David P. Roy
IntraLinks
Investor Relations
212-342-7690
droy@intralinks.com
Radley Moss
IntraLinks
Public Relations
212-543-7717
rmoss@intralinks.com
IntraLinks Announces Second Quarter Financial Results
NEW YORK, NY – September 1, 2010 – IntraLinks Holdings, Inc. (NYSE: IL), a leading provider of critical information exchange solutions, today announced results for its second quarter ended June 30, 2010.
Financial highlights for the second quarter include:
| - | Record quarterly revenue of $44.4 million, up 35% year-over-year |
| Record quarterly Enterprise revenue of $19.7 million, up 59% year-over-year |
| Record Non-GAAP adjusted EBITDA* of $14.2 million, a 32% non-GAAP adjusted EBITDA margin* |
| GAAP net loss narrows to $3.9 million |
| Non-GAAP net income* increases 28% year-over-year to $1.9 million |
“The record quarterly revenue and strong year-over-year growth illustrate the growing demand from our large and loyal customer base to transform their critical business processes with IntraLinks’ cloud-based platform,” said Andrew Damico, president and CEO, IntraLinks. “We are particularly pleased that our Enterprise revenue continued to increase at such a rapid rate as this is the largest principal market of the multi-billion dollar market opportunity that IntraLinks is addressing. Equally important, we believe that our three major principal markets – Enterprise, Mergers & Acquisitions and Debt Capital Markets - are poised to deliver positive year-over-year growth in the second half of 2010.”
“The company’s strong second quarter revenue performance, combined with the scalability of our business model, drove record quarterly adjusted EBITDA and an adjusted EBITDA margin of 32%,” said Anthony Plesner, CFO, IntraLinks. “The successful completion of our initial public offering in August allowed us to significantly reduce the company’s outstanding debt. We are well positioned to execute against our long-term growth objectives based on our expectation for continued strong adjusted EBITDA and declining interest expense.”
Second Quarter 2010 Summary:
Total second quarter revenue was $44.4 million, an increase of 35% on a year-over-year basis. Enterprise revenue was $19.7 million, up 59%; Mergers and Acquisitions (M&A) revenue was $16.2 million, up 38%; and Debt Capital Markets (DCM) revenue was $8.5 million, down 4%.
Non-GAAP adjusted EBITDA* was $14.2 million, representing a non-GAAP adjusted EBITDA margin of 32% and an increase of 26% compared to $11.3 million in the year ago period.
GAAP net loss for the second quarter was $3.9 million, compared to a $5.1 million GAAP net loss in the same quarter a year ago. Basic and diluted GAAP net loss per share in the second quarter was $1.78, compared with a basic and diluted GAAP net loss per share of $3.30 the same quarter a year ago. Per share amounts are magnified by the low pre-IPO (initial public offering) weighted average shares outstanding of 2.2 million used in the calculation this year, and 1.5 million used in the calculation a year ago. Following the company’s IPO of 11.0 million shares on August 6, 2010 and the conversion of all outstanding shares of preferred stock to 35.1 million shares of common stock, the company had 49.3 million shares outstanding as of August 31, 2010.
The company generated non-GAAP net income of $1.9 million for the second quarter 2010, an increase of 28% over the prior year.
Deferred revenue on the balance sheet as of June 30, 2010, was $31.5 million, an increase of 30% on a year-over-year basis. Deferred revenue represents the billed but unearned portion of existing contracts for services to be provided. Deferred revenue does not include future potential revenue represented by the unbilled portion of existing commitments of our customers.
Business Outlook:
Based on information available as of September 1, 2010, IntraLinks is issuing guidance for the third quarter and full year 2010 as follows:
Revenue for the company’s third quarter is projected to be in the approximate range of $45 million to $47 million, representing 35% year-over-year growth at the midpoint. Revenue for the company’s full 2010 fiscal year is projected to be in the approximate range of $175 million to $179 million, representing 26% year-over-year growth at the midpoint.
Non-GAAP adjusted EBITDA* for the company’s third quarter is projected to be in the approximate range of $14.0 million to $16.0 million, representing 39% year-over-year growth and a margin of 33% at the midpoint. Non-GAAP adjusted EBITDA for the company’s full 2010 fiscal year is projected to be in the approximate range of $55.0 million to $59.0 million, representing 22% year-over-year growth and a margin of 32% at the midpoint.
