Digital Island Announces Record Fourth Quarter Revenues and Year-End Results
Wednesday, November 3, 1999 04:01 PM
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Customer Base Grows by 37% in Quarter
SAN FRANCISCO, Nov. 3 /PRNewswire/ -- Digital Island, Inc. (Nasdaq: ISLD), a leading provider of network services for
globalizing e-Business applications, announced today its financial results for the fourth fiscal quarter and year-ended
September 30, 1999.
Revenues for the quarter ended September 30, 1999 were $4.9 million, an increase of 33% over revenues of $3.7
million for the quarter ended June 30, 1999 and representing a 433% increase over revenues of $927,000 for the
quarter ended September 30, 1998.
The net loss for the quarter ended September 30, 1999, was $22.0 million, or $0.62 per share, compared with a net
loss for the quarter ended June 30, 1999 of $14.1 million, or $0.50 per share on a pro forma basis, and a net loss of
$5.7 million, or $0.36 per share on a pro forma basis for the quarter ended September 30, 1998.
EBITDA loss (loss before interest, taxes, depreciation, amortization and other non-cash charges) was $20.4 million for
the quarter ended September 30, 1999, compared to EBITDA loss of $12.3 million for the quarter ended June 30, 1999,
and $5.2 million for the quarter ended September 30, 1998.
"As evidenced by our strong results, this has been a phenomenal year for Digital Island on many levels," said Ruann F.
Ernst, President and CEO of Digital Island. "In the quarter we increased our customer base by 37% to 111 including
Digital River, NetGravity, Intraware, Grey Zone Productions and Bell & Howell Information and Learning. In October, we
were pleased to add AsiAlliance.com, our first customer in Hong Kong and the Financial Times to the roster of customers
using our proprietary TraceWare(TM) technology. During the quarter we opened our Hong Kong Data Center extending our
Application Hosting and Content Distribution service into one of the largest potential markets for e-Business."
Ernst added, "We strengthened our product offerings with the launch of our new TraceWare(TM) technology, an Internet
atlas that determines users' country of origin with 96% accuracy. This new feature for our e-Network Services enables
our customers to extend their e-Marketing, e-Sales, e-Support and e-Fulfillment initiatives globally to deliver an
excellent end-user experience. In the quarter, we partnered with Inktomi and RealNetworks to build the first global
streaming media network. This innovative streaming media service is designed to enable high-quality delivery of content
to the end user and most importantly is geographically intelligent, allowing our customers to control the commercial
delivery of video and audio by region."
For fiscal 1999, Digital Island reported revenues of $12.4 million, representing a 431% increase over revenues of $2.3
million in the previous year. The net loss for the fiscal year ended September 30, 1999 was $50.9 million or $1.70 per
share on a pro forma basis, compared with a net loss of $16.8 million or $1.07 per share on a pro forma basis in the
previous year. EBITDA loss for fiscal 1999 was $46.0 million, compared to $15.8 million in the previous year.
"This has been a tremendous period of growth for Digital Island and we are very excited about the market opportunity
before us. We intend to continue to expand our worldwide sales and marketing efforts, invest in new product development
and build strategic relationships with major players within our industry," said Ernst.
On October 25 Digital Island and Sandpiper Networks, Inc. announced the companies had entered into a definitive
agreement to merge subject to approval by shareholders of both parties and standard regulatory approvals. Pursuant to
the terms of the merger, Sandpiper's shareholders will receive approximately 1.07 shares of Digital Island for each
Sandpiper share, warrant and option, or a total of approximately 27 million shares on a fully converted basis of Digital
Island. The merger is expected to close before the end of the first calendar quarter of 2000.
Digital Island(R) is a leading provider of network services for globalizing e-Business applications. Digital Island serves
companies that need to securely and consistently extend business-critical applications for marketing, selling, supporting,
or distributing products via the Internet. Digital Island e-Network Services include global content distribution and
hosting services, localization of the end user online experience and a reliable global Intelligent Network, all of which are
designed to deliver the right content, to the right customer, in the right market, at the right time. The Company has
regional data centers in New York, Santa Clara, Honolulu, London and Hong Kong, connecting directly into 21 countries
with Local Content Managers in more than 13 markets worldwide to provide the ubiquity and reach of the public Internet
with the quality and functionality normally available only in a corporate wide-area network. www.digitalisland.net
DIGITAL ISLAND is a registered trademark of Digital Island, Inc. All other trademarks are properties of their respective
owners.
