InPhonic, Inc. (NASDAQ:INPC), a leading online seller of wireless
services, today reported financial results for its second quarter
ended June 30, 2005. Consolidated Financial Results -0- *T GAAP
Results -- Revenues were $81.6 million for the second quarter 2005,
compared to $50.1 million for the second quarter 2004, an increase
of 63% year over year. -- Net loss attributable to common
stockholders was $(1.7) million or $(0.05) per basic and diluted
share for the second quarter 2005, a 74% improvement compared to a
net loss attributable to common stockholders of $(6.5) million, or
$(0.56) per basic and diluted share, for the second quarter 2004.
-- The net loss attributable to common stockholders for the second
quarter 2005 included stock-based compensation of $(2.8) million,
loss on investment of $(0.2) million, and depreciation and
amortization of $(2.1) million. The net loss attributable to common
stockholders for the second quarter 2004 included stock-based
compensation of $(2.7) million, loss on investment of $(0.2)
million, and depreciation and amortization of $(1.4) million. --
General and administrative costs for the second quarter 2005 were
$13.2 million, including stock-based compensation of $2.2 million.
This compares to $11.9 million for the second quarter 2004,
including stock-based compensation of $2.4 million. Sales and
marketing costs for the second quarter 2005 were $20.6 million,
including stock-based compensation of $0.6 million. This compares
to $11.3 million for the second quarter 2004, including stock-based
compensation of $0.3 million. Non-GAAP Results -- Revenues were
$81.6 million for the second quarter 2005, compared with revenues
of $49.1 million for the second quarter 2004 (excluding, for
comparison purposes, the effects of the one-time recognition of
$1.0 million in revenues in the second quarter 2004 that were
previously deferred in accordance with Staff Accounting Bulletin
No. 104, Revenue Recognition in Financial Statements), an increase
of 66% year over year. -- Adjusted EBITDA for the second quarter
2005 was $6.9 million, compared to Adjusted EBITDA of $0.5 million
for the second quarter 2004, an improvement of $6.4 million year
over year. -- Adjusted Earnings before Taxes ("Adjusted EBT") for
the second quarter 2005 were $5.4 million, or $0.13 per diluted
share, reflecting an improvement of $6.0 million compared to
Adjusted EBT of $(0.6) million, or $(0.02) per diluted share for
the second quarter 2004. -- General and administrative costs for
the second quarter 2005 were $9.4 million, excluding stock-based
compensation of $2.2 million, settlement costs of $0.4 million and
non-recurring expenses of $1.2 million, compared to general and
administrative costs of $9.5 million, excluding stock-based
compensation of $2.4 million, for the second quarter 2004. Sales
and marketing costs for the second quarter 2005 were $19.1 million,
excluding stock-based compensation of $0.6 million, settlement
costs of $0.5 million and non-recurring costs of $0.4 million,
compared to sales and marketing costs of $11.0 million, excluding
stock-based compensation of $0.3 million, for the second quarter
2004. *T The components of Adjusted EBITDA, Adjusted EBT and
Adjusted EBT per diluted share are discussed below under "Non-GAAP
Financial Measures", and a reconciliation between GAAP and Non-GAAP
results is shown immediately following the Unaudited Consolidated
Statements of Cash Flows. "Our financial results reflect solid
execution across our business," said David A. Steinberg, chairman
and chief executive officer. "We remain focused on expanding our
business and enhancing our value proposition to the carriers, our
marketing partners and customers. After having achieved our first
half 2005 goals, InPhonic is well positioned to execute on our
business plan for the remainder of the year and beyond." -0- *T
Operating Highlights -- Launched an online customer acquisition
program for Sprint PCS, employing InPhonic's expansive online
marketing channels and comprehensive e-commerce platform; -- Signed
multi-year wholesale contract with Cingular Wireless, the nation's
largest wireless provider, to resell wireless minutes and data
services provisioned on the Cingular GSM nationwide network; --
Completed the integration of the A1 Wireless USA, Inc. acquisition;
-- Acquired VMC Satellite, a leading satellite television
activation company; -- Added Hawaii's largest telecommunications
provider, Hawaiian Telecom, previously Verizon Hawaii, as MVNO
client; -- Launched premium Accessories and Device Protection
programs; -- Initiated VoIP communication service offering through
Vonage Partnership. *T Business Outlook The following business
outlook is based on current information and expectations as of
August 4, 2005. InPhonic's business outlook as of today will be
available on the Company's Investor Relations Web site throughout
the current quarter. It is currently expected the outlook will not
be updated until the release of InPhonic's next quarterly earnings
announcement, notwithstanding subsequent developments; however,
InPhonic may update the outlook or any portion thereof at any time.
