EX-99 2 dkm752a.txt EXHIBIT 99.1 - PRESS RELEASE Inforte Corp. Announces Third Quarter Results Net Income Jumps to $545,000, a 20 Percent Increase from Last Quarter; Net Revenue at $9.7 Million CHICAGO, October 25, 2005 /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 September 30, 2005. Third quarter revenue was $10.6 million. Net revenue was $9.7 million, which was at the higher end of the guidance range. Diluted earnings per share (EPS) were five cents, matching the high end of the guidance range of one to five cents, and compared to zero cents last year. Dave Sutton, Inforte's chief executive officer and president, commented, "We had a good quarter fueled by solid growth in our business intelligence and analytics practices, with strong cash flow and our best operating income and margin performance since the fourth quarter of 2000. The integration of GTS has been completed and we have seen immediate synergies leading to new strategy and business intelligence client engagements during the quarter. We also launched our Managed Analytics offerings in the market this quarter and we are starting to see good pipeline for this type of recurring revenue work." Actual earnings results for the quarter ending September 30, 2005, and financial highlights, are as follows: o Net income for the quarter increased to $545,000 compared to $5,000 last year. This is a net margin of 5.6 percent and represents a sequential increase of 20 percent. Results include a $76,000 loss on the investment in Provansis LLC. o Operating income for the quarter increased to $774,000 compared to a loss of $259,000 last year. Results include $187,000 of non-cash compensation related to restricted stock grants. This is an operating margin of 8.0 percent and represents a sequential increase of 37 percent. It is the best operating income and margin performance since the fourth quarter of 2000. o Gross margin increased to 46.6 percent, up from 45.7 percent last quarter. This compares to 38.5 percent in the third quarter of 2004. o Cash flow from operations for the quarter was $1.4 million. o Excluding the impact of the option exchange tender offer that occurred in the first quarter of 2005, cash flow from operations for the year to date is $871,000 (see footnote 1 to the Non-GAAP Supplemental Information and Inforte's SEC filings for more detail on the tender offer). o Utilization was 65 percent compared to 64 percent in the third quarter last year. o Quarterly revenue per consultant and revenue per employee were $211,000 and $170,000 annualized respectively. This compares to $177,000 and $149,000 respectively for the third quarter of last year. o As of September 30, 2005, we had 230 employees in total, 186 of which were billable. This compares to 212 employees last quarter, of which 170 were billable. o As of September 30, 2005, cash and marketable securities were $31.6 million. Nick Heyes, Inforte's chief financial officer, commented, "The third quarter is a seasonally weak quarter for us so we are pleased to be able to report such good results. Even with our utilization below targeted levels we have managed to increase the profitability of our business and have had improvements in most of our other key metrics for the quarter. In particular, given that our customer management related revenue decreased to 18 percent of net revenue compared to 34 percent last quarter, we did well to keep our overall net revenue at about the same level as last quarter. As we look to set our guidance for the fourth quarter, there are a number of factors that are driving more uncertainty than normal and they include the potential continuation of decline in the customer management revenue, the speed of closing the growing managed analytics pipeline, the impact of Provansis as it ramps up and a recent phenomena of quarters firming up much later in the period. We have therefore widened the guidance range to reflect this." Guidance is as follows: o Inforte's net revenue guidance for 4Q05 is now at a range of $8.5 million to $10 million o EPS guidance for 4Q05 is now at a range of zero to five cents o Net revenue guidance for 1Q06 is set at a range of $9 million to $10 million; 1Q06 EPS guidance is set at a range of one to five cents o EPS guidance for all future quarters includes non-cash compensation expense o 2005 full year net revenue guidance is a range of $36.7 million to $38.2 million; EPS guidance for the full year excluding expenses incurred in the first quarter from the option exchange tender offer is a range of nine to fourteen cents (see footnote 1 to the Non-GAAP Supplemental Information and Inforte's SEC filings for more detail on the tender offer) 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; 2 Dallas; Delhi, India; Hamburg, Germany; London; Los Angeles; San Francisco; Walldorf, Germany; 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 October 25, 2005, Investor Conference Call web cast, which begins at 8:30 a.m. Eastern. 3 CONSOLIDATED STATEMENTS OF OPERATIONS (000's, except per share data)

