<PAGE>
For Immediate Release:
US Interactive(R) Reports Third Quarter Results, Continues Cost Cuts;
Refines New Business Strategy and Names New CEO
Philadelphia, PA - November 8, 2000 - U.S. Interactive, Inc. (Nasdaq: USIT), an
Internet professional services company, as previously announced, today confirmed
its third quarter financial results were lower than previously announced. At the
same time, the Company unveiled plans for further cost reductions and a newly
refined business strategy that focuses on selected vertical markets and core
competencies.
US Interactive also announced that its recently appointed President, Mohan
Uttarwar (42), has been named Chief Executive Officer, succeeding William C.
Jennings who has been appointed chairman of the board of directors.
Revenues for the third quarter ended September 30, 2000 were $17.8 million, an
increase of 80% over revenues of $9.9 million for the third quarter ended
September 30, 1999. Gross profit for the quarter, defined as revenues less
project personnel and related expenses was $4.9 million, or a 28% margin, versus
a gross profit of $4.4 million or a 44% margin for the third quarter ended
September 30, 1999. The net loss for the third quarter was $25.6 million,
excluding $328,000 of non-cash compensation, $19.3 million of goodwill
amortization, and $1.6 million of non-recurring charges, compared to a net loss
of $3.2 million in the prior year period. The non-recurring expenses for the
third quarter of 2000 were primarily related to severance costs. Net losses per
share excluding non-cash compensation and amortization of goodwill ("Cash EPS")
were $1.05 for the quarter ended September 30, 2000 versus Cash EPS loss of
$0.10 for the year ago comparable period. Cash EPS excluding non-recurring
charges was a loss of $0.99 for the 2000 third quarter. Additionally, the
Company wrote-off $8.8 million of uncollectable accounts receivable during the
quarter ended September 30, 2000. These amounts were primarily related to
services performed for dot-com organizations.
Revenues for the nine months ended September 30, 2000 were $65.9 million, an
increase of 179% over revenues of $23.7 million for the nine months ended
September 30, 1999. Gross profit for the period was $30.6 million, or a 46%
margin, versus a gross profit of $10.8 million or a 46% margin for the nine
months ended September 30, 1999. The net loss before extraordinary item for the
first nine months of 2000 excluding $662,000 of non-cash compensation, $47.0
million of goodwill amortization, and $1.6 million in non-recurring charges was
$27.2 million, compared to a net loss of $7.7 million for the comparable period
in the prior year. Cash EPS was a loss of $1.25 for the nine months ended
September 30, 2000 versus a loss of $0.33 for the prior year comparable period.
"We are clearly disappointed by our third-quarter numbers, and we are
aggressively taking strategic actions to improve our operations going forward,"
Mohan Uttarwar, president and chief executive officer, US Interactive stated.
"The underlying reasons for our performance are varied and include a sharp
reduction in demand for the Company's services by dot-com organizations, a
lengthening of the sales cycle by Fortune 1000 and other well established
prospective clients, and an increase in expenses due to bad debts."
<PAGE>
In addition, Mr. Uttarwar noted, US Interactive has been burdened by excessive
overhead. "Overall, our operating expenses are too high," he said. "We built our
infrastructure for a level of business that unfortunately has not materialized
because of dramatic market changes."
To reduce expenses, the Company will continue a series of general,
administrative, and other cost reductions intended to result in substantial
annualized savings, and the Company also intends to pursue restructuring of
certain of its obligations. It also announced plans to reduce the size of its
operations by closing certain facilities, the locations of which are presently
under consideration and will further reduce its current workforce by
approximately 28 percent within the next 60 days. Charges for these initiatives
will be reflected in the Company's operating results for the fourth quarter. In
addition, it will move its corporate headquarters to Cupertino, California. US
Interactive already maintains an office in Cupertino and currently employs 137
people there. The move is expected to be completed by March 1, 2001.
Mr. Uttarwar added that in the coming months, US Interactive would deploy a new
business strategy, which is designed to position the Company favorably for
renewed revenue growth, given the shifts in the Company's core market.
