Avenue A, Inc. Announces Q3 Results; 68% Revenue Growth Leads Company To Pro Forma Profitability.Business Editors/High-Tech Writers SEATTLE--(BUSINESS WIRE)--Oct. 24, 2002 Avenue A, Inc. (Nasdaq:AVEA AVEA American Veterinary Exhibitors Association ), a digital marketing and technology company, today announced financial results for the third quarter and first nine months of 2002. Third quarter highlights include: -- Revenue of $34.4 million, a 68% increase from the comparable year-ago period and a 13% increase from the prior quarter -- Gross profit of $10.1 million, an increase of 49% from the comparable period in 2001 and an increase of 21% from the prior quarter -- Pro forma profitability of $62,000 -- GAAP net loss reduced to $677,000, versus GAAP net loss of $6.6 million in Q3 2001 -- Continued balance sheet strength, with cash and short-term investments of $115.4 million "We have achieved a milestone in our company's history in reaching pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma profitability for the first time," said Brian McAndrews, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Avenue A, Inc. "Despite difficult economic conditions overall, our business continues to move aggressively forward, with solid revenue growth attributable to both increased spending by current customers and continued market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" . This, combined with ongoing attention to cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. , has allowed us to reach our pro forma profitability goal," he added. For the third quarter ended September 30, 2002, Avenue A, Inc. reported revenue of $34.4 million, compared to revenue of $20.4 million for the third quarter of 2001. Pro forma net income for the third quarter of 2002, which includes interest income and expense but excludes the amortization of deferred stock compensation, was $62,000. This compares to a pro forma net loss, which includes interest income and expense but excludes amortization of deferred stock compensation and amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , of $3.3 million, or $0.06 per share, for the comparable 2001 quarter. Net loss, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), for the third quarter ended September 30, 2002 was $677,000, or $0.01 per share, compared to a net loss of $6.6 million, or $.11 per share, for the third quarter of 2001. Revenue for the first nine months of 2002 was $88.3 million, compared to revenue of $65.2 million for the comparable nine-month period in 2001. Pro forma net loss for the first nine months of 2002, which includes interest income and expense but excludes the amortization of deferred stock compensation, was $2.7 million, or $.05 per share. This compares to a pro forma net loss of $24.6 million, or $.43 per share, for the first nine months of 2001, which also included a charge of $2.5 million for the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of a cost-basis investment. GAAP net loss for the first nine months of 2002, including the impact of a change in accounting principle associated with the amortization of intangible assets, was $6.3 million, or $0.11 per share, compared to net loss of $35.5 million, or $0.62 per share, for the same nine-month period in 2001. Avenue A, Inc. ended the third quarter with $115.4 million in cash and short-term investments. Guidance The company projects that its Q4 revenue will be in the range of $35-38 million, with pro forma net income of 1-2 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . The company also expects to achieve GAAP profitability in Q4, with GAAP net income of 0-1 cent per share. Third Quarter 2002 Conference Call/Webcast Today Avenue A, Inc. will host a conference call today, October 24, 2002, to discuss these financial results at 11:00 a.m. Eastern/8:00 a.m. Pacific. The webcast and replay will be available from the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the Company's website at www.avenueainc.com, under "Calendar of Events." Interested parties should visit the website approximately 15 minutes prior to download and install any necessary software. About Avenue A, Inc. Avenue A, Inc., a digital marketing services and technology company, was founded in 1997 to help marketers acquire, retain and grow customers across all digital media. Through its two operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon -- Avenue A, an interactive agency, and Atlas Atlas, in Greek mythology Atlas (ăt`ləs), in Greek mythology, a Titan; son of Iapetus and Clymene and the brother of Prometheus. DMT See DSL. , provider of advertising technology solutions -- Avenue A, Inc. is able to touch and bring value to any interaction in the digital marketplace. Both units are headquartered in Seattle and have offices in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . Avenue A, Inc. adheres to the NAI See Network Associates. privacy principles that have been applauded by the FTC FTC See Federal Trade Commission (FTC). . These principles are designed to ensure Internet user Internet user n → internauta m/f Internet user Internet n → internaute m/f privacy. Please visit www.avenueainc.com to learn more. About Atlas DMT Atlas DMT is DMT I Diabetes Mellitus Type 1 an advertising technology provider and creator of the Atlas Digital Marketing Suite 3.0, the industry's first end-to-end, fully-integrated ad serving and campaign management platform built by and for marketers. The Atlas Suite helps advertising agencies and other marketing professionals deliver efficient, profitable digital marketing programs. The Suite manages online media planning, buying, ad serving, analysis and optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. , with four integrated modules: Atlas Media Console, Atlas Creative