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Ask Jeeves Reports Fourth Quarter and Year-End 2003 Results

Wednesday, January 28, 2004 - 05:05

-- Ask Jeeves posts fourth quarter revenues of $31.8 million
-- Fourth quarter pro forma income of $0.14 per share
-- Fourth quarter GAAP net income of $0.13 per share

EMERYVILLE, Calif., Jan. 28, 2004 -- Ask Jeeves, Inc. (Nasdaq: ASKJ; "the Company") today reported results for the fourth quarter and the year ended December 31, 2003.

 

Revenues for the quarter ended December 31, 2003 were $31.8 million. These fourth quarter results represent 58 percent growth over revenues of $20.2 million for the comparable year-ago quarter.

"Q4 was another great quarter capping off a great year," said Steve Berkowitz, CEO of Ask Jeeves, Inc. "We posted record revenues and the queries on our proprietary sites grew by 38 percent year-over-year, outpacing the query growth for the search market as a whole. We attribute our strong traffic growth and market share gains to continual improvements to our Teoma search technology, our differentiated site experience and our recent marketing campaign."

Pro forma income from continuing operations for the fourth quarter was $8.2 million, or $0.14 per share. For the comparable year-ago quarter, Ask Jeeves' pro forma income from continuing operations was $4.5 million, or $0.10 per share. These pro forma results should be evaluated in light of the Company's financial results prepared in accordance with GAAP. Ask Jeeves' pro forma results are calculated by adjusting GAAP income (loss) from continuing operations to exclude the effects of amortization of other assets and certain other items as detailed in the accompanying table. Under GAAP, Ask Jeeves' income from continuing operations for the fourth quarter of 2003 was $7.6 million, or $0.13 per share. This compares to income from continuing operations on a GAAP basis of $2.9 million, or $0.06 per share, for the comparable year-ago quarter. A table reconciling the Company's pro forma income (loss) from continuing operations to GAAP income (loss) from continuing operations is included in the condensed consolidated financial statements in this release. Unless otherwise indicated, revenues and other metrics in this release are based on Ask Jeeves' continuing operations. Ask Jeeves completed the sale of its Jeeves Solutions division on July 1, 2003.

Revenues for the year ended December 31, 2003 were $107.3 million compared to revenues of $65.0 million for 2002. Pro forma income from continuing operations for the year was $22.0 million, or $0.40 per share, compared to a pro forma loss for 2002 of $5.4 million, or a loss of $0.13 per share. The Company's pro forma results for 2003 exclude amortization of goodwill and other assets, stock-based compensation, impairment of long-lived assets, restructuring costs, gain on acquisition of its UK joint venture and the gain on dissolution of another joint venture. Under GAAP, Ask Jeeves' income from continuing operations for 2003 was $24.8 million, or $0.45 per share. This compares to a loss from continuing operations on a GAAP basis of $10.9 million, or a loss of $0.27 per share, for 2002.

For total operations (including discontinued operations), GAAP net income for 2003 was $26.0 million, or $0.48 per share, which exceeds GAAP income from continuing operations for the same period primarily due to the gain associated with the sale of the Company's Jeeves Solutions division.

Unrestricted cash, cash equivalents and marketable securities totaled $180.6 million on December 31, 2003.

Business Outlook

The following business outlook contains forward-looking statements describing management's current expectations for the future. The matters discussed in these forward-looking statements are subject to numerous assumptions, risks and uncertainties, some of which are listed or referred to in the cautionary note below. Similarly, the forward-looking guidance provided in this press release is based on limited information available to Ask Jeeves at this time, which is subject to change. As a result of these uncertainties and information limits, Ask Jeeves' actual results in the future may differ materially from management's current expectations. Although management's expectations may change after the date of this release, Ask Jeeves undertakes no obligation to revise or update the guidance below. The lack of any revision or update is not meant to imply continued affirmation of the guidance below. The pro forma guidance below has been calculated in a manner consistent with the pro forma historical data above.

Commenting on the Ask Jeeves' business outlook, the Company's CFO, Steve Sordello, said, "Our key revenue and productivity metrics have been strong. We have been able to invest more resources in R&D and marketing, while increasing our bottom-line performance. We expect this trend to continue throughout 2004 and we are projecting our pro forma earnings per share to increase by approximately 50 percent in 2004."

