Cricket Media 2015 Third Quarter Results

WASHINGTON, DC, Nov. 24, 2015 /CNW/ - Cricket Media Group Ltd. (TSXV:CKT) ("Cricket Media" or the "Company"), an education media company and global social learning network, today released its operating results for the third quarter ended September 30, 2015.  Results were prepared by management in accordance with International Financial Reporting Standards ("IFRS"). All figures are in U.S. dollars.

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Q3 Highlights

  • Total revenue of $2.8 million for the period
  • Operating expenses (excluding Q3 2014 impairment charges) down 23% or approximately $1.9 million compared to prior year period; seventh straight quarter of year over year reduction in quarterly net operating loss
  • Mixed year over year results: Licensing grew 26%; subscription revenue down 5%; subscriptions with a digital component grew 8%; commerce revenue down 34%
  • Completed roll-out of new ecommerce and fulfillment systems to efficiently support seasonal spike in Q3 and Q4 consumer sales
  • Added new content licensing partner in China
  • First phase of new ePals Global Community launched; second phase to be completed in Q4

Third Quarter Business Review

In the third quarter, Cricket Media delivered improving efficiencies and narrowing losses going into the Q4 consumer buying season.  The Company reported revenue of $2.8 million, consistent with the same period last year but on a significantly lower cost basis.  Operating expenses (including Q3 2014 impairment charges) for the quarter were down 43% or about $4.9 million compared to prior year period. Excluding the 2014 impairment charges, operating expenses decreased 23% year over year as a result of the Company's strategic initiatives and continued efforts to streamline operations and lower costs. This marks the seventh straight quarter of year over year reduction in quarterly net operating loss (excluding impairment charges).

The third quarter illustrated a positive trend in the overall operating efficiencies for 2015 as compared to the same period in 2014.

Year Over Year Change


Q1 2015

Q2 2015

Q3 2015

Revenue

(13%)

( 3%)

0%

Operating Expenses

(excluding impairment charges)

(14%)

(20%)

(23%)

Content licensing revenue was up 41% for Q3 2015 compared to the prior year period, and overall licensing revenue was up 26%. 

Cricket Media continues to see a significant ramp in interest in its content in China. During the quarter the Company added an additional Chinese partner, New Oriental. New Oriental is one of the leading language learning and private education service companies in China and is now licensing content from Cricket Media under its Dogwood brand of educational content.  In addition, two Chinese partners that were announced during the second quarter of 2015 recently released their first products based on licensed Cricket Media content. Joymis, a Tencent company, released its first apps based on Cricket Media's Babybug magazine content and English Salon, a leading national magazine brand in China, issued its first magazines featuring Cricket Media content, including Cricket stories, articles and images in magazines including its higher education, high school and junior high school editions. 

During the third quarter of 2015, the Company also launched two new distribution channels to drive subscriptions, including a partnership with the digital newsstand Zinio which is now distributing all Cricket Media magazine titles into the Zinio for Libraries program and on its consumer newsstand, and Magzter, a cross-platform global digital newsstand, which is currently featuring all magazine brands on Magzter platforms worldwide.

"These results are a testament to the strength of our content assets, including our consumer brands and the digital library for licensing which we launched earlier this year," said Cricket Media CEO, Katya Andresen.  "We see continued and growing strength in licensing revenue and channel partnership, including in China."

In the third quarter of 2015, subscriptions with a digital component grew 8% year-over-year.  This increase in digital products is aligned with the Company's strategy to grow its hybrid physical-digital and digital-only customer base and increase its focus on digital marketing, improved ecommerce and digital fulfillment and channel partnerships.

In Q3 2015 the Company rolled out its new subscription and management and fulfillment systems and a new customer service system.  These initiatives have contributed to lower expenses in Q3 2015 and is expected to improve the Company's ability to renew and cross-sell customers across its product offerings in the coming months. 

In the Company's commerce business line, revenue was down 34%, or $49,000, for Q3 2015 compared to the prior year.  This was a reflection of lower third-party consumer physical product sales, which are being deemphasized by the Company, along with eliminating the holiday catalog. 

In Q3 2015, Cricket Media launched the first phase of its platform to support third parties who want to add a global social graph and collaboration features to their products for project-based learning, cultural exchange or language learning practice.  The Company also launched the first phase of a new version of its ePals Global Community, built on the new platform, to support continued growth of its user community and to showcase the platform's functionality for partners.  The second phase of the new ePals platform is expected to launch during the fourth quarter of 2015.

