NeuLion's (NEUL) CEO Roy Reichbach on Q2 2016 Results - Earnings Call Transcript

| About: NeuLion Inc. (NEUL)

NeuLion, Inc. (OTCPK:NEUL) Q2 2016 Earnings Conference Call August 4, 2016 5:00 PM ET

Executives

Roy Reichbach – President and Chief Executive Officer

Trevor Renfield – Chief Financial Officer

Chris Wagner – Executive Vice President, Marketplace Strategy

Tim Alavathil – Chief Accounting Officer

Analysts

David McFadgen – Cormark Security

Ralph Garcea – Cantor Fitzgerald

Gabriel Leung – Beacon Securities

Matthew Harrigan – Wunderlich

Operator

Good day ladies and gentlemen, and welcome to the NeuLion Q2 Earnings Webcast Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Mr. Tim Alavathil, Chief Accounting Officer. Sir, you may begin.

Tim Alavathil

Good afternoon and welcome to NeuLion's second quarter 2016 earnings call. Today, we will be discussing our results that we issued this morning before the market opened. With me on the call are; Roy Reichbach, NeuLion's President and Chief Executive Officer; Trevor Renfield, NeuLion's Chief Financial Officer; and Chris Wagner, NeuLion's EVP of Marketplace Strategy.

Before we get started, we want to emphasize that some of the information discussed on this call is based on our information as of today August 4, 2016, and contains forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosures in the earnings release we issued today as well as the NeuLion's SEC filings.

During this call we would discuss GAAP and non-GAAP financial measures, a reconciliation between the two is available in our earnings press release and in our 10-Q and on NeuLion's Investor Relations website. Participants are advised that the webcast is live and also being recorded for playback purposes. An archive of the webcast will be made available on NeuLion's Investor Relations website for limited time and is the property of NeuLion. The webcast archive may not be rerecorded or otherwise reproduced or distributed without prior written permission from NeuLion.

In terms of our agenda for today's call, Roy will discuss the highlights of NeuLion's 2016 second quarter, followed by Trevor who will review our financials detailed in this morning's earnings release. Then, we will have Roy come back again to discuss further operational highlights from our second quarter and a look ahead, after which we will open up for questions.

I will now turn the call over to Roy.

Roy Reichbach

Thank you Tim, and thanks to all of you who are joining us today. We are pleased to announce our second quarter 2016 results. We believe we are well positioned to continue building on our market leading position for the delivery of live and on-demand video content to internet connected devices.

NeuLion is a unique position to be the leader in the TV Everywhere and OTT marketplace for entertainment and sports brands worldwide. Because NeuLion proprietary technology can connect content owners and rights holders with leading consumer electronic devices like Ultra HD televisions. This gives us the ability to enhance video quality, broaden our monetization features and elevate the experience which we give our customers and viewers.

We now have license agreements in place with major consumer electronics manufacturers that include Sony, LG and Samsung to utilize our NeuLion CE SDK. We're expanding our U.S. and international sales force to take advantage of the significant tailwinds from the industry as new OTT and TV Everywhere projects come to market. We're expanding internationally and we closed three new deals in Europe during Q2, and also acquired Saffron Digital to bring our headcount to over 50 people in our London office.

We had a number of key wins during the second quarter that I'll highlight later in our discussion this afternoon that were highly competitive and further demonstrate the breadth and depth of our solutions as we continue to beat our competition.

We grew our revenue quarter-over-quarter by 6%, with revenues of $24.1 million versus $22.7 million in the prior year. As many of you know, the National Hockey League sold their media rights last year, and in connection with that, transition to another service provider. Excluding the NHL related revenue in the prior period; NeuLion grew its platform revenues by 12% year-over-year. With 95% of our revenues coming from recurring fixed license fees or re-occurring variable fees, we have visible and realizable revenue growth opportunities.

Let me now turn it over to Trevor to look at our results for the quarter, and then I'll come back to discuss a few operational highlights and our look forward.

