Another uninspired year from INFT. One wonders why - aside from the perks accorded to the management groups of public companies - they remain public. As of year end, the balance of the cash and marketable securities works out to $2.54 per share.
Inforte Corp. Announces 2006 and Fourth Quarter Results; Appointment of COO and CFO
Wednesday January 31, 4:05 pm ET
CHICAGO, Jan. 31 /PRNewswire-FirstCall/ -- Inforte Corp. (Nasdaq: INFT - News) announced today that revenue for the quarter ending December 31, 2006 was $10.7 million. Net revenue, which is revenue less reimbursements, was $10.0 million, above the high end of guidance of $9.8 million. Revenue for 2006 was $43.3 million and net revenue was $39.7 million, a 5 percent increase over 2005.
Stephen Mack, Inforte's chief executive officer and president, commented, "In 2006 we returned to revenue growth; in particular we are pleased with our SAP practice which grew more than 50 percent from last year. The fourth quarter marked the first quarter that revenue from SAP was more than 50 percent of the total company revenue."
We are also announcing that effective February 1, 2007, Inforte's current chief financial officer Nick Heyes will become Inforte's president and chief operating officer. Nick joined Inforte in 1999 as the executive vice president of consulting. He has 19 years of experience in the management consulting industry and performed in a number of senior consulting and operations roles before becoming Inforte's chief financial officer in 2003.
Stephen Mack further commented, "Nick will give us an intense focus on operational excellence and the execution of our strategy, both of which are paramount in 2007."
Nick will be replaced as chief financial officer by Bill Nurthen, who currently serves as Inforte's treasurer and vice president of finance. Bill joined Inforte in 1999 and has been instrumental in building many of the firm's financial processes and completing its two acquisitions.
Nick Heyes stated, "I am extremely pleased to be announcing Bill's promotion. He deserves this opportunity and recognition and I am confident that he will do a great job. I look forward to continuing to work closely with Bill in his new role."
As of December 31, 2006, Inforte made some significant decisions regarding Provansis LLC, a joint venture formed in 2005 of which Inforte owns 19 percent. The determination was made that Inforte's equity investment in Provansis LLC and loan to Provansis LLC are impaired. The following actions have been taken:
-- During the quarter Provansis LLC impaired a significant intangible asset; Inforte recorded its 19 percent share of this loss which was approximately $1.4 million.
-- After recording the loss related to the intangible asset, the remaining Provansis LLC equity investment of approximately $150,000 was written off.
-- A provision of $2.2 million was made for a loss on the note receivable from Provansis LLC. The tax impact of this provision was $800,000.
We reviewed our foreign tax assets and as a result of the Provansis related write-offs and other non-recurring items in the last three years which have driven overall tax losses, we have booked a valuation allowance of $1.1 million against the foreign tax assets.
There was no cash impact from any of these actions. The total non-cash expense associated with all of these actions was $5.7 million. Non-GAAP financials for the fourth quarter and 2006 are presented excluding this expense. Non-GAAP financials for 2005 exclude the expense of a capital restructuring in the first quarter of 2005.
Actual results for the quarter ending December 31, 2006, and fourth quarter financial highlights, are as follows:
-- Net revenue for the fourth quarter was $10.0 million, representing year-over-year growth of 4 percent.
-- SAP net revenue grew 22 percent sequentially, increasing from $4.4 million in the third quarter to $5.3 million in the fourth quarter.
-- Cash flow from operations was $709,000, continuing a trend of positive cash flow from operations over the last seven quarters.
-- As of December 31, 2006, cash and marketable securities were $30.2 million, an increase from $29.6 million at the end of the third quarter.
-- Diluted earnings per share (EPS) were negative 40 cents. Non-GAAP EPS were 1 cent which is within the guidance range.
-- Net loss for the quarter was $4.6 million. Non-GAAP net income was $80,000.
-- Days sales outstanding were 55, down from 61 in the fourth quarter last year.
-- At the end of the quarter there were 253 employees, of which 207 were billable. This compares to 258 total employees last quarter, of which 210 were billable.
-- Consultant utilization was 69 percent, the same as last quarter.
-- Annualized quarterly net revenue per consultant and net revenue per employee were $202,000 and $166,000 respectively.
-- There were 11,892,091 actual shares outstanding as of December 31, 2006.
