EXHIBIT 99
[INFOCROSSING LOGO]
CONTACTS:
Chairman and Chief Executive Officer Chief Financial Officer
Zach Lonstein William McHale
Infocrossing, Inc. Infocrossing, Inc.
(201) 840-4726 (201) 840-4732
zlonstein@infocrossing.com wmchale@infocrossing.com
Media Relations Investor Relations
Michael Wilczak Matthew Hayden
Infocrossing, Inc. Hayden Communications, Inc.
(201) 840-4941 (858) 704-5065
mwilczak@infocrossing.com
INFOCROSSING REPORTS EARNINGS OF $0.01 PER SHARE
FOR THIRD QUARTER ENDED SEPTEMBER 30, 2005
LEONIA, NJ, NOVEMBER 9, 2005 -- INFOCROSSING, INC. (NASDAQ: IFOX) a provider of
selective IT outsourcing and business processing solutions announced today
financial results for the third quarter ended September 30, 2005.
KEY FINANCIAL RESULTS
(All numbers in thousands, except percentages and per share amounts)
THREE MONTHS ENDED SEPTEMBER 30,
2005 2004 Change %Change
Revenues $ 34,094 $ 26,445 $ 7,649 29%
EBITDA $ 4,419 $ 5,282 $ (863) (16%)
Income from operations $ 1,706 $ 3,085 $ (1,379) (45%)
Net income $ 113 $ 2,041 $ (1,928) (94%)
EPS - diluted $ 0.01 $ 0.10 $ (0.09) (90%)
Diluted shares 21,031 21,089 (58) 0%
NINE MONTHS ENDED SEPTEMBER 30,
2005 2004 Change %Change
Revenues $ 106,815 $ 66,232 $ 40,583 61%
EBITDA $ 17,083 $ 12,402 $ 4,681 38%
Income from operations $ 9,079 $ 6,474 $ 2,605 40%
Net income $ 2,674 $ 2,554 $ 120 5%
EPS - diluted $ 0.12 $ 0.13 $ (0.01) (8%)
Diluted shares 22,047 19,599 2,448 (12%)
THREE MONTHS ENDED SEPTEMBER 30, 2005
For the third quarter of 2005, Infocrossing reported revenues of $34,094,000, an
increase of $7,649,000 or 29%, compared with revenues of $26,445,000 reported
for the third quarter of 2004. This growth reflects $11,504,000 of revenue from
acquisitions completed in 2004. Excluding acquisitions, revenues declined by
$3,855,000 net of growth from new and existing customers.
Gross margin for the third quarter of 2005 was 26.0%, compared with gross margin
of 30.0% for the comparable period last year. The reduction is the result of
lower revenue without comparable offsetting cost reductions. The Company did not
reduce resources because it believes the resources will be redeployed to meet
anticipated future growth.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
decreased $863,000 or 16% from $5,282,000 for the third quarter of 2004 to
$4,419,000 during the third quarter of 2005. EBITDA for the third quarter
includes higher professional fees of $524,000 relating to increased compliance
costs with respect to the Sarbanes-Oxley Act and increased audit fees related to
the growth of the Company. Infocrossing uses EBITDA because it considers such
information an important supplemental measure of its operating performance and
believes EBITDA is frequently used by securities analysts, investors and other
interested parties in the evaluation of companies with comparable market
capitalization, many of which present EBITDA when reporting their results. A
reconciliation of EBITDA to net income follows in Appendix A.
Income before taxes for the third quarter was $272,000, a decrease of $1,971,000
compared with Income before taxes of $2,243,000 for the same period last year.
Income tax expense was $159,000 for the third quarter of 2005, compared with
$202,000 for the third quarter of 2004.
Cash from operations for the third quarter of 2005 was $2,122,000 compared with
cash used in operations of $786,000 for the third quarter of 2004. Free cash
flow was $791,000 for the third quarter of 2005, compared with cash used of
$1,053,000 for the third quarter of last year. Free cash flow ("FCF") is defined
as cash flow from operations less cash disbursed for capital expenditures.
Infocrossing presents FCF because it considers such information an important
supplemental measure of the Company's performance and believe it is frequently
used by securities analysts, investors and other interested parties in the
evaluation of companies with comparable market capitalization to us, many of
which present FCF when reporting their results. A reconciliation of cash from
operations to FCF is presented in Appendix C.
