Chicken Soup for the Soul Sees Return of Theatrical Titles But Sells Stock Amid Tough Environment

Caitlin Huston
·3 min read

After acquiring Redbox in August, Chicken Soup for the Soul Entertainment says it is finally poised to see a bigger return on its investment.

“The return of theatrical titles is firmly underway. This return, however, began in earnest, months later than we had anticipated when we acquired Redbox. When looking at 2022 there was only a small trickle of big budget wide release hits that broke the year long theatrical drought. Films like Top Gun: Maverick, Black Adam and Black Panther: Wakanda Forever. But the frequency of the releases was sporadic and very slow,” CEO William J. Rouhana, Jr. told investors Friday.

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Now Rouhana says the frequency of wide releases is back, starting with Ant-Man and the Wasp: Quantumania, and he now expects one new major wide release every weekend through the rest of the year. Chicken Soup for the Soul Entertainment expects to see that impact in its second quarter results.

“It’s like the floodgates have opened,” he said.

Still, Chicken Soup for the Soul Entertainment is still going through growing pains with its integration of Redbox, as well as a “challenging macroeconomic environment,” Rouhana said, and the company plans to sell more than four million shares to raise new capital.

The entertainment company, which is also behind Crackle and Chicken Soup for the Soul streaming services, plans to sell the shares at $2.30 per share, raising gross proceeds of about $10.8 million. About 1.6 million of those shares will be purchased by parent company Chicken Soup for the Soul, LLC.

The company has already cut costs, deferred executive bonuses to tie them to expectations for free cash flow and licensed $8 million of content. Chicken Soup for the Soul Entertainment is also planning to cut down on its content spending in 2023, targeting $19 million in content costs in 2023, and sell certain assets that are not key to its strategy in order to cut down on its debt load. As of December 31, 2022, the company had aggregate gross indebtedness of $500.2 million. 

In addition to raising working capital, which should help fund operations through March 31, 2024 and beyond, the company says it has entered into a modified agreement with the parent company to pay $3.45 million in aggregate fees earned in the first quarter of 2023 and $12.75 million in upcoming fees through the issuance of stock, rather than cash.

Chicken Soup for the Soul Entertainment pays its parent company an incremental recurring license fee equal to 4 percent of net revenue for each calendar quarter and a marketing fee of 1 percent of net revenue. The parent company earns a management fee of 5 percent of net revenue.

Shares plunged more than 30 percent Friday morning after the announcement and the company reported a widening loss in the fourth quarter.

The net loss grew to $56.3 million from $22.1 million a year ago and $20.1 million in the third quarter. Total operating costs grew to $215.8 million this quarter, up from $88.9 million a year ago.

The company reported fourth-quarter net revenue of $113.6 million, up from $36 million a year ago, and $72.4 million in the third quarter.

Despite the tough environment, Rouhana said the company remains “comfortable” with the advertising environment for connected TV and continues to see strong performance among its FAST networks and AVOD platforms.

“Everybody’s worried about the banks. Everybody’s worried about inflation. Everybody seems to be worried about everything right now. I don’t see a lot of signs in the ad market, of the kind of slowdown in connected television that may be occurring in broadcast and cable,” Rouhana said.

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