New Frontier Media Reports Third Quarter Earnings Per Share of $0.14

New Frontier Media Reports Third Quarter Earnings Per Share of $0.14

BOULDER, Colo., Feb. 6 /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 fully diluted share of $0.14 for the quarter ended December 31, 2006, representing a 17% increase over earnings per fully diluted share of $0.12 for the quarter ended December 31, 2005. The Company reported a 44% increase in quarterly revenue to $16.6 million from $11.5 million for the same quarter a year ago. Net income for the current year quarter was $3.4 million compared to $2.9 million for the same quarter a year ago, representing an increase of 17%.

Post-tax free cash flow, which going forward will be the basis for the computation of the Company's recently announced semi-annual dividend program, was $3.5 million for the quarter ended December 31, 2006. The first dividend under this program, based upon 60% of post-tax free cash flow, will be payable after the Company's quarter ended September 30, 2007.

"This quarter's results were driven largely by the strong performance of our newly acquired content production group, MRG Entertainment. MRG delivered an unexpectedly large quantity of titles this quarter, some of which were delivered earlier than originally forecast," stated Michael Weiner, Chief Executive Officer of New Frontier Media, Inc.

"Our core adult services are performing well. On the largest VOD platform in the country we are observing material retail market share advantages versus our competition. We have worked hard to improve our services this year and we believe we are now seeing the results of those efforts. We look forward to the payment of our special $0.60 per share dividend on February 14," Mr. Weiner continued.

Pay TV

The Company's Pay TV Group reported revenue of $11.2 million for the quarter ended December 31, 2006, as compared to $10.9 million for the quarter ended December 31, 2005, which represents an increase of 3%. Of this increase, revenue from the Pay TV Group's pay-per-view ("PPV") services increased 11% to $6.9 million for the quarter ended December 31, 2006 from $6.2 million for the quarter ended December 31, 2005. Revenue from the Pay TV Group's video-on-demand ("VOD") service provided both to the cable and hotel markets, decreased 5% to $3.8 million for the quarter ended December 31, 2006, from $4.0 million for the quarter ended December 31, 2005. Revenue from the Pay TV Group's C-Band service decreased 29% to $0.5 million for the quarter ended December 31, 2006, from $0.7 million for the quarter ended December 31, 2005.

The Pay TV Group's PPV revenue increased primarily due to the launch of two of its PPV services on the largest DBS platform in the United States. This increase in revenue was mitigated by the finalization of a new contract with our largest customer during the current quarter which adjusted our historical revenue splits.

The decrease in the Pay TV Group's VOD revenue year-over-year for the quarter is related to the sale of a smaller MSO's systems to larger multi-channel operators which resulted in a lower license fee on our VOD content from those systems. This decrease in revenue was partially offset by increases in revenue from the largest cable MSO in the United States and new launches of our VOD content to other top ten cable MSOs.

Operating income generated by the Pay TV Group was $5.9 million for the quarter ended December 31, 2006, as compared to operating income of $5.6 million for the quarter ended December 31, 2005, representing an increase of 5%. Gross margin for the Pay TV Group increased to 76% for the quarter ended December 31, 2006 from 72% for the quarter ended December 31, 2005. Operating expenses increased 18% to $2.6 million for the quarter ended December 31, 2006 from $2.2 million for the quarter ended December 31, 2005.

Internet Group

The Company's Internet Group reported revenue of $0.6 million for the quarter ended December 31, 2006 as compared to $0.7 million for the quarter ended December 31, 2005, which represents a decrease of 14%. Operating income for the Internet Group was breakeven, prior to a write-down taken for the impairment of licensed content in the amount of $0.4 million, for the quarter ended December 31, 2006 as compared to $0.1 million for the quarter ended December 31, 2005. The Company will be focusing additional resources on website redesign and marketing efforts in order to reinvigorate its web business, which currently accounts for the majority of revenue and profitability within the Internet Group.

During the current year quarter, the Company recognized an impairment loss of $0.4 million associated with the Internet Group's licensed content. The Company has undertaken an ongoing project to assess all of its content under license for use across all of its delivery platforms. As part of this continuing effort, this particular content was identified as content that did not meet the Company's stringent quality requirements for use within the Internet Group's products. Accordingly, the Company recognized an impairment loss for the remaining unamortized cost basis of the content. The Company does not anticipate any further write-offs related to its licensed content.

Film Production Group

The Film Production Group reported revenue of $4.8 million, cost of sales of $1.8 million and operating income of $1.8 million for the quarter ended December 31, 2006. Operating income for the quarter was positively impacted by higher third quarter revenues, increasing margins on owned content as the Film Production Group begins to monetize newly produced movies and events, and flat consecutive quarter operating costs. The Film Production Group expects that its third quarter revenues will typically trend higher than other fiscal year quarters as it generally delivers a larger number of titles to its customers during this quarter.

Corporate Administration Expenses

Corporate administration expenses increased 47% to $2.2 million for the quarter ended December 31, 2006 from $1.5 million for the quarter ended December 31, 2005. The increase in year-over-year quarterly corporate administration expenses is primarily related to an increase in stock compensation expense due to the Company's adoption during the current fiscal year of the new accounting pronouncement requiring the expensing of the fair value of stock options over the vesting period, and the addition of an executive vice president to the executive team in January 2006.