InPhonic is providing guidance for the third quarter 2005 and
reaffirming guidance for the full year 2005. -0- *T Guidance
Guidance Figures in millions, except Adjusted EBT Q3 2005 FY 2005
---------------------------------------- Revenues $90.0-$92.0
$345.0-$355.0 Adjusted EBITDA $11.0-$12.0 $36.0-$37.0 Adjusted EBT,
per share $0.24-$0.26 $0.75-$0.78 *T Forward-Looking Statements
This press release contains forward-looking statements, including,
without limitation, all statements related to future financial
performance, plans to grow our business and build our brand. Words
such as "expect," "anticipate" and similar expressions are intended
to identify forward-looking statements. These forward-looking
statements are based upon our current expectations. Forward-looking
statements involve risks and uncertainties. Our actual results and
the timing of events could differ materially from those anticipated
in such forward-looking statements as a result of these risks and
uncertainties, which include, without limitation, risks related to
our fluctuating operating results, seasonality in our business, our
ability to acquire products on reasonable terms, our online
business model, demand for our products, the strength of our brand,
competition, our ability to fulfill orders and other risks detailed
in our filings with the Securities and Exchange Commission,
including our Annual Report on Form 10-K for the Year ended
December 31, 2004 and our Quarterly Reports on Form 10-Q. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release.
All forward-looking statements are qualified in their entirety by
this cautionary statement, and InPhonic undertakes no obligation to
revise or update any forward-looking statements to reflect events
or circumstances after the date hereof. Conference Call Company
management will be holding a conference call to discuss its second
quarter 2005 financial results Today, Thursday, August 4, 2005
after the close of the day's trading on the NASDAQ Stock Market.
InPhonic will host a conference call, open to the general public,
at 5:00 PM Eastern Time to discuss financial results and provide a
Company update. The conference call can be accessed by the
following: -0- *T -- 877-502-9272 (Domestic) or 913-981-5581
(International); passcode 1943863. -- The replay will be available
through August 13, 2005 by dialing 888-203-1112 (Domestic) or
719-457-0820 (International); passcode 1943863. -- The Company will
also audio Webcast the call. A link to the audio Webcast will be
available on the Company's website at www.inphonic.com in the
Investor Relations section. -- More call information and an audio
archive following the call will be available on the Company's
website at www.inphonic.com in the Investor Relations section. --
Individual investors can listen to the call at
www.fulldisclosure.com , Thomson/CCBN's individual investor portal.
-- Institutional investors can access the call via the
password-protected event management site, www.streetevents.com. *T
Non-GAAP Financial Measures To supplement the Company's unaudited
consolidated financial statements, which are presented in
accordance with U.S. generally accepted accounting principles
("U.S. GAAP"), InPhonic uses the following Non-GAAP measures of
certain components of financial performance. Adjusted EBITDA
-Earnings before interest, taxes, depreciation and amortization
adjusted for stock-based compensation, loss on investments,
restructuring costs, settlement costs and non-recurring expenses,
which are defined as expenses that have been eliminated during the
period that will not be incurred in future periods. The Company's
calculation of Adjusted EBITDA for the first quarter 2005 did not
incorporate the impact of settlement costs or non-recurring
expenses. Adjusted EBT - Earnings excluding net interest and other
expense (income), stock-based compensation, restructuring costs,
loss on investments, depreciation and amortization related to
acquisitions, settlement costs and non-recurring expenses, which
are defined as expenses that have been eliminated during the period
that will not be incurred in future periods. The Company's
calculation of Adjusted EBT for the first quarter 2005 did not
incorporate the impact of settlement costs or non-recurring
expenses. Adjusted EBT per diluted share - per share value of
Adjusted EBT on fully-diluted basis, does not include the impact of
treasury stock. The Company believes that the presentation of
Adjusted EBITDA, Adjusted EBT and Adjusted EBT per diluted share
provides useful information to management and investors regarding
certain additional financial and business trends relating to its
financial condition and results of operations. The Company believes
when U.S. GAAP net income and U.S. GAAP net income per share are
viewed in conjunction with these Non-GAAP measures, investors are
provided with a more meaningful understanding of the Company's
ongoing operating performance. In addition, the Company's
management uses these measures for reviewing the Company's
financial results. These measures should be considered in addition
to results prepared in accordance with U.S. GAAP, but should not be
considered a substitute for, or superior to, GAAP results. The
Company has reconciled Non-GAAP financial measures included in this
press release to the nearest GAAP measure. Investors are encouraged
to review the related GAAP financial measures and the
reconciliation of these Non-GAAP financial measures to their most
directly comparable GAAP financial measure. About InPhonic
Headquartered in Washington, D.C., InPhonic, Inc. (NASDAQ:INPC) is
a leading online seller of wireless services and products. InPhonic
sells these services and products, and provides world-class
customer service through websites that it creates and manages for
online businesses, national retailers, member-based organizations
and associations under their own brands. InPhonic also operates
Wirefly, a leading mobile phones and wireless plans comparison site
that was awarded "Best of the Web" by Forbes magazine in 2004.