Trevor Renfield

Thanks Roy. On today's call, I will provide a summary review of our second quarter financial results. Our GAAP revenue for the second quarter was $24.1 million, an increase of 6% from the second quarter of 2015. Breaking down the revenues for the quarter, NeuLion Digital Platform increased to $15.9 million as compared to $15.5 million during the second quarter of 2015, reflecting a year-over-year growth of 3%. This increasing occurred despite a $1.5 million decrease in revenues associated with the NHL.

Excluding the NHL revenue impact, our Digital Platform revenues grew 12% during the quarter as compared to the second quarter of 2015. Q2 GAAP licensing revenues which are comprised of our consumer electronics and MainConcept products were $8.2 million as compared to $7.2 million during the second quarter of 2015.

On a non-GAAP basis, which includes certain revenues excluded for GAAP reporting purposes due to purchase accounting rules, consumer electronics and MainConcept licensing revenues declined $2.9 million to $8.3 million during the second quarter as compared to $11.2 million during the same period in 2015. The decline was primarily related to the non-renewal of legacy technology license agreements with Sharp and Toshiba as a result of the sale of their respective television brands.

Additionally, lower unit volumes on LG devices also impacted our Q2 revenues. We are however starting to see a demand from our CE partners for our NeuLion CE SDK products, which will begin to contribute towards our CE licensing revenues in the fourth quarter of 2016. As we have continued to expand and diversify our customer base, I am pleased to say that no single customer accounted for 10% of our revenues in the second quarter.

The revenue mix across geographies for the quarter was 62% for North America, 28% for Asia-Pacific and 10% for Europe. Variable revenues which are primarily comprised of subscription revenue share, usage-based revenues and per-unit revenues accounted for 57% of our total revenues in the quarter. This compares to 51% during the same period in 2015.

Total revenues from recurring fixed license fees and reoccurring variable revenues made up 95% of our total revenues. Cost of revenue decreased $4.1 million or 17% of revenues as compared to $4.2 million or 19% of revenues during the second quarter of 2015. This improvement was due to lower costs associated with the renewal of certain technology licenses used in our CE technology products.

Excluding stock-based compensation of $1.4 million, our SG&A and R&D expenses in the quarter, was $16.8 million, which compares to $18.3 million during the second quarter of 2015, a decrease of $1.5 million or 8%. The decreased in these costs are a direct result of synergies realized from our integration of the DivX acquisition over the past year. However, as compared to our operating expenses in Q1 2016, Q2 SG&A and R&D expenses decreased by $1.3 million or 8%. This increase was due to additional costs associated with the Saffron acquisition, costs related to the severance payments to terminated employees and increases in health benefit costs.

Non-GAAP adjusted EBITDA for the quarter was $3.3 million as compared to $4.2 million during the second quarter of 2015. Our GAAP net loss for the quarter was approximately $800,000 or $0.00 per share as compared to a net loss of $3.2 million or a loss of $0.01 per share during the second quarter of 2015.

Today's press release has a reconciliation of our GAAP results to non-GAAP adjusted EBITDA. Depreciation and amortization in the quarter was $2.1 million. This includes amortization of purchased intangible assets of $1.5 million. Other expense was about $200,000 during the quarter, which is primarily made up of foreign exchange losses on a non-U.S. dollar denominated assets as a result of currency fluctuations.

Our second quarter tax expense was $227,000 which is comprised of both current and deferred tax expenses. Cash tax payments during the quarter was approximately $1.1 million, which is primarily made up of foreign tax withholding on license revenues from customers in foreign jurisdictions, as well as minimum state and foreign corporate tax payments.

Turning to the balance sheet. We ended the quarter with total cash of $46.1 million, a net decline of $15.4 million in Q2. The decline in our cash position was primarily due to a $7.5 million cash outlay for the acquisition of Saffron Digital, $1.6 million used for our share repurchase program and the remaining difference was due to timing differences associated with working capital changes.

