Rentrak Reports Fiscal 2004 Second Quarter Results
--Anticipated Revenues From New Business Intelligence Services and PPT Customers Set Stage for Return to Profitability in Second Half of Fiscal Year--
PORTLAND, Ore., Nov 13, 2003 --
Rentrak Corp. (Nasdaq:RENT) today announced financial results for its second fiscal quarter ended September 30, 2003.
Consolidated revenues from continuing operations totaled $14.3 million, compared with revenues from continuing operations of $20.8 million for the same period one year ago. Revenues from the company’s continuing entertainment operations totaled $13.8 million.
Revenue from the company’s PPT® revenue-sharing business declined 32.2 percent from last year’s comparable period, to $12.2 million from $18.0 million. Lower VHS wholesale prices implemented by studios prompted studios to adopt new, competitively structured DVD/VHS revenue-sharing agreements. In these new agreements, studios agreed to reduce or eliminate their share of upfront processing fees and also allowed retailers to retain a greater portion of the transactional revenue-sharing income. The new agreements do not call for a reduction in the percentage of the transactional revenue-sharing income that is retained by Rentrak and recorded as revenue. However, because Rentrak also recognizes as revenue each studio’s portion of upfront processing fees and transactional revenue-sharing income, along with an equal, offsetting cost of sale, the transition to the lower studio upfront fees and revenue-sharing splits caused a comparable year-over-year decline in Rentrak’s PPT revenue but had little impact on the company’s PPT gross margins. Rentrak’s transactional PPT revenues were lower due to a weaker assortment of available VHS revenue-sharing titles during the quarter.
Total unit shipments to independent retailers in North America increased 15 percent over last year’s second fiscal quarter, reflecting a 309 percent increase in DVD and videogame shipments, partially offset by a 19 percent decline in VHS shipments. Due in part to the company’s new combined VHS/DVD revenue-sharing program with Warner Home Video, announced in August 2003, management expects PPT shipments for the second half of the fiscal year to increase substantially and lead to a revenue increase of between 35 and 40 percent, compared with the first half of the fiscal year.
The company used the cash generated from its PPT operations to make continued investments in new services totaling approximately $300,000 after tax, resulting in a net loss from continuing entertainment operations of $247,056, or $(0.03) per share in the second quarter of fiscal 2004. Revenues from continuing entertainment operations in the prior year period totaled $18.9 million and generated net income of $0.9 million, or $0.09 per share.
The company’s former fulfillment subsidiary, 3PF, Inc., contributed revenues of $504,616 in the second quarter, representing services provided to one of its customers through July 31 under terms of a continuing service contract following Rentrak’s July 1, 2003 sale of substantially all of 3PF’s assets. 3PF generated an after-tax net loss of approximately $1.1 million, or $(0.11) per share, primarily due to reserves totaling approximately $1 million after tax, or $(0.10) per share, related to the estimated cost of terminating a warehouse lease and a customer’s defaulted account receivable. In the comparable period last year, 3PF reported revenues of $2.4 million and a net loss of $689,603, or $(0.07) per diluted share.
Consolidated net loss for the second quarter of fiscal 2004 totaled $1.3 million, or $(0.14) per share. In the year-ago quarter, the company reported consolidated net income from continuing operations of $173,115, or $0.02 per share, and a consolidated net loss of $103,101, or $(0.01) per share. Management believes this quarter fully accounts for the conclusion of the company’s involvement in 3PF’s operations and that future results will not suffer any further negative impact.
Rentrak Chairman and Chief Executive Officer Paul Rosenbaum commented, “We’ve positioned Rentrak extremely well heading into the second half of fiscal 2004. Our PPT business continued to contribute positively to the company’s overall results despite extremely challenging circumstances which are now largely behind us. Our new combined VHS/DVD revenue-sharing program with Warner Home Video should lead to renewed PPT shipment and revenue growth beginning in the third quarter, and the possibility remains that additional studios will begin to offer DVD revenue-sharing.”
“Most significantly, the investments we continue to make in our expanding portfolio of business intelligence services are allowing us to win new customers. Through the first half of fiscal 2004, Box Office Essentials™ achieved a majority share of the major studio domestic market and is now operating at a profitable level. Supply Chain Essentials™ secured its first major customer during the first half and in mid-October we announced Borders, Inc. as our first Business Intelligence Essentials™ customer. Combined, these new services now represent incremental annualized revenues of approximately $4.3 million. We are increasingly optimistic of our ability to secure additional customers in the months ahead for these and other new services still under development.”
