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iMergent Announces Third Quarter Fiscal 2006 Financial Results
-Third Quarter 2006 Total Revenue of $25.0 Million - - $26.3 Million in Net Dollar Volume of Contracts Written Highest in Company History - - Posts Quarterly Diluted EPS of $0.22, Compared to a Loss Per Share of $0.54 in Prior Year Quarter - - Australia Court Sets May 9, 2006 Hearing to Enter Settlement Agreement - 4 May, 2006, 8:00 am ET OREM, Utah, May 4, 2006 -iMergent, Inc.(AMEX: IIG), a leading provider of eCommerce and software for small businesses and entrepreneurs, today announced the results for the three and nine months ended March 31, 2006. Don Danks, chairman and chief executive officer, stated, “Our third quarter results, with revenue growing 142 percent as a result of the change in business model in December 2005 and net dollar volume of contracts written reaching its highest level in company history during the quarter, demonstrates that our business remains strong. We are constantly evaluating new ancillary products to ensure we offer the best solutions to our customers. We believe this will drive greater benefits as we continue to serve this very large market. Recent data confirms that there are approximately 24.7 million small businesses in the United States alone. And when you add in the international markets, we believe we are positioned to best serve this very large and underserved market.” iMergent and the Australian Competition and Consumer Commission (ACCC) resolved all outstanding issues at a mediation previously held in Australia. The court has set a May 9th “We expect the court will confirm the settlement at the hearing, and we look forward to returning to Australia, as it has historically been a profitable market for our StoresOnline™ workshops,” added Danks. All terms of the settlement agreement are in Australian dollars. All dollar amounts appearing in this press release are shown on an “as converted” basis to the approximate US dollar equivalent as of March 29, 2006. The actual payments will be made in Australian dollars; thus, actual US dollar equivalents will vary according to prevailing exchange rates at the time of payments. Three-months Ended March 31, 2006 Compared to March 31, 2005
Brandon Lewis, president and chief operating officer, said, “As part of our drive to continually improve the business, we have adjusted our product financing policy, which has resulted in a stronger customer base. To further that improvement, we continue to leverage our business with the goal of improving margins. We have several new products and initiatives in the pipeline that we feel will help accomplish this goal – from the broadening of our training and education programs to offering exciting new products and solutions that help our merchants develop effective websites via proactive tools and solutions offering innovative and enhanced functionality.” Nine-Months Ended March 31, 2006 Compared to March 31, 2005
Robert Lewis, chief financial officer, stated, “We have built a solid foundation for our growth strategy. Net dollar volume of contracts written was up 11 percent over the prior year’s third quarter, and up five percent over the second quarter of fiscal 2006. During the quarter, we generated approximately $2.4 million in cash from operating activities, and we closed the quarter with $28.1 million in cash and cash equivalents. Moreover, we have the ability to sell our receivables to generate additional cash if needed.” Conference Call Safe Harbor Statement The statements made in this press release regarding (i) iMergent’s success in serving its customers and potential customers, (ii) iMergent’s payments and liability relating to the ACCC settlement, (iii) whether the court will confirm iMergent’s settlement with the ACCC and iMergent will return to Australia, (iv) iMergent’s ability to improve its margins, (v) iMergent’s development of new products and initiatives, and whether these new products and initiatives will help iMergent improve its margins, (vi) iMergent’s belief that it has built a solid foundation for its growth strategy, (vii) iMergent’s ability to sell its receivables and other statements that are not historical in nature constitute forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on the current expectations and beliefs of the management of iMergent and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include, without limitation, the Company’s ability to increase the net dollar volume of contracts written; the Company’s ability to continue to evaluate and find ancillary products; the Company’s ability to offer best solutions to its customers, or otherwise provide solutions to customers; the Company’s ability to maintain a very solid customer base; the Company’s ability to have lucrative long term relationships with its customers; that the market for the Company’s products will continue to grow; that the Company will realize greater benefits with any growth of its market; the total amount of claims filed by Australian customers; whether there will be any funds returned to the Company from the settlement account; whether the terms of the settlement with the ACCC will be deemed to be adhered to by the Company on an ongoing basis; whether regulatory authorities will bring future actions against the Company; fluctuations in the Company’s operating results because of negative publicity, seasonality, competition and other factors; adverse international or domestic