USWeb/CKS Reports Record Revenues for Second Quarter

1999 SANTA CLARA, Calif. (PROTEXT) - Breaks 100 Million Dollar Quarterly Revenue Mark; Attains Sequential Quarterly Revenue Increase of 20%; Realizes Record Margins While Achieving Significant Milestones and Scale USWeb/CKS (Nasdaq: USWB), the leader in strategic Internet and marketing communications services, today reported that its financial results for the second quarter of 1999 included record- high quarterly revenues. Revenues for the second quarter of 1999 were $101.0 million and net income before non-cash charges and after the application of an assumed 38% effective tax rate was $10.0 million or $0.12 per diluted share. Including non-cash charges, the company reported a net loss for the quarter of $22.6 million or $0.29 per share. Compared to the prior year, second quarter revenues increased 87%, from $54.0 million. In the second quarter of 1998, net income before non-cash charges and after the application of an assumed 38% effective tax rate was $3.0 million or $0.05 per diluted share, and net loss including non-cash charges was $61.1 million or $1.08 per share. Non-cash charges include a provision for contract loss or recovery (which represents the value of certain warrants granted in a strategic relationship), stock compensation, acquired in- process technology, amortization of intangible assets, and depreciation and amortization. "Reaching the $100 million quarterly revenue mark demonstrates that the hard work performed over the past two quarters is paying off," said Robert Shaw, CEO of USWeb/CKS. "We grew the business 20% sequentially while at the same time improving operating margins to 15%, before non-cash charges, which highlights the leverage in our business model." Leadership Milestones Shaw continued, "We are recognized as an industry powerhouse and intend to capitalize on our strong position. USWeb/CKS is fast becoming one of the most important companies in the digital economy -- reaching a scale and critical mass very few Internet professional services firms can match." * First pure-play Internet professional services firm to reach $100 million quarterly revenue milestone * Unequaled insight: Market-leading vision and expertise across strategy, marketing and technology disciplines * Unparalleled scale: Over 2,900 employees provide the talent and market-leading expertise in 40 offices in 10 countries that allows USWeb/CKS the ability and scale to execute at Internet speed * Industry-leading experience: Over 4,000 client projects and engagements which represents more experience than any other Internet professional services firm * Size and scope of client work expanded. Top client revenue for the quarter, annualized: - Top 10 clients was $8.5 million, 18% growth from last quarter - Top 30 clients was $5.0 million, 17% growth from last quarter * Major client wins and successes demonstrate high demand for USWeb/CKS's time-to-value proposition - delivering breakthrough results fast. Standout examples include: branding and e-commerce solution for Mars Music; online pharmacy for Walgreens; e- commerce platform for Williams-Sonoma brands; Internet-based data warehousing applications for 20th Century Fox; site redesign and branding for AOL; and hot start ups such as Ask Jeeves, MyPoints and RePlay Networks * Recruiting magnet: The Company recruited over 500 people in 90 days while maintaining a healthy 80% annualized retention rate * Completed on-time deployment of phase one integrated back- office systems * USWeb/CKS's intranet, a cornerstone competitive factor for the Company, won significant industry recognition as a next generation knowledge management system Shaw continued to highlight that, "our people are USWeb/CKS's most important asset and our second quarter results are a clear reflection of the caliber of people we recruit and retain. We've begun to put into place creative programs and initiatives that continue to make USWeb/CKS a fun and exciting place to work, attracting talented professionals from leading firms and universities internationally." About USWeb/CKS USWeb/CKS is the leading professional services firm that works with clients to define strategies and implement innovative ways to build their businesses through a combination of expertise in strategy, Internet technology and marketing communications. USWeb/CKS helps clients differentiate their products and services, strengthen customer relationships, leverage human capital, and improve business efficiency in the new electronic economy. The Company provides a broad selection of services from brand development and advertising to business process automation and e-commerce solutions. The Company headquarters are in Santa Clara, California. Additional information about USWeb/CKS is available by calling 408-987-3200 or at http://www.uswebcks.com. This press release contains "forward-looking statements" (as defined under securities law) regarding potential opportunities for USWeb/CKS to continue and build leadership in its markets and to attract and retain talented employees. USWeb/CKS's actual future results, including those in achieving its leadership, hiring, retention, timing, market share and financial goals, may differ materially and adversely from those discussed in this press release. Factors that may cause such a differences include the rate of adoption of Internet technology by large organizations and the level of investment these organizations make in Internet-related professional services, the Company's ability to differentiate itself from