Loudeye Announces Record Fourth Quarter and Full-Year 2004 Revenues
and Provides Guidance for Significant 2005 Revenue Growth Fourth
Quarter Revenues Increase 124% From Prior Year and 29% From Prior
Quarter; Loudeye Guides That It Expects Revenues to More Than
Double in 2005 Versus 2004 SEATTLE, March 1 /PRNewswire-FirstCall/
-- Loudeye Corp. (NASDAQ:LOUD), a worldwide leader in
business-to-business digital media solutions, today announced
preliminary financial results for the fourth quarter and fiscal
year ended December 31, 2004. Fourth Quarter and Fiscal Year 2004
Financial Highlights -- Revenues. Revenues increased to $6.5
million in the fourth quarter, compared with revenues of $5.1
million in the third quarter of 2004 and $2.9 million in the prior
year fourth quarter. This represents a 29% increase from the third
quarter of 2004 and a 124% increase from the prior year fourth
quarter. Contributing to the overall increase, revenues from
Loudeye's digital music store services grew to $3.5 million in the
current quarter, an increase of 87% from the third quarter of 2004.
For the year ended December 31, 2004, Loudeye's revenues were $16.7
million, compared to $11.9 million in the prior year, an increase
of 40%. -- Deferred revenue. Deferred revenue was $5.7 million at
quarter end, compared with $5.5 million as of September 30, 2004
and $0.7 million as of December 31, 2003. -- Net Loss. For the
fourth quarter of 2004, GAAP net loss was $5.5 million or $0.07 per
share, compared to a GAAP net loss of $5.3 million or $0.07 per
share in the third quarter of 2004 and $1.7 million or $0.03 per
share in the fourth quarter of 2003. For the year ended December
31, 2004, GAAP net loss was $16.3 million or $0.22 per share,
compared to a GAAP net loss of $19.2 million or $0.39 per share for
2003. Included in GAAP net loss for the fourth quarter of 2004 and
the year ended December 31, 2004 were net foreign exchange
transaction losses of approximately $1.0 million and $0.8 million,
respectively. There were no foreign exchange transaction gains or
losses for the year ended December 31, 2003 and the quarters ended
September 30, 2004 and December 31, 2003. -- Pro Forma Net Loss.*
Pro forma net loss for the quarter totaled $3.5 million or $0.04
per share, compared to a pro forma net loss of $4.3 million or
$0.05 per share in the third quarter of 2004 and $0.7 million or
$0.01 per share in the prior year fourth quarter. For the full year
2004, pro forma net loss was $12.1 million or $0.16 per share,
compared to a pro forma net loss of $6.6 million or $0.13 per share
for 2003. -- Cash and Investments. Cash, short-term, long-term and
restricted investments were approximately $43.7 million as of
December 31, 2004. * Pro forma net loss excludes charges related to
depreciation and amortization expense, charges related to
stock-based compensation, increase in fair value of common stock
warrants, gain on sale of media restoration assets, net interest
income or expense, foreign exchange transaction gain or loss, and
special charges. A reconciliation of Loudeye's GAAP financial
results with its pro forma financial results is set forth below.
Recent Highlights -- Announced new or expanded digital music store
services in the fourth quarter of 2004, including new or expanded
services for Coca-Cola, Home Entertainment AB, Migros, Mobitel, MTV
and Musica. -- Signed a multi-year, multi-million dollar agreement
to power a privately branded digital music service for a leading
national physical retailer, scheduled to be launched in the Fall of
2005. -- Launched a multi-year, strategic collaboration between
Loudeye and Nokia to provide a complete, privately branded mobile
music service for operators in over 30 countries worldwide. These
services benefit from a recently announced long-term collaboration
between Microsoft and Nokia regarding digital media format support
on Nokia handsets and the Windows Media Player. -- Completed a
$25.2 million private placement of common stock and warrants with
institutional investors. -- Appointed seasoned technology veteran
Mike Brochu president and chief executive officer. Brochu brings
over 20 years of senior level experience to Loudeye, including
senior executive and directorship positions in emerging growth
technology, software and digital entertainment companies, most
recently at Primus Knowledge Solutions and Sierra On-Line. "Our
record revenues in the fourth quarter were primarily driven by
growth in our digital music store business, which delivered a
significant increase in consumer transactions through our
white-labeled services globally. Revenues increased both due to new
stores launched worldwide and increased traction with existing
stores, benefiting from increased marketing and consumer adoption,"
said Mike Brochu, Loudeye's president and chief executive officer.
"We were successful in 2004 in achieving our strategic goals of
global expansion, record revenues and an improved balance sheet.
