SOURCE: NeuLion, Inc.

NeuLion, Inc.

March 13, 2014 07:20 ET

NeuLion Reports Record Fourth Quarter and Year-End Financial Results

Record Breaking Revenue, Non-GAAP Adjusted EBITDA and Net Income

PLAINVIEW, NY--(Marketwired - Mar 13, 2014) - NeuLion, Inc. (TSX: NLN), a leading enabler and provider of live and on-demand content to Internet-connected devices, today announced record financial results for both the three months and year ended December 31, 2013 (all amounts are in U.S. dollars). 

NeuLion posted its best-ever quarterly revenue of $14.1 million -- an increase of 34% over the previous year period. This boosted NeuLion's 2013 revenue to $47.1 million -- an increase of 21% over the previous year. Quarterly Non-GAAP Adjusted EBITDA was $2.2 million -- an improvement of $1.4 million over the previous year period. Annual Non-GAAP Adjusted EBITDA was $3.5 million -- an improvement of $6.8 million over the previous year. Quarterly Consolidated Net Income was $1.1 million -- an improvement of $1.9 million over the previous year period. Annual Consolidated Net Loss was $2.3 million -- an improvement of $7.8 million over the previous year.

"We are extremely pleased with the improvements in both our fourth quarter and year-end financial results," said Nancy Li, Chief Executive Officer of the Company. "Our financial success directly correlates to our ability to capitalize on the worldwide adoption of digital media as the means for consuming content. This is underscored by the fact that live video delivered by NeuLion increased by 88% to 154 petabytes in 2013. We expect to see continued growth in the breadth and scope of digital media adoption over the next year and beyond."

Fourth Quarter Operational Highlights:

Professional Sports
Interactive video experience delivering live and on-demand video

  • Deployed new NHL iOS and Android mobile applications for 14 teams, individually branded to offer exclusive team content and interactive features.
  • Launched new digital service for the NBA's Portland Trailblazers, giving fans the ability to watch the Trailblazer's live games inside the NBA-approved territories. 
  • Added Watch NFL Network to the Windows Store allowing fans to watch NFL Network programming and NFL RedZone live on their Windows 8 devices. 

College Sports
Athletic portal and online destination for college fans

  • Extended multi-year partnership with the Big 12 Conference to host and deliver big12sports.com as well as mobile applications, live streaming of events and affiliate video portals throughout the conferences' footprints.
  • College subscription business substantially increased from the prior year and added adaptive streaming capabilities for over 15 colleges and universities on PCs, smartphones and tablets.
  • Grew mobile traffic by 43% across the NeuLion college network year-over-year.

TV Everywhere
Multi-device content delivery

  • Launched new multi-screen apps for Sport TV, Portugal's number one sports network, which enables subscribers of the network access to a multitude of live HD content on multiple devices. 
  • Signed agreements with Shaw Communications and Bell Canada to create iOS and Android applications authenticated for Shaw Cable and Bell Canada subscribers.
  • Expanded the use of the NeuLion Platform to deliver high-quality, interactive live and on-demand high school sports games through MSG Varsity online.

Financial Results for the Three Months Ended December 31, 2013:

Revenue was $14.1 million, as compared to $10.5 million for the three months ended December 31, 2012, an increase of $3.6 million, or 34%.

Non-GAAP Adjusted Gross Margin % was 72%, as compared to 69% for the three months ended December 31, 2012, marking a period-over-period improvement of 3%.

Consolidated operating income was $1.1 million, as compared to a consolidated operating loss of $0.4 million for the three months ended December 31, 2012, an improvement of $1.5 million.

Consolidated net income was $1.1 million, which includes $1.1 million of non-cash and/or non-operating charges, netting a Non-GAAP Adjusted EBITDA of $2.2 million, as compared to a consolidated net loss of $(0.8) million, which includes $1.6 million of non-cash and/or non-operating charges, netting a Non-GAAP Adjusted EBITDA of $0.8 million for the three months ended December 31, 2012, marking a period-over-period improvement in Non-GAAP Adjusted EBITDA of $1.4 million, or 175%.

Financial Results for the Year Ended December 31, 2013:

Revenue was $47.1 million, as compared to $39.0 million for the year ended December 31, 2012, an increase of $8.1 million, or 21%.

Non-GAAP Adjusted Gross Margin % was 72%, as compared to 65% for the year ended December 31, 2012, marking a period-over-period improvement of 7%.

Consolidated operating loss was $1.6 million, as compared to $9.3 million for the year ended December 31, 2012, an improvement of $7.7 million.

Consolidated net loss was $2.3 million, which includes $5.8 million of non-cash and/or non-operating charges, netting a Non-GAAP Adjusted EBITDA of $3.5 million, as compared to a consolidated net loss of $10.1 million, which includes $6.8 million of non-cash and/or non-operating charges, netting a Non-GAAP Adjusted EBITDA of $(3.3) million for the year ended December 31, 2012, marking a year-over-year improvement in Non-GAAP Adjusted EBITDA of $6.8 million. 