First Quarter Business Outlook

Ask Jeeves expects first quarter 2004 revenue to be approximately $35 million. Ask Jeeves expects to report pro forma income for the first quarter of 2004 of approximately $9.4 million, or approximately $0.16 per share. Ask Jeeves expects GAAP net income in the first quarter of approximately $0.15 per share. The anticipated difference between first quarter GAAP-basis net income and pro forma income of approximately $0.01 per share is expected to result primarily from amortization of other assets. Ask Jeeves expects diluted weighted average shares outstanding for the first quarter to be approximately 60 million shares.

2004 Business Outlook

For the year 2004, Ask Jeeves anticipates revenues of approximately $142 million, pro forma income of approximately $0.60 per share, and GAAP net income of approximately $0.56 per share. The anticipated difference between 2004 GAAP-basis net income and pro forma income of approximately $0.04 per share is expected to result primarily from amortization of other assets.

Conference Call Scheduled for 5 p.m. Eastern time on January 28, 2004

Ask Jeeves will hold a conference call to discuss its fourth quarter and year-end 2003 results and its business outlook for the first quarter and the year 2004 at 5 p.m. Eastern time on January 28, 2004. A more-detailed outlook will be presented on the call than is contained in this release. Interested persons can listen to a live broadcast of the conference call on the Internet at www.ask.com/investor. To listen to the live call, go to the web site at least fifteen minutes prior to the start time to download and install the necessary audio software. For those unable to listen to the live broadcast, a replay will be available one hour after the conclusion of the call at www.ask.com/investor for a period of three months. The financial and statistical information to be discussed during the conference call will be posted on Ask Jeeves Web site at www.ask.com/investor under the category "Earnings Releases."

Cautionary Note Regarding Forward-looking Statements

This press release contains forward-looking statements. All statements regarding the future are forward-looking statements, including those statements regarding the Company's potential for sustainable and profitable growth, the Company's anticipated levels of R&D and marketing investment and all expectations regarding revenue and productivity metrics, cash flow, net income, pro forma income, revenue growth and pro forma earnings per share in the future. The matters discussed in those statements are subject to risks and uncertainties that could cause actual results to differ materially from the results expressed or implied by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to: Ask Jeeves' dependence on the Internet and its dependence on a single third-party paid placement provider; the risk of further vertical consolidation in the Internet search and keyword advertising markets; the risk that Ask Jeeves' user base might migrate to other search engines or that its web traffic might otherwise decline; risks associated with rapid technological change; the risk that companies' internet advertising budgets might contract or grow at a slower pace; Ask Jeeves' dependence on third parties for content, distribution and advertising delivery; potential lack of market acceptance of Ask Jeeves advertising products; introduction of new advertising products or search technologies by competitors; declines in the average selling price of Ask Jeeves' advertising products; and adverse economic conditions in any of the major countries or markets in which Ask Jeeves does business or to which its web content is targeted. As a relatively short announcement, this press release cannot present a full discussion of such risks. Further information on risk factors that could affect Ask Jeeves' financial results is included in its most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Ask Jeeves encourages investors to read all of the disclosures in its SEC filings for a broader discussion of important factors that may be material to investors and may affect Ask Jeeves' business, financial condition and results of operations.

About Ask Jeeves, Inc.

Ask Jeeves, Inc. is a provider of Web-wide search, providing consumers with authoritative and fast ways to find relevant information to their everyday searches. Ask Jeeves deploys its search technologies on Ask Jeeves (Ask.com and Ask.co.uk), Teoma.com, and Ask Jeeves for Kids (AJKids.com). In addition to its Web sites, Ask Jeeves syndicates its monetized search technology and advertising units to a network of third-party web sites. Ask Jeeves is based in Emeryville, California, with offices in New York, Boston, New Jersey, Los Angeles, London and Dublin.

For more information, visit http://www.Ask.com or call 510-985-7400.

NOTE: Ask Jeeves, Ask.com and Teoma are registered trademarks of Ask Jeeves, Inc.


