Strong Net Income and Cash Flow Highlight the Quarter
Total Revenue of $31.7 Million; Net Income Per Diluted Share of $0.18
October 23, 2003 (Longmont, Colo.)— Intrado Inc. (NASDAQ: TRDO), North America’s leading provider of 9-1-1 infrastructure systems and services, and experts in engineering and managing complex integrated data and telecommunications solutions, today announced its financial results for the three months and nine months ended September 30, 2003:
• For the three months ended September 30, 2003, Intrado reported revenue of $31.7 million, up 16% from $27.4 million reported in the same period in 2002. For the nine months ended September 30, 2003, revenue was $91.7 million, up 18% from $78.0 million reported in 2002.
• Net income for the third quarter of 2003 was $3.1 million, or $0.18 per diluted share, compared to $3.9 million, or $0.24 per diluted share for the same period in 2002. Net income for the third quarter of 2003 includes income tax expense of $1.7 million, a 35.5% effective tax rate. There was no tax expense recorded in the same period in 2002. Net income before taxes for the three months ended September 30, 2003 was $4.8 million, an increase of $900,000 or 23% compared to $3.9 million for the same period ended September 30, 2002.
• Net income for the nine months ended September 30, 2003 was $6.8 million, or $0.41 per diluted share, compared to $1.4 million, or $0.08 for the same period in 2002. Net income before taxes for the nine months ended September 30, 2003 was $10.6 million, compared with $1.4 million for the same period in 2002.
• Net cash provided by operating activities for the quarter ended September 30, 2003 was $8.9 million, compared to $7.1 million for the same period in 2002. For the nine month period ended September 30, 2003, net cash provided by operating activities was $25.6 million, compared to $8.8 million for the same period in 2002.
• Free cash flow for the third quarter of 2003 was $7.5 million (cash provided from operating activities of $8.9 million less cash used in investing activities of $1.4 million), compared to negative $3.7 million for the same period in 2002 (cash provided from operating activities of $7.1 million less cash used in investing activities of $10.8 million). Free cash flow for the nine month period ended September 30, 2003 was $19.6 million (cash provided from operating activities of $25.6 million less cash used in investing activities of $6.0 million), compared with negative $12.4 million (cash provided from operating activities of $8.8 million less cash used in investing activities of $21.2 million) for the same period in 2002.
• Net income and income from operations for the nine months ended September 30, 2002 included a $4.7 million inventory impairment charge, recognized by the Company during the second quarter of 2002.
Intrado Chief Executive Officer George Heinrichs said the Company continues to perform well. “Demand for our products and services remains strong. Our progress in the New Markets segment has been mixed. Although we’ve doubled our subscriber base this year, IntelliCast remains slower than we’d like. Our Commercial Database service is in the midst of execution on work that will deliver necessary revenue to its business model. New products in Wireless
including PDE managed services and enhanced emergency services are substantially stronger than expected. I remain very confident in our future growth.”
Recent Highlights
• Intrado announced a contract with regional wireless carrier Cellular South to provide E9-1-1 Phase II solutions and services to Cellular South’s subscribers who utilize the company’s third generation CDMA 1X wireless network.
• Intrado also completed a contract with Midwest Wireless to provide hosted PDE and 9-1-1 services to MidWest’s customers.
• Intrado added Chicago and Maricopa County (Phoenix) to its installed based of IntelliCastSM customers, resulting in three of the top ten cities (by population) in the U.S. being served by IntelliCast. Intrado now has approximately 12.0 million telephone numbers under management in its emergency notification database.
• Intrado and Direct Partner Telecom, Inc., a wholly owned subsidiary of theglobe.com (OTCBB: TGLO), joined forces to provide Voice over Internet Protocol (VoIP) Emergency Calling Services to theglobe.com voicegloÔ customers.
• Intrado extended its emergency communications leadership to Europe with the formation of a subsidiary in the Republic of Ireland and the opening of an office in the United Kingdom. This expansion positions Intrado to more effectively address a wide range of European emergency communications initiatives that are currently underway.
Wireline: Revenue increased to $20.8 million in the third quarter of 2003, up from $20.3 million in the third quarter of 2002. Direct costs were $9.7 million in the quarter, up from $9.2 million in the same period of 2002.
