Posts Tagged ‘OTTVideo’

NeuLion Revenue Increases 17 Percent in Q4 2014

Annual Results, Broadcaster Financial Results | Posted by Joe Zaller
Mar 04 2015

NeuLion,_Inc_-729822400065

Online video platform provider NeuLion reported that its revenue for the fourth quarter of 2014 was $16.5m, an increase of 17% versus the same period a year ago, and up 32% versus the previous quarter.

Consolidated net income for the quarter was $1.6m, or $0.01 per basic and diluted share, an increase of up from $1.1m last year, and $0.2m last quarter.

Operating income for the quarter was $1.8m, up from $1.1m last year, and $0.2m last quarter

Company CEO Kanaan Jemili said the NeiLion’s improved performance for the quarter reflects the company’s “continued gains in volume and usage from new and existing customers and demonstrating the earnings power of our business model.”

 

On a segment basis:

  • Revenue from Pro Sports was $7.9m, an increase of 18% versus the same period a year ago, and an increase of 52% versus the previous quarter. The company attributed the year-over-year increase in pro sports revenue to growth in variable subscription fees.
  • College Sports revenue was $3.6m, down 8% versus the same period a year ago, up 16.1% versus the previous quarter. The company attributed the year-over-year decline college sports revenue to the loss of the company’s ability to sell subscriptions for certain colleges, as colleges move to consolidate into conferences and sports networks
  • Revenue from TV Everywhere was $5m, up 43% versus the same period a year ago, and up 47.1% versus the previous quarter.  The company said TV Everywhere revenue increased because of increases in monthly fixed fees and variable usage fees.

 

Expenses during the quarter were up across the board.  Selling, general and administrative expenses, including stock-based compensation, were $8m, an increase of 27%, versus the same period a year ago. 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.

Research and development expenses in the fourth quarter were $2.1m, an increase of 5%, compared to the fourth quarter of 2013.

 

Full year 2014 Results

NeuLion’s revenue for the full year 2014 was $55.5m, up 18% versus the previous year.

Consolidated net income for the full year 2014 was $3.6m, or $0.01 per basic and diluted share, compared to a net loss of $2.3m in 2013.

Full year 2014 operating income for the quarter was $3.5m, versus an operating loss of $1.6m in 2013.

 

NeuLion CEO Kanaan Jemili said the company’s improved performance for the quarter reflects the company’s “continued gains in volume and usage from new and existing customers and demonstrating the earnings power of our business model.”

“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.

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Related Content:

Press Release: NeuLion Reports 22% Year-Over-Year Increase in Third Quarter Revenue to $12.2 Million

NeuLion Completes Acquisition of DivX

Broadcast Vendor M&A: Rovi Sells DivX and MainConcept to Parallax Capital and StepStone Group for $75 Million

Rovi – Parallax Capital: DivX Purchase Agreement

Press Release: Rovi Announces Sale of DivX and MainConcept Businesses

Press Release: Parallax Capital Partners and StepStone Group to Acquire DivX

Rovi to buy Sonic for $720 million

Sonic Solutions to buy DivX in $323M bid to become digital media leader

Sonic Solutions Integrates Newly Acquired MainConcept, Forms New Pro Technology Division

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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NeuLion Completes Acquisition of DivX

Broadcast Vendor M&A | Posted by Joe Zaller
Feb 02 2015

Online video platform NeuLion has completed the acquisition of DivX, a provider of video codecs and software for viewing and authoring.

The total transaction value was approximately $62.5m, comprised of 35.89 million newly issued shares of its common stock and a two-year convertible promissory note in the initial principal amount of $25 million subject to working capital credit of $2 million.

DivX CEO Kanaan Jemili will become CEO of the combined company, and NeuLion CEO Nancy Li will become Executive Vice Chairman of company’s board of directors

This is the fourth time in recent memory that DivX, a former publicly traded company has been acquired.

In 2010 DivX was acquired by Sonic Solutions $323m.  At that time Sonic Solutions said it planned to form a new professional technology division, which combined DivX subsidiary MainConcept with Sonic’s existing professional products group in order to offer a ‘one-stop-shop’ for companies that are looking to incorporate media management technologies into their products and services.

