InfoSpace, Inc. (NASDAQ: INSP) today announced financial results
for the first quarter ended March 31, 2012 as well as preliminary
TaxACT results for the 2011 tax season.
“We are pleased with our strong operating results in the first
quarter,” said Bill Ruckelshaus, President and Chief Executive
Officer of InfoSpace. “The acquisition of TaxACT in January
represents a significant milestone for our company, and
substantially diversifies our overall business operations. We are
pleased with the performance in both our search and tax preparation
businesses and feel positive about our combined Company growth and
profitability outlook.”
Summary Financial Performance: 1Q 2012 ($ in millions except
per share amounts)
Q1 2012*
Q1 2011 Growth Revenue $115.7
$51.7 124% Search $75.3 $51.7 46% Tax
Preparation $40.4 N/A N/A Adjusted EBITDA $31.7 $9.0 254%
Non-GAAP Net Income $28.5 $7.4 284% Non-GAAP EPS $0.70 $0.20 250%
Net Income $11.4 $1.3 762% GAAP Diluted EPS $0.28 $0.04 600%
* Q1 results include results for TaxACT
from acquisition through March 31, 2012.
See reconciliation of non-GAAP to GAAP
measures in the accompanying financial statements.
Segment Information
During the first quarter of 2012, the Company acquired TaxACT, a
leading provider of online tax solutions. As a result of the
acquisition, the Company has changed its reporting to reflect how
it measures the operating performance of its combined business.
InfoSpace will now report two segments: Search and Tax Preparation.
The Search segment includes all businesses operated by InfoSpace
prior to the acquisition of TaxACT. The Tax Preparation segment
represents the TaxACT business.
The operating segments exclude allocations for corporate
operating expenses (certain general, administrative, and other
overhead costs), depreciation, amortization of intangible assets,
and other charges and non-operating gains or losses.
Search
Search revenue for the first quarter of 2012 was $75.3 million,
up 46 percent from the first quarter of 2011. Search revenue
reflects strong growth from search distribution, which increased 75
percent over the prior year and was driven by growth from both
existing and new partners. Search segment income was $13.4 million,
up 21 percent over first quarter of 2011.
Tax Preparation
The Company completed its acquisition of TaxACT on January 31,
2012. First quarter results include results for TaxACT from the
acquisition through March 31, 2012.
Tax Preparation revenue for the first quarter of 2012 was $40.4
million. Tax Preparation segment income was $22.1 million or 55
percent of segment revenue for the first quarter of 2012.
Tax Season Update
TaxACT expects revenue growth for the tax season of 10 percent.
Through April 18, 2012, total TaxACT consumer DDIY federal e-files
were 5.0 million, up 8 percent compared to the same period last
year.
"We are encouraged with the performance for the full season, and
we believe we maintained share in the growing digital
do-it-yourself market,” said Ruckelshaus. "TaxACT professional
preparer and consumer DDIY offerings represent outstanding value
propositions for our customers. Our performance demonstrates that
the message is resonating. Combined TaxACT offerings assisted more
than 6 million filers this year.”
Corporate Operating Expenses
Unallocated corporate operating expenses for the first quarter
of 2012 were $3.8 million. Expenses include $1.1 million in
transaction costs related to the TaxACT acquisition.
Second Quarter Outlook
For the second quarter of 2012, the Company expects revenues to
be between $92.5 million and $96.5 million, Adjusted EBITDA to
be between $20.0 million and $21.5 million, Non-GAAP Net
Income to be between $16.9 million and $18.3 million, or $0.40 to
0.44 per diluted share, and Net Income to be between
$5.5 million and $6.5 million, or $0.13 to $0.16 per
diluted share.
Conference Call and Webcast
A conference call will be held today at 2 p.m. Pacific time
/ 5 p.m. Eastern time. The live webcast and supplemental
materials are included in a current report on form 8-K and can be
accessed in the Investor Relations section of the InfoSpace
corporate website at http://www.infospaceinc.com.
About InfoSpace, Inc.
