ATLANTA, Nov. 7, 2005 (PRIMEZONE) -- Interland (Nasdaq:INLD), a leading provider of websites and online services for small and medium-sized businesses (SMBs), today reported results for its fourth quarter and fiscal year ended August 31, 2005.
The quarter was highlighted by the appointment of Jeffrey M. Stibel as CEO and Director. The Board of Directors also added three other new members, including Seymour Holtzman as Chairman. In addition, Interland sold its dedicated server assets to Peer 1 Network for approximately $14 million in cash.
"While these results are a reflection of previous management's performance, since my arrival at the end of the quarter, Interland has begun a definitive restructure geared to improving the business," stated Jeff Stibel, President and CEO, Interland. "At our core, we are focused on providing websites and online services that create a powerful Web presence for small and medium-sized businesses. Our goals going-forward are to stabilize the business, grow our subscriber base, take advantage of our under-utilized assets, and move toward profitability to increase shareholder value."
Summary of Fiscal Fourth Quarter 2005 Quarter Results:
------------------------------------------------------
-- Total revenues for the quarter were $20.6 million, down 7.6%,
or $1.7 million from $22.3 million, in the third quarter.
-- Net loss was $6.2 million, or negative $0.38 per share, flat
from $6.2 million, or negative $0.39 per share, in the third
quarter.
-- Earnings before interest, taxes, depreciation, and amortization
("EBITDA")(a) for the quarter was negative $2.1 million, down
$1.6 million from negative $0.5 million in the third quarter.
-- Cash and investment position, which includes cash and
cash equivalents of $16.9 million and restricted investments of
$9.6 million, was $26.5 million (excludes approximately
$11.4 million of net proceeds from the dedicated server assets
sale to Peer 1 received in September), compared to $33.7 million in
the previous quarter.
Summary of Results for the Fiscal Year Ended August 31, 2005:
-------------------------------------------------------------
-- Total revenues for the year were $88.6 million, down 13.8%
versus $102.7 million year over year.
-- Net loss was negative $19.9 million, or negative $1.24 per
share, versus negative $104.7 million, or negative $6.50 per share
in the previous year.
-- EBITDA(a) for the year was positive $0.5 million, from negative
$72.1 million in the previous year (negative $72.1 million from
fiscal 2004 included $74 million in goodwill intangible and asset
impairments write-down).
"Interland strengthened its team and business with the addition of new management and a new philosophy that embraces our fundamentals," stated Gonzalo Troncoso, Executive Vice President and CFO. "The company has a solid reputation in the SMB marketplace and is well-positioned to take advantage of its core competencies. With $26.5 million of cash (not including the proceeds from the dedicated server assets deal), 280 employees and Sarbanes-Oxley 404 compliance under its belt, Interland is prepared to focus on its core strengths of providing high-quality websites and online services to the SMB market."
"In the short time since I joined Interland, the company has announced the sale of its dedicated server assets and multiple data centers for approximately $14 million in cash, a 38% reduction in head count, and a restructuring of the organization," Stibel continued. "We have also successfully concluded our first Sarbanes-Oxley Section 404 certification, demonstrating the effectiveness of our internal controls. We are taking a very thorough look at the business and are committed to growing key strategic areas such as direct and indirect sales, intellectual and human capital, technology and software development and our brand in the marketplace. I am encouraged by our efforts thus far and am confident in the new management team we are building."
As announced by previous management, Interland received a termination notice from Verizon in November 2004. The contract is set to expire on December 31, 2005. Interland anticipates that Verizon will migrate its customers in 2006. Verizon accounted for approximately 2.1% of Interland's August 2005 revenue. The company will maintain a smaller agreement with Verizon and continue to provide its SiteBuilder services.
For further information on the quarter and fiscal year, please refer to the Company's Form 10-K.
About Interland
Interland, Inc. (Nasdaq:INLD) is a leading provider of websites and online services focused on helping small and medium-sized businesses achieve success by providing the knowledge, services and tools to build, manage and promote businesses online. Interland offers a wide selection of online services, including standardized web hosting, ecommerce, application hosting, website development, online marketing and optimization tools. For more information about Interland, please visit www.interland.com or call at 800-336-9883.
