IntraLinks Announces Third Quarter 2011 Results

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Nov 08, 2011, 04:01 ET

NEW YORK, Nov. 8, 2011 /PRNewswire/ -- IntraLinks Holdings, Inc. (NYSE: IL), a leading provider of critical information exchange solutions, today announced results for its third quarter of 2011.

Financial highlights for the third quarter include:

Total revenue of $54.8 million, up 15% year-over-year
Enterprise revenue of $24.5 million, up 11% year-over-year
M&A revenue of $21.5 million, up 19% year-over-year
GAAP net income of $0.8 million or $0.01 per share, compared to a net loss of ($4.0) million or ($0.22) per share for the same quarter last year
Non-GAAP adjusted net income of $6.0 million or $0.11 per share, compared to non-GAAP adjusted net income of $3.8 million or $0.07 per share for the same quarter last year
Non-GAAP adjusted EBITDA of $18.0 million, an increase of 8%, compared to $16.7 million for the same quarter last year
Cash flow from operations of $13.3 million, compared to $11.9 million for the same quarter last year

"Our business as a whole performed well in the third quarter. We continued to gain share in the M&A market, and we are well underway with providing differentiated solutions for our DCM customers," said Andrew Damico, IntraLinks' President and CEO. "We have not yet gained the momentum I would like to see in our Enterprise business; however, I am confident that our continuing investments in sales, customer service and marketing will allow us to achieve greater momentum going forward."

"Our third quarter results were consistent with our guidance for the period. Our fourth quarter guidance reflects our continued investment in the business and the current macroeconomic environment," said Anthony Plesner, IntraLinks' CFO.

Third Quarter 2011

Total revenue was $54.8 million, an increase of 15%, compared to $47.9 million for the corresponding quarter last year.

Enterprise revenue was $24.5 million, up 11% year-over-year compared to $22.1 million last year
M&A revenue was $21.5 million, up 19% year-over-year compared to $18.2 million last year
DCM revenue was $8.3 million, up 8% year-over-year compared to $7.6 million last year
Other revenue of $0.5 million consisted of an insurance recovery for actual lost revenue under a business interruption policy.

GAAP gross margin was 73.7%, a decrease of 140 basis points compared to 75.1% for the corresponding quarter last year.

Non-GAAP gross margin was 79.9%, a decrease of 220 basis points compared to 82.1% for the corresponding quarter last year.

GAAP operating income was $2.8 million, compared to an operating income of $3.6 million for the corresponding quarter last year.

Non-GAAP adjusted operating income was $12.8 million, up 6% year-over-year compared to $12.1 million for the corresponding quarter last year.

GAAP net income of $0.8 million, compared to a GAAP net loss of ($4.0) million for the corresponding quarter last year. Diluted GAAP net income per share for the third quarter was $0.01 on the basis of 54,645,578 shares outstanding. In the prior year comparable period, diluted GAAP net loss per share was ($0.22) on the basis of 18,056,423 shares outstanding.

We generated non-GAAP adjusted net income of $6.0 million, compared to non-GAAP adjusted net income of $3.8 million for the corresponding quarter last year. Non-GAAP adjusted net income per share was $0.11 on the basis of 54,645,578 shares outstanding. In the corresponding quarter for the prior year, non-GAAP net income per share was $0.07 on the basis of 50,851,760 shares outstanding. Shares outstanding for the prior period are on a pro forma basis, assuming that the conversion of outstanding preferred stock to common stock and the initial and follow-on offerings of common stock occurred at the beginning of the period.

Non-GAAP adjusted EBITDA was $18.0 million, up 8% year-over-year compared to non-GAAP adjusted EBITDA of $16.7 million for the corresponding quarter last year.

Cash flow from operations was $13.3 million, compared to $11.9 million in the corresponding quarter last year.

