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Chicken Soup for the Soul Entertainment, Inc. (CSSE)·Q1 2023 Earnings Summary

Executive Summary

  • Q1 2023 revenue was $109.6M (+275% y/y) driven by international licensing and Redbox additions; Adjusted EBITDA was $20.1M and GAAP EPS was -$2.76, with results “in line with guidance” per management’s press release .
  • Sequentially, revenue declined vs Q4 2022 ($113.6M) while Adjusted EBITDA increased vs Q1 2022 ($3.7M), supported by a large international AVOD licensing agreement; retail revenue remained below expectations on fewer highly promoted theatrical releases .
  • Liquidity actions included equitizing $3.45M of management/license fees and closing a $10.8M equity raise in April; debt increased via PIK interest (SOFR+7.25%) on HPS facilities, with cash at $5.5M at quarter-end and total gross debt $519.0M .
  • Near-term catalysts: stronger theatrical slate expected from Q2 onward to improve kiosk rentals and gross margin; Crackle Connex’s scaled ad platform and MAUs (~60M) underpin AVOD/FAST monetization .

What Went Well and What Went Wrong

What Went Well

  • “Our first quarter came in line with our guidance,” noted CEO William J. Rouhana; Adjusted EBITDA reached $20.1M (vs $3.7M y/y), aided by equitization of fees and the international licensing deal .
  • Revenue mix broadened: Licensing & other surged to $42.7M (+444% y/y), driven by an international AVOD licensing agreement across Screen Media’s film library .
  • Kiosk momentum signs: daily rentals per kiosk in March–April were nearly 20% higher than Jan–Feb, and kiosks stood at ~30,600 nationwide, supporting expected margin improvement with the film release cadence .

What Went Wrong

  • EPS (-$2.76) missed Street expectations and revenue modestly lagged consensus according to Zacks/Nasdaq coverage (S&P Global consensus unavailable; see “Estimates Context”); GAAP net loss available to common widened to -$58.6M y/y .
  • Retail (Redbox) revenues were below expectations due to fewer highly promoted theatrical releases since the acquisition, highlighting sensitivity to studio slates .
  • Leverage and liquidity remain key risks: cash fell to $5.5M; gross debt $519.0M with ~$437.4M variable-rate exposure and PIK interest increasing principal balances; net debt (debt, net) was $499.6M .

Financial Results

MetricQ3 2022Q4 2022Q1 2023
Net Revenues ($USD Millions)$72.4 $113.6 $109.6
Operating Loss ($USD Millions)$(42.0) $(19.1) $(38.5)
Adjusted EBITDA ($USD Millions)$9.6 $14.7 $20.1
GAAP EPS ($)$(1.13) $(2.70) $(2.76)

Revenue breakdown by source (Q1 comparative):

Revenue SourceQ1 2022 ($USD)Q1 2023 ($USD)Change ($)Change (%)
VOD and Streaming$21,347,363 $34,611,586 $13,264,223 +62%
Retail$0 $32,259,454 $32,259,454 n/m
Licensing & Other$7,858,834 $42,728,253 $34,869,419 +444%
Total Net Revenue$29,206,197 $109,599,293 $80,393,096 +275%

KPIs:

KPIQ4 2022Q1 2023
Monthly Active Users (MAUs)~60M ~60M
Kiosks~32,000 planned expansion ~30,600
Daily rentals per kioskn/a~20% higher in Mar–Apr vs Jan–Feb

Balance sheet/liquidity snapshots:

  • Cash, cash equivalents and restricted cash: $5.5M at 3/31/23 .
  • Total gross debt: $519.0M; debt, net: $499.6M; variable-rate exposure ~$437.4M; HPS term + revolver outstanding $431.2M, Notes due 2025 $44.9M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ1 2023~$110M–$113M (3/30/23 8‑K) Actual $109.6M; “in line with guidance” Maintained/in‑line
Adjusted EBITDAQ1 2023~$18M–$20M (3/30/23 8‑K) Actual $20.1M Maintained/in‑line
RevenueFY 2023~$500M (3/30/23 8‑K) No explicit update in Q1 materials; prior guidance stands Maintained
Adjusted EBITDAFY 2023~$100M–$150M (3/30/23 8‑K) No explicit update in Q1 materials; prior guidance stands Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2022)Previous Mentions (Q4 2022)Current Period (Q1 2023)Trend
Theatrical slate & kiosksClosed Redbox; growth in AVOD/TVOD; best quarter historically; remote buttons partnerships Expect “over 40 major film releases” in 2023; weekly cadence to drive rentals and cash flow Film cadence improving; daily rentals/kiosk up ~20% Mar–Apr; gross margin expected to improve Improving through 2023
International licensingn/aKC Global AVOD/FAST partnership in Asia Large international AVOD licensing drove $42.7M licensing & other revenue Positive impact in Q1
Liquidity & capital actionsCFO appointment; continuing scaling Equity offering $10.8M; parent equitization commitment $3.45M equitized fees; April $10.8M equity raise; PIK interest runway to Feb 2024 Ongoing de‑leveraging efforts
AVOD/FAST monetization & MAUsViewership growth; expanded distribution; Crackle FAST channels Owned & Operated platforms ~60M MAUs; ad-rep partners 20 MAUs ~60M; Crackle Connex scaled ad platform with >20 partners Stable scale; monetization focus
Leverage & credit profilen/aHighlighted debt and paydown plan Variable-rate exposure ~$437.4M; PIK interest added $13.5M Q1; Egan‑Jones BBB noted on call Elevated leverage; managing runway

