Affirms 2016 Guidance for Positive Free Cash Flow & Stable EBITDA
Reports Improving Momentum in Recurring Revenue Performance
TORONTO, Aug. 10, 2016 /CNW/ - Mood Media Corporation ("Mood
Media," "Mood" or "the Company") (TSX:MM), the global leader in elevating Customer Experiences, today reported results for its
second quarter of 2016 and provided an update on the Company's progress executing against its strategic and operational plans.
Recent Highlights
- In the second quarter of 2016, Mood reported revenues of $119.7 million, up 1.7% relative to
prior year's second quarter. Mood reported revenue growth in its In-Store Media operations in North
America and International, and at BIS.
- Mood recurring revenues reached $62.3 million in the second quarter, increasing relative to its
first quarter results. Mood has grown its recurring revenues on a quarter over quarter basis in two of its most recent three
quarters and its North American operation has grown recurring revenues sequentially in five its most recent six quarters.
Relative to prior year, underlying recurring revenues remained relatively stable with the North American segment growing
recurring revenue and International declining slightly.
- Mood's key performance indicators show increasing traction from gains in sales and operating performance. Gross site
additions in the second quarter rose by 18% relative to the same quarter of the prior year with North
America recording its best second quarter gross addition performance since 2012 and International recording its best
overall quarterly gross site addition result since 2012. Underlying blended ARPU declined by 1.3% relative to the prior year with
North America core audio ARPU remaining stable and International ARPU declining
slightly.
- Mood EBITDA in the second quarter remained essentially stable relative to the prior year at $24.9
million. Mood In-Store Media operations in North America, International and BIS each grew
EBITDA. Technomedia EBITDA declined, although sales wins and cost savings are expected to improve its performance in the second
half of 2016. In aggregate, the North American, International & BIS operations grew EBITDA by 3.5% relative to prior year on
an underlying basis.
- The Company's 2016 global transformation, integration and consolidation initiatives are on target, with Mood delivering
incremental annualized efficiencies of more than $6 million from Wave 4 & 5 of its integration
and synergy program. The Company has estimated the initial scope of estimated savings related to its Wave 6 activities to be
approximately $3 million in 2017, raising the total annualized transformation savings delivered
since the programs began in the fourth quarter of 2013 to more than $28 million.
- Mood reaffirms guidance for 2016. Mood expects to achieve stable 2016 EBITDA relative to 2015, and positive free cash flow
generation. Mood's first half results have been in line with its expectations. Second half 2016 free cash flow when compared to
first half is expected to benefit from improvements in EBITDA reflecting sales and operating gains and improvements in working
capital.
"Mood is making significant strides in its transformation, on key measures of ARPU stabilization, recurring and partnership
revenues, equipment and labor revenue growth, gross site additions, margin protection, cost reductions, and cash flow
enhancements", said Steve Richards, President and CEO of Mood Media. "All of these steps give us
great satisfaction as we move closer to the Mood goal of achieving overall recurring revenue growth as a total Mood
enterprise."
"Our second quarter recurring revenue momentum was the strongest Mood performance since our businesses were put together in
2012. Our key North American division grew recurring revenues on a year over year basis and has grown revenues on a sequential
basis in five of the last six quarters, reflecting organizational, sales and operating enhancements. These improvements produced
North America's best second quarter gross site additions since 2012. Furthermore, Mood
International sales and recurring revenue performance are also showing marked improvements. Mood International recorded its best
quarter gross site additions since 2012. Their accomplishments give us confidence that we will achieve our financial and operating
goals for 2016, and they present a strong foundation for further expected gains in 2017 and beyond."
"Our transformation and investment activities are making a tangible positive impact on our growth momentum through enhanced
Local inside and field sales, acceleration in Premier and System sales, as well as through encouraging progress with partner and
marketing initiatives. The wide array of improvements and consistent positive momentum are very encouraging. We continue to achieve
process efficiency gains and are finalizing our 2017 Wave 6 plans that target $3 million in
incremental reductions."
We will not relent in improving all facets of business results, to further cement our position as the unquestionable global
leader across this industry. Mood's transformation is tracking nicely, and gives us great confidence for incremental
gains, reduced costs, increased efficiencies, and future enhancements to Mood stakeholder value", concluded Mr.
Richards.
