Hego Merger Drives 39 Percent Revenue Increase for Chyron in Q2 2013

Posted by Joe Zaller
Aug 12 2013

Broadcast graphics specialist Chyron reported that its revenue for the second quarter of 2013 was $10.7m, up 39% versus the same period a year ago, and up 34% versus the previous quarter.

These results include revenue from Hego, which was acquired by Chyron, from May 22, 2013 through June 30, 2013.

Excluding the $2.3m contribution from the sales of Hego products and services, the company’s revenue was up $700,000 or 9 percent, versus the same period a year ago.

The net loss for the quarter was $2.1m, or $0.09 per share, compared to a net loss of $630,000 or $0.04 per share last year, and a net loss of $921,000, or $0.05 last quarter (Chyron issued new share as part of the Hego merger process).

The operating loss for the second quarter of 2013 was $1.9m, compared to an operating loss of $1.1m for the same period last year, and an operating loss of $810,000 last quarter.

The company’s net loss and operating loss were both impacted by transaction costs associated with Chyron’s merger with Hego AB. The company says that when one-time costs,  including Hego merger-related expenses, restructuring costs and a valuation adjustment for contingent consideration related to the Hego merger in second quarter results, it posted net income of $800,000, and an operating profit of $900,000.

Service revenue in the second quarter of 2013 was $3.97m in the quarter, or 37% or total revenue.  Product revenue in the quarter was $6.74m.

Because the company did not break out the percentage of product versus service revenue from Hego, it is difficult to do a direct comparison with previous periods.

In the first quarter of 2013, the company’s revenue was split 75%/25% in favor of product sales.

Gross margins for the quarter were 68.4%, down from 69.2% last year, and down from 71% last quarter.

Operating expenses for the second quarter of 2013 were $9.2m. up 44% versus the same period a year ago, and up  41% versus the previous quarter.

R&D costs in the quarter were $2.3m, up 21% versus the same quarter last year, primarily due to the inclusion of $400,000 in Hego R&D expenses.

Sales and marketing expenses were $3.3m, down 6% versus the second quarter 2012, primarily due to inclusion of $200,000 of Hego costs, and $20,000 in expense from amortization of intangibles from the Hego merger, offset by a $600,000 decrease in Chyron &M expenses.

G&A expenses in the quarter were $3.6m, an increase 260% versus last year.  The company attributed the big jump in G&A coasts to inclusion of $300,000 in Hego G&A expenses and a $2.3m increase in Chyron G&A expenses, including $1.6m of merger-related expenses, severance costs of $600,000, and equity-based compensation of $400,000.

The company ended the quarter with $2.19m in cash, down from $2.3m last quarter.

“The second quarter was a pivotal quarter in the formation of ChyronHego,” said ChyronHego CEO Michael Wellesley-Wesley. “Having effected an extensive rebranding, we presented the combined company to our customers at the NAB tradeshow in April and received a very encouraging response. In early May, 2013, we eliminated a number of Chyron positions primarily in the United States, thus completing a restructuring initiative that began in 2012, and on May 22, 2013, we formally completed our merger with Hego AB to form ChyronHego. We’ve now been conducting business as a brand new company for just over two months. We have won significant new business in terms of product sales with BT Sport and ITV Regional News in the UK and major US and LatAm networks, as well as with US TV Station Groups. In the area of multi-year sports production services contracts, Hego announced its largest ever contract with the German Soccer League, during the quarter. I am optimistic regarding our business prospects for the second half of 2013.

“The strategic thinking underpinning the creation of ChyronHego is to create a market leading company in the fields of TV Graphics, Data Visualization and Production Services for ‘Live’ TV and Online News and Sports production. This merger creates a strong, global graphics company that is committed to innovation and to evolving existing products and services to support our customers in the future. Our second quarter financial results were inevitably impacted by one-time cash and non-cash expenses associated with the transaction. We anticipate that the compelling financial logic for the transaction will become clearer as we progress through the second half of 2013 and into 2014.”

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Related Content:

Press Release: ChyronHego Reports Financial Results for the Second Quarter Ended June 30, 2013

Previous Quarter: Chyron Revenue Up 2 Percent in Q1 2013, Gives Update on Merger, Layoffs, and Potential NASDAQ Delisting

Previous Year: Chyron Revenue Declines 18 Percent in Q2 2012

Chyron Lays Off 20 Employees, Says it will Save $3 Million per Year

Chyron Receives Another Delisting Notice From NASDAQ

More Broadcast Vendor M&A: Chyron to Acquire Hego Group in All-Stock Deal

Chyron – Hego Stock Purchase Agreement

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