RMG Networks Posts $8.3M Operating Loss For Quarter

May 8, 2014 by Dave Haynes

logo_rmgn_fullblkRMG Networks posted its quarterly financials today, a rough set of numbers the company is attributing to weaker ad revenues and higher operating costs pinned to adding to and changing sales and marketing efforts.

The company reported an adjusted operating loss for the last quarter of $8.3 million, compared to a pro forma operating loss of $2.6 million in the first quarter of 2013.

This increased loss is attributable to lower advertising revenue and gross margin in the current year period, higher operating expenses in the current year period resulting from investments made during the second half of 2013 in new sales and marketing personnel to support growth initiatives and approximately $2.1 million of additional depreciation, amortization and stock-based compensation expense.

Adjusted EBITDA loss was $5.3 million compared to pro forma combined adjusted EBITDA loss of $0.8 million in the first quarter of 2013, decreasing for the reasons described above.

Reported Results First Quarter. Total reported revenue for the quarter ended March 31, 2014 was $11.8 million; total revenue for the predecessor company for the period from February 1 to April 19, 2013 was $7.2 million.

Operating loss for the quarter ended March 31, 2014 was $8.5 million; operating income for the predecessor company for the period from February 1 to April 19, 2013 was $3.1 million.

Growth Outlook

Though the company expects to see some continued near term weakness in the out-of-home advertising market, we continue to expect that the sales investments we made in the second half of 2013 will drive accelerated second half 2014 revenue and that we will achieve 20+% year-over-year adjusted revenue growth. Revenue growth will lead to increasing operating leverage and the company expects to generate positive adjusted EBITDA for the full year 2014.

As I noted in a post earlier about the company’s soon to open Executive Briefing Center, CEO Garry McGuire is pivoting the company – long known first as a digital out of home network operator – to focus on the software, solutions and services side of the company, known as Symon Communications when it was acquired last year.

The revenues pretty strongly suggest that’s where the growth is, with about 80% in the last quarter from enterprise work and 20% from media sales.

I also assume McGuire has board support despite the bad numbers, as there are some big, very recent investments in office space, the briefing center and hires that got OK’d. Obviously, those folks are going to want to see a bump soon.

The release on the financials is here …

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