SOURCE: NeuLion, Inc.

NeuLion, Inc.

August 14, 2012 17:10 ET

NeuLion Reports Second Quarter 2012 Results

PLAINVIEW, NY--(Marketwire - Aug 14, 2012) - NeuLion, Inc. (TSX: NLN), the leading technology provider for delivering live and on-demand content to any Internet-enabled device, today announced financial results for the three months and six months ended June 30, 2012. Revenue was $8.7 million for the three months ended June 30, 2012. (All amounts are in U.S. dollars.)

For the three months ended June 30, 2012:

  • Revenue decreased by $1.3 million, or 13%, as compared to the same period a year ago.

  • Non-GAAP Adjusted EBITDA Loss (as defined below) improved by $0.1 million, or 6%, as compared to the same period a year ago, and Consolidated Net Loss increased by $0.2 million, or 6%, as compared to the same period a year ago.

For the six months ended June 30, 2012:

  • Revenue decreased by $0.8 million, or 4%, as compared to the same period a year ago.

  • Non-GAAP Adjusted EBITDA Loss (as defined below) improved by $0.2 million, or 5%, as compared to the same period a year ago, and Consolidated Net Loss improved by $0.2 million, or 3%, as compared to the same period a year ago.

"During the second quarter, we de-emphasized certain business initiatives that were not part of our core business, resulting in reduced revenue in the quarter. Consistent with our core business, we are pleased that we have secured new sports-related customers in the United States and Canada. In addition, we are very focused on our expansion into China through our partnership with China Network Television which debuted successfully with streaming coverage in China of over 5,600 hours of Olympic programming," said Nancy Li, Chief Executive Officer of the Company. "Our partnership with China Network Television opens new opportunities to capitalize on the growing marketplace in China and provide content owners worldwide with our leading technology and video platform infrastructure to seamlessly deliver their content to one of the world's largest consumer markets."

Second Quarter Operational Highlights:

TV Everywhere
Multi-device content delivery

  • Signed multi-year deal with China Network Television (CNTV), a new media agency of CCTV, to develop and deliver the new premium HD streaming service called CNTV 5+ VIP. CNTV 5+ VIP is China's first sports media platform that integrates the content of the number one Chinese sports TV platform, CCTV5, with exclusive distribution rights for 80% of the new media intellectual property resources that cover the top sporting events.
  • Partnered with the Outdoor Channel to launch a new subscription service called My Outdoor TV (MOTV). Subscribers get unlimited access on multiple devices to current and back season television episodes featuring some of the most exciting outdoor enthusiast programming.

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

  • Unveiled a new online destination for Major League Soccer, called MLS Live, that features an enhanced user interface with easy navigation, scores and game selection as well as higher-quality live and on-demand game delivery with an option to re-watch the action in slow motion. 
  • Partnered with USTA to deliver live and on-demand coverage of the Davis Cup featuring a full screen HD video player with instantly available highlights and DVR functionality.

College Athletics
Scholastic athletic portal and online destination for fans

  • Launched new partnerships with the University of North Carolina at Chapel Hill, the University of Miami and Clemson University to introduce a host of new interactive, digital services including revamped websites, live and on-demand video delivery to multiple devices with select events in HD, increased highlights and game content creation, new social media functionality and more.
  • Held first annual NeuLion Collegiate Partner Summit in Orlando, Florida, which featured a welcome reception, advisory board dinner and a full day of collaborative, educational and instructional sessions designed to maximize the partnerships and available technology to increase fan engagement.

Financial Results for the Three Months Ended June 30, 2012:

Revenue was $8.7 million, as compared to $10.0 million for the three months ended June 30, 2011, marking a period-over-period decrease of $1.3 million, or 13%.

Cost of revenue, exclusive of depreciation and amortization, was $3.1 million (36% of revenue), as compared to $4.0 million (40% of revenue) for the three months ended June 30, 2011, marking a period-over-period decrease of $0.9 million (4% of revenue).

Consolidated net loss was $3.5 million, which includes $2.0 million of non-cash and/or non-operating charges, netting a non-GAAP Adjusted EBITDA Loss of $1.5 million, as compared to a consolidated net loss of $3.3 million, which includes $1.7 million of non-cash and/or non-operating charges, netting a non-GAAP Adjusted EBITDA Loss of $1.6 million for the three months ended June 30, 2011, marking a period-over-period improvement in non-GAAP Adjusted EBITDA Loss of $0.1 million, or 6%. Non-cash and/or non-operating charges consist of depreciation and amortization, stock-based compensation, interest income, income taxes and foreign exchange loss.

Financial Results for the Six Months Ended June 30, 2012:

Revenue was $19.1 million, as compared to $19.9 million for the six months ended June 30, 2011, marking a period-over-period decrease of $0.8 million, or 4%.

