SOURCE: NeuLion, Inc.

NeuLion, Inc.

May 04, 2016 07:21 ET

NeuLion Reports First Quarter Revenue of $26.3 Million and Net Income of $2.1 Million

Total GAAP Revenue Increase of 21% Year Over Year

PLAINVIEW, NY--(Marketwired - May 04, 2016) -

First Quarter Highlights

  • GAAP revenue increased 21% to $26.3 million versus $21.7 million year over year
  • NeuLion Digital Platform revenue increased 10% to $18.2 million versus $16.5 million year over year
  • Net income grew to $2.1 million versus a net loss of $0.5 million year over year
  • Working capital improved to $43.5 million at March 31, 2016 versus $38.6 million at December 31, 2015

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 quarter ended March 31, 2016.

"Revenue from our NeuLion Digital Platform grew 10% on new customer additions and expanded usage from existing customers. Our Q1 results continue to highlight our scalable business model and significant operating leverage. As revenues increase, our costs increase at significantly lower rates." said Kanaan Jemili, Chief Executive Officer.

Added Jemili, "We continue to expand our efforts in the UHD 4K market, having completed four live OTT broadcasts of 4K content working with Univision, BT Sports and Mediapro. UHD 4K TV shipments with consumers are growing exponentially and this is key to the synergy we have created between our NeuLion Digital Platform business and our DivX CE licensing business with large manufacturers of UHD TVs."

Operational Highlights

  • NeuLion continued its penetration in the OTT 4K content market by partnering with Mediapro to broadcast live the El Clásico La Liga football match between FC Barcelona and Real Madrid in UHD 4K resolution.
  • The NeuLion Digital Platform and encoder have been certified by Nielsen, the recognized leader in audience measurement, enabling NeuLion content partners to add digital audiences to their National and Local TV ratings.
  • Rogers Media Sportsnet NOW, powered by NeuLion, became available as a direct to consumer service through a monthly subscription giving viewers across Canada live 24/7 access to six Sportsnet linear channels. Sportnet is the first mainstream sports TV channel in North America to be offered direct to consumers.
  • Professional Bowlers Association and NeuLion together launched a new video streaming service, PBA Xtra Frame, with new mobile apps and an enhanced video player for fans.
  • Major League Soccer and NeuLion extended their partnership agreement after seeing subscribers of MLS LIVE grow by over 60% year-over-year. MLS LIVE, powered by NeuLion, saw record number of existing subscribers renewing the service as well as a record number of activations from first-time subscribers.
  • Sony selected NeuLion as its partner to bring live 4K content to Sony televisions. The new agreement licenses the NeuLion 4K Streaming CE SDK, along with integration services connecting the NeuLion Digital Platform, to ensure high-quality streaming of live events delivered over the top to Sony 4K Ultra HD TVs.
  • TCL Corporation signed a new licensing agreement to integrate NeuLion's 4K Streaming CE SDK into its newest line of UHD televisions, enabling a superior OTT experience for live and on-demand secure 4K video streaming of immersive sports and premium content on TCL's UHD TVs.

Share Repurchase Program

On March 8, 2016, we announced that our Board of Directors had authorized the repurchase of up to $10 million shares of our common stock over the next 12 months through a normal course issuer bid ("NCIB") for up to 14,109,057 shares of common stock. On March 24, 2016, we announced that we had received the TSX's approval to commence the NCIB, and that the NCIB would commence on April 1, 2016.

During April 2016, a broker, on behalf of NeuLion, purchased 842,304 shares of our common stock on the Toronto Stock Exchange at a total cost of CDN$1.1 million. We intend to settle with the broker and cancel these shares shortly.

First Quarter Financial Review

As a result of the acquisition of DivX Corporation on January 30, 2015, the figures for the three months ended March 31, 2015 include results from DivX for two months, whereas the figures for the three months ended March 31, 2016 include results from DivX for three months.

GAAP Results

Total GAAP revenue was $26.3 million for the first quarter of 2016 compared to $21.7 million for the prior comparable period, an increase of $4.6 million, or 21%. The NeuLion Digital Platform had revenue growth of 10% to $18.3 million for the current period, from $16.5 million for the prior comparable period, due to new customer contracts and expanded usage from existing customers. DivX and MainConcept revenue was $8.0 million in the first quarter of 2016.

