EX-99 2 dkm954a.htm

Inforte Corp. Announces Second Quarter Results, Experiences Four-Fold Increase in Customer Analytics Year OverYear

CHICAGO, July 26, 2006 /PRNewswire-FirstCall/ — Inforte Corp. (Nasdaq: INFT) announced today that revenue for the quarter ending June 30, 2006 was $10.5 million. Net revenue, which is revenue less reimbursements, was $9.6 million. Diluted earnings per share (EPS) were four cents compared to three cents last quarter.

Steve Mack, Inforte’s chief executive officer and president, commented, “Over the last year and particularly this quarter we have seen our customer analytics business grow significantly. It has increased more than four fold in the year, which reinforces our belief that it will be a major part of our growth strategy.”

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

• Net income for the quarter was $420,000 compared to $328,000 last quarter.
• Net income as a percentage of net revenue was 4.4 percent compared to 3.3 percent last quarter.
• Operating income for the quarter increased to $443,000 compared to $362,000 last quarter.
• Operating income as percentage of net revenue was 4.6 percent, compared to 3.6 percent in the first quarter of the year.
• Gross income as a percentage of net revenue was 43.2 percent.
• Cash flow from operations for the quarter was positive.
• As of June 30, 2006, cash and marketable securities were $29.8 million.
• Consultant utilization was 63 percent.
• Annualized quarterly net revenue per consultant and net revenue per employee were $215,000 and $171,000 respectively.
• At the end of the quarter there were 238 employees in total, 192 of which were billable.

Last quarter’s figures include the expense related to the chief executive officer transition, the detail for which can be found in the first quarter press release and 10Q.

Net revenue guidance for the next quarter is set at a range of $8.8 million to $9.8 million and EPS guidance is set at a range of negative three cents to three 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 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 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; Los Angeles; London; San Francisco; and Washington, D.C. For more information, call 800.340.0200 or visit www.inforte.com. www.inforte.com.

CONTACT:   kelly.richards@inforte.com, or ir@inforte.com.

Visit http://www.inforte.com/investor/ to access the July 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
JUNE 30,
 SIX MONTHS ENDED
JUNE 30,
2005
 2006
 2005
 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Revenues:		                    

  Revenue before reimbursements		  
    (net revenue)   $ 9,794   $ 9,573   $ 18,449   $ 19,526  
  Reimbursements    1,099    889    1,990    1,886  
Total revenues    10,893    10,462    20,439    21,412  

Cost of services:		  
  Project personnel and related expenses    5,321    5,442    11,080    10,787  
  Reimbursed expenses    1,099    889    1,990    1,886  
Total cost of services    6,420    6,331    13,070    12,673  
Gross profit    4,473    4,131    7,369    8,739  

Other operating expenses:		  
  Sales and marketing    691    554    1,304    1,226  
  Recruiting, retention and training    262    471    461    844  
  Management and administrative    2,958    2,663    6,594    5,864  
Total other operating expenses    3,911    3,688    8,359    7,934  

Operating income (loss)		    562    443    (990 )  805  
Loss on investment in affiliate    --    (61 )  --    (136 )
Interest income, net and other    196    344    457    624  
Income (loss) before income tax    758    726    (533 )  1,293  
Income tax expense (benefit)    304    306    (217 )  544  
Net income (loss)   $ 454   $ 420   $ (316 ) $ 749  

Earnings per share:		  
-Basic   $ 0.04   $ 0.04   $ (0.03 ) $ 0.06  
-Diluted   $ 0.04   $ 0.04   $ (0.03 ) $ 0.06  

Weighted average common shares outstanding:		  
-Basic    11,234    11,363    11,184    11,323  
-Diluted    11,711    11,687    11,184    11,725  

Expenses as a percentage of net revenue		  
 Project personnel and related expenses    54.3 %  56.8 %  60.1 %  55.2 %
 Sales and marketing    7.1 %  5.8 %  7.1 %  6.3 %
 Recruiting, retention, and training    2.7 %  4.9 %  2.5 %  4.3 %
 Management and administrative    30.2 %  27.8 %  35.7 %  30.0 %
 Income tax rate    40.1 %  42.2 %  40.7 %  42.1 %

Margins		  
 Gross income        43.2 %  39.9 %  44.8 %
 Operating income        4.6 %  -5.4%    4.1 %
 Pretax income        7.6 %  -2.9%    6.6 %
 Net income        4.4 %  -1.7%    3.8 %

Year-over-year change		  
 Net revenue        -2 %      6 %
 Gross income        -8 %      19 %
 Operating income        -21 %      --  
 Pretax income        -4 %      --  
 Net income        -7 %      --  
 Diluted EPS        0 %      --  

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

SIX MONTHS ENDED
June 30, 2005
(Unaudited)

Operating income (loss)		      (990 )
Tender offer related charges    1,316  
Termination of employment charges    --  
Loss on investment in affiliate    --  
Interest income, net and other    457  
Non-GAAP income before income tax    783  
Non-GAAP income tax expense    304  
Non-GAAP net income   $ 479  
Non-GAAP earnings per share:  
-Basic   $ 0.04  
-Diluted   $ 0.04  

Weighted average common shares outstanding:		  
-Basic    11,184  
-Diluted    11,459  

Non-GAAP margins as a percentage of net revenue:		  
 Pretax income    4.2 %
 Net income    2.6 %


(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)