Second Quarter 2016 Financial Results
(in thousands of us dollars)
The composition of revenue in the second quarter was as follows:
|
Three months ended
|
Six months ended
|
|
June 30, 2016
|
June 30, 2015
|
June 30, 2016
|
June 30, 2015
|
Recurring
|
$62,258
|
$62,224
|
$123,227
|
$124,760
|
Equipment
|
37,010
|
35,029
|
70,639
|
68,709
|
Installation and services
|
13,714
|
13,312
|
24,073
|
25,187
|
Other
|
6,688
|
7,103
|
13,066
|
13,267
|
|
$119,670
|
$117,668
|
$231,005
|
$231,923
|
The Company reported second quarter 2016 revenues of $119.7 million and EBITDA of $24.9 million compared with revenues of $117.7 million and EBITDA of $24.5 million in the prior year's second quarter. Second quarter revenues rose by 1.7% or $2.0 million relative to prior year, with a $2.1 million increase from underlying
operations, and a $0.9 million increase from foreign exchange translation which was offset by a
$1.0 million decrease related to the sale of its French speaker manufacturing business.
The year over year improvement in underlying revenues was generated by increases of $2.5 million
in equipment revenues and $0.3 million in installation and services revenues, which were only
partially offset by decreases of $0.3 million in recurring revenues and $0.5
million in other revenues (royalty, advertising and other revenues).
The Company's recurring revenues represent its subscription and partnership revenue streams associated with its In-Store Media
operations in its North America and International divisions. The modest 0.4% underlying decrease
in second quarter recurring revenues relative to the prior year represents Mood's strongest performance in this area in recent
years and is directly attributable to improving sales and operating trends in its North American division, and to a lesser extent
to its International division, where subscriber and ARPU performance have steadily improved in recent quarters.
Second quarter equipment revenues rose by $2.5 million, or 7%, relative to prior year on an
underlying basis, driven by increases in new client installations and gross site additions across Mood's In-Store Media operations
where underlying equipment revenues rose by 17% in North America and by 23% in International.
Equipment revenues remained stable at BIS and declined at Technomedia relative to the prior year's second quarter results.
Installation and services revenues relate to the addition of new client locations and the service and maintenance of existing
sites. Installation and services revenues rose by $0.3 million on an underlying basis, with In-Store
Media International recording an increase, which was partially offset by declines in In-Store Media North America and
Technomedia.
In the second quarter, the Company's reported cost of sales increased by $1.2 million, and its
underlying cost of sales increased by $1.3 million relative to the prior year's quarter attributable
primarily to higher equipment, installation and services costs in the In-Store Media International division owing to significant
increases in related revenues. Cost of sales declined at Technomedia on lower revenues and at BIS due to improved margins while
rising in its In-Store Media North America division on higher revenues.
The Company's operating expenses were $37.0 million in the second quarter, for an increase of
$0.4 million relative to the prior year's second quarter on a reported basis and an increase of
$0.9 million on an underlying basis. The increase in operating expenses was primarily attributable to
Mood's North America operations where increasing revenues led to higher sales commissions and
owing to higher marketing expenses.
Mood's EBITDA in the second quarter was essentially stable at $24.9 million relative to the prior
year on an underlying basis, with three of four business units improving relative to prior year, including North America, International and BIS. In aggregate these business units grew underlying EBITDA by 3.5%
relative to prior year.
Q2 2016 Revenue and EBITDA Movements
|
|
|
|
|
|
|
|
|
Reported
|
Foreign
|
Asset
|
|
Reported
|
($000)
|
|
Q2.15
|
Exchange
|
Disposals
|
Underlying
|
Q2.16
|
|
|
|
|
|
|
|
Recurring
|
62,225
|
302
|
-
|
(269)
|
62,258
|
Equipment
|
35,031
|
439
|
(955)
|
2,494
|
37,010
|
Installation and
services
|
13,311
|
77
|
-
|
326
|
13,714
|
Other
|
|
7,101
|
51
|
-
|
(464)
|
6,688
|
Total
|
|
117,668
|
869
|
(955)
|
2,087
|
119,670
|
|
|
|
|
|
|
|
Cost of
sales
|
56,517
|
408
|
(440)
|
1,272
|
57,758
|
Operating
expenses
|
36,650
|
(138)
|
(414)
|
920
|
37,018
|
Total
|
|
93,168
|
270
|
(854)
|
2,192
|
94,776
|
|
|
|
|
|
|
|
EBITDA
|
|
24,501
|
598
|
(101)
|
(105)
|
24,894
|
Other Expenses totaled $0.1 million in the second quarter of 2016 compared with $1.7 million in the prior year's quarter. Other Expenses in the second quarter consisted primarily of
$0.6 million in severance expenses and $0.5 million in other
integration expenses related to the Company's global synergy program, offset by a $1.0 million
reduction in the contingent consideration related to Technomedia.
