InfoSpace Announces Record Search Revenues for Third Quarter

October 28, 2009 4:05 PM EDT

BELLEVUE, Wash.--(BUSINESS WIRE)-- InfoSpace, Inc. (NASDAQ: INSP) today announced financial results for the third quarter ended September 30, 2009.

"InfoSpace posted another strong quarter, with good performance across all of our key financial metrics," said Will Lansing, president and chief executive officer of InfoSpace. "Our results reflect impressive execution by the distribution team, which added nine new partners, and improved profitability in our core search business. We are seeing positive trends in the overall search industry and are optimistic about our continued growth in this environment."

Revenues for the third quarter of 2009 were $54.4 million, reflecting a $14.9 million or 38% increase from the third quarter of 2008. Distribution revenues represented $41.7 million or 77% of revenues in the third quarter 2009.

Adjusted EBITDA was $7.1 million for the third quarter of 2009, compared to Adjusted EBITDA of $6.6 million for the third quarter of 2008.

Net income for the third quarter of 2009 was $1.8 million, or $0.05 per share, compared to net loss of $9.9 million, or $0.29 per share, for the third quarter of 2008.

Cash, cash equivalents, and marketable securities as of September 30, 2009 totaled $214.1 million, including $8.2 million of auction rate securities. At the end of the third quarter, the Company had no debt obligations.

Fourth Quarter 2009 Outlook

For the fourth quarter of 2009, the Company expects revenues between $57 million and $60 million, Adjusted EBITDA between $7.4 million and $8.4 million, and net income between $3.3 million and $4.3 million, or $0.09 to $0.12 per share, which includes a one-time benefit from a net tax refund that increases net income by $3.3 million and Adjusted EBITDA by $2.4 million.

Conference Call and Webcast

A conference call will be held today at 2 p.m. Pacific / 5 p.m. Eastern. The live webcast can be accessed in the Investor Relations section of the InfoSpace corporate Web site, at http://www.infospaceinc.com. A replay of the call will be available from approximately one hour after the call through 9 p.m. Pacific time on November 4, 2009.

Use of Non-GAAP Financial Measures

InfoSpace's Adjusted EBITDA is calculated by adjusting GAAP net income (loss) to exclude the effects of discontinued operations, income taxes, depreciation, amortization of intangible assets, stock-based compensation expense, loss on investments, net, and other income, net (including such items as interest income, foreign currency gains or losses, and gains or losses from the disposal of assets), as detailed in the accompanying table to the preliminary unaudited condensed consolidated financial statements.

InfoSpace's management believes that this non-GAAP financial measure 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 believes that management and investors benefit from referring to this non-GAAP financial measure in assessing InfoSpace's performance. Adjusted EBITDA should be evaluated in light of the Company's financial results prepared in accordance with GAAP. A table reconciling the Company's Adjusted EBITDA to net income (loss) in accordance with GAAP accompanies the preliminary unaudited condensed consolidated financial statements included in this release.

About InfoSpace, Inc.

InfoSpace, Inc., a leading developer of metasearch products, is focused on bringing the best of the Web to Internet users. InfoSpace's proprietary metasearch technology combines the top results from several of the largest online search engines, providing fast and comprehensive search results. InfoSpace sites include Dogpile(R) (www.dogpile.com), DoGreatGood(TM) (www.dogreatgood.com), MetaCrawler(R) (www.metacrawler.com), WebCrawler(R) (www.webcrawler.com), and WebFetch(R) (www.webfetch.com). InfoSpace's metasearch technology is also available on nearly 100 partner sites, including content, community, and connectivity sites. More information may be found at www.infospaceinc.com.

InfoSpace.com, InfoSpace, Dogpile, DoGreatGood, MetaCrawler, WebCrawler, WebFetch, and other marks are trademarks of InfoSpace, Inc. The names of other companies and products mentioned herein may be the trademarks of their respective owners.

