InfoSpace Raises Full-Year 2004 Guidance on Strong Second Quarter Results
BELLEVUE, Wash.--(BUSINESS WIRE)--July 28, 2004--InfoSpace, Inc. (Nasdaq:INSP) today announced financial results for the three months ended June 30, 2004.
Revenues for the second quarter of 2004 were $54.4 million, reflecting a $22.8 million (or 72%) increase over the second quarter of 2003. In accordance with Generally Accepted Accounting Principles (GAAP), income from continuing operations for the second quarter of 2004 was $13.4 million, or $0.37 per diluted share, versus a net loss from continuing operations of $16.0 million, or $0.51 per diluted share, in the second quarter of 2003. During the second quarter of 2004, the Company recorded a net gain of $3.7 million as part of operating income, which primarily relates to a gain from the settlement of a litigation matter.
Cash, cash equivalents, and marketable investments at June 30, 2004 totaled approximately $293 million. The Company had no debt obligations at the end of the quarter.
"We had a tremendous quarter and are once again raising guidance for 2004," said Jim Voelker, chairman and chief executive officer of InfoSpace, Inc. "We had substantial growth in revenue and cash flow from our search distribution, directory and mobile businesses. With the acquisitions of Switchboard and Atlas Mobile as well as new business with Verizon Wireless and Dex Media, we are capitalizing on the expanding opportunities in our markets."
Second Quarter Highlights and Recent Developments
-- InfoSpace completed the acquisition of Switchboard Incorporated, a leading provider of local online advertising solutions and internet-based yellow pages, for approximately $160 million in cash, plus transaction costs. At closing, Switchboard had approximately $56.4 million in cash and marketable securities, and no debt. The acquisition nearly doubles the Company's share of total online yellow pages searches and establishes InfoSpace as a leading online directory provider in the United States.
-- InfoSpace acquired the assets of Atlas Mobile, a provider of multiplayer tournament-style games, such as Tetris(R) for Prizes(TM), Hold'em Poker for Prizes(TM) and Solitaire for Prizes(TM). The acquisition gives the Company established gaming distribution relationships with Verizon Wireless, Alltel, Midwest Wireless, U.S. Cellular and Western Wireless.
-- InfoSpace signed an agreement with Dex Media to add yellow pages listings from Dex's 14-state region to Switchboard's already substantial listings, and give Dex's advertisers access to millions of users who visit our Switchboard online yellow pages each month.
-- InfoSpace expanded its relationship with Verizon Wireless, signing an agreement to provide the infrastructure and subscription management for their Mobile Web WAP 2.0 portal.
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 & Directory
Search & Directory revenues were $34.4 million in the second quarter of 2004, an increase of $13.0 million or 61% from the second quarter of 2003. The increase in revenue is primarily due to growth in the search distribution business. During the quarter, total paid searches in North America for both Search and Directory (including Switchboard starting June 3, 2004) were approximately 178 million, generating average revenue per paid search of approximately $0.16. Search & Directory segment income was $14.6 million or 43% of revenues for the second quarter of 2004.
Mobile
Mobile revenues were $20.1 million in the second quarter of 2004, an increase of $13.2 million or 192% from the second quarter of 2003. The increase in revenue is a result of revenues generated from the Company's media download business. Mobile segment income totaled $6.5 million or 33% of revenues for the second quarter of 2004.
Outlook
The Company's guidance excludes the potential impact of any future one-time gains or losses.
Third Quarter 2004 Outlook (including Switchboard)
For the third quarter of 2004 the Company expects revenue to be between $60.0 million and $64.0 million. The Company also expects income from continuing operations to be between $8.0 million and $10.0 million, or $0.22 to $0.27 per share (based on 37 million fully diluted shares).
