Onstream Media's (ONSM) CEO Randy Selman on Q3 2014 Results - Earnings Call Transcript

| About: Onstream Media (ONSM)

Onstream Media Corp. (NASDAQ:ONSM)

Q3 2014 Earnings Conference Call

August 20, 2014 4:30 PM ET

Executives

Donald C. Weinberger – Investor Relations, Wolfe Axelrod Weinberger Associates, LLC

Randy S. Selman – Chairman, President and Chief Executive Officer

Robert E. Tomlinson – Chief Financial Officer, Senior Vice President

Analysts

Fred F. Milligan – Sanders Morris Harris Inc.

Operator

Good afternoon and welcome to the Onstream Media Corporation Conference Call to discuss the Company’s fiscal 2014 third quarter results. All participants have been placed on a listen-only mode and the floor will be opened for your questions and comments following the presentation.

At this time, I would like to turn the floor over to your host, Don Weinberger of Wolfe Axelrod Weinberger. Sir, you may begin.

Donald C. Weinberger

Thank you, Jason. Good afternoon and welcome to the Onstream Media Conference Call. I will read Slide 2 the Forward-Looking Statements. I would like to point out that during the course of the conference call there may be statements made related 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 should also 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 selecting Company at the top of the webpage and then clicking on Investor Relations and then selecting the 2014 Press Releases option. At that webpage, you will find a link to the news release for the Company’s third quarter fiscal year 2014 financial results and the webcast.

An archived version of today's webcast will be accessible from the Press Releases page shortly following the end of the call and will be available for at least the next 12 months pursuant to SEC guidelines. For those interested in reviewing Onstream’s Form 10-Q filed yesterday, August 19, 2014, which contains detailed financial information related to today's discussion, you may visit Onstream's corporate website at www.onstreammedia.com and then select the Company followed by Investor Relations and then click on SEC filings. You may also access the file directly from the SEC EDGAR database by visiting www.sec.gov and then input Onstream Media under search for company filings.

It is now my pleasure to introduce Randy Selman, President and Chief Executive Officer of Onstream Media to begin today's discussion of results. Randy please proceed. Thank you.

Randy S. Selman

Thank you Don. Good afternoon and thank you for joining us. Today we will briefly review our results for the three and nine months ended June 30, 2014. Joining today is Onstream's Chief Financial Officer, Robert Tomlinson.

Hopefully, you have all had the opportunity to review our financial results which were contained in our 10-Q filed yesterday after the close of the market, and summarized in the press release and 8-K also filed yesterday. Let me start with a summary of our financial results for the third quarter fiscal 2014, which Robert will go into in more detail later in the call.

Onstream Media had total revenues of approximately $4.5 million for the three-months ended June 30, 2014 essentially the same as the prior fiscal year. However, EBITDA for the third quarter was approximately $590,000 as compared to $257,000in the prior fiscal year, an increase of approximately $333,000 or 129.6%. The significant increase in EBITDA is primarily a result of decreased operating expenses including compensation.

For the nine-months ended June 30, 2014 Onstream Media had total revenues of approximately $12.9 million, approximately $251,000 less than the corresponding period of prior year. This decrease was primarily due to a reduction in webcasting revenues in the first and second quarters. However, webcasting revenues for the third quarter increased over the prior year, indicating that this segment is beginning to recover.

EBITDA for the nine-months was approximately $997,000 as compared to $246,000 in the prior fiscal year an increase of approximately $751,000 or 305%. Again, the significant increase in EBITDA is primarily a result of decreased operating expenses including compensation.

Another financial highlight of the quarter was the consolidated gross margin percentage increased to 73.2% for the three-months ended June 30, 2014 versus 72.1% for the corresponding period of the prior fiscal year. And consolidated gross margin percentage increased to 71.9% for the nine-months ended June 30, 2014 versus 70.5% for the corresponding period of the prior fiscal year.

In addition to these financial highlights, also during the third quarter I'm happy to report that we were awarded a one-year services agreement with four optional years from the internal revenue service with a total estimated value above to $4.9 million over the five years. This was a similar award we’ve received five years ago that was affected by the government sequestration back in the beginning of 2013. We are looking forward to see improved revenues from this and other government initiatives that are in process.

