Alloy, Inc. (the �Company�) (NASDAQ: �ALOY�), one of the country�s
largest providers of media and marketing programs reaching targeted
consumer segments, today reported financial results for its first
fiscal quarter ended April 30, 2008. Revenue in the first quarter
of the fiscal year ended January�31, 2009 (�fiscal 2008�) increased
$11.3 million, or 30%, to $49.1 million from $37.8 million in the
first quarter of the fiscal year ended January�31, 2008 (�fiscal
2007�). Adjusted EBITDA, defined by the Company as operating loss
plus depreciation and amortization and non-cash stock-based
compensation, for the first quarter of fiscal 2008 was $1.1
million, compared with $(0.1) million for the first quarter of
fiscal 2007. The improvement was driven primarily by an increase in
Adjusted EBITDA in the Company�s Media segment as the Company�s
Channel One, Alloy Entertainment and display board businesses all
performed strongly during the first quarter. This increase was
partially offset by a decrease in Adjusted EBITDA in the Company�s
Promotion and Placement segments. Free cash flow, defined by the
Company as the sum of net cash provided by or used in operating
activities, plus changes in operating assets and liabilities minus
capital expenditures, in the first quarter of fiscal 2008 was
$(3.2) million, or $(0.24) per basic share, compared with $(1.1)
million, or $(0.08) per basic share, in the first quarter of fiscal
2007, a decrease of $2.1 million. This difference was primarily due
to capital expenditures for upgrades to Channel One�s
infrastructure that was partially offset by improved accounts
receivable collection. Commenting on Alloy�s performance and
outlook, Matt Diamond, the Company�s Chairman and Chief Executive
Officer stated, �We are pleased with our first quarter performance,
especially in our important Media segment. Three years ago, we made
a strategic commitment to grow our business with higher margin
properties. We continue to deliver on that goal with our Media
segment revenue increasing 78% percent over that period. Our first
quarter results keep us on track to achieve our previously stated
2008 revenue guidance of $225.0 to $240.0 million and Adjusted
EBITDA guidance of $20.0 to $24.0 million. We expect each quarter
to show revenue and Adjusted EBITDA growth versus the same period
for the prior fiscal year. We see positive momentum across much of
our Media segment for the final three quarters of fiscal 2008 and a
strong turn-around in the second half of the year for our Promotion
segment. We are particularly excited about growth in our
Interactive, Alloy Entertainment and Channel One businesses and
believe these will be significant future drivers of Alloy
shareholder value.� Operating loss for the first quarter of fiscal
2008 was $(1.4) million, a decrease of approximately $0.5 million,
from $(1.9) million in the first quarter of fiscal 2007, due to the
improvement in Adjusted EBITDA that was partially offset primarily
by higher depreciation and amortization. Interest expense for the
first quarter of fiscal 2008 was $0.1 million, an increase of $0.1
million from the first quarter of fiscal 2007, due the amount
borrowed under the Company�s credit facility. Interest income was
$0.1 million, a decrease of $0.2 million, from $0.3 million, due to
lower cash and marketable securities balances. Income tax expense
was $0.2 million, an increase of $0.1 million, from $0.1 million,
due to higher taxable income. Net loss decreased $0.1 million, to
$(1.6) million, or $(0.12) per basic share, in the first quarter of
fiscal 2008, from a net loss of $(1.7) million, or $(0.13) per
basic share, for the first quarter of fiscal 2007. Stock Repurchase
Program During the first quarter of fiscal 2008, under the
Company�s stock repurchase plan, the Company spent approximately
$0.5 million repurchasing its common stock in the open market. The
Company will continue to monitor market conditions and repurchase
shares from time to time in the open market at prevailing market
prices or in privately negotiated transactions. Consolidated and
Segment Results The tables below present the Company�s revenue,
Adjusted EBITDA and operating income (loss) for the three-month
periods ended April 30, 2008 and 2007, respectively: � Three Months
