[GIGAMEDIA LIMITED LOGO] PRESS RELEASE
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
Brad Miller, Investor Relations Director
Country/City Code 8862 Tel: 3518-1107
brad.miller@gigamedia.com.tw
GIGAMEDIA REPORTS FIRST EVER PROFITABLE QUARTER
ALL BUSINESS UNITS PROFITABLE IN SECOND QUARTER 2004
Highlights of Second Quarter 2004 Results
- Consolidated revenues of US$24.0 million
- Consolidated EBITDA(1) of US$2.9 million
- Positive net income recorded in all business units; consolidated net
income of US$559 thousand
- No debt, with cash and short-term investments totaling US$37.7
million
TAIPEI, Taiwan, September 22, 2004 - GigaMedia Limited ("GigaMedia" or the
"Company") (NASDAQ: GIGM) announced today its first ever quarterly profit, for
the second quarter ended June 30, 2004, both on a consolidated basis and for
each of its business units.
"We are very pleased that our turnaround plan is beginning to show results - and
ahead of schedule," stated Chief Executive Officer Arthur M. Wang, who joined
GigaMedia at the end of 2003. "Our first ever profitable quarter is a key
milestone toward building a new GigaMedia."
The Company's results reflect in part an internal restructuring implemented by
the new management and focused on the realization of major operating
efficiencies.
"Going forward, we remain committed to delivering profitable returns to
shareholders and growing GigaMedia both organically and through acquisition,"
stated Mr. Wang. "With no debt and a healthy cash balance, we are excited about
our opportunities for expansion."
- -------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is
provided as a supplement to results provided in accordance with U.S. generally
accepted accounting principles ("GAAP"). See "Use of Non-GAAP Measures" for more
details.
CONSOLIDATED FINANCIAL RESULTS
Consolidated results of GigaMedia are summarized in the table below.
GIGAMEDIA Q2 2004 UNAUDITED CONSOLIDATED FINANCIAL RESULTS
CHANGE CHANGE
(IN US$ THOUSANDS) 2Q04 2Q03 (%) 2Q04 1Q04 (%)
- --------------------------------------------------------------------------------------------
REVENUES 23,959 20,898 15 23,959 27,255 -12
OPERATING INCOME (LOSS) 410 (2,269) NA 410 (1,141) NA
NET INCOME (LOSS)(A) 559 (2,122) NA 559 (775) NA
EBITDA(B) 2,870 (890) NA 2,870 687 318
CASH, CASH EQUIVALENTS AND
SHORT-TERM INVESTMENTS 37,709(C) 58,784 -36 37,709(C) 41,049 -8
(A) Net income (loss) excludes amounts attributable to minority interests.
GigaMedia's subsidiary G-Music Limited ("G-Music") conducts an offline music
distribution business. Minority shareholders own a 41.4% equity interest in
G-Music.
(B) EBITDA (earnings before interest, taxes, depreciation and amortization) is
provided as a supplement to results provided in accordance with GAAP. See "Use
of Non-GAAP Measures" for more details.
(C) $6.5 million was paid on April 1, 2004 in connection with the acquisition of
an entertainment software developer.
Consolidated revenues for the second quarter of 2004 were $24.0 million, a 15%
increase over consolidated revenues of $20.9 million for the corresponding
period in 2003 and a decrease of 12% from consolidated revenues of $27.3 million
for the preceding quarter. The quarter-to-quarter decline in consolidated
revenues was largely due to seasonality in the Company's music distribution
business, as music sales are strongest during Chinese New Year in the first
quarter.
Consolidated net income for the second quarter of 2004 was $559 thousand, a
turnaround of $2.7 million from a consolidated net loss of $2.1 million for the
same period in 2003 and an improvement of $1.3 million from a consolidated net
loss of $775 thousand for the preceding quarter. Driving the increase in
consolidated net income were reduced costs in our music distribution business,
strong expense controls in the Company's broadband ISP operations, and
contributions from our newly acquired entertainment software business.
