Net2Phone Reports 3rd Quarter Fiscal 2004 Results
Wednesday June 9, 4:00 pm ET
-- Continued traction in cable telephony business - a total of seven operators representing five countries have selected Net2Phone as cable telephony provider to-date
NEWARK, N.J.--(BUSINESS WIRE)--June 9, 2004--
-- 12th consecutive quarter of 40%+ gross margins
Note: Net2Phone CEO Stephen Greenberg will host a conference call at 4:30 p.m. EST today. The call-in number is 800-446-2782. The call can be accessed at web.net2phone.com or www.vcall.com
Net2Phone Inc. (Nasdaq: NTOP - News), a leading provider of retail Voice over IP (VoIP) services, today announced results for the third quarter of fiscal 2004 ended April 30, 2004.
Financial highlights for the quarter and recent achievements include:
Selection by Bresnan, Northland, and Coditel and EST Video (both owned by Altice) for cable telephony deployments
3rd consecutive quarter of NGS segment income exceeding NGS capital expenditures
12th consecutive quarter of gross margins above 40%
"We are very pleased with the traction we're seeing on the cable telephony front, having now been selected by cable operators in five countries representing more than 2.3 million homes passed," said Stephen Greenberg, CEO of Net2Phone. "Our footprint-wide deployment with Liberty Cablevision in Puerto Rico has achieved extraordinary quality measures, and we look forward to replicating that high level of performance for our other cable partners with the same commitment to excellence that we have demonstrated to Liberty."
Revenue for the company for the second quarter totaled $21.5 million, an 8% increase as compared with $19.8 million in the prior quarter and $23.8 million in the third quarter of fiscal 2003. Gross margin for the third quarter was above 40% for the 12th consecutive quarter at 40.4%, as compared to 43.3% in the prior quarter and 40.5% in the third quarter of 2003.
Net loss for the third quarter was ($0.5) million compared to net loss of ($9.5) million in the prior quarter and net loss of ($9.3) million in the third quarter of 2003. Net income (loss) includes certain non-operational, non-cash and/or non-recurring items that management excludes in assessing the company's performance. As a result, the company also reports net income (loss) before special and non-cash items(1) (adjusted for depreciation and amortization, minority interests, other income, interest income, non-cash compensation, non-cash services, gain from litigation, inventory obsolescence expense, non-recurring selling, general and administrative expenses and restructuring, severance, impairment and other items), which excludes the impact these aforementioned items have on the company's financial results.
Net loss before special and non-cash items for the quarter was ($3.1) million, essentially stable from ($3.1) million in the prior quarter, and ($3.1) million in the third quarter of 2003. Net income (loss) before special and non-cash items is not a term defined by generally accepted accounting principles (GAAP) and may not be comparable to other similarly titled measurements used by other companies. Such non-GAAP measures should be considered in addition to, and not as a substitute for, performance measures calculated in accordance with GAAP.
The company believes that net income (loss) before special and non-cash items provides investors with a measure of the company's operational and financial progress that corresponds with the measurements used by management. Management uses this measurement, instead of net income (loss), as a basis for allocating resources and making other daily operating decisions. The accompanying table includes a detailed reconciliation of net income (loss) reported in accordance with GAAP to net income (loss) before special and non-cash items.
Capital expenditures during the third quarter were $1.4 million, compared with $1.6 million in the prior quarter, and $1.2 million in the third quarter of 2003. The company reported cash, cash equivalents and marketable securities of $136.8 million as of April 30, 2004, including $22.2 million of restricted funds.
Net2Phone Global Services (NGS)
NGS revenue for the third quarter was $20.1 million, as compared to $19.7 million in the prior quarter and $23.6 million in the third quarter of fiscal year 2003. NGS reported segment income of $1.3 million this quarter, exceeding its capital expenditures by $0.6 million, representing the third consecutive quarter of successfully managing its business profitably. Segment income (loss) is the net income (loss) before special and non-cash items directly attributable to the segment's operations less the allocation of certain corporate expenses.
Net2Phone Cable Telephony (NCT)
NCT revenue for the third quarter was $1.4 million, primarily consisting of Liberty Cablevision of Puerto Rico's purchase of cable telephony infrastructure and technology necessary to support its footprint-wide launch of VoIP services.
About Net2Phone
As leaders in enabling telecom service providers and cable operators with turn-key hosted VoIP telephony services, Net2Phone has routed billions of retail VoIP minutes globally, servicing more than 100,000 users in the US as well as hundreds of thousands of more overseas. Net2Phone's hosted solutions provides partners with residential broadband telephony, calling cards, prefix dialing and enterprise services in over 100 countries using PacketCable, SIP and wireless VoIP technologies and standards. Net2Phone's PacketCable platform provides cable operators with the ability to deliver a primary line replacement service with guaranteed QoS and features such as E911. Traded on the NASDAQ under the symbol NTOP, Net2Phone's strategic partners and investors include Liberty Media Corporation (NYSE: L; LMC.B) and IDT Corporation (NYSE: IDT; IDT.C). For more information about Net2Phone's products and services, please visit www.net2phone.com.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward- looking statements involve risks and uncertainties and actual results could differ materially from those discussed in the forward-looking statements. For this purpose, any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Factors which may affect the Company's results include, but are not limited to, the Company's ability to expand its customer base, the Company's ability to develop additional and leverage its existing distribution channels for its products and solutions, dependence on strategic and channel partners including their ability to distribute the Company's products and meet or renew their financial commitments, the Company's ability to address international markets, the effectiveness of the Company's sales and marketing activities, the acceptance of the Company's products in the marketplace, the timing and scope of deployments of the Company's products by customers, fluctuations in customer sales cycles, customers' ability to obtain additional funding, technical difficulties with respect to the Company's products or products in development, the need for ongoing product development in an environment of rapid technological change, the emergence of new competitors in the marketplace, the Company's ability to compete successfully against established competitors with greater resources, the uncertainty of future governmental regulation, the Company's ability to manage growth, obtain patent protection, and obtain additional funds, general economic conditions and other risks discussed in this press release and in the Company's filings with the Securities and Exchange Commission. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to the Company as of the date thereof, and the Company assumes no obligation to update any forward-looking statement or risk factors.
