Intermedia Communications Announces Second Quarter Results; Increased Growth Pushes Quarterly Revenue to $218 Million.TAMPA, Fla.--(BUSINESS WIRE)--Aug. 4, 1999-- -- Company Also Completes Digex IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. and Inks Pre-271 Data Agreement with Bell Atlantic -- Intermedia Intermedia - A hypertext system developed by a research group at IRIS (Brown University). Communications 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 :ICIX) today announced record revenue of $217.9 million for the quarter ended June 30, 1999. Last week, Intermedia's majority-owned Digex (NASDAQ:DIGX) subsidiary completed an initial public offering (IPO) of its common stock. Gross proceeds of $195.5 million were raised by issuing 18.7 percent of Digex to the public, with Intermedia retaining 81.3 percent ownership. Earlier this week, the company also announced an agreement to provide data services to Bell Atlantic's out-of-region customers on a pre-271 basis. Intermedia has the 4th largest nationwide 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. and IP network and an industry leading 793 network to network data interconnections (NNIs) which makes Intermedia's data and IP network the densest and most flexible in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Intermedia also announced its plan to expand its IP backbone to OC48 capacity. "As usual, it has been a busy quarter at Intermedia," said David Ruberg, Intermedia's president, chairman, and chief executive officer. "We have put ourselves in an ideal position to continue to improve operating results in the near term and also to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. sustainable growth opportunities in Internet, data, and 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 applications. Our strategy is Internet centric, and the value proposition to our customers is in integrated services In computer networking, IntServ or integrated services is an architecture that specifies the elements to guarantee quality of service (QoS) on networks. IntServ can for example be used to allow video and sound to reach the receiver without interruption. and managed applications." SUMMARY OF SECOND QUARTER 1999 RESULTS Revenue for the second quarter of $217.9 million was up 6 percent sequentially over first quarter 1999 revenue of $204.7 million. Consolidated 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 (as defined below) for the second quarter was positive $10.1 million, inclusive of inclusive of prep. Taking into consideration or account; including. negative EBITDA of $12.2 million at Digex. "In the second quarter, we saw revenue growth accelerate to over 28 percent on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis versus 25 percent in the first quarter," said Robert M. Manning, Intermedia's chief financial officer. "The combination of accelerating revenue growth and increasing efficiency are driving expanding EBITDA margins in our core business. We expect accelerating financial improvements in the second half of 1999." REVENUE ANALYSIS Enhanced Data and Internet Services Enhanced Data and Internet services continued its growth. Revenue for the second quarter was $66.7 million, an increase of 56 percent over second quarter 1998 and an increase of 11 percent sequentially. Revenue grew sequentially in all categories, and was led by revenue growth at Digex, which grew 34 percent sequentially to $12.6 million in the second quarter versus $9.4 million in the first quarter of 1999, and was up 166 percent over the second quarter of 1998. Frame relay and ATM revenue also grew at double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" rates sequentially, as a function of increases in managed services as well as nodes in service. Frame relay nodes in service increased by 3,570 in the second quarter to 42,741. Frame relay nodes in service also increased 58 percent over the second quarter of 1998. Competitive Local Services Competitive Local services continued its growth. Revenue for the quarter was $55.5 million, an increase of 45 percent over second quarter 1998 and an increase of 5 percent sequentially. Intermedia installed 37,692 access lines in the quarter. 6,759 resale lines were either converted on-switch or pruned, bringing the total access lines in service at the end of the period to 407,675, a 46 percent increase versus second quarter 1998. At the end of the second quarter, 77 percent of the lines in service were on-switch. "Our on-switch percentage, gross margins, and revenue per access line continue to be the benchmarks in our industry," said Manning. "In the second quarter, we expanded our UV.net service, which provides integrated local, long distance and high-speed Internet See broadband. access to small and medium-sized businesses, to 20 additional cities, bringing our total market coverage to 23 major metropolitan cities. Interexchange Services Interexchange revenue was $64.3 million in the second quarter, a 22 percent decrease versus second quarter 1998, and down 5 percent sequentially. "While the reduction in long distance revenue that has resulted from our intentional in·ten·tion·al adj. 1. Done deliberately; intended: an intentional slight. See Synonyms at voluntary. 2. Having to do with intention. exit of certain lines of business, such as wholesale and low end stand-alone long distance, has helped to improve margins, we are nevertheless dissatisfied dis·sat·is·fied adj. Feeling or exhibiting a lack of contentment or satisfaction. dis·sat  is·fied with the overall performance
of this category," said Manning. "We have focussed on selling
integrated services, and 100 percent of our UV.net sales Net SalesThe amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight are for multiple services. As UV.net sales and install activity ramps up in the second half of 1999, we expect improving results in this category." Integration Services Integration Services revenue for the quarter was $31.4 million, an increase of 18 percent versus second quarter of 1998 and an increase of 31 percent sequentially. OUTLOOK "Overall, the second quarter results were consistent with our expectations," said Manning. "Our growth rate has increased, and we believe we will be able to further accelerate revenue growth in the second half of the year." "Our core business is delivering improving financial performance, and we expect that trend to continue in the second half of the year," said Manning. "And, by creating a public entity at Digex, we have attracted the management talent and financing to aggressively pursue the opportunities in the 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. and applications outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. marketplace, while retaining the vast majority of the financial benefits and all of the strategic benefits." EBITDA consists of earnings before interest and other income, income taxes, depreciation, amortization and charges for in-process R & D and business restructuring, integration and other charges. 