LONG ISLAND CITY, N.Y., Aug. 14, 2018 /CNW/ -- Frankly Inc. (TSX VENTURE: TLK) (Frankly or the Company), a leader in transforming local TV broadcasters and media companies by enabling them to publish and monetize their digital content across multiple platforms, reported financial results for the second quarter ended June 30, 2018. All financial statements have been prepared in accordance with U.S. GAAP.
Second Quarter 2018 Financial Results (All amounts in U.S. dollars)
Six Month 2018 Financial Results (All amounts in U.S. dollars)
Customer Agreement Update
Raycom, a significant customer of the Company which accounted for 19% of the Company's revenue for the six months ended June 30, 2018, is in the process of a pending merger with Gray Television, Inc. Raycom has given the Company preliminary notification that it intends to terminate its existing customer agreement with the Company on or about December 31, 2018. The Company and Raycom are currently exploring an ongoing relationship following that date. Separately, three other of the Company's customers, including one other significant customer which accounted for 12% of the Company's revenue for the six months ended June 30, 2018, have provided notice that their current customer agreements with the Company will terminate on or before December 31, 2018. While the Company expects to have ongoing service relationships with one or more of these customers, no such assurances can be made. In the aggregate, these terminations are expected to have a material negative impact on the Company's 2019 revenues and related income (loss).
Management Commentary
"Our second quarter results were largely in line with our expectations, and we are now beginning to see the positive effects of our greater cost reduction initiative which we began back in February," said CEO Lou Schwartz. "In fact, our second quarter operating expenses were down nearly $1.9 million from last year, and we also achieved positive adjusted EBITDA of $650,000 during the quarter. Looking ahead, we remain confident in our ability to achieve our near-term goal of being operating cash flow breakeven in the fourth quarter of this year, although the terminations of certain customer agreements will have an impact our ability to sustain this achievement into future periods."
Management Changes
Effective August 13, 2018 Melissa Hatter, Chief Operating Officer, has resigned from her position at Frankly to pursue other opportunities. To ensure a smooth transition, Ms. Hatter will continue to serve as an advisor to Frankly through the end of August 2018. Concurrently, Benj Smith, VP of Operations, has been promoted to SVP of Customer Success and will assume the majority of the responsibilities of the role.
About Frankly
Frankly (TSX VENTURE: TLK) builds an integrated software platform for media companies to create, distribute, analyze and monetize their content across all of their digital properties on web, mobile and TV. Its customers include NBC, ABC, CBS and FOX affiliates. The Company is headquartered in New York. To learn more, visit www.franklyinc.com.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Non-GAAP Measures
The Company reports earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA, which are not financial measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP") and therefore may not be comparable to similar measures presented by other issuers. EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute to net income (loss) or any other financial measures of performance or liquidity calculated and presented in accordance with GAAP. The Company defines Adjusted EBITDA as EBITDA, adjusted to exclude certain non-cash charges and other items that we do not believe are reflective of our ongoing operating results. The Company utilizes Adjusted EBITDA internally for purposes of forecasting, determining compensation, and assessing the performance of our business, therefore, we believe this measure provides useful supplemental information that may assist investors in assessing an investment in the Company.
The following unaudited table presents the reconciliation of net loss to Adjusted EBITDA for the three and six months ended June 30, 2018 and 2017, respectively.
Three Months Ended June 30, |
Six Months Ended June 30, | |||||||
2018 |
2017 |
2018 |
2017 | |||||
Net Loss |
$ (1,459,521) |
$ (2,404,109) |
$ (5,269,014) |
$ (3,907,928) | ||||
Interest expense, net |
599,003 |
646,943 |
1,196,099 |
1,257,148 | ||||
Income tax expense |
- |
- |
- |
- | ||||
Depreciation and amortization |
1,265,999 |
1,092,626 |
2,413,244 |
2,159,357 | ||||
Stock-based compensation |
96,848 |
284,006 |
331,888 |
512,172 | ||||
Loss on disposal of assets |
12,823 |
- |
12,823 |
- | ||||
Transaction costs |
54,019 |
- |
78,692 |
- | ||||
Restructuring expense |
81,250 |
- |
542,210 |
- | ||||
Retention expense |
- |
- |
588,099 |
- | ||||
Other expense |
- |
- |
- |
27,017 | ||||
Adjusted EBITDA |
$ 650,421 |
$ (380,534) |
$ (105,959) |
$ 47,766 |
Notice Regarding Forward-Looking Statements
This release includes forward-looking statements regarding Frankly and its respective businesses, including statements with respect to expected customer agreement terminations and the timing therefor, the potential for ongoing service relationships with customers and potential impacts on revenue in 2019, the ability to break-even on an operating cash-flow basis and the ability to create value for shareholders. Forward-looking events and circumstances discussed in this release may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the parties. Forward looking statements depend on certain assumptions that management deems to be reasonable in the circumstances, but such assumptions may prove to be incorrect and the outcome of the subject of any forward-looking statement cannot be guaranteed. Such assumptions are based on, among other things, ongoing negotiations with customers and current operating performance. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Frankly undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
SOURCE Frankly Inc.
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