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 FINANCIAL RESULTS FOR THE FOURTH QUARTER
AND FULL YEAR ENDED DECEMBER 31, 2005
COMPANY REAFFIRMS GUIDANCE FOR 2006
LEONIA, NJ, MARCH 9, 2006 -- INFOCROSSING, INC. (NASDAQ: IFOX), a provider of
selective IT outsourcing solutions, announced today financial results for the
fourth quarter and full year ended December 31, 2005.
YEAR ENDED DECEMBER 31, 2005 HIGHLIGHTS
o Revenues reached a record $148,006,000, an increase of $43,057,000,
compared with revenues of $104,949,000 for 2004.
o Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
were $22,085,000, the highest in the Company's history. A reconciliation of
EBITDA to net income follows in Appendix A, and descriptions of the reasons
for presenting this measure, as well as its limitations, are explained
below.
o Generated $21,944,000 in cash from operations in 2005, compared with
$6,316,000 in 2004. Generated $16,682,000 in free cash flow in 2005,
compared with free cash flow of $4,493,000 in 2004. A reconciliation of
free cash flow to cash from operations follows in Appendix A, and
descriptions of the reason for presenting this measure, as well as its
limitations, are explained below.
o Completed the acquisition of (i)Structure, LLC, a direct competitor in the
selective IT outsourcing market. The acquisition is expected to add at
least $76,000,000 in revenue during the first twelve months following the
closing of the transaction on November 30, 2005.
o Achieved sales momentum with the addition of $98,400,000 in total new
revenue commitments in the last six months of 2005 (over contract terms up
to six years in duration), including $77,000,000 in commitments signed by
(i)Structure over the ninety days prior to the announcement of the
acquisition on October 25, 2005.
o Subsequently added an additional $21,200,000 in new commitments since the
beginning of 2006 over contract terms up to five years in duration.
o Extended contract terms with a number of customers, including a four year
extension of one of the Company's largest IT outsourcing contracts.
o Migrated a significant portion of the outside processing by a third party
for Infocrossing Healthcare Services to Infocrossing's data center
resulting in approximately $4,000,000 in savings expected to be realized in
2006.
YEAR ENDED DECEMBER 31, 2005 RESULTS
Infocrossing reported revenues of $148,006,000 for the full year ended December
31, 2005, an increase of $43,057,000, or 41%, compared with revenues of
$104,949,000 for the prior year. Revenue growth for the year included
$52,321,000 in revenue from acquisitions completed in 2004 and 2005. Excluding
revenue from acquisitions, the decrease was attributed to fewer new sales in the
first half of 2005, lower usage-based billing and an unusually high dollar value
of contracts that came due for renewal during the year.
Gross margin for the year was 28.1%, compared with gross margin of 32.0% for the
comparable period last year. The reduction reflects lower revenues, excluding
acquisitions, without offsetting cost reductions. The Company deferred
implementing cost reductions in anticipation of new sales that were expected to
be added in 2005 and the acquisition of (i)Structure. In December 2005, the
Company began implementing cost reductions that are expected to result in higher
gross margins in 2006.
EBITDA increased by $525,000, or 2.4%, to $22,085,000 for 2005, from $21,560,000
for the comparable period in 2004. A reconciliation of EBITDA to net income
follows in Appendix A, and descriptions of the reason for presenting this
measure, as well as its limitations, are explained below.
Income before taxes was $4,725,000 for the year ended December 31, 2005, a
decrease of $2,699,000 from income before taxes of $7,424,000 for the comparable
period in 2004. Net income for the year was $2,573,000, or $0.12 per diluted
share, compared with net income of $19,963,000, or $0.95 per diluted share for
2004. Net Income for 2004 included a tax benefit of $12,539,000, while net
income for 2005 included tax expense of $2,152,000. In the fourth quarter of
2004, as a result of the Company's profitability and future outlook,
Infocrossing released approximately $12,500,000 of a deferred tax valuation
allowance. Effective with the first quarter of 2005, the Company began recording
income tax expense at its effective rates. Although income taxes were accrued
for the period at a rate of 45.5%, they are payable at a rate of 11.9% since
there were no federal income taxes payable for 2005.
Cash flow from operations for 2005 was $21,944,000 compared to $6,316,000 for
2004. Free cash flow was $16,682,000 for 2005, compared with $4,493,000 for
2004. A reconciliation of free cash flow to cash from operations follows in
Appendix A, and descriptions of the reasons for presenting this measure, as well
as its limitations, are explained below.
