Rare Medium Reports First Quarter Internet Services Revenue Increase of 835 Percent
NEW YORK--(BUSINESS WIRE)--April 27, 2000--Rare Medium Group Inc. (NASDAQ: RRRR - news)
Sequential Internet Services Revenue Increases 38 Percent to
$23.5 Million
Internet Services ``Cash EPS'' Improves to ($.05) per share
Rare Medium Group Inc. (NASDAQ: RRRR - news), a leading strategic Internet enabler and incubator, today announced its sixth consecutive quarter of double-digit revenue growth for the first quarter ended March 31, 2000. Revenue from the Internet Services business for the first quarter rose to $23.5 million, an 835 percent increase over the first quarter of 1999, and a 38 percent sequential increase over the fourth quarter of 1999. Revenue for the Internet Services business includes revenue from our consolidated subsidiaries of $1.1 million, which is eliminated in the consolidated financial statements.
The Company reported a loss from its Internet Services business before depreciation, amortization, and taxes of $(.05) per share, a 44 percent improvement from the loss of $(.09) per share reported in the fourth quarter of 1999.
Consolidated revenue rose to $23.8 million, compared to $17.6 million for the fourth quarter of 1999 and $2.6 million for the first quarter of 1999. The Company reported a loss before depreciation, amortization, equity in loss of investments carried on the equity method, and non-cash charges associated with the Company's convertible preferred securities for the first quarter of $(.21) per share, compared to $(.24) per share for the fourth quarter of 1999 and $(.07) per share for the first quarter of 1999.
Included in the Company's reported net loss available to common shareholders of $(.74) per share were non-cash dividend and accretion charges related to the Company's preferred securities of $11.8 million or $(.27) per share, and depreciation and amortization charges of $10.4 million or $(.23) per share.
Operating Results
The first quarter 38 percent increase in revenue from Internet Services over the fourth quarter of 1999 was achieved through organic growth. ``The surge in Internet Services revenue is indicative of the fact that our vertical market approach is finding tremendous acceptance from a market demanding a more evolved, sophisticated strategic solution,'' observed Glenn S. Meyers, Rare Medium's chairman and chief executive officer. ``The competitive demands of the Internet have elevated the level of solutions required by clients. These rising needs require a true partner whose industry-specific knowledge assures a unique and comprehensive strategic Internet strategy. New opportunities are emerging from these expanded relationships for Rare Medium to supplement its intellectual capital with financial capital. We expect financial partnering with clients in select situations to produce results far in excess of what can be achieved with conventional vendor and investor situations.''
Selected comparative operational metrics related to Internet Services:
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Q4 1999 Q1 2000
------- -------
Billable Professionals 443 540
Average Revenue per Hour $144 $152
Annual Revenue per Billable
Professional $182,000 $196,000
Utilization 66% 67%
Gross Margin 50% 50%
Hiring of billable professionals remained strong, with 97 added during the current quarter - an increase of 22 percent. New hires included key players in several of our targeted vertical markets, from such companies as Ernst & Young, KPMG Consulting, IBM, Intel, Bank of America, ZDTV, Nortel and PrimeCo.
During the first quarter, new clients included Furniture Brands, Wyndham Hotels, Corporate Express, and Red Herring. New business from continuing clients included Microsoft, Nestle, PaineWebber, Forbes.com, and Sun International.
Significant Events
In January, the Company completed a $70 million private placement of common stock to a group of mutual funds managed by Putnam Investments and Franklin Resources, Inc. In March the Company also successfully completed a $186 million secondary public offering of common stock underwritten by Credit Suisse First Boston, Deutsche Bank Alex. Brown, and Robertson Stephens. As of March 31, 2000, Rare Medium had over $235 million in cash and equivalents, which, among other uses, will be to support the continued growth of its Internet Services business; to continue development of its new Broadband and Commerce Service Provider product offerings; to continue to build its incubator companies; and to continue to make venture investments in selected Internet-focused businesses.
``With our significant capital reserves and the exciting developments taking place in our service offerings, we are among the best-positioned companies in the entire Internet industry,'' commented Mr. Meyers. ``Unlike many of our competitors, our strong cash position will allow us to vigorously pursue our strategies. In fact, we feel that the recent turmoil in the equity markets will actually enhance our opportunities to enter into comprehensive partnerships and make equity investments on more attractive terms.''
