VerticalNet Reports Third Quarter Net Revenues of $73.7 Million and a Cash Loss of $0.20 Per Share
Company Sees Growth in All Sectors
HORSHAM, Pa.--(BUSINESS WIRE)--Oct. 24, 2000--VerticalNet, Inc. (Nasdaq:VERT - news), the Internet's leading business-to-business e-commerce enabler, today announced its financial results for the third quarter ended September 30, 2000. Net revenues increased sequentially by 38 percent to $73.7 million from $53.6 million in the second quarter. This was a $68.5 million increase over the same period of the prior year. The Company's cash loss improved to $0.20 per share from the prior quarter's loss of $0.23.
The third quarter is VerticalNet's first under the leadership of its new President and CEO Joe Galli, who joined the Company on July 27. ``Joe has had a tremendous first quarter and a smooth transition,'' said Chairman Mark Walsh. ``He has produced an immediate impact across the organization.''
During the third quarter, Galli announced the organization of the Company's operations into three strategic business units:
VerticalNet Markets enables global B2B e-commerce for small and medium-sized businesses. It owns and operates 57 vertical marketplaces and relevant horizontal products and services;
VerticalNet Exchange enables trading of electronic components in open and spot markets; and
VerticalNet Solutions enables digital marketplaces for global 2000 customers, consortia and neutral Net market makers.
``This move allows us to better identify, manage, brand and sell VerticalNet's offerings, gauge operating performance, tailor our strategies and execute more rapidly,'' said Galli. ``Combined with our impressive management additions and operating momentum, these changes give us the firepower to execute very rapidly on our vision to be the leading global B2B e-commerce enabler in each of our core divisions,'' said Galli. ``VerticalNet has the resources, the talent, the strategy and the dedication, and we will reach our goal through helping our customers succeed in the 21st century.''
Financial Highlights
For the quarter ended September 30, VerticalNet generated net revenues of $73.7 million, compared to $53.6 million for the quarter ended June 30. Deferred revenues grew to $57.2 million from $46.4 million in the prior quarter. Cash and other liquid assets were $144.7 million at September 30.
``We've had another solid quarter and are excited about our progress,'' commented Executive Vice President and CFO Gene Godick. ``We further strengthened our balance sheet by completing a $75.0 million securitization of NECX.com accounts receivable. The securitization reduced our accounts receivable balance and eliminated our need for the previously reported outstanding line of credit. The securitization enhances our balance sheet with additional liquidity,'' concluded Godick.
Beginning in 2001, VerticalNet will separately report operating results and performance metrics of VerticalNet Solutions, currently reported in VerticalNet Markets. Following is a summary of the financial performance of VerticalNet Markets and VerticalNet Exchange.
VerticalNet Markets
To reflect the Company's evolution to an enablement model, revenue streams have been redefined as (a) e-enablement and e-commerce revenues, and (b) advertising and services revenues. E-enablement and e-commerce revenues include revenues from storefronts, E-Commerce Center (``ECC'') placement and transaction fees, asset remarketing, book and software sales, training classes and website development. Advertising and services revenues include revenues from sponsorships, career services and education services, as well as revenues from VerticalNet Solutions.
E-enablement and e-commerce revenues were reported at $17.5 million for the quarter ended September 30, an increase of $10.0 million over the quarter ended June 30. Advertising and services revenues were $17.0 million for the quarter ended September 30, as compared to $16.9 million for second quarter. ``We are encouraged by the e-enablement and e-commerce revenue increases. Advertising and services revenues are also encouraging, given the historically slow nature of advertising in the third quarter combined with a significant reduction in our third quarter barter revenue to 1 percent of combined net revenues, as compared to 7 percent of combined net revenues in the second quarter,'' said Galli.
At September 30, storefronts grew to 13,472 from 8,345 at the end of the second quarter and storefront customers grew to 11,853 from 6,864 at June 30. E-Commerce Centers totaled 228 at the end of the third quarter, up from 105 at the end of the second quarter. VerticalNet expects to define additional metrics for VerticalNet Markets. ``We are becoming a measurement- and metrics-obsessed company,'' stated Galli. ``We plan to refine our metrics to reflect measures closely correlated with shareholder value.''
VerticalNet Exchange
NECX.com, which closed its acquisition of American IC Exchange in July, generated net revenues of $39.3 million in the third quarter, compared to $29.1 million in the second quarter, a 35 percent increase. NECX.com generated online net revenues of $2.4 million, or six percent of total third quarter net exchange revenues.
Operating Results
VerticalNet Markets
VerticalNet Markets' 57 marketplaces have been organized into distinct industry clusters, each with its own general manager and individual operating objectives and metrics. Additionally, the sales, marketing and customer service teams have been reorganized and, under their new leaders, have ramped up to improve the end-to-end marketplace experience of clients and users.
