27 April 2004
FINDWHAT.COM ANNOUNCES RECORD FIRST QUARTER RESULTS
FORT MYERS, FL - April 26, 2004 - FINDWHAT.COM (NASDAQ: FWHT), a leading developer and provider of performance-based marketing and commerce enabling services, today reported record financial results for the three months ended March 31, 2004. Highlights include:
Revenue in Q1 2004 increased 56% versus Q1 2003, and was approximately $2.7 million ahead of the Company's previously-announced guidance. FindWhat.com has increased revenue sequentially for 18 consecutive quarters.
In Q1 2004, FindWhat.com generated adjusted pre-tax diluted EPS of $0.27, exceeding the Company's previously-announced guidance of $0.22. The Company has increased adjusted pre-tax income and EBITDA sequentially for 12 consecutive quarters.
Full year financial guidance for 2004 has been raised, in part due to the acquisition of Comet Systems which closed on March 22, 2004, and the expected closing of the merger with Espotting in July 2004.
Cash and cash equivalents at March 31, 2004 were approximately $55.2 million. FindWhat.com has $158,000 of long-term debt, and $10.0 million available to borrow under its new line of credit.
FindWhat.com reported record revenue in Q1 2004 of $24.7 million, an increase of 56% versus Q1 2003 revenue of $15.8 million.
FindWhat.com reported net income in Q1 2004 of $3.8 million, or $0.16 per diluted share, an increase of 41% versus Q1 2003 net income of $2.7 million, or $0.13 per share.
FindWhat.com's Q1 2004 results include a full quarter of results from Miva®, which was acquired on January 1, 2004, and nine full days of results from Comet Systems, which was acquired on March 22, 2004.
Given a) historical and projected changes in FindWhat.com's effective tax rate over time, and b) the introduction of non-cash amortization expense in Q1 2004 primarily due to accounting for intangibles resulting from the Company's strategic activity, FindWhat.com believes "EBITDA," "adjusted pre-tax income" and "adjusted pre-tax income per diluted share" can help provide meaningful comparisons of the Company's current and projected performance with its historical results from prior periods. FindWhat.com defines EBITDA as net income before interest, income taxes, depreciation, and amortization, and defines adjusted pre-tax income as net income before income taxes and amortization. Adjusted pre-tax income per diluted share is defined as net income, before income taxes and amortization, per diluted share. FindWhat.com believes these metrics can provide a useful measure to judge the Company's operating performance without non-cash amortization charges and the impact of fluctuating effective tax rates. FindWhat.com uses EBITDA, adjusted pre-tax income and adjusted pre-tax income per diluted share as internal barometers of its business, and sets goals and awards bonuses in part based on performance relative to these figures, but does not believe their use lessens the importance of GAAP measures.
The Company notes that EBITDA in Q1 2004 was a record $6.8 million, an increase of 49% versus Q1 2003 EBITDA of $4.6 million. Adjusted pre-tax income in Q1 2004 was a record $6.4 million, or $0.27 per diluted share, an increase of 48% versus Q1 2003 adjusted pre-tax income of $4.3 million, or $0.20 per diluted share.
Craig Pisaris-Henderson, chairman and chief executive officer of FindWhat.com, said, "It is with extreme pride that we announce our outstanding Q1 2004 results today. During the quarter, we began the process of integrating and launching a number of exciting new opportunities for our company, including the acquisitions of Miva and Comet Systems, and, with Verizon, taking a leadership position in the local search marketplace with the debut of our private label initiative with Verizon's SuperPages.com. We have announced several other pending deals which we continue to work on, and which we expect to implement during the remainder of 2004. Our long-term strategy and growth are dependent in part on these transactions, and we believe the resources and expenditures we have used to develop them in the short-term will generate a solid return for our shareholders in 2004 and beyond. However, we realize that no amount of strategic or developmental efforts should take our focus away from executing on a day-to-day level, and in Q1 2004 our operating team continued to perform impressively. Due to the dedication of our entire team in California, New York and Florida, we significantly surpassed our expectations for the quarter, and have raised the bar for the remainder of 2004. We feel that our results are consistent with our strategy of joining with the best-of-the-best in different geographies and market segments. We feel that our new team members at Miva, Comet and those that we are working with at Verizon certainly fit that description. We also are looking forward to the near-term closing of our announced merger with Espotting, bringing those new team members into the fold while leveraging the valuable knowledge they bring to all of our divisions, and the launch of our private label services with Mitsui and Thomas Global Register. Throughout 2004, we will continue to seek out additional strategic opportunities, keeping a dual focus on both short-term execution and longer-term initiatives."
Update on Recently Launched and Pending Initiatives
VERIZON SUPERPAGES.COM PRIVATE LABEL. On March 1, 2004, SuperPages.com launched a redesigned website, adding bid-for-position, pay-per-click advertisements to its online yellow pages listings. Through a revenue sharing-based licensing agreement, FindWhat.com provides the technology and business operations expertise to support these new enhanced local SuperPages.com advertising services. The services employ the existing infrastructure and systems at FindWhat.com and the technology resides on FindWhat.com's globally redundant data centers.
