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Lycos, Inc.
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Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451
Tel: 781-370-2700
Fax: 781-370-2600
Internet: http://www.lycos.com
FOR IMMEDIATE RELEASE
Contact: Ted Philip Michele Perry
Chief Financial Officer Director of Communications
Lycos, Inc. Lycos, Inc.
781-370-2700 781-370-2700
tphilip@lycos-inc.com mperry@lycos-inc.com
LYCOS REPORTS 120% INCREASE IN REVENUES
Earnings Per Share of $1.05
Pro Forma Earnings Per Share of $0.07
Operating Margins Improve to 8%
148 Million Average Daily Page Views
Waltham, Mass., May 17, 2000 -- Lycos, Inc. (NASDAQ: LCOS), the Internet's
premier global media network, today announced financial results for its third
quarter ended April 30, 2000. Revenues for the quarter were $78.6 million,
representing an increase of 15% over the previous quarter ended January 31,
2000 and a 120% increase over the comparable period from the previous fiscal
year. The Company reported net income of $7.9 million or $0.07 per share for
the quarter before amortization of goodwill, merger-related expenses and other
non-recurring items. This compares to a net loss of $1.0 million or ($0.01)
per share before amortization of goodwill for the comparable period from the
previous fiscal year. Diluted earnings per share rose to $1.05. In addition,
the Company generated more than $25 million in cash during the quarter.
"The continued improvement of our operating margins reflect the leverage
provided by our successful operating model," said Edward M. Philip, Lycos's
chief operating officer and chief financial officer. "We will continue to take
advantage of the economies of scale afforded us by our industry leading
Network model."
As announced yesterday, the Company has entered into a definitive agreement
with Terra Networks, S.A. (MC: TRR; NASDAQ: TRRA), the leading provider of
Internet access and interactive content and services to the Spanish- and
Portuguese-speaking world, under which Terra will acquire Lycos in a
stock-for-stock transaction for $97.55 per Lycos share, subject to certain
"collar" provisions. Bob Davis, president and CEO of Lycos, Inc. will be chief
executive officer of the new company, to be called Terra Lycos, and Ted
Philip, chief financial officer and chief operating officer of Lycos, Inc.,
will serve as chief financial officer of Terra Lycos. Upon completion of the
transaction, which is expected to be tax-free to Lycos shareholders, Lycos
shareholders will own approximately 37% to 46% of Terra Lycos. Terra and Lycos
expect pro forma 2000 revenues of approximately $500 million and together
currently have an estimated 50 million unique users and 175 million page views
per day. The transaction is expected to be completed in the third quarter of
calendar year 2000, subject to shareholder and regulatory approval. Additional
transaction details are available in the replay of yesterday's teleconference,
accessible via telephone at 877-375-1352 or via the Web at
http://broadstreet.fp.sandpiper.net.
"With this one transaction, our company will become a global Internet
powerhouse," said Bob Davis, president and CEO of Lycos, Inc. "As demonstrated
by our consistently strong financial performance, Lycos has the business model
to succeed. By combining with Terra we can apply our successful strategy on a
much larger scale. Terra Lycos will be a truly global Internet company with
operations in 37 countries and leading positions in multiple high- growth
markets. The new company's unique platform, which converges Internet services,
new media, branded content, e-commerce, and next-generation communication
technologies, will take Lycos to the next level."
Worldwide traffic to the Lycos Network averaged 148 million page views per day
in April, up 21% over the previous quarter. Lycos's global media network today
offers services in 25 countries and 65 sites throughout the world and in 13
languages. Registered users grew 15% to 55 million worldwide, with new users
signing up at a rate of 90,000 per day.
Lycos Third Quarter Financial Results-- 2
"Along with the Terra transaction, Lycos continued to improve its position
this quarter as a global leader through an alliance with Bell Canada making
Lycos the leading Canadian portal," said Davis. "In addition, we completed a
$650 million public offering of our European JV, creating more than $2 billion
in value for Lycos."
Key accomplishments for the quarter:
Strategic Milestones
o Lycos Europe raised approximately $650 million in its Initial Public
Offering on the Neuer Markt in Germany.
o Lycos launched a free Internet access service, Lycos Free Internet Access
(http://free.lycos.com), to complement the high quality, free dial-up
access services offered by its joint venture partners in Europe and Asia.
o Bell Canada and Lycos announced the creation of a new Internet company,
Sympatico-Lycos, to provide Canadians with expanded Internet resources
for the business-to-consumer marketplace. The move establishes Lycos as
the number one player in the Canadian Internet market as the joint
venture becomes the exclusive consumer portal for Sympatico dial-up and
broadband services. As part of the agreement, Bell Canada will invest $45
million in the venture. Separately, Bell ActiMedia and Lycos signed a $40
million multi-year distribution agreement.
o Lycos Asia, a joint venture between Lycos and Singapore Telecom,
announced the launch of Lycos Malaysia, a localized Lycos site located at
http://www.lycosasia.com.my/.
o Lycos successfully launched LycosLabs, a new Internet accelerator.
