PLAINVIEW, NY--(Marketwired - August 03, 2015) -
Second Quarter Year-Over-Year Highlights
- GAAP revenue increased 69% to $22.7 million versus $13.4 million; non-GAAP revenue increased 99% to $26.7 million versus $13.4 million
- NeuLion Digital Platform revenue (GAAP and non-GAAP) increased 16% to $15.5 million versus $13.4 million
- DivX and MainConcept GAAP revenues were $7.2 million; non-GAAP revenue was $11.2 million
- Non-GAAP Adjusted EBITDA grew to $4.2 million versus $1.6 million
- Non-GAAP Adjusted EBITDA margin increased to 15.7% versus 11.9%
NeuLion, Inc. (TSX: NLN), a leading technology product and service provider that specializes in the digital video broadcasting, distribution and monetization of live and on-demand content to Internet-enabled devices, today reported financial results for the second quarter ended June 30, 2015.
"Our second quarter results demonstrate the strength of NeuLion's 'land and expand' growth strategy, competitive positioning and business model leverage as we continue to lead the way in delivering next-generation video experiences on any connected device," said Kanaan Jemili, chief executive officer. "Revenue in our NeuLion Digital Platform grew 16% against a record second quarter last year fueled by new customer additions. Continued scaling of the NeuLion Digital Platform contributed to a 700 basis point improvement in cost of revenue as a percentage of revenue which, along with the addition of DivX and MainConcept revenue streams, drove a 380 basis point improvement in non-GAAP Adjusted EBITDA margin.
"Building on the second quarter's strong execution, we are excited about our growth prospects as we continue to win new customers and expand existing customer relationships with content owners and CE manufacturers. Our unique end-to-end service offering and proven capabilities to enable on-demand and live digital content viewing anywhere and on any device place us in an excellent position to continue capitalizing on the accelerating adoption of over-the-top and 4K video worldwide," concluded Jemili.
Second Quarter Operational Highlights
- Partnered with Millicom, an international telecommunications and media company, to create and deliver a new Tigo Sports app for fans in Latin America. Originally launched in Bolivia, the service has expanded to include Paraguay, Columbia and Guatemala.
- Launched a long-term web, mobile and video partnership with Drum Corps International (DCI), Marching Music's Major League'. Through the annual DCI Tour and more than 35 World Championships in 17 North American cities, Drum Corps International provides entertainment to millions through live performances, nationally-televised events and the all-new digital destination for all streamed events called DCI Live!, powered by NeuLion.
- Signed new multi-year agreement with Tennis Channel following the success of the 2015 French Open and Wimbledon 2015. The agreement extends the one reached in May 2014 to support the launch of Tennis Channel Plus at the start of last year's French Open; since then, Tennis Channel Plus subscriptions have grown 400% year-over-year and sees, on average, 25% of subscribers using the online service at least once daily.
- Signed new agreement with Rogers to deliver the 2015 Pan Am Games on Rogers Anyplace TV.
- The NeuLion College network continued to be fueled by the rise in mobile traffic with 54% of traffic coming from mobile devices in the quarter, as compared to 43% in the second quarter of 2014.
- Expanded partnership with Sky New Zealand to add the delivery of 4 linear channels to the recently launched over-the-top digital sports service FAN PASS.
- Recognized at the 2015 Microsoft Build Developer Conference as a Premier Plus Developer Partner for Xbox LIVE applications through NeuLion's work with major sports leagues.
- Hosted the NeuLion Partner Summit in New York that brought together attendees from its professional sports partners, including the NHL, NBA, UFC, World Surf League and others.
- Powered World Congress Live, the digital extension of the Sports Business Journal IMG World Congress of Sports event that gives viewers access to exclusive interviews from executives across the sports media landscape, including the NHL, the United States Olympic Committee, Adidas and others.
Second Quarter Financial Review
As a result of the acquisition of DivX Corporation on January 30, 2015, NeuLion is now reporting revenue for the NeuLion Digital Platform and DivX combined. Because the company expects revenue from the NeuLion Digital Platform to grow faster than revenue from other solutions, management intends to continue to report revenue from the NeuLion Digital Platform as a key performance metric. The NeuLion Digital Platform combines the previously reported customer categories of Pro Sports, College Sports, and TV Everywhere.
