New Frontier Media Reports Fiscal 2009 Second Quarter Results

New Frontier Media Reports Fiscal 2009 Second Quarter Results

- Second quarter 2009 net sales grew 8% compared to prior year quarter -

- Transactional TV segment delivered 19% quarterly VOD growth -

- International expansion initiatives providing additional opportunities -

- Generated strong cash flows from operations of $6 million in first half of fiscal 2009 -

BOULDER, Colo., Nov. 5 /PRNewswire-FirstCall/ -- New Frontier Media, Inc. (NASDAQ:NOOF), a leading producer and distributor of branded television networks and on-demand programming, reported its results for the fiscal 2009 second quarter and six-month period ended September 30, 2008.

"Our strong balance sheet with cash and investments of $15 million and no debt continues to provide us with a solid foundation from which to execute growth initiatives for existing and new markets," said Michael Weiner, chief executive officer of New Frontier Media. "New agreements in the Transactional TV segment increased our video-on-demand (VOD) content distribution by over one million network homes. We also added almost two million pay-per-view (PPV) network homes as we deepened an existing relationship with one of the largest multiple system operators (MSOs) in the country. Internationally, we are building our Transactional TV presence in regions such as Latin America, Canada and Europe, as demonstrated by our execution of recent agreements that bring our international distribution to 8 million network homes."

Mr. Weiner continued, "For the past few years we have been leveraging our expertise in our core business by broadening our content offerings. In the Film Production segment, we have begun production on the third season of a thirteen-episode series with a premium cable channel. We are also negotiating a new producer-for-hire agreement and are optimistic we will begin production for that film in the fourth fiscal quarter. These deals along with our recent entry into the mainstream DVD retail business should help drive long-term revenue growth for the Film Production segment. With respect to our IPTV project, we expect to launch key marketing initiatives in the third quarter of fiscal 2009 that will play an important role in calculating additional investment in this space. Looking ahead, we believe we have the resources in place to continue to be a leader in providing branded content to cable and satellite platforms and to expand our reach into promising new markets."

Second Fiscal Quarter Financial Highlights: September 30, 2008 Compared to September 30, 2007

-- Net sales grew to $13.4 million as compared to $12.4 million.
-- Transactional TV segment revenue grew to $10.8 million, increasing
by approximately $0.8 million primarily from improved VOD
performance on several of the top 10 largest cable MSOs in the U.S.
The increase in revenue was partially offset by a $0.3 million
decline from the termination of the C-Band services in the third
quarter of fiscal year 2008.
-- Film Production segment revenue grew to $2.2 million compared to
$2.0 million, reflecting an increase in owned content revenue of
approximately $0.3 million primarily from the delivery of seven
titles from a thirteen episode series to a premium cable channel
customer. This increase was partially offset by a decline of
$0.2 million in repped content revenue related to a softer global
independent film market.
-- Direct-to-Consumer segment revenue was $0.4 million for both
periods.
-- Cost of sales increased to $4.4 million from $3.5 million, primarily
due to additional expenses associated with the set-top box initiative
and an increase in the film cost amortization within the Film
Production segment. The Transactional TV segment gross margin
percentage of 73% was consistent with the same prior year period.
-- Operating expenses increased to $6.8 million as compared to
$5.7 million due to higher advertising and promotion costs within the
Transactional TV segment, higher consultant advisory fees within the
Corporate Administration segment, and from the set-top box initiative.
-- Net income was $1.3 million, or $0.06 per diluted share, as compared to
$2.1 million, or $0.09 per diluted share.
-- Cash flow from operations grew to $1.5 million as compared to cash used
in operations of $0.2 million. The prior year quarter results included
$2.1 million of cash distributions related to a producer-for-hire
production.

For the six months ended September 30, 2008, net sales grew to $26.4 million from $25.4 million in the same period last year. Net income was $2.5 million or $0.11 per diluted share, compared to $3.6 million or $0.15 per diluted share in the same prior year period. Cash flow from operations increased to $6.0 million from $0.9 million primarily due to a) the producer-for-hire cash disbursements, b) increased cash collections within the Transactional TV and Film Production segments, c) a decline in fiscal year 2008 bonuses paid during the first quarter of fiscal year 2009, and d) a decline in the use of cash for the 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 and six month periods ended September 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) 240-5318. To participate in the web cast please log onto http://www.noof.com/ and click on "Investor Relations" and then "Calendar of Events". A replay of the conference call will be available for seven days beginning after 1 p.m. Eastern Time on November 5, 2008 at (800) 405-2236, access code 11121990#. 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://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. These forward-looking statements are 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 179 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) (Unaudited)
Quarter Ended Six Months Ended
September 30, September 30,
2008 2007 2008 2007

