EX-99 2 dkm1010a.htm

Inforte Corp. Announces Third Quarter Results; Highest Quarterly Revenue Performance Since Third Quarter 2004

CHICAGO, October 25, 2006 /PRNewswire-FirstCall/ — Inforte Corp. (Nasdaq: INFT) announced today that revenue for the quarter ending September 30, 2006 was $11.2 million. Net revenue, which is revenue less reimbursements, was $10.3 million. Diluted earnings per share (EPS) were three cents.

Stephen Mack, Inforte’s chief executive officer and president, commented, “We had a good quarter, exceeding our revenue guidance and meeting our earnings expectations.”

Actual results for the quarter ending September 30, 2006, and financial highlights, are as follows:

• Net revenue was $10.3 million, representing year over year growth of six percent and sequential growth of seven percent.
• SAP net revenue grew seventeen percent sequentially going from $3.7 million in the second quarter to $4.4 million this quarter.
• Customer analytics added a significant new client and net revenue more than tripled year over year.
• Cash flow from operations was $792,000, continuing a trend of positive cash flow over the last six quarters. Cash flow from operations was $3.5 million over the last twelve months.
• EPS were three cents. EPS for the first nine months in 2006 were nine cents and compares to two cents last year.
• Net income for the quarter was $302,000.
• As of September 30, 2006, cash and marketable securities were $29.6 million.
• Days sales outstanding were 54, down from 67 in the third quarter last year.
• At the end of the quarter there were 258 employees in total of which 210 were billable. This compares to 237 total employees last quarter of which 191 were billable.
• Consultant utilization was 69 percent compared to 63 percent last quarter.
• Annualized quarterly net revenue per consultant and net revenue per employee were $214,000 and $174,000 respectively.

Net revenue guidance for the fourth quarter is set at a range of $8.8 million to $9.8 million and EPS guidance is set at a range of negative four cents to positive two cents.

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; (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 customer 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 helps companies acquire, develop and retain profitable customers with a unique combination of strategic, analytic and technology deployment services. Our approach enables clients to improve their understanding of customer behavior; successfully apply this insight to customer interactions; and continually analyze and fine-tune their strategies and tactics. Founded in 1993, Inforte is headquartered in Chicago with offices in Atlanta; Dallas; Delhi, India; Hamburg, Germany; London; Los Angeles; San Francisco; and Washington, D.C. For more information, call 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, 2006, Investor Conference Call web cast, which begins at 4:30 p.m. Eastern.

CONSOLIDATED STATEMENTS OF OPERATIONS
000's, except per share data)

THREE MONTHS ENDED
SEPTEMBER 30,
 NINE MONTHS ENDED
SEPTEMBER 30,
2005
 2006
 2005
 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Revenues:		                    

  Revenue before reimbursements (net revenue)		   $ 9,711   $ 10,252   $ 28,160   $ 29,778  
  Reimbursements    922    961    2,912    2,847  
Total revenues    10,633    11,213    31,072    32,625  
Cost of services:  
  Project personnel and related expenses    5,187    6,051    16,267    16,838  
  Reimbursed expenses    922    961    2,912    2,847  
Total cost of services    6,109    7,012    19,179    19,685  
Gross profit    4,524    4,201    11,893    12,940  

Other operating expenses:		  
  Sales and marketing    638    641    1,942    1,867  
  Recruiting, retention and training    324    576    785    1,420  
  Management and administrative    2,788    2,776    9,382    8,640  
Total other operating expenses    3,750    3,993    12,109    11,927  
Operating income (loss)    774    208    (216 )  1,013  
Loss on investment in affiliate    (76 )  (90 )  (76 )  (226 )
Interest income, net and other    214    414    671    1,038  
Income before income tax    912    532    379    1,825  
Income tax expense    367    230    150    774  
Net income   $ 545   $ 302   $ 229   $ 1,051  

