ADBL Audible (MM)

Audible, Inc. (NASDAQ: ADBL; www.audible.com), the leader in spoken audio entertainment, information, and educational programming on the Internet, today announced unaudited financial results for the fourth quarter and year ended December 31, 2007. Audible reported consolidated fourth quarter net revenue of $31.1 million, up 35% over the $23.2 million reported in the fourth quarter of 2006 and 13% over the $27.6 million reported in the third quarter of 2007. Revenue for the year ended December 31, 2007, was $110.0 million, up 34% from the $82.0 million in revenue for 2006. Adjusted EBITDA for the fourth quarter of 2007 was $3.2 million, an increase of $2.6 million from adjusted EBITDA in the fourth quarter of 2006, and an increase of $1.3 million from $1.9 million in the third quarter of 2007. The company finished 2007 with $8.0 million of adjusted EBITDA, compared to a loss of $(1.0 million) in 2006. Net income for the fourth quarter of 2007 was $4.0 million, or $0.16 per share, an improvement from the net loss of $(0.9 million), or $(0.04) per share, reported in the fourth quarter of 2006. Net income included a non-operating benefit of $3.1 million from the sale of net operating loss tax credits in the state of New Jersey. The company finished 2007 with net income of $2.4 million or $0.10 per share compared to a net loss of $(8.7 million) or $(0.36) per share in 2006. During the quarter, 71,000 new AudibleListener� members were acquired, an increase from the 70,000 new AudibleListener members reported in the fourth quarter of 2006, and a 13% increase quarter over quarter, from the 63,000 new members reported in the third quarter of 2007. There were 457,000 total AudibleListener members at the end of 2007, compared to 381,000 total members reported at the end of 2006. This included 324,000 Gold/Platinum members which represented a gain of 85,000 members in one of the minimum monthly delivery subscription plans since last year. Amazon Acquisition On January 31, 2008, Audible and Amazon.com, Inc. (NASDAQ:AMZN) announced that they had reached an agreement for Amazon to acquire Audible. Amazon commenced a tender offer on February 11, 2008, to purchase for cash all of the outstanding shares of Audible for $11.50 per share. The transaction is subject to certain regulatory reviews and other conditions and is expected to close by the second quarter of 2008. Use of Non-GAAP Measures In addition to the results presented in accordance with generally accepted accounting principles, or GAAP, Audible presents financial measures that are non-GAAP measures, specifically adjusted EBITDA. Adjusted EBITDA is net (loss) income excluding interest, taxes, depreciation, amortization, asset impairment, loss on equity investment, and stock based compensation. Audible believes that this non-GAAP measure, viewed in addition to and not in lieu of Audible's reported GAAP results, provides useful information to investors regarding its performance and overall results of operations. These metrics are an integral part of Audible�s internal reporting to measure the performance of the company and the overall effectiveness of senior management. Reconciliations to comparable GAAP measures are available in the accompanying schedules to this press release and on Audible's Web site. The GAAP financial measures presented are consistent with Audible's historical financial reporting practices. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies, and are not identical to corresponding measures used in our various agreements or other public filings. Management also presents total cash sales. The measurement of total cash sales is defined as the change in deferred revenue plus consolidated net sales. Management believes that total cash sales is a useful measurement when understanding the increase in deferred revenue. About Audible, Inc.: Audible (www.audible.com) is the leader in spoken audio information and entertainment on the Internet. Content from Audible is downloaded and played back on personal computers, CDs, or AudibleReady computer-based and wireless mobile devices. Audible has 180,000 hours of audio programs from more than 470 content partners that include leading audiobook publishers, broadcasters, entertainers, magazine and newspaper publishers, and business information providers. Audible is the preeminent provider of spoken-word audio products for Apple�s iTunes Store. Among Audible�s key business relationships are Apple, Inc., Amazon.com, Palm, Inc., Creative Labs Inc., SanDisk Corporation, and XM Satellite Radio, Inc. Audible has its headquarters in Newark, NJ, and an office in London, England. Audible, audible.com, AudibleListener, and AudibleReady are registered trademarks of Audible, Inc. and all are part of the family of Audible, Inc. trademarks. Other product or service names mentioned herein are the trademarks of their respective owners. Forward-Looking Statements The statements in this press release which are not historical facts may be deemed to contain forward-looking statements about Audible. Actual results may differ materially from those anticipated in any forward-looking statements as a result of certain risks and uncertainties, including, without limitation, Audible's limited operating history, history of losses, uncertain market for its services, and its inability to license or produce compelling audio content and other risks and uncertainties detailed in Audible's Securities and Exchange Commission filings. No forward-looking statement can be guaranteed. Forward-looking statements speak only as of the date on which they are made and Audible, Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. AUDIBLE INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) (Unaudited) � � � � � Three months ended Year ended December 31, September 30, December 31, December 31, December 31, 2007 2007 2006 2007 2006 � Revenue, net: Content and services: Consumer content $ 30,479 $ 26,973 $ 22,536 $ 108,158 $ 80,217 Point of sale rebates (4) (4) (25) (37) (318) Services � 19 � 28 � 26 � 109 � 111 Total content and services 30,494 26,997 22,537 108,230 80,010 Hardware 118 28 148 310 431 Related party revenue 106 431 395 648 1,247 Other � 421 � 162 � 70 � 780 � 344 Total revenue, net 31,139 27,618 23,150 109,968 82,032 � Operating expenses: Cost of content and services revenue: Royalties and other content charges 13,492 11,989 9,734 47,947 33,677 Discount certificate rebates � 181 � 74 � 418 � 588 � 1,328 Total cost of content and services revenue 13,673 12,063 10,152 48,535 35,005 Cost of hardware revenue 221 95 246 616 1,953 Cost of related party revenue 106 133 139 476 637 Operations 3,894 3,761 3,225 14,887 12,168 Technology and development 4,504 4,680 4,303 18,324 16,984 Marketing 4,692 4,300 4,108 16,945 15,322 General andadminis-trative � 3,831 � 3,609 � 3,402 � 13,903 � 12,009 Total operating expenses � 30,921 � 28,641 � 25,575 � 113,686 � 94,078 � Income (loss) from operations 218 (1,023) (2,425) (3,718) (12,046) � Loss on equity investment (303) (17) (94) (380) (364) � Other income (expense): Interest income 930 904 822 3,536 2,975 Other expense � 12 � (4) � - � (1) � - Other income, net 942 900 822 3,535 2,975 � � � � � Income (loss) before income taxes 857 (140) (1,697) (563) (9,435) � Income tax expense (53) (52) (5) (160) (14) � State income tax benefit 3,148 - 769 3,148 769 � � � � � Net income (loss) $ 3,952 $ (192) $ (933) $ 2,425 $ (8,680) � � Basic net income (loss) per common share $ 0.16 $ (0.01) $ (0.04) $ 0.10 $ (0.36) � Diluted net income (loss) per common share $ 0.16 $ (0.01) $ (0.04) $ 0.10 $ (0.36) � Basic weighted average common shares