Ziff Davis Reports Fourth Quarter Results EBITDA for the Fourth Quarter Increases 70% to $14.3 Million

EBITDA for the Full Year Increases 57% to $27.1 Million



    NEW YORK, March 22 /PRNewswire/ -- Ziff Davis Holdings Inc., the
 ultimate parent company of Ziff Davis Media Inc., today reported operating
 results for its fourth quarter and year ended December 31, 2006.
     The Company's consolidated EBITDA(1) increased to $14.3 million for the
 fourth quarter 2006, up 70% compared to $8.4 million for the prior year
 period. This increase in EBITDA was primarily due to the growth in the
 Company's digital businesses which generated an increase in EBITDA of 144%
 over the prior year quarter. Cost reductions along with the absence of
 losses from closed publications also contributed to the improvement.
     Consolidated revenues for the fourth quarter 2006 totaled $56.7
 million. Excluding revenue from closed publications (2), revenue increased
 nearly 6% or $2.8 million compared to the prior year. Including closed
 publications, consolidated revenue was down 2% when compared to a year ago.
 The Company's digital revenues for the quarter ended December 31, 2006
 increased by 24%, while print revenues, excluding the closed publications,
 decreased by 8%.
     For the full year 2006 the consolidated EBITDA increased to $27.1
 million, a 57% improvement compared to $17.3 million in 2005. The increase
 in EBITDA was primarily due to earnings from the Company's digital
 businesses more than doubling. Cost reductions and the absence of losses
 from closed publications also contributed to the improvement. This
 improvement was partially offset by a decrease in print EBITDA versus the
 prior year.
     Consolidated revenues for the full year 2006 totaled $181.0 million.
 Excluding revenue from closed publications, revenue increased more than 2%
 or $3.7 million compared to the prior year. Including closed publications,
 consolidated revenue was down 4% when compared to a year ago. The Company's
 digital revenues for the year ended December 31, 2006 increased by 25%
 versus 2005, while print revenues, excluding the closed publications,
 decreased by 11% compared to a year ago.
     Condensed Consolidated Statements of Operations for the 3 and 12 months
 ended December 31, 2006 and 2005; Condensed Consolidated Balance Sheets at
 December 31, 2006 and December 31, 2005 and Condensed Consolidated
 Statements of Cash Flows for the years ended December 31, 2006 and 2005 are
 set forth at the end of this release.
     "I'm pleased to announce strong Ziff Davis earnings for both the fourth
 quarter as well as full year 2006. Our investments, especially in digital
 media, have paid off and are yielding meaningful results," said Robert F.
 Callahan, Chairman and CEO of Ziff Davis Holdings Inc. "Ziff's creative and
 hard charging teams worked diligently to drive effective results for our
 customers which is job #1."
     Financial Summary for the Fourth Quarter Ended December 31, 2006 and 2005
 
                   Consumer/Small    Enterprise        Game          Total
                  Business Group(3)    Group(3)       Group(3)      Company
      $ millions    2006    2005    2006    2005    2006   2005   2006   2005
 
      Revenue      $22.0   $21.7   $23.1   $21.8   $11.6  $14.3  $56.7  $57.8
 
      EBITDA         7.1     4.3     5.6     1.1     1.6    3.0   14.3    8.4
 
 
 
