Audible Announces Second Quarter 2006 Financial Results; Company Reports Net Revenue of $19.1 Million; Reports GAAP EPS of ($0.09) and Non-GAAP EPS of ($0.03); Achieves $1.7 million in free cash flow.WAYNE Wayne, city (1990 pop. 19,899), Wayne co., SE Mich., a suburb of Detroit, on the Lower Rouge River; inc. as a village 1869, and with surrounding areas as a city 1960. It has automobile and aircraft industries and other varied manufactures. , N.J. -- Audible A protected MP3 file format from the Audible.com audio download service. See Audible.com. , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ADBL ADBL Agricultural Development Bank Limited (Nepal) ; www.audible.com A Web site that offers a library of audio material for downloading and listening on a computer or an Audible-enabled digital music player. Either Audible's own software or iTunes is required to manage the files. ), the leading provider of spoken entertainment and information on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , today announced financial results for the second quarter ended June June: see month. 30, 2006. Audible reported consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net revenue for the second quarter 2006 of $19.1 million, up 25% year over year; GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). loss from operations of $2.9 million and non-GAAP loss from operations of $1.3 million, versus a non-GAAP loss from operations of $2.6 million in Q1-06. Non-GAAP figures exclude the impact of stock-based compensation expenses. GAAP net loss in Q2-06 was $2.2 million, or $0.09 net loss per share. Non-GAAP net loss was $0.6 million, or $0.03 net loss per share. Total AudibleListener(R) members acquired during the quarter was 65,200, representing growth of 25% year over year. At the end of Q2-06, the total number of AudibleListener members was 308,800, representing growth of 51% year over year, as churn churn: see butter. declined by 120 basis points quarter over quarter to 3.4%. "Q2 proved to be a very important quarter for Audible as we made substantial progress towards building an evermore ev·er·more adv. 1. Forever; always. 2. In a future time. evermore Adverb all time to come Adv. 1. data-driven organization that is committed to profitable growth, cost management and high quality operations," stated Donald Donald (Domnall, Domhnall, Dumhnuil, Dónall) is an anglicized version of a Scottish or Irish Gaelic personal name, containing the elements dumno "world" and val "rule", viz. "ruler of the world". Compare Dumnorix. Katz Katz , Bernard 1911-2003. German-born British physiologist. He shared a 1970 Nobel Prize for the study of nerve impulse transmission. , 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. , Audible, Inc. "Perhaps the most important accomplishment during the quarter was the new leadership we added in key operating functions - most notably in marketing, merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. , content acquisition and customer service. This new leadership, combined with our existing talent and the progress we are making in other critical areas of our business, is the foundation that will support our journey to very strong growth and profitability well into the future. 2006 continues to be a year of significant progress for Audible." Key Financial and Operating Metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. : Consolidated Net Revenue: Consolidated net revenue totaled $19.1 million in Q2-06, a 25% increase over the $15.3 million reported in Q2-05. Total Deferred Revenue: Total deferred revenue was $9.9 million at the end of Q2-06, a 15% increase over the $8.6 million reported at the end of Q1-06 and a 234% increase over the $3.0 million reported at the end of Q2-05. New AudibleListener(R) Members:* New AudibleListener members totaled 65,200 in Q2-06, a 25% increase over 52,100 in Q2-05. Total AudibleListener Members: AudibleListener members at the end of Q2-06 totaled 308,800, a 51% increase over 204,700 at the end of Q2-05. Total New Customers: Total new customers, which includes new AudibleListener(R) members and other new customers, totaled 78,600 in Q2-06, a 9% increase over 72,300 in Q2-05. GAAP Loss from Operations: GAAP loss from operations totaled $2.9 million in Q2-06, as compared to GAAP loss from operations of $3.7 million in Q1-06 and GAAP income from operations of $0.4 million in Q2-05. Non-GAAP Loss from Operations: Non-GAAP loss from operations totaled $1.3 million in Q2-06, as compared to Non-GAAP loss from operations of $2.6 million in Q1-06 and Non-GAAP income from operations of $0.6 million in Q2-05. GAAP Net Loss: GAAP net loss totaled $2.2 million, or $0.09 net loss per share in Q2-06. Non-GAAP Net Loss: Non-GAAP net loss totaled $0.6 million, or $0.03 net loss per share in Q2-06. Operating Cash Flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. : operating cash flow totaled $2.0 million in Q2-06. Free Cash Flow: free cash flow totaled $1.7 million in Q2-06. Cash, Cash Equivalents, 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: Audible's cash, cash equivalents, and short-term investments totaled $60.5 million at the end of Q2-06. * See page 9 for detailed disclosure of historical AudibleListener membership metrics Conference Call Senior management