EasyLink Services Corporation (NASDAQ: EASY), a leading global
provider of outsourced business process automation services that
transform manual and paper-based business processes into efficient
electronic ones, reported financial results today for the first
quarter ended March 31, 2007. First quarter results include
approximately $0.8 million in expenses related to the review of
strategic alternatives by the Company�s board of directors and its
special committee, culminating in the execution of the definitive
agreement on May 3, 2007 with Internet Commerce Corporation (�ICC�)
for ICC to acquire the Company. Revenues for the first quarter of
2007 were $18.8 million as compared to $18.5 million during the
first quarter of 2006 and $18.0 million in the fourth quarter of
2006. For the first time, the Company�s newer Transaction
Management Services revenue growth of 38% over the 2006 quarter and
10% over the prior quarter exceeded the continuing decline in
Transaction Delivery Services revenues. Gross margin was 63% in the
first quarter of 2007 as compared to 60% in the first quarter of
2006 and 62% in the fourth quarter of 2006. Net income amounted to
$296,000 or $.03 per share including approximately $0.8 million of
transaction expenses related to the recently announced sale of the
Company. This compares to a net loss of $376,000 or $(.04) per
share for the first quarter of 2006 and a net loss of $(.01) per
share in the fourth quarter of 2006. Excluding the sale related
expenses of $0.8 million net income would have been $0.10 per share
for the current period. The Company further reported that it
achieved Earnings before interest, taxes, depreciation and
amortization (�EBITDA�) of $1.6 million in the first quarter of
2007 as compared to EBITDA during the first quarter of 2006 of $0.8
million. A reconciliation of this non-GAAP financial measure to the
most directly comparable GAAP financial measure, operating cash
flows, is attached in addition to a reconciliation to net income
(loss) for all periods presented. The Company considers EBITDA to
be a financial indicator of its operational strength, its ability
to service debt and its capacity to make new investments in its
services. The Company adopted the provisions of FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes (�FIN 48�) on
January 1, 2007. As a result of the implementation of FIN 48, the
Company recognized an increase in its tax liabilities and a
reduction of retained earnings of $108,000. The impact on the first
quarter 2007 was not significant. The Company�s cash and cash
equivalents balance at the end of the first quarter 2007 was $5.3
million as compared to $6.7 million as of December 31, 2006. For
the quarter ended March 31, 2007, net cash of $0.5 million was used
in operations, $0.2 million was used for capital expenditures and
$0.6 million was used to reduce the Company�s outstanding loan
balance. Thomas Murawski, Chairman, President and Chief Executive
Officer of EasyLink, said, �First, I�m pleased with the results of
our strategic initiatives and believe that the recently announced
sale of EasyLink to ICC is in the best interests of our customers,
employees and stockholders. I�m also pleased with our first
quarter�s performance. Revenue exceeded the top end of our guidance
and earnings came in on target including $0.8 million of expenses
relating to the sale of our Company. As noted last quarter,
EasyLink is poised to reap the benefits of the cost reduction
programs that we implemented in 2006 and we expect positive
earnings to continue throughout 2007.� For the first quarter of
2007 in comparison to the fourth quarter of 2006 and the first
quarter of 2006, revenues (in thousands) for the Company�s services
were as follows: % % 1st Quarter 4th Quarter Increase/ 1st Quarter
Increase/ 2007� 2006� (Decrease) 2006� (Decrease) Transaction
Management Services $ 6,347� $ 5,789� 9.60% $ 4,602� 37.90%
Transaction Delivery Services EDI $ 4,333� $ 4,204� 3.10% $ 4,714�
(8.10)% Transaction Delivery Services Other $ 8,079� $ 8,030� 0.60%
$ 9,145� (11.70)% � $ 18,759� $ 18,023� 4.10% $ 18,461� 1.60%
Business Outlook The following statements are forward-looking and
actual results may differ materially due to factors noted at the
end of this release, among others. EasyLink expects the following
performance for the second quarter of 2007: Second quarter revenues
in the range of $18.2 to $18.6 million with TMS revenues in the
range of $6.3 to $6.5 million, EDI revenue in the range of $4.1 to
$4.2 million and TDS revenue in the range of $7.8 to $8 million Net
income per share for the second quarter is expected to be in the
range of $.05 to $.07 per share. For the full year 2007 EasyLink
expects the following: Revenues in the range of $70 to $73 million.
Net income per share in the range of $.20 to $.30 per share.
