Exhibit 99.1
Arbinet Announces Second Quarter 2005 Financial Results
NEW BRUNSWICK, N.J., August 3, 2005- Arbinet-thexchange, Inc. (Nasdaq: ARBX), the world’s leading electronic market for trading, routing, and settling communications capacity, reported financial results for its second quarter ended June 30, 2005.
Second quarter 2005 fee revenues were $11.6 million, an increase of 10% over $10.5 million in the second quarter 2004 and a decrease of 5% compared to $12.3 million in the first quarter 2005. Second quarter 2005 net income was $2.3 million or $0.09 per diluted share compared to $618,000 or $0.03 per pro forma diluted share in the second quarter 2004. The second quarter 2005 includes a non-recurring reimbursement of $1.5 million from one of the Company’s insurers. The second quarter also reflects an increase in the Company’s effective annual tax rate from 6.6% to 11.9% due to an increase in the proportion of pre-tax income associated with the Company’s U.K. subsidiary. Excluding the insurance reimbursement, second quarter 2005 adjusted net income was $1.1 million or $0.04 per diluted share, an increase of 79% over the second quarter 2004.
First half 2005 fee revenues were $24.0 million, an increase of 16% over $20.7 million in the first half of 2004. First half 2005 net income was $3.6 million or $0.14 per diluted share compared to $1.5 million or $0.07 per pro forma diluted share. In the second quarter 2005, the Company designated approximately $12 million of its receivable from its U.K. subsidiary as permanent in nature and commenced reporting foreign exchange translation gains and losses on that amount as a component of accumulated other comprehensive income or loss included in stockholders’ equity. In the first quarter 2005, approximately $0.2 million of foreign exchange loss was recorded in other income (expense) related to this receivable prior to its designation as long term. Excluding the second quarter 2005 insurance reimbursement, first half 2005 adjusted net income was $2.4 million or $0.09 per diluted share an increase of 62% over the first half 2004.
A total of 2.92 billion minutes were bought and sold on Arbinet’s exchange in the second quarter of 2005, up 21% from 2.41 billion minutes in the second quarter 2004 and down 4% from 3.03 billion in the first quarter of 2005. The Company completed 372.3 million calls during the second quarter of 2005, an increase of 29% compared to 289.7 million for the comparable period of 2004, and an increase of 9% compared to 341.4 million in the first quarter of 2005. The average call duration on thexchange for the quarter was 3.9 minutes per call compared to 4.2 minutes per call in the second quarter of 2004 and 4.4 minutes per call in the first quarter of 2005.
Curt Hockemeier, President and Chief Executive Officer of Arbinet, commented, “Both fee revenue and net income in the second quarter were above the high-end of our revised outlook. We achieved a record for average daily completed calls in the second quarter reflecting growth in the use of our exchange and our member base, along with the adoption of our new services. As reported earlier, the average number of minutes per call transacted on thexchange declined primarily due to a change in the mix of geographic markets traded. Although market supply and demand will continue to fluctuate, we believe that the record growth in completed calls during the quarter demonstrates the success of our trading platform and the long-term growth potential of Arbinet.”
The DirectAxcessSM branded trading service, introduced on May 17, represented 3% of average daily trading volume at the end of the second quarter and exceeded one million daily minutes for the first time on June 30, 2005. The average call duration for DirectAxcessSM was 6.2 minutes in the second quarter, which is 59% more than the overall average call duration for the second quarter of 3.9 minutes. At the end of the second quarter, Arbinet had over 250 markets for sale on DirectAxcessSMwith over 40 sellers and 83 buyers. DirectAxcess offers the world’s fixed and mobile network operators the ability to buy and sell termination to branded networks in a transparent, non-anonymous environment.
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The Company had a balance of cash and cash equivalents, including marketable securities, of $56.3 million at June 30, 2005 an increase of $2.8 million from December 31, 2004.
Arbinet reaffirms its 2005 outlook of fee revenues within a range of $46 million to $50 million and net income within a range of $3 million to $6 million, excluding the effect of the insurance reimbursement received in the second quarter 2005.
