Exhibit 99.1
iMergent Announces Third Quarter Fiscal 2006 Financial Results
OREM, Utah--(BUSINESS WIRE)--May 4, 2006--iMergent, Inc.
(AMEX:IIG):
-- Third Quarter 2006 Total Revenue of $25.0 Million
-- $26.3 Million in Net Dollar Volume of Contracts Written
Highest in Company History
-- Posts Quarterly Diluted EPS of $0.22, Compared to a Loss Per
Share of $0.54 in Prior Year Quarter
-- Australia Court Sets May 9, 2006 Hearing to Enter Settlement
Agreement
iMergent, Inc. (AMEX:IIG), a leading provider of eCommerce and
software for small businesses and entrepreneurs, today announced the
results for the three and nine months ended March 31, 2006.
Don Danks, chairman and chief executive officer, stated, "Our
third quarter results, with revenue growing 142 percent as a result of
the change in business model in December 2005 and net dollar volume of
contracts written reaching its highest level in company history during
the quarter, demonstrates that our business remains strong. We are
constantly evaluating new ancillary products to ensure we offer the
best solutions to our customers. We believe this will drive greater
benefits as we continue to serve this very large market. Recent data
confirms that there are approximately 24.7 million small businesses in
the United States alone. And when you add in the international
markets, we believe we are positioned to best serve this very large
and underserved market."
iMergent and the Australian Competition and Consumer Commission
(ACCC) resolved all outstanding issues at a mediation previously held
in Australia. The court has set a May 9th re-listing of the matter for
entry of the settlement. Under terms of the settlement and without an
admission of any liability, iMergent has agreed to allow refunds up to
a maximum of approximately US $468,000 to certain Australian customers
and pay related administrative costs to the Australian Competition and
Consumer Commission (ACCC) of approximately US $28,000. The refund
account is funded entirely by funds of iMergent presently held as
restricted cash in an Australian bank account and will be transferred
into the refund account. If the refund account is not exhausted by the
claims of certain Australian customers, the remainder of the refund
account will be paid back to iMergent. iMergent will not be paying any
other fees, costs or penalties under the settlement agreement. If the
total value of qualifying claims exceeds the amount of the refund
account, payments will be made pro rata to those seeking refunds.
iMergent's total liability in this matter will not exceed
approximately US $496,000, and the company had reserved a substantial
portion of this settlement amount in previous quarters.
"We expect the court will confirm the settlement at the hearing,
and we look forward to returning to Australia, as it has historically
been a profitable market for our StoresOnline(TM) workshops," added
Danks.
All terms of the settlement agreement are in Australian dollars.
All dollar amounts appearing in this press release are shown on an "as
converted" basis to the approximate US dollar equivalent as of March
29, 2006. The actual payments will be made in Australian dollars;
thus, actual US dollar equivalents will vary according to prevailing
exchange rates at the time of payments.
Three-months Ended March 31, 2006 Compared to March 31, 2005
-- Revenues for the fiscal third quarter of 2006 increased to
$25.0 million from $10.3 million for the fiscal third quarter
of 2005. The increase is primarily due to the change in
business model regarding the customer service practice
implemented in December 2005.
-- Net dollar volume of contracts written was $26.3 million for
the quarter compared to $23.8 million for the same period last
year. The company believes that the net dollar volume of
contracts written during each period is a relevant and
meaningful statistic in understanding the operations of the
company as net dollar volume of contracts written represents
gross dollar sales contracts executed during the period less
estimates for bad debts and discounts incurred on sales of
trade receivables. A table reconciling GAAP revenue to net
dollar volume of contracts written follows in this press
release.
-- Total operating expenses were $21.5 million for the quarter
compared to $17.8 million for the comparable period of the
previous fiscal year. The increase was primarily attributable
to the increase in net dollar volume of contracts written,
increased travel costs associated with higher fuel prices,
additional marketing activities associated with an increase in
workshops conducted in early April 2006, an increase in
accounting fees associated with the restatement of previously
issued financial statements and an increase in stock option
compensation expense resulting from the application of SFAS
No. 123R in fiscal 2006.
-- Net income was $2.8 million, or $0.22 per diluted common
share, for the three months ended March 31, 2006 compared to a
net loss of $6.4 million, or $0.54 per diluted common share,
for the comparable period of the previous year.
