Company Posts First Quarter Revenue of $92.1 Million
Monthly Unique Users Increase 23 Percent
SAN FRANCISCO--(BUSINESS WIRE)--April 26, 2007--CNET Networks,
Inc. (Nasdaq:CNET) today reported results for the first quarter ended
March 31, 2007.
"CNET Networks' first quarter results demonstrate our unique
ability to build, grow, and monetize media brands that serve millions
of people across multiple areas of passion," said Neil Ashe, chief
executive officer of CNET Networks. "We operate some of the most
influential brands in the world, and are focused on realizing their
potential, while at the same identifying new opportunities for
growth."
- Total revenues for the first quarter were $92.1 million, a 10
percent increase compared to revenues of $83.7 million for the
same period of 2006. Excluding revenue generated by businesses
closed in late 2006, total revenue would have increased 15
percent in the first quarter of 2007.
- Operating income totaled a loss of $8.5 million during the
first quarter of 2007 compared to an operating loss of $2.3
million in the year ago quarter. Reported operating loss also
reflects $4.4 million in costs related to the Company's
recently concluded restatement and stock option investigation
and related ongoing matters.
- Operating income before depreciation, amortization, and stock
compensation expense was $7.3 million for the first quarter of
2007 compared to $10.0 million in the year ago quarter.
Excluding stock option investigation costs of $4.4 million,
operating income before depreciation, amortization, and stock
compensation expense was $11.8 million, an 18 percent increase
compared to $10.0 million during the first quarter of 2006.
- The profit margin of operating income before depreciation,
amortization, and stock compensation expense was 8 percent as
compared to 12 percent in the first quarter of 2006. Excluding
stock option investigation costs, the profit margin of
operating income before depreciation, amortization, and stock
compensation expense was 13 percent compared to 12 percent in
the year ago quarter.
- Net cash provided by operating activities for the first
quarter of 2007 was $11.0 million, down from $29.2 million for
the first quarter of 2006. Free cash flow for the first
quarter of 2007 was $3.8 million. Free cash flow is defined as
cash flow from operating activities less net capital
expenditures.
- On a reported basis, net loss for the first quarter of 2007
was a loss of $9.1 million, or $0.06 per diluted share. This
compares with net loss of $1.3 million, or $0.01 per diluted
share during the first quarter of 2006. Reported net loss for
the first quarter of 2007 was negatively impacted by $4.4
million in stock option investigation costs.
- Excluding stock compensation expense, stock option
investigation costs, realized gains on investments and loss
from discontinued operations, adjusted net income for the
first quarter of 2007 was $474,000, or breakeven on a diluted
share basis, compared to $3.0 million, or $0.02 per diluted
share, during the same period of 2006.
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, discontinued operations and
unusual gains are included in the accompanying "Operating Loss
Reconciliation" and "Reconciliation of Loss from Unusual Items."
Business Review
"2007 is a transition year for CNET Networks," said Ashe. "We are
strategically well-positioned and making the changes necessary to
thrive in the evolving media landscape."
- CNET Networks' global network of Internet properties reached an
average of 144 million unique monthly users during the first
quarter of 2007, an increase of 23 percent from the first quarter
of 2006. Average daily page views were over 81 million during the
first quarter, down 18 percent from the year-ago quarter.
- CNET Networks recently announced findings from a proprietary
research study designed to demystify influence, social
networks, and communication. Results provide new insights
about today's brokers of influence and information - who they are,
what motivates them, and how they share information and advice with
others. Building on the Company's foundation of industry-leading
research, this study provides a greater understanding of the role
these influencers play in shaping opinions and consideration. CNET
Networks is using these insights to create better opportunities
for its marketing partners to connect and activate these
influential audiences.
- During the first quarter, CNET Networks continued to realize the
potential of its existing brands with partnerships that further
extended brand reach and visibility, as well as added new features
that further allowed its properties to continue to super-serve
their passionate audiences.
