New Frontier Media (NOOF) offers disappointing F2006 guidance

New Frontier Media (NOOF) reported results on May 25, 2005 for the fiscal fourth quarter 2005.  Below are some highlights.

Results 1Q05 vs. 1Q04:

• EPS: $0.10 vs. $0.14 (-29%)
• Consensus EPS was $0.10
• Revenue: $10.8M vs. $11.1M (-3%)
• Consensus revenue was $11.9M
• Gross profit: $6.8M vs. $6.8M (0%)
• Gross margin: 63.2% vs. 61.4% (+180bps)
• Operating income: $3.2M vs. $3.3M (-4%)
• Operating margin: 29.3% vs. 29.9% (-60bps)
• Net Income: $2.4M vs. $3.3M (-28%)
• Net margin: 22.3% vs. 30% (-770bps)
• EBITDA: $3.1M vs. $3.7M (-15%)
• EBITDA margin: 29.2% vs. 33.5% (-430bps)
• Cash: $27.5.4M vs. $16.8M (+64%)
• Debt: $0.3M vs. $0.9M (-70%)

Pay TV Revenue Breakdown 1Q05 vs. 1Q04:

• Pay Per View: $5.9M vs. $5.6M (+5%)
• Video-On-Demand: $3.4M vs. $4.1M (-17%)
• C-Band: $0.8M vs. $0.7M (+14%)
• Total: $10.1M vs. $10.4M (-3%)

F2006 Guidance:

• EPS: $0.37 - $0.41; consensus was $0.52
• Revenues: $44.5M - $46.0M; consensus was $50.9M
• Net income: $8.4M - $9.3M
• Tax rate: 38%
• Link to a post on NOOF's fiscal Q3 results

Quick comments:

• NOOF opened the day down 17% before rebounding to close at $5.82, a 1.36% drop from a day earlier; investors were disappointed with the company's guidance
• PPV revenue increased as a result of a 7% increase in revenues from NOOF's largest customer
• Pay TV's network household
  distribution (excluding VOD) increased 18% to 61.8M versus 52.5M a year earlier
• Q4 VOD revenues decreased due to increased competition on the Time Warner (ticker: TWX) platform (previously, the company didn't have any competition)
• VOD is delivered to 18.3 million customers versus 11.5 million a year earlier (+59%) and 840,000 hotel rooms
• The C-Band has 232,000 active household unit, a 38% decline from a year earlier; the company has already expressed its intention to close this business by fiscal Q3 2006
• Internet revenues increased to $0.7M from $0.1 in fiscal 4Q04
• Corporate expenses increased 31% to $1.7M versus $1.3M as a result of Sarbanes-Oxley compliance
• On the agenda for NOOF's next board meeting:  uses of its cash, including paying a dividend or a stock buyback