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ATLANTA, May 01, 2008 (BUSINESS WIRE) -- Cbeyond, Inc. (NASDAQ: CBEY), ("Cbeyond"), a managed services provider that delivers integrated packages of voice, broadband, and mobile services to small businesses, today announced its results for the first quarter ended March 31, 2008.
Recent financial and operating highlights include the following:
-- Strong first quarter revenue growth with revenues of $80.5 million, up 27.7% over the first quarter of 2007;
-- Net income of $1.0 million in the first quarter of 2008 compared with $2.7 million in the first quarter of 2007;
-- Total adjusted EBITDA of $14.5 million during the first quarter of 2008, an increase of 20.1% from the first quarter of 2007 (see Schedule 1 for reconciliation to net income);
-- Total customers in Cbeyond's ten operating markets of 36,674, reflecting net customer additions of 1,633 in the quarter;
-- Average monthly revenue per customer location (ARPU) of $748 during the first quarter of 2008 compared to $750 in the fourth quarter of 2007 and $744 in the first quarter of 2007; and
-- Monthly customer churn of 1.3% in the first quarter of 2008 as compared to 1.4% in the fourth quarter of 2007.
Financial Overview and Key Operating Metrics
Financial and operating metrics, which include non-GAAP financial measures, for the three months ended March 31, 2007 and 2008, include the following:
For the Three Months Ended March 31,
------------------------------------
2007 2008 Change % Change
--------- -------- -------- --------
Selected Financial Data (dollars
in thousands)
Revenue $63,026 $80,493 $17,467 27.7%
Operating expenses $60,194 $78,032 $17,838 29.6%
Operating income $ 2,832 $ 2,461 $ (371) (13.1%)
Net income $ 2,733 $ 1,003 $(1,730) (63.3%)
Capital expenditures $13,882 $15,554 $ 1,672 12.0%
Key Operating Metrics and Non-
GAAP Financial Measures
Customers 29,166 36,674 7,508 25.7%
Net additions 1,823 1,633 (190) (10.4%)
Average monthly churn rate 1.0% 1.3% 0.3% 30.0%
Average monthly revenue per
customer location $ 744 $ 748 $ 4 0.5%
Adjusted EBITDA (in thousands) $12,059 $14,488 $ 2,429 20.1%
Management Comments
"As in previous quarters, our financial results in the first quarter of 2008 demonstrated the continued strength of our business model and success of our execution," said Jim Geiger, chief executive officer of Cbeyond. "We are pleased with the growth in our business and our financial performance in a tough economic environment, which was demonstrated by the continued high levels of profitability in our established markets."
Geiger added, "In the first quarter, we were able to lower our bad debt expense to less than 2% of revenues, while our monthly customer churn declined to 1.3%. In addition, applications used per customer increased to 6.4, mobile penetration of our customer base reached 26%, and ARPU was essentially stable. We continued to ramp our newly launched San Francisco Bay Area market and installed our first customer in our Miami market in the first quarter of 2008. All of this was achieved while also posting organic revenue growth of nearly 28% year-over-year."
Geiger continued, "I'm pleased to note that the steps we took in the first quarter to address challenges caused by the economy have been successful so far in improving the health of our receivables and customer base. Although we did see some impact from the economic environment on our sales in several of our markets during the first quarter, we believe that our competitive outlook remains positive and the size of our long term opportunities is undiminished."
First Quarter Financial and Business Summary
Revenues and ARPU
Cbeyond reported revenues of $80.5 million for the first quarter of 2008, an increase of 27.7% from the first quarter of 2007. ARPU, or average monthly revenue per customer location, was generally stable at $748 in the first quarter of 2008, as compared to $744 in the first quarter of 2007 and $750 in the fourth quarter of 2007.
Cost of Service and Gross Margin
Cbeyond's gross margin was 68.9% in the first quarter of 2008 as compared with 70.2% in the first quarter of 2007. The decrease in gross margin was anticipated and was due to a number of factors, including the growth in mobile services, increased losses from mobile handset subsidies, and increased cost pressure from additional early stage markets.
Operating Income and Total Adjusted EBITDA
Cbeyond reported operating income of $2.5 million in the first quarter of 2008 compared with operating income of $2.8 million in the first quarter of 2007. The operating income of $2.5 million in the first quarter of 2008 includes $3.0 million in non-cash share-based compensation expense while the operating income of $2.8 million in the first quarter of 2007 includes $2.1 million in non-cash share-based compensation.