Net income for the current quarter was $113,000, or $0.01 per diluted share,
compared with net income of $2,041,000, or $0.10 per diluted share for the
comparable quarter last year. The weighted average number of shares and share
equivalents used to calculate diluted EPS was 21,031,167 shares for the current
quarter compared with 21,088,760 for the comparable quarter last year. The
change in share count was a result of exercises of options and warrants net of
the repurchase of 50,000 shares of the Company's stock and a decrease in the
price of the Company's common stock. The share counts at September 30, 2005 and
2004 do not include shares to be issued upon the potential conversion of the
Company's convertible debt, because the effect of such inclusion would be
anti-dilutive.
"Our results for the third quarter reflect the continued delays that we have
experienced in transitioning our sales pipeline into revenue producing
outsourcing engagements, as well as delays in completing the integration of the
healthcare claims processing business that we acquired from Verizon in late
2004," stated Zach Lonstein, Chairman and Chief Executive Officer of
Infocrossing. "We continue to receive positive indications from several of our
current opportunities, but the process for closing sales is taking longer than
we would like. We remain optimistic that we will be selected for a number of
pending awards. We are also pleased that we have now completed the business
consolidation of the Verizon acquisition, and expect to have approximately half
of the processing migrated into our data centers by the end of November," Mr.
Lonstein added.
NINE MONTHS ENDED SEPTEMBER 30, 2005
Infocrossing reported revenues of $106,815,000 for the nine months ended on
September 30, 2005, an increase of $40,583,000, or 61%, compared with revenues
of $66,232,000 for the comparable period in 2004. This growth reflects
$45,127,000 of revenue from acquisitions completed in 2004. Excluding revenues
from acquisitions, revenues declined by $4,544,000, net of growth from new and
existing customers.
Gross margin for the first nine months of 2005 was 28.0%, compared with gross
margin of 30.0% for the comparable period last year. The reduction is the result
of lower revenue without comparable cost reductions. The Company did not reduce
resources because it believes the resources will be redeployed to meet
anticipated future growth.
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
increased by $4,681,000, or 38%, to $17,083,000 for the nine months ended
September 30, 2005 from $12,402,000 for the comparable period in 2004. EBITDA
for the nine-month period for 2005 includes an unusual addition of $1,000,000 to
the allowance for doubtful accounts and higher professional fees of $1,334,000
relating to increased compliance costs with respect to the Sarbanes-Oxley Act
and increased audit fees related to the growth of the Company. A reconciliation
of EBITDA to net income follows in Appendix A.
Income before taxes increased by $2,140,000 to $4,690,000 for the nine months
ended September 30, 2005 from $2,550,000 for the comparable period in 2004. Tax
expense was $2,016,000 for the nine months ended September 30, 2005 compared
with a tax benefit of $4,000 for the comparable period in 2004. In the fourth
quarter of 2004, as a result of the Company's profitability and future outlook,
Infocrossing released approximately $12.5 million of a deferred tax valuation
allowance. As a result, effective with the first quarter of 2005, the Company
began recording income tax expense at statutory rates. Although income taxes
were accrued for the period at a rate of 43%, they are payable at a rate of
13.8%.
Cash from operations for the first nine months of 2005 was $15,258,000 compared
with cash flow from operations of $79,000 for the first nine months of 2004.
Free cash flow (FCF)was $11,555,000 for the first nine months of 2005, compared
with cash used of $1,006,000 for the first nine months of 2004. A reconciliation
of cash from operations to FCF is presented in Appendix C.
Net income for the nine months ended September 30, 2005 was $2,674,000, or $0.12
per diluted share, compared with net income of $2,554,000, or $0.13 per diluted
share for the comparable period in 2004. The weighted average number of shares
and share equivalents used to calculate diluted EPS was 22,047,307 shares for
the nine months ended September 30, 2005 compared with 19,599,100 shares in
2004. The share count increase was a result of exercises of options and warrants
net of the repurchase of 50,000 shares of the Company's stock during the twelve
months ended September 30, 2005. The share count at September 30, 2005 does not
include shares to be issued upon the potential conversion of the Company's
convertible debt, because the effect of such inclusion would be anti-dilutive.
