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Global Traffic Network, Inc. Reports Fiscal Third Quarter 2009 Operating Results

Monday 11 May 2009

Global Traffic Network, Inc. Reports Fiscal Third Quarter 2009 Operating Results
Closes Acquisition of The Unique Broadcasting Company Limited & Becomes the Leading Radio Traffic Service in United Kingdom

NEW YORK, May 11, 2009 -- Global Traffic Network, Inc. (Nasdaq: GNET), a leading provider of custom traffic and news reports to radio and television stations outside the U.S., today announced its results for the fiscal third quarter ended March 31, 2009.

For the quarter ended March 31, 2009, revenue was $12.5 million, an increase of 2.5% from $12.2 million in the third quarter of fiscal 2008. The increase in quarterly revenue was achieved due to $2.6 million in revenue from the United Kingdom, which generated no revenue in the year ago period. Included in the UK revenue was $1.7 million of revenue associated with the first month of operations of the newly acquired Unique Broadcasting (renamed Global Traffic Network (UK) Commercial Limited). Both Australia and Canada had lower revenue than the previous year quarter. Australia revenue was down 18% and Canada revenue was down 27% from the third fiscal quarter of 2008. Both Canada and Australia were impacted by unfavorable currency exchange rate fluctuations due to a strengthening U.S. dollar compared with the local currencies. When measured in their local currencies, quarterly Australian revenue increased 12% and Canadian revenue decreased 9% respectively, compared to the prior year quarter. The Company's revenue has been negatively impacted in the local currencies by the current global economic conditions, which have had a significant impact on the advertising markets in which the Company operates.
Adjusted Operating Loss was $0.9 million for the third fiscal quarter ending March 31, 2009 compared to $0.6 million Adjusted Operating Income for the third fiscal quarter of 2008. The Company defines Adjusted Operating Income (Loss) as operating income (loss) plus depreciation and amortization expense.
Net loss for the third quarter of fiscal 2009 was $1.8 million, compared to net loss of $0.2 million for the same period a year ago.

For the nine months ended December 31, 2008, revenue was $42.4 million, an increase of 16% from $36.4 million in the prior nine month period. Year to date revenue increased in all three geographical markets the Company serves: Australia, Canada and United Kingdom. When measured in their local currencies, Australian and Canadian revenue increased 21% and 34%, respectively, compared to the prior year period. The Company's UK business posted revenue of $4.8 million, compared to no revenue for the same period last year. The Company's revenue was negatively impacted by unfavorable currency exchange rates as the U.S. dollar has been stronger in all its markets during the current fiscal year than the previous fiscal year.
Adjusted Operating Income increased to $3.3 million for nine months ending March 31, 2009 compared to $3.2 million for the nine month period ending March 31, 2008.

Net loss for the nine months ending March 31, 2009 was $38 thousand, compared to net income of $0.8 million for the same period a year ago.

Commenting on the results, William L. Yde III, Chairman, Chief Executive Officer and President of Global Traffic Network, said, "While we are disappointed that revenue was softer in Canada and Australia than we achieved in the previous two quarters of this fiscal year, the slowdown is not surprising. The current economic conditions have had a negative impact on the markets in which we operate, especially with regards to advertising spending. However, we believe that we are well positioned in the advertising arena, with no significant direct competitors, an extremely effective product and an experienced, seasoned sales staff. We fully expect the advertising markets to recover and that we will resume our historical revenue increases. The impact on our revenue was further compounded by the significant weakening of the local currencies when compared to the U.S. dollar. For the quarter, the United Kingdom was a bright spot for us and we are very pleased by our initial success with our acquisition of Unique, which provides traffic and entertainment news services to radio stations in the United Kingdom. Our first month of consolidated operations in the UK was Adjusted Operating Income positive and we have high expectations for this subsidiary in the future."

Mr. Yde continued, "We continue to invest in the long term future of our company. In addition to the Unique acquisition, which transformed us in to the dominant market leader in the United Kingdom, we have also strengthened our position in both Canada and Australia. In January 2009, we commenced operations in the Canadian capital of Ottawa, which is the fourth largest market in Canada and our eighth Canadian market overall. In addition, we continue to enter into long term contracts with our affiliates, bringing stability and improved expense visibility to our business. Since the beginning of the fiscal year, we have locked up four year agreements with our three largest traffic affiliates in Australia, a four year agreement with our largest news affiliate and, in January 2009, a two year agreement with our second largest news affiliate in Australia. In addition, we entered a four year agreement with our largest traffic affiliate in Canada in January 2009. Our United Kingdom subsidiary now has over 700,000 radio commercials available for sale on an annual basis while providing traffic reports to 250 radio stations and entertainment news reports to 120 radio stations."

Mr. Yde concluded, "We have made significant investments in the long term success of our Company. While there is great uncertainty in the short term global economic outlook, we believe the investments we have made set the Company up well for the future. The long term contracts we have entered into bring us flat costs related to these contracts for their respective lives as well as cost certainty for a significant portion of our business. Our strong balance sheet, with virtually no debt and significant cash balances, positions us to operate successfully during the current economic downturn."

For the Company's fourth fiscal quarter ending June 30, 2009, revenue reflected to date in the Company's internal sales reports is behind the same date for the previous fiscal year when measured in local currencies. The Company's operating, sales and general and administrative expenses were significantly higher in the third fiscal quarter of 2009 compared to the third fiscal quarter of 2008 when measured in local currencies. These expenses were higher due to the expansion of the United Kingdom operations to commence service for the Highways Agency Traffic Radio project and the operations of the Unique acquisition, increased start up cost of Mobile Traffic, and increased station costs in Australia and Canada, among other things. All of these increased costs are expected to be reflected in the fiscal fourth quarter results as well. In addition, the Company's costs will increase due to the inclusion of three months of the Unique acquisition, when compared to one month in the third fiscal quarter 2009. With the exception of UK traffic operating expenses, the vast majority of the Company's costs are fixed and are not readily reduced in the short or intermediate term. Should revenue from Canada and Australia end fiscal fourth quarter 2009 lower than fiscal fourth quarter 2008 in local currencies, this lower revenue combined with higher costs will have a significant negative impact on Adjusted Operating Income (Loss) and net income (loss) for the period.

Currencies in the local markets where the Company does business continue to be weaker than the fourth fiscal quarter of 2008. The impact of this will be to reduce the profit in those foreign markets that generate a profit and mitigate the loss in the markets that generate a loss in local currency. This weakness, should it continue, will reduce the Company's Australian revenues and expenses when reported in U.S. dollars. The Company's Australian revenues and expenses continue to comprise a majority of the Company's overall revenues and expenses as well as being its only profitable division for the nine months ended March 31, 2009. Based on current currency exchange rates, the first fiscal quarter of 2010 will also have difficult comps, after which, at current currency exchange rates, the comps will be similar.

Conference Call

Global Traffic Network, Inc. will host a conference call at 8:30 a.m. EDT on Monday, May 11, 2009, to discuss its fiscal third quarter results, as well as other relevant matters. To listen to the call, dial (877) 723-9523 (domestic), or (719) 325-4816 (international), and enter the pass code 8230549. The call will also be available live on the Internet at www.globaltrafficnetwork.com and www.kcsa.com.
A replay of the call will be available from 11:30 a.m. EDT on Monday, May 11, 2009 through 11:59 p.m. May 18, 2009. To access the replay, please call (888) 203-1112 or (719) 457-0820 (international) and enter the participant code: 8230549.

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 a 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 our 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 our annual report 10-K, which may cause our 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 "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.We do not undertake to revise or update any forward-looking statements to reflect future events or circumstances.