INCENTRA
--------------
SOLUTONS, INC.
1140 PEARL STREET, BOULDER, COLORADO 80302
NEWS RELEASE FOR AUGUST 16, 2005 AT 7:30 AM EDT
Contacts for Incentra Solutions:
Allen & Caron Inc. Incentra Solutions
Matt Clawson (investors) Paul McKnight
matt@allencaron.com Chief Financial Officer
Len Hall (financial media) pmcknight@incentrasolutions.com
len@allencaron.com (303) 449-8279
(949) 474-4300
INCENTRA SOLUTIONS ANNOUNCES 2005 SECOND QUARTER,
FIRST SIX MONTHS RESULTS
PRO FORMA REVENUES UP YEAR-OVER-YEAR 27% AND 25%, RESPECTIVELY, TO
$17.6 MILLION AND $34.0 MILLION
BOULDER, CO, AUGUST 16, 2005 - Incentra Solutions, Inc. (OTCBB: ICNS) today
announced that increased sales of information technology (IT) products and
services, higher levels of professional services and managed services to the
enterprise market and continued solid growth in its Front Porch Digital Media
offerings drove substantial year-over-year revenue increases for its second
quarter and six months ended June 30, 2005. Second quarter pro forma revenue
increased 27 percent to $17.6 million, from $13.9 million for the comparable
prior year period. Pro forma gross margin for the 2005 second quarter was $5.1
million as compared to $4.3 million for the comparable prior year period.
Chairman and CEO Thomas P. Sweeney noted, "Our revenue growth was
driven by higher third-party product sales, increased sales of professional
services, increased managed services in the enterprise market and the addition
of two DIVAcomplete installations for Front Porch Digital. The complete
solutions approach continues to position Incentra to take a larger percentage of
our customers' total spend with the opportunity to deliver higher-margin
recurring services.
"Second quarter revenues were higher than previously forecasted due to
the accelerated sale and delivery of a few transactions which were originally
forecasted for the third quarter," Sweeney added. "Margins continue to improve
this year as we begin to realize synergies from the acquisitions and from the
expansion of our service offering to existing customers and to newly-acquired
customers. With our acquisition integration efforts largely complete, the teams
are now solely focused on the delivery of complete solutions to our customers."
Pro forma net loss before amounts attributable to common
shareholders(1) for the quarter decreased 33 percent to $2.4 million compared to
a pro forma loss of $3.6 million for the 2004 second quarter. EBITDA(2), as
adjusted, was $293,000 for the 2005 second quarter and excluded a $135,000 gain
from an insurance recovery.
For the first six months of 2005, the pro forma revenues increased 25
percent to $34.0 million, from the comparable prior year period. EBITDA(2), as
adjusted, for the first six months of 2005 was $704,000 which also excluded the
insurance recovery. "Overall, we continue to make strides in delivering complete
IT solutions and solidifying our position as an outsourced provider and
implementer for our customers' complete IT needs," Sweeney commented.
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INCENTRA SOLUTIONS ANNOUNCES 2005 SECOND QUARTER, FIRST SIX MONTHS RESULTS
Page 2-2-2
Pro forma results of operations discussed above, include 100 percent of
the operating results the acquisitions for all periods presented.
RESULTS OF OPERATIONS IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
Revenues for the three and six months ended June 30, 2005 were
approximately $17.6 million and $23.6 million, respectively. Gross margin was
$5.1 million in the 2005 second quarter and $8.0 million for the six months
ended June 30, 2005. Gross margin as a percentage of revenue for the second
quarter was 29 percent and was 34 percent for the six month period. Net loss
before amounts attributable to common shareholders(1) was $2.4 million in the
2005 second quarter and $4.7 million for the first six months ending June 30,
2005.
Results of operations determined in accordance with GAAP exclude the
results of operations of the acquired businesses prior to the respective
acquisition dates.
CONFERENCE CALL INFORMATION
As previously announced, management will host a conference call to be
broadcast live on the Internet on Tuesday, August 16, 2005 at 11:30 a.m.
(Eastern time). The dial-in number for the call is 1-800-370-0898, or you may
access the live webcast on the Investors section of the Company's website,
WWW.INCENTRASOLUTIONS.COM. Additionally, an archive of the conference call will
be available on this site.
