EXHIBIT 99.1
Digital Fusion Releases Third Quarter 2005 Results; Revenue Increased 190% over
the Same Quarter Last Year
HUNTSVILLE, Ala.--(BUSINESS WIRE)--Nov. 1, 2005--Digital Fusion,
Inc. (OTCBB: DIGF), an information technology ("IT"), research and
engineering, and acquisition and business support services provider
today announced financial results for the third quarter ended
September 30, 2005.
Third Quarter 2005 Highlights
-- Revenue $5.8 million
-- Net income of $91,000
-- Increased revenue $1.3 million over prior quarter and $3.8
million over third quarter 2004
-- Earnings before interest, taxes, depreciation and amortization
(EBITDA) $366,000
-- Revenue increased 28% and EBITDA increased 18% over prior
quarter
Financial Comparisons
For the quarter ended September 30, 2005, revenues were $5.8
million compared to $4.5 million for the second quarter 2005 and $2.0
million for the same quarter in the previous year. The increase in
revenues during the third quarter 2005 compared to the prior quarter
was primarily due to growth in product revenue and growth in services
revenue resulting from additional billable employees. The increase in
revenues during the third quarter 2005 compared to the same period
last year was primarily due to growth in engineering services and the
acquisition of Summit Research. Net income for the quarter ended
September 30, 2005 was $91,000 compared to a net loss of $327,000 for
the same quarter in the previous year. Diluted income per share for
the quarter ended September 30, 2005 was $0.01 compared to a diluted
loss per share of $0.04 for the same quarter in the previous year. For
the nine months ended September 30, 2005, revenues were $14.8 million
compared to $5.2 million for the same period last year. The increase
in revenues during the nine months ended September 30, 2005, compared
to the same period last year was primarily due to growth in
engineering services and the acquisition of Summit Research. Net
income for the nine months ended September 30, 2005 was $196,000
compared to a net loss of $650,000 for the same period in the previous
year. Diluted income per share for the nine months ended September 30,
2005 was $0.02 compared to a diluted loss per share of $0.09 for the
previous year.
Business Discussion
Services revenue increased approximately $474,000 in the third
quarter of 2005 compared to the second quarter of 2005. The increase
in services revenues was primarily related to increases in billable
employees.
Reimbursed costs revenue increased approximately $180,000 in the
third quarter of 2005 compared to the second quarter of 2005. The
increase in reimbursed costs revenues was primarily related to
increases in billable expenses.
Product revenue for the quarter ended June 30, 2005 increased
$637,000 to $964,000 compared to the second quarter of 2005. Product
revenue is cyclical and typically stronger in the company's third
quarter, which coincides with the government's fiscal year-end. The
increase in product revenue as a percentage of total sales resulted in
a reduction of gross profit as a percentage of total sales.
Management Comments
"We are pleased with our financial performance this quarter and
expect continued improvement with the start up of the NASA contract in
the fourth quarter," said Frank Libutti, chairman and chief executive
officer. "We had solid revenue growth in our core services business
and our EBITDA increased 18% or $55,000 from the second quarter of
2005."
"We are excited about our potential new business opportunities and
continue to expand our business base in our core competencies," said
Gary Ryan, president. "Our service revenues were up 13% from the
previous quarter and we continue to add billable employees. Although
we have several holidays in the fourth quarter that could impact
services revenue we expect our positive trends to continue."
About Digital Fusion
Digital Fusion, Inc., headquartered in Huntsville, Alabama, is an
information technology, research and engineering, and acquisition and
business support services company that helps its customers make the
most of technology to meet their business needs. Digital Fusion
provides state-of-the-art solutions to both government and commercial
customers. Digital Fusion's core competencies are focused in the
following broad areas: Application Development, Architecture and
Security; Network Security; Data Management and Business Intelligence;
System Migration and Integration; Sensor Systems Development and
Analysis; Aerodynamic Design, Analysis, and Support;
Thermal-Structural Modeling; Test and Evaluation; Systems Engineering;
Modeling and Simulation; Control System Design and Analysis;
Mechanical Design and Analysis; and Program Management Support. For
additional information about Digital Fusion visit
http://www.digitalfusion.com.
Forward-Looking Statements. All statements other than statements
of historical fact included in this release are forward-looking
statements. When used in this release, words such as "project,
"anticipate," "believe," "estimate," "expect," "plan," "intend," and
similar expressions, as they relate to the Company or its management,
as well as assumptions made by and information currently available to
the Company's management, identify forward-looking statements.
Similarly, statements herein that describe the Company's business
strategy, outlook, objectives, plans, intentions or goals are also
forward-looking statements. Actual results could differ materially
from those contemplated by the forward-looking statements as a result
of certain factors including, but not limited to: the effect of
business and economic conditions; the impact of competitive products
and pricing; capacity and supply constraints or difficulties, the
Company's dependence on continued funding of U.S. government programs;
contract procurement and termination risks; competitive factors such
as pricing pressures and/or competition to hire and retain employees,
and material changes in laws or regulations applicable to the Company
businesses. Such statements reflect the current views of the Company
with respect to future events and are subject to these and other
risks, uncertainties and assumptions relating to the operations,
results of operations, growth strategy and liquidity of the Company.
