CNET Networks Reports Fourth Quarter and Full-Year 2006 Financial Results.- Company Posts Full Year Revenue of $387.7 Million - Monthly Unique Users Increase 17 Percent 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 -- CNET (body) CNET - Centre national d'Etudes des Telecommunications. The French national telecommunications research centre at Lannion. Networks, Inc. (Nasdaq:CNET) today reported results for the fourth quarter and year ended December December: see month. 31, 2006. "We were able to deliver solid performance in the fourth quarter," said Neil Ashe Ashe , Arthur Robert, Jr. 1943-1993. American tennis player who was the first African-American player to win the U.S. Open singles championship (1968) and the Wimbledon singles title (1975). Noun 1. , chief executive officer of CNET Networks. "We will continue to demonstrate our ability to build interactive media brands for people and the things they are passionate about. Our brands, combined with our ability to generate, fund and promote emerging media, provide us the platform for success in the evolving media landscape." * Total revenues for the fourth quarter were $118.4 million, a 14 percent increase compared to revenues of $103.7 million for the same period of 2005. * Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. totaled $9.7 million during the fourth quarter of 2006 compared to operating income of $23.0 million in the year ago quarter. Reported operating income also reflects $6.5 million in costs related to the Company's restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. and stock option investigation. * Operating income before depreciation, amortization, impairments, and stock compensation expense was $26.6 million for the fourth quarter of 2006. Excluding stock option investigation costs of $6.5 million, operating income before depreciation, amortization, asset impairments, and stock compensation expense was $33.1 million, a 7 percent increase compared to $31.0 million during the fourth quarter of 2005. * The profit margin of operating income before depreciation, amortization, impairments, and stock compensation expense was 22 percent as compared to 30 percent in the fourth quarter of 2005. Excluding stock option investigation costs, the profit margin of operating income before depreciation, amortization, asset impairments, and stock compensation expense was 28 percent. * Net cash provided by operating activities for the fourth quarter of 2006 was $8.6 million, down from $8.8 million in the fourth quarter of 2005. Free cash flow for the fourth quarter of 2006 was $2.7 million. Free cash flow is defined as cash flow from operating activities less capital expenditures. * On a reported basis, net income for the fourth quarter of 2006 was $6.3 million, or $0.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. This compares with net income of $20.7 million, or $0.13 per diluted share during the fourth quarter of 2005. Reported net income for the fourth quarter of 2006 was negatively impacted by $6.5 million in stock option investigation costs. * Excluding stock compensation expense, stock option investigation costs, impairments, realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. on investments and loss from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , adjusted net income for the fourth quarter of 2006 was $19.6 million, or a $0.13 per diluted share, compared to $23.3 million, or $0.15 per diluted share, during the same period of 2005. Financial highlights for the year ended December 31, 2006 are as follows: * Total revenues of $387.7 million, a 15 percent increase compared to revenues of $338.0 million for the same period of 2005. * Operating income totaled $9.4 million during 2006 compared to operating income of $29.9 million for the same period of 2005. Reported operating income also reflects $13.7 million in costs related to the Company's restatement and stock option investigation. * Operating income before depreciation, amortization, impairments, and stock compensation expense was $66.7 million for the year ended December 31, 2006. Excluding stock option investigation costs of $13.7 million, operating income before depreciation, amortization, asset impairments, and stock compensation expense was $80.5 million, a 24 percent increase compared to $65.0 million during 2005. * The profit margin of operating income before depreciation, amortization, asset impairments, and stock compensation expense was 17 percent. Excluding stock option investigation expenses, the profit margin of operating income before depreciation, amortization, impairments, and stock compensation expense increased to 21 percent from 19 percent during 2005. * Net cash provided by operating activities for the year of 2006 was $61.8 million, up from $43.2 million in the same period of 2005. Free cash flow for the year of 2006 was $29.0 million. Free cash flow is defined as cash flow from operating activities less capital expenditures. * On a reported basis, net income for the year of 2006 was $7.8 million, or $0.05 per diluted share. This compares with net income of $19.6 million, or $0.13 per diluted share in 2005. Reported net income was negatively impacted by stock option investigation costs of $13.7 million. Excluding stock compensation expense, 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. , realized gain (loss) on investments, loss from discontinued operations and stock option investigation costs, adjusted net income for the year of 2006 was $43.6 million, or a $0.29 per diluted share, compared to $36.8 