Onstream Media Corporation Reports Fiscal 2009 POMPANO BEACH, Fla. – February 17, 2009 – Onstream Media Corporation ( OTC: ONSM), an online service provider of live and on-demand internet video, announced today its financial results for the first quarter of fiscal 2009, the period ended December 31, 2008. First Quarter Financial Highlights
Financial Discussion Revenue for the first quarter of fiscal 2009 was essentially flat compared sequentially to the $4.4 million in revenues for the fourth quarter of fiscal 2008, primarily due to decreased revenues of the Audio and Web Conferencing Services Group, partially offset by increased revenues of the Digital Media Services Group. Gross margin for the quarter was approximately $3.0 million versus $3.1 million in the year-ago period and up sequentially from $2.8 million for fiscal fourth quarter 2008, an improvement of $128,000. Randy Selman, President and Chief Executive Officer of Onstream Media, commented, "Each of our individual segments produced operating income during the quarter and we continue to experience growth and increased demand for our Digital Media Services offerings. The reduction in revenues from the Audio and Web Conferencing Group was primarily due to fewer business days in the holiday season quarter. I'm pleased, however, to report a 270 basis point improvement in our gross margin from the fiscal 2008 fourth quarter and a narrowing of our net loss (excluding the impact of the charge for impairment of goodwill and other intangible assets) despite relatively flat revenue, demonstrating our ability to leverage our fixed costs more effectively and operate more efficiently." Mr. Selman continued, "Already during fiscal 2009 we have provided services to three new state governments (Louisiana, Oklahoma and New York), and several new commercial customers, including a major opinion polling and research organization, a webcaster of popular music concerts, and a world leading pharmaceutical company. In addition, we added two new webcasting resellers and seven web conferencing resellers and believe these new distributors will also add incremental volume in the remaining quarters of the fiscal year. However, in order to reach positive cash flow as quickly as possible, Onstream's management recently took certain steps to implement a cost-reduction program during the second fiscal quarter, including headcount reductions, compensation adjustments and the reduction of certain costs related to bandwidth and facilities. We expect the benefits of this initiative to be realized beginning in March of 2009." Consolidated gross margin for the quarter was approximately $3.0 million, or 67.7% of revenues, compared with gross margin of approximately $3.1 million, or 70.0% of revenues, in the first fiscal quarter last year. The gross margin on revenue related to Infinite Conferencing was approximately 70.8% for the quarter and the Webcasting division contributed gross profit margin of approximately 64.2%. Total operating expenses for the quarter were $10.0 million. After excluding the impact of a $5.5 million charge for impairment of goodwill and other intangible assets included in that number, the remaining $4.5 million of operating expenses can be compared to $4.8 million in operating expenses in the prior-year first quarter. The decrease was primarily due to a decline in professional fees expense from lower non-cash expenses related to equity-based compensation (shares and options) paid for financial and other consulting services. However, the remaining operating expenses for the quarter of $4.5 million as discussed above can be compared to only $4.0 million of operating expenses in the fourth quarter of fiscal 2008. The increase was primarily due to a higher accrual for untaken employee vacation and a seasonal increase in accounting fees related to the annual audit. In aggregate, these two expenses resulted in an approximate $228,000 increase compared to the fourth quarter of fiscal 2008, with the remainder of the increase primarily due to the effect of a one-time reversal of non-cash equity-based compensation expense in the fourth quarter of fiscal 2008. The Company reported a loss from operations (before interest expense and other non operating items) of approximately ($7.0) million for the first quarter of the current fiscal year. After excluding the impact of the $5.5 million charge for impairment of goodwill and other intangible assets included in that number, the remaining $(1.5) million can be compared to a loss from operations (before interest expense and other non operating items) of approximately $(1.7) million the first quarter last year. This favorable difference is primarily due to an approximately $312,000 reduction in professional fee expenses, in turn primarily due to lower non-cash expenses related to equity-based compensation (shares and options) paid for financial and other consulting services. The consolidated net loss for the current quarter was approximately $(7.1) million, or $(0.17) loss per share (based on 42.8 million weighted average shares outstanding), as compared to a loss of approximately $(1.7) million, or $(0.04) loss per share (based on 42.1 million weighted average shares outstanding) for the prior-year first quarter. Excluding