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." Non-GAAP Results EBITDA (Earnings before interest, taxes,
depreciation, and amortization) for first quarter 2005 was $3.9
million versus $7.7 million in the fourth quarter 2004 and $10.5
million in the first quarter of 2004. EBITDA is a non-GAAP concept,
differing from GAAP measures in that it excludes net interest
expense, taxes, depreciation and amortization. A more detailed
reconciliation of the differences between GAAP and non-GAAP results
is included in the financial tables in this press release. Non-GAAP
Financial Data We are presenting EBITDA (Earnings before interest,
taxes, depreciation and amortization) and Gross Margin because
management considers them to be important supplemental measures of
our performance and believes that they are frequently used by
interested parties in the evaluation of companies in our industry.
However, EBITDA and Gross Margin have limitations as analytical
tools, and you should not consider them in isolation, or as a
substitute for analysis of our results as reported under GAAP. Some
of these limitations include the following: -- EBITDA does not
reflect cash expenditures, future requirements for capital
expenditures, or contractual commitments; -- EBITDA does not
reflect changes in, or cash requirements for, working capital
needs; -- EBITDA does not reflect the significant interest expense,
or the cash requirements necessary to service interest or principal
payments, on debt; -- Although depreciation and amortization are
non-cash charges, the assets being depreciated and amortized will
often have to be replaced in the future, and EBITDA does not
reflect any cash requirements for such replacements; -- EBITDA
reflects the impact on earnings of charges resulting from matters
we consider not to be indicative of our ongoing operations; and --
Other companies in our industry may calculate EBITDA and Gross
Margin differently than we do, limiting their usefulness as a
comparative measure. -- The Gross Margin calculation excludes any
depreciation or amortization relating to property, equipment and
intangible assets required to generate revenues. Because of these
limitations, we rely primarily on the GAAP results and use EBITDA
and Gross Margin only as supplemental measures. Adjusted EBITDA is
a further supplemental measure of our performance. We compute
Adjusted EBITDA by adjusting EBITDA to eliminate the impact of a
number of items that management does not consider indicative of our
ongoing operating performance. You are encouraged to evaluate each
adjustment and the reasons we consider it appropriate for
supplemental analysis. In addition, in evaluating Adjusted EBITDA,
you should be aware that in the future we may incur expenses
similar to the adjustments in this presentation. The presentation
of Adjusted EBITDA should not be construed as an inference that our
future results will be unaffected by unusual or nonrecurring items.
About Teleglobe: Teleglobe International Holdings Ltd is a leading
provider of international voice, data, Internet and mobile roaming
services with over 50 years of industry expertise in international
telecommunications. Teleglobe became a public company trading on
the NASDAQ under the symbol TLGB with the acquisition of Voice over
IP (VoIP) network leader ITXC Corp. on June 1, 2004. Teleglobe owns
and operates one of the world's most extensive telecommunications
networks, reaching over 240 countries and territories with advanced
voice, mobile, and data services. Teleglobe is the carrier of
choice to more than 1,400 wholesale customers representing the
world's leading telecommunications, mobile operators and Internet
service providers. With an annual run-rate of over 13 billion
minutes, and a significant portion of the world's Internet traffic,
Teleglobe's network is consistently ranked among the most robust
and reliable, performing at the high end of industry standards.