Cost of revenue was $4.7 million, or 18% of revenue, for the current period, compared to $4.3 million, or 20% of revenue, for the prior comparable period. The two percentage point improvement was due to a combination of the addition of DivX and MainConcept revenue streams for a full three months and improved operating costs. Selling, general and administrative expenses, including stock-based compensation, were $11.9 million for the current period, an increase of 20% from $9.9 million for the prior comparable period. Research and development expenses were $4.4 million for the current period, a decrease of 17% from the $5.3 million figure reported in the prior comparable period, primarily as a result of reduction in headcount resulting from redundancy associated with the DivX acquisition. Operating income was $3.4 million for the current period compared to $0.6 million for the prior comparable period. Consolidated net income was $2.1 million, or $0.01 per diluted share, for the current period compared with consolidated net loss of $0.5 million, or $0.00 per diluted share, for the prior comparable period.

Non-GAAP Results

Pro Forma Non-GAAP revenue decreased 7% to $27.2 million from the same period a year ago. The decrease was primarily due to a decrease in our DivX licensing revenues as a result of a change in the terms of a license agreement with one of our larger customers. The terms of the agreement have changed from a fixed site license arrangement in 2015 to a variable per unit license fee in 2016. Under our revenue recognition policy, we recognize revenues earned from our variable per unit license fee agreement during the period in which customers report the number of royalty-eligible units that have been shipped, which is typically one quarter in arrears. As a result of this change, no revenues were recorded for this customer during the current period as compared to $2.6 million during the prior comparable period. Pro Forma Non-GAAP Adjusted EBITDA improved to $7.0 million from $6.8 million for the prior comparable period, on $1.9 million less Non-GAAP revenue. 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 Securities and Exchange Commission. NeuLion defines Non-GAAP revenues as GAAP revenues before purchase accounting adjustments as a result of an acquisition. NeuLion defines Adjusted EBITDA as consolidated net income (loss) before interest, income taxes, depreciation and amortization, purchase accounting adjustments, stock-based compensation, acquisition-related expenses, listing-related expenses, gain on revaluation of convertible note derivative, and foreign exchange gain (loss). Adjusted EBITDA is a key measure used by management to evaluate NeuLion'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, NeuLion'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 revenue to U.S. GAAP revenue and 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 including the NFL, NBA, World Surf League, Univision Deportes, Euroleague Basketball and others. NeuLion also operates a robust consumer electronics licensing business that has enabled over 1 billion devices worldwide with secure, high-quality video streaming, 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," 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 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, 2015, 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)  
  March 31,   December 31,  
  2016   2015  
  (unaudited)      
             
ASSETS            
Current            
Cash and cash equivalents $ 61,516   $ 53,413  
Accounts receivable, net of allowance of doubtful accounts of $550 and $688   11,363     12,967  
Other receivables   849     604  
Inventory   181     199  
Prepaid expenses and deposits   2,878     2,928  
Due from related parties   306     304  
Total current assets   77,093     70,415  
Property, plant and equipment, net   6,868     6,585  
Intangible assets, net   22,254     23,627  
Goodwill   11,496     11,496  
Deferred tax assets   29,946     30,614  
Other assets   1,195     1,413  
Total assets $ 148,852   $ 144,150  
             
LIABILITIES AND EQUITY            
Current            
Accounts payable $ 9,558   $ 10,006  
Accrued liabilities   10,345     10,230  
Due to related parties   2     18  
Deferred revenue   13,676     11,570  
Total current liabilities   33,581     31,824  
Long-term deferred revenue   1,572     1,067  
Deferred rent liabilities   1,554     1,649  
Deferred tax liabilities   1,093     1,425  
Other long-term liabilities   114     127  
Total liabilities   37,914     36,092  
             
Stockholders' equity            
Common stock (par value: $0.01; shares authorized: 300,000,000; shares issued and outstanding:            
2016: 282,243,652 and 2015: 280,903,667)   2,822     2,809  
Additional paid-in capital   168,490     167,705  
Promissory notes receivable   (209 )   (209 )
Accumulated deficit   (60,165 )   (62,247 )
Total stockholders' equity   110,938     108,058  
Total liabilities and stockholders' equity $ 148,852   $ 144,150  
   
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 March 31,  
  2016   2015  
             
Revenue $ 26,293   $ 21,675  
             
Costs and expenses            
  Cost of revenue, exclusive of depreciation and amortization shown separately below   4,654     4,326  
  Selling, general and administrative, including stock-based compensation   11,905     9,914  
  Research and development   4,354     5,316  
  Depreciation and amortization   1,974     1,527  
    22,887     21,083  
Operating income   3,406     592  
             
Other income (expense)            
  Gain (loss) on foreign exchange   294     (191 )
  Investment income, net   33     95  
  Interest on convertible note, including amortization of debt discount   -     (326 )
  Gain on conversion of convertible note and revaluation of related derivative, net   -     207  
    327     (215 )
Net and comprehensive income before income taxes   3,733     377  
  Income tax expense   (1,651 )   (886 )
Net and comprehensive income (loss) $ 2,082   $ (509 )
             
Net income (loss) per weighted average number of shares of common stock outstanding -- basic $
0.01
  $
0.00
 
             
Weighted average number of shares of common stock outstanding -- basic  
281,827,663
   
202,910,903
 
             
Net income (loss) per weighted average number of shares of common stock outstanding -- diluted $
0.01
  $
0.00
 
             
Weighted average number of shares of common stock outstanding -- diluted  
294,537,707
   
202,910,903
 
   
NEULION, INC.  
         
