Organic, Inc. Reports First Quarter 2001 Results

Company Posts $14.3 Million in First Quarter Revenues, Days Sales Outstanding

Under 40



Apr 26, 2001, 01:00 ET from Organic, Inc.

    SAN FRANCISCO, April 26 /PRNewswire/ -- Organic, Inc. (Nasdaq:   OGNC), an
 international Internet professional services company, today reported financial
 results for the first quarter ended March 31, 2001.
     Revenues in the first quarter ending March 31, 2001 were $14.3 million, a
 42% decrease from the fourth quarter ending December 31, 2000. The Company
 said that approximately 95% of first quarter revenues were derived from Global
 1000 clients and 20% were from its international network.  Cash balances at
 the end of the first quarter were $43.7 million, slightly ahead of plan.  The
 Company also has an unused $15 million line of credit with Omnicom Group,
 Inc., its second largest shareholder.
     "Clearly, our results for the first quarter reflect the difficult market
 conditions we and the rest of our sector continue to encounter as our Global
 1000 prospects and clients look for ways to manage their own spending levels,"
 said Mark Kingdon, Organic's Chief Executive Officer.  "In that context,
 Organic's client proposition, which focuses on delivering high return-on-
 investment digital initiatives, continues to be very compelling and is opening
 doors.  More specifically we have found that our newly designed diagnostic
 offering which demonstrates to clients how their digital initiatives can
 become more financially compelling, either by driving more transactions,
 lowering acquisition costs, improving customer retention rates or driving cost
 savings through more effective handling of back end processes, is helping us
 to gain traction."
     "We are also pleased to report that this quarter we launched what we
 believe to be the largest Internet content and transaction-based application
 in the industry to date on behalf of DaimlerChrysler.  The culmination of over
 eighteen months of effort, Organic combined approximately fifteen custom
 applications into a three tier hosting architecture to produce a dynamic,
 interactive buying experience which includes vehicle pricing and comparisons,
 a dealer locator and selected order fulfillment processing.  In addition, we
 launched multiple international sites including Denmark, Germany, Portugal,
 Ireland, New Zealand and Argentina with nine more country sites to be launched
 later this year, all with localized content in fifteen different languages.
 We also signed a new agreement with DaimlerChrysler that covers additional
 projects for the remainder of 2001.  From a recognition perspective, Organic
 won two awards this quarter for outstanding creative work.  The first is
 Communication Arts' Annual Interactive Design Award for helping Target create
 a site that embodies the innovative design and superior guest experience that
 Target is known for.  Organic also received The Art Directors' Club Merit
 Award for its collaboration with Washington Mutual in extending WaMu
 Mortgage's brand promise, 'The Power of Yes', to the online medium."
     "Our previously announced reduction in force was implemented at the end of
 March and resulted in the elimination of approximately 300 positions.  In
 conjunction with a number of other cost containment efforts and related real
 estate downsizing we estimate we will save nearly $50 million," Mr. Kingdon
 continued.  "As a result, our EBITDA breakeven point is estimated to be under
 $20 million of revenue by the third quarter of 2001.  Our cash management
 focus remains strong as we continue to be supported by our clients, as
 witnessed by our days sales outstanding at the end of the first quarter of
 only 40 days."
     As a result of severance and other costs associated with office closures
 and space reduction plans implemented in conjunction with the Company's
 corporate restructuring, Organic recorded a restructuring charge of $23.7
 million during the first quarter ended March 31, 2001.  Less than half of that
 amount is estimated to reflect potential future cash obligations with the
 balance representing non-cash write-offs of leasehold improvements, excess
 hardware and previously capitalized software.
     Pro forma net loss (excluding stock compensation and other stock-based
 charges, a restructuring charge and a one-time investment loss) for the first
 quarter of 2001 was $20.2 million, or diluted net loss per share of $0.23,
 compared with pro forma net loss (excluding stock compensation and other
 stock-based charges) of $6.8 million, or diluted net loss per share of $0.09,
 for the first quarter 2000.  Before pro forma adjustments, net loss for the
 first quarter of 2001 was $46.0 million, or diluted net loss per share of
 $0.53.
 
