SEATTLE, May 9 /PRNewswire-FirstCall/ -- Loudeye Corp.
(NASDAQ:LOUD), a worldwide leader in business-to-business digital
media store services, today announced financial results for the
first quarter 2006. "We exceeded our expectations in the first
quarter in both top line revenue and bottom line operational
performance. We have now substantially achieved the restructuring
of our business based on our 2006 operating plan to unify onto a
single music store platform, significantly reduce our operating
expenses and strengthen our balance sheet, while we focus on our
key revenue generating markets and customers," said Mike Brochu,
Loudeye president and chief executive officer. First Quarter 2006
Financial Highlights Revenue. Revenue was $8.4 million in the first
quarter 2006 compared with revenue of $5.2 million in the first
quarter 2005, an increase of 62%. First quarter 2006 revenue
decreased by 5% compared to $8.8 million in the fourth quarter
2005. Digital media store services revenue was $6.4 million in the
first quarter 2006, or 76% of total revenue, an increase of 61%
from $4.0 million, or 77% of total revenue, in the first quarter
2005. First quarter 2006 digital media store services revenue
decreased 10% compared to $7.0 million in the fourth quarter 2005.
Deferred Revenue. Deferred revenue and customer deposits were $6.1
million as of March 31, 2006, net of related receivables of $1.6
million, compared to $6.4 million as of December 31, 2005, net of
related receivables of $2.2 million. Loss from continuing
operations and net loss. For the first quarter 2006, GAAP loss from
continuing operations was $4.6 million, down from $7.0 million in
the first quarter 2005 and $5.7 million in the fourth quarter 2005.
GAAP loss from continuing operations for all periods presented
excludes results of Loudeye's Overpeer subsidiary, which ceased
operations in December 2005. -- For the first quarter 2006, GAAP
net loss (which includes results of Loudeye's discontinued Overpeer
operations) was $4.6 million, down from $7.5 million in the first
quarter 2005 and $10.5 million in the fourth quarter 2005. --
EBITDA loss from continuing operations totaled $3.7 million in the
first quarter 2006, down from $6.4 million in the first quarter
2005 and $4.9 million in the fourth quarter 2005. EBITDA loss from
continuing operations excludes charges related to depreciation and
amortization expense and interest income and expense. A
reconciliation of GAAP loss from continuing operations to EBITDA
loss from continuing operations is provided below. GAAP loss from
continuing operations, GAAP net loss and EBITDA loss from
continuing operations in the first quarter 2006 all include
stock-based compensation charges of $337,000 reflecting Loudeye's
adoption of Statement of Financial Accounting Standards No. 123R
effective January 1, 2006. Cash and Investments. Unrestricted and
restricted cash, cash equivalents and marketable securities were
$15.7 million as of March 31, 2006 compared to $10.9 million at
December 31, 2005. Manner of Financial Statement Presentation. The
financial statements contained in this press release include the
assets, liabilities and results of operations relating to Loudeye's
U.S.-based operating assets, which were divested in April 2006.
Beginning with Loudeye's second quarter 2006 financial statements,
the assets, liabilities and results of operations relating to these
divested assets will be presented as discontinued operations for
all periods presented. 2006 Business Highlights -- On April 30,
2006, Loudeye closed the sale of its substantially redundant and
declining U.S.-based operating assets for $11.0 million in cash.
This sale significantly reduces Loudeye's ongoing operating costs,
while improving its balance sheet for continued investment in the
growing markets it serves. -- In February 2006, Loudeye raised
$8.25 million in private placement financing. -- During early 2006,
digital music stores powered by Loudeye's European-based OD2
services scored high marks in independent reviews of online digital
music services in the U.K., France and Sweden. -- In January 2006,
Loudeye announced its "triple play" service offering, ushering in
an enhanced era of music accessibility. Through a single account,
whether at home, at the office or on the move, users will be able
to retrieve and play a copy of digital music they purchase. Central
to this offer is Internet-based interoperability among a "triple
play" of digital media devices including PC, mobile phone and set
top box. 2006 Operating Plan - Focus on Key Markets and Customers
Loudeye's 2006 operating plan focuses on the key markets and
customers, which are generating the most economic value and
opportunity for the company. After Loudeye's recent $11.0 million
sale of its U.S.-based operating assets, Loudeye is now singularly
focused on its award winning OD2 services based in Europe, where
Loudeye's services power over 75 retailers. The European-based
services contributed 98% of Loudeye's digital media services
revenue in 2005. Loudeye's OD2 services are the top seller of
Windows Media (WMA) formatted full track music downloads in Europe.
