NEW
YORK, March 7, 2023 /PRNewswire/ -- Troika Media
Group, Inc. (Nasdaq: TRKA) ("TMG"), a consumer engagement and
customer acquisition group, today announced financial results for
the six months ended December 31,
2022, a transition reporting period ("six month transition
period") as a result of the Company's change in fiscal year to
December 31 from June 30. TMG is a professional services company
that architects and builds enterprise value in consumer brands to
generate scalable, performance-driven revenue growth. The Company
delivers three solutions pillars: TMG CREATES brands and
experiences and CONNECTS consumers through emerging
technology products and ecosystems to deliver PERFORMANCE
based measurable business outcomes.
The six month transition period highlights include:
- Successive record revenue of approximately $187.9 million
- Revenue increase of 1125% over the comparative prior year
period
- Adjusted EBITDA of approximately $5.0
million
- Continued strong revenue growth in new revenue
streams
- Growing demand for Performance Solutions within Home
Improvement, Residential Services, Legal and Professional Services
Sectors
- Successful completion of restructuring of operations and
cost optimizations following the acquisition of Converge
Troika Media Group Reports Record Revenue
of $187.9 million for the Six Months
Ended December 31, 2022
"The operational changes and record business performance during
this six month transition period were delivered ahead of schedule
in what was an aggressive timetable to alter the strategic course
of the Company. In the last nine months, we repositioned the
business, delivered successive record-breaking revenue, diversified
our revenue sectors, and implemented changes to optimize
operational efficiency. The Company is now focused on taking
advantage of sustainably higher margin opportunities to
meaningfully improve its strategic and financial results in
scalable market sectors. The Management Team has delivered great
results during an intensive period of change, demonstrating the
resiliency of our services and business model. We continue to be
excited at the growth opportunities in home improvement,
residential services, legal and professional services and building
on our internal consumer brand portfolio. We can now focus on
optimizing our balance sheet and review strategic alternatives as
we work with Jefferies, LLC to architect the best capital structure
to grow the business and maximize shareholder value." commented
Sid Toama, Chief Executive Officer
of TMG.
Results for the six months ended December 31, 2022
(six month transition period) compared to six months ended
December 31, 2021:
|
Six months
ended
|
|
|
|
|
|
December
31,
|
|
Change
|
|
2022
|
|
2021
|
|
$
|
|
%
|
|
(in
thousands)
|
Revenues
|
$
187,910
|
|
$
15,343
|
|
$
172,567
|
|
1125 %
|
Net Loss
|
$
(9,580)
|
|
$
(6,249)
|
|
$
(3,331)
|
|
53 %
|
EBITDA
|
$
1,038
|
|
$
(5,744)
|
|
$
6,782
|
|
118 %
|
Adjusted
EBITDA
|
$
4,950
|
|
$
(4,587)
|
|
$
9,537
|
|
208 %
|
Financial Results for TMG
The results of operations for the six months ended
December 31, 2022, have been fundamentally powered by the
Converge acquisition, which resulted in diversifying the Company's
revenue streams and created efficiencies recognized by integrating
the acquired businesses.
Revenues for the six months ended December 31, 2022,
increased $172.6 million, or 1125%,
to $187.9 million as compared with
the prior year period. The increase in revenue was directly
attributable to the Converge business, which accounted for
approximately $180.3 million,
or 96%, of the Company's total revenue for the six months
ended December 31, 2022. The incremental revenue to the
business was comprised of performance solutions revenue of
$75.7 million, or 40%, and managed
services revenue of $104.6 million or
56%.
"The acquisition of Converge continues to provide
transformational changes for the Company. The revenue contributed
by these new revenue streams totaled approximately $270.6 million since its acquisition in
March 2022, a period of 285 days.
Further, we are pleased by the continued growth in revenue that is
derived from our owned and operated internal brands, which
justifies our continued investment in this enterprise strategy,"
said Erica Naidrich, CFO of TMG.
