NeuLion Reports Fourth Quarter Net Income of $1.6 Million on Revenue of $16.5 Million
Marketwired
PLAINVIEW, NY--(Marketwired - March 04, 2015) - NeuLion, Inc. (NLN.TO)
Fourth Quarter Year-Over-Year Highlights
Revenue increased 17% to $16.5 million versus $14.1 million
Cost of revenue as a percent of revenue improved 300 basis points to 25% versus 28%
Non-GAAP Adjusted EBITDA increased 59% to $3.5 million versus $2.2 million
Consolidated Net Income increased 45% to $1.6 million versus $1.1 million
9th consecutive quarter of positive Non-GAAP Adjusted EBITDA
5th consecutive quarter of net income
Fiscal Year 2014 Year-Over-Year Highlights
Revenue increased 18% to $55.5 million versus $47.1 million
Non-GAAP Adjusted EBITDA increased 140% to $8.4 million versus $3.5 million
NeuLion, Inc. (NLN.TO), 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, 2014.
Management Commentary
"NeuLion posted a 560 basis point improvement in our Non-GAAP Adjusted EBITDA margin for the fourth quarter to 21.2%, a quarterly record, from 15.6% for the fourth quarter of 2013, reflecting continued gains in volume and usage from new and existing customers and demonstrating the earnings power of our business model," said Kanaan Jemili, chief executive officer.
"With the acquisition of DivX, we have entered 2015 excited about our expanded set of opportunities globally to continue scaling the business and to seize leadership from both a technology platform and consumer experience perspective in the fast-growing online video market," added Dr. Jemili. "We are intently focused on enlarging our customer base of both sports and entertainment content owners and consumer electronics manufacturers while continuing to expand relationships with our established customers. As adoption of ultra HD/4K video and Over-the-Top services accelerates, our end-to-end solution offerings, which enable digital content management, distribution and monetization, perfectly position NeuLion to deliver high quality on-demand and live interactive digital content anywhere, on any device," concluded Dr. Jemili.
Fourth Quarter Operational Highlights
TV Everywhere
Partnered with Millicom, an international telecommunications and media company, to create and deliver an exclusive new digital mobile sports experience. This service will be available in Latin America.
Expanded partnership with Univision to include TV Everywhere offerings for its three top channels: Univision; UniMás; and Deportes.
Launched new TV Everywhere offering with MSG Network called MSG Go to deliver live games, pre- and post-game coverage and other MSG Network Emmy award-winning original programming.
Professional Sports
Expanded service and partnership with Coliseum Sports Media to include Barclays Premier League, PGA Tour, European Tour and LPGA Tour live events for the country of New Zealand.
Recognized by Microsoft as a Premier Plus development partner through work on XBOX apps for the NBA, NFL, NHL, UFC and others.
Licensed the NeuLion Sports Platform to the United Soccer League, a partner of Major League Soccer.
College Sports
Launched nine new college websites, for schools that include the University of Oregon, the University of Nebraska and Princeton University, for desktop, tablet and mobile devices.
Partnered with Drum Corps International, a non-profit governing body for over 500 junior drum and bugle corps in the United States and Canada, to create an online destination for live and on-demand coverage of the annual DCI Tour and more than 35 World Championships in 17 North American cities.
Continued enhancements to NeuLion College mobile and tablet services have resulted in an increase in traffic equaling 47% of all traffic across the NeuLion College network in 2014 and for the last two quarters of 2014, mobile traffic was over 50% of overall NeuLion College network traffic.
Fourth Quarter 2014 Financial Review
Total revenue was $16.5 million compared to $14.1 million for the fourth quarter of 2013, an increase of $2.4 million, or 17%, reflecting revenue growth from our Pro Sports and TV Everywhere customers.
Pro Sports revenue increased 18% to $7.9 million from $6.7 million for the fourth quarter of 2013, primarily due to growth in variable subscription fees.
College Sports revenue decreased 8% to $3.6 million from $3.9 million for fourth quarter of 2013. The decrease was primarily a result of a drop in variable subscription fees as the Company lost its ability to sell subscriptions for certain colleges, as colleges move to consolidate into conferences and sports networks.
TV Everywhere revenue increased 43% to $5.0 million from $3.5 million for the fourth quarter of 2013 primarily due to increases in monthly fixed fees and variable usage fees.
