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Exhibit 99.1
FOR IMMEDIATE RELEASE
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ROWECOM CONTACT INVESTOR CONTACT MEDIA CONTACT
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Dean Ridlon Gene Marbach Amy Rinaldi
RoweCom Inc. Makovsky & Co. Makovsky & Co.
(617) 588-2849 (212) 508-9645 (212) 508-9697
[email protected] [email protected] [email protected]
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ROWECOM REPORTS CONTINUED REVENUE AND
GROSS MARGIN GROWTH IN THIRD QUARTER
OPERATING EXPENSES REDUCED SIGNIFICANTLY;
CASH POSITIVE GOAL FOR 2001
CAMBRIDGE, MASS. - OCTOBER 26, 2000 - RoweCom Inc. (Nasdaq: ROWE), the
leader in empowering knowledge-based communities to work smarter, today reported
financial results for the three and nine months ended September 30, 2000.
Third quarter revenues were $41.2 million, an increase of more than $2
million from the second quarter of 2000 and greater than four times revenues for
the third quarter of 1999. Were it not for the continued strengthening of the
U.S. dollar, RoweCom's revenues would have been over $43 million for the
quarter.
Gross profits increased to $4.3 million or 10.4% of revenues, nearly
eight times the gross profits for the same period a year ago. Over the past
twelve months RoweCom has nearly doubled its gross margin from 5.8% to 10.4%.
RoweCom is beginning to see major increases in productivity allowing
for reductions in system redundancies that resulted from the acquisitions
completed last year. As a result, total departmental expenses declined by more
than $1 million from the second quarter to $14.1 million for the third quarter
of 2000. The company expects to achieve additional reductions through further
integration of its systems.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
showed a loss of $9.8 million or $0.79 per share, an improvement of 23% over the
$1.03 per share loss in the second quarter. Net loss for the third quarter was
$14.6 million, or $1.17 per share, a 32% improvement over the second quarter
loss of $1.71 per share. Approximately $.08 per share of non-operating expenses
during the third quarter was non-cash primarily due to the amortization of
warrants issued with debentures.
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"This quarter's results are evidence of our continuing success in
implementing a strategy intended to enable RoweCom to become cash positive in
2001," said Dr. Richard Rowe, RoweCom's president and CEO. "We are ahead of
schedule in taking advantage of economies of scale inherent in our increased
size which resulted from several acquisitions successfully completed in 1999."
During the third quarter, more than 130 new institutions joined
RoweCom's ever-expanding client roster. This was nearly double the number of new
clients in the second quarter. These new clients include British Airways and
Bank Societe Generale. British Airways is in the process of installing its own
company kStore as the preferred supplier for all periodicals, journals,
newsletters, magazines, books and research reports ordered by British Airways in
the United Kingdom. RoweCom has assumed responsibility for managing
subscriptions at Societe Generale's headquarters, branch offices and affiliates.
Acceptance of RoweCom's e-commerce platform continues to expand
worldwide. In the United States, approximately 83% of RoweCom's client base, as
measured by revenue, now has access to the e-commerce platform. In Europe,
adoption of the e-commerce model is happening much more rapidly than originally
anticipated. Through the end of September, approximately 30% of RoweCom's client
base in the United Kingdom and France, measured by revenue, has adopted the
model with nearly 50 additional clients per week coming online - double the rate
from last quarter.
Ian Best who has led these conversion efforts, has been named chief
technology officer. Mr. Best brings over 25 years experience in the development
and implementation of information systems for global customer focused
organizations. He replaces Walter Crosby who has left the company to pursue
other opportunities. Mr. Best managed the development of Dawson's business
systems and has effectively led the transition of the former Dawson U.S. and
European information technology systems into the RoweCom business environment.
Prior to being named chief technical officer, Mr. Best has served as RoweCom's
chief information officer.
RoweCom announced two significant new partnerships during the quarter.
Through a partnership with American Express, a customized, co-branded kStore is
being offered to all American Express Corporate Purchasing Card clients. This
agreement gives RoweCom access to 600 tier one accounts. An agreement with
AsiaSmart marks a significant entry into the Asian marketplace by offering
RoweCom's extensive catalog to 100,000 subscribers.
Revenues for the nine months ended September 30, 2000 increased to
$131.9 million compared with revenues of $13.2 million for the nine months ended
September 30, 1999, reflecting the acquisitions completed during 1999. Gross
profits increased to $12.8 million, or 9.7% of revenues, compared to $834,000,
or 6.3% of revenues recorded during the same period a year ago.
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The nine months ended September 30, 2000, produced operating losses of
$39.5 million compared to operating losses of $15.1 million in the first nine
months of 1999. While RoweCom generates approximately 70% of its revenue in the
fourth quarter, operating expenses are incurred evenly over the course of the
year. Net loss for the nine-month period was $48.7 million, or $4.30 per share,
compared to a net loss of $13.5 million, or $1.47 per share in the first nine
months of 1999.
"We have made a conscious decision to shift our emphasis toward
generating positive cash flow," commented Paul Burmeister, RoweCom's chief
financial officer. "As a result, our top line is projected to grow at a slower
rate than earlier projected in order for us to become cash flow positive in 2001
as we continue to build the company. For the full year of 2000, we expect to
generate gross revenues of approximately $430 million. Expectations for gross
revenues for the year would have been approximately $454 million were it not for
the effects of the strong U.S. dollar."
