Hoover's Reports Second Quarter Results

FOR IMMEDIATE RELEASE

Highlights Positive Operating Cash, Growing Subscription Revenue

AUSTIN, TEXAS - October 25, 2001 - Hoover's, Inc. (Nasdaq: HOOV), a provider of business information, today reported a net loss of $4.6 million for the quarter ended September 30, 2001, which was a 35% improvement over the comparable quarter last year, and a 39% improvement over the quarter ended June 30, 2001. Net revenue was $7.6 million, up 1% compared to the comparable quarter last year and down 7% compared to the quarter ended June 30, 2001.

Overall revenue declines were due primarily to the company's advertising business. Subscriptions, which are 70% of the company's revenue, grew 54% over the comparable quarter last year and 3% over the previous quarter, despite the impact of reduced sales activity in the month of September.

"We are pleased with the progress we made on our goals of growing subscription revenue and driving toward GAAP net income profitability," said president and CEO Jeffrey R. Tarr. "We added a number of major new accounts, including AT&T Wireless and Bristol-Myers Squibb. We also renewed accounts with IBM and the U.S. Postal Service. During turbulent times, people engaged in sales and business development activities have an increased need for intelligence on their customers and prospects. Hoover's fills this need and does so at a price point that is substantially less than its most direct competitor - an attribute which is appreciated by our growing base of more than 7,400 multiseat enterprise accounts."

Hoover's generated positive operating cash of $218,000 for the quarter and $1.8 million year-to-date. The company ended the quarter with approximately $30 million in cash. Hoover's paid off its remaining debt of $760,000 during the quarter and is now free of all significant debt.

During the quarter, the company recorded non-cash charges of $1.6 million related to the non-cash write-down for impairment of strategic investments and $1.8 million in restructuring charges associated with its reduction in workforce and closure of its London office.

Gross margins improved to 65% for the quarter ended September 30, 2001, as compared to 51% for the quarter ended September 30, 2000, and compared to 64% for the quarter ended June 30, 2001.

Revenues

On September 26, 2001, the company announced it would primarily focus on growing its core subscription business.

• Subscription revenues, which include both enterprise and personal subscriptions, of $5.3 million for the quarter ended September 30, 2001, were 54% higher than the quarter ended September 30, 2000, and represented an increase of 3% over the prior quarter.
• Subscription revenues represented 70% of net revenues, compared to 46% of net revenues for the quarter ended September 30, 2000, and 63% for the previous quarter.
• The number of Hoover's enterprise accounts increased 101% from the quarter ended September 30, 2000, to 7,455 in the quarter ended September 30, 2001, and increased 5% from the previous quarter. As of September 30, 2001, the average contract value was $2,000, and the average contract length was 12 months. Enterprise accounts are currently the company's primary area of focus for revenue growth.
• The company continued the strategy it initiated several quarters ago to de-emphasize personal accounts in favor of higher-priced and longer-term multiseat enterprise accounts. The number of personal accounts was approximately 26,000, which was a 47% decline from the quarter ended September 30, 2000, and a 20% decline from the previous quarter. As of September 30, 2001, the average personal account contract was $150, and the average contract length was nine months.
• Including both subscriptions and licensing, more than 80% of the company's total revenues are now recurring in nature.

Expenses

Total expenses of $8.2 million for the second quarter reflect several onetime charges, including the:

• non-cash write-off of software (reflected in product development) of $730,000;
• non-cash charge for stock options of $300,000 (reflected on separate line item) associated with the severance of an executive;
• expenses of $1.5 million, reflected in various categories, primarily related to restructuring costs associated with the closure of the London office and the reduction in staff in the U.S.;
• onetime write-down of assets associated with the office in London and Hoover's Media Technologies, which is reflected in the $350,000 increase in depreciation from the previous quarter.

During the quarter, the company reduced head count by approximately 20% through attrition, a reduction in staff and the closing of its London office. The company continues to serve non-U.S. markets through sales agencies, the Internet and telesales. Other cost reductions were concentrated in G&A and other areas that do not directly contribute to revenue.

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 September 30, 2001, the company repurchased 143,333 shares at an average price of $2.49 per share. From the inception of the buyback program through September 30, 2001, Hoover's has repurchased 398,833 shares at an average price of $2.63 per share.

Outlook:

• The company expects revenue growth of 2% to 3% for the quarter ending December 31, 2001, with continued increases for the quarter ending March 31, 2002.
• The company expects to generate positive cash flow from operations for the remainder of the fiscal year.
• Hoover's expects to be profitable, on a GAAP basis, for the quarter ending March 31, 2002.
• Assuming no extraordinary events, such as a significant increase in the company stock buyback program, Hoover's expects to maintain cash balances from $30 million to $31 million.

