Harris Interactive (NASDAQ:HPOL) today announced its financial
results for the second quarter of fiscal 2009.
Kimberly Till, President and CEO of Harris Interactive,
commented, �We said in October that we needed to act quickly in two
areas: to rigorously review our cost structure to align it with our
revenues and to recruit top talent to augment our already strong
internal teams. The cost reductions we made this quarter were a
critical first step to restoring profitability in the business and
enabled us to reorganize our business structure to support the
strategic initiatives we plan to undertake. We anticipate these
actions will result in nearly $10 million in annualized savings. On
the recruiting front, we are making significant progress and expect
to have several key hires in place by the end of our fiscal year.
We are doing what we committed to do and have also maintained a
solid cash position. Now we will focus on implementing our strategy
to grow revenues and market share by capitalizing on our strong
brand and leveraging the deep expertise and insights that our
client teams provide to our world class clients.�
Second Quarter Financial Summary
Our results for the second quarter included:
- Revenue of $50.7 million,
compared with $62.7 million for the same prior year period,
- Operating loss of $(45.9)
million, compared with operating income of $3.4 million for the
same prior year period. Our operating loss for the quarter included
$46.1 million in charges, specifically:
- $3.9 million for severance
related to U.S. headcount reductions and separation payments to
former executives,
- $0.9 million related to leased
space reductions,
- $1.1 million for performance
improvement consultant fees, and
- $40.3 million for goodwill
impairment, as described below.
- Net loss of $(65.6) million, or
$(1.23) per share, compared with net income of $2.0 million, or
$0.04 per share, for the same prior year period,
- Adjusted EBITDA1 of $(2.7)
million, compared with $7.1 million reported a year ago, and
- Cash and marketable securities
of $26.1 million at December 31, down from $33.3 million reported a
year ago.
Excluding the charges noted above, our operating income for the
quarter would have been $0.2 million and our adjusted EBITDA1 would
have been $3.1 million.
Non-Cash Impairment Charges
Continued declines in our stock price and the adverse impact of
global macroeconomic conditions on our operating results caused us
to assess our goodwill for impairment in accordance with FASB
Statement 142. Based on our assessment, we recorded a non-cash
impairment charge of $40.3 million during the quarter.
We also re-assessed the realizability of our deferred tax assets
at December 31 in accordance with FASB Statement 109. Based on our
assessment, we recorded a non-cash deferred tax valuation allowance
of $18.9 million during the quarter. We will continue to assess our
ability to utilize these deferred tax assets in future periods.
Credit Facilities
At December 31, we were in violation of the leverage ratio and
interest coverage covenants under the terms of our credit
facilities and therefore, reclassified the remaining $26.0 million
of outstanding debt to current liabilities until such time as
amended credit facilities are in place. In addition, we recorded a
$1.0 million charge to interest expense for the portion of our
interest rate swap that was deemed ineffective during the quarter
as a result of the covenant violation.
On February 5, 2009, we obtained a 30-day waiver from our
lenders. �We are in active and cooperative discussions with our
lenders and expect to have an amended credit facility in place by
the end of the waiver period. Our cash position remained strong at
December 31 and when offset against our outstanding debt, we were
still in a positive net cash position,� stated Deborah
Rieger-Paganis, Interim Chief Financial Officer.
Financial Outlook
�Given the continued uncertainty about the global macroeconomic
environment for the remainder of fiscal 2009, we will defer issuing
full-year guidance. We will continue to proactively monitor our
cost structure to ensure that it remains aligned with our revenue,�
commented Rieger-Paganis.
Detailed Financial Information
In addition to the financial statements that accompany this
earnings release, our key operating metrics can be found at
www.harrisinteractive.com/ir.
Second Quarter Results Conference Call and Webcast
Access
Kimberly Till, President and CEO, will host a conference call to
discuss these results on Friday, February 6, 2009, at 10:00 a.m.
EST. Formal remarks will be followed by a question and answer
session.
To access the conference call, please dial toll-free
888.713.4215 in the United States and Canada, or
617.213.4867 internationally. The passcode is
67789382.
You may pre-register for this call by clicking here (or cut and
paste the following URL into your browser window)
https://www.theconferencingservice.com/prereg/key.process?key=PBFTC99FN.
Pre-registrants will be issued a pin number that will permit rapid
access to the teleconference. A live webcast of the conference call
will also be accessible via the investor relations section of the
Company's website at www.harrisinteractive.com/ir, where an
archived replay of the webcast will be available for 30 days
following the call. No telephone replay of the conference call will
be provided. This media release and detailed financial information
will be available at our website www.harrisinteractive.com/ir prior
to the call.
About Harris Interactive
Harris Interactive is a global leader in custom market research.
With a long and rich history in multimodal research, powered by our
science and technology, we assist clients in achieving business
results. Harris Interactive serves clients globally through our
North American, European and Asian offices and a network of
independent market research firms. For more information, please
visit www.harrisinteractive.com.
Safe Harbor Statement
This media release includes statements that may constitute
forward-looking information. We caution you that these
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those
discussed. Additional detailed information concerning a number of
factors that could cause actual results to differ is readily
available in the "Risk Factors" section of the most recent Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934.
1 EBITDA is a non-GAAP measure. Adjusted EBITDA, also a non-GAAP
measure, is EBITDA less stock-based compensation. Both measures are
reconciled to our GAAP financial statements which are attached to
this release.