Selling, general, and administrative costs increased during the
transition period by $8.6 million, or
61%, to $22.7 million when compared
to the prior year period. This increase was primarily attributable
to an increase in employee related costs of approximately
$5.3 million, an increase of
approximately $1.5 million in office
and occupancy costs, an increase in professional fees of
approximately $1.4 million, an
increase of approximately $0.2
million in travel and entertainment costs, and an increase
of approximately $0.2 million in
other costs.
Employee related costs increased due to the addition of the 80+
headcount acquired with Converge, which added $5.8 million. This increase was offset by the
reduction in salaries and other employee related costs as a result
of the discontinuation of certain subsidiary operations as part of
the Company's restructuring efforts. The combined employee related
costs from the legacy Troika entities totaled $10.4 million during the six months ended
December 31, 2022, which reflects a
5% decrease compared to the prior year period. The decrease
is due to reduction in headcount from company lay-offs due to
restructuring activities.
The increased professional fees were largely driven by the
accounting and audit fees incurred during the six month transition
period. Due to the change in year-end date, the Company incurred
higher audit fees than in a normal six month period. Additional
professional fees, mainly legal fees, were incurred from newly
engaged firms to help the Company with various debt and equity
financing matters.
TMG's Adjusted EBITDA for the six months ended December 31,
2022, increased $9.5 million to
approximately $5.0 million as
compared to the prior year period. This increase was driven by the
increase in revenues and gross margin attributable to the managed
services and performance solutions revenue streams associated with
the Converge acquisition. These increases were offset by several
one-time costs incurred as a result of the ongoing restructuring
and transformational efforts by management as well as non-cash
charges.
The Company has made expeditious restructuring decisions in
order to focus on business initiatives that will drive growth to
ensure that the Company is well positioned to achieve value for our
shareholders.
These offsetting amounts contained several non-recurring and
non-cash costs including restructuring and other related charges
totaling $6.9 million, gain on fair
value of warrant derivative liabilities related to the Series E
Preferred Stock of $20.0 million,
foreign currency exchange losses of $0.9
million, $2.7 million in
non-cash stock compensation expense (which are reflected in
selling, general and administrative expenses), and loss
contingencies on equity issuance of $3.4
million.
The Company has historically recognized the fluctuation in the
fair value of the derivatives liabilities at each reporting period
in the Statement of Operations. The conversion of the derivative
liabilities to "Equity" classification will result in no future
impact on the Statements of Operations from the fluctuation in the
fair value of the derivatives liabilities.
About Troika Media Group
TMG is a consumer engagement and customer acquisition consulting
and solutions group based in New
York and Los Angeles. We
deliver resilient brand equity, amplifying brands through emerging
technology to deliver performance driven business growth. TMG's
expertise is in large consumer sectors including Insurance,
Financial Services, Home Improvement, Residential Services, Legal,
Professional Services, Media and Entertainment. For more
information, visit www.thetmgrp.com.
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, amortization and impairments of property and
equipment, goodwill and other intangible assets, (ii) interest
expense, and (iii) tax expense.
We define Adjusted EBITDA as EBITDA before (i) share-based
compensation expense or benefit, (ii) restructuring charges or
credits, (iii) restructuring charges or credits, (iv) gains or
losses on sales or dispositions of businesses and associated
settlements, and (v) 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 6 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 include, without limitation, statements about future
growth and growth rates and other information regarding future
performance and strategies and appear throughout this press
release. These forward-looking statements include, without
limitation, statements about future growth and growth rates and
other information regarding future performance and strategies and
appear throughout this press release. Investors are cautioned that
any such forward-looking statements are not guarantees of future
performance or results and involve risks and uncertainties, and
that actual results, developments or events may differ materially
from those in the forward-looking statements as a result of various
factors, including financial community perceptions of the Company
and its business, operations, financial condition and the
industries in which it operates, the impact of the COVID-19
pandemic and the factors described in the Company's filings with
the Securities and Exchange Commission, including the sections
titled "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's
Annual Report on Form 10-K in the Company's Annual Report on Form
10-K. The Company disclaims any obligation to update any
forward-looking statements contained herein. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which reflect management's opinions only as of the date
hereof.
