Onstream Media Corporation Announces Fiscal 2013 and Fourth Quarter Financial Results

POMPANO BEACH, Fla., Feb. 20, 2014 /PRNewswire/ -- Onstream Media Corporation (OTCQB: ONSM), a leading online service provider of corporate audio and web communications, including webcasting, webinar, conferencing and virtual event technology, has reported its financial results for the fiscal year and fourth quarter ended September 30, 2013.

Highlights

• Revenues for fiscal 2013 were approximately $17.2 million as compared to approximately $18.2 million for fiscal 2012. Revenues for the fourth quarter of fiscal 2013 were approximately $4.1 million as compared to approximately $4.2 million for the comparable quarter of fiscal 2012. These decreases were the result of an unexpected reduction in webcasting revenues from both government and commercial clients, and in the case of the full year comparison, also resulted from the loss of a single customer that we were providing streaming services to at very little margin.  
• Audio and Web Conferencing Services Group revenues were approximately $11.2 million for the year ended September 30, 2013, an increase of approximately $760,000 (7.3%) from the prior fiscal year. Audio and Web Conferencing Services Group revenues were approximately $2.7 million for the three months ended September 30, 2013, an increase of approximately $208,000 (8.3%) from the fourth quarter of fiscal 2012. These increases were the result of revenues from the operations of Intella2, a San Diego-based communications company, which Onstream acquired on November 30, 2012.
• Consolidated gross margin percentage was 70.8% for the year ended September 30, 2013, versus 66.4% for fiscal 2012. Consolidated gross margin percentage was 71.9% for the three months ended September 30, 2013, versus 67.8% for the fourth quarter of fiscal 2012. These improvements were due to reductions in webcasting cost of sales (proportionally greater than the reduction in revenues) and the impact of the acquired Intella2 operations, and in the case of the full year comparison, the discontinuance of a single low margin streaming customer, as discussed above.
• EBITDA, as adjusted, for the year ended September 30, 2013 was approximately $472,000, a decrease of approximately $102,000 (17.9%), as compared to EBITDA, as adjusted, of approximately $574,000 for fiscal 2012. EBITDA, as adjusted, for the three months ended September 30, 2013 was approximately $226,000, an increase of approximately $45,000 (25.1%), as compared to EBITDA, as adjusted, of approximately $180,000 for the fourth quarter of fiscal 2012.

Management Commentary

Randy Selman, President and Chief Executive Officer of Onstream Media, stated, "Although we did experience an overall revenue decline in the fourth quarter, as compared to the same quarter of the prior fiscal year, as the result of an unexpected reduction in webcasting revenues, our EBITDA, as adjusted, for the quarter was greater than the EBITDA as adjusted for the same quarter of the previous year."

Mr. Selman continued, "We believe that our webcasting division revenues will be favorably impacted during fiscal 2014 by the comprehensive update to our webcasting platform (VW4) which we released in January 2013 and which we will be updating with a second release in June 2014.  Although the first release of VW4 included several new features, the second release will include new features, such as additional billing and reporting capabilities, enhanced CPE functionality, a live phone option and the ability to connect to third party encoders, that we believe could significantly accelerate the rate of adoption of VW4 from what we have experienced thus far. We also expect to see increased webcasting sales as a result of our new Virtual Conference Center which is a multiple event conference solution with integrated webcasting."

Mr. Selman added, "We believe we are on track to show improvement in our revenues, EBITDA and our operating cash flow during fiscal 2014. During the period from June 2013 through January 2014 we made certain headcount reductions representing approximately $962,000 in annualized savings, which we expect will reduce our compensation and professional fee expenditures by approximately $822,000 in aggregate for fiscal 2014 as compared to 2013. In addition during that same period we renegotiated various supplier contracts representing approximately $331,000 in annualized savings, which we expect will cumulatively reduce our cost of sales and other general and administrative expenditures by approximately $242,000 for fiscal 2014 as compared to fiscal 2013."

Mr. Selman concluded, "Although our preliminary first quarter fiscal 2014 results, for the three months ended December 31, 2013, indicate that our revenues will be approximately $50,000 less than our first quarter fiscal 2013 revenues, as a result of the above cost reductions we expect that cash provided by operating activities (before changes in current assets and liabilities other than cash), as well as EBITDA as adjusted, for the first quarter of fiscal 2014 will exceed the corresponding amounts for any of the fiscal 2013 quarters."