ESPOTTING MERGER. FindWhat.com expects to hold its annual meeting on June 4, 2004, at which its shareholders will vote on several proposals necessary to complete the announced merger with Espotting, a leading provider of performance-based marketing services in Europe. Assuming receipt of all necessary shareholder approvals and the fulfillment of other conditions required by the merger agreement, FindWhat.com expects to close the merger on July 1, 2004. Espotting continues to finalize the audit of its March 2004 fiscal year, but based on preliminary unaudited results, prepared by Espotting's finance department, Espotting generated more than $30 million in net revenue and between $4 million and $5 million in EBITDA for the three months ended March 31, 2004. Espotting's results include certain items, charges and benefits that in FindWhat.com's view are either one-time in nature, or are not expected to continue after the closing. FindWhat.com estimates that these items, charges and benefits increased EBITDA for the three months ended March 31, 2004 by approximately $2 million. More information about the proposed merger is available in a press release posted on FindWhat.com's website, at:
http://www.findwhat.com / content / about / news / pressrelease.asp?a=139.
MITSUI PRIVATE LABEL. FindWhat.com currently expects that Mitsui will launch its paid listing service in Japan, powered via a private label agreement with FindWhat.com, during the summer of 2004.
THOMASB2B.COM JOINT VENTURE. FindWhat.com and Thomas Global Register established a joint venture, ThomasB2B.com, on April 1, 2004. The JV is expected to launch an industrial business-to-business paid listings service, to be powered via a private label agreement which capitalizes on proprietary, industry-leading technical and operational services developed by FindWhat.com, and to be marketed via an agreement with Thomas Global Register, leveraging its over 550,000 global business relationships. The joint venture will purchase services from both FindWhat.com and Thomas Global Register, and is not expected to begin generating positive cash flow or net income until late 2005.
Projected Results
Listed below are FindWhat.com's current estimates for 2004 revenue, EBITDA and adjusted pre-tax income per diluted share. It is important to note that these projections include Miva, Comet, all announced private label transactions (both launched and in development), and assume the announced merger with Espotting closes on July 1, 2004. There is no guarantee of when, or if, any of the pending transactions will close, or if they will have the impact currently anticipated. If any of FindWhat.com's pending initiatives are terminated, certain accrued expenses would be written off as a one-time expense at the time of termination, and such one-time expenses could reduce significantly the projections presented below.
FindWhat.com currently expects full year 2004 revenue of approximately $174 million, representing a 141% increase over full year 2003 revenue of $72 million.
For the full year 2004 FindWhat.com anticipates approximately $31.5 million in adjusted pre-tax income, or $1.08 per diluted share, which assumes approximately 29.2 million average diluted shares outstanding.
FindWhat.com is not projecting net income per diluted share because it has not finalized purchase price intangible asset allocations for its pending merger with Espotting, and it currently does not have estimated effective tax rates for the Company assuming the closing of all pending transactions.
Revenue
Q1 2004 actual: $25 million
Q2 2004 estimated: $27 million
Q3 2004 estimated: $58 million
Q4 2004 estimated: $64 million
Total 2004 estimated: $174 million
EBITDA
Q1 2004 actual: $6.8 million
Q2 2004 estimated: $7.2 million
Q3 2004 estimated: $9.2 million
Q4 2004 estimated: $10.8 million
Total 2004 estimated: $34.0 million
Adjusted Pre-Tax Income per Diluted Share
Q1 2004 actual: $0.27 (24.1 million diluted shares outstanding)
Q2 2004 estimated: $0.27 (assumes 25.2 million diluted shares outstanding)
Q3 2004 estimated: $0.25 (assumes 33.5 million diluted shares outstanding)
Q4 2004 estimated: $0.29 (assumes 33.9 million diluted shares outstanding)
Total 2004 estimated: $1.08 (assumes 29.2 million average diluted shares outstanding)
Operating Metrics and Financial Reporting
In response to investor requests, FindWhat.com anticipates that it will disclose paid click-throughs as an operating metric beginning in Q2 2004. FindWhat.com is currently gauging the number of active relationships it has with online business across its divisions, and expects to also disclose that metric on an ongoing basis once it believes it has established a consistent definition of these relationships that will provide meaningful comparisons across future periods.
FindWhat.com also anticipates that upon the closing of its pending merger with Espotting, it will provide information on the geographic sources of its revenue.
Management Comments
Chief operating officer and chief financial officer Phillip Thune said, "We had a terrific three months, driven by strong growth in the FindWhat.com Network™ early in the quarter. Our top-line results were impacted positively due to recognizing revenue during at least some of the quarter from Miva, Comet and our private label deal with Verizon. We do not intend to report revenue for each division or deal we do, but we note that in Q1 2004, the combined revenue from these three sources was less than $1 million, and the combined impact on net income per share was less than $0.01. We have now been pleasantly surprised by the growth in traffic on the FindWhat.com Network for two consecutive quarters, and while we may be surprised in the future, given our current run-rate, we believe it is prudent to project more modest results for the FindWhat.com Network on a sequential basis in Q2 and Q3 2004. The growth we have seen in Q4 2003 and Q1 2004 is a credit to our FindWhat.com Network team, which continues to perform at a high level for both our advertisers and our distribution partners, despite increasing responsibilities to help leverage opportunities with Miva, Comet, Espotting and our private label initiatives. Looking forward, we also continue to project moderate contributions from our launched and pending private label deals, as it is too early to gauge the speed at which they might grow. On the expense side, we have allowed ourselves some room to invest in developmental initiatives between our various operating divisions, and yet we have increased our estimates for adjusted pre-tax income per diluted share for the remainder of the year, which is consistent with our view that our recent initiatives will not be dilutive, even in the near-term. We continue to expect that Espotting will increase our adjusted pre-tax income per share in Q4 2004, or within a few months of our anticipated closing in July.
