ARTISTdirect Inc. Announces Strong First-Quarter Results.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--May 9, 2000 ARTISTdirect (Nasdaq:ARTD): First-Quarter Highlights: -- Net revenue of $4.5 million, up 165% from $1.7 million in Q1 1999. -- Online revenue of $3.8 million, up 173% from $1.4 million in Q1 1999. -- Advertising revenue increases to 40% of total revenue. -- Reached agreement to acquire Mjuice.com, a leading downloadable music site. -- Initiated Yahoo! distribution and marketing relationship. -- Cash and cash equivalents of $128.7 million at 3/31/00. ARTISTdirect Inc. (Nasdaq:ARTD) today announced financial results for the first quarter ended March 31, 2000. Net revenue for the first quarter of 2000 increased 165% to $4.5 million, compared with $1.7 million in the first quarter of 1999. Net loss for the first quarter of 2000 was $11.2 million, compared with a net loss of $2.7 million for the first quarter of 1999. Net loss was $0.39 per share for the first quarter of 2000, on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis after giving effect to the conversion of the company's redeemable Redeemable Eligible for redemption under the terms of an indenture. preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. to common shares in connection with the company's initial public offering ("IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. "), as if such conversion had occurred at the beginning of the period. The company reported a negative gross profit of $1.9 million for the first quarter of 2000. Adjusting for amortization of stock-based compensation, first-quarter gross profit was $0.9 million, or 21% of net revenue, compared with $402,000, or 24%, in the prior-year period. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become loss was $8.6 million, an improvement from a loss of $12.6 million in Q4 1999. Online revenue from the ARTISTdirect Network represented 85% of total revenue, up from 82% in Q1 1999. In addition, the company made significant progress toward its goal of increasing revenue from advertising, which contributed 40% of revenue in Q1 2000, vs. 22% in Q1 1999 and 33% in Q4 1999. Marc Geiger, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of ARTISTdirect, commented: "Our strong first-quarter results demonstrate the soundness of our business model, combining great revenue growth with well-managed operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . We believe that our unique combination of comprehensive music resources and artist-specific channels provides the most compelling music experience on the Internet today. "At a time when the music industry is facing unprecedented challenges, we expect to be a leader in developing new business models to address the opportunities that lie ahead." Keith Yokomoto, president and COO (Cell Of Origin) See mobile positioning. , added: "With our recently completed IPO, we have the capital resources necessary to execute our business plan. We have solidified so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. the foundation of our online media and e-commerce businesses and we are focused on developing new revenue streams such as digital distribution and subscription services." Rescission The abrogation of a contract, effective from its inception, thereby restoring the parties to the positions they would have occupied if no contract had ever been formed. By Agreement Offer At the time of ARTISTdirect's IPO, several media reports indicated that a substantial portion of the proceeds of the IPO might be spent in a rescission offer relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the issuance of options and shares in violation of securities laws. As a remedy, ARTISTdirect intends to make a rescission offer to the persons who received the shares or options. The potential financial liability resulting from this rescission offer is discussed below. The final prospectus Final Prospectus A legal document stating the price of a newly issued security, the delivery date, and other facts that are important for investors. Notes: The final prospectus must be given to every investor who purchases a new issue of registered securities. disclosed that the maximum potential liability of the rescission offer was $33.0 million, assuming that all options are exercised. However, the net economic effect of the rescission offer to the company is substantially less. The prospectus further disclosed that for those persons who hold shares purchased directly or through option exercises, ARTISTdirect will offer to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. the shares for an amount equal to the price paid for the shares, plus interest at the rate of 10% from the date the shares or options were issued. Thus, even if the rescission offer is accepted, the repurchase of shares would only result in a return of the purchase price previously received by the company for the shares, plus interest. The only net cash outlay would be to pay the interest obligation. The prospectus also disclosed that for those persons who hold options, ARTISTdirect will offer to repurchase options for a price equal to 20% of the option exercise price times the number of option shares, plus interest at the rate of 10% from the date the options were granted. Since these options have not been exercised and the company has not received any payment, any such repurchase would result in an out-of-pocket cost to the company. Based on the number of unexercised options outstanding at March 31, 2000, and assuming such options are not exercised prior to the end of the rescission offer, the maximum out-of-pocket cost to the company in repurchasing such options would be approximately $8.0 million, plus interest. About ARTISTdirect Inc. The ARTISTdirect Network is an online music network that connects music artists and fans. The integrated network A network that supports both data and voice and/or different networking protocols. See converged network and new public network. of Web sites offers multimedia