InfoSpace Announces Record Fourth Quarter Net Income
January 27, 2004 4:39:00 PM ET
InfoSpace, Inc. INSP today announced financial results for the fourth quarter and full year ended December 31, 2003.
Revenues for the fourth quarter of 2003 were $46.9 million, reflecting a $10.7 million (or 30%) increase over the fourth quarter of 2002. In accordance with Generally Accepted Accounting Principles (GAAP), net income for the fourth quarter of 2003 was $9.9 million, or $0.31 per basic and $0.29 per diluted share, versus a net loss of $64.4 million, or $2.09 per basic and diluted share in the fourth quarter of 2002.
Revenues for the full year 2003 were $160.1 million, reflecting a $23.9 million (or 18%) increase over the full year 2002. In accordance with GAAP, net loss for 2003 was $6.3 million, or $0.20 per basic and diluted share, versus a net loss of $345.3 million, or $11.26 per basic and diluted share in 2002.
Cash, cash equivalents, and marketable investments at December 31, 2003 totaled $300.5 million, reflecting an increase of $24.3 million from December 31, 2002. The Company had no debt obligations at the end of the year.
"Our strong fourth quarter and full year 2003 results reflect the dedication of our employees during this transition year," said Jim Voelker, chairman and chief executive officer of InfoSpace, Inc. "During 2003, we narrowed our strategic focus, restructured our operations, improved our service offerings and achieved quarterly profitability for the first time since 1999. We will build on this foundation throughout 2004."
Fourth Quarter Highlights and Recent Developments
-- Dogpile received high honors in PC World's "Web Stars: Best of the Web" feature published in the February 2004 issue of the magazine. The Dogpile Toolbar took top honors in the Browser Toolbar Plug-Ins category to win the "PC World Best Bet Award" in that category. Additionally, Dogpile was the first runner-up in the Search Engines category, behind Google.
-- The Company completed the acquisition of North American mobile media leader Moviso LLC from Vivendi Universal Net USA Group, Inc. for $25 million in cash. Together, InfoSpace and Moviso create one of the largest players in the North American wireless data industry, with extensive content offerings, strong carrier relationships and broad subscriber reach.
-- As part of its sharpened strategic focus, the Company is exploring strategic alternatives for its Payment Solutions business. InfoSpace has engaged Thomas Weisel Partners to assist in this process. The Company's Payment Solutions business was recently validated as compliant with the Visa Cardholder Information Security Program (CISP).
Segment Information
Segment income for each reportable operating segment does not include allocations for general, administrative and other overhead costs, depreciation and amortization expense, restructuring and other charges and non-operating gains or losses.
Search and Directory
Search and Directory revenues were $28.3 million in the fourth quarter of 2003, an increase of $9.2 million (or 48%) from the fourth quarter of 2002. The revenue increase is primarily due to growth in the number of paid searches coming from our distribution partners and greater revenue per search. Total paid searches in North America during the quarter, including both Search and Directory, were approximately 155 million, generating average revenue per paid search of approximately $0.15. Search and Directory segment income was $12.5 million or 44% of revenues for the fourth quarter of 2003.
For the full year 2003, Search and Directory revenues were $93.9 million, an increase of $25.4 million (or 37%) from full year 2002. Segment income for 2003 was $48.7 million, an increase of 33% from the $36.7 million in Search and Directory segment income reported for 2002.
Mobile
Mobile revenues were $9.3 million in the fourth quarter of 2003, an increase of $2.6 million (or 40%) from the fourth quarter of 2002. The increase in revenue is primarily a result of revenues attributable to Moviso's operations. Moviso's financial results are consolidated beginning November 27, 2003. Mobile segment income totaled $3.3 million or 36% of revenues for the fourth quarter of 2003.
For the full year 2003, Mobile revenues were $27.9 million, a decrease of $1.3 million (or 4%) from the full year 2002. Segment income for 2003 was $6.8 million versus a loss of $2.2 million in 2002.
Payment Solutions
Payment Solutions revenues were $7.8 million in the fourth quarter of 2003, an increase of $1.9 million (or 33%) from the fourth quarter of 2002. The revenue increase is primarily due to growth in the number of credit card merchants using the Authorize.Net(R) service and an increase in the number of transactions, in part from the holiday shopping season. At the end of the fourth quarter, approximately 91,000 active gateway merchants were using the Authorize.Net service, generating an average of approximately $24.30 in monthly revenue per active merchant. Payment Solutions segment income totaled $2.8 million or 35% of revenues for the fourth quarter of 2003.
For the full year 2003, Payment Solutions revenues were $27.8 million, an increase of $6.7 million (or 31%) from full year 2002. Segment income for 2003 was $6.9 million, an increase of 293% from the $1.8 million in Payment Solutions segment income reported for 2002.