"Traditionally, US Interactive provided comprehensive e-business solutions to a
broad variety of clients in many industries," Mr. Uttarwar explained. "However,
we have concluded we cannot be all things to all people. As the Internet
sophistication of our client companies increases, we must now focus on providing
services that use our core strengths to meet their ever more complex needs."
Mr. Uttarwar defined the Company's core strength as its ability to help clients
manage customer relationships along the entire value chain. "We can help our
clients accomplish their goals by deploying our superior know-how and our
proprietary e2e Hub(sm) and related customized software applications," he said.
"The results are truly dynamic."
At the same time, the Company further defined its new strategic direction. "We
have developed a pre-designed Internet-based consulting service for Fortune 1000
clients in the communications industry. We plan to develop a similar solution
for the financial-services industry," Mr. Uttarwar stated.
Mr. Uttarwar noted that these pre-designed solutions, which can be altered to
custom-fit a client's specific needs, enable companies to manage their customers
more profitably and aggressively. "Not only do they deliver both fast time to
market and top-level performance at a substantial cost savings," he said, "but
they also integrate and Web-enable the best applications from our strategic
alliance partners."
Mr. Uttarwar said that despite the challenges facing the Company, he believes
that the actions the Company is taking will position US Interactive to grow and
become a leader in its sector of the Internet services market.
The Company has entered into binding letters of intent with five former
shareholders of Soft Plus, including Mohan Uttarwar, to restructure the $80
million note owed to the former Soft Plus shareholders. The five shareholders
hold 74% of the interest in the $80 million note. The agreement reached is
subject to the satisfaction of certain conditions and is the subject of a
separate news release.
<PAGE>
About U.S. Interactive, Inc.
US Interactive(R) (Nasdaq: USIT) is a leading Internet professional services
company that provides businesses with customer focused Internet strategy,
infrastructure technology, marketing, and creative services. US Interactive
helps companies leverage Internet and emerging technologies, including broadband
and wireless, to transact business, communicate information and share knowledge
across employees, customers and suppliers to create thriving businesses. Founded
in 1994, US Interactive has served some of the world's leading companies
including Adidas, AIG, Asia Online, Dairy Farm International, Deloitte
Consulting, Disney Online, Sprint, Thomson Consumer Electronics and Toyota.
Forward Looking Statements
Certain statements made in this press release are not historical facts but are
"forward looking statements" and may involve risks and uncertainties which could
cause actual future results to differ materially and adversely from those
anticipated by such statements. Included among the factors that could affect the
Company's performance and future results include: the ability of the Company to
successfully implement its new strategy of focussing on core strengths, the
anticipated benefits to be obtained from its recent management promotions, cost
reductions and the relocation of its facilities to Cupertino, California;
general economic conditions; fluctuations in operating results; our ability to
effectively manage future growth, to retain and efficiently integrate our
executive management team, and to identify, hire, train and retain, in a highly
competitive market, individuals highly skilled in the Internet and its rapidly
changing technology; significant revenue concentration in a limited number of
clients; the lack of long-term contracts and the right of our customers to
terminate their contracts with us; our ability to enter into, and retain our
existing, strategic relationships; market acceptance, rapid technological
change, a decline in Internet usage, and intense competition in our market; our
ability to effectively integrate the operational, managerial and financial
aspects of acquisitions; and our ability to obtain financing when required. For
a discussion of these and other risk factors that could affect the Company's
business, see "Risk Factors" in the Company's Prospectus dated April 12, 2000.
###
The US Interactive name, design and e-Roadmap are registered service marks of
U.S. Interactive, Inc. IVL Methodology, CAPTURE, and e2e Solution are service
marks of U.S. Interactive, Inc. All other company names and products are
trademarks of their respective companies.
EDITOR'S NOTE: Additional information, including other announcements, about U.S.
Interactive, Inc. is available at www.usinteractive.com.
