8-K
RLJ ENTERTAINMENT, INC. filed this Form 8-K on 11/09/2017
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rlje-8k_20171109.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 9, 2017

RLJ ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation)

 

001-35675

 

45-4950432

(Commission File Number)

 

(IRS Employer Identification Number)

RLJ Entertainment, Inc.

8515 Georgia Avenue, Suite 650

Silver Spring, Maryland  20910

(Address of principal executive offices)

Registrant’s telephone number, including area code: (301) 608-2115

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act .  

 

 

 

 

 


 

Item 2.02. Results of Operations and Financial Condition.

On November 9, 2017, RLJ Entertainment, Inc., a Nevada corporation, (the “Company”), issued a press release announcing its operating results for the quarter ended September 30, 2017. A copy of the press release is furnished as Exhibit 99.1 attached hereto and is incorporated by reference in its entirety into this Item 2.02 of this Current Report on Form 8-K.

The information contained in this Item 2.02 and Exhibit 99.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act or otherwise subject to the liability of that section. Such information shall not be incorporated by reference in any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as otherwise expressly set forth by specific reference in such a filing.

Adjusted EBITDA and Other Non-GAAP Measures

In the press release, the Company discloses Adjusted EBITDA which is a non-GAAP financial measure, as defined in Regulation G promulgated by the Securities and Exchange Commission. A reconciliation of Adjusted EBITDA to net loss is included in page 6 of Exhibit 99.1.

This non-GAAP financial measure, Adjusted EBITDA, is in addition to, not an alternative for, or superior to, measures of financial performance prepared in accordance with accounting principles generally accepted in the United States of America (or U.S. GAAP). In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. The Company believes that this non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that this measure should only be used to evaluate the Company’s results of operations in conjunction with corresponding GAAP measures.

The Company believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations because it removes material noncash items and allows investors to analyze the operating performance of the business using the same metric management uses. The exclusion of noncash items better reflects our ability to make investments in the business and meet obligations. Adjusted EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. The Company uses this measure to assess operating results and performance of its business, perform analytical comparisons, identify strategies to improve performance and allocate resources to its business segments. While the Company considers Adjusted EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with U.S. GAAP. Not all companies calculate Adjusted EBITDA in the same manner, and the measure, as presented, may not be comparable to similarly-titled measures presented by other companies.

Item 9.01. Financial Statements and Exhibits.

(d)Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press release issued on November 9, 2017

 

 

2


 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

RLJ ENTERTAINMENT, INC.

 

 

 

 

 

Date:

 

November 9, 2017

 

By:

 

/s/ NAZIR ROSTOM

 

 

 

 

Name:

 

Nazir Rostom

 

 

 

 

Title:

 

Chief Financial Officer

 

 

3

rlje-ex991_6.htm

 

Exhibit 99.1

RLJ ENTERTAINMENT REPORTS THIRD QUARTER 2017 FINANCIAL RESULTS

 

Digital Channels subscriber count increased over 50% year-over-year

Net revenue grew 14% year-over-year, driven by 59% increase in revenue from Proprietary Digital Channels

Gross profit increased 16% year-over-year

Net loss of $2.7 million, improved 31% from last year

Adjusted EBITDA of $2.9 million, improved 3% from last year

SILVER SPRING, MD – November 9, 2017 – RLJ Entertainment, Inc. (“RLJ Entertainment,” “RLJE” or “the Company”) (NASDAQ: RLJE), today announced financial results for the quarter ended September 30, 2017.  

 

Third Quarter 2017 Highlights:

 

Digital Channels paying subscribers increased over 50% from the third quarter of 2016 to over 620,000.

 

Digital Channels segment revenues increased 58.6% to $7.0 million from $4.4 million in third quarter 2016.

 

Total net revenue increased 13.9% year-over-year to $20.9 million, primarily driven by a 58.6% increase in Digital Channels revenue. Our Wholesale Distribution segment revenue remained flat year-over-year.

 

Gross Profit increased 16% year-over-year to $8.2 million from the third quarter of 2016 as higher revenue from the Digital Channels offset the increased investment in content.

 

Equity Earnings from Agatha Christie Limited (ACL) increased by 74.0% to $1.7 million from the third quarter of 2016 as ACL continued to improve its film, TV distribution and publishing business segments.

 

Net loss was $2.7 million, an improvement of $1.2 million from third quarter of 2016.

 

Adjusted EBITDA grew 3.4% to $2.9 million from the third quarter of 2016 as a result of continued growth of the higher-margin Digital Channels segment and higher equity earnings from ACL.