“We’ve demonstrated Rentrak’s ability to deliver superior services in existing markets against much larger competitors, as well as our ability to develop and quickly implement entirely new services to address the unmet business intelligence needs of a wide array of companies comprising the entertainment industry.”
"Today, Rentrak is the only company in the world capturing and reporting hourly North American box office performance data with the ability to combine it with over 15 years of detailed North American movie rental and sales data. Over the next few years, Video-on-Demand, and other technologies that deliver media and entertainment to consumers electronically, are expected to move from early adoption to mass availability. Our IT and new business development teams have worked to rapidly evolve our proprietary technologies, making it possible in the future for cable operators to track transactional data on a census basis for all forms of content offered on-demand. This includes Hollywood movies, network programming and on-demand advertising."
"With the significant investment in our IT programming completed, we are ready to invest in dedicated sales forces to pursue customers for each new service and develop customer service operations to support each. We estimate these operations will require additional investments of approximately $1.6 million that will be expensed over the next two quarters, and which we intend to fund with the cash flow expected from our PPT business. In addition, as of September 30, our balance sheet contained approximately $10 million in cash and zero debt."
"We believe more strongly than ever that Rentrak is in perfect position to become the largest independent 3rd-party aggregator of consumption data spanning the full life cycle of entertainment media and the provider of related business intelligence services for the entire entertainment industry. Our most exciting opportunities for revenue and earnings growth are yet ahead of us."
Business Outlook
The company continues to experience great change, pursuing rapid expansion of recently launched new services and investing in the development and launch of several new services. In addition, a number of dynamics currently at play in the movie rental industry could have a direct impact, favorable or unfavorable, on the company's core PPT business. The timing and magnitude of the impacts from these dynamics, together with the timing of the launch and pace of expansion in the company's new business initiatives, are difficult to predict, but management believes there is significant promise in the new markets it has preliminarily sized.
Based on current customer agreements and titles scheduled for release under revenue-sharing terms, the company expects fiscal second-half PPT revenues to grow by between 35 and 40 percent compared with the first half of the fiscal year, and to produce the necessary cash flow to enable the company to continue investing in new business intelligence services. Management currently expects fiscal 2003 second-half earnings of between approximately $1.0 and 1.2 million, or $0.10 and 0.12 per share.
Conference Call
Rentrak has scheduled a conference call for 2 p.m. (PST), November 13, 2003 to discuss the company's financial performance. Shareowners, members of the media and other interested parties may participate in the call by dialing 1-800-299-9086, or 1-617-786-2903 for international callers and entering passcode 61358692. This call is being webcast by CCBN and can be accessed at Rentrak's web site at www.rentrak.com where it will be archived through February 13, 2004. The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (www.streetevents.com). A telephone replay of the call will be available through November 20, 2003 by dialing 888-286-8010 from the U.S. and Canada, or 617-801-6888 from international locations and entering passcode 55108971.
About Rentrak Corporation
Rentrak Corporation (Nasdaq: RENT) is an industry-advancing media measurement and research company, serving the most recognizable names in the entertainment industry. Reaching across numerous platforms including box office, home entertainment, on-demand and linear television, broadband and mobile, Rentrak provides unique and actionable insight for our clients and partners. From the introduction of our revolutionary Pay-Per-Transaction® distribution and revenue-sharing system, which equipped Rentrak with the intelligence and ability to deal with large, complex data streams, to the company's exclusive Essentials™ suite of services, Rentrak has redefined digital audience measurement. Rentrak is headquartered in Portland, Oregon, with additional offices in Los Angeles, New York City and Miami/ Ft. Lauderdale. For more information on any of Rentrak's services, please visit www.rentrak.com.
Safe Harbor Statement
When used in this discussion, the words “anticipates,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements. Such statements relate to, among other things, the company's ability to successfully manage expenses and run its business as efficiently as possible; the ability to successfully grow revenues, effectively manage costs, steadily generate cash and maintain strong and flexible balance sheet; the ability for Rentrak to create new and valuable products and services that best serve the company's customers and industry; the company's ability to monetize and reach the full potential of its development activities; and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Factors that could affect Rentrak's financial results include customer demand for movies in various media formats subject to company guarantees, the company's ability to attract new revenue-sharing customers and retain existing customers, the company's success in maintaining its relationships with studios and other product suppliers, the company's ability to successfully develop and market new services to create new revenue streams, and Rentrak's customers continuing to comply with the terms of their agreements. Additional factors that could affect Rentrak's financial results are described in Rentrak's March 31, 2008 annual report on Form 10-K and subsequent quarterly reports filed with the Securities and Exchange Commission. Results of operations in any past period should not be considered indicative of the results to be expected for future periods.
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