Harris Interactive Fiscal Second Quarter Consolidated Revenue Up 51%; Organic Revenue Grows 9%

Harris Interactive Fiscal Second Quarter Consolidated Revenue Up 51%; Organic Revenue Grows 9%

Noteworthy points

- Organic sales bookings increase 16% to $46.3 million, setting new quarterly record

- WirthlinWorldwide and Harris Interactive organizational realignment complete

- Dr. Gordon S. Black resigns as director of the Company

- Operating Income declines year over year including effect of one-time cost of $0.8 million

ROCHESTER, N.Y., Feb. 3 /PRNewswire-FirstCall/ -- Harris Interactive(R) (NASDAQ:HPOL) released its financial results for the second quarter of fiscal 2005.

Fiscal Second Quarter Results

Revenue, which includes $13.9 million from Wirthlin and $1.1 million from Novatris, was $54.4 million for the quarter, up 51% compared with $36.1 million of revenue for the same period a year ago. Organic revenue, not including revenue from Novatris (acquired in March 2004) and Wirthlin (acquired in September 2004), was $39.4 million, up 9% from last year. Global Internet revenue, including $1.1 million from Wirthlin and $1.0 million from Novatris, was $25.9 million, up 29% from the $20.0 million of Internet revenue reported for the same period a year ago. U.S. Internet revenue, including $1.1 million from Wirthlin, increased 22% to $23.1 million. For the quarter, Internet revenue comprised 48% of global revenue, and 59% of the U.S. revenue. The impact of foreign currency fluctuations added $0.7 million to revenue this quarter.

Operating income for the quarter was $2.3 million, which includes $1.2 million from Wirthlin and zero income from Novatris, compared with operating income of $3.1 million reported last year. The Company recorded a one-time cost of $0.8 million to reflect payment obligations to Dr. Gordon S. Black, former chairman of Harris Interactive, under the terms of his employment agreement which expired December 31, 2004. Net income for the quarter was $1.4 million, including one-time after-tax costs of $0.5 million for Dr. Black's severance. Earnings per share for the quarter were $0.02 per fully diluted share, including $0.01 of one-time costs for Dr. Black, compared with $2.2 million, or $0.04 per share, reported in the second quarter of fiscal 2004.

Sales bookings, which do not include Wirthlin, set a new record of $46.3 million, up 16% from last year's pace. "We now have clear evidence that our investment in sales is beginning to pay off. We will continue with our plan to invest in sales growth," stated Robert E. Knapp, chairman and CEO. "However, we got ahead of ourselves with other costs, and now will focus on improving our margins in the second half of the fiscal year," Knapp concluded.

Fiscal Year-to-Date Results

Revenue for the six-month period ended December 31, 2004, was $95.2 million, up 37% from $69.4 million reported last year. Six month organic revenue, which excludes $16.4 million from Wirthlin and $2.2 million from Novatris, was $76.6 million, an increase of 10% from a year ago. For the six months ended December 31, 2004, global Internet revenue, including $1.1 million for Wirthlin and $1.9 million from Novatris, was $50.1 million, up 32% from $37.9 million for the same period a year ago.

Operating income for the six month period ended December 31, 2004 decreased 2% to $4.9 million, which includes $0.8 million of one-time costs discussed above as well as income of $1.4 million from Wirthlin and $0.2 million from Novatris, compared with operating income of $5.0 million for the same period a year ago. Net income for the six months ended December 31, 2004, was $3.1 million, or $0.05 per fully diluted share, which includes one-time after-tax costs of $0.5 million, or $0.01 per share, for Dr. Black, compared to net income of $3.5 million, or $0.06 per fully diluted share, for the same period a year ago.

Guidance

The Company expects revenue in the range of $54 to $55 million for the fiscal third quarter, with earnings of $0.03 to $0.04 per fully diluted share which includes approximately $0.01 per share of one-time costs related to expense reduction actions. Revenue for the full fiscal year is expected to range from $205 to $210 million with earnings per share from $0.15 to $0.17 including approximately $0.02 per share of one-time costs related to Dr. Black's payments and other cost reduction actions.

Dr. Gordon S. Black Resigns

Dr. Gordon S. Black, whose employment agreement expired on December 31, 2004, resigned as a director of the Company, effective February 2, 2005. "Gordon pioneered Internet based market research and his impact on our industry and our company will be felt for years to come," said Knapp.