``Execution is the key to VerticalNet Markets' success,'' said Galli. ``A successful marketplace represents a virtual cycle of clients and users, where the quality of users drives client success and the quality of our clients drives user satisfaction. We will focus on and measure the primary drivers of this cycle. Our sales force and our marketing and customer support teams are obsessed with delivering client and user satisfaction to drive client retention,'' declared Galli.
Following the quarter close, the Company introduced both new and enhanced products that address customer evolution to e-commerce and are designed to have direct customer impact, including:
Storefront 2.1 - provides transaction capabilities for direct sales of up to 10 products;
Advanced E-Commerce Center - improves functionality and standardization, including e-commerce-enabled catalogs with up to 500 SKUs;
Custom E-Commerce Center - allows ECC catalog data to be displayed in both a VerticalNet marketplace and a client's own website using the same data management system and content platform;
Distributor Locator Service - enables clients to forward transactions to their local distributors, resolving customer channel conflict issues; and
My Price - enables identified customers of ECC clients to utilize negotiated ``preferred vendor'' price files versus standard price files through a password protected catalog.
``These next-generation products address customer needs and position VerticalNet to be a leading e-commerce enabler for small and mid-size companies,'' stated COO and Co-founder Mike Hagan. ``This new suite of products has the potential to deepen the relationships we have created with clients over the past several years. Together with our renewed sales and marketing focus, this broad selection of products will support accelerated growth in VerticalNet Markets.''
Another growing area in VerticalNet Markets is the asset remarketing business, including auctions of electronics equipment and off-lease equipment from financial institutions. VerticalNet is integrating this business horizontally across the VerticalNet® communities.
``We are pleased with the growth potential shown by the asset remarketing business in the third quarter and we believe that we can be a leader in the markets that we serve. We look forward to expanding and refining the business within VerticalNet Markets, and intend to leverage it across our other divisions to add to the VerticalNet value proposition,'' added Hagan.
VerticalNet Exchange
On September 25, VerticalNet Exchange's NECX.com began the rollout of its conversion to online operations with the introduction of a shopping cart feature. Following the introduction, approximately 15 percent of NECX.com's net exchange revenues moved online. ``The shopping cart functionality is the first phase of our online exchange capabilities. This quarter we will be launching the VerticalNet Solutions' trading platform to enhance the user's experience and the functionality of the site to meet the needs of the ever-growing electronics marketplace,'' said Larry Marshall, president of NECX.com. ``In the third quarter we experienced strong global demand for general integrated circuits, microcontrollers, logic, linear and static RAM. Meanwhile, we continue to integrate our recent acquisitions and bring NECX.com online. With the integration of AICE's online technology and the successful conversion to shopping cart functionality at NECX.com, we expect a significant increase in revenues generated from online trading in 2001.''
VerticalNet Solutions
VerticalNet Solutions, the newest of the three businesses, is already attracting a wide range of customers and leads from industry consortia, global 2000 enterprises and Net market makers looking to buy and sell goods and services over public or private markets. Recent wins include ElastomerSolutions and e-Catalysts. ``This has been a very productive quarter,'' said Zev Laderman, president of VerticalNet Solutions. ``We are pursuing a growing number of opportunities and seeing significant momentum in this business.''
Laderman continued, ``What sets us apart from the competition is the breadth of functionality and technology in the direct goods marketplace and VerticalNet's experience creating content, community and commerce in industrial markets. Our early successes give us confidence that VerticalNet Solutions can grow the business.''
Management Team Expansion; Acquisitions
During the quarter, the Company expanded its senior management team to include David Kostman as President of VerticalNet International; David Hicks as Senior Vice President of Sales for North America; Patricia Hume as Senior Vice President of Alliances; Nathanael Lentz as Senior Vice President of Strategy; Todd Pope as Vice President of Sales; and Rory Leyden as Vice President of Marketing.
Satya Nadella, Microsoft's vice president of bCentral, was recently appointed to the Board of Directors in conjunction with the Microsoft relationship announced last January. In addition, Leo J. Hindery, Jr. will no longer serve on the board.
VerticalNet plans to augment organic growth with selective strategic acquisitions. Having successfully integrated numerous acquisitions into VerticalNet's business lines and culture, VerticalNet will continue to view acquisitions as another tool for strategic positioning and growth. ``We continue to see a number of attractive merger and acquisition opportunities in the marketplace,'' said Hagan. ``However, these opportunities are carefully screened for strategic fit, with a watchful eye on our path to profitability.''
``After my first quarter with VerticalNet, I've come away even more excited about the opportunities than when I accepted the job,'' said Galli. ``Execution is the key to our success. We will continue to focus on defining the structure to drive execution and excellence, and to develop and report metrics that track our pursuit of operational excellence,'' concluded Galli. |