     Consumer/Small Business Group
     Excluding closed publications (Sync and ExtremeTech), revenue increased
 $1.9 million or 9% compared to the fourth quarter of 2005. This increase
 was attributable to growth in the Group's online and DigitalLife revenues
 of 23% and 62%, respectively, partially offset by lower print advertising
 revenue at PC Magazine.
     Including closed publications revenue for the Consumer/Small Business
 Group for fourth quarter 2006 was $22.0 million, up $0.3 million or 1%
 compared to the same period last year.
     Production costs of $5.2 million were down $0.5 million or 9% from a
 year ago, principally due to the elimination of costs associated with the
 closure of Sync and ExtremeTech magazines.
     Selling, general and administrative expenses of $9.7 million were down
 $2.0 million or 17% compared to the $11.7 million reported for the period a
 year ago. Approximately $1.6 million of this decrease was attributable to
 the closure of Sync and ExtremeTech magazines. Costs at PC Magazine
 declined by 5%, but were partially offset by investments in the Group's
 online business, related to content and marketing to support its growth.
     EBITDA for the Group was up 65% to $7.1 million from a year ago
 primarily due to the growth of the online and DigitalLife businesses as
 well as the elimination of $(0.7) million of losses associated with Sync
 and ExtremeTech magazines partly offset by a decline in PC Magazine EBITDA
 as lower advertising revenue was only partially offset by cost reductions.
     Enterprise Group
     Revenue for the Enterprise Group for fourth quarter of 2006 was up 6%
 or $1.3 million to $23.1 million compared to the fourth quarter of 2005.
 The increase was principally due to growth in the Group's online
 businesses, which grew 23%, and the events business, which grew 19% versus
 year ago. This increase was partially offset by lower revenue for print
 advertising.
     Production costs of $3.9 million were down 7% or $0.3 million for the
 quarter, reflecting a decrease in the Group's print advertising and
 contract publishing business during the fourth quarter of 2006 as compared
 to a year ago. This decrease was partially offset by investments to support
 the growth of the Group's online business.
     Selling, general and administrative expenses of $13.6 million were down
 18% or $2.9 million from last year. This decrease was primarily
 attributable to lower costs for event execution, editorial, circulation.
     EBITDA for the Group was $5.6 million, up substantially versus last
 year's $1.1 million. This improvement in EBITDA was attributable to the
 growth in the Group's online business, improved margins in the event
 business, and cost reductions in both the print and online businesses.
     Game Group
     Revenue for the Game Group for the fourth quarter 2006 was $11.6
 million, down $2.7 million compared to the same period last year. Excluding
 closed publications (Official U.S. PlayStation Magazine, XBOX Nation and
 GMR), revenue decreased $0.4 million or 5% compared to the fourth quarter
 of 2005. This decrease was attributable to a decline in print advertising
 revenue for the Group's ongoing publications, partially offset by 76%
 growth in the Group's online revenue compared to a year ago.
     Production costs of $5.4 million were down 10% or $0.6 million for the
 quarter. Excluding closed publications, production costs decreased $0.4
 million or 13%, due primarily to fewer print advertising and editorial
 pages in the fourth quarter of 2006. This decrease was partially offset by
 an increase in operating expenses supporting the growth of the Group's
 online business during the fourth quarter of 2006.
     Selling, general and administrative expenses of $4.6 million were down
 $0.7 million or 13% versus year ago. Excluding closed publications,
 selling, general and administrative expenses were essentially flat versus a
 year ago.
     EBITDA for the Group was $1.6 million, down $1.4 million or 47% versus
 year ago. Excluding the effect of closed publications, EBITDA was down $0.1
 million versus the fourth quarter of 2005.
     Cash Position
     At December 31, 2006 the Company had $15.4 million of cash and cash
 equivalents. During the fourth quarter of 2006, the Company's cash and cash
 equivalents increased $4.6 million. During the quarter, the Company paid
 $5.9 million of scheduled interest payments and spent $1.6 million for
 capital expenditures and $1.1 million in restructuring costs.
     On February 15, 2007 the Company executed a Note Purchase Agreement
 related to the issuance of an aggregate of $20.0 million in principal
 amount of new Senior Secured Notes due 2012 (the "Notes"). The Company
 intends to use the net proceeds of the sale of the Notes for general
 corporate purposes, including payment of interest obligations on its
 outstanding debt securities.
     Fourth Quarter Highlights and Milestones (4) (5)
 
     Consumer/Small Business Group
      - 6.7 million total average monthly online unique visitors, up 18% over
        the 2005 quarter.
      - Gearlog.com was named MPA Magazine's Blog of the Year.
      - PCMagcast's Security Virtual Trade Show named Folio Magazine's Digital
        Event of the Year.
      - Over 50,000 attendees and 200 exhibitors participated in the
        DigitalLife convention, up more than 17% and 16%, respectively from
        last year's show.
      - PCMagazine continued to rank as the number one personal computing
        magazine in the US with a fourth quarter 2006 advertising page market
        share of 58% versus its most direct competitor.
      - Total broadband video traffic (comprised of streams and downloads) was
        up more than 100% in the quarter.
 