During the third quarter, we launched three new products, Onstream meetings, Onstream Webinars and the MarketPlace365 Virtual Conference Center. Onstream Meetings is a low cost, cloud-based, self provision web conferencing platform for small to medium size meeting.

Onstream webinar is based on the same technology, addresses larger oriented and primarily designed for lead generation and thought-leadership presentations. And the MarketPlace365 Virtual Conference Center, which is based on the MarketPlace365 technology, provides a venue to hold meetings and conferences and it’s compatible with all forms of viewing devices and browsers. I will expand on these services later in the call.

Finally, another issued to mention is that we settled Intella2 litigation with the prior owners and the details of the settlement are noted in both the press release and 10-Q. The settlement resulted in a non-cash gain of $742,000 during the recently ended three and nine-month period.

I’ll now turn the call over to Robert, who will provide more details for the three and nine-month periods ended June 30, 2014. Robert.

Robert E. Tomlinson

Thank you, Randy. Good afternoon. This slide presents the components of our revenues for the third quarter of fiscal 2014.Consolidated operating revenue was approximately $4.5 million for the three-months ended June 30, 2014 an increase of approximately $15,000 or 0.3% from the corresponding period of prior fiscal year. Digital Media Services Group revenues were approximately $1.6 million for the three-months ended June 30, 2014, an increase of approximately $20,000 or 1.3% from the corresponding period in the prior fiscal year, primarily due to an increase in web casting division revenues.

Audio and web conferencing services group revenues were approximately $2.9 million for the three-months ended June 30, 2014, a decrease of approximately $5,000 or 0.2% from corresponding period of the prior fiscal year. However, the combined revenue of the Infinite and OCC division of approximately $2.4 million for the three-months ended June 30, 2014 represented an increase of approximately $69,000 or 2.9% as compared to corresponding period of prior fiscal year.

Consolidated gross margin was approximately $3.3 million for the three-months ended June 30, 2014, an increase of approximately $60,000 or 1.9% from the corresponding period of the prior fiscal year. In addition, our consolidated gross margin percentage increased to 73.2% for the three months ended June 30, 2014, versus 72.1% for the corresponding period of prior fiscal year.

Onstream’s third quarter fiscal 2014 net income of approximately $360,000, or $0.02 per share, was based on approximately 23.6 million weighted average shares outstanding, as compared to a third quarter fiscal 2013 net loss of approximately $520,000, or $0.03 loss per share, which was based on approximately 20.7 million weighted average shares outstanding. This $880,000 improvement in the results of operations for the fiscal 2014 third quarter was primarily due to an approximately $742,000 gain from Intella2 litigation settlement, for which there was no comparable transaction in the corresponding period of the prior fiscal year

Let me point out that Onstream’s EBITDA has adjusted doesn’t include the benefit of the gain from litigation settlement. Onstream’s EBITDA, as adjusted for the three months ended June 30, 2014 was approximately $590,000, an increase of approximately $333,000 or 129.6%.as compared to EBITDA, as adjusted of approximately $257,000 for the third quarter of fiscal 2013. This increase was primarily due to decreased operating expenses including compensation.

During the period from June 2013 to January 2014 we made certain headcount reductions representing approximately $1.1 million in annualized savings, which accounted for approximately $219,000 reduction in cash compensation expense for the three months ended June 30, 2014 as compared to the corresponding prior year period. The detail calculation of EBITDA, as adjusted is included in a table accompanying our August 19, 2014 press release.

This next slide details the approximately $723,000 of non-cash expenses included in Onstream's approximately $360,000 net income for the three quarter of fiscal 2014. The addition of these non-cash expenses to the net income as well as the deduction of the non-cash gain from litigation settlement results in cash provided by operating activities before changes in current asset and liabilities other than cash for the third quarter of fiscal 2014 of approximately $341,000 compared to approximately $110,000 provided by operations for the corresponding period of the prior fiscal year.

This approximately $231,000 improvement was primarily due to decrease operating expenses including compensation. The primary non-cash expenses included in our net income for depreciation and amortization and certain items, compensation, professional fees and interest paid with equity.

This slide presents the components of our revenues for the first nine-months of fiscal 2014, consolidated operating revenue was approximately $12.9 for the nine months ended June 30, 2014, a decrease of approximately $251,000, 1.9% from the corresponding period of the prior fiscal year, due to decreased revenues of the Digital Media Services Group, partially offset by increased revenues of the Audio and Web Conferencing Services Group.