This release may contain forward-looking statements that involve risks and uncertainties. Important factors which could
cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: the
short operating histories of Digital Island and Sandpiper Networks which makes it difficult to predict their future results
of operations; each company's history of operating losses and expected future losses which could impede its or their
combined ability to address the risks and difficulties encountered by companies in new and rapidly evolving markets; each
company's future operating results could fluctuate which may cause volatility or a decline in the price of the Digital
Island's stock; each company may not be able to price its services above the overall cost of bandwidth causing its financial
results to suffer; common or unforeseen difficulties in completing the merge or in integrating the combined companies'
management, personnel, operations and businesses; and other factors detailed in Digital Island's filings with the
Securities and Exchange Commission including the Form S-1 filings relating to its initial public offering.
DIGITAL ISLAND, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Year Ended
September 30, September 30,
1998 1999 1998 1999
(Unaudited) (Unaudited) (Unaudited)
Revenue $927 $4,936 $2,343 $12,431
Costs and expenses:
Cost of revenue 2,746 13,690 9,038 29,496
Sales and marketing 1,764 6,314 4,847 16,010
Product development 585 2,493 1,694 6,357
General and
administrative 1,326 4,286 3,392 9,848
Deferred compensation
expense 355 933 487 3,207
Total costs and
expenses 6,776 27,716 19,458 64,918
Loss from operations (5,849) (22,780) (17,115) (52,487)
Interest income
(expense), net 166 774 353 1,551
Loss before income
taxes (5,683) (22,006) (16,762) (50,936)
Provision for income taxes 1 -- 2 2
Net loss $(5,684) $(22,006) $(16,764) $(50,938)
Basic and diluted net
loss per share $(2.51) $(0.62) $(7.50) $(4.58)
Weighted shares outstanding
used in per share
calculation 2,260,991 35,735,727 2,236,452 11,127,462
Pro forma basic and
diluted net loss per
share (A) $(0.36) -- $(1.07) $(1.70)
Weighted shares outstanding
used in pro forma per
share calculation (A) 15,744,786 -- 15,637,109 29,942,784
EBITDA (B) $(5,150) $(20,393) $(15,817) $(46,027)
(A) Pro forma net loss per share has been computed by dividing the net
loss by the pro forma weighted shares outstanding. The pro forma
weighted shares assumes the conversion of all preferred stock (which
was converted into common stock at the time of the Initial Public
Offering on June 28, 1999), as if the conversion had occurred at the
beginning of the period.
(b) Loss before net interest expense, income taxes, depreciation,
amortization (including amortization of deferred stock compensation)
and other noncash charges.
DIGITAL ISLAND, INC.
CONDENSED CONSOLIDATED
BALANCE SHEETS
(in thousands, except per share data)
September 30, September 30,
1999 1998
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $5,711 $43,315
Investments 10,123 31,691
Accounts receivable, net 662 3,557
Restricted cash 263 763
Other receivables 532 --
Deferred offering costs 132 --
Prepaid expenses and other 152 1,825
Total current assets 17,575 81,151
Property and equipment, net 4,938 25,273
Other assets 104 1,224
Total assets $22,617 $107,648
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $801 $801
Capital lease obligations 756 3,915
Accounts payable 2,408 11,679
Accrued liabilities 716 4,931
Deferred revenue 11 319
Total current liabilities 4,692 21,645
Bank borrowings, less current portion 884 314
Capital lease obligations, less
current portion 1,551 6,061
Deferred revenue -- 410
Total liabilities 7,127 28,430
Stockholders' equity:
Convertible preferred stock 13 --
Common stock 3 36
Additional paid-in capital 39,182 156,791
Deferred compensation (1,503) (4,033)
Stockholder note receivable (110) (514)
Common stock warrants 29 --
Accumulated deficit (22,124) (73,062)
Total stockholders' equity 15,490 79,218
Total liabilities and
stockholders' equity $22,617 $107,648
SOURCE Digital Island, Inc.
CONTACT: Tom Thompson of Digital Island, 415-738-4550; or general info., Traci McCarty, analysts, Christine
Belonogoff, both of The Financial Relations Board, 415-986-1591, for Digital Island
Quote for referenced ticker symbols: ISLD
¸ 1999, PR Newswire
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