GAAP Results
Total GAAP revenue was $22.7 million for the second quarter of 2015 compared to $13.4 million for the previous year's quarter, an increase of $9.3 million, or 69%. The NeuLion Digital Platform had revenue growth of 16% to $15.5 million for the current period from $13.4 million for the comparable prior period, primarily due to revenue from new customers. DivX and MainConcept revenue was $7.2 million in the second quarter of 2015.
Cost of revenue was $4.2 million, or 19% of revenue, for the current period compared to $3.5 million, or 26% of revenue, for the prior comparable period. The seven percentage point improvement was due to a combination of the addition of DivX and MainConcept revenue streams and improved broadcast operating costs. Selling, general and administrative expenses, including stock-based compensation, were $11.4 million for the current period, an increase of 77% from $6.4 million for the prior comparable period. Research and development expenses were $7.5 million for the current period, more than triple the $2.2 million figure reported in the prior comparable period. SG&A and R&D expenses associated with DivX in the second quarter of 2015 were $3.8 million and $4.8 million, respectively. The operating loss in the second quarter was $2.5 million compared to operating income of $0.6 million in the second quarter of 2014. The consolidated net loss was $3.2 million, or $0.01 per diluted share, for the current period compared with consolidated net income of $0.6 million, or $0.00 per diluted share, for the prior comparable period.
Non-GAAP Results
Non-GAAP revenue increased 99% to $26.7 million from the prior year's level. Non-GAAP Adjusted EBITDA increased 163% to $4.2 million from $1.6 million for the same period last year, with $1.8 million of the increase due to the acquisition of DivX and $0.8 million coming from organic improvement due to higher revenue and improved cost of revenue as a percentage of revenue, offset by increases in SG&A, excluding stock-based compensation, and R&D expenses. Please refer to the tables accompanying this release for the calculation of Non-GAAP revenue and Adjusted EBITDA.
Use of Non-GAAP Financial Information
In addition to our U.S. GAAP results, this press release also includes disclosure on certain non-GAAP financial measures, as such term is used by the SEC. The Company defines Non-GAAP revenues as GAAP revenues before purchase accounting adjustments as a result of an acquisition. The Company defines Non-GAAP Adjusted EBITDA as consolidated net income (loss) before interest, income taxes, depreciation and amortization, purchase accounting adjustments, stock-based compensation, acquisition-related expenses, gain on revaluation of convertible note derivative, and foreign exchange gain (loss). Non-GAAP Adjusted EBITDA is a key measure used by management to evaluate the Company's results and make strategic decisions about the Company, including potential acquisitions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company's presentation of Non-GAAP Revenue and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. This measure does not have any standardized meaning prescribed by U.S. GAAP and therefore is unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with U.S. GAAP.
Pursuant to the requirements of Regulation G, we have provided a reconciliation of Non-GAAP Revenues to U.S. GAAP revenues and Non-GAAP Adjusted EBITDA to U.S. GAAP consolidated net income/(loss) as an exhibit to this press release.
About NeuLion
NeuLion, Inc. (TSX: NLN) offers solutions that power the highest quality digital experiences for live and on-demand content up to 4K on any device. Through its end-to-end technology platform, NeuLion enables digital content management, distribution and monetization for content owners worldwide. With the recent acquisition of DivX, LLC, the company also operates a robust consumer electronics licensing business that has enabled over 1 billion devices worldwide with secure, high-quality video playback, and delivers a DivX consumer software offering that has been downloaded over 1 billion times. NeuLion's customers include major sports, entertainment and global content companies as well as major consumer electronics manufacturers and software companies. NeuLion is headquartered in Plainview, NY. For more information about NeuLion, visit www.NeuLion.com.
