Exhibit 99.1
Arbinet Announces Second Quarter 2006 Financial Results
NEW BRUNSWICK, N.J., August 3, 2006 -Arbinet-thexchange, Inc. (Nasdaq: ARBX) reported financial results for its second quarter ended June 30, 2006.
Second quarter 2006 fee revenues were $11.5 million, a slight decrease from $11.6 million in the same quarter 2005 and a decrease of 2% compared to $11.7 million in the first quarter 2006. A total of 2.99 billion minutes were bought and sold on Arbinet’s exchange in the second quarter 2006, up from 2.92 billion minutes in the second quarter 2005 and up from 2.97 billion in the first quarter 2006. Arbinet completed 333.5 million calls during the second quarter 2006, compared to 372.3 million for the comparable period of 2005 and 346.1 million in the first quarter 2006. The average call duration on Arbinet’s exchange for the quarter was 4.5 minutes per call compared to 3.9 minutes per call in the second quarter 2005 and 4.3 minutes per call in the first quarter 2006.
Second quarter 2006 net loss was $0.6 million or $0.02 per diluted share, compared to net income of $1.2 million or $0.05 per diluted share in the first quarter 2006. Second quarter results were negatively impacted by $1.3 million of expenses related to Arbinet’s proxy contest in connection with its 2006 Annual Meeting of stockholders. Arbinet had a balance of cash and cash equivalents, including marketable securities, of $ 67.3 million as of June 30, 2006 compared to $63.6 million at the beginning of the year.
Curt Hockemeier, President and Chief Executive Officer of Arbinet, commented, “The core business continues to perform in line with expectations. We remain committed to expanding our core business and to pursuing additional opportunities that can best contribute to our growth.” As part of this strategy, the Company announced the introduction of new products including:
| • | PrivateExchange,(SM) the service which allows telecommunications companies to manage their own one-to-many commercial agreements and outsource the most costly interconnection and back office complexities to Arbinet, will be formally introduced into the market in mid August. |
| • | AssuredAxcess,(SM) will be offered in this same time frame. The service features fixed rates for all of the world’s destinations. |
In addition, Arbinet said one of the world’s largest cable operators began selling termination in July to its over 4.0 million telephone customers through Arbinet, and Arbinet is routing calls to those numbers using the Company’s new PeeringSolutions(SM)service introduced in May and the SPIDER Registry.
The Company also announced a plan that it believes will increase membership and liquidity on the exchange. Mr. Hockemeier said, “To increase thexchange liquidity the Company will create a new class of membership offering a modified fee structure to target specialty operators. Over time we recognize our fees have excluded some prospective Members, especially smaller sellers. This initiative completely removes any barrier so that even small Members can enjoy the benefits of the largest electronic communications exchange in the world.”
Finally, Mr. Hockemeier outlined the steps taken to capitalize on the value of its digital media exchange technology by forming Arbinet Digital Media Corporation. “Arbinet has begun a search for the President & CEO of this unit which will provide an online marketplace where buyers and sellers meet, transact, deliver and settle digital media in a secure, neutral environment. We believe this provides an opportunity to build on the intellectual property of our present telecommunications business. We remain confident in Arbinet’s future prospects and in our ability to execute on our growth opportunities,” concluded Mr. Hockemeier.
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Quarterly Conference Call
Arbinet will host a conference call to discuss its second quarter 2006 results, among other matters, at 5:00 p.m. EDT today. The dial-in number for the live audio call is (201) 689-8562. A live webcast of the conference call can be accessed through the Company’s Investor Relations website athttp://investor.arbinet.com. In addition, a replay of the call will be available from 8:00 p.m. on Thursday, August 3, 2006 through midnight ET on Thursday, August 17, 2006 athttp://investor.arbinet.com and by telephone at (201) 612-7415. The account number to access the replay is 3055 and the conference ID is 208460.
About Arbinet
Arbinet solutions simplify the exchange of digital communications in a converging world. These include exchanges, a transaction management platform and managed services, which streamline performance and improve profitability for Members.
