Troika Media Group Inc. Reports Revenue of $54.2 million and $172.0 million, for the Three and Nine Months Ended September 30, 2023
- TMG reported a significant decline in revenue and gross profit for the three and nine months ended September 30, 2023.
- The company experienced a 55% decrease in revenue and a 53% decrease in gross profit for the three months ended September 30, 2023, compared to the prior year period.
- TMG's net income (loss) for the three months ended September 30, 2023, was a loss of $55.5 million, compared to a net income of $1.3 million in the prior year period.
- Adjusted EBITDA for the three months ended September 30, 2023, decreased by approximately $6.1 million compared to the prior year period.
- The company's financial results for the nine months ended September 30, 2023, also showed a significant decrease in revenue, gross profit, and net income, with a net loss of $75.7 million.
- TMG's adjusted EBITDA for the nine months ended September 30, 2023, decreased by approximately $9.9 million compared to the prior year period.
- TMG's revenue and gross profit experienced a significant decline, indicating financial challenges for the company.
- The net loss of $55.5 million for the three months ended September 30, 2023, raises concerns about the company's financial stability and performance.
- The filing for Chapter 11 bankruptcy indicates severe financial distress for the company.
Insights
Troika Media Group's reported financials indicate a substantial year-over-year decline in revenue and gross profit, with a significant shift from a net income position to a net loss. The reported 55% decrease in quarterly revenue and 53% decrease in quarterly gross profit reflect a challenging operating environment, particularly in the managed services and performance solutions segments. This performance is concerning as it suggests a contraction in the company's core business areas, potentially due to increased competition and market saturation, as well as decreased client advertising spend.
The company's EBITDA and adjusted EBITDA have also deteriorated markedly, with the latter falling by 61% for the quarter, which implies operational challenges beyond the top-line revenue issues. The substantial impairments of intangible assets and goodwill indicate that past investments have not yielded the expected returns, leading to a write-down of these assets. Such impairments can signal a reassessment of the company's future earning potential and often result in a reevaluation of the stock by investors.
Given the company's Chapter 11 bankruptcy filing, stakeholders should be aware that the company is undergoing a process of reorganization, which may involve significant changes to its capital structure and operations. While the management has expressed optimism about future revenue potential if economic conditions improve, the current financials reflect a period of significant distress.
The advertising and marketing industry is highly sensitive to economic cycles and Troika Media Group's performance appears to be a reflection of this sensitivity. The decrease in advertising spend by insurance and telecom clients can be attributed to broader economic pressures, such as increased operating costs and a need to consolidate expenses. The competitive landscape in lead acquisition for legal services also highlights the importance of maintaining a competitive edge in cost-effective lead generation.
The company's efforts to diversify marketing channels and stabilize margins in the home services sector demonstrate a strategic response to market saturation. However, the success of these initiatives will be critical for future profitability. The decline in managed services and performance solutions suggests that TMG needs to reassess its service offerings and possibly pivot to adapt to changing market demands.
The Chapter 11 proceedings indicate that Troika Media Group is seeking to restructure its debts and continue operations while doing so. This legal process can provide the company with the opportunity to renegotiate terms with creditors and emerge as a more financially stable entity. However, it also brings uncertainty for shareholders and creditors, as the outcomes of such proceedings can significantly affect their interests.
Investors should closely monitor the developments within the bankruptcy court, as the company's ability to successfully reorganize and the court's rulings will have direct implications on the value of their investments. The non-recurring costs associated with debt service reduction and capital structure stabilization are important to consider when evaluating the company's ongoing expenses and potential for return to profitability post-restructuring.
