TAIPEI, Taiwan, Dec. 2 /Xinhua-PRNewswire-FirstCall/ -- GigaMedia Limited ("GigaMedia" or the "Company") (Nasdaq: GIGM - News) announced today third quarter 2004 consolidated net profit of $688 thousand, a 23 percent sequential increase over the second quarter of 2004 and a turnaround of $3.4 million from a consolidated net loss of $2.7 million in the same period of 2003.
"Our Q3 results demonstrate that our restructuring plan is beginning to deliver results," stated Chief Executive Officer Arthur Wang. "Much hard work remains, but the new management team sees strong upside in the transformation of GigaMedia."
"We delivered an improved bottom line despite what shaped up to be a challenging quarter, and see improved operating efficiencies going forward," stated Chief Financial Officer Thomas Hui.
"As we continue to implement best practices throughout the firm, we are also very focused on strategic consolidation and acquisition opportunities which can accelerate our turnaround," explained Mr. Wang.
Consolidated results of GigaMedia are summarized in the table below.
(%) (%)
Revenues 22,001 23,733 -7 22,001 23,958 -8
Operating Income
(Loss) 581 (2,562) NA 581 410 42
Net Income
(Loss)(A) 688 (2,690) NA 688 559 23
EBITDA(B) 2,785 (1,167) NA 2,785 2,833 -2
Cash, Cash
Equivalents
and Short-term
Investments 44,968 63,998 -30 44,968 37,709 19
(A) Net income (loss) excludes amounts attributable to minority interests.
GigaMedia's subsidiary G-Music Limited ("G-Music") conducts an offline
music distribution business. Minority shareholders own a 41.4 percent
equity interest in G-Music.
(B) EBITDA (earnings before interest, taxes, depreciation and amortization)
is provided as a supplement to results provided in accordance with
GAAP. See "Use of Non-GAAP Measures" for more details.
Consolidated revenues for the third quarter of 2004 were $22.0 million, a 7 percent decrease over consolidated revenues of $23.7 million for the corresponding period in 2003 and a decrease of 8 percent from consolidated revenues of $24.0 million for the preceding quarter. The quarter-over-quarter decline in consolidated revenues was largely due to the impact of the general downturn in Taiwan's retail music distribution industry on the Company's music distribution business.
Consolidated net income for the third quarter of 2004 was $688 thousand, a turnaround of $3.4 million from a consolidated net loss of $2.7 million for the same period in 2003 and an improvement of $129 thousand, or 23 percent, from consolidated net income of $559 thousand for the preceding quarter. Driving the increase in consolidated net income were strong expense controls in the Company's broadband ISP operations and contributions from the Company's entertainment software business, whose results began to be consolidated with those of the Company starting April 1, 2004.
Consolidated EBITDA for the third quarter of 2004 was $2.8 million, compared to consolidated EBITDA of negative $1.2 million for the same period in 2003. The Company recorded consolidated EBITDA of $2.8 million during the preceding quarter. The year-over-year increase in consolidated EBITDA reflected efficiency improvements in all business units and strong contributions from the Company's entertainment software business.
Cash and other cash equivalents at the end of the third quarter of 2004 totaled $10.1 million, not including additional short-term investments totaling $34.9 million, compared to $9.9 million and $27.8 million, respectively, at the end of the second quarter of 2004. During the third quarter, GigaMedia reclassified previously made long-term bond fund investments totaling approximately $6.8 million as short-term investments, since the maturation of these investments is now within one year.
BUSINESS UNIT RESULTS
Music Distribution Business
(in US$ thousands) 3Q04 3Q03 Change 3Q04 2Q04 Change
(%) (%)
Revenues 14,441 18,803 -23 14,441 16,367 -12
Operating Income
(Loss) (225) (734) 69 (225) (153) -47
Net Income (Loss) (200) (707) 72 (200) 3 NA
The general market downturn in Taiwan's recorded music sales and delayed releases by music labels of albums from certain top artists created a challenging operating environment for the Company's music distribution business in the third quarter. The music distribution business unit's net loss reflected this decline in revenues. Efficiency gains achieved to date from ongoing restructuring helped offset lower sales volumes during the period. Management continues to take steps to lower fixed costs and increase efficiencies to improve this business unit's performance. During the quarter, the Company closed four underperforming stores and continued rollout of a point-of-sale system.
Broadband ISP Business
(in US$ thousands) 3Q04 3Q03 Change 3Q04 2Q04 Change
(%) (%)
Revenues(A) 5,571 4,930 13 5,571 5,614 -1
Operating Income
(Loss)(A) 858 (1,099) NA 858 409 110
Net Income (Loss)(A) 869 (1,297) NA 869 440 98
(A) In previous quarterly and annual releases, GigaMedia included
corporate headquarters expenses and certain other items in the
Broadband ISP Unit results. In the table above, all such amounts have
been excluded for the current and past periods. All numbers are
presented on a consistent basis.
GigaMedia's broadband ISP business delivered increased profitability in the third quarter. In order to retain subscribers in what remains a highly competitive market, the Company's broadband ISP business is focused on providing differentiated, value-added products and services to both consumers and corporate customers. In line with this strategy, during the period, GigaMedia launched the corporate broadband service ON-NET, providing connectivity services between Taiwan, Hong Kong, and China. With the launch of the ON-NET service, GigaMedia is well positioned to rollout additional value- added telecommunications services targeting new corporate customers in Greater China. Ongoing implementation of strict cost controls and enhanced efficiencies resulted in net income of $869 thousand for the third quarter of 2004, compared to a loss of $1.3 million for the same period in 2003.
The number of subscribers in the Company's consumer broadband ISP business during the quarter ended September 30, 2004 decreased slightly compared to the second quarter of 2004 to approximately 97,000, with blended average revenue per subscriber ("ARPU") also down slightly compared to the second quarter of 2004 at approximately $12.00 per month. The number of subscription lines in the Company's corporate broadband ISP business increased by 14 percent quarter-over-quarter, from 583 to 666 lines.
Entertainment Software Business
(in US$ thousands) 3Q04 2Q03 Change 3Q04 2Q04 Change
(%) (%)
Revenues 2,236 NA NA 2,236 2,380 -6
Operating Income
(Loss) 45 NA NA 45 293 -85
Net Income (Loss) 50 NA NA 50 231 -78
The Company's entertainment software business unit made positive contributions to GigaMedia's financial results despite operating in what is seasonally the slowest period for the business. Quarter-over-quarter declines in operating income and net income were due to the slight decrease in revenue and to investments in developing new game software and marketing during the period. Overall market growth in online gaming remains strong; management is executing a plan to expand the business and build a leading position in nascent, non-English-speaking markets outside the United States and the United Kingdom. During the third quarter, the entertainment software business completed development of a multi-player, online poker product targeting non- English-speaking markets and began to market the software to licensees. Preliminary response has been encouraging. Development of additional non- English language products and services is ongoing. The entertainment software business also upgraded customer relationship management tools to enable more efficient online marketing campaigns to licensees. Management expects continued investments in new software games and upgrades of existing game products to drive improved results going forward.
Business Outlook
The following forward-looking statements reflect GigaMedia's expectations as of December 2, 2004. Given potential changes in economic conditions and consumer spending, the evolving nature of broadband and online entertainment software, fluctuations in Taiwan's recorded music market and various other risk factors, including those discussed in the Company's 2003 Annual Report or 20-F filing with the U.S. Securities and Exchange Commission referenced below, actual results may differ materially.
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