EX-99.1 2 v165592_ex99-1.htm Unassociated Document
 
FOR IMMEDIATE RELEASE
CONTACT:
 
November 11, 2009
Andrew Zaref, CFO, (212) 716-1977 x 222
 
   
   
 
ATRINSIC REPORTS OPERATING RESULTS FOR THE THIRD QUARTER 2009


New York (November 11, 2009) - Atrinsic, Inc., (NASDAQ: ATRN), a leading online marketing services company, announced third quarter 2009 results today.

Revenues for the third quarter of 2009 were $14.9 million compared with $30.8 million in the third quarter of 2008, a decrease of 52%. Subscription revenue decreased by approximately $10.5 million, or 68%, to $4.9 million for the three months ended September 30, 2009, compared to $15.4 million for the three months ended September 30, 2008. The decrease in subscription service revenue was principally attributable to a decrease in the average number of billable subscribers during the period as compared to the prior year period. Transactional revenue decreased by approximately $5.5 million or 35% to $10.0 million for the three months ended September 30, 2009 compared to $15.5 million for the three months ended September 30, 2008. The decrease was primarily attributable to the reduction in discretionary advertising expenditures by our clients.

Operating expenses for the third quarter of 2009 were $19.9 million compared with operating expenses of $30.8 million in the third quarter of 2008, a decrease of approximately $10.9 million. The decrease is primarily attributable to a reduced amount of purchased third party media, correlated to decreased revenues, and a reduction in labor and operating costs. During the quarter, the Company expended an estimated $2.0 million toward the continued development and launch of Kazaa. The Company is carefully monitoring its performance relative to expectations and market conditions to manage its fixed and discretionary customer acquisition, product development, and other operating expenses.

Adjusted EBITDA for the third quarter of 2009 was a loss of ($4.3) million compared with income of $1.3 million in the third quarter of 2008, a decrease of approximately $5.6 million. The decrease is primarily attributable to the decrease in revenue, partially offset by decreases in operating expenses, a portion of which Atrinsic has invested in new product and services development for future growth. Adjusted EBITDA is a non-GAAP measure – see Supplemental Disclosure regarding Non-GAAP Measures below.

Net loss for the third quarter of 2009 was ($2.4) million (($0.12) loss per basic and diluted share) compared with break even for the third quarter of 2008 ($0.00 earnings per basic and diluted share).

As of September 30, 2009, the Company had $17.6 million of cash, cash equivalents with adequate working capital to support future growth, business development initiatives, and capital activities.

              Jeffrey Schwartz noted, “The results that we are releasing today are not acceptable and we recognize the need for change. We are evaluating all of our products and services with an eye toward simplifying our business and refocusing on our core. In so doing, I firmly believe that we can return the business to growth and profitability in the future”.
 
 
All non-GAAP amounts have been adjusted from comparable GAAP measures. A description of all adjustments and reconciliations to comparable GAAP measures for all periods presented are included within this communication. 
 
 
 
 
Third Quarter 2009 Conference Call
 
Management will host a conference call today at 8:30 a.m. Eastern Time to discuss third quarter 2009 results with the investment community. Anyone interested in participating should call 1-877-941-8633 if calling within the United States, or 1-480-629-9822 if calling internationally. The call will also be accompanied by a live webcast and will be accessible via the Company’s corporate website at www.atrinsic.com.
 
A replay will be available until, November 18, 2009, which can be accessed by dialing 1-800-406-7325 if calling within the United States, or 1-303-590-3030 if calling internationally. Please use passcode 4138196 to access the replay.
 
About Atrinsic, Inc.

Atrinsic, Inc. www.atrinsic.com is a leading digital advertising and marketing services company in the United States. Atrinsic is organized as a single segment with two principal offerings: (1) Transactional  services - offering full service online marketing and distribution services which are targeted and measurable online campaigns and programs for marketing partners, corporate advertisers, or their agencies, generating qualified customer leads, online responses and activities, or increased brand recognition, and (2) Subscription  services - offering our portfolio of subscription based content applications direct to users working with wireless carriers and other distributors.
 
