DSL.net Reports Second Quarter 2003 Results: Second Quarter Revenue Increases 56%, Gross Margin Increases 58% and Adjusted EBITDA Improves 16% from Year Earlier.Business Editors 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)--Aug. 5, 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 second quarter 2003 financial results. Revenue for the second quarter of 2003 was a record $18.1 million, representing a 56% increase from second quarter of 2002 revenue of $11.6 million. Revenue for the six months ended June June: see month. 30, 2003, was $34.9 million, a 52% increase over revenue of $23.0 million for the comparable period in 2002. The Company generated gross margin, or revenue less network expense, of $4.7 million for the second quarter of 2003, representing a 58% improvement over gross margin of $3.0 million for the second quarter of 2002. For the six months ended June 30, 2003, the Company generated gross margin of $9.2 million, a 63% improvement over gross margin of $5.6 million for the first six months 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 second quarter of 2003 was negative $3.2 million, a 16% improvement compared to negative $3.8 million for the second quarter of 2002. Adjusted EBITDA for the six months ended June 30, 2003, was negative $6.8 million, a 13% improvement over negative $7.8 million Adjusted EBITDA for the comparable period in 2002. "Our second quarter results reflect continued strong growth in revenue, improvements in cash flow and the completion of several milestones in the integration of network assets and related subscriber lines The line from the customer site to the local telephone company. See subscriber network. acquired earlier this year," said David F. Struwas, chairman and chief executive officer of DSL.net. "Shortly after the quarter ended, we closed a $30 million financing with Deutsche Bank Deutsche Bank AG (IPA: /'dɔɪ.tʃə/[1]) (ISIN: DE0005140008, NYSE: DB) (English: German Bank and VantagePoint Venture Partners. We believe that this financing puts us in a strong position to continue the roll out of our integrated voice and data services and to pursue strategic acquisitions." Free cash flow (defined as Adjusted EBITDA minus capital expenditures) for the second quarter of 2003 was negative $4.1 million, in line with second quarter 2002 free cash flow of negative $4.1 million. For the first six months of 2003, free cash flow was negative $8.0 million, an 8% improvement over free cash flow of negative $8.6 million for the comparable period a year earlier. Net loss for the quarter ended June 30, 2003, was $8.7 million, representing a 7% improvement over net loss of $9.4 million for the second quarter of 2002. For the six months ended June 30, 2003, net loss was $17.9 million, a 5% improvement over net loss of $18.8 million for the comparable period a year earlier. Further improvements in Adjusted EBITDA, free cash flow and net loss on a year-over-year basis were offset by expenses associated with the integration of network assets and related subscriber lines acquired from Network Access Solutions (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 ). On a per share basis, the Company reported a net loss applicable to common stockholders of $0.20 per share for the second quarter of 2003, compared to $0.20 per share for the comparable period a year earlier. For the six months ended June 30, 2003, net loss applicable to common stockholders was $0.40 per share, compared to $0.38 per share for the comparable period a year earlier. The first and second quarters of 2003 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 comparable periods in 2002. These preferred stock-related charges translated into $0.06 per common share for the second quarter of 2003, compared to $0.05 per common share for the second quarter of 2002; and $0.12 per common share for the six months ended June 30, 2003, compared to $0.09 per common share for the comparable period a year earlier. At June 30, 2003, the Company had total assets of $61.7 million, including $3.6 million in cash. On July July: see month. 21, 2003, the Company announced that it had closed a $30 million financing with institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. led by Deutsche Bank. Referring to the recent financing, 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 second 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 800-274-0873, confirmation code 225074. For those unable to access the live conference call, an audio replay will be available until 11 p.m., Eastern Time, on August 19, 2003, by dialing 888-203-1112 and entering code 225074. 