Future Outlook
The Company is updating its fiscal 2007 guidance as follows:

Revenue guidance is updated to $62 - $63 million from $60 - $62 million
Net income guidance is updated to $12.0 - $13.0 million from
$10.0 - $11.4 million
EPS guidance is updated to $0.50 - $0.53 per share from $0.42 - $0.47 per
share
Pre-tax free cash flow guidance is updated to $22.8 - $23.8 million from
$22.0 - $24.0 million

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)-257-2101. 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 after 2 p.m. Eastern Time on February 6, 2007 at (800)-405-2236, access code 11083200#. 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. All statements in this release regarding the Company's expectations of paying a semi-annual dividend after the quarter ended September 30, 2007, payment of a special $0.60 per share dividend on February 14, its expectations of no further write-offs related to its licensed content, its updated fiscal 2007 guidance to revenue of $62 -$63 million, net income of $12.2 - $13.0 million, EPS of $0.50 - $0.53 per share, and pre-tax free cash flow of $23 - $23.8 million, and the outcome of any contingencies are 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 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.

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" 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, as well as to the hospitality industry. These services reach over 135 million network homes.

New Frontier Media's MRG Entertainment unit produces original, adult-themed content and series that are distributed on premium movie channels in the United States and around the world. MRG Entertainment also develops and produces original, adult-themed event programming that is widely distributed on satellite and cable platforms in the United States. Additionally, MRG Entertainment 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 Karyn Miller, Chief Financial Officer, at (303) 444-0900, extension 102, and please visit our web site at www.noof.com.

Consolidated Operating Results
(in '000's except per
share amounts)

(Unaudited) (Unaudited)
Quarter Ended Nine Months Ended
December 31, December 31,
2006 2005 2006 2005

Net Sales $16,569 $11,524 $49,063 $33,912

Cost of Sales (4,744) (3,324) (15,268) (10,440)

Gross Margin 11,825 8,200 33,795 23,472

Operating Expenses (6,741) (3,952) (17,581) (11,657)

Operating Income 5,084 4,248 16,214 11,815

Other Income 376 373 876 869

Income Before Provision for
Income Taxes 5,460 4,621 17,090 12,684

Provision For Income Taxes (2,076) (1,743) (6,503) (4,702)

Net Income $3,384 $2,878 $10,587 $7,982

Basic Income Per Share $0.14 $0.13 $0.44 $0.35

Diluted Income Per Share $0.14 $0.12 $0.44 $0.34

Dividends declared by
common share $0.60 $-- $0.60 $--

Average outstanding shares
of common stock 23,769 22,863 23,811 22,738

Common stock and common
stock equivalents 24,279 23,258 24,285 23,196

EBITDA and Adjusted EBITDA

(Unaudited) (Unaudited)
Quarter Ended Nine Months Ended
December 31, December 31,
2006 2005 2006 2005

Net Income $3,384 $2,878 $10,587 $7,982

Adjustments:
Depreciation/
Amortization(1) 519 352 1,470 998
Interest Expense 28 9 85 38
Interest Income (388) (369) (948) (893)
Income Taxes 2,076 1,743 6,503 4,702

EBITDA 5,619 4,613 17,697 12,827

Content Amortization 2,359 1,002 7,980 3,080
Cash Investments
in Content (1,502) (849) (5,467) (2,446)
Capital Expenditures (288) (375) (874) (598)
Stock Based Compensation 278 0 706 0

Adjusted EBITDA $6,466 $4,391 $20,042 $12,863

(1) Amortization excludes amortization of content

The Condensed Statement of Operations should be read in conjunction with
the Company's Form 10Q, 10-K and other filings with the Securities and
Exchange Commission.
To obtain a copy please contact New Frontier Media, Inc.

Consolidated Balance Sheets (Unaudited) (Audited)
(in 000s) (in 000s)
December 31, 2006 March 31, 2006
CURRENT ASSETS:
Cash and Cash Equivalents $21,445 $12,611
Restricted Cash 1,699 2,646
Marketable Securities 14,410 8,730
Accounts Receivable, net 14,324 12,395
Deferred Tax Asset 466 444
Other 1,447 871
TOTAL CURRENT ASSETS 53,791 37,697

EQUIPMENT AND FURNITURE, net 4,017 4,082

OTHER ASSETS:
Prepaid Distribution Rights,
net 9,067 8,877
Marketable Securities 1,013 1,936
Recoupable Costs and Producer
Advances 1,279 1,203
Film Costs, net 7,274 10,412
Goodwill 18,503 16,744
Other Identifiable Intangible
Assets, net 2,962 4,687
Other 929 1,127

TOTAL OTHER ASSETS 41,027 44,986

TOTAL ASSETS $98,835 $86,765

CURRENT LIABILITIES:
Accounts Payable $2,347 $2,151
Cash Dividend Payable 14,559 0
Taxes Payable 1,006 677
Producers Payable 1,152 546
Deferred Revenue 1,012 754
Due to Related Party 0 250
Accrued Compensation 2,463 1,857
Accrued Transport Fees 645 645
Accrued Liabilities and Other 3,761 1,605
TOTAL CURRENT LIABILITIES 26,945 8,485

LONG TERM LIABILITIES:
Deferred Tax Liability 509 1,268
Due to Related Party 723 1,000
Taxes Payable 1,509 1,359
Other 771 3,408
TOTAL LONG-TERM LIABILITIES 3,512 7,035
TOTAL LIABILITIES 30,457 15,520

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Common Stock 2 2
Additional Paid-in Capital 62,552 61,488
Retained Earnings 5,857 9,829
Accumulated Other
Comprehensive Loss (33) (74)
TOTAL SHAREHOLDERS' EQUITY 68,378 71,245

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $98,835 $86,765

Source: New Frontier Media, Inc.

CONTACT: Karyn L. Miller, Chief Financial Officer of New Frontier Media,
Inc., +1-303-444-0900, ext. 102, kmiller@noof.com

Web site: http://www.noof.com/

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