Inphonic (NASDAQ:INPC)
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InPhonic, Inc. (NASDAQ:INPC), a leading online seller of wireless
services and products, today reported financial results for the second
quarter ended June 30, 2007.
“In the second quarter of 2007, we began
addressing many of the operational challenges that were identified on
our last conference call in an effort to better position the Company in
the later half of 2007 for improved operating cash flow. Although we are
still early in the process, we are encouraged by some initial positive
indicators and believe these improvements to the business will yield
their full impact in the second half of the year,”
said InPhonic’s Chairman and CEO David A.
Steinberg.
Revenue was $79.4 million for the second quarter of 2007, compared to
$92.1 million for the second quarter of 2006. Loss from continuing
operations for the second quarter 2007 was ($40.6) million or ($1.06)
per basic and diluted share compared to a loss from continuing
operations of ($9.4) million or ($0.26) per basic and diluted share for
the second quarter of 2006.
Non-GAAP Adjusted EBITDA for the second quarter 2007 was a loss of
($15.5) million. Non-GAAP Adjusted EPS for the second quarter 2007 was a
loss of ($0.59) per share.
Adjusted EBITDA is defined as net income (loss) from continuing
operations before interest expense, taxes, depreciation and
amortization, restructuring costs, other non-recurring costs,
stock-based compensation and certain other adjustments. Adjusted EPS per
basic and diluted share is defined as earnings per share as calculated
on the face of the income statement adjusted for stock-based
compensation expense and depreciation of intangibles, non-recurring
costs and other adjustments. The footnotes to the Non-GAAP measures
describe these adjustments in more detail.
Signed Letter of Intent with Brightstar
The Company announced today a letter of intent for a new strategic
alliance with Brightstar and expects to sign a definitive agreement by
September 30, 2007. As part of the strategic alliance Brightstar would
acquire the distribution, inventory and fulfillment assets of InPhonic
and become InPhonic’s exclusive provider of
hardware (wireless handsets, SIM cards and accessories),
direct-to-consumer distribution, on-hand inventory, value added
customization and logistics. InPhonic would become the exclusive online
activation and enablement platform for Brightstar’s
existing consumer businesses. Currently, Brightstar has approximately
11,000 points of sale in the United States with some of the most
recognized retail store brands and approximately 160,000 points of sale
internationally.
It is expected that the definitive agreement will encompass
collaboration across a number of functional areas and would provide
InPhonic benefits in three key areas –
improved cash flows due to outsourced inventory management, enhanced
margins resulting from hardware procurement and significant growth
opportunities in a new marketing relationship with Brightstar and its
vast domestic and international sales channels.
Brightstar strengthened its commitment to this new alliance further by
making an investment of $5 million in InPhonic, purchasing approximately
925,000 newly issued restricted shares. These shares represent
approximately 2.5 percent of InPhonic’s
outstanding share count as of June 30, 2007, and were priced at a
premium to the existing market price.
Liquidity Position
InPhonic ended the second quarter of 2007 with $22.5 million in cash and
cash equivalents. The Company was able to improve its liquidity position
by working with Citicorp and Goldman Sachs to complete an agreement to
draw an additional $15 million from the existing credit agreement. The
total balance of the note will be $90 million.
The immediate new equity investment of $5 million from Brightstar plus
the new borrowings from the Lending Group will provide an aggregate
infusion of $20 million into InPhonic.
Hired New Chief Financial Officer
In July, InPhonic hired a new Chief Financial Officer, Kenneth D.
Schwarz. Mr. Schwarz joined InPhonic after many years of experience
working in publicly-held telecommunications and technology companies in
senior finance and operational roles. Immediately prior to joining
InPhonic, Mr. Schwarz served in senior executive positions, including
CFO and subsequently President of Consumer Solutions at Intersections
Inc., a NASDAQ-listed public company and leading provider of identity
theft protection and credit management solutions.
