Company Posts Full Year 2007 Revenue of $406 Million
Full Year 2007 Marketing Services Revenue up 10%
Monthly Unique Users Increase to 148 Million
SAN FRANCISCO--(BUSINESS WIRE)--Feb. 5, 2008--CNET Networks, Inc.
(Nasdaq:CNET) today reported financial results for the quarter and
year ended December 31, 2007.
"We are pleased with our solid performance in the fourth quarter,"
said Neil Ashe, chief executive officer, CNET Networks. "CNET Networks
enters 2008 with a solid management team, a quality collection of
properties and a balance sheet which provides us the financial
flexibility to create value for all shareholders."
Fourth Quarter 2007 Financial and Operating Highlights
Revenues - Total revenues for the fourth quarter were $125.5
million, an 11 percent increase compared to revenues of $113.1 million
for the same period of 2006.
Operating Income - On a reported basis, operating income totaled
$20.9 million during the fourth quarter of 2007 compared to operating
income of $8.2 million in the year-ago quarter. Fourth quarter 2007
reported operating income reflects $742,000 in costs principally
related to litigation concerning the Company's concluded stock option
investigation. Fourth quarter 2006 reported operating income reflects
$6.5 million in stock option investigation related costs and a $1.4
million non-cash goodwill impairment.
Operating income before depreciation, amortization, goodwill
impairment and stock compensation expense was $35.5 million for the
fourth quarter of 2007 compared to $23.4 million in the fourth quarter
of 2006. Excluding costs associated with the Company's stock option
investigation and related matters of $742,000 during the fourth
quarter of 2007 and $6.5 million in the year-ago quarter, operating
income before depreciation, amortization, goodwill impairment and
stock compensation expense was $36.3 million compared to $30.0 million
during the fourth quarter of 2006.
On a reported basis, operating profit margin was 17 percent
compared to an operating profit margin of 7 percent in the fourth
quarter of 2006. Excluding costs associated with the Company's stock
option investigation and related matters, the profit margin of
operating income before depreciation, amortization, goodwill
impairments, and stock compensation expense was 29 percent compared to
26 percent in the fourth quarter of 2006.
Net Income - Net income for the fourth quarter of 2007 was $202.6
million, or $1.33 per diluted share. This compares with net income of
$5.3 million, or $0.03 per diluted share for the fourth quarter of
2006. Net income for the fourth quarter of 2007 was positively
impacted by a $184.2 million income tax benefit related to the release
of a portion of the Company's deferred tax valuation allowance during
the quarter. Net income for the fourth quarter of 2006 was negatively
impacted by a $1.4 million non-cash goodwill asset impairment expense
and by $6.5 million in costs associated with the Company's stock
option investigation and related matters. Excluding the valuation
release related tax benefit, stock compensation expense, costs
associated with the Company's stock option investigation and related
matters, goodwill impairments, realized gains on investments and loss
from discontinued operations, adjusted net income for the fourth
quarter of 2007 was $22.7 million, or $0.15 on a diluted share basis,
compared to $17.9 million, or $0.12 per diluted share, during the
fourth quarter of 2006.
Cash Flow and Capital Expenditures - Net cash provided by
operating activities for the fourth quarter of 2007 was $21.0 million,
up from $10.8 million for the fourth quarter of 2006. Capital
expenditures in the fourth quarter of 2007 were $7.6 million compared
to $5.9 million in the fourth quarter of 2006. Excluding costs
associated with the Company's stock option investigation and related
matters of $742,000 in the fourth quarter of 2007 and $6.5 million in
the fourth quarter of 2006, free cash flow for the fourth quarter of
2007 was $14.2 million compared to $11.4 million in the fourth quarter
of 2006. Free cash flow is defined as cash flow from operating
activities less capital expenditures.
User Metrics - In the fourth quarter of 2007, the Company
completed the migration of its U.S. data reporting platforms to its
international properties. As such, the Company's user metrics now
include the full effect of its new and developing international
properties in China and Europe. Given the timing of the
implementation, prior quarter data and year-over-year comparisons are
not available. Utilizing the migrated reporting platforms, CNET
Networks' global network of Internet properties reached an average of
148 million unique monthly users during the fourth quarter of 2007
(1). Average daily page views were nearly 83 million during the fourth
quarter (1).
Full Year 2007 Financial Highlights
Revenues - Total revenues for the full year 2007 were $405.9
million, a 10 percent increase compared to revenues of $369.3 million
during 2006.
Operating Income - On a reported basis, operating income totaled
$16.2 million during 2007 compared to operating income of $7.5 million
during 2006. Full year 2007 reported operating income reflects $8.4
million in costs associated with the Company's concluded stock option
investigation. Full year 2006 reported operating income reflects $13.7
million in stock option investigation related costs and $2.8 million
of non-cash goodwill impairments.
Operating income before depreciation, amortization, goodwill
impairment and stock compensation expense was $71.2 million during
2007 compared to $58.5 million in 2006. Excluding costs associated
with the Company's stock option investigation and related matters of
$8.4 million during 2007 and $13.7 million in 2006, operating income
before depreciation, amortization, goodwill impairment and stock
compensation expense was $79.7 million compared to $72.2 million
during 2006.