The assets divested on April 30, 2006 included Loudeye's U.S.-based
digital media store services platform and its encoding, samples,
hosting and Internet radio services. Loudeye's U.S.-based digital
media store services platform contributed only 2% of its 2005
digital media store services revenue, and its encoding services,
primarily derived from Loudeye's arrangement with EMI Music,
accounted for approximately 14% of its 2005 revenue. In February
2006, Loudeye announced that EMI Music was transitioning, during
the second quarter 2006, all encoding services for its music
content away from Loudeye to another service provider. Loudeye's
other divested digital media content services offerings accounted
for approximately 8% of its 2005 revenue. Forward-Looking Financial
Guidance As a result of Loudeye's sale of its U.S.-based operating
assets, year to date revenue to June 30, 2006 will include only
$5.8 million in revenue from the first quarter 2006, as $2.6
million of Loudeye's first quarter 2006 revenue related to divested
assets will be presented as discontinued operations. Full year 2006
revenue will only include revenue from Loudeye's European-based
digital media store services offerings. The revenue guidance that
Loudeye gave in February 2006 included forecasted 2006 revenue for
its now divested operations. While future results are subject to
changes and risks, Loudeye currently anticipates that revenue from
continuing operations for 2006 will be approximately $26 to $29
million. This would represent growth of 28% to 43% over the 2005
annual revenue from Loudeye's European-based digital media store
services offerings of $20.3 million. Regarding Loudeye's operating
expenses, cost reductions resulting from the sale of Loudeye's
US-based operating assets, in combination with other cost saving
initiatives, are expected to reduce the continuing operating cost
structure for the third and fourth quarters of 2006 by
approximately $2.0 million per quarter as compared to Q1 2006
levels. During May and June 2006, Loudeye also expects to realize
comparable monthly operating cost savings. Forward-looking
financial guidance reflects management's expectations as of the
date of this press release and is based upon limited available
information, including loss contingencies, which is dynamic and
subject to change. Results may be materially affected by many
factors including those described in the Forward-looking Statements
section below. First Quarter 2006 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 an audio question and answer session.
Information regarding the first quarter 2006 results webcast is as
follows: Date: Tuesday, May 9, 2006 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 30, 2006 at 5:00 p.m. EDT. About
Loudeye Corp. Loudeye is a worldwide leader in business-to-business
digital media store services. Loudeye combines innovative services
with a broad catalog of licensed digital music and award winning
digital media store services, 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 regarding Loudeye's
2006 operating plan and statements about projected 2006 revenue and
revenue growth, reductions in operating expenses, and first quarter
2006 revenue and loss. In particular, the financial results
announced today are unaudited and are subject to change. The words
or phrases "believes," "expects," "will," and "anticipates" and
similar words and phrases are intended to identify such
forward-looking statements. The forward-looking statements
contained in this press release are based on current estimates and
actual results may differ materially. Risks Loudeye faces include
the sufficiency of our cash reserves to execute on our operating
plan; competitive pressures in the market for mobile music services
and technical risks associated with Loudeye's mobile music service
offerings; inability to add new customers; customer concentration;
competition with other providers of business-to-business digital
media store services and associated pricing pressures; the
complexity of Loudeye's services and delivery networks; pressure on
our margins, in particular resulting from increasing wholesale
content rates; loss contingencies such as an adverse outcome in
litigation to which Loudeye is a party; adverse or uncertain legal
developments with respect to copyrights surrounding the creation
and distribution of digital content; potential loss of key