Non-GAAP Financial Measures
A reconciliation between GAAP and Non-GAAP results is shown immediately
following the Unaudited Condensed Consolidated Statements of Cash Flows.
The Company believes that the presentation of the above Non-GAAP
measures provides useful information to investors regarding certain
additional financial and business trends relating to its financial
condition and results of operations. The Company believes when U.S. GAAP
results are viewed in conjunction with these Non-GAAP measures,
investors are provided with a more meaningful understanding of the
Company's ongoing operating performance. In addition, the Company's
management uses these measures for reviewing the Company's financial
results.
These measures should be considered in addition to results prepared in
accordance with U.S. GAAP, but should not be considered a substitute
for, or superior to, GAAP results. The Company has reconciled Non-GAAP
financial measures included in this press release to the nearest GAAP
measure. Investors are encouraged to review the related GAAP financial
measures and the reconciliation of these Non-GAAP financial measures to
their most directly comparable GAAP financial measure.
Conference Call
Company management will be holding a conference call on August 9, 2007
at 5:00 PM Eastern Time to discuss its second quarter 2007 financial
results and provide a Company update.
The conference call can be accessed by calling the following phone
numbers:
(800) 946-0783 (Domestic) or (719) 4572658 (International); passcode
6904443.
The replay will be available beginning at 7:00 p.m. on August 9, 2007
by dialing 888-203-1112 (Domestic) or 719-457-0820 (International);
passcode 6904443.
A link to an audio Webcast of the call will be available at http://investor.inphonic.com/.
An audio Webcast archive following the call will also be available at http://investor.inphonic.com/
About InPhonic
Headquartered in Washington, D.C., InPhonic, Inc. (NASDAQ:INPC)
is a leading online seller of wireless services and products. InPhonic
sells these services and products, and provides world-class customer
service through websites that it creates and manages for online
businesses, national retailers, member-based organizations and
associations under their own brands. InPhonic also operates Wirefly (www.wirefly.com),
a leading one-stop comparison mobile phones and wireless plans shopping
site that has been awarded "Best of the Web" by Forbes magazine and
"Best in Overall Customer Experience" by Keynote Performance Systems.
InPhonic also delivers a full range of MVNO and mobility solutions to
enterprise clients through its Mobile Virtual Network Enablement (MVNE)
platform. Among many awards in its history, InPhonic holds the
distinction as #1 Company of the Year on the INC. 500 for 2004. For more
information on the company, its products and services, visit the
InPhonic Corporate Web site at www.inphonic.com.
Click here to join our email alert list: http://www.b2i.us/irpass.asp?BzID=1461&to=ea&s=0
Forward-Looking Statements - This press release contains forward-looking
statements under the Private Securities Litigation Reform Act of 1995,
including, without limitation, all statements related to future
financial performance, plans to grow our business and build our brand.
Words such as "expect," "anticipate," "believe" and similar expressions
are intended to identify forward-looking statements. These
forward-looking statements are based upon our current expectations.
Forward-looking statements involve risks and uncertainties. Our actual
results and the timing of events could differ materially from those
anticipated in such forward-looking statements as a result of these
risks and uncertainties, which include, without limitation, risks
related to our fluctuating operating results, seasonality in our
business, our ability to acquire products on reasonable terms, our
online business model, demand for our products, the strength of our
brand, competition, our ability to fulfill orders and other risks
detailed in our filings with the Securities and Exchange Commission,
including our Annual Report on Form 10-K for the Year ended December 31,
2006 and our Quarterly Reports on Forms 10-Q. You are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date of this press release. All forward-looking
statements are qualified in their entirety by this cautionary statement,
and InPhonic undertakes no obligation to revise or update any
forward-looking statements to reflect events or circumstances after the
date hereof.
