Roxio Reports Third Quarter Results
Roxio Exceeds Third Quarter Sales Target; Expects More Than
20% Sequential Revenue Growth from Upcoming Launch of Easy CD &
DVD Creator 6.0 - The Digital Media Suite
Santa Clara, California - (January 22, 2003) - Roxio, Inc. (Nasdaq:
ROXI), The Digital Media Companyâ, provider of the best selling
digital media software in the world, today reported financial results
for its third quarter ended December 31, 2002. Net revenue for the
third quarter was $26.4 million, and pro forma net loss was $7.4
million, or $0.38 per basic and diluted share, which includes approximately
$0.21 per share in amounts incurred in connection with the settlement
of a lawsuit by certain former shareholders of Incat Systems. The
third quarter results compare with net revenue of $36.2 million
and pro forma net income of $3.4 million, or $0.20 per basic and
$0.19 per diluted share, for the same period of the prior fiscal
year. Pro forma net loss excludes non-cash charges related to the
amortization of intangible assets and deferred stock-based compensation.
Including non-cash charges related to the amortization of intangible
assets and deferred stock-based compensation, Roxio's reported (GAAP)
net loss for the third quarter of fiscal 2003 was $9.2 million,
or $0.47 per basic and diluted share. This compares with reported
net income of $0.6 million, or $0.04 per basic and diluted share,
for the third quarter of fiscal 2002. A reconciliation of pro forma
results with the reported results is included below.
"Roxio executed on its operating plans during the third quarter
as we set the stage for the February 18th launch of Easy CD & DVD
Creator 6.0 -- 'The Digital Media Suite,' an all-in-one solution
bringing together the best-known digital media brands and offering
CD and DVD recording, photo and video editing, music management
and data applications," said Chris Gorog, Roxio's President and
Chief Executive Officer. "This will be Roxio's biggest launch to
date and will leverage extensive support from leading retailers,
powerful promotional partners including ESPN, Intel and Fuji, consumer
print advertising and more. Roxio also solidified a number of important
OEM wins during the quarter including important DVD wins with TEAC
and BUSlink, among others. While we continue to deemphasize the
significance of these partnerships from a revenue perspective, they
are important drivers in growing our installed base and further
supporting our retail upgrade strategy."
Elliot Carpenter, Roxio's Chief Financial Officer, commented, "Retail
and OEM revenues were generally as expected during the quarter and
we were successful in managing our cash and expenses in advance
of the Creator 6.0 launch. As we approach the end of fiscal 2003,
we are increasing our revenue guidance to approximately $119 million,
with fiscal fourth quarter revenues expected to total roughly $32
million. We are forecasting a strong return to profitability in
the fiscal fourth quarter on pro forma earnings per share of $0.19
cents and should exit the fiscal year with over $45 million in cash
and cash investments. While we have not provided an outlook into
fiscal 2004, we expect that our new products will drive healthy
revenues and increased profitability for the year."
Corporate Highlights
-
Roxio successfully launched Starter Kit versions of Easy CD
Creator and PhotoSuite at mass merchants Wal-Mart and Target.
Based on the success of the initial launch of these products,
Roxio has significantly expanded the number of storefronts where
its software is sold, and its Easy CD Creator Starter Kit is already
among Wal-Mart's top ten titles for non-gaming software.
-
Roxio continued to strengthen its growing roster of OEM partnerships
with design wins for its leading digital media products including
Easy CD Creator, Easy CD Creator DVD Edition, VideoWave Movie
Creator and PhotoSuite at leading manufacturers including HP,
Compaq, Pioneer, Logitech, TEAC, BUSlink, TDK, Kyocera and others.
-
On November 27, 2002, Roxio completed the purchase of certain
of the assets of Napster, Inc. Roxio received all of Napster's
intellectual property including but not limited to the name, trademarks,
domain name, and its patent portfolio. The Company did not assume
any of Napster's pending liabilities or litigation and expects
to provide more details regarding its plans for Napster in the
next few months.
-
Roxio announced during the third quarter the promotion of Timothy
Corcoran to vice president of worldwide retail sales. Mr. Corcoran
was formerly director of sales for Roxio, where he was responsible
for both OEM and retail sales in the U.S.