On November 30, 2005, Infocrossing completed the previously announced
acquisition of (i)Structure, LLC for $82,300,000 in cash and approximately
$2,500,000 in Infocrossing stock. The acquisition is expected to add at least
$76,000,000 in revenue during the first twelve months following the close of the
transaction. Infocrossing expects to achieve between $9,000,000 and $11,000,000
in cost savings in 2006. The Company funded the cash portion of the purchase
price with a new $55,000,000 term loan, a new $15,000,000 revolving credit loan,
and a portion of the gross proceeds of approximately $25,000,000 from the
sale/leaseback of (i)Structure's data centers located in Tempe, Arizona and
Omaha, Nebraska. Subsequent to the acquisition, the Company used a portion of
the proceeds from the sale/leaseback arrangement to repay $10,000,000 of the
$15,000,000 revolving credit loan. Shortly before the acquisition, the Company
repaid the entire outstanding balance of approximately $24,400,000 of a term
loan. The Company had $16,892,000 in cash and equivalents at December 31, 2005.
"2005 was an important year for Infocrossing," stated Zach Lonstein, Chairman
and Chief Executive Officer. "Although we entered the year with a strong revenue
pipeline and favorable industry fundamentals, our sales organization did not
convert the opportunities into sufficient new contracts to provide meaningful
organic sales during the year. While revenue, EBITDA, cash from operations and
free cash flow all increased in 2005 compared with 2004, the combination of a
lower level of new sales in the first half of the year, less usage based billing
and the unusually high dollar value of contracts that came due for renewal
resulted in lower revenue, EBITDA, and net income than we initially forecasted
for 2005," Mr. Lonstein added. "We recognized the challenges, strengthened our
sales effort by adding key leadership in business development and marketing, and
acquired (i)Structure, a direct competitor in the selective IT outsourcing
market that provides us with the added capabilities, enhanced market position,
and most importantly, demonstrated sales success to deliver greater organic
sales in 2006. We have already seen a measurable improvement in our sales
performance. In the last half of 2005 we received new revenue commitments
totaling $98,400,000 over contract terms up to six years in length, including
$77,000,000 in total new revenue commitments signed by (i)Structure during the
ninety days prior to the announcement of the acquisition on October 25, 2005 and
$21,400,000 in new commitments achieved between the time the acquisition was
announced and the end of 2005. Our positive sales momentum has continued into
2006, and since the beginning of the year, we have received an additional
$21,200,000 in new revenue commitments over terms up to five years in length. In
addition to our focus on revenue growth, we have moved aggressively to realize
the forecasted $9,000,000 to $11,000,000 in cost synergies in 2006 from the
(i)Structure acquisition. We have already eliminated eighty three positions, and
we are working to integrate our operations to achieve further savings in 2006,"
Mr. Lonstein continued.
THREE MONTHS ENDED DECEMBER 31, 2005 RESULTS
For the fourth quarter ended December 31, 2005, Infocrossing reported revenues
of $41,191,000, an increase of $2,474,000, or 6.4%, compared with revenues of
$38,717,000 reported for the fourth quarter of 2004. Revenue growth includes
$7,194,000 from the (i)Structure acquisition, which closed on November 30, 2005.
Gross margin for the fourth quarter of 2005 was 27.6%, compared with gross
margin of 35.3% for the comparable period last year. The reduction reflects
lower revenues, excluding acquisitions during the year, without offsetting cost
reductions. The Company deferred implementing cost reductions in anticipation of
new sales that were expected to be added in 2005 and the acquisition of
(i)Structure. In December 2005, Infocrossing began implementing cost reductions
that are expected to result in higher gross margins in 2006.
EBITDA for the fourth quarter of 2005 was $5,002,000, a decrease of $4,156,000,
compared with $9,158,000 for the fourth quarter of 2004. A reconciliation of
EBITDA to net income follows in Appendix A, and descriptions of the reasons for
presenting this measure, as well as its limitations, are explained below.
Income before taxes for the fourth quarter was $35,000, a decrease of
$4,839,000, compared with Income before taxes of $4,874,000 for the same period
last year. Net loss for the current quarter was $101,000, or ($0.01) per diluted
share, compared with net income of $17,409,000, or $0.68 per diluted share for
the comparable quarter last year. Net income for the fourth quarter of 2004
included a tax benefit of $12,535,000, compared with a tax expense of $136,000
for 2005. As noted above, in the fourth quarter of 2004, as a result of the
Company's profitability and future outlook, the Company had released
approximately $12,500,000 of a deferred tax valuation allowance.
Cash flow from operations for the fourth quarter of 2005 was $6,686,000,
compared with $6,237,000 for the fourth quarter of 2004. Free cash flow was
$5,127,000 for the fourth quarter of 2005, compared with $5,497,000 for the
fourth quarter of last year. A reconciliation of free cash flow to cash from
operations follows in Appendix A and descriptions of the reason for presenting
this measure, as well as its limitations, are explained below.
