Internet Brands, Inc. Reports Record Third Quarter 2008 Financial Results

Business Wire, Oct 28, 2008

* Record revenues and Adjusted EBITDA of $26.9 million and $9.1 million

* Adjusted EBITDA increases 20% from third quarter of 2007

* Net income of $0.08 per share, excluding non-cash foreign currency loss

* Company re-affirms full year 2008 guidance

LOS ANGELES -- Internet Brands, Inc. (NASDAQ:INET) today reported financial results for the three and nine months ended September 30, 2008.

Third Quarter Operating Results

Total revenues for the third quarter of 2008 were $26.9 million, a 10% increase from $24.5 million in the prior year period.

Consumer Internet revenues were $18.4 million in the third quarter of 2008, a 9% increase from $16.8 million in the prior year period. Revenues grew due to increased advertising on both existing and acquired websites, partially offset by a reduction in spending from automotive dealers.

Licensing revenues were $8.5 million in the third quarter of 2008, an 11% increase from $7.6 million in the prior year period. Revenues increased as a result of the development of new client accounts and the sale of additional services to existing clients within the Company's Autodata division and continued organic growth from vBulletin.

Net income for the third quarter of 2008 was $2.6 million, or $0.06 per diluted common share. Excluding a non-cash foreign currency translation loss of $1.2 million, a result of an extraordinary exchange rate movement for the quarter, net income would have been $3.8 million or $0.08 per share.

For the third quarter of 2008, Adjusted EBITDA increased 20% to $9.1 million from $7.6 million in the same period last year. The Company defines Adjusted EBITDA as earnings before investment and other income, income taxes, depreciation and amortization and stock-based compensation.

EBITDA margins in the quarter increased to 33.8%, an expansion from 31.0% in the third quarter of 2007. The Company's EBITDA margins have increased sequentially throughout the year as a result of a shift of the Company's business revenues from lower margin e-commerce revenues to higher margin advertising revenues.

Nine Months Ended 2008 Operating Results

Total revenues for the nine months ended 2008 were $77.1 million, a 19% increase from $65.0 million in the prior year period.

Consumer Internet revenues were $52.7 million for the nine months ended 2008, a 13% increase from $46.7 million in the prior year period. Licensing revenues were $24.3 million for the nine months ended 2008, a 33% increase from $18.3 million in the prior year period. The increase was due to continued performance from the Company's Autodata division, and organic growth from vBulletin, which the Company acquired in June 2007.

Net income for the nine months ended 2008 was $8.5 million, or $0.19 per diluted common share. By comparison, the net loss in the prior year period was $2.5 million, or $0.06 per diluted common share.

For the nine months ended 2008, Adjusted EBITDA grew by 24% to $25.5 million from $20.5 million in the same period last year.

Third Quarter Key Metrics

* Total monthly unique visitors to the Company's network of owned websites grew to 38.8 million in September 2008, a 45% increase from 26.7 million in September 2007.

* Total page views for the Company's network of owned websites were 639 million in September 2008, an increase of 110% from 304 million in September 2007.

Q4 and Full Year 2008 Guidance

"We are pleased with our results and progress in the third quarter," said Bob Brisco, CEO. "Other than automotive e-commerce, virtually all aspects of our business grew substantially. In looking ahead to the fourth quarter, we expect solid year over year revenues and EBITDA growth. We are pleased to report that despite all of the economic turmoil this year, we remain on pace to deliver the results that we promised."

The Company expects full year revenues will be approximately $104.5 to $106.0 million and EBITDA will be approximately $34.75 - $35.75 million, which results in expected year over year EBITDA growth of 24% to 28%.

Balance Sheet and Liquidity

As of September 30, 2008, the Company had $53.2 million of cash and investments, and no outstanding debt.

Net cash provided by operating activities during the first nine months of 2008 was $23.3 million compared to $24.7 million in the prior year.

On October 7, 2008, the Company entered into an agreement with Silicon Valley Bank that entitles the Company to borrow up to a $35 million revolving line of credit under a four year term. The Company plans to use the credit facility for acquisitions starting in mid 2009.

Acquisitions

During the third quarter of 2008, the Company acquired 4 websites for an aggregate purchase price of approximately $10.7 million. An additional acquisition was completed subsequent to the third quarter of 2008. Of the 5 acquisitions, 3 are principal websites including two in Shopping and one in Careers. We previously announced one of the acquisitions, DealLocker.com, in our Shopping category. Two significant website acquisitions, BensBargains.net and GrooveJob.com, will join the Company's Shopping and Careers verticals, respectively.