Wireless: Revenue increased to $10.5 million in the third quarter of 2003, up from $6.7 million in the third quarter of 2002. Direct costs were $5.6 million in the quarter, up from $3.3 million in the third quarter of 2002.
New Markets: Revenue increased to $438,000 in the third quarter of 2003, up from $326,000 in the third quarter of 2002. Direct costs were $1.1 million in the quarter, up from $838,000 in the same period of 2002.
Indirect Overhead Expenses: Total indirect overhead expenses increased to $10.1 million in the third quarter of 2003, up from $9.9 million in the third quarter of 2002. Indirect overhead is composed of sales and marketing expenses, general and administrative expenses, inventory impairment and research and development expenses.
Cash Flow Performance and Liquidity: Intrado finished the quarter with $30.7 million in cash, up $4.6 million from $26.1 million at June 30, 2003. As of September 30, 2003, Intrado had $6.9 million available under its revolving line of credit with GE Capital and an additional $8.5 million available under existing capital lease facilities.
Performance Metrics: Days’ sales outstanding were 47 days at September 30, 2003, compared to 61 days for the quarter ending September 30, 2002, and 54 days from the quarter ending June 30, 2003.
1
Fourth Quarter 2003 Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially from current expectations. Fourth quarter guidance has been reduced to accommodate uncertainty in the speed of rollout in the new markets segment. While we believe it is still possible to meet the low end of original guidance, our reduced confidence in the speed of New Market penetration leads to us to this action.
Intrado’s expectations for fourth quarter 2003 revenue range between $33.0 million and $35.0 million.
Our fourth quarter 2003 expectations for net income range between $3.9 million and $4.6 million, with an estimated effective tax rate of 35.5%. On a diluted basis, fourth quarter 2003 earnings per share is expected to range between $0.23 and $0.27 per share on a projected share base of 17.1 million.
Intrado anticipates that free cash flow will range between $5.0 million and $7.0 million in the fourth quarter of 2003, consisting of net cash provided by operating activities ranging between $8.6 million and $9.0 million, less estimated capital expenditures of $1.5 million and estimated capitalized software development costs of $1.2 million.
Additionally, Intrado provides the following performance guidance for each of its three business units and for indirect overhead expenses:
Wireline: Expectations for fourth quarter 2003 revenue range between $22.0 and $23.2 million. Direct costs and expenses are estimated to be approximately $10.7 million.
Wireless: Outlook for fourth quarter revenue ranges between $10.3 and $10.8 million. Direct costs and expenses are estimated to be approximately $5.4 million.
New Markets: Outlook for fourth quarter revenue is approximately $700,000 to $1.0 million. Direct costs and expenses are estimated to be approximately $1.6 million.
Indirect Overhead Expenses: Intrado expects fourth quarter 2003 indirect overhead expenses to be approximately $10.0 million.
An outlook for 2004 and first quarter guidance will be provided before year-end 2003.
Conference Call Webcast
Intrado will be hosting a live broadcast over the Internet of the previously announced conference call on October 23, 2003 at 4:30 p.m. EDT, 2:30 p.m. MDT, and 1:30 p.m. PDT to discuss third quarter 2003 results. To participate, access the Company’s Web site at www.intrado.com and click on the Intrado Q3 Earnings Call Webcast button under the caption “Headlines.”
About Intrado
Founded in 1979, Intrado Inc. (NASDAQ: TRDO) is pioneering the technology of Informed Response® by providing telecommunications companies and public safety organizations with accurate, efficiently delivered, mission-critical information—enabling them to respond effectively, anywhere and anytime.
The Company’s unparalleled industry knowledge in systems engineering of complex, integrated data and telephony environments and in critical operations management reduces the effort, cost
2
and time associated with providing reliable communications information for 9-1-1, safety and commercial applications. Intrado has received International Organization of Standardization (ISO) 9001-2000 certification. To receive Intrado press releases and Company updates via e-mail, please register at the Company’s Web site: www.intrado.com.
Note Concerning Non-GAAP Financial Measures
Certain information set forth herein, including total indirect overhead expenses and free cash flow, may be considered non-GAAP financial measures. Intrado believes this information, along with comparable GAAP measurements, is useful to investors because it provides a basis for measuring our operating performance, ability to retire debt and invest in new business opportunities. Intrado’s management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating the Company’s operating performance and capital resources. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as reported by Intrado may not be comparable to similarly titled amounts reported by other companies.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Statements in this announcement that are not historical facts are hereby identified as forward-looking statements for the purpose of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this announcement. Known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those contemplated in forward-looking statements.
