TWW Terremark Worldwide

Terremark Worldwide, Inc. (AMEX:TWW): Revenues increase 73% year over year, 13% quarter over quarter Adds 39 new customers including NetLine Communications Corp., Pacific National Bank and the South Florida Water Management District Existing customer expansions include the Broward Community College, Citrix Systems, Inc., Cross Country Healthcare, Facebook, IDT Domestic Telecom and Verisign Global Registry Services Terremark Worldwide, Inc. (AMEX:TWW), a leading operator of integrated Internet exchanges and a global provider of managed IT infrastructure solutions for government and private sectors, today reported its results for the quarter ended September 30, 2006. Total revenues for the quarter ended September 30, 2006 were $24.2 million, exceeding guidance of $22.0 million to $23.0 million and representing an increase of 13% over the previous quarter and 73% over the same period the prior year. Total revenues for the quarter ended September 30, 2006 included $3.7 million of project type revenues related to the resale of equipment and consulting projects. EBITDA, as adjusted, for the quarter ended September 30, 2006 was $3.2 million, compared to EBITDA, as adjusted, of $3.0 million the prior quarter. EBITDA, as adjusted, also exceeded guidance of $2.0 million to $3.0 million. EBITDA, as adjusted, for the quarter ended September 30, 2006 included $1.1 million related to the project type revenue. EBITDA, as adjusted, is defined as income (loss) from operations less depreciation, amortization and stock based compensation. EBITDA, as adjusted, should be considered in addition to, but not in lieu of, income (loss) from operations reported under GAAP. �We are pleased with the results of the quarter, particularly the growth and profitability of our recurring revenue business, which represented over 70% of our EBITDA in the quarter,� said Manuel D. Medina, Chairman and CEO of Terremark Worldwide, Inc. �We also saw strong growth in our managed service offerings, where we are gaining traction in both the US and Europe. Our managed services offerings are a key differentiator with customers often indicating they selected Terremark as their data center outsourcing partner because of our full suite of product offerings.� Mr. Medina concluded, �We believe the results of the quarter speak to the strength of our core business, and we look to leverage this success through our stated strategy to expand our footprint in California and the Washington D.C. area.� Data center expenses were $14.8 million for the quarter ended September 30, 2006. Gross profit margins, excluding depreciation and amortization, were 39% during the September 30, 2006 quarter. As of September 30, 2006, Terremark�s cash and cash equivalents were $11.4 million and working capital of approximately $3.5 million. Total colocation space utilization increased to 15.7% as of September 30, 2006 from 12.9% as of June 30, 2006. Utilization of built-out colocation space increased to 56.3% as of September 30, 2006 from 46.2% as of June 30, 2006. Additionally, utilization of total net collocation space based on both deployed and yet to be deployed customers was 16.2% at September 30, 2006, an increase from 15.3% at June 30, 2006. Cross connects billed to customers increased to 4,865 as of September 30, 2006 from 4,245 the previous quarter and 3,182 a year earlier, representing an increase of 15% and 53%, respectively. During the quarter ended September 30, 2006, Terremark added 39 new customers, for a total of 566 customers at the end of the period. Terremark booked $10.0 million of new annual contract value during the quarter ended September 30, 2006. Over 70% of the bookings during the September 2006 quarter were generated from existing customers. For the quarter ended September 30, 2006, annualized data center services revenue per utilized square foot decreased slightly to $1,827 compared to $1,848 for the previous quarter. For the quarter ended September 30, 2006, data center services revenue churn was less than 1% for the commercial sector and 0% churn for the federal government sector. The Company defines churn as annualized data center services revenue lost as a percentage of annualized data center services revenue for the most recent quarter. Medina added, �The second quarter was an important period, as we demonstrated the continued strengthening of our business fundamentals and are beginning to benefit from the leverage in our model.