Roxio Reports Fourth Quarter and Fiscal 2003 Results
Fourth Quarter Revenues Rise to $34 Million Based on Successful Launch of Roxio's Digital Media Suite
Recent Acquisition of Pressplay Paves the Way for Re-Launch of Napster
Santa Clara, California - (May 21, 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 fourth quarter and year ended March 31, 2003. Net revenue for the fourth quarter grew 28% sequentially to $33.8 million from $26.4 million in the preceding third quarter. Pro forma net income, which excludes non-cash charges related to the amortization of intangible assets and deferred stock-based compensation, was $3.8 million, or $0.19 per basic and diluted share, and therefore approximately the same as pro forma net income of $3.8 million, or $0.21 per basic and $0.19 per diluted share, for the fourth quarter of the prior fiscal year.
Roxio's reported GAAP net income for the fourth quarter of fiscal 2003 was $2.3 million, or $0.12 per basic and diluted share, as compared with net income in the fourth quarter of the prior fiscal year of $340,000, or $0.02 per basic and diluted share.
Net revenue for the fiscal year ended March 31, 2003 was $120.4 million, as compared to net revenue of $142.5 million for fiscal 2002. Pro forma net loss excluding non-cash charges was $3.1 million, or $0.16 per basic and diluted share, as compared to pro forma net
income of $16.5 million, or $0.96 per basic and $0.94 per diluted
share for the prior fiscal year.
Roxio's GAAP net loss for fiscal 2003 was $9.9 million, or $0.51
per basic and diluted share, compared to GAAP net income of $2.3
million, or $0.14 per basic and $0.13 per diluted share, in fiscal
2002. A reconciliation of pro forma results described in this press
release with the reported GAAP results is included in the attached
table.
"Our fourth quarter financial results reflect a solid launch
of Easy CD & DVD Creator 6, the Digital Media Suite," said
Chris Gorog, Roxio's President and Chief Executive Officer. "Other
notable achievements include the launch in late March of our PhotoSuite
5 Platinum digital photo editing software and our first major DVD
OEM win for Creator 6 on TDK's new Indi DVD Multiformat burner.
With the sale of our GoBack software assets to Symantec, Roxio is
now focused exclusively on its core digital media business. Additionally,
our recent acquisition of Pressplay, as the foundation for the re-launch
of Napster should allow us to capitalize on the tremendous opportunity
in online music and is an important step toward diversifying our
revenues for the long-term growth of the company."
Elliot Carpenter, Roxio's Chief Financial Officer, commented, "We
are pleased with the response to our recent product launch and execution
on our fourth quarter financial objectives. At the same time, we
are forecasting that the combined effects of a difficult retail
environment, the sale of the GoBack product line to Symantec and
our previously issued guidance that OEM revenues will continue to
decline, will result in a June quarter outlook for our software
business of approximately $23.0 million in revenue and GAAP net
income of $0.05 per fully diluted share. These estimates do not
include the accounting impact of the Pressplay acquisition for the
remainder of the June quarter, which has not yet been fully determined.
Roxio's cash and short-term investments were $58.0 million as of
April 30, 2003. Taking into account the $12.5 million in cash consideration
paid for the Pressplay acquisition and the approximately $20.0 million
currently expected to be spent to re-launch Napster, we believe
that we have sufficient cash to drive our software business and
support our online music initiative."
Earnings Call Information
The Roxio Fourth Quarter and Fiscal 2003 teleconference and webcast
is scheduled to begin at 1:30 p.m., Pacific Time, on Wednesday,
May 21, 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: 9730870. 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:
9730870.
Non-GAAP Financial Measures
Roxio discloses pro forma or non-GAAP measures of net income and
earnings per share. Roxio believes that this pro forma information
provides greater comparability regarding its ongoing operating performance.
These measures should not be considered an alternative to measurements
required by accounting principles generally accepted in the United
States ("U.S. GAAP"), such as net income and earnings
per share. These pro forma measures are unlikely to be comparable
to pro forma information provided by other companies. In accordance
with SEC regulations, reconciliation of the Roxio U.S. GAAP information
to the pro forma information is provided in the table attached.
