EXHIBIT 99
INFOCROSSING, INC. [LOGO]
FOR RELEASE AT 7:50 AM ET
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 EPS OF $0.09, EBITDA of $9.9 MILLION AND REVENUES OF
$56.8 MILLION FOR THE SECOND QUARTER ENDED JUNE 30, 2006
Company Provides Guidance for Third Quarter and Updates Forecast for 2006
LEONIA, NJ, August 9, 2006 -- Infocrossing, Inc. (Nasdaq: IFOX) a provider of
selective IT outsourcing and business processing solutions announced today
financial results for the second quarter and six months ended June 30, 2006.
SECOND QUARTER HIGHLIGHTS
o Revenues reached a record $56,836,000, an increase of $21,642,000 compared
with revenues of $35,194,000 for the second quarter of 2005.
o Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
were a record $9,900,000 for the second quarter of 2006, an increase of
$5,379,000 compared with EBITDA of $4,521,000 for the comparable period
last year. 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 100 positions have
been eliminated, 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 future annual savings of
$13,000,000 to $15,000,000 upon completion of the integration at the end of
the year.
o Cost of revenues, excluding depreciation, declined to 70.8% of revenues,
compared with 72.5% of revenues for the second quarter of 2005.
o Added 7 clients for the new Medicare Part D service, bringing the total
client base to 67 managed care companies that are now using the Company's
Medicare Part D enrollment and reconciliation services.
THREE MONTHS ENDED JUNE 30, 2006
For the second quarter ended June 30, 2006, revenues grew 61.5% to $56,836,000
compared with revenues of $35,194,000 for the second quarter of 2005. These
results were in line with the Company's previously provided guidance of revenues
between $56,500,000 and $57,500,000. Revenues for the second quarter of 2006
included $19,564,000 as a result of the acquisition of (i)Structure, which had
closed on November 30, 2005. Excluding the acquisition of (i)Structure, revenues
increased $2,078,000 or 5.9% compared with the same period last year. On a
sequential basis, revenues for the second quarter increased $915,000 or 1.6%
compared with revenues of $55,921,000 for the first quarter of 2006.
Cost of revenues, excluding depreciation, for the second quarter of 2006 was
70.8% of revenues, compared with 72.5% for the second quarter of last year and
72.0% for the first quarter of 2006. The decrease reflects higher profitability
of new sales and the realization of cost synergies from the (i)Structure
acquisition. The Company expects cost of revenues, excluding depreciation, to
improve to approximately 67.0% of revenues by the end of the year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was
$9,900,000 for the second quarter of 2006, a 119.0% increase compared with the
same quarter last year and at the top of the Company's previously provided
guidance range of between $9,500,000 to $9,900,000. EBITDA for the second
quarter is net of non-cash compensation expense of $377,000 related to employee
stock options since the Company adopted Statement of Financial Accounting
Standards No. 123(R), Share-Based Payment on January 1, 2006. There was no such
expense in the second quarter of 2005. Compared with the first quarter of 2006,
EBITDA increased $1,435,000 as a result of higher revenue during the period and
the realization of cost synergies from the (i)Structure integration. 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 increased to $3,316,000 for the second quarter of 2006, an
increase of $2,956,000 from income before taxes of $360,000 for the second
quarter of 2005. Although income taxes were accrued for the period at a rate of
41.2%, they are payable at a rate of 6.7%, after the application of net
operating loss carry-forwards.
Net income for the current quarter was $1,950,000, or $0.09 per diluted share,
compared with net income of $124,000, or $0.01 per diluted share, for the second
quarter last year. The weighted average number of shares and share equivalents
used to calculate diluted earnings per share was 22,214,000 shares for the
current quarter compared with 22,114,000 for the second quarter last year.
Sequentially, net income for the current quarter increased by $939,000 from
$1,011,000 for the first quarter of 2006.
Cash generated from operations was $9,019,000 for the second quarter of 2006,
compared with $7,791,000 for the same period last year. Cash flow from
operations less cash disbursed for capital expenditures, or free cash flow, was
$7,158,000 for the second quarter of 2006, compared with $6,380,000 for the
second quarter of 2005. On a sequential basis, cash generated from operations in
the second quarter increased $9,053,000 compared with cash used in operations of
$34,000 in the first quarter of 2006, and free cash flow increased $8,554,000 in
the second quarter compared with free cash used in operations of $1,396,000 for
the first quarter. Cash used in operations and free cash used in operations for
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 the period. The prepayment of annual software
licenses will result in higher free cash flow during the balance of 2006. 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.
