Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Answers CORP | form8-k.htm |
| EX-99.2 - EXHIBIT 99.2 - Answers CORP | exh99-2.htm |
Answers.com
Reports Q1 2010 Financial Results
Traffic
Up 41% Year-over-Year; $1.57 Million Cash Flow from Operations
New York, NY, May 3, 2010 -
Answers Corporation (NASDAQ: ANSW), creators of the leading answer engine
Answers.com®, which includes the properties WikiAnswers® and ReferenceAnswers™,
today reported unaudited financial results for its first quarter ended
March 31, 2010.
“We are
pleased with overall Answers.com traffic and revenues, which grew 41% and 21%
year-over-year. The WikiAnswers component’s traffic and revenues grew 69% and
42% year-over-year,” said Robert Rosenschein, Chairman and CEO. “Our U.S.
audience size in March was 51.2 million unique visitors, ranking us #18 on the
comScore charts, right ahead of Craigslist and the Weather Channel. Globally,
our monthly unique visitors were 76 million, making Answers.com the 33rd highest
site worldwide.”
Rosenschein
added, “This quarter we will begin unveiling a series of new mobile and social
media initiatives to start capitalizing on dramatic new Web opportunities. Over
the course of 2010, we will also build new features which emphasize database
quality, which we believe will drive traffic and revenue growth, by
automatically empowering the broader population of contributors, even the more
casual ones, to conveniently curate their own corner of our database. We have
$24.4 million in cash and investments and are looking forward to a great
2010.”
Financial
Results at a Glance
(in
thousands)
|
Quarterly Results
(Unaudited)
|
Q1
2009
|
Q1
2010
|
Change
|
||
|
Revenues
|
$4,747
|
$5,726
|
21%
|
||
|
Operating
income
|
$1,097
|
$1,227
|
12%
|
||
|
Adjusted
EBITDA
|
$1,744
|
$1,840
|
6%
|
||
|
Cash
provided by operating activities
|
$1,241
|
$1,569
|
26%
|
See
Appendix A of this earnings release for the 2009 and 2010 quarterly revenue,
traffic and RPM data of our two Web properties.
Conference
Call
Answers.com
will host a conference call today, May 3, 2010, at 8:30 A.M. (Eastern Time) to
be broadcast over the Internet at http://ir.answers.com. To participate via
telephone, please dial (888) 396-3782 and request the Answers call. A
replay will be available on the site shortly after the call.
About
Answers Corporation
Answers
Corporation (NASDAQ: ANSW) owns and operates Answers.com, the leading Q&A
site, which includes WikiAnswers and ReferenceAnswers. The site supports
English, French, Italian, German, Spanish, and Tagalog (Filipino). WikiAnswers
is a community-generated social knowledge Q&A platform, leveraging
wiki-based technologies. Through the contributions of its large and growing
community, answers are improved and updated over time. The award-winning
ReferenceAnswers includes content on millions of topics from over 250 licensed
dictionaries and encyclopedias from leading publishers, including Houghton
Mifflin, Barron's and Encyclopedia Britannica. (answ-f)
Answers.com,
WikiAnswers and ReferenceAnswers are trademarks of Answers Corporation. All
other marks belong to their respective owners.
For
investor information, visit http://ir.answers.com.
Follow
www.Answers.com on Twitter as http://twitter.com/answersdotcom.
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 ability to maintain or improve
monetization, particularly in light of the current challenging economic
environment; our ability to maintain or improve traffic; a decision by Google or
other search engines to block our pages from users' search results or otherwise
adjust their algorithms in a manner detrimental to us, as experienced in July
2007; a potential termination of our Google Services Agreement; a failure of
WikiAnswers to experience continued growth in accordance with our expectations;
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; an increasingly competitive environment for our business; and other
risk factors identified from time to time in our SEC filings. 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
ir.answers.com. The information in Answers.com’s 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, including “Adjusted EBITDA”. The tables attached
to this press release include reconciliations of these non-GAAP financial
measures to the nearest GAAP financial measures. In addition, an “Explanation of
Non-GAAP Financial Measures” is set forth in Appendix B attached to this press
release.
