CNET Networks Reports Fourth Quarter Revenue and Profit Growth
SAN FRANCISCO, Feb. 6 /PRNewswire/ -- CNET Networks, Inc. (Nasdaq: CNET),
the global source of technology and commerce-related information, data,
exchanges and services, today reported pro forma financial results for the
fourth quarter and year ended December 31, 2000. Due to the significance of
the October 17, 2000 acquisition of ZDNet, all results for 1999 and 2000 are
presented on a pro forma basis as if the acquisition had occurred on
January 1, 1999, except where otherwise noted.
Pro forma net revenues for the fourth quarter totaled $120.0 million,
compared to net revenues of $92.1 million for the same period of 1999, an
increase of 30 percent. CNET Networks generated pro forma adjusted EBITDA
(earnings before interest, income taxes, other income (expense), realized
gains (losses) on investments, depreciation of property and equipment, merger
expenses and amortization of goodwill) of $18.1 million in the fourth quarter,
representing a 15 percent margin, compared with an adjusted EBITDA loss of
$23.6 million in the same period of 1999. Pro forma income, excluding
goodwill amortization, merger expenses, realized gains (losses) on
investments, and income taxes, was $13.2 million or $0.09 per diluted share,
versus a pro forma loss of $25.7 million or $0.21 per share in the fourth
quarter of 1999. Including goodwill amortization, merger expenses, realized
gains (losses) on investments, and income taxes, CNET Networks' pro forma net
loss for the fourth quarter of 2000 was $424.4 million, or $3.16 per share,
versus net income of $224.1 million or $1.65 per diluted share in the same
period last year. Fourth quarter 2000 results included a $384.2 million
non-cash charge to write down certain of the company's investments to market
value. Approximately $378 million of the charge is related to CNET Networks'
investment in NBCi, which the company received in 1999 in exchange for
non-cash assets.
For the year ended December 31, 2000, pro forma net revenues grew
49 percent to $427.7 million, when compared to 1999 net revenues of
$287.0 million. Pro forma adjusted EBITDA was $46.6 million, representing an
11 percent margin, versus an adjusted EBITDA loss of $15.6 million for the
same period in 1999. Pro forma income, excluding goodwill amortization,
merger expenses, related gains (losses) on investments and income taxes, was
$22.4 million or $0.16 per diluted share, versus a pro forma loss of
$24.6 million or $0.20 per diluted share in 1999. Including goodwill
amortization, related gains (losses) on investments and income taxes, CNET
Networks' pro forma net loss for the year of 2000 was $938.3 million, or
$7.17 per share, versus net loss of $110.5 million or $0.91 per diluted share
in the same period last year.
"We had an outstanding year topped by a solid fourth quarter, during which
the merger of CNET Networks and ZDNet became official," said Shelby Bonnie,
Chairman and CEO of CNET Networks. "In the fourth quarter, we focused on
integrating our businesses to leverage the power of our combined assets. We
have succeeded in building a network that is now the largest and most
successful technology information, commerce and services company in the world.
We have built a platform that links buyers, sellers and suppliers, touching
every segment of the technology supply chain, from distributors, to
manufacturers, to end users. This business model will serve us well as we
continue to expand our audience and services within the estimated
$1.4 trillion global IT market."
Q4 Operating Highlights:
-- CNET Networks ranked as the 7th largest global Web property with over
27 million unique users in November 2000, according to Media Metrix,
representing the largest and most loyal technology-buying audience in the
world.
-- In the United States alone, CNET Networks ranked as a top 10 Web
property, with a reach of 24.6 percent of US internet users.
-- Aggregated average daily page views grew to 41.1 million, an increase
of 58 percent over the fourth quarter of 1999.
-- Total aggregated unique customers increased by 100 from the third to
the fourth quarter to approximately 1,400.
-- Daily leads to merchants reached 447,000, up 61 percent from the third
quarter and 109 percent from the fourth quarter of 1999. Revenue per lead
averaged $0.64 in the quarter.
