Inforte Corp. Announces 2006 and Fourth Quarter Results; Appointment of COO and CFO

CHICAGO, Jan. 31  /PRNewswire-FirstCall/ -- Inforte Corp. (NASDAQ:INFT) announced today that revenue for the quarter ending December 31, 2006 was $10.7 million. Net revenue, which is revenue less reimbursements, was $10.0 million, above the high end of guidance of $9.8 million.  Revenue for 2006 was $43.3 million and net revenue was $39.7 million, a 5 percent increase over 2005.

Stephen Mack, Inforte's chief executive officer and president, commented, "In 2006 we returned to revenue growth; in particular we are pleased with our SAP practice which grew more than 50 percent from last year.  The fourth quarter marked the first quarter that revenue from SAP was more than 50 percent of the total company revenue."

We are also announcing that effective February 1, 2007, Inforte's current chief financial officer Nick Heyes will become Inforte's president and chief operating officer.  Nick joined Inforte in 1999 as the executive vice president of consulting.  He has 19 years of experience in the management consulting industry and performed in a number of senior consulting and operations roles before becoming Inforte's chief financial officer in 2003.

Stephen Mack further commented, "Nick will give us an intense focus on operational excellence and the execution of our strategy, both of which are paramount in 2007."

Nick will be replaced as chief financial officer by Bill Nurthen, who currently serves as Inforte's treasurer and vice president of finance.  Bill joined Inforte in 1999 and has been instrumental in building many of the firm's financial processes and completing its two acquisitions.

Nick Heyes stated, "I am extremely pleased to be announcing Bill's promotion.  He deserves this opportunity and recognition and I am confident that he will do a great job.  I look forward to continuing to work closely with Bill in his new role."

As of December 31, 2006, Inforte made some significant decisions regarding Provansis LLC, a joint venture formed in 2005 of which Inforte owns 19 percent.  The determination was made that Inforte's equity investment in Provansis LLC and loan to Provansis LLC are impaired.  The following actions have been taken:

   -- During the quarter Provansis LLC impaired a significant intangible
      asset; Inforte recorded its 19 percent share of this loss which was
      approximately $1.4 million.
   -- After recording the loss related to the intangible asset, the
      remaining Provansis LLC equity investment of approximately $150,000
      was written off.
   -- A provision of $2.2 million was made for a loss on the note receivable
      from Provansis LLC. The tax impact of this provision was $800,000.




We reviewed our foreign tax assets and as a result of the Provansis related write-offs and other non-recurring items in the last three years which have driven overall tax losses, we have booked a valuation allowance of $1.1 million against the foreign tax assets.

There was no cash impact from any of these actions. The total non-cash expense associated with all of these actions was $5.7 million. Non-GAAP financials for the fourth quarter and 2006 are presented excluding this expense. Non-GAAP financials for 2005 exclude the expense of a capital restructuring in the first quarter of 2005.

Actual results for the quarter ending December 31, 2006, and fourth quarter financial highlights, are as follows:

   -- Net revenue for the fourth quarter was $10.0 million, representing
      year-over-year growth of 4 percent.
   -- SAP net revenue grew 22 percent sequentially, increasing from
      $4.4 million in the third quarter to $5.3 million in the fourth
      quarter.
   -- Cash flow from operations was $709,000, continuing a trend of positive
      cash flow from operations over the last seven quarters.
   -- As of December 31, 2006, cash and marketable securities were
      $30.2 million, an increase from $29.6 million at the end of the third
      quarter.
   -- Diluted earnings per share (EPS) were negative 40 cents.  Non-GAAP EPS
      were 1 cent which is within the guidance range.
   -- Net loss for the quarter was $4.6 million. Non-GAAP net income was
      $80,000.
   -- Days sales outstanding were 55, down from 61 in the fourth quarter
      last year.
   -- At the end of the quarter there were 253 employees, of which 207 were
      billable. This compares to 258 total employees last quarter, of which
      210 were billable.
   -- Consultant utilization was 69 percent, the same as last quarter.
   -- Annualized quarterly net revenue per consultant and net revenue per
      employee were $202,000 and $166,000 respectively.
   -- There were 11,892,091 actual shares outstanding as of December 31,
      2006.




