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8-K - 8-K - Function(x) Inc. | form8-k2x14x2017earningspr.htm |
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Function(x) Inc. Reports Second Quarter Financial Results
PUBLISHING SEGMENT TURNS IN SOLID PERFORMANCE WITH 125% REVENUE
INCREASE QUARTER OVER QUARTER
NEW YORK – February 15, 2017 – Function(x) Inc. (NASDAQ: FNCX) (the “Company”)
yesterday reported financial results for the three and six months ended December 31, 2016.
Revenue for the three months ended December 31, 2016 was $1,215,000, down from $1,782,000
for the three months ended December 31, 2015. For the three months ended December 31, 2016,
revenue for the Company’s Publishing Segment, which we consider our core operating business,
was $834,000, up 57.4% from $530,000 for the three months ended December 31, 2015.
Additionally, this represents a 125% increase above the $371,000 in Publishing Segment revenue
posted last quarter.
Net loss and diluted loss per share for the three-month period ended December 31, 2016 were
$(2,771,000) and $(1.13), respectively. The same metrics for the six-month period ended
December 31, 2016 were $(10,324,000) and $(3.64), respectively.
EBITDA for the Company for the three months ended December 31, 2016 was a loss of
$(1,621,000), which is an improvement from a loss of $(37,748,000) for the same period in
2015. The three months ended December 31, 2015 includes significant non-cash impairment
charge of $30,402,000 that is included in the EBITDA calculation. EBITDA for the Publishing
Segment was a loss of $(1,105,000) for the three months ended December 31, 2016, which
represents an improvement from the loss of $(28,493,000) for such segment for the three months
ended December 31, 2015. The three months ended December 31, 2015 EBITDA figures for the
Publishing Segment include $26,977,000 of non-cash impairment expense. This quarter’s
EBITDA in the publishing segment represents a $1,824,000 improvement over the prior
quarter’s results.
For full details on the above and other pertinent figures, please see exhibit A and B, attached
hereto.
"The continued dramatic improvement in operating results, fueled by impressive growth in user
engagement metrics, confirms that the plan we instituted at the beginning of this fiscal year is
hitting on all cylinders.” said Robert FX Sillerman, Executive Chairman and Chief Executive
Officer. “This growth is continuing, and we expect to magnify these results when we shift our
focus to the Rant brand. Over the past six months, we have focused our efforts on growing
Wetpaint user engagement and monetization; focus which has proven successful at Wetpaint.
Applying this same methodology to Rant, and in the future to additional sites, should continue to
grow and strengthen our publishing business."
“I am confident that the recent successes of the business are just the beginning of what will be a
very exciting period. I look forward to building upon this strong performance and coming up
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with new and innovative ways to make this the business all that we know it can be, a creative and
innovative digital platform that is rivaled by none.” said Brian Rosin, COO.
Function(X), Inc. – Key Performance Indicators (Publishing Segment)
RPMv = Revenue per 1,000 Visits
Our Q2 Fiscal 2017 accomplishments listed below continue to be guided by our overall strategy
and vision, in which Function (x) is building a highly scalable publishing platform that is
designed to efficiently create, share and monetize content across a wide range of topics and
audiences. Our property, Wetpaint, has begun to take full advantage of our publishing
infrastructure to deliver compelling content around pop culture and entertainment, as
demonstrated by the increase in engagement and revenue. We plan on duplicating this success by
focusing on the Rant properties, applying our effective monetization strategy to further increase
revenues.
Fiscal 2017 Second Quarter Highlights and Recent Developments
• Brian Rosin, COO: On January 19, 2017, the Company named Brian Rosin as its Chief
Operating Officer. In this role, Mr. Rosin will report directly to Mr. Sillerman and will
be responsible for driving the long-term strategy and vision of the Company as well as
overseeing all day-to-day operations.