     Enterprise Group
      - 13.1 million in average monthly page views, up 30% relative to last
        year's quarter.
      - The number of events and eSeminars produced in the quarter grew by 24%
        and 8%, respectively, versus prior year.
      - eWeek advertising page market share of the four IT news weeklies was
        28% for the quarter, up from 25% in fourth quarter 2005.
      - Baseline and CIO Insight's ad page share among the four IT management
        monthly magazines were 24% and 24%, respectively, up from 22% and 23%
        last year.
 
     Game Group
      - Increased 1UP Network average monthly uniques in the 4th quarter by 63%
        over 2005 including 50% growth at the flagship site 1UP.com
      - New website mycheats.com launched in late Q3, reached nearly 700,000
        monthly uniques by December.
      - Reached agreements to provide 1UP Network content to Dell, Amazon.com
        and Digital River.
      - Leading Videogame Magazine EGM secured cover exclusives for big
        franchise games Halo 3 and Gears of War.
      - Re-launched Computer Gaming World as Games for Windows: The Official
        Magazine.
 
     Business Outlook
     The Company projects consolidated EBITDA for the first quarter of 2007
 will be in the range of $3 million to $4 million, compared to $2.7 million
 reported in the first quarter of 2006.
     The Company advises that its projections are subject to risks and
 uncertainties (see the "Forward-Looking Statements" heading below) which
 could therefore individually or collectively cause actual results to differ
 materially from those projected above.
     Investor Conference Call
     The Company's fourth quarter 2006 earnings conference call is scheduled
 for 2:00 p.m. eastern time on Thursday March 22, 2007. Individuals wishing
 to participate can join the conference call by dialing 210-234-0014 or
 888-790- 3563 for domestic calls and +800-3537-6218 for international calls
 and giving the operator the following information: Company -- Ziff Davis
 Media; Passcode -- HOLDINGS.
     For those who are unable to participate in the live call, the
 conference call will be recorded and available by telephone from 5:00 p.m.
 eastern time on March 22, 2007 to 5:00 p.m. eastern time on April 5, 2007.
 Persons interested in listening to the recorded call should dial
 1-888-673-3567 for domestic calls and 402-220-6430 for international calls.
     Any material financial or statistical information discussed on the
 conference call that is not otherwise included in this press release will
 be made available on the Company's website, www.ziffdavis.com, under the
 heading Investor Relations.
     About Ziff Davis Holdings Inc.
     Ziff Davis Holdings Inc. is the ultimate parent company of Ziff Davis
 Media Inc. Ziff Davis Media Inc. (www.ziffdavis.com) is a leading
 integrated media company serving the technology and videogame markets. Ziff
 Davis reaches over 28 million people a month through its portfolio of 32
 websites, 6 award- winning magazines, and hundreds of consumer and b-to-b
 events, as well as business IT tools, custom publishing, and direct
 marketing services. The company is headquartered in New York and also has
 offices and labs in San Francisco and Boston. The Company exports its
 brands internationally in 50 countries and 21 languages.
     Forward-Looking Statements
     Except for historical information contained herein, the statements made
 in this release including anticipated future revenues and operating
 results, cash balances and cost savings, constitute forward-looking
 statements within the meaning of Section 27A of the Securities Act of 1933
 and Section 21E of the Securities Exchange Act of 1934. Such
 forward-looking statements are subject to certain risks and uncertainties
 that may cause actual results to differ materially from those contained in
 the forward-looking statements. Such risks and uncertainties include the
 potential deterioration of the economic climate in general or with respect
 to the markets in which we operate, risks associated with new business
 investments, acquisitions, competition and seasonality and the other risks
 discussed in the Company's Annual Report on Form 10-K and other filings
 made with the Securities and Exchange Commission (which are available from
 the Company or at http://www.sec.gov), which discussions are incorporated
 in this release by reference. These forward- looking statements speak only
 as of the date of this release. After the issuance of this release, the
 Company might come to believe that certain forward-looking statements
 contained in this release are no longer accurate. The Company shall not
 have any obligation to release publicly any corrections or revisions to any
 forward-looking statements contained in this release.
                              ZIFF DAVIS HOLDINGS INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (in thousands)
 
