Frankly Reports Third Quarter and Nine Month 2019 Financial Results

NEW YORK, Nov. 29, 2019 /PRNewswire/ -- Frankly Inc. (TSX-V: TLK) (OTCQX: FRNKF) ("Frankly"), a multi-platform engagement, monetization and data company, reported financial results for the third quarter and nine months ended September 30, 2019. All financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP").

Third Quarter 2019 Financial Results (All amounts in U.S. dollars)

    --  Revenue increased 36% to $4.7 million from $3.4 million in the prior
        quarter and decreased 23% from $6.0 million in the third quarter of
        2018. The sequential increase in revenue consisted of an increase in
        license fees of approximately $828,000, advertising fees of $369,000,
        and professional services and other fees of $29,000, which was minorly
        offset by a decrease in usage fees of approximately $6,000. The increase
        was partially due to the acquisitions of the AMP assets on May 10, 2019
        and Vemba assets on August 7, 2019. The year-over-year decrease in
        revenue was due to customer terminations at the end of 2018 as discussed
        in previous filings.
    --  Net loss totaled $(1.8) million compared to a net income of $12.8
        million in the prior quarter and net loss of $(14.1) million in the
        third quarter of 2018. The sequential decrease in net income was
        primarily due to a gain on extinguishment of debt of $14.7 million
        recognized in the second quarter of 2019 in connection with a debt
        settlement and share repurchase transaction with Raycom Media Inc.
        ("Raycom"), which closed on May 30, 2019. The year-over-year improvement
        in net loss was primarily attributable to an impairment expense of $12.8
        million recognized in the prior year period.
    --  Adjusted EBITDA loss totaled $(874,000) compared to adjusted EBITDA loss
        of $(1.5) million in the prior quarter and Adjusted EBITDA of $972,000
        in the third quarter of 2018 (see discussion about the presentation of
        Adjusted EBITDA under the heading "Non-GAAP Measures" below). The
        sequential increase in Adjusted EBITDA was primarily due the increase in
        revenue discussed above of $1.2 million partially offset by an increase
        in operating expenses of $554,000. The year-over-year increase in
        Adjusted EBITDA loss was primarily due to the customer terminations at
        the end of 2018 as discussed in previous filings. In addition, the
        Company capitalized software development costs in the 2018 period of
        $0.6 million compared to $0 in the 2019 period. In the third quarter of
        2018, the Company fully impaired its capitalized software development
        costs. As a result, beginning in the fourth quarter of 2018, the Company
        no longer capitalized these costs, which consisted of employee and
        contractor costs.

Nine Month 2019 Financial Results (All amounts in U.S. dollars)

    --  Revenue decreased 43% to $10.0 million from $17.6 million in the same
        period in 2018. The decrease in revenue was due to the customer
        terminations at the end of 2018 as discussed in previous filings.
    --  Net income totaled $9.1 million compared to a net loss of $(19.4)
        million in the same period in 2018. The increase in net income was
        primarily due to the previously mentioned gain on extinguishment of debt
        of $14.7 million recognized in the second quarter of 2019 in connection
        with a debt settlement and share repurchase transaction with Raycom,
        which closed on May 30, 2019 and an impairment expense of $12.8 million
        recognized in the prior year period.
    --  Adjusted EBITDA loss totaled $(4.1) million compared to adjusted EBITDA
        of $866,000 in the prior year period. The decrease in adjusted EBITDA
        was due to decrease in revenue discussed above of $7.6 million partially
        offset by a decrease in operating expenses of $2.6 million. In addition,
        the Company capitalized software development costs in the 2018 period of
        $1.9 million compared to $0 in the 2019 period. In the third quarter of
        2018, the Company fully impaired its capitalized software development
        costs. As a result, beginning in the fourth quarter of 2018, the Company
        no longer capitalized these costs, which consisted of employee and
        contractor costs.
    --  At September 30, 2019 the Company had $1.8 million in cash and cash
        equivalents.

Management Commentary
"I am pleased to see continued sequential quarter over quarter revenue growth and scale across all parts of our business as we embark on our next chapter," said Company CEO Lou Schwartz. "The investments we made in our platform, strategic acquisitions we completed earlier in the year and the speed at which we integrated personnel and technology has contributed meaningfully to our performance. We look forward to leveraging the power of our technology platform, media footprint and the scale of our audience to support the recently announced planned merger between Torque Esports Corp., Frankly and WinView, Inc. to build the first 'integrated news, gaming, sports, and esports platform' called Engine Media. We believe this strategy will enable us to deliver engaging local, national, and global content, while creating new streams of revenue for our customers and an even stronger marketing platform for advertisers."

