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Exhibit 99.1
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[LOGO OF BE FREE INC.]
FOR IMMEDIATE RELEASE
Contacts: Stephen M. Joseph Scott Solomon
Chief Financial Officer Vice President
Be Free, Inc. Sharon Merrill Associates
508.480.4017 617.542.5300
[email protected] [email protected]
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BE FREE, INC. THIRD QUARTER REVENUE INCREASES MORE THAN
300 PERCENT YEAR-OVER-YEAR
Company Significantly Narrows Losses and Shortens Pathway to Profitability
Business Metrics Reach New Highs
MARLBOROUGH, Mass. - October 25, 2000 - Be Free, Inc. (Nasdaq: BFRE), a
leading provider of hosted online marketing services, today reported its
financial results for the third quarter ended September 30, 2000.
Revenue for the third quarter of 2000 increased more than 300 percent to a
record $5.3 million, compared with $1.3 million for the third quarter of 1999.
The net loss for the third quarter of 2000, excluding non-cash charges for
equity-related compensation and merger-related items, was $4.0 million, or $0.06
per share, compared with a loss of $5.2 million, or $0.41 per share, for the
same period in 1999. The net loss for the third quarter of 2000, including non-
cash charges, was $18.2 million, or $0.29 per share, compared with $6.3 million,
or $0.49 per share for the year-ago period.
Revenue for the first nine months of 2000 increased 390 percent to $13.3
million, compared with $2.7 million for the first nine months of 1999. The net
loss, excluding non-cash charges for equity-related compensation and merger-
related items for the first nine months of 2000, was $12.7 million, or $0.21 per
share, compared with $11.0 million, or $0.87 per share for the same period one
year earlier. Be Free's net loss, including the non-cash charges, was $46.7
million, or $0.78 per share, for the first nine months of 2000, compared with a
net loss of $13.8 million, or $1.09 per share, for the same period in 1999.
-more-
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Be Free Reports Third-quarter Financial Results/2
"Be Free had a tremendous quarter and is uniquely positioned to become the
dominant provider of online marketing services," said Gordon B. Hoffstein,
chairman and chief executive officer. "Our success this quarter was driven by
three critical factors: a growing base of increasingly successful customers; a
product offering of pay-for-performance marketing services that has become the
obvious choice for today's cost-conscience e-businesses; and a profitable
business model that is backed by $160 million in cash and marketable
securities."
Hoffstein continued, "During the quarter, we saw excellent revenue growth
and due to continued strength in all our business metrics, we expect that Be
Free can achieve profitability, before non-cash charges, in the first quarter of
2002. At that time, we believe that we will have a cash reserve of well over
$100 million."
Shift in Performance-based Marketing Spending
"Forrester Research predicts that performance-based marketing will represent 50
percent of all online marketing by 2003. We believe this trend is accelerating
as companies doing business online capitalize on the inherent accountability of
the Internet to lower their customer acquisition costs and improve
profitability. Be Free, as the leader in performance-based marketing services,
is in a unique position to capitalize on this shift in marketing spending," said
Hoffstein.
The following Be Free metrics support this trend:
. At the end of the third quarter, 29 percent of the company's customers had
exceeded their monthly minimum fees, compared to just 11 percent at the end
of the third quarter of 1999 and 25 percent at the end of the second quarter
of 2000. The average length of time that Be Free customers need to crest
their minimums is decreasing. As of the third quarter of last year, it took
eight and a half months on average to break through minimums. That figure had
declined to seven and a half months in the second quarter of 2000, and only
six and a half months in the third quarter of this year. This means that the
marketing programs of Be Free customers are becoming considerably more
successful at an increasingly faster pace. Since half of Be Free's customers
have not had live affiliate marketing programs for that average six and a
half month period, the company believes that its revenue growth should be
even greater as these younger customers crest their minimum payments.
-more-
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Be Free Reports Third-quarter Financial Results/3
. In the third quarter, Be Free's average revenue per customer increased eight
percent compared with the second quarter of this year. Be Free believes that
this reflects a shift in customers' spending to performance-based programs as
they attempt to build crucial market share and attain profitability.
Growth in Other Key Metrics
During the quarter, Be Free continued to achieve record levels in other key
business metrics:
. The number of live customers - those with revenue-generating performance
marketing channels - increased 279 percent to 356 from 94 in the same period
a year earlier. In addition, the company renewed 41 current customers,
representing almost 90 percent of customers whose contracts had expired
during the quarter. The company lost 17 customers due mainly to consolidation
or lack of adequate funding. With Be Free's pay-for-performance model, the
company anticipates that it will lose primarily those customers that will be
less successful and, therefore, contribute least to its revenue growth. For
example, the customers lost this quarter represented only 2.6 percent of the
company's revenue.
