ARTISTdirect Reports Results for Third Quarter 2001; $60.6 Million Cash Position At September 30, 2001.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--Oct. 25, 2001 ARTISTdirect Founded in 1994, Artistdirect, Inc. is an online digital media entertainment company. It owns several websites including Artistdirect.com, UBL.com, Loserkids.com and the Artistdirect Network. , Inc. (Nasdaq: ARTD) today announced financial results for its third quarter ended September September: see month. 30, 2001. Net revenue for the period was $2.3 million, compared with $5.6 million in the third quarter of 2000. 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 quarter was $5.0 million compared with $13.4 million in the year ago period, and improved from the $6.2 million EBITDA loss in the second quarter of 2001. As of September 30, 2001, cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments totaled $60.6 million, or $17.05 per share, and stockholder's equity Stockholder's equity The residual claims that stockholders have against a firm's assets, calculated by subtracting all current liabilities and debt liabilities from total assets. was $56.9 million, or $15.99 per share (using common shares outstanding at that date). Ted Field, ARTISTdirect Chairman and 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. , commented, "We are continuing to make steady progress in our commitment to realign re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. the Company's cost structure as reflected in the $1.2 million improvement in our EBITDA loss over the second quarter and the $8.4 million improvement over the third quarter of last year." "I am also pleased to report positive developments at ARTISTdirect Records, with the signing of three new artists and a single from our new rock act, Custom, being well-received by radio stations across the country." "With cash and short-term investments of $60.6 million at September 30th, steady reduction of our losses, and significant progress on building our joint-venture record label, we believe that ARTISTdirect is better positioned today than at any time in its recent past," Mr. Field concluded. Financial results Net revenue for the third quarter of 2001 decreased 58% to $2.3 million, compared with $5.6 million in the third quarter of 2000. Net loss for the quarter was $19.6 million, compared with a net loss of $16.9 million for the third quarter of 2000. Basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss per share was $5.48 for the third quarter of 2001, compared to $4.53 for the third quarter of 2000, in each case based upon weighted average shares outstanding for the period adjusted for the one-for-ten reverse split in July July: see month. 2001. EBITDA loss for the third quarter of 2001 was $5.0 million, compared with $13.4 million in the prior year period and $6.2 million in the second quarter of 2001. In addition, the Company recognized a $7.0 million loss from impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill related to the acquisitions of iMusic and the Ultimate Band List, both in 1999. This impairment was a result of the weak outlook for revenue generated by these assets. Revenue from e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. in the third quarter decreased 52% to $1.6 million from $3.3 million during the same period in 2000. Advertising revenue for the third quarter was $420,000, a decrease of 66% from the same period in 2000. The Company experienced continued weakness in the overall advertising market and expects this condition to persist for at least the remainder of 2001. Open market 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. program In May 2001, the Company's Board of Directors approved a $2 million share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program. During the three months ended September 30, 2001, the Company completed the repurchase of 27,528 shares for an aggregate of $163,066, or an average of $5.92 per share. ABOUT ARTISTdirect, Inc. ARTISTdirect Inc. (Nasdaq: ARTD) is a music entertainment company that combines an online music network with offline (1) Not connected to the Internet, online service or internal network. See offline file. (2) Not connected to or not installed in the computer. If a terminal, printer or other device is physically connected to the computer, but is not turned on or in ready mode, it is assets to provide an integrated solution for music fans, artists and marketing partners. The ARTISTdirect network (www.artistdirect.com) is a network of Web sites offering multi-media content, music news and information, community around shared music interests, music related commerce 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. Through its co-venture, ARTISTdirect Records, the Company operates a record label. 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. . 