Significant increases in page views and monetization continues into
second quarter fiscal 2017
NEW YORK–(BUSINESS WIRE)–Function(x) Inc. (NASDAQ: FNCX) (the “Company”) today reported financial
results for the three months ended September 30, 2016.
Revenue for the three months ended September 30, 2016 was $659,000 down
from $922,000 for the three months ended September 30, 2015. For the
same period the cash revenue for the Company’s Publishing Segment, which
we consider our core operating business, was $371,000 down from $561,000
for the three months ended September 30, 2015.
Net loss and diluted loss per share for the three month period ended
September 30, 2016 were $(7,553,000) and $(2.53), respectively.
EBITDA for the Company for the three months ended September 30, 2016 was
a loss of $2,693,000, which is an improvement from a loss of $7,292,000
for the same period in 2015. EBITDA for the Publishing Segment was a
loss of $1,633,000 for the three months ended September 30, 2016, which
represents a material improvement from the loss of $6,756,000 for such
segment in the prior year. Without expenses of $659,000, which
management has determined are operational expenses that we do not
anticipate to affect the financials going forward, the loss in EBITDA
for the Publishing Segment would have been $973,000. These unusual
operational expenses include stock compensation, costs associated with
our ongoing S-1, costs associated with the acquisition of Rant, and one
time marketing expense. Additionally, we have not included an
incremental $173,000 of cost savings that were not fully realized in the
quarter which we expect to impact our financials going forward; giving
effect to these cost savings would further reduce the loss of $973,000
above to $800,000.
For full details on the above and other pertinent figures, please see
exhibit A and B, attached herein.
“This past quarter confirms the opportunity we believed existed when we
reshaped FNCX,” said Robert FX Sillerman, Executive Chairman and Chief
Executive Officer, “With an even stronger October behind us I am now
convinced that the path we are on is the right one, and as such my
willingness to convert my approximate $35MM of Preferred into common
stock in the near future remains strong. The continued improvement of
our operations in the quarter and my conversion of debt to preferred
equity, resulting in a stronger balance sheet, provide the basis for us
to exploit the robust opportunity in front of us. Although we have
continuing defaults under our debentures, we are working to resolve the
matter. As our cash drain continues to decrease, I continue to
demonstrate my commitment to our efforts and fund the Company’s needs.”
“The excitement and potential that I saw in the company as a Board
Member is coming to fruition, and the hard work and dedication of the
team will continue to drive the success of the business and allow for us
to achieve our long term goals,” said Birame Sock, President and COO.
Our Q1 Fiscal 2017 accomplishments listed below are guided by our
overall strategy and vision, in which Function (x) is building a highly
scalable publishing platform that is designed to efficiently create,
share and monetize content across a wide range of topics and audience.
Our strategy is to invest in proprietary technology that gives us a
competitive advantage versus traditional publishers and allows us to
fully leverage the power of social media to better reach our target
audiences. Our initial properties, Rant and WetPaint, have begun to take
full advantage of our publishing infrastructure to deliver compelling
content around sports, pop culture and entertainment. Future properties
will also be built on top of our publishing technology.
Fiscal 2017 First Quarter Highlights and Recent Developments
-
New Management Team: Appointed a new and a highly experienced
management team. Each member has had a prior professional relationship
with the Company’s Chairman and CEO; -
Rant Acquisition: In Q1, the Company acquired Rant, Inc., a
leading digital publisher that publishes original content in multiple
different verticals, most notably sports, entertainment, and pets.
This business has been integrated into the Company’s existing digital
publishing platform; -
Deleveraging Initiatives: Affiliates of Function(x)’s Chairman
and CEO, Mr. Sillerman, have committed to converting approximately
$35,000,000 in preferred equity into shares of the Company’s common
stock, further illustrating Mr. Sillerman’s commitment to the
Company’s future; -
Established foundation for future growth: Developed a
streamlined headcount plan to scale the business, implement
disciplined financial controls and refine its operating expense model
and revamp its technology platform and acquisition team intended to
drive incremental growth; -
Optimized Revenue Model: Although not reflected in the Q1
financials, the Company has recalibrated its revenue model to achieve
sustainable revenue growth and to better align its capital and focus
in the most efficient manner possible; -
DraftDay Gaming Group: Recent positive regulatory developments
in the daily fantasy space have increased confidence in the prospects
of this business, and we are evaluating all strategic alternatives to
maximize shareholder return; -
Key performance metrics: Implemented daily monitoring of
operating results via automated reporting and analytics and
continually refining its approach to implementing the long-term
strategy.