     Conference Call Web Cast
     The Company will host a live audio broadcast of a conference call with the
 analyst community discussing issues related to this release via its Web site,
 http://www.organic.com.  The call, which is accessible through the Investor
 Relations section of the site, is scheduled to begin at 5:00 p.m. (EDT) / 2:00
 p.m. (PDT) on Thursday, April 26, 2001.  Please allow extra time prior to the
 call to visit the site and download the streaming media software required to
 listen to the Internet broadcast.
     An archive of the call will remain available in the Investor Relations
 section of the Organic Inc. corporate Web site (http://www.organic.com) for
 two weeks.
 
     About Organic, Inc.
     Organic, Inc., a leading international Internet professional services firm
 has a history as an industry innovator, having developed the Apache Web server
 and worked on the design of some of the Internet's earliest Web sites,
 including Yahoo!. The company's Internet professional services include
 strategic consulting and research, site design, software engineering and
 technical program management, online marketing services including media buying
 and management, and customer service and fulfillment consulting. Organic has
 performed work for over 250 clients including DaimlerChrysler, Federated
 Department Stores, Inc., British Telecommunications plc, Tommy Hilfiger,
 Washington Mutual, General Electric Financial Assurance Holdings, Inc.,
 PlayStation.com (America), Inc. and Target Corp. Organic has offices in the
 U.S., Canada, Asia, Europe and Latin America. In July 2000, the company was
 added to the Russell 2000(R) Index.
 
     ORGANIC and ORGANIC and leaf design are service marks or registered
 service marks of Organic, Inc. or its subsidiaries in the United States and in
 other countries. Other trademarks and service marks referenced are marks of
 their respective owners.
 
     Safe Harbor Statements Under the Private Securities Litigation Reform Act
 of 1995:
     This release contains, in addition to historical information, forward-
 looking statements, concerning the following topics: implementation of the
 Company's restructuring initiatives and expected savings and charges
 associated with those initiatives, the efficacy of new initiatives to develop
 business and projected results of operations for future quarters.  Forward-
 looking statements are subject by their nature to risks and uncertainties, and
 actual results could differ materially from those set forth in the forward-
 looking statements. Risks and uncertainties include but are not limited to
 those related to the Company's ability to successfully implement the
 restructuring initiatives, the Company's ability to realize savings from the
 restructuring initiatives, the number and size of projects from new clients
 and additional projects from existing clients, general economic conditions and
 other factors described from time to time in the Company's reports filed with
 the Securities and Exchange Commission, including the Company's Annual Report
 on Form 10-K for the year ended December 31, 2000.   All forward-looking
 statements are made pursuant to the Private Securities Litigation Reform Act
 of 1995 and, as such, speak only as of the date of this release. The Company
 disclaims any obligation to update such statements in the future.
 
 
                           - three tables to follow -
 
 
                                 ORGANIC, INC.
      Unaudited Pro Forma Condensed Consolidated Statements of Operations
                (in thousands, except share and per share data)
 
                                                          Three Months Ended
                                                               March 31,
                                                           2001         2000
 
 
     Revenues                                            $14,330       $29,214
 
     Operating expenses:
       Professional services                              15,169        16,336
 
       Selling, general and administrative                19,727        19,910
 
         Total operating expenses                         34,896        36,246
 
     Pro forma operating loss                            (20,566)       (7,032)
 
     Minority interest in operations of consolidated
      subsidiary                                              --            55
 
     Investment loss                                        (257)           --
 
     Interest expense                                        (75)         (250)
 
     Interest income                                         825           596
 
       Pro forma net loss before taxes                   (20,073)       (6,631)
 
     Income tax (benefit) expense                            124           199
 
       Pro forma net loss ( A) ( B) ( C)                $(20,197)      $(6,830)
 
     Pro forma diluted net loss per
      share ( A) ( B) ( C) ( D)                           $(0.23)       $(0.09)
 
