FOR RELEASE AT 7:50 AM EDT
INFOCROSSING, INC. [LOGO]
Contacts:
Chairman and Chief Executive Officer Chief Financial Officer
Zach Lonstein William McHale
Infocrossing, Inc. Infocrossing, Inc.
(201) 840-4726 (201) 840-4732
zach.lonstein@infocrossing.com william.mchale@infocrossing.com
Investor Relations Media Relations
Michael Wilczak Kathleen Ulrich
Infocrossing, Inc. Infocrossing, Inc.
(201) 840-4941 (402) 965-5174
michael.wilczak@infocrossing.com kathleen.ulrich@infocrossing.com
INFOCROSSING REPORTS FINANCIAL RESULTS FOR
THE FIRST QUARTER ENDED MARCH 31, 2007
Company Reports Revenues of $59.2 Million, E
BITDA of $10.2 Million and EPS of $0.08
LEONIA, NJ, May 10, 2007 -- Infocrossing, Inc. (Nasdaq: IFOX), a provider of
selective IT infrastructure, enterprise application and business process
outsourcing services, announced today the Company's financial results for the
first quarter ended March 31, 2007.
FIRST QUARTER HIGHLIGHTS
o Reached Record Revenues. Revenues were $59,200,000 for the period, an
increase of 5.8% compared with revenues of $55,900,000 for the first
quarter of 2006. Revenue growth was net of attrition totaling
approximately 1.5% of revenues.
o Net Income Increased 77% and EPS Increased 60%. Net income was
$1,800,000, or $.08 per diluted share, for the first quarter of 2007,
compared with net income of $1,000,000, or $0.05 per diluted share for
the first quarter of 2006. The weighted average number of shares and
share equivalents used to calculate diluted EPS was 23,553,830 shares
for the period ended March 31, 2007 compared with 21,922,259 shares for
the period ended March 31, 2006.
o EBITDA Increased 20%. Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) were $10,200,000 for the first quarter of 2007,
an increase of $1,700,000, or 20% compared with EBITDA of $8,500,000
for the first quarter of 2006. A reconciliation of EBITDA to net income
follows in Appendix A, and descriptions of this measure and the reasons
for presenting it, as well as its limitations, are explained below.
o Cash from Operations and Free Cash Flow Increased. For the current
period, Infocrossing generated $3,300,000 in cash from operations, an
increase of $3,300,000 compared with cash used in operations of less
than $100,000 for the first quarter of 2006. Free cash flow was
$1,200,000 for the reporting period, an increase of $2,600,000 compared
with negative free cash flow of $1,400,000 for the first quarter of
2006. A reconciliation of free cash flow to cash from operations
follows in Appendix A, and descriptions of this measure and the reasons
for presenting it, as well as its limitations, are explained below.
o Received New Revenue Commitments Totaling $32,400,000. The Company
continued to add clients for its outsourcing services and has received
new revenue commitments totaling approximately $32,400,000, a 29%
increase compared with new revenue commitments of $25,100,000 for the
first quarter of 2006. The $32,400,000 in new commitments achieved in
the first quarter of 2007 includes $5,100,000 in contracts that have
been finalized and $27,300,000 in commitments that are currently being
negotiated and expected to close in the next ninety days.
o Increased Spending on Sales and Marketing. The Company added headcount
in sales and client services to drive greater sales growth and
capitalize on an expanding market opportunity for its selective IT
outsourcing services. Selling and promotional costs for the first
quarter of 2007 increased $800,000 compared with the first quarter of
2006.
