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Go2Net Reports Third Quarter Financial Results
Third Quarter Pro Forma Income of $.07 Per Share
SEATTLE, July 21 /PRNewswire/ -- Go2Net, Inc. (Nasdaq: GNET - news), a network of branded, technology and community-driven Web sites ( go2net.com ), today reported that revenue for the three months ended June 30, 1999 was $5,726,004, representing an increase of 191% from $1,969,306 for the comparable period of the previous fiscal year. Revenue for the nine months ended June 30, 1999 was $12,651,287, representing an increase of 174% from $4,622,590 for the comparable period of the previous fiscal year.
For the quarter, the company reported pro forma income of $3,057,258, or $.07 per share diluted, excluding the effects of a one-time, non-cash preferred stock dividend and non-cash charges related to amortization of intangible assets and stock compensation expenses. This compares to a loss of $(160,831), or $(.01) per share diluted, for the comparable period during the previous fiscal year, excluding merger-related and non-cash charges related to stock compensation expenses. The one-time, non-cash dividend is related to the purchase of preferred stock from the company by Vulcan Ventures during the quarter. The number of shares used in the computation of pro forma income per share at June 30, 1999 and 1998 were 41,050,743 and, 19,396,120, respectively.
For the nine months ended June 30, 1999, the company reported pro forma income of $4,183,241, or $.12 per share diluted, excluding the effects of a one-time, non-cash preferred stock dividend, merger-related expenses and non-cash charges related to amortization of intangibles and stock compensation expenses. This compares to a loss of $(591,941), or $(.04) per share diluted, for the comparable period during the previous fiscal year, excluding merger related and non-cash charges related to stock compensation expenses. The number of shares used in the computation of pro forma income per share at June 30, 1999 and 1998 were 36,413,782 and, 15,329,666, respectively.
Net loss for the quarter including the one-time, non-cash preferred stock dividend, other non-cash charges related to amortization of intangible assets, and stock compensation and merger-related expenses was $(107,567,393) or $(4.07) per share basic and diluted, as compared to $(1,363,623) or $(.07) per share basic and diluted for the three months ended June 30, 1998. The number of shares used in the computation of basic and diluted net loss per share at June 30, 1999 and 1998 were 26,401,610 and, 19,396,120 respectively.
Gross profit as a percentage of net sales increased to 79.0% for the three months ended June 30, 1999, as compared to 65.4% for the three months ended June 30, 1998.
''During the recently completed quarter, we accelerated our pace of strategic acquisitions, continued to make significant progress in our market position and operating metrics, and positioned the company effectively for continued growth,'' said Go2Net CEO Russell C. Horowitz. ''Our acquisitions of Virtual Avenue, USA Online, IQC.com and Haggle Online added important components to the Go2Net Network.''
''With the Paul Allen and Vulcan Ventures $300 million investment and with the significant internal growth rates of our narrowband services, we look forward to extending Go2Net's proven strategy onto the broadband platform being developed by Paul Allen and Vulcan Ventures.''
Overview of company's quarter:
Usage and Reach Growth
The company also announced today that traffic on the Go2Net Network grew
to an average of 18.5 million page views per day in June 1999, compared to an
average of 12.3 million page views per day in March 1999. This represents
sequential quarterly growth of 50.4%.
Go2Net's reach continues to grow across its Network. According to the Media Metrix Web Report for June 1999 regarding Web properties, The Go2Net Network continues to be the fastest growing property among the Media Metrix top 20 destinations, climbing to a number 9 ranking in reach among home and work users in June, up from a number 21 ranking in March. This represents an increase of 57% in reach over the past three months.
''Several months ago, we publicly stated our company goal of becoming a Top 10 Web property by the end of calendar year 1999. We're very pleased to have reached this milestone ahead of schedule,'' Horowitz said. ''We understand what it takes to operate category-leading sites and look forward to continuing to enhance our existing properties and to possibly expand into complementary new strategic categories.''
Finance and Investment
On June 17, Go2Net announced that its shareholders approved elements of an investment by Paul Allen and his investment organization, Vulcan Ventures Inc. that bring Mr. Allen's direct cash investment in the company to $300 million. At a special meeting, shareholders approved Allen's purchase of additional preferred shares of Go2Net stock for $133 million cash. This complements Allen's $167 million purchase of preferred stock made on March 15. As a separate part of the March 15 investment agreement made between Mr. Allen and Go2Net, shareholders also approved Allen's purchase of approximately 1.4 million shares of Go2Net's common stock from company directors for approximately $126 million cash. The transactions bring Mr. Allen's ownership stake in Go2Net to approximately 34 percent for a total investment of $426 million. The transaction positions Go2Net to be a primary point of convergence and content delivery on Paul Allen's rapidly emerging base of cable subscribers.
