Chicken Soup for the Soul Entertainment Reports Q4 and Full Year 2020 Results

Rhea-AI Summary

Chicken Soup for the Soul Entertainment reported strong operational progress and financial results for Q4 and full year 2020. Gross revenue reached $68.2 million, up from $56.6 million in 2019, despite a net loss of $44.6 million. Online networks generated $35.3 million, down from $41.7 million, while Distribution & Production revenue rose significantly by 129% year-over-year to $38.0 million. Gross profit was $14.2 million, yielding a gross margin of 21%. The company continued to expand its content pipeline and distribution channels, positioning for transformational growth in 2021.

Positive

• Record gross revenue of $68.2 million for 2020, up from $56.6 million in 2019.
• Distribution and Production revenue increased by 129% year-over-year to $38.0 million.
• Adjusted EBITDA improved to $11.8 million from $6.0 million in 2019.
• Expanded distribution of Crackle Plus to 41 touchpoints, targeting 64 consumer touchpoints.
• Acquired 100% ownership of Crackle Plus from Sony Pictures Television.

Negative

• Net loss of $44.6 million in 2020 compared to $35.0 million in 2019.
• Gross profit decreased from $14.9 million (27% of revenue) in 2019 to $14.2 million (21% of revenue) in 2020.
• Operating loss widened from $26.1 million in 2019 to $44.3 million in 2020.

Record results and significant operational progress in 2020 set the stage for a strong 2021

COS COB, Conn., March 31, 2021 (GLOBE NEWSWIRE) -- Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE), one of the largest operators of streaming advertising-supported video-on-demand (AVOD) networks, today announced its financial results for the fourth quarter and full year ended December 31, 2020.

“The fourth quarter capped off a very successful 2020 as we continued to deliver growth in original and exclusive content on Crackle Plus and expanded our distribution to drive viewership growth into the future,” said William J. Rouhana Jr., chairman and chief executive officer of Chicken Soup for the Soul Entertainment. “Our strong 2020 results set the stage for what is shaping up to be a year of transformational growth in 2021. Our Distribution and Production business grew over 200% year-over-year and Crackle has seen strong viewership increases in the first quarter with continued increases in viewership of our original and exclusive content.”

“We are positioning Chicken Soup for the Soul Entertainment as a pure play AVOD network operator with a rich trove of content assets, differentiated production capabilities, a deep pipeline of exciting new original and exclusive content, and viewership that we expect to continue growing throughout the year as our new distribution touchpoints deliver results. We are building momentum toward our goal of creating the best AVOD experience.”

Fourth Quarter 2020 Financial Summary

• Gross revenue of $20.2 million, compared to $20.0 million in the third quarter of 2020, and $24.8 million in the year-ago period.
• Online Networks, which include Crackle and Popcornflix, gross revenue of $10.8 million, up 35% from $8.0 million in the third quarter of 2020, and compared to $15.9 million in the year-ago period. Gross revenue included intercompany revenue share payments of $1.7 million, $1.3 million, and $1.0 million, respectively. On a comparable basis, after the deduction of $5.6 million of revenue from the since-shuttered Playstation Vue, the year-over-year gross revenue grew from $10.1 million to $10.8 million, an increase of 7%.
• Distribution and Production revenue of $11.1 million compared to $13.3 million in the third quarter of 2020, and $9.9 million in the year-ago period.
• Net loss of $10.1 million compared to a net loss of $13.0 million in the third quarter of 2020, and a net loss of $12.4 million in the year-ago period; $8.9 million net loss before preferred dividends, compared to $12.1 million net loss in the third quarter 2020, and $11.4 million net loss before preferred dividends in the year-ago period.
• Adjusted EBITDA of $2.8 million, compared to $4.2 million in the third quarter 2020, and $5.9 million in the year-ago period.
  

Full Year 2020 Financial Summary

• Record gross revenue of $68.2 million, compared to $56.6 million in 2019.
• Online networks generated $35.3 million in gross revenue compared to $41.7 million in 2019. Gross revenue included intercompany revenue share payments of $5.2 million and $1.7 million, respectively. On a comparable basis, after the deduction of $0.3 million and $15.9 million of revenue from the since-shuttered Playstation Vue, the year-over-year gross revenue grew from $25.8 million to $35.0 million, an increase of 36%.
• Distribution & Production gross revenue was $38.0 million in revenue compared to $16.6 million in 2019.
• Net loss of $44.6 million compared to $35.0 million in 2019; $40.4 million net loss before preferred dividends, compared to $31.7 million net loss before preferred dividends in 2019.
• Adjusted EBITDA was $11.8 million, compared to $6.0 million in 2019.
  