Financial Discussion

Three Months Results

Consolidated operating revenue was approximately $4.1 million for the three months ended September 30, 2013, a decrease of approximately $109,000 (2.6%) from the corresponding period of prior fiscal year, due to decreased revenues of the Digital Media Services Group. However, Audio and Web Conferencing Services Group revenues were approximately $2.7 million for the three months ended September 30, 2013, which was an increase of approximately $208,000 (8.3%) from the corresponding period of the prior fiscal year. This increase was a result of the Intella2 operations which we acquired on November 30, 2012, which had revenues of approximately $341,000, including free conferencing business revenues of approximately $69,000.

Digital Media Services Group revenues were approximately $1.4 million for the three months ended September 30, 2013, a decrease of approximately $316,000 (18.9%) from the corresponding period of the prior fiscal year, primarily due to a decrease in in webcasting revenues as well as DMSP and hosting division revenues.

Revenues of the webcasting division decreased by approximately $309,000 (22.1%) for the three months ended September 30, 2013 as compared to the corresponding period of the prior fiscal year. The approximately 1,000 webcasts we produced during the three months ended September 30, 2013 was approximately 200 less than the number of webcasts we produced during the corresponding period of the prior fiscal year. In addition, the webcasts for the three months ended September 30, 2013 had a higher proportion of lower priced audio-only events, versus higher priced video events, as compared to the three months ended September 30, 2012.

Consolidated gross margin was approximately $2.9 million for the three months ended September 30, 2013, an increase of approximately $92,000 (3.3%) from the corresponding period of the prior fiscal year. Our consolidated gross margin percentage was 71.9% for the three months ended September 30, 2013, versus 67.8% for the corresponding period of the prior fiscal year. This improvement was due to reductions in webcasting cost of sales (proportionally greater than the reduction in revenues) and the impact of the acquired Intella2 operations.

Consolidated operating expenses were approximately $6.3 million for the three months ended September 30, 2013, an increase of approximately $2.6 million (68.7%) from the corresponding period of the prior fiscal year. The increase was due to a $1,650,000 increase in non-cash impairment loss on goodwill, as compared to the fourth quarter of the prior fiscal year, and an approximately $1.0 million non-cash impairment loss on property and equipment recorded in the fourth quarter of fiscal 2013, for which there was no corresponding expense in the fourth quarter of the prior fiscal year.

Cash provided by operating activities (before changes in current assets and liabilities other than cash) for the three months ended September 30, 2013 was approximately $70,000, compared to approximately $125,000 for the three months ended September 30, 2012. Cash provided in the current quarter for operating activities, as compared to the corresponding previous year quarter, was adversely affected by an increase in interest expense arising from the debt financing used to acquire Intella2 and for general working capital.

Onstream's fourth quarter fiscal 2013 net loss of approximately $3.8 million, or $(0.17) loss per share, was based on approximately 21.6 million weighted average shares outstanding, as compared to a fourth quarter fiscal 2012 net loss of approximately $1.0 million, or $(0.08) loss per share, which was based on approximately 12.6 million weighted average shares outstanding. The increased net loss was primarily due to the increased operating expenses, and more particularly the non-cash impairment losses on goodwill and property and equipment, as discussed above.

Onstream's EBITDA, as adjusted, for the three months ended September 30, 2013 was approximately $225,000, an increase of approximately $45,000 (25.1%), as compared to EBITDA, as adjusted, of approximately $180,000 for the fourth quarter of fiscal 2012.

Twelve Months Results

Consolidated operating revenue was approximately $17.2 million for the year ended September 30, 2013, a decrease of approximately $941,000 (5.2%) from the prior fiscal year, due to decreased revenues of the Digital Media Services Group. However, Audio and Web Conferencing Services Group revenues were approximately $11.2 million for the year ended September 30, 2013, which was an increase of approximately $760,000 (7.3%) from the prior fiscal year. This increase was a result of the Intella2 operations, which had revenues of approximately $1.1 million, including free conferencing business revenues of approximately $225,000.

Digital Media Services Group revenues were approximately $6.0 million for the year ended September 30, 2013, a decrease of approximately $1.7 million (22.0%) from the prior fiscal year, primarily due to a decrease in in webcasting revenues as well as DMSP and hosting division revenues.