Robert L. Johnson, Chairman of RLJ Entertainment, stated, “Acorn TV and UMC continue to prove that compelling programming targeted toward specific audiences, combined with effective marketing and subscriber engagement, creates a powerful value proposition in the OTT landscape. As standalone channels, Acorn TV and UMC represent a very significant and immediate opportunity to deliver incremental value to our subscribers and investors, given the Company’s timely strategy to accelerate content, marketing, and distribution investments.”

Miguel Penella, Chief Executive Officer of RLJ Entertainment, stated, “Exceeding 620,000 subscribers is a major accomplishment in our path to achieve our 1 million subscribers milestone within the next 12 to 18 months.  Our selective, compelling and engaging programming, including new and returning exclusive franchises, continues to draw high-touch consumer engagement.  We remain committed to execute our strategy of accelerated investments in content, distribution and marketing to support rapid Digital Channel growth and capture momentum in our IP licensing and wholesale business units.”

Nazir Rostom, Chief Financial Officer of RLJ Entertainment, commented, “RLJE has transformed into a strong digital company.  Quarter after quarter, our Digital Channels’ revenue continues to grow and represent a meaningful part of our total revenues. Our wholesale business has stabilized and our operational metrics continue to improve. With our increasing subscriptions, growing Digital Channel’s revenues and improving overall profitability, we expect to deliver revenue and margin growth for 2017.”

Conference Call Information

RLJE will hold a conference call today at 11:30 a.m. ET to discuss these results.  To participate in the live conference call, interested parties may dial +1.844.348.1685 (+1.213.358.0890 outside the U.S. and Canada) and provide the conference ID number 1637472, or listen via webcast at www.rljentertainment.com.  The webcast will be archived in the investors section of RLJE's website.

About RLJ Entertainment, Inc.

1


 

RLJ Entertainment, Inc. (NASDAQ: RLJE) is a premium digital channel company serving distinct audiences primarily through its popular OTT branded channels, Acorn TV (British TV) and UMC (Urban Movie Channel), which have rapidly grown through development, acquisition, and distribution of its exclusive rights to a large library of international and British dramas, independent feature films and urban content. RLJE’s titles are also distributed in multiple formats including broadcast and pay television, theatrical and non-theatrical, DVD, Blu-ray, and a variety of digital distribution models (including EST, VOD, SVOD and AVOD) in North America, the United Kingdom, and Australia. Additionally, through Acorn Media Enterprises, its UK development arm, RLJE co-produces and develops new programs and owns 64% of Agatha Christie Limited. For more information, please visit RLJEntertainment.com, Acorn.tv, and UMC.tv.

Forward Looking Statements

This press release may include “forward looking statements” within the meaning of the “safe harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Other than statements of historical fact, all statements made in this press release are forward-looking, including, but not limited to, statements regarding goals, industry prospects, future results of operations or financial position, and statements of our intent, belief and current expectations about our strategic direction, prospective and future results and condition.  In some cases, forward-looking statements may be identified by words such as “will,” “should,” “could,” “may,” “might,” “expect,” “plan,” “possible,” “potential,” “predict,” “anticipate,” “believe,” “estimate,” “continue,” “future,” “intend,” “project” or similar words.  

Forward-looking statements involve risks and uncertainties that are inherently difficult to predict, which could cause actual outcomes and results to differ materially from our expectations, forecasts and assumptions.  Factors that might cause such differences include, but are not limited to:

 

Our financial performance, including our ability to achieve improved results from operations and improved earnings before income tax, depreciation and amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, severance costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate (or Adjusted EBITDA);

 

Our expectation that subscribers, revenues and financial performance of our digital channels will continue to grow and have a positive effect on our liquidity, cash flows and operating results;

 

The effects of limited cash liquidity on operational performance;

 

Our obligations under the credit agreement;

 

Our ability to satisfy financial ratios;

 

Our ability to generate sufficient cash flows from operating activities;

 

Our ability to fund planned capital expenditures and development efforts;

 

Our inability to gauge and predict the commercial success of our programming;

 

Our ability to maintain relationships with customers, employees and suppliers, including our ability to enter into revised payment plans, when necessary, with our vendors that are acceptable to all parties;

 

Our ability to realize anticipated synergies and other efficiencies in connection with the AMC transaction;

 

Delays in the release of new titles or other content;

 

The effects of disruptions in our supply chain;

 

The loss of key personnel;

 

Our public securities’ limited liquidity and trading; or

 

Our ability to meet the NASDAQ Capital Market continuing listing standards and maintain our listing.

