Headline: VERTICALNET REPORTS TRIPLE-DIGIT REVENUE GROWTH IN FIRST QUARTER
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HORSHAM, Pa.--(BUSINESS WIRE)--April 26, 2000--VerticalNet, Inc.
(NASDAQ:VERT), the Internet's leading network of business-to-business
communities of commerce, announced the results for its first fiscal
quarter of 2000, reporting revenue growth of 172 percent over the
fourth quarter of 1999 and 1,320 percent over the first quarter of
1999. The Company generates revenues from exchange transactions,
advertising and e-commerce and reports revenues from the date of
acquisition.
Revenues reached $27.5 million for the first quarter, compared to
$10.1 million in the previous quarter and $1.9 million in the first
quarter of 1999. Deferred revenues reached $21.7 million, up from $9.8
million in the previous quarter. Net exchange transaction revenues
from NECX.com (a wholly-owned subsidiary which supports 15 existing
vertical markets) reached $14.6 million and represent 53 percent of
the total revenues for the quarter. Advertising revenues, including
storefronts and sponsorships, accounted for $11.9 million, or 43
percent of the total. E-commerce revenues (including slotting fees,
product sales, commissions, education, training and auction listing
fees) increased to $1.0 million, up from $0.6 million in the quarter
ended December 31, 1999. VerticalNet presents revenues from exchange
and e-commerce transactions on a net basis.
"Growth in our core vertical businesses exceeded our
expectations," said Mike Hagan, Chief Operating Officer. "Strong
quarterly sequential revenue growth across our network of 56
marketplaces was evidenced in both an increase in sponsorship - from
$7.1 million to $11.9 million - and e-commerce products - from
$628,000 to $1.0 million."
Excluding the impact of a one time gain, the Company reported a
cash loss for the quarter ended March 31, 2000 of $12.2 million or
$0.16 loss per share as compared to a cash loss of $10.2 million or
$0.14 loss per share in the fourth quarter 1999. During the first
quarter, the Company realized a $79.9 million net gain when a publicly
traded company merged with a private company in which VerticalNet was
a shareholder. The cash loss less amortization and acquisition
charges, plus the $79.9 million net gain realized during the first
quarter, resulted in net income of $42.1 million or basic earnings per
share of $0.56 compared to a net loss of $15.3 million or a loss per
share of $0.21 for the fourth quarter of 1999.
"This outstanding revenue growth is the result of investments in
our business and our aggressive acquisition strategy and is a terrific
start to the new fiscal year," said Mark Walsh, President and CEO.
"This quarter's launch of our "clicks and mortar" strategy with the
NECX acquisition and their robust revenues exceeded our most
aggressive goals," Walsh continued.
NECX.com's net revenues of $14.6 million were up sequentially from
their net revenues of $10.1 million in the last quarter, including
operations prior to the acquisition date of December 16, 1999. The
strong performance in the exchange segment resulted from high demand
in world markets for flash and SRAM memory as well as capacitors.
These market conditions had a positive impact on margins and gross
profit, which showed a dramatic improvement in the quarter. "NECX is
profiting from the recent cyclical upturn caused by increased demand
for wireless and telecom devices with the OEMs and contract
manufacturers who build these products," said Larry Marshall,
President of NECX.com. "We look forward to bringing our exchange
services online to improve transaction capabilities for customers,
suppliers and traders on our exchange."
Financial Results
"The first quarter of 2000 saw continued growth in all of our
revenue streams as a result of our market expansion, with especially
strong results from our NECX acquisition," said Gene S. Godick, Senior
Vice President and Chief Financial Officer.
The number of storefront customers grew from 1,795 on December 31,
1999 to 2,273 on March 31, 2000. Storefronts increased 14 percent from
2,903 in the fourth quarter of 1999 to 3,302 in the quarter just
ended. This growth does not include any storefronts from the joint
Microsoft-VerticalNet program which will launch in the second quarter
and is expected to lead to the deployment of 80,000 new storefronts
over the next 3 years.
