Daily Research News Online no. 7230 - Harris Revenue Flat Despite European Growth

Harris Revenue Flat Despite European Growth

August 24 2007

Harris Interactive has announced results for the fourth quarter and its full fiscal year 2007, ending 30th June. Fourth quarter revenue declined to $57.1m - down 3% from the same period a year ago - and full year revenue was $211.8m, similar to figures a year ago and well down on forecasts made then, of $230-240m.

A year on from publishing good results and declaring the company 'reinvented', but three months after a personal apology and pronouncing his team 'disappointed' with 'unacceptable' quarterly results, CEO Greg Novak presented a mixed picture, with the turnaround of the company's European operations apparently proceeding at a respectable pace, but declines in US business cancelling it out.

US revenue for the fiscal year was $159.8m, down 4% from $166.2m of revenue reported for the same period a year ago. European revenue rose 10% excluding $1.4m from Hamburg-based MediaTransfer, which was acquired in April 2007 (www.mrweb.com/drno/news6627.htm ). Including the MediaTransfer sales, revenue was up 13% to $52.0m (from $46.0m in 2006).

Fourth quarter US revenue was $41.4m, down 9% from $45.6m a year ago; European revenue was up 19% to $15.7m - or 8% excluding acquisitions.

Novak comments: 'We're pleased that our revenue performance was better than expected in what we knew would be a down quarter. We believe the turnaround in Europe is now largely complete with the UK, Novatris and MediaTransfer all showing strong results in the quarter.'

'Fiscal 2007 was certainly mixed. We had some successes offset by a few tough hurdles along the way. However, we exited the year much stronger than we entered it. Although we know there is still some work ahead of us, we also have much to be optimistic about.'

In the latter, he includes momentum building in the group's healthcare team, which is expected to translate into 'good growth in FY08'. Novak also cites recent buys into Canada and Asia which 'will help us compete in the world marketplace and service our global clients much better than in the past': in August Harris bought Decima in Canada and MarketShare in Asia Pacific in deals with a combined value of more than $24m (www.mrweb.com/drno/news7195.htm ). Says Novak: 'Adding the strengths of Decima and MarketShare will improve our global service offering and increase our access into two fast-growing research markets.'

Last year Harris's US and European Internet revenue each grew around 14-15%. This year the global figure was 2%, rising to $128.2m for the full year, but comprising very different pictures for the two regions. US Internet revenue was flat for the quarter at $30.3m ($30.2m Q4 2006), and down 1% to $110.6m for the full year. European Internet revenue for the quarter was $5.6m, up 54% including $1.3m from MediaTransfer - up 18% excluding the newly acquired company - and for the full year was up 34% to $17.6m (24% excluding Media Transfer). In Europe, Internet's share of total revenue rose from 29% to 34%, while in the US it fell a fraction from 69% to 68%.

Operating income for the fourth quarter was $4.2m, or 7.3% of revenue, up 4% when compared to operating income of $4.0m, or 6.8% of revenue, for the same period a year ago. For the full year, operating income fell 11% to $12.3m, or 5.8% of revenue.

Adjusted EBITDA, which CFO Ron Salluzzo says affords 'better measurement of our profit growth and more accurate comparisons', was $7.0m or 12.2% of revenue for Q4, up a fraction from $6.9m or 11.7% of revenue in Q4FY06. For the full year, adjusted EBITDA was $22.9m or 10.8% of revenue, as compared to $24.2m or 11.4% of revenue in FY06.

The company's online information for investors is at www.harrisinteractive.com/ir.