Press Release
InterSearch Announces First Quarter 2006 Results
Thursday May 11, 2006 4:05 pm ET
InterSearch Group, Inc. (OTC:IGPN - News), a leading provider of Internet search services and operator of industry specific destination portals, today reported financial results for the first quarter ended March 31, 2006.
First Quarter 2006 Consolidated Financial Results:
-- First quarter revenue was $8.0 million, a 99% increase relative to the $4.0 million reported in the first quarter of 2005;
-- Gross margins were 69% as compared to 48% in the first quarter a year ago;
-- Operating income was $3.5 million, up 400% compared to the same quarter of fiscal 2005;
-- GAAP(1) earnings available to common stockholders were $2.1 million or $0.08 per diluted share as compared to net earnings of $0.2 million or $0.02 per diluted share in the first quarter of 2005;
-- Cash flows from operations were $1.8 million as compared to $0.3 million in the first quarter of fiscal 2005;
-- Earnings before interest, taxes, depreciation and amortization (EBITDA) was $3.8 million, representing an increase of approximately 400% as compared to the same quarter of fiscal 2005(2);
-- Operating income before amortization (OIBA) increased to $3.7 million, from $0.7 million in the first quarter of 2005(2).
(1) Generally accepted accounting principles in the United States of America.
(2) EBITDA and OIBA are non-GAAP financial measures. These measures may be different from non-GAAP financial measures used by other companies. We encourage investors to review the section below entitled "Non-GAAP Financial Measures" and to review the reconciling adjustments between the GAAP and non-GAAP measures attached to this press release.
First Quarter Business Highlights
-- Generated 25 million paid clicks as compared to 13 million in the first quarter of 2005.
-- Increased revenue contribution from the proprietary traffic to 70%, up from 43% in the first quarter of 2005.
-- Generated $2.8 million in revenues from www.irs.com reflecting an increase in excess of 100%, on a pro forma basis, as compared to the first quarter of 2005.
-- Enhanced the revenue model of tax-related domains by converting the arrangements with direct advertisers to Pay-per-Click (PPC) from mainly revenue sharing.
-- Signed a major provider of online tax preparation services as a new direct advertising client.
In commenting on the results InterSearch President and CEO, Dan O’Donnell, said, "First quarter performance was strong reflecting the significant growth potential that we believe is inherent in our business model. Our revenue nearly doubled year-over-year, driven by a combination of organic growth and contribution from irs.com, which we acquired in September of 2005. Dramatically increasing irs.com revenues in the first full quarter after the acquisition reinforces our confidence in our ability to replicate this success with other domains. The direct navigation industry is undergoing a large scale consolidation, and we believe that InterSearch is well positioned to be a major participant and beneficiary of this trend."
Business Outlook and Financial Guidance
Said InterSearch CFO, Gary Bogatay, "As we discussed in our fiscal 2005 earnings release, this year our business will be characterized by pronounced seasonality due to the large revenue contribution from the www.irs.com domain. First quarter was seasonally strong driven by the tax season, whereas its impact on the second quarter was limited to 17 days - from April 1st to April 17th. The second quarter guidance reflects this trend."
InterSearch provides the following guidance for the second quarter of 2006, ending June 30:
Q2 2006 Revenue Range $5.5 - $6.0 Million
Q2 2006 EBITDA Range $1.2 - $1.5 Million
The company expects to be profitable and generate positive cash flow from operations in the second quarter of 2006 and for the rest of fiscal year 2006.
Continued Gary Bogatay, "Despite a decline expected in the second quarter, we believe that our full-year revenue growth will be in the range of 40 to 50% as compared to fiscal year 2005. These expectations do not include any new acquisitions."
Conference Call
InterSearch Group will host a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time), during which Dan O’Donnell, President and Chief Executive Officer, and Gary Bogatay, Chief Financial Officer, will further discuss financial results, execution milestones and the company’s strategy.