� Business Outlook For the quarter ending December 31, 2006, the Company expects revenue to range from $24.0 million to $26.0 million and EBITDA, as adjusted, to range from $4.0 million to $6.0 million. These revenue estimates include approximately $1.5 million to $2.5 million of project related revenues. For the full 2007 fiscal year, the Company is maintaining its previously announced guidance and expects revenues to be in the range of $100.0 million to $105.0 million, EBITDA, as adjusted, to range from $18.0 million to $22.0 million and capital expenditures to range from $10.0 million to $11.0 million. The Company will hold a conference call today, November 9, 2006 at 5:00 p.m. ET, to discuss all of the above. To hear the conference call live, please dial 866-831-6162 (domestic) or 617-213-8852 (international) five to ten minutes before the call and reference the passcode: TWW Call. A simultaneous live Webcast of the call will be available over the Internet at http://www.terremark.com, under the Investor Relations heading. A replay of the call will be available beginning on Thursday, November 9, 2006 at 7:00 p.m. (ET) by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and providing the following replay code: 24550642. 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 September 30, 2006 and a comparison to the quarter ended September 30, 2005 can be found on the attached balance sheet and statement of operations and in the Company�s Quarterly Report on Form 10-Q. About Terremark Worldwide, Inc. Terremark Worldwide, Inc. (AMEX:TWW) is a leading operator of integrated Internet exchanges and a global provider of managed IT infrastructure solutions for government and private sectors. Terremark delivers its portfolio of services from seven locations in the U.S., Europe and Latin America and from four service aggregation and distribution locations, which aggregate network traffic and distribute network-based services in Europe and Asia to meet specific customer needs. Terremark�s flagship facility, the NAP of the Americas, is the model for the carrier-neutral Internet exchanges the company has in Santa Clara, California (NAP of the Americas/West), in Sao Paulo, Brazil (NAP do Brasil) and in Madrid, Spain (NAP de las Americas - Madrid). The carrier-neutral NAP of the Americas is a state-of-the-art facility that provides exchange point, colocation and managed services. Terremark is headquartered at 2601 S. Bayshore Drive, 9th Floor, Miami, Florida USA, (305) 856-3200. More information about Terremark Worldwide can be found at 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, 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. 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 non-cash items that it believes are not good indicators of the Company's current or future operating performance. These non-cash items are depreciation, amortization and stock-based compensation. 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 and six months ended September 30, 2006 and 2005 and June 30, 2006, presented within this press release. Terremark Worldwide, Inc. Condensed Balance Sheets September 30, March 31, 2006� 2006� � Assets Current assets Cash and cash equivalents $ 11,398,901� $ 20,401,934� Restricted cash 2,156,731� 474,073� Accounts receivable, net of allowance for doubtful accounts 14,528,062� 10,951,827� Current portion of capital lease receivable 2,707,053� 2,507,029� Prepaid expenses and other current assets 3,450,587� 2,558,942� Total current assets 34,241,334� 36,893,805� � Restricted cash 3,457,867� 3,814,842� Property and equipment, net 130,414,114� 129,893,318� Debt issuance costs 5,990,611� 6,963,232� Other assets 3,871,676� 2,695,616� Capital lease receivable, net of current portion 3,237,292� 4,004,449� Intangibles, net of accumulated amortization 3,290,000� 3,680,000� Goodwill 16,771,189� 16,771,189� Total assets $ 201,274,083� $ 204,716,451� � Liabilities and Stockholder's Equity Current liabilities Current portion of debt and capital lease obligations $ 2,214,111� $ 1,890,108� Accounts payable and other current liabilities 24,935,270� 20,822,624� Interest payable 3,605,279� 3,833,288� Series H redeemable convertible preferred stock -� 646,693� Total current liabilities 30,754,660� 27,192,713� Mortgage payable, less current portion 45,675,385� 45,795,552� Convertible debt 62,129,416� 59,102,452� Derivative embedded within convertible debt, at estimated fair value 12,742,575� 24,960,750� Notes payable, less current portion 27,118,078� 25,614,140� Deferred rent and other liabilities 3,314,223� 3,267,481� Capital leases obligations, less current portion 1,493,939� 852,311� Deferred revenue 3,796,836� 4,094,735� Total liabilities 187,025,112� 190,880,134� � Stockholders' equity Series I convertible preferred stock 1� 1� Common stock 44,594� 44,490� Common stock warrants 12,946,698� 13,251,660� Common stock options 582,004� 582,004� Additional paid-in capital 291,941,003� 291,607,528� Accumulated deficit (283,737,786) (283,823,243) Accumulated other comprehensive loss (131,484) (317,756) Treasury stock (7,220,637) (7,220,637) Note receivable (175,422) (287,730) Total stockholders' equity 14,248,971� 13,836,317� � Total liabilities and stockholders' equity $ 201,274,083� $ 204,716,451� Terremark Worldwide, Inc. Consolidated Statement of Operations � For the Three Months Ended September 30, June 30, September 30, 2006� 2006� 2005� � Revenue Data center $ 24,184,103� $ 21,403,381� $ 13,961,080� Operating