SEATTLE, May 9 -- Loudeye Corp. (NASDAQ:LOUD) , a worldwide leader in business-to-business digital media store services, today announced financial results for the first quarter 2006.
"We exceeded our expectations in the first quarter in both top line revenue and bottom line operational performance. We have now substantially achieved the restructuring of our business based on our 2006 operating plan to unify onto a single music store platform, significantly reduce our operating expenses and strengthen our balance sheet, while we focus on our key revenue generating markets and customers," said Mike Brochu, Loudeye president and chief executive officer.
First Quarter 2006 Financial Highlights
Revenue. Revenue was $8.4 million in the first quarter 2006 compared with revenue of $5.2 million in the first quarter 2005, an increase of 62%. First quarter 2006 revenue decreased by 5% compared to $8.8 million in the fourth quarter 2005.
Digital media store services revenue was $6.4 million in the first quarter 2006, or 76% of total revenue, an increase of 61% from $4.0 million, or 77% of total revenue, in the first quarter 2005. First quarter 2006 digital media store services revenue decreased 10% compared to $7.0 million in the fourth quarter 2005.
Deferred Revenue. Deferred revenue and customer deposits were $6.1 million as of March 31, 2006, net of related receivables of $1.6 million, compared to $6.4 million as of December 31, 2005, net of related receivables of $2.2 million.
Loss from continuing operations and net loss. For the first quarter 2006, GAAP loss from continuing operations was $4.6 million, down from $7.0 million in the first quarter 2005 and $5.7 million in the fourth quarter 2005. GAAP loss from continuing operations for all periods presented excludes results of Loudeye`s Overpeer subsidiary, which ceased operations in December 2005.
-- For the first quarter 2006, GAAP net loss (which includes results of Loudeye`s discontinued Overpeer operations) was $4.6 million, down from $7.5 million in the first quarter 2005 and $10.5 million in the fourth quarter 2005.
-- EBITDA loss from continuing operations totaled $3.7 million in the first quarter 2006, down from $6.4 million in the first quarter 2005 and $4.9 million in the fourth quarter 2005. EBITDA loss from continuing operations excludes charges related to depreciation and amortization expense and interest income and expense. A reconciliation of GAAP loss from continuing operations to EBITDA loss from continuing operations is provided below.
GAAP loss from continuing operations, GAAP net loss and EBITDA loss from continuing operations in the first quarter 2006 all include stock-based compensation charges of $337,000 reflecting Loudeye`s adoption of Statement of Financial Accounting Standards No. 123R effective January 1, 2006. Cash and Investments. Unrestricted and restricted cash, cash equivalents and marketable securities were $15.7 million as of March 31, 2006 compared to $10.9 million at December 31, 2005.
Manner of Financial Statement Presentation. The financial statements contained in this press release include the assets, liabilities and results of operations relating to Loudeye`s U.S.-based operating assets, which were divested in April 2006. Beginning with Loudeye`s second quarter 2006 financial statements, the assets, liabilities and results of operations relating to these divested assets will be presented as discontinued operations for all periods presented.
2006 Business Highlights
-- On April 30, 2006, Loudeye closed the sale of its substantially redundant and declining U.S.-based operating assets for $11.0 million in cash. This sale significantly reduces Loudeye`s ongoing operating costs, while improving its balance sheet for continued investment in the growing markets it serves.
-- In February 2006, Loudeye raised $8.25 million in private placement financing.
-- During early 2006, digital music stores powered by Loudeye`s European-based OD2 services scored high marks in independent reviews of online digital music services in the U.K., France and Sweden.
-- In January 2006, Loudeye announced its "triple play" service offering, ushering in an enhanced era of music accessibility. Through a single account, whether at home, at the office or on the move, users will be able to retrieve and play a copy of digital music they purchase. Central to this offer is Internet-based interoperability among a "triple play" of digital media devices including PC, mobile phone and set top box.
2006 Operating Plan - Focus on Key Markets and Customers
Loudeye`s 2006 operating plan focuses on the key markets and customers, which are generating the most economic value and opportunity for the company. After Loudeye`s recent $11.0 million sale of its U.S.-based operating assets, Loudeye is now singularly focused on its award winning OD2 services based in Europe, where Loudeye`s services power over 75 retailers.
The European-based services contributed 98% of Loudeye`s digital media services revenue in 2005. Loudeye`s OD2 services are the top seller of Windows Media (WMA) formatted full track music downloads in Europe.
The assets divested on April 30, 2006 included Loudeye`s U.S.-based digital media store services platform and its encoding, samples, hosting and Internet radio services. Loudeye`s U.S.-based digital media store services platform contributed only 2% of its 2005 digital media store services revenue, and its encoding services, primarily derived from Loudeye`s arrangement with EMI Music, accounted for approximately 14% of its 2005 revenue. In February 2006, Loudeye announced that EMI Music was transitioning, during the second quarter 2006, all encoding services for its music content away from Loudeye to another service provider. Loudeye`s other divested digital media content services offerings accounted for approximately 8% of its 2005 revenue.
Forward-Looking Financial Guidance
As a result of Loudeye`s sale of its U.S.-based operating assets, year to date revenue to June 30, 2006 will include only $5.8 million in revenue from the first quarter 2006, as $2.6 million of Loudeye`s first quarter 2006 revenue related to divested assets will be presented as discontinued operations. Full year 2006 revenue will only include revenue from Loudeye`s European-based digital media store services offerings. The revenue guidance that Loudeye gave in February 2006 included forecasted 2006 revenue for its now divested operations. While future results are subject to changes and risks, Loudeye currently anticipates that revenue from continuing operations for 2006 will be approximately $26 to $29 million. This would represent growth of 28% to 43% over the 2005 annual revenue from Loudeye`s European-based digital media store services offerings of $20.3 million.