(Tables
and Explanation of Non-GAAP Financial Measures, to follow)
| Investor Contact: | Press Contact: |
| Bruce D. Smith, CFA | Renee Blodgett |
| Chief Strategic Officer | Magic Sauce Media |
| bruce@answers.com | renee at magicsaucemedia dot com |
| 646.502.4780 | 617.620.9664 |
Answers
Corporation
Unaudited
Condensed Consolidated Statements of Income
(in
thousands)
|
Three
months ended March 31
|
|||
|
2009
|
2010
|
||
|
$
|
$
|
||
|
Revenues:
|
|||
|
Advertising
revenue -
|
|||
|
WikiAnswers
|
3,162
|
4,489
|
|
|
ReferenceAnswers
|
1,567
|
1,218
|
|
|
Answers
service licensing
|
18
|
19
|
|
|
4,747
|
5,726
|
||
|
Costs
and expenses:
|
|||
|
Cost
of revenue
|
1,059
|
1,437
|
|
|
Research
and development
|
873
|
1,061
|
|
|
Community
development and marketing
|
499
|
744
|
|
|
General
and administrative
|
1,219
|
1,257
|
|
|
Total
operating expenses
|
3,650
|
4,499
|
|
|
Operating
income
|
1,097
|
1,227
|
|
|
Interest
income (expense), net
|
(87)
|
11
|
|
|
Other
income (expense), net
|
15
|
(8)
|
|
|
Gain
resulting from fair value adjustment of warrants, net
|
2,010
|
615
|
|
|
Income
before income taxes
|
3,035
|
1,845
|
|
|
Income
tax benefit (expense), net
|
6
|
(91)
|
|
|
Net
income
|
3,041
|
1,754
|
|
Answers
Corporation
Non-GAAP
Financial Measures and Reconciliation of Non-GAAP Financial
Measures
to
the nearest comparable GAAP Measures
(in
thousands)
|
Three
months ended March 31
|
|||
|
2009
|
2010
|
||
|
Adjusted
Cost of Revenue
|
|||
|
Cost
of revenue
|
$1,059
|
$1,437
|
|
|
Stock-based
compensation expense
|
(34)
|
(28)
|
|
|
Depreciation
and amortization
|
(137)
|
(203)
|
|
|
$888
|
$1,206
|
||
|
Adjusted
Research and Development
|
|||
|
Research
and development
|
$873
|
$1,061
|
|
|
Stock-based
compensation expense
|
(83)
|
(73)
|
|
|
Depreciation
and amortization
|
(33)
|
(35)
|
|
|
$757
|
$953
|
||
|
Adjusted
Community Development and Marketing
|
|||
|
Community
development and marketing
|
$499
|
$744
|
|
|
Stock-based
compensation expense
|
(33)
|
(35)
|
|
|
Depreciation
and amortization
|
(18)
|
(17)
|
|
|
$448
|
$692
|
||
|
Adjusted
General and Administrative
|
|||
|
General
and administrative
|
$1,219
|
$1,257
|
|
|
Stock-based
compensation expense
|
(236)
|
(177)
|
|
|
Depreciation
and amortization
|
(73)
|
(45)
|
|
|
$910
|
$1,035
|
||
|
Adjusted
Operating Expenses
|
|||
|
Operating
expenses
|
$3,650
|
$4,499
|
|
|
Stock-based
compensation expense
|
(386)
|
(313)
|
|
|
Depreciation
and amortization
|
(261)
|
(300)
|
|
|
$3,003
|
$3,886
|
||
|
Adjusted
EBITDA
|
|||
|
Net
income
|
$3,041
|
$1,754
|
|
|
Income
tax (benefit) expense
|
(6)
|
91
|
|
|
Gain
resulting from fair value adjustment of warrants, net
|
(2,010)
|
(615)
|
|
|
Other
(income) expense
|
(15)
|
8
|
|
|
Interest
(income) expense
|
87
|
(11)
|
|
|
Stock-based
compensation expense
|
386
|
313
|
|
|
Depreciation
and amortization
|
261
|
300
|
|
|
$1,744
|
$1,840
|
||
See
discussion regarding Adjusted EBITDA in Appendix B of this earnings release for
an explanation of the reconciling items noted above.
