DSL.net Reports First Quarter 2003 Results; First Quarter Revenue Increases 47%, Gross Margin Increases 70% and Adjusted EBITDA Improves 10% from Year Earlier.Business Editors/High-Tech Writers NEW HAVEN New Haven, city (1990 pop. 130,474), New Haven co., S Conn., a port of entry where the Quinnipiac and other small rivers enter Long Island Sound; inc. 1784. Firearms and ammunition, clocks and watches, tools, rubber and paper products, and textiles are among the many , Conn.--(BUSINESS WIRE)--May 13, 2003 DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary .net, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :DSLN), a leading nationwide provider of broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). communications services to businesses, today reported first quarter 2003 financial results. Revenue for the first quarter of 2003 was $16.8 million, representing a 47% increase from first quarter of 2002 revenue of $11.4 million. The Company ended the first quarter with approximately 33,800 installed broadband subscriber lines The line from the customer site to the local telephone company. See subscriber network. , a 57% increase compared to a year earlier. The Company generated gross margin, or revenue less network expense, of $4.5 million for the first quarter of 2003, representing a 70% improvement over gross margin of $2.7 million for the first quarter of 2002. Earnings before interest, taxes, depreciation, amortization and non-cash stock compensation ("Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ") for the first quarter of 2003 was negative $3.5 million, a 10% improvement compared to negative $3.9 million in the first quarter of 2002. Free cash flow (defined as Adjusted EBITDA minus capital expenditures) for the first quarter of 2003 was negative $3.9 million, a 14% improvement over first quarter of 2002 free cash flow of negative $4.5 million. Adjusted EBITDA and free cash flow in the first quarter of 2003 were affected by expenses related to integration of network assets and related subscriber lines acquired from Network Access Solutions Corporation (NAS (1) See network access server. (2) (Network Attached Storage) A specialized file server that connects to the network. A NAS device contains a slimmed-down operating system and a file system and processes only I/O requests by supporting the popular ). "Consistent with our previous quarters, we continued to generate improved cash flows in the first quarter of 2003. In addition, we made significant progress integrating network assets and related subscriber lines acquired from NAS at the beginning of the quarter," said David F. Struwas, chairman and chief executive officer of DSL.net. "We also continued to pursue external growth opportunities and, shortly after the first quarter closed, we announced plans for a strategic acquisition of substantially all of the assets and operations of TalkingNets, Inc. We believe this transaction can provide us with tremendous value by allowing us to incorporate a voice platform into our existing data network - and positioning us to realize new revenue streams and margins." Net loss for the quarter ended March 31, 2003, was $9.2 million, representing a 3% improvement over net loss of $9.5 million for the first quarter of 2002. Further improvements in net loss on a year-over-year basis were offset by the expenses associated with the NAS integration. On a per share basis, the Company reported a net loss applicable to common stockholders of $0.20 per share for the first quarter of 2003, compared to $0.18 per share for the same period a year earlier. The 2003 period included charges for dividends and accretions accretions (  krē´shnz),n. on a larger amount of outstanding preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. than the 2002 period. These preferred stock-related charges translated into $0.06 per share for the first quarter of 2003, compared to $0.03 per share for the first quarter of 2002. At the end of the first quarter of 2003, the Company had $4.5 million in cash. The Company has a $15 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility for general corporate purposes, with availability based on third-party guarantees. As part of its ongoing financing activities, the Company has secured $9.1 million of such guarantees and has drawn approximately $6.1 million under the facility. Total assets at the end of the first quarter were $66.7 million. "We are aggressively pursuing multiple avenues of financing to fund our existing business plan," said Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. J. DeSantis DeSantis is a common surname. Well-known people with this name include:
DSL.net will host a conference call to discuss results for the quarter, as well as future plans and expectations, today at 11 a.m., Eastern Time. Interested parties may listen to the live audio webcast of the call by visiting the investor relations Investor relations The process by which the corporation communicates with its investors. section of DSL.net's Web site, www.dsl.net. The call also may be accessed live via telephone by dialing 800-589-4298, confirmation code 466554. For those unable to access the live conference call, an audio replay will be available until 11 p.m., Eastern Time, on May 27, 2003, by dialing 888-203-1112 and entering code 466554. Investors may also access the call replay by visiting the investor relations section of the Company's Web site. About DSL.net DSL.net, Inc. is a leading nationwide provider of broadband communications services to businesses. The Company combines its own facilities, nationwide network infrastructure and Internet Service Provider Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. (ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. ) capabilities to provide high-speed Internet See broadband. access, private network solutions and value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. directly to small- and medium-sized Me´di`um-sized` a. 1. Having a medium size; as, a medium-sized man s>. Adj. 1. medium-sized - intermediate in size medium-size, moderate-size, moderate-sized businesses or larger enterprises looking to connect multiple locations. DSL.net product offerings include T-1 and business-class DSL services, virtual private networks (VPNs), frame relay A high-speed packet switching protocol used in wide area networks (WANs). Providing a granular service of up to DS3 speed (45 Mbps), it has become popular for LAN to LAN connections across remote distances, and services are offered by most major carriers. , Web hosting Making a Web site available on the Internet. Many ISPs host a few personal Web pages for an individual at no additional cost above the monthly service fee, but the