Results for the three and nine months ended September 30, 2023, compared to the three and nine months ended September 30, 2022 (in thousands):
Three months ended | |||||||
September 30, | |||||||
2023 | 2022 | Change ($) | Change (%) | ||||
Revenue | $ 54,239 | $ 119,810 | $ (65,571) | (55) % | |||
Gross profit | $ 8,769 | $ 18,754 | $ (9,985) | (53) % | |||
Net income (loss) | $ (55,549) | $ 1,274 | $ (56,823) | 4461 % | |||
EBITDA | $ (49,941) | $ 6,504 | $ (56,445) | 868 % | |||
Adjusted EBITDA | $ 3,911 | $ 10,060 | $ (6,149) | (61) % | |||
Nine months ended | |||||||
September 30, | |||||||
2023 | 2022 | Change ($) | Change (%) | ||||
Revenue | $ 171,966 | $ 220,877 | $ (48,911) | (22) % | |||
Gross profit | $ 23,267 | $ 40,113 | $ (16,847) | (42) % | |||
Net income (loss) | $ (75,712) | $ (31,170) | $ (44,542) | 143 % | |||
EBITDA | $ (59,028) | $ (20,368) | $ (38,660) | 190 % | |||
Adjusted EBITDA | $ 5,836 | $ 15,690 | $ (9,854) | (63) % | |||
Financial Results for TMG
Revenue
Revenues for the three months ended September 30, 2023 were approximately
Revenues for the nine months ended September 30, 2023, were approximately
During the three and nine month periods client retention has not been an issue and management believes future revenues could increase if budget and inflationary pressures become more favorable.
Gross Profit
For the three months ended September 30, 2023, gross profit was approximately
During the quarter the gross profit decline is primarily due to a decrease in revenue from the performance solutions revenue stream, specifically amongst legal and home services clients. The decrease in gross profit amongst legal clients was a result of increased competition to acquire leads, which increased our spend on a cost per lead basis and compressed margin as compared to the prior period. The decrease in gross profit related to home services clients was driven by a decline in response rates and market saturation, which were partially offset by our ability to diversify home services revenues with more stable margins as we diversify our marketing channels.
The decline in gross profit generated from the managed services revenue stream was primarily attributable to the decreased marketing spend by the insurance and telecom sector clients. Cost of revenues related to managed services clients move in tandem with revenues.
For the nine months ended September 30, 2023, gross profit decreased approximately
Selling, general, and administrative costs
For the three months ended September 30, 2023, selling, general, and administrative expenses decreased approximately
Selling, general, and administrative expenses during the three months ended September 30, 2023, contained certain non-recurring, one-time costs associated with the Company's efforts in reducing its debt service and stabilizing its capital structure. These one-time costs included approximately
For the nine months ended September 30, 2023, selling, general, and administrative expenses decreased approximately
Selling, general, and administrative expenses during the nine months ended September 30, 2023, contained certain non-recurring, one-time costs associated with the Company's efforts in reducing its debt service and stabilizing its capital structure. These one-time costs included approximately
Chapter 11 Proceedings
On December 7, 2023, the Company and certain of its subsidiaries each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of
Adjusted EBITDA
Adjusted EBITDA of approximately
Adjusted EBITDA of approximately
About Troika Media Group
TMG is a consumer engagement and customer acquisition consulting and solutions group based in
Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are not financial measures under generally accepted accounting principles (GAAP). These metrics are performance measurement tools used by our management team and you should not consider them in isolation or as a substitute for other financial statement data determined in accordance with GAAP. In addition, because EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP and are susceptible to varying calculations, the measures presented may differ from and may not be comparable to similarly titled measures used by other companies.
We define EBITDA as net income (loss) before (i) depreciation and amortization (ii) interest expense, and (iii) tax expense.
We define Adjusted EBITDA as EBITDA before (i) stock-based compensation expense or benefit, (ii) restructuring charges or credits, (iii) gains or losses on sales or dispositions of businesses and associated settlements, and (iv) certain other non-recurring or non-cash items. We believe that the exclusion of share-based compensation expense or benefit allows investors to better track the performance of our business without regard to the settlement of an obligation that is not expected to be made in cash. We eliminate merger and acquisition-related costs because the Company does not consider such costs to be indicative of the ongoing operating performance of the Company as they result from an event that is of a non-recurring nature, thereby enhancing comparability.
