Grew Underlying Revenues for First Time as a Consolidated Company; up 3.1% Year Over Year
Improves Underlying Free Cash Flow $14.7M Year Over Year; Targets Positive Free Cash Flow in 2016
Transformation Progressing Solidly; Positive Trends and Incremental Gains Targeted for 2016
TORONTO, Thursday, March 10, 2016 – Mood Media Corporation (“Mood Media,” “Mood” or “the Company”) (ISIN: CA61534J1057) (TSX:MM), the world’s largest integrated provider of in-store customer experience solutions, today reported results for its 2015 fiscal year and provided an update on the Company’s progress executing against its strategic and operational plans.
Recent Highlights
- In 2015, Mood achieved revenues of $475.1 million and EBITDA of $98.4 million, in line with its most recent guidance.
- 2015 EBITDA of $98.4 million was essentially flat year over year or -0.6% on an underlying basis (excluding the impact of foreign exchange and asset disposals).
- 2015 revenues of $475.1 million increased by 3.1% year over year, as reflected on an underlying basis. Mood achieved underlying revenue gains for the first time as a consolidated entity.Underlying rendering of services revenues increased 1.5% year over year, sale of goods revenues increased 6.7% year over year, and royalty revenues increased 6.0% year over year.
- Mood’s revenue enhancement initiatives are trending positively, evidenced by the improvements in each of the above revenue categories, which were driven by higher equipment, installation and service activities, coupled with a moderated pace of decline in underlying recurring subscriber revenues.
- The Company’s 2016 global transformation, integration and consolidation initiatives are at or above target, with Mood expected to deliver incremental annualized efficiencies of $3-$4 million from Wave 5 of its integration and synergy program. That will raise the total annualized transformation savings delivered since the program began to $24 million in just two plus years.
- Mood’s 2016 EBITDA is expected to be flat relative to 2015, with potential for end of year growth. Higher revenues related to equipment, service and installation activities, and continuing gains from its cost transformation activities, are expected to be largely offset by margin erosion from lower recurring subscriber revenues and by ongoing investments in sales and business development activities, though the pace of decline in recurring revenues is expected to be further moderated year over year.
- Mood expects to deliver positive Free Cash Flow in 2016, driven by reduced capital expenditures to a range of $28-$30 million, or down approximately 25%, which contemplates a strategically focused dedication of capital expenditure and investment dollars in 2016 toward sales, product and business development activities, along with incremental operating and working capital improvements.
“The two years of transformation activity at Mood are showing positive gains as evidenced by higher underlying revenues, stabilized EBITDA and improved free cash flow in 2015,” said Steve Richards, President and CEO of Mood Media. “We have materially arrested the declines experienced by the business in 2012 and 2013 achieving positive momentum in many key financial and operational metrics. In 2015, Mood underlying revenues grew 3.1% over 2014, marking the first time Mood achieved revenue growth as a Company with its present collection of assets.”
“With a significantly improved operational foundation, we are now accelerating Mood’s sales and business development activities in 2016, with incremental investments in talent and solutions to benefit Mood in 2016 and beyond. We continue to achieve efficiency improvements via our Wave consolidation programs, with cumulative annualized savings since we began of more than $24 million, including an expected $3-$4 million from 2016 initiatives. Our process improvements have produced a leaner operating cost structure, and have enhanced Mood’s capabilities as a far more effective, customer oriented organization that is increasing its wins in the Experience Design marketplace.
“We’ve laid the groundwork for further improvements in 2016. We expect to generate positive free cash flow even after our incremental investments in business development, and expect stable EBITDA year over year. We will significantly reduce capital spending in 2016 by 25%, reflecting fewer infrastructure investments as we emphasize greater sales, product and business development initiatives. We will also benefit from increasing working capital and tax efficiencies we’ve accomplished since beginning our efforts two years ago.
“The transformation of Mood is well underway. We expect 2016 to be a year of further operational gains, as we augment Mood’s capabilities as the global leader for Experience Design solutions,” Richards concluded.
2015 Financial Results
The Company reported 2015 revenues of $475.1 million and EBITDA of $98.4 million. Reported revenues in 2015 declined by $18.9 million relative to the prior year. The decrease was related primarily to the negative impact of foreign exchange translation which produced a $30.8 million negative impact to revenues in 2015. Assets disposed in mid-2014 represented an additional $2.2 million negative variance to revenues. On an underlying basis, 2015 revenues rose by $14.1 million or 3.1% relative to the prior year with rendering of services, sale of goods and royalties revenues each rising relative to prior year. In 2015, the Company’s rendering of services revenues rose by 1.5% year over year with growth in its equipment, installation and service revenues and a 4.0% year over year decline in recurring subscriber revenues. The 2015 revenue performance was the strongest by Mood in its current consolidated form, and reflects the benefits of its revenue enhancement initiatives that include the firm’s Local sales rebuild efforts, partnership deployments, Visual cross and up-sell activities, and enhanced service delivery.
2015 reported gross margin was $245.2 million, for a decline of $21.0 million relative to the prior year. The decrease was driven by a $17.5 million negative variance related to foreign exchange translation, a $0.9 million negative variance related to 2014 asset disposals and $2.6 million (1.1%) negative variance related to underlying operations.
The Company’s reported operating expenses were $146.8 million, for a decline of $16.8 million in 2015 relative to the prior year, of which $14.8 million was related to the impact of foreign exchange and $2.0 million (1.4%) was related to underlying operations, reflecting continued gains from its integration and synergy activities, which were offset to some degree by investments in sales and business development efforts.
Mood’s EBITDA in 2015 declined by only $0.6 million relative to the prior year, on an underlying basis. Additionally, reported EBITDA was negatively affected by $2.7 million related to foreign exchange and $0.9 million related to mid 2014 asset disposals.
Other Expenses totaled $10.3 million in 2015 compared with $28.2 million in the prior year. Other Expenses in 2015 consisted primarily of severance costs, information technology integration, relocation expenses, real estate consolidations, rebranding and other integration and transition costs. These restructuring and integration activities are a result of integrating various businesses, given previous acquisitions.
Net loss per share for 2015 was ($0.44) compared with a net loss per share of ($0.46) in the prior year. The 2015 net loss included a $25 million ($0.14 per share) impairment charge on the goodwill allocated to Mood International. Influences on net loss in 2015 include the negative impact of foreign exchange which resulted in a $2.7 million reduction to EBITDA, 2014 asset disposals which reduced reported EBITDA by $0.9 million, lower underlying EBITDA results which reduced EBITDA by $0.6 million, lower other expenses and lower finance costs.