Digital Media Store Services Drive Strong Growth and Record
Quarterly Revenue SEATTLE, Aug. 9 /PRNewswire-FirstCall/ -- 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 --
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. -- Deferred Revenue. Deferred revenue
was $5.8 million as of June 30, 2005, net of related receivables of
$2.9 million. -- 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. -- 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. -- 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: -- Powering music services in
more countries than any other digital music service provider; we
currently power music services in 22 countries worldwide. --
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. --
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. -- Launching new digital music services
for Virgin Megastores, CD WOW! and others. -- 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. --
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 http://www.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 http://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.
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 obligations 1,053 1,135
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 current portion 500
1,000 Total liabilities 22,346 37,258 STOCKHOLDERS' EQUITY 63,791
66,450 Total liabilities and stockholders' equity $86,137 $103,708
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 expense 983 560 1,963 1,041 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
DATASOURCE: Loudeye Corp. CONTACT: media, Karen Demarco of mPRm
Public Relations, +1-323-933-3399, or ; or investors, Mike
Dougherty of Loudeye Corp., +1-206-832-4000, or Web site:
http://www.loudeye.com/
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