BUSINESS OUTLOOK FOR THE FIRST QUARTER AND FULL YEAR 2006
In a press release issued October 25, 2005, the Company provided revenues,
EBITDA and net income guidance for 2006. The Company reaffirms the previous
guidance, which forecasts revenues for the full year ending December 31, 2006 to
be between $239,000,000 and $246,000,000. EBITDA for 2006 is projected to be
between $43,500,000 and $46,000,000, and net income for the period is forecasted
to be between $6,800,000 and $7,900,000. A reconciliation of net income to
EBITDA is included in Appendix B and descriptions of the reason for presenting
this measure, as well as its limitations, are explained below. Infocrossing
expects free cash flow for 2006 of between $25,000,000 and $29,000,000. A
reconciliation of free cash flow to cash flow from operations is included in
Appendix B and descriptions of the reason for presenting this measure, as well
as its limitations, are explained below.
For the first quarter ending March 31, 2006, Infocrossing forecasts revenues to
be between $55,000,000 and $56,000,000, and EBITDA to be between $8,000,000 and
$8,400,000. A reconciliation of net income to EBITDA is included in Appendix B
and descriptions of the reasons for presenting this measure, as well as its
limitations, are explained below.
"I have tremendous confidence in our ability to achieve our long-term growth
objectives," Mr. Lonstein continued. "In 2001, we had clients in a single data
center, $27,000,000 in revenue, and reported a net loss of $45,000,000. We set
our sights on becoming the leading provider of selective IT outsourcing services
in the United States, and achieving $250,000,000 in revenue in 2007. Today, we
have five data centers across the United States, expanded service offerings, an
impressive client base comprised of enterprise-scale companies, an experienced
management team and forecasted revenue of at least $239,000,000 for 2006, a
nearly nine-fold increase since 2001. With the addition of (i)Structure, we have
the sales and market strength to accelerate our growth and achieve even greater
goals, providing long-term value for our shareholders, clients and employees,"
Mr. Lonstein concluded.
Infocrossing will hold a conference call for investors and analysts on Thursday,
March 9, 2006 at 4:30 p.m. EDT to discuss results for the fourth quarter and
full year ended December 31, 2005. The call-in number for the live audio call
beginning at 4:30 p.m. EDT is 1-973-409-9259. A live webcast of the conference
call will be broadcast by ViaVid Broadcasting and can be accessed at ViaVid's
website at http://www.viavid.net, or Infocrossing's website at
www.infocrossing.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. An audio
replay of the conference call will be available for seven days beginning from
6:30 p.m. EDT on March 9, 2006, at 973-341-3080. The pass code for the replay is
7111014. A webcast of the conference call will be available for 30 days
following the call at http://www.infocrossing.com, or through ViaVid at
http://www.viavid.net.
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 on a supplemental basis.
FCF represents 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 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 GAAP. These limitations include that FCF excludes other significant cash
flows, such as principal payments on debt. 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 (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 DECEMBER 31, TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------------- ---------------------------------------
2005 2004 2005 2004
----------------- ----------------- ----------------- -----------------
(UNAUDITED)
REVENUES $ 41,191 $ 38,717 $ 148,006 $ 104,949
-------------- -------------- -------------- -------------
COSTS and EXPENSES:
Costs of revenues, excluding
depreciation shown below 29,830 25,065 106,354 71,368
Selling and promotion costs 1,350 835 4,726 3,277
General and administrative expenses 5,009 3,659 14,841 8,744
Depreciation and amortization 3,142 2,751 11,146 8,679
-------------- -------------- -------------- -------------
39,331 32,310 137,067 92,068
-------------- -------------- -------------- -------------
INCOME FROM OPERATIONS 1,860 6,407 10,939 12,881
-------------- -------------- -------------- -------------
Interest income (159) (107) (687) (313)
Interest expense 1,984 1,640 6,901 5,770
-------------- -------------- -------------- -------------
1,825 1,533 6,214 5,457
-------------- -------------- -------------- -------------
35 4,874 4,725 7,424
INCOME BEFORE
INCOME TAXES
Income tax expense (benefit) 136 (12,535) 2,152 (12,539)
-------------- -------------- -------------- -------------
NET INCOME $ (101) $ 17,409 $ 2,573 $ 19,963
============== ============== ============== =============
BASIC INCOME PER SHARE:
Net income $ (0.01) $ 0.91 $ 0.13 $ 1.12
============== ============== ============== =============
Weighted average number of common
shares outstanding 20,280,484 19,157,250 20,216,863 17,827,006
============== ============== ============== =============
DILUTED INCOME PER SHARE:
Net income $ (0.01) $ 0.68 $ 0.12 $ 0.95
============== ============== ============== =============
Weighted average number of
common shares and share equivalents
outstanding 20,280,484 26,215,317 21,726,496 21,931,982
============== ============== ============== =============
Certain reclassifications were made to prior period amounts to conform
to the current presentation.