As a key component of the agreement signed with Paul Allen and Vulcan Ventures March 15, Go2Net will work with Allen's affiliated cable companies to provide its portal services to those companies' subscribers. Allen's cable assets currently comprise the nation's 4th largest cable operation, having grown from the 7th largest position in March.
Acquisitions
During the quarter, Go2Net announced three acquisitions:
The company announced the acquisition of Virtual Avenue ( virtualave.net ), a leading provider of free Web hosting services for small and medium-sized businesses, for approximately $23 million in Go2Net stock. Virtual Avenue currently hosts more than 150,000 small and medium-sized businesses online. Go2Net's HyperMart ( hypermart.net ) free business hosting service and Virtual Avenue now provide hosting services for more than 400,000 small and medium-sized businesses and are growing at the combined rate of more than 1,000 new member businesses per day.
As part of the transaction, Go2Net also acquired USA Online ( usaol.com ), a directory of business Web sites featuring more than 200,000 listings organized geographically and by business category. Go2Net will position both Virtual Avenue and USA Online under the HyperMart umbrella.
During the quarter, the company also announced the acquisition of IQC.com ( iqc.com ) for approximately $20 million in Go2Net stock. The transaction brings Go2Net a powerful suite of free and subscription-based financial analysis and real-time charting services, which it will fully integrate with Go2Net's Silicon Investor ( siliconinvestor.com ), the Web's premier financial discussion site.
Go2Net also announced the acquisition of Haggle Online ( haggle.com ), a leading online auction site, for approximately $6.5 million in Go2Net stock. This provides Go2Net with an auction platform to extend auctions to the Internet's rapidly emerging business-to-business and business-to-consumer environments through HyperMart and Virtual Avenue.
Subsequent to the quarter end, Go2Net announced the acquisition of Authorize.Net ( authorize.net ), the Internet's leading payment authorization service for online businesses, for $90.5 million in Go2Net stock and cash. The transaction brings Go2Net a critical component in its ongoing development of end-to-end commerce solutions for its HyperMart and Virtual Avenue business hosting services.
Authorize.Net currently enables commerce for more than 36,000 online merchants and is growing at the rate of more than 3,000 new merchants per month.
Branding
During the quarter, Go2Net continued its first national offline brand advertising campaign, designed to generate consumer and Internet industry awareness of Go2Net and the Go2Net Network. Developed under the tagline of ''What's Next'' with the Seattle-based Hadley Green Advertising agency, Go2Net's first creative campaign, ''When You're Done Surfing,'' continued with placements in national consumer and trade publications, such as Media Week, The Industry Standard, and Entertainment Weekly, among others. Go2Net also extended its ''When You're Done Surfing'' outdoor mobile campaign in several of the largest markets in the United States, including New York, Los Angeles, Chicago, Boston and San Francisco.
Advertiser Growth and Commerce
Go2Net's advertising clients increased to 358 during the June quarter, up from 142 advertisers for the comparable period of the previous fiscal year. The company also realized revenues from online subscriptions, ecommerce and technology licensing.
During the quarter, Go2Net and Fleet Credit Card services launched a series of Go2Net-branded credit cards. The cards, which are marketed, issued and administered by Fleet Credit Card Services under an agreement announced in December 1998, feature the brands of the Go2Net Network and many of its most popular sites, including Silicon Investor; MetaCrawler; and HyperMart. The cards are available online throughout the Go2Net Network.
As part of its strategy to develop one of the Internet's largest communities of commerce-enabled online businesses, Go2Net introduced a fully redesigned version of HyperMart ( hypermart.net ), the Web's largest community of small- and medium-sized businesses. The redesign includes a completely new interface, along with a wide array of new features and services for HyperMart's membership. Go2Net also introduced the most comprehensive customer support program in the free Web hosting sector: Technical support 24 hours a day, seven days a week for all HyperMart member needs. As part of its redesign, HyperMart now offers a comprehensive business directory, where members can list their respective businesses under a series of specified categories. Additional new features include html check, image optimizer and link check, all geared toward helping HyperMart businesses improve their respective Web sites. In addition, Go2Net plans to offer end-to-end commerce solutions, including storefront, shopping cart, payment authorization and auction capabilities to HyperMart and Virtual Avenue business members during the September quarter.
Management team additions
During the quarter, Go2Net added two members to its management team: Thomas Camp, named vice president of business development; and Oren Etzioni, hired as chief technology officer.
