Answers Corporation (NASDAQ: ANSW), creators of the leading
answer engine Answers.com® today reported financial results for its
fourth quarter and full year ended December 31, 2010.
Financial and Traffic Results
(in thousands – except page
views)
Quarterly
Results
Three months ended December 31 2009
2010 Revenues $6,017 $6,273 Operating income $1,701 $1,473
Adjusted EBITDA $2,389 $2,382 WikiAnswers average daily page views
8,199,000 11,110,000 ReferenceAnswers average daily page views
2,737,000 2,801,000 Total Answers.com average daily page views
10,936,000 13,911,000
Full Year
Results
Year ended December 31 2009 2010 Revenues
$20,755 $21,471 Operating income $4,993 $3,869 Adjusted EBITDA
$7,731 $6,567 WikiAnswers average daily page views 6,496,000
9,244,000 ReferenceAnswers average daily page views 2,884,000
2,585,000 Total Answers.com average daily page views 9,380,000
11,829,000
See Appendix A for the 2009 and 2010 quarterly revenue, traffic
and RPM data of our two Web properties.
About Answers Corporation
Answers Corporation (NASDAQ: ANSW) owns and operates
Answers.com, the leading Q&A site. Answers.com is a
community-generated social knowledge Q&A platform, leveraging
wiki-based technologies. Through the contributions of its large and
growing community, answers are improved and updated over time. The
award-winning Answers.com also includes content on millions of
topics from over 250 licensed dictionaries and encyclopedias from
leading publishers, including Houghton Mifflin, Barron's and
Encyclopedia Britannica. The site supports English, French,
Italian, German, Spanish, and Tagalog (Filipino). (answ-f)
For investor information, visit http://ir.answers.com.
Answers.com is a registered trademark of Answers Corporation.
All other marks belong to their respective owners.
Proposed AFCV Holdings LLC Merger
On February 2, 2011, Answers Corporation entered into a
definitive merger agreement to have all of its outstanding shares
of common stock, Series A convertible preferred stock and Series B
convertible preferred stock, acquired by AFCV Holdings, LLC. Under
the terms of the agreement, Answers Corporation’s common stock
shareholders will receive $10.50 in cash for each outstanding share
of common stock they own. The holders of Series A and Series B
convertible preferred stock will also be entitled to receive cash
consideration based on the number of the common stock into which
those shares are convertible at the time of the merger. A special
meeting of Answers.com stockholders has been called for April 12,
2011 to vote on adoption of the merger agreement. The merger is
subject to adoption of the merger agreement by the Answers.com
stockholders, and various other conditions set forth in the merger
agreement.
Answers.com has filed with the Securities and Exchange
Commission a definitive proxy statement and other relevant
materials in connection with the merger. The definitive proxy
statement has been sent to the stockholders of Answers.com. Before
making any voting decision with respect to the merger, stockholders
are urged to read the proxy statement and the other relevant
materials because they contain important information about the
merger. The proxy statement and other relevant materials and any
other documents filed by Answers.com with the SEC, may be obtained
free of charge at the SEC's website at www.sec.gov or at Answers'
website at http://ir.answers.com/sec.cfm. In addition, stockholders
may obtain free copies of the documents filed with the SEC by
contacting Okapi Partners at (212) 297-0720.
Safe Harbor Statement
This press release contains statements that are forward-looking
statements as defined under the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to
risks and uncertainties with respect to the consummation of
the proposed AFCV merger. Such risks include the failure
to satisfy the conditions of the proposed transaction, including
failure to obtain the required approval of Answers.com stockholders
or certain third party consents and certain adverse changes to the
business of Answers.com, including as a result of factors detailed
from time to time in reports filed with the SEC; the failure of the
committed financing for the transaction; and potential litigation
risks.
Non-GAAP Financial Measures
This press release, and the accompanying tables, include both
financial measures in accordance with U.S. generally accepted
accounting principles, or GAAP, as well as non-GAAP financial
measures, including “Adjusted EBITDA”. The tables attached to this
press release include reconciliations of these non-GAAP financial
measures to the nearest GAAP financial measures. In addition, an
“Explanation of Non-GAAP Financial Measures” is set forth in
Appendix C attached to this press release.
