InfoSpace Announces Strong Second Quarter 2008 Results

"We achieved higher-than-expected revenue and Adjusted EBITDA in the second quarter," said Jim Voelker, chairman and chief executive officer of InfoSpace, Inc. "Much of our success can be attributed to growth in our owned-and-operated properties, demonstrating the progress the team has made in executing the Company's new initiatives. As we look toward the remainder of the year, we are optimistic about our ability to grow profitably."

Revenues for the second quarter of 2008 were $38.3 million, reflecting a $6.6 million or 21% increase over the second quarter of 2007.

Income from continuing operations was $2.7 million in the second quarter of 2008, compared to a loss from continuing operations of $21.0 million in the second quarter of 2007. Adjusted EBITDA from continuing operations was $9.7 million in the second quarter of 2008, compared to Adjusted EBITDA from continuing operations of a negative $15.2 million in the second quarter of 2007.

Net income for the second quarter of 2008 was $1.9 million or $0.06 per diluted share versus a net loss of $28.1 million or $0.86 per share in the second quarter of 2007. Net income in the second quarter of 2008 includes an impairment charge of $4.4 million on the Company's investments in auction rate securities.

Cash, cash equivalents, and marketable securities as of June 30, 2008 totaled $218.5 million, which includes an investment of $27.2 million in auction rate securities.

Second Quarter Highlights and Recent Developments

InfoSpace:

-- Entered into a partnership with Petfinder.com, the largest searchable site of pets in need of homes, to provide easy access for their users to Dogpile's web search and downloadable products;

-- Released a new search widget featuring Dogpile's mascot Arfie that provides an interactive desktop pal, a customized search bar, and access to SearchSpy;

-- Signed five new distribution partners and two contract extensions with existing customers; and

-- Reauthorized a repurchase of up to $100 million of the Company's outstanding shares of common stock over the next twelve months.

Third Quarter and Full Year Outlook

For the third quarter of 2008, the Company expects revenue to be between $37 million and $39 million. Additionally, the Company expects Adjusted EBITDA from continuing operations to be between $4 million and $5 million and net income (loss) to be between net loss of $500 thousand and net income of $500 thousand, or negative $0.01 and positive $0.01 per share.

For the full year 2008, the Company expects revenue to be between $156 million and $160 million. Additionally, the Company expects Adjusted EBITDA from continuing operations to be between $26 million and $28 million and net income (loss) to be between net loss of $500 thousand and net income of $1 million, or negative $0.01 and positive $0.03 per share.

A conference call will be held today at 2 p.m. Pacific/ 5 p.m. Eastern. The live Webcast can be accessed in the Investor Relations section of the InfoSpace corporate Web site, at http://www.infospaceinc.com. A replay of the call will be available approximately one hour after the call through August 12, 2008 at 9:00 p.m. Pacific/ 12:00 a.m. Eastern.

Non-GAAP Financial Measures

InfoSpace's Adjusted EBITDA from continuing operations is calculated by adjusting GAAP net income (loss) to exclude the effects of discontinued operations, income taxes, depreciation, stock-based compensation expense, gain (loss) on investments, net, and other income, net (including such items as interest income, foreign currency gains or losses, and gains or losses from the disposal of assets), as detailed in the accompanying table to the preliminary condensed consolidated financial statements.

InfoSpace's management believes that this non-GAAP financial measure provides meaningful supplemental information regarding our performance by excluding certain expenses and gains that are not indicative of our core business operating results. InfoSpace believes that management and the investors benefit from referring to this non-GAAP financial measure in assessing InfoSpace's performance. Adjusted EBITDA from continuing operations should be evaluated in light of the Company's financial results prepared in accordance with GAAP. A table reconciling the Company's Adjusted EBITDA from continuing operations to net income (loss) in accordance with GAAP accompanies the preliminary condensed consolidated financial statements in this release.

About InfoSpace, Inc.

