TMCnet News
Intersections Inc. Reports First Quarter 2008 EarningsCHANTILLY, Va. --(Business Wire)-- Intersections Inc. (NASDAQ:INTX) today announced financial results for the quarter ended March 31, 2008. Revenue for the first quarter of 2008 was $85.9 million, compared to $58.2 million for the quarter ended March 31, 2007 and $77.0 million for the quarter ended December 31, 2007, an increase of 47.6 percent and 11.5 percent, respectively. Net income for the quarter ended March 31, 2008 was $3.4 million, compared to $484 thousand for the quarter ended March 31, 2007 and $3.3 million for the quarter ended December 31, 2007. Diluted earnings per share ("EPS") were $0.20 for the first quarter of 2008, compared to $0.03 for the first quarter of 2007 and $0.19 for the fourth quarter of 2007. "The first quarter of 2008 was a strong start to the year. Revenue and gross subscriber additions in the first quarter of 2008 continued the trends recorded in the latter half of 2007," said Chairman and Chief Executive Officer, Michael Stanfield. "We are pleased with our overall business growth in the quarter, led by increases in direct marketing enrollments and the percentage of revenue coming from direct marketing programs, which creates top line growth and enhances subscriber value in our Consumer Products and Services segment. This top line growth is starting to translate into earnings growth, as reflected in our diluted EPS of $0.20 this quarter. We also are pleased with developments in our business services operations as well as the release of our new Identity Guard(R) Total Protection service offering and related new marketing campaigns and new corporate and service offering websites at www.intersections.com and www.identityguard.com." Our financial results include our Other reporting segment, which includes Captira Analytical LLC, which was acquired on August 7, 2007, and Net Enforcers, Inc., which was acquired on November 30, 2007. First Quarter 2008 Financial Highlights: -- Total subscribers increased to approximately 5.6 million as of March 31, 2008, compared to approximately 5.3 million subscribers as of December 31, 2007. Subscriber additions of approximately 1.1 million in the first quarter of 2008 were partially offset by subscriber cancels of 856 thousand. -- Total revenue for the first quarter of 2008 was $85.9 million compared to $58.2 million for the first quarter of 2007 and $77.0 million for the fourth quarter of 2007. -- Subscription revenue, net of marketing and commissions associated with subscription revenue, increased to $46.6 million for the first quarter of 2008 from $31.9 million for the first quarter of 2007, and from $41.1 million for the fourth quarter of 2007, an increase of 46.1 percent and 13.2 percent, respectively. Subscription revenue, net of marketing and commissions associated with subscription revenue, is a non-GAAP financial measure that we believe is important to investors and one that we utilize in managing our business as subscription revenue normalizes the effect of changes in the mix of indirect and direct marketing arrangements. -- In the first quarter of 2008, we acquired membership agreements from Citibank, which is recorded as a customer related intangible asset, for approximately $30.2 million. -- Income before taxes and minority interest was $5.1 million for the first quarter of 2008, including a loss before taxes and minority interest of $1.4 million for SI, compared to $456 thousand for the first quarter of 2007, which included a loss before taxes and minority interest of $684 thousand for SI. Income before taxes and minority interest was $4.9 million for the fourth quarter of 2007 which included a loss before taxes and minority interest of $1.1 million for SI. -- Net income was $3.4 million, or $0.20 per diluted share, for the quarter ended March 31, 2008, compared to $484 thousand, or $0.03 per diluted share, for the quarter ended March 31, 2007. -- Cash flow provided by operations for the quarter ended March 31, 2008, was approximately $15.8 million. -- In the first quarter of 2008, we increased our long-term debt obligations by $27.6 million