Revenue increases 23% in fiscal 2008 CLIFTON PARK, N.Y., March 5
/PRNewswire-FirstCall/ -- On2 Technologies, Inc. (NYSE Alternext
US: ONT), a leader in video compression solutions, today announced
quarterly and annual financial results for the period ending
December 31, 2008. Revenue in the fourth quarter of 2008 was $3.6
million, compared to revenue of $6.1 million in the fourth quarter
of 2007 and $5.0 million in the third quarter of 2008. The
year-over-year fourth quarter revenue decline was primarily due to
challenging business conditions in the global semiconductor
industry in which the company's Finnish subsidiary, On2 Finland,
operates, while the sequential decline was due largely to normal
quarter-to-quarter variability in licensing patterns. On a GAAP
basis, fourth quarter net loss was ($10.2) million, or ($0.06) per
share, compared to a net loss of ($1.8) million, or ($0.01) per
share, in the fourth quarter of 2007. The loss was largely driven
by a $7.0 million non-cash write-down of goodwill and intangible
assets related to the company's On2 Finland business. For the year
2008, revenue was $16.3 million, up 23% from $13.2 million in 2007.
GAAP net loss for 2008 was ($51.2) million, or ($0.30) per share,
compared to $6.9 million, or ($0.06) per share, in 2007. In 2008,
the company wrote down $33.3 million in goodwill and intangible
assets related to its On2 Finland operation. Matt Frost, Chief
Operating Officer and interim Chief Executive Officer of On2
Technologies said, "We are pleased with our business progress in
2008. We were particularly encouraged to see royalty revenue
increase 76% in 2008, confirming growing use of our technology
among a larger group of customers. In the fourth quarter we saw
some normal quarter-to-quarter variability after a strong third
quarter, resulting in a sequential revenue decline. Additionally,
our On2 Finland operation had a weaker performance in light of the
global economic recession, which has affected our semiconductor and
OEM customers and partners. However, our software-based encoding
solutions continue to be successful in the current economic
environment. As consumers are looking for lower-cost entertainment
and video content distributors look to reduce bandwidth costs,
on-line video continues to grow in popularity and our solutions
have demonstrated a compelling return on investment for video
content producers and providers." Frost continued, "We are pleased
with the results of our recent cost-cutting efforts and we expect
to see further benefits of these measures in early 2009. We are
optimistic that our differentiated bandwidth- and cost-reducing
technology will continue to be adopted by customers, despite - or
in some cases perhaps, because of - macroeconomic conditions.
Further, based on our current new business and cost-containment
projections, we continue to anticipate that the Company's existing
capital resources will be sufficient to satisfy our cash flow
requirements for the next 12 months. We believe our more
streamlined operations better position us for success in a soft
economy and should provide even greater advantage when the economy
improves." On2 Technologies also announced today that it plans to
appoint Wayne Boomer as Chief Financial Officer, succeeding Anthony
Principe, who plans to resign this month. Mr. Boomer joins On2 from
Inmedius, Inc., where he served as CFO and Vice President of
Finance for over five years. In that role, he was responsible for
management of finance, HR, IT, contracts and facilities worldwide.
Prior to joining Inmedius, Mr. Boomer spent seven years with
MapInfo Corporation in finance roles of increasing responsibility,
including Director of Finance and Operations for the 140 employees
working in MapInfo's Europe, Middle East and Africa region. Mr.
Boomer began his career at Coopers and Lybrand, where he was a
senior associate. He graduated from Siena College earning a
Bachelor of Science degree in Business Administration and is a CPA.
"It has been a pleasure to work with Tony Principe for the last
five years," said Matt Frost, interim Chief Executive Officer. "The
Company and board of directors are grateful for his many
contributions and we wish him well in his future endeavors. We are
very pleased to be welcoming Wayne Boomer to On2 and are confident
that the CFO transition will be a smooth process." Fourth Quarter
Business Highlights -- Royalties increased 16% year-over-year to
$820,000 in the fourth quarter and decreased 15% sequentially.
