Exhibit 99.2
ICT Group, Inc.
Reconciliation Tables for Investor Presentation on March 1, 2006
About Non-GAAP Financial Measures
Management uses certain non-GAAP measures of financial performance. These non-GAAP measures include adjusted net income, EBITDA, adjusted EBITDA, EBIT, adjusted EBIT, adjusted diluted earnings per share, free cash flow, adjusted free cash flow and adjusted income tax effective rate. Reconciliation tables for the other non-GAAP measures are presented below.
Free Cash Flow and Adjusted Free Cash Flow
Free cash flow is an additional measurement used by management to evaluate the liquidity of the business. Free cash flow measures operating cash flows less purchases of property and equipment. In addition, management also evaluates liquidity using an adjusted free cash flow measurement, which excludes the cash flows associated with litigation settlement payments and recoveries.
The reconciliation of operating cash flows to free cash flow and adjusted free cash flow is as follows:
For the year ended December 31, 2005 (in thousands) (unaudited) | |||||||
Cash flows provided by operating activities | $ | 26,093 | |||||
Less: Purchases of property and equipment | (21,132 | ) | |||||
Free Cash Flow | $ | 4,961 | |||||
Cash flows associated with litigation settlement payments (1) | 7,865 | ||||||
Adjusted Free Cash Flow | $ | 12,826 |
(1) | Cash flows associated with the litigation settlement payments reflect the $14,750 settlement amount paid less the $6,885 of insurance proceeds received. |
Adjusted Net Income and Adjusted Diluted Earnings per Share
The following table shows a reconciliation of net income to adjusted net income. The calculation of adjusted diluted earnings per share is also shown. Management uses these measurements to evaluate the profitability of the business. The adjusted net income and adjusted diluted earnings per share excludes the effects of litigation costs (recoveries) as well as certain tax adjustments.
(in thousands) (unaudited) For the fiscal quarters ended: | 3/31/2004 | 6/30/2004 | 9/30/2004 | 12/31/2004 | 3/31/2005 | 6/30/2005 | 9/30/2005 | 12/31/2005 | ||||||||||||||||||||||||
Net income (loss), as reported | $ | 224 | $ | 350 | $ | 276 | $ | (3,543 | ) | $ | 1,064 | $ | 1,744 | $ | 5,472 | $ | 3,895 | |||||||||||||||
Addback: | ||||||||||||||||||||||||||||||||
Litigation costs (recoveries) | 560 | 445 | 887 | 8,446 | 477 | 91 | (4,064 | ) | (115 | ) | ||||||||||||||||||||||
Tax effect of litigation costs (recoveries), and income tax adjustments | (184 | ) | (146 | ) | (293 | ) | (2,995 | ) | (143 | ) | (27 | ) | 873 | 28 | ||||||||||||||||||
Adjusted net income | $ | 600 | $ | 649 | $ | 870 | $ | 1,908 | $ | 1,398 | $ | 1,808 | $ | 2,281 | $ | 3,808 | ||||||||||||||||
Shares used to compute diluted earnings per share | 12,953 | 12,918 | 12,849 | 12,873 | 12,911 | 12,897 | 12,981 | 13,098 | ||||||||||||||||||||||||
Adjusted diluted earnings per share | $ | 0.05 | $ | 0.05 | $ | 0.07 | $ | 0.15 | $ | 0.11 | $ | 0.14 | $ | 0.18 | $ | 0.29 |
Adjusted Net Income, Adjusted EBIT and Adjusted Diluted Earnings per Share
The following table shows a reconciliation of net income and EBIT to adjusted net income and adjusted EBIT, both of which exclude litigation costs and recoveries. The calculation of adjusted diluted earnings per share and adjusted income tax effective rate is also shown. Management uses these measurements to evaluate the profitability of the business.
Adjusted EBIT, as presented, is supplemental information and is not presented and should not be considered in isolation, or as a substitute for ICT’s consolidated financial information presented under GAAP. There are potentially different definitions of EBIT and ICT’s definition may differ from other definitions.