     Shares used in computing pro forma diluted
      net loss per share ( D)                         86,826,943    79,711,665
 
     Note:  The above unaudited pro forma condensed consolidated statements of
 operations exclude the effects of the following (in thousands):
 
     ( A) During the three months ended March 31, 2001, amortization of
          professional services deferred stock-based compensation and selling,
          general and administrative deferred stock-based compensation and a
          warrant related to operating expenses was $(1,063) and $2,094,
          respectively.  During the three months ended March 31, 2000,
          amortization of professional services deferred stock-based and
          selling, general and administrative deferred stock-based compensation
          and a warrant related to operating expenses was $9,844 and $14,551,
          respectively.
 
     ( B) During the three months ended March 31, 2001, one-time write-off of
          long term investment of $999.
 
     ( C) During the three months ended March 31, 2001, cost related to
          restructuring was $23,749.
 
     ( D) Includes Organic's preferred stock and warrant, which converted to
          common stock upon the closing of Organic's initial public offering,
          as if the conversion occurred as of the beginning of the period, or
          date of issuance if later, for the three months ended March 31, 2000.
 
 
 
                                 ORGANIC, INC.
           Unaudited Condensed Consolidated Statements of Operations
                (in thousands, except share and per share data)
 
 
                                                         Three Months Ended
                                                              March 31,
                                                         2001          2000
 
 
     Revenues                                           $14,330       $29,214
 
     Operating expenses:
       Professional services                             15,169        16,336
       Professional services stock-based compensation    (1,063)        9,844
         Total professional services                     14,106        26,180
 
     Selling, general and administrative:
       Selling, general and administrative               19,727        19,910
       Selling, general and administrative stock-
        based compensation and other stock-based charges  2,094        14,551
         Total selling, general and administrative       21,821        34,461
 
     Restructure expense                                 23,749            --
 
       Total operating expenses                          59,676        60,641
 
     Operating loss                                     (45,346)      (31,427)
 
     Minority interest in operations of consolidated
      subsidiary                                             --            55
 
     Investment loss                                     (1,256)           --
 
     Interest expense                                       (75)         (250)
 
     Interest income                                        825           596
 
       Net loss before taxes                            (45,852)      (31,026)
 
     Income tax expense                                     124           199
 
       Net loss                                        $(45,976)     $(31,225)
 
     Basic and diluted net loss per share                $(0.53)       $(0.65)
 
     Weighted average common shares
      outstanding - basic and diluted                86,826,943    48,178,445
 
 
 
                                 ORGANIC, INC.
                     Condensed Consolidated Balance Sheets
                                 (in thousands)
 
                                                       March 31,   December 31,
                                                         2001         2000
                                                      (unaudited)   (audited)
     ASSETS
     Cash and cash equivalents and short-term
      investments                                       $32,081       $58,454
     Restricted Cash                                     11,653        11,653
     Accounts receivable, net                             6,164        18,649
     Costs in excess of billings                          2,591         1,413
     Other current assets                                 3,915         3,377
 
       Total current assets                              56,404        93,546
 
     Property and equipment, net                         21,774        33,769
     Net deferred bank facility charge                    8,571        10,084
     Other assets                                         1,016         2,109
 
       Total assets                                     $87,765      $139,508
 
     LIABILITIES AND OTHER STOCKHOLDERS' EQUITY
     Accounts payable                                    $1,418        $3,413
     Current portion of long-term debt                      260           329
     Current portion of obligations under capital leases     35            36
     Deferred revenue                                     6,561        12,393
     Other current liabilities                           12,214        18,445
     Accrued restructuring charges                       12,728         3,757
 
       Total current liabilities                         33,216        38,373
 
     Long-term debt, net of current portion                  11            22
     Obligations under capital leases, net of current
      portion                                                57            69
 
       Total liabilities                                 33,284        38,464
 
     Minority interest in consolidated subsidiary            --           215
     Total stockholders' equity                          54,481       100,829
 
