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Terremark Worldwide Reports First Quarter Fiscal Year 2009 Results

¶ -- Total revenues for the quarter ended June 30, 2008 were $56.1 million, representing an 59% year-over-year increase ¶ -- EBITDA, as adjusted, was $11.0 million, representing a 67% year-over-year increase ¶ -- Income from op

Terremark Worldwide, Inc. (NASDAQ:TMRK), a leading provider of managed IT infrastructure services, today reported its results for the quarter ended June 30, 2008. Terremarks results for the quarter ended June 30, 2008 were in-line with the high-end of previously announced guidance with total revenues of $56.1 million and EBITDA, as adjusted, of $11.0 million.

We have continued to build on the positive momentum we have generated over the past several quarters, and we are very pleased with the results of the first quarter, said Manuel D. Medina, Chairman and CEO of Terremark. Our solid performance is a result of the strong demand for our services being driven by positive industry fundamentals, our differentiated product offerings, and our focus on execution.

We once again delivered excellent quarterly results and strong bookings, which positions us for another successful fiscal year, said Jose Segrera, Terremarks CFO. Additionally, we continue to meet or exceed our goals against the key metrics by which we measure our business success.

Q109 Financial Highlights

  • Total revenues for the quarter ended June 30, 2008 were $56.1 million, which is in-line with the high-end of previously announced guidance and representing a 59% year-over-year increase.
  • EBITDA, as adjusted, for the quarter ended June 30, 2008 was $11.0 million, exceeding previously announced guidance. EBITDA, as adjusted, is defined as income from operations less depreciation, amortization, integration expenses, legal fees (including litigation settlements), and other non-cash expenses and share-based payments, including share-settled liabilities. EBITDA, as adjusted, should be considered in addition to, but not in lieu of, income from operations reported under generally accepted accounting principles (GAAP).
  • Income from operations for the first quarter was $3.7 million, representing a 55% year-over-year increase.
  • Cross connects billed to customers increased to 7,232 as of June 30, 2008 from 6,830 the previous quarter and 5,836 a year earlier, representing increases of 6% and 24%, respectively. This increase continues to highlight the strong demand for Terremarks network-neutral model.
  • Total colocation space utilization increased to 23.7% as of June 30, 2008 from 23.3% as of March 31, 2008. Utilization of built-out colocation space was 71.7% as of June 30, 2008.

Business Highlights

Sales and Marketing

  • During the quarter ended June 30, 2008, Terremark added 52 new customers, for a total of 1,016 customers at the end of the period.
  • Terremark booked $31.0 million of new annual contract value, which represents the thirteenth straight quarter of strong bookings.

Operations

  • The first 50,000-square-foot data center at Terremarks NAP of the Capital Region opened on June 25, 2008. Since securing Computer Sciences Corporation (CSC) as the anchor customer for the facility, the Company has added a number of additional customers including Applied Systems.
  • In June, Terremark launched the Enterprise Cloud, a revolutionary new managed platform that gives customers the power to provision computing resources for mission-critical applications in minutes, not days. Terremarks Enterprise Cloud is powered by an enhanced version of Terremarks industry-leading Infinistructure utility computing platform and leverages the Companys top-tier data centers and access to massive and diverse network connectivity. The platform has been well received by the marketplace and the Company has secured a number of customers since its launch.
  • In Q1, Terremark launched its security operations center, a strategic part of the Companys overall offering, which serves two roles first to provide basic security services to its existing base of managed hosting customers and secondly to offer higher end data security services to new customers and as an up sell opportunity to existing customers.

Business Outlook

  • For the second quarter of fiscal 2009, the Company expects revenues to range from $58.0 million to $60.0 million and EBITDA, as adjusted, to range from $12.0 million to $12.5 million.
  • For the 2009 fiscal year, guidance remains between $255 million to $260 million of revenues and EBITDA, as adjusted, to range between $58 million and $60 million.

