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CONTACT INFORMATION:
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Phil O'Shaughnessy
Creative Labs, Inc.
poshaughnessy@creativelabs.com
(408) 546-6773
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Wynne Leong
Creative Technology Ltd.
press_contact@ctl.creative.com
+65 6895-4120
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CREATIVE POSTS RECORD REVENUES IN Q3 - UP 65 PERCENT YEAR-OVER-YEAR
Two Million MP3 Players Sold in the Quarter Fuel Revenue Growth
SINGAPORE - April 22, 2005 - Creative Technology Ltd. (NASDAQ: CREAF), a worldwide leader in digital entertainment products, today announced financial results for the third quarter of fiscal year 2005, ended March 31, 2005. All financial results are stated in U.S. dollars.
Sales for the third quarter were the highest ever for the period, and were the highest ever for Creative outside of the holiday quarter. Sales were up 65 percent year-over-year, coming in at $333.8 million, up $132 million from $201.8 million in revenue for the same quarter last year.
Sales for the first nine months of fiscal year 2005 were up 50 percent over the same period last year, at $919.0 million, up $305.9 million from $613.1 million.
For the third quarter, net income was $15.9 million with EPS of $0.18, including an investment gain of $14.8 million. Excluding the investment gain, net income for the third quarter was $1.1 million with EPS of $0.01. This compares to net income for the same period last year of $57.0 million with EPS of $0.68, including an investment gain of $48.3 million. Excluding the investment gain, this compares to net income of $8.7 million and EPS of $0.10 for the same period last year.
Net income for the first nine months of the 2005 fiscal year including investment gains of $65.1 million and a non-cash impairment charge on 3Dlabs of $65.2 million, was $32.5 million, with EPS of $0.38. Net income for the first nine months of the 2005 fiscal year excluding investment gains of $65.1 million and a non-cash impairment charge of $65.2 million, was $32.7 million, with earnings per share of $0.38. This compares to the same nine months last year including the benefit of a $12.3 million tax write-back and investment gains of $72.8 million, with net income of $127.6 million and EPS of $1.53. Net income for the same nine months last year excluding the benefit of a $12.3 million tax write-back and investment gains of $72.8 million was $42.5 million with EPS of $0.51.
"For our third quarter, sales of our MP3 players were up 4x over the same quarter last year," said Craig McHugh, president of Creative Labs, Inc. "In the quarter, we substantially increased our retail distribution of the ZEN Micro by adding key retailers in the U.S. including Best Buy and Circuit City. During the quarter we reduced our selling prices on our MuVo flash players and ZEN Micro 5GB. This enabled us to continue building momentum following sharp price drops by Apple on its iPod mini and the introduction of its very basic flash players without LCD screen, FM radio or voice recording at lower-than-expected pricing. As a result, our gross margins at 23 percent were lower than our guidance. Even with increased competition and lower selling prices, we drove record revenues for the quarter, achieving our highest quarterly revenue outside of the holiday quarter in the Company history. With the substantial year-over-year increase in the number of MP3 players we are selling, we believe we can leverage our large volume to help drive down the costs of our players. This enables us to maintain our competitive advantages with our feature-rich players at great prices."
"This was our second consecutive quarter of selling two million MP3 players, an achievement that further positions us as an industry leader in the explosive MP3 market," said Sim Wong Hoo, chairman and CEO of Creative Technology Ltd. "Going forward we are targeting to strengthen our position in the MP3 market and drive strong revenue growth. In our efforts to achieve this, we are going to continue our aggressive channel marketing campaign and our very competitive pricing strategy for our MP3 players. Although we expect this will move our gross margin percentages to the low 20s, our expected strong revenue growth will improve our market position and allow us to increase profitability in the longer term."
Outlook
For the fourth quarter of fiscal year 2005, Creative is targeting to increase revenue by about 65 to 80 percent year-over-year, to approximately $330 million to $360 million in revenues with gross margins between 22 to 24 percent.
Share Buyback Program
During the quarter, Creative did not repurchase any shares under its share buyback program.
Recent Announcements
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Creative announced the retail shipment of the award-winning GigaWorks® G500 ProGamer speaker system, providing awesome power for PC and console games at a great price.
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Creative announced that the PCMCIA Sound Blaster® Audigy® 2 ZS Notebook has been chosen by Alienware, manufacturer of high-performance PCs, as the recommended audio solution for its entire line of mobile PCs.
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Creative introduced the only web cameras with a wide-angle lens and true high-speed USB 2.0 transfer with the WebCam Live!® Ultra and WebCam Live! Ultra for Notebooks.
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Creative announced the Sound Blaster Live! ADVANCED MB, a simple online upgrade that allows PC users with motherboard audio produced by Analog Devices Inc. to upgrade to Sound Blaster audio quality.