Cost of revenue, exclusive of depreciation and amortization, was $7.6 million (40% of revenue), as compared to $8.0 million (40% of revenue) for the six months ended June 30, 2011, marking a period-over-period decrease of $0.4 million (no change as a percentage of revenue).

Consolidated net loss was $7.0 million, which includes $3.5 million of non-cash and/or non-operating charges, netting a non-GAAP Adjusted EBITDA Loss of $3.5 million, as compared to a consolidated net loss of $7.2 million, which includes $3.5 million of non-cash and/or non-operating charges, netting a non-GAAP Adjusted EBITDA Loss of $3.7 million for the six months ended June 30, 2011, marking a period-over-period improvement in non-GAAP Adjusted EBITDA Loss of $0.2 million, or 5%. 

As of June 30, 2012, we had $5.1 million in cash and cash equivalents.

Use of Non-GAAP Measures

We report non-GAAP Adjusted EBITDA Loss 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 Loss represents consolidated net loss before interest, income taxes, depreciation and amortization, stock-based compensation, unrealized gain/loss on derivatives, investment income, non-controlling interests, loss on dissolution of majority-owned subsidiary and foreign exchange gain/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 Loss to its most directly comparable U.S. GAAP measure, consolidated net loss:

                         
Consolidated Statement of Operations Reconciliation:  
   
    Three months ended,     Six months ended,  
    June 30,     June 30,  
    2012     2011     2012     2011  
    $     $     $     $  
                         
Consolidated net loss on a GAAP basis   (3,485,657 )   (3,323,196 )   (7,030,020 )   (7,226,250 )
                         
Depreciation and amortization   1,182,217     1,378,592     2,420,818     2,824,011  
Stock-based compensation   681,445     334,183     914,869     729,397  
Income taxes   90,000     0     217,000     0  
Interest income and foreign exchange loss   14,728     (3,113 )   26,362     21,073  
                         
Non-GAAP Adjusted EBITDA Loss   (1,517,267 )   (1,613,534 )   (3,450,971 )   (3,651,769 )
                         

About NeuLion
Founded in 2000, NeuLion, Inc. (TSX: NLN) offers the true end-to-end solution for delivering live and on-demand content to any Internet-enabled device. NeuLion enables content owners and distributors, cable operators and telecommunications companies to capitalize on 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
Forward-looking statements involve significant risk, uncertainties and assumptions. Although the forward-looking statements contained in this release are based upon what management believes to be reasonable assumptions, we 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 we assume no obligation to update or revise them to reflect new events or circumstances, except as required by law. Many factors could cause our 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 develop and execute on our business plan, including further diversifying our customer base; continuing to invest in and expand our sports-related business; our ability to increase revenue; general economic and market segment conditions; our customers' subscriber levels; the financial health of our customers; 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 Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, 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)  
             
    June 30,     December 31,  
    2012     2011  
    (unaudited)        
    $     $  
             
ASSETS            
Current            
Cash and cash equivalents   5,073,838     12,346,882  
Accounts receivable, net of allowance for doubtful accounts of $78,736 and $64,132, respectively   2,170,295     3,494,077  
Other receivables   315,457     309,764  
Inventory   754,224     797,436  
Prepaid expenses and deposits   1,094,573     1,189,311  
Due from related parties   1,394,874     734,452  
Total current assets   10,803,261     18,871,922  
Property, plant and equipment, net   3,495,080     4,294,476  
Intangible assets, net   5,313,514     6,609,465  
Goodwill   11,327,626     11,327,626  
Other assets   169,622     226,266  
Total assets   31,109,103     41,329,755  
             
LIABILITIES AND EQUITY            
Current            
Accounts payable   7,881,085     9,597,359  
Accrued liabilities   4,640,189     5,314,308  
Due to related parties   10,221     13,298  
Deferred revenue   4,727,683     6,624,693  
Total current liabilities   17,259,178     21,549,658  
Long-term deferred revenue   1,034,687     1,050,495  
Other long-term liabilities   389,754     432,159  
Deferred tax liability   516,094     299,094  
Total liabilities   19,199,713     23,331,406  
             
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)   4,879,637     4,864,591  
Total redeemable preferred stock   14,879,637     14,864,591  
             
Stockholders' equity            
Common stock (par value: $0.01; authorized: 300,000,000; issued and outstanding: 141,185,130 and 140,012,310, respectively)   1,411,851     1,400,122  
Additional paid-in capital   78,171,810     77,257,524  
Promissory notes receivable   (209,250 )   (209,250 )
Accumulated deficit   (82,344,658 )   (75,314,638 )
Total (deficit) equity   (2,970,247 )   3,133,758  
Total liabilities and equity   31,109,103     41,329,755  
             
             
             
NEULION, INC.  
   
