The Cobalt Group, a provider of e-business products and services to the automotive industry, today announced financial results for its first quarter, ended March 31, 2001.

Pro forma revenue for the first quarter of 2001 was $13.6 million, compared to $8.9 million in the first quarter of 2000. Pro forma revenue consists of reported revenues plus $1.3 million billed to DaimlerChrysler Corporation and accounted for as equity subscriptions. Reported revenue was $12.3 million, compared to $8.9 million in the first quarter of 2000.

"We are pleased with our results for the first quarter, particularly in the face of choppy economic conditions," said John Holt, president and CEO of The Cobalt Group. "During the quarter, we increased the number of auto dealer Web site clients using our e-business products from 8,500 to 8,950, and we continued to deepen key relationships with major auto manufacturers and NADA. Our growth demonstrates the automotive industry's continued adoption of the Internet as a cost-effective medium for reaching nearly two-thirds of its customers. This, paired with Cobalt's recurring revenue model and our commitment to execution, resulted in another solid quarter."

Net loss for the first quarter of 2001 was $7.5 million or $0.37 per share, ahead of First Call consensus estimates of $0.42. Pro forma net loss for the first quarter of 2001 was $7.5 million or $0.37 per share compared to pro forma net loss of $3.8 million or $0.22 per share in the first quarter of 2000.

Pro forma net loss and net loss per share amounts exclude gain on the sale of the company's YachtWorld.com division, the cumulative effects of changes in accounting principle and the $1.2 million non-cash charge related to the dissolution of the strategic agreement between the company and General Electric Capital Auto Financial Services Corporation (GE Capital) relating to the development and operation of the company's MotorPlace Auto Exchange wholesale used vehicle exchange.

Exceptional items during the quarter included the $1.2 million gain on the sale of YachtWorld.com upon receipt of $1.2 million in cash in final settlement of the obligation of Boats.com to Cobalt.

Also in the quarter, Cobalt and GE Capital reached agreement to dissolve the strategic agreement related to MotorPlace Auto Exchange, and Cobalt accelerated the amortization of warrants issued to GE Capital in connection with the agreement. GE Capital remains a strategic customer of Cobalt and MotorPlace Auto Exchange and Cobalt is now fully responsible for revenues and expenses related to MotorPlace Auto Exchange and has included the effects of this treatment in the current quarter and future estimates.

During the quarter, Cobalt secured a $10 million revolving credit facility from Silicon Valley Bank of Santa Clara, Calif. Without drawing on this facility, the company ended the quarter with $10.4 million in cash.

"The company believes that a helpful gauge of its ability to generate cash to fund operating and investment needs is earnings before interest, taxes, depreciation and amortization (EBITDA), with adjustments to include deferrals resulting from the company's implementation of Staff Accounting Bulletin No. 101 (SAB 101) and amounts billed to DaimlerChrysler for services that are accounted for as equity subscriptions," a company statement said.

For the first quarter of 2001, this adjusted EBITDA amount was a loss of $2.8 million, with the adjustment amounts consisting of SAB 101 deferrals of $1 million and DaimlerChrysler equity subscriptions of $1.3 million.

Business Outlook

"We are encouraged by the results of the first quarter," said David Snyder, executive vice president and CFO of The Cobalt Group. "Most of our metrics suggest that our operating performance is in line with our expectations. Additionally, we believe that we have managed our capital spending appropriately to accommodate the unanticipated cash requirements of Motorplace Auto Exchange. However, we caution our shareholders that significant uncertainty about the performance of both the general economy and the automotive industry makes forecasting even more difficult than usual."

According to the Cobalt Group, the following statements are based on current expectations. These statements are forward-looking and actual results may differ materially.

-- For the second quarter of 2001 the company expects revenues to be between $12.5 million and $13.5 million and pro forma revenues to be between $14 million and $15 million.

-- The company expects operating expenses in the second quarter of 2001 to be between 10 percent to 15 percent greater than operating expenses for the first quarter, excluding the $1.2 million non-cash charge relating to the dissolution of the GE Capital agreement. Cost of revenues for the second quarter of 2001 are expected to remain in the range of 18 percent to 22 percent of pro forma revenue, consistent with the first quarter. Based on these estimates, the company anticipates a loss per share of $0.45 to $0.50 in the second quarter.

-- The company expects loss per share for the year to be in the range of $1.45 to $1.50. Approximately $0.05 of this estimated loss is due to the assumption of 100 percent of the costs related to MotorPlace Auto Exchange, net of savings in other portions of the company's operations.

-- Annual sales and marketing expenses are expected to be 40 percent to 45 percent of pro forma revenues for the year 2001. The company further expects annual general and administrative expenses to be between 40 percent and 45 percent of pro forma revenues and annual product development expenses to be between 20 percent to 25 percent of pro forma revenues in 2001.

-- Included in annual forecasted operating expenses and cost of revenues for 2001 are non-cash charges of $4.4 million for amortization of intangible assets, $1.8 million in stock-based compensation, and $7 to $9 million in depreciation and other amortization.

