New Frontier Media, Inc. ( NOOF)

F2Q2011 (Qtr End 09/30/10) Earnings Conference Call

November 5, 2010 11:00 AM ET


Grant Williams – CFO

Michael Weiner – CEO

Ken Boenish – President


Greg Scott – Merriman Capital

George Whiteside – SWS Financial Services

James Simone – Wentworth

Jerry Falkner – R.J. Falkner & Company



Welcome to the Second Quarter Fiscal Year 2011 Earnings Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open to the questions. (Operator Instructions) This conference is being recorded today, Friday, November 5, 2010. I would now like to turn the conference over to the Chief Financial Officer, Grant Williams. Please go ahead, sir.

Grant Williams

Thanks Christina. Good morning and welcome to the New Frontier Media’s fiscal 2011 second quarter results conference call. Joining me this morning are Michael Weiner, Chief Executive Officer of New Frontier Media, Ken Boenish, the company’s President; and Marc Callipari, the company’s General Counsel.

We will begin the call this morning with Michael’s comments on the second quarter results and strategic initiatives. And then I’ll 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 4380641. This call will be archived for 12 months on our website at 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 All information discussed during the conference call is current only as of today or as of the day 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 the New Frontier Media’s Chief Executive Officer, Michael Weiner.

Michael Weiner

Thank you, Grant, and good morning, everyone. New Frontier Media continued to execute its long-term strategic plan during the second quarter of fiscal 2011. As part of this effort to advance the strategic plan, we have been focusing our attention on expanding the transactional TV segment’s international footprint.

During the reported quarter, we grew our international revenue to $1.4 million, up 75% as compared to the same prior year quarter. The large majority of this revenue has been generated through VOD distribution. We are expanding the international service we provide to include pay-per-view channels and then recently we made several key investments in order to further these efforts.

In April, we announced a new transponder agreement allowing us to distribute up to three pay-per-view channels in Latin America. During the completed quarter, we successful launched these channels and are already distributing the pay-per-view channels on the largest system in Mexico and Columbia.

We also announced in August a new lease arrangement that allows us to launch up to three pay-per-view channels in Europe. We are currently working to secure distribution agreements with platforms throughout Europe and we have several significant deals in the pipeline.

Due to the strong performance of our VOD content, most our current VOD affiliates have shown strong interest in our pay-per-view channels. These new pay-per-view channel launches require additional investment and we believe our distribution of new channels will generate an exponential return on those investments over the long term.

We are encouraged with the slight increase in our sequential transactional TV segment revenue as compared to the results from the first quarter of fiscal 2011, and believe this could be a further indication of our success in stabilizing the domestic revenue. We believe there will continue to be opportunities to improve the domestic VOD and pay-per-view revenue as we grow our market share with existing customers.

In addition, we continued to expand our testing of pricing and packaging strategies aimed to improve the value of our content to consumers.

Regarding the film production segment, although we have made good progress with our initiatives, the film production segment continues to be under pressure as a result of the continuing challenges within the film markets. These challenges were evidenced by the noncash billing, cost impairment charges, and increases in our recoupable costs of producer advance reserves during the quarter.

We do continue to believe, however, there are opportunities to capitalize on this segment’s assets and relationships as we develop and refine our long-term strategy to this division.

Looking ahead, the company is gaining traction with many of its strategic initiatives as well as making investments that we believe will generate long-term shareholder value.

Now I’ll turn the call over to Grant, to discuss the financial results and related information in greater detail.

Grant Williams

Thank you, Michael. I’ll begin the financial review this morning by discussing the second quarter operating performance by business segment, and then I’ll briefly discuss our liquidity position before opening the call up for questions.

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