Management Conference Call
Chairman/CEO Craig Pisaris-Henderson, COO/CFO Phillip Thune, and senior vice president of finance Brenda Agius will participate in a conference call to discuss the results and the outlook for the Company. The call will take place on April 26, 2004 at approximately 5:00 p.m. Eastern Time, and will be simulcast on the Internet at:
http://www.vcall.com / CEPage.asp?ID=87982
A replay of the conference call will be available at the same URL, and on the Company's website at http://www.findwhat.com / content / about / news / webcast.asp, for 90 days after the call
Company Services
FindWhat.com is a leading developer and provider of performance-based marketing services for the Internet. With FindWhat.com's services, advertisers only pay for an Internet user who clicks through to their sites. Historically, advertising, including most online advertising, has been impression-based, meaning that advertisers are charged on the number of viewers, listeners, readers, or users who are potentially exposed to their ad, with no guarantee that the ad was seen, heard, or read. With the inherent accountability of the Internet, and the decreasing attention paid to banner ads, online advertisers are increasingly demanding performance-based advertising alternatives. According to the Interactive Advertising Bureau, 21% of all online advertising spending in 2002 was priced on a straight performance basis, up from 12% in 2001.
The Company currently offers two primary, proprietary performance-based services: the FindWhat.com Network, a keyword-targeted advertisement service that distributes millions of advertisements throughout the Internet each day based on a bid-for-position, pay-per-click pricing model; and a private label service, which offers large portals and search engines the opportunity to brand and sell their own pay-per-click, keyword-targeted advertisement service using FindWhat.com's turn-key operation. In addition, FindWhat.com has announced the signing of an agreement with Mitsui & Co., Ltd. to power a keyword-targeted advertisement service in Japan, which is expected to launch in early 2004.
The Company's main focus is the operation of online marketplaces that connect the businesses and consumers (prospects) that are most likely to purchase specific goods and services to the entities (advertisers) that provide those goods and services. Advertisers create advertisements, which are comprised of titles, descriptions, URLs, and relevant keywords or keyword phrases. For each keyword, the advertisers determine what price they are willing to pay for a qualified click-through. The pricing process is an open, automated, bid-for-position system. The highest bidder for a particular keyword or phrase receives the first place position, with all other bidders on that same keyword or phrase listed in descending bid order. Through the Account Management Center at FindWhat.com, or similar centers created for the paid listings services of third-parties which are powered by FindWhat.com, advertisers can sign-up and manage their accounts themselves, 24 hours a day, seven days a week. They can control and track their bids, the placement of their keyword ads, their total expenditures, their cost per visitor, and their return on investment, all in a real-time environment. As a result, they can easily determine and work to improve the value they derive from FindWhat.com's services. Editors review every keyword to ensure that the ad is appropriate for that advertiser's website. This methodology produces extremely relevant results for e-commerce oriented searches, and drives highly qualified traffic to FindWhat.com's managed advertisers.
FindWhat.com and its private-label partner, Terra Lycos's Lycos.com and HotBot, distribute advertisements to millions of Internet users each day. The FindWhat.com Network includes hundreds of distribution partners, including search engines like CNET's Search.com, Excite, Webcrawler, MetaCrawler, Dogpile, and Microsoft Internet Explorer Autosearch. FindWhat.com recognizes 100% of the revenue from paid click-throughs on the sites in its network, and then shares that revenue with those sites. FindWhat.com only recognizes its share of the revenue generated from third-party initiatives which are powered by FindWhat.com. With both the FindWhat.com Network and the third-party offerings, FindWhat.com's services are a source of revenue and relevant keyword-targeted listings for its partners, while providing its managed advertisers with exposure to potential customers across the Internet. As with the Yellow Pages in the offline world, FindWhat.com's managed advertisers get their message in front of prospects at the exact time they are looking for the advertisers' products and services. Unlike the Yellow Pages, advertisers only pay for those visitors that "walk" into their virtual stores.
FindWhat.com has discontinued the reporting of active advertiser accounts, paid click-throughs, and average revenue per click-through. "As our business continues to mature, and we pursue additional revenue streams, we feel our historical key metrics are less indicative of the direction of our business than they have been in the past. As always, we continue to focus on revenue and profits, as we believe they are the best gauges of our historical performance, and are the figures we uniformly try to increase over the long-term," said Thune.
Management Conference Call
Chairman/CEO Craig Pisaris-Henderson, COO/CFO Phillip Thune, and vice president of finance Brenda Agius will participate in a conference call to discuss the results and the outlook for the Company. The call will take place on October 20, 2003 at approximately 5:00 p.m. Eastern Time, and will be simulcast on the Internet at:
http://www.vcall.com / CEPage.asp?ID=87982
A replay of the conference call will be available at the same URL, and on the Company's website at http://www.findwhat.com / content / about / news / webcast.asp, for 90 days after the call.
