SOURCE: NeuLion, Inc.

NeuLion, Inc.

March 03, 2016 07:10 ET

NeuLion Reports Fourth Quarter Revenue of $27.8 Million

Driven by NeuLion Digital Platform Revenue Growth of 20%

PLAINVIEW, NY--(Marketwired - March 03, 2016) -

Fourth Quarter Year-Over-Year Highlights

  • GAAP revenue increased 68% to $27.8 million versus $16.5 million; Non-GAAP revenue increased 90% to $31.4 million versus $16.5 million
  • NeuLion Digital Platform revenue (GAAP and Non-GAAP) increased 20% to $19.8 million versus $16.5 million
  • DivX and MainConcept GAAP revenue was $8.0 million; Non-GAAP revenue was $11.6 million
  • Net income grew to $32.8 million versus $1.6 million
  • Non-GAAP Adjusted EBITDA grew to $8.8 million versus $3.5 million
  • Non-GAAP Adjusted EBITDA margin increased to 28.0% versus 21.2%
  • Working capital improved to $38.6 million at December 31, 2015 versus $7.1 million at December 31, 2014

Fiscal Year 2015 Year-Over-Year Highlights

  • GAAP revenue increased 69% to $94.0 million versus $55.5 million; Non-GAAP revenue increased 97% to $109.4 million versus $55.5 million
  • NeuLion Digital Platform revenue (GAAP and Non-GAAP) increased 19% to $66.1 million versus $55.5 million
  • DivX and MainConcept GAAP revenue was $28.0 million; Non-GAAP revenue was $43.3 million
  • Net income grew to $25.9 million versus $3.6 million
  • Non-GAAP Adjusted EBITDA grew to $24.7 million versus $8.4 million
  • Non-GAAP Adjusted EBITDA margin increased to 22.6% versus 15.1%

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 fourth quarter and fiscal year ended December 31, 2015.

"Revenue from our NeuLion Digital Platform grew 20% on new customer additions and expanded usage from existing customers. Continued scaling of the NeuLion Digital Platform contributed to a 500 basis point improvement in cost of revenue as a percentage of revenue which, along with the addition of the DivX and MainConcept revenue streams, drove a 680 basis point improvement in Non-GAAP Adjusted EBITDA margin," said Kanaan Jemili, Chief Executive Officer.

Added Jemili, "As an industry leader trusted by a growing and diverse group of global content owners in sports and entertainment plus the world's largest consumer electronic companies, we continue to innovate and drive higher quality experiences for our partners. Our unique end-to-end technology and service offerings 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 (OTT) and 4K video worldwide. With a steady stream of new customer wins and an ongoing expansion of existing customer relationships with content owners and CE manufacturers, we are excited about our growth prospects going forward."

Operational Highlights

  • Launched Univision NOW, a groundbreaking new direct-to-consumer over-the-top (OTT) service by Univision Communications Inc. (UCI), the leading media company serving Hispanic America. NeuLion provides Univision with a turnkey solution for reaching their target Hispanic audience on as many screens as possible with a great user experience.
  • NeuLion announced its new 4K mobile app, which enables consumers to seamlessly play out video content, in up to Ultra HD 4K, captured from their cameras and smartphones, to every connected device. As consumers use more 4K enabled smartphones and cameras from brands including Apple, GoPro, Samsung, Sony, Panasonic and others, playing video captured on these devices on 4K TVs will be significantly easier with the new app. 
  • As sales of 4K Ultra HDTVs continue to accelerate in the marketplace, NeuLion has secured new agreements with the world's largest suppliers of these products, signing licensing deals with Samsung and LG to embed our NeuLion Streaming SDK in their televisions. This technology will enable and enhance an interactive video experience plus deliver live streaming video 4K 60 frame resolutions on these Internet-connected TV sets, thereby connecting the ecosystem of manufacturers of Ultra HDTVs with content rights holders that have 4K content and user-generated libraries of 4K content.
  • NeuLion key performance indicators for 2015 continued to highlight the demand for the company's technology and services. NeuLion delivered 63,000 live events for the 2015 calendar year, an increase of 26% over the prior year, and the number of live events delivered was more than double that of NeuLion's closest competitor. NeuLion video traffic ending the year 2015 was 307 petabytes, representing a 35% growth year over year and with the total 2015 video traffic more than tripling that of the 2012 calendar year.
  • NeuLion successfully delivered multiple live NBA games in 4K with BT Sports from The O2 arena in London, and recently made history as the first company to successfully deliver a 4K live stream of a sporting event in the United States. Working with Univision, NeuLion delivered the soccer game between the national teams of Mexico and Senegal, in stunning 4K, from Marlins Park in Miami. 
  • NeuLion's deployment in Google Chromecast continues to expand as NeuLion partners grow their connected device strategies. NeuLion now powers more than 10 streaming services on Chromecast, including sports apps for the Big Ten Conference, Euroleague, Major League Soccer, NBA, NFL, Tennis Channel, UFC, Univision, World Surf League, and others.

