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New Frontier Media, Inc. F4Q10 (Qtr End 03/31/10) Earnings Call Transcript

New Frontier Media, Inc. F4Q10 (Qtr End 03/31/10) Earnings Call Transcript

New Frontier Media, Inc. (NOOF)

F4Q10 (Qtr End 03/31/10) Earnings Call

June 10, 2010 11:00 am ET

Executives

Grant Williams – CFO

Michael Weiner – CEO, Secretary, Director, and Chairman

Ken Boenish – President

Analysts

John Rolfe – Argand Capital Advisors

George Whiteside – SWS Financial Services

Steve Kohl – Mangrove Capital Partners

Presentation

Operator

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Good day, ladies and gentlemen and thank you for standing by. Welcome to the fourth quarter fiscal 2010 earnings conference call. During today’s presentation, all parties will be in a listen-only mode and following the presentation, the conference will be open for questions. (Operator Instructions). As a reminder, this conference is being recorded today, Thursday, the 10th of June, 2010.

I'll now hand the conference over to Mr. Grant Williams, Chief Financial Officer. Please go ahead, sir.

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Grant Williams

Good morning and welcome to the New Frontier Media fiscal 2010 fourth quarter results conference call. Joining me this morning are Michael Weiner, Chief Executive Officer of New Frontier Media; Ken Boenish, the company’s President; Marc Callipari, the company’s General Counsel; and Scott Piper, the company's CTO.

We will begin the call this morning with Michael’s comments on the fourth quarter results and strategic initiatives and then I will discuss the detailed financial results before we open up the call for questions. A replay of this conference call will be available for seven days at 1-800-406-7325 using the pass code 4313809. This call will be archived for 12 months on our website at noof.com under the Investor Relations' Calendar of Events tab.

This call is also being webcast. During the question-and-answer segment, those of you listening via the Internet will be able to ask questions. Please submit your questions via e-mail to hpatton@noof.com.

All information discussed during the conference call is current only as of today or as of the date of the applicable financial results and the company assumes no obligation to update information discussed during this conference call.

During this conference call, management may make forward-looking statements within the meaning of the Safe Harbor provided by the SEC for such statements, including statements regarding the company’s expected financial position and operating results, its business strategy, its financing plans, and the outcome of certain contingencies.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any forward-looking statements and should be considered in conjunction with the cautionary statements included in our press release and our most recent reports containing risk factors filed with the Securities and Exchange Commission, including our most recently filed Forms 10-Q and 10-K.

I’ll now turn the call over to New Frontier Media’s Chief Executive Officer, Michael Weiner.

Michael Weiner

Thanks, Grant and good morning, everyone. New Frontier Media continued to advance its strategic objectives in the fourth quarter of fiscal 2010. Although our Transactional TV results were down relative to the prior-year quarter, this segment has returned to a growth trend when compared to the third quarter of fiscal 2010. This is significant when you take into consideration the fact that this was the first full quarter that included the reduction of our carriage on the largest DBS platform in the U.S. to two channels.

We have been working with our domestic distribution partners to increase the value and appeal of our content on their platforms. Some of our distribution partners have begun to implement our suggestions and we are seeing positive results. The growth has been augmented by the success of our international initiatives. Overall, international revenue was up over 250% as compared to the same prior-year quarter.

During the fourth quarter, we expanded our international footprint, increasing the number of programming hours on existing customer platforms and generally improving our content performance. We are also expanding the product offerings available to our international customers. This can be seen in our new linear pay-per-view channel offerings in Latin American markets, as well as high definition content in select markets. We believe these efforts will result in another year of strong international revenue growth and improved domestic results in the fiscal 2011 year.

In our Film Production segment, we generated revenue from several producer-for-hire arrangements during the fourth quarter and we expect to execute a new producer-for-hire deal in fiscal 2011. We have also completed production on the fourth installment of an episodic series that should be delivered in the first half of fiscal 2011. In addition, we continue to grow the mainstream component of this business segment.

Market conditions have allowed us to secure a distribution of higher-quality films, featuring strong, well recognized Hollywood stars, which has bolstered the overall performance of our repped content revenue. Additionally, we continue to believe that distribution of mainstream content to VOD and retail DVD markets will generate further growth for our repped content revenue. Although we incurred significant non-cash impairment charges in the fourth quarter due to a slower-than-excepted recovery in the film markets, we believe that Film Production segment is well positioned for solid performance in fiscal 2011.

Investors have periodically asked us about the future prospects of the Film Production segment, which has had significant non-cash write-downs of goodwill and other assets in the past two fiscal years. Unfortunately, market conditions and asset valuation multiples have declined since we acquired this business in early calendar 2006. And as a result of these declines, we have recorded impairment charges. However, we believe there is significant opportunity for this business segment, which could be meaningful for the company and we plan to continue to capitalize on these opportunities.

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