Working capital items which accounted for the majority of the change included decrease in deferred revenues of $3.6 million, an increase in prepaid assets of $3.5 million and a $1.9 million decrease in accounts payable. Working capital as of the end of Q2 was $33.2 million.

Our fulltime employee headcount was 524 at June 30. This compares to 498 fulltime employees at the end of Q1. The increase in the headcount is primarily due to the acquisition of Saffron Digital in June 2016.

Now I'll turn back to Roy for some closing remarks.

Roy Reichbach

Thank you, Trevor. I'll now take you through some of our operational highlights for Q2. First, we acquired Saffron Digital as we expand our entertainment technology features to attract content owners and rights holders interested in launching new SVOD services. This transaction creates an online powerhouse, perfectly positioned to take full advantage of the accelerating adoption of live and on-demand streaming. This also grew our London office to over 50 employees.

Along with this expansion, we also want some big new clients in Europe. Sky Sports selected NeuLion to enable their live OTT event service, Eleven Sports Network entered into a new multiyear agreement with NeuLion, licensing the NeuLion Digital Platform to supporting all new OTT digital service for sports fans in Belgium, Luxembourg, Poland, Singapore and Taiwan.

EFL, formerly known as the Football League Interactive or FLi, signed on with us as its new long-term digital partner. EFL is the digital arm of the English football league, representing one of the oldest soccer competitions in the world with 72 clubs in the U.K. Over 175 companies bid for either the streaming or website design of this deal, and we beat out all other top OTT global competitors, including ML Band to win the streaming business.

Lastly, along with UFC, we reached a historic milestone with UFC 200, delivering the first ever live OTT 4K pay-per-view event. NeuLion was also commissioned by the UFC to redesign a brand-new UFC.TV site offering fans a large array of personalization features.

Looking forward, our four-pronged growth strategy of building technology, buying technology, integrating those technologies, and partnering will continue to be our focus. We're planning on unveiling our new fully-integrated version of the NeuLion Digital Platform this September at IBC in Amsterdam. The enhanced NeuLion Digital Platform will now offer content owners and rights holders full SVOD, EST, AVOD, Live, and Live Linear, and pay-per-view capabilities.

We've always been a technology focused company. That focus on technology has built the best platform in the industry. Our technology focus is now placed us in a position to leverage our platform. It's time for us to match our technological leadership with a significant investment in sales and marketing, with the ultimate goal of driving significant increases in revenue worldwide.

NeuLion is now aggressively adding sales and marketing staff in the U.S., Europe and Asia. We launched internal recruiting services to identify and target digital media executives to help accelerate our growth, as we plan to add 22 or more new sales hires in the U.S., Europe and Asia in this year. Growing our sales team will open up new opportunities and perspective deals where our technology leadership will continue to win.

In addition, with the acquisition of Saffron, our expanded entertainment capabilities will allow us to be involved in more OTT and TVE focus deals, opening up a much larger prospect base. We're excited to see the effects of our accelerating sales and marketing expansion as we expect them to begin to take shape towards the end of 2016.

I'll now open it up to Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of David McFadgen with Cormark Security. Your line is new open.

David McFadgen

Thank you. I have a couple of questions. So when you talk about the impact from NHL was down about $1.5 million, was there any revenue in Q2 2016 from NHL because I thought that in Q2 2015, the revenue from NHL was about $1.5 million, if you could just clarify that?

Trevor Renfield

So I think the revenue impact is a combination of the NHL as well as Rogers, so the Delta between 2015 and Q2 2016 was a decrease of $1.5 million between those two customers.

David McFadgen

Okay. That clarifies that. And then just on the LG contact with DivX, so it looks like for the first six months, the revenue from LG is fairly minimal, I know it's due to the change in the contract terms. But this business was about $10 million, and do you expect that eventually it will go back to the $10 million level. Can you provide us any update there?

