(1888PressRelease)
May 12, 2009 - First Quarter 2009 Highlights
* Overall revenue increased 20.5% with domestic metro services revenue increasing 48.6% to $21.4 million from $14.4 million in the first quarter of 2008 and domestic WAN services revenue increasing 48.1% to $16.0 million from $10.8 million in the first quarter of 2008.
* Adjusted EBITDA (defined below) nearly doubled, increasing 95.9% to $38.2 million from $19.5 million in the first quarter of 2008.
* Adjusted EBITDA Margin (defined below) reached 44.7%.
* Cash provided by operating activities increased to $35.8 million, compared to $25.3 million in the first quarter of 2008.
* Cash used for capital expenditures was $21.2 million, compared to $28.2 million in the first quarter of 2008.
* Cash and cash equivalents at March 31, 2009 were $101.3 million, compared to $87.1 million at December 31, 2008, an increase of $14.2 million.
“Our first quarter 2009 performance gave us an excellent start to the year. We built on the momentum we gained in 2008 and we are on track for another year of solid growth in revenue and Adjusted EBITDA,” said Bill LaPerch, President and Chief Executive Officer. “Higher revenue from our domestic lit services generated 84% of the year-over-year revenue growth, reflecting our competitive strengths in the fast-growing high-bandwidth enterprise segments of the market. We believe that the combination of our array of Ethernet and lit services with the reach of our metro fiber networks is enabling our customers to cost effectively optimize their connectivity requirements. In these challenging economic times, our strong balance sheet and the increasing demand for our high-bandwidth connectivity solutions have positioned us for continued growth.”
First Quarter 2009 Financial Results
Consolidated revenue for the three months ended March 31, 2009 was $85.4 million, an increase of 20.5% over the $70.9 million reported for the first quarter of 2008. Included in consolidated revenue was contract termination revenue of $1.9 million and $0.3 million for the first quarters of 2009 and 2008, respectively.
Revenue from domestic metro services was $21.4 million for the first quarter of 2009, up 48.6% from $14.4 million for the first quarter of 2008. Revenue from domestic fiber infrastructure services was $38.3 million, up 5.2% from $36.4 million for the first quarter of 2008. Revenue from domestic WAN services was $16.0 million, up 48.1% from $10.8 million for the first quarter of 2008. Revenue from foreign operations, primarily in the U.K., decreased to $6.9 million for the first quarter of 2009 from $7.8 million for the first quarter of 2008, primarily as a result of the weakening exchange rate of the British pound compared to the U.S. dollar.
Costs of revenue were $29.4 million for the first quarter of 2009, compared to $30.8 million for last year’s first quarter, an improvement of 4.5%. The decrease in costs of revenue was primarily related to the expiration of temporarily needed capacity leased in 2008 and savings in repairs and maintenance charges for our cable and transmission equipment, partially offset by increased payroll and co-location costs. Selling, general and administrative expenses were $20.7 million for the first quarter of 2009, compared to $24.8 million for the first quarter of 2008, which reflects a reduction of 16.5% or $4.1 million. The decrease related primarily to a reduction in non-cash deferred stock-based compensation expense and reduced professional fees. Depreciation and amortization decreased to $11.9 million for the first quarter of 2009 from $12.6 million for the first quarter of 2008 due primarily to the elimination of depreciation expense associated with property and equipment that became fully depreciated since March 31, 2008.
Operating income was $23.4 million for the first quarter of 2009, compared to $2.7 million for the first quarter of 2008, an increase of $20.7 million. Net income for the first quarter of 2009 was $27.4 million, or $2.22 per diluted share, compared to $3.4 million, or $0.28 per diluted share, for the first quarter of 2008. The first quarter of 2009 includes a tax benefit in the amount of $5.1 million (which is net of alternative minimum taxes). This benefit was recorded based on the expected tax benefit of certain depreciable deductions in 2009 that were limited in previous years by IRS regulations. The first quarter of 2008 included a tax provision of $0.6 million.
