SOURCE: NeuLion, Inc.

NeuLion, Inc.

May 07, 2015 17:14 ET

NeuLion Reports 61% Year-Over-Year Increase in First Quarter GAAP Revenue to $21.7 Million

PLAINVIEW, NY--(Marketwired - May 07, 2015) - NeuLion, Inc. (TSX: NLN) -

First Quarter Year-Over-Year Highlights

  • GAAP revenue increased 61% to $21.7 million versus $13.5 million; non-GAAP revenue increased 90% to $25.6 million versus $13.5 million
  • TV Everywhere revenue increased 59% to $5.4 million versus $3.4 million
  • Non-GAAP Adjusted EBITDA grew to $6.8 million versus $2.0 million
  • Non-GAAP Adjusted EBITDA margin increased to 26.6% versus 14.8%
  • GAAP revenue from DivX for two months was $5.2 million; non-GAAP revenue from DivX for two months was $9.2 million

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 first quarter ended March 31, 2015. 

Management Commentary

"By any financial measure, NeuLion had an outstanding first quarter of 2015," said Kanaan Jemili, chief executive officer. "Total GAAP revenue surged 61% with organic revenue growing 22% on increased usage and volume in our Pro Sports and TV Everywhere platforms. Non-GAAP revenue nearly doubled, with our newly acquired DivX business accounting for 36% of total Non-GAAP revenue. Along with posting very strong revenue growth, we realized a 6 percentage point improvement in our cost of revenue (to 20%), with half of that improvement coming from streaming cost efficiencies and the other half from the contribution of DivX's high-margin licensing business."

"During the first quarter, we began the integration of DivX into NeuLion, combining the sales and product development organizations, unifying the NeuLion and DivX technology platforms and consolidating the value proposition we are bringing to the industry," added Jemili. "We now empower the entire ecosystem of content producers, technology providers, distributors and consumers by delivering synergies between the CE industry, OTT and TV Everywhere service providers and the DivX MainConcept value chain. Additionally, with an expanded global footprint, entrenched customer relationships and a highly competitive technology platform, we remain well positioned to land and expand opportunities for growth, while continuing to deliver the highest quality on demand and live interactive sports and entertainment experience to consumers whenever, wherever and on any device."

First Quarter Operational Highlights

  • Delivered the first live 4K streaming event in partnership with Sony, BT Sports and the NBA by successfully streaming a live NBA game in 4K from the London O2 arena.
  • Announced new partnership with World Surf League (WSL), to deliver compelling surfing footage coupled with interactive touch-points including super slo-mo viewing, real-time highlights and the ability to stream in 1080p HD and Ultra HD (4K).
  • Launched MLS Live for the 2015 season with Major League Soccer (MLS) and saw 60% quarter over quarter growth in terms of new and renewing subscribers to the number one digital soccer network in North America. 
  • Expanded partnership with the Tennis Channel to create and deliver a new big screen experience for tennis fans on Apple TV and Roku connected devices.
  • Renewed license agreement with LG Electronics who will now benefit from the recent release of DivX® HEVC 4K that will be installed on LG Ultra HD televisions. The new DivX® HEVC solution for 4K video streaming will be implemented across LG's Ultra HD TV product line. 
  • Licensed the DivX® HEVC CE SDK to Hisense in order for them to integrate it into their line of Ultra HD television sets with 4K ready playback. 
  • Launched FAN PASS, SKY New Zealand's new Over The Top (OTT) Digital Sports Service for Super Rugby, NRL and Formula 1. 
  • Renewed a multi-year deal with Louisiana State University (LSU), one of the largest college sports programs, for the official digital platform of the LSU Sports Athletics Department.

First Quarter 2015 Financial Review

Total GAAP revenue was $21.7 million compared to $13.5 million for the first quarter of 2014, an increase of $8.2 million, or 61%, reflecting the addition of $5.2 million in revenue from DivX and organic revenue growth in the Pro Sports and TV Everywhere categories.

Pro Sports revenue increased 24% to $7.8 million for the current period from $6.3 million for the comparable prior period, primarily due to growth in fixed fees and variable subscription fees from new and existing customers. TV Everywhere revenue increased 59% to $5.4 million for the current period from $3.4 million for the prior comparable period, primarily due to increases in monthly and annual fixed fees from new and existing customers and increased variable support and usage fees. College Sports revenue decreased 13% to $3.3 million for the current period compared to $3.8 million for the prior comparable period. The decrease was primarily driven by a decline in variable subscription fees resulting from a shift in the manner in which colleges and conferences are monetizing digital assets. Revenues from the company's Consumer Electronics and Main Concept categories were $4.1 million and $0.9 million, respectively, as a result of the DivX acquisition on January 30, 2015.