-- CNET Networks delivered more than 40 million total leads during the
fourth quarter that resulted in an estimated $700 million in commerce
transactions for our merchants.
-- CNET Data Services (CDS) increased its site licenses to 139 in the
fourth quarter, from 120 in the third quarter of 2000.
-- CNET Networks delivered email alerts from its more than
100 topic-focused newsletter offerings to its 10.4 million unique email
subscribers in the fourth quarter.
Under generally accepted accounting principles (GAAP), the ZDNet financial
results were consolidated with CNET's results effective October 18, 2000 using
purchase accounting. Under GAAP, net revenues for the fourth quarter ended
December 31, 2000 were $111.0 million, compared to revenues of $38.3 million
for the same period in 1999. GAAP net loss was $392.1 million, or $3.12 per
share for the quarter ended December 31, 2000, compared to net income of
$356.4 million, or $4.18 per diluted share for the same period in 1999. GAAP
net revenues for the year ended December 31, 2000 were $264.0 million,
compared to revenues of $112.3 million for the same period in 1999. GAAP net
loss was $484.0 million, or $5.18 per share for the year ended
December 31, 2000, compared to net income of $416.9 million, or $5.00 per
diluted share for the same period in 1999.
BUSINESS UNIT HIGHLIGHTS
CNET Networks' organizational structure positions each business unit to
operate efficiently and allow them to move quickly to innovate and address new
opportunities as an industry leader.
Media
CNET Media includes a broad portfolio of US-based CNET and ZDNet-branded
technology content delivered over multiple platforms, from online and wireless
to television, radio and print. CNET Networks' online media properties
reached 44 percent of professionals in the MIS/technical universe*, and
25 percent of all executives and managers or professionals (non-MIS) with
business purchase decision-making power*, according to a Nielsen//NetRatings
December 2000 custom report. Together, CNET and ZDNet online sites reach over
five times the technology audience of its nearest competitor, according to
Media Metrix.
During the fourth quarter, CNET Networks began introducing innovative new
digital marketing units to leverage the unique marketing capabilities of the
Internet, in consultation with top agencies and advertising partners. The
attention-grabbing, rich media units are designed to enable marketers to
communicate brand messaging and more in-depth, targeted information about
their company's products or services to CNET Networks' large and influential
technology buying audience.
The ads were introduced on the newly redesigned CNET News.com
(www.news.com) and ZDNet News (www.zdnn.com) news sites, with several
blue-chip advertisers -- including IBM, Sun and Oracle -- having signed up to
deploy them. Since then, the New York Times Digital and other publishers have
said that they plan to adopt the new advertising formats set by CNET Networks.
"We are in an evolutionary period for the online advertising marketplace
and we're taking a leadership position in assuring that the Web becomes the
most effective medium for advertising," said Bonnie. "We believe that if we
work together with other players in the industry -- from ad agencies and
online publishers to the advertisers themselves -- we can create the ultimate
marketing and messaging platform."
International Media
CNET Networks' International Media division has an Internet presence in
25 countries around the world, making CNET Networks among the top five
international networks in terms of global footprint. Media Metrix projects
the international home user universe to have already surpassed the size of the
US home universe, with 78.8 million unique users in the month of November**.
This large market represents tremendous opportunity for growth of the CNET
Networks franchise. According to Media Metrix November data, CNET Networks
has already attracted 9.4 million unique users internationally. The company
ranks first in the technology category in almost all countries measured by
Media Metrix, including Canada, France, Germany, United Kingdom, Sweden and
Australia.
CNET Networks delivered approximately 5.4 million average daily page views
to its international sites in the fourth quarter, up 125 percent from the
2.4 million average daily page views of the fourth quarter of 1999. This
represents 12 percent of CNET Networks' total, worldwide page views.
