MediaBay, Inc. Announces First Quarter 2000 Results; Sales Increase 25.7%; Results Exceed Analysts' Expectations

Business Wire, May 11, 2000

Business Editors

MORRISTOWN, N.J.--(BUSINESS WIRE)--May 11, 2000

MediaBay, Inc. (Nasdaq: MBAY), the leading provider of premium spoken word audio content and products in hard goods and digital download formats, today announced its financial results for the first quarter ended March 31, 2000. The Company's results exceeded analysts' consensus expectations.

Sales for first quarter 2000 were $16.1 million, an increase of 25.7%, compared to $12.8 million for the same period a year ago. The increase in sales was due to increased sales of audiobooks resulting from the continued expansion of Audio Book Club's membership base including members of Doubleday Direct's Audiobooks Direct, which was acquired in June 1999. Net sales for first quarter 2000 increased to $10.9 million from $9.9 million in the same period a year ago.

"MediaBay made tremendous strides during the first quarter. The Company's operations were strong, including an increase in sales of 25.7%, demonstrating the ongoing success of our marketing and promotions during the quarter. These results are particularly encouraging because the first quarter is traditionally a weaker sales quarter for our company because sales of our old-time radio products are much stronger in the second and fourth quarters," said Mr. Michael Herrick, Chief Executive Officer of MediaBay, Inc. "As a company, MediaBay was able to further strengthen its market position as the leader in premium spoken word content in all formats. We were able to achieve this due to our totally integrated business approach, including online and offline sales and distribution of content and products, resulting from the Company's start as a catalogue business."

Gross profit remained flat at $5.2 million, compared to $5.3 million in first quarter 1999. Total advertising and promotion expenses increased $954,000 to $2.4 million in first quarter 2000 as a result of increased amortization related to previously capitalized advertising. The net amount capitalized in the first quarter of 1999 was $1.6 million as compared to $310,000 in the first quarter of 2000.

General and administrative expenses increased as a result of costs related to increased sales. MediaBay also incurred costs as a result of expanding MediaBay.com's infrastructure and technology staff and library of spoken word content in digital download format. Depreciation expenses increased due to computer equipment and web development costs to build new web sites and to expand digital download capabilities. The increase in amortization is attributable to the amortization of goodwill and other intangible assets related to the acquisition of Doubleday Direct's Audiobooks Direct.

"We have made a significant investment in time, manpower and money to be at the forefront of the coming digital delivery revolution. We are convinced that the digital delivery of premium spoken word content will have a profound effect on the way individuals are informed and entertained. As the leader in premium spoken word content we believe we will benefit significantly from this technological change," stated Michael Herrick.

Pro forma net loss for the first quarter of 2000 was $547,000 or $0.05 loss per share, excluding the effects of amortization of intangible assets, financing costs and interest expenses relating to the Company's mergers and acquisitions versus earnings of $1.7 million or $0.21 diluted earnings per share on a comparable basis for the first quarter of 1999. Net loss on a GAAP basis was $3.5 million for first quarter 2000, compared to a loss of $665,000 in the prior comparable period. Net loss per share was $0.34 for the first quarter, analysts' consensus estimates were for a loss of $0.35. The Company lost $0.09 in the same quarter a year ago. The increase in net loss was related primarily to increased amortization of goodwill and other intangible expenses related to the acquisition of Doubleday Direct's Audiobooks Direct, increases in general and administrative expenses related to sales increases and the expansion of MediaBay.com and increased amortization of capitalized advertising costs.

MediaBay had approximately 2.3 million customers (including 1.8 million Audio Book Club members) and 1.5 million unique monthly website visitors by the end of first quarter 2000. As of March 31, the Company's Affiliate Network program consisted of approximately 15,000 other Internet sites. The Company also has an e-mail database of approximately 450,000 opt-in e-mail addresses. The Company acquired approximately 20,000 new Audio Book Club members online during the first quarter, reflecting the strong contribution of the Internet as an expanded sales channel.

In February 2000, the Company consolidated its network of web sites, including audiobook.com, radiospirits.com, videoyesteryear.com and downloadbay.com into a single one-stop portal as MediaBay.com. This change should assist in streamlining the Company's marketing efforts and deliver more convenience to customers.

On March 15, 2000, MediaBay completed a follow-on primary offering of 3,650,000 shares of its Common Stock at a price of $9.00 per share, generating net proceeds to the Company after underwriting fees and related expenses of $29.5 million. Proceeds in the amount of $21.2 million were used to pay down long-term debt.