Actual earnings results for the full year ending December 31, 2006, and financial highlights for fiscal year 2006, are as follows:
-- Revenue was $43.3 million compared to $41.6 million in 2005.
-- Net revenue was $39.7 million compared to $37.7 million in 2005, a 5 percent increase.
-- SAP revenue was $17.5 million up from $11.6 million in 2005, a 51 percent increase.
-- Customer analytics revenue was $3.9 million, a four-fold increase over 2005
-- Cash flow from operations was $2.4 million compared to $1.9 million in 2005. In addition cash flow from operations was significantly greater than non-GAAP earnings before interest, tax, depreciation and amortization of $1.4 million.
-- Net loss for the year was $3.6 million, compared to income of $536,000 in 2005.
-- Non-GAAP net income was $1.1 million for 2006 and compares to $1.3 million in 2005.
-- EPS was negative 31 cents in the year and compares to 5 cents in 2005.
-- On a non-GAAP basis EPS was 10 cents and compares to 12 cents in 2005.
-- Consultant utilization was 68 percent, compared to 65 percent in 2005.
-- Annualized quarterly net revenue per consultant and net revenue per employee were $211,000 and $171,000 respectively, the same as 2005.
Net revenue guidance for the first quarter of 2007 is set at a range of $8.8 million to $9.8 million and EPS guidance is set at a range of negative 7 cents to zero cents.
Non-GAAP supplemental information is provided to enhance the understanding of Inforte's financial performance and is reconciled to Inforte's GAAP information in the accompanying tables at the end of this press release. Inforte presents the non-GAAP financial measures to complement results provided in accordance with GAAP, as management believes these measures help illustrate underlying trends in our business and facilitate comparisons between quarters and years. Management uses these measures to establish budgets and operational goals that are communicated internally and externally, to manage our business and evaluate its performance, and to assess compensation for executives.
The non-GAAP supplemental information excludes the costs of a capital restructuring during the first quarter of 2005, which included an exchange of outstanding options for cash and restricted stock and the granting of additional common stock. It also excludes the costs of the write-off of the Provansis LLC intangible asset and investment and the provision taken on the loan in the fourth quarter of 2006. It also excludes the tax expense associated with provision on the loan and a valuation allowance against foreign tax credits. See footnote 1 to the Non-GAAP Supplemental Information and Inforte's SEC filings for more detail on the capital restructuring, footnote 2 to the Non-GAAP Supplemental Information for more detail on the Provansis LLC write-off and footnote 3 to the Non-GAAP Supplemental Information for more detail on the tax valuation allowances.
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ from forward-looking results for a number of reasons, including, but not limited to, Inforte's ability to: (i) effectively forecast demand and profitably match resources with demand; (ii) attract and retain clients and satisfy our clients' expectations; (iii) recruit and retain qualified professionals; (iv) accurately estimate the time and resources necessary for the delivery of our services; (v) build and maintain marketing relationships with leading software vendors while occasionally competing with their professional services organizations; (vi) compete with emerging alternative economic models for delivery, such as offshore development; (vii) integrate acquired businesses; (viii) grow new areas of its business, such as business intelligence and customer analytics; and (ix) identify and successfully offer the solutions that clients demand; as well as other factors discussed from time to time in our SEC filings.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. All forward-looking statements included in this document are made as of the date hereof, based on information available to Inforte on the date thereof, and Inforte assumes no obligation to update any forward-looking statements.
About Inforte Corp.
Inforte helps companies acquire, develop and retain profitable customers with a unique combination of strategic, analytic and technology deployment services. Our approach enables clients to improve their understanding of customer behavior; successfully apply this insight to customer interactions; and continually analyze and fine-tune their strategies and tactics. Founded in 1993, Inforte is headquartered in Chicago with offices in Atlanta; Dallas; Delhi, India; Hamburg, Germany; London; Los Angeles; San Francisco; and Washington, D.C. For more information, call 800.340.0200 or visit inforte.com .
CONTACT: kelly.richards@inforte.com , or ir@inforte.com .
Visit inforte.com to access the January 31, 2007, Investor Conference Call web cast, which begins at 4:30 p.m. Eastern.
