UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 1, 2005 (March 1, 2005)
LOUDEYE CORP.
(Exact Name of Registrant as Specified in Charter)
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| Delaware | | 0-29583 | | 91-1908833 |
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(State or Other Jurisdiction of
Incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
1130 Rainier Avenue South
| | |
Seattle, Washington
| | 98144 |
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(Address of Principal Executive Offices)
| | Zip Code |
(206) 832-4000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operation and Financial Condition
On March 1, 2005, Loudeye issued a press release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2004, and certain other information. A copy of Loudeye’s press release announcing these financial results and certain other information is furnished as Exhibit 99.1 hereto and is incorporated by reference into this Item 2.02.
Loudeye management will conduct an audio webcast to discuss these financial results. The public is invited to listen in on this webcast. Management will discuss financial and operating results in the quarter and end the call with a question and answer session. Management will also provide a slide presentation to accompany its statements, available in conjunction with the audio webcast. A copy of Loudeye’s slide presentation is furnished as Exhibit 99.2 hereto and is incorporated by reference into this Item 2.02. Information regarding the fourth quarter and fiscal year ended December 31, 2004 results’ webcast and slide presentation is as follows:
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| Date: | | Tuesday, March 1, 2005 |
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| Time: | | 5:00 p.m. EDT / 2:00 p.m. PDT |
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| Audio Webcast: | | 5:00 p.m. EDT / 2:00 p.m. PDT; live and archived; Webcast fromhttp://www.loudeye.com/en/aboutus/earningscalls.asp. This webcast will be available until March 16, 2005 at 5:00 p.m. EDT |
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| Slide Presentation: | | Participants accessing the audio webcast will be able to view an accompanying management slide presentation synchronized with the audio webcast. |
The following information regarding Loudeye’s preliminary financial result for the quarter and fiscal year ended December 31, 2004, which is also contained in the press release is filed under this Item 2.02.
Fourth Quarter and Fiscal Year 2004 Financial Highlights
| | • | Revenues. Revenues increased to $6.5 million in the fourth quarter, compared with revenues of $5.1 million in the third quarter of 2004 and $2.9 million in the prior year fourth quarter. This represents a 29% increase from the third quarter of 2004 and a 124% increase from the prior year fourth quarter. Contributing to the overall increase, revenues from Loudeye’s digital music store services grew to $3.5 million in the current quarter, an increase of 87% from the third quarter of 2004. For the year ended December 31, 2004, Loudeye’s revenues were $16.7 million, compared to $11.9 million in the prior year, an increase of 40%. |
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| | • | Deferred revenue. Deferred revenue was $5.7 million at quarter end, compared with $5.5 million as of September 30, 2004 and $0.7 million as of December 31, 2003. |
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| | • | Net Loss.For the fourth quarter of 2004, GAAP net loss was $5.5 million or $0.07 per share, compared to a GAAP net loss of $5.3 million or $0.07 per share in the third quarter of 2004 and $1.7 million or $0.03 per share in the fourth quarter of 2003. For the year ended December 31, 2004, GAAP net loss was $16.3 million or $0.22 per share, compared to a GAAP net loss of $19.2 million or $0.39 per share for 2003. Included in GAAP net loss for the fourth quarter of 2004 and the year ended December 31, 2004 were net foreign exchange transaction losses of approximately $1.0 million and $0.8 million, respectively. There were no foreign exchange transaction gains or losses for the year ended December 31, 2003 and the quarters ended September 30, 2004 and December 31, 2003. |
| | • | Pro Forma Net Loss.*Pro forma net loss for the quarter totaled $3.5 million or $0.04 per share, compared to a pro forma net loss of $4.3 million or $0.05 per share in the third quarter of 2004 and $0.7 million or $0.01 per share in the prior year fourth quarter. For the full year 2004, pro forma net loss was $12.1 million or $0.16 per share, compared to a pro forma net loss of $6.6 million or $0.13 per share for 2003. |
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| | • | Cash and Investments. Cash, short-term, long-term and restricted investments were approximately $43.7 million as of December 31, 2004. |
| * | | Pro forma net loss excludes charges related to depreciation and amortization expense, charges related to stock-based compensation, increase in fair value of common stock warrants, gain on sale of media restoration assets, net interest income or expense, foreign exchange transaction gain or loss, and special charges. A reconciliation of Loudeye’s GAAP financial results with its pro forma financial results is set forth below. |
Use of Non-GAAP Financial Information
This information filed in this Item 2.02 contains financial metrics that are not based on generally accepted accounting principles in the United States, or GAAP. Management believes the pro forma presentation enhances an overall understanding of Loudeye’s financial performance, and is used by management for that purpose. To supplement Loudeye’s consolidated financial statements presented on a GAAP basis, we have included non-GAAP “pro forma” measures of operating results which exclude certain costs and expenses identified below. The pro-forma net loss and pro forma net loss per share presented in the information filed in this Item 2.02 exclude charges for depreciation and amortization expense, charges related to stock-based compensation, increase in the fair value of common stock warrants, gain on the sale of media restoration assets, net interest income or expense, foreign exchange transaction gain or loss and special charges. Included below in this press release is a tabular reconciliation of the non-GAAP financial measures to Loudeye’s GAAP financial results for the quarter ended December 31, 2004.