"Our results for the second quarter of 2006 reflect the benefits of the
(i)Structure acquisition and the continued execution of our growth strategy,"
stated Zach Lonstein, Chairman and Chief Executive Officer of Infocrossing.
"Revenues, income before taxes, net income, earnings per share, EBITDA and free
cash flow all increased in the second quarter of 2006 compared with both the
same quarter last year and the first quarter of this year. We've seen greater
strength in our sales organization, which has closed approximately $40,000,000
in new revenue commitments this year, including $15,000,000 in new commitments
added in the second quarter with terms ranging up to five years in length. In
addition to the revenue growth we have also made substantial progress in
reducing costs after the (i)Structure acquisition. We initially forecasted
$9,000,000 to $11,000,000 in cost savings that were expected to be realized in
2006, and believe we are on pace to achieve between $13,000,000 and $15,000,000
in future annual savings by the end of the year. The reduction in cost of
revenues, excluding depreciation, from the first quarter of 2006, and the higher
EBITDA, net income and earnings per share in the second quarter all demonstrate
that we are achieving significant savings, and we expect this to continue
through the remainder of 2006," Mr. Lonstein added.
SIX MONTHS ENDED JUNE 30, 2006
Infocrossing reported revenues of $112,757,000 for the six months ended on June
30, 2006, an increase $40,036,000, or 55.1%, compared with revenues of
$72,721,000 for the first six months of 2005. This growth includes $39,128,000
as a result of the acquisition of (i)Structure completed on November 30, 2005.
Excluding the acquisition of (i)Structure, revenues for the first six months of
2006 increased $908,000, or 1.2%, compared with the first six months of 2005.
Cost of revenues, excluding depreciation, for the first six months of 2006 was
71.4% of revenues, compared with 70.6% for the same period last year. The
increase in cost of revenues, excluding depreciation, was the result of higher
costs in the first quarter of 2006 due to the (i)Structure acquisition, which
had closed on November 30, 2005. Subsequent to the acquisition, Infocrossing
began implementing cost reductions that are expected to result in cost of
revenues, excluding depreciation, to decline to 67.0% of revenues by the end of
2006.
EBITDA increased by $5,701,000, or 45.0%, to $18,365,000 for the six months
ended June 30, 2006 from $12,664,000 for the comparable period in 2005. EBITDA
for the current period is net of non-cash compensation expense of $841,000
related to employee stock options since the Company adopted Statement of
Financial Accounting Standards No. 123(R), Share-Based Payment on January 1,
2006. There was no such expense in the comparable period in 2005. 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 increased by $815,000 to $5,233,000 for the six months ended
June 30, 2006 from $4,418,000 for the comparable period in 2005. Tax expense was
$2,272,000 for the six months ended June 30, 2006 compared with $1,857,000 for
the comparable period last year. Although taxes were accrued at a rate of 43.4%
for the first six months of 2006, they were payable at a rate of 12.9%, after
the application of net operating loss carry-forwards.
Cash generated from operations for the first six months of 2006 was $8,985,000,
compared with $13,136,000 for the first six months of 2005. Free cash flow was
$5,762,000 for the current period compared with $10,764,000 for the same period
last year. Cash generated from operations and free cash flow for the first six
months 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 $12,810,000 and free cash flow would have been $9,587,000 for such period.
The prepayment of annual software licenses will result in higher free cash flow
during the balance of 2006. 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.
Net income for the six months ended June 30, 2006 was $2,961,000, or $0.14 per
diluted share, compared with net income of $2,561,000, or $0.11 per diluted
share for the first six months of 2005. The weighted average number of shares
and share equivalents used to calculate diluted earnings per share was
21,858,000 shares for the six months ended June 30, 2006 compared with
22,415,000 shares for the first six months ended June 30, 2005.
BUSINESS OUTLOOK FOR THE THIRD QUARTER AND FULL YEAR 2006
"I'm pleased with our results for the first six months of 2006, and I'm
encouraged by our stronger client retention, the success of our business
integration after the (i)Structure acquisition and the strength of our sales
pipeline going into the latter half of the year. For the full year 2006 we are
raising our guidance for net income and earnings per share due to the higher
profitability of recent sales and less depreciation expense than previously
forecasted. We now believe net income for the full year will be between
$8,100,000 and $8,900,000, and diluted earnings per share will be between $0.36
and $0.39. We have experienced some delays in commencing services with respect
to certain sales that were made earlier in the year, and the sales process for
several of our new opportunities has been protracted. Therefore, we have reduced
our revenue forecast for the year and now expect 2006 revenue to be between
$230,000,000 and $232,000,000. Our pipeline remains strong, and we are
optimistic that we can close significant additional sales through the remainder
of 2006," Mr. Lonstein concluded.