to finance the acquisition of Citibank membership agreements. Intersections' quarter ended March 31, 2008 results will be discussed in more detail on May 7, 2008 at 5:00 pm EDT via teleconference. A live audio webcast will be available on Intersections' Web site at www.intersections.com. Participants are encouraged to go to the selected Web site at least 15 minutes in advance to register, download, and install any necessary audio software. This webcast will be archived and available for replay after the teleconference. Additionally, the call will be available for telephonic replay from 7:00 p.m. Wednesday, May 7, 2008 through 5:00 p.m. Monday, May 12, 2008, at 888-.286-8010, or if you are based internationally, at +1-617-801-6888 (Passcode: 22052982). Statements in this press release relating to future plans, results, performance, expectations, achievements and the like are considered "forward-looking statements." Those forward-looking statements involve known and unknown risks and are subject to change based on various factors and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including without limitation the effect of new subscriber additions. Factors and uncertainties that may cause actual results to differ include but are not limited to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to revise or update any forward-looking statements. About Us Intersections Inc. (NASDAQ: INTX) is a leading global provider of consumer and corporate identity risk management services. Its premier identity theft, privacy, and consumer solutions are designed to provide high value, revenue generating opportunities to its marketing partners, including leading financial institutions, Fortune 100 corporations and other businesses. Intersections also markets full identity theft protection solutions under its brand, IDENTITY GUARD(R). Intersections' consumer identity theft protection services actively safeguard more than 8 million consumers against identity theft. To address the growing threat of corporate fraud, Intersections and its subsidiaries provide cutting edge identity risk management solutions including: -- Pre-employment background screening, provided domestically through American Background Information Services, Inc., and internationally through Control Risks Screening Limited (London, United Kingdom) and Control Risks Screening PE (Singapore). -- Corporate brand protection, provided by Net Enforcers, Inc. -- Security breach remediation, provided by Intersections to enable companies to respond to security incidents and mitigate potential damage to their employees, customers, and corporate brands. -- Software and data management, provided by Captira Analytical, LLC to assist the bail bond industry in managing workflow and data requirements. Learn more at www.intersections.com.
INTERSECTIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
-------------------
(in thousands,
except per share
data)
2008 2007
--------- ---------
Revenue $85,894 $ 58,201
Operating expenses:
Marketing 12,194 7,984
Commissions 18,486 9,642
Cost of revenue 28,500 23,046
General and administrative 16,275 14,244
Depreciation 2,341 2,147
Amortization 2,489 586
--------- ---------
Total operating expenses 80,285 57,649
--------- ---------
Income from operations 5,609 552
Interest income 98 285
Interest expense (565) (338)
Other expense/(income), net (18) (43)
--------- ---------
Income before income taxes and minority interest 5,124 456
Income tax expense (2,099) (184)
--------- ---------
Income before minority interest 3,025 272
Minority interest in net loss of Screening
International, LLC 414 212
--------- ---------
Net income $ 3,439 $ 484
========= =========
Net income per share - basic $ 0.20 $ 0.03
Net income per share - diluted $ 0.20 $ 0.03
Weighted average common shares outstanding - basic 17,162 16,956
Weighted average common shares outstanding -
diluted 17,475 17,400
INTERSECTIONS INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2008 2007
------------ ------------
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 27,622 $ 19,780
Accounts receivable, net 23,463 25,471
Prepaid expenses and other current assets 4,675 6,217