Atrinsic brings together the power of the Internet, the latest in mobile technology, and traditional marketing/advertising methodologies, creating a fully integrated multi platform vehicle for the advanced generation of qualified leads monetized by the sale and distribution of subscription content, brand-based distribution and pay-for-performance advertising. Atrinsic’s content is organized into four strategic content groups - digital music, casual games, interactive contests, and communities/lifestyles. The Atrinsic brands include GatorArcade, a premium online and mobile gaming site, Ringtone.com, a mobile music download service, and iMatchUp, one of the first integrated web-mobile dating services. Feature-rich Network advertising services include a mobile ad network, extensive search capabilities, email marketing, one of the largest and growing publisher networks, and proprietary subscription  content. Services are provided on a variety of pricing models including cost per action, fixed fee, or commission based arrangements.
 
Forward-Looking Statements

This press release contains “forward-looking” statements based on management’s current expectations as of the date of this release. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include the Company’s discussion relating to management’s current strategic priorities. Because such statements inherently involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward looking statements. Such risks include, among others, risks related to the successful offering of the Company’s products and services; the risk that the anticipated benefits of the Traffix merger or the Ringtone.com acquisition, and the acquisition of assets from Shopit, Inc. may not be realized and other risks that may impact the Company’s business, some of which are discussed in the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) on or about the date of this release under the caption “Risk Factors” and elsewhere, including in the Company’s other reports filed from time to time with the SEC. All information in this release is as of November 11, 2009. The Company does not undertake any obligation to update or revise these forward-looking statements to conform to actual results or changes in the Company’s expectations.

 
 
 
Supplemental Disclosure regarding Non-GAAP Measures
 
EBITDA and Adjusted EBITDA

The following tables set forth the Company’s EBITDA and Adjusted EBITDA for the three and nine months periods ended September 30, 2009 and 2008. The Company defines “EBITDA” and “Adjusted EBITDA” as net income adjusted to exclude the following line items presented in its Statement of Operations: Equity in loss of investee, noncontrolling interest, income taxes, other expense (income), interest expense, interest and dividend income, net, depreciation and amortization, and in the case of Adjusted EBITDA non-cash equity based compensation. While this non-Generally Accepted Accounting Principles (“GAAP”) measure has been relabeled to more accurately describe in the title the method of calculation of the measure, the actual method of calculating the measure is presented below.
 
The Company uses Adjusted EBITDA, among other things, and possibly with additional adjustments, to evaluate the Company’s operating performance, to value prospective acquisitions, and as one of several components of incentive compensation targets for certain management personnel, and this measure is among the primary measures used by management for planning and forecasting of future periods. This measure is an important indicator of the Company’s operational strength and performance of its business because it provides one of several links between profitability and operating cash flow. The Company believes the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that have different financing and capital structures or tax rates. In addition, it is our understanding that this measure is also among the primary measures used externally by the Company’s investors, analysts and peers in its industry for purposes of valuation and comparing the operating performance of the Company to other companies in its industry. The Company has elected to not adjust EBITDA for the impact of the adoption of ASC 718 (formerly FAS No.123R) and the Company has provided what it believes to be relevant supplemental information in this communication for analysis by others to fit their particular needs.

Since EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance. EBITDA and Adjusted EBITDA, as the Company calculates it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure does not necessarily represent funds available for discretionary use, and is not necessarily a measure of the Company’s ability to fund its cash needs. As EBITDA and Adjusted EBITDA exclude certain financial information compared with net income, the most directly comparable GAAP financial measure, users of this financial information should consider when the types of events and transactions which are excluded. As required by the SEC, the Company provides below a reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable amount reported under GAAP.

