Exhibit 99.1
iMergent Announces First Quarter Fiscal 2007 Financial Results
Reports Total Revenue of $29.0 Million
Delivers $32.4 Million in Net Dollar Volume of Contracts Written
Delivers $3.0 Million of Net Cash Provided by Operating Activities
Increasing Cash and Cash Equivalents to $31.5 Million
Increases Trade Receivables Net of Allowance for Doubtful Accounts
by $4.3 Million to $25.2 Million
Posts Diluted EPS of $0.18 GAAP and $0.31 Non-GAAP
Company Increases Guidance for Fiscal 2007 Net Dollar Volume of
Contracts Written to Grow Between 25% and 30% over Fiscal 2006
OREM, Utah--(BUSINESS WIRE)--Nov. 7, 2006--iMergent, Inc.
(AMEX:IIG), a leading provider of eCommerce and software for small
businesses and entrepreneurs, today announced its financial results
for the three months ended September 30, 2006.
Don Danks, chairman and chief executive officer, stated, "We hit
the ground running in 2007, making progress on all fronts and
delivering an excellent quarter. Revenue reached $29.0 million with
strong domestic sales and a reinvigorated international program.
During the three months ended September 30, 2006, we held 243
workshops, including 21 internationally, compared to 175 workshops,
including one internationally, during the same period last year.
Additionally, we are experiencing traction from marketing partnerships
and believe we can continue to grow the business throughout the
remainder of fiscal 2007 and beyond."
Brandon Lewis, president, stated, "As a company we continually
work to improve our customer service. In addition, in August 2006, we
instituted a 45-day to 60-day waiting period between the initial
software license sales and some of our third-party follow-up offerings
to our customers. Our goal was to provide customers with more time to
gain a deeper understanding of their specific needs prior to some
third parties offering additional products and services. This
decision, however, lowered our commissions and other revenue this
quarter, and we expect that trend will continue through December 2006.
We expect commissions and other revenue will begin to increase in
January 2007."
"We posted net dollar volume of contracts written of $32.4 million
this quarter, achieving another record level," stated Robert Lewis,
chief financial officer. "Also during the quarter, we generated $3.0
million in cash from operating activities, and we repurchased 113,800
shares of our common stock for $1.6 million."
As of September 30, 2006, cash and cash equivalents were $31.5
million; net trade receivables were $25.2 million; working capital was
$20.5 million; and working capital excluding deferred revenue was
$44.4 million.
Comparison of Three-months Ended September 30, 2006 to September
30, 2005
-- Revenues for the first quarter of fiscal 2007 increased to
$29.0 million from $11.4 million for the first quarter of
fiscal 2006. The increase is primarily due to the change in
business model implemented in December 2005.
-- Net dollar volume of contracts written was $32.4 million for
the current quarter compared to $17.0 million for the same
period last year. The company believes that the net dollar
volume of contracts written during each period is a relevant
metric to understand the operations of the company. Net dollar
volume of contracts written represents the gross dollar amount
of contracts executed during the period less estimates for bad
debts, discounts incurred on sales of trade receivables, and
estimates for customer returns. A table reconciling US
Generally Accepted Accounting Principles (US GAAP) revenue to
net dollar volume of contracts written follows in this press
release.
-- Total operating expenses were $26.5 million for the quarter
compared to $17.2 million for the comparable quarter of the
previous fiscal year. The increase in cost of product and
other revenue and selling and marketing expense was primarily
attributable to the increase in net dollar volume of contracts
written and additional marketing activities associated with an
increase in workshops conducted in October 2006. General and
administrative expenses increased due to higher professional
fees of approximately $260,000 associated with the board of
directors' analysis to repurchase stock, higher legal expenses
of approximately $240,000, an increase in stock option
compensation expense of approximately $180,000 resulting from
the issuance of stock options in July 2006, and a general
increase in salaries and wages, insurance costs and other
expenses due to the increased sales activity.
-- Net income was $2.3 million, or $0.18 per diluted common
share, for the three months ended September 30, 2006, compared
to a net loss of $(5.5 million), or $(0.45) per common share,
for the comparable quarter of the prior year.