About FindWhat.com ®
FindWhat.com creates and offers proprietary performance-based marketing and commerce enabling services that help businesses of all sizes throughout the business cycle: finding, getting and keeping customers. Its marketing division creates online marketplaces where buyers are introduced to sellers at exactly the right moment, when they are searching for products and services on the Internet; this introduction is based on a bid-for-position, pay-per-click, keyword-targeted advertising service. FindWhat.com offers this service directly to advertisers through the FindWhat.com Network™, and offers a private label version of this service to large companies and portals worldwide, including Lycos and Mitsui & Co., Ltd. FindWhat.com also operates a merchant services division which includes Miva®, a leading online platform of software and services for small to medium-sized enterprises (SMEs). With its easy-to-use, highly customizable and integrated browser-based point and click business creation software and a vast partner network, Miva is focused on helping to create and enhance online business and marketing services for SMEs. Additionally, Comet Systems, a division of FindWhat.com, is a leading provider of connected desktop consumer software. More information on FindWhat.com is available on the Company's website at http://www.FindWhat.com.
Disclaimer
This press release is intended to provide information only. It is not intended to be an invitation or inducement to any person to enter into any investment activity in connection with the proposed transaction, Espotting Media Inc., or FindWhat.com.
Additional Information and Where to Find It
FindWhat.com has filed relevant documents concerning its proposed merger with Espotting with the Securities and Exchange Commission, including an amended Registration Statement on Form S-4 on April 22, 2004, containing a joint proxy statement/prospectus. FindWhat.com urges investors to read these documents because they will contain important information. Investors will be able to obtain the joint proxy statement/prospectus and any other documents that may be filed by FindWhat.com with the Commission free of charge at the Commission's web site (http://www.sec.gov) or by directing a request after such a filing has been made to FindWhat.com, 5220 Summerlin Commons Blvd., Suite 500, Fort Myers, FL 33907, Tel: (239) 561-7245, Attn: Brenda Agius.
FindWhat.com and its directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the proposed merger. Information about FindWhat.com directors and executive officers and their ownership of FindWhat.com voting securities is set forth in the Company's Joint Proxy Statement/Prospectus for the Annual Meeting of Stockholders to be held on June 4, 2004, filed with the Commission on April 22, 2004. Additional information about the interests of those participants may be obtained from reading the definitive joint proxy statement/prospectus regarding the proposed transaction with Espotting.
Forward Looking Statements
This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words or expressions such as "plan," "intend," "believe" or "expect," or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. Key risks are described in FindWhat.com's reports filed with the U.S. Securities and Exchange Commission, including the Amendment No. 1 to the Form S-4 filed on April 22, 2004. The forward-looking statements herein include, without limitation, statements addressing future financial and operating results; statements regarding growth strategies; statements relating to the expected financial performance of recent initiatives; and statements regarding integration of the businesses of Miva and Comet. In addition, past performance cannot be relied upon as a guide to future performance.
Non-GAAP Financial Measures
Additionally, this press release includes discussion of additional financial measures "EBITDA," "adjusted pre-tax income" and "adjusted pre-tax income per diluted share." These measures are defined as non-GAAP financial measures by the Securities and Exchange Commission and may differ from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. See Reconciliation of these three financial measures to net income and net income per share included in this press release for further information regarding these non-GAAP financial measures.
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FindWhat.com and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three months
ended March 31,
2004 2003
FindWhat announces record first quarter results
[Press Release]FINDWHAT.COM ANNOUNCES RECORD FIRST QUARTER RESULTS
- Revenue Increases 56% Versus Q1 2003; Raises 2004 Guidance -
FORT MYERS, FL - April 26, 2004 - FINDWHAT.COM (NASDAQ: FWHT), a leading developer and provider of performance-based marketing and commerce enabling services, today reported record financial results for the three months ended March 31, 2004. Highlights include:
Revenue in Q1 2004 increased 56% versus Q1 2003, and was approximately $2.7 million ahead of the Company's previously-announced guidance. FindWhat.com has increased revenue sequentially for 18 consecutive quarters.
In Q1 2004, FindWhat.com generated adjusted pre-tax diluted EPS of $0.27, exceeding the Company's previously-announced guidance of $0.22. The Company has increased adjusted pre-tax income and EBITDA sequentially for 12 consecutive quarters.
Full year financial guidance for 2004 has been raised, in part due to the acquisition of Comet Systems which closed on March 22, 2004, and the expected closing of the merger with Espotting in July 2004.
Cash and cash equivalents at March 31, 2004 were approximately $55.2 million. FindWhat.com has $158,000 of long-term debt, and $10.0 million available to borrow under its new line of credit.
FindWhat.com reported record revenue in Q1 2004 of $24.7 million, an increase of 56% versus Q1 2003 revenue of $15.8 million.
FindWhat.com reported net income in Q1 2004 of $3.8 million, or $0.16 per diluted share, an increase of 41% versus Q1 2003 net income of $2.7 million, or $0.13 per share.
FindWhat.com's Q1 2004 results include a full quarter of results from Miva®, which was acquired on January 1, 2004, and nine full days of results from Comet Systems, which was acquired on March 22, 2004.
