ARTISTdirect Reports 102% Revenue Growth for Third Quarter; Reports Cash of $97 Million; Company Plans to Reduce EBITDA Loss 30% to 40% in 2001.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Nov. 8, 2000 ARTISTdirect Inc. (Nasdaq:ARTD) today announced net revenue of $5.6 million for the quarter ended September 30, 2000, representing 102% growth compared with the same period of 1999. The company also announced that it is evaluating its strategic plan in order to improve operational efficiency and focus on accelerated profitability. As an outcome, the company anticipates a 30% to 40% reduction in 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 for the full-year 2001, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Chairman and Chief Executive Officer Marc Geiger. As of Sept. 30 (using common shares outstanding at that date), cash and short-term investments represented $97.2 million, or $2.58 per share, and shareholder's equity was $111.9 million, or $2.97 per share. The company believes that its financial resources will be sufficient to support its business plan through EBITDA break-even. Financial Results Net revenue for the third quarter of 2000 increased 102% to $5.6 million, compared with $2.75 million in the third quarter of 1999. Net loss for the quarter was $17.1 million compared with a net loss of $26.0 million for the third quarter of 1999. 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 loss per share was $0.45 for the third quarter of 2000 compared to pro forma loss per share of $1.26 for the third quarter of 1999. For the nine months ended Sept. 30, 2000, net revenue increased 143% to $15.7 million, compared with $6.4 million for the same period last year. Net loss for the nine months ended Sept. 30, 2000 was $42.3 million compared with a net loss of $34.2 million for the same period last year. Pro forma loss per share was $1.95 for the nine months ended Sept. 30, 2000, excluding non-recurring, non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. recognized in the first quarter in connection with the automatic conversion of the company's Series C 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. upon completion of its 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. ") and interest accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. in connection with a currently contemplated 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. Pro forma loss per share was $1.83 for the nine months ended Sept. 30, 1999. The company reported an adjusted gross profit, excluding non-cash charges relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc amortization and stock-based compensation, of $427,000, or 8% of net revenue, for the third quarter of 2000 compared with $457,000, or 17% of net revenue, in the prior year period. EBITDA loss for the third quarter of 2000 was $13.4 million compared with $5.2 million in the prior year period. Business Model Progress "These results reflect continued progress with our overall business model. While we can't control stock market volatility or the near-term uncertainty surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. online music, we believe that the long-term prospects of a global commercial online music business are very attractive," commented Geiger. "We believe that much of this uncertainty will be resolved in the near future and that we are well-positioned to benefit as the industry develops new ways for artists to distribute their work and for fans to consume music," continued Geiger. "We have this confidence because -- first and foremost -- our business model revolves around serving those same artists and fans, in addition to both major and independent record labels. Music will always be an important part of the world economy and we are uniquely suited to being an important part of the music industry." E-Commerce Gains Revenue from e-commerce increased 145% to $3.3 million from the third quarter last year and increased 27% sequentially from the second quarter of this year. Geiger said plans to introduce an ARTISTdirect Mall supporting all the sites are on track for launch in early 2001. This site will also house fan club sites now being developed. The first site, the official Ricky Martin Fan Club, was launched in October. The company expects to launch several other fan club sites before year-end. Through a strategic alliance with Ticketmaster Online - City Search (Nasdaq:TMCS TMCS Trimethylchlorosilane (derivatization reagent) TMCS Telecommunications Management & Control Subsystem TMCS Taylor Made Computer Solutions, Ltd. ), ARTISTdirect successfully launched an online ticket business, which includes pre-sale opportunities allowing fans access to tickets prior to the public on-sale date, as well as exclusive tickets to sold-out shows. Artists participating in exclusive ticket offerings have included *NSYNC NSYNC Justin Chris Joey Lasten JC (last letters of first names of members of the group NSYNC) NSYNC Negative Synchronization , Metallica, Foo Fighters Foo Fighters are an American rock band formed by musician Dave Grohl in 1995.[1] The group is named after a secret military operation during World War II which researched UFOs ("Foo" being the slang term for a UFO). , k.d. lang, Marilyn Manson
