Beacon Securities Note - July 21 2016NeuLion, Inc. (NLN – T)
July 21, 2016
Adds Another Strong Reference Customer
EFL (English Football League) Digital announced that it has selected Realise and NeuLion as its new long-term digital partners. The EFL ranks amongst one of top sports leagues from a revenue perspective (top 15 based on recent checks). UK-based digital agency Realise will be tasked with designing and developing EFL Digital’s club web and mobile sites, as well as implementing its Episerver content management system. Meanwhile, the streaming, merchandising and payment services will be provided by NeuLion. This is a 7-year contract, which will run until the end of the 2022/2023 season and is set to go live in July 2017. This was also a very comprehensive RFP in which over 175 of the world’s leading digital agencies expressed interest. Our discussions with NeuLion suggests that the company’s large reference customer base, UK presence (via its recent acquisition of Saffron Digital) and market leading technology platform represented key differentiators in securing this win. We view this contract as a strong endorsement of NeuLion’s relevance in the live digital streaming market place. We also recently had the opportunity to speak with recently appointed CEO Roy Reichbach. Recall that Mr. Reichbach is a NeuLion veteran most recently holding the General Counsel position. Our discussion with Mr. Reichbach suggests that over the near-term, two of his near-term focuses will revolve around augmenting NeuLion’s sales and marketing prowess and also improving investor relations communications. On the first point, the company has reorganized the sales and marketing team to focus on three areas - Main Concept, CE (consumer electronics), and platform. The platform division is further broken down into divisions focused on signing new accounts and further farming existing accounts in the Americas, rest of world, and client service also within Americas and rest of world. There will be 6 managers who will report directly to Mr. Reichbach. We also believe the company is in the process of adding another 15 sales reps with the goal of hitting a total ~25. On the first point, the company has reorganized the sales and marketing team to focus on three areas - Main Concept, CE (consumer electronics), and platform. The platform division is further broken down into divisions focused on signing new accounts and further farming existing accounts in the Americas, rest of world, and client service also within Americas and rest of world. There will be 6 managers who will report directly to Mr. Reichbach. We also believe the company is in the process of adding another 15 sales reps with the goal of hitting a total ~25. We reiterate our Buy rating and C$1.35 target price, which is based on 11.5x 2017e EV/EBITDA.