Market Overview

Intersections Inc. Reports Preliminary Second Quarter 2018 Results; Provides Refinancing Update; Delays Filing of Second Quarter Form 10-Q; Announces Second Quarter Business Update Conference Call

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Intersections Inc. (NASDAQ:INTX) today announced preliminary financial
results for the quarter ended June 30, 2018 and provided a refinancing
update. The Company expects to report:

  • Revenue of $39 million for the second quarter and $78 million for the
    six months ended June 30, 2018.
  • $(597) thousand consolidated loss from continuing operations before
    income taxes for the second quarter compared to $(7.8) million loss in
    the second quarter of 2017.
  • $674 thousand consolidated income from continuing operations before
    income taxes for the six months ended June 30, 2018 compared to
    $(12.0) million loss for the six months ended June 30, 2017.
  • $2.9 million adjusted EBITDA for the second quarter 2018 compared to
    $(736) thousand adjusted EBITDA loss for the second quarter 2017.
  • $6.2 million adjusted EBITDA for the six months ended June 30, 2018
    compared to $(1.7) million adjusted EBITDA loss for the six months
    ended June 30, 2017.
  • $2.4 million cash provided by continuing operations for the six months
    ended June 30, 2018 compared to cash used in continuing operations of
    $(1.9) for the six months ended June 30, 2017.

Liquidity and Refinancing Update

The Company entered into the fourth amendment of its credit agreement on
June 8, 2018, which set forth required monthly principal payments
beginning June 30, 2018 and shortened the maturity date of the secured
indebtedness (the "Secured Debt") to December 31, 2018. On June 27,
2018, the Company borrowed from certain existing stockholders an
aggregate amount of $3.0 million, the proceeds of which were used to
prepay a portion of the principal of the Secured Debt. As of June 30,
2018, the Company had a cash balance of $7.7 million and a total
outstanding principal balance of $20.5 million under its existing credit
agreement and promissory notes. The Company was in compliance with the
financial covenants in the credit agreement for the period ended June
30, 2018 and is not aware of non-compliance with any of the provisions
of the credit agreement that would require a waiver from its current
lender. The Company, with assistance from its financial advisors, is
currently evaluating options which include equity and/or debt financings
that we believe will be sufficient to fully repay the Secured Debt.
Other objectives of such a financing include providing additional
working capital to support the Company's expected growth.

The consummation and actual terms of any refinancing transaction are
subject to a number of factors, including without limitation, market
conditions, negotiation and execution of definitive agreements and
satisfaction of customary closing conditions. There can be no assurance
that the Company will be able to consummate the refinancing transaction
on favorable terms or at all.

Quarterly Report on Form 10-Q for Second Quarter 2018

The outcome of the evaluation of financing options will impact the
Company's financial statements and discussion of its liquidity and
capital resources in its Quarterly Report on Form 10-Q for its second
quarter of 2018. Because more time is required to evaluate these options
and finalize the financial statements and related disclosures that will
be included in the Form 10-Q, on August 15, 2018, the Company filed a
Notice of Late Filing on Form 12b-25 with regards to its Form 10-Q for
the second quarter of 2018. The Company anticipates filing its second
quarter Form 10-Q with the SEC on August 20, 2018.

Second Quarter 2018 Business Update Conference Call:

The Company will hold a conference call to provide a second quarter 2018
business update on Tuesday, August 21, 2018 at 4:30 p.m. Eastern Time.

Interested parties can access the live webcast on the Investor's page at
Intersections Inc.'s website www.intersections.com.
The live call can be accessed by dialing the toll-free numbers below.
Those who wish to participate in the Q&A session must dial in.

 
WHAT: Intersections Inc. Second Quarter 2018 Conference Call
 
WHEN: August 21, 2018
4:30 p.m. Eastern Time
 
HOW: Dial in: 888-771-4384
International: 847-585-4409

For a current list of alternate local and International Freephone
telephone numbers, please
click here
.

 

To pre-register for the conference and receive a Participant Pass
code, please
click here
.

 

The replay of the webcast will be available August 21, 2018 at 7:00 p.m.
(Eastern Time) through August 28, 2018 at 11:59 PM (Eastern Time). The
dial-in for the replay is 888-843-7419 or 630-652-3042 with the replay
access code of 6821828#.

Non-GAAP Financial Measures:

"Adjusted EBITDA (loss)" represents consolidated income (loss) from
continuing operations before income taxes plus (minus): share related
compensation; non-cash impairment of goodwill, intangibles and other
assets; (gain) loss on sale of Captira Analytical and Habits at Work;
loss on extinguishment of debt; (benefit) from change in vacation
policy; depreciation and amortization; and interest expense.

Intersections' Consolidated Financial Statements, "Other Data" and
reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures and related notes can be
found in the accompanying tables and footnotes to this release and in
the "GAAP and Non-GAAP Measures" link under the "Investor & Media" page
on our website at www.intersections.com.

