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LOS 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 basis after giving effect to the conversion of the company's
redeemable preferred stock to common shares in connection with the
company's initial public offering ("IPO"), 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
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 of ARTISTdirect, commented: "Our strong first-quarter
results demonstrate the soundness of our business model, combining great
revenue growth with well-managed operating expenses. 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, added: "With our recently completed
IPO, we have the capital resources necessary to execute our business plan.
We have solidified 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 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 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 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 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 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.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, a retail site offering a
wide selection of recorded music and artist merchandise.
Additionally, ARTISTdirect Inc. operates the ARTISTdirect Talent Agency
and manages Kneeling Elephant Records. The company has offices in New
York, Los Angeles, San Francisco and London.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995: This release may contain projections or other forward-looking
statements 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 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 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.
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.
CONTACT: ARTISTdirect Inc., Los Angeles
James B. Carroll,
323/634-4022
jim.carroll@artistdirect.com |