About Function(x) Inc.
Function(x) operates Wetpaint.com
and Rant. Wetpaint is the leading online destination for entertainment
news for millennial women, covering the latest in television, music, and
pop culture. Rant is a leading digital publisher with original content
in multiple different verticals, most notably in sports, entertainment,
and pets,. Function(x) Inc. is also the largest shareholder
of DraftDay Gaming Group, which is well-positioned to become a
significant participant in the expanding fantasy sports market, offering
a high-quality daily fantasy sports experience both directly to
consumers and to businesses desiring turnkey solutions to new revenue
streams. Function(x) Inc. also owns Choose Digital, a digital
marketplace platform that allows companies to incorporate digital
content into existing rewards and loyalty programs in support of
marketing and sales initiatives. For more information, visit www.functionxinc.com.
How Function(x) Came To Be
Previously known as Viggle and DraftDay Fantasy Sports Inc, the genesis
of Function(x) is largely due to the acquisition of Wetpaint in December
of 2013 by the Company’s predecessor Viggle, Inc. as an audience driver
for the rewards platform. Subsequently, the main assets of Viggle were
sold in February of 2016, with exception of Wetpaint. Due to the sale of
the Viggle name, the company briefly changed its name to DraftDay
Fantasy Sports, Inc while it evaluated the future direction of the
business. Realizing that the Company had a tremendous opportunity not
only DraftDay, but with Wetpaint (with over 13MM visits per month, its
patented social distribution system and exclusive content produced with
celebrities and social influencers). As Robert FX Sillerman has stated
in the past, “Function X is often referred to in mathematics as the
largest possible number. That is the goal of the company, to achieve the
maximum results possible. The combination of Wetpaint and Rant along
with the recent positive regulatory developments in fantasy sports
positions us to achieve significant levels of success.” Like that, a
brand was born, and the Company has been Function(x) ever since.
Forward-Looking Statements
This press release may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and as
defined in the U.S. Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve inherent risks and
uncertainties that could cause actual results to differ materially from
those projected or anticipated. All information provided in this press
release is as of the date of this release. Except as required by
law, Function(x), Inc. undertakes no obligation to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise, after the date on which the
statements are made or to reflect the occurrence of unanticipated events.
Definitions
The following definitions apply to these terms as used throughout this
press release and the exhibits:
Publishing Segments – represents Wetpaint and Rant and any corporate
expenses allocated to this segment. 2015 Rant figures exclude revenue
and corresponding expense associated with Traffic Acquisition, but
includes revenue from organic traffic.
Traffic Acquisition – Money spent to drive traffic to a website.
EBITDA – represents net income (loss) before other income (loss),
interest expense, income taxes, and depreciation and amortization.
Non-GAAP Financial Measures
We prepare our financial statements in accordance with generally
accepted accounting principles (“GAAP”) in the United States of America.
Within this press release, we make reference to EBITDA, which is a
non-GAAP financial measure. We include these non-GAAP financial measures
because management believes they are useful to investors in that they
provide for greater transparency with respect to supplemental
information used by management in its financial and operational decision
making.
Management uses EBITDA to convey supplemental information to investors
regarding our performance excluding the impact of certain non-cash
charges, costs associated with our borrowings and other special items
that can affect the comparability of results from quarter to quarter. In
particular, EBITDA is a key measure used by our management and board of
directors to understand and evaluate our core operating performance and
trends, to prepare and approve our annual budget, and to develop short-
and long-term operational plans. Of note, the elimination of certain
expenses in calculating EBITDA can provide a useful measure for
period-to-period comparisons of our core business.