Fourth 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 NeuLion 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 indicator. The NeuLion Digital Platform combines the previously reported customer categories of Pro Sports, College Sports, and TV Everywhere.

GAAP Results

Total GAAP revenue was $27.8 million for the fourth quarter of 2015 compared to $16.5 million for the previous year's quarter, an increase of $11.3 million, or 68%. The NeuLion Digital Platform had revenue growth of 20% to $19.8 million for the current period, from $16.5 million for the comparable prior period, due to new customer wins and expanded usage from existing customers. DivX and MainConcept revenue was $8.0 million in the fourth quarter of 2015.

Cost of revenue was $5.4 million, or 19% of revenue, for the current period, compared to $4.0 million, or 24% of revenue, for the prior comparable period. The five percentage point improvement was due to a combination of the addition of DivX and MainConcept revenue streams and improved operating costs. Selling, general and administrative expenses, including stock-based compensation, were $13.2 million for the current period, an increase of 65% from $8.0 million for the prior comparable period. Research and development expenses were $5.5 million for the current period, more than double the $2.1 million figure reported in the prior comparable period primarily as a result of increased headcount resulting from the DivX acquisition in January 2015. SG&A and R&D expenses associated with DivX for the fourth quarter of 2015 were $4.2 million and $3.5 million, respectively. Operating income for both the fourth quarters of 2015 and 2014 were $1.8 million. Consolidated net income was $32.8 million, or $0.11 per diluted share, for the current period compared with consolidated net income of $1.6 million, or $0.01 per diluted share, for the prior comparable period. The increase in consolidated net income was primarily driven by a $31.2 million income tax benefit recorded in the current period.

Non-GAAP Results

Non-GAAP revenue increased 68% to $27.8 million from the same period a year ago. Non-GAAP Adjusted EBITDA more than doubled to $8.8 million from $3.5 million for the same period last year, with $3.3 million of the increase due to the acquisition of DivX and $2.0 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. 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" 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 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.  
   
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
(Expressed in U.S. dollars)  
             
    As of December 31,  
    2015     2014  
                 
ASSETS                
Current                
Cash and cash equivalents   $ 53,413     $ 25,898  
Accounts receivable, net     12,967       8,056  
Other receivables     604       603  
Inventory     199       304  
Prepaid expenses and deposits     2,928       1,315  
Due from related parties     304       111  
Total current assets     70,415       36,287  
Property, plant and equipment, net     6,585       3,830  
Intangible assets, net     23,627       406  
Goodwill     11,496       11,327  
Deferred tax assets     30,614       -  
Other assets     1,413       88  
Total assets   $ 144,150     $ 51,938  
                 
LIABILITIES AND EQUITY                
Current                
Accounts payable   $ 10,006     $ 14,362  
Accrued liabilities     10,230       5,248  
Due to related parties     18       -  
Deferred revenue     11,570       9,602  
Total current liabilities     31,824       29,212  
Long-term deferred revenue     1,067       1,019  
Deferred rent liabilities     1,649       -  
Deferred tax liabilities     1,425       1,451  
Other long-term liabilities     127       202  
Total liabilities     36,092       31,884  
                 
Redeemable preferred stock, net (par value: $0.01; authorized: 50,000,000; issued and outstanding: 2015: 0 and 2014: 28,089,083)                
  Class 3 Preference Shares (par value: $0.01; authorized, issued and outstanding: 2015: 0 and 2014: 17,176,818     -       10,000  
  Class 4 Preference Shares (par value: $0.01; authorized, issued and outstanding: 2015: 0 and 2014: 10,912,265     -       4,955  
Total redeemable preferred stock     -       14,955  
                 
Stockholders' equity                
Common stock (par value: $0.01; shares authorized: 300,000,000; shares issued and outstanding: 2015: 280,903,667 and 2014: 178,210,006)     2,809       1,782  
Additional paid-in capital     167,705       87,631  
Promissory notes receivable     (209 )     (209 )
Accumulated deficit     (62,247 )     (84,105 )
Total stockholders' equity     108,058       5,099  
Total liabilities and stockholders' equity   $ 144,150     $ 51,938  
                 
                 
   
NEULION, INC.  
   