The foregoing statements regarding targets for the quarter and full year are forward-looking and actual results may differ materially. These are the Companys targets, not predictions of actual performance.

Conference Call Information

  • The Company will hold a conference call today, August 11, 2008 at 5:00 p.m. ET, to discuss all of the above.
  • To hear the conference call live, dial 800-435-1398 (domestic) or 617-614-4078 (international) five to ten minutes before the call and reference the passcode TMRK Call.
  • A simultaneous live Webcast of the call will be available on the Internet at http://www.terremark.com, under the Investor Relations heading.
  • A replay of the call will be available beginning on Monday, August 11, 2008 at 7:00 p.m. (ET) by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and providing the following replay code: 90422153. In addition, the Webcast will be available on the Company's web site at http://www.terremark.com.

Additional information regarding the Company's financial performance as of and for the quarter ended June 30, 2008 and a comparison to the quarter ended June 30, 2007 can be found on the attached balance sheet and statement of operations and in the Company's Annual Report on Form 10-K.

About Terremark Worldwide, Inc.

Terremark Worldwide (NASDAQ:TMRK) is a leading global provider of IT infrastructure services delivered on the industrys most robust and advanced technology platform. Leveraging data centers in the United States, Europe and Latin America with access to massive and diverse network connectivity, Terremark delivers government and enterprise customers a comprehensive suite of managed solutions including managed hosting, colocation, disaster recovery, security, and cloud computing services. Terremarks acclaimed Infinistructure utility computing architecture has redefined industry standards for scalable and flexible computing infrastructure and its DigitalOps® service platform combines end-to-end systems management workflow with a comprehensive customer portal. More information about Terremark Worldwide can be found at http://www.terremark.com.

Statements contained in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Terremark's actual results may differ materially from those set forth in the forward-looking statements due to a number of risks, ability to cross-sell across an acquired customer base, ability to increase revenue yields within facilities, ability to refinance existing debt, uncertainties and other factors, as discussed in Terremark's filings with the SEC. These factors include, without limitation, Terremark's ability to obtain funding for its business plans, uncertainty in the demand for Terremark's services or products and Terremark's ability to manage its growth, the successful integration of operations of acquired companies. Terremark does not assume any obligation to update these forward-looking statements.

Non-GAAP Financial Measures

Terremark continues to provide all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Terremark uses non-GAAP financial measures, such as EBITDA, as adjusted. In presenting these non-GAAP financial measures, Terremark excludes certain items that it believes are not good indicators of the Company's current or future operating performance. These items are depreciation, amortization, integration expenses, legal fees (including litigation settlement), other non-cash expenses, and share-based payments, including share-settled liabilities.

Terremark intends to calculate the various non-GAAP financial measures in future periods on a basis consistent with its calculation of those measures for the three months ended June 30, 2008 and 2007 and the three months ended March 31, 2008, presented within this press release.

Terremark Worldwide, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

  June 30,   March 31,   December 31,
  2008     2008     2007  
Assets
Current assets
Cash and cash equivalents $ 72,339,473 $ 96,989,932 $ 133,667,186
Accounts receivable, net 35,473,051 44,048,075 32,311,286
Prepaid expenses and other current assets   12,861,370     11,109,555     8,769,214  
Total current assets 120,673,894 152,147,562 174,747,686
 
Property and equipment, net 266,585,106 231,674,274 185,779,864
Debt issuance costs, net 9,275,855 9,869,503 10,313,198
Other assets 13,060,116 8,831,391 7,820,109
Intangibles, net 14,811,044 15,417,502 16,380,526
Goodwill   86,138,652     85,919,431     82,954,661  
Total assets $ 510,544,667   $ 503,859,663   $ 477,996,044  
 