Accordingly, we believe the presentation of these non-GAAP financial
measures, when used in conjunction with GAAP financial measures, is a
useful financial analysis tool that can assist investors in assessing
our operating performance and underlying prospects. This analysis should
not be considered in isolation or as a substitute for analysis of our
results as reported under GAAP. This analysis, as well as the other
information in this press release, should be read in conjunction with
our consolidated financial statements and footnotes contained in the
Form 10-Q that we filed with the U.S. Securities and Exchange
Commission. The non-GAAP financial measures used in this press release
may be different from the methods used by other companies. For more
information on the Non-GAAP financial measures, please see the
Reconciliation of GAAP financial measures to Non-GAAP financial measures
table in the press release
Exhibit A
| 2016 – All amounts shown in $ (000’s) | 2015 – All amounts shown in $ (000’s) | |||||
| Publishing Segment Cash Revenue Reconciliation | Publishing Segment Cash Revenue Reconciliation | |||||
| GAAP Revenue | $659 | GAAP Revenue | $922 | |||
| – Choose Revenue | 58 | – Choose Revenue | 198 | |||
| – DDGG Revenue | 105 | – DDGG Revenue | 83 | |||
| – Corporate Revenue | 125 | – Corporate Revenue | 125 | |||
| Pro-Forma Revenue | $371 | + Rant Revenue* | 45 | |||
| Pro-Forma Revenue | $561 | |||||
| *Adjusted to remove Revenue associated with Traffic Acquisition | ||||||
| Company EBITDA Reconciliation | Company EBITDA Reconciliation | |||||
| GAAP Net Income | ($7,517) | GAAP Net Income | ($7,632) | |||
| + Interest Expenses | 1,651 | + Rant Net Income | (1,364) | |||
| + Depreciation and Amortization | 687 | + Interest Expenses | 856 | |||
| + Other (income)/expense, net | 2,485 | + Depreciation and Amortization | 850 | |||
| EBITDA | ($2,693) | + Other (income)/expense, net | (2) | |||
| EBITDA | ($7,292) | |||||
| Publishing Segment EBITDA Reconciliation | Publishing Segment EBITDA Reconciliation | |||||
| GAAP Net Income | ($7,517) | GAAP Net Income | ($7,632) | |||
| – Choose Net Income | (401) | – Choose Net Income | (485) | |||
| – DDGG Net Income | (752) | – DDGG Net Income | 26 | |||
| – Viggle Net Income | (36) | – MyGuy Net Income | (336) | |||
| + Interest Expenses | 1,651 | + Rant Net Income* | (1,364) | |||
| + Depreciation and Amortization | 560 | + Interest Expenses | 856 | |||
| + Other (income)/expense, net | 2,485 | + Depreciation and Amortization | 588 | |||
| EBITDA | ($1,633) | EBITDA | ($6,756) | |||
|
*Adjusted to remove Revenue/Expenses associated with Traffic Acquisition |
||||||
| Publishing Segment EBITDA less Identified Operational Expenses | Publishing Segment EBITDA less Identified Operational Expenses | |||||
| EBITDA (as stated above) | ($1,633) | EBITDA (as stated above) | ($6,756) | |||
| + Equity Based Comp | $7 | + Equity Based Comp | 4,388 | |||
|
– Expenses Associated with S-1 |
176 | Adjusted EBITDA | ($2,369) | |||
| – One-time Signing Bonus | 50 | |||||
| – Severance | 26 | |||||
| – Transaction Expense – Valuations | 75 | |||||
| – Transaction Expense – Legal | 225 | |||||
| – One Time Marketing Expense | 100 | |||||
| – Cost Savings | 173 | |||||
| Adjusted EBITDA | ($800) | |||||
Exhibit B
| Function(x) Inc. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (amounts in thousands, except share data) | ||||||||
| (Unaudited) | ||||||||
|
September 30, |
September 30, |
|||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 827 | $ | 537 | ||||
| Marketable securities | – | 2,495 | ||||||
|
Accounts receivable (net of allowance for doubtful accounts of $20 |
383 | 307 | ||||||
| Prepaid expenses | 53 | 226 | ||||||
| Other receivables | 127 | 114 | ||||||
| Other current assets | 14 | 110 | ||||||
| Current assets of discontinued operations | 20 | 39 | ||||||
| Total current assets | 1,424 | 3,828 | ||||||
| Restricted cash | 435 | 440 | ||||||
| Property & equipment, net | 1,337 | 1,414 | ||||||
| Intangible assets, net | 10,229 | 5,339 | ||||||
