|
LOS 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 loss for the full-year 2001, according to 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 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 recognized in the first
quarter in connection with the automatic conversion of the company's
Series C Redeemable Preferred Stock upon completion of its initial public
offering ("IPO") and interest accrual in connection with a currently
contemplated rescission 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 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 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), 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, Metallica, Foo Fighters, k.d. lang, Marilyn Manson 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 and other Web-based exposure programs for several
major brands. Another multi-part brand program was launched in October,
including an Acoustic Series which ARTISTdirect produced and managed,
featuring artists such as Beck, The Foo Fighters, and Incubus.
In Oct. 2000, ARTISTdirect relaunched ARTISTdirect.com as a fully
integrated 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 to develop back-end support
for a streaming jukebox 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 stations
in partnership with RadioWave.
"We are confident that simple, legal digital distribution of a
comprehensive catalog of music, through both streaming and downloading,
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 to deliver downloads from
Universal Music Group, BMG 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, California.
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, 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 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, current report on Form 8-K and its Registration Statements on
Form S-1 and all amendments thereto. 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, included in other cost of revenue.
(d) Adjusted gross profit excludes stock-based compensation and
amortization of vendor prepaid.
| CONTACT: |
ARTISTdirect Inc. |
|
James B. Carroll, 323/634-4022 |
|
jim.carroll@artistdirect.com | |
