Shares of Troika Media Group (NASDAQ:TRKA) stock are down by more than 30% after the company reported its financial results for the six months ended Dec. 31. Revenue tallied in at $187.91 million, up by 1,125% year over year (YOY).
The substantial increase was primarily driven by the acquisition of Converge, which accounted for 96%, or $180.3 million, of the revenue. Converge’s performance solutions revenue totaled $75.7 million, while its managed services revenue totaled $104.6 million. CFO Erica Naidrich commented:
“The acquisition of Converge continues to provide transformational changes for the Company … The revenue contributed by these new revenue streams totaled approximately $270.6 million since its acquisition in March 2022, a period of 285 days. Further, we are pleased by the continued growth in revenue that is derived from our owned and operated internal brands, which justifies our continued investment in this enterprise strategy.”
TRKA Stock Falls on Earnings Report
While Converge supplied Troika with a boost in revenue, it also increased costs. Selling, general and administrative costs tallied in at $8.6 million, up by 61% YOY. Of that, the addition of 80+ employees from Converge added about $5.8 million in employee-related costs.
Meanwhile, profitability was mixed within the earnings report. Earnings before interest, taxes, deductions and amortizations (EBITDA) was $1.03 million, up from a loss of $5.74 million a year ago. Adjusted EBITDA was $4.95 million, up from a loss of $4.58 million YOY. This was mainly attributed to the uptick in revenue and gross margin from Converge. However, net loss was $9.58 million, up from $6.24 million.
The company incurred several non-recurring costs, such as “restructuring and other related charges totaling $6.9 million,” foreign exchange losses of $900,000, and $2.7 million in employee stock compensation.
“We can now focus on optimizing our balance sheet and review strategic alternatives as we work with Jefferies, LLC to architect the best capital structure to grow the business and maximize shareholder value,” said CEO Sid Toama. Guidance for the upcoming quarter or year was not provided.
Overall, the earnings report demonstrated a significant increase in growth but widening net losses. Even with today’s drawdown, TRKA is still up by over 400% year to date. As a result, investors could be jumping ship to secure gravity-defying profits in a short window of time.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