Actual earnings results for the full year ending December 31, 2006, and financial highlights for fiscal year 2006, are as follows:

   -- Revenue was $43.3 million compared to $41.6 million in 2005.
   -- Net revenue was $39.7 million compared to $37.7 million in 2005, a
      5 percent increase.
   -- SAP revenue was $17.5 million up from $11.6 million in 2005, a
      51 percent increase.
   -- Customer analytics revenue was $3.9 million, a four-fold increase over
      2005
   -- Cash flow from operations was $2.4 million compared to $1.9 million in
      2005.  In addition cash flow from operations was significantly greater
      than non-GAAP earnings before interest, tax, depreciation and
      amortization of $1.4 million.
   -- Net loss for the year was $3.6 million, compared to income of $536,000
      in 2005.
   -- Non-GAAP net income was $1.1 million for 2006 and compares to
      $1.3 million in 2005.
   -- EPS was negative 31 cents in the year and compares to 5 cents in 2005.
   -- On a non-GAAP basis EPS was 10 cents and compares to 12 cents in 2005.
   -- Consultant utilization was 68 percent, compared to 65 percent in 2005.
   -- Annualized quarterly net revenue per consultant and net revenue per
      employee were $211,000 and $171,000 respectively, the same as 2005.




Net revenue guidance for the first quarter of 2007 is set at a range of $8.8 million to $9.8 million and EPS guidance is set at a range of negative 7 cents to zero cents.

Non-GAAP supplemental information is provided to enhance the understanding of Inforte's financial performance and is reconciled to Inforte's GAAP information in the accompanying tables at the end of this press release. Inforte presents the non-GAAP financial measures to complement results provided in accordance with GAAP, as management believes these measures help illustrate underlying trends in our business and facilitate comparisons between quarters and years. Management uses these measures to establish budgets and operational goals that are communicated internally and externally, to manage our business and evaluate its performance, and to assess compensation for executives.

The non-GAAP supplemental information excludes the costs of a capital restructuring during the first quarter of 2005, which included an exchange of outstanding options for cash and restricted stock and the granting of additional common stock.  It also excludes the costs of the write-off of the Provansis LLC intangible asset and investment and the provision taken on the loan in the fourth quarter of 2006.  It also excludes the tax expense associated with provision on the loan and a valuation allowance against foreign tax credits.  See footnote 1 to the Non-GAAP Supplemental Information and Inforte's SEC filings for more detail on the capital restructuring, footnote 2 to the Non-GAAP Supplemental Information for more detail on the Provansis LLC write-off and footnote 3 to the Non-GAAP Supplemental Information for more detail on the tax valuation allowances.

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 http://www.inforte.com/ .

CONTACT:   , or  .

Visit http://www.inforte.com/investor/ to access the January 31, 2007, 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        TWELVE MONTHS ENDED
                                 DECEMBER 31,               DECEMBER 31,
                          -------------------------------------------------
                              2005         2006         2005         2006
                          -----------  ----------   ----------   ----------
                          (Unaudited)  (Unaudited)

  Revenues:

    Revenue before
     reimbursements
     (net revenue)            $9,558       $9,971      $37,718      $39,749
    Reimbursements             1,017          730        3,929        3,577
                          ----------   ----------   ----------   ----------
  Total revenues              10,575       10,701       41,647       43,326
  Cost of services:
    Project personnel
     and related
     expenses                  5,493        6,328       21,760       23,166
    Reimbursed expenses        1,017          730        3,929        3,577
                          ----------   ----------   ----------   ----------
  Total cost of services       6,510        7,058       25,689       26,743
                          ----------   ----------   ----------   ----------
  Gross profit                 4,065        3,643       15,958       16,583