Q3 Financial Review

Total revenue for each of the three months ended September 30, 2015 and the three months ended September 30, 2014 was approximately $2.8 million. Subscription revenues decreased approximately $124,000, or 5%, for the third quarter of 2015 compared to the prior year period.   Subscription revenue was impacted by the consolidation and discontinuation of five lower-performing brands at the end of 2014.  Licensing revenue, which consists of content licensing in both periods and a small amount of legacy enterprise licensing revenue in Q3 2014, increased approximately $89,000, or 26%, from approximately $339,000 to approximately $428,000 for the third quarter of 2015 compared to the prior year period primarily due to an increase in licensing activity during the current period. The increased licensing revenue is the result of the Company's continued focus on expanding its licensing business through the unified sales team established earlier this year. Commerce revenue decreased approximately $49,000, or 34%, for the three months ended September 30, 2015 compared to the prior year period primarily due to de-emphasis of third party physical products and the elimination of its holiday catalog.

Operating expenses for the third quarter of 2015 were approximately $6.5 million, a decrease of approximately $4.9 million, or 43%, compared to approximately $11.4 million during the prior year period. This decrease was reflected in lower marketing and promotion expenses, technology, research and development costs, general and administrative expenses and operations and support expenses driven by the Company's expense reduction initiatives which included focusing on near term revenue opportunities, streamlining senior management, and identifying outsourcing opportunities. This decrease was also driven by the recognition of impairment costs of approximately $2.9 million during 2014, while no impairment cost was recognized during the current year period.

Operating expenses by category for the third quarter of 2015 compared to the third quarter of 2014 are as follows:












Three months ended








September 30,


Increase




Operating Expense Detail


2015


2014


(Decrease)


%


(dollars in thousands)









Cost of sales


$

1,826


$

1,893


$

(67)


-4%


Technology, research and development


474


1,109


(635)


-57%


Operations and support


710


785


(75)


-10%


General and administrative


1,331


1,484


(153)


-10%


Marketing and promotion expenses


1,879


2,836


(957)


-34%


Stock-based compensation


25


43


(18)


-42%


Depreciation & amortization


201


244


(43)


-18%


Change in estimated fair value of acquisition share consideration


-


(45)


45


100%


Impairment of goodwill and intangible assets


-


2,962


(2,962)


-100%


Loss on investment in NeuPals


25


59


(34)


-58%


Total operating expenses


$

6,471


$

11,370


$

(4,899)


-43%

Core operating expenses, which include cost of sales, technology, research and development, operations and support, general and administrative and marketing and promotion expenses, decreased 23% during the third quarter of 2015 compared to the prior year period due to the following drivers:

  • Technology, research and development costs decreased compared to the prior year period primarily due to a reduction in employee headcount and lower costs related to external professional services associated with the Company's current technological initiatives.
  • Operations and support expenses decreased compared to the prior year period as a result of reduced employee headcount as the Company continues to streamline its operations.
  • General and administrative expenses decreased compared to the prior year period primarily due to a reduction of headcount and external professional services as part of the Company's cost containment initiatives, offset by an increase in legal fees associated with financing and general corporate matters.
  • Marketing and promotion expenses decreased compared to the prior year period primarily due to the revamp of the Company's marketing initiatives, which included the elimination of the holiday catalog in 2015.

Aside from the aforementioned decreases in core operating costs, stock-based compensation decreased primarily due to a reduction in fair value of awards vested to the Company's employees. Additionally, the Company did not recognize any goodwill or intangible related impairments during the third quarter of 2015, compared to the approximately $3.0 million in impairment charges recognized in the prior year period.

At September 30, 2015 Cricket Media had approximately $1.1 million in cash and cash equivalents.  Subsequent to quarter-end, the Company raised $440,000 through bridge financing transactions for general corporate purposes and working capital.

Net loss for the third quarter of 2015 was approximately $2.5 million, or ($0.08) per share, compared to a net loss of approximately $8.7 million, or ($0.45) per share for the prior year period. The decrease in net loss was primarily due to the factors discussed above, decreased interest expense and an increase in foreign currency gains in the current year.

As of November 13, 2015, Cricket Media had a total of 31,065,665 common shares outstanding, of which 7,948,466 are voting common shares and 23,117,199 are restricted voting common shares.

About Cricket Media

Cricket Media (TSXV: CKT) is an education media company that provides award-winning content on a safe and secure learning network for children, families and teachers across the world. Cricket Media's -popular media brands for toddlers to teens include Babybug, Ladybug, Cricket® and Cobblestone®. The Company's innovative web-based K12 tools for school and home include the ePals® community and virtual classroom for global collaboration as well as In2Books®, a Common Core eMentoring program that builds reading, writing and critical thinking skills. Cricket Media serves approximately one million classrooms and millions of teachers, students and parents in over 200 countries and territories through its products and services. Cricket Media also licenses its content and platform to top publishing and educational companies worldwide. For more information, please visit www.Cricketmag.com, www.ePals.com and www.In2Books.com.