InfoSpace operates two business units. Our search business
delivers online search solutions to a global network of
distribution partners, and directly to consumers through our
portfolio of branded web properties. Our tax software business
operates under the name TaxACT and is a leading provider of online
tax solutions, reliably serving millions of consumers and
professionals for over a decade. Additional corporate information
may be found at www.infospaceinc.com and iSpaceBlog.com. You may
also follow and connect with InfoSpace on LinkedIn, Google Plus,
Facebook, Twitter, and YouTube.
This announcement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Actual results may
differ significantly from management’s expectations due to various
risks and uncertainties including, but not limited to: general
economic, industry, and market sector conditions; the timing and
extent of market acceptance of developed products and services and
related costs; our dependence on companies to distribute our
products and services; the ability to successfully integrate
acquired businesses; future acquisitions; the successful execution
of the Company’s strategic initiatives, operating plans, and
marketing strategies; the condition of our cash investments; and
the completion of the review of our financial statements for the
first quarter of 2012. A more detailed description of these and
certain other factors that could affect actual results is included
in InfoSpace, Inc.’s most recent Annual Report on Form 10-K and
subsequent reports filed with or furnished to the Securities and
Exchange Commission. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this release. InfoSpace, Inc. undertakes no
obligation to update any forward-looking statements to reflect new
information, events, or circumstances after the date of this
release or to reflect the occurrence of unanticipated events.
InfoSpace, Inc.
Preliminary Condensed Consolidated
Statements of Comprehensive Income(1)
(Unaudited) (Amounts in thousands, except per share data)
Three months ended March 31 March 31
2012 2011 Revenues $ 115,696 $ 51,650
Cost of sales (includes amortization of
acquired intangible assets of $1,511 and 958)(2)
59,547 32,674 Gross profit 56,149 18,976
Expenses and other income:
Engineering and technology(2)
2,573 1,664
Sales and marketing(2)
19,443 6,967
General and administrative(2)
11,066 5,160 Depreciation 535 662 Amortization of intangible assets
2,113 -
Other loss (income) net(3)
1,555 (75 ) Total expenses and other
loss (income) 37,285 14,378
Income from continuing operations before income taxes 18,864 4,598
Income tax expense (7,458 ) (1,702 )
Income from continuing operations 11,406 2,896
Discontinued operations:(1)
Loss from discontinued operations, net of
taxes(2)
- (1,573 ) Net income $ 11,406 $ 1,323
Earnings per share - Basic Income from continuing
operations $ 0.29 $ 0.08 Loss from discontinued operations -
(0.04 ) Net income per share - Basic $ 0.29 $
0.04 Earnings per share - Diluted Income from
continuing operations $ 0.28 $ 0.08 Loss from discontinued
operations - (0.04 ) Net income per share -
Diluted $ 0.28 $ 0.04 Weighted average shares
outstanding used in
computing basic income per share
39,692 36,339 Weighted average shares
outstanding used in
computing diluted income per share
40,978 37,084
(1) In the year ended December 31, 2011,
the Company completed the sale of its Mercantila e-commerce
business. The operating results of that business have
been presented as discontinued operations for all periods
presented. In the three months ended March 31, 2011, the
Company recorded a $0.7 million income tax benefit related to
discontinued operations. Revenue, operating expenses and
income taxes, and loss from discontinued operations are presented
below (in thousands):
Three months ended March 31 March 31
E-Commerce 2012
2011 Revenue $ - $ 9,979 Operating expenses and income taxes
- 11,552 Loss from discontinued operations,
net of taxes $ - $ (1,573 )
(2) In the three months ended March 31,
2011, $5.2 million in stock-based compensation expense was recorded
in association with the modification of the terms of a warrant and
the vesting of a non-employee performance-based equity award, which
were both triggered by the acquisition of the TaxACT business, and
the related expense was allocated to general and administrative
expense. Stock-based compensation expense for the three
months ended March 31, 2012 and 2011 is allocated among the
following captions (in thousands):
Three months ended March 31 March 31 2012 2011 Cost of sales
$ 80 $ 144 Engineering and technology 256 255 Sales and marketing
414 429 General and administrative 5,958 1,205 Discontinued
operations - 377 Total stock-based
compensation expense $ 6,708 $ 2,410
(3) In the three months ended March 31,
2012, the Company recorded a $0.8 million charge for interest
payments on the $100 million credit facility used to help fund the
acquisition and a $0.3 million charge for amortization of the debt
origination costs and a $0.1 million charge for amortization of the
debt discount related to the credit facility. In the
three months ended March 31, 2011, the Company recorded a $1.5
million charge as a result of the increase in the estimated fair
value of a contingent liability related to operation of the assets
acquired on April 1, 2010 from Make The Web Better, and
recorded a $1.5 million gain on the
resolution of a contingency.
