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BELLEVUE, Wash., Nov 01, 2007 (BUSINESS WIRE) -- InfoSpace, Inc. (NASDAQ:INSP) today announced financial results for the three months ended September 30, 2007.
"We are pleased with our third quarter operating results, as we exceeded our expectations in both revenue and Adjusted EBITDA," said Jim Voelker, Chairman and CEO of InfoSpace, Inc. "Additionally, we unlocked significant value for InfoSpace shareholders through the sale of our directory business for $225 million and the pending sale of our mobile business for $135 million. We expect to return the majority of the net proceeds from the sales to shareholders. Going forward, InfoSpace will be a leading metasearch company with a strong financial position, solid cash flows, a large distribution network and award-winning branded websites. We are honing our strategic priorities for the upcoming year to ensure we fully capitalize on these strengths and continue to drive value creation."
Revenues for the third quarter of 2007 were $48.7 million and include both online search revenues and mobile revenues; however, they exclude online directory revenues of $8.7 million which are now treated as discontinued operations for the third quarter of 2007 and all prior periods. If the directory business had remained part of continuing operations of InfoSpace, revenues would have been $57.5 million for the third quarter of 2007.
Net loss for the third quarter of 2007, which includes the directory business as discontinued operations, was $12.3 million, or $0.37 per share.
Cash, cash equivalents, and marketable investments as of September 30, 2007 totaled $214.8 million. At the end of the quarter, the Company had no debt obligations.
Third Quarter Highlights and Recent Developments
InfoSpace:
-- Closed the sale of its online directory business, including the Company's yellow and white pages services, to Idearc for $225 million in cash.
-- Signed a definitive agreement to sell its mobile services business to Motricity for $135 million in cash.
-- Ranked highest in customer satisfaction among search engines for its flagship site Dogpile.com for the second consecutive year, according to the J.D. Power and Associates 2007 Residential Online Service Customer Satisfaction Study.
-- Launched a new version of Dogpile.com, incorporating several improved advanced search features.
-- Launched mCore(TM) managed web and mobile search service on Virgin Mobile.
-- Launched a customized mobile search engine and managed web service on Sprint.
Other
Additionally, in connection with the announced transactions, Brian McManus, Executive Vice President of the Online division, will leave the Company by the end of the year.
"Brian has made significant contributions to InfoSpace during his tenure," said Voelker. "We appreciate his dedicated service to this organization and wish him the best in his future endeavors."
Third Quarter 2007 Segment Information and Adjusted EBITDA
Online Search
Online search revenues were $33.9 million in the third quarter of 2007, a decrease of $6.8 million, compared to the third quarter of 2006. Online search segment income was $10.1 million in the third quarter of 2007. Directory revenues of $8.7 million as well as the related operating expenses are excluded from the segment results and included as a component of discontinued operations.
Mobile
Mobile revenues were $14.9 million in the third quarter of 2007, a decrease of $32.8 million compared to the third quarter of 2006. Mobile revenues included$13.9 million of mobile services revenues in the third quarter of 2007 compared to $9.1 million in the third quarter of 2006 and the remainder is attributable to the mobile media business. Mobile segment loss was $2.4 million in the third quarter of 2007.
Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization ("Adjusted EBITDA") from Continuing Operations
Adjusted EBITDA from continuing operations was $0.4 million in the third quarter of 2007, compared to negative Adjusted EBITDA from continuing operations of $56.2 million in the third quarter of 2006. InfoSpace's Adjusted EBITDA from continuing operations is calculated by adjusting GAAP loss from continuing operations, which includes the effects of the restructuring charges, the payments made to employees and directors related to the cash distribution to shareholders, and sale of non-core operations, and to exclude discontinued operations, the effects of income taxes, depreciation, amortization of intangible assets, stock-based compensation expense, and other income, net (including such items as interest income, 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.
InfoSpace's management believes that this non-GAAP financial measure provides meaningful supplemental information regarding the Company's performance by excluding certain expenses and gains that are not indicative of the Company's core business operating results. InfoSpace believes that management and its investors benefit from referring to this non-GAAP financial measure in assessing InfoSpace's performance. Adjusted EBITDA from continuing operations should be evaluated in light of the Company's financial results prepared in accordance with GAAP. A table reconciling the Company's Adjusted EBITDA from continuing operations to the loss from continuing operations in accordance with GAAP accompanies the condensed consolidated financial statements in this release.
