Thursday November 2, 5:37 pm Eastern Time
Press Release
deltathree Reports Third Quarter 2000 Financial Results
Revenues Rise 290 Percent in Q3 2000 to $8.6 Million Compared to Q3 1999
NEW YORK--(BUSINESS WIRE)--Nov. 2, 2000-- Hosted Communications Solution Contributes Over 400,000 New
Subscribers in Q3 2000
deltathree (NASDAQ: DDDC - news), the IP communications network and provider of a Hosted Communications Solution for service providers worldwide, today announced results for the third quarter of fiscal year 2000.
deltathree recorded third quarter 2000 revenues of $8.6 million, representing a gain of $6.4 million or a 290 percent increase over the corresponding $2.2 million in revenue recorded in the third quarter of 1999. Non-affiliate revenues during the quarter accounted for $5.6 million or 65 percent of total revenues. Affiliate revenues accounted for the remaining $3.0 million or 35 percent of revenues generated by affiliate sources. In the second quarter of 2000, non-affiliate revenues accounted for 41 percent of total revenues with affiliate revenues accounting for the remaining 59 percent. deltathree remains focused on continuing this trend of increasing non-affiliate revenues and broadening the revenue mix.
Excluding non-cash compensation costs of $1.4 million, net loss was $8.9 million or ($0.31) per diluted share compared to a net loss of $3.9 million or ($0.20) per diluted share for the third quarter ended September 30, 1999. Net loss for the quarter was $10.3 million, or ($0.36) per share, compared to a net loss of $10.7 million or ($0.55) per share in the third quarter of 1999.
Highlights of the Third Quarter 2000 Include:
Launched Hosted Communications Solution in September.
Rebranded retail division as ``iConnectHere.com''.
Revenues increased 290 percent to $8.6 million compared to Q3 1999.
Generated $1.6 million in positive gross margin in Q3 2000.
Subscriber base increased by approximately 1,000,000 to over 4.1 million.
Telephony minutes increased 495 percent to 87 million minutes compared to Q3 1999.
Points of Presence (POP) increased by 36 to 107 worldwide.
Senior management team was enhanced with the addition of Paul White, CFO, Lisa Indovino, Executive Vice President of Marketing and Sales, and Andrew Fink, General Counsel.
Noam Bardin, president and CEO of deltathree, stated, ``The third quarter of 2000 was extremely important in the evolution of deltathree. We executed on several strategically important objectives including the launch of our Hosted Communications Solution and the rebranding of our retail division as iConnectHere.com. Our third quarter revenue gains were also significant and we expect the customer growth from our Hosted Communications Solution to pay significant dividends into the coming year. This progress was bolstered by record performance across our business model metrics ranging from quarterly revenues and subscriber growth to the number of minutes routed on our network and worldwide points of presence. All of this is supported by the growth of our senior management team, which has exponentially increased our ability to execute our strategy.''
deltathree Business Metrics
The deltathree subscriber base grew by approximately 32 percent during the third quarter of 2000. Total subscribers jumped by nearly 1 million to over 4.1 million at quarter end, compared to just over 3.1 million subscribers at the end of the second quarter of 2000. The third quarter 2000 rise in subscribers represents an increase of 3.2 million or 369 percent from the third quarter of 1999. Subscriber numbers for the third quarter 2000 include over 400,000 acquired through the Hosted Communications Solution offering, an increase of over 179 percent from the second quarter of 2000.
Telephony minutes carried over the deltathree network during the third quarter rose 495 percent or 72.4 million minutes to total 87 million minutes, compared with 14.6 million minutes in the third quarter of 1999. The Company carried 19.8 million more minutes in the third quarter 2000 than the second quarter 2000.
deltathree added 35 points of presence worldwide in the third quarter of 2000, raising the total number to 107. New locations added include sites in the Philippines, Mexico, Brazil, Argentina, Nigeria, Jordan and Kuwait. deltathree now has points of presence in over 40 countries.
deltathree Operational Overview
In September 2000, deltathree launched its Hosted Communications Solution, reflecting the formal rollout of a turnkey suite of IP telephony products and services that evolved as deltathree migrated its product offering to an application service provider (ASP) model. The advantages of delivering global IP telephony business applications as an ASP include; scalability, speed to market, low cost of implementation and centralized quality control. Through this offering, service providers in any industry can effectively private label and deploy Internet-based communications products and services to their own customer base. This provides the Company's hosted customers with new sources of revenue and their customers with proven telecommunications products and services. This blend of products and services shifts deltathree's revenue sources away from a primarily minute-based fee structure towards a broader mix of recurring revenue streams.
iConnectHere.com serves as a showcase for deltathree's products and services as well as a test bed for future offerings and product enhancements that can be offered as a part of the Hosted Communications Solution. deltathree also received several accolades during the quarter reflecting the Company's success on this front including being named the best provider of Internet Telephony services in an independent review conducted by PC World magazine for its November issue. deltathree earned the highest marks of all Internet phone companies reviewed by PC World and was cited for its consistently good call quality and an easy-to-use interface. deltathree was also voted best PC-to-Phone service provider in an independent study by SmartMoney magazine this August.
