FOR IMMEDIATE RELEASE
LOUDEYE ANNOUNCES SECOND QUARTER 2004 RESULTS
COMPANY ANNOUNCES INCREASED REVENUES IN THE SECOND QUARTER AND PROVIDES
GUIDANCE FOR THE SECOND HALF OF 2004
SEATTLE, WA - AUGUST 5, 2004 - Loudeye Corp. (Nasdaq: LOUD), the worldwide
leader in business-to-business digital media solutions, today announced
financial results for the quarter ended June 30, 2004.
SECOND QUARTER 2004 FINANCIAL HIGHLIGHTS
- REVENUES. Revenues increased to $3.1 million in the current quarter,
compared with revenues of $2.0 million in the first quarter of 2004
and $2.9 million in the prior year quarter. Deferred revenues at
quarter end totaled $2.7 million, an increase of more than $1.9
million, or 244% from March 31, 2004.
- GROSS PROFIT. Gross profit as a percentage of revenues was 42% in
the current quarter, an improvement from 28% in the first quarter of
2004 and comparable to 42% in the prior year quarter.
- NET LOSS. For the quarter, GAAP net loss was $2.8 million or $0.04
per share compared to a net loss of $2.8 million or $0.04 per share
in the first quarter of 2004 and $2.1 million or $0.04 per share in
the prior year quarter.
- PRO FORMA NET LOSS. Pro forma net loss for the quarter totaled $2.1
million or $0.03 per share compared to a pro forma net loss of $2.3
million or $0.04 per share in the first quarter of 2004 and $1.1
million or $0.02 per share in the prior year quarter.
- CASH AND INVESTMENTS. Cash, short-term investments and restricted
investments were $32.5 million as of June 30, 2004.
Pro forma net loss excludes charges related to the amortization of intangible
and other assets, depreciation expense, charges relating to stock-based
compensation, loss on the sale of media restoration assets, net interest income
and special charges. A reconciliation of Loudeye's GAAP
financial results with its pro forma financial results is set forth below after
the accompanying condensed consolidated statements of operations.
These results are preliminary and may be subject to change based upon the
completion of the Company's review of the final accounting for its acquisition
of On Demand Distribution ("OD2") and filing of the Company's Form 10-Q.
RECENT OPERATING HIGHLIGHTS
- Acquiring OD2, the leading European provider of business-to-business
digital music services. The acquisition added over 35 customers for
the company's white label digital music store service, a Pan
European portfolio of music licenses and catalog and expanded
operations to support customers in 12 European countries.
- Launching seven new digital music store customers throughout Europe
and Australia, including NineMSN, Packard Bell, Ilse Media, GWR,
Tonlist, Eircom and Oxfam. Expanding its European digital music
store deployments with MSN and Coca-Cola.
- Adding sixteen new customers for P2P content protection, including
contracts with major content owners across the music, film/video,
game and software industries. The addition of new customers, as well
as the expansion of current contracts, demonstrates the growing
importance and urgency in deploying anti-piracy strategies among
content owners.
"We delivered increased revenue growth in the second quarter, driven by organic
growth in our core businesses and contribution from our new anti-piracy
business, which is growing soundly. In addition, we completed an important
strategic acquisition at the end of the quarter that expands our digital
distribution business, our customer base and our rights portfolio, significantly
increasing our addressable market. This acquisition globalizes Loudeye services
and positions us uniquely to attract new customers with global brands and
greater reach," said Jeff Cavins, Loudeye's president and chief executive
officer.
FORWARD-LOOKING FINANCIAL GUIDANCE
While future results are subject to fluctuation, Loudeye anticipates that
revenues for the quarter ending September 30, 2004 will be approximately $5.5
million to $6.0 million, an increase of
approximately 75% to 90% versus the second quarter of 2004 and approximately
double the revenues of the prior year period. Including the expected losses from
the OD2 acquisition during the third quarter, and excluding integration related
costs, the Company expects a pro forma net loss of between $3.3 million and $3.7
million, or approximately $0.04 per share.
For the fourth quarter of 2004, the Company expects revenues to range between
approximately $7.3 million and $8.0 million, an increase of approximately 150%
to 175% versus the prior year period. Based on increased revenues, progress in
the integration of OD2, and strict management of expenses, the Company expects
pro forma net losses to decrease in the fourth quarter and range between
approximately $2.0 million and $2.5 million.
For the full year 2004, the Company expects revenues to range between $17.9
million and $19.1 million, which represents an increase of between 50% and 60%
from 2003 levels. Pro forma net losses for the full year are expected to range
between $9.6 million and $10.5 million, or $0.13 to $0.14 per share. The Company
also forecasts continued revenue growth in the first half of 2005 and expects to
achieve pro forma net profit by the middle of 2005.
