Revenue

Search

Tax Preparation

Adjusted EBITDA

Non-GAAP Net Income

Non-GAAP EPS

Net Income

GAAP Diluted EPS

Revenues

Cost of sales (includes amortization of acquired intangible assets of $1,511 and 958) ⁽²⁾

Gross profit

Expenses and other income:

Engineering and technology ⁽²⁾

Sales and marketing ⁽²⁾

General and administrative ⁽²⁾

Depreciation

Amortization of intangible assets

Other loss (income) net ⁽³⁾

Total expenses and other loss (income)

Income from continuing operations before income taxes

Income tax expense

Income from continuing operations

Discontinued operations: ⁽¹⁾

Loss from discontinued operations, net of taxes ⁽²⁾

Net income

Earnings per share - Basic

Income from continuing operations

Loss from discontinued operations

Net income per share - Basic

Earnings per share - Diluted

Income from continuing operations

Loss from discontinued operations

Net income per share - Diluted

Weighted average shares outstanding used in computing basic income per share

Weighted average shares outstanding used in computing diluted income per share

In the year ended December 31, 2011, the Company completed the sale of its Mercantila e-commerce business. The operating results of that business have been presented as discontinued operations for all periods presented. In the three months ended March 31, 2011, the Company recorded a $0.7 million income tax benefit related to discontinued operations. Revenue, operating expenses and income taxes, and loss from discontinued operations are presented below (in thousands):

E-Commerce

Revenue

Operating expenses and income taxes

Loss from discontinued operations, net of taxes

In the three months ended March 31, 2011, $5.2 million in stock-based compensation expense was recorded in association with the modification of the terms of a warrant and the vesting of a non-employee performance-based equity award, which were both triggered by the acquisition of the TaxACT business, and the related expense was allocated to general and administrative expense. Stock-based compensation expense for the three months ended March 31, 2012 and 2011 is allocated among the following captions (in thousands):

Cost of sales

Engineering and technology

Sales and marketing

General and administrative

Discontinued operations

Total stock-based compensation expense

In the three months ended March 31, 2012, the Company recorded a $0.8 million charge for interest payments on the $100 million credit facility used to help fund the acquisition and a $0.3 million charge for amortization of the debt origination costs and a $0.1 million charge for amortization of the debt discount related to the credit facility. In the three months ended March 31, 2011, the Company recorded a $1.5 million charge as a result of the increase in the estimated fair value of a contingent liability related to operation of the assets acquired on April 1, 2010 from Make The Web Better, and recorded a $1.5 million gain on the resolution of a contingency.

ASSETS

Current assets:

Cash and cash equivalents

Short-term investments, available-for-sale

Accounts receivable, net

Other receivables

Prepaid expenses and other current assets, net

Total current assets

Property and equipment, net

Goodwill

Deferred tax asset, net

Other intangible assets, net

Other long-term assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses and other current liabilities

Derivative instrument

Short-term portion of long-term debt, net of discount of $211

Total current liabilities

Long-term liabilities:

Long-term debt, net of discount of $607

Deferred tax liability

Other long-term liabilities

Total long-term liabilities

Total liabilities

Stockholders’ equity:

Common stock

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income

Total stockholders’ equity

Total liabilities and stockholders’ equity

Summary of cash, cash equivalents, and short-term investments:

Cash and cash equivalents

Short-term investments, available-for-sale

Cash, cash equivalents, and short-term investments

Operating activities:

Net income

Adjustments to reconcile net income to net cash provided (used) by operating activities of continuing operations:

Loss from discontinued operations

Stock-based compensation

Warrant-related stock-based compensation

Loss on derivative instrument

Depreciation and amortization of intangible assets

Excess tax benefits from stock-based award activity

Deferred income taxes

Unrealized amortization of premium or accretion of discount on investments, net

Amortization of prepaid financing costs

Amortization of debt discount

Earn-out contingent liability adjustments

Gain on resolution of contingent liability

Other

Cash provided (used) by changes in operating assets and liabilities:

Accounts receivable

Other receivables

Prepaid expenses and other current assets

Other long-term assets

Accounts payable

Accrued expenses and other current and long-term liabilities

Net cash provided (used) by operating activities of continuing operations

Investing activities:

Business acquisition, net of cash acquired

Purchases of property and equipment

Change in restricted cash

Proceeds from sales of investments

Proceeds from maturities of investments

Purchases of investments

Net cash used by investing activities of continuing operations

Financing activities:

Proceeds from loan, net of debt issuance costs of $2,343 and debt discount of $953

Repayment of debt

Excess tax benefits from stock-based award activity

Proceeds from stock option exercises and issuance of stock through employee stock purchase plan

Tax payments from shares withheld upon vesting of restricted stock units

Earn-out payments for business acquisition

Repayment of capital lease obligation

Net cash provided by financing activities of continuing operations

Discontinued operations:

Net cash used by operating activities attributable to discontinued operations

Net cash used by investing activities attributable to discontinued operations

Net cash used by discontinued operations

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents:

Beginning of period

End of period

Search:

Revenue

Cost of revenue ⁽¹⁾

Operating expenses

Search segment income

Search segment margin

Tax Preparation:

Revenue

Cost of revenue ⁽²⁾

Operating expenses

Tax Preparation segment income

Tax Preparation segment margin

Total segment:

Total revenue

Total cost of revenue

Total segment operating expenses

Total segment income

Total segment margin

Corporate:

Operating expense

Stock-based compensation

Depreciation

Amortization of other intangible assets

Other income, net

Income tax expense, net

Disc ops, net of tax

Total corporate

Net income

Amounts do not include amortization of acquired technology and costs associated with the operation of the Company’s data centers that serve its search business, including depreciation, personnel expenses (including stock-based compensation expense), energy, and bandwidth costs.

