Loudeye (NASDAQ:LOUD)
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Loudeye Announces First Quarter 2005 Financial Results
SEATTLE, May 3 /PRNewswire-FirstCall/ -- Loudeye Corp. (NASDAQ:LOUD), a
worldwide leader in business-to-business digital media solutions, today
announced preliminary financial results for the first quarter 2005.
First Quarter 2005 Financial Highlights
-- Revenue. Revenue was $6.0 million in the first quarter, compared with
revenue of $2.0 million in the prior year first quarter and
$6.6 million in the fourth quarter 2004.
-- Deferred revenue. Deferred revenue was $6.5 million at quarter end,
compared with $5.7 million as of December 31, 2004 and $796,000 as of
the end of the first quarter 2004.
-- Net Loss. For the first quarter 2005, GAAP net loss was $7.5 million
or $0.07 per share, compared to a GAAP net loss of $5.6 million or
$0.07 per share in the fourth quarter 2004 and $2.8 million or $0.04
per share in the first quarter 2004. Included in GAAP net loss were
net foreign exchange transaction gains (losses) of approximately $0.2
million for the first quarter 2005 and ($1.0) million for the fourth
quarter 2004. There were no foreign exchange transaction gains or
losses for the first quarter 2004.
-- EBITDA Loss*. EBITDA loss for the quarter totaled $6.6 million or
$0.06 per share.
-- Cash and Marketable Securities. Cash, restricted cash, and short-term
and long-term marketable securities were approximately $34.8 million as
of March 31, 2005.
* EBITDA excludes charges related to depreciation and amortization expense and
net interest income or expense. A reconciliation of Loudeye's GAAP financial
results with its non-GAAP financial results is provided below.
Recent Highlights
Loudeye's recent operating highlights include:
-- Advancing our strategic collaboration with Nokia around mobile music.
In February 2005, we launched our collaboration with Nokia at the 3GSM
conference in Cannes, France, and in March 2005 Nokia announced that O2
Germany, the fastest growing mobile operator in Germany and part of the
European O2 group, was the first operator to sign up to launch a
complete mobile music experience under the O2 Germany brand powered by
Loudeye.
-- Appointing Michael A. Brochu as president and chief executive officer
and expanding our management team and board of directors through
strategic appointments. Ron Stevens joined Loudeye as chief financial
officer and chief operating officer, Larry Madden was promoted to the
position of president, digital media solutions, and Jason Berman,
Chairman Emeritus of the International Federation of Phonographic
Industries (IFPI), joined our board of directors as an independent
director. We believe the combined experience and vision from these
individuals, together with our existing management team and board of
directors, will play an important role in helping us achieve our
strategic goals and grow our leadership position in digital media
services worldwide.
-- Announcing new digital music store services for leading portable device
manufacturer Gizmondo (UK), Swiss retailer Migros Electronics and
Polish Internet portal Onet.pl
-- Deploying the aacPlus codec from Coding Technologies into our mobile
music platform to enable a wider range of format options for operators.
-- Restructuring obligations related to our 2004 acquisition of OD2
resulting in an approximate 54% reduction in the maximum potential
aggregate amount of our remaining deferred and contingent payment
obligations, as valued based on the February 25, 2005 closing share
price and exchange rates.
"This was primarily a quarter of investment as we continue to develop our
mobile and online platform to prepare for marquee launches later in the year
and support future growth. We continued to see solid growth in our digital
music store services and significant progress with our mobile music initiative,
as we look forward to a significant online store launch with a major U.S.
retailer in the fall 2005 and, later in 2005, the launch of our first mobile
operator partner via the Nokia collaboration," said Mike Brochu, Loudeye's
president and chief executive officer. "Our new management team has
strategically assessed our service lines, technology and operations, and is
focused on driving our resources to improve operational and financial
performance in coming periods."
Forward-Looking Financial Guidance
While future results are subject to change, Loudeye currently anticipates that
revenue for the full-year 2005 will be approximately $35 million.