QUARTER ENDED MARCH 31, 2007 RESULTS
For the first quarter ended March 31, 2007, revenues increased 5.8% to
$59,200,000 compared with revenues of $55,900,000 reported for the first quarter
of 2006. Revenue for the first quarter of 2007 was net of attrition totaling
approximately 1.5% of revenues and was in-line with the Company's previously
provided guidance. On a sequential basis, revenues increased $300,000 compared
with revenues of $58,900,000 for the fourth quarter of 2006 and benefited from
the installation of new clients for the Company's selective outsourcing
services. This included a portion of the $42,000,000 in new contracts, averaging
five years in length that were previously announced on March 13, 2007. The
majority of these services will commence after the first quarter and are
expected to provide greater revenues in the second and third quarters of the
year. Additionally, revenues for the Company's healthcare processing services
were lower than expected for the first quarter of 2007. Revenues for these
services are based on when the transactions are submitted by clients and
processed by the Company. A significant portion of the transactions that were
expected to be processed in the first quarter were delayed, resulting in lower
healthcare processing revenues than expected in the first quarter and a backlog
that is expected to be processed through the remainder of the year.
Cost of revenues, excluding depreciation and amortizations, for the first
quarter of 2007 was $41,000,000 or 69% of revenues compared with 71% for the
first quarter of 2006. The reduction in 2007, as a percentage of revenues,
reflects the realization of cost savings from the consolidation of (i)Structure.
Infocrossing acquired (i)Structure in November of 2005, and implemented
approximately $14,000,000 in annual cost reductions during 2006.
Income before taxes for the current quarter was $3,300,000, an increase of
$1,400,000, compared with Income before taxes of $1,900,000 for the first
quarter of 2006. Tax expense was $1,500,000 for the first quarter of 2007,
compared with an expense of $900,000 for the first quarter of 2006. Income taxes
were accrued at an effective rate of 45% but are payable at a rate of 8%, after
the application of net operating loss carry-forwards.
EBITDA for the first quarter of 2007 was $10,200,000, an increase of $1,700,000,
or 20%, over EBITDA of $8,500,000 for the first quarter of 2006. These results
were in-line with the Company's previously provided guidance of EBITDA between
$10,200,000 and $11,000,000 for the quarter. A reconciliation of EBITDA to net
income follows in Appendix A, and descriptions of this measure and the reasons
for presenting it, as well as its limitations, are explained below.
Net income for the current quarter was $1,800,000, or $.08, per diluted share,
compared with net income of $1,000,000, or $0.05 per diluted share for the first
quarter of last year. The weighted average number of shares and share
equivalents used to calculate diluted EPS was 23,553,830 shares for the quarter
ended March 31, 2007 compared with 21,922,259 shares for the first quarter of
2006.
Cash generated from operations for the first quarter of 2007 was $3,300,000
compared with cash used in operations of less than $100,000 for the first
quarter of 2006. Free cash flow was $1,200,000 for the quarter ended March 31,
2007 compared with a negative $1,400,000 for the first quarter of 2006. As
previously announced, the Company expects free cash flow for the year to be
between $30,000,000 and $31,000,000. A reconciliation of free cash flow to cash
from operations follows in Appendix A, and descriptions of this measure and the
reasons for presenting it, as well as its limitations, are explained below.
"We are very pleased with our results for the first quarter of 2007 as revenues
continued to grow year-over-year due to new sales of our selective outsourcing
services," stated Zach Lonstein, Chairman and Chief Executive Officer of the
Company. "We achieved our revenue, EBITDA and net income objectives for the
period and began installing approximately $42,000,000 in contracts that were
announced last quarter. These contracts have an average term of five years in
length and will provide greater revenue growth beginning in the second quarter
of 2007. Furthermore, we have received additional commitments totaling
approximately $32,400,000 over terms up to three years in length, an increase of
29% in total revenues and approximately 115% in annual revenues compared with
new revenue commitments of $25,100,000 achieved in the first quarter of 2006
that had terms up to five years in length. We have signed contracts totaling
$5,100,000 and we are actively negotiating contracts for the remaining
$27,300,000 in new commitments. While we caution that all of these commitments
may not close, we do believe that they demonstrate the positive sales momentum
that was established in 2006 is continuing," Mr. Lonstein added. "We have also
begun increasing spending on sales and marketing to accelerate our sales growth
and capture a unique market opportunity. We have already added people in our
sales and client services organizations to drive cross selling opportunities and
add new clients for our outsourcing services. Furthermore, we are making
investments in product development to introduce new selective outsourcing
services through our sales and account management organizations. We believe the
additional spending on sales, marketing and product development will contribute
to our sales growth in 2007 and enable us to achieve a growth rate in the mid
teens in 2008. We have also commenced the previously announced data center
transformation project to provide greater standardization and automation of our
data center operations, which we believe will enable us to achieve greater
profitability in the future," Mr. Lonstein continued.
