InfoSpace, Inc. (NASDAQ: INSP), a leader in online search, today
announced that it has signed a definitive agreement to acquire
TaxACT, a leading provider of online tax solutions, for $287.5
million in cash. The acquisition is subject to satisfaction of
customary closing conditions and is expected to close in the first
quarter of 2012.
“The acquisition of TaxACT is significant for our Company, and
consistent with our capital deployment objectives,” said William J.
Ruckelshaus, President and Chief Executive Officer of InfoSpace.
“As a leading brand with a loyal, growing customer base and a
sustained track record, TaxACT is well positioned to grow in the
large and enduring tax preparation category. As the market
continues its shift toward online ‘do-it-yourself’ tax preparation,
we are confident that we can leverage our online expertise,
TaxACT’s industry leading solutions, and the fantastic TaxACT
management team to drive future growth. The financial benefits of
this transaction are compelling and provide us ongoing flexibility
to invest in our businesses to further enhance shareholder
value.”
The transaction is expected to be immediately accretive to
InfoSpace earnings per share and year one return on shareholder
capital is expected to exceed 16%. For the twelve months ending
September 30, 2011, TaxACT had revenues of $78.1 million and
adjusted EBITDA of $37.8 million. For the twelve months ending
September 30, 2011, InfoSpace and TaxACT together generated pro
forma revenue of $290.0 million, pro forma adjusted EBITDA of $72.5
million, and pro forma non-GAAP net income of $45.6 million or
$1.21 per diluted share.
Based in Cedar Rapids, Iowa, TaxACT is the second largest
provider of online tax solutions. With approximately 70 full-time
employees, TaxACT participates in the large and growing $20 billion
tax preparation market. The Company had more than five million tax
filers last season, with the vast majority of those customers
filing online.
TaxACT offers the only complete free federal tax solution for
“everyone.” Its offerings include a free edition, deluxe edition
and state edition, for individual tax filers, and TaxACT
professional for businesses. TaxACT’s offerings are available
through a secure online delivery system, complemented by available
desktop downloads and extensive tax and IRS expertise.
“On behalf of the entire TaxACT team, I want to express my
excitement as we partner with InfoSpace,” said JoAnn Kintzel,
president of TaxACT. “We are committed to providing a superior
customer experience and working hard to ensure that everyone is
comfortable using the TaxACT products to complete their federal tax
returns for free. We have the right tools, tremendous in-house
expertise, and an established consumer following. With the support
of InfoSpace, we are confident that we can further strengthen our
position and capitalize on the substantial opportunities in the
market for online tax preparation.”
InfoSpace will fund the acquisition through a combination of
cash on hand and debt, and has secured a commitment for
approximately $95 million of financing in connection with this
transaction. The combined company is expected to have a solid
balance sheet with an estimated cash and short term investments in
excess of $90 million.
Upon completion of the acquisition, 2nd Story Software, the
operating company for the TaxACT business, will become a
wholly-owned subsidiary of InfoSpace, and will continue operations
in Cedar Rapids, Iowa as a standalone business unit led by the
TaxACT management team. TA Associates, the majority shareholder of
the TaxACT business, will sell its full holdings as part of this
transaction.
Conference Call and Webcast
InfoSpace will host a conference today at 5:30 a.m. Pacific time
/ 8:30 a.m. Eastern time to discuss the acquisition of TaxACT. The
live webcast and a set of slides with additional information can be
accessed in the Investor Relations section of the Company’s
website, at http://www.infospaceinc.com.
About InfoSpace, Inc.
InfoSpace, Inc., a leading developer of metasearch products, is
focused on bringing the best of the Web to Internet users.
InfoSpace's proprietary metasearch technology combines the top
results from several of the largest online search engines,
providing fast and comprehensive search results. InfoSpace sites
include Dogpile(R) (www.dogpile.com), InfoSpace.com(R)
(www.infospace.com), MetaCrawler(R) (www.metacrawler.com),
WebCrawler(R) (www.webcrawler.com), and WebFetch(R)
(www.webfetch.com). InfoSpace's metasearch technology is also
available on nearly 100 partner sites, including content,
community, and connectivity sites. In addition, the Company
operates an innovative online search engine optimization tool,
WebPosition(R) (www.webposition.com). Additional information may be
found at www.infospaceinc.com.