Liabilities and Stockholder's Equity
Current liabilities
Current portion of mortgage payable and capital lease obligations $ 3,392,464 $ 2,999,741 $ 3,045,047
Accounts payable and other current liabilities 59,956,000 57,947,054 37,101,729
Current portion of convertible debt   29,828,173     -     -  
Total current liabilities 93,176,637 60,946,795 40,146,776
Mortgage payable, less current portion 250,072,792 249,222,856 248,372,253
Convertible debt, less current portion 57,192,000 86,284,017 85,562,769
Deferred rent and other liabilities 8,485,724 9,729,736 7,226,270
Deferred revenue   7,889,299     7,154,424     6,607,588  
Total liabilities   416,816,452     413,337,828     387,915,656  
Commitments and contingencies   -     -     -  
 
Stockholders' equity
Series I convertible preferred stock 1 1 1
Common stock 59,237 59,172 58,601
Common stock warrants 11,216,638 11,216,638 11,216,638
Additional paid-in capital 421,708,229 420,550,532 417,802,637
Accumulated deficit (340,280,444 ) (342,425,836 ) (339,958,933 )
Accumulated other comprehensive income 1,072,463 1,169,241 1,068,230
Note receivable   (47,909 )   (47,913 )   (106,786 )
Total stockholders' equity   93,728,215     90,521,835     90,080,388  
Total liabilities and stockholders' equity $ 510,544,667   $ 503,859,663   $ 477,996,044  

Terremark Worldwide, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

  For the Three Months Ended
June 30,   March 31,   June 30,
  2008     2008     2007  
Revenues $ 56,116,205   $ 56,841,162   $ 35,240,570  
Expenses
Cost of revenues, excluding depreciation and amortization 32,086,683 30,276,082 18,947,646
General and administrative 8,949,850 8,778,294 6,338,020
Sales and marketing 5,719,508 5,927,250 3,841,977
Depreciation and amortization   5,643,145     5,242,710     3,707,805  
Operating expenses   52,399,186     50,224,336     32,835,448  
Income from operations

 

3,717,019  

 

6,616,826  

 

2,405,122  
 
Other (expenses) income
Change in fair value of derivatives 5,633,966 (2,530,812 ) 1,513,341
Interest expense (7,051,099 ) (7,445,517 ) (6,806,293 )
Interest income 547,581 1,195,978 918,569
Loss on early extinguishment of debt   -     -     (18,498,446 )
Total other expenses   (869,552 )   (8,780,351 )   (22,872,829 )
Income (loss) before income taxes 2,847,467 (2,163,525 ) (20,467,707 )
Income taxes   702,075     302,662     284,000  
Net income (loss) 2,145,392 (2,466,187 ) (20,751,707 )
Preferred dividend (195,250 ) (195,250 ) (202,125 )
Earnings attributable to participating security holders   (231,376 )   -     -  
Net income (loss) attributable to common stockholders $ 1,718,766   $ (2,661,437 ) $ (20,953,832 )
Net income (loss) per common share:
Basic and diluted $ 0.03   $ (0.05 ) $ (0.37 )
Weighted average common shares outstanding - basic and diluted   59,185,222     59,046,281     57,166,791  
 
Reconciliation of Income from Operations to EBITDA, as adjusted:
Income from operations

$

3,717,019

$

6,616,826

$

2,405,122
Depreciation and amortization 5,643,145 5,242,710 3,707,805
Share-based payments, including share-settled liabilities 994,302 1,379,804 460,674
Other non-cash expenses 383,425 - -
Legal fees 252,396 102,282 -
Integration expenses   -     170,895     -  
EBITDA, as adjusted $ 10,990,287   $ 13,512,517   $ 6,573,601  
 
Calculation of Gross Profit Margin:
Revenues

$

56,116,205

$

56,841,162

$

35,240,570
Less:
Cost of revenues, excluding depreciation and amortization   32,086,683     30,276,082     18,947,646  
Gross profit $ 24,029,522   $ 26,565,080   $ 16,292,924  
Gross Profit Margin as a % of revenues   43 %   47 %   46 %

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