NEW PROFILE $ONSM: Onstream Media NASDAQ: ONSM
Posted by admin in Company Profiles, Featured Articles, Twitter Updates on Mar 14th, 2010 | one response
Our Top Seven Reasons to Buy ONSM:
1. Established Company since 1993, NOT a start up.
2. Experienced and Long Term Dedicated Management, that own shares.
3. Real assets and existing base of nearly $17 Million in revenues, cash flow break even with expected return to positive cash flows by Year End 2010.
4. New and proprietary streaming multi-media product being launched called “MARKETPLACE 365”. Marketplace 365 is unparalleled in its flexibility and could add multi-millions in new revenues bringing additional positive cash flow for many years to come. www.cdac365.com
5. Customer list dominated by AAA clients including Dell, Disney, Georgetown University, National Press Club, PR Newswire, Shareholder.com (NASDAQ’s market site), Sony Pictures and the U. S. Government.
6. Half of Fortune 1000 companies and 78 of the Fortune 100 CEOs have used Onstream Media’s services.
7. Stocks in this industry trade at a multiple of revenues; ONSM is at a discount to current revenues. Add the new revenues and get back to regular trading at a multiple of revenues with positive earnings and you find it will never be cheaper.
Onstream Media Corp Website www.onstreammedia.com
ONSM SHARE PRICE IS BACK ON UPSWING, MAKING IT AN IDEAL BUYING ENTRY POINT Even if you don’t want to tie up a lot of money, at the current share price you can buy a decent amount of shares for just a few dollars with a potential huge investment return. Buy low, sell high as we feel this stock is going to a multiple of revenues valuation, instead of a discount to revenues where it’s currently trading.
* EXPERIENCED LONG TERM MANGEMENT: Onstream Media Corp.
has a long term committed management team in place.
Randy Selman: Investor and founder of ONSM since its inception in May 1993, Mr. Selman has served as Chief Executive Officer, President, and a director. Mr. Selman was founder, Chairman, CEO of SK Technologies Corporation (NASDAQ:SKTC), a software development company. SKTC developed and marketed software for point-of-sale with complete back office functions such as inventory, sales analysis and communications. Mr. Selman’s responsibilities include management of ONSM, public and investor relations, finance, and high level sales and general overall administration.
Clifford Friedland. Mr. Friedland has been a member of their Board of Directors since December 2004. From June 2001 until the closing of the Onstream Merger in December 2004 he had served as Chairman, CEO and co-founder of privately held Onstream Media Corporation. Mr. Friedland was Vice President of Business Development and co-founder of TelePlace, Inc., a developer and owner of internet data centers and central offices from December 1999 to May 2001. Mr. Friedland received a B.B.A. cum laude, from City University of New York.
Alan M. Saperstein. Mr. Saperstein has served as Executive Vice President, Treasurer and a director since our inception in May 1993, and has been their Chief Operating Officer since December 2004. From March 1989 until May 1993, Mr. Saperstein was a free-lance producer of video film projects. Mr. Saperstein had provided consulting services for corporations that set up their own sales and training video departments. From 1983 through 1989, Mr. Saperstein was the Executive Director/Entertainment Division of NFL Films where he was responsible for supervision of all projects, budgets, screenings’ and staffing.
David Glassman. Mr. Glassman has served as their Chief Marketing Officer since December 2004. He served as Vice Chairman, President and co-founder of acquired “private Onstream” from June 2001 until becoming part of public company. Mr. Glassman was the Vice President of Marketing and co-founder of TelePlace, Inc., a developer and owner of internet data centers and central offices from December 1999 to May 2001. Mr. Glassman received his B.S. in Business Management from Florida International University.
Robert E. Tomlinson. On December 15, 2004 Mr. Tomlinson was appointed ONSM’s Chief Financial Officer. Mr. Tomlinson joined them as Vice President-Finance in September 2004. Mr. Tomlinson started his financial and accounting career in 1977 with the international accounting firm of Price Waterhouse. He has worked as an independent certified public accountant, focusing on accounting and tax services to corporations. From 2002 until joining ONSM, Mr. Tomlinson served as CFO for Total Travel and Tickets, a Fort Lauderdale based ticket broker. Mr. Tomlinson has held an active Certified Public Accountant license since 1978.
