The Orchard (NASDAQ: ORCD), a full service media company
specializing in the distribution of music and video entertainment,
today reported financial results for the third quarter of 2009.
Third Quarter Results
Revenues increased 4% from $14.6 million for the third
quarter of 2008 to $15.2 million for the third quarter of
2009.
The Orchard’s gross profit margin was 26% in the third quarter
of 2009, as compared to 32% in the third quarter of 2008.
Operating expenses for the third quarter of 2009, including an
impairment charge for goodwill of $14.1 million and restructuring
expense of $0.3 million, were $19.3 million. Excluding impairment
of goodwill and restructuring expenses, operating expenses were
$4.9 million, in line with the corresponding period of 2008.
Due to the weakening of the global economy, which, among other
factors, has contributed to our weaker than expected performance
and a decline in our overall market value and declining digital
media industry growth during 2009, The Orchard was required to
perform an interim impairment test on its goodwill, resulting in
the impairment charge. The goodwill impairment charge is a non-cash
item and does not affect the Company’s operations, cash flow or
liquidity.
In addition, in the third quarter of 2009, the Company
implemented a cost reduction program which included a 20% reduction
of its salaried workforce. This cost control measure resulted in a
restructuring charge of $0.3 million.
The net loss for the third quarter of 2009 was $15.4 million or
$2.47 per share. Excluding the impact of the restructuring charges
and non-cash charge for goodwill impairment, the third quarter
non-GAAP net loss was $1.0 million or $0.15 per share. A
reconciliation of non-GAAP net loss to net loss is provided in the
financial tables that accompany this release. The Orchard’s net
loss for the third quarter of 2008 was $0.1 million or $0.01 per
share.
EBITDA for the third quarter of 2009 was a loss of $0.8 million
compared with income of $0.3 million in the third quarter of 2008.
A reconciliation of GAAP net income to EBITDA is provided in the
financial tables that accompany this release.
As of September 30, 2009, cash and cash equivalents were
$4.7 million and the company had no debt. Net cash provided by
operations for the nine months ended September 30, 2009 was $1.3
million, as compared to $0.4 million for the nine months ended
September 30, 2008.
As of September 30, 2009, there were approximately
1.7 million music tracks available for sale, an increase of
33% from the same date in 2008 and an increase of 13% from June 30,
2009. During the third quarter of 2009, there were approximately
14.7 million paid downloads from The Orchard’s catalogue, an
increase of 18% as compared to the corresponding period of
2008.
Management Comment
“During the third quarter of 2009, we increased revenue from the
same period last year, despite a significant slowdown in the
digital media industry. We also increased our catalogue of
available music tracks by 33% from the same period in 2008 and 13%
from the second quarter of 2009. For the second consecutive
quarter, we reduced operating cost excluding non-recurring charges.
We are focused on continuing to grow our core business and create
shareholder value,” said Brad Navin, the Company’s Interim Chief
Executive Officer.
Further Financial Information
For further Company financial information, refer to the
unaudited condensed consolidated statements of operations and
unaudited summarized cash flow information attached to this
release; the Quarterly Report on Form 10-Q for the Third Quarter of
2009, to be filed on November 13, 2009 with the Securities and
Exchange Commission (the “SEC”), the Quarterly Report on Form 10-Q
for the First Quarter of 2009, filed with the SEC on May 15, 2009,
the Quarterly Report on Form 10-Q for the Second Quarter of 2009,
filed on August 14, 2009, and The Orchard’s Annual Report on Form
10-K for the year ended December 31, 2008, filed with the SEC on
March 30, 2009.
Investor Conference Call and Webcast
The company will host a conference call on November 13, 2009 at
4:30 p.m. EST to discuss its results and provide an update on the
company. Presenting from the Company will be Interim Chief
Executive Officer, Brad Navin, and Chief Financial Officer, Nathan
Fong.
To participate in the call, interested parties are invited to
dial 1 (800) 261-3417 for domestic callers or 1 (617) 614-3673 for
international callers at least five minutes prior to the start
time. The participant pass-code is 58681819. A live webcast of the
call will be available on the Company's website at
http://investor.theorchard.com.
A replay of the call will be available for one week, beginning
one hour after the call ends by dialing 1 (888) 286-8010 for
domestic callers or 1 (617) 801-6888 for international callers. The
pass-code is 90965202. A replay of the webcast will also be
archived on The Orchard’s website for at least fourteen days.
About The Orchard®
Headquartered in New York and London with operations in 25
markets around the world, The Orchard (NASDAQ: ORCD) is a full
service media company specializing in the distribution of music and
video entertainment. Founded in 1997, the company is a global
leader in digital marketing and distribution, driving sales across
more than 730 digital storefronts and mobile carriers in 69
countries. Fostering creativity and independence, The Orchard
enables labels, artists and rights holders to grow and monetize
audiences globally. For further information please visit
www.theorchard.com.
The Orchard is a registered trademark and The Orchard logo is a
service mark of Orchard Enterprises NY, Inc. All Rights
Reserved.
