Roxio Reports First Quarter Results
The Digital Media Company Confirms Launch Plans for Napster
Santa Clara, California - (July 31, 2003) - 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 fiscal first quarter ended June 30, 2003. Net revenue for the first quarter of fiscal 2004 was $24.2 million compared to $32.3 million in the first quarter of the prior fiscal year. Roxio's reported net loss for the first quarter was $370,000, or $0.02 per basic and diluted share, as compared to a net loss of $1.2 million, or $0.06 per basic and diluted share, in the first quarter of the prior fiscal year. Shares used for computing basic and fully diluted earnings per share were approximately 21.9 million for the first fiscal quarter ended June 30, 2003 and 19.5 million shares for the first quarter of the prior fiscal year.
"First quarter sales results for our software division are in line with our estimates. Easy CD & DVD Creator 6.0 continues to outsell its nearest retail competitors by a substantial margin and maintain its leadership in CD and DVD recording," said Chris Gorog, Roxio's Chairman and CEO.
"The development of Napster 2.0 is on track, allowing us to launch the service in time for Christmas. We believe that the new,
legal version of Napster will be the richest, most complete music experience available on the Internet and that it will offer
consumers, for the first time, a choice between a la carte downloads and a monthly subscription program," concluded Mr. Gorog.
For the quarter, Roxio's digital media software division recorded revenues of $23.4 million and pretax income of $6.4 million.
Pretax income includes a gain on the sale of the GoBack product line of approximately $10.6 million. Revenues for the company's
online music division totaled approximately $780,000 and pretax loss was $4.0 million. Combined pretax income for the two
divisions was approximately $2.4 million before a tax provision of approximately $2.7 million.
Elliot Carpenter, Roxio's chief financial officer, commented, "Our results of operations and balance sheet reflect significant
transactions during the quarter including our recent equity financing, the purchase of Pressplay and gains from the sale of our
GoBack product line to Symantec. We exited the quarter with approximately $63 million in cash and short-term investments, a more
focused consumer software product line and an expanded growth opportunity through Napster. Near-term, our focus is on managing
our software business for profitability and launching our online music business. The combination of our earlier launch date for
Napster and softness in retail software sales lead us to fiscal second quarter guidance of $21.4 million in revenue and a net
loss per fully diluted share of $0.56, assuming approximately 27.4 million shares outstanding."
Recent Corporate Highlights
- Roxio completed the operational integration of Pressplay and will launch Napster 2.0 by the upcoming holiday season.
-
Roxio added Larry Kenswil, current president of Universal Music Group's eLabs new media and technologies division, to its
board of directors.
-
Memorex began offering Roxio's complete line of digital media software products with the new Memorex Dual Format DVD Recorder.
Roxio's Easy CD & DVD Creator™ 6 Basic - DVD Edition, PhotoSuite(R) 5 SE, VideoWave Movie Creator™, and
DVDMax™ Player software are bundled with the Memorex Dual-X drive, which is available now for a suggested retail price
of $329.99.
-
I/OMagic Corporation signed on to include Easy CD & DVD™ Creator 6 Basic and Roxio DVDMax™ software in the new
I/OMagic "MediaStation Combo" drive.
-
Pacific Digital Corporation began bundling Roxio's Easy CD & DVD™ Creator 6 Basic with its new DVD burners, starting
with the Pacific Digital 4x DVD+R/+RW Burner for PCs.
-
In June, Roxio completed a private placement of 4,000,000 shares of its Common Stock at $5.50 per share with gross proceeds of
$22 million. The offering expands Roxio's stockholder base and adds to Roxio's working capital as it continues to expand its
activities in the digital media sector.
-
Roxio's digital media suite was recently honored by PC World with two 2003 World Class Awards for Best CD Mastering Software
and Best DVD Mastering Software.
Earnings Call Information
The Roxio first quarter teleconference and webcast is scheduled to begin at 1:30 p.m., Pacific Time, on Thursday, July 31, 2003.
To participate on the live call, analysts and investors should dial 800-216-6962 at least ten minutes prior to the call and
reference conference ID: 1622569. Roxio will also offer a live and archived webcast of the conference call, accessible from the
"Investor Relations" section of the company's Web site at http://investor.roxio.com.
A telephonic replay of the conference call will also be available for 48 hours by dialing 800-642-1687 and entering the passcode:
1622569.
Safe Harbor Statement
Except for historical information, the matters discussed in this press release, in particular matters related to Roxio's future
revenue, net income (loss), cash flow, the re-launch of Napster, OEM relationships, relationships with content providers, and
product development, are forward-looking statements that are subject to certain risks and uncertainties such as decreased demand
for our products, increased competition, failure to develop new products or improvements to existing products, general economic
conditions and third party claims, 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 30, 2003, 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.
