infoUSA Reports Record Revenue and Strong Results for FY2004

    Business Editors

    OMAHA, Neb.--(BUSINESS WIRE)--Jan. 20, 2005--infoUSA(R) (Nasdaq:IUSA):

---------------------------------------------------------------------- (amounts in thousands, except 4th 4th Year-to- Year-to- per share amounts) Quarter Quarter date date 2003 2004 2003 2004 ---------------------------------------------------------------------- Net sales $79,055 $90,082 $311,345 $344,859 ---------------------------------------------------------------------- EBITDA (see table on income statement) 15,913 19,452(a) 71,163 68,919(b) Operating income 9,351 11,288(a) 48,550 41,329(b) Net income 4,483 5,328 19,695 18,458 Diluted earnings per share 9 cents 10 cents 38 cents 35 cents ----------------------------------------------------------------------

---------------------------------------------------------------------- Total debt 139,765 196,226 139,765 196,226 Capital expenditures (see table) 1,225 1,342 6,625 6,957 Cash Flow from Operations 19,020 27,165 56,564 72,956 ----------------------------------------------------------------------

(a) These figures were negatively impacted by approximately $6.9 million related to acquisition accounting of OneSource and conversion of a portion of infoUSA Group business to subscription format.

(b) These figures were negatively impacted by approximately $17.9 million related to acquisition accounting of OneSource and conversion of a portion of infoUSA Group business to subscription format.

    RESULTS OF OPERATIONS

    Vin Gupta, Chairman and CEO, infoUSA, said, "During 2004, we achieved record revenues of $344.9 million, as well as solid profitability. We were able to grow our revenues through strong organic results in most of our key revenue divisions as well as successful integration of our recent acquisitions. We generated this revenue growth while at the same time achieving adjusted EBITDA margins of 24%. Our fiscal 2004 reported revenues were negatively impacted by approximately $18 million related to acquisition accounting of OneSource and conversion of a portion of our infoUSA Group business to subscription format. Our full year EBITDA was $68.9 million or 20% of revenues. EBITDA for the full year was negatively impacted by aforementioned accounting impact of approximately $18 million. We have generated $66.0 million of free cash flow (calculated as cash flow from operations less capital expenditures) for the full year 2004. Our GAAP earnings per share for fiscal 2004 were 35 cents. Our results for fiscal 2004 exceeded our latest guidance to Wall Street. These results have positioned us well to meet or exceed our previous revenue and EPS guidance for fiscal 2005. Based on these results, we are also increasing our median free cash flow projection for 2005 to $70 million."
    Gupta continued, "We were very satisfied with our fiscal 2004 performance. We have fully integrated our three acquired companies, i.e. OneSource, Edith Roman and Triplex. Their contribution to our cash flow has been better than expected. They will continue to enhance our revenue growth and operating margins by cross-selling more of our proprietary data content products to their existing customer bases. These acquisitions have also strengthened our already strong pipeline of new business for fiscal 2005, as evidenced by our $33 million increase in deferred revenue during 2004."
    "Our roll-out of subscription products is proceeding on plan, and is gaining acceptance among small businesses, entrepreneurs, and sales people. We were able to build this subscription base while at the same time keeping our cancellation rates below 10%. Our 'Unlimited Sales Leads and Mailing List' service (Sales Genie(TM)) has been a real hit with small businesses. Now they have access to unlimited sales leads for only $250 per month. They also get free and integrated contact management software and mapping capability. Our strategy of migrating our small business customers from one-time purchasers of sales leads to a subscription based service will be a key growth driver of infoUSA."
    "Due to our cost cuts and early integration of acquisitions, we have been able to get closer to our historical EBITDA margin levels again. We finished fourth quarter of 2004 with an adjusted EBITDA margin of approximately 27%. We are also investing in migrating our mainframe-based infrastructure to a server-based environment to deliver more expedient, reliable, and affordable data processing solutions to our customer base in 2005 and beyond. The effective migration to a server-based architecture will enable us to reduce significantly our data processing hardware and software costs. We feel confident that we can deliver expected internal growth and EBITDA margins to our shareholders going forward."
    Gupta added, "We continued to strengthen our balance sheet throughout the year. We used approximately $54 million of our free cash flow to pay down our debt. Our plan is to continue de-leveraging our balance sheet through prudent cash management. Our Board of Directors is also considering a dividend payment in 2005 to reward our loyal shareholders, who will be able to take advantage of lower tax rates."
    Gupta continued, "We have several database enhancement initiatives in 2005 that will enable us to stay on the cutting edge of our industry. In 2004 we started taking pictures of store fronts along with entering precise latitudes and longitudes called geocodes. In 2005 we will kick this project into high gear and take around 4 million pictures in 100 largest metropolitan areas. These pictures will add value to our Business Credit Reports and Sales Leads products. Additionally, we will license them to value added resellers to be used in applications like car navigation, legal due diligence services, and financial services applications."
    "We are in the process of enhancing our Business Credit Report by suggesting the recommended credit limit on 13 million businesses in our database. This credit limit amount will be offered in addition to our proprietary Business Credit Score on each business in our database."
    "During the first quarter of 2005, we are also enhancing our consumer database to include lifestyle information on most of our web sites. The web will enable a greater distribution of the valuable lifestyle information to our customers."
    "We will be publishing a report on Yellow Page Ad Spending by Small Businesses by March of this year. The report will include money spent by small businesses for Yellow Page advertising. Yellow Page publishers and web advertising firms will be able to sort this information by many selects, including by individual business as well as by SIC code and any geographic region. Combined these initiatives will provide us with a significant competitive edge for our already finest database in the industry."
    Gupta concluded, "We have built a strong management team whose dedication and commitment will enable us to provide solid growth. We have the highest quality database of consumers and businesses in the U.S. and Canada. The database has many different applications for small businesses, non-profit organizations, governmental entities, and Fortune 1000 companies. We also control our distribution channel with our sales force of over 1,000 sales executives. We feel confident that our recent initiatives around subscription products will lead us to the next level of growth."