Less than a year later, Sonic Solutions was itself acquired by acquired by Rovi for $720m.

In 2014 Rovi sold DivX and MainConcept to Parallax Capital and StepStone Group for $52.5m in cash, plus a maximum earnout of $22.5m

 

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Related Content:

Press Release: NeuLion Completes Acquisition of DivX

Broadcast Vendor M&A: Rovi Sells DivX and MainConcept to Parallax Capital and StepStone Group for $75 Million

Rovi – Parallax Capital: DivX Purchase Agreement

Press Release: Rovi Announces Sale of DivX and MainConcept Businesses

Press Release: Parallax Capital Partners and StepStone Group to Acquire DivX

Rovi to buy Sonic for $720 million

Sonic Solutions to buy DivX in $323M bid to become digital media leader

Sonic Solutions Integrates Newly Acquired MainConcept, Forms New Pro Technology Division

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Kit Digital Announces $6 Million Settlement of Securities Lawsuits

Broadcast technology vendor financials, SEC Filings | Posted by Joe Zaller
Jul 02 2013

One-time high flying online video delivery leader Kit Digital has signed a memorandum of understanding to settle a series of federal securities lawsuits filed against the company and some of its KIT’s current and former officers and directors.

KIT, which was delisted from the Nasdaq stock exchange in December 2012, and filed for Chapter 11 bankruptcy protection in April 2013, said the execution of this agreement is “an important milestone as KIT continues to build momentum for a successful future.”

A total of four lawsuits are subject to this agreement.  They were filed separately in the US District Court for the Southern District of New York on behalf of all persons who purchased or otherwise acquired KIT stock during the period between May 19, 2009 and November 21, 2012.

The court combined these separate actions into a single Class Action lawsuit.

At issue was conduct that was alleged to have occurred between 2008 and 2011, and alleged violations of federal securities law arising from, among other things, alleged accounting issues, material weaknesses in the internal controls and financial reporting at KIT, certain acquisition transactions that KIT consummated during 2008-2011, and other events from that time period.

Under the terms of the deal, KIT’s insurers will pay approximately $6m to settle all claims of the Class, and all parties will execute mutual releases. KIT and the other defendants will have no obligation to fund any part of the settlement, and any fee award to plaintiffs’ counsel will be paid from the settlement.

KIT digital Interim CEO, Peter Heiland said: “The federal securities lawsuits, which concerned conduct under KIT’s prior management, have been a significant distraction to the business, hindering its ability to attract capital and grow according to its real capability. Resolving these lawsuits signifies our continued progress towards putting the company back on its feet and freeing the company to focus solely on delivering the best in cutting-edge video software and services.

Along with the chapter 11 Plan of Reorganization that’s progressing in a way that we’re confident will satisfy creditors — as well as shareholders keen to invest in the reorganized KIT business, Piksel — the signing of this MOU is yet a further indication that I think we’re finally seeing blue sky ahead.”

KIT added that its entry into the MOU is not an admission of any fault, wrongdoing, or liability for the claims and damages asserted in the Consolidated Action.

The settlement embodied in the MOU is subject to execution of all necessary documents, including a formal stipulation of settlement, as well as all necessary court approvals.

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Related Content:

Press Release: Kit Digital Announces Settlement of Securities Lawsuits

KIT Digital Files For Chapter 11 Bankruptcy, Plans to Re-Emerge as “Healthier, Focused Company” by IBC 2013

KIT Digital: Chapter 11 Plan of Reorganization

KIT Digital: Voluntary Petition for Chapter 11 & List of 30 Largest Unsecured Creditors

KIT Digital: Declaration of Fabrice Hamaide in Support of Debtor’s Chapter 11 Petition

KIT Digital Delisted by NASDAQ, Will Not Appeal

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© Devoncroft Partners 2009 – 2013. All Rights Reserved.

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KIT Digital Files For Chapter 11 Bankruptcy, Plans to Re-Emerge as “Healthier, Focused Company” by IBC 2013

Broadcast technology vendor financials, SEC Filings | Posted by Joe Zaller
Apr 29 2013

One-time high flying online video delivery leader Kit Digital announced that it has filed a voluntary petition for reorganization under chapter 11 of the United States Bankruptcy Code.

