Intersections Inc. Reports Fourth Quarter 2004 Financial Results, Larg

Intersections Inc. Reports Fourth Quarter 2004 Financial Results, Largest Single Quarter Addition of New Subscribers in Company History

    Business Editors

    CHANTILLY, Va.--(BUSINESS WIRE)--Feb. 14, 2005--Intersections Inc. (Nasdaq:INTX) today announced financial results for the quarter and year ending December 31, 2004, including the largest single quarter addition of new subscribers in its history. Net income for the quarter ending December 31, 2004 was $3.3 million, compared to $2.5 million for the quarter ending December 31, 2003, an increase of 32.6 percent. Earnings per share ("EPS") was $0.18 for the fourth quarter and $0.70 for the year ending December 31, 2004. Fourth quarter earnings were lowered by approximately three cents per share due to the additional fulfillment expense for the record number of new subscribers, the previously announced amendment to an agreement with a major client, and the company's acquisition of American Background during its seasonal low period.
    "We are pleased with our performance in our first year as a public company, especially our fourth quarter in which we reported a record addition of new subscribers," said Chairman and Chief Executive Officer Michael Stanfield. "With the strong growth in our active subscriber base, which is now over 2.9 million, and our position in the marketplace, we look forward to an exciting and positive 2005."

    Fourth Quarter 2004 Financial Highlights:

--	Total subscribers increased to approximately 2.89 million as of December 31, 2004, compared to approximately 2.56 million as of September 30, 2004, an increase of 12.9 percent. Subscriber additions in the fourth quarter of 2004 were approximately 754,000, including approximately 105,000 prior period enrollments received and processed in October 2004. Even excluding the 105,000 prior enrollments, this represented the highest single quarter addition of new subscribers in our history.
--	Subscription revenue, net of marketing and commissions associated with subscription revenue, increased to $22.9 million for the fourth quarter of 2004 from $21.8 million for the third quarter of 2004, and from $18.0 million for the fourth quarter of 2003, an increase of 5.3 percent and 27.7 percent, respectively. Subscription revenue, net of marketing and commissions associated with subscription revenue, is a non-GAAP financial measure that we believe is important to investors and one that we utilize in managing our business as it normalizes the effect of changes in the mix of indirect and direct marketing arrangements and related revenue recognition.
--	Pre-tax income was $5.6 million, or 15.7 percent of revenue, for the fourth quarter of 2004, compared to $5.6 million, or 14.4 percent of revenue, for the third quarter of 2004 and $4.0 million, or 10.8 percent of revenue, for the fourth quarter of 2003.
--	Cash flow from operations for the quarter ending December 31, 2004 was over $8.7 million.
--	On November 12, 2004, we completed our acquisition of American Background Information Services, Inc. The consolidated financial results presented include the activity of American Background for the period November 12, 2004 through December 31, 2004.

    Twelve Month Results:

    -- Total subscribers increased 26.8 percent to approximately 2.89
    million as of December 31, 2004, compared to approximately
    2.27 million as of December 31, 2003.

    -- Subscription revenue, net of marketing and commissions
    associated with subscription revenue, increased 32.5 percent
    to $84.5 million for the twelve months ending December 31,
    2004, from $63.7 million for the twelve months ending December
    31, 2003.

    -- Pre-tax income was $19.5 million, or 12.8 percent of revenue,
    for the twelve months ending December 31, 2004 compared to
    $14.6 million, or 9.9 percent of revenue, for the twelve
    months ending December 31, 2003.

    -- Cash flow from operations for the twelve months ending
    December 31, 2004 was over $20.8 million. Capital expenditures
    for the twelve months ending December 31, 2004 were $10.3
    million.

    -- Our cash, cash equivalents and investment balance as of
    December 31, 2004 was over $52 million.

    Intersections' fourth quarter 2004 results will be discussed in more detail on February 14, 2005, at 5:00 p.m. EST via teleconference. A live audio webcast will be available on Intersections' Web site at www.intersections.com or at www.fulldisclosure.com. Participants are encouraged to go to the selected Web site at least 15 minutes in advance to register, download and install any necessary audio software. This webcast will be archived and available for replay after the teleconference. Additionally, the call will be available for telephonic replay from approximately 7:00 p.m. Monday, February 14 through 11:59 p.m. Wednesday, February 16, 2004 at (888) 286-8010 (Passcode: 97124905).

