NeuLion, a technology product and service provider for digital distribution, announced Q4 2015 and full year 2015 financial results.
2015 GAAP revenue was $94.0 million, a 69% increase versus 2014 revenue. The January 2015 acquisition of DivX contributed approximately 73% of the year-over-year increase in GAAP revenue.
Commenting on NeuLion’s organic growth in Q4 2015, CEO Kanaan Jemili stated, “Revenue from our NeuLion Digital Platform grew 20% on new customer additions and expanded usage from existing customers.”
Net Income for the full year 2015 was $25.9 million versus $3.6 million for 2014. The sharp increase in 2015 net income was primarily attributable to a $31.2 million income tax benefit recognized during Q4 2015.
Gross margins (exclusive of depreciation and amortization) were 81% for 2015, an increase over the 75% gross margins from 2014. Kanaan Jemili attributed the margin improvement to further scale in NeuLion’s Digital Platform business and the addition of revenue streams from the acquisition of DivX.
Operating income for 2015 was negative $1.86 million, which compares to positive $3.5 million during 2014.
Selling, general and administrative (“SG&A”) expenses were $45.6 million for the 2015, an increase of 68.6% versus 2014. SG&A expense as a percentage of revenue was 48.5% for 2015, flat when compared to 2014 levels.
Research and development (“R&D”) expense was $24.9 million for the full year, an almost tripling (197%) of R&D expense versus $8.3 million in 2014. R&D expense represented 26.5% of 2015 revenue, in comparison to 15.1% in 2014. The increase in R&D expense was almost entirely attributable to additional headcount from the acquisition of DivX.
Cash and cash equivalents ended the year at $53.4 million. This compares to a cash balance of $25.8 million at the end of 2014. Positive changes in working capital accounts contributed $18.3 million to the increase in cash.
NeuLion had 638 total employees (504 full time) as of February 29, 2016. This is down from the 767 total employees (567 full-time) as of March 1, 2015.
Q4 2015 Results:
NeuLion’s Q4 2015 GAAP Revenue was $27.8 million, a 68% increase compared to Q4 2014.
Net income for the fourth quarter was $32.8 million versus $1.6 million for Q4 2014.
Gross margins for Q4 2015 were 81%, an improvement versus the 75% gross margins in Q4 2014. The 600 basis point increase was primarily the result of the addition of revenues from DivX and improved operating costs for NeuLion Digital Platform.
Q4 2015 operating income was $1.7 million, a slight decrease of 2.3% versus Q4 2014. Operating margins for the quarter were 6.3%, compared to 10.9% in Q4 2014.
SG&A expense for Q4 2015 was $13.2 million, a 65% increase versus Q4 2014. R&D expense was $5.5 million during the fourth quarter, an increase of 161% when compared to Q4 2014.
Revenue by Service and Product Offerings:
- NeuLion Digital Platform revenue was $66.1 million for 2015, an increase of 19% over 2014 revenue. For Q4 2015 GAAP revenue was $19.8 million, representing a 20% increase in year-over-year performance.
- DivX and MainConcept product lines contributed GAAP revenue of $28.0 million for 2015. The product lines contributed GAAP revenue of $8.0 million for the fourth quarter of 2015. Comparable periods are not available since the DivX and MainConcept product lines were acquired in January 2015.
Management Discussion and Analysis:
NeuLion’s earnings release highlighted several notable customer projects and related milestones.
Management called attention to the launch of Univision NOW, a new direct-to-consumer over-the-top service by Univision. Univision NOW uses the NeuLion Digital Platform. Other customer case studies mentioned were the delivery of multiple live NBA games in 4K with BT Sports and a 4K live stream of the national soccer teams of Mexico and Senegal from Miami (carried by Univision).
More broadly, NeuLion’s management reviewed key performance indicators of its Digital Platform including a 26% year-over-year increase in the number of live events and a 35% year-over-year increase in video traffic.
Separate to the earnings release, NeuLion announced a $10 million stock buyback. The stock repurchase will occur over the next 12 months. $10 million represents a meaningful percentage of NeuLion’s market cap, which is currently $264 million.
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