Cobalt's 1st Quarter Net Loss Doubles
SEATTLE--April 24, 2001--The Cobalt Group, a provider of e-business products and services to the automotive industry, today announced financial results for its first quarter, ended March 31, 2001.Pro forma revenue for the first quarter of 2001 was $13.6 million, compared to $8.9 million in the first quarter of 2000. Pro forma revenue consists of reported revenues plus $1.3 million billed to DaimlerChrysler Corporation and accounted for as equity subscriptions. Reported revenue was $12.3 million, compared to $8.9 million in the first quarter of 2000.
Net loss for the first quarter of 2001 was $7.5 million or $0.37 per share, ahead of First Call consensus estimates of $0.42. Pro forma net loss for the first quarter of 2001 was $7.5 million or $0.37 per share compared to pro forma net loss of $3.8 million or $0.22 per share in the first quarter of 2000. Pro forma net loss and net loss per share amounts exclude gain on the sale of the company's YachtWorld.com division, the cumulative effects of changes in accounting principle and the $1.2 million non-cash charge related to the dissolution of the strategic agreement between the company and General Electric Capital Auto Financial Services Corporation (GE Capital) relating to the development and operation of the company's MotorPlace Auto Exchange wholesale used vehicle exchange.
"Attempting to put a positive on the report, John Holt,president and CEO of The Cobalt Group, said "We are pleased with our results for the first quarter, particularly in the face of choppy economic conditions. During the quarter, we increased the number of auto dealer Web site clients using our e-business products from 8,500 to 8,950, and we continued to deepen key relationships with major auto manufacturers and NADA. Our growth demonstrates the automotive industry's continued adoption of the Internet as a cost-effective medium for reaching nearly two-thirds of its customers. This, paired with Cobalt's recurring revenue model and our commitment to execution, resulted in another solid quarter."
Holt did not comment on why, if his company has had a more than 100% increase in losses since the same period one year ago, that he felt that the company's position proves anything affirmative.
Exceptional items during the quarter included the $1.2 million gain on the sale of YachtWorld.com upon receipt of $1.2 million in cash in final settlement of the obligation of Boats.com to Cobalt. Also in the quarter, Cobalt and GE Capital reached agreement to dissolve the strategic agreement related to MotorPlace Auto Exchange, and Cobalt accelerated the amortization of warrants issued to GE Capital in connection with the agreement. GE Capital remains a strategic customer of Cobalt and MotorPlace Auto Exchange and Cobalt is now fully responsible for revenues and expenses related to MotorPlace Auto Exchange and has included the effects of this treatment in the current quarter and future estimates.
During the quarter, Cobalt secured a $10 million revolving credit facility from Silicon Valley Bank of Santa Clara, Calif. Without drawing on this facility, the company ended the quarter with $10.4 million in cash.
"David Snyder, executive vice president and CFO of The Cobalt Group, said, "Most of our metrics suggest that our operating performance is in line with our expectations. Additionally, we believe that we have managed our capital spending appropriately to accommodate the unanticipated cash requirements of Motorplace Auto Exchange. However," continued Snyder, "we caution our shareholders that significant uncertainty about the performance of both the general economy and the automotive industry makes forecasting even more difficult than usual."
The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially.
| -- | For the second quarter of 2001 the company expects revenues to be between $12.5 million and $13.5 million and pro forma revenues to be between $14 million and $15 million. |
| -- | The company expects operating expenses in the second quarter of 2001 to be between 10% to 15% greater than operating expenses for the first quarter, excluding the $1.2 million non-cash charge relating to the dissolution of the GE Capital agreement. Cost of revenues for the second quarter of 2001 are expected to remain in the range of 18% to 22% of pro forma revenue, consistent with the first quarter. Based on these estimates, the company anticipates a loss per share of $0.45 to $0.50 in the second quarter. |
| -- | The company expects loss per share for the year to be in the range of $1.45 to $1.50. Approximately $0.05 of this estimated loss is due to the assumption of 100% of the costs related to MotorPlace Auto Exchange, net of savings in other portions of the company's operations. |
| -- | Annual sales and marketing expenses are expected to be 40% to 45% of pro forma revenues for the year 2001. The company further expects annual general and administrative expenses to be between 40% and 45% of pro forma revenues and annual product development expenses to be between 20% to 25% of pro forma revenues in 2001. |
| -- | Included in annual forecasted operating expenses and cost of revenues for 2001 are non-cash charges of $4.4 million for amortization of intangible assets, $1.8 million in stock-based compensation, and $7 to $9 million in depreciation and other amortization. |
| -- | For 2001, the company estimates SAB 101 deferrals will be between $1.5 million and $2 million and between $5.5 million and $6.5 million in amounts billed to DaimlerChrysler will be characterized as equity subscriptions. |
| -- | The company expects adjusted EBITDA for 2001 to be a loss of between $7 million and $10 million. |
Cobalt's business outlook statements, as well as statements regarding Cobalt's future market share, investment plans, business strategy and prospects are based on current expectations as of today only. Due to economic and automotive market variables, among other factors, actual results could differ from the stated outlook and careful consideration should be given to the cautionary statement at the end of this release. Cobalt makes these statements as of today and does not undertake any obligation to update them. It is currently expected that these business outlook statements will not be updated until the release of Cobalt's next quarterly earnings announcement. Cobalt reserves the right to update the outlook on the occurrence of material events or for any other reason during the quarter.