will host an investor teleconference at 5:00 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT today, to discuss second quarter results as well as related financial and operational developments. A live webcast of the conference call is available at www.audible.com/ir for audio streaming See streaming audio. access to the call. To participate in the call, the dial-in number is (800) 967-7141 or +1(719) 457-2630. The confirmation code is 4100042. To sign up for the podcast (iPOD broadCAST) An audio broadcast that has been converted to an MP3 file or other audio file format for playback in a digital music player or computer. The "pod" in podcast was coined from "iPod," the predominant portable, digital music player, and although podcasts are of the earnings call through Audible Wordcast, please go to the Webcast & Presentation section of Audible's Investor Relations Investor relations The process by which the corporation communicates with its investors. Web site (www.audible.com/ir). Non-GAAP Measures To supplement the company's consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP, Audible uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP income (loss) from operations, non-GAAP net (loss) income, and non-GAAP net (loss) income per share. Non-GAAP figures exclude the impact of employee stock-based compensation expenses. Audible's reference to these measures should be considered in addition to results that are prepared under U.S. GAAP but should not be considered a substitute for results that are presented in accordance with GAAP. These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future and provide further information for comparative information due to the adoption of the new accounting standard FAS 123(R) on January January: see month. 1, 2006. The company believes the non-GAAP measures provide useful information to both management and investors by excluding the non-cash impact of employee stock-based compensation expenses, which may not be indicative indicative: see mood. of the company's core operating results and business outlook. Additionally, management believes that free cash flow, a non-GAAP measure, is a useful measure of liquidity because it includes cash provided by operating activities as well as the impact of cash used for investment in property and equipment and capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. software development costs. Reconciliation to the nearest GAAP measure of all non-GAAP measures included in this press release can be found in the financial table included on page 6. About Audible, Inc. Audible (www.audible.com) is the leading provider of spoken entertainment and information on the Internet. Content from Audible is downloaded and played back on personal computers, CDs, or AudibleReady(R) computer-based mobile devices. Audible has 105,000 hours of audio programming from 334 content partners, including leading audiobook publishers, broadcasters, entertainers, magazine and newspaper publishers, and business information providers. Audible.com is the Apple iTunes Digital jukebox software for the Mac and Windows from Apple. Designed to transfer music to the iPod and iPhone and administer the copy protection on purchased music titles, iTunes is extremely popular because of its ease of use. Music Store's preeminent pre·em·i·nent or pre-em·i·nent adj. Superior to or notable above all others; outstanding. See Synonyms at dominant, noted. [Middle English, from Latin prae provider of spoken products for downloading downloading - download or streaming via the Web. Among Audible's other key business relationships are Bookspan, Creative Labs, Dell, iriver iriver (formerly iRiver) is a brand and division of ReignCom, manufacturer of digital audio players and other portable products. They typically include USB mass storage, or the Media Transfer Protocol, multiple codecs, FM tuners, recording capabilities, and upgradeable , Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. , Palm, SanDisk This article is about SanDisk Corporation. For Computer Storage Device in Storage Area Network (SAN), see Storage Area Network. SanDisk Corporation (NASDAQ: SNDK), formerly SunDisk , Sony Ericsson For an arrangement of Sony Ericsson products, see list of Sony Ericsson products Sony Ericsson is a joint venture established in 2001 by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. and XM Satellite Radio. Audible, www.audible.com, www.audible.co.uk, AudibleListener, and AudibleReady are registered trademarks of Audible, Inc. and all are part of the family of Audible, Inc. trademarks. Other product or service names mentioned herein are the trademarks of their respective owners. This press release contains information about Audible, Inc. that is not historical fact and may be deemed to contain 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. about the company. Actual results may differ materially from those anticipated in any forward-looking statements as a result of certain risks and uncertainties, including, without limitation, Audible's limited operating history, history of losses, uncertain market for its services, and its inability to license or produce compelling audio content and other risks and uncertainties detailed in the company's Securities and Exchange Commission filings.