"We remain committed to maintaining a strong balance sheet to
support our aggressive growth, and as of March 31, 2000 on a pro forma
basis, our balance sheet reflects cash and available-for-sale
investments of approximately $208 million," continued Godick. "The pro
forma balance sheet includes a $100 million investment by Microsoft,
which closed on April 7, 2000, and the conversion (during April) of
approximately $93 million in principal of our 5.25% convertible
subordinated debentures into 4.665 million shares of common stock. "We
believe a good bit of the acceleration in our revenue growth came as a
result of the investments in our business which we made last year when
we decided to increase our expenditures on sales and marketing and our
internal infrastructure. We will continue on our plan to achieve
positive cash earnings in 2001. This means we will continue to invest
in marketing and infrastructure and continue the cycle. We believe we
are on course to profitability; but our paramount goal is to build a
defensible business quickly without losing sight of the bottom line,"
Godick explained. "We will continue to explore opportunities to extend
our global leadership in the B2B e-commerce space."
"Our strong position and liquidity during this current weakness in
the B2B market create some very interesting opportunities to make
strategic alliances as well as continue our aggressive acquisition
strategy," said Mark Walsh.
Recent Highlights
Since January 1, 2000, the Company:
-- Closed a multi-million dollar, multi-year co-marketing
alliance with Microsoft Corporation. In addition, Microsoft
completed its $100 million equity investment in the Company.
-- Announced a joint venture to form VerticalNet Europe with
British Telecom and Internet Capital Group. VerticalNet Europe
subsequently has announced the formation of VerticalNet UK
Ltd., a joint venture by VerticalNet Europe and British
Telecom.
-- Announced the formation of VerticalNet Japan with Softbank, in
which VerticalNet expects to initially own a 40 percent
interest.
-- Completed NECX.com's acquisition of R.W. Electronics, an
electronics exchange based in Andover, MA, to expand its open
market trading community for engineers and purchasing
professionals in the electronics and high technology industry.
The platform for the NECX and R.W. Electronics exchange is
being "webified" to support end-to-end e-commerce and exchange
capabilities. Computer Sciences Corporation is assisting NECX
to design the online exchange architecture.
-- Completed its acquisition of Tradeum, Inc. of San Francisco, a
B2B e-commerce technology platform company. Tradeum is
operating as a wholly owned subsidiary with its own Global
2000 client base. Its core technology platform, which includes
state-of-the-art exchange capabilities, will be deployed
across VerticalNet's growing global network accelerating the
move to trading and exchange.
-- Created new alliances between NECX and market exchange
e-commerce and trading leaders like PcOrder and Market Design,
Inc. in order to broaden products and increase services for
the electronics exchange marketplace.
-- Completed a joint venture with Eastman Chemical to form
PaintandCoatings.com Inc., to create a fully transactional
marketplace with 3,600 suppliers. Eastman Chemical will be the
anchor tenant.
-- Announced strategic alliances with Honeywell (NYSE:HON) to
broaden and expand the content and resources of Honeywell's
MyPlant.com(TM) e-business (www.myplant.com); and with WIZNET,
a leading Internet content management company. WIZNET can
rapidly transform tens of thousands of printed and electronic
supplier catalogs into fully searchable, interactive on-line
documents.
-- Formed alliances with American Business Financial Services,
Inc. and Biztro(TM)to offer increased products and services
across VerticalNet's online trading communities.
"We will continue to buy, build and partner to achieve our
vision," said Walsh. "The achievements of this quarter make us an even
more attractive partner in the future.
"The transforming events of this quarter -- our multi-year,
multi-million dollar alliance with Microsoft, and our entry in
European and Asian markets -- have as yet produced no material effect
on our financial results," said Walsh. "But they are key elements in
our strategy to accelerate our leadership of B2B e-commerce globally.
We are enormously excited about the potential for 80,000 new customers
we expect to acquire as a result of the Microsoft deal. We believe the
VerticalNet model of driving revenues and audience, not simply saving
time and transaction costs, will deliver the full promise of
e-commerce to our customers by accelerating their revenue growth,"
Walsh added.