Forward-Looking Statements:

Our preliminary financial information represents a preliminary
estimate of the results we expect to report.
Our actual results
may differ materially from these estimates due to completion of
financial closing procedures, final adjustments and other developments
that may arise between now and the filing of our second quarter 2018
Form 10-Q.

Statements in this release relating to future plans, results,
performance, expectations, achievements and the like are considered
"forward-looking statements" under the Private Securities Litigation
Reform Act of 1995. You can identify forward-looking statements by the
fact that they do not relate strictly to historical or current facts.
These statements may include words such as "anticipate," "estimate,"
"expect," "project," "plan," "intend," "believe," "may," "should," "can
have," "likely" and other words and terms of similar meaning in
connection with any discussion of the timing or nature of future
operating or financial performance or other events. Those
forward-looking statements involve known and unknown risks and
uncertainties 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 our ability to
consummate a refinancing transaction; our ability to maintain sufficient
liquidity and produce sufficient cash flow to pay our debt service
obligations and fund our business and growth strategy; our needs for
additional capital to grow our business, including our ability to
maintain compliance with the covenants under our term loan or seek
additional sources of debt and/or equity financing; the success of our
strategic objectives; our ability to meet the targets disclosed by
management with respect to costs and revenue, and that these targets do
not represent historical performance, projected results or guidance; our
ability to generate revenue from our partner sales strategy and business
development pipeline with our distribution partners; the timing and
success of new product launches and other growth initiatives, including
our Identity Guard
® with Watson
service; the continuing impact of the regulatory environment on our
business; the continued dependence on a small number of financial
institutions for a majority of our revenue and to service our U.S.
financial institution customer base; our ability to execute our strategy
and previously announced transformation plan; our incurring additional
restructuring charges; our incurring additional charges for non-income
business taxes or otherwise, or impairment costs or charges on goodwill
and/or other assets; our ability to control costs; and our failure to
protect private data due to a security breach or other unauthorized
access. Factors and uncertainties that may cause actual results to
differ include but are not limited to the risks disclosed under
"Forward-Looking Statements," "Item 1. Business—Government Regulation"
and "Item 1A. Risk Factors" in the Company's most recent Annual Report
on Form 10-K and Quarterly Reports on Form 10-Q and in its recent other
filings with the U.S. Securities and Exchange Commission. The Company
undertakes no obligation to revise or update any forward-looking
statements unless required by applicable law.

About Intersections:

Intersections Inc. (NASDAQ:INTX) provides innovative software solutions
to help consumers and businesses manage the potential risks associated
with the proliferation of their data in the virtual world. Under its
IDENTITY GUARD® brand, the company utilizes advanced
data-enabled technologies, including artificial intelligence, to help
monitor, manage and protect sensitive information. Headquartered in
Chantilly, Virginia, the company was founded in 1996. To learn more,
visit www.intersections.com.

INTERSECTIONS INC.
OTHER DATA, continued
(unaudited)

Intersections Inc.
Reconciliation of Non-GAAP Financial Measures

The tables below include financial information prepared in accordance
with accounting principles generally accepted in the United States
("GAAP"), as well as other financial measures referred to as non-GAAP
financial measures. Adjusted EBITDA (as defined below) is presented in a
manner consistent with the way management evaluates operating results
and which management believes is useful to investors and others. Share
related compensation includes non-cash share based compensation. An
explanation regarding the Company's use of non-GAAP financial measures
and a reconciliation of non-GAAP financial measures used by the Company
to GAAP measures is provided below. These non-GAAP financial measures
should be considered in addition to, but not as a substitute for, net
income (loss) and the other information prepared in accordance with
GAAP, and may not be comparable to similarly titled measures reported by
other companies. Management strongly encourages shareholders to review
our financial statements and publicly-filed reports in their entirety
and not to rely on any single financial measure.

Adjusted EBITDA represents consolidated (loss) income from continuing
operations before income taxes plus (minus): share related compensation;
non-cash impairment of goodwill, intangibles and other assets; (gain)
loss on sale of Captira Analytical and Habits at Work; loss on
extinguishment of debt; (benefit) from change in vacation policy;
depreciation and amortization; and interest expense. We believe that the
consolidated Adjusted EBITDA calculation provides useful information to
investors because they are indicators of our operating performance, and
we use these measures in communications with our board of directors,
creditors, investors and others concerning our financial performance.
Adjusted EBITDA is commonly used as a basis for investors and analysts
to evaluate and compare the periodic and future operating performance
and value of companies within our industry. Our Board of Directors and
management use Adjusted EBITDA to evaluate the operating performance of
the Company. In addition, consolidated Adjusted EBITDA, as defined in
our Credit Agreement with PEAK6 Investments, L.P., as amended, is used
to measure covenant compliance.

