Profitability - now that's a welcome change

A company announcement of its quarterly report consists of a company statement, followed by the numbers. You can tell when a company isn't doing all that well by looking at the first line of the company statement. If the first line says that the company is poised for growth, or that it's entering a new era, or something, then you know that quarterly performance wasn't all that good.

In that spirit, let's look at the first line of NTN Buzztime's recently quarterly report:

Company was profitable for the quarter

To long-time watchers, this is significant and is good news. Here are some other excerpts:

Revenues for the third quarter of 2010 were $6.5 million, compared to revenues of $6.7 million for the same period of 2009. The 3.2% decrease in revenue was the result of lower average revenue generated per site, a lower site count compared to the prior year period, decreased advertising revenue and a decrease
in certain non-recurring hardware sales we recognized for the period in 2009.

The Company ended the third quarter of 2010 with 4,015 subscribing venues,
compared to 4,051 at September 30, 2009, a decrease of 1.0%. During the third
quarter of 2010, installations were down approximately 26.7% while terminations
were up 38.1% compared with the third quarter of 2009. Customer churn was 6.7%
for the quarter up from 4.9% in the prior year period.

Huh? That doesn't sound good. But read on:

Gross margin as a percentage of revenue increased to 77% in the third quarter of
2010, compared to 74% in the third quarter of 2009.



Selling, general and administrative expenses were $4.7 million for the third
quarter of 2010 compared to $5.5 million for the three months ended September
30, 2009. Selling, general and administrative expenses decreased during the
three months ended September 30, 2010 primarily due to decreased sales and
marketing expenses of $258,000, lower facilities expense of $126,000 due to
reduced rent, telephone and maintenance costs, lower software disposal costs of
$135,000, decreased payroll and payroll related expense of $94,000 primarily due
to a decline in incentive compensation, lower consulting expense of $83,000 due
to reduced reliance on consultants, decreased travel expense of $60,000 and a
net decrease of $55,000 in other miscellaneous expense.

Depreciation and amortization expense (excluding depreciation and amortization
included in direct operating costs) decreased $253,000 to $163,000 for the three
months ended September 30, 2010 from $416,000 for the three months ended
September 30, 2009 primarily due to fully amortizing an intangible asset we
acquired in 2009.

Net income for the third quarter of 2010 was $124,000, or $0.00 per basic and
diluted share, compared to a net loss of $768,000 or $0.01 per basic and diluted
share in the same period a year ago.

OK, so they weren't THAT profitable. But they were profitable. And that, quite literally, is the bottom line.