EX-99 2 dkm829a.txt EXHIBIT 99.1 - PRESS RELEASE Inforte Corp. Announces Fourth Quarter and 2005 Results Cash Flow from Operations $1.9 Million for the Quarter, Best Result Since Third Quarter 2001; Diluted EPS Three Cents CHICAGO, January 26, 2006 /PRNewswire-FirstCall/ -- Customer Intelligence consultancy Inforte Corp. (Nasdaq: INFT - News) announced today that revenue and diluted earnings per share (EPS) were at the high end of guidance for the quarter ending December 31, 2005. Fourth quarter revenue was $10.6 million, and net revenue, which is revenue less reimbursements, was $9.6 million. Diluted EPS were three cents. Dave Sutton, Inforte's chief executive officer and president, commented, "2005 marks our best profitability performance in the past five years, with strong cash flow and our best operating income and margin performance since 2000. We continue to see the benefits of shifting our revenue mix towards high growth business intelligence and managed analytics areas. Growth in our SAP business intelligence and analytics area is up 32 percent year over year." Actual earnings results for the quarter ending December 31, 2005, and financial highlights, are as follows: o Net income for the quarter was $308,000 compared to a loss of $1.3 million in the fourth quarter of 2004. In the fourth quarter of 2004 there was an office space restructuring resulting in a one-time write-off of lease costs; excluding this expense fourth quarter 2004 net income was $16,000. o Net income as a percentage of net revenue was 3.2 percent and compares to -13.1 percent last year and 0.2 percent excluding the office space restructuring. o Operating income for the quarter increased to $329,000 compared to a loss of $2.4 million in the fourth quarter of 2004 and a loss of $296,000 excluding the office space restructuring. This result includes $254,000 of non-cash compensation expense related to restricted stock for this quarter. o Operating income as percentage of net revenue was 3.4 percent compared to -24.9 percent in the fourth quarter of 2004 and -3.0 percent excluding the office space restructuring. o Gross income as a percentage of net revenue was 42.5 percent, up from 39.8 percent in the fourth quarter of 2004. o Cash flow from operations for the quarter was $1.9 million, the best quarterly result since the third quarter of 2001. o As of December 31, 2005, cash and marketable securities increased to $32.9 million from $31.6 million last quarter. o Utilization was 66 percent compared to 55 percent in the fourth quarter of 2004. o Quarterly net revenue per consultant and net revenue per employee were $211,000 and $172,000 annualized respectively. This compares to $211,000 and $170,000 respectively for the third quarter of this year and $180,000 and $153,000 for the fourth quarter of 2004. o As of December 31, 2005, we had 233 employees in total, 191 of which were billable. This compares to 230 employees last quarter, of which 186 were billable. Actual earnings results for the full year ending December 31, 2005, and financial highlights, are as follows: o Net income for the year was $537,000 compared to a loss of $565,000 in 2004. In the first quarter of 2005 Inforte underwent a capital restructuring in which it exchanged options for cash and restricted stock; excluding this expense 2005 net income was $1.3 million and compares to $732,000 in 2004 excluding the impact of the office space restructuring. o Net income as a percentage of net revenue was 1.4 percent for the year and compares to -1.3 percent in 2004. Net income as a percentage of net revenue excluding the capital restructuring was 3.5 percent and compares to 1.7 percent in 2004 excluding the office space restructuring. o Operating income for the year was $113,000 compared to a loss of $2 million in 2004. Operating income excluding the capital restructuring was $1.4 million and compares to $124,000 in 2004 excluding the office space restructuring. o Operating income as a percentage of net revenue was 0.3 percent compared to -4.6 percent in 2004. Operating income as a percentage of net revenue excluding the capital restructuring was 3.8 percent and compares to 0.3 percent in 2004 excluding the office space restructuring. o Gross income as a percentage of net revenue excluding the capital restructuring was 43.1 percent, up from 41.4 percent in 2004. o Cash flow from operations for the year was $1.9 million. Excluding the impact of the capital restructuring, cash flow from operations was $2.7 million. Nick Heyes, Inforte's chief financial officer, commented, "2005 has been a good year for profitability and cash flow. Our operating earnings before interest, tax, depreciation and amortization (EBITDA) excluding the capital restructuring were $2.5 million at 6.7 percent of net revenue. This is our best performance on an absolute and percentage of net revenue basis since 2000. Excluding the impact of the capital restructuring, this was also our best year for cash flow from operations since 2001. A key item related to our 2006 guidance is that we currently have no stock options expense as we have zero unvested options. We have already been including our restricted stock expense in our results over the last year and that expense is included in our guidance." Guidance for the next two quarters is as follows: o Inforte's net revenue guidance for 1Q06 is unchanged at a range of $9 million to $10 million o EPS guidance for 1Q06 is unchanged at a range of one to five cents o Net revenue guidance for 2Q06 is set at a range of $9.5 million to $10.5 million; 2Q06 EPS guidance is set at a range of two to six cents o EPS guidance for all future quarters includes non-cash compensation expense Non-GAAP supplemental information is provided to enhance the understanding of Inforte's financial performance and is reconciled to Inforte's GAAP information in the accompanying tables at the end of this press release. Inforte presents the non-GAAP financial measures to complement results provided in accordance with GAAP, as management believes these measures help illustrate underlying trends in our business and facilitate comparisons between quarters and years. Management uses these measures to establish budgets and operational goals that are communicated internally and externally, to manage our business and evaluate its performance, and to assess compensation for executives. The non-GAAP supplemental information excludes the costs of an office space restructuring which was a one-time write-off of excess space in the fourth quarter of 2004 and also excludes the costs of a capital restructuring during the first quarter of 2005, which included an exchange of outstanding options for cash and restricted stock and the granting of additional common stock. See footnote 3 to the Non-GAAP Supplemental Information and Inforte's SEC filings for more detail on the office space restructuring and footnote 2 to the Non-GAAP Supplemental Information and Inforte's SEC filings for more detail on the capital restructuring. This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ from forward-looking results for a number of reasons, including but not limited to, Inforte's ability to: (i) effectively forecast demand and profitably match resources with demand during a period of tight client budgets and lower spending levels, and when worldwide economic and geopolitical uncertainty is high; (ii) attract and retain clients and satisfy our clients' expectations; (iii) recruit and retain qualified professionals; (iv) accurately estimate the time and resources necessary for the delivery of our services; (v) build and maintain marketing relationships with leading software vendors while occasionally competing with their professional services organizations; (vi) compete with emerging alternative economic models for delivery, such as offshore development; (vii) integrate acquired businesses; (viii) grow new areas of its business, such as business intelligence and managed analytics; and (ix) identify and successfully offer the solutions that clients demand; as well as other factors discussed from time to time in our SEC filings. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. All forward-looking statements included in this document are made as of the date hereof, based on information available to Inforte on the date thereof, and Inforte assumes no obligation to update any forward-looking statements. About Inforte Corp. Inforte Corp. increases the competitive strength of its Global 1000 clients by providing them with insight, intelligence and an infrastructure to close the fact-gap and enable more timely and profitable decision-making. Inforte consultants combine real-world industry, functional and analytical expertise with innovative go-to-market strategies and technology solutions, ensuring that our clients can drive transformational, measurable results in their customer interactions. Inforte is headquartered in Chicago and has offices in Atlanta; Dallas; Delhi, India; Hamburg, Germany; London; Los Angeles; San Francisco; and Washington, D.C. For more information, contact Inforte at 800.340.0200 or visit www.inforte.com. CONTACT: kelly.richards@inforte.com, or ir@inforte.com. Visit http://www.inforte.com/investor/ to access the January 26, 2006, Investor Conference Call web cast, which begins at 8:30 a.m. Eastern. CONSOLIDATED STATEMENTS OF OPERATIONS (000's, except per share data)

THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------------------ ------------------------ 2004 2005 2004 2005 ---------- ---------- ---------- ---------- (Unaudited) (Unaudited) Revenues: Revenue before reimbursements (net revenue) $ 9,784 $ 9,558 $ 43,944 $ 37,718 Reimbursements 1,220 1,017 6,106 3,929 -------- -------- -------- -------- Total revenues 11,004 10,575 50,050 41,647 Cost of services: Project personnel and related expenses 5,893 5,493 25,735 21,760 Reimbursements 1,220 1,017 6,106 3,929 -------- -------- -------- -------- Total cost of services 7,113 6,510 31,841 25,689 -------- -------- -------- -------- Gross profit 3,891 4,065 18,209 15,958 Other operating expenses: Sales and marketing 1,020 648 4,777 2,590 Recruiting, retention and training 237 315 1,341 1,100 Management and administrative 5,074 2,773 14,111 12,155 -------- -------- -------- -------- Total other operating expenses 6,331 3,736 20,229 15,845 -------- -------- -------- -------- Operating income (loss) (2,440) 329 (2,020) 113 Loss on investment in affiliate - (67) - (143) Interest income, net and other 312 247 1,084 918 -------- -------- -------- -------- Income (loss) before income tax (2,128) 509 (936) 888 Income tax expense (benefit) (848) 202 (372) 352 -------- -------- -------- -------- Net income (loss) $ (1,280) $ 307 $ (564) $ 536 ======== ======== ======== ======== Earnings per share: -Basic $ -0.12 $ 0.03 $ -0.05 $ 0.05 -Diluted $ -0.12 $ 0.03 $ -0.05 $ 0.05 Weighted average common shares outstanding: -Basic 11,091 11,260 11,045 11,222 -Diluted (1) 11,091 11,477 11,045 11,504 Expenses as a percentage of net revenue Project personnel and related expenses 60.2% 57.5% 58.6% 57.7% Sales and marketing 10.4% 6.8% 10.9% 6.9% Recruiting, retention, and training 2.4% 3.3% 3.1% 2.9% Management and administrative 51.9% 29.0% 32.1% 32.2% Income tax rate 39.8% 39.6% 39.6% 39.6% Margins as a percentage of net revenue Gross income 39.8% 42.5% 41.4% 42.3% Operating income -24.9% 3.4% -4.6% 0.3% Pretax income -21.7% 5.3% -2.1% 2.4% Net income -13.1% 3.2% -1.3% 1.4% Year-over-year change Net revenue -2% -14% Gross income 4% -12% Operating income - - Pretax income - - Net income - - Diluted EPS - -

