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Executives

Brett Maas – IR, Hayden IR

Randy Selman – Chairman, President and CEO

Robert Tomlinson – SVP and CFO

Analysts

Jeff Miller [ph]

Leo Novat [ph]

Alan Messner [ph] – Alcore Associates [ph]

Howard Geiger [ph]

Fred Milligan – Sanders Morris Harris

Onstream Media Corporation (OTCQB:ONSM) F3Q2010 Earnings Call Transcript August 17, 2010 4:30 PM ET

Operator

Good afternoon, and welcome to the Onstream Media Corporation conference call to discuss the company's fiscal 2010 third quarter financial results. All participants have been placed on a listen-only mode and the floor will be opened for questions and comments following the presentation.

At this time, I would like to turn the floor over to our host, Brett Maas of Hayden IR. Sir, you may begin.

Brett Maas

Thank you. Hello, good afternoon. Slide two, forward-looking statements. I'd like to point out that during the course of the conference call, there may be statements made relating to future results of the company that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Actual results, performance or achievements could differ materially from those anticipated in such forward-looking statements as a result of certain factors including those set forth in the company's filings with the Securities and Exchange Commission.

It also should be noted that the webcast of today's conference call may be found on the Internet by visiting Onstream Media’s corporate website at www.onstreammedia.com and then by selecting company at the top of the web page and then clicking on the Press Releases. At that web page, you will find a link to the news release we issued to announce the company's fiscal 2010 third quarter financial results and webcast.

An archived version of the webcast will be available shortly and accessible from the Press Release’s page and be available for the next 12 months pursuant to SEC guidelines.

Finally, those interested in reviewing our recently filed 10-Q, which contains all of the financial information being discussed today, can find this document also via our corporate website by selecting Company and under that heading Investor Relations and then clicking on SEC Filings, where all of our recent SEC filings can be found as well as the Edgar database directly at www.sec.gov and then search for company filings.

At this time, I would like to introduce Randy Selman, President and Chief Executive Officer of Onstream. Randy, floor is yours.

Randy Selman

Good afternoon and thank you for joining us. Today we will review our results for the third fiscal quarter 2010 which ended June 30, 2010 as well as our year-to-date results. We'll also update on our overall strategic progress including some details about our products including MarketPlace365. With me today is our Chief Financial Officer, Robert Tomlinson.

Hopefully you’ve all had the opportunity to review our financial results which were released yesterday afternoon, August, 16 after the close of the market.

This was a strong quarter for Onstream as we generated 188,000 in cash before changes in working capital, our best operating performance to-date, due to a sequential increase in our revenue and our aggressive cost reduction initiatives.

Revenues for our third fiscal quarter 2010, the period ended June 30, 2010 were approximately 4.4 million, up 7.2% sequentially from our second fiscal quarter of 2010 and even with revenues of 4.4 million in the third fiscal quarter of 2009.

Audio and web conferencing services group revenues were approximately 2.3 million for the three months ended, June 30, 2010, a decrease of approximately 19,000, 0.8% from the corresponding period of the prior fiscal year. But the sequential quarter-over-quarter revenues were up 211,000 or 9.9% over the previous second quarter of 2010. From this increase it appears the revenue reduction we’ve experienced over the past year in this segment is beginning to abate.

Digital media services group revenues were approximately 2.1 million for the three months ended, June 30, 2010 as well as for the three months ended, June 30, 2009. However, as we have seen over the last several quarters and again this quarter DMSP and hosting revenues showed growth by 15.5% as compared to the same quarter last year and 20.4% compared to year-to-date results in the prior year’s same period. For the quarter, webcasting revenues were flat with last year’s same quarter.

In August of 2010 we announced the debut of MarketPlace365 with SUBWAY. Over 100 of the top food, beverage and consumer packaged goods and service providers are participating in the restaurant chain's new online, perpetual business-to-business marketplace. The launch of the marketplace coincided with SUBWAY's annual convention held July 23 to 25 2010.

