SOURCE: Interchange Corporation

August 03, 2006 16:30 ET

Interchange Announces Second Quarter 2006 Financial Results

IRVINE, CA -- (MARKET WIRE) -- August 3, 2006 -- Interchange Corporation (NASDAQ: INCX), owner of Local.com, a leading local search engine, today announced its financial results for the second quarter 2006.

"Interchange had an exceptional quarter with improved site monetization and record traffic on Local.com," said Heath Clarke, CEO of Interchange. "We believe we are demonstrating improvements to our operational efficiencies while returning the company to growth mode. With a solid plan, key partnerships, and additional product enhancements designed to attract new users, we are executing on our goal of making Local.com a leader in local search."

Q2 Financial Highlights:

-- Revenues -- Interchange returned to growth mode -- Revenue was $3.4
million for the second quarter of 2006, which was approximately $200,000
better than the high end of guidance and represented growth of 7% over the
first quarter of 2006.

    - Local Search -- For the third consecutive quarter, local search
      revenue exceeded our expectations. Local search revenue was $1.7
      million for the second quarter, which was $100,000 better than
      guidance, and represented growth of 46% over the first quarter.

    - National Search -- Our national search distribution network revenue
      was $1.7 million for the second quarter of 2006, which decreased
      from $2.1 million in the first quarter of 2006.

-- Net Loss -- For the second quarter of 2006, the net loss was $3.5
million, which was approximately $100,000 better than our guidance and
about $300,000 better than the first quarter of 2006. Basic and diluted net
loss per share was $0.38.  The net loss included $1.2 million, or $0.13 per
share, of non-cash stock based compensation ($666,000) and depreciation and
amortization ($521,000).

-- Cash and Marketable Securities -- Interchange ended the second quarter
with $9.3 million in cash and marketable securities and no material debt.
The company used $2.7 million in cash during the quarter.

-- Positive Return on Ad Spend -- Local.com achieved a major local search
milestone with a positive return on ad spend for all traffic acquired in
the month of June.  This means that our local search revenue exceeded our
traffic acquisition costs.

-- Record Traffic & Reach -- Traffic on Local.com grew to 8.6 million
monthly unique visitors in June, ranking the site at #102 of all US
websites and giving Local.com a 5% reach to all US internet users (source:
comScore June 2006).

-- Increased Site Monetization -- Monetization of the site improved
significantly, with quarterly revenue per thousand page views increasing
62% to $15.13, up from $9.34 in the first quarter.

-- Key Hires -- VP Marketing, Jennifer Black and VP Engineering, Lee
Siegfried.
Financial Guidance

The company expects third quarter 2006 revenue of between $4.2 million and $4.4 million, which represents an increase of 24% to 30% over the second quarter. Of this revenue, we expect local search to account for approximately $3.0 million, an increase of 79% over the local search revenue from the second quarter 2006. The company expects net loss for the third quarter 2006 to be between $2.8 million and $3.0 million, or $0.30 to $0.33 per share. The loss per share forecast assumes 9.3 million outstanding shares.

The above guidance includes non-cash expenses of $1.1 million, or $0.11 per share, consisting of non-cash stock based expense of $526,000 and depreciation and amortization of $527,000.

Based on the above guidance, the company expects to use approximately $2.3 million in cash in the third quarter, down from $2.7 million used in the second quarter.

Conference Call and Webcast Information

A live webcast of Interchange's second quarter 2006 earnings release call will be available at www.visualwebcaster.com/event.asp?id=34874. The call begins today at 2:00 PM (PT) / 5:00 PM (ET). This press release, the financial tables, as well as other company information can also be viewed at that site. Investors and analysts can participate in the call by dialing 1-800-218-0204. 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 Corporation (NASDAQ: INCX) owns Local.com (www.local.com), a leading local search engine (ranked #102 in U.S. website traffic -- June 2006 comScore). According to comScore data, Local.com attracts over 8 million monthly unique visitors seeking information on local businesses, products, services and people. Powered by the company's patent-pending Keyword DNA® and local web indexing technologies, Local.com provides users with targeted, relevant local search results. These results include special offers from local businesses, reviews from other users, local businesses' website links, maps, driving directions and more. Businesses can advertise on Local.com with subscription, pay per click, banner and pay per call ad products.