InfoSpace, Inc. Preliminary Condensed Consolidated
Balance Sheets (Unaudited) (Amounts in thousands)
March 31, December 31, 2012 2011 ASSETS
Current assets: Cash and cash equivalents $ 101,840 $ 81,897
Short-term investments, available-for-sale 28,028 211,654 Accounts
receivable, net 31,438 25,019 Other receivables 1,121 542 Prepaid
expenses and other current assets, net 5,125
1,958 Total current assets 167,552 321,070
Property and equipment, net 5,878 5,277 Goodwill 230,980 44,815
Deferred tax asset, net 21,165 19,102 Other intangible assets, net
148,391 1,032 Other long-term assets 2,134
3,560 Total assets $ 576,100 $ 394,856
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 35,561 $ 28,947 Accrued expenses
and other current liabilities 15,876 10,250 Derivative instrument
6,490 - Short-term portion of long-term debt, net of discount of
$211 6,914 - Total current
liabilities 64,841 39,197 Long-term liabilities: Long-term
debt, net of discount of $607 77,268 - Deferred tax liability
50,188 - Other long-term liabilities 2,732 837
Total long-term liabilities 130,188
837 Total liabilities 195,029 40,034
Stockholders' equity: Common stock 4 4 Additional paid-in capital
1,368,557 1,353,971 Accumulated deficit (987,496 ) (998,902 )
Accumulated other comprehensive income 6 32
Total stockholders' equity 381,071
355,105 Total liabilities and stockholders'
equity $ 576,100 $ 395,139 Summary of cash,
cash equivalents, and short-term investments: Cash and cash
equivalents $ 101,840 $ 81,897 Short-term investments,
available-for-sale 28,028 211,654
Cash, cash equivalents, and short-term investments $ 129,868
$ 293,551
InfoSpace, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited) (Amounts in thousands) Three months ended
March 31, March 31, 2012 2011
Operating
activities: Net income $ 11,406 $ 1,323 Adjustments to
reconcile net income to net cash provided (used) by operating
activities of continuing operations: Loss from discontinued
operations - 1,573 Stock-based compensation 2,422 2,033
Warrant-related stock-based compensation 4,286 - Loss on derivative
instrument 272 - Depreciation and amortization of intangible assets
4,575 2,409 Excess tax benefits from stock-based award activity
(12,058 ) (787 ) Deferred income taxes (5,462 ) 1 Unrealized
amortization of premium or accretion of discount on investments,
net (327 ) 105 Amortization of prepaid financing costs 331 -
Amortization of debt discount 135 - Earn-out contingent liability
adjustments - 1,500 Gain on resolution of contingent liability -
(1,500 ) Other 26 (33 ) Cash provided (used) by changes in
operating assets and liabilities: Accounts receivable 2,971 (1,117
) Other receivables 657 235 Prepaid expenses and other current
assets (1,564 ) 351 Other long-term assets 1,863 (245 ) Accounts
payable (3,713 ) 8,950 Accrued expenses and other current and
long-term liabilities 13,228 (16,326 ) Net
cash provided (used) by operating activities of continuing
operations 19,048 (1,528 )
Investing activities:
Business acquisition, net of cash acquired (279,386 ) - Purchases
of property and equipment (193 ) (1,191 ) Change in restricted cash
767 168 Proceeds from sales of investments 163,883 - Proceeds from
maturities of investments 20,020 30,486 Purchases of investments
- (33,186 ) Net cash used by investing
activities of continuing operations (94,909 ) (3,723 )
Financing activities: Proceeds from loan, net of debt
issuance costs of $2,343 and debt discount of $953 96,704 -
Repayment of debt (15,000 ) - Excess tax benefits from stock-based
award activity 12,058 787 Proceeds from stock option exercises and
issuance of stock through employee stock purchase plan 2,252 2,473
Tax payments from shares withheld upon vesting of restricted stock
units (210 ) (299 ) Earn-out payments for business acquisition -
(423 ) Repayment of capital lease obligation -
(151 ) Net cash provided by financing activities of continuing
operations 95,804 2,387
Discontinued operations: Net
cash used by operating activities attributable to discontinued
operations - (3,684 ) Net cash used by investing activities
attributable to discontinued operations - (44
) Net cash used by discontinued operations - (3,728 )
Net increase (decrease) in cash and cash equivalents 19,943
(6,592 )
Cash and cash equivalents: Beginning of
period 81,897 155,645 End of period $
101,840 $ 149,053
InfoSpace, Inc.
