iMergent Reports Fiscal Year and Fiscal Fourth Quarter 2009 Financial Results and IRS Settlement


PHOENIX, Sept. 1, 2009 (GLOBE NEWSWIRE) -- iMergent, Inc. (AMEX:IIG), a leading provider of eCommerce software, site development, web hosting and search engine optimization for businesses and entrepreneurs, today reported financial results for its fiscal year and fiscal fourth quarter ended June 30, 2009. The Company also announced a settlement with the IRS related to the IRS' audits of its income tax returns for the fiscal years ended June 30, 2005, 2006 and 2007.

Fiscal Fourth Quarter 2009 Compared to 2008

Income from operations for the fourth quarter of fiscal 2009 increased to $1,100,000 from a loss of $438,000 in the same quarter last year due in large part to the continued success of cost saving initiatives which significantly reduced our selling and marketing expenses to approximately 44% of revenue in the current quarter down from approximately 55% of revenue in the same quarter last year. Income before income tax provision for the fourth quarter of fiscal 2009 increased 53% to $2,660,000 from $1,730,000 in the same quarter last year. The income tax benefit for the fourth quarter of fiscal 2009 was $5,880,000, primarily due to our settlement with the IRS, compared to an income tax provision of $1,180,000 in the same quarter last year. Net income for the fourth quarter of fiscal 2009 was $8,540,000, or $0.74 per diluted common share, compared to net income of $554,000, or $0.05 per common share in the same quarter last year.

Product and other revenues for the fourth quarter of fiscal 2009 were $14,100,000, compared to $22,500,000 for the same quarter last year. The lower product and other revenues were a result of a 20% reduction in the number of workshops conducted during the current quarter as compared to the prior year quarter as well as a decrease in the percentage of attendees purchasing to 24% in the current quarter, compared to 31% in the prior year quarter. Commission and other revenues for the fourth quarter of fiscal 2009 decreased 20% to $5,300,000, compared to $6,600,000 for same quarter last year. Commission and other revenues are derived from commissions on sales of ancillary products by independent third-party partners as well as hosting and other revenues. The lower commission and other revenues were a result of a smaller number of leads sent to the independent third-party partners as a result of the reduction in number of previews and full workshops.

Total operating expenses decreased 38% to $18,300,000 for the fourth quarter of fiscal 2009, compared to $29,600,000 for the fourth quarter last year, primarily as a result of cost saving initiatives in the current quarter as well as conducting fewer workshops. Selling and marketing expenses as a percentage of revenue decreased to 44% for the fourth quarter of fiscal 2009 compared to 55% for the fourth quarter of fiscal 2008. The decrease is attributable to the continuation of cost savings initiatives in the current quarter which reduced our cost per direct response advertising piece which in turn decreased our advertising cost per buyer.

Cash used in operating activities was $826,000 for the fourth quarter of fiscal 2009, compared to cash provided by operating activities of $3,400,000 for the same period in fiscal 2008. As of June 30, 2009, cash and cash equivalents were $20,500,000, working capital was $16,300,000, and working capital excluding deferred revenue was $40,000,000. Total current and long-term net trade receivables were $30,800,000 as of June 30, 2009.

Year Ended June 30, 2009 Compared to 2008

Revenues for the year ended June 30, 2009 were $94,400,000 compared to $128,000,000 for the same period last year. Total operating expenses were $102,300,000, compared to $131,300,000 for the same period last year.

For the year ended June 30, 2009, net loss was $7,500,000, or $.66 per diluted common share, which included a $5,700,000 income tax provision. Net income for the year ended June 30, 2008, was $3,100,000, or $0.26 per diluted common share, which included a $3,000,000 income tax provision. Cash used in operating activities was $7,000,000 for the year ended June 30, 2009, compared to cash provided by operating activities of $10,400,000 for the same period last year.

Steven G. Mihaylo, Chief Executive Officer of iMergent, stated, "While economic conditions have been challenging this year, we maintained our focus on improving our marketing efforts to reach more highly qualified prospects, improved customer satisfaction, improved our operating efficiency, reduced costs, and expanded our product offerings to provide the tools and expertise necessary to allow our customers to compete in this competitive marketplace. In light of this challenging environment, we are pleased with the results of the past two quarters. While we expect the challenging economic conditions to continue for the next few quarters, we believe we have positioned ourselves well for a return to a more stable economic environment."

