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RMG Networks Reports Second Quarter 2014 Results(Marketwire Via Acquire Media NewsEdge) DALLAS, TX -- (Marketwired) -- 08/07/14 -- RMG Networks Holding Corporation (NASDAQ: RMGN) Second Quarter Highlights Robert Michelson joins RMG Networks as interim President and interim Chief Executive Officer, subsequent to quarter-end Consolidated revenue of $16.4 million, on an adjusted basis(1,2), increased 29.9% from the first quarter 2014; consolidated adjusted revenue was comprised of $11.5 million in adjusted Enterprise revenue(1,2) and $4.9 million in Media revenue, Adjusted EBITDA loss of $2.8 million(3) represented a $2.6 million improvement from the first quarter 2014 Won the largest Enterprise software sale in company history, with over 27,000 software licenses to a Tier 1 telecom provider Completed reallocation of corporate resources that streamlined the business and is expected to reduce ongoing operating expense levels Subsequent to quarter-end, amended the Senior Credit facility, adding $3.4 million in net cash proceeds to the balance sheet and eliminated financial covenants until at least mid-year 2015 RMG Networks Holding Corporation (NASDAQ: RMGN), or RMG Networks, a leading provider of technology-driven visual communications solutions, today announced its financial results for the second quarter ended June 30, 2014. RMG Networks helps brands and organizations communicate more effectively using location-based video networks. The company builds enterprise video networks that empower organizations to visualize critical data to better run their business. The company also connects brands with target audiences using video advertising networks comprised of over 200,000 display screens, reaching over 100 million consumers each month. Robert Michelson, Chief Executive Officer, commented, "Two weeks ago, I joined RMG Networks to head a recognized industry leader and innovator in intelligent visual communications solutions. I was attracted to the company by the strength of its growth platform as well as the truly differentiated solutions that offer customers a proprietary value proposition. As a growth-focused CEO, I see in RMG Networks an exciting opportunity to expand our leadership and put the company firmly on a profitable growth trajectory." "Our second quarter results demonstrate sequential growth in revenue and gross margin in both units as sales execution improved and that costs were strictly controlled. We are focused on continuing to deliver sequential growth through the second half of the year. As previously announced, we have made some changes to our senior leadership team and are now refocusing our efforts on a limited number of strategic initiatives in key industries, products and solutions and plan to pursue our investments in a measured manner. We are managing the business with the goal of achieving profitable growth by measuring our performance against a refined set of benchmarked metrics. Finally, we will maintain clarity in our communications to all audiences through consistency and transparency. With momentum building in the business, refocused execution, and a bolstered balance sheet, we are prepared to achieve the company's growth potential and long-term strategic objectives." Second Quarter Financial Review RMG Networks completed the business combinations of Reach Media Group Holdings, Inc. and Symon Holdings Corporation, or Symon, on April 8 and April 19, 2013, respectively. Symon was determined to be the Predecessor Company for accounting purposes and accordingly Symon's historical financials are included for comparison in RMG Networks' "as-reported" financials. Because Symon recorded results of operations on a January 31 fiscal year and because the results of Reach Media Group Holdings, Inc. are included in Predecessor Company financials only as of the date of combination, second quarter 2014 results as-reported are not comparable with the Predecessor Company's results for second quarter 2013. In addition, "as-reported" results include certain items and the effects of purchase accounting which RMG Networks does not believe reflect the underlying performance of its business. Therefore, for ease of comparison, the following provides adjusted results for the second quarter of 2014 and pro forma combined results for the second quarter of 2013 as if the companies had existed as a combined entity for the relevant periods and adjusting for the items described above. Adjusted and Pro Forma Combined Results(4,5) Second Quarter Revenue. Total adjusted revenues in the second quarter of 2014 were $16.4 million, a sequential increase of 29.9% from $12.6 million in the first quarter of 2014. Adjusted Enterprise revenue of $11.5 million increased 14.4% from $10.1 million in the first quarter of 2014, driven by an increase in product sales. Adjusted