InfoSpace, Inc., a leading developer of metasearch products, is focused on bringing the best of the Web to Internet users. InfoSpace's proprietary metasearch technology combines the top results from several of the largest online search engines, providing fast and comprehensive search results on InfoSpace sites including Dogpile (www.dogpile.com) and WebFetch (www.webfetch.com). For the second consecutive year, JD Power and Associates ranked Dogpile highest in customer satisfaction among search engines. InfoSpace's metasearch technology is also available on more than 100 partner sites, including content, community and connectivity sites. More information can be found at www.infospaceinc.com.

This release contains forward-looking statements relating to InfoSpace, Inc.'s operating results that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward looking. Forward-looking statements include, without limitation, statements regarding optimism for strong growth and profitability to continue and our financial performance for the third quarter and full year 2008. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect InfoSpace's actual results include general economic, industry and market sector conditions, the progress and costs of the development of our products and services, the timing and extent of market acceptance of those products and services, our dependence on companies to distribute our products and services, the ability to successfully integrate acquired businesses, the successful execution of the Company's strategic initiatives and restructuring plans, and the condition of our cash investments. A more detailed description of certain factors that could affect actual results include, but are not limited to, those discussed in InfoSpace's most recent Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q as filed from time to time, in the section entitled "Risk Factors." Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. InfoSpace undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