. The number of impressions, or times that the promotions of Be Free's
customers were viewed on affiliate sites, rose to 6.3 billion, an increase of
449 percent from a year ago.
. The company's cash burn remained low. The company spent $5 million for third
quarter operations and $4 million primarily for capital expenditures for a
total cash burn of $9 million. The $9 million cash burn is $3 million less
than the company had expected for this period.
Diverse Customer Base
During the quarter, Be Free broadened its diverse base of traditional
brick-and-mortar and well-established dot-com customers. "Large and successful
companies continue to turn to Be Free for online marketing solutions. Today, Be
Free customers include all of the top five most highly trafficked sites on the
Internet according to Media Metrix," Hoffstein said.
-more-
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Be Free Reports Third-quarter Financial Results/4
"Our successful customer base is one of Be Free's crown jewels. From the
beginning, Be Free set out on a path to develop pay-for-performance marketing
services that appealed to the high end of e-businesses and to then build breadth
and depth within this segment. Our customers include best of breed e-businesses
such as Yahoo, AOL, Lycos, C/Net, Travelocity and Network Solutions as well as
emerging brick-and-click leaders including BarnesandNoble.com, IBM, Bertelsmann,
3M, Motorola, Sprint, Staples, Compaq and The Gap. At the end of the third
quarter, roughly one-third of our customers were brick-and-click businesses,
compared to just 15 percent one year ago. We believe that many of today's
successful offline retailers will become more of a force in driving tomorrow's
online commerce. Be Free is ready for that evolution, and we have positioned
ourselves to benefit from it."
BSELECT(SM) - Be Free's Personalized Recommendation Service
BSELECT is a real-time recommendation engine for online sellers and content
sites - providing personalized product and content recommendations for site
visitors. For retailers, this means increased browse-to-buy ratios, order
volume and average order size. For content sites, this leads to increased page
views, site viewing time and improved site loyalty.
Customers signed this quarter for the BSELECT service included Xerox
Corporation. Xerox will be launching both BSELECT and BFAST(SM), the company's
performance-based affiliate marketing service.
New BFAST Product Offerings
Be Free continues to offer its customers a spectrum of services to cost-
effectively expand their online reach, convert browsers to buyers and promote
customer and visitor loyalty. This week the company launched BFAST(SM) version
6.5, which includes the Advanced Marketing Pack. The Advanced Marketing Pack,
which is available for a separate fee, gives Be Free customers complete control
and flexibility over their promotions and links, using a combination of dynamic
links and Be Free's two most popular merchandizing tools - Auto Merchandizer and
Creative Optimizer. For the commerce site, this means the ability to push
promotions and specials, to utilize dynamic pricing, special offers and
auctions, and to schedule and target promotions. Content sites can use the
Advanced Marketing Pack to syndicate headlines, push timely data, such as stock
and sports scores, update search boxes and optimize best-performing creatives.
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Be Free Reports Third-quarter Financial Results/5
The company also launched the Performance Partner Program during the
quarter. This program enhances the relationship between Be Free's customers and
their large, strategic affiliates by offering those affiliates special services
such as aggregated reporting, technology enhancements and technical support. By
fostering more streamlined relationships between its customers and large,
revenue producing affiliates, Be Free expects to increase the transactions
flowing through its infrastructure and thus its revenue stream.
International Expansion
As the worldwide demand for performance-based marketing services continues
to expand, Be Free is increasing its reach into these new markets. During the
quarter, the company continued to expand its operations in the UK and France,
but delayed the opening of a German office to concentrate on other areas of the
continent where it is experiencing more demand. At the end of the third quarter,
Be Free had six live European customers and 14 customers in its backlog. Those
20 customers represent more than 80 individual country-specific programs. "We
see tremendous opportunity internationally as Be Free capitalizes on our
dominant market position in Europe," said Hoffstein.
Strategy and Business Outlook
Looking to the future, Hoffstein said, "We are very optimistic about our
performance as we enter the fourth quarter. We expect that the trend toward
performance-based marketing will continue to grow, and Be Free will capitalize
on this.
"We have planned for continued industry consolidation and indeed
consolidation of our customer base, but, because of our performance-based model,
we do not anticipate that this will have an impact on our business both in terms
of our revenue growth and our drive toward profitability. We will increase our
emphasis on the leading companies whose businesses represent a significant
portion of e-commerce - and we expect that more of these customers will tap into
additional marketing services from Be Free.
"Be Free has the financial resources, world-class customers, superior
technology, exceptional people and the will to be the leading provider of online
marketing services," Hoffstein concluded.
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Be Free Reports Third-quarter Financial Results/6
About Be Free, Inc. (Nasdaq: BFRE)
As a leading provider of hosted online marketing services, including affiliate
marketing and personalization, Be Free helps companies successfully market
online. By simply plugging into Be Free's marketing infrastructure, services and
knowledge, online businesses can reach more people with the right offers across
multiple channels. For more information about Be Free, its BFAST performance-
based affiliate marketing service or its BSELECT personalized product and
content recommendation service, visit http://www.befree.com.