Since Loudeye has historically reported non-GAAP results to the investment community, management believes the inclusion of non-GAAP financial measures provides consistency in its financial reporting. Further, these non-GAAP results are important indicators that management uses for planning and forecasting in future periods and for making financial and operating decisions. Although Loudeye believes, for the foregoing reasons, that its presentation of non-GAAP financial measures enhance investors’ understanding of Loudeye’s business and performance, these non-GAAP financial measures are inherently limited in that they exclude a variety of charges and credits that are required to be included in a GAAP presentation, and do not therefore present the full measure of Loudeye’s recorded costs against its revenues. Management compensates for these limitations in non-GAAP results by also evaluating the company’s performance based on traditional GAAP financial measures. Accordingly, investors should consider these pro forma results together with GAAP results, rather than as an alternative to GAAP basis financial measures.
LOUDEYE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
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| | | Three Months Ended | | | Years Ended | |
| | | December 31, | | | September 30, | | | December 31, | | | December 31, | |
| PRELIMINARY | | 2004 | | | 2004 | | | 2003 | | | 2004 | | | 2003 | |
| REVENUES | | $ | 6,540 | | | $ | 5,080 | | | $ | 2,924 | | | $ | 16,742 | | | $ | 11,948 | |
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| COST OF REVENUES | | | 4,598 | | | | 3,480 | | | | 1,418 | | | | 11,323 | | | | 7,206 | |
| | | | | | | | | | | | | | | | |
| Gross margin | | | 1,942 | | | | 1,600 | | | | 1,506 | | | | 5,419 | | | | 4,742 | |
| Gross margin percent | | | 30 | % | | | 31 | % | | | 52 | % | | | 32 | % | | | 40 | % |
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| OPERATING EXPENSES | | | | | | | | | | | | | | | | | | | | |
| Research and development | | | 1,349 | | | | 1,325 | | | | 320 | | | | 4,017 | | | | 1,688 | |
| Sales and marketing | | | 1,507 | | | | 1,478 | | | | 419 | | | | 4,456 | | | | 3,286 | |
| General and administrative | | | 3,333 | | | | 3,798 | | | | 1,672 | | | | 11,323 | | | | 7,778 | |
| Amortization of intangibles and other assets | | | 196 | | | | 325 | | | | 157 | | | | 787 | | | | 1,100 | |
| Stock-based compensation | | | 120 | | | | 21 | | | | 344 | | | | 306 | | | | 1,298 | |
| Special charges | | | 12 | | | | 350 | | | | 262 | | | | 312 | | | | 8,699 | |
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| | | | 6,517 | | | | 7,297 | | | | 3,174 | | | | 21,201 | | | | 23,849 | |
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| OPERATING LOSS | | | (4,575 | ) | | | (5,697 | ) | | | (1,668 | ) | | | (15,782 | ) | | | (19,107 | ) |
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| Increase in fair value of common stock warrants | | | — | | | | — | | | | (26 | ) | | | — | | | | (248 | ) |
| Gain on sale of media restoration assets | | | 43 | | | | 273 | | | | — | | | | 156 | | | | | |
| Other income (expense) | | | (998 | ) | | | 93 | | | | (20 | ) | | | (663 | ) | | | 181 | |
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| NET LOSS | | $ | (5,530 | ) | | $ | (5,331 | ) | | $ | (1,714 | ) | | $ | (16,289 | ) | | $ | (19,174 | ) |
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| Basic and diluted net loss per share | | $ | (0.07 | ) | | $ | (0.07 | ) | | $ | (0.03 | ) | | $ | (0.22 | ) | | $ | (0.39 | ) |
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| Weighted average shares — basic and diluted | | | 81,848 | | | | 79,285 | | | | 56,131 | | | | 73,845 | | | | 49,797 | |
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| NON-GAAP PRO FORMA INFORMATION: | | | | | | | | | | | | | | | | | | | | |
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| Net loss | | $ | (5,530 | ) | | $ | (5,331 | ) | | $ | (1,714 | ) | | $ | (16,289 | ) | | $ | (19,174 | ) |
| Adjustments to reconcile GAAP net loss to pro forma net loss: | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 903 | | | | 977 | | | | 355 | | | | 2,919 | | | | 2,378 | |
| Stock-based compensation | | | 155 | | | | 65 | | | | 362 | | | | 423 | | | | 1,360 | |
| Increase in fair value of common stock warrants | | | — | | | | — | | | | 26 | | | | — | | | | 248 | |
| Gain on sale of media restoration assets | | | (43 | ) | | | (273 | ) | | | — | | | | (156 | ) | | | — | |