| Goodwill | 18,859 | 11,270 | ||||||
| Other assets | 786 | 748 | ||||||
| Total assets | $ | 33,070 | $ | 23,039 | ||||
|
Liabilities, convertible redeemable preferred stock and stockholders’ equity/(deficit) |
||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 9,484 | $ | 11,625 | ||||
| Deferred revenue | 682 | 637 | ||||||
| Current portion of loans payable, net | 8,853 | 8,996 | ||||||
| Common stock warrant liability | 1,500 | – | ||||||
| Current liabilities of discontinued operations | 2,830 | 2,851 | ||||||
| Total current liabilities | 23,349 | 24,109 | ||||||
| Loans payable, less current portion | – | 19,716 | ||||||
| Deferred revenue | 3,229 | 3,429 | ||||||
| Common stock warrant liability | 10 | 10 | ||||||
| Other long-term liabilities | 929 | 951 | ||||||
| Total liabilities | 27,517 | 48,215 | ||||||
|
Series A Convertible Redeemable Preferred Stock, $1,000 stated |
– | – | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity/(deficit): | ||||||||
|
Series B Convertible Preferred Stock, $1,000 stated value, |
– | – | ||||||
|
Series C Convertible Redeemable Preferred Stock, $1,000 stated |
33,912 | 4,940 | ||||||
|
Series D Preferred Stock, $1,000 stated value, authorized 150 |
– | – | ||||||
|
Series E Convertible Preferred Stock, $1,000 stated value, |
7,600 | – | ||||||
|
Common stock, $0.001 par value: authorized 300,000,000 shares, |
3 | 3 | ||||||
| Additional paid-in-capital | 410,995 | 409,765 | ||||||
| Treasury stock, 10,758 shares at September 30, 2016 and June 30, 2016 | (11,916 | ) | (11,916 | ) | ||||
| Accumulated deficit | (435,650 | ) | (428,380 | ) | ||||
| Accumulated other comprehensive income | – | (361 | ) | |||||
| Noncontrolling interest | 609 | 773 | ||||||
| Total stockholders’ equity/(deficit) | 5,553 | (25,176 | ) | |||||
| Total liabilities and stockholders’ equity/(deficit) | $ | 33,070 | $ | 23,039 | ||||
| Function(x) Inc. | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (amounts in thousands, except share and per share data) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Revenues | $ | 659 | $ | 922 | ||||
| Selling, general and administrative expenses | (4,040 | ) | (7,700 | ) | ||||
| Operating loss | (3,381 | ) | (6,778 | ) | ||||
| Other expense: | ||||||||
| Other (expense)/income, net | (2,485 | ) | 2 | |||||
| Interest expense, net | (1,651 | ) | (856 | ) | ||||
| Total other expense | (4,136 | ) | (854 | ) | ||||
| Net loss before provision for income taxes | (7,517 | ) | (7,632 | ) | ||||
| Income tax expense | – | – | ||||||
| Net loss from continuing operations | $ | (7,517 | ) | $ | (7,632 | ) | ||
| Net loss from discontinued operations | (36 | ) | (5,780 | ) | ||||
| Net loss | (7,553 | ) | (13,412 | ) | ||||
| Accretion of Convertible Redeemable Preferred Stock | 22 | 74 | ||||||
| Undeclared Series C Convertible Redeemable Preferred Stock Dividend | (494 | ) | (307 | ) | ||||
| Add: Net loss attributable to non-controlling interest | 283 | 168 | ||||||
| Net loss attributable to Function(x) Inc. common stockholders | $ | (7,742 | ) | $ | (13,477 | ) | ||
| Net loss per common share – basic and diluted: | ||||||||
| Continuing operations | $ | (2.52 | ) | $ | (6.46 | ) | ||
| Discontinued operations | $ | (0.01 | ) | $ | (4.85 | ) | ||
|
Net loss per share attributable to Function(x) Inc. common stockholders – basic and diluted |
$ | (2.53 | ) | $ | (11.31 | ) | ||
| Weighted average common shares outstanding – basic and diluted | 3,053,796 | 1,191,434 | ||||||
| Net loss | $ | (7,553 | ) | $ | (13,412 | ) | ||
| Other comprehensive income, net of tax: | ||||||||
| Unrealized loss on available for sale securities | (289 | ) | – | |||||
|
Reclass of available for sale securities to Consolidated Statements of Operations |
650 | – | ||||||
| Other comprehensive income | 361 | – | ||||||
| Comprehensive loss | $ | (7,192 | ) | $ | (13,412 | ) | ||
Contacts
For Function(x):
Investors:
Michelle Lanken, 212-231-0092
Chief
Financial Officer
mlanken@functionxinc.com
or
Media
Relations:
IRTH Communications
Robert Haag, 866-976-4784
Managing
Partner
