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NEW YORK, Mar 06, 2008 (BUSINESS WIRE) -- Answers Corporation (NASDAQ: ANSW), creators of the leading answer engine offering Answers.com(TM) and WikiAnswers (TM), today reported unaudited financial results for its full year and fourth quarter ended December 31, 2007.
"With record ad revenues, return to positive adjusted EBITDA, and the fastest growing Internet property in the US for 2007, we had a good Q4," said Robert Rosenschein, Founder and CEO. "Our revenues bounced back from a challenging Q3. WikiAnswers traffic grew 80% sequentially and revenues over 130%. We were disappointed that market conditions prevented our acquisition of Lexico, but we are excited to move forward and are confident in our growth outlook for the future."
Q4 2007 Financial Results
-- Revenues were $2,991 thousand in Q4 2007, an increase of 19% compared to Q4 2006, and an increase of 35% compared to the $2,208 thousand reported for Q3 2007.
-- Answers.com revenues were $2,270 thousand in Q4 2007, an increase of 22% compared to $1,861 thousand in Q3 2007.
-- WikiAnswers.com revenues were $704 thousand in Q4 2007, an increase of 132% compared to $304 thousand in Q3 2007.
-- GAAP net loss in Q4 2007 was $617 thousand, a decrease of $359 thousand compared to Q4 2006, and a decrease of $1,333 thousand, compared to the GAAP net loss of $1,950 thousand in Q3 2007. GAAP net loss per share in Q4 2007 was $0.08, compared to $0.13 in Q4 2006, and $0.25 in Q3 2007.
-- Adjusted EBITDA in Q4 2007 was $180 thousand, an improvement of $387 thousand compared to negative $207 thousand in Q4 2006, and an improvement of $907 thousand compared to the Adjusted EBITDA of negative $727 thousand in Q3 2007.
Full Year 2007 Financial Results
-- Revenues, excluding subscription revenue of $425 thousand, were $10,970 thousand in 2007, an increase of 56% compared to $7,029 in 2006.
-- Revenues, including subscription revenue of $425 thousand, were $11,395 thousand in 2007. The subscription revenue resulted from the recognition, in Q1 2007, of revenue, previously deferred, from lifetime subscriptions to GuruNet, an information service we sold in 2003. Recognition of this revenue was a one-time event and is not reflective of the Company's core business. The GuruNet service was shut down in February 2007.
-- GAAP net loss in 2007 was $4,118 thousand, a decrease of $4,453 thousand compared to $8,571 in 2006. GAAP net loss per share in 2007 was $0.52, compared to $1.12 in 2006.
-- Adjusted EBITDA in 2007 was negative $696 thousand, an improvement of $1,594 thousand compared to negative $2,290 in 2006.
Business Outlook - First Quarter 2008
The following business outlook is based on the Company's current information and expectations as of March 6, 2008. Answers undertakes no obligation to update the outlook, or any portion thereof, prior to the release of the Company's next earnings announcement, notwithstanding subsequent developments; however, Answers may update the outlook or any portion thereof at any time at its discretion.
Three months ending
March 31, 2008
-------------------------
(in thousands)
-------------------------
Revenues $2,900 - $3,000
=========================
Adjusted EBITDA
-----------------------------------------
GAAP Operating loss $(3,755) - $(3,855)
Adjustment to GAAP Operating loss:
Stock-based compensation 425
Depreciation and amortization 480
Cost relating to terminated Lexico
acquisition and follow-on offering 2,650
-------------------------
($200) - ($300)
=========================
Business Outlook - Full Year 2008
The following business outlook is based on the Company's current information and expectations as of March 6, 2008. Answers undertakes no obligation to update the outlook, or any portion thereof, prior to the release of the Company's next earnings announcement, notwithstanding subsequent developments; however, Answers may update the outlook or any portion thereof at any time at its discretion.
Twelve months ending
December 31, 2008
-----------------------------
(in thousands)
-----------------------------
Revenues $15,000 - $18,000
=============================
Adjusted EBITDA
-------------------------------------
GAAP Operating loss $(3,350) - $(4,350)
Adjustment to GAAP Operating loss:
Stock-based compensation 2,000
Depreciation and amortization 2,200
Cost relating to terminated Lexico
acquisition and follow-on offering 2,650
-----------------------------
$2,500 - $3,500
=============================
Conference Call
A conference call to review the Q-4 2007 financial results will follow this release today at 4:30 PM EST. The company's management will host the call, discuss its quarterly results and will provide insight into its business outlook. The call will be followed by a question and answer session. Investors are invited to listen to the conference call and the replay over the Internet through Answers' Website, within its Investor Relations page at http://ir.answers.com. To listen to the live call via Webcast, please go to our Website at least 10 minutes early to connect and register. To dial in to listen and/or submit a question, please dial 877-675-4753 and request the Answers call. For those unable to listen to the live broadcast, a replay will be available on the site shortly after the call.
