EX-99.1 2 a5008719ex99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 Digital Fusion Releases Third Quarter 2005 Results; Revenue Increased 190% over the Same Quarter Last Year HUNTSVILLE, Ala.--(BUSINESS WIRE)--Nov. 1, 2005--Digital Fusion, Inc. (OTCBB: DIGF), an information technology ("IT"), research and engineering, and acquisition and business support services provider today announced financial results for the third quarter ended September 30, 2005. Third Quarter 2005 Highlights -- Revenue $5.8 million -- Net income of $91,000 -- Increased revenue $1.3 million over prior quarter and $3.8 million over third quarter 2004 -- Earnings before interest, taxes, depreciation and amortization (EBITDA) $366,000 -- Revenue increased 28% and EBITDA increased 18% over prior quarter Financial Comparisons For the quarter ended September 30, 2005, revenues were $5.8 million compared to $4.5 million for the second quarter 2005 and $2.0 million for the same quarter in the previous year. The increase in revenues during the third quarter 2005 compared to the prior quarter was primarily due to growth in product revenue and growth in services revenue resulting from additional billable employees. The increase in revenues during the third quarter 2005 compared to the same period last year was primarily due to growth in engineering services and the acquisition of Summit Research. Net income for the quarter ended September 30, 2005 was $91,000 compared to a net loss of $327,000 for the same quarter in the previous year. Diluted income per share for the quarter ended September 30, 2005 was $0.01 compared to a diluted loss per share of $0.04 for the same quarter in the previous year. For the nine months ended September 30, 2005, revenues were $14.8 million compared to $5.2 million for the same period last year. The increase in revenues during the nine months ended September 30, 2005, compared to the same period last year was primarily due to growth in engineering services and the acquisition of Summit Research. Net income for the nine months ended September 30, 2005 was $196,000 compared to a net loss of $650,000 for the same period in the previous year. Diluted income per share for the nine months ended September 30, 2005 was $0.02 compared to a diluted loss per share of $0.09 for the previous year. Business Discussion Services revenue increased approximately $474,000 in the third quarter of 2005 compared to the second quarter of 2005. The increase in services revenues was primarily related to increases in billable employees. Reimbursed costs revenue increased approximately $180,000 in the third quarter of 2005 compared to the second quarter of 2005. The increase in reimbursed costs revenues was primarily related to increases in billable expenses. Product revenue for the quarter ended June 30, 2005 increased $637,000 to $964,000 compared to the second quarter of 2005. Product revenue is cyclical and typically stronger in the company's third quarter, which coincides with the government's fiscal year-end. The increase in product revenue as a percentage of total sales resulted in a reduction of gross profit as a percentage of total sales. Management Comments "We are pleased with our financial performance this quarter and expect continued improvement with the start up of the NASA contract in the fourth quarter," said Frank Libutti, chairman and chief executive officer. "We had solid revenue growth in our core services business and our EBITDA increased 18% or $55,000 from the second quarter of 2005." "We are excited about our potential new business opportunities and continue to expand our business base in our core competencies," said Gary Ryan, president. "Our service revenues were up 13% from the previous quarter and we continue to add billable employees. Although we have several holidays in the fourth quarter that could impact services revenue we expect our positive trends to continue." About Digital Fusion Digital Fusion, Inc., headquartered in Huntsville, Alabama, is an information technology, research and engineering, and acquisition and business support services company that helps its customers make the most of technology to meet their business needs. Digital Fusion provides state-of-the-art solutions to both government and commercial customers. Digital Fusion's core competencies are focused in the following broad areas: Application Development, Architecture and Security; Network Security; Data Management and Business Intelligence; System Migration and Integration; Sensor Systems Development and Analysis; Aerodynamic Design, Analysis, and Support; Thermal-Structural Modeling; Test and Evaluation; Systems Engineering; Modeling and Simulation; Control System Design and Analysis; Mechanical Design and Analysis; and Program Management Support. For additional information about Digital Fusion visit http://www.digitalfusion.com. Forward-Looking Statements. All statements other than statements of historical fact included in this release are forward-looking statements. When used in this release, words such as "project, "anticipate," "believe," "estimate," "expect," "plan," "intend," and similar expressions, as they relate to the Company or its management, as well as assumptions made by and information currently available to the Company's management, identify forward-looking statements. Similarly, statements herein that describe the Company's business strategy, outlook, objectives, plans, intentions or goals are also forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors including, but not limited to: the effect of business and economic conditions; the impact of competitive products and pricing; capacity and supply constraints or