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CSSE: Year End Results Show Revenue Growth of 35% to $11 Million

03/29/2018
By Lisa Thompson

NASDAQ:CSSE

Since the acquisition of Screen Media on November 3rd of last year, Chicken Soup for the Soul Entertainment (NASDAQ:CSSE) has moved from being strictly a producer of original content, to a content distributor and web based streaming network. Its end goal it to grow its streaming content and leverage its unique model of owning and producing content and the means of distribution to gain a competitive advantage. On a pro forma basis, the acquisition of Screen Media created a company with $19.8 million in revenue in 2017 and adjusted GAAP EBITDA of $7.3 million.

For the year ending December 31, 2017 the company reported revenues of $11.0 million versus $8.1 million, up 35%. Gross margin and operating profits were down, as the company took on Screen Media in the fourth quarter, which incurred high amortization costs from the newly acquired film library.

Gross margin, including amortization of both the film library and programming costs, declined to 54% from 61%. It was up on a dollar basis to $5.9 million from $5.0 million a year ago. Without the new amortization of the film library, this would have been $9.7 million in gross margin for 2017, almost double last year.

Operating expenses increased to $4.3 versus $3.2 million a year ago. Reported operating income was $1.7 versus $1.8 million last year. Taking out library amortization that would have been $3.0 million in 2017.

GAAP net income including all one time costs associated with the merger was $22.8 million versus $0.8. Taking out the one-time gain from the purchase of the library and other one-time costs as well as stock based compensation, non-GAAP net income would have been $1.3 million versus $2.3 million. All of that decline can be explained by the additional expense of amortization of the film library.

Fully diluted GAAP EPS was $2.23 versus $0.09 a year ago.

The company is managing the company on cash flow and EBITDA. It reported adjusted GAAP EBITDA as $28.3 million versus $3.8 million a year ago, however taking out the one time events especially the gain on the library purchase, and amortization of programming costs, we believe the non-GAAP adjusted EBITDA was $6.7 million versus $6.5 million a year ago.

The company reiterated its 2018 guidance for $36 million in revenues and adjusted EBITDA of $18 million. Based on using an average enterprise value to sales of its peers of 13 times, and $18 million in EBITDA, we believe the stock is worth $20.20 per share.



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