a year ago, reflecting the companys strategic focus on original programming. -- Continued to expand pipeline of Original & Exclusive content. Crackle Plus is fully programmed into early 2021 despite industry production delays and has announced agreements including 200 hours of new original and exclusive programming. -- Acquired an in-process next-generation technology platform to support delivery and growth of AVOD networks from Sony for $4.6 million; acquisition will enable Chicken Soup for the Soul Entertainment to accelerate completion of platform, which will improve service and drive ongoing operating cost efficiencies beginning immediately. -- Increased liquidity through bond issuance that raised an aggregate principal amount of more than $22.1 million after underwriters exercised their over-allotment option.

Despite a challenging Q2 advertising market, we were able to exceed top line expectations and increase our EBITDA by 10-fold for the six months ended June 30, 2020 on a year-over-year basis. Our results are validating our differentiated business model focused on Original & Exclusive content for our AVOD networks, and acquiring and producing that content cost-effectively through our combined Distribution and Production operations, said William J. Rouhana Jr., chairman and chief executive officer of Chicken Soup for the Soul Entertainment. Since establishing the Crackle Plus joint venture a little over a year ago, the execution of our strategic plan is going well, and we believe we now have a solid foundation on which to implement the next stages of our growth strategy, which include accelerating the rollout of our next generation technology platform, growing viewership through increased distribution relationships, and building audience and advertising revenue. While the pandemic adversely impacted us in the quarter and continues to create uncertainties, we have adapted and now have momentum and significant tailwinds to our performance potential in the second half of 2020.

Gross profit for the quarter ended June 30, 2020 was $0.6 million, or 4% of net revenue, compared to $3.6 million, or 30% of net revenue for the year-ago period. The change in the percentage of gross profit resulted in part from $6.4 million of non-cash amortization of the film library in the companys 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 $7.0 million or 51% of total net revenue.

Operating loss for the quarter ended June 30, 2020 was $13.1 million, compared to an operating loss of $3.0 million for the year-ago period. Without this film library amortization expense, the operating loss would have been $6.7 million.

Net loss was $10.0 million, or $0.83 per share, compared to a net loss of $5.9 million, or $0.49 per share in the prior-year second quarter. Excluding preferred dividends, the net loss in the second quarter of 2020 would have been $9.0 million, or $0.75 per share, compared to net loss of $5.1 million, or $0.43 per share last year.

Adjusted EBITDA for the quarter ended June 30, 2020 was $2.7 million, compared to $1.3 million in the same period last year.

As of June 30, 2020, the company had $4.7 million of cash and cash equivalents compared to $6.4 million at December 31, 2019, and outstanding debt of $18.6 million as of June 30, 2020 compared to $20.2 million as of December 31, 2019. The company completed debt and equity financings after the end of the second quarter that increased liquidity.

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: Thursday, August 13, 2020, 4:30 p.m. ET. -- Toll-free: (833) 832-5128 -- International: (484) 747-6583 -- Conference ID: 6999674 -- 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 -- Conference ID: 6999674

ABOUT CHICKEN SOUP FOR THE SOUL ENTERTAINMENTChicken Soup for the Soul Entertainment, Inc. (Nasdaq: 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, Espaolflix and FrightPix. The company also acquires and distributes video content through its Screen Media subsidiaryand produces original long and short-form content throughLandmark Studio Group, its Chicken Soup for the Soul Originals division andAPlus.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 companys 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 companys 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 companys 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 companys 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 companys Annual Report on Form 10-Q for the three and six month periods ended June 30, 2020 under Managements Discussion and Analysis of Financial Condition and Results of Operations Reconciliation of Unaudited Historical Results to Adjusted EBITDA.

FORWARD-LOOKING STATEMENTSThis 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 companys 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 KrafchikEllipsisCSSE@ellipsisir.com646-776-0886

MEDIA CONTACTKate BarretteRooneyPartners LLCkbarrette@rooneyco.com(212) 223-0561

Chicken Soup for the Soul Entertainment, Inc. Condensed Consolidated Balance Sheets June30, December31, 2020 2019 (unaudited) ASSETS Cash and cash equivalents $ 4,655,317 $ 6,447,402 Accounts receivable, net 22,573,432 34,661,119 Prepaid expenses and other current 1,485,557 1,173,223 assetsGoodwill 21,448,106 21,448,106 Indefinite lived intangible assets 12,163,943 12,163,943 Intangible assets, net 25,093,057 35,451,951 Film library, net 41,105,470 33,250,149 Due from affiliated companies 4,996,754 7,642,432 Programming costs and rights, net 16,418,308 15,113,574 Other assets, net 5,303,550 313,585 Total assets $ 155,243,494 $ 167,665,484 LIABILITIES AND EQUITY Current maturities of commercial loan $ 3,200,000 $ 3,200,000 Commercial loan, net of unamortizeddeferred finance cost of $169,219 and 10,230,781 11,810,475 $189,525 respectivelyNotes payable under revolving credit 5,000,000 5,000,000 facilityAccounts payable and accrued expenses 30,041,385 26,646,390 Ad representation fees payable 8,511,033 12,429,838 Film library acquisition obligations 8,335,600 5,020,600 Programming obligations 6,416,012 7,300,861 Accrued participation costs 12,064,073 5,066,512 Other liabilities 1,484,050 170,106 Total liabilities 85,282,934 76,644,782 Commitments and contingencies Equity Stockholders' Equity: Series A cumulative redeemableperpetual preferred stock, $.0001 parvalue, liquidation preference of $25.00per share, 10,000,000 shares 160 160 authorized; 1,599,002 shares issued andoutstanding, redemption value of$39,975,050Class A common stock, $.0001 par value,70,000,000 shares authorized; 4,267,725and 4,259,920 shares issued, 4,193,490 426 425 and 4,185,685 shares outstanding,respectivelyClass B common stock, $.0001 par value,20,000,000 shares authorized; 7,813,938 782 782 shares issued and outstandingAdditional paid-in capital 88,084,137 87,610,030 Deficit (54,133,136 ) (32,695,629 ) Class A common stock held in treasury, (632,729 ) (632,729 ) at cost (74,235 shares)Total stockholders? equity 33,319,640 54,283,039 Subsidiary convertible preferred stock 36,350,000 36,350,000 Noncontrolling interests 290,920 387,663 Total equity 69,960,560 91,020,702 Total liabilities and equity $ 155,243,494 $ 167,665,484

