Exhibit 99.1
FOR IMMEDIATE RELEASE
LOUDEYE ANNOUNCES SECOND QUARTER 2005 FINANCIAL RESULTS
Digital media store services drive strong growth and record quarterly revenue
SEATTLE, WA - AUGUST 9, 2005 - Loudeye Corp. (Nasdaq: LOUD), a worldwide leader
in business-to-business digital media solutions, today announced financial
results for the second quarter 2005.
SECOND QUARTER 2005 FINANCIAL HIGHLIGHTS
o REVENUE. Revenue was $7.0 million in the second quarter 2005 compared
with revenue of $3.1 million in the second quarter 2004 and $6.0 million
in the first quarter 2005. Digital media store services revenue
represented $5.0 million of total revenue, an increase from $205,000 in
the second quarter 2004 and $4.0 million in the first quarter 2005.
o DEFERRED REVENUE. Deferred revenue was $5.8 million as of June 30,
2005, net of related receivables of $2.9 million.
o NET LOSS. For the second quarter 2005, GAAP net loss was $6.9 million or
$0.06 per share, compared to $2.6 million or $0.04 per share in the
second quarter 2004 and $7.5 million or $0.07 per share in the first
quarter 2005.
o EBITDA LOSS.* EBITDA loss for the current quarter totaled $6.1 million
compared to $2.1 million for the second quarter 2004 and $6.6 million
for the first quarter 2005.
o CASH AND MARKETABLE SECURITIES. Cash, cash equivalents, restricted cash
and marketable securities were approximately $26.5 million as of June
30, 2005.
* EBITDA loss excludes charges related to depreciation and amortization expense
and interest income and expense. A reconciliation of GAAP net loss to EBITDA
loss is provided below.
RECENT HIGHLIGHTS
Loudeye's recent operating highlights include:
o Powering music services in more countries than any other digital music
service provider; we currently power music services in 22 countries
worldwide.
o Expanding our relationship with The Coca-Cola Company to include new
digital music stores in Ireland, Italy and New Zealand. We now power
eight music stores across the globe for Coca-Cola.
o Launching a digital music service for Panasonic in the United Kingdom to
coincide with their release of two new portable music players. Now
Panasonic consumers have one place to purchase hardware as well as
download high quality, digital music for playback on their devices.
o Launching new digital music services for Virgin Megastores, CD WOW! and
others.
o Further enhancing our intellectual property portfolio through the
issuance of a U.S. patent on digital encoding technologies as well as
the purchase of a patent covering peer-to-peer anti-piracy technologies.
o Appointing 30-year industry veteran Frank Varasano to our board of
directors. Mr. Varasano most recently served as Executive Vice
President at Oracle Corporation.
"Strength in our digital media store services was the primary driver for our
business in the quarter, as we focused on transaction growth from existing
stores and new store launches," said Mike Brochu, Loudeye's president and chief
executive officer. "We continue to make significant investments in our online
and mobile platform and are making progress toward marquee digital music store
launches in the fall 2005. We are encouraged by growth trends in our stores, our
market share in Europe and positive global industry trends in the first half of
2005. We are well positioned to capitalize on global trends in digital
distribution, with our reach in 22 countries and our leading online and mobile
platform capabilities."
FORWARD-LOOKING FINANCIAL GUIDANCE
While future results are subject to change and risks, Loudeye currently
anticipates that revenue for the second half of 2005 will be approximately $15.0
million to $17.0 million, an increase of 28% to 45% over the second half of
2004. Digital media store services revenue is estimated to represent greater
than 75% of total revenue in the second half of 2005. These estimates would
result in total revenue of $28.0 million to $30.0 million for the full-year
2005.
"We expect continued revenue growth from our existing digital media stores in
the second half of 2005, combined with early-stage revenue contribution from the
launch of two major music store customers in the fall 2005. Because of
seasonality from summer holidays in Europe, we expect only modest third quarter
2005 transactional revenue growth but expect to show strong sequential and
year-over-year growth for the fourth quarter," said Ron Stevens, Loudeye's chief
financial officer and chief operating officer. "While we are excited about
growth in revenue for our digital media store services, we continue to be
cautious in setting growth expectations for our content protection services and
digital media content services as we focus our efforts on how best to scale and
leverage these assets."
"The fourth consecutive quarter of revenue growth for our digital media store
services demonstrates digital music distribution is really taking off. Our
guidance for 2005 represents a doubling of our digital media store revenues in
the second half of 2005 over the comparable 2004 period," said Mike Brochu. "We
anticipate this momentum will continue into 2006, with similar growth in our
digital media store services, demonstrating the benefits of our reach and
leadership position in the global digital music stores market."