Full Year 2004 Outlook (including Switchboard)
The Company is raising guidance for full year 2004. The Company expects revenue to be between $227.0 million and $237.0 million (up from previous guidance of $205.0 to $217.0 million), comprised of $147.0 million to $152.0 million in Search & Directory revenue, and $80.0 million to $85.0 million in Mobile revenue (up from previous guidance of $60.0 million to $65.0 million). The Company expects income from continuing operations to be between $36.0 million and $40.0 million, or $0.97 to $1.08 per share for full year 2004 (based on 37 million fully diluted shares).
A conference call will be held today at 2 p.m. Pacific/ 5 p.m. Eastern. To access the conference call, please dial 800-238-9007 (U.S. and Canada), or 719-457-2622 (International). The live Webcast 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 Wednesday, Aug. 11, 2004, at 7 p.m. Pacific/ 10 p.m. Eastern.
All information in this release is as of July 28, 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. (Nasdaq: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. More information can be found at http://www.infospaceinc.com.
This release contains forward-looking statements relating to InfoSpace, Inc.'s products and services and future operating result 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 consolidated revenue and net income for the Company for the third quarter and full year 2004 and projected revenue for the Company's Search & Directory and Mobile 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 Six months ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
(unaudited) (unaudited)(unaudited)(unaudited)
(1) (1)
---------------------- ----------------------
Revenues $ 54,448 $ 31,685 $102,529 $ 61,968
Operating expenses(2):
Content and
distribution costs 18,611 5,343 35,497 8,882
Systems and network
operations 3,813 2,743 7,031 6,164
Product development 5,580 3,853 10,018 9,863
Sales and marketing 5,083 4,100 10,541 8,656
General and
administrative 8,998 9,527 18,492 17,004
Depreciation 1,745 3,215 3,544 6,510
Amortization of
intangible assets 2,002 1,623 3,743 3,245
Restructuring charges
and other, net (3) (3,651) 10,302 (2,610) 14,425
-------- -------- -------- ---------
Total operating expenses 42,181 40,706 86,256 74,749
-------- -------- -------- ---------
Operating income (loss) 12,267 (9,021) 16,273 (12,781)
Gain (loss) on equity
investments - (12,427) 458 (12,014)
Other income, net 1,176 5,619 2,161 6,789
-------- -------- -------- ---------
Income (loss) from
continuing operations
before income taxes 13,443 (15,829) 18,892 (18,006)
Income tax benefit
(expense) (71) (192) (103) 67
-------- -------- -------- ---------
Income (loss) from
continuing operations 13,372 (16,021) 18,789 (17,939)
Income (loss) from
discontinued
operations, net
of tax (4) 133 (471) 31,399 140
-------- -------- -------- ---------
Net income (loss) $ 13,505 $(16,492) $ 50,188 $ (17,799)
======== ======== ======== =========
Earnings per share -
Basic
Income (loss) from
continuing
operations $ 0.42 $ (0.51) $ 0.59 $ (0.57)
Income (loss) from
discontinued
operations $ 0.00 $ (0.02) $ 0.99 $ 0.00
-------- -------- -------- ---------
Net income (loss) per
share $ 0.42 $ (0.53) $ 1.58 $ (0.57)
======== ======== ======== =========
Weighted average shares
outstanding used in
computing basic net
income (loss) per
share 31,915 31,153 31,741 31,067
======== ======== ======== =========
Earnings per share -
Diluted
Income (loss) from
continuing
operations $ 0.37 $ (0.51) $ 0.52 $ (0.57)
Income (loss) from
discontinued
operations $ 0.00 $ (0.02) $ 0.88 $ 0.00
-------- -------- -------- ---------
Net income (loss) per
share $ 0.37 $ (0.53) $ 1.40 $ (0.57)
======== ======== ======== =========
Weighted average shares
outstanding used in
computing diluted
net income (loss)
per share 36,245 31,153 35,925 31,067
======== ======== ======== =========
(1) On June 3, 2004, the Company completed the acquisition of
Switchboard Incorporated, and since the acquisition date, the
Company's operating results include the results of Switchboard.
(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 and six
months ended June 30, 2003, to conform to the current presentation.
