NOOF New Frontier Media, Inc. (MM)

- Company Projects Continued Growth for Full Fiscal Year - BOULDER, Colo., Aug. 8 /PRNewswire-FirstCall/ -- New Frontier Media, Inc. (NASDAQ:NOOF), a leading producer and distributor of branded television networks and on-demand programming, today announced results for its fiscal 2009 first quarter ended June 30, 2008. The Company reported net sales of $13.1 million compared to $12.9 million in the same prior year quarter. The Company noted that the prior year quarter included $0.4 million in net sales from C-Band services that it ceased offering in the third quarter of fiscal year 2008. Net income for the quarter was $1.2 million, or $0.05 per share, as compared to $1.5 million, or $0.06 per share, in the same prior year quarter. As previously announced and expected, the Company, in this quarter, incurred incremental costs associated with the test of a Direct-to-Consumer IPTV set-top box; these costs totaled $0.5 million. Cash flows from operations grew to $4.5 million as compared to $1.1 million in the prior year quarter. "We continue to execute on our growth strategies for our core businesses and expect to see both segment and consolidated top-line revenue growth in this fiscal year," said Michael Weiner, Chief Executive Officer of New Frontier Media. "New initiatives designed to better manage our working capital are having an impact," said Mr. Weiner. "During the quarter, we delivered cash flows from operations of $4.5 million, a four fold increase versus the same quarter last year. During fiscal year 2009, we expect cash flows from operations will be significantly greater than that required to fund our growth initiatives as well as our stock repurchase program. We are conducting an extensive analysis on the allocation of the Company's capital," continued Mr. Weiner. "We intend to aggressively repurchase shares under our stock repurchase program as and when market conditions permit. Under this program, we repurchased approximately 383,000 shares of our common stock at an average per share purchase price of $3.92 this quarter. The Company has approximately 746,000 shares remaining in its present repurchase program." "Simultaneously," said Mr. Weiner, "we continue to execute on our growth strategies for our core businesses. In the Transactional TV segment, we have entered into contracts with customers in Germany, France, Canada and Mexico, which we expect to deliver meaningful revenue by the end of this fiscal year. Domestically, we expect to launch cable pay-per-view services in new systems, and to receive additional hours of video-on-demand shelf space as we continue to both gain share and participate in category growth in this marketplace. Finally, our testing of our Direct-to-Consumer IPTV set-top box in the U.K. is continuing on schedule and on budget. Beta test customers are already on-line, and preliminary test marketing communications have begun. We expect results of this test by the end of our fiscal year." Financial Highlights -- Adjusted EBITDA improved to $2.8 million from $1.7 million in the same prior year quarter. -- Video-on-demand Transactional TV segment revenue increased 15.2% as compared to the same prior year quarter due to strong performance on the largest multiple system operator in the U.S. -- Pay-per-view Transactional TV segment revenue declined 5.7% as compared to the same prior year quarter due to lower revenue from the second largest direct broadcast satellite provider in the U.S. reflecting increased competition on this platform. Revenue was also impacted by the disaffiliation of a cable system in Seattle. This system discontinued all adult pay-per-view movie services in order to reclaim bandwidth. Management does not believe this disaffiliation is evidence of a trend. -- Owned content revenue within the Film Production segment increased to $1.7 million during the current quarter primarily as a result of the delivery of 6 titles from a 13 episode series to a premium cable channel as well as from an increase in video-on-demand revenue. -- Cost of sales and operating expenses were slightly higher as compared to the same prior year quarter resulting from incremental costs incurred for the IPTV set-top box test. -- Cash flows generated from operating activities were $4.5 million in the current quarter as compared to $1.1 million in the same prior year quarter and were beneficially impacted by a) increased cash collections within the Transactional TV and Film Production segments, b) a decline in fiscal year 2008 employee bonuses paid during the current quarter, and c) a decline in the use of cash for Film Production segment content creation. Non-GAAP Financial Measures This press release contains non-GAAP financial measures as defined in Item 10 of Regulation S-K, including EBITDA and Adjusted EBITDA on a consolidated basis for the three month periods ended June 30, 2008 and 2007. 