Other Matters
The Company voluntarily de-registered its common shares with the SEC on April 1, 2019. As a "reporting issuer" in Canada that is no longer an "SEC Issuer" under Canadian securities laws by virtue of having a class of securities registered with the SEC, the applicable generally acceptable accounting principles (GAAP) for the Company's financial statements is International Financial Reporting Standards (IFRS), rather than U.S. GAAP. The Company is in the process of transitioning to IFRS to meet this requirement but until the transition is complete, the Company has continued to present and file financial information using U.S. GAAP and has submitted an application for exemptive relief with Canadian securities regulatory authorities in order to be permitted to continue to present and file financial information using U.S. GAAP up to and including the third quarter of 2019. Until the exemptive relief is granted, or, if not granted, until the Company files financial statements presented using IFRS (and if applicable, audited in accordance with Canadian generally accepted auditing standards), the Company will be noted as in default of its filing obligations. Based on discussions with the applicable regulatory authorities, the Company does not currently anticipate any trading restrictions resulting from this notation. The Company will update the market upon any material changes with respect to or resulting from the application. The presentation of financial information using U.S. GAAP is consistent with financial reporting in prior periods, and the Company does not believe the financial information presented under U.S. GAAP is materially different than it would be as presented under IFRS.

About Frankly
Frankly Media provides a complete suite of solutions that give publishers a unified workflow for the creation, management, publishing and monetization of digital content to any device, while maximizing audience value and revenue.

Frankly's products include a groundbreaking online video platform for Live, VOD and Live-to-VOD workflows, a full-featured CMS with rich storytelling capabilities, as well as native apps for iOS, Android, Apple TV, Fire TV and Roku.

Frankly also provides comprehensive advertising products and services, including direct sales and programmatic ad support. With the release of its server-side ad insertion (SSAI) platform, the company has been positioned to help video producers take full advantage of the growing market in addressable advertising. The company is headquartered in New York with offices in Atlanta. Frankly Media is publicly traded under ticker TLK on Canada's TSX Venture Exchange. For more information, visit www.franklymedia.com

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Non-GAAP Measures
The Company reports earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA, which are not financial measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP") and therefore may not be comparable to similar measures presented by other issuers. EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute to net income (loss) or any other financial measures of performance or liquidity calculated and presented in accordance with GAAP. The Company defines Adjusted EBITDA as EBITDA, adjusted to exclude certain non-cash charges and other items that we do not believe are reflective of our ongoing operating results. The Company utilizes Adjusted EBITDA internally for purposes of forecasting, determining compensation, and assessing the performance of our business, therefore, we believe this measure provides useful supplemental information that may assist investors in assessing an investment in the Company.

The following unaudited table presents the reconciliation of net loss to Adjusted EBITDA for the three and nine months ended September 30, 2019 and 2018, respectively.


                                                Three Months Ended September 30,                 Nine Months Ended September 30,



                                           2019                        2018                2019            2018





                 Net Income (Loss) $(1,767,928)              $(14,102,800)         $9,091,314   $(19,371,814)


      Interest expense, net              49,175                     684,230              49,175       1,880,329


      Income tax expense


      Gain on extinguishment
       of debt                                                                   (14,651,644)


      Depreciation and
       amortization                     190,645                   1,313,485             351,696       3,726,729


      Impairment expense                                        12,789,343                         12,789,343


      Loss on disposal of
       assets                                                                                         12,823


      Stock-based
       compensation                       8,402                      42,518              32,265         374,406


      Transaction costs                  52,273                     (2,110)            199,728          76,582


      Restructuring expense             128,097                                        128,097         542,210


      Retention expense                                            247,548             205,632         835,647


      Shareholder
       communications                   465,000                                        465,000



     Other expense                                                                     1,273


                 Adjusted EBITDA     $(874,336)                   $972,214        $(4,127,464)       $866,255

Notice Regarding Forward-Looking Statements
This release includes forward-looking statements regarding Frankly and its respective businesses, including statements with respect to transitioning to presenting financial reporting using IFRS, the expected effects of being noted in default of disclosure obligations under Canadian securities laws, the Company's growth and profitability in the future and the planned merger between Torque Esports Corp., Frankly and WinView, Inc.
Forward-looking events and circumstances discussed in this release may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the parties. Such risks include, but are not limited to, risks that the Company will be unable to timely transition the Company from U.S. GAAP to IFRS or that such transition will not occur as anticipated or on terms compliant with regulatory requirements or acceptable to regulatory authorities, and risks relating to the Company's binding agreement to combine with Torque Esports Corp. and WinView, Inc., including the risks that such transaction may not be completed as proposed, or at all. Accordingly, readers should not place undue reliance on forward-looking statements and information contained in this news release. Forward looking statements depend on certain assumptions that management deems to be reasonable in the circumstances, but such assumptions may prove to be incorrect and the outcome of the subject of any forward-looking statement cannot be guaranteed. Such assumptions are based on, among other things, historical financial performance, evaluation of market dynamics and opportunities, discussions with regulatory authorities and interpretation of securities regulatory instruments, and contractual obligations. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Frankly undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by applicable law.

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SOURCE Frankly Media