New Frontier Media (NOOF) reports solid quarter thanks to Comcast (CMCSA) and VOD; expects increased competition and continued shift to VOD

New Frontier Media (NOOF) reported results  on February 10, 2005 for
the fiscal third quarter 2005.  Below are some highlights.

Results F3Q05 vs. F3Q04

• EPS: $0.13 vs. $0.12 (+8%)
• Total revenues: $12.0M vs. $10.8M (+11%)
• Pay TV revenues: $11.3M vs. $10.0M (+12%)
• Internet revenues: $0.7M vs. $0.8M (-5%)
• Gross profit: $8.0M vs. $6.6M (+22%)
• Gross margin: 67% vs. 61% (+570 bps)
• Operating income: $4.4M vs. $3.0M (+48%)
• Operating margin: 37% vs. 28% (+900 bps)
• Net income: $2.9M vs. $2.7M (+7%)
• Cash: $17.4M vs. $15.4M (+13%)
• Debt: $0.3 vs. $0.9 (-63%)
• Free Cash Flow: $12.7M vs. $8.9M (+43%)

Revenue trends by platform

• VOD revenues (36% of total): +30%
• PPV revenues (32% of total): +17%
• C-Band revenues (8% of total): -36%

Major Customers F3Q05 vs. F3Q04 (% of total revenues):

• Echostar (DISH): 34% vs. 34%
• Time Warner (TWX): 17% vs. 17%
• Comcast (CMCSA): 12% vs. 3%

Quick comments:

• Kagan Research estimates that there will be 24M digital cables subs in the US by year-end 2005; of the current estimated 20M subs, 17.7M have access to adult VOD.
• NOOF expects increased competition as its largest competitor and other smaller competitors will be picked up by the largest cable MSO.
• Some cable MSOs are removing adult content from their PPV platform and only offering it as VOD.
• The C-Band analog market is in decline; NOOF's C-Band business should show declining revenues for the rest of 2005 and will be discontinued by F3Q06.