entertainment content, music news and information, community around shared music interests and music-related commerce. The ARTISTdirect Network consists of ARTISTdirect.com (www.artistdirect.com), home of the official channels that the company operates on behalf of artists; UBL (Universal Business Language) A format for exchanging data from one XML business language to another. Based on ebXML Core Components, UBL is designed to provide a common language that acts as an intermediate vocabulary so that one XML vocabulary can interoperate with .com (www.ubl.com), a music search engine on the Web; iMusic (www.imusic.com), an online community site where fans exchange music interests and commentary; DOWNLOADSdirect, (www.downloadsdirect.com), a feature which enables users to download music from the ARTISTdirect Network and to upload their music and other information; and the ARTISTdirect Superstore su·per·store n. A very large retail store that stocks highly diversified merchandise, such as groceries, toys, and camera equipment, or a wide variety of mechandise in a specific product line, such as computers or sporting goods. , a retail site offering a wide selection of recorded music recorded music n → música grabada and artist merchandise. Additionally, ARTISTdirect Inc. operates the ARTISTdirect Talent Agency and manages Kneeling Elephant Records. The company has offices in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden and London. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: This release may contain projections or other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events or the future financial performance of ARTISTdirect that involve risks and uncertainties. Readers are cautioned that these statements are only predictions and may differ materially from actual future events or results. Potential risks and uncertainties that may affect future events and results include, among others, ARTISTdirect's unproven unproven Dubious, nonscientific, not proven, quack, questionable, unscientific adjective Relating to that which has not been validated by reproducible experiments or other scientific methods for determining effect or efficacy business model, increased competition in its industry, ARTISTdirect's ability to increase revenue from online product sales, advertising and other revenue streams, ability to increase visits to ARTISTdirect's site, ability to attract and retain artists, ability to offer compelling content, ability to fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. online music and merchandise orders in a timely manner, ability to build brand recognition, ability to integrate acquisitions of technology and other businesses, ability to protect and/or obtain intellectual property rights, and ability to manage growth. More information about potential factors that could affect the company's business and financial results is included in the documents filed by ARTISTdirect with the SEC, including its Registration Statement on Form S-1 and all amendments thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. .
ARTISTdirect Inc.
Condensed Consolidated Balance Sheets
(in thousands)
March 31, December 31,
2000 1999
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 128,702 $ 69,119
Cash held for clients 183 770
Accounts receivable, net 1,969 1,001
Prepaid expenses
and other current assets 8,960 6,795
Total current assets 139,814 77,685
Property and equipment, net 5,583 3,343
Goodwill and intangibles, net 12,742 13,415
Other assets 2,540 4,157
Total assets $ 160,679 $ 98,600
Liabilities, Redeemable
Preferred Stock and
Stockholders' Equity (Deficit)
Current liabilities:
Cash held for clients $ 183 $ 770
Accounts payable 3,268 3,709
Accrued expenses 9,501 4,698
Notes and contracts payable 762 741
Deferred revenue -- 37
Total current liabilities 13,714 9,955
Long-term liabilities 756 683
Total liabilities 14,470 10,638
Redeemable securities 11,269 111,707
Stockholders' equity:
Common stock 370 141
Additional paid-in capital 206,224 36,688
Unearned compensation (36,869) (36,976)
Accumulated deficit (34,785) (23,598)
Total stockholders'
equity (deficit) 134,940 (23,745)
Total liabilities,
redeemable securities
and stockholders' equity $ 160,679 $ 98,600
ARTISTdirect Inc.
Consolidated Statements of Operation
(in thousands, except for share data)
(Unaudited)
Three Months Ended
March 31, March 31,
2000 1999
Net revenue:
Online product sales $ 2,029 $ 1,016
Advertising and other 1,797 381
Agency commissions 545 130
Record label 126 171
Total net revenue 4,497 1,698
Cost of revenue:
Direct cost of product sales 1,921 901
Other cost of revenue 1,633 395
Stock-based compensation 2,793 --
Total cost of revenue 6,347 1,296
Gross Profit (1,850) 402
Operating expenses:
Product and content development 807 191
Sales and marketing 5,117 777
General and administrative 3,660 1,308
Stock-based compensation (366) 802
Depreciation and amortization 1,174 88
Loss from operations (12,242) (2,764)
Income from equity investment -- 33
Interest income, net 1,055 12
Net loss $ (11,187) $ (2,719)
Basic and Diluted net
loss per share $ (0.75) N/A (a)
Weighted average
common shares outstanding 14,901,505 N/A (a)
Pro forma net loss per share $ (0.39) $ (0.16)(b)
Pro forma weighted
average shares outstanding 28,489,648 16,649,626
EBITDA loss $ (8,641) $ (1,874)(c)
(a) During the three months ended March 31, 1999, the company was
organized as a limited liability company. Accordingly, no common
shares were outstanding and no loss per share is applicable.
(b) Pro forma net loss per share and pro forma weighted average shares
outstanding are calculated assuming that the company's members'
interests, which were converted to common shares in 1999, and its
redeemable preferred securities, which were converted to common
shares at the IPO, were outstanding as common shares during the
periods presented.
(c) EBITDA excludes net interest income, depreciation and amortization
and stock-based compensation.
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