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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------------------------
Date of Report (Date of earliest event reported):
May 2, 2000
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Digex, Incorporated
(Exact name of registrant as specified in its charter)
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Delaware 59-3582217
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
0-26873
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(Commission File Number)
One Digex Plaza
Beltsville, MD 20705
(Address of principal executive offices)
(240) 264-2000
(Telephone Number)
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ITEM 5. OTHER EVENTS
On May 2, 2000, Digex, Inc. (the "Company") issued the attached press
releases.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are filed herewith:
Exhibit 99 Press Release dated May 2, 2000: "Digex Announces
First Quarter Results"
Exhibit 99.1 Press Release dated May 2, 2000: "Digex Establishes
European Subsidiary; Opens London SmartCenter(SM)"
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 4, 2000
DIGEX, INCORPORATED
(Registrant)
/s/ Mark K. Shull
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Mark K. Shull
President and Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
99 Press Release dated May 2, 2000: "Digex Announces First Quarter Results"
99.1 Press Release dated May 2, 2000: "Digex Establishes European Subsidiary; Opens London
SmartCenter(SM)"
</TABLE>
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EXHIBIT 99
NEWS RELEASE
INVESTOR RELATIONS: Tania Almond
Digex, Incorporated
240-264-2237
[email protected]
MEDIA CONTACTS: Laura Heinrich
Digex, Incorporated
301-847-5998
[email protected]
Nicole Morodan
MS&L for Digex
212-213-7140
[email protected]
DIGEX ANNOUNCES FIRST QUARTER RESULTS
RECORD QUARTERLY REVENUE OF $28 MILLION UP 198% AND EUROPEAN EXPANSION SIGNAL
MAJOR GROWTH FOR LEADING MANAGED HOSTING PROVIDER
BELTSVILLE, MD - MAY 2, 2000 - Digex, Incorporated (Nasdaq: DIGX), a leading
managed Web and application hosting service provider for businesses worldwide,
today announced revenue of $28.0 million for the quarter-ended March 31, 2000, a
198% increase over the year-ago level. Managed servers totaled 2,911, a record
increase of 600 units over the previous quarter, with average monthly revenue
per server reaching a new high of over $3,550. EBITDA* losses were ($15.1)
million in the first quarter with a net loss per share of ($0.41), as the
company continued its planned investments in infrastructure expansion.
Digex has established its European subsidiary and opened the first new
SmartCenter outside the U.S. as part of a global expansion strategy. Other
important initiatives during the quarter include a joint development effort and
investment by Compaq and Microsoft and several new program and product releases
in conjunction with Sun Microsystems and Oracle to broaden product offerings and
accelerate into new markets.
"The first quarter was a strong start to the New Year for Digex, demonstrating
the growing demand for our managed services and our ability to scale the
business effectively," said Mark Shull, President and Chief Executive Officer.
"Our core competencies in developing pre-engineered, Internet-ready hardware and
software platforms, along with our continuing ability to leverage technology to
further automate our processes, are allowing us to deploy servers rapidly and
bring customer sites online in compressed timeframes."
The opening of the first European Digex SmartCenter (outside London) and the
establishment of Digex Europe mark the first phase of Digex's planned
international expansion. "We believe our managed hosting model will be
particularly attractive in international markets, and Digex is well positioned
by virtue of its depth of experience to become a leader in a market projected to
be at $6.7 billion within three years," Shull noted.
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The company's strong results were driven by the following additional key
metrics:
- - Annualized revenue per customer grew to over $185,000, up 166% over 1Q99
- - Average number of servers per customer rose to 4.6, up 94% over the
year-ago level
- - Total customers as of March 31, 2000 were 637, a 12% sequential increase
Capital investments for the quarter totaled $33.8 million. Cash and equivalents
were $283.3 million as of March 31, 2000. "We have funded our business plan into
2001 and are in a strong position to continue our investments in the growth of
this business," said Tim Adams, Chief Financial Officer.
