Kowabunga!�, Inc. (NYSE-AMEX:KOW) reported financial results for
the fourth quarter and year ended December 31, 2008.
"2008 was a year of transformation for Kowabunga," said Richard
K. Howe, Kowabunga�s President and Chief Executive Officer. "As we
look forward, the changes we have made will provide a more stable
platform upon which to create shareholder value."
Fourth Quarter 2008 Results
Revenue from continuing operations totaled $12.2 million for the
three months ended December 31, 2008, up 42% from $8.6 million in
the comparable period of 2007.
Net loss from continuing operations was $34.3 million for the
three months ended December 31, 2008, compared with a net loss from
continuing operations of $0.9 million in the comparable period of
2007. The net loss from continuing operations for the three months
ended December 31, 2008 contains an impairment of goodwill and
intangible assets of $28.7 million and an allowance on deferred tax
assets of $9.8 million.
The net loss from discontinued operations, net of income taxes,
for the three months ended December 31, 2008 was $8.0 million,
compared with a net income from discontinued operations, net of
income taxes of $0.7 million, in the comparable period of 2007. The
net loss from discontinued operations for the three months ended
December 31, 2008 includes a write-down of assets to reflect
estimated net realizable value less selling cost of $6.9 million.
There was no comparable item for the three months ended December
31, 2007.
EBITDA was $0.0 million for the three months ended December 31,
2008, down from $2.4 million in the comparable period of 2007.
Recent Events
During the fourth quarter and subsequent to year end, the
Company reported the following key accomplishments:
- Hired a new President and CEO,
Richard K. Howe.
- Renegotiated the terms and
conditions of its loan agreements with Wachovia Bank N.A.
- Divested of its Cherish, Inc.
subsidiary.
- Reinstated into continuing
operations, its online direct marketing business iLead Media.
- Hired a new CFO, Gail
Babitt.
- Right-sized the operation from
an average FY08 headcount of 196 to the current headcount of
125.
Fourth Quarter Financial Details for Continuing
Operations
The Network segment, which represented 85%
of total revenue for the three months ended December 31, 2008, is
comprised of an online search network, an affiliate network,
software solutions and web hosting. Network revenue for the three
months ended December 31, 2008 totaled $10.3 million, up 60% from
$6.4 million from the comparable period in 2007 primarily due to
strong growth in our search business. Network EBITDA was $0.7
million, down 37% from $1.1 million reported a year ago. Weakness
in the affiliate business and the economy are the cause of the
decline.
The Direct segment, which represented 17%
of total revenue for the three months ended December 31, 2008, is
primarily engaged in the interactive direct marketing of internally
generated and third party offers. Revenue from the Direct segment
totaled $2.1 million for the three months ended December 31, 2008,
down 25% from $2.7 million from the comparable period in 2007.
Direct EBITDA was $0.2 million, down 86% from $1.2 million from the
comparable period in 2007. Weakness in the economy is the cause of
the decline.
Full Year Results
For the twelve months ended December 31, 2008, revenue from
continuing operations rose 86% over the comparable period in 2007
to $51.6 million, reflecting strong growth in the Company�s search
business within the Network segment. For the twelve months ended
December 31, 2008, Network revenue rose 125% over the comparable
period in 2007 to $42.7 million.
The net loss from continuing operations for the twelve months
ended December 31, 2008 was $44.9 million, or $0.68 per share,
which included impairment charges totaling $40.2 million and a
provision for valuation allowance on deferred tax assets of $9.8
million. This is compared with a net loss from continuing
operations of $3.1 million, or $0.05 per share, for the comparable
period in 2007.
The net loss from discontinued operations for the twelve months
ended December 31, 2008 was $37.9 million, or $0.56 per share,
versus a net profit of $2.0 million, or $0.03 per share for the
comparable period in 2007. The net loss from discontinued
operations for the twelve months ended December 31, 2008 includes a
write-down of assets to reflect estimated net realizable value less
selling cost of $40.4 million, whereas there was no comparable item
for the twelve months ended December 31, 2007.
