Troika Media Group, Inc. (Nasdaq: TRKA) ("TMG"), a consumer engagement and customer acquisition group, today announced financial results for the six months ended December 31, 2022, a transition reporting period ("six month transition period") as a result of the Company's change in fiscal year to December 31 from June 30. TMG is a professional services company that architects and builds enterprise value in consumer brands to generate scalable, performance-driven revenue growth. The Company delivers three solutions pillars: TMG CREATES brands and experiences and CONNECTS consumers through emerging technology products and ecosystems to deliver PERFORMANCE based measurable business outcomes.
The six month transition period highlights include:
- Successive record revenue of approximately $187.9 million
- Revenue increase of 1125% over the comparative prior year period
- Adjusted EBITDA of approximately $5.0 million
- Continued strong revenue growth in new revenue streams
- Growing demand for Performance Solutions within Home Improvement, Residential Services, Legal and Professional Services Sectors
- Successful completion of restructuring of operations and cost optimizations following the acquisition of Converge
"The operational changes and record business performance during this six month transition period were delivered ahead of schedule in what was an aggressive timetable to alter the strategic course of the Company. In the last nine months, we repositioned the business, delivered successive record-breaking revenue, diversified our revenue sectors, and implemented changes to optimize operational efficiency. The Company is now focused on taking advantage of sustainably higher margin opportunities to meaningfully improve its strategic and financial results in scalable market sectors. The Management Team has delivered great results during an intensive period of change, demonstrating the resiliency of our services and business model. We continue to be excited at the growth opportunities in home improvement, residential services, legal and professional services and building on our internal consumer brand portfolio. We can now focus on optimizing our balance sheet and review strategic alternatives as we work with Jefferies, LLC to architect the best capital structure to grow the business and maximize shareholder value." commented Sid Toama, Chief Executive Officer of TMG.
Results for the six months ended December 31, 2022 (six month transition period) compared to six months ended December 31, 2021:
Six months ended | |||||||
December 31, | Change | ||||||
2022 | 2021 | $ | % | ||||
(in thousands) | |||||||
Revenues | $ 187,910 | $ 15,343 | $ 172,567 | 1125 % | |||
Net Loss | $ (9,580) | $ (6,249) | $ (3,331) | 53 % | |||
EBITDA | $ 1,038 | $ (5,744) | $ 6,782 | 118 % | |||
Adjusted EBITDA | $ 4,950 | $ (4,587) | $ 9,537 | 208 % | |||
Financial Results for TMG
The results of operations for the six months ended December 31, 2022, have been fundamentally powered by the Converge acquisition, which resulted in diversifying the Company's revenue streams and created efficiencies recognized by integrating the acquired businesses.
Revenues for the six months ended December 31, 2022, increased $172.6 million, or 1125%, to $187.9 million as compared with the prior year period. The increase in revenue was directly attributable to the Converge business, which accounted for approximately $180.3 million, or 96%, of the Company's total revenue for the six months ended December 31, 2022. The incremental revenue to the business was comprised of performance solutions revenue of $75.7 million, or 40%, and managed services revenue of $104.6 million or 56%.
"The acquisition of Converge continues to provide transformational changes for the Company. The revenue contributed by these new revenue streams totaled approximately $270.6 million since its acquisition in March 2022, a period of 285 days. Further, we are pleased by the continued growth in revenue that is derived from our owned and operated internal brands, which justifies our continued investment in this enterprise strategy," said Erica Naidrich, CFO of TMG.
Selling, general, and administrative costs increased during the transition period by $8.6 million, or 61%, to $22.7 million when compared to the prior year period. This increase was primarily attributable to an increase in employee related costs of approximately $5.3 million, an increase of approximately $1.5 million in office and occupancy costs, an increase in professional fees of approximately $1.4 million, an increase of approximately $0.2 million in travel and entertainment costs, and an increase of approximately $0.2 million in other costs.
Employee related costs increased due to the addition of the 80+ headcount acquired with Converge, which added $5.8 million. This increase was offset by the reduction in salaries and other employee related costs as a result of the discontinuation of certain subsidiary operations as part of the Company's restructuring efforts. The combined employee related costs from the legacy Troika entities totaled $10.4 million during the six months ended December 31, 2022, which reflects a 5% decrease compared to the prior year period. The decrease is due to reduction in headcount from company lay-offs due to restructuring activities.
The increased professional fees were largely driven by the accounting and audit fees incurred during the six month transition period. Due to the change in year-end date, the Company incurred higher audit fees than in a normal six month period. Additional professional fees, mainly legal fees, were incurred from newly engaged firms to help the Company with various debt and equity financing matters.
TMG's Adjusted EBITDA for the six months ended December 31, 2022, increased $9.5 million to approximately $5.0 million as compared to the prior year period. This increase was driven by the increase in revenues and gross margin attributable to the managed services and performance solutions revenue streams associated with the Converge acquisition. These increases were offset by several one-time costs incurred as a result of the ongoing restructuring and transformational efforts by management as well as non-cash charges.
The Company has made expeditious restructuring decisions in order to focus on business initiatives that will drive growth to ensure that the Company is well positioned to achieve value for our shareholders.
These offsetting amounts contained several non-recurring and non-cash costs including restructuring and other related charges totaling $6.9 million, gain on fair value of warrant derivative liabilities related to the Series E Preferred Stock of $20.0 million, foreign currency exchange losses of $0.9 million, $2.7 million in non-cash stock compensation expense (which are reflected in selling, general and administrative expenses), and loss contingencies on equity issuance of $3.4 million.
The Company has historically recognized the fluctuation in the fair value of the derivatives liabilities at each reporting period in the Statement of Operations. The conversion of the derivative liabilities to "Equity" classification will result in no future impact on the Statements of Operations from the fluctuation in the fair value of the derivatives liabilities.