"We expect aggressive top-line growth in the second half of 2004. We intend to
focus on operational execution to maximize our financial performance in each of
our service lines and geographic markets," said Larry Madden, Loudeye's chief
financial officer. "We remain highly focused on achieving profitability and
believe we can achieve our worldwide growth plans without sacrificing progress
toward that important financial goal. With over $32 million of cash resources on
our balance sheet, Loudeye remains well positioned to execute on our global
operating plan. We intend to leverage this financial strength to continue to
invest in new business development efforts that will help drive organic growth,
as well as pursue strategic opportunities that can leverage our world-class
infrastructure."
Forward-looking financial guidance statements are based upon current
expectations as of the date of this release and are based upon limited available
information which is dynamic and subject to risk and uncertainty. Results may be
materially affected by many factors including those described in the
Forward-Looking Statements section below.
SECOND QUARTER 2004 WEBCAST INFORMATION
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.
Information regarding the second quarter 2004 results' webcast and slide
presentation is as follows:
Date: Thursday, August 5, 2004
Time: 5:00 p.m. EDT / 2:00 p.m. PDT
Audio Webcast: 5:00 p.m. EDT / 2:00 p.m. PDT; live and archived;
Webcast from
http://www.loudeye.com/common/aboutus/
investorrelations/earningscalls.asp
Slide Presentation: Participants accessing the audio webcast will be
able to view an accompanying management slide
presentation synchronized with the audio webcast.
ABOUT LOUDEYE CORP.
Loudeye is the worldwide leader in business-to-business digital media solutions
and the outsourcing provider of choice for companies looking to maximize the
return on their digital media investment. Loudeye combines innovative products
and services with the world's largest music archive and the industry's leading
digital media infrastructure enabling partners to rapidly and cost effectively
launch complete, customized digital media stores and services. For more
information, visit www.loudeye.com.
###
CONTACTS:
Media/press contact: Karen Demarco, mPRm Public Relations, 323-933-3399,
kdemarco@mprm.com
Investor Relations: Mike Dougherty, Loudeye Corp., 206.832.4000,
ir@loudeye.com
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking information within the meaning of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, including Forward-Looking Financial Guidance, statements about growth,
ability to attract and win new customers, and increased focus on operations and
other factors. Our forward-looking statements are based on currently available
information, which management has assessed, but which is subject to rapid change
due to risks and uncertainties that affect our business, including limited
visibility of
future demand for our products and services; end-consumer demand for digital
music sold from the services of our customers; current uncertainties in our
marketplace which may affect expected demand, customer selection criteria and
sales cycles; variability in the amount and timing of expenses and cash usage;
negative macroeconomic conditions or world events; foreign exchange risk;
difficulties encountered in the integration of acquisitions into Loudeye's
operations or the failure to achieve the synergies expected from that
integration; changes in capital requirements as a result of acquisitions;
increased competition; adverse developments in any material customer or
copyright holder relationships; ability to acquire and maintain copyright
licensing agreements; uncertainty involving intellectual property rights
involved with the reproduction and online distribution of digital media; the
loss of service of our hosting infrastructure, including the failure of third
party service providers; our ability to retain key personnel; and other factors
beyond our control. Our forward-looking statements should be considered in the
context of these and other risk factors disclosed from time to time in the
company's filings with the Securities and Exchange Commission, including our
annual report on Form 10-K and quarterly filings on Form 10-Q (available through
EDGAR at www.sec.gov). We assume no obligation to update our forward-looking
statements.
USE OF NON-GAAP FINANCIAL INFORMATION
The press release and webcast contain financial metrics that are not based on
accounting principals generally accepted in the United States ("GAAP"). To
supplement our consolidated financial statements presented on a GAAP basis, we
have included non-GAAP "pro forma" measures of operating results which excludes
certain costs and expenses. The pro-forma net loss and pro forma net loss per
share presented in the press release and webcast exclude charges for
amortization of intangible and other assets, depreciation expenses, charges
related to stock-based compensation, loss on the sale of media restoration
assets, net interest income and special charges. Included in the press release
is a reconciliation of the non-GAAP financial measures to our GAAP financial
results. As described further below, we believe the pro forma presentation
enhances an overall understanding of our financial performance, and is used by
management for that purpose.
Although management believes the above non-GAAP financial measures enhance
investors' understanding of our 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 our recorded costs against our
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. Additional details regarding these items are included in the
Company's Form 8-K furnished to the SEC concurrently with this press release.
