InfoSpace Announces Record Fourth Quarter and Full Year 2004 Results (stock up over 5 bucks in after hours)
January 25, 2005 4:17:00 PM ET
InfoSpace, Inc. INSP today announced financial results for the fourth quarter and full year ended December 31, 2004.
Revenues for the fourth quarter of 2004 were $79.7 million, reflecting a $40.6 million (or 104%) increase over the fourth quarter of 2003. Net income for the fourth quarter of 2004 was $18.9 million, or $0.50 per diluted share, versus net income of $9.9 million, or $0.29 per diluted share, in the fourth quarter of 2003.
Revenues for the full year 2004 were $249.4 million, reflecting a $117.1 million (or 89%) increase over the full year 2003. Net income for 2004, which includes the gain from the sale of its Payment Solutions business, was $82.4 million, or $2.26 per diluted share, versus a net loss of $6.3 million, or $0.20 per diluted share in 2003. Excluding the sale of Payment Solutions, income from continuing operations for 2004 was $51.0 million, or $1.40 per diluted share, versus a loss from continuing operations of $9.1 million, or $0.29 per diluted share, in 2003.
Cash, cash equivalents, and marketable investments at December 31, 2004, totaled $321.8 million, reflecting an increase of $26.5 million from December 31, 2003. The Company had no debt obligations at the end of the year.
"The fourth quarter of 2004 continued our trend of strong growth and profitability," said Jim Voelker, chairman and chief executive officer of InfoSpace, Inc. "Throughout the year, we improved our market position with strategic acquisitions, broader distribution and new partnerships. We enter 2005 with operating momentum, attractive opportunities and the resources to capitalize on them."
2004 Highlights and Recent Developments
-- Directory acquisition: InfoSpace acquired Switchboard Inc., a leading provider of local online advertising solutions and internet-based yellow pages, for approximately $109 million in cash. The acquisition nearly doubled the Company's share of total online yellow pages searches. Additionally, InfoSpace signed an agreement with Dex Media to add its yellow pages listings to Switchboard results.
-- Mobile acquisitions: InfoSpace acquired three mobile gaming companies - Atlas Mobile, IOMO Limited and Elkware GmbH, for an aggregate cost of approximately $47 million in cash. The companies provide InfoSpace with a large portfolio of high quality J2ME and BREW gaming titles, core development and publishing capabilities, and distribution relationships with major mobile operators and handset manufacturers in North America and Europe, including Vodafone, O2, Orange, T-Mobile, Telefonica Moviles, 3, TIM, Nokia, Siemens and Motorola.
-- Sale of Payment Solutions: InfoSpace narrowed its focus to two businesses in 2004 after successfully completing the sale of its Payment Solutions business in March 2004 for $82 million in cash.
-- Settlement agreement: InfoSpace reached a combined Settlement Agreement in the Dreiling v. Jain, et al. derivative lawsuit, the Dreiling v. Jain, et. al. Section 16(b) case, and certain other lawsuits involving the Company. Pending final court approval, the Settlement Agreement contemplates (among other consideration) a cash payment to the Company of approximately $83 million, including insurance proceeds.
Segment Information and Adjusted EBITDA
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 & Directory
Search & Directory revenues were $47.2 million in the fourth quarter of 2004, an increase of $18.8 million or 66% from the fourth quarter of 2003. During the fourth quarter, total paid searches in North America for both Search and Directory were approximately 205 million, an increase of 32% from the prior year fourth quarter. Average revenue per paid search was approximately $0.19, an increase of 27% over the prior year fourth quarter. Search & Directory segment income was $21.7 million or 46% of revenues for the fourth quarter of 2004.
Mobile
Mobile revenues were $32.5 million in the fourth quarter of 2004, an increase of $23.2 million or 250% from the fourth quarter of 2003. The increase in revenue is due primarily to growth in the Company's media download business. Mobile segment income totaled $8.1 million or 25% of revenues for the fourth quarter of 2004.
Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization ("Adjusted EBITDA")
Adjusted EBITDA was $21.7 million in the fourth quarter of 2004, an increase of $4.6 million or 27% from the third quarter of 2004. The Adjusted EBITDA results should be evaluated in the light of the Company's financial results prepared in accordance with GAAP. A table reconciling the Company's Adjusted EBITDA to income from continuing operations in accordance with GAAP is included in a table accompanying the condensed consolidated financial statements in this release. InfoSpace's Adjusted EBITDA results are calculated by adjusting income from continuing operations in accordance with GAAP to exclude the effects of interest income, income taxes, depreciation & amortization, litigation settlements, foreign currency gains or losses, and gains or losses from the disposal of assets, as detailed in the accompanying table to the condensed consolidated financial statements.
Outlook
The Company's guidance excludes the impact of stock option expense, litigation settlements and any other future one-time gains or losses. The Adjusted EBITDA guidance below has been prepared in a manner consistent with the historical Adjusted EBITDA data provided above and the table accompanying the financial statements in this release. The 2005 guidance includes an estimate of $14 million of increased expense, or $0.35 per share, consisting of a $10 million increase in non-cash depreciation and amortization expense primarily from the recent Mobile acquisitions and a $4 million increase in tax expense (see accompanying guidance reconciliation table).
First Quarter 2005 Outlook
For the first quarter of 2005, the Company expects revenue to be between $84 million and $86 million. The Company expects that Adjusted EBITDA will be between $19 million and $20 million, net income to be between $13.0 million and $13.5 million, and fully diluted earnings per share to be between $0.34 and $0.35 (based on 38.5 million fully diluted shares). First quarter guidance includes an estimate of $3.5 million of increased expense, or $0.09 per share, consisting of a $2.5 million increase in non-cash depreciation and amortization expense primarily from the recent Mobile acquisitions and a $1 million increase in tax expense (see accompanying guidance reconciliation table).
Full Year 2005 Outlook
For full year 2005, the Company expects revenue to be between $375 million and $395 million, comprised of $200 million to $210 million in Search & Directory revenue, and $175 million to $185 million in Mobile revenue. The Company expects that Adjusted EBITDA will be between $92 and $100 million, net income to be between $67 million and $75 million, and fully diluted earnings per share to be between $1.75 and $1.95 (based on 38.5 million fully diluted shares). The 2005 guidance includes an estimate of $14 million of increased expense, or $0.35 per share, consisting of a $10 million increase in non-cash depreciation and amortization expense primarily from the recent Mobile acquisitions and a $4 million increase in tax expense (see accompanying guidance reconciliation table).
A conference call will be held today at 2 p.m. Pacific/ 5 p.m. Eastern. The live Webcast can be accessed in the Investor Relations section of the InfoSpace corporate Web site, at infospaceinc.com. A replay of the call will be available approximately one hour after the call through February 8, 2005 at 7:30 p.m. Pacific/ 10:30 p.m. Eastern.
All information in this release is as of January 25, 2005. 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 provides content and applications that enable carriers and content providers to efficiently develop and deliver mobile data services across multiple devices. More information can be found at infospaceinc.com.
This release contains forward-looking statements relating to 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 projected results of the Company's strategic plan and efforts to achieve long-term sustainable growth; projected financial performance for the Company for the first quarter and full year 2005; and projected segment revenue for Search & Directory and Mobile for full year 2005. 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 general economic, industry and market sector conditions, 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
(Unaudited)
(Amounts in thousands, except per share data)
Three months Year
ended ended
----------------- -------------------
December December December December
31, 31, 31, 31,
2004 (1) 2003 2004 (1) 2003
-------- -------- --------- ---------
Revenues $79,674 $39,030 $249,354 $132,230
