Hi Doug and thread;
TALK - if anything was going to orchestrate a huge
increase in stock price, changing your name to
TALK.com on Monday, and bring out a good earnings
report Tuesday morning.
Tuesday April 27, 7:47 am Eastern Time
Company Press Release
SOURCE: TALK.com Inc.
TALK.com Posts Record Earnings of $31.3
Million or $ 0.50 Per Share
NEW HOPE, Pa., April 27 /PRNewswire/ -- TALK.com Inc. (Nasdaq: TALK - news), the nation's
largest provider of e-commerce telecommunications services reported record first quarter earnings of
$31.3 million or $0.50 per share for the three months ending March 31, 1999 compared to a loss of $0.65
for the same three month period of 1998. Excluding extraordinary gains, first quarter earnings were $12.3
million or $0.20 per share. Revenue for the first quarter was $110.6 million, an increase of 21% over
revenue of $91.1 million for the same three-month period in 1998.
''We are pleased that we exceeded expectations across the board, including revenue and income, and that
TALK.com has verified its profitable e-commerce business model,'' said Gabe Battista, Chief Executive
Officer and Chairman of TALK.com. ''We remain confident that we will continue to expand our product
portfolio and distribution channels on the Internet and provide an expanding customer base new high
quality products.''
Quarterly Highlights:
Improved Financial Position -- The Company's current cash position is approximately $35 million and
shareholders' equity has improved by $67.9 million at the end of the quarter. Long-term debt outstanding
at the end of the quarter was $94 million, down significantly from $500 million a year ago. All margin
indebtedness was eliminated at the beginning of the quarter. The Company's improved balance sheet and
generation of strong free cash flow from operations support its BB credit rating from Standard & Poors.
Six-fold Increase in E-Commerce Telecom Revenue -- For the quarter ended March 31, 1999, revenue
generated from online telecom customers grew by 607% to $71.0 million from $11.7 million in the first
quarter of 1998. The growth was driven by significant increases throughout 1998 and in the first quarter
of online customers. Based on Yankee Group estimates of electronically billed consumers, TALK.com
has the largest market share in e-commerce telecom services. Given current subscriber growth,
TALK.com remains confident in the sequential growth forecasted in analyst models.
Gross Margins Doubled -- The Company has improved its gross margin to 33% which is a 100% increase
over the 16.5% gross margin in the first quarter of 1998 and a 32% increase over the 25% gross margin
in the fourth quarter of 1998. Margin expansion was driven primarily by network efficiencies. The
Company expects the gross margin to continue to improve throughout 1999.
Expansion of Real Time E-commerce Engine -- The Company recently established its new TALK.com
web site which can handle thousands of users simultaneously to compliment its present industry leading
online revenue from its AOL partnership. Using its new brand of TALK.com? to create a popular internet
hub for online and offline communications, the Company expects to expand the awareness to the Internet
community through advertising and business partnerships so that easy online signup, the nations only
''real time'' billing information, low rates, online customer service and convenient credit card payment
will be available to new sets of customers.
Strategic Re-Focus of Assets -- The Company reached an agreement to sell the non-strategic assets of the
former Symetrics business and will no longer have management and payroll responsibility for
approximately 100 employees in Melbourne, Florida. These assets were no longer relevant to the
Company's e- commerce strategy. Despite the sale of unprofitable revenue associated with Symetrics, the
Company expects to meet its sequential growth targets. Also the Company is no longer the guarantor of
the Communications Telesystems International (WorldxChange) note and any financial obligations with
WorldxChange have terminated.
The following contains operating results for the three months ended March 31, 1999 and 1998 and
balance sheet highlights as of March 31, 1999 and December 31, 1998:
TALK.com INC.
Operating Results
(In Thousands, except per share amounts)
Three Months Ended
March 31
1999 1998
Sales $110,572 $ 91,146
Cost of sales 74,698 76,580
Gross profit 35,874 14,566
Other operating expenses 23,519 78,268
Operating income (loss) 12,355 (63,702)
Investment and other income
(expense), net (21) (4,814)
Income (loss) before provision
(benefit) for income taxes 12,334 (68,516)
Provision (benefit) for
income taxes -- (26,721)
Income (loss) before
extraordinary gain 12,334 (41,795)
Extraordinary gain 18,997 --
Net income (loss) $ 31,331 $(41,795)
Basic Earning Per Share:
Income (loss) before
extraordinary gain $ 0.21 $ (0.65)
Extraordinary gain 0.32 --
Net income (loss) $ 0.53 $ (0.65)
Weighted average common
shares -- Basic 58,909 64,153
Diluted Earnings Per Share:
Income (loss) before
extraordinary gain $ 0.20 $ (0.65)
Extraordinary gain 0.30 --
Net income (loss) $ 0.50 $ (0.65)
Weighted average common
and equivalent shares
- Diluted 62,335 64,153
TALK.COM INC.
Balance Sheet Highlights
(In thousands)
March 31, 1999 December 31, 1998
Cash and marketable
securities $ 31,064 $ 92,712
Other current assets 51,195 57,057
Total current assets 82,259 149,769
Other assets 66,242 127,291
Current liabilities 61,244 141,208
Other liabilities 26,550 30,250
Convertible debt 94,285 242,387
Stockholders' equity (68,867) (136,785)
TALK.com is the nation's largest e-commerce telecommunications provider through an exclusive
arrangement with America Online, Inc. and utilizes its Company owned state of the art network -- One
Better Network (''OBN'').
Certain of the statements contained herein may be considered forward- looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such statements are identified by the use of forward-looking words or phrases, including, but not
limited to, ''estimates'', ''projected'', ''expects'', ''expected'', ''anticipates'' and ''anticipated''. These
forward-looking statements are based on the Company's current expectations. Although the Company
believes that the expectations reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been correct. Forward-looking statements involve
risks and uncertainties and the Company's actual results could differ materially from the Company's
expectations. Important factors that could cause such actual results to differ materially include, among
others, adverse developments in the Company's relationship with AT&T and AOL, increased price
competition for long distance service, failure of the marketing of long distance services under the AOL
Agreement or the need to incur greater marketing costs to maintain expected customer bases, attrition in
the number of end users, increased implementation of PIC freezes by local telephone companies, the
occurrence of yet generally unidentified problems related to the Year 2000 problem or other like date
identification issues in computer systems and changes in governmental policy, regulation and
enforcement. Additional information concerning these risks and uncertainties are contained in the
Company's filings with the Securities and Exchange Commission, including the Company's report on
Form 10-K for the year ended December 31, 1998, as amended, and its Report on Form 8-K dated
January 20, 1999, including the Risk Factors exhibit included in the Report. The Company undertakes no
obligations to update its forward-looking statements.
Gabe Battista, TALK.com's Chairman and Chief Executive Officer will host a conference call on
Tuesday, April 27, 1999 at 10:00 a.m. Eastern Standard Time.
SOURCE: TALK.com Inc.
Allan P
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