"Our strategic partnerships with industry-leading hardware and software players
have allowed us to expand the range of services we provide," said Rebecca Ward,
President of Product Management, Engineering and Marketing. "In our work with
Sun Microsystems, for example, we were the first provider to achieve SunTone
certification; we announced support for the Sun Solaris 8 platform; and we
joined with Sun in its Start-up Accelerator program, expanding our addressable
customer base significantly."
"We strengthened our position as a preferred provider of managed hosting
services for leading financial institutions with the addition of JP Morgan,
Advanta, and Fleet Credit Card as customers, and we added several major business
to business customers, including Medline," stated Nancy Faigen, President of
Sales and Service Delivery. "We consistently hear from our customers their
priorities for managed web hosting are performance, reliability, security and
scalability. We believe we continue to win in the marketplace because these key
factors have long been Digex's value-proposition."
The Company's expansion of its sales force remains on track. Quota-carrying
salespeople grew to 91, out of a total Digex employee base of 785, as of March
31, 2000. Over 50% of the company's employee base has achieved advanced levels
of technical certifications. Digex believes one of the keys to achieving its
goals and maintaining a competitive advantage is winning and retaining customers
through a combination of a direct sales force and a highly skilled technical
workforce.
Quarterly highlights for Digex include:
- - Growth in core managed Web hosting services for enterprise clients, with
new additions including JP Morgan, Advanta, Pharmacia and Fleet Credit
Card, and dot-com customers, including RedMeteor.com,
independenttraveler.com, loquesea.com, tellthemnow.com, Medem.com,
childU.com and I2Networks.com.
- - Focus on the Application Service Provider managed hosting market under
the Digex app-Link program with the addition of new ASP customers
including AppNet and support for the Lotus Domino platform.
- - Recognition of Digex's superior security practices and systems as the
first managed Web hosting company to achieve ICSA TruSecure MSP (Managed
Service Provider) certification.
- - Expansion of customer platform options and improved Web site management
with the addition of support for Microsoft Windows 2000 concurrent with
product release by Microsoft.
- - Achievement of the industry's first Sun-Tone certification from Sun
Microsystems for excellence in managed hosting.
- - Participation in the Sun Start-up Accelerator Program, providing selected
dot-coms with up-front hardware and software for the development of new
customer sites.
- - Introduction of the Digex Oracle Dynamic Fail-Over Service to guarantee
greater uptime service levels and the introduction of the Performance
Testing Service to troubleshoot potential performance issues before sites
go live.
- - Support for the high performance Sun Solaris 8 Operating Environment.
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FORWARD LOOKING STATEMENTS
Statements contained in this news release regarding expected financial results
and other planned events are forward-looking statements, subject to
uncertainties and risks, including, but not limited to, the demand for Digex's
services and the ability of Digex to successfully implement its strategies, each
of which may be impacted, among other things, by economic, competitive or
technological conditions. These and other applicable risks are summarized under
the caption "Risk Factors" in the Company's annual 10K filing, and are updated
periodically through the filing of reports and registration statements with the
Securities and Exchange Commission.
ABOUT DIGEX
Digex (Nasdaq: DIGX) is a leading provider of managed Web and application
hosting services for some of the world's leading companies that rely on the
Internet as a critical business tool. Digex also offers value-added enterprise
and professional services, including performance and security testing,
monitoring, reporting and networking services. Digex customers, from mainstream
enterprise corporations, Internet-based businesses and Application Service
Providers (ASPs), leverage Digex's services to deploy secure, scaleable, high
performance business solutions, including electronic retailing, online banking,
online procurement and customer self-service applications. Additional
information on Digex is available at www.digex.com.
* EBITDA consists of earnings (net loss) before interest expense, interest and
other income, income taxes, deferred compensation, depreciation, and
amortization. EBITDA does not represent funds available for management's
discretionary use and is not intended to represent cash flow from operations.
