infoUSA Releases Second Quarter Financials

infoUSA Releases Second Quarter Financials

Omaha, Nebraska - (Cheap Web Hosting Directory) - July 21, 2006 - Provider of business and consumer information products, database marketing services, data processing services and sales and marketing solutions firm, infoUSA, has released its financial results for the second quarter and first half of fiscal year 2006 ending on June 30, 2006. infoUSA's earnings per share for the second quarter of 2006 was $0.06 versus $0.12 in the second quarter of 2005. EBITDA for the second quarter was $15.6 million versus $20.7 million last year.

The following are highlights of infoUSA's accomplishments in the second quarter of 2006:

-- infoUSA continued building on the success of its subscription model during the second quarter adding over 6,000 subscribers to Salesgenie.com(R), Credit.net and infoUSA's other subscription products. infoUSA now has approximately 42,000 total subscribers compared to approximately 18,000 at the end of the second quarter of 2005. The cancellation rate has stabilized at approximately 18% as the company continues to refine its advertising and marketing strategy to find the right mix of direct marketing, e-mail, radio and television advertising, and keyword searches on the internet, to reach ideal customers such as small business owners, entrepreneurs, and sales people. By continually adding new subscribers, infoUSA is generating a future sustainable and predictable revenue stream.

-- As previously discussed, in accordance with generally accepted accounting principles (GAAP), infoUSA only recognizes one month of revenue in the month a subscription is sold, while advertising and marketing must be expensed as the costs are incurred. For example, the Company believes that it costs approximately $1,500 to acquire a new Salesgenie.com subscriber, but infoUSA only recognizes $300 of revenue in the month in which a new customer is acquired. However, infoUSA believes the lifetime value of a Salesgenie.com subscriber to be over $7,500. infoUSA is confident that it can employ the same business model as cable companies and cell phone companies to effectively build a sustainable and predictable revenue stream.

-- infoUSA intends to continue investing in marketing and advertising in order to build a profitable revenue base. By converting many of its one-time list customers to subscription customers, we are signing on a new class of subscribers to Salesgenie.com. Many of these new clients have never used direct mail or lead generation products, so infoUSA is reaching a much bigger market potential than ever before. Moving forward, infoUSA is evaluating opportunities to lower the acquisition cost per customer.

-- infoUSA continues to invest in advertising and branding. Total advertising and marketing expense increased by $2.9 million in the second quarter as compared to the same period last year. The increased spending is generating approximately 4% revenue growth, year to date, for the entire company. It is infoUSA's objective to make Salesgenie.com, infoUSA.com, and Credit.net widely recognized small business brands.

-- To take advantage of revenue growth opportunities, infoUSA continues to expand its international sales force. In the second quarter, additional sales people were added in Hong Kong, Mexico and South America.

-- infoUSA is constantly seeking additional data sources to improve and expand on what it believes is the finest international database of large businesses by adding more content on small and medium sized business. In the second quarter, infoUSA added an additional 1.6 million small businesses in the United Kingdom to its international databases. infoUSA is seeking specific data providers in fast-growing, emerging markets, such as Brazil, India, China, Asia Pacific, and Australia.

-- infoUSA continued to consolidate the direct mail industry with its acquisition of List Brokerage and List Management companies. During the second quarter, infoUSA acquired Mokrynskidirect(TM) adding to its stable of companies in this space. infoUSA is anticipating a strong third and fourth quarter for its List Brokerage and List Management business, because traditionally third and fourth quarters are the strongest in the direct mail industry.

Vin Gupta, Chairman and CEO of infoUSA, commented, ''During the second quarter of 2006, we delivered strong organic revenue growth of approximately 3% across our major business units. Revenues for the second quarter, which is historically the slowest period in the direct mail industry, were $100.3 million.''

Mr. Gupta continued, ''During the second quarter 2006, revenue was $100.3 million vs. $93.7 million for the same period in 2005, an increase of 7%. Our second quarter operating income was $7.5 million versus $11.8 million during the corresponding quarter of 2005. The operating margin was down in the second quarter of 2006 due to the company's investment in advertising and marketing for our subscription products and due to losses in our seasonal list brokerage businesses. Also during the quarter, $1.7 million was spent on the proxy contest and other shareholder matters.''