---------------------
Public Relations Contacts:
Priya Bhatt, U.S. Interactive, Inc., phone: 408-863-7611, e-mail:
[email protected]
------------------------
Investor Relations Contact:
Shawn Southard, U.S. Interactive, Inc., phone: 610-382-8879, e-mail:
[email protected]
-----------------------------------
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US Interactive/Third quarter 2000 Earnings -4-
U.S. INTERACTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
Assets 2000 1999
--------------------------
Current assets:
Cash and cash equivalents $ 13,531 $ 34,130
Accounts receivable 19,937 12,274
Other current assets 6,109 2,736
-------- --------
Total current assets 39,577 49,140
Furniture and equipment, net 18,294 5,451
Goodwill and other intangibles, net 326,613 5,988
Other assets 2,225 1,699
-------- --------
Total Assets 386,709 $ 62,278
======== ========
Liabilities and Stockholders' Equity
Total current liabilities * 104,701 $ 10,636
Long-term debt, net of current portion 2,768 1,666
-------- --------
Total Liabilities 107,469 12,302
Total Stockholders' Equity 279,240 49,976
-------- --------
Total Liabilities and Stockholders' Equity 386,709 $ 62,278
======== ========
* Includes $84 million related to the SoftPlus note which is being restructured
to a seven year convertible note subject to stockholder approval and certain
other conditions.
U.S. INTERACTIVE, INC. AND SUBSIDIARIES
OPERATING METRICS
3Q 1999 2Q 2000 3Q 2000
-----------------------------------------
New clients added
16 37 23
Top 5 concentration (% of revenue) 53% 28% 24%
Top 10 concentration (% of revenue) 65% 42% 40%
Fixed price (% of revenue) 65% 54% 40%
Dot-com (% of revenue) less than 20% 16% 12%
Fortune 1000 clients (% of revenue) 0% 0% 18%
Global 500 clients (% of revenue) 0% 0% 18%
International (% of revenue) 0% 0% 25%
Total headcount
305 832 721
Professional headcount
212 561 479
<PAGE>
US Interactive/Third quarter 2000 Earnings -5-
U.S. INTERACTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Revenue $17,840 $9,887 $65,907 $23,650
Operating costs and expenses:
Project personnel and related expenses 12,902 5,521 35,290 12,819
Management and administrative 24,174 5,007 42,513 11,601
Research and development 819 - 1,804 -
Selling and marketing 3,193 1,013 9,272 2,464
Depreciation and amortization 20,877 2,680 50,002 7,737
Non-recurring charges 1,598 -- 1,598 --
---------------------------- ----------------------------
Total operating expenses 63,563 14,221 140,479 34,621
---------------------------- ----------------------------
Operating loss (45,723) (4,334) (74,572) (10,971)
Other income (expense):
Interest expense (1,418) (74) (3,310) (314)
Interest income 343 289 1,333 347
---------------------------- ----------------------------
Loss before extraordinary item (46,798) (4,119) (76,549) (10,938)
Extraordinary item - loss from early extinguishment of
debt -- -- (2,284) --
---------------------------- ----------------------------
Net loss (46,798) (4,119) (78,833) (10,937)
Accretion of mandatorily redeemable preferred stock to
redemption value -- (168) -- (916)
---------------------------- ----------------------------
Net loss attributable to common shareholders $(46,798) $(4,287) $(78,833) $(11,854)
============================ ============================
Basic and diluted loss before extraordinary item per share
and before accretion of mandatorily redeemable preferred
stock to redemption value: $(1.81) $(0.29) $(3.33) $(1.05)
Basic and diluted loss per share for extraordinary item: -- -- $(0.10) --
---------------------------- ----------------------------
Basic and diluted loss before accretion of mandatorily
redeemable preferred stock to redemption value: $(1.81) $(0.29) $(3.43) $(1.05)
============================ ============================
Basic and diluted loss per share after accretion of
mandatorily redeemable preferred stock to redemption
value: $(1.81) $(0.30) $(3.43) $(1.14)
============================ ============================
Net loss per share before extraordinary item, excluding
non-cash compensation and amortization of goodwill
(Cash EPS): $(1.05) $(0.10) $(1.25) $(0.33)
============================ ============================
Weighted average shares 25,860 14,414 22,987 10,447
</TABLE>
Note: The results of operations include the results of Soft Plus from the date
of acquisition on March 8, 2000.