- TV.com (www.tv.com) took part in the launch of the CBS
Interactive Audience Network, along with other leading
interactive companies. As part of the program, TV.com will
create an interactive environment for CBS's hit show, CSI,
that lets TV.com's 19 million users deepen their bonds with
the show and connect with other fans. Millions of people visit
TV.com each week to discuss CSI, and this partnership feeds the
TV.com audience's desire for more CSI content and a richer
interactive experience.
- CNET (www.cnet.com) had another impressive showing at the
annual 2007 International Consumer Electronics Show. As the
authoritative voice of the show, CNET produced over 300 product
reviews and over 80 video packages, contributing to a 30
percent increase in product review pages from the 2006 show
and more than 2 million streams. In addition, CNET editors were
once again sought out by national and international media,
including CNN, CNBC, NBC Nightly News, National Public Radio,
and the BBC, to provide their expert, unbiased opinion on the
latest technology news, products, and trends.
- GameSpot (www.gamespot.com) continued to be the premier
destination for gamers, delivering access to content and
information about the most anticipated games and exclusive
coverage of key industry events. GameSpot was selected as the
exclusive North American partner for the multi-phased Lord of
the Rings Online Beta, distributing more than 100,000 beta keys
to gamers looking for exclusive sneak peaks and game-related
content directly from the developer. GameSpot also provided
extensive coverage of the Game Developers Conference (GDC) in
March, including exclusive coverage of the Sony keynote and the
GDC Awards, plus hundreds of game reviews, news and preview
articles, and videos that drove nearly one million streams.
- Internationally, we continue to have success with the
introduction of CNET Networks' leading U.S. brands to
international markets. GameSpot, which has launched in the UK,
Japan, Australia and China, and CNET, which has launched in
Australia, France, and the UK, are showing positive trends
in their local markets.
- CNET Networks continued to identify new opportunities for growth,
launching BNET (www.bnet.com), the latest addition to its business
portfolio. Launched in March, the completely new BNET delivers
practical insight and straightforward tools that address the
challenges business managers face every day. BNET now hosts the
web's largest non-IT business resource directory. The site gives
marketers another outlet to reach business professionals who are
passionate about keeping informed, building knowledge, and sharing
insights to master their lives at work. New charter sponsors
include Sprint, Verizon, Research in Motion, Dell, Adobe, and Dow
Chemical.
- During the first quarter, CNET Networks continued to expand its
customer base, adding more general consumer advertisers to the
network. Advertiser renewal rates remained strong, with 96 percent
of CNET Networks' top 100 customers renewing during the quarter.
General consumer advertisers during the quarter included Procter
& Gamble, Daimler Chrysler, and Wrigley. By combining its broad
reach as one of the world's largest Internet properties, its
engagement with influential audiences around their areas of
passion, and the high level of service and attention it gives
consumers, CNET Networks is well positioned to gain further share
of general consumer dollars in 2007 and beyond.
- CNET Networks' leading brands continued to gain recognition from
outside sources for its leadership and expertise.
Avenue A / Razorfish, a leading advertising agency, recognized
CNET as "Publisher of the Year" in the Technology Category.
The distinction is given to publishers who have the best
combination of audience, service, performance and creativity,
and is part of Avenue A / Razorfish's 2007 Digital Outlook Report.
CNET TV also received two winner and two finalist awards in the
Television News category by the Aegis Video & Film Production
Awards, the industry's premier competition for peer recognition of
outstanding video productions and non-network TV commercials.
Business Outlook
For the second quarter of 2007, management anticipates total
revenues of $97 million to $102 million. Including approximately $5.5
million in non-cash stock compensation expense, management estimates
an operating income in the range of a loss of $3.0 million to income
of $1.0 million for the second quarter. Management expects operating
income before depreciation, amortization, and stock compensation
expense of between $13 million and $17 million for the quarter.
