InfoSpace Reports Second Quarter Results

Merchant services processed more than 20 million transactions, accounting for more than $1.5 billion in total dollar volume; Monthly active wireless subscribers grew to 1.49 million; Wireline launched next generation meta-search product

BELLEVUE, Wash.--(BUSINESS WIRE)--July 23, 2002--InfoSpace, Inc. (:INSP), a provider of wireless and Internet software and application services, today announced results for its second quarter ended June 30, 2002. Revenues for the second quarter were $33.5 million.

Pro forma net loss for the second quarter was $5.2 million of which $5.14 million was non-cash depreciation. Pro forma EPS was a net loss of $0.02. Pro forma excludes amortization of intangibles and certain other items as detailed in the footnotes in the following financial tables.

In accordance with Generally Accepted Accounting Principles (GAAP), net loss for the second quarter was $13.5 million, or a loss of $0.04 per basic share.

"We are pleased to post another quarter of encouraging results," said Naveen Jain, chairman and chief executive officer of InfoSpace. "Our Merchant and Wireline business units, which together accounted for 78 percent of second quarter revenue, again achieved profitability on a pro forma basis. In addition, our Wireless business posted strong growth in both number of users and global usage of our wireless data services."

"We are well capitalized to maximize on the opportunities in each of our three business areas," said Tammy Halstead, chief financial officer of InfoSpace. "We ended the quarter with cash, investments and a federal payroll tax receivable totaling $279 million. In addition, we continued to focus on reducing operating costs as demonstrated by our reduction of SG&A expenses by $4.4 million from the previous quarter."

Financial and operating highlights:

-- Two of InfoSpace's three Business Units, Merchant and Wireline, were profitable on a pro forma basis. These two Business Units accounted for 78 percent of second quarter revenue. Merchant reported a profit of $3.2 million on revenue of $12.6 million. Wireline reported a profit of $5.6 million on revenue of $13.4 million (see statement of operations by business unit in the following financial tables).

-- Merchant services processed more than $1.5 billion in transactions during the quarter, up from the $1.3 billion reported last quarter. Number of transactions processed grew to more than 20 million, up from the 16 million reported last quarter. This quarter, Merchant accounted for 38 percent of total revenue, up from 36 percent in the first quarter.

-- During the quarter, more than 10,000 new merchant accounts were established. Notable merchants added during the quarter included Seattle's Best Coffee, Cleveland Indians Baseball Company and the Nature Conservancy Catalog.

-- One and two-way SMS traffic in the U.S. and Europe grew by more than 20 percent.

-- Wireline launched a next generation meta-search product. The new meta-search product can be accessed at both (www.excite.com) and WebCrawler (www.webcrawler.com).

-- InfoSpace's balance sheet remains strong with no debt. The Company has cash, investment grade securities, and a federal payroll tax receivable totaling $279 million. In addition, the Company has investments in private and public securities of $29 million.

Merchant

InfoSpace's payment solutions processed more than $1.5 billion in transactions, up from the $1.3 billion reported last quarter. InfoSpace continues to see strong growth in the number of transactions processed, which grew to more than 20 million, up from the 16 million reported last quarter. In addition, InfoSpace's channel for selling merchant services has grown to include more than 1,200 resellers.

As InfoSpace continues to solidify and expand its leadership in electronic payment processing, the Company's research and development team is working to deploy a new payments architecture. This new architecture is designed to deliver the next generation of electronic payments, including eCheck, eDebit and stored value technologies to merchant service providers and financial institutions.

Also, during the second quarter, InfoSpace delivered its first suite of universal stored value solutions.

The suite includes three initial products - Gift Card, Teen Card and Payroll Card. Each stored value product, or pre-paid card, works in a similar fashion. Consumers utilize a Web interface to create and load value to branded credit cards, such as Visa® and MasterCard®, that can be used at the point-of-sale in both the physical and virtual world. Consumers are also able to utilize the Web to check balances and statement information, as well as add additional funds.

Wireline

The Wireline Business Unit is focused on providing highly scalable wired Internet services, such as Web search, directory services and a comprehensive platform of dynamic content and cutting-edge broadband applications to DSL (Digital Subscriber Line) and cable-modem Internet Service Providers and destination Web sites.

During the quarter, more than three billion queries were made to InfoSpace's wireline services.

