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Audible Announces Third Quarter 2006 Financial Results

- Company Reports Net Revenue of $20.0 Million -

- GAAP EPS of ($0.10) and Non-GAAP Basic EPS of ($0.04) -

Business Editors/Internet Writers

WAYNE, N.J.--(BUSINESS WIRE)--Nov. 2, 2006--Audible, Inc. (NASDAQ: ADBL; www.audible.com), the leading provider of spoken entertainment, information, and education on the Internet, today announced financial results for the third quarter ended September 30, 2006.

Audible reported consolidated net revenue for the third quarter 2006 of $20.0 million, up 19% year over year and up 5% over Q2-06 consolidated net revenue. Revenues for the nine-month period ended September 30, 2006 were $58.9 million, up 31% from the 2005 period of $45.0 million.

GAAP loss from operations was $3.2 million, non-GAAP loss from operations was $1.7 million. GAAP net loss in Q3-06 was $2.5 million, or $0.10 net loss per share. Non-GAAP net loss was $1.0 million, or $0.04 net loss per basic share. Non-GAAP figures exclude the impact of stock-based compensation expenses.

Total AudibleListener(R) members acquired during the quarter was 71,100, representing growth of 19% year over year. At the end of Q3-06, the total number of AudibleListener members was 345,200, representing growth of 54% year over year. Churn declined by 30 basis points quarter over quarter to 3.1%, and has declined 200 basis points from 5.1% in the Q3 05 period.

"Despite another quarter of positive cash flow, lower churn, full quarter profitability from the combined Audible UK and iTunes UK revenue only sixteen months after launch - and the signing of a pivotal new technology integration and content distribution agreement with Apple that extends through September of 2010 - we did not achieve the top line growth we expected during the third quarter of 2006," said Donald R. Katz, Chairman and CEO, Audible, Inc. "We continued to hold back on marketing during Q3 as our new marketing and merchandising teams tested multiple offer designs and merchandising techniques to improve conversion to AudibleListener membership plans and product consumption, several of which we plan to roll out in the coming weeks."

"While we expect continued quarter over quarter and year over year revenue growth in the fourth quarter, as well as increasing cash flow," Mr. Katz continued, "we expect this transitional period to continue through the fourth quarter, and we are looking at 2007 as a time of far more consumer awareness of our service, profitable growth, and much better financial results in general."

In other news, the Company announced earlier today that William H. Mitchell will join Audible as Chief Financial Officer by November 20, 2006, at which time current CFO Andrew P. Kaplan will leave the Company.

"We want to welcome Bill Mitchell, an extremely accomplished financial executive, to the Audible leadership team," Mr. Katz stated, "and we want to say thanks to Andy Kaplan. Few people have had as important an effect on the Audible story as has Andy. He came to Audible seven years ago as we were creating a new digital media distribution paradigm for the spoken word. Andy arrived during a quarter in which we achieved all of $130,000 in content and services revenue, and he leaves us to become the CFO of an entrepreneurial non-profit, as Audible reports quarterly revenue more than 150 times greater than the quarter in which he arrived."

Key Financial and Operating Metrics:

Consolidated Net Revenue: Consolidated net revenue totaled $20.0 million in Q3-06, a 19% increase over the $16.8 million reported in Q3-05.

Total Deferred Revenue: Total deferred revenue was $11.4 million at the end of Q3-06, a 15% increase over the $9.9 million reported at the end of Q2-06 and a 256% increase over the $3.2 million reported at the end of Q3-05.

Total Cash Sales: Defined as the change in deferred revenue plus consolidated net revenue, total cash sales was $21.6 million for Q3-06, a 26% increase over Q3-05.

New AudibleListener(R) Members:* New AudibleListener members totaled 71,100 in Q3-06, a 19% increase over 59,800 in Q3-05.

Total AudibleListener Members: AudibleListener members at the end of Q3-06 totaled 345,200, a 54% increase over 223,700 at the end of Q3-05.

GAAP Loss from Operations: GAAP loss from operations totaled $3.2 million in Q3-06, as compared to GAAP loss from operations of $2.7 million in Q2-06 and GAAP loss from operations of $0.8 million in Q3-05.

Non-GAAP Loss from Operations: Non-GAAP loss from operations totaled $1.7 million in Q3-06, as compared to Non-GAAP loss from operations of $1.2 million in Q2-06 and Non-GAAP loss from operations of $0.4 million in Q3-05.

GAAP Net Loss: GAAP net loss totaled $2.5 million, or $0.10 net loss per share in Q3-06.

