Cbeyond Communications Reports First Quarter 2006 Results; Revenue Increased by 35% and Adjusted EBITDA Up by 55% Over Prior Year
ATLANTA, May 09, 2006 (BUSINESS WIRE) -- Cbeyond Communications, Inc. (Nasdaq: CBEY), ("Cbeyond"), a managed services provider that delivers integrated packages of voice and broadband services to small businesses, today announced its first quarter 2006 results.
Recent financial and operating highlights include the following:
-- Continued strong first quarter revenue growth with revenues of $47.6 million, up 35.3% over the first quarter of 2005
-- Net income of $20,000, including non-cash compensation expense of $782,000 according to SFAS No. 123R, which was adopted during the first quarter of 2006
-- Adjusted EBITDA (a non-GAAP measure) of $7.2 million during the first quarter of 2006, an increase of 54.8% from the first quarter of 2005
-- The Los Angeles market installed its first customer during March 2006 and contributed $1.0 million of start-up losses to consolidated adjusted EBITDA
-- Cbeyond launched its new BeyondMobile service to new and existing customers in all six of its markets
Financial Overview and Key Operating Metrics
Financial and operating metrics, which include non-GAAP financial measures, for the three months ended March 31, 2005, and 2006 include the following:
For the Three Months Ended March 31,
------------------------------------
2005 2006 Change % Change
------- ------- ------- ---------
Selected Financial Data
(dollars in thousands)
Revenue $35,176 $47,578 $12,402 35.3%
Operating expenses $36,293 $47,752 $11,459 31.6%
Operating loss $(1,117) $ (174) $ 943 N/M
Net income (loss) before
dividends $(1,576) $ 20 $ 1,596 N/M
Capital expenditures $ 3,738 $11,011 $ 7,273 194.6%
Key Operating Metrics and
Non-GAAP Financial Measures
Customers 15,978 21,909 5,931 37.1%
Net additions 1,265 1,562 297 23.5%
Average monthly churn rate 1.0% 1.0% 0.0% 0.0%
Average monthly revenue per
customer location $ 764 $ 751 $ (13) (1.7%)
Adjusted EBITDA (in thousands) $ 4,642 $ 7,185 $ 2,543 54.8%
Management Comments
"Our continued rapid organic growth in revenue and adjusted EBITDA in the quarter was underscored by our customers' increased adoption of applications," said Jim Geiger, chief executive officer of Cbeyond. "Recently introduced applications such as fax-to-email and secure backup have proven to be valuable and popular services for our entrepreneurial customers. Most importantly, our new BeyondMobile service provides a major platform for us to serve our customers more comprehensively, as well as a significant source of differentiation for us versus competitive offerings."
First Quarter Financial and Business Summary
Revenues and ARPU
Cbeyond reported revenues of $47.6 million for the first quarter of 2006, an increase of 35.3% from the first quarter of 2005. ARPU, or average revenue per customer location, was $751 in the first quarter. ARPU declined 1.7% from the first quarter of 2005 and 0.3% from the fourth quarter of 2005. Cbeyond expects that ARPU will continue to decline moderately through at least 2006 pending increased revenue from our mobile service and other value-added applications.
Cost of Service and Gross Margin
Cbeyond's gross margin was 68.5% in the first quarter of 2006 as compared with 70.3% in the first quarter of 2005. The decline in gross margin was primarily due to two factors, $0.7 million in expenses relating to Triennial Review and Remand Order (TRRO)-related network changes and $0.2 million in startup network-related expenses in Los Angeles prior to recording revenues from a base of customers in that market. Excluding the impact of these two items, Cbeyond's gross margin was 70.2%, which is consistent with historical levels.
Income from Operations and Adjusted EBITDA
Cbeyond reported a loss from operations of approximately $0.2 million in the first quarter of 2006 compared with a loss from operations of $1.1 million in the first quarter of 2005. As of January 1, 2006, Cbeyond adopted SFAS No. 123R. The loss from operations of $0.2 million in the first quarter of 2006 includes $0.8 million in non-cash stock-based compensation expense as calculated using the fair value method under SFAS No. 123R, while the loss from operations of $1.1 million in the first quarter of 2005 includes $0.1 million in non-cash stock-based compensation as calculated using the intrinsic method under APB No. 25. As these are two different methodologies used for calculating non-cash stock-based compensation, they are not comparable.
