Company Indicates Pro Forma Fourth Quarter NEt Sales of $33.4 Million, Pro Forma 2007 Net Sales of $113.4 Million, And Recommits to 2008 Guidance
Merger of New Motion and Traffix Creates Potential for Significant Synergistic Opportunities; Establishes Unique Business Model to Capitalize on the Convergence of Mobile Media and the Internet
New York (February 19, 2008) – New Motion, Inc, announces today, that on February 14, 2008, its newly comprised Board of Directors approved management’s plan to integrate and reorganize the combined enterprise arising from the recently completed merger between New Motion and Traffix. The plan is designed to successfully integrate both companies by maximizing certain operational efficiencies, while also positioning the group for sustained, profitable growth, as a leader in the mobile entertainment and performance-based online marketing industry. Along with this plan, the board of directors unanimously approved a change in the Company’s name from New Motion, Inc. to “Atrinsic, Inc.”, subject to shareholder approval.
“Today’s introduction of the Atrinsic brand symbolizes the emergence of Atrinsic as a leading digital advertising and mobile entertainment network,” said Burton Katz, CEO of Atrinsic. “Atrinsic is the product of two great companies – New Motion – a mobile entertainment company – and Traffix – a performance-based online marketing company. The result is a mobile and Internet digital media powerhouse, with the depth and breadth to meet subscriber and customer expectations in this rapidly growing and evolving space.”
“The new Atrinsic brand demonstrates our commitment to unlock the value of our assets and our responsibility to shareholders to rapidly and completely integrate the operations of New Motion and Traffix,” continued Mr. Katz. “The merger is expected to generate several significant benefits and unique business attributes.”
The combined entity will organize into two divisions: Atrinsic Entertainment and Atrinsic Networks.
Anticipated synergies and strategic benefits include:
Completion of the Merger Between New Motion and Traffix
On February 4, 2008, the merger between New Motion and Traffix was completed. Traffix shareholders received approximately 0.676 shares of New Motion common stock in exchange for their Traffix common stock, which resulted in Traffix shareholders owning approximately 45% of the combined company. Immediately following the closing, the company had approximately 25.8 million shares outstanding on a fully diluted basis. Traffix shareholders have been mailed a letter of transmittal instructing them on how to exchange their shares.
Reiteration of Guidance
“We are expecting positive pro forma year-over-year and sequential revenue growth across the Entertainment and Networks businesses in the first quarter, and the full fiscal 2008 year, said Mr. Katz. “Based on the anticipated opportunities and operational synergies, including nearing one million subscribers and the expected reduction in Atrinsic’s average cost per new subscriber, coupled with the expanded yield of Atrinsic’s online advertising media, we are reiterating our expectation of $145 to $160 million in sales. We are also narrowing our expected Adjusted EBITDA range to $15 to $20 million, as a result of improved visibility into the combined company’s operations, though we remain cautious of the ultimate impact on our results from general economic uncertainty in the U.S.,” continued Mr. Katz. “I look forward to sharing additional details about our new corporate strategy, including the many synergies in the combined organization, at our presentation at the Roth Capital Partners ‘OC’ conference on February 19. I encourage shareholders to listen to the audio webcast of our presentation.”
Estimated 2007 Results
New Motion expects to report net sales of approximately $13.7 million for the three months ended December 31, 2007 and net sales of approximately $36.7 million for all of 2007. The Company also expects to report Adjusted EBITDA of approximately ($1.0) million for the three months ended December 31, 2007, and Adjusted EBITDA of approximately ($3.1) million for all of 2007.
Traffix expects to report net sales of approximately $23.9 million for the pro forma three months ended December 31, 2007 and net sales of approximately $89.1 million for all of pro forma calendar 2007. The Company also expects to report approximately $300,000 in Adjusted EBITDA for the pro forma three months ended December 31, 2007, and Adjusted EBITDA of approximately $5.4 million for all of pro forma calendar 2007. Both the pro forma fourth quarter and full fiscal year Adjusted EBITDA include approximately $1.3 and $1.5 million in merger related expenses, respectively.