(Tables and Explanation of Non-GAAP Financial Measures, to
follow)
Answers Corporation
Condensed Consolidated Statements of
Operations
(in thousands)
Three months endedDecember
31
Year ended December 31
2009 2010 2009 2010
$ $ $ $ Revenues:
Advertising revenue: WikiAnswers 4,470
4,734 14,454
16,529 ReferenceAnswers 1,530
1,531 6,230
4,888 Answers service licensing 17
8 71
54 6,017
6,273 20,755
21,471 Costs and expenses: Cost
of revenue 1,307
1,369 4,796
5,424 Research and
development 997
1,205 3,608
4,608 Community
development and marketing 781
805 2,459
2,777 General
and administrative 1,231
1,421 4,899
4,793 Total operating expenses 4,316
4,800 15,762
17,602
Operating income 1,701
1,473 4,993
3,869
Interest income (expense), net 5
18 (440 )
61
Other expense, net 5
(24 ) 6
(35 ) Gain
(loss) resulting from fair value adjustment of warrants 740
(1,654 ) (2,634 )
1,750
Income (loss) before income taxes 2,451
(187 )
1,925
5,645 Income tax benefit (expense), net (43 )
1,739 (165 )
1,443 Net income
(loss) 2,408
1,552 1,760
7,088
Answers Corporation
Condensed Consolidated Statements of
Cash Flows
(in thousands)
Year ended December 31 2009 2010
$ $ Cash flows from operating activities:
Net income 1,760
7,088 Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization 1,185
1,255 Increase in
deposits in respect of employee severance obligations (407 )
(322 ) Increase in liability in respect of employee
severance obligations 288
359 Stock-based compensation to
employees and directors 1,553
1,190 Increase in deferred tax
asset (48 )
(1,753 ) Increase in deferred tax
liability 12
6 Fair value adjustments of warrants, net 2,634
(1,750 ) Loss on disposal of property and equipment
73
24 Increase in short-term deposits (restricted) -
(200 ) Increase in long-term deposits (restricted)
(19 )
(51 ) Loss from exchange rate differences 6
35 Changes in operating assets and liabilities:
Increase in accounts receivable, and prepaid expenses and other
current assets (410 )
(1,103 ) Decrease (increase) in
prepaid expenses, long-term 49
(389 ) Increase
(decrease) in accounts payable (307 )
314 Increase
(decrease) in accrued expenses, accrued compensation and other
current liabilities 411
(76 ) Net cash
provided by operating activities 6,780
4,627
Cash flows from investing activities: Capital
expenditures (1,515 )
(1,222 ) Purchases of
marketable securities (799 )
(3,515 ) Net cash
used in investing activities (2,314 )
(4,737 )
Cash flows from financing activities: Repayment of
capital lease obligation (78 )
(83 ) Redpoint
financing, net of issuance cost 6,480
- Dividends paid (602
)
(786 ) Exercise of common stock options and
warrants 247
253 Net cash provided by (used
in) financing activities 6,047
(616 )
Effect of exchange rate changes on cash and cash equivalents
(18 )
(5 ) Net increase (decrease) in cash
and cash equivalents 10,495
(731 ) Cash
and cash equivalents at beginning of year 11,739
22,234 Cash and cash equivalents at end of
year 22,234
21,503
Answers Corporation
Condensed Consolidated Balance
Sheets
(in thousands, except for share and per
share data)
December 31 December 31 2009
2010 $ $ Assets Current
assets: Cash and cash equivalents 22,234
21,503
Marketable securities 795
4,331 Short-term deposits
(restricted) -
200 Accounts receivable 2,350
3,191
Prepaid expenses and other current assets 907
1,235 Deferred
tax asset 34
1,780 Total current assets
26,320
32,240 Long-term deposits
(restricted) 276
327 Deposits in
respect of employee severance obligations 1,756
2,208 Property and equipment, net 1,858
1,732 Other assets: Intangible
assets, net 797
719 Goodwill 437
437 Prepaid
expenses, long-term 167
555 Deferred tax asset, long-term 14
22 Total other assets 1,415
1,733 Total assets 31,625
38,240 Liabilities and stockholders'
equity Current liabilities: Accounts payable 403
578 Accrued expenses and other current liabilities 774
758 Accrued compensation 1,009
972 Capital lease
obligations – current portion 82
23 Total
current liabilities 2,268
2,331
Long-term liabilities: Liability in respect of employee
severance obligations 1,838
2,333 Capital lease obligations,
net of current portion 24
- Deferred tax liability 38
44 Series A and Series B Warrants 8,008
6,258
Total long-term liabilities 9,908
8,635
Series A and Series B convertible preferred
stock: $0.01 par value; stated value and liquidation preference
of $101.76 per share for the Series A and $100 per share for the
Series B Convertible Preferred Stock; 6% cumulative annual
dividend; 130,000 shares authorized, issued and outstanding as of