InPhonic owns and operates Liberty Wireless, a leading MVNO and can
deliver a full range of mobility solutions to enterprise clients
through its Mobile Virtual Network Enablement (MVNE) platform. In
2004, InPhonic was selected #1 company of the year on the Inc. 500
- Inc. Magazine's list of the fastest-growing privately held
companies in the United States. InPhonic was named T-Mobile's
Internet Partner of the Year for 2004. For more information on the
company, its products and services, visit the InPhonic Corporate
website at www.inphonic.com. -0- *T INPHONIC, INC. &
SUBSIDIARIES Unaudited Consolidated Statements of Operations (in
thousands, except per share and share amounts) Three Months Ended
Six Months Ended June 30, June 30, -----------------------
----------------------- 2004 2005 2004 2005 ----------- -----------
----------- ----------- Revenues: Activations and services $ 40,405
$ 61,266 $ 73,827 $ 118,508 Equipment 9,697 20,352 16,351 39,717
----------- ----------- ----------- ----------- Total revenues
50,102 81,618 90,178 158,225 ----------- ----------- -----------
----------- Cost of revenues, excluding depreciation and
amortization: Activations and services 5,807 4,442 11,836 9,779
Equipment 22,289 42,642 39,236 82,738 ----------- -----------
----------- ----------- Total cost of revenues 28,096 47,084 51,072
92,517 ----------- ----------- ----------- ----------- Operating
expenses: General and administrative expenses, excluding
depreciation and amortization 11,916 13,192 22,059 31,301 Sales and
marketing expenses, excluding depreciation and amortization 11,317
20,619 21,337 39,026 Depreciation and amortization 1,425 2,142
3,034 3,919 Restructuring costs - 245 - 394 Loss on investment 150
228 150 228 ----------- ----------- ----------- ----------- Total
operating expenses 24,808 36,426 46,580 74,868 -----------
----------- ----------- ----------- Loss from operations (2,802)
(1,892) (7,474) (9,160) ----------- ----------- -----------
----------- Other income (expense): Interest income 69 545 134
1,027 Interest expense (191) (305) (368) (513) -----------
----------- ----------- ----------- Total other income (expense)
(122) 240 (234) 514 ----------- ----------- ----------- -----------
Net loss (2,924) (1,652) (7,708) (8,646) Preferred stock dividends
and accretion to preferred redemption value (3,542) - (5,657) -
----------- ----------- ----------- ----------- Net loss
attributable to common stockholders $ (6,466) $ (1,652) $ (13,365)
$ (8,646) =========== =========== =========== =========== Basic and
diluted net loss per share $ (0.56) $ (0.05) $ (1.16) $ (0.26)
=========== =========== =========== =========== Basic and diluted
weighted average shares outstanding 11,576,364 33,847,007
11,561,524 33,380,156 =========== =========== ===========
=========== Three Months Ended Six Months Ended June 30, June 30,
----------------------- ----------------------- 2004 2005 2004 2005
----------- ----------- ----------- ----------- Stock based
compensation is allocated as follows: General and administrative $
2,406 $ 2,225 $ 2,613 $ 8,586 Sales and marketing 302 567 320 1,210
----------- ----------- ----------- ----------- Total stock based
compensation $ 2,708 $ 2,792 $ 2,933 $ 9,796 -----------
----------- ----------- ----------- INPHONIC, INC. &
SUBSIDIARIES Unaudited Selected Segment Information (in thousands)
Three Months Ended, Six Months Ended, June 30 June 30 2004 2005
2004 2005 ----------- ----------- ----------- ----------- Revenues:
Wireless activations and services (a) $ 35,908 $ 73,396 $ 61,481 $
138,927 MVNO services (b) 12,328 7,024 24,848 16,670 Data services
1,866 1,198 3,849 2,628 ----------- ----------- -----------
----------- Total revenues 50,102 81,618 90,178 158,225 ===========
=========== =========== =========== Cost of revenues, excluding
depreciation and amortization: Wireless activations and services
(a) $ 19,778 $ 41,719 $ 34,390 $ 80,668 MVNO services (b) 8,021
5,190 15,714 11,417 Data services 297 175 968 432 -----------
----------- ----------- ----------- Total cost of revenues 28,096
47,084 51,072 92,517 =========== =========== ===========
=========== (a) Wireless activations and services segment includes
financial results of the Cellular Activations and Satellite