Mr. Gupta added, ''We're pleased by the continued organic revenue growth across the company and the performance of our subscription products in the second quarter of 2006. In order to reduce operating costs, we have taken cost-cutting measures throughout the company. We are examining all of our advertising and marketing expenses and are eliminating programs that are not producing results. In addition, we have initiated a hiring freeze and are reducing overhead costs in divisions that are not growing. We incurred $0.8 million in severance and restructuring charges in the second quarter and we expect this effort to generate annual savings of $8 million. Going forward, we expect to see continued revenue growth as the number of new subscribers continues to increase, building our revenue base. The strong revenue base is reflected in $52.5 million of unbilled revenue in the company's pipeline for the next twelve months. We will continue to invest in branding and advertising on our subscription services because that's the only way to achieve long-term organic growth.''

For the first six months of 2006, net sales were $203.4 million compared to $188.8 million for the same period last year. That represents an 8% increase in revenue, when adjusted for acquisitions, it represents 4% organic growth in 2006 compared to 2005. Operating income was $23.0 million for the first six months of 2006 compared to $27.4 million for the first six months of 2005. The decrease in operating income is mainly attributed to increased marketing and advertising expenses and to $2.0 million dollars of expenses related to the proxy contest and other shareholder matters. For the first six months of 2006, EBITDA and EPS were $38.6 million and $0.20 per share respectively, compared to $45.9 million and $0.29 for the same period last year.

For the second quarter of 2006, revenue for the Donnelley Group was $63.4 million versus $59.0 million for the same period last year. The Donnelley Group consists of five operating groups: Donnelley Marketing, Yesmail, Catalog Vision, OneSource and the List Brokerage and List Management divisions, consisting of Walter Karl, Edith Roman, Millard Group and the newly acquired Mokrynskidirect.

Donnelley Marketing, based in New York and New Jersey, continues to progress under the leadership of Pete Giraldi. The division continues to be successful in cross-selling across multiple product lines combining data, direct marketing services, data processing, email and analytics, adding new customers and exploring new vertical markets. In the second quarter of 2006, Donnelley Marketing made great strides in the insurance vertical market and added a professional sports team as a client. In addition, Donnelley Marketing has added vertical sales specialists in the insurance/financial industry and the entertainment/travel industry to take advantage of growing opportunities in these expanding sectors. Recently Donnelley Marketing(R), along with over a dozen key customers, participated in the "Aspen Institute Ideas Festival" attended by the corporate CEO's and world leaders. The Donnelley customers also had a private lunch with General Colin Powell.

Catalog Vision is the company's Data Processing and Direct Marketing division dedicated to Direct Mail Catalog Retailers, and non-profit and charitable organizations. This division, based in Marshfield, Wisconsin, continues to prosper by retaining nearly 100% of existing clients and adding new customers due to its cutting edge technology and white glove customer service.

Yesmail, based in Silicon Valley and Portland, Oregon, is comprised of five e-mail companies purchased in 2003 and 2004. Today, Yesmail is one of the largest e-mail technology companies in the industry. Yesmail built on its first quarter momentum by recording a very strong second quarter. As direct mail usage is decreasing, e-mail marketing is becoming a bigger part of corporate advertising and media spending fueling its growth. For the remainder of 2006, Yesmail intends to continue to grow its customer base via its expanded sales force, investing in its leading technology platform, and by taking advantage of cross-selling opportunities with other divisions in the Donnelley Group. In the second quarter, Yesmail has completed several key technology milestones and is currently offering new features and functions to their client base. This investment in technology will continue with new releases scheduled in the third and fourth quarter. Yesmail continues to effectively market both email acquisition and retention to its client base as a unique offering.

OneSource, based in the Boston area and London, United Kingdom, is a leader in the global business database industry. OneSource continues to expand its sales force internationally. Since it was acquired by infoUSA, the company has reduced costs, improved the product, invested in technology and increased its profitability. OneSource has reengineered its product line and now is targeting mid-size businesses by offering a lower price product to fit their budget. OneSource has also launched a free service to attract more customers to its website and then convert them into paying subscribers. infoUSA has increased its advertising and marketing effort to continue growing the OneSource subscription brand.