With the market for digital media distribution growing rapidly via
online and mobile services, our global deployments and advanced
mobile platform have positioned the company well for continued
financial and operational growth in 2005." Forward-Looking
Financial Guidance While future results are subject to change,
Loudeye currently anticipates that revenues for the full-year 2005
will be approximately $35 million to $40 million, with slight to
moderate revenue growth in the first quarter of 2005 compared to
the fourth quarter of 2004, and stronger sequential quarterly
revenue growth for the remainder of the year. Loudeye anticipates
that its pro forma net loss will be wider in the first quarter of
2005 as compared to the fourth quarter of 2004, due primarily to
charges for severance expenses and Sarbanes Oxley
compliance-related expenses, in aggregate totaling approximately
$0.7 million in the first quarter. Loudeye expects to achieve pro
forma profitability by the end of 2005. "Our expectation for
significant revenue growth in 2005 is supported by current growth
trends in our existing online digital music distribution services
as well as positive industry trends overall. Our ability to achieve
the high end of the guidance range is dependent in part on
continued development of the emerging mobile music distribution
sector and increased penetration of 3G and other broadband mobile
services," said Larry Madden, Loudeye's executive vice president
and chief financial officer. "This anticipated growth, combined
with a balance between continued investment in R&D and a focus
on operational efficiencies, will enable us to achieve our pro
forma profitability guidance by the end of 2005." 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.
Loudeye's forward guidance for 2005 excludes the impact of
accounting changes relating to stock compensation, which are
currently scheduled to be effective in the third quarter, and any
potential future acquisitions. Results may be materially affected
by many factors including those described in the Forward-Looking
Statements section below. The historical results below represent
management's current expectations and are preliminary and may be
subject to change based upon the completion of the 2004 audit and
the filing of Loudeye's Form 10-K for the fiscal year ended
December 31, 2004. Fourth Quarter 2004 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.
Management will also provide a slide presentation to accompany its
statements, available in conjunction with the audio webcast.
Information regarding the fourth quarter 2004 results' webcast and
slide presentation is as follows: Date: Tuesday, March 1, 2005
Time: 5:00 p.m. EST / 2:00 p.m. PST Audio Webcast: 5:00 p.m. EST /
2:00 p.m. PST; Webcast from
http://www.loudeye.com/en/aboutus/earningscalls.asp This webcast
will be available until March 16, 2005 at 5:00 p.m. EST Slide
Presentation: Participants accessing the audio webcast will be able
to view an accompanying management slide presentation synchronized
with the audio webcast. 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 revenues for the year ended
December 31, 2005, sequential quarterly growth rates for 2005, pro
forma net loss for the first quarter of 2005 and pro forma
profitability targets for 2005. The words or phrases "expects" and
"anticipates" and similar words and phrases are intended to
identify such forward-looking statements. As disclosed in our
quarterly report on Form 10-Q/A for the quarter ended September 30,
2004, we have identified material weaknesses in our internal
control over financial reporting. The material weaknesses we have
identified to date relate to insufficient staffing, competence and
controls surrounding adequate monitoring and oversight within our
accounting and financial reporting functions and insufficient
analysis, documentation and review of the selection and application
of generally accepted accounting principles to significant
non-routine transactions. We also expect to conclude that we will
not be able to demonstrate through testing that our internal
control over financial reporting was effective as of December 31,
2004 because our remediation efforts of the material weaknesses
discussed above were not complete as of the December 31, 2004
measurement date. We have identified additional deficiencies in
internal control over financial reporting which we are in the
process of evaluating to determine whether the deficiencies
constitute significant deficiencies or material weaknesses, and we
may identify further material weaknesses during the course of
management's assessment of our internal control over financial
reporting. 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 fourth quarter and year ended December 31,
2004, and completion of Loudeye's audit for the fiscal year ended
December 31, 2004; performance and integration of our new president
and chief executive officer; the possibility of adverse changes in
the market for distribution of digital audio and video 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, 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 This press release, management's
audio webcast and the slide presentation accompanying management's
audio webcast contain financial metrics that are not based on
generally accepted accounting principles in the United States, or
GAAP. Management believes the pro forma presentation enhances an
overall understanding of Loudeye's financial performance, and is
used by management for that purpose. To supplement Loudeye's
consolidated financial statements presented on a GAAP basis, we
have included non-GAAP "pro forma" measures of operating results
which exclude certain costs and expenses identified below. The
pro-forma net loss and pro forma net loss per share presented in
the press release and webcast exclude charges for depreciation and
amortization expense, charges related to stock-based compensation,
increase in the fair value of common stock warrants, gain on the
sale of media restoration assets, net interest income or expense,
foreign exchange transaction gain or loss and special charges.