During the fourth quarter, CNET Networks added to its Asian presence by
acquiring the remaining interest in its joint venture with AsiaContent.com to
gain full ownership of seven CNET Web sites throughout Asia. By directly
controlling the development of the sites' content, audience, brand and revenue
streams, the company strengthened its leadership position.
CNET Networks also recently announced the formation of a European network
sales organization, which provides the company's sales managers in nine
European countries the tools they need to provide cross-border marketing
opportunities for their clients. This important development will enable the
company to better identify efficiencies across borders and new opportunities
for marketers, wherever their prospective customers may be. Local CNET
Networks' advertising account managers will eventually be able to work with
their customers to seamlessly advertise on CNET or ZDNet brands in North
America, Latin America, Europe and Asia.
Channel Services
CNET Data Services (CDS), a standardized, multi-lingual database of more
than 600,000 technology and consumer electronics products, added more than
19 new licenses to its customer base, including Yahoo! Shopping, Boise Cascade
Office Products, Vitessa, and Singlesource, during the fourth quarter.
"For more than a year, we have been adding individual channel services
offerings, and implementing innovative features that have allowed us to
continue to expand our channel customer base," said Bonnie. "The launch of an
enhanced version of CNET ChannelOnline in the first part of this year will be
a significant milestone. It will be a clear industry first for participating
VARs, by offering a single online platform to evaluate product information,
pricing and availability and enabling a frictionless commerce marketplace."
mySimon
CNET Networks' mySimon (www.mysimon.com) experienced a record-breaking
quarter in terms of audience growth, page views, and leads. During the
critical holiday shopping month of December, mySimon was the number one,
pure-play consumer comparison-shopping site that is not a portal and
outdistanced its closest competitor by more than one million unique visitors,
based on traffic reported by both Nielsen//NetRatings and Media Metrix. In
addition, mySimon users viewed an average of 11.3 unique pages and spent an
average of 12.3 minutes on the sited during the month of December 2000,
according to Media Metrix.
mySimon generated more than 50 percent of CNET Networks' total leads to
merchants in the fourth quarter, with more than half of the mySimon leads
representing non-technology products.
"Since we acquired it a year ago, mySimon has performed extremely well in
creating incredibly appealing information and shopping tools for consumers to
learn about and shop for all types of products, as well as in implementing
programs for merchants to effectively communicate to consumers. mySimon more
than delivered on its year 2000 revenue and lead expectations," Bonnie
commented.
INVESTMENTS & OUTLOOK
CNET Networks ended the year 2000 with cash and marketable securities
valued at approximately $360 million, of which approximately $300 million was
in cash and cash equivalents.
For the combined businesses of CNET Networks, Inc., management estimates
net revenues will be in the range of $86 million to $92 million for the first
quarter of 2001. The company is targeting 2001 annual revenue of $450 to
$480 million. Based on these revenue goals, management believes reasonable
EBITDA targets are between break even and $5 million in the first quarter of
2001 and approximately $60 million to $80 million (13 percent to 17 percent
margins) in 2001. For 2002, we are targeting annual revenue growth of
approximately 25 percent and an adjusted EBITDA margin of approximately
25 percent. For further guidance, please refer to the addendum that follows
the financial statements.
The company also announced that it plans to eliminate duplication in
certain businesses and discontinue certain non-growth or unprofitable
businesses. These decisions, which will be implemented within the next few
weeks, will reduce the company's global workforce by approximately 10 percent.
"Because of the current slowdown affecting the economy and particularly
the technology market, we have limited visibility and thus have lowered our
2001 revenue guidance by 17 to 20 percent," said Bonnie. "We have also moved
to reduce our cost structure, a decision we did not make lightly. We feel
these are the steps needed to focus the company squarely on our long-term
goals. Our reduced guidance does allow for continued year-over-year revenue
growth and increased profitability over year 2000 results, so our overall
outlook is still very positive."
