Cobalt Announces Third Quarter 1999 Financial Results
19 October 1999
Cobalt Announces Third Quarter 1999 Financial Results; Record Revenues Increase 30% Over Q2 1999; Up 328% Over Q3 1998
SEATTLE--Oct. 19, 1999--The Cobalt Group, Inc. , a leading provider of automotive e-commerce products and services to automobile dealers and manufacturers, today announced financial results for its third quarter, ended September 30, 1999.Revenues for the third quarter 1999 increased to $7.0 million, an increase of 30% from revenues of $5.4 million in the second quarter of 1999, and a 328% increase over $1.6 million for the third quarter of 1998. For the nine months ended September 30, 1999, revenues increased 274% to $14.9 million, from $4.0 million during the comparable nine-month period in 1998. During the third quarter of 1999, $4.2 million of revenues were derived from Internet marketing services. This compares to $3.6 million for the second quarter of 1999. The remaining $2.8 million of third quarter revenues is attributable to Cobalt's PartsVoice subsidiary, which was acquired on April 30, 1999. PartsVoice accounted for $1.8 million of second quarter revenues.
Net loss for the third quarter of 1999 was $5.5 million, or $0.37 per share, compared with a second quarter 1999 net loss of $3.8 million, or $0.33 per share, and a net loss of $1.7 million or $0.22 per share in the third quarter of 1998. Net loss for the nine months ended September 30, 1999 was $11.7 million, or $0.94 per share, compared to a net loss of $1.5 million, or $0.19 per share, for the comparable nine-month period in 1998. Net loss for the third quarter of 1999 excluding depreciation, amortization of goodwill and deferred compensation and net interest expense was $2.5 million or $0.16 per share. All per-share amounts are computed on a pro forma diluted basis, which assumes conversion of the convertible preferred stock from the original date of issuance.
"Record revenues were driven by strong growth in Cobalt's automobile dealer client base, particularly for our Internet marketing services," commented Geof Barker, Cobalt's co-Chief Executive Officer. "Successful launches of Internet marketing services to the dealer networks of three auto manufacturers as well as sales of additional services to existing clients spurred both increased client acquisition and higher average revenues per client."
With nearly 1,000 new client additions during the third quarter 1999, Cobalt managed and maintained Web sites for approximately 4,600 dealer clients as of September 30, 1999, including more than 50 of the 100 largest dealer groups in the U.S. Average revenue per client for Web site services increased to $214 per month for the third quarter 1999 compared to $190 per month for the second quarter 1999.
"We are very pleased with the results of the quarter," said John Holt, co-Chief Executive Officer. "With the PartsVoice integration underway and our IPO complete, we have new opportunities and the resources to continue investing in the Company. We will continue to develop new products, grow our customer base and scale our operations to support our clients. The more value we can bring to each of our clients, the more revenue we can generate."
On August 5, 1999, Cobalt completed an initial public offering of 4.5 million shares of common stock at an initial public offering price of $11.00 per share. On August 11, 1999, Cobalt completed a direct sale of 454,545 shares of common stock to GE Financial Assurance Holdings, Inc. for an aggregate purchase price of $5.0 million. All of the shares were offered by the Company. BancBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc., SG Cowen Securities Corporation, and Wit Capital Corporation underwrote the offering. Proceeds from the IPO and direct sale were partially used to fully repay debt associated with the PartsVoice acquisition.
In October, the Company retained Golin/Harris International, a full-service public relations firm. Golin/Harris clients include DaimlerChrysler, Michelin, McDonald's Corporation, Texas Instruments and Nintendo of America Inc. In addition, the Company also retained The Snyder Buscher Group, a Seattle-based investor relations firm.
About The Cobalt Group, Inc.
The Cobalt Group(TM) , based in Seattle, is a leading provider of automotive e-commerce products and services. Through Web development and hosting, data management and online car shopping services, Cobalt drives value to automotive consumers, dealers and manufacturers nationwide.
With approximately 4,600 dealer clients, the Company has been endorsed by 12 automotive manufacturers and more than 50 of the 100 largest dealer groups in the United States. Cobalt operates DealerNet(R) (www.dealernet.com), one of the best-known automotive destination sites on the Web, and PartsVoice(R) (www.partsvoice.com), a leading aftermarket auto parts locating service. For more information, please visit The Cobalt Group at www.cobaltgroup.com.
