TRDO Intrado Inc. (MM)

Intrado Inc. (NASDAQ: TRDO) (www.intrado.com), a global provider of integrated data and telecommunications solutions, today reported third-quarter financial results. -- For the three months ended September 30, 2005, Intrado reported revenue of $35.4 million, compared to third quarter 2004 revenue of $35.3 million. For the nine months ended September 30, 2005, Intrado reported revenue of $107.5 million, compared to $96.4 million for the same period in 2004. -- Net income for the third quarter of 2005 was $3.5 million, or $0.19 per diluted share, compared to $4.0 million, or $0.22 per diluted share, for the same period in 2004. Net income for the nine months ended September 30, 2005, was $8.6 million, or $0.47 per diluted share, compared to $6.1 million, or $0.34 per diluted share, for the same period in 2004. -- Net cash from operations for the third quarter of 2005 was $9.3 million, compared to $10.9 million for the same period in 2004. -- Free cash flow (net cash from operations of $9.3 million less cash used in acquisition of property and equipment of $3.3 million, investment in joint venture of $1.0 million and capitalized software development costs of $1.2 million) for the third quarter of 2005 was $3.8 million compared to $7.4 million for the same period in 2004 (cash from operations of $10.9 million less cash used in acquisition of property and equipment of $0.4 million and capitalized software development costs of $3.1 million). "We delivered another quarter of solid financial performance," said George Heinrichs, Chief Executive Officer of Intrado. "In the third quarter, our VoIP customer base continued to grow as we deploy the nation's first native VoIP 9-1-1 solution. Furthermore, we engaged JP Morgan to evaluate strategic alternatives for the company, underscoring our commitment to maximize long-term shareholder value." Recent Highlights Wireline -- Intrado now supports 31 V9-1-1(SM) Mobility Service customers and has over one million VoIP subscriber records under contract, the largest subscriber base in the industry. -- Intrado added several VoIP service providers to its growing list of V9-1-1 Mobility Service customers. AT&T, CommPartners, Affinity, DNA, Ecuity, Heartland, I2, Spirit, Telefinity and US LEC have all chosen Intrado V9-1-1 Mobility Service as they work to comply with the FCC VoIP E9-1-1 mandate, currently scheduled to go into effect on November 28, 2005. -- Intrado reached agreement to enhance Target Notification services for a federal government agency. The initial phase of this effort is expected to generate $400,000 of revenue over the next nine months. Wireless -- Intrado continued to expand its market leadership in the delivery of wireless 9-1-1 services with the addition of eight new wireless carriers. This brings total wireless carriers served by Intrado to 60. -- Intrado announced that it had passed the 50 million-call-mark for the delivery of wireless 9-1-1 calls, a reflection of the growing role Intrado is playing in the networks of its wireless carrier customers. -- Intrado also announced availability of its V9-1-1 Mobility Service for wireless service providers intending to offer wireless broadband VoIP service. The service extends the existing V9-1-1 Mobility Service to assist wireless service providers in complying with the FCC's VoIP E9-1-1 Mandate. -- Intrado announced availability of the Intrado(R) Hosted User-Plane Position Determining Entity (PDE) which provides enhanced functionality needed to successfully launch and manage location-based applications. Using the most broadly deployed position location solution, Intrado will assist wireless service providers in offering more reliable and precise services. International -- Intrado announced that Intrado (XieAn) Technology (China) Co. Ltd., a joint venture between Intrado International Ltd. and PDAger, has been granted a business license allowing it to operate in China. Headquartered in Beijing, XieAn will develop enhanced emergency communications solutions for public safety and disaster management agencies in China. Intelligent Emergency Network(TM) -- Intrado continued to enhance the Intrado(R) Intelligent Emergency Network(TM) with the addition of IP-based voice delivery, which will provide the nation's PSAPs with increased agency interoperability and collaboration capabilities, dynamic routing of 9-1-1 calls and intelligent congestion control. Third-Quarter Operational Results Wireline. Revenue was $21.2 million in the third quarter of 2005, down 1.2% from $21.4 million in the third quarter of 2004. Revenue for the nine months ended September 30, 2005, was $64.1 million, up 9.1% from the same period in 2004. Wireless. Revenue was $14.2 million in the third quarter of 2005, up 2.5% from $13.9 million in the third quarter of 2004. Revenue for the nine months ended September 30, 2005, was $43.4 million, up 15.1% from the same period in 2004. Direct Costs. Direct costs for the third quarter of 2005 were $18.5 million, compared to $17.9 million in the year-ago quarter, an increase of 3.4%. Direct costs for the nine months ended September 30, 2005, were $58.5 million, up 11.1% from the same period in 2004. Indirect Overhead Expenses. Total indirect overhead expenses increased 9.9% to $11.6 million in the third quarter of 2005, compared to the same period in 2004. Total indirect overhead expenses are defined as sales and marketing expenses of $5.4 million, general and administrative expenses of $5.3 million and research and development expenses of $0.9 million. During the third