Audible, Inc. Announces Positive Free Cash Flow in Q4 2003 on Strong Consumer Content Revenue Growth; Company Also Announces Conversion of All Preferred Stock to Common Stock

Business Wire, Feb 10, 2004

Business Editors

WAYNE, N.J.--(BUSINESS WIRE)--Feb. 10, 2004

Audible, Inc. (OTC BB: ADBL), the leading provider of digitally delivered spoken word audio, today announced financial results for the quarter and year ended December 31, 2003.

Fourth quarter financial and growth highlights include:

-- First quarterly net cash provided by operating activities:

$592,000.

-- First quarterly generation of free cash flow*: $548,000.

-- First quarter of net income before accrued dividends on

preferred stock.

-- Consumer content revenue of $5.6 million, up 60% over the

fourth quarter of 2002 and 17% over the third quarter of 2003.

-- Total 2003 consumer content revenue of $18.5 million, up 69%

over 2002.

-- 31,000 new customers added in the fourth quarter, bringing

total customer count to 311,000.

-- Cash and cash equivalents at December 31, 2003 of $9.1 million

increased by $2.2 million during the quarter due to free cash

flow* of $548,000 and proceeds from the exercise of warrants

and options of $1.6 million.

-- The automatic conversion of the Series C convertible preferred

stock to common stock in December.

"Our growth rate for the fourth quarter of 2003 and the milestone achievement of positive free cash flow ahead of our expectations testify to the fundamental power of Audible's business model," said Donald Katz, Chairman and CEO, Audible. "While the Audible service has consistently achieved substantial growth by offering consumers a better way to be informed and entertained, 2003 was clearly a period of turnaround in terms of the perception of Audible's prospects, and for the digital media category in general. These are still early days for the coming transition of a significant portion of the $600 billion information and entertainment economy to digital distribution. We are extremely proud of Audible's progress and equally determined as we move forward."

Audible also announced that Apax Partners and Random House, Inc., the holders of the company's Series A and Series B Convertible Preferred Stock, have converted their shares into common stock. This conversion means that Audible no longer has preferred stock outstanding and will no longer be subject to the related dividend requirements, liquidation preferences, or other preferential rights that attended those securities. As an inducement to early conversion of the Series A Preferred, which carried a 12% coupon through August 2007, the company has negotiated a grant to Apax Partners of 2.3 million common shares over dividend shares currently due and warrants to purchase one million shares at $7 per share. The company believes these transactions are of substantial benefit to common shareholders as they significantly curtail future dilution and the requirement of cash dividends to preferred holders. The company also believes that after dividend charges in the fourth quarter of 2003 and dividend and inducement charges in the first quarter of 2004 related to the conversion, the financial reporting clarity afforded by the conversion will also be of value to our shareholders. The conversion will be discussed in full by management during today's conference call.

"In light of the dramatic improvement in Audible's performance and increasingly positive environmental factors for the digital media category, we agreed to give up dividends and other rights and preferences by converting these shares to common stock and warrants priced at $7 per share," noted Oren Zeev, a partner with Apax Partners and member of the Audible board of directors. "The conversion of the Series A Preferred to common stock and $7 per share warrants will benefit all shareholders by reducing future dilution, increasing the transparency of ownership and financial reporting going forward, and is a testament to Apax's optimism about Audible's future."

During today's conference call, management also plans to discuss today's announcement that the Creative Labs flagship MP3 player product lines, the Creative NOMAD MuVo and Creative NOMAD Jukebox Zen, will soon ship as AudibleReady(R) devices. The NOMAD and MuVo products will become fully compatible with the Audible.com content and the Audible audio service. The companies have agreed to integrated co-marketing plans that include in-box brochures, the inclusion of Audible software during device installation, and cooperative retail programs.

Other recent highlights include:

-- Audible's announcement today that Apple Macintosh users who

own palmOne Treo 600 Smartphones, Zire and Tungsten handhelds,

or Sony Clie handhelds, can now shop for, download, and

transfer Audible audio onto their handhelds.

-- More than 20,000 hours of spoken word audio from Audible

successfully integrated and offered for sale at Apple's

industry-leading iTunes Music Store.

-- Device compatibility and marketing initiatives launched for

the Sony Clie.

-- Device compatibility and marketing initiatives launched for

the Treo 600 Smartphone from palmOne.