InfoSpace, Inc. Preliminary Condensed Consolidated Statements of Operations(1) (Unaudited) (Amounts in thousands, except per share data) Three months ended Six months ended ------------------ ------------------- June 30, June 30, June 30, June 30, 2008 2007 2008 2007 -------- --------- --------- --------- Revenues $38,328 $ 31,763 $ 80,510 $ 67,627 Operating expenses: (2) Content and distribution 18,062 12,597 39,854 27,545 Systems and network operations 2,774 2,406 5,216 4,685 Product development 2,929 2,484 5,138 4,763 Sales and marketing 6,041 6,665 9,830 11,490 General and administrative 4,960 29,557 12,682 39,199 Depreciation 1,731 1,273 3,218 2,656 Restructuring and other, net(3) (2,011) (1,669) (1,871) (2,502) -------- --------- --------- --------- Total operating expenses 34,486 53,313 74,067 87,836 -------- --------- --------- --------- Operating income (loss) 3,842 (21,550) 6,443 (20,209) Gain (loss) on investments, net (4,362) 65 (11,069) 65 Other income, net 2,654 4,360 4,897 9,685 -------- --------- --------- --------- Income (loss) from continuing operations before income taxes 2,134 (17,125) 271 (10,459) Income tax benefit (expense) 577 (3,894) 395 (6,969) -------- --------- --------- --------- Income (loss) from continuing operations 2,711 (21,019) 666 (17,428) -------- --------- --------- --------- Discontinued operations:(1) Loss from discontinued operations, net of taxes (821) (7,111) (1,311) (11,242) Gain (loss) on sale of discontinued operations, net of taxes 43 - (195) - -------- --------- --------- --------- Net income (loss) $ 1,933 $(28,130) $ (840) $(28,670) ======== ========= ========= ========= Earnings (loss) per share - Basic Income (loss) from continuing operations $ 0.08 $ (0.64) $ 0.02 $ (0.54) Loss from discontinued operations (0.02) (0.22) (0.04) (0.35) Gain (loss) on sale of discontinued operations 0.00 - (0.00) - -------- --------- --------- --------- Net income (loss) per share - Basic $ 0.06 $ (0.86) $ (0.02) $ (0.89) ======== ========= ========= ========= Weighted average shares outstanding used in computing basic income (loss) per share 34,334 32,626 34,316 32,047 ======== ========= ========= ========= Earnings (loss) per share - Diluted Income (loss) from continuing operations $ 0.08 $ (0.64) $ 0.02 $ (0.54) Loss from discontinued operations (0.02) (0.22) (0.04) (0.35) Gain (loss) on sale of discontinued operations 0.00 - (0.00) - -------- --------- --------- --------- Net income (loss) per share - Diluted $ 0.06 $ (0.86) $ (0.02) $ (0.89) ======== ========= ========= ========= Weighted average shares outstanding used in computing diluted income (loss) per share 34,755 32,626 34,628 32,047 ======== ========= ========= ========= (1) In 2007, the Company completed the sale of its directory business. The operating results of the directory business have been presented as discontinued operations for all periods presented. Amounts include stock-based compensation expense of $7,000 and $52,000 for the three and six months ended June 30, 2008, respectively. Amounts include stock-based compensation expense of $0.4 million and $0.9 million for the three and six months ended June 30, 2007, respectively. Income tax expense related to discontinued operations was $5,000 and $4,000 for the three and six months ended June 30, 2008, respectively and $1.3 million and $3.1 million for the three and six months ended June 30, 2007, respectively. A gain, net of taxes of $1,000, was recorded on the sale of the directory business in the three and six months ended June 30, 2008. Revenue, operating expenses and income taxes, income (loss) and the gain on sale of these discontinued operations are presented below (in thousands): Three months ended Six months ended ------------------ ------------------- Directory June 30, June 30, June 30, June 30, 2008 2007 2008 2007 -------- --------- --------- --------- Revenue $ - $ 7,979 $ - $ 17,154 Operating expenses and income taxes 12 5,660 (200) 12,351 -------- --------- --------- --------- Income (loss) from discontinued operations, net of taxes $ (12) $ 2,319 $ 200 $ 4,803 ======== ========= ========= ========= Gain on sale of discontinued operations, net of taxes $ 81 $ - $ 66 $ - ======== ========= ========= ========= In 2007, the Company completed the sale of its mobile services business. The operating results of the mobile services business have been presented as discontinued operations for all periods presented. Amounts include stock-based compensation expense of $77,000 and $89,000 for the three and six months ended June 30, 2008, respectively, and stock-based compensation expense of $3.4 million and $5.7 million for the three and six months ended June 30, 2007, respectively. Income taxes related to discontinued operations were a benefit of $0.1 million and an expense of $86,000 for the three and six months ended June 30, 2008, respectively, and a benefit of $5.4 million and $9.3 million for the three and six months ended June 30, 2007, respectively. A loss, net of a tax benefit of $10,000 and $0.2 million, on the sale of the mobile services business was recorded in the three and six months ended June 30, 2008. Revenue, operating expenses and income taxes, loss and the loss on sale of these discontinued operations are presented below (in thousands): Three months ended Six months ended ------------------ ------------------- Mobile June 30, June 30, June 30, June 30, 2008 2007 2008 2007 -------- --------- --------- --------- Revenue $ 53 $ 30,788 $ 80 $ 72,392 Operating expenses and income taxes 862 40,218 1,591 88,437 -------- --------- --------- --------- Loss from discontinued operations, net of taxes $ (809) $ (9,430) $ (1,511) $(16,045) ======== ========= ========= ========= Loss on sale of discontinued operations, net of taxes $ (38) $ - $ (261) $ - ======== ========= ========= ========= (2) Stock-based compensation expense for the three and six months ended June 30, 2008 and 2007 is allocated among the following captions (in thousands): Three months ended Six months ended ------------------ ------------------- June 30, June 30, June 30, June 30, 2008 2007 2008 2007 -------- --------- --------- --------- Systems and network operations $ 446 $ 264 $ 813 $ 465 Product development 1,047 616 1,640 1,185 Sales and marketing 1,038 1,390 1,891 2,702 General and administrative 1,643 2,809 2,857 5,134 -------- --------- --------- --------- Total stock-based compensation expense $ 4,174 $ 5,079 $ 7,201 $ 9,486 ======== ========= ========= ========= (3) Amounts for the three and six months ended June 30, 2008 consist of gains on the sale of certain non-core assets of $1.9 million, and amounts for the three and six months ended June 30, 2007 consist of gains on sale of assets related to the mobile media operations of $2.1 million and $3.3 million, respectively. Restructuring charges are comprised of the following (in thousands): Three months ended Six months ended ------------------ ------------------- June 30, June 30, June 30, June 30, 2008 2007 2008 2007 -------- --------- --------- --------- Employee separation $ (26) $ 472 $ 54 $ 361 Stock-based compensation expense - 86 60 (68) Contractual commitments (88) 61 (88) 473 Estimated future lease losses - (370) - (84) Other - 129 - 129 -------- --------- --------- --------- $ (114) $ 378 $ 26 $ 811 ======== ========= ========= =========