Forward-Looking Statements
Certain statements herein are forward-looking statements and represent NeuLion's current intentions in respect of future activities. Forward-looking statements can be identified by the use of the words "will," "expect," "seek," "anticipate," "believe," "plan," "estimate," "expect," and "intend" and statements that an event or result "may," "will," "can," "should," "could," or "might" occur or be achieved and other similar expressions. These statements, in addressing future events and conditions, involve inherent risks and uncertainties. Although the forward-looking statements contained in this release are based upon what management believes to be reasonable assumptions, NeuLion cannot assure readers that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this release and NeuLion assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law. Many factors could cause NeuLion's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including: our ability to derive anticipated benefits from the acquisition of DivX; our ability to successfully integrate the operations of DivX; our ability to realize some or all of the anticipated benefits of our partnerships; general economic and market segment conditions; our customers' subscriber levels and financial health; our ability to pursue and consummate acquisitions in a timely manner; our continued relationships with our customers; our ability to negotiate favorable terms for contract renewals; competitor activity; product capability and acceptance rates; technology changes; regulatory changes; foreign exchange risk; interest rate risk; and credit risk. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. A more detailed assessment of the risks that could cause actual results to materially differ from current expectations is contained in the "Risk Factors" section of NeuLion's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which is available on www.sec.gov and filed on www.sedar.com.
NEULION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Expressed in U.S. dollars)
June 30, December 31,
2015 2014
(unaudited)
----------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 34,059 $ 25,898
Accounts receivable, net of allowance for
doubtful accounts of $910 and $221 22,519 8,056
Other receivables 488 603
Inventory 241 304
Deferred tax assets, net 384 0
Prepaid expenses and deposits 3,243 1,315
Due from related parties 197 111
----------------------------------------------------------------------------
Total current assets 61,131 36,287
Property, plant and equipment, net 6,814 3,830
Intangible assets, net 26,453 406
Goodwill 11,496 11,327
Other assets 1,797 88
----------------------------------------------------------------------------
Total assets $ 107,691 $ 51,938
============================================================================
LIABILITIES AND EQUITY
Current
Accounts payable $ 6,996 $ 14,362
Accrued liabilities 7,731 5,248
Due to related parties 9 0
Deferred revenue 9,364 9,602
----------------------------------------------------------------------------
Total current liabilities 24,100 29,212
Long-term deferred revenue 1,249 1,019
Deferred rent liabilities 1,827 0
Deferred tax liabilities 3,753 1,451
Other long-term liabilities 165 202
----------------------------------------------------------------------------
Total liabilities 31,094 31,884
----------------------------------------------------------------------------
Redeemable preferred stock, net (par value:
$0.01; shares authorized: 50,000,000; shares
issued and outstanding: 28,089,083)
Class 3 Preference Shares (par value: $0.01;
shares authorized, shares issued and
outstanding: 17,176,818) 10,000 10,000
Class 4 Preference Shares (par value: $0.01;
shares authorized, shares issued and
outstanding: 10,912,265) 4,970 4,955
----------------------------------------------------------------------------
Total redeemable preferred stock 14,970 14,955
----------------------------------------------------------------------------
Stockholders' equity
Common stock (par value: $0.01; shares
authorized: 300,000,000; shares issued and
outstanding: 244,212,387 and 178,210,006
respectively) 2,442 1,782
Additional paid-in capital 147,230 87,631
Promissory notes receivable (209) (209)
Accumulated deficit (87,836) (84,105)
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Total stockholders' equity 61,627 5,099
----------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 107,691 $ 51,938
============================================================================
NEULION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands, except share and per share data)
(Expressed in U.S. dollars)
Three months ended June 30, Six months ended June 30,
2015 2014 2015 2014
----------------------------------------------------------------------------
Revenue $ 22,684 $ 13,409 $ 44,358 $ 26,878
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Costs and expenses