LycosLabs will focus on financing and incubating new businesses that have
the greatest synergies with the core competencies and long range goals of
the Lycos Network.
o Lycos acquired Valent Software Corporation, maker of NetClubs, a leading
Internet community services platform, for $45 million in stock. Valent's
NetClubs powers Lycos Clubs, a core community service within the Lycos
Network providing the infrastructure and tools to link more than 62,000
separate online clubs that convene regularly across the Lycos Network.
Wireless
Lycos is pursuing an aggressive wireless strategy, and in the third quarter,
formed a series of strategic wireless alliances:
o Lycos announced it offers wireless-enabled alert technologies and other
user-driven personalization solutions for wireless devices, powered by
Puma Technology. When Lycos users activate the new tool on the search
results page, they will receive automatic notification of any updates to
the search results. Users have the flexibility to designate phones,
pagers, handheld devices or their e-mail address as the destination for
their notification message.
o AnyDay.com, provider of comprehensive, online calendar services, and
Lycos signed a $12 million distribution agreement. Under the terms of the
agreement, AnyDay will provide Lycos Calendar AnyDay, a wireless-enabled,
comprehensive, co-branded online calendar service to Lycos Network users.
o Pixo, Inc., a leading developer of mobile commerce solutions, and Lycos,
Inc. announced that they are working together to extend Web access from
the desktop to wireless phones including mobile transaction capabilities.
The optimized browser and streamlined purchasing give Lycos users a
better wireless Web experience.
o Handango, the world's largest Internet marketplace for handheld computing
solutions, and Lycos launched a new marketplace on the Lycos Network that
hosts the most comprehensive collection of handheld software, hardware
and accessories for Palm and Windows-powered devices.
The Lycos Network
o Autoweb, the leading consumer automotive Internet service, and Lycos
announced a four-year strategic alliance to build and jointly operate
a new online automotive channel, www.autoweb.lycos.com, and deliver
Lycos Third Quarter Financial Results-- 3
unique marketing and e-commerce opportunities to the auto industry.
Pursuant to the deal, Lycos acquired a 10 percent stake in Autoweb.
o Lycos and Trellix(R) announced a comprehensive technology and marketing
agreement. Under the terms of the agreement, Trellix will license hosting
platform technology from Lycos, enabling Trellix to offer a complete Web
site building and private label hosting service to online communities.
Also, Lycos now offers significantly improved features to builders on its
Tripod community site. As part of the agreement, Lycos will take up to a
9.5 percent equity stake in Trellix.
o IBM, AT&T and Lycos partnered to deliver a new broadband-enabled Internet
appliance and services to Fidelity Investments(R) customers. End-users
will enjoy the benefits of convenient investment planning tools,
customized content, online trading, Web surfing, e-mailing and other
services 24-hours a day, seven days a week--from home.
o Verio Inc., the world's largest operator of Web sites for businesses and
a leading provider of comprehensive Internet services, and Lycos
announced an agreement to market Lycos Shop membership to thousands of
existing and potential on-line merchants. Together, Verio and Lycos
merchants comprehensive co-branded e-commerce packages to build, operate
and drive customer traffic to on-line stores.
o Intel Corporation and Lycos announced that the companies are providing
free multimedia tools to both Tripod and Intel(R) WebOutfitterSM Service
members. Tripod is the only major publishing site on the Web to offer
free streaming services to its members.
o Lycos Zone, www.lycoszone.com, the smart engaging site on the Web for
children ages three to 12, received the Wired Kids/Cyberangels "Best of
the Web" award. In addition, Lycos Zone has seen traffic soar
approximately 1,000 percent since its launch in September 1999.
Forward-looking statements in this release are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, including, without limitation, the level of usage of the
Internet and traffic to the Company's Internet site, continued acceptance of
the Company's products, demand for Internet advertising, seasonal trends in
advertising sales, the advertising budgeting cycles of individual advertisers,
capital expenditures and other costs relating to the expansion of operations,
the introduction of new products or services by the Company or its
competitors, the mix of the services sold and the channels through which those
services are sold, pricing changes, general economic conditions and specific
economic conditions in the Internet industry and other risks detailed in the
Company's filings with the Securities and Exchange Commission.