• Non-Core Assets: We are negotiating the sale of a majority stake in our non-core assets
principally in the technology space, including certain intellectual property related to
Social Distribution System ("SDS") and the assets related to the DraftDay daily fantasy
19,113
29,603 30,327
45,012
57,549
78,900
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Jul Aug Sep Oct Nov Dec
Pageviews (in 000's)
$85,914
$127,431
$157,175
$196,577
$260,559
$377,332
$20,000
$80,000
$140,000
$200,000
$260,000
$320,000
$380,000
Jul Aug Sep Oct Nov Dec
Revenue
$6.60
$8.53
$10.13
$13.35
$17.10
$21.56
$2.00
$6.00
$10.00
$14.00
$18.00
$22.00
Jul Aug Sep Oct Nov Dec
RPMv
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sports business. If completed, the contemplated transaction would combine these assets in
to a new company, Element(X). In addition, the Company intends to enter into a shared
services agreement with Element(X), which will provide for a monthly payment for legal,
accounting and office-related expenses, among other things. The terms of any such
transaction will be determined on an arms-length basis and will only be consummated if
the board of directors determines that the transaction is in our best interests as a
Company. There can be no assurance that we will be successful in consummating such a
transaction on the terms as described, or at all.
• Deleveraging Initiatives: Affiliates of Function(x)’s Chairman and CEO, Mr. Sillerman,
have committed to converting approximately $36,000,000 in preferred equity into shares
of the Company’s common stock.
• Built upon foundation for future growth: Continued to refine our streamlined
headcount plan to scale the business, disciplined financial controls and operating expense
model and revamp its technology platform and acquisition team intended to drive
incremental growth.
• Optimized Revenue Model: Our Revenue Model has shown that it has the ability to
drive growth in our Wetpaint property, success that we plan to replicate across other
properties.
• Key performance metrics: Through our daily monitoring of user engagement metrics,
we are able to react quickly to market trends and adjust strategy, which has been a key
component in our recent growth. This automated reporting and analytics allow for
continuous refinement to our approach to implementing the long-term strategy.
About Function(x) Inc.
Function(x) operates Wetpaint.com and Rant. Wetpaint is the leading online destination for
entertainment news for millennial women, covering the latest in television, music, and pop
culture. Rant is a leading digital publisher with original content in multiple different verticals,
most notably in sports, entertainment, and pets. Function(x) Inc. is also the largest shareholder
of DraftDay Gaming Group, which is well-positioned to become a significant participant in the
expanding fantasy sports market, offering a high-quality daily fantasy sports experience both
directly to consumers and to businesses desiring turnkey solutions to new revenue
streams. Function(x) Inc. also owns Choose Digital, a digital marketplace platform that allows
companies to incorporate digital content into existing rewards and loyalty programs in support of
marketing and sales initiatives. For more information, visit www.functionxinc.com.
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve inherent risks and uncertainties that could cause actual
results to differ materially from those projected or anticipated. All information provided in this
press release is as of the date of this release. Except as required by law, Function(x), Inc.
undertakes no obligation to update or revise publicly any forward-looking statements, whether as
a result of new information, future events or otherwise, after the date on which the statements are
made or to reflect the occurrence of unanticipated events.
4 | P a g e
Definitions
The following definitions apply to these terms as used throughout this press release and the
exhibits:
Publishing Segments - represents Wetpaint and Rant and any corporate expenses allocated to this
segment.
EBITDA – represents net income (loss) before other income (loss), interest expense, income
taxes, depreciation and amortization.
Non-GAAP Financial Measures
We prepare our financial statements in accordance with generally accepted accounting principles
(“GAAP”) in the United States of America. Within this press release, we make reference to
EBITDA, which is a non-GAAP financial measure. We include these non-GAAP financial
measures because management believes they are useful to investors in that they provide for
greater transparency with respect to supplemental information used by management in its
financial and operational decision making.
Management uses EBITDA to convey supplemental information to investors regarding our
performance excluding the impact of certain non-cash charges, costs associated with our
borrowings and other special items that can affect the comparability of results from quarter to
quarter. In particular, EBITDA is a key measure used by our management and board of directors
to understand and evaluate our core operating performance and trends, to prepare and approve
our annual budget, and to develop short- and long-term operational plans. Of note, the
elimination of certain expenses in calculating EBITDA can provide a useful measure for period-
to-period comparisons of our core business.
Accordingly, we believe the presentation of these non-GAAP financial measures, when used in
conjunction with GAAP financial measures, is a useful financial analysis tool that can assist
investors in assessing our operating performance and underlying prospects. This analysis should
not be considered in isolation or as a substitute for analysis of our results as reported under
GAAP. This analysis, as well as the other information in this press release, should be read in
conjunction with our consolidated financial statements and footnotes contained in the Form 10-Q
that we filed with the U.S. Securities and Exchange Commission. The non-GAAP financial
measures used in this press release may be different from the methods used by other companies.
