CLIFTON PARK, N.Y., -- On2 Technologies, Inc. (NYSE Amex: ONT), a leader in video compression solutions, announced quarterly results for the period ending June 30, 2009. Revenue in the second quarter of 2009 was $5.0 million, an increase of 53% from the second quarter of 2008, and an increase of 24% from the prior quarter. On a GAAP basis, second quarter net loss was ($224,000), or ($0.00) per share, compared to a net loss of ($7.2) million, or ($0.04), in the second quarter of 2008. GAAP net loss includes non-recurring expenses for the second quarter of $420,000 in legal and other fees incurred in the second quarter of 2009 related to the previously announced merger agreement with Google and $523,000 in litigation settlement costs.
Matt Frost, Chief Operating Officer and interim Chief Executive Officer of On2 Technologies said, "We are very pleased to have delivered our strongest revenue performance in six quarters. While we have felt some impact of the global economic recession, the continual growth of video on the Internet coupled with the growing need for content providers to reduce bandwidth and improve quality continues to drive our business forward. We were encouraged to see a strong performance from our On2 Finland operation, particularly after it underwent significant cost-reducing measures earlier in the year. Excluding non-recurring expenses, we produced our first quarter of non-GAAP net income and non-GAAP break-even net income per share in over three years. As our top-line patterns are likely to remain somewhat variable, there is no guarantee that positive earnings trends will continue into the next quarter. We believe, however, that encouraging longer term trends are being established through a combination of revenue growth and effective cost management."
Frost added, "Non-recurring items in the second quarter included $523,000 in costs to settle a complaint filed by Islandia LP in August 2008. We also incurred non-recurring legal and other costs of $420,000 associated with our proposed merger with a subsidiary of Google. On the positive side, we recognized a gain from forgiveness of debt this quarter of $669,000 from a loan owed to the Finnish government."
Second Quarter Business Highlights
•Royalties of $1.2 million in the second quarter increased 74% year-over-year and 5% sequentially. Royalties represented 24% of revenue in the quarter, compared with 21% of revenue in the second quarter of 2008 and 28% of revenue in the first quarter of 2009.
•In the second quarter of 2009, On2 added 40 new customers, excluding online sales, with 13 transactions in the quarter that contributed over $50,000 each to revenue. While the number of new customers decreased year-over-year and sequentially, the number of transactions over $50,000 is up over the same periods.
•In April, On2 announced that Westec Interactive, a provider of innovative, intelligent video surveillance systems, will integrate the On2 VP7(TM) format into its digital video recorder to increase the quality of stored video while delivering a substantial savings in bandwidth.
•In April, On2 and Boo-Ree Multimedia, a fabless semiconductor company that designs, develops and markets multimedia systems-on-chips, announced On2 Video playback on the Boo-Ree Tachyon-I multimedia processor with high-performance hardware playback of On2 VP6 and VP7, and other formats.
•Also in April, On2 announced its fastest hardware codec design ever, the Hantro(TM) 9170. The design supports video playback up to full HD (1080p) resolution at 60 frames per second in multiple formats including MPEG-1, MPEG-2, MPEG-4, Sorenson Spark(R), H.263, H.264, VC-1 and REALVIDEO(R) 8, 9 & 10. On2 also completed a successful Beta test of and announced the availability of its Flix Cloud on-demand video transcoding service.
•In April, On2 announced that ASUS, a leading provider of digital home solutions and Internet devices, has licensed the On2 VP7 format and encoder/decoder software SDK to develop Skype-enabled videophones.
•In May, On2 announced that it had licensed VP6 encoding technology to Verismo Networks for use in its VuNow Internet TV platform, and that Chinese web portal NetEase would be deploying On2's VP6 technology.
•In June, On2 announced that Mobixell Networks, a provider of multimedia and advertising solutions to mobile operators and content providers, had licensed the VP6 Codec SDK for use in Mobixell's mobile multimedia processing and optimization platform.
Google Acquisition
As announced yesterday, On2 entered into a definitive agreement to be acquired by Google. Under the terms of the agreement, each outstanding share of On2 common stock will be converted into $0.60 worth of Google class A common stock in a stock-for-stock transaction. The transaction is valued at approximately $106.5 million. The transaction, which is subject to On2 stockholder approval, regulatory clearances and other closing conditions, is expected to close in the fourth quarter of 2009.
Conference Call
Management will hold a conference call to discuss its results for the second quarter of 2009 and the Google acquisition announcement at 5:00pm ET on August 6, 2009.
To access the live webcast, visit: http://www.investorcalendar.com/IC/CEPage.asp?ID=148129.
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 #: 329419
The telephonic replay will be available until August 13, 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. The 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 www.on2.com.
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