Business Outlook:

Based on information available as of November 8, 2011, IntraLinks is providing guidance for the fourth quarter 2011 as follows:

Fourth Quarter 2011

Revenue: $51 million to $53 million
GAAP operating income: $2.0 million to $3.0 million
Non-GAAP operating income: $11.2 million to $13.2 million
Non-GAAP adjusted EBITDA: $16.5 million to $18.5 million
GAAP net loss per share: ($0.05) to ($0.07)
Non-GAAP net income per share: $0.11 to $0.13

Quarterly Conference Call

IntraLinks will host a conference call today at 5:00 p.m. Eastern Time (ET) to discuss the company's third quarter 2011 financial results and its business outlook for the fourth quarter 2011, which may include guidance supplemental to the above. To access this call, dial 866-524-3160 (domestic) or 412-317-6760 (international). A passcode is not required. This presentation will also be webcast live on the investor relations section on the IntraLinks website at www.intralinks.com/ir. In conjunction with this call, there will also be accompanying slides with supplemental information available at the same website location.

Following the conference call, a replay will be available until November 15, 2011, at 877-870-5176 (domestic) or 858-384-5517 (international). The passcode for the replay is 2254481. An archived webcast of this conference call will also be available on the investor relations section on the IntraLinks website at www.intralinks.com/ir.

About IntraLinks

IntraLinks (NYSE: IL) is a leading global provider of Software-as-a-Service solutions for securely managing content, exchanging critical business information and collaborating within and among organizations. More than 1 million professionals in industries including financial services, pharmaceutical, biotechnology, consumer, energy, industrial, legal, insurance, real estate and technology, as well as government agencies, have utilized IntraLinks' easy-to-use, cloud-based solutions. IntraLinks users can accelerate information-intensive business processes and workflows, meet regulatory and risk management requirements and collaborate with customers, partners and counterparties in a secure, auditable and compliant manner. Professionals at more than 800 of the Fortune 1000 companies have used IntraLinks' solutions. For more information, visit www.intralinks.com or http://blog.intralinks.com. You can also follow IntraLinks on Twitter at http://twitter.com/intralinks and Facebook at www.facebook.com/IntraLinks.

Non-GAAP Financial Measures

The Press Release includes information about certain financial measures that are not prepared in accordance with generally accepted accounting principles in the United States ("GAAP" or "U.S. GAAP"), including non-GAAP gross profit and margin, non-GAAP adjusted operating income and margin, non-GAAP adjusted net income, non-GAAP adjusted net income per share, non-GAAP adjusted EBITDA and margin and free cash flow. These non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies.

Management defines its non-GAAP financial measures as follows:

Non-GAAP gross margin represents the corresponding GAAP measure adjusted to exclude (1) stock-based compensation expense, and (2) amortization of intangible assets.
Non-GAAP adjusted operating income represents the corresponding GAAP measure adjusted to exclude (1) stock-based compensation expense, (2) amortization of intangible assets, and (3) costs related to public stock offerings.
Non-GAAP adjusted net income represents the corresponding GAAP measure adjusted to exclude (1) stock-based compensation expense, (2) amortization of intangible assets, (3) costs related to public stock offerings, and (4) costs related to debt repayments. Non-GAAP adjusted net income is calculated using an estimated long-term effective tax rate.
Non-GAAP adjusted EBITDA represents net income (loss) adjusted to exclude (1) interest expense, net of interest income, (2) income tax provision (benefit), (3) depreciation and amortization, (4) amortization of intangible assets, (5) stock-based compensation expense, (6) amortization of debt issuance costs, (7) loss on extinguishment of debt, (8) other expense (income), net and (9) costs related to public stock offerings.
Free cash flow represents cash flow from operations less capital expenditures.
Metrics presented as non-GAAP margins represent the respective non-GAAP measures as a percentage of revenue.