Digital Media Services Group revenues were approximately $4.3 million for the nine-months ended June 30, 2014, a decrease of approximately $404,000, 0.6% from the corresponding period of the prior fiscal year, primarily due to a decrease in webcasting division revenues. The webcasting revenue reduction was related to the first and second quarters as noted previously webcasting revenues increased in the third quarter exceeding such revenues for the corresponding fiscal 2013 quarter.

Audio and Web Conferencing Services Group revenues were approximately $8.6 million for the nine-months ended June 30, 2014, an increase of approximately $153,000, 1.8% from the corresponding period of the prior fiscal year. This was primarily due to an increase in the combined revenues of the Infinite and OCC divisions which were approximately $7.1 million for the nine-months ended June 30, 2014 and represented an increase of approximately $293,000, 4.3% as compared to the corresponding period of the prior fiscal year.

Consolidated gross margin was approximately $9.3 million for the nine months ended June 30, 2014, an increase of approximately $5,000 or 0.1% from the corresponding period of the prior fiscal year. In addition, our consolidated gross margin percentage increased to 71.9% for the nine-months ended June 30, 2014, versus 70.5% for the corresponding period of the prior fiscal year.

Onstream’s net loss of approximately $1.0 million or $0.04 loss per share for the nine-months ended June 30, 2014, was based on approximately 22.7 million weighted average shares outstanding, as compared to a net loss of approximately $3.4 million, or $0.20 loss per share, for the corresponding period of the prior fiscal year, which is based on approximately 17.4 million weighted shares outstanding.

The decreased net loss was primarily due to an approximately $1.7 million, or 21.9% decreased in compensation, including compensation paid with equity as compared to the corresponding period of the prior fiscal year. In February 2013, we established an executive incentive plan, under which the five executives could receive fully restricted common shares based on the Company achieving certain financial objectives.

In February 2013, the initial issuance authorized under the executive incentive plan was an aggregate of $2,250,000 executive incentive shares, which were issued in connection with meeting certain financial objectives related to fiscal 2011 and fiscal 2012, as well as earn compensation for past service and in recognition that all options previously held by all promise to the executives had been cancelled.

Primarily as a result of the share issuance, which was related to the initial year of the program, which included several previous years and not expected to continue at that level in subsequent years. Non-cash compensation expense for the nine-months ended June 30, 2013 was approximately $1.1 million greater than non-cash compensation expense of the current period to nine-months ended June 30, 2014.

During the period from June 2013 through January 2014 we made certain headcount reductions representing approximately $1.1 million in annualized savings, which accounted for approximately $512,000 reduction in cash compensation expense for the nine-months ended June 30, 2014 as compared to the corresponding prior year period.

We expect these headcount reductions will also reduce our compensation expenditures by approximately $199,000 for the remaining three months of fiscal 2014 as compared to the corresponding prior year period and by approximately $159,000 over the first seven-months of fiscal 2015 as compared to the corresponding prior year period.

Onstream's net loss for the nine months ended June 30, 2014 also includes the benefit of the gain from the Intella2 litigation settlement. However, EBITDA as adjusted doesn’t not include the benefit of the gain from the Intella2 litigation settlement. Onstream’s EBITDA as adjusted for the nine months ended June 30, 2014 was approximately $997,000 an increase of approximately $751,000 or 305% as compared to EBITDA as adjusted of approximately $246,000 for the corresponding period of fiscal 2013. This increase was primarily due to decreased operating expenses including compensation.

This next slide details the approximately $2.1 million of non-cash expenses included in Onstream’s approximately $1 million net loss for nine-months ended June 30, 2014. the subtraction of these non-cash expenses from the net loss as low as the removal of the non-cash gain from the Intella2 litigation settlement results in cash provided by operating activities before changes in current assets and liabilities over the cash for the nine-months ended June 30, 2014 of approximately $376.000 compared to approximately $116,000 used in operations for the corresponding period of prior fiscal year.

This approximately $492,000 improvement was primarily due to increased operating expenses including compensation. The primarily non-cash expenses included in our net loss or depreciation and amortization and certain items, compensation, professional fees and interest paid with equity.

I will now turn the call back over to Randy.

Randy S. Selman

Thank you, Robert for the detailed review of our financials for the three and nine-months ended June 30, 2014.