CONSOLIDATED STATEMENTS OF OPERATIONS AND
 
COMPREHENSIVE INCOME (LOSS)  
(in thousands, except share and per share data)  
(Expressed in U.S. dollars)  
   
   
  Year ended December 31,  
  2015   2014   2013  
                   
Revenue $ 94,043   $ 55,520   $ 47,107  
                   
Costs and expenses                  
  Cost of revenue, exclusive of depreciation and amortization shown separately below   17,775     13,897     13,279  
  Selling, general and administrative, including stock-based compensation   45,672     27,073     24,290  
  Research and development   24,912     8,381     7,423  
  Depreciation and amortization   7,544     2,621     3,755  
    95,903     51,972     48,747  
Operating income (loss)   (1,860 )   3,548     (1,640 )
                   
Other income (expense)                  
  Loss on foreign exchange   (818 )   (138 )   (125 )
  Investment income, net   363     428     (2 )
  Interest on convertible note, including amortization of debt discount   (123 )   -     (234 )
  Gain on conversion of convertible note and revaluation of related derivative, net   507     -     -  
    (71 )   290     (361 )
Net and comprehensive income (loss) before income taxes   (1,931 )   3,838     (2,001 )
  Income tax benefit (expense)   27,847     (271 )   (277 )
Net and comprehensive income (loss) $ 25,916   $ 3,567   $ (2,278 )
                   
Net income (loss) per weighted average number of shares of common stock outstanding - basic $
0.11
  $
0.01
  $
(0.01
)
                   
Weighted average number of shares of common stock outstanding - basic  
233,489,798
   
174,645,803
   
166,663,448
 
                   
Net income (loss) per weighted average number of shares of common stock outstanding - diluted $
0.11
  $
0.01
  $
(0.01
)
                   
Weighted average number of shares of common stock outstanding - diluted   245,346,681     214,711,362     166,663,448  
                   
                   
   
NEULION, INC.  
                   
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(in thousands)  
(Expressed in U.S. dollars)  
         
    Year ended December 31,  
    2015     2014     2013  
OPERATING ACTIVITIES                        
                         
Net income (loss)   $ 25,916     $ 3,567     $ (2,278 )
Adjustments to reconcile net income (loss) to net cash                        
  provided by operating activities:                        
  Depreciation and amortization     7,544       2,621       3,755  
  Stock-based compensation     2,702       1,438       1,417  
  Amortization of debt discount     123       -       234  
  Gain on revaluation of convertible note derivative     (507 )     -       -  
  Income tax (benefit) expense     (32,402 )     271       269  
                         
Changes in operating assets and liabilities, net of acquisitions                        
  Accounts receivable     18,851       (2,767 )     (1,095 )
  Income tax receivable     4,318       -       -  
  Other receivables     246       (238 )     (16 )
  Inventory     105       177       (64 )
  Prepaid expenses, deposits and other assets     (1,262 )     (185 )     129  
  Due from related parties     (193 )     133       656  
  Accounts payable     (5,191 )     1,360       3,189  
  Accrued liabilities     (587 )     (91 )     635  
  Deferred revenue     (984 )     1,038       2,733  
  Deferred rent liability     (263 )     -       -  
  Long-term liabilities     (75 )     (68 )     (87 )
  Due to related parties     18       (17 )     4  
Cash provided by operating activities     18,359       7,239       9,481  
                         
INVESTING ACTIVITIES                        
Cash acquired from acquisition of DivX Corporation     9,718       -       -  
Purchase of property, plant and equipment     (1,428 )     (1,850 )     (1,301 )
Cash provided by (used in) investing activities     8,290       (1,850 )     (1,301 )
                         
FINANCING ACTIVITIES                        
Proceeds from exercise of stock options     847       733       354  
Proceeds from exercise of broker units     19       132       2  
Cash provided by financing activities     866       865       356  
                         
Net increase in cash and cash equivalents, during the year     27,515       6,254       8,536  
Cash and cash equivalents, beginning of year     25,898       19,644       11,108  
Cash and cash equivalents, end of year   $ 53,413     $ 25,898     $ 19,644  
                         