regulatory developments affecting the internet or the Company’s business; costs of and developments in the Company’s pending litigation and SEC investigation; the Company’s ability to generate revenue and profits from current strategic partnerships; the Company’s ability to generate cash flow from operating activities and sales of receivables; the Company’s ability to expand current markets and develop new markets and establish profitable strategic partnerships; the Company’s ability to continue to finance extended payment term arrangement customer contracts; whether there is continual demand for the Company’s products and services in its target market of small business and entrepreneurs for assistance in establishing websites; that the Company can successfully adjust its product financing policy, and that such adjustment to policy will not negatively impact business or revenues; that the Company is able to leverage its business; that the Company does improve margins and can continue to improve margins; that new products and initiatives in the pipeline will be implemented; that new products and initiatives if implemented will improve the customer base and margins of the Company; that the Company can broaden its training and education programs as well as offer new products and solutions; that if the Company is able to broaden its training and education programs as well as offer new products and solutions that such actions will have a positive impact on the Company, its customers, its customer relationships, its margins or revenues; and, that the growth strategy undertaken by the Company will be successful. For a more detailed discussion of factors that affect iMergent's operations, please refer to the Company’s Form 10-K for the year ended June 30, 2005 and its Forms 10-Q for the quarterly periods ended September 30, 2005, December 31, 2005, as well as the Form 10-Q being filed for the period ended March 31, 2006. These forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update such forward-looking statements. About iMergentiMergent provides eCommerce solutions to entrepreneurs and small businesses enabling them to market and sell their business products or ideas via the Internet. Headquartered in Orem, Utah the Company sells its proprietary StoresOnline software and training services, helping users build a successful Internet strategy to market products, accept online orders, analyze marketing performance, and manage pricing and customers. In addition to software, iMergent offers site development, web hosting, marketing and mentoring products. iMergent typically reaches its target audience through a concentrated direct marketing effort to fill Preview Sessions, in which a StoresOnline expert reviews the product opportunities and costs. These sessions lead to a follow-up Workshop Conference, where product and technology experts train potential users on the software and encourage them to make purchases. iMergent, Inc. and StoresOnline are trademarks of iMergent, Inc.
iMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(unaudited)
March 31, 2006 June 30, 2005
--------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 28,083 $ 10,691
Certificate of deposit 500 -
Trade receivables, net of allowance for
doubtful accounts of $6,354 as of March
31, 2006 and $6,452 as of June 30, 2005 10,140 7,018
Trade receivables held for sale - 14,006
Trade receivables pledged - 763
Inventories 92 74
Prepaid expenses and other 3,613 2,783
--------- ---------
Total current assets 42,428 35,335
Restricted cash 496 446
Certificate of deposit 500
Long-term trade receivables, net of
allowance for doubtful accounts of
$3,387 as of March 31, 2006 and $1,508
as of June 30, 2005 5,092 1,754
Property and equipment, net 582 508
Deferred income tax assets 10,639 -
Merchant account deposits and other 1,123 384
--------- ---------
Total Assets $ 60,360 $ 38,927
========= =========
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable $ 3,361 $ 2,376
Accrued expenses and other 5,212 5,171
Income taxes payable 242 -
Collateralized borrowing - 763
Deferred revenue, current portion 22,306 33,146
Capital lease obligations, current
portion 104 91
--------- ---------
Total current liabilities 31,225 41,547
Capital lease obligations, net of current
portion 7 79
Deferred revenue, net of current portion 3,275 80,904
--------- ---------
Total liabilities 34,507 122,530
--------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, par value $0.001 per
share - authorized 5,000,000 shares;
none issued - -
Common stock, par value $0.001 per share
- authorized 100,000,000 shares;
12,144,994 and 12,130,679 shares
outstanding as of March 31, 2006 and
June 30, 2005, respectively 12 12
Additional paid-in capital 75,791 74,807
Accumulated other comprehensive loss (5) (5)
Accumulated deficit (49,945) (158,417)
--------- ---------
Total stockholders' equity (deficit) 25,853 (83,603)
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) $ 60,360 $ 38,927
========= =========
iMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- -------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Revenue:
Product and other
revenue $ 21,508 $ 6,783 $ 147,970 $ 17,733
Commission and
other revenue 3,497 3,538 8,923 10,474
----------- ----------- ----------- -----------
Total revenue 25,005 10,321 156,893 28,207
----------- ----------- ----------- -----------
Operating expenses:
Cost of product and
other revenue 7,542 6,554 21,753 21,560
Selling and
marketing 10,071 8,052 27,400 22,609
