Roxio Announces First Quarter Results

Company to Maintain Annual Profitability during Downturn

Santa Clara, California - (July 24, 2002) - Roxio, Inc. (Nasdaq: ROXI), The Digital Media Company®, provider of the best selling digital media software in the world, today reported financial results for its first quarter ended June 30, 2002. Net revenue for the first quarter was $32.3 million, and pro forma net income was $642,000 or $0.03 per basic and diluted share, excluding non-cash charges related to the amortization of intangible assets and deferred stock-based compensation. Both the top and bottom line results are above the Company's revised guidance provided on June 25, 2002 and compare with net revenue of $37.0 million and pro forma net income of $7.2 million or $0.44 per basic and $0.43 per diluted share for the first quarter of the prior fiscal year.

Chris Gorog, Roxio's President and Chief Executive Officer stated, "The significant downturn in PC and CD recorder shipments as well as overall softness in the retail software sector globally has affected our results. Analysts suggest that these factors will continue to impact our industry for the near-term, so we are taking actions to better align our cost structure with current economic realities and will reduce our fiscal 2003 spending by approximately $15 million. While we are implementing cost-cutting measures throughout the company, we will continue to maintain all necessary resources to support the growth we anticipate in the second half of our fiscal year resulting from several major product releases. Despite the current market downturn, our business fundamentals and balance sheet remain healthy and we are very excited about our upcoming product launches."

The reported net loss for the first quarter of fiscal 2003 was $1.2 million, or $0.06 per basic and diluted share including non-cash charges related to the amortization of intangible assets and deferred stock-based compensation. This compares with reported net income of $2.4 million or $0.14 per basic and diluted share for the first quarter of fiscal 2002.

Elliot Carpenter, Roxio's Chief Financial Officer, commented, "We are revising our guidance in response to reduced industry forecasts for PC and software sales. Specifically, we are assuming negative PC unit growth for calendar 2002 and lower than normal seasonal retail growth. On the positive side, we believe our planned new product releases will drive growth in the second half of our fiscal year, and we will continue our strategy towards a more consumer oriented model, thus building in less economic dependence on income directly from our OEM partners. In light of the current market environment we are implementing changes to our cost structure, which should have a meaningful impact beginning in our third fiscal quarter. Based on these assumptions, we expect revenues for our seasonally soft second fiscal quarter to be approximately $27 million and to incur a proforma net loss of up to $0.10 per diluted share and a reported net loss of up to $0.15 per diluted share. For fiscal year 2003 we expect revenues to be in the range of $130 to $140 million and to generate proforma net income per diluted share in the range of $0.30 to $0.40 and reported net income of $0.06 to $0.16 per diluted share. We would expect any signs of recovery in the PC and retail software sales sectors to result in upside to our current guidance."

Recent Corporate Highlights Roxio recently:

  • Debuted VideoWave Movie Creator™ at DV Expo in New York, an automated, yet powerful way for consumers to edit video, burn it to DVD or CD, and share with family and friends. The product, which has been favorably received by the press, is currently in production and will be available on retail shelves in early August, in time for the back-to-school and holiday shopping seasons.
  • Announced that Yamaha Electronics Corporation has selected Roxio's Toast as its worldwide CD-Recording software bundle for two external recorders--the CRW-F1ZSX (SCSI) and the Dual interface CRW-F1ZDX (FireWire/USB 2.0), both developed specifically for the Macintosh user.
  • Partnered with SnapFish, a leading online photo service, to provide a co-branded service that allows customers to upload and store digital photos, create online photo albums, and order prints and special products like greeting cards. Roxio's partnership with SnapFish is the latest addition to its growing roster of content and service providers, which include pressplay and Audible.com.

Reconciliation of Reported Earnings to Pro Forma Earnings:

Safe Harbor Statement

Except for historical information, the matters discussed in this press release, in particular matters related to demand for Roxio's Toast product, are forward-looking statements that are subject to certain risks and uncertainties such as competition, general economic factors and product failures 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 June 29, 2001, and in Roxio's Quarterly Report on Form 10-Q as filed with the SEC on February 14, 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.