Investors and security holders are urged to read the joint proxy
statement/prospectus regarding the Terra Lycos business combination
transaction referenced above when it becomes available because it will contain
important information. The joint proxy statement/prospectus will be filed with
the Securities and Exchange Commission by Terra and Lycos. Investors and
security holders may obtain a free copy of the joint proxy
statement/prospectus (when it is available) and other documents filed by Terra
and Lycos with the Commission at the Commission's Web site at www.sec.gov. The
joint proxy statement/prospectus and these other documents may also be
obtained by directing a request to Lycos Investor Relations
investor.relations@lycos.com or 781-370-2875.
About Lycos, Inc. (http://www.lycos.com)
Founded in 1995, Lycos, Inc. is a leading Web media company and owner of the
Lycos Network, one of the most visited hubs on the Internet reaching nearly
one out of every two U.S. Web users. The Lycos Network is a unified set of Web
sites, attracting a diverse audience by offering a variety of services,
including leading Web search and navigation resources; Web community and
communications services including free homepage building, free Web- based
e-mail, clubs, chat, instant messaging; a personalized My Lycos start page; a
comprehensive shopping center featuring more than 2,400 merchants; and an
assortment of compelling content such as games, music, news, fun and
educational information and activities for kids as well as information about
investing, technology, entertainment, sports, small business, travel and more.
The Lycos Network is composed of Lycos.com, Tripod, WhoWhere, Angelfire,
MailCity, HotBot, HotWired, Wired News, Webmonkey, Suck.com, Sonique, Quote,
Gamesville and Lycos Zone. Headquartered near Boston in Waltham, Mass., Lycos,
Inc. is a global Internet leader with a major presence throughout the U.S.,
Europe, Asia and Latin America.
(C)2000 Lycos, Inc. all rights reserved. Lycos(R)is a trademark of Carnegie
Mellon University. All other product or service marks mentioned herein are
those of respective owners.
Lycos Third Quarter Financial Results-- 4
LYCOS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING MERGER AND ACQUISITION-RELATED EXPENSES
AND OTHER NON-RECURRING ITEMS (1)(2)
(In thousands except per share data)
Three Months Ended Nine Months Ended
April 30, April 30,
---------------------- ----------------------
2000 1999 2000 1999
---------------------- ----------------------
(Unaudited) (Unaudited)
Revenues:
Advertising $ 51,568 $ 24,388 $ 134,734 $ 63,470
E-Commerce, license and other 27,035 11,450 68,302 28,623
--------- --------- --------- ---------
Total revenues 78,603 35,838 203,036 92,093
Cost of revenues 13,764 7,277 38,118 19,241
--------- --------- --------- ---------
Gross profit 64,839 28,561 164,918 72,852
Operating expenses:
Research and development 12,570 6,613 33,597 18,193
Sales and marketing 38,921 20,714 106,866 55,053
General and administrative 7,083 3,604 20,724 9,593
--------- --------- --------- ---------
Total operating expenses, excluding merger and
acquisition-related expenses and other non-
recurring items 58,574 30,931 161,187 82,839
--------- --------- --------- ---------
Pro forma operating income (loss), excluding
merger and acquisition-related expenses and
other non-recurring items 6,265 (2,370) 3,731 (9,987)
Interest income, net 8,034 1,415 12,144 4,886
Minority interest and other, net (1,090) -- (1,090) --
--------- --------- --------- ---------
Pro forma net income (loss), before taxes,
excluding merger and acquisition-related
expenses and other non-recurring items 13,209 (955) 14,785 (5,101)
--------- --------- --------- ---------
Provision for income taxes 5,284 -- 6,526 --
--------- --------- --------- ---------
Pro forma net income (loss), excluding merger
and acquisition-related expenses and other non-
recurring items $ 7,925 $ (955) $ 8,259 $ (5,101)
========= ========= ========= =========
Pro forma basic and diluted net income (loss) per
share, excluding merger and acquisition-related
expenses and other non-recurring items $ 0.07 $ (0.01) $ 0.08 $ (0.06)
========= ========= ========= =========
Weighted average shares used in computing pro
forma net income (loss) per share excluding
merger and acquisition-related expenses and
other non-recurring items (2) 109,949 89,810 103,463 88,665
========= ========= ========= =========
(1) These pro-forma consolidated financial statements exclude merger and
acquisition related expenses, including the amortization of goodwill and
non-recurring expenses and gains related to: a legal settlement,
international joint ventures and Lycos Ventures, L.P. They do not purport
to be financial statements prepared in accordance with Generally Accepted
Accounting Principles.
