INSP Blucora, Inc. (MM)

InfoSpace, Inc. (NASDAQ:INSP) today announced financial results for the fourth quarter and full year ended December 31, 2011.

• Revenue for the fourth quarter and full year up 34% and 7% from 2010
• Distribution revenue for the fourth quarter and full year up 69% and 24% from 2010
• Distribution revenue from new partners launched in 2011 of $11.8 million, up $8.6 million or 270% from comparable new partner revenue in 2010
• Adjusted EBITDA for the fourth quarter and full year up 23% and 13% from 2010

“InfoSpace delivered solid growth and profitability in 2011, including a strong fourth quarter,” said Bill Ruckelshaus, President and Chief Executive Officer of InfoSpace. “The period since January 2011 has been an important time for our Company. In 2011, we solidified our position as a leading provider of distributed search solutions, adding more than 40 new distribution partners, and renewed our supplier agreements with Google and Yahoo!. Last month we announced our acquisition of TaxACT and thus entered the growing market for online tax preparation solutions. We approach the coming year with strong operating momentum in our search business and we are excited about the significant opportunity for TaxACT to expand their market presence and build upon their offerings.”

Fourth Quarter and Full Year 2011 Highlights

• Revenues for the fourth quarter of 2011 were $66.6 million, compared to revenues of $49.7 million for the fourth quarter of 2010. Revenues for full year 2011 were $228.8 million, compared to revenues of $214.3 million in 2010.
• Adjusted EBITDA (defined below) for the fourth quarter of 2011 was $10.2 million, compared to $8.3 million for the fourth quarter of 2010. Adjusted EBITDA for full year 2011 was $36.6 million, compared to $32.5 million for full year 2010.
• Non-GAAP net income (defined below) for the fourth quarter of 2011 was $5.3 million or $0.13 per diluted share, compared to $19.2 million, or $0.52 per diluted share, for the fourth quarter of 2010. Non-GAAP net income for full year 2011 was $18.5 million, or $0.48 per diluted share, compared to $17.8 million, or $0.48 per diluted share, for full year 2010. (Note, the fourth quarter and full year 2010 results include a net gain of $19.0 million, or $0.51 per diluted share, from a litigation settlement.)
• Net income for the fourth quarter of 2011 was $23.6 million, or $0.59 per diluted share, compared to net income of $9.1 million, or $0.25 per diluted share, for the fourth quarter of 2010. Net income for full year 2011 was $22.3 million, or $0.58 per diluted share, compared to net income of $4.7 million or $0.13 per diluted share, for full year 2010. (Note, 2011 figures include a tax benefit of $19.6 million, due to the release of the valuation allowance on deferred tax assets. The 2010 figures, as noted above, include a net gain from a litigation settlement of $19.0 million. Also, net income for the fourth quarter 2010 and full years 2011 and 2010 includes losses on discontinued operations.)
• Cash, cash equivalents, and marketable securities as of December 31, 2011 totaled $293.6 million. As of the end of the quarter, the Company had no debt obligations. On January 31, 2012 the Company completed the acquisition of TaxACT. Upon completion of the transaction, the Company had more than $100 million cash and short-term investments and $100 million of debt.

First Quarter Outlook

As previously announced, the Company completed its acquisition of TaxACT on January 31, 2012. The Company’s first quarter guidance includes anticipated results for TaxACT beginning on February 1, 2012 through March 31, 2012.

For the first quarter of 2012, the Company expects revenues to be between $109 million and $114 million, Adjusted EBITDA to be between $26 million and $29 million, and net income to be between $9.5 million and $11.5 million, or $0.24 to $0.29 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 can be accessed in the Investor Relations section of the InfoSpace corporate website, at http://www.infospaceinc.com.

Non-GAAP Financial Measures

Adjusted EBITDA is calculated by adjusting net income determined in accordance with generally accepted accounting principles ("GAAP") to exclude the effects of discontinued operations (including loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes),of income taxes, depreciation, amortization of intangible assets, stock-based compensation expense, and other loss (income), net (which includes such items as litigation settlements, adjustments to the fair values of contingent liabilities related to business combinations, gains on resolutions of contingencies, interest income, interest expense, foreign currency gains or losses, and gains or losses from the disposal of assets), as detailed in the accompanying table to the preliminary condensed consolidated financial statements (unaudited).