                                                  For the Three Months Ended
                                                 December 31,      December 31,
                                                     2006              2005
                                                 (unaudited)       (unaudited)
 
        Revenue, net                                $56,705           $57,758
        Operating expenses:
            Cost of production                       14,594            15,893
            Selling, general and
             administrative expenses                 27,816            33,482
            Non-cash employee stock
             compensation (income)/expense               (3)               12
            Depreciation and amortization
             of property and equipment                2,018             1,590
            Amortization of intangible
             assets                                   4,640             4,308
            Restructuring expense                       668             2,967
            Acquisition related
             compensation                             3,107               -
            Transaction related expenses                236               -
            Loss in equity investment                     8                56
            Total operating expenses                 53,084            58,308
        Income (loss) from operations                 3,621              (550)
 
        Interest expense, net (6)                   (33,381)          (29,243)
        Loss before income taxes                    (29,760)          (29,793)
 
        Income tax provision                             36                47
        Net loss                                   $(29,796)         $(29,840)
        EBITDA (1)                                  $14,295            $8,383
 
 
 
                                                       For the Year Ended
                                                 December 31,      December 31,
                                                    2006               2005
                                                 (unaudited)         (audited)
 
        Revenue, net                               $181,017           $187,611
        Operating expenses:
            Cost of production                       48,991             51,834
            Selling, general and
             administrative expenses                104,890            118,495
            Non-cash employee stock
             compensation
             expense/(income)                             3               (807)
            Depreciation and amortization
             of property and equipment                7,628              5,831
            Amortization of intangible
             assets                                  17,908             16,384
            Restructuring expense                       510              2,967
            Impairment charge                         4,064                -
            Acquisition related
             compensation                             3,107                -
            Transaction related expenses                409                -
            Loss in equity investment                   322                 56
            Total operating expenses                187,832            194,760
        Loss from operations                         (6,815)            (7,149)
 
        Interest expense, net (6)                  (126,823)          (110,711)
        Loss before income taxes                   (133,638)          (117,860)
 
        Income tax provision                            112                215
        Net loss                                  $(133,750)         $(118,075)
        EBITDA (1)                                  $27,136            $17,282
 
 
 
                              ZIFF DAVIS HOLDINGS INC.
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (in thousands)
 
                                                 December 31,      December 31,
                                                    2006               2005
                                                 (unaudited)        (audited)
 
                          Assets
        Current assets:
        Cash and cash equivalents                   $15,369            $34,174
        Accounts receivable, net                     30,872             30,456
        Other current assets, net                     4,861              6,069
        Total current assets                         51,102             70,699
 
        Property and equipment, net                  15,622             16,322
        Intangible assets, net                      214,294            236,208
        Other non-current assets, net                18,760             21,526
        Total assets                               $299,778           $344,755
 
           Liabilities and stockholders' deficit
        Current liabilities:
        Accounts payable                            $17,664            $21,787
        Accrued expenses and other
         current liabilities                         38,791             32,171
        Unexpired subscriptions and
         deferred revenue, net                       15,606             18,177
        Total current liabilities                    72,061             72,135
 
        Long-term debt                              369,764            357,458
        Accrued interest - troubled debt
         restructuring                               43,084             60,278
        Accrued expenses - long-term                  8,041             12,058
        Redeemable preferred stock                  996,578            899,533
        Other non-current liabilities                10,612              9,905
        Total liabilities                         1,500,140          1,411,367
 
