09:27am EDT 22-Apr-99 DLJ Securities (Jamie Kiggen) CNET
CNET: CNET Reports Solid Q1 Results
DLJ ****** DONALDSON, LUFKIN & JENRETTE ****** DLJ
April 22, 1999 Jamie Kiggen (212) 892-8985
Tim Albright (212) 892-6801
Hilary Frisch (212) 892-4374
Cathy Watters (212) 892-4357
CNET (CNET: $119.75) *
CNET Reports Solid Q1 Results
Range: Earnings Per Share 1999 vs 1998 % Chg
14-159 Old New P/E Ratios F1QA $0.09 vs (0.07) +229%
(FY:Dec.) 2000E $0.58 $0.70 171.1 F2Q 0.09 vs 0.01 +800%
1999E 0.31 0.41 292.1 F3Q 0.10 vs 0.03 +233%
1998A 0.05 2395.0 F4Q 0.15 vs 0.09 +67%
Yield: % Market Cap.: $4.5 Billion 5-Yr. Growth Rate: 50%
Dividend: $0 Avg. Trading Vol.(000): Book Value: $
RATING: Market Perf. Change: None 12-Mo. Target: $NA
IMPORTANT POINTS
1. CNET reported solid March quarter results last night after the close.
Core operating EPS was $0.09 (flat with last quarter and ahead of our $0.03
consensus-matching estimate) based on $19.6 million in revenue, (+2% q/q ,
+101% y/y) and exceeding our $17.5 million estimate. CNET also announced a
two-for-one stock split, effective May 28.
2. On-line revenues of $17.95 million were up 2% q/q and exceeded our
$15.9 million estimate, combining with essentially flat television-related
revenues of $1.65 million, which exceeded our estimate by $1 million.
Traffic in the quarter averaged 9.5 million page views per day, up 16% from
8.2 million page views in the prior quarter. Effective CPM, or revenue per
1000 page views, was extremely strong at $21 in Q1. Average leads in the
quarter increased from 90,000 per day in December to 105,000 leads per day.
3. Gross margin of 56.9% increased approximately 30 basis points over
last quarter and exceeded our 54% estimate. Operating margin of 16.3% grew
300 basis points over last quarter's level and exceeded our 5% estimate
estimate due to ongoing solid expense control and leverage of an improving
top line. CNET will continue to invest in both marketing and technology
development, but spending is certainly lagging revenue growth, reflecting
the inherent leverage in CNET's model. We are raising estimates to reflect
the leverage that CNET is beginning to enjoy. We are increasing fiscal 1999
revenue from $87.7 million to $92.9 million, and EPS from $0.31 to $0.41.
We are similarly raising our fiscal 2000 estimates from $120.6 million in
revenue to $125.8 million and $0.58 in EPS to $0.70.
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