Message #1 From:
NewsBot Date: August 9, 2006 04:00:00 AM
DIGF News Digital Fusion Releases Second Quarter 2006 Results
HUNTSVILLE, Ala.--(BUSINESS WIRE)--Aug. 9, 2006--Digital Fusion, Inc. (OTCBB:DIGF), an information technology ("IT"), research and engineering, and acquisition and business support services provider, today announced financial results for the second quarter ended June 30, 2006.
Second Quarter 2006 Highlights
-- Revenue of $8.5 million, an increase of $4.0 million over same quarter in the previous year
-- Earnings before interest, taxes, share-based compensation, depreciation and amortization (EBITDA) of $422,000, an increase of $111,000 or 36% over same quarter in the previous year
Financial Comparisons
For the quarter ended June 30, 2006, revenues increased to $8.5 million compared to $4.5 million for the second quarter of 2005. Non-GAAP net income which does not include stock option expense increased to $126,000 for the quarter compared to net income of $14,000 for the second quarter of 2005. Non-GAAP earnings per share, assuming dilution, increased to $0.01 for the quarter compared to earnings per share, assuming dilution, of $0.00 for the second quarter of 2005. For the quarter, GAAP net loss was $305,000 and GAAP loss per share was $0.03 compared to GAAP net income of $14,000 and earnings per share of $0.00 for the second quarter of 2005.
For the six months ended June 30, 2006, revenues increased to $15.7 million compared to $9.0 million for the six months ended June 30, 2005. Non-GAAP net income which does not include stock option expense increased to $319,000 for the six months ended June 30, 2006 compared to net income of $107,000 for the six months ended June 30, 2005. Non-GAAP earnings per share, assuming dilution, increased to $0.02 for the six months ended June 30, 2006 compared to earnings per share, assuming dilution, of $0.01 for the six months ended 2005. For the six months ended June 30, 2006, GAAP net loss was $468,000 and GAAP loss per share was $0.04 compared to GAAP net income of $107,000 and earnings per share of $0.01 for the six months ended June 30, 2005.
Non-GAAP net income and non-GAAP earnings per share for the second quarter and six months ended June 30, 2006 exclude the effect of stock-based compensation expense resulting from the application of Statement of Financial Accounting Standards No. 123R, Share-Based Payment ("SFAS 123R"). SFAS 123R was adopted on a modified prospective basis effective January 1, 2006. See the table below for reconciliation between non-GAAP and GAAP net income.
Business Discussion
Service revenue increased approximately $3.3 million in the second quarter of 2006 compared to the same quarter in the previous year. The increase in service revenues during the second quarter of 2006 compared to the same quarter in the previous year was primarily related to the increase in the number of billable employees, the NASA Marshall Space Flight Center contract, and growth in engineering services. Reimbursed costs revenue increased $922,000 in the second quarter of 2006 compared to the second quarter of 2005. The increase in reimbursed cost revenue is primarily related to an increase in purchases made for customers. Product revenue decreased approximately $263,000 in the second quarter of 2006 compared to the same quarter of the previous year. The decrease in product revenue resulted from a reduction of software re-sales to governmental organizations.
Management Comments
"Our financial performance is on target and we are continuing to refine and execute our strategic plans," said Lt. Gen. (Ret.) Frank Libutti, Chairman of the Board and Chief Executive Officer of Digital Fusion. "We opened our Washington D.C. office and continue to expand our customer base. We grew top line revenue $4.0 million and EBITDA $111,000 over of the same quarter in the previous year."
"In an effort to increase efficiency and improve our support functions we moved our corporate headquarters and consolidated some operations," said Gary Ryan, Digital Fusion's President. "The move of our corporate headquarters impacted our second quarter financial results but it will provide for our anticipated future growth."
About Digital Fusion
Digital Fusion, Inc., headquartered in Huntsville, Alabama, is an information technology, research and engineering, and acquisition and business support services company that helps its customers make the most of technology to meet their business needs. Digital Fusion provides state-of-the-art solutions to both government and commercial customers. Digital Fusion's core competencies are focused in the following broad areas: Application Development, Architecture and Security; Network Security; Data Management and Business Intelligence; System Migration and Integration; Sensor Systems Development and Analysis; Aerodynamic Design, Analysis, and Support; Thermal-Structural Modeling; Test and Evaluation; Systems Engineering; Modeling and Simulation; Control System Design and Analysis; Mechanical Design and Analysis; and Program Management Support. For additional information about Digital Fusion visit http://www.digitalfusion.com.
