Fast Search & Transfer Announces Q2 2006 Results

02/08/2006 - 11:53

Record Revenues of $38.5m in Q2, Yielding Growth of 60%

Record Revenues of $71.3m for Half Year; Yielding Growth of 57%
under US GAAP and 68% under IFRS

Adjusted EBITDA of $9.9m in Q2 and $18.4m for Half Year; Both
Reaching 26% of Revenues

Fast Search & Transfer(TM) (OSEAX: FAST.OL) (FAST(TM)), the
leading developer of enterprise search technologies and solutions,
today announced record financial results for the second quarter and
half year ended June 30, 2006.
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Q2 and Half Year 2006 Financial Summary

For the three months ending For the six months ending
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Amounts in 30-June-06 31-March-06 30-June-05 30-June-06 30-June-05
US$000's (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
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US GAAP:
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Revenue 38,521 32,796 24,070 71,317 45,336
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EBIT 6,065 6,138 4,154 12,203 7,817
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EBITDA 9,571 8,416 5,962 17,987 11,240
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Adjusted
EBITDA(a) 9,936 8,491 5,962 18,427 11,240
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IFRS:
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Revenue 38,521 32,796 24,070 71,317 42,536
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Adjusted
EBITDA(a) 9,936 8,491 5,962 18,427 8,440
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(a) Adjusted EBITDA excludes non-cash charges, such as share-based
compensation, accrued payroll tax on employee stock options and
share of losses in equity method investees.
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Highlights

-- Q2 revenues of $38.5m; grew by 18% quarter on quarter and 60%
year on year
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-- Growth driven by continuous adoption of the FAST
Enterprise Search Platform (FAST ESP(TM)), Search
Derivative Applications (SDAs), and OEM enterprise
search solutions from both new customers and the
expansion of existing relationships
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-- Adjusted EBITDA of $9.9m in Q2; reached 26% of revenues
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-- Half year growth increased adjusted EBITDA to $18.4m,
improving the margin year on year from 25% to 26% of
revenues
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-- Quarter end cash balances solid at $271m; remained the same
from Q1
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-- Cash received from customers reached $32.5m; an
increase of $2.5m from Q1
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-- Continued accelerated organic growth with a record number of
new customer wins in the Americas including: Gelb Consulting,
Hearst, Helium Exchange, Hoovers, Iconoculture, InfoJobs,
Merrill Lynch, National Education Association, NFPA,
SmartBrief, Spherion, Tribune Interactive, and TSV Group.

-- Record number new of customer wins in EMEA and APAC including
Mobile People, Norwegian National Library, Opplysningen AS,
Pages Jaunes, and Petronas.

-- Continued strong growth with new reseller, OEM and alliance
partnership agreements including Cognos, Permabit,
NetDocuments, and Traction Software.

-- Extended relationships including Amp'd Mobile, BC Energy, BC
Hydro, Careerbuilder.com, FT Publications, Financial Times
Ltd, Grant Thornton, Insource, National Instruments, SBC -
Yellowpages.com, and Zantaz.

-- New product announcements included the release of the FAST
InStream(TM) for Data Classification.

-- Continued advancements with technology acquisitions that
complement organic growth and expand and extend industry
leading market footprint.

-- Investment in personnel with market and technology expertise
up 14%.

-- FAST named a Leader in The Forrester Wave(TM) Report on
Enterprise Search.

-- IDC acknowledged enterprise search market growth fueled by
applications that address a specific business problem and the
trend towards new architectures (FAST) specifically targeted
at unifying information access.