Income tax receivable 2,187 4,329
Deferred subscription solicitation costs 24,470 21,912
------------ ------------
Total current assets 82,417 77,709
PROPERTY AND EQUIPMENT--Net 17,835 18,817
GOODWILL 77,449 76,506
INTANGIBLE ASSETS--Net 44,542 16,855
OTHER ASSETS 20,052 16,381
------------ ------------
TOTAL ASSETS $ 242,295 $ 206,268
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - current portion $ 7,013 $ 3,346
Note payable to Control Risks Group Ltd 900 900
Capital leases - current portion 872 1,001
Accounts payable 13,915 10,647
Accrued expenses and other current
liabilities 16,897 15,187
Accrued payroll and employee benefits 3,189 4,945
Commissions payable 4,687 2,413
Deferred revenue 3,350 2,886
Deferred tax liability - current portion 7,058 6,019
------------ ------------
Total current liabilities 57,881 47,344
------------ ------------
NOTE PAYABLE - less current portion 44,260 22,347
OBLIGATIONS UNDER CAPITAL LEASES - less
current portion 557 699
DERIVATIVE LIABILITY 606 -
OTHER LONG-TERM LIABILITIES 2,465 2,071
DEFERRED TAX LIABILITY - less current
portion 8,733 8,935
------------ ------------
TOTAL LIABILITIES $ 114,502 $ 81,396
MINORITY INTEREST 9,604 10,024
STOCKHOLDERS' EQUITY:
Common stock 182 182
Additional paid-in capital 100,221 99,706
Treasury stock (9,516) (9,516)
Retained earnings 27,796 24,357
Accumulated other comprehensive income-cash
flow hedge relationship (606) -
Accumulated other comprehensive income-other 112 119
------------ ------------
Total stockholders' equity 118,189 114,848
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 242,295 $ 206,268
============ ============
INTERSECTIONS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2008 2007
--------- ---------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,439 $ 484
Adjustments to reconcile net income to net cash
provided by/(used in)
Depreciation 2,357 2,171
Amortization of intangible assets 2,489 586
Amortization of gain from sale leaseback (16) (24)
Amortization of debt issuance cost 24 20
Provision for doubtful accounts 4 12
Share based compensation 1,031 552
Amortization of deferred subscription
solicitation costs 12,338 6,970
Minority interest in net loss of Screening
International, LLC (414) (212)
Foreign currency transaction gains, net (9) -
Changes in assets and liabilities, net of
businesses acquired:
Accounts receivable 2,004 (1,434)
Prepaid expenses and other current assets 1,542 (254)
Income tax receivable 2,142 587
Deferred subscription solicitation costs (16,466) (10,074)
Other assets (931) (2,860)
Accounts payable 3,237 4,046
Accrued expenses and other current
liabilities 1,833 1,303
Accrued payroll and employee benefits (1,756) (3,449)
Commissions payable 2,274 130
Deferred revenue 464 (1,896)
Deferred income tax (202) (26)
Other long-term liabilities 371 1,977
--------- ---------
Net cash provided by/(used in)
operating activities 15,755 (1,391)
--------- ---------
NET CASH (USED IN)/PROVIDED BY INVESTING
ACTIVITIES:
Sale of short term investments - 5,973
Cash paid in the acquisition of Intersections
Insurance Services, Inc. - (5)
Cash paid in the acquisition of Net Enforcers,
Inc., net of cash received (805) -
Cash paid in the acquisition of intangible
membership agreements (30,176) -
Acquisition of property and equipment (1,588) (1,552)
--------- ---------
Net cash (used in)/provided by
investing activities (32,569) (4,416)
--------- ---------
NET CASH PROVIDED BY/(USED IN) FINANCING
ACTIVITIES:
Cash proceeds from stock options exercised 2 722
Withholding tax payment on vesting of restricted
stock units (517) -
Proceeds from debt issuance 27,611 -
Debt issuance costs (133) -
Repayments on note payable (2,031) (1,111)
Note receivable - (160)
Capital lease payments (272) (327)
--------- ---------
Net cash provided by/(used in)
financing activities 24,660 (876)
--------- ---------
EFFECT OF EXCHANGE RATE ON CASH (4) 1
INCREASE IN CASH AND CASH EQUIVALENTS 7,842 2,150
CASH AND CASH EQUIVALENTS--Beginning of period 19,780 15,580
--------- ---------
CASH AND CASH EQUIVALENTS--End of period $ 27,622 $ 17,730
========= =========
INTERSECTIONS INC.