CONSOLIDATED STATEMENTS OF OPERATIONS AND  
COMPREHENSIVE LOSS  
(unaudited)  
(Expressed in U.S. dollars, unless otherwise noted)  
                         
    Three months     Six months  
    ended     ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
    $     $     $     $  
                                 
Revenue                                
  Services revenue     8,202,133       8,813,595       18,033,487       18,377,525  
  Equipment revenue     514,793       1,144,529       1,051,955       1,526,597  
      8,716,926       9,958,124       19,085,442       19,904,122  
                                 
Costs and expenses                                
  Cost of services revenue, exclusive of depreciation and amortization shown separately below     2,676,978       3,150,377       6,724,521       6,819,188  
  Cost of equipment revenue     390,227       826,326       856,919       1,137,888  
  Selling, general and administrative, including stock-based compensation     6,082,672       6,344,930       12,509,531       13,256,343  
  Research and development     1,765,761       1,584,208       3,360,311       3,071,869  
  Depreciation and amortization     1,182,217       1,378,592       2,420,818       2,824,011  
      12,097,855       13,284,433       25,872,100       27,109,299  
Operating loss     (3,380,929 )     (3,326,309 )     (6,786,658 )     (7,205,177 )
                                 
Other income (expense)                                
  Loss on foreign exchange     (16,558 )     (3,796 )     (30,439 )     (41,892 )
  Investment income     1,830       6,909       4,077       20,819  
      (14,728 )     3,113       (26,362 )     (21,073 )
                                 
Net and comprehensive loss before income taxes     (3,395,657 )     (3,323,196 )     (6,813,020 )     (7,226,250 )
  Income taxes     (90,000 )     -       (217,000 )     -  
Net and comprehensive loss     (3,485,657 )     (3,323,196 )     (7,030,020 )     (7,226,250 )
  Net loss attributable to non-controlling interest     -       11,731       -       21,485  
Net and comprehensive loss attributable to controlling interest     (3,485,657 )     (3,311,465 )     (7,030,020 )     (7,204,765 )
  Adjustment to the carrying amount of redeemable preferred stock     -       420,889       -       153,233  
Net and comprehensive loss attributable to NeuLion, Inc. common stockholders     (3,485,657 )     (2,890,576 )     (7,030,020 )     (7,051,532 )
                                 
                                 
Net loss per weighted average number of shares outstanding - basic and diluted   $ (0.02 )   $ (0.02 )   $ (0.05 )   $ (0.05 )
                                 
Weighted average number of shares outstanding - basic and diluted     140,866,631       139,389,376       140,520,157       139,293,692  
                                 
                                 
                                 
NEULION, INC.  
   
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(unaudited)  
(Expressed in U.S. dollars, unless otherwise noted)  
                         
    Three months     Six months  
    ended     ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
    $     $     $     $  
                         
OPERATING ACTIVITIES                        
                         
Net loss   (3,485,657 )   (3,323,196 )   (7,030,020 )   (7,226,250 )
Adjustments to reconcile net loss to net cash used in operating activities                        
  Depreciation and amortization   1,182,217     1,378,592     2,420,818     2,824,011  
  Stock-based compensation   681,445     334,183     914,869     729,397  
  Deferred income taxes   90,000     -     217,000     -  
                         
Changes in operating assets and liabilities                        
  Accounts receivable   691,310     (1,111,861 )   1,323,782     (1,209,429 )
  Inventory   137,704     34,220     43,212     (113,082 )
  Prepaid expenses, deposits and other assets   (24,653 )   210,308     151,382     (116,029 )
  Other receivables   (40,002 )   17,669     (5,693 )   112,034  
  Due from related parties   (456,913 )   1,053,472     (660,422 )   966,157  
  Accounts payable   (1,641,215 )   (1,105,163 )   (1,716,274 )   (1,719,345 )
  Accrued liabilities   (1,157,255 )   (613,148 )   (647,927 )   (329,882 )
  Deferred revenue   (121,742 )   (315,061 )   (1,830,053 )   (1,911,769 )
  Long-term liabilities   (22,372 )   (18,681 )   (42,406 )   (21,360 )
  Due to related parties   (6,035 )   (500 )   (3,077 )   8,849  
Cash used in operating activities   (4,173,168 )   (3,459,166 )   (6,864,809 )   (8,006,698 )
                         
INVESTING ACTIVITIES                        
Purchase of property, plant and equipment   (86,187 )   (188,465 )   (408,235 )   (487,751 )
Cash used in investing activities   (86,187 )   (188,465 )   (408,235 )   (487,751 )
                         
FINANCING ACTIVITIES                        
Private placement, net   -     4,903,906     -     4,903,906  
Cash provided by financing activities   -     4,903,906     -     4,903,906  
                         
Net increase (decrease) in cash and cash equivalents during the period   (4,259,355 )   1,256,275     (7,273,044 )   (3,590,543 )
Cash and cash equivalents, beginning of period   9,333,193     8,082,507     12,346,882     12,929,325  
Cash and cash equivalents, end of period   5,073,838     9,338,782     5,073,838     9,338,782