On a reported basis, operating profit margin was 4 percent
compared to an operating profit margin of 2 percent last year.
Excluding costs associated with the Company's stock option
investigation and related matters, the profit margin of operating
income before depreciation, amortization, goodwill impairments, and
stock compensation expense was 20 percent in both 2007 and 2006.
Net Income - Net income for 2007 was $176.8 million, or $1.16 per
diluted share. This compares with net income of $6.8 million, or $0.04
per diluted share for 2006. Net income for 2007 was positively
impacted by a $184.2 million income tax benefit related to the release
of a portion of the Company's deferred tax valuation allowance during
the fourth quarter of 2007 and $2.2 million in gains on private
investments offset by $8.4 million in costs associated with the
Company's stock option investigation and related matters. Excluding
the valuation allowance release tax benefit, stock compensation
expense, costs associated with the Company's stock option
investigation and related matters, goodwill impairments, and realized
gains on investments, adjusted net income for 2007 was $36.7 million,
or $0.24 on a diluted share basis, compared to $41.0 million, or $0.27
per diluted share, during 2006.
Cash Flow and Capital Expenditures - Net cash provided by
operating activities during 2007 was $61.8 million, down from $64.0
million during 2006. Net capital expenditures in 2007 were $27.4
million compared to $32.8 million during 2006. Excluding costs
associated with the Company's stock option investigation and related
matters of $8.4 million in 2007 and $13.7 million in 2006, free cash
flow in 2007 was $42.8 million compared to $44.9 million in 2006. Free
cash flow is defined as cash flow from operating activities less net
capital expenditures.
A reconciliation of the non-GAAP measures used in this release to
the most comparable GAAP measure and further information regarding the
Company's stock compensation expense, impairment charges and realized
gains on investments are included in the accompanying "Operating
Income Reconciliation", "Net Income Reconciliation", and "Cash Flows
from Operating Activities Reconciliation" and "Operating Expense
Reconciliation".
Business Highlights
"We compete in a fast paced industry where change is constant,"
said Ashe. "CNET Networks has consistently and repeatedly innovated to
lead changes in the internet landscape and we are excited to do so
again in 2008."
Management Team Additions: In November 2007, Dave Morris joined
the Company as senior vice president of network sales. In his new
role, Morris is responsible for overseeing CNET Networks' corporate
sales and partnership accounts. A veteran of Time Inc., Morris brings
more than 20 years of marketing, sales, and publishing experience to
CNET Networks. Most recently Morris was president and publisher of
Entertainment Weekly and EW.com, where he led the publication and Web
site to record profits and audience numbers.
New Growth Opportunities: In December 2007, CNET Networks
announced the Open Content Platform, an easy, scaleable way for CNET
Networks to share content with publishers from around the web, giving
consumers access to the content they want, where they want it. Through
the Open Content Platform, CNET Networks can export the best content
from its leading brands BNET, CNET, CHOW, GameSpot, and TV.com, and
import premium content from other publishers to enhance the user
experience on its own sites. Partners include AOL, YouTube, and NPD
Group, as well as more targeted web sites and popular blogs such as
BuddyTV, Cupcake BakeShop, GeekEntertainmentTV, The Gothamist Network,
Monster.com, Revision3, Savory Cities, Virapop.com, and Wikia.
BNET (www.bnet.com) continues to be an important new brand for the
Company. BNET offers practical insight and straightforward tools that
address the challenges business managers face everyday. During the
fourth quarter, the Company acquired FindArticles.com for $20.5
million - a library of 11 million resource articles from over 3,000
leading independent publishers. FindArticles complements the existing
resource channel on BNET, offering the ability to gain scale through
high-quality content and specialized information sources to meet the
needs of business professionals. BNET also continued to produce
original video content, including shows with leading business book
authors and interviews with successful business people and
entrepreneurs.
CNET Networks continued its investment in China, a market where
the Company has proven its ability to strategically add and grow new
brands in new categories. The Company acquired Cheshi
(www.cheshi.com.cn), a leading Beijing-based automotive website whose
leading advertisers include Mazda, Infiniti, Dong Feng-Nissan, Buick,
and Ford. The acquisition bolsters CNET Networks' leadership position
in the auto category in China, which also includes the web sites XCAR
and GOCAR.
Brand Highlights: During the fourth quarter, CNET Networks
continued to drive innovation and product developments across its
leading brands. Examples include:
CNET.com (www.cnet.com) and GameSpot (www.gamespot.com) continued
to be go-to resources for people who wanted to learn about the latest
consumer electronics and games during the holiday season. CNET's
holiday features, including the annual gift guide and live Holiday
Help Desk call-in show contributed to a 14 percent increase in unique
users and a nine percent increase in streams from the fourth quarter
2006 (2). GameSpot's coverage of popular releases such as Guitar Hero
III, and editorial features such as the GameSpot Best of 2007 Awards
highlighting the best games of the year, attracted record numbers of
page views and users, with 19 of the site's top 20 traffic days in
2007 falling during the 4th quarter.