Net sales $13,375 $12,430 $26,436 $25,370

Cost of sales 4,429 3,459 8,358 7,256

Gross margin 8,946 8,971 18,078 18,114

Operating expenses 6,800 5,719 13,946 12,723

Operating income 2,146 3,252 4,132 5,391

Other income 9 149 31 385

Income before provision for income
taxes 2,155 3,401 4,163 5,776

Provision for income taxes (860) (1,256) (1,689) (2,134)

Net income $1,295 $2,145 $2,474 $3,642

Basic income per share $0.06 $0.09 $0.11 $0.15

Diluted income per share $0.06 $0.09 $0.11 $0.15

Dividends declared per common share $- $0.13 $- $0.25

Average outstanding shares of common
stock 23,202 24,120 23,445 24,232

Common stock and common stock
equivalents 23,216 24,225 23,474 24,424

EBITDA and Adjusted EBITDA

(Unaudited) (Unaudited)
Quarter Ended Six Months Ended
September 30, September 30,
2008 2007 2008 2007

Net Income $1,295 $2,145 $2,474 $3,642

Adjustments:
Other income (9) (149) (31) (385)
Provision for income taxes 860 1,256 1,689 2,134
Depreciation and amortization 2,396 1,715 4,575 3,611
EBITDA 4,542 4,967 8,707 9,002
Cash paid for content(1) (2,282) (2,196) (3,671) (4,540)
Adjusted EBITDA $2,260 $2,771 $5,036 $4,462

(1) Amount includes total cash paid for prepaid distribution rights and
capitalized film costs.

Consolidated Balance Sheets
(in thousands)
September 30, March 31,
2008 2008
Assets (Unaudited)
Current assets:
Cash and cash equivalents $13,544 $18,325
Restricted cash 109 38
Marketable securities 1,474 930
Accounts receivable, net 11,193 13,873
Deferred tax asset 601 620
Prepaid and other assets 1,384 1,899
Total current assets 28,305 35,685
Equipment and furniture, net 6,096 4,861
Prepaid distribution rights, net 11,101 10,381
Recoupable costs and producer advances 3,883 2,448
Film costs, net 7,383 7,626
Goodwill 18,608 18,608
Other identifiable intangible assets, net 2,983 3,033
Other assets 1,040 1,019
Total assets $79,399 $83,661

Liabilities and shareholders' equity
Current liabilities:
Accounts payable $2,358 $2,937
Dividend payable - 2,982
Taxes payable 1,944 760
Producers payable 957 1,012
Deferred revenue 1,257 984
Accrued compensation 1,448 1,817
Deferred producer liabilities 2,009 2,862
Accrued liabilities and other 3,068 2,257
Total current liabilities 13,041 15,611
Deferred tax liability 677 795
Taxes payable 216 216
Other long-term liabilities 771 1,002
Total liabilities 14,705 17,624

Commitments and contingencies

Shareholders' equity:
Common stock 2 2
Additional paid-in capital 58,088 61,854
Retained earnings 6,665 4,191
Accumulated other comprehensive loss (61) (10)
Total shareholders' equity 64,694 66,037
Total liabilities and shareholders' equity $79,399 $83,661

Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
Six Months Ended
September 30,
2008 2007
Cash flows from operating activities:
Net income $2,474 $3,642
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 4,575 3,611
Tax benefit from option/warrant exercises - 167
Share-based compensation 537 563
Deferred tax asset and liability, net (99) (508)
Charge for asset disposition and impairment 65 363
Changes in operating assets and liabilities
Accounts receivable 2,680 987
Accounts payable (263) 195
Prepaid distribution rights (2,504) (2,388)
Capitalized film costs (1,167) (2,152)
Deferred costs - (2,106)
Deferred revenue 273 242
Producers payable (55) (411)
Taxes receivable and payable 1,184 275
Accrued compensation (369) (1,547)
Other assets and liabilities (1,347) (45)

Net cash provided by
operating activities 5,984 888

Cash flows from investing activities:
Purchase of investments available-for-sale (1,730) (2,671)
Redemption of investments available-for-sale 1,184 7,532
Purchase of equipment and furniture (2,222) (1,160)
Purchase of intangible assets (688) -
Payment of related party note arising
from business acquisition (21) (555)