 
 
 
 
Reconciliation of Reported Net Income (Loss)
To EBITDA and Adjusted EBITDA
For the Three and Nine Months Ending September 30, 2009 and 2008
(Dollars in thousands, except per share data)
 
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
    
September 30,
    
September 30,
  
     
2009
      
2008
      
2009
      
2008
  
                                 
Net (Loss) Income attributable to Atrinsic
   $ (2,386 )   $ (6 )     (5,520 )   $ 793  
                                 
Reconciliation Items:
                                
Equity in loss of Investee
     61       -       113       -  
Net loss (income) attributable to noncontrolling interest
     -       (15 )     28       (92 )
Income taxes
     (2,736 )     (77 )     (4,336 )     517  
Other expense (income)
     -       271       5       145  
Interest (income) expense and dividends, net
     (4 )     (124 )     9       (485 )
Depreciation and amortization
     549       1,336       3,111       2,616  
                                 
EBITDA
   $ (4,516 )   $ 1,385     $ (6,590 )     3,494  
                                 
Non-cash equity based compensation
   $ 258     $ (70 )     1,080     $ 1,010  
                                 
Adjusted EBITDA
     (4,258 )   $ 1,315     $ (5,510 )   $ 4,504  
                                 
Diluted Adjusted EBITDA
                                
per Common Share
   $ (0.21 )   $ 0.06     $ (0.27 )   $ 0.20  

Condensed Pro Forma Summary

The following table sets forth the Company’s Condensed Proforma results for the three and nine month periods ended September 30, 2009 and 2008. The following pro forma consolidated amounts give effect to the merger with Traffix, Inc. on February 4, 2008 and the acquisition of Ringtone.com on June 30, 2008 with both being accounted for by the purchase method of accounting as if they had occurred as of the beginning of the periods presented. The pro forma consolidated results are not necessarily indicative of the operating results that would have been achieved had the transactions been in effect as of the beginning of the periods presented and should not be construed as being representative of future operating results. The Consolidated Statement of Operations for the three and nine months ending September 30, 2009 is presented for comparative purposes.
 
Pro Forma Condensed Consolidated Statement of Operations
For the Three and Nine Months Ending September 30, 2009 and 2008
(Dollars in thousands, except per share data)

 
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
    
September 30,
    
September 30,
  
   
2009 (Actual)
    
2008 (Actual)
    
2009 (Actual)
    
2008 (Proforma)
  
                                 
Net revenues
   $ 14,873     $ 30,819     $ 55,429     $ 105,545  
                                 
Operating expense net of interest
                                
and other expense
     19,995       30,902       65,285       101,874  
                                 
Income taxes
     (2,736 )     (77 )     (4,336 )     516  
                                 
Net Proforma (Loss) Income
   $ (2,386 )   $ (6 )   $ (5,520 )   $ 3,155  
                                 
Diluted earnings per share
   $ (0.12 )   $ (0.00 )   $ (0.27 )   $ 0.15  

 
 
 
Pro Forma EBITDA and Adjusted EBITDA
 
The following table sets forth pro forma EBITDA and pro forma Adjusted EBITDA amounts after giving effect to the merger with Traffix, Inc. on February 4, 2008 and the acquisition of Ringtone.com on June 30, 2008 as if they had occurred as of the beginning of the periods presented. The pro forma consolidated results are not necessarily indicative of the operating results that would have been achieved had the transactions been in effect as of the beginning of the periods presented and should not be construed as being representative of future operating results. EBITDA and Adjusted EBITDA for the three and nine months ending September 30, 2009 are presented for comparative purposes.
 
