Intersections Inc. Reports First Quarter 2005 Financial Results and An

    Business Editors/Technology Editors

    CHANTILLY, Va.--(BUSINESS WIRE)--April 25, 2005--Intersections Inc. (Nasdaq:INTX) today announced financial results for the quarter ending March 31, 2005. Net income for the quarter ending March 31, 2005 was $1.8 million, compared to $2.2 million for the quarter ending March 31, 2004. Earnings per share ("EPS") were 10 cents for the first quarter of 2005, including a 5 cent EPS charge for the impairment of certain capitalized software development costs. Intersections also announced that on April 21, 2005, the company's Board of Directors approved a program for the repurchase of the company's common stock with total purchases not to exceed $20 million.
    "During the first quarter, we were faced with some unexpected events that impacted our ability to meet our quarterly goals, some of which were related to our continued investments in improved infrastructure which we believe will help us leverage emerging opportunities," said Chairman and Chief Executive Officer Michael Stanfield. "As a result, we have revised our earnings objectives and now expect to earn between 75 cents and 85 cents per share for 2005. While our hurdles for the remainder of the year are now set a bit higher, we remain confident in our fourth quarter profit margin, subscriber growth expectations, and our goals for long-term growth and profitability as we continue to build aggressively for the future."

First Quarter 2005 Financial Highlights:

-- Total subscribers increased to approximately 2.98 million as of March 31, 2005, compared to approximately 2.89 million as of December 31, 2004, an increase of 3.3 percent. Subscriber additions in the first quarter of 2004 were approximately 614,000.

-- Total revenue for the first quarter of 2005 was $38.6 million, including $2.9 million from American Background ("ABI"), compared to $35.9 million, including $1.3 million from ABI, for the fourth quarter of 2004 and $38.2 million for the first quarter of 2004.

-- Subscription revenue, net of marketing and commissions associated with subscription revenue, increased to $23.6 million for the first quarter of 2005 from $22.9 million for the fourth quarter of 2004, and from $19.1 million for the first quarter of 2004, increases of 2.9 percent and 23.6 percent, respectively. Subscription revenue, net of marketing and commissions associated with subscription revenue, is a non-GAAP financial measure that we believe is important to investors and one that we utilize in managing our business as it normalizes the effect of changes in the mix of indirect and direct marketing arrangements.

-- Depreciation and amortization expense for the first quarter of 2005 was approximately $1.5 million, including $168,000 from ABI, compared to $1.3 million, including $62,000 from ABI, for the fourth quarter of 2004 and $880,000 for the first quarter of 2004.

-- A software impairment charge of approximately $1.5 million was recognized during the first quarter of 2005, primarily due to the decision to revise the company's development approach in an effort to accelerate the launch of our small business product, while reducing the company's overall investment in the project.

-- Pre-tax income was $3.0 million, or 7.8 percent of revenue, for the first quarter of 2005, compared to $5.6 million, or 15.7 percent of revenue, for the fourth quarter of 2004 and $3.7 million, or 9.6 percent of revenue, for the first quarter of 2004. Excluding the impact of the software impairment charge, pre-tax income would have been $4.5 million, or 11.7 percent of revenue.

-- Cash flow used in operations for the quarter ending March 31, 2005 was approximately $3.0 million, primarily as a result of a $5.5 million cash outflow for prepaid royalty payments incurred in connection with certain exclusive rights under two agreements that provide for the receipt of data and other information to be used primarily in the company's identity theft prevention product under development.

    Stock Repurchase Program:

    Under the stock repurchase program, Intersections is authorized to repurchase up to $20 million of its outstanding shares of common stock from time to time, depending on market conditions, share price and other factors. The repurchases may be made on the open market, in block trades, through privately negotiated transactions or otherwise, and the program may be suspended or discontinued at any time. As of April 20th, 2005, Intersections had approximately 17.54 million shares of common stock outstanding.