About Answers Corporation
Answers Corporation (NASDAQ:ANSW) operates the award-winning Answers.com(TM) answer engine, delivering comprehensive content on over four million topics spanning health, finance, entertainment, business and more. Content includes over 180 licensed titles from leading publishers such as Houghton Mifflin Company, Barron's, Encyclopedia Britannica, All Media Guide and others; original articles written by Answers.com's editorial team; and user-generated questions & answers from Answers.com's industry-leading WikiAnswers(TM). Founded in 1999 by CEO Bob Rosenschein, Answers.com can be launched directly from within Internet Explorer 7, Firefox and Opera browsers, and its service is integrated into sites like The New York Public Libraries' homeworkNYC.org, The New York Times, CBSNews.com and others. Answers.com is also available for mobile devices at mobile.answers.com. For investment information, visit ir.answers.com. (answ-f)
Cautionary Statement
Some of the statements included in this press release are forward-looking statements that involve a number of risks and uncertainties, including, but not limited to, statements regarding future market opportunity and future financial performance. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Important factors may cause our actual results to differ materially, including, but not limited to, our inability to increase the number of persons who use our products, our inability to increase the number of partners who will generate increased traffic to our sites, our failure to improve the monetization of our products, a change in the algorithms and methods used by Google, the provider of the vast majority of our search engine traffic, and other search engines to identify web pages towards which traffic will ultimately be directed or a decision to otherwise restrict the flow of users visiting www.answers.com and our other Web properties, a decision by Google, Inc. to discontinue directing user traffic to www.answers.com through its definition link, the effects of facing liability for any content displayed on our Web properties, potential claims that we are infringing the intellectual property rights of any third party, and other risk factors identified from time to time in our SEC filings, including, but not limited to, our quarterly report on Form 10-Q filed on November 9, 2007 (excluding risks described in such quarterly report under the heading "Risks Related to the Acquisition", following the termination of our proposed acquisition of Lexico). Any forward-looking statements set forth in this press release speak only as of the date of this press release. We do not intend to update any of these forward-looking statements to reflect events or circumstances that occur after the date hereof. This press release and prior releases are available at www.answers.com. The information in Answers' website is not incorporated by reference into this press release and is included as an inactive textual reference only.
Non-GAAP Financial Measures
This press release, and the accompanying tables, include both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures, which we refer to as "Adjusted EBITDA". The tables attached to this press release include reconciliations to the GAAP amounts excluded from Adjusted EBITDA. In addition an "Explanation of Non-GAAP Financial measures" is set forth in Appendix A attached to this press release
(Tables and Explanation of Non-GAAP Financial Measures, to follow)
Answers Corporation
Consolidated Statements of Operations
(in thousands, except for share and per share data)
Year ended Three months
December 31 ended
------------------- -------------------
December September
2007 2006 31, 2007 30, 2007
--------- --------- --------- ---------
Revenues:
Advertising revenue $10,751 $6,817 $2,974 $2,165
Answers service licensing 219 187 17 43
Subscriptions 425 25 - -
--------- --------- --------- ---------
11,395 7,029 2,991 2,208
--------- --------- --------- ---------
Costs and Expenses:
Cost of revenue 4,890 3,406 1,247 1,179
Research and development 2,978 5,865 739 769
Sales and marketing 3,951 3,253 676 1,221
General and administrative 4,020 3,385 1,017 1,058
--------- --------- --------- ---------
Total Operating Expenses 15,839 15,909 3,679 4,227
--------- --------- --------- ---------
Operating Loss (4,444) (8,880) (688) (2,019)
Interest income, net 385 553 86 88
Other income (expenses), net (11) (176) - -
--------- --------- --------- ---------
Loss Before Income Taxes (4,070) (8,503) (602) (1,931)
Income taxes (48) (68) (15) (19)
--------- --------- --------- ---------
Net Loss $(4,118) (8,571) $(617) $(1,950)
========= ========= ========= =========
Basic and diluted net loss
per common share $(0.52) $(1.12) $(0.08) $(0.25)
========= ========= ========= =========
Weighted average shares used in
computing
basic and diluted net loss per
common share 7,847,610 7,673,543 7,855,370 7,854,053
========= ========= ========= =========
Answers Corporation