On October 25, 2005, the Company announced that it had entered into a definitive
agreement to acquire (i)Structure from Level 3 Communications (NASDAQ: LVLT) for
$81.5 million, including approximately $1.5 million of Infocrossing stock. The
purchase price is subject to customary working capital and certain other
adjustments, including an increase of up to $10 million in cash to reimburse the
seller for capital expenditures and certain other costs related to providing
services for new customers that are pending installation. Over the ninety days
prior to the announcement, (i)Structure had signed new contracts totaling
approximately $77 million over contract terms ranging from three to six years in
length.
Infocrossing plans to fund the cash portion of the purchase price with a
combination of cash on hand, and with the proceeds of a new $70 million debt
facility bearing interest at 3% above LIBOR and other financing, including a
proposed sale and leaseback of certain assets. In conjunction with the
acquisition, the Company has repaid its previous $25 million debt facility,
which bore interest at 3% above the prime lending rate. The transaction, which
is subject to customary closing conditions, including the receipt of
Hart-Scott-Rodino clearance, is expected to close at the end of November or the
beginning of December. Infocrossing expects (i)Structure to add at least $76
million in revenues during the twelve months following the closing of the
transaction. The Company will hold a conference call after the closing of the
acquisition to discuss the impact of the transaction.
In a separate press release issued October 25, 2005, the Company provided
revenues, EBITDA and net income guidance for 2006. The Company forecasts
revenues for the full year ending December 31, 2006 to be between $239.0 million
and $246.0 million. EBITDA for 2006 is projected to be between $43.5 million to
$46.1 million, and net income for the period is forecasted to be between $6.8
million to $7.9 million. A reconciliation of net income to EBITDA is included in
Appendix B. For the twelve month period, Infocrossing expects free cash flow of
between $25.0 million and $29.0 million. A reconciliation of free cash flow to
cash flow from operations is included in Appendix C. The forecasts for 2006
include the acquisition of (i)Structure, the effect of the renewal of an
agreement with a major Infocrossing client which has committed to a four year
extension, the addition of new clients for the Company's IT outsourcing services
and growth in the Company's claims processing services driven by the new
Medicare Part D prescription drug benefit program.
"The (i)Structure acquisition is an important step toward achieving our
objectives for Infocrossing, and stimulating our growth through IT outsourcing
services," Mr. Lonstein stated. "We're especially excited about their recent new
contract signings and strong positioning in the marketplace by industry
analysts. We believe the greater market awareness and sales synergies resulting
from the acquisition will expand our sales pipeline, drive greater revenue
growth and enable us to achieve our forecasts for 2006," Mr. Lonstein concluded.
Infocrossing will hold a conference call for investors and analysts on
Wednesday, November 9, 2005 at 4:30 p.m. EDT to discuss results for the
Company's third quarter of 2005. The call-in number for the live audio call
beginning at 4:30 p.m. EDT is 1-973-409-9259. A live web cast of the conference
call will also be available on Infocrossing's website at
http://www.infocrossing.com. An audio replay of the conference call will be
available for seven days beginning from 6:30 p.m. EDT on November 9, 2005, at
973-341-3080. The pass code for the replay is 6678939. A webcast of the
conference call will be available for 30 days following the call at
http://www.infocrossing.com.
This call is being webcast by ViaVid Broadcasting and can be accessed at
Infocrossing's website at www.infocrossing.com. The replay of the webcast may
also be accessed for a period of thirty days after the conference call at the
Company's website, or through ViaVid at www.viavid.com. To access the webcast,
you will need to have the Windows Media Player on your desktop. For the free
download of the Media Player please visit:
www.microsoft.com/windows/windowsmedia/en/download/default.asp
EBITDA represents net income before interest, taxes, depreciation and
amortization. The Company presents EBITDA because it considers such information
an important supplemental measure of its performance and believes it is
frequently used by securities analysts, investors and other interested parties
in the evaluation of companies with comparable market capitalization, many of
which present EBITDA when reporting their results. The Company also uses EBITDA
for the following purposes: (1) EBITDA is one of the factors used to determine
the total amount of bonuses available to be awarded to executive officers and
other employees; (2) the Company's credit agreement uses EBITDA (with additional
adjustments) to measure compliance with covenants such as interest coverage and
debt incurrence; (3) EBITDA is also used by prospective and current lessors as
well as potential lenders to evaluate potential transactions with the Company;
and (4) EBITDA is also used by us to evaluate and price potential acquisition
candidates.