The forward-looking statements included in this announcement are necessarily estimates reflecting the best judgment of senior management. Although we believe that these forward-looking statements are reasonable, we cannot promise that they will turn out to be correct. Our actual results could be materially different from our expectations due to a variety of risks and uncertainties, including, but not limited to the following:
• our reliance on large contracts from a limited number of significant telecommunications customers and their ability to pay for our services, especially in light of recent competitive and market pressures in the telecommunications industry;
• fluctuations in quarterly operating results, including those that are due to adverse trends in the telecommunications industry, bankruptcy filings by WorldCom and other customers, and other factors that are beyond our control;
• whether our investments in research and development and capitalized software will expand our service offerings and prove to be economically viable;
• our ability to retain key executives, particularly George Heinrichs, our co-founder, President, Chief Executive Officer and Chairman of the Board;
• competition in service, price and technological innovation from entities with substantially greater resources than us;
• our ability to integrate businesses and assets that we may acquire;
• whether our efforts to expand into European and other international markets will prove to be economically viable;
• constraints on our sales and marketing channels due to the fact that many of our customers compete with each other;
• our ability to accurately predict and recoup the large amount of up-front expenditures necessary to serve new customers and possible delays in sales cycles;
3
• our ability to expand our services beyond our traditional business and into the highly competitive data management industry, such as our proposed IntelliBaseSM National Repository Line Level Database and IntelliCastSM Target Notification services;
• the unpredictable rate of adoption of wireless 9-1-1 services, including further delays in the Federal Communications Commission’s mandated deployment of Phase I and Phase II wireless location services;
• the potential for liability claims, including product liability claims relating to our software;
• technical difficulties and network downtime, including those caused by sabotage or unauthorized access to our systems;
• changes in interest rates, including the LIBOR and prime rate, and their potentially adverse effect on our liquidity;
• the possibility that we will not generate taxable income in an amount sufficient to allow us to utilize previously generated net operating loss carryforwards;
• developments in telecommunications regulation and the unpredictable manner in which existing or new legislation and regulation may be applied to our business; and
• developments in governance, accounting and financial regulation and their unpredictable impact on general and administrative expenses.
This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this announcement. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed risk factors included in our SEC filings. Except for our ongoing obligations to disclose material information under U.S. federal securities laws, we undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this announcement or to reflect the occurrence of unanticipated events.
Investor Contact
Michael D. Dingman, Jr.
Chief Financial Officer
Intrado Inc.
720.494.6504 mdingman@intrado.com
4
INTRADO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
|
| THREE MONTHS ENDED |
| NINE MONTHS ENDED |
| ||||||||
|
| SEPTEMBER 30, |
| SEPTEMBER 30, |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenue: |