The core focus of the Wireline Business Unit is Web search. InfoSpace is the market leader in the meta-search space of Web search. InfoSpace's meta-search technology allows users to search multiple search engines/properties at once, returning the most comprehensive and relevant results fast. During the quarter, InfoSpace launched its next generation meta-search product. The new meta-search product can be accessed at both Excite (www.excite.com) and WebCrawler (www.webcrawler.com) and will soon be available at MetaCrawler (www..com).

InfoSpace's next generation meta-search product is designed to identify the intent of a user's search. Because various search engines return better results for different types of queries, InfoSpace's proprietary meta-search algorithm sorts the results accordingly and then displays a blended mix of highly relevant commercial and non-commercial results for a given search.

The new InfoSpace meta-search product includes results from leading search companies and properties, including FAST, Overture, About, Ask Jeeves, FindWhat, LookSmart, Open Directory and . During the second quarter, InfoSpace reached new or expanded agreements with Fast Search & Transfer (FAST), FindWhat.com and LookSmart.

During the quarter, InfoSpace announced that it had recovered the cost of purchasing certain media assets, including the Excite.com and WebCrawler.com domain names, from Excite@Home late last year (Nov. 2001).

Also, during the second quarter, InfoSpace announced a new relationship with Cablevision Systems Corporation, one of the nation's leading telecommunications and entertainment companies. Under the agreement, InfoSpace will provide its broadband Web search results delivered by InfoSpace's meta-search technology, and directory services, including yellow pages, white pages, maps and directions through OptOnline.net, the broadband portal for Cablevision's Optimum Online® high-speed Internet solution. Cablevision represents InfoSpace's first relationship with a cable broadband service provider.

Wireless

InfoSpace's Wireless Business Unit continued to show growth in both number of subscribers and global usage during the second quarter.

During the quarter, InfoSpace launched new wireless services with several leading carriers, including Rogers AT&T in Canada, Iusacell in Mexico, Verizon Wireless Puerto Rico and Nextel Brazil.

The Nextel Brazil launch marked the first deployment of InfoSpace's "zero-footprint" wireless corporate email product, which offers enterprises the ability to quickly deploy fully secure access to email and other critical information without the need to install and maintain hardware or software at the corporate site.

Also during the quarter, Canadian-based Rogers AT&T Wireless launched a new English and French-language SMS services powered by InfoSpace's innovative "pound-pound" Instant-Access SMS solutions. The services provide users with fast and easy access to information and entertainment as well as the ability to download and exchange ringtones and graphics by pressing just a few keys on their wireless device. InfoSpace's Instant-Access SMS solutions offer carriers new opportunities to drive revenue and encourage adoption of wireless data by enabling delivery of interactive services to almost any digital wireless phone on their network -- even those that are not WAP or two-way SMS capable. Also during the second quarter, InfoSpace launched its Wireless Application Manager (WAM!™) with one of its largest carrier customers. WAM! provides a robust deck management tool-set offering carriers a high degree of control over decks, content links and production releases. WAM! is a key component of InfoSpace's Mobile Application Services framework, which provides the underlying technologies necessary for carriers to deploy seamless and multi-modal wireless data services that can be packaged and targeted directly to user groups such as teens, enterprise users and others.

Corporate

As a result of the alignment of InfoSpace's product units directly beneath their respective business unit heads, Rasipuram "Russ" V. Arun, the Company's executive vice president and chief technology officer, will now work closely with the COO to manage the day-to-day operations of the three business units. Mr. Arun now holds the title of group executive vice president and reports directly to the CEO.

InfoSpace also announced the appointment of James F. Voelker to its board of directors. Mr. Voelker is a telecommunications industry veteran with over twenty years of experience in a variety of executive positions and serves or has served as an independent director for , Comdisco, Monet Mobil Wireless and Epoch Internet and as an advisor to Providence Equity Partners and Pivotal Partners. Mr. Voelker replaces William D. Savoy of Vulcan, Inc., who recently resigned.

A replay of the conference call will be available in the investor relations section of the Web site www.infospaceinc.com approximately one hour after the call until Fri., July 26 at 4 p.m. PST.

About InfoSpace, Inc.

InfoSpace, Inc. (Nasdaq:INSP) provides wireless and Internet software and application services. The Company develops software technologies that enable customers to efficiently offer a broad array of network-based services under their own brand to any device. InfoSpace corporate information can be found at www.infospaceinc.com.