quarter of 2004, indirect overhead expenses were $10.5 million and consisted of $5.1 million of sales and marketing expenses, $4.6 million of general and administrative expenses and $0.8 million of research and development expenses. Total indirect overhead expenses increased 8.3% to $35.5 million during the nine months ended September 30, 2005, compared to the same period in 2004. Intrado had $49.1 million in cash and cash equivalents at September 30, 2005. The company had $17.3 million available under its revolving line of credit with GE Capital and an additional $10.5 million under existing capital lease facilities. Days sales outstanding (DSOs) were 43 days at September 30, 2005, down from 59 days at September 30, 2004. DSOs is defined as gross accounts receivable plus unbilled revenue divided by total quarterly revenue, multiplied by 90 days. Intrado's Fourth-Quarter 2005 Outlook -- Total revenue of $37 million to $39 million. -- Wireline revenue of $23 million to $24 million. -- Wireless revenue of $14 million to $15 million. -- Direct costs of $21 million to $22 million, including approximately $1.5 million in costs related to the Intrado(R) Intelligent Emergency Network(TM). -- Earnings per diluted share of $0.15 to $0.17, based on an estimated effective tax rate of 36.5% and (18.6) million shares outstanding. -- Free cash flow of $2 to $5 million, consisting of estimated net cash provided by operating activities ranging between $6 million and $8 million, less estimated capital expenditures of $1.5-$2.5 million and estimated capitalized software development costs of $1.5 million. -- Sales and marketing expenses of $5.7 million to $5.9 million. -- General and administrative expenses of $5.4 million to $5.6 million. -- Research and development costs of approximately $850,000. Intrado expects that incremental investments in the Intelligent Emergency Network(TM) will continue in future quarters, temporarily putting pressure on operating margins and earnings in the near and medium term. The company plans to provide 2006 financial guidance in the first quarter of 2006. Conference Call Webcast Intrado's third-quarter earnings conference call will be hosted live via the Internet on November 1, 2005, at 4:30 p.m. ET at www.intrado.com. An online archive of the broadcast will be available through November 8, 2005. About Intrado For over two decades, telecommunications providers, public safety organizations and government agencies have turned to Intrado for their communications needs. Intrado provides the core of the nation's 9-1-1 network and delivers innovative solutions to communications service providers and public safety organizations, including complex data management, network transactions, wireless data services and notification services. The company's unparalleled industry knowledge and experience reduce the effort, cost and time associated with providing reliable information for 9-1-1, safety and mobility applications. Additional information on Intrado, its products and services, and past press releases can be found at Intrado's Web site: www.intrado.com. Note Concerning Non-GAAP Financial Measures Certain information set forth herein, including net income, direct expenses and earnings per share excluding non-cash asset impairment charges are non-GAAP financial measures; further, total indirect overhead expenses and free cash flow, may be considered non-GAAP financial measures. Intrado believes this information, along with comparable GAAP measurements, is useful to investors because it provides a basis for measuring its operating performance, ability to retire debt and invest in new business opportunities. Intrado's management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating Intrado's operating performance and capital resources. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as reported by Intrado may not be comparable to similarly titled amounts reported by other companies. A reconciliation of GAAP and non-GAAP Statements of Operations is provided in the financial statements attached to this press release. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Statements in this announcement that are not historical facts are hereby identified as forward-looking statements for the purpose of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this announcement. Known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those contemplated in forward-looking statements. The forward-looking statements included in this announcement are estimates reflecting the best judgment of senior management as of the date of this announcement. Although we believe that these forward-looking statements are reasonable, we cannot promise that they will turn out to be correct. Our actual results could be materially different from our expectations due to a variety of risks and uncertainties, including, but not limited to, the following: -- Our reliance on large contracts from a limited and potentially decreasing number of significant telecommunications customers and their ability to pay for our services, especially in light of recent competitive pressures in the telecommunications industry; -- Whether acquisitions, consolidations, bankruptcies and reorganizations among our telecommunications customers will result in volume pricing discounts or otherwise have a material, adverse effect on our market share, revenue, liquidity and profitability; -- Competition in service, price and technological innovation from entities with substantially greater resources, especially in light of the fact that the increased