Net loss per share in Q2 2016 was ($0.06) compared with a net loss per share of ($0.01) in the prior year's quarter. The major influences on net loss in the second quarter include a
$5.5 million foreign exchange loss on financing transactions in the current period compared with a
$4.2 million gain in the second quarter of 2015, higher finance and tax expense, which were partially
offset by reduced other expense and share-based compensation expense.
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
Unaudited
In thousands of US dollars, except per share information and weighted average number of shares
|
|
Three months ended
|
Six months ended
|
|
Notes
|
June 30, 2016
|
June 30, 2015
|
June 30, 2016
|
June 30, 2015
|
|
|
|
|
|
|
Revenue
|
5
|
$119,670
|
$117,668
|
$231,005
|
$231,923
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Cost
of sales
|
|
57,758
|
56,517
|
109,721
|
110,761
|
|
Operating expenses
|
|
37,018
|
36,650
|
74,570
|
72,541
|
|
Depreciation and
amortization
|
|
16,217
|
16,870
|
32,784
|
33,619
|
|
Share-based compensation
|
11
|
92
|
235
|
120
|
451
|
|
Other
expenses
|
6
|
133
|
1,691
|
6,197
|
2,588
|
|
Foreign exchange loss (gain) on
financing transactions
|
10
|
5,525
|
(4,196)
|
(1,086)
|
14,807
|
|
Finance costs, net
|
7
|
14,489
|
13,694
|
30,334
|
27,774
|
Loss for the period before income
taxes
|
|
(11,562)
|
(3,793)
|
(21,635)
|
(30,618)
|
|
|
|
|
|
|
Income tax charge
(recovery)
|
8
|
317
|
(1,596)
|
(325)
|
(1,450)
|
Loss for the period
|
|
(11,879)
|
(2,197)
|
(21,310)
|
(29,168)
|
|
|
|
|
|
|
Net loss attributable
to:
|
|
|
|
|
|
Owners of the parent
|
|
(11,921)
|
(2,185)
|
(21,349)
|
(29,153)
|
Non-controlling interests
|
|
42
|
(12)
|
39
|
(15)
|
|
|
(11,879)
|
(2,197)
|
(21,310)
|
(29,168)
|
|
|
|
|
|
|
Net loss per share attributable to
shareholders
|
|
|
|
|
|
Basic and diluted
|
|
$(0.06)
|
$(0.01)
|
$(0.12)
|
$(0.16)
|
Weighted average number of shares
outstanding – basic
|
|
184,767
|
182,067
|
184,289
|
181,101
|
Weighted average number of shares
outstanding – diluted
|
|
186,702
|
182,067
|
186,223
|
181,101
|
|
|
|
|
|
|
Loss for the period
|
|
$(11,879)
|
$(2,197)
|
$(21,310)
|
$(29,168)
|
|
|
|
|
|
|
Items that may be reclassified
subsequently to the loss for the period:
|
|
|
|
|
|
|
Exchange gain (loss) on translation
of foreign operations
|
|
2,400
|
(1,025)
|
(134)
|
2,267
|
Other comprehensive income (loss)
for the period,
net of tax
|
|
2,400
|
(1,025)
|
(134)
|
2,267
|
Total comprehensive loss for the
period, net of tax
|
|
(9,479)
|
(3,222)
|
(21,444)
|
(26,901)
|
|
|
|
|
|
|
Comprehensive loss attributable
to:
|
|
|
|
|
|
Owners of the parent
|
|
(9,521)
|
(3,210)
|
(21,483)
|
(26,886)
|
Non-controlling interests
|
|
42
|
(12)
|
39
|
(15)
|
|
|
$(9,479)
|
$(3,222)
|
$(21,444)
|
$(26,901)
|
|
The accompanying notes
form part of the interim consolidated financial statements
|
Key Performance Indicators
As of June 30, 2016, the number of total Company-owned sites decreased by 1,459 relative to
March 31, 2016. The Company grew its visual site count by 268, while its audio site count decreased
by 1,727.
Total gross site activations in the second quarter were 12,762, or an increase of 18% relative to the prior year's second
quarter. Audio gross site additions rose by 16% year over year, while visual site additions grew by 39% year over year reflecting
improved traction of Mood's sales activities. In the quarter, North America recorded its highest
level of gross site additions in a second quarter since 2012; and International recorded its highest overall level of quarterly
gross site additions since 2012.
Total monthly churn was 1.2% in the second quarter versus 1.1% in the first quarter of 2016 and versus 1.0% in the second
quarter of 2015. Audio churn improved in Mood's International business unit and increased slightly in North America. Total visual churn improved in North America and increased in
Mood's International business unit.