Three months ended December 31, | Years ended December 31, | |||||||||||||||
(in thousands, except per share data) (unaudited) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Net income (loss) | $ | 3,895 | $ | (3,543 | ) | $ | 12,175 | $ | (2,693 | ) | ||||||
Addback: | ||||||||||||||||
Income tax provision ( benefit) | 1,297 | (2,054 | ) | 4,133 | (1,634 | ) | ||||||||||
Interest expense, net | 662 | 524 | 2,464 | 1,594 | ||||||||||||
EBIT | $ | 5,854 | $ | (5,073 | ) | $ | 18,772 | $ | (2,733 | ) | ||||||
Addback litigation costs (recoveries) | (115 | ) | 8,446 | (3,611 | ) | 10,338 | ||||||||||
Adjusted EBIT | $ | 5,739 | $ | 3,373 | $ | 15,161 | $ | 7,605 | ||||||||
Less: | ||||||||||||||||
Interest expense, net | 662 | 524 | 2,464 | 1,594 | ||||||||||||
Income tax provision, adjusted for the tax effect of the addback for litigation costs (recoveries) | 1,269 | 941 | 3,402 | 1,984 | ||||||||||||
Adjusted net income | $ | 3,808 | $ | 1,908 | $ | 9,295 | $ | 4,027 | ||||||||
Adjusted diluted earnings per share | $ | 0.29 | $ | 0.15 | $ | 0.72 | $ | 0.31 | ||||||||
Shares used in computing adjusted diluted earnings per share | 13,098 | 12,873 | 12,964 | 12,886 | ||||||||||||
Adjusted EBIT | $ | 5,739 | $ | 3,373 | $ | 15,161 | $ | 7,605 | ||||||||
Less: Interest expense, net | 662 | 524 | 2,464 | 1,594 | ||||||||||||
Adjusted earnings before tax | 5,077 | 2,849 | 12,697 | 6,011 | ||||||||||||
Adjusted income tax provision | 1,269 | 941 | 3,402 | 1,984 | ||||||||||||
Adjusted net income | $ | 3,808 | $ | 1,908 | $ | 9,295 | $ | 4,027 | ||||||||
Effective income tax rate, as adjusted | 25 | % | 33 | % | 27 | % | 33 | % |
Annualized Return on Equity:
The following chart shows the calculation of the annualized fourth quarter of 2005 return on equity. Net income used in the calculation is adjusted to exclude the effects of litigation costs and recoveries.
(in thousands) (unaudited) | |||||||
Total Shareholders’ Equity at 9/30/05 | $ | 76,180 | |||||
Total Shareholders’ Equity at 12/31/05 | $ | 81,012 | |||||
Average Shareholders’ Equity | $ | 78,596 | |||||
Adjusted Net Income | $ | 3,808 | |||||
Annualized Adjusted Net Income | $ | 15,232 | |||||
Annualized Return on Equity | 19.4 | % |
Annualized Revenue per Average Workstation:
The following chart shows the calculation of quarterly annualized revenue per average workstation. Management uses this metric to evaluate ongoing utilization of the workstations in our contact centers.
(in thousands, except workstation data) | 3/31/2003 | 6/30/2003 | 9/30/2003 | 12/31/2003 | 3/31/2004 | 6/30/2004 | 9/30/2004 | 12/31/2004 | ||||||||||||||||
Revenue | $ | 76,579 | $ | 70,543 | $ | 73,320 | $ | 77,700 | $ | 77,098 | $ | 75,511 | $ | 80,395 | $ | 92,525 | ||||||||
Annualized Revenue | 306,316 | 282,172 | 293,280 | 310,800 | 308,392 | 302,044 | 321,580 | 370,100 | ||||||||||||||||
Average Workstations | 8,172 | 7,980 | 8,032 | 8,248 | 8,398 | 8,540 | 8,677 | 9,006 | ||||||||||||||||
Annualized Revenue per Average Workstation | 37.48 | 35.36 | 36.51 | 37.68 | 36.72 | 35.37 | 37.06 | 41.09 |
3/31/2005 | 6/30/2005 | 9/30/2005 | 12/31/2005 | |||||||||
Revenue | $ | 94,019 | $ | 96,991 | $ | 99,921 | $ | 110,403 | ||||
Annualized Revenue | 376,076 | 387,964 | 399,684 | 441,612 | ||||||||
Average Workstations | 9,272 | 9,447 | 9,911 | 10,435 | ||||||||
Annualized Revenue per Average Workstation | 40.56 | 41.07 | 40.33 | 42.32 |
EBITDA and Adjusted EBITDA
EBITDA is commonly defined as Earnings before Interest, Taxes, Depreciation and Amortization. Management believes that Adjusted EBITDA is a meaningful indicator of profitability for the business. Adjusted EBITDA excludes from EBITDA the effects of special charges (reversals).