Management System, Atlas Delivery and Tracking Services and Atlas Analysis and Optimization Engine. Atlas DMT's patent-pending analytics architecture -- Web Analysis Results Profiler (WARP) -- seeks to provide marketers with the depth and granularity The degree of modularity of a system. More granularity implies more flexibility in customizing a system, because there are more, smaller increments (granules) from which to choose. they need to answer their most important marketing questions. WARP is just one of a long list of Atlas DMT innovations, including online ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). processing, behavior-based media planning, and online GRP GRP Group GRP Group (file name extension) GRP Glass Reinforced Plastic GRP Gastrin-Releasing Peptide (biology) GRP Gross Rating Point (advertising) and reach forecasting. Atlas DMT clients include Tribal DDB Tribal DDB is a worldwide network of interactive agencies, established in 2000, when the advertising giant DDB integrated all its interactive-web properties under the Tribal brand. , Foote, Cone & Belding and TBWA/Chiat/Day. Atlas DMT serves its clients from offices in Seattle, San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden , Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. and New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . To learn more, please visit www.atlasdmt.com. About Avenue A Avenue A is an interactive advertising agency. It offers a one-stop solution that seeks to drive breakthrough results for its clients' web and e-mail marketing Email marketing is a form of direct marketing which uses electronic mail as a means of communicating commercial or fundraising messages to an audience. In its broadest sense, every email sent to a potential or current customer could be considered email marketing. initiatives by using innovative technology and rigorous analytical methods that turn campaign data into actionable Giving sufficient legal grounds for a lawsuit; giving rise to a Cause of Action. An act, event, or occurrence is said to be actionable when there are legal grounds for basing a lawsuit on it. insights. Avenue A's integrated suite of services includes web advertising, affiliate programs, search engine optimization Designing a Web site so that search engines easily find the pages and index them. The goal is to have your page be in the top 10 results of a search. Optimization includes the choice of words used in the text paragraphs and the placement of those words on the page, both visible and hidden , strategic portal relationships, e-mail prospecting, e-mail list management, branding surveys, customer targeting, profiling and advanced analytical services. Avenue A focuses on achieving the best possible results and the highest possible return on investment for its clients' digital marketing efforts. Clients include Microsoft, AT&T Wireless, and Best Buy. Please visit www.avenuea.com to learn more. Certain statements in this press release are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements include all passages containing verbs such as 'aims, anticipates, believes, estimates, expects, intends, plans, predicts, projects or targets' or nouns corresponding to such verbs. Forward-looking statements also include any other passages that are primarily relevant to expected future events or that can only be evaluated by events that will occur in the future. The forward-looking statements in this release include, among others, statements about financial projections for Q4 2002 and expectations of pro forma and GAAP profitability in Q4. Forward-looking statements are based on the opinions and estimates of the management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. These risks and uncertainties include, among others, the risk of fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. or declining demand for our advertising services, the risk of erosion in service pricing, potential failure to attract sufficient new business to Atlas DMT to materially and positively impact financial results, the potential failure to attract new clients, to maintain current, desired client relationships or to achieve effective advertising campaigns for existing clients, potential deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. or slower-than-expected development of the Internet advertising Delivering ads to Internet users via Web sites, e-mail, ad-supported software and Internet-enabled cellphones. Also called an "ad network," Internet advertising organizations act as a middleman between the advertiser and the Web sites and software publishers that display the ads. market, the need to generate additional revenue to achieve profitability, quarterly and seasonal fluctuations in operating results, timing variations on the part of advertisers to implement advertising campaigns, costs related to any possible future acquisitions of technologies or businesses, the short term nature of Avenue A, Inc.'s contracts with clients which generally are cancelable on 90 days' or less notice, the uncertainties, potential costs, and possible business impacts of unfavorable rulings in the previously-announced class action lawsuits class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax . More information about factors that potentially could affect Avenue A, Inc.'s financial results is included in Avenue A, Inc.'s Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 30, 2002, filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance upon these forward-looking statements which speak only as to the date of this release. Except as required by law, Avenue A, Inc. undertakes no obligation to update any forward-looking or other statements in this press release, whether as a result of new information, future events or otherwise.