"Growth in our Digital Music Store Services was stronger than expected during
the quarter but was overshadowed by weakness in revenue from our other service
lines. At present we expect to achieve the lower end of our prior full-year
revenue guidance and we are not giving specific guidance regarding
profitability," said Ron Stevens, Loudeye's chief financial officer and chief
operating officer. "Our focus for the next few quarters will be on growing
revenue, streamlining our costs, and showing consistent, measurable progress
towards profitability."
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.
The historical results below are unaudited and represent management's current
expectations and are preliminary and may be subject to change based upon the
completion of the first quarter 2005 review procedures and the filing of
Loudeye's Form 10-Q for the quarter ended March 31, 2005.
First 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 first quarter 2005
results' webcast is as follows:
Date: Tuesday, May 3, 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 May 18, 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, management's audio webcast and the slide presentation
accompanying 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 for the year ended December 31, 2005, and sequential quarterly growth
rates. The words or phrases "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 a result of our assessment that material weaknesses in our
internal control over financial reporting existed as of December 31, 2004,
management concluded that our internal control over financial reporting was not
effective as of December 31, 2004. We may identify further material weaknesses
during the course of management's assessment of our internal control over
financial reporting during 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 completion of Loudeye's review of its
financial performance for the first quarter ended March 31, 2005; performance
and integration of our new president and chief executive officer and chief
financial and operating officer; 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-K and other SEC filings which are available
through EDGAR at http://www.sec.gov/. 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 and depreciation and amortization. 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. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
March 31,
2005 2004
REVENUE $6,029 $1,991
COST OF REVENUE 6,309 1,461
Gross profit (loss) (280) 530
Gross profit (loss) percent -5% 27%
OPERATING EXPENSES:
Sales and marketing 1,931 635
Research and development 1,784 590
General and administrative 3,637 1,960
Amortization of intangibles 100 105
Stock-based compensation 57 122
Special charges (credits) (43) (50)
Total operating expenses 7,466 3,362
LOSS FROM OPERATIONS (7,746) (2,832)
OTHER INCOME, net 294 11
NET LOSS $(7,452) $(2,821)
Basic and diluted net loss per share $(0.07) $(0.04)
Weighted average shares outstanding 101,723 63,286
NON-GAAP INFORMATION:
Net loss $(7,452) $(2,821)
Adjustments to reconcile GAAP net
loss to EBITDA:
Depreciation and amortization expense 980 481
Interest (income) expense (134) (8)
EBITDA $(6,606) $(2,348)
Basic and diluted EBITDA per share $(0.06) $(0.04)
Weighted average shares outstanding 101,723 63,286
LOUDEYE CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
2005 2004
ASSETS
Current assets:
Cash and short-term marketable securites $33,409 $38,880
Accounts receivable, net 5,219 5,333
Prepaid expenses and other current assets 2,014 1,298
Restricted cash 744 --
Total current assets 41,386 45,511
Restricted cash -- 2,288
Long-term marketable securities 621 2,568
Property and equipment, net 5,926 5,661
Goodwill 44,621 43,549
Intangible assets, net 3,398 3,700
Other assets, net 288 431
Total assets $96,240 $103,708
LIABILITIES
Current liabilities:
Accounts payable $3,045 $4,012
Accrued compensation and benefits 1,066 929
Accrued and other liabilities 6,629 4,966
Accrued special charges -- 403
Accrued acquisition consideration 2,476 15,924
Deferred revenue 5,320 4,353
Current portion of long-term debt and
capital lease obligations 1,093 1,135
Total current liabilities 19,629 31,722
Deferred revenue, net of current portion 1,194 1,343
Common stock payable related to acquisition 2,233 3,193
Long-term debt and capital lease obligations,
net of current portion 750 1,000
Total liabilities 23,806 37,258
STOCKHOLDERS' EQUITY 72,434 66,450
Total liabilities and stockholders'
equity $96,240 $103,708
DATASOURCE: Loudeye Corp.
CONTACT: media, Karen Demarco of mPRm Public Relations, +1-323-933-3399,
or , for Loudeye Corp.; or investors, Mike Dougherty of
Loudeye Corp., +1-206-832-4000, or
Web site: http://www.loudeye.com/