AUDIBLE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
Three months ended
-----------------------------------
June 30, March 31, June 30,
2006 2006 2005
----------- ----------- -----------
Revenue, net:
Content and services:
Consumer content $18,835 $19,281 $15,159
Point of sale rebates (126) (167) (231)
Services 26 33 21
----------- ----------- -----------
Total content and services 18,735 19,147 14,949
Hardware 85 125 86
Related party revenue 257 373 259
Other 64 70 4
----------- ----------- -----------
Total revenue, net 19,141 19,715 15,298
Operating expenses:
Cost of content and services
revenue:
Royalties and other content
charges 7,720 7,983 5,414
Discount certificate rebates 305 298 363
----------- ----------- -----------
Total cost of content and
services revenue 8,025 8,281 5,777
Cost of hardware revenue 206 675 301
Cost of related party revenue 42 158 44
Operations 2,861 3,102 2,275
Technology and development 4,484 3,694 1,843
Marketing 3,573 4,301 2,935
General and administrative 2,843 3,201 1,689
----------- ----------- -----------
Total operating expenses 22,034 23,412 14,864
----------- ----------- -----------
(Loss) income from operations (2,893) (3,697) 434
Other income (expense):
Interest income 714 660 456
Interest expense - - -
----------- ----------- -----------
Other income, net 714 660 456
----------- ----------- -----------
(Loss) income before income taxes (2,179) (3,037) 890
Income tax expense (3) (3) (67)
----------- ----------- -----------
Net (loss) income $(2,182) $(3,040) $823
=========== =========== ===========
Basic net (loss) income per common
share $(0.09) $(0.12) $0.03
Basic weighted average common
shares outstanding 24,501,629 24,481,751 24,169,396
Diluted net (loss) income per
common share $(0.09) $(0.12) $0.03
Diluted weighted average common
shares outstanding 24,501,629 24,481,751 25,987,000
Six months ended
-----------------------
June 30, June 30,
2006 2005
----------- -----------
Revenue, net:
Content and services:
Consumer content $38,116 $27,997
Point of sale rebates (293) (587)
Services 59 40
----------- -----------
Total content and services 37,882 27,450
Hardware 210 190
Related party revenue 630 533
Other 134 29
----------- -----------
Total revenue, net 38,856 28,202
Operating expenses:
Cost of content and services revenue:
Royalties and other content charges 15,703 9,567
Discount certificate rebates 603 964
----------- -----------
Total cost of content and services revenue 16,306 10,531
Cost of hardware revenue 881 595
Cost of related party revenue 200 74
Operations 5,963 4,122
Technology and development 8,178 3,468
Marketing 7,874 5,195
General and administrative 6,044 3,225
----------- -----------
Total operating expenses 45,446 27,210
----------- -----------
(Loss) income from operations (6,590) 992
Other income (expense):
Interest income 1,374 870
Interest expense - (1)
----------- -----------
Other income, net 1,374 869
----------- -----------
(Loss) income before income taxes (5,216) 1,861
Income tax expense (6) (148)
----------- -----------
Net (loss) income $(5,222)$ $1,713
=========== ===========
Basic net (loss) income per common share $(0.21) $0.07
Basic weighted average common shares
outstanding 24,491,745 24,089,237
Diluted net (loss) income per common share $(0.21) $0.07
Diluted weighted average common shares
outstanding 24,491,745 26,052,104
AUDIBLE, INC. AND SUBSIDIARY
NON-GAAP INFORMATION
(in thousands, except share and per share amounts)
(Unaudited)
Three months ended
-----------------------------------
June 30, March 31, June 30,
2006 2006 2005
----------- ----------- -----------
Stock-based compensation included
in expense line items:
Operations $300 $143 $37
Technology and development 287 131 2
Marketing 321 204 10
General and administrative 655 616 86
----------- ----------- -----------
$1,563 $1,094 $135
