CLIFTON PARK, N.Y., April 30 /PRNewswire-FirstCall/ -- On2
Technologies, Inc. (NYSE Amex: ONT), a leader in video compression
solutions, today announced quarterly results for the quarter ending
March 31, 2009. Revenue in the first quarter of 2009 was $4.0
million, down 10% from the first quarter of 2008, but up 12% from
the fourth quarter of 2008. On a GAAP basis, first quarter net loss
was ($3.0) million, or ($0.02) per share, compared to a net loss of
($4.7) million, or ($0.03), in the first quarter of 2008. GAAP net
loss includes $1.0 million in restructuring and impairment charges
related to a workforce reduction at On2's Finland subsidiary.
Excluding these restructuring and impairment charges, non-GAAP net
loss was ($2.0) million, or ($0.01) per share. The narrowing of the
loss on a year-over-year basis was primarily attributable to
significant expense reductions. Matt Frost, Chief Operating Officer
and interim Chief Executive Officer of On2 Technologies said, "In
the first quarter we made significant progress in both driving
long-term revenue growth and reducing our overall cost structure.
We are pleased with our revenue performance across the board, which
produced sequential revenue increases in each of our major product
lines over the fourth quarter of 2008. Video content producers and
providers continue to see both quality and cost benefits of
deploying On2's technology, and these factors are as important in
weak economic environments as they are in strong environments.
Additionally, we were pleased to see royalties increase both
year-over-year and sequentially, as it signals increases in use of
our technology among our customers and their audiences." Frost
added, "During the first quarter we made important headway in the
cost reduction program that we initiated in 2008. Additionally, we
restructured our Finland operation through a furlough of
approximately 37 employees that we initiated in Q1. We expect that
restructuring to have a positive impact on our quarterly results
for the remainder of 2009. We also believe our lower cost
structure, combined with an increasingly powerful product line,
further positions us for long-term success." First Quarter Business
Highlights -- Royalties of $1.1 million in the first quarter
increased 20% year-over-year and 37% sequentially. Royalties
represented 28% of revenue in the quarter, compared with 21% of
revenue in the first quarter of 2008 and 23% of revenue in the
fourth quarter of 2008. The increase in year-over-year royalties
reflects a combination of an increase in the number of royalty
paying customers and higher unit shipments and/or video served
using On2 technology. -- In the first quarter of 2008, On2 added
over 50 new customers, excluding online sales, with 11 transactions
in the quarter that contributed over $50,000 each to revenue. -- In
January, On2 announced that the Chinese video website, Tudou.com,
with a catalog of over 13 million videos, is migrating to On2(R)
VP6(R) video for their default video codec for creating Adobe Flash
video content. Tudou.com serves over 7 million unique visitors in a
day and is experiencing cost-savings from a 40% reduction in
bandwidth overhead with VP6. -- In February, On2 announced a
license agreement with Shanghai InfoTM, a subsidiary of Shuoying
Digital Science & Technology, a Chinese OEM manufacturer of
consumer multimedia electronics. Shanghai InfoTM licensed two
Hantro hardware video encoders, as well as VP6 software video
decoding technology for its single-chip solution for mobile
internet devices. -- Also in February, On2 announced that 21ViaNet,
the leading carrier-neutral Internet data center service provider
in China, has licensed On2 VP7(TM) video for video-on-demand
applications, enabling them to bring real-time video to telecom
partners such as China Telecom and China Unicom, as well as major
content providers like CCTV. -- In March, On2 announced that
VisualOn has licensed the VP6 format and software and will optimize
and integrate VP6 decoding software into its multimedia software
application suite for mobile platforms. -- Also in March, On2 began
implementing a number of cost reduction initiatives at its Finnish
subsidiary, On2 Finland. These initiatives include a furlough of
approximately 37 employees out of approximately 65 employees at the
subsidiary through a process that is expected to take four months
to complete. In the first quarter, On2 incurred $1.0 million in
restructuring and impairment charges associated with the furlough.
Conference Call Management will hold a conference call to discuss
its results for the first quarter of 2009 and other developments in
the business at 5:00pm ET on April 30, 2009. To access the live
webcast, visit:
http://www.investorcalendar.com/IC/CEPage.asp?ID=144207. If you
prefer to dial-in to the call, the information is as follows: Live
Call: (877) 407-9210, domestic (201) 689-8049, international
Replay: (877) 660-6853 (201) 612-7415 Replay Passcodes: Account #:
286 Conference ID #: 321431 The telephonic replay will be available
until May 7, 2009. About On2 On2 (NYSE Amex: ONT) creates advanced
video compression technologies that power the video in today's
leading desktop and mobile applications and devices. On2 customers
include Adobe, Skype, Nokia, Infineon, Sun Microsystems, Mediatek,
Sony, Brightcove, and Move Networks. On2 is also an industry leader
in server-based video transcoding software. Their On2 VP6 video
format provides web and HD-quality video for leading sites such as
Hulu, Vimeo, Yahoo! Video, Dailymotion, CCTV.com, 56.com, Tudou.com
and Eurosport.com. On2 Technologies is headquartered in Clifton
Park, NY USA. For more information visit http://www.on2.com/ or
http://www.on2.cn/. All trademarks mentioned in this document are
the property of their respective owners. Forward-Looking and
Cautionary Statements Except for historical information and
discussions contained herein, certain statements included in this
press release may constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements included in this document, other than
statements of historical fact, that address activities, events or
developments that management expects, believes or anticipates will
or may occur in the future are forward-looking statements. These
statements represent our reasonable judgment on the future based on
various factors and using numerous assumptions and are subject to
known and unknown risks, uncertainties and other factors that could
cause our actual results and financial position to differ
materially from those contemplated by the statements. You can
identify these statements by the fact that they do not relate
strictly to historical or current facts. They use words such as
"expect," "will," "anticipate," "should," "plans" and other words
of similar meaning. Such statements include, but are not limited
to, statements regarding the potential future impact of cost
cutting and containment measures, the expected size of the
headcount reduction at On2 Finland and the degree to which On2's
lower cost structure, combined with an increasingly powerful
product line, further positions On2 for long-term success.