Answers
Corporation
Unaudited
Condensed Consolidated Statements of Cash Flows
(in
thousands)
|
Three
months ended March 31
|
|||
|
2009
|
2010
|
||
|
$
|
$
|
||
|
Cash
flows from operating activities:
|
|||
|
Net
income
|
3,041
|
1,754
|
|
|
Adjustments
to reconcile net income to net cash flows from operating
activities:
|
|||
|
Depreciation
and amortization
|
256
|
300
|
|
|
Decrease
(increase) in deposits in respect of employee severance
obligations
|
34
|
(124)
|
|
|
Increase
(decrease) in liability in respect of employee severance
obligations
|
(35)
|
197
|
|
|
Stock-based
compensation to employees and directors
|
386
|
313
|
|
|
Decrease
(increase) in deferred tax asset
|
3
|
(8)
|
|
|
Decrease
in deferred tax liability
|
-
|
(1)
|
|
|
Fair
value adjustments of warrants, net
|
(2,010)
|
(615)
|
|
|
Loss
on disposal of property and equipment
|
6
|
2
|
|
|
Increase
in short-term deposits related to hedging activity
|
-
|
(100)
|
|
|
Loss
from exchange rate forward contracts, net
|
11
|
-
|
|
|
Loss
from exchange rate differences
|
(15)
|
(7)
|
|
|
Changes
in operating assets and liabilities:
|
|||
|
Increase
in accounts receivable, and prepaid expenses and other current
assets
|
(182)
|
(210)
|
|
|
Decrease
(increase) in prepaid expenses, long-term, and
other assets
|
(79)
|
188
|
|
|
Decrease
in accounts payable
|
(260)
|
(65)
|
|
|
Increase
(decrease) in accrued expenses, accrued compensation and other current
liabilities
|
85
|
(55)
|
|
|
Net
cash provided by operating activities
|
1,241
|
1,569
|
|
|
Cash
flows from investing activities:
|
|||
|
Capital
expenditures
|
(212)
|
(118)
|
|
|
Decrease
(increase) in long-term deposits
|
(7)
|
6
|
|
|
Purchases
of marketable securities
|
-
|
(3,516)
|
|
|
Net
cash used in investing activities
|
(219)
|
(3,628)
|
|
|
Cash
flows from financing activities:
|
|||
|
Repayment
of capital lease obligation
|
(19)
|
(20)
|
|
|
Dividends
paid
|
(91)
|
(194)
|
|
|
Exercise
of common stock options
|
8
|
46
|
|
|
Net
cash used in financing activities
|
(102)
|
(168)
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
(15)
|
3
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
905
|
(2,224)
|
|
|
Cash
and cash equivalents at beginning of period
|
11,739
|
22,234
|
|
|
Cash
and cash equivalents at end of period
|
12,644
|
20,010
|
|
Answers
Corporation
Unaudited
Condensed Consolidated Balance Sheets
(in
thousands, except for share and per share data)
|
December
31
2009
|
March
31
2010
|
||
|
$
|
$
|
||
|
Assets
|
|||
|
Current
assets:
|
|||
|
Cash
and cash equivalents
|
22,234
|
20,010
|
|
|
Marketable
securities
|
795
|
4,314
|
|
|
Short-term
deposits (restricted)
|
-
|
100
|
|
|
Accounts
receivable
|
2,350
|
2,502
|
|
|
Prepaid
expenses and other current assets
|
907
|
865
|
|
|
Deferred
tax asset
|
34
|
28
|
|
|
Total
current assets
|
26,320
|
27,819
|
|
|
Long-term
deposits (restricted)
|
276
|
270
|
|
|
Deposits
in respect of employee severance obligations
|
1,756
|
1,851
|
|
|
Property
and equipment, net of $2,464 and $2,657 accumulated
depreciation
as
of December 31, 2009 and March 31, 2010, respectively
|
1,858
|
1,982
|
|
|
Other
assets:
|
|||
|
Intangible
assets, net of $657 and $688 accumulated amortization as
of December 31, 2009 and
March 31, 2010, respectively
|
797
|
766
|
|
|
Goodwill
|
437
|
437
|
|
|
Prepaid
expenses, long-term, and other assets
|
167
|
79
|
|
|
Deferred
tax asset, long-term
|
14
|
28
|
|
|
Total
other assets
|
1,415
|
1,310
|
|
|
Total
assets
|
31,625
|
33,232
|
|
|
Liabilities
and stockholders' equity
|
|||
|
Current
liabilities:
|
|||
|
Accounts
payable
|
403
|
614
|
|
|
Accrued
expenses and other current liabilities
|
774
|
744
|
|
|
Accrued
compensation
|
1,009
|
982
|
|
|
Capital
lease obligation – current portion
|
82
|
83
|
|
|
Total
current liabilities
|
2,268
|
2,423
|
|
|
Long-term
liabilities:
|
|||
|
Liability
in respect of employee severance obligations
|
1,838
|
2,005
|
|
|
Capital
lease obligation, net of current portion
|
