Industry Leadership through Innovation, Experience and Execution. Stephens Investment Conference June 6, 2012

Transcription

1 Industry Leadership through Innovation, Experience and Execution Stephens Investment Conference June 6, 2012

2 Safe Harbor Statement Statements in this presentation relating to future plans, results, performance, expectations, achievements and the like are considered forward-looking statements. Those forward-looking statements involve known and unknown risks 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. Factors and uncertainties that may cause actual results to differ include, but are not limited to, the risks disclosed in the company s filings with the U.S. Securities and Exchange Commission. The company undertakes no obligation to revise or update any forward-looking statements. 2

3 Agenda Corporate Overview Financial Update 3

4 About Us Since 1996, Intersections has been the leading provider of consumer identity theft protection solutions. More than 34 million consumers protected Comprehensive solutions Preferred partner to the financial services industry Trailing 12 month Revenue of $373 million* Trailing 12 month Adjusted EBITDA before share related compensation of $55.5 million* NASDAQ listed (Ticker: INTX) since 2004 *As of the Quarter ended March 31,

5 Leadership, Experience, Stability, Passion Michael R. Stanfield Chairman and Chief Executive Officer Since 1996 Co-founded Intersections Inc. Former Managing Director at Loeb Partners Corporation Neal B. Dittersdorf Executive Vice President, Chief Legal Officer Since 2003 Previously served as Senior Vice President and General Counsel Founder of intellectual property and technology practice at major law firms; General Counsel of publicly held credit technology company; and Trial Attorney at U.S. Department of Justice John G. Scanlon Executive Vice President, Chief Financial Officer Since 2006 Previously served as Chief Operating Officer, Intersections Business Services Former executive at Capital One Financial Corporation, Columbia Energy Group, ATKearney and JPMorgan Steven A. Schwartz Executive Vice President, Consumer Services Since 2003 Previously served as Senior Vice President of the Client Services division Former Senior Vice President at The Motley Fool As of 6/6/12 5

6 Identity Theft Protection Market Overview Market Size* Endorsed Identity Theft Protection Market: $2.5B to $3.5B and Growing Direct to Consumer Only an estimated 12% of consumers pay for an Identity Protection Subscription Service; indicating a huge, untapped market ** *Market Size based on internal estimates, the high end of $3.5 billion was referenced in Javelin s Fifth Annual ID Protection Services Scorecard (August 2011). Javelin s 2011 ID protection market estimates were expanded in 2011 to include a wider array of antivirus and PC protection services. ** According to Javelin s Fifth Annual ID Protection Services Scorecard (August 2011) 20% of consumers received a core Identity Protection Service of which 41% were for free, limited feature and /or limited duration subscriptions. 6

7 Consumers Trust Their Banks for Their Identity Protection Identity Fraud Protection Services by Age My bank or credit card company 48% 50% 46% 54% Institution providing identity protection services An independent provider, such as LifeLock, Debix, Identity Guard, etc. Experian Equifax Other 6% 7% 4% 3% 3% 2% 3% TransUnion 5% 9% 9% 10% 10% 11% 11% 14% 17% 17% 19% 22% 19% Gen Y Gen X Baby boomers All Consumers 0% 10% 20% 30% 40% 50% 60% Percent of Consumers Source: Javelin 2010 Annual Identity Protection Services Scorecard, Identity Fraud Protection Services by Age. 7

8 Banking Partners Require a Wide Spectrum of World Class Skills Products Best in Class Comprehensive and Multilayered Solutions Track Record of Innovation Incorporating Advanced Technology Customer In-house and Off Shore Customer Service Centers Highly Secure Environment to Protect Data Seamless Customer Experience to Support Brand Secure and High Brand Quality Print Capabilities Partnership Marketing and Operational Expertise Dedicated Client Services Team Put Clients' Needs First Flexible Program Management to Meet Evolving Objectives and more 8