The key reasons we feel that ONSM represents a compelling and immediate speculative investment opportunity is that management has taken required steps to address head on the critical business hurdles encountered last year, which drove their share price down along with many other tech companies, plus management has new products and a concrete, believable and achievable plan to generate new sales, and became a growth company story once again:
* AGGRESSIVE COST CUTTING TO REACH POSITIVE CASH FLOWS
Onstream Media Corp. has embarked on two projects that we feel can create a significant financial upside in 2010. First, the company has implemented cost saving initiatives, outlined below, that could eliminate nearly $107,000 in monthly overhead expenses – or about $1.2 million in their fiscal 2010. Second, the company has two new full-service solutions to offer existing clients in 2010 that we believe will drive additional revenues, create more product cross-sell, and increase overall ONSM’s operating margins. By the end of fiscal 2010 in September, Onstream Media could not only have cash flow positive operations, but the company expects to be posting solid profits excluding goodwill write-downs, and other non-cash charges.
In fact in October 2009 the company’s announced its entire staff was to take a 10% reduction in pay, which will reduce company payroll expense by nearly $62,000 a month and save the company $744,000 in fiscal 2010. In addition, management has implemented other cost-cutting initiatives in the infrastructure, sales and operational departments that could further reduce expenses by $45,000 a month, or $540,000 annually. Together these cost-cutting efforts can save the company approximately $1.2 million in fiscal 2010 without hindering its abilities to execute strategy and grow their product sales. The result of the increased efficiencies from the cost-cutting initiatives may well be a return to positive operational cash-flow by Q2 2010!
In addition, 2010 should see Onstream Media continue its move toward a solid trajectory of diminishing losses and increasing margin profitability. In fiscal 2008 and 2009 the company reported multimillion dollar losses primarily related to “Non-Cash Charges” from impairment of goodwill and other intangible assets, depreciation and amortization expense and non-cash compensation expenses in the form of stock and stock options. Without these non-cash expenses, the company had incurred losses of $2.2 million in 2008 and a smaller cash loss of $700,000 for fiscal year 2009. The improved performance was reflected in an increase in their consolidated gross margin from 67% in 2008 to 67.5% in fiscal year 2009. (Please review the company’s detailed SEC filings reported on September 2009 Year End 10K, and the 10Q’s for additional information.)
We expect further improvements in their financial performance on the revenue side as well, without taking into account two product launches in 2010. However, their fiscal year 2009 saw revenues of about $16.9 million – a small dip of 3.8 percent from the prior year. In an economic environment where companies were cutting back on travel and related conferencing and marketing expenditures, management feels 2009 remained a solid year and we agree. Management has already stated it expects an increase in sequential revenue in Q1 2010, to be reported Mid-February 2009, and barring any unforeseen events we expect that to continue through the end of the fiscal year as its web conferencing activity rises. In particular, management is upbeat on its Digital Media Services group, where DMSP hosting and streaming revenues rose 18.4 percent in 2009, or about $320,000!
* COMPANY MAINTAINS POSITIVE CASH POSITION
In the past three years Onstream Media has consistently maintained a cash position of about $500,000+. We anticipate this to continue into 2010 as the company has already made plans to secure sufficient financing to cover any unanticipated costs it could encounter. In addition to approximately $541,000 in cash on hand reported in December 2009 conference call, the company received $500,000 from one of its lenders in October 2009 and has secured an Accounts Receivable Line-of-Credit arrangement increase to $2 million for two years from $1.6 million – with certain financial covenants relaxed or eliminated. In total, during December 2009, management received funding commitment letters executed by three entities agreeing to provide the company within 20 days after notice given on or before December 31, 2010 aggregate cash funding of $750,000.
