THK Think Partnership

Kowabunga!� (AMEX:THK), the leading provider of interactive performance-based advertising networks and technology platforms, today reported financial results for the second quarter and six months ended June 30, 2008. Second Quarter Results Revenues from continuing operations in the second quarter of 2008 were $12.8 million, compared with revenues from continuing operations of $5.8 million in the second quarter of 2007. The increase was primarily attributed to growth in the Company�s network segment revenues, which increased by $6.5 million. Net loss from continuing operations was $9.0 million, or $0.13 per share, and included impairment charges totaling $7.8 million net of taxes, or $0.12 per share. This compared with a loss in the second quarter of 2007 of $0.9 million, or $0.01 per share. Discontinued operations reflect the results of those entities that are currently being divested and include the Company�s advertising segment as well as its online dating and internal offers reporting units. The net loss from discontinued operations in the second quarter of 2008 was $25.8 million, or $0.38 per share, and included impairment charges relating to the carrying value of goodwill and other intangibles related to the entities held for sale of $26.1 million net of taxes, or $0.38 per share, compared with a profit of $0.5 million, or $0.01 per share in the second quarter of 2007. The Company's total net loss for the 2008 second quarter was $34.7 million, or $0.51 per share, compared with a total net loss of $0.3 million, or $0.01 per share, in the 2007 second quarter. Total impairment charges for the quarter were $33.9 million net of taxes. Without the impairment charges, the net loss would have been $0.8 million, or $0.01 per share. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization expenses) improved to approximately $1.4 million for the quarter compared with $0.4 million in the first quarter, primarily as a result of cost saving measures implemented during the second quarter, as well as a slight improvement to gross margins. First Half Results Loss from continuing operations for the first half of 2008 was $10.1 million, or $0.15 per share, and included impairment charges totaling $7.8 million net of taxes, or $0.12 per share. This compared with a loss from continuing operations of $1.6 million, or $0.03 per share, in the first half of 2007. The net loss from discontinued operations for the first half of 2008 was $26.9 million, or $0.40 per share, and included impairment charges relating to entities held for sale of $26.8 million net of taxes, or $0.40 per share. This compared with a profit of $0.8 million, or $0.01 per share in 2007. The Company's total net loss, for the first half of 2008 was $37.0 million, or $0.55 per share, compared with a total net loss of $1.0 million, or $0.02 per share, in 2007. Total impairment charges for the first half were $34.6 million, net of taxes. Without impairment charges, the net loss would have been $2.4 million, or $0.04 per share. Chief Executive Officer, Stan Antonuk, stated, �I am particularly pleased with the performance of our pay per click business as well as the improvement in our operating margins and EBITDA this quarter. We had some very tough, but necessary decisions to make and the cost savings that resulted, which will be fully reflected in the third quarter, translated into improved operating results.� Antonuk went on to say, �We are executing on our plan of divesting non-core assets and were therefore required to change our financial presentation and evaluate the carrying value of our intangible assets, resulting in some material non-cash impairment charges. Our continuing operations however, which are predominately Network driven now, showed favorable increases in revenue, gross margin and EBITDA and our Network segment has surpassed expectations to date. We are committed to continuing to streamline our operations in order to focus on our valuable core competencies in the interactive marketing and performance space.� Since the Company last reported financial results, the following are key accomplishments: Achieved annualized cost savings of $3 million, some of which related to discontinued operations from the consolidation and streamlining of operations, including the closing of the U.K.-based Web Diversity business in June. The full impact of these cost cutting initiatives will be reflected in the third quarter. Engaged an investment banking firm to support the Company�s goal of divesting non-core assets, proceeds of which will be used to reduce the Company�s debt and fund the expected continued growth of the Network segment. And, in keeping with the Company�s divestiture plan, concluded the non-material sale of Catamount in July. Added Jack Balousek and Charles Pope to Kowabunga!