Revenue increased 57.1% quarter-over-quarter to $6.99 million
Company expects to continue strong revenue growth in FY 2022
LOS ANGELES, CA – 
Second Quarter and Year-to-Date Financial and Operational Highlights
- Revenue increased 57.1% to $6.99 million in Q2 2022, compared to the prior year quarter
- Adjusted EBITDA was $(1.95) million in Q2 2022, compared $0.8 million to the prior year quarter
- Revenue increased 78.76% to $15.34 million for the first six months of FY 2022
- Accelerating expansion in fast growing gaming and Esports market
- Business mix and client spend shifting to faster growth areas: Experiential, Consumer and Technology
- New client growth accelerating
- Demand for client services across brands continues momentum in Q3 2022 with pipeline growing
Growth in Client Activity First Half FY 2022
Troika has made significant progress in deepening existing relationships and winning new accounts. First half 2022 was another strong period for significant expanded assignments with existing clients including: LA Rams, SoFi, UFC, ESPN, HBO, Yahoo, Netflix, Victoria’s Secret, CNN, Riot Games, Ubisoft, Big Ten Network, Pac-12 Networks, Bobbi Brown Cosmetics and Coca-Cola. New client wins included: CNBC, PointsBet, Viacom, San Diego Wave FC, Unimas, ESL, VSPN, Greenpark Sports, LASEC Super Bowl Host Committee, F 45 Fitness, La Mer, Coffee Bean and Wilson Sporting Goods.
Management Commentary
“Our second-quarter performance closes out a strong first half of the fiscal year with robust organic revenue growth of 57%,” said Robert Machinist, Troika’s Chairman and CEO. “We have now reported revenue growth in excess of 78% for the first six months of fiscal year 2022 as compared to the same period in 2021, and with the actions we have taken over the last two years, we are even better positioned for growth. Our formula for success firmly resides with the efforts of our people across Troika, working together to deliver the best client outcomes in a rapidly evolving market. During the second quarter, all of Troika’s business units generated significant new client mandates and we hired aggressively to stay ahead of strong revenue growth year-to-date. We believe our staffing has been optimized to successfully service our expected revenue growth for the remainder of fiscal year 2022. Based on our performance year-to-date, we are optimistic about the outlook for the second half of 2022 and expect to continue to build on our strong client demand, clear strategic direction and improved financial performance to enhance value creation for our shareholders.”
Machinist added, “We believe the demand for digital marketing transformation, involving the sales, marketing and information technology functions in client organizations, will accelerate. We continue to review significant new growth opportunities that would create a stronger organization during the remainder of fiscal year 2022 across all practices in order to help our clients grow their brands and build their businesses.”
Q 2 Fiscal 2022 Summary Results (GAAP)
Revenues for the three months ended December 31, 2021 and 2020 were $6.99 million and $4.45 million, respectively, an increase of approximately $2.54 million or 57.1%. This increase is primarily due to Troika Design recognizing $1.6 million in additional revenue in comparison to the prior period as a result of the generation of new business and increased new business from the UK and US subsidiaries of Mission-Media Holdings Limited.
Operating costs for the three months ended December 31, 2021 and 2020 were $7.49 million and $4.52 respectively, an increase of $2.97 or 65.8%. The primary driver of this increase was an increase of $2.53 million in cost of personnel to service new business wins.
The Company recognized a $1.7 million reduction in gains from the extinguishment of stimulus loans in other expenses in the three months ending December 31, 2021 as compared to the three months ending December 31, 2020. The loans were awarded as a result of the pandemic and the funds were recognized in the prior period as expensed.
Net loss for the three months ended December 31, 2021 increased to $4.11 million from $623,000 for the three months ended December 31, 2020.
Q2 Fiscal 2022 Summary Results (Non-GAAP)*
| Three Months Ended December 31, |
||||||||
| Un-Audited | 2021 | 2020 | ||||||
| Un-Audited | Un-Audited | |||||||
| Net Operating Loss | $ | (4,110,000 | ) | $ | (623,000 | ) | ||
| * Unrealized gains or losses – Rent Abatement | 39,000 | – | ||||||
| * Non-cash expenses (Depreciation, amortization of intangibles & amortization of note payable discount) | 199,000 | 961,000 | ||||||
| * Interest expense | 34,000 | 42,000 | ||||||
| * Losses on foreign exchange | 10,000 | – | ||||||
| * Stock-based compensation non-cash expense | 1,071,000 | 320,000 | ||||||
| * Acquisition costs | 517,000 | – | ||||||
| * Consulting services (non-recurring) | 204,000 | – | ||||||
| * Software implementation (non-recurring) | 45,000 | – | ||||||
| * Legal costs | 44,000 | 105,000 | ||||||
| Adjusted EBITDA | $ | (1,947,000 | ) | $ | 805,000 | |||
* Please refer to “Non-GAAP Financial Measures” below for a description of these measures
Definitions
Free Cash Flow is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment.
