SOURCE: NeuLion, Inc.

NeuLion, Inc.

August 07, 2014 07:10 ET

NeuLion Reports 22% Year-Over-Year Increase in Second Quarter Revenue to $13.4 Million

PLAINVIEW, NY--(Marketwired - Aug 7, 2014) - NeuLion, Inc. (TSX: NLN)

Second Quarter Year-Over-Year Highlights

  • Revenue increased 21.8% to $13.4 million versus $11.0 million
  • Non-GAAP Adjusted Gross Margin Percentage expanded to 74% versus 71%
  • Non-GAAP Adjusted EBITDA grew to $1.6 million versus $0.2 million
  • Consolidated Net Income was $0.6 million versus consolidated net loss of $(1.3) million
  • Trailing twelve month revenue reached $51.0 million, 19% greater than the comparable prior period
  • 7th consecutive quarter of positive Non-GAAP Adjusted EBITDA
  • 3rd 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 second quarter ended June 30, 2014.

Management Commentary

"NeuLion extended its track record of growth during the second quarter," said Nancy Li, chief executive officer. "With each customer category delivering revenue gains over last year on increased usage and new customer additions, we expanded margins and delivered a $1.9 million positive improvement in bottom line results."

"Our flawless delivery of the 2014 FIFA World Cup coverage for Univision Deportes through an all new interactive digital experience on multiple devices was a major success of the quarter. With 10 million unique viewers culminating in 73 million live video streams, we believe this achievement cements our leading position as a mission critical supplier of interactive streaming of live events. NeuLion is poised to continue to drive innovation and grow as the experience and consumption of digital content through Internet-connected devices gains traction," concluded Ms. Li.

Second Quarter Operational Highlights

TV Everywhere

  • Delivered the 2014 FIFA World Cup digital experience for Univision Deportes with unparalleled success as viewers watched a record total of 1.7 billion minutes of live game video.
  • Streamed the 2014 FIFA World Cup for CNTV in China. The premium service was well received with a record number of paid streaming subscribers for a live event in China.
  • Launched hybrid TV Everywhere strategy with the Tennis Channel, providing both an authenticated linear channel and subscription package for complete live and on-demand tennis coverage.

Professional Sports

  • Selected by the NBA and the NHL to design, develop and operate the all new Xbox 360 and Xbox One Apps for NBA International League Pass and NHL Game Center Live.
  • Major League Soccer saw double digit subscriber growth of the NeuLion-powered digital service, MLS Live, for soccer fans in the United States.
  • Partnered with the United Soccer League to launch new websites for the top two leagues, USL Pro and PDL.
  • Barclays Premier League expanded its distribution to New Zealand, Taiwan and Philippines through Coliseum Sports Media who licenses the NeuLion Sports Platform.
  • Hosted the NeuLion Sports Summit in Chicago, IL that for the first time included attendees from its professional sports partners including the NFL, NHL, NBA, UFC, Major League Soccer, and others.

College Sports

  • Extended partnership with the Southern Conference for an additional five years and added the streaming of all conference games through a conference-wide, unified digital network.
  • Added new ticketing and donor management partners, including the University of San Francisco and University of South Dakota.
  • Launched an all new multi-screen college live stats service that automatically adjusts to the viewing device's screen size, allowing fans seamless consumption of real-time stats across multiple devices.
  • Delivered select live content from the 2014 Sports Video Group College Sports Summit show floor in Atlanta to more than 500 college sports and technology attendees on multiple devices.

Second Quarter 2014 Financial Review

Total revenue was $13.4 million compared to $11.0 million for the second quarter of 2013, an increase of $2.4 million, or 22%, reflecting revenue growth across the TV Everywhere, Pro Sports and College Sports divisions.

Pro Sports revenue increased 19% to $5.7 million from $4.8 million for the three months ended June 30, 2013, primarily due to growth in fixed fees from new and existing customers. College Sports revenue increased 21% to $3.4 million compared to $2.8 million for the three months ended June 30, 2013. The increase was primarily driven by revenue generated from NeuLion's recent advertising agreement with USA Today as well as from new agreements with additional colleges and conferences. TV Everywhere revenue increased 39% to $3.9 million from $2.8 million for the three months ended June 30, 2013 primarily due to usage fees generated from the Univision Deportes agreement for coverage and exclusive content of the 2014 FIFA World Cup.

Cost of revenue was $3.5 million, or 26% of total revenue, compared to $3.2 million, or 29% of total revenue, for the same period last year. Selling, general and administrative expenses, including stock-based compensation, were $6.4 million, an increase of 7% from $6.0 million for the three months ended June 30, 2013. Research and development expenses were $2.2 million, a 16% increase compared to $1.9 million for the three months ended June 30, 2013. Operating income was $0.6 million compared to an operating loss of $1.0 in the second quarter of 2013. Consolidated net income was $0.6 million, or $0.00 per diluted share, compared with a consolidated net loss of $(1.3) million, or a loss of $(0.01) per diluted share, for the three months ended June 30, 2013.