FINANCIAL TABLES FOLLOW
LOUDEYE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
2004 2003 2004 2003
-------- -------- -------- --------
REVENUES $ 3,131 $ 2,903 $ 5,122 $ 6,213
COST OF REVENUES
OTHER COST OF REVENUES 1,800 1,678 3,207 4,219
NON-CASH STOCK-BASED COMPENSATION 19 4 38 7
-------- -------- -------- --------
TOTAL COST OF REVENUES 1,819 1,682 3,245 4,226
-------- -------- -------- --------
GROSS PROFIT 1,312 1,221 1,877 1,987
GROSS PROFIT PERCENT 42% 42% 37% 32%
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT 753 392 1,343 969
SALES AND MARKETING 836 835 1,471 2,381
GENERAL AND ADMINISTRATIVE 2,232 1,740 4,192 4,492
AMORTIZATION OF INTANGIBLES AND OTHER ASSETS 126 260 266 786
STOCK-BASED COMPENSATION 43 191 165 231
GAIN ON SALE OF PROPERTY & EQUIPMENT -- (96) -- (96)
SPECIAL CHARGES -- -- (50) 8,437
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 3,990 3,322 7,387 17,200
OPERATING LOSS (2,678) (2,101) (5,510) (15,213)
LOSS ON SALE OF MEDIA RESTORATION ASSETS (160) -- (160) --
OTHER INCOME, NET 48 39 59 93
-------- -------- -------- --------
NET LOSS $ (2,790) $ (2,062) $ (5,611) $(15,120)
======== ======== ======== ========
BASIC AND DILUTED NET LOSS PER SHARE $ (0.04) $ (0.04) $ (0.08) $ (0.33)
======== ======== ======== ========
WEIGHTED AVERAGE SHARES - BASIC AND DILUTED 70,882 45,931 67,105 46,215
======== ======== ======== ========
NON-GAAP PRO FORMA INFORMATION:
NET LOSS $ (2,790) $ (2,062) $ (5,611) $(15,120)
ADJUSTMENTS TO RECONCILE GAAP NET LOSS TO PRO FORMA NET LOSS:
AMORTIZATION OF INTANGIBLES AND OTHER ASSETS 126 260 266 786
DEPRECIATION 431 525 773 813
STOCK-BASED COMPENSATION 62 195 203 238
LOSS ON SALE OF MEDIA RESTORATION ASSETS 160 -- 160 --
INTEREST INCOME, NET (48) (53) (56) (90)
SPECIAL CHARGES -- -- (50) 8,437
-------- -------- -------- --------
PRO FORMA NET LOSS $ (2,059) $ (1,135) $ (4,315) $ (4,936)
======== ======== ======== ========
BASIC AND DILUTED PRO FORMA NET LOSS PER SHARE $ (0.03) $ (0.02) $ (0.06) $ (0.11)
======== ======== ======== ========
WEIGHTED AVERAGE SHARES - BASIC AND DILUTED 70,882 45,931 67,105 46,215
======== ======== ======== ========
LOUDEYE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
JUNE 30, DECEMBER 31,
2004 2003
---------- ------------
ASSETS
CURRENT ASSETS:
CASH AND SHORT-TERM INVESTMENTS $ 32,143 $ 21,940
ACCOUNTS RECEIVABLE, NET 4,659 1,781
PREPAID EXPENSES AND OTHER CURRENT ASSETS 1,118 345
ASSETS HELD FOR SALE -- 363
---------- ----------
TOTAL CURRENT ASSETS 37,920 24,429
RESTRICTED INVESTMENTS 316 316
PROPERTY AND EQUIPMENT, NET 3,903 1,123
GOODWILL AND INTANGIBLE ASSETS, NET 48,688 86
ASSETS HELD FOR SALE -- 730
OTHER ASSETS, NET 250 360
---------- ----------
TOTAL ASSETS $ 91,077 $ 27,044
========== ==========
LIABILITIES
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 4,610 $ 1,229
LINE OF CREDIT -- 1,285
ACCRUED COMPENSATION AND BENEFITS 437 378
OTHER ACCRUED EXPENSES 4,547 1,155
ACCRUED SPECIAL CHARGES 521 1,670
ACCRUED ACQUISITION CONSIDERATION 15,827 --
DEFERRED REVENUE 1,983 485
CURRENT PORTION OF LONG-TERM DEBT AND CAPITAL LEASES 1,281 1,348
COMMON STOCK PAYABLE RELATED TO ACQUISITION 2,596 --
LIABILITIES RELATED TO ASSETS HELD FOR SALE -- 98
---------- ----------
TOTAL CURRENT LIABILITIES 31,802 7,648
DEFERRED REVENUE 757 228
ACCRUED ACQUISITION CONSIDERATION, NET OF CURRENT PORTION 4,519 --
LONG-TERM DEBT AND CAPITAL LEASES, NET OF CURRENT PORTION 1,540 2,135
---------- ----------
TOTAL LIABILITIES 38,618 10,011
STOCKHOLDERS' EQUITY 52,459 17,033
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 91,077 $ 27,044
========== ==========