Including stock compensation expense of approximately $0.04 per
diluted share, earnings per share is expected to be in the range of a
loss of $0.03 to breakeven in the second quarter.
For 2007, management estimates total annual revenues to be in the
range of $425 million to $445 million. Including $23 million in stock
compensation expense, management estimates operating income between
$23 million and $38 million. Management expects operating income
before depreciation, amortization and stock compensation expense to be
between $90 million and $105 million. Including stock compensation
expense of approximately $0.15 per diluted share and tax benefit of
approximately $1.23 per share related to the potential release of a
portion of the company's deferred tax valuation allowance in the
fourth quarter of 2007, earnings per share is expected to be in the
range of $1.37 to $1.47 for the year.
Operating income guidance for the second quarter and full-year
2007 does not consider ongoing fees associated with the Company's
stock option investigation.
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 first
quarter financial results and business outlook beginning at 5:00 pm ET
(2:00 pm PT), today, April 26, 2007. 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 4227514. 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
forward-looking statements include the statements under the sections
entitled "Business Outlook" and "Guidance to the Investment Community"
which set forth our estimated financial performance for the second
quarter and full year of 2007, and statements regarding our growth
prospects and expectations regarding the future success of our
products and 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; 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 for 2007; 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, 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, 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 delete 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, Webshots, 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, January 2007 to March 2007.
Consolidated Statements of Operations
Unaudited
(in thousands, except per share data)
Three Months Ended
March 31,
---------------------
2007 2006
---------- ---------
Revenues $ 92,097 $ 83,650
Operating expenses:
Cost of revenues (1) 43,482 41,419
Sales and marketing (1) 25,926 22,963
General and administrative (1) 16,080 14,029
Stock option investigation and related matters 4,429 -
Depreciation 7,489 4,822
Amortization of intangible assets 3,220 2,739
---------- ---------
Total operating expenses 100,626 85,972
Operating loss (8,529) (2,322)
Non-operating income (expense):
Realized gains on investments - 500
Interest income 638 1,152
Interest expense (1,346) (659)
Other, net 301 140
---------- ---------
Total non-operating income (expense) (407) 1,133
---------- ---------
Loss from continuing operations before income
taxes (8,936) (1,189)
Income tax expense 182 76
---------- ---------
Loss from continuing operations (9,118) (1,265)
Loss from discontinued operations - (37)
---------- ---------
Net loss $ (9,118) $ (1,302)
========== =========
Basic and diluted net loss per share $ (0.06) $ (0.01)
========== =========
Shares used in calculating basic and diluted
net loss per share 150,386 148,733
========== =========
(1) Includes stock compensation expense, which
was allocated as follows:
Cost of revenues $ 1,765 $ 1,964
Sales and marketing 843 896
General and administrative 2,555 1,896
---------- ---------
$ 5,163 $ 4,756
========== =========
Consolidated Balance Sheets
Unaudited
(in thousands)
March 31, December 31,
2007 2006
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 45,282 $ 31,327
Investments in marketable debt securities 24,881 30,372
Accounts receivable, net 76,190 89,265
Other current assets 12,740 10,512
------------ ------------
Total current assets 159,093 161,476
Investments in marketable debt securities 2,500 13,915
Restricted cash 2,216 2,200
Property and equipment, net 75,719 72,625
Other assets 15,685 15,554
Intangible assets, net 35,981 34,978
Goodwill 140,888 133,059
------------ ------------
Total assets $ 432,082 $ 433,807