This release contains forward-looking statements relating to the development of InfoSpace, Inc.'s products and services and future operating results that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect InfoSpace's actual results include the progress and costs of the development of our products and services, the timing and extent of market acceptance of those products and services. A more detailed description of certain factors that could affect actual results include, but are not limited to, those discussed in InfoSpace's Annual Report on Form 10-K, in the section entitled "Factors Affecting Our Operating Results, Business Prospects and Market Price of Stock." Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. InfoSpace undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

InfoSpace, Inc. Pro Forma Consolidated Statements of Operations (A) (Amounts in thousands, except per share data)

Three months ended June Six months ended June 30, 30, 2002 2001 2002 2001 (unaudited) (unaudited) (unaudited) (unaudited)

Revenues $ 33,461 $ 50,942 $ 66,605 $ 97,507

Cost of revenues 9,589 10,614 18,885 22,335 ------

Gross profit 23,872 40,328 47,720 75,172

Operating expenses:

Product development 8,789 10,569 16,476 22,356 Sales, general and administrative 22,165 31,651 47,757 67,778 ------

Total operating expenses 30,954 42,220 64,233 90,134 ------

Loss from operations (7,082) (1,892) (16,513) (14,962)

Other income, net 1,981 4,580 4,059 10,563 Income tax expense 96 137 240 187 ------

Pro forma net income (loss) $ (5,197) $ 2,551 $ (12,694) $ (4,586) ======

Pro forma basic and diluted net income (loss) per share $ (0.02) $ 0.01 $ (0.04) $ (0.01) Shares used in computing pro forma basic and diluted net income (loss) per share 309,040 325,027 308,822 324,167

(A) Pro forma results exclude non-cash charges, non-recurring charges and items unrelated to the Company's core operations. These financial statements exclude restricted stock compensation expense, amortization, acquisition-related expenses, restructuring charges, other non-recurring charges, gains and losses on equity investments and the cumulative effects of changes in accounting principles. They do not purport to be financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP). The following table reconciles the pro forma net income (loss) in accordance with GAAP for all periods presented.

InfoSpace, Inc. Reconciliation of Pro Forma Net Income (Loss) (Amounts in thousands, except per share data)

Three months ended June Six months ended June 30, 30, 2002 2001 2002 2001 (unaudited) (unaudited) (unaudited) (unaudited)

Pro forma net income (loss) $ (5,197) $ 2,551 $ (12,694) $ (4,586)

Restricted stock compensation expense (1,385) -- (4,996) -- Amortization of intangibles (5,750) (59,107) (11,664) (123,004) Acquisition and related charges -- (111) -- (1,000) Other non-recurring charges (849) (217) (799) (167) Restructuring charges -- 62 -- (1,655) Loss on equity investments, net of minority interest (345) (14,099) (17,256) (61,715) Cumulative effect of change in accounting principle -- -- (206,619) (3,171) ------

Net loss $ (13,526) $ (70,921) $ (254,028) $ (195,298) ======

Basic and diluted net loss per share $ (0.04) $ (0.22) $ (0.82) $ (0.60) Shares used in computing pro forma basic and diluted net loss per share 309,040 325,027 308,822 324,167

InfoSpace, Inc. Consolidated Statements of Operations (Amounts in thousands, except per share data)

Three months ended June Six months ended June 30, 30, 2002 2001 2002 2001 (unaudited) (unaudited) (unaudited) (unaudited)

Revenues $ 33,461 $ 50,942 $ 66,605 $ 97,507

Cost of revenues 9,721 10,614 19,384 22,335 ------

Gross profit 23,740 40,328 47,221 75,172

Operating expenses:

Product development 9,516 10,569 18,943 22,356 Sales, general and administrative 22,691 31,651 49,787 67,778 Amortization of intangibles 5,750 59,107 11,664 123,004 Acquisition and related charges -- 111 -- 1,000 Other non-recurring charges 849 217 799 167 Restructuring charges -- (62) -- 1,655 ------

Total operating expenses 38,806 101,593 81,193 215,960 ------

Loss from operations (15,066) (61,265) (33,972) (140,788)

Loss on equity investments (345) (14,099) (17,256) (61,715) Other income, net 1,981 4,580 4,059 10,563 ------

Loss before income tax expense and cumulative effect of change in accounting principle (13,430) (70,784) (47,169) (191,940)