Preliminary Segment Information (Unaudited) (Amounts in
thousands) Three months ended
March 31, March 31, 2012 2011 Search:
Revenue $ 75,295 $ 51,650
Cost of revenue(1)
53,106 29,185 Operating expenses 8,816 11,370
Search segment income 13,373 11,095 Search segment margin 18
% 22 % Tax Preparation: Revenue 40,401 -
Cost of revenue(2)
2,579 - Operating expenses 15,687 - Tax
Preparation segment income 22,135 - Tax Preparation segment margin
55 % - Total segment: Total revenue 115,696 51,650 Total
cost of revenue 55,685 29,185 Total segment operating expenses
24,503 11,370 Total segment income
35,508 11,095 Total segment margin 31 % 22 % Corporate:
Operating expense 3,806 2,130 Stock-based compensation 6,708 2,033
Depreciation 951 1,451 Amortization of other intangible assets
3,624 958 Other income, net 1,555 (75 ) Income tax expense, net
7,458 1,702 Disc ops, net of tax - 1,573
Total corporate 24,102 9,772 Net income $
11,406 $ 1,323
(1) Amounts do not include amortization of acquired technology
and costs associated with the operation of the Company’s data
centers that serve its search business, including depreciation,
personnel expenses (including stock-based compensation expense),
energy, and bandwidth costs.
(2) Amounts do not include amortization of acquired technology
and costs associated with the operation of the Company’s data
center that serves its tax preparation business, including
depreciation, personnel expenses (including stock-based
compensation expense), energy, and bandwidth costs, and personnel
costs associated with customer service.
InfoSpace, Inc. Reconciliations of Non-GAAP Financial
Measures to the Nearest Comparable GAAP Measure
Preliminary Adjusted EBITDA
Reconciliation(1)
(Unaudited) (Amounts in thousands) Three
months ended March 31, March 31, 2012 2011
Net income(2)
$ 11,406 $ 1,323 Discontinued operations - 1,573 Depreciation and
amortization of intangible assets 4,575 2,409 Stock-based
compensation 6,708 2,033
Other loss (income), net(3)
1,555 (75 ) Income tax expense 7,458 1,702
Adjusted EBITDA(4)
$ 31,702 $ 8,965
InfoSpace, Inc.
