NeuLion Reports 61% Year-Over-Year Increase in First Quarter GAAP Revenue to $21.7 Million
NeuLion, Inc., a 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, reported financial results for the first quarter ended March 31, 2015.
First Quarter Year-Over-Year Highlights
- GAAP revenue increased 61% to $21.7 million versus $13.5 million; non-GAAP revenue increased 90% to $25.6 million versus $13.5 million
- TV Everywhere revenue increased 59% to $5.4 million versus $3.4 million
- Non-GAAP Adjusted EBITDA grew to $6.8 million versus $2.0 million
- Non-GAAP Adjusted EBITDA margin increased to 26.6% versus 14.8%
- GAAP revenue from DivX for two months was $5.2 million; non-GAAP revenue from DivX for two months was $9.2 million
“By any financial measure, NeuLion had an outstanding first quarter of 2015,” said Kanaan Jemili, chief executive officer. “Total GAAP revenue surged 61% with organic revenue growing 22% on increased usage and volume in our Pro Sports and TV Everywhere platforms. Non-GAAP revenue nearly doubled, with our newly acquired DivX business accounting for 36% of total Non-GAAP revenue. Along with posting very strong revenue growth, we realized a 6 percentage point improvement in our cost of revenue (to 20%), with half of that improvement coming from streaming cost efficiencies and the other half from the contribution of DivX’s high-margin licensing business.”
“During the first quarter, we began the integration of DivX into NeuLion, combining the sales and product development organizations, unifying the NeuLion and DivX technology platforms and consolidating the value proposition we are bringing to the industry,” added Jemili. “We now empower the entire ecosystem of content producers, technology providers, distributors and consumers by delivering synergies between the CE industry, OTT and TV Everywhere service providers and the DivX MainConcept value chain. Additionally, with an expanded global footprint, entrenched customer relationships and a highly competitive technology platform, we remain well positioned to land and expand opportunities for growth, while continuing to deliver the highest quality on demand and live interactive sports and entertainment experience to consumers whenever, wherever and on any device.”
First Quarter Operational Highlights
- Delivered the first live 4K streaming event in partnership with Sony, BT Sports and the NBA by successfully streaming a live NBA game in 4K from the London O2 arena.
- Announced new partnership with World Surf League (WSL), to deliver compelling surfing footage coupled with interactive touch-points including super slo-mo viewing, real-time highlights and the ability to stream in 1080p HD and Ultra HD (4K).
- Launched MLS Live for the 2015 season with Major League Soccer (MLS) and saw 60% quarter over quarter growth in terms of new and renewing subscribers to the number one digital soccer network in North America.
- Expanded partnership with the Tennis Channel to create and deliver a new big screen experience for tennis fans on Apple TV and Roku connected devices.
- Renewed license agreement with LG Electronics who will now benefit from the recent release of DivX® HEVC 4K that will be installed on LG Ultra HD televisions. The new DivX® HEVC solution for 4K video streaming will be implemented across LG’s Ultra HD TV product line.
- Licensed the DivX® HEVC CE SDK to Hisense in order for them to integrate it into their line of Ultra HD television sets with 4K ready playback.
- Launched FAN PASS, SKY New Zealand’s new Over The Top (OTT) Digital Sports Service for Super Rugby, NRL and Formula 1.
- Renewed a multi-year deal with Louisiana State University (LSU), one of the largest college sports programs, for the official digital platform of the LSU Sports Athletics Department.
First Quarter 2015 Financial Review
Total GAAP revenue was $21.7 million compared to $13.5 million for the first quarter of 2014, an increase of $8.2 million, or 61%, reflecting the addition of $5.2 million in revenue from DivX and organic revenue growth in the Pro Sports and TV Everywhere categories.
Pro Sports revenue increased 24% to $7.8 million for the current period from $6.3 million for the comparable prior period, primarily due to growth in fixed fees and variable subscription fees from new and existing customers. TV Everywhere revenue increased 59% to $5.4 million for the current period from $3.4 million for the prior comparable period, primarily due to increases in monthly and annual fixed fees from new and existing customers and increased variable support and usage fees. College Sports revenue decreased 13% to $3.3 million for the current period compared to $3.8 million for the prior comparable period. The decrease was primarily driven by a decline in variable subscription fees resulting from a shift in the manner in which colleges and conferences are monetizing digital assets. Revenues from the company’s Consumer Electronics and Main Concept categories were $4.1 million and $0.9 million, respectively, as a result of the DivX acquisition on January 30, 2015.
Cost of revenue was $4.3 million, or 20% of total revenue, for the current period compared to $3.5 million, or 26% of total revenue, for the prior comparable period. Half of the cost of revenue percentage improvement was due to the high margin DivX business and half was due to improved broadcast operating costs. Selling, general and administrative expenses, including stock-based compensation, were $9.9 million for the current period, an increase of 55% from $6.4 million for the prior comparable period. Research and development expenses were $5.3 million for the current period, a 165% increase compared to $2.0 million for the prior comparable period. Operating income was $0.6 million compared to $0.9 million in the first quarter of 2014. The consolidated net loss was $0.5 million, or $0.00 per diluted share, for the current period compared with consolidated net income of $1.1 million, or $0.00 per diluted share, for the prior comparable period.
Non-GAAP revenue increased 90% to $25.6 million from the prior year’s level. Non-GAAP Adjusted EBITDA more than tripled to $6.8 million from $2.0 million for the same period last year, with $2.9 million of the increase due to the acquisition of DivX and $1.9 million from organic improvement due to higher revenue and improved cost of revenues as a percentage of revenues, 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. The Company defines Non-GAAP revenues as GAAP revenues before purchase price accounting adjustments as a result of an acquisition. The Company defines Non-GAAP Adjusted EBITDA as consolidated net income (loss) before interest, income taxes, depreciation and amortization, purchase price accounting adjustments, stock-based compensation, acquisition-related expenses, gain on revaluation of convertible note derivative, 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 Revenue and 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 Revenues to U.S. GAAP revenues and Non-GAAP Adjusted EBITDA to U.S. GAAP consolidated net income/(loss) as an exhibit to this press release.