Cost of revenue was $4.0 million, or 25% of total revenue, compared to $4.0 million, or 28% of total revenue, for the fourth quarter of 2013, a 300 basis point improvement, reflecting improved operating costs on streaming.
Selling, general and administrative expenses, including stock-based compensation, were $8.0 million, an increase of 27%, compared to $6.3 million for the fourth quarter of 2013. Including in selling, general and administrative costs were approximately $0.8 million of acquisition-related expenses and $0.2 million in costs associated with compliance with Section 404 of the Sarbanes-Oxley Act (SOX).
Research and development expenses were $2.1 million, an increase of 5%, compared to $2.0 million for the fourth quarter of 2013. Research and development expenses primarily consist of wages and benefits.
Operating income was $1.8 million, an increase of 64%, compared to $1.1 million for the fourth quarter of 2013.
Consolidated net income was $1.6 million, or $0.01 per basic and diluted share, an increase of 45% compared to consolidated net income of $1.1 million, or $0.00 per basic and diluted share, for the fourth quarter of 2013.
Non-GAAP Results
Non-GAAP Adjusted EBITDA increased 59% to $3.5 million from $2.2 million for the same period last year due to higher 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 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. The Company defines Non-GAAP Adjusted EBITDA as consolidated net income (loss) before interest, income taxes, depreciation and amortization, investment income, stock-based compensation, acquisition-related expenses, amortization of discount on convertible note and foreign exchange loss. Non-GAAP Adjusted EBITDA is a key measure used by management to evaluate the Company'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, the Company's presentation of Non-GAAP 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 Adjusted EBITDA to U.S. GAAP consolidated net income/(loss) as an exhibit to this press release.
About NeuLion
NeuLion, Inc. (NLN.TO) offers solutions that power the highest-quality digital experiences for live and on-demand content up to ultra HD/4K on any device. Through its end-to-end technology platform, NeuLion enables digital content management, distribution and monetization for content owners worldwide. With the recent acquisition of DivX, the Company also operates a robust consumer electronics licensing business that has enabled over 1 billion devices worldwide with secure, high-quality video playback and 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, New York. 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 successfully integrate the operations 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, 2014, as amended, which is available on www.sec.gov and filed on www.sedar.com.
NEULION, INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
As of December 31,
2014
2013
ASSETS
Current
Cash and cash equivalents
$ 25,898,386
$ 19,644,270
Accounts receivable, net
8,055,714
5,289,136
Other receivables
602,668
364,797
Inventory
304,028
481,012
Prepaid expenses and deposits
1,315,113
1,135,949
Due from related parties
111,114
243,842
Total current assets
36,287,023
27,159,006
Property, plant and equipment, net
3,829,666
3,357,626
Intangible assets, net
406,196
1,649,959
Goodwill
11,327,626
11,327,626
Other assets
87,662
81,778
Total assets
$ 51,938,173
$ 43,575,995
LIABILITIES AND EQUITY
Current
Accounts payable
$ 14,362,317
$ 13,002,104
Accrued liabilities
5,247,483
5,338,418
Due to related parties
0
16,743
Deferred revenue
9,601,907
8,856,629
Total current liabilities
29,211,707
27,213,894
Long-term deferred revenue
1,018,807
725,853
Other long-term liabilities
202,333
270,892
Deferred tax liability
1,451,526
1,180,978
Total liabilities
31,884,373
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)
4,954,867
4,924,775
Total redeemable preferred stock
14,954,867
14,924,775
Stockholders' equity (deficit)
Common stock (par value: $0.01; shares authorized: 300,000,000; shares issued and outstanding: 178,210,006 and 170,326,338, respectively)
1,782,100
1,703,263
Additional paid-in capital
87,630,600
85,437,337
Promissory notes receivable
(209,250)
(209,250)
Accumulated deficit
(84,104,517)
(87,671,747)
Total stockholders' equity (deficit)