Operating expenses(2):
Content and distribution costs 32,654 11,312 92,688 27,583
Systems and network operations 3,691 2,584 14,220 10,988
Product development 6,688 4,171 23,142 17,781
Sales and marketing 6,733 4,832 23,486 17,487
General and administrative 8,291 7,849 36,348 32,225
Depreciation 1,749 1,967 6,974 10,819
Amortization of intangible
assets 3,116 1,952 9,920 6,819
Impairment of other intangible
assets - - - 1,151
Restructuring charges - 1,232 222 11,722
Other, net (125) (3,811) (3,203) 1,529
-------- -------- --------- ---------
Total operating expenses 62,797 32,088 203,797 138,104
-------- -------- --------- ---------
Operating income (loss) 16,877 6,942 45,557 (5,874)
Gain (loss) on equity
investments - (57) 425 (11,997)
Other income, net 1,830 720 4,991 8,190
-------- -------- --------- ---------
Income (loss) from continuing
operations before
income taxes 18,707 7,605 50,973 (9,681)
Income tax benefit 150 455 29 607
-------- -------- --------- ---------
Income (loss) from continuing
operations 18,857 8,060 51,002 (9,074)
Income from discontinued
operations, net
of income taxes (3) - 1,828 31,399 2,755
-------- -------- --------- ---------
Net income (loss) $18,857 $9,888 $82,401 $(6,319)
======== ======== ========= =========
Earnings per share - Basic
Income (loss) from continuing
operations $0.58 $0.25 $1.59 $(0.29)
Income from discontinued
operations $- $0.06 $0.98 $0.09
-------- -------- --------- ---------
Net income (loss) per share $0.58 $0.31 $2.57 $(0.20)
======== ======== ========= =========
Weighted average shares
outstanding used in
computing basic net income
(loss) per share 32,766 31,456 32,109 31,232
======== ======== ========= =========
Earnings per share - Diluted
Income (loss) from continuing
operations $0.50 $0.23 $1.40 $(0.29)
Income from discontinued
operations $- $0.06 $0.86 $0.09
-------- -------- --------- ---------
Net income (loss) per share $0.50 $0.29 $2.26 $(0.20)
======== ======== ========= =========
Weighted average shares
outstanding used in
computing diluted net income
(loss) per share 37,850 34,692 36,541 31,232
======== ======== ========= =========
(1) The Company completed the acquisitions of Switchboard
Incorporated on June 3, 2004 and IOMO Limited on December 1, 2004. The
Company's operating results include the results of Switchboard and
IOMO since their respective acquisition dates.
(2) The Consolidated Statements of Operations have been revised
to eliminate the caption cost of revenues, and separately present
content and distribution costs, depreciation expense and systems and
network operations costs. Content and distribution costs were
previously included in cost of revenues and sales and marketing
expense. Certain reclassifications have been made to the accounts for
the three months and year ended December 31, 2003 to conform to the
current presentation. The reclassifications did not impact previously
reported revenue, total operating expenses, operating income or net
loss.
(3) On March 31, 2004, the sale of the Payment Solutions business
was consummated. The operating results of Payment Solutions have been
presented as a discontinued operation for all periods presented and
includes income from operations of $2.3 million and a gain on sale of
$29.1 million for the year ended December 31, 2004.
InfoSpace, Inc.
Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
-----------------------
December December
31, 31,
2004 2003
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $200,770 $223,858
Short-term investments, available-for-sale 82,885 71,465
Accounts receivable, net 57,110 24,585
Notes and other receivables, net 7,259 4,454
Payroll tax receivable 13,214 13,214
Prepaid expenses and other current assets 3,623 3,425
Assets of discontinued operations, including
cash of $5,187 - 58,366
----------- -----------
Total current assets 364,861 399,367
Long-term investments, available-for-sale 38,159 -
Property and equipment, net 16,782 13,281
Other investments - 1,396
Goodwill 156,246 57,133
Other intangible assets, net 46,189 20,388
Other long-term assets 1,293 750
----------- -----------
Total assets $623,530 $492,315
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,460 $4,363
Accrued expenses and other current
liabilities 44,031 29,529
Deferred revenue 4,750 3,315
Liabilities of discontinued operations - 8,501
----------- -----------
Total current liabilities 55,241 45,708
Long-term liabilities:
Long-term deferred revenue 503 75
Deferred taxes 5,390 -
----------- -----------
Total long-term liabilities 5,893 75
Total liabilities 61,134 45,783
Stockholders' equity:
Preferred stock - -
Common stock 3 3