For the first quarter of 2008, total adjusted EBITDA was $14.5 million, an improvement of 20.1% over total adjusted EBITDA of $12.1 million in the first quarter of 2007.
Net Income
Cbeyond reported net income of $1.0 million for the first quarter of 2008 as compared to net income of $2.7 million for the first quarter of 2007. Income tax expense increased as a percentage of income before taxes as a result of our having begun to accrue federal income taxes at the full corporate tax rate and due to an increase in the Texas state margin tax, both of which occurred in the first quarter of 2008. Also, the loss on disposal of property and equipment was $0.7 million for the first quarter of 2008 as compared to $0.3 million for the first quarter of 2007, with the increase in the first quarter of 2008 primarily due to the higher level of write-offs of certain software licenses in 2008.
Cash and Cash Equivalents
Cash, cash equivalents and marketable securities amounted to $46.0 million at the end of the first quarter of 2008, as compared to $56.2 million at the end of the fourth quarter of 2007. The decrease in cash was anticipated and related to a number of factors, including the payment for significant purchases of capital expenditures recorded in the fourth quarter but not paid until the first quarter, the payment of other significant payables in the first quarter, such as payments in connection with the favorable resolution of significant billing disputes with telecommunications suppliers, and payment of outstanding 2007 bonuses and commissions.
Capital Expenditures
Capital expenditures were $15.6 million during the first quarter of 2008, compared to $18.1 million in the fourth quarter of 2007 and $13.9 million in the first quarter of 2007. Capital expenditures in the first quarter of 2008 decreased from the fourth quarter of 2007 due to the greater number of network efficiency and back office projects that occurred in the fourth quarter.
Business Outlook for 2008
With respect to its annual guidance for 2008, Cbeyond anticipates completing the year within the previously announced ranges for adjusted EBITDA and capital expenditures, but at the lower end of the previously announced range for revenue.
2008 Guidance
----------------------------
Revenues $355 million to $360 million
Adjusted EBITDA $60 million to $62 million
Capital expenditures $65 million to $70 million
Cbeyond's guidance for 2008 assumes a continued challenging economy during 2008.
Conference Call
Cbeyond will hold a conference call to discuss this press release Thursday, May 1, 2008, at 5:00 p.m. EDT. 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 (877) 440-5787 (for domestic U.S. callers) and (719) 325-4895 (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 one year.
About Cbeyond
Cbeyond, Inc. (NASDAQ: CBEY) is a leading IP-based managed services provider that delivers integrated packages of communications and IT services to more than 36,000 small businesses throughout the United States. Cbeyond offers more than 30 productivity-enhancing applications including local and long-distance voice, broadband Internet, mobile, BlackBerry(R), broadband laptop access, voicemail, email, web hosting, fax-to-email, data backup, file-sharing and virtual private networking. 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'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: the risk that we may be unable to continue to experience revenue growth at historical levels; changes in federal or state regulation or decisions by regulatory bodies that affect the Company; periods of economic downturn and the resulting inability of certain of our customers to meet their payment obligations; the timing of the initiation, progress or cancellation of significant contracts or arrangements; the mix and timing of services sold in a particular period; our ability to recruit and maintain experienced management and personnel; 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; our ability to maintain or attract sufficient customers in existing or new markets; our ability to respond to increasing competition; our ability to manage the growth of our operations; changes in estimates of taxable income or utilization of deferred tax assets which could significantly affect the Company's effective tax rate; pending regulatory action relating to our compliance with customer proprietary network information; and general economic and business conditions. You are advised to consult any further disclosures we make on related subjects in the reports we file with the SEC, including the "Risk Factors" in our most recent annual report on Form 10-K, together with updates that may occur in our quarterly reports on Form 10-Q and Current Reports on Form 8-K. Such disclosure covers certain risks, uncertainties and possibly inaccurate assumptions that could cause our actual results to differ materially from expected and historical results. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.
