Hoover's Achieves Positive EBITDA For Its Fiscal First Quarter

FOR IMMEDIATE RELEASE

AUSTIN, Texas - July 26, 2001 - Hoover's, Inc. (Nasdaq: HOOV), a leading provider of online business information, tools, and content integration technology, today reported net revenue of $8.1 million for its first quarter ended June 30, 2001, up 18% over the quarter ended June 30, 2000, and up 5% over the previous quarter ended March 31, 2001.

Hoover's reported EBITDA (Earnings before interest, depreciation, amortization of goodwill and impairment of intangibles and investments) for the quarter ended June 30, 2001, of $73,000, compared to an EBITDA loss of $2.8 million for the previous quarter, ended March 31, 2001.

"We are pleased to have achieved positive EBITDA for the June quarter," said president and CEO Jeffrey R. Tarr. "We achieved these results primarily by reducing operating costs while growing our subscription revenues. However, the current economic downturn has adversely affected the valuation of certain of our investments and our advertising revenues. Going forward, our focus will be on driving continued growth in our subscription revenue streams and maintenance of advertising revenues in a difficult environment, while tightly controlling costs and expenses."

Hoover's ended the quarter with $31.0 million in cash, which was an increase over the prior quarter-end balance, due to cash generated from operations of $1.6 million, offset by capital expenditures and cash outlays for note repayments and stock repurchases.

During the first quarter, the company recorded a non-cash charge of $5.8 million to further write down goodwill and intangibles associated with its acquisition of Powerize. This write-down was specifically associated with lower expected future cash flows due to the recent decisions to discontinue two lines of business, the Hoover's Intelligence Monitor, as well as the NewsStand business, which were acquired from Powerize.

Gross margins improved to 64% for the quarter ended June 30, 2001, as compared to 62% for the quarter ended June 30, 2000, and compared to 56% for the previous quarter ended March 31, 2001.

Subscriptions

Hoover's has attracted a large base of paying customers who need information on companies in order to get their jobs done.

• Subscription revenues, which include both business and personal subscriptions, of $5.1 million for the quarter ended June 30, 2001, were 67% higher than the $3.1 million for the quarter ended June 30, 2000, and represented an increase of 10% over the prior quarter.
• Subscription revenues represented 63% of net revenues, compared to 45% of net revenues for the quarter ended June 30, 2000, and 60% for the previous quarter.
• The number of annual contracts for enterprise accounts increased 142%, to 7,077 in the quarter ended June 30, 2001, from 2,927 as of June 30, 2000, and increased 18% from the previous quarter. Enterprise accounts are currently the company's key area of focus for revenue growth.
• Paid seats grew 18%, to 293,000 in the quarter ended June 30, 2001, from approximately 248,000 as of June 30, 2000, and grew 3% from the previous quarter. This growth reflects an increase in enterprise accounts partially offset by a decrease in personal subscriptions.

Advertising, e-commerce and traffic

Combined advertising and e-commerce revenues of $1.7 million for the quarter ended June 30, 2001, were 11% lower than the prior quarter ended March 31, 2001. They were 44% lower than the $3.0 million in revenues for the quarter ended June 30, 2000, which reflects the significant decline in the advertising industry that has taken place in the past year. Advertising and e-commerce represented 21% of net revenues for the quarter ended June 30, 2001, compared to 44% of net revenues in the year-ago period.

"We believe that normal seasonality, coupled with decreased spending in marketing, have contributed to a decline of 19% for page views and 8% for unique visitors, compared to the March quarter. Because we believe that the advertising market will remain soft, we continue to focus on developing qualified leads for enterprise subscriptions, rather than investing in programs to drive across-the-board growth in traffic," said Hoover's CFO Lynn Atchison.

Licensing and Other Revenues

Licensing revenues of $925,000 for the quarter ended June 30, 2001, were 77% higher than $524,000 for the quarter ended June 30, 2000, and 26% higher than the quarter ended March 31, 2001. This revenue stream represented 11% of net revenues for the quarter ended June 30, 2001, compared to 7% of net revenues in the year-ago period. The increase over the prior year is a result of revenue streams acquired as part of the company's acquisition of Powerize. However, the company has decided to discontinue the NewsStand business and the Hoover's Intelligence Monitor. The NewsStand product, with its focus on Lotus Notes delivery, was not core to the company's strategy of serving its customers through the Internet, and in addition, was at risk in future quarters due to a dependency on a single customer. The revenue outlook for the Hoover's Intelligence Monitor did not meet Hoover's expectations, and therefore, the company is in the process of winding down that operation.