address is subordinate to the ISP; for example, www.friendlyisp.com/pat_smith. , DNS (Domain Name System) A system for converting host names and domain names into IP addresses on the Internet or on local networks that use the TCP/IP protocol. For example, when a Web site address is given to the DNS either by typing a URL in a browser or behind the management, enhanced e-mail, online data backup and recovery services, firewalls and nationwide dial-up services An information service on demand. The term was popular when analog modems were the only way to connect to a remote system. See dial-up. ; as well as integrated voice and data offerings in select markets. For more information, visit www.dsl.net, e-mail info@dsl.net, or call 1-877-DSL-NET1 (1-877-375-6381). This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to a variety of risks and uncertainties, many of which are beyond DSL.net's control, which could cause actual results to differ materially from those contemplated in these forward-looking statements. In particular, the risks and uncertainties include, among other things, (i) fluctuations in DSL.net's quarterly operating results, which could adversely affect the price of its common stock; (ii) DSL.net's unproven unproven Dubious, nonscientific, not proven, quack, questionable, unscientific adjective Relating to that which has not been validated by reproducible experiments or other scientific methods for determining effect or efficacy business model, which may not be successful; (iii) DSL.net's ability to execute its business plan in a timely manner to generate the forecasted financial and operating results and liquidity; (iv) DSL.net's need for additional funds by the third quarter of 2003, which may not be available on acceptable terms or at all, which could adversely impact DSL.net's ability to implement its business plan and continue as a going concern, and which has resulted in DSL.net's independent accountants including a "going concern" discussion in their report on DSL.net's 2002 financial statements; (v) failure to generate sufficient revenue, contain certain discretionary spending, achieve certain other business plan objectives or obtain additional capital could have a material adverse effect on DSL.net's results of operations or financial position, or cause it to pursue strategic alternatives or discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: some, a significant portion or all of its operations; (vi) risks associated with acquisitions, including difficulties in identifying and completing acquisitions, integrating acquired businesses or assets and realizing the revenue, earnings or synergies anticipated from any acquisitions; (vii) risks associated with the completion of DSL.net's pending acquisition of assets Acquisition of assets A merger or consolidation in which an acquirer purchases the selling firm's assets. and subscriber lines from TalkingNets, Inc.; (viii) risks associated with DSL.net's ability to draw amounts under its bank credit facility; (ix) competition; (x) risks associated with the possible removal of DSL.net's common stock from the Nasdaq SmallCap Market, which removal could adversely impact the pricing and trading of DSL.net's common stock; (xi) regulatory, legislative and judicial developments, which could adversely affect the way DSL.net operates its business; and (xii) DSL.net's dependence on wholesale providers to provide it with local DSL and T1 facilities in areas where it has not deployed its own equipment. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . DSL.net undertakes no obligation, and disclaims any obligation, to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or otherwise. For additional information regarding these and other risks faced by DSL.net, see the disclosure contained under "Risk Factors'' in DSL.net's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2002, which has been filed with the Securities and Exchange Commission. DSL.net is a trademark of DSL.net, Inc. Other company names may be trademarks of their respective owners.
DSL.net, Inc.
Statements of Operations
(in thousands, except share and per share data)
(unaudited)
Three Months Ended
March 31,
2002 2003
----------- -----------
Revenue $11,381 $16,765
----------- -----------
Operating expenses:
Network (excluding $7 and
$7 of stock compensation, respectively) 8,712 12,238
Operations (excluding $15 and
$9 of stock compensation, respectively) 1,991 2,756
General and administrative (excluding $111
and $52 of stock compensation,
respectively) 3,402 3,056
Sales and marketing (excluding $214 and
$210 of stock compensation, respectively) 1,197 2,233
Stock compensation 347 278
Depreciation and amortization 5,114 4,837
----------- -----------
Total operating expenses 20,763 25,398
----------- -----------
Operating loss (9,382) (8,633)
----------- -----------
Interest (expense) income, net (245) (564)
Other income (expense), net 172 (46)
----------- -----------
Net loss $(9,455) $(9,243)
=========== ===========
Net loss applicable to common stockholders:
Net loss $(9,455) $(9,243)
Dividends on preferred stock $(594) (1,050)
Accretion of preferred stock, net of
issuance costs (1,597) (3,010)
----------- -----------
Loss applicable to common stockholders $(11,646) $(13,303)
=========== ===========
Net loss per common share - basic and diluted $(0.18) $(0.20)
=========== ===========
Shares used in computing net loss per share 64,743,155 64,931,588
=========== ===========
Other data:
Reconciliation of net loss to adjusted
EBITDA & free cash flow:
Net loss $(9,455) $(9,243)
Add back:
Interest and other expense (income), net 73 610
Depreciation and amortization 5,114 4,837
Stock compensation 347 278
----------- -----------
Adjusted EBITDA (3,921) (3,518)
Less Capital Expenditures (605) (378)
----------- -----------
Free cash flow $(4,526) $(3,896)
=========== ===========
Condensed Balance Sheet
(dollars in thousands)
(unaudited)
December 31, March 31,
2002 2003
------------ -----------
Cash and cash equivalents (a) $11,319 $4,482
Accounts receivable, net of allowances 4,358 8,330
Other current assets 2,048 2,786
------------ -----------
Total current assets 17,725 15,598
Net property and equipment 23,066 32,968
Other assets 12,705 18,145
------------ -----------
Total assets 53,496 66,711
============ ===========
Current liabilities 16,734 21,818
Long-term obligations - less current portion 1,889 12,326
Mandatorily redeemable convertible preferred
stock 14,122 18,182
Stockholders' equity 20,751 14,385
------------ -----------
$53,496 $66,711
============ ===========
(a) Includes restricted cash of approximately $1 and $4 at December
31, 2002 and March 31, 2003, respectively.
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