For the third quarter ending September 30, 2006, the Company forecasts revenues
to be between $57,500,000 and $58,500,000 and EBITDA to be between $11,100,000
and $11,500,000. Net income for the third quarter is expected to be between
$2,300,000 and $2,500,000 and diluted earnings per share is expected to be
between $0.10 and $0.11 for the period. A reconciliation of net income to EBITDA
is included in the table entitled "Guidance Summary," and descriptions of the
reasons for presenting this measure, as well as its limitations, are explained
below.
For the full year ending December 31, 2006, the Company forecasts revenues to be
between $230,000,000 and $232,000,000; EBITDA to be between $42,000,000 and
$43,500,000; net income to be between $8,100,000 and $8,900,000; and diluted
earnings per share to be between $0.36 and $0.39. 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 projects free cash flow for 2006 to be between $23,000,000 and
$25,000,000. 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.
Guidance Summary
(All numbers in thousands, except numbers of shares and per share amounts)
Three Months Ending Twelve Months Ending
September 30, 2006 December 31, 2006
---------------------------------------- ---------------------------------------
Low High Low High
------------------ ------------------ ------------------ -----------------
REVENUES $ 57,500 $ 58,500 $ 230,000 $ 232,000
--------------- --------------- --------------- --------------
EBITDA 11,100 11,500 42,000 43,500
Depreciation and amortization 4,600 4,600 18,000 18,000
Interest expense 2,400 2,400 9,700 9,700
--------------- --------------- --------------- --------------
INCOME BEFORE
INCOME TAXES 4,100 4,500 14,300 15,800
--------------- --------------- --------------- --------------
Income tax expense 1,800 2,000 6,200 6,900
--------------- --------------- --------------- --------------
NET INCOME 2,300 2,500 8,100 8,900
=============== =============== =============== ==============
BASIC EARNINGS PER SHARE:
Net income $ 0.11 $ 0.12 $ 0.39 $ 0.42
=============== =============== =============== ==============
Weighted average number of
common shares outstanding 21,266,019 21,266,019 21,138,063 21,138,063
=============== =============== =============== ==============
DILUTED EARNINGS PER SHARE:
Net income $ 0.10 $ 0.11 $ 0.36 $ 0.39
=============== =============== =============== ==============
Weighted average number of
common shares and share equivalents
outstanding 27,827,628 27,827,628 27,769,726 27,769,726
=============== =============== =============== ==============
Infocrossing will hold a conference call for investors and analysts on
Wednesday, August 9, 2006 at 11:00 a.m. ET to discuss results for the Company's
second quarter of 2006. The call-in number for the live audio call beginning at
11:00 a.m. ET is 1-973-582-2785. 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 from 1:30 p.m. ET on
Wednesday, August 9, 2006, for seven days at 1-973-341-3080. The pass code for
the replay is 7667252. A web cast of the conference call will be available for
30 days following the call at http://www.infocrossing.com.
This call is being web cast by ViaVid Broadcasting and can be accessed at
Infocrossing's website at www.infocrossing.com. The web cast may also be
accessed at ViaVid's website at www.viavid.net. The web cast can be accessed
through September 9, 2006 on either site. To access the web cast, 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 the Company 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.
