Newsletter

May 10, 2002

Volume V, Issue 35

Email : info@otcjournal.com
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To OTC Journal Members:

Cross Media (AMEX: XMM) Releases March Quarterly Financial Results

Cross Media has been a wild ride since announcing earnings yesterday prior to the market open. The company announced revenues surged 124% to $44 million for the quarter. Earnings were up 71% to $1.6 million.

As has been the norm in today's market environment, good corporate performance was rewarded with rapid price appreciation. Cross Media, which opened at $13.10, traded up to $14.39 by 1:20 PM EST. The party ended abruptly when Cross Media Chairman Ron Altbach was interviewed on CNBC's Power Lunch.

Unfortunately for Ron Altbach, Power Lunch's host Bill Griffeth focused the majority of his questions directly on the recent FTC action against Cross Media which we reported on in depth in our April 17th edition.

Because the interview was so short, Mr. Altbach never had the opportunity to point out the alleged violations occurred before Cross Media owned the subsidiary. All of the alleged violations happened between 1996 and 2000. Since taking over Cross Media has implemented changes to prevent future abuses. Mr. Altbach admitted there was a possibility the FTC action could affect earnings. Apparently the market didn't like that statement.

The stock turned around, headed straight south at the conclusion of the interview, and traded to a low of $11.90, which it hit at 10:30 EST this morning. It has since rebounded as buyers recognized the opportunity, up about $1 from today's low to close at $12.89.

The quandary is evident- Based on the earnings the stock looked like it was headed to a new all time high. When investors were reminded of the FTC action, the market sent the stock down.

In most cases, these types of regulatory actions are settled at levels which seem reasonable to both parties. Common sense would suggest Cross Media will eventually pay a small fine and sign a document saying they will never do it again.

In light of the small number of alleged violations (1100 out of 2 million transactions) during that time period, we believe the issue will be settled without significant affect on earnings.

In the press release, management reaffirmed its belief the company will earn $1.25 to $1.29 EPS this year on about $200 million in revenues. Margins were down in the 1st quarter as the company invested heavily in new programs. Cross Media expects earnings to accelerate in succeeding quarters for the remainder of the year as their investments pay off. The 1st quarter was right in line with management's expectations.

Conclusion

In today's market environment investors seem to have adopted a policy of "Sell Now and Ask Questions Later". Can you blame them- The news is dominated by daily horror stories of accounting irregularities, analyst investigations, and stocks being hammered on the slightest sign of negative news.

We continue to believe today's market environment favors buying severe dips when emotions rule the day over common sense. The chart tells us Cross Media remains in a solid uptrend since the early December low, and buyers on the support line have been rewarded with trading gains.

Yesterday's earnings release and subsequent interview have done nothing to derail our price target of $20 this year on Cross Media. The market loved the stock early in the day before the CNBC debacle, and had the stock headed for a new all time high.

The quick turn around after the interview was an emotional reaction to information that is already widely known. In our opinion, this is a buying opportunity for investors who can take the emotion out of the decision.

Of course, there is a risk the FTC action could eventually harm the company's earnings. On the other hand, you might wake up one day to learn Cross Media and the FTC has agreed to a settlement which has no significant effect on Cross Media's profit picture, and the stock has opened $3 higher. It seems to be a sensible risk.

Here is the complete text of the press release for your review:

Thursday May 9, 7:04 am Eastern Time
Press Release
SOURCE: Cross Media Marketing Corporation

Cross Media First Quarter 2002 Revenues Surge 124% to $44 Million, Net Income Rises 71%
Ronald Altbach, XMM Chairman, to Appear on CNBC "Power Lunch" at 1:20 P.M. ET Today to Discuss Technology-Driven Marketing

NEW YORK, May 9 /PRNewswire-FirstCall/ -- Cross Media (Amex: XMM - news), a leading technology-driven marketing company committed to redefining the art and science of 1-to-1 marketing, today announced financial results for the first quarter 2002.

The Company announced revenues for the first quarter of $44 million, an increase of 124% over the corresponding quarter in 2001 of $19.7 million. Earnings for the quarter, before an extraordinary charge of $.5 million, were $1.6 million representing fully-diluted earnings per share of $.11, or $.08 after giving effect to the extraordinary item. The EPS of $.11 represents a $.14 gain from a loss of $(.03) for the corresponding quarter in 2001.

The extraordinary item is a one time charge associated with the early termination of the Company's credit agreement with its former lender pursuant to its recently announced $35 million credit facility led by Fleet Bank. The Fleet credit facility effectively reduces the Company's interest expense by more than 50% for each dollar borrowed and approximately doubles the Company's borrowing capacity. Management noted that the one time charge for the quarter will be significantly less than the anticipated interest savings for the year.

The Company also reiterated its previously projected revenues of $210 million and net income of $1.29 per share for 2002. The $1.29 gives effect to the anticipated JWE Enterprises' acquisition previously announced on April 2, 2002 which is expected to contribute an approximate $12 million in revenues and earnings per share of $.04, subject to completion of the acquisition by the Company.