General and
administrative 3,642 2,942 10,385 7,120
Research and
development 208 231 677 551
----------- ----------- ----------- -----------
Total operating
expenses 21,463 17,779 60,215 51,840
----------- ----------- ----------- -----------
Income (loss) from
operations 3,542 (7,458) 96,678 (23,633)
----------- ----------- ----------- -----------
Other income
(expense):
Interest income 819 938 2,099 2,594
Interest expense (3) (22) (17) (86)
Other income
(expense), net 158 242 (117) 383
----------- ----------- ----------- -----------
Total other
income, net 974 1,158 1,965 2,891
----------- ----------- ----------- -----------
Income (loss)
before income tax
(provision)
benefit 4,516 (6,300) 98,643 (20,742)
Income tax
(provision)
benefit (1,716) (136) 9,829 (454)
----------- ----------- ----------- -----------
Net income (loss) $ 2,800 $ (6,436) $ 108,472 $ (21,196)
=========== =========== =========== ===========
Net income (loss)
per common share:
Basic $ 0.23 $ (0.54) $ 8.94 $ (1.81)
=========== =========== =========== ===========
Diluted $ 0.22 $ (0.54) $ 8.56 $ (1.81)
=========== =========== =========== ===========
Weighted average
common shares
outstanding:
Basic 12,135,889 11,965,993 12,133,971 11,738,149
Diluted 12,691,997 12,654,448 12,674,550 12,426,604
iMERGENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
Nine Months Ended March 31,
---------------------------
Increase (decrease) in cash and cash
equivalents 2006 2005
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 108,472 $ (21,199)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 212 172
Amortization of deferred compensation - 6
Expense for stock options issued to
employees 898 -
Expense for stock options issued to
consultants 44 67
Related tax benefit upon issuance of
common stock - 1,014
Gain on early extinguishment of debt - (39)
Loss on disposition of property and
equipment - 17
Changes in assets and liabilities:
Trade receivables and trade
receivables held for sale 7,546 (11,243)
Inventories (18) (101)
Prepaid expenses and other (830) (3,030)
Restricted cash (50) -
Merchant account deposits and other (739) 357
Deferred income tax asset (10,639) -
Accounts payable, accrued expenses
and other liabilities 1,026 2,981
Deferred revenue (88,469) 37,579
Income taxes payable 242 (1,130)
---------- -----------
Net cash provided by operating
activities 17,695 5,451
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (286) (171)
---------- -----------
Net cash used in investing
activities (286) (171)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line-of credit
agreements - 1,122
Proceeds from exercise of options and
warrants 42 1,302
Principal payments on capital lease
obligations (59) (67)
Repayment of notes payable - (361)
---------- -----------
Net cash (used in) provided by
financing activities (17) 1,996
---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 17,392 7,276
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 10,691 4,957
----------- --------------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD $ 28,083 $ 12,233
========== ===========
Supplemental disclosures of non-cash
transactions:
Trade receivables pledged and
collateralized borrowings $ 763 $ 2,681
Cash paid during the periods for:
Interest $ 9 $ 61
Income taxes $ 41 $ 1,953
IMERGENT, INC. AND SUBSIDIARIES
Net Dollar Volume of Contracts Written Reconciling Table and Deferred
Revenue Detail
(Dollars in thousands)
Fiscal Year 2006
--------------------------------------
Q1 Q2 Q3 Q4
---------------------------------------
Deferred revenue, beginning of
period $ 114,050 $ 119,644 $ 24,256 -
Add: product and other
contracts written net of
estimates for bad debts and
financial discounts 14,563 22,105 22,833 -
Less: amounts recognized as
product and other revenue in
the financial statements (8,969) (117,493) (21,508) -
--------- --------- --------- --------
Deferred revenue, end
of period $ 119,644 $ 24,256 $ 25,581 -
========= ========= ========= ========
Total revenue recognized in
financial statements $ 11,393 $ 120,495 $ 25,005 -
Less: Product and other revenue
recognized in financial
statements (8,969) (117,493) (21,508) -
Add: Product and other
contracts written, net of
estimates for bad debts and
financial discounts 14,563 22,105 22,833 -
--------- --------- --------- --------
Net dollar volume of contracts
written $ 16,987 $ 25,107 $ 26,330 -
========= ========= ========= ========
Fiscal Year 2005
--------------------------------------
Q1 Q2 Q3 Q4
---------------------------------------
Deferred revenue, beginning of
period $ 68,990 $ 79,337 $ 93,129 $106,569
Add: product and other
contracts written net of
estimates for bad debts and
financial discounts 15,377 19,712 20,223 14,643
Less: amounts recognized as
product and other revenue in
the financial statements (5,030) (5,920) (6,783) (7,162)
--------- --------- --------- --------
Deferred revenue, end
of period $ 79,337 $ 93,129 $ 106,569 $114,050
========= ========= ========= ========
Total revenue recognized in
financial statements $ 8,050 $ 9,836 $ 10,321 $ 10,868
Less: Product and other revenue
recognized in financial
statements (5,030) (5,920) (6,783) (7,162)
Add: Product and other
contracts written, net of
estimates for bad debts and
financial discounts 15,377 19,712 20,223 14,643
--------- --------- --------- --------
Net dollar volume of contracts
written $ 18,397 $ 23,628 $ 23,761 $ 18,349
========= ========= ========= ========
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