gross margin improved to 58.9% from 57.5% in the first quarter of 2014, due to a favorable product mix driven by a large software sale. Media revenue of $4.9 million increased 91.3% from $2.5 million in the first quarter of 2014, due to a rebound in advertising demand and better sales execution. Adjusted gross margin improved to 13.8% from (16.8)% in the first quarter of 2014, due to increased revenue generation. On a year over year basis, total adjusted revenues in the second quarter of 2014 represented a decrease of 13.3% from $18.9 million of pro forma combined revenues in the second quarter of 2013. Adjusted Enterprise revenue decreased 3.8% from $12.0 million in the second quarter of 2013, due to a slight decrease in product sales and professional services. Adjusted Enterprise gross margin was 58.9% compared to 54.2% in the second quarter of 2013, increasing year over year due to a favorable sales mix resulting from a large software sale in the second quarter of 2014. Media revenue decreased 29.6% from $6.9 million in the second quarter of 2013, primarily due to continued headwinds in the out-of-home advertising sector. Adjusted Media gross margin was 13.8% compared to 38.6% in the second quarter of 2013, due primarily to lower revenue generation failing to cover fixed costs of sales. Second Quarter Adjusted EBITDA(4). Adjusted EBITDA loss was $2.8 million, improving from a loss of $5.3 million in the first quarter of 2014, due to higher revenues, improved gross margins and lower cash operating expenses(6). On a year over year basis, adjusted EBITDA decreased in the second quarter from pro forma combined adjusted EBITDA of $0.8 million in the second quarter of 2013, due to the reasons described above. During the second quarter of 2014, the company incurred approximately $14.0 million in non-recurring charges comprised of the following: Impairment charges of $1.3 million and $5.9 million related to goodwill and intangible assets, respectively, within the Media Unit A $6.2 million loss accrual charge on a long-term contract, resulting from a revised forecast of the revenue associated with the contract Approximately $0.6 million in costs related to the departure of the company's former CEO and a reorganization of certain business operations Reported Results Second Quarter. Total reported revenue for the quarter ended June 30, 2014 was $13.4 million; total revenue for the successor company from April 20, 2013 through June 30, 2013 was $15.1 million. Operating loss for the quarter ended June 30, 2014 was $19.6 million; operating loss for the successor company from April 20, 2013 through June 30, 2013, was $2.9 million. Legal Matters From time to time, the company has been and may become involved in legal proceedings arising in the ordinary course of its business. Although the results of litigation and claims cannot be predicted with certainty, RMG Networks is not presently involved in any legal proceeding in which the outcome, if determined adversely to the company, would be expected to have a material adverse effect on its business, operating results, or financial condition. Regardless of the outcome, however, litigation can have an adverse impact on the company because of defense and settlement costs, diversion of management resources, and other factors. The currently expected financial impact of ongoing legal proceedings is reflected in accruals in costs of revenues and in a reserve for legal expenses which was accrued in the second quarter of 2013 in the amount of $500,000. Amended Senior Credit Facility As previously disclosed, on July 16, 2014 the company successfully completed a Third Amendment to its senior credit facility. The amended term loan facility increased from $8 million to $12 million, adding approximately $3.4 million in net cash proceeds to the company's balance sheet. The amendment also eliminated financial covenants until at least mid-year 2015, providing the company with substantial operating flexibility. The amended 3-year facility, which matures in July 2017, bears interest at a fixed rate of 12% and continues to defer principal payments until maturity. Outlook For the remainder of 2014, RMG Networks expects to see continued sequential quarterly adjusted revenue increases with sequential reductions in quarterly cash operating expenses(7), resulting in sequential quarterly Adjusted EBITDA increases. Over the long term, given the leadership positions the company holds in the growing industries in which its competes, the company continues to strongly believe in its prospects for generating revenue growth, for developing material operating leverage and for producing significant adjusted EBITDA. Conference Call Management will host a conference call to discuss these results today, Thursday, August 7, 2014 at 9:00 a.m. ET. To access the call, please dial 866-700-6293 (toll