use of Voice over Internet Protocol (VoIP) technology has opened our traditional 9-1-1 data management services business to new competition; -- Our ability to enter and renew wireline, wireless and VoIP contracts at prices that will allow us to maintain current profit margins; -- Our ability to integrate businesses and assets that we have acquired or may acquire; -- Whether our efforts to expand into European, Asian and other international markets will prove to be economically viable and whether we will be able to generate revenue sufficient to recover our investment in bmd wireless AG or other international investments; -- Adverse trends in the telecommunications industry in general, including bankruptcy filings by our customers and other factors that are beyond our control; -- Whether our investments in research and development and capitalized software will expand our service offerings and prove to be economically viable; -- Constraints on our sales and marketing channels because many of our customers compete with each other; -- Our ability to accurately predict, control and recoup the large amount of up-front expenditures necessary to serve new customers and possible delays in sales cycles; -- Our ability to expand beyond our traditional business and into highly competitive notification and data management sectors, including, but not limited to, our efforts to deploy IntelliCast(R) Target Notification and Commercial Database (CDB) services; -- The unpredictable rate of adoption of wireless 9-1-1 services, including further delays in the Federal Communications Commission's mandated deployment of VoIP 9-1-1 services and Phase I and Phase II wireless location services; -- The potential for liability claims, including product liability claims relating to our software and services; -- Technical difficulties and network downtime, including those caused by sabotage or unauthorized access to our systems; -- Changes in interest rates, including the LIBOR and prime rates, and in foreign currency exchange rates, and their potentially adverse effect on our results of operations and cash flows; -- The possibility that we will not generate taxable income in an amount sufficient to allow us to utilize previously generated research and development tax credits; -- Our ability to economically attract, motivate and retain high-quality employees with skills that match our business needs; -- Developments in telecommunications regulation and the unpredictable manner in which existing or new legislation and regulation may be applied to our business; -- The potential impact of recent accounting pronouncements related to share-based payments on our prospective financial statements; and -- Developments in governance, accounting and financial regulations, and their impact on general and administrative expenses. This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this announcement. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed risk factors included in our SEC filings. Except for our ongoing obligations to disclose material information under U.S. federal securities laws, we undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this announcement or to reflect the occurrence of unanticipated events. -0- *T INTRADO INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Data) (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Revenues: Wireline business unit $21,170 $21,427 $64,104 $58,732 Wireless business unit 14,226 13,884 43,361 37,671 ----------- ----------- ----------- ----------- Total revenues 35,396 35,311 107,465 96,403 Costs and expenses: Direct costs - Wireline 12,123 11,341 37,989 33,301 Direct costs - Wireless 6,358 6,535 20,510 19,344 Sales and marketing 5,414 5,124 16,746 14,479 General and administrative 5,302 4,615 16,130 16,158 Research and development 848 787 2,594 2,126 ----------- ----------- ----------- ----------- Total costs and expenses 30,045 28,402 93,969 85,408 ----------- ----------- ----------- ----------- Equity in loss from joint venture (48) - (48) - ----------- ----------- ----------- ----------- Income from operations 5,303 6,909 13,448 10,995 Other income (expense): Interest and other income 361 102 804 282 Interest and other expense (59) (277) (447) (971) ----------- ----------- ----------- ----------- Income before income taxes 5,605 6,734 13,805 10,306 Income tax expense 2,156 2,669 5,141 4,075 ----------- ----------- ----------- ----------- Income from continuing operations 3,449 4,065 8,664 6,231 Discontinued operations: Income (loss) from discontinued operations before income taxes 40 (108) (66) (231) Income tax benefit (expense) (16) 39 25 88 ----------- ----------- ----------- ----------- Income (loss) from discontinued operations 24 (69) (41) (143) ----------- ----------- ----------- ----------- Net income $3,473 $3,996 $8,623 $6,088 =========== =========== =========== =========== Net income (loss) per share: Basic: Continuing operations $0.20 $0.23 $0.49 $0.37 Discontinued operations (0.00) (0.00) (0.00) (0.01) ----------- ----------- ----------- ----------- Total $0.20 $0.23 $0.49 $0.36 =========== =========== =========== =========== Diluted: Continuing operations $0.19 $0.22 $0.47 $0.35 Discontinued operations (0.00) (0.00) 0.00 (0.01) ----------- ----------- ----------- ----------- Total $0.19 $0.22 $0.47 $0.34 =========== =========== =========== =========== Shares used in computing net income per share: Basic 17,753,690 17,360,546 17,646,486 17,102,066 =========== =========== =========== =========== Diluted 18,559,656 17,803,487 18,342,108 18,073,339 =========== =========== =========== =========== *T -0- *T INTRADO INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) September 30, December 31, 2005 2004 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $49,096 $10,657 Short-term investments - 28,705 Accounts receivable, net of allowance for doubtful accounts of $126 and $190 13,366 17,556 Unbilled revenue 3,384 1,675 Prepaids and other 3,940 3,032 Deferred contract costs 5,065 5,775 Deferred tax asset 4,073 7,507 ----------- ------------ Total current assets 78,924 74,907 ----------- ------------ Property and equipment, net of accumulated depreciation of $52,484 and $46,591 23,140 22,703 Goodwill 29,532 30,278 Other intangibles, net of accumulated amortization of $8,764 and $7,836 3,217 4,260 Long-term investments - 898 Deferred contract costs 3,129 1,541 Software development costs, net of accumulated amortization of $13,763 and $8,875 14,910 16,551 Investment in joint venture 952 - Other assets 314 410 ----------- ------------ Total assets $154,118 $151,548 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $12,346 $9,777 Current portion of capital lease obligations 1,777 1,504 Mandatorily redeemable preferred stock payable - 4,431 Deferred contract revenue 9,465 19,742 ----------- ------------ Total current liabilities 23,588 35,454 ----------- ------------ Capital lease obligations, net of current portion 1,710 1,312 Line of credit 2,000 2,000 Deferred rent, net of current portion 1,708 1,643 Deferred contract revenue 8,110 5,620 Deferred tax liability 1,750 1,174 ----------- ------------ Total liabilities 38,866 47,203 ----------- ------------ Commitments and contingencies Stockholders' equity: Preferred stock, $.001 par value; 15,000,000 shares authorized; 0 and 4,552 issued and outstanding - - Common stock, $.001 par value; 50,000,000 shares authorized; 17,817,940 and 17,473,860 shares issued and outstanding 18 17 Accumulated other comprehensive income (loss) (233) 656 Additional paid-in-capital 115,364 112,192 Retained earnings (accumulated deficit) 103 (8,520) ----------- ------------ Total stockholders' equity 115,252 104,345 ----------- ------------ Total liabilities and stockholders' equity $154,118 $151,548 =========== ============ *T -0- *T INTRADO INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited) THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 2005 2004 2005 2004 ---------- -------- -------- -------- Cash flows from operating activities: Net income $3,473 $3,996 $8,623 $6,088 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,919 3,801 12,958 11,646 Asset impairment - - - 2,536 Tax benefit for stock option exercises 228 47 581 1,349 Loss from sale of discontinued operations, net of tax - - 5 - Equity in loss from joint venture 48 - 48 - Accretion of interest on mandatorily redeemable preferred stock payable - 68 120 66 Stock-based compensation 87 172 198 273 Provision for doubtful accounts (182) 44 (53) 205 Other, including loss on disposal of assets 1 3 37 12 Change in- Accounts receivable and unbilled revenue 2,554 (963) 2,457 (5,679) Prepaids and other assets (881) 31 (832) (1,069) Deferred contract costs (1,173) 937 (916) 516 Deferred income taxes 1,572 2,582 4,040 2,621 Accounts payable and accrued liabilities 2,924 452 2,539 (1,722) Deferred revenue (3,257) (234) (7,402) 763 ---------- -------- -------- -------- Net cash provided by operating activities 9,313 10,936 22,403 17,605 Cash flows from investing activities: Acquisition of property and equipment (3,346) (367) (4,620) (1,173) Purchases of investments - (655) (9,109) (31,119) Proceeds from sales of investments - - 38,713 23,153 Investment in joint venture (1,000) - (1,000) - Capitalized software development costs (1,213) (3,122) (4,157) (7,709) Cash paid on disposal of discontinued operations (9) - (291) - Acquisition, net of cash acquired - - - (4,354) ---------- -------- -------- -------- Net cash provided by (used in) investing activities (5,568) (4,144) 19,536 (21,202) Cash flows from financing activities: Principal payments on capital lease obligations (483) (804) (1,342) (2,566) Principal payments on notes payable and mandatorily redeemable preferred stock - (1,083) (4,552) (7,547) Proceeds from exercise of stock options, warrants and employee stock purchase plan 862 408 2,429 4,120 ---------- -------- -------- -------- Net cash provided by (used in) financing activities 379 (1,479) (3,465) (5,993) Effect of exchange rate changes on cash 13 9 (35) 13 Net increase (decrease) in cash and cash equivalents 4,137 5,322 38,439 (9,577) Cash and cash equivalents, beginning of period 44,959 23,082 10,657 37,981 ---------- -------- -------- -------- Cash and cash equivalents, end of period $49,096 $28,404 $49,096 $28,404 ========== ======== ======== ======== Supplemental schedule of noncash financing and investing activities: Property acquired with capital leases $503 $606 $2,010 $1,585 ========== ======== ======== ======== Supplemental reconciliation of free cash flow, not including acquisitions and investments Net cash provided by operating activities $9,313 $10,936 $22,403 $17,605 Net cash provided by (used in) investing activities (5,568) (4,144) 19,536 (21,202) ---------- -------- -------- -------- Free cash flow 3,745 6,792 41,939 (3,597) add back net purchases (sales) of ST and LT investments - 655 (29,604) 7,966 add back acquisitions, net of cash acquired 9 - 282 4,354 ---------- -------- -------- -------- Free cash flow, not including acquisitions and investments $3,754 $7,447 $12,617 $8,723 ========== ======== ======== ======== *T