Exhibit 99.1
GIGAMEDIA: NET PROFIT UP 23%
Q3 OVER Q2 2004
Highlights of Third Quarter 2004 Results
- Consolidated revenues of US$22.0 million
- Consolidated EBITDA(1) of US$2.8 million
- Consolidated net income of US$688 thousand
- No debt, with cash and short-term investments totaling US$45.0 million
TAIPEI, Taiwan, December 2, 2004 - GigaMedia Limited ("GigaMedia" or the
"Company") (NASDAQ: GIGM) announced today third quarter 2004 consolidated net
profit of $688 thousand, a 23 percent sequential increase over the second
quarter of 2004 and a turnaround of $3.4 million from a consolidated net loss of
$2.7 million in the same period of 2003.
"Our Q3 results demonstrate that our restructuring plan is beginning to deliver
results," stated Chief Executive Officer Arthur Wang. "Much hard work remains,
but the new management team sees strong upside in the transformation of
GigaMedia."
"We delivered an improved bottom line despite what shaped up to be a challenging
quarter, and see improved operating efficiencies going forward," stated Chief
Financial Officer Thomas Hui.
"As we continue to implement best practices throughout the firm, we are also
very focused on strategic consolidation and acquisition opportunities which can
accelerate our turnaround," explained Mr. Wang.
CONSOLIDATED FINANCIAL RESULTS
Consolidated results of GigaMedia are summarized in the table below.
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(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is
provided as a supplement to results provided in accordance with U.S. generally
accepted accounting principles ("GAAP"). See "Use of Non-GAAP Measures" for more
details.
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GIGAMEDIA Q3 2004 UNAUDITED CONSOLIDATED FINANCIAL RESULTS
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(IN US$ THOUSANDS) 3Q04 3Q03 CHANGE 3Q04 2Q04 CHANGE
(%) (%)
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REVENUES 22,001 23,733 -7 22,001 23,958 -8
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OPERATING INCOME (LOSS) 581 (2,562) NA 581 410 42
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NET INCOME (LOSS)(A) 688 (2,690) NA 688 559 23
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EBITDA(B) 2,785 (1,167) NA 2,785 2,833 -2
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CASH, CASH EQUIVALENTS AND
SHORT-TERM INVESTMENTS 44,968 63,998 -30 44,968 37,709 19
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(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 percent 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.
Consolidated revenues for the third quarter of 2004 were $22.0 million, a 7
percent decrease over consolidated revenues of $23.7 million for the
corresponding period in 2003 and a decrease of 8 percent from consolidated
revenues of $24.0 million for the preceding quarter. The quarter-over-quarter
decline in consolidated revenues was largely due to the impact of the general
downturn in Taiwan's retail music distribution industry on the Company's music
distribution business.
Consolidated net income for the third quarter of 2004 was $688 thousand, a
turnaround of $3.4 million from a consolidated net loss of $2.7 million for the
same period in 2003 and an improvement of $129 thousand, or 23 percent, from
consolidated net income of $559 thousand for the preceding quarter. Driving the
increase in consolidated net income were strong expense controls in the
Company's broadband ISP operations and contributions from the Company's
entertainment software business, whose results began to be consolidated with
those of the Company starting April 1, 2004.
Consolidated EBITDA for the third quarter of 2004 was $2.8 million, compared to
consolidated EBITDA of negative $1.2 million for the same period in 2003. The
Company recorded consolidated EBITDA of $2.8 million during the preceding
quarter. The year-over-year increase in consolidated EBITDA reflected efficiency
improvements in all business units and strong contributions from the Company's
entertainment software business.
Cash and other cash equivalents at the end of the third quarter of 2004 totaled
$10.1 million, not including additional short-term investments totaling $34.9
million, compared to $9.9 million and $27.8 million, respectively, at the end of
the second quarter of 2004. During the third quarter, GigaMedia reclassified
previously made long-term bond fund investments totaling approximately $6.8
million as short-term investments, since the
maturation of these investments is now within one year.
BUSINESS UNIT RESULTS
MUSIC DISTRIBUTION BUSINESS
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(IN US$ THOUSANDS) 3Q04 3Q03 CHANGE 3Q04 2Q04 CHANGE
(%) (%)
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REVENUES 14,441 18,803 -23 14,441 16,367 -12
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OPERATING INCOME (LOSS) (225) (734) 69 (225) (153) -47
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NET INCOME (LOSS) (200) (707) 72 (200) 3 NA
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The general market downturn in Taiwan's recorded music sales and delayed
releases by music labels of albums from certain top artists created a
challenging operating environment for the Company's music distribution business
in the third quarter. The music distribution business unit's net loss reflected
this decline in revenues. Efficiency gains achieved to date from ongoing
restructuring helped offset lower sales volumes during the period. Management
continues to take steps to lower fixed costs and increase efficiencies to
improve this business unit's performance. During the quarter, the Company closed
four underperforming stores and continued rollout of a point-of-sale system.
