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Rule 425
Filer: Quokka Sports, Inc.
Subject Company: Total Sports Inc.
Subject Company SEC File No.: 333-90905
CONTACT INFORMATION:
INVESTORS:
Kate Rajeck
Quokka Sports Inc.
415/908-3800
[email protected]
PRESS:
CARYN MAROONEY
OutCast Communications
415/392-8282
[email protected]
QUOKKA SPORTS ANNOUNCES RECORD THIRD QUARTER 2000 RESULTS
o Reports Record Quarter Revenues of $16.0 Million, up 433%
o Reports Record Monthly Unique Visitors of 3.4 million, up 750%
o Company Wins the Gold on all Major Metrics for the Sydney 2000 Olympic Games
SAN FRANCISCO, Calif., October 31, 2000 -- Quokka Sports, Inc. (NASDAQ: QKKA),
a leading provider of sports entertainment for the digital world (TM), today
announced record third quarter financial results for the three months ended
September 30, 2000.
Revenues for the quarter ended September 30, 2000 were $16.0 million, up 433%
from $3.0 million reported for the third quarter in 1999 and an increase of 27%
over revenues of $12.6 million in the second quarter of 2000. Revenues for the
September quarter exceeded the Company's revenues for all of fiscal year 1999.
The net loss for the 2000 third quarter, excluding interest charges,
depreciation, and amortization of intangibles was $19.8 million, or $(0.43) per
share, compared to a net loss of $15.0 million or $(0.35) per share for the
third quarter in 1999. Including one time interest charges, depreciation and
amortization of intangibles, net loss for the quarter ended September 30, 2000
was $55.7 million or a loss of $(1.21) per share.
Major audience metrics for the Quokka Sports Network experienced strong
sequential growth over the prior quarter. Average unique visitors per month in
the third quarter of 2000 were 3.4 million, up 113% from 1.6 million average
unique visitors per month in the second quarter of 2000 and up 750% from the
third quarter of 1999, according to company estimates. The total connected time
per unique visitor per month reached 44 minutes for the September quarter, which
would maintain the Quokka Sports
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Network in the top tier of sticky networks on the Internet. Total connected time
for the Quokka Sports Network in the September quarter was 7.4 million hours, up
155% from 2.9 million hours in the June 2000 quarter and up 517% over the third
quarter of 1999. Revenue per connected hour was $2.16 and costs per connected
hour were $2.80 for the third quarter of 2000. The revenue and costs per
connected hour reflect the tremendous growth in audience reach due to Olympic
traffic and the extended connected time per visitor during the quarter.
"Third Quarter was a true milestone in the history of Quokka Sports. The largest
event in the company's history, our production of the Sydney Olympic Games,
exceeded all of our expectations for success. Operationally, this quarter was
terrific as we achieved record revenue from sponsors as we expand our sports
entertainment coverage and effectively managed expenses," said Alvaro Saralegui,
Quokka Sports' President and CEO.
Saralegui continued, "This year we have done a terrific job executing on our
business model and as we move towards the end of the year, we are focused on
completing the next step in our network expansion- extending further into
mainstream sports with our acquisition of Total Sports. With our accomplishments
this year we are well positioned to achieve our goals for 2001. Our leadership
in digital entertainment gives us great confidence in our business model as we
continue to grow the market for digital sports entertainment."
SEQUENTIAL REVENUE GROWTH ACHIEVED THROUGH RECORD REVENUES
During the third quarter, sponsorship and advertising accounted for the majority
of the quarter's revenue growth as the Company's sponsorship base grew from 18
to 24 sponsors. The majority of the quarter's revenues were from Sydney Olympic
gold medal sponsors and included General Electric, General Motors, Axient,
Ameritrade, e-Synch, Anheuser-Bush, IBM and Visa International. Revenues were
recognized from global content distribution agreements with Excite@Home, Intel,
Terra Networks and Microsoft. Consumer revenues were generated through sales of
specialty merchandise and auctions. Combined, content syndication and consumer
revenues contributed 21% of the September quarter's revenues.
SYDNEY 2000 OLYMPIC GAMES AND NBCOLYMPICS.COM
In September, Quokka Sports, as part of its joint venture with NBC, produced the
online Internet coverage for NBC's "Complete Olympics." NBCOlympics.com enhanced
and expanded NBC's network and cable coverage of the Sydney Games through
digital coverage that included premium content, broadband experiences, chats
with athletes, analysis and live event coverage through it's Action Tracker
product. Unlike any other Olympic Internet destination, NBCOlympics.com
attracted
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5.6 million unique visitors and the average connected time per visitor was 50
minutes during the Games, according to company estimates.