    Intersections' first quarter 2005 results will be discussed in more detail on April 25, 2005, at 5:00 p.m. Eastern Time via teleconference. A live audio webcast will be available on Intersections' Web site at www.intersections.com or at www.fulldisclosure.com. Participants are encouraged to go to the selected Web site at least 15 minutes in advance to register, download, and install any necessary audio software. This webcast will be archived and available for replay after the teleconference. Additionally, the call will be available for telephonic replay from approximately 7:00 p.m. Monday, April 25 through 11:59 p.m. Wednesday, April 27, 2005 at (888) 286-8010 (Passcode: 56140349).

    Statements in this press release relating to future plans, results, performance, expectations, achievements and the like are considered "forward-looking statements." Those forward-looking statements involve known and unknown risks and are subject to change based on various factors and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including without limitation the effect of new subscriber additions. Factors and uncertainties that may cause actual results to differ include but are not limited to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to revise or update any forward-looking statements.

    About Intersections Inc.

    Intersections Inc. is the leading provider of branded and fully-customized consumer identity theft protection and credit management services to the customers of financial institutions and financial services companies in North America. Using our technology solutions and marketing capabilities, we assist these companies in meeting the needs of their customers in an effective, efficient and ethical environment. Intersections currently provides its services to nearly 3 million subscribers in the U.S. and Canada. Learn more about Intersections at www.intersections.com.

INTERSECTIONS INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended March 31, ------------------------- 2005 2004 ------------ ------------ (In Thousands, except per share data)

Revenue $ 38,586 $ 38,177 Operating expenses: Marketing and commissions 11,697 18,587 Cost of revenue 13,130 9,286 General and administrative 7,992 5,499 Depreciation and amortization 1,458 880 Impairment of software development 1,515 - ------------ ------------ Total operating expenses 35,792 34,252 ------------ ------------ Income from operations 2,794 3,925 Interest income (expense) 216 (260) Other expense (5) (3) ------------ ------------ Income before income taxes and minority interest 3,005 3,662 Income tax expense (1,213) (1,425)

Minority interest in net loss of subsidiaries - - ------------ ------------ Net income $ 1,792 $ 2,237 ============ ============ Net income per basic share $ .10 $ .45 ============ ============ Net income per diluted share $ .10 $ .16 ============ ============ Weighted average common shares outstanding 17,389,516 4,963,956 Dilutive effect of common stock equivalents 1,118,906 10,533,097 ------------ ------------ Weighted average common shares outstanding - assuming dilution 18,508,422 15,497,053 ============ ============

INTERSECTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

March 31, December 31, 2005 2004 ------------ ------------

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 7,607,325 $ 12,026,557 Short term investments 39,566,424 40,171,037 Accounts receivable, net 11,326,068 9,969,709 Prepaid expenses and other current assets 2,790,533 2,795,822 Deferred subscription solicitation costs 9,536,317 9,185,196 Deferred tax asset 377,042 489,959 ------------ ------------ Total current assets 71,203,709 74,638,280 PROPERTY AND EQUIPMENT--Net 16,421,668 15,821,136 GOODWILL 16,314,451 16,314,451 CUSTOMER INTANGIBLE ASSETS 1,864,020 1,954,020 OTHER ASSETS 6,151,527 382,632 ------------ ------------ TOTAL ASSETS $111,955,375 $109,110,519 ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES: Accounts payable $ 2,716,721 $ 3,593,255 Accrued expenses and other current liabilities 6,437,764 6,050,436 Accrued payroll and employee benefits 1,377,425 2,205,751 Commissions payable 2,054,250 1,932,493 Deferred revenue 3,672,859 3,691,110 Current obligations under capital leases 1,271,028 1,180,823 Current tax payable 832,145 - ------------ ------------

Total current liabilities 18,361,742 18,653,868 ------------ ------------ OBLIGATIONS UNDER CAPITAL LEASES--Less current portion 2,127,458 1,763,857 OTHER LONG-TERM LIABILITIES 117,132 116,318 DEFERRED TAX LIABILITY 1,449,147 1,449,147