Forward-looking financial guidance reflects management's expectations as of the
date of this release and is 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 2005 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 for the quarter and end the call with a
question and answer session. Information regarding the second quarter 2005
results' webcast is as follows:
Date: Tuesday, August 9, 2005
Time: 5:00 p.m. EDT / 2:00 p.m. PDT
Audio Webcast: 5:00 p.m. EDT / 2:00 p.m. PDT; Webcast from
http://www.loudeye.com/en/aboutus/earningscalls.asp
This webcast will be available until August 24,
2005 at 5:00 p.m. EDT
ABOUT LOUDEYE CORP.
Loudeye is a 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, a broad catalog of licensed
digital music 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 and management's audio webcast contain forward-looking
information within the meaning of the Private Securities Litigation Reform Act
of 1995, including forward-looking financial guidance such as statements about
expected revenue and revenue mix for the second half of 2005, the years ending
December 31, 2005 and 2006, and sequential quarterly growth rates. The words or
phrases "estimates," "expects" and "anticipates" and similar words and phrases
are intended to identify such forward-looking statements. As disclosed in our
annual report on Form 10-K for the year ended December 31, 2004, we determined
that, as of the December 31, 2004 measurement date, there were deficiencies in
both the design and effectiveness of our internal control over financial
reporting. We assessed those deficiencies and determined that there were eight
material weaknesses in our internal control over financial reporting as of
December 31, 2004. As a result, management concluded that our internal control
over financial reporting was not effective as of December 31, 2004. We may not
be successful in remediating each of these material weaknesses and we identify
further material weaknesses during the course of our internal control assessment
as of December 31, 2005. The existence of a material weakness or weaknesses is
an indication that there is more than a remote likelihood that a material
misstatement of our financial statements will not be prevented or detected in a
future period. The forward-looking statements contained in this press release
are based on current estimates and actual results may differ materially due to
risks including the possibility of adverse changes in the market for
distribution of digital media that Loudeye serves; adverse or uncertain legal
developments with respect to copyrights surrounding the creation and
distribution of digital content; pricing pressures and other activities by
competitors; the failure of Loudeye's hosting infrastructure; the complexity of
Loudeye's services and delivery networks; any problems or failures in the
structure, complexities or redundancies of Loudeye's network infrastructure;
failures in third party telecommunication and network providers to provide
required transmission
capacity; lack of market acceptance for Loudeye's products and services; the
possible delay in the adoption of digital media or related applications on the
web in general; and other risks set forth in Loudeye's most recent Form 10-Q,
10-K and other SEC filings which are available through EDGAR at www.sec.gov.
These are among the primary risks we foresee at the present time. Loudeye
assumes no obligation to update the forward-looking statements.
USE OF NON-GAAP FINANCIAL INFORMATION
EBITDA loss presented in this press release and management's audio presentation
is a non-GAAP financial measure that represents GAAP net loss excluding the
effects of interest income and expense and depreciation and amortization
expense. EBITDA as presented below may differ from non-GAAP measures used by
other companies and is not a measurement under GAAP. Management believes the
EBITDA presentation enhances an overall understanding of Loudeye's financial
performance from ongoing operations, and is used by management for that purpose.
We believe EBITDA and EBITDA per share presented below provides useful
information to investors about our financial performance because it eliminates
the effects of period to period changes in costs associated with impairment of
assets related to capital investments and interest on our debt and capital lease
obligations, both of which we believe are not reflective of the underlying
performance of our business operations. The adjustments made in calculating
EBITDA are adjustments that would be made in calculating our performance for
purposes of employment agreements and associated bonus potentials for our senior
executives. Measures similar to EBITDA are also widely used by us and others in
the industry to evaluate and price potential acquisition candidates. We believe
EBITDA facilitates operating performance comparisons by backing out potential
differences across periods caused by variations in capital structures (affecting
interest expense) and the age and book depreciation of equipment (affecting
depreciation expense). In addition, we present EBITDA because we believe it is
frequently used by analysts, investors and other interested parties in
evaluating companies such as ours. 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.
There are limitations inherent in non-GAAP financial measures such as EBITDA 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 revenue. Management compensates for
these limitations in non-GAAP measures by also evaluating our performance based
on traditional GAAP financial measures. Accordingly, investors should consider
these non-GAAP results together with GAAP results, rather than as an alternative
to GAAP basis financial measures.