    Statements in this press release relating to future plans, results, performance, expectations, achievements and the like are considered "forward-looking statements." Those forward-looking statements involve known and unknown risks and are subject to change based on various factors and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including without limitation the effect of new subscriber additions. Factors and uncertainties that may cause actual results to differ include but are not limited to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to revise or update any forward-looking statements.

    About Intersections Inc.

    Intersections Inc. is the leading provider of branded and fully-customized consumer identity theft protection and credit management services to the customers of financial institutions and financial services companies in North America. Using our technology solutions and marketing capabilities, we assist these companies in meeting the needs of their customers in an effective, efficient and ethical environment. Intersections currently provides its services to over 2.9 million subscribers in the U.S. and Canada. Learn more about Intersections at www.intersections.com.

INTERSECTIONS INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended Twelve Months Ended December 31, December 31, ----------------------- ----------------------- 2004 2003 2004 2003 ----------- ----------- ----------- ----------- (In Thousands, except per share data)

Revenue $ 35,934 $ 36,546 $ 152,916 $ 147,306 Operating expenses: Marketing and commissions 11,656 17,950 66,047 75,531 Cost of revenue 11,283 8,785 40,093 35,668 General and administrative 6,312 4,901 23,330 18,312 Depreciation and amortization 1,296 709 3,991 2,234 ----------- ----------- ----------- ----------- Total operating expenses 30,547 32,345 133,461 131,745 ----------- ----------- ----------- ----------- Income from operations 5,387 4,201 19,455 15,561 Interest income (expense) 196 (250) 56 (1,008) Other income (expense) 51 13 31 12 ----------- ----------- ----------- ----------- Income before income taxes and minority interest 5,634 3,964 19,542 14,565 Income tax expense/(benefit) (2,337) (1,477) (7,685) 4,811 Minority interest in net loss of subsidiaries - - - 35 ----------- ----------- ----------- ----------- Net income $ 3,297 $ 2,487 $ 11,857 $ 19,411 =========== =========== =========== ===========

Net income per basic share $ .19 $ .50 $ .92 $ 3.92 =========== =========== =========== =========== Net income per diluted share $ .18 $ .18 $ .70 $ 1.36 =========== =========== =========== ===========

Weighted average common shares outstanding 17,169,710 4,963,953 12,929,211 4,954,344 Dilutive effect of common stock equivalents 1,335,652 9,994,717 4,587,614 10,010,513 ----------- ----------- ----------- ----------- Weighted average common shares outstanding - assuming dilution 18,505,362 14,958,670 17,516,825 14,964,857 =========== =========== =========== ===========

INTERSECTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

December 31, December 31, 2004 2003 ------------- ------------

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 12,026,557 $14,411,276 Short term investments 40,171,037 - Accounts receivable, net 9,969,709 7,914,771 Prepaid expenses and other current assets 2,795,822 1,591,575 Deferred subscription solicitation costs 9,185,196 9,767,563 Deferred tax asset 489,959 - ------------- ------------ Total current assets 74,638,280 33,685,185 PROPERTY AND EQUIPMENT--Net 15,821,136 7,138,908 DEFERRED TAX ASSET - 8,394,567 RESTRICTED CASH - 140,108 GOODWILL 16,268,471 - CUSTOMER INTANGIBLE ASSETS 2,000,000 - OTHER ASSETS 382,632 541,617 ------------- ------------ TOTAL ASSETS $109,110,519 $49,900,385 ============= ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES: Accounts payable $ 3,593,255 $ 2,387,754 Accrued expenses and other current liabilities 6,050,485 6,643,816 Accrued payroll and employee benefits 2,205,751 1,939,148 Accrued interest - 2,016,367 Commissions payable 1,932,493 2,070,617 Deferred revenue 3,691,110 4,246,004 Current obligations under capital leases 1,180,823 806,983 Deferred tax liability 1,449,147 3,230,757 ------------- ------------

Total current liabilities 20,103,064 23,341,446 ------------- ------------ OBLIGATIONS UNDER CAPITAL LEASES--Less current portion 1,763,857 972,142 OTHER LONG-TERM LIABILITIES 116,318 101,684 SENIOR SECURED CONVERTIBLE NOTE - 20,000,000 MINORITY INTEREST - 49 STOCKHOLDERS' EQUITY: Preferred stock 495 Common stock 173,245 49,640 Deferred compensation (29,506) (49,177) Additional paid-in capital 90,531,204 20,888,835 Accumulated deficit (3,547,663) (15,404,729) ------------- ------------