These statements reflect the Company's current beliefs and are based
upon information currently available to it. Be advised that
developments subsequent to this release are likely to cause these
statements to become outdated with the passage of time.
DIGITAL FUSION, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
September 30, December 31,
2005 2004
(Unaudited)
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1 $ 252
Accounts receivable (net of allowance
for doubtful accounts of $29 and $54
for 2005 and 2004, respectively) 3,614 1,050
Unbilled receivables 614 -
Prepaid expenses and other current assets 73 27
------------- ------------
Total current assets 4,302 1,329
Property and equipment, net of accumulated
depreciation of $1,068 for 2005 and $952
for 2004 495 417
Prepaid acquisition costs and acquisition
deposit - 285
Goodwill 5,865 3,347
Purchased intangible assets, net 1,742 -
Other assets 18 13
------------- ------------
Total assets $ 12,422 $ 5,391
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,442 $ 647
Accounts payable 1,414 609
Deferred revenue 405 21
Accrued compensation and related expenses 959 97
Other current liabilities 83 266
------------- ------------
Total current liabilities 4,303 1,640
Long-term debt, less current maturities 2,220 81
Pension obligation 302 302
------------- ------------
Total liabilities 6,825 2,023
------------- ------------
Stockholders' Equity:
Preferred Stock - $.01 par value;
authorized 1,000 shares, no shares
issued and outstanding - -
Common Stock - $.01 par value; authorized
30,000 shares; 11,072 and 9,721 shares
issued and outstanding at September 30,
2005 and December 31, 2004, respectively 111 97
Additional paid in capital 44,069 42,050
Accumulated deficit (38,583) (38,779)
------------- ------------
Total stockholders' equity 5,597 3,368
------------- ------------
Total liabilities and stockholders'
equity $ 12,422 $ 5,391
============= ============
DIGITAL FUSION, INC.
Condensed Consolidated Statements of Operations
For the three and nine months ended September 30, 2005 and 2004
(unaudited, in thousands except share data)
Three months ended Nine months ended
September 30, September 30,
--------------------------------------
2005 2004 2005 2004
--------- -------- -------- ---------
Revenues
Services and fees $ 4,061 $ 962 $11,107 $ 3,137
Reimbursed costs 815 191 1,993 461
Product 964 891 1,728 1,567
--------- -------- -------- ---------
Total Revenues 5,840 2,044 14,828 5,165
--------- -------- -------- ---------
Cost of services and goods sold
Services 3,163 846 8,605 2,527
Reimbursed costs 796 150 1,872 370
Product 877 845 1,608 1,478
--------- -------- -------- ---------
Total cost of services and
goods sold 4,836 1,841 12,085 4,375
--------- -------- -------- ---------
Gross profit 1,004 203 2,743 790
Selling, general and
administrative 678 472 1,925 1,309
--------- -------- -------- ---------
Operating income (loss) 326 (269) 818 (519)
Other income (expenses):
Interest expense, net (54) (58) (137) (131)
Other income 1 - 21 -
Amortization of intangible
assets (101) - (201) -
Amortization of discount on
debt and intrinsic value of
convertible debt (81) - (305) -
---------- ----------------- ---------
Total other expenses (235) (58) (622) (131)
--------- -------- -------- ---------
Net income (loss) before
income taxes 91 (327) 196 (650)
Income tax benefit - - - -
--------- -------- -------- ---------
Net income (loss) $ 91 $ (327) $ 196 $ (650)
========= ======== ======== =========
Basic earnings (loss) per share $ 0.01 $ (0.04) $ 0.02 $ (0.09)
========= ======== ======== =========
Basic weighted average common
shares outstanding 11,051 7,985 10,792 7,599
========= ======== ======== =========
Diluted earnings (loss) per
share $ 0.01 $ (0.04) $ 0.02 $ (0.09)
========= ======== ======== =========
Diluted weighted average common
shares outstanding 13,156 7,985 12,879 7,599
========= ======== ======== =========
Earnings before interest, income taxes, depreciation,
and amortization (EBITDA)
(unaudited in thousands)
EBITDA is not a measure of financial performance under United States
generally accepted accounting principles ("US GAAP") and should not be
considered as an alternative to net income, operating income or any
other performance measures derived in accordance with US GAAP or as an
alternative to cash flow from operating activities as a measure of
liquidity. Management believes EBITDA provides additional, useful
information regarding Digital Fusion's ability to meet our debt
service, capital expenditure and working capital requirements. EBITDA
is a traditional measure of a business' ability to generate cash flows
irrespective of financing costs and is presented as a supplemental
financial measurement in the evaluation of our business.
Three months ended Nine months ended
September 30, September 30,
------------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Net income (loss) $ 91 $ (327) $ 196 $ (650)
Interest expense 54 58 137 131
Income tax expense - - - -
Depreciation 39 36 118 72
Amortization of intangible
assets 101 - 201 -
Amortization of discount on debt
and intrinsic value of
convertible debt 81 - 305 -
-------- -------- -------- --------
EBITDA $ 366 $ (233) $ 957 $ (447)
======== ======== ======== ========
CONTACT: Digital Fusion, Inc.
Elena Crosby, 256-837-2620
ir@digitalfusion.com