In the second quarter, deltathree articulated its plan to bolster the overall quality of its revenue streams. The first part of the plan was to reduce revenues related to RSL Communications (RSL)(a majority shareholder of deltathree), also known as affiliate revenues, as a percentage of overall revenues. As a result, the percentage of revenue related to traffic generated by RSL and its entities dropped to 35 percent in the current quarter from roughly 59 percent of total revenue in Q2 2000, and 72 percent of total revenue in Q1 2000. The second part of the plan was to diversify revenue streams from a pure ``fee per minute'' basis through the launch of the Hosted Communications Solution. These new sales not only generate per-minute fees but also generate per-customer fees from customer care and support as well as monthly recurring charges from hosting, e-commerce and provisioning.
Mr. Bardin stated, ``RSL revenues were primarily related to breakeven wholesale calling card revenue streams that did not coincide with our long-term path to profitability. As we continue to focus on the quality of revenues, we are choosing to leave any business yielding 5 percent or less to our wholesale peers. In addition, with the implementation and successful launch of the Hosted Communications Solution, deltathree has made significant progress in diversifying our revenue streams and replacing low margin revenues with more strategically important Hosted Communications Solutions revenue.''
Board of Directors
deltathree also announced today that it had named three individuals to the Board of Directors. Mr. Paul Domorski, president and CEO of RSL will assume the role of Chairman of the Board of deltathree replacing Mr. Donald Shassian who left RSL in August of 2000. Prior to joining RSL Mr. Domoski served as president of British Telecom Syncordia Solutions. Syncordia is British Telecom's worldwide value-added solutions business, covering outsourcing, network integration, consultancy, customer relationship management and e-commerce. The deltathree Board of Directors has also approved the addition of Mr. Noam Bardin, president, Co-Founder and Chief Executive Officer of deltathree as well as Mr. Eric Zinterhofer of Apollo Management, L.P.
Conference Call Details
deltathree third quarter earnings conference call will be Webcast live at 5:00 p.m. EDT [2:00 p.m. PDT] today November 2, 2000. Investors are invited to listen via deltathree's Web site, corp.deltathree.com. Please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. A replay of the call will also be available through the deltathree corporate Web site. Those that cannot listen via the Webcast, are invited to listen to the telephone replay of the conference call by dialing 800-475-6701 and entering reservation number 544104, beginning at 8:00 p.m. EDT [5:00 p.m. PDT].
About deltathree:
Founded in 1996, deltathree (http://corp.deltathree.com) is an IP communications network and leading provider of IP-based products and services. The company's Hosted Communications Solution offers service providers Internet-based communication products that include PC-to-Phone calling, Phone-to-Phone calling, unified messaging, and ClickIT(TM) as well as the infrastructure, billing, customer service and e-commerce systems to become a full service telecommunications provider. These products are also offered through deltathree's retail division, iConnectHere.com (www.iConnectHere.com). Through iConnectHere.com and its Hosted Communications Solution, deltathree serves over 4 million individual users around the world.
deltathree routes IP telephony traffic to over 160 countries and for 18 international telecommunications carriers. The company's network consists of 107 Points of Presence in over 40 countries. deltathree received the Best Built Public Network Award for excellence in IP services/applications at SUPERCOMM 2000, and was named the best IP telephony provider by SmartMoney magazine and PC World Magazine.
Except for historical matters contained herein, the matters discussed in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that these forward-looking statements reflect numerous assumptions and involve risks and uncertainties that may affect deltathree's business and prospects and cause actual results to differ materially from these forward-looking statements.
Among the factors that could cause actual results to differ are the inherent uncertainty of financial estimates and projections, the competitive environment for Internet telephony, deltathree's limited operating history, changes of rates of all related telecommunications services, the level and rate of customer acceptance of new products and services, legislation that may affect the Internet telephony industry, rapid technological changes, and other risk factors contained in deltathree's periodic reports on Form 10-K and Form 10-Q on file with the SEC and available through www.sec.gov.
All such forward-looking statements are current only as of the date on which such statement were made. deltathree does not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.