Financial Performance

Commenting on the Company's results, Dr. John M. Lervik, chief
executive officer of FAST, said "In Q2 FAST drove revenues past the
$38 million mark to deliver our fourteenth consecutive record
quarterly result. I attribute our continued strong momentum to our
ever-present focus on exceeding prospect and customer expectations,
and to the success of our market-leading solutions. Working closely
with our customers and partners, we have redefined enterprise search
into the game-changing technology that is reshaping the way companies
operate. We are thrilled to participate in the progress of our
customers and to see the results of our efforts come to fruition in
the form of their innovations and ultimately, their successes."
Lervik went on to comment: "Our FAST ESP(TM) 5 platform with
Contextual Insight(TM) continues to draw accolades from customers,
partners, and analysts as we extend our momentum in the market.
Forrester Research is the most recent firm to acknowledge our
leadership in their recent Wave report, citing our extensive search
capabilities, broad platform focus, and significant market presence.
Clearly our investment in R&D, the highest dollar value in the
enterprise search market, and our global approach to meeting our
customers' challenges are paying off."
Ali I. Riaz, president and chief financial officer of FAST,
remarked, "In Q2 we continued to deliver market-leading results
through strong organic growth - an achievement unique in our sector.
Our revenues grew 18% quarter on quarter, and 60% year on year. Our
strong quarterly finish came from closing a record number of new
customers during the quarter, in no small part as a result of
replacing underperforming legacy or other non-scalable systems
installed by our competition. In fact, 42% of license revenue came
from such replacements. Further, our focus on tightly aligning our
sales efforts with the business needs of our prospects has resulted in
a 92% win rate for the quarter and kicked off strong working
relationships with our new customers. Speaking of strong
relationships, we improved our customer satisfaction rating from 98%
to 99% in Q2."
Riaz added, "We were able to rapidly grow our revenues, maintain
industry-leading customer satisfaction and continue to make the
highest R&D related investment in our market (20.5% of Q2 revenue)
without sacrificing margins: our adjusted EBITDA remains high at 26%
of Q2 revenue. At the same time, we effectively managed our cash
collections - maintaining a healthy balance of $271 million. In short,
our balance sheet validates that we understand how to scale our
business and that we are executing accordingly."

FAST Innovation

In Q2, FAST customers deployed Contextual Search capabilities
based on FAST ESP 5 across numerous verticals and application areas.
The rapid deployments and methodology adoption of Contextual Search
have validated the business value of the three core innovation pillars
of FAST ESP 5 redefining search precision, information access and IT
infrastructure. Specifically, disruptive business value has been
proven around the following themes:

-- Profit: Monetization and distribution advances for enterprise
eCommerce and premium content delivery to drive top-line
results.

-- Perform: Discovery and distillation advances in both
information management and knowledge management to drive
internal performance.

-- Protect: Control, transparency and applied intelligence
breakthroughs for compliance and content governance as well as
detection, surveillance and enforcement applications.

"The Contextual Navigation framework in FAST ESP 5 has proven to
be a breakthrough in precision navigation," stated Bjorn Olstad, chief
technology officer of FAST. "A new pattern of analytical search
applications is emerging based on these extreme precision capabilities
for documents, concepts and contextual facts."
In Q2, FAST extended the Contextual Search framework in FAST ESP
with a suite of tools to build search powered social network
experiences. This suite, developed in close collaboration with
customers, will again raise the bar for enterprise search and pave the
way for FAST customers to deploy innovative game-changing
applications. FAST also continued to optimize FAST ESP for specific
solution areas by developing plug-in modules that provide specialized
functionality. For example, in Q2 FAST released the FAST Tracking and
Monitoring option for personalized concept definition, tracking and
monitoring, enabling users to define concepts based on their own
implicit or explicit user behavior.

New Customers

In Q2, FAST continued to increase its Global market share and
market presence by signing a record number of new and expanded
customer relationships. Increased demand of companies looking to
implement strategic enterprise search solutions aimed at maximizing
profit, performance and protection were validated by numerous
customers including:

-- Profit (monetization and premium content): Amp'd Mobile,
Hearst, Hoovers, Iconoculture, InfoJobs, Mobile People,
Opplysningen AS, Page Jaunes, SBC - Yellowpages.com, SEEK,
Spherion, Traction and TSV Group.

-- Perform (information management, knowledge management to drive
internal performance): BC Hydro, British Energy, Gelb
Consulting, GuideStar, Insource, Merrill Lynch, National
Education Association, National Instruments, Petronas,
SourceLoop and TWSCO.

-- Protect (risk mitigation, detection and enforcement): Grant
Thorton, Norton Rose, Merlin Department of Homeland Security,
Office of the Under Secretary of Defense and
Utenriksdepartementet.

Customer Milestones

FAST Solution Services was directly involved with over 60
successful customer deployments during Q2 including:
FinancialTimes.com, Live Nation, Sesam.no, Platefood, and Elsevier's
award winning sites, Scopus and Scirus; as well as significant
launches that included: Priceminister's successful move from a limited
data base driven auction site to a FAST architected solution that
offloaded the database and opened the site for a dramatic increase in
the numbers of users accessing the service; Enel's innovative
Knowledge Management solution that was delivered to over 40,000 users;
Sesam.no's local search services enhanced with mobile and blog search
capabilities; Hoovers', proprietary business information portal that
reports on more than 14 million corporations and organizations through
the internet, data feeds, and wireless devices; and Reed Business's
debut of Zibb.com, a new B2B search site which maximizes the latest
FAST ESP features and functions to deliver the most comprehensive,
accurate, and rapid answers to the specific question that the business
user needs answered.