Given a) historical and projected changes in FindWhat.com's effective tax rate over time, and b) the introduction of non-cash amortization expense in Q1 2004 primarily due to accounting for intangibles resulting from the Company's strategic activity, FindWhat.com believes "EBITDA," "adjusted pre-tax income" and "adjusted pre-tax income per diluted share" can help provide meaningful comparisons of the Company's current and projected performance with its historical results from prior periods. FindWhat.com defines EBITDA as net income before interest, income taxes, depreciation, and amortization, and defines adjusted pre-tax income as net income before income taxes and amortization. Adjusted pre-tax income per diluted share is defined as net income, before income taxes and amortization, per diluted share. FindWhat.com believes these metrics can provide a useful measure to judge the Company's operating performance without non-cash amortization charges and the impact of fluctuating effective tax rates. FindWhat.com uses EBITDA, adjusted pre-tax income and adjusted pre-tax income per diluted share as internal barometers of its business, and sets goals and awards bonuses in part based on performance relative to these figures, but does not believe their use lessens the importance of GAAP measures.
The Company notes that EBITDA in Q1 2004 was a record $6.8 million, an increase of 49% versus Q1 2003 EBITDA of $4.6 million. Adjusted pre-tax income in Q1 2004 was a record $6.4 million, or $0.27 per diluted share, an increase of 48% versus Q1 2003 adjusted pre-tax income of $4.3 million, or $0.20 per diluted share.
Craig Pisaris-Henderson, chairman and chief executive officer of FindWhat.com, said, "It is with extreme pride that we announce our outstanding Q1 2004 results today. During the quarter, we began the process of integrating and launching a number of exciting new opportunities for our company, including the acquisitions of Miva and Comet Systems, and, with Verizon, taking a leadership position in the local search marketplace with the debut of our private label initiative with Verizon's SuperPages.com. We have announced several other pending deals which we continue to work on, and which we expect to implement during the remainder of 2004. Our long-term strategy and growth are dependent in part on these transactions, and we believe the resources and expenditures we have used to develop them in the short-term will generate a solid return for our shareholders in 2004 and beyond. However, we realize that no amount of strategic or developmental efforts should take our focus away from executing on a day-to-day level, and in Q1 2004 our operating team continued to perform impressively. Due to the dedication of our entire team in California, New York and Florida, we significantly surpassed our expectations for the quarter, and have raised the bar for the remainder of 2004. We feel that our results are consistent with our strategy of joining with the best-of-the-best in different geographies and market segments. We feel that our new team members at Miva, Comet and those that we are working with at Verizon certainly fit that description. We also are looking forward to the near-term closing of our announced merger with Espotting, bringing those new team members into the fold while leveraging the valuable knowledge they bring to all of our divisions, and the launch of our private label services with Mitsui and Thomas Global Register. Throughout 2004, we will continue to seek out additional strategic opportunities, keeping a dual focus on both short-term execution and longer-term initiatives."
Update on Recently Launched and Pending Initiatives
VERIZON SUPERPAGES.COM PRIVATE LABEL. On March 1, 2004, SuperPages.com launched a redesigned website, adding bid-for-position, pay-per-click advertisements to its online yellow pages listings. Through a revenue sharing-based licensing agreement, FindWhat.com provides the technology and business operations expertise to support these new enhanced local SuperPages.com advertising services. The services employ the existing infrastructure and systems at FindWhat.com and the technology resides on FindWhat.com's globally redundant data centers.
ESPOTTING MERGER. FindWhat.com expects to hold its annual meeting on June 4, 2004, at which its shareholders will vote on several proposals necessary to complete the announced merger with Espotting, a leading provider of performance-based marketing services in Europe. Assuming receipt of all necessary shareholder approvals and the fulfillment of other conditions required by the merger agreement, FindWhat.com expects to close the merger on July 1, 2004. Espotting continues to finalize the audit of its March 2004 fiscal year, but based on preliminary unaudited results, prepared by Espotting's finance department, Espotting generated more than $30 million in net revenue and between $4 million and $5 million in EBITDA for the three months ended March 31, 2004. Espotting's results include certain items, charges and benefits that in FindWhat.com's view are either one-time in nature, or are not expected to continue after the closing. FindWhat.com estimates that these items, charges and benefits increased EBITDA for the three months ended March 31, 2004 by approximately $2 million. More information about the proposed merger is available in a press release posted on FindWhat.com's website, at:
http://www.findwhat.com / content / about / news / pressrelease.asp?a=139.
MITSUI PRIVATE LABEL. FindWhat.com currently expects that Mitsui will launch its paid listing service in Japan, powered via a private label agreement with FindWhat.com, during the summer of 2004.
THOMASB2B.COM JOINT VENTURE. FindWhat.com and Thomas Global Register established a joint venture, ThomasB2B.com, on April 1, 2004. The JV is expected to launch an industrial business-to-business paid listings service, to be powered via a private label agreement which capitalizes on proprietary, industry-leading technical and operational services developed by FindWhat.com, and to be marketed via an agreement with Thomas Global Register, leveraging its over 550,000 global business relationships. The joint venture will purchase services from both FindWhat.com and Thomas Global Register, and is not expected to begin generating positive cash flow or net income until late 2005.
