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Kowabunga!® (AMEX:THK), the leading provider
of interactive performance-based advertising networks and technology
platforms, today reported financial results for the second quarter and
six months ended June 30, 2008.
Second Quarter Results
Revenues from continuing operations in the second quarter of 2008 were
$12.8 million, compared with revenues from continuing operations of $5.8
million in the second quarter of 2007. The increase was primarily
attributed to growth in the Company’s network
segment revenues, which increased by $6.5 million.
Net loss from continuing operations was $9.0 million, or $0.13 per
share, and included impairment charges totaling $7.8 million net of
taxes, or $0.12 per share. This compared with a loss in the second
quarter of 2007 of $0.9 million, or $0.01 per share. Discontinued
operations reflect the results of those entities that are currently
being divested and include the Company’s
advertising segment as well as its online dating and internal offers
reporting units. The net loss from discontinued operations in the second
quarter of 2008 was $25.8 million, or $0.38 per share, and included
impairment charges relating to the carrying value of goodwill and other
intangibles related to the entities held for sale of $26.1 million net
of taxes, or $0.38 per share, compared with a profit of $0.5 million, or
$0.01 per share in the second quarter of 2007.
The Company's total net loss for the 2008 second quarter was $34.7
million, or $0.51 per share, compared with a total net loss of $0.3
million, or $0.01 per share, in the 2007 second quarter. Total
impairment charges for the quarter were $33.9 million net of taxes.
Without the impairment charges, the net loss would have been $0.8
million, or $0.01 per share.
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization
expenses) improved to approximately $1.4 million for the quarter
compared with $0.4 million in the first quarter, primarily as a result
of cost saving measures implemented during the second quarter, as well
as a slight improvement to gross margins.
First Half Results
Loss from continuing operations for the first half of 2008 was $10.1
million, or $0.15 per share, and included impairment charges totaling
$7.8 million net of taxes, or $0.12 per share. This compared with a loss
from continuing operations of $1.6 million, or $0.03 per share, in the
first half of 2007. The net loss from discontinued operations for the
first half of 2008 was $26.9 million, or $0.40 per share, and included
impairment charges relating to entities held for sale of $26.8 million
net of taxes, or $0.40 per share. This compared with a profit of $0.8
million, or $0.01 per share in 2007.
The Company's total net loss, for the first half of 2008 was $37.0
million, or $0.55 per share, compared with a total net loss of $1.0
million, or $0.02 per share, in 2007. Total impairment charges for the
first half were $34.6 million, net of taxes. Without impairment charges,
the net loss would have been $2.4 million, or $0.04 per share.
Chief Executive Officer, Stan Antonuk, stated, “I
am particularly pleased with the performance of our pay per click
business as well as the improvement in our operating margins and EBITDA
this quarter. We had some very tough, but necessary decisions to make
and the cost savings that resulted, which will be fully reflected in the
third quarter, translated into improved operating results.”
Antonuk went on to say, “We are executing on
our plan of divesting non-core assets and were therefore required to
change our financial presentation and evaluate the carrying value of our
intangible assets, resulting in some material non-cash impairment
charges. Our continuing operations however, which are predominately
Network driven now, showed favorable increases in revenue, gross margin
and EBITDA and our Network segment has surpassed expectations to date.
We are committed to continuing to streamline our operations in order to
focus on our valuable core competencies in the interactive marketing and
performance space.”
Since the Company last reported financial results, the following are
key accomplishments:
Achieved annualized cost savings of $3 million, some of which related
to discontinued operations from the consolidation and streamlining of
operations, including the closing of the U.K.-based Web Diversity
business in June. The full impact of these cost cutting initiatives
will be reflected in the third quarter.
Engaged an investment banking firm to support the Company’s
goal of divesting non-core assets, proceeds of which will be used to
reduce the Company’s debt and fund the
expected continued growth of the Network segment. And, in keeping with
the Company’s divestiture plan, concluded
the non-material sale of Catamount in July.
Added Jack Balousek and Charles Pope to Kowabunga!’s
Board of Directors. Mr. Balousek has more than 20 years’
experience in executive management including serving as Chairman and
CEO of True North Technologies, a digital and interactive services
firm and as President and COO of Foote, Cone and Belding
Communications, at the time, one of the largest global advertising and
communications networks. Mr. Pope brings more than 30 years of
experience in executive management, finance and accounting to his
director position. He has been the Chief Financial Officer of three
public companies and is currently the CFO of Aerosonic Corporation, a
worldwide manufacturer of aircraft instruments.
Upgraded the ValidClick AdExchange platform and data center to
significantly improve performance and scalability. The enhancements
will allow the business to service a significant number of new
advertisers and publishers joining the ValidClick AdExchange.
