ADBL Audible (MM)

Audible, Inc. (NASDAQ: ADBL; www.audible.com), the leading provider of spoken entertainment and information on the Internet, today announced financial results for the second quarter ended June 30, 2006. Audible reported consolidated net revenue for the second quarter 2006 of $19.1 million, up 25% year over year; 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 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 data-driven organization that is committed to profitable growth, cost management and high quality operations," stated Donald Katz, Chairman and CEO, 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, 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: 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 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 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 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 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 of the earnings call through Audible Wordcast, please go to the Webcast & Presentation section of Audible's Investor Relations Web site (www.audible.com/ir). Non-GAAP Measures To supplement the company's consolidated financial statements presented in accordance 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 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 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 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 Music Store's preeminent provider of spoken products for downloading or streaming via the Web. Among Audible's other key business relationships are Bookspan, Creative Labs, Dell, iriver, Microsoft, Palm, SanDisk, Sony Ericsson 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 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. -0- *T 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. *T