ASK JEEVES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)


Three Months Ended
(unaudited)
December 31, 2003 December 31, 2002

Revenues $31,834 100.0% $20,168 100.0%

Cost of revenues 5,136 16.1% 4,542 22.5%

Gross profit 26,698 83.9% 15,626 77.5%

Operating expenses:
Product development 3,762 11.8% 2,717 13.5%
Sales and marketing 9,639 30.3% 5,284 26.2%
General and administrative 4,982 15.6% 3,388 16.8%

Total pro forma operating
expenses 18,383 57.7% 11,389 56.5%

Pro forma operating income
(loss) 8,315 26.2% 4,237 21.0%

Interest and other income,
net 411 1.3% 257 1.3%

Pro forma income (loss) before
income tax provision 8,726 27.5% 4,494 22.3%

Income tax provision 483 1.5% -- 0.0%

Pro forma income (loss) from
continuing operations $8,243 26.0% $4,494 22.3%

Basic pro forma income (loss)
from continuing operations
per share $0.18 $0.11

Weighted average shares
outstanding used in computing
basic pro forma income (loss)
from continuing operations
per share 46,375,914 41,220,427

Diluted pro forma income
(loss) from continuing
operations per share $0.14 $0.10

Weighted average shares
outstanding used in computing
diluted pro forma income (loss)
from continuing operations
per share 58,404,069 44,411,056

Revenues from related
parties $1,131 $1,154

RECONCILIATION OF PRO FORMA INCOME (LOSS) FROM CONTINUING OPERATIONS TO
GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS


Pro forma income (loss)
from continuing
operations $8,243 $4,494
Cost of revenues -- --
Amortization of other assets (522) (522)
(522) (522)
Product development -- (1)
Sales and marketing -- (1)
General and administrative -- (2)
Amortization of other assets (7) (7)
Transaction costs -- --
(7) (9)

Impairment and write off
of long-lived assets -- --
Restructuring costs -- (1,140)
Gain on acquisition and
dissolution of joint
ventures -- --
Interest and other income,
net (76) 40

Income (loss) from continuing
operations $7,638 $2,861


Twelve Months Ended

December 31, 2003 December 31, 2002

Revenues $107,292 100.0% $65,048 100.0%

Cost of revenues 19,828 18.5% 17,140 26.3%

Gross profit 87,464 81.5% 47,908 73.7%

Operating expenses:
Product development 14,766 13.8% 13,286 20.5%
Sales and marketing 31,901 29.7% 25,943 39.9%
General and administrative 18,369 17.1% 15,109 23.2%

Total pro forma operating
expenses 65,036 60.6% 54,338 83.6%

Pro forma operating income
(loss) 22,428 20.9% (6,430) -9.9%

Interest and other income,
net 1,446 1.3% 1,051 1.6%

Pro forma income (loss) before
income tax provision 23,874 22.2% (5,379) -8.3%

Income tax provision 1,891 1.8% -- 0.0%

Pro forma income (loss) from
continuing operations $ 21,983 20.4% $ (5,379) -8.3%

Basic pro forma income (loss)
from continuing operations per
share $0.50 $(0.13)

Weighted average shares
outstanding used in computing
basic pro forma income (loss)
from continuing operations per
share 44,233,461 40,698,137

Diluted pro forma income (loss)
from continuing operations per
share $0.40 $(0.13)

Weighted average shares
outstanding used in computing
diluted pro forma income (loss)
from continuing operations per
share 54,760,623 40,698,137


Revenues from related parties $4,525 $6,189


RECONCILIATION OF PRO FORMA INCOME (LOSS) FROM CONTINUING OPERATIONS TO
GAAP INCOME (LOSS) FROM CONTINUING OPERATIONS

Pro forma income (loss) from
continuing operations $21,983 $(5,379)
Cost of revenues (1) (7)
Amortization of other assets (2,088) (2,155)
(2,089) (2,162)
Product development (2) (15)
Sales and marketing (1) (30)
General and administrative (2) (25)
Amortization of other assets (29) (29)
Transaction costs (625) --
(656) (54)

Impairment and write off of
long-lived assets (702) (2,592)
Restructuring costs -- (1,653)
Gain on acquisition and
dissolution of joint ventures 6,356 974
Interest and other income, net (104) 55