Clint Sanderson, Senior Vice President of iMergent, added, "We are continuing to focus on the small to medium enterprise market (SME) through our Crexendo Business Solutions division. While still in the beginning stages, we are encouraged by the initial positive reaction this offering has received from both Value Added Resellers (VARs) and the end user customers. Our focus over the next three to six months will be on developing the tools necessary to allow us to scale our search engine optimization (SEO) and search engine management (SEM) offerings to a larger customer base. We are pleased with the progress made in the development of our managed network services and hosted telecom service lines. We expect to launch our hosted telecom service within the next six to nine months."

IRS Settlement

"On August 28, 2009, we agreed to a formal settlement with the Internal Revenue Service ("IRS") appeals office related to the audits of our income tax returns for fiscal years 2007, 2006 and 2005," stated Jonathan R. Erickson, Chief Financial Officer of iMergent. "The decision is important as the settlement with the appeals office allows us to deduct 100% of all meals served to attendees at both our workshop and preview training sessions, which we have done historically and will continue to do. It was also agreed that our ownership change in April 2002 limited our usage of net operating losses (NOL's) generated prior to the ownership change to offset future taxable income to $461,000 per year. As a result, we recorded a valuation allowance against these NOL's of approximately $5,100,000 during the fiscal year ended June 30, 2009. Additionally, we were able to resolve all other outstanding issues with the IRS with no impact to the financial statements."

"We are pleased with the outcome of the IRS settlement," stated Steven G. Mihaylo, Chief Executive Officer of iMergent. "This settlement eliminates this uncertainty and allows us to focus our efforts on providing superior products and services to our StoresOnline and Crexendo Business Solutions customers."

Conference Call

The company is hosting a conference call today at 1:30 p.m. PT (4:30 p.m. ET). The conference call will be broadcast live over the Internet at www.imergentinc.com. If you do not have Internet access, the telephone dial-in number is 866-673-7695 for domestic participants and 404-665-9596 for international participants. Please dial in five to ten minutes prior to the beginning of the call at 1:30 p.m. PT (4:30 p.m. ET). A telephone replay will be available two hours after the call through September 3, 2009 by dialing 800-642-1687 for domestic callers or 706-645-9291 for international callers and entering access code 95395409. Online webcast replay will be available for 90 days from the date of the call.

About iMergent

iMergent provides e-commerce solutions to entrepreneurs and businesses enabling them to market and sell their business products or ideas via the Internet. The company sells its proprietary software and training services which help users build Internet strategies to allow entrepreneurs and businesses to market and sell their products, accept online orders, analyze marketing performance and manage pricing and customers over the Internet. In addition to software and training, iMergent offers site development, web hosting and search engine optimization (SEO). iMergent, StoresOnline and Crexendo Business Solutions, Inc. are trademarks of iMergent, Inc.

Safe Harbor Statement

This press release contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. The words, "believe," "expect," "anticipate," "estimate," "will" and other similar statements of expectation identify forward-looking statements. Specific forward-looking statements in this press release include information about iMergent, (1) continuing to focus on the small to medium enterprise market (SME) through its Crexendo Business Solutions division, (2) being encouraged by the initial positive reaction the SME offering has received from both Value Added Resellers (VARs) and end user customers, (3) focus over the next three to six months being on developing the tools necessary to allow iMergent to scale its search engine optimization (SEO) and search engine management (SEM) offerings to a larger customer base, (4) expecting to launch its hosted telecom service within the next six to nine months, (5) maintaining its focus on improving marketing efforts, delivering customer satisfaction, improving operating efficiencies and expanding product offerings, (6) has positioned itself well for a return to a more stable economic environment, (7) continuing to deduct 100% of the cost of meals, (8) resolving all other outstanding issues with the IRS with no impact to the financial statements and (9) providing superior products and services to our customers. You are cautioned not to place undue reliance on our forward-looking statements. We do not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after the release of this press release, or to reflect the occurrence of unanticipated events.