       Total liabilities and other stockholders'
        equity                                          $87,765      $139,508
 
 
 
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X81652847
 
 

SOURCE Organic, Inc.
    SAN FRANCISCO, April 26 /PRNewswire/ -- Organic, Inc. (Nasdaq:   OGNC), an
 international Internet professional services company, today reported financial
 results for the first quarter ended March 31, 2001.
     Revenues in the first quarter ending March 31, 2001 were $14.3 million, a
 42% decrease from the fourth quarter ending December 31, 2000. The Company
 said that approximately 95% of first quarter revenues were derived from Global
 1000 clients and 20% were from its international network.  Cash balances at
 the end of the first quarter were $43.7 million, slightly ahead of plan.  The
 Company also has an unused $15 million line of credit with Omnicom Group,
 Inc., its second largest shareholder.
     "Clearly, our results for the first quarter reflect the difficult market
 conditions we and the rest of our sector continue to encounter as our Global
 1000 prospects and clients look for ways to manage their own spending levels,"
 said Mark Kingdon, Organic's Chief Executive Officer.  "In that context,
 Organic's client proposition, which focuses on delivering high return-on-
 investment digital initiatives, continues to be very compelling and is opening
 doors.  More specifically we have found that our newly designed diagnostic
 offering which demonstrates to clients how their digital initiatives can
 become more financially compelling, either by driving more transactions,
 lowering acquisition costs, improving customer retention rates or driving cost
 savings through more effective handling of back end processes, is helping us
 to gain traction."
     "We are also pleased to report that this quarter we launched what we
 believe to be the largest Internet content and transaction-based application
 in the industry to date on behalf of DaimlerChrysler.  The culmination of over
 eighteen months of effort, Organic combined approximately fifteen custom
 applications into a three tier hosting architecture to produce a dynamic,
 interactive buying experience which includes vehicle pricing and comparisons,
 a dealer locator and selected order fulfillment processing.  In addition, we
 launched multiple international sites including Denmark, Germany, Portugal,
 Ireland, New Zealand and Argentina with nine more country sites to be launched
 later this year, all with localized content in fifteen different languages.
 We also signed a new agreement with DaimlerChrysler that covers additional
 projects for the remainder of 2001.  From a recognition perspective, Organic
 won two awards this quarter for outstanding creative work.  The first is
 Communication Arts' Annual Interactive Design Award for helping Target create
 a site that embodies the innovative design and superior guest experience that
 Target is known for.  Organic also received The Art Directors' Club Merit
 Award for its collaboration with Washington Mutual in extending WaMu
 Mortgage's brand promise, 'The Power of Yes', to the online medium."
     "Our previously announced reduction in force was implemented at the end of
 March and resulted in the elimination of approximately 300 positions.  In
 conjunction with a number of other cost containment efforts and related real
 estate downsizing we estimate we will save nearly $50 million," Mr. Kingdon
 continued.  "As a result, our EBITDA breakeven point is estimated to be under
 $20 million of revenue by the third quarter of 2001.  Our cash management
 focus remains strong as we continue to be supported by our clients, as
 witnessed by our days sales outstanding at the end of the first quarter of
 only 40 days."
     As a result of severance and other costs associated with office closures
 and space reduction plans implemented in conjunction with the Company's
 corporate restructuring, Organic recorded a restructuring charge of $23.7
 million during the first quarter ended March 31, 2001.  Less than half of that
 amount is estimated to reflect potential future cash obligations with the
 balance representing non-cash write-offs of leasehold improvements, excess
 hardware and previously capitalized software.
     Pro forma net loss (excluding stock compensation and other stock-based
 charges, a restructuring charge and a one-time investment loss) for the first
 quarter of 2001 was $20.2 million, or diluted net loss per share of $0.23,
 compared with pro forma net loss (excluding stock compensation and other
 stock-based charges) of $6.8 million, or diluted net loss per share of $0.09,
 for the first quarter 2000.  Before pro forma adjustments, net loss for the
 first quarter of 2001 was $46.0 million, or diluted net loss per share of
 $0.53.
 