Income (loss) from continuing
operations $24,785 $(10,856)

Notes:
Adjustments to cost of revenues, product development, sales and
marketing, and general and administrative costs relate to amortization
of stock based compensation.
Amortization of other assets consists of the pro-rata expensing of
intangibles from acquisitions, certain licensing fees, and trademarks.
Transaction costs in 2003 related to certain merger and acquisition
activities that did not come to fruition.
Impairment and write off of long-lived assets consists primarily of the
write-off of obsolete equipment.
Restructuring costs in 2002 were a result of our actions to better align
our cost structure with our then current and anticipated levels of
business activities.
Gain on acquisition and dissolution of joint ventures consists of a gain
in 2002 and 2003 from the acquisition of our UK joint venture and a gain
in 2003 from the dissolution of our Ask Jeeves en Espanol joint venture.
The adjustments to interest and other income, net consist of realized
gains and losses on investments, losses on disposals of assets and
miscellaneous income.


ASK JEEVES, INC.
PRO FORMA INCOME (LOSS) FROM CONTINUING OPERATIONS TO PRO FORMA EBITDA
FROM CONTINUING OPERATIONS AND GAAP INCOME (LOSS) FROM CONTINUING
OPERATIONS


Three Months Ended
(unaudited)
December 31, 2003 December 31, 2002
AmountPer Share Amount Per Share
Pro forma income (loss)
from continuing operations $8,243 $0.14 $4,494 $0.10

Depreciation 1,586 0.03 2,033 0.04

Interest and other income,
net (411) (0.01) (257) (0.01)

Income tax provision 483 0.01 -- --

Pro forma EBITDA from
continuing operations 9,901 0.17 6,270 0.13

Adjustments:
Depreciation (1,586) (0.03) (2,033) (0.04)
Interest and other income,
net 411 0.01 257 0.01
Income tax provision (483) (0.01) -- --
Cost of revenues -- -- -- --
Amortization of other
assets (522) (0.01) (522) (0.01)
(522) (0.01) (522) (0.01)
Product development -- -- (1) --
Sales and marketing -- -- (1) --
General and administrative -- -- (2) --
Amortization of other assets (7) -- (7) --
Transaction costs -- -- -- --
(7) -- (9) --
Impairment and write off of
long-lived assets -- -- -- --
Restructuring costs -- -- (1,140) (0.03)
Gain on acquisition and
dissolution of joint ventures -- -- -- --
Interest and other income,
net (76) -- 40 --

Income (loss) from continuing
operations $7,638 $2,861

Weighted average shares
outstanding used in computing
diluted income (loss) from
continuing operations per
share 58,404,069 $0.13 44,411,056 $0.06


Twelve Months Ended

December 31, 2003 December 31, 2002
Amount Per Share Amount Per Share
Pro forma income (loss) from
continuing operations $21,983 $0.40 $(5,379) $(0.13)

Depreciation 6,922 0.13 8,302 0.20

Interest and other income,
net (1,446) (0.03) (1,051) (0.03)

Income tax provision 1,891 0.03 -- --

Pro forma EBITDA from
continuing operations 29,350 0.53 1,872 0.04

Adjustments:
Depreciation (6,922) (0.13) (8,302) (0.20)
Interest and other income,
net 1,446 0.03 1,051 0.03
Income tax provision (1,891) (0.03) -- --
Cost of revenues (1) -- (7) --
Amortization of other
assets (2,088) (0.04) (2,155) (0.05)
(2,089) (0.04) (2,162) (0.05)
Product development (2) -- (15) --
Sales and marketing (1) -- (30) --
General and administrative (2) -- (25) --
Amortization of other assets (29) -- (29) --
Transaction costs (625) (0.01) -- --
(656) (0.01) (54) --

Impairment and write off of
long-lived assets (702) (0.01) (2,592) (0.07)
Restructuring costs -- -- (1,653) (0.04)
Gain on acquisition and
dissolution of joint ventures 6,356 0.11 974 0.02
Interest and other income, net (104) -- 55 --

Income (loss) from continuing
operations $24,785 $(10,856)

Weighted average shares
outstanding used in computing
diluted income (loss) from
continuing operations per
share 54,760,623 $0.45 40,698,137 $(0.27)



Note: Pro forma EBITDA from continuing operations is defined as pro forma
income (loss) from continuing operations excluding depreciation, interest
and other income, and income tax provision.