ABOUT INCENTRA SOLUTIONS, INC.
Incentra Solutions, Inc. (www.incentrasolutions.com, OTCBB:ICNS) is a
provider of complete IT & storage management solutions to broadcasters,
enterprises and managed service providers worldwide. Incentra's complete
solution includes professional services, hardware & software products with first
call support, IT outsourcing solutions and financing options. To the broadcast
market, Incentra delivers complete digital archive management and transcoding
solutions built on its IT and storage expertise and offerings.
INCENTRA SOLUTIONS FORWARD LOOKING STATEMENTS
CERTAIN INFORMATION DISCUSSED IN THIS PRESS RELEASE MAY CONSTITUTE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND THE FEDERAL SECURITIES LAWS. ALTHOUGH THE
COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE BASED UPON REASONABLE ASSUMPTIONS AT THE TIME MADE, IT CAN GIVE
NO ASSURANCE THAT ITS EXPECTATIONS WILL BE ACHIEVED. READERS ARE CAUTIONED NOT
TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING
STATEMENTS ARE INHERENTLY SUBJECT TO UNPREDICTABLE AND UNANTICIPATED RISKS,
TRENDS AND UNCERTAINTIES SUCH AS THE COMPANY'S INABILITY TO ACCURATELY FORECAST
ITS OPERATING RESULTS; THE COMPANY'S POTENTIAL INABILITY TO ACHIEVE
PROFITABILITY OR GENERATE POSITIVE CASH FLOW; THE AVAILABILITY OF FINANCING; AND
OTHER RISKS ASSOCIATED WITH THE COMPANY'S BUSINESS. FOR FURTHER INFORMATION ON
FACTORS WHICH COULD IMPACT THE COMPANY AND THE STATEMENTS CONTAINED HEREIN,
REFERENCE SHOULD BE MADE TO THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, INCLUDING ANNUAL REPORTS ON FORM 10-KSB, QUARTERLY REPORTS
ON FORM 10-QSB AND CURRENT REPORTS ON FORM 8-K. THE COMPANY ASSUMES NO
OBLIGATION TO UPDATE OR SUPPLEMENT FORWARD-LOOKING STATEMENTS THAT BECOME UNTRUE
BECAUSE OF SUBSEQUENT EVENTS.
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INCENTRA SOLUTIONS ANNOUNCES 2005 SECOND QUARTER, FIRST SIX MONTHS RESULTS
Page 3-3-3
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(1) Net loss before amounts attributable to common shareholders excludes deemed
dividends and accretion related to the Company's preferred stock.
(2) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and cumulative effect of changes in accounting principles. Although
EBITDA is not a measure of performance or liquidity calculated in accordance
with United States generally accepted accounting principles (GAAP), the Company
believes the use of the non-GAAP financial measure EBITDA enhances an overall
understanding of the Company's past financial performance and is a widely-used
measure of operating performance in practice. In addition, the Company believes
the use of EBITDA provides useful information to the investor because EBITDA
excludes significant non-cash interest and amortization charges related to past
financings by the Company that, when excluded, the Company believes produces
more meaningful operating information. EBITDA also excludes depreciation expense
incurred primarily in the MSI subsidiary and amortization expense for intangible
assets which arose out from the acquisition of MSI, which are significant when
compared to such levels prior to the acquisition of MSI. However, investors
should not consider this measure in isolation or as a substitute for net income
(loss), operating income (loss), cash flows from operating activities or any
other measure for determining the Company's operating performance or liquidity
that are calculated in accordance with GAAP, and this measure may not
necessarily be comparable to similarly titled measures employed by other
companies. A reconciliation of EBITDA to the most comparable GAAP financial
measure, loss before income taxes, is included in the adjoining tables.