OTHER DATA
(Unaudited)
Three Months Ended
March 31,
----------------------
(dollars in thousands)
2008 2007
---------- ----------
Subscribers at beginning of period 5,259 4,626
New subscribers - indirect 585 560
New subscribers - direct 562 388
Cancelled subscribers within first 90 days
of subscription (287) (238)
Cancelled subscribers after first 90 days of
subscription (569) (650)
---------- ----------
Subscribers at end of period 5,550 4,686
========== ==========
Indirect subscribers 62.1% 65.8%
Direct subscribers 37.9 34.2
---------- ----------
100.0% 100.0%
========== ==========
*Cancellations within first 90 days of
subscription 25.0% 25.1%
**Cancellations after first 90 days of
subscription 29.8% 30.4%
***Overall retention 61.8% 61.6%
Percentage of revenue from indirect marketing
arrangements to total subscription revenue 26.3% 36.7%
Percentage of revenue from direct marketing
arrangements to total subscription revenue 73.7 63.3
---------- ----------
Total subscription revenue 100.0% 100.0%
========== ==========
Total revenue $ 85,894 $ 58,201
Revenue from transactional sales (8,640) (8,691)
Revenue from lost/stolen credit card
registry (9) (20)
---------- ----------
Subscription revenue 77,245 49,490
========== ==========
Marketing and commissions 30,680 17,626
Commissions paid on transactional sales (2) (5)
Commissions paid on lost/stolen credit card
registry (10) (6)
---------- ----------
Marketing and commissions associated with
subscription revenue 30,668 17,615
========== ==========
Subscription revenue, net of marketing and
commissions associated with subscription
revenue $ 46,577 $ 31,875
========== ==========
* Percentage of cancellation within the first 90 days to new subscribers ** Percentage of the number of subscribers at the beginning of the period plus new subscribers during the period less cancellations within the first 90 days *** On a rolling 12 month basis by taking subscribers at the end of the period divided by the sum of the subscribers at the beginning of the period plus additions for the period
INTERSECTIONS INC.
OTHER DATA, continued
(Unaudited)
Intersections Inc.
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except for per subscriber information)
The table below includes financial information prepared in accordance
with accounting principles generally accepted in the United States,
or GAAP, as well as other financial measures referred to as non-GAAP
financial measures. Consolidated EBITDA before stock based
compensation is presented in a manner consistent with the way
management evaluates operating results and which management believes
is useful to investors and others. An explanation regarding the
company's use of non-GAAP financial measures and a reconciliation of
non-GAAP financial measures used by the company to GAAP measures is
provided below. These non-GAAP financial measures should be
considered in addition to, but not as a substitute for, net income
and the other information prepared in accordance with GAAP, and may
not be comparable to similarly titled measures reported by other
companies.
(1) Consolidated EBITDA before stock based compensation, represents
consolidated income before income taxes plus non-cash stock based
compensation, depreciation and amortization, investment income
(expense), and other income (expense). We believe that the
consolidated EBITDA before stock based compensation calculation
provides useful information to investors because they are indicators
of our operating performance. Consolidated EBITDA before stock based
compensation is commonly used as a basis for investors and analysts
to evaluate and compare the periodic and future operating performance
and value of companies within our industry. Our Board of Directors
and management use consolidated EBITDA before stock based
compensation to evaluate the operating performance of the company and
to make compensation and bonus determinations, and our lenders use
consolidated EBITDA before stock based compensation as a measure of
our ability to make interest payments and to comply with our debt
covenants.
INTERSECTIONS INC.
OTHER DATA, continued
(Unaudited)
The following table reconciles consolidated income before income taxes
to consolidated EBITDA before stock based compensation, as defined
for the previous five quarters and year-to-date through December 31,
2007. In managing our business, we analyze our performance quarterly
on a consolidated income before income tax basis.
2007 2008
For the Three Months Ended For the Three
Months Ended
March June September December March 31
31 30 30 31
Reconciliation from consolidated income before income
taxes to consolidated EBITDA before stock based
compensation
-----------------------------------------
INTERSECTIONS INC.
OTHER DATA, continued
(Unaudited)
(2) Net Amortization and stock based compensation per share is not a
measurement under GAAP, may not be similar to net amortization and
stock based compensation per share measures of other companies and
should be considered in addition to, but not as a substitute for, the
information contained in our statement of operations. We believe that
net amortization and stock based compensation per share provides
useful information to investors because it is an indicator of
operating performance since it excludes items that are not directly
attributable to ongoing business operations, as well as a non-cash
stock based compensation expense that we are required to record under
Statement of Financial Accounting Standards No. 123 (Revised 2004),
"Share-Based Payment." We believe our net amortization and stock
based compensation per share calculations are commonly used as some
of the bases for investors, analysts and credit rating agencies to
evaluate and compare the periodic and future operating performance
and value of companies.
