Infonet Announces First Quarter Results; Quarterly Core Revenue Up 5%.

Business Editors

EL SEGUNDO, Calif.--(BUSINESS WIRE)--Aug. 5, 2002

Infonet Services Corporation (NYSE:IN)(FSE:IN):

Financial Highlights Q1 FY 2003 vs. Q1 FY 2002

-- Revenue: $147 vs. $172 million, down 14%

-- Net income/(loss): $(36) vs. $3 million After KPNQwest and WorldCom write-offs

-- KPNQwest shutdown gives rise to $41 million write-off

-- Core revenue: $130 vs. $124 million, up 5%

-- Network services: $79 vs. $78 million, up 2%

-- Core EBITDA: $5 vs. $12 million, down 54% After $5 million write-off due to WorldCom bankruptcy

-- New client contracts: 160 vs. 185, down 14%

Infonet Services Corporation (NYSE:IN)(FSE:IN) today announced fiscal year (FY) 2003 first quarter (Q1) revenue of $147 million versus $172 million for the comparable period in FY '02. Infonet's core (non-AUCS platform) revenue grew five percent to $130 million in Q1 FY '03 compared to $124 million in Q1 FY '02.

Revenue for network services was $79 million in Q1 FY '03 versus $78 million for Q1 FY '02, an increase of two percent. Excluding the impact of the loss of a major client in FY '02, network services revenue increased by four percent in Q1 FY '03 from Q1 FY '02.

Infonet's consulting, integration and provisioning revenue declined slightly in this quarter from $48 million in Q1 FY '02 to $46 million in Q1 FY '03. Core (non-AUCS platform) consulting, integration and provisioning revenue increased from $36 million in Q1 FY '02 to $42 million in Q1 FY '03, an increase of 17 percent.

Infonet's application services for this quarter remained unchanged from the first quarter of FY '02 at $2 million. As expected, other communications services, almost 80 percent of which were composed of AUCS platform-related revenue in Q1 FY '02, declined 55 percent from $45 million to $20 million in Q1 FY '03. The AUCS contract is expected to terminate on October 1, 2002.

Jose A. Collazo, Chairman, President and CEO of Infonet, said, "It is gratifying that during these difficult times in the technology sector, demand for our core (non-AUCS platform) services which represents almost 90% of our business resulted in revenue growth of 5% in this quarter compared to the first quarter of the previous fiscal year."

Impact of Recent Telecom Bankruptcies/Shutdowns

In the first quarter, Infonet incurred a charge of approximately $41 million resulting from the write-off of capacity previously purchased from KPNQwest and its affiliates. KPNQwest stopped operating in July 2002. In addition, Infonet created a reserve of approximately $5 million to cover anticipated losses related to the bankruptcy of WorldCom.

Mr. Collazo does not believe any future bankruptcies among service capacity providers will materially affect Infonet's long-term strategic plans. "If we have to replace additional capacity to continue to ensure service integrity," he said, "we expect to have more than enough cash to do it."

EBITDA

Earnings before interest, taxes, depreciation and amortization (EBITDA) during Q1 FY '03 decreased to $10 million from $22 million in Q1 FY '02. Core (non-AUCS platform) EBITDA decreased to $5 million in Q1 FY '03 from $12 million in Q1 FY '02 after the impact of the aforementioned $5 million of bad debt expense.

"In order to cover network redundancies wiped out by the shutdown of KPNQwest, Infonet made the decision to lease some additional unplanned capacity this year at an estimated cost of $5 million in the latter quarters of this fiscal year," said Mr. Collazo. "While the economics of this decision are attractive to us long-term, the increased expenses will negatively impact our EBITDA."

Operating Income, Net Income, EPS and Capital Expenditures

Operating income/(loss) for Q1 FY '03 was ($55) million from $117,000 in Q1 FY '02. Before non-cash, stock-based compensation charges, operating income/(loss) was ($51) million for Q1 FY '03 and $4 million for Q1 FY '02. Stock-based compensation charges for Q1 FY '03 were $4 million.