You should carefully consider and evaluate all of the information in this press release, including the risk factors listed above and in our Form 10-K filed with the Securities Exchange Commission (or SEC), including “Item 1A.  Risk Factors.”  If any of these risks occur, our business, results of operations, and financial condition could be harmed, the price of our common stock could decline and you may lose all or part of your investment, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements contained in this press release.  Unless otherwise required by law, we undertake no obligation to release publicly any updates or revisions to any such forward-looking statements that may reflect events or circumstances occurring after the date of this press release.

2


 

Readers are referred to the most recent reports filed with the SEC by RLJ Entertainment. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Media Contact: 
Traci Otey Blunt, 301-830-6204
RLJ Entertainment, Inc. 
tblunt@rljentertainment.com

Investor Contact: 
Jody Burfening/Carolyn Capaccio, 212-838-3777

LHA

ir@rljentertainment.com

# # #

3


 

RLJ ENTERTAINMENT, INC.

Consolidated Balance Sheets

(Unaudited)

As of September 30, 2017 and December 31, 2016

 

 

 

 

September 30,

 

 

December 31,

 

(In thousands, except share data)

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Cash

 

$

6,587

 

 

$

7,834

 

Accounts receivable, net

 

 

13,263

 

 

 

19,569

 

Inventories, net

 

 

5,368

 

 

 

6,215

 

Investments in content, net

 

 

75,314

 

 

 

60,737

 

Prepaid expenses and other assets

 

 

789

 

 

 

798

 

Property, equipment and improvements, net

 

 

1,178

 

 

 

1,336

 

Equity investment in affiliate

 

 

19,884

 

 

 

16,491

 

Other intangible assets, net

 

 

8,063

 

 

 

9,309

 

Goodwill

 

 

13,958

 

 

 

13,691

 

Total assets

 

$

144,404

 

 

$

135,980

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

12,316

 

 

$

11,995

 

Accrued royalties and distribution fees

 

 

52,834

 

 

 

55,614

 

Deferred revenue

 

 

2,549

 

 

 

2,152

 

Debt, net of discounts and debt issuance costs

 

 

51,599

 

 

 

42,053

 

Deferred tax liability

 

 

1,857

 

 

 

1,715

 

Stock warrant and other derivative liabilities

 

 

13,410

 

 

 

9,763

 

Total liabilities

 

 

134,565

 

 

 

123,292

 

Commitments and contingencies (see Note 13)

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.001 par value, 1,000,000 shares

   authorized; 31,046 shares issued; 15,198 shares outstanding at September 30,

   2017 and 30,198 shares outstanding at December 31, 2016; liquidation

   preference of $17,997 at September 30, 2017 and $34,366 at December 31, 2016

 

 

19,725

 

 

 

38,708

 

Common stock, $0.001 par value, 250,000,000 shares authorized, 13,644,076

   shares issued and outstanding at September 30, 2017; and 5,240,085

   shares issued and outstanding at December 31, 2016

 

 

14

 

 

 

5

 

Additional paid-in capital

 

 

130,585

 

 

 

106,059

 

Accumulated deficit

 

 

(137,331

)

 

 

(127,388

)

Accumulated other comprehensive loss

 

 

(3,154

)

 

 

(4,696

)

Total shareholders' equity

 

 

9,839

 

 

 

12,688

 

Total liabilities and shareholders' equity

 

$

144,404

 

 

$

135,980

 

 

4


 

RLJ ENTERTAINMENT, INC.

Consolidated Statements of Operations

(Unaudited)

Three and Nine Months Ended September 30, 2017 and 2016

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(In thousands, except share data)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

 

$

20,900

 

 

$

18,351

 

 

$

53,620

 

 

$

51,882

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Content amortization and royalties

 

 

9,538

 

 

 

7,887

 

 

 

21,867

 

 

 

22,957

 

Manufacturing and fulfillment

 

 

3,174

 

 

 

3,425

 

 

 

9,055

 

 

 

12,031

 

Total cost of sales

 

 

12,712

 

 

 

11,312

 

 

 

30,922

 

 

 

34,988

 

Gross profit

 

 

8,188

 

 

 

7,039

 

 

 

22,698

 

 

 

16,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

 

3,972

 

 

 

2,536

 

 

 

9,131

 

 

 

6,882

 

General and administrative expenses

 

 

4,926

 

 

 

4,068

 

 

 

14,165

 

 

 

13,563

 

Depreciation and amortization

 

 

974

 

 

 

831

 

 

 

2,751

 

 

 

2,100

 

Total operating expenses

 

 

9,872

 

 

 

7,435

 

 

 

26,047

 

 

 

22,545

 

LOSS FROM CONTINUING OPERATIONS

 

 

(1,684

)

 

 

(396

)

 

 

(3,349

)

 

 

(5,651

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity earnings of affiliate

 