About TaxACT
TaxACT is a privately held company founded in 1998 and
critically acclaimed as a leader in developing affordable tax
preparation software and Web-based services directly for consumers.
TaxACT was the first to offer free Federal tax software and free
e-file to all American taxpayers in the 2005 tax season. TaxACT is
the 2nd most visited online destination for tax preparation
services. Since 2000, TaxACT Online has assisted with more than 20
million e-filed federal returns. TaxACT is also the only Web-based
tax planning and preparation product to offer a year-round tax
preparation solution, with Preview Versions released in October and
Final Versions released in January. Learn more about TaxACT
individual, business and professional products at www.taxact.com
and in the Press Center at www.taxact.com/press.
InfoSpace.com, InfoSpace, Dogpile, MetaCrawler, WebCrawler,
WebFetch, and other marks are trademarks of InfoSpace, Inc. TaxACT
and 2nd Story Software are trademarks of 2nd Story Software,
Inc.
This announcement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date of this release, and which may
differ significantly from actual results due to various risks and
uncertainties including, but not limited to: general economic,
industry, and market sector conditions; the timing and extent of
market acceptance of developed products and services and related
costs; the successful execution of the Company’s strategic
initiatives, business integration plans, operating plans, and
marketing strategies. A more detailed description of these and
certain other factors that could affect actual results is included
in InfoSpace, Inc.’s most recent Annual Report on Form 10-K and
subsequent reports filed with or furnished to the Securities and
Exchange Commission. InfoSpace, Inc. undertakes no obligation to
update any forward-looking statements to reflect new information,
events, or circumstances after the date of this release or to
reflect the occurrence of unanticipated events.
InfoSpace, Inc. Reconciliations of Non-GAAP Financial
Measures to the Nearest Comparable GAAP Measure Pro Forma
Adjusted EBITDA Reconciliation (1) (Unaudited) (Amounts in
thousands) 12 Months Ended September
30, 2011
INSP
TaxACT
Pro FormaCombined
GAAP pro forma net income (2) $ 13,798 $ 16,487 $ 30,285
Discontinued operations 11,579 - 11,579 Depreciation and
amortization of intangible assets 9,480 752 10,232 Stock-based
compensation 11,560 35 11,595 Other loss (income), net (3) (19,125
) 11,658 (7,467 ) Pro forma income tax expense (4) 7,429
8,877 16,306 Adjusted pro forma EBITDA
(5) $ 34,721 $ 37,809 $ 72,530
InfoSpace,
Inc. Reconciliations of Non-GAAP Financial Measures to the
Nearest Comparable GAAP Measure Pro Forma Non-GAAP Net
Income Reconciliation (1) (Unaudited) (Amounts in thousands,
except per share amounts) 12 Months Ended September 30, 2011
INSP
TaxACT
Pro FormaCombined
GAAP pro forma net income (2) $ 13,798 $ 16,487 $ 30,285
Discontinued operations 11,579 - 11,579 Other non-recurring loss
(income), net (6) (18,965 ) 7,083 (11,882 )
Pro forma income from continuing operations net of non-recurring
loss (income), net 6,412 23,570 29,982 Pro forma non-cash income
tax expense from continuing operations net of non-recurring loss
(income), net (7) 7,384 8,228 15,612
Pro forma Non-GAAP net income (5) $ 13,796 $ 31,798 $
45,594 Income from continuing operations net of
non-recurring loss (income), net - diluted $ 0.17 $ 0.62 $ 0.79
Non-cash income tax expense from continuing operations net of
non-recurring loss (income), net - diluted (5) $ 0.19 $ 0.23
$ 0.42 Non-GAAP net income per share - diluted (5) $ 0.36
$ 0.85 $ 1.21 (1) InfoSpace’s and
TaxACT's Pro forma adjusted EBITDAs are calculated by adjusting net
income (loss) determined in accordance with generally accepted
accounting principles ("GAAP"), less pro forma interest imputed on
the debt incurred related to the acquisition of TaxACT's operations
and pro forma income tax expense, to exclude the effects of
discontinued operations (including loss from discontinued
operations, net of taxes, and loss on sale of discontinued
operations, net of taxes), pro forma income taxes, depreciation,
amortization of intangible assets, stock-based compensation
expense, and other loss (income), net (which includes such items as
litigation settlements, adjustments to the fair values of
contingent liabilities related to business combinations, gains on
resolutions of contingencies, interest income, foreign currency
gains or losses, certain transaction expenses, and gains or losses
from the disposal of assets), as detailed above. InfoSpace’s
management believes that Pro forma adjusted EBITDA provides
meaningful supplemental information regarding the Company’s
performance by excluding certain expenses and gains that management
believes are not indicative of its core business operating results.