OneSource is expanding its presence in Mexico, India, the Asia-Pacific region, and Brazil. Also, OneSource is a co-sponsor of the Clinton Global Initiative, the most effective place to network with global leaders and global corporate CEOs.

This division operates under the Walter Karl(R), Edith Roman(R), Millard Group(R) and the Mokrynskidirect Brands, based in New York, New Jersey and New Hampshire. With the acquisition of the Millard Group in November 2005, and Mokrynskidirect in June of 2006, infoUSA's list brokerage/list management business is the largest in the industry. Millard's and Mokrynski's ''blue chip'' client bases present significant cross-selling opportunities for the entire range of infoUSA proprietary databases and its e-mail marketing services, as it has for Walter Karl and Edith Roman. While the direct mail business is declining due to online advertising and e-mail marketing, infoUSA is uniquely positioned to create value by leveraging its email marketing expertise. infoUSA was the pioneer in e-mail marketing by acquisitions of Yesmail, Clickaction, @Once, Doubleclick, and Markado. All of our list brokerage and management companies are offering multi channel marketing to their customers. As the newly acquired companies enter into their historically strong second half, infoUSA expects strong results in the third and fourth quarter.

For the second quarter of 2006, revenue from the infoUSA Group, the company's small business group, was $36.9 million vs. $34.7 million for the same period last year. Subscription revenue, which includes Salesgenie.com, SalesLeadsUSA.info and Credit.net led to growth in this division, despite the anticipated drop in revenue from Polk Directories. The non-subscription divisions also experienced strong growth during the second quarter as result of the pricing strategy implemented with the resellers last year. The company attributes this growth to successful advertising and marketing campaigns, including email, print, TV, radio, direct mail, search word advertising, and utilizing an outbound call center for lead generation. Planned product enhancements for Salesgenie.com include Customer Analyzer, Enhanced Contact Manager, unlimited Business Credit reports, ZipMailUSA.com(R), Express Mailing List Downloads, and enhanced mapping. Recent Credit.net product enhancements include UCC Filings, Secretary of State information, and the company will be adding Yellow Page advertising spending, Annual Reports and Rating/Opinion Boards for payment history.

ZipMailUSA.com is an end-to-end direct mail solution. It is not just selling lists, but also offering creative services, printing and mailing services online at a reasonable cost. That means a customer has to do nothing except generate sales leads, and deal with only one vendor. Our technology makes it possible to offer this most sought after service to our customers.

The infoUSA Group's Canadian division, infoCanada, based in Toronto, Montreal, and Vancouver, generated organic revenue growth in the second quarter of 2006, building on its growth in the first quarter. infoCanada will be introducing its dedicated subscription product, Salesgenie.ca, to the Canadian market in the third quarter.

Polk City Directories and Hill-Donnelly City Directories(R) subscription-based websites are performing well and successfully transitioning print directory customers to an online subscription product, which includes unlimited sales leads and mailing labels. Polk City Directories continues to go through a complete overhaul and reengineering. The expensive field sales force has been entirely replaced by a call center sales force in Livonia, Michigan. Despite an anticipated drop in revenue, the company expects profitable growth from Polk City Directories in Livonia and Hill-Donnelly City Directories.

The infoUSA Group non-subscription and vertical market businesses continued to flourish. One-time list buyers are still providing growth because of infoUSA's leading edge on-line list delivery engine - infoUSA.com. infoUSA was the first company to offer on-line list download, and today infoUSA has the best and most user friendly website for customers. infoUSA's Reseller division has brought pricing discipline to the market place. By stabilizing the pricing matrix, infoUSA can provide better quality service to the resellers and realize future growth.

infoUSA believes it has the finest, most accurate proprietary databases. infoUSA has 12 databases that are widely regarded as unparalleled in breadth and depth of content. Additional business data content includes private company profiles of the leading 110,000 private U.S. companies. These comprehensive and timely profiles include a multi-paragraph company description, executive functions and biographies, corporate affiliations and linkages, and, where available, storefront photographs. We now have over 3 million individual pictures of businesses and have completed coverage in 40 of the top 100 MSA's.

infoUSA is continuously adding more content, such as detailed business descriptions, more executives, hours of operation, credit cards accepted, URL address and other information. The recent introduction of a database compilation facility in India is helping the group accomplish this objective at a low cost.

