PR Newswire, 05/17/2001 16:29
GlobalNet Reports Significant Reduction in EBITDA Loss in Q1
Record Gross Margins, Substantial Reduction in Operating Expenses
Confirm Expectations for Positive EBITDA in Second Quarter
LOMBARD, Ill., May 17 /PRNewswire/ -- GlobalNet, Inc. (NASDAQ:GBNE), citing record gross margins and stringent cost controls, today reported a 74.2 percent reduction in the EBITDA loss -- earnings before interest, taxes, depreciation and amortization, exclusive of non-cash stock compensation and bad debt expense -- to $337,000, or ($0.01) per share, from $1.3 million, or ($0.04) per share, in the previous quarter. The improved EBITDA results were primarily accomplished through a 419 basis point increase in gross margins to 11.7 percent from 7.5 percent in the previous quarter, and a 21.2 percent reduction in cash operating expenses to $2.5 million from $3.1 million in the previous quarter.
Solid Outlook For Q2 And Beyond
"Our focus on gross margins and stringent cost-control measures are accelerating our path to profitability," said Chairman and Chief Executive Officer Robert J. Donahue. "We expect to be EBITDA positive in the second quarter of 2001, becoming the first Voice over IP (VoIP) carrier to achieve this milestone. We decided to forego some revenue growth in the first quarter in order to reduce our credit exposure with certain customers and ensure that our future growth will come at higher gross margins."
GlobalNet reported first-quarter bad debt expense decreased by 62.7 percent to $150,000 from $402,000 in the previous quarter as a result of the company's efforts to reduce its credit exposure. Cash operating expenses decreased by 21.2 percent to $846,000 per month for the first quarter of 2001 from $1.0 million for the fourth quarter of 2000 as a result of cuts in non-revenue generating expenses.
Expanding Customer Base
"Although we have implemented very strict credit policies and are focusing on larger customers with solid credit histories in order to minimize bad debt expense, we are continuing to expand our customer base and expect substantial growth in the second quarter," Donahue said. "GlobalNet has added 33 new customers-including four Tier 1 carriers that are in the interconnection process-since the beginning of the year and our existing customers are continually adding capacity into our network."
Q1 Financial Summary
Revenues for the quarter ended March 31, 2001, increased 30.0 percent to $18.8 million from $14.5 million a year earlier, and decreased by 20.5 percent from the previous quarter. The company's gross margin increased to $2.2 million, or 11.7 percent of net revenue, for the first quarter of 2001, from $834,936, or 5.8 percent of revenue, a year earlier and $1.8 million, or 7.5 percent of net revenue, for the fourth quarter of 2000. The company attributed the improvement to the addition of new direct routes and the increased competitiveness of existing routes.
The first-quarter net loss was $3.1 million, or ($0.11) per share, compared with $3.8 million, or ($0.13) per share, in the previous quarter.
Other Key Developments
-- Proprietary Interoperability Solution -- GlobalNet internally
developed a solution for connecting diverse IP networks that will
facilitate expanding to new markets, provide increased flexibility in
selecting affiliates and, ultimately, lead to lower costs. The
solution allows calls to pass from one VoIP network to another
without using equipment from the same vendor and without causing
deterioration in the quality of the connection.
-- Deployment of an Enterprise Management System -- GlobalNet has
deployed an advanced suite of applications to monitor faults and
availability of services throughout its rapidly expanding high-speed
global network. This system provides real-time, proactive monitoring
of faults throughout the GlobalNet infrastructure, allowing network
engineers and operations personnel to address potential problems
before they cause disruptions in service.
-- Additional Financing -- In April, we secured a commitment for up to
$6 million of additional financing from an existing shareholder. The
first trench of this financing represented a cash infusion of
approximately $2 million, net of placement fees and certain expenses.
In February, the Company effected a private placement that reported
net proceeds of $615,000, net of offering costs.
-- Agreement with Cisco Systems -- In April, we entered into an
agreement with Cisco that will allow us to purchase and finance up to
$8.7 million of Cisco equipment. This agreement will ensure that the
company has the necessary equipment to expand its global VoIP
network.
-- Refinancing of Existing Capital Leases -- In May, the Company
refinanced a $2.8 million capital lease, ending a dispute with a
former lender. GlobalNet's monthly lease payments will decrease by
approximately $80,000 as a result of a reduction of the interest cost
to 11.8 percent from 22.0 percent and the extension of the term to 36
months from 18 months.