This release contains forward-looking statements relating to InfoSpace, Inc.'s operating results that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Words such as "expect," "believe," "intend," "anticipate" and "are optimistic," and similar expressions, identify forward-looking statements, but their absence does not mean that the statement is not forward looking. Forward-looking statements include, without limitation: statements regarding trends in the overall search industry and InfoSpace's continued growth in this environment and statements regarding InfoSpace's expectations for financial performance and results of operations for the fourth quarter of 2009. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Factors that could affect InfoSpace's actual results include: the completion of the review of the financial statements for the third quarter of 2009; changes in relationships with customers and distribution partners on which InfoSpace depends and that represent a substantial portion of revenues; general economic, industry, and market sector conditions; the progress and costs of the development of InfoSpace's products and services; the timing and extent of market acceptance of those products and services; the ability to successfully integrate acquired businesses; the successful execution of InfoSpace's strategic initiatives, operating plans, and marketing strategies; and the condition of cash investments. A more detailed description of certain factors that could affect actual results include, but are not limited to, those discussed in InfoSpace's most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission, in the section entitled "Risk Factors" and elsewhere in such document. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. InfoSpace undertakes no obligation to update publicly 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

(Unaudited)

(Amounts in thousands, except per share data)

                  Three months ended          Nine months ended

                  September   September 30,   September 30,   September 30,
                  30,

                  2009        2008            2009            2008

Revenues          $ 54,356    $ 39,469        $ 137,189       $ 119,979

Operating
expenses:(1)

Content and         34,016      18,265          78,702          58,119
distribution

Systems and
network             2,430       3,238           7,220           8,454
operations

Product             1,207       2,757           4,216           7,895
development

Sales and           6,694       6,882           18,776          16,712
marketing

General and         6,884       5,940           19,452          18,622
administrative

Depreciation
and                 1,818       2,160           5,440           5,378
amortization

Restructuring       -           (9      )       -               (1,880  )
and other, net

Total
operating           53,049      39,233          133,806         113,300
expenses

Operating           1,307       236             3,383           6,679
income

Loss on
investments,        -           (11,046 )       (5,016  )       (22,115 )
net(2)

Other income,       472         1,458           1,545           6,355
net

Income (loss)
from
continuing          1,779       (9,352  )       (88     )       (9,081  )
operations
before income
taxes

Income tax
benefit             32          (548    )       (251    )       (153    )
(expense)

Income (loss)
from                1,811       (9,900  )       (339    )       (9,234  )
continuing
operations

Discontinued
operations:

Loss from
discontinued        -           (12     )       -               (1,323  )
operations,
net of taxes

Loss on sale
of
discontinued        -           (13     )       -               (208    )
operations,
net of taxes

Net income        $ 1,811     $ (9,925  )     $ (339    )     $ (10,765 )
(loss)

Earnings
(loss) per
share - Basic

Income (loss)
from              $ 0.05      $ (0.29   )     $ (0.01   )     $ (0.27   )
continuing
operations

Loss from
discontinued        -           (0.00   )       -               (0.04   )
operations

Loss on sale
of                  -           (0.00   )       -               (0.00   )
discontinued
operations

Net income
(loss) per        $ 0.05      $ (0.29   )     $ (0.01   )     $ (0.31   )
share - Basic

Weighted
average shares
outstanding
used in             35,035      34,479          35,945          34,371
computing
basic income
(loss) per
share

Earnings
(loss) per
share -
Diluted

Income (loss)
from              $ 0.05      $ (0.29   )     $ (0.01   )     $ (0.27   )
continuing
operations

Loss from
discontinued        -           (0.00   )       -               (0.04   )
operations

Loss on sale
of                  -           (0.00   )       -               (0.00   )
discontinued
operations

Net income
(loss) per        $ 0.05      $ (0.29   )     $ (0.01   )     $ (0.31   )
share -
Diluted

Weighted
average shares
outstanding
used in             35,766      34,479          35,945          34,371
computing
diluted income
(loss) per
share

