Exhibit 99.2
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: FIRST FULL-YEAR PROFIT IN 2004
Q4 2004 PROFIT UP 76% FROM Q3 2004
Highlights of FY04 Results
o Consolidated revenues of US$99.8 million
o Consolidated EBITDA(1) US$9.1 million
o Consolidated net income US$1.7 million
o Cash and short-term investments at year end of US$47.5 million
Highlights of 4Q04 Results
o Consolidated revenues of US$26.6 million
o Consolidated EBITDA(1) of US$2.9 million
o Consolidated net income of US$1.2 million
TAIPEI, Taiwan, June 8, 2005 - GigaMedia Limited ("GigaMedia" or the "Company")
(NASDAQ: GIGM) announced today its first ever profitable year in 2004, turning
around from a loss of $14.1 million in 2003 to full-year profit of $1.7 million
in 2004.
The record 2004 results were driven by a strong fourth quarter in which the
Company recorded a consolidated net profit of $1.2 million, a 76 percent
increase quarter-over-quarter. The fourth quarter of 2004 represented an
increase of $9.1 million from a loss of $7.9 million during the fourth quarter
of 2003.
"In just one year, GigaMedia has climbed out of a $14 million hole. We are
standing above ground now as a profitable company with strong growth prospects,"
stated Chief Executive Officer Arthur Wang, who assumed office at the end of
2003. "The new management team is confident in our internal restructuring plan
and excited by the opportunities for growth and acquisition."
________________
(1) EBITDA (earnings before interest, taxes, depreciation, amortization and
minority interests) is provided as a supplement to results provided in
accordance with U.S. generally accepted accounting principles ("GAAP"). See "Use
of Non-GAAP Measures" for more details.
CONSOLIDATED FINANCIAL RESULTS
For the Full Year 2004
Financial results for 2004 benefited from GigaMedia's acquisition in April 2004
of entertainment software developer Cambridge Entertainment Software ("CES",
formerly called Grand Virtual). As a result of this acquisition, financial
results for 2004 and 2003 may not be comparable.
GIGAMEDIA FY04 CONSOLIDATED FINANCIAL RESULTS
(AUDITED FULL-YEAR FY04 FY03 CHANGE
FIGURES, ALL IN US$ (%)
THOUSANDS)
REVENUES 99,819 95,352 5
OPERATING INCOME (LOSS) 3,016 (14,171) NA
NET INCOME (LOSS) 1,682 (14,095) NA
EBITDA(A) 9,141 (10,081) NA
Cash, Cash Equivalents 47,517 64,250 -26
and Short-term Investments
(A) EBITDA (earnings before interest, taxes, depreciation, amortization and
minority interests) is provided as a supplement to results provided in
accordance with GAAP. (See, "Use of Non-GAAP Measures," for more details.)
Consolidated revenues for 2004 increased five percent to $99.8 million from
$95.4 million in 2003, primarily as a result of the acquisition of the Company's
entertainment software business in 2004. Revenue contributions from the
Company's entertainment software business more than offset weakness in the
Company's music distribution business, which continued to be negatively impacted
by a general decline in recorded music sales in Taiwan.
Consolidated net income for 2004 was $1.7 million, a turnaround of $15.8 million
from a consolidated net loss of $14.1 million in 2003. Driving the increase in
consolidated net income were significant contributions from the Company's
entertainment software business, cost and expense controls in the Company's
broadband ISP business, and inventory management and cost and expense control
initiatives in GigaMedia's music distribution business.
Consolidated EBITDA for 2004 was $9.1 million, a rise of $19.2 million compared
to consolidated EBITDA of negative $10.1 million for 2003. The year-over-year
increase in consolidated EBITDA reflected efficiency improvements in all
business units gained from ongoing internal restructuring, as well as strong
contributions from GigaMedia's entertainment software business.
Cash, cash equivalents and short-term investments at the end of 2004 totaled
$47.5 million.
For the Fourth Quarter
Fourth quarter 2004 results reflect the Company's adoption during the fourth
quarter of Financial Accounting Standards Board ("FASB") Interpretation No. 46,
Consolidation of Variable Interest Entities - an Interpretation of Accounting
Research Bulletin No. 51 ("FIN 46"), as revised by the subsequent amendment, FIN
46(R). Accounting rule FIN 46(R) relates to variable interest entities and,
because of the adoption of this standard, the Company has consolidated the
financial results of a licensee of the Company's entertainment software business
into GigaMedia's consolidated financial statements. (See, "About the Numbers in
This Release.") As a result, financial results for the fourth quarter of 2004
and 2003 and the third quarter of 2004 may not be comparable.