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this press release constitute forward-looking information within the meaning of applicable securities laws, including statements with respect to customers, ventures; partnerships; contributions and/or prospects of one or more of the Company's business lines; the Company's strategy, prospects and success in pursuing domestic or international markets; and the Company's anticipated plans to increase its subscriptions, revenue and sales. These statements relate to future events or future performance. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or statements formed in the future tense or indicating that certain actions, events or results "may", "could", "would", "might" or "will" (or other variations of the forgoing) be taken, occur, be achieved, or come to pass. Forward-looking information is necessarily based upon a number of assumptions and factors that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking information. Those assumptions and factors are based on information currently available to the Company. Such material factors and assumptions include, but are not limited to: the Company's ability to execute on its business plan; the acceptance of the Company's products and services by customers globally; that the Company's affiliated entities will be able to secure distribution partners for sale of the Company's products and services; the Company's subjective assessment of the likelihood of success of a sales lead or opportunity; that sales will be completed at or above  estimated margins; that the demand for secure email communication as well as education media related products domestically, in Europe and in China will continue to grow; that the demand for the Company's products and services globally will develop and grow; the receipt of all requisite regulatory approvals throughout venture territories for the sale of the Company's products and services; the availability of additional financing, if and when required and market conditions generally. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. The forward-looking information contained in this press release is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

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


 

Cricket Media Group Ltd.


Condensed Consolidated Interim Statements of Financial Position


September 30, 2015 and December 31, 2014











(Unaudited)







September 30,


December 31,




2015


2014


Assets

Current assets









Cash & cash equivalents


$

1,088,857


$

912,565



Accounts receivable, net of allowance for doubtful accounts



1,006,572



968,678



Inventory



404,550



448,770



Other current assets



880,018



915,231



Current assets held for sale



525,157



676,399




Total current assets




3,905,154



3,921,643













Property and equipment, net



151,363



261,824


Investment in NeuPals



439,548



540,266


Goodwill



13,519,899



13,519,899


Other intangible assets, net



4,499,200



4,375,055


Restricted cash



76,432



76,277


Other assets



111,848



63,231


Long-term assets held for sale



-



1,275




Total assets



$

22,703,444


$

22,759,470













Liabilities and Stockholders' Equity (Deficit)

Current liabilities









Accounts payable and accrued expenses


$

5,195,909


$

5,785,970



Accrued interest



1,997,242



1,010,689



Deferred revenue, current



4,159,406



6,267,928



Notes payable, current portion



260,076



1,470,000



Notes payable to related parties



3,500,000



1,050,118



Bridge loan debentures 



6,420,946



-



Finance lease obligations, current



34,084



46,554



Other current liabilities



178,037



168,992



Current liabilities held for sale



523,073



565,127




Total current liabilities




22,268,773



16,365,378













Secured convertible debentures



16,288,092



18,710,994


Deferred revenue, less current portion



668,395



689,875


Notes payable, less current portion 



1,102,035



-


Finance lease obligations, less current portion



43,376



70,953


Other liabilities



11,440



11,440




Total liabilities




40,382,111



35,848,640













Commitments and contingencies
















Stockholders' equity (deficit)









Share capital 



115,735,473



115,057,827



Additional paid-in-capital



14,448,076



12,744,057



Accumulated deficit



(146,269,992)



(139,259,881)



Accumulated other comprehensive loss



(100,176)



(139,125)



Less: Treasury stock (28,800 shares)



(1,492,048)



(1,492,048)




Total stockholders' equity (deficit)




(17,678,667)



(13,089,170)















Total liabilities and stockholders' equity (deficit)



$

22,703,444


$

22,759,470


The accompanying notes are an integral part of these consolidated financial statements.

Cricket Media Group Ltd.


Condensed Consolidated Interim Statements of Comprehensive Loss


Three and Nine Months Ended September 30, 2015 and 2014 (Unaudited)













Three Months Ended September
30,


Nine Months Ended September
30,












2015


2014


2015


2014















Revenue


$

2,834,468


$

2,843,444


$

9,693,897


$

10,379,099















Operating expenses:













Cost of sales


1,826,525



1,893,530



5,970,622



6,210,960


Technology, research & development costs


474,325



1,109,325



1,717,394



3,441,196


Operations and support expenses


710,075



785,365



1,880,832



2,374,113


General and administrative expenses


1,331,273



1,484,016



4,229,933



4,796,578


Marketing and promotion expenses


1,878,707



2,836,048



3,497,120



4,573,791


Stock-based compensation


24,556



42,714



126,777



291,241


Depreciation & amortization


200,679



243,536



610,861



725,447


Loss on investment in NeuPals


24,869



58,938



100,718



227,701


Change in estimated fair value of acquisition share consideration


-



(45,261)