Quarterly Conference Call
IntraLinks will host a conference call today at 9:00 a.m. Eastern Time (ET) to discuss the company’s second quarter financial results and its business outlook for the third quarter and fiscal year 2010, which may include guidance supplemental to the above. To access this call, dial 866-440-1940 (domestic) or 706-758-9574 (international), followed by conference ID # 96720537. This presentation will also be webcast live on the investor relations section on the IntraLinks website at www.intralinks.com/ir.
Following the conference call, a replay will be available until September 8, 2010, at 800-642-1687 (domestic) or 706-645-9291 (international) and can be accessed with conference ID # 96720537. An archived webcast of this conference call will also be available on the investor relations section on the IntraLinks website at www.intralinks.com/ir.
About IntraLinks
IntraLinks is a leading global provider of Software-as-a-Service solutions for securely managing content, exchanging critical business information and collaborating within and among organizations. More than 1,000,000 professionals in industries including financial services, pharmaceutical, biotechnology, consumer, energy, industrial, legal, insurance, real estate and technology, as well as government agencies, have utilized IntraLinks' easy-to-use, cloud-based solutions. IntraLinks users can accelerate information-intensive business processes and workflows, meet regulatory and risk management requirements and collaborate with customers, partners and counterparties in a secure, auditable and compliant manner. IntraLinks counts 800 of the Fortune 1000 as users. For more information, visit www.intralinks.com or http://blog.intralinks.com. You can also follow IntraLinks on Twitter at http://twitter.com/intralinks and Facebook at www.facebook.com/IntraLinks.
*Non-GAAP Financial Measures
This press release includes information about certain financial measures that are not prepared in accordance with GAAP, including non-GAAP net income (loss), non-GAAP adjusted EBITDA, and non-GAAP adjusted EBITDA margin. These non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies.
Non-GAAP net income (loss) represents GAAP net income (loss) adjusted for stock-based compensation expense and amortization of intangible assets. Adjusted EBITDA represents net income (loss) adjusted for (1) interest expense, net of interest income, (2) income tax provision (benefit), (3) depreciation and amortization, (4) amortization of intangible assets, (5) stock-based compensation expense, (6) amortization of debt issuance costs and (7) other (income) expense. Items (1) through (7) are excluded from net income (loss) internally when evaluating our operating performance. Adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.
Management believes that non-GAAP net income, adjusted EBITDA, and adjusted EBITDA margin, when viewed with our results under U.S. GAAP and the accompanying reconciliations, provide useful information about operating performance and period-over-period growth, and provide additional information that is useful for evaluating our operating performance. Additionally, management believes that non-GAAP net income, adjusted EBITDA and adjusted EBITDA margin provide a more meaningful comparison of our operating results against those of other companies in our industry, as well as on a period-to-period basis, because these measures exclude items that are not representative of our operating performance, such as amortization of intangible assets, interest expense and fair value adjustments to the interest rate swap, both of which are related to our long-term debt. Management believes that including these costs in our results of operations results in a lack of comparability between our operating results and those of our peers in the industry, the majority of which are not highly leveraged and do not have comparable amortization costs related to intangible assets. However, non-GAAP net income, adjusted EBITDA, and adjusted EBITDA margin are not measures of financial performance under U.S. GAAP and, accordingly, should not be considered as an alternative to net loss as an indicator of operating performance.
A reconciliation of GAAP to Non-GAAP financial measures has been provided in the financial statement tables included in this press release. Reconciliation of projected ranges for non-GAAP adjusted EBITDA for the third quarter and full year 2010 to the comparable GAAP financial measure is unavailable, as it is impractical at this time to project or estimate certain items expected to be included in GAAP net income (loss) for those periods.