"NBCOlympics.com delivered the most compelling and exciting online Olympic
coverage seen by the U.S. audience. The success of our traffic and visit lengths
per visitor allowed us to deliver over one billion impressions for our gold
medal sponsors. In addition, the site achieved the highest recognition from
leading sports and Internet companies evaluating online Olympic coverage. With
Salt Lake 2002 only 16 months away, we are looking forward to capitalizing on
our success as we begin production of the winter Olympic experience," said Tom
Newell, general manager of NBC/Quokka Ventures.
ACQUISITION STRATEGY CONTINUES WITH GOLF.COM AND TOTAL SPORTS
This year, Quokka Sports has strategically expanded the Quokka Sports Network
through acquisitions of leading sports media companies. In early October, the
Company completed its acquisition of 71% of golf.com, a privately-held golf
media property. NBC retains the other 29% interest in that partnership. In July,
the Company announced its plans to acquire Total Sports, a privately held
mainstream U.S. sports media company and expects that transaction to close in
November. In March, the Company acquired MountainZone, a leading mountain sports
Internet property and completed the integration of that business in the
September quarter. Through these acquisitions, the Company expects to expand its
network audience reach, attract new sponsors, and improve production and
technology efficiencies.
$77.4 MILLION PRIVATE PLACEMENT RAISED TO FUND THE COMPANY'S OPERATIONS
In September, the Company completed a private placement of $77.4 million, before
transaction fees and expenses, of 7% convertible subordinated promissory notes
and warrants. The Company expects to use the capital raised from the private
placement for working capital, debt refinancing and other general corporate
purposes. GE Capital, a subsidiary of General Electric Company (NYSE: GE) led
the round of financing of financial and strategic partners. At the end of
September, the Company's cash and cash equivalents totaled $74.7 million.
MANAGEMENT CONFERENCE CALL AND OUTLOOK
In conjunction with this earnings release, Management's conference call will be
webcast at 2:00 p.m. Pacific Standard Time on the investor relations page of the
Company's web site, located at www.quokka.com. Management will discuss the
results of the third quarter 2000 and outlook for fourth quarter 2000 and
fiscal year 2001. As of October 31, 2000, the Company's outlook for the fourth
quarter ending December 31, 2000 estimate revenues will be within a range of
$11-12 million and a range of $.25-$.26 loss per share, excluding interest,
taxation, depreciation and amortization and based on approximately 57.7 million
shares estimated to be outstanding. For the fiscal year ending December 31,
2001, the Company estimates revenues will be in a range of $75-80 million and
loss per share for the year will be in a range of $.30-$.38, excluding
interest, taxaction depreciation and amortization, based on approximately 65.7
million shares estimated to be outstanding.
ABOUT QUOKKA SPORTS
Quokka Sports, a leading provider of sports entertainment for the digital
world(TM), creates complete interactive sports experiences that fulfill the
passions of sports enthusiasts worldwide. Quokka Sports
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(Quokka.com) leverages digital technology to offer rich, immersive presentations
that include live event coverage, analysis, news and information, audio and text
dispatches from athletes, games, community forums, and premium shopping. The
Quokka Sports Network is comprised of several sport verticals that feature some
of the world's premier sporting properties. These include Golf.com (Golf.com,
PresidentsCup.com), year-round coverage of summer and winter Olympic sports
(NBCOlympics.com, SaltLake2002.com), Sailing (QuokkaSailing.com,
AmericasCup.org, BTChallenge.com, VolvoOceanRace.org), Motor Racing (CART.com,
MotoGP.com), and Action Sports (MountainZone.com coverage of skiing, climbing,
hiking, snowboarding, adventure racing and mountain biking). Quokka Sports
develops its content for a broad range of digital platforms from narrowband and
broadband Internet to wireless and converged devices. Quokka Sports' innovative
sports entertainment productions are enabled by Quokka Performance Team members
Compaq Computer Corporation, Computer Associates International, Inc. and Intel
Corporation. Quokka Sports has offices in San Francisco, London, New York and
Seattle.
###
"Quokka," "Quokka Sports" and "MountainZone" are registered trademarks, and
"Quokka Sports Immersion," "Qnews," "What Happens Next," "Sports Entertainment
for the Digital World," "Wired Athlete," "Athlete's Voice" and the Quokka Logos
are trademarks of Quokka Sports, Inc.