NON-GAAP SUPPLEMENTAL INFORMATION (UNAUDITED) (2)(3) STATEMENTS OF OPERATIONS (000's, except per share data)

THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, ------------------------- ------------------------- 2004 2005 2004 2005 ---------- ---------- ---------- ---------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Operating income (loss) (2,440) 329 (2,020) 113 Capital restructuring - - - 1,316 Office space restructuring 2,144 - 2,144 - Loss on investment in affiliate - (67) - (143) Interest income, net and other 312 247 1,084 918 -------- -------- -------- -------- Non-GAAP income before income tax 16 509 1,208 2,204 Non-GAAP income tax expense - 202 476 873 -------- -------- -------- -------- Non-GAAP net income $ 16 $ 307 $ 732 $ 1,331 ======== ======== ======== ======== Non-GAAP earnings per share: -Basic $ - $ 0.03 $ 0.07 $ 0.12 -Diluted $ - $ 0.03 $ 0.07 $ 0.12 Weighted average common shares outstanding: -Basic 11,019 11,260 11,045 11,222 -Diluted 11,140 11,477 11,224 11,504 Non-GAAP margins as a percentage of net revenue Pretax income 0.2% 5.3% 2.7% 5.8% Net income 0.2% 3.2% 1.7% 3.5% Year-over-year change Non-GAAP pretax income 3,081% 82% Non-GAAP net income 1,819% 82% Non-GAAP diluted EPS - 71%

(1) Potentially dilutive shares were excluded from the diluted loss per share calculation for the three and twelve months ended December 31, 2004 as their effects would have been anti-dilutive to the loss incurred by the Company. The total number of weighted average common and common equivalent shares outstanding, including any anti-dilutive shares, for each period were the following: Three months ending December 31, 2004: 11,140 shares, Twelve months ending December 31, 2004: 11,224 shares. (2) The Non-GAAP supplemental information shows results excluding the impact of the capital restructuring in the first quarter of 2005. The total expense of $1,316 included: (i)$848 for charges related to the exchange of stock options for cash; (ii) $378 for common stock grants to employees who had chosen not to exercise options prior to the one-time cash distribution; and (iii) $90 for professional services. Of the total expense of $1,316, $292 was charged to Project personnel and related expenses, $119 was charged to Sales and marketing, $8 was charged to Recruiting, retention and training and $897 was charged to the Management and administrative line of the Statement of Operations. The non-GAAP results are provided in order to enhance the user's overall understanding of the company's current and future financial performance by excluding certain items that management believes are not indicative of its core operating results and by providing results that provide a more consistent basis for comparison between quarters. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States of America. (3) The Non-GAAP supplemental information shows the impact of office space restructuring that occurred in the fourth quarter of 2004. The total expense of the restructuring was $2,144, all of which was charged to the Management and administrative line of the Statement of Operations. We present the non-GAAP results as a complement to the results provided in accordance with Generally Accepted Accounting Principles. These non-GAAP results are provided in order to enhance the user's overall understanding of the company's current and future financial performance by excluding certain items that management believes are not indicative of its core operating results and by providing results that provide a more consistent basis for comparison between quarters. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States of America. INFORTE CORP. CONSOLIDATED BALANCE SHEETS (000's)