"Approximately $46 million of the decrease in operating income was the result of unusual charges recorded in the quarter," said Mr. Collazo.

Depreciation and amortization for Q1 FY '03 was $20 million compared to $18 million in Q1 FY '02 exclusive of the $41 million write-off in Q1 FY '03.

First quarter net income/(loss), also heavily affected by the asset write-off and bad debt related reserve expense, was a loss of ($36) million versus income of $3 million in the comparable quarter in FY '02. Basic and diluted earnings per share for Q1 FY '03 were a loss of ($0.08) versus $0.01 in Q1 FY '02.

Capital expenditures in this quarter were $10 million compared to $27 million in Q1 FY '02.

Client Data

During Q1 FY '03, Infonet added 160 new client service contracts. Of the new contracts, 88 were new clients and 72 represented additional sales to existing clients from cross-selling activities, including eight migrated KPNQwest clients.

"Our client wins are expected to continue at a strong pace and should increase above normal rates as we sign a limited number of former KPNQwest clients. The financial problems of some of our competitors has led to increased sales activities, but it takes some time to translate this into revenue, and the additional benefit, if any, will only be seen next year," said Mr. Collazo.

Summary

Mr. Collazo said, "Infonet continues to be in an enviable financial position with approximately $500 million in cash on our books and very little debt. Multinational companies looking to outsource their mission critical applications need to find stable partners to minimize the risk of business interruption," he said. "As the company with the lowest debt-to-equity ratio in our peer group, with 30 years of experience, with cash from operations to cover maintenance cap-ex, and with $500 million in cash, Infonet is a more attractive alternative to provide these services than ever.

"Although we expect the turmoil impacting the industry to benefit Infonet in the long run, it is premature to speculate on any additive revenue impact. In fact, because WorldCom and other financially impaired operators are resellers of our services, we are reevaluating their contributions to expected core revenue growth. Our previously expected FY '03 growth in core (non-AUCS platform) revenue of 15-20% is now more likely to be approximately 15%."

Mr. Collazo also said that the WorldCom bankruptcy may not necessarily alleviate pricing pressures in the market, and, in any event, it will take time for pricing issues to 'work their way through' the market.

"In the meantime, our strategy remains the same: to focus our energies on providing the highest levels of customer service available to multinational corporations."

Mr. Collazo said that he expects more than $25 million of AUCS platform-related (previously booked as other communications services) revenue to transition into core revenue during the second half of the year. In addition, revenue associated with a large contract signed last year will begin ramping up in the second half.

In January 2002, Infonet announced that its board of directors had authorized the expenditure of up to $100 million over 24 months to repurchase shares of the Company's common stock. As of June 30, 2002, Infonet had spent approximately $4.9 million to purchase approximately 2.3 million shares at an average price of $2.15 per share.

"Our strong financial position, enhanced by a favorable IRS ruling, enable us to continue our share repurchase program," said Mr. Collazo. "We feel that this is an additional avenue to building shareholder value."

Finally, Mr. Collazo said that, in order to provide fuller information earlier to the financial community, future earnings press releases will include a summary balance sheet, income statements and cash flow information. "We're a stable company and we want to make sure everyone can see this information as soon as possible."

About Infonet

Infonet Services Corporation, known for its quality of service, is a leading provider of value-added global communications services, including IP VPNs, for nearly 3,000 multinational enterprises.

Employing a unique consultative approach, Infonet offers integrated solutions optimizing the complex relationship between enterprise applications and the global network. Extensive project management capabilities are the foundation for the services and solution offerings (broadband, Internet, intranet, multimedia, remote and local access, provisioning, application and consulting services) positioning Infonet as the ideal single-source partner for multinationals. In particular, Infonet IP VPN solutions offer multinationals a unique combination of Private and Public IP services as well as a full set of Managed Security Services.