The KIT story has been interesting to watch, and judging by what the company appears to be planning, things are going to a lot more interesting.

According to documents filed with the court, KIT has reached an agreement with three of its largest shareholders, Prescott Group Capital Management, JEC Capital Partners, and Ratio Capital Partners; who are collectively referred to as the “plan sponsor group.”

Under its reorganization plan, KIT will go into bankruptcy, be recapitalized by the “plan sponsor group,” and emerge as profitable, debt-free business with more than 800 employees focused on multi-screen video deployments.

The company plans to shed its loss-making businesses, while retaining four of its profitable subsidiaries, Ioko 365, Polymedia, KIT digital France and KIT digital – Americas. These four businesses will be consolidated into a new company to be Piksel.

According to court filings, these businesses generated aggregate revenues of approximately $134.5 million in 2012.

However, the company said it anticipates that another eight of its subsidiaries “will still need to be wound-down or divested through this chapter 11 case.”

KIT says that at the end of the reorganization process, it expects to emerge as “a healthier, focused company that is poised to take advantage of the burgeoning demand in its industry and to generate significant cash flows after obtaining a financial ‘fresh start.’”

The company also says that this plan will enable it to be in a position to pay all employees, vendors and suppliers for their valid pre-petition claims.

During the time of the reorganization, the company will continue to operate its business as a “debtor-in-possession” under the jurisdiction of the court.

KIT says it plans to be out of reorganization in about 90 days, just in time to launch Piksel at the IBC Show in September.

 

Court filings detail rise and fall

The documents KIT has filed with the court provide insight into what was happening at the company, and ultimately what led to the decision to file for Chapter 11.  It’s fascinating reading.

Selected excerpts follow from the Declaration of Fabrice Hamaide in Support of Debtor’s Chapter 11 Petition

 

The Debtor’s proposed restructuring is the result of an extensive marketing process that began over a year ago after the Debt or suffered a number of significant setbacks that impacted its operations. First, in early 2012, the Debtor accepted the resignation of its then-CEO amid an SEC investigation into certain of his trading practices with respect to the Debtor’s stock. Thereafter, the Debtor’s audit committee uncovered financial irregularities and the Debtor announced that it would need to restate historical financials from 2009 onward, sparking a flurry of securities lawsuits and derivative claims along with attendant litigation costs. Contemporaneously, the company was incurring extensive losses from unprofitable acquisitions made over the prior twenty-four (24) months. While the Debtor’s core businesses were (and remain) profitable and strong, mounting legal expenses and the costs of divesting and liquidating the unprofitable non-core businesses caused the Debtor to experience a near-term liquidity crunch. The crunch became more acute when the Debtor’s prepetition lender, without forewarning, swept the Debtor’s operating account and withdrew approximately $1.1 million.

Recognizing it had a short runway and no audited financials, the Debtor redirected the efforts of its investment banker, Deutsche Bank (“DB”), to assist the company with possible financing or sale alternatives. DB conducted an extensive marketing process over the past year canvassing a wide range of over fifty-six (56) financial and strategic players, as well as possible stand-alone financing options to accompany the Debtor in a chapter 11 process. In addition to DB, the Debtor also retained financing brokers to look into the availability of third-party financing. Although the Debtor engaged in extensive negotiations on non-binding terms with at least two parties, the negotiations ultimately failed to culminate in a binding term sheet either because of the need to provide audited financials or because of extensive requirements for due diligence that represented a substantial execution risk.