For more information on the Non-GAAP financial measures, please see the Reconciliation of
GAAP financial measures to Non-GAAP financial measures table in the press release
Contact:
For Function(x):
Investors:
Michelle Lanken, 212-231-0092
Chief Financial Officer
mlanken@functionxinc.com
Contact:
Media Relations:
IRTH Communications
Robert Haag, 866-976-4784
Managing Partner
or
5 | P a g e
Exhibit A
Three Months Ended December 31st
2016 2015
Publishing Segment Revenue Reconciliation Publishing Segment Revenue Reconciliation
GAAP Revenue $1,215 GAAP Revenue $1,782
- DDGG Revenue $256 - Choose Revenue $885
- Corporate Revenue $125 - DDGG Revenue $243
Publishing Segment Revenue $834 - Corporate Revenue $125
Publishing Segment Revenue $530
Company EBITDA Reconciliation Company EBITDA Reconciliation
GAAP Net Loss ($2,771) GAAP Net Loss ($39,570)
+ Interest Expenses $2,471 + Interest Expenses $926
+ Depreciation and Amortization $738 + Depreciation and Amortization $898
+ Other (income)/expense, net ($2,161) + Other (income)/expense, net ($1)
+ Taxes $102 EBITDA ($37,747)
EBITDA ($1,621)
Publishing Segment EBITDA Reconciliation Publishing Segment EBITDA Reconciliation
GAAP Net Loss ($2,770) GAAP Net Loss ($39,571)
- Choose Net Loss ($47) - Choose Net Loss ($3,645)
- DDGG Net Loss ($715) - DDGG Net Loss ($1,533)
+ Interest Expenses $2,471 - MyGuy Net Loss ($214)
+ Depreciation and Amortization $491 - Coporate Net Loss ($4,125)
+ Other (income)/expense, net ($2,161) + Interest Expenses $926
+ Taxes $102 + Depreciation and Amortization $636
EBITDA ($1,105) + Other (income)/expense, net ($1)
EBITDA ($28,493)
* Numbers may not total due to rounding
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Six Months Ended December 31st
2016 2015
Publishing Segment Revenue Reconciliation Publishing Segment Revenue Reconciliation
GAAP Revenue $1,875 GAAP Revenue $3,255
- Choose Revenue $58 - Choose Revenue 1,634
- DDGG Revenue $361 - DDGG Revenue 326
- Corporate Revenue $250 - Corporate Revenue 250
Publishing Segment Revenue $1,205 Publishing Segment Revenue $1,045
Company EBITDA Reconciliation Company EBITDA Reconciliation
GAAP Net Loss ($10,324) GAAP Net Loss ($48,336)
+ Interest Expenses $4,121 + Interest Expenses $1,783
+ Depreciation and Amortization $1,425 + Depreciation and Amortization $1,846
+ Other (income)/expense, net $325 + Other (income)/expense, net ($3)
+ Taxes $102 EBITDA ($44,710)
EBITDA ($4,351)
Publishing Segment EBITDA Reconciliation Publishing Segment EBITDA Reconciliation
GAAP Net Loss ($10,324) GAAP Net Loss ($48,336)
- Choose Net Loss ($448) - Choose Net Loss ($4,120)
- DDGG Net Loss ($1,467) - DDGG Net Loss ($1,507)
+ Interest Expenses $4,121 - MyGuy Net Loss ($550)
+ Depreciation and Amortization $932 - Corporate Net Loss ($8,250)
+ Other (income)/expense, net $325 + Interest Expenses $620
+ Taxes $102 + Depreciation and Amortization $1,274
EBITDA ($2,929) + Other (income)/expense, net ($3)
EBITDA ($32,016)
* Numbers may not total due to rounding
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Exhibit B
Assets
Current assets:
Cash and cash equivalents $ 122 $ 537
Marketable securities
Accounts receivable (net of allowance for doubtful accounts of
$20 at December 31, 2016 and June 30, 2016)
Prepaid expenses
Other receivables
Other current assets
Current assets of discontinued operations
Total current assets
Restricted cash
Property & equipment, net
Intangible assets, net
Goodwill
Other assets
Total assets $ 31,807 $ 23,039
Liabilities, convertible redeemable preferred stock and
stockholders' equity/(deficit)
Current liabilities:
Accounts payable and accrued expenses $ 8,901 $ 11,625
Deferred revenue
Current portion of loans payable and conversion feature, net
