SOURCE: NeuLion, Inc.

NeuLion, Inc.

November 06, 2014 07:19 ET

NeuLion Reports 22% Year-Over-Year Increase in Third Quarter Revenue to $12.2 Million

PLAINVIEW, NY--(Marketwired - November 06, 2014) -

Third Quarter Year-Over-Year Highlights

  • Revenue increased 22% to $12.2 million versus $10.0 million
  • Non-GAAP Adjusted Gross Margin Percentage expanded to 77% versus 74%
  • Non-GAAP Adjusted EBITDA grew to $1.3 million versus $0.2 million
  • Consolidated Net Income was $0.2 million versus a consolidated net loss of $1.7 million
  • Trailing twelve month revenue reached $53.2 million, 22% greater than the comparable prior period
  • 8th consecutive quarter of positive Non-GAAP Adjusted EBITDA
  • 4th consecutive quarter of net income

NeuLion, Inc. (TSX: NLN), a leading enabler and provider of live and on-demand content to Internet-connected devices, today reported financial results for the third quarter ended September 30, 2014. 

Management Commentary

"NeuLion's revenue increased 22% over last year, driven by the addition of new customers as well as increased usage by existing customers," said Nancy Li, chief executive officer. "With increased revenue across our three divisions, marked by increased usage and volume in Pro Sports and TV Everywhere, adjusted EBITDA increased from $200,000 to $1.3 million, demonstrating the operating leverage inherent in our business model."

"In addition, with the rate of revenue growth increasing, our third quarter results are indicative of the increasing momentum in our business. With growing adoption of the consumption of content through digital media worldwide, NeuLion is in an excellent position for future growth," concluded Ms. Li.

Third Quarter Operational Highlights

TV Everywhere

  • Launched new Hybrid TV Everywhere service with the Big Ten Network to include BTN Plus, a new subscription service within BTN2Go that includes access to all non-televised Big Ten events via a monthly or yearly subscription pass.
  • Expanded partnership with Coliseum Sports Media to include PGA Tour content in a new direct-to-consumer service throughout New Zealand, set to launch in 2015. Expanded Barclays Premier League territory, which started in New Zealand, to now include the Philippines and Taiwan. 
  • Partnered with Rogers Cable for the delivery of Quebec Major Junior Hockey League games to multiple devices.
  • Expanded services in Canada for both the NFL and NBA. For the NBA, we are powering NBA League Pass on the Bell TV app. For the NFL, we are powering NFL Sunday Ticket on Rogers Anyplace TV, the Shaw Go NFL Sunday Ticket™ app and NFL Sunday Ticket services for SaskTel, Telus, and MTS.

Professional Sports

  • Developed and launched Rogers NHL GameCentre LIVE™, hockey's new home in Canada, with live in- and out-of-market game coverage and new interactive camera feeds, multiple angle highlights, French language support and more. 
  • Partnered with the East Coast Hockey League to create a new digital service, ECHL.TV, for all live and on-demand ECHL games available on PCs, iPhones and iPads through one user account with multiple subscription package options from team passes to a league-wide pass.
  • Partnered with the Southern Professional Hockey League to deliver live and on-demand SPHL games for fans to view on multiple devices worldwide. 

College Sports

  • Launched NCHC.tv, the National Collegiate Hockey Conference's brand new digital network, as the first fully integrated digital network offered by a single-sport NCAA conference. NCHC.tv brings collegiate hockey fans nearly all of their team's games live, both home and on the road, seamlessly available across multiple devices.
  • Created an innovative in-venue, game-day experience for the University of Nebraska with in-depth information about each game, including exclusive streaming video content only available to those inside Nebraska's Memorial Stadium. It also includes rosters, real-time stats and venue maps with concession stands, restrooms and more.
  • Unveiled new Seminoles.com athletic website for Florida State University that boasts a more innovative and mobile-friendly design, allowing FSU Athletics to have a more user-oriented digital footprint, thus making fans' engagement with the teams they love that much easier.

Third Quarter 2014 Financial Review

Total revenue was $12.2 million compared to $10.0 million for the third quarter of 2013, an increase of $2.2 million, or 22%, reflecting revenue growth across the Pro Sports, TV Everywhere, and College Sports divisions.