Forward Looking Statements. All statements other than statements of historical fact included in this release are forward-looking statements. When used in this release, words such as "project," "anticipate," "believe," "estimate," "expect," "plan," "intend" and similar expressions, as they relate to the Company or its management, as well as assumptions made by and information currently available to the Company's management, identify forward-looking statements. Similarly, statements herein that describe the Company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors including, but not limited to: the effect of business and economic conditions; the impact of competitive products and pricing; capacity and supply constraints or difficulties, the Company's dependence on continued funding of U.S. government programs; contract procurement and termination risks; competitive factors such as pricing pressures and/or competition to hire and retain employees, and material changes in laws or regulations applicable to the Company businesses. Such statements reflect the current views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. These statements reflect the Company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this release are likely to cause these statements to become outdated with the passage of time.
This press release includes non-GAAP net income, non-GAAP earnings per share data, and other non-GAAP line items from the Non-GAAP Information table in this release. These measures exclude the effect of stock compensation expense for employee stock options associated with the application of SFAS 123R, which Digital Fusion, Inc. adopted effective January 1, 2006. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. Digital Fusion, Inc. believes that the presentation of the non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. In particular, as Digital Fusion, Inc. begins to apply SFAS 123R, it believes that it is useful to investors to understand how the expense associated with the application of SFAS 123R are reflected in its results of operations. The presentation of these non-GAAP measures permits both investors and management to more readily compare past results, which do not include the impact of SFAS 123R, with future results, and to better understand Digital Fusion's performance over the periods presented.
DIGITAL FUSION, INC.
Condensed Consolidated Balance Sheets
(In thousands)
June 30, 2006 December 31,
(Unaudited) 2005
------------- --------------
ASSETS
Current Assets:
Cash $ 2 $ 1
Marketable equity securities - 66
Accounts receivable (net of
allowance for doubtful accounts of
$26 for 2006 and 2005) 5,317 5,277
Unbilled receivables 443 256
Prepaid expenses and other current
assets 183 70
------------- --------------
Total current assets 5,945 5,670
Property and equipment, net of
accumulated depreciation of $1,215
for 2006 and $1,111 for 2005 897 492
Goodwill 5,861 5,861
Purchased intangible assets, net 1,421 1,634
Other assets 24 18
------------- --------------
Total assets $ 14,148 $ 13,675
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term
debt $ 2,894 $ 3,041
Accounts payable 1,133 1,121
Deferred revenue 13 212
Accrued compensation and related
expenses 2,100 1,470
Other current liabilities 88 72
------------- --------------
Total current liabilities 6,228 5,916
Long-term debt, less current
maturities 1,404 1,685
Pension obligation 341 341
------------- --------------
Total liabilities 7,973 7,942
------------- --------------
Stockholders' Equity:
Preferred Stock - $.01 par value;
authorized 1,000 shares, no share
issued and outstanding - -
Common Stock - $.01 par value;
authorized 30,000 shares; 11,460
and 11,247 shares issued and
outstanding at June 30, 2006 and
December 31, 2005, respectively 115 112
Additional paid in capital 45,300 44,393
Accumulated deficit (39,240) (38,772)
------------- --------------
Total stockholders' equity 6,175 5,733
------------- --------------
Total liabilities and
stockholders' equity $ 14,148 $ 13,675
============= ==============
DIGITAL FUSION, INC.
Condensed Consolidated Statements of Operations
For the three and six months ended June 30, 2006 and 2005
(Unaudited)
(In thousands, except per share data)
Three months Six months
ended June 30, ended June 30,
---------------- ----------------
2006 2005 2006 2005
------- ------- ------- -------
Revenues:
Services and fees $ 6,929 $ 3,587 $13,305 $ 7,082
Reimbursed costs 1,557 635 2,166 1,144
Product 64 327 183 764
------- ------- ------- -------
Total Revenue 8,550 4,549 15,654 8,990
------- ------- ------- -------
Cost of services and goods sold:
Services 5,822 2,779 11,001 5,442
Reimbursed costs 1,515 600 2,108 1,076
Product 51 309 161 731
------- ------- ------- -------
Total cost of services and
goods sold 7,388 3,688 13,270 7,249
------- ------- ------- -------
Gross profit 1,162 861 2,384 1,741
Amortization of intangible assets 107 100 214 100
Selling, general and
administrative 1,232 609 2,375 1,247
------- ------- ------- -------
Operating (loss) income (177) 152 (205) 394
------- ------- ------- -------
Other income (expenses):
Interest expense, net (44) (36) (92) (83)
Amortization of discount on
debt and intrinsic value of
convertible debt (88) (122) (175) (224)
------- ------- ------- -------
Total interest expense (132) (158) (267) (307)
Other income 4 20 4 20
------- ------- ------- -------
Total other expenses, net (128) (138) (263) (287)
------- ------- ------- -------
Net Income (loss) before income
taxes (305) 14 (468) 107
Income tax benefit - - - -
------- ------- ------- -------
Net (loss) income (1) $ (305) $ 14 $ (468) $ 107
======= ======= ======= =======
Basic earnings (loss) per share $ (0.03) $ 0.00 $ (0.04) $ 0.01
======= ======= ======= =======
Basic weighted average common
stock shares outstanding 11,441 10,873 11,378 10,661
======= ======= ======= =======
Diluted earnings (loss) per share $ (0.03) $ 0.00 $ (0.04) $ 0.01
======= ======= ======= =======
Diluted weighted average common
stock shares outstanding 11,441 12,938 11,378 12,764
======= ======= ======= =======
(1) Net income for the three and six-month periods ended June 30, 2006
included stock-based compensation expense under Statement of Financial
Accounting Standards No. 123R of $431,000 and $787,000, respectively,
related to stock options. There was no stock-based compensation
expense recorded in the three and six-month periods ended
June 30, 2005.