Current liabilities of discontinued operations
Total current liabilities
Loans payable, less current portion
Deferred revenue
Deferred tax liability
Common stock warrant liability
Other long-term liabilities
Total liabilities
901 951
27,949 48,215
3,446 3,429
102 —
420 10
2,703 2,851
23,080 24,109
— 19,716
682 637
10,794 8,996
432 748
1,260 1,414
9,573 5,339
18,859 11,270
20 39
1,185 3,828
498 440
72 226
50 114
179 110
— 2,495
742 307
Function(x) Inc.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
December 31, 2016
(Unaudited)
June 30, 2016
8 | P a g e
Series A Convertible Redeemable Preferred Stock, $1,000 stated
value, authorized 100,000 shares, issued and outstanding -0-
shares as of December 31, 2016 and June 30, 2016
Commitments and contingencies
Stockholders' equity/(deficit):
Series B Convertible Preferred Stock, $1,000 stated value,
authorized 50,000 shares, issued and outstanding -0- shares as of
December 31, 2016 and June 30, 2016
Series C Convertible Redeemable Preferred Stock, $1,000 stated
value, authorized 100,000 shares, issued and outstanding of
33,175 and 3,000 shares as of December 31, 2016 and June 30,
2016, respectively
Series D Preferred Stock, $1,000 stated value, authorized 150
shares, issued and outstanding -0- shares as of December 31,
2016 and June 30, 2016
Series E Convertible Preferred Stock, $1,000 stated value,
authorized 10,000 shares, issued and outstanding 4,435 and -0-
shares as of December 31, 2016 and June 30, 2016, respectively
Common stock, $0.001 par value: authorized 300,000,000 shares,
issued and outstanding 3,244,275 and 3,023,753 shares as of
December 31, 2016 and June 30, 2016, respectively
Additional paid-in-capital
Treasury stock, 10,758 shares at December 31, 2016 and June 30,
2016
) )
Accumulated deficit ) )
Accumulated other comprehensive income )
Non-controlling interest
Total stockholders' equity/(deficit) )
Total liabilities and stockholders' equity/(deficit) $ 31,807 $ 23,039
3,858 (25,176
(438,280 (428,380
— (361
469 773
3 3
411,075 409,765
(11,916 (11,916
34,907 4,940
— —
7,600 —
— —
— —
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Revenues $ 1,215 $ 1,782 $ 1,875 $ 3,255
Selling, general and administrative expenses ) ) ) )
Impairment loss (see Note 3) ) )
Operating loss ) ) ) )
Other expense:
Other (expense)/income, net )
Interest expense, net ) ) ) )
Total other expense ) ) ) )
Net loss before provision for income taxes ) ) ) )
Income tax expense ) )
Net loss from continuing operations $ (2,771 ) $ (39,570 ) $ (10,288 ) $ (48,336 )
Net loss from discontinued operations ) ) )
Net loss ) ) ) )
Accretion of Convertible Redeemable Preferred Stock
Undeclared Series C Convertible Redeemable Preferred Stock
Dividend
) ) ) )
Add: Net loss attributable to non-controlling interest
Net loss attributable to Function(x) Inc. common stockholders $ (3,625 ) $ (44,404 ) $ (11,367 ) $ (57,885 )
Net loss per common share - basic and diluted:
Continuing operations $ (1.13 ) $ (28.25 ) $ (3.64 ) $ (37.21 )
Discontinued operations $ — $ (3.69 ) $ (0.01 ) $ (7.56 )
Net loss per share attributable to Function(x) Inc. common
stockholders - basic and diluted
$ (1.13 ) $ (31.94 ) $ (3.65 ) $ (44.77 )
Weighted average common shares outstanding - basic and
diluted
3,196,136 1,390,204 3,113,010 1,292,838
141 522 424 689
(1,017 (306 (1,511 (613
22 74 44 148
(2,771 (44,694 (10,324 (58,109
— (5,124 (36 (9,773
(102 — (102 —
(2,669 (39,570 (10,186 (48,336
(310 (925 (4,447 (1,780
2,161 1 (326 3
(2,471 (926 (4,121 (1,783
— (30,402 — (30,402
(2,359 (38,645 (5,739 (46,556
2016 2015 2016 2015
(3,574 (10,025 (7,614 (19,409
Function(x) Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
(Unaudited)
Three Months Ended December 31, Six Months Ended December 31,