-- Non-GAAP net income was $4.0 million, or $0.31 per diluted
common share, for the three months ended September 30, 2006,
compared to non-GAAP net income of $140,000, or $0.01 per
diluted common share, for the comparable quarter of the prior
year.
Outlook
As previously announced, in fiscal 2007, the company expects
product and other revenues to decrease as a result of the recognition
of a significant amount of revenue that occurred in fiscal 2006 as a
result of the change in the Company's business model in December 2005.
Danks added, "Due to strong demand and response to our marketing,
we are increasing guidance for full year 2007. We now expect net
dollar volume of contracts written to grow between 25 percent and 30
percent compared to fiscal 2006. Additionally, we continue to
anticipate non-GAAP pre-tax income will grow at a faster rate than net
dollar volume of contracts written."
Conference Call
The company is hosting a conference call today at 1:30 p.m. PT
(4:30 p.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 November 9, 2006; dial 706-645-9291, and
enter access code 9572145.
Safe Harbor Statement
The statements made in this press release regarding (i) iMergent
continuing its progress of strong domestic sales and reinvigorated
international programs, (ii) iMergent's commissions and other revenue
beginning to increase beginning January 2007 (iii) iMergent continuing
to experience traction from marketing partnerships, (iv) iMergent's
ability to continue to grow its business throughout the remainder of
fiscal 2007 and beyond, (v) iMergent continuing to improve its
customer service (vi) iMergent's expectation that GAAP product and
other revenue will decrease as a result of the change in business
model in December 2005, (vii) iMergent's goal that net dollar volume
of contracts written will grow between 25 percent and 30 percent in
fiscal 2007, (viii) iMergent's ability to generate new products and
initiatives, 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 properly estimating customer returns and cash
collections on financed contracts; the Company's ability to continue
to evaluate and find ancillary products; the Company's ability to
offer best solutions to its 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; whether regulatory
authorities will bring future actions against the Company; the success
of StoresOnline (TM) Pro; the continued ability to increase the number
of workshops; the ability to expand operating margins; 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; the effect of competitive and economic factors and
the Company's reaction to them; possible disruption in commercial
activities caused by terrorist activity and armed conflicts; changes
in logistics and security arrangements; reduced purchases relative to
security expectations; possible disruption in commercial activity as a
result of natural disasters or major health concerns including
epidemics; continued competitive pressures in the marketplace; the
ability of the Company to successfully evolve its products; 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
positive cash flows from operating activities; the ability to sell
receivables; the continued ability of the Company to repurchase its
common shares and what effect those transactions may have on cash and
liquidity; 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 adjustments to the 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 risk factors that may affect iMergent's operations,
please refer to the Company's Form 10-K for the year ended June 30,
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, except as
required by law.
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)
September 30, 2006 June 30, 2006
------------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 31,466 $ 30,023
Certificate of deposit - 500
Trade receivables, net of
allowance for doubtful accounts
of $9,181 as of September 30,
2006 and $6,894 as of June 30,
2006 16,872 13,419
Inventories 157 151
Prepaid expenses and other 4,726 2,739
------------------- --------------
Total current assets 53,221 46,832
Certificate of deposit 500 -
Long-term trade receivables, net of
allowance for doubtful accounts of
$4,788 as of September 30, 2006
and $4,117 as of June 30, 2006 8,320 7,508
Property and equipment, net 824 696
Deferred income tax assets 8,606 9,976
Merchant account deposits and other 1,047 1,000
------------------- --------------
Total Assets $ 72,518 $ 66,012
=================== ==============
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $ 3,683 $ 2,752
Accrued expenses and other 4,353 4,085
Income taxes payable 735 348
Deferred revenue, current portion 23,853 20,064
Capital lease obligations,
current portion 71 91
------------------- --------------
Total current liabilities 32,695 27,340
Deferred revenue, net of current
portion 8,336 8,693
------------------- --------------
Total liabilities 41,031 36,033
------------------- --------------
Commitments and contingencies
Stockholders' equity:
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; 12,289,410
shares outstanding as of
September 30, 2006 and
12,375,313 shares outstanding as
of June 30, 2006 12 12
Additional paid-in capital 76,942 77,762
Accumulated deficit (45,467) (47,795)
------------------- --------------