|
|
|
|
|
|
|
|
| ||||
Wireline business unit |
| $ | 20,779 |
| $ | 20,295 |
| $ | 61,828 |
| $ | 59,449 |
|
Wireless business unit |
| 10,466 |
| 6,731 |
| 28,682 |
| 17,792 |
| ||||
New markets business unit |
| 438 |
| 326 |
| 1,193 |
| 734 |
| ||||
Total revenue |
| 31,683 |
| 27,352 |
| 91,703 |
| 77,975 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
Wireline business unit |
| 9,725 |
| 9,150 |
| 29,305 |
| 28,372 |
| ||||
Wireless business unit |
| 5,611 |
| 3,279 |
| 16,004 |
| 10,332 |
| ||||
New markets business unit |
| 1,082 |
| 838 |
| 3,457 |
| 1,708 |
| ||||
Sales and marketing |
| 4,008 |
| 4,065 |
| 12,450 |
| 12,956 |
| ||||
General and administrative |
| 5,535 |
| 5,242 |
| 17,214 |
| 15,664 |
| ||||
Inventory impairment |
| — |
| — |
| — |
| 4,697 |
| ||||
Research and development |
| 580 |
| 555 |
| 1,820 |
| 2,028 |
| ||||
Total costs and expenses |
| 26,541 |
| 23,129 |
| 80,250 |
| 75,757 |
| ||||
Income from operations |
| 5,142 |
| 4,223 |
| 11,453 |
| 2,218 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||||
Interest and other income |
| 59 |
| 35 |
| 147 |
| 130 |
| ||||
Interest and other expense |
| (392 | ) | (312 | ) | (1,014 | ) | (967 | ) | ||||
Net income before income taxes |
| 4,809 |
| 3,946 |
| 10,586 |
| 1,381 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense |
| 1,707 |
| — |
| 3,758 |
| — |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 3,102 |
| $ | 3,946 |
| $ | 6,828 |
| $ | 1,381 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.20 |
| $ | 0.26 |
| $ | 0.44 |
| $ | 0.09 |
|
Diluted |
| $ | 0.18 |
| $ | 0.24 |
| $ | 0.41 |
| $ | 0.08 |
|
|
|
|
|
|
|
|
|
|
| ||||
Shares used in computing net income per share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| 15,749,993 |
| 15,237,882 |
| 15,641,085 |
| 15,203,188 |
| ||||
Diluted |
| 17,237,161 |
| 16,226,799 |
| 16,650,465 |
| 16,604,224 |
| ||||
INTRADO INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
|
|
|
|
|
| ||
|
| September 30, |
| December 31, |
| ||
|
| 2003 |
| 2002 |
| ||
|
| (Unaudited) |
|
|
| ||
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 30,740 |
| $ | 12,895 |
|
Accounts receivable, net of allowance for doubtful accounts of approximately $504 and $589, respectively |
| 14,494 |
| 14,900 |
| ||
Unbilled revenue |
| 1,917 |
| 6,165 |
| ||
Prepaids and other |
| 2,243 |
| 2,144 |
| ||
Deferred contract costs |
| 3,875 |
| 3,196 |
| ||
Deferred income taxes-current portion |
| 9,476 |
| 4,091 |
| ||
|
|
|
|
|
| ||
Total current assets |
| 62,745 |
| 43,391 |
| ||
|
|
|
|
|
| ||
Property and equipment, net |
| 26,352 |
| 30,277 |
| ||
Goodwill, net of accumulated amortization of $1,394 |
| 24,517 |
| 11,716 |
| ||
Other intangibles, net of accumulated amortization of $5,584 and $3,823, respectively |
| 6,173 |
| 7,934 |
| ||
Deferred income taxes |
| 1,730 |
| 8,916 |
| ||
Deferred contract costs |
| 3,092 |
| 2,710 |
| ||
Software development costs, net |
| 12,337 |
| 11,760 |
| ||
Other assets |
| 679 |
| 676 |
| ||
|
|
|
|
|
| ||
Total assets |
| $ | 137,625 |
| $ | 117,380 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable and accrued liabilities |
| $ | 9,745 |
| $ | 8,646 |
|
Current portion of capital lease obligations |
| 3,055 |
| 3,131 |
| ||
Line of credit |
| 2,000 |
| — |
| ||
Current portion of note payable |
| 4,250 |
| 917 |
| ||
Payable to Lucent |
| — |
| 2,395 |
| ||
Mandatorily redeemable preferred stock payable |
| 4,366 |
| — |
| ||
Deferred contract revenue |
| 14,235 |
| 10,280 |
| ||
|
|
|
|
|
| ||
Total current liabilities |
| 37,651 |
| 25,369 |
| ||
|
|
|
|
|
| ||
Capital lease obligations, net of current portion |
| 1,715 |
| 2,689 |
| ||
Line of credit |
| — |
| 8,000 |