Adjusted EBITDA, as presented, is supplemental information and is not presented and should not be considered in isolation, or as a substitute for ICT’s consolidated financial information presented under GAAP. There are potentially different definitions of EBITDA and ICT’s definition may differ from other definitions.
The reconciliation of net income to EBITDA and Adjusted EBITDA is as follows:
(in thousands) For fiscal years: | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | ||||||||||||||||||||
Net income (loss), as reported | $ | 898 | $ | 1,570 | $ | (7,517 | ) | $ | 2,672 | $ | 2,427 | $ | 4,745 | $ | 6,729 | $ | 7,978 | $ | 2,968 | ||||||||||
Addback: | |||||||||||||||||||||||||||||
Interest expense, net | 511 | 833 | 180 | (398 | ) | 406 | 801 | 1,207 | 1,079 | 828 | |||||||||||||||||||
Income tax provision or benefit | — | — | (2,998 | ) | 1,708 | 1,549 | 3,033 | 4,302 | 4,506 | 1,398 | |||||||||||||||||||
Depreciation and Amortization | 1,243 | 1,877 | 2,792 | 3,560 | 5,667 | 8,004 | 9,621 | 11,279 | 15,443 | ||||||||||||||||||||
EBITDA | $ | 2,652 | $ | 4,280 | $ | (7,543 | ) | $ | 7,542 | $ | 10,049 | $ | 16,583 | $ | 21,859 | $ | 24,842 | $ | 20,637 | ||||||||||
Addback: | |||||||||||||||||||||||||||||
Charge related to stock compensation at time of IPO | — | — | 12,690 | — | — | — | — | — | — | ||||||||||||||||||||
Restructuring charge (reversals) | — | — | — | — | — | — | — | — | 8,894 | ||||||||||||||||||||
Client claim | — | — | — | — | — | — | — | — | 1,409 | ||||||||||||||||||||
Litigation costs | — | — | — | — | — | — | — | — | 1,673 | ||||||||||||||||||||
Writeoff of deferred offering costs | — | — | — | — | — | — | — | — | 581 | ||||||||||||||||||||
Adjusted EBITDA | $ | 2,652 | $ | 4,280 | $ | 5,147 | $ | 7,542 | $ | 10,049 | $ | 16,583 | $ | 21,859 | $ | 24,842 | $ | 33,194 |
(in thousands) For fiscal years: | 2003 | 2004 | 2005 | |||||||||
Net income (loss), as reported | $ | (1,144 | ) | $ | (2,693 | ) | $ | 12,175 | ||||
Addback: | ||||||||||||
Interest expense, net | 1,183 | 1,594 | 2,464 | |||||||||
Income tax provision or benefit | (856 | ) | (1,634 | ) | 4,133 | |||||||
Depreciation and Amortization | 17,855 | 17,822 | 20,790 | |||||||||
EBITDA | $ | 17,038 | $ | 15,089 | $ | 39,562 | ||||||
Addback: | ||||||||||||
Charge related to stock compensation at time of IPO | — | — | — | |||||||||
Restructuring charge (reversals) | (686 | ) | — | — | ||||||||
Client claim | — | — | — | |||||||||
Litigation costs | 4,693 | 10,338 | (3,611 | ) | ||||||||
Writeoff of deferred offering costs | — | — | — | |||||||||
Adjusted EBITDA | $ | 21,045 | $ | 25,427 | $ | 35,951 |
For fiscal quarters ended: | 12/31/04 | 12/31/05 | ||||||
Net income (loss), as reported | $ | (3,543 | ) | $ | 3,895 | |||
Addback: | ||||||||
Interest expense, net | 524 | 662 | ||||||
Income tax provision or (benefit) | (2,054 | ) | 1,297 | |||||
Depreciation and Amortization | 4,975 | 5,365 | ||||||
EBITDA | $ | (98 | ) | $ | 11,219 | |||
Addback: | ||||||||
Litigation costs (recoveries) | 8,446 | (115 | ) | |||||
Adjusted EBITDA | $ | 8,348 | $ | 11,104 |