NetGravity, Inc. Announces Record Fourth Quarter and Year-End 1998
Results
SAN MATEO, Calif.--(BUSINESS WIRE)--Jan. 28, 1999--
NetGravity Expands Leadership Position with Top Internet Businesses; Over 6 Billion Ad Impressions
Served in December by Top 10% of Customer Base
NetGravity (Nasdaq:NETG), the market leader in online advertising and direct marketing management
solutions, today announced financial results for the quarter and the fiscal year ended December 31, 1998.
NetGravity reported revenues of $4,163,000 for the fourth quarter of 1998, a 36 percent increase over
revenues of $3,059,000 reported for the third quarter of 1998, and a 123 percent increase over revenues of
$1,863,000 reported for the fourth quarter of 1997. The net loss for the fourth quarter of 1998 was
$2,662,000, or $0.20 per share, compared to a net loss of $2,823,000, or $0.22 per share for the third
quarter of 1998, and a net loss of $2,470,000, or $0.88 per share for the fourth quarter of 1997. A strong
contributor to the company's revenue growth in the fourth quarter was a 58 percent quarter-to-quarter
growth in software license revenue.
The Company reported revenues of $11,557,000 for the fiscal year ended December 31, 1998, an 82
percent increase over revenues of $6,358,000 reported for the fiscal year ended December 31, 1997. The
net loss for the fiscal year ended December 31, 1998, was $11,293,000, or $1.28 per share compared to a
net loss of $6,882,000 for $2.46 per share for the fiscal year ended December 31, 1997.
NetGravity Demonstrates Overall Market Leadership
NetGravity successfully expanded its market presence in 1998 to cover all three critical segments of
interactive marketing -- publishers, advertising agencies and e-commerce sites. "During 1998, NetGravity
continued to demonstrate its leadership in Internet advertising solutions by successfully penetrating both
the e-commerce and ad agency segments," said John Danner, chairman and CEO of NetGravity. "In
addition to our strong software licensing, we introduced the most reliable and fastest-growing outsourced
ad management service with AdCenter."
NetGravity's unique ability to provide both site-based software solutions and transaction-based
outsourcing services enabled the company to make significant strides in each segment. For example, in
the publisher segment where advertising revenues are dominated by the top 50 web publishers, NetGravity
achieved 36 percent marketshare -- double that of any competitor. The top 10 percent alone of
NetGravity's customer base, as measured by advertising traffic volume, showed over 6 billion ad
impressions served in the month of December -- 20 percent higher than that claimed by the nearest
competitor. "This success validates our strategy of focusing on the largest, high-end customers," said
Danner. In 1998, NetGravity also provided interactive marketing solutions to over 40 e-commerce sites,
and 15 interactive ad agencies. "The flow of advertising revenues and thus the ultimate control of the
business is always weighted at the top, NetGravity has successfully penetrated the top ad spenders as
well as publishers, effectively creating the world's largest closed-loop marketing network," said Danner.
IBM Relationship Delivers Results
In its efforts to become the leading provider of interactive marketing solutions for e-commerce, NetGravity
established a strategic alliance with IBM in August 1998. In the fourth quarter of 1998, that relationship
was responsible for two showcase e-commerce deals -- Portal Mechanics, worth over $350,000 to
NetGravity, and Transaction TV in Europe, worth over $160,000. "The activity level between the two
companies is outstanding," said Danner. "With the help of over 700 e-business sales reps, NetGravity is
well-positioned to successfully penetrate the enterprise, and to deliver an entirely new class of commerce
solutions."
1999 Brings Comprehensive Outsourced Service Offerings to Market
Earlier in the week, NetGravity announced a new outsourced ad management service specifically aimed at
the agency market segment -- AdCenter for Agencies, the industry's first complete, end-to-end ad
management solution to manage and optimize online campaigns. AdCenter for Agencies was designed by
agencies for agencies, including top interactive agencies as key contributors -- Agency.com, Anderson &
Lembke and Ogilvy Interactive. Industry analysts estimate that approximately 60 percent of online
advertising is controlled by agencies, with a growing number of them turning to third-party ad management
solutions. Because of NetGravity's early success in the agency market segment, and the
transaction-based revenue model of the service, AdCenter for Agencies offers NetGravity significant upside
opportunities to the extent that Internet advertising volumes continue to expand rapidly. In order to
capitalize on this opportunity, the company is accelerating its investment in its overall AdCenter
infrastructure.
