Gross Margin Expands to More Than 66% of Net Revenues,
Gross Profit Increases By 31%
MARINA DEL REY, Calif., March 30 - AdStar, Inc. (Nasdaq: ADST), a leading provider of e-commerce transaction software and services for the advertising and publishing industries, today reported its operating results for the year ended December 31, 2005.
Gross profits for the year increased 31 percent to $3.5 million, versus $2.6 million in 2004, with gross margin expanding to 66 percent of revenues, compared with 54 percent in 2004. For the year ended December 31, 2005, including charges related to beneficial interest and amortization of financing fees on a convertible note, the company reported a net loss of $1.2 million, or $0.07 per share, compared with a net loss of $3.65 million, or $0.26 per share, in 2004. The company reported earnings before interest, taxes, depreciation and amortization (EBITDA) for 2005 of $500,000, or $0.03 per share, compared with a negative EBITDA of $2.5 million, or $0.18 per share, in 2004 (see EBITDA table at end of this release for further information).
For the year 2005, AdStar reported a six percent increase in net revenues to $5.2 million, when compared with net revenues of $4.9 million in 2004. The increase was primarily comprised of a 12 percent increase in licensing/software revenues and an eight percent increase in ASP revenues, partially offset by a nine percent decrease in customization and other revenues. The company reported ASP net revenues of $1.82 million in the year ended December 31, 2005, compared with 2004 ASP net revenues of $1.69 million. The increase reflects growth in business from existing customers and the addition of 21 new ASP customers.
"We continued to realize significant improvements in our financial performance in 2005, including taking a number of steps to reduce our overhead costs and our outstanding debt," stated Leslie Bernhard, president and chief executive officer of AdStar, Inc. "We are pleased to report a positive EBITDA of more than $500,000, along with a 93 percent reduction in operating loss, for the year ended December 31, 2005. We also launched 21 news publications on our ASP service and introduced the long-awaited AdStar-powered Manheim Dealer Advertising System at The Atlanta Journal-Constitution. These new relationships should have a substantial impact on our ad transactions in the coming months."
Transactions using AdStar's ASP technology infrastructure increased 30 percent to 337,400 in 2005 versus 260,000 in 2004. Total ASP transactions, including large contract accounts, increased 13 percent to 490,000 compared with total transactions in 2004 of 432,000. The total dollar value of these transactions exceeded $92.5 million, compared with $75.9 million in 2004.
The newspapers that integrated AdStar's technology into their publication infrastructures during 2005 are:
* amNew York
* Alameda (CA) Newspaper Group (6 papers)
* The Advocate Weekly (MA)
* Berkshire (MA) Eagle
* Brooks Community Newspapers (CT, 6 papers)
* The Charleston (WV) Gazette
* The Connecticut Post
* The Dallas Morning News
* Las Vegas Review Journal
* The Sun Media Group (MA, 5 papers)
* North Adams (MA) Transcript
"Looking back at 2005 and anticipating further growth in 2006, there is much to be excited about," added Bernhard. "In addition to more than doubling the newspapers on our ASP system, we also expanded our reach beyond the borders of the United States by signing an international licensing agreement with Associados, one of Brazil's largest media organizations, and an international distribution agreement with UK-based AdSecure. These two organizations will assist us in marketing and selling our E-commerce Platform services throughout Brazil and to industry resellers worldwide.
"We will continue to leverage our platform and our expanding customer base as a means to connect third-party software providers and advertisers with newspaper publishing systems. As part of this strategy, we are moving forward with the implementation of Manheim's Dealer Advertising System into other markets and anticipate a phased rollout at additional Cox Media newspapers throughout 2006.
"We are encouraged by the results of the past year and the improvements that have been made within our company and to our technology. Rising ASP revenues and the elimination of funded debt from Laurus Master Funds allowed AdStar to greatly improve its financial position in 2005. We are optimistic that growth in our ASP business will accelerate and expect additional publishers to implement Web strategies that will benefit from our technology in 2006."
For the year, general and administrative expenses decreased to $1.96 million from $2.05 million in 2004, a net reduction of five percent. Product maintenance and development expenses decreased 34 percent to $901,000 (vs. $1.36 million), while selling and marketing expenses decreased 42 percent to $750,000 (vs. $1.29 million). As of December 31, 2005, AdStar's cash and cash equivalents approximated $1.34 million, compared with $1.1 million at the end of December 2004.
The Company will host a conference call today at 4:15 p.m. Eastern Time (EST). Shareholders and other interested parties may participate in the conference call by dialing 800-938-0653 (international/local participants dial 973-935-2408) and referencing the ID code 7182568, a few minutes before 4:15 p.m. EST on March 30, 2006. The call will also be broadcast live on the Internet at http://www.adstar.com. A replay of the conference call will be available two hours after the completion of the conference call from March 30, 2006 until April 5, 2006 by dialing 877-519-4471 (international/local participants dial 973-341-3080) and entering the conference ID 7182568. The replay of the call will be archived on the company's website at http://www.adstar.com until June 27, 2006.
About AdStar, Inc.
AdStar, Inc. (Nasdaq: ADST) is the leading provider of e-commerce transaction software and services for the advertising and publishing industries. AdStar's proprietary suite of e-commerce services includes remote ad entry software and web-based ad transaction services, as well as payment processing and content processing solutions that are provided through its Edgil Associates subsidiary, the industry's largest supplier of automated payment processing services. AdStar's ad transaction infrastructure powers classified ad sales for more than 40 of the largest newspapers in the United States, CareerBuilder, and a growing number of other online and print media companies. EdgCapture, Edgil's automated payment process solution, is currently employed by call centers at more than 100 of the nation's leading newspaper and magazines. AdStar is headquartered in Marina del Rey, Calif., and its Edgil office is located in North Chelmsford, Mass. For additional information on AdStar, Inc., visit http://www.adstar.com.
