Attached files
| file | filename |
|---|---|
| 8-K - ARBINET Corp | v193263_8-k.htm |
| EX-10.1 - ARBINET Corp | v193263_ex10-1.htm |
Exhibit
99.1
Arbinet
Corporation Announces Second Quarter 2010 Financial Results
Previously
Announced Cost Reductions Expected to Drive
Savings
and Efficiencies in Second Half of 2010
HERNDON, VA., August 11, 2010
- Arbinet Corporation (NASDAQ: ARBX), a leading provider of telecommunications
services to fixed and mobile operators, today reported financial results for the
second quarter ended June 30, 2010.
Quarter
Ended June 30, 2010
Total
revenues for the second quarter 2010 were $81.2 million, which included $73.4
million trading revenues and $7.8 million fee revenues. This represents a 5.6%
decrease from total revenues of $86.0 million for the second quarter 2009 and a
7.3% decrease from total revenues of $87.6 million for the first quarter
2010. The decrease in total revenues was due, in part, to lower
trading revenues caused by lower average trade rate for minutes bought and sold
on Arbinet’s exchange, which was partially offset by higher traffic
volumes. In addition, average fee revenue per minute decreased as a
result of changes in the mix of both geographic markets and the trading activity
of members on the exchange, resulting in decreased sales of certain premium
service offerings and decreases in usage minimums.
A total
of 3.12 billion minutes were bought and sold on Arbinet’s exchange in the second
quarter 2010, up 20.3% and 4.9%, compared with 2.59 billion minutes in the
second quarter 2009 and 2.97 billion minutes in the first quarter 2010,
respectively. Arbinet completed 325.9 million calls during the second
quarter 2010, up 12.2% and 11.1%, compared with 290.5 million calls in the
second quarter 2009 and 293.3 million calls in the first quarter 2010,
respectively.
Second
quarter 2010 gross profit was $4.2 million, up 2.9% compared with $4.1 million
in the second quarter 2009, and down 11.4% compared with $4.8 million in the
first quarter 2010. The modest improvement in gross profit
compared with second quarter 2009 was due, in part, to the Company’s
reclassification of $0.6 million of rent expense and bonus expense from indirect
cost of revenues to general and administrative expenses for
2010. This favorable impact was largely offset by the lower fee
revenues.
Second
quarter 2010 loss from operations was ($4.0) million, compared with a loss from
operations of ($2.0) million in the second quarter 2009 and ($3.3) million in
the first quarter 2010. The increased loss from second quarter 2009
is due primarily to lower fee revenues, increased bad debt reserves and
severance charges. Compared with first quarter 2010, those same
factors were partially offset by savings related to cost reduction
initiatives.
Net cash
provided by operating activities from continuing operations in the second
quarter 2010 was $4.0 million compared with net cash used in operating
activities from continuing operations in the second quarter 2009 of
$36,000. At June 30, 2010, Arbinet had cash and cash equivalents of
$14.0 million and marketable securities of $7.4 million, totaling approximately
$21.5 million.
The
Company’s net loss in the second quarter 2010 was ($4.0) million, or ($0.73) per
diluted share, compared with net income of $1.0 million, or $0.17 per diluted
share, in the second quarter 2009.
Commenting
on the Company’s second quarter 2010 results and cost reduction initiatives,
Shawn O'Donnell, President and Chief Executive Officer of Arbinet, stated,
“During the second quarter, our year-over-year growth in traffic was offset by
lower average trade rates and declining average fees per minute. To
mitigate pricing challenges, we have enhanced our networks and broadened our
sales offerings to increase traffic. We have also incurred severance
and restructuring costs over the past several quarters as part of our cost
reduction initiatives, and we expect to recognize the benefits of these
initiatives during the third and fourth quarters of 2010. As a result
of these cost reduction initiatives, including headcount reductions, today
Arbinet is a leaner company, poised for growth and improved
results. We remain focused on leveraging our core capabilities and
prudently investing in areas that we believe represent the highest growth
opportunity, while effectively managing costs.”
Six
Months Ended June 30, 2010
First
half 2010 total revenues were $168.8 million, which included $152.3 million
trading revenues and $16.4 million fee revenues. This represents a 2.5% decrease
from total revenues of $173.1 million for the first half 2009, due,
in part, to lower trading revenues, which declined 1.9% year over year, caused
by lower average trade rates for minutes bought and sold on Arbinet’s
exchange, partially offset by higher traffic volumes.
A total
of 6.09 billion minutes were bought and sold on the exchange for the six months
ended June 30, 2010, an increase of 16.0% from the 5.26 billion minutes that
were bought and sold on the exchange for the six months ended June 30, 2009.
There were 619.3 million completed calls in the six months ended June 30, 2010,
representing a 6.9% increase from the 579.4 million completed calls for the six
months ended June 30, 2009.