First Quarter Highlights
-- During the quarter, the company expanded its partnership with
the National Automobile Dealers Association (NADA). NADA
endorsed five Cobalt e-business packages designed to help auto
dealers successfully manage their online businesses and
strengthen customer relationships.
-- In late March, Cobalt and the Chrysler Group completed the
launch of the Five Star dealer e-business program, which began
rolling out nationwide last August. Cobalt provides e-business
tools, customer relationship management capabilities,
integrated Web sites, and best practices training to more than
2,200 Five Star dealers as part of the program.
-- In March, the company teamed with Dubuque Data Services (DDS)
to provide more dealers with the ability to offer accurate,
detailed and timely vehicle inventory listings to online car
shoppers. With 350 dealers nationwide, DDS is an industry
leader in providing integrated information management
solutions to the automotive, medium/heavy truck, and equipment
retailing marketplaces.
-- In late February, Cobalt hired Doug Beighle as vice president
of account services, responsible for growing Cobalt's
strategic auto manufacturer accounts, as well as working with
the company's major auto dealer group clients. Beighle brings
nearly 20 years of proven sales and service experience to
Cobalt, having held executive positions at Request4Bid.com,
Computech Systems Corporation, and Quebecor Integrated Media.
-- In February, Cobalt launched ChronicleCars.com for the Houston
Chronicle, a Hearst newspaper. ChronicleCars.com provides
consumers with direct online access to over 15,000 new and
used vehicles from car dealers in the greater Houston area.
-- In early February, at the NADA Convention, Cobalt launched an
all-new MotorPlace.com portal for the auto industry, making it
the only full-service online resource for dealers. The new
MotorPlace.com includes three online marketplaces,
personalized dealer pages and extensive automotive and
industry news coverage.
-- During February, Cobalt partnered with Respond and
Edmunds.com, Inc. to launch Pick-or-Pass(TM). With
Pick-or-Pass, dealers view customer lead information and pay
for only those leads they want to pursue. Pick-or-Pass offers
a low-cost alternative to online buying services that require
expensive fixed subscription fees and provide no control over
the type or quantity of leads dealers receive. Dealers access
Pick-or-Pass and purchase leads through Cobalt's newly
enhanced MotorPlace.com dealer portal.
-- In January, Cobalt announced an exclusive initiative with
Volkswagen to help the auto manufacturer extend its online
presence into Canada. Cobalt provides Volkswagen's 150
Canadian auto dealers with e-business marketing and reporting
tools and custom Canadian French and English language branded
Web sites. As part of the program, Volkswagen has stipulated
that it will provide leads from the manufacturer site
(www.vw.com) only to Cobalt-built dealer sites.
-- During January, the company released PartsVoice DirectLink, a
new Internet-based product that makes original equipment
manufacturer parts inventory easily accessible on a dealer's
Web site to anyone searching for parts. DirectLink allows
wholesale parts purchasers and consumers to find and order
parts on a dealer's Web site. The company launched two
additional new e-business parts products in January,
PartsVoice Discount Parts Locator and PartsVoice Idle Stock
Relocator. The two products work together to provide dealers
with a cost-effective idle parts management solution.