Adjusted EBITDA for the first quarter of 2009 was $38.2 million, compared to $19.5 million for the first quarter of 2008. Adjusted EBITDA Margin was 44.7% for the first quarter of 2009, compared to 27.5% for the first quarter of 2008.
Cash used for capital expenditures in the first quarter of 2009 was $21.2 million, compared to $28.2 million for the first quarter of 2008.
At March 31, 2009, cash and cash equivalent balances were $101.3 million, compared to $87.1 million at December 31, 2008. The Company's secured credit facility requires that a minimum balance of $20.0 million be maintained at all times. At March 31, 2009, indebtedness for borrowed money totaled $36.0 million, compared to $24.0 million at March 31, 2008.
“I am pleased with our first quarter 2009 results, which were built off of our strong 2008 performance. Our balance sheet remains strong and we increased working capital from $11.8 million at December 31, 2008 to $36.1 million at March 31, 2009,” said Joe Ciavarella, Senior Vice President and Chief Financial Officer.
Guidance
Management is providing the following outlook for full year 2009:
* Revenue is estimated at $340 million to $350 million.
* 2009 Adjusted EBITDA Margin will not continue at the first quarter level, but is expected to increase modestly year-over-year.
* Current plan calls for Adjusted EBITDA to exceed cash used for capital expenditures for the year.
Non-GAAP Financial Measures
“Adjusted EBITDA” is defined as net income before provision for income taxes, other income/expense, interest income/expense, gain on reversal of foreign currency translation adjustments from liquidation of subsidiaries, depreciation and amortization, and non-cash stock-based compensation. “Adjusted EBITDA Margin” is defined as Adjusted EBITDA divided by revenue.
Adjusted EBITDA and Adjusted EBITDA Margin are not intended to replace operating income (loss), net loss, cash flow and other measures of financial performance reported in accordance with accounting principles generally accepted in the U.S. Rather, Adjusted EBITDA and Adjusted EBITDA Margin are measures of operating performance that investors may consider in addition to such measures.
AboveNet’s management believes that adjusted or modified EBITDA and its related margin are measures of operating performance that are commonly reported and widely used by analysts, investors, and other interested parties in the telecommunications industry because they eliminate many differences in financial, capitalization and tax structures, as well as certain non-cash and non-operating charges to earnings. AboveNet’s management currently uses Adjusted EBITDA and Adjusted EBITDA Margin for this purpose. AboveNet’s management believes that Adjusted EBITDA and Adjusted EBITDA Margin trends can be used as indicators of whether the Company’s operations are able to produce sufficient operating cash flow to fund working capital needs, service debt obligations and fund capital expenditures.
Adjusted EBITDA is also used by the Company for other purposes, including, management’s assessment of ongoing operations and as a measure for performance-based compensation. However, the definition of adjusted EBITDA for other purposes may differ from the definition of Adjusted EBITDA used herein. For example, for 2009 the definition of adjusted EBITDA in the Company’s incentive cash bonus plan excludes certain customer contract termination revenue. Additionally, Adjusted EBITDA as used in this press release may not be calculated identically to similarly titled measures reported by other companies.
Conference Call
AboveNet will hold a conference to report first quarter 2009 results tomorrow, May 12, 2009, at 10:00 a.m. ET. The dial-in number for the conference call is (877) 866-5534, passcode 98195108. The call is also being webcast, and there will be an accompanying slide presentation, which can be accessed at http://investors.above.net. For those who cannot listen to the live broadcast, a replay of the call will be available from 1:00 p.m. ET on May 12 until 11:59 p.m. ET on May 19. To listen to the telephone replay in the U.S., please dial (800) 642-1687 and for international callers, please dial (706) 645-9291. The webcast and the slide presentation will also be archived in the investor relations section of AboveNet’s website, under “Events and Presentations,” for 90 days.
About AboveNet, Inc.
AboveNet, Inc. provides high bandwidth connectivity solutions for business and carriers. Its private optical network delivers key network and IP services in and among 15 top U.S. metro markets and London. AboveNet's network is widely used in demanding markets such as financial services, media, health care, retail and government.
http://www.above.net
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