The company will not be in a position to file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 on a timely basis, pending the completion of its financial restatements related to its independent investigation of stock option granting practices and of the requisite audit procedures by the Company’s independent registered public accountants. Consequently, CNET Networks is not in a position to provide actual results or guidance regarding operating expense, operating income, net income or earnings per share.
Convertible Notes
As previously announced, on October 19, 2006, the Company did not receive a sufficient number of consents from holders to satisfy the requisite 70 percent consent threshold in regard to its consent solicitation for its $125.0 million convertible notes. If the notes are accelerated, the Company intends to repay them at par value.
Conference Call and Webcast
CNET Networks will host a conference call to discuss its third quarter 2006 the foregoing revenue results and business outlook beginning at 5:00 pm ET (2:00 pm PT), today, October 23, 2006. To listen to the discussion, please visit http://ir.cnetnetworks.com and click on the link provided for the webcast conference call or dial (800) 344-1035 (international dial-in: (706) 679-3076). A replay of the conference call will be available via webcast at the URL listed above or by calling (800) 642-1687 (international dial-in: (706) 645-9291) and entering the conference ID number 7747781. The company’s past financial news releases, related financial and operating information, and access to all Securities and Exchange Commission filings, can also be accessed at http://ir.cnetnetworks.com.
Safe Harbor
This press release and its attachments include forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ materially. These forward-looking statements include the statements under the sections entitled “Business Outlook” which sets forth management’s estimated financial performance for the fourth quarter and full year of 2006, and statements regarding our growth prospects and expectations regarding the future success of our products and services. In addition, management expects to provide forward-looking information statements on the conference call to be held shortly following the issuance of this release, which are also subject to risks and uncertainties that could cause actual results to differ materially. The forward-looking statements in this release and on the conference call are identified by the words “expect,” “estimate,” “target,” “believe,” “goal,” “anticipate,” “intend” and similar expressions or are otherwise identified in the context in which they are made as being forward-looking. These statements are only effective as of the date of this release and we undertake no duty to publicly update these forward-looking statements, whether as a result of new information, future developments or otherwise. The risks and uncertainties that could cause actual results to differ materially from those projected include: a lack of growth or a decrease in marketing spending on the Internet due to failure of marketers to adopt the Internet as an advertising medium at the rate that we currently anticipate; a lack of growth or decrease in marketing spending on CNET Networks’ properties in particular, which could be prompted by competition from other media outlets, both on and off the Internet, dissatisfaction with CNET Networks’ services, or economic difficulties in our clients’ businesses; a decrease in user activity on our sites due to competition or other factors, which could reduce advertising revenue generated by such user activities; reduced consumer activity or manufacturer marketing due to product lifecycles or product launch delays in the Company’s content categories; economic conditions such as weakness in corporate or consumer spending, which could prompt a reduction in overall advertising expenditures or expenditures specifically on our properties; the failure of existing advertisers to meet or renew their advertising commitments as we anticipate; the failure to attract advertisers outside of our traditional technology and consumer electronics categories; a continued decline in revenues from our print publications as advertising dollars shift to other media and general risks associated with our business. In addition, the Company anticipates that it will restate its historical financial statements to record non-cash charges for compensation expense relating to past stock option grants. The outcome and timing of the restatement may be impacted by actions that may be taken or required as a result of the investigation concerning matters relating to CNET Networks’ stock option grants. The Company and its independent auditors are reviewing recent accounting guidance published by the SEC, and have not yet determined the amount of such charges, the resulting tax and accounting impact, or which periods may require restatement.. For additional information about risks to CNET Networks’ business, see its Annual Form 10-K for the year ended December 31, 2005 and subsequent Forms 10-Q and 8-K, including disclosures under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” which are filed with the Securities and Exchange Commission and are available on the SEC's website at www.sec.gov. Forward-looking statements are made as of the date of this press release and, except as required by law, the Company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.
About CNET Networks, Inc.