Non-GAAP Net Loss: Non-GAAP net loss totaled $1.0 million, or $0.04 net loss per basic share in Q3-06.

Operating Cash Flow: Operating cash flow totaled $2.0 million in Q3-06.

Free Cash Flow: Free cash flow totaled $1.8 million in Q3-06.

Cash, Cash Equivalents and Short-Term Investments: Audible's cash, cash equivalents and short-term investments totaled $60.9 million at the end of Q3-06.

* See page 9 for detailed disclosure of historical AudibleListener membership metrics

Conference Call

Senior management will host an investor teleconference at 5:00 p.m. EST today, to discuss third quarter results as well as related financial and operational developments. 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 (800) 236-8506 or +1(719) 457-2681. The confirmation code is 2316347.

To sign up for the podcast of the earnings call through Audible Wordcast, please go to the Webcast & Presentation section of Audible's Investor Relations Web site (www.audible.com/ir).

Non-GAAP Measures

To supplement the company's consolidated financial statements presented in accordance with GAAP, Audible uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP income (loss) from operations, non-GAAP net (loss) income, and non-GAAP net (loss) income per share and exclude the impact of employee stock-based compensation expenses. Audible's reference to these measures should be considered in addition to results that are prepared under U.S. GAAP but should not be considered a substitute for results that are presented in accordance with GAAP.

These non-GAAP measures are provided to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future and provide further information for comparative information due to the adoption of the new accounting standard FAS 123(R) on January 1, 2006. The company believes the non-GAAP measures provide useful information to both management and investors by excluding the non-cash impact of employee stock-based compensation expenses, which may not be indicative of the company's core operating results and business outlook.

Additionally, management believes that free cash flow, a non-GAAP measure, 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, capital lease payments, and capitalized software development costs.

Management also presents total cash sales. The measure total cash sales is defined as change in deferred revenue plus consolidated net sales. Management believes that total cash sales is a useful measure when understanding the increase in deferred revenue.

Reconciliation to the nearest GAAP measure of all non-GAAP measures included in this press release can be found in the financial table included on page 6.

About Audible, Inc.:

Audible (www.audible.com) is the leading provider of spoken entertainment and information on the Internet. Content from Audible is downloaded and played back on personal computers, CDs, or AudibleReady(R) computer-based mobile devices. Audible has more than 115,000 hours of audio programming from more than 360 content partners, including leading audiobook publishers, broadcasters, entertainers, magazine and newspaper publishers, and business information providers. Audible.com is the Apple iTunes Music Store's preeminent provider of spoken products for downloading or streaming via the Web. Among Audible's other key business relationships are Bookspan, Creative Labs, iriver, Microsoft, Palm, SanDisk, and XM Satellite Radio.

Audible, www.audible.com, www.audible.co.uk, 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. AND SUBSIDIARY
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           (in thousands, except share and per share data)
                             (Unaudited)

                                         Three months ended
                               ---------------------------------------
                               September 30,  June 30,   September 30,
                                   2006         2006         2005
                               ------------- ----------- -------------

Revenue, net:
 Content and services:
  Consumer content                  $19,565     $18,835       $16,472
  Point of sale rebates                   -        (126)         (208)
  Services                               26          26            42
                               ------------- ----------- -------------
 Total content and services          19,591      18,735        16,306
  Hardware                               73          85           142
  Related party revenue                 222         257           263
  Other                                 140          64            60
                               ------------- ----------- -------------
 Total revenue, net                  20,026      19,141        16,771

Operating expenses:
 Cost of content and services
  revenue:
  Royalties and other content
   charges                            8,240       7,720         6,018
  Discount certificate rebates          307         305           298
                               ------------- ----------- -------------
 Total cost of content and
  services revenue                    8,547       8,025         6,316
  Cost of hardware revenue              826         206           846
  Cost of related party
   revenue                               27          42            48
  Operations                          2,996       2,861         2,461
  Technology and development          4,758       4,484         2,343
  Marketing                           3,340       3,573         3,173
  General and administrative          2,743       2,663         2,376
                               ------------- ----------- -------------
Total operating expenses             23,237      21,854        17,563
                               ------------- ----------- -------------

(Loss) income from operations        (3,211)     (2,713)         (792)

Loss on equity investment               (90)       (180)            -

Other income (expense):
  Interest income                       779         714           554
  Interest expense                        -           -             -
                               ------------- ----------- -------------
 Other income, net                      779         714           554

                               ------------- ----------- -------------
(Loss) income before income
 taxes                               (2,522)     (2,179)         (238)

