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infoUSA Reports Record Revenue for First Quarter 2006 and Expects Revenue at Upper Level of Estimates

Posted on: Friday, 21 April 2006, 09:00 CDT

infoUSA(R) (Nasdaq:IUSA):

-- Organic growth of 4.3% over last year

-- GAAP Revenue of $103.1 Million, an increase of 8% from last

year

infoUSA(R) (Nasdaq:IUSA). The following table presents the financial results and selected balance sheet items for the first quarter of 2006 ending on March 31, 2006. ---------------------------------------------------------------------- (amounts in thousands, except per share 1st Quarter 1st Quarter amounts) 2005 2006 ---------------------------------------------------------------------- Net sales $95,095 $103,070 Database and production costs 26,027 25,725 Selling, general and administrative 45,166 54,079 Depreciation 3,908 3,140 Amortization 4,404 4,637 Operating income 15,590 15,489 Other income (expense)(a) (1,420) (3,048) Income before taxes 14,170 12,441 Income taxes 5,112 4,494 Net income 9,058 7,947 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Deferred revenue 52,604 76,090 Total debt 199,781 143,404 Capital expenditures (see table) 1,956 4,112 Cash flow from operations 10,745 20,169 ---------------------------------------------------------------------- (a)- see attached income statement for details

RESULTS OF OPERATIONS

Vin Gupta, Chairman and CEO, commented, "First quarter 2006 was one of the most successful in the history of infoUSA. We had record first quarter revenue and registered 4.3% organic growth over last year. We progressed on a number of initiatives to enhance shareholder value. The following are highlights of our accomplishments:

-- We added a significant number of new subscribers to our

subscription products, SalesGenie.com, SalesLeadsUSA.com and

Credit.net(R). These sales lead generation services have

become a darling of small business owners and sales

executives. During the first quarter, we signed an additional

6,000+ subscribers, with a low cancellation rate. At the end

of the first quarter of 2006 we had over 35,000 subscribers

compared to 12,000 subscribers at the end of the first quarter

of 2005. Our continuous addition of new subscribers is

generating future revenue. Due to Generally Accepted

Accounting Principals (GAAP), we only recognize 1/12th of the

revenue in the month the subscription is sold but advertising

and marketing must be expensed as the costs are incurred.

While it is expensive to acquire a new subscriber, the

lifetime value of that subscriber is much higher than the

acquisition cost. Cable companies and cell phone companies

have used this advertising & subscription generation model

very effectively to build a sustainable and predictable

revenue stream. However, they had to invest in marketing and

advertising in order to build a profitable revenue base. We

are following that same business model.

-- During the first quarter we increased our advertising expenses

by $2.5 million compared to the same period last year. We plan

to continue our investment in advertising and branding. Our

media spending in radio, TV, search word advertising, and

tradeshows has been very successful as demonstrated by the

organic revenue growth from out subscription products. It is

our objective to make SalesGenie.com, infoUSA.com, and

Credit.net(R), widely recognized small business brands.

-- During the first quarter, we hired Ron Bruggeman as the Chief

Marketing Officer for the infoUSA Group. His addition will

help refine our marketing and advertising strategy.

Immediately prior to joining infoUSA, Mr. Bruggeman spent over

twenty years with Omaha Steaks(R) as the Director of Sales and

Strategic Planning. Mr. Bruggeman was responsible for the

development of that company's direct marketing, telemarketing,

and incentive campaigns including establishing the pricing and

sales through multiple sales channels.

-- We believe our international business and executive database

is the finest in the business. Our subsidiary, OneSource(R),

has the industry's most extensive global business database,

and we are making it even richer and more comprehensive by

adding more content. To take advantage of revenue growth

opportunities, we are also expanding our sales force

internationally.

-- During 2005, we invested in migrating our data center from an

outsourced mainframe to an in-house data center. As a result,

all of our subsidiaries now share the same data center at a

much lower cost. In the long run, it will increase our

efficiency and productivity along with providing significant

cost savings.

-- On February 14, 2006, we announced a new $275 million senior

secured credit facility to replace the previous $250 million

credit facility, under which $121 million was outstanding. We

made $79.7 million in principal payments toward the debt in

2005 and a total of $17.3 million in principal payments in the

first quarter of 2006."

