IVILLAGE ADDS TO HOLDINGS
Byline: Valerie Seckler
NEW YORK — Doug McCormick keeps pulling rabbits out of his hat — though none yet named operating profit — and Tuesday was no exception: The chairman and chief executive officer of iVillage said the women’s media network has just acquired the Business Women’s Network in an all-cash deal.
Word of the deal came against a backdrop of iVillage’s second-quarter results, released after Wall Street’s closing bell. The figures met analysts’ expectations, but reflected a 52 percent plunge in pro forma revenue, to $15.2 million, from year-ago pro forma revenue of $31.7 million, resulting in a pro forma loss before interest, taxes, depreciation and amortization of $17.3 million — before restructuring costs for the Women.com deal, completed late in the quarter ended June 30. During the second quarter of 2000, iVillage’s pro forma operating loss tallied $19.2 million. (The pro forma figures include results of Women.com for all periods.)
Despite the difficult ad environment, McCormick put on a brave face Tuesday, estimating a 10 percent increase in third-quarter revenue over second-quarter levels will propel the media firm, based here in the fashion district, to operating profit during that period. “This is assuming an ongoing tough economy and ad climate,” McCormick noted in a conference call Tuesday. “We expect to retain EBITDA profitability in the fourth quarter and for fourth-quarter revenue to be up slightly from the third quarter.”
IVillage’s shares closed at 95 cents a share, unchanged, in light Nasdaq trading Tuesday. During the past 52 weeks, iVillage stock has ranged from a low of 37 cents, to a high of $7.50, and during the second quarter, the issue skirted a possible delisting by the Nasdaq as its stock rose to $1.18 on April 25. If a Nasdaq stock trades below $1 a share for 90 consecutive days, it is subject to delisting from the Nasdaq National Market.
IVillage has been digging hard to achieve operating profit in the third quarter and McCormick has made it clear he can’t do so by cost-cutting alone. There will be plenty of deal-making, he’s promised. And the purchase of Business Women’s Network, indeed, marks one of several struck this year by iVillage, which is focusing on facilitating high-margin, paid services, including pay-per-use and subscription-based models, as advertising has dried up. They’ve included acquisitions, like BWN and Women.com (which brought iVillage $20 million in cash), as well as strategic alliances, such as the one iVillage forged with Coca-Cola’s Dasani brand of bottled water in May. That was a multimillion dollar deal designed to bring more users to iVillage and more exposure to the Dasani brand, through the launch of a wellness community Web site by iVillage, funded by Dasani, at ivillage.com/dasani.
“During the second quarter, we continued to expand beyond the online ad market and sell bits and bytes,” McCormick said of such efforts. “Today, we’re excited to announce the Business Women’s Network transaction to further round out our pay-per-service strategy.”
BWN, a privately held group based in Washington, D.C., connects more than 5,000 companies and 39 million executive women via fee-based services, from offline seminars to online subscriptions, through BWNi.com. The BWN lineup includes a database on women’s businesses compiled from 9,800 research reports and a calendar of women’s events. Now a subsidiary of iVillage, Business Women’s Network and its 21 employees will remain in Washington, and Edie Fraser will stay on as ceo. BWN is profitable, according to iVillage. Its clients include 250 of the Fortune 500 firms, including American Express, BellSouth, General Motors and Johnson & Johnson.
Still, McCormick can’t afford to eschew cost-cutting. In fact, he said Tuesday that iVillage has managed to slash its annual cash burn rate, before restructuring charges for the Women.com deal, to roughly $70 million annually, from a burn rate running at $130 million as recently as May. At the end of the second quarter, iVillage had $63 million in cash on its balance sheet, with about $15 million to $20 million earmarked for severance pay and other charges stemming from the purchase of former number one rival Women.com.