Cost of revenue was $4.3 million, or 20% of total revenue, for the current period compared to $3.5 million, or 26% of total revenue, for the prior comparable period. Half of the cost of revenue percentage improvement was due to the high margin DivX business and half was due to improved broadcast operating costs. Selling, general and administrative expenses, including stock-based compensation, were $9.9 million for the current period, an increase of 55% from $6.4 million for the prior comparable period. Research and development expenses were $5.3 million for the current period, a 165% increase compared to $2.0 million for the prior comparable period. Operating income was $0.6 million compared to $0.9 million in the first quarter of 2014. The consolidated net loss was $0.5 million, or $0.00 per diluted share, for the current period compared with consolidated net income of $1.1 million, or $0.00 per diluted share, for the prior comparable period.

Non-GAAP Results

Non-GAAP revenue increased 90% to $25.6 million from the prior year's level. Non-GAAP Adjusted EBITDA more than tripled to $6.8 million from $2.0 million for the same period last year, with $2.9 million of the increase due to the acquisition of DivX and $1.9 million from organic improvement due to higher revenue and improved cost of revenues as a percentage of revenues, 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 price 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 price accounting adjustments, stock-based compensation, acquisition-related expenses, gain on revaluation of convertible note derivative, and foreign exchange 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 Adjusted Revenue and 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, 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  
(Expressed in U.S. dollars)  
            
   March 31,     December 31,  
   2015     2014  
   (unaudited)        
            
ASSETS           
Current           
Cash and cash equivalents $35,224,745    $25,898,386  
Accounts receivable, net of allowance for doubtful accounts of $1,203,560 and $220,803  31,176,947     8,055,714  
Income tax receivable  169,598     0  
Other receivables  670,158     602,668  
Inventory  268,255     304,028  
Deferred tax assets, net  383,752     0  
Prepaid expenses and deposits  2,259,763     1,315,113  
Due from related parties  281,624     111,114  
Total current assets  70,434,842     36,287,023  
Property, plant and equipment, net  7,209,608     3,829,666  
Intangible assets, net  27,905,851     406,196  
Goodwill  12,108,595     11,327,626  
Other assets  374,785     87,662  
Total assets $118,033,681    $51,938,173  
            
LIABILITIES AND EQUITY           
Current           
Accounts payable $12,200,865    $14,362,317  
Accrued liabilities  8,211,394     5,247,483  
Due to related parties  9,401     0  
Deferred revenue  10,978,204     9,601,907  
Total current liabilities  31,399,864     29,211,707  
Long-term deferred revenue  1,479,823     1,018,807  
Other long-term liabilities  181,384     202,333  
Deferred rent liability  1,912,925     0  
Convertible note  26,612,525     0  
Convertible note derivative  506,482     0  
Deferred tax liability  3,694,325     1,451,526  
Total liabilities  65,787,328     31,884,373  
        
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)
 4,962,390   4,954,867 
Total redeemable preferred stock  14,962,390     14,954,867  
        
Stockholders' equity        
Common stock (par value: $0.01; shares authorized: 300,000,000; shares issued and outstanding: 217,243,180 and 178,210,006, respectively)  2,172,432     1,782,100  
Additional paid-in capital  119,933,907     87,630,600  
Promissory notes receivable  (209,250 )   (209,250 )
Accumulated deficit  (84,613,126 )   (84,104,517 )
Total stockholders' equity  37,283,963     5,098,933  
Total liabilities and stockholders' equity $118,033,681    $51,938,173
 
  
NEULION, INC.  
  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
 
COMPREHENSIVE INCOME (LOSS)
 
(unaudited)  
(Expressed in U.S. dollars)  
          
  Three months ended March 31,  
  2015    2014  
            
Revenue $21,674,641    $13,469,582  
            
Costs and expenses           
 Cost of revenue, exclusive of depreciation and amortization shown separately below  4,326,211     3,510,674  
 Selling, general and administrative, including stock-based compensation  9,905,552     6,354,050  
 Research and development  5,315,804     1,972,803  
 Depreciation and amortization  1,526,828     685,804  
   21,074,395     12,523,331  
Operating income  600,246     946,251  
            
Other income (expense)           
 Loss on foreign exchange  (190,832 )   (45,362 )
 Investment income, net  94,880     422,844  
 Interest on convertible note, including amortization of debt discount  (325,735 )   0  
 Gain on revaluation of convertible note derivative  206,728     0  
 Other  (8,336 )   0  
   (223,295 )   377,482  
Net and comprehensive income before income taxes  376,951     1,323,733  
 Income taxes  (885,560 )   (254,846 )
Net and comprehensive income (loss) $(508,609 )  $1,068,887  
            
Net income (loss) per weighted average number of shares of common stock outstanding - basic $0.00    $0.01  
            
Weighted average number of shares of common stock outstanding - basic  202,910,903     170,855,997  
            
Net income (loss) per weighted average number of shares of common stock outstanding - diluted $0.00    $0.00  
            
