Digex Announces First Quarter Results; Record Quarterly Revenue of $28 Million up 198% and European Expansion Signal Major Growth for Leading Managed Hosting Provider.Business Editors/Technology Writers BELTSVILLE, Md.--(BUSINESS WIRE)--May 2, 2000 Digex Digex - Digital Express Group, Inc. , Incorporated (Nasdaq:DIGX), a leading managed Web and application hosting service provider for businesses worldwide, today announced revenue of $28.0 million for the quarter-ended March 31, 2000, a 198% increase over the year-ago level. Managed servers totaled 2,911, a record increase of 600 units over the previous quarter, with average monthly revenue per server reaching a new high of over $3,550. 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 losses were ($15.1) million in the first quarter with a net loss per share of ($0.41), as the company continued its planned investments in infrastructure expansion. Digex has established its European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. subsidiary and opened the first new SmartCenter outside the U.S. as part of a global expansion strategy. Other important initiatives during the quarter include a joint development effort and investment by Compaq and Microsoft and several new program and product releases in conjunction with Sun Microsystems Sun Microsystems, Inc. (NASDAQ: JAVA[3]) is an American vendor of computers, computer components, computer software, and information-technology services, founded on 24 February 1982. and Oracle to broaden product offerings and accelerate into new markets. "The first quarter was a strong start to the New Year for Digex, demonstrating the growing demand for our managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality and our ability to scale the business effectively," said Mark Shull, president and chief executive officer. "Our core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
The opening of the first European Digex SmartCenter (outside London) and the establishment of Digex Europe mark the first phase of Digex's planned international expansion. "We believe our managed hosting model will be particularly attractive in international markets, and Digex is well positioned by virtue of its depth of experience to become a leader in a market projected to be at $6.7 billion within three years," Shull noted. The company's strong results were driven by the following additional key metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. :
-- Annualized revenue per customer grew to over $185,000, up 166%
over 1Q99
-- Average number of servers per customer rose to 4.6, up 94% over
the year-ago level
-- Total customers as of March 31, 2000 were 637, a 12% sequential
increase
Capital investments for the quarter totaled $33.8 million. Cash and equivalents were $283.3 million as of March 31, 2000. "We have funded our business plan into 2001 and are in a strong position to continue our investments in the growth of this business," said Tim Adams, chief financial officer. "Our strategic partnerships with industry-leading hardware and software players have allowed us to expand the range of services we provide," said Rebecca Ward Rebecca "Becca" Ward (born 7 February, 1990) is an American sabre fencer. Ward won the gold medal at the sabre 2006 World Fencing Championships after beating Mariel Zagunis 15-11 in the final. , president product management, engineering and marketing. "In our work with Sun Microsystems, for example, we were the first provider to achieve SunTone certification; we announced support for the Sun Solaris 8 platform; and we joined with Sun in its Start-up Start-up The earliest stage of a new business venture. Accelerator accelerator: see particle accelerator. (1) A key combination such as Alt-G or Ctrl-Shift H that is used to activate a task. (2) An incubator that expects to develop the company considerably faster than normal. See incubator. program, expanding our addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be customer base significantly." "We strengthened our position as a preferred provider of managed hosting services for leading financial institutions with the addition of JP Morgan Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. , Advanta, and Fleet Credit Card as customers, and we added several major business to business customers, including Medline," stated Nancy Faigen, president, sales and service delivery. "We consistently hear from our customers their priorities for managed 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. are performance, reliability, security and scalability. We believe we continue to win in the marketplace because these key factors have long been Digex's value-proposition." The Company's expansion of its sales force remains on track. Quota-carrying salespeople sales·peo·ple pl.n. Persons who are employed to sell merchandise in a store or in a designated territory. grew to 91, out of a total Digex employee base of 785, as of March 31, 2000. Over 50% of the company's employee base has achieved advanced levels of technical certifications. Digex believes one of the keys to achieving its goals and maintaining a competitive advantage is winning and retaining customers through a combination of a direct sales force and a highly skilled technical workforce. Quarterly highlights for Digex include:
-- Growth in core managed Web hosting services for enterprise
clients, with new additions including JP Morgan, Advanta,
Pharmacia and Fleet Credit Card, and dot-com customers, including
RedMeteor.com, independenttraveler.com, loquesea.com,
tellthemnow.com, Medem.com, childU.com and I2Networks.com.
-- Focus on the Application Service Provider managed hosting market
under the Digex app-Link program with the addition of new ASP
customers including AppNet and support for the Lotus Domino
platform.
-- Recognition of Digex's superior security practices and systems as
the first managed Web hosting company to achieve ICSA TruSecure
MSP (Managed Service Provider) certification.
-- Expansion of customer platform options and improved Web site
management with the addition of support for Microsoft Windows
2000 concurrent with product release by Microsoft.