Supplemental disclosure of cash flow information:                        
Cash paid for income taxes   $ 3,961     $ -     $ -  
                         
Supplemental disclosure of non-cash activities:                        
Par value of shares of common stock issued upon exercise of cashless warrants   $ 19     $ 52     $ 10  
                         
Accretion of issuance costs on Class 4 Preference Shares   $ 46     $ 30     $ 30  
                         
Issuance of shares of common stock upon acquisition of DivX Corporation   $ 58,521     $ -     $ -  
                         
Issuance of shares of common stock upon conversion of Preference Shares   $ 15,000     $ -     $ -  
                         
Issuance of shares of common stock upon declaration of dividend on Preference Shares   $ 4,058     $ -     $ -  
                         
                         
 
NEULION, INC.
 
RECONCILIATION OF NON-GAAP MEASURES
(in thousands)
(Expressed in U.S. dollars)
                         
Reconciliation of GAAP Revenue to Non-GAAP Revenue:                        
                         
    Organic   DivX   Consolidated
Three months ended December 31,   2015   2014   2015   2014   2015   2014
                                     
GAAP Revenue   $ 19,774   $ 16,464   $ 8,010   $ -   $ 27,784   $ 16,464
                                     
Revenue excluded due to purchase accounting     -     -     3,572     -     3,572     -
                                     
Non-GAAP Revenue   $ 19,774   $ 16,464   $ 11,582   $ -   $ 31,356   $ 16,464
                                     
                                     
    Organic   DivX   Consolidated
Year ended December 31,   2015   2014   2015 (1)   2014   2015   2014
                                     
GAAP Revenue   $ 66,088   $ 55,520   $ 27,955   $ -   $ 94,043   $ 55,520
                                     
Revenue excluded due to purchase accounting     -     -     15,308     -     15,308     -
                                     
Non-GAAP Revenue   $ 66,088   $ 55,520   $ 43,263   $ -   $ 109,351   $ 55,520
                                     
(1) The figures presented are for the period from February 1, 2015 to December 31, 2015.
 
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:    
Q1 2016   $ 878  
         
 
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted EBITDA:   
                                   
    Organic     DivX   Consolidated  
Three months ended December 31,   2015     2014     2015     2014   2015     2014  
                                               
Consolidated Net Income on a GAAP basis   $ 28,946     $ 1,621     $ 3,820     $ -   $ 32,766     $ 1,621  
                                               
Revenue excluded due to purchase accounting     -       -       3,572       -     3,572       -  
Depreciation and amortization     343       546       1,567       -     1,910       546  
Stock-based compensation     859       349       -       -     859       349  
Acquisition-related expenses     -       806       -       -     -       806  
Listing-related expenses     663       -       -       -     663       -  
Income tax (benefit) expense     (25,453 )     106       (5,723 )     -     (31,176 )     106  
Investment income (expense) and foreign exchange loss     138       72       28       -     166       72  
                                               
Non-GAAP Adjusted EBITDA   $ 5,496     $ 3,500     $ 3,264     $ -   $ 8,760     $ 3,500  
                                               
      Organic       DivX     Consolidated  
Year ended December 31,     2015       2014       2015 (1)       2014     2015       2014  
                                               
Consolidated Net Income (Loss) on a GAAP basis   $ 33,872     $ 3,567     $ (7,956 )   $ -   $ 25,916     $ 3,567  
                                               
Revenue excluded due to purchase accounting     -       -       15,308       -     15,308       0  
Depreciation and amortization     1,731       2,621       5,813       -     7,544       2,621  
Stock-based compensation     2,702       1,438       -       -     2,702       1,438  
Acquisition-related expenses     341       806       18       -     359       806  
Listing-related expenses     663       -       -       -     663       -  
Gain on revaluation of convertible note derivative     (507 )     -       -       -     (507 )     -  
Income tax (benefit) expense     (25,382 )     271       (2,465 )     -     (27,847 )     271  
Investment income (expense) and foreign exchange loss     580       (290 )     (2 )     -     578       (290 )
                                               
Non-GAAP Adjusted EBITDA   $ 14,000     $ 8,413     $ 10,716     $ -   $ 24,716     $ 8,413  
                                               
(1) The figures presented are for the period from February 1, 2015 to December 31, 2015.
 

Contact Information

  • Investor Relations Contact:
    Tim Alavathil
    SVP, Finance
    Email contact
    (647) 426-1254