CoolSavings Reports Third Quarter 2004 Financial Results.CHICAGO -- Experiences 11% Revenue Growth for the Quarter Over Same Quarter of Prior Year and Year to Date Positive Cash Flow from Operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses CoolSavings, Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :CSAV CSAV Center for the Study of Active Volcanoes (University of Hawaii) CSAV Compañía Sud Americana de Vapores (Chilean Shipping Company) CSAV Chief of Staff Aviation ), a leading interactive marketing services company, today reported results for the third quarter ended September 30, 2004. The Company posted an 11% increase in net revenues in the third quarter compared to the same quarter of 2003. This growth was due primarily to the success of the CoolSavings' Lead Generation Network and the growing sophistication so·phis·ti·cate v. so·phis·ti·cat·ed, so·phis·ti·cat·ing, so·phis·ti·cates v.tr. 1. To cause to become less natural, especially to make less naive and more worldly. 2. of yield management and associated pricing improvements, and occurred despite lower registration volume and higher member acquisition costs. Net revenues in the third quarter of 2004 were $9.0 million compared to $8.0 million for the same period of 2003. For the third quarter, net loss was $0.2 million, compared to net income of $0.02 million for the same period of 2003. Gross profit in the third quarter of 2004 was $7.4 million, or 83% of net revenues, compared to $7.3 million, or 90% of net revenues in the third quarter of the prior year. The decrease in gross profit was primarily due to the increase in partner fee expenses related to the Lead Generation Network. The Company's total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. in the third quarter of 2004 increased to $7.5 million from $7.1 million in the same period of 2003, reflecting increased member acquisition costs and costs related to the acquisition of Targeted Marketing Services during the first quarter of 2004. The Company's loss from operations was $0.1 million for the third quarter of 2004 compared to income from operations of $0.1 million in the third quarter of 2003. Net loss applicable to common stockholders was $0.7 million, or $0.02 per share, for the third quarter of 2004, compared to a net loss applicable to common stockholders of $0.5 million, or $0.01 per share, reported for the same period of 2003. Cash Flows from Operations for the third quarter of 2004 were a positive $1.2 million, driven by strong cash collections. Nine Month Financial Highlights Net revenues in the nine month period ended September 30, 2004 were $26.1 million compared to $24.3 million during the same period of 2003. Gross profit in the first nine months of 2004 was $22.8 million, or 87% of net revenues, compared to $22.2 million, or 91% of net revenues in the same period of the prior year. The decrease in gross profit percentage was primarily due to the increase in partner fee expenses related to the Lead Generation Network. The Company's total operating expenses for the first nine months of 2004 increased to $23.3 million from $22.7 million in the same period of 2003, reflecting increased member acquisition costs and costs related to CoolSavings' acquisition of Targeted Marketing Services during the first quarter of 2004. Results for the first nine months of 2003 included charges of $0.4 million for stock option expense, $0.4 million for lease exit costs, and $0.1 million for asset 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. expense. The Company's loss from operations was $0.5 million for the first nine months of 2004 and the first nine months of 2003. The net loss for the first nine months of 2004 was $0.8 million, compared to a net loss of $0.9 million reported for the same period of 2003. Net loss applicable to common stockholders was $2.4 million, or $0.06 per share, for the first nine months of 2004, compared to a net loss applicable to common stockholders of $2.3 million, or $0.06 per share, for the same period of 2003. Cash Flows from Operations for the nine month period ended September 30, 2004 were a positive $0.5 million, reflecting increased cash collections in the third quarter. Financial Condition At September 30, 2004, the Company had cash and cash equivalents of $6.0 million compared to $7.3 million at December 31, 2003. Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying , net of allowances for doubtful accounts, were $5.5 million at September 30, 2004 compared to $4.8 million at the end of 2003. Current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. totaled $13.5 million at September 30, 2004 compared to $12.4 million at the end of 2003. Strong Momentum for Lead Generation Network & Grocery Retail Network CoolSavings' Lead Generation Network Service has shown solid momentum in the third quarter in both the number of partner Web sites in the program and the volume of leads acquired for participating advertisers. Launched in March 2004, the Lead Generation Network enables advertisers to collect a high number of quality consumer leads across top Web sites, including Better Homes and Gardens, weather.com, About.com, Publisher's Clearing House Publishers Clearing House (or PCH) is a multi-channel direct marketing company, that offers discounted magazine subscriptions and household merchandise to consumers with the chance to enter to win one of many ongoing sweepstakes. and