iMergent, Inc., a leading provider of eCommerce and software for small businesses and entrepreneurs, announced its results for the quarter and nine-months ended March 31, 2004.
Total revenue for the third fiscal quarter ended March 31, 2004 rose to $19.6 million from $14.3 million in the same quarter of 2003, an increase of 37 percent, surpassing the company’s expectations. The higher revenue was primarily due to an increase in the total number of workshops held in the first quarter, as well as the addition of workshops held in conjunction with MIT Financial. The company also continued its international expansion.
During the quarter, the company implemented the ETIF 99-19 accounting standard, which changed its revenue reporting method to net certain sales and marketing expenses against revenue and does not impact the company’s earnings, cash flows or financial position. The impact to revenue and sales and marketing expense is reconciled within the financial tables at the end of the release.
Earnings before income taxes (EBT) for the third fiscal quarter ended March 31, 2004 rose to $2.3 million from $2.0 million in the same quarter of 2003, an increase of 13 percent. Earnings before taxes includes a $1.0 million charge to bad debt expense for contracts signed prior to the company’s new customer service initiatives that were implemented during the second fiscal quarter; the company is seeing early, positive trends in the performance of contracts signed after the customer service initiatives were implemented. EBT per diluted share was $0.19 for the third quarter 2004, a 6 percent increase over $0.18 for the third quarter of 2003.
As a result of its recent strong earnings history, iMergent recognized a $13.5 million non-cash income tax benefit based on the reversal of the valuation allowance against its deferred tax asset, which consists mainly of net operating losses carried forward (NOL) from prior periods, effectively eliminating a $14.1 million tax burden on future earnings. As a result, net income for the third fiscal quarter increased to $15.8 million, or $1.28 per diluted share, compared to net income of $1.6 million, or $0.14 per diluted share, for the comparable quarter of the prior fiscal year.
Revenue for the nine-months ended March 31, 2004 grew to $56.1 million compared to $32.7 million for the same period last year, representing an increase of 71 percent. Earnings before income taxes for the nine-months ended March 31, 2004 rose to $5.9 million from $3.9 million in the same period, an increase of 53 percent. EBT per diluted share was $0.49 for the nine-month period, a 40 percent increase over $0.35 for the same period in 2003. Net income for the nine-months ended March 31, 2004, including the income tax benefit increased to $19.4 million, or $1.61 per diluted share, compared to $3.4 million, or $0.30 per diluted share, for the same period last year.
— Increased the number of StoresOnline(TM) workshops held during the quarter to 146 and year-to-date to 380.
— Continued iMergent’s international expansion, conducting eight workshops in Canada during the third quarter. International workshops events are planned for Australia, Canada, New Zealand, and the United Kingdom during the fourth quarter.
— Decreased the bad debt expense as a percentage of sales by 1.4 percent year-over-year. The company has a goal of reducing this expense further throughout the remainder of 2004.
— In February announced a marketing relationship with MIT Financial, an educational/training conference company, enabling iMergent experts to present the StoresOnline opportunity at MIT Financial’s conferences, which draws iMergent’s target audience.
— In February appointed Robert Lewis, CPA, chief financial officer, replacing Frank C. Heyman, who will retire from the company on June 30, 2004.
— In April closed a $3.0 million revolving loan agreement with Zions First National Bank allowing iMergent to borrow up to 80 percent of qualifying receivables at prime plus three percent. The loan agreement provides the company with liquidity and capital resources to finance customers and continue international expansion.
Brandon Lewis, president and chief operating officer, stated, “Our business continues to grow rapidly both domestically and internationally. We exceeded our expectations with record third quarter earnings, and we believe we will continue to show improvement in the coming quarters. In addition, our new line of credit increases our access to capital that will enable the company to substantially reduce the number of customer finance contracts sold at a discount each quarter. We expect this credit agreement along with our customer service initiatives will have a direct positive impact on our future operations.”
“Our customer service initiatives including our three-day right to rescind policy and customer education programs are coming to fruition, and our bad debt expenses have been trending downward,” stated Robert Lewis, chief financial officer. “In addition, we have established a strong profitability trend. Therefore, this quarter management decided to reverse the valuation allowance against our deferred tax assets and recognize the non-cash tax benefit of approximately $13.5 million, which impacted our bottom line significantly. Going forward we expect our tax rate will be approximately 38 percent. However, the future tax provision will not significantly affect our cash balance as it will we will benefit from our deferred tax asset of $14.1 million.”
Exchange Listing Summary
— On April 27th, iMergent applied for American Stock Exchange Listing.
— On May 5th, iMergent withdrew its application for NASDAQ Small Cap Exchange Listing.
Don Danks, chairman and chief executive officer, stated, “iMergent’s management team has been implementing strategies to achieve our goal of national exchange listing. Since January 2001, when iMergent was delisted, it has undergone significant changes. We now have a different primary business, different management team, and different board of directors, and we have established a record of consistent revenue growth and profitability. We initially applied for national market listing with NASDAQ nearly a year ago, and since that time we have been very responsive to all of NASDAQ’s requests. However, NASDAQ has informed us the examiners would still like to review another six months of customers service.”
Danks continued, “Consequently, the board of directors has determined it is in the best interest of our shareholders to apply for listing on the AMEX and withdraw our NASDAQ application. We have been speaking with AMEX and we anticipate our application will be processed efficiently. We hope to gain AMEX listing in the near future, and we will keep you posted.”
iMergent provides eCommerce solutions to entrepreneurs and small businesses enabling them to market and sell their business product or idea via the Internet. Headquartered in Orem, Utah the company sells its proprietary StoresOnline software and training services, helping users build a successful Internet strategy to market products, accept online orders, analyze marketing performance, and manage pricing and customers. In addition to software, iMergent offers site development, web hosting, marketing and mentoring products. iMergent typically reaches its target audience through a concentrated direct marketing effort to fill Preview Sessions, in which a StoresOnline expert reviews the product opportunities and costs. These sessions lead to a follow-up Workshop Conference, where product and technology experts train potential users on the software and encourage them to make purchases.
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