Safe Harbor
This press release includes forward-looking information and statements
that are subject to risks and uncertainties that could cause actual results to
differ materially. The statements set forth in the second, third and fourth
paragraphs under "Investments and Outlook" and in the attached "Guidance to
the Investment Community" are forward-looking statements, as well as other
statements throughout the release that are identified by the words "expect,"
"estimate," "target," "believe," "anticipate" and "intend". We undertake no
duty to publicly update these forward-looking statements, whether as a result
of new information, future developments or otherwise. Our forward looking
statements, are subject to the following risks: that cost-reduction
initiatives will not be achieved due to implementation difficulties or
contractual spending commitments that can't be reduced; that the businesses
identified for further integration to achieve cost synergies will not be
integrated successfully; the acquisition of businesses or the launch of new
lines of business necessary to respond to changing market conditions, which
could increase operating expense and dilute operating margins; the inability
to attract new customers for the company's channel services products;
increased competition, including from the internet initiatives of Ziff-Davis
Media and VNU Publishing, which could lead to negative pressure on the
company's pricing and the need for increased marketing; increased costs
associated with the need to replace content previously provided by Ziff-Davis
Media; the inability to maintain, establish or renew relationships with
commerce, advertising, marketing, technology, and content providers, whether
due to competition or other factors; a continued or worsening slowdown in
advertising spending on the Internet in general or on CNET Networks'
properties in particular, which could be prompted by a decrease in consumer
spending, the failure of early stage companies who are heavy internet
advertisers to receive financing or other factors; and the inability of the
company to increase the proportion of advertising from established companies;
and to the general risks associated with the company' businesses. For risks
about CNET's business, see its registration statement on
Form S-4 filed September 8, 2000, in connection with the ZDNet merger, its
Form 10-K for the year-ended December 31, 1999 and subsequent Forms 10-Q and
Forms 8-K, including under the captions "Risk Factors" and "Management's
Discussion and Analysis of Results of Operations." For risks about ZDNet's
business, which may also apply to its business as part of CNET Networks, see
its Form 10-K for the-year ended December 31, 1999 and subsequent Forms
10-Q and Forms 8-K, as well as its definitive proxy statement dated February
7, 2000 and other SEC filings, including under the captions "Risk Factors" and
"Management's Discussion and Analysis of Results of Operations."
About CNET Networks, Inc.
CNET Networks, Inc. is the global source of technology and
commerce-related information, data, exchanges and services. As a top
10 Internet company with established Web sites in 25 countries and
16 languages, CNET Networks connects buyers, sellers and suppliers throughout
the IT supply chain with award-winning content via the Web, wireless devices,
television, radio and print. Its respected brand portfolio includes CNET,
ZDNet, mySimon, News.com, Computer Shopper magazine, and CNET Radio, as well
as CNET Channel Services, including CNET Data Services and ChannelOnline. The
company's vision is to educate and empower people and businesses by unlocking
the potential of the technology world to make things easier and faster, and by
helping them make smarter buying decisions.
CNET Networks' conference call to discuss its fourth quarter financial
results and outlook for 2001 will be hosted by Shelby Bonnie, Chairman and
CEO, Dan Rosensweig, President, and Doug Woodrum, CFO, and webcast live at
5:00 PM EST (2:00 PST), today, February 6, 2001. To listen to the discussion,
please visit http://www.cnet.com/aboutcnet/0-13614.html , and click on the
link for the webcast conference call. The webcast will be archived for seven
days at the URL listed above.
*who are active online at work
**Includes Sweden, which is measured in a separate report from the Media
Metrix Multi-Country report.