Recent Business Highlights

• Continued to expand pipeline of Original & Exclusive content which represented nearly 20.0% of ad impressions for the fourth quarter and 18.5% for full year 2020.
• Increased distribution of Crackle Plus AVOD networks to 41 touchpoints and expanding this initiative with plans to reach a total of 64 consumer touchpoints.
• Signed agreement for Crackle-branded button to be included on approximately 2.5 million VIZIO SmartCast TV remotes in 2021.
• Obtained 100% ownership of Crackle Plus from Sony Pictures Television, strengthening relationship and positioning company for further growth.
• Strengthened balance sheet and enhanced liquidity with additional equity and long-term debt without covenants.
  

Gross profit for the year ended December 31, 2020 was $14.2 million, or 21% of net revenue, compared to $14.9 million, or 27% of net revenue in 2019.

Operating loss for the year ended December 31, 2020 was $44.3 million compared to an operating loss of $26.1 million in in 2019.

Net loss for the year ended December 31, 2020 was $44.6 million, or $3.62 per share, compared to a net loss of $35.0 million, or $2.92 per share, in the prior year. Excluding preferred dividends, the net loss in 2020 was $40.4 million, or $3.29 per share, compared to net loss of $31.7 million, or $2.64 per share, in the prior year.

Adjusted EBITDA for the year ended December 31, 2020 was $11.8 million, compared to $6.0 million in 2019.

As of December 31, 2020, the company had $14.7 million of cash and cash equivalents compared to $6.4 million at December 31, 2019, and outstanding debt of $33.6 million as of December 31, 2020 compared to $20.0 million as of December 31, 2019.

For a discussion of the financial measures presented herein which are not calculated or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), see "Note Regarding Use of Non-GAAP Financial Measures" below and the schedules to this press release for additional information and reconciliations of non-GAAP financial measures.

The company presents non-GAAP measures such as Adjusted EBITDA and Pro Forma Adjusted EBITDA to assist in an analysis of its business. These non-GAAP measures should not be considered an alternative to GAAP measures as an indicator of the company's operating performance.

Conference Call Information

• Date, Time: Wednesday, March 31, 2021, 4:30 p.m. ET.
• Toll-free: (833) 832-5128
• International: (484) 747-6583
• Conference ID: 2587209
• A live webcast and replay will be available at http://ir.cssentertainment.com/ under the “News & Events” tab
  

Conference Call Replay Information

• Toll-free: (855) 859-2056
• International: (404) 537-3406
• Conference ID: 2587209
  

ABOUT CHICKEN SOUP FOR THE SOUL ENTERTAINMENT

Chicken Soup for the Soul Entertainment, Inc. (Nasdaq: CSSE) operates streaming video-on-demand networks (VOD). The company owns a majority stake in Crackle Plus, a company formed with Sony Pictures Television, which owns and operates a variety of ad-supported and subscription-based VOD networks including Crackle, Popcornflix, Popcornflix Kids, Truli, Pivotshare, Españolflix and FrightPix. The company also acquires and distributes video content through its Screen Media subsidiary and produces original long and short-form content through Landmark Studio Group, its Chicken Soup for the Soul Originals division and APlus.com. Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul, LLC, which publishes the famous book series and produces super-premium pet food under the Chicken Soup for the Soul brand name.

Note Regarding Use of Non-GAAP Financial Measures

The company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). It uses a non-GAAP financial measure to evaluate its results of operations and as a supplemental indicator of operating performance. The non-GAAP financial measure that is used is Adjusted EBITDA. Adjusted EBITDA (as defined below) is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Management believes this non-GAAP financial measure enhances the understanding of the company’s historical and current financial results and enables the board of directors and management to analyze and evaluate financial and strategic planning decisions that will directly affect operating decisions and investments. The presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or non-recurring items or by non-cash items. This non-GAAP financial measure should be considered in addition to, rather than as a substitute for, the company’s actual operating results included in its condensed consolidated financial statements.

