Internet Commerce Corporation Announces Financial Results for Second Quarter Fiscal 2005

Norcross, Georgia – March 16, 2005 - Internet Commerce Corporation (ICC) (NasdaqSC: ICCA), a pioneer in the use of the Internet for business-to-business (B2B) e-commerce solutions, today announced financial results for its fiscal second quarter ended January 31, 2005.

Thomas J. Stallings, chief executive officer of ICC, said: "The ICC team continues to deliver on its commitment to improve the financial position of the company, making this fiscal quarter the second consecutive quarter of cash flow positive results on an adjusted EBITDA basis.  Behind the continued financial improvement is strong revenue growth and improved gross margins from the prior year.  Our balance sheet remains healthy with $3.15 million in cash.

“Credit for the financial performance goes to the entire ICC team whose focus on securing new business, increasing customer satisfaction, reducing expenditures, and streamlining core business processes is yielding positive results.  With the relocation to our more cost-effective headquarters location behind us and an extension to the original date for Sarbanes-Oxley compliance, we anticipate accelerated progress in the second half.  We are pleased with our results, but recognize an unrelenting focus on execution is vital to realize our goal of generating positive cash flow from operations.”

Second quarter revenue from continuing operations in fiscal 2005 was $3.49 million, up 26.4% compared with the second quarter of fiscal 2004 revenues of $2.76 million.  Income was a net loss of $288 thousand compared with net loss of $1.5 million a year ago, a decrease of 80.5%.  Basic and diluted loss per common share of $0.02 from continuing operations compared with basic and diluted loss of $0.12 per common share in the same period of fiscal 2004, a decrease of 81.8%.

The Company further reported that it achieved Earnings Before Interest, non-cash compensation, Taxes, Depreciation and Amortization (Adjusted "EBITDA") of $271 thousand in the second quarter of fiscal 2005 as compared to Adjusted EBITDA during the second quarter of fiscal 2004 of $(595) thousand. Adjusted EBITDA is not a financial measure within generally accepted accounting principles (GAAP). The Company believes that this presentation of Adjusted EBITDA provides useful information to investors regarding certain additional financial and business trends relating to its financial condition and results of operations. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, operating cash flows, is attached in addition to a reconciliation to net income for all periods presented.

Second quarter revenue growth of 26.4% from second quarter fiscal 2004 to second quarter fiscal 2005 was driven by both business segments.  In the ICC.NETTM segment, second quarter revenues from continuing operations were $2.7 million, up 8% from $2.5 million in the fiscal 2004 period.  This revenue represented 78.5% of consolidated revenue in the second quarter compared to 90.2% of consolidated revenue in the year ago period Revenues from the Service Bureau segment was $752 thousand, an increase of 177.5% compared $271 thousand in the second quarter of fiscal 2004. This revenue represented 21.5% of consolidated revenue in the second quarter compared to 9.8% of consolidated revenue in the year ago period.

The Company’s total gross profit margin from continuing operations improved to 61.6% in second quarter fiscal 2005 from 34.8% in the second quarter of last fiscal year, and total expenses from continuing operations decreased 13% in second quarter fiscal 2005 from the prior-year period to $3.79 million from $4.37 million. 

Six Month Fiscal 2005 Results

For the six months ended January 31, 2005, revenues from continuing operations totaled $7.24 million, up 23.6% compared with first half fiscal 2004 revenues of $5.86 million.  Income was a net loss of $690 thousand compared to $2.32 million for the same period in fiscal 2004, a decrease of 70.3%.  Basic and diluted loss per common share from continuing operations was $0.05 compared with a loss of $0.18 per basic diluted and common share for the fiscal 2004 period, a decrease of 70.6%. 

The Company further reported that it achieved Adjusted EBITDA of $465 thousand in the first six months of fiscal 2005 as compared to $(986) thousand of Adjusted EBITDA during the first six months of fiscal 2004. The Company believes that this presentation of Adjusted EBITDA provides useful information to investors regarding certain additional financial and business trends relating to its financial condition and results of operations.  A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, operating cash flows, is attached in addition to a reconciliation to net income for all periods presented.

Six month revenue growth of 23.6% was driven by both business segments.  In the ICC.NETTM segment, six month revenues from continuing operations were $5.57 million, up 5.5% from $5.28 million the same fiscal 2004 period. This revenue represented 76.9% of consolidated revenue in the first half of fiscal 2005 compared to 90.1% of consolidated revenue in the year ago period.  Revenues from the Service Bureau segment were $1.67 million, an increase of 188.4% compared with $579 thousand in the first six months of fiscal 2004.  This revenue represented 23.1% of consolidated revenue compared to 9.9% of consolidated revenue in the year ago period.

The Company’s total gross profit margin from continuing operations improved to 61.9% in the first six months of fiscal 2005 from 38.4% in the first six months of last fiscal year, and total expenses from continuing operations decreased 3.8% in first half of fiscal 2005 from the prior-year period to $7.95 million from $8.26 million. 

The company ended the first six months of fiscal 2005 with over $3.15 million of cash on hand.  The balance sheet remains strong, and the company is well positioned to take advantage of opportunities.

About Internet Commerce Corporation (ICC)
Internet Commerce Corporation (NasdaqCM: ICCA), headquartered in Norcross, Georgia, is a leader in providing business-to-business e-commerce solutions. Thousands of customers rely on ICC's comprehensive line of solutions, in-depth expertise, and unmatched customer service to help balance cost, fit, and function required to meet unique requirements for trading partner compliance, coordination, and collaboration.  With its software solutions, network services, hosted web applications, managed services, and consulting services, ICC is the trusted provider of e-commerce solutions for businesses, regardless of size and level of technical sophistication, to connect them with their trading communities.  For more information, visit www.icc.net.

Except for the historical information contained herein, this press release includes forward looking statements which are subject to a number of risks and uncertainties, including the risks and uncertainties associated with rapidly changing technologies such as the Internet, the risks of technology development and the risks of competition. Actual results could differ materially. For more information about these risks and uncertainties, see the SEC filings of Internet Commerce Corporation.