Income tax expense 96 137 240 187 ------

Loss before cumulative effect of change in accounting principle (13,526) (70,921) (47,409) (192,127)

Cumulative effect of change in accounting principle -- -- (206,619) (3,171) ------

Net loss $ (13,526) $ (70,921) $ (254,028) $ (195,298) ======

Basic and diluted net loss per share $ (0.04) $ (0.22) $ (0.82) $ (0.60)

Shares used in computing basic and diluted net loss per share 309,040 325,027 308,822 324,167

InfoSpace, Inc. Consolidated Balance Sheets (Amounts in thousands)

June 30, December 31, 2002 2001 (unaudited) ASSETS

Current assets: Cash and cash equivalents $ 94,723 $ 118,561 Short-term investments, available-for-sale 119,061 80,319 Accounts receivable, net 27,272 16,305 Payroll tax receivable 13,914 13,214 Notes receivable, net 3,084 2,888 Other receivables, net 8,685 11,095 Prepaid expenses and other current assets 7,715 8,239 ------

Total current assets 274,454 250,621

Property and equipment, net 35,044 39,443 Long-term investments, available-for-sale 51,119 94,891 Other investments 28,918 47,087 Goodwill, net 153,948 356,476 Other intangible assets, net 36,097 47,084 Other long-term assets 917 1,403 ------

Total assets $ 580,497 $ 837,005 ======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities: Accounts payable $ 6,106 $ 9,139 Accrued expenses and other current liabilities 21,800 25,791 Deferred revenue 13,140 15,794 ------

Total current liabilities 41,046 50,724

Long-term liabilities: Long-term deferred revenue 2,511 3,693 ------

Total liabilities 43,557 54,417

Stockholders' equity: Common stock 31 31 Additional paid-in capital 1,704,385 1,702,522 Accumulated deficit (1,164,753) (910,725) Deferred expense -- warrants (272) (680) Unearned compensation -- restricted stock (2,333) (7,881) Accumulated other comprehensive loss (118) (679) ------

Total stockholders' equity 536,940 782,588 ------

Total liabilities and stockholders' equity $ 580,497 $ 837,005 ======

Summary of cash and marketable investments(a): Cash and cash equivalents $ 94,723 $ 118,561 Short-term investments, available-for- sale 119,061 80,319 Long-term investments, available-for-sale 51,119 94,891 ------Total cash and marketable investments $ 264,903 $ 293,771 ======

(a) We invest our excess cash in high quality marketable investments, which are rated at least A-1, P-1. These investments, which include, but are not limited to, commercial paper, certificates of deposit, money market, corporate and United States government securities, and taxable muncipal bonds are classified on the balance sheet in three captions: cash and cash equivalents, short-term investments and long term investments based on their relative maturity dates.

InfoSpace, Inc Statement of Operations by Business Unit (Amounts in thousands)

Three months ended June 30, 2002

Wireline Merchant Wireless Corporate Consolidated

Revenues $ 13,362 $ 12,625 $ 7,473 $ -- $ 33,460

Operating expenses 7,724 9,381 9,056 8,852 (a) 35,013

Unallocated depreciation and non-capitalized property, plant and equipment ------5,530 (b) 5,530 ------

Pro forma income (loss) from operations 5,638 3,244 (1,583) (14,382) (7,083)

Income tax expense ------(96) (96) Other income, net ------1,982 1,982 ------

Pro forma net income (loss) 5,638 3,244 (1,583) (12,496) (5,197)

Loss on equity investments ------(345) (345) Amortization of intangibles ------(5,750) (5,750) Other non-recurring charges ------(849) (849) Restricted stock compensation expense ------(1,385) (1,385) ------Net income (loss) $ 5,638 $ 3,244 $ (1,583)$ (20,825) $ (13,526) ======

(a) Unallocated indirect operating expenses includes approximately $3.1 million of professional services, $2.3 million of facilities expense, $1.8 million of corporate insurance expense and $1.6 million of salaries and benefits

(b) Depreciation and non-capitalized property, plant and equipment expenses may be allocated in future periods.

InfoSpace Inc. Nicole Knowles, Director - Investor Relations 425/201-6100 [email protected] or Steve Stratz, Sr. Manager - Public Relations 425/709-8167 [email protected] or Adam Whinston, Sr. Manager - Public Relations 425/201-8946 [email protected]