GIGAMEDIA 4Q04 CONSOLIDATED FINANCIAL RESULTS
(UNAUDITED 4Q04 4Q03 CHANGE 4Q04 3Q04 CHANGE
QUARTERLY (%) (%)
FIGURES, ALL
IN US$
THOUSANDS)
REVENUES 26,605 24,477 9 26,605 22,001 21
OPERATING 3,166 (7,190) NA 3,166 581 445
INCOME (LOSS)
NET INCOME 1,209 (7,856) NA 1,209 688 76
(LOSS)
EBITDA(A) 2,899 (7,068) NA 2,899 2,785 4
(A) EBITDA (earnings before interest, taxes, depreciation, amortization and
minority interests) 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 fourth quarter of 2004 were $26.6 million, a nine
percent increase from consolidated revenues of $24.5 million for the
corresponding period in 2003 and an increase of 21 percent over consolidated
revenues of $22.0 million for the preceding quarter. The year-over-year increase
in consolidated revenues was largely due to strong contributions from the
Company's entertainment software business, which offset declining contributions
from GigaMedia's music distribution business.
Consolidated net income for the fourth quarter of 2004 was $1.2 million, a
turnaround of $9.1 million from a consolidated net loss of $7.9 million for the
same period in 2003 and an improvement of $521 thousand, or 76 percent, from
consolidated net income of $688 thousand for the preceding quarter. Driving the
year-over-year increase in consolidated net income were an increase in
contributions from the Company's entertainment software business and inventory
management and cost and expense control initiatives in GigaMedia's music
distribution business.
Consolidated EBITDA for the fourth quarter of 2004 was $2.9 million, an increase
of $10.0 million compared to consolidated EBITDA of negative $7.1 million for
the same period in 2003 and an improvement of $114 thousand, or four percent,
over the previous quarter. Increases in consolidated EBITDA reflected strong
contributions from the Company's entertainment software business and efficiency
improvements in all business units.
BUSINESS UNIT RESULTS
MUSIC DISTRIBUTION BUSINESS
(UNAUDITED, IN US$ 4Q04 4Q03 CHANGE 4Q04 3Q04 CHANGE
THOUSANDS) (%) (%)
REVENUES 14,537 19,272 -25 14,537 14,441 1
OPERATING INCOME (LOSS) 1,265 (3,993) NA 1,265 (225) NA
NET INCOME (LOSS) (A) 1,339 (4,575) NA 1,339 (200) NA
(A) Net income includes amounts attributable to minority interests. Minority
shareholders own a 41.42 percent interest in G-music.
Improved performance in the music distribution business in the fourth quarter
resulted from management's efforts throughout 2004 to improve inventory
management and reduce associated costs. Rollout of an all store point-of-sale
system has strengthened management's ability to manage inventory of the music
chains and accurately monitor and analyze sales. As a result, GigaMedia has
obtained better and more flexible product distribution arrangements with major
music labels. The Company also benefited during the fourth quarter from lower
fixed costs as a result of sharing store space at select locations with popular
entertainment and service businesses targeting similar clientele. During the
quarter, the Company closed two underperforming stores.
Net income for the fourth quarter of 2004 was $1.3 million, an improvement of
$1.5 million over a net loss of $200 thousand in the previous quarter and a
turnaround of $5.9 million from a loss of $4.6 million in the same period of
2003. The Company's inventory management initiatives have led to an increased
level of returnable inventory and lowered inventory provisions. A reversal of
inventory provisioning reflecting the lowered level of required inventory
provisioning, together with other cost initiatives, contributed to the increase
in net income during the period.
Despite the significant improvements achieved in the financial performance of
the music distribution business, the overall market remains in a secular
downtrend. Consumers continue to shift to digital music distribution, and piracy
remains a serious challenge, posing significant challenges to the business in
2005.
BROADBAND ISP BUSINESS
(UNAUDITED, IN US$ THOUSANDS) 4Q04 4Q03 CHANGE 4Q04 3Q04 CHANGE
(%) (%)
REVENUES(A) 5,251 5,205 1 5,251 5,571 -6
OPERATING INCOME (LOSS)(A) 285 (2,541) NA 285 858 -67
NET INCOME (LOSS)(A) (630) (2,767) NA (630) 1,011 NA
(A) In quarterly and annual releases before the second quarter of 2004,
GigaMedia included corporate headquarters expenses and certain other items in
the broadband ISP business 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.