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

                           ASSETS		                        
Current assets:  
  Cash and cash equivalents   $ 9,471   $ 12,107   $ 10,353   $ 12,217   $ 10,569  
  Short-term marketable securities    20,022    18,996    22,591    17,844    19,266  
  Accounts receivable    7,875    8,707    8,460    8,078    7,683  
  Allowance for doubtful accounts    (450 )  (450 )  (400 )  (400 )  (400 )
  Accounts receivable, net    7,425    8,257    8,060    7,678    7,283  
  Note receivable from affiliate    50    429    684    1,122    1,537  
  Prepaid expenses and other current assets    1,162    1,066    1,023    1,211    1,147  
  Interest receivable on investment securities    261    204    199    164    133  
  Deferred income taxes    1,053    1,073    484    371    351  
  Income taxes recoverable    1,013    218    124    124    13  
          Total current assets    40,457    42,350    43,518    40,731    40,299  

Computers, purchased software and property		    2,602    2,111    1,862    1,865    2,303  
Less accumulated depreciation and amortization    1,754    1,091    881    805    893  
Computers, purchased software and property, net    848    1,020    981    1,060    1,410  
Long-term marketable securities    3,543    492    --    --    --  
Intangible assets    --    64    42    27    14  
Goodwill    11,726    14,307    15,238    15,238    15,126  
Deferred income taxes    1,495    1,565    2,758    2,754    2,748  
Investment in affiliate    2,000    1,924    1,857    1,783    1,721  
          Total assets   $ 60,069   $ 61,722   $ 64,394   $ 61,593   $ 61,318  


            LIABILITIES AND STOCKHOLDERS' EQUITY		  
Current liabilities:  
  Accounts payable   $ 413   $ 666   $ 357   $ 406   $ 1,152  
  Income taxes payable    260    359    920    992    306  
  Accrued expenses    2,890    3,012    3,595    3,850    3,195  
  Accrued loss on disposal of leased property    1,492    1,106    845    635    486  
  Current portion of deferred acquisition payment    3,150    3,650    3,650    500    500  
  Dividends declared    --    --    --    --    --  
  Deferred revenue    1,166    1,084    1,679    1,456    1,197  
          Total current liabilities    9,371    9,877    11,046    7,839    6,836  

Non current liabilities:		  
  Non-current portion of deferred acquisition payment    --    500    1,500    1,500    1,500  
Stockholders' equity:  
  Common stock, $0.001 par value  
    authorized- 50,000,000 shares; issued and  
    outstanding (net of treasury stock)- 11,853,576 as  
    of Jun. 30, 2006    12    12    13    12    12  
  Additional paid-in capital    74,170    74,168    74,204    74,204    74,146  
  Cost of common stock in treasury (2,720,823 shares as  
    of Jun. 30, 2006)    (24,997 )  (24,997 )  (24,997 )  (24,997 )  (24,997 )
  Stock-based compensation    823    1,011    1,265    1,257    1,341  
  Retained earnings    454    999    1,307    1,636    2,056  
  Accumulated other comprehensive income    236    152    56    142    424  
          Total stockholders' equity    50,698    51,345    51,848    52,254    52,982  
         Total liabilities and stockholders' equity   $ 60,069   $ 61,722   $ 64,394   $ 61,593   $ 61,318  
Total cash and marketable securities   $ 33,036   $ 31,595   $ 32,944   $ 30,061   $ 29,835  

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

THREE MONTHS ENDED
JUNE 30,
 SIX MONTHS ENDED
JUNE 30,
2005
 2006
 2005
 2006
(Unaudited)
 (Unaudited)
 (Unaudited)
 (Unaudited)

Cash flows from operating activities		                    
Net income (loss)   $ 454   $ 420   $ (316 ) $ 749  

Adjustments to reconcile net income to net		  
cash provided by (used in) operating  
activities:  
  Depreciation and amortization    302    242    686    470  
  Loss on investment in affiliate    --    61    --    136  
  Stock-based compensation    238    14    642    6  
  Deferred income taxes    242    (5 )  321    112  
  Accounts receivable    (1,115 )  395    (384 )  777  
  Prepaid expenses and other current assets    139    63    (166 )  (109 )
  Accounts payable    (297 )  298    (343 )  347  
  Income taxes    141    (422 )  (1,037 )  (350 )
  Accrued expenses and other    282    (805 )  (260 )  (760 )
Deferred revenue    81    (259 )  (501 )  (482 )
Net cash provided by (used in) operating  
  activities    467    2    (1,358 )  896  

Cash flows from investing activities		  
  Acquisition of Compendit, net of cash    --    --    (3,150 )  (3,150 )
  Note receivable from affiliate    (50 )  (382 )  (50 )  (803 )
  Investment in affiliate    (2,000 )  --    (2,000 )  --  
 (Increase) Decrease in marketable securities    6,375    (1,492 )  12,734    3,246  
Purchases of property and equipment    (25 )  (109 )  (162 )  (365 )
Net cash provided by (used in) investing  
  activities    4,300    (1,983 )  7,372    (1,072 )
Cash flows from financing activities  
  Proceeds from stock option and purchase  
    plans    156    --    202    --  
Dividends    (17,375 )  --    (17,375 )  --  
Net cash used in financing activities    (17,219 )  --    (17,173 )  --  
Effect of changes in exchange rates on cash    (118 )  333    (187 )  392  
Increase (decrease) in cash and cash  
  equivalents    (12,570 )  (1,648 )  (11,346 )  216  
Cash and cash equivalents, beg. of period    22,041    12,217    20,817    10,353  
Cash and cash equivalents, end of period   $ 9,471   $ 10,569   $ 9,471   $ 10,569