  Other operating expenses:
    Sales and marketing          648          762        2,590        2,629
    Recruiting, retention
     and training                315          550        1,100        1,970
    Management and
     administrative            2,773        2,555       12,155       11,195
                          ----------   ----------   ----------   ----------
  Total other operating
   expenses                    3,736        3,867       15,845       15,794
                          ----------   ----------   ----------   ----------
  Operating income (loss)        329         (224)         113          789
  Provision for loss on
   note receivable
   to affiliate                    -       (2,201)           -       (2,201)
  Loss on investment
   in affiliate                  (67)      (1,631)        (143)      (1,857)
  Interest income,
   net and other                 247          427           918       1,465
                          ----------   ----------    ----------  ----------
  Income (loss) before
   income tax                    509       (3,629)          888      (1,804)
  Income tax expense             202          982           352       1,756
                          ----------   ----------    ----------  ----------
  Net income (loss)             $307      $(4,611)         $536     $(3,560)
                          ==========   ==========    ==========  ==========

  Earnings (loss) per share:
  -Basic                       $0.03       ($0.40)        $0.05      ($0.31)
  -Diluted                     $0.03       ($0.40)        $0.05      ($0.31)

  Weighted average common
   shares outstanding:
  -Basic                      11,260       11,419        11,222      11,369
  -Diluted                    11,477       11,419        11,504      11,369

  Expenses as a percentage
   of net revenue
    Project personnel and
     related expenses          57.5%        63.5%         57.7%       58.3%
    Sales and marketing         6.8%         7.6%          6.9%        6.6%
    Recruiting, retention,
     and training               3.3%         5.5%          2.9%        5.0%
    Management and
     administrative            29.0%        25.6%         32.2%       28.2%
    Income tax rate            39.6%       -27.1%         39.6%      -97.3%

  Margins
    Gross income               42.5%        36.5%         42.3%       41.7%
    Operating income            3.4%        -2.2%          0.3%        2.0%
    Pretax income               5.3%       -36.4%          2.4%       -4.5%
    Net income                  3.2%       -46.2%          1.4%       -9.0%

  Year-over-year change
    Net revenue                                4%                        5%
    Gross income                             -10%                        4%
    Operating income (loss)                 -168%                      600%
    Pretax income (loss)                    -812%                     -303%
    Net income                            -1,598%                     -763%
    Diluted EPS                           -1,433%                     -720%



           NON-GAAP SUPPLEMENTAL INFORMATION (UNAUDITED) (1)(2)
                         STATEMENTS OF OPERATIONS
                      (000's, except per share data)

                             THREE       THREE       TWELVE    TWELVE
                             MONTHS      MONTHS      MONTHS    MONTHS
                             ENDED       ENDED       ENDED     ENDED
                            DECEMBER    DECEMBER    DECEMBER  DECEMBER
                               31,         31,         31,       31,
                              2005        2006        2005      2006
                          ----------------------------------------------
                          (Unaudited) (Unaudited) (Unaudited) (Unaudited)

  Operating income (loss)        329        (224)        113      789
  Tender offer related charges     -           -       1,316 (1)    -
                             -------     -------       -----    -----
  Non-GAAP operating
   income (loss)                 329        (224)      1,429      789
  Reserve on note to affiliate     -      (2,201)          -   (2,201)
  Loss on investment in
   affiliate                     (67)     (1,631)       (143)  (1,857)
  Interest income, net and
   other                         247         427         918    1,465
  Reserve on note to affiliate     -       2,201 (2)       -    2,201 (2)
  Write-off of investment in
   affiliate                       -       1,566 (2)       -    1,566 (2)
                             -------     -------       -----    -----
  Non-GAAP income before
   income tax                    509         138       2,204    1,963
  Non-GAAP income tax expense,
   excluding tax effect of
   tender offer costs            202 (1)       -         873 (1)    -
  Non-GAAP income tax expense,
   excluding tax valuation
   allowances, and write-offs
   related to affiliate            -          58 (2)(3)    -      832 (2)(3)
                             -------     -------       -----    -----
  Non-GAAP net income           $307         $80      $1,331   $1,131
  Non-GAAP earnings per share:
  -Basic                       $0.03       $0.01       $0.12    $0.10
  -Diluted                     $0.03       $0.01       $0.12    $0.10

  Weighted average common
   shares outstanding:
  -Basic                      11,260      11,419      11,222   11,370
  -Diluted                    11,477      11,751      11,504   11,838

  Non-GAAP margins as a
   percentage of net revenue:
    Pretax income               5.3%        1.4%        5.8%     4.9%
    Net income                  3.2%        0.8%        3.5%     2.8%

  (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 supplemental information excludes the tax
      effect of the above mentioned items. 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.