9 Recognized for Best In Class Identity Fraud Protection Services Selected as the Exclusive Provider of ITAC Victim Assistance endorsed by the Financial Services Roundtable 2011 Best in Class Provider to Financial Institutions AND Best Overall service IDENTITY GUARD TOTAL PROTECTION SM Honored as one of the Top 500 Innovative Information Technology Companies (2010 and 2011) Best Online Banking Site for Identity Theft Protection 9

10 What Is a Comprehensive Identity Theft Protection Product? Consumer Benefits May Include: Customized 1B or 3B Credit Reports and Credit Scores Daily, monthly, and quarterly monitoring of credit files by one or all 3 Bureaus: Equifax, Experian & TransUnion Alternative data monitoring of public record information, new account openings, exposed data on the internet, etc. Mobile Data Storage Software Antivirus, Anti-Keylogging, and other Software Tools Credit Education Identity Theft Insurance Exclusive access to The Identity Theft Assistance Corporation (ITAC), a financial services industry sponsored non-profit that assists identity theft victims 10

11 Innovations Such as kid Sure SM Continually Refresh the Category How kid Sure SM Helps Protect Kids All-new, patent-pending technology scours thousands of data sources providing o o o Ongoing visibility into potential exposure of a child s personal data A comprehensive Digital Footprint report showing detected data Alerts to certain kinds of activity detected kid Sure SM scans for: o o o o SSN Exposure Criminal Records DMV Records Utilities Records 11

12 Strategic Focus on Marketing of Identity Theft Protection Services Driving endorsed business growth through: Existing large clients New large client wins Reformulated products to succeed in new industry verticals Improved retention rates through quality products and retention training which encourages continued usage New and recently won clients Growing our own IDENTITY GUARD brand: As both a standalone business and a showcase for new endorsed business Positive EBITDA contribution in Q1 Top line growth of 37% in 2011 Re-launched website with family centered focus As of 6/6/12 12

13 Agenda Corporate Overview Financial Update 13

14 Attractive Economic Profile $380 $370 $360 LTM Revenue ($MM) Flexible economic arrangements with clients o High margin fee for service indirect arrangements $350 $340 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 o High return on marketing investment direct arrangements $60 $40 $20 $0 LTM Adjusted EBITDA ($MM) Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Detailed financial modeling at the client, product and marketing channel level based on cumulative knowledge from more than 34 million customers served High visibility recurring revenue and cash flow business model from 4.8 million subscribers Annualized Dividend 7.0% Returning capital to shareholders via share repurchases and dividends Dividend Yield is based on May 31, 2012 closing price of $11.43 Adjusted EBITDA is a non-gaap financial measure. Our consolidated financial statements, other data and reconciliations of these non-gapp financial measures to the most directly comparable GAAP financial measures and related notes can be found in the GAAP and Non-GAAP Measures link under the Investor & Media "page on our website at Includes an estimated $2.3 million in severance expenses recorded in the 4th quarter of Consolidated results adjusted for sale of SI. EBITDA adjusted for share related compensation and non-cash impairment charges. 14

15 Q Consolidated Highlights Financial Results Revenue: $90.2 million Flat compared to Q1 2011; 4% decrease from Q Adjusted EBITDA: $16.3 million 26% increase over Q and a 45% increase from Q Net Income: $6.2 million, a new record A 36% increase over Q s $4.6 million Net Income Diluted EPS: $0.33, a new record A 44% increase from Q and a 50% increase from Q Cash Flow provided by operations: $16.1 million A 27% increase over Q s $12.7 million Last 12 months of cash flow provided by operations totals $39.0 million Strong Balance Sheet: $30.6M in Cash and Equivalents $10 million in outstanding debt under our revolving credit facility and additional $15.0 million available for future borrowing Please see the company s release and website at for additional details on quarterly results. 15

