WorldGate Revenues Up 159% From Prior Year, Subscribers Up 78% From Prior Quarter; Earnings Per Share Beats Consensus Estimates.

Business Editors/Hi-Tech Writers

TREVOSE, Pa.--(BUSINESS WIRE)--May 3, 2001

WorldGate Communications, Inc. (Nasdaq:WGAT), the leading global interactive TV solutions provider for the cable television industry, today announced its financial results for the quarter ended March 31, 2001.

Financial Summary:

WorldGate reported revenues of $4.1 million for the first quarter of 2001, a 159% increase from revenues of $1.6 million reported for the first quarter a year ago. The net loss for the quarter was $10.6 million, or $0.45 per share, favorably exceeding both the Thomson Financial/First Call mean estimates of $0.47 and the $0.50 per share loss reported in the first quarter of 2000.

As of March 31, 2001, there were approximately 185,000 subscribers to WorldGate's interactive TV ("iTV") services, a 78% increase over the 104,000 subscribers reported at the end of the fourth quarter.

Subscriber growth, which is expected to continue throughout 2001, is being driven by the continued deployment of equipment to support the WorldGate Interactive and TVGateway guide products, as well as by increased penetration in existing markets.

Cash, cash equivalents, and short-term investments amounted to $33.8 million at quarter end, as compared to $46.5 million at the end of the fourth quarter 2000. Of the $12.7 million cash decrease, approximately $3.0 million represents items that are non-recurring. After adjustment for these items, cash usage during the quarter was $9.7 million.

Further cash usage reductions have been achieved and more are expected as a result of the Company's recent cost reductions activities which were implemented in April, expected increases in revenues and subscribers, gross margin improvement due to deployment of new Ultra-Compact servers, and aggressive management of operating expenses and working capital turns.

Given these initiatives, the Company expects it has sufficient cash for an additional 5 quarters of operations. The Company's goal remains to achieve break-even cash flow by mid-2002, concurrent with the cash usage timeframe.

Hal Krisbergh, chairman and CEO, commented, "Subscriber growth continues to ramp aggressively, and we have delivered continued traction in building our subscriber base, both in existing WorldGate systems and in new systems that were deployed during the quarter. Our compounded subscriber growth rate over the past four quarters is 148%, demonstrating the productive work we have done to make iTV a reality. Expenses are under control, as evidenced by the fact that we delivered another quarter of improved earnings, despite an anticipated quarter to quarter decrease in sales revenue, as discussed during our last quarterly conference call. This decrease notwithstanding, revenues continue to grow when compared to the previous year, and we believe we are on track to deliver a substantial year-over-year increase in revenues."

Krisbergh continued, "Now that the cable industry has resolved the platform issue, with the 2000 class set-top box clearly dominating the marketplace, and uncertainty surrounding the interactive program guide being removed with recent deals establishing TVGateway as one of the two major players, the industry is now able to more aggressively deploy interactive services. We are continuing to work with our partners and customers, including AT&T Broadband, Charter, Cox, Comcast, and Adelphia, to develop a game plan for deployment of iTV services beyond the initial deployments that we have already announced. We have revised our revenue guidance for 2001 to reflect the general delays in the roll out of interactive services to date, which have resulted from the platform and guide uncertainty."

Domestic Rollouts

WorldGate is continuing to improve its market position with its major domestic cable operator partners. In light of successful results from their earlier deployments of WorldGate Interactive, Comcast and AT&T Broadband are in the process of extending their deployments to additional system locations.

Cox Communications, which along with Comcast, Charter, and Adelphia, committed to make the WorldGate interactive products available to at least 150,000 two-way interactive digital homes each, is beginning to establish a plan for meeting that commitment.

The Company is also deployed or has commitments to deploy with other domestic cable operators, such as Blue Ridge Cable, which are expected to go live during the second quarter.

Latin America and Caribbean

WorldGate continues to expand on its interactive television leadership role in Latin America, providing iTV products and services to cable subscribers throughout the region. WorldGate this week announced its seventh launch in Latin America with GigaRed in Argentina.

The Company is currently deploying its WorldGate Interactive service in such locations as Mexico City and Monterrey, Mexico; Nassau, Bahamas; Dominican Republic; Lima, Peru; and Bolivia; in addition to the upcoming GigaRed launch in Argentina.

Having done the development work to provide customized Spanish-language content and web browsers, WorldGate has established a significant presence in this market.

During the quarter, WorldGate also announced a special partnership with Digital Latin America (a joint venture between Hicks, Muse, Tate and Furst, Inc., Liberty Media Corp., and Motorola, Inc.,).

A principal goal of DLA is to help accelerate the growth of high-speed Internet services and digital programming for all cable television customers in the region, which, according to the Strategis Group, now total approximately 12 million households, a figure that is expected to triple by 2008.

WorldGate interactive products will be available to cable subscribers throughout Latin America via the DLA satellite distribution network.

TVGateway

After just nine months in existence the interactive program guide being distributed by the TVGateway joint venture, which includes Adelphia, Charter, Comcast, Cox and WorldGate, has begun to capture market share from competitors in the interactive program guide ("IPG") business.