  (2) The non-GAAP supplemental information shows results excluding the
      impact of non-operating losses from Provansis LLC, an unconsolidated
      subsidiary, in the fourth quarter of 2006. The total non-operating
      loss of $3,767 included: (i) $2,201 for a provision for loss on a note
      receivable from Provansis LLC; (ii) $1,416 for loss associated with a
      write-off of an intangible asset on Provansis LLC's books; and (iii)
      $150 for a write-off of the remaining investment balance in Provansis
      LLC on Inforte's Balance Sheet. The non-GAAP supplemental information
      excludes the tax effect of the above mentioned items. 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.

  (3) The non-GAAP supplemental information shows results excluding the
      impact of tax valuation allowances against the deferred tax assets
      related to foreign tax credits and deferred tax assets related to the
      provision for loss on the note receivable from Provansis LLC. The
      total tax valuation allowance of $1,968 included:(i) $1,126 against
      unrealizable foreign tax credits based on current projections; and
      (ii) $842 against the deferred tax assets generated by the loss
      associated with the note receivable to Provansis LLC. The non-GAAP
      supplemental information excludes the tax effect of the above
      mentioned items. 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)

                      DEC 31,   MAR 31,    JUNE 30,    SEPT 30,   DEC 31,
                       2005      2006       2006        2006       2006
                     -------   --------   --------    --------    -------
                             (Unaudited) (Unaudited) (Unaudited)
      ASSETS
  Current assets:
    Cash and cash
     equivalents     $10,353    $12,217    $10,569     $13,583    $15,100
    Short-term
     marketable
     securities       22,591     17,844     19,266      16,037     15,070
    Accounts
     receivable        8,460      8,078      7,683       7,453      7,554
    Allowance for
     doubtful
     accounts           (400)      (400)      (400)       (400)      (400)
                    --------   --------   --------    --------   --------
    Accounts receivable,
     net               8,060      7,678      7,283       7,053      7,154
    Note receivable
     from affiliate      684      1,122      1,537       1,784          -
    Prepaid expenses
     and other
     current assets    1,023      1,211      1,147         895        780
    Interest receivable
     on investment
     securities          199        164        133         125        103
    Deferred income
     taxes               484        371        351         371        388
    Income taxes
     recoverable         124        124         13           -          -
                    --------   --------   --------    --------   --------
      Total current
       assets         43,518     40,731     40,299      39,848     38,595

  Computers, purchased
   software and
   property            1,862      1,865      2,303       2,324      2,524
  Less accumulated
   depreciation and
   amortization          881        805        893         955      1,141
                    --------   --------   --------    --------   --------
  Computers, purchased
   software and
   property, net         981      1,060      1,410       1,369      1,383
  Long-term marketable
   securities              -          -          -           -          -
  Intangible assets       42         27         14           7          -
  Goodwill            15,238     15,238     15,126      15,118     15,182
  Deferred income
   taxes               2,758      2,754      2,748       2,786      1,891
  Investment in
   affiliate           1,857      1,783      1,721       1,631          -
                    --------   --------   --------    --------   --------
      Total assets   $64,394    $61,593    $61,318     $60,759    $57,051
                    ========   ========   ========    ========   ========

     LIABILITIES AND
      STOCKHOLDERS'
         EQUITY
  Current liabilities:
    Accounts payable    $357       $406     $1,152        $458       $451
    Income taxes
     payable             920        992        306         320        289
    Accrued expenses   3,595      3,850      3,195       3,349      3,643
    Accrued loss on
     disposal of
     leased property     845        635        486         408        353
    Current portion of
     deferred acquisition
     payment           3,650        500        500         500        500
    Deferred revenue   1,679      1,456      1,197         944      1,142
                    --------   --------   --------    --------   --------
      Total current
       liabilities    11,046      7,839      6,836       5,979      6,378

