DSL.net Reports Q-2, Year-to-Date 2006 Results.WALLINGFORD Wallingford, town (1990 pop. 40,822), New Haven co., S Conn.; inc. 1670. Its silverware industry dates from c.1835. Fruit growing and the manufacture of plastics, steel, precision instruments, and hardware are among the town's other industries. , Conn. -- 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. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). : 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 second quarter and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. Jun. 2006 financial results. Revenue from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the second quarter of 2006 was $9.5 million, as compared to revenue from continuing operations of $12.7 million for the second quarter of 2005. Revenue from continuing operations for the six months ended Jun. 30, 2006 was $19.6 million as compared to revenue from continuing operations of $26.4 million for the same period in 2005. The Company generated gross margin (defined as revenue less network expense) from continuing operations of $2.5 million for the second quarter of 2006, compared to gross margin of $4.2 million from continuing operations for the second quarter of 2005. Gross margin from continuing operations for the six months ended Jun. 30, 2006 was $4.2 million compared to gross margin from continuing operations of $8.5 million for the same period in 2005. Earnings before interest, taxes, depreciation, amortization, other income (expense) 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 second quarter of 2006 was negative $1.3 million, compared to positive $0.4 million for the second quarter of 2005. Adjusted EBITDA for the six months ended Jun. 30, 2006 was negative $3.7 million compared to positive $0.9 million for the same period in 2005. Free cash flow (defined as Adjusted EBITDA minus capital expenditures) for the second quarter of 2006 was negative $1.6 million, compared to positive $0.3 million for the second quarter of 2005. Free cash flow for the six months ended Jun. 30, 2006 was negative $4.2 million compared to positive $0.7 million for the same 2005 period. Net loss from continuing operations for the second quarter of 2006 was $5.7 million (which included a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $2.1 million for stock-based compensation expense), compared to net loss from continuing operations of $3.1 million for the second quarter of 2005 (which had no charge for stock-based compensation expense). Net loss from continuing operations for the six months ended Jun. 30, 2006 was $10.6 million (which included a non-cash charge of $2.3 million for stock-based compensation expense), compared to net loss from continuing operations of $6.6 million for the same period in 2005 (which had no charge for stock-based compensation expense). On a per share basis, the Company reported a net loss applicable to common stockholders from continuing operations of $0.02 per share for the second quarter of 2006, compared to a net loss of $0.01 per share from continuing operations for the same 2005 period. On a per share basis, the Company reported a net loss applicable to common stockholders from continuing operations of $0.05 per share for the six months ended Jun. 30, 2006 compared to a net loss of $0.03 per share from continuing operations for the same 2005 period. "Our results of operations have continued to decline in the second quarter, primarily due to declining sales and customer churn churn: see butter. , and also due to certain expenses incurred in connection with our cost reduction efforts initiated in the fourth quarter of 2005, the results of which the Company may not fully realize until later periods," said David F. Struwas, the Company's chief executive officer. "We believe that our outstanding network assets, VoIP platform and technical abilities have operational value that can be commercially leveraged either by the Company, with additional funding, or by a strategic partner." Net income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for the second quarter of 2006 was $0, compared to $7 thousand (nil per share) for the second quarter of 2005. Net loss from discontinued operations was $0 for the six months ended Jun. 30, 2006 compared to $6 thousand (nil per share) for the same period in 2005. Net loss for the second quarter of 2006 was $5.7 million compared to net loss of $3.1 million for the same period in 2005. Net loss for the six months ended Jun. 30, 2006 was $10.6 million compared to $6.6 million for the same period in 2005. On a per share basis, the Company reported a net loss applicable to common stockholders of $0.02 per share for the second quarter of 2006, compared to a net loss applicable to common stockholders of $0.01 per share for the same 2005 period. On a per share basis, the Company reported a net loss applicable to common stockholders from continuing operations of $0.05 per share for the six months ended Jun. 30, 2006 compared to a net loss of $0.03 per share from continuing operations for the same 2005 period. At Jun. 30, 2006, the Company had total assets of $18.6 million, including $7.2 million in cash, compared to total assets of $22.8 million, including $8.8 million in cash, at Dec. 31, 2005. At Jun.30, 2006, the Company had total liabilities of $23.1 million compared to total liabilities of $19.2 million at Dec. 31, 2005. "Based on our current plans and projections, we believe that our existing cash resources will be sufficient to fund our operations through the third quarter of 2006," said Walter Wal·ter , Bruno 1876-1962. German conductor noted for his interpretations of Mozart and Mahler. Noun 1. Walter - German conductor (1876-1962) Bruno Walter Keisch, the Company's chief financial officer. "We will need to raise additional financing in the third quarter of 2006 in order to meet our ongoing operating requirements and to repay all of our secured debt obligations. We continue to actively pursue financing and strategic opportunities, although there can be no guarantee that we will succeed in closing any of such transactions." 