INFOCROSSING, INC. [LOGO]
FOR RELEASE AT 7:50 AM EST
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 Brett Maas or Matt Hayden
Infocrossing, Inc. Hayden Communications, Inc.
(201) 840-4941 (646) 536-7331
mwilczak@infocrossing.com brett@haydenir.com
INFOCROSSING REPORTS EPS OF $0.11,
EBITDA OF $11.1 MILLION AND REVENUES OF $57.5 MILLION
FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2006
Company Provides Guidance for Fourth Quarter and Full Year 2006
LEONIA, NJ, November 9, 2006 -- Infocrossing, Inc. (Nasdaq: IFOX), a provider of
selective IT infrastructure, enterprise application and business process
outsourcing services, announced today financial results for the third quarter
and nine months ended September 30, 2006.
THIRD QUARTER HIGHLIGHTS
o Revenues reached a record $57,500,000, an increase of $23,400,000 compared
with revenues of $34,100,000 for the third quarter of 2005.
o Earnings before interest, taxes, depreciation and amortization (EBITDA)
were a record $11,100,000, an increase of $6,700,000 compared with EBITDA
of $4,400,000 for the third quarter of 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 The Company is on track to achieve the previously forecasted $13,000,000 to
$15,000,000 in annual savings from the (i)Structure integration by the end
of the year.
o Cost of revenues, excluding depreciation, declined to 68.9% of revenues,
compared with 74.3% of revenues for the third quarter of 2005.
o Received approximately $26,000,000 in new revenue commitments, including
one contract that is ten years in length. These are new commitments and do
not include extensions of existing agreements.
o Awarded an $18,000,000 contract extension to continue providing Medicaid
claims processing services for the State of Missouri through June 30, 2008.
In addition, the State has two one-year options to renew the contract
through June 30, 2010.
o Renewed and extended several IT outsourcing contracts, including a
three-year extension with The Reader's Digest Association, which initially
signed a sixty-five month, $22,000,000 contract for Infocrossing to provide
outsourcing services through June 2009. The three-year extension extends
the terms of the initial agreement through June 2012.
THREE MONTHS ENDED SEPTEMBER 30, 2006
For the third quarter ended September 30, 2006, revenues grew 68.7% to
$57,500,000 compared with revenues of $34,100,000 for the third quarter of 2005.
These results were in line with the Company's previously provided guidance of
revenues between $57,500,000 and $58,500,000. Revenues for the third quarter
included $19,600,000 as a result of the acquisition of (i)Structure, which had
closed on November 30, 2005. Excluding the acquisition of (i)Structure, revenues
increased $3,800,000 or 11.1%, compared with the third quarter of 2005. On a
sequential basis, revenues for the third quarter increased $700,000, or 1.2%,
compared with revenues of $56,800,000 for the second quarter of 2006.
Cost of revenues, excluding depreciation, for the third quarter of 2006 was
68.9% of revenues, compared with 74.3% for the third quarter of 2005 last year
and 70.8% for the second quarter of 2006.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was
$11,100,000 for the third quarter of 2006, a 150.9% increase compared with
EBITDA of $4,400,000 for the same quarter last year and in line with the
Company's previously provided guidance range of between $11,100,000 to
$11,500,000. Compared with the second quarter of 2006, EBITDA increased
$1,200,000 as a result of higher revenues during the period and the realization
of cost synergies from the (i)Structure integration. EBITDA for the third
quarter is net of non-cash compensation expense of $400,000 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 during the third quarter of 2005. Infocrossing uses EBITDA because it
considers such information to be 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, and descriptions of the reasons for presenting this measure, as well
as its limitations, are explained below.
Income before taxes increased to $4,400,000 for the third quarter of 2006, an
increase of $4,100,000 from income before taxes of $300,000 for the third
quarter of 2005. Tax expense was $1,800,000 for the quarter ended September 30,
2006 compared with an expense of $200,000 for the third quarter of last year.
Income taxes were accrued at an effective rate of 41.1% for the third quarter of
2006, but are payable at a rate of 10.5%, after the application of net operating
loss carry-forwards.