DELTATHREE
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2 0 0 0 1 9 9 9
------- -------
US$ in thousands
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 18,179 $ 89,957
Short-term investments 52,775 11,276
Accounts receivable, net 5,665 903
Due from affiliates 4,769 1,760
Prepaid expenses and other current assets 2,646 3,090
--------- ---------
Total current assets 84,034 106,986
--------- ---------
Investments -- 90
--------- ---------
Property and equipment:
Telecommunications equipment 17,657 9,844
Furniture, fixtures and other 4,326 721
--------- ---------
21,983 10,565
Less - accumulated depreciation 2,962 1,066
--------- ---------
Property and equipment, net 19,021 9,499
--------- ---------
Goodwill, net 16,176 9,457
--------- ---------
Deposits 1,494 800
--------- ---------
Total assets $ 120,725 $ 126,832
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short-term debt due to affiliates $ 13,469 $ 14,752
Accounts payable 5,975 2,580
Due to affiliates 3,910 626
Deferred revenues 391 538
Other current liabilities 6,306 5,548
--------- ---------
Total current liabilities 30,051 24,044
--------- ---------
Long-term liabilities:
Long-term debt 474 --
Severance pay obligations 223 208
--------- ---------
Total long-term liabilities 697 208
--------- ---------
Total liabilities 30,748 24,252
--------- ---------
Stockholders' equity:
Class A Common stock, par value $0.001 9 9
Class B Common stock, par value $0.001 20 20
Additional paid-in capital 168,621 157,891
Receivable for capital stock (83) (1,232)
Deferred compensation (5,217) (10,670)
Accumulated deficit (73,373) (43,438)
--------- ---------
Total stockholder's equity 89,977 102,580
--------- ---------
Total liabilities and stockholder's
equity $ 120,725 $ 126,832
========= =========
DELTATHREE
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
September 30,
2 0 0 0 1 9 9 9
------- -------
(Unaudited)
US$ in thousands
(except share data)
Revenues:
Affiliates $ 2,969 $ 991
Non-affiliates 5,566 1,198
------------ ------------
Total revenues 8,535 2,189
------------ ------------
Costs and operating expenses:
Cost of revenues 6,944 2,271
Research and development expenses 1,952 292
Selling and marketing expenses 5,328 1,626
General and administrative expenses
(exclusive of non-cash 1,736 600
compensation expense shown below)
Non-cash compensation expense 1,374 6,800
Depreciation and amortization 2,150 1,126
------------ ------------
Total costs and operating expenses 19,484 12,715
------------ ------------
Loss from operations (10,949) (10,526)
Interest income (expenses), net 608 (158)
------------ ------------
Net loss $ (10,341) $ (10,684)
============ ============
Net loss per share -
basic and diluted (in US$) $ (0.36) $ (0.55)
============ ============
Weighted average shares outstanding -
basic and diluted (number of shares) 28,932,232 19,569,459
============ ============
Nine months ended Year ended
September 30, December 31,
2 0 0 0 1 9 9 9 1 9 9 9
------- ------- -------
(Unaudited)
US$ in thousands (except share data)
Revenues:
Affiliates $ 12,356 $ 4,077 $ 7,431
Non-affiliates 10,615 2,355 3,621
------------ ------------ ------------
Total revenues 22,971 6,432 11,052
------------ ------------ ------------
Costs and operating expenses:
Cost of revenues 18,854 5,585 9,723
Research and development
expenses 4,726 721 1,233
Selling and marketing
expenses 16,326 3,087 7,403
General and administrative
expenses (exclusive of
non-cash compensation
expense shown below) 4,572 2,014 2,754
Non-cash compensation
expense 5,530 8,926 19,116
Depreciation and
amortization 5,407 2,642 3,721
------------ ------------ ------------
Total costs and operating
expenses 55,415 22,975 43,950
------------ ------------ ------------
Loss from operations (32,444) (16,543) (32,898)
Interest income (expenses),
net 2,509 (915) (873)
------------ ------------ ------------
Net loss $ (29,935) $ (17,458) $ (33,771)
============ ============ ============
Net loss per share -
basic and diluted (in US$) $ (1.04) $ (0.89) $ (1.65)
============ ============ ============
Weighted average shares
outstanding - basic and
diluted (number of shares) 28,727,148 19,569,459 20,418,457
============ ============ ============
--------------------------------------------------------------------------------
Contact:
deltathree, New York
Mr. Paul White
Chief Financial Officer
212/500-7718
or
Ms. Sharon Tolpin
Director of Corporate Communications
212/500-4850
or
Investor Relations:
Thomson Financial / Carson, New York
Mr. Erik Knettel
212/701-1963
or
Media:
Clifford Public Relations, New York
Mr. Josh Epstein
212/358-0800 |
