Audible Reports 77% Year-over-Year Increase in Fourth Quarter Revenue

Audible Reports 77% Year-over-Year Increase in Fourth Quarter Revenue and Record Free Cash Flow *; Company Adds Record Number of New AudibleListener Members in Fourth Quarter - Up 115% Year-Over-Year

    Business Editors

    WAYNE, N.J.--(BUSINESS WIRE)--Feb. 15, 2005--Audible, Inc. (NASDAQ:ADBL), the leading provider of digitally delivered spoken word audio, today announced financial results for the fourth quarter and full year ended December 31, 2004.

    Highlights include:

    Revenue. Revenue for the fourth quarter increased to $10.3 million, up 77% over the fourth quarter of 2003 and 11% over the third quarter of 2004. Total revenue for 2004 grew to $34.4 million, up 78% over $19.3 million reported in total revenue for 2003.
    Free cash flow *. Free cash flow for the fourth quarter increased to $2.2 million, up 309% over the fourth quarter of 2003 and 124% over the third quarter of 2004. For 2004, total free cash flow was $4.2 million, as compared to negative $1.3 million in 2003.
    Net Income. Net income for the fourth quarter was $1.4 million or $0.06 per share, as compared to $24,000, before preferred stock charges, in the fourth quarter of 2003 and $484,000 or $0.02 per share in the third quarter of 2004. Net income for 2004, before preferred stock charges, was $2.2 million, as compared to a $3.6 million loss in 2003.
    Balance Sheet. Cash, cash equivalents, and short term investments were $61.7 million at the end of 2004, as compared to $9.1 million at the end of 2003. This reflects the successful completion of a shelf offering of 2,022,500 shares on November 23, 2004, that raised $46.5 million in net proceeds to the Company.
    New AudibleListener(R) Members. The addition of 41,600 new AudibleListener members set a new record and represents a 115% gain over the fourth quarter of 2003 and a 31% gain over the third quarter of 2004. The new AudibleListener members acquired in the quarter represented 88% of more than 47,500 total customer additions, up from 78% of total customer additions in the third quarter of 2004.
    "The strength of our new AudibleListener member acquisition programs during the fourth quarter demonstrates both the increased efficiency of our marketing techniques and the fundamental readiness of the marketplace for our audio service," said Donald R. Katz, Audible's Chairman and CEO. "Today we are announcing several new strategic growth initiatives. We have identified novel ways to build on our solid foundation and profitably scale our business. The strength of our 2005 guidance indicates our level of confidence in our ability to grow our core business even as we pursue significant new opportunities for future growth."

    Other recent highlights include:

--	More than 120 individual audio-enabled digital devices are now AudibleReady. New additions to the AudibleReady family include:
--	the Apple iPod Shuffle digital audio player;
--	the MuVo TX, MuVo TX FM, MuVo Micro, and MuVo Slim digital audio players from Creative Labs;
--	new AudibleReady Smart Devices from Audiovox and palmOne, both units available through Audible's co-marketing effort with Sprint.
--	Audible announced that SigmaTel Processors for digital audio players are to include AudibleReady technology.
--	Audible.de launched in November, 2004, to serve German-language listeners worldwide.

    2005 Strategic Initiatives and Business Outlook

    "With the explosive movement of digital media toward the mainstream, we believe there is no better time to leverage our market position, expertise, and powerful products, so as to expand aggressively into new markets while accelerating the growth of the category we have created," noted Mr. Katz. "We will invest in these growth initiatives in a way we believe will drive very strong growth in 2005 and 2006, and dramatically increase Audible's profitability in 2006 and beyond."

    These initiatives include:

    -- The launch of Audible UK during the second quarter of 2005.
    This follows the related announcement yesterday of a new long
    term exclusive partnership with BBC Audiobooks Ltd. that
    includes more than 10,000 hours of premier spoken word audio
    for global distribution through Audible.

    -- The launch of Audible Wireless, a direct to handset
    over-the-air delivery service, in the second quarter of 2005.

    -- The launch of Audible Education, focused on consumer and
    institutional learning markets, in the second quarter of 2005.

