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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 26, 1999
(Date of earliest event reported)
OnHealth Network Company
(Exact name of registrant as specified in its charter)
Commission file number: 0-22212
Washington 41-1686038
(State of incorporation or organization) (IRS Employer Identification No.)
808 Howell Street, Suite 400 Seattle, Washington 98101
(Address of principal executive offices)
(206) 583-0100
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On October 26, 1999, OnHealth Network Company ("OnHealth") announced its
financial results for the third quarter of 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are filed herewith:
99.1 Press release, dated October 26, 1999, regarding OnHealth's third
quarter financial results.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OnHealth Network Company
Date: OCTOBER 26, 1999 By: /S/ RON STEVENS
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Ron Stevens
Chief Financial Officer
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
CONTACT:
Ron Stevens Gary Ball Joseph Jaffoni
Chief Financial Officer Investor Relations Jaffoni & Collins Incorporated
206/381-0221 206/652-0308 212/835-8500
[email protected] [email protected] [email protected]
ONHEALTH REPORTS STRONG THIRD QUARTER REVENUE GROWTH
- INCREASED ADVERTISING AND PAGE VIEWS DRIVE 305% YEAR-OVER-YEAR REVENUE
GAINS AND 73% RISE IN SEQUENTIAL QUARTERLY REVENUES -
SEATTLE, Washington - October 26, 1999 - OnHealth Network Company (NASDAQ:
ONHN), a leading consumer health and wellness Internet destination
(WWW.ONHEALTH.COM), today reported results for the third quarter ended September
30, 1999.
Total revenue for the third quarter ended September 30, 1999 rose 305% to
$1,005,000 from $248,000 in the third quarter of 1998. On a sequential basis,
OnHealth's 1999 third quarter revenue rose 73% above the second quarter levels.
The strong revenue growth is attributable to increased page views and
advertising as well as revenue derived from e-commerce activities. Third quarter
1999 advertising revenue increased 615% to $865,000 from $121,000 in the third
quarter of 1998, and 107% over the $417,000 in the second quarter of 1999.
In the third quarter of 1999, the Company reported a net loss to common
shareholders of $17.5 million, or ($1.00) per share, compared to a net loss of
$2.9 million, or ($0.27) per share in the third quarter of last year. The net
loss reflects increased product development, sales and marketing and general and
administrative expenses compared to the year-ago period, resulting primarily
from increased personnel and marketing costs. The marketing expenses in the
third quarter of 1999 reflect costs related to a broad-based consumer targeted
advertising campaign that commenced with the re-launch of the onhealth.com Web
site in late July 1999.
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ONHEALTH REPORTS THIRD QUARTER RESULTS
PAGE TWO
The table below summarizes key statistics regarding use of the onhealth.com Web
site according to Internet Profile Corporation (I/PRO), an independent
third-party auditor of OnHealth's server logs:
MONTH MONTH QUARTER QUARTER
SEPT 1999 JUNE 1999 SEPT 1999 JUNE 1999
Visits 3,478,741 1,563,785 8,999,790 4,424,658
Page views 11,618,425 5,386,127 27,709,466 13,395,315
For the recently acquired babydata.com Web site, Sept 1999 visits and page views
were 252,734 and 1,376,085, respectively.
Over the past quarter, OnHealth made significant progress in the following key
areas:
o Attracted over 1.3 million unique users according to the September Media
Metrix report, securing OnHealth Network Company's position as the second
largest health content site on the Web;
o Raised approximately $21 million through Warburg Dillon Read, SG Cowen and
CIBC World Markets for brand building and marketing initiatives and for
general corporate purposes;
o Moved the listing for ONHN shares from the Nasdaq SmallCap Market to the
Nasdaq National Market System;
o Acquired BabyData.com Inc., the premier Web site for pregnant couples and
those trying to conceive;
o Entered into an expanded distribution agreement with AOL's Digital City;
o Entered into a premier merchant agreement with Yahoo! Inc. providing
OnHealth with fixed placement modules in the Yahoo! Health "alternative
medicine" category and Yahoo! Get Local Health; and
o Became the exclusive third party provider of health content and tools on
About.com's health and fitness channel.
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ONHEALTH REPORTS THIRD QUARTER RESULTS
PAGE THREE
"OnHealth made significant progress against its business plan by virtually
every measure as we generated strong traffic growth, successfully launched our
consumer-targeted advertising and marketing campaign, generated increased
revenues, completed the acquisition of a complementary business in the form of
BabyData.com and entered into strategic distribution relationships," commented
Robert Goodman, President and Chief Executive Officer of OnHealth. "Looking
forward, the successful re-launch of our site, coupled with our expanded
distribution and content agreements are strengthening our leadership position as
a premier health and wellness Internet destination."