Non-GAAP Financial Measures and Reconciliation of
Non-GAAP Financial Measures
to the nearest comparable GAAP Measures
(in thousands, except for per share data)
Three months ended
-----------------------------------
December December
31, September 30, 31,
2007 2007 2006
---------- ------------- ----------
Adjusted Cost of Revenue
Cost of revenue $1,247 $1,179 $1,071
Stock-based compensation expense (40) (41) (34)
Cost related to layoff - (4) -
Depreciation and amortization (324) (341) (276)
---------- ------------- ----------
$883 $793 $761
========== ============= ==========
Adjusted Research and Development
Research and development $739 $769 $656
Stock-based compensation expense (92) (91) (80)
Cost related to layoff - (14) -
Depreciation and amortization (29) (28) (40)
---------- ------------- ----------
$618 $636 $536
========== ============= ==========
Adjusted Sales and Marketing
Sales and marketing $676 $1,221 $1,009
Stock-based compensation expense (72) (219) (197)
Cost related to layoff - (230) -
Depreciation and amortization (20) (23) (21)
---------- ------------- ----------
$584 $749 $791
========== ============= ==========
Adjusted General and Administrative
General and administrative $1,017 $1,058 $854
Stock-based compensation expense (222) (224) (184)
Cost related to layoff - (5) -
Depreciation and amortization (69) (72) (45)
---------- ------------- ----------
$726 $757 $625
========== ============= ==========
Adjusted Operating Expenses
Operating expenses $3,679 $4,227 $3,590
Stock-based compensation expense (426) (574) (495)
Cost related to layoff - (254) -
Depreciation and amortization (442) (464) (382)
---------- ------------- ----------
$2,811 $2,935 $2,713
========== ============= ==========
Adjusted EBITDA
Operating Loss $(688) $(2,019) $(1,084)
Stock-based compensation expense 426 574 495
Cost related to layoff - 254 -
Depreciation and amortization 442 464 382
---------- ------------- ----------
$180 $(727) $(207)
========== ============= ==========
Adjusted EBITDA Per Share
(basic and diluted)
Operating loss per share $(0.09) $(0.26) $(0.14)
Stock-based compensation expense 0.05 0.07 0.06
Cost related to layoff - 0.03 -
Depreciation and amortization 0.06 0.06 0.05
---------- ------------- ----------
$0.02 $(0.10) $(0.03)
========== ============= ==========
See discussion regarding Adjusted EBITDA in Appendix A of this earnings release for an explanation of the reconciling items noted above.
Answers Corporation
Non-GAAP Financial Measures and Reconciliation of
Non-GAAP Financial Measures
to the nearest comparable GAAP Measures
(in thousands, except for per share data)
Year ended
------------------------------
December 31, December 31,
2007 2006
-------------- --------------
Adjusted Cost of Revenue
Cost of revenue $4,890 $3,406
Stock-based compensation expense (160) (128)
Cost related to layoff (4) -
Depreciation and amortization (1,316) (1,079)
-------------- --------------
$3,410 $2,199
============== ==============
Adjusted Research and Development
Research and development $2,978 $5,865
Stock-based compensation expense (363) (341)
Stock-based compensation resulting
from Brainboost acquisition - (3,489)
Cost related to layoff (14) -
Depreciation and amortization (127) (60)
-------------- --------------
$2,474 $1,975
============== ==============
Adjusted Sales and Marketing
Sales and marketing $3,951 $3,253
Stock-based compensation expense (756) (676)
Cost related to layoff (230) -
Depreciation and amortization (87) (74)
-------------- --------------
$2,878 $2,503
============== ==============
Adjusted General and Administrative
General and administrative $4,020 $3,385
Stock-based compensation expense (844) (665)
Cost related to layoff (5) -
Depreciation and amortization (267) (78)
-------------- --------------
$2,904 $2,642
============== ==============
Adjusted Operating Expenses
Operating expenses $15,839 $15,909
Stock-based compensation expense (2,123) (1,810)
Stock-based compensation resulting
from Brainboost acquisition - (3,489)
Cost related to layoff (253) -
Depreciation and amortization (1,797) (1,291)
-------------- --------------
$11,666 $9,319
============== ==============
Adjusted EBITDA
Operating Loss $(4,444) $(8,880)
Subscription revenue (425) -
Stock-based compensation expense 2,123 1,810
Stock-based compensation resulting
from Brainboost acquisition - 3,489
Cost related to layoff 253 -
Depreciation and amortization 1,797 1,291
-------------- --------------
$(696) $(2,290)
============== ==============
Adjusted EBITDA Per Share
(basic and diluted)
Operating loss per share $(0.57) $(1.16)
Subscription revenue (0.05)
Stock-based compensation expense 0.27 0.24
Stock-based compensation resulting
from Brainboost acquisition - 0.45
Cost related to layoff 0.03 -
Depreciation and amortization 0.23 0.17
-------------- --------------
$(0.09) $(0.30)
============== ==============
See discussion regarding Adjusted EBITDA in Appendix A of this earnings release for an explanation of the reconciling items noted above.
