Roxio Reports Strong Third Quarter Earnings
Revenues Up 19% Sequentially
Milpitas, California - (January 23, 2002) - Roxio, Inc., the Digital Media Company (Nasdaq: ROXI), today reported financial results for its third quarter ended December 31, 2001. Net revenue for the third quarter was $36.2 million, and pro forma net income was $3.4 million, or $0.20 per basic and $0.19 per diluted share, excluding non-cash charges. This compares with net revenue of $27.5 million and pro forma net income of $5.9 million or $0.36 per basic and diluted share for the third quarter of the prior fiscal year.
Net revenue for the nine month period ended December 31, 2001 was $103.6 million, as compared with net revenue of $85.6 million for the comparable period in the prior year. Pro forma net income excluding non-cash charges was $12.7 million or $0.76 per basic and $0.75 per diluted share for the first nine months of the current fiscal year, as compared with pro forma net income of $19.2 million or $1.17 per basic and diluted share for the comparable period in the prior year.
"The third quarter marked another solid financial performance for Roxio with revenues up 19% from the previous quarter, reflecting strong growth in retail sales," commented Chris Gorog, President and Chief Executive Officer of Roxio. "We believe this increase was driven by inherent strong demand for our award-winning products, together with support from our branding and advertising initiatives
and the launch of Windows XP. We also succeeded this quarter in
creating a key strategic alliance with content owners by becoming
the CD burning and marketing partner of pressplay, the music subscription
service offered by Universal, Sony and EMI. Additionally, we expanded
on our relationship with Real Networks by providing the burn engine
for Real Network's new 'RealOne' media player. Roxio continues to
expand its business in the digital media space, and upon the conclusion
of our pending acquisition of MGI Software, our product line will
include the top-selling consumer software in CD recording, photo
editing and video editing."
Reported net income for the third quarter of fiscal 2002 was $0.6 million or $0.04 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 $1.2 million or $0.07 per basic and diluted share for the third quarter of fiscal 2001.
Reported net income for the nine months ended December 31, 2001 was $2.0 million or $0.12 per basic and diluted share including non-cash charges. This compares with reported net income of $5.5 million or $0.33 per basic and diluted share for the first nine months of fiscal 2001. For a reconciliation of reported earnings to pro forma earnings, see table below.
Elliot Carpenter, Roxio's Chief Financial Officer, said, "Revenues for the third fiscal quarter were greater than anticipated as we experienced strong demand from consumers for our flagship CD burning products during the holiday season. In addition, we continued to
strengthen our balance sheet, with a reported cash position of $60.6
million and working capital of $60.9 million. We are reiterating
our revenue guidance of $33.0 million for the fourth quarter, which
when combined with our nine months' performance, raises our previous
year-end target to $136.6 million."
Recent Corporate Highlights
Roxio recently:
- Agreed to acquire all of the outstanding shares of MGI Software Corp. The proposed combination will result in the creation of one of the world's largest consumer digital media software companies with the best-selling products in CD recording, photo editing, video editing and system recovery. The acquisition has received interim court approval by the Superior Court of Justice of Ontario and a special meeting of MGI shareholders has been set for January 28, 2002.
- Became the provider of CD recording capabilities for pressplay's music subscription service, as well as a pressplay affiliate, offering consumers digital music on 'Roxio pressplay'. Pressplay
includes music from some of the largest record companies including
EMI Recorded Music, Sony Music Entertainment and Universal Music
Group and is the first major music subscription service to offer
CD burning in recognition of the importance of portability to
the consumer.
-
Expanded its relationship with RealNetworks® as the provider
of the CD recording technology for the new RealOne Player, the
all-in-one digital media player, which integrates functions of
RealPlayer and RealJukebox, a media browser and content discovery
window, and a significantly enhanced subscription service.
-
Established an enterprise software team led by Kamal Arafeh
in the new position of General Manager of Enterprise Products.
The group is charged with addressing a significant new market
opportunity through Roxio's new Volume Licensing program, which
allows corporate customers to purchase and deploy Easy CD Creator
and GoBack across a number of seats in their organizations.
-
Appointed Vernon E. Altman, a Director of Bain & Company,
to its board of directors, expanding the number of board members
to five.
-
Signed a multi-year license that provides Gracenote CDDB as
the exclusive CD recognition service to current and future Roxio
customers through Roxio's current and future CD-recording products.
Concurrent with the licensing agreement, Gracenote and Roxio settled
all litigation between the two companies in a sealed agreement.