* IN OUR OPINION-THE NARROWSTEP LAWSUIT IS BASELESS
In May 29, 2008, ONSM entered into an Agreement to acquire Narrowstep, Inc., which Merger Agreement was amended twice (on August 13, 2008 and on September 15, 2008). The terms of the Merger Agreement, as amended, allowed that the Merger Agreement could be terminated by either the company or Narrowstep at any time. On March 18, 2009, ONSM wisely terminated the acquisition of Narrowstep. However, in December 2009, Narrowstep filed a lawsuit against ONSM for damages. ONSM has filed response, and it is our opinion that the suit is with out merit and ONSM will prevail and leave this matter behind them, which will instantly put a “positive halo” back on company. It is clear when one looks at the steeply declining sales of Narrowstep (Per last SEC filings made in 2009) that ONSM did the only and prudent thing it had to for sake of its shareholders. Thus, we do not expect the ultimate resolution of this matter to have any material impact on their financial position or results of operations.
* NEW PRODUCTS= NEW & GROWING REVENUE STREAMS
Beyond the expected sales growth in their current product offerings, Onstream Media has launched two new proprietary products in fiscal 2010. Management fully expects both products to contribute to the company’s bottom line and to show strong sales growth as the 2010 year progresses. The iEncode (Version 2) webcast-in-a-box solution and MarketPlace 365 launched with promotion contracts and agent agreements in place that management fully expects to yield early and rapidly growing sales.
The first product, iEncode offers an ideal solution for large volume web casting organizations as well as AV and other companies looking to add web casting to their service offerings. iEncode is a low-cost subscription-based webcasting service that puts self administered, highly affordable internet broadcasting power in the hands of users featuring easy set up and on-premises encoding for a higher quality streaming signal. The product builds off of company’s existing solutions and will offer up sell opportunities to Onstream Media’s current client base.
iEncode enables these enterprises to produce webcasts on the fly in a simple, easy to use way. This technology seems highly scalable, user friendly, and their customers can develop webcasts without involving Onstream personnel. Management expects iEncode to evolve into one of the company’s higher margin offerings. The product is also a very cost effective solution for customers, enabling the higher volume users to produce more webcasts more efficiently and at lower overall costs than historical models.
MarketPlace 365 is newest product offering we believe can bring in new clients and additional revenue streams with additional opportunities to cross-sell Onstream products. MarketPlace 365 is a comprehensive marketing and promotion solution that combines the best elements of web-based lead generation; social media marketing and comprehensive communications to create trade shows, virtual malls and conferences. The platform enables publishers, associations, trade show promoters and established entrepreneurs to self deploy and manage their own virtual marketplaces.
To get things started, Onstream Media has reached an agreement with Tarsus Group PLC, one of the largest U.S. and European trade show promoters, to implement and market the MarketPlace 365 platform. In the process, MarketPlace 365 has immediate exposure to Tarsus Group’s 19,000 trade shows and 2,000 suppliers. We feel that the agreement is a win-win for both companies and demonstrates ONSM marketing plans. MarketPlace 365 will allow Tarsus Group to create additional revenue streams with a prepackaged solution along with an array of powerful marketing and search engine optimization features that can be implemented quickly with little to no upfront costs, and minimal IT resource requirements. While bricks-and-mortar will continue to remain a mainstay of retailing, a sophisticated consumer-friendly online presence is welcome an add tool and necessity in the 21st Century – especially in the very competitive business-to-business marketing and services segments.
Each MarketPlace 365 client can determine the number of booths in the show, the charge per month for each booth, the charge for leads if any, rates for banner ads as well as any other service offered including the ability to chat with a booth administrator or sales person either via text, instant phone call or even have an automatic access feed to every booth attendee when new content is added to the booth. Each booth will have a wide range of features, including audio, video, white papers, brochures, as well as web cast or web conferencing product demonstrations. How-to’s, FAQ’s and other documents can be loaded and updated on the fly. Web conferences can create interactivity with potential customers.
Looking ahead to late 2010 and beyond, Onstream Media could soon introduce its high quality live mobile video streaming service enabled for iPhone and Blackberry and even the new iPad users. The reason is that these new mobile video streaming services were developed to use Onstream Media’s DMSP technology platform, and which are used by many global 2000 media companies and the business-to-business community market places.
In terms of revenue, a typical iEncode installation is expected to generate recurring annual revenues of approximately $20,000 with large companies using multiple units once the service is into their day-to-day communication processes. Management also expects ongoing revenues from iEncode users for storage and bandwidth usage. Management believes the addressable market is in excess of 200,000 installations, with our initial focus on AV professionals, healthcare, educational organizations, and large government organizations and corporations.