Management believes that these non-GAAP financial measures, when viewed with our results under U.S. GAAP and the accompanying reconciliations, provide useful information about our period-over-period growth and provide additional information that is useful for evaluating our operating performance and manage the cash needs of our business. Additionally, management believes that these non-GAAP financial measures provide a more meaningful comparison of our operating results against those of other companies in our industry, as well as on a period to-period basis, because these measures exclude items that are not representative of our operating performance, such as amortization of intangible assets, interest expense and fair value adjustments to the interest rate swap. Management believes that including these costs in our results of operations results in a lack of comparability between our operating results and those of our peers in the industry, the majority of which are not highly leveraged and do not have comparable amortization costs related to intangible assets. However, non-GAAP gross margin, non-GAAP adjusted operating income, non-GAAP adjusted net income, non-GAAP adjusted EBITDA and margin and free cash flow are not measures of financial performance under U.S. GAAP and, accordingly, should not be considered as alternatives to gross margin, operating income, net income (loss), and cash flows provided by operations as indicators of operating performance.

A reconciliation of GAAP to Non-GAAP financial measures has been provided in the financial statement tables included in the Press Release.

Forward Looking Statements

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This press release contains express or implied forward-looking statements that are not based on historical information relating to, among other things, expectations and assumptions concerning management's forecast of financial performance, future business growth, and management's plans, objectives, and strategies. These statements are neither promises nor guarantees, but are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things: the uncertainty of our future profitability; our ability to sustain positive cash flow; periodic fluctuations in our operating results; risks related to our substantial debt balances; our ability to maintain the security and integrity of our systems; our ability to increase our penetration in our principal existing markets and expand into additional markets; our dependence on the volume of financial and strategic business transactions; our dependence on customer referrals; our ability to maintain and expand our direct sales capabilities; our ability to develop and maintain strategic relationships to sell and deliver our solutions; customer renewal rates; our ability to maintain the compatibility of our services with third-party applications; competition and our ability to maintain our average sales prices; our ability to adapt to changing technologies; interruptions or delays in our service; international risks; our ability to protect our intellectual property; costs of being a public company; and risks related to changes in laws, regulations or governmental policy including tax regulations. Further information on these and other factors that could affect our financial results is contained in our public filings with the Securities and Exchange Commission (the "SEC") from time to time, including our Registration Statement on Form S-1 as amended (File No. 333-173107), which was declared effective by the SEC on April 6, 2011. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

IntraLinks undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise.

IntraLinks Holdings, Inc. Consolidated Balance Sheets (In Thousands, Except Share and per Share Data) (unaudited)
				September 30,		December 31,
				2011		2010
ASSETS
Current assets:
	Cash and cash equivalents		$	47,647	$	50,467
	Accounts receivable, net of allowances of $2,178 and $2,418, respectively			41,824		37,137
	Investments			20,459		-
	Deferred taxes			19,781		18,264
	Prepaid expenses			5,643		5,916
	Other current assets			4,429		2,457
		Total current assets		139,783		114,241
Fixed assets, net				7,898		8,075
Capitalized software, net				29,153		25,676
Goodwill				215,478		215,478
Other intangibles, net				139,391		160,863
Other assets				1,212		2,022
		Total assets	$	532,915	$	526,355

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	2,925	$	4,191
	Accrued expenses and other current liabilities			18,547		22,444
	Deferred revenue			41,533		38,043
		Total current liabilities		63,005		64,678
Long term debt				90,843		125,886
Deferred taxes				46,103		46,103
Other long term liabilities				699		2,244
		Total liabilities		200,650		238,911
Stockholders' equity:
	Undesignated Preferred Stock, $0.001 par value; 10,000,000 shares authorized; 0 shares
		issued and outstanding as of September 30, 2011 and December 31, 2010		-		-
	Common stock, $0.001 par value; 300,000,000 shares authorized; 54,204,694 and 52,387,374
		shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively		54		52
	Additional paid-in capital			409,651		365,962
	Accumulated deficit			(77,559)		(78,813)
	Accumulated other comprehensive income			119		243
		Total stockholders' equity		332,265		287,444
		Total liabilities and stockholders' equity	$	532,915	$	526,355

IntraLinks Holdings, Inc. Consolidated Statements of Operations (In Thousands, Except Share and per Share Data) (unaudited)
				Three Months Ended				Nine Months Ended
				September 30,				September 30,
				2011		2010		2011		2010