STOCKHOLDERS' EQUITY: Common stock 174,707 173,245 Deferred compensation (24,588) (29,506) Additional paid-in capital 92,417,031 91,442,907 Accumulated deficit (2,667,254) (4,459,317) ------------ ------------

Total stockholders' equity 89,899,896 87,127,329 ------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $111,955,375 $109,110,519 ============ ============

INTERSECTIONS INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

Three Three Months Ended Months Ended March 31, March 31, 2005 2004 ---- ---- (In Thousands) CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 1,792 $ 2,238 Adjustments to reconcile net income to net cash used in operating activities Depreciation and amortization 1,458 880 Compensation expense related to warrants and options 5 5 Deferred income tax 945 1,334 Amortization of deferred subscription solicitation costs 5,390 5,436 Impairment of software development 1,515 - Changes in assets and liabilities (14,074) (5,475) -------- --------

Net cash provided by (used in) operations (2,969) 4,418

NET CASH USED IN INVESTING ACTIVITIES:

Acquisition of property and equipment (2,676) (2,095) Investments 605 - -------- --------

Net cash used in investing activities (2,071) (2,095)

CASH FLOW FROM FINANCING ACTIVITIES:

Options exercised 975 - Capital lease payments (354) (296) -------- --------

Net cash provided by (used in) financing activities 621 (296)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,419) 2,027

CASH AND CASH EQUIVALENTS - Beginning of period 12,026 14,411 -------- -------- CASH AND CASH EQUIVALENTS - End of period $ 7,607 $16,438 ======== ========

INTERSECTIONS INC. OTHER DATA (DOLLARS IN THOUSANDS)

Three Months Ending March 31, 2005 2004 ---------- ---------- Subscribers at beginning of period 2,885,236 2,274,605 New subscribers - indirect 419,289 400,013 New subscribers - direct 194,481 200,170 Cancelled subscribers within first 90 days of subscription 198,703 149,703 Cancelled subscribers after first 90 days of subscription 320,408 288,080 ---------- ---------- Subscribers at end of period 2,979,895 2,437,005 ========== ==========

Indirect subscribers 61.3% 55.2% Direct subscribers 38.7 44.8 ---------- ---------- Subscribers at end of period 100.0% 100.0% ========== ==========

Percentage of revenue from indirect marketing arrangements to total subscription revenue 30.7% 37.5% Percentage of revenue from direct marketing arrangements to total subscription revenue 69.3% 62.5% ---------- ---------- Total subscription revenue 100.0% 100.0% ========== ==========

Total revenue $ 38,586 (1) $ 38,177 Revenue from transactional sales (3,348) (863) Revenue from lost/stolen credit card registry (12) (24) ---------- ---------- Subscription revenue $ 35,226 $ 37,290 ========== ========== Marketing and commissions $ 11,697 $ 18,587 Commissions paid on transactional sales (37) (369) Commissions paid on lost/stolen credit card registry (17) (2) ---------- ---------- Marketing and commissions associated with subscription revenue $ 11,643 $ 18,216 ========== ========== Subscription revenue, net of marketing and commissions associated with subscription revenue $ 23,583 $ 19,074 ========== ==========

(1) Total revenue in the first quarter of 2005, excluding $2.9 million from ABI, was $35.7 million compared to total revenue in the first quarter of 2004 of $38.2 million. As previously disclosed, the reduction in revenue is primarily the result of a change in revenue recognition as a result of the revised terms of a new marketing and services agreement that became effective on September 1, 2004.

--30--TG/ph*

CONTACT: Intersections Inc. Amy Gergely, 703-488-6229 agergely@intersections.com

KEYWORD: VIRGINIA INDUSTRY KEYWORD: HARDWARE BANKING SOFTWARE INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Intersections Inc.

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