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's, except per share data)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------------------------
2005 2006 2005 2006
----------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Revenues:
Revenue before
reimbursements
(net revenue) $9,558 $9,971 $37,718 $39,749
Reimbursements 1,017 730 3,929 3,577
---------- ---------- ---------- ----------
Total revenues 10,575 10,701 41,647 43,326
Cost of services:
Project personnel
and related
expenses 5,493 6,328 21,760 23,166
Reimbursed expenses 1,017 730 3,929 3,577
---------- ---------- ---------- ----------
Total cost of services 6,510 7,058 25,689 26,743
---------- ---------- ---------- ----------
Gross profit 4,065 3,643 15,958 16,583
Other operating expenses:
Sales and marketing 648 762 2,590 2,629
Recruiting, retention
and training 315 550 1,100 1,970
Management and
administrative 2,773 2,555 12,155 11,195
---------- ---------- ---------- ----------
Total other operating
expenses 3,736 3,867 15,845 15,794
---------- ---------- ---------- ----------
Operating income (loss) 329 (224) 113 789
Provision for loss on
note receivable
to affiliate - (2,201) - (2,201)
Loss on investment
in affiliate (67) (1,631) (143) (1,857)
Interest income,
net and other 247 427 918 1,465
---------- ---------- ---------- ----------
Income (loss) before
income tax 509 (3,629) 888 (1,804)
Income tax expense 202 982 352 1,756
---------- ---------- ---------- ----------
Net income (loss) $307 $(4,611) $536 $(3,560)
========== ========== ========== ==========
Earnings (loss) per share:
-Basic $0.03 ($0.40) $0.05 ($0.31)
-Diluted $0.03 ($0.40) $0.05 ($0.31)
Weighted average common
shares outstanding:
-Basic 11,260 11,419 11,222 11,369
-Diluted 11,477 11,419 11,504 11,369
Expenses as a percentage
of net revenue
Project personnel and
related expenses 57.5% 63.5% 57.7% 58.3%
Sales and marketing 6.8% 7.6% 6.9% 6.6%
Recruiting, retention,
and training 3.3% 5.5% 2.9% 5.0%
Management and
administrative 29.0% 25.6% 32.2% 28.2%
Income tax rate 39.6% -27.1% 39.6% -97.3%
Margins
Gross income 42.5% 36.5% 42.3% 41.7%
Operating income 3.4% -2.2% 0.3% 2.0%
Pretax income 5.3% -36.4% 2.4% -4.5%
Net income 3.2% -46.2% 1.4% -9.0%
Year-over-year change
Net revenue 4% 5%
Gross income -10% 4%
Operating income (loss) -168% 600%
Pretax income (loss) -812% -303%
Net income -1,598% -763%
Diluted EPS -1,433% -720%
NON-GAAP SUPPLEMENTAL INFORMATION (UNAUDITED) (1)(2)
STATEMENTS OF OPERATIONS
(000's, except per share data)
THREE THREE TWELVE TWELVE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER
31, 31, 31, 31,
2005 2006 2005 2006
----------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating income (loss) 329 (224) 113 789
Tender offer related charges - - 1,316 (1) -
------- ------- ----- -----
Non-GAAP operating
income (loss) 329 (224) 1,429 789
Reserve on note to affiliate - (2,201) - (2,201)
Loss on investment in
affiliate (67) (1,631) (143) (1,857)
Interest income, net and
other 247 427 918 1,465
Reserve on note to affiliate - 2,201 (2) - 2,201 (2)
Write-off of investment in
affiliate - 1,566 (2) - 1,566 (2)
------- ------- ----- -----
Non-GAAP income before
income tax 509 138 2,204 1,963
Non-GAAP income tax expense,
excluding tax effect of
tender offer costs 202 (1) - 873 (1) -
Non-GAAP income tax expense,
excluding tax valuation
allowances, and write-offs
related to affiliate - 58 (2)(3) - 832 (2)(3)
------- ------- ----- -----
Non-GAAP net income $307 $80 $1,331 $1,131
Non-GAAP earnings per share:
-Basic $0.03 $0.01 $0.12 $0.10
-Diluted $0.03 $0.01 $0.12 $0.10
Weighted average common
shares outstanding:
-Basic 11,260 11,419 11,222 11,370
-Diluted 11,477 11,751 11,504 11,838
Non-GAAP margins as a
percentage of net revenue:
Pretax income 5.3% 1.4% 5.8% 4.9%
Net income 3.2% 0.8% 3.5% 2.8%
(1) The non-GAAP supplemental information shows results excluding the
impact of the capital restructuring in the first quarter of 2005. The
total expense of $1,316 included: (i) $848 for charges related to the
exchange of stock options for cash; (ii) $378 for common stock grants
to employees who had chosen not to exercise options prior to the one-
time cash distribution; and (iii) $90 for professional services. Of
the total expense of $1,316, $292 was charged to Project personnel and
related expenses, $119 was charged to sales and marketing, $8 was
charged to recruiting, retention and training and $897 was charged to
the management and administrative line of the Consolidated Statement
of Operations. The non-GAAP supplemental information excludes the tax
effect of the above mentioned items. The non-GAAP results are provided
in order to enhance the user's overall understanding of the company's
current and future financial performance by excluding certain items
that management believes are not indicative of its core operating
results and by providing results that provide a more consistent basis
for comparison between quarters. The presentation of this additional
information should not be considered in isolation or as a substitute
for results prepared in accordance with accounting principles
generally accepted in the United States of America.