Amounts do not include amortization of acquired technology and costs associated with the operation of the Company’s data center that serves its tax preparation business, including depreciation, personnel expenses, (including stock-based compensation expense), energy, and bandwidth costs, and personnel costs associated with customer service.

Net income ⁽²⁾

Discontinued operations

Depreciation and amortization of intangible assets

Stock-based compensation

Other loss (income), net ⁽³⁾

Income tax expense

Adjusted EBITDA ⁽⁴⁾

Net income ⁽²⁾

Discontinued operations

Income from continuing operations ⁽²⁾

Stock-based compensation

Amortization of acquired intangible assets

Loss on derivatives

Cash tax impact of GAAP adjustments

Non-cash income tax expense from continuing operations ⁽¹⁾

Non-GAAP net income ⁽⁴⁾

Income from continuing operations- diluted

Stock-based compensation - diluted

Amortization of acquired intangible assets - diluted

Loss on derivatives - diluted

Cash tax impact of GAAP adjustments - diluted

Non-cash income taxes per share - diluted ⁽⁴⁾

Non-GAAP net income per share - diluted ⁽⁴⁾

Net income

Depreciation and amortization of acquired intangible assets

Stock-based compensation

Other loss (income), net

Income tax expense

Adjusted EBITDA

Net income

Stock-based compensation

Amortization of acquired intangible assets

Non-cash income tax expense from continuing operations

Non-GAAP net income

InfoSpace’s Adjusted EBITDA is calculated by adjusting net income determined in accordance with generally accepted accounting principles (“GAAP”) to exclude the effects of loss from discontinued operations, net of taxes, income taxes, depreciation, amortization of acquired intangible assets, stock-based compensation expense, and other loss (income),net (which includes such items as interest expense, interest income, derivative instrument gains or losses, foreign currency gains or losses, gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, and gains on resolutions of contingencies), as detailed above. InfoSpace’s management believes that Adjusted EBITDA provides meaningful supplemental information regarding the Company’s performance by excluding certain expenses and gains that management believes are not indicative of its core business operating results. InfoSpace 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. InfoSpace believes that Adjusted EBITDA is a common measure used by investors and analysts to evaluate its performance, that it provides a more complete understanding of the results of operations and trends affecting the Company’s business when viewed together with GAAP results, and that management and investors benefit from referring to this non-GAAP financial measure.

As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).

Other loss (income), net includes such items as interest expense, interest income, derivative instrument gains or losses, foreign currency gains or losses, gains or losses from the disposal of assets, adjustments to the fair values of contingent liabilities related to business combinations, and gains on resolutions of contingencies.

Amounts previously disclosed have been revised to reflect the effect of classifying the Company’s Mercantila e-commerce business as discontinued operations.

Other loss, net, primarily consists of interest expense, interest income, derivative instrument gains or losses, and gains or losses from the disposal of assets.

Net income ⁽²⁾

Discontinued operations

Income from continuing operations ⁽²⁾

Stock-based compensation

Amortization of acquired intangible assets

Cash impact of GAAP adjustments

Non-cash income tax expense from continuing operations⁽¹⁾

Non-GAAP net income ⁽³⁾

Income from continuing operations per share - diluted

Stock-based compensation - diluted

Amortization of acquired intangible assets - diluted

Cash tax impact of GAAP adjustments - diluted

Non-cash income taxes per share - diluted ⁽³⁾

Non-GAAP net income per share - diluted ⁽³⁾

InfoSpace’s Non-GAAP net income and Non-GAAP earnings per share is calculated by adjusting net income adjusting net income determined in accordance with generally accepted accounting principles (“GAAP”) to exclude the effects of discontinued operations, net of taxes, stock-based compensation expense, amortization of acquired intangible assets, gain or loss on derivatives, the cash tax impact of those adjustments to GAAP net income, and non-cash portion of income tax expense from continuing operations, as detailed in the accompanying table to the preliminary condensed consolidated financial statements (unaudited). The Company excludes the non-cash portion of income tax expense because of its ability to offset a substantial portion of its cash tax liabilities by using these deferred tax assets. The majority of these deferred tax assets will expire if unutilized in 2020.

As presented in the Preliminary Condensed Consolidated Statements of Operations (unaudited).

Amounts previously disclosed have been revised to reflect the effect of classifying the Company’s Mercantila e-commerce business as discontinued operations.