outstanding 24,406,910 24,349,644 24,158,857 24,311,667 24,371,844 � Diluted weighted average common shares outstanding 25,171,943 24,349,644 24,158,857 24,958,120 24,371,844 AUDIBLE INC. AND SUBSIDIARY NON-GAAP INFORMATION (Unaudited) (in thousands) � � � � � � � Three months ended Year ended December 31, September 30, December 31, December 31, December 31, 2007 2007 2006 2007 2006 � Stock-based compensation included in expense line items: Operations $ 286 $ 243 $ 344 $ 1,095 $ 1,111 Technology and development 295 240 294 1,098 993 Marketing 326 292 327 1,224 1,123 General and administrative � 710 � � 694 � � 787 � � 2,777 � � 2,687 � $ 1,617 � $ 1,469 � $ 1,752 � $ 6,194 � $ 5,914 � � � Depreciation and amortization included in expense line items: Operations $ 13 $ 13 $ 14 $ 45 $ 57 Technology and development 1,122 1,117 1,148 4,482 4,377 Marketing - - - - - General and administrative � 219 � � 204 � � 145 � � 791 � � 583 � $ 1,354 � $ 1,334 � $ 1,307 � $ 5,318 � $ 5,017 � � � Asset impairment included in expense line items: Technology and development � - � � 160 � � - � � 160 � � 144 � $ - � $ 160 � $ - � $ 160 � $ 144 � � � Reconciliation to Non-GAAP Financial Measures (unaudited) Net income (loss) $ 3,952 $ (192 ) $ (933 ) $ 2,425 $ (8,680 ) Add back: Stock-based compensation 1,617 1,469 1,752 6,194 5,914 Depreciation and amortization 1,354 1,334 1,307 5,318 5,017 Loss on equity investment 303 17 94 380 364 Asset impairment - 160 - 160 144 Income tax expense 53 52 5 160 14 Less: Interest income, net (942 ) (900 ) (822 ) (3,535 ) (2,975 ) State income tax benefit (3,148 ) - (769 ) (3,148 ) (769 ) � � � � � Non-GAAP adjusted EBITDA $ 3,189 � $ 1,940 � $ 634 � $ 7,954 � $ (971 ) � � Reconciliation to Non-GAAP Financial Measures (unaudited) Total revenue, net $ 31,139 $ 27,618 $ 23,150 $ 109,968 $ 82,032 Add: Change in deferred revenue � 2,080 � � 785 � � 2,253 � � 4,843 � � 7,125 � Non-GAAP total cash sales $ 33,219 � $ 28,403 � $ 25,403 � $ 114,811 � $ 89,157 � AUDIBLE INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) � � � December 31, December 31, Assets 2007 2006 (unaudited) � Current Assets: Cash and cash equivalents $ 72,384 $ 14,925 Short-term investments 8,453 51,295 Interest receivable on short-term investments 332 626 Accounts receivable, net of allowance 5,007 4,181 Accounts receivable, related parties 443 100 Royalty advances 310 710 Prepaid expenses and other current assets 740 1,797 Inventory � 69 � � 212 � Total current assets 87,738 73,846 � Property and equipment, net 9,910 8,149 Investment in related party, net at equity 657 - Other assets 1,695 781 � � Total Assets $ 100,000 � $ 82,776 � � Liabilities and Stockholders' Equity � Current Liabilities: Accounts payable $ 1,796 $ 3,121 Accrued expenses 3,804 4,678 Accrued royalties 9,532 9,028 Accrued compensation 6,241 778 Deferred revenue, current � 18,651 � � 13,840 � Total current liabilities 40,024 31,445 � Deferred revenue, non current 546 513 Royalty obligations, non current - 90 Other liabilities, non current 1,734 262 � Commitments and contingencies � Stockholders' Equity: Common stock 243 241 Additional paid-in capital 195,617 190,799 Accumulated other comprehensive (loss) income (51 ) (36 ) Accumulated deficit � (138,113 ) � (140,538 ) Total Stockholders' Equity 57,696 50,466 � � Total Liabilities and Stockholders' Equity $ 100,000 � $ 82,776 � AUDIBLE INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) � � � � � Three months ended Year ended December 31, December 31, 2007 2006 2007 2006 � Cash flows from operating activities: Net income (loss) $ 3,952 $ (933 ) $ 2,425 $ (8,680 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss on equity investment in related party 303 - 320 - Depreciation and amortization 1,354 1,308 5,318 5,018 Amortization of audio production costs 186 69 553 148 