The Orchard Reports Continued Revenue Growth

iTunes Sales Grew To 60% Of Total 2009 Revenue

Mobile Music Sales Off

Despite increasing downward price pressure in the sector, The Orchard reported strong revenue growth for the quarter ending December 31st 2009 as well as the entire year.

The Orchard's board recently announced that that it had accepted an offer from majority owner Dimensional to buy out stockholders and take the company private. Whether or not the strong numbers will cause shareholders to reject the buyout will play out over the next several weeks.

Highlights for the 4th Quarter:

• Revenue increased 3% to $16.7 million in the fourth quarter of 2009 from $16.2 million in the fourth quarter of 2008.
• The Orchard's gross profit margin was 26% as compared to 33% in the fourth quarter of 2008.
• Operating expenses for the fourth quarter of 2009 were $4.5 million, compared to $5.7 million in the corresponding period of 2008. This decrease in operating expenses is primarily a result of a reduction in workforce.
• The net loss for the fourth quarter of 2009 was $0.3 million or $0.04 per share, compared to a net loss of $0.3 million or $0.05 per share corresponding period of 2008.
• As of December 31, 2009, cash and cash equivalents were $4.5 million and the Company had no debt. Net cash provided by operations for the year ended December 31, 2009 was $1.2 million, as compared to $2.3 million for the year ended December 31, 2008.

Highlights all of 2009:

• In 2009, revenues were $62.3 million, compared to $57.4 million for 2008, an increase of 9%.
• Combined revenue from digital downloads and subscription fees comprised approximately 81% of total revenues in 2009, an increase from 78% in 2008.
• Approximately 9% of 2009 revenues were derived from sales for mobile devices, as compared to 11% in 2008.
• Apple iTunes represented 60% of total revenues in 2009, as compared to 55% in 2008.
• Gross profit was $16.4 million (a 26% gross profit margin) for 2009, compared to $17.1 million (a 30% gross profit margin) for 2008.
• Operating expenses for 2009 were $34.6 million, including a third quarter goodwill impairment charge of $14.1 million and third quarter restructuring expense of $0.3 million. Excluding impairment of goodwill and restructuring expenses, operating expenses were $20.2 million, compared to $19.7 million for the corresponding period of 2008.
• The net loss for 2009 was $17.8 million, or $2.88 per share based on 6.2 million weighted average shares outstanding for the year, compared with a net loss of $2.3 million, or $0.36 per share based on 6.3 million weighted average shares outstanding for 2008.