Exhibit 99.1
Question and Answer Transcript from August 24, 2005 Conference Call
(First Caller): | Good afternoon, guys. Thanks for taking my call and congrats on another solid quarter. |
Pete Stevenson: | Thanks. How are you doing? |
(First Caller): | Good, thanks. I wanted to get an idea about capital expenditures particularly as it relates to NEON. Obviously there was a big bump in CAPEX last quarter (unintelligible) going to NEON. Do you expect that level of CAPEX to continue? And I guess going further, is that indicative of a demand for their services? |
Bob Dennerlein: | We anticipate probably spending in the range of about $1.2 million a month from now through the balance of the fiscal year. |
Pete Stevenson: | I would also add, the opportunities we have for CAPEX are purely driven by what our customers are requiring. So for example, we know we have some large opportunities in the market place in what we’re calling our NEON group that we can’t always predict when the customers are actually going to sign the contract. |
(First Caller): | Right. Most of that is coming from growth in the wireless side? |
Pete Stevenson: | Yeah, we’re continuing to see strong demand in the cellular companies that are transforming themselves from just cellular providers of minutes for voice into adding a lot more value added services that consume a lot more bandwidth. |
(First Caller): | Okay. And if I could follow up with a question regarding churn? |
Pete Stevenson: | Yep. |
(First Caller): | I’ve noticed the last couple of quarters new contracts have been churning higher. But last quarter it was still up but only about half of the level it was the previous quarter. Was there any seasonality behind that? |
Pete Stevenson: | Largely where that was coming from, if I think I know where your question is coming from, is in the kind of the hosting group. |
(First Caller): | Right. |
Pete Stevenson: | In its entirety. As we were doing our power upgrade in California, and we also did one - we commenced it at the end of December, beginning of January in our New York region - we had demand but we were cautious in bringing in too many customers while we were balancing a power upgrade. |
(First Caller): | Okay, great. Thanks a lot guys. |
Pete Stevenson: | You’re welcome. |
Operator: | Your next question comes from the line of [name of caller]. |
Second Caller: | Hi, guys. How are you doing? |
Pete Stevenson: | Good. |
Bob Dennerlein: | Good. |
Second Caller: | Congrats on getting the deal closed finally. I’ve got a number of questions. First I wanted to drill down on EBITDA. I guess you said EBITDA was 2.2. To get to a cash EBITDA number on a normalized basis, should we back out the $1.3 million in dark fiber and add back $400,000 in the foreign currency benefit? And I guess you said it was a $100,000 service credit in London? |
Bob Dennerlein: | I think what you end up with, is a combined EBITDA on a monthly run rate of, you know, about $1 million at this point. |
Second Caller: | Okay, I’ll drill down offline. |
Bob Dennerlein: | Yeah. |
Second Caller: | Pete, you said that you are pruning customers. I guess we can see that obviously in the customer count being down but also products. Should we look for you to possibly get out of your internet access business completely? It looks like that was kind of a source of weakness and the other product lines were strong. |
Pete Stevenson: | We have under evaluation our entire pricing and where we’re spending our time with respect to certain product segments. And I can tell you that the internet access piece to us is really not a critical component for us going forward. |
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| But similar to what we did in DSL where we provided a lot of scrutiny on non-core products, the T-1 access business for customers that are stand alone T-1 customers probably don’t fit squarely into our sites here. |
Second Caller: | Okay, I’ve got a couple more if I may. I was a little bit surprised at the stand alone Globix operating loss considering, you know, how much work you guys have put into turning around stand alone Globix. Am I just reading it wrong? Was there some sort of reallocation of costs or is stand alone Globix, is it a source of drag right now? What can you do to clean that up? |
Bob Dennerlein: | The stand alone Globix has most of the corporate costs in it. |
Second Caller: | Right. That’s what I was assuming. |
Pete Stevenson: | Yeah. |
Second Caller: | Alright, one last question. Total data center square footage - I think you said 150 but if I recall, Globix had more than that. So what is the total amount of co-location space that you have and what is your utilization across both Globix and NEON? Even a rough number would be fine. |
Pete Stevenson: | Yeah. The data center space that we’ve got - let me define it - is inclusive of our London data centers, our New York data center, our Atlanta data center, and our Santa Clara data center. But when we put Globix together with NEON, we also picked up additional facilities that NEON had that you would consider for investment to turn that into hosting centers and those are the nine that we talked about. |
Second Caller: | Alright. Thanks a lot, guys. |
Pete Stevenson: | Alright, thanks. |
Operator: | Once again, if you would like to ask a question, please press star 1 on your telephone keypad. |
(Third Caller): | Good afternoon. This is [name of caller]. |
Pete Stevenson: | Hi. |
(Third Caller): | Hi. One thing that would be very useful, could you give a little bit more flavor on some of the pricing trends you’re seeing in the market, specifically in the hosting and co-location segments? |
Pete Stevenson: | We are, at least in co-location, we are de-emphasizing co-location in terms of new customers being brought in. So the comments that I can give you center around the existing co-location customers that we’ve got and what we’re doing with them. |
(Third Caller): | Great. And a quick follow up - what other factors do you see differentiating Globix from competitors in terms of bringing new customers on line today? |
Pete Stevenson: | I think when you look at our combined capabilities of hosting and security services, our turnkey operations and providing a managed infrastructure that we can talk about the enterprise market for just a minute. Customers are turning to us because we’re becoming a one source solution to them. |
(Third Caller): | Great, thank you. |
Pete Stevenson: | You’re very welcome. |
Operator: | At this time there are no further questions. Mr. Stevenson, are there any closing remarks? |
Pete Stevenson: | I think I’ve given my closing remarks earlier. I would like to thank everybody for participating on our call. I’ll leave you with the fact that we, upon leaving this call, will be getting right back to work and focusing in on making sure we have a solid Q4 for the corporation. |
Operator: | Thank you. This concludes today’s Globix 2005 Third Quarter earnings conference call. You may now disconnect. |