The virtual tradeshow was well received by the SUBWAY franchises and will serve as a great case study for other promoters and corporations considering deploying our innovative solution. In addition to the initial MarketPlace365 launch with SUBWAY more marketplaces are expected to launch in the coming months with MarketPlace365 revenues increasing to more meaningful levels during fiscal 2011.

Currently we have 15 signed MarketPlace365 promoter agreements, a dozen channel partners and a pipeline of tradeshow organizers, publishers and associations continues to go. I will talk more about our products, particularly our MarketPlace365 platform and growth opportunities later before opening the call for questions, but for now I will turn the call over to Robert who will provide financial details of the quarter and year-to-date. Robert?

Robert Tomlinson

Thank you, Randy, and good afternoon. As Randy mentioned, consolidated revenues were approximately $4.4 million for the three months ended June 30, 2010, approximately equal to the revenues for the corresponding prior year quarter. However, please note that the quarter consolidated revenues represent a 7.2 sequential increase from the consolidated revenues for the immediately preceding second quarter of this same fiscal year.

In addition the revenues of the digital media services group and the revenues of the audio and web conferencing group for the current third quarter were approximately equal to the revenues from the corresponding prior year quarter.

Consolidated revenues were approximately $12.6 million for the nine months ended June 30, 2010, a decrease to approximately $565,000 or 4.3%, from the corresponding period in the prior fiscal year primarily due to decreased revenues of the audio and web conferencing services group.

However as Randy mentioned based on the current quarter increase in this group it appears the revenue reduction we experienced in this segment over the past year is beginning to abate.

Although the digital media services group revenues were flat year-over-year that group’s revenues for the nine months ended June 30, 2010 included DMSP and hosting division revenues representing an approximately $256,000 or 24.4% increase over the corresponding period of the prior fiscal year.

This slide shows a summary of our fiscal third quarter 2010 financial results compared to the same period of the prior fiscal year. There was very little difference between revenues, gross margin and net loss current year quarter as compared with prior year quarter. However, the cash flow from operating activities will significantly improve for the current year quarter as compared to the prior year quarter.

The consolidated net loss for the three months ended June 30, 2010 of $1.1 million included non-cash expenses which I will present in more detail shortly of approximately $1.3 million. Accordingly we generated approximately $188,000 positive cash flow from operating activities before changes in current assets and liabilities for the third quarter of fiscal 2010, which cash flow was more than double the $91,000 from operating activities for the same period last year.

This slide shows a summary of our financial results for the nine months ended June 30, 2010 compared with same period of the prior fiscal year. Although gross margin was lower for the current year period, which was generally consistent with reduced revenues, reduced operating expenses in the current year period resulted in a net loss significantly lower than the net loss for the prior fiscal year period.

The $3.5 million decrease in the net loss was primarily the result of a charge for impairment of goodwill and other intangible assets in the current fiscal year, $18.4 [ph] million lower than the charge for such item in the comparable period of the prior fiscal year.

We also recorded an approximately $540,000 charge for the write-off of deferred acquisition cost for the nine months ended June 30, 2009 versus no such expense in the comparable period of the current fiscal year.

Certain other operating expenses, primarily compensation and depreciation and amortization also decreased in the current fiscal year period as compared to the corresponding period in prior fiscal years.

Our consolidated net loss for the nine months ended June 30, 2010 of approximately $6.7 million included approximately $6.4 million of non-cash expenses. As a result the cash used in operations for the nine months ended June 30, 2010 was only $256,000 before changes in current assets and liabilities. This was slightly less than the amount of cash used in operations for the previous year period.

This slide provides more detail of our operating cash flow for the first nine months of fiscal 2010 as compared to the same information for the corresponding period of fiscal 2009. As you can see the $6.7 million net loss reported by us for the nine months ended June 30, 2010 includes a number of non-cash expenses, including a charge for impairment of goodwill we already discussed.

Other non-cash expenses included in the net loss were depreciation and amortization, employee compensation expense arriving from the issuance of stock and options, amortization of deferred professional fee expenses paid for by issuing stock and options and interest expense including amortization of debt discount paid in common shares and options.

The $10.1 million net loss reported by us for the nine months ended June 30, 2009 included the same type of non-cash expenses as well as a charge for the write-off of deferred acquisition cost.