We provide this information to show the impact of share related
compensation on our operating results, as it is excluded from our
internal operating and budgeting plans and measurements of financial
performance; however, we do consider the dilutive impact to our
shareholders when awarding share related compensation and consider both
the Black-Scholes value and GAAP value (to the extent applicable) in
connection therewith, and value such awards accordingly.

INTERSECTIONS INC.
OTHER DATA, continued
(unaudited)

We do not consider share related compensation charges when we evaluate
the performance of our individual business groups or formulate our short
and long-term operating plans. Due to its nature, individual managers
generally are unable to project the impact of share related compensation
and accordingly we do not hold them accountable for the impact of equity
award grants. When we consider making share related compensation grants,
we primarily take into account the need to attract and retain high
quality employees, overall shareholder dilution and the Black-Scholes
values of the equity grant to the recipient, rather than the potential
accounting charges associated with such grants. For comparability
purposes, we believe it is useful to provide a non-GAAP financial
measure that excludes share related compensation in order to better
understand the long-term performance of our core business and to compare
our results to the results of our peer companies because of varying
available valuation methodologies and the variety of award types that
companies can use under GAAP. Furthermore, the value of share related
compensation is determined using a complex formula that incorporates
factors, such as market volatility, that are beyond our control.
Accordingly, we believe that the presentation of Adjusted EBITDA when
read in conjunction with our reported GAAP results can provide useful
supplemental information to our management, to investors and to our
lenders regarding financial and business trends relating to our
financial condition and results of operations.

Adjusted EBITDA has limitations due to the fact it does not include all
compensation related expenses. For example, if we only paid cash based
compensation as opposed to a portion in share related compensation, the
cash compensation expense included in our general and administrative
expenses would be higher. We compensate for this limitation by providing
information required by GAAP about outstanding share based awards in the
footnotes to our financial statements in our SEC filings. We believe
equity based compensation is an important element of our compensation
program and all forms of share related awards are valued and included as
appropriate in our operating results.

The following tables reconcile consolidated income (loss) from
continuing operations before income taxes to Adjusted EBITDA for the
previous six quarters through June 30, 2018. The information in the
following tables is presented giving effect to the disposal of Voyce,
with its historical financial results reflected as discontinued
operations. We made adjustments to our historical financial results for
certain costs and overhead allocations to either discontinued or
continuing operations for the year ended December 31, 2017; for
additional information, please see "Note 2 — Basis of Presentation and
Consolidation" in our most recent Form 10-Q. In managing our business,
we analyze our performance quarterly on a consolidated income (loss)
before income tax basis.

 

INTERSECTIONS INC.

OTHER DATA, continued

(in thousands, unaudited)

 

Preliminary Consolidated Adjusted EBITDA (as recast and
revised):

 
  2018 Quarter Ended     2017 Quarter Ended
June 30   March 31 December 31   September 30   June 30   March 31
Reconciliation from consolidated (loss) income from continuing
operations before income taxes to consolidated Adjusted EBITDA:
Consolidated (loss) income from continuing operations before income
taxes (1)
$ (597) $ 1,271 $ 1,270 $ (2,960) $ (7,765) $ (4,249)
Non-cash share based compensation (1) 1,015 4 1,948 1,809 3,676 1,096
Impairment of goodwill, intangibles and other assets (86) 86
(Gain) loss on sales of Captira Analytical and Habits at Work (24) 130
Loss on extinguishment of debt 1,525
Benefit from change in vacation policy (1,113)
Depreciation and amortization 1,613 1,502 1,548 1,407 1,335 1,346
Interest expense, net   823   531   332   701   603   592
Consolidated Adjusted EBITDA $ 2,854 $ 3,308 $ 3,985 $ 957 $ (736) $ (999)
 
Note (1): The results of operations for the year ended December 31,
2017 have been recast to show the effects of our discontinued
operations and to reflect an adjustment to our share based
compensation expense. For additional information, please see Note 21
to our consolidated financial statements in our most recent Form
10-K.
 
  Six Months Ended June 30,
2018   2017
Reconciliation from consolidated income (loss) from continuing
operations before income taxes to consolidated Adjusted EBITDA:
Consolidated income (loss) from continuing operations before income
taxes
$ 674 $ (12,014)
Non-cash share based compensation 1,019 4,772
Loss on sales of Captira Analytical and Habits at Work 106
Loss on extinguishment of debt 1,525
Benefit from change in vacation policy
Depreciation and amortization 3,115 2,681
Interest expense, net   1,354   1,195
Consolidated Adjusted EBITDA $ 6,162 $ (1,735)
Consolidated Revenue from Continuing Operations $ 77,698 $ 80,384
Consolidated Adjusted EBITDA % of Revenue   7.9%   (2.2)%
 

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