EBITDA for the twelve months ended December 31, 2008 was $3.3
million, compared with $9.1 million for the twelve months ended
December 31, 2007.
Please refer to Kowabunga's Form 10-K filed with the SEC on
March 31, 2009 for the complete report of financial results for the
fourth quarter and full year ended December 31, 2008.
�
Net Revenue by Industry Segment
Three Months Ended December
31,
(in Thousands)
2008 �
2007 Segment Amount �
Percent �
Amount �
Percent Network $10,284 �
84.60% � $6,420 � 74.51% Direct 2,054 16.90% 2,730 31.69%
Elimination (183) � (1.50%) � (534) � (6.20%)
Total Revenue
$12,155 � 100.00% � $8,616 � 100.00% � �
Net Revenue by Industry
Segment
Twelve Months Ended December
31,
(in Thousands)
2008 �
2007 Segment Amount �
Percent �
Amount �
Percent Network $42,748 �
82.89% � $19,009 � 68.39% Direct 9,977 19.35% 10,095 36.32%
Elimination (1,153) � (2.24%) � (1,308) � (4.71%)
Total
Revenue $51,573 � 100.00% � $27,796 � 100.00% �
Reconciliation of Net Income to EBITDA
In addition to other measures, management evaluates the
operating results of each of its segments based upon revenue and
"EBITDA," which is defined as net income before interest, income
taxes, depreciation and amortization, each of which is presented on
the company's Consolidated Statements of Operations or Statements
of Cash Flows as well as other one-time items and non-cash
expenses. The company's presentation of EBITDA may not be
comparable to similarly-titled measures used by other companies.
Any of these items could be significant to the company's financial
results. The following table reconciles EBITDA to net income for
the three months and the twelve months ended December 31, 2008 and
2007 (Amounts in Thousands):
Years Ended December 31, �
Three Months Ended December
31, EBITDA Reconciliation 2008 2007
2008 2007 � Pre-tax ($85,876) ($1,610) ($37,485)
($398) � Amortization 6,171 7,086 1,318 1,856 � Stock-Based
Compensation 268 1,066 (118) 131 � Assets Impairment 80,624 114
35,565 - � Depreciation 2,040 1,663 582 609 � Net Interest Expense
726 848 155 223 � Derivative Adjustment - (31) - - � Gain From
Settlement (628) - - - �
TOTAL EBITDA $3,325 $9,136 $17
$2,421 �
EBITDA By Segment
� Network $4,310 $4,576 $730 $1,149 � Direct 2,970 4,076 165 1,155
� Discontinued Operations 2,200 5,896 620 1,656 � Corporate (6,155)
(5,412) (1,498) (1,539) �
TOTAL EBITDA
$3,325 $9,136 $17 $2,421 � �
Conference Call Information
The Company will host a conference call Tuesday, March 31, 2009
at 4:30 pm Eastern Time. Participants can access the call by
dialing 800-762-8779 (domestic) or 480-248-5081 (international). In
addition, the call will be webcast on the Investor Relations
section of the Company�s website at www.kowabunga.com where it will
also be archived for 45 days. A telephone replay will be available
through Tuesday, April 14, 2009. To access the replay, please dial
800-406-7325 (domestic) or 303-590-3030 (international), passcode
4032578.
About Kowabunga!� Inc.
Kowabunga is a leading provider of performance based advertising
and technology solutions. The company operates two businesses, a
Direct Marketing business and an Advertising Exchange business. For
more information, visit www.kowabunga.com.
Forward-Looking Statements
Statements made in this press release that express the Company's
or management's intentions, plans, beliefs, expectations or
predictions of future events are forward-looking statements. Those
statements are based on many assumptions and are subject to many
known and unknown risks, uncertainties and other factors that could
cause the Company's actual activities, results or performance to
differ materially from those anticipated or projected in such
forward-looking statements. For a discussion of these risks, see
the Company's report, as filed with the Securities and Exchange
Commission on Form 10-K, filed March 31, 2009, under the section
headed "Risk Factors." The Company cannot guarantee future
financial results, levels of activity, performance or achievements,
and investors should not place undue reliance on the Company's
forward-looking statements.
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