May 11, 2005
HAMILTON, Bermuda -- Teleglobe International Holdings Ltd (NASDAQ:TLGB), a leading provider of international telecommunications services to Internet service providers and to fixed and mobile network operators, announced today unaudited first quarter 2005 results for the period ended March 31, 2005.
First quarter 2005 revenue was $255.3 million versus $280.2 million in the fourth quarter of 2004 and $214.5 million in the first quarter of 2004. Net loss for first quarter 2005 was $8.4 million versus $9.2 million in the fourth quarter of 2004 and net income of $2.5 million in the first quarter of 2004. Net loss attributable to common shareholders for the first quarter of 2005 was $8.4 million or $(0.22) per share versus $9.2 million, or $(0.23) per share in the fourth quarter of 2004 and income of $105,000, or $(0.00) per share in the first quarter of 2004. Prior period financials are not comparable as ITXC Corp. (ITXC) results were included for the full period in first quarter 2005 and fourth quarter 2004 and not at all in the year-ago period. The merger with ITXC and related transactions were consummated on May 31, 2004. As of March 31, 2005, the company had 39,105,756 shares outstanding.
First quarter 2005 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $5.9 million including a $1.9 million loss from foreign exchange translations versus $11.2 million including a $2.7 million gain from foreign exchange translations in the fourth quarter of 2004. These figures exclude integration expenses and professional fees incurred in connection with the Company's internal Foreign Corrupt Practices Act ("FCPA") investigation of $2.0 million and $3.6 million from each period, respectively. EBITDA is a non-GAAP concept (see non-GAAP financial data footnote in this press release).
Liam Strong, president and CEO of Teleglobe, stated, "Teleglobe's first quarter results reflect our progress in delivering our integration synergies, offset to some extent by investments in productivity, new product introductions and Sarbanes-Oxley compliance in the quarter. Voice volume growth was limited in Q1 primarily by the pending unification of our VoIP and TDM networks. However, since March, we have made good progress in integration and improving gross margin on routes unified. By the end of April, 66% of our voice network was unified, and we are on track to complete integration by the end of May, providing significantly greater precision in control over pricing, routing and costing, the key factors in improving gross margin. Data volume continued its pattern of solid sequential volume increases. However, both data and value-added services revenues decreased slightly due to planned pricing actions on certain customer contracts. Gross margin contribution remained largely stable in spite of revenue decline due to integration benefits in network costs and telecommunications expenses. Finally, we increased our cash balance by $8 million through improved capital spending efficiency as well as active working capital management."
Mr. Strong continued, "In the second quarter, we are on track to complete the ITXC integration and to deliver $30 million in annual synergies as network unification sustains gross margin, increased automation lowers SG&A, and VoIP efficiencies reduce capital expenditures. We continue to use some of these synergies to continue to invest in new product introductions and efficiency projects. Approximately 70% of synergies were included in the first quarter run rate and the balance is planned to be achieved by the end of the second quarter as our voice business is fully integrated."
Fourth Quarter 2005 Outlook
Based upon its 2005 strategic plan, Teleglobe currently targets the achievement of the following results for the fourth quarter of 2005:
Revenue in the range of $275 million to $310 million compared to $255 million in first quarter 2005, given an expectation of voice volume recovery after integration completion and some gains from seasonality
Gross margin in the range of 15% to 17% compared to 17% in first quarter 2005, given the expectation of a higher contribution of voice revenue in the mix, stable IP revenues, and some incremental contribution from value-added mobile services revenues
SG&A percent to sales in the range of 11% to 13% assuming a full ITXC synergy run rate and the completion of efficiency projects
Capital expenditure continuing at 2% to 3% of revenue
Mr. Strong concluded, "For the remainder of the year, we are focused on the shift to a lower cost, more efficient operating platform. On this platform, we plan to expand our portfolio of mobile applications services and to launch new value-added products in our IP business. Our opportunities in these higher-growth segments should begin contributing to sales and gross margin in the fourth quarter of the year."
Teleglobe International Holdings Ltd.
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