(1) The schedule accompanying this release provides reconciliations to generally accepted accounting principles (GAAP) for all non-GAAP financial measures mentioned in this release.
Net2Phone, Inc.
Condensed Consolidated Statements of
Operations
(unaudited)
-------- ----------- -------- -------- ---------
(All Numbers in 000's 3Q04 3Q03 2Q04 YTD FY04 YTD FY03
except EPS
Calculation)
April 30, April 30, January April 30, April 30,
2004 2003 31, 2004 2004 2003
---------- --------- -------- --------- --------
Revenue $ 21,451 $ 23,788 $ 19,812 $ 61,667 $ 70,787
Direct cost of
revenue 12,790 14,158 11,243 34,981 40,386
Selling, general and
administrative 11,787 12,739 11,589 35,949 40,961
Depreciation and
amortization 2,668 2,305 2,659 7,815 7,161
Non-cash compensation (7,059) 2,709 2,155 (3,063) 7,058
Non-cash services
provided by IDT 452 2,254 2,706
Restructuring,
severance,
impairment and other
items 421 1,708 833 1,449 7,584
Settlement of Cisco
litigation - (58,034)
-------- --------- -------- -------- --------
Total cost and
expense 21,059 33,619 30,733 79,837 45,116
-------- -------- -------- -------- --------
Income (loss) from
operations 392 (9,831) (10,921) (18,170) 25,671
Interest income, net 591 531 660 1,466 1,930
Other Income (loss) (1,445) (73) 740 11,817 (67)
Income (loss) before
minority interests (462) (9,373) (9,521) (4,887) 27,534
Minority interests (84) - (60)
------- --------- -------- ------- ---------
Net income (loss)
available to common
stockholders $ (462)$ (9,289) $ (9,521) $ (4,887)$ 27,594
Net income (loss) per
common share-basic
and diluted $ (0.01)$ (0.16) $ (0.13) $ (0.07)$ 0.46
Weighted Average
number of common
shares used in the
calculation of basic
net gain/(loss) per
common share 76,031 59,758 71,059 69,058 59,634
Weighted Average
number of common
shares used in the
calculation of
diluted net
gain/(loss) per
common share 76,031 59,758 71,059 69,058 59,711
-------- -------- -------- -------- --------
-------- --------- -------- --------- --------
Cash, cash
equivalents and
marketable
securities(*) $136,756 $102,042 $138,803 $136,756 $102,042
Fixed assets (net) 20,029 27,839 21,133 20,029 27,839
Total assets 173,769 155,204 176,772 173,769 155,204
Total Stockholders'
Equity 135,055 91,661 142,753 135,055 91,661
-------- -------- -------- -------- --------
(*) Includes
Restricted Cash
------- ---------- -------- -------- ---------
Net income (loss)
available to common
stockholders $ (462)$ (9,289) $ (9,521) $ (4,887)$ 27,594
EXCLUDING
---------------------
Minority interests - 84 - 60
Other Income (loss) (1,446) (73) 740 11,817 (67)
Interest income, net 591 531 660 1,467 1,930
Depreciation and
amortization (2,668) (2,305) (2,659) (7,815) (7,161)
Inventory
obsolescence
expense (556) (556)
Non-recurring SG&A
expense 648 168 (415)
Settlement of Cisco
litigation - 58,034
Restructuring,
severance,
impairment and
other items (420) (1,708) (833) (1,449) (7,584)
Non-cash
compensation 7,059 (2,709) (2,155) 3,063 (7,058)
Non-cash services
provided by IDT (452) (2,254) (2,706)
------- ---------- -------- -------- -------
Net income (loss)
before special and
non-cash items $ (3,126)$ (3,108) $ (3,112) $ (8,875)$(10,145)
-------- -------- -------- -------- --------
SEGMENT INCOME (LOSS)
--------------------
The following table summarizes the operating
performance of Net2Phone's business segments:
--------- ---------- -------- -------- ---------
Net2Phone Global
Services (NGS) $ 1,252 $ 325 $ 1,135 $ 3,725 $ 1,621
Net2Phone Cable
Telephony (NCT) (2,382) (2,105) (2,136) (6,593) (6,008)
Corporate / Other (1,996) (1,328) (2,111) (6,007) (5,758)
--------- ---------- -------- -------- ---------
Total $ (3,126)$ (3,108) $ (3,112) $ (8,875)$(10,145)
---------- -------- -------- -------- -------- |