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, cash flow or operating income 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 before interest, income taxes, depreciation and amortization expenses, excluding non-cash share-based compensation, public offering expenses, 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 share-based 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:
CBEYOND, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
------------------
2007 2008
--------- --------
Revenue:
Customer revenue $61,661 $78,738
Terminating access revenue 1,365 1,755
--------- --------
Total revenue 63,026 80,493
Operating expenses:
Cost of revenue 18,779 25,038
Selling, general and administrative 34,293 43,982
Public offering expenses 2 -
Depreciation and amortization 7,120 9,012
--------- --------
Total operating expenses 60,194 78,032
--------- --------
Operating income 2,832 2,461
Other income (expense):
Interest income 608 380
Interest expense (45) (56)
Loss on disposal of property and equipment (332) (742)
--------- --------
Total other income (expense) 231 (418)
--------- --------
Income before income taxes 3,063 2,043
Income tax expense (330) (1,040)
--------- --------
Net income $ 2,733 $ 1,003
========= ========
Earnings per common share
Basic $ 0.10 $ 0.04
Weighted average number of common shares
outstanding
Basic 27,485 28,228
CBEYOND, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, March 31,
2007 2008
------------ ----------
ASSETS
Current Assets
Cash and cash equivalents $ 56,174 $ 46,039
Accounts receivable, gross 26,149 26,260
Less: Allowance for doubtful
accounts (2,983) (2,571)
------------ ----------
Accounts receivable, net 23,166 23,689
Other assets 12,181 12,926
------------ ----------
Total current assets 91,521 82,654
Property and equipment, gross 236,254 250,438
Less: Accumulated depreciation and
amortization (137,900) (146,284)
------------ ----------
Property and equipment, net 98,354 104,154
Other assets 8,487 8,920
------------ ----------
Total assets $ 198,362 $ 195,728
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 12,983 $ 10,628
Other accrued liabilities 57,467 53,458
------------ ----------
Total current liabilities 70,450 64,086
Other non-current liabilities 594 589
Stockholders' equity
Common stock 282 283
Additional paid-in capital 253,534 256,265
Accumulated deficit (126,498) (125,495)
------------ ----------
Total stockholders' equity 127,318 131,053
------------ ----------
Total liabilities and stockholders'
equity $ 198,362 $ 195,728
============ ==========
CBEYOND, INC. AND SUBSIDIARIES
Selected Financial Data and Operating Metrics
(Dollars in thousands, except for Other Operating Data)
(Unaudited)
-------------------------------------------------
Mar. 31 Jun. 30 Sept. 30 Dec. 31 Mar. 31
2007 2007 2007 2007 2008
--------- --------- --------- --------- ---------
Revenues
Atlanta $17,255 $17,957 $18,555 $19,044 $19,412
Dallas 14,328 15,039 15,652 16,165 16,607
Denver 15,548 16,035 16,453 16,793 17,155
Houston 8,608 9,422 10,147 10,813 11,069
Chicago 5,373 6,319 7,143 7,913 8,406
Los Angeles 1,842 2,611 3,522 4,372 4,945
San Diego 72 332 818 1,288 1,796
Detroit - - 126 450 851
San Francisco Bay
Area - - - 39 239
Miami - - - - 13
--------- --------- --------- --------- ---------
Total revenues $63,026 $67,715 $72,416 $76,877 $80,493
========= ========= ========= ========= =========
Operating income
(loss)
Atlanta $8,859 $9,241 $9,723 $9,807 $10,164
Dallas 5,804 6,097 6,575 7,242 7,359
Denver 7,739 7,893 7,945 7,777 8,215
Houston 2,558 3,098 3,658 3,718 4,310
Chicago 536 905 1,307 1,583 1,860
Los Angeles (1,188) (1,261) (682) (63) 398
San Diego (1,324) (1,671) (1,500) (1,330) (1,181)
Detroit (11) (762) (1,410) (1,657) (1,413)
San Francisco Bay
Area - (5) (328) (1,211) (1,387)
Miami - - (8) (63) (809)
Minneapolis - - - (2) (71)
Corporate (20,141) (20,967) (22,314) (22,856) (24,984)
--------- --------- --------- --------- ---------
Total operating
