What happened
Shares of Chicken Soup for the Soul Entertainment (CSSE -2.53%) are plunging 15.1% at 11:39 a.m. ET on Friday after the ad-supported video-on-demand provider reported second-quarter earnings.
The parent of the Crackle streaming service reported revenue that beat Wall Street estimates, but also recorded a loss for the period that was much wider than last year and what analysts were forecasting.
So what
The earnings report followed Chicken Soup for the Soul completing its $370 million acquisition of video rental kiosk provider Redbox Entertainment the day before. Redbox investors got 0.087 shares of Chicken Soup for each share they owned, meaning Chicken Soup shareholders will own approximately 76.5% of the company and Redbox investors will own the remaining 23.5%.
Chicken Soup for the Soul Entertainment reported revenue of $37.6 million, well ahead of analyst expectations of $29.5 million. But its adjusted loss of $18.4 million, or $1.23 per share, was much wider than the $8.8 million or $0.63-per-share loss it recorded a year ago and far outstripped Wall Street estimates of $0.74 per share.
Now what
Redbox brings to Chicken Soup for the Soul 36,000 movie rental kiosks and 40 million loyalty program members. Chicken Soup says the combined company will triple revenue to over $500 million and will produce adjusted earnings before interest, taxes, depreciation, and amortization of between $100 million and $150 million. It also expects the deal will generate more than $40 million in cost synergies in 2023.
Redbox had gone public last October following a five-year stint as a privately held company owned by Apollo Global Management. But it soon ran into financial difficulties and warned that if the transaction were not completed there would be serious doubts about its ability to survive as a going concern.