We believe Adjusted EBITDA is an appropriate measure for evaluating the operating performance of our business and the Company on a consolidated basis. Adjusted EBITDA and similar measures with similar titles are common performance measures used by investors and analysts to analyze our performance. Internally, we use revenues and gross margin as the most important indicators of our business performance, and evaluate management's effectiveness with specific reference to these indicators. Adjusted EBITDA should be used as a supplement to and not a substitute for operating income (loss), net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. For a reconciliation of net (loss) income to Adjusted EBITDA, please see page 9 of this release.
Forward-Looking Statements
This press release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "should," "could," "may," "plan," "project," "predict," "will" and similar expressions and include references to assumptions and relate to our future prospects, developments and business strategies.
Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:
- our ability to fund our planned operations for the next twelve months and our ability to continue as a going concern;
- the adverse impact of the Chapter 11 proceedings on our business, financial condition, and results of operations;
- our ability to successfully consummate the Potential Transaction and emerge from the Chapter 11 proceedings;
- our ability to improve our liquidity and long-term capital structure and to address our debt service obligations through the Potential Transaction;
- our ability to make the required payments under the agreements governing our debt obligations;
- our ability to maintain relationships with suppliers, customers, employees and other third parties as a result of the Potential Transaction and the Chapter 11 proceedings;
- risks and uncertainties associated with the Potential Transaction, including our ability to receive approvals for debtor-in-possession financing, under the Chapter 11 proceedings and successfully consummate the Potential Transaction;
- our ability to receive any required approvals of the Potential Transaction and the responses of our securityholders, other stakeholders and customers;
- our ability to monetize certain assets;
- general competitive, economic, industry, market, political and regulatory conditions, including continued impacts of inflation or other pricing environment factors on our costs, liquidity and our ability to pass on price increases to our customers, including as a result of inflationary and deflationary pressures, a decline in consumer spending or deterioration in consumer financial position, whether due to inflation or other factors, as well as other factors specific to the markets in which we operate;
- our ability to manage expenses, our liquidity and our investments in working capital;
- changes in future exchange or interest rates or credit ratings, changes in tax laws, regulations, rates and policies;
- the impact of our common stock being delisted from Nasdaq; and
- other risks and uncertainties described from time to time in our filings with the
U.S. Securities and Exchange Commission (the "SEC").
The Company undertakes no obligation to update or revise the forward-looking statements included in this press release, whether as a result of new information, future events or otherwise, after the date of this press release. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences are discussed in the section entitled "Management's Discussion and Analysis of Financial Condition and Results" included in the Company's Transition Report on Form 10-K/T (as amended by 10-KT/A) for the six month transition period ended December 31, 2022, and in "Part II - Item 1A. Risk Factors" of the Company's Quarterly Report on Form 10-Q, which was filed with the SEC on December 20, 2023. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof.