    Highlights of Fourth Quarter:

    Net sales for the fourth quarter were $90.1 million compared to $79.1 million for the fourth quarter of 2003. EBITDA for the fourth quarter was $19.5 million, or 22% of net sales, compared to $15.9 million, or 20% of net sales, for the fourth quarter of last year. EBITDA for the fourth quarter was impacted negatively by approximately $6.9 million as follows: (i) non-recognizable deferred revenue from the OneSource acquisition of $3.2 million and (ii) deferral of approximately $3.7 million of revenues from accounting for our subscription product revenue. The increase in EBITDA margin for the fourth quarter is attributable to: (i) margin expansion in our core business through strict cost cutting initiatives and (ii) successful integration of our recent acquisitions.
    Fourth quarter GAAP earnings per share were 10 cents versus earnings per share of 9 cents for the fourth quarter of 2003. The aforementioned factors contributed to the growth of earnings per share. Free cash flow (cash flow from operations less capital expenditures) for fiscal fourth quarter was $25.8 million, or 29% of net sales, compared to $17.8 million, or 23% of net sales, for the prior year period.

    Highlights of Fiscal Year 2004:

    Net sales for the fiscal year 2004 were $344.9 million compared to $311.3 million for 2003. EBITDA for 2004 was $68.9 million, or 20% of net sales, compared to $71.2 million, or 23% of net sales for the previous year. EBITDA for 2004 was impacted negatively by approximately $17.9 million as follows: (i) non-recognizable deferred revenue from the OneSource acquisition of $9.0 million and (ii) deferral of approximately $8.9 million of revenues from accounting for our subscription product revenue.
    Fiscal 2004 GAAP earnings per share were 35 cents versus earnings per share of 38 cents for fiscal 2003. The aforementioned accounting impact was primarily responsible for a lower earnings per share in 2004 versus 2003. Cash flow from operations for fiscal 2004 was $73.0 million, or 21% of net sales, compared to $56.6 million, or 18% of net sales for the prior year. Free cash flow (cash flow from operations less capital expenditures) for fiscal 2004 was $66.0 million, or 19% of net sales, compared to $49.9 million, or 16% of net sales for the prior year.
    Deferred revenue liability on the balance sheet as of December 31, 2004 was $53.0 million, an important measure of contractually obligated revenue for the company. The company also had an incremental $45.1 million of unbilled contractually obligated revenue at the end of the year that is not reflected on the balance sheet. Deferred revenue on the balance sheet combined with the unbilled contractually obligated revenue provides a good measure of the business in the pipeline for the company over next twelve months.

