Ziff-Davis Continues to Explore Strategic Alternatives
Ziff-Davis (ZD Group) Reports Third
Quarter Financial Results
Strong Growth in Consumer Publications; Successful
Launch of SmartPlanet.com
NEW YORK, Oct. 27 /PRNewswire/ -- ZD Group (NYSE: ZD - news) today announced financial results for
the third quarter and nine-month period ended September 30, 1999.
ZD Group reported combined EBITDA (earnings before interest, taxes, depreciation and amortization) of $50.2
million for the third quarter of 1999 on revenue of $232.0 million, compared to EBITDA of $27.6 million on
revenue of $211.5 million in the same quarter in 1998. EBITDA in the third quarter of 1999 included continuing
investments in ZDTV and SmartPlanet.com (the recently launched e-learning Web site), and one-time gains
totaling $13.3 million from the sales of assets. 1999 EBITDA also benefited from the company's 81.5% retained
interest in ZDNet, which contributed $3.8 million in the quarter compared to $1.9 million in the 1998
comparable period (which was based on a 100% retained interest).
The increase in revenue was in line with expectations, and was due primarily to the shift of two events that
occurred in the fourth quarter of 1998 to the third quarter of 1999, partly offset by lower advertising revenue in
certain business publications, as well as the absence of revenue from publications discontinued in October 1998.
ZD Group continued to experience strong revenue growth in the company's consumer publications, which were
up by almost 30%, and from its recently launched business publications, which were up 80%. A comparative
table of third quarter revenue for 1999 and 1998 is attached as Exhibit A.
As was the case in the last two quarters, due to a significant change in the company's effective tax rate, the net
loss and per share results are not comparable. The net loss for the quarter was $14.9 million, or $0.14 per
share, versus a net loss of $4.5 million, or $0.04 per pro forma share, for the same year-ago quarter. Adjusting
the effective tax rate for the third quarter of 1998 on a pro forma basis to make the periods comparable (see
Note 4), the net loss would have been $27.6 million or $0.28 per share.
Combined EBITDA for the first nine months of 1999 was $129.0 million on revenue of $685.1 million. In the
comparable 1998 period, EBITDA was $106.2 million on revenue of $694.1 million.
Proceeds from the sale of the company's Market Intelligence business in early October were used to repay
outstanding indebtedness, which currently stands at approximately $1.17 billion, a 24% decline from the $1.55
billion reported at December 31, 1998.
Ziff-Davis Continues to Explore Strategic Alternatives
The company announced in mid-July that it retained Morgan Stanley Dean Witter to explore strategic
alternatives to maximize shareholder value. The Ziff-Davis Board of Directors and executive management team
are actively investigating all possible alternatives, including strategic alliances, mergers, and the sale or joint
venture of all or some of the company's businesses.
``We are pleased with how the exploration process is proceeding, and believe that the balance of the process
will be concluded by year-end,' said Eric Hippeau, Chairman and Chief Executive Officer of Ziff-Davis Inc.
``We have seen a significant level of interest in Ziff-Davis and its business units, which is not surprising given the
strength of our cash flow, the powerful position of our brands and the talents of our people.'
``Our publishing and events businesses continue to generate very solid cash flows,' Hippeau added. ``We are
extremely pleased with the performance of our high-growth enterprises such as ZDNet, ZDTV, ZD Studios,
Inter@ctive Week, Sm@rt Reseller and Yahoo! Internet Life. The launch of SmartPlanet.com this week with
100,000 members marks the start of another exciting consumer-based Internet business. We believe these
strategic brands will continue to position each ZD business unit for tremendous growth in the future.'
BUSINESS SEGMENT REVIEW:
ZD Publishing -- In the publishing segment, which includes print publishing, market research and education,
revenue was $165.3 million in the third quarter of 1999, a 9% decline from the $181.7 million reported for the
third quarter of 1998. As noted above, the decrease was attributed to lower advertising in certain business
publications and the discontinuation of three publications in October 1998. The decline was partially offset by an
almost 30% increase in the revenue of consumer publications and 80% increase in revenue from newer business
publications.
Highlights
* ZD Publishing leads all technology/computer publishers with a 25% share
of revenue derived from Internet-related advertisers through September
1999. PC Magazine is the number-three magazine overall in the
publishing market in terms of ad revenue from ".com" advertisers.
* Ad pages from consumer advertisers -- including AT&T, Citibank, Fidelity
Investments, Ford, Goodyear, Jeep and Sheraton Hotels, among others --
have grown 250% in 1999 versus the same period last year.
* In the business publications segment, Inter@ctive Week and Sm@rt
Reseller continue to report strong ad page increases. Through September
1999, Inter@ctive Week posted a 26% ad page increase over the first nine
months of 1998, while Sm@rt Reseller posted a 27% increase over the same
period last year.
* In the consumer publications segment, ad pages in Yahoo! Internet Life
increased more than 60% through September 1999, compared to the same
period last year. ZD's video gaming publications -- Electronic Gaming
Monthly, Expert Gamer and Official U.S. Playstation -- topped their
guaranteed rate bases for the first six months of 1999, according to
Audit Bureau of Circulations (ABC) statements, with total average
monthly paid circulation of almost 840,000.
* SmartPlanet.com -- Recently launched as an innovative e-learning
community, SmartPlanet enters the market with one of the largest paid
subscriber bases on the Web, with 60,000 paid subscribers among its
100,000 registered members. The SmartPlanet business model generates
revenue from member subscriptions, course fees and e-commerce offerings.