�s Board of Directors. Mr. Balousek has more than 20 years� experience in executive management including serving as Chairman and CEO of True North Technologies, a digital and interactive services firm and as President and COO of Foote, Cone and Belding Communications, at the time, one of the largest global advertising and communications networks. Mr. Pope brings more than 30 years of experience in executive management, finance and accounting to his director position. He has been the Chief Financial Officer of three public companies and is currently the CFO of Aerosonic Corporation, a worldwide manufacturer of aircraft instruments. Upgraded the ValidClick AdExchange platform and data center to significantly improve performance and scalability. The enhancements will allow the business to service a significant number of new advertisers and publishers joining the ValidClick AdExchange. Made continued progress on the upgrade to Kowabunga!�s merchant affiliate platform, MyAP�, as well as progress toward the planned simultaneous launch of the Company�s own affiliate network platform, KB Network, scheduled for release later this year. Q2 2008 Financial Detail for Continuing Operations Network Network revenue for the quarter totaled $10.4 million, up 7% from $9.7 million in the previous quarter and up 169% from $3.9 million a year ago. The Network business, which represented 81% of second quarter 2008 revenue before elimination, is comprised of an online search network ($5.7 million), affiliate networks ($4.4 million), and other income ($0.3 million). Network EBITDA was $1.3 million, compared with $1.0 million for the previous quarter and flat from the second quarter of 2007. Direct Direct business revenue in the second quarter of 2008 totaled $2.7 million, compared with $2.8 million in the previous quarter and up from $2.2 million reported a year ago, and represented 21% of total second quarter revenue before elimination. Direct is primarily engaged in the interactive direct marketing of internally generated and third party offers. Revenues are derived from lead sales and list management services through life-stage niche marketing as well as direct-to-consumer services such as online education and certification. Direct EBITDA was $0.9 million, compared with 1.2 million in the previous quarter and compared with $0.7 million a year ago. Please refer to the Kowabunga!�s Form 10-Q filed with the SEC on this date for the complete report of financial results for the second quarter and six months ended June 30, 2008. Conference Call Information The Company will host a conference call today at 5:00 pm EDT/2:00 pm PDT. Participants can access the call by dialing 800-762-8908 (domestic) or 480-248-5081 (international). In addition, the call will be webcast on the Investor Relations section of the Company�s web site at: www.kowabunga.com where it will also be archived for 45 days. A telephone replay will be available through Monday, August 25, 2008. To access the replay, please dial 800-406-7325 (domestic) or 303-590-3030 (international), passcode 3904487. About Kowabunga! Inc. Think Partnership Inc. is now doing business under the name �Kowabunga! Inc.� and will seek formal shareholder approval to change its legal name to Kowabunga! Inc. later in 2008. Kowabunga Marketing Inc. will continue as a subsidiary, operating its affiliate network and related products. Kowabunga! Inc. is the leading provider of interactive performance-based advertising networks and technology platforms. Kowabunga! provides a comprehensive and integrated set of scalable and cost-effective marketing solutions for both advertisers and publishers. These solutions increase customer retention and revenues through a diverse set of related marketing channels, including affiliate marketing, click-fraud-protected pay-per-click advertising, and lead generation. High-profile brands include ValidClick AdExchange�, MyAP�, PrimaryAds�, and BabyToBee�. For more information, visit www.kowabunga.com. Forward Looking Statements Statements made in this press release that express the Company's or management's intentions, plans, beliefs, expectations or predictions of future events, are forward-looking statements. Those statements are based on many assumptions and are subject to many known and unknown risks, uncertainties and other factors that could cause the Company's actual activities, results or performance to differ materially from those anticipated or projected in such forward-looking statements. For a discussion of these risks, see Kowabunga!