The potential financial returns from MarketPlace 365 are even greater still. Management expects a typical MarketPlace to contain about 200 booths, or clients. Each booth will generate $150 in revenue per month at a 75% gross margin. With 200 booths per MarketPlace, Onstream Media can expect approximately $270,000 of additional annual gross profit and substantially more for larger marketplaces. MarketPlace 365 is a high-margin low-cost platform which we expect can generate significant cash as it grows. In addition, MarketPlace 365’s platform integrates and leverages essentially all of Onstream’s other existing technologies including archiving, transcoding, user generated video, customized players, video advertising, secure streaming, pay-per-view and audio conferencing which will further increase revenues.
* THE COMPETITION
While Onstream Media has focused on providing comprehensive, full-service solutions to its customers, most of their competitors string together products from several companies that require substantial upfront expenses to launch a show. They handle all of these services in an automated way, allowing for rapid scalability and the potential to increase Onstream’s margin as their products gain market adoption rates.
* SOME PUBLIC COMPANY MARKET VALUE COMPARISONS
For a better idea of the fair market value of Onstream Media, we have compiled a list of comparable publicly traded companies that offer Web based B2B services. You will find that Onstream Media is currently trading below these values and why we feel company is at a discount to some of its peers and expect its share price could be set to rise.
* On2 Technologies (Amex: ONT): Currently in discussions with Google on a merger (purchase). Shareholders voted down an earlier offer from Google, but Google has increased its offer by $0.15 a share, valuing On2 at about $132 million. Shareholders are set to vote on February 17, 2010. Valuation: Revenues: $17.8 million; Current Market Cap: $120+ million; Price/Sales: 6.6; Price/Book: 10.6.
* Salesforce.com (NYSE: CRM): Founded in 1999, this provider of customer relationship management software has become the test bed for the cloud-based technology model which complements ONSM very well. Revenues: $1.24 billion; Market Cap: $8.2 billion; Price/Sales Ratios: 6.6; Price/Book Ratio: 9.5.
* Ariba Inc. (Nasdaq: ARBA): Provider of spend management solutions which are integrated with enterprise resource planning and other software systems. Revenues: $339 million; Market Cap: $1.08 billion; Price/Sales: 3.23; Price/Book: 2.37.
* Taleo Corporation. (Nasdaq: TLEO): Provides on-demand talent management software solutions for recruiting, performance management, on boarding/new hire and other software. Revenues: $196 million; Market Cap: $663 million; Price/Sales: 3.43; Price/Book 4.5:
* OUR INVESTMENT CONCLUSION
We feel that Onstream Media is executing on its business plan to be the market leader in web communications, and streaming technology by building platforms that serve critical corporate and organizational clients needs. They currently have 388 clients including 16 major S&P 500 listed clients today, and we expect that to grow significantly in 2010, plus with an improving and more stable economic environment and the launch of their two newest platforms. It seems very reasonable to conclude that existing DMSP and hosting services could resume growth at double-digit rates on the strength of referrals and the company’s re-focused and targeted marketing efforts.
Also, the introduction of MarketPlace 365 will significantly help them to increase DMSP sales as well. So far in fiscal 2010, management stated clients have committed to the creation of about 20 MarketPlaces and company expects to complete development of these MarketPlaces soon with solid add on revenues not being too far behind.
Revenues: $16.9+ million; Current Market Cap: $19 million; Price/Sales: 1+; Price/Book: 1
Finally, Onstream Media has approximately 44 Million shares outstanding, and if it were priced at similar, but quite conservative valuation levels as other tech companies, with a Price/Sales ratio of 3 and a Price/Book value of 2.5, the company’s stock would easily be trading above $1.25 a share. However, based on the strength of some good news from company this could push up valuation to a much higher Price/Sales ratio of 6, and a Price/Book value of 9, then company would be trading far higher and be approaching and may even exceed their 2007 historical high share price of well over $3.50 a share.
In Summary:
These are the key reasons we are so bullish and have a high confidence level that the stock price at these current low price levels represents a unique and very strong near term speculative buying opportunity for significant potential capital appreciation for those investors willing to take some initial capital risk with their hard earned investment dollars.