As you have seen from the increase in EBITDA and other financial measures, the cost cutting measures we implemented in fiscal 2013 and continued through fiscal 2014 have been successful. The third quarter had revenue of approximately $4.5 million essentially flat with 2013. Therefore, our result should even further improved from the increase revenues including those anticipated as a result of our new government business including the IRS and the department of Veterans affairs as well as from new state government contracts awarded recently which is our fastest growing segment prior to the sequestration.

In addition, we anticipate additional growth from the sales our three new products I mentioned previously. Since November 2013, we have been involved in litigation with Intella2 and its owner in connection with the Intella2 acquisition. On July 29, 2014 the parties entered into a settlement agreement and on August 4, 2014 the lawsuit was dismissed with prejudice by the court. As I have mentioned the details of the settlement are contained in both 10-Q and press release.

However, based on the litigation settlement as of June 30, 2014 we reduced approximately $782,000 estimated liability previously recorded on our books for the unpaid portion of the purchase price to an estimated liability of $40,000 which resulted in our recognition of the non-cash gain of $742,000 for the nine and three-months ended June 30, 2014.

Also as I stated in the prior conference call, we have certain debts that are due at the beginning of the 2015 fiscal year. We are continuing discussion with several lending intuitions to refinance the debt specifically into a longer term instrument with lower interest rates. We fully expect to report on a successful resolution during the current. Now I will go into some of the highlight of our divisions and discuss some of the key metrics.

As we stated, Audio and Web Conferencing Services Group revenues were approximately $2.9 million for the three months ended June 30, 2014, essentially flat from the corresponding period of the prior fiscal year. However, The Infinite division, excluding Onstream Conferencing, had revenues of approximately $2.2 million for the three months ended June 30, 2014, which represented an increase of approximately $142,000 or 6.9% as compared to the corresponding period of the prior fiscal year.

This was in turn due to a 8.6% increase in the number of minutes billed which was approximately 37.6 million for the three months ended June 30, 2014, as compared to approximately 34.6 million minutes for the corresponding period of the prior fiscal year. This average revenue per minutes was approximately $6.1 for the three months ended June 30, 2014 as well as for the corresponding period of the prior fiscal year.

Our Infinite subsidiary provides feature-rich conferencing solutions that range from on-demand audio and web conferencing to full scale online event management. Although this division demonstrated an almost 7% growth year-over-year, we expect that to significantly accelerate based on expanded marketing investment and further efficiency in our online automated finer process. Over the next two quarter, we will realize further reduction in overhead cost to reduce buy rates and compensation. As a result, we expect to add approximately $400,000 an additional EBITDA to annual constitutionally for this position

During the third quarter of 2014, Infinite added 358 new accounts, some notable wins for this period include American College of Physicians, Cable Vision, The People's Corporation, BootBarn [ph], Global Health Strategies, American Mental Health Association and SmithBucklin.

Our EDNet division continues to provide clients from the TV advertising, film; music, production, post-production and distribution industries with tools they need to complete projects more efficiently extend their reach and create new revenue opportunities. Since the beginning of the calendar year, EDNet has been working on many new television and movie projects including WGN Salem and Manhattan and for TNT Legends.

New for the fall season shows include Madam Secretary and Forever. In the movies EDNet services we’re using the making of the Giver, Guardians of the Galaxy and Gone Girl. And finally, EDNet services were also used to develop TV commercials for McDonalds, Chrysler, Target and Nike.

During both first and second quarters of fiscal 2014, we experienced a decline of webcasting revenues as compared to the prior year due impart to a reduction of both government and corporate usage, which we believed was temporary. I’m pleased to report the revenues of webcasting division increased by approximately $48,000 or 3.8% for the three-months ended June 30, 2014 as compared to the corresponding period of the prior fiscal year.

The approximately 1,000 webcasts we produced during the three-months ended June 30, 2014 was approximately 300 less than the number of webcasts we produced during the corresponding period of the prior fiscal year. The impact on revenue arising from the decreased number of events was offset by an increase in the average revenue per webcast event to $1,368 for the three-months ended June 30, 2014, which represented an increase of $343 or 33.4% from the corresponding period of the prior fiscal year.