Royalties represented 23% of revenue in the quarter, compared with
11% in the fourth quarter of 2007 and 19% of revenue in the third
quarter of 2008. The increase in year-over-year royalties reflects
higher unit shipments and increased delivery of video that uses On2
technology. -- Royalties were $3.4 million in 2008, up 76% from
$1.9 million in 2007 and represented 21% of 2008 revenue. Royalties
increased year-over-year due to increases in both the number of
royalty-paying customers and the average royalty per customer. --
In the fourth quarter of 2008, On2 added over 50 new customers,
excluding online sales, with 12 transactions in the quarter that
contributed over $50,000 to revenue. -- In November, On2 introduced
Flix(R) Cloud, a video transcoding solution building on On2's
popular Flix Engine. Flix Cloud will operate in the Amazon EC2(R)
(Elastic Computing Cloud) and provide on-demand, pay-as-you-go
networked transcoding. -- In November, On2 announced that China's
leading video-sharing website, 56.com, is switching to VP6-based
Flash video and is using the Flix encoding engine for server-side
transcoding and publishing. 56.com serves video to over 35 million
people each month and chose On2's VP6 encoder based on factors
including encoding speed, video performance and quality, market
acceptance, and licensing terms. -- In November, On2 announced that
Skype has extended its relationship with On2 in a new strategic
agreement. In February, Skype 4.0 for Windows was launched
featuring advanced video conferencing capabilities that use On2's
VP7 technology. Additionally, Asus recently launched its AiGuru SV1
Skype Certified videophone, which also uses VP7 technology. -- In
December, On2 added support for Sun JavaFX(R) to the Flix line of
video encoders, enabling cross-platform video encoding for JavaFX
applications. Conference Call Management will hold a conference
call to discuss On2's results for the fourth quarter and full year
2008, as well as other developments in the business, at 5:00pm ET
on March 5, 2009. To access the live webcast, visit:
http://www.investorcalendar.com/IC/CEPage.asp?ID=136464 The webcast
replay will be available until March 12, 2009. 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 #: 314509 About On2 On2 creates advanced video
compression technologies for desktop and wireless environments.
Powering the video in many of today's leading web and mobile
applications and devices, On2's customers include: Nokia, Infineon,
Sun Microsystems, Mediatek, Sony, Brightcove, Move Networks, Adobe
and Skype. On2 Technologies is headquartered in Clifton Park, NY
USA. For more information please visit http://www.on2.com/. 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 impact of cost cutting and containment
measures, the potential for such cost cutting and containment
measures to right-size the business and offset some of the global
weakness in the economy, the Company's plans to build an encoding
service and the potential benefit to the Company of continued
growth in demand for on-line video. 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. On2 Technologies, Inc. Condensed Consolidated Balance
Sheets December 31, ------------ ASSETS 2008 2007 ---- ---- Current
assets: Cash and cash equivalents $4,157,000 $9,573,000 Short-term
investments 132,000 5,521,000 Accounts receivable, net 2,730,000
7,513,000 Prepaid expenses and other current assets 439,000
1,492,000 ------- --------- Total current assets 7,458,000
24,099,000 Intangible assets, net 16,587,000 54,500,000 Property
and equipment, net 1,401,000 751,000 Other assets 430,000 175,000
------- ------- Total assets $25,876,000 $79,525,000 ===========
=========== LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable and accrued expenses $5,720,000
$6,253,000 Deferred revenue 2,133,000 1,887,000 Short-term
borrowings 63,000 2,198,000 Current portion of long-term debt
1,148,000 491,000 Capital lease obligation 260,000 24,000 -------
------ Total current liabilities 9,324,000 10,853,000 Capital lease