    OPERATING HIGHLIGHTS

    The Donnelley Group (Large Business Group)

    The Donnelley Group, previously known as the Large Business Group, reported fourth quarter 2004 revenues of $57.0 million, up 38% from the comparable quarter of 2003, and full year 2004 revenues of $200.3 million, up 28% from the previous year. Much of the growth was due to the recent acquisition of Triplex, OneSource, and Edith Roman, which have provided better than expected contributions to our operating margins. Our organic revenue growth in this segment was 3% for the full year 2004. Under the leadership of Ray Butkus, Ed Mallin, Dan Gust, Yvonne Cekel, and Ed Henrich, the Donnelley Group is totally focused on cross-selling our various products and services to customers and long-term organic revenue growth of over 10%.

    The infoUSA Group (Small Business Group)

    The infoUSA Group, formerly known as the Small Business Group, reported 2004 fourth quarter revenues of $33.1 million, compared to $37.6 million in the fourth quarter of last year. The primary reason for the decline was the impact from subscription accounting during the fourth quarter of approximately $3.7 million. For fiscal year 2004, this group had revenue of $144.5 million, versus $155.4 million last year. The primary reason for the decline was the impact from subscription accounting during the fiscal 2004 of approximately $8.9 million, including lower recognized revenue from our Sales Genie(TM) product due to subscription revenue recognition.
    This Group consists of approximately 20 small business units that offer directory products, vertical databases, online sales leads, custom sales leads and products for sales people and SOHO markets. Most of these divisions are being very successful in migrating a significant portion of their business to subscription products. Conversions from one-time sales to this subscription format have caused this Group to experience short-term reductions in reported GAAP revenue due to accounting for subscription products because revenue from subscriptions are recognized over the subscription period instead of at the time of sale. Our recently introduced Sales Genie(TM), SalesLeadsUSA(TM), and Credit.Net(TM) products have been embraced by the small business marketplace. While these subscription products have short-term negative impact on our recognized GAAP revenues, they provide the critical impetus for our long-term goal of over 10% organic revenue growth for infoUSA Group. Our Polk Directories division is also selling its directories, DVD, and Internet access on subscription basis. This migration is taking place to our satisfaction.

    OUTLOOK FOR FISCAL 2005

    Based on the revenue growth initiatives in its infoUSA Group and early acquisition integrations in its Donnelley Group, infoUSA management feels optimistic about continuing to execute on its current product and marketing strategies to drive organic revenue growth while producing healthy EBITDA margins and earnings per share. During 2005, the accounting impact related to OneSource revenue and subscription products will total less than $6 million. The company is re-confirming its previous guidance for 2005 revenues, EBITDA, and earnings per share as follows: (i) GAAP revenues for fiscal 2005 is projected to be approximately $390 million to $400 million; (ii) EBITDA for fiscal 2005 is projected to be approximately $98 million to $102 million; and (ii) GAAP earnings per share for fiscal 2005 is projected to be approximately 63 cents to 67 cents. The company is revising upward its previous guidance for 2005 free cash flow to be approximately $68 million to $72 million.

    Conference Call

    The company will host its fourth quarter conference call on January 21st, at 11:00 AM Eastern time. To access the conference call, please dial 800/901-5259, passcode #50207152, approximately 10 minutes prior to the start of the call. A replay of the call will be available from 1:00 PM Eastern time, January 21st, through midnight Eastern Time, January 28th. The replay number is 888/286-8010, passcode # 18704951. 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.

    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 FOR THE TWELVE QUARTER ENDED MONTHS ENDED ----------------- ------------------- Dec 31, Dec 31, Dec 31, Dec 31, 2003 2004 2003 2004 -------- -------- --------- --------- (unaudited)

Net sales $79,055 $90,082 $311,345 $344,859 Costs and expenses: Database and production costs 22,518 26,520 87,074 102,838 Selling, general and administrative 40,243 43,469 144,068 166,715 Depreciation and amortization of operating assets 3,319 3,665 14,573 14,062 Amortization of intangible assets 3,316 4,404 13,276 15,875 Non-cash stock compensation 74 184 219 779 Restructuring costs 231 552 1,861 2,940 Litigation settlement charge 0 0 1,667 0 Acquisition costs 3 0 57 321 -------- -------- --------- --------- 69,704 78,794 262,795 303,530 -------- -------- --------- ---------

