[COMPANY LOGO]
NEW FRONTIER MEDIA
For Immediate Release
Contact: Grant Williams, Corporate Controller
(303) 444-0900 x185
gwilliams@noof.com
New Frontier Media Reports Fiscal 2008 Second Quarter Results
BOULDER, Colo., Nov. 8 /PRNewswire-FirstCall/ -- New Frontier Media, Inc.
(Nasdaq: NOOF), a worldwide producer and distributor of general and adult-themed
motion picture entertainment, today reported earnings per share of $0.09 for the
quarter ended September 30, 2007, as compared to $0.15 per share for the same
period last year. The Company reported quarterly revenue of $12.4 million,
representing a decline of $3.8 million as compared to the same period in the
prior year.
"On a consecutive quarter basis, we believe New Frontier Media is now returning
to a growth trend both in terms of adjusted EBITDA and earnings per share" said
Michael Weiner, Chief Executive Officer of New Frontier Media, Inc. "We believe
that our newly announced distribution and programming contracts will provide us
with continued and material growth as we move into the second half of the fiscal
year."
During the second fiscal quarter, New Frontier Media, Inc. provided shareholders
with a $0.125 quarterly dividend and repurchased almost 570,000 shares of its
common stock. Since fiscal 2007, the Company has provided shareholders with over
$20.6 million in cash dividends, and has repurchased approximately $5.8 million
of its common stock.
Quarterly Results
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On a quarterly basis, the Company reported a decrease in second quarter revenue
to $12.4 million from $16.2 million for the same quarter a year ago. Net income
for the current year quarter was $2.1 million compared to $3.7 million for the
same quarter a year ago. The Company reported earnings per share of $0.09 for
the quarter ended September 30, 2007, as compared with $0.15 per share for the
same quarter a year ago.
Pay TV
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The Company's Pay TV segment reported revenue of $10.0 million for the quarter
ended September 30, 2007, as compared to $12.2 million for the quarter ended
September 30, 2006, representing a decrease of 18%. Within the Pay TV segment,
the following detailed results were reported for the current quarter compared to
the same quarter last year:
* Pay-per-view ("PPV") revenue declined 33% to $5.0 million from $7.5
million for the same period last year. The decrease is primarily a
result of the renegotiated agreement with one of our key customers
in October 2006, which resulted in a downward adjustment of our
historical revenue split.
* Video-on-demand ("VOD") revenue was $4.7 million representing a 12%
increase from the $4.2 million in revenue recognized during the same
prior year quarter. The increase is attributable to an improvement
in the performance of our services.
* C-Band revenue decreased 40% to $0.3 million from $0.5 million in
the prior year.
Operating income for the Pay TV segment was $5.1 million for the quarter ended
September 30, 2007, as compared to operating income of $7.8 million for the
quarter ended September 30, 2006, representing a decrease of 35%. Gross margin
for the Pay TV segment decreased to 72% for the quarter ended September 30, 2007
from 77% for the quarter ended September 30, 2006. Operating expenses increased
31% to $2.1 million for the quarter ended September 30, 2007 from $1.6 million
for the quarter a year ago primarily as a result of higher costs associated with
promotion and marketing activities in anticipation of new channel launches. The
Company launched two of these new channels in October 2007 on the largest direct
broadcast satellite platform in the U.S.
Film Production
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The Company's Film Production segment reported revenue of $2.0 million for the
quarter ended September 30, 2007 as compared to revenue of $3.3 million for the
quarter ended September 30, 2006, representing a decrease of 39%. The decline in
revenue is primarily related to different delivery schedules between years. In
the prior year quarter, the Film Production segment delivered four episodes of a
13 episode series. This same episodic business has completed production and is
expected to be delivered during the third quarter of the current fiscal year.
Offsetting these revenue declines was higher revenue from the delivery of the
Film Production segment's content on the video-on-demand platforms of four major
cable operators in the U.S. and higher revenue from the distribution of several
horror films to home video and video-on-demand platforms through a mainstream
film distributor.