    -- Investing to achieve the following milestone targets:

    -- Doubling the number of AudibleListeners each year through
    2006: Audible acquired 121,000 AudibleListeners in 2004
    and expects to report approximately 260,000
    AudibleListeners in 2005 and more than 520,000 in 2006;

    -- Doubling the quantity of premium audio made available to
    our listeners each week to 1,400 hours by the end of 2005;

    -- Improvements in Audible's customer service and customer
    communications capacity designed to drive customer
    acquisition and increase average revenue per user.

    "We believe that now is the time to step up our investment in our people, infrastructure, customer service operation, marketing, technology innovations such as wireless delivery, and in the launch of new business units," said Andy Kaplan, Audible's Chief Financial Offer. "Our proven core business will generate the revenue growth we expect in 2005, while allowing us to develop significant new revenue streams -- and to still generate a solid stream of positive free cash flow and profit."
    The Company's guidance for 2005 is for total revenue to increase to the range of $59 million to $62 million, which represents 71% to 80% year-over-year revenue growth. Income before income taxes for 2005 is expected to be in the range of $3.6 million to $4.0 million before deducting an expected $2 million expense related to the launch of Audible UK and before deducting any charges related to share-based expense. Capital expenditures in information technology infrastructure are expected to be in the range of $2.7 to $3.3 million. Free cash flow for 2005 is expected to be in the range of $1.6 million to $2.0 million.

    Conference Call

    Senior management will host an investor teleconference at 5:00 p.m. EDT today, to discuss these results as well as related financial and operational developments and its 2005 strategic plan. A live webcast of the conference call is available at www.audible.com/ir for audio streaming access to the call. To participate in the call, the dial-in number is (877) 236-1078.

    * Use of Non-GAAP Measures

    Management believes that free cash flow is a useful measure of liquidity because it includes cash provided by operating activities as well as the impact of cash used for investment in property and equipment. However, this non-GAAP measure should be considered in addition to, not as a substitute for, or superior to, net cash provided by (used in) operating activities, or other financial measures prepared in accordance with GAAP. A reconciliation to the GAAP equivalents of this non-GAAP measure is contained in tabular form on the attached unaudited financial statements.

    About Audible.com:

    Audible.com, recently named the best consumer Web service by CNet.com, and one of the "Best of Today's Web" by PC World, features daily audio editions of The Wall Street Journal and The New York Times -- available on a subscription basis in time for the morning drive to work each day -- as well as Forbes, Harvard Business Review, Scientific American, and Fast Company. The site offers a powerful collection of audiobook best sellers and classics by authors such as Tom Clancy, Stephen King, John Grisham, Janet Evanovich, James Patterson, the Dalai Lama, David McCullough, Stephen Hawking, William Shakespeare, Emily Dickinson, and Jane Austen. There are also speeches, lectures, and on-demand radio programs including Marketplace, All Things Considered, Car Talk, Fresh Air, and This American Life, and original shows such as RobinWilliams@audible.com. All of the programs at audible.com are available for computer-based playback, burning to audio CD, and on-the-go listening using numerous AudibleReady(R) portable digital audio players offered by leading consumer electronics and computer manufacturers.

    About Audible, Inc.:

    Audible(R) (www.audible.com(R)) is the Internet's leading premium spoken audio source. Content from Audible is downloaded and played back on personal computers, CDs, or AudibleReady(R) computer-based mobile devices. Audible has more than 70,000 hours of audio programs from more than 200 content partners that include leading audiobook publishers, broadcasters, entertainers, magazine and newspaper publishers, and business information providers. Audible.com is Amazon.com's and the Apple iTunes Music Store's pre-eminent provider of spoken word products for downloading or streaming via the Web. Additionally, the Company is strategically aligned with Random House, Inc. in the first-ever imprint to produce spoken word content specifically suited for digital distribution, Random House Audible. Among the Company's key business relationships are Apple Corp., Creative Labs, Hewlett-Packard Company, Microsoft Corporation, palmOne, Inc., PhatNoise Inc., Rio Audio, Sony Electronics, Texas Instruments Inc., and VoiceAge Corporation.
    Audible, www.audible.com, AudibleListener, and AudibleReady are registered trademarks of Audible, Inc. and all are part of the family of Audible, Inc. trademarks.
    Other product or service names mentioned herein are the trademarks of their respective owners.
    This press release contains information about Audible, Inc. that is not historical fact and may be deemed to contain forward-looking statements about the company. Actual results may differ materially from those anticipated in any forward-looking statements as a result of certain risks and uncertainties, including, without limitation, Audible's limited operating history, history of losses, uncertain market for its services, and its inability to license or produce compelling audio content and other risks and uncertainties detailed in the company's Securities and Exchange Commission filings.

