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Cbeyond Reports First Quarter 2012 Results

Stocks in this article: CBEY

Cbeyond, Inc. (NASDAQ: CBEY), (“Cbeyond”), a managed services provider delivering integrated packages of IT infrastructure and communications services to small and medium sized businesses, including network services, virtual and dedicated servers and cloud PBX, today announced its results for the first quarter ended March 31, 2012, including the highest quarterly adjusted EBITDA and free cash flow in its history.

Recent financial and operating highlights include:

  • First quarter 2012 total revenue of $123.8 million, up 4.1% over the first quarter of 2011;
  • Adjusted EBITDA of $23.0 million in the first quarter of 2012 compared with $19.4 million in the first quarter of 2011, and $22.6 million in the fourth quarter of 2011 (see page 10 for reconciliation to net income);
  • Free cash flow (defined as adjusted EBITDA less cash capital expenditures) of $8.1 million in the first quarter of 2012, compared with ($1.4) million in the first quarter of 2011;
  • Net loss of ($1.2) million in the first quarter of 2012, compared with a net loss of ($0.1) million in the first quarter of 2011, which includes $2.3 million of realignment costs;
  • Executed construction contracts with Zayo and FiberLight and placed orders for dark fiber network assets to connect more than 700 buildings;
  • Redeployed sales and support resources to focus on Cbeyond 2.0 opportunity;
  • Average monthly revenue per Core Managed Services customer location (ARPU) of $642 during the first quarter of 2012, compared with $646 in the fourth quarter of 2011 and $668 in the first quarter of 2011; and,
  • Reiterated annual guidance for 2012 of $485 million to $490 million of revenue, $85 million to $90 million of adjusted EBITDA, $55 million to $60 million of cash capital expenditures, and $25 million to $35 million of free cash flow.

Financial Overview and Key Operating Metrics

Financial and operating metrics, which include non-GAAP financial measures, for the three months ended March 31, 2012, include:

For the Three Months Ended March 31,
2011 2012 Change % Change
Selected Financial Data (dollars in thousands)
Revenue $ 118,978 $ 123,843 $ 4,865 4.1 %
Operating expenses $ 120,511 $ 125,168 $ 4,657 3.9 %
Operating income (loss) $ (1,533 ) $ (1,325 ) $ 208 13.6 %
Net income (loss) $ (141 ) $ (1,194 ) $ (1,053 ) N/M
Capital expenditures (total) $ 20,962 $ 17,236 $ (3,726 ) (17.8 %)
Key Operating Metrics and Non-GAAP Financial Measures
Customers (Core Managed Services) at end of period 58,554 62,465 3,911 6.7 %
Net customer additions (Core Managed Services) 1,582 296 (1,286 ) (81.3 %)
Average monthly churn rate (Core Managed Services) 1.3 % 1.5 % 0.2 % 15.4 %
Average monthly revenue per Core Managed Services customer $ 668 $ 642 $ (26 ) (3.9 %)
Adjusted EBITDA (in thousands) $ 19,386 $ 22,974 $ 3,588 18.5 %
Cash capital expenditures $ 20,778 $ 14,836 $ (5,942 ) (28.6 %)

Management Comments

“We are pleased with our progress in the 'Cbeyond 2.0’ business transition that we outlined on our February 16, 2012, earnings call. In fact, the first quarter of 2012 showed our highest level of quarterly adjusted EBITDA and free cash flow in our history, as we re-focused a substantial portion of our sales force to address our Cbeyond 2.0 initiative,” said Jim Geiger, chief executive officer of Cbeyond, Inc. “Our early Cbeyond 2.0 efforts have been rewarded as our sequential ARPU decline was the lowest it has been in the previous 12 quarters. We are confident that we are taking the necessary steps to drive ARPU higher in future periods, as we target accounts with more complex business needs.”

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