employees; 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 from continuing operations as presented in
this press release and management's audio presentation is a
non-GAAP financial measure that represents GAAP loss from
continuing operations excluding the effects of interest income and
expense and depreciation and amortization expense. EBITDA loss from
continuing operations as presented below may differ from non-GAAP
measures used by other companies and is not a measurement under
GAAP. Management believes the EBITDA loss from continuing
operations presentation enhances an overall understanding of
Loudeye's financial performance from continuing operations, and it
is used by management for that purpose. We believe EBITDA loss from
continuing operations and per share EBITDA loss from continuing
operations presented below provides useful information to investors
about our financial performance because it eliminates the effects
of period to period changes in depreciation and amortization,
interest income, and interest expense on our debt and capital lease
obligations, all of which we believe are not reflective of the
underlying performance of our ongoing operations. The adjustments
made in calculating EBITDA loss from continuing operations 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 loss from
continuing operations are also widely used by us and others in the
industry to evaluate and price potential acquisition candidates. We
believe EBITDA loss from continuing operations 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 loss from continuing operations 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 loss from continuing operations 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 BALANCE SHEETS March 31, December
31, 2006 2005 (in thousands) ASSETS Current assets: Cash, cash
equivalents and short-term marketable securities $14,347 $9,045
Accounts receivable, net 4,786 5,132 Prepaids and other current
assets 2,185 1,212 Restricted cash 1,335 1,810 Current assets of
discontinued operations 40 5 Total current assets 22,693 17,204
Property and equipment, net 4,153 4,686 Goodwill and intangible
assets, net 47,696 47,329 Other assets, net 500 189 Total assets
$75,042 $69,408 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $5,621 $3,701 Accrued compensation
and benefits 785 825 Accrued and other liabilities 6,961 6,531
Deposits and deferred revenue 5,635 6,061 Current portion of
long-term debt and capital lease obligations 750 1,000 Current
liabilities of discontinued operations 959 981 Total current
liabilities 20,711 19,099 Deposits and deferred revenue, net of
current portion 488 350 Common stock payable related to acquisition
321 321 Total liabilities 21,520 19,770 STOCKHOLDERS' EQUITY 53,522
49,638 Total liabilities and stockholders' equity $75,042 $69,408
LOUDEYE CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS Three Months Ended March 31, 2006 2005 (in
thousands, except per share data) REVENUE $8,400 $5,170 COST OF
REVENUE 6,412 5,466 Gross profit (loss) 1,988 (296) Gross profit
(loss) percent 24% -6% OPERATING EXPENSES: Sales and marketing
1,396 1,804 Research and development 1,976 1,595 General and
administrative 2,974 3,497 Amortization of intangibles 63 58
Stock-based compensation 323 54 Special charges (credits) -- (43)
Total operating expenses 6,732 6,965 LOSS FROM OPERATIONS (4,744)
(7,261) OTHER INCOME, net 103 294 Loss from continuing operations
(4,641) (6,967) Loss from discontinued operations -- (485) NET LOSS
$(4,641) $(7,452) Loss per share - basic and diluted: From
continuing operations $(0.04) $(0.07) From discontinued operations
-- -- LOSS PER SHARE - BASIC AND DILUTED $(0.04) $(0.07) Weighted
average shares outstanding 120,001 101,718 NON-GAAP INFORMATION:
Loss from continuing operations $(4,641) $(6,967) Adjustments to
reconcile GAAP net loss to EBITDA loss from continuing operations:
Depreciation and amortization expense 973 726 Interest (income)
expense (46) (134) EBITDA loss from continuing operations $(3,714)
$(6,375) Basic and diluted EBITDA loss per share from continuing
operations $(0.03) $(0.06) Weighted average shares outstanding
120,001 101,718 DATASOURCE: Loudeye Corp. CONTACT: media, Karen
DeMarco, , or Gil Lee, , both of mPRm, +1-323-933-3399 for Loudeye;
or investors, Chris Pollak of Loudeye, +1-206-832-4000, or Web
site: http://www.loudeye.com/
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