free) or 617-213-8835 and passcode # 69913925. The conference call will also be broadcast live over the Internet with an accompanying slide presentation, which can be accessed via the Investor Relations section of RMG Networks' web site at http://ir.rmgnetworks.com/phoenix.zhtml?c=251935&p=irol-calendar. All participants should call or access the website approximately 10 minutes before the conference begins. The webcast and slide presentation will be available for replay for 90 days. A telephonic replay of this conference call will also be available by dialing 888-286-8010 (toll free) or 617-801-6888 (passcode: 81618153) from 2:00 p.m. ET on August 7, 2014 until midnight ET on August 11 2014. About RMG Networks RMG Networks (NASDAQ: RMGN) helps brands and organizations communicate more effectively using location-based video networks. The company connects brands with target audiences using video advertising networks comprised of over 200,000 display screens, reaching over 100 million consumers each month. The company also builds enterprise video networks that empower organizations to visualize critical data to better run their business. RMG Networks works with over 70% of the Fortune 100. The company is headquartered in Dallas, Texas with offices in the United States, United Kingdom, China, India, Singapore and the U.A.E. For more information, visit http://www.rmgnetworks.com. About Non-GAAP Financial Measures This release includes certain non-GAAP financial measures as defined under SEC regulations, including Adjusted Revenue, Adjusted Gross Margin, and Adjusted EBITDA. In evaluating its business, RMG Networks considers and uses Adjusted Revenue, Adjusted Gross Margin, and Adjusted EBITDA as supplemental measures of its operating performance, and believes that many of the company's investors use these non-GAAP measures to monitor the company's performance. These measures should not be considered as a substitute for the most directly comparable GAAP measures and should not be used in isolation, but in conjunction with these GAAP measures. Definitions and reconciliations between non-GAAP measures and relevant GAAP measures are set forth in the tables at the end of this press release. Cautionary Note Regarding Forward Looking StatementsThis press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding guidance relating to future financial performance, expected operating results, such as revenue growth, our ability to achieve profitability, our position within the markets that we serve, efforts to grow our business and the impact of litigation. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the company's success in retaining or recruiting, or changes required in, its management and other key personnel; the limited liquidity and trading volume of the company's securities; Reach Media Group's ("RMG") history of incurring significant net losses and limited operating history; the competitive environment in the advertising markets in which the company operates; the risk that the anticipated benefits of the combination of RMG or Symon Holdings Corporation, or of other acquisitions that the company may complete, may not be fully realized; the risk that any projections, including earnings, revenues, margins or any other financial items are not realized; changing legislation and regulatory environments; business development activities, including the company's ability to contract with, and retain, customers on attractive terms; the general volatility of the market price of the company's common stock; risks and costs associated with regulation of corporate governance and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act); and general economic conditions. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. RMG Networks Holding Corporation Consolidated Balance Sheets June 30, 2014 and December 31, 2013 June 30, December 31, 2014 2013 ------------- ------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 3,087,094 $ 8,235,566 Accounts receivable, net 16,206,437 22,731,678 Inventory, net 3,587,266 4,633,213 Deferred tax assets 16,782 63,617 Other current assets 1,326,635 2,224,547 ------------- ------------- Total current assets 24,224,214 37,888,621 Property and equipment, net 4,638,301 3,548,985 Intangible assets, net 29,649,000 38,782,000 Goodwill 27,927,027 28,642,398 Loan origination fees 857,404 971,726 Other assets 225,522 496,879 ------------- ------------- Total assets $ 87,521,468 $ 110,330,609 ============= ============= Liabilities and Stockholders' equity Current liabilities: Accounts payable $ 4,637,157 $ 8,009,380 Revenue share liabilities 2,142,605 2,595,614 Accrued liabilities 4,481,651 4,423,896 Accrued loss on long-term contract 2,036,000 - Deferred revenue 10,205,163 10,074,420 Capital leases and other 103,508 86,952 ------------- ------------- Total current liabilities 23,606,084 