 
NeuLion Financial Highlights
 
Three months ended December 31, 2013 vs December 31, 2012
                 
    Q4 2013
(million)
  Q4 2012
(million)
  $ change
(million)
  %
change
                 
Total Revenue   $14.1   $10.5   $3.6   34%
                 
  Professional Sports (1)   $6.8   $3.9   $2.9   74%
  College Sports (1)   $3.8   $3.1   $0.7   23%
  TV Everywhere (1)   $3.0   $2.9   $0.1   3%
                 
Non-GAAP Adjusted Gross Margin % (defined below)   72%   69%   --   --
                 
Consolidated Operating Income (Loss)   $1.1   $(0.4)   $1.5   --
                 
Non-GAAP Adjusted EBITDA (defined below)   $2.2   $0.8   $1.4   175%
                 
Consolidated Net Income (Loss)   $1.1   $(0.8)   $1.9   --
                 
                 
 
Year ended December 31, 2013 vs December 31, 2012
                 
    2013 YE
(million)
  2012 YE
(million)
  $ change (million)   %
change
                 
Total Revenue   $47.1   $39.0   $8.1   21%
                 
  Professional Sports (1)   $20.9   $13.5   $7.4   55%
  College Sports (1)   $12.6   $10.9   $1.7   16%
  TV Everywhere (1)   $11.3   $10.6   $0.7   7%
                 
Non-GAAP Adjusted Gross Margin % (defined below)   72%   65%   --   --
                 
Consolidated Operating Income (Loss)   $(1.6)   $(9.3)   $7.7   --
                 
Non-GAAP Adjusted EBITDA (defined below)   $3.5   $(3.3)   $6.8   --
                 
Consolidated Net Income (Loss)   $(2.3)   $(10.1)   $7.8   --
                 
                 

(1) Excludes equipment revenue

Use of Non-GAAP Measures

Non-GAAP Adjusted Gross Margin %

We report non-GAAP Adjusted Gross Margin % because it is a key measure used by management to evaluate our results and make strategic decisions about the Company, including potential acquisitions. Non-GAAP Adjusted Gross Margin % represents consolidated operating income (loss) plus depreciation and amortization, research and development expenses and selling general administrative expenses divided by total revenue. 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. 

The below table reconciles our Non-GAAP Adjusted Gross Margin % to its most directly comparable U.S. GAAP measure, consolidated operating income (loss):

             
    Three months ended     Year ended  
    December 31,     December 31,  
    2013   2012     2013     2012  
                       
Consolidated operating income (loss) on a GAAP basis   1,117,379   (433,242 )   (1,639,586 )   (9,333,040 )
Amortization and depreciation   767,782   842,614     3,755,054     4,407,474  
Research and development   1,962,676   1,663,510     7,422,802     6,672,778  
Selling, general and administrative, including stock-based compensation   6,300,462   5,244,689     24,289,845     23,541,296  
Non-GAAP Adjusted Gross Margin   10,148,299   7,317,571     33,828,115     25,288,508  
                       
Non-GAAP Adjusted Gross Margin % (as a % of total revenue)   72%   69%     72%     65%  
                       
                       

Non-GAAP Adjusted EBITDA

We report Non-GAAP Adjusted EBITDA because it is a key measure used by management to evaluate our results and make strategic decisions about our Company, including potential acquisitions. Non-GAAP Adjusted EBITDA represents consolidated net income (loss) before interest, income taxes, depreciation and amortization, stock-based compensation, discount on convertible note and foreign exchange loss. This measure does not have any standardized meaning prescribed by U.S. generally accepted accounting principles (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.

The below table reconciles our Non-GAAP Adjusted EBITDA to its most directly comparable U.S. GAAP measure, consolidated net income (loss):

             
    Three months ended     Year ended  
    December 31,     December 31,  
    2013   2012     2013     2012  
                       
Consolidated net income (loss) on a GAAP basis   1,071,979   (862,040 )   (2,278,345 )   (10,078,764 )
Depreciation and amortization   767,782   842,614     3,755,054     4,407,474  
Stock-based compensation   344,291   361,497     1,416,892     1,627,231  
Discount on convertible note   --   77,922     233,769     77,922  
Deferred income taxes   11,556   333,884     276,846     612,884  
Interest and foreign exchange loss   33,844   16,992     128,144     54,918  
Non-GAAP Adjusted EBITDA   2,229,452   770,869     3,532,360     (3,298,335 )
                       
                       

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 major entertainment, sports, global content and news companies. 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. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. 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. 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, which is available on www.sec.gov and filed on www.sedar.com.

   
NEULION, INC.  
   