| ||
Deferred rent, net of current portion |
| 1,532 |
| 1,424 |
| ||
Notes payable, net of current portion |
| 7,000 |
| 1,833 |
| ||
Mandatorily redeemable preferred stock payable |
| 4,090 |
| — |
| ||
Deferred contract revenue |
| 6,290 |
| 12,346 |
| ||
|
|
|
|
|
| ||
Total liabilities |
| 58,278 |
| 51,661 |
| ||
|
|
|
|
|
| ||
Stockholders' equity: |
|
|
|
|
| ||
Common stock |
| 16 |
| 15 |
| ||
Additional paid-in-capital |
| 87,735 |
| 80,936 |
| ||
Accumulated deficit |
| (8,404 | ) | (15,232 | ) | ||
Total stockholders' equity |
| 79,347 |
| 65,719 |
| ||
|
|
|
|
|
| ||
Total liabilities and stockholders' equity |
| $ | 137,625 |
| $ | 117,380 |
|
INTRADO INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
|
| THREE MONTHS ENDED |
| NINE MONTHS ENDED |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 3,102 |
| $ | 3,946 |
| $ | 6,828 |
| $ | 1,381 |
|
Adjustments to reconcile net income to net cash provided by operating activities- |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
| 3,785 |
| 2,408 |
| 11,853 |
| 6,655 |
| ||||
Tax benefit for stock option exercises |
| 1,624 |
| — |
| 1,850 |
| — |
| ||||
Stock-based compensation |
| 49 |
| 9 |
| 103 |
| 77 |
| ||||
Inventory impairment |
| — |
| — |
| — |
| 4,697 |
| ||||
Other adjustments |
| (34 | ) | 201 |
| (66 | ) | 466 |
| ||||
Non-cash interest |
| 138 |
| — |
| 207 |
| — |
| ||||
Change in- |
|
|
|
|
|
|
|
|
| ||||
Accounts receivable and unbilled revenue |
| 1,179 |
| (1,171 | ) | 4,739 |
| (3,977 | ) | ||||
Prepaids and other |
| (553 | ) | 2,441 |
| (102 | ) | 1,815 |
| ||||
Deferred contract costs |
| (241 | ) | (253 | ) | (1,061 | ) | 343 |
| ||||
Deferred income taxes |
| (23 | ) | — |
| 1,801 |
| — |
| ||||
Accounts payable and accrued liabilities |
| 103 |
| (1,181 | ) | 1,578 |
| (4,693 | ) | ||||
Deferred revenue |
| (232 | ) | 683 |
| (2,101 | ) | 2,049 |
| ||||
Net cash provided by operating activities |
| 8,897 |
| 7,083 |
| 25,629 |
| 8,813 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| ||||
Acquisition of property and equipment |
| (385 | ) | (8,036 | ) | (2,448 | ) | (12,747 | ) | ||||
Investment in TechnoCom |
| — |
| — |
| — |
| (500 | ) | ||||
Capitalized software development costs |
| (1,027 | ) | (2,791 | ) | (3,557 | ) | (7,999 | ) | ||||
Net cash used in investing activities |
| (1,412 | ) | (10,827 | ) | (6,005 | ) | (21,246 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| ||||
Principal payments on capital lease obligations |
| (671 | ) | (1,109 | ) | (2,478 | ) | (3,570 | ) | ||||
Payments on payable to Lucent |
| — |
| — |
| (2,395 | ) | — |
| ||||
Payments on mandatorily redeemable preferred stock payable |
| (4,552 | ) | — |
| (4,552 | ) | — |
| ||||
Principal payments on notes payable |
| (1,083 | ) | — |
| (1,400 | ) | — |
| ||||
Proceeds from line of credit |
| — |
| 3,000 |
| — |
| 6,000 |
| ||||
Proceeds from notes payable and capital lease advances |
| 299 |
| 3,000 |
| 4,199 |
| 3,000 |
| ||||
Proceeds from exercise of options, warrants and employee stock purchase plan |
| 3,151 |
| 231 |
| 4,847 |
| 1,777 |
| ||||
Net cash provided by financing activities: |
| (2,856 | ) | 5,122 |
| (1,779 | ) | 7,207 |
| ||||
Net increase (decrease) in cash and cash equivalents |
| 4,629 |
| 1,378 |
| 17,845 |
| (5,226 | ) | ||||
Cash and cash equivalents, beginning of period |
| 26,111 |
| 9,112 |
| 12,895 |
| 15,716 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents, end of period |
| $ | 30,740 |
| $ | 10,490 |
| $ | 30,740 |
| $ | 10,490 |
|
|
|
|
|
|
|
|
|
|
| ||||
Supplemental schedule of noncash financing and investing activities: |
|
|
|
|
|
|
|
|
| ||||
Property acquired with capital leases |
| $ | 1,093 |
| $ | 165 |
| $ | 1,129 |
| $ | 3,035 |
|