CNET had another impressive showing at the annual 2008
International Consumer Electronics Show. As the authoritative voice of
the show, CNET produced hundreds of product reviews and videos,
contributing to 12 percent more average daily unique users during the
five day show than last year, and a 15 percent increase in streams
over 2007. CNET TV content was served up in over 75,000 hotel rooms
throughout Las Vegas, bringing show attendees the latest news from the
show floor. In addition, CNET editors were once again sought out by
national and international media, including CNN, CNBC, National Public
Radio, and the BBC, to provide their expert, unbiased opinion on the
latest technology news, products, and trends.
CHOW (www.chow.com) rolled out an innovative recipe feature that
lets food fanatics change CHOW recipes to fit their own taste, and
then share their recipes with the CHOW community. The first
of-its-kind Recipe Hack feature is ideal for cooks who find themselves
tweaking ingredient portions or who want to share their creative
interpretations of familiar recipe standards. CHOW users can view all
hacks made by other members, as well as track new submissions from
favorite users, and upload photos to personalize the presentation of
their own recipes.
Business Outlook
For fiscal 2008, management expects total annual revenues to be in
the range of $440 million to $460 million. This represents growth of
between 8 percent and 13 percent. Including $20 million in stock
compensation expense, management estimates operating income of between
$21 and $29 million. Management expects operating income before
depreciation, amortization and stock compensation expense to be
between $88 million and $96 million. Including stock compensation
expense of approximately $0.06 per diluted share, net of tax, earnings
per share is expected to be in the range of $0.06 to $0.08 per share
for the year.
For the first quarter of 2008, management anticipates total
revenues of $91 million to $95 million. This represents year-over-year
growth of between 2 percent and 7 percent. Including approximately
$5.0 million in non-cash stock compensation expense, management
estimates an operating loss in the range of $12 million to $14 million
for the first quarter. Management expects operating income before
depreciation, amortization, and stock compensation expense of between
$3.0 million and $5.0 million for the quarter. Including stock
compensation expense of approximately $0.02 per diluted share, net of
tax, earnings per share is expected to be in the range of a loss of
$0.04 to a loss of $0.05 in the first quarter.
Operating income and net income guidance for the first quarter and
full-year 2008 does not consider ongoing costs associated with the
Company's concluded stock option investigation and related matters or
expenses associated with the Company's recent stockholder proposals.
More detailed guidance, as well as a table that reconciles
operating income before depreciation, amortization, and stock
compensation guidance to operating income (loss) guidance can be found
on the "Guidance to the Investment Community" sheet that accompanies
this press release.
Conference Call and Webcast
CNET Networks will host a conference call to discuss its fourth
quarter and full year financial results and business outlook beginning
at 5:00 pm ET (2:00 pm PT), today, February 5, 2008. To listen to the
discussion, please visit http://ir.cnetnetworks.com and click on the
link provided for the webcast conference call or dial (800) 344-1035
(international dial-in: (706) 679-3076). A replay of the conference
call will be available via webcast at the URL listed above or by
calling (800) 642-1687 (international dial-in: (706) 645-9291) and
entering the conference ID number 32421043. The Company's past
financial news releases, related financial and operating information,
and access to all Securities and Exchange Commission filings, can also
be accessed at http://ir.cnetnetworks.com.
Safe Harbor
This press release and its attachments include forward-looking
information and statements that are subject to risks and uncertainties
that could cause actual results to differ materially. These statements
are only effective as of the date of this press release and CNET
Networks undertakes no duty to publicly revise or update these
forward-looking statements, whether as a result of new information,
future developments or otherwise. These forward-looking statements
include the statements under the sections entitled "Business Outlook"
which set forth our estimated financial performance for the first
quarter and full year of 2008, including future revenue, expenses,
operating income and earnings per share, and statements regarding our
expected growth, progress, business changes, value creation,
innovation, product development, access to funding, and success of our
services. In addition, management expects to provide forward-looking
information statements on the conference call to be held shortly
following the issuance of this release, which are also subject to
risks and uncertainties that could cause actual results to differ
materially. The forward-looking statements in this release and on the
conference call are identified by the words "expect," "estimate,"
"target," "believe," "goal," "anticipate," "intend" and similar
expressions or are otherwise identified in the context in which they
are made as being forward-looking. These statements are only effective
as of the date of this release and we undertake no duty to publicly
update these forward-looking statements, whether as a result of new
information, future developments or otherwise. The risks and
uncertainties that could cause actual results to differ materially
from those projected include: a lack of growth or a decrease in
marketing spending on the Internet due to failure of marketers to
adopt the Internet as an advertising medium at the rate that we
currently anticipate; a lack of growth or decrease in marketing
spending on CNET Networks' properties in particular, which could be
prompted by competition from other media outlets, both on and off the
Internet; dissatisfaction with CNET Networks' services, or economic
difficulties in our clients' businesses; the inability of our exiting
brands to attract new users; the inability to innovate or adapt to
market opportunities and changes at a successful pace; an increase in
the competitiveness of the market for qualified employees or changes
in our stock price or volatility, both of which could increase our
estimated stock compensation expenses; economic conditions such as
weakness in corporate or consumer spending, which could prompt a
reduction in overall advertising expenditures or expenditures
specifically on our properties; the failure of existing advertisers to
meet or renew their advertising commitments as we anticipate, many of
which are for short terms, which would cause us to not meet our
financial projections; the failure to attract advertisers outside of
our traditional technology and consumer electronics categories, which
would cause us to not meet our financial projections; a continued
decline in revenues from our print publications as advertising dollars
shift to other media; the acquisition of businesses or the launch of
new lines of business, which could decrease our cash position,
increase operating expense, and dilute operating margins; an increase
in intellectual property licensing fees or infringement claims, which
could increase operating expense, including amortization; the risk of
future impairment of our intangible assets, goodwill or investments
based on a decline in our business or investments; and general risks
associated with our business. For additional discussion regarding the
risks related to CNET Networks' business, see its Annual Report on
Form 10-K for the year ended December 31, 2006 and subsequent
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
including disclosures under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Conditions and
Results of Operations," which are filed with the Securities and
Exchange Commission and are available on the SEC's website at
www.sec.gov.