Cost of sales declined 76% to $0.5 million for the quarter ended September 30,
2007 from $2.1 million for the quarter ended September 30, 2006. This decline is
primarily from lower film amortization from a decline in revenue and from the
Film Production segment's monetization of titles produced subsequent to its
acquisition by New Frontier Media in February 2006. Also contributing to the
decline was the delivery and recognition of revenue for several older titles and
a horror title whose film costs had been fully amortized in prior periods. As a
result of this decline in cost of sales, the Film Production segment's gross
margin increased to 75% for the current fiscal quarter as compared to 36% for
the same quarter in the prior year.
The Film Production segment generated operating income of $0.4 million for the
quarter ended September 30, 2007 as compared to $0.1 million during the quarter
ended September 30, 2006 as a result of the higher gross margins.
Internet
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The Company's Internet segment reported net revenue of $0.4 million for the
quarter ended September 30, 2007 as compared to net revenue of $0.6 million for
the quarter ended September 30, 2006, representing a decrease of 33%. Operating
income for the Internet segment was $0.1 million for the quarter ended September
30, 2007 and breakeven for the quarter ended September 30, 2006.
Corporate Administration Expenses
- ---------------------------------
Corporate administration expenses were $2.4 million for the quarter ended
September 30, 2007 and were relatively flat from the $2.3 million in corporate
administration expenses reported for the comparable quarter last year.
Other Results
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The Company reported Adjusted EBITDA for the quarter ended September 30, 2007 of
$2.4 million compared to $6.3 million last year. A schedule reconciling Adjusted
EBITDA to the most directly comparable GAAP (defined below) financial measure --
Net Income -- is provided below. The Company believes EBITDA and Adjusted EBITDA
are important financial measures and they are used by management to monitor the
financial performance of the Company. The decline in Adjusted EBITDA compared to
the same period last year is primarily attributable to the following:
* lower net income attributable to a decline in the PPV revenue
reported in the Pay TV segment from the renegotiated contract with a
key customer;
* lower revenue from the Film Production segment primarily due to
different delivery schedules associated with a 13 episode series.
The series was delivered in the first half of fiscal 2007 but is not
scheduled to occur until the third quarter of fiscal 2008;
* the impact of lower amortization expenses in the Film Production
segment; and
* increased capital expenditure investments related to investments in
our digital production facility.
Total cash and investments as of September 30, 2007 were $16.6 million,
down from $23.9 million as of June 30, 2007. The decrease from the previous
quarter is primarily attributable to the following second quarter activities:
* $3.6 million used to repurchase outstanding common stock during the
quarter;
* $3.0 million used to fund the $0.125 quarterly dividend to
stockholders during the quarter;
* $2.2 million used to acquire content and produce owned content
during the quarter; and
* $2.1 million used to fund a large "producer-for-hire" project in the
Film Production segment during the quarter.
Conference Call Information
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New Frontier Media, Inc. will be conducting its conference call and web cast to
discuss earnings today at 11 a.m. Eastern Time. The participant phone number for
the conference call is (800) 366-3964. To participate in the web cast please log
on to www.noof.com and click on "Investor Relations" and then "Webcasts &
Events". A replay of the conference call will be available for seven days
beginning after 1 p.m. Eastern Time on November 8, 2007 at (800) 405-2236,
access code 11100423#. The replay will also be archived for twelve months on the
Corporate web site at www.noof.com. This press release can be found on the
Company's corporate web site, www.noof.com, under "Investor Relations/News
Releases".
This news release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking statements are
based on current expectations, estimates and projections made by management. The
Company intends for the forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements. Words such as "anticipates",
"expects", "intends", "plans", "believes", "seeks", "estimates", or variations
of such words are intended to identify such forward-looking statements. The
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those set forth or implied by any
forward-looking statements. All forward-looking statements made in this press
release are made as of the date hereof, and the Company assumes no obligation to
update the forward-looking statements included in this news release whether as a
result of new information, future events, or otherwise. Please refer to the
Company's most recent Form 10-K and other filings with the SEC for additional
information regarding risks and uncertainties, including, but not limited to,
the risk factors listed from time to time in such SEC reports. Copies of these
filings are available through the SEC's electronic data gathering analysis and
retrieval system (EDGAR) at www.sec.gov.