For purposes of providing a better understanding of management’s expectations concerning the future results of the combined company, it is expected that Atrinsic would have had pro forma net sales of $33.4 million for the three months ended December 31, 2007 and pro forma net sales of $113.4 million for the year ended December 31, 2007. The above referenced pro forma disclosures have been adjusted to eliminate intercompany transactions and assume that the combination of NWMO and TRFX were combined as of January 1, 2007.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA refers to a financial measure defined as earnings before interest expense, income taxes, depreciation, amortization and stock-based compensation. Adjusted EBITDA may not be comparable to EBITDA as reported by other companies because it is adjusted to exclude stock-based compensation, which is not excluded from EBITDA as reported by other companies. EBITDA also is a non-GAAP financial measure and is defined as earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is a part of the internal management reporting and planning process and assists management in the evaluation of operating performance. We believe this non-GAAP operating measure may be useful for investors because it enhances investor’s ability to analyze trends in our business, when considered in conjunction with measures calculated in accordance with GAAP. There are significant limitations on the use of this non-GAAP financial measure and it is not, and is not intended to be, a substitute for any GAAP financial measures as an indicator of our performance.
The Company will provide reconciliations of Adjusted EBITDA and any other non-GAAP financial measures in its press releases of historical performance. However, reconciliation for forward-looking or estimated Adjusted EBITDA amounts presented in this release is not being provided due to the number of variables in the projected ranges of Adjusted EBITDA. Each Adjusted EBITDA range in this release is calculated in accordance with New Motion’s past practices and the past practices of Traffix, as applicable.
About Atrinsic
Atrinsic, Inc. (NASDAQ: NWMO) (New Motion, Inc. dba Atrinsic, Inc.) is one of the fastest growing digital advertising and entertainment networks in the United States. Atrinsic brings together the power of the Internet, the latest in mobile technology, and traditional marketing/advertising methodologies, creating a fully integrated vehicle for both entertainment content and brand-based and performance advertising. Entertainment content is organized into four strategic services — digital music, casual games, sweepstakes, and community and lifestyle. Brands include Altnet, a mobile legal music download service featuring original artists, GatorArcade, a premium online and mobile gaming site, Bid4Prizes, a low-bid mobile auction game, and iMatchUp, one of the first integrated web-mobile dating services. Feature-rich advertising services include a mobile ad network, extensive search capabilities, e-mail marketing, one of the biggest publisher networks around at 8000+ and growing, and proprietary entertainment content. Headed by a team of Internet, new media, entertainment and technology professionals, Atrinsic, Inc. was founded in 2005 and is headquartered in New York with offices in Irvine, CA, Seattle, WA, and Moncton, Canada. Atrinsic, Inc. was recently called “a company to watch” by Wireless Business Forecast, and their mobile content capabilities were named a “rival to those of their mainstream-media counterparts” by Wired Magazine.
Forward-Looking Statements
This news release includes forward-looking statements, including those regarding the anticipated financial results, reach, capabilities and opportunities for the combined company, future products and services, expected benefits to merchants and other customers, market opportunities and expected customer base. These statements are based on certain assumptions and reflect our current expectations. Statements including words such as “anticipate,” “propose,” “estimate,” “believe” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance, or achievements discussed or implied by such forward-looking statements. Some of the factors that could cause results to differ materially from the expectations expressed in these forward-looking statements include the following: disruption from the recently completed merger making it more difficult to maintain relationships with customers, employees or suppliers; risks related to the successful offering of the combined company’s products and services; the risk that the anticipated benefits of the merger may not be realized; and other risks that may impact New Motion’s and Traffix’s businesses, some of which are discussed in the companies’ reports filed with the Securities and Exchange Commission (the “SEC”) under the caption “Risks That Could Affect Future Results” or “Risk Factors” and elsewhere, including, without limitation, each of New Motion’s and Traffix’s Quarterly Reports on Form 10-Q or 10-QSB, as applicable. Additional risks associated with the proposed transaction are set forth in the companies’ joint proxy statement/prospectus under the caption “Risk Factors”. Any forward-looking statement is qualified by reference to these risks, uncertainties and factors. If any of these risks or uncertainties materializes, the potential benefits of the merger may not be realized, the operating results of New Motion could suffer, and actual results could differ materially from the expectations described in these forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. These risks, uncertainties and factors are not exclusive, and New Motion undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this release.
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