Consumer database additions include a newly created proprietary lifestyle and hobby database containing the highest counts in the industry. The group's expanded lifestyle and hobby database contains many popular selections such as book/magazine readers, travel, health and cooking, apparel, sweepstakes, gardening, catalog buyers, crafts, pet owners, investment and finance, golf, gourmet food and wine, fishing, home decorating, dieting and weight loss, photography, boating, camping, and hunting.

infoUSA's Growth Strategy includes:

-- New product development and delivery - infoUSA plans to grow by developing new products and by enhancing existing products. The company is leveraging the strength of its ZipMailUSA.com and Salesgenie.com products to transition the business to a subscription model. These products also reach a much larger market than ever before.

-- International growth opportunities - OneSource Global Business Database is ripe for international sales growth.

-- Solution selling - Offer end-to-end advertising and marketing solutions for small business customers. ZipmailUSA.com offers completely integrated online copywriting, graphics, printing and mailing services to small businesses.

-- Develop new markets - Expand the use of the Donnelley database and database marketing services among political and 501(c)3 not-for-profit fundraising organizations, professional sports business offices. With the help of recently appointed Peter O'Keefe, we are centralizing our ability to review RFP's with the federal government enabling us to leverage government business across multiple infoUSA divisions.

-- Increase market share and enter complimentary business through acquisitions - infoUSA intends to enhance its capabilities through acquisitions. There are many small direct marketing businesses that have no economies of scale and their owners are seeking an exit strategy. infoUSA has the opportunity to buy these businesses, improve the cost structure, and increase marketshare and profit. infoUSA is currently in discussions with several potential acquisitions and intends to continue leading the consolidation of this industry.

infoUSA is investing heavily in branding and advertising to promote SalesGenie.com, infoUSA.com, and Credit.net(R). infoUSA increased its advertising by $2.9 million over the second quarter of 2005 and by $5.4 million YTD over the same period last year. The increased spending was in radio, TV, Google, and other mass advertising. This advertising effort has led to an increase in expense, but as the subscription base builds and the advertising costs remain stable, infoUSA expects that sales and profitability will increase.

The company has retained two agencies, A. Eickhoff in Chicago and DDB in San Francisco, to develop television advertising. The company is promoting its Salesgenie product in a nationwide radio advertising campaign. The radio advertising is proving to be very effective in reaching outside sales people and small business owners. We are working with Marketing Architects to help us develop infoUSA's radio advertising efforts. infoUSA is a major advertiser in on-line media using companies such as Google(R), MSN(R), AOL(R), and Yahoo(R) for keyword searches and the company plans to increase its presence in online media.

infoUSA confirmed that it believes its 2006 revenue will be on the high side of its previously provided range of $410 million to $420 million. The company expects that EBITDA and EPS will be on the low side of the range for 2006. infoUSA provided the following EBITDA and EPS guidance for fiscal year in January 2006:

-- 2006 EBITDA Guidance: $99 to $105 million
-- 2006 EPS Guidance: $0.75 to $0.85 per share

The company's forward looking guidance involves potential risks and uncertainties, including, without limitation, those described in the "About infoUSA" section of this press release, which could cause the actual results to differ materially from our projection.

The company will host its second quarter conference call on July 21st, at 4 PM Eastern time. To access the conference call, please dial 800-591-6923 (international 617-614-4907), passcode 11400530, approximately 10 minutes prior to the start of the call. A replay of the call will be available from 6 PM Eastern time, July 21st, through midnight Eastern Time, July 28th, 2006. The replay number is 888-286-8010 (international 617-801-6888), passcode 55088773.

infoUSA, founded in 1972, is a provider of business and consumer information products, database marketing services, data processing services and sales and marketing solutions. infoUSA provides a comprehensive collection of data, with a proprietary database of 250 million consumers and 14 million businesses. The infoUSA database powers the directory services of the top Internet traffic-generating sites. Nearly 3 million customers use infoUSA's products and services to find new customers, grow sales, and for other direct marketing, telemarketing, customer analysis and credit reference purposes. infoUSA headquarters are located at 5711 S. 86th Circle, Omaha, NE 68127 and can be contacted at (402) 593-4500.

To learn more about the live webcast of the conference call, please visit: http://ir.infousa.com.

For more information about infoUSA, please visit: www.infousa.com.

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