CD-ROM and print revenues of $357,000 for the quarter ended June 30, 2001, were 57% higher than $228,000 for the quarter ended June 30, 2000, and 16% lower than the quarter ended March 31, 2001. These variances are due to the timing of publications during the quarter rather than trends in this business, which are expected to be flat year over year. This revenue stream represented 4% of net revenues for the quarter ended June 30, 2001, compared to 3% of net revenues in the year-ago period.

Expenses

Total expenses of $12.0 million for the first quarter reflect non-cash write-downs of goodwill and intangibles, totaling $5.8 million, which were attributable to the company's recent decisions regarding HIM and NewsStand. The combination of product development, sales and marketing, and general and administrative expenses declined by 26% from the previous quarter. During the quarter, the company recognized a non-cash loss on investments of $937,000. This write-off was recognized based on the revised outlook for one of our strategic investments.

"We have been focused on a steady and continuing improvement in our operations to achieve positive cash flows, which we accomplished in the June quarter," said Atchison. "We have taken steps to focus our business, and in doing so we have incurred some additional non-cash charges for impairment."

Additional Highlights of the Quarter

• Hoover's announced that it would provide Microsoft with a collection of Hoover's Portal Windows, which will be offered as Web Parts for use within Microsoft's SharePoint Portal Server. Hoover's Portal Windows are navigational windows into Hoover's Online and the SharePoint Portal Server allows companies to easily find, share and publish information, and is the first Microsoft product based on the company's digital dashboard framework.
• On May 31, Hoover's announced the launch of the Hoover's Information Marketplace, which includes a comprehensive collection of thousands of pay-per-view business research reports from multiple top-tier publishers. Hoover's Online users can now use the Marketplace to find research reports by industry sector, topic of interest and report type.
• The company expanded the wireless distribution capabilities on Hoover's Online. Subscribers can now use Hoover's Wireless to search for and access premium information on the largest, most influential and fastest-growing enterprises worldwide.
• Hoover's renewed key enterprise accounts such as Andersen and Carlson Companies, Inc., and signed up new major accounts such as Hyperion and Autodesk.
• During the quarter the company received several accolades. These included the receipt of a Revolution Award from Revolution magazine, as well as the recent selection as a Top Web Site by both PC Magazine and, for the second year running, Entrepreneur magazine.

Stock Buyback

On December 22, 2000, Hoover's announced plans to buy back up to 10% of the outstanding shares of its common stock, based on the price and general market conditions. During the quarter ended June 30, 2001, the company repurchased 82,000 shares at an average price of $2.91 per share. Since the inception of the program, Hoover's has repurchased 255,500 shares at an average price of $2.72. This brings the total balance of treasury shares to 405,500, as of June 30, 2001.

Outlook

"While we continue to pursue advertising and licensing revenues, Hoover's is particularly focused at this time on meeting the needs of our business users and increasing recurring revenue from subscriptions. We continue to pursue advertising revenues, but expect this revenue stream to decline in the September quarter. Internet advertising typically experiences a seasonal decline in the summer months, and we do not yet see strong signs of a recovery in the advertising market," added Tarr.

The following represents the company's revised financial guidance:

• The company expects revenues for the upcoming quarter ending September 30, 2001, to be flat to slightly down, compared to the June quarter, with slight increases for the remainder of the year.
• The company expects to generate positive EBITDA for the total year. EBITDA estimates exclude interest, deprecation, and any charges for stock-based compensation expense, amortization of goodwill and intangibles or other one-time charges that may arise. However, in light of the company's substantial cash resources, management continues to evaluate opportunities to accelerate growth. Certain opportunities that the company may choose to pursue may require investment, which could have a negative impact on EBITDA.
• Due to the lack of visibility for advertising, the company is not providing guidance as to the timing for net income, but expects that it will occur no earlier than the fourth fiscal quarter.
• Assuming no extraordinary events, Hoover's expects to maintain cash balances in the range of $29.0 to $31.0 million during the year.

When the economy does recover, the company's management believes that there is potential upside on this Outlook.

Conference Call

Hoover's, Inc. will be hosting a conference call and simultaneous Webcast to discuss the first quarter financial results at 5:30 pm ET on Thursday, July 26, 2001. The company welcomes investors, analysts and members of the press to listen to the call. To participate, please call: (Domestic) 800-946-0742, Confirmation 666207; (International) (719) 457-2650, Confirmation 666207; and ask to be connected to the Hoover's conference call. To listen to the live Webcast of the call, go to the Hoover's Online Web site: www.hoovers.com. Access "About Hoover's" and click on "Investor Relations."