EBITDA has limitations as an analytical tool, and you should not consider it in
isolation or as a substitute for analysis of the Company's results as reported
under GAAP. Some of these limitations are: (a) EBITDA does not reflect changes
in, or cash requirements for, the Company's working capital needs; (b) EBITDA
does not reflect the significant interest expense, or the cash requirements
necessary to service interest or principal payments, on the Company's debts; and
(c) although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the future, and
EBITDA does not reflect any cash requirements for such capital expenditures.
Because of these limitations, EBITDA should not be considered as a principal
indicator of the Company's performance. The Company compensates for these
limitations by relying primarily on the Company's GAAP results and using EBITDA
only supplementally.
Free cash flow ("FCF") is defined as cash flow from operations less cash
disbursed for capital expenditures. The Company presents FCF because it
considers such information an important supplemental measure of the Company's
performance and believes it is frequently used by securities analysts, investors
and other interested parties in the evaluation of companies with comparable
market capitalization to us, many of which present FCF when reporting their
results.
FCF has limitations as an analytical tool, and you should not consider it in
isolation, or as a substitute for analysis of the Company's results as reported
under U.S. Generally Accepted Accounting Principles ("GAAP"). These limitations
include that FCF excludes other significant cash flows, such as principal
payments on the Company's debts. Because of these limitations, FCF should not be
considered as a principal indicator of the Company's performance. The Company
compensates for these limitations by relying primarily on the Company's GAAP
results and using FCF only on a supplemental basis.
ABOUT INFOCROSSING, INC. (http://www.infocrossing.com)
Infocrossing, Inc. (IFOX) is a provider of selective IT outsourcing services,
delivering the computing platforms and proprietary systems that enable
companies, regardless of industry, to process data and share information within
their business, and between their customers, suppliers and distribution
channels. Leading companies leverage Infocrossing's robust computing
infrastructure, skilled technical team, and process-driven operations to reduce
costs and improve service delivery by outsourcing the operation of mainframes,
mid-range, open system servers, networks, and business processes to
Infocrossing.
Safe Harbor Statement
This release contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. As such, final results
could differ from estimates or expectations due to risks and uncertainties,
including, but not limited to: incomplete or preliminary information; changes in
government regulations and policies; continued acceptance of the Company's
products and services in the marketplace; competitive factors; closing contracts
with new customers and renewing contracts with existing customers on favorable
terms; expanding services to existing customers; new products; technological
changes; the Company's dependence upon third-party suppliers; intellectual
property rights; difficulties with the identification, completion, and
integration of acquisitions, including the acquisition and integration of
Infocrossing Healthcare Services, Inc., f/k/a Verizon Information Technologies
Inc. and the acquisition and integration of (i)Structure, LLC and other risks.
For any of these factors, the Company claims the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995, as amended.
(financial tables follow)
INFOCROSSING, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------- ---------------------------------------
2005 2004 2005 2004
------------------ ------------------ ------------------ -----------------
(UNAUDITED) (UNAUDITED)
REVENUES $ 34,094 $ 26,445 $ 106,815 $ 66,232
--------------- --------------- --------------- --------------
COSTS and EXPENSES:
Costs of revenues, excluding
depreciation shown below 25,171 18,514 76,524 46,303
Selling and promotion costs 1,262 801 3,376 2,442
General and administrative expenses 3,242 1,848 9,832 5,085
Depreciation and amortization 2,713 2,197 8,004 5,928
--------------- --------------- --------------- --------------
32,388 23,360 97,736 59,758
--------------- --------------- --------------- --------------
INCOME FROM OPERATIONS 1,706 3,085 9,079 6,474
--------------- --------------- --------------- --------------
Interest income (276) (126) (528) (206)
Fees related to loans repaid - - - 1,347
Interest expense 1,710 968 4,917 2,783
--------------- --------------- --------------- --------------
1,434 842 4,389 3,924
--------------- --------------- --------------- --------------
INCOME BEFORE INCOME TAXES 272 2,243 4,690 2,550
Income tax expense (benefit) 159 202 2,016 (4)
--------------- --------------- --------------- --------------
NET INCOME $ 113 $ 2,041 $ 2,674 $ 2,554
=============== =============== =============== ==============
BASIC INCOME PER SHARE:
Net income $ 0.01 $ 0.11 $ 0.13 $ 0.15
=============== =============== =============== ==============
Weighted average number of common
shares outstanding 20,213,613 18,620,252 20,183,031 17,382,089
=============== =============== =============== ==============
DILUTED INCOME PER SHARE:
Net income $ 0.01 $ 0.10 $ 0.12 $ 0.13
=============== =============== =============== ==============
Weighted average number of
common shares and share equivalents
outstanding 21,031,167 21,088,760 22,047,307 19,599,100
=============== =============== =============== ==============
Certain reclassifications were made to prior period amounts to conform
to the current presentation.