Impairment loss on purchased software - - 160 144 Non-cash stock-based compensation charge 1,617 1,752 6,194 5,914 Income tax benefit from exercise of stock options 20 - 20 - Amortization of discounts on short-term investments (114 ) (280 ) (881 ) (1,004 ) Changes in assets and liabilities: Interest receivable on short-term investments 90 (121 ) 294 (198 ) Accounts receivable, net (1,383 ) (1,337 ) (823 ) (1,833 ) Accounts receivable, related parties (180 ) 427 (343 ) 494 Royalty advances 114 (191 ) 400 (239 ) Prepaid expenses and other current assets 758 202 1,059 (896 ) Inventory 10 (52 ) 144 293 Other assets (254 ) (45 ) (1,467 ) (812 ) Accounts payable (257 ) 762 (1,326 ) (1,640 ) Accrued expenses 176 (129 ) (967 ) (724 ) Accrued royalties 1,935 3,129 499 3,902 Accrued compensation 2,249 (295 ) 5,460 (101 ) Deferred revenue 2,080 2,253 4,843 7,125 Other liabilites, non-current � (109 ) � 262 � � 1,471 � � 262 � Net cash provided by operating activities � 12,547 � � 6,781 � � 23,353 � � 7,173 � � Cash flows from investing activities: Purchases of property and equipment (657 ) (231 ) (6,051 ) (4,280 ) Capitalized software development costs (535 ) (427 ) (1,188 ) (872 ) Investment in related party - - (978 ) - Purchases of short-term investments - (25,367 ) (44,313 ) (85,465 ) Proceeds from maturity of short-term investments � 19,615 � � 21,725 � � 88,036 � � 90,790 � Net cash provided by investing activities � 18,423 � � (4,300 ) � 35,506 � � 173 � � Cash flows from financing activities: Proceeds from exercise of common stock options 47 248 516 633 Proceeds from exercise of common stock warrants 76 - 76 750 Payment of taxes due on vested restricted stock (124 ) - (572 ) - Repurchase of treasury stock at cost � (1,414 ) � (1,363 ) � (1,414 ) � (5,351 ) Net cash (used in) provided by financing activities � (1,415 ) � (1,115 ) � (1,394 ) � (3,968 ) � Effect of exchange rate changes on cash and cash equivalents � (17 ) � 3 � � (6 ) � (2 ) � Increase in cash and cash equivalents 29,538 1,369 57,459 3,376 � Cash and cash equivalents at beginning of period � 42,846 � � 13,556 � � 14,925 � � 11,549 � Cash and cash equivalents at end of period $ 72,384 � $ 14,925 � $ 72,384 � $ 14,925 � AUDIBLE INC. AND SUBSIDIARY UNAUDITED SUPPLEMENTAL OPERATING DATA (Members in thousands) New AudibleListener Membership Reporting: � Q1 2005 � Q2 2005 � Q3 2005 � Q4 2005 � Q1 2006 � Q2 2006 � Q3 2006 � Q4 2006 � Q1 2007 � Q2 2007 � Q3 2007 � Q4 2007 Total AudibleListener� Members1 186 204 223 245 277 306 343 381 412 425 441 457 Year-over-year 77% 78% 70% 56% 49% 50% 54% 56% 49% 39% 29% 20% Quarter-over-quarter 18% 10% 9% 10% 13% 10% 12% 11% 8% 3% 4% 4% Basic/Value AudibleListener� Members 2 0 0 0 9 47 80 113 142 150 147 143 133 All Other (Gold/Platinmu) AudibleListener� Members 2 186 204 223 236 230 226 230 239 262 278 298 324 Year-over-year 77% 78% 70% 56% 24% 11% 3% 1% 14% 23% 30% 36% Quarter-over-quarter 18% 10% 9% 6% -3% -2% 2% 4% 10% 6% 7% 9% New AudibleListener� Members3 54 52 60 62 79 65 71 70 72 55 63 71 Year-over-year 143% 136% 107% 59% 46% 25% 18% 13% -9% -15% -11% 1% Quarter-over-quarter 38% -4% 15% 3% 27% -18% 9% -1% 3% -24% 15% 13% Average Monthly Churn in AudibleListener� Members4 4.78% 4.70% 5.20% 4.80% 4.80% 3.50% 3.00% 2.60% 3.00% 3.00% 3.30% 3.50% Cost per New AL $52 $57 $57 $94 $51 $44 $45 $49 $41 $48 $45 $46 (1) Total number of AudibleListener� members at the end of the period. (2) Number of Basic/Value AudibleListener�members at the end of the period. (3) Total number of new AudibleListener� members added during the period. Members canceling and rejoining a membership within the same day are counted as one membership. (4) Churn is defined as member cancellations in the period divided by the sum of members at the beginning of the period plus gross member adds, divided by three months.