About Hoover's, Inc.

Hoover's, Inc. (Nasdaq: HOOV) provides online business information, tools, and content integration technology to help businesspeople get their jobs done. Hoover's information is available through its destination sites Hoover's Online (http://www.hoovers.com) and the company's other sites in France, Germany, Italy, Spain and the U.K., through syndication and co-branding agreements with other online services, and through customized applications developed for enterprise information portals, corporate intranets and business-to-business vertical and content sites. Hoover's investors include AOL Time Warner (NYSE: AOL), Media General (AMEX: MEG.A), and Knowledge Universe, through its Knowledge Net Holdings and Nextera Enterprises (Nasdaq: NXRA) units. Hoover's is headquartered in Austin, TX, and has offices in London, New York City, and San Francisco.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

This press release may contain forward-looking statements relating to future events or results that involve risks and uncertainties, including statements regarding the financial position of the company, including the carrying value of the remaining intangibles from our acquisition of Powerize, and the carrying value of other strategic investments. Among the important factors which could cause actual results of Hoover's to differ materially from those in the forward-looking statements are the success of new features and tools on Hoover's Online, the company's strategy for Europe, prospects for growth in subscriptions, licensing, advertising and e-commerce revenue, effectiveness of strategic relationships, market demand and acceptance of new and enhanced services, the retention of subscribers and customers, ability to attract new subscribers and customers, the attractiveness of our audience to advertisers, competition, our ability to sustain profitability, on an EBITDA or other basis, and positive cash flow on a continued basis, economic conditions specific to the Internet, as well as general economic and market conditions and other factors detailed in Hoover's reports and documents filed from time to time with the Securities and Exchange Commission, including its prospectus and recent 10-K and 10-Q filings.

Summary Financial Results

Condensed Consolidated Statements of Operations - Unaudited (in thousands, except per share data)

	Three Months Ended
		June 30
	2001	2000
Revenue
Subscription Revenue	$5,112	$3,064
Advertising and E-Commerce	1,711	$3,046
Licensing	925	524
CD-ROM and Print, net	357	228
Net Revenues	8,105	6,862
Cost of Revenues	2,958	2,615
Gross Profit	5,147	4,247
Expenses
Product Development	303	623
Sales and Marketing	2,198	3,910
General and Administrative	3,231	2,856
Amortization Expense and Impairment	6,214	-
Non-Cash Compensation	74	91
Total Expenses	12,020	7,480
Operating Loss	(6,873)	(3,233)
Interest Income	403	792
Interest Expense	(19)	(2)
Loss on Strategic Investments	(937)	-
Net Loss	(7,426)	(2,443)
Basic and Diluted Net Loss per Share	($0.48)	($0.19)
Weighted Average Basic and Diluted Shares Outstanding	15,404,125	12,792,518
EBITDA, adjusted (Income (Loss) Before Interest, Depreciation, Goodwill and Intangible Amortization, Non-Cash Compensation and loss on investments)	$73	($2,698)

Condensed Consolidated Balance Sheet (in thousands)

	June 30 , 2001	March 31, 2001
Assets
Current Assets
Cash and Marketable Securities	$31,014	$30,533
Accounts Receivable	3,912	4,352
Inventory - Finished Goods	79	120
Other Current Assets	671	472
Total Current Assets	35,676	35,477
Fixed Assets	6,692	6,760
Goodwill and Intangible Assets	101	6,315
Other Non-Current Assets	1,672	2,610
Total Assets	$44,141	$51,162
Liabilities
Current Liabilities
Accounts Payable and Commissions	$1,344	$1,834
Accrued Expenses	3,597	3,421
Notes Payable	760	1,015
Unearned Revenue	6,391	5,235
Total Current Liabilities	12,092	11,506
Other Liabilities	23	31
Total Liabilities	12,115	11,537
Common Stock	158	158
Paid-In Capital	95,537	95,535
Unearned Stock Compensation	(257)	(331)
Cumulative Translation Adjustment	(36)	(25)
Treasury Stock (at cost)	(845)	(606)
Retained Earnings (deficit)	(62,531)	(55,105)
Shareholders' Equity	32,026	39,625
Total Liabilities & Equity	$44,141	$51,162

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