During the first quarter, the Company also made significant
additions to the management team: Monica Haley, VP Human Resources;
James W. McKenzie, Jr., SVP and General Counsel; James A. Mirage, VP
Mergers and Acquisitions; Sharon O'Shea, VP Marketing; David Ritter,
Chief Technology Officer; Dwayne Spradlin, VP Corporate Development;
and Jeff R.C. Zimmerman, SVP Client Services. Leo J. Hindery, Jr.,
Chief Executive Officer of Global Crossing Ltd. and of GlobalCenter
Inc., was named to the Board of Directors.
"We continue to run very fast," said Walsh. "Recently, Forbes ASAP
magazine ranked us fourth among the 20 best-managed hypergrowth
companies in the United States. Bringing these extremely talented
people onto the VerticalNet team gives us additional bandwidth to move
aggressively into global opportunities at Internet speed."
About VerticalNet, Inc.
VerticalNet, Inc. (www.verticalnet.com) owns and operates 56
industry-specific Web sites designed as online business-to-business
communities, known as vertical trade communities. These vertical trade
communities provide users with comprehensive sources of information,
interaction and e-commerce. They are grouped into the following
industry sectors: ADVANCED TECHNOLOGIES, COMMUNICATIONS,
ENVIRONMENTAL, FOOD AND PACKAGING, FOODSERVICE AND HOSPITALITY,
HEALTHCARE/SCIENCE, MANUFACTURING AND METALS, PROCESS, PUBLIC SECTOR,
SERVICE, TEXTILES AND APPAREL.
Additionally, VerticalNet provides auctions, reverse auctions,
exchanges, hosted catalogs, knowledge based distributed catalogs,
bookstores, career services and other e-commerce capabilities
horizontally across its communities with sites like Industry
Deals.com, IT CareerHub.com, LabX.com, ProfessionalStore.com.
VerticalNet's NECX Exchange provides an exchange for the electronic
components industry.
This announcement contains forward-looking statements that involve
risks and uncertainties, including those relating to the Company's (i)
commitment to maintain a strong balance sheet; (ii) plan to achieve
positive cash earnings within several quarters and its intention to
continue to invest in marketing and infrastructure; (iii) goal to
build its business quickly and its intention to continue to explore
opportunities to extend its leadership; (iv) expectation of bringing
NECX's exchange services online to improve transaction capabilities;
(v) belief that the current market's weakness creates opportunities;
(vi) expectation that it will own 40% of VerticalNet Japan; (vii)
intention to continue to buy, build and partner to achieve its vision;
(viii) belief that driving revenue and audience will deliver the full
promise of e-commerce to its customers by accelerating their revenue
growth; and (ix) information contained elsewhere in this document
where statements are preceded by, followed by or include the words
"believes," "plans," "intends," "expects," "anticipates" or similar
expressions. For such statements, the Company claims the protection of
the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. Actual results may
differ materially from the results predicted, and reported results
should not be considered as an indication of future performance. The
potential risks and uncertainties that could cause actual results to
differ from those included in the forward-looking statements include,
among others, risks associated with an acquisition strategy, general
economic and market conditions, volatility of the Company's stock
price, the Company's limited operating history, the increasingly
competitive and constantly changing environment within which the
Company operates, the early stage of the Web as an advertising and
commerce medium, dependence on joint venture partners, foreign
government regulations including regulations relating to the Internet,
rapid technological and market change, and the Company's dependence on
advertising revenues and on third parties for technology, content and
distribution. Additional factors that could cause actual results to
differ from those contained in the forward-looking statements include
those set forth in the Company's Annual Report on Form 10-K for the
period ending December 31, 1999. VerticalNet undertakes no obligation
to publicly update or revise any of the forward-looking statements in
this release.
VerticalNet is the registered trademark of VerticalNet, Inc. All
other names are trademarks and/or registered trademarks of their
respective owners.
*T
VerticalNet, Inc.