After deducting all non-cash expenses from the net losses of each respective period, the $256,000 cash used in operations before changes in current assets and liabilities for the nine months ended June 30, 2010, was slightly less than the $275,000 cash used in operations for the corresponding 2009 period.

This slide provides more detail of our operating cash flow for the third quarter of fiscal 2010 as compared to the same information for the third quarter of fiscal 2009. We have already discussed the types of non-cash expenses included in the net losses reported for both periods. After deducting all non-cash expenses from the net losses of each respective periods, the $188,000 cash generated by operations before changes in current assets and liabilities for the three months ended June 30, 2010, it was more than double the $91,000 from operating activities for the corresponding prior year quarter. I would now like to turn it back over to Randy.

Randy Selman

Thank you, Robert, for the overview of our third fiscal quarter 2010 operating results and financial position. Now that it appears that our legacy business, Webcasting and Conferencing, are back on track showing both growth and contribution, we are confident that we now have a strong base to build from.

We believe that continued growth of these divisions, as well as the additional sales opportunities from our new MarketPlace365 and iEncode products, as major drivers of our revenue going forward, will result in record revenues for Onstream in 2011.

During our sales activities with MarketPlace365, we discovered that many of our new clients require webinar and conferencing services as part of their virtual conference requirement, as well as for other business purposes. We anticipate sales of these products to improve as we sign more and more promoters for the MarketPlace365 service.

In addition, iEncode, our webcasting appliance used for on-site webcasting, appears to be a great fit for providing economical webcasting services right from the convention floor or auditorium of the physical event, enabling virtual event participants to watch the activities live as they occur. As we found out in our jointly conducted survey with the Trade Show News Network, the hybrid show, both physical and virtual, is expected to be rapidly adopted by the tradeshow industry, and we expect will be the catalyst to drive the sale of iEncode, as well as our other services.

In early August, we co-hosted a lead generation webinar with approximately 400 registrants that revealed the findings of an industry-focused joint online survey designed to identify what is driving the rapid adoption and expansion of virtual trade shows, events and online marketplaces. Other presenters of the webinar included industry leaders, RD Whitney, CEO of Tarsus Online Media, a division of Tarsus Group PLC, and Stephen Noll, President of TSNN.com, MTO Summit and MeetingTech Online.com. These visionaries and their respective organizations became early advocates of our MarketPlace365 platform as they quickly recognized the power and potential that it had to offer the tradeshow industry.

The survey responses from over 800 professionals in the tradeshow industry reflected that virtual events have come of age and are proliferating, growing and gaining momentum. This is causing a major paradigm shift in the events industry. Virtual events are projected to become an $18 billion industry in the next five years. Part of the interest in an explosion of virtual trade shows is that companies are beginning to focus on virtual trade shows to be green, or environmentally conscious, as a way of reducing their carbon footprint.

In addition, 75% of responders see virtual trade shows as an add-on or an extension to an existing show or physical event. They all insist that content is still king, followed by ease-of-use and core savings. Early adopters of virtual events are already beginning to reap the benefits.

The tradeshow industry is being transformed and reshaped before our very eyes as more and more tradeshow organizers realize how virtual tradeshow technology is being utilized to embrace and extend their existing events, and creating a better environment for exhibitors to be part of a dynamic online community of like-minded individuals who openly share ideas, best practices and content conduct business. There is a sea change taking place within the tradeshow industry and Onstream Media is at the forefront. We are seeing significant interest and demand for our MarketPlace365 technology as a result.

We are well-positioned to be one of the leading providers of virtual tradeshow and n online marketplace technology due to our self-provision, no upfront cost model, and integrated search engine optimization, social networking and other lead generation features.

Our first milestone for MarketPlace365 was accomplished when we launched the Subway tradeshow with more than 100 of its vendors. With favorable results coming from the attendees, vendors and subway staff, we are encouraged that our platform has demonstrated that it is operationally sound and provides a service base that provides value to all the participants.