revenues 24,184,103� 21,403,381� 13,961,080� Expenses Data center operations, excluding depreciation 14,773,552� 11,612,206� 8,718,207� General and administrative 3,595,002� 4,020,851� 3,503,439� Sales and marketing 2,636,662� 2,744,062� 2,021,059� Depreciation and amortization 2,695,644� 2,699,915� 2,047,154� Operating expenses 23,700,860� 21,077,034� 16,289,859� Income (loss) from operations 483,243� 326,347� (2,328,779) � Other income (expenses) Change in fair value of derivatives embedded within convertible debt (3,298,200) 15,516,375� 10,441,700� Interest expense (6,871,705) (6,617,585) (6,305,142) Interest income 278,513� 303,081� 439,261� Gain on sale of an asset -� -� 499,388� Other, net (35,274) 661� (80,276) Total other income (expenses) (9,926,666) 9,202,532� 4,994,931� Income (loss) before income taxes (9,443,423) 9,528,879� 2,666,152� Income taxes -� -� -� Net income (loss) (9,443,423) 9,528,879� 2,666,152� Preferred dividend (161,700) (164,100) (184,700) � Earnings allocation to participating security holders -� (1,458,477) (396,616) Net income (loss) attributable to common stockholders $ (9,605,123) $ 7,906,302� $ 2,084,836� Net income (loss) per common share: Basic $ (0.22) $ 0.18� $ 0.05� Diluted $ (0.22) $ (0.05) $ (0.09) Weighted average common shares outstanding - basic 43,719,659� 43,677,412� 42,890,383� Weighted average common shares outstanding - diluted 43,719,659� 52,124,974� 49,790,383� � Reconciliation of Loss from Operations to EBITDA, as adjusted: � Income (loss) from operations 483,243� 326,347� (2,328,779) Depreciation and amortization 2,695,644� 2,699,915� 2,047,154� Stock based compensation -� (65,052) -� EBITDA, as adjusted $ 3,178,887� $ 2,961,210� $ (281,625) � Calculation of Gross Profit Margin: Operating revenues 24,184,103� 21,403,381� 13,961,080� Less: Data center operations, excluding depreciation 14,773,552� 11,612,206� 8,718,207� Gross Profit $ 9,410,551� $ 9,791,175� $ 5,242,873� Gross Profit Margin as a % of operating revenues 39% 46% 38% Terremark Worldwide, Inc. (AMEX:TWW): -- Revenues increase 73% year over year, 13% quarter over quarter -- Adds 39 new customers including NetLine Communications Corp., Pacific National Bank and the South Florida Water Management District -- Existing customer expansions include the Broward Community College, Citrix Systems, Inc., Cross Country Healthcare, Facebook, IDT Domestic Telecom and Verisign Global Registry Services Terremark Worldwide, Inc. (AMEX:TWW), a leading operator of integrated Internet exchanges and a global provider of managed IT infrastructure solutions for government and private sectors, today reported its results for the quarter ended September 30, 2006. Total revenues for the quarter ended September 30, 2006 were $24.2 million, exceeding guidance of $22.0 million to $23.0 million and representing an increase of 13% over the previous quarter and 73% over the same period the prior year. Total revenues for the quarter ended September 30, 2006 included $3.7 million of project type revenues related to the resale of equipment and consulting projects. EBITDA, as adjusted, for the quarter ended September 30, 2006 was $3.2 million, compared to EBITDA, as adjusted, of $3.0 million the prior quarter. EBITDA, as adjusted, also exceeded guidance of $2.0 million to $3.0 million. EBITDA, as adjusted, for the quarter ended September 30, 2006 included $1.1 million related to the project type revenue. EBITDA, as adjusted, is defined as income (loss) from operations less depreciation, amortization and stock based compensation. EBITDA, as adjusted, should be considered in addition to, but not in lieu of, income (loss) from operations reported under GAAP. "We are pleased with the results of the quarter, particularly the growth and profitability of our recurring revenue business, which represented over 70% of our EBITDA in the quarter," said Manuel D. Medina, Chairman and CEO of Terremark Worldwide, Inc. "We also saw strong growth in our managed service offerings, where we are gaining traction in both the US and Europe. Our managed services offerings are a key differentiator with customers often indicating they selected Terremark as their data center outsourcing partner because of our full suite of product offerings." Mr. Medina concluded, "We believe the results of the quarter speak to the strength of our core business, and we look to leverage this success through our stated strategy to expand our footprint in California and the Washington D.C. area." Data center expenses were $14.8 million for the quarter ended September 30, 2006. Gross profit margins, excluding depreciation and amortization, were 39% during the September 30, 2006 quarter. As of September 30, 2006, Terremark's cash and cash equivalents were $11.4 million and working capital of approximately $3.5 million. Total colocation space utilization increased to 15.7% as of September 30, 2006 from 12.9% as of June 30, 2006. Utilization of built-out colocation space