Filing summary
Entity note: The supplied filing is NTN Buzztime, Inc.’s Form 10-Q, not a filing for Ernexa Therapeutics Inc. It covers the quarter and six months ended June 30, 2015; financial statements are unaudited. Dollar amounts below are in millions unless noted.
Business context and reporting period
NTN Buzztime provides interactive games and entertainment services to hospitality venues, generating revenue from subscriptions, equipment leases, live events, advertising, and premium products. It reported 2,942 subscriber sites at quarter-end, about half using its BEOND platform. The company said the site count rose from 2,908 in the prior quarter, the first quarter in 13 quarters in which new sites exceeded attrition.
Financial performance and position
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $6.193 | $6.873 | $11.919 | $13.291 |
| Gross profit / margin | $2.814 / 45% | $4.067 / 59% | $5.891 / 49% | $7.955 / 60% |
| Operating loss | $(2.472) | $(1.300) | $(4.678) | $(1.954) |
| Net loss | $(2.625) | $(1.348) | $(4.888) | $(1.997) |
| Net loss per share, diluted | $(0.03) | $(0.02) | $(0.05) | $(0.02) |
| EBITDA, non-GAAP | $(1.709) | $(0.621) | $(3.155) | $(0.551) |
Q2 revenue fell about 10% year over year; subscription revenue declined $0.371 million and sales-type lease revenue declined $0.339 million. For the first half, revenue fell about 10%, including a $0.790 million subscription decline and a $0.612 million sales-type lease decline. Management attributed subscription weakness to lower average site counts and lower revenue per site.
Operating costs exceeded revenue in both periods. Q2 selling, general and administrative expense was $4.868 million, up 6%; first-half expense was $10.030 million, up 12%. Interest and other expense also increased, primarily due to higher debt and debt prepayment fees. The filing does not present a separate operating cash flow margin.
- Cash flow, first half: Operating cash use was $1.216 million, versus $1.990 million in the prior-year period; investing cash use was $0.815 million versus $0.780 million. Financing provided $0.285 million, compared with $8.478 million in 2014, which included $6.369 million of public-offering proceeds.
- Cash and liquidity: Cash was $5.391 million at June 30, down from $7.185 million at year-end. Working capital was $4.896 million, down from $7.779 million. Management said cash and available credit were expected to cover operating requirements and debt obligations for at least the next 12 months, while noting that additional financing might not be available on acceptable terms.
- Debt: Balance-sheet long-term debt totaled $5.627 million, including $0.530 million current and $5.097 million long-term, versus $5.319 million at year-end. In April, the company obtained a revolving facility with East West Bank, borrowing $4.5 million during Q2 at a stated three-month LIBOR rate of 4.3125%; it used about $3.381 million to repay equipment financing, accrued interest, and a prepayment fee. The revolving line is capped at $7.5 million, subject to the borrowing base, and matures April 14, 2018. The company reported compliance with its specified financial and churn targets at June 30.
Material changes, outlook, and risks
- Gross margin declined sharply, chiefly because of obsolete BEOND hardware components and higher equipment and production costs. The company recorded a $0.444 million Q2 component write-off; first-half component write-offs and other scrap expense were approximately $0.607 million.
- Software impairment was $0.295 million in both Q2 and the first half of 2015, relating to projects no longer considered strategically suitable or marketable.
- The company was outsourcing supply-chain management and manufacturing for a third-generation BEOND tablet, expected to begin shipping in Q4 2015. It planned to pilot payment functionality in the second half of 2015 and expected production by year-end. These are expectations, not guaranteed outcomes.
- Management said it would offer both free-to-consumer and paid versions of its arcade product, expecting the free version could support higher customer subscription pricing. It also reported digital-menu functionality launched at one chain customer and BEOND deployments in 10 chains still moving from pilot toward brand standard.
- Buffalo Wild Wings corporate-owned restaurants and franchisees represented 47% of Q2 revenue and 44% of first-half revenue, a significant customer concentration. The company also disclosed limited alternative suppliers for BEOND tablets, equipment, assembly, and Classic playmakers.
- Risks include continued operating losses, dependence on Buffalo Wild Wings, competition and technology change, the need to grow subscription revenue, hardware supply and execution, and potential need for further financing. The company highlighted NYSE MKT listing risk: shares had traded below $1 since 2007, and stockholders’ equity was $6.145 million at June 30 after $10.924 million at year-end. It warned of possible suspension or delisting if listing criteria are not maintained.
- No formal full-year financial guidance is provided in the supplied filing text. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter. No legal proceedings were reported.
Important facts for investors to verify
- Confirm the issuer identity: the supplied report is for NTN Buzztime, Inc., not Ernexa Therapeutics Inc.
- Review whether subscriber-site growth and BEOND conversions can reverse the year-over-year declines in subscription revenue and average revenue per site.
- Track gross-margin recovery after the hardware write-off and outsourcing transition, including whether third-generation tablets ship as expected.
- Assess cash burn, debt availability and borrowing-base constraints, covenant compliance, and the company’s stated 12-month liquidity expectation.
- Monitor Buffalo Wild Wings’ revenue contribution, hardware-supplier concentration, and NYSE MKT listing compliance.