Onstream Media Corporation Announces First Quarter Fiscal 2013 Financial Results

- Company Reports Higher Audio and Web Conferencing Revenues along with Continued Reduction in Operating Expenses –

- Management to Hold Conference Call for Investment Community on

Wednesday, February 20, 2013 at 4:00pm ET -

POMPANO BEACH, FL, February 20, 2013 – Onstream Media Corporation (OTCQB: ONSM), a leading online service provider of live and on-demand corporate audio and web communications and virtual event technology with integrated social media marketing tools, announced today its financial results for the first quarter ended December 31, 2012.

Highlights

·         Revenues for the first quarter of fiscal 2013 were approximately $4.3 million as compared to approximately $4.5 million for the comparable quarter of fiscal 2012. This decrease was primarily the result of the loss of a single customer that we were providing streaming services to at very little margin, as part of a larger business relationship that is still in place. Therefore, the loss of this customer and the related revenues did not have a material impact on our net operating results.

·         Audio and Web Conferencing Services Group revenues were approximately $2.6 million for the three months ended December 31, 2012, an increase of approximately $104,000 (4.2%) from the corresponding period of the prior fiscal year. This increase included only one month of revenues from the Intella2 Inc. assets and operations of Intella2, a San Diego-based communications company, which Onstream acquired on November 30, 2012.

·         Onstream’s EBITDA, as adjusted, for the three months ended December 31, 2012 was negative ($38,997), a $97,536 improvement as compared to EBITDA, as adjusted, of negative ($136,533) for the first quarter of fiscal 2012. EBITDA for the current year quarter was adversely affected by a one-time expense for fees related to the Intella2 acquisition.

·         Consolidated gross margin percentage was 70.3% for the three months ended December 31, 2012, versus 65.7% for the corresponding period of the prior fiscal year. This improvement was due to reductions in Infinite cost of sales as well as the discontinuance of a single low margin DMSP and hosting customer as noted above.

·         Consolidated operating expenses were approximately $3.3 million for the three months ended December 31, 2012, a decrease of approximately $133,000 (3.8%) from the corresponding period of the prior fiscal year, primarily due to an approximately $200,000, or 33.0%, decrease in professional fees expense as compared to the corresponding period of the prior fiscal year.

·         Cash flow from operating activities (before changes in current assets and liabilities other than cash) for the three months ended December 31, 2012 was negative ($10,425), compared to net cash provided by operating activities of $110,259 for the three months ended December 31, 2011. Cash used in operations for the current year quarter included a one time expense of $85,000 for broker’s fees related to the  Intella2 acquisition, an approximately $65,000 cost of a funding commitment letter as well as an increase in interest expense arising from the debt financing used to acquire Intella2 and without the full benefit of the Intella2 revenues for the first quarter.

Management Commentary

Randy Selman, President and Chief Executive Officer of Onstream Media, stated, “The impact of the changes we’ve made over the past couple of years is starting to reveal itself, especially in the lower cost structure as well as the much improved gross profit margin as we have focused on more profitable business. While operations did use some cash during the quarter, that usage included a few expense items that were of a one-time or unusual nature, including items from our acquisition of Intella2 that will not recur. Also, the current quarter only had one month of revenue from our newly acquired Intella2 operations.”

Financial Discussion

Consolidated operating revenue was approximately $4.3 million for the three months ended December 31, 2012, a decrease of approximately $234,000 (5.2%) from the corresponding period of prior fiscal year, due to decreased revenues of the Digital Media Services Group.

Digital Media Services Group revenues were approximately $1.7 million for the three months ended December 31, 2012, a decrease of approximately $339,000 (16.8%) from the corresponding period of the prior fiscal year, primarily due to a decrease in DMSP and hosting division revenues. This decrease was primarily the result of the loss of a single customer that we were providing streaming services to at very little margin, as part of a larger business relationship that is still in place. Therefore, the loss of this customer and the related revenues did not have a material impact on our net operating results.