Pro Sports revenue increased 37% to $5.2 million from $3.8 million for the three months ended September 30, 2013, primarily due to growth in fixed fees and variable subscription fees from new and existing customers. College Sports revenue increased 7% to $3.1 million compared to $2.9 million for the three months ended September 30, 2013. The increase was primarily driven by an increase in variable advertising revenue. TV Everywhere revenue increased 17% to $3.4 million from $2.9 million for the three months ended September 30, 2013 primarily due to an increase in monthly fixed fees from new and existing customers and increased variable usage fees.

Cost of revenue was $2.8 million, or 23% of total revenue, compared to $2.6 million, or 26% of total revenue, for the same period last year. Selling, general and administrative expenses, including stock-based compensation, were $6.3 million, an increase of 3% from $6.1 million for the three months ended September 30, 2013. Research and development expenses were $2.1 million, an 11% increase compared to $1.9 million for the three months ended September 30, 2013. Operating income was $0.2 million compared to an operating loss of $1.5 million in the third quarter of 2013. Consolidated net income was $0.2 million, or $0.00 per diluted share, compared with a consolidated net loss of $1.7 million, or a loss of $0.01 per diluted share, for the three months ended September 30, 2013.

Non-GAAP Results

Adjusted Gross Margin Percentage was 77% compared with 74% for the three months ended September 30, 2014, reflecting improved operating costs. Adjusted EBITDA rose to $1.3 million from $0.2 million for the same period last year due to higher revenue and lower SG&A and R&D costs as a percentage of revenue. Please refer to the tables accompanying this release for the calculations of Adjusted Gross Margin Percentage and Adjusted EBITDA.

Use of Non-GAAP Financial Information

In addition to our U.S. GAAP results, this press release also includes certain non-GAAP financial measures as defined by the SEC. The Company defines Adjusted Gross Margin Percentage as consolidated operating income (loss) plus depreciation and amortization, research and development expenses and selling general administrative expenses divided by total revenue. It defines Adjusted EBITDA as consolidated net income (loss) before interest, income taxes, depreciation and amortization, investment income, stock-based compensation, amortization of discount on convertible note and foreign exchange loss. Adjusted Gross Margin Percentage and Adjusted EBITDA are key measures used by management to evaluate our results and make strategic decisions about the Company, including potential acquisitions. Management believes these measures are useful to investors because they are indicators of operational performance. Because not all companies use identical calculations, the Company's presentation of Adjusted Gross Margin Percentage and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. These measures do not have any standardized meaning prescribed by U.S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives 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 reconciliations of Adjusted EBITDA to U.S. GAAP consolidated net income/(loss) and of Adjusted Gross Margin Percentage to U.S. GAAP consolidated operating income/(loss) as exhibits to this press release.

About NeuLion

NeuLion, Inc. (TSX: NLN) offers a true end-to-end solution for delivering live and on-demand content to Internet-enabled devices. NeuLion enables content owners and distributors, cable operators and telecommunications companies to capitalize on the massive consumer demand for viewing video content on PCs, smartphones, iPads and other similar devices. NeuLion's customers include professional sports, college sports and other content rights holders. NeuLion is based 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 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, 2013, as amended, which is available on www.sec.gov and filed on www.sedar.com.

   
NEULION, INC.  
   
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Expressed in U.S. dollars)  
  
  September 30, 2014 December 31, 2013  
 (unaudited)
   
ASSETS         
Current         
Cash and cash equivalents $25,759,973  $19,644,270  
Accounts receivable, net of allowance for doubtful accounts of $162,871 and $85,882  4,840,275   5,289,136  
Other receivables  372,286   364,797  
Inventory  296,001   481,012  
Prepaid expenses and deposits  1,238,915   1,135,949  
Due from related parties  447,638   243,842  
Total current assets  32,955,088   27,159,006  
Property, plant and equipment, net  3,999,090   3,357,626  
Intangible assets, net  587,638   1,649,959  
Goodwill  11,327,626   11,327,626  
Other assets  84,492   81,778  
Total assets $48,953,934  $43,575,995  
          