"We currently expect to generate gross revenues of approximately $540
million in 2001," continued Mr. Burmeister. "With the changes we have made to
our pricing structure and focus on higher margin business, we expect gross
margin to be approximately 9% for 2001. Our target for next year is to maintain
operating expenses less than 9% of the full year's revenue.
"We are committed to achieving our gross margin and operating targets
in a manner that will generate positive cash for the company in 2001," said Mr.
Burmeister.
Investors wishing to listen to RoweCom's third quarter conference call
may access the call on the investor relations' section of the company's Web site
located at www.rowe.com. The call will begin at 4:30 p.m. EDT on Thursday,
October 26 and requires Real Player 7.
ABOUT ROWECOM INC.
A first mover in business-to-business e-commerce, RoweCom develops and
operates global web-based solutions that enable knowledge-based communities to
purchase, manage, and use comprehensive knowledge resources and e-content such
as magazines, newspapers, journals, and books. With clients ranging from Fortune
1000 companies to academic libraries, RoweCom serves communities with intensive
knowledge requirements and high-volume purchases. Faxon, a long-established
leader in academic information services, joined RoweCom in October 1999 and
continues to serve its clients by offering expanded Internet and e-commerce
tools as well as new levels of control, convenience, and cost-savings. For more
information, visit www.rowe.com.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN
THIS NEWS RELEASE MAY CONTAIN FORWARD-LOOKING STATEMENTS MADE UNDER THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ALL
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. ROWECOM'S ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FOR A DISCUSSION OF THE FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE
SEE "RISK FACTORS" IN ROWECOM'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION INCLUDING THE FORM S-3 FILED ON OCTOBER 5, 2000.
TABLES TO FOLLOW
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ROWECOM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
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Three Months Ended
September 30,
2000 1999
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Revenues $ 41,241 $ 9,479
Cost of revenues 36,946 8,930
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Gross profit 4,295 549
Operating expenses:
Sales and marketing 8,065 3,460
Research and development 2,221 773
General and administrative 3,797 1,599
Stock based compensation -- 656
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Total departmental expenses 14,083 6,488
EBITDA (9,788) (5,939)
Depreciation 826 218
Amortization of goodwill and intangibles 2,020 699
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Loss from operations (12,634) (6,856)
Interest and other income, net (1,670) 605
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Loss before income taxes (14,304) (6,251)
Provision for income taxes 247 7
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Net loss $ (14,551) $ (6,258)
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Basic and diluted proforma net loss per share $(1.17) $ (.62)
Basic and diluted historical net loss per share $(1.17) $ (.62)
Proforma basic and diluted weighted average shares 12,395 10,116
outstanding
Historical basic and diluted weighted average shares 12,395 10,116
outstanding
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Nine Months Ended
September 30,
2000 1999
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Revenues $ 131,883 $13,159
Cost of revenues 119,122 12,325
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Gross profit 12,761 834
Operating expenses:
Sales and marketing 26,080 7,944
Research and development 7,434 2,512
General and administrative 11,139 3,456
Stock based compensation -- 656
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Total departmental expenses 44,653 14,568
EBITDA (31,892) (13,734)
Depreciation 2,137 426
Amortization of goodwill and intangibles 5,488 903
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Loss from operations (39,517) (15,063)
Interest and other income, net (4,393) 1,673
Loss before income taxes (43,910) (13,390)
Provision for income taxes 716 63
Loss before extraordinary item (44,626) (13,453)
Extraordinary loss (4,087) --
Net loss $(48,713) $(13,453)
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Basic and diluted proforma loss per share $(4.30) $(1.47)
Basic and diluted historical loss per share $(4.30) $(1.74)
Proforma basic and diluted weighted average shares 11,335 9,209
outstanding
Historical basic and diluted weighted average shares 11,335 7,964
outstanding
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ROWECOM INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
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AT SEPTEMBER 30, AT DECEMBER 31,
2000 1999
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ASSETS:
Current assets:
Cash and cash equivalents $ 41,802 $ 13,264
Accounts receivable, net 64,011 137,512
Other current assets 13,674 12,306
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Total current assets 119,487 163,082
Property and equipment, net 10,457 10,787
Goodwill, net 5,342 7,411
Intangible and other assets, net 43,071 34,328
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Total assets 178,357 215,608
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LIABILITIES AND STOCKHOLDERS' EQUITY :
Current liabilities:
Accounts payable 27,908 51,595
Accrued expenses 6,115 9,005
Accrued compensation 2,482 2,511
Customer advances 35,672 20,095
Deferred revenue 71,522 11,187
Loans payable 7,016 61,060
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Total current liabilities 150,715 155,453
Stockholders' equity :
Common stock 124 104
Additional paid-in capital 109,404 89,907
Treasury stock, at cost (53) (53)
Accumulated deficit (78,051) (29,338)
Accumulated other comprehensive loss (3,782) (465)
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Total stockholders' equity 27,642 60,155
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Total liabilities and stockholders' equity $ 178,357 $ 215,608
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