BUSINESS OUTLOOK FOR THE SECOND QUARTER AND FULL YEAR 2007
For the second quarter ending June 30, 2007, the Company forecasts revenues to
be between $60,800,000 and $61,800,000 and EBITDA to be between $11,200,000 and
$11,800,000. A reconciliation of net income to EBITDA is included in Appendix B
and descriptions of this measure and the reasons for presenting it, as well as
its limitations, are explained below.
In a press release issued March 13, 2007, the Company provided revenues, EBITDA
and net income guidance for 2007. Revenues for the full year ending December 31,
2007 were forecasted to be between $250,000,000 and $255,000,000. EBITDA for
2007 was projected to be between $47,000,000 and $49,000,000, and net income for
the period was forecasted to be between $10,800,000 and $11,500,000. A
reconciliation of net income to EBITDA is included in Appendix B, and
descriptions of this measure and the reasons for presenting it, as well as its
limitations, are explained below. The Company projected free cash flow for 2007
to be between $30,000,000 and $31,000,000. A reconciliation of free cash flow to
cash flow from operations is included in Appendix B, and descriptions of this
measure and the reasons for presenting it, as well as its limitations, are
explained below.
Guidance Summary
(All numbers in thousands, except per share amounts)
Three Months Ending Twelve Months Ending
June 30, 2007 December 31, 2007
---------------------------------------- ---------------------------------------
Low High Low High
------------------ ------------------ ------------------ -----------------
REVENUES $ 60,800 $ 61,800 $ 250,000 $ 255,000
--------------- --------------- --------------- --------------
EBITDA 11,200 11,800 47,000 49,000
Depreciation and amortization 4,700 4,700 18,000 18,500
Interest expense (net) 2,500 2,500 9,700 9,900
--------------- --------------- --------------- --------------
INCOME BEFORE INCOME TAXES 4,000 4,500 19,300 20,600
--------------- --------------- --------------- --------------
Income tax expense 1,800 2,000 8,500 9,100
NET INCOME $ 2,200 $ 2,500 $ 10,800 $ 11,500
=============== =============== =============== ==============
BASIC EARNINGS PER SHARE:
Net income $ 0.10 $ 0.11 $ 0.49 $ 0.52
=============== =============== =============== ==============
Weighted average number of
common shares outstanding 22,008 22,008 22,008 22,008
=============== =============== =============== ==============
DILUTED EARNINGS PER SHARE:
Net income $ 0.09 $ 0.10 0.43 0.46
=============== =============== =============== ==============
Weighted average number of common shares
and share equivalents outstanding 29,228 29,228 29,228 29,228
=============== =============== =============== ==============
The Company will hold a conference call for investors and analysts on Thursday,
May 10, 2007 at 11:00 a.m. EDT to discuss results for the first quarter ended
March 31, 2007. The call-in number for the live audio call beginning at 10:50
a.m. EDT is 1-973-582-2847. 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 from 2:00 p.m. EDT on May 10, 2007, for
seven days at 1-973-341-3080. The pass code for the replay is 8763673. 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 (www.infocrossing.com)
Infocrossing, Inc. (NASDAQ:IFOX) is a provider of selective IT infrastructure,
enterprise application and business process 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; 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 March 31,
------------------------------------
2007 2006
--------------- --------------
REVENUES $ 59,158 $ 55,921
--------------- --------------
COSTS and EXPENSES:
Costs of revenues excluding depreciation and amortization
shown below 40,982 39,876
Selling and promotion costs 3,044 2,292
General and administrative expenses 4,956 5,288
Depreciation and amortization 4,536 4,131
--------------- --------------
53,518 51,587
--------------- --------------
INCOME FROM OPERATIONS 5,640 4,334
--------------- --------------
Interest income 111 105
Interest expense 2,475 2,522
--------------- --------------
2,364 2,417
--------------- --------------
INCOME BEFORE INCOME TAXES 3,276 1,917
Income tax expense 1,483 906
--------------- --------------
NET INCOME $ 1,793 $ 1,011
=============== ==============
BASIC INCOME PER SHARE:
Net income $ 0.08 $ 0.05
=============== ==============
Weighted average number of common shares outstanding 22,008,038 20,754,196
=============== ==============
DILUTED INCOME PER SHARE:
Net income $ 0.08 $ 0.05
=============== ==============
Weighted average number of common shares and
share equivalents outstanding 23,553,830 21,922,259
=============== ==============
Certain reclassifications were made to prior period expense
amounts to conform to the current presentation.