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, DS-3 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, www.getduet.com, e-mail info@dsl.net, or call 1-877-DSL-NET1 (1-877-375-6381). This press release may contain 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, and, to the extent it does, 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 associated with DSL.net's business 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 raise sufficient additional capital on acceptable terms, or at all, during the third quarter of 2006 to finance continuing operations and to pay off DSL.net's senior secured debt; (iv) DSL.net's failure to generate sufficient revenue, contain certain discretionary spending, achieve certain other business plan objectives, or obtain additional debt or equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. , which could have a material adverse effect on DSL.net's results of operations or financial position, or cause it to restructure its operations to further reduce operating costs operating costs npl → gastos mpl operacionales or to cease operations or to sell all or a portion of DSL.net's assets; (v) regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. , legislative and judicial developments, which could adversely affect the way DSL.net operates its business or increase its costs of operations; (vi) competition; (vii) the marketplace's receptiveness re·cep·tive adj. 1. Capable of or qualified for receiving. 2. Ready or willing to receive favorably: receptive to their proposals. 3. to DSL.net's offering of integrated voice and data services; (viii) DSL.net's ability to recruit RECRUIT. A newly made soldier. and retain qualified personnel; and (ix) DSL.net's dependence on third-party providers to supply it with local DSL and T-1 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, 2005, 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
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenue $9,494 $12,706 $19,604 $26,380
------------ ------------ ------------ ------------
Operating expenses:
(a)
Network 7,015 8,497 15,413 17,904
Operations 1,299 1,391 2,676 2,741
General and
administrative 2,203 2,376 4,386 4,764
Sales and
marketing 259 167 811 352
Stock
compensation 2,067 - 2,283 -
Depreciation and
amortization 880 951 1,761 2,813
------------ ------------ ------------ ------------
Total operating
expenses 13,723 13,382 27,330 28,574
------------ ------------ ------------ ------------
Operating loss (4,229) (676) (7,726) (2,194)
Interest expense,
net (1,518) (2,484) (2,871) (4,593)
Other income, net 46 71 29 209
------------ ------------ ------------ ------------
Loss from
continuing
operations (5,701) (3,089) (10,568) (6,578)
Income (loss) from
discontinued
operations - 7 - (6)
------------ ------------ ------------ ------------
Net Income (loss) $(5,701) $(3,082) $(10,568) $(6,584)
============ ============ ============ ============
Net loss per common
share, basic and
diluted from
continuing
operations $(0.02) $(0.01) $(0.05) $(0.03)
============ ============ ============ ============
Net loss per common
share, basic and
diluted from
discontinued
operations $- nil $- nil
============ ============ ============ ============
Net loss per share
basic and diluted $(0.02) $(0.01) $(0.05) $(0.03)
============ ============ ============ ============
Shares used in
computing net loss
per share, basic
and diluted 235,282,355 233,620,817 234,456,176 233,620,486
============ ============ ============ ============
(a) Stock-based compensation and depreciation and amortization were
excluded from the following operating expense line items and
presented as separate operating expense line items:
Stock-based
compensation:
Network $170 $- $189 $-
Operations 269 - 398 -
General and
administrative 1,569 - 1,636 -
Sales and
marketing 59 - 60 -
------------ ------------ ------------ ------------
Total $2,067 $- $2,283 $-
============ ============ ============ ============
Depreciation and
amortization:
Network $812 $865 $1,623 $2,552
General and
administrative 68 86 138 261
------------ ------------ ------------ ------------
Total $880 $951 $1,761 $2,813
============ ============ ============ ============
Other data:
Reconciliation of net income (loss) to
Adjusted EBITDA and free cash flow:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- ------------------- ---------
Net income (loss) $(5,701) $(3,082) $(10,568) $(6,584)
Less: other income, net (46) (71) (29) (209)
Plus: interest expense, net 1,518 2,484 2,871 4,593
Plus: depreciation and
amortization* 880 1,109 1,761 3,108
Plus: non-cash stock
compensation 2,067 - 2,283 -
--------- --------- --------- ---------
Adjusted EBITDA (b) (1,282) 440 (3,682) 909
Less: capital expenditures (358) (180) (513) (240)
--------- --------- --------- ---------
Free cash flow $(1,640) $260 $(4,195) $669
========= ========= ========= =========
(b) Adjusted EBITDA is defined as earnings (losses) before interest,
taxes, depreciation, amortization, other income and expense, and
non cash stock compensation.
*Depreciation for the three and six months ended June 30 2005 includes
depreciation from discontinued operations.
DSL.net, Inc.
Consolidated Condensed Balance Sheets
(dollars in thousands)
(unaudited)
June 30, December 31,
2006 2005
------------ ------------
Cash and cash equivalents $7,183 $8,765
Accounts receivable, net of allowances 3,536 4,210
Other current assets 1,623 2,334
------------ ------------
Total current assets 12,342 15,309
Net property and equipment 5,538 6,859
Other assets 686 674
------------ ------------
Total assets $18,566 $22,842
============ ============
Accounts payable $2,540 $3,211
Notes payable, net of discount 15,962 10,289
Other current liabilities 4,514 5,633
------------ ------------
Total current liabilities 23,016 19,133
Long-term liabilities, less current portion 41 37
Stockholders' (deficiency) equity (4,491) 3,672
------------ ------------
Total liabilities and stockholders
(deficiency) equity $18,566 $22,842
============ ============
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