Included below in this press release is a tabular reconciliation of
the non-GAAP financial measures to Loudeye's GAAP financial results
for the quarter ended December 31, 2004. Estimated pro forma
profitability provided in Loudeye's Forward-Looking Financial
Guidance above is calculated consistently with Loudeye's historical
practice of calculating pro forma net loss by excluding certain
charges, expenses and one-time gains or losses, such as
depreciation and amortization expense, charges related to
stock-based compensation, increase in the fair value of common
stock warrants, gain on the sale of media restoration assets, net
interest income or expense, foreign exchange transaction gains or
losses and special charges. Because these charges, expenses, gains
or losses and one-time items that we exclude in calculating pro
forma net loss are subject to change and fluctuation, we are
currently not providing guidance concerning when we expect to
report GAAP net income. 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. Further, these non-GAAP results are
important indicators that management uses for planning and
forecasting in future periods and for making financial and
operating decisions. Although Loudeye believes, for the foregoing
reasons, that its presentation of non-GAAP financial measures
enhance investors' understanding of Loudeye's business and
performance, these non-GAAP financial measures are inherently
limited 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 revenues. Management compensates for these limitations
in non-GAAP results by also evaluating the company's performance
based on traditional GAAP financial measures. Accordingly,
investors should consider these pro forma results together with
GAAP results, rather than as an alternative to GAAP basis financial
measures. LOUDEYE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share
amounts) Three Months Ended Years Ended December September December
December 31, 30, 31, 31, PRELIMINARY 2004 2004 2003 2004 2003
REVENUES $6,540 $5,080 $2,924 $16,742 $11,948 COST OF REVENUES
4,598 3,480 1,418 11,323 7,206 Gross margin 1,942 1,600 1,506 5,419
4,742 Gross margin percent 30% 31% 52% 32% 40% OPERATING EXPENSES
Research and development 1,349 1,325 320 4,017 1,688 Sales and
marketing 1,507 1,478 419 4,456 3,286 General and administrative
3,333 3,798 1,672 11,323 7,778 Amortization of intangibles and
other assets 196 325 157 787 1,100 Stock-based compensation 120 21
344 306 1,298 Special charges 12 350 262 312 8,699 Total operating
expenses 6,517 7,297 3,174 21,201 23,849 OPERATING LOSS (4,575)
(5,697) (1,668) (15,782) (19,107) Increase in fair value of common
stock warrants -- -- (26) -- (248) Gain on sale of media
restoration assets 43 273 -- 156 -- Other income (expense) (998) 93
(20) (663) 181 NET LOSS $(5,530) $(5,331) $(1,714) $(16,289)
$(19,174) Basic and diluted net loss per share $(0.07) $(0.07)
$(0.03) $(0.22) $(0.39) Weighted average shares - basic and diluted
81,848 79,285 56,131 73,845 49,797 NON-GAAP PRO FORMA INFORMATION:
Net loss $(5,530) $(5,331) $(1,714) $(16,289) $(19,174) Adjustments
to reconcile GAAP net loss to pro forma net loss: Depreciation and
amortization 903 977 355 2,919 2,378 Stock-based compensation 155
65 362 423 1,360 Increase in fair value of common stock warrants --
-- 26 -- 248 Gain on sale of media restoration assets (43) (273) --
(156) -- Interest (income) expense (27) (93) 21 (176) (61) Foreign
exchange transaction loss 1,016 -- -- 833 -- Special charges (1) 12
350 262 312 8,699 Pro forma net loss $(3,514) $(4,305) $(688)
$(12,134) $(6,550) Basic and diluted pro forma net loss per share
$(0.04) $(0.05) $(0.01) $(0.16) $(0.13) Weighted average shares -
basic and diluted 81,848 79,285 56,131 73,845 49,797 (1) Special
charges of $8,699 relate primarily to the impairment of assets in
accordance with our long-lived asset policy. During the year ended
December 31, 2003, we recorded impairment charges for goodwill,
intangible assets and property and equipment of approximately
$5,300, $685 and $670 respectively. The remaining costs related to
corporate restructurings and facilities consolidations. LOUDEYE
CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands) December 31, PRELIMINARY 2004 2003 ASSETS
Current assets: Cash, cash equivalents and marketable securities
$38,880 $21,940 Accounts receivable, net 5,333 1,781 Prepaid and
other 1,298 345 Assets held for sale -- 363 Total current assets
45,511 24,429 Long-term investments 2,288 -- Restricted investments
2,568 316 Property and equipment, net 5,661 1,123 Goodwill 43,549
-- Intangible assets, net 3,700 86 Assets held for sale -- 730
Other long-term assets, net 539 360 Total assets $103,816 $27,044
LIABILITIES Current liabilities: Accounts payable $4,012 $1,229
Line of credit -- 1,285 Accrued compensation and benefits 929 378
Other accrued expenses 4,966 1,155 Accrued special charges 403
1,670 Accrued acquisition consideration 15,924 -- Deferred revenue
4,353 485 Current portion of long-term debt and capital leases
1,135 1,348 Liabilities related to assets held for sale -- 98 Total
current liabilities 31,722 7,648 Deferred revenue 1,343 228 Common
stock payable related to acquisition 3,193 -- Long-term debt and
capital leases, net of current portion 1,000 2,135 Total
liabilities 37,258 10,011 STOCKHOLDERS' EQUITY 66,558 17,033 Total
liabilities and stockholders' equity $103,816 $27,044 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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