INFOCROSSING, INC. & SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31, DECEMBER 31,
2005 2004
-------------- ---------------
ASSETS
Cash and equivalents $ 16,892 $ 26,311
Trade accounts receivable, net of allowances for doubtful accounts of
$637 and $249, respectively 25,631 26,707
Other current assets 13,103 7,733
-------------- ---------------
Total current assets 55,626 60,751
Property, equipment and purchased software, net 40,749 25,113
Goodwill 150,799 103,177
Other non-current assets 39,261 27,609
-------------- ---------------
TOTAL ASSETS $ 286,435 $ 216,650
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 49,710 $ 22,569
Long-term debt and capitalized lease obligations, net of current portion 123,734 100,432
Other long-term liabilities 5,961 2,412
-------------- ---------------
TOTAL LIABILITIES 179,405 125,413
Common stockholders' equity 107,030 91,237
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 286,435 $ 216,650
============== ===============
Certain reclassifications were made to prior period amounts to conform to the
current presentation.
SUPPLEMENTARY INFORMATION
APPENDIX A - RECONCILIATIONS OF HISTORICAL INFORMATION
EBITDA RECONCILIATION
The reconciliation of EBITDA with net income for the quarters and years ended
December 31, 2005 and 2004, respectively, is as follows (in thousands):
THREE MONTHS ENDED DECEMBER 31, TWELVE MONTHS ENDED DECEMBER 31,
---------------------------------------- -----------------------------------------
2005 2004 2005 2004
------------------ ------------------ ------------------- ------------------
Net income (loss) $ (101) $ 17,409 $ 2,573 $ 19,963
Add (deduct):
Income tax provision (benefit) 136 (12,535) 2,152 (12,539)
Net interest expense 1,825 1,533 6,214 5,457
Depreciation and amortization 3,142 2,751 11,146 8,679
--------------- --------------- ---------------- ---------------
EBITDA $ 5,002 $ 9,158 $ 22,085 $ 21,560
=============== =============== ================ ===============
Certain reclassifications were made to prior period amounts to conform
to the current presentation.
FREE CASH FLOW RECONCILIATION
The reconciliation of cash flows provided by operations with free cash flow for
the quarters and years ended December 31, 2005 and 2004, respectively, is as
follows (in thousands):
THREE MONTHS ENDED DECEMBER 31, TWELVE MONTHS ENDED DECEMBER 31,
---------------------------------------- -----------------------------------------
2005 2004 2005 2004
------------------ ------------------ ------------------- ------------------
Cash flow provided by operations $ 6,686 $ 6,237 $ 21,944 $ 6,316
Less:
Purchases of property and equipment
including software costs deferred (1,559) (740) (5,262) (1,823)
--------------- --------------- ---------------- ---------------
Free Cash Flow $ 5,127 $ 5,497 $ 16,682 $ 4,493
=============== =============== ================ ===============
APPENDIX B - RECONCILIATIONS OF GUIDANCE INFORMATION
EBITDA RECONCILIATION
The reconciliation of EBITDA with net income for the projected quarter ending
March 31, 2006 and projected year ending December 31, 2006, respectively, is as
follows (in thousands):
PROJECTED 1ST QUARTER ENDING MARCH 31, PROJECTED YEAR ENDING DECEMBER 31, 2006
2006
---------------------------------------- -----------------------------------------
LOW HIGH LOW HIGH
------------------ ------------------ ------------------- ------------------
Net income (loss) $ 500 $ 700 $ 6,800 $ 7,900
Add (deduct):
Income tax provision (benefit) 400 600 4,500 5,200
Net interest expense 2,500 2,500 10,000 10,400
Depreciation and amortization 4,600 4,600 22,200 22,600
--------------- --------------- ---------------- ---------------
EBITDA $ 8,000 $ 8,400 $ 43,500 $ 46,100
=============== =============== ================ ===============
FREE CASH FLOW RECONCILIATION
The reconciliation of cash flows provided by operations with free cash flow for
the projected year ending December 31, 2006 is as follows (in thousands):
PROJECTED YEAR ENDING DECEMBER 31, 2006
----------------------------------------
LOW HIGH
------------------ ------------------
Cash flow provided by operations $ 28,000 $ 32,000
Less:
Purchases of property and equipment
including software costs deferred (3,000) (3,000)
--------------- ---------------
Free Cash Flow $ 25,000 $ 29,000
=============== ===============
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