Revenues of the webcasting division decreased by approximately $985,000 (16.6%) for the year ended September 30, 2013 as compared to the prior fiscal year. The approximately 4,800 webcasts we produced during the year ended September 30, 2013 was approximately 200 less than the number of webcasts we produced during the prior fiscal year. In addition, the webcasts for the year ended September 30, 2013 had a higher proportion of lower priced audio-only events, versus higher priced video events, as compared to the prior fiscal year.

Consolidated gross margin was approximately $12.1 million for the year ended September 30, 2013, an increase of approximately $133,000 (1.1%) from the prior fiscal year. Our consolidated gross margin percentage was 70.8% for the year ended September 30, 2013, versus 66.4% for the prior fiscal year. This improvement was due to reductions in webcasting cost of sales (proportionally greater than the reduction in revenues) and the impact of the acquired Intella2 operations, as well as the discontinuance of a single low margin streaming customer.

Consolidated operating expenses were approximately $17.8 million for the year ended September 30, 2013, an increase of approximately $3.7 million (178.5%) from the prior fiscal year. The increase was primarily due to a $1,650,000, or 300.0%, increase in non-cash impairment loss on goodwill and an approximately $1.0 million, or 173.6%, increase in compensation paid with common shares and other equity, both as compared to the prior fiscal year, and an approximately $1.0 million non-cash impairment loss on property and equipment during fiscal 2013, for which there was no corresponding expense in the prior fiscal year.

Cash used in operating activities (before changes in current assets and liabilities other than cash) for the year ended September 30, 2013 was approximately $46,000, compared to approximately $677,000 cash provided by operating activities for the year ended September 30, 2012. Cash used in the current year for operating activities, as compared to the previous year, was adversely affected by an increase in interest expense arising from the debt financing used to acquire Intella2 and for general working capital.

Onstream's fiscal 2013 net loss of approximately $7.2 million, or $(0.39) loss per share, was based on approximately 18.5 million weighted average shares outstanding, as compared to a fiscal 2012 net loss of approximately $2.6 million, or $(0.22) loss per share, which was based on approximately 12.2 million weighted average shares outstanding. The increased net loss was primarily due to the increased operating expenses, including the non-cash impairment losses on goodwill and property and equipment, as discussed above.

Onstream's EBITDA, as adjusted, for the year ended September 30, 2013 was approximately $472,000, a decrease of approximately $102,000 (17.9%), as compared to EBITDA, as adjusted, of approximately $574,000 for fiscal 2012.

Teleconference

Because of the timing of the release of these results and the filing of the related 10-K, Onstream's leadership team will combine its conference call discussing the financial results for the period ended September 30, 2013 with a discussion of the financial results for the first quarter of fiscal 2014, the three month period ended December 31, 2013. The time and date of that combined conference call will be announced by us shortly before the first quarter fiscal 2014 10-Q is filed.

About Onstream Media:

Onstream Media Corporation (OTCQB: ONSM), is a leading online service provider of corporate audio and web communications, including webcasting, webinar, conferencing and virtual event technology. Onstream Media's innovative webcasting platform has recently been ranked #1 by TopTenREVIEWS. The company's video streaming, hosting and publishing platform  - Streaming Publisher, provides customers with cost effective tools for encoding, managing, indexing, and publishing content to the Internet or virtually any mobile device. To date, 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 Dell, GE Capital, Georgetown University, IRS, KPMG, National Press Club, Nuclear Regulatory Commission, PR Newswire and Shareholder.com (NASDAQ). Onstream Media's strategic relationships include Akamai, BT Conferencing, Telefonica and Trade Show News Network. For more information, visit Onstream Media at http://www.onstreammedia.com or call 954-917-6655.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this document and elsewhere by Onstream Media are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such information includes, without limitation, the business outlook, assessment of market conditions, anticipated financial and operating results, strategies, future plans, contingencies and contemplated transactions of the company. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors which may cause or contribute to actual results of company operations, or the performance or achievements of the company or industry results, to differ materially from those expressed, or implied by the forward-looking statements. In addition to any such risks, uncertainties and other factors discussed elsewhere herein, risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied for the forward- looking statements include, but are not limited to fluctuations in demand; changes to economic growth in the U.S. economy; government policies and regulations, including, but not limited to those affecting the Internet. Onstream Media undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. 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 Onstream Media Corporation's filings with the Securities and Exchange Commission.

SOURCE Onstream Media Corporation