EXHIBIT 99.2
ICT Group, Inc.
Reconciliation Tables for Investor Presentation on May 9, 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 and adjusted free cash flow. Reconciliation tables for the other non-GAAP measures are presented below.
Adjusted Net Income and Adjusted Diluted Earnings per Share
The following table shows a reconciliation of net income to adjusted net income on a quarterly basis. 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. For the quarter ended March 31, 2006, there were no litigation costs and related tax effects excluded from our reported diluted earnings per share under GAAP.
(in thousands) | ||||||||||||||||||||||||||||||||
(unaudited) | 3/31/2004 | 6/30/2004 | 9/30/2004 | 12/31/2004 | 3/31/2005 | 6/30/2005 | 9/30/2005 | 12/31/2005 | ||||||||||||||||||||||||
For the fiscal quarters ended: | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||
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. For the quarter ended March 31, 2006, there were no litigation settlement payments or recoveries excluded from our free cash flow.
(in thousands) (unaudited) | For the year ended 12/31/05 | For the quarter ended 03/31/06 | ||||||
Cash flows provided by operating activities | $ | 26,093 | $ | 9,627 | ||||
Less: Purchases of property and equipment | (21,132 | ) | (5,886 | ) | ||||
Free Cash Flow | $ | 4,961 | $ | 3,741 | ||||
Cash flows associated with litigation settlement payments (1) | 7,865 | — | ||||||
Adjusted Free Cash Flow | $ | 12,826 | $ | 3,741 | ||||
Adjusted Net Income and Adjusted EBIT
The following table shows a reconciliation of net income and EBIT to adjusted net income and adjusted EBIT for fiscal years 2004 and 2005, which exclude litigation costs and recoveries. Adjusted diluted earnings per share is also shown. Management uses these measurements to evaluate the profitability of the business.
EBIT is commonly defined as Earnings before Interest and Taxes. Also, 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.
(in thousands, except per share data) | For Fiscal Years Ended December 31, | For Fiscal Quarters Ended March 31, | ||||||||||||||
(unaudited) | 2004 | 2005 | 2005 | 2006 | ||||||||||||
For fiscal years: | ||||||||||||||||
Net income (loss) | $ | (2,693 | ) | $ | 12,175 | $ | 1,064 | $ | 2,762 | |||||||
Addback: | ||||||||||||||||
Income tax provision ( benefit) | (1,634 | ) | 4,133 | 456 | 734 | |||||||||||
Interest expense, net | 1,594 | 2,464 | 487 | 624 | ||||||||||||
EBIT (Operating Income) | $ | (2,733 | ) | $ | 18,772 | $ | 2,007 | $ | 4,120 | |||||||
Addback litigation costs (recoveries) | 10,338 | (3,611 | ) | 477 | — | |||||||||||
Adjusted EBIT | $ | 7,605 | $ | 15,161 | $ | 2,484 | $ | 4,120 | ||||||||
Less: | ||||||||||||||||
Interest expense, net | 1,594 | 2,464 | 487 | 624 | ||||||||||||
Income tax provision, adjusted for the tax effect of the addback for litigation costs (recoveries) | 1,984 | 3,402 | 599 | 734 | ||||||||||||
Adjusted net income | $ | 4,027 | $ | 9,295 | $ | 1,398 | $ | 2,762 | ||||||||
Adjusted diluted earnings per share | $ | 0.31 | $ | 0.72 | $ | 0.11 | $ | 0.21 | ||||||||
Shares used in computing adjusted diluted earnings per share | 12,886 | 12,964 | 12,911 | 13,265 | ||||||||||||
Adjusted EBIT | $ | 7,605 | $ | 15,161 | $ | 2,484 | $ | 4,120 | ||||||||
Less: Interest expense, net | 1,594 | 2,464 | 487 | 624 | ||||||||||||
Adjusted earnings before tax | 6,011 | 12,697 | 1,997 | 3,496 | ||||||||||||
Adjusted income tax provision | 1,984 | 3,402 | 599 | 734 | ||||||||||||
Adjusted net income | $ | 4,027 | $ | 9,295 | $ | 1,398 | $ | 2,762 | ||||||||
Effective income tax rate, as adjusted | 33 | % | 27 | % | 30 | % | 21 | % | ||||||||
Operating Income Margin:
The following table shows a reconciliation of operating income to adjusted operating income. Adjusted operating income excludes litigation costs. For the three months ended March 31, 2006, there were no litigation costs excluded from our operating income. Also shown is the calculation of our operating income margin.
