Exhibit 99.1
iMergent Announces Record Third Quarter 2004 Revenues and Profits;
Third Quarter Revenue Increases 37% and Nine-month Revenue Increases by 71%
OREM, Utah--(BUSINESS WIRE)--May 5, 2004--
EBT per Diluted Share Increased 6% to $0.19 for Quarter and 40%
to $0.49 for Nine Months; Applies for American Stock Exchange
Listing, Withdraws Application from NASDAQ
iMergent, Inc., (OTCBB:IMGG) a leading provider of eCommerce and
software for small businesses and entrepreneurs, announced today its
results for the quarter and nine-months ended March 31, 2004.
Total revenue for the third fiscal quarter ended March 31, 2004
rose to $19.6 million from $14.3 million in the same quarter of 2003,
an increase of 37 percent, surpassing the company's expectations. The
higher revenue was primarily due to an increase in the total number of
workshops held in the first quarter, as well as the addition of
workshops held in conjunction with MIT Financial. The company also
continued its international expansion.
During the quarter, the company implemented the ETIF 99-19
accounting standard, which changed its revenue reporting method to net
certain sales and marketing expenses against revenue and does not
impact the company's earnings, cash flows or financial position. The
impact to revenue and sales and marketing expense is reconciled within
the financial tables at the end of the release.
Earnings before income taxes (EBT) for the third fiscal quarter
ended March 31, 2004 rose to $2.3 million from $2.0 million in the
same quarter of 2003, an increase of 13 percent. Earnings before taxes
includes a $1.0 million charge to bad debt expense for contracts
signed prior to the company's new customer service initiatives that
were implemented during the second fiscal quarter; the company is
seeing early, positive trends in the performance of contracts signed
after the customer service initiatives were implemented. EBT per
diluted share was $0.19 for the third quarter 2004, a 6 percent
increase over $0.18 for the third quarter of 2003.
As a result of its recent strong earnings history, iMergent
recognized a $13.5 million non-cash income tax benefit based on the
reversal of the valuation allowance against its deferred tax asset,
which consists mainly of net operating losses carried forward (NOL)
from prior periods, effectively eliminating a $14.1 million tax burden
on future earnings. As a result, net income for the third fiscal
quarter increased to $15.8 million, or $1.28 per diluted share,
compared to net income of $1.6 million, or $0.14 per diluted share,
for the comparable quarter of the prior fiscal year.
Revenue for the nine-months ended March 31, 2004 grew to $56.1
million compared to $32.7 million for the same period last year,
representing an increase of 71 percent. Earnings before income taxes
for the nine-months ended March 31, 2004 rose to $5.9 million from
$3.9 million in the same period, an increase of 53 percent. EBT per
diluted share was $0.49 for the nine-month period, a 40 percent
increase over $0.35 for the same period in 2003. Net income for the
nine-months ended March 31, 2004, including the income tax benefit
increased to $19.4 million, or $1.61 per diluted share, compared to
$3.4 million, or $0.30 per diluted share, for the same period last
year.
Highlights
-- Increased the number of StoresOnline(TM) workshops held during
the quarter to 146 and year-to-date to 380.
-- Continued iMergent's international expansion, conducting eight
workshops in Canada during the third quarter. International
workshops events are planned for Australia, Canada, New
Zealand, and the United Kingdom during the fourth quarter.
-- Decreased the bad debt expense as a percentage of sales by 1.4
percent year-over-year. The company has a goal of reducing
this expense further throughout the remainder of 2004.
-- In February announced a marketing relationship with MIT
Financial, an educational/training conference company,
enabling iMergent experts to present the StoresOnline
opportunity at MIT Financial's conferences, which draws
iMergent's target audience.
-- In February appointed Robert Lewis, CPA, chief financial
officer, replacing Frank C. Heyman, who will retire from the
company on June 30, 2004.
-- In April closed a $3.0 million revolving loan agreement with
Zions First National Bank allowing iMergent to borrow up to 80
percent of qualifying receivables at prime plus three percent.
The loan agreement provides the company with liquidity and
capital resources to finance customers and continue
international expansion.
Brandon Lewis, president and chief operating officer, stated, "Our
business continues to grow rapidly both domestically and
internationally. We exceeded our expectations with record third
quarter earnings, and we believe we will continue to show improvement
in the coming quarters. In addition, our new line of credit increases
our access to capital that will enable the company to substantially
reduce the number of customer finance contracts sold at a discount
each quarter. We expect this credit agreement along with our customer
service initiatives will have a direct positive impact on our future
operations."
"Our customer service initiatives including our three-day right to
rescind policy and customer education programs are coming to fruition,
and our bad debt expenses have been trending downward," stated Robert
Lewis, chief financial officer. "In addition, we have established a
strong profitability trend. Therefore, this quarter management decided
to reverse the valuation allowance against our deferred tax assets and
recognize the non-cash tax benefit of approximately $13.5 million,
which impacted our bottom line significantly. Going forward we expect
our tax rate will be approximately 38 percent. However, the future tax
provision will not significantly affect our cash balance as it will we
will benefit from our deferred tax asset of $14.1 million."