Net income for the current quarter was $2,600,000, or $0.11 per diluted share,
compared with net income of $100,000, or $0.01 per diluted share, for the third
quarter of 2005. Sequentially, net income increased $600,000, or 32.8%, compared
with net income of $2,000,000, or $0.09 per diluted share, for the second
quarter of 2006. The weighted average number of shares and share equivalents
used to calculate diluted EPS was 22,571,627 shares for the third quarter of
2006 compared with 21,031,167 for the third quarter of 2005.
Cash generated from operations was $6,200,000 for the third quarter of 2006,
compared with $2,100,000 for the third quarter of 2005. Cash flow from
operations less cash disbursed for capital expenditures and capitalized
software, or free cash flow, was $5,000,000 for the third quarter of 2006,
compared with $800,000 for the third quarter of 2005. In the third quarter of
2006, cash flow from operations and free cash flow were reduced by delays in
collecting approximately $3,500,000 in certain accounts receivable, the majority
of which were collected in October. In addition, the third quarters of 2006 and
2005 were impacted by semi-annual payments of $1,400,000 in interest on the
Company's convertible notes. These payments are due January 15th and July 15th.
The Company forecasts cash from operations for the fourth quarter of 2006 to be
$12,800,000 and free cash flow to be $12,300,000. 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 third quarter of 2006 demonstrate that we are successfully
executing our growth strategy," stated Zach Lonstein, Chairman and Chief
Executive Officer of Infocrossing. "Key measures such as revenues, EBITDA,
income before taxes, net income and earnings per share all increased for the
third quarter of 2006 compared with both the third quarter of last year and the
second quarter of this year. We continue to focus on leveraging our greater
market presence, more experienced sales team and expanding pipeline to close
more outsourcing sales. Through the first nine months of 2006 we have finalized
new revenue commitments totaling approximately $66,000,000, including
$26,000,000 in new commitments finalized in the third quarter. We have also
received additional commitments for contracts totaling approximately $42,000,000
that are currently being negotiated but have not been finalized. We expect the
negotiations to be completed by the end of the year, and while we caution that
all of these contracts may not close, we do believe that they demonstrate that
we have established positive sales momentum. We are gratified that the market is
recognizing the value of our outsourcing services," Mr. Lonstein continued. "We
also continue to focus on achieving the cost synergies from the (i)Structure
integration. For the third quarter of 2006, cost of revenues, excluding
depreciation; selling; and general and administrative expenses all decreased as
a percentage of revenues compared with the same period last year and the second
quarter of 2006. The lower costs, as a percentage of revenues, demonstrate that
we are selling more profitable services and that we are achieving the targeted
cost synergies from the (i)Structure acquisition. Last quarter we increased our
forecasted annual integration savings to be between $13,000,000 and $15,000,000,
and we believe that we are on pace to complete the integration by the end of
this year," Mr. Lonstein concluded.
NINE MONTHS ENDED SEPTEMBER 30, 2006
Infocrossing reported revenues of $170,300,000 for the nine months ended
September 30, 2006, an increase of $63,500,000, or 59.4%, compared with revenues
of $106,800,000 for the nine months ended September 30, 2005. This growth
reflects $58,700,000 from the acquisition of (i)Structure completed on November
30, 2005. Excluding the acquisition of (i)Structure, revenues for the first nine
months of 2006 increased $4,800,000, or 4.5%, compared with the first nine
months of 2005.
Cost of revenues, excluding depreciation, for the first nine months of 2006 was
70.5% of revenues, compared with 72.0 % for the first nine months of 2005.
EBITDA increased by $12,400,000, or 72.4%, to $29,500,000 for the nine months
ended September 30, 2006 from $17,100,000 for the comparable period in 2005.
EBITDA for the first nine months of 2006 is net of non-cash compensation expense
of $1,200,000 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 during the first three months of
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 $5,000,000 to $9,700,000 for the nine months
ended September 30, 2006 from $4,700,000 for the comparable period in 2005. Tax
expense was $4,100,000 for the nine months ended September 30, 2006 compared
with $2,000,000 for the first nine months of last year. Income taxes were
accrued at an effective rate of 42.4% for the first nine months of 2006, but are
payable at a rate of 11.8%, after the application of net operating loss
carry-forwards.