Ended April 30, � Change (In thousands) 2008 � 2007 $ � % Revenue
Promotion $ 15,752 $ 13,540 $ 2,212 16 % Media 19,896 10,416 9,480
91 Placement � 13,497 � 13,831 � (334) (2) � Total Revenue $ 49,145
$ 37,787 $ 11,358 30 % � Adjusted EBITDA Promotion $ (278) $ 286 $
(564) NM % Media 2,750 509 2,241 NM Placement 572 1,512 (940) (62)
Corporate � (1,975) � (2,415) � 440 18 � Total Adjusted EBITDA $
1,069 $ (108) $ 1,177 NM % � Operating Income (Loss) Promotion $
(675) $ (111) $ (564) NM % Media 1,235 (325) 1,560 NM Placement 518
1,467 (949) (65) Corporate � (2,511) � (2,919) � 408 14 � Total
Operating Loss $ (1,433) $ (1,888) $ 455 24 % NM � Not meaningful
Promotion segment revenue for the three months ended April 30, 2008
was $15.8 million, an increase of approximately $2.2 million, or
16%, from revenue of $13.5 million for the three months ended April
30, 2007. Revenue increased in the Company�s on-campus marketing,
sampling and AMP Agency businesses. Adjusted EBITDA was $(0.3)
million, a decrease of approximately $0.6 million, from $0.3
million, primarily due to higher postage costs in the Company�s
on-campus marketing business, an increase in bad debt expense and
higher payroll costs. Operating loss was $(0.7) million, a decrease
of $0.6 million, from $(0.1) million, primarily due to lower
Adjusted EBITDA. Media segment revenue for the three months ended
April 30, 2008 was $19.9 million, an increase of $9.5 million, or
91%, from revenue of $10.4 million for the three months ended April
30, 2007. Revenue increased in the Company�s entertainment and
interactive businesses, and Channel One and Frontline were included
for an entire quarter. Adjusted EBITDA was $2.8 million, an
increase of approximately $2.3 million, from $0.5 million,
primarily driven by increased revenue. Operating income was $1.2
million, an increase of $1.5 million, from operating loss of $(0.3)
million, due to higher Adjusted EBITDA and partially offset by
higher depreciation and amortization. Placement segment revenue for
the three months ended April 30, 2008 was $13.5 million, a decrease
of $0.3 million, or 2%, from revenue of $13.8 million for the three
months ended April�30, 2007. Revenue decreased primarily due to
decreases in college and military advertising, partially offset by
an increase in multicultural advertising. Adjusted EBITDA was $0.6
million, a decrease of approximately $0.9 million, from $1.5
million, primarily due to the decline in revenue and an increase in
bad debt expense. Operating income was $0.5 million, a decrease of
$1.0 million, from $1.5 million, primarily due to lower Adjusted
EBITDA. Corporate Adjusted EBITDA increased 18% to $(2.0) million
for the first quarter of fiscal 2008, from $(2.4) million in the
prior year�s first fiscal quarter, primarily due to lower
information technology costs and lower employee medical costs.
Operating loss decreased 14% to $(2.5) million, from $(2.9)
million, primarily driven by improved Adjusted EBITDA and lower
depreciation, partially offset by higher stock compensation
expense. About Alloy Alloy, Inc. (NASDAQ: �ALOY�) is one of the
country�s largest providers of media and marketing programs
reaching targeted consumer segments. Alloy manages a diverse array
of assets and services in interactive, display, direct mail,
content production and educational programming. Alloy works with
over 1,500 companies including half of the Fortune 200. For further
information regarding Alloy, please visit our corporate website at
www.alloymarketing.com. Forward-Looking Statements This
announcement contains forward-looking statements within the meaning
of Section�27A of the Securities Act of 1933 and Section�21E of the
Securities Exchange Act of 1934, including statements regarding the
Company�s expectations and beliefs regarding the Company�s future
results or performance. Because these statements apply to future
events, they are subject to risks and uncertainties. When used in
this announcement, the words �anticipate�, �believe�, �estimate�,
�expect�, �expectation�, �project� and �intend� and similar
expressions are intended to identify such forward-looking
statements. The Company�s actual results could differ materially
from those projected in the forward-looking statements.