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THREE MONTHS ENDED 6-30-05 SIX MONTHS ENDED 6-30-05
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AS REPORTED PROFORMA AS REPORTED PROFORMA
EBITDA RECONCILIATION
all amounts in (000's)
Net loss $(2,356) $(2,356) $(4,705) $(4,741)
Income tax expense 559 559 877 877
Non-cash interest 431 431 972 973
Cash interest, net 175 175 173 250
Depreciation 398 398 793 826
Amortization 949 949 1,840 1,869
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EBITDA $156 $156 $(50) $54
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Owner's costs - - - 314
Referral fees 29 29 72 72
Stock-based compensation 108 108 264 264
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EBITDA, AS ADJUSTED $293 $293 $286 $704
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TABLES FOLLOW
INCENTRA SOLUTIONS ANNOUNCES RECORD SECOND QUARTER AND SIX-MONTH RESULTS
Page 4-4-4
INCENTRA SOLUTIONS, INC. & SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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THREE MONTHS ENDED SIX MONTHS ENDED
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JUNE 30, 2005 JUNE 30, 2004 JUNE 30, 2005 JUNE 30, 2004
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all amounts in (000's)
Revenues $ 17,599 $ 1,898 $ 23,606 $ 4,262
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Cost of revenue 12,505 1,337 15,569 2,550
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Gross margin 5,094 561 8,037 1,712
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Total operating expenses 6,287 2,458 11,171 4,857
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Loss from operations (1,193) (1,897) (3,134) (3,145)
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Loss before income tax (1,797) (2,558) (3,828) (4,441)
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Net loss (2,356) (2,558) (4,705) (4,441)
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Net loss applicable to common
stockholders $ (3,011) $ (2,715) $ (6,013) $ (4,754)
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INCENTRA SOLUTIONS ANNOUNCES RECORD SECOND QUARTER AND SIX-MONTH RESULTS
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INCENTRA SOLUTIONS, INC. & SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------- -----------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
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JUNE 30, 2005 JUNE 30, 2004 JUNE 30, 2005 JUNE 30, 2004
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all amounts in (000's)
Revenues $ 17,599 $ 13,860 $ 34,050 $ 28,137
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Cost of revenue 12,505 9,511 24,475 19,638
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Gross margin 5,094 4,349 9,575 8,499
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Total operating expenses 6,287 6,883 12,668 12,705
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Loss from operations (1,193) (2,534) (3,093) (4,206)
----------- ----------- ----------- -----------
Loss before income taxes (1,797) (3,633) (3,864) 6,151
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Net loss (2,356) (3,633) (4,741) (6,151)
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Net loss applicable to common
shareholders $ (3,011) $ (3,790) $ (6,050) $ (6,464)
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INCENTRA SOLUTIONS ANNOUNCES RECORD SECOND QUARTER AND SIX-MONTH RESULTS
Page 6-6-6
INCENTRA SOLUTIONS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
JUNE 30, 2005
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Assets
Current assets:
Cash and cash equivalents $ 2,058,585
Accounts receivable, net of allowance for doubtful accounts of $260,000 12,309,757
Other current assets 1,036,076
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Total current assets 15,404,418
Property and equipment, net 2,366,712
Capitalized software costs, net 1,655,837
Software and intellectual property, net 14,916,003
Goodwill 14,482,287
Other assets 894,149
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34,314,988
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TOTAL ASSETS $ 49,719,406
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Liabilities and shareholders' equity
Current liabilities:
Current portion of notes payable, capital leases and other long term obligations $ 4,495,929
Accounts payable 9,612,801
Accrued expenses 3,720,186
Current portion of deferred revenue 1,378,109
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Total current liabilities 19,207,025
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Notes payable, capital leases and other long term obligations, net of current portion 6,317,932
Deferred revenue, net of current portion 109,105
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6,427,037
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TOTAL LIABILITIES 25,634,062
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Commitments and contingencies
Series A convertible preferred stock, $.001 par value, $31,500,000 liquidation preference,
2,500,000 shares authorized, 2,466,971 shares issued and outstanding 23,309,550
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Shareholders' equity:
Preferred stock, nonvoting, $.001 par value, 2,500,000 shares --
authorized, none issued or outstanding
Common stock, $.001 par value, 200,000,000 shares authorized, 13,030,446 shares issued,
12,887,082 shares outstanding, 143,364 shares in treasury 12,887
Additional paid-in capital 124,021,141
Accumulated other comprehensive loss (134,766)
Accumulated deficit (123,123,468)
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TOTAL SHAREHOLDERS' EQUITY 775,794
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 49,719,406
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