In addition to outsourced ad management services provided by AdCenter, NetGravity also launched its
outsourced data management services in the fourth quarter of 1998, Global Profile Service (GPS). GPS is
a comprehensive database of consumer profiles aggregated from multiple data partners, representing over
45 million online users, which will assist NetGravity customers to more effectively target advertisements
and increase response rates, taking their business to the next level. "By the year 2000, we believe
database targeting using standard demographics and behavioral information will become mainstream in
the market," said Danner. "NetGravity's GPS offering provides the most comprehensive and detailed data
source to empower effective audience analysis, segmentation, and targeting that we believe will ultimately
drive higher response rates online."
NetGravity expects to significantly increase its expenditures on research and development, and sales and
marketing in connection with its efforts to expand its presence in its target markets; including ad
management and data management. Because NetGravity does not expect incremental revenues to offset
these incremental expenses in the short term, the company expects these incremental expenditures to
result in continued quarterly operating losses through the first half of 2000; in addition, although NetGravity
remains focused on growing its software business, to the extent that the company's revenue mix shifts
from historically higher-margin software revenues to lower-margin outsourcing revenues during the
development of these services, NetGravity's overall gross margins could be adversely affected.
About NetGravity
NetGravity is the leading provider of mission-critical interactive marketing solutions. NetGravity delivers a
range of comprehensive software and service solutions to reliably manage, target and analyze online
campaigns. The company's worldwide customer base numbers more than 325, including many of the
leading e-commerce sites, advertising agencies, and Web publishers.
NetGravity was founded in 1995 and has headquarters in San Mateo. NetGravity's common stock trades
on The Nasdaq Stock Market(SM) under the symbol NETG. For more information, please call
650/425-6000, or refer to NetGravity's website at netgravity.com.
Legal Notice Regarding Forward-Looking Statements
Except for the financial and historical information contained in this press release, the matters discussed
herein, including, without limitation, statements related to the future success of NetGravity's relationship
with IBM, the ability of NetGravity to deliver new commerce solutions to customers, NetGravity's
accelerating investment in its overall AdCenter infrastructure and the ability of its Global Profile Service to
enable customers to take the Internet to the next level of targeting and response rates, are forward-looking
statements that are subject to risks and uncertainties that could cause actual results to differ materially
from those contained in or implied by such statements. Such risks and uncertainties include, without
limitation, those relating to: the size and rate of growth of the online advertising market; the ability of
NetGravity's data suppliers to provide unique insight into consumer behavior; NetGravity's ability to
develop, on a timely basis, new releases of its software products; and NetGravity's ability to successfully
market and gain customer acceptance of its products and services. These and other important risk factors
are described in detail in the "Risk Factors" section of NetGravity's Registration Statement on Form S-1
(No. 333-51007) and certain other of NetGravity's filings with the Securities and Exchange Commission,
each available online at sec.gov.
NETGRAVITY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
(Unaudited)
Revenues $ 4,163 $ 1,863 $11,557 $ 6,358
Cost of revenues 1,729 1,056 5,228 2,572
Gross profit 2,434 807 6,329 3,786
Operating expenses:
Research and development 1,282 896 4,639 3,033
Sales and marketing 3,097 1,764 10,351 6,073
General and administrative 916 648 3,172 1,552
Total operating expenses 5,295 3,308 18,162 10,658
Loss from operations (2,861) (2,501) (11,833) (6,872)
Other income (expense) 199 31 540 (10)
Net loss (2,662) (2,470) (11,293) (6,882)
Basic and diluted net loss
per share $ (0.20) $ (0.88) $ (1.28) $ (2.46)
Weighted average shares
used in basic and
diluted net loss per
share calculation 13,093 2,808 8,823 2,799
NETGRAVITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except per share data)
December 31, December 31,
1998 1997
ASSETS
Current assets:
Cash & short-term investments $ 20,799 $ 5,637
Accounts receivable, net 6,311 2,739
Prepaid expenses and other
current assets 778 155
Total current assets 27,888 8,531
Property and equipment, net 3,473 1,356
Other assets 2,059 -
Total assets $ 33,420 $ 9,887
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable 535 1,140
Accounts payable 898 305
Accrued liabilities 2,867 1,344
Deferred revenue 5,800 3,520
Total current liabilities 10,100 6,309
Notes payable, less
current portion 1,192 727
Stockholders' equity:
Convertible preferred stock - 11
Common stock 20 4
Additional paid-in capital 46,811 16,209
Deferred compensation (1,706) (1,669)
Accumulated deficit (22,997) (11,704)
Total stockholders' equity 22,128 2,851
Total liabilities and
stockholders' equity 33,420 9,887 |