Fourth Quarter Outlook
Starting in the fourth quarter of 2007, in addition to the directory business, the Company will present its mobile business as a discontinued operation and will also adjust all prior periods. Accordingly, fourth quarter guidance for revenue, Adjusted EBITDA from continuing operations and income from continuing operations represents only the Online search business. The Company will not be providing guidance for the revenue and operating expense components of the directory or mobile businesses. In addition, the Company's guidance excludes the potential impact of any future one-time gains or losses, including the gain from the sale of the directory business and the expected gain from the pending sale of the mobile businesses. The Adjusted EBITDA from continuing operations guidance below has been prepared in a manner consistent with the historical Adjusted EBITDA from continuing operations provided above and in the accompanying table.
For the fourth quarter of 2007, the Company expects revenue for its online search business to be between $34 million and $35 million. Additionally, the Company expects Adjusted EBITDA from continuing operations to be approximately $1 million and GAAP loss from continuing operations, to be between $7.5 million and $8.5 million, or $0.22 and $0.25 per share.
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 http://www.infospaceinc.com. A replay of the call will be available approximately one hour after the call through November 10, 2007, at 7:30 p.m. Pacific/ 10:30 p.m. Eastern.
About InfoSpace, Inc.
InfoSpace, Inc. is a leading developer of tools and technologies to help people discover and enjoy content and information - whether on a mobile phone or on the PC. InfoSpace uses its proprietary metasearch technology to power a portfolio of branded Web sites, including Dogpile (www.dogpile.com) and WebFetch (www.webfetch.com). The Company's mCore mobile platform creates revenue opportunities for carriers, while satisfying consumer demand for a highly relevant mobile user experience. More information can be found at www.infospaceinc.com.
This release contains forward-looking statements relating to InfoSpace, Inc.'s 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 our expectations that we will return the majority of the net proceeds from the sales of our businesses to shareholders; our expectation that, going forward, InfoSpace will be a leading metasearch company with a strong financial position, solid cash flows, a large distribution network and award-winning branded websites; our expectation that Brian McManus will leave the Company by the end of the year; and our expectations regarding our financial performance for the fourth quarter of 2007. 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 and restructuring plans, including the sale of its mobile business. 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 Annual Report on Form 10-K, quarterly reports on Form 10-Q as filed from time to time, in the section entitled "Risk Factors," and InfoSpace's current reports on Form 8-K as filed from time to time. 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.
Condensed Consolidated Statements of Operations(1)
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Nine months ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2007 2006 2007 2006
--------- --------- --------- ---------
Revenues $ 48,748 $ 88,346 $188,767 $257,095
Operating expenses:(2)(3)
Content and distribution 16,963 46,644 84,876 132,248
Systems and network
operations 6,722 8,111 20,079 22,670
Product development 11,713 10,852 40,322 30,246
Sales and marketing 8,397 12,195 26,318 33,277
General and administrative 16,903 13,499 65,517 40,028
Depreciation 4,293 3,184 13,168 9,206
Amortization of intangible
assets 172 2,429 2,895 8,015
Restructuring and other,
net(4) 623 57,789 (1,879) 57,789
--------- --------- --------- ---------
Total operating expenses 65,786 154,703 251,296 333,479
--------- --------- --------- ---------
Operating loss (17,038) (66,357) (62,529) (76,384)
Other income, net 2,716 5,406 12,449 14,005
--------- --------- --------- ---------
Loss from continuing
operations before income
taxes (14,322) (60,951) (50,080) (62,379)
Income tax benefit 684 12,921 2,970 13,257
--------- --------- --------- ---------
Loss from continuing
operations (13,638) (48,030) (47,110) (49,122)
--------- --------- --------- ---------
Discontinued operations:(1)
Income from discontinued
operations, net of taxes 1,381 1,301 6,183 6,417
--------- --------- --------- ---------
Net loss $(12,257) $(46,729) $(40,927) $(42,705)
========= ========= ========= =========
Earnings per share - Basic and
Diluted
Loss from continuing
operations (0.41) (1.53) (1.45) (1.57)
Income from discontinued
operations 0.04 0.04 0.19 0.20
--------- --------- --------- ---------
Net loss per share - Basic
and Diluted $ (0.37) $ (1.49) $ (1.26) $ (1.37)
========= ========= ========= =========
Weighted average shares
outstanding used in computing
basic net loss per share 33,158 31,316 32,421 31,213
========= ========= ========= =========
(1) In the three months ended September 30, 2007, the Company entered
into a definitive agreement to sell its directory business. The
operating results of the directory business have been presented as a
discontinued operation for all periods presented. Amounts for the
nine months ended September 30, 2007 include $0.5 million of payments
made to employees related to the cash distribution to shareholders in
May. Amounts include stock-based compensation expense of $0.3
million and $1.2 million for the three and nine months ended
September 30, 2007, respectively, and $0.3 million and $0.5 million
for the three and nine months ended September 30, 2006, respectively.