Interland will be hosting a conference call today at 9:30AM ET (6:30AM PT) to discuss its quarterly and year end results. A live webcast of the call can be accessed on the investors section of the company's website at www.interland.com. A replay of the call will be available on the site for seven days.
(a) EBITDA from continuing operations is a non-GAAP financial measure that is most directly comparable to the GAAP financial measure of Net Loss from continuing operations. Reconciliations of the non-GAAP measure to both Net Loss from continuing operations, as well as to Net Cash Used in Operating Activities, are attached.
Forward-looking Statements
Except for the historical information contained in this press release, statements in this press release may be considered forward-looking statements. These forward-looking statements include, but are not limited to: our plans to stabilize the business, grow our subscriber base and product offerings, take advantage of our under-utilized assets, move toward profitability, and take advantage of core competencies; and other statements concerning matters that are not historical facts. Actual results may differ materially from those contained in the forward-looking statements in this press release. Factors which could affect these forward-looking statements, and Interland's business, include but are not limited to: the ability to operate within budgeted expense, the ability of the company to improve customer satisfaction, reduce churn, and expand its customer base as planned, our growing dependence on our reseller and other indirect sales channels, general economic conditions, the impact of competition, quarterly fluctuations in operating results, the loss of customers with failing businesses and customer churn in general, customer acceptance of new products and services, the possible lack of availability of our restricted investments, the retention of key employees, the company's ability to make infrastructure investments at a lower cost per customer than its competition, potential liabilities from the sale of our dedicated server assets, possible disruptions due to our data centers being maintained by third parties, higher than expected costs of litigation and the impact of liabilities that could carry over from Micron Electronics' discontinued operations. Certain of these and other risks associated with Interland's business are discussed in more detail in its public filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K, and its proxy statement. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not undertake to update its forward-looking statements.
INTERLAND, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
For the For the
Fiscal Years Ended Quarter Ended
-------------------- -----------------
8/31/05 8/31/04 8/31/05 5/31/05
-------------------- -----------------
Revenues $ 88,608 $ 102,745 $20,618 $22,307
Operating costs and expenses:
Network operating costs,
exclusive of depreciation
shown below 22,903 28,254 5,642 6,272
Sales and marketing,
exclusive of depreciation
shown below 18,503 19,948 4,469 5,687
Technical support, exclusive
of depreciation
shown below 13,084 17,965 2,612 3,005
General and administrative,
exclusive of depreciation
shown below 30,489 30,835 7,980 7,672
Bad debt expense 1,761 3,690 321 535
Depreciation and
amortization 21,239 30,650 4,370 5,686
Restructuring costs 2,616 756 950 1,666
Goodwill impairment -- 66,587 -- --
Asset impairment -- 7,009 -- --
Gain on sale of accounts (1,210) -- 705 (1,915)
Other expense (income), net (41) (192) (4) (96)
-------------------- -----------------
Total operating costs
and expenses 109,344 205,502 27,045 28,512
-------------------- -----------------
Operating loss (20,736) (102,757) (6,427) (6,205)
Interest income (expense),
net 436 (202) 181 131
-------------------- -----------------
Loss from continuing
operations before income
taxes (20,300) (102,959) (6,246) (6,074)
Income tax benefit (expense) 850 -- 850 --
-------------------- -----------------
Net loss from continuing
operations (19,450) (102,959) (5,396) (6,074)
Income/(loss) from
discontinued operations,
net of tax (439) (1,704) (778) (173)
-------------------- -----------------
Net loss $(19,889) $(104,663) $(6,174) $(6,247)
==================== =================
Net Income/(loss) per share,
basic and diluted:
Continuing operations $ (1.21) $ (6.40) $ (0.34) $ (0.38)
Discontinued operations (0.03) (0.10) (0.04) (0.01)