In the fourth quarter, management continued to focus on retaining subscribers in
the consumer broadband ISP business and growing GigaMedia's higher-margin
corporate broadband ISP business segment. The Company's consumer broadband ISP
business launched several initiatives in the fourth quarter, including retention
programs featuring more flexible payment options and upgrade programs to move
ADSL subscribers to higher specification broadband products. Sales benefited
from the development of a new sales channel during the period, in which the
Company bundled ADSL service with select hardware sold by a popular Taiwanese
consumer electronics retailer. The number of subscribers in the Company's
consumer broadband ISP business during the quarter ended December 31, 2004
decreased slightly compared to the third quarter of 2004 to approximately
95,000, with blended average revenue per subscriber up slightly compared to the
third quarter of 2004 at approximately $12.40 per month.
Initiatives in the Company's corporate broadband business targeted growing
bandwidth demand, leading to improved performance from the business unit during
the fourth quarter. Bandwidth provided per line increased during the fourth
quarter, resulting in higher ARPU. In addition, during the same period GigaMedia
grew total bandwidth provided to other broadband system operators.
Net loss was $630 thousand in the fourth quarter of 2004, versus net income of
$1.0 million for the third quarter of 2004. Net loss in the fourth quarter of
2004 decreased by $2.1 million compared to a loss of $2.8 million for the same
period in 2003. The year-over-year decline in revenues reflected a slight
decrease in subscribers during the period. The quarter-over-quarter variation in
operating income was largely attributable to certain items recorded during the
third quarter, including a reversal of certain compensation expenses, which
resulted from implementation of an employee stock option program, and technology
consulting income recorded in connection with the integration of GigaMedia's
entertainment software business. The sequential decline in revenues also
contributed to the quarter-over-quarter variation in operating income. During
the fourth quarter, the broadband ISP business also recorded a non-operating
loss from an impairment of marketable securities and investment income from the
sales of marketable securities. The net effect of such impairment and sales of
marketable securities was a loss of approximately $1.3 million.
ENTERTAINMENT SOFTWARE BUSINESS
(UNAUDITED, IN US$ 4Q04 3Q03 CHANGE 4Q04 3Q04 CHANGE
THOUSANDS) (%) (%)
REVENUES(A) 6,838 NA NA 6,838 2,236 NA
OPERATING INCOME 1,839 NA NA 1,839 45 NA
(LOSS)(A)
NET INCOME (LOSS) (A) 2,061 NA NA 2,061 50 NA
(A) Includes contributions from Ultra Internet Media ("UIM") as a result of the
adoption of FIN 46(R). (See, "About the Numbers in This Release.") Net income
includes amounts attributable to minority interests.
The Company's entertainment software business unit delivered increased
profitability and made significant contributions to GigaMedia's financial
results during the fourth quarter. Adoption of FIN 46(R) resulted in an increase
in revenues during the fourth quarter and the reclassification of certain
intangible assets to goodwill, which lowered amortization expenses. Increases in
operating and net income were also attributable to a quarter-over-quarter
decrease in restructuring charges related to the acquisition of the
entertainment software business unit, and to revenue growth, primarily driven by
new game software launched during the period in the online casino vertical. In
addition, results of the entertainment software business were favorably impacted
by seasonality, as the winter months are traditionally the peak period of online
play. During the fourth quarter, the entertainment software business released
four new casino-based games and continued marketing of a multi-player, online
poker product launched in the third quarter of 2004 targeting
non-English-speaking markets. The Company also recently launched a multi-table
poker product for tournament play.
Overall market growth in online gaming remains strong, with attractive global
growth opportunities in both online casino games and online poker. As a result,
GigaMedia will continue to invest in this business unit in 2005 to scale up
operations, better capture market opportunities and capitalize on the high
margins inherent in the entertainment software development business.
BUSINESS OUTLOOK
The following forward-looking statements reflect GigaMedia's expectations as of
June 8, 2005. Given potential changes in economic conditions and consumer
spending, fluctuations in Taiwan's recorded music market, the evolving nature of
broadband and online entertainment software, 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.
