Infonet Announces Fiscal 2004 Third Quarter Results
Thursday February 5, 4:01 pm ET
biz.yahoo.com
EL SEGUNDO, Calif.--(BUSINESS WIRE)--Feb. 5, 2004--Infonet Services Corporation (NYSE:IN), a leading provider of value-added global communications services, today announced results for the period ended December 2003, Infonet's third quarter of fiscal 2004.
Revenue
Net services revenues for the third quarter of fiscal 2004 totaled $151.1 million compared with $141.6 million for the same period a year ago, an increase of 7%. Total revenues for the third quarter of last fiscal year, fiscal 2003, were $198.3 million, including a $56.7 million incentive fee received in connection with the completion of a European outsourcing agreement.
Expenses
Total operating expenses for the quarter increased to $175.0 million, from $166.0 million a year ago. These costs, which include a $5.0 million litigation accrual discussed below,(1) increased 5% on a net services revenues gain of 7% over the comparable period. Net of the $5.0 million accrual, these costs increased 2% on a net services revenues gain of 7% over the comparable period.
Communications services costs and integration and provisioning costs generally relate directly to revenues. These two cost elements amounted to $76.0 million, or 50% of third quarter fiscal 2004 revenues. These costs increased by 11% on a net services revenues gain of 7% over the comparable period.
Bandwidth and related costs, network operations and SG&A expenses are generally leveragable and, therefore, we expect them to decline as a percentage of revenues as revenues grow. These three cost elements amounted to $99.0 million, or 66% of third quarter fiscal 2004 net services revenues, compared with $97.8 million, or 69% of net services revenues in the comparable period of fiscal 2003.
Communication services costs decreased $0.6 million, or 2%, to $22.7 million in the third quarter of fiscal 2004 from $23.3 million in the comparable period of fiscal 2003.
Integration and provisioning costs increased to $53.3 million in the third quarter of fiscal 2004 from $44.9 million in the comparable period of fiscal 2003, largely due to increased integration and provisioning activities by which we incur expenses directly in connection with the generation of revenues.
Bandwidth and related costs decreased to $25.7 million in the third quarter of fiscal 2004 from $28.0 million in the same quarter of last year. As a percentage of net services revenues, bandwidth and related costs decreased to 17% from 20% in the year earlier period, reflecting the efficiencies of scale that Infonet expects to achieve by leveraging existing capacity.
Network operations expense decreased to $32.3 million in the third quarter of fiscal 2004 from $33.5 million in the comparable quarter of last year. As a percentage of net services revenues, network operations expenses declined to 21% in the third quarter of fiscal 2004 from 24% in the comparable period of fiscal 2003, as Infonet leverages its existing infrastructure.
Selling, general and administrative expenses increased to $40.9 million in the third quarter of fiscal 2004 from $36.3 million in the third quarter of fiscal 2003. As a percentage of net services revenues, these expenses were 27% in the third quarter of fiscal 2004, from 26% in the third quarter of fiscal 2003. SG&A expenses for the third quarter of fiscal 2004 include the $5.0 million litigation accrual. Net of this accrual, SG&A expenses decreased to 24% of net services revenues in the third quarter of fiscal 2004, from 26% in the third quarter of fiscal 2003.
Depreciation and amortization for the third quarter of fiscal 2004 was $20.1 million, compared with $18.7 million in the same period of last year. As a percentage of net services revenues, depreciation and amortization remained flat at 13% when compared to the third quarter of fiscal 2003.
Infonet has invested significant cash in its assets that it expects to leverage for higher profitability as the revenues grow. Infonet believes, therefore, that EBITDA is a meaningful measure of its results.
EBITDA for the third quarter of fiscal 2004 was ($2.8) million as compared to $48.4 million in the same quarter of the prior year. The third quarter of fiscal 2003 includes revenues from a $56.7 million incentive fee and the third quarter fiscal 2004 results include the $5.0 million litigation accrual.(2)
Operating Income, Net Income, EPS
Infonet's operating loss, which includes the $5.0 million litigation accrual, totaled $23.9 million in the third quarter of fiscal 2004. Net of this accrual, operating loss would have been $18.9 million in the third quarter of fiscal 2004.