DEC 31, MAR 31, JUNE 30, SEPT 30, DEC 31, 2004 2005 2005 2005 2005 -------- -------- -------- -------- -------- (Unaudited) (Unaudited) (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 20,817 $ 22,041 $ 9,471 $ 12,107 $ 10,353 Short-term marketable securities 24,657 24,036 20,022 18,996 22,591 Accounts receivable 7,491 6,760 7,875 8,707 8,460 Allowance for doubtful accounts (450) (450) (450) (450) (400) -------- -------- -------- -------- -------- Accounts receivable, net 7,041 6,310 7,425 8,257 8,060 Note receivable from affiliate - - - 429 684 Prepaid expenses and other current assets 875 1,163 1,212 1,066 1,023 Interest receivable on investment securities 383 399 261 204 199 Deferred income taxes 2,662 2,424 1,053 1,073 484 Income taxes recoverable 1,025 1,042 1,013 218 124 -------- -------- -------- -------- -------- Total current assets 57,460 57,415 40,457 42,350 43,518 Computers, purchased software and property 3,218 2,642 2,602 2,111 1,862 Less accumulated depreciation and amortization 2,125 1,623 1,754 1,091 881 -------- -------- -------- -------- -------- Computers, purchased software and property, net 1,093 1,019 848 1,020 981 Long-term marketable securities 12,106 6,086 3,543 492 - Intangible assets - - - 64 42 Goodwill 11,726 11,726 11,726 14,307 15,238 Deferred income taxes 207 366 1,495 1,565 2,758 Investment in affiliate - - 2,000 1,924 1,857 -------- -------- -------- -------- -------- Total assets $ 82,592 $ 76,612 $ 60,069 $ 61,722 $ 64,394 ======== ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 756 $ 710 $ 413 $ 666 $ 357 Income taxes payable 1,309 148 260 359 920 Accrued expenses 2,364 2,274 2,890 3,012 3,595 Accrued loss on disposal of leased property 2,278 1,826 1,492 1,106 845 Current portion of deferred acquisition payment 3,150 3,150 3,150 3,650 3,650 Dividends declared - 17,375 - - - Deferred revenue 1,667 1,085 1,166 1,084 1,679 -------- -------- -------- -------- -------- Total current liabilities 11,524 26,568 9,371 9,877 11,046 Non current liabilities: Non-current portion of deferred acquisition payment 3,150 - - 500 1,500 Stockholders' equity: Common stock, $0.001 par value authorized- 50,000,000 shares; issued and outstanding (net of treasury stock)- 12,568,405 as of Dec. 31, 2005 11 11 12 12 13 Additional paid-in capital 80,652 74,015 74,170 74,168 74,204 Cost of common stock in treasury (2,720,823 shares as of Dec. 31, 2005) (24,997) (24,997) (24,997) (24,997) (24,997) Stock-based compensation 181 585 823 1,011 1,265 Retained earnings 11,462 - 454 999 1,307 Accumulated other comprehensive income 609 430 236 152 56 -------- -------- -------- -------- -------- Total stockholders' equity 67,918 50,044 50,698 51,345 51,848 -------- -------- -------- -------- -------- Total liabilities and stockholders' equity $ 82,592 $ 76,612 $ 60,069 $ 61,722 $ 64,394 ======== ======== ======== ======== ======== Total cash and marketable securities $ 57,580 $ 52,163 $ 33,036 $ 31,595 $ 32,944

INFORTE CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (000's)

THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, ----------------------- ------------------------- 2004 2005 2004 2005 ---------- --------- ---------- ---------- (Unaudited) (Unaudited) Cash flows from operating activities Net income (loss) $ (1,280) $ 307 $ (564) $ 536 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 430 253 1,646 1,232 Non-cash compensation 1 - 181 - Loss on investment in affiliate - 67 - 143 Stock based compensation - 254 - 1,084 Deferred income taxes (453) (528) (379) (297) Changes in operating assets and liabilities Accounts receivable (72) 197 (536) (909) Prepaid expenses and other current assets 116 38 (121) 30 Unbilled revenue - - - 463 Accounts payable (239) (309) (846) (730) Income taxes (714) 655 (1,856) 512 Accrued expenses and other 1,558 322 (265) (202) Deferred revenue (542) 595 (1,098) 12 -------- -------- -------- -------- Net cash provided by (used in) operating activities (1,195) 1,851 (3,838) 1,874 Cash flows from investing activities Note receivable from affiliate - (245) - (670) Investment in affiliate - - - (2,000) Acquisition of Compendit/GTS, net of cash 11 - (5,666) (5,327) Decrease in marketable securities 2,696 (3,153) 6,011 13,562 Purchases of property and equipment (105) (143) (946) (421) -------- -------- -------- -------- Net cash provided by (used in) investing activities 2,602 (3,541) (601) 5,144 Cash flows from financing activities Proceeds from stock option and purchase plans 268 31 861 233 Dividends - - - (17,375) -------- -------- -------- -------- Net cash provided by (used in) financing activities 268 31 861 (17,142) -------- -------- -------- -------- Effect of changes in exchange rates on cash 253 (95) 324 (340) Increase (decrease) in cash and cash equivalents 1,928 (1,754) (3,254) (10,464) Cash and cash equivalents, beginning of period 18,889 12,107 24,071 20,817 -------- -------- -------- -------- Cash and cash equivalents, end of period $ 20,817 $ 10,353 $ 20,817 $ 10,353 ======== ======== ======== ========