        Stockholders' deficit:
        Common stock                                 17,329             17,329
        Additional paid-in capital                    8,468              8,468
        Accumulated deficit                      (1,226,159)        (1,092,409)
        Total stockholders' deficit              (1,200,362)        (1,066,612)
 
        Total liabilities and
         stockholders' deficit                     $299,778           $344,755
 
 
 
 
                              ZIFF DAVIS HOLDINGS INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (in thousands)
 
                                                      For the Year Ended
                                                December 31,       December 31,
                                                     2006              2005
                                                 (unaudited)        (audited)
      Cash flows from operating
       activities:
      Net loss                                    ($133,750)         ($118,075)
      Adjustments to reconcile net loss
       to net cash used in operating
       activities:
         Accrued dividends on mandatorily
          redeemable preferred stock                 97,045             84,985
         Depreciation and amortization               25,536             22,215
         Loss in equity investment                      322                 56
         Provision for doubtful accounts               (896)             1,118
         Non-cash rent expense                           71                164
         Non cash interest
          (income)/expense, net                      (3,783)             2,598
         Amortization of debt issuance
          costs                                       3,183              3,316
         Restructuring charge                          (800)             2,967
         Impairment charge                            4,064                -
         Non-cash employee stock
          compensation                                    3               (807)
      Changes in operating assets and
       liabilities:
         Accounts receivable                            480              1,162
         Other current assets and other,
          net                                         1,208                906
         Accounts payable and accrued
          expenses                                   (1,932)            (6,340)
         Unexpired subscriptions and
          deferred revenue, net                      (2,571)            (3,068)
      Net cash used in operating
       activities                                   (11,820)            (8,803)
      Cash flows from investing
       activities:
         Capital expenditures                        (6,928)            (6,542)
         Acquisitions                                   (57)            (5,237)
         Joint venture investment                       -                 (751)
      Net cash used in investing
       activities                                    (6,985)           (12,530)
      Cash flows from financing
       activities:
         Proceeds from issuance of senior
          secured notes                                 -              205,000
         Repayment of borrowings under
          senior credit facilities                      -             (174,141)
         Letters of credit                              -               (1,623)
         Debt issuance costs                            -               (6,321)
      Net cash provided by financing
       activities                                       -               22,915
      Net increase (decrease) in cash and
       cash equivalents                             (18,805)             1,582
      Cash and cash equivalents at
       beginning of period                           34,174             32,592
      Cash and cash equivalents at end of
       period                                       $15,369            $34,174
 
 
 
                              ZIFF DAVIS HOLDINGS INC.
                               EBITDA Reconciliations
                                   (in thousands)
 
                                                  For the Three Months Ended
                                                  December 31,     December 31,
                                                     2006             2005
                                                  (unaudited)      (unaudited)
 
       EBITDA (1)                                   $14,295            $8,383
       Adjustments to reconcile to
        income/(loss) from operations:
            Depreciation and amortization
             of property and equipment                2,018             1,590
            Amortization of intangible
             assets                                   4,640             4,308
            Restructuring expense                       668             2,967
            Acquisition related
             compensation                             3,107               -
            Transaction related expenses                236               -
            Loss in equity investment                     8                56
            Non-cash employee stock
             compensation (income)/expense               (3)               12
        Income (loss) from operations                $3,621             $(550)
 
 
 
                                                       For the Year Ended
                                                  December 31,     December 31,
                                                     2006               2005
                                                  (unaudited)       (unaudited)
 
       EBITDA (1)                                   $27,136            $17,282
       Adjustments to reconcile to loss
        from operations:
            Depreciation and amortization
             of property and equipment                7,628              5,831
            Amortization of intangible
             assets                                  17,908             16,384
            Restructuring expense                       510              2,967
            Non-cash employee stock
             compensation expense/(income)                3               (807)
            Impairment charge                         4,064                -
            Acquisition related
             compensation                             3,107                -
            Transaction related expenses                409                -
            Loss in equity investment                   322                 56
       Loss from operations                         $(6,815)           $(7,149)
 
 
 
     Ziff Davis Holdings Inc.
 