Trevor Renfield

Sure. On the LG, so there was a change in the contract terms in 2016 as compared 2015, and the way it's reported in 2016 is on a per-unit basis. So essentially, we had a – and we only get the unit reporting one quarter – one month after the end of a quarter, so we essentially had zero in Q1 for LG, and we had a fairly significant number, we had less than 10% of our revenue. So we had no customer over 10%. So the number was a relatively large number, but not – but less than 10% of total revenues. So we did have reporting in Q2 and we did have one quarter gap for the first half of the year.

Roy Reichbach

And David, it's Roy. To just follow-on and may be expand a little bit on that. Our expectation as we move forward with the adoption of the streaming SDK will be that, that will provide some up lift as we move forward with respect to LG as well as some of the other CE manufactures.

David McFadgen

Do you expect that the LG business would get back to $10 million or you just can't say right now?

Roy Reichbach

We can't say right now, but we're hopeful that and expect full that the numbers that we're seeing now will be positively impacted as we move forward.

David McFadgen

Okay. Then just one last one if I may, I'll pass the line. Can you just provide some more detail about the non-renewable with Sharp and Toshiba exactly what happened? And I don't know if you can, but it would be helpful if you could clarify the impact?

Roy Reichbach

So, rather than speak specifically to those, let's talk about some of the macro effects that we're seeing in the CE manufacturing business. There's been a significant over the last few years, a significant price push downward for television sets. As I'm sure you notice when you'll go to your local Best Buy or elsewhere. And that in turn has pushed a lot of the CE manufacturers to try to exclude as much third-party licensed product as they possibly can.

The challenge that we have with respect to that is been that on the DivX side of the house where we acquired the DivX technology. Prior to our acquisition, there had not been a lot of innovation, and accordingly the use case for the legacy DivX technology was not as strong as we would like. The good news there, which is countervailing to what happened, is that, since the acquisition we spent a good deal of time, effort and a little bit of money in making that innovation.

The piece that's going to be the most significant there is the streaming SDK, and I'm sure you saw our press releases around UFC 200 and Sony. So Sony was the first of the CE manufacturers, and the one that we did not have a contract with before, one that DivX had lost a while ago, we got back in connection with the 4K streaming SDK. And they went live, did a firmware update on July 6 of this year, three days before the July 9, UFC 200. We are very happy and as our Sony and UFC with the results of that, despite the short timeframe between the firmware push and the event. And that is triggering revenue for us, which we won't see until Q4 because the reporting for Q3, just like Trevor indicated with respect to LG, won't be until Q4.

But that's the first of the uplift that was going to see with respect to CE revenue and the streaming SDK. We are expecting that and hopeful that the remainder of the big players will be adopting this quickly. It's in their contracts and we just need to activate those, and then we believe that that will further drive the lower – the mid to lower tier manufacturers to adopt the 4K streaming SDK as well, which will be obviously an increased revenue opportunity for us.

David McFadgen

Okay. So if I may just to follow on that.

Roy Reichbach

Now you went over two lines.

David McFadgen

I'm sorry. When do you think that the DivX revenue will stabilize and will stop declining?

Roy Reichbach

We're hopeful that and obviously we can't give specific guidance on this, but we're hopeful in the near-term, we're going to see a leveling off, and then we believe as we move forward an uptick on that side of the business.

David McFadgen

Okay. All right. Thank you.

Roy Reichbach

You're welcome.

Operator

Our next question is from the line of Ralph Garcea, Cantor Fitzgerald. Your line is now open.

Ralph Garcea

Good afternoon, gentlemen.

Roy Reichbach

Good afternoon.

Ralph Garcea

Just a follow-up on that Sony comment with UFC, so if the Sony revenues are going to get recognize in Q4 because of the sort of one month in arrears at the end of a quarter. How about the actual UFC events revenues? Will that be recognized in Q3, or do you have similar sort of – end of quarter recognition for some of these larger events?

