Message #16 From:
Stock News Bot Date: November 2, 2006 05:30:00 AM
EASY News EasyLink Reports Third Quarter 2006 Results
PISCATAWAY, N.J.--(BUSINESS WIRE)--EasyLink Services Corporation (NASDAQ: EASY), a leading global provider
of outsourced business process automation services that transform manual
and paper-based business processes into efficient electronic processes,
reported financial results for the third quarter ended September 30,
2006.
Revenues for the third quarter of 2006 were $18.7 million as compared to
$18.9 million for the second quarter of 2006 and $19.7 million for the
third quarter of 2005. Revenues for the second and third quarters of
2006 included approximately $0.1 million and $0.7 million, respectively,
related to a previously announced software licensing arrangement. Gross
margin was 63% in the third quarter of 2006 as compared to 58% in the
second quarter of 2006 and 59% in the third quarter of 2005. Gross
margin for the third quarter of 2006 included approximately $0.5 million
of credits from telecommunications carriers and the expected refund of
Federal excise taxes previously paid. Excluding the impact of these
credit adjustments, gross margin improved 3 percentage points to 61% for
the quarter as we begin to realize the benefits of the consolidation of
our facilities to our Piscataway, NJ headquarters. Loss from continuing
operations was $431,000 or approximately $.04 per share for the third
quarter of 2006 as compared to a net loss of $89,000, or $.00 per share
for the second quarter of 2006 and net income of $344,000 or $.04 per
share for the third quarter of 2005. All of the per share amounts have
been adjusted to reflect the Company’s 1 for
5 reverse stock split completed on August 28, 2006.
The loss from continuing operations for the third quarter includes
approximately $0.5 million in interest expense consisting of termination
fees and the expensing of deferred costs associated with our previous
lender upon the refinancing of our debt with CAPCO. Net income for the
third quarter of $0.5 million includes $0.9 million from discontinued
operations for the reversal of the accrual related to litigation
associated with the Company’s former
India.com business. The US District Court for the Southern District of
New York ruled in favor of the Company and denied the defendant’s
appeal on this matter.
The Company further reported that it achieved earnings before interest,
taxes, depreciation and amortization from continuing operations (“EBITDA”)
of $1.3 million in the third quarter of 2006, as compared to EBITDA in
the second quarter of 2006 of $941,000 and EBITDA in the third quarter
of 2005 of $1.9 million. A reconciliation of this non-GAAP financial
measure to the most directly comparable GAAP financial measure,
operating cash flows, together with reconciliation to net income or loss
for all periods presented, is attached. The Company considers EBITDA to
be a financial indicator of its operational strength, its ability to
service debt, and its capacity to make new investments in its services.
The Company’s cash and cash equivalents
balance of $6.2 million at the end of the third quarter remained
relatively unchanged from the $6.3 million balances at June 30, 2006 and
December 31, 2005. Net cash from operating activities amounted to $1.2
million for the current quarter and $1.9 million for the nine months
ended September 30, 2006.
Thomas Murawski, Chairman, President and Chief Executive Officer of
EasyLink, said,
“Third quarter results demonstrated
continuing growth in our Transaction Management Services (TMS) business.
TMS revenue grew sequentially by over 20% to just over $5.9 million for
the quarter, on the strength of the one-time software sale to a Fortune
20 company. Excluding the one time sale, TMS revenue grew just under
$0.4 million or 8%, which was less than we expected. Revenue in the
quarter was unfavorably impacted by implementation delays from already
contracted deals with large corporations. We experience this from time
to time, typically on large projects where customers introduce delays
due to resource contention, greater than anticipated project complexity
or integration issues on their end. We also expect some of these delays
to continue into the fourth quarter. It’s
important to note that we have not lost the customers but rather have
delayed the revenue based on revised implementation schedules. On the
expense side, we are beginning to see the benefits of our cost reduction
programs in improving gross margins and we expect the improving trend to
continue. Operating expenses however, were unfavorably impacted on two
fronts; legal expenses related to the patent infringement lawsuit
initiated by Dynamic Depth which we expect to continue into the fourth
quarter and increased sales and marketing spending, which will not
repeat in the next quarter”.