Quarterly Conference Call
Arbinet will host a conference call to discuss second quarter 2005 results at 5:00 p.m. EDT today. The dial-in number for the live audio call is (201) 689-8470. The password confirmation to access the call is 160245. A live webcast of the conference call can be accessed through the Company’s Investor Relations website at http://investor.arbinet.com. In addition, a replay of the call will be available immediately following the call through midnight EDT on Wednesday, August 10, 2005 at http://investor.arbinet.com and by telephone at (201) 612-7415. The account number to access the replay is 3055 and the conference ID is 160245.
About Arbinet
Arbinet is the leading electronic market for trading, routing and settling communications capacity. Members of the exchange, consisting primarily of communications service providers, buy and sell voice calls and Internet capacity based on route quality and price through its centralized, efficient and liquid marketplace. Members place orders through a web-based interface. Its fully automated, highly scalable trading platform matches these orders using proprietary software and delivers them through state-of-the-art facilities.
Forward-Looking Statements
This press release contains “forward-looking statements” (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended), including statements about the Company’s growth and future operating results derived from the DirectAxcessSM trading service. Various important risks and uncertainties may cause the Company’s 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 our exchange or utilizing our new and additional services (including data on thexchange, mobile on thexchange services, and DirectAxcessSM trading service); continued volatility in the volume and mix of trading activity (including the average call duration for DirectAxcessSMand the mix of geographic markets traded); our uncertain and long member enrollment cycle; the failure to manage our credit risk; failure to manage our growth; competitive factors; system failures, human error and security breaches could cause the Company to lose members and expose it to liability; future government regulation; and the Company’s ability to obtain and enforce patent protection for our methods and technologies. For a further list and description of the risks and uncertainties the Company faces, please refer to the Company’s 10-K and other filings, which have been filed with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Contacts: | ||||
Mike Lemberg Arbinet 1.732.509.9220 mlemberg@arbinet.com | David Pasquale Executive Vice President The Ruth Group 1.646.536.7006 dpasquale@theruthgroup.com |
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ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2004 | 2005 | 2004 | 2005 | |||||||||||||
Trading revenues | $ | 224,578,645 | $ | 245,307,294 | $ | 116,802,504 | $ | 120,874,980 | ||||||||
Fee revenues | 20,667,446 | 23,950,836 | 10,546,517 | 11,640,404 | ||||||||||||
Total revenues | 245,246,091 | 269,258,130 | 127,349,021 | 132,515,384 | ||||||||||||
Cost of trading revenues | 224,546,076 | 244,961,840 | 116,802,505 | 120,729,033 | ||||||||||||
20,700,015 | 24,296,290 | 10,546,516 | 11,786,351 | |||||||||||||
Costs and expenses | ||||||||||||||||
Operations and development | 6,017,549 | 6,910,652 | 2,983,916 | 3,282,661 | ||||||||||||
Sales and marketing | 2,767,015 | 3,648,969 | 1,492,329 | 1,891,326 | ||||||||||||
General and administrative | 4,441,576 | 5,809,660 | 2,279,564 | 2,993,177 | ||||||||||||
Depreciation and amortization | 4,279,174 | 4,866,291 | 2,229,494 | 2,334,165 | ||||||||||||
Insurance reimbursement for litigation settlements | — | (1,450,000 | ) | — | (1,450,000 | ) | ||||||||||
Total costs and expenses | 17,505,314 | 19,785,572 | 8,985,303 | 9,051,329 | ||||||||||||
Income from operations | 3,194,701 | 4,510,718 | 1,561,213 | 2,735,022 | ||||||||||||
Interest income (expense), net | (1,354,419 | ) | 434,419 | (628,193 | ) | 275,385 | ||||||||||
Other income (expense), net | (386,984 | ) | (816,564 | ) | (315,497 | ) | (267,928 | ) | ||||||||
