Chicken Soup for the Soul, the company that owns Redbox and Crackle, is undergoing a strategic review to determine its next steps. CEO William J. Rouhana, Jr. announced on an earnings call that the company has received requests from financial and strategic partners and will form a strategic review committee composed of independent board members to evaluate these opportunities. The goal is to pursue transactions that create value for shareholders.
Despite some recent successes, including a rebound in rentals and a resilient ad market, Chicken Soup for the Soul reported a net loss of $43.7 million compared to a net loss of $20.8 million the previous year. The company’s net revenue increased to $79.9 million from $37.6 million. Following this news, the company’s shares dropped 18 percent in after-hours trading.
One of the challenges Chicken Soup for the Soul is facing is the slower-than-expected rebound of its Redbox kiosks. Rouhana attributed this to sporadic new content and concerns about production slowdowns in the uncertain media climate. In response to these challenges and as part of their commitment to pay down debt, the company has conducted a review of operations. This review has led to cost-savings measures such as cutting down on future content commitments and unwinding content deals that did not generate cash in the near term. The company has also deferred the timing of licensing deals to conserve cash and licensed its own content to third parties. Additionally, Chicken Soup for the Soul is focusing on monetizing its large catalog in the event of a prolonged slowdown, as its library becomes more valuable during a strike.
To further manage costs, the company has reduced its employee headcount by 50 percent through attrition. They have also decided to let go of their Seattle office and allow those employees to work remotely. In addition, Chicken Soup for the Soul held a public offering of its class A common stock at the beginning of the quarter to raise funds for working capital.
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Due to their shift towards cash-generating activities instead of future revenue drivers, the company has adjusted its guidance for the full year. They now expect revenue to be between $400 million and $450 million, down from the previous estimate of about $500 million. However, adjusted EBITDA for the full year is expected to be between $75 million and $100 million.
One area of concern for Chicken Soup for the Soul has been the performance of the Redbox kiosks. While they have grown, they haven’t met the company’s expectations. To address this, the company is exploring alternative ways to monetize the kiosks. They have recently announced a partnership with Dollar General to roll out 1,500 kiosks, and they have also struck a deal with TikTok to display branded content on more than 3,000 Redbox kiosk digital video screens.
Despite the challenges, the company had some highlights in the quarter. The Super Mario Bros. Movie became the most rented movie at Redbox kiosks in its first week since Top Gun: Maverick, and it also had the most first-week rentals for a family film since The Croods: A New Age. Transactional video on demand revenue increased by 16 percent year over year, driven by a strong spring release slate, while revenue from advertising video on demand and FAST networks increased by 8 percent year over year.
While Rouhana expressed satisfaction with most of what happened in the quarter, he emphasized the need to focus on cash flow given the current economic climate. Moving forward, Chicken Soup for the Soul will continue to prioritize cost savings, cash flow, and evaluating strategic opportunities to create value for its shareholders.