 Income tax (expense) benefit            (3)         (3)           51

                               ------------- ----------- -------------
Net (loss) income                   $(2,525)    $(2,182)        $(187)
                               ============= =========== =============


Basic net (loss) income per
 common share                        $(0.10)     $(0.09)       $(0.01)

Basic weighted average common
 shares outstanding              24,348,938  24,501,629    24,291,008

Diluted net (loss) income per
 common share                        $(0.10)     $(0.09)       $(0.01)

Diluted weighted average
 common shares outstanding       24,348,938  24,501,629    24,291,008

                                                Nine months ended
                                           ---------------------------
                                           September 30, September 30,
                                               2006          2005
                                           ------------- -------------

Revenue, net:
 Content and services:
  Consumer content                              $57,681       $44,469
  Point of sale rebates                            (293)         (795)
  Services                                           85            82
                                           ------------- -------------
 Total content and services                      57,473        43,756
  Hardware                                          283           332
  Related party revenue                             852           796
  Other                                             274            89
                                           ------------- -------------
 Total revenue, net                              58,882        44,973

Operating expenses:
 Cost of content and services revenue:
  Royalties and other content charges            23,943        15,585
  Discount certificate rebates                      910         1,262
                                           ------------- -------------
 Total cost of content and services
  revenue                                        24,853        16,847
  Cost of hardware revenue                        1,707         1,442
  Cost of related party revenue                     227           121
  Operations                                      8,959         6,584
  Technology and development                     12,936         5,812
  Marketing                                      11,214         8,368
  General and administrative                      8,607         5,601
                                           ------------- -------------
Total operating expenses                         68,503        44,775
                                           ------------- -------------

(Loss) income from operations                    (9,621)          198

Loss on equity investment                          (270)            -

Other income (expense):
  Interest income                                 2,153         1,424
  Interest expense                                    -            (1)
                                           ------------- -------------
 Other income, net                                2,153         1,423

                                           ------------- -------------
(Loss) income before income taxes                (7,738)        1,621

 Income tax (expense) benefit                        (9)          (97)

                                           ------------- -------------
Net (loss) income                               $(7,747)       $1,524
                                           ============= =============


Basic net (loss) income per common share         $(0.32)        $0.06

Basic weighted average common shares
 outstanding                                 24,443,620    24,157,233

Diluted net (loss) income per common share       $(0.32)        $0.06

Diluted weighted average common shares
 outstanding                                 24,443,620    24,458,621
                     AUDIBLE INC. AND SUBSIDIARY
                         NON-GAAP INFORMATION
                             (Unaudited)
          (in thousands, except share and per share amounts)

                                         Three months ended
                               ---------------------------------------
                               September 30,  June 30,   September 30,
                                   2006         2006         2005
                               ------------- ----------- -------------

Stock-based compensation
 included in expense line
 items:
  Operations                           $324        $300           $43
  Technology and development            281         287            57
  Marketing                             271         321            37
  General and administrative            629         655           226
                               ------------- ----------- -------------
                                     $1,505      $1,563          $363
                               ------------- ----------- -------------



Reconciliation to Non-GAAP
 Financial Measures
 (unaudited)
(Loss) income from operations       $(3,211)    $(2,713)        $(792)
Add back:
  Stock-based compensation            1,505       1,563           363
                               ------------- ----------- -------------
Non-GAAP (loss) income from
 operations                         $(1,706)    $(1,150)        $(429)
                               ============= =========== =============



Reconciliation to Non-GAAP
 Financial Measures
 (unaudited)
Net (loss) income                   $(2,525)    $(2,182)        $(187)
Add back:
  Stock-based compensation            1,505       1,563           363
                               ------------- ----------- -------------
Non-GAAP net (loss) income          $(1,020)      $(619)         $176
                               ============= =========== =============

Non-GAAP net (loss) income per
 common share
  Basic                              $(0.04)     $(0.03)        $0.01

Weighted average common shares
 outstanding
  Basic                          24,348,938  24,501,629    24,291,008


Reconciliation to Non-GAAP
 Financial Measures
 (unaudited)
  Net cash provided by
   operating activities              $2,043      $1,995        $3,978
  Purchases of property and
   equipment and capital lease
   payments                             (76)       (257)         (390)
  Capitalized software
   development costs                   (191)        (56)         (768)
                               ------------- ----------- -------------
Non-GAAP free cash flow              $1,776      $1,682        $2,820
                               ============= =========== =============


Reconciliation to Non-GAAP
 Financial Measures
 (unaudited)
Total revenue, net                  $20,026     $19,141       $16,771
Add:
  Change in deferred revenue          1,526       1,276           285
                               ------------- ----------- -------------
Non-GAAP total cash sales           $21,552     $20,417       $17,056
                               ============= =========== =============