InfoSpace, Inc. Preliminary Condensed Consolidated Balance Sheets (Unaudited) (Amounts in thousands) June 30, December 31, 2008 2007 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 161,624 $ 498,326 Short-term investments, available-for-sale 29,690 39,019 Accounts receivable, net 16,155 17,081 Notes and other receivables 944 7,104 Prepaid expenses and other current assets 1,788 1,902 Assets of discontinued operations 25 4,730 ------------ ------------ Total current assets 210,226 568,162 Property and equipment, net 18,239 10,945 Long-term investments, available-for-sale 27,179 37,472 Goodwill and other intangible assets, net 44,123 44,123 Other long-term assets 9,283 10,722 ------------ ------------ Total assets $ 309,050 $ 671,424 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,104 $ 5,148 Accrued expenses and other current liabilities 24,336 78,703 Special dividend payable - 299,296 Liabilities of discontinued operations 3,114 21,753 ------------ ------------ Total current liabilities 34,554 404,900 Other long-term liabilities 1,481 634 ------------ ------------ Total liabilities 36,035 405,534 Stockholders' equity: Common stock 3 3 Additional paid-in capital 1,293,348 1,286,219 Accumulated deficit (1,021,874) (1,021,034) Accumulated other comprehensive income 1,538 702 ------------ ------------ Total stockholders' equity 273,015 265,890 ------------ ------------ Total liabilities and stockholders' equity $ 309,050 $ 671,424 ============ ============ Summary of cash, short-term and long-term investments: Cash and cash equivalents $ 161,624 $ 498,326 Short-term investments, available-for-sale 29,690 39,019 Long-term investments, available-for-sale 27,179 37,472 ------------ ------------ Cash, short-term and long-term investments $ 218,493 $ 574,817 ============ ============

InfoSpace, Inc. Preliminary Condensed Consolidated Statements of Cash Flows (Unaudited) (Amounts in thousands) Six months ended --------------------- June 30, June 30, 2008 2007 ---------- ---------- Operating activities: Net loss $ (840) $ (28,670) Adjustments to reconcile net loss to net cash used by operating activities: Loss from discontinued operations 1,311 17,428 Loss on sale of discontinued operations 195 - Loss on investments 11,069 - Stock-based compensation 7,201 9,486 Depreciation 3,218 2,947 Restructuring 26 811 Deferred income taxes (819) 800 Net gain on sale of non-core assets (1,897) (3,313) Other 40 (36) Cash provided (used) by changes in operating assets and liabilities: Accounts receivable 847 (2,359) Notes and other receivables 5,741 1,847 Prepaid expenses and other current assets 114 83 Other long-term assets 2,442 135 Accounts payable (991) (5,169) Accrued expenses and other current and long- term liabilities (55,030) (9,971) ---------- ---------- Net cash used by operating activities (27,373) (15,981) Investing activities: Purchases of property and equipment (5,715) (4,173) Other long-term assets (1,003) - Loan to equity investee - (2,000) Proceeds from the sale of assets 2,316 2,223 Proceeds from sales and maturities of investments 27,300 225,480 Purchases of investments (17,984) (74,523) ---------- ---------- Net cash provided by investing activities 4,914 147,007 Financing activities: Special dividend paid (299,146) (208,203) Proceeds from stock option and warrant exercises 15 12,756 Proceeds from issuance of stock through employee stock purchase plan 219 741 Repayment of capital lease obligations (32) - ---------- ---------- Net cash used by financing activities (298,944) (194,706) Discontinued operations: Net cash provided (used) by operating activities attributable to discontinued operations (15,299) 20,839 Net cash used by investing activities attributable to discontinued operations - (9,674) ---------- ---------- Net cash provided (used) by discontinued operations (15,299) 11,165 ---------- ---------- Net decrease in cash and cash equivalents (336,702) (52,515) Cash and cash equivalents: Beginning of period 498,326 162,387 ---------- ---------- End of period $ 161,624 $ 109,872 ========== ==========

