Like any good movie, the MoviePass twist and turns just keep coming. In the latest development, the brand’s parent company Helios and Matheson Analytics Inc. has now confirmed that some of the financial statements it issued late last year can “no longer be relied upon.”
In other words, what the company declared in the closing stages of 2018 is not correct. This doesn’t just mean there was a typo in the statement, but in the words of MoviePass the company’s “press releases, earnings releases, and investor communications” for that period are equally unreliable.
MoviePass says, the erroneous financial statements and press releases were due to an overstatement in how much revenue it actually generated during the third-quarter of 2018. Mistakes happen, but in this case it would seem more than once this occurred in the same period.
For example, MoviePass has now confirmed that $0.7 million of revenue that had been previously disclosed was not actually real as it did not take into account refunded Costco subscriptions.
More of concern, the same issue seemed to have happened with another $5.9 million of revenue which the service says was miscalculated due to MoviePass having not taken into consideration “subscriptions that were in a suspended state.”
The latter is an interesting one as over the past months the company has come under fire from users who have accused the service of reigniting accounts that had been closed. The suggestion at the time was MoviePass was only suspending the accounts instead of outright ending them and this was resulting in the accounts being re-enrolled and therefore billed again, unless the user actively opted-out again.
While the latest admission to the U.S. Securities and Exchange Commission doesn't necessarily confirm accounts were being suspended instead of deactivated, the timing of the miscalculation tallies with those user reports and might help to explain how the accounts were included in the revenue figures for the period - they were active in the eyes of MoviePass, but cancelled in reality. The SEC filing even states these accounts "had not yet been consented to by the applicable subscribers."
Of course, even these readjusted figures are not definitive as the SEC filing also states the review is still ongoing and the results listed are “preliminary and subject to change.” Therefore, there could be more adjustments announced at a later time.
What should not be lost in the narrative is this is not simply just miscalculations on the part of MoviePass, but actual overblown figures that distorted how well the company was doing at the time. For example, the new figures highlight the service made less money than it originally declared. Or in MoviePass’ specific situation - lost more money than declared.
Previously, MoviePass has declared that during the the third-quarter (ending September 30) of 2018 it saw a net loss of $137.2 million. In light of today’s news that has now been adjusted to read $146.7 million. Likewise, this also has a knock-on effect on the year-to-date figure which saw the net loss increase from $246.9 million to $256.4 million.
This follows on from the news earlier in the week where MoviePass announced its latest strategic move which looks to place a greater focus on its own products and services to help increase in-house revenues at the cost of its relationship with studios and exhibitors.