INCX Interchange

Interchange Corp. (Nasdaq:INCX), owner of Local.com, a leading local search engine, today reported its financial results for the first quarter 2006. First Quarter Results and Highlights: -- Revenue was $3.2 million for the first quarter of 2006 which was at the high end of our guidance. Local search revenue was approximately $1.2 million which was $600,000 better than the previous quarter and $200,000 better than our guidance. National search revenue was approximately $2.0 million. -- Net loss was $3.8 million for the first quarter of 2006, which was at the low end of our guidance. Basic and diluted net loss per share was $0.41. The net loss included $915,000, or $0.10 per share, of non-cash stock-based compensation as required with the adoption of Statement of Financial Accounting Standards No. 123R. -- Cash and marketable securities were $12.0 million at March 31, 2006 with no material debt. The company used $2.3 million in cash during the quarter. -- Released Local.com from beta. -- Launched uk.local.com beta. -- Traffic on Local.com grew to 8.6 million monthly unique visitors and 42 million page views in March. -- Hired VP Product Management Vickie Young. -- Entered into a number of local search partnerships including Fidelity Assets, Contractors.com, Judy's Book and Jambo. -- Launched LocalConnect and Domain Dividends syndication products. -- Engaged an investment banker to explore strategic options for national search business. "For the second quarter in a row, local search revenues have exceeded our expectations. We continue to build on the three value creators in search: traffic; technology; and advertisers. Local.com finished the quarter ranked as the 123rd busiest website and sixth largest pure-play local search engine according to comScore. In the second quarter we will launch high-margin ad products on Local.com as we continue to monetize our high-quality traffic," said Heath Clarke, Interchange CEO. "Most important of all, the recent additions of Lee Siegfried as VP Engineering and Jennifer Black as VP Marketing, and the promotion of Bruce Crair to President and COO, complete a management team designed to take our company to the next level. We look forward to continuing to deliver on our goal of making Local.com number one in local search." Financial Guidance The company expects second quarter 2006 revenue to be between $3.0 million and $3.2 million. Of this revenue, local search is expected to be approximately $1.6 million, which is an increase of approximately 40% over the first quarter 2006. The company expects net loss for the second quarter 2006 to be between $3.6 million and $3.8 million, which would be $0.39 to $0.41 per share. The loss per share forecast assumes 9.3 million outstanding shares. The above guidance includes non-cash expenses of $1.2 million, or $0.13 per share, consisting of the following: -- Non-cash stock-based expense of approximately $675,000, or $0.07 per share, resulting from the adoption of Statement of Financial Accounting Standards No. 123R as required beginning January 2006; and -- Depreciation and amortization of $520,000, or $0.06 per share. Based on the above guidance, the company expects to use approximately $2.5 million in cash in Q2. Conference Call and Webcast Information Chairman and CEO Heath Clarke, President and COO Bruce Crair and CFO Doug Norman will participate in a conference call to discuss the results and outlook. The conference call will take place today, May 9, 2006 at 5 p.m. ET. Investors and analysts can participate in the call by dialing 1-888-802-2268 or 1-913-312-1271, pass code # 5479513. To listen to the webcast, or to view the press release, please visit the Investor Relations section of the Interchange website at: http://ir.interchangeusa.com. A replay of the webcast will be available for 90 days at the company's website, starting approximately one hour after the completion of the call. About Interchange Interchange Corp. (Nasdaq:INCX) owns and operates Local.com (www.local.com), a leading local-search engine that now draws more than 8 million visitors per month seeking information on local businesses, products and services. Local.com is powered by the company's proprietary Keyword DNA(TM) and local-web indexing technologies. The company serves local and national Internet, wireless and operator-assisted local-search markets in the United States and Europe. Interchange generates revenue principally from paid-search advertising. The company recently launched a domain syndication network in the United States, launched Local.com in the United Kingdom (uk.local.com) and plans to expand into additional markets during 2006. The company has headquarters in Irvine with European headquarters in Stockholm, Sweden. For more information on Interchange, please visit: www.interchangeusa.com. Forward-Looking Statements: All statements other than statements of historical fact included in this document regarding our anticipated financial position, business strategy and plans and objectives of our management for future operations, are forward-looking statements within the meaning of section 21E of the United States Securities and Exchange Act of 1934, as amended. When used in this report, words such as "anticipate," "believe," "estimate," "will," "plans," "expect," "intend" and similar expressions, as they relate to Interchange or our management, identify forward-looking statements. Any forward-looking statements reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this paragraph. All statements regarding potential results and future plans and objectives of the company, including those made regarding the exploration of strategic options related to the company's National Search business, and the company's assumptions regarding the value, growth, margins and defensibility of Local.com, its traffic acquisition strategies, subscription advertising products and planned and future search activities, are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the company's expectations include, but are not limited to, those factors that are disclosed under the heading "Risk Factors" and elsewhere in the company's documents filed from time to time with the United States Securities and Exchange Commission and other regulatory authorities. Our Annual Report on Form 10-KSB, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements in this release speak only as if the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement for any reason. Unless otherwise stated, all site traffic and usage statistics provided are from third-party service providers engaged by the company. -0- *T INTERCHANGE CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) March 31, Dec. 31, 2006 2005 ----------- -------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $1,752 $1,075 Restricted cash 10 10 Marketable securities 10,270 13,244 Accounts receivable, net of allowances of $15 and $30, respectively 1,198 1,138 Prepaid expenses and other current assets 376 377 ----------- -------- Total current assets 13,606 15,844 Property and equipment, net 2,497 2,772 Intangible assets, net 3,523 3,760 Goodwill 12,445 12,445 Long-term restricted cash 166 166 Deposits 47 47 ----------- -------- Total assets $32,284 $35,034 =========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $1,552 $1,798 Accrued compensation 386 347 Deferred rent 543 575 Accrued royalties 478 496 Other accrued liabilities 776 631 Notes payable 56 84 Deferred revenue 332 295 ----------- -------- Total liabilities, all current 4,123 4,226 ----------- -------- Minority interest (1) (1) ----------- -------- Commitments and contingencies Stockholders' equity: Convertible preferred stock, $0.00001 par value; 10,000,000 shares authorized; none issued and outstanding for all periods presented - - Common stock, $0.00001 par value; 30,000,000 shares authorized; 9,232,509 and 9,171,944 issued and outstanding, respectively - - Additional paid-in capital 49,826 48,706 Accumulated comprehensive loss (135) (151) Accumulated deficit (21,529) (17,746) ----------- -------- Stockholders' equity 28,162 30,809 ----------- -------- Total liabilities and stockholders' equity $32,284 $35,034 =========== ======== INTERCHANGE CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Three months ended March 31, --------------------- 2006 2005 ---------- ---------- Revenue $3,151 $5,911 ---------- ---------- Operating expenses: Search serving 1,580 3,176 Sales and marketing 2,467 1,338 General and administrative 1,804 961 Research and development 950 556 Amortization of intangibles 237 51 ---------- ---------- Total operating expenses 7,038 6,082 ---------- ---------- Operating loss (3,887) (171) Interest and other income 105 314 ---------- ---------- Income (loss) before income taxes (3,782) 143 Provision for income taxes 1 12 ---------- ---------- Net income (loss) $(3,783) $131 ========== ========== Per share data: Basic net income (loss) per share $(0.41) $0.02 ========== ========== Diluted net income (loss) per share $(0.41) $0.01 ========== ========== Basic weighted average shares outstanding 9,211,044 7,989,608 Diluted weighted average shares outstanding 9,211,044 9,765,291 Supplemental consolidated statements of operations information: Three months ended March 31, ------------------- 2006 2005 --------- --------- Non-cash stock-based compensation expense: Sales and marketing $172 $- General and administrative 670 9 Research and development 73 - ------------------- Total stock-based compensation expense $915 $9 =================== Basic and diluted net compensation expense per share $0.10 $0.00 =================== *T