Company Press Release
SOURCE: Verio Inc.
Verio Inc. Announces Strong Second Quarter 1999 Results
Web-hosting and Enhanced Services Now Exceed 50% of Revenue as the Launch Of The AOL Media Campaign, New E-Commerce Products and Channel Programs Contribute to Rapid Growth
Recent Highlights: -- Acquired digitalNation, a premier dedicated hosting provider, for $100 million -- Launched AOL media campaign domestically, and announced a similar marketing agreement with AOL UK to provide Web-hosting, e-commerce, and domain-name registration services -- Raised $360 million in a convertible preferred offering -- Announced a 2:1 stock split to be effective on August 20, 1999 -- Unveiled VerioStore, a one-stop e-commerce service for small and mid-sized businesses
ENGLEWOOD, Colo., Aug. 5 /PRNewswire/ -- Verio Inc. (Nasdaq: VRIO - news), the world's largest domain-based Web hosting company and a leading provider of comprehensive business Internet services, today announced that revenue for the quarter ended June 30, 1999 was $61.9 million, an increase of 117% from the same period in the prior year. Approximately 53% of total revenues were attributable to Web hosting and other enhanced services. Net loss attributable to common shareholders for the quarter ended June 30, 1999 improved to ($1.22) per share, or $45.7 million, compared with ($1.44) per share, or $26.3 million for the quarter ended June 30, 1998.
''In the second quarter Verio crossed another strategic milestone as Web hosting and enhanced services exceeded 50% of total revenues, up from 37% only one year ago,'' said Chief Executive Officer Justin L. Jaschke. ''Our acquisition of digitalNation further expands our Web hosting product line and extends our capabilities to host and manage outsourced applications. In addition, the highly successful completion of our $360 million preferred stock offering positions us to continue our strategic growth through acquisitions. In May, we launched our media campaign with AOL, which is driving substantial new business and brand-name recognition as Verio Web hosting and e-commerce products are advertised exclusively on the leading portals in the industry. With our Tier 1 network, Web-hosting platforms, powerful distribution channels and expanded product offerings, Verio has significantly improved its strategic positioning to deliver the best Internet solutions to small and medium-size business customers around the world.''
Gross margin improved from 65% of revenue in the quarter ended March 31, 1999 to 67% of revenue as Verio realized scale efficiencies from its Tier 1 national network and regional networks. The cost of the network remained essentially flat for the quarter. At the regional network level, Verio continued to consolidate its POPs, closing 11 redundant POPs during the quarter. Verio now has 186 regional POPs.
Operating expenses excluding depreciation and amortization improved from 79% of revenues in the quarter ended March 31, 1999 to 74% of revenues. General and administrative expenses did not change materially from the first quarter, as the scalable billing and financial systems handled the increased volume of transactions. Customer care and engineering expenses each increased approximately $1.1 million as customer growth continued and work accelerated on the national server systems. Of all operations acquired through December 31, 1998, now 88% are on the national systems, up from 80% at March 31, 1999. As a result of these efficiencies, more than 50% of the increase in revenues from the first quarter dropped to the EBITDA line.
''In the second quarter, Verio's organic growth rate accelerated, primarily attributable to our Web-hosting business,'' said Herbert R. Hribar, president and chief operating officer. ''We have generated significant growth in sales through our channel programs with a number of large telecommunications firms and our recently launched AOL program. Also, our direct sales force, which is now bundling Web-hosting packages with DSL and other high-speed access products, has become a significant contributor to Web sales. Over the last six months, Verio has introduced a series of highly automated e-commerce packages, VPNs and managed security offerings that are increasing the value-added component of our product offerings. In the e-commerce space alone, we estimate that 60% of our Web sites include some e-commerce components, but less than 5% have an end-to-end e-commerce solution. High-speed access bookings, including DSL, continued to be strong in the second quarter, increasing approximately 20% from the first quarter. We expect further revenue growth in this area of our business as those lines are installed.''