Exchange Listing Summary
-- On April 27th, iMergent applied for American Stock Exchange
Listing.
-- On May 5th, iMergent withdrew its application for NASDAQ Small
Cap Exchange Listing.
Don Danks, chairman and chief executive officer, stated,
"iMergent's management team has been implementing strategies to
achieve our goal of national exchange listing. Since January 2001,
when iMergent was delisted, it has undergone significant changes. We
now have a different primary business, different management team, and
different board of directors, and we have established a record of
consistent revenue growth and profitability. We initially applied for
national market listing with NASDAQ nearly a year ago, and since that
time we have been very responsive to all of NASDAQ's requests.
However, NASDAQ has informed us the examiners would still like to
review another six months of customers service."
Danks continued, "Consequently, the board of directors has
determined it is in the best interest of our shareholders to apply for
listing on the AMEX and withdraw our NASDAQ application. We have been
speaking with AMEX and we anticipate our application will be processed
efficiently. We hope to gain AMEX listing in the near future, and we
will keep you posted."
Conference Call
The company will hold a conference call to discuss these results
on Wednesday, May 5, 2004 at 4:30 p.m. EST; 1:30 p.m. PST. The
conference call will be broadcast live over the Internet at
www.imergentinc.com. If you do not have Internet access, the telephone
dial-in number is 800-639-0297 for domestic and 706-634-7417 for
international participants. Please dial in five to ten minutes prior
to the beginning of the call. A telephone replay will be available
through May 7, 2004; dial 706-645-9291, and enter access code 7040299.
About iMergent
iMergent provides eCommerce solutions to entrepreneurs and small
businesses enabling them to market and sell their business product or
idea via the Internet. Headquartered in Orem, Utah the company sells
its proprietary StoresOnline software and training services, helping
users build a successful Internet strategy to market products, accept
online orders, analyze marketing performance, and manage pricing and
customers. In addition to software, iMergent offers site development,
web hosting, marketing and mentoring products. iMergent typically
reaches its target audience through a concentrated direct marketing
effort to fill Preview Sessions, in which a StoresOnline expert
reviews the product opportunities and costs. These sessions lead to a
follow-up Workshop Conference, where product and technology experts
train potential users on the software and encourage them to make
purchases.
iMergent, Inc. and StoresOnline are trademarks of iMergent, Inc.
Statements made in this press release that are not historical in
nature constitute forward-looking statements within the meaning of the
Safe Harbor Provision of the Private Securities Litigation Reform Act
of 1995. Such statements are based on the current expectations and
beliefs of the management of iMergent and are subject to a number of
factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements.
Such risks and uncertainties include, without limitation, the
Company's continued ability to increase revenue; continue to increase
earnings; continue to expand business internationally; continue to
increase the number of workshops; continue to decrease bad debt
expense; continue to maintain/increase training events; the success of
the MIT relationship; the continued ability to use loans to increase
liquidity and capital resources; the continued acceptance of new
customer services practices; the Company's ability to attract and
retain key management and other personnel. For a more detailed
discussion of factors that affect iMergent's operating results, please
refer to its SEC reports including its most recent Form 10-K and Form
10-Q. The Company undertakes no obligation to update this
forward-looking information.
IMERGENT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Earnings for the
---------------------------------------------------------------
Three Months Nine Months
Ended Ended
------------------------ ------------------------
March 31, March 31, March 31, March 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(restated) (restated)
Revenue $19,564,954 $14,328,039 $56,060,551 $32,733,198
Cost of revenue 4,059,290 2,713,422 12,966,772 6,904,423
Cost of revenue -
related party - 348,807 - 840,263
----------- ----------- ----------- -----------
Total cost of
revenue 4,059,290 3,062,229 12,966,772 7,744,686
----------- ----------- ----------- -----------
Gross profit 15,505,664 11,265,810 43,093,779 24,988,512
Operating expenses
Research and
development 93,485 - 256,214 -
Selling and
marketing 5,580,894 3,398,522 14,555,026 7,930,045
Selling and
marketing -
related party - 160,277 - 349,680
General and
administrative 1,970,383 1,254,815 6,114,212 3,544,804
Bad debt expense 6,020,349 4,611,640 17,383,435 9,816,200
----------- ----------- ----------- -----------
Total operating
expenses 13,665,111 9,425,254 38,308,887 21,640,729