Suresh Mathews, president and chief operating officer of Rare Medium's Internet Services business, has received the additional title of President of the parent company. ``Suresh will play a key role as the company continues to leverage its services, venture capital, and incubation business,'' Mr. Meyers commented.
During the quarter, the Company announced that it has signed a strategic alliance with IBM. The agreement provides a framework for Rare Medium and IBM to work together on a number of future engagements ranging from Web development and integration to venture capital strategy and the development of e-business incubators.
Investment
Rare Medium invested a total of $16.6 million into new and existing investments during the first quarter. The Company recently created a new wholly-owned company, Speak4Free, a voice portal, which offers solutions to businesses including free Internet telephony services. Recent venture investments include Essential.com, NextJet.com, and ShareMax (see descriptions below). During the quarter, Rare Medium co-invested with Hicks, Muse, Tate & Furst; Brentwood Associates; Putnam Investments; and Central Newspapers, Inc. The Company currently holds equity positions in the following concerns:
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Effective
Company Description % Ownership(1)
------- ----------- --------------
Incubator Businesses:
Regards.com Electronic greeting card distribution
and viral marketing company. 90%
LiveUniverse.com ASP serving small businesses with a 85%
unique set of tools for community
building, intranet and extranet
development.
ePrize.net Online sweepstakes, direct marketing 80%
and promotions company.
Changemusic.com A digital music company providing 74%
music news, information and content.
iFace.com Telephony Applications Service Provider 68%
("TASP") offering Voice over IP
solutions for telecommunication service
providers and other internet applications.
NoticeNow.com Private label unified messaging 86%
technology.
Speak4Free.com Direct marketing and promotions company 100%
offering free domestic long distance
telephone service.
Venture Investments:
AtomicPop.com Internet music label representing 33%
artists dedicated to leveraging the
digital medium to change the way music
is acquired, promoted, sold and
distributed.
Competition Internet community for motorcycle 25%
accessories.com enthusiasts and direct marketer of
motorcycles, parts and accessories.
StreamSearch.com Streaming media search engine that 15%
offers the easiest-to-use and most
complete database of live events,
full-length motion pictures, sports,
weather, entertainment news and
pay-per-view events on the Internet.
MoneyHunt.com Online and offline media company 13%
dedicated to entertaining, educating
and empowering entrepreneurs as they
seek capital for and develop their
start-up ideas.
Mysportsguru.com Provider of sports instructional 13%
content and services for sports
participants through broadband and
narrowband technologies.
ShareMax ShareMax is the first online network 10%
to conduct strategic sourcing for the
purchase of direct materials
and strategic services.
Quicknet Provider of hardware and software 8%
low-density Internet telephony products
including the award-winning Internet
PhoneJACK and Internet PhoneCARD
hardware and the Internet SwitchBoard
software for Windows and Linux PCs.
Speakout.com Internet information and advocacy portal 7%
providing a platform for citizens to
debate issues, comment on news and
communicate with government, political
and business leaders.
Like.com Internet recommendation service 5%
highlighting celebrity style choices to
drive e-commerce by collecting and
aggregating their likes and dislikes.
L90.com Provider of comprehensive online 5%
(NASDAQ: LNTY - news) advertising and direct marketing solutions
for advertisers and Web publishers.
GoShip.com Provider of enhanced, cost effective 5%
co-op shipping and fulfillment solutions
for e-commerce websites.
Archive.com Provider of secure Internet-based 3%
archival and retrieval services for
business critical document management.
NextJet.com Shipping fulfillment resource for 3%
businesses guaranteeing same day shipping.
Edmunds.com Provider of automotive information, 3%
including original editorial content,
complete pricing and specification
information and sales referrals for
purchasing, finance, insurance, warranty
and other ancillary services.
iParty.com Internet-based merchant of party goods, 2%
(Amex: IPT - news) party related services and party-planning
advice.
Essential.com(2) The Internet's first "energy and 1%
communications superstore," providing an
online marketplace for telecommunications
services, Internet access, electricity
and home heating oil.
SmartOnline.com Provider of Web-hosted business 1%
productivity applications and information
resources for small businesses and
entrepreneurs.
DeltaThree.com Provider of Internet protocol Less than 1%
(NASDAQ: DDDC - news) telephony services, including voice
and data transmission and enhanced
Internet-based communication services.
(1) Includes issued options and warrants.