     Conference Call Web Cast
     The Company will host a live audio broadcast of a conference call with the
 analyst community discussing issues related to this release via its Web site,
 http://www.organic.com.  The call, which is accessible through the Investor
 Relations section of the site, is scheduled to begin at 5:00 p.m. (EDT) / 2:00
 p.m. (PDT) on Thursday, April 26, 2001.  Please allow extra time prior to the
 call to visit the site and download the streaming media software required to
 listen to the Internet broadcast.
     An archive of the call will remain available in the Investor Relations
 section of the Organic Inc. corporate Web site (http://www.organic.com) for
 two weeks.
 
     About Organic, Inc.
     Organic, Inc., a leading international Internet professional services firm
 has a history as an industry innovator, having developed the Apache Web server
 and worked on the design of some of the Internet's earliest Web sites,
 including Yahoo!. The company's Internet professional services include
 strategic consulting and research, site design, software engineering and
 technical program management, online marketing services including media buying
 and management, and customer service and fulfillment consulting. Organic has
 performed work for over 250 clients including DaimlerChrysler, Federated
 Department Stores, Inc., British Telecommunications plc, Tommy Hilfiger,
 Washington Mutual, General Electric Financial Assurance Holdings, Inc.,
 PlayStation.com (America), Inc. and Target Corp. Organic has offices in the
 U.S., Canada, Asia, Europe and Latin America. In July 2000, the company was
 added to the Russell 2000(R) Index.
 
     ORGANIC and ORGANIC and leaf design are service marks or registered
 service marks of Organic, Inc. or its subsidiaries in the United States and in
 other countries. Other trademarks and service marks referenced are marks of
 their respective owners.
 
     Safe Harbor Statements Under the Private Securities Litigation Reform Act
 of 1995:
     This release contains, in addition to historical information, forward-
 looking statements, concerning the following topics: implementation of the
 Company's restructuring initiatives and expected savings and charges
 associated with those initiatives, the efficacy of new initiatives to develop
 business and projected results of operations for future quarters.  Forward-
 looking statements are subject by their nature to risks and uncertainties, and
 actual results could differ materially from those set forth in the forward-
 looking statements. Risks and uncertainties include but are not limited to
 those related to the Company's ability to successfully implement the
 restructuring initiatives, the Company's ability to realize savings from the
 restructuring initiatives, the number and size of projects from new clients
 and additional projects from existing clients, general economic conditions and
 other factors described from time to time in the Company's reports filed with
 the Securities and Exchange Commission, including the Company's Annual Report
 on Form 10-K for the year ended December 31, 2000.   All forward-looking
 statements are made pursuant to the Private Securities Litigation Reform Act
 of 1995 and, as such, speak only as of the date of this release. The Company
 disclaims any obligation to update such statements in the future.
 
 
                           - three tables to follow -
 
 
                                 ORGANIC, INC.
      Unaudited Pro Forma Condensed Consolidated Statements of Operations
                (in thousands, except share and per share data)
 
                                                          Three Months Ended
                                                               March 31,
                                                           2001         2000
 
 
     Revenues                                            $14,330       $29,214
 
     Operating expenses:
       Professional services                              15,169        16,336
 
       Selling, general and administrative                19,727        19,910
 
         Total operating expenses                         34,896        36,246
 
     Pro forma operating loss                            (20,566)       (7,032)
 
     Minority interest in operations of consolidated
      subsidiary                                              --            55
 
     Investment loss                                        (257)           --
 
     Interest expense                                        (75)         (250)
 
     Interest income                                         825           596
 
       Pro forma net loss before taxes                   (20,073)       (6,631)
 
     Income tax (benefit) expense                            124           199
 
       Pro forma net loss ( A) ( B) ( C)                $(20,197)      $(6,830)
 
     Pro forma diluted net loss per
      share ( A) ( B) ( C) ( D)                           $(0.23)       $(0.09)
 
     Shares used in computing pro forma diluted
      net loss per share ( D)                         86,826,943    79,711,665
 
     Note:  The above unaudited pro forma condensed consolidated statements of
 operations exclude the effects of the following (in thousands):
 
     ( A) During the three months ended March 31, 2001, amortization of
          professional services deferred stock-based compensation and selling,
          general and administrative deferred stock-based compensation and a
          warrant related to operating expenses was $(1,063) and $2,094,
          respectively.  During the three months ended March 31, 2000,
          amortization of professional services deferred stock-based and
          selling, general and administrative deferred stock-based compensation
          and a warrant related to operating expenses was $9,844 and $14,551,
          respectively.
 