Fee
revenues decreased 8.4% to $16.4 million for the six months ended June 30, 2010
from $17.9 million for the six months ended June 30, 2009. Average fee revenues
decreased to $0.0027 per minute for the six months ended June 30, 2010 from
$0.0034 per minute for the six months ended June 30, 2009,
primarily due to changes in the mix of both geographic markets
and the trading activity of members on the exchange, resulting in decreased
sales of certain premium service offerings and decreases in usage
minimums.
First
half 2010 gross profit was $9.0 million, up 9.3%, compared with $8.2 million
gross profit for the first half 2009. $1.5 million of the improvement
in gross profit was due to the Company’s reclassification of rent expense and
bonus expense from indirect cost of revenues to general and administrative
expenses for 2010.
First
half 2010 loss from operations was ($7.4) million, compared with loss from
operations of ($4.1) million in the first half 2009.
Net cash
provided by operating activities from continuing operations in the first half
2010 was $2.8 million compared with net cash provided by operating activities
from continuing operations in the first half 2009 of $0.8 million.
The
Company’s net loss in the first half 2010 was ($8.9) million, or ($1.63) per
diluted share, compared with net loss of ($1.5) million, or ($0.28) per diluted
share, in the first half 2009.
In the
six months ended June 30, 2010, Arbinet recorded $1.2 million of severance
charges primarily related to separation and transition services agreements
entered into with its former general counsel and three division chiefs who
departed from the Company during the six months ended June 30,
2010. In addition, Arbinet recorded $1.13 million in bad debt
expense, more than half of which relates to a single account.
Conference
Call
As
previously announced on August 9, 2010, Arbinet will host a conference call to
discuss its second quarter 2010 results at 10:00 a.m. Eastern Time
today.
The
dial-in number for the live audio call beginning at 10:00 a.m. Eastern Time is
(888) 562-3654, or (973) 582-2703 for international callers; the passcode is
92197722. A live web cast of the conference call will be available on
Arbinet’s web site at http://www.arbinet.com.
A replay
of the conference call will be available from 1:00 p.m. Eastern Time on August
11, 2010 through midnight Eastern Time on August 18, 2010 at
http://www.arbinet.com and by telephone at (800) 642-1687, or (706) 645-9291 for
international callers; the passcode is 92197722.
About
Arbinet Corporation
Arbinet
is a leading provider of international voice and IP solutions to carriers and
service providers globally. With more than 1,100 carriers across the world
utilizing the Arbinet network, Arbinet combines global scale with sophisticated
platform intelligence, call routing and industry leading credit management and
settlement capabilities. Customers and suppliers include many leading fixed
line, mobile, wholesale and VoIP carriers, as well as calling card, ISPs and
content providers around the world who buy and sell voice and IP
telecommunications capacity and content. The Company can be reached at its
corporate headquarters in Herndon, VA at (703) 456-4100 or by email at
sales@arbinet.com.
Forward-Looking
Statements
This
press release contains forward-looking statements, including forward-looking
statements regarding our ability to leverage our core capabilities and prudently
invest in areas that we believe represent the highest growth opportunities,
while effectively managing costs; and our expectations regarding the timing and
amount of the cost savings as a result of our cost reduction and restructuring
initiatives. Various important risks and uncertainties may
cause our actual results to differ materially from the results indicated by
these forward-looking statements, including, without limitation: Members (in
particular, significant trading Members) not trading on the Exchange or not
utilizing our new and additional services; continued volatility in the volume
and mix of trading activity; our uncertain and long Member enrollment cycle;
failure to manage our credit risk; failure to manage and adequately estimate
costs of our Carrier Services business; pricing pressure; investment in our
management team and investments in our personnel; disruption or uncertainty
resulting from recent changes in senior management; regulatory uncertainty;
system failures, human error and security breaches that could cause us to lose
Members and expose us to liability; our ability to obtain and enforce patent
protection for our methods and technologies; losses in efficiency due to cost
cutting and restructuring initiatives; failure to extend the term of our credit
facility; economic conditions and volatility of financial markets; and decreased
availability of credit to us or buyers on the Exchange, and the impact they may
have on us and the Members. For a further discussion of the risks and
uncertainties we face, please refer to Part I, Item 1A of our Annual Report on
Form 10-K, for the year ended December 31, 2009, filed with the Securities and
Exchange Commission (SEC) on March 17, 2010 and other periodic and current
filings that have been filed with the SEC and are available at www.sec.gov. We
assume no obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise, and such statements are
current only as of the date they are made.
