EX-99.1 2 a5267974ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Viewpoint Corporation Announces Third Quarter 2006 Financial Results NEW YORK--(BUSINESS WIRE)--Nov. 2, 2006--Viewpoint Corporation (NASDAQ: VWPT), a leading internet marketing technology company, today announced financial results for the third quarter and nine months ended September 30, 2006. Viewpoint reported total revenue of $3.2 million for the third quarter 2006, a 44 percent decrease as compared to $5.7 million in the second quarter 2006 and a 46 percent decrease as compared to $6.0 million in the third quarter 2005. Gross profit was $2.3 million for the third quarter of 2006, a 18 percent decrease as compared to $2.8 million in the second quarter of 2006, and a decrease of 49 percent as compared to $4.6 million for the third quarter of 2005. Patrick Vogt, President and Chief Executive Officer, commented, "As we stated previously, we are disappointed in our third quarter results. However, we believe the challenges we are facing are due to short-term market conditions that will not impede our progress. Results were impacted by unanticipated softness in the automotive space, which resulted in some delays in spending that affected both Unicast and TheStudio, as well as a decline in orders for our lower margin media services products in the Unicast business. This decline in revenue has forced us to re-evaluate the goodwill associated with our services segment. The resulting evaluation concluded it was proper to record a non-cash goodwill impairment of $10.7 million in the quarter. "Over the past year we have made necessary and deliberate cultural, organizational and business model changes in our transformation from a toolbar company to an internet marketing technology company. Our business model is sound, we are still in the build mode of our long term plan and the progress we've made to create a great company in just one year is considerable. We strongly believe our new direction will allow us to better serve our existing customers and compete effectively in this increasingly competitive market to drive stronger, more consistent financial results and long-term growth." Net loss for the third quarter 2006 was $12.3 million or $(0.18) per share compared to a net loss of $2.8 million, or $(0.04) per share in the second quarter 2006 and a net loss of $1.5 million, or $(0.02) per share, in the third quarter 2005. Operating loss for the third quarter of 2006 was $13.2 million, compared to operating loss of $2.1 million in the second quarter of 2006 and $1.4 million for the third quarter of 2005. Both the net loss and operating loss in the third quarter of 2006 included a non-cash stock-based charge of $0.5 million as well as a non-cash goodwill impairment charge of $10.7 million. This compares to a non-cash stock-based charge of $1.1 million in 2005. There was no impairment charge in the third quarter of 2005. The adjusted operating loss (as defined in Financial Measures below) for the third quarter 2006 was $1.7 million as compared to $1.4 million in the second quarter of 2006 and an adjusted operating profit of $0.1 million in the third quarter of 2005. For the nine months ended September 30, 2006, the Company reported revenue of $12.9 million, a 29 percent decrease compared to $18.1 million for the same period in 2005. Viewpoint's operating expenses for the nine month period ending September 30, 2006 were $25.8 million, compared with $16.1 million for the nine month period ending September 30, 2005. The Company's net loss for the nine months ended September 30, 2006 of $19.1 million, or $(0.29) per share, was based on a loss from operations of $18.5 million, which included charges of $1.6 million for non-cash stock based compensation, $0.9 million for depreciation and amortization and $10.7 million non-cash goodwill impairment charge. This compares to a net loss for the nine months ended September 30, 2005 of $2.6 million, or $(0.05) per share, based on a loss from operations of $3.0 million, which included charges of $1.7 million for non-cash stock based compensation and $1.2 million for depreciation and amortization. During the first nine months of 2006 the adjusted operating loss was $5.2 million as compared to a neutral adjusted operating profit for the first nine months of 2005. Viewpoint's cash, cash equivalents, and marketable securities were $6.3 million and working capital was $5.2 million as of September 30, 2006. This can be compared to cash, cash equivalents, and marketable securities of $7.5 million and working capital of $6.2 million as of June 30, 2006. GUIDANCE As previously disclosed, the Company continues to expect full year 2006 revenue to be approximately in the range of $17 million to $20 million. In addition, the Company no longer expects to report positive "Adjusted Operating Income" for the year. FINANCIAL INFORMATION Management prepares and is responsible for the Company's consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States and audited by independent external auditors. The financial information contained in this press release, which is