The Cobalt Group's headquarters are at 2030 First Avenue, Suite 300, Seattle, WA 98121; 800/909-8244 or 206/269-6363.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release may contain forward-looking statements relating to the development of Cobalt's products and services and future operating results, including statements regarding future market share and new products and services. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Actual results may vary significantly from the results expressed or implied in such statements. For a discussion of the risks that could affect Cobalt's future performance, please see "Risk Factors" in Cobalt's most recent quarterly report on Form 10-Q, as filed with the Securities and Exchange Commission. Cobalt undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Cobalt, The Cobalt Group, DealerNet and PartsVoice are trademarks of The Cobalt Group, Inc. All other trademarks are the property of their respective owners.
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,
1998 1999 1998 1999
Revenues $ 1,647 $ 7,049 $ 3,984 $ 14,911
Cost of revenues 333 1,506 746 3,143
------- ------- ------- --------
1,314 5,543 3,238 11,768
Operating Expenses
Sales and marketing 1,218 3,675 2,566 7,776
Product development 261 834 609 1,835
General and
administrative 1,349 5,271 2,937 10,749
Stock based
compensation 172 1,051 279 2,382
------- ------- ------- --------
Total operating
expenses 3,000 10,831 6,391 22,742
------- ------- ------- --------
Loss from operations (1,686) (5,288) (3,153) (10,974)
Gain on sale of
HomeScout 1,626 -
Interest expense (43) (374) (58) (926)
Other income, net 13 135 48 228
------- ------- ------- --------
Net loss $ (1,716) $ (5,527) $ (1,537) $ (11,672)
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Net loss available to
common shareholders $(1,719) $ (5,830) $ (1,545) $ (13,213)
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Basic and diluted
net loss per share $ (0.50) $ (0.52) $ (0.45) $ (2.67)
======= ======= ======= ========
Weighted-average
shares
outstanding 3,438,216 11,286,321 3,423,258 4,955,322
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Pro forma net loss
available to
common
shareholders $ (1,716) $ (5,527) $ (1,537) $ (11,672)
======= ======= ======= ========
Pro forma basic and
diluted net loss
per share $ (0.22) $ (0.37) $ (0.19) $ (0.94)
======= ======= ======= ========
Pro forma weighted-
average shares
outstanding 7,949,150 14,938,073 7,934,192 12,389,063
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The Cobalt Group, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
Dec. 31, 1998 Sept. 30, 1999
(unaudited)
------------- -------------
Assets
Current assets
Cash and cash equivalents $ 5,756 $ 18,205
Short-term investments 983 -
Accounts receivable, net of allowance
for doubtful accounts of $85 and $203
(unaudited), respectively 1,250 3,847
Other current assets 130 1,816
------- --------
8,119 23,868
Capital assets, net of accumulated
depreciation of $410 and $1,252 (unaudited),
respectively 1,453 3,863
Intangible assets, net of accumulated
amortization of $321 and $2,686 (unaudited)
respectively 479 28,661
Other assets 11 1,047
------- --------
Total assets $ 10,062 $ 57,439
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Liabilities, Mandatorily Redeemable
Convertible Preferred Stock and
Shareholders' Deficit
Current liabilities
Accounts payable $ 191 $ 1,786
Accrued liabilities 776 1,158
Deferred revenue 1,290 1,838
Software financing contract,
current portion - 433
Capital lease obligations,
current portion 328 862
------- --------
2,585 6,077
Non-current liabilities
Software financing contract,
non-current portion - 119
Capital lease obligations,
non-current portion 557 1,264
------- --------
557 1,383
Mandatorily redeemable convertible preferred stock
Series A; $0.01 par value per share; 2,106,282 and 0
(unaudited) shares issued
and outstanding; redemption and
liquidation value of $1,158 and
$0 (unaudited) 1,116 -
Series B; $0.01 par value per share;
7,047,620 and 0 (unaudited) shares issued and
outstanding; redemption and liquidation
value of $29,600 plus unpaid dividends
and $0 (unaudited) 30,046 -
------- --------
31,162 -
Shareholders' deficit
Preferred stock; $0.01 par value per share;
100,000,000 shares authorized;
9,153,902 and 0 shares issued and
outstanding as mandatorily redeemable
convertible preferred stock - -
Common stock; $0.01 par value per share;
200,000,000 shares authorized;
1,343,898 and 16,836,811 (unaudited)
issued and outstanding,
respectively 13 168
Additional paid-in capital 2,435 90,879
Deferred compensation (1,686) (4,392)
Notes receivable from shareholders (144) (144)
Accumulated deficit (24,860) (36,532)
------- --------
(24,242) 49,979
------- --------
Total liabilities, mandatorily
redeemable convertible preferred
stock and shareholders' deficit $ 10,062 $ 57,439
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