Conference Call:

Hoover's, Inc. will be hosting a conference call and simultaneous Webcast to discuss the second quarter financial results at 4:30 p.m. EST, Thursday, October 25, 2001. The company welcomes investors, analysts and members of the press to listen to the call. To participate, please call: Domestic 1-800-289-0544 (Confirmation # 451238), or International 1-913-981-5532 (Confirmation # 451238). Ask to be connected to the Hoover's conference call.

To listen to the live Webcast, go to the Hoover's Online Web site: www.hoovers.com. Access "About Hoover's" and click on "Investor Relations."

About Hoover's

Hoover's, Inc. (Nasdaq: HOOV) provides online business information and tools to help businesspeople get their jobs done. Hoover's information is available through its destination site Hoover's Online (http://www.hoovers.com); through co-branding agreements with other online services; and through enterprise information portals. Hoover's investors include AOL Time Warner (NYSE: AOL), Media General (NYSE: MEG), and Knowledge Universe, through its Knowledge Net Holdings and Nextera Enterprises (Nasdaq: NXRA) units. Hoover's is headquartered in Austin, Texas, and has offices in New York City and San Francisco.

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

This press release contains forward-looking statements relating to future events or results that involve risks and uncertainties, including statements regarding the size of the company's market and the success of the company's strategy. Among the important factors which could cause actual results of Hoover's to differ materially from those contained herein include the development and success of new features and tools on Hoover's Online, expected benefits of strategic relationships, both the short and long term industry outlook for the growth of online business services, advertising and e-commerce, market demand and acceptance of new and enhanced services, retention of existing subscribers and customers, the company's ability to attract new subscribers and customers, in particular, but not exclusively enterprise accounts, the company's ability to lead in its market segments, the company's ability to generate revenue growth and achieve and sustain profitability on an EBITDA or other basis, its ability to achieve and sustain positive cash flow on a continued basis, competition, economic conditions specific to the Internet, as well as general economic and market conditions which might be significantly impacted by the recent terrorist attacks on the U.S., 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		Six Months Ended
	September 30		September 30
	2001	2000	2001	2000
REVENUE
Subscription Revenue	5,272	$3,428	10,384	6,492
Advertising and E-Commerce	1,338	3,051	3,049	6,097
Licensing	841	888	1,766	1,412
CD-ROM and Print, net	111	151	468	379
Net Revenues	7,562	7,518	15,667	14,380
Cost of Revenues	2,658	3,648	5,616	6,263
Gross Profit	4,904	3,870	10,051	8,117
	65%	51%	64%	56%
EXPENSES
Product Development	1,171	717	1,474	1,341
Sales and Marketing	2,336	5,347	4,534	9,256
General and Administrative	4,291	3,710	7,522	6,565
Amortization Expenseand Impairment	11	856	6,225	856
Non-Cash Compensation	367	225	441	317
Total Expenses	8,176	10,855	20,196	18,335
Operating Loss	(3,272)	(6,985)	(10,145)	(10,218)
Interest Income	286	732	689	1,524
Interest Expense	(6)	(40)	(25)	(41)
Impairment of Strategic Investments	(1,572)	(695)	(2,509)	(695)
Net Loss	(4,564)	(6,988)	(11,990)	(9,430)
Basic and Diluted Net Loss per Share	($0.30)	($0.47)	($.78)	($.68)
Weighted Average Basic and Diluted Shares Outstanding	15,374,306	14,768,860	15,389,134	13,786,089
EBITDA, adjusted (Loss Before Interest, Depreciation, Goodwill and Intangible Amortization, Non-Cash Compensation and Loss on Investments)	($1,880)	($5,331)	($1,808)	($8,029)

Condensed Consolidated Balance Sheet (in thousands)

	September 30, 2001	March 31, 2001
ASSETS	(Unaudited)
Current Assets
Cash and Marketable Securities	$29,914	$30,533
Accounts Receivable	2,987	4,352
Inventory - Finished Goods	156	120
Other Current Assets	963	472
Total Current Assets	34,020	35,477
Fixed Assets	5,237	6,760
Goodwill and Intangible Assets	89	6,315
Other Non-Current Assets	76	2,610
TOTAL ASSETS	$39,422	$51,162
LIABILITIES
Current Liabilities
Accounts Payable and Commissions	$961	$1,834
Accrued Expenses	3,959	3,422
Notes Payable	-	1,015
Unearned Revenue	6,922	5,235
Total Current Liabilities	11,842	11,506
Other Liabilities	15	31
Total Liabilities	11,857	11,537
Common Stock	158	158
Paid-In Capital	95,919	95,535
Unearned Stock Compensation	(185)	(331)
Cumulative Translation Adjustment	(31)	(25)
Treasury Stock (at cost)	(1,201)	(606)
Retained Earnings (deficit)	(67,095)	(55,106)
Shareholders' Equity	27,565	39,625
TOTAL LIABILITIES & EQUITY	$39,422	$51,162

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