25,190,262 Notes payable - non current 8,000,000 8,000,000 Warrant liability 2,701,641 4,573,123 Accrued loss on long-term contract-non current 4,164,000 - Deferred revenue - non current 1.575.429 990,989 Deferred tax liabilities 6,567,609 6,430,853 Capital leases and other 670,123 392,558 ------------- ------------- Total liabilities 47,284,886 45,577,785 ------------- ------------- Commitments and Contingencies Stockholders' equity: Common stock, $.0001 par value, (250,000,000 shares authorized; 12,367,756 and 11,920,583 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively) 1,237 1,192 Additional paid-in capital 81,773,063 77,452,317 Accumulated comprehensive income 401,406 299,618 Retained earnings (accumulated deficit) (41,459,124) (13,000,303) Treasury stock (300,000 shares) (480,000) - ------------- ------------- Total stockholders' equity 40,236,582 64,752,824 ------------- ------------- Total liabilities and stockholders' equity $ 87,521,468 $ 110,330,609 ============= ============= RMG Networks Holding Corporation Consolidated Statements of Comprehensive Income (Loss) For The Six Months Ended June 30, 2014 and the Period April 20 through June 30, 2013 Successor Successor Predecessor Company Company Company ------------- ------------- ------------- April 20, February 1, Six Months 2013 2013 Ended Through Through June 30, June 30, April 19, 2014 2013 2013 ------------- ------------- ------------- (Unaudited) Revenue: Advertising $ 7,417,237 $ 5,556,557 $ - Products 5,589,302 5,069,160 2,239,236 Maintenance and content services 7,904,287 2,572,555 3,594,520 Professional services 4,240,689 1,851,755 1,323,559 ------------- ------------- ------------- Total Revenue 25,151,515 15,050,027 7,157,315 Cost of Revenue: Advertising 5,789,910 3,355,883 - Products 4,421,768 3,261,492 1,498,135 Maintenance and content services 1,516,084 572,433 611,692 Professional services 3,084,968 1,197,304 861,640 ------------- ------------- ------------- 14,812,730 8,387,112 2,971,467 Loss on long-term contract 4,130,104 - - ------------- ------------- ------------- Total Cost of Revenue 18,942,834 8,387,112 2,971,467 ------------- ------------- ------------- Gross Profit 6,208,681 6,662,915 4,185,848 ------------- ------------- ------------- Operating expenses: Sales and marketing 10,636,104 3,351,286 1,729,871 General and administrative 10,490,344 2,585,983 1,739,348 Research and development 2,120,037 806,401 512,985 Acquisition expenses - 1,485,566 3,143,251 Depreciation and amortization 3,800,818 1,292,276 140,293 Impairment of intangible assets and goodwill 7,245,359 - - ------------- ------------- ------------- Total operating expenses 34,292,662 9,521,512 7,265,748 ------------- ------------- ------------- Operating income (loss) (28,083,981) (2,858,597) (3,079,900) Other Income (Expense): Warrant liability expense (589,009) (3,920,000) - Interest expense and other - net (114,691) (495,880) (14,553) ------------- ------------- ------------- Income (loss) before income taxes (28,787,681) (7,274,477) (3,094,453) Income tax expense (benefit) (328,860) - (540,897) ------------- ------------- ------------- Net income (loss) (28,458,821) (7,274,477) (2,553,556) Other comprehensive income (loss) - Foreign currency translation adjustments 101,788 13,157 (121,144) ------------- ------------- ------------- Total comprehensive income (Loss) $ (28,357,033) $ (7,261,320) $ (2,674,700) ============= ============= ============= Net income(loss) per share: Basic and dilutive net income (loss) per share of Common Stock $ (2.34) $ (1.16) $ - ============= ============= ============= Basic and dilutive net income (loss) per share of Class L Common Stock $ - $ - $ (2.55) ============= ============= ============= Basic and dilutive net income (loss) per share of Class A Non-Voting Common Stock $ - $ - $ - ============= ============= ============= Weighted average shares used in computing basic and dilutive net income (loss) per share of Common Stock 12,161,112 6,285,583 - ============= ============= ============= Weighted average shares used in computing basic and dilutive net income (loss) per share of Class L Common Stock - - 1,000,000 ============= ============= ============= Weighted average shares used in computing basic and dilutive net income (loss) per share of Class A Non-Voting Common Stock - - 68,889 ============= ============= ============= RMG Networks Holding Corporation Consolidated Statements of Comprehensive Income (Loss) For The Three Months Ended June 30, 2014 and The Period April 20 Through June 30, 2013 Successor Successor Company Company ------------- ------------- April 20, Three Months 2013 Ended Through June 30, June 30, 2014 2013 ------------- ------------- (Unaudited) Revenue: Advertising $ 4,871,146 $ 5,556,557 Products 3,301,555 5,069,160 Maintenance and content services 3,601,562 2,572,555 Professional