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 GAAP. A reconciliation of EBITDA and Adjusted EBITDA, as compared to the most directly comparable GAAP financial measure, net income, is presented in a reconciliation table that follows our presentation of Consolidated Operating Results below. EBITDA is calculated as net income plus depreciation, amortization, and income taxes less other income; and Adjusted EBITDA is calculated as EBITDA less cash paid for content. Conference Call Information 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) 366-3908. To participate in the web cast please log on to http://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 August 8, 2008 at (800) 405-2236, access code 11118157#. The replay will also be archived for twelve months on the Corporate web site at http://www.noof.com/. This press release can be found on the Company's corporate web site, http;//http://www.noof.com/, under "Investor Relations/News Releases." Cautionary Statements 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 Securities and Exchange Commission ("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 (EDGAR) system at http://www.sec.gov/. ABOUT NEW FRONTIER MEDIA, INC. New Frontier Media, Inc. is a leading producer and distributor of branded television networks and on-demand programming. The Company delivers nine full-time transactional adult-themed pay-per-view networks to cable and satellite operators across the United States. These services reach over 175 million network homes. Additionally, the Company is a leading provider of content to video-on-demand platforms on cable and satellite. New Frontier Media is the exclusive distributor of Penthouse branded adult television in the U.S. The Company's programming originates at New Frontier Media's state of the art digital broadcast center in Boulder, Colorado. The Company owns thousands of hours of digital content and partners with more than 130 movie studios to bring together a variety of transactional adult entertainment available today. New Frontier Media's Film Production segment produces original motion pictures that are distributed in the U.S. on premium movie channels, such as Cinemax(R) and Showtime(R), and internationally on similar services. The Film Production segment also develops and produces exciting original event programming that is widely distributed on satellite and cable pay-per-view. Through the Lightning Entertainment(R) Group label, this segment also represents the work of a full range of independent U.S. film producers in markets around of the globe. For more information about New Frontier Media, Inc. contact Grant Williams, Chief Financial Officer, at (303) 444-0900, extension 2185, and please visit our web site at http://www.noof.com/. Consolidated Operating Results (in thousands, except per share amounts) (Unaudited) Quarter Ended June 30, 2008 2007 Net sales $13,061 $12,940 Cost of sales 3,929 3,797 Gross margin 9,132 9,143 Operating expenses 7,146 7,004 Operating income 1,986 2,139 Other income 22 236 Income before provision for income taxes 2,008 2,375 Provision for income taxes (829) (878) Net income $1,179 $1,497 Basic income per share $0.05 $0.06 Diluted income per share $0.05 $0.06 Dividends declared per common share $- $0.13 Average outstanding shares of common stock 23,692 24,315 Common stock and common stock equivalents 23,735 24,594 EBITDA and Adjusted EBITDA (Unaudited) Quarter Ended June 30, 2008 2007 Net Income $1,179 $1,497 Adjustments: Other income (22) (236) Provision for income taxes 829 878 Depreciation and amortization 2,179 1,896 EBITDA 4,165 4,035 Cash paid for content(1) (1,389) (2,344) Adjusted EBITDA $2,776 $1,691 (1) Amount includes total cash paid for prepaid distribution rights and capitalized film costs. Consolidated Balance Sheets (in thousands) June 30, 2008 March 31, 2008 Assets (Unaudited) Current assets: Cash and