NEW YORK, March 20, 2006 – Ziff Davis Holdings Inc., the ultimate parent company of Ziff Davis Media Inc., today reported operating results for its fourth quarter and year ended December 31, 2005.
The Company's consolidated revenues for the fourth quarter 2005 totaled $57.8 million, a decline of 11% compared to $65.0 million reported in the prior year quarter. The Company's print revenues for the period were down 20% from the fourth quarter 2004, while online revenues grew 24% and Digital Life event revenues increased 38%. Approximately $2.0 million of the print revenue decline was attributed to a settlement reached with a list rental agent.
Consolidated EBITDA(1) was $8.4 million for the fourth quarter 2005, down 47% from $15.9 million for the prior year period principally due to the revenue decline as noted above. As previously announced, during the quarter, the Company closed its Sync and ExtremeTech magazines. EBITDA losses for these publications totaled $0.6 million and were included in the reported fourth quarter EBITDA; without these losses, EBITDA for the quarter would have been $9.0 million.
For the full year 2005, consolidated revenues totaled $187.6 million, a decline of 8% compared to revenues of $204.5 million in 2004. EBITDA for the full year 2005 was $17.3 million, down 50% compared to $34.9 million for full year 2004. EBITDA losses of $3.0 million for the closed publications were included in the reported full year EBITDA; without these losses, EBITDA for 2005 would have been $20.3 million.
"Last year ended up being a tough year," said Robert F. Callahan, Chairman & CEO, Ziff Davis Holdings Inc. "We've made terrific progress at Ziff Davis over the past several years developing and growing innovative new brands and franchises. However, 2005 was a 'building year' as we continued to invest significantly to grow these new digital and event assets coupled with the sharp tech print market erosion. This resulted in a setback to our earnings. We'll continue to focus on cost efficiencies. In the fourth quarter, we closed two publications that were not on plan (Sync and ExtremeTech). Additionally, in December, we completed the operational realignment of our businesses into three distinct groups that each offer integrated customer solutions. This realignment enables us to serve our customers with speed and clarity of mission and should ultimately allow us to maximize stakeholder value."
Condensed Consolidated Statements of Operations for the quarter and the year ended December 31, 2005 and 2004; Condensed Consolidated Balance Sheets at December 31, 2005 and December 31, 2004; Condensed Consolidated Statements of Cash Flows for the years ended December 31, 2005 and 2004; and descriptions of the Group segments are set forth at the end of this release.
Financial Summary for the Fourth Quarter Ended December 31, 2005 and 2004
($ millions) |
Consumer/Small Business(2) |
Enterprise Group(2) |
Game Group(2) |
Total Company |
||||
|
2005 |
2004 |
2005 |
2004 |
2005 |
2004 |
2005 |
2004 |
Revenue |
$21.7 |
$26.8 |
$21.8 |
$21.1 |
$14.3 |
17.1 |
$57.8 |
$65.0 |
EBITDA(1) |
4.3 |
7.4 |
1.1 |
5.3 |
3.0 |
3.2 |
8.4 |
15.9 |
Consumer/Small Business Group
Revenue for the Consumer/Small Business Group for the fourth quarter 2005, including Sync and ExtremeTech magazines, was $21.7 million, down $5.1 million or 19% compared to the same period last year. This decrease was primarily related to lower print advertising revenues and lower circulation revenues for PC Magazine. The declines were partially offset by the growth of both the online business, principally pcmag.com, and the DigitalLife convention. Revenue for Sync and ExtremeTech magazines for the quarter was $1.6 million.
Production costs of $5.7 million were down 24%, principally due to the reduction in PC Magazine's rate base in the first quarter of 2005, which reduced the volume of magazines produced in the fourth quarter 2005 compared to last year. The decrease was partially offset by higher costs to produce the expanded DigitalLife convention.
Selling, general and administrative expenses of $11.7 million were down slightly as a decrease in magazine circulation and marketing costs were offset by increased spending on content development, sales and marketing to expand the Group's online presence.
EBITDA for the Group was $4.3 million, down $3.1 million from last year reflecting the decline in revenue partially offset by overall lower production costs. Included in EBITDA was $0.6 million in losses for Sync and ExtremeTech magazines.
Enterprise Group
Revenue for the Enterprise Group for the fourth quarter 2005 was $21.8 million, an increase of $0.7 million or 3% compared to the same period last year. This increase was due to growth in online revenues which more than offset a decrease in print revenues. Most of the print decline was due to $1.5 million attributable to the Enterprise Group of the list rental agent settlement noted above. Within the print business, a decline in print advertising was offset by the growth in new product revenues such as white papers and Business Information Services tools. Online revenue increased by 34%, driven by strong growth in online advertising.
Production costs of $4.2 million were up 20% for the quarter reflecting the costs of an additional issue of eWEEK magazine as well as higher reprint orders for contract publications compared to last year.
Selling, general and administrative expenses totaled $16.5 million and were up 33% from last year due to increased spending on content development, sales and marketing to expand the Group's online presence as well as higher execution costs on the growing custom events business.
As a result of the increase in overall expenses, fourth quarter 2005 EBITDA for the Group was $1.1 million, down $4.2 million from last year.