Earnings per share:		  
-Basic   $ 0.05   $ 0.03   $ 0.02   $ 0.09  
-Diluted   $ 0.05   $ 0.03   $ 0.02   $ 0.09  

Weighted average common shares outstanding:		  
-Basic    11,260    11,411    11,209    11,353  
-Diluted    11,694    11,811    11,516    11,826  

Expenses as a percentage of net revenue		  
 Project personnel and related expenses    53.4 %  59.0 %  57.8 %  56.5 %
 Sales and marketing    6.6 %  6.2 %  6.8 %  6.3 %
 Recruiting, retention, and training    3.3 %  5.6 %  2.8 %  4.8 %
 Management and administrative    28.7 %  27.1 %  33.3 %  29.0 %
 Income tax rate    40.2 %  43.2 %  39.6 %  42.4 %

Margins		  
 Gross income    46.6 %  41.0 %  42.2 %  43.5 %
 Operating income    8.0 %  2.0 %  -0.8%    3.4 %
 Pretax income    9.4 %  5.2 %  1.3 %  6.1 %
 Net income    5.6 %  2.9 %  0.8 %  3.5 %

Year-over-year change		  
 Net revenue        6 %      6 %
 Gross income        -7 %      9 %
 Operating income        -73 %      --  
 Pretax income        -42 %      381 %
 Net income        -45 %      358 %
 Diluted EPS        -40 %      350 %

NON-GAAP SUPPLEMENTAL INFORMATION (UNAUDITED) (1)
STATEMENTS OF OPERATIONS
(000's, except per share data)

NINE MONTHS ENDED
SEPTEMBER 30, 2005
(Unaudited)

Operating income (loss)		      (216 )
Tender offer related charges    1,316  
Loss on investment in affiliate    (76 )
Interest income, net and other    671  
Non-GAAP income before income tax    1,695  
Non-GAAP income tax expense    671  
Non-GAAP net income   $ 1,024  
Non-GAAP earnings per share:  
-Basic   $ 0.09  
-Diluted   $ 0.09  

Weighted average common shares outstanding:		  
-Basic    11,209  
-Diluted    11,516  

Non-GAAP margins as a percentage of net revenue:		  
 Pretax income    6.0 %
 Net income    3.6 %


(1) 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 Consolidated 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.

INFORTE CORP.
CONSOLIDATED BALANCE SHEETS
(000‘s)

SEPT 30,
2005
 DEC 31,
2005
 MAR 31,
2006
 JUNE 30,
2006
 SEPT 30,
2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

                           ASSETS		                        
Current assets:  
  Cash and cash equivalents   $ 12,107   $ 10,353   $ 12,217   $ 10,569   $ 13,583  
  Short-term marketable securities    18,996    22,591    17,844    19,266    16,037  
  Accounts receivable    8,707    8,460    8,078    7,683    7,453  
  Allowance for doubtful accounts    (450 )  (400 )  (400 )  (400 )  (400 )
  Accounts receivable, net    8,257    8,060    7,678    7,283    7,053  
  Note receivable from affiliate    429    684    1,122    1,537    1,784  
  Prepaid expenses and other current assets    1,066    1,023    1,211    1,147    895  
  Interest receivable on investment securities    204    199    164    133    125  
  Deferred income taxes    1,073    484    371    351    371  
  Income taxes recoverable    218    124    124    13    --  
          Total current assets    42,350    43,518    40,731    40,299    39,848  
Computers, purchased software and property    2,111    1,862    1,865    2,303    2,324  
Less accumulated depreciation and amortization    1,091    881    805    893    955  
Computers, purchased software and property, net    1,020    981    1,060    1,410    1,369  
Long-term marketable securities    492    --    --    --    --  
Intangible assets    64    42    27    14    7  
Goodwill    14,307    15,238    15,238    15,126    15,118  
Deferred income taxes    1,565    2,758    2,754    2,748    2,786  
Investment in affiliate    1,924    1,857    1,783    1,721    1,631  
          Total assets   $ 61,722   $ 64,394   $ 61,593   $ 61,318   $ 60,759  

