NAPS Napster (MM)

Napster (NASDAQ:NAPS) today reported financial results for its first quarter ended June 30, 2008. �Napster delivered a solid first quarter of $30.3 million in sales, which was relatively flat compared to the fourth quarter of fiscal 2008 reflecting the beginning of the summer season,� said Chris Gorog, chairman and CEO. �Our continued focus on expenses resulted in cash flow positive results for our fifth consecutive quarter, and we are pleased to begin to see the positive impacts from both the launch of our new MP3 store and the expansion of Napster Mobile. The introduction of MP3�s into our line-up has created positive trends for Napster with increases to visitation and user engagement. In addition, track sales per subscriber were up 10% in July, month over month, with total track sales up 5% during the same period. The roll out of Napster Mobile is driving forward and Napster compatible handsets will expand by millions of new units in the coming months. We expect that Napster Mobile will make the most significant contribution to our growth in fiscal 2009 bolstered by the integration of MP3 sales into our product line-up.� Napster also announced that its award-winning music subscription service will be offered on Lenovo�s new line of consumer notebook computers in the U.S. and Canada. Lenovo is one of the top four computer manufacturers globally in terms of market share. Net revenue for the first quarter of fiscal 2009 was $30.3 million compared to $30.8 million in the fourth quarter of fiscal 2008. Gross margin increased to 27% in the first quarter of fiscal 2009 compared to 26% in the fourth quarter of fiscal 2008. Net loss for the first quarter of fiscal 2009 was $4.4 million, or $0.10 per basic and diluted share, compared to a net loss of $4.3 million, or $0.10 per basic and diluted share, in the fourth quarter of fiscal 2008. Napster ended the first fiscal quarter with a total of $70.3 million of cash, cash equivalents and investments, up $500,000 from $69.8 million at March 31, 2008. Napster had approximately 708,000 paid subscribers at June 30, 2008 compared to 760,000 paid subscribers at March 31, 2008. Business Outlook �We expect our second fiscal quarter revenue to be approximately $30 million depending on the pace of our Napster Mobile roll outs, including new compatible handsets and carrier promotions, as well as other new marketing initiatives. We are targeting a relatively flat spend during the second quarter, excluding one-time items. Considering our stronger holiday seasonal patterns and the anticipated further expansion of Napster Mobile later this year, we expect revenue to increase in the second half of fiscal 2009,� said Suzanne M. Colvin, Napster�s interim chief financial officer. Conference Call Information The Napster first-quarter teleconference and webcast is scheduled to begin at 2:00 p.m. PDT on Monday, August 11, 2008. To participate on the live call, analysts and investors should dial 800-366-3964 at least ten minutes prior to the call. Napster will also offer a live and archived webcast of the conference call, accessible from the "Investor Relations" section of the company�s Web site at http://investor.napster.com. About Napster Napster, the pioneer of digital music, offers the ultimate in interactive music experiences, creating better ways to discover, share, acquire and enjoy music -- anytime, anywhere. The Company's offerings include "Napster" (www.Napster.com) -- the premier online music destination featuring the most popular on-demand music subscription service in the world and the largest, most comprehensive MP3 download store on the market; "Freenapster" (www.freenapster.com) -- a unique Web experience offering free on demand music legally; and "Napster Mobile" -- one of the industry's fastest growing mobile music platforms. Headquartered in Los Angeles, Napster's services are available in markets across the Americas, Europe and Japan. Safe Harbor Statement Except for historical information, the matters discussed in this press release (including the matters set forth under �Business Outlook� , Napster�s expectation that Napster compatible handsets will expand by millions of new units in the coming months and Napster�s expectations regarding the contribution to its growth from Napster Mobile in fiscal 2009) are forward-looking statements that are subject to certain risks and uncertainties such as our limited operating history; failure to develop new products and services; flaws inherent in our products or services; decreased demand for our products and services; failure of our products to interoperate with the hardware products of our customers; the adoption rate of mobile platforms as a method of digital music purchase, including the rate of adoption of music-enabled cell phones compatible with the Company's service offerings; intense and varied competition; failure to maintain relationships with strategic partners and content providers; and general economic conditions; that could cause actual results to differ materially from those projected. Additional information on these and other factors are contained in Napster's reports filed with the Securities and Exchange Commission (SEC), including the Company's Quarterly Report on Form 10-Q as filed with the SEC on August 11, 2008, copies of which are available at the website maintained by the SEC at http://www.sec.gov. Napster assumes no obligation to update the forward-looking statements included in this press release. Copyright � 2008 Napster, LLC. All rights reserved. Napster is a registered trademark of Napster, Inc. or its subsidiaries in the United States and/or other countries. All other trademarks are owned by their respective owners. NAPSTER, INC. � CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited) � As of June 30, 2008 � March 31, 2008 ASSETS Current assets: Cash and cash equivalents $ 36,881 $ 32,628 Short-term investments 30,731 37,164 Accounts receivable, net of allowance for doubtful accounts of $41 at June 30, 2008 and $16 at March 31, 2008 2,476 2,365 Prepaid expenses and other current assets � 3,576 � � 2,289 � Total current assets 73,664 74,446 Long-term investments 2,708 - Property and equipment, net 2,909 3,358 Goodwill 34,658 34,658 Identifiable intangible assets, net 3,011 3,560 Other assets � 381 � � 285 � Total assets $ 117,331 � $ 116,307 � � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,950 $ 1,745 Accrued liabilities 35,772 31,166 Deferred revenues � 5,696 � � 6,474 � Total current liabilities 44,418 39,385 Long-term liabilities Deferred income taxes 4,830 4,593 Other long-term liabilities � 47 � � 28 � Total liabilities � 49,295 � � 44,006 � Stockholders' equity: Common stock, $0.001 par value; Authorized: 100,000 shares; Issued and Outstanding: 47,853 shares at June 30, 2008 and 46,122 shares at March 31, 2008 48 46 Additional paid-in capital 266,931 266,447 Accumulated deficit (199,028 ) (194,646 ) Accumulated other comprehensive income � 85 � � 454 � Total stockholders' equity � 68,036 � � 72,301 � � Total liabilities and stockholders' equity $ 117,331 � $ 116,307 � NAPSTER, INC. � CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) � � Three Months Ended June 30, � March 31, � June 30, 2008 2008 2007 � Net Revenues: $ 30,317 $ 30,782 $ 32,254 � Cost of revenues: � 22,012 � � 22,630 � � 23,451 � � Gross margin � 8,305 � � 8,152 � � 8,803 � � Gross margin % 27 % 26 % 27 % � Operating expenses: Research and development 2,015 2,357 2,712 Sales and marketing 3,970 4,442 3,991 General and administrative 6,514 5,418 5,965 Amortization of intangible assets � 550 � � 680 � � 1,539 � Total operating expenses � 13,049 � � 12,897 � � 14,207 � � Loss from continuing operations (4,744 ) (4,745 ) (5,404 ) � Other income, net � 339 � � 787 � � 1,431 � � Loss before income tax benefit (provision) (4,405 ) (3,958 ) (3,973 ) Income tax benefit (provision) � 23 � � (340 ) � (271 ) � Net loss $ (4,382 ) $ (4,298 ) $ (4,244 ) � Basic and diluted net loss per share $ (0.10 ) $ (0.10 ) $ (0.10 ) � Weighted average shares used in computing net loss per share Basic and diluted � 43,868 � � 43,631 � � 43,408 