Mitchell Rubenstein – Chairman and CEO
Hollywood Media Corp. (OTCPK:HOLL) Q2 2010 Earnings Call Transcript August 24, 2010 4:30 PM ET
Greetings and welcome to the Hollywood Media 2010 second quarter financial results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mitchell Rubenstein, Chairman and Chief Executive Officer for Hollywood Media. Thank you. You may begin.
Okay. Thank you, Jen. I would like to welcome everyone to today's conference call to discuss Hollywood Media's 2010 second quarter financial results. Today's press release is available for viewing on the Investor Relations section of our website at hollywoodmedia.com.
After my prepared remarks, we will host a Q&A session. This presentation may contain, in addition to historical information, forward-looking statements reflecting expectations that are subject to risks and uncertainties that may cause actual outcomes to differ materially from such expectations.
Many potential risks and uncertainties are discussed in Hollywood Media's Form 10-K Report for 2009 and other filings with the SEC. These filings can be accessed through the Investor Relations section of the Hollywood Media website at hollywoodmedia.com or from the SEC’s Edgar database at sec.gov.
Because forward-looking statements are subject to risks and uncertainties, we caution you not to place undue reliance on any forward-looking statements. Forward-looking statements made during this presentation speak only as of the date of this presentation. All written or oral forward-looking statements by Hollywood Media or on its behalf are qualified by these cautionary statements.
Today's press release contains additional data including information about the EBITDA results for Hollywood Media and its segments. On today's call, I would like to briefly comment on our financial performance before opening up for any questions.
Please note that as announced on December 29th, 2009, we entered into a definitive agreement for the sale of our Broadway Ticketing division. We cannot provide any additional detail or comment on timing related to the proposed transaction other than what's disclosed in our public filings, including the press release and 8-K filed on December 29th, 2009 and in the most recent preliminary proxy statement filed on April 29th, 2010.
Turning now to results from the second quarter, our Broadway Ticketing business, which represented 97% of our revenue mix for the period, generated a 12% increase in revenues. This increase resulted in 11% top line growth for the company as a whole in the second quarter versus the prior year. Broadway Ticketing revenues are benefiting from a few noteworthy factors, including the successful re-launch in mid-2009 of our Broadway.com website, our increased focus on inventory management, and robust tourism in New York City.
In addition to top line growth, we benefited from a 44% increase in ad sales on Broadway.com from Broadway shows, which is reported as a reduction in cost of revenues ticketing. So far, ad sales on Broadway.com remain strong in the third quarter, up over 200% in the month of July 2010 compared to the same period last year.
During the second quarter, profitability for the period was impacted by the following items; approximately $200,000 in legal expenses related to the proposed sale of the Broadway Ticketing business, a $150,000 increase in inventory reserve to reflect our decision to carry more ticketing inventory to meet future demand, and an early termination fee of approximately $100,000 on an office lease in order to downsize our corporate offices in Boca Raton, and approximately $100,000 in Broadway Ticketing payroll costs also related to the proposed sale.
We do not view these costs as reflective of our typical operating model. These expenses offset the significant progress we made in growing our top line in the period. As a result, net income for the second quarter 2010 was approximately $200,000 or $0.01 per diluted share, which was flat with prior year's results, after excluding the $5 million impairment charge recorded in the 2009 period.
EBITDA for the 2010 second quarter, for the company as a whole, was approximately $500,000, with Broadway Ticketing EBITDA contributing $2.1 million in the 2010 second quarter compared to $2.2 million last year.
Within our Intellectual Property division, we are pleased that "Death's Excellent Vacation," one of our book projects developed under our Tekno Books subsidiary and edited by Charlaine Harris and Toni Kelner, reached number eight on The New York Times Hard Cover Fiction Bestseller List, currently posted on The Times website at nytimes.com and to be published in this Sunday's print edition of The New York Times Book Review. The HBO series True Blood is based on a series of novels by Charlaine Harris.
As a reminder, Tekno Books typically develops and executes book projects with best selling authors or celebrities and then licenses the projects to publishers. While a very small component of our revenue mix today, we are pleased with the return to the bestseller list with this project after a dry spell and we are currently developing several e-book initiatives in this division.
MovieTickets.com, in which we own a 26.2% interest, continues to perform well. During the second quarter, MovieTickets.com reached a major milestone as it added its 200th theater chain as a partner.
At June 30th, 2010, we had cash and cash equivalents of $6.8 million with no debt compared to cash and cash equivalents of $10 million with no debt at March 31, 2010. The change in cash position is due primarily to an increase of $3.4 million in ticketing inventories held for sale, as well as approximately $300,000 in cash paid in connection with the proposed sale of our Broadway Ticketing division and the early lease termination fee of approximately $100,000 that I mentioned earlier.
In addition to the impact of our decision to carry more ticketing inventory to meet improved demand that I mentioned earlier, we historically ramp up ticketing inventory to position ourselves for the seasonally strong fourth quarter holiday season. On June 30th, 2010, the company's ticketing inventory level was approximately $600,000 higher than it was on June 30th, 2009.
The company also has approximately $1.2 million in its restricted cash balance related to a bond for Broadway Ticketing purchases, which is a separately stated item on our balance sheet. In addition, over the last year, working capital has remained consistent.
In closing, we are very pleased with the revenue growth we generated in our Broadway Ticketing business during the period and remain encouraged by the trends we are seeing as we look forward to the second half of the year. Although it's early in the third quarter, we are seeing increased demand trends, with ticket revenue for July performances up 29% over the same period last year and tickets sold in July 2010 up 21% over July 2009. We believe we are continuing to manage our costs and would expect that future top line gains would translate into greater margins and greater contribution to earnings.
And with that, let's open up the call for any questions. Operator?
Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. (Operator Instructions). One moment please while we poll for questions. (Operator Instructions) It appears there are no questions at this time. I would like to turn the floor back to management for any closing comments.
Okay. Well, thank you very much, Jen. Thank you all for listening and we look forward to updating you on various events at Hollywood Media over the next few months. And everyone have a great rest of the – rest of summer and don't forget to look for our book on the New York Times list this Sunday. Bye.
Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.