Television units. (b) MVNO services segment includes financial
results of the MVNO services and MVNE services units. INPHONIC, INC
& SUBSIDIARIES Unaudited Consolidated Balance Sheets (in
thousands, except share amounts) December 31, June 30, 2004 2005
------------ ------------ Assets (unaudited) Current assets: Cash
and cash equivalents $ 100,986 $ 65,260 Short-term investments -
17,860 Accounts receivable, net of allowance for doubtful accounts
19,039 39,667 Inventory, net 10,860 17,791 Prepaid expenses 11,434
1,475 Deferred costs and other current assets 2,391 2,561
------------ ------------ Total current assets 144,710 144,614
Restricted cash and cash equivalents 500 500 Property and
equipment, net 5,975 9,336 Goodwill 9,479 30,710 Intangible assets,
net 1,490 15,978 Deposits and other assets 1,635 1,749 ------------
------------ Total assets $ 163,789 $ 202,887 ============
============ Liabilities and Stockholders' Equity Current
liabilities: Accounts payable $ 16,922 $ 24,298 Accrued expenses
and other liabilities 23,502 34,873 Short-term capital leases 279
225 Deferred revenue 10,723 12,860 ------------ ------------ Total
current liabilities 51,426 72,256 Long-term capital leases 261 168
------------ ------------ Total liabilities $ 51,687 $ 72,424
------------ ------------ Stockholders' equity: Common stock, $0.01
par value Authorized 200,000,000 shares at December 31, 2004 and
June 30, 2005; issued and outstanding 32,252,573 and 35,097,657
shares at December 31, 2004 and June 30, 2005, respectively; $ 324
$ 352 Additional paid-in capital 238,241 265,220 Accumulated
deficit (126,463) (135,109) ------------ ------------ Total
stockholders' equity 112,102 130,463 ------------ ------------
Total liabilities and stockholders' equity $ 163,789 $ 202,887
============ ============ INPHONIC, INC & SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows (in thousands) Six
Months Ended Three Months June 30, Ended June 30, 2004 2005 2005
----------------------- -------------- (unaudited) (unaudited)
(unaudited) Cash flows from operating activities: Net loss (7,708)
(8,646) (1,652) Adjustments to reconcile net loss to net cash used
in operating activities Depreciation and amortization 3,034 3,919
2,142 Non-cash interest expense, net 25 324 162 Stock-based
compensation 2,933 9,796 2,792 Write-off of investment 150 228 228
Changes in operating assets and liabilities, net of assets and
liabilities received from business acquisition: Accounts receivable
(1,428) (20,542) (10,567) Inventory (3,135) (4,106) (1,802) Prepaid
expenses 256 (741) 575 Deferred costs and other assets (201) (275)
234 Accounts payable 7,368 7,376 3,989 Accrued expenses and other
liabilities 1,016 3,655 5,264 Deferred revenue (667) 2,137 (1,566)
----------- ----------- -------------- Net cash provided by (used
in) operating activities 1,643 (6,875) (201) Cash flows from
investing activities: Net cash paid for acquisitions - (8,632)
(5,777) Net cash paid for intangible assets - (2,439) (2,439) Note
receivable from stockholder (30) - - Purchase of short-term
investments - (17,860) (12,893) Capitalized expenditures, including
internal capitalized labor (2,359) (6,026) (3,948) -----------
----------- -------------- Net cash used in investing activities
(2,389) (34,957) (25,057) Cash flows from financing activities:
Principal repayments on debt (189) (146) (66) Net borrowings on
line of credit 1,702 - - Proceeds from debt borrowings 2,250 - -
Series D-4 dividends paid (92) - - Proceeds from exercise of
warrants and options - 6,543 5,896 Costs of initial public offering
- (291) (88) ----------- ----------- -------------- Net cash
provided by financing activities 3,671 6,106 5,742 -----------
----------- -------------- Net increase (decrease) in cash and cash
equivalents 2,925 (35,726) (19,516) Cash and cash equivalents at
December 31, 2003 and 2004 and March 31, 2005, respectively 29,048
100,986 84,776 ----------- ----------- -------------- Cash and cash
equivalents at June 30, 2004 and 2005, respectively 31,973 65,260
65,260 =========== =========== ============== Supplemental
disclosure of cash flows information: Cash paid during the quarter
for: Interest 342 90 Supplemental disclosure of non- cash