Game Group
Revenue for the Game Group for the fourth quarter 2005 was $14.3 million, down $2.8 million or 16% from the fourth quarter 2004. Approximately $1.6 million or 57% of this decrease was the result of the expiration of the GMR magazine partnership and reducing the frequency of Xbox Nation. The balance of the decrease was equally due to a decline in newsstand sales and advertising revenue, both of which were primarily attributable to the current stage of the videogame console cycle. These decreases were partially offset by a doubling in online revenues at the 1UP Network.
Production costs of $6.0 million were down 23%, principally due to the reduced volume of magazines produced in the fourth quarter 2005 compared to last year. The Group did not publish any issues of Xbox Nation or holiday issues of Electronic Gaming Monthly or Computer Gaming World in the 2005 quarter.
Selling, general and administrative expenses of $5.3 million were down 13% as a decrease in magazine circulation and marketing costs, principally due to the absence of costs for GMR and Xbox Nation, was partly offset by increased spending on content development within the group's online operations.
EBITDA for the Group of $3.0 million was basically flat with last year. The decline in revenue was mostly offset by lower production costs and lower overall selling, general and administrative spending.
Fourth Quarter 2005 Restructuring
Due to continued difficult market conditions that are anticipated to persist in the technology print advertising sector, the Company recorded a $3.0 million pre-tax restructuring charge during the fourth quarter 2005. The restructuring charge was principally comprised of severance for terminated employees and closure costs for Sync and ExtremeTech magazines.
The Company expects to realize approximately $5 million of annual EBITDA improvement in 2006 directly attributable to the closure of Sync and ExtremeTech magazines along with additional restructuring actions within the Company's selling, general and administrative activities.
Cash Position
At December 31, 2005 the Company had $34.2 million of cash and cash equivalents. Since the end of the third quarter 2005, the Company has invested $6.0 million to acquire FileFront.com and launch its Chinese joint venture, paid $4.9 million of scheduled interest payments, made $2.3 million of capital expenditures and paid $2.0 million in restructuring costs. While these uses of cash were mostly funded by cash generated from operations, the Company's cash and cash equivalents declined $4.3 million during the quarter.
Highlights and Milestones
Consumer/Small Business Group
Enterprise Group
Game Group
Senior Management Change
On January 31, 2006, the Company eliminated the position of Chief Operating Officer and as a result Bart W. Catalane resigned his position as President and Chief Operating Officer. Mr. Catalane will continue to serve Ziff Davis as a member of the Company's Board of Directors.
Business Outlook
Reflecting normal seasonality plus the continued decline in print advertising, the Company is projecting consolidated EBITDA for the first quarter of 2006 will be in the range of $2.0 million to $3.0 million compared to $4.3 million of consolidated EBITDA for the first quarter of 2005. The Company advises that its projections are subject to risks and uncertainties (see the "Forward Looking Statements" heading below) and these could therefore individually or collectively cause actual results to differ materially from those projected above.
Investor Conference Call
The Company's fourth quarter 2005 earnings conference call is scheduled for 4:00 p.m. EST on March 20, 2006. Individuals wishing to participate can join the conference call by dialing 800-857-5485 for domestic calls and 773-681-5843 for international calls and giving the operator the following information: Company — Ziff Davis Media; Pass Code — 8687972.
For those who are unable to participate in the live call, the conference call will be recorded and available by telephone from 5:00 p.m. EST on March 20, 2006 to 5:00 p.m. EST on March 27, 2006. Persons interested in listening to the recorded call should dial 866-454-2122 for domestic calls and 203-369-1242 for international calls. Any material financial or statistical information discussed on the conference call that is not otherwise included in this press release will be made available on the Company's website, www.ziffdavis.com, under the heading Investor Relations.
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Contact: Randy Zane |
Mark Moyer |
About Ziff Davis Holdings Inc.
Ziff Davis Holdings Inc. is the ultimate parent company of Ziff Davis Media Inc. Ziff Davis Media is a leading integrated media company serving the technology and videogame markets. The Company is an information services provider of technology media including publications, websites, conferences, events, eSeminars, eNewsletters, custom publishing, list rentals, research and market intelligence. In the United States, the Company publishes 7 magazines including PC Magazine, eWEEK, CIO Insight, Baseline, Electronic Gaming Monthly, Computer Gaming World and Official U.S. PlayStation Magazine. The Company exports the power of its brands internationally, with publications in 41 countries and 20 languages. Ziff Davis leverages its content on the Internet with a network of highly-targeted technology and gaming sites including PCMag.com, eWEEK.com, ExtremeTech.com and 1UP.com. The Company also produces highly-targeted b-to-b and consumer technology events including DigitalLife. With its main headquarters and PC Magazine Labs based in New York, Ziff Davis Media also has offices and lab facilities in the San Francisco and Boston markets. Additional information is available at www.ziffdavis.com.
Forward-Looking Statements
Except for historical information contained herein, the statements made in this release including anticipated future revenues and operating results, cash balances and cost savings, constitute 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. Such forward-looking statements are subject to certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Such risks and uncertainties include the potential deterioration of the economic climate in general or with respect to the markets in which we operate, risks associated with new business investments, acquisitions, competition and seasonality and the other risks discussed in the Company's Annual Report on Form 10-K and other filings made with the Securities and Exchange Commission (which are available from the Company or at http://www.sec.gov), which discussions are incorporated in this release by reference. These forward-looking statements speak only as of the date of this release. After the issuance of this release, the Company might come to believe that certain forward-looking statements contained in this release are no longer accurate. The Company shall not have any obligation to release publicly any corrections or revisions to any forward-looking statements contained in this release.