Non-GAAP Results

Adjusted Gross Margin Percentage was 74% compared with 71% for the three months ended June 30, 2013, reflecting improved broadcast operating costs. Adjusted EBITDA rose to $1.6 million from $0.2 million for the same period last year due to higher revenue and improved Adjusted Gross Margin Percentage. 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, 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 the 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)  
   
    June 30,
2014
(unaudited)
    December 31,
2013
 
                 
ASSETS                
Current                
Cash and cash equivalents   $ 14,577,764     $ 19,644,270  
Accounts receivable, net of allowance for doubtful accounts of $83,022 and $85,882     5,000,463       5,289,136  
Other receivables     400,911       364,797  
Inventory     494,900       481,012  
Prepaid expenses and deposits     1,051,849       1,135,949  
Due from related parties     418,571       243,842  
Total current assets     21,944,458       27,159,006  
Property, plant and equipment, net     3,113,987       3,357,626  
Intangible assets, net     941,745       1,649,959  
Goodwill     11,327,626       11,327,626  
Other assets     84,325       81,778  
Total assets   $ 37,412,141     $ 43,575,995  
                 
LIABILITIES AND EQUITY                
Current                
Accounts payable   $ 6,952,169     $ 13,002,104  
Accrued liabilities     4,759,201       5,338,418  
Due to related parties     11,285       16,743  
Deferred revenue     5,606,416       8,856,629  
Total current liabilities     17,329,071       27,213,894  
Long-term deferred revenue     1,150,642       725,853  
Other long-term liabilities     237,612       270,892  
Deferred tax liability     1,373,596       1,180,978  
Total liabilities     20,090,921       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)     4,939,821       4,924,775  
Total redeemable preferred stock     14,939,821       14,924,775  
                 
Stockholders' equity (deficit)                
Common stock (par value: $0.01; shares authorized: 300,000,000; shares issued and outstanding: 175,078,227 and 170,326,338, respectively)     1,750,782       1,703,263  
Additional paid-in capital     86,814,647       85,437,337  
Promissory notes receivable     (209,250 )     (209,250 )
Accumulated deficit     (85,974,780 )     (87,671,747 )
Total stockholders' equity (deficit)     2,381,399       (740,397 )
Total liabilities and stockholders' equity (deficit)   $ 37,412,141     $ 43,575,995  
                 
                 
                 
NEULION, INC.  
                       
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND  
COMPREHENSIVE INCOME (LOSS)  
(unaudited)  
(Expressed in U.S. dollars)  
                       
                       
    Three months
ended
June 30,
    Six months
ended
June 30,
 
    2014   2013     2014     2013  
                               
Revenue   $ 13,408,876   $ 11,036,230     $ 26,878,458     $ 22,936,179  
                               
Costs and expenses                              
  Cost of revenue, exclusive of depreciation and amortization shown separately below     3,535,906     3,220,015       7,046,580       6,635,802  
  Selling, general and administrative, including stock-based compensation     6,424,026     6,009,154       12,778,076       11,938,192  
  Research and development     2,187,287     1,873,380       4,160,090       3,572,747  
  Depreciation and amortization     709,636     972,047       1,395,440       1,997,189  
      12,856,855     12,074,596       25,380,186       24,143,930  
Operating income (loss)     552,021     (1,038,366 )     1,498,272       (1,207,751 )
                               
Other income (expense)                              
  Gain (loss) on foreign exchange     11,965     (33,395 )     (33,397 )     (47,206 )
  Investment income (expense), net     1,866     (2,141 )     424,710       (6,445 )
  Discount on convertible note     -     (155,847 )     -       (233,769 )
      13,831     (191,383 )     391,313       (287,420 )
Net and comprehensive income (loss) before income taxes     565,852     (1,229,749 )     1,889,585       (1,495,171 )
  Income taxes     62,228     (87,845 )     (192,618 )     (105,290 )
Net and comprehensive income (loss)   $ 628,080   $ (1,317,594 )   $ 1,696,967     $ (1,600,461 )
                               
Net income (loss) per weighted average number of shares of common stock outstanding - basic   $ 0.00   $ (0.01 )   $ 0.01     $ (0.01 )
                               
Weighted average number of shares of common stock outstanding - basic     173,781,312     165,005,548       172,326,735       164,608,553  
                               
Net income (loss) per weighted average number of shares of common stock outstanding - diluted   $ 0.00   $ (0.01 )   $ 0.01     $ (0.01 )
                             
Weighted average number of shares of common stock outstanding - diluted     216,810,911     165,005,548       213,293,074       164,608,553  
                               
                               
                               
NEULION, INC.  
                         