Cautionary Statement Under The Private Securities Litigation Reform Act Of 1995:
Except for the historical information contained herein, this news release
contains forward-looking statements that involve risks and uncertainties,
including the Company's ability to meet expected financial results, improve
profitability, complete the Total Sports transaction, achieve anticipated
efficiencies, achieve its growth objectives, expand the Quokka Sports Network,
attract and retain sponsors and advertisers, attract and retain an audience,
and develop and launch programming and new products, as well as the other risks
detailed from time to time in the Company's SEC filings, including its Report
on Form 10-K for the year ended December 31, 1999, its Quarterly Report on Form
10-Q for the quarter ended June 30, 2000 and filings related to pending and
recently completed acquisition transactions. Actual results could differ
materially from those discussed and reported results should not be considered
as an indication of future performance. All forward-looking statements are
based on information available to the Company on the date hereof, and the
Company assumes no obligation to update such statements.
Investors are urged to read proxy statements and documents relevant to Quokka
Sports' acquisition of Total Sports described in this announcement that are
filed with or that will be filed with the U.S. Securities and Exchange
Commission because they contain important information about that transaction.
After they are filed, you can obtain the relevant documents that are filed with
the Securities and Exchange Commission for free on the Securities and Exchange
Commission's web site at http://www.sec.gov. If you write Quokka Sports at 525
Brannan Street, Ground Floor, San Francisco, CA 94107, Attention: Investor
Relations, or call the Company at (415) 908-3800, Quokka Sports will send you
for free the final joint proxy statement/prospectus that the Company filed in
connection with obtaining their stockholder approval of the Total Sports
transaction and in connection with the registration of the shares to be issued
in the Total Sports acquisition.
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QUOKKA SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
ASSETS ------------- -------------
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,732 $ 3,855
Investments in marketable securities 70,918 64,902
Accounts receivable, net 10,448 6,067
Inventory, net 287 -
Acquired programming and distribution rights 9,338 12,042
Prepaid and other expenses 1,506 1,823
-------- --------
Total current assets 96,229 88,689
Property and equipment, net 19,480 10,551
Other assets 643 640
Debt issuance costs 5,157 -
Goodwill & other intangibles 27,338 -
Total assets $148,848 $ 99,880
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $5,343 $2,427
Accrued expenses 13,605 3,797
Current portion of long-term debt and
capitalized lease obligations 6,619 6,041
Deferred revenues 4,461 3,864
-------- --------
Total current liabilities 30,027 16,129
Long current term debt and capitalized lease
obligations, net of current portion 76,751 11,493
Redeemable Warrants 8,225 -
Stockholders' equity
Preferred stock - -
Common stock, voting and non-voting 5 4
Additional paid-in capital 193,451 137,460
Warrants and other 8,885 7,831
Treasury stock, at cost (107) (107)
Accumulated deficit (168,390) (72,930)
-------- --------
Total stockholders' equity 33,844 72,258
-------- --------
Total liabilities and stockholders' equity $148,848 $ 99,880
======== ========
</TABLE>
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QUOKKA SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except EPS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, December 31,
------------------- ------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $16,009 $ 2,961 $38,105 $ 6,410
----------------------------------------
Cost of revenues
Production and other costs 19,195 6,926 36,472 13,269
Amortization of programming and distribution rights 1,515 226 5,134 1,863
----------------------------------------
Total cost of revenues 20,710 7,152 41,606 15,132
----------------------------------------
Gross profit/(loss) (4,701) (4,191) (3,501) (8,722)
Operating expenses
Research and engineering 5,103 2,596 16,528 9,249
Sales and marketing 6,642 4,858 22,284 13,919
General and administrative 4,040 3,581 11,320 7,978
Restructuring costs - - 587 -
Depreciation 2,267 1,605 5,693 2,755
Amortization of intangibles 4,754 - 9,001 -
-----------------------------------------
Total operating expenses 22,806 12,640 65,413 33,901
-----------------------------------------
Loss from operations (27,507) (16,831) (68,914) (42,623)
Losses of associated venture - 372 - 1,439
Minority interest in net loss of consolidated
subsidiary (645) (645) (1,936) (1,291)
Interest income/(expense), net (28,834) 745 (28,482) 957
------------------------------------------
Net loss $ (55,696) $(15,813) $(95,460) $(41,814)
==========================================
Net loss per share:
Basic and diluted $ (1.21) (.37) $ (2.10) (1.11)
Weighted average shares outstanding -- basic
and diluted 46,131 42,545 45,449 37,597
==========================================
</TABLE>