                                                Nine months ended
                                           ---------------------------
                                           September 30, September 30,
                                               2006          2005
                                           ------------- -------------

Stock-based compensation included in
 expense line items:
  Operations                                       $767           $98
  Technology and development                        699            61
  Marketing                                         796            50
  General and administrative                      1,900           326
                                           ------------- -------------
                                                 $4,162          $535
                                           ------------- -------------



Reconciliation to Non-GAAP Financial
 Measures (unaudited)
(Loss) income from operations                   $(9,621)         $198
Add back:
  Stock-based compensation                        4,162           535
                                           ------------- -------------
Non-GAAP (loss) income from operations          $(5,459)         $733
                                           ============= =============



Reconciliation to Non-GAAP Financial
 Measures (unaudited)
Net (loss) income                               $(7,747)       $1,524
Add back:
  Stock-based compensation                        4,162           535
                                           ------------- -------------
Non-GAAP net (loss) income                      $(3,585)       $2,059
                                           ============= =============

Non-GAAP net (loss) income per common
 share
  Basic                                          $(0.15)        $0.09

Weighted average common shares outstanding
  Basic                                      24,443,620    24,157,233


Reconciliation to Non-GAAP Financial
 Measures (unaudited)
  Net cash provided by operating
   activities                                      $392        $9,157
  Purchases of property and equipment and
   capital lease payments                        (4,049)       (2,228)
  Capitalized software development costs           (445)         (768)
                                           ------------- -------------
Non-GAAP free cash flow                         $(4,102)       $6,161
                                           ============= =============


Reconciliation to Non-GAAP Financial
 Measures (unaudited)
Total revenue, net                              $58,882       $44,973
Add:
  Change in deferred revenue                      4,879           798
                                           ------------- -------------
Non-GAAP total cash sales                       $63,761       $45,771
                                           ============= =============
                     AUDIBLE INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED BALANCE SHEETS
                        (dollars in thousands)

                                            September 30, December 31,
                  Assets                        2006         2005
                                            ------------- ------------
                                             (unaudited)

Current Assets:
 Cash and cash equivalents                       $13,556      $11,549
 Short-term investments                           47,373       55,616
 Interest receivable on short-term
  investments                                        505          428
 Accounts receivable, net of allowance             2,836        2,337
 Accounts receivable, related parties                631          594
 Royalty advances                                    519          471
 Prepaid expenses and other current assets         1,998          899
 Inventory                                           156          498
                                            ------------- ------------
Total current assets                              67,574       72,392

 Property and equipment, net                       8,798        8,159
 Other assets                                        804          114

                                            ------------- ------------
Total Assets                                     $77,176      $80,665
                                            ============= ============

   Liabilities and Stockholders' Equity

Current Liabilities:
 Accounts payable                                 $2,356       $4,750
 Accrued expenses                                  4,382        4,802
 Accrued royalties                                 5,889        5,104
 Accrued compensation                              1,069          868
 Deferred revenue, current                        10,957        6,459
                                            ------------- ------------
Total current liabilities                         24,653       21,983

 Deferred revenue, non current                       480           99
 Royalty obligations, non current                    124          188

 Commitments and contingencies

Stockholders' Equity:
 Common stock                                        242          243
 Additional paid-in capital                      190,161      192,547
 Deferred compensation                                 -       (3,696)
 Accumulated other comprehensive (loss)
  income                                             (23)          15
 Accumulated deficit                            (138,461)    (130,714)
                                            ------------- ------------
Total Stockholders' Equity                        51,919       58,395

                                            ------------- ------------
Total Liabilities and Stockholders' Equity       $77,176      $80,665
                                            ============= ============
                     AUDIBLE INC. AND SUBSIDIARY
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (dollars in thousands)
                             (unaudited)

                                  Three months ended Nine months ended
                                    September 30,      September 30,
                                  ------------------ -----------------
                                    2006     2005     2006     2005
                                  --------- -------- -------- --------