For the first quarter of 2006, adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, was $7.2 million, an improvement of 54.8% over adjusted EBITDA of $4.6 million in the first quarter of 2005. Adjusted EBITDA excludes the impact to EBITDA of non-cash stock-based compensation expense, loss on disposal of property and equipment, and gain on early retirement of debt.
Net Income
Cbeyond reported net income of $20,000 for the first quarter of 2006 as compared to a net loss of $1.6 million and a net loss available to common stockholders of $4.0 million for the first quarter of 2005.
Cash and Marketable Securities
Cash, cash equivalents and marketable securities amounted to $29.5 million at the end of the first quarter of 2006, as compared to $37.9 million at the end of the fourth quarter of 2005.
Capital Expenditures
Capital expenditures were $11.0 million during the first quarter of 2006, compared to $12.6 million in the fourth quarter of 2005. These capital expenditures included $3.2 million related to network changes made in connection with the TRRO and $0.8 million related to our launch in Los Angeles.
Business Outlook for 2006
Cbeyond reiterates the following guidance for the year 2006, which was previously provided to the public:
-- Revenues of at least $206 million
-- Adjusted EBITDA of at least $30 million
-- Capital expenditures of $42 million
Based on first quarter 2006 results, Cbeyond believes that it is on track to meet its expectations for 2006. Following its second quarter results, Cbeyond will reexamine its expectations for the year and update its guidance as appropriate.
Conference Call
Cbeyond Communications will hold a conference call to discuss this press release Tuesday, May 9, 2006, at 5:00 p.m. ET. A live broadcast of the conference call will be available on-line at www.cbeyond.net. To listen to the live call, please go to the Web site at least 10 minutes early to register, download, and install any necessary audio software. The conference call will also be available by dialing (800) 967-7135 (for domestic U.S. callers) and (719) 457-2626 (for international callers). For those who cannot listen to the live broadcast, an on-line replay will be available shortly after the call and continue to be available for a year.
About Cbeyond
Cbeyond (Nasdaq: CBEY) is an Atlanta-based managed services provider that delivers integrated packages of voice, mobile and broadband services to small businesses in Atlanta, Chicago, Dallas, Denver, Houston and Los Angeles. Cbeyond offers core communications services like local and long-distance voice, mobile and broadband Internet access along with enhanced applications, including voicemail, email, Web hosting, fax-to-email, data backup, file-sharing, VPN and more. Cbeyond manages these services over a private, 100-percent Voice over Internet Protocol (VoIP) facilities-based network. For more information on Cbeyond, visit www.cbeyond.net.
Forward Looking Statements
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions. Such statements are based upon the current beliefs and expectations of Cbeyond Communication's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that might cause future results to differ include, but are not limited to, the following: changes in federal or state regulation that affects the Company; the timing of the initiation, progress or cancellation of significant contracts or arrangements; the mix and timing of services sold in a particular period; competitive factors; the need to balance the recruitment and retention of experienced management and personnel with the maintenance of high labor utilization; rapid technological change and the timing and amount of start-up costs incurred in connection with the introduction of new services or the entrance into new markets; the inability to attract sufficient customers in new markets; changes in estimates of taxable income or utilization of deferred tax assets which could significantly affect the Company's effective tax rate; and general economic and business conditions
Key Operating Metrics and Non-GAAP Financial Measures
In this press release, the Company uses several key operating metrics and non-GAAP financial measures. In Schedule I, the Company defines each of these metrics and provides a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure. These financial measures and operating metrics are a supplement to GAAP financial information and should not be considered as an alternative to, or more meaningful than, net income (loss), cash flow or operating income (loss) as determined in accordance with GAAP.
SCHEDULE I
Adjusted EBITDA is not a substitute for operating income, net income, or cash flow from operating activities as determined in accordance with accounting principles generally accepted in the United States, or GAAP, as a measure of performance or liquidity. The Company defines adjusted EBITDA as net income (loss) before interest, taxes, depreciation and amortization expenses, excluding non-cash stock option compensation, write-off of public offering costs and gain recognized on troubled debt restructuring, loss on disposal of property and equipment and other non-operating income or expense. Information relating to total adjusted EBITDA is provided so that investors have the same data that management employs in assessing the overall operation of the Company's business.