Detailed information about Teleglobe is available on the company's
web site at www.teleglobe.com. Forward-looking Statements Teleglobe
has included in this press release forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including all statements concerning future or expected
events or results. Actual results could differ materially from
those projected in the companies' forward-looking statements due to
numerous known and unknown risks and uncertainties, including,
among other things, the risks and uncertainties described in the
Form 10-Q that will be filed by Teleglobe on or before May 16,
2005. -0- *T Teleglobe International Holdings Ltd - Selected
Financial Highlights for the periods indicated (Unaudited) (USD$,
000's): Q1-2005 Q4-2004 Q1-2004 Consolidated Statement of
Operations - Selected Information ---------------------------
Revenues $255,307 $280,165 $214,544 Telecommunication expenses
189,580 211,968 154,356 Network expenses, exclusive of amortization
and depreciation 22,779 23,651 23,734 ---------------------------
Total telecommunication and network expenses $212,359 $235,619
$178,090 Selling, general & administrative, bad debt expenses,
stock based compensation, restructuring charges, foreign exchange
loss (gain) and other income $39,046 $36,866 $25,905 Net (loss)
income $(8,445) $(9,150) $2,480 Teleglobe International Holdings
Ltd - Selected Financial Highlights for the periods indicated
(USD$, 000's) (Unaudited): Consolidated Balance Sheet as at the
Period March December Indicated - Selected Information 31, 2005 31,
2004 ------------------- Cash, Marketable Securities and Restricted
Cash $41,898 $34,060 Accounts Receivable 198,155 210,588 Other
Current Assets 13,647 10,189 ------------------- Total Current
Assets 253,700 254,837 Property and Equipment 131,277 134,083
Intangible Assets 142,826 143,231 Other Non-Current Assets 22,408
21,638 ------------------- Total Assets $550,211 $553,789 Accounts
Payable and Accrued Liabilities $281,750 $275,645 Other Current
Liabilities 5,858 6,065 ------------------- Total Current
Liabilities 287,608 281,710 Other Non-Current Liabilities 12,829
13,929 Senior Notes 100,000 100,000 Total Equity 149,774 158,150
------------------- Total Liabilities and Shareholders' Equity
$550,211 $553,789 Teleglobe International Holdings Ltd - Selected
Financial Highlights for the periods indicated (USD$, 000's)
(Unaudited): (a)Reconciliation of EBITDA to GAAP Measure Q1-2005
Q4-2004 Q1-2004 for the periods indicated
----------------------------------------------------------------------
Net (loss) income $(8,445) $(9,150) $2,480 Add: Interest expense,
net 3,932 6,217 2,389 Income tax expense (recovery) (287) 676 148
Depreciation 6,247 7,111 4,129 Amortization of intangible assets
2,455 2,826 1,403 ------------------------- EBITDA $3,902 $7,680
$10,549 Add: Integration costs 1,331 2,611 800 Professional fees
incurred in connection with Foreign Corrupt Practices Act
investigation 664 954 - Adjusted EBITDA $5,897 $11,245 $11,349
(a)Reconciliation of Gross Margin to GAAP Q1-2005 Q4-2004 Q1-2004
Measure for the periods indicated
----------------------------------------------------------------------
(Loss) income before income taxes $(8,732) $(8,474) $2,628 Add:
Interest expense, net and other income 3,956 6,112 2,381 Foreign
exchange loss (gain) 1,926 (2,714) 485 Depreciation 6,247 7,111
4,129 Amortization of intangible assets 2,455 2,826 1,403 Bad debt
expense (recovery) (847) 645 (1,087) SG&A, stock based
compensation and restructuring charges 37,943 39,040 26,515
-------------------------- Gross Margin $42,948 $44,546 $36,454
-------------------------- Gross Margin as a Percentage of Revenue
16.8% 15.9% 17.0% Revenue Information The following table presents
relevant revenue-related information for the periods indicated for
Teleglobe International Holdings Ltd (Unaudited) Three Three Three
Months Months Months Ended Ended Ended March December March 31, 31,
31, 2005 2004 2004 --------------------------- Revenues per line of
business (in millions of U.S. dollars) Voice - transport $206 $228
$166 Data - transport 26 27 28 Value - added services 23 25 21
--------------------------- Total $255 $280 $215 Total revenues
excluding Bell Canada (1) revenues $228 $246 $192 Percentage of
revenues from Bell Canada (1) 10.6% 12.3% 10.5% Minutes of traffic
(in millions) Voice - transport 3,432 3,536 2,092 Other 63 62 50
--------------------------- Total 3,495 3,598 2,142 Average voice
revenue per minute $0.060 $0.065 $0.079 Geographic distribution of
revenues Asia 8% 8% 9% Canada 15% 17% 13% Europe 32% 31% 30% USA
31% 30% 33% Latin America 4% 4% 5% Other 10% 10% 10%
--------------------------- Total 100% 100% 100% (1) Bell Canada is
Canada's largest telecommunications company. *T
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