About CNET Networks, Inc.
CNET Networks, Inc. (Nasdaq: CNET - www.cnetnetworks.com) is an
interactive media company that builds brands for people and the things
they are passionate about, such as gaming, music, entertainment,
technology, business, food, and parenting. The Company's leading
brands include CNET, GameSpot, TV.com, MP3.com, CHOW, UrbanBaby,
ZDNet, BNET, and TechRepublic. Founded in 1992, CNET Networks has a
strong presence in the US, Asia, and Europe.
(1) CNET Networks Internal Log Data, October 2007 to December 2007
(2) CNET.com Internal Log Data, October 2007 to December 2007
CNET Networks, Inc.
Consolidated Statements of Operations
Unaudited
(in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2007 2006 2007 2006
--------- -------- --------- --------
Revenues $ 125,553 $113,104 $ 405,895 $369,259
Operating expenses:
Cost of revenues (1) 47,705 43,369 170,620 159,881
Sales and marketing (1) 28,891 26,417 107,521 94,445
General and administrative
(1) 17,717 18,548 66,904 61,771
Stock option investigation
and related matters 742 6,519 8,436 13,745
Depreciation 7,056 6,457 27,050 21,491
Amortization of intangible
assets 2,524 2,175 9,177 7,622
Goodwill impairments - 1,375 - 2,793
--------- -------- --------- --------
Total operating expenses 104,635 104,860 389,708 361,748
--------- -------- --------- --------
Operating income 20,918 8,244 16,187 7,511
--------- -------- --------- --------
Non-operating income
(expense):
Realized gains on investments - - 2,190 558
Interest income 1,089 874 3,680 4,871
Interest expense (1,798) (3,009) (5,702) (5,023)
Other, net 530 (646) 1,470 (596)
--------- -------- --------- --------
Total non-operating income (179) (2,781) 1,638 (190)
--------- -------- --------- --------
Income from continuing
operations before income
taxes 20,739 5,463 17,825 7,321
Income tax expense
(benefit) (180,421) 633 (178,718) 1,334
--------- -------- --------- --------
Income from continuing
operations 201,160 4,830 196,543 5,987
Income (loss) from
discontinued operations,
net of tax(2) 1,458 478 (19,768) 849
--------- -------- --------- --------
Net income $ 202,618 $ 5,308 $ 176,775 $ 6,836
========= ======== ========= ========
Basic net income per share
Earnings per share from
continuing operations $ 1.32 $ 0.03 $ 1.30 $ 0.04
Earnings per share,
discontinued operations 0.01 0.00 (0.13) 0.01
Net earnings per share 1.33 0.03 1.17 0.05
Diluted net income per share
Earnings per share from
continuing operations $ 1.32 $ 0.03 $ 1.29 $ 0.04
Earnings per share,
discontinued operations 0.01 0.00 (0.13) 0.00
Net earnings per share 1.33 0.03 1.16 0.04
Shares used in calculating
basic income per share 151,947 149,805 151,333 149,076
Shares used in calculating
diluted income per share 152,695 152,559 152,320 152,313
(1) Includes stock
compensation expense, which
was allocated as follows:
Cost of revenues $ 1,510 $ 1,434 $ 5,321 $ 6,942
Sales and marketing 654 822 2,612 3,575
General and administrative 2,881 2,933 10,890 8,555
--------- -------- --------- --------
$ 5,045 $ 5,189 $ 18,823 $ 19,072
========= ======== ========= ========
(2) Income (loss) from discontinued operations, net of tax, is
primarily related to our former Webshots reporting unit, sold in
October 2007.
CNET Networks, Inc.