FINANCIAL HIGHLIGHTS

Gupta continued, "During the first quarter 2006, revenue was a record $103.1 million vs. $95.1 million for the same period in 2005, an increase of 8%. After adjusting for the acquisition of the Millard Group, we had 4.3% organic growth. It was our first $100 million plus quarter." Gupta added, "Our first quarter operating income was $15.5 million versus $15.6 million during the corresponding quarter of 2005. The operating margin was down in 2006 due to the company's investment in advertising and marketing for our subscription products. Cash flow from operations for first quarter was $20.2 million compared to $10.7 million in the same period of 2005." Gupta concluded, "Our EPS for first quarter was $0.15 vs. $0.17 in 2005. Our 2005 EPS included 2(cents) per share of non-recurring income from the sale of investments."

Gupta added, "We were extremely pleased with the continued strong performance of our subscription products for the first quarter of 2006. By converting our one-time list customer to a subscription customer and signing on a new class of customers to SalesGenie.com, we are creating a recurring revenue stream and revenue growth engine. Based on our first quarter new subscriptions, we believe 2006 revenue will be on the high side of the projected revenue range."

Gupta concluded, "Despite our increased advertising and marketing expenses, our first quarter 2006 EBITDA was consistently strong at 22% of revenue. Under GAAP accounting, we only recognize 1/12th of the revenue in the month the subscription is sold but advertising and marketing must be expensed as the costs are incurred. Going forward, we will see revenue growth as the number of new subscribers increases and we will adjust our advertising spending to match with revenue. This is reflected by the $76.1 million of deferred revenue and $52.7 million of unbilled revenue that the company has in its pipeline for the next twelve months."

2006 Dividend

In January, infoUSA's Board of Directors declared a cash dividend of 23 cents per common share. The dividend was paid February 21st, 2006 to shareholders of record on February 6th, 2006.

GUIDANCE FOR 2006 - Update

On January 23, 2006 infoUSA provided the following guidance for fiscal year 2006. The following are computed on a GAAP basis:

-- 2006 Revenue Guidance: $410 million to $420 million

-- 2006 EBITDA Guidance: $99 to $105 million

-- 2006 EPS Guidance: $0.75 to $0.85 per share

Based on the success of subscription services and our e-mail marketing division, we are estimating 2006 revenue to be on the high side of the revenue range indicated above. The company's forward looking guidance involves potential risks and uncertainties, including, without limitation, those described in the "About infoUSA" section of this press release, which could cause the actual results to differ materially from those stated above or implied by the forward looking guidance.

OPERATING HIGHLIGHTS

Donnelley Group

For the first quarter of 2006, revenue for the Donnelley Group was $65 million vs. $57.2 million for the same period last year. The Donnelley Group consists of five operating groups: Donnelley Marketing, Yesmail, Catalog Vision, OneSource and the List Brokerage and List Management division, consisting of Walter Karl, Edith Roman and Millard. This group showed healthy growth over last year. Our international expansion and better success with government, political organizations, and not-for-profit organizations, combined with cross training our sales force to sell products from other divisions will be the major growth drivers for 2006 and beyond. The April 17th, 2006 BusinessWeek article entitled, "If You're Cheating on your Taxes..." gives an example of how government uses infoUSA databases to collect taxes. Customer confidentiality prevents us from naming a lot of Blue Chip customers who have contracted for our services.

Donnelley Marketing

Donnelley Marketing, based in New York and New Jersey, experienced a strong first quarter as the company continues to progress under new management. The momentum from the success of the fourth quarter of 2005 has been carried forward into the first quarter of 2006. The division was also successful in cross-selling across multiple product lines combining data, data processing, email and analytics.

In the first quarter of 2006, under the leadership of Ed Mallin and Pete Giraldi, Donnelley Marketing focused on adding new customers and exploring new vertical markets such as gaming, hospitality, insurance industry, etc. We are highly confident that this division will have organic growth under new management going forward.

Catalog Vision(R)

Catalog Vision(R) is the company's Data Processing and Database Marketing division dedicated to Direct Mail Catalog Retailers, and non-profit and charitable organizations. This division, based in Marshfield, Wisconsin, continues to prosper by retaining nearly 100% of existing clients and adding new customers due to its cutting edge technology and white glove customer service.

