MELVILLE, N.Y—ChyronHego reported its first profitable quarter since Q2, 2011. The company said it had net income of $2.9 million in Q2 2014, ended June 30, 2014, compared to a net loss of $2.1 million in Q2 2013. The results included the operations of Hego and its subsidiaries from May 2013 to the transaction close on June 30, 2013.
“We are very excited to show our first profitable quarter since Q2 2011,” said president and CEO Johan Apel. “Our efforts in both keeping costs under control and driving revenue growth are bearing fruit. We are expecting growth in revenues to continue in the coming quarters. In terms of revenues, we are ahead of plan in both the U.S. and Europe and we have a positive outlook regarding the development of these markets. Our customers are investing with us and they appreciate our efforts to create the most complete offering within broadcast graphics.
“We closed the acquisition of ZXY Sport Tracking AS on April 30, and they have since received orders from several new customers. The WeatherOne AS acquisition closed on July 1 and we expect to see positive impact from their operations in the Q3 financials.”
Revenues for the second quarter of 2014 increased 37 percent to $14.7 million compared to $10.7 million in the second quarter of 2013. This $4 million increase was primarily driven by the contribution of services from the 2013 merger with Hego, which included a sale of tracking systems to a European Soccer League.
Gross profit margin for the second quarter of 2014 was 62 percent, down from 68 percent in Q2 2013. Services, increasing to 48 percent of revenues as compared to 37 percent in Q2 2013, carry a lower gross profit margin than products.
Operating income for the second quarter of 2014 was $3 million and included the benefit of a $2.2 million change in the fair value of the company’s contingent consideration. This compared to a $1.9 million operating loss in Q2 2013 which included merger-related expenses and restructuring costs of $2.6 million.
Operating expenses for the second quarter of 2014 were $8.3 million, excluding the benefit of a mark-to-market adjustment of $2.2 million, compared to $9.2 million in the second quarter of 2013. Research & development expenses were $2.1 million, down 9 percent from $2.3 million in the second quarter 2013, primarily due to inclusion of Hego R&D expenses for a full quarter, offset by cost savings from the 2013 workforce reduction.
Sales and marketing expenses were $4.8 million, up 46 percent from $3.3 million in Q2 2013, also due to the incremental costs from the Hego merger. General and administrative expenses were $1.4 million, a decrease of $2.2 million from $3.6 million in the second quarter of 2013. The decrease was primarily due to inclusion in Q2 2013 of $2 million in merger-related expenses.
Net income for the second quarter of 2014 was $2.9 million, or 8 cents per basic and diluted share, as compared to a net loss of $2.1 million, or 9 cents per basic and diluted share, in the second quarter of 2013. Excluding the $2.2 million contingent consideration, the company would have reported net income of $800,000 compared to Q2 2013 net income of $500,000, excluding $2.6 million of merger-related expenses and restructuring costs.
The financial results for the first half 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 first half of 2014 were $27.3 million, up $8.6 million or 46 percent over the comparable prior year period. Product revenues were $13.4 million and represent 49 percent of total revenues. This represents an increase of 6 percent over the first half of 2013. Service revenues were $13.9 million and represent 51 percent of total revenues. This represents an increase of 131 percent over the first half of 2013.
Gross profit margin declined to 62 percent in the first half of 2014 as compared to 70 percent in the first half of 2013 due to the change in product mix resulting from the large increase in service revenues from the merger with Hego.
Operating loss in the first half of 2014 was $100,000 compared to $2.7 million in the first half of 2013. First half of 2014 includes a charge of $400,000 resulting from the change in fair value of the contingent consideration. First half of 2013 includes charges of $3.3 million in merger-related expenses and restructuring costs.
The net loss for the first half of 2014 was $300,000, including the $400,000 charge for the change in fair value of the contingent consideration. This compares to a net loss of $3 million, which includes $3.3 million in merger-related expenses and restructuring costs.
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