Cash generated from operations for the first nine months of 2006 was
$15,200,000, compared with $15,300,000 for the first nine months of 2005. Free
cash flow was $10,700,000 for the current period compared with $11,600,000 for
the same period last year. Cash generated from operations and free cash flow for
the first nine months of 2006 included the full year prepayment of annual
software license fees totaling $7,700,000 pursuant to an (i)Structure agreement
existing prior to the acquisition. Excluding this prepayment, cash flow from
operations would have been $17,100,000 and free cash flow would have been
$12,600,000 for the period. In addition, cash flow from operations and free cash
flow for the first nine months of this year were reduced by delays in collecting
approximately $3,500,000 in certain accounts receivable, the majority of which
were collected in October. As a result, the Company forecasts cash from
operations to be $28,000,000 for the full year 2006, and free cash flow for the
period to be $23,000,000. 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 nine months ended September 30, 2006 was $5,600,000, or $0.25
per diluted share, compared with net income of $2,700,000, or $0.12 per diluted
share for the first nine months of 2005. The weighted average number of shares
and share equivalents used to calculate diluted EPS was 22,063,689 shares for
the nine months ended September 30, 2006 compared with 22,047,307 shares for the
first nine months of 2005.
BUSINESS OUTLOOK FOR THE FOURTH QUARTER AND FULL YEAR 2006
For the fourth quarter ending December 31, 2006, the Company forecasts revenues
to be $59,700,000 and EBITDA to be $12,500,000.
For the full year ending December 31, 2006, the Company forecasts revenues to be
$230,000,000 and EBITDA to be $42,000,000. A reconciliation of net income to
EBITDA is included in the table below 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 $23,000,000. 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.
INFOCROSSING, INC. AND SUBSIDIARIES
GUIDANCE SUMMARY
(All numbers in thousands, except numbers of shares and per share amounts)
Three Months Twelve Months
Ending Ending
December 31, 2006 December 31, 2006
--------------------- --------------------
REVENUES $ 59,700 $ 230,000
================ =================
EBITDA $ 12,500 $ 42,000
Depreciation and amortization 4,800 17,300
Interest expense 2,600 9,900
---------------- -----------------
INCOME BEFORE
INCOME TAXES 5,100 14,800
---------------- -----------------
Income tax expense 2,200 6,400
---------------- -----------------
NET INCOME $ 2,900 $ 8,400
================ =================
BASIC EARNINGS PER SHARE:
Net income $ 0.13 $ 0.39
================ =================
Weighted average number of
common shares outstanding 21,872,000 21,434,000
================ =================
DILUTED EARNINGS PER SHARE:
Net income $ 0.12 $ 0.37
================ =================
Weighted average number of
common shares and share
equivalents outstanding 28,445,000 27,937,000
================ =================
Infocrossing will hold a conference call for investors and analysts on Thursday,
November 9, 2006 at 11:00 a.m. ET to discuss results for the Company's third
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 1:00 p.m. ET on Thursday,
November 9, 2006, for seven days at 1-973-341-3080. The pass code for the replay
is 8062706. This call is being webcast by ViaVid Broadcasting and can be
accessed at Infocrossing's website at www.infocrossing.com. The webcast may also
be accessed at ViaVid's website at www.viavid.net. The webcast can be accessed
through December 9, 2006 on either site. 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 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, LLC,
f/k/a (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 September 30, Nine months Ended September 30,
---------------------------------------- ---------------------------------------
2006 2005 2006 2005
------------------ ------------------ ------------------ -----------------
(Unaudited) (Unaudited)
REVENUES $ 57,500 $ 34,100 $ 170,300 $ 106,800
--------------- --------------- --------------- --------------
COSTS and EXPENSES:
Costs of revenues, excluding
depreciation shown below 39,600 25,300 120,100 76,900
Selling and promotion costs 2,300 1,300 6,400 3,400
General and administrative expenses 4,500 3,100 14,300 9,400
Depreciation and amortization 4,300 2,700 12,500 8,000
--------------- --------------- --------------- --------------
50,700 32,400 153,300 97,700
--------------- --------------- --------------- --------------
INCOME FROM OPERATIONS 6,800 1,700 17,000 9,100
