ARBX Arbinet Corp. (MM)

NEW BRUNSWICK, N.J., Nov. 2 /PRNewswire-FirstCall/ -- Arbinet-thexchange, Inc. (NASDAQ:ARBX), the world's leading electronic market for trading, routing, and settling communications capacity, reported financial results for its third quarter ended September 30, 2005. Third quarter 2005 fee revenues were $12.9 million, an increase of 12% over $11.5 million in the third quarter 2004 and an increase of 11% compared to $11.6 million in the second quarter 2005. Third quarter 2005 net income was $2.4 million or $0.09 per diluted share compared to $417,000 or $0.02 per pro forma diluted share in the third quarter 2004. A total of 3.03 billion minutes were bought and sold on Arbinet's exchange in the third quarter of 2005, up 12% from 2.70 billion minutes in the third quarter 2004 and up 4% from 2.92 billion in the second quarter of 2005. The Company completed 359.7 million calls during the third quarter of 2005, an increase of 17% compared to 308.2 million for the comparable period of 2004, and a decrease of 3% compared to 372.3 million in the second quarter of 2005. The average call duration on thexchange for the quarter was 4.2 minutes per call compared to 4.4 minutes per call in the third quarter of 2004 and 3.9 minutes per call in the second quarter of 2005. Curt Hockemeier, President and Chief Executive Officer of Arbinet, commented, "The third quarter demonstrates the strong operating leverage of our model. We were able to maintain our relatively stable cost structure, while supporting higher fee revenue. However, the inherent volatility in our voice exchange remains so we are continuing to focus our efforts on decreasing this volatility through ancillary products and services." The DirectAxcess(SM) branded trading service, introduced in the second quarter, represented 3% of average daily trading volume in the third quarter. At the end of the third quarter, there were over 250 markets for sale on DirectAxcess. 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. The Company had a balance of cash and cash equivalents, including marketable securities, of $58.5 million as of September 30, 2005 an increase of $2.2 million from June 30, 2005. Looking forward, Hockemeier said, "While we expect short-term market supply and demand will continue to fluctuate, we remain encouraged in our long-term business outlook. We recently announced that all of the world's ten largest international carriers are now Members of Arbinet's exchange, along with hundreds of other Members of all sizes. Arbinet is the world's leading electronic market for trading, routing, and settling communications capacity, and we expect to continue to increase buy and sell opportunities for our exchange Members across the globe." 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 third quarter 2005 results at 5:00 p.m. EST today. The dial-in number for the live audio call is 201-689-8470. 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 11:59 p.m. EST on Wednesday, November 9, 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 172138. 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. 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 DirectAxcess(SM) trading service); continued volatility in the volume and mix of trading activity (including the average call duration for DirectAxcess(SM) 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; 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 David Pasquale or Denise Roche Arbinet The Ruth Group 1.732.509.9220 1.646.536.7006 / 1.646.526.7008 / ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended September 30, September 30, 2004 2005 2004 2005 Trading revenues $117,477,408 $122,059,465 $342,056,053 $367,366,759 Fee revenues 11,530,253 12,881,803 32,197,699 36,832,639 Total revenues 129,007,661 134,941,268 374,253,752 404,199,398 Cost of trading revenues 117,477,408 121,902,926 342,023,484 366,864,766 11,530,253 13,038,342 32,230,268 37,334,632 Costs and expenses Operations and development 3,524,315 3,409,035 9,541,864 10,319,687 Sales and marketing 1,170,209 1,807,522 3,937,224 5,456,491 