obligation, excluding current portion 432,000 18,000 Long-term debt
1,802,000 3,082,000 --------- --------- Total liabilities
11,558,000 13,953,000 Stockholders' equity 14,318,000 65,572,000
---------- ---------- Total liabilities and stockholders' equity
$25,876,000 $79,525,000 =========== =========== On2 Technologies,
Inc. Consolidated Statements of Operations
------------------------------------- Three months ended December
31, ------------------------------- 2008 2007 2006 ---- ---- ----
Revenue $3,580,000 $6,118,000 $2,117,000 Operating expenses: Cost
of revenues(1) 590,000 1,134,000 511,000 Research and
development(2) 2,071,000 2,333,000 272,000 Sales and marketing(2)
1,313,000 2,386,000 470,000 General and administrative(2) 2,588,000
1,732,000 1,001,000 Asset impairment 7,023,000 Equity-based
compensation: Research and development 108,000 81,000 16,000 Sales
and marketing 57,000 69,000 (16,000) General and administrative
298,000 161,000 170,000 ------- ------- ------- Total operating
expenses 14,048,000 7,896,000 2,424,000 ---------- ---------
--------- Loss from operations (10,468,000) (1,778,000) (307,000)
Interest and other income (expense), net 291,000 (3,000)
(1,190,000) ------- ------ ---------- Loss before provision for
income taxes (10,177,000) (1,781,000) (1,497,000) Provision for
income taxes - 15,000 13,000 --- ------ ------ Net loss
(10,177,000) (1,796,000) (1,510,000) Convertible preferred stock
deemed dividend Convertible preferred stock 8% dividend - 4,000
65,000 --- ----- ------ Net loss attributable to common
stockholders $(10,177,000) $(1,800,000) $(1,575,000) ============
=========== =========== Basic and diluted net loss attributable to
common stockholders per common share $(0.06) $(0.01) $(0.02) ======
====== ====== Weighted average basic and diluted common shares
outstanding 171,833,000 154,347,000 100,603,000 ===========
=========== =========== Year ended December 31,
----------------------- 2008 2007 2006 ---- ---- ---- Revenue
$16,268,000 $13,237,000 $6,572,000 Operating expenses: Cost of
revenues(1) 4,154,000 2,549,000 2,328,000 Research and
development(2) 10,736,000 3,833,000 972,000 Sales and marketing(2)
7,095,000 4,272,000 1,093,000 General and administrative(2)
11,228,000 5,200,000 4,384,000 Asset impairment 33,268,000
Equity-based compensation: Research and development 433,000 147,000
98,000 Sales and marketing 204,000 157,000 103,000 General and
administrative 1,026,000 491,000 1,184,000 --------- -------
--------- Total operating expenses 68,144,000 16,649,000 10,162,000
---------- ---------- ---------- Loss from operations (51,876,000)
(3,412,000) (3,590,000) Interest and other income (expense), net
670,000 (3,467,000) (1,226,000) ------- ---------- ---------- Loss
before provision for income taxes (51,206,000) (6,879,000)
(4,816,000) Provision for income taxes - 25,000 30,000 --- ------
------ Net loss (51,206,000) (6,904,000) (4,846,000) Convertible
preferred stock deemed dividend 68,000 Convertible preferred stock
8% dividend - 82,000 285,000 --- ------ ------- Net loss
attributable to common stockholders $(51,206,000) $(6,986,000)
$(5,199,000) ============ =========== =========== Basic and diluted
net loss attributable to common stockholders per common share
$(0.30) $(0.06) $(0.05) ====== ====== ====== Weighted average basic
and diluted common shares outstanding 171,231,000 121,561,000
96,642,000 =========== =========== ========== (1) Includes
equity-based compensation of $73,000 and $288,000 for the three
months and year ended December 31, 2008, respectively. Includes
equity-based compensation of $87,000 and $151,000 for the three
months and year ended December 31, 2007, respectively. Includes
equity-based compensation of $15,000 and $169,000 for the three
months and year ended December 31, 2006, respectively. (2) Excludes
equity-based compensation, which is presented separately.
DATASOURCE: On2 Technologies, Inc. CONTACT: Garo Toomajanian, ICR,
Inc., +1-518-881-4299, Web Site: http://www.on2.com/
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