unaudited, is subject to revision and should not be considered final until the Company files its Quarterly Report on Form 10-Q, which is scheduled to occur on or before November 9, 2006. At the present time, the Company has no reason to believe that there will be changes to the financial information contained herein. FINANCIAL MEASURES In addition to the results presented above in accordance with generally accepted accounting principles, or GAAP, the Company presents financial measures that are non-GAAP measures, specifically adjusted operating income (loss). The Company believes that this non-GAAP measure, viewed in addition to and not in lieu of the Company's reported GAAP results, provides useful information to investors regarding its performance and overall results of operations. These metrics are an integral part of the Company's internal reporting to measure the performance of the Company and the overall effectiveness of senior management. Reconciliations to comparable GAAP measures are available in the accompanying schedules and on the Company's website. The financial measures presented are consistent with the Company's historical financial reporting practices. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies, and are not identical to corresponding measures used in our various agreements or public filings. CONFERENCE CALL The Company will host a conference call on November 2, 2006 at 9:00 A.M. (Eastern Time) to discuss third quarter 2006 financial results. The conference call will be available via the Internet in the Investor Relations section of Viewpoint's Web site at http://www.viewpoint.com, as well as through Thomson/CCBN at www.earnings.com. If you are not able to access the live Web cast, dial in information is as follows: Toll-Free Telephone Number: (800) 603-7883 International Telephone Number: (706) 643-1946 Passcode: 8292919 Participants should call at least 10 minutes prior to the start of the call. A complete replay of the conference call will be available approximately one hour after the completion of the call by dialing (800) 642-1687 through Thursday, November 9, 2006. Callers should enter the pass code above to access the recording. ABOUT VIEWPOINT Viewpoint is a leading Internet marketing technology company, offering Internet marketing and online advertising solutions through the powerful combination of its proprietary visualization technology and a full range of campaign management services including TheStudio, Viewpoint's creative services group, Unicast, Viewpoint's online advertising group, and KeySearch, Viewpoint's search engine marketing consulting practice. Viewpoint's technology and services are behind the online presence of some of the world's most esteemed brands, including AOL, GE, Sony, Toyota and Yahoo. More information on Viewpoint can be found at www.viewpoint.com. The company has approximately 100 employees principally at its headquarters in New York City and in Los Angeles. FORWARD LOOKING STATEMENTS This press release contains "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995 and similar expressions that reflect Viewpoint's current expectations about its future performance. These statements and expressions are subject to risks, uncertainties and other factors that could cause Viewpoint's actual performance to differ materially from those expressed in, or implied by, these statements and expressions. Such risks, uncertainties and factors include those described in the Company's filings and reports on file with the Securities and Exchange Commission as well as the lack of assurances that the Company will achieve full year 2006 revenue in the range of $17 million to $20 million. Viewpoint, Unicast, TheStudio by Viewpoint and KeySearch are trademarks or registered trademarks of Viewpoint Corporation. Copyright (C)2006 Viewpoint Corporation. All Rights Reserved. VIEWPOINT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Three Months Ended September 30, June 30, ------------------ -------- 2006 2005 2006 --------- -------- -------- Revenue: Search $1,460 $2,498 $1,573 Advertising systems 961 566 3,013 Services 786 1,744 1,091 Related party services - 154 - Licenses 4 124 32 Related party licenses - 873 - --------- -------- -------- Total revenue 3,211 5,959 5,709 Cost of revenue: Search 39 39 38 Advertising systems 399 405 2,199 Services 455 956 648 Licenses 0 8 2 --------- -------- -------- Total cost of revenue 893 1,408 2,887 --------- -------- -------- Gross profit 2,318 4,551 2,822 Operating expenses: Sales and marketing 1,350 1,325 1,330 Research and development 915 1,126 983 General and administrative 1,855 2,077 1,983 Non-cash stock-based compensation charges 418 1,147 447 Depreciation 113 158 107 Amortization of intangible assets 222 118 111 Impairment of goodwill and other intangible assets 10,655 - - --------- -------- -------- Total operating expenses 15,528 5,951 4,961 Loss from operations (13,210) (1,400) (2,139) Other income (expense): Interest and other income, net 95 30 90 Interest expense (213) (288) (209) Changes in fair values of warrants to purchase common stock and