For a more detailed discussion of risk factors that may affect iMergent's operations and results, please refer to the company's Form 10-K for the year ended June 30, 2009. These forward-looking statements speak only as of the date on which such statements are made, and the company undertakes no obligation to update such forward-looking statements, except as required by law.



                   iMERGENT, INC. AND SUBSIDIARIES
                      Consolidated Balance Sheets
             (Dollars in thousands, except per share data)
                              (unaudited)


                                      June 30, 2009     June 30, 2008
                                     ---------------   ---------------
 Assets

 Current Assets:
  Cash and cash equivalents           $      20,474     $      26,184
   Restricted cash                            1,802                --
  Trade receivables, net of
   allowance for doubtful
   accounts of $9,670 as of
   June 30, 2009 and $13,797
   as of June 30, 2008                       20,771            28,723
  Inventories                                   256               627
  Income taxes receivable                     1,826               793
  Deferred income tax assets                  2,171             3,891
  Prepaid expenses and other                  1,524             3,849
                                     ---------------   ---------------
    Total Current Assets                     48,824            64,067

 Certificate of deposit                         500               500
 Available-for-sale securities                   --             3,800
 Long-term trade receivables,
  net of allowance for doubtful
  accounts of $4,437 as of
  June 30, 2009 and $4,786 as
  of June 30, 2008                            9,985             9,845
 Property and equipment, net                  1,322             1,672
 Deferred income tax assets                   4,975             4,385
 Intangible assets, net                       1,400             1,831
 Merchant account deposits and
  other                                         348               514
                                     ---------------   ---------------
    Total Assets                      $      67,354     $      86,614
                                     ===============   ===============

 Liabilities and Stockholders'
  Equity

 Current Liabilities:
  Accounts payable                    $       2,265     $       4,760
  Accrued expenses and other                  6,257             5,614
  Dividend payable                              229                --
  Income taxes payable                           41               212
  Deferred revenue, current
   portion                                   23,627            32,859
  Note payable, current portion                  68                64
                                     ---------------   ---------------

    Total Current Liabilities                32,487            43,509

 Deferred revenue, net of
  current portion                            10,236            10,332
 Note payable, net of current
  portion                                        47               115
 Other long-term liabilities                    184               183
                                     ---------------   ---------------
     Total Liabilities                       42,954            54,139
                                     ---------------   ---------------

 Commitments and contingencies
   (Note 8)

 Stockholders' Equity:
  Preferred stock, par value
   $0.001 per share -
   authorized 5,000,000 shares;
   none issued                                   --                --
  Common stock, par value $0.001
   per share - authorized
   100,000,000 shares;
   11,425,320 shares outstanding
   as of June 30, 2009 and
   11,304,410 shares outstanding
   as of June 30, 2008                           11                11
  Additional paid-in capital                 52,782            53,315
  Accumulated deficit                       (28,393)          (20,851)
                                     ---------------   ---------------
    Total Stockholders' Equity               24,400            32,475
                                     ---------------   ---------------

    Total Liabilities and
     Stockholders' Equity             $      67,354     $      86,614
                                     ===============   ===============


                 iMERGENT, INC. AND SUBSIDIARIES
                 Consolidated Statements of Operations
             (Dollars in thousands, except per share data)
                              (unaudited)

                          Three Months Ended         Years Ended
                               June 30,                June 30,
                        ----------------------  ----------------------
                           2009        2008        2009        2008
                        ----------  ----------  ----------  ----------

 Revenues:
  Product and other     $   14,112  $   22,492  $   68,664  $   97,141
  Commission and
   other                     5,258       6,621      25,747      30,907
                        ----------  ----------  ----------  ----------
    Total revenues          19,370      29,113      94,411     128,048
                        ----------  ----------  ----------  ----------

 Operating expenses:
  Cost of product and
   other revenues            5,533       7,433      29,138      41,191
  Selling and
   marketing                 8,452      16,110      52,434      69,787
  General and
   administrative            3,711       5,474      18,541      18,210
  Research and
   development                 582         534       2,177       2,113
                        ----------  ----------  ----------  ----------
    Total operating
     expenses               18,278      29,551     102,290     131,301
                        ----------  ----------  ----------  ----------