With recent announcements that domestic cable operators are expected to roll the TVGateway guide out to nearly 1 million digital households, it has become increasingly clear that the customizable product of this cable industry consortium is expected to be a significant participant in the IPG space.

Financial Guidance for 2001

-- The Company is reiterating its guidance for subscriber base, which is
expected to be between 400,000 - 500,000 for all WorldGate iTV services by the
end of the year, representing an approximate 300% year-to-year increase.

-- Revenue expectations for fiscal 2001 have been revised to $28

- $32 million, which would represent a minimum 46% increase

over prior year revenues.

-- Despite the decrease in the revenue expectations, the Company

continues to expect a loss per share between $1.65 to 1.70 for

the year, an approximate 25% improvement upon the year 2000

loss per share.

Jim Agnello, Chief Financial Officer, stated, "As demonstrated in the first quarter, our subscriber growth continues to be robust and we expect that trend to continue. Although our revenue guidance has been reduced, our product acceptance remains strong and we are well positioned to increase our revenues as the market for interactive services grows. Operating cash usage included $3 million of non-recurring items, including an additional cash contribution to the TVGateway joint venture along with our other joint venture partners and post-quarter receipt of receivables that were expected to be collected during March. Considering these nonrecurring items, together with expected increases in revenues and subscribers, gross margin improvements, aggressive management of operating expenses and working capital turns, and cost savings initiatives announced in April 2001, the ongoing cash usage for the Company is estimated to be $5.5 - $6.5 million per quarter. Achieving these objectives would result in the Company having sufficient cash to achieve its goal of break-even by mid-2002."

       WorldGate Communications, Inc. - Statement of Operations
           (in thousands, except per share data) (Unaudited)

                                       Three Months Ended March 31
                                       ---------------------------
                                         2001               2000
                                       --------           --------
Total Revenues                         $ 4,080            $ 1,573
Cost of Revenues                         5,446              3,928
                                       --------           --------
Gross Profit (Loss)                     (1,366)            (2,355)

General and Administrative               1,816              1,914
Engineering and Operations               4,212              4,877
Sales and Marketing                      2,192              2,734
Depreciation and Amortization              311                114
                                       --------           --------
    Total Operating Expenses             8,531              9,639

Loss from Operations                    (9,897)           (11,994)
Other Income (Expense)                     310              1,161
Loss on Unconsolidated Entity           (1,000)                 0
                                       --------           --------
Net Income (Loss)                      (10,587)           (10,833)

Weighted Avg. Shares - Basic and
 Diluted                            23,312,000         21,527,000
Net Loss Per Share - Basic and
 Diluted                               $ (0.45)           $ (0.50)



                    WorldGate Communications, Inc.
                    Consolidated Balance Sheet Data
                            (in thousands)
                               Unaudited

                                   Mar 31, 2001          Dec. 31, 2000
                                   ------------          -------------

Cash, Cash Equivalents, and Short
 Term Investments                   $   33,789           $    46,505
Accounts Receivable                      7,179                 7,004
Inventory                               10,104                11,264
Total Assets                            60,747                74,841
Total Stockholders' Equity          $   45,317           $    55,781

About WorldGate Communications, Inc.

WorldGate Communications, Inc., the world's most widely deployed real-time interactive cable TV service provider, offers the cable industry a full line of Internet based, hi-speed interactive and enhanced television services. WorldGate's CableWare 2000(SM), is an open-standards middleware platform designed for current generation and advanced digital converters.

It supports interactive applications, VOD, electronic guides, Internet TV and enhanced TV. CableWare's eTV application provides viewers synchronized graphic overlays to live video and instant access to related programming and advertising Web sites.

WorldGate is deployed, has agreements to deploy or is in trials to deploy its service in 45 cable systems in 14 countries worldwide, including five of the top six MSOs in the U.S. WorldGate is a partner with Adelphia Communications Corp., Charter Communications Inc., Comcast Cable Communications Inc., and Cox Communications Inc. in a joint venture called TVGateway(SM) to provide interactive programming and advertising for digital cable.

WorldGate is traded on NASDAQ under the symbol WGAT. More information on WorldGate can be accessed at www.wgate.com.

WorldGate, Channel HyperLinking and CableWare 2000 are service marks of WorldGate Service, Inc.

This press release contains forward-looking statements that are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.

Expressions of future goals, including financial guidance for 2001, the Company's cash break-even goals, and similar expressions including, without limitation, expressions using the terminology "may," "will," "believes," "plans," "expects," "anticipates," "predicts," "forecasts," and expressions which otherwise reflect something other than historical fact are intended to identify forward-looking statements.

These forward-looking statements involve a number of risks and uncertainties, including the timely development and market acceptance of products and technologies and other factors described in the Company's filings with the Securities and Exchange Commission, including the "Factors Affecting our Business Condition" section of the Company's Annual Report on Form 10-K for 2000.

The actual results may differ materially from any forward-looking statements due to such risks and uncertainties. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.