INPHONIC, INC. & SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2006
2007
2006
2007
Revenue:
Activations and services
$
74,216
$
66,780
$
140,958
$
151,541
Equipment
17,912
12,642
38,148
29,286
Total revenue
92,128
79,422
179,106
180,827
Cost of revenue, exclusive of depreciation and amortization:
Activations and services
1,065
621
1,325
1,384
Equipment
50,510
53,093
98,431
118,755
Total cost of revenue
51,575
53,714
99,756
120,139
Operating expenses:
Sales and marketing, exclusive of depreciation and amortization
27,408
30,514
54,130
61,959
General and administrative, exclusive of depreciation and
amortization
16,908
26,519
30,139
50,395
Depreciation and amortization
3,960
5,829
7,443
11,220
Restructuring
1,906
340
1,906
340
Total operating expenses
50,182
63,202
93,618
123,914
Operating loss
(9,629
)
(37,494
)
(14,268
)
(63,226
)
Other income (expense):
Interest income
547
326
1,174
1,003
Interest expense
(288
)
(3,476
)
(624
)
(6,138
)
Total other income (expense)
259
(3,150
)
550
(5,135
)
Loss from continuing operations
(9,370
)
(40,644
)
(13,718
)
(68,361
)
Discontinued operations:
Loss from discontinued operations
(206
)
(4
)
(171
)
(102
)
Net loss
$
(9,576
)
$
(40,648
)
$
(13,889
)
$
(68,463
)
Basic and diluted net loss per share:
Net loss from continuing operations
$
(0.26
)
$
(1.06
)
$
(0.38
)
$
(1.77
)
Loss from discontinued operations
(0.01
)
(0.00
)
(0.01
)
(0.00
)
Basic and diluted net loss per share
$
(0.27
)
$
(1.06
)
$
(0.39
)
$
(1.77
)
Basic and diluted weighted average shares outstanding
35,856,253
38,265,453
35,529,454
38,654,575
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands)
2006
2007
2006
2007
Sales and marketing
$
819
$
784
$
1,538
$
1,457
General and administrative
2,097
2,459
4,260
5,018
Restructuring
1,312
-
1,312
-
$
4,228
$
3,243
$
7,110
$
6,475
INPHONIC INC, & SUBSIDIARIES
Condensed Consolidated Balance Sheet
(in thousands, except share and per share amounts)
December 31,
June 30,
2006
2007
Assets
(unaudited)
Current assets:
Cash and cash equivalents
$
89,972
$
22,543
Accounts receivable, net
63,820
50,393
Inventory, net
23,164
13,882
Prepaid expenses
6,507
5,455
Deferred costs and other current assets
3,122
3,277
Current assets of discontinued operations
391
115
Total current assets
186,976
95,665
Restricted cash and cash equivalents
38
38
Property and equipment, net
22,746
25,604
Goodwill
38,223
38,223
Intangible assets, net
8,092
6,475
Deposits and other assets
8,330
15,235
Total assets
$
264,405
$
181,240
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
85,975
$
76,258
Accrued expenses and other liabilities
22,521
18,719
Current portion of deferred revenue
16,604
14,798
Current maturities of capital leases
301
280
Current liabilities of discontinued operations
1,103
1,103
Total current liabilities
126,504
111,158
Long-term debt and capital lease obligations, net of current
maturities
63,826
65,385
Deferred revenue, net of current portion
478
351
Total liabilities
190,808
176,894
Commitments and contingencies
-
-
Stockholders' equity:
Common stock, $0.01 par value
Authorized 200,000,000 shares at December 31, 2006 and June 30,
2007; issued and outstanding 37,138,480 and 36,926,080 shares at
December 31, 2006 and June 30, 2007, respectively
371
369
Additional paid-in capital
301,611
300,825
Accumulated deficit
(228,385
)
(296,848
)
Total stockholders' equity
73,597
4,346
Total liabilities and stockholders' equity
$
264,405
$
181,240
INPHONIC, INC. & SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended
June 30,
2006
2007
Cash flows from operating activities:
Net loss
$
(13,889
)
$
(68,463
)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization
7,443
11,220