Common shares outstanding plus shares underlying stock-based awards includes common shares outstanding, restricted stock units, restricted stock awards, warrants and outstanding stock options.
Adjusted EBITDA is defined as net income (loss), excluding interest income; interest expense; other income (expense) net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and other payroll related tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time.
Note: For adjustments and additional information regarding the non-GAAP financial measures and other items discussed, please see “Non-GAAP Financial Measures,” “Reconciliation of GAAP to Non-GAAP Financial Measures.”
About Troika Group
Troika Media Group is an end-to-end brand solutions company that creates both near-term and long-term value for global brands in entertainment, sports and consumer products. Applying emerging technology, data science, and world-class creative, Troika Media Group helps brands deepen engagement with audiences and fans throughout the consumer journey and builds brand equity. Clients include Apple, Hulu, Riot Games, Belvedere Vodka, Unilever, UFC, Peloton, CNN, HBO, ESPN, Wynn Resorts and Casinos, Tiffany & Co., IMAX, Netflix, Sony, Yahoo and Coca-Cola. For more information, visit www.troikamediagroup.com
Forward-Looking Statements
Certain statements in this press release that are not historical facts are forward-looking statements that reflect management’s current expectations, assumptions, and estimates of future performance and economic conditions, and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “believe,” “expects,” “may,” “looks to,” “will,” “should,” “plan,” “intend,” “on condition,” “target,” “see,” “potential,” “estimates,” “preliminary,” or “anticipates” or the negative thereof or comparable terminology, or by discussion of strategy or goals or other future events, circumstances, or effects. Moreover, forward-looking statements in this release include, but are not limited to, the impact of the current COVID-19 pandemic, which may limit access to the Company’s facilities, customers, management, support staff, and professional advisors, and to develop and deliver advanced voice and data communications systems, demand for the Company’s products and services, economic conditions in the U.S. and worldwide, and the Company’s ability to recruit and retain management, technical, and sales personnel. Further information relating to factors that may impact the Company’s results and forward-looking statements are disclosed in the Company’s filings with the SEC. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company disclaims any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use the non-GAAP financial measure of Free Cash Flow, which is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment. We believe Free Cash Flow is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business and is a key financial indicator used by management. Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.
We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and other payroll related tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.
We use the non-GAAP financial measure of non-GAAP net loss, which is defined as net income (loss); excluding amortization of intangible assets; stock-based compensation expense and other payroll related tax expense; certain other non-cash or non-recurring items impacting net income (loss) from time to time; and related income tax adjustments. Non-GAAP net loss and weighted average diluted shares are then used to calculate non-GAAP diluted net loss per share. Similar to Adjusted EBITDA, we believe these measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses we exclude in the measure.