InfoSpace 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. A table reconciling the Company's Adjusted EBITDA to net income, which the Company's management believes to be the most comparable GAAP measure, accompanies the preliminary condensed consolidated unaudited financial statements in this release.

Non-GAAP net income is calculated by adjusting GAAP net income to exclude the effects of discontinued operations (including loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes) and non-cash income taxes from continuing operations, as detailed in the accompanying table to the preliminary condensed consolidated financial statements (unaudited). Non-cash income tax expense from continuing operations represents a reduction in cash taxes from continuing operations primarily attributable to the utilization of U.S. net operating losses. InfoSpace’s management believes that this non-GAAP measure provides meaningful supplemental information regarding the Company’s performance.

Adjusted EBITDA and non-GAAP net income 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.

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; 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 audit of our financial statements for 2011. 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 Operations (1) (Unaudited) (Amounts in thousands, except per share data)         Three months ended Year ended December 31 December 31 December 31 December 31 2011 2010   2011 2010 Revenues: $ 66,614 $ 49,683 $ 228,813 $ 214,343   Cost of sales: 46,954 30,154 154,962 138,995         Gross profit 19,660 19,529 73,851 75,348   Expenses and other income: Engineering and technology (2) 1,904 1,828 7,158 8,471 Sales and marketing (2) 4,753 7,044 21,510 28,145 General and administrative (2) (3) 4,899 10,124 21,542 32,843 Depreciation 473 700 2,162 3,138 Other loss (income) net (4)   972   (19,399 )   1,246     (15,247 )   Total expenses and other loss (income)   13,001   297     53,618     57,350     Income from continuing operations before income taxes 6,659 19,232 20,233 17,998   Income tax benefit (expense)   16,951   (8,530 )   12,024     (8,725 )   Income from continuing operations   23,610   10,702     32,257     9,273     Discontinued operations:(1)   Loss from discontinued operations, net of taxes (2) - (1,652 ) (2,253 ) (4,593 ) Loss on sale of discontinued operations, net of taxes   -   -     (7,674 )   -   Net income $ 23,610 $ 9,050   $ 22,330   $ 4,680     Earnings per share - Basic Income from continuing operations $ 0.60 $ 0.30 $ 0.85 $ 0.26 Loss from discontinued operations - (0.05 ) (0.06 ) (0.13 ) Loss on sale of discontinued operations   -   -     (0.20 )   -   Net income per share - Basic $ 0.60 $ 0.25   $ 0.59   $ 0.13     Earnings per share - Diluted Income from continuing operations $ 0.59 $ 0.29 $ 0.84 $ 0.25 Loss from discontinued operations - (0.04 ) (0.06 ) (0.12 ) Loss on sale of discontinued operations   -   -     (0.20 )   -   Net income per share - Diluted $ 0.59 $ 0.25   $ 0.58   $ 0.13    

Weighted average shares outstanding used in computing basic income per share

 

  39,448   36,196     37,954     35,886  

Weighted average shares outstanding used in computing diluted income per share

 

  40,074   36,851     38,621     36,829    

(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 year ended December 31, 2011, the Company recorded a $1.3 million income tax benefit related to discontinued operations.  In the three months and year ended December 31, 2010 the Company recorded income tax benefits related to discontinued operations of $1.1 million and $1.3 million, respectively.  In the year ended December 31, 2011, the Company recorded a loss, net of an income tax benefit of $5.1 million, on the sale of the Mercantila business.  Revenue, operating expenses and income taxes, loss from discontinued operations and the loss on sale of these discontinued operations are presented below (in thousands):

  Three months ended Year ended December 31 December 31 December 31 December 31 E-Commerce 2011 2010 2011 2010 Revenue $ - $ 14,260 $ 16,894 $ 32,492 Operating expenses and income taxes   -   15,912     19,147     37,085   Loss from discontinued operations, net of taxes $ - $ (1,652 ) $ (2,253 ) $ (4,593 ) Loss on sale of discontinued operations, net of taxes $ - $ -   $ (7,674 ) $ -    

(2) In the three months and year ended December 31, 2010, stock-based compensation expense associated with the acceleration of vesting of equity awards for a departed executive amounted to $3.4 million, which was allocated to general and administrative expense.  Stock-based compensation expense for the year ended  December 31, 2011 and 2010 is allocated among the following captions (in thousands):

  Three months ended Year ended December 31 December 31 December 31 December 31   2011   2010     2011     2010   Cost of sales $ 52 $ 71 $ 286 $ 461 Engineering and technology 137 261 821 1,298 Sales and marketing 173 259 1,002 2,631 General and administrative 906 4,549 5,579 9,528 Discontinued operations   -   310     (159 )   833   Total stock-based compensation expense $ 1,268 $ 5,450   $ 7,529   $ 14,751    

(3) In the three months and year ended December 31, 2010, the Company recorded charges of $1.7 million and $4.1 million, respectively, relating to executive cash severance.