Increase (decrease) in allowance for doubtful accounts
(997
)
5,492
Non-cash interest expense, sales and marketing expense and other
135
2,244
Stock-based compensation, including related payroll taxes
7,110
6,349
Changes in operating assets and liabilities
Accounts receivable
(20,928
)
8,211
Inventory
(3,454
)
9,282
Prepaid expenses
(2,336
)
(948
)
Deferred costs and other assets
4,295
(155
)
Deposits and other assets
161
(937
)
Accounts payable
21,037
(9,717
)
Accrued expenses and other liabilities
(2,722
)
(7,221
)
Deferred revenue
(3,678
)
(1,933
)
Net cash used in operating activities
(7,823
)
(46,576
)
Cash flows from investing activities:
Capitalized expenditures, including internal capitalized labor
(8,874
)
(12,159
)
Cash paid for acquisitions
(3,028
)
(1,000
)
Cash paid for the purchase of intangible assets
(193
)
-
Purchase of short-term investments
(5,000
)
-
Proceeds from the sale of assets of discontinued operations
1,110
-
Reduction in restricted cash and cash equivalents
400
-
Other
-
(50
)
Net cash used in investing activities
(15,585
)
(13,209
)
Cash flows from financing activities:
Principal repayments on capital leases
(213
)
(134
)
Cash paid for repurchase of common stock
(503
)
(10,726
)
Proceeds from exercise of options, warrants and other
752
3,216
Net cash provided by (used in) financing activities
36
(7,644
)
Net decrease in cash and cash equivalents
(23,372
)
(67,429
)
Cash and cash equivalents, beginning of the period
70,783
89,972
Cash and cash equivalents, end of the period
$
47,411
$
22,543
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest
$
263
$
2,719
Supplemental disclosure of non-cash activities:
Issuance of common stock in business acquisitions
3,856
-
Issuance of warrant to purchase common stock to vendor
3,228
-
Stock-based compensation capitalized as internal labor
325
302
INPHONIC INC.
Reconciliation of non-GAAP measure to nearest comparable GAAP
measures
(unaudited, in thousands, except share and per share amounts)
Three Months Ended
June 30,
2006
2007
Adjusted EBITDA and EPS:
Net loss from continuing operations
$
(9,370
)
$
(40,644
)
Non-cash items:
Depreciation and amortization
3,960
5,829
Stock -based compensation
2,916
3,243
Non-cash amortization of sales and marketing expense
135
162
Interest income and expense
(259
)
3,150
Non-recurring items (1):
Restructuring costs
1,906
340
Discontinued marketing programs
-
4,459
Rebate settlement and related expenses
-
1,906
AR reserves for bad debts and other adjustments
-
2,563
Legal and accounting expenses related to restatement
-
3,030
Settlement, relocation and other exit costs
-
503
Adjusted EBITDA
$
(712
)
$
(15,459
)
Net Loss
$
(9,576
)
$
(40,648
)
Stock-based compensation
2,916
3,243
Non-cash amortization of sales and marketing expenses
135
162
Non-cash interest
-
974
Amortization of intangible assets
1,078
703
Impact of non-recurring items:
1,906
12,801
Adjusted Net Loss
$
(2,229
)
$
(22,765
)
Adjusted EPS per share
Basic
$
(0.06
)
$
(0.59
)
Diluted
$
(0.06
)
$
(0.59
)
Basic weighted average shares
35,856,253
38,265,453
Diluted weighted average shares
35,856,253
38,265,453
Footnotes:
(1) These items were incurred during the quarter and are not expected to
recur beyond the second quarter of 2007. This category includes legal
and accounting fees associated with the completion of the restatement of
the 2006 financials; consumer credits or settlements provided to
consumers during the rebate process outside of our normal procedures;
write-offs of accounts receivable with certain troubled wireless
partners; additional reserves on certain carrier receivables and
facility relocation and other exit/settlement costs incurred during the
quarter.