###
Forward Looking Statements
This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This press release contains express or implied forward-looking statements that are not based on historical information relating to, among other things, expectations and assumptions concerning management's forecast of financial performance, future business growth, and management's plans, objectives, and strategies. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: the uncertainty of our future profitability; our ability to sustain positive cash flow; periodic fluctuations in our operating results; risks related to our substantial debt balances; our ability to maintain the security and integrity of our systems; our ability to increase our penetration in our principal existing markets and expand into additional markets; our dependence on the volume of financial and strategic business transactions; our dependence on customer referrals; our ability to maintain and expand our direct sales capabilities; our ability to develop and maintain strategic relationships to sell and deliver our solutions; customer renewal rates; our ability to maintain the compatibility of our services with third-party applications; competition and our ability to maintain our average sales prices; our ability to adapt to changing technologies; interruptions or delays in our service; international risks; our ability to protect our intellectual property; costs of being a public company; and risks related to changes in laws, regulations or governmental policy. Further information on these and other factors that could affect the company’s financial results is contained in our public filings with the Securities and Exchange Commission (SEC) from time to time, including our Registration Statement on Form S-1 (Registration No. 333-165991), which was declared effective by the Securities and Exchange Commission on August 5, 2010, and subsequent filings with the SEC. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
IntraLinks undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise.
IntraLinks and the IntraLinks logo are registered trademarks of IntraLinks Holdings, Inc. All rights reserved.
INTRALINKS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and per Share Data)
| | | June 30, | | | December 31, | |
| | | 2010 | | | 2009 | |
| ASSETS | | (unaudited) | | | | |
| | | | | | | |
| Current Assets: | | | | | | |
| Cash and cash equivalents | | $ | 15,931 | | | $ | 30,481 | |
| Restricted cash | | | 87 | | | | 87 | |
| Accounts receivable, net of allowances of $2,392 and $2,470, respectively | | | 32,064 | | | | 25,898 | |
| Investments | | | 5,218 | | | | 3,414 | |
| Deferred taxes | | | 6,979 | | | | 6,979 | |
| Prepaid expenses and other current assets | | | 8,960 | | | | 6,355 | |
| Total current assets | | | 69,239 | | | | 73,214 | |
| | | | | | | | | |
| Fixed assets, net | | | 10,286 | | | | 7,064 | |
| Capitalized software, net | | | 24,099 | | | | 20,734 | |
| Goodwill | | | 215,478 | | | | 215,478 | |
| Other intangibles, net | | | 175,178 | | | | 189,604 | |
| Other assets | | | 2,473 | | | | 3,247 | |
| Total assets | | $ | 496,753 | | | $ | 509,341 | |
| | | | | | | | | |
| LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 8,721 | | | $ | 8,870 | |
| Accrued expenses and other current liabilities | | | 14,066 | | | | 21,958 | |
| Deferred revenue | | | 31,467 | | | | 26,795 | |
| Total current liabilities | | | 54,254 | | | | 57,623 | |
| Long term debt | | | 293,171 | | | | 290,513 | |
| Deferred taxes | | | 38,268 | | | | 42,719 | |
| Other long term liabilities | | | 4,057 | | | | 4,040 | |
| Total liabilities | | | 389,750 | | | | 394,895 | |
| Commitments and contingencies | | | | | | | | |
| Redeemable convertible preferred stock: | | | | | | | | |
Series A $0.001 par value, 36,000,000 shares authorized; 35,863,270 and 35,864,887 shares issued and outstanding (liquidation preference of $176,596 and $176,604) as of June 30, 2010 and December 31, 2009, respectively | | | 176,617 | | | | 176,478 | |