Additional Marketplaces are expected to launch in the coming months, drawing from our 15 existing promoter agreements, with MarketPlace365 revenues increasing to more meaningful levels during fiscal 2011. Due to the revenue potential from a single Marketplace, we expect this new business segment could have a significant impact on our future revenues.

Besides our new product introductions, we continue to see growth in our DMSP and Hosting Division. As I mentioned earlier, we were pleased to see a 15.5% increase in DMSP and Hosting revenues this quarter as compared to the same quarter last year, and a 20.4% increase year-to-date from the same period last year. We are approaching our milestone of 400 DMSP and hosting clients to date, up from the 369 at the end of the third fiscal quarter 2010.

Finally, we anticipate growth in revenue attributed to our iEncode product for both existing clients, such as VT and other resellers, as well as the previously discussed requirements of promoters using our MarketPlace365 service.

Based on the commercial successes we've already achieved for our MarketPlace365 platform and the pipeline of opportunities we have in place, as well as the expected increase in sales of our current products, and the potential new applications of our iEncode appliance, we anticipate meaningful revenue growth through 2011.

With the help of our operator, we will now open it up for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions)

Randy Selman

I do have a question from the QA on the system e-mail. It says, can you in any way give us a better understanding of Marketplace potential revenue or profitability in 2011? Would it be a Hail Mary path to model in a few million dollars in additional revenue? From Jeff Miller.

Jeffrey, thank you for the question. Obviously, at this point in time it's hard to really give a revenue projection for Marketplace. As we said in the previous conference calls, our MarketPlace could average anywhere from a low-end of about $150,000 on up to hundreds, if not even reaching a $1 million, depending on how big the marketplace is and how many exhibitors there are. So the revenue potential per Marketplace is very substantial.

With 15 MarketPlaces now under our belts, and in the process of being built, obviously there are issues about when they are going to launch and how many booths they are going to launch, and what costs they are going to pay per booth. So there are a lot of things up in the air. So it would be a little premature at this point to actually give projections just on those 15.

I can tell you that those first 15 did not – didn't come easy, but I can tell you this, that the pipeline is very substantial. And I expect that we are going to start to see very regular promoter announcements in the coming months. And we have a goal of a substantial amount of contracts by the end of the year, so that going into 2011, calendar year, we are going to be loading up MarketPlaces in very different segments.

One of the key things that I did want to mention was in the press release about the four promoter agreements, is to just show that the diversity of the different types of promoters that can use this product. We have from all different walks of life, investment relations firms and veterinarian firms, and so the fact is that virtually anyone can build a Marketplace and make money using it. We are very excited about that possibility.

I do want to apologize for the few minutes that it took to get the conference off the ground today. There was some technical difficulties with one of our providers. But they were able to fix the problem and I think they got it up within about six or seven minutes of the start time.

So we do appreciate Internet Conferencing for giving whatever it was, one of their vendors, I guess, pushing them along to get whatever it was that was broke fixed quickly, and got us up and running. So I invite you for more questions.

Operator

Okay. And we have a question from Leo Novat [ph]. Leo you can go ahead and state your question.

Leo Novat

You just about answered my question. You didn't take five or six minutes. I don't know what I missed when you first came on. But I didn't get on to you until 4.55. What was on before? What did you speak about? What did I miss?

Randy Selman

Well, anything that you missed you will be able to get in the recap that will be up shortly after the conference. And you'd be more than happy to be able to listen to it just by clicking that same link.

Operator

Okay we have a question from Alan Messner from Alcore Associates [ph]. So, Alan you can go ahead and state your question.

Alan Messner – Alcore Associates

Of the 15 promoters – 15 –, 365 promoters who have signed an agreement to date, what is the breakdown of direct sales through onscreen versus sales through resellers or agents? And as a follow-up to that, how does the potential profit margin break down between direct sales, if you will, and sales through the agents?

Randy Selman

Yeah, we – almost all of the Marketplaces are through agents. There is only a few of them – I can only think of maybe two of the 15 that actually are direct sales. The others are coming through our channel partners, companies like TSNN, TSCA, The Convention 365 Group as well.