Consolidated EBITDA for the second quarter of 2004 was $2.9 million, compared to
consolidated EBITDA of negative $890 thousand for the
same period in 2003. The Company recorded consolidated EBITDA of $687 thousand
during the preceding quarter. The increase in consolidated EBITDA reflected the
aforementioned improvements across all business units and strong contributions
from our entertainment software business.
Cash and other cash equivalents at the end of the second quarter of 2004 totaled
$9.9 million, not including additional short-term investments totaling $27.8
million, compared to $12.4 million and $28.6 million, respectively, at the end
of the first quarter of 2004. The reduction in cash and other cash equivalents
during the period was primarily due to the payment of $6.5 million on April 1,
2004 in connection with the acquisition of an entertainment software developer,
augmented by positive cash flow from operations.
GigaMedia's second quarter 2004 consolidated results reflect for the first time
the Company's acquisition of an entertainment software developer and service
provider, which was completed on April 1, 2004. Operating results of this unit
have been consolidated with those of the Company starting April 1, 2004. See
"Entertainment Software Business" for additional details regarding the
acquisition and the financial results of that business unit.
BUSINESS UNIT RESULTS
MUSIC DISTRIBUTION BUSINESS
CHANGE CHANGE
(IN US$ THOUSANDS) 2Q04 2Q03 (%) 2Q04 1Q04 (%)
- ---------------------------------------------------------------------------------------------------
REVENUES 16,367 16,083 2 16,367 21,749 -25
OPERATING INCOME (LOSS) (153) (1,372) 89 (153) (324) 53
NET INCOME (LOSS) 3 (1,367) NA 3 (374) NA
The Company's music distribution business delivered improved performance despite
a challenging operating environment. Gains achieved reflected strong focus on
streamlining operations and improving efficiencies. During the second quarter,
the Company closed four underperforming stores and renegotiated marketing terms
with music labels. The Company also implemented a small price increase on
selected merchandise. Management believes these moves and ongoing restructuring
are generating improvements in gross margin and helping to offset the overall
market downtrend. Initial results of restructuring have been positive, with net
income for the second quarter of 2004 reaching $3,000, compared to a loss of
$1.4 million for the same period in 2003.
BROADBAND ISP BUSINESS
CHANGE CHANGE
(IN US$ THOUSANDS) 2Q04 2Q03 (%) 2Q04 1Q04 (%)
- ---------------------------------------------------------------------------------------------------
REVENUES 5,614 4,814 17 5,614 5,525 2
OPERATING INCOME (LOSS) 262 (897) NA 262 (824) NA
NET INCOME (LOSS) 326 (1,321) NA 326 (556) NA
GigaMedia's broadband ISP business delivered solid performance in the second
quarter. In order to offset price drops and achieve revenue growth in a
competitive market, the Company's broadband ISP business is migrating users to
higher monthly average revenue per subscriber ("ARPU") products that feature
unique selling points such as dedicated versus shared connections, phasing out
one-way cable modem service, and expanding international connectivity. During
the second quarter, GigaMedia upgraded its island-wide backbone and its
international connectivity, which positions the Company well to continue to
"upsell" subscribers to higher specification products and export content traffic
to other ISPs. Ongoing implementation of strict cost controls and enhanced
efficiencies resulted in net income of $326 thousand for the second quarter of
2004, compared to a loss of $1.3 million for the same period in 2003.
Subscribers during the quarter ended June 30, 2004 were down slightly compared
to the first quarter of 2004 at approximately 100,000, with blended ARPU flat
compared to the first quarter of 2004 at approximately $12.24 per month.
ENTERTAINMENT SOFTWARE BUSINESS
(IN US$ THOUSANDS) 2Q04 2Q03 1Q04
- ---------------------------------------------------------------------------
REVENUES 2,380 NA NA
OPERATING INCOME (LOSS) 293 NA NA
NET INCOME (LOSS) 231 NA NA
The Company's second quarter 2004 results include the first financial results
for the entertainment software unit following the acquisition of that business
on April 1, 2004. As a result of the acquisition, the Company recorded certain
intangible assets in the amount of approximately $15.0 million. The amortization
expense related to these intangible assets amounted to $498 thousand for the
quarter ended June 30, 2004. In
addition, the Company recorded goodwill in the amount of approximately $16.0
million for this acquisition.