Total stockholders' equity 31,487 29,979
------------------- --------------
Total Liabilities and
Stockholders' Equity $ 72,518 $ 66,012
=================== ==============
iMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended September 30,
-----------------------------------
2006 2005
----------------- ----------------
Revenues:
Product and other $ 25,445 $ 8,969
Commission and other 3,564 2,424
----------------- ----------------
Total revenues 29,009 11,393
----------------- ----------------
Operating expenses:
Cost of product and other
revenues 9,208 5,803
Selling and marketing 12,752 7,608
General and administrative 4,308 3,504
Research and development 234 274
----------------- ----------------
Total operating expenses 26,502 17,189
----------------- ----------------
Income (loss) from operations 2,507 (5,796)
----------------- ----------------
Other income (expense):
Interest income 1,368 676
Interest expense (2) (10)
Other income (expense), net 15 (231)
----------------- ----------------
Total other income, net 1,381 435
----------------- ----------------
Income (loss) before income tax
provision 3,888 (5,361)
Income tax provision 1,560 158
----------------- ----------------
Net income (loss) $ 2,328 $ (5,519)
================= ================
Net income (loss) per common
share:
Basic $ 0.19 $ (0.45)
Diluted $ 0.18 $ (0.45)
Weighted average common shares
outstanding:
Basic 12,366,479 12,132,134
Diluted 12,873,789 12,132,134
iMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
Three months ended
September 30,
--------------------
Increase (decrease) in cash and cash equivalents 2006 2005
------------------------------------------------ --------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,328 $ (5,519)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 122 64
Expense for stock options issued to
employees 540 337
Expense for stock options issued to
consultants 34 22
Changes in assets and liabilities:
Trade receivables and trade receivables
held for sale (4,265) 15,504
Inventories (6) (68)
Prepaid expenses and other (1,987) (728)
Merchant account deposits and other (47) (629)
Deferred income tax asset 1,370 -
Accounts payable, accrued expenses and
other liabilities 1,045 622
Deferred revenue 3,432 5,594
Income taxes payable 388 -
--------- ----------
Net cash provided by operating activities 2,953 15,199
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (95) (33)
--------- ----------
Net cash used in investing activities (95) (33)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock (1,566) -
Proceeds from exercise of options and
related tax benefit 172 10
Principal payments on capital lease
obligations (20) (12)
--------- ----------
Net cash used in financing activities (1,414) (2)
--------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,443 15,164
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE YEAR 30,023 10,691
--------- ----------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD $ 31,466 $ 25,855
========= ==========
Supplemental disclosures of non-cash
transactions:
Purchase of property and equipment included
in accounts payable $ 154 $ -
Trade receivables pledged and
collateralized borrowings - 445
Cash paid during the year for:
Interest 2 2
Income taxes 22 5
Net Dollar Volume of Contracts Written
Until the change in our business model in late December 2005, the
Company recognized product and other revenue ratably over a period of
five years and not at the time contracts were written in accordance
with US GAAP. Effective December 2005, the Company began recognizing
product and other revenue after the expiration of the three-day
cancellation period for contracts written for which cash payments were
received. For products purchased by customers under extended payment
term arrangements, the Company continues to defer and recognize
revenue as cash payments are received from customers, typically over
two years.
Because of the changes in the Company's revenue recognition
policies resulting from the change in business model noted above and
due to the Company's growth, management believes that the net dollar
volume of contracts written is a consistent and relevant metric to
understand the operations of the Company. Net dollar volume of
contracts written represents the gross dollar amount of contracts
executed during the period less estimates for bad debts, discounts
incurred on sales of trade receivables (financial discounts), and
estimates for customer returns. Management uses this non-GAAP metric
to evaluate the profitability of the Company's operations because net
dollar volume of contracts written is the primary factor that
influences cost of revenue and selling and marketing expenses, which
are typically recognized at the time the contract is written but no
later than the expiration of the customer's three-day cancellation
period. Consequently, management measures the Company's operating
performance and sets its future operating budgets based upon the net
dollar volume of contracts written during the period.
Net dollar volume of contracts written is not equivalent to
revenue recognized in accordance with US GAAP. This non-GAAP metric
represents cash contracts written plus estimates of future cash
collections on financed contracts, net of estimated customer returns.