| Stockholders' deficit | | | | | | | | |
Common stock, $0.001 par value; 41,000,000 shares authorized; 3,197,845 and 3,152,669 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively | | | 3 | | | | 3 | |
| Additional paid-in capital | | | 6,049 | | | | 4,302 | |
| Accumulated deficit | | | (75,801 | ) | | | (66,377 | ) |
| Accumulated other comprehensive income | | | 135 | | | | 40 | |
| Total stockholders' deficit | | | (69,614 | ) | | | (62,032 | ) |
| Total liabilities, redeemable convertible preferred stock and stockholders' deficit | | $ | 496,753 | | | $ | 509,341 | |
INTRALINKS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and per Share Data)
(unaudited)
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | |
| Revenue | | $ | 44,409 | | | $ | 32,863 | | | $ | 84,341 | | | $ | 67,486 | |
| Cost of revenue | | | 11,555 | | | | 12,692 | | | | 23,031 | | | | 26,849 | |
| Gross profit | | | 32,854 | | | | 20,171 | | | | 61,310 | | | | 40,637 | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Product development | | | 4,461 | | | | 2,890 | | | | 8,743 | | | | 6,016 | |
| Sales and marketing | | | 19,106 | | | | 13,806 | | | | 38,126 | | | | 27,943 | |
| General and administrative | | | 7,595 | | | | 5,196 | | | | 13,142 | | | | 9,541 | |
| Restructuring costs | | | - | | | | 245 | | | | - | | | | 293 | |
| Total operating expenses | | | 31,162 | | | | 22,137 | | | | 60,011 | | | | 43,793 | |
| Income (loss) from operations | | | 1,692 | | | | (1,966 | ) | | | 1,299 | | | | (3,156 | ) |
| Interest expense, net | | | 7,109 | | | | 7,025 | | | | 14,136 | | | | 14,025 | |
| Amortization of debt issuance costs | | | 457 | | | | 473 | | | | 914 | | | | 950 | |
| Other (income) expense | | | (361 | ) | | | (1,461 | ) | | | (286 | ) | | | 9,701 | |
| Net loss before income tax | | | (5,513 | ) | | | (8,003 | ) | | | (13,465 | ) | | | (27,832 | ) |
| Income tax benefit | | | (1,568 | ) | | | (2,922 | ) | | | (4,041 | ) | | | (10,632 | ) |
| Net loss | | $ | (3,945 | ) | | $ | (5,081 | ) | | $ | (9,424 | ) | | $ | (17,200 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net loss per common share - basic and diluted | | $ | (1.78 | ) | | $ | (3.30 | ) | | $ | (4.42 | ) | | $ | (11.81 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average number of shares | | | | | | | | | | | | | | | | |
| used in calculating net loss per share - | | | | | | | | | | | | | | | | |
| basic and diluted | | | 2,210,438 | | | | 1,537,432 | | | | 2,133,393 | | | | 1,456,094 | |
INTRALINKS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
| | | | | | | |
| | | Six Months Ended June 30, | |
| | | 2010 | | | 2009 | |
| | | | | | | |
| Net loss | | $ | (9,424 | ) | | $ | (17,200 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 7,607 | | | | 5,886 | |
| Stock-based compensation expense | | | 1,744 | | | | 817 | |
| Amortization of intangible assets | | | 14,426 | | | | 20,503 | |
| Amortization of debt discount | | | 78 | | | | 78 | |
| Amortization of debt issuance cost | | | 914 | | | | 950 | |
| Provision for bad debts and customer credits | | | 175 | | | | 407 | |
| Gain on disposal of fixed assets | | | (28 | ) | | | - | |
| Change in deferred taxes | | | (4,450 | ) | | | (6,660 | ) |
| Gain on interest rate swap | | | (755 | ) | | | 4,599 | |
| Non-cash interest expense | | | 3,255 | | | | 5,538 | |
| | | | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Restricted cash | | | - | | | | 362 | |
| Accounts receivable | | | (6,344 | ) | | | (792 | ) |
| Prepaid expenses and other current assets | | | (1,819 | ) | | | (843 | ) |
| Other assets | | | (19 | ) | | | 50 | |
| Accounts payable | | | (129 | ) | | | (1,938 | ) |
| Accrued expenses and other liabilities | | | (6,159 | ) | | | (3,002 | ) |
| Deferred revenue | | | 5,013 | | | | (803 | ) |
| Net cash provided by operating activities | | | 4,085 | | | | 7,952 | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Capital expenditures | | | (5,711 | ) | | | (2,571 | ) |