Blended ARPU in the second quarter was $42.63, or a reduction of 0.8% relative to the prior year's
quarter. The reduction of $0.33 relative to the prior year was related to a $0.56 decrease related to underlying performance, which was offset partially by a $0.23 improvement resulting from foreign exchange translation. Reported blended ARPU has declined by less than 1%
since the first quarter of 2015 driven primarily by improvements in North America given
enhancements to sales and operating performance. This ARPU performance compares very favorably to previous trends in 2013 to 2015,
when underlying ARPU declined by approximately 4% on average each year.
|
Q1.15
|
Q2.15
|
Q3.15
|
Q4.15
|
Q1.16
|
Q2.16
|
|
|
|
|
|
|
|
Audio
sites
|
402,690
|
401,428
|
398,745
|
398,773
|
395,596
|
393,869
|
Visual
sites
|
12,872
|
13,050
|
13,437
|
13,759
|
14,095
|
14,363
|
Total
sites
|
415,562
|
414,478
|
412,182
|
412,532
|
409,691
|
408,232
|
|
|
|
|
|
|
|
Audio
ARPU
|
$
|
41.71
|
$
|
41.70
|
$
|
40.97
|
$
|
41.10
|
$
|
40.77
|
$
|
41.30
|
Visual
ARPU
|
$
|
78.76
|
$
|
81.93
|
$
|
82.26
|
$
|
75.12
|
$
|
72.10
|
$
|
79.52
|
Blended
ARPU
|
$
|
42.90
|
$
|
42.96
|
$
|
42.29
|
$
|
42.24
|
$
|
41.83
|
$
|
42.63
|
|
|
|
|
|
|
|
Audio gross
additions
|
8,625
|
10,136
|
9,850
|
10,947
|
9,800
|
11,789
|
Visual gross
additions
|
1,006
|
698
|
829
|
876
|
786
|
973
|
Total gross
additions
|
9,631
|
10,834
|
10,679
|
11,823
|
10,586
|
12,762
|
|
|
|
|
|
|
|
Audio monthly
churn
|
1.2%
|
0.9%
|
1.1%
|
0.9%
|
1.1%
|
1.1%
|
Visual monthly
churn
|
5.2%
|
1.3%
|
0.8%
|
1.6%
|
1.1%
|
1.7%
|
Total monthly
churn
|
1.3%
|
1.0%
|
1.0%
|
0.9%
|
1.1%
|
1.2%
|
Mood Media presents EBITDA/Adjusted EBITDA information as a supplemental figure because management believes it provides useful
information regarding operating performance. The Company uses the terms EBITDA and Adjusted EBITDA interchangeably and recognizes
that neither (i) is a recognized measure under IFRS, (ii) has a standardized meaning, and (iii) may be comparable to similar
measures used by other companies. Accordingly, investors are cautioned that Adjusted EBITDA should not be construed as an
alternative to net earnings or (loss) determined in accordance with IFRS as an indicator of the financial performance of Mood Media
or as a measure of Mood Media's liquidity and cash flows.
Reconciliation of segment profit to Consolidated Group loss for the period before income taxes
|
Three months ended
|
Six months ended
|
|
June 30, 2016
|
June 30, 2015
|
June 30, 2016
|
June 30, 2015
|
Segment profit (i)
|
$24,894
|
$24,501
|
$46,714
|
$48,621
|
Depreciation and
amortization
|
16,217
|
16,870
|
32,784
|
33,619
|
Share-based compensation
|
92
|
235
|
120
|
451
|
Other
expenses
|
133
|
1,691
|
6,197
|
2,588
|
Foreign exchange loss (gain) on
financing transactions
|
5,525
|
(4,196)
|
(1,086)
|
14,807
|
Finance costs, net
|
14,489
|
13,694
|
30,334
|
27,774
|
Loss for the period before income
taxes
|
$(11,562)
|
$(3,793)
|
$(21,635)
|
$(30,618)
|
|
|
(i)
|
Segment profit is a non-GAAP IFRS metric
internally referred to by management as Adjusted EBITDA and is prepared on a consistent basis. Adjusted EBITDA is
considered by executive management as one of the key drivers for the purpose of making decisions about performance
assessment and resource allocation of each operating segment. It is calculated by reducing revenue by cost of sales and
operating expenses. The non-IFRS measure does not have a standardized meaning, and therefore unlikely to be comparable to
similarly titled measures reported by other companies.
|
Free Cash Flow ("FCF") is another non-IFRS measure that Mood Media uses to explain positive or negative net cash flows. The
Company defines FCF as the change in net debt from the end of the prior period to the end of the current period being reported.