So for the most part, that is the channel we are using and therefore we don't have to have big expenditures on our sales and marketing efforts that our sales agents are doing that for us. The margins that are built in were designed into the product from the beginning. We have a special pricing discount structure as more and more business is provided by that agent. They can reach up to a 30% discount.

Alan Messner – Alcore Associates

I see. And also, how much longer do you anticipate discounting the product?

Randy Selman

As far as discounting, we are not actually discounting the product. The end-users are all paying the correct list price that has been identified for promoters. To the extent that we only have one or two shows that we haven't done that with, primarily for the purposes of getting product off the ground and tested, but other than that, virtually all of our products are going at the full list price.

Alan Messner – Alcore Associates

All right. Thanks.

Operator

(Operator Instructions) Okay, sir, there appear to be no further questions at this time.

Randy Selman

I've got a couple more online here, so let me try to answer them. Let's see, we've got a message – let's see – Howard Geiger asks what type of margins do we expect on Marketplace with Subway?

The margins on Marketplace from Subway at this point in time, they are under a special arrangement with Onstream. They will be paying a certain amount, but then at a certain point in time, they will move onto standard cost basis. So although we will be looking at Subway as kind of our beta test and first one out the door, which we are very happy that Subway chose us and decided to do this with us, primarily we are expecting to see beneficial revenues from somewhere down the road.

Operator

And I see another question over the phone line again from Alan Messner. So, Alan you can go ahead and state your question.

Alan Messner – Alcore Associates

Sure. Randy, at the last conference call you mentioned that there were a couple of brokerage firms that were looking to work with Onstream, and also hoping to get their research departments behind the company. How has that progressed?

Randy Selman

Well, they are still interested, but the stock price has been up and down, up and down, and it's difficult to get someone to commit when it has been that much changing over the last couple of three, four months. So I think that overall there's a lot of interest to work with us. They are very excited about our product line. They believe that Onstream is headed in a very good direction.

But at this point in time to get research, you need to have stability, and so far that stock price hasn’t been stable although we have finally seen an upward trend. But unfortunately, even when we see a pop, we do see a pullback, and it has just been one of those struggles.

You know I keep talking with new investment bankers to get research to hopefully get interest in the stock, but unfortunately, until it gets stable and there is definitive ways for analysts to work with us and be comfortable about their projections, it's going to take a while before that happens.

I am hoping that as we build Marketplace revenues and legacy revenues and Onstream really starts to show revenue growth that the market will react to it and thereby that will be an interest from the financial community.

Alan Messner – Alcore Associates

Thanks. Well, tell me this, there was on the last conference call an asset manager based in London from, I believe, it was EFG Bank. Has there been any contact with him, or has your Investor Relations company at least sent him some sort of investor package to see if you can gain his interests, or anybody else that he may be in touch with that looking to invest in basically a cheap micro, microcap stock?

Randy Selman

Oh, yes. No, everybody that goes onto the conference call or sends in information is followed up by the Investor Relations firms. I'm sure that he was contacted. In fact, I'm pretty sure he was, and I think we had a subsequent conversation. I do speak to probably 30 or 40 of these kinds of people every week, so it's hard to keep track of every one of them. I do remember the one you were talking about, the one that was based in London. But I'm pretty sure somebody contacted him.

Alan Messner – Alcore Associates

All right. So the next conference call isn't since its year-end for Onstream soon for about four months plus, can you shed any additional light on the prospects for 2011 as far as even from the existing MarketPlace365 promoters what the minimum potential ballpark type figure is for incremental revenues? I mean, particularly given the liquidity issues of Onstream and the comment that you need probably $3 million in additional cash over and above what would be generated from, I think, it was a 7% to 8% increase in revenues?

Randy Selman

Yes, I think that to give speculation it is really all across the board here. I mean, we have 15 Marketplaces. We believe all of them are viable. We believe that all of those can generate the revenue levels I was talking about earlier. So calculate it up, and bring your own numbers on the low end and high end, you can see that there is a big potential here. I don't believe 15 will be all that will be done. I think that by the end of the year, we will have substantially more than that 15. There are many in the works. There is a large pipeline of interested companies. Our partners, companies like TSNN and TSCA and Conventions.net and others have a lot of friends in the tradeshow industry.