Revenue and operating expenses for these discontinued operations are
presented below (in thousands):
Three months ended Nine months ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2007 2006 2007 2006
---------------------------------------
Revenue $ 8,740 $ 7,953 $ 25,895 $ 25,324
Operating expenses 7,359 6,652 19,712 18,907
--------- --------- --------- ---------
Income from discontinued
operations $ 1,381 $ 1,301 $ 6,183 $ 6,417
========= ========= ========= =========
(2) Stock-based compensation expense for the three and nine months
ended September 30, 2007 and 2006 is allocated among the following
captions (in thousands):
Three months ended Nine months ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2007 2006 2007 2006
---------------------------------------
Systems and network
operations $ 1,085 $ 478 $ 2,283 $ 1,119
Product development 2,767 671 6,168 1,749
Sales and marketing 2,905 1,260 6,821 3,677
General and administrative 6,226 2,136 12,865 6,546
--------- --------- --------- ---------
Total stock-based compensation
expense $ 12,983 $ 4,545 $ 28,137 $ 13,091
========= ========= ========= =========
(3) For the nine months ended September 30, 2007 operating expenses
include payments made to employees and directors related to the cash
distribution to shareholders in May 2007. This amount is allocated
among the following captions (in thousands):
Nine months ended
-------------------
Sept. 30, Sept. 30,
2007 2006
-------------------
Systems and network
operations $ 409 $ -
Product development 1,476 -
Sales and marketing 2,117 -
General and administrative 17,825 -
--------- ---------
Total $ 21,827 $ -
========= =========
(4) For the three and nine months ended September 30, 2007
restructuring and other, net consists of a gain on the sale of the
assets related to the mobile media operations of $0 and $3.3 million,
respectively, and adjustments to estimated restructuring charges of
$0.6 million and $1.4 million, respectively. For the three and nine
months ended September 30, 2006 restructuring and other, net consists
of a restructuring charge of $57.8 million, comprised of goodwill and
other intangible asset impairment of $44.5 million, employee
separation costs of $6.3 million, a benefit of $1.1 million related
to stock compensation, losses on contractual commitments of $5.6
million, and costs of $2.4 million for abandoned facilities.
InfoSpace, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
September 30, December 31,
2007 2006
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 113,647 $ 163,505
Short-term investments, available-for-sale 101,125 238,444
Accounts receivable, net 35,271 67,951
Prepaid expenses and other current assets 14,408 16,130
Assets of discontinued operations 76,261 83,045
------------- ------------
Total current assets 340,712 569,075
Property and equipment, net 33,458 30,548
Goodwill and other intangible assets, net 55,537 58,432
Deferred tax assets, net 99,989 100,789
Other long-term assets 8,908 6,995
------------- ------------
Total assets $ 538,604 $ 765,839
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,791 $ 12,454
Accrued expenses and other current
liabilities 35,478 58,415
Short-term deferred revenue 8,842 6,205
Liabilities of discontinued operations 8,265 9,211
------------- ------------
Total current liabilities 64,376 86,285
Long-term liabilities: 679 989
------------- ------------
Total liabilities 65,055 87,274
Stockholders' equity:
Common stock 3 3
Additional paid-in capital 1,548,655 1,712,897
Accumulated deficit (1,076,540) (1,035,613)
Accumulated other comprehensive income 1,431 1,278
------------- ------------
Total stockholders' equity 473,549 678,565
------------- ------------
Total liabilities and stockholders'
equity $ 538,604 $ 765,839
============= ============
Summary of cash and short-term investments:
Cash and cash equivalents $ 113,647 $ 163,505
Short-term investments, available-
for-sale 101,125 238,444
------------- ------------
Cash and short-term investments $ 214,772 $ 401,949
============= ============
InfoSpace, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Nine months ended
---------------------------
September 30, September 30,
2007 2006
------------- -------------
Operating activities:
Net loss $ (40,927) $ (42,705)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Income from discontinued operations (6,183) (6,417)
Depreciation and amortization 16,063 17,221
Stock-based compensation 28,137 13,091