The reclassifications did not impact previously reported revenue,
total operating expenses, operating loss or net loss.
(3) Restructuring charges and other, net of $3.7 million in the three
months ended June 30, 2004, primarily consists of a $3.9 million gain
related to settling an outstanding litigation matter, partially offset
by an adjustment to the restructuring reserves. In the three months
ended June 30, 2003, the net charge primarily consists of a
restructuring charge of $10.5 million, which includes employee
separation costs of $4.0 million and a charge of $6.5 million related
to excess facilities. In the six months ended June 30, 2004, in
addition to the above items, the net charge includes severance and a
non-cash stock compensation charge. In the six months ended June 30,
2003, in addition to the above items, the net charge includes a $4.0
million charge, including penalties and interest, related to a
settlement agreement with the Internal Revenue Service regarding the
audit of its payroll tax returns for the year 2000.
(4) 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
include income of $2.3 million and gain on sale of $29.1 million for
the six months ended June 30, 2004.
InfoSpace, Inc.
Consolidated Balance Sheets
(Amounts in thousands)
June 30, December 31,
2004 2003
(unaudited) (unaudited)
ASSETS ------------ ------------
Current assets:
Cash and cash equivalents $ 169,684 $ 223,858
Short-term investments, available-for-sale 59,631 71,465
Accounts receivable, net 41,942 24,585
Notes and other receivables, net 6,034 4,454
Payroll tax receivable 13,214 13,214
Prepaid expenses and other current assets 5,849 3,425
Assets of discontinued operations,
including cash of $5,187 - 58,366
----------- -----------
Total current assets 296,354 399,367
Long-term investments, available-for-sale 63,349 -
Property and equipment, net 14,278 13,281
Other investments - 1,396
Goodwill 147,844 57,133
Other intangible assets, net 39,570 20,388
Other long-term assets 1,200 750
----------- -----------
Total assets $ 562,595 $ 492,315
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,989 $ 4,363
Accrued expenses and other current
liabilities 32,945 29,529
Deferred revenue 10,518 3,315
Liabilities of discontinued operations - 8,501
----------- -----------
Total current liabilities 49,452 45,708
Long-term liabilities:
Long-term deferred revenue - 75
Deferred tax liability 5,390 -
----------- -----------
Total long-term liabilities 5,390 75
Total liabilities 54,842 45,783
Stockholders' equity:
Preferred stock - -
Common stock 3 3
Additional paid-in capital 1,719,406 1,707,617
Accumulated deficit (1,212,106) (1,262,294)
Accumulated other comprehensive income 450 1,206
----------- -----------
Total stockholders' equity 507,753 446,532
----------- -----------
Total liabilities and stockholders' equity $ 562,595 $ 492,315
=========== ===========
Summary of cash and marketable investments:
Cash and cash equivalents $ 169,684 $ 223,858
Short-term investments, available-
for-sale 59,631 71,465
Long-term investments, available-for-
sale 63,349 -
----------- -----------
Cash and marketable investments $ 292,664 $ 295,323
=========== ===========
InfoSpace, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
Six months ended June 30,
------------------------
2004 2003
(unaudited) (unaudited)
----------- ------------
Operating Activities:
Net income (loss) $ 50,188 $(17,799)
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Income from discontinued
operations (31,399) (140)
Depreciation and amortization 7,287 9,753
Warrant and stock-related revenue - (135)
Warrant and stock-based
compensation expense 981 305
Bad debt expense (recovery) 156 (447)
Loss (gain) on equity investments (458) 12,014
Restructuring charges and other,
net (400) 2,059
Loss (gain) on disposal of assets (140) 141
Other 71 (120)
Cash provided (used) by changes in