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All statements in this news release that are not statements of historical fact
are "forward-looking statements" under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include, but are not limited to, statements about our future financial
performance, such as our expected revenue growth, future profitability, cash
expenditures and cash balances, the level of customer transactions, as well as
statements about the growth of performance marketing and the future market
conditions for our services. These statements are based on Be Free's current
expectations, hopes, beliefs and estimates and invoke risks and uncertainties
that could cause actual results to differ materially from those anticipated or
projected.
The risk factors include, but are not limited to:
. If the Internet fails to grow as an advertising, marketing, and sales medium,
our future revenue and business prospects would be materially and adversely
affected;
. System disruptions and failures may result in customers dissatisfaction,
customer loss or both, which could materially and adversely affect our
reputation and business;
. To be competitive, we must continue to develop new and enhanced services, and
our failure to do so may adversely affect our prospects;
. The Internet generates privacy concerns which could result in market
perceptions or legislation which could harm our business, result in reduced
sales of our services, or both;
. If we infringe upon the intellectual property rights of others, we could be
exposed to significant liability;
. If we fail to manage effectively the rapid growth in our operations, our
business and prospects will be materially and adversely affected;
. We may not achieve the expected benefits of our acquisition of TriVida;
. If we fail to attract and retain key personnel, our business will be
materially and adversely affected; and
. If we are not able to overcome the challenges of our planned international
expansion, our revenue and our prospects for profitability may be materially
and adversely affected.
Further information about risk factors that could affect the Company's
performance are contained in the Company's filings with the Securities and
Exchange Commission, including but not limited to its report on Form 10-Q for
the quarter ended June 30, 2000. Be Free disclaims any obligations to update
these expectations, hopes and beliefs.
The Consolidated Statements of Operations and Consolidated Balance Sheets
follow:
# # #
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BE FREE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenue:
Performance marketing services $ 5,330 $ 1,313 $ 13,279 $ 2,709
-------- ------- -------- --------
Operating expenses:
Cost of revenue 990 199 2,445 437
Sales and marketing 4,656 2,695 12,961 6,045
Client services 1,726 1,143 5,051 2,289
Development and engineering 2,997 1,653 7,294 3,135
General and administrative 1,624 798 4,555 1,652
Equity related compensation 493 488 1,153 1,441
Merger related expenses 13,754 - 32,857 -
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Total operating expenses 26,240 6,976 66,316 14,999
Operating loss (20,910) (5,663) (53,037) (12,290)
Interest income (expense), net 2,680 (25) 6,345 (193)
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Net loss (18,230) (5,688) (46,692) (12,483)
Accretion of preferred stock to
redemption value - (596) - (1,297)
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Net loss attributable to common
stockholders $(18,230) (6,284) $(46,692) $(13,780)
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Basic and diluted net loss per share $ (0.29) $ (0.49) $ (0.78) $ (1.09)
Shares used in computing basic and
diluted net loss per share 62,862 12,695 59,794 12,661
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Supplemental Data:
Net loss attributable to common
stockholders $(18,230) $(6,284) $(46,692) $(13,780)
Equity related compensation 493 488 1,153 1,441
Merger related charges 13,754 - 32,857 -
Accretion of preferred stock to
redemption value - 596 - 1,297
-------- ------- -------- --------
Adjusted net loss $ (3,983) $(5,200) $(12,682) $(11,042)
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Supplemental net loss per share $ (0.06) $ (0.41) $ (0.21) $ (0.87)
Shares used in computing supplemental
net loss per share 62,862 12,695 59,794 12,661
</TABLE>
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BE FREE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
Unaudited
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
ASSETS
<S> <C> <C>
Current assets:
Cash, cash equivalents and marketable securities $148,719 $71,738
Accounts receivable, net of allowances 2,756 1,328
Prepaid expenses and other current assets 5,447 1,282
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Total current assets 156,922 74,348
Marketable securities 10,960 7,954
Property and equipment, net 16,130 7,967
Intangible assets, net 132,946 -
Other assets 1,283 568
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Total assets $318,241 $90,837
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 6,566 3,883
Deferred revenue 1,571 943
Current portion of long term debt 2,586 943
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Total current liabilities 10,723 5,769
Long-term debt, net of current portion 3,352 2,507
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Total liabilities 14,075 8,276
Stockholders' equity 304,166 82,561
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Total liabilities and stockholders' equity $318,241 $90,837
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Supplemental Data:
Cash, cash equivalents and marketable securities $148,719 $71,738
Marketable securities - long term 10,960 7,954
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Total cash, cash equivalents and marketable securities $159,679 $79,692
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