Other Items
In the fourth quarter of 2003, the Company recorded a net gain of $3.8 million which included a gain from the sale of certain non-core services and a gain from a research & development tax credit. During the quarter, the Company also recorded $1.2 million of restructuring charges relating to excess facilities and employee separation costs from a workforce reduction.
Outlook
The Company's guidance excludes the potential impact of any one-time gains or losses, and includes operating results from Payment Solutions. However, in the fourth quarter of 2003 the Company began exploring strategic alternatives for its Payment Solutions group. This process is ongoing and the timing and outcome are uncertain.
First Quarter 2004 Outlook
For the first quarter of 2004, the Company expects revenue to be between $44.0 million and $47.0 million and net income to be between $3.0 million and $5.0 million.
Full Year 2004 Outlook
For the full year 2004, the Company expects revenue to be between $195.0 million and $205.0 million, comprised of $120.0 million to $125.0 million in Search and Directory revenue, $43.0 million to $46.0 million in Mobile revenue, and $32.0 million to $34.0 million in Payment Solutions revenue. The Company expects net income to be between $21.0 million and $26.0 million for full year 2004.
A conference call will be Webcast live today at 2 p.m. Pacific Time/5 p.m. Eastern and can be accessed in the Investor Relations section of the InfoSpace corporate Web site at www.infospaceinc.com. A replay of the call will be available approximately one hour after the call until Thursday, February 5th, 2004 at 10 p.m. Pacific Time.
All information in this release is as of January 27, 2004. InfoSpace undertakes no duty to update any forward-looking statements to actual results or changes in the Company's expectations.
About InfoSpace, Inc.
InfoSpace, Inc. INSP is a diversified technology and services company that develops Internet and wireless solutions for a wide range of customers. InfoSpace Search & Directory provides Web search and online directory products that help users find the information they need while creating opportunities for merchants. InfoSpace Mobile develops infrastructure, tools and applications that enable carriers and content providers to efficiently develop and deliver mobile data services across multiple devices. InfoSpace Payment Solutions enables merchants to authorize, settle and manage electronic transactions via its IP-based payment gateway, Authorize.Net. More information can be found at infospaceinc.com.
This release contains forward-looking statements relating to the development of InfoSpace, Inc.'s products and services and future operating results that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Forward-looking statements include without limitation statements regarding the expected results of the Company's strategic plan and efforts to achieve long-term sustainable growth, the Company's plan to explore strategic alternatives for Payment Solutions and projected consolidated revenue and net income for the Company for the first quarter and full year 2004 and projected revenue for the Company's Search and Directory, Mobile and Payments Solutions units for 2004. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect InfoSpace's actual results include the progress and costs of the development of our products and services, the timing and extent of market acceptance of those products and services, our dependence on companies to distribute our products and services, the ability to successfully integrate acquired businesses and the successful execution of the Company's strategic initiatives. A more detailed description of certain factors that could affect actual results include, but are not limited to, those discussed in InfoSpace's most recent Quarterly Report on Form 10-Q, in the section entitled "Factors Affecting Our Operating Results, Business Prospects and Market Price of Stock." Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. InfoSpace undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
InfoSpace, Inc.
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
Three months ended Year ended
December 31, December 31,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $ 46,854 $ 36,161 $ 160,054 $ 136,142
Operating expenses:
Cost of revenues 7,337 8,736 29,256 36,781
Product development 5,616 7,880 23,674 35,195
Sales, general and
administrative 24,837 20,251 86,284 89,602
Impairment of
intangible assets(A) - 4,807 1,151 20,281
Impairment of
goodwill(B) - 56,104 - 56,104
Amortization of
other intangible
assets 1,952 2,091 6,819 16,875
Other, net(C) (3,812) 3,346 3,029 4,167
Restructuring
charges(D) 1,220 758 11,722 1,814
---------- ---------- ---------- ----------
Total operating
expenses 37,150 103,973 161,935 260,819
---------- ---------- ---------- ----------
Income (loss) from
operations 9,704 (67,812) (1,881) (124,677)
Gain (loss) on
equity investments(E) (57) 1,848 (11,997) (20,940)
Other income, net(F) 771 1,651 8,435 7,416
---------- ---------- ---------- ----------
Income (loss)
before income tax
expense and
cumulative effect
of change in
accounting
principle 10,418 (64,313) (5,443) (138,201)
Income tax expense (530) (97) (876) (430)
---------- ---------- ---------- ----------
Loss before
cumulative effect
of change in
accounting
principle 9,888 (64,410) (6,319) (138,631)
Cumulative effect of
change in accounting
principle(B) - - - (206,619)
---------- ---------- ---------- ----------
Net income (loss) $ 9,888 $ (64,410) $ (6,319) $ (345,250)
========== ========== ========== ==========
Basic net income
(loss) per share(G) $ 0.31 $ (2.09) $ (0.20) $ (11.26)
Diluted net income
(loss) per share(G) $ 0.29 $ (2.09) $ (0.20) $ (11.26)
Shares used in
computing basic net
income (loss) per
share(G) 31,456 30,781 31,232 30,656
Shares used in
computing diluted net
income (loss) per
share(G) 34,692 30,781 31,232 30,656
(A) During the years ended December 31, 2003 and 2002, the Company
recorded impairment charges primarily related to obsolescence of core
technology previously acquired in certain business acquisitions.