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(unaudited)  
(Expressed in U.S. dollars)  
   
    Three months
ended
June 30,
    Six months
ended
June 30,
 
    2014     2013     2014     2013  
OPERATING ACTIVITIES                                
                                 
Consolidated net income (loss)   $ 628,080     $ (1,317,594 )   $ 1,696,967     $ (1,600,461 )
Adjustments to reconcile consolidated net income (loss) to net cash used in operating activities:                                
  Depreciation and amortization     709,636       972,047       1,395,440       1,997,189  
  Discount on convertible note     -       155,847       -       233,769  
  Stock-based compensation     374,486       233,210       709,304       354,836  
  Income taxes     (62,228 )     80,000       192,618       97,444  
                                 
Changes in operating assets and liabilities                                
  Accounts receivable     349,946       1,640,985       288,673       1,392,287  
  Inventory     (111,612 )     242,725       (13,888 )     108,926  
  Prepaid expenses, deposits and other assets     (72,281 )     (61,372 )     81,553       260,188  
  Other receivables     15,030       (3,841 )     (36,114 )     (1,513 )
  Due from related parties     (35,071 )     28,230       (174,729 )     154,525  
  Accounts payable     (4,313,000 )     (6,528,600 )     (6,049,935 )     (3,286,056 )
  Accrued liabilities     243,533       283,902       (579,217 )     380,764  
  Deferred revenue     (1,362,117 )     (1,434,406 )     (2,825,424 )     (1,351,467 )
  Long-term liabilities     (14,538 )     (21,919 )     (33,280 )     (43,960 )
  Due to related parties     (1,532 )     638       (5,458 )     1,185  
Cash used in operating activities     (3,651,668 )     (5,730,148 )     (5,353,490 )     (1,302,344 )
                                 
INVESTING ACTIVITIES                                
Purchase of property, plant and equipment     (338,651 )     (72,679 )     (443,587 )     (398,931 )
Cash used in investing activities     (338,651 )     (72,679 )     (443,587 )     (398,931 )
                                 
FINANCING ACTIVITIES                                
Proceeds from exercise of stock options     242,211       --       600,358       --  
Proceeds from exercise of broker units     4,200       840       130,213       840  
Cash provided by financing activities     246,411       840       730,571       840  
                                 
Net decrease in cash and cash equivalents, during the period     (3,743,908 )     (5,801,987 )     (5,066,506 )     (1,700,435 )
Cash and cash equivalents, beginning of period     18,321,672       15,209,659       19,644,270       11,108,107  
Cash and cash equivalents, end of period   $ 14,577,764     $ 9,407,672     $ 14,577,764     $ 9,407,672  
                                 
Supplemental disclosure of non-cash activities:                                
Par value of shares of common stock issued upon exercise of cashless warrants   $ 18,822     $ --     $ 25,521     $ --  
                                 
                                 
                                 
NEULION, INC.  
                         
RECONCILIATION OF NON-GAAP MEASURES  
(unaudited)  
(Expressed in U.S. dollars)  
                     
                         
Consolidated Statement of Operations Reconciliations:  
                         
The reconciliations from consolidated operating income (loss) to Non-GAAP Adjusted Gross Margin % are as follows:  
                         
    Three months ended
June 30,
    Six months ended
June 30,
 
    2014     2013     2014     2013  
                                 
Consolidated operating income (loss) on a GAAP basis   $ 552,021     $ (1,038,366 )   $ 1,498,272     $ (1,207,751 )
                                 
Amortization and depreciation     709,636       972,047       1,395,440       1,997,189  
Research and development     2,187,287       1,873,380       4,160,090       3,572,747  
Selling, general and administrative, including stock-based compensation     6,424,026       6,009,154       12,778,076       11,938,192  
Non-GAAP Adjusted Gross Margin   $ 9,872,970     $ 7,816,215     $ 19,831,878     $ 16,300,377  
                                 
Total Revenue   $ 13,408,876     $ 11,036,230     $ 26,878,458     $ 22,936,179  
                                 
Non-GAAP Adjusted Gross Margin % (as a % of total revenue)     74 %     71 %     74 %     71 %
                                 
                                 
The reconciliations from consolidated net income (loss) to Non-GAAP Adjusted EBITDA are as follows:  
                         
    Three months ended
June 30,
    Six months ended
June 30,
 
    2014     2013     2014     2013  
                                 
Consolidated net income (loss) on a GAAP basis   $ 628,080     $ (1,317,594 )   $ 1,696,967     $ (1,600,461 )
                                 
Depreciation and amortization     709,636       972,047       1,395,440       1,997,189  
Stock-based compensation     374,486       233,210       709,304       354,836  
Discount on convertible note             155,847       -       233,769  
Income taxes     (62,228 )     87,845       192,618       105,290  
Investment (income) expense, net and foreign exchange (gain) loss     (13,831 )     35,536       (391,313 )     53,651  
                                 
Non-GAAP Adjusted EBITDA   $ 1,636,143     $ 166,891     $ 3,603,016     $ 1,144,274