To Pro Forma EBITDA and Pro Forma Adjusted EBITDA
For the Three and Nine Months Ending September 30, 2009 and 2008
(Dollars in thousands, except per share data)
 
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
    
September 30,
    
September 30,
  
   
2009 (Actual)
    
2008 (Actual)
    
2009 (Actual)
    
2008 (Proforma)
  
                                 
Net Pro Forma (Loss) Income
   $ (2,386 )   $ (6 )   $ (5,520 )   $ 3,155  
                                 
Reconciliation Items:
                                
Equity in loss of Investee
     61       -       113       -  
Net loss (income) attributable to noncontrolling
     -       (15 )     28       (92 )
Income taxes
     (2,736 )     (77 )     (4,336 )     517  
Other expense (income)
     -       271       5       145  
Interest (income) expense and dividends, net
     (4 )     (124 )     9       (457 )
Depreciation and amortization
     549       1,336       3,111       3,055  
                                 
Pro Forma EBITDA
   $ (4,516 )   $ 1,385     $ (6,590 )   $ 6,323  
                                 
Non-cash equity based compensation
     258       (70 )     1,080       1,010  
                                 
Adjusted Pro Forma EBITDA
   $ (4,258 )   $ 1,315     $ (5,510 )   $ 7,333  
                                 
Diluted Adjusted EBITDA per Common Share
   $ (0.21 )   $ 0.06     $ (0.27 )   $ 0.33  
 
 
 
 
 
ATRINSIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands, except per share data)
 
   
September 30,
    
December 31,
  
   
2009
    
2008
  
ASSETS
            
Current Assets
            
Cash and cash equivalents
   $ 17,591     $ 20,410  
Marketable securities
     -       4,245  
Accounts receivable, net of allowance for doubtful accounts of $5,002 and $2,938
     11,492       16,790  
Income tax receivable
     2,676       2,666  
Prepaid expenses and other current assets
     3,027       3,686  
                 
Total Currents Assets
     34,786       47,797  
                 
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $918 and $1,435
     3,646       3,525  
GOODWILL
     12,096       11,075  
INTANGIBLE ASSETS, net of accumulated amortization of $8,167 and $5,683
     12,850       12,508  
DEFERRED TAXES
     4,843       778  
INVESTMENTS, ADVANCES AND OTHER ASSETS
     1,865       3,080  
                 
TOTAL ASSETS
   $ 70,086     $ 78,763  
                 
LIABILITIES AND EQUITY
                
                 
Current Liabilities
                
Accounts payable
   $ 6,956     $ 7,194  
Accrued expenses
     10,683       13,941  
Note payable
     -       1,858  
Deferred revenues and other current liabilities
     2,706       1,121  
                 
Total Current Liabilities
     20,345       24,114  
                 
STOCKHOLDERS' EQUITY
                
Common stock - par value $.01, 100,000,000 authorized, 23,580,527 and
                
22,992,280 shares issued at 2009 and 2008, respectively; and, 20,839,209 and
                
21,083,354 shares outstanding at 2009 and 2008, respectively.
     236       230  
Additional paid-in capital
     178,955       177,347  
Accumulated other comprehensive loss
     (89 )     (286 )
Common stock, held in treasury, at cost, 2,741,318 and 1,908,926 shares as of
                
September 30, 2009 and December 31, 2008.
     (4,992 )     (4,053 )
Accumulated deficit
     (124,369 )     (118,849 )
Total Stockholders' Equity
     49,741       54,389  
                 
NONCONTROLLING INTEREST
     -       260  
                 
TOTAL EQUITY
     49,741       54,649  
                 
TOTAL LIABILITIES AND EQUITY
   $ 70,086     $ 78,763  
 
 
 
 
 
ATRINSIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except per share data)
 
   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Subscription
   $ 4,889     $ 15,362     $ 15,099     $ 38,919  
Transactional
     9,984       15,457       40,330       52,089  
NET REVENUE
     14,873       30,819       55,429       91,008  
                                 
OPERATING EXPENSES
                                
Cost of media-third party
     9,911       20,853       35,859       60,778  
Product and distribution
     3,651       2,681       8,502       7,634  
Selling and marketing
     2,168       2,596       7,095       6,757  
General, administrative and other operating
     3,659       3,304       10,563       12,345  
Depreciation and amortization
     549       1,336       3,111       2,616  
      19,938       30,770       65,130       90,130  
(LOSS) INCOME FROM OPERATIONS
     (5,065 )     49       (9,701 )     878  
                                 