-- For 2001, the company estimates SAB 101 deferrals will be between $1.5 million and $2 million and between $5.5 million and $6.5 million in amounts billed to DaimlerChrysler will be characterized as equity subscriptions.

-- The company expects adjusted EBITDA for 2001 to be a loss of between $7 million and $10 million.

"Cobalt makes these statements as of today and does not undertake any obligation to update them," a company statement said. "It is currently expected that these business outlook statements will not be updated until the release of Cobalt's next quarterly earnings announcement. Cobalt reserves the right to update the outlook on the occurrence of material events or for any other reason during the quarter."

First Quarter Highlights

-- During the quarter, the company expanded its partnership with the National Automobile Dealers Association (NADA). NADA endorsed five Cobalt e-business packages designed to help auto dealers manage their online businesses and strengthen customer relationships.

-- In late March, Cobalt and the Chrysler Group completed the launch of the Five Star dealer e-business program, which began rolling out nationwide last August. Cobalt provides e-business tools, customer relationship management capabilities, integrated Web sites, and best practices training to more than 2,200 Five Star dealers as part of the program.

-- In March, the company teamed with Dubuque Data Services (DDS) to provide more dealers with the ability to offer accurate, detailed and timely vehicle inventory listings to online car shoppers. With 350 dealers nationwide, DDS is an industry leader in providing integrated information management solutions to the automotive, medium/heavy truck, and equipment retailing marketplaces.

-- In late February, Cobalt hired Doug Beighle as vice president of account services, responsible for growing Cobalt's strategic auto manufacturer accounts, as well as working with the company's major auto dealer group clients. Beighle brings nearly 20 years of proven sales and service experience to Cobalt, having held executive positions at Request4Bid.com, Computech Systems Corporation, and Quebecor Integrated Media.

-- In February, Cobalt launched ChronicleCars.com for the Houston Chronicle, a Hearst newspaper. ChronicleCars.com provides consumers with direct online access to over 15,000 new and used vehicles from car dealers in the greater Houston area.

-- In early February, at the NADA Convention, Cobalt launched an all-new MotorPlace.com portal for the auto industry, making it the only full-service online resource for dealers. The new MotorPlace.com includes three online marketplaces, personalized dealer pages and extensive automotive and industry news coverage.

-- During February, Cobalt partnered with Respond and Edmunds.com, Inc. to launch Pick-or-Pass(TM). With Pick-or-Pass, dealers view customer lead information and pay for only those leads they want to pursue. Pick-or-Pass offers a low-cost alternative to online buying services that require expensive fixed subscription fees and provide no control over the type or quantity of leads dealers receive. Dealers access Pick-or-Pass and purchase leads through Cobalt's newly enhanced MotorPlace.com dealer portal.

-- In January, Cobalt announced an exclusive initiative with Volkswagen to help the auto manufacturer extend its online presence into Canada. Cobalt provides Volkswagen's 150 Canadian auto dealers with e-business marketing and reporting tools and custom Canadian French and English language branded Web sites. As part of the program, Volkswagen has stipulated that it will provide leads from the manufacturer site (www.vw.com) only to Cobalt-built dealer sites.

-- During January, the company released PartsVoice DirectLink, a new Internet-based product designed to make original equipment manufacturer parts inventory easily accessible on a dealer's Web site to anyone searching for parts. DirectLink allows wholesale parts purchasers and consumers to find and order parts on a dealer's Web site. The company launched two additional new e-business parts products in January, PartsVoice Discount Parts Locator and PartsVoice Idle Stock Relocator. The two products are designed work together to provide dealers with a cost-effective idle parts management solution, according to Cobalt.

About the Cobalt Group

The Cobalt Group(TM), headquartered in Seattle, is a provider of e-business products and services designed to help automotive dealers and manufacturers manage their businesses online.

Cobalt's suite of e-business solutions includes Web services, Web site hosting, e-commerce applications, Internet-based customer relationship management applications, data management, and best practices training and consulting.

Nearly half of the nation's auto dealers use Cobalt's technology, including approximately 8,950 Web services clients, and approximately 9,000 PartsVoice(R) (www.partsvoice.com) clients. Cobalt's e-business products and services are endorsed by 14 automotive manufacturers and more than 50 of the 100 largest dealer groups in the United States. Cobalt is the only e-business provider endorsed by the National Automobile Dealers Association (NADA).

Cobalt operates MotorPlace.com(TM) (www.MotorPlace.com), an online business management and industry information resource for auto dealers. At MotorPlace.com, dealers utilize Cobalt tools to manage their Web sites, buy wholesale used vehicles through MotorPlace Auto Exchange, locate and market OEM parts through PartsVoice, purchase leads through Pick-or-Pass, and access industry information, news, events, and stock quotes.

Cobalt also operates DealerNet(R) (www.dealernet.com), one of the most widely visited consumer automotive information portals on the Web. IntegraLink Corporation, a Cobalt company, is a provider of automotive data collection and reporting services to the automotive industry.

Cobalt has offices in Seattle, Wash.; Portland, Ore.; Detroit, Mich.; Columbus, Ohio; and Austin, Texas.

For more information, visit www.cobaltgroup.com or call 1-800-909-8244.

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