(2) Essential.com filed an S-1 with the SEC on April 10, 2000
Conference Call
The company has scheduled a conference call with the investment community for 11 a.m. (EST) on Thursday, April 27, 2000:
Telephone Number: 888/849-9221
The conference call can be accessed live or on a recorded basis through Vcall on the Internet at www.vcall.com. A replay of the conference call will also be available approximately one hour after the completion of the conference call for 24 hours by dialing 800/633-8284 and entering the reservation number 14983260.
About Rare Medium
Rare Medium invests in next generation Internet companies and provides end-to-end Internet Services. Rare Medium incubates, finances and manages private companies and also makes strategic investments in independently managed companies that it believes possess superior Internet-focused business models. Rare Medium's Internet Services include development and authoring of business plans and strategies; strategic, creative and technological consulting for Web initiatives; on-line brand development and management; development of content for broadband and wireless applications; and launch of on-line commerce trading exchanges. Rare Medium leverages its Internet Services expertise to increase the overall success of the companies in its investment portfolio.
Rare Medium employs over 900 people in more than 20 locations worldwide. For more information, visit raremediumgroup.com.
Except for historical matters contained herein, the matters discussed in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements reflect numerous assumptions and involve risks uncertainties that may affect Rare Medium Group Inc., and its subsidiaries' business and prospects and cause actual results to differ materially from these forward-looking statements. Among the factors that could cause actual results to differ are Rare Medium's limited operating history; competition; low barriers to entry; reliance on strategic relationships; rapid technological changes; inability to complete transactions on favorable terms and those risks discussed in the company's filings with the SEC.
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Rare Medium Group, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands except share data)
Three months ended
March 31,
2000 1999
---- ----
Revenues $ 23,816 $ 2,589
Cost of revenues 13,061 1,380
------------ ------------
Gross profit 10,755 1,209
------------ ------------
Expenses:
Sales and
marketing expense 3,390 211
General and
administrative
expense 17,979 2,620
Depreciation and
amortization 10,409 4,493
------------ ------------
Total expenses 31,778 7,324
------------ ------------
Operating loss (21,023) (6,115)
Interest income
(expense), net 1,152 (736)
Equity in loss of
investments (1,371) --
Other income 49 --
------------ ------------
Net loss (21,193) (6,851)
Cumulative dividends
and accretion of
convertible preferred
stock to liquidation
value (11,828) --
------------ ------------
Net loss attributable
to common
stockholders $ (33,021) $ (6,851)
============ ============
Basic and diluted
(loss) earnings per
share:
Net loss $ (0.47) $ (0.22)
Non-cash dividends
and accretion of
convertible
preferred stock
(0.27) --
------------ ------------
Net loss
attributable to
common shareholders $ (0.74) $ (0.22)
============ ============
Weighted average
common shares
outstanding 44,910,388 31,747,187
============ ============
Consolidated Balance Sheets Data
March 31, December 31,
2000 1999
---- ----
(Unaudited)
(In thousands)
Cash and cash equivalents $ 236,294 $ 28,540
Total current assets 266,366 47,920
Investments in affiliates 53,458 26,467
Total assets 403,822 160,423
Total current liabilities 19,607 17,476
Total liabilities 19,828 19,208
Series A convertible preferred stock 39,025 36,224
Stockholders' equity 344,969 104,991
Rare Medium Group, Inc.
Supplemental Operations Data
Internet Services Business
(Unaudited)
(In thousands except share data)
Three months Three months
Ended Ended
March 31, December 31,
2000 1999
---- ----
Revenues $ 23,489 $ 17,020
Cost of revenues 11,776 8,518
---------- ----------
Gross profit 11,713 8,502
---------- ----------
Gross margin 50% 50%
Expenses:
Sales and marketing expense 2,382 2,681
General and administrative
expense 12,595 9,680
---------- ----------
Loss before interest, taxes,
depreciation and amortization (3,264) (3,859)
Interest income, net 1,152 44
---------- ----------
Loss before taxes, depreciation
and amortization $ (2,112) $ (3,815)
========== ==========
Weighted average shares
outstanding 44,910,388 40,496,737
Loss before taxes, depreciation
and amortization per share $ (0.05) $ (0.09)
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Contact:
Rare Medium Group, Inc.
Jeffrey J. Kaplan
Executive Vice President and Chief Financial Officer
212/883-6940
or
Wall Street Investor Relations Corp.
Joseph M. Zappulla, 301/907-4090
joez@wallstreetir.com |
