LOS ANGELES (Napster PR) - Napster, the biggest brand in digital music, today reported financial results for its fourth quarter and fiscal year ended March 31, 2005.
"Napster maintained its position as the most innovative and fastest growing online music subscription service by ending its first fiscal year with revenue of $46.7 million and 412,000 subscribers," said Chris Gorog, Napster's chairman and CEO.
"Fourth quarter revenue grew 188% over the prior year quarter with the very successful launch of Napster To Go, the first portable music subscription service in the world, driving sales performance. We recently delivered on our commitment to expand our service and grow our audience with the availability of our Napstertones mobileproduct, which makes the hottest ringtones and exclusive Napster graphics and wallpaper available to almost 70 million cellphone users in the U.S. We ended fiscal 2005 with a very strong cash and short term investment position and are very excited to execute on our growth plans for fiscal 2006."
Net revenue from continuing operations for the fourth quarter of fiscal 2005 grew to $17.4 million, 188% over the prior year quarter and a 44% increase from $12.1 million in the immediately preceding quarter. Net loss from continuing operations, after income tax benefit (provision), was ($24.1) million for the fourth quarter of fiscal 2005, or ($0.59) per basic and diluted share, compared to a net loss from continuing operations, after income tax benefit (provision), of ($12.2) million or ($0.37) per basic and diluted share in the fourth quarter of fiscal 2004.
Net revenue from continuing operations for the fiscal year ended March 31, 2005 was $46.7 million, as compared to net revenue from continuing operations of $12.0 million for fiscal 2004. Net loss from continuing operations, after income tax benefit (provision), for fiscal 2005 was ($51.4) million, or ($1.43) per basic and diluted share, compared to a net loss from continuing operations, after tax benefit (provision), of ($46.4) million, or ($1.69) per basic and diluted share, in fiscal 2004.
Napster ended fiscal 2005 with $158 million in cash, cash equivalents and short-term investments, plus $14.5 million in value of shares of Sonic Solutions stock, including the associated hedge.
Business Outlook
For the first quarter of fiscal 2006 Napster expects revenue to increase to $19-21 million, which reflects more modest growth due to the start of typical summer seasonality for both Internet usage and music sales and the university summer recess which causes a seasonal cancellation of most university subscriber accounts.
"We believe that the promotion of new subscription services by competitors will expand the market. Based on our discussions with record labels, it is clear that very aggressive introductory pricing for portable subscriptions from competitors will be at negative gross margins and we believe that consumers should expect rapid price increases. We further believe that most consumers will demand that that a paid subscription service should be an ad-free environment and Napster is committed to offering true music fans a safe haven.
Napster has, and continues to outsell many significant competitors both in downloads and subscription because of the quality of our experience and the power of the Napster brand. We are in development on a number of new initiatives that could significantly improve the margins of our business by leveraging the Napster brand further into the on-line and physical world with new products and services. With the fastest growing online subscription service in the industry, a subscriber base in excess of 400,000 music fans and a very healthy balance sheet, we believe we will continue to compete very successfully against any new entrants," concluded Mr. Gorog.