Revenue			$	54,319	$	47,874	$	159,955	$	132,214
Other revenue				507		-		614		-
	Total revenue			54,826		47,874		160,569		132,214
Cost of revenue				14,439		11,916		42,192		34,947
	Gross profit			40,387		35,958		118,377		97,267
Operating expenses:
Product development				3,587		5,030		14,692		13,774
Sales and marketing				23,734		20,130		67,461		58,256
General and administrative				10,292		7,234		29,735		20,339
	Total operating expenses			37,613		32,394		111,888		92,369
		Income from operations		2,774		3,564		6,489		4,898
Interest expense, net				2,552		5,862		8,146		19,998
Amortization of debt issuance costs				214		1,111		1,155		2,026
Loss on extinguishment of debt				-		4,974		-		4,974
Other expense (income), net				515		(919)		(2,547)		(1,207)
	Net loss before income tax			(507)		(7,464)		(265)		(20,893)
Income tax benefit				(1,271)		(3,433)		(1,519)		(7,439)
	Net income (loss)		$	764	$	(4,031)	$	1,254	$	(13,454)

Net income (loss) per common share
		Basic	$	0.01	$	(0.22)	$	0.02	$	(2.19)
		Diluted	$	0.01	$	(0.22)	$	0.02	$	(2.19)

Weighted average number of shares used in
	calculating net income (loss) per share
		Basic		53,912,637		18,056,423		53,140,869		6,153,359
		Diluted		54,645,578		18,056,423		54,396,333		6,153,359

IntraLinks Holdings, Inc. Consolidated Statements of Cash Flows (In Thousands) (unaudited)
					Nine Months Ended
					September 30,
					2011		2010
Net income (loss)				$	1,254	$	(13,454)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization				15,401		12,137
	Stock-based compensation expense				6,765		2,846
	Amortization of intangible assets				21,472		21,583
	Amortization of debt discount				-		116
	Amortization of debt issuance cost				1,155		2,026
	Provision for bad debts and customer credits				642		332
	Loss (gain) on disposal of fixed assets				227		(221)
	Change in deferred taxes				(1,518)		(8,117)
	Gain on interest rate swap				(3,098)		(1,393)
	Currency remeasurement loss				357		-
	Loss on extinguishment of debt				-		4,974
	Non-cash interest expense				-		4,880
Changes in operating assets and liabilities:
	Accounts receivable				(5,826)		(11,219)
	Prepaid expenses and other current assets				(2,894)		242
	Other assets				813		(2,391)
	Accounts payable				(1,274)		(3,231)
	Accrued expenses and other liabilities				(2,330)		(1,800)
	Deferred revenue				3,601		8,662
		Net cash provided by operating activities			34,747		15,972
Cash flows from investing activities:

	Capital expenditures				(4,519)		(6,550)
	Capitalized software development costs				(14,414)		(12,470)
	Purchase of short-term investments				(20,459)		(4,320)
	Sale of short-term investments				-		6,810
		Net cash used in investing activities			(39,392)		(16,530)
Cash flows from financing activities:
	Proceeds from exercise of stock options				1,347		240
	Proceeds from issuance of common stock				1,091		-
	Offering costs paid in connection with initial public offering and follow-on offerings				(516)		(1,767)
	Capital lease payments				-		(27)
	Proceeds from follow-on offering, net of underwriting discounts and commissions				35,002		144,838
	Repayments of outstanding principal on long-term debt				(35,043)		(137,778)
	Prepayment penalty on PIK loan				-		(4,092)
			Net cash provided by financing activities		1,881		1,414
	Effect of foreign exchange rate changes on cash and cash equivalents				(56)		(41)
	Net (decrease) increase in cash and cash equivalents				(2,820)		815
	Cash and cash equivalents at beginning of period				50,467		30,481
	Cash and cash equivalents at end of period			$	47,647	$	31,296

