Total Revenue Grows 93% Year-Over-Year, Driven by Strong Growth in
Digital Media Store Services Revenue SEATTLE, Feb. 23
/PRNewswire-FirstCall/ -- Loudeye Corp. (NASDAQ:LOUD), a worldwide
leader in business-to-business digital media solutions, today
announced financial results for the fourth quarter 2005 and full
year 2005. Fourth Quarter 2005 and Full Year 2005 Financial
Highlights Revenue. Revenue was $8.8 million in the fourth quarter
2005 compared with revenue of $5.5 million in the fourth quarter
2004, an increase of 61%. Revenue for the year ended December 31,
2005 was $27.0 million compared with revenue of $14.0 million in
2004, an increase of 93%. Fourth quarter 2005 revenue increased
approximately 35% compared to $6.5 million in the third quarter
2005. -- Digital media store services revenue represented $7.0
million of total revenue, or 80%, an increase of approximately 90%
from $3.7 million, or 68% of total revenue, in the fourth quarter
2004. Fourth quarter 2005 digital media store services revenue
increased approximately 46% compared to $4.8 million in the third
quarter 2005. -- Digital media store services revenue for the year
ended December 31, 2005 represented $20.9 million of total revenue,
or 77%, an increase of more than 250% from $5.9 million, or 42% of
total revenue, in 2004. Deferred Revenue. Deferred revenue was $6.4
million as of December 31, 2005, net of related receivables of
approximately $2.2 million, compared to $6.5 million as of
September 30, 2005, net of related receivables of $2.9 million.
Loss from continuing operations and net loss. For the fourth
quarter 2005, GAAP loss from continuing operations was $5.7
million, compared to $5.6 million in the fourth quarter 2004 and
down from $7.2 million in the third quarter 2005. For the year
ended December 31, 2005, GAAP loss from continuing operations was
$25.6 million, compared to $16.0 million in 2004. Loss from
continuing operations for all periods presented excludes results of
Loudeye's Overpeer subsidiary which ceased operations in December
2005. -- For the fourth quarter 2005, GAAP net loss was $10.5
million, compared to $5.6 million in the fourth quarter 2004 and
$8.5 million in the third quarter 2005. -- EBITDA loss from
continuing operations totaled $4.9 million in both the fourth
quarter of 2005 and 2004, and was down from $6.3 million in the
third 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. Cash and Investments. Unrestricted and restricted
cash, cash equivalents and marketable securities were approximately
$10.9 million as of December 31, 2005 compared to $16.6 million at
September 30, 2005. -- On February 22, 2006, we closed a private
placement of common stock and warrants raising $8.25 million, or
approximately $7.6 million in net proceeds. This announcement does
not constitute an offer to sell or a solicitation of an offer to
buy shares of Loudeye's common stock. 2006 Operating Plan -- Focus
on Key Markets and Customers Loudeye's 2006 operating plan will
focus on the markets and customers which are generating the most
economic value and opportunity for the company. -- Focus on digital
media services offerings in Europe where Loudeye's services have a
significant installed customer base. Loudeye's digital media store
service operations will be centralized at its European headquarters
in the United Kingdom. -- Invest in our mobile music platform and
service offerings. -- Continue to operate digital media content
services located at Loudeye's Seattle, Washington headquarters,
including encoding and samples services. Forward-Looking Financial
Guidance While future results are subject to change and risks,
Loudeye expects revenue for the full year 2006 will be
approximately $35.0 to $40.0 million. Digital media store services
revenue is expected to represent more than 75% of revenue in 2006.
Loudeye expects that first quarter 2006 revenue will be
approximately $7.5 million to $8.0 million. This is less than $8.8
million in fourth quarter 2005 revenue, which included
approximately $1.3 million in promotional credit revenue from one
internet service provider in Europe that had been included in
deferred revenue as of September 30, 2005. "We are implementing our
plans to improve our margins, reduce our cost structure and improve
efficiency," said Chris Pollak, Loudeye's chief financial officer.
"We believe that our financial resources, including proceeds from
our recent capital raise, will be sufficient to meet our
anticipated cash needs for working capital or other purposes for at
least the next twelve months." Forward-looking financial guidance
reflects management's expectations as of the date of this 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. Fourth Quarter and
Full Year 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 an audio question and answer session. Information regarding
the fourth quarter and full year 2005 results webcast is as
follows: Date: Thursday, February 23, 2006 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 9, 2006 at 5:00 p.m. EST.