Yesmail(R) - E-mail Technology Company

Yesmail(R), based in Silicon Valley and Portland, Oregon, is comprised of email companies purchased in 2003 and 2004. Today, Yesmail(R) is one of the largest e-mail technology companies in the industry. Yesmail(R) recorded a strong first quarter, as email marketing is becoming a bigger part of corporate advertising and media spending. For the remainder of 2006, Yesmail intends to continue to grow its customer base via its expanded salesforce and leading technology platform. We have invested heavily in Yesmail's(R) technology platform and now it is the most advanced technology in the e-mail industry.

OneSource(R) - International Business Database Products

OneSource(R), based in the Boston area and London, United Kingdom, is a leader in the global business database industry. OneSource(R) continues to expand its sales force internationally. Since its acquisition, we have cut costs, improved the product, invested in technology and increased its profitability. OneSource(R) has reengineered its product line and now is targeting mid size businesses by offering a lower price product to fit their budget. OneSource(R) has also launched a free service to attract more customers to its website and then convert them into paying subscribers. We have increased our advertising and marketing in order to grow their subscription brand.

List Brokerage and List Management

This division operates under the Walter Karl(R), Edith Roman(R), and Millard Group(R) brands, based in New York and New Hampshire. With the acquisition of the Millard Group(R) in November 2005, infoUSA's list brokerage/list management division is the largest in the industry. Millard's(R) "blue chip" client base presents significant cross-selling opportunities for the entire range of infoUSA proprietary databases and services, as it has for Walter Karl(R) and Edith Roman(R). Our List Brokerage & Management division is experiencing organic growth, despite the slump in the list brokerage industry.

infoUSA(R) Group (Small Business Group)

For the first quarter of 2006, revenue from the infoUSA(R) Group, the company's small business group, was $38.1 million vs. $37.9 million for the same period last year. Subscription revenue, which includes SalesGenie.com, SalesLeadsUSA.com and Credit.net(R) led to growth in this division, despite the anticipated drop in revenue from the Reseller Group and Polk Directories. The company attributes this growth to successful advertising and marketing campaigns, including email, print, TV, radio, direct mail, search word advertising, and call center marketing. The company plans to continue to aggressively advertise its subscription products in this manner as well as to offer valuable product enhancements. Planned product enhancements for SalesGenie.com include Customer Analyzer, Enhanced Contact Manager, unlimited Business Credit reports, ZipMailUSA.com, Express Mailing List Downloads, and enhanced mapping. Recent Credit.net product enhancements include UCC Filings, Secretary of State information, and the company will be adding Yellow Page advertising spending, Annual Reports and Rating/Opinion Boards for payment history.

The infoUSA(R) Group's Canadian division, infoCanada, based in Toronto, Montreal, and Vancouver, had organic revenue growth in the first quarter of 2006 and will be introducing a dedicated subscription product, SalesGenie.ca, to the Canadian market.

Polk City Directories(R) and Hill-Donnelly City Directories(R) subscription-based websites are performing well and successfully transitioning the print directory customers to an online subscription product, which includes unlimited sales leads and mailing labels. Polk City Directories(R) has gone through a complete overhaul and reengineering. The expensive field sales force has been entirely replaced by a telemarketing sales force of over 100 in Livonia, Michigan. Even though we saw a drop in revenue last year and the first quarter of 2006, we are now in a position to grow this business profitably going forward. Hill-Donnelly City Directories(R) is based in Tampa, Florida.

The infoUSA Group non-subscription and vertical market businesses continued to flourish; in particular, the ReferenceUSA division, which markets to public and university libraries and the government market. Our one time list buyers are still providing growth because of our leading edge on-line list delivery engine - infoUSA.com. We were the first company to offer on-line list download, and today we have the best and most user friendly website for our customers. Our Reseller division has brought pricing discipline to the market place. By stabilizing our pricing matrix, we can provide better quality service to the resellers and realize future growth.

Our 4 million strong user base

We were at the forefront of developing the concept of sales leads and mailing list sales to small customers. Today, we have over four million users - more, we believe, than all of our competitors combined. infoUSA.com brand is widely known amongst small business and sales executives across America.