 

1,723

 

 

 

990

 

 

 

3,143

 

 

 

2,198

 

Interest expense, net

 

 

(2,288

)

 

 

(2,222

)

 

 

(6,326

)

 

 

(6,617

)

Change in fair value of stock warrants and other derivatives

 

 

(264

)

 

 

(1,222

)

 

 

(3,647

)

 

 

(3,406

)

Gain on extinguishment of debt

 

 

 

 

 

 

 

 

470

 

 

 

 

Other income (expense), net

 

 

169

 

 

 

(42

)

 

 

614

 

 

 

(772

)

LOSS FROM CONTINUING OPERATIONS

   BEFORE PROVISION FOR INCOME TAXES

 

 

(2,344

)

 

 

(2,892

)

 

 

(9,095

)

 

 

(14,248

)

Provision for income taxes

 

 

(372

)

 

 

(151

)

 

 

(848

)

 

 

(192

)

LOSS FROM CONTINUING OPERATIONS,

   NET OF INCOME TAXES

 

 

(2,716

)

 

 

(3,043

)

 

 

(9,943

)

 

 

(14,440

)

LOSS FROM DISCONTINUED OPERATIONS,

   NET OF INCOME TAXES

 

 

 

 

 

(917

)

 

 

 

 

 

(3,169

)

NET LOSS

 

 

(2,716

)

 

 

(3,960

)

 

 

(9,943

)

 

 

(17,609

)

Accretion on preferred stock

 

 

(203

)

 

 

(1,473

)

 

 

(959

)

 

 

(3,763

)

NET LOSS ATTRIBUTABLE TO COMMON

   SHAREHOLDERS

 

$

(2,919

)

 

$

(5,433

)

 

$

(10,902

)

 

$

(21,372

)

Net loss per common share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.22

)

 

$

(0.97

)

 

$

(1.31

)

 

$

(4.08

)

Discontinued operations

 

 

 

 

 

(0.20

)

 

 

 

 

 

(0.71

)

Basic and diluted net loss per common share attributable

   to common shareholders

 

$

(0.22

)

 

$

(1.17

)

 

$

(1.31

)

 

$

(4.79

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

13,463

 

 

 

4,640

 

 

 

8,329

 

 

 

4,463

 

 

5


 

RLJ ENTERTAINMENT, INC.

UNAUDITED Adjusted EBITDA

Three and Nine Months Ended September 30, 2017 and 2016

 

 

We define “Adjusted EBITDA” as earnings before income tax, depreciation, amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, severance costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.  Management believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations because it removes material non-cash items that allows investors to analyze the operating performance of the business using the same metric management uses.  The exclusion of non-cash items better reflects our ability to make investments in the business and meet obligations.  Presentation of Adjusted EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance.  Management uses this measure to assess operating results and performance of our business, perform analytical comparisons, identify strategies to improve performance and allocate resources to our business segments. While management considers Adjusted EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with U.S. GAAP. Not all companies calculate Adjusted EBITDA in the same manner and the measure, as presented, may not be comparable to similarly-titled measures presented by other companies.

The following table includes the reconciliation of our consolidated U.S. GAAP net loss to our consolidated Adjusted EBITDA:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(In thousands)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net loss

 

$

(2,716

)

 

$

(3,960

)

 

$

(9,943

)

 

$

(17,609

)

Interest expense

 

 

2,288

 

 

 

2,222

 

 

 

6,326

 

 

 

6,617

 

Provision for income tax

 

 

372

 

 

 

151

 

 

 

848

 

 

 

192

 

Depreciation and amortization

 

 

974

 

 

 

831

 

 

 

2,751

 

 

 

2,100

 

Basis-difference amortization in equity earnings of

   affiliate

 

 

117

 

 

 

117

 

 

 

342

 

 

 

373

 

Change in fair value of stock warrants and other

   derivatives

 

 

264

 

 

 

1,222

 

 

 

3,647

 

 

 

3,406

 

Stock-based compensation

 

 

696

 

 

 

277

 

 

 

1,208

 

 

 

887

 

Restructuring

 

 

200

 

 

 

 

 

 

8

 

 

 

 

Loss from discontinued operations

 

 

 

 

 

917

 

 

 

 

 

 

3,169

 

Foreign currency exchange gain on intercompany

   accounts

 

 

(165

)

 

 

76

 

 

 

(640

)

 

 

900

 

Non-cash royalty expense

 

 

881

 

 

 

963

 

 

 

2,397

 

 

 

2,001

 

Adjusted EBITDA

 

$

2,911

 

 

$

2,816

 

 

$

6,944

 

 

$

2,036

 

 

 

 

6

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