Strategic Partnerships

Strategic partnering initiatives continued to add to a significant
portion of FAST's revenue growth as the company saw significant
successes in both its OEM and Strategic Alliance business. New OEM
relationships signed in Q2 include Traction Software, Permabit, and
NetDocuments. FAST's reseller channel continued its strong momentum
with contributions from partners around the globe including continued
expansion into the Russian market with new partners IBS and NVision.
FAST welcomed new partner vendors from a variety of complimentary
solutions including enterprise weblog software, document archiving,
information management and business intelligence, further expanding
the FAST enterprise search ecosystem. Announced partnerships included
a technology alliance with Cognos aimed at leveraging the power of
FAST ESP to deliver business intelligence for the masses.
"Q2 saw a widespread adoption of FAST ESP and FAST InStream(TM) by
a variety of applications vendors and solution providers which is a
firm acknowledgement that the FAST enterprise search architecture has
become a core piece of the IT infrastructure and a key enabler for
mission-critical applications," stated Riaz. "Our open approach to
developing partnerships with complementary technology and solutions
providers combined with the unrivaled support services delivered by
our FAST X(10) Partner Program has enabled us to forge deep
relationships with innovative partners around the globe."

Mergers and Acquisitions

FAST continues to evaluate opportunities that are leading the way
in emerging search enabled markets including Information Management,
Risk Management, Surveillance/Enforcement and Enterprise eCommerce or
companies that are developing key technologies to enable these search
centric markets such as predictive analytics, hyper-personalization
and contextual synergy. "FAST's strategy is to explore M&A
opportunities that yield accelerated growth within the enterprise
search sector; specifically to evaluate synergistic companies with a
strong focus on solving information management challenges and/or
technologies that augment the value of FAST ESP, as evidenced with our
acquisition of bWise and Corporate Radar," commented Riaz.

Consulting Services

FAST delivered 58 SBP workshops in Q2, including 15 "Total"
workshops providing in-depth analysis and guidance to Fortune 1000
companies covering a variety industry sectors. The FAST Search Best
Practices (FAST SBP(TM)) strategic consulting service continues to
exceed expectations and increase its positive impact on FAST's sales,
delivery, and channel development programs.

Q3 2006 Business Focus

A growing number of companies are viewing enterprise search as a
strategic differentiator. As a result, FAST has been invited to engage
in developing new business models and structures. These new models and
structures allow our customers to take greater advantage of Search
capabilities to expand on existing revenue streams, as well as build
new revenue streams. This development offers FAST a substantial upside
through opportunities that may take shape as strategic relationships
with market leaders and partners, typically in the form of revenue
share models. FAST will continue to expand its core capabilities and
explore and establish new market-driven business models.

About FAST

FAST is the leading developer of enterprise search technologies
and solutions that are behind the scenes at the world's best known
companies with the most demanding search problems. FAST's flexible and
scalable enterprise search platform (FAST ESP) elevates the search
capabilities of enterprise customers and connects people to the
relevant information they seek regardless of medium. This drives
revenues and reduces total cost of ownership by effectively leveraging
IT infrastructure. FAST's solutions are used by more than 2,600 global
customers and partners, including America Online (AOL), Cardinal
Health, CareerBuilder.com, Chordiant, CIGNA, CNET, Computer
Associates, Dell, EMC Documentum, Factiva, Fidelity Investments,
Findexa, IBM, Knight Ridder, LexisNexis, Merrill Lynch, Rakuten, Reed
Elsevier, Reuters, Sensis, Stellent, Tenet Healthcare, Thomas
Industrial Networks, T-Online, US Army, Virgilio (Telecom Italia),
Vodafone, and Wanadoo.
FAST is headquartered in Norway and is publicly traded under the
ticker symbol 'FAST' on the Oslo Stock Exchange. The FAST Group
operates globally with presence in Europe, the United States, Asia
Pacific, Australia, South America, and the Middle East and Africa. For
further information about FAST, please visit www.fastsearch.com.