The Cobalt Group, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)
Three months ended
March 31,
-----------------------
2001 2000
----------- -----------
Revenues
Internet applications and
professional services $ 8,713 $ 5,420
Data extraction and aggregation services 3,116 2,889
Other services 454 605
----------- -----------
Total revenues 12,283 8,914
Cost of revenues 2,495 1,775
----------- -----------
Gross profit 9,788 7,139
Operating expenses
Sales and marketing, excluding stock-based
compensation of $1,252 and $68,
respectively 6,963 4,276
Product development, excluding stock-based
compensation of $37 and $46 respectively 3,169 1,254
General and administrative,
excluding stock-based compensation
of $104 and $152 respectively 6,067 3,783
Amortization of intangible assets 1,123 1,508
Stock-based compensation 1,393 290
----------- -----------
Total operating expenses 18,715 11,111
----------- -----------
Loss from operations (8,927) (3,972)
Interest expense (74) (68)
Interest income 299 317
Gain on sale of YachtWorld 1,175 6,446
Other income, net (11) (64)
----------- -----------
Net income (loss) $ (7,538) $ 2,659
=========== ===========
Net income (loss) prior to change
in accounting principle $ (7,538) $ 2,659
=========== ===========
Cumulative effect of change
in accounting principle $ -- $ (2,164)
=========== ===========
Net income (loss) $ (7,538) $ 495
=========== ===========
Basic net income (loss) per share $ (0.37) $ 0.03
=========== ===========
Weighted-average shares outstanding - basic 20,287,918 17,082,768
=========== ===========
Diluted net income (loss) per share $ (0.37) $ 0.03
=========== ===========
Weighted-average shares outstanding - diluted 20,287,918 18,587,055
=========== ===========
The Cobalt Group, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
March 31, Dec. 31,
2001 2000
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 10,354 $ 16,577
Accounts receivable, net of
allowance for doubtful accounts
of $1,135 and $944, respectively 10,427 8,892
Other current assets 1,508 1,673
--------- ---------
22,289 27,142
Capital assets, net 15,125 14,256
Intangible assets, net 14,446 15,569
Other assets 653 959
--------- ---------
Total assets $ 52,513 $ 57,926
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 2,661 $ 4,696
Accrued liabilities 3,052 2,187
Deferred revenues, current portion 6,012 4,668
Notes payable - 270
Software financing contract, current portion 631 1,054
Capital lease obligations, current portion 723 900
--------- ---------
13,079 13,775
Non-current liabilities
Deferred revenues, non-current portion 1,298 1,348
Software financing contract,
non-current portion 279 279
Capital lease obligations,
non-current portion 156 269
--------- ---------
1,733 1,896
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; 20,309,969
and 20,140,376 issued and outstanding,
respectively 203 201
Additional paid-in capital 124,141 124,021
Deferred equity subscriptions (11,592) (12,951)
Deferred equity expenses (664) (2,167)
Notes receivable from shareholders (144) (144)
Accumulated deficit (74,243) (66,705)
--------- ---------
37,701 42,255
--------- ---------
Total liabilities and shareholders' equity $ 52,513 $ 57,926
========= =========
The Cobalt Group, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Quarter ended
March 31,
2001 2000
-------------------
Cash Flows from Operating Activities
Net income (loss) $ (7,538) $ 495
Adjustments to reconcile net loss
to net cash used in operating activities:
Amortization of deferred equity expenses 1,460 290
Depreciation and amortization 2,380 2,040
Amortization of deferred equity subscriptions
in excess of payments received 866 -
Gain on sale of YachtWorld (1,175) (6,382)
Changes in:
Accounts receivable (1,075) (1,564)
Other assets 471 1,133
Accounts payable and accrued liabilities (1,900) (138)
Deferred revenues 1,295 3,038
-------------------
Net cash used in operating activities (5,217) (1,088)
-------------------
Cash Flows from Investing Activities
Acquisition of capital assets (2,127) (1,593)
Proceeds from sale of YachtWorld 1,175 6,674
Investment in IntegraLink - (1,614)
Proceeds from sale of capital assets - 24
-------------------
Net cash provided by (used in)
investing activities (952) 3,491
-------------------
Cash Flows from Financing Activities
Proceeds from exercise of stock options 32 331
Proceeds from employee stock purchase plan 132 175
Proceeds from deferred equity subscriptions 495 -
Payment of capital lease obligations and
software financing contract (713) (316)
-------------------
Net cash provided by (used in)
financing activities (54) 190
-------------------
Net Change In Cash (6,223) 2,593
Cash, Beginning of Period 16,577 14,224
-------------------
Cash, End of Period $ 10,354 $ 16,817
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