About Loudeye Corp. Loudeye is a worldwide leader in
business-to-business digital media solutions. Loudeye combines
innovative services with one of the world's largest music archives,
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
regarding Loudeye's 2006 operating plan and statements about
expected revenue, revenue mix and loss for the fourth quarter 2005,
first quarter 2006 and the years 2005 and 2006, growth rates, cost
reductions, technology platform migration, and other matters. 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 potential effects of
Loudeye's restructuring on our business and operations including
potential loss of customers; potential effect on our cash reserves
of payments, if any, that we could owe to investors in our February
2006 financing transaction in the event we are delayed in
registering the shares sold to the investors or if we effect a
reverse stock split and our stock price declines below certain
thresholds; loss contingencies such as an adverse outcome in
litigation to which Loudeye is a party; inability to add new
customers, and inability to continue to provide services to
existing customers on discontinued technology platforms; customer
concentration, especially in our European digital media store
business and our digital media content encoding services; potential
loss of key employees; competitive pressures in the market for
mobile music services and customer concentration and technical
risks associated with Loudeye's mobile music service offerings;
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; adverse or uncertain legal developments with respect
to copyrights surrounding the creation and distribution of digital
content; 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. 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. 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 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 STATEMENTS OF OPERATIONS Three
Months Ended Years Ended December 31, December 31, 2005 2004 2005
2004 (in thousands, except per share data) REVENUE $8,833 $5,472
$27,041 $14,033 COST OF REVENUE 7,810 4,271 25,082 10,336 Gross
profit 1,023 1,201 1,959 3,697 Gross profit percent 12% 22% 7% 26%
OPERATING EXPENSES: Sales and marketing 1,502 1,431 6,412 4,200
Research and development 2,254 1,252 8,404 3,726 General and
administrative 2,954 3,103 13,057 10,658 Amortization of
intangibles 62 2 235 92 Stock-based compensation 69 13 250 199
Special charges (credits) -- 12 (43) 312 Total operating expenses
6,841 5,813 28,315 19,187 LOSS FROM OPERATIONS (5,818) (4,612)
(26,356) (15,490) OTHER INCOME (EXPENSE), net 120 (955) 778 (507)
Loss from continuing operations (5,698) (5,567) (25,578) (15,997)
Loss from discontinued operations (4,816) (71) (7,783) (400) NET
LOSS $(10,514) $(5,638) $(33,361)$(16,397) Loss per share - basic
and diluted: From continuing operations $(0.05) $(0.07) $(0.24)
$(0.22) From discontinued operations (0.04) -- (0.07) -- LOSS PER
SHARE - BASIC AND DILUTED $(0.09) $(0.07) $(0.31) $(0.22) Weighted
average shares outstanding 110,411 81,848 107,652 73,845 NON-GAAP
INFORMATION: Loss from continuing operations $(5,698) $(5,567)
$(25,578)$(15,997) Adjustments to reconcile GAAP net loss to EBITDA
loss from continuing operations: Depreciation and amortization
expense 873 674 3,334 2,308 Interest (income) expense (73) (27)
(465) (176) EBITDA loss from continuing operations $(4,898)
$(4,920) $(22,709)$(13,865) Basic and diluted EBITDA loss per share
from continuing operations $(0.04) $(0.06) $(0.21) $(0.19) Weighted
average shares outstanding 110,411 81,848 107,652 73,845 LOUDEYE
CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS December 31, December 31, 2005 2004 (in thousands) ASSETS
Current assets: Cash and short-term marketable securities $9,045
$37,994 Accounts receivable, net 5,132 4,847 Prepaids and other
current assets 1,212 1,226 Restricted cash 1,810 -- Current assets
of discontinued operations 5 1,444 Total current assets 17,204
45,511 Long-term marketable securities -- 2,288 Restricted cash --
2,393 Property and equipment, net 4,686 4,129 Goodwill and
intangible assets, net 47,329 43,611 Other assets, net 189 431
Assets of discontinued operations -- 5,345 Total assets $69,408
$103,708 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $3,701 $3,443 Accrued compensation and benefits
825 923 Accrued and other liabilities 6,531 4,769 Accrued special
charges -- 403 Accrued acquisition consideration -- 15,924 Deposits
and deferred revenue 6,061 4,343 Current portion of long-term debt
and capital lease obligations 1,000 1,135 Current liabilities of
discontinued operations 981 782 Total current liabilities 19,099
31,722 Deposits and deferred revenue, net of current portion 350
1,343 Common stock payable related to acquisition 321 3,193
Long-term debt and capital lease obligations, net of current
portion -- 1,000 Total liabilities 19,770 37,258 STOCKHOLDERS'
EQUITY 49,638 66,450 Total liabilities and stockholders' equity
$69,408 $103,708 First Call Analyst: FCMN Contact: glee@mprm.com
DATASOURCE: Loudeye Corp. CONTACT: Media/Public Relations: Karen
DeMarco of mPRm, +1-323-933-3399 or , for Loudeye; or Investor
relations: Chris Pollak of Loudeye, +1-206-832-4000 or Web site:
http://www.loudeye.com/
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