All are being presented with the product. We really believe we'll have a very substantial number of Marketplaces in the pipeline and contracted by the end of the year and then many of them to hit during 2011.

I can't really give you projections at this point in time. The numbers would be very, very wide apart as far as low to high. But I can say that we think we are onto something very big. The whole webinar survey that I gave earlier, the summary of that survey, there's a lot of other information in the survey beside what I presented, but we've got a big industry. It is happening. There are not a lot of players. There are no public companies in the industry. We are the first right now in that industry, and only right now.

So it really affords us a very, very interesting position. I don't think it's going to take a long time before the revenue numbers hit. And I thank our shareholders are going to be pleased with the performance that we will be seeing, and as a result, hopefully it reflects in the company's valuation.

Alan Messner – Alcore Associates

Right. Just as a follow-up, about a week and a half ago on, I think, Friday, that was a historically large volume for Onstream, maybe the highest ever. Obviously, it's from folks that in your travels you spoke to. I mean, other than in my business, if I stick to a potential investor in Onstream and they take a look at either the charts, God forbid, or they take a look at the financials, it really doesn't tell the story. But how do you tell a potential investor – quite obviously you have – what is the game changer this time around? I mean, we know it’s MarketPlace365, but how do you present that?

Randy Selman

Well, actually –

Alan Messner – Alcore Associates

Onstream has attempted to reinvest itself, I don't know how many times, so it's tough telling somebody that?

Randy Selman

Yeah, Alan what's different today, okay? Is that MarketPlace365 is not a brand-new product that we came up with out of the blue, and we developed it out of – from scratch. What's great about MarketPlace365 is that MarketPlace365 is webcasting, it is conferencing, it is digital media services platform, it is auction video.

All of the components, everything that we basically built over all these years, all basically built into this one new application. So it's not like everything that we've done in the past we are going to start over and try this for now. Everything led up to this. And it turns out – and I can't take credit that it was pre-thought out, also all those years, because nobody thought about this three or four years ago. But the truth of the matter is, we just all of a sudden became tremendously well-positioned for this product.

And now that we are bringing it out, when we go to these prospective clients, we can show them all the functionality of Marketplace. So to answer your question, when I go to these investor meetings, I show them the product. When their jaws drop and they say, wow, that's pretty impressive. Why is it so – tell us a little bit about the model behind it and I explain the model. Why isn't everybody doing this? And it has been a matter of development. We just passed a major milestone. We've got a working MarketPlace365 out in the world with real people and real vendors and real activities going on it, and that's a tremendous milestone.

It took us a while to build it, but it's built and it's working. It will continue to be built. There's a lot more stuff we are going to put it in over time. But we have something that's working and now saleable, and that is what we plan to do now is to sell this product. And as you can see, as I mentioned in the call as well, that there is a lot of components that are being sold in addition to the Marketplace.

For instance, we find a promoter just the other day that is evaluating an iEncode. Wants to use our webinar service and will probably use some of our white glove webcasting services. Another one a couple of days ago that signed up is also using our Audio and Web Conferencing services already.

So it's really interesting, but we are getting into the meat of this industry, and we are finding that our product line really – really matches up well. Now, you mix that with industry leaders like our friends from TSNN and TSCA and others, and we are just getting a lot of people coming and seeing the product, and we think that that is going to continue to happen.

So the investors just have to see – when I present the product and tell them the model, and I tell them who is signing up, and I tell them who our partners are, they seem to be very excited about the product. To get someone to buy stock though, it's another thing. Obviously those are trends, those are looking at financial statements, looking at track records and making decisions.

And I think there will be a time – like you said, we had a big peak day when we announced the Subway Marketplace announcement. And to me, that announcement was more, hey, it's finished, than it was anything else. That is the key. When we start announcing more Marketplaces, believe me, there will be bigger ones than Subway and bigger in terms of exhibitors and booths and revenue streams and everything else, far bigger. And the point of the matter is, we just now at the beginning.

Alan Messner – Alcore Associates

Right. Now, you had mentioned in the past that if you announced any of these promoters that basically it would be only those that had a minimum of 100 seats plus. Is that going to continue?