(1) Stock-based compensation expense for the three and nine months ended
September 30, 2009 and 2008 is allocated among the following captions (in
thousands):

                  Three months ended          Nine months ended

                  September   September 30,   September 30,   September 30, 2008
                  30, 2009    2008            2009

Systems and
network           $ 238       $ 494           $ 552           $ 1,307
operations

Product             435         1,080           757             2,720
development

Sales and           974         1,074           1,423           2,965
marketing

General and         2,287       1,535           4,642           4,392
administrative

Total
stock-based       $ 3,934     $ 4,183         $ 7,374         $ 11,384
compensation
expense

(2) In the nine months ended September 30, 2009, the Company recorded net
other-than-temporary impairment charges of $5.0 million relating to the auction
rate securities investments that it holds. In the three and nine months ended
September 30, 2008, the Company recorded other-than-temporary impairment charges
relating to the auction rate securities investments that it holds of $9.0
million and $21.0 million, respectively. In the three and nine months ended
September 30, 2008, the Company recorded a charge of $2.1 million to write down
the carrying value of certain equity investments.

InfoSpace, Inc.

Preliminary Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)

                                              September 30,    December 31,

                                              2009             2008

ASSETS

Current assets:

Cash and cash equivalents                     $ 93,250         $ 49,936

Short-term investments, available-for-sale      112,695          141,592

Accounts receivable, net                        21,661           15,423

Notes and other receivables                     3,891            1,349

Prepaid expenses and other current assets       2,193            1,767

Total current assets                            233,690          210,067

Property and equipment, net                     13,650           18,078

Long-term investments, available-for-sale       8,200            13,916

Goodwill and other intangible assets, net       45,319           44,123

Other long-term assets                          4,431            4,949

Total assets                                  $ 305,290        $ 291,133

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                              $ 6,620          $ 6,518

Accrued expenses and other current              27,920           19,707
liabilities

Liabilities of discontinued operations          -                1,109

Total current liabilities                       34,540           27,334

Other long-term liabilities                     1,663            1,475

Total liabilities                               36,203           28,809

Stockholders' equity:

Common stock                                    4                3

Additional paid-in capital                      1,300,457        1,292,360

Accumulated deficit                             (1,032,918 )     (1,032,579 )

Accumulated other comprehensive income          1,544            2,540

Total stockholders' equity                      269,087          262,324

Total liabilities and stockholders' equity    $ 305,290        $ 291,133

Summary of cash, short-term and long-term
investments:

Cash and cash equivalents                     $ 93,250         $ 49,936

Short-term investments, available-for-sale      112,695          141,592

Long-term investments, available-for-sale       8,200            13,916

Cash, short-term and long-term investments    $ 214,145        $ 205,444

InfoSpace, Inc.

Preliminary Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

                                                 Nine months ended

                                                 September 30,   September 30,

                                                 2009            2008

Operating activities:

Net loss                                         $ (339    )     $ (10,765  )

Adjustments to reconcile net loss to net cash
provided (used) by operating activities:

Loss from discontinued operations                  -               1,323

Loss on sale of discontinued operations            -               208

Loss on investments, net                           5,016           22,115

Stock-based compensation                           7,374           11,384

Depreciation and amortization                      5,440           5,378

Deferred income taxes                              186             (1,423   )

Gain on sale of non-core assets, net               -               (1,897   )

Loss on disposals of property and equipment        635             -

Other                                              228             34

Cash provided (used) by changes in operating
assets and liabilities:

Accounts receivable                                (6,234  )       2,025

Notes and other receivables                        (3,042  )       5,927

Prepaid expenses and other current assets          (426    )       (145     )

Other long-term assets                             359             3,278

Accounts payable                                   144             (464     )

Accrued expenses and other current and             6,984           (58,554  )
long-term liabilities

Net cash provided (used) by operating              16,325          (21,576  )
activities

Investing activities:

Business acquisition, net of cash acquired         (395    )       -

Purchases of property and equipment                (1,654  )       (10,672  )

Other long-term assets                             159             (1,003   )

Proceeds from the sale of assets                   611             2,313

Proceeds from sales and maturities of              75,600          43,980
investments

Purchases of investments                           (47,317 )       (17,984  )

Net cash provided by investing activities          27,004          16,634

Financing activities:

Special dividend paid                              -               (299,146 )

Proceeds from stock option exercises and
issuance of stock through employee stock           405             454
purchase plan

Repayment of capital lease obligations             (420    )       (96      )

Net cash used by financing activities              (15     )       (298,788 )

Discontinued operations:

Net cash used by operating activities              -               (15,361  )
attributable to discontinued operations

Net increase (decrease) in cash and cash           43,314          (319,091 )
equivalents

Cash and cash equivalents:

Beginning of period                                49,936          498,326

End of period                                    $ 93,250        $ 179,235

InfoSpace, Inc.

Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable
GAAP Measure

Preliminary Adjusted EBITDA from Continuing Operations Reconciliation(1)

(Unaudited)

(Amounts in thousands)

                Three months ended             Nine months ended

                September 30,  September 30,   September 30,  September 30,

                2009           2008            2009           2008

Net income      $ 1,811        $ (9,925 )      $ (339   )     $ (10,765 )
(loss) (2)

Discontinued      -              25              -              1,531
operations

Depreciation
and               1,818          2,160           5,440          5,378
amortization

Stock-based       3,934          4,183           7,374          11,384
compensation

Loss on
investments,      -              11,046          5,016          22,115
net

Other
income, net       (472   )       (1,458 )        (1,545 )       (6,355  )
(3)

Income tax
expense           (32    )       548             251            153
(benefit)

Adjusted
EBITDA from     $ 7,059        $ 6,579         $ 16,197       $ 23,441
continuing
operations

Preliminary Adjusted EBITDA Reconciliation for Forward-Looking Guidance

(Amounts in thousands)

                Ranges for the Three months
                ending

                December 31, 2009

Net income      $ 3,300        $ 4,300

Depreciation
and               1,800          1,800
amortization

Stock-based       3,300          3,300
compensation

Loss on           -              -
investments

Other
income, net       (1,100 )       (1,100 )
(3)

Income tax        100            100
expense

Adjusted        $ 7,400        $ 8,400
EBITDA

(1) Adjusted Earnings before Interest, Taxes, Depreciation and Amortization
("EBITDA") from continuing operations is a non-GAAP financial measure and
is reconciled to net income (loss), which the Company's management believes
to be the most comparable generally accepted accounting principles ("GAAP")
measure. Adjusted EBITDA from continuing operations results are calculated
by adjusting GAAP net income (loss) to exclude the effects of discontinued
operations, income taxes, depreciation, amortization of intangible assets,
stock-based compensation expense, losses on investments, net, and other
income, net (including such items as interest income, litigation
settlements and contingencies, foreign currency gains or losses, and gains
or losses from the disposal of assets), as detailed above. The Company 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. The Company's management believes
that this non-GAAP financial measure is a common measure used by investors
and analysts to evaluate its performance. This non-GAAP financial measure
is used in addition to and in conjunction with results presented in
accordance with GAAP and reflect an additional way of viewing aspects of
the Company's operations that, when viewed with GAAP results and the
accompanying reconciliations to corresponding GAAP financial measures,
provide a more complete understanding of the results of operations and
trends affecting the Company's business. This non-GAAP financial measure
should be considered as a supplement to, and not as a substitute for, or
superior to, net income (loss) in accordance with GAAP.

(2) As presented in the Preliminary Condensed Consolidated Statements of
Operations (unaudited).

(3) Other income, net, primarily consists of interest income, gains or
losses from the disposal of assets, and foreign currency transaction gains
or losses.

    Source: InfoSpace, Inc.

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