----------- ----------- -----------
Reconciliation to Non-GAAP
Financial Measures (unaudited)
(Loss) income from operations $(2,893) $(3,697) $434
Add back:
Stock-based compensation 1,563 1,094 135
----------- ----------- -----------
Non-GAAP (loss) income from
operations $(1,330) $(2,603) $569
=========== =========== ===========
Reconciliation to Non-GAAP
Financial Measures (unaudited)
Net (loss) income $(2,182) $(3,040) $823
Add back:
Stock-based compensation 1,563 1,094 135
----------- ----------- -----------
Non-GAAP net (loss) income $(619) $(1,946) $958
=========== =========== ===========
Non-GAAP net (loss) income per
share
Basic $(0.03) $(0.08) $0.04
Diluted $(0.03) $(0.08) $0.04
Weighted average common shares
outstanding
Basic 24,501,629 24,481,751 24,169,396
Diluted 24,501,629 24,481,751 25,987,000
Reconciliation to Non-GAAP
Financial Measures (unaudited)
Net provided by (used in)
operating activities $1,994 $(3,646) $1,674
Purchases of property and
equipment and capital lease
payments (257) (3,716) (1,254)
Capitalized software development
costs (56) (198) --
----------- ----------- -----------
Non-GAAP free cash flow $1,681 $(7,560) $420
=========== =========== ===========
Six months ended
June 30
-----------------------
2006 2005
----------- -----------
Stock-based compensation included in expense
line items:
Operations $443 $55
Technology and development 418 4
Marketing 525 13
General and administrative 1,271 100
----------- -----------
$2,657 $172
----------- -----------
Reconciliation to Non-GAAP Financial Measures
(unaudited)
(Loss) income from operations $(6,590) $992
Add back:
Stock-based compensation 2,657 172
----------- -----------
Non-GAAP (loss) income from operations $(3,933) $1,164
=========== ===========
Reconciliation to Non-GAAP Financial Measures
(unaudited)
Net (loss) income $(5,222) $1,713
Add back:
Stock-based compensation 2,657 172
----------- -----------
Non-GAAP net (loss) income $(2,565) $1,885
=========== ===========
Non-GAAP net (loss) income per share
Basic $(0.10) $0.08
Diluted $(0.10) $0.08
Weighted average common shares outstanding
Basic 24,491,745 24,089,237
Diluted 24,491,745 26,052,104
Reconciliation to Non-GAAP Financial Measures
(unaudited)
Net provided by (used in) operating
activities $(1,651) $5,179
Purchases of property and equipment and
capital lease payments (3,973) (1,838)
Capitalized software development costs (254) --
----------- -----------
Non-GAAP free cash flow $(5,878) $3,341
=========== ===========
AUDIBLE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
Assets 2006 2005
----------- ------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 10,707 $ 11,549
Short-term investments 49,834 55,616
Interest receivable on short-term
investments 495 428
Accounts receivable, net of allowance 1,930 2,337
Accounts receivable, related parties 607 594
Royalty advances 431 471
Prepaid expenses and other current assets 1,696 899
Inventory 801 498
----------- ------------
Total current assets 66,501 72,392
Property and equipment, net 10,001 8,159
Other assets 935 114
----------- ------------
Total Assets $ 77,437 $ 80,665
=========== ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 2,698 $ 4,750
Accrued expenses 3,633 4,802
Accrued royalties 5,111 5,104
Accrued compensation 1,297 868
Deferred revenue, current 9,639 6,459
----------- ------------
Total current liabilities 22,378 21,983
Deferred revenue, non current 271 99
Royalty obligations, non current 172 188
Commitments and contingencies
Stockholders' Equity:
Common stock 244 243
Additional paid-in capital 190,324 192,547
Deferred compensation - (3,696)
Accumulated other comprehensive (loss)
income (16) 15
Accumulated deficit (135,936) (130,714)
----------- ------------
Total Stockholders' Equity 54,616 58,395
----------- ------------
Total Liabilities and Stockholders' Equity $ 77,437 $ 80,665