IntraLinks Holdings, Inc. Reconciliation of Non-GAAP to GAAP Financial Measures (In Thousands, Except Share and per Share Data) (unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Gross profit	$	40,387	$	35,958	$	118,377	$	97,267
Gross margin		73.7%		75.1%		73.7%		73.6%
Cost of revenue - stock-based compensation expense		110		36		218		64
Cost of revenue - amortization of intangible assets		3,309		3,309		9,927		9,928
Non-GAAP gross profit	$	43,806	$	39,303	$	128,522	$	107,259
Non-GAAP gross margin		79.9%		82.1%		80.0%		81.1%

Income from operations	$	2,774	$	3,564	$	6,489	$	4,898
Stock-based compensation expense		2,894		1,102		6,765		2,846
Amortization of intangible assets		7,157		7,157		21,472		21,583
Costs related to public stock offerings		-		314		57		1,221
Non-GAAP adjusted operating income	$	12,825	$	12,137	$	34,783	$	30,548

Net loss before income tax	$	(507)	$	(7,464)	$	(265)	$	(20,893)
Stock - based compensation expense		2,894		1,102		6,765		2,846
Amortization of intangible assets		7,157		7,157		21,472		21,583
Costs related to public stock offerings		-		314		57		1,221
Costs related to debt repayments		-		5,609		-		5,609
Non-GAAP adjusted net income before tax		9,544		6,718		28,029		10,366
Non-GAAP income tax provision		3,560		2,922		10,231		4,043
Non-GAAP adjusted net income	$	5,984	$	3,796	$	17,798	$	6,323

Net income (loss)	$	764	$	(4,031)	$	1,254	$	(13,454)
Interest expense, net		2,552		5,862		8,146		19,998
Income tax benefit		(1,271)		(3,433)		(1,519)		(7,439)
Depreciation and amortization		5,197		4,531		15,401		12,138
Amortization of intangible assets		7,157		7,157		21,472		21,583
Stock-based compensation expense		2,894		1,102		6,765		2,846
Amortization of debt issuance costs		214		1,111		1,155		2,026
Loss on extinguishment of debt		-		4,974		-		4,974
Other expense (income), net		515		(919)		(2,547)		(1,207)
Costs related to public stock offerings		-		314		57		1,221
Non-GAAP adjusted EBITDA	$	18,022	$	16,668	$	50,184	$	42,686
Non-GAAP adjusted EBITDA margin		32.9%		34.8%		31.3%		32.3%

Cash flow provided by operations	$	13,275	$	11,887	$	34,747	$	15,972
Capital expenditures		(6,927)		(4,765)		(18,933)		(19,020)
Free cash flow	$	6,348	$	7,122	$	15,814	$	(3,048)

IntraLinks Holdings, Inc. Reconciliation of Non-GAAP to GAAP Financial Measures - Guidance (In Thousands) (unaudited)
		Three Months Ending
		December 31,
		2011
Gross profit	$	38,331
Gross margin		73.7%

Cost of revenue- stock-based compensation expense		110
Cost of revenue- amortization of intangible assets		3,309
Non-GAAP gross profit	$	41,750

Non-GAAP gross margin		80.3%


Income from operations	$	2,464
Stock-based compensation expense		2,579
Amortization of intangible assets		7,157
Non-GAAP operating income	$	12,200

Non-GAAP operating margin		23.5%

Net income before income tax	$	1,515
Stock-based compensation expense		2,579
Amortization of intangible assets		7,157
Non-GAAP net income before income tax		11,251
Non-GAAP income tax provision		4,163
Non-GAAP net income	$	7,088

Net loss	$	(3,425)
Interest expense, net		2,467
Income tax provision		4,940
Depreciation and amortization		4,566
Amortization of intangible assets		7,157
Stock-based compensation expense		2,579
Amortization of debt issuance costs		216
Other income		(1,000)
Non-GAAP adjusted EBITDA	$	17,500

Non-GAAP adjusted EBITDA margin		33.7%


Note: All forward-looking figures presented in this table are stated at the mid-point of the estimated range

SOURCE IntraLinks Holdings, Inc.

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