December 31, 2009 and 2010 2,381
4,724
Stockholders' equity: Preferred stock: $0.01 par value;
870,000 shares authorized as of December 31, 2009 and 2010, none
issued -
- Common stock: $0.001 par value; 100,000,000
shares authorized; 7,951,329 and 8,005,780 shares issued and
outstanding as of December 31, 2009 and 2010, respectively 8
8 Additional paid-in capital 88,539
86,853
Accumulated other comprehensive income 28
108 Accumulated
deficit (71,507 )
(64,419 ) Total stockholders'
equity 17,068
22,550 Total
liabilities and stockholders' equity 31,625
38,240
Answers Corporation
Non-GAAP Financial Measures and
Reconciliation of Non-GAAP Financial Measures
to the nearest comparable GAAP
Measures
(in thousands)
Three months ended
December 31
Year ended
December 31
2009 2010 2009 2010
Adjusted Cost of Revenue Cost of revenue
$1,307
$1,369 $4,796
$5,424 Stock-based compensation
expense (30 )
(29 ) (135 )
(105 )
Depreciation and amortization (204 )
(236 ) (744 )
(884 ) $1,073 $1,104
$3,917 $4,435 Adjusted
Research and Development Research and development $997
$1,205 $3,608
$4,608 Stock-based compensation expense
(98 )
(74 ) (352 )
(272 ) Depreciation
and amortization (33 )
(28 ) (130 )
(133
) $866 $1,103
$3,126 $4,203 Adjusted
Community Development and Marketing Community development and
marketing $781
$805 $2,459
$2,777 Stock-based
compensation expense (41 )
(56 ) (145 )
(165
) Depreciation and amortization (15 )
(18 )
(62 )
(70 ) $725 $731
$2,252 $2,542 Adjusted
General and Administrative General and administrative $1,231
$1,421 $4,899
$4,793 Stock-based compensation expense
(217 )
(175 ) (921 )
(648 )
Depreciation and amortization (50 )
(40 ) (249 )
(168 ) Expenses related to the AFCV acquisition -
(253 ) -
(253 )
$964 $953 $3,729
$3,724 Adjusted Operating Expenses
Operating expenses $4,316
$4,800 $15,762
$17,602
Stock-based compensation expense (386 )
(334 ) (1,553
)
(1,190 ) Depreciation and amortization (302 )
(322 ) (1,185 )
(1,255 ) Expenses
related to the AFCV acquisition -
(253 ) -
(253 ) $3,628
$3,891 $13,024 $14,904
Adjusted EBITDA Net income $2,408
$1,552
$1,760
$7,088 Income tax (benefit) expense 43
(1,739
) 165
(1,443 ) (Gain) loss resulting from fair
value adjustment of warrants, net (740 )
1,654 2,634
(1,750 ) Foreign currency exchange rate differences
(5 )
24 (6 )
35 Interest (income) expense (5 )
(18 ) 440
(61 ) Stock-based
compensation expense 386
334 1,553
1,190 Depreciation
and amortization 302
322 1,185
1,255 Expenses related
to the AFCV acquisition -
253 -
253 $2,389 $2,382
$7,731 $6,567
See discussion regarding Adjusted EBITDA in Appendix B for an
explanation of the reconciling items noted above.
Appendix A
2009 2010 Q1
Q2 Q3 Q4 Q1
Q2 Q3 Q4 Ad Revenue ($
- in thousands) WikiAnswers 3,162 3,400 3,422 4,470
4,489 3,992 3,314 4,734 ReferenceAnswers 1,567 1,585 1,548 1,530
1,218 1,012 1,127 1,531
Total 4,729 4,985
4,970 6,000 5,707 5,004 4,441
6,265 WikiAnswers 67% 68% 69% 75% 79% 80% 75% 76%
ReferenceAnswers 33% 32% 31% 25% 21% 20% 25% 24%
Total
100% 100% 100% 100% 100%
100% 100% 100% Traffic –
Average Daily Page Views WikiAnswers 5,337,000 6,082,000
6,336,000 8,199,000 8,995,000 8,578,000 8,279,000 11,110,000
ReferenceAnswers 2,982,000 2,965,000 2,857,000 2,737,000 2,737,000
2,399,000 2,405,000 2,801,000
Total 8,319,000
9,047,000 9,193,000 10,936,000
11,732,000 10,977,000 10,684,000
13,911,000 WikiAnswers 64% 67% 69% 75% 77% 78% 77%
80% ReferenceAnswers 36% 33% 31% 25% 23% 22% 23% 20%
Total
100% 100% 100% 100% 100%
100% 100% 100% RPM
WikiAnswers $6.58 $6.14 $5.87 $5.93 $5.55 $5.11 $4.35 $4.63
ReferenceAnswers $5.84 $5.87 $5.89 $6.08 $4.94 $4.64 $5.09 $5.94
Appendix B
Explanation of Non-GAAP Financial Measures
This earnings release and the accompanying financial tables
include both financial measures in accordance with U.S. generally
accepted accounting principles, or GAAP, as well as non-GAAP
financial measures. The non-GAAP financial measure we refer to,
Adjusted EBITDA, represents net income (loss) before interest,
income taxes, depreciation, amortization, gain (loss) resulting
from fair value adjustment of warrants, stock-based compensation,
foreign currency exchange rate differences and expenses relating to
the proposed acquisition of all the shares of the Company by AFCV
Holdings LLC (“the AFCV Acquisition”). We also refer to Adjusted
Cost of Revenue, Adjusted Research and Development, Adjusted
Community Development and Marketing, Adjusted General and
Administrative and Adjusted Operating Expenses, which are our GAAP
expenses, adjusted for the expense items we exclude from Adjusted
EBITDA.