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,831 $ 10,055
Accrued liabilities 51,989 80,335
Revolving credit facility 60,000 60,000
Current portion of long-term debt 11,521 13,850
------------ ------------
Total current liabilities 131,341 164,240
Commitments and contingencies
Non-current liabilities:
Long-term debt 5,483 4,498
Other liabilities 4,325 726
------------ ------------
Total liabilities 141,149 169,464
Stockholders' equity:
Common stock; 400,000 shares
authorized; 152,546 outstanding at
March 31, 2007 and 151,315 outstanding at
December 31, 2006 15 15
Additional paid-in-capital 2,892,237 2,857,238
Accumulated other comprehensive loss (10,909) (11,357)
Treasury stock, at cost; 1,510 shares
outstanding at March 31, 2007 and
December 31, 2006 (30,453) (30,453)
Cumulative effect on retained earnings
due to change in accounting principle 261 -
Accumulated deficit (2,560,218) (2,551,100)
------------ ------------
Total stockholders' equity 290,933 264,343
------------ ------------
Total liabilities and stockholders'
equity $ 432,082 $ 433,807
============ ============
Statements of Cash Flows
Unaudited
(in thousands)
Three Months ended
March 31,
--------------------
2007 2006
--------- ---------
Cash flows from operating activities:
Net loss $ (9,118) $ (1,302)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 10,709 7,561
Noncash stock compensation expense 5,163 4,756
Asset disposals - 52
Noncash interest expense (59) (126)
Provision for doubtful accounts 363 837
Gain on sale of business, net - (778)
Gains on sales of privately held investments - (500)
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable 13,611 19,727
Other assets (2,992) 3,211
Accounts payable (2,573) (217)
Accrued liabilities (3,298) (4,010)
Other liabilities (770) (33)
--------- ---------
Net cash provided by operating activities 11,036 29,178
--------- ---------
Cash flows from investing activities:
Purchase of marketable debt securities (6,372) (18,043)
Proceeds from sales of marketable debt
securities 24,161 10,070
Proceeds from sales of investments in privately
held companies - 2,562
Investments in privately held companies - (31)
Purchases of other intangible assets (181) -
Cash paid for acquisitions, net of cash
acquired (14,108) (840)
Sale of leasehold improvements 2,349 -
Purchases of property and equipment (9,540) (8,711)
--------- ---------
Net cash used in investing activities (3,691) (14,993)
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of stock 6,454 4,293
--------- ---------
Net cash provided by financing activities 6,454 4,293
--------- ---------
Net increase in cash and cash equivalents 13,799 18,478
Effect of exchange rate changes on cash and cash
equivalents 156 (215)
Cash and cash equivalents at the beginning of
the period 31,327 55,895
--------- ---------
Cash and cash equivalents at the end of the
period $ 45,282 $ 74,158
========= =========
Quarterly Statistical Highlights
Unaudited
Q1-07 Q4-06 Q3-06 Q2-06 Q1-06
--------------------------------------
Total Quarterly Revenue ($mm) $ 92.1 $ 118.0 $ 93.3 $ 92.4 $ 83.7
Revenue Distribution (%) (a)
Marketing Services 87% 89% 86% 86% 85%
Licensing, Fees and User 13% 11% 14% 14% 15%
Segment Revenue ($mm)
U.S. Media $ 74.2 $ 93.5 $ 73.5 $ 72.8 $ 67.8
International Media 17.9 24.5 19.8 19.6 15.9
Advertiser Metrics
CNET Networks Top 100 US
Advertisers' Renewal Rate (Q-
to-Q) 96% 96% 96% 100% 96%
CNET Networks Top 100 US
Advertisers' % of Network
Revenue 57% 57% 54% 55% 53%
Select Business Metrics
Network Unique Users (mm) 143.7 135.8 124.5 116.2 116.8
Network Average Daily Page
Views (mm) 81.2 84.8 86.3 92.8 98.7
Balance Sheet Highlights ($mm)
Cash $ 45.3 $ 31.3 $ 78.7 $ 79.0 $ 74.2
Marketable Debt Securities 27.4 44.3 60.9 62.0 62.1
--------------------------------------
Total Cash and Investments $ 72.7 $ 75.6 $139.6 $ 141.0 $136.3
Days Sales Outstanding (DSO) 74 69 73 67 70
Total Debt $ 77.0 $ 78.3 $143.3 $ 143.3 $141.7
(a) Marketing Services - 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 - licensing our product database, online
content, subscriptions to online services, subscription and newsstand
sales of print publications, and other paid services.