Avenue A, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
2002 2001
------------- ------------
Assets
Current assets:
Cash, cash equivalents, and short-term
investments $ 115,449 $ 117,754
Accounts receivable, net of allowance 20,429 16,127
Other receivables 783 1,369
Prepaid expenses and other current
assets 663 242
------------- ------------
Total current assets 137,324 135,492
Property and equipment, net 4,763 6,664
Other assets 817 1,325
Intangible assets, net - 1,330
------------- ------------
Total assets $ 142,904 $ 144,811
============= ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 30,647 $ 25,448
Notes payable, current portion 1,778 2,000
Deferred revenue 444 488
------------- ------------
Total current liabilities 32,869 27,936
Notes payable, less current portion 278 1,555
------------- ------------
Total liabilities 33,147 29,491
------------- ------------
Shareholders' equity:
Common stock 581 584
Paid-in capital 215,594 216,884
Deferred stock compensation (1,600) (4,063)
Subscription receivable (347) (548)
Accumulated deficit (104,471) (97,537)
------------- ------------
Total shareholders' equity 109,757 115,320
------------- ------------
Total liabilities and shareholders' equity $ 142,904 $ 144,811
============= ============
Avenue A, Inc.
Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- ------------------
2002 2001 2002 2001
-------- -------- -------- ---------
Revenue $34,372 $20,419 $88,300 $65,176
Cost of revenue 24,241 13,629 62,992 46,929
-------- -------- -------- ---------
Gross profit 10,131 6,790 25,308 18,247
-------- -------- -------- ---------
Expenses:
Client support 3,620 2,636 10,465 10,605
Product development 1,555 2,919 4,853 9,922
Selling, general, and
administrative 4,001 4,052 11,869 16,179
Depreciation and amortization of
property and equipment 1,193 1,431 3,510 4,392
Amortization of deferred stock
compensation 739 2,737 2,269 9,453
Corporate restructuring charges 497 - 497 3,666
Amortization of intangible
assets - 504 - 1,503
Impairment of fixed assets - 550 - 550
-------- -------- -------- ---------
Total expenses 11,605 14,829 33,463 56,270
-------- -------- -------- ---------
Loss from operations (1,474) (8,039) (8,155) (38,023)
Interest income, net 797 1,472 3,155 5,001
Impairment of cost-basis
investment - - - (2,500)
-------- -------- -------- ---------
Net loss before cumulative effect
of change
in accounting principle (677) (6,567) (5,000) (35,522)
Cumulative effect of change in
accounting principle - - (1,330) -
-------- -------- -------- ---------
Net loss $ (677) $(6,567) $(6,330) $(35,522)
======== ======== ======== =========
Basic and diluted net loss per
share before
change in accounting principle $ (0.01) $ (0.11) $ (0.09) $ (0.62)
Cumulative effect of change in
accounting principle - - (0.02) -
-------- -------- -------- ---------
Basic and diluted net loss per
share $ (0.01) $ (0.11) $ (0.11) $ (0.62)
======== ======== ======== =========
Shares used in computing basic
and diluted
net loss per share 58,368 57,346 58,302 57,042
======== ======== ======== =========
Avenue A, Inc.
Reconciliation of Loss From Operations to Pro Forma Income (Loss)
From Operations and Pro Forma Net Income (Loss)
(in thousands, except per share data)
(unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- ------------------
2002 2001 2002 2001
-------- -------- -------- ---------
Loss from operations $(1,474) $(8,039) $(8,155) $(38,023)
Amortization of deferred stock
compensation 739 2,737 2,269 9,453
Amortization of intangible
assets - 504 - 1,503
-------- -------- -------- ---------
Pro forma loss from operations
(A) (735) (4,798) (5,886) (27,067)
Interest income, net 797 1,472 3,155 5,001
Impairment of cost-basis
investment - - - (2,500)
-------- -------- -------- ---------
Pro forma net income (loss) (A) $62 $(3,326) $(2,731) $(24,566)
======== ======== ======== =========
Pro forma basic and diluted
earnings (loss) per share $0.00 $(0.06) $(0.05) $(0.43)
======== ======== ======== =========
(A) The pro forma loss from operations and net income (loss) exclude
amortization of intangible assets and stock-based compensation
charges, which are summarized in the above table. These
disclosures do not purport to be prepared in accordance with
Generally Accepted Accounting Principles (GAAP).
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