Net2Phone Reports 3rd Quarter Fiscal 2002 Results
EBITDA losses continue to narrow; Revenue in line with guidance
Note: Net2Phone CEO Stephen Greenberg will host a conference call at 4:30
p.m. EST today. The call can be accessed at www.net2phone.com/corporate/ir/
or www.vcall.com. A replay of the conference call will be available online
NEWARK, NJ - June 13, 2002 - Net2Phone, Inc. (Nasdaq: NTOP), the leading provider
of Voice-over-IP (VoIP) services, announced results for the third quarter of
fiscal 2002 ended April 30, 2002.
Highlights for the third fiscal quarter include:
Revenues for the quarter of $30.6 million, in line with guidance
Gross margins of 45%, significantly above peers in the space
Continued narrowed EBITDA losses (exclusive of charges) by 25% quarterly
to ($11.7) million
"Our improved focus on financial discipline and profitable opportunities
in VoIP serves as a gateway to long-term growth," said Stephen Greenberg,
CEO of Net2Phone. "With restructuring behind us, we can deliver high margin
business in new markets globally through our channel sales group. Additional
benefit will come from our broadband initiative, which we expect to accelerate
cable operators' time to market telephony solutions. We have built the foundation
- now it's time to grow the business prudently and efficiently."
THIRD QUARTER FISCAL 2002:
Consolidated revenues for the third quarter were in line with guidance at $30.6
million, a 19% quarterly decline due to the company's recent restructuring,
which included the scaling back of certain business lines. Consolidated gross
margins for the third quarter stood at 45% excluding charges, an almost fivefold
year over year improvement, driven by the company's continued ability to lower
termination and connectivity costs while maintaining relatively stable average
revenue per minute for both domestic and international termination.
Consolidated EBITDA loss from continuing operations (excluding restructuring
and other charges) was ($11.7) million, a 25% improvement over the corresponding
($15.7) million EBITDA loss in the second quarter of fiscal 2002 and a 57% year
over year improvement.
Consolidated net loss (excluding restructuring, severance, impairment and other
charges) for the third quarter totaled ($24.0) million or ($0.41) per share.
Capital expenditures for the third quarter were $2.6 million, a 72% sequential
reduction over $9.4 million spent in the second quarter. SG&A expenses for
the quarter narrowed by 30% year over year as the company has reduced costs,
including headcount, to align its cost structure with revenues.
Cash, cash equivalents, marketable securities and related investments as of
April 30, 2002 were $121.8 million. The company firmly believes it is sufficiently
funded to reach EPS positive with its current financial standing.
Net2Phone incurred restructuring charges during the quarter of approximately
$114 million, associated with workforce reductions, lease terminations, closure
of unprofitable telecom routes, the impairment of long-lived assets and the
impairment of goodwill in the context of applicable accounting standards. Impaired
assets include network equipment, platform servers, software, customer lists,
acquired technology and office furniture and fixtures.
The company expects its near-term growth to come primarily from selling its
integrated Voice over IP (VoIP) solutions through its channel partners around
the world. For example, India recently opened up for competition in telecom
markets and has legalized VoIP services. Net2Phone is aggressively pursuing
the right partners in that country, setting its sights on the top Indian ISPs
and carriers. The company anticipates quarterly revenue growth to be reinitiated.
Gross margins are expected to stay well above competitors, as the company continues
to keep its wholesale costs down and retain demand on the retail side.
Net2Phone is modifying its EBITDA breakeven target because of the longer time
periods that will be required for the company to begin to fully realize the
opportunities that lie ahead in international markets. The process, which begins
with signing the right partners and culminates with significant consumer usage,
takes anywhere from 120-150 days, and the company is in the process of finalizing
solid partnerships with top ISPs and carriers in international markets, and
expects to begin to realize revenues from these relationships within that time
"This path enables us to be a much larger and more successful company
within an acceptable time frame," commented Greenberg. "It is more
important for us to gain a strong foothold with strong partners in the right
markets. We are back in the growth phase."
Additional benefits could come from Net2Phone's broadband initiative. While
the upside from the broadband effort is not currently modeled into Net2Phone's
fiscal 2003 budget, since many cable operators have displayed interest in our
solution, the company firmly believes this is a market worth pursuing. Net2Phone's
broadband solution enables cable operators to completely outsource their telephony
services while utilizing existing high-speed networks and leveraging their last
mile access into residences.
Founded in 1995, Net2Phone is a leading provider of voice services over IP networks
to consumers and businesses worldwide. With millions of users around the world,
Net2Phone enables toll-quality calls between computers, telephones, and broadband
devices utilizing IP networks. Recognized as the first company to bridge the
Internet with the public switched telephone network, Net2Phone has routed billions
of minutes of traffic over its award-winning network. Traded on the NASDAQ under
the symbol NTOP, Net2Phone's strategic partners and investors include Liberty
Media Corporation (NYSE: LMC.A; LMC.B), AT&T Corporation (NYSE: T), and
IDT Corporation (NYSE: IDT; IDT.B). For more information about Net2Phone's products
and services, please visit www.net2phone.com.
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward- looking
statements involve risks and uncertainties and actual results could differ materially
from those discussed in the forward-looking statements. For this purpose, any
statements contained in this press release that are not statements of historical
fact may be deemed to be forward-looking statements. Factors which may affect
the Company's results include, but are not limited to, the Company's ability
to expand its customer base, the Company's ability to develop additional and
leverage its existing distribution channels for its products and solutions,
dependence on strategic and channel partners including their ability to distribute
the Company's products and meet or renew their financial commitments, the Company's
ability to address international markets, the effectiveness of the Company's
sales and marketing activities, the acceptance of the Company's products in
the marketplace, the timing and scope of deployments of the Company's products
by customers, fluctuations in customer sales cycles, customers' ability to obtain
additional funding, technical difficulties with respect to the Company's products
or products in development, the need for ongoing product development in an environment
of rapid technological change, the emergence of new competitors in the marketplace,
the Company's ability to compete successfully against established competitors
with greater resources, the uncertainty of future governmental regulation, the
Company's ability to manage growth, obtain patent protection, and obtain additional
funds, general economic conditions and other risks discussed in this Report
and in the Company's other filings with the Securities and Exchange Commission.
All forward-looking statements and risk factors included in this document are
made as of the date hereof, based on information available to the Company as
of the date thereof, and the Company assumes no obligation to update any forward-looking
statement or risk factors.
Inc. Condensed Consolidated Statements of Operation