income $2,832 $2,568 $2,966 $2,945 $2,461
========= ========= ========= ========= =========
Adjusted EBITDA
Atlanta $9,959 $10,290 $10,779 $10,865 $11,221
Dallas 6,888 7,181 7,683 8,283 8,353
Denver 8,811 8,900 8,823 8,646 9,085
Houston 3,375 3,965 4,513 4,634 5,245
Chicago 1,090 1,540 2,001 2,336 2,690
Los Angeles (877) (883) (283) 432 950
San Diego (1,233) (1,537) (1,289) (1,182) (938)
Detroit (11) (743) (1,239) (1,451) (1,154)
San Francisco Bay
Area - (5) (322) (1,141) (1,219)
Miami - - (8) (58) (781)
Minneapolis - - - (2) (66)
Corporate (15,943) (16,097) (17,195) (17,387) (18,898)
--------- --------- --------- --------- ---------
Total adjusted
EBITDA $12,059 $12,611 $13,463 $13,975 $14,488
========= ========= ========= ========= =========
Adjusted EBITDA
margin (market-
level)
Atlanta 57.7% 57.3% 58.1% 57.1% 57.8%
Dallas 48.1% 47.7% 49.1% 51.2% 50.3%
Denver 56.7% 55.5% 53.6% 51.5% 53.0%
Houston 39.2% 42.1% 44.5% 42.9% 47.4%
Chicago 20.3% 24.4% 28.0% 29.5% 32.0%
Los Angeles (47.6%) (33.8%) (8.0%) 9.9% 19.2%
San Diego N/M N/M (157.6%) (91.8%) (52.2%)
Detroit N/M N/M N/M N/M (135.6%)
San Francisco Bay
Area N/M N/M N/M N/M N/M
Miami N/M N/M N/M N/M N/M
Minneapolis N/M N/M N/M N/M N/M
Adjusted EBITDA
margin (as % of
total revenue)
Corporate (25.3%) (23.8%) (23.7%) (22.6%) (23.5%)
Total 19.1% 18.6% 18.6% 18.2% 18.0%
CBEYOND, INC. AND SUBSIDIARIES
Selected Operating Statistics
(Dollars in thousands, except for Other Operating Data)
(Unaudited)
-------------------------------------------------
Mar. 31 Jun. 30 Sept. 30 Dec. 31 Mar. 31
2007 2007 2007 2007 2008
--------- --------- --------- --------- ---------
Capital expenditures
Atlanta $1,464 $916 $1,059 $2,163 $677
Dallas 2,149 777 586 738 683
Denver 394 731 847 1,230 959
Houston 1,149 826 889 689 778
Chicago 1,166 792 907 947 580
Los Angeles 854 923 1,014 791 785
San Diego 1,067 205 653 609 710
Detroit 1,379 1,572 550 464 832
San Francisco Bay
Area 36 408 1,363 1,301 1,146
Miami - - 54 1,095 1,977
Minneapolis - - 47 288 1,098
Corporate 4,224 5,652 4,764 7,802 5,329
--------- --------- --------- --------- ---------
Total capital
expenditures $13,882 $12,802 $12,733 $18,117 $15,554
========= ========= ========= ========= =========
Other Operating Data
Customers (at
period end) 29,166 31,175 33,287 35,041 36,674
Net additions 1,823 2,009 2,112 1,754 1,633
Average monthly
churn rate 1.0% 1.0% 1.1% 1.4% 1.3%
Average monthly
revenue per
customer location $744 $748 $749 $750 $748
CBEYOND, 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
2007 2007 2007 2007 2008
-------- -------- -------- -------- --------
Reconciliation of
Adjusted EBITDA to Net
income:
Total Adjusted EBITDA
for reportable
segments $12,059 $12,611 $13,463 $13,975 $14,488
Depreciation and
amortization (7,120) (7,557) (7,763) (8,366) (9,012)
Non-cash share-
based compensation (2,105) (2,486) (2,734) (2,664) (3,015)
Public offering
expenses (2) - - - -
Interest income 608 655 749 688 380
Interest expense (45) (48) (100) (59) (56)
Loss on disposal of
property and
equipment (332) (243) (219) (370) (742)
Income tax benefit
(expense) (330) (40) (16) 9,289 (1,040)
-------- -------- -------- -------- --------
Net income $2,733 $2,892 $3,380 $12,493 $1,003
======== ======== ======== ======== ========
Three Months
Ended
March 31,
-----------------
2007 2008
-------- --------
Reconciliation of
Adjusted EBITDA to Net
income:
Total Adjusted EBITDA
for reportable
segments $12,059 $14,488
Depreciation and
amortization (7,120) (9,012)
Non-cash share-
based compensation (2,105) (3,015)
Public offering
expenses (2) -
Interest income 608 380
Interest expense (45) (56)
Loss on disposal of
property and
equipment (332) (742)
Income tax benefit
(expense) (330) (1,040)
-------- --------
Net income $2,733 $1,003
======== ========
CBEY-F CBEY-G
SOURCE: Cbeyond, Inc.
Cbeyond, Inc. Kurt Abkemeier, 678-370-2887 Vice President, Finance and Treasurer
Copyright Business Wire 2008
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