To listen to the call and have the opportunity to ask questions, please dial 888-396-2369 (domestic) or 617-847-8710 (International) five to ten minutes before the call and reference the passcode (55265255). A simultaneous live Webcast of the call will be available at the Investor Relations section of the InterSearch website at http://www.intersearch.com. An online playback of the Webcast will be available on the company's website for at least 90 days following the call. This press release will also be available on the InterSearch website.
Questions for the conference call will also be taken via email at stockwatch@intersearch.com and can be sent anytime prior to the conference call’s starting time.
About InterSearch Group, Inc.
InterSearch is a leading provider of Internet search services through a combination of traffic aggregation and proprietary websites, such as www.irs.com. The company operates in the fastest growing segments of Internet commerce including paid search, direct navigation and online marketing driving high quality traffic to advertisers and providing users with quick access to pertinent products and services. Through its InterSearch Corporate Services division, the company also provides IT and Internet strategy consulting to large corporations, predominantly in the financial services market. InterSearch is headquartered in San Francisco, California at 222 Kearny Street, Suite 550, and can be reached via telephone at 415-962-9700. More information about InterSearch Group, Inc. can be found at http://www.intersearch.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. Forward-looking statements, which are based on management’s current expectations, are generally identifiable by the use of terms, such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "possible," "potential," "predicts," "projects," "should," "would" and similar expressions. The forward-looking statements in this press release are contained principally in the section entitled "Business Outlook and Financial Guidance" The potential risks and uncertainties that could cause actual results to differ materially from those expressed or implied herein include, among others, the Company's ability to raise additional debt or equity financing, the Company’s relationships with its current and future advertising and distribution network partners, the Company's ability to achieve anticipated results from acquisitions, and market development of Internet advertising and paid search services. Further information on the factors that could affect the Company’s financial results is included in the Company's SEC filings, including the most recent registration statement filed with the SEC under the heading "Risk Factors." Except as required by law, InterSearch Group assumes no obligation to update these forward-looking statements publicly, even if new information becomes available in the future.
Non-GAAP Financial Measures
This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: EBITDA (earnings before interest, tax, depreciation and amortization) and OIBA (operating income before amortization). The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. See "Reconciliation of GAAP Net Earnings to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)" and "Reconciliation of GAAP Net Earnings to Operating Income Before Amortization (OIBA)" tables included in this press release for further information regarding these non-GAAP financial measures.
InterSearch’s management evaluates and monitors performance for InterSearch primarily through earnings before interest, income taxes, depreciation and amortization ("EBITDA") and operating income before amortization ("OIBA"). In addition, EBITDA is presented because management believes it is frequently used by securities analysts, investors and others in the evaluation of companies. EBITDA is calculated by adding income taxes, interest expense, depreciation and amortization. OIBA is calculated by adding income taxes, interest expense, amortization and loss on derivative to net earnings. EBITDA and OIBA are not defined under GAAP and should not be considered in isolation or as a substitute for net earnings and other consolidated earnings data prepared in accordance with GAAP or as a measure of InterSearch’s profitability. A reconciliation of EBITDA and OIBA is provided in the tables below.