Conference Call and Webcast Access Information

The Company will conduct a teleconference on Thursday, February 3, 2005 at 5:00 p.m. ET to discuss its second quarter fiscal 2005 results. Robert E. Knapp, chairman and CEO will host the call. Gregory T. Novak, president and COO and Frank J. Connolly, executive vice president and CFO will also participate in the discussion.

To access the conference call, please dial toll-free (800) 289-0544 in the United States and Canada, or (913) 981-5533 internationally by 4:50 p.m. ET on February 3.

A live webcast of the conference call will also be accessible via the Company's website at http://www.harrisinteractive.com/, and an archived version of the webcast will be available for 30 days following the call under the heading "Webcasts" in the "Investor Relations" section of the Company's website. A telephone replay of the call will not be available.

This media release will be available prior to the call at our website: http://www.harrisinteractive.com/news.

Please see attached schedules for detailed financial information.

About Harris Interactive(R)


Harris Interactive Inc. (http://www.harrisinteractive.com/), the 15th largest and fastest-growing market research firm in the world, is a Rochester, N.Y.-based global research company that blends premier strategic consulting with innovative and efficient methods of investigation, analysis and application. Known for The Harris Poll(R) and for pioneering Internet-based research methods, Harris Interactive conducts proprietary and public research to help its clients achieve clear, material and enduring results.

Harris Interactive combines its intellectual capital, databases and technology to advance market leadership through U.S. offices and wholly owned subsidiaries: London-based HI Europe (http://www.hieurope.com/), Paris-based Novatris (http://www.novatris.com/), Tokyo-based Harris Interactive Japan, through newly acquired WirthlinWorldwide (http://www.wirthlin.com/), a Reston, Virginia-based research and consultancy firm ranked 25th largest in the world, and through an independent global network of affiliate market research companies. EOE M/F/D/V.

To become a member of the Harris Poll Online(SM) and be invited to participate in future online surveys, visit http://www.harrispollonline.com/.

Contact:

Dan Hucko, SVP
Corporate Communications/Investor Relations
Harris Interactive
585.214.7470
800.866.7655 x7470


HARRIS INTERACTIVE INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)

December 31, June 30,
2004 2004
Assets
Current assets:
Cash and cash equivalents $19,901 $20,906
Marketable securities 21,065 35,658
Accounts receivable, net 34,143 23,876
Costs and estimated earnings in excess
of billings on uncompleted contracts 8,563 5,885
Other current assets 4,554 4,227
Deferred tax assets 5,276 6,340
Total current assets 93,502 96,892

Property, plant and equipment, net 10,468 6,261
Goodwill 102,611 63,906
Other intangibles, net 13,836 2,745
Other assets 1,823 1,937
Deferred tax assets 24,608 25,383
Total assets $246,848 $197,124

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 7,689 7,638
Accrued expenses 20,394 11,570
Billings in excess of costs and
estimated earnings on uncompleted
contracts 18,144 10,756
Notes payable, current 2,299 -
Total current liabilities 48,526 29,964

Deferred tax liabilities 3,734 792
Other long-term liabilities 1,163 879
Notes payable 933 -

Total stockholders' equity 192,492 165,489
Total liabilities and
stockholders' equity $246,848 $197,124


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,
2004 2003 2004 2003

Revenue from services $54,440 $36,126 $95,176 $69,393
Cost of services 26,093 18,139 45,493 35,376
Gross profit 28,347 17,987 49,683 34,017
52% 50% 52% 49%
Operating expenses:
Sales and marketing
expenses 5,655 2,807 9,643 5,582
General and
administrative
expenses 18,532 10,899 31,683 21,097
Depreciation
and amortization 1,825 1,195 3,434 2,322
Total Operating
Expenses 26,012 14,901 44,760 29,001

Operating income 2,335 3,086 4,923 5,016

Interest and other
income, net 79 122 257 243

Net income before
income taxes 2,414 3,208 5,180 5,259

Income tax expense 994 983 2,072 1,783

Net income $1,420 $2,225 $3,108 $3,476

Basic net income
per share $0.02 $0.04 $0.05 $0.06
Diluted net income
per share $0.02 $0.04 $0.05 $0.06

Weighted average
shares outstanding -
Basic 60,633,885 56,073,995 59,269,973 55,472,015
Diluted 61,907,721 57,858,897 60,461,547 57,234,936



Source: Harris Interactive

CONTACT: Dan Hucko, SVP, Corporate Communications/Investor Relations,
Harris Interactive, +1-585-214-7470, or 1-800-866-7655 x7470

Web site: http://www.harrisinteractive.com/


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