Non-GAAP Financial Measures
- ---------------------------
This press release contains "non-GAAP financial measure(s)" as defined in Item
10 of Regulation S-K, including EBITDA and Adjusted EBITDA on a consolidated
basis for the three months ended September 30, 2007 and September 30, 2006 and
the six months ended September 30, 2007 and September 30, 2006.
The Company believes these measures provide useful information to management and
to investors; however, these "non-GAAP" measures should be viewed in addition
to, and not as an alternative for, the Company's reported results prepared in
accordance with Generally Accepted Accounting Principles in the United States
("GAAP"). A reconciliation of EBITDA and Adjusted EBITDA, as compared to the
most directly comparable GAAP financial measure, is presented in a
reconciliation table that follows our presentation of Consolidated Operating
Results below. EBITDA is calculated as net income plus depreciation,
amortization (excluding content amortization), income taxes and interest expense
less interest income. Adjusted EBITDA is calculated as EBITDA plus content
amortization and share based compensation expenses, less cash investments for
content and capital expenditures.
ABOUT NEW FRONTIER MEDIA, INC.
New Frontier Media, Inc. is a worldwide producer and distributor of adult-themed
and general motion picture entertainment. Under the "The Erotic Networks"(R)
trademark, the Company delivers seven, full-time adult-themed pay-per-view
networks to cable and satellite operators across the United States.
Additionally, the Company is a leading provider of adult-themed Video-on-Demand
content to cable and satellite platforms. These services reach approximately 160
million network homes.
New Frontier Media's Film Production segment produces original, adult-themed
content and series that are distributed on premium movie channels in the United
States and around the world. The Film Production segment also develops and
produces original, adult-themed event programming that is widely distributed on
satellite and cable platforms in the United States. Additionally, the Film
Production segment manages a sales operation, which matches independent,
mainstream film producers with film distributors around the world. New Frontier
Media owns and operates a digital broadcast infrastructure in Colorado, which
serves content to broadcast, IP and wireless networks around the world.
For more information about New Frontier Media, Inc. contact Grant Williams,
Corporate Controller, at (303) 444-0900, extension 185, and please visit our web
site at www.noof.com.
Consolidated Operating Results
(in thousands, except per share amounts)
(Unaudited) (Unaudited)
Quarter Ended September 30, Six Months Ended September 30,
------------------------------- -------------------------------
2007 2006 2007 2006
-------------- -------------- -------------- --------------
Net sales $ 12,430 $ 16,166 $ 25,370 $ 32,494
Cost of sales 3,459 5,195 7,256 10,524
-------------- -------------- -------------- --------------
Gross margin 8,971 10,971 18,114 21,970
Operating expenses 5,719 5,332 12,723 10,840
-------------- -------------- -------------- --------------
Operating income 3,252 5,639 5,391 11,130
Other income 149 298 385 500
-------------- -------------- -------------- --------------
Income before provision for income
taxes 3,401 5,937 5,776 11,630
Provision for income taxes (1,256) (2,283) (2,134) (4,427)
-------------- -------------- -------------- --------------
Net income $ 2,145 $ 3,654 $ 3,642 $ 7,203
============== ============== ============== ==============
Basic income per share $ 0.09 $ 0.15 $ 0.15 $ 0.30
============== ============== ============== ==============
Diluted income per share $ 0.09 $ 0.15 $ 0.15 $ 0.30
============== ============== ============== ==============
Dividends declared per common share $ 0.13 $ - $ 0.25 $ -
============== ============== ============== ==============
Average outstanding shares of common
stock 24,120 23,830 24,232 23,832
============== ============== ============== ==============
Common stock and common stock
equivalents 24,225 24,276 24,424 24,287
============== ============== ============== ==============
Reconciliations of EBITDA and Adjusted EBITDA
(Unaudited) (Unaudited)
Quarter Ended September 30, Six Months Ended September 30,
2007 2006 2007 2006
-------------- -------------- -------------- --------------
Net Income $ 2,145 $ 3,654 $ 3,642 $ 7,203
Adjustments:
Depreciation/Amortization (1) 556 488 1,081 951
Interest Expense 53 28 96 57
Interest Income (215) (322) (469) (560)
Income taxes 1,256 2,283 2,134 4,427
-------------- -------------- -------------- --------------
EBITDA 3,795 6,131 6,484 12,078
-------------- -------------- -------------- --------------
Content Amortization 1,159 2,750 2,530 5,626
Cash Investments in Content (2,196) (2,569) (4,540) (3,965)
Capital Expenditures (653) (286) (1,160) (586)
Stock Based Compensation 288 225 563 428
-------------- -------------- -------------- --------------
Adjusted EBITDA $ 2,393 $ 6,251 $ 3,877 $ 13,581
============== ============== ============== ==============
(1) Amortization excludes amortization of content.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, 2007 March 31, 2007
------------------ ------------------
CURRENT ASSETS:
Cash and Cash Equivalents $ 12,205 $ 17,345
Restricted Cash 10 1,710
Marketable Securities 3,845 8,681
Accounts Receivable, net 11,262 12,249
Deferred Cost 2,106 --
Deferred Tax Asset 407 528
Other Current Assets 2,175 2,863
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TOTAL CURRENT ASSETS 32,010 43,376
------------------ ------------------
Equipment and Furniture, net 4,722 4,534
Prepaid Distribution Rights, net 9,872 9,084
Marketable Securities 583 587
Recoupable Costs and Producer Advances 1,610 1,278
Film Costs, net 8,213 6,991
Goodwill 18,608 18,608
Other Identifiable Intangible
Assets, net 2,390 2,771
Other Assets 984 987
------------------ ------------------
TOTAL ASSETS $ 78,992 $ 88,216
================== ==================
CURRENT LIABILITIES:
Accounts Payable $ 2,137 $ 1,942
Producer Payable 638 1,049
Deferred Revenue 1,131 889
Due to Related Party 92 647
Accrued Compensation 1,751 3,298
Deferred Producer Liabilities 2,309 1,344
Accrued and Other Liabilities 857 3,664
------------------ ------------------
TOTAL CURRENT LIABILITIES 8,915 12,833
------------------ ------------------
Deferred Tax Liability 355 976
Taxes Payable 1,849 1,726
Other Long-Term Liabilities 962 982
------------------ ------------------
TOTAL LIABILITIES 12,081 16,517
------------------ ------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock 2 2
Additional Paid-in Capital 61,789 64,191
Retained Earnings 5,136 7,536
Accumulated Other
Comprehensive Loss (16) (30)
------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 66,911 71,699
------------------ ------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 78,992 $ 88,216
================== ==================
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended September 30,
--------------------------------
Cash flows from operating activities: 2007 2006
--------------- ---------------
Net income $ 3,642 $ 7,203
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,611 6,577
Tax benefit from option/warrant exercises 167 134
Share-based compensation 563 428
Charge for asset disposition and
impairment 363 --
Changes in operating assets and
liabilities
Accounts receivable 987 11
Accounts payable 195 (441)
Prepaid distribution rights (2,388) (2,468)
Capitalized film costs (2,152) (1,497)
Deferred costs (2,106) --
Deferred revenue, net 242 510
Producer payable (411) 58
Taxes receivable and payable, net 275 1,288
Deferred tax asset and
liability, net (508) (1,218)
Accrued compensation (1,547) (21)
Other assets and liabilities, net (45) 247
--------------- ---------------
Net cash provided by
operating activities 888 10,811
--------------- ---------------
Cash flows from investing activities:
Payment for business acquisitions -- (18)
Purchase of investments
available-for-sale (2,671) (12,571)
Redemption of investments
available-for-sale 7,532 2,753
Purchase of equipment and furniture (1,160) (586)
Payment of related party note arising
from business acquisition (555) (468)
--------------- ---------------
Net cash provided by (used in)
investing activities 3,146 (10,890)
--------------- ---------------
Cash flows from financing activities:
Proceeds from exercise of stock
options/warrants 512 636
Purchase of common stock (3,618) (2,160)
Payment of dividend (6,042) --
Excess tax benefit from
option/warrant exercise (26) 323
--------------- ---------------
Net cash used in financing
activities (9,174) (1,201)
--------------- ---------------
Net decrease in cash and cash equivalents (5,140) (1,280)
Cash and cash equivalents, beginning of
period 17,345 12,611
--------------- ---------------
Cash and cash equivalents, end of period $ 12,205 $ 11,331
=============== ===============