Reconciliation of Reported Earnings to Pro Forma Earnings:
ROXIO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| (In
thousands, except per share data, unaudited) |
|
|
|
|
Three
Months |
|
Nine
Months |
|
Ended
December 31, |
|
Ended
December 31, |
|
2001 |
|
2000 |
|
2001 |
|
2000 |
|
|
|
|
|
|
| Net
revenues |
$
36,164 |
|
$
27,496 |
|
$
103,627 |
|
$
85,568 |
| Cost
of revenues (excludes stock-based |
|
|
|
|
|
|
|
| compensation
charges of $14, $0, |
|
|
|
|
|
|
|
| $89
and $0, respectively) |
8,168 |
|
4,488 |
|
21,070 |
|
16,840 |
| Gross
profit |
27,996 |
|
23,008 |
|
82,557 |
|
68,728 |
|
|
|
|
|
| Operating
expenses: |
|
|
|
| Research
and development (excludes stock-based |
|
|
|
| compensation
charges of $208, $698, |
|
|
|
| $1,307
and $1,994, respectively) |
4,763 |
|
3,671 |
|
15,958 |
|
13,052 |
| Sales
and marketing (excludes stock-based |
|
|
|
| compensation
charges of $807, $0, |
|
|
|
| $2,964
and $0, respectively) |
13,510 |
|
8,813 |
|
35,149 |
|
23,682 |
| General
and administrative (excludes stock-based |
|
|
|
| compensation
charges of $309, $177, |
|
|
|
| $2,024
and $177, respectively.) |
4,681 |
|
4,145 |
|
13,149 |
|
9,718 |
| Amortization
of intangible assets |
1,433 |
|
3,861 |
|
4,297 |
|
11,581 |
| Stock-based
compensation charges |
1,338 |
|
875 |
|
6,384 |
|
2,171 |
| Total
operating expenses |
25,725 |
|
21,365 |
|
74,937 |
|
60,204 |
|
|
|
|
| Income
from operations |
2,271 |
|
1,643 |
|
7,620 |
|
8,524 |
| Other
income, net |
278 |
|
- |
|
993 |
|
- |
|
|
|
|
| Income
before provision for income taxes |
2,549 |
|
1,643 |
|
8,613 |
|
8,524 |
| Provision
for income tax |
(1,910) |
|
(472) |
|
(6,604) |
|
(3,033) |
|
|
|
|
| Net
income |
$
639 |
|
$
1,171 |
|
$
2,009 |
|
$
5,491 |
|
|
|
|
| Earnings
per share: |
|
|
|
| Basic |
$
0.04 |
|
$
0.07 |
|
$
0.12 |
|
$
0.33 |
| Diluted |
$
0.04 |
|
$
0.07 |
|
$
0.12 |
|
$
0.33 |
|
|
|
|
| Weighted
average shares used in computing basic and |
|
|
|
| diluted
net income per share |
|
|
|
| Basic |
16,883 |
|
16,500 |
|
16,766 |
|
16,500 |
| Diluted |
17,591 |
|
16,500 |
|
16,945 |
|
16,500 |
|
|
|
|
|
|
|
|
ROXIO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| (In
thousands, except per share data, unaudited) |
|
|
December
31, |
|
March
31, |
|
|
2001 |
|
2001 |
|
|
| ASSETS |
|
| Current
assets: |
|
| Cash |
$
60,593 |
|
$
- |
|
| Accounts
receivable, net of allowance for doubtful accounts of |
|
|
|
|
|
$918 and $155, respectively |
19,201 |
|
31,525 |
|
| Inventories |
191 |
|
1,211 |
|
| Prepaid
expenses and other current assets |
3,503 |
|
2,354 |
|
| Deferred
income taxes |
3,482 |
|
3,133 |
|
| Total
current assets |
86,970 |
|
38,223 |
|
| Property
and equipment, net |
3,175 |
|
1,426 |
|
| Goodwill,
net |
16,255 |
|
16,255 |
|
| Other
intangibles, net |
5,758 |
|
10,268 |
|
| Other
assets |
533 |
|
- |
|
|
|
|
|
|
| Total
assets |
$
112,691 |
|
$
66,172 |
|
|
|
|
|
|
|
|
| LIABILITIES
AND OWNER'S NET INVESTMENT / |
|
| STOCKHOLDERS'
EQUITY |
|
| Current
liabilities: |
|
| Accounts
payable |
$
12,566 |
|
$
7,721 |
|
| Income
taxes payable |
1,654 |
|
9,508 |
|
| Accrued
liabilities |
11,372 |
|
6,075 |
|
| Current
portion of long term debt |
443 |
|
- |
|
| Total
current liabilities |
26,035 |
|
23,304 |
|
|
|
| Long
term liabilities: |
|
| Long
term debt |
891 |
|
- |
|
| Deferred
income taxes |
1,407 |
|
2,251 |
|
|
|
| Total
liabilities |
28,333 |
|
25,555 |
|
|
|
| Owner's
net investment / stockholders' equity: |
|
| Common
stock, $0.001 par value; 100,000 shares authorized; |
|
|
16,928 and
16,500 issued and outstanding |
17 |
|
17 |
|
| Additional
paid-in capital |
93,875 |
|
16 |
|
| Deferred
stock-based compensation |
(8,462) |
|
- |
|
| Accumulated
deficit |
(1,071) |
|
- |
|
| Accumulated
other comprehensive income (loss) |
(1) |
|
402 |
|
| Owner's
net investment |
- |
|
40,182 |
|
| Total
owner's net investment / stockholder's equity |
84,358 |
|
40,617 |
|
|
|
|
|
|
| Total
liabilities and owner's net investment / stockholders' equity |
$
112,691 |
|
$
66,172 |
|
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.