services 1,602,123 1,851,755 ------------- ------------- Total Revenue 13,376,386 15,050,027 Cost of Revenue: Advertising 3,454,167 3,355,883 Products 2,511,845 3,261,492 Maintenance and content services 755,938 572,433 Professional services 1,475,138 1,197,304 ------------- ------------- 8,197,088 8,387,112 Loss on long-term contract 4,130,104 - ------------- ------------- Total Cost of Revenue 12,327,192 8,387,112 ------------- ------------- Gross Profit 1,049,194 6,662,915 ------------- ------------- Operating expenses: Sales and marketing 5,402,824 3,351,286 General and administrative 5,084,576 2,585,983 Research and development 1,028,111 806,401 Acquisition expenses - 1,485,566 Depreciation and amortization 1,880,785 1,292,276 Impairment of intangible assets and goodwill 7,245,359 - ------------- ------------- Total operating expenses 20,641,655 9,521,512 ------------- ------------- Operating income (loss) (19,592,461) (2,858,597) Other Income (Expense): Warrant liability expense 4,052,462 (3,920,000) Interest expense and other - net 134,048 (495,880) ------------- ------------- Income (loss) before income taxes (15,405,951) (7,274,477) Income tax expense (benefit) 621,219 - ------------- ------------- Net income (loss) (16,027,170) (7,274,477) Other comprehensive income - Foreign currency translation adjustments 97,182 13,157 ------------- ------------- Total comprehensive income (loss) $ (15,929,988) $ (7,261,320) ============= ============= Net income (loss) per share: Basic and diluted net income (loss) per share of Common Stock $ (1.32) (1.16) ============= ============= Weighted average shares used in computing basic and diluted net income (loss) per share of Common Stock 12,161,112 6,285,583 ============= ============= RMG Networks Holding Corporation Consolidated Statements of Cash Flows For The Six Months Ended June 30, 2014 and The Period April 20 through June 30, 2013 Successor Successor Predecessor Company Company Company ------------- ------------- ------------- April 20, February 1, Six Months 2013 2013 Ended Through Through June 30, June 30, April 19, 2014 2013 2013 ------------- ------------- ------------- (Unaudited) Cash flows from operating activities: Net income (loss) $ (28,458,821) $ (7,274,477) $ (2,553,556) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 3,800,818 1,292,276 140,293 Change in warrant liability 589,009 3,920,000 - Impairment of intangible assets and goodwill 7,245,359 - - Stock-based compensation 1,743,836 - - Non-cash treasury stock (480,000) - - Non-cash loan origination fees 114,322 - - Non-cash consulting fees 264,750 - - Non-cash directors' fees 116,464 - - Non-cash interest expense - 60,000 140,293 Deferred tax (benefit) (433,231) - (12,294) Other non-cash expense (income), net - - (2,054) Changes in operating assets and liabilities: Accounts receivable 6,525,241 (4,412,699) 2,846,332 Inventory 1,045,947 (74,919) (488,722) Other current assets 897,912 211,440 (154,529) Other assets, net 6,606 (1,073) 12,572 Accounts payable (3,404,430) 1,708,576 (2,978,808) Accrued liabilities 6,130,908 362,830 (765,937) Deferred revenue 715,184 330,532 (372,579) ------------- ------------- ------------- Net cash provided by (used in) operating activities (3,580,126) (3,877,514) (4,329,282) ------------- ------------- ------------- Cash flows from investing activities: Acquisition of Symon Holdings Corporation - (209,079) - Purchases of property and equipment (1,670,134) (172,244) (86,470) ------------- ------------- ------------- Net cash provided by (used in) investing activities (1,670,134) (381,323) (86,470) ------------- ------------- ------------- Cash flows from financing activities: Repayment of debt - (600,000) - ------------- ------------- ------------- Net cash provided by (used in) financing activities - (600,000) - ------------- ------------- ------------- Effect of exchange rate changes on cash 101,788 13,157 (121,144) Net increase (decrease) in cash and cash equivalents (5,148,472) (4,845,680) (4,536,896) Cash and cash equivalents, beginning of period 8,235,566 10,824,943 10,203,169 ------------- ------------- ------------- Cash and cash equivalents, end of period $ 3,087,094 $ 5,979,263 $ 5,666,273 ============= ============= ============= Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 294,570 $ - $ 2,053 Cash paid during the year for income taxes $ - $ - $ 150,000 RMG Networks Holding Corporation Reconciliation of Gross Profit For The Three Months Ended June 30, 2014 Successor Company Three Months Ended Purchase Cost of June 30, Price Revenue Loss on 2014 Accounting Reclassi- Long-Term Adjusted (GAAP) Adjustment fication Contract (Non-GAAP) ----------- ---------- -------- ----------- ----------- (Unaudited) Revenue: Advertising $ 4,871,146 $ - $ - $ - $ 4,871,146 Product sales 3,301,555 - 742,417 987,542 5,031,514 Maintenance and content