Q2 Earnings
Second Quarter 2013 Financial Summary
•Total revenues of $10.7 million for the second quarter, an increase of 39% when compared to $7.7 million for the prior year's second quarter;
•Operating loss of $1.9 million for the second quarter, as compared to an operating loss of $1.1 million for the prior year's second quarter;
•Excluding Hego AB (Hego) merger-related expenses and restructuring costs of $2.8 million in second quarter results, operating profit of $0.9 million for the second quarter as compared to an operating loss of $1.1 million for the prior year's second quarter;
•Net loss of $2.1 million for the second quarter of 2013, as compared to net loss of $0.6 million for the prior year's second quarter; and
•Excluding Hego merger-related expenses, restructuring costs and a valuation adjustment for contingent consideration related to the Hego merger in second quarter results, net income of $0.8 million, as compared to net loss of $0.6 million for the prior year's second quarter.
Michael Wellesley-Wesley, ChyronHego CEO, said, "The second quarter was a pivotal quarter in the formation of ChyronHego. 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."
Mr. Wellesley-Wesley concluded, "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."
Second Quarter 2013 Financial Results
The financial results for the second quarter of 2013 include the results of operations for Hego and its subsidiaries from May 22, 2013, the closing date of the transaction, through June 30, 2013.
Revenues for the second quarter of 2013 increased 39% to $10.7 million as compared to $7.7 million in the second quarter of 2012. Of this $3.0 million increase, $0.7 million was from sales of Chyron products and services, a 9% increase over last year's second quarter, and $2.3 million was from sales of Hego products and services for the period from the merger closing date of May 22, 2013 through June 30, 2013.
Gross profit margin for the second quarter of 2013 was 68.4%, down slightly from 69.2% for last year's second quarter.
Operating expenses for the second quarter of 2013 were $9.2 million compared to $6.4 million in the second quarter of 2012. Research & development (R&D) expenses were $2.3 million, up 21% from $1.9 million in second quarter 2012, primarily due to the inclusion of $0.4 million of Hego R&D expenses in the second quarter of 2013. Sales and marketing (S&M) expenses were $3.3 million, down 6% from $3.5 million in the second quarter 2012, primarily due to inclusion of $0.2 million of Hego S&M expenses and $0.2 million in expense from amortization of intangibles from the Hego merger, offset by a $0.6 million decrease in Chyron S&M expenses. General and administrative (G&A) expenses were $3.6 million, an increase of $2.6 million from $1.0 million in the second quarter of 2012. The additional $2.6 million was due to inclusion of $0.3 million in Hego G&A expenses and a $2.3 million increase in Chyron G&A expenses, primarily due to Hego merger-related expenses of $1.6 million. Included in second quarter of 2013 operating expenses in connection with the May restructuring were severance expenses of $0.6 million and equity-based compensation expense of $0.4 million, which restructuring expenses were spread among R&D, S&M and G&A operating expenses.
Operating loss for the second quarter of 2013 was $1.9 million as compared to an operating loss of $1.1 million in the second quarter of 2012. Excluding Hego merger-related expenses and restructuring costs of $2.8 million, the Company would have reported an operating profit of $0.9 million for the second quarter of 2013.
Net loss for the second quarter of 2013 was $2.1 million, or $(0.09) per basic and diluted share, as compared to net loss of $0.6 million, or $(0.04) per basic and diluted share, in the second quarter of 2012. Excluding $1.8 million of Hego merger-related expenses, a $0.1 million valuation adjustment for the Hego merger contingent consideration and restructuring costs of $1.0 million, $0.8 million of net income would have been reported for the second quarter of 2013.