(B) During the year ended December 31, 2002, the Company recorded
goodwill impairment charges, initially related to the cumulative
effect upon the adoption of a new accounting principle and
subsequently in the fourth quarter of 2002 as part of its annual
evaluation of the carrying value of its goodwill.
(C) During the fourth quarter of 2003, the Company recorded a net gain
in Other, net, primarily comprised of a gain related to the sale of
its remaining non-core services and an R&D tax credit. For the year
ended December 31, 2003, in addition to the above items, Other, net,
is primarily comprised of gains related to the sale of its non-core
services and R&D tax credits, which is offset by settlements related
to its Mobile and Payment Solutions businesses and a charge, which
included interest and penalties, related to a settlement agreement
with the Internal Revenue Services regarding certain aspects of the
audit of its payroll tax returns for the year 2000. During the year
ended December 31, 2002, the Company recorded charges for a
litigation settlement and a full allowance related to a note
receivable with a former executive of the Company.
(D) During the years ended December 31, 2003 and 2002, the Company
recorded restructuring charges, which included employee separation
costs and excess facilities charges. Additionally, the restructuring
charges during the year ended December 31, 2002 included costs related
to the closure of certain foreign operations.
(E) During the years ended December 31, 2003 and 2002, the net loss
from equity investments includes gains and losses from the sale of a
portion of the Company's equity investments and impairment charges
related to certain equity investments in public and privately-held
companies.
(F) Other income primarily consists of interest income for the periods
presented, except for the year ended December 31, 2003, in which the
Company recognized a $4.1 million gain from a litigation settlement.
(G) All shares presented reflect the one-for-ten reverse stock split
of all outstanding shares of common stock, which was effective
September 13, 2002. Basic earnings per share is computed using the
weighted average number of common shares outstanding during the
period. Diluted earnings per share is computed using the weighted
average number of common and potentially dilutive shares outstanding
during the period. Potentially dilutive shares are excluded from the
computation of earnings per share if their effect is antidilutive.
InfoSpace, Inc.
Consolidated Balance Sheets
(Amounts in thousands)
December 31, December 31,
2003 2002
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 229,045 $ 136,672
Short-term investments, available-for-
sale 71,465 138,895
Accounts receivable, net 26,543 21,027
Notes and other receivables, net 4,524 6,442
Payroll tax receivable 13,214 13,214
Prepaid expenses and other current assets 3,564 2,921
----------- -----------
Total current assets 348,355 319,171
Long-term investments, available-for-sale - 651
Property and equipment, net 15,416 26,252
Other investments 1,396 25,836
Goodwill 106,236 97,844
Other intangible assets, net 20,144 10,983
Other long-term assets 768 659
----------- -----------
Total assets $ 492,315 $ 481,396
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,588 $ 4,688
Funds due to merchants 5,011 2,516
Accrued expenses and other current
liabilities 30,897 15,570
Deferred revenue 5,212 9,169
----------- -----------
Total current liabilities 45,708 31,943
Long-term liabilities:
Long-term deferred revenue 75 1,317
----------- -----------
Total liabilities 45,783 33,260
Stockholders' equity:
Preferred stock - -
Common stock 3 3
Additional paid-in capital 1,707,617 1,704,123
Accumulated deficit (1,262,294) (1,255,975)
Deferred expense - warrants - (39)
Unearned compensation - restricted stock - (543)
Accumulated other comprehensive income 1,206 567
----------- -----------
Total stockholders' equity 446,532 448,136
----------- -----------
Total liabilities and stockholders' equity $ 492,315 $ 481,396
=========== ===========
Summary of cash and marketable investments:
Cash and cash equivalents $ 229,045 $ 136,672
Short-term investments, available-for-
sale 71,465 138,895
Long-term investments, available-for-sale - 651
----------- -----------
Total cash and marketable investments $ 300,510 $ 276,218
=========== ===========
InfoSpace, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
Year ended December 31,