AUDIBLE INC. COMPARATIVE STATEMENTS OF OPERATIONS

Three months ended --------------------------- December 31, September 30, 2004 2004 ----------- ----------- (unaudited) (unaudited) Revenue: Consumer content $10,114,197 $ 9,110,575 Point of sale rebates (316,744) (101,640) Services 20,333 17,791 ----------- ----------- Net content and services 9,817,786 9,026,726

Hardware 164,026 186,408 Related party revenue 296,408 65,762 Other 19,887 - ----------- ----------- Total revenue, net 10,298,107 9,278,896 ----------- -----------

Operating expenses: Cost of content and services revenue: Royalties and other content charges 3,247,516 2,838,098 Discount certificate rebates 503,197 434,170 ----------- ----------- Total cost of content and services revenue 3,750,713 3,272,268

Cost of hardware revenue 317,676 747,734 Operations 1,487,481 1,318,442 Technology and development 1,250,475 1,271,737 Marketing 1,851,692 1,180,929 General and administrative 1,157,783 959,518 ----------- ----------- Total operating expenses 9,815,820 8,750,628 ----------- -----------

Income from operations 482,287 528,268

Other income, (expense) Interest income 169,751 23,467 Interest expense (5,874) (10,069) ----------- ----------- Total other income, net 163,877 13,398

------------ ------------ Income before income taxes and state tax benefit 646,164 541,666

Income tax benefit (expense) 66,300 (57,782)

State tax loss sale 723,724 -

------------ ------------ Net income $ 1,436,188 $ 483,884 =========== ===========

Basic net income per common share $ 0.06 $ 0.02 ----------- -----------

Weighted average basic common shares outstanding 22,457,573 21,270,416 ----------- -----------

Diluted net income per common share $ 0.06 $ 0.02 ----------- -----------

Weighted average diluted shares outstanding 25,085,716 23,678,669 ----------- -----------

AUDIBLE INC. STATEMENTS OF OPERATIONS

Three months ended Year ended December 31, December 31, ------------------------ --------------------------- 2004 2003 2004 2003 ----------- ----------- ------------ ------------ (unaudited) (unaudited) Revenue, net: Consumer content $10,114,197 $ 5,712,026 $ 33,838,272 $ 18,594,531 Point of sale rebates (316,744) (104,710) (602,389) (104,710) Services 20,333 25,651 68,127 104,569 ----------- ----------- ------------ ------------ Net content and services 9,817,786 5,632,967 33,304,010 18,594,390

Hardware 164,026 177,062 694,900 665,584 Related party revenue 296,408 - 362,170 - Other 19,887 16,126 52,144 64,504 ----------- ----------- ------------ ------------ Total revenue, net 10,298,107 5,826,155 34,413,224 19,324,478 ----------- ----------- ------------ ------------

Operating expenses: Cost of content and services revenue: Royalties and other content charges 3,247,516 1,884,174 10,740,382 5,318,919 Discount certificate rebates 503,197 - 1,281,702 - ----------- ----------- ------------ ------------ Total cost of content and services revenue 3,750,713 1,884,174 12,022,084 5,318,919

Cost of hardware revenue 317,676 579,898 2,197,013 2,085,254 Operations 1,487,481 996,290 5,145,855 3,843,311 Technology and Development 1,250,475 1,145,797 5,058,314 4,784,648 Marketing 1,851,692 898,110 5,184,618 4,494,702 General and administrative 1,157,783 558,918 3,525,016 2,633,031 ----------- ----------- ------------ ------------ Total operating expenses 9,815,820 6,063,187 33,132,900 23,159,865 ----------- ----------- ------------ ------------