Reconciliation of Reported Earnings (Loss) to Pro Forma Earnings (Loss):
Three Months Three Months
Ended Ended
Dec. 31, Dec. 31,
2002 2001
Net Basic Diluted Net Basic Diluted
Income EPS EPS Income EPS EPS
Reported
earnings
(loss) $(9,200) $(0.47) $(0.47) $639 $ 0.04 $ 0.04
Adjustments:
Amortization of
intangible
assets 1,428 0.07 0.07 1,433 0.08 0.08
Stock-based
compensation
charges 659 0.03 0.03 1,338 0.08 0.07
Tax effect of
pro forma
entries (252) (0.01) (0.01) -- -- --
Pro forma
earnings
(loss) $(7,365) $(0.38) $(0.38) $3,410 $0.20 $ 0.19
Nine Months Nine Months
Ended Ended
Dec. 31, Dec. 31,
2002 2001
Net Basic Diluted Net Basic Diluted
Income EPS EPS Income EPS EPS
Reported
earnings
(loss) $(12,268) $(0.63) $(0.63) $2,009 $ 0.12 $ 0.12
Adjustments:
Amortization of
intangible
assets 4,764 0.25 0.25 4,297 0.26 0.25
Stock-based
compensation
charges 1,447 0.07 0.07 6,384 0.38 0.38
Tax effect of
pro forma
entries (835) (0.04) (0.04) -- -- --
Pro forma
earnings $(6,892) $(0.35) $(0.35) $12,690 $ 0.76 $ 0.75
ROXIO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
Three Months Nine Months
Ended December 31, Ended December 31,
2002 2001 2002 2001
Net revenues $26,430 $36,164 $86,652 $103,627
Cost of revenues (excludes stock-
based
compensation charges of $13, $14,
$39 and $89, respectively) 7,529 8,168 22,887 21,070
Gross profit 18,901 27,996 63,765 82,557
Operating expenses:
Research and development (excludes
stock-based
compensation charges of $191, $208
$573 and $1,307, respectively) 5,067 4,763 15,737 15,958
Sales and marketing (excludes stock-
based
compensation charges of $172, $807,
($14) and $2,964, respectively) 10,113 13,510 32,271 35,149
General and administrative (excludes
stock-based
compensation charges of $283, $309,
$849 and $2,024, respectively.) 9,438 4,681 21,213 13,149
Amortization of intangible assets 1,428 1,433 4,764 4,297
Stock-based compensation charges 659 1,338 1,447 6,384
Total operating expenses 26,705 25,725 75,432 74,937
Income (loss) from operations (7,804) 2,271 (11,667) 7,620
Other income, net 150 278 565 993
Income (loss) before provision
for income tax (7,654) 2,549 (11,102) 8,613
Provision for income tax (1,546) (1,910) (1,166) (6,604)
Net income (loss) $(9,200) $639 $(12,268) $2,009
Earnings per share:
Basic $(0.47) $0.04 $(0.63) $0.12
Diluted $(0.47) $0.04 $(0.63) $0.12
Weighted average shares used in
computing basic and
diluted net income per share
Basic 19,422 16,883 19,470 16,766
Diluted 19,422 17,591 19,470 16,945
ROXIO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data, unaudited)
December 31, March 31,
2002 2002
ASSETS
Current assets:
Cash and cash equivalents $25,640 $47,280
Short-term investments 15,966 4,700
Accounts receivable, net of allowance
for doubtful accounts of
$1,255 and $775, respectively 13,369 24,260
Inventories 283 363
Prepaid expenses and other current
assets 3,468 3,409
Income tax receivable 3,197 2,378
Deferred income taxes 3,895 3,880
Total current assets 65,818 86,270
Long-term investment 3,000 --
Property and equipment, net 9,302 7,122
Goodwill 55,247 51,447
Other intangibles assets, net 12,026 11,248
Other assets 674 545
Total assets $146,067 $156,632
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $9,895 $9,563
Accrued liabilities 16,125 21,972
Current portion of long-term debt 585 526
Total current liabilities 26,605 32,061
Long term liabilities:
Long term debt 5,585 921
Deferred income taxes 1,135 1,922
Total liabilities 33,325 34,904
Stockholders' equity:
Common stock, $0.001 par value;
100,000 shares authorized;
19,422 and 19,474 issued and
outstanding 19 20
Additional paid-in capital 127,815 129,804
Deferred stock-based compensation (3,858) (7,487)
Accumulated deficit (12,999) (731)
Accumulated other comprehensive
income 1,765 122
Total stockholders' equity 112,742 121,728
Total liabilities and stockholders'
equity $146,067 $156,632
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.