ABOUT ONHEALTH NETWORK COMPANY
Headquartered in Seattle, Washington, OnHealth Network Company (NASDAQ: ONHN) is
a leading Internet information and services resource for consumers that provides
multiple perspectives and an independent viewpoint on health, wellness and
well-being. OnHealth complies with the Health on the Net Foundation Code of
Conduct (HONcode), an international initiative established to help unify and
standardize the reliability of medical and health information available on the
World Wide Web. Onhealth.com consistently ranks among the most highly trafficked
independent health content sites on the Web. OnHealth Network Company's
advertisers include Glaxo Wellcome, Johnson & Johnson, Pfizer, Procter & Gamble
and SmithKline Beecham. The consumer-driven Web site has also attracted
non-endemic advertisers such as AIG Insurance, Kellogg's, Fidelity Investments,
Neiman Marcus, Women.com, Garden.com and Pets.com. OnHealth has numerous
distribution and content sharing relationships that drive traffic to
onhealth.com including: AOL's Digital City, Inc., Better Homes and Gardens,
Snap.com, Weather.com, Yahoo!, and About.com.
Certain statements in this release, such as the Company's ability to pursue
strategic growth opportunities, increase its traffic levels and other statements
containing "looking forward", "expects," "anticipates," "intends," "hopes" or
"believes" or variations of such words and similar expressions are intended to
identify forward-looking statements and are subject to risks and uncertainties
that could cause actual results to differ materially from those projected.
Potential risks and uncertainties include such factors as acceptance of the
Company's products and services, including the re-launch of the Company's Web
site, the Company's ability to raise sufficient capital to fully implement the
planned advertising campaign, competition and other risks described in the
Company's filings with the Securities and Exchange Commission, including the
report on Form 10-K, as amended, for the year ended December 31, 1998.
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ONHEALTH REPORTS THIRD QUARTER RESULTS
PAGE FOUR
ONHEALTH NETWORK COMPANY
STATEMENT OF OPERATIONS
(in thousands, except per share amount)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue $ 1,005 $ 248 $ 1,787 $ 733
Cost of revenue 88 549 187 1,290
------------- -------------- -------------- -------------
Gross margin 917 (301) 1,600 (557)
Operating expenses:
Product development, editorial & design 1,976 547 5,023 2,105
Sales and marketing 15,491 1,265 22,503 2,696
General and administrative 798 420 2,795 1,653
Acquisition related costs, including
amortization of goodwill and purchased
intangibles 73 - 73 -
Stock-based compensation 92 - 92 -
------------- -------------- -------------- -------------
Total operating expenses 18,430 2,232 30,486 6,454
------------- -------------- -------------- -------------
Loss from operations (17,513) (2,533) (28,886) (7,011)
Interest income 49 30 277 84
Other income, net - - 2 282
------------- -------------- -------------- -------------
Total interest and other income, net 49 30 279 366
Net loss (17,464) (2,503) (28,607) (6,645)
Preferred stock dividends - (36) - (92)
Preferred stock accretion - (374) - (528)
-------------- -------------- -------------- -------------
Net loss applicable to common shareholders $ (17,464) $ (2,913) $ (28,607) $ (7,265)
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Net loss per common share $ (1.00) $ (0.27) $ (1.77) $ (0.70)
Weighted average number of common shares outstanding 17,388 10,698 16,165 10,323
</TABLE>
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ONHEALTH REPORTS THIRD QUARTER RESULTS
PAGE FIVE
ONHEALTH NETWORK COMPANY
CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
----------------- -----------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,973 $ 2,119
Restricted cash 500 -
Accounts receivable, net of allowances
for returns and doubtful accounts of
$311 in 1999 and $256 in 1998 846 509
Prepaid advertising 8,234 197
Other current assets 209 212
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Total current assets 14,762 3,037
Furniture and equipment:
Computers and software 1,883 1,218
Office equipment 302 291
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2,185 1,509
Accumulated depreciation (1,004) (774)
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1,181 735
Goodwill, net 3,440 -
Intangibles, net 42 -
Other non-current assets 46 122
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Total assets $ 19,471 $ 3,894
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 3,643 $ 1,526
Other accrued expenses 1,485 2,669
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Total current liabilities 5,128 4,195
Other non-current liabilities 36 -
Shareholders' equity (deficit):
Common stock, $.01 par value:
Issued and outstanding shares-
20,313 (1999) and 12,800 (1998) 203 128
Additional paid-in capital 133,668 89,159
Accumulated deficit (118,122) (89,515)
Deferred compensation (1,442) (73)
------------- ----------- ----
Total shareholders' equity (deficit) 14,307 (301)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 19,471 $ 3,894
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</TABLE>
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