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 and the Untied Kingdom and several print publications in China.
Management believes that segment operating income (loss) before
depreciation, amortization, stock 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 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 prepared in accordance with generally accepted accounting
principles.
(Unaudited)
(in thousands)
U.S. International
Media Media Other (1) Total
--------- ------------- --------- --------
Three Months Ended
March 31, 2007
Revenues $ 74,233 $ 17,864 $ - $ 92,097
Operating expenses 59,981 20,344 20,301 100,626
--------- ------------- --------- --------
Operating loss $ 14,252 $ (2,480) $ (20,301) $ (8,529)
========= ============= ========= ========
Three Months Ended
March 31, 2006
Revenues $ 67,763 $ 15,887 $ - $ 83,650
Operating expenses 56,519 17,137 12,316 85,972
--------- ------------- --------- --------
Operating loss $ 11,244 $ (1,250) $ (12,316) $ (2,322)
========= ============= ========= ========
(1) For the three months ended March 31, 2007, Other includes
operating expenses related to depreciation of $7.5 million,
amortization of $3.2 million, expenses of $4.4 million related to our
stock option investigation and related matters and non-cash stock
compensation expense of $5.2 million. For the three months ended
March 31, 2006, Other includes operating expenses related to
depreciation of $4.8 million, amortization of $2.7 million and non-
cash stock compensation expense of $4.8 million.
Guidance to the Investment Community
-----------------------------------------
Q1-07 Q2-07 estimate FY 2007 estimate
$ in millions, except per Actual Low - High Low - High
share
----------------------------------- ---------------- ----------------
Total Revenues $92.1 $97.0 - $102.0 $425.0 - $445.0
Operating income before
depreciation, amortization,
stock option investigation
and related matters and
stock compensation expense $11.8 $13.0 - $17.0 $90.0 - $105.0
Depreciation expense $7.5 $7.5 $32.0
Amortization expense $3.2 $3.0 $12.0
Stock compensation expense $5.2 $5.5 $23.0
Stock option investigation
and related matters $4.4 - -
Operating income (loss) ($8.5) ($3.0) - $1.0 $23.0 - $38.0
Interest income (expense),
net ($0.7) ($0.5) ($2.0)
Other income (expense), net $0.3 - $0.3
Tax (expense) benefit ($0.2) ($0.5) $188.0
GAAP EPS (including stock ($0.06) ($0.03) - $0.00 $1.37 - $1.47
compensation expense)
----------------------------------- ---------------- ----------------
Note: Operating income guidance for the second quarter and full year
2007 does not consider ongoing fees related to the stock option
investigation and related matters.
Note: Earnings per share guidance for the full year 2007 reflects the
non-cash financial statement impact of the likely release of a
portion of the deferred tax asset related valuation allowance in the
fourth quarter of 2007. As a result, CNET Networks expects to report
a tax benefit of approximately $189 million in the fourth quarter of
2007. 2007 earnings guidance excluding the tax benefit would be in
the range of $0.13 to $0.23 per share.
Operating Loss Reconciliation
(Unaudited)
(in thousands)
Three Months Ended
March 31,
-----------------------
2007 2006
----------- ----------
Operating loss $ (8,529) $ (2,322)
Stock compensation expense 5,163 4,756
Depreciation 7,489 4,822
Amortization of intangible assets 3,220 2,739
----------- ----------
Operating income before depreciation,
amortization and stock compensation expense 7,343 9,995
Stock option investigation and related
matters 4,429 -
----------- ----------
Operating income before depreciation,
amortization, stock compensation expense
and stock option investigation and related
matters $ 11,772 $ 9,995
=========== ==========
We believe that "operating income before depreciation, amortization
and stock compensation expense" is useful to management and investors
as a supplement to our GAAP (generally accepted accounting principles
in the United States) financial measures for evaluating the ability
of the business to generate cash from operations. Depreciation and
amortization are non-cash items and included within them are amounts
related to past transactions and expenditures that are not
necessarily reflective of the current cash or capital requirements of
the business. Exlcuding non-cash stock compensation expense allows
management to make financial and operational decisions and evaluate
the business based on recurring operating results.