ROXIO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
June 30, March 31,
2003 2003
ASSETS
Current assets:
Cash and cash equivalents $46,596 $36,820
Short-term investments 16,694 16,677
Accounts receivable, net of allowance
for doubtful accounts of
$945 at June 30, 2003 and $850 at
March 31, 2003 9,504 12,637
Inventories 196 460
Prepaid expenses and other current assets 7,623 3,366
Deferred income taxes 2,337 4,709
Total current assets 82,950 74,669
Long-term investment 3,000 3,059
Property and equipment, net 13,561 9,058
Goodwill, net 89,006 55,247
Other intangibles assets, net 9,353 10,314
Other assets 2,425 589
Total assets $200,295 $152,936
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,023 $11,952
Income taxes payable 226 1,353
Accrued liabilities 22,485 16,153
Deferred revenues 1,829 --
Current portion of long-term debt 620 606
Total current liabilities 33,183 30,064
Long term liabilities:
Long term debt 5,326 5,490
Deferred income taxes 1,014 1,190
Other liabilities 295 --
Total liabilities 39,818 36,744
Stockholders' equity:
Preferred stock, $0.001 par value;
Authorized: 10,000 shares;
Issued and outstanding: none at
June 30, 2003 and at March 31, 2003 -- --
Common stock, $0.001 par value;
Authorized: 100,000 shares;
Issued and outstanding: 27,488
shares at June 30, 2003 and
19,574 shares at March 31, 2003 27 20
Additional paid-in capital 171,492 127,804
Deferred stock-based compensation (2,367) (2,886)
Accumulated deficit (11,045) (10,675)
Accumulated other comprehensive income 2,370 1,929
Total stockholders' equity 160,477 116,192
Total liabilities and stockholders' equity $200,295 $152,936
ROXIO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months
Ended June 30,
2003 2002
Net revenues $24,176 $32,303
Cost of revenues (excluding stock-based
compensation charges of $10 and $13
respectively) 7,874 8,450
Gross profit 16,302 23,853
Operating expenses:
Research and development (excluding
stock-based compensation charges of
$151 and $191 respectively) 7,318 5,464
Sales and marketing (excluding
stock-based compensation charges of
$135 and $(358) respectively) 9,850 11,934
General and administrative
(excluding stock-based compensation
charges of $223 and $283 respectively) 5,356 5,665
Amortization of intangible assets 1,204 2,064
Stock-based compensation charges 519 129
Total operating expenses 24,247 25,256
Loss from operations (7,945) (1,403)
Other income, net 10,297 127
Income (loss) before provision
for income taxes 2,352 (1,276)
Provision (benefit) for income taxes 2,722 (56)
Net loss (370) (1,220)
Other comprehensive gain, net of tax:
Foreign currency translation adjustment 487 1,257
Unrealized gain (loss) on short-term
investments (46) 23
Comprehensive income $71 $60
Earnings per share:
Basic $(0.02) $(0.06)
Diluted $(0.02) $(0.06)
Weighted average shares used in
computing basic and diluted
net loss per share
Basic 21,864 19,506
Diluted 21,864 19,506
ROXIO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
June 30,
2003 2002
Cash flows from operating activities:
Net loss $(370) (1,220)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,347 2,721
Stock-based compensation charges 519 129
Provision for doubtful accounts 38 208
Loss on retirement of property and equipment 320 --
Gain on sale of GoBack assets (10,592) --
Deferred income taxes 2,372 (267)
Change in operating assets and liabilities:
Accounts receivable 2,820 5,210
Inventories 200 126
Prepaid expenses and other current assets 343 (366)
Other long term assets (228) --
Accounts payable (4,583) (1,599)
Income taxes payable (1,052) (755)
Accrued liabilities (486) (4,732)
Deferred revenues 1,827 --
Other liabilities 295 --
Net cash used in operating activities (6,230) (545)
Cash flows from investing activities:
Purchases of property and equipment (1,114) (2,598)
Proceeds from sale of property and
equipment 1 --
Proceeds from sale of GoBack assets 10,250 --
Purchases of other intangible assets (63) --
Purchases of short-term investments (2,792) (21,201)
Proceeds from sale of short-term
investments 350 --
Maturities of short-term investments 2,390 295
Acquisition of Pressplay, net of
cash acquired (13,473) --
Net cash used in investing activities (4,451) (23,504)
Cash flows from financing activities:
Principal payment of capital lease
obligation (154) (129)
Issuance of common stock under employee
stock plan -- 555
Issuance of common stock from private
equity financing 20,613 --
Net cash provided by financing activities 20,459 426
Effect of exchange rates on cash (2) 480
Change in cash and cash equivalents 9,776 (23,143)
Cash and cash equivalents at
beginning of period 36,820 47,280
Cash and cash equivalents at
end of period $46,596 $24,137
Supplemental cash flow information:
Cash paid for interest $61 $31
Cash paid for income taxes $1,313 $1,320
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.