Total stockholders' equity 87,127,280 5,485,064 ------------- ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $109,110,519 $49,900,385 ============= ============

INTERSECTIONS INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

Twelve Months Ended Twelve Months Ended December 31, December 31, 2004 2003 ---- ---- (In Thousands) CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 11,857 $ 19,411 Adjustments to reconcile net income to net cash used in operating activities Depreciation and amortization 3,991 2,233 Non-cash interest expense 321 - Compensation expense related to warrants and options 20 29 Tax benefit of stock options exercised 743 - Deferred income tax 6,123 (5,164) Amortization of deferred subscription solicitation costs 21,671 22,794 Minority interest - (35) Changes in assets and liabilities (23,917) (28,107) --------- --------- Net cash provided by operations 20,809 11,161

NET CASH USED IN INVESTING ACTIVITIES: Acquisition of property and equipment (10,350) (5,265) Purchase of ABI (18,321) - Investments (40,171) - --------- --------- Net cash used in investing activities (68,842) (5,265)

CASH FLOW FROM FINANCING ACTIVITIES: Issuance of common stock 44,947 19 Options exercised 1,798 - Capital lease payments (1,097) (963) --------- --------- Net cash provided by (used in) financing activities 45,648 (944)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,385) 4,952

CASH AND CASH EQUIVALENTS Beginning of period 14,411 9,459 --------- --------- CASH AND CASH EQUIVALENTS End of period $ 12,026 $ 14,411 ========= =========

INTERSECTIONS INC. OTHER DATA (DOLLARS IN THOUSANDS)

Three Months Ending Twelve Months Ending December 31, December 31, 2004 2003 2004 2003 --------- --------- --------- --------- Depreciation & Amortization $ 1,296 $ 709 $ 3,991 $ 2,233 ========= ========= ========= =========

Subscribers at beginning of period 2,555,017 2,113,101 2,274,605 1,562,537 New subscribers - indirect (1) 545,150 382,733 1,609,469 1,491,282 New subscribers direct 209,036 197,708 805,217 793,365 Cancelled subscribers within first 90 days of subscription 146,069 153,028 586,680 662,058 Cancelled subscribers after first 90 days of subscription 277,911 265,909 1,217,388 910,521 --------- --------- --------- --------- Subscribers at end of period 2,885,223 2,274,605 2,885,223 2,274,605 ========= ========= ========= =========

Indirect subscribers 60.1% 52.4% Direct subscribers 39.9 47.6 --------- --------- Subscribers at end of period 100.0% 100.0% ========= =========

Total revenue $ 35,934 (2) $ 36,546 $152,916 $147,306 Revenue from transactional sales (1,363) (1,332) (3,093) (18,450) Revenue from lost/stolen credit card registry (20) (22) (85) (93) --------- --------- --------- --------- Subscription revenue $ 34,551 $ 35,192 $149,738 $128,763 ========= ========= ========= ========= Marketing and commissions $ 11,656 $ 17,950 $ 66,047 $ 75,531 Commissions paid on transactional sales (27) (712) (759) (10,475) Commissions paid on lost/stolen credit card registry (2) (2) (9) (12) --------- --------- --------- --------- Marketing and commissions associated with subscription revenue $ 11,627 $ 17,236 $ 65,279 $ 65,044 ========= ========= ========= ========= Subscription revenue, net of marketing and commissions associated with subscription revenue $ 22,924 $ 17,956 $ 84,459 $ 63,719 ========= ========= ========= =========

Indirect revenue 41.6% 33.8% 40.5% 31.7% Direct revenue 58.4 66.2 59.5 68.3 --------- --------- --------- --------- Subscription revenue, net of marketing and commissions associated with subscription revenue 100.0% 100.0% 100.0% 100.0% ========= ========= ========= =========

(1) Included in our fourth quarter new subscribers are approximately 105,000 subscriber enrollments that were not received by us until October due to a processing delay at another company. We fulfilled these subscribers in the fourth quarter of 2004.

(2) Total revenue was lower in the fourth quarter of 2004 compared to the fourth quarter of 2003 due to a change in revenue recognition as a result of revised pricing terms to a marketing and services agreement with one of our clients that was effective September 1, 2004.

--30--JS/ph*

CONTACT: Intersections Inc. Debra Hoopes, 703-488-6184 dhoopes@intersections.com or Amy Gergely, 703-488-6229 agergely@intersections.com

KEYWORD: VIRGINIA INDUSTRY KEYWORD: BANKING SOFTWARE INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Intersections Inc.

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