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At the Game Developers Conference in San Francisco, Creative announced its free upgrade to OpenAL 1.1, which combines with EAX ADVANCED HD to provide developers with the ideal solution for implementing high-quality audio in today's hottest games. Creative also announced at GDC that its GameCODA® cross-platform audio middleware tools will support the next generation Xbox® platform.
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Creative shook up the MP3 player market with the ZEN Micro priced at only $179.99 after a $20 rebate for the 4GB model. Pricing for the ZEN Micro 6GB was announced at only $249.99, and the 5GB model is only $229.99.
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3Dlabs announced that the Wildcat® Realizm™ 800 PCI Express-based graphics accelerator is now available for purchase, and that it has been selected by IBM for its IntelliStation M Pro and Z Pro product lines.
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3Dlabs announced that its Wildcat® Realizm™ 100 and 200 graphics accelerators have been certified by leading Independent Software Vendors (ISVs) in the Computer-aided Design (CAD) and Digital Content & Creation (DCC) markets.
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Awards & Accolades
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The Creative ZEN Micro received:
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The "Editor's Choice" award from Laptop magazine |
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The "Editor's Choice" award from PC Gamer magazine |
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The "Mobile Choice" award from Mobile PC magazine
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The Creative MuVo TX FM won the "Editor's Choice" award from Laptop magazine
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The Creative PCMCIA Sound Blaster Audigy 2 ZS Notebook received:
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The "Editor's Choice" award from Computer Gaming World magazine |
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The "Drool Award" from GamersDepot.com |
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The "Highly Recommended" award from LaptopLogic.com
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The Creative GigaWorks ProGamer G500 received:
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The "Editor's Choice" award from PC Gamer magazine |
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The "Editor's Choice" award from EZ Tech Guide: Windows XP magazine
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Listen to Creative's Q3 FY05 Analyst Conference Call:
Link to the Q3 earnings conference call live on April 21st at 8:00 PM Eastern time (April 22nd at 8:00 AM Singapore time) via Creative's Investor Relations Web site: http://www.creative.com/corporate/investor/ or by calling 1-800-374-2493.
A replay will be available from shortly after the end of the conference call until April 28 via the same link from the IR web site or by calling 1-800-642-1687 or 1-706-645-9291, reservation #5460048.
| Balance Sheets & Statements of Operations |
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# # #
About Creative :
Creative (NASDAQ: CREAF) is a worldwide leader in digital entertainment products for PC users. Famous for its Sound Blaster® audio cards and for launching the multimedia revolution, Creative is now driving digital entertainment on the PC platform with products like its highly acclaimed Zen and MuVo® MP3 players. Creative's innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience high-quality digital entertainment -- anytime, anywhere.
This announcement refers to products and pricing sold in the United States of America. Pricing and product availability are subject to change without notice. Sound Blaster, GigaWorks, Live!, GameCODA, Wildcat, Realizm and MuVo are trademarks of Creative Technology Ltd. in the United States and/or other countries. All other brand and product names are trademarks of their respective holder and are hereby recognized as such.
Safe Harbor for Forward-Looking Statements:
This press release contains forward-looking statements, including those related to Creative's estimated revenue and gross margin for the fourth fiscal quarter of 2005. These forward-looking statements involve risks and uncertainties that could cause Creative's actual results to differ materially. Such risks and uncertainties include: Creative's ability to timely develop new products that gain market acceptance and to manage frequent product transitions; competitive pressures in the marketplace; Creative's ability to successfully integrate acquisitions; potential fluctuations in quarterly results due to the seasonality of Creative's business and the difficulty of projecting such fluctuations; possible disruption in commercial activities caused by factors outside of Creative's control, such as terrorism, armed conflict and labor disputes; a reduction in demand for computer systems, peripherals and related consumer products as a result of poor economic conditions, social and political turmoil; major health concerns; the proliferation of sound functionality in new products from competitors at the application software, chip and operating system levels; the deterioration of global equity markets; exposure to excess and obsolete inventory; Creative's reliance on sole sources for many of its chips and other key components; component shortages which may impact Creative's ability to meet customer demand; Creative's ability to protect its proprietary rights; a reduction or cancellation of sales orders for Creative products; accelerated declines in the average selling prices of Creative's products; Creative's ability to successfully manage its expanding operations; the vulnerability of certain markets to current and future currency fluctuations; the effects of restricted fuel availability and rising costs of fuel; fluctuations in the value and liquidity of Creative's investee companies; and the potential decrease in trading volume and value of Creative's Ordinary Shares as a result of the Flow Back Restriction that commenced on June 1, 2003 and Creative's previous plan and any future plans to delist from NASDAQ and to eliminate its U.S. reporting obligations. For further information regarding the risks and uncertainties associated with Creative's business, please refer to its filings with the SEC, including its Form 20-F for fiscal 2004 filed with the SEC. Creative undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in Creative's expectations.
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