Consolidated Statements of Operations
(in thousands except per share amounts)
Three months ended March 31,
2000 1999
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(unaudited)
Revenues
Exchange sales transactions $ 99,044 $ -
Cost of exchange sales transactions 84,456 -
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Net exchange revenues 14,588 -
Advertising and e-commerce revenues 12,863 1,934
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Combined net revenues 27,451 1,934
Costs and Expenses
Editorial and operational 4,262 1,196
Product development 4,534 1,210
Sales and marketing 18,123 3,630
General and administrative 12,206 1,380
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Cash operating loss (11,674) (5,482)
Interest, net (493) 148
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Cash loss $(12,167) $ (5,334)
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Amortization expense (15,615) (275)
In-process research & development
charge (1) (10,000) -
Net gain on investment (2) 79,875 -
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Net income (loss) $ 42,093 $ (5,609)
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Pro forma net cash loss per share $ (0.16) $ (0.09)
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Shares used in computing pro forma
net cash loss per share (3) 74,805 57,933
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(1) The in-process research and development charge resulting from the
Tradeum transaction is based on an independent valuation and
represents the valuation of projects that had not yet reached
technological feasibility and for which the technology has no
alternative future use.
(2) The net gain on investment represents the gross gain resulting
from the Company's receipt of publicly traded stock when the issuer
acquired the Company's shares of a privately held company in a merger
and the subsequent realized loss when the Company sold some of that
stock.
(3) Pro forma net cash loss per share is computed using the weighted
average number of shares of common stock, including common equivalent
shares from the convertible preferred shares which were converted into
common shares upon the completion of the Company's IPO on February 17,
1999.
Cash EPS, which is net loss per share excluding amortization,
acquisition charges and net gain on investment, is not intended to
reflect our actual net loss per share as determined under generally
accepted accounting principles and reported in our periodic quarterly
and annual filings with the Securities and Exchange Commission.
(More tables to follow)
VerticalNet, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
Pro Forma
Dec. 31, March 31, March 31,
1999 2000 2000
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Assets (unaudited)
Current Assets:
Cash and cash
equivalents $ 14,254 $ 31,046 $ 119,839 (a)(c)
Investments - short
term 44,131 79,723 79,723
Accounts receivable 45,776 106,455 106,455
Inventory 5,510 13,030 13,030
Prepaid expenses and
other assets 5,964 8,729 8,729
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Total current
assets 115,635 238,983 327,776
Property and equipment,
net 13,148 23,976 23,976
Investments - long term 16,885 8,790 8,790
Other assets 17,312 17,326 22,041 (a)(d)
Goodwill and other
intangibles 177,924 711,601 711,601
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Total assets $340,904 $1,000,676 $1,094,184
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Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of
long-term debt $ 1,372 $ 1,264 $ 1,264
Line of credit - 46,614 46,614
Accounts payable and
accrued expenses 34,617 51,215 51,215
Deferred revenues 9,768 21,650 21,650
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Total current
liabilities 45,757 120,743 120,743
Long-term and
convertible debt 116,750 116,471 23,176 (b)
Shareholders' equity 178,397 763,462 950,265 (a)(b)(c)(d)
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Total liabilities
and shareholders'
equity $340,904 $1,000,676 $1,094,184
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Pro forma adjustments include:
a) the issuance of $100 million of Series A 6% convertible
redeemable preferred stock and warrants with a fair value of
approximately $108 million. The difference between the cash
received and fair value is recorded as an asset to be
amortized over 3 years.
b) the conversion of $93.295 million of convertible debt into
4,664,750 shares of common stock as of April 25, 2000.
c) the conversion inducement payment of approximately $11 million
made to debt holders.
d) the write-off of approximately $3 million (portion
attributable to debt converted) in deferred debt offering
costs to APIC.
*T
CONTACT: VerticalNet, Inc., Horsham
The Poretz Group, Investor Relations
investor relations information:
Esther Smith, 703/506-1778, x225
esther@poretz.com
or
Peppercom
media inquiries:
Peter Harris, 212/931-6112
pharris@peppercom.com
or
VerticalNet, Inc.
Muriel Lange, Director of Investor Relations
215/315-3367
mlange@verticalnet.com
KEYWORD: PENNSYLVANIA
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS INTERNET SOFTWARE EARNINGS
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