  Non current
   liabilities:
    Non-current portion
     of deferred
     acquisition
     payment           1,500      1,500      1,500       1,000      1,000
  Stockholders' equity:
    Common stock, $0.001
     par value authorized-
     50,000,000 shares;
     issued and
     outstanding (net of
     treasury stock)-
     11,829,091 as
     of Dec. 31, 2006     13         12         12          12         12
    Additional paid-in
     capital          75,469     75,461     75,487      75,795     75,888
    Cost of common
     stock in treasury
     (2,720,823 shares as
     of Dec. 31,
     2006)           (24,997)   (24,997)   (24,997)    (24,997)   (24,997)
    Retained earnings  1,307      1,636      2,056       2,358     (2,253)
    Accumulated other
     comprehensive
     income               56        142        424         612      1,023
                    --------   --------   --------    --------   --------
      Total
       stockholders'
       equity         51,848     52,254     52,982      53,780     49,673
                    --------   --------   --------    --------   --------
      Total
       liabilities
       and
       stockholders'
       equity        $64,394    $61,593    $61,318     $60,759    $57,051
                    ========   ========   ========    ========   ========


  Total cash and
   marketable
   securities        $32,944    $30,061    $29,835     $29,620    $30,170



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

                             THREE MONTHS ENDED        TWELVE MONTHS ENDED
                                DECEMBER 31,              DECEMBER 31,
                          --------------------------------------------------
                              2005         2006        2005          2006
                            ---------    --------    ---------     --------
                          (Unaudited)  (Unaudited)
  Cash flows from
   operating activities
  Net income (loss)             $307      $(4,611)        $536      $(3,560)

  Adjustments to reconcile
   net income to net cash
   provided by operating activities:
    Depreciation and
     amortization                253          195        1,232          893
    Loss on investment in
     affiliate                    67        1,631          143        1,857
    Reserve on note to affiliate   -        2,201            -        2,201
    Stock-based compensation     254          161        1,084          358
    Deferred income taxes       (528)         877         (297)         931
  Changes in operating assets
   and liabilities
    Accounts receivable          197         (101)        (909)         906
    Prepaid expenses and other
     current assets               38           76           30          177
    Unbilled revenue               -            -          463            -
    Accounts payable            (309)           6         (730)          84
    Income taxes                 655         (169)         512         (475)
    Accrued expenses and other
     current assets              322          245         (202)        (438)
    Deferred revenue             595          198           12         (537)
                            --------     --------     --------     --------
  Net cash provided by
   operating activities        1,851          709        1,874        2,397

  Cash flows from investing
   activities
    Acquisitions, net of
     cash                          -            -       (5,327)      (3,542)
    Note receivable from
     affiliate                  (245)        (355)        (670)      (1,356)
    Investment in affiliate        -            -       (2,000)           -
    Decrease in marketable
     securities               (3,153)       1,124       13,562        7,593
  Purchases of property and
   equipment                    (143)        (256)        (421)      (1,218)
                            --------     --------     --------     --------
  Net cash provided by
   (used in) investing
   activities                 (3,541)         513        5,144        1,477

  Cash flows from financing
   activities
    Proceeds from stock
     option and purchase plans    31            -          233            -
    Dividends                      -            -      (17,375)           -
                            --------    ---------     --------     --------
  Net cash provided by
   (used in) financing
   activities                     31            -      (17,142)           -
                            --------    ---------     --------     --------
  Effect of changes in
   exchange rates on cash        (95)         295         (340)         873
  Increase (decrease) in
   cash and cash equivalents  (1,754)       1,517      (10,464)       4,747
  Cash and cash equivalents,
   beg. of period             12,107       13,583       20,817       10,353
                            --------     --------     --------     --------
  Cash and cash equivalents,
   end of period             $10,353      $15,100      $10,353      $15,100
                            ========     ========     ========     ========


DATASOURCE: Inforte Corp.



CONTACT:  Kelly Richards of Inforte Corp., [phone], or

 , or  



Web site:  http://www.inforte.com/ 

Copyright