BROADBAND ISP BUSINESS
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(IN US$ THOUSANDS) 3Q04 3Q03 CHANGE 3Q04 2Q04 CHANGE
(%) (%)
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REVENUES(A) 5,571 4,930 13 5,571 5,614 -1
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OPERATING INCOME (LOSS)(A) 858 (1,099) NA 858 409 110
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NET INCOME (LOSS)(A) 869 (1,297) NA 869 440 98
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(A) In previous quarterly and annual releases, GigaMedia included corporate
headquarters expenses and certain other items in the Broadband ISP Unit results.
In the table above, all such amounts have been excluded for the current and past
periods. All numbers are presented on a consistent basis.
GigaMedia's broadband ISP business delivered increased profitability in the
third quarter. In order to retain subscribers in what remains a highly
competitive market, the Company's broadband ISP business is focused on providing
differentiated, value-added products and services to both consumers and
corporate customers. In line with this strategy, during the period, GigaMedia
launched the corporate broadband service ON-NET, providing connectivity services
between Taiwan, Hong Kong, and China. With the launch of the ON-NET service,
GigaMedia is well positioned to rollout additional value-added
telecommunications services targeting new corporate customers in Greater China.
Ongoing implementation of strict cost controls and enhanced efficiencies
resulted in net income of $869 thousand for the third quarter of 2004, compared
to a loss of $1.3 million for the same period in 2003.
The number of subscribers in the Company's consumer broadband ISP business
during the quarter ended September 30, 2004 decreased slightly compared to the
second quarter of 2004 to approximately 97,000, with blended average revenue per
subscriber ("ARPU") also down slightly compared to the second quarter of 2004 at
approximately $12.00 per month. The number of subscription lines in the
Company's corporate broadband ISP business increased by 14 percent
quarter-over-quarter, from 583 to 666 lines.
ENTERTAINMENT SOFTWARE BUSINESS
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(IN US$ THOUSANDS) 3Q04 2Q03 CHANGE 3Q04 2Q04 CHANGE
(%) (%)
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REVENUES 2,236 NA NA 2,236 2,380 -6
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OPERATING INCOME (LOSS) 45 NA NA 45 293 -85
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NET INCOME (LOSS) 50 NA NA 50 231 -78
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The Company's entertainment software business unit made positive contributions
to GigaMedia's financial results despite operating in what is seasonally the
slowest period for the business. Quarter-over-quarter declines in operating
income and net income were due to the slight decrease in revenue and to
investments in developing new game software and marketing during the period.
Overall market growth in online gaming remains strong; management is executing a
plan to expand the business and build a leading position in nascent,
non-English-speaking markets outside the United States and the United Kingdom.
During the third quarter, the entertainment software business completed
development of a multi-player, online poker product targeting
non-English-speaking markets and began to market the software to licensees.
Preliminary response has been encouraging. Development of additional non-English
language products and services is ongoing. The entertainment software business
also upgraded customer relationship management tools to enable more efficient
online marketing campaigns to licensees. Management expects continued
investments in new software games and upgrades of existing game products to
drive improved results going forward.
BUSINESS OUTLOOK
The following forward-looking statements reflect GigaMedia's expectations as of
December 2, 2004. Given potential changes in economic conditions and consumer
spending, the evolving nature of broadband and online entertainment software,
fluctuations in Taiwan's recorded music market and various other risk factors,
including those discussed in the Company's 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. Despite these challenges, we remain highly confident in our ability to
deliver continued profitability and improved operating efficiencies.
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.
Consolidated financial results of the Company for the third quarter of 2004 may
differ from totals of the Company's segmental financial results for the same
period due to (1) certain inter-company eliminations and (2) the impact of the
Company's corporate headquarters and certain non-operating subsidiaries of
GigaMedia on the Company's consolidated financial results.
