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Global Traffic Network, Inc. Reports Fiscal Second Quarter 2011 Operating Results

Thursday 10 February 2011

Achieves Record Revenue, Earnings and Adjusted Operating Income

Quarterly Revenue Up 24% while Adjusted Operating Income Increases $3.65 million

New York, NY, February 10, 2011 – Global Traffic Network, Inc. (Nasdaq: GNET), a leading provider of custom traffic and news reports to radio and television stations outside the United States, today announced its results for the fiscal second quarter ended December 31, 2010.

The Company’s revenue for the quarter ended December 31, 2010 was $31.8 million, an increase of 24% from $25.6 million reported in the second quarter of fiscal 2010.  Revenue from the Company’s Australian, Canadian and United Kingdom operations were up 21%, 84% and 11%, respectively, from the fiscal second quarter of 2010.  When measured in local currencies, Australian, Canadian and United Kingdom revenues increased 11%, 78% and 15%, respectively compared to the prior year quarter. 

Adjusted Operating Income more than doubled to $6.9 million for the fiscal second quarter ended December 31, 2010 compared to $3.2 million for the quarter ended December 31, 2009.   The Company defines Adjusted Operating Income (Loss) as net operating income (loss) plus depreciation and amortization expense.   Adjusted Operating Income includes the impact of non-cash compensation from the granting of stock options and restricted stock which was $0.35 million for the current quarter compared to $0.3 million for the previous year quarter.

Net income for the second quarter of fiscal 2011 was $3.75 million compared to $0.8 million for the same quarter a year ago.  In addition to the continued profitability of the Company’s Australian and United Kingdom operations, the Company’s Canadian operations were profitable for the first time.  Included in the United Kingdom results were $0.7 million of amortization expense related to the intangibles of the Company’s acquisition of Unique Broadcasting in March 2009.

The Company’s revenue for the six months ended December 31, 2010 was $57.1 million, an increase of 24% from $46.0 million reported in the second quarter of fiscal 2010.  Revenue from the Company’s Australian, Canadian and United Kingdom operations were up 23%, 97% and 7%, respectively, from the six month period ended December 31, 2009.  When measured in local currencies, Australian, Canadian and United Kingdom revenues increased 14%, 88% and 12%, respectively compared to the prior year six month period.

Adjusted Operating Income increased $6.8 million to $10.7 million for the six month period ended December 31, 2010 compared to $3.9 million for the comparable period ended December 31, 2009.   Adjusted Operating Income includes the impact of non-cash compensation from the granting of stock options and restricted stock which was $0.7 million for the current period compared to $0.6 million for the year ago period.

Net income for the first six months of fiscal 2011 was $5.1 million compared to a net loss of $0.2 million in the year ago period.  In addition to the continued profitability of the Australian operations, the Company’s United Kingdom operations attained profitability while the Company’s Canadian operations significantly reduced their net loss compared to the six months ended December 31, 2009.  Included in the United Kingdom current results were $1.3 million of amortization expense related to the intangibles of the Company’s acquisition of Unique Broadcasting in March 2009.

Commenting on the results, William L. Yde III, Chairman, Chief Executive Officer and President of Global Traffic Network, said, “We have had a very strong first half of fiscal 2011 as we have increased the momentum that began in the previous fiscal year.  Australia, Canada and United Kingdom sales were significantly higher than the year ago quarter in the local currencies with Australian revenue increasing 11%, Canadian revenue increasing 78% and United Kingdom revenue increasing 15%.  Revenue for January was strong as well.  In addition, currency exchange rates continued to have a positive impact on our consolidated results and based on the exchange rates to date appear poised to continue to be a benefit in the third quarter of fiscal 2011.”

Mr. Yde continued, “Our strong revenue growth resulted in record Adjusted Operating Income for the quarter.  Adjusted Operating Income increased from $3.2 million for the quarter ended December 31, 2009 to $6.9 million for the quarter ended December 31, 2010.  Only 8% of our Adjusted Operating Income was due to favorable currency fluctuations while the remaining increase pertained to increased performance in our local markets.  We are especially pleased with the progress of our Canadian operations which achieved both positive Adjusted Operating Income and net income on a quarterly basis for the first time ever.  While there is still much to be accomplished in Canada, this is a significant milestone for the Company.”

Mr. Yde concluded, “We anticipate solid growth for this quarter and the remainder of the fiscal year.  We believe the investments we made in our company during the economic downturn made us even stronger and we feel this commitment will ensure the long term success of our Company. We are able to take advantage of opportunities regardless of the economic climate because of our strong balance sheet which has no debt and over $1.50 per share in cash. We continue to be well positioned in the advertising market place, with no significant direct competitors, an extremely effective product and a seasoned, experienced sales staff.”