LOUDEYE CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------------- ------------------------------------
2005 2004 2005 2004
--------------- ----------------- --------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUE $ 7,017 $ 3,131 $ 13,046 $ 5,122
COST OF REVENUE 6,847 1,900 13,156 3,361
GROSS PROFIT (LOSS) 170 1,231 (110) 1,761
GROSS PROFIT (LOSS) PERCENT 2% 39% -1% 34%
OPERATING EXPENSES:
SALES AND MARKETING 1,626 836 3,557 1,471
RESEARCH AND DEVELOPMENT 2,252 753 4,036 1,343
GENERAL AND ADMINISTRATIVE 3,354 2,232 6,991 4,192
AMORTIZATION OF INTANGIBLES 93 45 193 150
STOCK-BASED COMPENSATION 5 43 62 165
SPECIAL CHARGES (CREDITS) - - (43) (50)
--------------- ----------------- --------------- ----------------
TOTAL OPERATING EXPENSES 7,330 3,909 14,796 7,271
--------------- ----------------- --------------- ----------------
LOSS FROM OPERATIONS (7,160) (2,678) (14,906) (5,510)
OTHER INCOME, NET 230 71 524 82
--------------- ----------------- --------------- ----------------
NET LOSS $ (6,930) $ (2,607) $ (14,382) $ (5,428)
=============== ================= =============== ================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.06) $ (0.04) $ (0.14) $ (0.08)
=============== ================= =============== ================
WEIGHTED AVERAGE SHARES OUTSTANDING 108,694 70,700 105,225 67,013
=============== ================= =============== ================
NON-GAAP INFORMATION:
NET LOSS $ (6,930) $ (2,607) $ (14,382) $ (5,428)
ADJUSTMENTS TO RECONCILE GAAP NET LOSS TO
EBITDA:
DEPRECIATION AND AMORTIZATION 560 1,963 1,041
EXPENSE 983
INTEREST (INCOME) EXPENSE (155) (48) (289) (56)
--------------- ----------------- --------------- ----------------
EBITDA $ (6,102) $ (2,095) $ (12,708) $ (4,443)
=============== ================= =============== ================
BASIC AND DILUTED EBITDA PER SHARE $ (0.06) $ (0.03) $ (0.12) $ (0.07)
=============== ================= =============== ================
WEIGHTED AVERAGE SHARES OUTSTANDING 108,694 70,700 105,225 67,013
--------------- ----------------- --------------- ----------------
LOUDEYE CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2005 2004
---------------- --------------------
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
CASH AND SHORT-TERM MARKETABLE SECURITIES $ 25,810 $ 38,880
ACCOUNTS RECEIVABLE, NET 5,015 5,333
PREPAID EXPENSES AND OTHER CURRENT ASSETS 2,099 1,298
RESTRICTED CASH 654 --
---------------- ---------------------
TOTAL CURRENT ASSETS 33,578 45,511
LONG-TERM MARKETABLE SECURITIES -- 2,288
RESTRICTED CASH -- 2,568
PROPERTY AND EQUIPMENT, NET 5,597 5,661
GOODWILL 42,357 43,549
INTANGIBLE ASSETS, NET 4,445 3,700
OTHER ASSETS, NET 160 431
---------------- ---------------------
TOTAL ASSETS $ 86,137 $ 103,708
================ =====================
LIABILITIES
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 3,796 $ 4,012
ACCRUED COMPENSATION AND BENEFITS 1,166 929
ACCRUED AND OTHER LIABILITIES 5,849 4,966
ACCRUED SPECIAL CHARGES -- 403
ACCRUED ACQUISITION CONSIDERATION 2,378 15,924
DEPOSITS AND DEFERRED REVENUE 4,695 4,353
CURRENT PORTION OF LONG-TERM DEBT AND CAPITAL LEASE 1,135
OBLIGATIONS 1,053
---------------- ---------------------
TOTAL CURRENT LIABILITIES 18,937 31,722
DEPOSITS AND DEFERRED REVENUE, NET OF CURRENT PORTION 1,067 1,343
DEFERRED RENT 51 --
COMMON STOCK PAYABLE RELATED TO ACQUISITION 1,791 3,193
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF 1,000
CURRENT PORTION 500
---------------- ---------------------
TOTAL LIABILITIES 22,346 37,258
STOCKHOLDERS' EQUITY 63,791 66,450
---------------- ---------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 86,137 $ 103,708
---------------- ---------------------