CNET Networks, Inc. (Nasdaq: CNET, www.cnetnetworks.com) is an interactive media company that builds brands for people and the things they are passionate about, such as gaming, music, entertainment, technology, business, food, and parenting. The Company’s leading brands include CNET, GameSpot, TV.com, MP3.com, Webshots, CHOW, ZDNet and TechRepublic. Founded in 1993, CNET Networks has a strong presence in the US, Asia and Europe.
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Investor Relations Contact: | Media Contact: |
Gloria Lee | Martha Papalia |
(415) 344-2975 | (617) 225-3340 |
gloria.lee@cnet.com | martha.papalia@cnet.com |
| 1 | CNET Networks July 2006 – September 2006 (internal log data) |
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| | | | | | |
| | | | | | |
Quarterly Statistical Highlights (a) | | | | | | |
Unaudited | | | | | | |
| | Q3-06 | Q2-06 | Q1-06 | Q4-05(b) | Q3-05(b) |
| | | | | | |
Total Quarterly Revenue ($mm) | | $ 92.8 | $ 92.0 | $ 83.4 | $ 103.3 | $ 81.9 |
| | | | | | |
Revenue Distribution (%) (c) | | | | | | |
Marketing Services | | 86% | 86% | 85% | 89% | 86% |
Licensing, Fees and User | | 14% | 14% | 15% | 11% | 14% |
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Segment Revenue | | | | | | |
U.S. Media | | $ 73.5 | $ 72.8 | $ 67.8 | $ 82.9 | $ 65.9 |
International Media | | $ 19.3 | $ 19.2 | $ 15.6 | $ 20.4 | $ 16.0 |
| | | | | | |
Advertiser Metrics | | | | | | |
CNET Networks Top 100 US Advertisers' Renewal Rate (Q-to-Q) | | 96% | 100% | 96% | 100% | 97% |
CNET Networks Top 100 US Advertisers' % of Network Revenue | | 54% | 55% | 53% | 55% | 55% |
| | | | | | |
Select Business Metrics | | | | | | |
Network Unique Users (mm) | | 124.5 | 116.2 | 116.8 | 116.1 | 110.1 |
Network Average Daily Page Views (mm) | | 86.3 | 92.8 | 98.7 | 103.6 | 99.4 |
| | | | | | |
Balance Sheet Highlights ($mm) | | | | | | |
Cash | | $ 78.7 | $ 79.1 | $ 74.2 | $ 55.9 | $ 69.8 |
Marketable Debt Securities | | 60.9 | 62.0 | 62.1 | 54.1 | 38.3 |
Restricted Cash | | 2.2 | 2.2 | 2.2 | 2.2 | 4.6 |
Total Cash and Equivalents | | $ 141.8 | $ 143.3 | $ 138.5 | $ 112.2 | $ 112.7 |
| | | | | | |
Total Debt | | $ 143.3 | $ 143.3 | $ 141.7 | $ 141.8 | $ 141.3 |
| | | | | | |
Days Sales Outstanding (DSO) | | 73 | 67 | 70 | 71 | 66 |
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(a) The company will not be in a position to disclose operating expense, operating income, net income or earnings per share information pending |
the completion of the company's financial statement restatement as described in the company's Current Report on Form 8-K filed July 10, 2006 and October 11, 2006. |
(b) Results for 2005 and 2006 exclude revenue related to Computer Shopper due to the sale of the Computer Shopper magazine | |
business in Q1 2006 and resulting discontinued operations treatment. | | | | | | |
(c) Due to the sale of Computer Shopper magazine on February 2, 2006, CNET Networks no longer reports publishing revenue. The company's international |
publishing revenue is now distributed in the marketing services and licensing, fee and user lines as described below: | | |
Marketing Services - sales of advertisements on our Internet network through impression-based and activity-based advertising, and sales of advertisements in our print |
publications. | | | | | | |
Licensing, Fees and User - licensing our product database, online content, subscriptions to online services, subscription and newsstand sales of print publications, and |
other paid services. | | | | | | |