 

(4) In the three months and year ended December 31, 2011, the Company recorded charges of $1.0 million and $3.0 million, respectively, 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.  In the three months and year ended December 31, 2010 the Company recorded charges of $1.5 million and $5.0 million, respectively, 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.  In the year ended December 31, 2011, the Company recorded a $1.5 million gain on the resolution of a contingency.  In the three months and year ended December 31, 2010, the Company recorded a $19.0 million net gain on a litigation settlement.

  InfoSpace, Inc. Preliminary Condensed Consolidated Balance Sheets (Unaudited) (Amounts in thousands)     December 31, December 31, 2011 2010 ASSETS   Current assets: Cash and cash equivalents $ 81,897 $ 155,645 Short-term investments, available-for-sale 211,654 98,091 Accounts receivable, net 25,019 19,189 Other receivables, net 542 1,185 Prepaid expenses and other current assets, net 1,962 2,163 Assets of discontinued operations   -     16,161     Total current assets 321,074 292,434   Property and equipment, net 5,277 7,304 Goodwill 44,815 44,815 Deferred tax asset, net 19,835 306 Other intangible assets, net 1,315 3,910 Other long-term assets, net   3,560     3,951     Total assets $ 395,876   $ 352,720     LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable $ 28,947 $ 2,699 Accrued expenses and other current liabilities 10,250 39,518 Liabilities from discontinued operations   -     7,777     Total current liabilities 39,197 49,994   Other long-term liabilities   838     955     Total liabilities 40,035 50,949   Stockholders' equity: Common stock 4 4 Additional paid-in capital 1,353,971 1,322,265 Accumulated deficit (998,166 ) (1,020,496 ) Accumulated other comprehensive income (loss)   32     (2 )   Total stockholders' equity   355,841     301,771    