the effect of the $5.5 million impairment loss on goodwill and other intangible assets, the remaining difference between the net loss for the current quarter and the net loss for the corresponding prior year quarter was an improvement of approximately $63,000. SFAS 142, Goodwill and Other Intangible Assets, requires that goodwill be tested for impairment on a periodic basis, essentially comparing the fair value of a reporting unit with its carrying amount, including goodwill and measuring any potential impairment. Although the Company's testing of the reporting units during the prior year indicated that the fair value of those intangible assets exceeded their recorded carrying value, it was noted that as a result of recent substantial volatility in the capital markets, the Company's stock price and market value had decreased significantly and as of December 31, 2008, the Company's market capitalization was determined to be less than its net book value (i.e., stockholders' equity as reflected in the Company's financial statements). Based on this condition, and in accordance with the provisions of SFAS 142, the Company recorded a non-cash expense for the impairment of its goodwill and other intangible assets of $5.5 million for the three months ended December 31, 2008. This $5.5 million adjustment was determined to relate to $1.1 million of goodwill and intangible assets of Infinite Conferencing, $100,000 of intangible assets of Auction Video and $4.3 million of goodwill of Acquired Onstream. Since the most recent impairment review was completed, the Company's stock price and market value have continued to decline, which may result in future non-cash impairment charges to the Company's results of operations related to its goodwill and other intangible assets. Onstream utilized approximately $225,000 cash in operating activities, before changes in current assets and liabilities, during the three months ending December 31, 2008. Onstream's cash balance was approximately $615,000 as of December 31, 2008. The Merger Agreement entered into by the Company with Narrowstep and first announced in May 2008 may be terminated under certain specified events, including by either Onstream or Narrowstep if the effective time has not occurred on or prior to November 30, 2008. Onstream and Narrowstep are currently negotiating to extend this termination date, which negotiations may result in changes to other terms of the transaction. Regardless of this, the management of Onstream expects to complete the Narrowstep acquisition during the current fiscal quarter or beginning of the next fiscal quarter. Outlook "We continue to believe fiscal 2009 will be a record year for Onstream, with incremental dollar increases in both sales and gross margin compared to our record performance last year," Mr. Selman concluded. "The current economic uncertainty prevents us from giving a more detailed near-term outlook but we remain confident in Onstream's opportunities during fiscal 2009 and beyond." Teleconference Onstream Media will hold a conference call at 4:30 p.m. ET on Wednesday, February 18, 2009, to discuss its fiscal 2009 first quarter financial results for the period ended December 31, 2008. Interested parties may listen to the presentation live online at http://www.visualwebcaster.com/event.asp?id=56015 or by calling 1-888-645-4404 or 1-201-604-0169. It is recommended to dial in approximately 10 to 15 minutes prior to the scheduled start time. An audio rebroadcast of the conference call will be archived for one year online at http://www.visualwebcaster.com/event.asp?id=56015. About Onstream Media: Onstream Media Corporation (OTC: ONSM) is an online service provider of live and on-demand internet video, corporate web communications and content management applications. Onstream Media's pioneering Digital Media Services Platform (DMSP) provides customers with cost effective tools for encoding, managing, indexing, and publishing content via the Internet. The DMSP provides our clients with intelligent delivery and syndication of video advertising, and supports pay-per-view for online video and other rich media assets. The DMSP also provides an efficient workflow for transcoding and publishing user- generated content in combination with social networks and online video classifieds, utilizing Onstream Media’s Auction Video™ (patent pending) technology. In addition, Onstream Media provides live and on-demand webcasting, webinars, web and audio conferencing services. In fact, almost half of the Fortune 1000 companies and 78% of the Fortune 100 CEOs and CFOs have used Onstream Media's services. Select Onstream Media customers include: AOL, AAA, AXA Equitable Life Insurance Company, Bonnier Corporation, Dell, Deutsche Bank, Disney, National Press Club, NHL, MGM, PR Newswire, Rodale, Inc., Televisa, WireOne, Shareholder.com, and the U.S. Government. Onstream Media's strategic relationships include Akamai, Adobe, eBay, FiveAcross/Cisco and Qwest. For more information, visit Onstream Media at http://www.onstreammedia.com or call 954-917-6655. Onstream Media: Investor Relations: Cautionary Note Regarding Forward Looking Statements Additional Information and Where to Find It TABLES FOLLOW
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