Made continued progress on the upgrade to Kowabunga!’s
merchant affiliate platform, MyAP™, as well
as progress toward the planned simultaneous launch of the Company’s
own affiliate network platform, KB Network, scheduled for release
later this year.
Q2 2008 Financial Detail for Continuing Operations
Network
Network revenue for the quarter totaled $10.4 million, up 7% from $9.7
million in the previous quarter and up 169% from $3.9 million a year
ago. The Network business, which represented 81% of second quarter 2008
revenue before elimination, is comprised of an online search network
($5.7 million), affiliate networks ($4.4 million), and other income
($0.3 million). Network EBITDA was $1.3 million, compared with $1.0
million for the previous quarter and flat from the second quarter of
2007.
Direct
Direct business revenue in the second quarter of 2008 totaled $2.7
million, compared with $2.8 million in the previous quarter and up from
$2.2 million reported a year ago, and represented 21% of total second
quarter revenue before elimination. Direct is primarily engaged in the
interactive direct marketing of internally generated and third party
offers. Revenues are derived from lead sales and list management
services through life-stage niche marketing as well as
direct-to-consumer services such as online education and certification.
Direct EBITDA was $0.9 million, compared with 1.2 million in the
previous quarter and compared with $0.7 million a year ago.
Please refer to the Kowabunga!’s Form 10-Q
filed with the SEC on this date for the complete report of financial
results for the second quarter and six months ended June 30, 2008.
Conference Call Information
The Company will host a conference call today at 5:00 pm EDT/2:00 pm
PDT. Participants can access the call by dialing 800-762-8908 (domestic)
or 480-248-5081 (international). In addition, the call will be webcast
on the Investor Relations section of the Company’s
web site at: www.kowabunga.com
where it will also be archived for 45 days. A telephone replay will be
available through Monday, August 25, 2008. To access the replay, please
dial 800-406-7325 (domestic) or 303-590-3030 (international), passcode
3904487.
About Kowabunga! Inc.
Think Partnership Inc. is now doing business under the name “Kowabunga!
Inc.” and will seek formal shareholder
approval to change its legal name to Kowabunga! Inc. later in 2008.
Kowabunga Marketing Inc. will continue as a subsidiary, operating its
affiliate network and related products.
Kowabunga! Inc. is the leading provider of interactive performance-based
advertising networks and technology platforms. Kowabunga! provides a
comprehensive and integrated set of scalable and cost-effective
marketing solutions for both advertisers and publishers. These solutions
increase customer retention and revenues through a diverse set of
related marketing channels, including affiliate marketing,
click-fraud-protected pay-per-click advertising, and lead generation.
High-profile brands include ValidClick AdExchange™,
MyAP™, PrimaryAds™,
and BabyToBee™. 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 Kowabunga!’s
Securities and Exchange Commission filings including Form 10-K, filed
March 31, 2008, 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.
THINK PARTNERSHIP INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2008 and December 31, 2007
June 30,2008
December 31,2007
“Unaudited”
Assets
Current Assets
Cash and Cash Equivalents
$
78,867
$
2,578,246
Restricted Cash
1,442,265
1,668,302
Accounts Receivable net of allowance for doubtful accounts of
$467,185 and $97,170
7,533,656
8,302,782
Unbilled Revenue
460,762
124,653
Refundable Corporate Income Taxes
436,522
436,522
Prepaid Expenses and Other Current Assets
600,053
217,201
Current Assets of Discontinued Operations
5,051,742
6,412,597
Total Current Assets
15,603,867
19,740,303
Property & Equipment, net
5,607,232
4,679,541
Other Assets
Goodwill
29,921,810
41,229,930
Intangible Assets
8,115,188
9,395,056
Deferred Income Taxes
4,425,295
0
Other Assets
93,999
198,151
Other Assets of Discontinued Operations
13,867,614
45,882,532
Total Other Assets
56,423,906
96,705,669
Total Assets
$