difficulties, the Company's dependence on continued funding of U.S. government programs; contract procurement and termination risks; competitive factors such as pricing pressures and/or competition to hire and retain employees, and material changes in laws or regulations applicable to the Company businesses. Such statements reflect the current views of the Company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company. These statements reflect the Company's current beliefs and are based upon information currently available to it. Be advised that developments subsequent to this release are likely to cause these statements to become outdated with the passage of time. DIGITAL FUSION, INC. Condensed Consolidated Balance Sheets (in thousands, except share data) September 30, December 31, 2005 2004 (Unaudited) ------------- ------------ ASSETS Current Assets: Cash and cash equivalents $ 1 $ 252 Accounts receivable (net of allowance for doubtful accounts of $29 and $54 for 2005 and 2004, respectively) 3,614 1,050 Unbilled receivables 614 - Prepaid expenses and other current assets 73 27 ------------- ------------ Total current assets 4,302 1,329 Property and equipment, net of accumulated depreciation of $1,068 for 2005 and $952 for 2004 495 417 Prepaid acquisition costs and acquisition deposit - 285 Goodwill 5,865 3,347 Purchased intangible assets, net 1,742 - Other assets 18 13 ------------- ------------ Total assets $ 12,422 $ 5,391 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 1,442 $ 647 Accounts payable 1,414 609 Deferred revenue 405 21 Accrued compensation and related expenses 959 97 Other current liabilities 83 266 ------------- ------------ Total current liabilities 4,303 1,640 Long-term debt, less current maturities 2,220 81 Pension obligation 302 302 ------------- ------------ Total liabilities 6,825 2,023 ------------- ------------ Stockholders' Equity: Preferred Stock - $.01 par value; authorized 1,000 shares, no shares issued and outstanding - - Common Stock - $.01 par value; authorized 30,000 shares; 11,072 and 9,721 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively 111 97 Additional paid in capital 44,069 42,050 Accumulated deficit (38,583) (38,779) ------------- ------------ Total stockholders' equity 5,597 3,368 ------------- ------------ Total liabilities and stockholders' equity $ 12,422 $ 5,391 ============= ============ DIGITAL FUSION, INC. Condensed Consolidated Statements of Operations For the three and nine months ended September 30, 2005 and 2004 (unaudited, in thousands except share data) Three months ended Nine months ended September 30, September 30, -------------------------------------- 2005 2004 2005 2004 --------- -------- -------- --------- Revenues Services and fees $ 4,061 $ 962 $11,107 $ 3,137 Reimbursed costs 815 191 1,993 461 Product 964 891 1,728 1,567 --------- -------- -------- --------- Total Revenues 5,840 2,044 14,828 5,165 --------- -------- -------- --------- Cost of services and goods sold Services 3,163 846 8,605 2,527 Reimbursed costs 796 150 1,872 370 Product 877 845 1,608 1,478 --------- -------- -------- --------- Total cost of services and goods sold 4,836 1,841 12,085 4,375 --------- -------- -------- --------- Gross profit 1,004 203 2,743 790 Selling, general and administrative 678 472 1,925 1,309 --------- -------- -------- --------- Operating income (loss) 326 (269) 818 (519) Other income (expenses): Interest expense, net (54) (58) (137) (131) Other income 1 - 21 - Amortization of intangible assets (101) - (201) - Amortization of discount on debt and intrinsic value of convertible debt (81) - (305) - ---------- ----------------- --------- Total other expenses (235) (58) (622) (131) --------- -------- -------- --------- Net income (loss) before income taxes 91 (327) 196 (650) Income tax benefit - - - - --------- -------- -------- --------- Net income (loss) $ 91 $ (327) $ 196 $ (650) ========= ======== ======== ========= Basic earnings (loss) per share $ 0.01 $ (0.04) $ 0.02 $ (0.09) ========= ======== ======== ========= Basic weighted average common shares outstanding 11,051 7,985 10,792 7,599 ========= ======== ======== ========= Diluted earnings (loss) per share $ 0.01 $ (0.04) $ 0.02 $ (0.09) ========= ======== ======== ========= Diluted weighted average common shares outstanding 13,156 7,985 12,879 7,599 ========= ======== ======== ========= Earnings before interest, income taxes, depreciation, and amortization (EBITDA) (unaudited in thousands) EBITDA is not a measure of financial performance under United States generally accepted accounting principles ("US GAAP") and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with US GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. Management believes EBITDA provides additional, useful information regarding Digital Fusion's ability to meet our debt service, capital expenditure and working capital requirements. EBITDA is a traditional measure of a business' ability to generate cash flows irrespective of financing costs and is presented as a supplemental financial measurement in the evaluation of our business. Three months ended Nine months ended September 30, September 30, ------------------- ----------------- 2005 2004 2005 2004 -------- -------- -------- -------- Net income (loss) $ 91 $ (327) $ 196 $ (650) Interest expense 54 58 137 131 Income tax expense - - - - Depreciation 39 36 118 72 Amortization of intangible assets 101 - 201 - Amortization of discount on debt and intrinsic value of convertible debt 81 - 305 - -------- -------- -------- -------- EBITDA $ 366 $ (233) $ 957 $ (447) ======== ======== ======== ======== CONTACT: Digital Fusion, Inc. Elena Crosby, 256-837-2620 ir@digitalfusion.com