~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~
VERTICALNET REPORTS TRIPLE-DIGIT REVENUE GROWTH IN FIRST QUARTER
HORSHAM, Pa., Apr 26, 2000 (BUSINESS WIRE) -- 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.
VerticalNet, Inc.
Consolidated Statements of Operations
(in thousands except per share amounts)
Three months ended March 31,
2000 1999
---- ----
(unaudited)
Revenues
Exchange sales transactions $ 99,044 $ -
Cost of exchange sales transactions 84,456 -
-------- --------
Net exchange revenues 14,588 -
Advertising and e-commerce revenues 12,863 1,934
-------- --------
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
-------- --------
Cash operating loss (11,674) (5,482)
Interest, net (493) 148
-------- --------
Cash loss $(12,167) $ (5,334)
-------- --------
Amortization expense (15,615) (275)
In-process research & development
charge (1) (10,000) -
Net gain on investment (2) 79,875 -
-------- --------
Net income (loss) $ 42,093 $ (5,609)
======== ========
Pro forma net cash loss per share $ (0.16) $ (0.09)
======== ========
Shares used in computing pro forma
net cash loss per share (3) 74,805 57,933
======== ========
(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
---- ---- ----
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
-------- -------- --------
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
-------- -------- --------
Total assets $340,904 $1,000,676 $1,094,184
======== ========== ==========
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
-------- -------- --------
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)
-------- -------- --------
Total liabilities
and shareholders'
equity $340,904 $1,000,676 $1,094,184
======== ========== ==========
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.
Distributed via COMTEX.
Copyright (C) 2000 Business Wire. All rights reserved.
-0-
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 |