Reconciliations of Non-GAAP Financial Measures to the Nearest
Comparable GAAP Measure
Preliminary Non-GAAP
Reconciliation(1)
(Unaudited) (Amounts in thousands) Three months ended
March 31, March 31, 2012 2011
Net income(2)
$ 11,406 $ 1,323 Discontinued operations -
1,573
Income from continuing operations(2)
11,406 2,896 Stock-based compensation 6,708 2,033 Amortization of
acquired intangible assets 3,624 958 Loss on derivatives 272 - Cash
tax impact of GAAP adjustments (90 ) (43 )
Non-cash income tax expense from
continuing operations(1)
6,597 1,589
Non-GAAP net income(4)
$ 28,517 $ 7,433 Income from continuing
operations- diluted $ 0.28 $ 0.08 Stock-based compensation -
diluted $ 0.16 $ 0.05 Amortization of acquired intangible assets -
diluted $ 0.09 $ 0.03 Loss on derivatives - diluted $ 0.01 $ - Cash
tax impact of GAAP adjustments - diluted $ 0.00 $ 0.00
Non-cash income taxes per share -
diluted(4)
$ 0.16 $ 0.04
Non-GAAP net income per share -
diluted(4)
$ 0.70 $ 0.20
Preliminary Adjusted EBITDA
Reconciliation for Forward-Looking Guidance (Amounts in
thousands) Ranges for the three months ending June
30, 2012 Net income 5,500 6,500 Depreciation and
amortization of acquired intangible assets 6,400 6,400 Stock-based
compensation 2,100 1,900 Other loss (income), net 1,400 1,400
Income tax expense 4,600 5,300 Adjusted EBITDA $
20,000 $ 21,500
Preliminary Non-GAAP Reconciliation for
Forward-Looking Guidance (Amounts in thousands)
Ranges for the three months ending June 30, 2012 Net income 5,500
6,500 Stock-based compensation 2,100 1,900
Amortization of acquired intangible assets 5,200 5,200 Non-cash
income tax expense from continuing operations 4,100
4,700 Non-GAAP net income $ 16,900 $ 18,300
(1) InfoSpace’s Adjusted EBITDA is calculated by adjusting net
income determined in accordance with generally accepted accounting
principles ("GAAP") to exclude the effects of loss from
discontinued operations, net of taxes, income taxes, depreciation,
amortization of acquired intangible assets, stock-based
compensation expense, and other loss (income), net (which includes
such items as interest expense, interest income, derivative
instrument gains or losses, foreign currency gains or losses, gains
or losses from the disposal of assets, adjustments to the fair
values of contingent liabilities related to business combinations,
and gains on resolutions of contingencies), as detailed above.
InfoSpace’s management believes that Adjusted EBITDA provides
meaningful supplemental information regarding the Company’s
performance by excluding certain expenses and gains that management
believes are not indicative of its core business operating results.
InfoSpace uses this non-GAAP financial measure for internal
management purposes, when publicly providing guidance on possible
future results, and as a means to evaluate period-to-period
comparisons. InfoSpace believes that Adjusted EBITDA is a common
measure used by investors and analysts to evaluate its performance,
that it provides a more complete understanding of the results of
operations and trends affecting the Company's business when viewed
together with GAAP results, and that management and investors
benefit from referring to this non-GAAP financial measure.
InfoSpace's Non-GAAP net income and Non-GAAP earnings per share
is calculated by adjusting GAAP net income to exclude the effects
of discontinued operations, net of taxes, stock-based compensation
expense, amortization of acquired intangible assets, gain or loss
on derivatives, the cash tax impact of those adjustments to GAAP
net income, and non-cash portion of income tax expense from
continuing operations, as detailed in the accompanying table to the
preliminary condensed consolidated financial statements
(unaudited). The Company excludes the non-cash portion of income
tax expense because of its ability to offset a substantial portion
of its cash tax liabilities by using these deferred tax assets. The
majority of these deferred tax assets will expire if unutilized in
2020.
InfoSpace’s management believes that non-GAAP net income and
non-GAAP earnings per share provide meaningful supplemental
information to management, investors and analysts regarding the
Company's performance and the valuation of its business by
excluding items in the statement of operations that management does
not consider part of the Company's ongoing operations or have not
been, or are not expected to be, settled in cash. Additionally,
InfoSpace's management believes that non-GAAP net income and
non-GAAP earnings per share are common measures used by investors
and analyst to evaluate the Company's performance and the valuation
of its business.
Adjusted EBITDA, non-GAAP net income and non-GAAP earnings per
share should be evaluated in light of the Company's financial
results prepared in accordance with GAAP, and should be considered
as a supplement to, and not as a substitute for or superior to,
GAAP net income.