Management believes the Company's entertainment software business is well
positioned to benefit from a rapidly growing global online gaming market and
achieve significant long-term growth. We expect growth from the Company's
entertainment software business will offset the challenges we face; namely, the
secular downtrend of the music distribution market and strong competition in the
broadband ISP market.
Based on improvements gained to date from internal restructuring and our
long-term growth plans, we are highly confident in our ability to deliver
continued improvement in the Company's 2005 financials and increasing
shareholder value.
USE OF NON-GAAP MEASURES
Management believes that EBITDA (earnings before interest, taxes, depreciation,
amortization and minority interests) 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 full-year figures referred to in the text, tables and attachments to this
release are audited; all quarterly and segmental figures 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.
GigaMedia's segmental financial results are based on the Company's method of
internal reporting and are not necessarily in conformity with accounting
principles generally accepted in the U.S. Consolidated financial results of the
Company for the fourth quarter and full year 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. In previous quarterly and annual
releases, GigaMedia included corporate headquarters expenses and certain other
items in the broadband ISP business unit results. All such amounts have been
excluded in this press release for the current and past periods. All numbers
pertaining to the broadband ISP business are presented on a consistent basis.
During the fourth quarter, the Company adopted FIN 46(R). The provisions of FIN
46(R) require consolidation by the primary beneficiary of variable interest
entities, as that term is defined in FIN 46(R). The Company has conducted a
review of existing contracts for our variable interest parties and determined
that it was a primary beneficiary of UIM, a licensee of GigaMedia's
entertainment software developer CES. Accordingly, the Company has incorporated
the results of UIM into the Company's consolidated financial statements,
resulting in certain adjustments to GigaMedia's consolidated financial results
and the financial results of the Company's entertainment software business
recorded during the second and third quarters of 2004. All such adjustments were
recorded during the fourth quarter of 2004 as part of the Company's year-end
adjustments. All results referred to in this press release reflect the Company's
adoption of FIN 46(R). FIN 46(R) had no adverse impact on the Company's results
of operations or financial position in 2004.
CONFERENCE CALL AND WEBCAST
GigaMedia will hold a conference call at 9 p.m. Taipei/Hong Kong Time on June 8,
2005, which is 9 a.m. Eastern Daylight Time on June 8, 2005 in the U.S., to
discuss the Company's fourth-quarter and full-year 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 (Singapore registration number: 199905474H) 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 KBT provides broadband services
to corporate subscribers in Taiwan. The Company also develops software for
online entertainment services, including the global online gaming market. 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
Three months ended Twelve months ended
12/31/2004 9/30/2004 12/31/2003 12/31/2004 12/31/2003
---------- --------- ---------- ---------- ----------
unaudited unaudited unaudited audited audited
---------- --------- ---------- ---------- ----------
USD USD USD USD USD
---------- --------- ---------- ---------- ----------
OPERATING REVENUES
Access revenues 5,139,619 5,231,738 5,053,354 20,960,543 18,828,956
Sales/rental 14,259,213 14,122,377 18,855,378 65,593,927 74,389,753
Software licensing &
online entertainment revenue 6,817,436 2,235,953 0 11,433,803 0
Advertising & promotional revenues 304,812 333,466 463,313 1,500,742 1,595,764
Subscription revenues 55,524 60,903 73,839 248,387 0
Other revenues 28,060 16,988 31,566 81,491 537,941
---------- ---------- ---------- ---------- -----------
Total operating revenues 26,604,663 22,001,425 24,477,450 99,818,895 95,352,414
COSTS AND EXPENSES
Operating cost 4,319,699 3,836,567 8,174,712 15,585,850 19,676,859
Cost of sales/rental/installation 9,706,946 11,406,583 16,192,793 52,627,489 65,238,269