Cost of revenue,
exclusive of
depreciation and
amortization shown
separately below 4,215 3,536 8,541 7,047
Selling, general
and
administrative,
including stock-
based compensation 11,390 6,424 21,303 12,778
Research and
development 7,480 2,187 12,796 4,160
Depreciation and
amortization 2,062 710 3,588 1,395
----------------------------------------------------------------------------
25,147 12,857 46,228 25,380
----------------------------------------------------------------------------
Operating income
(loss) (2,463) 552 (1,870) 1,498
Other income
(expense)
Gain (loss) on
foreign exchange (149) 12 (340) (33)
Investment income,
net 90 2 184 425
Interest on
convertible note,
including
amortization of
debt discount 202 0 (123) 0
Gain on conversion
of convertible
note and
revaluation of
related
derivative, net 300 0 507 0
----------------------------------------------------------------------------
443 14 228 392
----------------------------------------------------------------------------
Net and comprehensive
income (loss) before
income taxes (2,020) 566 (1,642) 1,890
Income taxes (1,203) 62 (2,089) (193)
----------------------------------------------------------------------------
Net and comprehensive
income (loss) $ (3,223) $ 628 $ (3,731) $ 1,697
----------------------------------------------------------------------------
Net income (loss) per
weighted average
number of shares of
common stock
outstanding - basic ($0.01) $ 0.00 ($0.02) $ 0.01
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Weighted average
number of shares of
common stock
outstanding - basic 224,949,928 173,781,312 213,990,794 172,326,735
============================================================================
Net income (loss) per
weighted average
number of shares of
common stock
outstanding -
diluted ($0.01) $ 0.00 ($0.02) $ 0.01
============================================================================
Weighted average
number of shares of
common stock
outstanding -
diluted 224,949,928 216,810,911 213,990,794 213,293,074
============================================================================
NEULION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
(Expressed in U.S. dollars)
Six months ended
June 30,
2015 2014
----------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ (3,731) $ 1,697
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 3,588 1,395
Stock-based compensation 921 709
Amortization of debt discount 123 0
Gain on revaluation of convertible note derivative (507) 0
Deferred income taxes 147 193
Changes in operating assets and liabilities, net of
acquisitions
Accounts receivable 9,299 289
Income tax receivable 4,318 0
Other receivables 362 (36)
Inventory 63 (14)
Prepaid expenses, deposits and other assets (1,961) 82
Due from related parties (86) (175)
Accounts payable (8,201) (6,050)
Accrued liabilities (3,076) (579)
Deferred revenue (3,008) (2,825)
Deferred rent liability (85) 0
Long-term liabilities (37) (33)
Due to related parties 9 (6)
----------------------------------------------------------------------------
Cash used in operating activities (1,862) (5,353)
----------------------------------------------------------------------------
INVESTING ACTIVITIES
Cash acquired from acquisition of DivX Corporation 9,718 0
Purchase of property, plant and equipment (527) (444)
----------------------------------------------------------------------------
Cash provided by (used in) investing activities 9,191 (444)
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from exercise of stock options 813 601
Proceeds from exercise of broker units 19 130
----------------------------------------------------------------------------
Cash provided by financing activities 832 731
============================================================================
Net increase (decrease) in cash and cash equivalents,
during the period 8,161 (5,066)
Cash and cash equivalents, beginning of period 25,898 19,644
----------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 34,059 $ 14,578
============================================================================
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 1,590 $ -
============================================================================
Supplemental disclosure of non-cash activities:
Par value of shares of common stock issued upon
exercise of cashless warrants $ - $ 26
============================================================================
Accretion of issuance costs on Class 4 Preference
Shares $ 15 $ -
============================================================================
Issuance of shares of common stock upon acquisition of
DivX Corporation $ 58,521 $ -
----------------------------------------------------------------------------
Issuance of convertible note upon acquisition of DivX
Corporation $ 27,000 $ -
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Reconciliation of GAAP Revenue to non-GAAP