*** Neilsen Net Ratings, Shopping Aggregators Spotlight, October 20, 2000.
Supplemental Combined CNET and ZDNet Proforma Consolidated Statements of
Operations*
Unaudited - (000s)
Three Months Ended Year Ended
December 31, December 31,
2000 1999 2000 1999
Revenues:
Internet $106,232 $73,102 $370,793 $212,567
Other 13,813 19,013 56,881 74,466
Total revenues 120,045 92,115 427,674 287,033
Cost of revenues 43,843 37,222 174,404 117,730
Gross profit 76,202 54,893 253,270 169,303
Operating expenses:
Sales and marketing 51,318 66,469 168,936 141,229
General and administrative 6,793 12,021 37,778 43,710
58,111 78,490 206,714 184,939
Adjusted EBITDA 18,091 (23,597) 46,556 (15,636)
Other operating expenses:
Merger expenses 1,195 -- 1,195 --
Depreciation 5,541 3,482 18,707 11,500
Amortization of goodwill
and intangibles 182,725 146,585 763,083 561,054
189,461 150,067 782,985 572,554
Operating income (loss) (171,370) (173,664) (736,429) (588,190)
Other income (expense):
Realized gain (loss) on
investments (384,678) 613,716 (277,783) 736,082
Other income (expense), net 676 1,351 (5,410) 2,523
Total other income
(expense) (384,002) 615,067 (283,193) 738,605
Net income (loss) before
income taxes (555,372) 441,403 (1,019,622) 150,415
Income taxes (130,947) 217,302 (81,339) 260,891
Net income (loss) $(424,425) $224,101 $(938,283) $(110,476)
Basic net income (loss) per
share $(3.16) $1.81 $(7.17) $(0.91)
Diluted net income (loss) per
share $(3.16) $1.65 $(7.17) $(0.91)
EPS before amortization of
goodwill, merger
expenses, realized gain
(loss) on investments
and income taxes $0.09 $(0.21) $0.16 $(0.20)
Shares used in calculating
basic per share data 134,218 123,624 130,774 121,820
Shares used in calculating
diluted per share data 134,218 135,516 130,774 121,820
Shares used in calculating EPS
before amortization of
goodwill, merger expenses,
realized gains (losses) on
investments and income taxes 140,467 123,624 139,019 121,820
* ZDNet consolidated as of January 1, 1999.
Consolidated Statements of Operations*
Unaudited - (000s)
Three Months Ended Year Ended
December 31, December 31,
2000 1999 2000 1999
Revenues:
Internet $99,168 $35,846 $244,658 $104,887
Other 11,807 2,462 19,361 7,458
Total revenues 110,975 38,308 264,020 112,345
Cost of revenues 39,192 16,054 97,548 47,605
Gross profit 71,783 22,254 166,472 64,740
Operating expenses:
Sales and marketing 47,985 48,680 107,119 94,139
General and administrative 6,575 1,988 19,167 8,731
54,560 50,668 126,285 102,870
Adjusted EBITDA 17,223 (28,414) 40,186 (38,130)
Other operating expenses:
Merger expenses 1,195 -- 1,195 --
Depreciation 5,276 2,231 15,442 7,972
Amortization of goodwill and
intangibles 178,174 8,575 340,406 15,036
184,645 10,806 357,043 23,008
Operating income (loss) (167,422) (39,220) (316,857) (61,138)
Other income (expense):
Realized gain (loss) on
investments (384,678) 611,772 (277,783) 734,138
Other income (expense), net 809 891 1,062 1,223
Total other income
(expense) (383,869) 612,663 (276,721) 735,361
Net income (loss) before
income taxes (551,291) 573,443 (593,578) 674,223
Income taxes (159,207) 217,003 (109,599) 257,315
Net income (loss) $(392,084) $356,440 $(483,979) $416,908
Basic net income (loss) per
share ($3.12) $4.84 ($5.18) $5.80
Diluted net income (loss) per
share ($3.12) $4.18 ($5.18) $5.00
EPS before amortization of
goodwill, merger expenses,
costs, realized gain (loss)
on investments and income
taxes $0.10 $(0.40) $0.25 $0.62
Shares used in calculating basic
per share data 125,868 73,624 93,461 71,820
Shares used in calculating
diluted
per share data 125,868 85,516 93,461 83,373
Shares used in calculating EPS
before amortization of goodwill,
merger expenses, realized gains
(losses) on investments and
income taxes 132,117 73,624 101,706 71,820
* ZDNet consolidated as of October 18, 2000
Consolidated Balance Sheet
Unaudited
(000s)
December 31, December 31,
2000 1999
ASSETS
Current assets:
Cash and cash equivalents $169,311 $53,803
Investments in marketable debt
securities 52,864 65,985
Investments in marketable equity
securities 55,512 785,909
Accounts receivable, net 95,573 24,628
Other current assets 52,737 18,743
Total current assets 425,997 949,068
Investments in marketable debt
securities 81,823 109,802
Investments in marketable equity
securities 4,375 --
Property and equipment, net 59,288 30,044
Other assets 189,716 50,609
Goodwill and intangibles 2,102,200 90,788
Total assets $2,863,399 $1,230,311
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $19,044 $11,461
Accrued liabilities 97,861 16,398
Current portion of long-term
debt 5,831 5,750
Tax-related liabilities 6,798 311,750
Total current liabilities 129,534 345,359
--
Long-term debt and other liabilities 185,185 179,114
Total liabilities 314,719 524,473
Stockholders' equity:
Common stock 14 7
Additional paid in capital 2,659,893 218,670
Other comprehensive income 37,364 121,409
Retained earnings (deficit) (118,227) 365,752
Treasury stock, at cost (30,364) --
Total stockholders' equity 2,548,680 705,838
$2,863,399 $1,230,311
Guidance to the Investment Community
Full
Q1 Q2 Q3 Q4 Year
2001 2001 2001 2001 2001
Net revenues $86-92 $95-105 $115-125 $145-160 $450-480
Cash operating
expense $86-87 $90-95 $100-105 $115-120 $380-400
EBITDA $0-5 $5-10 $15-20 $30-40 $60-80
EBITDA margin 0-5% 5-10% 13-16% 20-25% 13-17%
Depreciation
expense $6.2 $6.6 $6.8 $6.9 $26.5
Amortization
expense $183 $183 $183 $183 $732
Effective tax
rate -- 38% 38% 38% 38%
Other assumptions:
Assume a 1 million share increase per quarter in fully diluted shares
outstanding. Note that shares outstanding including options calculated
are a function of the stock price and difficult to forecast.
Safe Harbor for Guidance Attachment:
This table consists solely of forward-looking information that is subject
to risks and uncertainties that could cause actual results to differ
materially. We undertake no duty to publicly update these forward-looking
statements, whether as a result of new information, future developments or
otherwise. These projections are subject to the following risks: that
expected synergies of the ZDNet acquisition will not be achieved; that the
businesses will not be Integrated successfully; that acquisition costs will be
greater than expected; the acquisition of businesses or the launch of new
lines of business, which could increase operating expense and dilute operating
margins; the inability to identify, develop and achieve success for new
products, services and technologies; the inability to attract new customers
for the company's channel services products; increased competition, which
could lead to negative pressure on the company's pricing and the need for
increased marketing; the inability to maintain, establish or renew
relationships with commerce, advertising, marketing, technology, and content
providers; a decrease in the growth of advertising spending on the Internet in
general or on CNET Networks' properties in particular; and to the general
risks associated with the company' businesses. For risks about CNET's
business, see its registration statement on Form S-4 filed September 8, 2000,
in connection with the Ziff-Davis merger, its Form 10-K for the year-ended
December 31, 1999 and subsequent Forms 10-Q and Forms 8-K, including under the
captions "Risk Factors" and "Management's Discussion and Analysis of Results
of Operations." For risks about Ziff-Davis's business, which may also apply to
its business as part of CNET Networks, see its Form 10-K for the-year ended
December 31, 1999 and subsequent Forms 10-Q and Forms 8-K, as well as its
definitive proxy statement dated February 7, 2000 and other SEC filings,
including under the captions "Risk Factors" and "Management's Discussion and
Analysis of Results of Operations."
SOURCE CNET
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