Total liabilities and stockholders' equity

$ 395,876   $ 352,720     Summary of cash, cash equivalents, and short-term investments: Cash and cash equivalents $ 81,897 $ 155,645 Short-term investments, available-for-sale   211,654     98,091     Cash, cash equivalents, and short-term investments $ 293,551   $ 253,736     InfoSpace, Inc. Preliminary Condensed Consolidated Statements of Cash Flows (Unaudited) (Amounts in thousands)   Year ended December 31,   December 31, 2011 2010 Operating activities: Net income $ 22,330 $ 4,680 Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: Loss on sale of discontinued operations 7,674 - Loss from discontinued operations 2,253 4,593 Stock-based compensation 5,756 13,918 Warrant-related stock-based compensation 1,932 - Depreciation and amortization of intangible assets 7,456 15,793 Earn-out contingent liability adjustments 3,000 5,000 Common stock retired relating to litigation settlement - (2,099 ) Gain on resolution of contingent liability (1,500 ) - Foreign currency translation gains, net - (1,436 ) Deferred income taxes (19,606 ) 19 Excess tax benefits from stock-based award activity (1,260 ) (7,032 ) Unrealized amortization of premium or accretion of discount on investments, net (89 ) 365 Loss on disposal of assets 46 1,262 Other (28 ) 3 Cash provided (used) by changes in operating assets and liabilities: Accounts receivable (5,734 ) 9,274 Other receivables 643 1,852 Prepaid expenses and other current assets 284 636 Other long-term assets (258 ) (201 ) Accounts payable 26,253 (3,506 ) Accrued expenses and other current and long-term liabilities   (23,889 )   6,785   Net cash provided by operating activities of continuing operations 25,263 49,906   Investing activities: Purchases of property and equipment (2,679 ) (2,894 ) Other long-term assets 649 230 Business acquisition, net of cash acquired - (8,000 ) Proceeds from the sale of assets - 307 Proceeds from sales of investments 63,166 52,801 Proceeds from maturities of investments 160,161 191,976 Purchases of investments   (336,770 )   (200,493 ) Net cash provided (used) by investing activities of continuing operations (115,473 ) 33,927   Financing activities: Proceeds from stock option exercises and issuance of stock through employee stock purchase plan 17,426 2,541 Proceeds from the sale of common stock 7,000 - Tax payments from shares withheld upon vesting of restricted stock units (1,786 ) (4,201 ) Earn-out payments for business acquisition (423 ) (4,577 ) Repayment of capital lease obligation (221 ) (589 ) Excess tax benefits from stock-based award activity   1,260     7,032   Net cash provided by financing activities of continuing operations 23,256 206   Discontinued operations: Net cash used by operating activities attributable to discontinued operations (6,156 ) (4,034 ) Net cash used by investing activities attributable to discontinued operations   (638 )   (8,110 ) Net cash used by discontinued operations (6,794 ) (12,144 )     Net increase (decrease) in cash and cash equivalents (73,748 ) 71,895   Cash and cash equivalents: Beginning of period   155,645     83,750   End of period $ 81,897   $ 155,645     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 Year ended December 31, December 31, December 31, December 31, 2011 2010 2011 2010 Net income (2) $ 23,610 $ 9,050 $ 22,330 $ 4,680 Discontinued operations - 1,652 9,927 4,593 Depreciation and amortization of intangible assets 1,266 3,290 7,456 15,793 Stock-based compensation 1,268 5,140 7,688 13,918 Other loss (income), net (3) 972 (19,399 ) 1,246 (15,247 ) Income tax expense (benefit)   (16,951 )   8,530     (12,024 )   8,725   Adjusted EBITDA (4) $ 10,165   $ 8,263   $ 36,623   $ 32,462       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 Year ended December 31, December 31, December 31, December 31, 2011 2010 2011 2010 Net income (2) $ 23,610 $ 9,050 $ 22,330 $ 4,680 Discontinued operations   -     1,652     9,927     4,593   Income from continuing operations (2) 23,610 10,702 32,257 9,273 Non-cash income tax expense (benefit) from continuing operations(1)   (18,349 )   8,530     (13,736 )   8,530   Non-GAAP net income (4) $ 5,261   $ 19,232   $ 18,521   $ 17,803     Income from continuing operations- diluted $ 0.59 $ 0.29 $ 0.84 $ 0.25 Non-cash income taxes per share - diluted (4) $ (0.46 ) $ 0.23     $ (0.36 ) $ 0.23   Non-GAAP net income per share - diluted (4) $ 0.13   $ 0.52     $ 0.48   $ 0.48       Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance (Amounts in thousands) Ranges for the three months ending March 31, 2012 Net income $ 9,500 $ 11,500 Depreciation and amortization of intangible assets 4,500 4,500 Stock-based compensation 5,000 5,000

Other loss, net (5)

800 800

Income tax expense

  6,200     7,200   Adjusted EBITDA $ 26,000   $ 29,000    

(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 discontinued operations (including loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes), income taxes, depreciation, amortization of intangible assets, stock-based compensation expense, and other loss,(income) ,net (which includes such items as litigation settlements, adjustments to the fair values of contingent liabilities related to business combinations, gains on resolutions of contingencies, interest income, foreign currency gains or losses, and gains or losses from the disposal of assets), 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 is calculated by adjusting GAAP net income to exclude the effects of discontinued operations (including loss from discontinued operations, net of taxes, and loss on sale of discontinued operations, net of taxes) and the non-cash portion of income tax expense from continuing operations.  The non-cash portion of income tax expense from continuing operations represents a reduction to cash taxes payable associated with the utilization of deferred tax assets, which are primarily comprised of U.S. federal net operating losses.  Due to the Company’s continued ability to offset a substantial portion of its cash tax liabilities through 2020 provided by these deferred tax assets, management believes that excluding the non-cash portion of income tax expense from continuing operations and the effects of discontinued operations from its GAAP net income provides meaningful supplemental information to investors and analysts regarding the Company’s performance and the valuation of its business.

 

Adjusted EBITDA and non-GAAP net income 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, primarily consists of a litigation settlement, adjustments to the fair values of contingent liabilities related to business combinations, gains on resolutions of contingencies, interest income, interest expense, foreign currency gains or losses, and gains or losses from the disposal of assets.

 

(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, foreign currency gains or losses, and gains or losses from the disposal of assets.