Management refers to "operating income before depreciation,
amortization, stock compensation expense and stock option
investigation and related matters" in making operating decisions and
for planning and compensation purposes. A limitation associated with
this measure is that is does not reflect the costs of certain
capitalized tangible and intangible assets used in generating revenue
and the cash costs associated with our stock option investigation and
related matters. 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, stock compensation expense and
stock option investigation and related matters" only on a
supplemental basis. 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 "operating income
before depreciation and amortization" does not reflect any cash
requirements for such replacements. This measure also does not take
into account interest expense, or the cash requirements necessary to
service interest or principle payments on our debt. Nor does the
measure reflect changes in, or cash requirements for, our working
capital needs. "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 prepared in accordance
with GAAP.
Net Loss Reconciliation
(Unaudited)
(in thousands, except per share data)
Three Months Ended
March 31,
----------------------
2007 2006
----------------------
Net loss $ (9,118) $ (1,302)
---------- ---------
Stock compensation expense (1) 5,163 4,756
Stock option investigation and related
matters (2) 4,429 -
Realized gain on investments (3) - (500)
Loss from discontinued operations (4) - 37
---------- ---------
Effect on earnings from stock compensation,
stock option investigation and related
matters, gains on investments and
discontinued operations 9,592 4,293
---------- ---------
Net income excluding stock compensation, stock
option investigation and related matters,
gains on investments and discontinued
operations $ 474 $ 2,991
========== =========
Diluted net income per share excluding stock
compensation expense, stock option
investigation and related matters, gain on
investments and discontinued operations $ 0.00 $ 0.02
========== =========
Shares used in calculating diluted net income
per share 152,192 155,598
========== =========
(1) During the three months ended March 31, 2007 and 2006, the Company
recorded $5.2 million and $4.8 million of stock compensation expense,
respectively.
(2) During the three months ended March 31, 2007, $4.4 million of
charges related to our stock option investigation and related matters
were incurred.
(3) The Company recognized gains of $0.5 million on sales of privately
held investments during the three months ended March 31, 2006.
(4) The Company recognized a loss from discontinued operations of
$37,000 for the quarter ended March 31, 2006.
The Company believes that the information presented above is useful to
investors because these items are infrequent in nature and may affect
the comparability of the current quarter results to other quarter
results. For additional discussion of the uses and limitations of
this information, see "Operating Loss Reconciliation."
Free Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
---------------------
2007 2006
---------- ---------
Cash flows from operating activities $ 11,036 $ 29,178
Capital expenditures (1) (7,191) (8,711)
---------- ---------
Free cash flow $ 3,845 $ 20,467
Stock option investigation and related matters 4,429 -
---------- ---------
Free cash flow excluding stock option
investigation and related matters $ 8,274 $ 20,467
========== =========
(1) Capital expenditures for the three months ended March 31, 2007
are net of $2,349 in cash proceeds under a sale-leaseback
transaction related to certain leasehold improvements made during
the period.
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. A limitation of free cash flow is that is does not
represent the total increase or decrease in the cash balance for the
period. Free cash flow should be considered in addition to, and not
as a substitute for, other measures of financial performance
prepared in accordance with US GAAP.
CONTACT: CNET Networks, Inc.
Cammeron McLaughlin, 415-344-2844 (Investor Relations)
cammeron.mclaughlin@cnet.com
Sarah Cain, 415-344-2218 (Media)
sarah.cain@cnet.com
SOURCE: CNET Networks, Inc.
