Q3 Revenue $31.7 Million for USi

USinternetworking, Inc., (USi) the Annapolis, Md. , provider of e-commerce software the leading, today reported results for the third quarter ended September 30, 2001. Revenue in the third quarter was $31.7 million. USi achieved EBITDA profitability for the quarter of $680,000, after including the effect of a $2.6 million restructuring charge from actions taken during the third quarter. The net loss amounted to $37.6 million, or $0.27 per share.

“Reaching EBITDA breakeven is a significant milestone for USi,” says Andrew Stern, the firm’s chief executive officer. “This achievement reflects the improvements we’ve made in the management of our operations and evidences the overall efficacy of USi’s business model.”

Reported gross margin for the quarter improved to $11.7 million or 37 percent, further evidence of gains in operational efficiency. USi’s cost structure was also improved by further reductions within its employee base, primarily in indirect functions. At the end of the quarter the company employed approximately 625 people.

“Despite difficult economic conditions and financial viability concerns that significantly limited new sales, USi delivered substantial improvements on bottom line performance, as evidenced by our improving margins and significantly reduced cash consumption,” says Stern. “Moreover, these results were achieved while improving client service levels, which rose to historical highs in the third quarter,” he adds.

During the quarter, USi worked with its investment bank to identify more permanent funding and evaluate strategic alternatives. Following a four-month process, which included discussions with a broad variety of strategic and financial investors and extensive business due diligence with a select group of interested parties, the company executed a letter of intent with Bain Capital Partners, LLC (Bain) providing for an equity investment of up to $100 million.

The investment is contingent upon a number of conditions, including, a mutually agreeable restructuring of the company’s obligations, execution of definitive documentation, and any necessary regulatory approvals.

Bain and USi will continue to work closely to structure the form of the transaction and to execute a definitive agreement. Subsequent to closing, it is expected that Bain will own substantially all of USi’s equity, materially diluting the company’s current equity. Upon completion of the transaction and the associated restructuring, USi expects to be fully funded to cash flow positive.

“Our current clients and prospects have responded favorably to the Bain announcement of October 11,” says Stern. “The proposed recapitalization, upon completion, will ensure our long-term viability, and will enable us to extend our leadership position into the future.”

USi’s restructuring adviser, Conway Del Genio Gries & Co., LLC (CDG), has recently begun discussions with its creditors and says that while the intention is to come to consensual agreement with its creditors, there can be no assurance that the restructuring will be successfully completed outside of court.

  • Guidance for USi’s fiscal year 2001 follows:

  • Revenue for 2001 is expected to be approximately $130.0 million, a 19 percent increase over 2000.

  • The gross margin for the full year 2001 is expected to be slightly above 30 percent.

  • For the full year, USi expects to report an EBITDA loss of $19.0 to $20.0 million, including restructuring charges.

  • For the full year, the expected loss per share is in the range of $1.20 to $1.21.

  • USi expects capital expenditures for 2001 to be in the range of $30.0 – 35.0 million.
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