Projected Results
Listed below are FindWhat.com's current estimates for 2004 revenue, EBITDA and adjusted pre-tax income per diluted share. It is important to note that these projections include Miva, Comet, all announced private label transactions (both launched and in development), and assume the announced merger with Espotting closes on July 1, 2004. There is no guarantee of when, or if, any of the pending transactions will close, or if they will have the impact currently anticipated. If any of FindWhat.com's pending initiatives are terminated, certain accrued expenses would be written off as a one-time expense at the time of termination, and such one-time expenses could reduce significantly the projections presented below.
FindWhat.com currently expects full year 2004 revenue of approximately $174 million, representing a 141% increase over full year 2003 revenue of $72 million.
For the full year 2004 FindWhat.com anticipates approximately $31.5 million in adjusted pre-tax income, or $1.08 per diluted share, which assumes approximately 29.2 million average diluted shares outstanding.
FindWhat.com is not projecting net income per diluted share because it has not finalized purchase price intangible asset allocations for its pending merger with Espotting, and it currently does not have estimated effective tax rates for the Company assuming the closing of all pending transactions.
Revenue
Q1 2004 actual: $25 million
Q2 2004 estimated: $27 million
Q3 2004 estimated: $58 million
Q4 2004 estimated: $64 million
Total 2004 estimated: $174 million
EBITDA
Q1 2004 actual: $6.8 million
Q2 2004 estimated: $7.2 million
Q3 2004 estimated: $9.2 million
Q4 2004 estimated: $10.8 million
Total 2004 estimated: $34.0 million
Adjusted Pre-Tax Income per Diluted Share
Q1 2004 actual: $0.27 (24.1 million diluted shares outstanding)
Q2 2004 estimated: $0.27 (assumes 25.2 million diluted shares outstanding)
Q3 2004 estimated: $0.25 (assumes 33.5 million diluted shares outstanding)
Q4 2004 estimated: $0.29 (assumes 33.9 million diluted shares outstanding)
Total 2004 estimated: $1.08 (assumes 29.2 million average diluted shares outstanding)
Operating Metrics and Financial Reporting
In response to investor requests, FindWhat.com anticipates that it will disclose paid click-throughs as an operating metric beginning in Q2 2004. FindWhat.com is currently gauging the number of active relationships it has with online business across its divisions, and expects to also disclose that metric on an ongoing basis once it believes it has established a consistent definition of these relationships that will provide meaningful comparisons across future periods.
FindWhat.com also anticipates that upon the closing of its pending merger with Espotting, it will provide information on the geographic sources of its revenue.
Management Comments
Chief operating officer and chief financial officer Phillip Thune said, "We had a terrific three months, driven by strong growth in the FindWhat.com Network™ early in the quarter. Our top-line results were impacted positively due to recognizing revenue during at least some of the quarter from Miva, Comet and our private label deal with Verizon. We do not intend to report revenue for each division or deal we do, but we note that in Q1 2004, the combined revenue from these three sources was less than $1 million, and the combined impact on net income per share was less than $0.01. We have now been pleasantly surprised by the growth in traffic on the FindWhat.com Network for two consecutive quarters, and while we may be surprised in the future, given our current run-rate, we believe it is prudent to project more modest results for the FindWhat.com Network on a sequential basis in Q2 and Q3 2004. The growth we have seen in Q4 2003 and Q1 2004 is a credit to our FindWhat.com Network team, which continues to perform at a high level for both our advertisers and our distribution partners, despite increasing responsibilities to help leverage opportunities with Miva, Comet, Espotting and our private label initiatives. Looking forward, we also continue to project moderate contributions from our launched and pending private label deals, as it is too early to gauge the speed at which they might grow. On the expense side, we have allowed ourselves some room to invest in developmental initiatives between our various operating divisions, and yet we have increased our estimates for adjusted pre-tax income per diluted share for the remainder of the year, which is consistent with our view that our recent initiatives will not be dilutive, even in the near-term. We continue to expect that Espotting will increase our adjusted pre-tax income per share in Q4 2004, or within a few months of our anticipated closing in July.
Management Conference Call
Chairman/CEO Craig Pisaris-Henderson, COO/CFO Phillip Thune, and senior vice president of finance Brenda Agius will participate in a conference call to discuss the results and the outlook for the Company. The call will take place on April 26, 2004 at approximately 5:00 p.m. Eastern Time, and will be simulcast on the Internet at:
http://www.vcall.com / CEPage.asp?ID=87982
A replay of the conference call will be available at the same URL, and on the Company's website at http://www.findwhat.com / content / about / news / webcast.asp, for 90 days after the call
Company Services
FindWhat.com is a leading developer and provider of performance-based marketing services for the Internet. With FindWhat.com's services, advertisers only pay for an Internet user who clicks through to their sites. Historically, advertising, including most online advertising, has been impression-based, meaning that advertisers are charged on the number of viewers, listeners, readers, or users who are potentially exposed to their ad, with no guarantee that the ad was seen, heard, or read. With the inherent accountability of the Internet, and the decreasing attention paid to banner ads, online advertisers are increasingly demanding performance-based advertising alternatives. According to the Interactive Advertising Bureau, 21% of all online advertising spending in 2002 was priced on a straight performance basis, up from 12% in 2001.
