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

| About: New Frontier (NOOF)
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New Frontier Media (NASDAQ: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 (NASDAQ:DISH): 34% vs. 34%
  • Time Warner (NYSE:TWX): 17% vs. 17%
  • Comcast (NASDAQ: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.

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