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 news 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. These projections and statements involve risks and uncertainties. Readers are cautioned that these statements are based on information currently available to management and are only predictions. These predictions may differ materially from the Company's actual future events or results. Potential risks and uncertainties that may affect future events and the Company's business, financial status and operating results include, among others, the Company's ability to reduce costs and increase revenue, the ability of ARTISTdirect and Mr. Field to successfully implement and operate the Company's new record label co-venture, general uncertainties related to amounts spent on online advertising and e-commerce, ARTISTdirect's ability to attract new artists and retain existing artists, competition in its industry, 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, and ability to protect and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. obtain intellectual property rights. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, ARTISTdirect cannot assure the public that future results will meet these expectations. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. ARTISTdirect 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 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , 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,
2001 2000
--------- --------
Assets
Current assets:
Cash and cash equivalents $ 40,658 $ 51,457
Cash held for clients 260 743
Marketable securities 19,942 36,368
Accounts receivable, net 388 948
Prepaid expenses and other current
assets 4,142 3,218
-------- --------
Total current assets 65,390 92,734
Property and equipment, net 7,011 9,057
Goodwill and intangibles, net 936 15,018
Other assets, net 411 1,696
-------- --------
$ 73,748 $118,505
======== ========
Liabilities, Redeemable Securities
and Stockholders' Equity
Current liabilities:
Cash held for clients $ 260 $ 743
Accounts payable 642 2,257
Accrued expenses 3,600 5,186
Loans and notes payable 198 178
Deferred revenue -- 34
-------- --------
Total current liabilities 4,700 8,398
1,009 1,530
-------- --------
Total liabilities 5,709 9,928
-------- --------
Redeemable securities 11,189 10,778
-------- --------
Stockholders' equity:
Common stock 379 379
Treasury stock (2,663) --
Additional paid-in-capital 198,861 200,690
Unearned compensation (9,428) (20,364)
Accumulated deficit (130,299) (82,906)
-------- --------
Total stockholders' equity 56,850 97,799
-------- --------
$ 73,748 $118,505
======== ========
ARTISTdirect, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except for share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------- -------- -------- --------
2001 2000 2001 2000
-------- -------- -------- --------
Net revenue:
E-Commerce $ 1,569 $ 3,265 $ 5,651 $ 7,874
Media 420 1,246 2,205 5,016
Agency 359 1,051 738 2,523
Record label -- -- -- 244
-------- -------- -------- --------
Total net revenue 2,348 5,562 8,594 15,657
Cost of revenue:
Direct cost of product
sales 1,279 2,813 4,698 7,051
Other cost of revenue 1,423 2,405 4,713 6,167
Stock-based compensation 1,549 1,678 4,648 6,150
-------- -------- -------- --------
Total cost of revenue 4,251 6,896 14,059 19,368
Gross loss (1,903) (1,334) (5,465) (3,711)
Operating expenses:
Web site development 456 1,271 3,269 2,757
Sales and marketing 1,145 7,749 5,053 19,542
General and
administrative 3,040 4,774 10,877 12,832
Amortization of
stock-based compensation 1,569 1,725 4,859 3,116
Depreciation and
amortization 1,789 1,684 5,429 4,315
Loss from impairment
of goodwill 6,986 -- 11,444 --
-------- -------- -------- --------
Loss from operations (16,888) (18,537) (46,396) (46,273)
Income/(loss) from
equity investments (3,331) -- (4,054) 15
Interest income, net 858 1,462 3,057 3,993
-------- -------- -------- --------
Net loss $(19,361) $(17,075) (47,393) (42,265)
Interest on rescission
offer 196 (154) 533 339
Dividend on redeemable stock -- -- -- 963
Beneficial conversion
feature on redeemable
preferred stock -- -- -- 24,375
-------- -------- -------- --------
Net loss attributable
to common shareholders $(19,557) $(16,921) $(47,926) $(67,942)
======== ======== ======== ========
Basic and diluted loss
per share $ (5.48) $ (4.53) $ (13.11) $ (22.90)
======== ======== ======== ========
Weighted average common
shares outstanding 3,568,577 3,735,555 3,656,333 2,966,541/a
======== ======== ======== ========
Pro forma loss per share $ (5.48) $ (4.53) $(13.11) $(19.55)/b
======== ======== ======== ========
Pro forma weighted
average common shares
outstanding 3,568,577 3,735,555 3,656,333 3,426,392/a
======== ======== ======== ========
EBITDA loss $ (4,995) $(13,367) $(19,877) $(32,442)/c
======== ======== ======== ========
Adjusted gross
profit/(loss) $ (354) $ 427 $ (678) $ 2,689/d
======== ======== ======== ========
(a) On July 5, 2001, the Company declared a 1 for 10 reverse stock
split. The outstanding common shares have been retroactively
adjusted to reflect the reverse stock split.
(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 October 1999
and its Redeemable Preferred Securities, which were converted to
common shares at March 28, 2000, 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/(loss) from equity investment, net interest
income, depreciation and amortization, stock-based compensation,
loss on impairment of goodwill and amortization of vendor prepaid,
included in other cost of revenue.
(d) Adjusted gross profit/(loss) excludes stock based compensation and
amortization of vendor prepaid.
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