(2) The non-GAAP supplemental information shows results excluding the
impact of non-operating losses from Provansis LLC, an unconsolidated
subsidiary, in the fourth quarter of 2006. The total non-operating
loss of $3,767 included: (i) $2,201 for a provision for loss on a note
receivable from Provansis LLC; (ii) $1,416 for loss associated with a
write-off of an intangible asset on Provansis LLC's books; and (iii)
$150 for a write-off of the remaining investment balance in Provansis
LLC on Inforte's Balance Sheet. The non-GAAP supplemental information
excludes the tax effect of the above mentioned items. The non-GAAP
results are provided in order to enhance the user's overall
understanding of the company's current and future financial
performance by excluding certain items that management believes are
not indicative of its core operating results and by providing results
that provide a more consistent basis for comparison between quarters.
The presentation of this additional information should not be
considered in isolation or as a substitute for results prepared in
accordance with accounting principles generally accepted in the United
States of America.
(3) The non-GAAP supplemental information shows results excluding the
impact of tax valuation allowances against the deferred tax assets
related to foreign tax credits and deferred tax assets related to the
provision for loss on the note receivable from Provansis LLC. The
total tax valuation allowance of $1,968 included:(i) $1,126 against
unrealizable foreign tax credits based on current projections; and
(ii) $842 against the deferred tax assets generated by the loss
associated with the note receivable to Provansis LLC. The non-GAAP
supplemental information excludes the tax effect of the above
mentioned items. The non-GAAP results are provided in order to enhance
the user's overall understanding of the company's current and future
financial performance by excluding certain items that management
believes are not indicative of its core operating results and by
providing results that provide a more consistent basis for comparison
between quarters. The presentation of this additional information
should not be considered in isolation or as a substitute for results
prepared in accordance with accounting principles generally accepted
in the United States of America.
INFORTE CORP.