Additionally, you should not consider past results to be an
indication of the Company�s future performance. Factors that might
cause or contribute to such differences include, among others, the
Company�s ability to: increase revenues; generate high margin
sponsorship and multiple revenue streams; increase visitors to its
Web sites (www.alloy.com, www.delias.com and www.ccs.com) and build
customer loyalty; develop its sales and marketing teams and
capitalize on these efforts; develop commercial relationships with
advertisers and the continued resilience in advertising spending to
reach the teen market; manage the risks and challenges associated
with integrating newly acquired businesses; and identify and take
advantage of strategic, synergistic acquisitions and other revenue
opportunities. Other relevant factors include, without limitation:
its competition; seasonal sales fluctuations; the uncertain
economic and political climate in the United States and throughout
the rest of the world and the potential that such climate may
deteriorate further; and general economic conditions. For a
discussion of certain of the foregoing factors and other risk
factors see the �Risk Factors That May Affect Future Results�
section included in the Company�s annual report on Form 10-K for
the year ended January�31, 2008 and in subsequent filings that the
Company makes with the Securities and Exchange Commission. The
Company does not intend to update any of the forward-looking
statements after the date of this announcement to conform these
statements to actual results, to changes in management�s
expectations or otherwise, except as may be required by law. ALLOY,
INC. SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL
INFORMATION (Unaudited; in millions) A. Adjusted EBITDA The
following tables set forth the Company�s Adjusted EBITDA for the
three-month periods ended April�30, 2008 and 2007 respectively. The
Company defines Adjusted EBITDA as net loss adjusted to exclude the
following line items and amounts presented in its Statements of
Operations: income taxes, interest income, interest expense,
depreciation and amortization and stock-based compensation. The
Company uses Adjusted EBITDA, among other things, to evaluate the
Company�s operating performance and to value prospective
acquisitions. The measure is also one of several components of
incentive compensation targets for certain management personnel and
is among the primary measures used by management for planning and
forecasting future periods. The Company believes that this measure
is an important indicator of the Company�s operational strength and
performance of its business, because it provides a link between
profitability and operating cash flow. The Company believes the
presentation of this measure is relevant and useful for investors
because it allows investors to view performance in a manner similar
to the method used by the Company�s management, helps improve
investors� ability to understand the Company�s operating
performance and makes it easier to compare the Company�s results
with other companies that have different financing and capital
structures or tax rates. In addition, this measure is also among
the primary measures used externally by the Company�s investors,
analysts and peers in its industry for purposes of valuation and
comparing the operating performance of the Company to other
companies in the industry. Since Adjusted EBITDA is not a measure
of performance calculated in accordance with Generally Accepted
Accounting Principles (�GAAP�), it should not be considered in
isolation from, nor as a substitute for, net income as an indicator
of operating performance. Adjusted EBITDA, as the Company
calculates it, may not be comparable to similarly titled measures
employed by other companies. In addition, this measure does not
necessarily represent funds available for discretionary use and is
not necessarily a measure of the Company�s ability to fund its cash
needs. As Adjusted EBITDA excludes certain financial information
compared to net income, the most directly comparable GAAP financial