LIABILITIES AND EQUITY         
Current         
Accounts payable $14,628,418  $13,002,104  
Accrued liabilities  4,551,152   5,338,418  
Due to related parties  24,796   16,743  
Deferred revenue  9,090,000   8,856,629  
Total current liabilities  28,294,366   27,213,894  
Long-term deferred revenue  1,064,229   725,853  
Other long-term liabilities  218,559   270,892  
Deferred tax liability  1,345,208   1,180,978  
Total liabilities  30,922,362   29,391,617  
          
Redeemable preferred stock, net (par value: $0.01; authorized: 50,000,000; issued and outstanding: 28,089,083)
 
 Class 3 Preference Shares (par value: $0.01; authorized, issued and outstanding: 17,176,818)  10,000,000   10,000,000  
 
 Class 4 Preference Shares (par value: $0.01; authorized, issued and outstanding:10,912,265)  4,947,344   4,924,775  
Total redeemable preferred stock  14,947,344   14,924,775  
          
Stockholders' equity (deficit)         
Common stock (par value: $0.01; shares authorized: 300,000,000; shares issued and outstanding:177,987,133 and 170,326,338, respectively)  1,779,871   1,703,263  
Additional paid-in capital  87,239,510   85,437,337  
Promissory notes receivable  (209,250 ) (209,250 )
Accumulated deficit  (85,725,903 ) (87,671,747 )
Total stockholders' equity (deficit)  3,084,228   (740,397 )
Total liabilities and stockholders' equity $48,953,934  $43,575,995  
          
          
   
NEULION, INC.  
   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND  
COMPREHENSIVE INCOME (LOSS)  
(unaudited)  
(Expressed in U.S. dollars)  
   
  Three months ended
September 30,
 Nine months ended
September 30,
 
  2014  2013  2014  2013  
              
Revenue $ 12,177,278  $ 10,026,866  $ 39,055,736  $ 32,963,045  
                  
Costs and expenses                 
 Cost of revenue, exclusive of depreciation and amortization shown separately below  2,813,599   2,647,427   9,860,179   9,283,230  
 Selling, general and administrative, including stock-based compensation  6,329,684   6,051,191   19,107,760   17,989,383  
 Research and development  2,104,339   1,887,379   6,264,429   5,460,126  
 Depreciation and amortization  679,888   990,083   2,075,328   2,987,272  
   11,927,510   11,576,080   37,307,696   35,720,011  
Operating income (loss)  249,768   (1,549,214 ) 1,748,040   (2,756,966 )
                  
Other income (expense)                 
 Loss on foreign exchange  (31,168 ) (42,744 ) (64,565 ) (89,949 )
 Investment income (expense), net  1,889   2,094   426,599   (4,351 )
 Amortization of discount on convertible note  0   0   0   (233,769 )
   (29,279 ) (40,650 ) 362,034   (328,069 )
Net and comprehensive income (loss) before income taxes  220,489   (1,589,864 ) 2,110,074   (3,085,035 )
 Income taxes  28,388   (160,000 ) (164,230 ) (265,290 )
Net and comprehensive income (loss) $248,877  $(1,749,864 )$1,945,844  $(3,350,325 )
                  
Net income (loss) per weighted average number of shares of common stock outstanding - basic $0.00   ($0.01 )$0.01   ($0.02 )
                  
Weighted average number of shares of common stock outstanding - basic  175,803,863   167,842,903   173,498,515   165,698,517  
                  
Net income (loss) per weighted average number of shares of common stock outstanding - diluted $0.00   ($0.01 )$0.01   ($0.02 )
                  
Weighted average number of shares of common stock outstanding - diluted  217,162,823   167,842,903   212,654,453   165,698,517  
             
             
   
NEULION, INC.  
   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(unaudited)  
(Expressed in U.S. dollars)  
   
  Three months ended
September 30,
 Nine months ended
September 30,
 
  2014  2013  2014  2013  
OPERATING ACTIVITIES                 
                  
Net income (loss) $248,877  $(1,749,864 )$1,945,844  $(3,350,325 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                 
 Depreciation and amortization  679,888   990,083   2,075,328   2,987,272  
 Discount on convertible note  0   0   0   233,769  
 Stock-based compensation  379,756   717,765   1,089,060   1,072,601  
 Deferred income taxes  (28,388 ) 160,000   164,230   257,444  
                  
