Internet Commerce Corporation Announces Financial Results for Fourth Quarter & Year End Fiscal 2005

Norcross, Georgia – September 29, 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 fourth quarter and year ended July 31, 2005.

In announcing the results, Thomas J. Stallings, chief executive officer, said, "Fiscal year 2005 was a historic year for Internet Commerce Corporation. We made excellent progress compared to our performance a year ago with a $5.0 million increase in revenue, $5.7 million increase in gross margin and $4.3 million increase in net income.”

Stallings continued, “An unrelenting focus on our operation plan, continued growth through acquisition, and an unyielding employee commitment were key drivers in our success and represent a powerful combination to further strengthen company performance in 2006.”

Fourth Quarter Fiscal Year 2005 Results

Fourth quarter revenue from continuing operations in fiscal 2005 was approximately $5.1 million, up 71.9% compared with our fourth quarter of fiscal 2004 revenues of approximately $3.0 million. Net income was $628,000 compared with a loss of $1.1 million a year ago. Basic and diluted earnings per common share from continuing operations increased to $0.03 compared with a basic and diluted loss of $0.06 per common share in the same period of fiscal 2004.

The Company’s Earnings Before Interest, non-cash compensation, Taxes, Depreciation and Amortization (Adjusted "EBITDA") was up 305% over the fourth quarter of fiscal 2004. Adjusted EBITDA was approximately $1.2 million in the fourth quarter of fiscal 2005 as compared to an Adjusted EBITDA loss during the fourth quarter of fiscal 2004 of $591,000. 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.

Fourth quarter revenue growth of 72% from fourth quarter fiscal 2004 to fourth quarter fiscal 2005 was driven by both business segments. In the ICC.NET™ segment, fourth quarter revenues from continuing operations were approximately $3.0 million, up 22% from $2.4 million in the fiscal 2004 period. This revenue represented 58% of consolidated revenue in the fourth quarter compared to 82% of consolidated revenue in the fiscal 2004 period. Revenues from the Service Bureau segment were $2.1 million, an increase of 306% compared to $521,000 in the fourth quarter of fiscal 2004. This revenue represented 42% of consolidated revenue in the fourth quarter compared to 18% of consolidated revenue in the fiscal 2004 period.

The Company’s total gross profit margin from continuing operations improved to 61.8% in fourth quarter fiscal 2005 from 47.0% in the fourth quarter of last fiscal year, and total expenses from continuing operations increased 9.3% in fourth quarter fiscal 2005 from the prior-year period to $4.4 million from $4.1 million. The increase in expenses during the quarter was driven by the transition of the acquired Managed EC business from New York City to Carrollton, Georgia.

Fiscal Year 2005 Results

For the fiscal year ended July 31, 2005, revenues from continuing operations totaled $16.7 million, up 43% compared with fiscal year 2004 revenues of $11.7 million. Income was $264,000 compared to a net loss of $4.1 million for fiscal year 2004, an increase of 106%. Basic and diluted income per common share from continuing operations was a loss of $0.01 compared with a loss of $0.30 per basic diluted and common share for fiscal year 2004. 

The Company further reported that it achieved Adjusted EBITDA of $2.5 million in fiscal 2005 as compared to loss of $1.8 million of Adjusted EBITDA during 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.

Fiscal year 2005 revenue growth of 42.7% was driven by both business segments. In the ICC.NETTM segment, fiscal year revenues from continuing operations were $11.3 million, up 9.7% from $10.3 million the same fiscal 2004 period. This revenue represented 67% of consolidated revenue in the fiscal year 2005 compared to 88% of consolidated revenue in the fiscal year 2004. Revenues from the Service Bureau segment were $5.4 million, an increase of 280% compared with $1.4 million in fiscal year 2004. This revenue represented 33% of consolidated revenue compared to 12% of consolidated revenue in fiscal year 2004.

The Company’s total gross profit margin from continuing operations improved to 63.9% in fiscal 2005 from 42.5% in fiscal year 2004, and total expenses from continuing operations increased 4.2% in fiscal year 2005 from the prior-year period to $16.5 million from $15.8 million. 

The company ended fiscal 2005 with approximately $4.0 million of cash on hand. The balance sheet remains strong, and the company is well positioned to take advantage of opportunities.

Business Outlook

For the fiscal first quarter ending October 31, 2005, the Company expects revenue in the range of $4.5 million to $4.75 million with a pre-tax GAAP operating income in the range of $500,000 to $800,000.

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.