=========== ============
AUDIBLE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three months ended Six months ended
June 30, June 30,
----------------- -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Cash flows from operating
activities:
Net (loss) income $ (2,182)$ 823 $ (5,222)$ 1,713
Adjustments to reconcile net
(loss) income to net cash
provided by (used in) operating
activities:
Depreciation and amortization 1,263 238 2,385 377
Non-cash stock-based
compensation charge 1,563 135 2,657 172
Accretion of discounts on
short-term investments (219) (325) (449) (626)
Income tax effect from
exercise of stock options - 125 - 147
Changes in assets and liabilities:
Interest receivable on short-
term investments (102) (125) (67) (76)
Accounts receivable, net 991 (549) 409 (690)
Accounts receivable, related
parties (10) 104 (13) 42
Royalty advances 29 (191) 40 (255)
Prepaid expenses and other
current assets 286 (505) (797) (264)
Inventory (524) 223 (301) 243
Other assets (47) - (821) (11)
Accounts payable 356 (480) (2,057) 627
Accrued expenses (707) 733 (1,189) 933
Accrued royalties (7) 877 - 2,059
Accrued compensation 32 201 425 275
Deferred revenue 1,273 390 3,349 513
-------- -------- -------- --------
Net cash provided by (used in)
operating activities 1,995 1,674 (1,651) 5,179
-------- -------- -------- --------
Cash flows from investing
activities:
Purchases of property and
equipment (257) (1,254) (3,973) (1,717)
Capitalized software
development costs (56) - (254) -
Purchases of short-term
investments (20,605) (20,933) (35,569) (32,649)
Proceeds from maturity of
short-term investments 17,300 21,000 41,800 26,000
-------- -------- -------- --------
Net cash (used in) provided by
investing activities (3,618) (1,187) 2,004 (8,366)
-------- -------- -------- --------
Cash flows from financing
activities:
Proceeds from exercise of
common stock options 203 229 354 295
Proceeds from exercise of
common stock warrants - 317 750 590
Principal payments made on
capital lease obligations - - - (121)
Repurchase of treasury stock
at cost (1,927) - (2,287) -
-------- -------- -------- --------
Net cash (used in) provided by
financing activities (1,724) 546 (1,183) 764
-------- -------- -------- --------
Effect of exchange rate changes on
cash and cash equivalents (7) 14 (12) 14
-------- -------- -------- --------
(Decrease) increase in cash
and cash equivalents (3,354) 1,047 (842) (2,409)
Cash and cash equivalents at
beginning of period 14,061 9,840 11,549 13,296
-------- -------- -------- --------
Cash and cash equivalents at end
of period $ 10,707 $ 10,887 $ 10,707 $ 10,887
======== ======== ======== ========
AUDIBLE, INC. AND SUBSIDIARY
UNAUDITED SUPPLEMENTAL OPERATING DATA
(Numbers in thousands)
New AudibleListener Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Membership Reporting: 2004 2004 2004 2005 2005 2005 2005 2006 2006
----------------------
Total AudibleListener(R)
Members(1) 115 132 157 186 205 224 245 279 309
Year-over-year -- -- -- 77% 77% 70% 56% 50% 51%
Quarter-over-quarter 10% 14% 20% 18% 10% 9% 10% 14% 11%
New AudibleListener(R)
Members(2) 22 29 39 54 52 60 62 79 65
Year-over-year -- -- -- 143% 141% 104% 58% 46% 25%
Quarter-over-quarter -2% 35% 34% 37% -3% 15% 4% 26% -17%
Average Monthly Churn in
AudibleListener(R)
Members(3) 3.0% 3.0% 2.6% 4.0% 4.7% 5.1% 4.8% 4.6% 3.4%
Cost per New AL $64 $62 $64 $52 $58 $58 $95 $52 $45
(1) Total number of AudibleListener(R) members at the end of the
period.
(2) Total number of new AudibleListener(R) members added during the
period. Members canceling and rejoining a membership within the
same day are counted as one membership.
(3) Churn is defined as member cancellations in the period divided by
the sum of members at the beginning of the period plus gross
member adds, divided by three months.
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