-------- --------- ------- -------
$ (1.24) $ (6.50) $ (0.38) $ (0.39)
======== ========= ======= =======
Number of shares used in per
share calculation:
Basic and diluted 16,044 16,096 16,103 16,032
INTERLAND, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
As of August 31,
----------------------
2005 2004
--------- ---------
Assets
Current assets
Cash and cash equivalents $ 16,891 $ 15,203
Auction rate securities -- 12,525
Trade receivables, net of the
allowance of $34 and $381, respectively 1,365 2,431
Receivable on sale of assets 11,367 --
Other receivables 135 553
Prepaids and other current assets 2,698 3,479
Restricted investments 258 283
--------- ---------
Total current assets 32,714 34,474
Restricted investments 9,299 10,609
Securities, held-to-maturity 50 --
Property plant and equipment, net 5,858 24,508
Goodwill -- --
Intangibles, net 3,038 12,077
Other assets 5,600 3,244
--------- ---------
Total assets $ 56,559 $ 84,912
========= =========
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 2,355 $ 2,517
Accrued expenses 10,465 12,105
Accrued restructuring charges 4,717 4,393
Current portion of long-term debt and
capital lease obligations 859 2,271
Deferred revenue 4,542 7,777
--------- ---------
Total current liabilities 22,938 29,063
Long-term debt and capital lease obligations 2,510 3,473
Deferred revenue, long-term 229 268
Other liabilities 939 3,209
--------- ---------
Total liabilities 26,616 36,013
--------- ---------
Commitments and contingencies
(notes 21 & 22) -- --
Shareholders' equity
Common stock, $.01 par value, authorized
21 million shares, issued and outstanding
16.4 and 16.1 million shares, respectively 164 161
Additional capital 323,498 321,091
Warrants 2,806 4,603
Deferred compensation -- (320)
Note receivable from shareholder (735) (735)
Accumulated deficit (295,790) (275,901)
--------- ---------
Total shareholders' equity 29,943 48,899
--------- ---------
Total liabilities and shareholders' equity $ 56,559 $ 84,912
========= =========
EBITDA is defined as net income (loss) less (i) provision for income
taxes, (ii) interest income or expense, and (iii) depreciation and
amortization. EBITDA is not an indicator of financial performance
under generally accepted accounting principles and may not be
comparable to similarly captioned information reported by other
companies. In addition, it does not replace net income (loss),
operating income (loss), or cash flows from operating activities as
indicators of operating performance. The effect of taxes and interest
on Interland’s net loss is not significant, but depreciation and
amortization, primarily as a result of acquisitions, is significant.
The Company believes that measuring the performance of the business
without regard to non-cash depreciation and amortization can make
trends in operating results more readily apparent, and when
considered with other information, assist investors and other users
of the Company’s financial statements who wish to evaluate the
Company’s ability to generate future cash flows.
The following table reflects the calculation of EBITDA from
continuing operations and a reconciliation to net cash provided by
(used in) operating activities:
For the For the
Fiscal Years Ended Quarter Ended
-------------------- -------------------
8/31/05 8/31/04 8/31/05 5/31/05
-------------------- -------------------
Net loss $(19,889) $(104,663) $ (6,174) $ (6,247)
Depreciation and
amortization 21,239 30,650 4,370 5,686
Interest expense (income) (436) 202 (181) (131)
Income tax benefit (850) -- (850) --
Discontinued operations 439 1,704 778 173
-------------------- -------------------
EBITDA $ 503 $ (72,107) $ (2,057) $ (519)
==================== ===================
Interest income/(expense) 436 (202) 181 131
Provision for bad debts 1,761 3,690 321 535
Gain on sale of accounts (1,210) -- 705 (1,915)
(Gain)/Loss on the sale
of assets (41) (159) (4) (96)
Goodwill and asset
impairment -- 73,596 -- --
Other non-cash adjustments 320 678 -- --
Restructuring charges 2,616 -- 950 1,666
Income tax (expense)
benefit 850 -- 850 --
Changes in assets and
liabilities:
Receivables, net (837) (1,514) 548 149
Income tax recoverable -- 612 -- --
Other current assets 271 (206) (534) 647
Accounts payable, accrued
expenses, and deferred
revenue (6,613) (8,447) (5,320) 3,072
-------------------- -------------------
Net cash provided by
(used in) operating
activities $ (1,944) $ (4,059) $ (4,360) $ 3,670
==================== ===================