The Orchard (NASDAQ: ORCD), a global leader in music and video
distribution and comprehensive digital strategy, today reported
financial results for the first quarter ended March 31, 2010.
Highlights for First Quarter Ended March 31, 2010
Revenue increased 16% to $17.8 million in the first quarter of
2010 from $15.3 million in the first quarter of 2009.
The Orchard’s gross profit margin was 25% in the first quarter
of 2010, as compared to 28% in the first quarter of 2009.
Operating expenses for the first quarter of 2010 were $4.9
million, compared to $5.7 million in the corresponding period of
2009. This decrease in operating expenses is primarily a result of
a reduction in workforce during the third quarter of 2009, in
addition to other cost cutting initiatives.
The net loss for the first quarter of 2010 was $0.4 million or
$0.07 per share, compared with a net loss of $1.1 million or $0.17
per share in the corresponding period of 2009.
EBITDA for the first quarter of 2010 was a net loss of $0.1
million, compared to a net loss of $0.6 million in the first
quarter of 2009. A reconciliation of GAAP net loss to EBITDA is
provided in the financial tables that accompany this release.
As of March 31, 2010, cash and cash equivalents were
$6.1 million and The Orchard had no debt. Net cash provided by
operations for the three months ended March 31, 2010 was $1.9
million, as compared to $2.0 million for the three months ended
March 31, 2009.
As of March 31, 2010, there were approximately 2.1 million
music tracks available for sale, an increase of 49% from the same
date in 2009 and an increase of 19% from December 31, 2009. During
the first quarter of 2010, there were approximately 17.5 million
paid downloads from The Orchard’s catalogue, an increase of 7% as
compared to the corresponding period of 2009.
Management Comment
“In Q1 2010 we recorded The Orchard’s highest quarterly revenue
ever and reduced our operating expenses by 14% from the comparable
period in 2009. We expect the company to continue on this path and
remain excited about the future,” said Brad Navin, the Chief
Executive Officer.
Further Financial Information
For further company financial information, refer to the
unaudited consolidated balance sheets and unaudited consolidated
statements of operations attached to this release and to The
Orchard’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2010 to be filed May 14, 2010 with the Securities and Exchange
Commission.
Investor Conference Call and Webcast
The company will host a conference call on May 14, 2010 at 4:30
p.m. EDT to discuss its results and provide an update on the
company. Presenting from the company will be President and Chief
Executive Officer, Brad Navin, and Chief Financial Officer, Nathan
Fong.
To participate in the call, interested parties are invited to
dial 1 (800) 706-7745 for domestic callers or 1 (617) 614-3472 for
international callers at least five minutes prior to the start
time. The participant pass-code is 12532327. A live webcast of the
call will be available on the Company's website at
www.theorchard.com/about/investor-relations.
A replay of the call will be available for one week, beginning
one hour after the call ends by dialing 1 (888) 286-8010 for
domestic callers or 1 (617) 801-6888 for international callers. The
pass-code is 19237632. A replay of the webcast will also be
archived on The Orchard’s website for at least fourteen days.
About The Orchard®
Headquartered in New York and London with operations in 25
markets around the world, The Orchard (NASDAQ: ORCD) is an
independent music and video distributor specializing in
comprehensive digital strategies for content owners. Through
innovative global marketing and promotions, The Orchard drives
sales across 660 digital and mobile storefronts in 75 countries, as
well as physical retailers across North America and Europe. The
company was founded in 1997 as a business partner that fosters
creativity and independence within its global clients. For further
information, please visit www.theorchard.com.