Contractual debt less unrestricted cash is used to calculate net debt at the respective balance sheet dates. The Company uses the
contractual principal amount of its debt instruments and financing leases. Following is a table which sets forth the calculation of
net debt and FCF from December 31, 2015 to June 30, 2016. The Company
cautions that net debt and free cash flow do not have standardized meanings and may not be comparable to similar measures used
by other companies. Accordingly, investors are cautioned that FCF and change in net debt should not be construed as an alternative
to net earnings or (loss) determined in accordance with IFRS as an indicator of the financial performance of Mood Media or as a
measure of Mood Media's liquidity and cash flows.
Reconciliation of Consolidated Group Free Cash Flow
|
|
|
Increase or
|
|
|
|
Decrease in
|
Description
|
June 30, 2016
|
Dec. 31, 2015
|
Debt & Cash
|
|
|
|
|
First lien credit
facility
|
$
|
235,714
|
$
|
236,888
|
($1,174)
|
Senior unsecured
notes
|
350,000
|
350,000
|
($0)
|
MMG Notes
|
50,000
|
50,000
|
$0
|
Convertible
debentures
|
-
|
-
|
$0
|
Finance leases
|
3,181
|
3,413
|
($232)
|
Total Contractual Principal of
Debt
|
$
|
638,895
|
$
|
640,301
|
-$
|
1,406
|
Less: Unrestricted
cash
|
12,369
|
17,326
|
(4,957)
|
Net debt
|
$
|
626,526
|
$
|
622,975
|
$
|
3,551
|
Free Cash Flow / (Increase) or
Decrease in Net Debt
|
|
($3,551)
|
Conference Call
As previously announced, the Company will hold a conference call on August 11, 2016, at
8:30 a.m. Eastern Time to discuss its results and respond to questions from the investment community.
To participate, please dial 416-764-8658 or toll free at 1-888-886-7786. A replay will be available within 24 hours following the
teleconference by dialing 416-764-8691or toll free at 1-877-674-6060 (passcode 927520#).
This earnings release, which is current as of August 10, 2016, is a summary of the Company's
second quarter 2016 results and should be read in conjunction with the Company's second quarter 2016 Management Discussion and
Analysis ("MD&A") and Interim Condensed Consolidated Financial Statements and Notes thereto and our other recent regulatory
filings.
The financial information presented herein has been prepared on the basis of International Financial Reporting Standards
("IFRS") for consolidated financial statements and is expressed in United States dollars unless
otherwise stated.
This news release includes certain non-IFRS financial measures. Mood Media uses these non-IFRS financial measures as
supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings
prescribed by IFRS and therefore may not be comparable to the calculation of similar measures used by other companies, and should
not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS.
In this earnings release, the terms "we," "us," "our," "Mood Media," "Mood" and "the Company" refer to Mood Media Corporation
and its subsidiaries.
About Mood Media Corporation
Mood Media (TSX:MM) is the global leader in elevating Customer Experiences. With more than 500,000 active client locations around
the globe, Mood combines sight, sound, scent, social mobile technology and systems to create greater emotional connections between
brands and consumers. Mood's clients include businesses of all sizes and market sectors, from the world's most recognized retailers
and hotels to quick-service restaurants, local banks and thousands of small businesses. For more details: http://us.moodmedia.com/.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements. The words "believe," "expect," "anticipate," "estimate," "intend," "may,"
"will," "would", "is planning" and similar expressions and the negative of such expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain these identifying words. These
forward-looking statements are subject to important assumptions, including the following specific assumptions: general industry and
economic conditions; and changes in regulatory requirements affecting the businesses of Mood Media. While Mood Media considers
these factors and assumptions to be reasonable based on information currently available, they are inherently subject to significant
uncertainties and contingencies and may prove to be incorrect.
Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking
statements. Such factors include, but are not limited to: the impact of general market, industry, credit and economic conditions,
currency fluctuations as well as the risk factors identified in Mood Media's Management Discussion and Analysis dated August 10, 2016 and Mood Media's annual information form dated March 30, 2016, both
of which are available on www.sedar.com.
Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All of the
forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements
or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if
substantially realized, that they will have the expected consequences to, or effects on, Mood Media.
Forward-looking statements are given only as at the date hereof and Mood Media disclaims any obligation to update or revise the
forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable
laws.
SOURCE Mood Media Corporation
![](http://rt.newswire.ca/rt.gif?NewsItemId=C3549&Transmission_Id=201608101733CANADANWCANADAPR_C3549&DateId=20160810)