     ( B) During the three months ended March 31, 2001, one-time write-off of
          long term investment of $999.
 
     ( C) During the three months ended March 31, 2001, cost related to
          restructuring was $23,749.
 
     ( D) Includes Organic's preferred stock and warrant, which converted to
          common stock upon the closing of Organic's initial public offering,
          as if the conversion occurred as of the beginning of the period, or
          date of issuance if later, for the three months ended March 31, 2000.
 
 
 
                                 ORGANIC, INC.
           Unaudited Condensed Consolidated Statements of Operations
                (in thousands, except share and per share data)
 
 
                                                         Three Months Ended
                                                              March 31,
                                                         2001          2000
 
 
     Revenues                                           $14,330       $29,214
 
     Operating expenses:
       Professional services                             15,169        16,336
       Professional services stock-based compensation    (1,063)        9,844
         Total professional services                     14,106        26,180
 
     Selling, general and administrative:
       Selling, general and administrative               19,727        19,910
       Selling, general and administrative stock-
        based compensation and other stock-based charges  2,094        14,551
         Total selling, general and administrative       21,821        34,461
 
     Restructure expense                                 23,749            --
 
       Total operating expenses                          59,676        60,641
 
     Operating loss                                     (45,346)      (31,427)
 
     Minority interest in operations of consolidated
      subsidiary                                             --            55
 
     Investment loss                                     (1,256)           --
 
     Interest expense                                       (75)         (250)
 
     Interest income                                        825           596
 
       Net loss before taxes                            (45,852)      (31,026)
 
     Income tax expense                                     124           199
 
       Net loss                                        $(45,976)     $(31,225)
 
     Basic and diluted net loss per share                $(0.53)       $(0.65)
 
     Weighted average common shares
      outstanding - basic and diluted                86,826,943    48,178,445
 
 
 
                                 ORGANIC, INC.
                     Condensed Consolidated Balance Sheets
                                 (in thousands)
 
                                                       March 31,   December 31,
                                                         2001         2000
                                                      (unaudited)   (audited)
     ASSETS
     Cash and cash equivalents and short-term
      investments                                       $32,081       $58,454
     Restricted Cash                                     11,653        11,653
     Accounts receivable, net                             6,164        18,649
     Costs in excess of billings                          2,591         1,413
     Other current assets                                 3,915         3,377
 
       Total current assets                              56,404        93,546
 
     Property and equipment, net                         21,774        33,769
     Net deferred bank facility charge                    8,571        10,084
     Other assets                                         1,016         2,109
 
       Total assets                                     $87,765      $139,508
 
     LIABILITIES AND OTHER STOCKHOLDERS' EQUITY
     Accounts payable                                    $1,418        $3,413
     Current portion of long-term debt                      260           329
     Current portion of obligations under capital leases     35            36
     Deferred revenue                                     6,561        12,393
     Other current liabilities                           12,214        18,445
     Accrued restructuring charges                       12,728         3,757
 
       Total current liabilities                         33,216        38,373
 
     Long-term debt, net of current portion                  11            22
     Obligations under capital leases, net of current
      portion                                                57            69
 
       Total liabilities                                 33,284        38,464
 
     Minority interest in consolidated subsidiary            --           215
     Total stockholders' equity                          54,481       100,829
 
       Total liabilities and other stockholders'
        equity                                          $87,765      $139,508
 
 
 
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X81652847
 
 SOURCE  Organic, Inc.