--------------- --------------- --------------- --------------
Interest income (100) (300) (400) (500)
Interest expense 2,500 1,700 7,700 4,900
--------------- --------------- --------------- --------------
2,400 1,400 7,300 4,400
--------------- --------------- --------------- --------------
4,400 300 9,700 4,700
INCOME BEFORE
INCOME TAXES
Income tax expense 1,800 200 4,100 2,000
--------------- --------------- --------------- --------------
NET INCOME $ 2,600 $ 100 $ 5,600 $ 2,700
=============== =============== =============== ==============
BASIC EARNINGS PER SHARE:
Net income $ 0.12 $ 0.01 $ 0.26 $ 0.13
=============== =============== =============== ==============
Weighted average number of
common shares outstanding 21,671,508 20,213,613 21,233,936 20,183,031
=============== =============== =============== ==============
DILUTED EARNINGS PER SHARE:
Net income $ 0.11 $ 0.01 $ 0.25 $ 0.12
=============== =============== =============== ==============
Weighted average number of
common shares and share equivalents
outstanding 22,571,627 21,031,167 22,063,689 22,047,307
=============== =============== =============== ==============
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)
September 30, December 31,
ASSETS 2006 2005
----------------- -----------------
(Unaudited)
CURRENT ASSETS:
Cash and equivalents $ 12,600 $ 16,900
Trade accounts receivable, net of allowances for doubtful accounts of
$428 and $637 at September 30, 2006 and December 31, 2005, respectively 25,400 25,600
Other current assets 20,000 13,100
-------------- --------------
Total current assets 58,000 55,600
Property, equipment, purchased and deferred software, net 43,600 42,300
Goodwill 158,400 150,800
Other non-current assets 32,000 37,700
-------------- --------------
TOTAL ASSETS $ 292,000 $ 286,400
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current liabilities $ 49,200 $ 49,700
Notes payable, long-term debt and capitalized lease obligations, net of current
portion 114,700 123,700
Other long-term liabilities 8,500 6,000
-------------- --------------
TOTAL LIABILITIES 172,400 179,400
TOTAL STOCKHOLDERS' EQUITY 119,600 107,000
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 292,000 $ 286,400
============== ==============
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 June 30 and
September 30, 2006 and 2005, and the nine months ended September 30, 2006 and
2005, respectively, is as follows (in thousands):
Three Months Ended Nine Months Ended
------------------------------------------------- --------------------------------
June September September September September
30, 2006 30, 2006 30, 2005 30, 2006 30, 2005
------------- ------------- -- -------------- -------------- -- --------------
(Unaudited) (Unaudited)
Net income $ 2,000 $ 2,600 $ 100 $ 5,600 $ 2,700
Plus:
Income tax expense 1,400 1,800 200 4,100 2,000
Interest expense 2,400 2,400 1,400 7,300 4,400
Depreciation and amortization 4,100 4,300 2,700 12,500 8,000
--------- ---------- ---------- ---------- ----------
EBITDA $ 9,900 $ 11,100 $ 4,400 $ 29,500 $ 17,100
========= ========== ========== ========== ==========
Free Cash Flow Reconciliation
The reconciliation of cash flows provided by (used in) operations with free cash
flow for the quarters ended June 30 and September 30, 2006 and 2005, and the
nine months ended September 30, 2006 and 2005, respectively, is as follows (in
thousands):
Three Months Ended Nine Months Ended
------------------------------------------------- --------------------------------
June September September September September
30, 2006 30, 2006 30, 2005 30, 2006 30, 2005
------------- ------------- -- -------------- -------------- -- --------------
(Unaudited) (Unaudited)
Cash provided by operating activities $ 9,000 $ 6,200 $ 2,100 $ 15,200 $ 15,300
Less:
Fixed asset purchases for cash (1,700) (1,100) (1,100) (3,800) (3,100)
Software costs deferred (200) (100) (200) (700) (600)
--------- ---------- ---------- ---------- ----------
Free Cash Flow $ 7,100 $ 5,000 $ 800 $ 10,700 $ 11,600
========= ========== ========== ========== ==========
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 three months and year ending December 31, 2006 is as follows (in
thousands):
Projected Three
Months Ending Projected Year Ending
December 31, 2006 December 31, 2006
----------------------- -----------------------
Cash flow provided by operations $ 12,800 $ 28,000
Less:
Purchases of property and equipment
including software costs deferred (500) (5,000)
-------------------- --------------------
Free Cash Flow $ 12,300 $ 23,000
==================== ====================
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