Deferred income taxes 800 (9,622)
Net gain on sale of assets (3,148) -
Restructuring 1,369 57,783
Other 193 95
Cash provided (used) by changes in
operating assets and liabilities:
Accounts receivable 32,375 9,737
Other receivables - (1,403)
Prepaid expenses and other current
assets 2,647 4,172
Other long-term assets 87 (947)
Accounts payable 4,369 1,192
Accrued expenses and other current and
long-term liabilities (28,551) (4,007)
Deferred revenue 2,321 428
------------- -------------
Net cash provided by operating
activities 9,552 38,618
Investing activities:
Purchases of property and equipment (20,971) (17,372)
Proceeds from the sale of assets 3,016 153
Loan to equity investee (2,000) -
Proceeds from sales and maturities of
investments 265,199 261,614
Purchases of investments (127,834) (277,283)
------------- -------------
Net cash provided (used) by investing
activities 117,410 (32,888)
Financing activities:
Dividend paid (208,203) -
Proceeds from stock option and warrant
exercises 12,947 3,061
Proceeds from issuance of stock
through employee stock purchase plan 1,381 1,832
------------- -------------
Net cash (used) provided by financing
activities (193,875) 4,893
------------- -------------
Discontinued operations:
Net cash provided by operating
activities attributable to
discontinued operations 17,346 9,979
Net cash used by investing activities
attributable to discontinued
operations (291) (1,058)
------------- -------------
Net cash provided by discontinued
operations 17,055 8,921
------------- -------------
Net increase (decrease) in cash and cash
equivalents (49,858) 19,544
Cash and cash equivalents:
Beginning of period 163,505 153,013
------------- -------------
End of period $ 113,647 $ 172,557
============= =============
InfoSpace, Inc.
Segment Information(1)
(Unaudited)
(Amounts in thousands)
Three months ended Nine months ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2007 2006 2007 2006
Online search
Revenue $ 33,851 $ 40,615 $101,479 $119,747
Content and distribution
expenses 15,274 17,157 42,820 49,424
Operating expenses(2) 8,481 8,081 25,481 23,531
--------- --------- --------- ---------
Segment income 10,096 15,377 33,178 46,792
Segment margin 29.8% 37.9% 32.7% 39.1%
Mobile
Revenue 14,897 47,731 87,288 137,348
Content and distribution
expenses 1,689 29,487 42,056 82,823
Operating expenses(2) 15,585 24,487 54,615 68,894
--------- --------- --------- ---------
Segment loss (2,377) (6,243) (9,383) (14,369)
Segment margin -16.0% -13.1% -10.7% -10.5%
Total
Total revenue 48,748 88,346 188,767 257,095
Total content and distribution
expenses 16,963 46,644 84,876 132,247
Total segment operating
expenses(2) 24,066 32,568 80,096 92,425
--------- --------- --------- ---------
Total segment income 7,719 9,134 23,795 32,423
Total segment margin 15.8% 10.3% 12.6% 12.6%
Corporate
Operating expenses(2)(3) 6,686 7,544 44,003 20,706
Depreciation 4,293 3,184 13,168 9,206
Amortization of intangible
assets 172 2,429 2,895 8,015
Stock-based compensation 12,983 4,545 28,137 13,091
Restructuring and other,
net(4) 623 57,789 (1,879) 57,789
Other income, net (2,716) (5,406) (12,449) (14,005)
Income tax benefit (684) (12,921) (2,970) (13,257)
Income from discontinued
operations(5) (1,381) (1,301) (6,183) (6,417)
--------- --------- --------- ---------
Net loss $(12,257) $(46,729) $(40,927) $(42,705)
========= ========= ========= =========
(1) In the nine months ended September 30, 2007, the Company realigned
its operations and, as a result, changed the way it presents its
financial information to its chief operating decision maker to better
reflect how management measures operating performance.
(2) For 2007, amounts include expenses directly attributable to the
reportable business units and, in addition, include certain indirect
expenses allocated to the reportable business units based on internal
usage measurements. Segment operating expenses do not include
allocations for certain indirect general and administrative expenses,
depreciation and amortization expense, stock-based compensation
expense, restructuring and other charges, non-operating gains and
losses, income taxes or interest income. Segment information for
2006 is presented in a manner consistent with measures used for
reporting 2007 segment information.
(3) Amount for the nine months ended September 30, 2007 includes $21.8
million of payments made to employees and directors related to the
cash distribution to shareholders in May.