cash equivalents $16,395 $18,325 Restricted cash 110 38 Marketable securities 679 930 Accounts receivable, net 11,540 13,873 Deferred tax asset 627 620 Prepaid and other assets 1,512 1,899 Total current assets 30,863 35,685 Equipment and furniture, net 6,007 4,861 Prepaid distribution rights, net 10,538 10,381 Recoupable costs and producer advances 3,039 2,448 Film costs, net 7,350 7,626 Goodwill 18,608 18,608 Other identifiable intangible assets, net 3,057 3,033 Other assets 1,049 1,019 Total assets $80,511 $83,661 Liabilities and shareholders' equity Current liabilities: Accounts payable $2,666 $2,937 Dividend payable - 2,982 Taxes payable 1,476 760 Producers payable 1,239 1,012 Deferred revenue 1,742 984 Accrued compensation 1,092 1,817 Deferred producer liabilities 2,018 2,862 Accrued liabilities and other 2,509 2,257 Total current liabilities 12,742 15,611 Deferred tax liability 776 795 Taxes payable 216 216 Other long-term liabilities 806 1,002 Total liabilities 14,540 17,624 Commitments and contingencies Shareholders' equity: Common stock 2 2 Additional paid-in capital 60,609 61,854 Retained earnings 5,370 4,191 Accumulated other comprehensive loss (10) (10) Total shareholders' equity 65,971 66,037 Total liabilities and shareholders' equity $80,511 $83,661 Consolidated Statements of Cash Flows (In thousands) (Unaudited) Quarter Ended June 30, 2008 2007 Cash flows from operating activities: Net income $1,179 $1,497 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,179 1,896 Tax benefit from option/warrant exercises - 119 Share-based compensation 257 275 Charge for asset disposition and impairment - 273 Changes in operating assets and liabilities Accounts receivable 2,333 1,407 Accounts payable 46 (468) Prepaid distribution rights (1,018) (815) Capitalized film costs (371) (1,529) Deferred revenue 758 90 Producers payable 227 (312) Taxes receivable and payable, net 716 877 Deferred tax asset and liability, net (26) (271) Accrued compensation (725) (2,091) Other assets and liabilities, net (1,086) 152 Net cash provided by operating activities 4,469 1,100 Cash flows from investing activities: Purchase of investments available-for-sale (586) (2,681) Redemption of investments available-for-sale 837 1,724 Purchase of equipment and furniture (1,662) (507) Purchase of intangible assets (489) - Payment of related party note arising from business acquisition (15) (528) Net cash used in investing activities (1,915) (1,992) Cash flows from financing activities: Proceeds from exercise of stock options/warrants - 241 Purchase of common stock (1,502) - Payment of dividend (2,982) (3,049) Excess tax benefit from option/warrant exercise - 1 Net cash used in financing activities (4,484) (2,807) Net decrease in cash and cash equivalents (1,930) (3,699) Cash and cash equivalents, beginning of period 18,325 17,345 Cash and cash equivalents, end of period $16,395 $13,646 Segment Summary Data (1) (In millions) (Unaudited) Quarter Ended June 30, 2008 2007 % change Net sales Transactional TV $10.6 $10.4 2% Film Production 2.0 2.1 -5% Direct-to-Consumer 0.5 0.5 0% Total net sales 13.1 12.9 2% Cost of sales Transactional TV 2.6 2.8 -7% Film Production 0.9 0.8 13% Direct-to-Consumer 0.4 0.2 # Total cost of sales 3.9 3.8 3% Operating expenses Transactional TV 2.4 2.5 -4% Film Production 1.3 1.5 -13% Direct-to-Consumer 0.6 0.3 # Corporate Administration 2.9 2.8 4% Total operating expenses 7.1 7.0 1% Operating income (loss) Transactional TV 5.5 5.1 8% Film Production (0.1) (0.2) 50% Direct-to-Consumer (0.5) - # Corporate Administration (2.9) (2.8) -4% Total operating income $2.0 $2.1 -5% (1) Amounts in this schedule may not sum due to rounding. # Represents an increase or decrease in excess of 100%. Supplemental Revenue Data (1) (In millions) (Unaudited) Quarter Ended June 30, 2008 2007 % change Transactional TV VOD $5.3 $4.6 15% PPV 5.0 5.3 -6% C-Band and other 0.2 0.5 -60% Total $10.6 $10.4 2% Film Production Owned content $1.7 $1.4 21% Repped content 0.3 0.5 -40% Other 0.1 0.2 -50% Total $2.0 $2.1 -5% Direct-to-Consumer Net membership $0.4 $0.4 0% Other 0.1 0.1 0% Total $0.5 $0.5 0% (1) Amounts in this schedule may not sum due to rounding. DATASOURCE: New Frontier Media, Inc. CONTACT: Grant Williams, Chief Financial Officer of New Frontier Media, Inc., +1-303-444-0900, ext. 2185, Web site: http://www.noof.com/

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