BUSINESS OUTLOOK
The following forward-looking statements reflect GigaMedia's expectations as of
September 22, 2004. Given potential changes in economic conditions and consumer
spending, the evolving nature of broadband, fluctuations in Taiwan's recorded
music market and various other risk factors, including those discussed in our
2003 Annual Report or 20-F filing with the U.S. Securities and Exchange
Commission referenced below, actual results may differ materially.
The general business environment remains challenging, with continuing weakness
in the music distribution market and strong competition in the broadband ISP
market. The second-half of the year is also seasonally the slowest period of the
year for the Company's entertainment software business. However, GigaMedia
believes restructuring is on track and expects to achieve sustained
profitability in 2004.
USE OF NON-GAAP MEASURES
Management believes that EBITDA (earnings before interest, taxes, depreciation
and amortization) is a useful supplemental measure of performance because it
excludes certain non-cash items such as depreciation and amortization. EBITDA is
not a recognized earnings measure under GAAP and does not have a standardized
meaning. Non-GAAP measures such as EBITDA should be considered in addition to
results prepared in accordance with GAAP, but should not be considered a
substitute for, or superior to, other financial measures prepared in accordance
with GAAP. A reconciliation to the GAAP equivalent of the non-GAAP measure is
provided on the attached unaudited financial statements.
ABOUT THE NUMBERS IN THIS RELEASE
All figures referred to in the text, tables and attachments to this release are
unaudited. The financial statements from which the financial results reported in
this press release are derived have been prepared in accordance with U.S. GAAP,
and are presented in U.S. dollars.
CONFERENCE CALL AND WEBCAST
GigaMedia will hold a conference call at 10 a.m. Taipei/Hong Kong Time on
September 23, 2004, which is 10 p.m. Eastern Daylight Time on September 22, 2004
in the U.S., to discuss the Company's second quarter
performance. Individual investors can listen to a webcast of the call at
http://ir.giga.net.tw, through CCBN's individual investor center at
www.fulldisclosure.com, or by visiting any of the investor sites in CCBN's
Individual Investor Network. Institutional investors can access the call via
CCBN's password-protected event management site, StreetEvents
(www.streetevents.com). The webcast will be available for replay.
ABOUT GIGAMEDIA
GigaMedia Limited is a diversified provider of broadband and entertainment
services, with headquarters in Taipei, Taiwan. The Company operates Taiwan's two
largest music store chains, Rose Records and Tachung Records, through its
subsidiary G-Music. The Company also operates a major Taiwanese broadband ISP,
providing Internet access service and broadband content with multiple delivery
technologies via its Web destination http://www.gigigaga.com. GigaMedia's
subsidiary Koos Broadband Telecom Co., Ltd provides broadband services to
corporate subscribers in Taiwan. The Company also develops software for online
entertainment services. Strategic investors of GigaMedia include the Koos Group,
a major participant in Taiwan's manufacturing, finance, telecommunications,
media, and cable industries. More information on GigaMedia can be obtained from
http://ir.giga.net.tw.
The statements included above and elsewhere in this press release that are not
historical in nature are "forward-looking statements" within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. GigaMedia cautions readers that forward-looking statements are based on
the Company's current expectations and involve a number of risks and
uncertainties. Actual results may differ materially from those contained in such
forward-looking statements. Information as to certain factors that could cause
actual results to vary can be found in GigaMedia's Annual Report on Form 20-F
filed with the United States Securities and Exchange Commission in June 2004.