Net cash (used in) provided
by investing activities (3,477) 3,146

Cash flows from financing activities:
Proceeds from exercise of stock
options/warrants - 512
Purchase of common stock (4,303) (3,618)
Payment of dividend (2,982) (6,042)
Excess tax benefit from
option/warrant exercise - (26)

Net cash used in
financing activities (7,285) (9,174)

Net decrease in cash and cash equivalents (4,778) (5,140)
Effect of exchange rate changes on
cash and cash equivalents (3) -
Cash and cash equivalents,
beginning of period 18,325 17,345

Cash and cash equivalents, end of period $13,544 $12,205

Segment Summary Data (1)
(In millions)
(Unaudited) (Unaudited)
Quarter Ended Six Months Ended
September 30, September 30,
2008 2007 %change 2008 2007 %change
Net sales
Transactional TV $10.8 $10.0 8% $21.3 $20.4 4%
Film Production 2.2 2.0 10% 4.2 4.1 2%
Direct-to-Consumer 0.4 0.4 0% 0.9 0.9 0%
Total net sales 13.4 12.4 8% 26.4 25.4 4%

Cost of sales
Transactional TV(2) 2.9 2.7 7% 5.5 5.5 0%
Film Production 1.0 0.5 # 1.9 1.3 46%
Direct-to-Consumer(2) 0.5 0.2 # 0.9 0.4 #
Total cost of sales 4.4 3.5 26% 8.4 7.3 15%

Operating expenses
Transactional TV 2.4 2.1 14% 4.8 4.6 4%
Film Production 1.1 1.0 10% 2.4 2.5 -4%
Direct-to-Consumer 0.5 0.2 # 1.1 0.4 #
Corporate Administration 2.7 2.4 13% 5.6 5.2 8%
Total operating expenses 6.8 5.7 19% 13.9 12.7 9%

Operating income (loss)
Transactional TV 5.5 5.1 8% 11.0 10.2 8%
Film Production - 0.4 # - 0.3 #
Direct-to-Consumer (0.7) 0.1 # (1.2) 0.1 #
Corporate Administration (2.7) (2.4) -13% (5.6) (5.2) -8%
Total operating income $2.1 $3.3 -36% $4.1 $5.4 -24%

(1) Amounts in this schedule may not sum due to rounding.

(2) The Company has reclassified certain prior year prepaid distribution
rights amortization from the Transactional TV segment to the
Direct-to-Consumer segment to conform with the current period
presentation.

# Represents an increase or decrease in excess of 100%.

Supplemental Revenue Data (1)
(In millions)
(Unaudited) (Unaudited)
Quarter Ended Six Months Ended
September 30, September 30,
2008 2007 %change 2008 2007 %change

Transactional TV(2)
VOD $5.6 $4.7 19% $10.8 $9.3 16%
PPV 5.0 4.9 2% 10.0 10.2 -2%
C-Band and other 0.2 0.4 -50% 0.4 0.9 -56%
Total $10.8 $10.0 8% $21.3 $20.4 4%

Film Production(3)
Owned content $1.7 $1.4 21% $3.4 $2.8 21%
Repped content 0.3 0.5 -40% 0.7 1.0 -30%
Other 0.1 0.1 0% 0.2 0.3 -33%
Total $2.2 $2.0 10% $4.2 $4.1 2%

Direct-to-Consumer
Net membership $0.3 $0.3 0% $0.7 $0.7 0%
Other 0.1 0.1 0% 0.1 0.2 -50%
Total $0.4 $0.4 0% $0.9 $0.9 0%

(1) Amounts in this schedule may not sum due to rounding.

(2) Prior year net revenue from advertising has been reclassified from
PPV to C-Band and other revenue to conform with the current period
presentation.

(3) Other revenue was previously classified within owned content revenue
and has been reclassified to conform with the current period
presentation.

Source: New Frontier Media, Inc.

CONTACT: Grant Williams, Chief Financial Officer of New Frontier Media,
Inc., +1-303-444-0900, ext. 2185, gwilliams@noof.com; or Investors, Becky
Herrick of Lippert|Heilshorn & Associates, +1-415-433-3777, bherrick@lhai.com,
for New Frontier Media, Inc.

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

-------
Profile: intent