EXHIBIT 99
For release at 4:05 EDT
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 matt@haydenir.com
INFOCROSSING REPORTS FINANCIAL RESULTS
FOR THE FIRST QUARTER ENDED MARCH 31, 2006
Company Reports Revenues of $55.9 Million and EBITDA of $8.5 Million
LEONIA, NJ, May 10, 2006 -- Infocrossing, Inc. (Nasdaq: IFOX), a provider of
selective IT outsourcing solutions, announced today the Company's financial
results for the first quarter ended March 31, 2006. Results for the quarter were
at the high end of the Company's previously announced guidance.
FIRST QUARTER HIGHLIGHTS
o Revenues reached a record $55,921,000, an increase of $18,394,000 compared
with revenues of $37,527,000 for the first quarter of 2005.
o Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
were $8,465,000 for the first quarter of 2006, an increase of $322,000
compared with EBITDA of $8,143,000 for the same period last year. EBITDA
for the first quarter of 2006 includes a non-cash charge of $464,000 for
expensing stock options under new accounting rules. 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 Completed a significant portion of the integration of the (i)Structure
acquisition. The Company is on track to achieve the forecasted $9,000,000
to $11,000,000 in cost savings for 2006. Approximately 90 positions were
eliminated as of May 1, 2006, and forecasted hardware, software and
communications savings have been identified and are in the process of being
implemented. As a result, the Company expects to achieve annualized savings
of $13,000,000 to $15,000,000 upon completion of the integration at the end
of the year.
o Added fifteen clients for the new Medicare Part D service, bringing the
total client base to 60 managed care companies that are now using the
Company's Medicare Part D enrollment and reconciliation services.
For the first quarter ended March 31, 2006, revenues grew 49.0% to $55,921,000
compared with revenues of $37,527,000 reported for the first quarter of 2005.
These results were at the high end of the Company's previously provided guidance
of revenues between $55,000,000 and $56,000,000 for the quarter. Revenues for
the first quarter of 2006 included $19,564,000 from the acquisition of
(i)Structure, which had closed on November 30, 2005. Excluding (i)Structure,
revenues declined $1,170,000, or 3.1% compared with the first quarter of 2005.
On a sequential basis, revenues excluding those from the acquisition of
(i)Structure increased by $2,359,000, or 6.9%, from $33,997,000 for the fourth
quarter of 2005.
Gross margin for the first quarter of 2006 was 28.0%, compared with gross margin
of 31.0% for the comparable period last year. The reduction reflects lower
revenues, excluding the (i)Structure acquisition, without offsetting cost
reductions. After the close of the (i)Structure acquisition, the Company began
implementing cost reductions that are expected to result in savings of between
$9,000,000 to $11,000,000 in 2006, with a portion of the savings to be realized
in the second quarter and additional savings expected to be realized in the
third and fourth quarters of the year. Identified synergies are expected to
result in between $13,000,000 to $15,000,000 in annualized savings once the
reductions have been fully implemented by the end of 2006. The Company expects
gross margins to improve to approximately 33% by the end of the year.
EBITDA for the first quarter of 2006 was $8,465,000, an increase of $322,000,
compared with $8,143,000 for the first quarter of 2005. These results exceeded
the Company's previously announced forecast of EBITDA between $8,000,000 and
$8,400,000 for the quarter. 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 first quarter was $1,917,000, a decrease of
$2,141,000, compared with Income before taxes of $4,058,000 for the comparable
period last year. The decrease resulted from higher selling, general and
administrative expense, interest and depreciation expenses due to the
(i)Structure acquisition. Net income for the current quarter was $1,011,000, or
$0.05 per diluted share, compared with net income of $2,437,000, or $0.11 per
diluted share for the comparable quarter last year.
Cash used in operations for the first quarter of 2006 was $34,000, compared with
$5,345,000 of cash generated from operations in the first quarter of 2005. Free
cash flow was a negative $1,396,000 for the quarter ended March 31, 2006
compared with a positive of $4,384,000 for the comparable period last year. Cash
used in operations and free cash used in the first quarter of 2006 included the
full year prepayment of annual software license fees totaling $7,650,000
pursuant to an (i)Structure agreement existing prior to the acquisition.
Excluding this prepayment, cash flow from operations would have been $5,704, 000
for the first quarter of 2006 and free cash flow would have been $4,342,000 for
such period. The prepayment of annual software license fees will result in
higher free cash flow during the balance of 2006. As previously announced, the
Company expects between $25,000,000 and $29,000,000 of free cash flow for the
year.
"We are very pleased with our results for the first quarter of 2006," stated
Zach Lonstein, Chairman and Chief Executive Officer of the Company. "We achieved
our revenue, EBITDA and net income objectives for the quarter and made
significant progress in integrating (i)Structure to realize the forecasted sales
and cost synergies of the acquisition. We have fully integrated our sales,
marketing and client services organizations to drive greater demand for our
services, close existing opportunities in our sales pipeline and cross sell our
expanded capabilities to our existing client base. Since January 1, 2006 we have
signed new revenue commitments totaling $25,100,000 over contract terms up to
five years in length," Mr. Lonstein continued. "Furthermore, we have moved
aggressively to achieve the forecasted $9,000,000 to $11,000,000 in cost savings
expected to be realized in 2006. Since the acquisition closed on November 30,
2005, we have eliminated approximately 90 positions, leveraged our greater scale
to renegotiate vendor pricing and identified further savings to be implemented
throughout the remainder of the year. The majority of the reductions were
implemented in the first quarter and savings are expected to be realized in the
second quarter with additional savings in the third and fourth quarters of
2006."