            LIABILITIES AND STOCKHOLDERS' EQUITY		  
Current liabilities:  
  Accounts payable   $ 666   $ 357   $ 406   $ 1,152   $ 458  
  Income taxes payable    359    920    992    306    320  
  Accrued expenses    3,012    3,595    3,850    3,195    3,349  
  Accrued loss on disposal of leased property    1,106    845    635    486    408  
  Current portion of deferred acquisition payment    3,650    3,650    500    500    500  
  Deferred revenue    1,084    1,679    1,456    1,197    944  
          Total current liabilities    9,877    11,046    7,839    6,836    5,979  

Non current liabilities:		  
  Non-current portion of deferred acquisition payment    500    1,500    1,500    1,500    1,000  
Stockholders' equity:  
  Common stock, $0.001 par value  
    authorized- 50,000,000 shares; issued and  
    outstanding (net of treasury stock)- 11,905,374 as  
    of Sept. 30, 2006    12    13    12    12    12  
  Additional paid-in capital    75,179    75,469    75,461    75,487    75,795  
  Cost of common stock in treasury (2,720,823 shares as  
    of Sept. 30, 2006)    (24,997 )  (24,997 )  (24,997 )  (24,997 )  (24,997 )
  Retained earnings    999    1,307    1,636    2,056    2,358  
  Accumulated other comprehensive income    152    56    142    424    612  
          Total stockholders' equity    51,345    51,848    52,254    52,982    53,780  
         Total liabilities and stockholders' equity   $ 61,722   $ 64,394   $ 61,593   $ 61,318   $ 60,759  

Total cash and marketable securities		   $ 31,595   $ 32,944   $ 30,061   $ 29,835   $ 29,620  

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

THREE MONTHS ENDED
SEPTEMBER 30,
 NINE MONTHS ENDED
SEPTEMBER 30,
2005
 2006
 2005
 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Cash flows from operating activities		                    
Net income   $ 545   $ 302   $ 229   $ 1,051  

Adjustments to reconcile net income to net		  
cash provided by operating activities:  
   Depreciation and amortization    293    228    979    698  
   Loss on investment in affiliate    76    90    76    226  
   Stock-based compensation    188    191    830    197  
   Deferred income taxes    (90 )  (58 )  231    54  
Changes in operating assets and liabilities  
   Accounts receivable    (722 )  230    (1,106 )  1,007  
   Prepaid expenses and other current assets    158    210    (8 )  101  
   Unbilled revenue    463    --    463    --  
   Accounts payable    (78 )  (269 )  (421 )  78  
   Income taxes    894    44    (143 )  (306 )
   Accrued expenses and other current assets    (264 )  77    (524 )  (683 )
Deferred revenue    (82 )  (253 )  (583 )  (735 )
Net cash provided by operating activities    1,381    792    23    1,688  

Cash flows from investing activities		  
  Acquisitions, net of cash    (2,177 )  (392 )  (5,327 )  (3,542 )
  Note receivable from affiliate    (375 )  (198 )  (425 )  (1,001 )
  Investment in affiliate    --    --    (2,000 )  --  
  Decrease in marketable securities    3,981    3,223    16,715    6,469  
Purchases of property and equipment    (116 )  (597 )  (278 )  (962 )
Net cash provided by investing activities    1,313    2,036    8,685    964  
Cash flows from financing activities  
   Proceeds from stock option and purchase plans    --    --    202    --  
   Dividends    --    --    (17,375 )  --  
Net cash used in financing activities    --    --    (17,173 )  --  
Effect of changes in exchange rates on cash    (58 )  186    (245 )  578  
Increase (decrease) in cash and cash equivalents    2,636    3,014    (8,710 )  3,230  
Cash and cash equivalents, beg. of period    9,471    10,569    20,817    10,353  
Cash and cash equivalents, end of period   $ 12,107   $ 13,583   $ 12,107   $ 13,583