Consolidated Balance Sheets
Unaudited
(in thousands)
December 31, December 31,
2007 2006
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 88,626 $ 31,327
Investments in marketable debt securities 18,296 30,372
Accounts receivable, net 97,122 89,265
Deferred tax asset 23,745 141
Other current assets 12,758 10,371
------------ ------------
Total current assets 240,547 161,476
Investments in marketable debt securities,
long term 510 13,915
Restricted cash 1,417 2,200
Property and equipment, net 72,547 72,625
Other assets 16,677 15,116
Deferred tax asset, long term 193,549 438
Intangible assets, net 28,998 34,978
Goodwill 84,039 133,059
------------ ------------
Total assets $ 638,284 $ 433,807
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,543 $ 10,055
Accrued liabilities 48,197 67,809
Deferred revenue 11,829 12,526
Revolving credit facility - 60,000
Current portion of long-term debt 8,860 13,850
------------ ------------
Total current liabilities 79,429 164,240
Non-current liabilities:
Long-term debt 55,108 4,498
Other liabilities 4,473 726
------------ ------------
Total liabilities 139,010 169,464
------------ ------------
Stockholders' equity:
Common stock; 400,000 shares authorized;
152,123 issued at December 31, 2007 and
151,315 issued at December 31, 2006 15 15
Additional paid-in-capital 2,911,512 2,857,238
Accumulated other comprehensive loss (7,736) (11,357)
Treasury stock, at cost; 1,510 shares
outstanding at December 31, 2007 and 2006 (30,453) (30,453)
Accumulated deficit (2,374,064) (2,551,100)
------------ ------------
Total stockholders' equity 499,274 264,343
------------ ------------
Total liabilities and stockholders'
equity $ 638,284 $ 433,807
============ ============
CNET Networks, Inc.
Statements of Cash Flows
Unaudited
(in thousands)
Year Ended
December 31,
--------------------
2007 2006
---------- ----------
Cash flows from operating activities:
Net income $ 176,775 $ 6,836
Adjustments to reconcile net income (loss) to
net cash provided by
operating activities:
Depreciation and amortization 40,942 34,744
Fair value remeasurement (702) -
Noncash stock compensation expense 18,961 19,751
Deferred taxes (184,239) 336
Tax benefit from exercise of stock options 879 -
Excess tax benefits from stock-based
compensation (1,109) -
Impairments 19,009 2,793
Other noncash items, net 114 1,882
Provision for doubtful accounts 2,040 2,475
Gain on sale of business, net (1,288) (298)
Gains on sales of privately held investments (2,190) (558)
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable (8,401) (6,392)
Other assets (2,227) (2,752)
Accounts payable 77 1,400
Accrued liabilities 846 3,853
Other long-term liabilities 2,272 (59)
--------- ---------
Net cash provided by operating activities 61,759 64,011
--------- ---------
Cash flows from investing activities:
Purchase of marketable debt securities (11,828) (45,546)
Proceeds from sales of marketable debt
securities 39,038 57,620
Proceeds from sale of business 45,200 -
Release of restricted funds 829 69
Investments in privately held companies 2,190 3,058
Cash paid for other intangible assets (521) -
Cash paid for acquisitions, net of cash
acquired (61,366) (14,482)
Sale of leasehold improvements 2,349 -
Purchases of property and equipment (29,718) (32,833)
--------- ---------
Net cash used in investing activities (13,827) (32,114)
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of stock 12,293 7,280
Excess tax benefits from stock-based
compensation 1,109 -
Proceeds from borrowings on revolving credit
facility - 60,000
Repayment of revolving credit facility (60,000) -
Proceeds from borrowings on credit facility,
net 59,778 -
Principal payments on long-term debt (1,605) (125,096)
Costs for issuance of debt (2,813) -
--------- ---------
Net cash provided by (used in) financing
activities 8,762 (57,816)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 56,694 (25,919)
Effect of exchange rate changes on cash and cash
equivalents 605 1,351
Cash and cash equivalents at the beginning of
the period 31,327 55,895
--------- ---------
Cash and cash equivalents at the end of the
period $ 88,626 $ 31,327
========= =========
CNET Networks, Inc.
Quarterly Statistical Highlights
Unaudited
Q4-07 Q3-07 Q2-07 Q1-07 Q4-06
-----------------------------------
Total Quarterly Revenue ($mm) $125.5 $ 96.7 $ 94.6 $ 89.1 $113.1
Revenue Distribution (%) (a)
Marketing Services 91% 88% 89% 87% 90%
Licensing, Fees and User 9% 12% 11% 13% 10%
Segment Revenue ($mm)
U.S. Media $ 94.7 $ 74.0 $ 71.1 $ 71.2 $ 88.6
International Media 30.8 22.7 23.5 17.9 24.5
Advertiser Metrics
CNET Networks Top 100 US
Advertisers' Renewal Rate (Q-to-
Q) 94% 95% 95% 96% 96%
CNET Networks Top 100 US
Advertisers' % of Revenue 55% 53% 52% 57% 57%
Select Business Metrics (b)
Network Unique Users (mm) 147.6 141.1 137.4 143.7 135.8
Network Average Daily Page Views
(mm) 82.8 91.0 74.9 81.2 84.8
Balance Sheet Highlights ($mm)
Cash $ 88.6 $ 54.9 $ 59.5 $ 45.3 $ 31.3
Marketable Debt Securities 18.8 16.5 25.9 27.4 44.3
-----------------------------------
Total Cash and Investments $107.4 $ 71.4 $ 85.4 $ 72.7 $ 75.6
Days Sales Outstanding (DSO) 70 72 67 74 68
Total Debt $ 64.0 $ 66.1 $ 75.7 $ 77.0 $ 78.3
Note: The accompanying unaudited financial information, except for
Days Sales Outstanding, excludes revenues and expenses of our
Webshots reporting unit which was sold in October 2007.
(a) Marketing Services - represents sales of advertisements on our
Internet network through impression-based and activity-based
advertising, and sales of advertisements in our print publications.