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(unaudited)  
(in thousands)  
(Expressed in U.S. dollars)  
       
  Three months ended March 31,  
  2016   2015  
OPERATING ACTIVITIES            
             
Net income (loss) $ 2,082   $ (509 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:            
  Depreciation and amortization   1,974     1,527  
  Stock-based compensation   754     327  
  Amortization of debt discount   -     60  
  Gain on revaluation of convertible note derivative   -     (207 )
  Income tax expense   750     795  
             
Changes in operating assets and liabilities, net of acquisitions            
  Accounts receivable   1,604     548  
  Income tax receivable   -     3,597  
  Other receivables   (352 )   (230 )
  Inventory   18     36  
  Prepaid expenses, deposits and other assets   268     444  
  Due from related parties   (2 )   (170 )
  Accounts payable   (448 )   (3,141 )
  Accrued liabilities   (192 )   (2,466 )
  Deferred revenue   2,611     (1,163 )
  Deferred rent liability   (95 )   18  
  Long-term liabilities   (13 )   (21 )
  Due to related parties   (16 )   10  
Cash provided by (used in) operating activities   8,943     (545 )
             
INVESTING ACTIVITIES            
Cash acquired from acquisition of DivX Corporation   -     9,718  
Purchase of property, plant and equipment   (884 )   (314 )
Cash (used in) provided by investing activities   (884 )   9,404  
             
FINANCING ACTIVITIES            
Proceeds from exercise of stock options   44     450  
Proceeds from exercise of broker units   -     18  
Cash provided by financing activities   44     468  
             
Net increase in cash and cash equivalents, during the period   8,103     9,327  
Cash and cash equivalents, beginning of period   53,413     25,898  
Cash and cash equivalents, end of period $ 61,516   $ 35,225  
             
Supplemental disclosure of cash flow information:            
Cash paid for income taxes $ 916   $ 91  
             
Supplemental disclosure of non-cash activities:            
Par value of shares of common stock issued upon exercise of cashless warrants $ -   $ 19  
             
Accretion of issuance costs on Class 4 Preference Shares $ -   $ 8  
             
Issuance of shares of common stock upon acquisition of DivX Corporation $ -   $ 31,905  
             
Issuance of convertible note upon acquisition of DivX Corporation $ -   $ 27,000  
             
             
             
             
             
NEULION, INC.  
           
RECONCILIATION OF NON-GAAP MEASURES  
(in thousands)  
(Expressed in U.S. dollars)  
           
           
Reconciliation of GAAP Revenue to Pro Forma non-GAAP Revenue (in thousands):  
           
       
Three months ended March 31,   2016   2015  
               
GAAP Revenue   $ 26,293   $ 21,675  
               
Pro forma adjustment     -     2,239  
               
Pro Forma GAAP Revenue   $ 26,293   $ 23,914  
               
Revenue excluded due to purchase accounting     866     5,164  
               
Pro Forma Non-GAAP Revenue   $ 27,159   $ 29,078  
               
               
Reconciliation of GAAP Net Income (Loss) to Pro Forma Adjusted EBITDA (in thousands):  
               
         
Three months ended March 31,     2016     2015  
               
Consolidated Net Income (Loss) on a GAAP basis   $ 2,082   $ (509 )
               
Pro forma adjustment     -     (2,225 )
               
Consolidated Net Income (Loss) on a Pro Forma GAAP basis   $ 2,082   $ (2,734 )
               
Revenue excluded due to purchase accounting     866     5,164  
Depreciation and amortization     1,974     2,061  
Stock-based compensation     754     327  
Acquisition-related expenses     -     360  
Gain on revaluation of convertible note derivative     -     (206 )
Income tax expense     1,651     1,497  
Investment income (expense) and foreign exchange loss     (327 )   359  
               
Pro Forma Adjusted EBITDA   $ 7,000   $ 6,828  

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Contact Information

  • Investor Relations Contact:

    Tim Alavathil
    SVP, Finance
    Email contact

    (647) 426-1254