77,635,005
$
121,125,513
June 30,2008
December 31,2007
“Unaudited”
Liabilities and Shareholders’ Equity
Current Liabilities
Notes Payable – Current Portion
$
1,600,689
$
1,301,537
Note Payable – Related Party
17,235
37,326
Accounts Payable
3,524,116
3,102,229
Deferred Revenue
28,327
41,190
Deferred Income Taxes
544,435
470,205
Accrued Expenses and Other Current Liabilities
1,016,807
1,250,756
Current Liabilities of Discontinued Operations
5,138,048
5,089,019
Total Current Liabilities
11,869,657
11,292,262
Long-Term Liabilities
9,685,900
14,188,265
Shareholders’ Equity
Preferred Stock, $.001 par value:
Authorized Shares — 5,000,000 —
none issued or outstanding
0
0
Common Stock, $.001 par value:
Authorized Shares — 200,000,000
Issued Shares — 71,425,024 as of June 30
and 70,295,024 as of December 31
Outstanding Shares — 66,294,244 as of
June 30 and 67,646,350 as of December 31
71,425
70,295
Additional Paid in Capital
106,099,319
106,524,393
Accumulated Deficit
(48,276,473
)
(11,245,536
)
Accumulated Other Comprehensive Income
97,787
1,139,715
Treasury Stock – 5,130,780 as of June 30
and 2,648,674 as of December 31
(1,912,610
)
(843,881
)
Total Shareholders’ Equity
56,079,448
95,644,986
Total Liabilities and Shareholders’ Equity
$
77,635,005
$
121,125,513
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
THINK PARTNERSHIP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (“Unaudited”)
Six and Three Months Ended June 30, 2008 and 2007
Six Months Ended June 30
Three Months Ended June 30
2008
2007
2008
2007
Net Revenue
$
24,956,827
$
11,458,990
$
12,846,168
$
5,826,967
Cost of Revenue
15,075,507
3,590,132
7,777,882
1,927,182
Gross Profit
9,881,320
7,868,858
5,068,286
3,899,785
Operating Expenses
Selling,General andAdministrative
11,536,555
8,960,977
5,769,664
4,503,671
Impairment of Intangible Assets
11,509,957
0
11,509,957
0
Amortization of Purchased Intangibles
1,084,902
1,112,869
522,294
563,281
Loss from Continuing Operations
(14,250,094
)
(2,204,988
)
(12,733,629
)
(1,167,167
)
Other Income (Expenses)
Interest Income
5,778
19,362
2,671
35
Interest Expense
(402,503
)
(429,999
)
(185,591
)
(206,611
)
Other Income, Net
0
30,718
0
0
Loss from continuing operations before taxes on income
(14,646,819
)
(2,584,907
)
(12,916,549
)
(1,373,743
)
Income Tax Benefit
(4,551,885
)
(952,018
)
(3,946,543
)
(502,677
)
Net Loss from Continuing Operations
(10,094,934
)
(1,632,889
)
(8,970,006
)
(871,066
)
(Loss) Profit from Discontinued Operations net of Tax Benefit (see
Note 11)
(26,936,003
)
756,966
(25,758,708
)
522,384
Net Loss
(37,030,937
)
(875,923
)
(34,728,714
)
(348,682
)
Accretion of Redeemable Preferred
0
(135,527
)
0
0
Net Loss allocable to common shareholders
($37,030,937
)
($1,011,450
)
($34,728,714
)
($348,682
)
Per Common Share Data:
Basic
Loss from continuing operations
($0.15
)
($0.03
)
($0.13
)
($0.01
)
(Loss) Profit from discontinued operations
(0.40
)
0.01
(0.38
)
0.01
Loss
($0.55
)
($0.02
)
($0.51
)
($0.01
)
Diluted
Loss from continuing operations
($0.15
)
($0.03
)
($0.13
)
($0.01
)
(Loss) Profit from discontinued operations
(0.40
)
0.01
(0.38
)
0.01
Loss
($0.55
)
($0.02
)
($0.51
)
($0.01
)
Weighted Average Shares (Basic)
67,438,956
66,590,308
67,777,260
67,523,383
Weighted Average Shares (Diluted)
67,438,956
66,590,308
67,777,260
67,523,383
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
Net Revenue by Industry Segment
Three Months Ended June 30,
2008
2007
Year to Year
Amount
% of
Amount
% of
% Change
Revenue by Segment
Network
$
10,404,207
81
%
$
3,868,258
66
%
169
%
Direct
2,714,287
21
%
2,230,777
38
%
22
%
Elimination
(272,326
)
-2
%
(272,068
)
-5
%
0
%
Total Revenue
$
12,846,168
100
%
$
5,826,968
100
%
120
%
Three Months Ended June 30,
EBITDA Reconciliation
2008
2007
Pre tax
($40,351,721
)
($562,382
)
Amortization
1,775,240
1,675,452
Amortization – Stock Options
389,296
334,906
Depreciation
539,879
411,248
Impairment
39,423,925
-
Net Interest Expense
179,723
205,409
Other
(529,887
)
-
TOTAL EBITDA
$
1,426,455
$
2,064,633
EBITDA By Segment
Network
$
1,288,176
$
1,304,503
Direct
857,025
714,758
Corporate
(1,334,457
)
(1,454,595
)
Discontinued
615,712
1,499,967
Total EBITDA
$
1,426,455
$
2,064,633