The Company currently offers two primary, proprietary performance-based services: the FindWhat.com Network, a keyword-targeted advertisement service that distributes millions of advertisements throughout the Internet each day based on a bid-for-position, pay-per-click pricing model; and a private label service, which offers large portals and search engines the opportunity to brand and sell their own pay-per-click, keyword-targeted advertisement service using FindWhat.com's turn-key operation. In addition, FindWhat.com has announced the signing of an agreement with Mitsui & Co., Ltd. to power a keyword-targeted advertisement service in Japan, which is expected to launch in early 2004.
The Company's main focus is the operation of online marketplaces that connect the businesses and consumers (prospects) that are most likely to purchase specific goods and services to the entities (advertisers) that provide those goods and services. Advertisers create advertisements, which are comprised of titles, descriptions, URLs, and relevant keywords or keyword phrases. For each keyword, the advertisers determine what price they are willing to pay for a qualified click-through. The pricing process is an open, automated, bid-for-position system. The highest bidder for a particular keyword or phrase receives the first place position, with all other bidders on that same keyword or phrase listed in descending bid order. Through the Account Management Center at FindWhat.com, or similar centers created for the paid listings services of third-parties which are powered by FindWhat.com, advertisers can sign-up and manage their accounts themselves, 24 hours a day, seven days a week. They can control and track their bids, the placement of their keyword ads, their total expenditures, their cost per visitor, and their return on investment, all in a real-time environment. As a result, they can easily determine and work to improve the value they derive from FindWhat.com's services. Editors review every keyword to ensure that the ad is appropriate for that advertiser's website. This methodology produces extremely relevant results for e-commerce oriented searches, and drives highly qualified traffic to FindWhat.com's managed advertisers.
FindWhat.com and its private-label partner, Terra Lycos's Lycos.com and HotBot, distribute advertisements to millions of Internet users each day. The FindWhat.com Network includes hundreds of distribution partners, including search engines like CNET's Search.com, Excite, Webcrawler, MetaCrawler, Dogpile, and Microsoft Internet Explorer Autosearch. FindWhat.com recognizes 100% of the revenue from paid click-throughs on the sites in its network, and then shares that revenue with those sites. FindWhat.com only recognizes its share of the revenue generated from third-party initiatives which are powered by FindWhat.com. With both the FindWhat.com Network and the third-party offerings, FindWhat.com's services are a source of revenue and relevant keyword-targeted listings for its partners, while providing its managed advertisers with exposure to potential customers across the Internet. As with the Yellow Pages in the offline world, FindWhat.com's managed advertisers get their message in front of prospects at the exact time they are looking for the advertisers' products and services. Unlike the Yellow Pages, advertisers only pay for those visitors that "walk" into their virtual stores.
FindWhat.com has discontinued the reporting of active advertiser accounts, paid click-throughs, and average revenue per click-through. "As our business continues to mature, and we pursue additional revenue streams, we feel our historical key metrics are less indicative of the direction of our business than they have been in the past. As always, we continue to focus on revenue and profits, as we believe they are the best gauges of our historical performance, and are the figures we uniformly try to increase over the long-term," said Thune.
Management Conference Call
Chairman/CEO Craig Pisaris-Henderson, COO/CFO Phillip Thune, and vice president of finance Brenda Agius will participate in a conference call to discuss the results and the outlook for the Company. The call will take place on October 20, 2003 at approximately 5:00 p.m. Eastern Time, and will be simulcast on the Internet at:
http://www.vcall.com / CEPage.asp?ID=87982
A replay of the conference call will be available at the same URL, and on the Company's website at http://www.findwhat.com / content / about / news / webcast.asp, for 90 days after the call.
About FindWhat.com ®
FindWhat.com creates and offers proprietary performance-based marketing and commerce enabling services that help businesses of all sizes throughout the business cycle: finding, getting and keeping customers. Its marketing division creates online marketplaces where buyers are introduced to sellers at exactly the right moment, when they are searching for products and services on the Internet; this introduction is based on a bid-for-position, pay-per-click, keyword-targeted advertising service. FindWhat.com offers this service directly to advertisers through the FindWhat.com Network™, and offers a private label version of this service to large companies and portals worldwide, including Lycos and Mitsui & Co., Ltd. FindWhat.com also operates a merchant services division which includes Miva®, a leading online platform of software and services for small to medium-sized enterprises (SMEs). With its easy-to-use, highly customizable and integrated browser-based point and click business creation software and a vast partner network, Miva is focused on helping to create and enhance online business and marketing services for SMEs. Additionally, Comet Systems, a division of FindWhat.com, is a leading provider of connected desktop consumer software. More information on FindWhat.com is available on the Company's website at http://www.FindWhat.com.
Disclaimer
This press release is intended to provide information only. It is not intended to be an invitation or inducement to any person to enter into any investment activity in connection with the proposed transaction, Espotting Media Inc., or FindWhat.com.
Additional Information and Where to Find It
FindWhat.com has filed relevant documents concerning its proposed merger with Espotting with the Securities and Exchange Commission, including an amended Registration Statement on Form S-4 on April 22, 2004, containing a joint proxy statement/prospectus. FindWhat.com urges investors to read these documents because they will contain important information. Investors will be able to obtain the joint proxy statement/prospectus and any other documents that may be filed by FindWhat.com with the Commission free of charge at the Commission's web site (http://www.sec.gov) or by directing a request after such a filing has been made to FindWhat.com, 5220 Summerlin Commons Blvd., Suite 500, Fort Myers, FL 33907, Tel: (239) 561-7245, Attn: Brenda Agius.