increased to 56.3% as of September 30, 2006 from 46.2% as of June 30, 2006. Additionally, utilization of total net collocation space based on both deployed and yet to be deployed customers was 16.2% at September 30, 2006, an increase from 15.3% at June 30, 2006. Cross connects billed to customers increased to 4,865 as of September 30, 2006 from 4,245 the previous quarter and 3,182 a year earlier, representing an increase of 15% and 53%, respectively. During the quarter ended September 30, 2006, Terremark added 39 new customers, for a total of 566 customers at the end of the period. Terremark booked $10.0 million of new annual contract value during the quarter ended September 30, 2006. Over 70% of the bookings during the September 2006 quarter were generated from existing customers. For the quarter ended September 30, 2006, annualized data center services revenue per utilized square foot decreased slightly to $1,827 compared to $1,848 for the previous quarter. For the quarter ended September 30, 2006, data center services revenue churn was less than 1% for the commercial sector and 0% churn for the federal government sector. The Company defines churn as annualized data center services revenue lost as a percentage of annualized data center services revenue for the most recent quarter. Medina added, "The second quarter was an important period, as we demonstrated the continued strengthening of our business fundamentals and are beginning to benefit from the leverage in our model." Business Outlook For the quarter ending December 31, 2006, the Company expects revenue to range from $24.0 million to $26.0 million and EBITDA, as adjusted, to range from $4.0 million to $6.0 million. These revenue estimates include approximately $1.5 million to $2.5 million of project related revenues. For the full 2007 fiscal year, the Company is maintaining its previously announced guidance and expects revenues to be in the range of $100.0 million to $105.0 million, EBITDA, as adjusted, to range from $18.0 million to $22.0 million and capital expenditures to range from $10.0 million to $11.0 million. The Company will hold a conference call today, November 9, 2006 at 5:00 p.m. ET, to discuss all of the above. To hear the conference call live, please dial 866-831-6162 (domestic) or 617-213-8852 (international) five to ten minutes before the call and reference the passcode: TWW Call. A simultaneous live Webcast of the call will be available over the Internet at http://www.terremark.com, under the Investor Relations heading. A replay of the call will be available beginning on Thursday, November 9, 2006 at 7:00 p.m. (ET) by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and providing the following replay code: 24550642. 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 September 30, 2006 and a comparison to the quarter ended September 30, 2005 can be found on the attached balance sheet and statement of operations and in the Company's Quarterly Report on Form 10-Q. About Terremark Worldwide, Inc. Terremark Worldwide, Inc. (AMEX:TWW) is a leading operator of integrated Internet exchanges and a global provider of managed IT infrastructure solutions for government and private sectors. Terremark delivers its portfolio of services from seven locations in the U.S., Europe and Latin America and from four service aggregation and distribution locations, which aggregate network traffic and distribute network-based services in Europe and Asia to meet specific customer needs. Terremark's flagship facility, the NAP of the Americas, is the model for the carrier-neutral Internet exchanges the company has in Santa Clara, California (NAP of the Americas/West), in Sao Paulo, Brazil (NAP do Brasil) and in Madrid, Spain (NAP de las Americas - Madrid). The carrier-neutral NAP of the Americas is a state-of-the-art facility that provides exchange point, colocation and managed services. Terremark is headquartered at 2601 S. Bayshore Drive, 9th Floor, Miami, Florida USA, (305) 856-3200. More information about Terremark Worldwide can be found at 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, 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. 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 non-cash items that it believes are not good indicators of the Company's current or future operating performance. These non-cash items are depreciation, amortization and stock-based compensation. 