(2) These pro-forma consolidated financial statements have been restated to
reflect the acquisition of Gamesville, Inc., accounted for as a pooling
of interests. Weighted average shares used in computing basic and diluted
pro forma net income (loss) per share for the three and nine months ended
April 30, 2000 include Lycos common stock from the conversion of
Gamesville, Inc. common stock and preferred stock on December 3, 1999,
which is included as outstanding for all periods presented, the
conversion of Quote.com, Inc. common stock, preferred stock and warrants
on December 6, 1999, and the conversion of Valent Software Corporation
common stock, preferred stock and options on February 2, 2000.
Lycos Third Quarter Financial Results-- 5
LYCOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(In thousands except per share data)
Three Months Ended Nine Months Ended
April 30, April 30,
---------------------- ----------------------
2000 1999 2000 1999
---------------------- ----------------------
(Unaudited) (Unaudited)
Revenues:
Advertising $ 51,568 $ 24,388 $ 134,734 $ 63,470
E-Commerce, license and other 27,035 11,450 68,302 28,623
--------- --------- --------- ---------
Total revenues 78,603 35,838 203,036 92,093
Cost of revenues 13,764 7,277 38,606 19,241
--------- --------- --------- ---------
Gross profit 64,839 28,561 164,430 72,852
Operating expenses:
Research and development 12,570 6,613 34,033 18,193
Sales and marketing 38,921 20,714 106,866 55,053
General and administrative 8,483 3,604 24,444 9,593
Amortization of intangible assets 37,191 12,274 96,872 35,687
--------- --------- --------- ---------
Total operating expenses 97,165 43,205 262,215 118,526
--------- --------- --------- ---------
Operating loss (32,326) (14,644) (97,785) (45,674)
Interest income, net 8,034 1,415 12,144 4,886
Minority interest and other, net (1,090) -- (1,090) --
Equity share of income in affiliates, net (13,643) -- (11,756) --
Gain on sale of investment 270,237 -- 270,237 10,120
--------- --------- --------- ---------
Net income (loss) before income taxes $ 231,212 $ (13,229) $ 171,750 $ (30,668)
--------- --------- --------- ---------
Provision for income taxes 108,802 -- 111,255 --
--------- --------- --------- ---------
Net income (loss) $ 122,410 $ (13,229) $ 60,495 $ (30,668)
========= ========= ========= =========
Basic net income (loss) per share $ 1.11 $ (0.15) $ 0.58 $ (0.35)
========= ========= ========= =========
Diluted net income (loss) per share $ 1.05 $ (0.15) $ 0.55 $ (0.35)
========= ========= ========= =========
Weighted average shares used in computing
basic net income (loss) per share (1) 109,949 89,810 103,463 88,665
========= ========= ========= =========
Weighted average shares used in computing
diluted net income (loss) per share (1) 116,244 89,810 109,758 88,665
========= ========= ========= =========
(1) These consolidated financial statements have been restated to reflect the
acquisition of Gamesville, Inc., accounted for as a pooling of interests.
Weighted average shares used in computing basic and diluted net income
(loss) per share for the three and nine months ended April 30, 2000
include Lycos common stock from the conversion of Gamesville, Inc. common
stock and preferred stock on December 3, 1999, which is included as
outstanding for all periods presented, the conversion of Quote.com, Inc.
common stock, preferred stock and warrants on December 6, 1999, and the
conversion of Valent Software Corporation common stock, preferred stock
and options on February 2, 2000.
Lycos Third Quarter Financial Results-- 6
LYCOS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
(In thousands)
April 30, July 31,
2000 1999
----------- -----------
(Unaudited)
Assets
Cash and cash equivalents $ 652,684 $ 166,506
Accounts receivable, net 30,783 25,830
License fees receivable 131,768 119,872
Property and equipment, net 10,759 7,726
Investments 426,117 48,001
Intangible assets, net 535,510 505,682
Other assets, net 13,187 16,182
---------- ----------
Total assets $1,800,808 $ 889,799
========== ==========
Liabilities and stockholders' equity
Accounts payable and accrued expenses $ 50,058 $ 24,692
Deferred revenues 155,922 119,950
Other liabilities 107,084 5,687
---------- ----------
Total liabilities 313,064 150,329
---------- ----------
Stockholders' equity 1,487,744 739,470
---------- ----------
Total liabilitiies and stockholders'
equity $1,800,808 $ 889,799
========== ==========
(1) These consolidated financial statements have been restated to reflect the
acquisition of Gamesville, Inc., accounted for as a pooling of interests.