We will also make available on the investor relations page of our
web site at http://investor.roxio.com
this press release, a replay of the Webcast, and a reconciliation
of the difference between the GAAP and non-GAAP financial measures.
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, upgrades by existing users 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 successfully integrate Pressplay, 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 and Quarterly Report on Form
10-Q as filed with the SEC on July 1, 2002 and February 14, 2003,
respectively, 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)
March 31, March 31,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $36,820 $47,280
Short-term investments 16,677 4,700
Accounts receivable, net of allowance
for doubtful accounts of
$850 at March 31, 2003 and
$775 at March 31, 2002 12,637 24,260
Inventories 460 363
Prepaid expenses and other current
assets 3,366 3,409
Income taxes receivable -- 2,378
Deferred income taxes 4,709 3,880
Total current assets 74,669 86,270
Long-term investment 3,059 --
Property and equipment, net 9,058 7,122
Goodwill, net 55,247 51,447
Other intangibles assets, net 10,314 11,248
Other assets 589 545
Total assets $152,936 $156,632
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,952 $9,563
Income taxes payable 1,353 --
Accrued liabilities 16,153 21,972
Current portion of long-term debt 606 526
Total current liabilities 30,064 32,061
Long term liabilities:
Long term debt 5,490 921
Deferred income taxes 1,190 1,922
Total liabilities 36,744 34,904
Stockholders' equity:
Preferred stock, $0.001 par value;
Authorized: 10,000 shares;
Issued and outstanding: none at
March 31, 2003 and 2002 -- --
Common stock, $0.001 par value;
Authorized: 100,000 shares;
Issued and outstanding: 19,574
shares at March 31, 2003 and
19,474 shares at March 31, 2002 20 20
Additional paid-in capital 127,804 129,804
Deferred stock-based compensation (2,886) (7,487)
Accumulated deficit (10,675) (731)
Accumulated other comprehensive
income 1,929 122
Total stockholders' equity 116,192 121,728
Total liabilities and stockholders'
equity $152,936 $156,632
ROXIO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Year
Ended March 31, Ended March 31,
2003 2002 2003 2002
Net revenues $33,756 $38,894 $120,408 $142,521
Cost of revenues (excluding stock-
based
compensation charges of $10, $14,
$49 and $103, respectively) 8,523 8,084 31,410 29,154
Gross profit 25,233 30,810 88,998 113,367
Operating expenses:
Research and development (excludes
stock-based
compensation charges of $142, $208
$715 and $1,515, respectively) 5,886 5,679 21,623 21,637
Sales and marketing (excludes stock-
based
compensation charges of $127,
$1,194,
$113 and $4,158, respectively) 9,282 14,098 41,553 49,247
General and administrative (excludes
stock-based
compensation charges of $210,
$1,419,
$1,059 and $3,443 respectively.) 5,777 6,178 26,990 19,327
Amortization of intangible assets 1,637 1,849 6,401 6,146
Stock-based compensation charges 489 1,726 1,936 8,110
In-process research and development -- 1,110 -- 1,110
Total operating expenses 23,071 30,640 98,503 105,577
Income (loss) from operations 2,162 170 (9,505) 7,790
Other income (loss), net (94) 292 471 1,285
Income (loss) before provision for
income taxes 2,068 462 (9,034) 9,075
Provision (benefit) for income taxes (256) 122 910 6,726
Net income (loss) $2,324 $340 $(9,944) $2,349
Other comprehensive gain (loss) :
Foreign currency translation
adjustment -- -- 1,785 (280)
Unrealized gain on short-term
investment -- 24 --
Comprehensive income (loss) $2,324 $340 $(8,135) $2,069
Earnings per share:
Basic $0.12 $0.02 $(0.51) $0.14
Diluted $0.12 $0.02 $(0.51) $0.13
Weighted average shares used in