5,098,933
(740,397)
Total liabilities and stockholders' equity
$51,938,173
$43,575,995
NEULION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(Expressed in U.S. dollars)
Year ended December 31,
3 months ended December 31,
2014
2013
2014
2013
(audited)
(unaudited)
Revenue
$ 55,519,739
$ 47,107,178
$ 16,464,003
$ 14,144,133
Costs and expenses
Cost of revenue, exclusive of depreciation and amortization shown separately below
13,896,629
13,279,063
4,036,450
3,995,834
Selling, general and administrative, including stock-based compensation
27,073,344
24,289,845
7,965,584
6,300,462
Research and development
8,380,944
7,422,802
2,116,515
1,962,676
Depreciation and amortization
2,621,366
3,755,054
546,038
767,782
51,972,283
48,746,764
14,664,587
13,026,754
Operating income (loss)
3,547,456
(1,639,586)
1,799,416
1,117,379
Other income (expense)
Loss on foreign exchange
(138,295)
(125,657)
(73,729)
(35,708)
Investment income (expense), net
428,617
(2,487)
2,018
1,864
Amortization of discount on convertible note
0
(233,769)
0
0
290,322
(361,913)
(71,711)
(33,844)
Net and comprehensive income (loss) before income taxes
3,837,778
(2,001,499)
1,727,705
1,083,535
Income taxes
(270,548)
(276,846)
(106,318)
(11,556)
Net and comprehensive income (loss)
$ 3,567,230
$ (2,278,345)
$ 1,621,387
$ 1,071,979
Net income (loss) per weighted average number of shares of common stock outstanding - basic
$0.01
($0.01)
$0.01
$0.00
Weighted average number of shares of common stock outstanding - basic
174,645,803
166,663,448
178,056,256
169,526,776
Net income (loss) per weighted average number of shares of common stock outstanding - diluted
$0.01
($0.01)
$0.01
$0.00
Weighted average number of shares of common stock outstanding - diluted
214,711,362
166,663,448
217,615,815
197,521,360
NEULION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
Year ended December 31,
2014
2013
OPERATING ACTIVITIES
Net income (loss)
$
3,567,230
$
(2,278,345)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
2,621,366
3,755,054
Discount on convertible note
0
233,769
Stock-based compensation
1,437,982
1,416,892
Deferred income taxes
270,548
269,000
Changes in operating assets and liabilities
Accounts receivable
(2,766,578)
(1,095,187)
Inventory
176,984
(64,471)
Prepaid expenses, deposits and other assets
(185,048)
129,237
Other receivables
(237,871)
(15,906)
Due from related parties
132,728
656,125
Accounts payable
1,360,214
3,188,867
Accrued liabilities
(90,935)
635,341
Deferred revenue
1,038,232
2,733,305
Long-term liabilities
(68,559)
(86,960)
Due to related parties
(16,743)
4,461
Cash provided by operating activities
7,239,550
9,481,182
INVESTING ACTIVITIES
Purchase of property, plant and equipment
(1,849,644)
(1,300,690)
Cash used in investing activities
(1,849,644)
(1,300,690)
FINANCING ACTIVITIES
Proceeds from exercise of stock options
732,527
353,991
Proceeds from exercise of broker units
131,683
1,680
Cash provided by financing activities
864,210
355,671
Net increase in cash and cash equivalents, during the period
6,254,116
8,536,163
Cash and cash equivalents, beginning of period
19,644,270
11,108,107
Cash and cash equivalents, end of period
$
25,898,386
$
19,644,270
Supplemental disclosure of non-cash activities:
Par value of shares of common stock issued upon exercise of cashless warrants
$
52,415
$
10,443
Accretion of issuance costs on Class 4 Preference Shares
$
30,092
$
30,092
NEULION, INC.
RECONCILIATION OF NON-GAAP MEASURES
(unaudited)
(Expressed in U.S. dollars, unless otherwise noted)
Three months ended December 31,
2014
2013
Consolidated net income on a GAAP basis
$1,621,387
$1,071,979
Depreciation and amortization
546,038
767,782
Stock-based compensation
348,922
344,291
Acquisition-related expenses
805,732
0
Income taxes
106,318
11,556
Investment income and foreign exchange loss
71,711
33,844
Non-GAAP Adjusted EBITDA
$3,500,108
2,229,452
Non-GAAP Adjusted EBITDA Margin
21.2%
15.6%
(Non-GAAP Adjusted EBITDA/Total Revenue)
Year ended December 31,
2014
2013
Consolidated net income (loss) on a GAAP basis
$3,567,230
$(2,278,345)
Depreciation and amortization
2,621,366
3,755,054
Stock-based compensation
1,437,982
1,416,892
Acquisition-related expenses
805,732
0
Discount on convertible note
0
233,769
Income taxes
270,548
276,846
Investment income (expense) and foreign exchange loss