We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP measures to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
| Troika Media Group, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| December 31, | June 30, | |||||||
| ASSETS | 2021 | 2021 | ||||||
| Current assets: | (Unaudited) | |||||||
| Cash and cash equivalents | $ | 5,982,000 | $ | 12,066,000 | ||||
| Accounts receivable, net | 1,241,000 | 1,327,000 | ||||||
| Prepaid expenses | 232,000 | 670,000 | ||||||
| Other assets – short term portion | 65,000 | 1,000 | ||||||
| Total current assets | 7,520,000 | 14,064,000 | ||||||
| Other assets -long term portion | 629,000 | 626,000 | ||||||
| Property and equipment, net | 374,000 | 343,000 | ||||||
| Operating lease right-of-use assets | 6,356,000 | 6,887,000 | ||||||
| Intangible assets, net | 2,259,000 | 2,603,000 | ||||||
| Goodwill | 19,368,000 | 19,368,000 | ||||||
| Total assets | $ | 36,506,000 | $ | 43,891,000 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 6,549,000 | $ | 8,363,000 | ||||
| Convertible notes payable | 50,000 | 50,000 | ||||||
| Note payable – related party – short term portion | 150,000 | 200,000 | ||||||
| Due to related parties | 7,000 | 41,000 | ||||||
| Contract liabilities | 5,826,000 | 5,973,000 | ||||||
| Operating lease liability – short term portion | 3,109,000 | 3,344,000 | ||||||
| Derivative liabilities | 1,000 | 13,000 | ||||||
| Taxes payable | 58,000 | 62,000 | ||||||
| Stimulus loan programs- short term portion | 19,000 | 22,000 | ||||||
| Total current liabilities | 15,769,000 | 18,068,000 | ||||||
| Long term liabilities: | ||||||||
| Operating lease liability – long term portion | 5,341,000 | 5,835,000 | ||||||
| Stimulus loan programs – long term portion | 418,000 | 547,000 | ||||||
| Rental deposits | 119,000 | 119,000 | ||||||
| Other long-term liabilities | 140,000 | 477,000 | ||||||
| Liabilities of discontinued operations – long term portion | 107,000 | 107,000 | ||||||
| Total liabilities | 21,894,000 | 25,153,000 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value: 15,000,000 shares authorized | ||||||||
| Series A Preferred Stock ($0.01 par value: 5,000,000 shares authorized, 720,000 shares issued and outstanding as of December 31, 2021 and June 30, 2021) | 7,000 | 7,000 | ||||||
| Common stock, ($0.001 par value: 300,000,000 shares authorized; 43,659,616 and 39,496,588 shares issued and outstanding as of December 31, 2021 and June 30, 2021, respectively) | 44,000 | 40,000 | ||||||
| Additional paid-in-capital | 208,085,000 | 204,788,000 | ||||||
| Stock payable | – | 1,210,000 | ||||||
| Accumulated deficit | (193,138,000 | ) | (186,889,000 | ) | ||||
| Other Comprehensive Loss | (386,000 | ) | (418,000 | ) | ||||
| Total stockholders’ equity | 14,612,000 | 18,738,000 | ||||||
| Total liabilities and stockholders’ equity | $ | 36,506,000 | $ | 43,891,000 | ||||
| Troika Media Group, Inc. and Subsidiaries | ||||||||||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Loss | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, |
Six Months Ended December 31, |
|||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Project revenues, net | $ | 6,994,000 | $ | 4,451,000 | $ | 15,343,000 | $ | 8,583,000 | ||||||||
| Cost of revenues | 3,583,000 | 2,139,000 | 8,420,000 | 4,419,000 | ||||||||||||
| Gross profit | 3,411,000 | 2,312,000 | 6,923,000 | 4,164,000 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 6,994,000 | 3,601,000 | 13,229,000 | 8,051,000 | ||||||||||||
| Professional fees | 300,000 | 350,000 | 868,000 | 1,138,000 | ||||||||||||
| Depreciation expense | 28,000 | 30,000 | 58,000 | 61,000 | ||||||||||||
| Amortization expense of intangibles | 171,000 | 539,000 | 343,000 | 1,079,000 | ||||||||||||
| Total operating expenses | 7,493,000 | 4,520,000 | 14,498,000 | 10,329,000 | ||||||||||||
| Loss from operations | (4,082,000 | ) | (2,208,000 | ) | (7,575,000 | ) | (6,165,000 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Income from government grants | – | 1,704,000 | 262,000 | 1,704,000 | ||||||||||||
| Amortization expense of note payable discount | – | (392,000 | ) | – | (409,000 | ) | ||||||||||
| Interest expense | (34,000 | ) | (42,000 | ) | (47,000 | ) | (46,000 | ) | ||||||||
| Foreign exchange gain | (10,000 | ) | 10,000 | (26,000 | ) | (37,000 | ) | |||||||||
| Gain on early termination of operating lease | – | – | (3,000 | ) | – | |||||||||||
| Gain on derivative liabilities | – | 23,000 | 12,000 | – | ||||||||||||
| Other income | 73,000 | 129,000 | 1,185,000 | 256,000 | ||||||||||||