Roy Reichbach

No. The beauty of it is, because we actually have visibility into all of the events we handle the subscriptions, we handle the pay flow. So we have access to all of that information on a relatively timely basis. So, there is no delay from that in terms of recognition of revenue. The problem with the CE manufacturer is, they have to report to us. Their actual output and their processes are such that they do the quarter 30 days after the end of the quarter, and so we have no visibility, and because we have no track record with respect to, we can estimate at this point.

Ralph Garcea

And is it based on global TV shipments or just in the U.S. or Europe?

Roy Reichbach

So this initial was North America, predominantly U.S. It's up to Sony to decide where they're going to deploy the 4K streaming SDK. Obviously, to the extent we have borne more 4K content with our content clients worldwide, and this ties into our push into Europe. Will it be more demand for 4K streaming in those jurisdictions and that will enhance our ability to drive revenue in those places.

Ralph Garcea

Okay. You guys mentioned in the press release with the EFL that it was a competitive win. Was it the same on as the Sky Sports offering?

Roy Reichbach

The Sky Sports offering was competitive. We didn't have as good visibility into who our competition was there. So, I can't tell you for sure. My expectation though would be that it was similar players because of the size of Sky and its importance in the UK and beyond. So I have every expectation that we beat out the same cast of characters.

Ralph Garcea

They wouldn't develop it in-house. I mean they were using a concoction of other technologies I guess to try to deliver?

Roy Reichbach

Yeah. They had a host of various other providers that were cobbled together, and this is their big look for them to go on event-based opportunities to one platform, which is us. We are very excited. We think it's a huge opportunity. Sky is a very big organization with a lot of content that it can monetize. So, we're hoping that we utilize what Chris likes to refer to as our land and expand methodology. We'll get that business, show how good we are and expend that business throughout the organization.

Ralph Garcea

Okay. And just on the sales force comment you made, where you looking to add another 22. What's that on top of – I mean what was the sales headcount at the end of June?

Roy Reichbach

Yes. So, I'll try to amplify that even a little bit more. At March 31, we had 17, and June 30, we had 22. However, in the last seven weeks which includes a portion of June, we've added seven. We have three offers in process at the moment. We have a number of others in the queue and expect another 12 plus by year end. So from the point that – I use this because it's the easiest measuring stick for me, which is for the point that I changed roles, we're now with seven plus three more and just need another 12 to get to our target of 22 by year-end, which I believe we will not just meet, but exceed.

Ralph Garcea

Then sort of – what sort of comp structures would these guys have? I mean are they chasing events like UFC 2 or 1-2 or 2-2 or 3, are they chasing leagues and you'll pay them, dependent on how many events they bring in for that league. How you're trying to I guess incent these guys to go on drive business?

Roy Reichbach

Sure. So the current package is generally includes a base salary and the salaries are in my opinion significant for these folks. They're higher and experienced sales folks with – for the most part deep roots into this industry, and then it's a commission-based, based on revenue. And to some extent in certain cases where appropriate there is some equity.

But it's our platform, commission plan, which is a salary and commission-based plan. We do it just to – so it helps you a little bit in terms of understanding. We've sort of reorganized the sales force, so that on the platform side, so there is now six senior sales executives reporting to me; one on the CE side of the business, one on our MainConcept side of the business, and then four on the Platform. On the Platform they're broken down, two in new sales, two in what we used to refer to as account management. We're now calling it client services. So, it's essentially hunters and farmers.

Of the hunters, the new sales, we have Jason Keane, who was the CEO of Saffron, he is running – well, I should start with there's fellow Phil Green, based out of New York, he is running the Americas, and then Jason Keane, out of London, he is running the Rest of the World. In the U.K. another Saffron person Pete Bellamy, on the Client Services side is [indiscernible], and here in New York, Charlie Melillo is running the Rest of the World. So, the idea there is for me to have a number of senior sales execs who literally I can whip on a regular basis to drive there folks.