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 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 is not a term defined by 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 , and, as a result, the measure of EBITDA presented herein may not be comparable to similarly titled measures used by other companies. 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 Intermedia's services, the ability of Intermedia to complete its restructuring and integration program, and the ability of the Company to successfully implement its strategies, each of which may be impacted, among other things, by economic, competitive or regulatory conditions. These and other applicable risks are summarized under the caption "Risk Factors" in the Company's 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. Annual Report for its fiscal year ended December 31, 1998, and are updated periodically through the filing of reports and registration statements with the Securities and Exchange Commission. About Intermedia Intermedia Communications provides integrated solutions to business and government customers. These solutions include voice and data, local and long distance, and advanced network access services in major U.S. markets. Intermedia's enhanced data portfolio, including frame relay networking, ATM, and a full range of business Internet solutions and web hosting services A web hosting service is a type of Internet hosting service that allows individuals and organizations to provide their own websites accessible via the World Wide Web. Web hosts are companies that provide space on a server they own for use by their clients as well as providing , offers seamless end-to-end service virtually anywhere in the world. Intermedia is one of the top 5 Internet services providers (ISPs) to businesses and is consistently rated at or near the top of all ISPs for network performance and customer services by such industry publications as Keynote and Boardwatch. Intermedia Communications Inc. is headquartered in Tampa, Florida “Tampa” redirects here. For other uses, see Tampa (disambiguation). Tampa is a United States city in Hillsborough County, on the west coast of Florida. It serves as the county seat for Hillsborough County.GR6. , and can be found on the World Wide Web at www.intermedia.com. About Digex Digex is a leading provider of Web and application hosting services for some of the world's leading companies that rely on the Internet 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 corporations to Internet-based businesses, leverage Digex's services to deploy secure, scalable, 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. . Digex, Incorporated is headquartered in Beltsville, Maryland Beltsville is a census-designated place (CDP) in extreme northern Prince George's County, Maryland, United States. The population was 15,691 at the 2000 census. Beltsville is 17.45 miles (0 km) away from Washington, DC. and is a subsidiary of Intermedia Communications. Additional information on Digex is available at http://www.digex.com. INTERNET USERS Internet user n → internauta m/f Internet user Internet n → internaute m/f : Intermedia news releases, investor contacts and other useful information are available on Intermedia's website at www.intermedia.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 our website, and go to the "Request Information" link. -0-
INTERMEDIA COMMUNICATIONS INC.
Financial Highlights
(In thousands, except share data)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues:
Local network services $ 55,475 $ 38,193 $ 108,457 $ 71,869
Enhanced data services 66,675 42,668 126,768 79,205
Interexchange services 64,329 82,747 131,942 127,498
Integration services 31,410 26,622 55,444 48,443
Total revenues 217,889 190,230 422,611 327,015
Expenses:
Network operations 93,996 88,015 187,904 159,557
Facilities administration
and maintenance 23,171 18,536 45,807 33,568
Cost of goods sold 19,501 17,218 35,305 30,909
Selling, general and
administrative 71,102 56,402 128,416 102,747
Depreciation and
amortization 68,772 50,215 140,383 90,991
Charge-off of purchased
in process R & D -- -- -- 63,000
Business restructuring,
integration and other
charges 3,439 50,081 8,838 50,081
Total operating
expenses 279,981 280,467 546,653 530,853
Loss from operations (62,092) (90,237) (124,042) (203,838)
Other income (expense)
Interest (69,224) (47,858) (131,402) (97,159)
Other 13,749 6,040 20,307 16,770
Net loss (117,567) (132,055) (235,137) (284,227)
Preferred stock dividends
and accretions (22,965) (18,876) (45,448) (37,471)
Net loss attributable to
common stockholders $(140,532) $(150,931) $(280,585) $(321,698)
Loss per common share:
Net loss before charge
for in-process R&D and
restructuring $ (2.74) $ (2.33) $ (5.47) $ (5.30)
Charge for in-process
R&D -- -- -- $ (1.60)
Charge for business
restructuring,
integration and
other charges $ (0.07) $ (1.16) $ (0.18) $ (1.27)
Basic and diluted net
loss per common share $ (2.81) $ (3.49) $ (5.65) $ (8.17)
Weighted average shares
outstanding basic and
diluted 50,009,473 43,300,889 49,682,966 39,373,704
EBITDA (1) $ 10,119 $ 10,059 $ 25,179 $ 234
Other Data:
June 30, March 31,
1999 1999
Local and Long Distance Services (2)
Buildings (3) 4,374 4,359
Voice switches in operation 25 23
Access line equivalents 407,675 376,742
Access line equivalents per local switch (4) 14,315 13,862
Enhanced Data Services (2)
Data switches in operation 173 167
Nodes in service (5) 42,741 39,171
NNI connections 793 728
Employees 4,252 4,128
(1) EBITDA consists of earnings before interest and other income,
income taxes, depreciation, amortization and charges for in-process
R&D and business restructuring and integration expenses. EBITDA 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 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.
(2) Amounts reflected in the table are based upon information
contained in the Company's operating records.
(3) Includes both on-net direct connections with Intermedia-owned
fiber optic cable and on-net extended connections with leased
circuits.
(4) Calculated by dividing the number of on-switch access line
equivalents by the number of switches providing local service.
(5) Amount represents an individual point of origination and
termination of data served by the Company's enhanced network.
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