In March 2013, the Debtor was approached by a group of shareholders with the terms of a restructuring plan. The Debtor (through a special committee of its independent board of directors) negotiated with the shareholder group, which ultimately included the Debtor’s largest shareholders, Prescott Group Capital Management, JEC Capital Partners (an affiliate of the current CEO), and Ratio Capital Partners (collectively, the “ Plan Sponsor Group ”), on the terms of a restructuring to be backstopped by the Plan Sponsor Group. The special committee’s negotiations culminated in a plan support agreement (the “Plan Support Agreement”), which provides the Debtor with the resources necessary to fund this chapter 11 case and a reorganization plan that is expected to pay allowed unsecured claims in full while also providing a meaningful recovery to the Debtor’s equity holders in the form of the opportunity to participate in the reorganized company. A copy of the Plan Support Agreement is attached hereto as Exhibit A. 7. The Debtor believes the contemplated re organization pursuant to the Plan Support Agreement marks the best opportunity for the Debt or to preserve its global operations and the jobs of its over 800 employees world-wide. It is economically the best proposal the Debtor received through the prepetition marketing process, even including bids conditioned on due diligence. The Plan Support Agreement, however, requires the Debtor to emerge from chapter 11 within ninety-five (95) days of the filing date. Accordingly, to meet the required tight timeframe, contemporaneously herewith, the Debtor has filed a chapter 11 plan with the hope that confirmation of such plan can occur within 90 days of the date hereof

Under the management of its former CEO, the Debtor spent much of the last few years acquiring other companies in an effort to increase its market share in the video technology market. Since late 2008, the Company made 22 acquisitions, taking its revenue from less than $30 million to slightly over $200 million in 2011.  While certain of these acquired businesses have enhanced the Debtor’s operations, others have struggled or posed integration and  operational problems. In total, since May 2008 , the Debtor has paid,  in both cash and common  stock, more than $320 million in connection with acquisitions on its way to becoming an online  video technology powerhouse.  

The time and expense associated with the Debtor’s “buying binge” took a significant toll on the Debtor. Indeed, the acquired businesses that could not be successfully integrated became a significant cash drain on the entire KDI corporate group. Out of a total of $389 million paid-in-capital, $320 million was spent on acquisitions and approximately $60 million was spent operating and then liquidating or winding down unprofitable Subsidiaries. The Debtor anticipates 8 of its Subsidiaries will still need to be wound-down or divested through this chapter 11 case.

In the beginning of 2012, the Company experienced a protracted  period  of upheaval. In April 2012, Mr. Tuzman, the Debtor’s then-CEO, resigned as chairman and CEO after the Debtor’s receipt of subpoenas from the SEC related to certain 2010 transactions purportedly undertaken by Mr. Tuzman in the Debtor’s common stock. Several other Board members and officers of the Debtor, some of which were affiliated with Mr. Tuzman, had also resigned by this time. A securities class action lawsuit, two shareholder derivative lawsuits, as well as other similar litigations were initiated against the Debtor, diverting management time and expense at a critical time for the company.

To address the leadership void left after Mr. Tuzman’s exit, the Debtor made significant changes to the composition of its Board of Directors and its management team. On June 28, 2012, two independent directors, Bill Russell and Greg Petersen, were elected to the Board, and in July 2012, I was brought in as Chief Financial Officer. The following month two shareholder representatives were elected to the Board, Seth Hamot and K. Peter Heiland. Thereafter, K. Peter Heiland was also appointed as the Debtor’s interim Chief Executive Officer, a position he holds today.

The Debtor’s new management team took proactive steps to begin to focus the Debtor’s operations on its core strengths, while cutting costs. Ultimately, management was successful in reducing operating losses from an average consolidated monthly loss of -$7.0 million to -$1.0 million by October 2012. During the same time period, however, the audit committee (the “Audit Committee”) of the Debtor’s Board, after an extensive investigation, uncovered certain accounting errors and irregularities related to recognition of revenue  for certain perpetual software license agreements entered into by the prior management team in 2010 and 2011. The Audit Committee also determined that certain transactions the Debtor entered into under the prior management team during fiscal years ended December 31, 2008 through 2011 were related party transactions and additional disclosure with respect to those transactions should have been included in the footnotes to the relevant financial statements. As a result, the Audit Committee concluded on November 15, 2012, that the Debtor’s financial statements for the years ended December 31, 2009, 2010 and 2011 and each of the three quarters in 2009, 2010 and 2011 would need to be restated.  Because of the need to restate prior periods, the financial statements for the quarters ended March 31, 2012 and June 30, 2012 also had to be amended.