CONFERENCE CALL AND WEBCAST
GigaMedia will hold a conference call at 9 p.m. Taipei/Hong Kong Time on
December 2, 2004, which is 8 a.m. Eastern Daylight Time on December 2, 2004 in
the U.S., to discuss the Company's third 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, including the global online gaming market. 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)
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GIGAMEDIA LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended
9/30/2004 9/30/2003 6/30/2004
---------- ---------- ----------
USD USD USD
---------- ---------- ----------
OPERATING REVENUES
Access revenues 5,231,738 4,766,727 5,227,648
Sales/rental/installation 14,122,377 18,470,416 15,887,330
Software licensing and support service revenue 2,235,953 0 2,380,414
Advertising revenues 333,466 374,357 379,533
Subscription revenues 60,903 89,988 65,154
Other revenues 16,988 31,350 18,191
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Total operating revenues 22,001,425 23,732,838 23,958,270
COSTS AND EXPENSES
Operating cost 3,836,567 4,021,841 3,965,730
Cost of sales/rental/installation 11,406,583 15,897,905 13,177,661
Product development & engineering expenses 244,005 293,531 298,684
Selling and marketing expenses 3,371,684 3,706,262 3,533,002
General and administrative expenses 2,561,990 2,384,168 2,572,960
Bad debt expenses 0 (8,465) 0
---------- ---------- ----------
Total costs and expenses 21,420,829 26,295,242 23,548,037
---------- ---------- ----------
Gain (Loss) from operations 580,596 (2,562,404) 410,233
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NON-OPERATING INCOME (EXPENSE)
Interest income 8,193 90,045 36,861
Foreign exchange gain (loss) - net 35,883 (663,328) 78,511
Investment income 8,623 119,406 107
Gain (loss) on disposal of property, plant & eqpmt. (27,824) (895) (17,770)
Interest expense (238) (118) (1,353)
Other non-operating income (expense) (1,250) 28,870 113,293
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Non-operating income (expense) 23,387 (426,020) 209,649
Income tax expense (1,626) 0 59,596
Minority interest income (loss) (82,784) (298,079) 1,213
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Net income (loss) 688,393 (2,690,345) 559,073
========== ========== ==========
Net income (loss) per common share 0.01 (0.05) 0.01
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Average shares outstanding 50,154,000 50,154,000 50,154,000
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RECONCILIATION OF NET INCOME TO EBITDA
Net income (loss) 688,393 (2,690,345) 559,073
Minority interest income (loss) (82,784) (298,079) 1,213
Depreciation 1,183,895 1,340,944 1,217,948
Amortization 1,004,791 570,678 1,025,140
Interest (income) expense (7,955) (89,928) (35,509)
Tax (1,626) 0 59,596
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EBITDA 2,784,714 (1,166,730) 2,827,461
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GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEET
(Unaudited)
Three months ended
9/30/2004 9/30/2003 6/30/2004
----------- ----------- -----------
USD USD USD
----------- ----------- -----------
ASSETS
Current assets
Cash and cash equivalents 10,093,622 36,745,855 9,934,588
Short-term investments 34,874,600 27,252,311 27,774,521
Accounts receivable 5,828,519 4,521,059 6,792,321
Inventories - net 7,146,223 7,270,721 6,313,834
Prepaid expenses 1,147,636 986,564 807,489
Restricted cash 32,372 328,889 328,792
Note receivable from officer 0 519,640 0
Other current assets 3,013,841 2,482,599 1,526,984
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Total current assets 62,136,813 80,107,638 53,478,529
Investment 1,939,543 16,547,993 9,714,882
Property, plant & equipment - net 15,225,216 19,137,793 14,989,899
Goodwill 15,992,681 752,274 15,992,681
Intangible assets - net 19,565,130 6,472,312 20,331,604
Other assets 3,051,751 4,997,739 3,401,511
----------- ----------- -----------
Total assets 117,911,134 128,015,749 117,909,106
=========== =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Notes and accounts payable 15,281,970 17,361,592 15,762,462
Accrued compensation 1,325,548 1,128,704 1,473,434
Accrued expenses 3,223,716 1,759,839 3,165,645
Other current liabilities 4,114,190 2,121,365 3,033,221
----------- ----------- -----------
Total current liabilities 23,945,424 22,371,500 23,434,762
Other liabilities 2,089,748 1,729,755 2,018,199
----------- ----------- -----------
Total Liabilities 26,035,172 24,101,255 25,452,961
Minority interests 3,050,153 5,483,915 3,152,372
SHAREHOLDERS' EQUITY 88,825,809 98,430,579 89,303,773
----------- ----------- -----------
Total liabilities & shareholders' equity 117,911,134 128,015,749 117,909,106
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