| Capitalized software development costs | | | (8,544 | ) | | | (4,530 | ) |
| Purchase of investments | | | (4,318 | ) | | | - | |
| Sale of investments | | | 2,550 | | | | - | |
| Net cash used in investing activities | | | (16,023 | ) | | | (7,101 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Proceeds from exercise of stock options | | | 138 | | | | 1 | |
| Capital lease payments | | | (27 | ) | | | (65 | ) |
| Offering costs paid in connection with initial public offering | | | (881 | ) | | | - | |
| Repayments of long-term debt | | | (1,854 | ) | | | (2,535 | ) |
| Net cash used in financing activities | | | (2,624 | ) | | | (2,599 | ) |
| | | | | | | | | |
| Effect of foreign exchange rate changes on cash and cash equivalents | | | 12 | | | | (85 | ) |
| | | | | | | | | |
| Net decrease in cash and cash equivalents | | | (14,550 | ) | | | (1,833 | ) |
| | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 30,481 | | | | 24,671 | |
| | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 15,931 | | | $ | 22,838 | |
RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES
(In Thousands, Except Share and per Share Data)
(unaudited)
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Reconciliation of Non-GAAP adjusted EBITDA and Non-GAAP adjusted EBITDA margin: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Net loss | | $ | (3,945 | ) | | $ | (5,081 | ) | | $ | (9,424 | ) | | $ | (17,200 | ) |
| Interest expense, net | | | 7,109 | | | | 7,025 | | | | 14,136 | | | | 14,025 | |
| Income tax benefit | | | (1,568 | ) | | | (2,922 | ) | | | (4,041 | ) | | | (10,632 | ) |
| Depreciation and amortization | | | 4,262 | | | | 2,923 | | | | 7,607 | | | | 5,886 | |
| Amortization of intangible assets | | | 7,208 | | | | 9,976 | | | | 14,426 | | | | 20,503 | |
| Stock-based compensation expense | | | 991 | | | | 401 | | | | 1,744 | | | | 817 | |
| Amortization of debt issuance costs | | | 457 | | | | 473 | | | | 914 | | | | 950 | |
| Other (income) expense | | | (361 | ) | | | (1,461 | ) | | | (286 | ) | | | 9,701 | |
| Non-GAAP adjusted EBITDA | | $ | 14,153 | | | $ | 11,334 | | | $ | 25,076 | | | $ | 24,050 | |
| | | | | | | | | | | | | | | | | |
| Non-GAAP adjusted EBITDA margin | | | 31.9 | % | | | 34.5 | % | | | 29.7 | % | | | 35.6 | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Reconciliation of Non-GAAP income from operations: | | | | | | | | | | | | | | | | |
| Income (loss) from operations | | $ | 1,692 | | | $ | (1,966 | ) | | $ | 1,299 | | | $ | (3,156 | ) |
| Stock-based compensation expense | | | 991 | | | | 401 | | | | 1,744 | | | | 817 | |
| Amortization of intangible assets | | | 7,208 | | | | 9,976 | | | | 14,426 | | | | 20,503 | |
| Non-GAAP income from operations | | $ | 9,891 | | | $ | 8,411 | | | $ | 17,469 | | | $ | 18,164 | |
| | | | | | | | | | | | | | | | | |
| Non-GAAP income from operations as a percentage of total revenue | | | 22.3 | % | | | 25.6 | % | | | 20.7 | % | | | 26.9 | % |
| | | | | | | | | | | | | | | | | |
| Income (loss) from operations as a percentage of total revenue | | | 3.8 | % | | | -6.0 | % | | | 1.5 | % | | | -4.7 | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Reconciliation of Non-GAAP net income (loss): | | | | | | | | | | | | | | | | |
| Net loss | | $ | (3,945 | ) | | $ | (5,081 | ) | | $ | (9,424 | ) | | $ | (17,200 | ) |
| Stock-based compensation expense | | | 991 | | | | 401 | | | | 1,744 | | | | 817 | |
| Amortization of intangible assets | | | 7,208 | | | | 9,976 | | | | 14,426 | | | | 20,503 | |
| Income tax adjustment* | | | (2,329 | ) | | | (3,788 | ) | | | (4,851 | ) | | | (8,144 | ) |
| Non-GAAP net income (loss) | | $ | 1,925 | | | $ | 1,508 | | | $ | 1,895 | | | $ | (4,024 | ) |
*Income tax adjustment is used to adjust the GAAP income tax benefit to a non-GAAP income tax provision (benefit).
For the three and six months ended June 30, 2010, we utilized an effective tax rate of 28.4% and 30.0%, respectively.
For the three and six months ended June 30, 2009, we utilized an effective tax rate of 36.5% and 38.2%, respectively.