Rated "Best in Class" overall in Telemark's survey of Global Managed Data Network Services, Infonet has also won "Best Customer Care" and "Best Carrier" at the World Communication Awards. Infonet owns and operates The World Network(R), accessible from more than 180 countries, and provides local service support in over 70 countries and territories.

Founded in 1970, Infonet's stock is traded on the New York and Frankfurt Stock Exchanges under the symbol IN. Additional information about the company is available at www.infonet.com.

Infonet will file its Q1 FY '03 10-Q on August 12, 2002. It will be available through www.sec.gov, which can be accessed through Infonet's investor relations site at www.infonet.com.

Audio Web Cast/Conference Call Information

Infonet will host a conference call and audio Webcast on Tuesday, August 6, at 9 a.m. New York time (2 p.m. in London, 6 a.m. in Los Angeles). Participants within the United States should call 1-800-231-9012. Outside the United States, participants should call [phone]. Please establish connections 10 minutes before the hour. Those listening in through the Web, should log on to www.infonet.com. For a replay of the call within the United States, call 1-888-203-1112; outside the United States, call [phone]. The replay will be available from 12 p.m. New York time on Tuesday, August 6, through midnight on Tuesday, August 20. The confirmation code for the replay is 334331.

Safe Harbor Statement: Infonet may have made forward-looking statements in this release. These statements, if any, are based on information available to the company as of the date of this release and Infonet undertakes no duty to update the information to take account of later events. The accuracy of our forward-looking statements will also be affected by the strength of the market for Infonet products and services, competition, the timely transitioning of new business opportunities to Infonet's network and the effect of currency fluctuation. Investors should bear these risk factors in mind as well as those elaborated on in Infonet's 10-K, 10-Qs and other recent filings made with the U.S. Securities and Exchange Commission. These documents are available through the investor relations portion of Infonet's web site at www.infonet.com.

                                            Q1

                              FY03                      FY02

                    Core      Non     Total    Core    Non     Total
                              Core                     Core
Revenues:
 Network Services  $79,283      $0  $79,283  $77,659      $0  $77,659
 Consulting,
  Integration and
  Provisioning
  Services          41,750   4,243   45,993   35,710  11,945   47,655
 Application
  Services           1,967       0    1,967    1,953       0    1,953
 Other
  Communications
  Services           7,333  12,731   20,064    9,030  35,557   44,587

Total Revenues     130,333  16,974  147,307  124,352  47,502  171,854

EBITDA              $5,484  $4,148   $9,632  $11,976  $9,868  $21,844

Operating Income/
 (Loss)                            ($54,626)                     $117
Other Income, Net                    $5,069                    $5,126
Provision (Credit)
 for Income Taxes                  ($13,204)                   $2,390
Net Income/(Loss)                  ($36,420)                   $2,530
EPS                                  ($0.08)                    $0.01
Depreciation,
 Amortization and
 Asset Write-Off                    $60,481                   $17,527

Operating Income/(Loss)
 and EBITDA excluding
 stock-based compensation
 charges:

EBITDA                               $9,632                   $21,844
Operating Income/(Loss)            ($50,849)                   $4,317


                                                        Q1

                                                     % change

                                               Core    Non     Total
                                                       Core

Revenues:
 Network Services                               2%      na       2%
 Consulting, Integration
  and Provisioning Services                    17%     (64%)    (3%)
 Application Services                           1%      na       1%
 Other Communications Services                (19%)    (64%)   (55%)

Total Revenues                                  5%     (64%)   (14%)

EBITDA                                        (54%)    (58%)   (56%)

Operating Income/(Loss)                                         na
Other Income, Net                                               (1%)
Provision (Credit) for Income Taxes                             na
Net Income/(Loss)                                               na
EPS                                                             na
Depreciation, Amortization and Asset
 Write-Off                                                     245%

Operating Income/(Loss) and EBITDA
 excluding stock-based
 compensation charges:

EBITDA                                                         (56%)
Operating Income/(Loss)                                         na