We use Adjusted EBITDA as an additional measure of our overall
performance for purposes of business decision-making, developing
budgets and managing expenditures. It is useful because it removes
the impact of our capital structure (interest expense and gain
(loss) resulting from fair value adjustment of warrants), asset
base (amortization and depreciation), stock-based compensation
expenses, taxes, foreign currency exchange rate differences and
expenses relating to the AFCV Acquisition from our results of
operations. We believe that the presentation of Adjusted EBITDA
provides useful information to investors in their analysis of our
results of operations for reasons similar to the reasons why we
find it useful and because these measures enhance their overall
understanding of the financial performance and prospects of our
ongoing business operations. By reporting Adjusted EBITDA, we
provide a basis for comparison of our business operations between
current, past and future periods, and peer companies in our
industry.
More specifically, we believe that removing these impacts is
important for several reasons:
- Amortization of Intangible Assets.
Adjusted EBITDA disregards amortization of intangible assets.
Specifically, we exclude amortization of intangible assets
resulting from the acquisition of WikiAnswers and other related
assets in November 2006. This acquisition resulted in operating
expenses that would not otherwise have been incurred. We believe
that excluding such expenses is significant to investors, due to
the fact that they derive from prior acquisition decisions and are
not necessarily indicative of future cash operating costs. In
addition, we believe that the amount of such expenses in any
specific period may not directly correlate to the underlying
performance of our business operations. While we exclude the
aforesaid expenses from Adjusted EBITDA we do not exclude revenues
derived as a result of such acquisitions. The amount of revenue
that resulted from the acquisition of WikiAnswers and other related
assets is disclosed in Appendix A.
- Stock-based Compensation Expense.
Adjusted EBITDA disregards expenses associated with stock-based
compensation, a non-cash expense arising from the grant of
stock-based awards to employees and directors. We believe that,
because of the variety of equity awards used by companies, the
varying methodologies for determining stock-based compensation
expense, and the subjective assumptions involved in those
determinations, excluding stock-based compensation from Adjusted
EBITDA enhances the ability of management and investors to compare
financial results over multiple periods.
- Depreciation, Interest, Gain (Loss)
Resulting from Fair Value Adjustment of Warrants, Taxes and Foreign
Currency Exchange Rate Differences. We believe that, excluding
these items from the Adjusted EBITDA measure provides investors
with additional information to measure our performance, by
excluding potential differences caused by variations in capital
structures (affecting interest expense), asset composition, and tax
positions.
- Expenses related to the AFCV
acquisition. Adjusted EBITDA for the three months and year ended
December 31, 2010, disregards $253 thousand costs associated with
the AFCV acquisition. We believe that, excluding these costs
provides investors with additional information to measure our
performance.
Adjusted EBITDA is not a measure of liquidity or financial
performance under GAAP and should not be considered in isolation
from, or as a substitute for, a measure of financial performance
prepared in accordance with GAAP. Investors are cautioned that
there are inherent limitations associated with the use of Adjusted
EBITDA as an analytical tool. Some of these limitations are:
- Non-GAAP financial measures are not
based on a comprehensive set of accounting rules or
principles;
- Many of the adjustments to Adjusted
EBITDA reflect the exclusion of items that are recurring and will
be reflected in our financial results for the foreseeable
future;
- Other companies, including other
companies in our industry, may calculate Adjusted EBITDA
differently than us, thus limiting its usefulness as a comparative
tool;
- Adjusted EBITDA does not reflect the
periodic costs of certain tangible and intangible assets used in
generating revenues in our business;
- Adjusted EBITDA does not reflect the
costs incurred in connection with the AFCV Acquisition.
- Adjusted EBITDA does not reflect
interest income from our investments in cash and investment
securities;
- Adjusted EBITDA does not reflect gains
and losses from foreign currency exchange rate differences;
- Adjusted EBITDA does not reflect
interest expense and other cost relating to financing our business,
including gains and losses resulting from fair value adjustment of
Redpoint Ventures’ warrants;
- Adjusted EBITDA excludes taxes, which
is an integral cost of doing business; and
- Because Adjusted EBITDA does not
include stock-based compensation, it does not reflect the cost of
granting employees equity awards, a key factor in management’s
ability to hire and retain employees.
We compensate for these limitations by providing specific
information in the reconciliation to the GAAP amounts excluded from
Adjusted EBITDA.
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