(4) Amounts for the three and nine months ended September 30, 2007
consist of gains on the sale of the assets related to the mobile
media operations of $0 and $3.3 million, respectively, and
adjustments to estimated restructuring charges of $0.6 million and
$1.4 million, respectively. Amounts for the three and nine months
ended September 30, 2006 consist of a restructuring charge of $57.8
million, comprised of goodwill and other intangible asset impairment
of $44.5 million, employee separation costs of $6.3 million, a
benefit of $1.1 million related to stock compensation, losses on
contractual commitments of $5.6 million, and costs of $2.4 million
for abandoned facilities.
(5) In the three months ended September 30, 2007, the Company entered
into a definitive agreement to sell its directory business. The
operating results of the directory business have been presented as a
discontinued operation for all periods presented. The amount for the
nine months ended September 30, 2007 includes $0.5 million of
payments made to employees related to the cash distribution to
shareholders in May 2007. Amounts include stock-based compensation
expense of $0.3 million and $1.2 million for the three and nine
months ended September 30, 2007, respectively, and $0.3 million and
$0.5 million for the three and nine months ended September 30, 2006,
respectively. Revenue and operating expenses for these discontinued
operations are presented below (in thousands):
Three months ended Nine months ended
------------------- -------------------
Sept, 30, Sept. 30, Sept. 30, Sept. 30,
2007 2006 2007 2006
---------------------------------------
Revenue $ 8,740 $ 7,953 $ 25,895 $ 25,324
Operating expenses 7,359 6,652 19,712 18,907
--------- --------- --------- ---------
Income from discontinued
operations $ 1,381 $ 1,301 $ 6,183 $ 6,417
========= ========= ========= =========
InfoSpace, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest
Comparable GAAP Measure
Adjusted EBITDA from Continuing Operations Reconciliation(1)
(Unaudited)
(Amounts in thousands)
Three months ended Nine months ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2007 2006 2007 2006
--------- --------- --------- ---------
Loss from continuing
operations(2) $(13,638) $(48,030) $(47,110) $(49,122)
Depreciation 4,293 3,184 13,168 9,206
Amortization of intangible
assets 172 2,429 2,895 8,015
Stock-based compensation 12,983 4,545 28,137 13,091
Other income, net(3) (2,716) (5,406) (12,449) (14,005)
Income tax benefit (684) (12,921) (2,970) (13,257)
--------- --------- --------- ---------
Adjusted EBITDA from
continuing operations $ 410 $(56,199) $(18,329) $(46,072)
========= ========= ========= =========
Adjusted EBITDA from Continuing Operations Reconciliation for Forward
Looking Guidance(4)
(Amounts in thousands)
Ranges for the three
months ending
December 31, 2007
-------------------
Loss from continuing
operations $ (7,500) $ (8,500)
Depreciation and amortization
of intangible assets 2,000 2,500
Stock-based compensation 8,500 9,500
Other income, net(3) (2,000) (2,500)
Income tax provision - -
--------- ---------
Adjusted EBITDA from
continuing operations $ 1,000 $ 1,000
========= =========
(1) Adjusted Earnings before Interest, Taxes, Depreciation and
Amortization ("EBITDA") from continuing operations is a non-GAAP
financial measure and is reconciled to loss from continuing
operations, which the Company's management believes to be the most
comparable generally accepted accounting principles ("GAAP") measure.
Adjusted EBITDA from continuing operations results are calculated by
adjusting GAAP loss from continuing operations to exclude the effects
of income taxes, depreciation, amortization of intangible assets,
stock-based compensation expense and other income, net (including
such items as interest income, litigation settlements and
contingencies, foreign currency gains or losses, and gains or losses
from the disposal of assets), as detailed above. This calculation
excludes the directory business, as it has been classified as
discontinued operations in all periods presented. The Company uses
this non-GAAP financial measure for internal management purposes,
when publicly providing guidance on possible future results, and as a
means to evaluate period to period comparisons. The Company's
management 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.
(2) As presented in the unaudited Condensed Consolidated Statements of
Operations.
(3) Other income, net, primarily consists of interest income, gains or
losses from the disposal of assets, and foreign currency transaction
gains or losses.
(4) Adjusted EBITDA from continuing operations reconciliation for
forward looking guidance excludes both the directory and mobile
businesses, as each will be classified as discontinued operations in
future periods.
SOURCE: InfoSpace, Inc.
InfoSpace, Inc. Stacy Ybarra, 425-709-8127 stacy.ybarra@infospace.com
Copyright Business Wire 2007
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