Answers Corporation
Condensed Consolidated Balance Sheets
(in thousands)
December 31 December 31
2007 2006
------------- -------------
Assets
Current assets:
Cash and cash equivalents $6,778 $4,976
Investment securities 700 4,102
Accounts receivable 1,448 1,304
Prepaid expenses and other current assets 487 416
------------- -------------
Total current assets 9,413 10,798
------------- -------------
Long-term deposits (restricted) 196 218
------------- -------------
Deposits in respect of employee severance
obligations 1,232 856
------------- -------------
Property and equipment, net 1,012 998
------------- -------------
Other assets:
Intangible assets, net 4,766 6,010
Goodwill 437 437
Prepaid expenses, long-term, and other
assets 275 362
Deferred charges (Lexico acquisition and
public offering) 1,267 -
------------- -------------
Total other assets 6,745 6,809
------------- -------------
Total assets 18,598 19,679
============= =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable 968 366
Accrued expenses 1,045 805
Accrued compensation 551 623
Deferred revenues, short-term 16 465
------------- -------------
Total current liabilities 2,580 2,259
------------- -------------
Long-term liabilities:
Liability in respect of employee
severance obligations 1,233 828
Deferred tax liability 14 -
------------- -------------
Total long-term Liabilities 1,247 828
------------- -------------
Stockholders' equity:
Common stock; $0.001 par value;
30,000,000 shares authorized; 7,859,890
and 7,809,394 shares issued and
outstanding as of December 31, 2007
and 2006, respectively 8 8
Additional paid-in capital 73,893 71,599
Accumulated other comprehensive loss (28) (31)
Accumulated deficit (59,102) (54,984)
------------- -------------
Total stockholders' equity 14,771 16,592
------------- -------------
Total liabilities and stockholders' equity $18,598 $19,679
============= =============
Appendix A
Explanation of Non-GAAP Financial Measures
This earning release and the accompanying financial tables include both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures. The non-GAAP financial measure we refer to, Adjusted EBITDA, represents net earnings before interest, taxes, depreciation, amortization, stock-based compensation, foreign currency exchange rate differences and certain non-recurring revenues and expenses. We also refer to Adjusted Cost of Revenue, Adjusted Research and Development, Adjusted Sales and Marketing, Adjusted General and Administrative, and Adjusted Operating Expenses, which are our GAAP expenses adjusted for the expense items we exclude from Adjusted EBITDA.
We use Adjusted EBITDA as an additional measure of our overall performance for purposes of business decision-making, developing budgets and managing expenditures. It is useful because it removes the impact of our capital structure (interest expense), asset base (amortization and depreciation), stock-based compensation expenses, taxes, foreign currency exchange rate differences and certain non-recurring revenues and expenses from our results of operations. We believe that the presentation of Adjusted EBITDA provides useful information to investors in their analysis of our results of operations for reasons similar to the reasons why we find it useful and because these measures enhance their overall understanding of the financial performance and prospects of our ongoing business operations. By reporting Adjusted EBITDA, we provide a basis for comparison of our business operations between current, past and future periods, and peer companies in our industry.
More specifically, we believe that removing these impacts is important for several reasons:
-- Amortization of Intangible Assets. Adjusted EBITDA disregards amortization of intangible assets. Specifically, we exclude (a) amortization of acquired technology resulting from the acquisition of Brainboost Technology, LLC, developer of the Brainboost Answer Engine in December 2005; and (b) amortization of intangible assets resulting from the acquisition of WikiAnswers and other related assets in November 2006. These acquisitions resulted in operating expenses that would not otherwise have been incurred. We believe that excluding such expenses is significant to investors, due to the fact that they derive from prior acquisition decisions and are not necessarily indicative of future cash operating costs. In addition, we believe that the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. While we exclude the aforesaid expenses from Adjusted EBITDA we do not exclude revenues derived as a result of such acquisitions. The amount of revenue that resulted from the acquisition of WikiAnswers and other related assets, for the years ended December 31, 2007 and 2006 was $1,301 thousand and $62 thousand, respectively. The amount of revenue that resulted from the acquisition of technology from Brainboost is not quantifiable due to the nature of its integration.