coolsavings.com. The network service is expected to generate more than 18 million qualified leads for top retail, CPG CPG central pattern generators. and direct marketing customers in 2004, with approximately 30% growth expected in 2005. This strong performance is bolstered by several advanced features CoolSavings has recently implemented to enhance lead quality such as advanced field validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. and real time address standardization standardization In industry, the development and application of standards that make it possible to manufacture a large volume of interchangeable parts. Standardization may focus on engineering standards, such as properties of materials, fits and tolerances, and drafting . Also initiated in 2004, CoolSavings' Grocery Solutions enables the distribution of printable print·a·ble adj. 1. Capable of being printed or of producing a print: printable negatives. 2. Fit for publication: printable language. and electronic, direct-to-frequent shopper card coupons across the Company's Grocery Retail Network. Among the growing list of leading grocery retailers in the more than 4,000-store network are The Kroger Co., Meijer Stores, Food Lion Food Lion LLC is an American grocery store company headquartered in Salisbury, North Carolina that operates approximately 1,300 supermarkets in 11 Southeast and Mid-Atlantic states under the Food Lion, Harveys, Bloom, Bottom Dollar, and Reid's nameplates. LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , Defense Commissary Agency The Defense Commissary Agency (DeCA) is an agency of the United States Department of Defense that manages more than 260 grocery establishments on U.S. military installations worldwide. and Marsh Supermarkets Marsh Supermarkets is a retail food chain headquartered in Indianapolis, Indiana, with stores throughout Indiana and parts of Ohio. History Founded in 1931 in Muncie, the company went public in 1953 and has since grown to 69 locations. , Inc. CoolSavings is also currently managing the Kroger Plus Internet Coupons electronic customer loyalty program for Kroger, providing CPG manufacturers the ability to target 1.6 million consumers who have opted in to Kroger's e-mail program Software in the user's computer that can access the mail servers in a local or remote network. Also known as an "e-mail client," "mail client," "mail program," and "mail reader," it provides the ability to send and receive e-mail messages and file attachments. based on their actual purchase history. "We are very pleased with the early success of CoolSavings' Lead Generation Network and Grocery Retail Network," commented Matthew Moog, President and Chief Executive Officer of CoolSavings, Inc. "Together with our new loyalty initiatives and the continued strength of our targeted e-mail services See Internet e-mail service. , we feel we have the pieces in place to deliver positive results for our advertisers, partners and members for the duration of 2004 and beyond." In the third quarter of 2004, CoolSavings had a 95% retention rate among the Company's top 100 revenue-producing clients from 2003. CoolSavings provides marketing services for more than 700 clients on an annual basis, including JCPenney, Hormel Foods, Land O'Lakes
Business Outlook The following statements are based on current expectations, are forward-looking and actual results may differ materially. See "Cautionary Note Regarding 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. " below. Looking forward, CoolSavings remains dedicated to its mission to be the leading provider of promotional offers to consumers while effectively connecting marketers to their best customers. The Company will continue to offer a compelling consumer experience on its Web site and across the CoolSavings Marketing Network by delivering valuable promotional offers to consumers from leading national brands. The Company plans to continue to expand the capabilities of the CoolSavings Marketing Network. The Company is confirming its full year 2004 revenue growth projection to be approximately 20%, however, the Company is revising downward its expectation for full year 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. to be approximately the same as the prior year. The primary reason for this revision is the significant increase in media costs experienced over the prior nine months, which the Company expects to continue for the remainder of 2004. This cost, plus the added cost related to the acquisition of Targeted Marketing Services during the first quarter of 2004, has caused the change in earnings forecast. The Company expects its current liquidity position to meet its anticipated cash needs for working capital and capital expenditures, excluding potential acquisitions that may require large cash outlays Outlays Payments on obligations in the form of cash, checks, the issuance of bonds or notes, or the maturing of interest coupons. , or any accelerated payments that Landmark Communications Landmark Communications is a privately held media company headquartered in Norfolk, Virginia and specializing in cable television, broadcast television, print publishing, and internet publishing. Inc. may require with respect to its preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. holdings or its loan to the Company, for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future. About CoolSavings CoolSavings, Inc. is