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About Non-GAAP Financial Measures
In its communications with investors, the Company references certain non-GAAP financial measures, which differ from GAAP measurements by the amount of non-cash equity compensation from continuing operations, non-cash income tax expense associated with continuing operations, and discontinued operations. The Company believes that providing non-GAAP net income in its communications with investors is useful to investors for a number of reasons. As presented, the non-GAAP net income provides a consistent basis of presentation for investors to understand the Company’s financial performance in comparison to historical periods using the same methodology and information that the Company’s management uses to evaluate the Company’s performance, which the Company believes is useful to investors. A reconciliation of non-GAAP financial measures to GAAP basis can be found below. Amounts are in thousands ($000) and reflect the restatement disclosed in Note 10 to the Condensed Consolidated Financial Statements presented in Item 1 to Form 10-Q for the fiscal quarter ended June 30, 2009.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2009 | 2008 | 2009 | 2008 | |
| GAAP net income (loss) | $ (375) | $ 380 | $ (558) | $ 2,504 |
| Equity-based compensation expense from continuing operations | 471 | 479 | 1,614 | 1,205 |
| Non-cash income tax expense from continuing operations | 46 | 391 | 66 | 1,586 |
| Discontinued operations | 48 | (9) | 104 | (23) |
| Non-GAAP net income | $ 190 | $ 1,241 | $ 1,226 | $ 5,272 |
| Non-GAAP net income per diluted share | $ 0.02 | $ 0.13 | $ 0.14 | $ 0.61 |
| Shares used in computing non-GAAP net income per diluted share | 8,927,549 | 9,338,353 | 8,818,793 | 8,579,268 |
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2009 | 2008 | 2009 | 2008 | |
| GAAP net income (loss) | $ 319 | $ 1,113 | $ (183) | $ 2,124 |
| Equity-based compensation expense from continuing operations | 550 | 414 | 1,143 | 726 |
| Non-cash income tax expense (benefit) from continuing operations | 20 | 594 | 20 | 1,195 |
| Discontinued operations | 17 | (10) | 56 | (14) |
| Non-GAAP net income | $ 906 | $ 2,111 | $ 1,036 | $ 4,031 |
| Non-GAAP net income per diluted share | $ 0.10 | $ 0.25 | $ 0.12 | $ 0.49 |
| Shares used in computing non-GAAP net income per diluted share | 9,319,280 | 8,281,715 | 8,764,416 | 8,199,449 |
| Three Months Ended March 31, |
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| 2009 | 2008 | |
| GAAP net income | $ (502) | $ 1,011 |
| Equity-based compensation expense from continuing operations | 593 | 312 |
| Non-cash income tax expense from continuing operations | — | 601 |
| Discontinued operations | 39 | (4) |
| Non-GAAP net income | $ 130 | $ 1,920 |
| Non-GAAP net income per diluted share | $ 0.01 | $0.23 |
| Shares used in computing non-GAAP net income per diluted share | 8,706,210 | 8,242,191 |
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2008 | 2007 | 2008 | 2007 | |
| GAAP net (loss) income | $ (15,218) | $ 1,311 | $ (12,714) | $ 3,735 |
| Equity-based compensation expense from continuing operations | 500 | 223 | 1,705 | 743 |
| Non-cash income tax expense (benefit) from continuing operations | 177 | (402) | 1,763 | (402) |
| Impairment charge | 13,071 | — | 13,071 | — |
| Discontinued operations | (14) | 14 | (37) | (83) |
| Non-GAAP net (loss) income | $(1,484) | $ 1,146 | $ 3,788 | $ 3,993 |
| Non-GAAP net (loss) income per diluted share | $ (0.17) | $ 0.14 | $ 0.47 | $ 0.50 |
| Shares used in computing non-GAAP net (loss) income per diluted share | 8,655,761 | 8,408,437 | 8,133,165 | 8,027,286 |
To view a sequential quarterly presentation of Non-GAAP financial measures covering the period from the fourth quarter of 2005 to the present, click here
Effect of Adjustment for Expense from Exchange of Stock Options:
The schedule below discloses 2005 operating results before and after the $5,729 non-cash charge recorded for the exchange of InterNetwork Experts, Inc. stock options for INX Inc. stock options.
| As Reported | Adjustment | As Adjusted | |
| Amounts (in thousands): | |||
| SG&A expense | $22,759 | $(5,729) | $17,030 |
| Operating income (loss) | (4,183) | 5,729 | 1,546 |
| Net income (loss) from continuing operations | (4,917) | 5,729 | 812 |
| Net income (loss) | (7,884) | 5,729 | (2,155) |
| As a Percentage of Sales: | |||
| SG&A expense | 21.2% | (5.3)% | 15.9% |
| Operating income (loss) | (3.9)% | 5.3% | 1.4% |
| Net income (loss) from continuing operations | (4.5)% | 5.3% | 0.8% |
| Net income (loss) | (7.3)% | 5.3% | (2.0)% |