Atlanta, Georgia – (The Hosting News) – November 30, 2006 – Web hosting and managed integrated VoIP services provider, Cbeyond, has reported a strong third quarter growth, with a net income of $2.0 million for the third quarter of 2006, compared to net income of $0.9 million, for the third quarter of 2005.
Other financial and operating highlights include the following:
- Strong third quarter revenue growth with revenues of $54.9 million, up 32.6% over the third quarter of 2005;
- Net income of $2.0 million, including non-cash stock-based compensation expense of $1.1 million recorded under SFAS No. 123R, which was adopted during the first quarter of 2006;
- Total adjusted EBITDA (a non-GAAP measure) of $10.6 million during the third quarter of 2006, an increase of 40.3% from the third quarter of 2005;
- Rapid growth in customers with 1,807 net customer additions, bringing the total customers in CbeyondÃ¢â‚¬â„¢s six markets to 25,521;
- Average monthly revenue per customer (ARPU) of $743, down 1.2% from $752 in the prior quarter (second quarter revenues reflect $16 in ARPU relating to changes in estimates from prior periods); and
- A $5.1 million increase in cash, cash equivalents and marketable securities during the third quarter to $37.1 million, with no debt.
Jim Geiger, Chief Executive Officer of Cbeyond explained, ”Our third quarter results marked another period of solid execution in each of our markets and all aspects of our business. We achieved our goals for revenue growth and continued to post strong gains in total adjusted EBITDA. We are happy to report that our fifth market, Chicago, hit its milestone of positive adjusted EBITDA on track in September, its 18th month from launch, and will post its first full quarter of positive adjusted EBITDA in the fourth quarter of 2006. Our other operating results included an increase in applications used per customer to 5.4, continued low average monthly churn at 1.0%, and stable ARPU at $743. We are pleased to announce that our next market will be San Diego, with service scheduled to begin early in the first quarter of 2007. Our market launch in San Diego will leverage CbeyondÃ¢â‚¬â„¢s growing strength in the Los Angeles area and will help us build a major presence in the large and rapidly growing southern California small business market.”
Cbeyond reported revenues of $54.9 million for the third quarter of 2006, an increase of 32.6% from the third quarter of 2005. ARPU, or average revenue per customer location, was $743 in the third quarter, as compared to $752 in the second quarter, excluding positive revenue adjustments in the second quarter for customer promotional liabilities and terminating access revenues billed to other telecommunications carriers, both of which resulted from changes to estimated obligations recorded in earlier periods. While ARPU has generally declined moderately over time, Cbeyond recorded a slight increase in ARPU in the second quarter of 2006. Cbeyond believes that, while quarter-to-quarter changes in ARPU will be difficult to predict with precision, the added revenue from the CompanyÃ¢â‚¬â„¢s mobile service and continued growth in the use of other value-added applications will continue to provide stability in ARPU and lead to future increases over time.
Cbeyond’s gross margin was 70.0% in the third quarter of 2006 as compared with 71.0% in the third quarter of 2005. Cost of service included $0.5 million in expenses associated with network changes identified during our network project relating to the Triennial Review Remand Order (TRRO), which was substantially completed in the second quarter. Gross margin was negatively impacted by mobile handset subsidies expensed in connection with sales of mobile service to CbeyondÃ¢â‚¬â„¢s customers and historically typical early stage results in the newly opened Los Angeles market, which the Company believes is beginning to increase its revenue base to cover the early cost of service in the market. In addition, cost of service included $0.4 million in service credits and performance penalties received from suppliers of access and transport circuits.
Cbeyond reported income from operations of approximately $1.9 million in the third quarter of 2006 compared with income from operations of $1.4 million in the third quarter of 2005. As of January 1, 2006, Cbeyond adopted SFAS No. 123R. The income from operations of $1.9 million in the third quarter of 2006 includes $1.1 million in non-cash stock-based compensation expense as calculated using the fair value method under SFAS No. 123R, while the income from operations of $1.4 million in the third quarter of 2005 includes $0.1 million in non-cash stock-based compensation as calculated using the intrinsic method under APB No. 25. As these are two different methodologies used for calculating non-cash stock-based compensation, they are not comparable.
For the third quarter of 2006, total adjusted EBITDA was $10.6 million, an improvement of 40.3% over total adjusted EBITDA of $7.6 million in the third quarter of 2005. Total adjusted EBITDA excludes the impact to EBITDA of non-cash stock-based compensation expense, public offering costs, loss on disposal of property and equipment, and gain on early retirement of debt.
Cash, cash equivalents and marketable securities amounted to $37.1 million at the end of the second quarter of 2006, as compared to $32.0 million at the end of the second quarter of 2006. The increase in cash, cash equivalents and marketable securities of $5.1 million in the third quarter was due to a variety of factors, including an increase in the profitability of the company. Capital expenditures were $10.2 million during the third quarter of 2006, compared to $11.5 million in the second quarter of 2006.
Cbeyond is an Atlanta-based managed services provider that delivers integrated packages of voice, mobile and broadband services to small businesses in Atlanta, Chicago, Dallas, Denver, Houston and Los Angeles. Cbeyond offers core communications services like local and long-distance voice, mobile and broadband Internet access along with enhanced applications, including voicemail, email, web hosting, fax-to-email, data backup, file-sharing and VPN. Cbeyond manages its services over a private, 100-percent Voice over Internet Protocol (VoIP) facilities-based network.
For more information about Cbeyond, please visit: www.cbeyond.net.