Income (loss) from operations 482,287 (237,032) 1,280,324 (3,835,387)

Other income, (expense) Interest income 169,751 10,268 252,873 25,451 Interest expense (5,874) - (32,221) - ----------- ----------- ------------ ------------ Total other income, net 163,877 10,268 220,652 25,451

----------- ----------- ------------ ------------ Income before income taxes and state tax benefit 646,164 (226,764) 1,500,976 (3,809,936)

Income tax benefit (expense) 66,300 - (10,271) -

State tax loss sale 723,724 250,408 723,724 250,408

----------- ----------- ------------ ------------ Net income (loss) 1,436,188 23,644 2,214,429 (3,559,528)

Dividends on convertible preferred stock - (4,462,066) (614,116) (5,656,894) Preferred stock discount - - - (1,444,444) Charges related to conversion of convertible preferred stock - - (9,873,394) - ----------- ----------- ------------ ------------ Total preferred stock expense - (4,462,066) (10,487,510) (7,101,338)

----------- ----------- ------------ ------------ Net income (loss) applicable to common shareholders $ 1,436,188 $(4,438,422) $ (8,273,081) $(10,660,866) =========== =========== ============ ============

Basic net income (loss) per common share $ 0.06 $ (0.40) $ (0.40) $ (1.01) ----------- ----------- ------------ ------------

Weighted average basic common shares outstanding 22,457,573 11,014,824 20,912,997 10,506,704 ----------- ----------- ------------ ------------

Diluted net income (loss) per common share $ 0.06 $ (0.40) $ (0.40) $ (1.01) ----------- ----------- ------------ ------------

Weighted average diluted shares outstanding 25,085,716 11,014,824 20,912,997 10,506,704 ----------- ----------- ------------ ------------

AUDIBLE INC. CONDENSED BALANCE SHEETS

December 31, December 31, Assets 2004 2003 ------------- ------------- (unaudited)

Current Assets Cash and cash equivalents $ 13,296,006 $ 9,074,987 Short-term investments 48,386,399 - Interest receivable on short-term investments 76,151 - Accounts receivable, net of allowance 643,533 245,641 Accounts receivable from related parties 87,625 - Royalty advances 140,634 72,338 Prepaid expenses and other current assets 737,874 596,720 Inventory 394,109 99,936 ------------- ------------- Total current assets 63,762,331 10,089,622

Property and equipment, net 919,090 272,851 Other assets 20,805 418,524 ------------- ------------- Total Assets $ 64,702,226 $ 10,780,997 ============= =============

Liabilities and Stockholders' Equity

Current Liabilities Accounts payable $ 850,906 $ 526,359 Accrued expenses and compensation 3,806,476 2,809,860 Royalty obligations 150,800 408,000 Capital lease obligations 120,795 - Deferred revenue and advances 2,445,868 873,520 ------------- ------------- Total current liabilities 7,374,845 4,617,739

Deferred cash compensation - 58,750

Royalty obligations, non current 38,000 -

Stockholders' Equity Convertible preferred stock: Series A - 13,027,375 Convertible preferred stock: Series B - 1,137,500 Common stock 241,697 150,155 Additional paid-in capital 187,257,616 110,507,841 Deferred compensation and services (154,173) (239,425) Notes due from stockholders for common stock - (58,750) Treasury stock at cost (184,740) (184,740) Accumulated deficit (129,871,019) (118,235,448) ------------- ------------- Total Stockholders' Equity 57,289,381 6,104,508

------------- ------------- Total Liabilities and Stockholders' Equity $ 64,702,226 $ 10,780,997 ============= =============