| Other expenses | – | 153,000 | – | 153,000 | ||||||||||||
| Total other income (expense) | 29,000 | 1,585,000 | 1,383,000 | 1,621,000 | ||||||||||||
| Net loss from continuing operations before income tax | (4,053,000 | ) | (623,000 | ) | (6,192,000 | ) | (4,544,000 | ) | ||||||||
| Provision for income tax | (57,000 | ) | – | (57,000 | ) | – | ||||||||||
| Net loss attributable to common stockholders | $ | (4,110,000 | ) | $ | (623,000 | ) | $ | (6,249,000 | ) | $ | (4,544,000 | ) | ||||
| Foreign currency translation adjustment | 1,000 | (406,000 | ) | 32,000 | (499,000 | ) | ||||||||||
| Comprehensive loss | $ | (4,109,000 | ) | $ | (1,029,000 | ) | $ | (6,217,000 | ) | $ | (5,043,000 | ) | ||||
| Basic earnings (loss) per share | ||||||||||||||||
| Net loss attributable to common stockholders | $ | (0.09 | ) | $ | (0.04 | ) | $ | (0.15 | ) | $ | (0.26 | ) | ||||
| Weighted average basic shares | 43,600,019 | 17,687,179 | 42,517,201 | 17,589,581 | ||||||||||||
| Troika Media Group, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (Unaudited) | ||||||||
| Six Months Ended December 31, |
||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (6,249,000 | ) | $ | (4,544,000 | ) | ||
| Depreciation | 58,000 | 61,000 | ||||||
| Amortization of intangibles | 343,000 | 1,079,000 | ||||||
| Amortization of discount on convertible note payables | – | 409,000 | ||||||
| Stock-based compensation on options | 213,000 | 429,000 | ||||||
| Stock-based compensation on warrants | 124,000 | 455,000 | ||||||
| Stock-based compensation relating to Redeem acquisition | 1,610,000 | 7,000 | ||||||
| Issuance of common stock related to employees | 104,000 | – | ||||||
| Issuance of common stock to contractors for services | 40,000 | – | ||||||
| Gain on early termination of operating lease | 3,000 | – | ||||||
| Loss on derivative liabilities | (12,000 | ) | – | |||||
| Income from government grants | – | (1,704,000 | ) | |||||
| (Recovery) and provision for bad debt | (67,000 | ) | (136,000 | ) | ||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | 153,000 | (1,622,000 | ) | |||||
| Prepaid expenses | 438,000 | (3,000 | ) | |||||
| Accounts payable and accrued expenses | (1,814,000 | ) | 1,709,000 | |||||
| Other assets | (67,000 | ) | 15,000 | |||||
| Operating lease liability | (201,000 | ) | 586,000 | |||||
| Due to related parties | (34,000 | ) | – | |||||
| Other long-term liabilities | (337,000 | ) | – | |||||
| Taxes payable | (4,000 | ) | – | |||||
| Contract liabilities relating to revenue | 123,000 | 3,570,000 | ||||||
| Contract liabilities to government grants | (402,000 | ) | (1,704,000 | ) | ||||
| Net cash used in operating activities | (5,978,000 | ) | (1,393,000 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | (93,000 | ) | (19,000 | ) | ||||
| Net cash used in investing activities | (93,000 | ) | (19,000 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from stimulus loan programs | – | 565,000 | ||||||
| Payments to note payable of related party | (50,000 | ) | – | |||||
| Proceeds from convertible note payable | – | 500,000 | ||||||
| Net cash provided by financing activities | (50,000 | ) | 1,065,000 | |||||
| Effect of exchange rate on cash | 37,000 | (287,000 | ) | |||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $ | (6,084,000 | ) | $ | (634,000 | ) | ||
| CASH AND CASH EQUIVALENTS — beginning of period | 12,066,000 | 1,706,000 | ||||||
| CASH AND CASH EQUIVALENTS — end of period | $ | 5,982,000 | $ | 1,072,000 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | – | $ | – | ||||
| Interest expense | $ | 3,000 | $ | – | ||||
| Noncash investing and financing activities: | ||||||||
| Beneficial conversion features on convertible promissory notes | $ | – | $ | 144,000 | ||||
| Record derivative liability on convertible notes | $ | – | $ | 98,000 | ||||
| Warrants granted for convertible promissory note | $ | – | $ | 12,000 | ||||
| Shares to be issued for convertible promissory note | $ | – | $ | 156,000 | ||||
| Issuance of common stock related to stock payable | $ | – | $ | 1,300,000 | ||||
| Issuance of common stock related to stock payable | $ | 104,000 | $ | – | ||||
| Issuance of common stock to contractors for services | $ | 40,000 | $ | – | ||||
| Conversion of convertible note payable | $ | – | $ | 1,400,000 | ||||
| Right-of-use assets acquired through adoption of ASC 842 | $ | – | $ | 8,931,000 | ||||
| Right-of-use assets acquired through operating leases | $ | 467,000 | $ | 2,398,000 | ||||
Contact:
Investor Relations
TraDigital IR
Kevin McGrath
+1-646-418-7002
kevin@tradigitalir.com