Revenue (in thousands):
--------------------------------------------
Organic DivX Consolidated
--------------- --------------- ---------------
Three months ended June 30, 2015 2014 2015 2014 2015 2014
--------------- --------------- ---------------
GAAP Revenue $15,506 $13,409 $ 7,177 $ - $22,683 $13,409
Revenue excluded due to
purchase accounting 0 0 4,032 0 4,032 0
--------------- --------------- ---------------
Non-GAAP Revenue $15,506 $13,409 $11,209 $ - $26,715 $13,409
=============== =============== ===============
Organic DivX (1) Consolidated
--------------- --------------- ---------------
Six months ended June 30, 2015 2014 2015 2014 2015 2014
--------------- --------------- ---------------
GAAP Revenue $31,973 $26,878 $12,385 $ - $44,358 $26,878
Revenue excluded due to
purchase accounting 0 0 7,994 0 7,994 0
--------------- --------------- ---------------
Non-GAAP Revenue $31,973 $26,878 $20,379 $ - $52,352 $26,878
=============== =============== ===============
Since DivX was acquired by NeuLion on January 30, 2015, the purchase price allocation included an adjustment to record the fair value of assumed contractual payments due to DivX for which no or little additional obligations existed in order to receive such payments. These contractual payments are for fixed multi-year site licenses and unbilled per unit royalties for units shipped prior to the acquisition. Prior to the acquisition, revenue in such transactions was recognized during the period in which such customers reported the number of royalty-eligible units that they had shipped. Revenues from annual or other license fees are recognized based on the specific terms of the license arrangement. For instance, some of the DivX's large CE customers have entered into agreements for which they have the right to ship an unlimited number of units over a specified term for a flat fee. The Company records the fees associated with these arrangements on a straight-line basis over the specified term. Upon closing the acquisition of DivX, because DivX assumed no additional obligations under such contracts, these fixed payments are considered a fixed payment stream, rather than revenue and are therefore treated as accounts receivable as opposed to revenue as part of the purchase accounting. The fair value of the remaining fixed payments due under the applicable contracts is estimated by calculating the discounted cash flows associated with such fixed payments. The reduction in revenues related to the fixed payments being treated as accounts receivable as opposed to revenues has been reflected as a non-GAAP financial measure to include the effect of the excluded revenues to allow investors and analysts to make meaningful comparisons between DivX's ongoing core business operating results and those of other companies.
We anticipate the revenue excluded due to purchase accounting going-forward as follows:
Q3 2015 3,653
Q4 2015 3,478
Q1 2016 878
---------
$ 8,009
---------
Reconciliation of GAAP Net Income (Loss)
to Adjusted EBITDA (in thousands):
----------------------------------------
Organic DivX Consolidated
---------------- ---------------- ----------------
Three months ended June
30, 2015 2014 2015 2014 2015 2014
---------------- ---------------- ----------------
Consolidated Net Income
(Loss) on a GAAP basis $ 1,932 $ 628 $(5,155) $ - $(3,223) $ 628
Revenue excluded due to
purchase accounting 0 0 4,032 0 4,032 0
Depreciation and
amortization 470 710 1,592 0 2,062 710
Stock-based
compensation 594 374 0 0 594 374
Acquisition-related
expenses 0 0 0 0 0 0
Gain on revaluation of
convertible note
derivative (300) 0 0 0 (300) 0
Income taxes 0 (62) 1,203 0 1,203 (62)
Investment income
(expense) and foreign
exchange loss (217) (14) 74 0 (143) (14)
---------------- ---------------- ----------------
Adjusted EBITDA $ 2,479 $ 1,636 $ 1,746 $ - $ 4,225 $ 1,636
================ ================ ================
Organic DivX (1) Consolidated
---------------- ---------------- ----------------
Six months ended June
30, 2015 2014 2015 2014 2015 2014
---------------- ---------------- ----------------
Consolidated Net Income
(Loss) on a GAAP basis $ 4,070 $ 1,697 $(7,801) $ - $(3,731) $ 1,697
Revenue excluded due to
purchase accounting 0 0 7,994 0 7,994 0
Depreciation and
amortization 939 1,395 2,649 0 3,588 1,395
Stock-based
compensation 922 709 0 0 922 709
Acquisition-related
expenses 342 0 18 0 360 0
Gain on revaluation of
convertible note
derivative (507) 0 0 0 (507) 0
Income taxes 238 193 1,850 0 2,088 193
Investment income
(expense) and foreign
exchange loss 297 (391) (18) 0 279 (391)
---------------- ---------------- ----------------
Adjusted EBITDA $ 6,301 $ 3,603 $ 4,692 $ - $10,993 $ 3,603
================ ================ ================
The figures are for the period from February 1, 2015 to June 30, 2015.
Investor Relations Contact:
LHA
Ed McGregor/Jody Burfening
Email contact
(212) 838-3777