Licensing, Fees and User - represents licensing our product database
and online content, subscriptions to online services, subscriptions
to our online services and print publications.
(b) In the third quarter of 2007, the Company completed the migration
of its US data reporting platforms to its international properties.
The Company's user metrics now include the full effect of its new and
developing international properties in China and Europe.
CNET Networks, Inc.
Business Outlook
FY 2008
Q4-07 Q1-08 estimate estimate
actual Low - High Low - High
$ in millions, except per
share data
----------------------------- -------- ----------------- -------------
Total Revenues $125.5 $91 - $95 $440 - $460
Operating income before
depreciation, amortization,
stock option investigation
and related matters and
stock compensation expense $36.3 $3 - $5 $88 - $96
Depreciation expense $7.1 $8.0 $33.0
Amortization expense $2.5 $4.0 $14.0
Stock compensation expense $5.0 $5.0 $20.0
Stock option investigation
and related matters $0.8 $- $-
Operating income (loss) $20.9 $(14) - $(12) $21 - $29
Interest income (expense),
net $(0.7) $(0.5) $(1.0)
Other income (expense) , net $0.5 $(0.5) $(1.0)
Tax expense (benefit) $(180.4) $(7) - $(8) $10 - $15
GAAP EPS $1.33 $(0.05) - $(0.04) $0.06 - $0.08
-
Note: Operating income guidance for the first quarter and full year
2008 does not consider ongoing fees related to the stock option
investigation and related matters or expenses associated with the
Company's recent stockholder proposals.
CNET Networks, Inc.
Business Segments
CNET Networks' primary areas of measurement and decision-making
include two principal business segments, U.S. Media and International
Media. U.S. Media consists of an online media network focused on
topics that people are highly interested in such as technology,
entertainment, community and business. International Media includes
media properties under several of the same brands as our sites in the
United States with additional brands represented in markets such as
China, France, Germany and the United Kingdom and several print
publications in China. Management believes that segment operating
income (loss) before depreciation, amortization, stock option
investigation and related matters and stock compensation expenses is
an appropriate measure of evaluating the operating performance of the
company's segments. However, segment operating income (loss) before
depreciation, amortization, stock option investigation and related
matters and stock compensation expense should not be considered a
substitute for operating income, cash flows or other measures of
financial performance or liquidity prepared in accordance with
generally accepted accounting principles.
(Unaudited)
(in thousands)
U.S. International Other
Media Media (1) Total
------- ------------- -------- -------
Three Months Ended
December 31, 2007
Revenues $ 94,711 $ 30,842 $ - $125,553
Operating expenses 64,035 25,233 15,367 104,635
------- ------------- -------- -------
Operating income (loss) $ 30,676 $ 5,609 $(15,367) $ 20,918
======= ============= ======== =======
Three Months Ended
December 31, 2006
Revenues $ 88,639 $ 24,465 $ - $113,104
Operating expenses 62,173 20,972 21,715 104,860
------- ------------- -------- -------
Operating income (loss) $ 26,466 $ 3,493 $(21,715) $ 8,244
======= ============= ======== =======
U.S. International Other
Media Media (1) Total
------- ------------- -------- -------
Year Ended
December 31, 2007
Revenues $310,959 $ 94,936 $ - $405,895
Operating expenses 236,844 89,378 63,486 389,708
------- ------------- -------- -------
Operating income (loss) $ 74,115 $ 5,558 $(63,486) $ 16,187
======= ============= ======== =======
Year Ended
December 31, 2006
Revenues $289,512 $ 79,747 $ - $369,259
Operating expenses 222,267 74,758 64,723 361,748
------- ------------- -------- -------
Operating income (loss) $ 67,245 $ 4,989 $(64,723) $ 7,511
======= ============= ======== =======
Note: The accompanying unaudited financial information excludes
revenues and expenses of our Webshots reporting unit which was sold
in October 2007.
(1) For the three months ended December 31, 2007, "Other" includes
depreciation and amortization expenses of $9.6 million, stock
compensation expense of $5.0 million, and stock option investigation
and related matters of $0.8 million. For the three months ended
December 31, 2006, "Other" includes $8.6 million of depreciation and
amortization, $1.4 million of asset impairment expenses, $5.2 million
of stock compensation expense, and $6.5 million of stock option
investigation and related matters. For the year ended December 31,
2007, "Other" includes depreciation and amortization expenses of
$36.2 million, stock compensation expense of $18.8 million, and stock
option investigation and related matters of $8.5 million. For the
year ended December 31, 2006, "Other" includes depreciation and
amortization of $29.1 million, asset impairment expenses of $2.8
million, stock compensation expense of $19.1 million, and stock
option investigation and related matters of $13.7 million.
CNET Networks, Inc.