Management Commentary

  • CEO: “Our first quarter came in line with our guidance,” underscoring execution against Q1 targets and a path to margin improvement with increasing theatrical cadence .
  • CFO: Operating loss was $38.5M vs $10.8M prior year; Adjusted EBITDA was $20.1M, or $16.6M excluding $3.45M equitization of CSS fees; highlighted PIK flexibility on HPS facility and streamlining to drive efficiency .
  • Strategy: Leverage Crackle Connex ad scale and international licensing; expect kiosk rentals growth via stronger film slate and weekly release cadence .

Q&A Highlights

  • Theatrical slate cadence: Management reiterated expectation for more consistent weekly releases, supporting kiosk rentals and gross margin improvement through 2023 .
  • Kiosk performance: Daily rentals per kiosk up ~20% in Mar–Apr vs Jan–Feb, indicating improving demand with slate recovery .
  • Liquidity/credit runway: PIK interest option through Feb 11, 2024 on HPS credit facility; pursuit of efficiencies and potential service revenue expansion .
  • Revenue mix clarity: International AVOD licensing deal explained as major Q1 driver; expectation of diversified monetization (AVOD/FAST/TVOD/retail) .

Estimates Context

  • S&P Global consensus estimates could not be retrieved due to mapping limitations; official SPGI consensus is unavailable for this analysis. Values retrieved from S&P Global were not accessible in this instance.
  • External coverage indicates a miss vs consensus: EPS was -$2.76 vs Zacks consensus of -$1.66 and revenue was $109.6M vs consensus (~$110.5M), a ~0.77% miss; this is directional context only and not a substitute for S&P Global data .

Key Takeaways for Investors

  • Q1 was execution “in line with guidance,” driven by a one-time step-up in licensing while retail lagged due to limited theatrical slates; watch Q2–Q4 slate cadence for margin recovery and retail normalization .
  • Cash remains tight ($5.5M), with significant leverage and variable-rate exposure; PIK interest provides runway but raises principal—monitor liquidity actions (equity raises, ABL option up to $40M, content financings) .
  • Crackle Connex’s scaled ad-rep platform and ~60M MAUs underpin AVOD/FAST monetization; sustained ad demand and partner growth are critical to offset rate-driven interest burdens .
  • Retail (kiosks) is highly sensitive to studio behavior—management expects steady weekly releases in 2023 to boost rentals and gross margin; early rental trends in Mar–Apr are encouraging .
  • Debt service risk: variable-rate debt (~$437.4M) implies ~$4.4M annual interest increase per +100bps; hedging is not currently in place—interest-rate trajectory is a key macro swing factor .
  • Guidance: Q1 targets achieved; FY 2023 guidance (Revenue ~$500M; Adjusted EBITDA ~$100–$150M) was maintained from the March 30 8-K—monitor for updates with Q2 release .
  • Trading implications: near-term sentiment to hinge on proof of kiosk and margin recovery with the film slate and disciplined liquidity management; international licensing provides optionality but may be uneven quarter-to-quarter .

Additional Source Documents Reviewed

  • Q1 2023 Form 10‑Q filed May 15, 2023 (full financials, MD&A, liquidity, debt profile) .
  • Q4 2022 & FY 2022 8‑K press release (April 3, 2023) (context, MAUs, business updates) .
  • March 30, 2023 8‑K (Q1 and FY 2023 guidance; CSS equitization) .
  • Q3 2022 8‑K press release (trend baseline) .
  • Q1 2023 earnings press release (Business Wire) .
  • Q1 2023 earnings call transcript (InsiderMonkey/Seeking Alpha) .
  • Nasdaq/Zacks coverage on consensus miss .