�
HARRIS INTERACTIVE INC. CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited) � � � � � � �
December 31, 2008 � � � �
June 30, 2008 �
Assets
� Cash and cash equivalents $ 23,644 $ 32,874 Marketable securities
2,423 - Accounts receivable, net 30,358 34,940 Unbilled receivables
6,128 11,504 Prepaids and other current assets 6,284 8,753 Deferred
tax assets � - � � � � � 3,959 Total current assets 68,837 92,030 �
Property, plant and equipment, net 9,450 11,953 Goodwill - 42,805
Other intangibles, net 19,471 23,302 Deferred tax assets 2,188
14,606 Other assets � 2,085 � � � � � 2,353 Total assets $ 102,031
� � � � $ 187,049 � �
Liabilities and Stockholders' Equity �
Accounts payable $ 7,647 $ 10,779 Accrued expenses 20,885 25,611
Current portion of long-term debt 25,969 6,925 Deferred revenue �
15,129 � � � � � 16,226 Total current liabilities 69,630 59,541 �
Long-term debt - 22,506 Deferred tax liabilities 4,991 4,035 Other
long-term liabilities 4,105 2,331 � Total stockholders' equity �
23,305 � � � � � 98,636 Total liabilities and stockholders' equity
$ 102,031 � � � � $ 187,049 �
HARRIS INTERACTIVE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands,
except share and per share data) (Unaudited) � � � �
Three months ended Six months ended December
31, December 31, �
2008 � � �
2007 � � �
2008 � � �
2007 � � Revenue from services $ 50,660 $
62,715 $ 100,940 $ 117,902 � Operating expenses: Cost of services
25,920 30,815 51,905 58,426 Sales and marketing 5,232 6,151 10,343
11,838 General and administrative 17,377 20,128 37,041 38,477
Restructuring and other charges 5,844 - 6,472 - Depreciation and
amortization 1,912 2,267 3,995 4,174 Goodwill impairment charge �
40,250 � � � - � � � 40,250 � � � - � Total operating expenses �
96,535 � � � 59,361 � � � 150,006 � � � 112,915 � Operating income
(loss) (45,875 ) 3,354 (49,066 ) 4,987 Operating margin -90.6 % 5.3
% -48.6 % 4.2 % � Interest and other income 135 307 325 679
Interest expense � (1,374 ) � � (523 ) � � (1,830 ) � � (962 )
Income (loss) from continuing operations before income taxes �
(47,114 ) � � 3,138 � � � (50,571 ) � � 4,704 � Provision for
income taxes � 18,509 � � � 1,112 � � � 17,315 � � � 1,658 � Income
(loss) from continuing operations (65,623 ) 2,026 (67,886 ) 3,046
Income from discontinued operations, net of tax � - � � � - � � � -
� � � 124 � Net income (loss) $ (65,623 ) � $ 2,026 � � $ (67,886 )
� $ 3,170 � � Basic net income (loss) per share: Continuing
operations $ (1.23 ) $ 0.04 $ (1.27 ) $ 0.06 Discontinued
operations � - � � � - � � � - � � � 0.00 � $ (1.23 ) � $ 0.04 � �
$ (1.27 ) � $ 0.06 � � Diluted net income (loss) per share:
Continuing operations $ (1.23 ) $ 0.04 $ (1.27 ) $ 0.06
Discontinued operations � - � � � - � � � - � � � 0.00 � $ (1.23 )
� $ 0.04 � � $ (1.27 ) � $ 0.06 � � Weighted average shares
outstanding - Basic � 53,391,308 � � � 52,765,738 � � � 53,365,347
� � � 52,703,928 � Diluted � 53,391,308 � � � 52,863,437 � � �
53,365,347 � � � 52,812,896 � �
Reconciliation of GAAP Income to
EBITDA and Adjusted EBITDA � � � � �
Three months ended
Six months ended December 31, December 31, �
2008 � � �
2007 � � � �
2008 � � �
2007
� � GAAP net income (loss) $ (65,623 ) $ 2,026 $ (67,886 ) $ 3,170
� Income from discontinued operations, net of tax - - - (124 ) �
Interest income (135 ) (307 ) (325 ) (679 ) � Interest expense
1,374 523 1,830 962 � Provision for income taxes 18,509 1,112
17,315 1,658 � Depreciation and amortization � 2,276 � � � 2,614 �
� � � 4,738 � � � 4,904 � � EBITDA $ (43,599 ) $ 5,968 $ (44,328 )
$ 9,891 � Goodwill impairment charge 40,250 - 40,250 - �
Stock-based compensation * � 661 � � � 1,113 � � � � 1,454 � � �
2,187 � Adjusted EBITDA $ (2,688 ) � $ 7,081 � � � $ (2,624 ) � $
12,078 � � Adjusted EBITDA $ (2,688 ) $ 7,081 $ (2,624 ) $ 12,078
Add-back specified GAAP charges: � Severance 3,880 - 3,880 - �
Charges for leased space reductions 859 - 859 - � Performance
improvement consultant fees � 1,073 � � � - � � � � 1,701 � � � - �
Adjusted EBITDA with add-back of
specified GAAPcharges
$ 3,124 � � $ 7,081 � � � $ 3,816 � � $ 12,078 �
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