Forward Looking Statements
This release contains forward-looking statements concerning the business and products of the company. Actual results may differ from those projected or implied by such forward-looking statements depending on a number of risks and uncertainties including, but not limited to, the following: historical business has already matured, new online business is unproven and may not generate expected revenues, and Internet security risks. Other risks inherent in the business of the company are described in Securities and Exchange Commission filings, including the company's annual report on Form 10-KSB. The company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
AdStar Company Contact: Jeff Baudo, 310-577-8255, jbaudo@adstar.com
AdStar Media Contact: Kevin Wilson, 513-885-5520, kwilson@kevinwilsonpr.com
AdStar, Inc. and Subsidiary
Consolidated Balance Sheet
As of December 31, 2005
Assets
Current assets:
Cash and cash equivalents $1,338,000
Accounts receivable, net of allowance for
doubtful accounts of $68,000 571,000
Notes receivable from officers - current portion 8,000
Prepaid and other current assets 115,000
Total current assets 2,032,000
Notes receivable from officers, net of current portion 216,000
Property and equipment, net 127,000
Capitalized and purchased software, net 1,031,000
Intangible assets, net 1,306,000
Goodwill 2,132,000
Other assets 30,000
Total assets $6,874,000
Liabilities and Stockholders' Equity
Current liabilities:
Due to publications $1,314,000
Accounts payable and accrued expenses 677,000
Deferred revenue and customer deposits - current portion 219,000
Loans from stockholders - current portion 21,000
Capital lease obligations - current portion 1,000
Total current liabilities 2,232,000
Deferred revenues, net of current portion 28,000
Total liabilities 2,260,000
Stockholders' equity 4,614,000
Total liabilities and stockholders' equity $6,874,000
AdStar, Inc. and Subsidiary
Consolidated Statements of Operations
For the Two Years
Ended December 31, 2005
2005 2004
ASP, net $1,815,000 $1,687,000
Licensing and software 2,534,000 2,268,000
Customization and other 890,000 978,000
Net revenues 5,239,000 4,933,000
Cost of revenues, including depreciation and
amortization of $649,095 and $595,000 1,779,000 2,027,000
Loss on write-down of capitalized software -- 258,000
Total cost of revenues 1,779,000 2,285,000
Gross profit 3,460,000 2,648,000
General and administrative expense 1,959,000 2,053,000
Product maintenance and development costs 901,000 1,359,000
Selling and marketing expense 750,000 1,291,000
Restructuring expenses -- (38,000)
Amortization of customer list 88,000 88,000
Abandoned acquisition costs -- 1,203,000
Loss from operations (238,000) (3,308,000)
Beneficial interest and amortization of
financing fees on convertible note (802,000) (299,000)
Interest income (expense), net (38,000) (36,000)
Loss before income taxes (1,078,000) (3,643,000)
Provision for income taxes (12,000) (5,000)
Net loss $(1,090,000) $(3,648,000)
Deemed dividends on exercise of warrants (98,000) --
Net loss applicable to common stockholders $(1,188,000) $(3,648,000)
Loss per share - basic and diluted $(0.07) $(0.26)
Weighted average number of shares - basic
and diluted 16,133,000 14,043,000
AdStar, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Two Years
Ended December 31,
2005 2004
Cash flows from operating activities:
Net loss $(1,090,000) $(3,648,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 738,000 797,000
Beneficial interest and amortization of
financing fees on convertible note 803,000 299,000
Loss on write-down of capitalized software -- 258,000
Loss on disposal of equipment and
purchased software -- 13,000
Stock based charges 94,000 96,000
Bad debt provision (7,000) 12,000
Changes in assets and liabilities:
Accounts receivable 21,000 (257,000)
Prepaids and other assets (1,000) 15,000
Due to publications 16,000 215,000
Accounts payable and accrued expenses (713,000) 196,000
Deferred revenue and customer deposits (113,000) 170,000
Net cash used in operating activities (252,000) (1,834,000)
Cash flows from investing activities:
Purchase of Edgil Associates, Inc., net
of cash received -- 29,000
Additions to capitalized and purchased
software (68,000) (499,000)
Purchase of property and equipment (53,000) (83,000)
Notes from officers -- (6,000)
Repayment of officer receivable 8,000 8,000
Net cash used in investing activities (113,000) (551,000)
Cash flows from financing activities:
Net proceeds from issuance of convertible
debt -- 1,347,000
Repayment of convertible debt (411,000) (45,000)
Proceeds from exercise of options and
warrants 1,061,000 168,000
Cost of conversion of series A Preferred
Stock -- (31,000)
Principal repayments on loans from
shareholders (21,000) (21,000)
Principal repayments on capital leases (19,000) (32,000)
Net cash provided by financing
activities 610,000 1,386,000
Net increase (decrease) in cash and
cash equivalents 245,000 (999,000)
Cash and cash equivalents at beginning
of year 1,093,000 2,092,000
Cash and cash equivalents at end of year $1,338,000 $1,093,000
AdStar, Inc. and Subsidiary
Consolidated Schedules of EBITDA
For the Two Years
Ended December 31,
2005 2004
Net Income (Loss) $(1,090,000) $(3,648,000)
Interest Expense (Income) net 840,000 335,000
Provision for income taxes 12,000 5,000
Depreciation and Amortization 738,000 797,000
EBITDA $500,000 $(2,511,000)
Weighted average shares 16,133,000 14,043,000
EBITDA per share $0.03 $(0.18)