CONSOLIDATED BALANCE SHEETS  
(Expressed in U.S. dollars, unless otherwise noted)  
   
    As of December 31,  
             
    2013     2012  
    $     $  
             
ASSETS            
Current            
Cash and cash equivalents   19,644,270     11,108,107  
Accounts receivable, net   5,289,136     4,193,949  
Other receivables   364,797     348,891  
Inventory   481,012     416,541  
Prepaid expenses and deposits   1,135,949     1,185,051  
Due from related parties   243,842     899,967  
Total current assets   27,159,006     18,152,506  
Property, plant and equipment, net   3,357,626     3,446,648  
Intangible assets, net   1,649,959     4,015,301  
Goodwill   11,327,626     11,327,626  
Other assets   81,778     161,913  
Total assets   43,575,995     37,103,994  
             
LIABILITIES AND EQUITY            
Current            
Accounts payable   13,002,104     9,813,237  
Accrued liabilities   5,338,418     4,766,668  
Due to related parties   16,743     12,282  
Deferred revenue   8,856,629     5,715,102  
Convertible note, net of discount   -     320,560  
Total current liabilities   27,213,894     20,627,849  
Long-term deferred revenue   725,853     1,134,075  
Other long-term liabilities   270,892     357,852  
Deferred tax liability   1,180,978     911,978  
Total liabilities   29,391,617     23,031,754  
             
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: 17,176,818; issued and outstanding: 17,176,818)   10,000,000     10,000,000  
  Class 4 Preference Shares (par value: $0.01; authorized; 10,912,265; issued and outstanding: 10,912,265)   4,924,775     4,894,683  
Total redeemable preferred stock   14,924,775     14,894,683  
             
Stockholders' deficit            
Common stock (par value: $0.01; authorized: 300,000,000; issued and outstanding: 170,326,338 and 164,207,147, respectively)   1,703,263     1,642,072  
Additional paid-in capital   85,437,337     83,138,137  
Promissory notes receivable   (209,250 )   (209,250 )
Accumulated deficit   (87,671,747 )   (85,393,402 )
Total shareholders' deficit   (740,397 )   (822,443 )
Total liabilities and shareholders' deficit   43,575,995     37,103,994  
             
             
   
NEULION, INC.  
   
CONSOLIDATED STATEMENTS OF OPERATIONS AND  
COMPREHENSIVE LOSS  
(Expressed in U.S. dollars, unless otherwise noted)  
   
    Years ended December 31,  
             
    2013     2012  
    $     $  
                 
Revenue                
  Services revenue     46,257,712       37,178,431  
  Equipment revenue     849,466       1,804,495  
      47,107,178       38,982,926  
                 
Costs and Expenses                
  Cost of services revenue, exclusive of depreciation and amortization shown separately below     12,697,104       12,280,658  
  Cost of equipment revenue     581,959       1,413,760  
  Selling, general and administrative, including stock-based compensation     24,289,845       23,541,296  
  Research and development     7,422,802       6,672,778  
  Depreciation and amortization     3,755,054       4,407,474  
      48,746,764       48,315,966  
Operating loss     (1,639,586 )     (9,333,040 )
                 
Other income (expense)                
  Loss on foreign exchange     (125,657 )     (56,244 )
  Interest, net     (2,487 )     1,326  
  Discount on convertible note     (233,769 )     (77,922 )
      (361,913 )     (132,840 )
Net and comprehensive loss before income taxes     (2,001,499 )     (9,465,880 )
  Provision for income taxes     (276,846 )     (612,884 )
Net and comprehensive loss     (2,278,345 )     (10,078,764 )
                 
                 
Net loss per weighted average number of shares of common stock outstanding - basic and diluted   $ (0.01 )   $ (0.07 )
                 
Weighted average number of shares of common stock outstanding - basic and diluted     166,663,448       146,899,685  
                 
                 
   
NEULION, INC.  
   
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Expressed in U.S. dollars, unless otherwise noted)  
   
    Years ended December 31,  
             
    2013     2012  
    $     $  
             
OPERATING ACTIVITIES            
Consolidated net loss   (2,278,345 )   (10,078,764 )
Adjustments to reconcile net loss to cash provided by (used in) operating activities            
  Depreciation and amortization   3,755,054     4,407,474  
  Discount on convertible note   233,769     77,922  
  Stock-based compensation   1,416,892     1,627,231  
  Income taxes   269,000     612,884  
             
Changes in operating assets and liabilities            
  Accounts receivable   (1,095,187 )   (699,872 )
  Inventory   (64,471 )   380,895  
  Prepaid expenses, deposits and other assets   129,237     68,613  
  Other receivables   (15,906 )   (39,127 )
  Due from related parties   656,125     (165,515 )
  Accounts payable   3,188,867     215,878  
  Accrued liabilities   635,341     (524,327 )
  Deferred revenue   2,733,305     (684,793 )
  Long-term liabilities   (86,960 )   (74,307 )
  Due to related parties   4,461     (1,016 )
Cash provided by (used in) operating activities   9,481,182     (4,876,824 )
             
INVESTING ACTIVITIES            
Purchase of property, plant and equipment, net   (1,300,690 )   (1,106,700 )
Cash used in investing activities   (1,300,690 )   (1,106,700 )
             
FINANCING ACTIVITIES            
Exercise of stock options   353,991     --  
Exercise of broker warrants   1,680     --  
Convertible note   --     545,628  
Private placement, net   --     4,199,121  
Cash provided by financing activities   355,671     4,744,749  
Net increase (decrease) in cash and cash equivalents during the year   8,536,163     (1,238,775 )
Cash and cash equivalents, beginning of year   11,108,107     12,346,882  
Cash and cash equivalents, end of year   19,644,270     11,108,107