services 3,601,562 209,913 - 394,565 4,206,040 Professional services 1,602,123 - - 687,789 2,289,912 ----------- ---------- -------- ----------- ----------- Total Revenue 13,376,386 209,913 742,417 2,069,896 16,398,612 ----------- ---------- -------- ----------- ----------- Cost of Revenues: Advertising 3,454,167 - 742,417 - 4,196,584 Product sales 2,511,845 - - - 2,511,845 Maintenance and content services 755,938 - - - 755,938 Professional services 1,475,138 - - - 1,475,138 Loss on long-term contract 4,130,104 - - (4,130,104) - ----------- ---------- -------- ----------- ----------- Total Cost of Revenue 12,327,192 - 742,417 (4,130,104) 8,939,505 ----------- ---------- -------- ----------- ----------- Gross Profit $ 1,049,194 $ 209,913 $ - $ 6,200,000 $ 7,459,107 =========== ========== ======== =========== =========== RMG Networks Holding Corporation Reconciliation of Gross Profit For The Three Months Ended June 30, 2013 Successor Predecessor Company Company and April 20 Reach Media Through April 1 Purchase Pro Forma June 30, Through Price Combined 2013 April 19, Accounting Adjusted (GAAP) 2013 Adjustment (Non-GAAP) ------------ ------------ ------------ ------------ (Unaudited) Revenue: Advertising $ 5,556,557 $ 1,361,245 $ - $ 6,917,802 Product sales 5,069,160 224,690 - 5,293,850 Maintenance and content services 2,572,555 884,207 675,110 4,131,872 Professional services 1,851,755 710,463 - 2,562,218 ------------ ------------ ------------ ------------ Total Revenue 15,050,027 3,180,605 675,110 18,905,742 ------------ ------------ ------------ ------------ Cost of Revenues: Advertising 3,355,883 890,789 - 4,246,672 Product sales 3,261,492 130,527 - 3,392,019 Maintenance and content services 572,433 152,251 - 724,684 Professional services 1,197,304 180,745 - 1,378,049 Loss on long-term contract - - - - ------------ ------------ ------------ ------------ Total Cost of Revenue 8,387,112 1,354,312 - 9,741,424 ------------ ------------ ------------ ------------ Gross Profit $ 6,662,915 $ 1,826,293 $ 675,110 $ 9,164,318 ============ ============ ============ ============ RMG Networks Holding Corporation Reconciliation of Operating Income (Loss) to Adjusted EBITDA Second Quarter ----------------------------- 2014 2013 ------------- ------------- Operating income (loss) per Statements of Comprehensive Income $ (19,592,461) $ (2,858,597) Predecessor Company and Reach Media operating income (loss) for the period April 1 through April 19, 2013 - (2,333,740) Revenues that would have been recognized in the period had the balance in deferred revenue at the acquisition date not been required to be adjusted to market value at the acquisition date in accordance with GAAP purchase accounting guidelines 209,913 675,110 ------------- ------------- Pro-Forma Operating Income (Loss) (19,382,548) (4,517,227) ------------- ------------- Depreciation and amortization 1,880,785 1,342,689 Acquisition expenses - 4,013,757 Stock-based compensation 714,148 - Impairment of intangible assets and goodwill 7,245,359 - Loss on long-term contract 6,200,000 - Reorganization expenses 579,029 - ------------- ------------- Adjusted EBITDA $ (2,763,227) $ 839,219 ------------- ------------- (1) 2014 adjusted results; Enterprise revenues represent Products, Maintenance and Content Services, and Professional Services revenue line items; Media revenues represent Advertising revenue line item. (2) Q1 & Q2 2014 GAAP consolidated revenue was $11.8 million and $13.4 million, respectively, and Q1 & Q2 2014 GAAP Enterprise revenue was $9.2 million and $8.5 million, respectively. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results. (3) Q1 & Q2 2014 GAAP operating loss was $8.5 million and $19.6 million, respectively. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results. (4) Q1 & Q2 2014 GAAP consolidated revenue was $11.8 million and $13.4 million, respectively, and Q1 & Q2 2014 GAAP Enterprise revenue was $9.2 million and $8.5 million, respectively. Q1 & Q2 2014 GAAP operating loss was $8.5 million and $19.6 million, respectively. Please see the tables at the end of this press release for a reconciliation of GAAP results to adjusted results. (5) 2014 adjusted results; 2013 pro forma combined results; Enterprise revenues represent Products, Maintenance and Content Services, and Professional Services revenue line items; Media revenues represent Advertising revenue line item. (6) Cash operating expenses exclude depreciation & amortization, stock-based compensation and other one-time or non-recurring charges. (7) Cash operating expenses exclude depreciation & amortization, stock-based compensation and other one-time or non-recurring charges. Contact: For RMG Networks Holding Corporation Investor Carolyn M. Capaccio, CFA LHA 212-838-3777 Email Contact or Media Julie Rasco 800-827-9666 Email Contact Source: RMG Networks Holding Corporation |