Arbinet’s 600+ voice and data Members, including the world’s 10 largest international carriers, use Arbinet’s Internet based electronic platforms to buy, sell, deliver and settle transactions valued at about $500 million in 2005. These Members include fixed, mobile and VoIP carriers, ISPs and content providers from more than 60 countries who exchange voice, data, content and value added services.
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 but not limited to statements about the Company’s growth, strategic and business plans, product development and service offerings, and future operating results. 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: the Company’s revenue growth and losses; ability to raise capital; 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, DirectAxcessSM trading service, PrivateExchange(SM), AssuredAxcess(SM), and PeeringSolutions(SM)); continued volatility in the volume and mix of trading activity (including the average call duration and 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; pricing pressure; competitive factors; investment in our management team and investments in our personnel; system failures, human error and security breaches which 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 Annual Report on Form 10-K and other filings, which have been filed with the Securities and Exchange Commission. The Company assumes 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: | ||
Jack Wynne Arbinet 1.732.509.9230 jwynne@arbinet.com | David Pasquale or Denise Roche The Ruth Group 1.646.536.7006 / 1.646-536-7008 dpasquale@theruthgroup.com / droche@theruthgroup.com | |
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ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2005 | 2006 | 2005 | 2006 | |||||||||||||
Trading revenues | $ | 120,874,980 | $ | 115,796,931 | $ | 245,307,294 | $ | 233,408,266 | ||||||||
Fee revenues | 11,640,404 | 11,455,897 | 23,950,836 | 23,185,999 | ||||||||||||
Total revenues | 132,515,384 | 127,252,828 | 269,258,130 | 256,594,265 | ||||||||||||
Cost of trading revenues | 120,729,033 | 115,769,061 | 244,961,840 | 233,343,399 | ||||||||||||
| 11,786,351 | 11,483,767 | 24,296,290 | 23,250,866 | |||||||||||||
Costs and expenses | ||||||||||||||||
Operations and development | 3,282,661 | 3,962,412 | 6,910,652 | 7,817,669 | ||||||||||||
Sales and marketing | 1,891,326 | 1,904,647 | 3,648,969 | 3,742,971 | ||||||||||||
General and administrative | 2,993,177 | 5,632,609 | 5,809,660 | 9,184,201 | ||||||||||||
Depreciation and amortization | 2,334,165 | 1,680,819 | 4,866,291 | 3,518,237 | ||||||||||||
Reimbursement for/gain from litigation settlements | (1,450,000 | ) | (93,000 | ) | (1,450,000 | ) | (93,000 | ) | ||||||||
Total costs and expenses | 9,051,329 | 13,087,487 | 19,785,572 | 24,170,078 | ||||||||||||
Income (loss) from operations | 2,735,022 | (1,603,720 | ) | 4,510,718 | (919,212 | ) | ||||||||||
Interest income (expense), net | 275,385 | 730,597 | 434,419 | 1,378,338 | ||||||||||||
Other income (expense), net | (267,928 | ) | 150,218 | (816,564 | ) | 63,597 | ||||||||||
Income (loss) from continuing operations before income taxes | 2,742,479 | (722,905 | ) | 4,128,573 | 522,723 | |||||||||||
Provision for income taxes (income tax benefit) | 399,818 | (13,965 | ) | 491,300 | (1,882 | ) | ||||||||||
Income (loss) from continuing operations | 2,342,661 | (708,940 | ) | 3,637,273 | 524,605 | |||||||||||
Income from discontinued operations, net of income tax of $4,477 | — | 121,388 | — | 121,388 | ||||||||||||
Net income (loss) | $ | 2,342,661 | $ | (587,552 | ) | $ | 3,637,273 | $ | 645,993 | |||||||
Basic net income (loss) per share: | ||||||||||||||||
Continuing operations | $ | 0.10 | $ | (0.03 | ) | $ | 0.15 | $ | 0.02 | |||||||
Discontinued operations | — | $ | 0.01 | — | $ | 0.01 | ||||||||||