a leading interactive marketing services company that provides best-in-class lead generation, e-mail, coupon and loyalty programs for advertisers and publishers. Our unique targeting, optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. and predictive modeling capabilities help to power an extensive marketing network that has reached more than 15 million active consumers in the last 12 months. In 2005, CoolSavings will serve more than 1 billion offer impressions across our distribution network, generating more than 100 million responses for our advertisers, which include leaders in the consumer packaged goods Noun 1. packaged goods - groceries that are packaged for sale foodstuff, grocery - (usually plural) consumer goods sold by a grocer plural, plural form - the form of a word that is used to denote more than one , retail and direct marketing industries. Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements 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, including statements made regarding the number of qualified leads to be generated by CoolSavings' Lead Generation Network Service in 2004 and 2005, under the caption "Business Outlook" and other statements regarding the Company's expectations, beliefs, hopes, intentions, or strategies. Where possible, these forward-looking statements have been identified by use of words such as "project," "forecast," "anticipate," "believe," "will," "expect," and similar expressions. Known and unknown risks, uncertainties and other factors, both general and specific to the matters discussed in this press release, may cause our actual results and performance to differ materially from the future results and performance expressed in, or implied by, such forward-looking statements. These risks, uncertainties, and other factors include, without limitation, our ability to secure financing to meet our long-term capital needs, our ability to secure long-term contracts with existing advertisers and attract new advertisers, our ability to add new members, our successful introduction of new services and features, our ability to compete successfully against current and future competitors, our ability to protect our patents, trademarks and proprietary rights, our ability to continue to attract, assimilate as·sim·i·late v. 1. To consume and incorporate nutrients into the body after digestion. 2. To transform food into living tissue by the process of anabolism. and retain highly skilled personnel, general industry, economic and market conditions and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , the potential for higher actual media costs, and other costs and expenses when compared to our estimated costs and projections. For a discussion of these and other risks, uncertainties and factors which could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements, see "Risk Factors" in our annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2003, and our Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 30, 2004, both as filed with the SEC. We undertake no obligation to update any of the forward-looking statements after the date of this press release to conform these statements to actual results or otherwise reflect new developments or changed circumstances, unless expressly required by applicable federal securities laws. You should not place undue reliance on any such forward-looking statements.
COOLSAVINGS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
For the Three Months For the Nine Months
Ended Ended
----------------------- -----------------------
September September September September
30, 2004 30, 2003 30, 2004 30, 2003
----------- ----------- ----------- -----------
Revenue:
e-marketing services $ 8,952 $ 7,977 $ 26,068 $ 24,106
License royalties 12 66 68 207
----------- ----------- ----------- -----------
Net revenues 8,964 8,043 26,136 24,313
Cost of revenues 1,525 772 3,341 2,161
----------- ----------- ----------- -----------
Gross profit 7,439 7,271 22,795 22,152
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 5,121 4,511 15,476 13,466
Product development 936 778 2,888 2,255
General and
administrative 1,421 1,828 4,748 6,460
Lease exit costs 32 18 146 427
Loss on asset
impairment - - - 81
----------- ----------- ----------- -----------
Total operating
expenses 7,510 7,135 23,258 22,689
----------- ----------- ----------- -----------
Income (loss) from
operations (71) 136 (463) (537)
Other income (expense):
Interest and other
income 12 6 27 31
Interest expense (130) (121) (381) (350)
----------- ----------- ----------- -----------
Total other income
(expense) (118) (115) (354) (319)
----------- ----------- ----------- -----------
Income (loss) before
income taxes (189) 21 (817) (856)
Income taxes (3) - (9) -
----------- ----------- ----------- -----------
Net income (loss) (192) 21 (826) (856)
Cumulative dividend on
Series B Preferred
Stock (526) (486) (1,548) (1,430)
----------- ----------- ----------- -----------
Loss applicable to
common stockholders $ (718) $ (465) $ (2,374) $ (2,286)
=========== =========== =========== ===========
Basic and diluted net
loss per share $ (0.02) $ (0.01) $ (0.06) $ (0.06)
=========== =========== =========== ===========
Weighted average shares
used in the calculation
of basic and diluted
net loss per share 39,239,689 39,101,636 39,230,522 39,098,802
=========== =========== =========== ===========
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