Database and Technology Group

Content is "king" and we are confident that we have the finest, most accurate proprietary databases. We have 12 databases that we believe are unparalleled in breadth and depth of content. Additional business data content includes private company profiles of the leading 110,000 private U.S. companies. These comprehensive and timely profiles include a multi-paragraph company description, executive functions and biographies, corporate affiliations and linkages, and, where available, storefront photographs. The company has begun its global database initiative, creating similar company profiles for the top businesses worldwide.

We are continuously adding more content, such as detailed business descriptions, more executives, hours of operation, credit cards accepted, URL address and other information. Our introduction of a database compilation facility in India is helping us accomplish this objective.

Consumer database additions include a newly created proprietary lifestyle and hobby database containing the highest counts in the industry. Our expanded lifestyle and hobby database contains many popular selections such as book/magazine readers, travel, health and cooking, apparel, sweepstakes, gardening, catalog buyers, crafts, pet owners, investment and finance, golf, gourmet food and wine, fishing, home decorating, dieting and weight loss, photography, boating, camping, and hunting.

Blue Chip Technology

Companies like AOL(R), Google(R), Apple(R), Yahoo(R) and Infospace(R) use our database for their directory assistance service because of our superior quality of database and its comprehensiveness.

Million of Cars Use In-car Navigation Systems

In-car navigation companies use our database to provide points of interest information on their GPS systems. Most cars in America with GPS systems use our database to find nearby hotels, fast food restaurants, hospitals and gas stations.

Our Future Growth Strategy

-- Grow number of Subscription customers by getting sales people

and small business owners hooked to our user-friendly sales

lead services - SalesGenie.com and Credit.net(R);

-- International Market - OneSource Global Business Database is

ripe for international Sales growth with virtually no

competition;

-- Offer end-to-end advertising and marketing solutions for small

business customers - Completely integrated copywriting,

graphics, printing and mailing services to small customers -

all done online & painless (ZipmailUSA.com(R));

-- Political and non-profit groups - using Donnelley database and

database marketing. We have an office in Washington, D.C.,

near the White House and another office in suburban

Washington, D.C., and have recently appointed Peter O'Keefe to

be in charge of this effort. Political organizations and

501(c)3 not-for-profit fundraising organizations need the

Donnelley database and direct marketing database marketing

capabilities. Customer confidentiality prevents us from naming

them.

-- Acquisitions - the industry is ripe for acquisition. There are

many small direct marketing businesses that have no economies

of scale. Their owners are getting old. infoUSA has the

opportunity to buy these businesses, cut costs, and increase

marketshare and profit. We are currently in discussions with

several potential acquisitions.

Expanded Advertising and Corporate Branding

We are investing heavily in branding and advertising to promote SalesGenie.com, infoUSA.com, and Credit.net(R). We have retained A. Eickhoff in Chicago to help us with 60 second and 120 second TV commercials. We are using agency.com(R) in San Francisco to help us with banner advertising. We increased our advertising by $2.5 million over the first quarter of 2005. The increased spending was in radio, TV, Google, and other mass advertising. Our radio advertising has proven to be very successful. Heavy advertising has led to an increase in expense, which is resulting in an increase in our subscription base. As the subscription base builds up and the advertising costs remain stable, our sales and profitability will increase. The increase in advertising and marketing is the basis for estimating 2006 revenue to be on the high side of our guidance.

CONFERENCE CALL

The company will host its first quarter conference call on April 21st, at 4 PM Eastern time. To access the conference call, please dial 800-295-3991 (international 617-614-3924), passcode 43821427, approximately 10 minutes prior to the start of the call. A replay of the call will be available from 6 PM Eastern time, April 21st, through midnight Eastern Time, April 26th, 2006. The replay number is 888-286-8010 (international 617-801-6888), passcode 97637250. A live webcast of the conference call will be available at the company's Investor Relations web site, http://ir.infousa.com.