SmartPlanet will partner with a range of content providers, such as
Cooks Illustrated and Smart Money, to deliver hundreds of courses to its
members. Its content alliance with ZD Education has already produced
more than 250 technology-oriented courses. Partners such as
barnesandnoble.com, beyond.com, and ZDNet deliver essential commerce and
audience development components to SmartPlanet.com.
* ZD Education -- A leading provider of integrated IT learning solutions
to enhance business productivity, ZD Education offers more than 8,000
corporate and government customers access to over 500 course titles for
desktop applications, networking, application development, client-server
technologies, and Internet technologies. ZD Education's first mover
advantage in the exploding online IT training business has enabled the
company to gain market leadership with over 140,000 current paid
subscribers, up from 80,000 in 1998.
ZD Events -- Revenue from the events segment was $63.1 million for the third quarter of 1999, compared to
the $29.8 million reported in the third quarter of 1998. The doubling of revenue was primarily due to the shift of
certain events, most significantly the NetWorld+Interop show in Atlanta that occurred in the fourth quarter of
1998, to the third quarter of 1999.
Highlights
* Seybold San Francisco 1999 successfully brought print and Web publishers
together in record numbers, and was the launch point for several
important initiatives in the design and publishing marketplace. Revenue
from paid attendance hit an all-time high, and Expo attendance was up
nearly 15% over the previous year.
* NetWorld+Interop 99 Atlanta saw the introduction of more than 400 new
product and corporate announcements to over 350 members of the media
community. More than 200 new companies participated into the event,
which drew over 45,000 qualified networking professionals.
ZDTV -- The first 24-hour cable TV channel and integrated Web site focused exclusively on computing and the
Internet, ZDTV and ZDTV.com provide entertaining, original programming designed to appeal to a wide range
of viewers and users from the computer novice to the technologically advanced. ZDTV now reaches
approximately 14 million homes in the U.S., up from 9.6 million at December 31, 1998. For the eight months of
1999 that ZD Group has owned ZDTV, revenue has totaled $9.3 million.
Highlights
* ZDTV has distribution agreements with 88 cable operators and is
available on more than 400 cable systems and both major satellite
companies, DirecTV and Echo Star's Dish Network. Recent carriage
additions include Adelphia launches in Southern New Jersey and Buffalo,
New York, additional Comcast launches in the Detroit area, Media One
launches in Southern California, and a Knology launch in Huntsville,
Alabama.
* The channel continues to attract top-tier advertisers, adding
automotive, banking, e-commerce, pharmaceuticals and electronics
accounts in the third quarter. ZDTV has seen a 60% increase in the
number of advertisers since the end of 1998.
* Launched in March 1999, ZDTV Radio provided nearly 750,000 audio streams
in the third quarter. ZDTV radio can now be heard in both RealNetworks
and Windows Media formats. Its features are also heard on 75 AM and FM
U.S. radio stations and internationally on 600 stations in 140 countries
through the Armed Forces Radio Network.
ZDNet (NYSE: ZDZ - news)
Revenue for the third quarter of 1999 increased 81% to $26.3 million versus $14.5 million for the same quarter
of 1998. ZDNet remains one of the few Internet companies generating positive cash flow. EBITDA for the third
quarter was $4.6 million compared to EBITDA of $1.9 million in the third quarter of 1998. [See press release:
ZDNet Announces Record Third Quarter Results] ZD Group's results include its retained interest of ZDNet's
EBITDA and net income in its financial statements. ZDNet's revenue is not consolidated into ZD Group's
results.
Highlights
* According to the September 1999 Media Metrix consolidated at home/at
work report, ZDNet Sites was the largest technology content property*,
and the 15th largest Web property overall, with 8.64 million unique
visitors in the month, or an audience reach of approximately 13.6% of
all Web users in the United States. ZDNet Sites was also the largest
technology content property in the third quarter, averaging 8.39 million
unique visitors per month.
* Unlike any other technology content property, ZDNet Sites registered
increases in reach as well as all key retention metrics such as time
spent and average days visitedn. On average, ZDNet Sites visitors spent
98% more time on the site and visited ZDNet Sites 41% more often than
users of other technology content properties.
* Average daily page views increased 80% to 10.1 million from 5.6 million
in the third quarter last year and up 14% from 8.85 million in the
second quarter of 1999.
* The number of ZDNet advertisers reached 484 in the third quarter of
1999, up 63% from 297 in the same quarter last year and 12% higher than
the 431 advertisers in the second quarter of 1999.
* Yield per thousand page views increased 5% to $26.46 versus $25.13 in
the third quarter of 1998.
* International traffic continues to grow rapidly, with average page views
increasing 61% in the third quarter of 1999 to 161 million from 100
million in the same period last year.
* During the last 90 days, ZDNet:
-- Acquired SoftSeek Inc., which produces a leading digital software
download site.
-- Inked an alliance with eCircles.com to create a destination on ZDNet
for close-knit groups to privately share information, strengthen
relationships and coordinate events on the Web.
-- Signed an agreement for techies.com to be the exclusive U.S.
technology career resource on ZDNet Sites, and made an equity
investment in the company.
-- Launched a co-branded unified messaging service with onebox.com on
the ZDNet site for the retrieval of free voicemail, fax and email
capabilities using onebox.com's voice-enabled technology, and
received an equity stake in the company.
-- Entered into a multi-year, pan-European agreement with QXL.com to
offer co-branded auction sites for online buyers and sellers of
technology products and services in Belgium, France, Germany,
Switzerland, the Netherlands and the United Kingdom.
-- Signed a pan-European strategic alliance with Monster.com to be the
exclusive career-content provider on ZDNet's "Jobs" channel on its
European sites in Belgium, France, the Netherlands and the United
Kingdom. |