Troika Media Group, Inc. | |||||||
Three Months Ended | Nine Months Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Revenue | $ 54,238,863 | ||||||
Cost of revenue | 45,470,265 | 101,055,664 | 148,699,718 | 180,763,162 | |||
Gross profit | 8,768,598 | 18,754,294 | 23,266,630 | 40,113,499 | |||
Operating expenses: | |||||||
Selling, general and administrative expenses | 8,927,432 | 9,305,955 | 31,978,778 | 40,480,812 | |||
Depreciation and amortization | 2,066,465 | 2,232,509 | 6,195,513 | 4,929,289 | |||
Impairment and other losses, net | 50,217,492 | — | 50,217,492 | 8,937,677 | |||
Restructuring and other related charges | (15,708) | 934,147 | (114,292) | 6,525,079 | |||
Total operating expenses | 61,195,681 | 12,472,611 | 88,277,491 | 60,872,857 | |||
Operating income (loss) | (52,427,083) | 6,281,683 | (65,010,861) | (20,759,358) | |||
Other income (expense): | |||||||
Interest expense | (3,472,559) | (2,835,588) | (10,362,267) | (5,731,955) | |||
Miscellaneous (expense)/income | 419,523 | (2,009,944) | (212,676) | (4,537,617) | |||
Total other expense | (3,053,036) | (4,845,532) | (10,574,943) | (10,269,572) | |||
Income (loss) from operations before income taxes | (55,480,119) | 1,436,151 | (75,585,804) | (31,028,930) | |||
Income tax expense | (68,908) | (162,368) | (125,908) | (141,293) | |||
Net income (loss) | (55,549,027) | 1,273,783 | (75,711,712) | (31,170,223) | |||
Foreign currency translation adjustment | — | 955,438 | — | 386,000 | |||
Comprehensive income (loss) | (55,549,027) | 2,229,221 | (75,711,712) | (30,784,223) | |||
Troika Media Group, Inc. | |||||||
Three Months Ended | Nine Months Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net income (loss) | $ (55,549,027) | $ 1,273,783 | $ (75,711,712) | $ (31,170,223) | |||
Depreciation and amortization | 2,066,465 | 2,232,509 | 6,195,513 | 4,929,289 | |||
Interest expense | 3,472,559 | 2,835,588 | 10,362,267 | 5,731,955 | |||
Income tax expense (benefit) | 68,908 | 162,368 | 125,908 | 141,293 | |||
EBITDA | (49,941,095) | 6,504,248 | (59,028,024) | (20,367,686) | |||
Stock-based compensation expense | (238,443) | 516,800 | 639,334 | 13,817,814 | |||
Non-recurring expenses related to financing | 3,885,493 | — | 13,434,949 | — | |||
Non-recurring financing expenses(2) | — | — | 405,159 | — | |||
Reverse stock split fees | — | — | 53,744 | — | |||
Restructuring and other related charges | (12,272) | 934,147 | (114,292) | 6,525,079 | |||
Loss contingency on equity issuance | — | 301,350 | 227,400 | 3,916,350 | |||
Impairments and other losses, net | 50,217,492 | — | 50,217,492 | 8,937,677 | |||
Net gain on sale of subsidiary | — | (82,894) | — | (82,894) | |||
Loss (gain) on derivative liability | — | 942,390 | — | 316,245 | |||
Foreign exchange loss | — | 944,416 | — | 944,416 | |||
Related acquisition & related professional | — | — | — | 1,683,000 | |||
Adjusted EBITDA | $ 3,911,175 | $ 10,060,457 | $ 5,835,762 | $ 15,690,001 | |||
1) | Costs primarily relate to Blue Torch financing matters. Costs are recorded in selling, general, and administration expenses. |
2) | Costs primarily relate to the Preferred Series E equity matters. |
The following is a description of the adjustments to net income (loss) in arriving at adjusted EBITDA as described in this earnings release:
- Interest Expense.
- Income Tax Expense.
- Depreciation and amortization. This adjustment eliminates depreciation and amortization of property and equipment and intangible assets in all periods.
- Impairment and other (gains) losses, net. This adjustment eliminates non-cash impairment charges and the impact of gains or losses from the disposition of assets or businesses in all periods.
- Related acquisition and related professional costs. This adjustment eliminates costs related to acquisitions in all periods.
- Restructuring charges (Credits). This adjustment includes costs related to termination benefits provided to employees as part of the Company's full-time workforce reductions.
- Stock based compensation. This adjustment eliminates the compensation expense relating to restricted stock units and stock options granted under the Troika Media Group Stock Plan.
- Gains or losses on dispositions of businesses and associated settlements
- Certain other non-recurring or non-cash items
- Partial liquidated damages expense related to the Series E Pipe
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SOURCE Troika Media Group
FAQ
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