We believe that our webcasting division revenues will continue to be favorably impacted during the balance of fiscal 2014 by the comprehensive update to our Visual Webcaster platform VW4, which continues to be updated with new features and capabilities. We expect the adoption rate of VW4 will continue to accelerate, we also expect to see increased sales from iEncode, a derivative service that allows our customers to self-encode their live professional video and attach the streams to the Visual Webcaster system in the cloud.

This allows them to take advantage of using their internal staff and facilities while still utilizing all of the Visual Webcaster features. Notable wins from the webcasting segment for the third quarter include this Viscom [ph] Group, Quantum Marketing, Cleary Gottlieb Steen & Hamilton LLP, Kemira Chemical, JPL Creative, Audio Visual Management, The Ryan Medical, Prudential New Jersey, Thermal Physio-Scientific and Stanford University.

As I mentioned last quarter also in development is Express, a self serviced large audience webcasting products that could be run from the customers desktop and will be available a fixed cost monthly subscription basis that can be purchased online. And finally, we’ll also expect to see increased webcasting sales as a result of our MarketPlace365 Virtual Conference Center which is a multiple event conference venue with integrated webcasting.

The Virtual Conference Center enables our client to host their own conference room or conference center on their website with complete registration functionality and the ability to present any form of online communication such as webcast, webinars, web conferences or even just an audio conference with social interaction. VCC is now in production and available for sale.

Streaming Publisher our digital media streaming and presentation platform featuring enterprise grade digital publishing and distribution technology will soon be upgraded to be a more user-friendly automated service. A simple sign-up and on boarding process will provide a highly effective lay of attracting customers allowing users to get up and running quickly.

Notable wins during the third quarter in our streaming publisher accounts includes health solutions team and the order department, Accelerated Christian education, Xerox, Christian Vision Broadcasting network, Ethicon Knowledge Anywhere, Distance Entertainment, Miami-Dade Express Lay Authority, First Christian Church, JLF Media Productions and Media Motion Online.

This past quarter we launched our new web conferencing services Onstream Meetings and Onstream Webinars. Onstream Meeting is a next-generation web conferencing platform delivering a truly all-in-one web conferencing solution for collaboration for smaller groups of up to 50 participants, clients have immediate 24/7 access to features such as full duplex audio and video broadcasting, stream and file sharing, chat, session recording and much more.

Additionally, Onstream Meetings offers the first web conferencing solution with real-time and recorded multipoint desktop video conferencing wrapped into an easy TUS flash interface. This multipoint high resolution video communications tool, allows hosts to use any standard webcam and headset or high-end video cameras if desired. Onstream Meeting is an easy to learn with little no training and no technology barrier. Connecting to an Onstream Media sessions is as easy as clicking on link in an e-mail an instant message or a website. No downloads, software or java are required to host a session or participate.

Onstream Webinars sharing the same technology is Onstream Meetings is a highly professional, web-based tool for communicating with those targeted audience, simply and affordably. This system is designed to reach hundreds of participants with enterprise-grade, high-quality streaming video, audio and presentations. Organizers of Onstream Webninars can send out invites prior to an event, upload documents to share, organize, polls and interact with your audience via Q&A or whiteboard functionality.

The system is completely turnkey, cloud-based and optimized for mobile delivery. For one low monthly fee an organization can hold an unlimited number of webinars, improving productivity and saving on travel costs. Webinars are primarily used for lead generation, thought-leadership and new product launches. As I mentioned earlier, our government services business of the DMS Group was our fastest growing segment prior to the government sequestration.

I’m happy to report that this segment once again is growing and several federal and state contracts have been awarded, these include the IRS as I mentioned earlier The Federal Reserve Bank of San Francisco and extension of the contracts for the fifth consecutive year, Department of Veterans Affairs, the U.S. Department of Agriculture and the California Board of Equalization.

Onstream Media continues to implement our comprehensive marketing plan which is primarily designed to accelerate the online customer acquisition process. To address the market need particular desired for cost efficient subscription programs, Onstream Media has designed a new online sign-up interface to facilitate online subscription processing for all of our services.

The new interfacing encourages subscriber conversation based on a proven design layout, direct response messaging and triggered e-mails and phone calls. We continue to pursue listings, ratings and lead generation from review site including TopTenREVIEWS, getup.com, Compare Cloudware, and TMCnet.com.