“Adjusted EBITDA” means earnings before interest, taxes, depreciation, amortization and non-cash share-based compensation expense, and also includes the gain on bargain purchase of subsidiary and adjustments for other identified charges such as costs incurred to form the company and to prepare for the offering of its Class A common stock to the public, prior to its IPO. Identified charges also include the cost of maintaining a board of directors prior to being a publicly traded company. As the IPO has been completed, director fees will be deducted from Adjusted EBITDA going forward. Adjusted EBITDA is not an earnings measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP; accordingly, Adjusted EBITDA may not be comparable to similar measures presented by other companies. Management believes Adjusted EBITDA to be a meaningful indicator of the company’s performance that provides useful information to investors regarding its financial condition and results of operations. The most comparable GAAP measure is operating income.

A reconciliation of net loss to Adjusted EBITDA is provided in the company’s Annual Report on Form 10-K for the year ended December 31, 2020 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Reconciliation of Unaudited Historical Results to Adjusted EBITDA.”

FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are subject to risks (including those set forth in the Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2021) and uncertainties which could cause actual results to differ from the forward-looking statements. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. Investors should realize that if our underlying assumptions for the projections contained herein prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections.

INVESTOR RELATIONS
Taylor Krafchik
Ellipsis
CSSE@ellipsisir.com
646-776-0886

MEDIA CONTACT
Kate Barrette
RooneyPartners LLC
kbarrette@rooneyco.com
(212) 223-0561

Chicken Soup for the Soul Entertainment, Inc.
Condensed Consolidated Balance Sheets
		December 31,					December 31,
		2020					2019
ASSETS
Cash and cash equivalents		$	14,732,726				$	6,447,402
Accounts receivable, net of allowance for doubtful accounts of $1,035,643, and $1,531,247, respectively			25,996,947					34,661,119
Prepaid expenses and other current assets			1,382,502					1,173,223
Goodwill			21,448,106					21,448,106
Indefinite lived intangible assets			12,163,943					12,163,943
Intangible assets, net			19,370,490					35,451,951
Film library, net			35,239,135					33,250,149
Due from affiliated companies			5,648,652					7,642,432
Programming costs and rights, net			15,781,183					15,113,574
Other assets, net			4,517,102					313,585
Total assets		$	156,280,786				$	167,665,484
LIABILITIES AND EQUITY
Current maturities of commercial loan		$	—				$	3,200,000
Commercial loan, net of unamortized deferred finance costs of $0 and $189,525, respectively			—					11,810,475
9.50% Notes due 2025, net of unamortized deferred issuance costs of $1,798,433 and $0, respectively			31,097,467					—
Notes payable under revolving credit facility			2,500,000					5,000,000
Film acquisition advance			8,659,136					—
Accounts payable and accrued expenses			18,445,925					26,646,390
Ad representation fees payable			2,949,032					12,429,838
Film library acquisition obligations			8,616,562					5,020,600
Programming obligations			4,697,316					7,300,861
Accrued participation costs			12,535,651					5,066,512
Other liabilities			1,677,906					170,106
Total liabilities			91,178,995					76,644,782
Equity
Stockholders' Equity:
Series A cumulative redeemable perpetual preferred stock, $.0001 par value, liquidation preference of $25.00 per share, 10,000,000 shares authorized; 2,098,318 and 1,599,002 shares issued and outstanding, respectively; redemption value of $52,457,950 and $39,975,050, respectively			210					160
Class A common stock, $.0001 par value, 70,000,000 shares authorized; 5,157,053 and 4,259,920 shares issued, 5,082,818 and 4,185,685 shares outstanding, respectively			516					425
Class B common stock, $.0001 par value, 20,000,000 shares authorized; 7,654,506 and 7,813,938 shares issued and outstanding, respectively			766					782
Additional paid-in capital			106,425,548					87,610,030
Deficit			(77,247,982	)				(32,695,629	)
Class A common stock held in treasury, at cost (74,235 shares)			(632,729	)				(632,729	)
Total stockholders’ equity			28,546,329					54,283,039
Subsidiary convertible preferred stock			36,350,000					36,350,000
Noncontrolling interests			205,462					387,663
Total equity			65,101,791					91,020,702
Total liabilities and equity		$	156,280,786				$	167,665,484