InfoSpace uses Adjusted EBITDA, which is a non-GAAP financial
measure, for internal management purposes, when publicly providing
guidance on possible future results, and as a means to evaluate
period-to-period comparisons. InfoSpace believes that Adjusted
EBITDA is a common measure used by investors and analysts to
evaluate its performance, that it provides a more complete
understanding of the results of operations and trends affecting the
Company's business when viewed together with GAAP results, and that
management and financial statement users benefit from referring to
this non-GAAP financial measure. Accordingly, InfoSpace also
believes that the presented Pro forma adjusted EBITDA is meaningful
information for financial statement users. InfoSpace's and
TaxACT's Pro forma non-GAAP net incomes are calculated by adjusting
Pro forma GAAP net income, less pro forma interest imputed on the
debt incurred related to the acquisition of TaxACT's operations and
pro forma income tax expense, to exclude the effects of
discontinued operations (including loss from discontinued
operations, net of taxes, and loss on sale of discontinued
operations, net of taxes) and the non-cash portion of income tax
expense from pro forma continuing operations. The non-cash portion
of income tax expense from pro forma continuing operations
represents a reduction to cash taxes payable associated with the
utilization of deferred tax assets, which are primarily comprised
of U.S. federal net operating losses. Due to the Company’s
continued ability to offset a substantial portion of its cash tax
liabilities through 2020 provided by these deferred tax assets,
management believes that excluding the non-cash portion of income
tax expense from pro forma continuing operations and the effects of
discontinued operations from its Pro forma GAAP net income provides
meaningful supplemental information to financial statement users
regarding the Company’s performance and the valuation of its
business. Accordingly, InfoSpace also believes that the presented
Pro forma non-GAAP net income is meaningful information for
financial statement users. Pro forma adjusted EBITDA and Pro
forma non-GAAP net income should be evaluated in light of the
Company's financial results prepared in accordance with GAAP, and
should be considered as a supplement to, and not as a substitute
for or superior to, GAAP net income. These non-GAAP
financial measures presented, both Pro forma adjusted EBITDA and
Pro forma non-GAAP net income, for the combined entities InfoSpace
and TaxACT, do not necessarily reflect the results of operations
that would have existed had InfoSpace operated those organizations
as a combined business. (2) As presented in the Condensed
Consolidated Statements of Operations (unaudited) for InfoSpace and
the unaudited consolidated statement of earnings for TaxACT's
operations. (3)
Other loss (income), net for InfoSpace
primarily consists of litigation settlements, adjustments to the
fair values of contingent liabilities related to business
combinations, gains on resolutions of contingencies, interest
income, foreign currency gains or losses, and gains or losses from
the disposal of assets. The amount for TaxACT includes expenses
incurred related to the H&R Block failed transaction process
and pro forma interest expense imputed on debt.
(4) The amounts are computed at the statutory rate of 35 percent.
(5) Amounts previously disclosed have been revised to
reflect the effect of classifying InfoSpace's Mercantila e-commerce
business as discontinued operations. (6) The amount for
InfoSpace represents a gain on a litigation settlement. The amount
for TaxACT represents expenses incurred related to the H&R
Block failed transaction process. (7) The amounts are
computed at the statutory rate of 35 percent, less 2 percent
alternative minimum tax payments.
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