measure, users of this financial information should consider the
types of events and transactions that are excluded. As required by
the Securities and Exchange Commission, the Company provides below
a reconciliation of net loss to Adjusted EBITDA and operating
income (loss) to Adjusted EBITDA by segment. � Three Months Ended
April 30, 2008 � 2007 Net loss $ (1.6) $ (1.7) Plus (minus) Income
taxes 0.2 0.1 Interest income & other (0.1) (0.3) Interest
expense 0.1 0.0 Operating loss $ (1.4) $ (1.9) Plus Depreciation
and amortization 1.5 1.0 Stock based compensation 1.0 0.8 Adjusted
EBITDA $ 1.1 $ (0.1) � Three Months Ended April 30, 2008 Operating
� Depreciation � Stock-based � � Adjusted Income (loss) and
Amortization Compensation EBITDA Promotion $ (0.6) $ 0.2 $ 0.1 $
(0.3) Media 1.2 1.1 0.4 2.7 Placement 0.5 -- 0.1 0.6 Corporate �
(2.5) � 0.2 � 0.4 � � (1.9) � Total $ (1.4) $ 1.5 $ 1.0 $ 1.1 � � �
� � � � � � � � � � Three Months Ended April 30, 2007 Operating
Depreciation Stock-based Adjusted Income (loss) and Amortization
Compensation EBITDA Promotion $ (0.1) $ 0.3 $ 0.2 $ 0.4 Media (0.3)
0.5 0.3 0.5 Placement 1.4 -- -- 1.4 Corporate � (2.9) � 0.2 � 0.3 �
� (2.4) � Total $ (1.9) $ 1.0 $ 0.8 $ (0.1) B. Free Cash Flow Free
cash flow is defined by the Company as the sum of net cash used or
provided by operating activities and changes in operating assets
and liabilities less capital expenditures. The Company uses free
cash flow, among other measures, to evaluate its operating
performance. Management believes free cash flow provides investors
with an important perspective on the Company�s cash available to
service debt and the Company�s ability to make strategic
acquisitions and investments, maintain its capital assets,
repurchase its common stock and fund ongoing operations. As a
result, free cash flow is a significant measure of the Company�s
ability to generate long-term value. The Company believes the
presentation of free cash flow is relevant and useful for investors
because it allows investors to view performance in a manner similar
to the method used by management. In addition, free cash flow is
also a primary measure used externally by the Company�s investors,
analysts and peers in its industry for purposes of valuation and
comparing the operating performance of the Company to other
companies in its industry. Free cash flow per weighted average
shares outstanding is defined by the Company as free cash flow
divided by the weighted average shares outstanding used in the
computation of net income (loss) per share. As free cash flow is
not a measure of performance calculated in accordance with GAAP,
free cash flow should not be considered in isolation from, nor as a
substitute for, net income as an indicator of operating performance
or net cash flow provided by operating activities as a measure of
liquidity. Free cash flow, as the Company calculates it, may not be
comparable to similarly titled measures employed by other
companies. In addition, free cash flow does not necessarily
represent funds available for discretionary use and is not
necessarily a measure of operating cash flow. Specifically, the
Company adjusts operating cash flow (the most directly comparable
GAAP financial measure) for capital expenditures, non-recurring
expenditures and certain other non-cash items in addition to
removing the impact of sources and or uses of cash resulting from
changes in operating assets and liabilities. Accordingly, users of
this financial information should consider the types of events and
transactions which are not reflected in this financial measure. The
Company provides below a reconciliation of net cash flow provided
by operating activities, a GAAP measure, to free cash flow. � Three
Months Ended April 30, 2008 � 2007 (In millions, except per share
amounts) Net cash used in operating activities $ (0.6) $ (1.1) Plus
(minus) Changes in operating assets and liabilities 1.6 1.2 Capital
expenditures (4.2) (1.2) Free Cash Flow $ (3.2) $ (1.1) Weighted
average shares outstanding - Basic 13.5 13.1 Free Cash Flow per