Ralph Garcea

Well, that's good. And you're not hiring and so training these guys over the next two quarters, just either you're going after the experience guys that can actually chase that content and drive profit [ph]?

Roy Reichbach

Absolutely.

Ralph Garcea

Thank you very much.

Roy Reichbach

You're welcome.

Operator

Thank you. Our next question comes from the line of Gabriel Leung with Beacon Securities. Your line is now open.

Roy Reichbach

Good afternoon.

Gabriel Leung

Hi there. Hi. Good afternoon. Thanks for taking my questions. Just got a couple of things. First, just on the operating expense side, it looks like in the quarter was about $18.2 million. Given that you're going to have to add Saffron for I guess two more months in terms of contributions and in terms of the additional, I guess 15 or so sales you planned to add. How should we think about quarterly operating expenses exiting 2016?

Trevor Renfield

Yes. So, one thing of note, I had mentioned in my prepared remarks is that we did have some severance costs in Q2. So as kind of the transition of the DivX integration, we did have the cost of certain employee salaries, plus some severance expenses within the quarter. So I think Q2, part of the increase of a Q1 was impacted by those costs, so I think the additional sales hires are essentially going to be a switch out for some of the terminated costs as well as the severance payment. So, I would expect Q2 run rate probably a little more of an increase based on the full quarter of Saffron employees, but I wouldn't expect the exit run rate to be too significantly higher.

Gabriel Leung

All right, that's helpful. Secondly, just on – I guess the DivX side of the house, can you talk a little about – so when you look at some of the more recent renewals you have like the LG or new addition like Sony. Are these guys licensing primarily the new line SDK or are they licensing some of older DivX sort of video and codec or technology as well?

Roy Reichbach

Sure. So, the bulk of the revenue right now is still the legacy DivX products, which is the good news. I believe we're stabilizing those revenues and we now have the opportunity to fold in to each and every one of them, the newly developed NeuLion technology, so that there is a good pathway for us on the CE side. The fundamental issue that we faced is that there was this period of – lack of innovation and it takes time for – it took time for us to develop the innovative product set and to deploy it. So, you have that lag period. Now, as we start to get those things deployed, we'll start to see a positive revenue effect.

Gabriel Leung

So, just go back to some of our initial portions, guys like LG and Sony, they are processing the entire suite of products, not just specifically NeuLion SDK for example?

Roy Reichbach

Sure. I mean those agreements give them the right to deploy the 4K streaming SDK.

Gabriel Leung

All right. And just to clear in terms of the – sort of I guess the portfolio of customers, you have with DivX. Are the majority of them on the variable model already or are they still play – most of them are still playing sort of annual licenses or multiyear licenses?

Trevor Renfield

So, I'd say the significant one on the sat license is Samsung. There was a renewal effect of 2016 and 2017, and then we have a few smaller ones, but the majority are all more on the variable model.

Gabriel Leung

On the variable model. Okay. Are there any initial conversations with Samsung around how that's going to play out for the 2018, 2019 renewal I guess? Are they looking towards just sort of variable like LG is doing?

Roy Reichbach

It's a little early for that. Obviously, our hope is to get them to deploy the streaming SDK, show the substantial value that we believe is inherent in that product set, and then negotiate even a better deal as we move forward.

Gabriel Leung

Perfect. That's helpful. Thanks a lot.

Roy Reichbach

Thanks.

Operator

Thank you. Our next question comes from the line of Matthew Harrigan, with Wunderlich. Your line is now open.

Matthew Harrigan

Thank you. Just apart from sort of the input-output on the sales expenses in Saffron and all that. Philosophically, it sounds like you are moving the curve a little bit in favor of growth. I mean is that something that we should think conceptually about valuation or about the path of the revenues versus OCF versus free cash flow. I know you don't like to give explicit guidance, but it kind of feels like your orientation is a little bit different.

Then secondly, I updated my model at about six companies report today, I may have missed something, but I don't think you're breaking out the EBITDA on DivX separately anymore. I'm sure those going to get lost at some point. I'm curious if you have that for this quarter?