Forward Looking Statements
This release may contain certain forward-looking statements
regarding The Orchard's expectations regarding future events and
operating performance within the meaning of Federal Securities laws
that are subject to certain risks and uncertainties and involve
factors that may cause actual results to differ materially from
those projected or suggested. Factors that could cause actual
results to differ include, but are not limited to, the growth of
the digital music and video markets, the impact of the general
economic recession and management’s ability to capitalize on our
business strategy and take advantage of opportunities for revenue
expansion, satisfaction of the conditions of the pending merger
with Dimensional, including the approval of a majority of the
stockholders unaffiliated with Dimensional; the costs and expenses
associated with the pending merger; contractual restrictions on the
conduct of The Orchard’s business included in the merger agreement;
the potential loss of key personnel, disruption of our sales and
operations or any impact on The Orchard’s relationships with third
parties as a result of the pending merger; any delay in
consummating the proposed merger with Dimensional or the failure to
consummate the transaction; and the outcome of, or expenses
associated with, any litigation which may arise in connection with
the pending merger with Dimensional, including the purported class
action civil suit filed in Delaware Chancery Court. Undue reliance
should not be placed on such forward-looking statements as they
speak only as of the date hereof, and The Orchard undertakes no
obligation to update these statements to reflect subsequent events
or circumstances except as may be required by law. Additional
factors that could cause actual results to differ materially from
those projected or suggested in any forward-looking statements are
contained in The Orchard's most recent periodic reports on Form
10-K and Form 10-Q that are filed with the Securities and Exchange
Commission.
Use of Non-GAAP Measures
In addition to The Orchard’s condensed consolidated statements
of operations and cash flow presented in accordance with GAAP, we
present investors with EBITDA.
EBITDA consists of net loss excluding the impact of the
following: interest income, net; income taxes; depreciation; and
amortization. Management believes EBITDA is a useful measure
because it provides important supplemental information to
management and investors regarding financial and business trends
relating to The Orchard’s financial condition and results of
operations and is useful to investors in their assessment of our
operating performance and the valuation of our company.
The use EBITDA should be considered in addition to, not as a
substitute for or superior to, revenue and operating expenses
provided by reported operating activities, net loss, or other
financial measures prepared in accordance with GAAP. In the
financial tables of our earnings press release, The Orchard has
included a reconciliation of EBITDA to GAAP net loss.
THE ORCHARD ENTERPRISES, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS For the
Three Months Ended March 31, 2010 2009 (unaudited)
REVENUES $ 17,820,218 $ 15,327,976 COSTS OF REVENUES
13,347,558 11,077,508 GROSS
PROFIT 4,472,660 4,250,468 Gross profit margin 25.1 % 27.7 %
OPERATING EXPENSES 4,904,498 5,682,986
LOSS FROM OPERATIONS (431,838 )
(1,432,518 ) OTHER INCOME (EXPENSE): Interest income - 2,939
Interest expense (20,000 ) (12,088 ) Other income 3,983
383,715 Total other income (expense)
(16,017 ) 374,566 NET LOSS $
(447,855 ) $ (1,057,952 ) Net loss per share - basic
and diluted $ (0.07 ) $ (0.17 ) Weighted average shares
outstanding - basic and diluted 6,248,066 6,093,416
THE ORCHARD ENTERPRISES, INC. SUMMARIZED CASH FLOW
INFORMATION For the Three Months Ended March 31,
2010 2009 (unaudited) NET CASH FLOWS PROVIDED BY (USED IN):
Operating activities $ 1,935,993 $ 2,006,283 Investing activities
(266,816 ) (1,097,645 ) Financing activities - - Effect of exchange
rate changes (2,345 ) (64,104 ) INCREASE CASH
AND CASH EQUIVALENTS 1,666,832 844,534 CASH AND CASH
EQUIVALENTS - Beginning of period 4,475,470
4,521,027 CASH AND CASH EQUIVALENTS - End of period $
6,142,302 $ 5,365,561
THE ORCHARD
ENTERPRISES, INC. RECONCILIATION OF GAAP NET LOSS TO
EBITDA For the Three Months Ended March 31, 2010
2009 (unaudited) Net loss in accordance with GAAP $
(447,855 ) $ (1,057,952 ) Add (deduct) adjustments: Interest income
- (2,939 ) Interest expense 20,000 12,088 Depreciation and
amortization 367,020 451,627
EBITDA $ (60,835 ) $ (597,176 )
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