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WOW! Cobalt Beats Consensus Estimates - Loses Just $14 Mill in Q3!(?)

24 October 2000

The Cobalt Group Announces Third Quarter 2000 Financial Results

    SEATTLE - Get the marching band ready. In some kind of perverse reporting logic, The Cobalt Group, a provider of e-business products and services to the automotive industry, announced Monday financial results for its third quarter ended Sept. 30, 2000, with jubilant enthusiasm of beating consensus estimates. - (Yes, this is a sarcastic editorial opinion)

    Gross revenue for the third quarter of 2000 increased to $11.3 million, up from $11.0 million in the second quarter of 2000 and up from $7.0 million in the third quarter of 1999, an increase of 3% and 60% respectively. However, net loss for the third quarter was $14.0 million or $0.79 per share. This compares to a net loss of $4.7 million or $0.27 per share in the second quarter of 2000 and a net loss of $5.5 million or $0.52 per share in the third quarter of 1999. So, in other words, while Q3 2000 revenues showed an increase of $4 million from Q3 1999, loses from Q3 to Q3 went up $8.5 million. Uhh, do they use a different kind of accounting system in Seattle?

    Gross revenue for the nine months ended September 30, 2000 was $31.6 million, up from $14.9 million for the comparable nine-month period in 1999. Net loss for the nine months ended Sept. 30, 2000 was $15.6 million or $0.90 per share as compared to a loss of $11.7 million or $2.67 per share for the comparable nine-month period in 1999.

                        The Cobalt Group, Inc.
                 Consolidated Statements of Operations
                              (unaudited)
          (in thousands, except share and per share amounts)

                         Three months ended        Nine months ended
                             September 30,           September 30,
                       -----------------------------------------------
                           2000        1999        2000       1999
                       -----------------------------------------------
Gross revenues
 Web site design and
   hosting services       $ 7,727     $ 3,553    $ 20,890    $ 8,598
 Data extraction and
   aggregation services     3,213       2,810       9,384      4,610
 Other services               366         686       1,304      1,703
                       ----------- ----------- ----------- ----------
   Total gross revenues    11,306       7,049      31,578     14,911

 Less: Amortization of
   non-cash equity
   discounts                  202           -         216          -
                       ----------- ----------- ----------- ----------
    Net revenues           11,104       7,049      31,362     14,911

Cost of revenues,
 exclusive of stock-
 based compensation of 
 $16, $50, $43 and $96,
 respectively               2,117       1,506       6,084      3,143
                       -----------------------------------------------
  Gross profit              8,987       5,543      25,278     11,768

Operating expenses
 Sales and marketing,
   exclusive of stock-
   based compensation
   of $44, $324, $96
   and $598,
   respectively             6,093       3,675      15,541      7,776
 Product development,
   exclusive of stock-
   based compensation 
   of $51, $146, $139
   and $391
   respectively             2,248         834       5,184      1,835
 General and
   administrative,
   exclusive of stock-
   based compensation
   of $101, $531, $474
   and $1,297
   respectively             5,494       3,893      14,297      8,385
    
 Amortization of
   intangible assets        1,584       1,378       4,676      2,364
 Stock-based
   compensation               212       1,051         752      2,382
                       -----------------------------------------------
    Total operating
     expenses              15,631      10,831      40,450     22,742
                       -----------------------------------------------

Loss from operations       (6,644)     (5,288)    (15,172)   (10,974)

Interest expense              (78)       (374)       (297)      (926)
Interest income               277           -         975          -
Intangible asset
 impairment charge         (9,742)          -      (9,742)         -
Gain on sale of
 YachtWorld                 2,212           -       8,658          -
Other income, net             (15)        135         (71)       228
                       -----------------------------------------------
 Net loss               $ (13,990)   $ (5,527)  $ (15,649) $ (11,672)
                       ===============================================
Net loss available to
 common shareholders    $ (13,990)   $ (5,830)  $ (15,649) $ (13,213)
                       ===============================================
Basic and diluted net
 loss per share           $ (0.79)    $ (0.52)    $ (0.90)   $ (2.67)
                       ===============================================
Weighted-average
 shares outstanding    17,777,662  11,286,321  17,429,143  4,955,322
                       ===============================================

                           The Cobalt Group, Inc.
                        Consolidated Balance Sheets
             (in thousands, except share and per share amounts)

                                                 Sept. 30,    Dec. 31,
                                                    2000        1999
                                                 ---------   ---------
                 Assets                         (unaudited)

Current assets
 Cash and cash equivalents                       $ 11,083    $ 14,224
 Accounts receivable, net of allowance for
   doubtful accounts of $920 and $497,
   respectively                                     7,714       4,581
 Other current assets                               1,638       2,225
                                                 ---------   ---------
                                                   20,435      21,030
Capital assets, net                                11,159       4,636
Intangible assets, net                             16,645      27,330
Other assets                                        1,312       1,036
                                                 ---------   ---------
    Total assets                                 $ 49,551    $ 54,032
                                                 =========   =========
       Liabilities and Shareholders' Equity

Current liabilities
 Accounts payable                                $  5,224    $  2,020
 Accrued liabilities                                1,971       1,520
 Deferred revenue                                   3,622       2,456
 Notes payable                                        263           -
 Software financing contract, current portion         669         362
 Capital lease obligations, current portion         1,320         844
                                                 ---------   ---------
                                                   13,069       7,202
Non-current liabilities
 Software financing contract, non-current portion     176          28
 Capital lease obligations, non-current portion       996       1,217
                                                 ---------   ---------
                                                    1,172       1,245
Shareholders' equity
 Preferred stock; $0.01 par value per share;
  100,000,000 shares authorized; 0 shares issued
   and outstanding                                      -           -
 Common stock; $0.01 par value per share;
  200,000,000 shares
  authorized; 17,937,527 and 16,855,431 issued
  and outstanding, respectively                       179         169
 Additional paid-in capital                       109,162      89,957
 Deferred equity expenses                         (16,877)     (3,036)
 Notes receivable from shareholders                  (144)       (144)
 Accumulated deficit                              (57,010)    (41,361)
                                                 ---------   ---------
                                                   35,310      45,585
                                                 ---------   ---------
    Total liabilities and shareholders' equity   $ 49,551    $ 54,032
                                                 =========   =========

MJR