Gail Chiasson, North American Editor
RMG Networks Holding Corporation, or RMG Networks, a major provider of Digital Out-of-Home Advertising Media and Digital Signage technology, announced its results for the second quarter ended June 30, 2013, announcing total Q2 revenues of $18.9 million, an increase of 14% from $16.6 million in the second quarter of 2012.
While Symon Communications and RMG usually reported Q2 results ending at different periods (one at July 31and the other at June 30), since RMG has now acquired Symon, it was decided that now and in future, financial reports would go by the calendar year, with Q2 thereby ending on June 30. The figures reported today were compared to the combined both companies in 2012.
Of the earlier mentioned Q2 2012 revenue, it included in 2012 revenue was $1.1 million of non-recurring software development revenue. Excluding this revenue from the prior period, second quarter 2013 revenue increased 22%.
We sat in on the conference call where Garry McGuire, CEO, and Bill Cole, CFO, gave detailed information that included:
- Advertising revenue of $6.9 million increased 23% from $5.6 million in second quarter 2012 due to increased demand from advertisers embracing video ad platforms;
- Product sales revenue of $5.3 million increased 35% from $3.9 million Q2 2012 due to increasing demand from businesses looking to utilize digital signage in their workplace;
- Maintenance and content services revenue of $4.1 million remained relatively flat from $4.2 million in Q2 2012;
- Professional services revenue of $2.6 million decreased 9% from $2.8 million in second quarter 2012.
Operating loss was $4.5 million compared to operating income of $0.9 million in the second quarter of 2012. This decrease is attributable to: lower gross margin as a percentage of sales in the current year period, resulting from lower sales of our high margin proprietary software; the inclusion of $4.0 million in acquisition-related costs in the quarter; increases in sales and marketing expenses as the company invests in new sales and marketing staff to support our growth initiatives, and higher R&D expense.
Adjusted EBITDA was $0.8 million compared to $1.7 million in the second quarter of 2012; the decrease was driven by the change in product mix and the sales and marketing investments, as mentioned above.
Over the past quarter, RMG Networks has completed the following actions:
- Acquired and substantially integrated Symon Communications, creating a market leader in digital signage visual communications solutions for advertising and enterprise applications;
- Combined and reorganized these management teams, creating a public-company and growth-ready executive team and corporate infrastructure;
- Laid groundwork for international expansion by establishing presence in SE Asia and Latin;
- Pro forma combined total and core revenues increased 14% and 22%, respectively, from Q2 2012
- Completed, on August 2, 2013, a $40 million follow-on offering of common stock to repay debt, fund growth initiatives and fund strategic acquisitions.
McGuire said, “During the quarter, RMG acquired and integrated a significant acquisition, creating a market leader that is taking advantage of the explosive growth in digital video and the shift from traditional media to digital media. We also completed a $40M follow-on offering. Amid this transformation, RMG recorded, on a pro forma combined basis, strong second quarter revenue growth, demonstrating the operating performance inherent in our business units even before most of our growth initiatives have begun to hit full effectiveness.
“RMG’s second half year priorities focus on capturing cross-selling opportunities between our two divisions, adding new ad inventory and inventory partners, and expanding our geographic and vertical market presences. With our existing global footprint, our exceptional reputation with large-enterprise customers, our comprehensive and customizable solutions offerings, and our strong track record of success, our mission is to be the leader in the marketplace through organic growth, to be the consolidator of a fragmented industry, and to deliver increasing profitability.”
The company’s current balance sheet, taking into account shares, cash on hand, and more is $2 7.4 million.
RMG Networks anticipates 2013 revenue to be in the range of $76 million to $78 million compared to $68.2 million in 2012, and Adjusted EBITDA in the range of $5 million to $6 million compared to $7.5 million in 2012; the decrease in 2013 Adjusted EBITDA reflects, as the company has previously disclosed, integration costs and the company’s investment in growth initiatives. For 2014, RMG Networks is anticipating revenue in the range of $105 million to $110 million and Adjusted EBITDA in the range of $16 million to $18 million.
“These, of course, are subject to change depending on unforeseen activities,” McGuire said.
McGuire gave a detailed explanation of the company’s divisions that deliver digital signage media solutions for corporate networks, consumer networks, and advertising networks, including solutions for 70% of the Fortune 500. RMG operates an Advertising Media business unit that sells digital video advertising across a network of over 200,000 display screens, reaching 100 million consumers each month. RMG also operates an Enterprise Solutions business unit that provides digital signage data visualization solutions for a variety of application areas including contact centers, supply chain, employee communications, hospitality, higher education, financial services, healthcare and retail.
In total, MccGuire said that the company has 1 million screens, 20% used for advertising purposes, and mentioned several new users over the past year, among them Verizon and Johnson & Johnson. The mall division includes about 160 malls across the U.S.. Within the airport and airline division, he went into considerable explanation of the differences of advertising on the airlines themselves, including that while seat back advertising is used for branding, WiFi advertising usually tend to be customable and a call for action, so costs are somewhat higher .
McGuire said that considerable business expansion efforts are being made in Europe and will be made in the future in Southeast Asia, China and Latin America, (The company is headquartered in Dallas, Texas with offices in the United States, United Kingdom, China, India and the U.A.E.) He also is looking forward to further acquisitions (although strategic acquisitions were not included in today’s Q2 figures or announcements.)
Follow DailyDOOH