Business context and reporting period
This summary covers NTN Buzztime, Inc. and subsidiaries’ unaudited Form 10-Q for the quarter ended March 31, 2019, filed May 14, 2019. The filing issuer differs from the company name in the request metadata (Ernexa Therapeutics Inc.). NTN Buzztime provides interactive entertainment, games, tablets, and related services to venues; it reported 2,632 subscribing venues, about 85% using its tablet platform.
Financial results and liquidity
Amounts are in U.S. dollars; financial statement amounts are in thousands unless stated otherwise.
| Metric | Q1 2019 | Q1 2018 | Change |
|---|---|---|---|
| Revenue | $4.832 million | $5.761 million | Down 16.1% |
| Gross profit / margin | $3.348 million / 69.3% | $3.794 million / 65.9% | Gross profit down 11.8%; margin up 3.4 points |
| Operating loss | $217,000 | $313,000 | Loss narrowed |
| Net loss | $313,000 | $409,000 | Loss narrowed |
| Net loss per share | $0.11 | $0.16 | Loss per share narrowed |
| Operating cash flow | $780,000 | $(120,000) | Improved |
| Investing cash flow | $(396,000) | $(372,000) | Higher use of cash |
| Financing cash flow | $(273,000) | $(226,000) | Higher use of cash |
Subscription revenue was $3.833 million (down 5.7%), hardware revenue $205,000 (down 69.8%), and other revenue $794,000 (down 21.9%). Management attributed the subscription decline to lower average venue count and revenue per venue; hardware revenue declined primarily because of fewer sales-type lease installations. SG&A fell 13.7% to $3.469 million, principally reflecting lower payroll and professional fees. EBITDA, a non-GAAP measure, was $512,000 versus $325,000.
At March 31, cash and cash equivalents were $2.666 million, with another $250,000 in restricted cash; total cash, cash equivalents, and restricted cash were $2.916 million, up $130,000 from year-end. Working capital was $2.151 million, down from $2.761 million. Long-term debt outstanding was $3.5 million before unamortized issuance costs, including $1.0 million current; monthly principal payments are approximately $83,000. The company reported compliance with its Avidbank covenants at quarter-end, including a $2.0 million minimum unrestricted-cash requirement and a trailing-six-month EBITDA test.
Adoption of lease accounting standard ASC 842 added $3.458 million of operating lease liabilities at January 1, 2019; at March 31, operating lease liabilities were $3.430 million. The company said adoption did not materially affect its statement of operations. Total assets were $16.475 million and total liabilities $9.784 million at quarter-end.
Material changes, outlook, and risks
- Revenue declined 16.1% year over year, while gross margin improved because lower hardware sales reduced the mix of lower-margin equipment revenue. Subscriber venues decreased to 2,632 from 2,703 a year earlier.
- Buffalo Wild Wings corporate restaurants and franchisees generated $1.936 million, or 40% of Q1 revenue, compared with $2.798 million, or 49%, in Q1 2018. Existing agreements terminate in November 2019. If the relationship is not extended and replacement business is insufficient, management expects subscription revenue to decrease materially beginning in Q1 2020.
- The company said it believed available cash would cover operating requirements and debt obligations for at least the next 12 months after issuance of the statements. It was nevertheless exploring additional financing, including equity and alternative debt, and warned that funding may not be available on acceptable terms—or at all. Existing lending restrictions limit additional borrowing.
- The board’s strategic-alternatives review, announced in December 2018, remained ongoing; no decision or timetable was disclosed. Management gave no quantified financial guidance.
- After quarter-end, Buzztime began field testing a lower-cost product, Buzztime Basic, in Q2 2019; it also released an open-beta mobile app in May 2019. Management described a modernized ad platform launched in Q1 and reported initial advertising deals, but did not quantify expected revenue.
- Other risks include competition and product execution, tablet supply and development costs, covenant compliance, and potential dilution if new capital is raised. The company reported no pending material legal proceedings and no material change in internal control during the quarter.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is for NTN Buzztime, Inc., not Ernexa Therapeutics Inc.
- Track Buffalo Wild Wings negotiations and any extension beyond November 2019, as well as subscriber additions sufficient to offset that concentration.
- Assess cash generation, capital needs, and access to financing against debt service, covenant requirements, and the company’s stated liquidity expectations.
- Review subsequent results for execution and monetization of Buzztime Basic, the mobile app, and advertising initiatives; the filing provides no quantified targets.
- Reconcile the reported Q1 cash-flow figures with cash balances: operating cash flow was positive, but the company continued investing in software and made debt payments.