Additional paid-in capital 1,741,241 1,707,617
Accumulated deficit (1,179,893) (1,262,294)
Accumulated other comprehensive income 1,045 1,206
----------- -----------
Total stockholders' equity 562,396 446,532
----------- -----------
Total liabilities and stockholders' equity $623,530 $492,315
=========== ===========
Summary of cash and marketable investments:
Cash and cash equivalents $200,770 $223,858
Short-term investments, available-for-
sale 82,885 71,465
Long-term investments, available-for-
sale 38,159 -
----------- -----------
Cash and marketable investments $321,814 $295,323
=========== ===========
InfoSpace, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Year ended December 31,
-----------------------
2004 2003
--------- ---------
Operating Activities:
Net income (loss) $82,401 $(6,319)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Income from discontinued operations (31,399) (2,755)
Depreciation and amortization 16,894 17,638
Impairment of other intangible assets - 1,151
Warrant and stock-related revenue - (135)
Warrant and stock-based compensation
expense 981 321
Bad debt expense (recovery) 328 (1,024)
Loss (gain) on equity investments (425) 11,997
Restructuring charges 222 2,059
Gain on sale of non-core services - (6,432)
Other (523) 640
Cash provided (used) by changes in
operating assets and liabilities:
Accounts receivable (29,800) 894
Notes and other receivables (1,540) 2,100
Prepaid expenses and other current
assets 967 (385)
Other long-term assets (543) (109)
Accounts payable (1,749) (582)
Accrued expenses and other current
liabilities 14,806 14,008
Deferred revenue 1,863 (3,876)
Discontinued operations net assets - 17,217
--------- ---------
Net cash provided by operating activities 52,483 46,408
Investing Activities:
Business acquisitions, net of cash
acquired (130,607) (29,075)
Purchase of intangible assets - (55)
Purchases of property and equipment (10,410) (2,179)
Proceeds from the sale of assets 465 -
Proceeds from the sale of non-core
services - 5,620
Proceeds from the sale of discontinued
operation 82,000 -
Proceeds from the sale of equity
investments 500 12,454
Purchases of investments (130,929) (140,991)
Sales and maturities of investments 80,663 206,895
--------- ---------
Net cash provided (used) by investing
activities (108,318) 52,669
Financing activities:
Proceeds from exercise of stock options 31,601 2,710
Proceeds from issuance of stock through
employee stock purchase plan 1,146 906
--------- ---------
Net cash provided by financing activities 32,747 3,616
--------- ---------
Net increase (decrease) in cash and cash
equivalents (23,088) 102,693
Cash and cash equivalents:
Beginning of period 223,858 121,165
--------- ---------
End of period $200,770 $223,858
========= =========
InfoSpace, Inc.
Segment Information
(Unaudited)
(Amounts in thousands)
Three Months Year
Ended ended
----------------- ------------------
December December December December
31, 31, 31, 31,
2004 2003 2004 2003
-------- -------- --------- --------
Search & Directory
Revenue $47,175 $28,341 $156,839 $93,893
Operating expense 25,460 15,880 88,224 45,217
-------- -------- --------- --------
Segment income (1) 21,715 12,461 68,615 48,676
Segment margin 46.0% 44.0% 43.7% 51.8%
Mobile
Revenue 32,499 9,279 92,515 27,929
Operating expense 24,386 5,944 66,926 21,089
-------- -------- --------- --------
Segment income (1) 8,113 3,335 25,589 6,840
Segment margin 25.0% 35.9% 27.7% 24.5%
Non-Core Services
Revenue - 1,410 - 10,408
Operating expense - 736 - 5,631
-------- -------- --------- --------
Income (1) - 674 - 4,777
Total
Total segment revenue 79,674 39,030 249,354 132,230
Total segment operating expense 49,846 22,560 155,150 71,937
-------- -------- --------- --------
Total segment income (1) 29,828 16,470 94,204 60,293
Total segment margin 37.4% 42.2% 37.8% 45.6%
Corporate
Operating Expenses 8,211 8,188 34,734 34,127
Depreciation 1,749 1,967 6,974 10,819
Amortization of intangible assets 3,116 1,952 9,920 6,819
Impairment of other intangible
assets - - - 1,151
Restructuring charges - 1,232 222 11,722
Other, net (125) (3,811) (3,203) 1,529
Loss (gain) on investments - 57 (425) 11,997
Other income, net (1,830) (720) (4,991) (8,190)
Income tax benefit (150) (455) (29) (607)
Income from discontinued
operations (2) - (1,828) (31,399) (2,755)
-------- -------- --------- --------
10,971 6,582 11,803 66,612
-------- -------- --------- --------
Total Net Income (Loss) $18,857 $9,888 $82,401 $(6,319)
======== ======== ========= ========
For each of the business segments, Search & Directory and Mobile,
the financial information above is used by the Company's chief
operating decision maker.