activities: Preferred stock dividends and accretion to redemption
value (5,657) - Restricted stock issuance - 547 Issuance of common
stock in business acquisitions - 9,238 Issuance of common stock in
intangible asset purchase - 1,721 Issuance of common stock warrants
for debt fees 816 - Issuance of common stock to settle a liability
50 - Release of funds in escrow related to acquisitions - 10,700
INPHONIC, INC & SUBSIDIARIES Reconciliation of non-GAAP
measures to the nearest comparable GAAP measures (Unaudited, in
millions) Non-GAAP financial metrics: Three months ended June 30,
2004 ---------------------------------- Non- GAAP Actual
Adjustments Results --------- ----------- ---------- Revenues $
50.1 $ (1.0)(a)$ 49.1 Cost of Revenues $ (28.1) $ (28.1) General
and Administrative Expenses $ (11.9) $ 2.4 (d)$ (9.5) Sales and
Marketing Expenses $ (11.3) $ 0.3 (d)$ (11.0) Three months ended
June 30, 2005 ---------------------------------- Non- GAAP Actual
Adjustments Results --------- ----------- ---------- Revenues $
81.6 $ - $ 81.6 Cost of Revenues (47.1) 0.9 (c) (46.2) General and
Administrative Expenses (13.2) 0.4 (b) (9.4) 1.2 (c) 2.2 (d) Sales
and Marketing Expenses (20.6) 0.5 (b) (19.1) 0.4 (c) 0.6 (d) (a)
One-time recognition of $1.0 million in revenues that were
previously deferred in accordance with Staff Accounting Bulletin
No. 104, Revenue Recognition in Financial Statements. (b)
Adjustment to exclude settlement costs associated with the A1
Wireless USA acquisition incurred during the period, as these
expenses are not expected to be incurred in future periods. These
adjustments have been allocated between general and administrative
and sales and marketing expenses. Included in settlement costs are
vendor termination and settlement costs totaling $0.7 million
associated with the A1 Wireless USA acquisition (allocated between
general and administrative and sales and marketing expenses), and
A1 Wireless USA acquisition relationship termination and settlement
costs of $0.2 million (included in general and administrative
expenses). (c) Adjustment to exclude non-recurring expenses that
were eliminated in the current period and are not expected to be
incurred in any future periods. Included in non-recurring expenses
are costs related to the integration of A1 Wireless USA of $0.5
million (included in general and administrative expenses) which
represent salaries and benefits paid to former A1 employees;
outsourcing costs of $0.4 million (allocated between general and
administrative and sales and marketing expenses), which represent
costs incurred related to a terminated customer service vendor;
elimination of product line costs of $0.9 million, incurred related
to a now corrected, temporary rate plan matching discrepancy
between our carrier offering and customer purchases resulting in
excessive cost of sales; and employee costs of $0.8 million
(allocated between general and administrative and sales and
marketing expenses) related to salaries and benefits for employees
terminated in the quarter as the Company increased operating
efficiency. (d) Adjustment to exclude the impact of stock
compensation on general and administrative and sales and marketing
expenses. INPHONIC, INC & SUBSIDIARIES Reconciliation of
non-GAAP measures to the nearest comparable GAAP measures
(Unaudited, in millions) Adjusted EBITDA: Three-Months Ended
----------------------------- June 30, 2004 June 30, 2005
------------- ------------- Net income (loss) $ (2.9) $ (1.7)
Non-recurring revenue adjustment (1.0)(a) - Add Back: Net interest
and other expense (income) 0.1 (0.2) Taxes - - Depreciation and
amortization 1.4 2.1 Stock-based compensation 2.7 2.8 Restructuring
costs - 0.2 (b) Loss on investment 0.2 0.2 Settlement costs - 0.9
(c) Non-recurring expenses - 2.6 (d) ------------- -------------
Adjusted EBITDA $ 0.5 $ 6.9 (a) One-time recognition of $1.0
million in revenues that were previously deferred in accordance
with Staff Accounting Bulletin No. 104, Revenue Recognition in
Financial Statements. (b) Restructuring costs related to the
integration of A1 Wireless USA and the related restructuring of the
Company's workforce of $0.2 million, including severance costs for
employees terminated in Q1 2005 and trailing rental expenses for