Finally, we initiated a new telesales program targeted at prospects that indicated interest in our products and services that have not yet purchased the service from us in order to improve conversion rates. All of these continue to deliver low cost and quality leads to our customer care and sales groups and with anticipated further investment we expect to increase the marketing effectiveness and thereby increase conversions.

Finally, we believe we’re on track to show continued improvement in our EBITDA and our operating cash flow for the reminder of fiscal 2014 and into fiscal 2015 as compared to the corresponding prior year periods. We anticipate for the cost reductions in compensation expenses, facility reductions, buy rates and other cost of sales. We also expect increased sale, as a result of the favorable acceptance of Visual Webcaster 4, as well as from the three new product offerings and the government business improvements we’ve spoken about today.

Now with the help of our operator, we’ll open up the call for questions. Jason.

Question-and-Answer-Session

Operator

Yes. I apologize, I was muted.

Randy S. Selman

We are opening up for questions Jason.

Operator

Thank you. The floor is now opened for questions. (Operator Instruction) I do not see any questions coming in at this time.

Randy S. Selman

And we have none on the internet as well there is an audience.

Operator

I do have one question here.

Randy S. Selman

Okay.

Operator

This comes from Fred Milligan. Fred, please state your question.

Fred F. Milligan – Sanders Morris Harris Inc.

Hi, guys.

Randy S. Selman

Hi, Fred. How are you?

Fred Milligan – Sanders Morris Harris

Fine. And you stay in my neighborhood thank you so far.

Randy S. Selman

I was good to say, did you fall asleep, I expected your question.

Fred F. Milligan – Sanders Morris Harris Inc.

The four, five [indiscernible] roughly break-evens in terms of operations, so if you were to do say for a $300,000 more what kind of margins could you expect on that kind of business?

Randy S. Selman

Well if it’s the $4 million, $5 million that we had, we had a 72% approximate margins for the quarter. So it would probably extrapolate further margin of that level.

Fred F. Milligan – Sanders Morris Harris Inc.

Okay. Now the government business.

Randy S. Selman

Fred, excuse. It also depend on the products, some of our products have higher margins. So if we sell specific services, we can see higher margins.

Fred F. Milligan – Sanders Morris Harris Inc.

Okay. So if you do $300,000 more, say the $300,000 is going to grow at something like 70% to 80%.

Robert E. Tomlinson

Yes that’s probably a good measurement.

Fred F. Milligan – Sanders Morris Harris Inc.

Okay. The government business, is that making a contribute – did it make a contribution this quarter?

Randy S. Selman

Some not a lot. We’ve always had some government business IRS and a few others, but the main concept from the IRS kicks in, in October and the one that I mentioned are just about to start, so they will be effect in depend the quarter. And then from that point forward, we should have all of these different ones I mentioned contributing. At one point, as I had mentioned the government business was actually – I think one of the reports that we had a 44% year-over-growth rate at one point in the government segment, we hope to certainly see those kind of numbers again very soon.

Fred F. Milligan – Sanders Morris Harris Inc.

Okay. That’s all I have right now. So thank you very much.

Robert E. Tomlinson

Thank you. Fred.

Operator

All right our next question comes from John Scribner [ph]. John please take your question. John Scribner are you muted on your line?

Unidentified Analyst

Hello are we connected?

Operator

Hello John. Yes you are.

Unidentified Analyst

Okay.

Robert E. Tomlinson

you are connected, please turn off the sound behind you because it’s repeating.

Unidentified Analyst

Yes. I mean, can anybody hear me?

Robert E. Tomlinson

We can hear you.

Operator

Yes. We can hear you John.

Unidentified Analyst

Okay. Yes, just listing to the…

Robert E. Tomlinson

John, you need to turn the sound off behind you, otherwise you’re not going to be able talk to us.

Unidentified Analyst

Okay. I got. I got, I’m sorry. Yes. Just last question, it really was not a question that I had, but if you say your discovering contact that you have is going to stretch over, I believe you said over four years and it’s going to contribute at least $1 million a year to revenues, is that correct?

Robert E. Tomlinson

Well, it’s a five year award, its starts out into one year guarantee and then its four optional years, which we were awarded a similar contract five years ago, and the buy amount that’s associated to the award is approximately a $1 million a year, a total of $4.9 million over the five years. That doesn’t guarantee that we get all that revenue, but that the government has the right to buy that level of services from us.