Product development & engineering expenses 1,666,529 244,005 326,833 2,512,921 1,211,419
Selling and marketing expenses 6,912,153 3,371,684 3,544,606 17,629,980 14,529,654
General and administrative expenses 586,629 2,561,990 2,546,217 8,199,498 7,973,208
Bad debt expenses 246,818 0 144,324 246,818 155,878
Impairment loss on goodwill 0 738,060 0 738,060
Other costs 0 0 0 0 0
---------- ---------- ---------- ---------- -----------
Total costs and expenses 23,438,773 21,420,829 31,667,545 96,802,555 109,523,347
---------- ---------- ---------- ---------- -----------
Gain (Loss) from operations 3,165,890 580,596 (7,190,095) 3,016,340 (14,170,933)
---------- ---------- ---------- ---------- ----------
NON-OPERATING INCOME (EXPENSE)
Interest income 67,844 8,193 100,044 169,947 419,018
Foreign exchange gain (loss) - net (389,478) 35,883 60,631 (896,294) (722,935)
Investment income 512,919 8,623 130,154 1,230,410 487,985
Gain (loss) on disposal of property,
plant & equipment (59,599) (27,824) (763,565) (105,769) (846,142)
Interest expense (5,000) (238) (115) (6,663) (36,263)
Other-than-temporary impairment on
marketable securities (1,832,808) (1,701,163) (1,832,808) (1,701,163)
Other non-operating income (expense) 333,248 (1,250) (254,438) 508,893 (509,150)
---------- ---------- ---------- ---------- -----------
Non-operating income (expense) (1,372,875) 23,388 (2,428,452) (932,284) (2,908,650)
Income tax expense (137,461) (1,626) 140,301 (79,490) 141,843
Minority interest income (loss) 721,261 (82,784) (1,902,943) 481,973 (3,126,729)
---------- ---------- ---------- ---------- -----------
Net income (loss) 1,209,214 688,393 (7,855,905) 1,681,574 (14,094,697)
========== ========== ========== ========== ===========
Net income (loss) per common share 0.02 0.01 (0.16) 0.03 (0.28)
---------- ---------- ---------- ---------- -----------
Average shares outstanding 50,154,000 50,154,000 50,154,000 50,154,000 50,154,000
---------- ---------- ---------- ---------- -----------
RECONCILIATION OF NET INCOME TO EBITDA
Net income (loss) 1,209,214 688,393 (7,855,905) 1,681,574 (14,094,697)
Minority interest income (loss) 721,261 (82,784) (1,902,943) 481,973 (3,126,729)
Depreciation 1,180,140 1,183,895 1,319,577 4,675,139 4,670,549
Amortization (11,325) 1,004,791 1,330,970 2,545,545 2,710,344
Interest (income) expense (62,843) (7,955) (99,929) (163,284) (382,755)
Tax (137,461) (1,626) 140,301 (79,490) 141,843
---------- ---------- ---------- ---------- -----------
EBITDA 2,898,986 2,784,714 (7,067,929) 9,141,456 (10,081,445)
GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEET
12/31/2004 9/30/2004 12/31/2003
---------- --------- ----------
audited unaudited audited
---------- --------- ----------
USD USD USD
---------- --------- ----------
ASSETS
Current assets
Cash and cash equivalents 13,232,637 10,093,622 35,293,911
Short-term investments 34,284,178 34,874,600 28,956,284
Accounts receivable 5,838,483 5,828,519 4,093,324
Receivables from related parties 128,452 0 603,196
Inventories - net 10,488,252 7,146,223 4,803,809
Prepaid expenses 678,500 1,147,636 1,367,646
Restricted cash 1,506,467 32,372 1,925,494
Other current assets 1,569,195 3,013,841 665,438
----------- ----------- -----------
Total current assets 67,726,165 62,136,813 77,709,102
Investment 2,892,574 1,939,543 15,259,979
Property, plant & equipment - net 15,055,518 15,225,216 15,636,009
Goodwill 29,607,283 15,992,681 0
Intangible assets - net 8,372,144 19,565,130 6,199,099
Other assets 2,323,616 3,051,751 4,988,020
----------- ----------- -----------
Total assets 125,977,299 117,911,134 119,792,210
=========== =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term loans 283,822 0
Notes and accounts payable 14,001,522 15,281,970 16,787,852
Payables to related parties 51,133 0 407,215
Accrued compensation 1,654,939 1,325,548 1,418,214
Accrued expenses 3,346,440 3,223,716 3,255,365
Other current liabilities 3,902,073 4,114,190 2,241,968
----------- ----------- -----------
Total current liabilities 23,239,929 23,945,424 24,110,616
Other liabilities 2,499,869 2,089,748 1,797,598
----------- ----------- -----------
Total liabilities 25,739,798 26,035,172 25,908,214
Minority interests 4,266,837 3,050,153 3,521,367
SHAREHOLDERS' EQUITY 95,970,665 88,825,809 90,362,629
----------- ----------- -----------
Total liabilities & shareholders' equity 125,977,299 117,911,134 119,792,210
----------- ----------- -----------