-



(135,782)


Impairment of goodwill and intangible assets


-



2,962,470



-



2,962,470

Total operating expenses


6,471,009



11,370,681



18,134,257



25,467,715















Loss from operations


(3,636,541)



(8,527,237)



(8,440,360)



(15,088,616)















Other income (expense):













Change in fair value of derivatives


86,800



-



13,600



63,750


Interest expense, net


(534,318)



(1,118,902)



(1,379,624)



(3,254,472)


Other income


2,687



-



2,687



52,571


Net foreign currency exchange gain


1,572,377



926,845



2,702,483



944,134















Loss from continuing operations 


(2,508,995)



(8,719,294)



(7,101,214)



(17,282,633)
















Income from discontinued operations 


58,426



39,170



91,103



7,594















Net Loss 


(2,450,569)



(8,680,124)



(7,010,111)



(17,275,039)















Other comprehensive income :













Items that may be subsequently reclassfied into net income/loss














Foreign currency translation


(15,411)



4,647



38,949



30,817















Total comprehensive loss

$

(2,465,980)


$

(8,675,477)


$

(6,971,162)


$

(17,244,222)















Net loss per common share - basic and diluted:













Continuing operations


(0.08)



(0.45)



(0.23)



(1.11)


Discontinued operations


-



-



-



-

Net loss per share - basic and diluted

$

(0.08)


$

(0.45)


$

(0.23)


$

(1.11)















Weighted average number of common shares:












Basic and diluted


31,003,917



19,248,893



30,782,473



15,493,339

The accompanying notes are an integral part of these consolidated financial statements.

Cricket Media Group, Ltd.


Condensed Consolidated Statements of Cash Flows


Nine Months Ended September 30, 2015 and 2014 (Unaudited)




Nine Months Ended
September 30,



2015


2014

Cash flows from operating activities:






Net loss from continuing operations

$

(7,101,214)

$

(17,282,633)


Adjustments to reconcile net loss to net cash used in operating activities:







Gain from change in fair value of derivatives


(13,600)


(63,750)



Depreciation and amortization


610,861


725,447



Stock-based compensation


126,777


291,241



Bad debt recovery, net


123,954


(179,923)



Loss on investment in NeuPals


100,718


227,701



Amortization of financing costs from debentures


189,142


1,953,132



Net foreign currency exchange gains


(2,702,483)


(944,134)



Restricted share vesting


-


1,876



Change in estimated fair value of acquisition consideration


-


(135,782)



Impairment of goodwill and intangible assets


-


2,962,470



Changes in operating assets and liabilities:







Accounts receivable


(135,524)


17,172



Inventory


44,220


(321,529)



Other current assets


65,212


(232,115)



Accounts payable and accrued expenses


432,809


604,029



Deferred revenue


(2,130,002)


(2,360,961)



Other


76,888


64,977



Total adjustments


(3,211,028)


2,609,851







Net cash used in continuing operations


(10,312,242)


(14,672,782)


Net cash provided by discontinued operations


110,244


242,549


Net cash used in operating activities


(10,201,998)


(14,430,233)






Cash flows from investing activities:






Cash paid for acquisitions


-


(174,794)


Cash received for sale of Nexify business


35,000


-


Purchases of equipment


-


(47,342)


Cash paid for patents and owned permissions


(563,480)


(459,209)







Net cash used in investing activities


(528,480)


(681,345)






Cash flows from financing activities:






Proceeds from bridge financing debentures, net of financing costs


6,356,160


-


Proceeds from related party line of credit


5,297,000


9,700,118


Proceeds from private placement, net of expenses


1,250,000


2,452,806


Repayments on related party line of credit


(1,847,118)


-


Repayments on bank line of credit / promissory note


(107,889)


-


Payments on finance lease obligations


(40,047)


(54,401)


Proceeds from exercise of stock warrants


-


399,882







Net cash provided by financing activities


10,908,106


12,498,405







Increase (decrease) in cash and equivalents


177,628


(2,613,173)







Effect of exchange rates on cash


(1,336)


(2,821)







Cash & cash equivalents at the beginning of the period


912,565


3,641,985


Cash & cash equivalents at the end of the period

$

1,088,857

$

1,025,991

 

 

 

SOURCE Cricket Media Inc.

For further information: Chief Financial Officer: Aric Holsinger, Cricket Media, Phone: (703) 885-3400, aholsinger@cricketmedia.com; Investor Relations: Cory Pala, E.vestor, Phone: (416) 657-2400, cpala@cricketmedia.com


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