competitors and win new clients, the risks associated with implementation of the Company's products and service offerings, technical challenges, the Company's ability to attract, retain and motivate talented employees, timing in delivering completed projects, costs associated with formation of Internet data centers, risks relating to the integration of acquired entities, including difficulties in integration or loss of customers or employees, and diversion of management and employee time and attention from other aspects of the Company's business. Current revenue growth patterns are not necessarily indicative of future performance. For additional information about factors that could affect the Company's business, see the company's documents filed with the United States Securities and Exchange Commission. USWEB/CKS CONDENSED CONSOLIDATED BALANCE SHEET (In thousands) June 30, December 31, 1999 1998 (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $46,658 $64,956 Short-term investments 35,981 36,230 Accounts receivable, net 137,890 89,038 Other current assets 12,653 9,946 Deferred tax assets 637 637 Total current assets 233,819 200,807 Property and equipment, net 26,589 18,880 Intangible assets, net 198,899 168,335 Deferred income taxes and other assets 18,896 15,152 $478,203 $403,174 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $48,863 $38,251 Accrued expenses 68,027 52,908 Deferred revenue 7,834 4,210 Income taxes payable 2,528 3,111 Lease obligations, current 3,076 3,445 Total current liabilities 130,328 101,925 Lease obligations, long-term portion 2,721 1,377 133,049 103,302 Stockholders' equity: Common Stock 72 66 Additional paid-in-capital 666,500 546,976 Accumulated deficit (321,418) (247,170) Total stockholders' equity 345,154 299,872 $478,203 $403,174 USWEB/CKS CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 Historical Data: Revenues $100,966 $54,041 $185,078 $93,366 Cost of revenues: Services 60,454 32,666 111,826 58,410 Depreciation and amortization 1,731 1,196 3,285 2,202 Provision for (recovery of) lost on contract (15,706) 9,430 (4,491) 9,430 Stock compensation 4,763 3,576 9,171 5,257 Total cost of revenues 51,242 46,868 119,791 75,299 Gross profit 49,724 7,173 65,287 18,067 Operating expenses: Marketing, sales and support 9,089 6,961 17,840 12,146 General and administrative 16,285 10,562 29,806 19,664 Depreciation and amortization 740 445 1,356 777 Acquired in-process technology 1,389 18,289 2,212 22,612 Stock compensation 9,520 13,534 18,668 16,102 Amortization of intangible assets 35,414 17,364 64,887 22,224 Merger and integration costs -- -- 5,316 - - Total operating expenses 72,437 67,155 140,085 93,525 Loss from operations (22,713) (59,982) (74,798) (75,458) Interest income, net 1,020 1,051 1,921 1,976 Loss before income taxes (21,693) (58,931) (72,877)(73,482) Provision for income taxes 880 2,181 1,371 2,885 Net loss $(22,573) $(61,112) $(74,248) $(76,367) Net loss per share (1): Basic and diluted $(0.29) $(1.08) $(1.02) $(1.37) Weighted average shares outstanding 76,804 56,648 72,648 55,742 Supplemental Data: Gross profit as reported $49,724 $7,173 $65,287 $18,067 Non-cash and merger related charges (2) (9,212) 14,202 7,965 16,889 Supplemental gross profit $40,512 $21,375 $73,252 $34,956 Net loss before income taxes as reported $(21,693) $(58,931) $(72,877) $(73,482) Non-cash and merger related charges (2) 37,851 63,834 100,404 78,604 Provision for income taxes (3) (6,140) (1,863) (10,460) (1,946) Supplemental net income $10,018 $3,040 $17,067 $3,176 Supplemental net income per share (1): Basic supplemental net income per share $0.13 $0.05 $0.23 $0.06 Basic supplemental weighted average shares outstanding 76,804 56,648 72,648 55,742 Diluted supplemental net income per share $0.12 $0.05 $0.20 $0.05 Diluted supplemental weighted average shares outstanding 85,599 58,322 85,557 58,300 (1) Net loss per share is computed in accordance with SFAS No. 128, "Earnings Per Share," and SEC Staff Accounting Bulletin No. 98 for all periods presented.The computation excludes: (i) acquisition-related shares held in escrow, and (ii) Common Stock subject to repurchase rights.The computation of net loss and diluted supplemental net loss per share excludes Common Stock issuable upon exercise of certain employee stock options and upon exercise of certain outstanding warrants, as their effect is antidilutive. (2) Non-cash and merger related charges include provision for (recovery of) loss on contract, which represents the value of certain warrants granted in a strategic relationship, merger and integration costs, stock compensation, acquired in-process technology, amortization of intangible assets and depreciation and amortization. (3) Supplemental net income and supplemental net income per share data include a tax provision at an assumed effective rate of 38% for all periods presented. ots Original Text Service: USWeb/CKS Internet: http://www.newsaktuell.de Contact: Geoff Kerr, 408-987-3260, or gkerr@uswebcks.com, or investors, Kate Wagner, USWeb/CKS, 408/987-3268, kwagner@uswebcks.com, both of USWeb/CKS Company News On-Call: http://www.prnewswire.com/comp/126755.html or fax, 800-758-5804, ext. 126755 Web site: http://www.uswebcks.com Subscribers please note that material bearing the slug "PROTEXT" is not part of CTK's news service and is not to be published under the "CTK" slug. Protext is a commercial service providing distribution of press releases from clients, who are identified in the text of Protext reports and who bear full responsibility for their contents.