| Interest (income) expense | | | (27 | ) | | | (93 | ) | | | 21 | | | | (176 | ) | | | (61 | ) |
| Foreign exchange transaction loss | | | 1,016 | | | | — | | | | — | | | | 833 | | | | — | |
| Special charges (1) | | | 12 | | | | 350 | | | | 262 | | | | 312 | | | | 8,699 | |
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| Pro forma net loss | | $ | (3,514 | ) | | $ | (4,305 | ) | | $ | (688 | ) | | $ | (12,134 | ) | | $ | (6,550 | ) |
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| Basic and diluted pro forma net loss per share | | $ | (0.04 | ) | | $ | (0.05 | ) | | $ | (0.01 | ) | | $ | (0.16 | ) | | $ | (0.13 | ) |
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| | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares — basic and diluted | | | 81,848 | | | | 79,285 | | | | 56,131 | | | | 73,845 | | | | 49,797 | |
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| (1) | | Special charges of $8,699 relate primarily to the impairment of assets in accordance with our long-lived asset policy. During the year ended December 31, 2003, we recorded impairment charges for goodwill, intangible assets and property and equipment of approximately $5,300, $685 and $670 respectively. The remaining costs related to corporate restructurings and facilities consolidations. |
LOUDEYE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
| | | | | | | | | |
| | | December 31, | |
| PRELIMINARY | | 2004 | | | 2003 | |
| ASSETS | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash, cash equivalents and marketable securities | | $ | 38,880 | | | $ | 21,940 | |
| Accounts receivable, net | | | 5,333 | | | | 1,781 | |
| Prepaid and other | | | 1,298 | | | | 345 | |
| Assets held for sale | | | — | | | | 363 | |
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| Total current assets | | | 45,511 | | | | 24,429 | |
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| Long-term investments | | | 2,288 | | | | — | |
| Restricted investments | | | 2,568 | | | | 316 | |
| Property and equipment, net | | | 5,661 | | | | 1,123 | |
| Goodwill | | | 43,549 | | | | — | |
| Intangible assets, net | | | 3,700 | | | | 86 | |
| Assets held for sale | | | — | | | | 730 | |
| Other long-term assets, net | | | 539 | | | | 360 | |
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| Total assets | | $ | 103,816 | | | $ | 27,044 | |
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| LIABILITIES | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 4,012 | | | $ | 1,229 | |
| Line of credit | | | — | | | | 1,285 | |
| Accrued compensation and benefits | | | 929 | | | | 378 | |
| Other accrued expenses | | | 4,966 | | | | 1,155 | |
| Accrued special charges | | | 403 | | | | 1,670 | |
| Accrued acquisition consideration | | | 15,924 | | | | — | |
| Deferred revenue | | | 4,353 | | | | 485 | |
| Current portion of long-term debt and capital leases | | | 1,135 | | | | 1,348 | |
| Liabilities related to assets held for sale | | | — | | | | 98 | |
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| Total current liabilities | | | 31,722 | | | | 7,648 | |
| | | | | | | | | |
| Deferred revenue | | | 1,343 | | | | 228 | |
| Common stock payable related to acquisition | | | 3,193 | | | | — | |
| Long-term debt and capital leases, net of current portion | | | 1,000 | | | | 2,135 | |
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| Total liabilities | | | 37,258 | | | | 10,011 | |
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| STOCKHOLDERS’ EQUITY | | | 66,558 | | | | 17,033 | |
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| Total liabilities and stockholders’ equity | | $ | 103,816 | | | $ | 27,044 | |
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Item 9.01 Financial Statements and Exhibits
| (a) | Not applicable. |
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| (b) | Not applicable. |
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| (c) | Exhibits. |
| | 99.1 | Press Release issued March 1, 2005 by Loudeye Corp |
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| | 99.2 | Loudeye Corp. slide presentation dated March 1, 2005. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | Loudeye Corp.
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| Dated: March 1, 2005 | By: | /s/ Lawrence J. Madden | |
| | | Lawrence J. Madden | |
| | | Executive Vice President and Chief Financial Officer | |
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