Wizard World Making More Money But Losing More Too
This is old news, but I’m hoping someone who knows more about it will enlighten me.
In November, Wizard World, Inc., the operator of 16 announced conventions for 2014, released financial results for third quarter 2013. Typical of such public company releases, there were many comparisons to how they did in the same quarter the year before (2012).
They made almost 50% more from conventions, $4.1 million in revenue from July-September 2013 instead of $2.8 million in July-September 2012. Each period consisted of two events, and they made more from each event (average $2.1 million 2013 instead of $1.4 million 2012). Expenses are rising as well, but not by much ($0.9 million instead of $0.7 million). They’ve hired some more people and paid them more. (“The increase is primarily attributable to an increase in salaries and employee headcount as well as share based payments” made to the CEO.)
Yet there was a big snag. In the previous year, 2012, during this three-month summer convention period, they had additional income of $1.1 million. This year, they had additional expenses of $2.2 million. This is where I start losing the thread: “The decrease is primarily attributable to the loss on the fair value of the Company’s derivative liabilities.” So the stock market was really really bad for them this quarter? I don’t know what that means.
While they made more — operating income in 2012 was $0.6 million; 2013, $1.1 million — they’re running at a final loss of $1.2 million, mostly due to those additional expenses. 2012 quarter results were positive to the tune of $1.2 million, for a net change of -$2.4 million. If I was an investor, I’d want to know a lot more about those “derivative liabilities”, because they’re tanking the company during their most productive time period. Look at the summary: they brought in over $4 million but list a loss once the math is done.
Their prediction is that the company will be able to continue operating for at least 12 months based on “existing available cash, along with our cash flows from operations”. The burn rate (money needed) is $210,000 per month. This part scared me: “The Company continues to explore potential expansion opportunities in the industry in order to boost sales while leveraging distribution systems to consolidate lower costs.” Where else can they expand?
There should be another quarterly results release this month or next. I’m curious to see if it makes any more sense to a non-specialized-in-finance person.