excess facilities that were terminated in Q1 2005. (c) In
calculating Adjusted EBITDA, the Company adds back settlement costs
associated with the A1 Wireless USA acquisition incurred during the
period, as these expenses are not expected to be incurred in future
periods. Included in settlement costs are vendor termination and
settlement costs of $0.7 million associated with the A1 Wireless
USA acquisition, and A1 Wireless USA relationship termination and
settlement costs of $0.2 million. (d) In calculating Adjusted
EBITDA, the Company adds back non-recurring expenses that were
eliminated in the current period and are not expected to be
incurred in any future periods. Included in non-recurring expenses
are costs related to the integration of A1 Wireless USA of $0.5
million which represent salaries and benefits paid to former A1
employees; outsourcing costs of $0.4 million, which represent costs
incurred related to a terminated customer service vendor;
elimination of product line costs of $0.9 million, incurred related
to a now corrected, temporary rate plan matching discrepancy
between our carrier offering and customer purchases resulting in
excessive cost of sales; and employee costs of $0.8 million related
to salaries and benefits for employees terminated in the quarter as
the Company increased operating efficiency. INPHONIC, INC &
SUBSIDIARIES Reconciliation of non-GAAP measures to the nearest
comparable GAAP measures (Unaudited, in millions except share and
per share amounts) Adjusted EBT: Three-Months Ended
----------------------------- June 30, 2004 June 30, 2005
------------- ------------- Net income (loss) $ (2.9) $ (1.7)
Non-recurring revenue adjustment (1.0)(a) - Add Back: Taxes - - Net
interest and other expense (income) 0.1 (0.2) Stock-based
compensation 2.7 2.8 Restructuring costs - 0.2 (b) Loss on
investment 0.2 0.2 Depreciation and amortization of acquisitions
0.3 0.6 Settlement costs 0.9 (c) Non-recurring expenses 2.6 (d)
------------ ------------ Adjusted EBT $ (0.6) $ 5.4 =============
============= Adjusted EBT per share $ (0.02) $ 0.13 Basic Weighted
Average Shares 11,576,364 33,847,007 Add: Diluted shares 19,435,002
7,453,574 Weighted Average Diluted Shares 31,011,366 41,300,581
Diluted shares used in per share calculation 31,011,366 41,300,581
Outstanding Common Shares at period end 35,097,657 Outstanding
options and restricted stock at period end 6,167,789 Outstanding
warrants at period end 942,380 (a) One-time recognition of $1.0
million in revenues that were previously deferred in accordance
with Staff Accounting Bulletin No. 104, Revenue Recognition in
Financial Statements. (b) Restructuring costs related to the
integration of A1 Wireless USA and the related restructuring of the
Company's workforce of $0.2 million, including severance costs for
employees terminated in Q1 2005 and trailing rental expenses for
excess facilities that were terminated in Q1 2005. (c) In
calculating Adjusted EBT, the Company adds back settlement costs
associated with the A1 Wireless USA acquisition incurred during the
period, as these expenses are not expected to be incurred in future
periods. Included in settlement costs are vendor termination and
settlement costs of $0.7 million associated with the A1 Wireless
USA acquisition, and A1 Wireless USA relationship termination and
settlement costs of $0.2 million. (d) In calculating Adjusted EBT,
the Company adds back non-recurring expenses that were eliminated
in the current period and are not expected to be incurred in any
future periods. Included in non-recurring expenses are costs
related to the integration of A1 Wireless USA of $0.5 million which
represent salaries and benefits paid to former A1 employees;
outsourcing costs of $0.4 million, which represent costs incurred
related to a terminated customer service vendor; elimination of
product line costs of $0.9 million, incurred related to a now
corrected, temporary rate plan matching discrepancy between our
carrier offering and customer purchases resulting in excessive cost
of sales; and employee costs of $0.8 million related to salaries
and benefits for employees terminated in the quarter through
increased operating efficiency. *T
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