NeuLion Tanks on (Partial?) Loss of NHL Deal

James West

NeuLion Inc. (TSX:NLN), the digital video broadcasting, distribution and monetization of live and on-demand content to Internet-enabled devices company saw its share price halved today after rumours of the company’s loss of its biggest NHL contract were confirmed.

According to the statement issued by the NHL today at 2:45 p.m. ET, “The National Hockey League and Major League Baseball Advanced Media (MLBAM), the interactive media and Internet company of Major League Baseball, today announced a groundbreaking digital media rights partnership. NHL Commissioner Gary Bettman and Baseball Commissioner Rob Manfred jointly announced the six-year agreement at NHL headquarters.

The partnership will transform the fan experience by creating a fully integrated global hub of digital content that encompasses video, live game streaming, social media, fantasy, apps, along with statistical and analytical content. With an emphasis on deeper access into the game and telling the stories of NHL players, MLBAM and the NHL will collaborate on developing new digital products and platforms while enhancing current offerings.”

The statement goes on to say that “MLBAM expects to fully launch its NHL presence in January 2016. Prior digital partner NeuLion will assist the League and MLBAM through the transition period.

“NeuLion has been a terrific partner,” Bettman said. “We could not have established the deep foundation we have in digital content without their expertise and talented people.”

That statement appears somewhat contradicted, however, by an 8-K filing on the SEC today, which states, “NeuLion, Inc. (the “Company”) has an agreement with the National Hockey League (“NHL”) to provide development and operational services for NHL digital properties that expires on September 30, 2015. The NHL announced today that it has reached an agreement to transition that business to a third party sometime in 2016. The Company is currently negotiating with the NHL on a new agreement to begin October 1, 2015 and continue through the transition to the NHL’s successor partner. The Company expects an agreement to be in place prior to the expiration of its current agreement with the NHL.”

According to the company’s most recently filed 10K, ‘For the three months ended June 30, 2015, the National Hockey League (“NHL”) and LG Electronics accounted for 23% of revenue: 11% and 12%, respectively. For the six months ended June 30, 2015, the NHL and LG Electronics accounted for 24% of revenue: 12% and 12%, respectively. For the three months ended June 30, 2014, the NHL and Univision Deportes accounted for 29% of revenue: 18% and 11%, respectively. For the six months ended June 30, 2014, the NHL accounted for 19% of revenue.’

Shares of NeuLion were down $0.72, or 47% to $0.80 at 2:53 p.m. ET today, on volume of 4.7 million.

NeuLion reported second quarter financial performance as follows:

  • GAAP revenue increased 69% to $22.7 million versus $13.4 million; non-GAAP revenue increased 99% to $26.7 million versus $13.4 million
  • NeuLion Digital Platform revenue (GAAP and non-GAAP) increased 16% to $15.5 million versus $13.4 million
  • DivX and MainConcept GAAP revenues were $7.2 million; non-GAAP revenue was $11.2 million
  • Non-GAAP Adjusted EBITDA grew to $4.2 million versus $1.6 million
  • Non-GAAP Adjusted EBITDA margin increased to 15.7% versus 11.9%

A sell-off appears to be warranted, but half price seems a bit extreme.

James West

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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