In contrast, revenue recognized in accordance with US GAAP represents
cash contracts written net of estimated customer returns plus actual
cash collections on financed contracts. Actual collections on financed
contracts and customer returns may differ materially from original
estimates. However, the Company has several years of experience with
the financing arrangements and products and services offered to its
customers. Consequently, management believes it has a reasonable basis
for its estimates.
The following tables summarize the activity within deferred
revenue and the net dollar volume of contracts written during the
three months ended September 30, 2006 and 2005 and reconciles the net
dollar volume of contracts written with US GAAP revenue as reported in
our financial statements.
2006 2005
------------- ------------
Deferred revenue, beginning of period $ 28,757 $ 114,050
Add: Product and other contracts written
net of estimates for bad debts, financial
discounts, and estimated customer returns 27,337 14,563
Add: Cash product sales during the last
three business days of period 1,540 -
Less: Amounts recognized as product and
other revenue (25,445) (8,969)
------------- ------------
Deferred revenue, end of period $ 32,189 $ 119,644
============= ============
2006 2005
------------- ------------
Total revenue recognized in financial
statements in accordance with US GAAP $ 29,009 $ 11,393
Less: Product and other revenue recognized
in financial statements (25,445) (8,969)
Add: Product and other contracts written
net of estimates for bad debts, financial
discounts, and estimated customer returns 27,337 14,563
Add: Cash product sales during the last
three business days of period 1,540 -
------------- ------------
Net dollar volume of contracts written,
non-GAAP $ 32,441 $ 16,987
============= ============
iMERGENT, INC. AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliation Tables
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended September 30, 2006
----------------------------------------
GAAP Adj. Non-GAAP
------------- ----------- -----------
Cost of product and other
revenue $9,208 $237 (1) $9,445
Selling and marketing 12,752 450 (1) 13,202
Three Months Ended September 30, 2006
----------------------------------------
GAAP Adj. Non-GAAP
------------- ----------- -----------
Income before income tax
provision $3,888 $2,745 (2) $6,633
Income tax provision 1,560 1,093 (3) 2,653
------------- ----------- -----------
Net income $2,328 $1,652 $3,980
============= =========== ===========
Net income per common share:
Basic $0.19 $0.32
============= ===========
Diluted $0.18 $0.31
============= ===========
Weighted average common
shares outstanding:
Basic 12,366,479 12,366,479
Diluted 12,873,789 12,873,789
Three Months Ended September 30, 2005
----------------------------------------
GAAP Adj. Non-GAAP
------------- ----------- -----------
Income (loss) before income
tax (provision) benefit $(5,361) $5,594 (4) $233
Income tax provision
(benefit) 158 (65)(3) 93
------------- ----------- -----------
Net income (loss) $(5,519) $5,529 $140
============= =========== ===========
Net income (loss) per common
share:
Basic $(0.45) $0.01
============= ===========
Diluted $(0.45) $0.01
============= ===========
Weighted average common
shares outstanding:
Basic 12,132,134 12,132,134
Diluted 12,132,134 12,607,546
(1) Represents certain expenses related to cash sales that were
deferred to October 2006 as a result of workshops conducted during the
last three business days of the fiscal quarter. The Company does not
recognize revenue and certain related expenses during the customers'
three-day cancellation period. No workshops were conducted during the
last three business days of the quarter ended September 30, 2005.
(2) Represents the adjustment to revenue of $3,432,000 to derive
the net dollar volume of contracts written during the period
(including $1,540,000 of cash sales that were deferred to October 2006
as a result of workshops conducted during the last three business days
of the fiscal quarter), less the adjustment to expenses noted above in
cost of product and other revenue of $237,000 and selling and
marketing expense of $450,000.
(3) Represents the adjustment necessary to recognize the income
tax provision based upon an estimated federal, state, and foreign
statutory blended rate of 40%.
(4) Represents the adjustment to revenue to derive the net dollar
volume of contracts written during the period.
CONTACT: iMergent, Inc.
Rob Lewis, CFO, 801-431-4695
investor_relations@imergentinc.com
or
Lippert/Heilshorn & Assoc.
Kirsten Chapman, 415-433-3777 (Investor Relations)
kchapman@lhai.com
or
Politis Communications
David Politis, 801-523-3730 (Media)
dpolitis@politis.com