operating assets and liabilities:
Accounts receivable (15,992) (751)
Notes and other receivables (505) (1,049)
Prepaid expenses and other
current assets (1,331) (1,314)
Other long-term assets (450) 24
Accounts payable (1,301) (866)
Accrued expenses and other
current liabilities 3,647 9,046
Deferred revenue 7,128 (220)
Discontinued operations net
assets - (129)
--------- --------
Net cash provided by operating
activities 17,482 10,372
Investing Activities:
Business Acquisitions, net of
cash acquired (108,607) (270)
Purchase of intangible assets - (55)
Purchases of property and
equipment (4,260) (386)
Proceeds from the sale of assets 320 -
Proceeds from the sale of non-
core services - 220
Proceeds from the sale of
discontinued operation 82,000 -
Proceeds from the sale of equity
investments 81 11,131
Short-term investments, net 11,247 (27,524)
Long-term investments, net (63,349) -
--------- --------
Net cash used by investing
activities (82,568) (16,884)
Financing activities:
Proceeds from exercise of stock
options 10,438 603
Proceeds from issuance of stock
through employee stock purchase
plan 474 474
--------- --------
Net cash provided by financing
activities 10,912 1,077
--------- --------
Net decrease in cash and cash
equivalents (54,174) (5,435)
Cash and cash equivalents:
Beginning of period 223,858 120,092
--------- --------
End of period $ 169,684 $114,657
========= ========
InfoSpace, Inc
Segment Information
(Amounts in thousands)
Three Months Ended Six months ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
(unaudited) (unaudited) (unaudited) (unaudited)
Search & Directory
Revenue $34,393 $ 21,421 $ 67,652 $ 41,775
Operating expense 19,759 9,664 39,220 17,845
------- -------- -------- --------
Segment income (1) 14,634 11,757 28,432 23,930
Segment margin 42.5% 54.9% 42.0% 57.3%
Mobile
Revenue 20,055 6,857 34,877 12,973
Operating expense 13,522 4,820 24,566 10,302
------- -------- -------- --------
Segment income (1) 6,533 2,037 10,311 2,671
Segment margin 32.6% 29.7% 29.6% 20.6%
Non-Core Services
Revenue - 3,407 - 7,220
Operating expense - 1,685 - 3,978
------- -------- -------- --------
Income (1) - 1,722 - 3,242
Total
Total segment
revenue 54,448 31,685 102,529 61,968
Total segment
operating expense 33,281 16,169 63,786 32,125
------- -------- -------- --------
Total segment
income (1) 21,167 15,516 38,743 29,843
Total segment
margin 38.9% 49.0% 37.8% 48.2%
Corporate
Operating Expenses 8,804 9,397 17,793 18,444
Depreciation 1,745 3,215 3,544 6,510
Amortization of
intangible assets 2,002 1,623 3,743 3,245
Restructuring
charges and
other, net (3,651) 10,302 (2,610) 14,425
Loss (gain) on
investments - 12,427 (458) 12,014
Other income, net (1,176) (5,619) (2,161) (6,789)
Income tax expense
(benefit) 71 192 103 (67)
Loss (income) from
discontinued
operations (2) (133) 471 (31,399) (140)
------- -------- -------- --------
7,662 32,008 (11,445) 47,642
------- -------- -------- --------
Total Net Income
(Loss) $13,505 $(16,492) $ 50,188 $(17,799)
======= ======== ======== ========
For each of the business segments, Search & Directory and Mobile, the
financial information above is presented to the Company's chief
operating decision maker.
(1) Amounts exclude depreciation, amortization and allocation of
corporate expenses.
(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 segment results
from Payment Solutions, which include 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 six months ended June 30,
2004, the Company recorded a gain on the sale of the Payment Solutions
business of $29.1 million.
--30--APS/se*
CONTACT: InfoSpace, Inc.
Nancy Bacchieri, 425-201-8722
nancy.bacchieri@infospace.com
Amina Ghaddar Suchoski, 425-201-8681
amina.ghaddar@infospace.com
KEYWORD: WASHINGTON
INDUSTRY KEYWORD: TELECOMMUNICATIONS NETWORKING CONFERENCE CALLS
EARNINGS
SOURCE: InfoSpace, Inc.
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