�s Securities and Exchange Commission filings including Form 10-K, filed March 31, 2008, under the section headed �Risk Factors�. The Company cannot guarantee future financial results, levels of activity, performance or achievements, and investors should not place undue reliance on the company's forward-looking statements. � THINK PARTNERSHIP INC. CONSOLIDATED BALANCE SHEETS June 30, 2008 and December 31, 2007 � June 30,2008 December 31,2007 �Unaudited� � Assets Current Assets Cash and Cash Equivalents $ 78,867 $ 2,578,246 Restricted Cash 1,442,265 1,668,302 Accounts Receivable net of allowance for doubtful accounts of $467,185 and $97,170 7,533,656 8,302,782 Unbilled Revenue 460,762 124,653 Refundable Corporate Income Taxes 436,522 436,522 Prepaid Expenses and Other Current Assets 600,053 217,201 Current Assets of Discontinued Operations � 5,051,742 � 6,412,597 Total Current Assets � 15,603,867 � 19,740,303 Property & Equipment, net � 5,607,232 � 4,679,541 Other Assets Goodwill 29,921,810 41,229,930 Intangible Assets 8,115,188 9,395,056 Deferred Income Taxes 4,425,295 0 Other Assets 93,999 198,151 Other Assets of Discontinued Operations � 13,867,614 � 45,882,532 Total Other Assets � 56,423,906 � 96,705,669 Total Assets $ 77,635,005 $ 121,125,513 June 30,2008 � December 31,2007 �Unaudited� � Liabilities and Shareholders� Equity Current Liabilities Notes Payable � Current Portion $ 1,600,689 $ 1,301,537 Note Payable � Related Party 17,235 37,326 Accounts Payable 3,524,116 3,102,229 Deferred Revenue 28,327 41,190 Deferred Income Taxes 544,435 470,205 Accrued Expenses and Other Current Liabilities 1,016,807 1,250,756 Current Liabilities of Discontinued Operations � 5,138,048 � � 5,089,019 � Total Current Liabilities 11,869,657 11,292,262 � Long-Term Liabilities � 9,685,900 � � 14,188,265 � � Shareholders� Equity Preferred Stock, $.001 par value: Authorized Shares � 5,000,000 � none issued or outstanding 0 0 Common Stock, $.001 par value: Authorized Shares � 200,000,000 Issued Shares � 71,425,024 as of June 30 and 70,295,024 as of December 31 Outstanding Shares � 66,294,244 as of June 30 and 67,646,350 as of December 31 71,425 70,295 Additional Paid in Capital 106,099,319 106,524,393 Accumulated Deficit (48,276,473 ) (11,245,536 ) Accumulated Other Comprehensive Income 97,787 1,139,715 Treasury Stock � 5,130,780 as of June 30 and 2,648,674 as of December 31 � (1,912,610 ) � (843,881 ) Total Shareholders� Equity � 56,079,448 � � 95,644,986 � Total Liabilities and Shareholders� Equity $ 77,635,005 � $ 121,125,513 � � The accompanying notes to the consolidated financial statements are an integral part of these statements. � � THINK PARTNERSHIP INC. CONSOLIDATED STATEMENTS OF OPERATIONS (�Unaudited�) Six and Three Months Ended June 30, 2008 and 2007 � Six Months Ended June 30 Three Months Ended June 30 2008 � 2007 2008 � 2007 Net Revenue $ 24,956,827 $ 11,458,990 $ 12,846,168 $ 5,826,967 Cost of Revenue � 15,075,507 � � 3,590,132 � � 7,777,882 � � 1,927,182 � Gross Profit 9,881,320 7,868,858 5,068,286 3,899,785 Operating Expenses Selling,General andAdministrative 11,536,555 8,960,977 5,769,664 4,503,671 Impairment of Intangible Assets 11,509,957 0 11,509,957 0 Amortization of Purchased Intangibles � 1,084,902 � � 1,112,869 � � 522,294 � � 563,281 � Loss from Continuing Operations (14,250,094 ) (2,204,988 ) (12,733,629 ) (1,167,167 ) Other Income (Expenses) Interest Income 5,778 19,362 2,671 35 Interest Expense (402,503 ) (429,999 ) (185,591 ) (206,611 ) Other Income, Net � 0 � � 30,718 � � 0 � � 0 � Loss from continuing operations before taxes on income (14,646,819 ) (2,584,907 ) (12,916,549 ) (1,373,743 ) Income Tax Benefit � (4,551,885 ) � (952,018 ) � (3,946,543 ) � (502,677 ) Net Loss from Continuing Operations (10,094,934 ) (1,632,889 ) (8,970,006 ) (871,066 ) (Loss) Profit from Discontinued Operations net of Tax Benefit (see Note 11) � (26,936,003 ) � 756,966 � � (25,758,708 ) � 522,384 � Net Loss (37,030,937 ) (875,923 ) (34,728,714 ) (348,682 ) Accretion of Redeemable Preferred � 0 � � (135,527 ) � 0 � � 0 � Net Loss allocable to common shareholders � ($37,030,937 ) � ($1,011,450 ) � ($34,728,714 ) � ($348,682 ) � Per Common Share Data: Basic Loss from continuing operations ($0.15 ) ($0.03 ) ($0.13 ) ($0.01 ) (Loss) Profit from discontinued operations � (0.40 ) � 0.01 � � (0.38 ) � 0.01 � Loss � ($0.55 ) � ($0.02 ) � ($0.51 ) � ($0.01 ) Diluted Loss from continuing operations ($0.15 ) ($0.03 ) ($0.13 ) ($0.01 ) (Loss) Profit from discontinued operations � (0.40 ) � 0.01 � � (0.38 ) � 0.01 � Loss � ($0.55 ) � ($0.02 ) � ($0.51 ) � ($0.01 ) � Weighted Average Shares (Basic) � 67,438,956 � � 66,590,308 � � 67,777,260 � � 67,523,383 � Weighted Average Shares (Diluted) � 67,438,956 � � 66,590,308 � � 67,777,260 � � 67,523,383 � � The accompanying notes to the consolidated financial statements are an integral part of these statements. � Net Revenue by Industry Segment Three Months Ended June 30, 2008 � 2007 � Year to Year Amount % of Amount % of % Change Revenue by Segment Network $ 10,404,207 81 % $ 3,868,258 66 % 169 % Direct 2,714,287 21 % 2,230,777 38 % 22 % Elimination � (272,326 ) -2 % � � (272,068 ) -5 % � 0 % Total Revenue $ 12,846,168 � 100 % � $ 5,826,968 � 100 % � 120 % Three Months Ended June 30, EBITDA Reconciliation 2008 � � 2007 � Pre tax ($40,351,721 ) � ($562,382 ) Amortization 1,775,240 1,675,452 Amortization � Stock Options 389,296 334,906 Depreciation 539,879 411,248 Impairment 39,423,925 - Net Interest Expense 179,723 205,409 Other � (529,887 ) � � - � TOTAL EBITDA $ 1,426,455 � � $ 2,064,633 � � EBITDA By Segment Network $ 1,288,176 $ 1,304,503 Direct 857,025 714,758 Corporate (1,334,457 ) (1,454,595 ) Discontinued � 615,712 � � � 1,499,967 � Total EBITDA $ 1,426,455 � � $ 2,064,633 