conversion feature of convertible notes 1,021 207 (544) --------- -------- -------- Total other income (expense) 903 (51) (663) --------- -------- -------- Loss before provision for income taxes (12,307) (1,451) (2,802) Provision for income taxes 30 - 19 --------- -------- -------- Net loss from continuing operations (12,337) (1,451) (2,821) Adjustment to net loss on disposal of discontinued operations - - - --------- -------- -------- Net loss $(12,337) $(1,451) $(2,821) ========= ======== ======== Basic and diluted net loss per common share: $(0.18) $(0.02) $(0.04) ========= ======== ======== Weighted average number of shares outstanding-basic and diluted 67,361 59,136 66,505 ========= ======== ======== VIEWPOINT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Nine Months Ended September 30, ------------------ 2006 2005 --------- -------- Revenue: Search $4,822 $7,071 Advertising systems 5,569 2,461 Services 2,430 4,551 Related party services - 903 Licenses 82 506 Related party licenses - 2,618 --------- -------- Total revenue 12,903 18,110 Cost of revenue: Search 113 134 Advertising systems 3,638 1,907 Services 1,766 2,875 Licenses 8 11 --------- -------- Total cost of revenue 5,525 4,927 --------- -------- Gross profit 7,378 13,183 Operating expenses: Sales and marketing 4,086 3,828 Research and development 2,877 3,465 General and administrative 5,868 6,237 Non-cash stock-based compensation charges 1,475 1,742 Depreciation 337 496 Amortization of intangible assets 443 370 Impairment of goodwill and other intangible assets 10,655 - Restructuring charges 92 - --------- -------- Total operating expenses 25,833 16,138 Loss from operations (18,455) (2,955) Other income (expense): Interest and other income, net 264 86 Interest expense (709) (943) Loss on conversion of debt - - Changes in fair values of warrants to purchase common stock and conversion feature of convertible notes (151) 1,037 --------- -------- Total other income (expense) (596) 180 --------- -------- Loss before provision for income taxes (19,051) (2,775) Provision for income taxes 56 12 --------- -------- Net loss from continuing operations (19,107) (2,787) Adjustment to net loss on disposal of discontinued operations - 145 --------- -------- Net loss $(19,107) $(2,642) ========= ======== Basic and diluted net loss per common share: $(0.29) $(0.05) ========= ======== Weighted average number of shares outstanding-basic and diluted 66,253 58,274 ========= ======== VIEWPOINT CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (Unaudited) September December 30, 2006 31, 2005 --------- --------- Assets Current assets: Cash and cash equivalents $1,927 $6,437 Marketable securities 4,382 2,674 Accounts receivable, net 2,572 4,342 Related party accounts receivable, net - - Prepaid expenses and other current assets 504 510 --------- --------- Total current assets 9,385 13,963 Restricted cash 188 182 Property and equipment, net 1,146 1,218 Goodwill 14,882 25,537 Intangible assets, net 3,681 4,131 Other assets 92 105 --------- --------- Total assets $29,374 $45,136 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $2,257 $2,834 Accrued expenses 609 635 Deferred revenue 149 207 Current portion of notes payable 389 814 Accrued incentive compensation 545 545 Current liabilities related to discontinued operations 231 231 --------- --------- Total current liabilities 4,180 5,266 Accrued expenses - Deferred Rent 261 334 Warrants to purchase common stock 1,133 982 Subordinate notes 2,357 2,090 Unicast notes 1,583 1,582 Stockholders' equity Preferred stock - - Common stock 68 65 Paid-in capital 305,787 301,766 Deferred compensation - - Treasury stock (1,015) (1,015) Accumulated other comprehensive loss (2) (63) Accumulated deficit (284,978) (265,871) --------- --------- Total stockholders' equity 19,860 34,882 --------- --------- Total liabilities and stockholders' equity $29,374 $45,136 ========= ========= VIEWPOINT CORPORATION RECONCILIATION OF INCOME (LOSS) FROM OPERATIONS TO ADJUSTED OPERATING INCOME (LOSS) (in thousands, except per share amounts) (Unaudited) Three Months Ended September 30, June 30, ------------------ -------- 2006 2005 2006 --------- -------- -------- Loss from Operations $(13,210) $(1,400) $(2,139) Plus (Less): Non-cash stock based Compensation: Cost of revenue 35 - 48 Sales and marketing 104 - 119 Research and development 67 - 85 General and administrative 247 1,147 243 Depreciation 137 213 133 Amortization 250 159 139 Impairment of Goodwill 10,655 - - --------- -------- -------- Adjusted Operating (Loss) Income $(1,715) $119 $(1,372) Nine Months Ended September 30, ------------------ 2006 2005 --------- -------- (Loss) from Operations $(18,455) $(2,955) Plus (Less): Non-cash stock based Compensation: COSCost of revenue 141 - Sales and marketing 395 - Research and development 261 14 General and administrative 819 1,728 Depreciation 415 666 Amortization 527 516 Restructuring charges 92 - Impairment of Goodwill 10,655 - --------- -------- Adjusted Operating Income (Loss) $(5,150) $(31) CONTACT: Viewpoint Corporation Investor Relations 212-201-0800 ir@viewpoint.com