Investors should not rely on forward-looking statements because
they are subject to a variety of risks and uncertainties and other
factors that could cause actual results to differ materially from
the Company's expectation. Additional information concerning risk
factors is contained from time to time in the Company's SEC
filings. The Company expressly disclaims any obligation to update
the information contained in this release. Non-GAAP Financial
Measures On2 has provided in this release financial information
that has not been prepared in accordance with GAAP. This
information includes non-GAAP net loss and non-GAAP net loss per
share excluding restructuring and impairment charges. This non-GAAP
information is provided to enhance the reader's overall
understanding of the Company's current financial performance and
prospects for the future. Specifically, On2 believes that the
exclusion of restructuring and impairment charges provides useful
comparative data by reflecting On2's business operations in a
manner that is consistent with expected future operations.
Management has historically used non-GAAP net loss and non-GAAP net
loss per share when evaluating operating performance because we
believe the exclusion of the items described above provides an
additional measure of our core operating results and facilitates
comparisons of our core operating performance against prior periods
and our business model objectives. The presentation of this
additional information should not be considered in isolation or as
a substitute for results prepared in accordance with accounting
principles generally accepted in the United States. In the
financial tables of our earnings press release, On2 has included
for the relevant periods reconciliations of GAAP net loss and GAAP
net loss per share to non-GAAP net loss and non-GAAP net loss per
share excluding restructuring and impairment charges. On2
Technologies, Inc. Condensed Consolidated Balance Sheets December
31, ASSETS March 31, 2009 2008 -------------- ------------
(unaudited) Current assets: Cash and cash equivalents $3,159,000
$4,157,000 Short-term investments 131,000 132,000 Accounts
receivable 2,178,000 2,730,000 Prepaid expenses and other current
assets 659,000 439,000 ------- ------- Total current assets
6,127,000 7,458,000 Intangible assets, net 15,229,000 16,587,000
Property and equipment, net 1,188,000 1,401,000 Other assets
413,000 430,000 ------- ------- Total assets $22,957,000
$25,876,000 =========== =========== LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable & accrues expenses
$5,471,000 $5,720,000 Accrued Restructuring expenses 868,000 -
Deferred revenue 2,217,000 2,133,000 Short-term borrowings 16,000
63,000 Current portion of long-term debt 1,044,000 1,148,000
Capital lease obligation 245,000 260,000 ------- ------- Total
current liabilities 9,861,000 9,324,000 Capital lease obligation,
excluding current portion 362,000 432,000 Long-term debt 1,608,000
1,802,000 Warrant derivative liability 121,000 - ------- - Total
liabilities 11,952,000 11,558,000 Commitments and contingencies - -
Total stockholders' equity 11,005,000 14,318,000 ----------
---------- Total liabilities and stockholders' equity $22,957,000
$25,876,000 =========== =========== On2 Technologies, Inc.
Unaudited Condensed Consolidated Statements of Operations Three
months ended March 31, ------------------ 2009 2008 ---- ----
Revenue $4,016,000 $4,452,000 Operating expenses: Cost of revenue
(1) 573,000 1,430,000 Research and development (2) 2,164,000
2,808,000 Sales and marketing (2) 976,000 1,889,000 General and
administrative (2) 2,074,000 2,768,000 Restructuring expense
1,032,000 - Equity-based compensation: Research and development
138,000 119,000 Sales and marketing 49,000 38,000 General and
administrative 232,000 213,000 ------- ------- Total operating
expenses 7,238,000 9,265,000 --------- --------- Income (loss) from
operations (3,222,000) (4,813,000) Interest and other (expense)
income, net 234,000 74,000 ------- ------ Loss before provision for
income taxes (2,988,000) (4,739,000) Provision for income taxes - -
------- ------- Net loss $(2,988,000) $(4,739,000) Convertible
preferred stock 8% dividend - - Net loss attributable to common
stockholders $(2,988,000) $(4,739,000) =========== ===========
Basic and diluted net loss per common share $(0.02) $(0.03) ======
====== Weighted average basic and diluted common shares outstanding
173,361,000 170,487,000 =========== =========== (1) Includes
equity-based compensation of $71,000 and $83,000 for the three
months ended March 31, 2009 and 2008, respectively (2) Excludes
equity-based compensation, which is presented separately On2
Technologies, Inc. Unaudited Reconciliation of Non-GAAP Adjustments
Three months ended March 31, --------------------------- 2009 2008
---- ---- Operating Expenses: -------------------- GAAP Operating
expenses: $7,238,000 $9,265,000 Restructuring expense 1,032,000 -
Operating expenses, excluding restructuring ---------- ----------
expense $6,206,000 $9,265,000 ---------- ---------- Net Loss:
--------- GAAP net loss $(2,988,000) $(4,739,000) Restructuring and
impairment charge 1,032,000 - Net loss, excluding restructuring and
----------- ---------- impairment charge $(1,956,000) $(4,739,000)
----------- ----------- GAAP Net loss per share $(0.02) $(0.03)
====== ====== Net Loss per share, excluding restructuring and
impairment charge $(0.01) $(0.03) ====== ====== DATASOURCE: On2
Technologies, Inc. CONTACT: Investors, Garo Toomajanian, ICR, LLC,
, +1-518-881-4299 Web Site: http://www.on2.com/
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