Randy Selman

Yes. We think that that is the required minimum to launch a show. I'm not saying that there won't be entrepreneurs that want to try smaller ones than that, and it will be tested for that kind of stuff in the future, but we are looking at – I mean, the majority of Marketplaces we are looking at have the potential of more than 400, even as much as 1,000 booths, most of them.

Alan Messner – Alcore Associates

Great. Just one another follow up to the liquidity issue –

Randy Selman

I am going to have to charge you if you want any more questions. Go ahead.

Alan Messner – Alcore Associates

One last one. I understand what you have to legally put in a 10-K or 10-Q as far as liquidity, but in order to allay some investors' fears, it certainly sounds like, given the potential incremental revenue from the MarketPlace365 in 2011, that there isn't nearly – the liquidity issue may have to be stated in the K and the Q.

Randy Selman

That is correct. And we always overstate that for conservative reasons. But the truth of the matter is, we do need to raise some capital at some point in the future. And as you know, I have been diligently trying to do that at much, much higher levels.

And based on the way we expect contributions to start in Marketplace, we can hold off if we have to for a bit longer. And I am looking at hopefully seeing higher levels of the share price. And then we will see what we need to do about liquidity issues. But, look, the Company survived a lot of years, and we are not about to have any problems now.

Alan Messner – Alcore Associates

Right. Or give away the company.

Randy Selman

Right. Or give away the company, right.

Operator

Okay sir, we have another question from Fred Milligan from Sanders Morris Harris. Fred, you can go ahead and state your question.

Fred Milligan – Sanders Morris Harris

Thank you. Good afternoon.

Randy Selman

Hi Fred, how are you?

Fred Milligan – Sanders Morris Harris

Good. How are you? The 365, when will one be open to the public so that we can go in and scrounge around – look around ourselves?

Randy Selman

There are a few in the works that will be publicly open so that people can go in and check them out. I am in the works right now of putting up a demo – a video demo that will give you a walk-through of the entire Marketplace so that people can see all the aspects of it. That should be up hopefully within the month. We are trying to get it professionally done and so that everybody can see all the aspects of it clearly.

But I would think probably late summer, early fall, there should be some Marketplaces that should be opening their doors to the general public to walk-through.

Fred Milligan – Sanders Morris Harris

Suddenly I'm a little troubled by all of these people, Coca-Cola, Frito Lay, ADP, whatever, Otis Spunkmeyer. What is the advantage to them of having booths in this kind of a setup?

Randy Selman

Well, I think there's two advantages, one to than the one for us, and I will tell you what they are. The first one to them is basically that the fact that they are able to put information inside this Marketplace that is valuable to the Subway franchisees. And likewise the franchisees can get information very quickly and easily.

The intent of MarketPlace365 for Subway is eventually to become an entire community where franchisees and vendors and Subway staff and everybody else can communicate and provide services and have complete social networking functions that they can use to help in all of the different functions that take place in the Subway chain.

Fred Milligan – Sanders Morris Harris

Will this mean that a franchisee could order 12 cases of Pepsi Cola or Coca-Cola through the system?

Randy Selman

I am not sure that they will necessarily use it as an e-commerce function, but they certainly could introduce new products. They could talk about their results from certain product trials. They can educate and they can have courses on new and advanced product designs. There are so many things they can do. Remember, there is so many functions within Marketplace. There's an auditorium for presentations and a learning center for training. There is a media library for all kinds of content and information. And then of course there's the exhibitor booths that allows for any kind of product information to be conveyed. All the websites of all the vendors sit right below the booth, so there is access to websites of those vendors. So it's very convenient, and it really seems to be well received. It has gotten great reviews from the franchisees.

Fred Milligan – Sanders Morris Harris

Now, as I understand it, these sites will be open, or could be open for 365 days a year?

Randy Selman

That is the intent of them, yeah. Now, just to explain something a little different, the other types of shows, the ones that are not closed where it's limited to just the company's franchisees or members or associates or whatever, the ones that are general market Marketplaces, are going to have built-in search engine optimization that is going to attract people all over the Web to the marketplace, based on keyword search, and what is called natural search engine optimization.