InfoSpace, Inc. Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measure Preliminary Adjusted EBITDA from Continuing Operations Reconciliation (1) (Unaudited) (Amounts in thousands) Three months Six months ended ended ------------------ ------------------ June June 30, June June 30, 30, 30, 2008 2007 2008 2007 ------- ---------- ------- ---------- Net income (loss)(2) $ 1,933 $ (28,130) $ (840) $ (28,670) Discontinued Operations 778 7,111 1,506 11,242 Depreciation 1,731 1,273 3,218 2,656 Stock-based compensation 4,174 5,079 7,201 9,486 Loss (gain) on investments, net 4,362 (65) 11,069 (65) Other income, net (3) (2,654) (4,360) (4,897) (9,685) Income tax expense (benefit) (577) 3,894 (395) 6,969 ------- ---------- ------- ---------- Adjusted EBITDA from continuing operations $9,747 $(15,198) $16,862 $(8,067) ======= ========== ======= ========== Preliminary Adjusted EBITDA from Continuing Operations Reconciliation for Forward-Looking Guidance (Amounts in thousands) Ranges for the Ranges for the three months year ending ending September 30, 2008 December 31, 2008 ------------------ ------------------ Net income (loss) $ (500) $500 $ (500) $ 1,000 Discontinued Operations - - 1,500 1,500 Depreciation 2,000 2,000 7,400 7,500 Stock-based compensation 3,900 3,900 14,700 14,900 Loss on investments, net - - 11,600 11,600 Other income, net (3) (1,420) (1,600) (8,400) (8,600) Income tax expense (benefit) 20 200 (300) 100 ------- ---------- ------- ---------- Adjusted EBITDA from continuing operations $4,000 $5,000 $26,000 $28,000 ======= ========== ======= ========== (1) Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") from continuing operations is a non-GAAP financial measure and is reconciled to net income (loss), which the Company's management believes to be the most comparable generally accepted accounting principles ("GAAP") measure. Adjusted EBITDA from continuing operations results are calculated by adjusting GAAP net income (loss) to exclude the effects of discontinued operations, income taxes, depreciation, stock-based compensation expense, gain (loss) on investments, net, and other income, net (including such items as interest income, litigation settlements and contingencies, foreign currency gains or losses, and gains or losses from the disposal of assets), as detailed above. This calculation excludes the directory and mobile businesses, because they have been classified as discontinued operations in all periods presented. The Company uses this non- GAAP financial measure for internal management purposes, when publicly providing guidance on possible future results, and as a means to evaluate period-to-period comparisons. The Company's management believes that this non-GAAP financial measure is a common measure used by investors and analysts to evaluate its performance. This non-GAAP financial measure is used in addition to and in conjunction with results presented in accordance with GAAP and reflect an additional way of viewing aspects of the Company's operations that, when viewed with GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the results of operations and trends affecting the Company's business. This non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, or superior to, net income (loss) in accordance with GAAP. (2) As presented in the preliminary unaudited Condensed Consolidated Statements of Operations. (3) Other income, net, typically consists of interest income, gains or losses from the disposal of assets, and foreign currency transaction gains or losses.

SOURCE: InfoSpace, Inc.

InfoSpace, Inc. Stacy Ybarra, 425-709-8127 stacy.ybarra@infospace.com