Earnings from
operations 1,840,553 1,840,556 4,784,892 3,347,783
Other income
(expense)
Other income
(expense), net 6,645 120 49,933 2,992
Interest income 468,661 218,197 1,110,418 549,414
Interest expense (8,721) (11,657) (20,286) (29,483)
----------- ----------- ----------- -----------
Total other
income (expense) 466,585 206,660 1,140,065 522,923
----------- ----------- ----------- -----------
Earnings before
income taxes 2,307,138 2,047,216 5,924,957 3,870,706
Provision for
income taxes 13,515,081 (450,275) 13,515,081 (450,275)
----------- ----------- ----------- -----------
Net earnings $15,822,219 $ 1,596,941 $19,440,038 $ 3,420,431
=========== =========== =========== ===========
Basic earnings per
share:
Basic $ 1.39 $ 0.14 $ 1.72 $ 0.31
Diluted $ 1.28 $ 0.14 $ 1.61 $ 0.30
Weighted average
shares
outstanding:
Basic 11,368,868 11,030,931 11,275,086 11,011,070
Diluted 12,353,626 11,290,240 12,111,583 11,219,115
Reconciliation of ETIF 99-19 Reclassification
---------------------------------------------
Three Months Nine Months
Ended Ended
------------------------ ------------------------
March 31, March 31, March 31, March 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue, prior to
reclassification $21,549,124 $15,786,458 $61,921,318 $37,658,988
Reclassification (1,984,170) (1,458,419) (5,860,767) (4,925,790)
----------- ----------- ----------- -----------
Revenue, as
adjusted $19,564,954 $14,328,039 $56,060,551 $32,733,198
=========== =========== =========== ===========
Selling and
marketing expense,
prior to
reclassification $ 7,565,064 $ 4,856,941 $20,415,793 $12,855,835
Reclassification (1,984,170) (1,458,419) (5,860,767) (4,925,790)
----------- ----------- ----------- -----------
Selling and
marketing expense,
as adjusted $ 5,580,894 $ 3,398,522 $14,555,026 $ 7,930,045
=========== =========== =========== ===========
Earnings Before Income Taxes Per Share Calculation
--------------------------------------------------
Three Months Nine Months
Ended Ended
------------------------ ------------------------
March 31, March 31, March 31, March 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Earnings before
income taxes
(EBIT) $ 2,307,138 $ 2,047,216 $ 5,924,957 $ 3,870,706
Basic EBIT per
share:
Basic $ 0.20 $ 0.19 $ 0.53 $ 0.35
Diluted $ 0.19 $ 0.18 $ 0.49 $ 0.35
Weighted average
shares
outstanding:
Basic 11,368,868 11,030,931 11,275,086 11,011,070
Diluted 12,353,626 11,290,240 12,111,583 11,219,115
IMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, June 30,
2004 2003
------------- -------------
(Unaudited)
Assets
Current assets
- --------------
Cash $ 3,477,441 $ 2,319,618
Trade receivables, net of allowance for
doubtful accounts of $4,330,271 at
March 31, 2004 and $4,471,667 at June
30, 2003 9,112,978 5,161,010
Other receivables - 50,000
Inventories 67,907 34,194
Prepaid expenses 964,877 687,983
Deferred tax asset - current 2,851,082 -
Credit card reserves 457,497 770,011
------------ ------------
Total current assets 16,931,782 9,022,816
Property and equipment, net 302,230 200,174
Goodwill, net 455,177 455,177
Trade receivables, net of allowance for
doubtful accounts of $2,454,714 at
March 31, 2004 and $2,131,593 at June
30, 2003 4,911,023 2,254,969
Deferred tax asset 11,259,004 -
Other assets, net of allowance for doubtful
accounts of $0 at March 31, 2004
and $100,783 at June 30, 2003 229,898 103,460
------------ ------------
Total Assets $ 34,089,114 $ 12,036,596
============ ============
Liabilities and Stockholders' Equity
Current liabilities
- -------------------
Accounts payable $ 2,045,596 $ 1,413,112
Accounts payable - related party - 114,925
Accrued liabilities 2,191,041 1,130,808
Current portion of capital lease
obligations 14,464 26,536
Current portion of notes payable - 121,206
Income taxes payable 606,203 -
Other current liabilities 62,781 35,840
Deferred revenue 527,847 653,463
------------ ------------
Total current liabilities 5,447,932 3,495,890
Capital lease obligations, net of current
portion 25,603 1,802
Notes payable, net of current portion 400,000 435,857
------------ ------------
Total liabilities 5,873,535 3,933,549
------------ ------------
Commitments and contingencies
Stockholders' equity
- --------------------
Capital stock, par value $.001 per share
Preferred stock - authorized 5,000,000
shares; none issued
Common stock - authorized 100,000,000 shares; issued
and outstanding 11,404,604
and 11,062,290 shares, at March 31,
2004 and June 30, 2003, respectively 11,405 11,063
Additional paid-in capital 73,268,519 72,605,749
Deferred compensation (13,092) (22,474)
Accumulated other comprehensive loss (4,902) (4,902)
Accumulated deficit (45,046,351) (64,486,389)
------------ ------------
Total stockholders' equity 28,215,579 8,103,047
------------ ------------
Total liabilities and stockholders' equity $ 34,089,114 $ 12,036,596
============ ============
CONTACT: iMergent, Inc.
Don Danks, Chairman and CEO, 801-431-4695
investor_relations@imergentinc.com
or
Lippert/Heilshorn & Associates
Investor Relations Contacts:
Brendan Lahiff & Kirsten Chapman, 415-433-3777
Brendan@lhai-sf.com