(1) Amounts do not include allocations for general, administrative
and overhead costs, depreciation and amortization expense,
restructuring and other charges and non-operating gains or loses.
2) On March 31, 2004, the sale of the Payment Solutions business
was consummated. The operating results of Payment Solutions have been
presented as a discontinued operation for all periods presented.
Income from discontinued operations is comprised of the segment
results from Payment Solutions, which includes previously reported
segment revenues, segment income and unallocated depreciation,
amortization and corporate expenses that were attributed to Payment
Solutions, less allocated income taxes. Additionally, in the year
ended December 31, 2004, the Company recorded a gain on the sale of
the Payment Solutions business of $29.1 million.
InfoSpace, Inc.
Adjusted EBITDA Reconciliation to GAAP
(Unaudited)
(Amounts in thousands)
Three months ended Year
ended
------------------------------- -------
March June Sept. Dec. Dec.
31, 30, 30, 31, 31,
2004 2004 2004 2004 2004
-------------------------------- -------
Income from continuing
operations (1) $5,417 $13,372 $13,356 $18,857 $51,002
Depreciation $1,799 $ 1,745 $ 1,681 $ 1,749 $ 6,974
Amortization of intangible
assets $1,741 $ 2,002 $ 3,061 $ 3,116 $ 9,920
Litigation settlement (2) $ - $(3,922) $ - $ - $(3,922)
Other income, net (3) $ (985)$(1,176) $(1,000) $(1,830) $(4,991)
Income tax expense
(benefit) $ 32 $ 71 $ 18 $ (150) $ (29)
------------------------------------------
Adjusted EBITDA $8,004 $12,092 $17,116 $21,742 $58,954
==========================================
Adjusted Earnings before Interest, Taxes, Depreciation and
Amortization (EBITDA) is a non-GAAP financial measure and is
reconciled to income from continuing operations, which the Company
believes to be the most comparable GAAP measure. The Company uses this
non-GAAP financial measure for internal managerial purposes, when
publicly providing guidance on possible future results, and as a means
to evaluate period to period comparisons. The Company believes that
this non-GAAP financial measure is a common measure used by investors
and analysts to evaluate its performance. This non-GAAP financial
measure is used in addition to and in conjunction with results
presented in accordance with GAAP and reflect an additional way of
viewing aspects of the Company's operations that, when viewed with
GAAP results and the accompanying reconciliations to corresponding
GAAP financial measures, provide a more complete understanding of the
results of operations and trends affecting the Company's business.
This non-GAAP financial measure should be considered as a supplement
to, and not as a substitute for, or superior to, income from
continuing operations in accordance with GAAP.
(1) As presented in the Unaudited Consolidated Statement of
Operations.
(2) Represents a non-recurring gain from the settlement of a specific
litigation matter.
(3) Other income, net, primarily consists of interest income and
gains or losses from the disposal of assets and foreign currency gains
or losses.
InfoSpace, Inc.
Net Income Guidance Reconciliation
Pro Forma
Guidance
Excluding
Guidance Adjustments Adjustments
(1) (1)
----------- ----------------------
First quarter 2005 net $13.0-13.5 $3.5 $16.5-17.0
income million million million
Diluted earnings per share $0.34-0.35 $0.09 $0.43-0.44
Full year 2005 net income $67-75 $14 $81-89
million million million
Diluted earnings per share $1.75-1.95 $0.35 $2.10-2.30
(1) First quarter 2005 guidance includes an estimate of $3.5 million
of increased expense, or $0.09 per share, consisting of a $2.5 million
increase in non-cash depreciation and amortization expense primarily
from the recent Mobile acquisitions and a $1 million increase in tax
expense. The full year 2005 guidance includes an estimate of $14
million of increased expense, or $0.35 per share, consisting of a $10
million increase in non-cash depreciation and amortization expense
primarily from the recent Mobile acquisitions and a $4 million
increase in tax expense.
Contact Information: InfoSpace, Inc. Amina Suchoski Communications Manager 425-201-8681 - Office 206-229-0496 - Mobile amina.suchoski@infospace.com
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