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) failure to generate sufficient revenue, contain certain discretionary spending or achieve certain other business plan objectives could have a material adverse effect on DSL.net's results of operations or financial position; (v) 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; (vi) regulatory, legislative and judicial developments, which could adversely affect the way DSL.net operates its business; (vii) 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; (viii) 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.; (ix) competition; (x) the risk that DSL.net's stockholders do not approve the matters required for the issuance of the remaining warrants to purchase shares of DSL.net's common stock in the Deutsche Bank-led financing, or that other conditions to the issuance of such warrants are not satisfied or waived by January 14, 2004, in which case DSL.net may be obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to then repay the $30 million raised in such financing; and (xi) DSL.net's dependence on wholesale providers to provide 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 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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
2002 2003 2002 2003
----------- ----------- ----------- -----------
Revenue $11,596 $18,097 $22,977 $34,862
----------- ----------- ----------- -----------
Operating expenses:
Network (excluding $8,
$3, $15 and $11 of
stock compensation,
respectively) 8,625 13,406 17,337 25,643
Operations (excluding
$14, $3, $29 and
$10 of stock
compensation,
respectively) 1,856 2,818 3,847 5,574
General and administrative
(excluding $57, $17,
$168 and $69 of stock
compensation,
respectively) 3,373 3,216 6,776 6,273
Sales and marketing
(excluding $217, $137,
$430 and $348 of stock
compensation,
respectively) 1,577 1,889 2,774 4,122
Stock compensation 296 160 642 438
Depreciation and
amortization 5,274 4,498 10,388 9,335
----------- ----------- ----------- -----------
Total operating
expenses 21,001 25,987 41,764 51,385
----------- ----------- ----------- -----------
Operating loss (9,405) (7,890) (18,787) (16,523)
----------- ----------- ----------- -----------
Interest income
(expense), net 8 (847) (236) (1,411)
Other income (expense),
net 3 37 175 (9)
----------- ----------- ----------- -----------
Net loss $(9,394) $(8,700) $(18,848) $(17,943)
=========== =========== =========== ===========
Net loss applicable to
common stockholders:
Net loss $(9,394) $(8,700) $(18,848) $(17,943)
Dividends on
preferred stock (879) (1,050) (1,473) (2,100)
Accretion of
preferred stock, net
of issuance costs (2,461) (3,011) (4,057) (6,021)
----------- ----------- ----------- -----------
Loss applicable to
common stockholders $(12,734) $(12,761) $(24,378) $(26,064)
=========== =========== =========== ===========
Net loss per common
share, basic and
diluted $(0.20) $(0.20) $(0.38) $(0.40)
=========== =========== =========== ===========
Shares used in
computing net loss per
share 64,868,362 65,030,504 64,806,104 64,981,319
=========== =========== =========== ===========
Other data:
Reconciliation of net loss to
adjusted EBITDA & free cash
flow:
Net loss $(9,394) $(8,700) $(18,848) $(17,943)
Add back:
Interest and other
(income) expense,
net (11) 810 61 1,420
Depreciation and
amortization 5,274 4,498 10,388 9,335
Stock compensation 296 160 642 438
--------- ----------- ----------- -----------
Adjusted EBITDA (3,835) (3,232) (7,757) (6,750)
Less capital
expenditures (275) (853) (880) (1,231)
--------- ----------- ----------- -----------
Free Cash Flow $(4,110) $(4,085) $(8,637) $(7,981)
========= =========== =========== ===========
Condensed Balance Sheet
(dollars in thousands)
(unaudited)
December 31, June 30,
2002 2003
--------- ----------
Cash and cash equivalents (a) $11,319 $3,604
Accounts receivable, net
of allowances 4,358 7,791
Other current assets 2,048 2,416
Total current assets 17,725 13,811
Net property and equipment 23,066 30,170
Other assets 12,705 17,678
--------- ----------
53,496 61,659
========= ==========
Current liabilities 16,734 25,877
Long-term obligations -
less current portion 1,889 11,644
Mandatorily redeemable convertible
preferred stock 14,122 22,243
Stockholders' equity 20,751 1,895
--------- ----------
$53,496 $61,659
========= ==========
(a) Includes restricted cash of approximately $1 and $22
at December 31, 2002, and June 30, 2003, respectively.
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