Income before income taxes | 1,453,298 | 4,128,573 | 617,523 | 2,742,479 | ||||||||||||
Provision for income taxes | — | 491,300 | — | 399,818 | ||||||||||||
Net income | $ | 1,453,298 | $ | 3,637,273 | $ | 617,523 | $ | 2,342,661 | ||||||||
Preferred stock dividends and accretion | (3,386,570 | ) | — | (1,696,028 | ) | — | ||||||||||
Net (loss) income attributable to common stockholders | $ | (1,933,272 | ) | $ | 3,637,273 | $ | (1,078,505 | ) | $ | 2,342,661 | ||||||
Earnings per share | ||||||||||||||||
Basic | $ | (0.80 | ) | $ | 0.15 | $ | (0.42 | ) | $ | 0.10 | ||||||
Diluted | $ | (0.80 | ) | $ | 0.14 | $ | (0.42 | ) | $ | 0.09 | ||||||
Pro Forma Diluted | $ | 0.07 | N/A | $ | 0.03 | N/A | ||||||||||
Weighted average number of common shares | ||||||||||||||||
Basic | 2,430,211 | 24,479,281 | 2,549,079 | 24,497,929 | ||||||||||||
Diluted | 2,430,211 | 25,968,025 | 2,549,079 | 25,814,206 | ||||||||||||
Pro Forma Diluted | 21,669,788 | N/A | 21,947,398 | N/A |
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ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, | ||||||||
2004 | 2005 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 1,453,298 | $ | 3,637,273 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 4,255,661 | 4,866,297 | ||||||
Amortization of deferred compensation | 38,150 | 69,385 | ||||||
Non-cash interest on redeemable preferred stock | 835,120 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade accounts receivable, net | (4,881,901 | ) | 2,514,392 | |||||
Other assets | 507,839 | 1,972,187 | ||||||
Accounts payable | 1,763,335 | (2,561,931 | ) | |||||
Deferred revenue, accrued expenses and other current liabilities | (1,224,263 | ) | (736,843 | ) | ||||
Other long-term liabilities | (519,987 | ) | (510,089 | ) | ||||
Net cash provided by operating activities | 2,227,252 | 9,250,671 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (3,135,973 | ) | (3,671,719 | ) | ||||
Purchases of marketable securities | — | (19,647,000 | ) | |||||
Net cash used in investing activities | (3,135,973 | ) | (23,318,719 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repayment of indebtedness, net | (5,142,594 | ) | (376,338 | ) | ||||
Issuance of common stock | 97,335 | 153,525 | ||||||
Loans made to stockholders, net of repayments | 150,130 | — | ||||||
Net payments on obligations under capital leases | (1,242,199 | ) | (1,718,420 | ) | ||||
Net cash used in financing activities | (6,137,328 | ) | (1,941,233 | ) | ||||
Effect of foreign exchange rate changes on cash | (4,652 | ) | (884,264 | ) | ||||
Net decrease in cash and cash equivalents | (7,050,701 | ) | (16,893,545 | ) | ||||
Cash and cash equivalents, beginning of period | 17,147,245 | 53,532,660 | ||||||
Cash and cash equivalents, end of period | $ | 10,096,544 | $ | 36,639,115 | ||||
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ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2004 | As of June 30, 2005 | |||||
Assets | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 53,532,660 | $ | 36,639,115 | ||
Marketable securities | — | 19,647,000 | ||||
Trade accounts receivable, net | 27,351,810 | 24,039,233 | ||||
Other current assets | 2,369,746 | 1,836,757 | ||||
Total current assets | 83,254,216 | 82,162,105 | ||||
Property and equipment, net | 24,689,053 | 23,447,163 | ||||
Other long-term assets | 6,923,671 | 6,255,993 | ||||
Total Assets | $ | 114,866,940 | $ | 111,865,261 | ||
Liabilities & Stockholders’ Equity | ||||||
Current Liabilities: | ||||||
Short-term debt obligations | $ | 1,924,023 | $ | 1,001,317 | ||
Accounts payable | 15,645,826 | 12,946,712 | ||||
Deferred revenue | 4,314,006 | 4,390,178 | ||||
Accrued expenses and other current liabilities | 9,445,247 | 8,360,539 | ||||
Total current liabilities | 31,329,102 | 26,698,746 | ||||
Other long-term liabilities | 8,299,972 | 6,617,831 | ||||
Total Liabilities | 39,629,074 | 33,316,577 | ||||
Stockholders’ Equity | 75,237,866 | 78,548,684 | ||||
Total Liabilities & Stockholders’ Equity | $ | 114,866,940 | $ | 111,865,261 | ||
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