"I am extremely pleased to announce we are quite solidly on track and on plan," stated Ronald Altbach, Cross Media Chairman and Chief Executive Officer. "We have seamlessly integrated National Syndications, we are successfully and profitably rolling out our state-of-the-art web-centric membership programs and we have now fully deployed the numerous powerful direct marketing assets we have assembled over this last six months. We are now beginning to reap the benefits being generated by these acquisitions, benefits which will only compound over the balance of the year, demonstrably enhancing earnings generation."

"We have not hesitated in making significant investments in our mid-term and long-term future as our 2002 projected earnings of $1.29 a share validate, particularly substantial financial commitments to our web-centric membership programs" continued Mr. Altbach. "We now market over one hundred great products - products which inform, entertain or enhance the quality of life for our consumers, who now number in excess of 30 million, as we continue to build this vital and responsible sales organization."

CNBC's Power Lunch Appearance by Cross Media's Chairman

The Company also announced the anticipated appearance of Mr. Altbach on CNBC's "Power Lunch" today at 1:20 p.m. ET. "Power Lunch" focuses on companies, people and trends driving the markets and influencing Wall Street from the world of entertainment, media, real estate, technology or fashion. It is expected that the topics Mr. Altbach will discuss will range from technology-driven marketing and Cross Media's significant growth to his early career as a producer and keyboardist with the legendary Beach Boys.

Conference Call and Webcast

The Company will host a conference call and webcast at 10:30 a.m. ET today. On the call Ronald Altbach, Chairman and Chief Executive Officer, and other members of the executive management team, will discuss the results and be available to answer questions. Investors can e-mail questions in advance of the call to Alfonso J. Cervantes, Senior Vice President, Business Development atacervantes@xmmcorp.com.

This call is being webcast by CCBN and can be accessed at Cross Media's web site at http://www.xmmcorp.com. Investors may also access the call by dialing 888.428.4474 or from an international location by calling 612.332.0107.

The webcast will also be distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at http://www.companyboardroom.comor by visiting any of the investor sites in CCBN's Individual Investor Network such as America Online's Personal Finance Channel, Fidelity Investments® (Fidelity.com) and others. Institutional investors can access the call via CCBN's password protected event management site, StreetEvents at http://www.streetevents.com. A replay of the webcast will also be posted on the Cross Media web site at http://www.xmmcorp.com.

Individual investors will also be able to listen to the call through WILinks' Vcall website at http://www.vcall.com/EventPage.asp?ID=81569. A replay will be available shortly after the conference call has ended.

About Cross Media

Cross Media Marketing Corporation is a leading technology-driven marketing company engaged in sophisticated targeted 1-to-1 marketing utilizing multiple direct marketing channels. For more information about Cross Media, the Company encourages potential investors to visit the Investor Relations section of http://www.xmmcorp.comor email Alfonso J. Cervantes, Senior Vice President, Business Development, acervantes@xmmcorp.com

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Cross Media intends that these forward-looking statements be subject to the safe harbor created thereby. Such forward-looking statements are based on current expectations of management but involve certain risks and uncertainties. Cross Media's actual results, performance or achievements could differ materially from the results, performance or achievements projected in, or implied by, such forward-looking statements as a result of risk factors, including, without limitation, the following: Cross Media's ability to integrate the recently acquired National Syndications, Inc. operations and to make additional strategically appropriate acquisitions, the outcome of the recent FTC civil action; the adequacy of accounts receivable reserves and other significant estimates, changes in economic conditions or a material decline in the availability of consumer credit, interest rate fluctuations risks relating to government regulation of telemarketing and Internet marketing activities, Cross Media's ability to exploit its database and technological innovations and potential dilution. These factors are described in detail in Cross Media's filings with the Securities and Exchange Commission, including, where applicable, its most recent filings on Forms 10-KSB and 8-K. Cross Media does not assume any responsibility to update the information included in this press release, whether as a result of new information, future events or otherwise.

                        Cross Media Marketing Corporation
                                 Financial Table
                                First Quarter 2002
                (unaudited)($ in thousands, except per share data)

                                                   QTR Ended        QTR Ended
                                                    March 31,       March 31,
                                                      2002              2001

Revenues, net $44,001 $19,678

Direct costs and expenses 33,376 14,785

Gross profit 10,625 4,893

General and administrative 7,819 3,282

Income from operations 2,806 1,611

Interest expense/other 708 458

Income before income taxes 2,098 1,153

Provision for income taxes 525 232

Net income before extraordinary item 1,573 921

Extraordinary item 478 --

Net income 1,095 921

Preferred dividends -- 1,131

Net Income applicable to
common stockholders $1,095 $(210)

       Earnings per share before
        extraordinary item:
        - diluted                                       $0.11            $(0.03)

Extraordinary loss per share -
diluted $(0.03) $--

Earnings (loss) per share- diluted $0.08 $(0.03)

      Weighted average shares of common
       stock outstanding
          - diluted                                       14,575             6,558

Balance Sheet Data: March 31, December 31,
2002 2001

Total assets $132,808 $95,231

Total liabilities $57,576 $37,057

Working capital $42,222 $38,076

Stockholders' equity $75,232 $58,174

SOURCE: Cross Media Marketing Corporation

In the interest of full disclosure, we inform you that one of our editors owns 3000 shares of Cross Media in his own personal account, purchased in the open market with a cost basis of $9.185. Our editor is free to buy and sell the stock any time at his own discretion. This should be viewed as a potential conflict of interest.

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