(2) As presented in the Preliminary Condensed Consolidated
Statements of Operations (unaudited).
(3) Other loss (income), net, includes such items as interest
expense, interest income, derivative instrument gains or losses,
foreign currency gains or losses, gains or losses from the disposal
of assets, adjustments to the fair values of contingent liabilities
related to business combinations, and gains on resolutions of
contingencies.
(4) Amounts previously disclosed have been revised to reflect
the effect of classifying the Company's Mercantila e-commerce
business as discontinued operations.
(5) Other loss, net, primarily consists of interest expense,
interest income, derivative instrument gains or losses, and gains
or losses from the disposal of assets.
InfoSpace, Inc. Reconciliations of Non-GAAP Financial
Measures to the Nearest Comparable GAAP Measure
Preliminary Non-GAAP Income
Reconciliation(1)
(Unaudited) (Amounts in thousands)
Year ended June 30, September 30,
December 31, December 31, 2011 2011
2011 2011
Net income(2)
$ (4,678 ) $ 2,075 $ 22,874 $ 21,594 Discontinued operations
8,354 - -
9,927
Income from continuing operations(2)
3,676 2,075 22,874 31,521 Stock-based compensation 1,338 3,049
1,268 7,688 Amortization of acquired intangible assets 772 518 347
2,595 Cash impact of GAAP adjustments 1 (18 ) 20 (40 )
Non-cash income tax expense from
continuing operations(1)
1,803 1,221
(17,613 ) (13,000 )
Non-GAAP net income(3)
$ 7,590 $ 6,845 $ 6,896
$ 28,764 Income from continuing operations per
share - diluted $ 0.10 $ 0.05 $ 0.57 $ 0.82 Stock-based
compensation - diluted $ 0.04 $ 0.08 $ 0.03 $ 0.19 Amortization of
acquired intangible assets - diluted $ 0.02 $ 0.01 $ 0.01 $ 0.07
Cash tax impact of GAAP adjustments - diluted $ - $ - $ - $ -
Non-cash income taxes per share -
diluted(3)
0.04 0.03
(0.44 ) (0.34 )
Non-GAAP net income per share -
diluted(3)
$ 0.20 $ 0.17 $ 0.17
$ 0.74 $ - $ - $ - $ -
(1) InfoSpace's Non-GAAP net income and Non-GAAP earnings per
share is calculated by adjusting net income determined in
accordance with generally accepted accounting principles
("GAAP") to exclude the effects of discontinued operations,
net of taxes, stock-based compensation expense, amortization of
acquired intangible assets, gain or loss on derivatives, the cash
tax impact of those adjustments to GAAP net income, and non-cash
portion of income tax expense from continuing operations, as
detailed in the accompanying table to the preliminary condensed
consolidated financial statements (unaudited). The Company excludes
the non-cash portion of income tax expense because of its ability
to offset a substantial portion of its cash tax liabilities by
using these deferred tax assets. The majority of these deferred tax
assets will expire if unutilized in 2020.
InfoSpace’s management believes that non-GAAP net income and
non-GAAP earnings per share provide meaningful supplemental
information to management, investors and analysts regarding the
Company's performance and the valuation of its business by
excluding items in the statement of operations that management does
not consider part of the Company's ongoing operations or have not
been, or are not expected to be, settled in cash. Additionally,
InfoSpace's management believes that non-GAAP net income and
non-GAAP earnings per share are common measures used by investors
and analysts to evaluate the Company's performance and the
valuation of its business.
Non-GAAP net income and non-GAAP earnings per share should be
evaluated in light of the Company's financial results prepared in
accordance with GAAP, and should be considered as a supplement to,
and not as a substitute for or superior to, GAAP net income.
(2) As presented in the Preliminary Condensed Consolidated
Statements of Operations (unaudited).
(3) Amounts previously disclosed have been revised to reflect
the effect of classifying the Company's Mercantila e-commerce
business as discontinued operations.
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