AUDIBLE INC. CONDENSED STATEMENTS OF CASH FLOWS

Three months ended Year ended December 31, December 31, ------------------------- -------------------------- 2004 2003 2004 2003 ------------ ---------- ------------ ----------- (unaudited) (unaudited) Cash flows from operating activities: Net income (loss) $ 1,436,188 $ 23,644 $ 2,214,429 $(3,559,528) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 121,675 94,651 498,959 498,206 Amortization of discounts on investments (86,164) - (86,164) - Services rendered for common stock and warrants 78,417 251,956 510,744 1,136,024 Non-cash compensation charge 14,913 34,113 85,252 173,743 Non-cash forgiveness of notes due from stockholders for common stock - - - 198,995 Deferred cash compensation - - (58,750) - Income tax benefit from exercise of stock options 9,721 - 9,721 - Changes in assets and liabilities: Accounts receivable, net (113,303) 4,952 (397,892) (56,378) Accounts receivable from related parties (21,863) - (87,625) - Interest receivable on short-term investments (76,151) (76,151) - Royalty advances (112,134) (25,674) (68,296) (13,913) Prepaid expenses and other current assets (99,450) (254,552) (141,154) 140,103 Inventory (243,271) 100,388 (294,173) (22,674) Other assets - (89,292) 397,719 (327,719) Accounts payable 136,917 (89,534) 324,547 (551,150) Accrued expenses and compensation 239,013 431,306 1,004,116 1,077,968 Royalty obligations (72,700) (83,000) (219,200) (215,500) Deferred revenue and advances 1,259,619 192,629 1,572,348 378,019

------------ ----------- ------------ ------------ Net cash provided by (used in) operating activities 2,471,427 591,587 5,188,430 (1,143,804) ------------ ---------- ------------ -----------

Cash flows from investing activities: Purchases of short-term investments (48,300,235) - (48,300,235) - Purchases of property and equipment (76,815) (43,678) (401,895) (137,657) ------------ ---------- ------------ ----------- Net cash used in investing activities (48,377,050) (43,678) (48,702,130) (137,657) ------------ ---------- ------------ -----------

Cash flows from financing activities: Proceeds from sale of common stock, net 46,456,593 - 46,456,593 - Proceeds from sale of Series C Convertible Preferred Stock, net - - - 5,859,772 Proceeds from exercise of common stock warrants 29,000 1,237,539 56,500 1,237,539 Proceeds from exercise of common stock options 1,422,422 407,020 1,785,384 437,057 Payments received on notes due from stockholders for common stock - - 58,750 - Principal payments made on capital lease obligations (154,069) - (622,508) - ------------ ---------- ------------ ----------- Net cash provided by financing activities 47,753,946 1,644,559 47,734,719 7,534,368 ------------ ---------- ------------ -----------

Increase in cash and cash equivalents 1,848,323 2,192,468 4,221,019 6,252,907

Cash and cash equivalents at beginning of period 11,447,683 6,882,519 9,074,987 2,822,080 ------------ ---------- ------------ ----------- Cash and cash equivalents at end of period $ 13,296,006 $9,074,987 $ 13,296,006 $ 9,074,987 ============ ========== ============ ===========

Non-cash investing and financing activities: Purchase of property and equipment through capital leases $ - $ - $ 743,302 $ - Reversal of unused accrued expense related to Series C financing - - 7,500 - ------------ ---------- ------------ ----------- $ - $ - $ 750,802 $ - ------------ ---------- ------------ -----------

Non-GAAP Free Cash Flow reconciliation: Net cash provided by (used in) operating activities $ 2,471,427 $ 591,587 $ 5,188,430 $(1,143,804) Purchases of property and equipment and capital lease payments (230,884) (43,678) (1,024,403) (137,657)

------------ ----------- ------------ ------------ Non-GAAP Free Cash Flow $ 2,240,543 $ 547,909 $ 4,164,027 $(1,281,461) ------------ ---------- ------------ -----------

--30--NR/ny*

CONTACT: Audible, Inc. Andrew Kaplan, 973-837-2734 akaplan@audible.com or Jonathan Korzen, 973-837-2718 jkorzen@audible.com

KEYWORD: NEW JERSEY INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS PUBLISHING ADVERTISING/MARKETING BANKING ENTERTAINMENT EARNINGS CONFERENCE CALLS SOURCE: Audible, Inc.

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