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 GAPP. 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 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. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, In Thousands Except
Numbers of Shares and Per Share Amounts)
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------- ---------------------------------------
2006 2005 2006 2005
------------------ ------------------ ------------------ -----------------
(Unaudited) (Unaudited)
REVENUES $ 56,836 $ 35,194 $ 112,757 $ 72,721
--------------- --------------- --------------- --------------
COSTS and EXPENSES:
Costs of revenues, excluding
depreciation shown below 40,234 25,506 80,499 51,353
Selling and promotion costs 2,121 1,156 4,079 2,114
General and administrative expenses 4,581 4,011 9,814 6,590
Depreciation and amortization 4,129 2,671 8,260 5,291
--------------- --------------- --------------- --------------
51,065 33,344 102,652 65,348
--------------- --------------- --------------- --------------
INCOME FROM OPERATIONS 5,771 1,850 10,105 7,373
--------------- --------------- --------------- --------------
Interest income 142 126 247 252
Interest expense 2,597 1,616 5,119 3,207
--------------- --------------- --------------- --------------
2,455 1,490 4,872 2,955
--------------- --------------- --------------- --------------
3,316 360 5,233 4,418
INCOME BEFORE
INCOME TAXES
Income tax expense 1,366 236 2,272 1,857
--------------- --------------- --------------- --------------
NET INCOME $ 1,950 $ 124 $ 2,961 $ 2,561
=============== =============== =============== ==============
BASIC EARNINGS PER SHARE:
Net income $ 0.09 $ 0.01 $ 0.14 $ 0.13
=============== =============== =============== ==============
Weighted average number of
common shares outstanding 21,266,019 20,247,587 21,011,521 20,167,490
=============== =============== =============== ==============
DILUTED EARNINGS PER SHARE:
Net income $ 0.09 $ 0.01 $ 0.14 $ 0.11
=============== =============== =============== ==============
Weighted average number of
common shares and share equivalents
outstanding 22,213,539 22,114,261 21,857,723 22,415,204
=============== =============== =============== ==============
Certain reclasses have been made to prior period amounts to conform to the
current presentation.
INFOCROSSING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
June 30, December 31,
ASSETS 2006 2005
--------------- ---------------
(Unaudited)
CURRENT ASSETS:
Cash and equivalents $ 16,651 $ 16,892
Trade accounts receivable, net of allowances for doubtful accounts of
$428 and $637 at June 30, 2006 and December 31, 2005, respectively 20,543 25,631
Other current assets 19,839 13,103
------------ ------------
Total current assets 57,033 55,626
Property, equipment and purchased software, net 40,305 40,749
Goodwill 158,115 150,799
Other non-current assets 37,118 39,261
------------ ------------
TOTAL ASSETS $ 292,571 $ 286,435
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 50,638 $ 49,710
Notes payable, long-term debt and capitalized lease obligations, net of current
portion 117,500 123,734
Other long-term liabilities 8,598 5,961
------------ ------------
TOTAL LIABILITIES 176,736 179,405
TOTAL STOCKHOLDERS' EQUITY 115,835 107,030
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 292,571 $ 286,435
============ ============
Certain reclasses have been 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 June 30, 2006 and 2005, and the six months ended June 30, 2006 and
2005, respectively, is as follows (in thousands):
------------------------------------------------- --------------------------------
Three Months Ended Six Months Ended
------------------------------------------------- --------------------------------
March 31, June 30, June 30, 2005 June 30, June 30,
2006 2006 2006 2005
------------- ------------- -- -------------- -------------- -- --------------
(Unaudited) (Unaudited)
--------- ---------- ---------- ---------- ----------
Net income $ 1,011 $ 1,950 $ 124 $ 2,961 $ 2,561
Plus:
Income tax expense 906 1,366 236 2,272 1,857
Interest expense 2,417 2,455 1,490 4,872 2,955
Depreciation and amortization 4,131 4,129 2,671 8,260 5,291
--------- ---------- ---------- ---------- ----------
EBITDA $ 8,465 $ 9,900 $ 4,521 $ 18,365 $ 12,664
========= ========== ========== ========== ==========
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 June 30, 2006 and 2005, and the
six months ended June 30, 2006 and 2005, respectively, is as follows (in
thousands):
------------------------------------------------- --------------------------------
Three Months Ended Six Months Ended
------------------------------------------------- --------------------------------
March 31, June 30, June 30, 2005 June 30, June 30,
2006 2006 2006 2005
------------- ------------- -- -------------- -------------- -- --------------
(Unaudited) (Unaudited)
--------- ---------- ---------- ---------- ----------
Cash provided by operating activities $ (34) $ 9,019 $ 7,791 $ 8,985 $ 13,136
Less:
Fixed asset purchases for cash (1,054) (1,656) (1,221) (2,710) (2,000)
Software costs deferred (308) (205) (190) (513) (372)
--------- ---------- ---------- ---------- ----------
Free Cash Flow $ (1,396) $ 7,158 $ 6,380 $ 5,762 $ 10,764
========= ========== ========== ========== ==========
SUPPLEMENTARY INFORMATION
Appendix B - Guidance Information
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 $ 27,000 $ 29,500
Less:
Purchases of property and equipment
including software costs deferred (4,000) (4,500)
--------------- ---------------
Free Cash Flow $ 23,000 $ 25,000
=============== ===============
####