-- Stock-based Compensation Expense. Adjusted EBITDA disregards expenses associated with stock-based compensation, a non-cash expense arising from the grant of stock-based awards to employees and directors. We believe that, because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, excluding stock-based compensation from Adjusted EBITDA enhances the ability of management and investors to make period-to-period comparisons of operating performance and to make meaningful comparisons between our performance and the performance of other companies. Investors are cautioned that stock-based compensation is offered to employees as a key incentive to continue their contribution to the operating results of the company in future periods. Adjusted EBITDA also disregards compensation costs resulting from certain portions of the stock component of the Brainboost purchase price that were deemed compensation expense. Such stock-based compensation should be viewed by investors as a non-recurring, one-time event and its exclusion enhances the understanding of our operating results going forward.
-- Depreciation, Interest, Taxes and Exchange Rate Differences. Adjusted EBITDA excludes depreciation, interest, taxes and foreign exchange rate differences. We believe that, excluding these items from the Adjusted EBITDA measure provides investors with additional information to measure our performance, by excluding potential differences caused by variations in capital structures (affecting interest expense), asset composition, and tax positions.
-- Terminated Lexico Acquisition and Follow-On Offering. We exclude the costs associated with our proposed acquisition of Lexico and the cancellation of our follow-on offering. We believe that, excluding these costs provides investors with additional information to measure our performance, by excluding events that are of a non-recurring nature.
-- Subscription Revenues. Adjusted EBITDA disregards $425,000 in deferred subscription revenues. Prior to December 2003, we sold lifetime subscriptions to our GuruNet service, generally for $40 per subscription. In December 2003, we decided to alter our pricing model and moved to an annual subscription model, for which we generally charged our subscribers $30 per year. We have not sold subscriptions since our launch of Answers.com in January 2005. In February 2007, we terminated the GuruNet service and recognized $425 thousand of deferred revenue as revenue during the quarter ended March 31, 2007. We believe that the recognition of the $425 thousand of revenue is a one-time, non-cash event and is not reflective of our core business and core operating results, and that its exclusion provides investors with a better understanding of our operating results.
-- Layoff Costs. Adjusted EBITDA disregards third quarter charges associated with a restructuring event. In July 2007, a search engine algorithm adjustment by Google led to a drop in Google directed traffic to Answers.com. This adjustment reduced our overall traffic by approximately 28% based on the average traffic directed to Answers.com from Google for the week prior to the adjustment as compared to the week after. As a result, our revenue declined proportionately. In response to this Google algorithm adjustment, we reduced our headcount and related compensation costs, reducing our base payroll expenses by approximately 12%. We believe that, excluding these costs provides investors with additional information to measure our performance, by excluding events that are of a non-recurring nature.
Adjusted EBITDA is not a measure of liquidity or financial performance under generally accepted accounting principles and should not be considered in isolation from, or as a substitute for, a measure of financial performance prepared in accordance with GAAP. Investors are cautioned that there are inherent limitations associated with the use of Adjusted EBITDA as an analytical tool. Some of these limitations are:
-- Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles;
-- Many of the adjustments to Adjusted EBITDA reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future;
-- Other companies, including other companies in our industry, may calculate Adjusted EBITDA differently than us, thus limiting its usefulness as a comparative tool;
-- Adjusted EBITDA does not reflect the periodic costs of certain tangible and intangible assets used in generating revenues in our business;
-- Adjusted EBITDA does not reflect changes in our cash and investment securities and the results of our investments;
-- Adjusted EBITDA excludes taxes, which is a significant cost of operating a business; and
-- Because Adjusted EBITDA does not include stock-based compensation, it does not reflect the cost of granting employees equity awards, a key factor in management's ability to hire and retain employees.
We compensate for these limitations by providing specific information in the reconciliation to the GAAP amounts excluded from Adjusted EBITDA.
SOURCE: Answers Corporation
Investor Answers Corporation Bruce D. Smith, CFA Chief Strategic Officer 646-502-4780 bruce@answers.com or Press Technology PR for Answers.com Alison Minaglia 203-972-3170 or 917-902-3404 aminaglia@technologypr.com
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