Napster Ups Its Tune: Fool by Numbers

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On Feb. 8, Napster (Nasdaq: NAPS) released third-quarter earnings for the period ended Dec. 31.

• Revenue increased by 20.6% to $28.4 million, driven by strong subscriber growth and its launch of Napster Japan in October of 2006.
• The recent acquisition of AOL's music subscription business is expected to increase the company's subscriber base by more than 50%.
• Although Napster still is not turning a profit, margins significantly improved year over year and revenue is expected to exceed $26 million for next quarter.
• Napster is a one-star stock on Motley Fool CAPS, our interactive stock database.

(Figures in thousands, except per-share data)

Income Statement Highlights

	Q3 2007	Q3 2006	Change
Sales	$28,372	$23,532	20.6%
Net Profit	($9,510)	($17,007)	N/A
EPS	($0.22)	($0.40)	N/A
Diluted Shares	43,217	42,994	0.5%

Get back to basics with a look at the income statement.

Margin Checkup

	Q3 2007	Q3 2006	Change*
Gross Margin	30.1%	26.8%	3.3
Operating Margin	(33.4%)	(77.6%)	44.3
Net Margin	(33.5%)	(72.3%)	38.8

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets	Q3 2007	Q3 2006	Change
Cash + ST Invest.	$80,905	$111,439	(27.4%)
Accounts Rec.	$2,210	$3,667	(39.7%)
Inventory	N/A	N/A	N/A

Liabilities	Q3 2007	Q3 2006	Change
Accounts Payable	$2,434	$4,777	(49.0%)
Long-Term Debt	N/A	N/A	N/A

Learn the ways of the balance sheet.

Cash Flow Highlights

	YTD 2007	YTD 2006	Change
Cash From Ops.	($25,375)	($39,993)	N/A
Capital Expenditures	$659	$3,392	(80.6%)
Free Cash Flow	($26,034)	($43,385)	N/A

Find out why Fools always follow the money.

Related Companies:

• RealNetworks (Nasdaq: RNWK)
• Apple (Nasdaq: AAPL)
• Yahoo! (Nasdaq: YHOO)

Related Foolishness:

• You've Got Napster
• Lawsuit Threatens Napster, Annoys Giants
• Digital Music's Double Trouble
• Napster's New Gig

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean. This data has been provided by Netscribes. To provide feedback on this article, please click on the "feedback" button below.