OTHER (INCOME) EXPENSE
                                
Interest income and dividends
     (5 )     (207 )     (67 )     (568 )
Interest expense
     1       83       76       83  
Other expense (income)
     -       271       5       145  
      (4 )     147       14       (340 )
(LOSS) INCOME BEFORE TAXES AND EQUITY IN LOSS OF
                                
INVESTEE
     (5,061 )     (98 )     (9,715 )     1,218  
                                 
INCOME TAXES
     (2,736 )     (77 )     (4,336 )     517  
                                 
EQUITY IN LOSS OF INVESTEE, AFTER TAX
     61       -       113       -  
                                 
NET (LOSS) INCOME
     (2,386 )     (21 )     (5,492 )     701  
                                 
LESS: NET (INCOME) LOSS ATTRIBUTABLE TO
                                
NONCONTROLLING INTEREST, AFTER TAX
     -       (15 )     28       (92 )
                                 
NET (LOSS) INCOME ATTRIBUTABLE TO ATRINSIC, INC
   $ (2,386 )   $ (6 )     (5,520 )   $ 793  
                                 
NET (LOSS) INCOME ATTRIBUTABLE TO ATRINSIC, INC
                                
PER SHARE
                                
Basic
   $ (0.12 )   $ (0.00 )   $ (0.27 )   $ 0.04  
Diluted
   $ (0.12 )   $ (0.00 )   $ (0.27 )   $ 0.04  
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING:
                                
Basic
     20,634,558       22,545,451       20,570,326       21,208,980  
Diluted
     20,634,558       22,545,451       20,570,326       22,006,232  
 
 
 
 
 
ATRINSIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands, except per share data)
 
   
Nine Months Ended September 30,
  
   
2009
    
2008
  
Cash Flows From Operating Activities
            
Net (loss) income
   $ (5,492 )   $ 793  
Adjustments to reconcile net loss (income) to net cash
                
 provided by (used in) operating activities:
                
Allowance for doubtful accounts
     1,824       1,221  
Depreciation and amortization
     3,111       3,097  
Stock-based compensation expense
     1,080       1,009  
Stock for service
     16       -  
Net loss on sale of marketable securities
     -       238  
Deferred income taxes
     (4,640 )     (1,248 )
Equity in loss (income) of investee
     186       (92 )
Changes in operating assets and liabilities of business, net of
                
acquisitions:
                
Accounts receivable
     4,812       2,872  
Prepaid income tax
     (11 )     (2,478 )
Prepaid expenses and other current assets
     1,334       2,116  
Accounts payable
     (237 )     (3,412 )
Other, principally accrued expenses
     (4,330 )     1,215  
Net cash (used in) provided by operating activities
     (2,347 )     5,331  
                 
Cash Flows From Investing Activities
                
Cash received from investee
     1,940       -  
Cash paid to investees
     (914 )     (7,041 )
Purchases of marketable securities
     -       (6,332 )
Proceeds from sales of marketable securities
     4,242       20,758  
Business combinations
     (2,220 )     12,271  
Capital expenditures
     (675 )     (1,737 )
                 
Net cash provided by investing activities
     2,373       17,919  
                 
Cash Flows From Financing Activities
                
Repayments of notes payable
     (1,750 )     (111 )
Liquidation of non-controlling interest
     (288 )     -  
Return on investment
     138       -  
Purchase of common stock held in treasury
     (939 )     (2,581 )
Proceeds from exercise of options
     -       343  
Net cash used in financing activities
     (2,839 )     (2,349 )
                 
Effect of exchange rate changes on cash and cash equivalents
     (6 )     -  
                 
Net (Decrease) Increase In Cash and Cash Equivalents
     (2,819 )     20,901  
Cash and Cash Equivalents at Beginning of Year
     20,410       987  
Cash and Cash Equivalents at End of Period
   $ 17,591     $ 21,888  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                
Cash paid for interest
   $ 72     $ 20  
Cash paid for taxes
   $ 284     $ 2,548