So you type in a phrase or a word that has something to do with the marketplace, that marketplace is going to come up in the search results on Google and attract those people to that marketplace. And in that way it's going to generate leads for the exhibitors. And that is a technology that we have built into our marketplaces that will occur once we have open-door marketplaces.

Fred Milligan – Sanders Morris Harris

Will you be in good position in regard to Google?

Randy Selman

I think we could eventually be a very big buyer of Google services and get big discounts because of the sheer size of all these marketplaces and the spend that they’ll eventually make. Part of it is natural search engine optimization another part of it is doing Google ad purchases for each marketplace. A small portion of the revenue by the promoter would go (inaudible) they could put it through us, we could get maximum discount and be able to share the benefit of an asset buying of Google AdWords though Google. That would make Google very happy to know about us.

Fred Milligan – Sanders Morris Harris

Is there any competition out there currently? Now, I mean 365 days I wouldn’t think there is anybody else out there, but is there anybody else selling conventions online–?

Randy Selman

Yes there are private companies that are selling similar products to Onstream. Each one of them has a different way of going about it. As I mentioned in previous calls most of them cost a lot of money upfront, which is one of the problems with their model. But – number two is that they always require somebody to do all the changes and work in (inaudible) you could do it yourself.

If you are an exhibitor you go in add a video or change a graphic, you can just jump right in and do that yourself. So those are the key components that make, that really set marketplace aside the business model and the self administration. But there are lot of functions, there are our FEO [ph], our collected purchasing, the ease of use, all of the behind the scenes workflows that manage all the contents. So you don’t have to be technically capable to do the administration of the (inaudible).

There is a lot of good stuff behind the scenes that all came about from the existing product line.

Fred Milligan – Sanders Morris Harris

Okay. Somebody has a – some promoter has aside we have 100 booths, how much money does he get and how much money do you get?

Randy Selman

It depends on what he charges the end user, we get a percentage of that usage with a minimum number and we could provide that information on the call, but I think some of this should remain proprietary for purposes of dealing with our competitors. But to the extent we get a significant portion of the shared revenues. I mentioned you could expect on a low end anywhere in the neighborhood of 100,000, 150,000 on up to several 100,000 a year depending on that purchase price of the booth. And on top of the booth there is extra (inaudible) there is sponsorships, there is advertising, there is marketing programs, press release programs, there is all kinds of things built in that are additional revenue producers.

Fred Milligan – Sanders Morris Harris

Are you going to have bathrooms?

Randy Selman

That’s part of it. Yours is already there.

Fred Milligan – Sanders Morris Harris

Putting it another way, sometime next year, I’m going to say this, second quarter of next year, what percentage of revenue is coming from – will be coming from 365 for you?

Randy Selman

And I’ll do it the same way. I don’t know about that either, I can’t really give you that one either.

Fred Milligan – Sanders Morris Harris

Okay.

Randy Selman

Do I believe – I will answer this for you. Do I believe that MarketPlace365 will be the dominant revenue driver for Onstream Media in the future? Absolutely. I believe that whole heartedly. I believe that the potential of this product will dwarf [ph] everything we’ve ever had and I believe that the potential is absolutely there to get to those levels.

I cannot give you a time frame yet it’s in the nascent stage, but we’ve already signed up some pretty good names, we’ve signed up some very, very major players, you’ll be seeing press releases on them shortly and many more are in the works. And I think based on the response rate and the types and the fact that it’s so flexible and can be used in so many applications, I think we’re on to something.

Fred Milligan – Sanders Morris Harris

Okay. All right, certainly hope so.

Randy Selman

Yeah.

Fred Milligan – Sanders Morris Harris

Good luck.

Randy Selman

And thank you, Fred.

Fred Milligan – Sanders Morris Harris

Thank you.

Operator

That wraps up our question and answer for today. So Randy, back over to you.

Randy Selman

Okay, thank you very much. So thank you for joining us today. We look forward to updating you on our continued progress throughout the remainder of the calendar year and into 2011. That will conclude it, thank you all.

Operator

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.

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