     Endnotes:
     (1) EBITDA is defined as income before interest expense, provision for
 income taxes, depreciation expense, amortization expense and certain non-
 recurring and non-cash charges. Non-recurring and non-cash charges include
 the write-down of intangible assets, restructuring charges (cash and non-
 cash), gains and losses on the sale of non-core assets, gains and losses
 from equity investments, certain transaction related costs, including
 acquisition related compensation, and non-cash compensation charges.. These
 items are not included in EBITDA as management considers the charges to be
 items that are not indicative of the performance of its underlying
 business. EBITDA is presented because it is commonly used by certain
 investors and analysts to evaluate a company's ability to service debt.
 However, our method of computation may not be comparable to similarly
 titled measures reported by other companies. In addition, EBITDA, as
 defined, is not a measure of performance under generally accepted
 accounting principles (GAAP), and EBITDA should not be considered in
 isolation or as a substitute for Net income/(loss), Income/(loss) from
 operations, Cash flows from operating activities or other income or cash
 flow statement data prepared in accordance with GAAP, or as a measure of
 profitability or liquidity. The most directly comparable financial measure
 under GAAP to EBITDA is Income/(loss) from operations. Reconciliations
 between EBITDA and Income/(loss) from operations are included in tables
 provided in this release.
     (2) Consolidated results from closed publications.  Closed publications
 include Sync, Extreme Tech, Official U.S. PlayStation Magazine, XBOX Nation
 and GMR.
 
 
                              2006                         2005
      $ millions   Fourth Quarter   Full Year   Fourth Quarter    Full Year
      Revenue          $  3.3        $  13.0       $  7.2         $  23.3
      EBITDA             (0.4)          (1.1)         0.1            (2.5)
 
 
     (3) Group Segments:
     Consumer/Small Business Group (formerly known as the Consumer Tech
 Group) is comprised of one magazine PC Magazine; the Company's consumer
 electronics event, DigitalLife; and a number of consumer-focused websites
 including PCMag.com.
     Enterprise Group is comprised of several businesses in the magazine,
 Internet, event, research and marketing tools areas. The three magazines in
 this segment are eWEEK, Baseline and CIO Insight. The Internet properties
 in this segment are primarily affiliated with the Enterprise Group's
 brands, including eWEEK.com, CIOInsight.com and BaselineMag.com, but also
 include 42 weekly eNewsletters; the eSeminars(TM) business, which produces
 sponsored interactive webcasts; the Ziff Davis Web Buyers Guide (TM). This
 segment also includes the Company's Custom Solutions Group (CSG), which
 creates and manages several hundred sponsored events per year; Business
 Information Services (BIS), a marketing research and tools unit; and
 Contract Publishing, which produces custom magazines, white papers, case
 studies and other sales and marketing collateral for customers.
     Game Group is comprised of three magazines -- Electronic Gaming
 Monthly, Games for Windows (formerly known as Computer Gaming World) and
 Official U.S. PlayStation Magazine (the latter of which was discontinued in
 the first quarter of 2007) the Company's online destinations for gaming
 enthusiasts, the 1UPNetwork.
     (4) Total traffic reflects page views. The source is the Company's own
 data.
     (5) Unless otherwise noted, all ad page market share data is sourced
 from IMS/ The Auditor (Toronto, Canada). IMS independently hand-counts and
 tabulates ads by magazine and advertising category. The company includes
 only what it believes to be its direct competitors by business segment in
 its ad page market share calculations. For PC Magazine's market share, it
 is share of its competitive set.
     (6) Interest expense reflects the accrual of dividends on preferred
 stock, pursuant to Statement of Financial Accounting Standards 150, adopted
 by the Company effective January 1, 2004.
 
 

SOURCE Ziff Davis Holdings Inc.
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