Cash flows from operating
 activities:
 Net (loss) income                 $(2,525)   $(190) $(7,747)  $1,524
Adjustments to reconcile net
 (loss) income to net cash
 provided by operating
 activities:
 Depreciation and amortization       1,325      300    3,710      677
 Impairment loss on internally
  developed software                   144        -      144        -
 Non-cash stock-based
  compensation charge                1,505      363    4,162      535
 Accretion of discounts on short-
  term investments                    (275)    (306)    (724)    (932)
 Income tax effect from exercise
  of stock options                       -      (50)       -       97
Changes in assets and
 liabilities:
 Interest receivable on short-
  term investments                     (10)     (90)     (77)    (166)
 Accounts receivable, net             (905)      53     (496)    (637)
 Accounts receivable, related
  parties                              (24)    (131)     (37)     (89)
 Royalty advances                      (88)    (146)     (48)    (401)
 Prepaid expenses and other
  current assets                      (301)     196   (1,098)     (68)
 Inventory                             646       52      345      295
 Other assets                          133     (103)    (688)    (114)
 Accounts payable                     (345)     259   (2,402)     886
 Accrued expenses                      698    1,883     (491)   2,815
 Accrued royalties                     773    1,365      773    3,424
 Accrued compensation                 (231)     238      194      513
 Deferred revenue                    1,523      285    4,872      798
                                  --------- -------- -------- --------
Net cash provided by operating
 activities                          2,043    3,978      392    9,157
                                  --------- -------- -------- --------

Cash flows from investing
 activities:
 Purchases of property and
  equipment                            (76)    (390)  (4,049)  (2,107)
 Capitalized software development
  costs                               (191)    (768)    (445)    (768)
 Purchases of short-term
  investments                      (24,529) (29,069) (60,098) (61,718)
 Proceeds from maturity of short-
  term investments                  27,265   28,900   69,065   54,900
                                  --------- -------- -------- --------
Net cash (used in) provided by
 investing activities                2,469   (1,327)   4,473   (9,693)
                                  --------- -------- -------- --------

Cash flows from financing
 activities:
 Proceeds from exercise of common
  stock options                         31       33      385      623
 Proceeds from exercise of common
  stock warrants                         -        -      750      295
 Principal payments made on
  capital lease obligations              -        -        -     (121)
 Repurchase of treasury stock at
  cost                              (1,701)       -   (3,988)       -
                                  --------- -------- -------- --------
Net cash (used in) provided by
 financing activities               (1,670)      33   (2,853)     797
                                  --------- -------- -------- --------

Effect of exchange rate changes
 on cash and cash equivalents            7        -       (5)      14
                                  --------- -------- -------- --------

 Increase in cash and cash
  equivalents                        2,849    2,684    2,007      275

Cash and cash equivalents at
 beginning of period                10,707   10,887   11,549   13,296
                                  --------- -------- -------- --------
Cash and cash equivalents at end
 of period                         $13,556  $13,571  $13,556  $13,571
                                  ========= ======== ======== ========
                     AUDIBLE INC. AND SUBSIDIARY
                UNAUDITED SUPPLEMENTAL OPERATING DATA
            (Numbers in thousands except where specified)
                     2004             2005                2006
                   ---------------------------------------------------
New AudibleListener Q3   Q4   Q1    Q2    Q3    Q4    Q1    Q2    Q3
 Membership
 Reporting:
-------------------
Total
 AudibleListener(R)
 Members(1)         132  157  186   205   224   245   279   309   345
  Year-over-year(4) n/a  n/a   77%   77%   70%   56%   50%   51%   54%
  Quarter-over-
   quarter           14%  20%  18%   10%    9%   10%   14%   11%   12%
New
 AudibleListener(R)
 Members(2)          29   39   54    52    60    62    79    65    71
  Year-over-year(4) n/a  n/a  143%  141%  104%   58%   46%   25%   18%
  Quarter-over-
   quarter           35%  34%  37%   -3%   15%    4%   26%  -17%    9%
Average Monthly
 Churn in
 AudibleListener(R)
 Members(3)        3.00%2.60%4.00% 4.70% 5.10% 4.80% 4.60% 3.40% 3.10%
Cost per New AL (in
 whole dollars)(5)  $62  $64  $52   $58   $58   $95   $52   $45   $47
(1) Total number of AudibleListener(R) members at the end of the
 period.
(2) Total number of new AudibleListener(R) members added during the
 period. Members canceling and rejoining a membership within the same
 day are counted as one membership.
(3) Churn is defined as member cancellations in the period divided by
 the sum of members at the beginning of the period plus gross member
 adds, divided by three months.
(4) AudibleListener numbers were not announced for Q3 2003 and Q4 2003
 making year-over-year comparison with 2004 not applicable
(5) Cost per new AL includes all variable marketing expenses, net
 hardware subsidy cost, and retail rebates.

CONTACT: Audible, Inc.
Jonathan Korzen, 973-837-2718
Director of Corporate Communications
jkorzen@audible.com

SOURCE: Audible, Inc.

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