Investor Relations Contact:
Sid Toama
President and Chief Executive Officer
Troika Media Group, Inc.
(323) 297-8100
|
Six Months
Ended
|
|
December 31,
2022
|
|
December 31,
2021
|
|
|
|
|
Revenue
|
$
187,910,491
|
|
$
15,343,000
|
Cost of
revenue
|
162,250,051
|
|
8,420,000
|
Gross
margin
|
25,660,440
|
|
6,923,000
|
Operating
expenses:
|
|
|
|
Selling, general and
administrative expenses
|
22,658,206
|
|
14,097,000
|
Depreciation and
amortization
|
4,423,831
|
|
401,000
|
Restructuring and
other related charges
|
6,868,066
|
|
—
|
Impairment and other
losses (gains), net
|
11,066,341
|
|
—
|
Total operating
expenses
|
45,016,444
|
|
14,498,000
|
Operating
loss
|
$
(19,356,004)
|
|
$
(7,575,000)
|
|
|
|
|
Other income
(expense):
|
|
|
|
Loss contingency on
equity issuance
|
(3,385,000)
|
|
—
|
Interest
expense
|
(6,174,849)
|
|
(47,000)
|
Foreign exchange
loss
|
(944,417)
|
|
(26,000)
|
Gain on change in fair
value of derivative liabilities
|
20,004,367
|
|
12,000
|
Net gain on sale of
subsidiary
|
82,894
|
|
—
|
Other income,
net
|
212,386
|
|
1,444,000
|
Total other income
(expense)
|
$
9,795,381
|
|
$
1,383,000
|
|
|
|
|
Loss from operations
before income taxes
|
(9,560,623)
|
|
(6,192,000)
|
Income tax
expense
|
(19,122)
|
|
(57,000)
|
Net loss
|
$
(9,579,745)
|
|
$
(6,249,000)
|
Foreign currency
translation adjustment
|
955,438
|
|
32,000
|
Comprehensive
loss
|
$
(8,624,307)
|
|
$
(6,217,000)
|
|
|
|
Six Months
Ended
|
|
December 31,
2022
|
|
December 31,
2021
|
Net
Loss
|
$
(9,579,745)
|
|
$
(6,249,000)
|
Interest
expense
|
6,174,849
|
|
47,000
|
Income tax
expense
|
19,122
|
|
57,000
|
Depreciation and
amortization
|
4,423,831
|
|
401,000
|
EBITDA
|
$
1,038,057
|
|
$
(5,744,000)
|
Impairment and other
losses (gains), net
|
11,066,341
|
|
(1,448,000)
|
Business Acquisition
Costs included in SG&A
|
—
|
|
517,000
|
Restructuring and
other related charges
|
6,868,066
|
|
—
|
Share based
compensation
|
2,680,081
|
|
2,100,000
|
Loss contingency on
equity issuance
|
3,385,000
|
|
—
|
Net gain on sale of
subsidiary
|
(82,894)
|
|
—
|
(Gain) loss on
derivative liabilities
|
(20,004,367)
|
|
(12,000)
|
Adjusted
EBITDA
|
$
4,950,284
|
|
$
(4,587,000)
|
|
|
|
|
|
|
|
|
The following is a description of the adjustments to net 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.
- Business acquisition costs. This adjustment eliminates costs
related to acquisitions in all periods.
- Restructuring charges. This adjustment eliminates costs related
to termination benefits provided to employees as part of the
Company's full-time workforce reductions
- Share based compensation. This adjustment eliminates the
compensation expense relating to restricted stock units and stock
options granted under the Troika Media Group Stock Plan.
- Loss Contingency on Equity Issuance related to Series E
PIPE
- Net gain on sale of subsidiary
- (Gain) loss on derivative liabilities related to the Series E
PIPE
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SOURCE Troika Media Group, Inc.