Operating Income Reconciliation
(Unaudited)
(in thousands)
Three Months
Ended Year Ended
December 31, December 31,
-------------- --------------
2007 2006 2007 2006
------ ------ ------ ------
Operating income $20,918 $ 8,244 $16,187 $ 7,511
Stock compensation expense 5,045 5,189 18,823 19,072
Depreciation 7,056 6,457 27,050 21,491
Amortization of intangible assets 2,524 2,175 9,177 7,622
Goodwill impairments - 1,375 - 2,793
------ ------ ------ ------
Operating income before depreciation,
amortization, goodwill impairments
and stock compensation expense 35,543 23,440 71,237 58,489
Stock option investigation and
related matters 742 6,519 8,436 13,745
------ ------ ------ ------
Operating income before depreciation,
amortization, goodwill impairments,
stock compensation expense, and stock
option investigation and related
matters $36,285 $29,959 $79,673 $72,234
====== ====== ====== ======
Note: The accompanying unaudited financial information excludes
revenues and expenses of our Webshots reporting unit which was sold
in October 2007.
We believe that "Operating income before depreciation, amortization,
goodwill impairments and stock compensation expense" and "Operating
income before depreciation, amortization, goodwill impairments, stock
compensation expense, and stock options investigation and related
matters" are useful to management and investors as a supplement to
our GAAP financial measures for evaluating the ability of the
business to generate cash from operations. Depreciation, amortization
and goodwill impairments are non-cash items, which include amounts
related to past transactions and expenditures that are not
necessarily reflective of the current cash or capital requirements of
the business. Excluding non-cash stock compensation expense allows
management to make financial and operating decisions and evaluate the
business based on recurring operating results. Stock option
investigation and related matters are expenses settled in cash but
are not reflective of the ability of our business to generate cash.
Management refers to "Operating income before depreciation,
amortization, goodwill impairments, stock compensation expense" and
"Operating income before depreciation, amortization, goodwill
impairments, stock compensation expense and stock option
investigation and related matters" in making operating decisions and
for planning purposes. A limitation associated with these measures
is that they do not reflect the costs of certain capitalized tangible
and intangible asses used in generating revenue and the cash
expenditures associated with our stock option investigation and
related matters. Although depreciation and amortization are non-cash
charges, the capitalized assets being depreciated and amortized will
often have to be replaced in the future, and these measures do not
reflect and cash requirements for such replacements. These measures
also do not take into account interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt. Nor do these measures reflect changes in or cash
requirements for, our working capital needs. Management compensates
for these limitations by relying primarily on our GAAP financial
measures, such as capital expenditures and operating income (loss),
and using "Operating income before depreciation, amortization,
goodwill impairments and stock compensation expense" and "Operating
income before depreciations, amortization, stock compensation expense
and stock option investigation and related matters" only on a
supplemental basis. "Operating income before depreciation,
amortization, stock compensation expense and stock option
investigation and related matters" should be considered in addition
to, and not as a substitute for, other measures of financial
performance of liquidity prepared in accordance with GAAP.
CNET Networks, Inc.
Net Income Reconciliation
(Unaudited)
(in thousands, except per
share data)
Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
--------- -------- --------- --------
Net income $ 202,618 $ 5,308 $ 176,775 $ 6,836
--------- -------- --------- --------
Stock compensation expense 5,045 5,189 18,823 19,072
Stock option investigation
and related matters 742 6,519 8,436 13,745
Realized gains on
investments - - (2,190) (558)
Release of valuation
allowance (184,219) - (184,219) -
Goodwill impairments - 1,375 - 2,793
Fair value remeasurement
(1) - - (702) -
(Gain) Loss from
discontinued operations (1,458) (478) 19,768 (849)
--------- -------- --------- --------
Effect on earnings from
stock compensation, stock
option investigation and
related matters, realized
gains on investments, fair
value remeasurement,
goodwill impairments and
discontinued operations (179,890) 12,605 (140,084) 34,203
--------- -------- --------- --------
Net income excluding stock
compensation, stock option
investigation and related
matters, gains on
investments, fair value
remeasurement goodwill
impairments and
discontinued operations $ 22,728 $ 17,913 $ 36,691 $ 41,039
========= ======== ========= ========
Diluted net income per share $ 1.33 $ 0.03 $ 1.16 $ 0.04
========= ======== ========= ========
Shares used in calculating
diluted net income per
share 152,695 152,559 152,320 152,313
========= ======== ========= ========
Diluted net income per share
excluding stock
compensation expense, stock
option investigation and
related matters, gains on
investments, fair value
remeasurement, goodwill
impairments and
discontinued operations $ 0.15 $ 0.12 $ 0.24 $ 0.27
========= ======== ========= ========
Shares used in calculating
diluted net income per
share excluding stock
compensation expense, stock
option investigation and
related matters, gains on
investments, fair value
remeasurement, goodwill
impairments and
discontinued operations 152,695 152,559 152,320 152,313
========= ======== ========= ========
(1) In the year ended December 31, 2007, the Company recognized a gain
from the remeasurement of a liability related to our stock option
extensions to former employees.
Adjusted net income is defined as net income excluding stock
compensation expense, costs associated with the Company's stock
option investigation and related matters, impairments and realized
gains on investments and discontinued operations. Management believes
that adjusted net income and adjusted net income per share are useful
to investors as supplements to GAAP net income and net income per
share in evaluating the performance of our business.