16 Q Consumer Product and Services (CP&S) Highlights Subscribers: 4.8 million 15% increase from Q and a 4% decrease from Q Overall retention rate improved to 72% in Q up from 65% the same quarter last year Direct to Consumer: Growing at a meaningful rate Generated positive earnings in Q for the first time CP&S Revenue: $89.4 million Slight decrease compared to Q1 2011, driven by the reduction in Bank of America subscribers offset by a new large indirect client and steady growth in our Direct to Consumer business Bank of America s subscriber retention rates continue to exceed forecast assumptions CP&S Income from Operations: $11.1 million Increase of 26% percent from Q and 62% from Q Income increased primarily due to the discontinuation of new Bank of America marketing and commission expenses as well as the shift in mix toward more customers from indirect relationships Excluding one-time severance packages, G&A decreased in Q by 4.4% from Q Please see the company s release and website at for additional details on quarterly results. 16

17 Continuing Shift Towards A Higher Percentage of Indirect Subscribers 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Q New Direct Enrollment Percentage New Indirect Enrollment Percentage Marketing arrangements are based on the economic risk and reward of the specific marketing campaign. Direct Marketing Arrangement o Intersections recognizes the gross amount billed to the subscriber o Intersections bears most of the new subscriber marketing expenses o Intersections pays commissions and/or bounties to marketing partners Indirect Marketing Arrangement o The client pays Intersections a service fee or percentage of the revenue o The client bears the new subscriber marketing expenses o No commissions paid by Intersections Please see the company s release and website at for additional details on results. 17

18 Income Statement Impacts of Mix Shift Revenue Line Item Impact Generally declines as mix shifts to indirect for the same size of subscriber base Marketing & Commissions Generally declines as mix shifts to indirect for the same size of subscriber base Product Costs Generally driven by subscriber count and specific product attributes rather than direct/indirect mix. Declines as ratio of new accounts to existing subscribers declines. G&A Costs Largely independent of mix. Driven by technology & marketing investments and number of clients. EBITDA Result of trends noted above. Management estimates. 18

19 Strong Shareholder Value Proposition Quarterly cash dividends Share Repurchases Delivering Value to Shareholders To be paid on June 8, 2012 to stockholders of record as of business on May 29, 2012 Represents an effective annual yield of approximately 7.0% (based on 5/31/12 closing price of $11.43) $12.1 million in regular dividends since January 1, 2011 $20 million authorized by our Board for share repurchases Entered into a trading plan in accordance with 10b5-1 to facilitate repurchases of up to $2.5 million of our common stock* $19.6 million returned to shareholders through repurchases in 2011 * In accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, Intersections entered into a trading plan to facilitate repurchases by the Company of up to $2.5 million of its common stock. It is anticipated that the repurchase plan will commence on June 10, 2012 and will remain in effect until July 31, 2012 but may be limited or terminated at any time without prior notice. Please see the company s release and website at for additional details on quarterly results. 19

20 Well-positioned to Capitalize on Industry Trends and Leverage Our Unique Advantages Favorable Industry Dynamics * Market-Leading Position 11.6 million adults were victims of identity theft in 2011 (12.6 percent y-o-y increase); with total dollar fraud amount of $18 billion Estimated 15 percent of U.S. consumers received notification of data breach in 2011, an increase of 67 percent from Increasing trends in non-card frauds, computerbased crimes, and counterfeit software 4.8 million subscribers currently protected; more than 34 million protected since inception Recognized as the innovator and product leader in the identity protection industry Most comprehensive identity protection product suite available Attractive Financial Characteristics Proven subscription model creates strong, predictable cash flow Strong cash flow from operations of $16.1 million, and $30.6 million in cash & equiv. on balance sheet as of March 31, 2012 Will pay a 8th consecutive quarterly dividend on June 8, 2012, an effective dividend Yield of 7.0% Multiple Growth Opportunities Multiple medium to large existing clients/portfolios Consumer Direct Recently added clients and additional new client wins New product launches such as Identity Guard Platinum and kidsure SM Javelin s 2012 Identity Fraud Report: Social media and Mobile Forming New Fraud Frontier (February 2012) Dividend Yield is based on May 31, 2012 closing price of $

21 Thank You Corporate Headquarters Intersections Inc Stonecroft Boulevard Chantilly, VA Toll-free: NASDAQ : INTX Investor Relations Eric Miller Senior Vice President Corporate Finance and Investor Relations Tel: emiller@intersections.com