Camp joined Go2Net from the Boston-based law firm of Hutchins, Wheeler & Dittmar, where he represented Go2Net in many of its most significant business transactions, ranging from the company's recent $300 million investment from Paul Allen and Vulcan Ventures Inc. to its acquisitions of IQC ( iqc.com ), Haggle Online ( haggle.com ) and Virtual Avenue ( virtualave.net ). He directs Go2Net's business development efforts and plays a leading role in the company's acquisitions, strategic partnerships and investments. He also oversees the growth and day-to-day operations of Go2Net's business development department.
Etzioni, the co-creator of the award-winning MetaCrawler ( metacrawler.com ) online search service, joined Go2Net from the University of Washington, where he was a professor in its Department of Computer Science. He also founded Netbot, Inc., which was acquired by Excite, Inc. in 1997. He leads Go2Net's improvement and extension of its Web technologies across the Go2Net Network. He also oversees the integration and leveraging of Go2Net's technologies with Paul Allen and Vulcan Ventures' emerging broadband infrastructure, via the creation of Go2Net's broadband content division.
Go2Net, Inc.
Unaudited Pro Forma Condensed Statements of Operations Excluding non-cash
preferred stock dividend, merger and other non-cash charges for stock
compensation and amortization of intangibles (A)
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
Revenue $5,726,004 $1,969,306 $12,651,287 $4,622,590
Cost of Revenue 1,205,310 681,279 2,832,068 1,597,940
Gross Profit 4,520,694 1,288,027 9,819,219 3,024,650
Operating expenses:
Sales and
marketing 1,481,248 511,924 3,618,551 1,427,369
Product development 634,711 339,574 1,452,403 1,002,898
General and
administrative 1,751,192 712,601 3,697,917 1,529,929
Total operating
expenses 3,867,151 1,564,099 8,768,871 3,960,196
Income/(loss)
from operations 653,543 (276,072) 1,050,348 (935,546)
Interest income, net 2,422,248 135,047 3,151,426 383,216
Income/(loss)
before taxes 3,075,791 (141,025) 4,201,774 (552,330)
Income taxes 18,533 19,806 18,533 39,611
Pro forma
income/(loss) $3,057,258 $(160,831) $4,183,241 $(591,941)
Diluted pro
forma income/(loss)
per common share (B) $0.07 $(0.01) $0.12 $(0.04)
Shares used in
computing diluted
pro forma income/
(loss) per common
share (B) 41,050,743 19,396,120 36,413,782 15,329,666
(A) These financial statements exclude a one-time, non-cash preferred stock dividend, stock compensation, merger related expenses, and amortization of intangibles, which are summarized in the following table. They do not purport to be financial statements prepared in accordance with Generally Accepted Accounting Principles. The following table reconciles the pro forma net income/(loss) excluding these charges to net loss for the periods presented.
(B) Pro forma basic net income per share is $.12 and $.16 for the three and nine months ended June 30, 1999, respectively. Pro forma basic net loss per share is ($.01) and ($.04) for the three and nine months ended June 30, 1998, respectively.
Go2Net, Inc.
Reconciliation of Pro Forma Income to Net Loss
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
Pro forma income/
(loss) $3,057,258 $(160,831) $4,183,241 $(591,941)
Merger related
costs -- 715,982 650,257 715,982
Stock compensation
expense 883,441 88,684 960,708 159,631
Amortization of
intangibles 2,740,763 -- 2,740,763 --
Impairment loss -- 398,126 -- 398,126
Preferred stock
dividend 107,000,447 -- 159,930,733 --
Net loss applicable
to common
shareholders $(107,567,393) $(1,363,623) $(160,099,220) $(1,865,680)
Go2Net, Inc.
Unaudited Condensed Statements of Operations
Three Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
Revenue $5,726,004 $1,969,306 $12,651,287 $4,622,590
Cost of Revenue 1,205,310 681,279 2,832,068 1,597,940
Gross Profit 4,520,694 1,288,027 9,819,219 3,024,650
Operating expenses:
Sales and
marketing 1,481,248 511,924 3,618,551 1,427,369
Product development 634,711 339,574 1,452,403 1,002,898
General and
administrative 1,751,192 712,601 3,697,917 1,529,929
Merger related
costs -- 715,982 650,257 715,982
Stock compensation
expense 883,441 88,684 960,708 159,631
Impairment loss -- 398,126 -- 398,126
Amortization
of intangibles 2,740,763 -- 2,740,763 --
Total operating
expenses 7,491,355 2,766,891 13,120,599 5,233,935
Income/(loss)
from operations (2,970,661) (1,478,864) (3,301,380) (2,209,285)
Interest income,
net 2,422,248 135,047 3,151,426 383,216
Loss before taxes (548,413) (1,343,817) (149,954) (1,826,069)
Income taxes 18,533 19,806 18,533 39,611
Net loss (566,946) (1,363,623) (168,487) (1,865,680)
Preferred stock
dividend 107,000,447 -- 159,930,733 --
Net loss
applicable
to common
shareholders $(107,567,393) $(1,363,623) $(160,099,220) $(1,865,680)
Basic and
diluted net
loss per
common share $(4.07) $(0.07) $(6.24) $(0.12)
Shares used in
computing basic
and diluted net
loss per common
share 26,401,610 19,396,120 25,668,028 15,329,666
Diluted pro forma
income/(loss) per
common share before
preferred stock
dividend,
nonrecurring and
non cash charges $0.07 $(0.01) $0.12 $(0.04)
Shares used in
computing
diluted pro forma
income/(loss)
per common share 41,050,743 19,396,120 36,413,782 15,329,666
Go2Net, Inc.