Quarterly Conference Call EasyLink will host its quarterly
conference call today at 10:30 a.m. EST. Listeners should call five
minutes prior to the start of the call to 800/340-8363 and the
reservation number is 6782241. The call will also be broadcast over
the Internet. Online listeners should visit the investor relations�
pages of the EasyLink web site, www.EasyLink.com, or
www.streetevents.com prior to the start of the call for login
information. If you are unable to participate, the online archive
of the broadcast will be available on the investor relations� pages
of www.EasyLink.com within two hours of the live call through
Friday, May 25th at 11:59 p.m. EST. You can also access the replay
by calling 800/642-1687 and entering the reservation number
6782241. About EasyLink Services Corporation EasyLink Services
Corporation (NASDAQ: EASY), headquartered in Piscataway, New
Jersey, is a leading global provider of outsourced business process
automation services that enable medium and large enterprises,
including 60 of the Fortune 100, to improve productivity and
competitiveness by transforming manual and paper-based business
processes into efficient electronic business processes. EasyLink is
integral to the movement of information, money, materials,
products, and people in the global economy, dramatically improving
the flow of data and documents for mission-critical business
processes such as client communications via invoices, statements
and confirmations, insurance claims, purchasing, shipping and
payments. Driven by the discipline of Six Sigma Quality, EasyLink
helps companies become more competitive by providing the most
secure, efficient, reliable, and flexible means of conducting
business electronically. For more information, please visit
www.EasyLink.com. This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include, but are not
limited to, statements regarding the proposed transaction between
the Company and Internet Commerce Corporation, including statements
about the benefits of the transaction, the expected timetable for
completing the transaction, managements� assumptions about the
transaction, and other statements that are not historical or
current facts. Such statements are based upon the current beliefs
and expectations of the Company�s management, are subject to
significant risks and uncertainties and may differ materially from
actual future experience involving any one or more of such matters.
These forward-looking statements are not guarantees of future
performance and involve certain risks, uncertainties and
assumptions that are difficult to assess. Investors are cautioned
that such statements are only predictions, and in evaluating such
statements, investors should specifically consider the various
factors that could cause actual events or results to differ
materially from what is expressed or forecasted in such statements.
These risks and uncertainties are based upon a number of important
factors including, among others: the inability to complete the
merger due to the failure to obtain stockholder approval or the
failure to satisfy other conditions to the completion of the
merger, including the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976; the
occurrence of any event, change or other circumstances that could
give rise to the termination of the merger agreement; the outcome
of any legal proceedings that may be instituted against the Company
and others following announcement of the merger agreement; risks
that the proposed transaction disrupts current plans and operations
and the potential difficulties in employee retention as a result of
the merger; the amount of the costs, fees, expenses and charges
related to the merger; the Company�s ability to manage business
growth effectively; changes in customer relationships; the ability
to attract additional customers or to expand services sold to
existing customers; the Company�s ability to implement its business
strategy successfully; and significant competition. While the
Company believes that its forecasts and assumptions are reasonable,
the Company cautions that actual results may differ materially. For
a more complete list and description of such risks and
uncertainties, refer to the Company�s filings with the Securities
and Exchange Commission (the �SEC�), including but not limited to
the Company�s most recent Forms 10-K (as amended) and 10-Q. All
forward-looking statements are based on information available to
the Company on the date of this press release. Except as required
under federal securities laws and the rules and regulations of the
SEC, the Company disclaims any intention or obligation to update
any forward-looking statements, or to make any other
forward-looking statements, after the distribution of this press
release, whether as a result of new information, future events,
developments, changes in assumptions or otherwise. Important
Additional Information This communication is not a solicitation of
a proxy from any security holder of the Company. In connection with
the proposed merger, the Company intends to file with the SEC a
proxy statement and other relevant documents to be mailed by the
Company to its stockholders. This proxy statement will contain