Contacts:
Gary
Brandt, Chief Financial Officer
Arbinet
Corporation
(703)
456-4140
Andi
Salas / Jed Repko
Joele
Frank, Wilkinson Brimmer Katcher
(212)
355-4449
ARBINET
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except per share amounts)
(unaudited)
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Trading
revenues
|
$ | 73,408 | $ | 77,304 | $ | 152,333 | $ | 155,157 | ||||||||
|
Fee
revenues
|
7,772 | 8,674 | 16,417 | 17,921 | ||||||||||||
|
Total
revenues
|
81,180 | 85,978 | 168,750 | 173,078 | ||||||||||||
|
Cost
of trading revenues
|
73,418 | 77,272 | 152,351 | 155,360 | ||||||||||||
|
Indirect
cost of trading and fee revenues
|
3,534 | 4,598 | 7,401 | 9,488 | ||||||||||||
|
Total
cost of trading and fee revenues
|
76,952 | 81,870 | 159,752 | 164,848 | ||||||||||||
|
Gross
profit
|
4,228 | 4,108 | 8,998 | 8,230 | ||||||||||||
|
Other
operating expenses:
|
||||||||||||||||
|
Sales
and marketing
|
1,952 | 1,848 | 3,873 | 3,665 | ||||||||||||
|
General
and administrative
|
3,957 | 2,438 | 7,906 | 5,036 | ||||||||||||
|
Depreciation
and amortization
|
1,675 | 1,821 | 3,372 | 3,612 | ||||||||||||
|
Severance
charges
|
686 | - | 1,232 | - | ||||||||||||
|
Total
other operating expenses
|
8,270 | 6,107 | 16,383 | 12,313 | ||||||||||||
|
Loss
from operations
|
(4,042 | ) | (1,999 | ) | (7,385 | ) | (4,083 | ) | ||||||||
|
Interest
income
|
26 | 27 | 44 | 87 | ||||||||||||
|
Interest
expense
|
(160 | ) | (172 | ) | (345 | ) | (323 | ) | ||||||||
|
Foreign
currency transaction loss
|
193 | 3,149 | (1,298 | ) | 2,766 | |||||||||||
|
Other
income, net
|
63 | 61 | 132 | 171 | ||||||||||||
|
Loss
before income taxes
|
(3,920 | ) | 1,066 | (8,852 | ) | (1,382 | ) | |||||||||
|
Provision
for income taxes
|
65 | 99 | 73 | 138 | ||||||||||||
|
Net
loss
|
(3,985 | ) | 967 | (8,925 | ) | (1,520 | ) | |||||||||
|
Basic
net income (loss) per common share
|
$ | (0.73 | ) | $ | 0.18 | $ | (1.63 | ) | $ | (0.28 | ) | |||||
|
Diluted
net income (loss) per common share
|
$ | (0.73 | ) | $ | 0.17 | $ | (1.63 | ) | $ | (0.28 | ) | |||||
|
Weighted
average shares used in computing
|
||||||||||||||||
|
basic
net income (loss) per share
|
5,482 | 5,524 | 5,474 | 5,460 | ||||||||||||
|
Weighted
average shares used in computing
|
||||||||||||||||
|
diluted
net income (loss) per share
|
5,482 | 5,555 | 5,474 | 5,460 | ||||||||||||
ARBINET
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands)
|
As
of
|
||||||||
|
June
30, 2010
|
As
of
|
|||||||
|
(Unaudited)
|
December
31, 2009
|
|||||||
|
Assets
|
||||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 14,019 | $ | 15,492 | ||||
|
Marketable
securities
|
7,445 | 6,407 | ||||||
|
Trade
accounts receivable, net of allowances
|
19,021 | 24,513 | ||||||
|
Prepaids
and other current assets
|
932 | 1,284 | ||||||
|
Total
current assets
|
41,417 | 47,696 | ||||||
|
Property
and equipment, net
|
16,745 | 17,821 | ||||||
|
Security
deposits
|
1,665 | 1,676 | ||||||
|
Intangible
assets, net
|
123 | 149 | ||||||
|
Other
assets
|
347 | 395 | ||||||
|
Total
Assets
|
$ | 60,297 | $ | 67,737 | ||||
|
Liabilities
and Stockholders' Equity
|
||||||||
|
Current
Liabilities:
|
||||||||
|
Accounts
payable
|
$ | 12,053 | $ | 11,676 | ||||
|
Deferred
revenue
|
966 | 1,434 | ||||||
|
Accrued
expenses and other current liabilities
|
6,885 | 6,172 | ||||||
|
Due
to Silicon Valley Bank
|
- | 2,014 | ||||||
|
Current
portion of long-term debt
|
4,963 | 3,600 | ||||||
|
Current
liabilities for discontinued operations
|
100 | 100 | ||||||
|
Total
current liabilities
|
24,967 | 24,996 | ||||||
|
Deferred
rent
|
2,257 | 2,343 | ||||||
|
Long-term
debt and other liabilities
|
234 | 66 | ||||||
|
Total
Liabilities
|
27,458 | 27,405 | ||||||
|
Stockholders'
Equity
|
||||||||
|
Common
stock
|
7 | 7 | ||||||
|
Additional
paid-in capital
|
176,774 | 175,926 | ||||||
|
Treasury
stock
|
(17,264 | ) | (17,122 | ) | ||||
|
Accumulated
other comprehensive income
|
2,782 | 2,056 | ||||||
|
Accumulated
deficit
|
(129,460 | ) | (120,535 | ) | ||||
|
Total
Stockholders' Equity
|
32,839 | 40,332 | ||||||
|
Total
Liabilities and Stockholders' Equity
|
$ | 60,297 | $ | 67,737 | ||||