In the second quarter, Verio surpassed 265,000 hosted Web sites and reached 400,000 registered domain names. E-commerce sales continued to accelerate, as the company sold more than 1,900 packages in the second quarter, compared to 1,350 in the first quarter. DSL sales also rose, from 850 in the first quarter to approximately 1,600 in the second quarter, as significant DSL promotional campaigns are now launched in 10 cities, with 11 more expected by year-end. Distribution strength increased during the quarter as the productivity of our sales representatives rose by 10% per representative, and the number of resellers grew to more than 5,000. Verio added data center space in Virginia, bringing the total number of data centers to nine, with over 150,000 square feet.
On July 20, 1999 Verio completed the private placement of $360 million of convertible preferred stock. The dividend rate is 6.75%, payable quarterly, and the preferred stock is convertible into common stock at a price of $96.56 per share. Verio will use proceeds for acquisitions and general corporate purposes.
About Verio Inc.
Verio Inc. is the world's largest domain-based (e.g. yourcompany.com) Web-hosting company and a leading provider of business Internet services. With an emphasis on serving the small and mid-sized business market, the company offers customers the critical services they need to compete in the new world of business: high-speed Internet access, Web site hosting, electronic commerce, virtual private networks, and other enhanced services. Verio supports its operations with a highly reliable and scalable national infrastructure including a tier one national network and delivers locally based sales and engineering support in 41 of the top 50 U.S. markets. The company also provides Web-hosting services to customers in more than 170 countries and operates an international network of more than 5,000 resellers.
For more information on Verio, visit the company's Web site at www.verio.com. The corporate headquarters are located in Englewood, Colorado at 8005 S. Chester St., Suite 200, 80112, phone number 303.645.1900.
Except for the historical information contained herein, certain matters set forth in this press release concerning Verio are forward-looking statements within the meaning of the ''safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, including but not limited to fluctuations in operating results, additional capital requirements, competition, integration of acquisitions, and implementation of network infrastructure. Readers are also encouraged to refer to Verio's reports from time to time filed with the Securities and Exchange Commission, including the Company's Current Annual Report on Form 10-K filed on March 31, 1999, for a further discussion of Verio's business and risk factors that may affect operating and financial results.
Verio Inc.
Summary Consolidated Financial Data
(amounts in millions, except per share amounts)
3 Months Ended 3 Months Ended
6/30/98 6/30/99
(unaudited) (unaudited)
Statement of Operations Data:
Revenue
Dedicated $12.6 $23.1
Dial 5.7 6.1
Enhanced services and other 10.2 32.7
Total revenue 28.5 61.9
Costs of goods sold 13.3 20.1
Selling, general and administrative 27.9 45.7
Total costs and expenses 49.8 91.0
Loss from operations (21.3) (29.1)
Net loss attributable to common stockholders$(26.3) $(45.7)
Loss per common share -- basic and diluted $(1.44) $(1.22)
Weighted average common shares outstanding
basic and diluted 18.2 37.4
Other Data:
EBITDA (A) $(12.6) $(3.9)
Cash flow from operations (15.2) (40.0)
Capital expenditures 9.0 18.7
12/31/98 6/30/99
(unaudited)
Balance Sheet Data:
Cash, cash equivalents and
short-term investments $577.4 $293.5
Restricted cash and securities 14.8 8.4
Goodwill, net 236.7 469.8
Total assets 933.7 967.3
Long-term liabilities and capital
lease obligations, net of current portion 674.6 693.9
Stockholders' equity 202.7 185.6
(A) EBITDA represents earnings (loss) from operations before interest, taxes, depreciation, amortization and provision for loss on write-offs of investments in ISPs and fixed assets. The primary measure of operating performance is net earnings (loss). Although EBITDA is a measure commonly used in the Company's industry, it should not be construed as an alternative to net earnings (loss), determined in accordance with generally accepted accounting principles (''GAAP''), as an indicator of operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP. In addition, the measure of EBITDA presented herein by the Company may not be comparable to other similarly titled measures of other companies.
SOURCE: Verio Inc.
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