Total adjusted EBITDA allows the chief operating decision maker to assess the performance of the Company's business on a consolidated basis that corresponds to the measure used to assess the ability of its operating segments to produce operating cash flow to fund working capital needs, to service debt obligations and to fund capital expenditures. In particular, total adjusted EBITDA permits a comparative assessment of the Company's operating performance, relative to a performance based on GAAP results, while isolating the effects of depreciation and amortization, which may vary among segments without any correlation to their underlying operating performance, and of non-cash stock option compensation, which is a non-cash expense that varies widely among similar companies. The following information includes a reconciliation of total adjusted EBITDA to net income (loss):
CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
------------------------
2005 2006
----------- -----------
Revenues:
Customer revenue $ 34,126 $ 46,459
Terminating access revenue 1,050 1,119
----------- -----------
Total revenue 35,176 47,578
Operating expenses:
Cost of service 10,444 14,998
Selling, general and administrative 20,175 26,177
Depreciation and amortization 5,674 6,577
----------- -----------
Total operating expenses 36,293 47,752
----------- -----------
Operating loss (1,117) (174)
Other income (expense):
Interest income 248 390
Interest expense (631) (8)
Loss on disposal of property and
equipment (79) (157)
Other income (expense), net 3 -
----------- -----------
Total other income (expense) (459) 225
----------- -----------
Income before taxes (1,576) 51
Income taxes - (31)
Net income (loss) (1,576) 20
Dividends accreted on preferred stock (2,385) -
----------- -----------
Net income (loss) available to common
stockholders $ (3,961) $ 20
=========== ===========
Earnings (loss) per common share
Basic $ (28.63) $ -
Weighted average number of common shares
outstanding
Basic 138 26,631
CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, March 31,
2005 2006
----------- -----------
ASSETS
Current Assets
Cash and cash equivalents $ 27,752 $ 26,461
Marketable securities 10,170 2,995
Accounts receivable, net of allowance
for doubtful accounts of $1,811 and
$2,094 as of December 31, 2005 and
March 31, 2006, respectively 10,688 11,818
Other assets 4,328 6,104
----------- -----------
Total current assets 52,938 47,378
Property and equipment, gross 142,973 153,746
Less: accumulated depreciation (85,905) (92,394)
----------- -----------
Property and equipment, net 57,068 61,352
Other assets 4,826 4,272
----------- -----------
Total assets $ 114,832 $ 113,002
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 9,364 $ 5,342
Other accrued liabilities 29,989 30,917
Current portion of capital lease
obligations 382 382
----------- -----------
Total current liabilities 39,735 36,641
Deferred installation revenue 511 535
Stockholders' equity
Common stock 266 267
Deferred stock compensation (701) (38)
Additional paid-in capital 230,797 231,353
Accumulated deficit (155,776) (155,756)
----------- -----------
Total stockholders' equity 74,586 75,826
----------- -----------
Total liabilities and stockholders'
equity $ 114,832 $ 113,002
=========== ===========
CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES
Selected Operating Statistics
(Dollars in thousands, except where noted)
(Unaudited)
------------------------------------------------------
Mar. 31 Jun. 30 Sept. 30 Dec. 31 Mar. 31
2005 2005 2005 2005 2006
-------- -------- -------- -------- --------
Revenues
Atlanta $ 12,356 $ 13,046 $ 13,874 $ 14,443 $ 14,863
Dallas 9,714 10,321 10,840 11,402 11,901
Denver 10,834 11,660 12,445 12,977 13,769
Houston 2,266 2,862 3,592 4,331 5,217
Chicago 6 293 652 1,183 1,820