Changes in operating assets and liabilities                 
 Accounts receivable  160,188   (987,453 ) 448,861   404,834  
 Inventory  198,899   (49,114 ) 185,011   59,812  
 Prepaid expenses, deposits and other assets  (187,233 ) (386,742 ) (105,680 ) (126,554 )
 Other receivables  28,625   67,666   (7,489 ) 66,153  
 Due from related parties  (29,067 ) 474,003   (203,796 ) 628,528  
 Accounts payable  7,676,249   10,064,504   1,626,314   6,778,448  
 Accrued liabilities  (208,049 ) 444,788   (787,266 ) 825,552  
 Deferred revenue  3,397,171   2,814,583   571,747   1,463,116  
 Long-term liabilities  (19,053 ) (20,450 ) (52,333 ) (64,410 )
 Due to related parties  13,511   (13,467 ) 8,053   (12,282 )
Cash provided by operating activities  12,311,374   12,526,302   6,957,884   11,223,958  
                  
INVESTING ACTIVITIES                 
Purchase of property, plant and equipment  (1,210,884 ) (640,998 ) (1,654,471 ) (1,039,929 )
Cash used in investing activities  (1,210,884 ) (640,998 ) (1,654,471 ) (1,039,929 )
                  
FINANCING ACTIVITIES                 
Proceeds from exercise of stock options  80,249   0   680,607   0  
Proceeds from exercise of broker units  1,470   840   131,683   1,680  
Cash provided by financing activities  81,719   840   812,290   1,680  
                  
Net increase in cash and cash equivalents, during the period  11,182,209   11,886,144   6,115,703   10,185,709  
Cash and cash equivalents, beginning of period  14,577,764   9,407,672   19,644,270   11,108,107  
Cash and cash equivalents, end of period $25,759,973  $21,293,816  $25,759,973  $21,293,816  
                  
Supplemental disclosure of non-cash activities:                 
Par value of shares of common stock issued upon exercise of cashless warrants $26,874  $6  $52,395  $1,134  
                  
Accretion of issuance costs on Class 4 Preference Shares $7,523  $22,569  $7,523  $22,569  
                  
             
NEULION, INC.  
   
RECONCILIATION OF NON-GAAP MEASURES  
(unaudited)  
(Expressed in U.S. dollars, unless otherwise noted)  
   
Consolidated Statement of Operations Reconciliations:  
   
The reconciliations from consolidated operating income (loss) to Non-GAAP Adjusted Gross Margin % are as follows:  
   
  Three months ended
September 30,
 Nine months ended
September 30,
 
  2014  2013  2014  2013  
                  
Consolidated operating income (loss) on a GAAP basis $249,768  $(1,549,214 )$1,748,040  $(2,756,966 )
                  
Amortization and depreciation  679,888   990,083   2,075,328   2,987,272  
Research and development  2,104,339   1,887,379   6,264,429   5,460,126  
Selling, general and administrative, including stock-based compensation  6,329,684   6,051,191   19,107,760   17,989,383  
Non-GAAP Adjusted Gross Margin $9,363,679  $7,379,439  $29,195,557  $23,679,815  
                  
Total Revenue $12,177,278  $10,026,866  $39,055,736  $32,963,045  
                  
Non-GAAP Adjusted Gross Margin % (as a % of total revenue)  77 % 74 % 75 % 72 %
                  
                  
The reconciliation from net income (loss) to Non-GAAP Adjusted EBITDA is as follows:  
                  
   Three months ended
September 30,
  Nine months ended
September 30,
 
   2014   2013   2014   2013  
                  
Consolidated net income (loss) on a GAAP basis $248,877  $(1,749,864 )$1,945,844  $(3,350,325 )
                  
Depreciation and amortization  679,888   990,083   2,075,328   2,987,272  
Stock-based compensation  379,756   717,765   1,089,060   1,072,601  
Discount on convertible note  0   0   0   233,769  
Income taxes  (28,388 ) 160,000   164,230   265,290  
Investment (income) expense, net and foreign exchange (gain) loss  29,279   40,650   (362,034 ) 94,300  
                  
Non-GAAP Adjusted EBITDA $1,309,412  $158,634  $4,912,428  $1,302,907  

Contact Information

  • Investor Relations Contact:
    LHA
    Stephanie Prince/Jody Burfening
    Email contact
    (212) 838-3777