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. When used in this report, words such as "anticipate," "believe," "estimate," "plans," "expect," "intend" and similar expressions, as they relate to Interchange or our management, identify forward-looking statements. Any forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including, but not limited to, our ability to monetize the Local.com domain, incorporate our local-search technologies, market the Local.com domain as a destination for consumers seeking local-search results, grow our business by enhancing our local-search services, expand our Advertiser and Distribution Networks, expand internationally, integrate and effectively utilize our acquisitions' technologies, develop our products and sales, marketing, finance and administrative functions and successfully integrate our expanded infrastructure, as well as our dependence on major advertisers, competitive factors and pricing pressures, changes in legal and regulatory requirements, and general economic conditions. 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.

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 of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.


                          INTERCHANGE CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except share data)


                                                      June 30, December 31,
                                                        2006       2005
                                                      --------   --------
                                                     (unaudited)

ASSETS
Current assets:
  Cash and cash equivalents                           $  1,402   $  1,075
  Restricted cash                                           41         10
  Marketable securities                                  7,890     13,244
  Accounts receivable, net of allowances of $16 and
   $30, respectively                                     1,857      1,138
  Prepaid expenses and other current assets                331        377
                                                      --------   --------
    Total current assets                                11,521     15,844

Property and equipment, net                              2,375      2,772
Intangible assets, net                                   3,287      3,760
Goodwill                                                12,213     12,445
Long-term restricted cash                                  125        166
Deposits                                                    47         47
                                                      --------   --------
Total assets                                          $ 29,568   $ 35,034
                                                      ========   ========

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
  Accounts payable                                    $  1,962   $  1,798
  Accrued compensation                                     389        347
  Deferred rent                                            508        575
  Accrued royalties                                        254        496
  Other accrued liabilities                                731        631
  Notes payable                                             14         84
  Deferred revenue                                         319        295
                                                      --------   --------
    Total liabilities, all current                       4,177      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; 9,235,352 and 9,171,944 issued and
   outstanding, respectively                                 -          -
  Additional paid-in capital                            50,497     48,706
  Accumulated comprehensive loss                          (101)      (151)
  Accumulated deficit                                  (25,004)   (17,746)
                                                      --------   --------
    Stockholders’ equity                                25,392     30,809
                                                      --------   --------
Total liabilities and stockholders’ equity            $ 29,568   $ 35,034
                                                      ========   ========

                          INTERCHANGE CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share amounts)
                                (Unaudited)


                                 Three months ended    Six months ended
                                      June 30,              June 30,
                                ------------------------------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------

Revenue                         $   3,374  $   4,753  $   6,525  $  10,663
                                ---------  ---------  ---------  ---------
Operating expenses:
 Search serving                     1,381      2,638      2,961      5,813
 Sales and marketing                3,146      1,507      5,614      2,845
 General and administrative         1,549      1,032      3,352      1,993
 Research and development             618        459      1,569      1,015
 Amortization of intangibles          237        177        473        228
                                ---------  ---------  ---------  ---------

   Total operating expenses         6,931      5,813     13,969     11,894
                                ---------  ---------  ---------  ---------

Operating loss                     (3,557)    (1,060)    (7,444)    (1,231)

 Interest and other income             83        226        188        540
                                ---------  ---------  ---------  ---------

Loss before income taxes           (3,474)      (834)    (7,256)      (691)

 Provision (benefit) for income
  taxes                                 1         (6)         2          5
                                ---------  ---------  ---------  ---------

Net loss                        $  (3,475) $    (828) $  (7,258) $    (696)
                                =========  =========  =========  =========

Per share data:

Basic net loss per share        $   (0.38) $   (0.10) $   (0.79) $   (0.08)
                                =========  =========  =========  =========
Diluted net loss per share      $   (0.38) $   (0.10) $   (0.79) $   (0.08)
                                =========  =========  =========  =========

Basic weighted average shares
 outstanding                    9,233,601  8,536,068  9,222,385  8,264,347
Diluted weighted average shares
 outstanding                    9,233,601  8,536,068  9,222,385  8,264,347



   Supplemental  consolidated  statements  of  operations  information:


                                                         Three months ended
                                                               June 30,
                                                          -----------------
                                                            2006     2005
                                                          -------- --------
Non-cash stock based compensation expense:

Sales and marketing                                       $    199 $      -
General and administrative                                     391       65
Research and development                                        76        -
                                                          -------- --------
Total stock based compensation expense                    $    666 $     65
                                                          ======== ========
Basic and diluted net compensation expense per share      $   0.07 $   0.01
                                                          ======== ========

Contact Information

  • Corporate Communications Contact:
    Jennifer Black
    Vice President of Marketing
    jblack@local.com
    (949) 784-0800

    Investor Relations Contact:
    John Baldissera
    BPC Financial Marketing
    (800) 368-1217