And then thirdly, it probably might be question for Chris, just the number of operators have commented on 2017 4K, OTT activity and more virtual MVPDs. Are you seeing any sense different in the market in terms of activity moving into 2017 in those regards?

Trevor Renfield

So, let's take the financial piece first. We're not breaking out the DivX EBITDA, and that we are not going to do on a go forward basis.

Tim Alavathil

So Matt, we did it the first year, just because you're comparing apples-and-oranges. For comparability purposes, we broke out DivX. We can't really break it out going forward. We don't want our business that way going forward, as you know we have our separate revenue streams. We won't run our business that way, but going forward, it's – we are comparing apples-to-apples, so there won't be a breakout.

Trevor Renfield

If I can just add, there's also been as we've most the integration, there is being integration of the function, so the line between the DivX and NeuLion is going to be become a little more integrated.

Roy Reichbach

Sure. I mean the CE – obviously the CE business as we've added the 4K streaming SDK is now a converged product set. So, if you call it DivX revenue versus NeuLion CE revenue, the latter is the appropriate. I think trying to go back and pick up the remainder of your question. Chris, do you want to touch on the 4K OTT piece?

Chris Wagner

Hey, Matt. I mean the momentum for 4K delivery, we're seeing that. I mean UFC delivered over the top, a pay-per-view of earned that in round numbers was about $60, which gave the fan the ability to get HD or 4K. So what we see from content rights holders and content owners is a move to start to organize their events, create some 4K content, definitely it's going to be delivered over the top. And let's you switch out boxes, Rogers is doing that now with their set-top box that can handle 4K, BT is doing that in London with their set-top box. DirecTV has their proprietary receiver for 4K, but the majority of its going to happen over the top.

The MVPDs like it because it's broadband and it's their most profitable product. Fans love it. The feedback that we got from people who bought the digital ticket for 4K and watched on their Sony was pretty significant. We know we had – the average engagement time was essentially the entire fight.

So the rights holders know that the quality matters to consumers. I think you'll see a positioning around 4K content. If you really want that quality, you know perhaps it charged differently and more expensive than lower forms of quality. UFC has done that with HD for a while now with different price points. But we're seeing all of our content rights holders and owners of sort of think through how they're going to focus and deliver on 4K.

Roy Reichbach

And then Matt, to answer the – but I think it's the biggest part of the question about our strategy as we move forward. Our board has given us a very clear directive which is to really kick start our sales and marketing. As you know, we have been a technology driven company from the get-go. That is both a wonderful thing and in some respects a inhibiting thing, which is we focus so much on building the best platform that sometimes we left the sales and marketing behind and we've done that for a while. We now have what we believe is far in a way the best platform in the industry. It is a fully end-to-end platform that we don't believe has viable competition at that level.

What we now are charged with doing and this is now management's responsibility is to match our sales and marketing efforts with the success we've had in technology. And the way to do that, get the right sales people, and then stay on top of them, not let things round up. So that is what we are going to do. We've already started. We've gotten – we had success in terms of the acquisition of appropriate personnel.

More importantly, we've already had success on the sales front in terms of signing new deals and getting new customers excited about what we can deliver. We have a number of other deals that we will announce in the coming months that I think will further demonstrate to the world where we are and where we're going. So we're very excited about the opportunity in front of us.

Matthew Harrigan

Lots to look forward to then. Thank you.

Roy Reichbach

Thanks a lot.

Operator

And that is all the time we have for question. I would now like to turn the call back over to Mr. Roy Reichbach for any closing remarks.

Roy Reichbach

First, I really want to thank everyone for attending the call today. This is the first of many for us. We appreciate the time, questions, and the interest each of you have in NeuLion. Lastly, I'd like to also thank all of NeuLion employees for their hard work this quarter and let them know that we expect that work to be even harder in the quarters to come. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.

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