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------ 2004 2005 2004 2005 ---------- ---------- ---------- ---------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues: Revenue before reimbursements (net revenue) $11,516 $ 9,711 $34,160 $28,160 Reimbursements 1,675 922 4,886 2,912 -------- -------- -------- -------- Total revenues 13,191 10,633 39,046 31,072 Operating expenses: Project personnel and related expenses 7,085 5,187 19,842 16,267 Reimbursed expenses 1,675 922 4,886 2,912 Sales and marketing 1,178 638 3,757 1,942 Recruiting, retention and training 370 324 1,104 785 Management and administrative 3,142 2,788 9,037 9,382 -------- -------- -------- -------- Total operating expenses 13,450 9,859 38,626 31,288 Operating income (loss) (259) 774 420 (216) Loss on investment in affiliate - (76) - (76) Interest income, net and other 267 214 772 671 -------- -------- -------- -------- Income before income tax 8 912 1,192 379 Income tax expense 3 367 476 150 -------- -------- -------- -------- Net income $ 5 $ 545 $ 716 $ 229 ======== ======== ======== ======== Earnings per share: -Basic $0.00 $0.05 $0.06 $0.02 -Diluted $0.00 $0.05 $0.06 $0.02 Weighted average common shares outstanding: -Basic 11,056 11,260 11,030 11,209 -Diluted 11,183 11,694 11,302 11,516 Expenses as a percentage of net revenue Project personnel and related expenses 61.5% 53.4% 58.1% 57.8% Sales and marketing 10.2% 6.6% 11.0% 6.9% Recruiting, retention, and training 3.2% 3.3% 3.2% 2.8% Management and administrative 27.3% 28.7% 26.5% 33.3% Income tax rate 40.0% 40.2% 40.0% 39.6% Margins Gross income 38.5% 46.6% 41.9% 42.2% Operating income -2.2% 8.0% 1.2% -0.8% Pretax income 0.1% 9.4% 3.5% 1.3% Net income 0.0% 5.6% 2.1% 0.8% Year-over-year change Net revenue -16% -18% Gross income 2% -17% Operating income 399% -152% Pretax income 10,797% -68% Net income 10,756% -68% Diluted EPS - -67%

4 NON-GAAP SUPPLEMENTAL INFORMATION (UNAUDITED) (1) STATEMENTS OF OPERATIONS (000's, except per share data) NINE MONTHS ENDED SEPTEMBER 30, ------------------------- 2004 2005 ---------- ---------- (Unaudited) (Unaudited) Operating income (loss) 420 (216) Tender offer related charges - 1,316 Loss on investment in affiliate - (76) Interest income, net and other 772 671 -------- -------- Income before income tax 1,184 1,695 Income tax expense 473 671 -------- -------- Net income $ 711 $ 1,024 ======== ======== Earnings per share: -Basic $ 0.06 $ 0.09 -Diluted $ 0.06 $ 0.09 Weighted average common shares outstanding: -Basic 11,030 11,209 -Diluted 11,302 11,516 Expenses as a percentage of net revenue Project personnel and related expenses 58.1% 56.7% Sales and marketing 11.0% 6.5% Recruiting, retention, and training 3.2% 2.8% Management and administrative 26.5% 30.1% Margins Gross income 41.9% 43.3% Operating income 1.2% 3.9% Pretax income 3.5% 6.0% Net income 2.1% 3.6% Year-over-year change Net revenue -18% Gross income -15% Operating income 162% Pretax income 42% Net income 43% Diluted EPS 50% (1) The Non-GAAP supplemental information shows results excluding the impact of one-time charges related to the tender offer to convert certain stock options into cash and restricted stock and a one-time cash distribution to stockholders that occurred 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. 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. 5 INFORTE CORP. CONSOLIDATED BALANCE SHEETS (000's)