This compares with an operating income of $32.3 million in the same period last year. Excluding the incentive fee, operating loss in the third quarter of last year would have been $24.4 million.
Net loss for the third quarter of fiscal 2004 totaled $20.5 million, or $0.04 per share. Infonet recorded net income of $18.2 million, or $0.04 per share in the third quarter of fiscal 2003. In that quarter, Infonet received a $56.7 million incentive fee.
Other Operating Highlights
Capital Expenditures
The cash outlay for capital expenditures for the third quarter of fiscal 2004 totaled approximately $9 million, compared with $15.3 million in the comparable period of fiscal 2003.
Infonet expects capital expenditures for the fiscal year to be approximately 11% of net services revenues.
Cash Position
At December 31, 2003, Infonet's balance sheet reflected cash, cash equivalents and short-term investments totaling approximately $411 million, compared with $429.0 million at fiscal year-end March 31, 2003.
Stock Repurchase Program
Under a 24-month program approved by Infonet's Board of Directors in November 2001 by which the company was authorized to purchase up to $100 million of the Company's common stock, Infonet repurchased approximately 826,000 shares in the third quarter of fiscal 2004 at an average price of $2.26 per share. During the first nine months of fiscal 2004, Infonet repurchased approximately 3.5 million shares at an average price of $1.76 per share. Over the life of the program, which ended November 19, 2003, Infonet repurchased approximately 10.9 million shares at an average price of $1.93 per share for a total expenditure of $21.1 million.
Commentary
Jose A. Collazo, Chairman, President and CEO of Infonet, said, "Third quarter fiscal 2004 net services revenues grew 7%. This underscores continued demand for our managed data services in what continues to be a challenging environment in the communications sector.
"In addition, operating expenses for the third quarter of fiscal 2004, excluding the litigation accrual, increased to $170 million from $166 million in the comparable quarter. This represents an increase of $4 million in operating expenses on a net services revenues gain of $9 million in the comparable quarter. The revenue growth and the restrained growth in expenses demonstrate that our efforts to improve operating income are bringing positive results - and we expect to see continued improvement in this area.
"EBITDA in the third quarter of fiscal 2004 was ($2.8) million. We expect to see substantial improvement in this area on a year-to-year basis going forward. The third quarter of fiscal 2004 included a stock-based compensation charge in conjunction with the IPO in 1999 of $2.8 million and the $5.0 million litigation accrual.
"With respect to local access costs, our strategic activities continue and they are beginning to produce results. Our multifaceted approach is aimed at first reducing the growth rate in relation to revenues, followed by an absolute decrease in this cost category as a percentage of revenues.
"We continue to receive international recognition for the quality of our services and innovative service offerings. During the third quarter we won multiple Telemark awards in the international business IP category and were named `best in class' as an international network services provider. Infonet was also listed as a leader in Gartner's Magic Quadrant for global network service providers.
"Meanwhile, we continue to introduce new services aimed at providing higher value to our existing clients as well as to new clients. Our objective is to maintain our position as a world-class service provider with an industry-leading portfolio of offerings.
"Our results confirm that Infonet is on track to meet its strategic and financial targets. We have grown revenue consistently from quarter to quarter. We're lowering expenses and addressing higher local access fees. At the same time we continue to focus on customer service. Our control over costs is targeted and deliberate - not at the expense of innovation or our customers."
Regional Highlights
Americas
Infonet's net services revenue in Americas was $43.8 million in the third quarter of fiscal 2004 compared with $33.4 million in the comparable quarter of fiscal 2003.
Asia-Pacific
Infonet's revenue in Asia-Pacific was $19.9 million in the third quarter of fiscal 2004, compared with $21.8 million in the third quarter of fiscal 2003.
Europe, Middle East and Africa (EMEA)
Infonet's EMEA revenue was $87.4 million in the third quarter of fiscal 2004 compared with $86.4 million in the third quarter of fiscal 2003. |