-- Achievement of the industry's first Sun-Tone certification from
Sun Microsystems for excellence in managed hosting.
-- Participation in the Sun Start-up Accelerator Program, providing
selected dot-coms with up-front hardware and software for the
development of new customer sites.
-- Introduction of the Digex Oracle Dynamic Fail-Over Service to
guarantee greater uptime service levels and the introduction of
the Performance Testing Service to troubleshoot potential
performance issues before sites go live.
-- Support for the high performance Sun Solaris 8 Operating
Environment.
Forward Looking Statements Statements contained in this news release regarding expected financial results and other planned events are 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. , subject to uncertainties and risks, including, but not limited to, the demand for Digex's services and the ability of Digex to successfully implement its strategies, each of which may be impacted, among other things, by economic, competitive or technological conditions. These and other applicable risks are summarized under the caption "Risk Factors" in the Company's annual 10K filing, and are updated periodically through the filing of reports and registration statements with the Securities and Exchange Commission. About Digex Digex (Nasdaq:DIGX) is a leading provider of managed Web and application hosting services for some of the world's leading companies that rely on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the as a critical business tool. Digex also offers value-added enterprise and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. , including performance and security testing Security Testing: (The) Process to determine that an IS (Information System) protects data and maintains functionality as intended. The six basic security concepts that need to be covered by security testing are: confidentiality, integrity, authentication, authorisation, , monitoring, reporting and networking services. Digex customers, from mainstream enterprise corporations, Internet-based businesses and Application Service Providers (ASPs), leverage Digex's services to deploy secure, scaleable, high performance business solutions, including electronic retailing, online banking, online procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. and customer self-service applications A software application that allows a user to obtain information or complete a business transaction on the computer that has traditionally required the help of a human representative. Voice response systems and Web sites are widely used for self-service applications. See kiosk. . Additional information on Digex is available at www.digex.com. Internet Users Internet user n → internauta m/f Internet user Internet n → internaute m/f : Digex news releases and other useful information are available on the Digex Web site at www.digex.com. To receive news releases by e-mail or to request that information be mailed to you, please visit the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the site and click on the "Investor Information Request Form" link. EBITDA consists of earnings (net loss) before interest expense, interest and other income, income taxes, deferred compensation, depreciation, and amortization. EBITDA does not represent funds available for management's discretionary use and is not intended to represent cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . EBITDA should also not be construed as a substitute for operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. or a better measure of liquidity than cash flow from operating activities, which are determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . This caption excludes components that are significant in understanding and assessing the results of operations and cash flows. In addition, EBITDA is not a term defined by generally accepted accounting principles and as a result EBITDA may not be comparable to similarly titled measures used by other companies. However, the Company believes that EBITDA is relevant and useful information that is often reported and widely used by analysts, investors and other interested parties in the Web site and application hosting industry. Accordingly, the Company is disclosing this information to permit a more comprehensive analysis of the Company's operating performance, as an additional meaningful measure of performance and liquidity, and to provide additional information with respect to the Company's ability to meet future debt service, capital expenditures and working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. .
DIGEX, INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share information)
Three Months Ended
---------------------------------------
March 31, 2000 March 31, 1999
------------------- -------------------
(unaudited) (unaudited)
Revenues $ 27,974 $ 9,392
Costs and expenses:
Cost of operations 3,940 1,652
Cost of services 11,396 3,952
Selling, general and administrative 27,776 8,069
Deferred compensation 994 -
Depreciation and amortization 12,571 4,314
------------ ------------
Total costs and expenses 56,677 17,987
------------ ------------
Loss from operations (28,703) (8,595)
Other income (expense)
Interest expense (443) -
Interest and other income 3,500 -
------------ ------------
Net loss before income tax benefit (25,646) (8,595)
Income tax benefit - -
------------ ------------
Net loss $ (25,646) $ (8,595)
============ ============
Net loss per common share -
basic and diluted (1) $ (0.41) $ (0.17)
============ ============
Shares used in computing basic and
diluted net loss per share 62,620,879 50,000,000
============ ============
EBITDA (2) (15,138) (4,281)
(1) Basic and diluted loss per share have been calculated assuming
that the common shares issued in connection with the Company's
recapitalization in common shares issued in connection with the
Company's recapitalization in April 1999
(2) EBITDA before certain charges consists of earnings (net loss)
before interest expense, interest and other income, income taxes,
deferred compensation, depreciation and amortization. EBITDA before
certain charges does not represent funds available for management's
discretionary use and is not intended to represent cash flow from
operations. EBITDA should not be considered as an alternative to
net loss as an indicator of the Company's operating performance or to
cash flows as a measure of liquidity. In addition, EBITDA before
certain charges is not a term defined by generally accepted accounting
principles, and, as a result, the measure of EBITDA presented herein
may not be comparable to similarly titled measures used by other
companies.
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