CONSOLIDATED BALANCE SHEETS
(000's)
DEC 31, MAR 31, JUNE 30, SEPT 30, DEC 31,
2005 2006 2006 2006 2006
------- -------- -------- -------- -------
(Unaudited) (Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash
equivalents $10,353 $12,217 $10,569 $13,583 $15,100
Short-term
marketable
securities 22,591 17,844 19,266 16,037 15,070
Accounts
receivable 8,460 8,078 7,683 7,453 7,554
Allowance for
doubtful
accounts (400) (400) (400) (400) (400)
-------- -------- -------- -------- --------
Accounts receivable,
net 8,060 7,678 7,283 7,053 7,154
Note receivable
from affiliate 684 1,122 1,537 1,784 -
Prepaid expenses
and other
current assets 1,023 1,211 1,147 895 780
Interest receivable
on investment
securities 199 164 133 125 103
Deferred income
taxes 484 371 351 371 388
Income taxes
recoverable 124 124 13 - -
-------- -------- -------- -------- --------
Total current
assets 43,518 40,731 40,299 39,848 38,595
Computers, purchased
software and
property 1,862 1,865 2,303 2,324 2,524
Less accumulated
depreciation and
amortization 881 805 893 955 1,141
-------- -------- -------- -------- --------
Computers, purchased
software and
property, net 981 1,060 1,410 1,369 1,383
Long-term marketable
securities - - - - -
Intangible assets 42 27 14 7 -
Goodwill 15,238 15,238 15,126 15,118 15,182
Deferred income
taxes 2,758 2,754 2,748 2,786 1,891
Investment in
affiliate 1,857 1,783 1,721 1,631 -
-------- -------- -------- -------- --------
Total assets $64,394 $61,593 $61,318 $60,759 $57,051
======== ======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $357 $406 $1,152 $458 $451
Income taxes
payable 920 992 306 320 289
Accrued expenses 3,595 3,850 3,195 3,349 3,643
Accrued loss on
disposal of
leased property 845 635 486 408 353
Current portion of
deferred acquisition
payment 3,650 500 500 500 500
Deferred revenue 1,679 1,456 1,197 944 1,142
-------- -------- -------- -------- --------
Total current
liabilities 11,046 7,839 6,836 5,979 6,378
Non current
liabilities:
Non-current portion
of deferred
acquisition
payment 1,500 1,500 1,500 1,000 1,000
Stockholders' equity:
Common stock, $0.001
par value authorized-
50,000,000 shares;
issued and
outstanding (net of
treasury stock)-
11,829,091 as
of Dec. 31, 2006 13 12 12 12 12
Additional paid-in
capital 75,469 75,461 75,487 75,795 75,888
Cost of common
stock in treasury
(2,720,823 shares as
of Dec. 31,
2006) (24,997) (24,997) (24,997) (24,997) (24,997)
Retained earnings 1,307 1,636 2,056 2,358 (2,253)
Accumulated other
comprehensive
income 56 142 424 612 1,023
-------- -------- -------- -------- --------
Total
stockholders'
equity 51,848 52,254 52,982 53,780 49,673
-------- -------- -------- -------- --------
Total
liabilities
and
stockholders'
equity $64,394 $61,593 $61,318 $60,759 $57,051
======== ======== ======== ======== ========
Total cash and
marketable
securities $32,944 $30,061 $29,835 $29,620 $30,170
INFORTE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------------------------------
2005 2006 2005 2006
--------- -------- --------- --------
(Unaudited) (Unaudited)
Cash flows from
operating activities
Net income (loss) $307 $(4,611) $536 $(3,560)
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and
amortization 253 195 1,232 893
Loss on investment in
affiliate 67 1,631 143 1,857
Reserve on note to affiliate - 2,201 - 2,201
Stock-based compensation 254 161 1,084 358
Deferred income taxes (528) 877 (297) 931
Changes in operating assets
and liabilities
Accounts receivable 197 (101) (909) 906
Prepaid expenses and other
current assets 38 76 30 177
Unbilled revenue - - 463 -
Accounts payable (309) 6 (730) 84
Income taxes 655 (169) 512 (475)
Accrued expenses and other
current assets 322 245 (202) (438)
Deferred revenue 595 198 12 (537)
-------- -------- -------- --------
Net cash provided by
operating activities 1,851 709 1,874 2,397
Cash flows from investing
activities
Acquisitions, net of
cash - - (5,327) (3,542)
Note receivable from
affiliate (245) (355) (670) (1,356)
Investment in affiliate - - (2,000) -
Decrease in marketable
securities (3,153) 1,124 13,562 7,593
Purchases of property and
equipment (143) (256) (421) (1,218)
-------- -------- -------- --------
Net cash provided by
(used in) investing
activities (3,541) 513 5,144 1,477
Cash flows from financing
activities
Proceeds from stock
option and purchase plans 31 - 233 -
Dividends - - (17,375) -
-------- --------- -------- --------
Net cash provided by
(used in) financing
activities 31 - (17,142) -
-------- --------- -------- --------
Effect of changes in
exchange rates on cash (95) 295 (340) 873
Increase (decrease) in
cash and cash equivalents (1,754) 1,517 (10,464) 4,747
Cash and cash equivalents,
beg. of period 12,107 13,583 20,817 10,353
-------- -------- -------- --------
Cash and cash equivalents,
end of period $10,353 $15,100 $10,353 $15,100
======== ======== ======== ========
--------------------------------------------------------------------------------
Source: Inforte Corp.
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