# # #
(Tables to follow)
GIGAMEDIA LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended
6/30/2004 6/30/2003 3/31/2004
----------- ----------- -----------
USD USD USD
----------- ----------- -----------
Operating revenues
Access revenues 5,227,648 4,659,655 5,361,538
Sales/rental/installation 15,887,330 15,798,255 21,325,007
Software licensing and support service revenue 2,380,414 - -
Advertising revenues 379,533 319,972 482,933
Subscription revenues 65,154 102,922 66,807
Other revenues 18,191 16,801 18,253
----------- ----------- -----------
Total operating revenues 23,958,270 20,897,605 27,254,538
Costs and expenses
Operating cost 3,965,730 3,661,212 3,463,853
Cost of sales/rental/installation 13,177,661 14,113,299 18,336,300
Product development & engineering expenses 298,684 280,126 303,702
Selling and marketing expenses 3,533,002 3,432,610 3,813,322
General and administrative expenses 2,572,960 1,668,465 2,477,919
Bad debt expenses - 10,949 -
----------- ----------- -----------
Total costs and expenses 23,548,037 23,166,661 28,395,096
----------- ----------- -----------
Gain (loss) from operations 410,233 (2,269,056) (1,140,558)
----------- ----------- -----------
Non-operating income (expense)
Interest income 36,861 122,197 57,049
Foreign exchange gain (loss) - net 78,511 (125,990) (621,210)
Investment income 107 117,966 708,760
Gain (loss) on disposal of property, plant & eqpmt. (17,770) (79,834) (575)
Interest expense (1,353) (1,030) (72)
Other non-operating income (expense) 113,293 (452,665) 63,782
----------- ----------- -----------
Non-operating income (expense) 209,649 (419,356) 207,734
Income tax expense 59,596 1,527 0
Minority interest income (loss) 1,213 (567,975) (157,717)
----------- ----------- -----------
Net income (loss) 559,073 (2,121,964) (775,107)
=========== =========== ===========
Net income (loss) per common share 0.01 (0.04) (0.02)
----------- ----------- -----------
Average shares outstanding 50,154,000 50,154,000 50,154,000
----------- ----------- -----------
RECONCILIATION OF NET INCOME TO EBITDA
Net income (loss) 559,073 (2,121,965) (775,107)
Minority interest income (loss) 1,213 (567,974) (157,717)
Depreciation - cost 858,423 984,828 813,488
Depreciation - expense 359,527 256,978 279,669
Amortization - cost 147,380 162,102 163,767
Amortization - expense 877,758 393,286 363,172
Interest expense 6,923 1,031 72
Tax 59,596 1,527 -
----------- ----------- -----------
EBITDA 2,869,893 (890,187) 687,344
----------- ----------- -----------
GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEET
(Unaudited)
Three months ended
6/30/2004 6/30/2003 3/31/2004
----------- ----------- -----------
USD USD USD
----------- ----------- -----------
ASSETS
Current assets
Cash and cash equivalents 9,934,588 32,775,128 12,422,287
Short-term investments 27,774,521 26,009,350 28,626,613
Accounts receivable 6,792,321 4,471,743 5,421,321
Inventories - net 6,313,834 7,084,586 6,163,754
Prepaid expenses 807,489 793,716 1,272,477
Restricted cash 328,791 1,818,258 1,348,788
Note receivable from officer - 521,778 172,506
Other current assets 1,526,984 1,372,545 1,670,495
----------- ----------- -----------
Total current assets 53,478,528 74,847,104 57,098,241
Investment
Total investment 9,714,882 16,763,050 37,180,454
Property, plant & equipment - net 14,989,899 19,596,950 15,210,658
Goodwill 15,992,681 733,687 -
Intangible assets- net 20,331,605 6,539,450 6,138,570
Total other assets 3,401,511 5,363,436 4,771,214
----------- ----------- -----------
Total assets 117,909,106 123,843,677 120,399,137
=========== =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Notes and accounts payable 15,762,462 13,425,469 16,082,738
Accrued compensation 1,473,434 829,929 1,081,550
Accrued expenses 3,165,645 1,339,659 3,704,766
Other current liabilities 3,033,221 1,783,426 3,178,802
----------- ----------- -----------
Total current liabilities 23,434,762 17,378,483 24,047,856
Total other liabilities 2,018,199 1,576,533 1,979,445
----------- ----------- -----------
Total liabilities 25,452,961 18,955,016 26,027,301
Minority interests 3,152,372 5,639,136 3,221,304
TOTAL SHAREHOLDERS' EQUITY 89,303,773 99,249,525 91,150,532
----------- ----------- -----------
Total liabilities & shareholders' equity 117,909,106 123,843,677 120,399,137
----------- ----------- -----------