-- Retention of an Investment Bank -- GlobalNet retained Ladenburg,
Thalmann & Co. as its investment bank and financial advisor to assist
it in raising additional capital and with investment banking services
relating to mergers and acquisitions. Ladenburg Thalmann, founded in
1876 and a New York Stock Exchange member since 1879, is a full-
service investment banking and brokerage headquartered in New York
City and with regional offices in Los Angeles, Boca Raton (FL),
Cleveland and Great Neck (NY).
-- Retention of an Investor Relations Firm -- GlobalNet retained The
Investor Relations Company (IRC) to enhance the company's
communications with the professional investment community, retail
investors and the news media. IRC is a 19-year old full-service
international financial public relations consulting firm with
headquarters in Des Plaines, Illinois.
About GlobalNet
GlobalNet, Inc. provides international voice, data and Internet services over a private IP network to international carriers and other communication service providers in the United States and Latin America. GlobalNet's state- of-the-art IP network, utilizing the convergence of voice and data networking, offers customers economical pricing, global reach and an intelligent platform that guarantees fast delivery of value-added services and applications. The company, through its facilities in the U.S. and Latin America and arrangements with affiliates worldwide, can carry traffic to more than 240 countries.
Safe Harbor Statement
Forward-looking statements and comments in this news release are made pursuant to the safe harbor provisions of the Securities and Exchange Commission Act of 1934. Certain statements, which describe the company's intentions, expectations or predictions, are forward-looking and are subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the impact of rapid technological and market change; general industry and market conditions and growth rates; international growth and global economic conditions, particularly in emerging markets and including interest rates and currency exchange rate fluctuations; and the impact of consolidation in the technology industry. These risks may further be discussed in periodic reports and registration statements to be filed by the company from time to time with the SEC.
GLOBALNET, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three months ended March 31, 2001 and 2000
(Unaudited)
March 31, March 31,
2001 2000
Revenue $18,835,614 14,486,390
Operating expenses:
Data communications and
telecommunications 16,633,159 13,651,454
Network research and development
(exclusive of $126,913
for the 3 months ended March 31,
2001 reported below as
non-cash stock compensation) 1,265,060 262,018
Selling and marketing 96,745 21,783
General and administrative (exclusive
of $963,415 for
the 3 months ended March 31, 2001
reported below as
non-cash stock compensation) 1,177,243 578,279
Bad debt expense 150,000 _
Depreciation and amortization 1,198,617 415,984
Non-cash stock compensation 1,090,328 _
Total operating expenses 21,611,152 14,929,518
Operating loss (2,775,538) (443,128)
Interest expense, net (311,216) (282,447)
Net loss $(3,086,754) (725,575)
Weighted average number of shares (pro
forma in 2000)
outstanding 29,159,894 20,000,000
Basic and diluted loss per share (pro
forma in 2000) $(0.11) (0.04)
GLOBALNET, INC. AND SUBSIDIARY
Consolidated Balance Sheet
March 31, 2001 (Unaudited)
March 31,
Assets 2001
Current assets:
Cash [A] $711,837
Restricted cash 173,507
Accounts receivable, net of allowance
for doubtful
accounts of $514,000 5,595,244
Prepaid expenses and other current
assets 445,516
Total current assets 6,926,104
Property and equipment, net 9,663,526
Intangible assets, net 1,566,668
Total assets $18,156,299
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $11,202,512
Accrued expenses 455,649
Deferred revenue 25,710
Current portion of capital lease
obligations 3,867,352
Total current liabilities 15,551,224
Capital lease obligations, net of
current portion 5,471,514
Stockholders' deficit:
Common stock; 100,000,000 shares
authorized, $0.001 par value;
31,865,450 shares issued and
outstanding at March 31, 2001 31,865
Additional paid-in-capital 24,219,072
Accumulated deficit (18,712,523)
Deferred compensation (8,404,852)
Total stockholders' deficit (2,866,438)
Total liabilities and
stockholders' deficit $18,156,299
Notes
[A] The cash balance at March 31, 2001 does not include the private
placement effected in April with net proceeds of approximately $2
million.
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http://tbutton.prnewswire.com/prn/11690X86529156 SOURCE GlobalNet, Inc.
-0- 05/17/2001
/CONTACT: Pere Valles, Chief Financial Officer of GlobalNet, Inc., 630-652-1330, or Karl Plath of The Investor Relations Company, 847-296-4200, for GlobalNet, Inc./
/Web site: http://www.gbne.net /
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