Chicken Soup for the Soul Entertainment, whose $375 million acquisition of Redbox closed about a year ago, delivered second-quarter financial results reflecting the company’s struggle to fully digest the deal.
Citing a host of industry headwinds that have intensified since the transaction was completed, the company reported total revenue of $79.9 million in the quarter ending June 30. While that was more than twice the year-earlier figure of $37.6 million thanks to the addition of Redbox and its thousands of movie-rental kiosks, it fell well short of Wall Street analysts’ consensus expectation for $120.1 million.
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Net losses came in a little ahead of the Street’s outlook, widening to $1.50 per share from $1.39 in the year-ago quarter but topping analysts’ -$1.72 outlook.
In a conference call with analysts to discuss the quarterly numbers, CEO Bill Rouhana and CFO Jason Meier said the company has intensified its efforts to cut costs and generate more near-term free cash flow. Plans are in place to generate about $15 million of incremental cash flow savings from “streamlining of our digital and distribution businesses,” Meier said, and creating a centralized organization. About $30 million in licensing deals, meanwhile, were turned away during the quarter because they would have generated profits in the long term but not cash flow in the near term, Rouhana said.
In after-hours trading, already-battered shares of Chicken Soup took another drubbing, falling 18% to 88 cents. They began 2023 trading at $5.26.
As the effort to get the enlarged company on a surer financial footing continues, Rouhana said a committee consisting of independent members of the board of directors has been formed to evaluate various specific options. In recent months, the company has received “incoming requests from financial and strategic partners,” the CEO said, without elaborating. The committee will “pursue all transactions that check all the boxes in creating value for our shareholders. This is clearly not reflected in our stock price.”
Despite the overall turbulence, the quarter also saw the release of Super Mario Bros. on Redbox, with the Universal/Illumination smash claiming the crown of the year’s top home entertainment title.
Another development in the spring quarter sets Chicken Soup apart from many of its streaming peers, which is the onset of the first dual strikes to hit Hollywood in decades. The WGA and SAG-AFTRA walkouts are increasing demand for library titles, Rouhana said, and give the various parts of the overall business a chance to prove their mettle as rivals lack key programming. “The longer the strike continues, the more valuable the library becomes,” Rouhana said. The company’s 1091 distribution unit, acquired for $15.6 million last year, releases between 25 and 35 titles per month and provides “attractive cash flows, and we’re focused on making sure that continues to grow.”
A months-long extension of both strikes, of course, would also threaten the studio theatrical pipeline. That scenario poses a threat to a number of businesses dependent upon Hollywood movie output, including Redbox.
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