Condensed Balance Sheets
(Unaudited)
June 30, September 30,
1999 1998
Assets
Current asset:
Cash and cash equivalents $133,176,418 $941,351
Short-term investments 134,394,249 7,944,249
Trade accounts receivables, net 2,946,886 1,402,340
Other accounts receivable 1,884,980 48,043
Prepaid expenses 425,450 272,823
Total current assets 272,827,983 10,608,806
Property and equipment, net 2,009,892 1,315,168
Other assets, net 51,746 311,232
Long-term investments 40,715,569 --
Deposits 250,000 300,000
Deferred tax asset 311,654 --
Intangibles, net 49,955,876 --
Total assets $366,122,720 $12,535,206
Liabilities and stockholders' equity -- --
Current liabilities:
Accounts payable and accrued expenses $2,354,107 $770,387
Accrued compensation and benefits 841,478 269,240
Short term debt -- 90,616
Deferred revenue 1,106,671 503,798
Deferred tax liability 3,298,111 --
Total current liabilities 7,600,367 1,634,041
Commitments and contingencies
Stockholders' equity:
Preferred stock 450,996,185 --
Common stock 72,434,214 15,347,048
Unrealized loss on
available for sale securities (362,940) --
Accumulated deficit (164,545,106) (4,445,883)
Total stockholders' equity 358,522,353 10,901,165
Total liabilities and
stockholders' equity $366,122,720 $12,535,206
About Go2Net, Inc.
Go2Net is a network of branded, technology- and community-driven Web sites focused on the following categories: personal finance, search and directory, commerce and business services, and games. The company also develops Web-related software. The Go2Net Network's properties include: Go2Net Personal ( go2net.com ), which provides users with a comprehensive Internet start page offering customizable news, discussion, and stock information, as well as direct access to Go2Net's own finance, search, free Web hosting, shopping and Java multiplayer game sites; Silicon Investor ( siliconinvestor.com ), the Web's premier financial discussion site; StockSite ( stocksite.com ), which offers proprietary articles, portfolio tracking tools, company research and news relating to business and finance; MetaCrawler ( metacrawler.com ), a metasearch service that combines various existing search/index guides into one service; 100hot ( 100hot.com ), a leading directory of the Web's most popular sites; HyperMart ( hypermart.net ), the Web's leading provider of free business hosting services; Authorize.Net ( authorize.net ), the Internet's leading payment authorization system for online businesses; Haggle Online ( haggle.com ), one of the Web's premier person-to-person auction services; WebMarket ( webmarket.com ), a one-stop comparison shopping service; and PlaySite ( playsite.com ), the Web's premier Java-based multi-player games site. The company's Go2Net Labs division develops innovative technologies to enhance the features and functionality of the Go2Net sites and for licensing to other Internet companies.
This announcement contains forward-looking statements that involve risks and uncertainties, including those relating to the company's ability to grow its user and advertiser base. 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 include, among others, the company's limited operating history, the competitive environment in which the company competes, the early stage of the Web as an advertising and electronic commerce medium, the company's dependence on advertising and sponsorship revenues, the company's dependence on strategic relationships to drive traffic to its Web sites, consumer acceptance of the company's new products and services, the company's ability to develop and integrate new technologies and services into its existing services, and the increased use of the Web for commerce. More information about the potential factors that could affect the company's business and financial results is included in the company's Annual Report on Form 10-K for the year ended September 30, 1998 and Quarterly Reports on Form 10-Q for the quarters ended December 31, 1998 and March 31, 1999, which are on file with the Securities and Exchange Commission.
CONTACT: Mark S. Peterson, Director of Public Relations of Go2Net, Inc., 206-447-1595, or mark@go2net.com.
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