important information about the Company, the transaction and
related matters. THE COMPANY URGES INVESTORS AND SECURITY HOLDERS
TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
CAREFULLY WHEN THEY BECOMES AVAILABLE, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND THE PARTIES
THERETO. Investors and security holders will be able to obtain
these materials (when they are available) and other documents filed
by the Company with the SEC free of charge at the SEC�s Web site at
http://www.sec.gov. In addition, a copy of the proxy statement
(when it becomes available) may be obtained free of charge from the
Company at EasyLink Services Corporation, Investor Relations, 33
Knightsbridge Road, Piscataway, New Jersey 08654. Participants in
Solicitation The Company and its directors and executive officers
and certain other persons may be deemed to be participants in the
solicitation of proxies from the Company�s stockholders in
connection with the proposed merger. Information regarding the
Company�s directors and executive officers is available in the
Company�s Form 10-K/A, which was filed with the SEC on April 30,
2007. OTHER INFORMATION REGARDING THE PARTICIPANTS IN THE PROXY
SOLICITATION AND A DESCRIPTION OF THEIR DIRECT AND INDIRECT
INTERESTS, BY SECURITY HOLDINGS OR OTHERWISE, WILL BE CONTAINED IN
THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS TO BE FILED WITH
THE SEC WHEN THEY BECOME AVAILABLE. EasyLink Services Corporation
Condensed Consolidated Balance Sheets (in thousands) � � � Mar. 31,
2007 Dec. 31, 2006 � (unaudited) ASSETS Cash and cash equivalents $
5,289� $ 6,707� Accounts receivable, net 10,943� 10,725� Other
current assets � 2,701� � 2,511� Total current assets 18,933�
19,943� � Property and equipment, net 9,212� 9,703� Goodwill and
other intangible assets, net 11,206� 11,282� Other assets � 213� �
305� � Total assets $ 39,564� $ 41,233� � LIABILITIES AND
STOCKHOLDERS' EQUITY Accounts payable $ 5,898� $ 5,810� Accrued
expenses 8,900� 10,299� Loans and notes payable 3,808� 4,413� Other
current liabilities � 1,428� � 1,363� Total current liabilities
20,034� 21,885� � Long term liabilities � 1,027� � 1,186� � Total
liabilities 21,061� 23,071� � Total stockholders' equity � 18,503�
� 18,162� � Total liabilities and stockholders' equity $ 39,564� $
41,233� EasyLink Services Corporation Unaudited Condensed
Consolidated Statements of Operations (in thousands, except per
share amounts) � � Three Months Ended Ended March 31, 2007� 2006�
Revenues $ 18,759� $ 18,461� � Cost of revenues � 6,901� � 7,463� �
Gross profit 11,858� 10,998� � Operating expenses: Sales and
marketing 3,640� 4,555� General and administrative 5,672� 5,126�
Product development � 1,781� � 1,747� � Total operating expenses �
11,093� � 11,428� � Income (loss) from operations 765� (430) �
Other income (expense), net � (88) � (295) � Income (loss) before
income taxes 677� (725) � Provision (credit) for income taxes �
381� � (349) � Net income (loss) $ 296� $ (376) � � Basic and
diluted net income (loss) per share $ 0.03� $ (0.04) � � Weighted
average basic shares outstanding � 10,984� � 9,061� � Weighted
average diluted shares outstanding � 11,036� � 9,061� EasyLink
Services Corporation Unaudited Condensed Consolidated Statements of
Cash Flows (in thousands) � Three months ended March 31, � 2007� �
2006� � Cash flows from operating activities: Net income (loss) $
296� $ (376) Adjustments to reconcile net income (loss) to net cash
used in operating activities: Depreciation 701� 727� Amortization
of intangible assets 77� 402� Issuance of shares as matching
contributions to employee benefit plans 135� 108� Other (157) 26�
Changes in operating assets and liabilities: Accounts receivable,
net 71� (10) Prepaid expenses and other assets (166) 92� Accounts
payable, accrued expenses and other liabilities � (1,504) � (1,035)
Net cash used in operating activities (547) (66) � Cash flows from
investing activities: Purchases of property and equipment � (202) �
(395) Net cash used in investing activities � (202) � (395) � Cash
flows from financing activities: Proceeds (repayment) of bank loan
advances (605) (950) Principal payments of notes payable ---� (600)
Other � (10) � (4) Net cash used in financing activities � (615) �
(1,554) � Effect of foreign exchange rate changes on cash and cash
equivalents � (54) � (177) � Net decrease in cash and cash
equivalents (1,418) (2,192) � Cash and cash equivalents at
beginning of the period � 6,707� � 6,282� � Cash and cash
equivalents at the end of the period � 5,289� $ 4,090� EasyLink
Services Corporation Reconciliation of Non GAAP Financial
Information to GAAP (in thousands) � � Three Months Ended Mar 31,
2007� 2006� � Net income (loss) $ 296� $ (376) Add: Depreciation
701� 727� Amortization of intangible assets 77� 402� Interest
expense, net 131� 358� Income taxes (credits) � 381� � (349) �
EBITDA 1,586� 762� � Less: Interest expense, net 131� 358� Income
taxes (credits) 381� (349) � Add (subtract): Other non-cash items
(22) 134� Changes in operating assets and liabilities � (1,599) �
(953) Net cash used in operations $ (547) $ (66)
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