24
|
2
|
|
|
Deferred
tax liability
|
38
|
36
|
|
|
Series
A and Series B Warrants
|
8,008
|
7,393
|
|
|
Total
long-term liabilities
|
9,908
|
9,436
|
|
|
Series A and Series B
convertible preferred stock: $0.01 par value; stated value and
liquidation preference of $101.76 per share for the Series A and
$100 per share for the Series B Convertible Preferred Stock; 6%
cumulative annual dividend; 130,000 shares authorized, issued and
outstanding
|
2,381
|
2,967
|
|
|
Stockholders'
equity:
|
|||
|
Preferred
stock: $0.01 par value; 870,000 shares authorized, none
issued
|
-
|
-
|
|
|
Common
stock; $0.001 par value; 100,000,000 shares authorized; 7,951,329 and
7,958,928 shares issued
and outstanding as of December 31, 2009 and March 31, 2010,
respectively
|
8
|
8
|
|
|
Additional
paid-in capital
|
88,539
|
88,118
|
|
|
Accumulated
other comprehensive income
|
28
|
33
|
|
|
Accumulated
deficit
|
(71,507)
|
(69,753)
|
|
|
Total
stockholders' equity
|
17,068
|
18,406
|
|
|
Total
liabilities and stockholders' equity
|
31,625
|
33,232
|
Appendix
A
|
2009
|
2010
|
||||||||
|
Q1
|
Q2
|
Q3
|
Q4
|
Q1
|
|||||
|
Ad
Revenue
($
- in thousands)
|
|||||||||
|
WikiAnswers
|
3,162
|
3,400
|
3,422
|
4,470
|
4,489
|
||||
|
ReferenceAnswers
|
1,567
|
1,585
|
1,548
|
1,530
|
1,218
|
||||
|
Total
|
4,729
|
4,985
|
4,970
|
6,000
|
5,707
|
||||
|
WikiAnswers
|
67%
|
68%
|
69%
|
75%
|
79%
|
||||
|
ReferenceAnswers
|
33%
|
32%
|
31%
|
25%
|
21%
|
||||
|
Total
|
100%
|
100%
|
100%
|
100%
|
100%
|
||||
|
Traffic
– Average Daily Page Views
|
|||||||||
|
WikiAnswers
|
5,337,000
|
6,082,000
|
6,336,000
|
8,199,000
|
8,995,000
|
||||
|
ReferenceAnswers
|
2,982,000
|
2,965,000
|
2,857,000
|
2,737,000
|
2,737,000
|
||||
|
Total
|
8,319,000
|
9,047,000
|
9,193,000
|
10,936,000
|
11,732,000
|
||||
|
WikiAnswers
|
64%
|
67%
|
69%
|
75%
|
77%
|
||||
|
ReferenceAnswers
|
36%
|
33%
|
31%
|
25%
|
23%
|
||||
|
Total
|
100%
|
100%
|
100%
|
100%
|
100%
|
||||
|
RPM
|
|||||||||
|
WikiAnswers
|
$6.58
|
$6.14
|
$5.87
|
$5.93
|
$5.55
|
||||
|
ReferenceAnswers
|
$5.84
|
$5.87
|
$5.89
|
$6.08
|
$4.94
|
||||
Appendix
B
Explanation
of Non-GAAP Financial Measures
This
earnings 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, gain (loss) resulting from fair value adjustment of
warrants, stock-based compensation and foreign currency exchange rate
differences. We also refer to Adjusted Cost of Revenue, Adjusted Research and
Development, Adjusted Community Development 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
and gain (loss) resulting from fair value adjustment of warrants), asset base
(amortization and depreciation), stock-based compensation expenses, taxes and
foreign currency exchange rate differences 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 amortization of intangible assets
resulting from the acquisition of WikiAnswers and other related assets in
November 2006. This acquisition 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 three months
ended March 31, 2009 and 2010, was $3.16 million and $4.49 million,
respectively.
|
|
·
|
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 compare financial results over multiple
periods.
|
|
·
|
Depreciation, Interest, Gain
(Loss) Resulting from Fair Value Adjustment of Warrants, Taxes and Foreign
Currency 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.
|
Adjusted
EBITDA is not a measure of liquidity or financial performance under GAAP 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 interest income from our investments in cash and
investment securities;
|
|
·
|
Adjusted
EBITDA does not reflect gains and losses from foreign currency exchange
rate differences;
|
|
·
|
Adjusted
EBITDA does not reflect interest expense and other cost relating to
financing our business, including gains and losses resulting from fair
value adjustment of Redpoint Ventures’
warrants;
|
|
·
|
Adjusted
EBITDA excludes taxes, which is an integral cost of doing
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.