ASK JEEVES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)


Three Months Ended Twelve Months Ended
December 31, December 31,
(unaudited)
2003 2002 2003 2002


Revenues $31,834 $20,168 $107,292 $65,048

Cost of revenues 5,658 5,064 21,917 19,302

Gross profit 26,176 15,104 85,375 45,746

Operating expenses:
Product development 3,762 2,718 14,768 13,301
Sales and marketing 9,639 5,285 31,902 25,973
General and
administrative 4,989 3,397 19,025 15,163
Impairment and write-off
of long-lived assets -- -- 702 2,592
Restructuring costs -- 1,140 -- 1,653

Total operating expenses 18,390 12,540 66,397 58,682

Operating income (loss) 7,786 2,564 18,978 (12,936)

Gain on acquisition and
dissolution of joint
ventures -- -- 6,356 974
Interest and other
income/expense, net 335 297 1,342 1,106

Income (loss) before
income tax provision 8,121 2,861 26,676 (10,856)

Income tax provision 483 -- 1,891 --

Income (loss) from
continuing operations 7,638 2,861 24,785 (10,856)

Discontinued operations
Loss from
discontinued
operations -- (856) (1,218) (10,447)
Gain on sale of
discontinued
operations -- -- 2,482 --

Income (loss) from
discontinued operations -- (856) 1,264 (10,447)

Net income (loss) $7,638 $2,005 $26,049 $(21,303)

Earnings per Share -- Basic:
Income (loss) from
continuing operations $0.16 $0.07 $0.56 $(0.27)
Income (loss) from
discontinued operations $-- $(0.02) $0.03 $(0.25)
Net income (loss) per
share $0.16 $0.05 $0.59 $(0.52)

Weighted average shares
outstanding used in
computing basic net
income (loss) per share 46,375,914 41,220,427 44,233,461 40,698,137

Earnings per Share --
Diluted:
Income (loss) from
continuing operations $0.13 $0.06 $0.45 $(0.27)
Income (loss) from
discontinued operations $-- $(0.01) $0.03 $(0.25)
Net income (loss) per
share $0.13 $0.05 $0.48 $(0.52)

Weighted average shares
outstanding used in
computing diluted net
income (loss) per share 58,404,069 44,411,056 54,760,623 40,698,137

Revenues from related
parties $1,131 $1,154 $4,525 $6,189


ASK JEEVES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)


December 31, December 31,
2003 2002

ASSETS
Current assets:
Cash and cash equivalents $36,673 $27,613
Marketable securities 143,975 5,827
Restricted cash and marketable
securities -- 11,000
Total cash, cash equivalents and
marketable securities 180,648 44,440
Accounts receivable, net 12,062 7,600
Prepaid expenses and other current
assets 3,299 2,272
Current assets of discontinued
operations -- 2,699
Total current assets 196,009 57,011
Property and equipment, net 10,933 10,922
Intangible assets, net 831 2,948
Other long-term assets 4,482 1,295
Total assets $212,255 $72,176

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued
liabilities $12,050 $8,209
Accrued compensation and related
expenses 5,137 3,598
Accrued restructuring costs 1,167 1,892
Deferred revenue 5,367 8,633
Deferred gain on joint venture -- 6,226
Borrowings under line of credit -- 11,000
Current liabilities of discontinued
operations -- 3,015
Total current liabilities 23,721 42,573
Convertible subordinated notes 115,000 --
Other liabilities 326 326
Total liabilities 139,047 42,899

Commitments and contingencies

Stockholders' equity 73,208 29,277
Total liabilities and
stockholders' equity $212,255 $72,176
CONTACT:  Ask Jeeves, Inc.
Colby Zintl
Corporate Communications
510-985-7610
czintl@askjeeves.com
or
Derrick Nueman
Investor Relations
510-985-7485
dnueman@askjeeves.com
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