General and administrative 2,176,357 3,248,991 6,617,933 9,058,651 Depreciation and amortization 2,437,570 2,070,086 6,716,744 6,936,377 Litigation settlement (Insurance reimbursement for litigation settlements) 850,000 - 850,000 (1,450,000) Total costs and expenses 10,158,451 10,535,634 27,663,765 30,321,206 Income from operations 1,371,802 2,502,708 4,566,503 7,013,426 Interest income (expense), net (631,642) 401,984 (1,986,061) 836,403 Other income (expense), net (322,682) (216,789) (709,666) (1,033,353) Income before income taxes 417,478 2,687,903 1,870,776 6,816,476 Provision for income taxes - 319,861 - 811,161 Net income $417,478 $2,368,042 $1,870,776 $6,005,315 Preferred stock dividends and accretion (1,791,245) - (5,177,817) - Net (loss) income attributable to common stockholders $(1,373,767) $2,368,042 $(3,307,041) $6,005,315 Earnings per share Basic $(0.52) $0.10 $(1.32) $0.24 Diluted $(0.52) $0.09 $(1.32) $0.23 Pro Forma Diluted $0.02 N/A $0.09 N/A Weighted average number of common shares Basic 2,667,117 24,677,289 2,509,751 24,546,009 Diluted 2,667,117 25,391,693 2,509,751 25,663,944 Pro Forma Diluted 21,254,440 N/A 21,097,074 N/A ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2004 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,870,776 $6,005,315 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,716,744 6,936,377 Amortization of deferred compensation 54,784 218,556 Non-cash interest on redeemable preferred stock 1,257,270 - Foreign currency exchange (gain) loss (152,091) 331,737 Changes in operating assets and liabilities: Trade accounts receivable, net (8,681,688) 3,898,528 Other assets 536,130 1,097,612 Accounts payable 3,047,712 (2,805,347) Deferred revenue, accrued expenses and other current liabilities 2,157,146 (769,880) Other long-term liabilities (914,853) (756,462) Net cash provided by operating activities 5,891,930 14,156,436 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of certain assets of Band-X (4,160,000) - Acquisition of certain intangible assets of Summit - (1,100,000) Purchases of property and equipment (7,939,321) (5,187,846) Purchases of marketable securities - (20,749,000) Net cash used in investing activities (12,099,321) (27,036,846) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance (repayment) of indebtedness, net 677,480 (569,205) Issuance of common stock 368,165 176,109 Loans made to stockholders, net of repayments 151,723 - Net payments on obligations under capital leases (2,085,448) (1,781,619) Net cash used in financing activities (888,080) (2,174,715) Effect of foreign exchange rate changes on cash (10,815) (725,676) Net decrease in cash and cash equivalents (7,106,286) (15,780,801) Cash and cash equivalents, beginning of period 17,147,245 53,532,660 Cash and cash equivalents, end of period $10,040,959 $37,751,859 ARBINET - THEXCHANGE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of As of December 31, September 30, 2004 2005 Assets Current Assets: Cash and cash equivalents $53,532,660 $37,751,859 Marketable securities - 20,749,000 Trade accounts receivable, net 27,351,810 23,491,797 Other current assets 2,369,746 1,638,547 Total current assets 83,254,216 83,631,203 Property and equipment, net 24,689,053 22,912,303 Other long-term assets 6,923,671 7,053,609 Total Assets $114,866,940 $113,597,115 Liabilities & Stockholders' Equity Current Liabilities: Short-term debt obligations $1,924,023 $958,747 Accounts payable 15,645,826 12,866,584 Deferred revenue 4,314,006 3,911,459 Accrued expenses and other current liabilities 9,445,247 8,878,555 Total current liabilities 31,329,102 26,615,345 Other long-term liabilities 8,299,972 6,157,962 Total Liabilities 39,629,074 32,773,307 Stockholders' Equity 75,237,866 80,823,808 Total Liabilities & Stockholders' Equity $114,866,940 $113,597,115 DATASOURCE: Arbinet CONTACT: Mike Lemberg of Arbinet, +1-732-509-9220, ; or David Pasquale, +1-646-536-7006, , or Denise Roche, +1-646-526-7008, , both of The Ruth Group, for Arbinet Web site: http://www.arbinet.com/ http://investor.arbinet.com/

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