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Roxio Reports Second Quarter Results

Leading Digital Media Software Company Delivers Strong Year over Year Retail Growth

Santa Clara, California - (October 23, 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 second quarter ended September 30, 2002. Net revenue for the second quarter was $27.9 million, and pro forma net loss was $169,000, or $0.01 per basic and diluted share, excluding non-cash charges related to the amortization of intangible assets and deferred stock-based compensation. This compares with net revenue of $30.5 million and pro forma net income of $2.0 million, or $0.12 per basic and diluted share, for the second quarter of the prior fiscal year.

"As we expected, retail has become the lion's share of Roxio's revenues, and despite the challenging retail market globally and the fact that we are at the end of our product cycles, our retail business grew 26% over the prior year," said Chris Gorog, Roxio's President and Chief Executive Officer. "This growth did not, however, offset the dramatic year-over-year drop in our OEM business, caused by flat PC shipments and rapidly declining ASPs. While the OEM channel remains an important driver in seeding the Roxio brand across desktops and consumer devices worldwide, we are strategically focused on driving growth through retail, leveraging Roxio's powerful global marketing capabilities."

"Roxio has some very significant product releases over the next two quarters including the debut of Easy CD & DVD Creator 6.0: The Digital Media Suite. This will be the first all-in-one solution for digital media applications with the top brands in the business. Creator 6 will bring together in one integrated product: CD recording, video editing/DVD authoring, photo editing and sophisticated new data applications. The response from sneak-previews by consumers, retailers and our OEM partners bodes very well for the success of Roxio's next major product cycle."

Roxio's reported (GAAP) net loss for the second quarter of fiscal 2003 was $1.8 million, or $0.09 per basic and diluted share, including non-cash charges related to the amortization of intangible assets and deferred stock-based compensation. This compares with a reported net loss of $1.0 million, or $0.06 per basic and diluted share, for the second quarter of fiscal 2002. A reconciliation of pro forma results with the reported results is included below.

Elliot Carpenter, Roxio's Chief Financial Officer, commented, "We are aggressively managing expenses and significantly reduced costs on a sequential basis. We expect revenues in the third fiscal quarter to be approximately $25 million and to incur a proforma net loss of up to $2.4 million, or $0.12 per share, reflecting industry analysts' expectations of slower than usual back-to-school and holiday seasons. We believe that revenues should rise sequentially in the fourth fiscal quarter based on our new product releases. For fiscal year 2003, we are forecasting revenues of approximately $117 million, proforma net income of approximately $1.9 million or $0.10 per share, and expect to end the fiscal year with approximately $45 million in cash and short-term investments. Looking out to fiscal 2004, while we expect to expand our presence at the OEM level, we are modeling only modest revenue contributions from the OEM channel. We expect our retail, direct and enterprise channels to account for approximately 90% of revenues, and solid growth from these channels should result in increased revenues and earnings for the fiscal year."

On a reported basis, the projected net loss for the fiscal third quarter is expected to be approximately $4.4 million, or $0.22 per share. For fiscal year 2003, the Company is projecting a reported net loss of approximately $5.7 million, or $0.29 per share.

Corporate Highlights

  • As part of its retail expansion strategy, Roxio's award-winning digital media software brands, Easy CD Creator and PhotoSuite are now available at mass merchant stores including Target and Wal-Mart, bringing its total number of store-fronts in the US and Canada to approximately 9,000.
  • In August, Roxio's board of directors authorized a repurchase program for up to ten percent of its outstanding common stock. Since that announcement, the Company has been active in accumulating shares.
  • Roxio expanded its partnership with Microsoft to provide the CD recording capability for versions of Microsoft's new Windows Media Player 9 Series for Windows 2000, Windows ME and Windows 98SE. The agreement offers another important avenue for upgrades to Roxio's full-featured software.
  • Roxio partnered with, and made a strategic investment in, YesVideo, the leader in videotape-to-DVD conversion, to jointly develop various marketing and distribution channels, and to share technology licensing.

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.