Chicken Soup for the Soul Entertainment, Inc.
Condensed Consolidated Statements of Operations
		Three Months Ended December 31,								Year Ended December 31,
		2020				2019				2020				2019
Revenue:
Online networks		$	9,106,260			$	14,899,288			$	30,145,225			$	40,027,289
Distribution and Production			11,076,002				9,922,749				38,024,797				16,577,863
Total revenue			20,182,262				24,822,037				68,170,022				56,605,152
Less: returns and allowances			48,330				(412,461	)			(1,813,066	)			(1,241,246	)
Net revenue			20,230,592				24,409,576				66,356,956				55,363,906
Cost of revenue			14,455,033				16,854,807				52,139,819				40,423,550
Gross profit			5,775,559				7,554,769				14,217,137				14,940,356
Operating expenses:
Selling, general and administrative			8,379,145				8,347,681				31,573,368				22,242,032
Amortization and depreciation			1,268,442				7,662,143				16,291,327				13,293,279
Impairment of content assets			3,973,878				—				3,973,878				—
Management and license fees			2,023,060				2,445,297				6,635,696				5,536,390
Total operating expenses			15,644,525				18,455,121				58,474,269				41,071,701
Operating loss			(9,868,966	)			(10,900,352	)			(44,257,132	)			(26,131,345	)
Interest expense			899,275				327,654				2,222,106				811,017
Loss on extinguishment of debt			—				—				169,219				350,691
Acquisition-related costs			—				232,916				98,926				3,968,289
Other non-operating income, net			(1,872,913	)			(5,645	)			(6,254,205	)			(40,191	)
Loss before income taxes and preferred dividends			(8,895,328	)			(11,455,277	)			(40,493,178	)			(31,221,151	)
Provision for income taxes			6,000				28,000				99,000				585,000
Net loss before noncontrolling interests and preferred dividends			(8,901,328	)			(11,483,277	)			(40,592,178	)			(31,806,151	)
Net loss attributable to noncontrolling interests			(12,323	)			(97,322	)			(182,201	)			(134,282	)
Net loss attributable to Chicken Soup for the Soul Entertainment, Inc.			(8,889,005	)			(11,385,955	)			(40,409,977	)			(31,671,869	)
Less: preferred dividends			1,176,141				974,272				4,142,376				3,304,947
Net loss available to common stockholders		$	(10,065,146	)		$	(12,360,227	)		$	(44,552,353	)		$	(34,976,816	)
Net loss per common share:
Basic and diluted		$	(0.79	)		$	(1.03	)		$	(3.62	)		$	(2.92	)

Chicken Soup for the Soul Entertainment, Inc.
Adjusted EBITDA
	Three Months Ended December 31,								Year Ended December 31,
	2020				2019				2020				2019
Net loss available to common stockholders	$	(10,065,146	)		$	(12,360,227	)		$	(44,552,353	)		$	(34,976,816	)
Preferred dividends		1,176,141				974,272				4,142,376				3,304,947
Provision for income taxes		6,000				28,000				99,000				585,000
Other taxes		110,483				73,940				312,600				460,205
Interest expense		899,275				327,654				2,222,106				811,017
Film library and program rights amortization		6,641,019				6,878,959				23,563,772				10,683,227
Share-based compensation expense		310,634				267,777				1,131,515				1,061,926
Acquisition-related costs		—				232,916				98,926				3,968,289
Expense for bad debt and video returns		(688,201	)			1,428,456				3,384,584				2,669,699
Amortization and depreciation		1,655,473				7,662,143				17,317,247				13,293,279
Other non-operating income, net		(1,872,913	)			(5,645	)			(6,254,205	)			(40,191	)
Loss on extinguishment of debt		—				—				169,219				350,691
Impairment of content assets		3,973,878				—				3,973,878				—
Transitional expenses		—				629,731				4,353,345				3,505,855
All other nonrecurring costs		660,907				(287,840	)			1,789,569				276,400
Adjusted EBITDA	$	2,807,550			$	5,850,136			$	11,751,579			$	5,953,528

FAQ

What were the financial results for Chicken Soup for the Soul Entertainment in Q4 2020?

In Q4 2020, Chicken Soup for the Soul Entertainment reported gross revenue of $20.2 million, with a net loss of $10.1 million.

How did the company perform financially in 2020?

For 2020, the company achieved record gross revenue of $68.2 million but incurred a net loss of $44.6 million.

What is the distribution revenue growth for Chicken Soup for the Soul Entertainment?

Distribution and Production revenue grew by 129% year-over-year, reaching $38.0 million in 2020.

What is the outlook for 2021 for Chicken Soup for the Soul Entertainment?

The company is positioning for transformational growth in 2021, with plans to expand its content and distribution network.

How much did Chicken Soup for the Soul Entertainment lose per share in 2020?

The net loss per share in 2020 was $3.62, compared to $2.92 in 2019.