The following table provides the consolidated Net Amortization and
Stock Based Compensation per Share amount:
2007 2008
For the
Three
Months
For the Three Months Ended Ended
March September December March
31 June 30 30 31 31
Net amortization and stock
based compensation per
share
---------------------------
Amortization $ 586 $ 839 $ 911 $ 1,010 $ 2,489
Stock based compensation 552 737 737 689 1,031
------- ------- --------- -------- -------
Subtotal 1,138 1,576 1,648 1,699 3,520
Tax effect at 40% 455 630 659 680 1,408
------- ------- --------- -------- -------
Net amortization and
stock based compensation 683 946 989 1,019 2,112
Diluted shares 17,400 17,558 17,560 17,544 17,475
Net amortization and
stock based compensation
per share (2) $ 0.04 $ 0.05 $ 0.06 $ 0.06 $ 0.12
INTERSECTIONS INC.
OTHER DATA, continued
(Unaudited)
For the Year
Ended
December 31
2007
Net amortization and stock based compensation per share
---------------------------------------------------------[FEED_C
The following table provides components of Intersections' Consumer Products and Services (CPS) segment on a per ending subscriber per quarter basis:
2008
For the
Three
2007 Months
For the Three Months Ended Ended
March 31 June 30 September 30 December 31 March 31
Per Ending
Subscriber per
Quarter
Revenue $11.01 $11.81 $12.86 $13.21 $14.12
Cost of revenue 4.12 4.14 4.52 4.21 4.39
Gross margin
(4)(A) 6.89 7.66 8.35 9.00 9.72
Marketing 1.70 1.64 1.90 2.08 2.20
Commissions 2.06 2.51 2.83 3.19 3.33
Revenue less
marketing and
commissions
(4)(B) 7.24 7.65 8.14 7.93 8.59
General and
Administrative 2.35 2.30 2.18 2.10 2.03
Stock based
compensation (0.12) (0.15) (0.15) (0.13) (0.19)
EBITDA before
stock based
compensation
(4)(C) 0.90 1.36 1.59 1.75 2.35
INTERSECTIONS INC.
OTHER DATA, continued
(Unaudited)
Intersections Inc.
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands, except for per subscriber information)
The table above includes financial information prepared in accordance
with accounting principles generally accepted in the United States,
or GAAP, as well as other financial measures referred to as non-GAAP
financial measures. EBITDA before stock based compensation, CPS Gross
margin per ending subscriber, CPS Revenue less marketing and
commissions per ending subscriber and CPS EBITDA before stock based
compensation per ending subscriber are non-GAAP financial measures
that are presented in a manner consistent with the way management
evaluates operating results, and which management believes is useful
to investors and others. An explanation regarding the company's use
of non-GAAP financial measures and a reconciliation of non-GAAP
financial measures used by the company to GAAP measures is provided
below. These non-GAAP financial measures should be considered in
addition to, but not as a substitute for, net income and the other
information prepared in accordance with GAAP, and may not be
comparable to similarly titled measures reported by other companies.
(3) CPS earnings before interest, tax, depreciation and amortization,
or EBITDA before stock based compensation, represents income before
income taxes plus non-cash stock based compensation, depreciation and
amortization, investment income (expense), and other income (expense)
for the CPS segment. We believe that the EBITDA before stock based
compensation calculation provides useful information to investors
because they are indicators of our operating performance. EBITDA
before stock based compensation is commonly used as a basis for
investors and analysts to evaluate and compare the periodic and
future operating performance and value of companies within our
industry. Our Board of Directors and management use EBITDA before
stock based compensation to evaluate the operating performance of the
CPS segment and to make compensation and bonus determinations, and
our lenders use EBITDA before stock based compensation as a measure
of our ability to make interest payments and to comply with our debt
covenants.
The following table reconciles income before income taxes to EBITDA
before stock based compensation, as defined for the previous five
quarters and year-to-date through December 31, 2007. In managing our
business, we analyze the performance of our segments quarterly on an
income before income tax basis.