BUSINESS OUTLOOK FOR THE SECOND QUARTER AND FULL YEAR 2006
For the second quarter ending June 30, 2006, the Company forecasts revenues to
be between $56,500,000 and $57,500,000 and EBITDA to be between $9,500,000 and
$9,900,000. 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.
In a press release issued October 25, 2005, the Company provided revenues,
EBITDA and net income guidance for 2006. Revenues for the full year ending
December 31, 2006 were forecasted to be between $239,000,000 and $246,000,000.
EBITDA for 2006 was projected to be between $43,500,000 and $46,100,000, and net
income for the period was 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. The Company projected free cash flow for 2006
to be 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.
"We remain committed to achieving our forecast for 2006 and believe we will end
the year in the lower end of our guidance range," Mr. Lonstein stated.
"Furthermore, we believe the accomplishments of the last several months provide
us with the foundation to deliver long-term growth," Mr. Lonstein concluded.
The Company will hold a conference call for investors and analysts on Wednesday,
May 10, 2006 at 4:30 p.m. ET to discuss results for the first quarter ended
March 31, 2006. The call-in number for the live audio call beginning at 4:30
p.m. ET is 1-973-582-2785. 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 the Company'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. ET on May 10, 2006, at 973-341-3080. The pass code for
the replay is 7347894. 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 March 31,
----------------------------------------
2006 2005
------------------ ------------------
(Unaudited)
REVENUES $ 55,921 $ 37,527
--------------- ---------------
COSTS and EXPENSES:
Costs of revenues, excluding
depreciation shown below 40,265 25,847
Selling and promotion costs 1,958 958
General and administrative expenses 5,233 2,579
Depreciation and amortization 4,131 2,620
--------------- ---------------
51,587 32,004
--------------- ---------------
INCOME FROM OPERATIONS 4,334 5,523
--------------- ---------------
Interest income (105) (126)
Interest expense 2,522 1591
--------------- ---------------
2,417 1,465
--------------- ---------------
INCOME BEFORE
INCOME TAXES 1,917 4,058
Income tax expense 906 1,621
--------------- ---------------
NET INCOME $ 1,011 $ 2,437
=============== ===============
BASIC INCOME PER SHARE:
Net income $ 0.05 $ 0.12
=============== ===============
Weighted average number of common
shares outstanding 20,754,196 20,086,501
=============== ===============
DILUTED INCOME PER SHARE:
Net income $ 0.05 $ 0.11
=============== ===============
Weighted average number of
common shares and share equivalents
outstanding 21,922,259 27,338,434
=============== ===============
Certain reclassifications were made to prior period amounts to conform
to the current presentation.
INFOCROSSING, INC. & SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2006 2005
-------------- --------------
(Unaudited)
ASSETS
Cash and equivalents $ 11,734 $ 16,892
Trade accounts receivable, net of allowances for doubtful accounts of
$473 and $637 at March 31, 2006 and December 31, 2005, respectively 25,217 25,631
Other current assets 21,036 13,103
----------- -----------
Total current assets 57,987 55,626
Property, equipment and purchased software, net 40,024 40,749
Goodwill 154,678 150,799
Other non-current assets 38,733 39,261
----------- -----------
TOTAL ASSETS $ 291,422 $ 286,435
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 50,412 $ 49,710
Long-term debt and capitalized lease obligations, net of current portion 121,260 123,734
Other long-term liabilities 9,335 5,961
----------- -----------
TOTAL LIABILITIES 181,007 179,405
Common stockholders' equity 110,415 107,030
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 291,422 $ 286,435
=========== ===========
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 ended March 31,
2006 and 2005, respectively, is as follows (in thousands):
Three Months Ended March 31,
----------------------------------------
2006 2005
------------------ ------------------
Net income (loss) $ 1,011 $ 2,437
Add (deduct):
Income tax provision) 906 1,621
Net interest expense 2,417 1,465
Depreciation and amortization 4,131 2,620
--------------- ---------------
EBITDA $ 8,465 $ 8,143
=============== ===============
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 (used in) operations with free cash
flow for the quarters ended March 31, 2006 and 2005, respectively, is as follows
(in thousands):
Three Months Ended March 31,
---------------------------------------
2006 2005
----------------- -----------------
Cash flow provided by (used in) operations $ (34) $ 5,345
Less:
Purchases of property and equipment
including software costs deferred (1,362) (961)
--------------- --------------
Free Cash Flow $ (1,396) $ 4,384
=============== ==============
APPENDIX B - RECONCILIATIONS OF GUIDANCE INFORMATION
SUPPLEMENTARY INFORMATION
Appendix A
EBITDA RECONCILIATION
The reconciliation of EBITDA with net income for the projected quarter ending
June 30, 2006 and year-ending December 31, 2006 are as follows (in thousands):
Projected 2nd Quarter Ending June 30,
2006 Projected Year Ending December 31, 2006
---------------------------------------- -----------------------------------------
Low High Low High
------------------ ------------------ ------------------- ------------------
Net income (loss) $ 1,400 $ 1,600 $ 6,800 $ 7,900
Add (deduct):
Income tax provision (benefit) 1,100 1,300 4,500 5,200
Net interest expense 2,600 2,600 10,000 10,400
Depreciation and amortization 4,400 4,400 22,200 22,600
--------------- --------------- ---------------- -----------------
EBITDA $ 9,500 $ 9,900 $ 43,500 $ 46,100
=============== =============== ================ =================
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 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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