Brian Hugh Warner (born January 5, 1969), better known by his stage name Marilyn Manson, is an American musician and artist known for his outrageous stage persona and image as the lead singer of the and The Dandy Warhols. Advertising Revenue Advertising revenue for the third quarter of 2000 increased 60% to $1.2 million from the same period a year ago, but declined from the second quarter ended June 30, 2000, as the company experienced weakness in the overall advertising market and postponed its FanNation event, resulting in no significant off-line sponsorship activity in the third quarter. ARTISTdirect's initiative to provide artist-based online and offline promotional solutions was successfully launched in June 2000 with sponsorship, banner ad A graphic image used on Web sites to advertise a product or service. Banner ads come in numerous sizes, but are often rectangles 460 pixels wide by 60 pixels high. Also 460 x 55 and 392 x 72 sizes are commonly used. and other Web-based exposure programs for several major brands. Another multi-part brand program was launched in October, including an Acoustic acoustic /acous·tic/ (ah-kldbomacs´tik) relating to sound or hearing. a·cous·tic or a·cous·ti·cal adj. Of or relating to sound, the sense of hearing, or the perception of sound. Series which ARTISTdirect produced and managed, featuring artists such as Beck, The Foo Fighters, and Incubus incubus (ĭng`ky  bəs), lascivious male demon said to possess mortal women as they sleep and to be responsible for the birth of demons, witches, and deformed children. .In Oct. 2000, ARTISTdirect relaunched ARTISTdirect.com as a fully integrated network A network that supports both data and voice and/or different networking protocols. See converged network and new public network. , focusing on improved functionality and user experience. The ARTISTdirect.com homepage now provides a streamlined navigation allowing users greater utility. Geiger said, "Both online and offline media remain important sources of revenue, and our focus on selling them in combination is expected to contribute to revenue growth next year. We see many significant opportunities to package marketing solutions for major brand advertisers looking to connect with targeted demographic segments closely identified with music." Digital Music The company is pursuing its digital music strategy through focused internal development combined with strategic alliances. "Rather than develop all of the technology in-house, we are creating alliances with companies that are leaders in their specialties," said ARTISTdirect President Keith Yokomoto. As an example, in October, ARTISTdirect entered into an agreement with technology partner On Air Streaming Networks  This article or section may be confusing or unclear for some readers.Please [improve the article] or discuss this issue on the talk page. to develop back-end support for a streaming jukebox A storage device for multiple sets of CD-ROMs, DVDs, tape cartridges or disk modules. Using carousels, robot arms and other methods, a jukebox physically moves the storage medium from its assigned location to an optical or magnetic station for reading and writing. that is currently expected to be completed during the first quarter of 2001. In addition, during the fourth quarter of 2000 the company will expand its offering of streaming Internet radio Listening to audio broadcasts via the Internet. There are more than 4,000 broadcasts available on the Internet that can be streamed and played by a software media player in the computer or in a stand-alone Internet radio with the software built in. stations in partnership with RadioWave. "We are confident that simple, legal digital distribution of a comprehensive catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. of music, through both streaming and downloading downloading - download , will one day be an important part of the music industry and we are in active discussions with artists and labels to help make this happen so that everyone benefits," Yokomoto added. Currently, ARTISTdirect is authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: to deliver downloads from Universal Music Group, BMG BMG Bundesministerium für Gesundheit (Germand: Federal Ministry for Health) BMG Be My Girl BMG Blue Man Group BMG Bertelsmann Music Group BMG Be My Guest BMG Browning Machine Gun BMG Bulk Metallic Glass Entertainment, and a variety of independent labels. Promotional downloads are also available on the site. Rescission Offer The company currently expects to complete a rescission offer with respect to certain options and shares issued pursuant to its stock option plans during the fourth quarter of 2000. Assuming that all options and shares subject to the rescission offer are tendered to the company as of December 31, the maximum cash exposure would be approximately $10.2 million, including interest. About ARTISTdirect Inc. ARTISTdirect Inc. (Nasdaq:ARTD) is a music and media company that combines an online music network with integrated offline assets to provide a single-stop solution for music fans, artists, labels and advertisers. ARTISTdirect.com (www.artistdirect.com), a comprehensive online destination, blends music programming, community, e-commerce retail and digital music services. Through the ARTISTdirect Talent Agency, the company also manages offline musical tour booking and develops event marketing programs extending sponsor reach. The company has headquarters in 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. , California. 