The public announcement of the need to restate the Debtor’s historical financials resulted in a significant decline in the trading price for the Debtor’s stock. Additional litigations were initiated against the Debtor, further diverting management time and expense. In addition, an event of default was triggered under the WTI Loans for breach of a financial representation therein, and on November 21, 2012, WTI, without advance notice to the Debtor, swept approximately $1.1 million from the Debtor’s cash collateral account.

Without reliable financials, the Debtor’s ability to “borrow” out of its near-term liquidity crisis by accessing the capital markets was foreclosed. In addition, the Subsidiaries, although profitable on a consolidated basis, could not continue to fund the Debtor’s mounting legal expenses and regulatory costs.

In February 2012, the Debtor engaged DB to assist the company in identifying sale alternatives. DB conducted an extensive search of financial and strategic players, aggressively canvassing the marketplace to locate potential financial or strategic partners to purchase the Debtor. Although DB contacted fifty-six (56) potential buyers (twenty-five (25) strategic and thirty-one (31) financial), no firm interest in the purchase of the Debtor resulted. Following the conclusion that its financials would have to be restated and the resulting short term liquidity constraints, the Debtor, to preserve its Business, redirected the efforts of DB to find stand-alone rescue financing or potential chapter 11 stalking horse bidders. In addition to DB’s efforts, the Debtor also reached out to specialized financing brokers who contacted over twenty-five (25) potential financing sources for stand-alone financing options. While several parties provided draft term sheets, the Debtor could not move forward with such proposals either because of the need to provide audited financials or because of extensive requirements for due diligence that represented a substantial execution risk. Moreover, despite advancing work fees to two interested parties, the Debtor still failed to obtain a binding commitment from either of those parties that could serve as a basis for a successful restructuring.

Thereafter, the Debtor was approached by a group of shareholders led by JEC, the private equity firm affiliate of KDI’s CEO, with the terms of a restructuring alternative. As a result, and to remove any conflicts of interest in the Debtor’s decision-making, the Board constituted a special committee of its independent directors to consider the shareholder proposal. Among other things, the special committee was charged with overseeing the sales and/or restructuring process from then forward, including the decision to file for chapter 11.

The special committee met numerous times to consider the Debtor’s alternatives. From the outset, the special committee, in an effort to achieve the highest and best result for the Debtor’s stakeholders, pursued restructuring on a dual-track, negotiating with the shareholder group and its then-proposed third-party DIP lender, on one hand, while having DB continue to canvas interested third-parties, on the other. All the while, the special committee was mindful of the Debtor’s dwindling cash position, which I advised them on regularly.

Discussions with the shareholder group stalled in early April 2013, when the group’s proposed DIP lender could not come to terms with the special committee on a path forward for the financing necessary to fund a chapter 11 process. Thereafter, the Debtor, unable to upstream sufficient funds from its Subsidiaries, failed to make a scheduled payment in respect of the WTI Loans on April 1, 2013, triggering an 8-K obligation to disclose the event of default. The special committee faced and prepared for the possibility of having to file chapter 11 without a restructuring plan in place, thereby risking the Debtor’s customer relationships and putting the Debtor’s chances of restructuring in peril. Indeed, if a filing would have happened at that time, the Debtor had sufficient cash in its corporate group to operate in chapter 11 for only several weeks. The Debtor was, put simply, at the end of its rope by early April 2013.

Ultimately, the shareholder group reconstituted itself into the Plan Sponsor Group and proposed terms for restructuring the Debtor, which included a debtor-in-possession financing from an affiliate of JEC sufficient to fund the chapter 11 case.

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Related Content:

Press Release: KIT digital, Inc. Files Previously Announced Plan of Reorganization

KIT Digital: Chapter 11 Plan of Reorganization

KIT Digital: Voluntary Petition for Chapter 11 & List of 30 Largest Unsecured Creditors

KIT Digital: Declaration of Fabrice Hamaide in Support of Debtor’s Chapter 11 Petition

KIT Digital Delisted by NASDAQ, Will Not Appeal

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© Devoncroft Partners. All Rights Reserved.

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