Brandon Lewis, president and chief operating officer, said, "As
part of our drive to continually improve the business, we have
adjusted our product financing policy, which has resulted in a
stronger customer base. To further that improvement, we continue to
leverage our business with the goal of improving margins. We have
several new products and initiatives in the pipeline that we feel will
help accomplish this goal -- from the broadening of our training and
education programs to offering exciting new products and solutions
that help our merchants develop effective websites via proactive tools
and solutions offering innovative and enhanced functionality."
Nine-Months Ended March 31, 2006 Compared to March 31, 2005
-- Revenues for the nine months ended March 31, 2006 increased to
$156.9 million from $28.2 million for the nine months ended
March 31, 2005. The increase reflects the recognition of
$108.0 million of previously deferred revenue that would have
been recognized in future periods had the change in business
model regarding the customer service practice not occurred in
December 2005.
-- Net dollar volume of contracts written was $68.4 million for
the nine-month period compared to $65.8 million the same
period last year.
-- Total operating expenses were $60.2 million for the nine-month
period compared to $51.8 million for the same period last
year.
-- Net cash provided by operating activities for the nine-month
period was $17.7 million compared to $5.5 million for the same
period last year.
-- Net income was $108.5 million, or $8.56 per diluted common
share, for the nine months ended March 31, 2006 compared to a
net loss of $21.2 million, or $1.81 per diluted common share,
for the comparable period in the prior fiscal year.
Robert Lewis, chief financial officer, stated, "We have built a
solid foundation for our growth strategy. Net dollar volume of
contracts written was up 11 percent over the prior year's third
quarter, and up five percent over the second quarter of fiscal 2006.
During the quarter, we generated approximately $2.4 million in cash
from operating activities, and we closed the quarter with $28.1
million in cash and cash equivalents. Moreover, we have the ability to
sell our receivables to generate additional cash if needed."
Conference Call
The company is hosting a conference call today at 8:00 a.m. PT
(11:00 a.m. ET). The 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 participants 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 8, 2006; dial 706-645-9291, and enter
access code 8373576.
Safe Harbor Statement
The statements made in this press release regarding (i) iMergent's
success in serving its customers and potential customers, (ii)
iMergent's payments and liability relating to the ACCC settlement,
(iii) whether the court will confirm iMergent's settlement with the
ACCC and iMergent will return to Australia, (iv) iMergent's ability to
improve its margins, (v) iMergent's development of new products and
initiatives, and whether these new products and initiatives will help
iMergent improve its margins, (vi) iMergent's belief that it has built
a solid foundation for its growth strategy, (vii) iMergent's ability
to sell its receivables and other statements that are not historical
in nature constitute forward-looking statements within the meaning of
the Safe Harbor Provisions 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
risks 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 ability to increase the net dollar volume of contracts
written; the Company's ability to continue to evaluate and find
ancillary products; the Company's ability to offer best solutions to
its customers, or otherwise provide solutions to customers; the
Company's ability to maintain a very solid customer base; the
Company's ability to have lucrative long term relationships with its
customers; that the market for the Company's products will continue to
grow; that the Company will realize greater benefits with any growth
of its market; the total amount of claims filed by Australian
customers; whether there will be any funds returned to the Company
from the settlement account; whether the terms of the settlement with
the ACCC will be deemed to be adhered to by the Company on an ongoing
basis; whether regulatory authorities will bring future actions
against the Company; fluctuations in the Company's operating results
because of negative publicity, seasonality, competition and other
factors; adverse international or domestic regulatory developments
affecting the internet or the Company's business; costs of and
developments in the Company's pending litigation and SEC
investigation; the Company's ability to generate revenue and profits
from current strategic partnerships; the Company's ability to generate
cash flow from operating activities and sales of receivables; the
Company's ability to expand current markets and develop new markets
and establish profitable strategic partnerships; the Company's ability
to continue to finance extended payment term arrangement customer
contracts; whether there is continual demand for the Company's
products and services in its target market of small business and
entrepreneurs for assistance in establishing websites; that the
Company can successfully adjust its product financing policy, and that
such adjustment to policy will not negatively impact business or
revenues; that the Company is able to leverage its business; that the
Company does improve margins and can continue to improve margins; that
new products and initiatives in the pipeline will be implemented; that
new products and initiatives if implemented will improve the customer
base and margins of the Company; that the Company can broaden its
training and education programs as well as offer new products and
solutions; that if the Company is able to broaden its training and
education programs as well as offer new products and solutions that
such actions will have a positive impact on the Company, its
customers, its customer relationships, its margins or revenues; and,
that the growth strategy undertaken by the Company will be successful.