computing basic and
diluted net income per share
Basic 19,498 18,568 19,477 17,216
Diluted 19,783 19,767 19,477 17,518
Reconciliation of Reported Earnings (Loss) to Pro Forma Earnings (Loss):
Three Months Ended Three Months Ended
March 31, March 31,
2003 2002
Net Basic Diluted Net Basic Diluted
Income EPS EPS Income EPS EPS
Reported
earnings $2,324 $0.12 $0.12 $340 $0.02 $0.02
Adjustments:
Amortization
of intangible
assets 1,637 0.08 0.08 1,849 0.10 0.09
Stock-based
compensation
charges 489 0.02 0.02 1,726 0.09 0.09
Write-off
of in-process
research
and development -- -- -- 1,110 0.06 0.06
Tax effect of pro
forma entries (682) (0.03) (0.03) (1,180) (0.06) (0.06)
Pro forma
earnings $3,768 $0.19 $0.19 $3,845 $0.21 $0.19
Year Ended Year Ended
March 31, March 31,
2003 2002
Net Basic Diluted Net Basic Diluted
Income EPS EPS Income EPS EPS
Reported
earnings
(loss) $(9,944) $(0.51) $(0.51) $2,349 $0.14 $0.13
Adjustments:
Amortization of
intangible
assets 6,401 0.33 0.33 6,146 0.36 0.35
Stock-based
compensation
charges 1,936 0.10 0.10 8,110 0.47 0.46
Write-off of
in-process
research
and development -- -- -- 1,110 0.06 0.06
Tax effect of
pro forma
entries (1,517) (0.08) (0.08) (1,180) (0.07) (0.07)
Pro forma
earnings
(loss) $(3,124) $(0.16) $(0.16) $16,535 $0.96 $0.94
ROXIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Years Ended
March 31,
2003 2002
Cash flows from operating activities:
Net income $(9,944) 2,349
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,742 7,439
Stock-based compensation charges 1,936 8,110
Provision for doubtful accounts 649 790
Write-off of acquired in-process technology -- 1,110
Deferred income taxes (1,549) (1,076)
Change in operating assets and liabilities:
Accounts receivable 12,356 8,544
Inventories (172) 875
Prepaid expenses and other assets (199) (2,160)
Accounts payable 2,162 (10,189)
Income taxes payable (receivable) 4,065 363
Accrued liabilities (9,926) 7,921
Net cash provided by operating activities 9,120 24,076
Cash flows from investing activities:
Purchases of property and equipment (4,235) (3,839)
Proceeds from sale of property and equipment -- --
Purchases of other intangible assets (5,667) (251)
Purchases of short-term investments (27,578) (4,700)
Proceeds from sale of short-term investments 11,075 --
Maturities of short-term investments 4,526 --
Investment in nonconsolidated companies (3,059) --
Acquisition of MGI Software Corp,
net of acquired cash of $770 -- (1,988)
Net cash used in investing activities (24,938) (10,778)
Cash flows from financing activities:
Net cash transfers from Adaptec -- 27,446
Principal payment of capital lease obligation (557) (199)
Proceeds from line of credit 5,000 --
Issuance of common stock to strategic partner -- 1,999
Issuance of common stock under employee
stock plan 1,367 4,740
Repurchase of common stock (1,064) --
Net cash provided by financing activities 4,746 33,986
Effect of exchange rates on cash 612 (4)
Change in cash and cash equivalents (10,460) 47,280
Cash and cash equivalents at beginning
of period 47,280 --
Cash and cash equivalents at end of period $36,820 $47,280
Supplemental cash flow information:
Cash paid for interest $220 $47
Cash paid for income taxes $1,832 $5,258
Non-cash disclosure of financing and
investing activities:
Transfer of other assets from Adaptec upon
legal separation $-- $4,608
Adjustment to the purchase price allocation
of MGI Software Corp $3,802 $--
Issuance of stock for acquisition of
MGI Software Corp. $-- $31,421
Deferred stock compensation $-- $12,880
Issuance and remeasurement of warrants
for services $(705) $--
Issuance of warrant for services $329 $1,840
Assets acquired under capital leases $203 $1,624
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.