Third Fiscal Quarter 2011 Outlook

To date, for the Company’s fiscal third quarter ending March 31, 2011, revenue reflected in the Company’s internal sales reports is higher compared to the fiscal third quarter ended March 31, 2010.  The Company’s anticipates that its fixed operating, sales and general and administrative expenses will increase over fiscal second quarter 2011 as well as the comparable (third) quarter of fiscal 2010 when measured in local currencies.  With the exception of sales commissions and certain U.K. operating expenses, the vast majority of the Company’s costs are fixed and not readily reduced in the short or intermediate term.  The Company also anticipates its variable costs will be higher due to the anticipated increase in revenue.  The U.S. dollar has been weaker to date during the fiscal third quarter of 2011 when compared to the Australian dollar, Canadian dollar and British pound for the same period.  The impact of a weaker U.S. dollar, all other things being equal, is to increase the reported revenues and expenses when local currency financial statements are translated into financial statements reported in U.S. dollars compared to a neutral exchange rate. Conversely, a stronger U.S. dollar decreases the reported revenues and expenses.  Should foreign exchange rates and revenues from the Company’s consolidated operations end fiscal third quarter 2011 consistent with the exchange rates to date and current sales pacings, the Company anticipates revenues, Adjusted Operating Income and net income will exceed the fiscal third quarter ended March 31, 2010.

Conference Call

Global Traffic Network, Inc. will host a conference call at 8:30 a.m. EST on Thursday, February 10, 2011, to discuss its fiscal second quarter 2011 results, as well as other relevant matters.  To listen to the call, dial (877) 303-9131 (domestic), or (408) 337-0141 (international), and enter the pass code 39899230. The call will also be available live on the Internet at www.globaltrafficnetwork.com. A replay of the call will be available from 11:30 a.m. February 10, 2011 through February 18, 2011. To access the replay, please call (800) 642-1687 (domestic) or (706) 645-9291 (international) and enter the following code: 39899230.

About Global Traffic Network

Global Traffic Network, Inc. (Nasdaq: GNET) is a leading provider of custom traffic and news reports to radio and television stations outside the U.S.  The Company operates the largest traffic and news network in Australia, operates traffic networks in eight Canadian markets and the largest national radio traffic network across the United Kingdom.  In exchange for providing custom traffic and news reports, television and radio stations provide Global Traffic Network with commercial airtime inventory that the Company sells to advertisers.  As a result, radio and television stations incur no out-of-pocket costs when contracting to use Global Traffic Network’s services.  For more information, visit the Company’s website at www.globaltrafficnetwork.com.

This press release contains statements that constitute forward-looking statements.  These statements reflect the Company’s current views with respect to future events.  These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed under the heading “Risk Factors” and elsewhere in the Company’s annual report 10-K, which may cause the actual results, performance or achievements to be materially different from any future results, performances or achievements anticipated or implied by these forward-looking statements.  These statements can be recognized by the use of words such as “anticipate,” “may,” “will,” “intend,” “ should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “ predict,” “potential,” “plan,” “is designed to,” “target” or the negative of these terms, and similar expressions.  The Company does not undertake to revise or update any forward-looking statements to reflect future events or circumstances.

Currency Exchange Rates for Income Statement Information

Three Months Ending

December 31, 2010

Three Months Ending

December 31, 2009

Difference

Australia

0.9887

0.9094

 +8.7%

Canada

0.9873

0.9469

  +4.3%

United Kingdom

1.5803

1.6344

    (3.3)%

SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION

Global Traffic Network, Inc. defines Adjusted Operating Income (Loss) as net operating income (loss) adjusted to exclude depreciation and amortization expense.   The Company uses Adjusted Operating Income (Loss), among other things, to evaluate its operating performance.  The Company believes the presentation of this measure is relevant and useful for investors because it helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that have different financing and capital structures or tax rates.  In addition, the Company believes this measure is among the measures used by investors, analysts and peers in the media industry for purposes of evaluation and comparing its operating performance to other companies.

Adjusted Operating Income (Loss) is not a measure of performance calculated in accordance with generally accepted accounting principles (“GAAP”) and it should not be considered in isolation of, or as a substitute for, net operating income (loss) as an indicator of operating performance.  Because Adjusted Operating Income (Loss) excludes certain financial information compared with net operating income (loss), the most directly comparable GAAP financial measure, users of this financial information should consider the types of events and transactions which are excluded.  In addition, Adjusted Operating Income (Loss) may not be comparable to measures of adjusted operating income, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA, operating cash flow or similarly titled measures employed by other companies. Adjusted Operating Income (Loss) is not necessarily a measure of the Company’s ability to fund its cash needs.

The following presents the reconciliation of net operating income to Adjusted Operating Income for the three and six month periods ended December 31, 2010 and 2009.

Global Traffic Network, Inc.

Income Statement Detail

(Unaudited)

 (In thousands)

Three Months Ended December 31,

Global Traffic Network, Inc.

Income Statement Detail

(Unaudited)

 (In thousands)

Six Months Ended December 31,

GLOBAL TRAFFIC NETWORK, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except share and per share amounts)

GLOBAL TRAFFIC NETWORK, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

GLOBAL TRAFFIC NETWORK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)