2003 2002
(unaudited) (unaudited)
----------- ------------
Operating Activities:
Net loss $ (6,319) $ (345,250)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Depreciation and amortization 18,965 35,939
Impairment of goodwill and other
intangible assets 1,151 76,385
Warrant and stock-related revenue (135) (2,442)
Warrant and stock-based compensation
expense 360 6,722
Tax benefit from exercise of stock
options 100 -
Bad debt recoveries (1,174) (833)
Loss on equity investments 11,997 20,940
Other 418 4,306
Gain on sale of non-core services (6,432) -
Asset impairment restructuring charge 2,059 1,327
Cumulative effect of change in
accounting principle - 206,619
Cash provided (used) by changes in
operating assets and liabilities:
Accounts receivable 477 (3,756)
Notes and other receivables 2,125 2,280
Prepaid expenses and other current
assets (482) 4,652
Other long-term assets (109) 744
Accounts payable (422) (4,451)
Funds due to merchants 2,495 2,516
Accrued expenses and other current
liabilities 13,558 (10,236)
Deferred revenue (3,116) (6,258)
---------- -----------
Net cash provided (used) by operating
activities 35,516 (10,796)
Investing Activities:
Business acquisitions (29,075) (2,430)
Purchase of intangible assets (55) (100)
Notes receivable - 1,955
Purchases of property and equipment (3,330) (5,806)
Proceeds from the sale of non-core
services 5,620 -
Proceeds from the sale of equity
investments 12,454 -
Short-term investments, net 66,976 (58,576)
Long-term investments, net 651 92,929
---------- -----------
Net cash provided by investing activities 53,241 27,972
Financing activities:
Proceeds from exercise of stock options 2,710 769
Proceeds from issuance of stock through
employee stock purchase plan 906 166
---------- -----------
Net cash provided by financing activities 3,616 935
---------- -----------
Net increase in cash and cash equivalents 92,373 18,111
Cash and cash equivalents:
Beginning of period 136,672 118,561
---------- -----------
End of period $ 229,045 $ 136,672
========== ===========
InfoSpace, Inc
Segment Information
(Amounts in thousands)
Three Three
Months Months Year Year
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2003 2002 2003 2002
---------- ---------- ----------- ----------
Search & Directory
Revenue $ 28,342 $ 19,175 $ 93,893 $ 68,534
Operating expense 15,880 7,860 45,217 31,875
--------- --------- --------- ---------
Segment income(1) 12,462 11,315 48,676 36,659
Segment margin 44.0% 59.0% 51.8% 53.5%
Mobile
Revenue 9,280 6,652 27,929 29,207
Operating expense 5,945 6,211 21,089 31,426
--------- --------- --------- ---------
Segment income(1) 3,335 441 6,840 (2,219)
Segment margin 35.9% 6.6% 24.5% -7.6%
Payment Solutions
Revenue 7,826 5,888 27,825 21,170
Operating expense 5,066 5,277 20,889 19,404
--------- --------- --------- ---------
Segment income(1) 2,760 611 6,936 1,766
Segment margin 35.3% 10.4% 24.9% 8.3%
Non-Core Services
Revenue 1,406 4,446 10,407 17,231
Operating expense 732 2,309 5,630 8,761
--------- --------- --------- ---------
Income(1) 674 2,137 4,777 8,470
Total
Total segment revenue 46,854 36,161 160,054 136,142
Total segment operating
expense 27,623 21,657 92,825 91,466
--------- --------- --------- ---------
Total segment income(1) 19,231 14,504 67,229 44,676
Total segment margin 41.0% 40.1% 42.0% 32.8%
Corporate
Operating expense 7,888 10,774 34,243 51,047
Depreciation 2,279 4,436 12,146 19,065
Impairment of goodwill
and other intangible
assets - 60,911 1,151 76,385
Amortization of other
intangible assets 1,952 2,091 6,819 16,875
Other, net (3,812) 3,346 3,029 4,167
Restructuring charges 1,220 758 11,722 1,814
Loss (gain) on
investments, net 57 (1,848) 11,997 20,940
Other income, net (771) (1,651) (8,435) (7,416)
Income tax expense 530 97 876 430
Cumulative effect of
change in accounting
principle - - - 206,619
--------- --------- --------- ---------
9,343 78,914 73,548 389,926
--------- --------- --------- ---------
Total Consolidated Net
Income (Loss) $ 9,888 $ (64,410) $ (6,319) $(345,250)
========= ========= ========= =========
For each of the business segments (Search & Directory, Mobile and
Payment Solutions), the financial information above is presented to
the Company's chief operating decision maker.
(1) Amounts exclude depreciation, amortization and allocation of
corporate expenses.
Contact Information: InfoSpace, Inc. Nancy Bacchieri, 425-201-8722 nancy.bacchieri@infospace.com
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