Net income (loss) | $ | 0.10 | $ | (0.02 | ) | $ | 0.15 | $ | 0.03 | |||||||
Diluted net income (loss) per share: | ||||||||||||||||
Continuing operations | $ | 0.09 | $ | (0.03 | ) | $ | 0.14 | $ | 0.02 | |||||||
Discontinued operations | — | $ | 0.01 | — | $ | 0.01 | ||||||||||
Net income (loss) | $ | 0 .09 | $ | (0.02 | ) | $ | 0.14 | $ | 0.03 | |||||||
Weighted average number of common shares | ||||||||||||||||
Basic | 24,497,929 | 25,160,675 | 24,479,281 | 24,996,476 | ||||||||||||
Diluted | 25,814,206 | 25,160,675 | 25,968,025 | 25,687,748 | ||||||||||||
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ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| As of December 31, 2005 | As of June 30, 2006 | |||||
| Assets | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 40,364,777 | $ | 39,592,649 | ||
Marketable securities | 23,230,913 | 27,684,824 | ||||
Trade accounts receivable, net | 24,831,554 | 20,170,810 | ||||
Other current assets | 1,461,118 | 2,787,098 | ||||
Total current assets | 89,888,362 | 90,235,381 | ||||
Property and equipment, net | 21,775,895 | 20,967,125 | ||||
Other long-term assets | 8,015,078 | 8,018,886 | ||||
Total Assets | $ | 119,679,335 | $ | 119,221,392 | ||
| Liabilities & Stockholders’ Equity | ||||||
Current Liabilities: | ||||||
Short-term debt obligations | $ | 914,778 | $ | 530,634 | ||
Accounts payable | 13,785,594 | 13,664,620 | ||||
Deferred revenue | 3,967,970 | 3,445,294 | ||||
Accrued expenses and other current liabilities | 11,160,418 | 10,431,755 | ||||
Total current liabilities | 29,828,760 | 28,072,303 | ||||
Other long-term liabilities | 4,080,489 | 3,552,751 | ||||
Total Liabilities | 33,909,249 | 31,625,054 | ||||
Stockholders’ Equity | 85,770,086 | 87,596,338 | ||||
Total Liabilities & Stockholders’ Equity | $ | 119,679,335 | $ | 119,221,392 | ||
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ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended June 30, | ||||||||
| 2005 | 2006 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 3,637,273 | $ | 645,993 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 4,866,297 | 3,518,237 | ||||||
Amortization of deferred compensation | 69,385 | — | ||||||
Stock-based compensation expense | — | 564,697 | ||||||
Gain on discontinued operations | — | (121,388 | ) | |||||
Foreign currency exchange (gain) loss | 283,330 | (442,369 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Trade accounts receivable, net | 3,233,870 | 4,472,891 | ||||||
Other assets | 771,206 | (992,901 | ) | |||||
Accounts payable | (2,690,072 | ) | (133,110 | ) | ||||
Deferred revenue, accrued expenses and other current liabilities | (846,292 | ) | (1,403,687 | ) | ||||
Other long-term liabilities | (510,089 | ) | (302,101 | ) | ||||
Net cash provided by operating activities | 8,814,908 | 5,806,262 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (3,671,719 | ) | (2,140,688 | ) | ||||
Purchases of marketable securities | (19,647,000 | ) | (27,176,100 | ) | ||||
Proceeds from sales and maturities of marketable securities | — | 22,734,000 | ||||||
Net cash used in investing activities | (23,318,719 | ) | (6,582,788 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Issuance (repayment) of indebtedness, net | (376,338 | ) | (403,238 | ) | ||||
Issuance of common stock, net of costs | 153,525 | 126,494 | ||||||
Net payments on obligations under capital leases | (1,718,420 | ) | (80,677 | ) | ||||
Net cash used in financing activities | (1,941,233 | ) | (357,421 | ) | ||||
Effect of foreign exchange rate changes on cash | (448,501 | ) | 361,819 | |||||
Net decrease in cash and cash equivalents | (16,893,545 | ) | (772,128 | ) | ||||
Cash and cash equivalents, beginning of period | 53,532,660 | 40,364,777 | ||||||
Cash and cash equivalents, end of period | $ | 36,639,115 | $ | 39,592,649 | ||||
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