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INTERSEARCH GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
----------------------
2006 2005
----------- ----------
Revenues:
Internet search services $7,199,472 3,433,336
Corporate services 824,344 609,145
----------- ----------
Total revenues 8,023,816 4,042,481
----------- ----------
Cost of revenues:
Traffic acquisition cost 1,939,871 1,628,218
Cost of consulting services 579,547 467,894
----------- ----------
Total cost of revenues 2,519,418 2,096,112
----------- ----------
Gross profit 5,504,398 1,946,369
----------- ----------
Operating expenses:
Sales and marketing expense 273,857 162,667
General and administrative expense 1,705,520 1,080,046
----------- ----------
Total operating expenses 1,979,377 1,242,713
----------- ----------
Earnings from operations 3,525,021 703,656
Interest expense 27,065 36,482
Loss on derivative instrument 19,321 -
----------- ----------
Earnings before income taxes 3,478,635 667,174
Income taxes 1,401,231 361,721
----------- ----------
Net earnings 2,077,404 305,453
Preferred stock dividends - 157,200
----------- ----------
Net earnings available to
common stockholders 2,077,404 148,253
----------- ----------
Basic earnings per share 0.08 0.04
----------- ----------
Diluted earnings per share 0.08 0.02
----------- ----------
Unaudited proforma tax and earnings
available to common stockholders and
per share information for S Corporation
periods
Net earnings available to common stockholders 148,253
Proforma income tax expense adjustment 31,454
----------
Proforma net earnings 116,799
----------
Proforma basic earnings per share 0.03
----------
Proforma diluted earnings per share 0.01
----------
INTERSEARCH GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
---------------------------
2006 2005
------------ ------------
Assets
Current assets:
Cash $895,237 576,096
Accounts receivable 4,055,035 3,205,880
Prepaid expenses and other 351,141 227,168
Deferred income taxes 21,246 -
------------ ------------
Total current assets 5,322,659 4,009,144
Office equipment, net 271,983 257,565
Patents and trademarks, net 69,169 71,022
Domains, net 12,479,057 12,694,213
Goodwill 573,123 573,123
Deferred income taxes 483,665 553,638
------------ ------------
Total Assets $19,199,656 18,158,705
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Revolving line of credit - 726,000
Accrued liabilities 2,259,354 1,830,931
Accounts payable 1,415,858 1,226,053
Deferred revenue 103,088 300,000
Deferred income taxes - 89,525
Note payable 847,000 1,540,000
Common stock subject to
mandatory redemption 6,150,000 6,150,000
Common stock warrants - 3,263,814
------------ ------------
Total current liabilities 10,775,300 15,126,323
------------ ------------
Stockholders' equity:
Preferred Stock - -
Common Stock 25,226 25,220
Additional paid-in capital 7,368,972 4,054,408
Retained earnings (accumulated deficit) 1,095,014 (982,390)
Notes receivable for common stock issued (64,856) (64,856)
------------ ------------
Total stockholders' equity 8,424,356 3,032,382
------------ ------------
Total liabilities and
stockholders' equity $19,199,656 18,158,705
============ ============
INTERSEARCH GROUP, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Earnings to Earnings Before
Interest, Taxes, Depreciation, and Amortization (EBITDA)
(Unaudited)
Three Months Ended
March 31,
2006 2005
----------------------------
Net earnings available to common
stockholders $2,077,404 148,253
Preferred Stock Dividends - 157,200
----------------------------
Net earnings 2,077,404 305,453
Income taxes 1,401,231 361,721
----------------------------
Earnings before income taxes 3,478,635 667,174
Interest expense 27,065 36,482
----------------------------
Earnings from operations 3,505,700 703,656
Depreciation 35,870 26,529
Amortization 217,009 -
----------------------------
Earnings before interest, taxes,
depreciation,
amortization (EBITDA) $3,758,579 $730,185
============================
INTERSEARCH GROUP, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Earnings to Operating
Income Before Amortization (OIBA)
(Unaudited)
Three Months Ended
March 31,
2006 2005
--------------------------
Net earnings available to common
stockholders $2,077,404 148,253
Preferred Stock Dividends - 157,200
--------------------------
Net earnings 2,077,404 305,453
Income taxes 1,401,231 361,721
--------------------------
Earnings before income taxes 3,478,635 667,174
Loss on derivative instrument 19,321 -
Interest expense 27,065 36,482
--------------------------
Earnings from operations 3,525,021 703,656
Amortization 217,009 -
--------------------------
Operating income before
amortization (OIBA) $3,742,030 $703,656
==========================
Investor Contact:
BPC Financial Marketing,
John Baldissera,
800-368-1217.