 Income (Loss) from
  operations                 1,092       (438)     (7,879)     (3,253)
                        ----------  ----------  ----------  ----------

 Other income
  (expense):
  Interest income            1,492       1,991       6,799       8,858
  Interest expense             (3)         (2)        (13)         (3)
  Other income
   (expense), net               78         182       (768)         579
                        ----------  ----------  ----------  ----------
    Total other
     income, net             1,567       2,171       6,018       9,434
                        ----------  ----------  ----------  ----------

 Income (loss)
  before income tax
  provision                  2,659       1,733     (1,861)       6,181

 Income tax
  provision                  5,876     (1,179)     (5,681)     (3,039)
                        ----------  ----------  ----------  ----------
 Net income (loss)      $    8,535  $      554  $  (7,542)  $    3,142
                        ==========  ==========  ==========  ==========

 Net income (loss)
  per common share:
  Basic                 $     0.75  $     0.05  $   (0.66)  $     0.27
  Diluted               $     0.74  $     0.05  $   (0.66)  $     0.26
 Dividends per
  common share:         $     0.02  $     0.11  $     0.17  $     0.44
 Weighted average
  common shares
  outstanding:
  Basic                 11,416,723  11,293,998  11,371,303  11,676,188
  Diluted               11,496,482  11,439,503  11,371,303  11,857,808


                    iMERGENT, INC. AND SUBSIDIARIES
                   Consolidated Statements of Cash Flows
                           (Dollars in thousands)
                                (unaudited)

                                                  Years Ended June 30,
                                                  --------------------
                                                    2009        2008
                                                  --------    --------

 CASH FLOWS FROM OPERATING ACTIVITIES

 Net income (loss)                                $(7,542)    $  3,142
 Adjustments to reconcile net income
   (loss) to net cash provided by (used
    in) operating activities:
  Depreciation and amortization                      1,468       1,196
  Expense for stock options issued to
   employees                                         1,544       1,902
  Changes in assets and liabilities:
   Trade receivables                                 7,812         342
   Inventories                                         371       (200)
   Prepaid expenses and other                        2,325         307
   Restricted cash                                 (1,802)          --
   Merchant account deposits and other                 166         251
   Income taxes receivable                         (1,033)       (498)
   Deferred income tax assets                        1,130       2,460
   Other long-term liabilities                           1        (16)
   Accounts payable, accrued expenses and
    other                                          (1,926)       2,451
   Deferred revenue                                (9,328)         736
   Income taxes payable                              (171)     (1,712)
                                                  --------    --------
    Net cash provided by (used in)
     operating activities                          (6,985)      10,361
                                                  --------    --------

 CASH FLOWS FROM INVESTING ACTIVITIES

  Acquisition of property and equipment              (613)       (604)
  Repayment of note receivable                          --         167
  Proceeds (Purchase) from sale of
   available-for-sale securities                     3,800     (3,800)
                                                  --------    --------
    Net cash provided by (used in)
     investing activities                            3,187     (4,237)
                                                  --------    --------

 CASH FLOWS FROM FINANCING ACTIVITIES

  Purchase of common stock                           (734)    (12,581)
  Proceeds from exercise of stock options
   and related income tax benefit                      600         916
  Principal payments on note payable                  (64)        (21)
  Dividend payments                                (1,714)     (5,113)
                                                  --------    --------
    Net cash used in financing activities          (1,912)    (16,799)
                                                  --------    --------

 NET DECREASE IN CASH AND CASH EQUIVALENTS         (5,710)    (10,675)

 CASH AND CASH EQUIVALENTS AT THE
  BEGINNING OF THE PERIOD                           26,184      36,859
                                                  --------    --------
 CASH AND CASH EQUIVALENTS AT THE END OF
  THE PERIOD                                      $ 20,474    $ 26,184
                                                  ========    ========

 Supplemental disclosures of non-cash
  transactions:

 Dividends declared                               $    229    $     --
  Cumulative effect adjustment (FIN 48)                 --         199
  Conversion of note receivable to
   intangible asset                                     --         833
  Purchase of property and equipment with
   note payable                                         --         200
 Cash paid for:
  Interest                                               7           3
  Income taxes                                       5,790       2,546


            

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