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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.
RELATED LINKShttp://www.zdnet.com
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