For a more detailed discussion of factors that affect iMergent's
operations, please refer to the Company's Form 10-K for the year ended
June 30, 2005 and its Forms 10-Q for the quarterly periods ended
September 30, 2005, December 31, 2005, as well as the Form 10-Q being
filed for the period ended March 31, 2006. These forward-looking
statements speak only as of the date on which such statements are
made, and the Company undertakes no obligation to update such
forward-looking statements.
About iMergent
iMergent provides eCommerce solutions to entrepreneurs and small
businesses enabling them to market and sell their business products or
ideas 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.
iMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(unaudited)
March 31, 2006 June 30, 2005
--------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 28,083 $ 10,691
Certificate of deposit 500 -
Trade receivables, net of allowance for
doubtful accounts of $6,354 as of March
31, 2006 and $6,452 as of June 30, 2005 10,140 7,018
Trade receivables held for sale - 14,006
Trade receivables pledged - 763
Inventories 92 74
Prepaid expenses and other 3,613 2,783
--------- ---------
Total current assets 42,428 35,335
Restricted cash 496 446
Certificate of deposit 500
Long-term trade receivables, net of
allowance for doubtful accounts of
$3,387 as of March 31, 2006 and $1,508
as of June 30, 2005 5,092 1,754
Property and equipment, net 582 508
Deferred income tax assets 10,639 -
Merchant account deposits and other 1,123 384
--------- ---------
Total Assets $ 60,360 $ 38,927
========= =========
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable $ 3,361 $ 2,376
Accrued expenses and other 5,212 5,171
Income taxes payable 242 -
Collateralized borrowing - 763
Deferred revenue, current portion 22,306 33,146
Capital lease obligations, current
portion 104 91
--------- ---------
Total current liabilities 31,225 41,547
Capital lease obligations, net of current
portion 7 79
Deferred revenue, net of current portion 3,275 80,904
--------- ---------
Total liabilities 34,507 122,530
--------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, par value $0.001 per
share - authorized 5,000,000 shares;
none issued - -
Common stock, par value $0.001 per share
- authorized 100,000,000 shares;
12,144,994 and 12,130,679 shares
outstanding as of March 31, 2006 and
June 30, 2005, respectively 12 12
Additional paid-in capital 75,791 74,807
Accumulated other comprehensive loss (5) (5)
Accumulated deficit (49,945) (158,417)
--------- ---------
Total stockholders' equity (deficit) 25,853 (83,603)
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) $ 60,360 $ 38,927
========= =========
iMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- -------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Revenue:
Product and other
revenue $ 21,508 $ 6,783 $ 147,970 $ 17,733
Commission and
other revenue 3,497 3,538 8,923 10,474
----------- ----------- ----------- -----------
Total revenue 25,005 10,321 156,893 28,207
----------- ----------- ----------- -----------
Operating expenses:
Cost of product and
other revenue 7,542 6,554 21,753 21,560
Selling and
marketing 10,071 8,052 27,400 22,609
General and
administrative 3,642 2,942 10,385 7,120
Research and
development 208 231 677 551
----------- ----------- ----------- -----------
Total operating
expenses 21,463 17,779 60,215 51,840
----------- ----------- ----------- -----------
Income (loss) from
operations 3,542 (7,458) 96,678 (23,633)
----------- ----------- ----------- -----------
Other income
(expense):
Interest income 819 938 2,099 2,594
Interest expense (3) (22) (17) (86)
Other income
(expense), net 158 242 (117) 383
----------- ----------- ----------- -----------
Total other
income, net 974 1,158 1,965 2,891
----------- ----------- ----------- -----------
Income (loss)
before income tax
(provision)
benefit 4,516 (6,300) 98,643 (20,742)
Income tax
(provision)
benefit (1,716) (136) 9,829 (454)
----------- ----------- ----------- -----------
Net income (loss) $ 2,800 $ (6,436) $ 108,472 $ (21,196)
=========== =========== =========== ===========
Net income (loss)
per common share:
Basic $ 0.23 $ (0.54) $ 8.94 $ (1.81)
=========== =========== =========== ===========
Diluted $ 0.22 $ (0.54) $ 8.56 $ (1.81)
=========== =========== =========== ===========
Weighted average
common shares
outstanding:
Basic 12,135,889 11,965,993 12,133,971 11,738,149