Operating income 9,351 11,288 48,550 41,329

Other income (expense): Investment income (loss) (73) 29 1,149 (190) Other charges 0 66 (6,385) (2,157) Interest expense (2,047) (2,788) (11,547) (9,210) -------- -------- --------- ---------

Income before income taxes 7,231 8,595 31,767 29,772 Income taxes 2,748 3,267 12,072 11,314 -------- -------- --------- ---------

Net income $4,483 $5,328 $19,695 $18,458 ======== ======== ========= ========= BASIC & DILUTED EARNINGS PER SHARE: Basic earnings per share $0.09 $0.10 $0.38 $0.35 ======== ======== ========= ========= Diluted earnings per share $0.09 $0.10 $0.38 $0.35 ======== ======== ========= ========= Basic weighted average shares outstanding 52,245 53,116 51,576 52,851 ======== ======== ========= ========= Diluted weighted average shares outstanding 52,526 53,979 51,714 53,564 ======== ======== ========= =========

The following provides a reconciliation of net income to EBITDA:

FOR THE QUARTER FOR THE TWELVE ENDED MONTHS ENDED December 31, December 31, December 31, December 31, 2003 2004 2003 2004 Net income $4,483 $5,328 $19,695 $18,458 Interest expense 2,047 2,788 11,547 9,210 Income taxes 2,748 3,267 12,072 11,314 Depreciation and amortization of operating assets 3,319 3,665 14,573 14,062 Amortization of intangible assets 3,316 4,404 13,276 15,875 ------------ ------------ ------------ ------------ EBITDA $15,913 $19,452 $71,163 $68,919 ============ ============ ============ ============

The following provides a schedule of Capital Expenditures:

FOR THE QUARTER FOR THE TWELVE ENDED MONTHS ENDED December 31, December 31, December 31, December 31, 2003 2004 2003 2004 ------------ ------------ ------------ ------------ Purchases of Property of Equipment $825 $649 $5,482 $4,370 Software and Database Development Costs 400 693 1,143 2,587 ------------ ------------ ------------ ------------ Capital Expenditures $1,225 $1,342 $6,625 $6,957 ============ ============ ============ ============

The following provides a reconciliation of Cash Flow from Operations to Free Cash Flow:

FOR THE QUARTER FOR THE TWELVE ENDED MONTHS ENDED December 31, December 31, December 31, December 31, 2003 2004 2003 2004 ------------ ------------ ------------ ------------ Cash Flow from Operations $19,020 $27,165 $56,564 $72,956 Less: Capital Expenditures (1,225) (1,342) (6,625) (6,957) ------------ ------------ ------------ ------------ Free Cash Flow $17,795 $25,823 $49,939 $65,999 ============ ============ ============ ============

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 December 31, 2004, compared to December 31, 2003.

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(amounts in thousands) December 31, December 31, 2003 2004 ---------------------------------------------------------------------- Assets ---------------------------------------------------------------------- Cash and Cash Equivalents $2,686 $10,404

Accounts Receivable 40,922 51,707

Accounts Receivable-List Brokerage 12,844 19,635

Deferred Marketing Costs 5,457 2,632

Property and Equipment, net 40,984 42,537

Intangible Assets, net 247,609 365,286

---------------------------------------------------------------------- Liabilities ---------------------------------------------------------------------- Accounts Payable 16,212 21,268

Accounts Payable-List Brokerage 9,516 15,427

Accrued Payroll Expenses 17,793 15,917

Accrued Expenses 824 7,028

Deferred Revenue 19,824 53,034

Total Debt 139,765 196,226 ----------------------------------------------------------------------

--30--SH/ms*

CONTACT: infoUSA, Omaha Vin Gupta, 402-596-8900 Fax: 402-339-0265 E-Mail: vin.gupta@infoUSA.com or Raj Das, 402-593-4517 Fax: 402-339-0265 E-Mail: raj.das@infoUSA.com or Laurel Gupta, 402-593-4535 Fax: 402-339-0265 E-Mail: laurel.gupta@infousa.com

KEYWORD: NEBRASKA INDUSTRY KEYWORD: HARDWARE ADVERTISING/MARKETING SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: infoUSA

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