INTERSECTIONS INC.
OTHER DATA, continued
(Unaudited)
2007 2008
For the
Three
Months
For the Three Months Ended Ended
March 31 June 30 September 30 December 31 March 31
CPS reconciliation
from income before
income taxes to
EBITDA before
stock based
compensation
-------------------
CPS Income before
income taxes $ 1,141 $2,999 $ 4,278 $ 6,604 $ 7,398
Stock based
compensation 552 737 737 689 1,031
Plus Depreciation 1,954 2,079 1,982 2,129 2,098
Plus Amortization 460 714 713 713 2,065
Investment
expense, net 60 121 136 257 451
Other
expense/(income) 41 (65) 18 (1,194) 27
-------- ------- ------------ ----------- --------
EBITDA before
stock based
compensation (3) $ 4,208 $6,585 $ 7,864 $ 9,198 $ 13,070
For the Year Ended
December 31
2007
CPS reconciliation from income before income taxes
to EBITDA before stock based compensation
---------------------------------------------------[FEED_
INTERSECTIONS INC.
OTHER DATA, continued
(Unaudited)
(4) A. CPS gross margin per ending subscriber represents CPS revenue
less cost of revenue divided by the ending number of subscribers. We
believe this measure is important to investors because it
demonstrates our profitability trend on a per subscriber basis and is
one that we use in managing our CPS business because it demonstrates
our profitability trend on a per subscriber basis. B. CPS Revenue
less marketing and commissions per ending subscriber represents CPS
revenue less marketing and commissions divided by the ending number
of subscribers. We believe this measure is important to investors and
is one that we use in managing our CPS business because it normalizes
the effect of changes in the mix of direct and indirect marketing
arrangements and it demonstrates our profitability trend on a per
subscriber basis. C. CPS EBITDA before stock based compensation per
ending subscriber represents CPS EBITDA before stock based
compensation (defined in section (1) above) divided by the ending
number of subscribers. We believe this measure is important to
investors because it demonstrates our profitability trend on a per
subscriber basis and is one that we use in managing our CPS business
because it demonstrates our profitability trend on a per subscriber
basis.
2007 2008
For the
Three
Months
For the Three Months Ended Ended
March 31 June 30 September 30 December 31 March 31
A. CPS Gross Margin
per Ending
Subscriber
-------------------
Revenue $ 51,577 $57,251 $ 63,678 $ 69,462 $ 78,349
Less Cost of
Revenue 19,296 20,094 22,366 22,135 24,381
-------- ------- ------------ ----------- --------
Gross Margin 32,281 37,157 41,312 47,327 53,968
Ending Subscribers 4,686 4,850 4,950 5,259 5,551
CPS Gross Margin
per Ending
Subscriber 6.89 7.66 8.35 9.00 9.72
B. CPS Revenue Less
Marketing and
Commissions per
Ending Subscriber
-------------------
Revenue $ 51,577 $57,251 $ 63,678 $ 69,462 $ 78,349
Less:
Marketing 7,984 7,951 9,390 10,960 12,194
Commissions 9,642 12,195 13,992 16,795 18,486
-------- ------- ------------ ----------- --------
Revenue Less
Marketing and
Commissions 33,951 37,105 40,296 41,707 47,669
Ending Subscribers 4,686 4,850 4,950 5,259 5,551
CPS Revenue Less
Marketing and
Commissions per
Ending Subscriber 7.24 7.65 8.14 7.93 8.59
C. CPS EBITDA
before stock based
compensation per
Ending Subscriber
-------------------
EBITDA before stock
based compensation $ 4,208 $ 6,585 $ 7,864 $ 9,198 $ 13,070
Ending Subscribers 4,686 4,850 4,950 5,259 5,551
CPS EBITDA before
stock based
compensation per
Ending Subscriber 0.90 1.36 1.59 1.75 2.35
INTERSECTIONS INC.
OTHER DATA, continued
(Unaudited)
For the Year
Ended
December 31
2007
A. CPS Gross Margin per Ending Subscriber
---------------------------------------------------------[F
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