INFOCROSSING, INC. & SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2005 2004
-------------- --------------
(UNAUDITED)
ASSETS
Cash and equivalents $ 39,247 $ 26,311
Trade accounts receivable, net of allowances for doubtful accounts of
$1,404 and $249 at September 30, 2005 and December 31, 2004, respectively 19,686 26,707
Other current assets 8,901 7,733
----------- -----------
Total current assets 67,834 60,751
Property, equipment and purchased software, net 26,459 25,113
Goodwill 104,403 103,177
Other non-current assets 26,055 27,609
----------- -----------
TOTAL ASSETS $ 224,751 $ 216,650
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 45,282 $ 22,569
Long-term debt and capitalized lease obligations, net of current portion 71,979 100,432
Other long-term liabilities 2,858 2,412
----------- -----------
TOTAL LIABILITIES 120,119 125,413
Common stockholders' equity 104,632 91,237
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 224,751 $ 216,650
=========== ===========
Certain reclassifications were made to prior period amounts to conform to the
current presentation.
SUPPLEMENTARY INFORMATION
APPENDIX A
EBITDA RECONCILIATION
The reconciliation of EBITDA with net income for the quarters and nine-month
periods ended September 30, 2005 and 2004, respectively, is as follows (in
thousands):
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------- ---------------------------------------
2005 2004 2005 2004
------------------ ------------------ ------------------ -----------------
Net income (loss) $ 113 $ 2,041 $ 2,674 $ 2,554
Add (deduct):
Income tax provision (benefit) 159 202 2,016 (4)
Net interest expense 1,434 842 4,389 3,924
Depreciation and amortization 2,713 2,197 8,004 5,928
--------------- --------------- --------------- --------------
EBITDA $ 4,419 $ 5,282 $ 17,083 $ 12,402
=============== =============== =============== ==============
APPENDIX B
2006 EBITDA RECONCILIATION
The reconciliation of projected EBITDA with projected net income for the full
year ending December 31, 2006 is as follows (in thousands):
FULL YEAR ENDING DECEMBER 31, 2006
----------------------------------------
FROM TO
------------------ ------------------
Net income (loss) $ 6,800 $ 7,900
Add (deduct):
Income tax provision (benefit) 4,500 5,200
Net interest expense 10,000 10,400
Depreciation and amortization 22,200 22,600
--------------- ---------------
EBITDA $ 43,500 $ 46,100
=============== ===============
APPENDIX C
FREE CASH FLOW RECONCILIATION
The reconciliation of projected cash from operations to free cash flow for the
three months and nine months ended September 30, 2005, and the full year ending
December 31, 2006 is as follows (in thousands):
RECONCILIATION OF CASH FROM OPERATIONS TO FREE CASH FLOW
PROJECTED YEAR ENDING NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2006 SEPTEMBER 30, SEPTEMBER 30,
LOW HIGH 2005 2004 2005 2004
Operating Cash Flow 28,000 32,000 15,258 79 2,122 (786)
Cash capital expenditures,
including deferred
software costs (3,000) (3,000) (3,703) (1,085) (1,331) (267)
Free Cash Flow 25,000 29,000 11,555 (1,006) 791 (1,053)
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