We were seeing very, very similar levels from that particular department of the government back several years ago, but as you all recall the sequestration ended a lot of government programs, and as a result one of them was that particular award. It’s been re-awarded to us, so we can expect a significant growth in the revenue from that particular department, which is the internal revenue service. However, there is not guarantee that it will actually be a $1 million that’s why we were very careful to explain it the way we did.

Unidentified Analyst

Yes. Well assuming its something close to that that’s probably going to be roughly 200,000 per quarter would that be within the target.

Randy S. Selman

At one of times in the past when we had that in place, yes we were seeing revenues very similar to that from that particular division.

Unidentified Analyst

So that would get us to $4.7 million and then assuming you have some improvements and other things that you are doing, we could start to approach that $5 million revenue per quarter mark, would it be safe to say that that’s is a possibility we could get there – or close to it by the second quarter of the new fiscal year.

Randy S. Selman

Yes. Look obviously revenues are going to be affected by all the new products, we are marketing webinars and meetings, we expect that to grow very well, it’s an exceptional product and we think a lot of people that had already tried it out a love it and we think that there will be a nice scale to that. We know that our webcasting product is competitive to anything else on the market to-date and we expect fully – that should really start to ramp-up, we’re involved in several large RFPs, we expect to win some of them if not all of them. We expect revenues to come in as a result of the new virtual conference center, so we've got lot of things in the works to drive revenues.

The interesting point what I was trying to make in the call is that because of the reduction in revenue that we had during the end of 2012 and 2013, we basically reduced the operating expenses of the corporation and so now we are operating at nice pivotal levels which will continue, but with an increase in sales those levels are going to really, really get driven upward and we feel that that’s going to really reflect in the bottom line of cash flow.

And it wasn’t very much, I mean it wasn’t whole lot of money that made us to a $0.2 per share net income for the period even though it’s a one-time anomaly, but it doesn’t mean that we are that far away now if you can see what I mean. A couple of hundred thousand dollar per month of increased revenues and we are going to showing earnings. So we are very, very close and of course like I said, we had record of EBITDA levels we can call a non-GAAP measure record, but it is a very good indication of how healthy the company is now.

Unidentified Analyst

Well that’s what I was telling somebody what earlier, but I think the report that you put out is a very good report, the only thing of course revenues don’t seem to be growing year-to-year, but another question I have, do you do anything with the mobile devices use for video streaming in that arena?

Randy S. Selman

Yes in fact the call that we are on is actually streaming to mobile devices, so you could have accessed this on your iPhone or your Android. Although we don’t use videos for these type of calls, just PowerPoint slides and audio, if we had a video stream you would have been able to view it on your devices and our streaming publisher product is specifically designed that when you upload video content into it, it will automatically transform it, actually called transcoding into all of the different video format required to basically send it to virtually any device that exists from every kind of phone to every kind of browser that’s on a desktop. so yes, it’s a big part of our capabilities and business.

Unidentified Analyst

Are you doing any work with MicroVision who is working with…

Randy S. Selman

I don’t know that

Unidentified Analyst

Well they are working with the mobile devices used for video streaming and they also got a product called PicoP which is green laser based another device used for micro sized projection display technology and I just wonder if you are doing anything in that area because it seems to be something that’s looks pretty interesting?

Randy S. Selman

Well we've got a wide area of targeted markets already in the business obviously Audio and Web Conferencing Services, we think we've got excellent products now for that arena at very attractive prices. We've got our webcasting business which has improved quality and improved capabilities over the past year since we introduced VW4 and then finally we've got our streaming publisher platform basically designed to store and mange content with complete intelligence. So I think we've got enough products to work on now we just have to scale them.

Unidentified Analyst

Yes, another reason I asked about marketplace because I have been following MCC [ph] used to trade at $50 years ago, dropped down to nothing and now they are back to $2 [indiscernible] and they are going to be working and it seems like some of the areas that Onstream is in or possibly could be in and I just was curious as if you heard of them or looked at that technology that they have.

Randy S. Selman

Okay John. Any other question?

Unidentified Analyst

No that’s it you know. Lets get to the $5 billion market is all I got to say.

Randy S. Selman

All right. Thanks. All right Operator.

Operator

There are no further question in the telephone queue.

Randy S. Selman

Okay. So then we thank you for joining us today. We look forward to updating you on our year-end fiscal 2013 results. Have a good evening, bye-bye.

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