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, specifically expectations as to revenues, reduction in cash burn rate and cash flow. These projections and statements 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, general uncertainties related to amount spent on online advertising, ARTISTdirect's ability to attract new artists and retain existing artists, competition in its industry, including from Web sites offering free music, ability to enter into new strategic relationships and leverage existing strategic relationships, ability to increase revenue from online product sales, advertising and other revenue streams, and to generate revenue from digital distribution, ability to increase visits to ARTISTdirect's network of sites, 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. on-line music and merchandise orders in a timely manner, ability to build brand recognition, and ability to protect and/or obtain intellectual property rights. Although the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot assure you that the company's future results, levels of activity, performance or achievements will meet these expectations. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The company is under no duty to update any of the forward-looking statements after the date of this release to conform those statements to actual results or to changes in the company's expectations. 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 most recent Quarterly Report on Form 10-Q Form 10-Q See 10-Q. , current report on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. and its Registration Statements 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. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2000 1999
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 53,465 $ 69,119
Cash held for clients 210 770
Short term investments 43,765 -
Accounts receivable, net 2,455 1,001
Prepaid expenses and other current assets 5,898 6,795
Total current assets 105,793 77,685
Property and equipment, net 8,785 3,343
Goodwill and intangibles, net 16,026 13,415
Other assets, net 2,425 4,157
$ 133,029 $ 98,600
Liabilities, Redeemable Preferred Stock and Stockholders'
Equity (Deficit)
Current liabilities:
Cash held for clients $ 210 $ 770
Accounts payable 1,656 3,709
Accrued expenses 7,404 4,698
Notes payable 172 741
Deferred revenue 18 37
Total current liabilities 9,460 9,955
Long term liabilities 1,387 683
Total liabilities 10,847 10,638
Redeemable securities 10,242 111,707
Stockholders' equity (deficit):
Common stock 378 141
Additional paid-in-capital 204,339 36,688
Unearned compensation (26,914) (36,976)
Accumulated deficit (65,863) (23,598)
Total stockholders' equity (deficit) 111,940 (23,745)
$ 133,029 $ 98,600
ARTISTdirect Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except for share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Net revenue:
Online product sales $ 3,265 $ 1,331 $ 7,874 $ 3,501
Advertising and other 1,246 777 5,016 1,666
Agency commissions 1,051 371 2,523 662
Record label - 273 244 605
Total net revenue 5,562 2,752 15,657 6,434
Cost of revenue:
Direct cost of
product sales 2,813 1,165 7,051 3,114
Other cost of revenue 2,405 1,212 6,167 2,161
Stock-based compensation 1,678 330 6,150 381
Total cost of revenue 6,896 2,707 19,368 5,656
Gross Profit (1,334) 45 (3,711) 778
Operating expenses:
Product development 1,271 397 2,757 1,028
Sales and marketing 7,749 2,901 19,542 5,438
General and
administrative 4,774 2,385 12,832 5,622
Amortization of stock-based
compensation 1,725 19,625 3,116 21,542
Depreciation and
amortization 1,684 841 4,315 1,554
Loss from operations (18,537) (26,104) (46,273) (34,406)
Income from equity
investment - - 15 33
Interest income, net 1,462 90 3,993 167
Net loss $ (17,075)$ (26,014) $ (42,265)$ (34,206)
Dividend on redeemable stock (154) 523 1,302 952
Beneficial conversion feature on redeemable
preferred stock - - 24,375 -
Net loss attributable to
common shareholders $ (16,921)$ (26,537) $ (67,942)$ (35,158)
Basic and diluted loss
per share $ (0.45) N/A $ (2.29) N/A(a)
Weighted average
common shares
outstanding 37,355,556 N/A 29,665,415 N/A (a)
Pro forma loss per share $ (0.45)$ (1.26) $ (1.95)$ (1.83)(b)
Pro forma weighted average common shares
outstanding 37,355,556 20,745,745 34,263,920 18,665,230
EBITDA loss $ (13,367)$ (5,226) $ (32,442)$(10,818)(c)
Adjusted gross profit $ 427 $ 457 $ 2,689 $ 1,270(d)
(a) During the three and nine months ended Sept. 30, 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. The calculation of the pro forma net loss per share includes the effect of the beneficial conversion feature assuming the Series C preferred stock converted at the initial public offering date pursuant to the original terms of the Series C preferred stock. (c) EBITDA excludes income from equity investment, net interest income, depreciation and amortization, stock-based compensation and amortization of vendor prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. , included in other cost of revenue.(d) Adjusted gross profit excludes stock-based compensation and amortization of vendor prepaid. |
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