Consolidated gross margin was approximately $3.0 million for the three months ended December 31, 2012, an increase of approximately $43,000 (1.5%) from the corresponding period of the prior fiscal year. Our consolidated gross margin percentage was 70.3% for the three months ended December 31, 2012, versus 65.7% for the corresponding period of the prior fiscal year. This was due to reductions in Infinite cost of sales as well as the discontinuance of a single low margin DMSP and hosting customer, as discussed above. During the third quarter of fiscal 2012, we renegotiated certain supplier contracts which reduced our Infinite division cost of sales by approximately $55,000 for the three months ended December 31, 2012 and that we expect will reduce our Infinite division cost of sales by another approximately $116,000 for the remainder of fiscal 2013, as compared to the corresponding period of fiscal 2012.

Onstream’s first quarter fiscal 2013 net loss of approximately $0.7 million, or $(0.05) per share, was based on approximately 13.3 million weighted average shares outstanding, as compared to net loss of approximately $0.7 million, or $(0.06) per share, which was based on approximately 11.9 million weighted average shares outstanding. As discussed above, the current quarter loss includes a one time expense of $85,000 for broker’s fees related to the Intella2 acquisition, an approximately $65,000 cost of a funding commitment letter and an approximately $58,000 increase in interest expense arising from the debt financing used to acquire Intella2. 

The current quarter net loss also includes a non-cash debt extinguishment loss of approximately $69,000.

Onstream’s EBITDA, as adjusted, for the three months ended December 31, 2012 was negative ($38,997) an approximately $97,536 improvement as compared to EBITDA, as adjusted, of negative ($136,533) for the first quarter of fiscal 2012. EBITDA for the current year quarter was adversely affected by a one-time expense of $85,000 for brokers fees related to the Intella2 acquisition.

Cash flow from operating activities (before changes in current assets and liabilities other than cash) for the three months ended December 31, 2012 was negative ($10,425), compared to net cash provided by operating activities of $110,259 for the three months ended December 31, 2011. Cash used in the quarter for operations included a one time expense for $85,000 for broker’s fees  related to the Intella2 acquisition, an approximately $65,000 cost of a funding commitment letter as well as an increase in interest expense arising from the debt financing used to acquire Intella2.

Teleconference

Onstream’s leadership team will conduct a conference call on Wednesday, February 20^th at 4:00 p.m. ET to discuss those financial results. During this teleconference, Mr. Randy Selman, President and Chief Executive Officer of Onstream and Mr. Robert Tomlinson, the company's Chief Financial Officer, will also discuss the integration of the Company’s recent acquisition of Intella2 as well as provide an outlook for the remainder of fiscal 2013. The discussion will be followed by an open Q&A session. Interested parties may listen to the presentation live online at http://www.visualwebcaster.com/event.asp?id=92268 or by calling 1-888-645-4404 or 201-604-0169. It is recommended to dial in approximately 10 to 15 minutes prior to the scheduled start time. An audio rebroadcast of the conference call will be archived for one year online at http://www.visualwebcaster.com/event.asp?id=92268.

About Onstream Media:

Onstream Media Corporation (OTCQB: ONSM), is a leading online service provider of live and on-demand corporate audio and web communications and  virtual event technology with integrated social media marketing tools. Onstream Media's innovative Digital Media Services Platform (DMSP) provides customers with cost effective tools for encoding, managing, indexing, and publishing content via the Internet. The company's MarketPlace365® solution enables publishers, associations, tradeshow promoters and entrepreneurs to rapidly and cost effectively self-deploy their own online virtual marketplaces. In addition, Onstream Media provides live and on-demand webcasting, webinars, web and audio conferencing services. 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 AAA, Dell, Disney, Georgetown University, National Press Club, PR Newswire, Shareholder.com (NASDAQ), Sony Pictures, and the U.S. Government. Onstream Media's strategic relationships include Akamai, BT Conferencing, and Trade Show News Network (TSNN). 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.

Financial Tables Follow

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ONSTREAM MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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ONSTREAM MEDIA CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET LOSS TO EBITDA AND EBITDA, AS ADJUSTED

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ONSTREAM MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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