After a tumultuous quarter that included a 25-percent headcount reduction and renegotiating of its credit lines, Annapolis, Md.-based enterprise ASP USinternetworking Inc. Tuesday reported mixed second-quarter financial results, but still expects to achieve EBITDA breakeven by the third quarter of 2001.
“We feel good about where we’ve been, and we feel good about where we’re going,” CEO Andrew A. Stern said during an analyst conference call. “Though the top-line results are mixed, the profitability markers are all positive.”
Revenue for the quarter was $32.2 million, missing USi’s guidance by $1.8 million, and down from $36.7 million last quarter. Net loss amounted to $51.5 million, or $0.37 per share, compared with a $0.33 loss per share last quarter.
On the other hand, gross margin remained constant at 25 percent, despite the top-line revenue decline. A now-complete restructuring – including a 25-percent headcount reduction and a significant reduction in non-headcount related expenses – is expected to save USi $35 million annually. Operational cash burn was reduced to $17.9 million, down from over $40 million in Q1 and over $80 million a year ago.
“During the quarter, we signed $34 million in new service contract value, almost entirely from enterprise clients,” Stern said. “This result in the face of a continued economic slowdown and reductions in IT spending, and while undertaking a major restructuring of our business, is further evidence of the continued acceptance of the ASP value proposition.”
USi ended the quarter with $79 million in cash, and access to nearly all its credit lines, Stern said. To reduce its reliance on the equity lines as a means of funding its business, USi engaged its investment bank last month to assist in its efforts to raise more permanent funding and evaluate other strategic alternatives.
“The actions taken by the Company to improve operating processes, focus our service offerings, and capitalize on increasing efficiencies have enabled us to maintain our gross margin and improve EBITDA performance, despite the reduction in revenue and backlog resulting from financial difficulties within our existing client base,” said Stern. “We continue to see evidence of a sizable ASP market. With the increasing improvements in our business model, USi is well-positioned to take advantage of the market opportunity.”