About infoUSA

infoUSA (www.infoUSA.com), founded in 1972, is the leading provider of business and consumer information products, database marketing services, data processing services and sales and marketing solutions. Content is the essential ingredient in every marketing program, and infoUSA has the most comprehensive data in the industry, and is the only company to own a proprietary database of 250 million consumers and 14 million businesses under one roof. The infoUSA database powers the directory services of the top Internet traffic-generating sites. Nearly 3 million customers use infoUSA's products and services to find new customers, grow their sales, and for other direct marketing, telemarketing, customer analysis and credit reference purposes. infoUSA headquarters are located at 5711 S. 86th Circle, Omaha, NE 68127 and can be contacted at (402) 593-4500. To know more about Sales Leads, click www.infousa.com. To get a 7-day free trial and 100 free sales leads, click www.salesgenie.com.

Statements in this announcement other than historical data and information constitute forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements. The potential risks and uncertainties include, but are not limited to, recent changes in senior management, the successful integration of recent and future acquisitions, fluctuations in operating results, failure to successfully carry out our Internet strategy or to grow our Internet revenue, effects of leverage, changes in technology and increased competition. More information about potential factors that could affect the company's business and financial results is included in the company's filings with the Securities and Exchange Commission. infoUSA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) FOR THE QUARTER ENDED ----------------------- March 31, March 31, 2005 2006 ----------- ----------- Net sales $95,095 $103,070 Costs and expenses: Database and production costs 26,027 25,725 Selling, general and administrative 45,166 54,079 Depreciation and amortization of operating assets 3,908 3,140 Amortization of intangible assets 4,404 4,637 ----------- ----------- 79,505 87,581 ----------- ----------- Operating income 15,590 15,489 Other income (expense): Investment income 1,320 72 Other charges 0 (315) Interest expense (2,740) (2,805) ----------- ----------- Income before income taxes 14,170 12,441 Income taxes 5,112 4,494 ----------- ----------- Net income $9,058 $7,947 ----------- ----------- BASIC & DILUTED EARNINGS PER SHARE: Basic earnings per share $0.17 $0.15 ----------- ----------- Diluted earnings per share $0.17 $0.15 ----------- ----------- Basic weighted average shares outstanding 53,797 53,866 ----------- ----------- Diluted weighted average shares outstanding 53,841 54,652 ----------- ----------- The following provides a reconciliation of net income to EBITDA: FOR THE QUARTER ENDED March 31, March 31, 2005 2006 Net income $9,058 $7,947 Interest expense 2,740 2,805 Income taxes 5,112 4,494 Depreciation and amortization of operating assets 3,908 3,140 Amortization of intangible assets 4,404 4,637 --------- --------- EBITDA $25,222 $23,023 --------- --------- The following provides a schedule of Capital Expenditures: FOR THE QUARTER ENDED March 31, March 31, 2005 2006 --------- --------- Purchases of Property of Equipment $1,161 $2,548 Software and Database Development Costs 795 1,564 --------- --------- Capital Expenditures $1,956 $4,112 --------- --------- The following provides a reconciliation of Cash Flow from Operations to Free Cash Flow: FOR THE QUARTER ENDED March 31, March 31, 2005 2006 --------- --------- Cash Flow from Operations $10,745 $20,169 Less: Capital Expenditures (1,956) (4,112) --------- --------- Free Cash Flow $8,789 $16,057 --------- --------- infoUSA INC. AND SUBSIDIARIES Selected Balance Sheet Amounts (In thousands, except per share amounts) The following table presents selected balance sheet account information as of March 31, 2006, compared to December 31, 2005. ---------------------------------------------------------------------- (amounts in thousands) December 31, March 31, 2005 2006 ---------------------------------------------------------------------- Assets ---------------------------------------------------------------------- Cash and Cash Equivalents $792 $10,523 Accounts Receivable 52,693 35,705 Accounts Receivable-List Brokerage 50,384 42,739 Deferred Marketing Costs 2,853 3,848 Property and Equipment, net 48,530 48,531 Intangible Assets, net 364,716 364,571 ---------------------------------------------------------------------- Liabilities ---------------------------------------------------------------------- Accounts Payable 12,958 13,488 Accounts Payable-List Brokerage 44,019 36,793 Accrued Payroll Expenses 18,973 19,051 Accrued Expenses 6,955 4,962 Deferred Revenue 86,080 76,090 Total Debt 148,006 143,404 ----------------------------------------------------------------------

Source: Business Wire

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