Chicken Soup for the Soul Entertainment, Inc. Condensed Consolidated Statements of Operations (unaudited) Three Months Ended June30, Six Months Ended June30, 2020 2019 2020 2019 Revenue: Online networks $ 5,360,693 $ 10,009,078 $ 14,386,403 $ 10,744,342 Distribution and 8,537,956 2,202,451 13,630,745 3,992,685 ProductionTotal revenue 13,898,649 12,211,529 28,017,148 14,737,027 Less: returns and (378,109 ) (241,047 ) (1,252,535 ) (573,391 ) allowancesNet revenue 13,520,540 11,970,482 26,764,613 14,163,636 Cost of revenue 12,933,545 8,321,994 22,843,935 9,954,095 Gross profit 586,995 3,648,488 3,920,678 4,209,541 Operating expenses: Selling, general 7,052,776 4,700,424 13,892,673 7,522,481 and administrativeAmortization and 5,241,415 729,991 10,446,143 935,614 depreciationManagement and 1,352,054 1,195,520 2,676,461 1,414,790 license feesTotal operating 13,646,245 6,625,935 27,015,277 9,872,885 expensesOperating loss (13,059,250 ) (2,977,447 ) (23,094,599 ) (5,663,344 ) Interest expense 333,903 146,359 663,028 287,482 Acquisition-related ? 2,258,801 98,926 2,656,736 costsOther non-operating (4,331,409 ) (12,024 ) (4,337,847 ) (25,549 ) income, netLoss before incometaxes and preferred (9,061,744 ) (5,370,583 ) (19,518,706 ) (8,582,013 ) dividendsProvision for(benefit from) 18,000 (253,000 ) 67,000 (691,000 ) income taxesNet loss beforenoncontrolling (9,079,744 ) (5,117,583 ) (19,585,706 ) (7,891,013 ) interests andpreferred dividendsNet (loss) incomeattributable to (43,889 ) 513 (96,743 ) 513 noncontrollinginterestsNet lossattributable toChicken Soup for (9,035,855 ) (5,118,096 ) (19,488,963 ) (7,891,526 ) the SoulEntertainment, Inc.Less: preferred 974,272 797,981 1,948,544 1,401,288 dividendsNet loss availableto common $ (10,010,127 ) $ (5,916,077 ) $ (21,437,507 ) $ (9,292,814 ) stockholdersNet loss per common share:Basic and diluted $ (0.83 ) $ (0.49 ) $ (1.79 ) $ (0.78 )

Chicken Soup for the Soul Entertainment, Inc. Adjusted EBITDA Three Months Ended June30, 2020 2019 Net loss available to common $ (10,010,127 ) $ (5,916,077 ) stockholdersPreferred dividends 974,272 797,981 Provision for income taxes 18,000 (253,000 ) Other taxes 51,240 50,465 Interest expense 333,903 146,359 Film library and program rights 6,407,283 1,563,268 amortizationShare-based compensation expense 229,273 275,097 Acquisition-related costs ? 2,258,801 Reserve for bad debt and video returns 812,741 218,111 Amortization and depreciation 5,496,972 729,991 Other non-operating income, net (4,331,409 ) (12,024 ) Transitional expenses 2,239,876 1,241,353 All other nonrecurring costs 469,392 162,901 Adjusted EBITDA $ 2,691,416 $ 1,263,226 Six Months Ended June30, 2020 2019 Net loss available to common $ (21,437,507 ) $ (9,292,814 ) stockholdersPreferred dividends 1,948,544 1,401,288 Provision for income taxes 67,000 (691,000 ) Other Taxes 104,651 331,675 Interest expense 663,028 287,482 Film library and program rights 8,902,115 2,434,394 amortizationShare-based compensation expense 474,108 490,944 Acquisition-related costs 98,926 2,656,736 Reserve for bad debt & video returns 2,534,336 518,514 Amortization and depreciation 10,701,700 935,614 Other non-operating income, net (4,337,847 ) (25,549 ) Transitional expenses 4,353,345 1,241,353 All other nonrecurring costs 656,340 187,056 Adjusted EBITDA $ 4,728,739 $ 475,693