DIGITAL FUSION, INC.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2006 and 2005
(Unaudited)
(In thousands)
2006 2005
-------- --------
Cash flows provided by operating activities:
Net (loss) income $ (468) $ 107
Adjustments to reconcile net (loss) income to net
cash used in operating activities, net of effect
of acquisition:
Depreciation and amortization 104 77
Amortization of beneficial interest 126 161
Amortization of discount on debt 49 63
Amortization of intangible assets 214 100
Stock-based compensation expense 787 -
Proceeds from sale of trading securities 66 -
Changes in assets and liabilities 121 (217)
------- -------
Net cash provided by operating activities 999 291
------- -------
Cash flows used in investing activities:
Capital expenditures - property and equipment (509) (98)
Acquisition of Summit - (1,118)
------- -------
Net cash used in investing activities (509) (1,216)
------- -------
Cash flows provided by (used in) financing
activities:
Proceeds from exercise of options and warrants 115 676
Repayments of notes payable - (423)
Net proceeds from line of credit (604) 421
------- -------
Net cash (used in) provided by financing
activities (489) 674
------- -------
Net increase (decrease) in cash and cash
equivalents 1 (251)
Cash and cash equivalents, beginning of periods 1 252
------- -------
Cash and cash equivalents, end of periods $ 2 $ 1
======= =======
Earnings before interest, income taxes, share-based compensation,
depreciation, and amortization (EBITDA)
(unaudited in thousands)
EBITDA (which we define as earnings before interest, income taxes,
share-based compensation, depreciation, and amortization) is not a
measure of financial performance under United States generally
accepted accounting principles ("US GAAP") and should not be
considered as an alternative to net income, operating income or any
other performance measures derived in accordance with US GAAP or as an
alternative to cash flow from operating activities as a measure of
liquidity. Management believes EBITDA provides additional, useful
information regarding Digital Fusion's ability to meet our debt
service, capital expenditure and working capital requirements. EBITDA
is a traditional measure of a business' ability to generate cash flows
irrespective of financing costs and is presented as a supplemental
financial measurement in the evaluation of our business.
Three months Six months
ended June 30, ended June 30,
--------------- --------------
2006 2005 2006 2005
------- ------ ------ ------
Net income (loss) $ (305) $ 14 $ (468) $ 107
Interest expense 44 36 92 83
Income tax expense - - - -
Share-based compensation 431 - 787 -
Depreciation 57 39 104 77
Amortization of intangible assets 107 100 214 100
Amortization of discount on debt
and intrinsic value of convertible
debt 88 122 175 224
------- ------ ------ ------
EBITDA $ 422 $ 311 $ 904 $ 591
======= ====== ====== ======
Non-GAAP Information (1) (2)
For the three and six months ended June 30, 2006 and 2005
(unaudited, in thousands)
Non-GAAP
(excludes
effects of
GAAP SFAS 123R) GAAP
Three Three Three
Months Effects of Months Months
Ended SFAS 123R Ended Ended
June 30, June 30, June 30, June 30,
2006 2006 2006 2005
---------- ----------- --------- ----------
Revenues $ 8,550 $ - $ 8,550 $ 4,549
Cost of Sales 7,388 148 7,240 3,688
-------- -------- -------- --------
Gross profit (loss) 1,162 (148) 1,310 861
-------- -------- -------- --------
Selling, general and
administrative expenses 1,339 283 1,056 709
-------- -------- -------- --------
Operating income (loss) (177) (431) 254 152
-------- -------- -------- --------
Interest expense 44 - 44 36
Other expense 84 - 84 102
-------- -------- -------- --------
Net income (loss) before
income taxes (305) (431) 126 14
Income tax benefit - - - -
-------- -------- -------- --------
Net income (loss) $ (305) $ (431) $ 126 $ 14
======== ======== ======== ========
(1) A reconciliation between net income on a GAAP basis and non-GAAP
net income including items (a) through (b) is provided in the table
below.