Stock compensation expense and goodwill impairments are non-cash items
which are not necessarily reflections of the Company's core
performance. The costs associated with the Company's stock option
investigation and related matters are not reflective of our business,
as are gain on investments, similarly, discontinued operations are
not part of our ongoing business. In addition, management uses
adjusted net income and adjusted net income per share in making
operating decisions and for planning purposes. The non-cash income
tax benefit resulting from the release of a portion of our valuation
allowance on deferred tax assets is not reflective of our operations,
and as such, is not reasonably expected to recur.
A limitation of adjusted net income is that it does not exclude all
non-cash items which have an impact on GAAP net income, such as
depreciation and amortization, and net income excludes items, such as
the litigation costs related to our stock option investigation, which
have a cash impact on the Company. Management compensates for these
limitations by primarily relying on the Company's GAAP financial
measures, including net income, and using adjusted net income only on
a supplemental basis. Adjusted net income and adjusted net income per
share should be considered in addition to, and not as a substitute
for, other measures of financial performance of liquidity prepared in
accordance with GAAP.
CNET Networks, Inc.
Cash Flows from Operating Activities Reconciliation
(Unaudited)
(in thousands)
Three Months
Ended Year Ended
December 31, December 31,
---------------- ------------------
2007 2006 2007 2006
------- ------- -------- --------
Cash flows from operating
activities $21,042 $10,793 $ 61,759 $ 64,011
Capital expenditures (1) (7,612) (5,942) (27,369) (32,833)
------- ------- -------- --------
Free cash flow 13,430 4,851 34,390 31,178
Stock option investigation and
related matters 742 6,519 8,436 13,745
------- ------- -------- --------
Free cash flow excluding stock
option investigation and
related matters $14,172 $11,370 $ 42,826 $ 44,923
======== ======= ========= ========
(1) Capital expenditures for the year ended December 31, 2007 are net
of $2,349 in cash proceeds under a sale-leaseback transaction related
to certain leasehold improvements made during the first quarter of
2007.
Free Cash Flow is defined as net cash provided by operating activities
less net capital expenditures. The Company believes that free cash
flow provides useful information about the amount of cash generated
by the business after the purchase of property and equipment.
Similarly, the Company believes that free cash flow excluding stock
option investigation and related matters provides useful information
because such expenses, while settled in cash, are not reflective of
the ability of our business to generate cash. A limitation of free
cash flow is that is does not represent the total increase or
decrease in the cash balance for the period. A limitation of free
cash flow excluding stock option investigation and related matters is
that it excludes costs that are paid in cash. Management compensates
for these limitations by primarily relying on our GAAP financial
measures, such as cash flows from operating activities and uses of
free cash flow and free cash flow excluding stock option
investigation and related matters only on a supplemental basis. Free
cash flow should be considered in addition to, and not as a
substitute for, other measures of financial performance or liquidity
prepared in accordance with US GAAP.
CNET Networks, Inc.
Operating Expense Reconciliation
(Unaudited)
(in thousands)
Three Months
Ended Year Ended
December 31, December 31,
---------------- ----------------
2007 2006 2007 2006
------- ------- ------- -------
Operating expense $104,635 $104,860 $389,708 $361,748
Less non-cash operating
expenses:
Stock compensation expense 5,045 5,189 18,823 19,072
Depreciation 7,056 6,457 27,050 21,491
Amortization of intangible
assets 2,524 2,175 9,177 7,622
Goodwill impairments - 1,375 - 2,793
------- ------- ------- -------
Cash operating expenses 90,010 89,664 334,658 310,770
Stock option investigation and
related matters 742 6,519 8,436 13,745
------- ------- ------- -------
Cash operating expenses before
stock option investigation and
related matters $ 89,268 $ 83,145 $326,222 $297,025
======= ======= ======= =======
Note: The accompanying unaudited financial information excludes
revenues and expenses of our Webshots reporting unit which was sold
in October 2007.
Management believes that cash operating expenses and cash operating
expenses before stock option investigation and related matters are
useful to investors as supplements to GAAP operating expense in
evaluating the performance of our businesses. Depreciation,
amortization, stock compensation expense and goodwill impairments are
non-cash items, which include amounts related to past transactions
and expenditures that are not necessarily reflective of the current
cash or capital requirements of the business. Excluding these non-
cash items allows management to make financial and operating
decisions and evaluate the business based on recurring operating
results. The costs associated with the Company's stock option
investigation and related matters, while paid in cash, are not
reflective of our core business. Although depreciation and
amortization are non-cash charges, the capitalized assets being
depreciated and amortized will often have to be replaced in the
future, and these measures do not reflect any cash requirements for
such replacements. These measures also do not take into account
interest expense, or the cash requirements necessary to service
interest or principal payments on our debt. Management compensates
for these limitations by primarily relying on the Company's GAAP
financial measures, including operating expense, and using cash
operating expenses and cash operating expenses before stock option
investigation and related matters only on a supplemental basis. Cash
operating expenses and cash operating expenses before stock option
investigation and related matters should be considered in addition
to, and not as substitutes for, other measures of financial
performance or liquidity prepared in accordance with GAAP.
CONTACT:
CNET Networks, Inc.
Nicole Noutsios, 510-451-2952 (Investor Relations)
nicole@nmnadvisors.com
Sarah Cain, 415-344-2218 (Media Contact)
sarah.cain@cnet.com
SOURCE: CNET Networks, Inc.