SEPT 30, DEC 31, MAR 31, JUNE 30, SEPT 30, 2004 2004 2005 2005 2005 -------- -------- -------- -------- -------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 18,889 $ 20,817 $ 22,041 $ 9,471 $ 12,107 Short-term marketable securities 25,457 24,657 24,036 20,022 18,996 Accounts receivable 7,469 7,491 6,760 7,875 8,707 Allowance for doubtful accounts (500) (450) (450) (450) (450) -------- -------- -------- -------- -------- Accounts receivable, net 6,969 7,041 6,310 7,425 8,257 Note receivable from affiliate - - - - 429 Prepaid expenses and other current assets 985 875 1,163 1,212 1,066 Interest receivable on investment Securities 389 383 399 261 204 Deferred income taxes 622 2,662 2,424 1,053 1,073 Income taxes recoverable 501 1,025 1,042 1,013 218 -------- -------- -------- -------- -------- Total current assets 53,812 57,460 57,415 40,457 42,350 Computers, purchased software and property 3,113 3,218 2,642 2,602 2,111 Less accumulated depreciation and amortization 1,907 2,125 1,623 1,754 1,091 -------- -------- -------- -------- -------- Computers, purchased software and property, net 1,206 1,093 1,019 848 1,020 Long-term marketable securities 14,136 12,106 6,086 3,543 492 Intangible assets 38 - - - 64 Goodwill 11,737 11,726 11,726 11,726 14,107 Deferred income taxes 295 207 366 1,495 1,565 Investment in affiliate - - - 2,000 1,924 -------- -------- -------- -------- -------- Total assets $ 81,224 $ 82,592 $ 76,612 $ 60,069 $ 61,522 ======== ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 995 $ 756 $ 710 $ 413 $ 666 Income taxes payable - 1,309 148 260 359 Accrued expenses 2,738 2,364 2,274 2,890 3,012 Accrued loss on disposal of Leased property 346 2,278 1,826 1,492 1,106 Current portion of deferred acquisition payments 3,150 3,150 3,150 3,150 3,550 Dividends declared - - 17,375 - - Deferred revenue 2,209 1,667 1,085 1,166 1,084 -------- -------- -------- -------- -------- Total current liabilities 9,438 11,524 26,568 9,371 9,777 Non current liabilities: Non-current portion of deferred acquisition payment 3,150 3,150 - - 400 Stockholders' equity: Common stock, $0.001 par value authorized- 50,000,000 shares; issued and outstanding (net of treasury stock)- 11,892,039 as of Sept. 30, 2005 11 11 11 12 12 Additional paid-in capital 80,384 80,652 74,015 74,170 74,168 Cost of common stock in treasury (2,720,823 shares as of Sep. 30, 2005) (24,997) (24,997) (24,997) (24,997) (24,997) Stock-based compensation 180 181 585 823 1,011 Retained earnings 12,742 11,462 - 454 999 Accumulated other comprehensive income 316 609 430 236 152 -------- -------- -------- -------- -------- Total stockholders' equity 68,636 67,918 50,044 50,698 51,345 -------- -------- -------- -------- -------- Total liabilities and stockholders' equity $ 81,224 $ 82,592 $ 76,612 $ 60,069 $ 61,522 ======== ======== ======== ======== ======== Total cash and marketable securities $ 58,482 $ 57,580 $ 52,163 $ 33,036 $ 31,595

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

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ---------------------- 2004 2005 2004 2005 ---------- --------- ---------- ---------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Cash flows from operating activities Net income $ 5 $ 545 $ 716 $ 229 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 435 293 1,216 979 Loss on investment in affiliate - 76 - 76 Stock based compensation 19 188 180 830 Deferred income taxes 48 (90) 74 231 Changes in operating assets and liabilities Accounts receivable 1,424 (722) (464) (1,106) Prepaid expenses and other current assets 84 158 (237) (8) Unbilled Revenue - 463 - 463 Accounts payable (346) (78) (607) (421) Income taxes (41) 894 (1,142) (143) Accrued expenses and other (650) (264) (1,823) (524) Deferred revenue (569) (82) (556) (583) -------- -------- -------- -------- Net cash provided by (used in) operating activities 409 1,381 (2,643) 23 Cash flows from investing activities Note receivable from affiliate - (375) - (425) Investment in affiliate - - - (2,000) Acquisition of Compendit/GTS, net of cash (1) (2,177) (5,677) (5,327) Decrease in marketable securities 981 3,981 3,315 16,715 Purchases of property and equipment (431) (116) (841) (278) -------- -------- -------- -------- Net cash provided by (used in) investing activities 549 1,313 (3,203) 8,685 Cash flows from financing activities Proceeds from stock option and purchase plans 178 - 593 202 Dividends - - - (17,375) -------- -------- -------- -------- Net cash provided by financing activities 178 - 593 (17,173) -------- -------- -------- -------- Effect of changes in exchange rates on cash (14) (58) 71 (245) Increase (decrease) in cash and cash equivalents 1,122 2,636 (5,182) (8,710) Cash and cash equivalents, beginning of period 17,767 9,471 24,071 20,817 -------- -------- -------- -------- Cash and cash equivalents, end of period $18,889 $ 12,107 $ 18,889 $ 12,107 ======== ======== ======== ========

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