Diluted 12,691,997 12,654,448 12,674,550 12,426,604
iMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
Nine Months Ended March 31,
---------------------------
Increase (decrease) in cash and cash
equivalents 2006 2005
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 108,472 $ (21,199)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 212 172
Amortization of deferred compensation - 6
Expense for stock options issued to
employees 898 -
Expense for stock options issued to
consultants 44 67
Related tax benefit upon issuance of
common stock - 1,014
Gain on early extinguishment of debt - (39)
Loss on disposition of property and
equipment - 17
Changes in assets and liabilities:
Trade receivables and trade
receivables held for sale 7,546 (11,243)
Inventories (18) (101)
Prepaid expenses and other (830) (3,030)
Restricted cash (50) -
Merchant account deposits and other (739) 357
Deferred income tax asset (10,639) -
Accounts payable, accrued expenses
and other liabilities 1,026 2,981
Deferred revenue (88,469) 37,579
Income taxes payable 242 (1,130)
---------- -----------
Net cash provided by operating
activities 17,695 5,451
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (286) (171)
---------- -----------
Net cash used in investing
activities (286) (171)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line-of credit
agreements - 1,122
Proceeds from exercise of options and
warrants 42 1,302
Principal payments on capital lease
obligations (59) (67)
Repayment of notes payable - (361)
---------- -----------
Net cash (used in) provided by
financing activities (17) 1,996
---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 17,392 7,276
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 10,691 4,957
----------- --------------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD $ 28,083 $ 12,233
========== ===========
Supplemental disclosures of non-cash
transactions:
Trade receivables pledged and
collateralized borrowings $ 763 $ 2,681
Cash paid during the periods for:
Interest $ 9 $ 61
Income taxes $ 41 $ 1,953
IMERGENT, INC. AND SUBSIDIARIES
Net Dollar Volume of Contracts Written Reconciling Table and Deferred
Revenue Detail
(Dollars in thousands)
Fiscal Year 2006
--------------------------------------
Q1 Q2 Q3 Q4
---------------------------------------
Deferred revenue, beginning of
period $ 114,050 $ 119,644 $ 24,256 -
Add: product and other
contracts written net of
estimates for bad debts and
financial discounts 14,563 22,105 22,833 -
Less: amounts recognized as
product and other revenue in
the financial statements (8,969) (117,493) (21,508) -
--------- --------- --------- --------
Deferred revenue, end
of period $ 119,644 $ 24,256 $ 25,581 -
========= ========= ========= ========
Total revenue recognized in
financial statements $ 11,393 $ 120,495 $ 25,005 -
Less: Product and other revenue
recognized in financial
statements (8,969) (117,493) (21,508) -
Add: Product and other
contracts written, net of
estimates for bad debts and
financial discounts 14,563 22,105 22,833 -
--------- --------- --------- --------
Net dollar volume of contracts
written $ 16,987 $ 25,107 $ 26,330 -
========= ========= ========= ========
Fiscal Year 2005
--------------------------------------
Q1 Q2 Q3 Q4
---------------------------------------
Deferred revenue, beginning of
period $ 68,990 $ 79,337 $ 93,129 $106,569
Add: product and other
contracts written net of
estimates for bad debts and
financial discounts 15,377 19,712 20,223 14,643
Less: amounts recognized as
product and other revenue in
the financial statements (5,030) (5,920) (6,783) (7,162)
--------- --------- --------- --------
Deferred revenue, end
of period $ 79,337 $ 93,129 $ 106,569 $114,050
========= ========= ========= ========
Total revenue recognized in
financial statements $ 8,050 $ 9,836 $ 10,321 $ 10,868
Less: Product and other revenue
recognized in financial
statements (5,030) (5,920) (6,783) (7,162)
Add: Product and other
contracts written, net of
estimates for bad debts and
financial discounts 15,377 19,712 20,223 14,643
--------- --------- --------- --------
Net dollar volume of contracts
written $ 18,397 $ 23,628 $ 23,761 $ 18,349
========= ========= ========= ========
CONTACT: iMergent, Inc.
Rob Lewis, CFO, 801-431-4695
investor_relations@imergentinc.com
or
Lippert/Heilshorn & Assoc.
Kirsten Chapman, 415-433-3777 (Investor Relations)
kirsten@lhai-sf.com
or
Politis Communications
David Politis, 801-523-3730 (Media)
dpolitis@politis.com