FindWhat.com and its directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the proposed merger. Information about FindWhat.com directors and executive officers and their ownership of FindWhat.com voting securities is set forth in the Company's Joint Proxy Statement/Prospectus for the Annual Meeting of Stockholders to be held on June 4, 2004, filed with the Commission on April 22, 2004. Additional information about the interests of those participants may be obtained from reading the definitive joint proxy statement/prospectus regarding the proposed transaction with Espotting.
Forward Looking Statements
This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words or expressions such as "plan," "intend," "believe" or "expect," or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. Key risks are described in FindWhat.com's reports filed with the U.S. Securities and Exchange Commission, including the Amendment No. 1 to the Form S-4 filed on April 22, 2004. The forward-looking statements herein include, without limitation, statements addressing future financial and operating results; statements regarding growth strategies; statements relating to the expected financial performance of recent initiatives; and statements regarding integration of the businesses of Miva and Comet. In addition, past performance cannot be relied upon as a guide to future performance.
Non-GAAP Financial Measures
Additionally, this press release includes discussion of additional financial measures "EBITDA," "adjusted pre-tax income" and "adjusted pre-tax income per diluted share." These measures are defined as non-GAAP financial measures by the Securities and Exchange Commission and may differ from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. See Reconciliation of these three financial measures to net income and net income per share included in this press release for further information regarding these non-GAAP financial measures.
® Registered Trademark of FindWhat.com
™Trademark of FindWhat.com
All other trademarks are the property of their respective owners.
FindWhat.com and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
Three months
ended March 31,
2004 2003
----------------
Revenues $24,686 $15,849
----------------
Operating expenses
Search serving 844 610
Marketing, sales and service 13,540 8,969
General and administrative 3,459 1,754
Product development 600 298
Amortization 189 -
----------------
Total operating expenses 18,632 11,631
----------------
Income from operations 6,054 4,218
Interest income, net 180 127
----------------
Income before provision for income taxes 6,234 4,345
Income tax expense 2,432 1,650
----------------
Net income $3,802 $2,695
================
Net income per share
Basic $0.17 $0.15
================
Diluted $0.16 $0.13
================
Weighted-average number of common
shares outstanding
Basic 21,899 18,553
================
Diluted 24,053 21,337
================
Additional information:
EBITDA $6,834 $4,586
================
Adjusted pre-tax income $6,423 $4,345
================
Adjusted pre-tax income per diluted share $0.27 $0.20
================
Reconciliation of EBITDA to Net Income
Three months
ended March 31,
2004 2003
------- -------
EBITDA 6,834 4,586
Interest 180 127
Taxes (2,432) (1,650)
Depreciation (591) (368)
Amortization (189) -
------- -------
Net Income 3,802 2,695
======= =======
Reconciliation of Adjusted Pre-tax Income to Net Income
Three months
ended March 31,
2004 2003
------- -------
Adjusted pre-tax income $6,423 $4,345
Income taxes (2,432) (1,650)
Amortization (189) -
------- -------
Net income $3,802 $2,695
======= =======
Reconciliation of Adjusted Pre-tax Income per Diluted Share to
Income per Share
Three months
ended March 31,
2004 2003
------- -------
Adjusted pre-tax income per diluted share $0.27 $0.20
Income taxes per share (0.10) (0.07)
Amortization per share (0.01) -
------- -------
Net income per share - diluted $0.16 $0.13
======= =======
FindWhat.com and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)
March December
31, 31,
ASSETS 2004 2003
------------ ---------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $55,181 $59,210
Accounts receivable, less allowance for
doubtful accounts of $282
and $223 at March 31, 2004 and December 31,
2003, respectively 7,990 5,051
Deferred tax asset 467 180
Note receivable 2,080 2,054
Prepaid expenses and other current assets 2,947 3,312
------------ ---------
Total current assets 68,665 69,807
EQUIPMENT AND FURNITURE - NET 5,607 4,695
INTANGIBLE ASSETS - NET 22,944 -
DEFERRED TAX ASSETS 10,568 -
OTHER ASSETS 441 156
------------ ---------
Total assets $108,225 $74,658
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $9,041 $7,770
Note payable 1,366 -
Deferred revenue 2,164 1,866
Current portion of long-term debt 139 -
Deferred tax liabilities - current 1,272 -
Other current liabilities 765 -
------------ ---------
Total current liabilities 14,747 9,636
DEFERRED INCOME TAXES 4,009 600
LONG-TERM DEBT 158 -
OTHER LIABILITIES 1,699 115
------------ ---------
Total liabilities 20,613 10,351
------------ ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized,
500 shares; none issued and outstanding - -
Common stock, $.001 par value; authorized,
50,000 shares;
issued 22,848 and 21,428, respectively;
outstanding 22,841
and 21,421, respectively 23 21
Additional paid-in capital 72,385 52,884
Treasury stock; 7 shares, at cost (82) (82)
Retained earnings 15,286 11,484
------------ ---------
Total stockholders' equity 87,612 64,307
------------ ---------
Total liabilities and stockholders' equity $108,225 $74,658
============ =========
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