Weighted average number of shares of common stock outstanding - diluted  202,910,903     214,405,854  
  
NEULION, INC.  
   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(unaudited)  
(Expressed in U.S. dollars)  
   
  Three months ended March 31,  
  2015    2014  
OPERATING ACTIVITIES           
            
Net income (loss) $(508,609 )  $1,068,887  
Adjustments to reconcile net income (loss) to net cash used in operating activities:           
 Depreciation and amortization  1,526,828     685,804  
 Stock-based compensation  327,058     334,818  
 Amortization of debt discount  59,434     0  
 Gain on revaluation of convertible note derivative  (206,728 )   0  
 Deferred income taxes  794,779     254,846  
            
Changes in operating assets and liabilities, net of acquisitions           
 Accounts receivable  548,120     (61,273 )
 Income tax receivable  3,597,015     0  
 Other receivables  (229,809 )   (51,144 )
 Inventory  35,773     97,724  
 Prepaid expenses, deposits and other assets  444,310     153,834  
 Due from related parties  (170,510 )   (139,658 )
 Accounts payable  (3,141,179 )   (1,736,935 )
 Accrued liabilities  (2,466,202 )   (822,750 )
 Deferred revenue  (1,162,687 )   (1,463,307 )
 Deferred rent liability  17,976     0  
 Long-term liabilities  (20,949 )   (18,742 )
 Due to related parties  9,401     (3,926 )
Cash used in operating activities  (545,979 )   (1,701,822 )
            
INVESTING ACTIVITIES           
Cash acquired from acquisition of DivX Corporation  9,717,779     0  
Purchase of property, plant and equipment  (314,184 )   (104,936 )
Cash provided by (used in) investing activities  9,403,595     (104,936 )
            
FINANCING ACTIVITIES           
Proceeds from exercise of stock options  450,250     358,147  
Proceeds from exercise of broker units  18,493     126,013  
Cash provided by financing activities  468,743     484,160  
            
Net increase (decrease) in cash and cash equivalents, during the period  9,326,359     (1,322,598 )
Cash and cash equivalents, beginning of period  25,898,386     19,644,270  
Cash and cash equivalents, end of period $35,224,745    $18,321,672  
            
Supplemental disclosure of cash flow information:           
Cash paid for income taxes $91,453    $-  
            
Supplemental disclosure of non-cash activities:           
Par value of shares of common stock issued upon exercise of cashless warrants $19,235    $6,699  
            
Accretion of issuance costs on Class 4 Preference Shares $7,523    $7,523  
            
Issuance of shares of common stock upon acquisition of DivX Corporation $31,905,361    $-  
            
Issuance of convertible note upon acquisition of DivX Corporation $27,000,000    $-
 
 
NEULION, INC.
 
RECONCILIATION OF NON-GAAP MEASURES
(unaudited)
(Expressed in U.S. dollars)
  
Reconciliation of GAAP Total Revenue to non-GAAP Total Revenue:  
  
                       
  Organic    DivX   Consolidated  
  Three months ended March 31,    Three months ended March 31,   Three months ended March 31,  
  2015  2014    2015  2014   2015  2014  
                             
GAAP Total Revenue $16,466,945  $13,469,582    $5,207,696  $-   $21,674,641  $13,469,582  
                             
Revenue excluded due to purchase accounting  0   0     3,962,303   0    3,962,303   0  
                             
Non-GAAP Total Revenue $16,466,945  $13,469,582    $9,169,999  $-   $25,636,944  $13,469,582  
  
Reconciliation of GAAP Net Income (Loss) to non-GAAP Adjusted EBITDA:  
  
                       
  Organic    DivX   Consolidated  
  Three months ended March 31,    Three months ended March 31,   Three months ended March 31,  
  2015  2014    2015  2014   2015  2014  
                             
Consolidated Net Income (Loss) on a GAAP basis $2,137,987  $1,068,887    $(2,646,596 )$-   $(508,609 )$1,068,887  
                             
Revenue excluded due to purchase accounting  0   0     3,962,303   0    3,962,303   0  
Depreciation and amortization  469,232   685,804     1,057,596   0    1,526,828   685,804  
Stock-based compensation  327,058   334,818     0   0    327,058   334,818  
Acquisition-related expenses  341,867   0     18,000   0    359,867   0  
Gain on revaluation of convertible note derivative  (206,728 ) 0     0   0    (206,728 )    
Income taxes  238,388   254,846     647,172   0    885,560   254,846  
Investment income (expense) and foreign exchange loss  514,175   (377,482 )   (92,488 ) 0    421,687   (377,482 )
                             
Non-GAAP Adjusted EBITDA $3,821,979  $1,966,873    $2,945,987  $-   $6,767,966  $1,966,873  

Contact Information

  • Investor Relations Contact:
    LHA
    Ed McGregor
    Jody Burfening
    Email contact
    (212) 838-3777