INFOCROSSING, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
March 31, December 31,
ASSETS 2007 2006
-------------- ---------------
(Unaudited)
CURRENT ASSETS:
Cash and equivalents $ 19,118 $ 22,324
Trade accounts receivable, net of allowances for doubtful accounts of
$339 at March 31, 2007 and $380 at December 31, 2006 24,335 23,000
Other current assets 21,891 19,636
----------- ------------
Total current assets 65,344 64,960
Property, equipment, purchased and developed software, net 53,626 47,875
Goodwill 157,454 157,454
Other non-current assets 25,738 27,836
----------- ------------
TOTAL ASSETS $ 302,162 $ 298,125
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capitalized lease obligations $ 20,799 $ 18,749
Other current liabilities 29,105 30,539
----------- ------------
Total current liabilities 49,904 49,288
Notes payable, long-term debt and capitalized lease
obligations, net of current portion 114,087 113,202
Other long-term liabilities 10,531 10,393
----------- ------------
TOTAL LIABILITIES 174,522 172,883
COMMON STOCKHOLDERS' EQUITY 127,640 125,242
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 302,162 $ 298,125
=========== ============
Certain reclassifications were made to prior period expense
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,
2007 and 2006, respectively, is as follows (in thousands):
Reconciliation - in Thousands
- -------------------------------------------------------------------
Quarter Ended March 31,
--------------------------------
2007 2006
------------- --------------
NET INCOME $ 1,793 $ 1,011
Add back:
Tax expense 1,483 906
Interest expense 2,364 2,417
Depreciation and amortization 4,536 4,131
------------- --------------
EBITDA $ 10,176 $ 8,465
============= ==============
EBITDA is a measure of our performance that is not required by, or presented in
accordance with, GAAP. EBITDA is not a measurement of our financial performance
under GAAP and should not be considered as an alternative to net income, income
from operating activities or any other performance measures derived in
accordance with GAAP.
Free Cash Flow Reconciliation
The reconciliation of cash flows provided by (used in) operations with free cash
flow for the quarters ended March 31, 2007 and 2006, respectively, is as follows
(in thousands):
Three Months Ended March 31,
------------------------------
007 2006
-------------- -------------
Cash flow provided by (used in) operations $ 3,332 $ (43)
Less:
Purchases of property and equipment
including software costs deferred (2,124) (1,362)
------------- ----------
Free Cash Flow $ 1,208 $ (1,405)
============= ==========
Appendix B - Reconciliations of Guidance Information
SUPPLEMENTARY INFORMATION
Free Cash Flow Reconciliation
The reconciliation of cash flows provided by operations with free cash flow for
the projected year ending December 31, 2007 is as follows (in thousands):
Projected Year Ending December 31, 2007
---------------------------------------
Low High
------------------ -----------------
Cash flow provided by operations $ 36,000 $ 38,000
Less:
Purchases of property and equipment
including software costs deferred (6,000) (7,000)
--------------- ----------------
Free Cash Flow $ 30,000 $ 31,000
=============== ================
#####