Forward Looking Statements
This release contains certain forward-looking statements, which
reflect management’s expectations regarding future events and
operating performance, such as the factors underlying The Orchard’s
historical performance and the likelihood that these will result in
similar future performance, The Orchard’s performance in 2009
despite a challenging macro-economic environment, the impact that
new business areas that are being launched will have on future
growth and management’s ability to control costs as revenues
increase. Undue reliance should not be placed on such
forward-looking statements as they speak only as of the date hereof
and are based on our current views and assumptions. The Orchard
undertakes no obligation to update these statements to reflect
subsequent events or circumstances except as may be required by
law. These forward-looking statements involve a number of risks and
uncertainties, certain of which are outside of The Orchard’s
control, such as the growth of the digital music and video markets,
the impact of the general economic recession and management’s
ability to capitalize on our business strategy and take advantage
of opportunities for revenue expansion, the outcome of, expenses
associated with, or developments concerning, Dimensional's proposal
to acquire all of our outstanding common stock not already owned by
it or any litigation related to the proposal, the uncertainty for
our employees, customers and other business partners resulting from
Dimensional's proposal, which could adversely affect our business
and financial results, and our ability to maintain the listing of
our common stock on The NASDAQ Stock Market. These and other
factors that could cause actual results to differ materially from
our expectations are detailed in The Orchard’s filings with the
Securities and Exchange Commission, such as our annual reports on
Form 10-K and quarterly reports on Form 10-Q.
Use of Non-GAAP Measures
In addition to The Orchard’s condensed consolidated statements
of operations and cash flow presented in accordance with GAAP, we
present investors with the non-GAAP, net loss, non-GAAP net loss
per share, and EBITDA.
Non-GAAP net loss and non-GAAP net loss per share excludes the
non-cash charge for goodwill impairment and restructuring charges
from GAAP net loss.
EBITDA consists of net income excluding the impact of the
following: interest income, net; income taxes; depreciation; and
amortization. Management believes EBITDA is a useful measure
because it provides important supplemental information to
management and investors regarding financial and business trends
relating to The Orchard’s financial condition and results of
operations and is useful to investors in their assessment of our
operating performance and the valuation of our company.
The use of non-GAAP net loss and EBITDA should be considered in
addition to, not as a substitute for or superior to, revenue and
operating expenses provided by reported operating activities, net
income, earnings per share, or other financial measures prepared in
accordance with GAAP. In the financial tables of our earnings press
release, The Orchard has included a reconciliation of EBITDA to
GAAP net income, non-GAAP net loss to GAAP net loss, and non-GAAP
net loss per share to GAAP net loss per share.
The Company recorded restructuring charges and a non-cash
goodwill impairment charge in the third quarter of 2009. These
charges have not occurred frequently and the Company believes that
excluding these charges will provide investors with a basis to
compare the Company’s core operating results in different periods
without this variability.
THE ORCHARD ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For
the Three Months Ended September 30, 2009 2008 (unaudited)
REVENUES $ 15,169,437 $ 14,624,068 COSTS OF REVENUES
11,262,041 9,975,959 GROSS PROFIT
3,907,396 4,648,109 Gross profit margin 26 % 32 % IMPAIRMENT
OF GOODWILL 14,113,522 - RESTRUCTURING EXPENSE 312,008 - GAIN FROM
DISPOSAL AND WRITEDOWN OF PROPERTY AND EQUIPMENT (23,870
)
- OPERATING EXPENSES 4,875,390 4,878,805
LOSS FROM OPERATIONS (15,369,654 )
(230,696 ) OTHER INCOME (EXPENSE): Interest income 1,384
21,846 Interest expense (20,000 ) - Other income 8,115
150,000 Total other income (expense)
(10,501 ) 171,846 NET LOSS $ (15,380,155 ) $
(58,850 ) Net loss per share - basic and diluted $ (2.47 ) $
(0.01 ) Weighted average shares outstanding - basic and
diluted 6,228,184 6,296,170
THE ORCHARD ENTERPRISES,
INC.
SUMMARIZED CASH FLOW
INFORMATION
For the Nine Months Ended September 30, 2009 2008
(unaudited) NET CASH FLOWS PROVIDED BY (USED IN): Operating
activities $ 1,327,548 $ 360,794 Investing activities (1,088,248 )
(7,549,113 ) Effect of exchange rate changes (64,848 )
23,852 INCREASE (DECREASE) CASH AND CASH
EQUIVALENTS 174,452 (7,164,467 ) CASH AND CASH EQUIVALENTS -
Beginning of period 4,521,027 10,636,618
CASH AND CASH EQUIVALENTS - End of period $ 4,695,479
$ 3,472,151
THE ORCHARD ENTERPRISES, INC.
RECONCILIATION OF GAAP NET LOSS TO EBITDA
For the Three Months Ended September 30, 2009 2008
(unaudited) Net loss in accordance with GAAP $ (15,380,155 )
$ (58,850 ) Add (deduct) adjustments: Interest income (1,384 )
(21,846 ) Interest expense 20,000 - Depreciation and amortization
469,139 406,301 Impairment of Goodwill 14,113,522
- EBITDA $ (778,878 ) $ 325,605
THE ORCHARD ENTERPRISES, INC.
RECONCILIATION OF NON-GAAP NET LOSS TO REPORTED NET LOSS
For the Three Months Ended September 30, 2009 2008
(Unaudited) Reconciliation of non-GAAP income: Net loss
excluding restructuring and non-cash charge for goodwill impairment
$ (954,625 ) $ (58,850 ) Charge for goodwill impairment (14,113,522
) - Restructuring charges (312,008 ) - Net
loss in accordance with GAAP $ (15,380,155 ) $ (58,850 )
Weighted average shares outstanding - basic and diluted 6,228,184
6,296,170 Reconciliation of non-GAAP EPS: Net loss per share
excluding restructuring and non-cash charge for goodwill impairment
$ (0.15 ) $ (0.01 ) Charge per share for goodwill impairment (2.27
) - Restructuring charges per share (0.05 ) -
Basic and diluted loss per share $ (2.47 ) $ (0.01 )
Orchard Enterprise (MM) (NASDAQ:ORCD)
Historical Stock Chart
From Jun 2024 to Jul 2024
Orchard Enterprise (MM) (NASDAQ:ORCD)
Historical Stock Chart
From Jul 2023 to Jul 2024