Los Angeles - - - - 8
-------- -------- -------- -------- --------
Total
revenues $ 35,176 $ 38,182 $ 41,403 $ 44,336 $ 47,578
======== ======== ======== ======== ========
Operating
profit (loss)
Atlanta $ 5,489 $ 6,016 $ 6,772 $ 5,978 $ 7,173
Dallas 2,512 3,113 3,646 4,103 3,900
Denver 4,363 4,779 5,234 5,397 6,077
Houston (578) (301) 197 397 538
Chicago (1,500) (1,976) (1,999) (615) (1,382)
Los Angeles - - - (382) (1,029)
Corporate (11,403) (11,920) (12,470) (13,529) (15,451)
-------- -------- -------- -------- --------
Total
operating
profit
(loss) $ (1,117) $ (289) $ 1,380 $ 1,349 $ (174)
======== ======== ======== ======== ========
Adjusted EBITDA
Atlanta $ 7,001 $ 7,540 $ 8,249 $ 7,384 $ 8,640
Dallas 3,813 4,455 4,957 5,336 5,278
Denver 5,624 6,085 6,544 6,701 7,346
Houston (264) 74 631 936 1,120
Chicago (1,496) (1,822) (1,794) (358) (1,081)
Los Angeles - - - (382) (1,029)
Corporate (10,036) (10,576) (11,022) (11,773) (13,089)
-------- -------- -------- -------- --------
Total
adjusted
EBITDA $ 4,642 $ 5,756 $ 7,565 $ 7,844 $ 7,185
======== ======== ======== ======== ========
Adjusted EBITDA
margin
(market-level)
Atlanta 56.7% 57.8% 59.5% 51.1% 58.1%
Dallas 39.3% 43.2% 45.7% 46.8% 44.3%
Denver 51.9% 52.2% 52.6% 51.6% 53.4%
Houston (11.7%) 2.6% 17.6% 21.6% 21.5%
Chicago N/M N/M N/M (30.3%) (59.4%)
Los Angeles N/M N/M N/M N/M N/M
Adjusted EBITDA
margin
(as % of total
revenue)
Corporate (28.5%) (27.7%) (26.6%) (26.6%) (27.5%)
Total 13.2% 15.1% 18.3% 17.7% 15.1%
Capital
expenditures
Atlanta $ 600 $ 1,365 $ 1,046 $ 1,935 $ 1,396
Dallas 471 816 894 1,795 2,482
Denver 701 1,043 1,047 1,047 1,747
Houston 511 1,142 894 1,492 1,217
Chicago 621 1,029 879 727 745
Los Angeles - 93 252 1,786 847
Corporate 834 1,138 1,796 3,812 2,577
-------- -------- -------- -------- --------
Total capital
expenditures $ 3,738 $ 6,626 $ 6,808 $ 12,594 $ 11,011
======== ======== ======== ======== ========
Other Operating
Data Customers
(at period end) 15,978 17,435 18,897 20,347 21,909
Net additions 1,265 1,457 1,462 1,450 1,562
Average monthly
churn rate 1.0% 1.0% 1.0% 0.9% 1.0%
Average
monthly revenue
per customer
location $ 764 $ 762 $ 760 $ 753 $ 751
CBEYOND COMMUNICATIONS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
(In thousands)
(Unaudited)
--------------------------------------------
Mar. 31 Jun. 30 Sept. 30 Dec. 31 Mar. 31
2005 2005 2005 2005 2006
------- ------- ------- ------- -------
Reconciliation of
Adjusted EBITDA to Net
income (loss):
Total Adjusted EBITDA
for reportable
segments $ 4,642 $ 5,756 $ 7,565 $ 7,844 $ 7,185
Depreciation and
amortization (5,674) (5,978) (6,097) (6,411) (6,577)
Non-cash stock option
compensation (85) (67) (88) (84) (782)
Interest income 248 260 374 443 390
Interest expense (631) (684) (730) (379) (8)
Gain on early
retirement of debt - - - 4,060 -
Loss on disposal of
property and
equipment (79) (194) (109) (157) (157)
Other income
(expense), net 3 (25) 13 - -
Income taxes - - - - (31)
------- ------- ------- ------- -------
Net income (loss) $(1,576) $ (932) $ 928 $ 5,316 $ 20
======= ======= ======= ======= =======
Except for 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. The specific forward-looking statements cover Cbeyond's expectations for revenue, EBITDA, as adjusted, and capital expenditures for the fiscal year 2006. The statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations. Numerous factors could cause or contribute to such differences. Some of the factors and risks associated with our business are discussed in Cbeyond's filings with the Securities and Exchange Commission.
CBEY-G CBEY-F
SOURCE: Cbeyond Communications, Inc.
Cbeyond Communications, Inc. Kurt Abkemeier, 678-370-2887
Copyright Business Wire 2006
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