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 and six months ended September 30, 2006 and 2005 and June 30, 2006, presented within this press release. -0- *T Terremark Worldwide, Inc. Condensed Balance Sheets September 30, March 31, 2006 2006 ------------- ------------- Assets Current assets Cash and cash equivalents $11,398,901 $20,401,934 Restricted cash 2,156,731 474,073 Accounts receivable, net of allowance for doubtful accounts 14,528,062 10,951,827 Current portion of capital lease receivable 2,707,053 2,507,029 Prepaid expenses and other current assets 3,450,587 2,558,942 ------------- ------------- Total current assets 34,241,334 36,893,805 Restricted cash 3,457,867 3,814,842 Property and equipment, net 130,414,114 129,893,318 Debt issuance costs 5,990,611 6,963,232 Other assets 3,871,676 2,695,616 Capital lease receivable, net of current portion 3,237,292 4,004,449 Intangibles, net of accumulated amortization 3,290,000 3,680,000 Goodwill 16,771,189 16,771,189 ------------- ------------- Total assets $201,274,083 $204,716,451 ============= ============= Liabilities and Stockholder's Equity Current liabilities Current portion of debt and capital lease obligations $2,214,111 $1,890,108 Accounts payable and other current liabilities 24,935,270 20,822,624 Interest payable 3,605,279 3,833,288 Series H redeemable convertible preferred stock - 646,693 ------------- ------------- Total current liabilities 30,754,660 27,192,713 Mortgage payable, less current portion 45,675,385 45,795,552 Convertible debt 62,129,416 59,102,452 Derivative embedded within convertible debt, at estimated fair value 12,742,575 24,960,750 Notes payable, less current portion 27,118,078 25,614,140 Deferred rent and other liabilities 3,314,223 3,267,481 Capital leases obligations, less current portion 1,493,939 852,311 Deferred revenue 3,796,836 4,094,735 ------------- ------------- Total liabilities 187,025,112 190,880,134 ------------- ------------- Stockholders' equity Series I convertible preferred stock 1 1 Common stock 44,594 44,490 Common stock warrants 12,946,698 13,251,660 Common stock options 582,004 582,004 Additional paid-in capital 291,941,003 291,607,528 Accumulated deficit (283,737,786) (283,823,243) Accumulated other comprehensive loss (131,484) (317,756) Treasury stock (7,220,637) (7,220,637) Note receivable (175,422) (287,730) ------------- ------------- Total stockholders' equity 14,248,971 13,836,317 ------------- ------------- Total liabilities and stockholders' equity $201,274,083 $204,716,451 ============= ============= *T -0- *T Terremark Worldwide, Inc. Consolidated Statement of Operations For the Three Months Ended ---------------------------------------- September 30, June 30, September 30, 2006 2006 2005 ------------- ------------ ------------- Revenue Data center $24,184,103 $21,403,381 $13,961,080 ------------- ------------ ------------- Operating revenues 24,184,103 21,403,381 13,961,080 ------------- ------------ ------------- Expenses Data center operations, excluding depreciation 14,773,552 11,612,206 8,718,207 General and administrative 3,595,002 4,020,851 3,503,439 Sales and marketing 2,636,662 2,744,062 2,021,059 Depreciation and amortization 2,695,644 2,699,915 2,047,154 ------------- ------------ ------------- Operating expenses 23,700,860 21,077,034 16,289,859 ------------- ------------ ------------- Income (loss) from operations 483,243 326,347 (2,328,779) ------------- ------------ ------------- Other income (expenses) Change in fair value of derivatives embedded within convertible debt (3,298,200) 15,516,375 10,441,700 Interest expense (6,871,705) (6,617,585) (6,305,142) Interest income 278,513 303,081 439,261 Gain on sale of an asset - - 499,388 Other, net (35,274) 661 (80,276) ------------- ------------ ------------- Total other income (expenses) (9,926,666) 9,202,532 4,994,931 ------------- ------------ ------------- Income (loss) before income taxes (9,443,423) 9,528,879 2,666,152 Income taxes - - - ------------- ------------ ------------- Net income (loss) (9,443,423) 9,528,879 2,666,152 Preferred dividend (161,700) (164,100) (184,700) Earnings allocation to participating security holders - (1,458,477) (396,616) ------------- ------------ ------------- Net income (loss) attributable to common stockholders $(9,605,123) $7,906,302 $2,084,836 ============= ============ ============= Net income (loss) per common share: Basic $(0.22) $0.18 $0.05 ============= ============ ============= Diluted $(0.22) $(0.05) $(0.09) ============= ============ ============= Weighted average common shares outstanding - basic 43,719,659 43,677,412 42,890,383 ============= ============ ============= Weighted average common shares outstanding - diluted 43,719,659 52,124,974 49,790,383 ============= ============ ============= Reconciliation of Loss from Operations to EBITDA, as adjusted: Income (loss) from operations 483,243 326,347 (2,328,779) Depreciation and amortization 2,695,644 2,699,915 2,047,154 Stock based compensation - (65,052) - ------------- ------------ ------------- EBITDA, as adjusted $3,178,887 $2,961,210 $(281,625) ============= ============ ============= Calculation of Gross Profit Margin: Operating revenues 24,184,103 21,403,381 13,961,080 Less: Data center operations, excluding depreciation 14,773,552 11,612,206 8,718,207 ------------- ------------ ------------- Gross Profit $9,410,551 $9,791,175 $5,242,873 ============= ============ ============= Gross Profit Margin as a % of operating revenues 39% 46% 38% ============= ============ ============= *T