Murawski added “In this report we have also
begun to separately break out EDI revenues, a Transaction Delivery
Service used by companies to send and receive commercial transactions
such as purchase orders, invoices and shipping information
electronically. As we have mentioned previously, EDI, has delivered
stable revenues and strong contribution margins over the past several
years. We expect EDI to be relatively stable this year, in spite of the
fact that we recently lost one of our largest EDI customers as a result
of a merger with a company who owned a competing EDI provider. Going
forward, we will break out EDI revenues in our quarterly reports to
provide greater visibility into our revenue dynamics which show our
combined TMS growth business and a stable EDI business already larger
than a declining TDS legacy business”.
For the third quarter of 2006 in comparison to the second quarter of
2006 and the third quarter of 2005, revenues (in thousands) for the
Company’s services were as follows:
3rd Quarter
2006
2nd Quarter
2006
%
Increase/
(Decrease)
3rd Quarter
2005
%Increase/
(Decrease)
TMS
$
5,927
$
4,912
20.7%
$
4,513
31.3%
TDS - EDI
$
4,480
$
4,712
(4.9%)
$
4,578
(2.1%)
TDS - Other
$
8,282
$
9,228
(10.3%)
$
10,610
(21.9%)
$
18,689
$
18,852
(0.9%)
$
19,701
(5.1%)
This table has been changed from prior quarters to provide greater
investor visibility into the dynamics of EasyLink’s
Transaction Delivery Services (TDS) business, which is comprised of a
stable EDI business and declining Telex, E-Mail, and Text-to-Fax
businesses.
Business Outlook
The following statements are forward looking and actual results may
differ materially due to factors noted at the end of this release, among
others.
For the fourth quarter EasyLink expects:
Revenues in the range of $17.6 to $18.1 million with TMS revenues in
the range of $5.3 to $5.4 million, EDI revenue in the range of $4.3 to
$4.4 million and TDS revenues in the range of $8.0 to $8.3 million.
Earnings in the range of break even to a net loss of $.04 per share.
For the year 2006:
Revenues are expected to be approximately $74 million.
Earnings are expected to be in the range of breakeven to a net loss of
$.04 per share.
Quarterly Conference Call
EasyLink will host its quarterly conference call today at 10:30 a.m.
EST. Listeners should call five minutes prior to the start of the call
to 800/340-8363 and the reservation number is 9165505. The call will
also be broadcast over the Internet. Online listeners should visit the
investor relations’ pages of the EasyLink Web
site, www.EasyLink.com, or www.streetevents.com
prior to the start of the call for login information. If you are unable
to participate, the online archive of the broadcast will be available on
the investor relation’s pages of www.EasyLink.com
within two hours of the live call through 11:00 p.m. EST November 24.
You can also access the replay by calling 800/642-1687 and entering the
reservation number 9165505.
About EasyLink Services Corporation
EasyLink Services Corporation (NASDAQ: EASY), headquartered in
Piscataway, New Jersey, is a leading global provider of outsourced
business process automation services that enable medium and large
enterprises, including 60 of the Fortune 100, to improve productivity
and competitiveness by transforming manual and paper-based business
processes into efficient electronic business processes. EasyLink is
integral to the movement of information, money, materials, products and
people in the global economy, dramatically improving the flow of data
and documents for mission-critical business processes such as client
communications via invoices, statements and confirmations, insurance
claims, purchasing, shipping and payments. Driven by the discipline of
Six Sigma Quality, EasyLink helps companies become more competitive by
providing the most secure, efficient, reliable, and flexible means of
conducting business electronically. For more information, please visit www.EasyLink.com.
This news release may contain statements of a forward-looking nature
relating to future events or financial results of EasyLink Services
Corporation. Investors are cautioned that such statements are only
predictions and actual events or results may differ materially. In
evaluating such statements, investors should specifically consider the
various factors that could cause actual events or results to differ
materially from those indicated from such forward-looking statements.
These include: the ability to service our remaining indebtedness; the
ability to continue as a going concern being dependent upon the ability
to generate sufficient cash flow to meet our obligations on a timely
basis, to obtain additional financing or refinancing as may be required,
and to achieve and maintain profitable operations; the ability to
attract additional customers or to expand services sold to existing
customers; the ability to successfully implement our business strategy;
the ability to commence service for new customers on a timely basis and
to ramp usage by such customers in accordance with our expectations; and
significant competition. These and other risks and uncertainties are
described in more detail in the Company's filings with the Securities
and Exchange Commission.
