Internet Commerce Corporation Announces Financial Results for Second Quarter Fiscal 2006

Norcross, Georgia – March 17, 2006 - Internet Commerce Corporation (ICC) (NasdaqCM: ICCA), a leader in business-to-business e-commerce solutions, today announced financial results for its fiscal second quarter ended January 31, 2006.

"We are pleased with our results for the first half of fiscal year 2006,” said Thomas J. Stallings, chief executive officer of ICC. “We realized excellent earnings-per-share improvements in the first six months of the year as a result of our vigilant management of the business. With a strong earnings and a solid balance sheet, we are in a position to invest in development, marketing and sales with targeted initiatives aimed at gaining a stronger foothold in the market and increasing our profitability. While investing in the business, however, we will continue with our constant and careful expense reviews and capitalize on opportunities to improve long-term financial health.”

"With the Kodiak Group, Inc. acquisition in November 2005, we developed and began to execute a plan for streamlining expenses and optimizing efficiencies,” said Glen Shipley, chief financial officer for ICC. “Some cost-cutting measures, including one time charges, were incurred during this quarter. Others will occur during the second half of the fiscal year.”

Shipley added that the cost-cutting plan focuses on long-term financial strength and is vital to an improved cost structure going forward.

Second Quarter Fiscal 2006 Results

Second quarter revenue from continuing operations in fiscal 2006 was $5.01 million, up 43.5% compared with the second quarter of fiscal 2005 revenues of $3.49 million. Net income was $372 thousand compared with net loss of $288 thousand a year ago, an increase of $660 thousand. Basic and diluted income per common share of $0.01 and $0.02, respectively from continuing operations compared with basic and diluted loss of $0.02 per common share in the same period of fiscal 2005, an increase of $0.03 and $0.04, respectively.

The Company further reported that it achieved Earnings Before Interest, non-cash compensation, Taxes, Depreciation and Amortization (Adjusted "EBITDA") of $895 thousand in the second quarter of fiscal 2006 as compared to Adjusted EBITDA during the second quarter of fiscal 2005 of $257 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 net income for all periods presented is attached.

The Company reported one-time charges of $360 thousand in the second quarter of fiscal 2006 including severance and other employment related expenses payments and costs for facilities restructuring.

Second quarter revenue growth of 43.5% from second quarter fiscal 2005 to second quarter fiscal 2006 was driven by both business segments. In the ICC.NETTM segment, second quarter revenues from continuing operations were $3.12 million, up 13.8% from $2.74 million in the fiscal 2005 period.  This revenue represented 62.3% of consolidated revenue in the second quarter compared to 78.5% of consolidated revenue in the year ago period. Revenues from the Service Bureau segment were $1.9 million, an increase of 151.6% compared $752 thousand in the second quarter of fiscal 2005. This revenue represented 37.7% of consolidated revenue in the second quarter compared to 21.5% of consolidated revenue in the year ago period.

The Company’s total gross profit margin from continuing operations improved to 65.1% in second quarter fiscal 2006 from 61.6% in the second quarter of last fiscal year. Total expenses from continuing operations increased 21.8% in second quarter fiscal 2006 from the prior-year period to $4.61 million from $3.79 million principally as a result of the additional costs from the Kodiak Group Inc.’s operations. 

Six Month Fiscal 2006 Results

For the six months ended January 31, 2006, revenues from continuing operations totaled $10.03 million, up 38.5% compared with first half fiscal 2005 revenues of $7.24 million. Net income was $1.09 million compared to a net loss of $690 thousand for the same period in fiscal 2005, an increase of $1.78 million.  Basic and diluted income per common share from continuing operations was $0.05 compared with a loss of $0.05 per basic and diluted common share for the fiscal 2005 period, an increase of $0.10. 

The Company further reported that it achieved Adjusted EBITDA of $2.2 million in the first six months of fiscal 2006 as compared to $445 thousand of Adjusted EBITDA during the first six months of fiscal 2005. 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 net income for all periods presented is attached.

Six month revenue growth of 38.5% was driven by both business segments.  In the ICC.NETTM segment, six month revenues from continuing operations were $6.15 million, up 10.6% from $5.57 million the same fiscal 2005 period. This revenue represented 61.4% of consolidated revenue in the first half of fiscal 2006 compared to 76.9% of consolidated revenue in the year ago period. Revenues from the Service Bureau segment were $3.88 million, an increase of 131.6% compared with $1.67 million in the first six months of fiscal 2005.

This revenue represented 38.6% of consolidated revenue compared to 23.1% of consolidated revenue in the year ago period.

The Company’s total gross profit margin from continuing operations improved to 63.6% in the first six months of fiscal 2006 from 61.9% in the first six months of last fiscal year. Total expenses from continuing operations increased 12.0% in first half of fiscal 2006 from the prior-year period to $8.9 million from $7.94 million principally as a result of the additional costs from the Kodiak Group Inc.’s operations. 

The company ended the first six months of fiscal 2006 with over $4 million of cash on hand.  The balance sheet remains strong, and the company is well positioned to take advantage of opportunities.

Forward-Looking and Cautionary Statements
Except for the historical information and discussion contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, as discussed in the company’s filing with the U.S. Securities and Exchange Commission (SEC).

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.