Roxio's Second Quarter Results Surpass Expectations

Strong Demand for Industry-Leading Digital Media SoftwareBranding Campaign Raises Consumer Awareness

Milpitas, California - (October 24, 2001) - Roxio, Inc., the Digital Media Company (Nasdaq: ROXI), today reported financial results for its second quarter ended September 30, 2001. Surpassing consensus analyst expectations, net revenue for the second quarter was $30.5 million, and pro forma net income was $2.0 million, or $0.12 per basic and diluted share, excluding non-cash charges. This compares with net revenue of $29.5 million and pro forma net income of $6.4 million or $0.38 per basic and diluted share for the second quarter of fiscal 2001.

Net revenue for the first six months of the current fiscal year was $67.5 million, as compared with net revenue of $58.1 million for the comparable period in the prior year. Pro forma net income excluding non-cash charges was $9.3 million or $0.55 per basic and $0.54 per diluted share for the first six months of the current fiscal year, as compared with pro forma net income of $13.3 million or $0.81 per basic and diluted share for the comparable period in the prior year.

"We are pleased to post another quarter of positive financial results," commented Chris Gorog, President and Chief Executive Officer of Roxio. "We saw solid consumer demand for our industry-leading CD-burning products despite a negative overall economic climate, and the Roxio brand continues to gain awareness with consumers as a result of our national television and print branding campaign. Our results reflect the strength of Roxio's flagship product, Easy CD Creator, with both OEM's and through our retail channels, along with increased demand for our Toast and GoBack products. Going forward we see an opportunity to increase Roxio's installed base and expand our retail upgrade business as Roxio provides the CD-burning technology for Microsoft's Windows XP operating system. We are also excited about the progress on the development of our new DVD software, which we expect to release to the general consumer market in early 2002."

Reported net loss for the second quarter of fiscal 2002 was $1.0 million or $0.06 per basic and diluted share including non-cash charges related to the amortization of goodwill and deferred stock-based compensation. This compares with reported net income of $1.9 million or $0.11 per basic and diluted share for the second quarter of fiscal 2001.

Reported net income for the first six months of fiscal 2002 was $1.4 million or $0.08 per basic and diluted share including non-cash charges. This compares with reported net income of $4.3 million or $0.26 per basic and diluted share for the first six months of fiscal 2001. For a reconciliation of reported earnings to pro forma earnings, see table below.

Commenting on the strength of Roxio's balance sheet and current business outlook, Chief Financial Officer Elliot Carpenter said, "Our balance sheet is healthy as we exit the quarter with $51 million in cash, $58 million in working capital and very little debt. While most indicators point to negative trends in the PC market overall, our consumer segment has been more resistant to the impacts of the economic downturn and we expect increased demand from consumers for our products during the next quarter. We believe Roxio will see solid results on higher revenues through the holiday season, and we reiterate our previous guidance for fiscal 2002 of $135 million in revenue and $24 million in pretax pro forma operating income."

Corporate Highlights

Roxio recently:

  • Announced a worldwide licensing agreement with Symantec for the inclusion of Roxio's GoBack 3 Personal Edition in Symantec's Norton SystemWorks 2002. The agreement also provides an upgrade path to GoBack 3 Deluxe.
  • Launched a volume licensing program, RoxioLicense Now! for GoBack3 Deluxe, making it easier for corporations, educational institutions and other organizations to acquire volume licenses through a single media pack, with the rights to install the physical goods on a number of licensed seats within a given organization.
  • Announced with Virgin Records, as part of its strategic alliance with EMI, a promotion to enable consumers to download and burn from MTV.com and VH1.com the soon-to-be-released Lenny Kravitz music video, "Dig In."
  • Strengthened its senior management team with the appointment of Philippe Cassereau as Vice President of Engineering. The position was formerly held by Samir Patel, who now serves in the newly created position of Vice President OEM Marketing and Product Management. Additionally, Chris Gorog was appointed Chairman of the Board and Elliot Carpenter was promoted to Chief Financial Officer.
  • Received the CNET Editors Choice award for its CD-recording software Toast 5 Titanium and its system recovery product GoBack 3 Deluxe.

Safe Harbor Statement

The matters discussed relating to Roxio in this press release, in particular matters related to Roxio's OEM relationships, include forward-looking statements that are subject to certain risks and uncertainties, including delays in product development, competition in the software industry, and failure to maintain OEM relationships, that could cause actual results to differ materially from those projected. Additional information on these and other factors are contained in Roxio's reports filed with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 10-K as filed with the SEC on July 1, 2002 and Quarterly Report on Form 10-Q as filed with the SEC on November 13, 2002, copies of which are available at the website maintained by the SEC at http://www.sec.gov. Roxio assumes no obligation to update the forward-looking statements included in this press release.

About Roxio

Roxio, a division of Sonic Solutions, develops and markets the best-selling digital media software in the world. Roxio offers award-winning software products for CD/DVD burning, photo editing and video editing and has an installed base of over 150 million users. Roxio distributes its products globally through strategic partnerships with major hardware manufacturers, through leading retailers, through Internet partnerships and through direct sales at www.roxio.com. Roxio's parent company, Sonic Solutions (NASDAQ: SNIC; http://www.sonic.com) is the leader in digital media software and provides a broad range of software tools and applications for creative professionals, business and home users and technology partners. Sonic's products range from professional DVD authoring systems and interactive content delivery technologies that are used to produce the majority of Hollywood movies released on DVD, to the award-winning Roxio- and Sonic-branded CD and DVD creation, playback and backup applications that have become the premiere solutions for consumers and business users worldwide. Sonic's AuthorScript® is the de facto standard for CD and DVD burning and formatting and has been licensed by major software and hardware manufacturers, including Adobe, Broadcom, Microsoft, Scientific-Atlanta, Sony, and many others. Sonic Solutions is headquartered in Marin County, California.

Sonic, the Sonic logo, Sonic Solutions, Roxio, MyDVD, CineMagic, Plug & Burn, LiveShare, Roxio Easy Media Creator, and AuthorScript are trademarks or registered trademarks of Sonic Solutions or its subsidiaries in the United States and/or other countries. Dolby is a trademark of Dolby Laboratories. All other company or product names are trademarks of their respective owners and, in some cases, are used by Sonic Solutions under license. Specifications, pricing and delivery schedules are subject to change without notice.