million, or $0.24 per diluted share, in 2005. A reconciliation of the non-GAAP measures used in this release to the most comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure and further information regarding the Company's stock compensation expense, discontinued operations and unusual gains are included in the accompanying "Operating Income Reconciliation" and "Reconciliation of Net Gain (Loss) from Unusual Items." Business Review "In the face of many distractions during the fourth quarter, we continued to move our business forward. We introduced new features across our existing brands, launched entirely new brands, and acquired properties that expanded our business. We are pleased with the continued growth and expansion of our media network," said Ashe. [TABLE OMITTED] Business Outlook For the first quarter of 2007, management anticipates total revenues of $90 million to $94 million. Including approximately $5.5 million in non-cash stock compensation expense, management estimates an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of between $4.5 million and $8.5 million for the first quarter. Management expects operating income before depreciation, amortization and stock compensation expense of between $7 million and $11 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 $0.06 to a loss of $0.03 in the first quarter. Excluding stock compensation expense, the company anticipates first quarter earnings per diluted share to be in the range of a loss of $0.02 to $0.00 per share. 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, earnings per share is expected to be in the range of $0.12 to $0.22 for the year. Excluding stock compensation expense, adjusted earnings per diluted share is expected to be in the range of $0.27 and $0.37 for the year. Operating income guidance for the first quarter and full-year 2007 does not consider ongoing fees associated with the Company's stock option investigation. Earnings per share guidance for the full-year 2007 does not reflect the non-cash financial statement impact of any adjustments to the Company's deferred tax assets and the likely release of the related valuation analysis. More detailed guidance, as well as a table that reconciles operating income (loss) before depreciation, amortization, and asset impairment guidance to operating income (loss) guidance can be found on the "Guidance to the Investment Community" sheet that accompanies this press release. Conference Call and Webcast CNET Networks will host a conference call to discuss its fourth quarter and full year 2006 financial results and business outlook beginning at 5:00 pm ET (2:00 pm PT), today, January January: see month. 29, 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 URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. listed above or by calling (800) 642-1687 (international dial-in: (706) 645-9291) and entering the conference ID number 5679070. 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 Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. This press release and its attachments include forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information and statements that are subject to risks and uncertainties that could cause actual results to differ materially. These 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. include the statements regarding CNET Network's expectations with respect to continued listing on The Nasdaq Global Market and statements under the sections entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Business Outlook" and "Guidance to the Investment Community" which set forth our estimated financial performance for the first 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 Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the 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 2006; economic conditions such as weakness in corporate or consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. , 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 Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. , and dilute di·lute v. To reduce a solution or mixture in concentration, quality, strength, or purity, as by adding water. adj. Thinned or weakened by diluting. operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ; an increase in intellectual property licensing fees, which could increase operating expense, including amortization; the risk of future impairment of our 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. , 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 Amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. Annual Report on Form 10-K/A for the year ended December 31, 2005 and subsequent Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. and Current Reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. , including disclosures under the captions "Risk Factors" and "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial 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 See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . 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 GameSpot video gaming website that provides news, reviews, previews, downloads, and other information. The site was launched in May 1996 by Pete Deemer, Vince Broady, and Jon Epstein. , TV.com, MP3.com, Webshots, CHOW, ZDNet and TechRepublic. Founded in 1993, CNET Networks has a strong presence in the US, Asia, and Europe. 1 CNET Networks Internal Log Data, October 2006 to December 2006. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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