Share $ (0.24) $ (0.08) ALLOY, INC. CONSOLIDATED BALANCE SHEETS (In
thousands, except per share amounts) � ALLOY, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share amounts) �
Alloy, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
ALLOY, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per
share amounts) � � April 30, January 31, � 2008 � 2008 � ASSETS
Current assets: Cash and cash equivalents $ 11,955 $ 12,270
Marketable securities 3,225 9,030 Accounts receivable, net of
allowance for doubtful accounts of $2,174 and $1,971, respectively
29,754 32,530 Unbilled accounts receivable 9,988 8,164 Inventory
7,088 3,242 Other current assets � 5,692 � 4,987 � Total current
assets 67,702 70,223 Fixed assets, net 23,465 20,199 Goodwill
50,111 50,111 Intangible assets, net 7,272 7,389 Other assets � 973
� 494 Total assets $ 149,523 $ 148,416 � LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 13,103
$ 10,717 Deferred revenue 11,537 11,956 Bank loan payable 4,000
4,000 Accrued expenses and other current liabilities � 15,042 �
14,615 Total current liabilities 43,682 41,288 Senior convertible
debentures 1,397 1,397 Other long-term liabilities � 2,500 � 2,400
Total liabilities � 47,579 � 45,085 � Stockholders' equity: Common
stock; $.01 par value: authorized 200,000 shares; issued and
outstanding, 15,564 and 15,377, respectively 155 152 Additional
paid-in capital 446,437 445,406 Accumulated deficit � (328,667) �
(327,098) 117,925 118,460 Less treasury stock, at cost; 1,358 and
1,243 shares � (15,981) � (15,129) � Total stockholders' equity �
101,944 � 103,331 � Total liabilities and stockholders' equity $
149,523 $ 148,416 ALLOY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) � � � Three Months Ended
April 30, 2008 2007 (Unaudited) Revenues: Services revenue $ 43,353
$ 32,326 Product revenue � 5,792 � 5,461 Total revenue $ 49,145 $
37,787 � Cost of Goods Sold: Costs of goods sold- services $ 21,186
$ 17,361 Costs of goods sold- product � 1,271 � 1,198 Total costs
of goods sold $ 22,457 $ 18,559 � Expenses: Operating 22,318 15,970
General and administrative 4,333 4,129 Depreciation and
amortization (includes amortization of intangibles of $505, and
$447, respectively) � 1,470 � 1,017 Total expenses � 28,121 �
21,116 � Operating loss (1,433) (1,888) � Interest expense (87)
(19) Interest income 139 312 Loss before income taxes (1,381)
(1,595) Income taxes � (188) � (113) � Net loss � (1,569) � (1,708)
� � Basic and diluted net loss per share � ($0.12) � ($0.13) �
Weighted average shares outstanding: Basic � 13,537 � 13,138
Diluted � 13,537 � 13,138 Alloy, Inc. CONSOLIDATED STATEMENTS OF
CASH FLOWS (In Thousands) � � Three Months Ended April 30, 2008 �
2007 � Cash Flows from Operating Activities Net loss $ (1,569) $
(1,708) Adjustments to reconcile net loss to net cash used in
operating activities: Depreciation and amortization of fixed assets
965 570 Amortization of intangible assets 505 447 Provision for
losses on accounts receivable 510 (170) Compensation charge for
restricted stock and issuance of options 1,034 763 Changes in
operating assets and liabilities: Accounts receivable 442 (461)
Other assets (5,030) (3,504) Accounts payable, accrued expenses,
and other 2,494 2,935 � � Net cash used in operating activities �
(649) � (1,128) � Cash Flows from Investing Activities Capital
expenditures (4,231) (1,149) Acquisition of companies - 1,312
Purchases of marketable securities - (8,345) Proceeds from the
sales and maturity of marketable securities 5,805 16,215 Purchase
of domain name / mailing list / marketing rights (388) (810) � �
Net cash provided by investing activities � 1,186 � 7,223 � Cash
Flows from Financing Activities Issuance of common stock - 528
Repurchase of common stock (852) (353) � � Net cash (used in)
provided by financing activities � (852) � 175 � Net change in cash
and cash equivalents (315) 6,270 � Cash and cash equivalents: �
Beginning of period � 12,270 � 6,366 � End of period $ 11,955 $
12,636
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