(2) There was no stock-based compensation expense recorded in fiscal
2005, as we had adopted the footnote disclosure only provision of
SFAS 123.
Non-GAAP
(excludes
effects of
SFAS 123R)
GAAP Six Six GAAP Six
Months Effects of Months Months
Ended SFAS 123R Ended Ended
June 30, June 30, June 30, June 30,
2006 2006 2006 2005 (4)
---------- ----------- --------- ----------
Revenues $ 15,654 $ - $ 15,654 $ 8,990
Cost of Sales 13,270 254 13,016 7,249
-------- ------- -------- --------
Gross profit (loss) 2,384 (254) 2,638 1,741
-------- ------- -------- --------
Selling, general and
administrative expenses 2,589 533 2,056 1,347
-------- ------- -------- --------
Operating income (loss) (205) (787) 582 394
-------- ------- -------- --------
Interest expense 92 - 92 83
Other expense 171 - 171 204
-------- ------- -------- --------
Net income (loss) before
income taxes (468) (787) 319 107
Income tax benefit - - - -
-------- ------- -------- --------
Net income (loss) (3) $ (468) $ (787) $ 319 $ 107
======== ======= ======== ========
(3) A reconciliation between net income on a GAAP basis and non-GAAP
net income including items (a) through (b) is provided in the table
below.
(4) There was no stock-based compensation expense recorded in fiscal
2005, as we had adopted the footnote disclosure only provision of
SFAS 123.
Reconciliation of GAAP to Non-GAAP Net Income and Earnings per Share
(unaudited, in thousands except per share data)
Quarter Ended Quarter Ended
June 30, June 30,
2006 2005
------------- -------------
GAAP Net Income (Loss) $ (305) $ 14
(a) Stock-based compensation expense
related to employee stock options (1) 431 -
(b) Income tax effect of stock-based
compensation expense - -
------------- -------------
Non-GAAP Net Income $ 126 $ 14
============= =============
GAAP Earnings per common share - $ (0.03) $ 0.00
Per share effect of stock-based
compensation expense 0.04 -
------------- -------------
Non-GAAP Earnings per common share -
Basic $ 0.01 $ 0.00
============= =============
Non-GAAP Earnings per common share
- Diluted (2) $ 0.01 $ 0.00
============= =============
(1) For the second quarter of 2006, stock-based compensation expense
was allocated as follows: $148 to cost of sales expense and $283 to
selling, general and administrative expense.
(2) Common stock equivalents in the three months ended June 30, 2006,
were anti-dilutive due to the net losses sustained by the Company
during this period. Therefore, the diluted weighted average common
stock shares outstanding in this period are the same as the basic
weighted average common stock shares outstanding. However, if the
Company had net income the diluted weighted average number of shares
would have been 13,789,377 for the three months ended June 30, 2006.
Six Months Six Months
Ended June 30, Ended June 30,
2006 2005
--------------- ---------------
GAAP Net Income (Loss) $ (468) $ 107
(a) Stock-based compensation
expense related to employee
stock options (3) 787 -
(b) Income tax effect of
stock-based compensation
expense - -
--------------- ---------------
Non-GAAP Net Income $ 319 $ 107
=============== ===============
GAAP Earnings per common
share - $ (0.04) $ 0.01
Per share effect of stock-
based compensation expense 0.07 -
--------------- ---------------
Non-GAAP Earnings per
common share - Basic $ 0.03 $ 0.01
=============== ===============
Non-GAAP Earnings per
common share - Diluted (4) $ 0.02 $ 0.01
=============== ===============
(3) For the six months ended June 30, 2006, stock-based compensation
expense was allocated as follows: $254 to cost of sales expense and
$533 to selling, general and administrative expense.
(4) Common stock equivalents in the six months ended June 30, 2006,
were anti-dilutive due to the net losses sustained by the Company
during this period. Therefore, the diluted weighted average common
stock shares outstanding in this period are the same as the basic
weighted average common stock shares outstanding. However, if the
Company had net income the diluted weighted average number of shares
would have been 13,784,701 for the six months ended June 30, 2006.