(in thousands) | ||||||||||||||||||||||||||||||||||||
(unaudited) | 3/31/2004 | 6/30/2004 | 9/30/2004 | 12/31/2004 | 3/31/2005 | 6/30/2005 | 9/30/2005 | 12/31/2005 | 3/31/2006 | |||||||||||||||||||||||||||
For the fiscal quarters ended: | ||||||||||||||||||||||||||||||||||||
Net income (loss), as reported | $ | 224 | $ | 350 | $ | 276 | $ | (3,543 | ) | $ | 1,064 | $ | 1,744 | $ | 5,472 | $ | 3,895 | $ | 2,762 | |||||||||||||||||
Addback: | ||||||||||||||||||||||||||||||||||||
Income tax provision (benefit) | 111 | 173 | 136 | (2,054 | ) | 456 | 748 | 1,632 | 1,297 | 734 | ||||||||||||||||||||||||||
Interest expense, net | 294 | 325 | 451 | 524 | 487 | 659 | 656 | 662 | 624 | |||||||||||||||||||||||||||
Operating income | $ | 629 | $ | 848 | $ | 863 | $ | (5,073 | ) | $ | 2,007 | $ | 3,151 | $ | 7,760 | $ | 5,854 | $ | 4,120 | |||||||||||||||||
Addback: | ||||||||||||||||||||||||||||||||||||
Litigation costs (recoveries) | 560 | 445 | 887 | 8,446 | 477 | 91 | (4,064 | ) | (115 | ) | — | |||||||||||||||||||||||||
Adjusted operating income | $ | 1,189 | $ | 1,293 | $ | 1,750 | $ | 3,373 | $ | 2,484 | $ | 3,242 | $ | 3,696 | $ | 5,739 | $ | 4,120 | ||||||||||||||||||
Revenue, as reported | $ | 77,098 | $ | 75,511 | $ | 80,395 | $ | 92,525 | $ | 94,019 | $ | 96,991 | $ | 99,921 | $ | 110,403 | $ | 113,053 | ||||||||||||||||||
Operating Income Margin | 1.54 | % | 1.71 | % | 2.18 | % | 3.65 | % | 2.64 | % | 3.34 | % | 3.70 | % | 5.20 | % | 3.64 | % | ||||||||||||||||||
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), as described in the chart below.
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) | ||||||||||||
(unaudited) | 2003 | 2004 | 2005 | |||||||||
For fiscal years: | ||||||||||||
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: | ||||||||||||
Restructuring charge (reversals) | (686 | ) | — | — | ||||||||
Litigation costs | 4,693 | 10,338 | (3,611 | ) | ||||||||
Adjusted EBITDA | $ | 21,045 | $ | 25,427 | $ | 35,951 | ||||||
Operating Leverage Financial Metrics Per Average Workstation:
The following chart shows the year over year growth calculation of revenue per average workstation. Management uses these metrics to evaluate ongoing utilization of the workstations in our contact centers. The reconciliations for Adjusted EBIT, Adjusted EBITDA and Adjusted Net Income are shown in the various preceding reconciliations.
(in thousands, except workstation data) | |||||||
(unaudited) | 2004 | 2005 | |||||
For fiscal years: | |||||||
Revenue | 325,529 | 401,334 | |||||
Adjusted EBITDA | 25,427 | 35,951 | |||||
Adjusted EBIT | 7,605 | 15,161 | |||||
Adjusted Net Income | 4,027 | 9,295 | |||||
Year-Over-Year Growth | |||||||
Average Workstations | 8,683 | 9,805 | |||||
Revenue per Average Workstation | 37.49 | 40.93 | 9 | % | |||
Adjusted EBITDA per Average Workstation | 2.93 | 3.67 | 25 | % | |||
Adjusted EBIT per Average Workstation | 0.88 | 1.55 | 77 | % | |||
Net Income per Average Workstation | 0.46 | 0.95 | 104 | % | |||