EBITDA should also not be construed as a substitute for operating income or a
better measure of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles. This
caption excludes components that are significant in understanding and assessing
the results of operations and cash flows. In addition, EBITDA is not a term
defined by generally accepted accounting principles and as a result EBITDA may
not be comparable to similarly titled measures used by other companies. However,
the Company believes that EBITDA is relevant and useful information that is
often reported and widely used by analysts, investors and other interested
parties in the Web site and application hosting industry. Accordingly, the
Company is disclosing this information to permit a more comprehensive analysis
of the Company's operating performance, as an additional meaningful measure of
performance and liquidity, and to provide additional information with respect to
the Company's ability to meet future debt service, capital expenditures and
working capital requirements.
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DIGEX, INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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MARCH 31, 2000 MARCH 31, 1999
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<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues $ 27,974 $ 9,392
Costs and expenses:
Cost of operations 3,940 1,652
Cost of services 11,396 3,952
Selling, general and administrative 27,776 8,069
Deferred compensation 994 -
Depreciation and amortization 12,571 4,314
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Total costs and expenses 56,677 17,987
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Loss from operations (28,703) (8,595)
Other income (expense)
Interest expense (443) -
Interest and other income 3,500 -
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Net loss before income tax benefit (25,646) (8,595)
Income tax benefit - -
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Net loss $ (25,646) $ (8,595)
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Net loss per common share -
basic and diluted (1) $ (0.41) $ (0.17)
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Shares used in computing basic and
diluted net loss per share 62,620,879 50,000,000
============== ==============
EBITDA (2) (15,138) (4,281)
</TABLE>
(1) Basic and diluted loss per share have been calculated assuming that the
common shares issued in connection with the Company's recapitalization in April
1999 were outstanding for all periods presented.
(2) EBITDA before certain charges consists of earnings (net loss) before
interest expense, interest and other income, income taxes, deferred
compensation, depreciation and amortisation. EBITDA before certain charges does
not represent funds available for management's discretionary use and is not
intended to represent cash flow from operations. EBITDA should not to be
considered as an alternative to net loss as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity. In addition,
EBITDA before certain charges is not a term defined by generally accepted
accounting principles, and, as a result, the measure of EBITDA presented herein
may not be comparable to similarly titled measures used by other companies.
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EXHIBIT 99.1
NEWS RELEASE
MEDIA CONTACTS: INVESTOR RELATIONS:
Laura Heinrich Nicole Morodan Tania Almond
Digex, Inc. MS&L, for Digex Digex, Inc.
301.847.5998 212.213.7140 240.264.2237
[email protected] [email protected] [email protected]
DIGEX ESTABLISHES EUROPEAN SUBSIDIARY; OPENS LONDON SMARTCENTER(SM)
"DIGEX EUROPE" INTRODUCES INDUSTRY-LEADING MANAGED HOSTING SERVICES
BELTSVILLE, MD, May 2, 2000 - Digex, Incorporated (Nasdaq: DIGX), a leading
managed Web and application hosting service provider for businesses worldwide,
today announced it has established a European subsidiary, Digex Europe, to
enhance the company's service offerings for its multinational clients. In
addition, the company announced the opening of its first European SmartCenter
data center, located near London, to provide managed hosting services to
European companies as well as US-based clients who wish to establish
international sites for improved service outside the United States.
The announcement marks the first phase of Digex's expansion into international
markets. Thomas Davidsson has been named Senior Vice President, Digex Europe, to
oversee marketing, sales, technical support and expansion strategy. Davidsson
has over 15 years management experience with IT companies in Asia, Europe and
the United States. He joins Digex from Sweden's Telia AB, where he was managing
director of the Business Solutions Department.
Like Digex's existing SmartCenters, the new London data center conforms to the
company's stringent standards of security, redundancy and quality built into
every component of the facility, network and operation management. Managed
Hosting service offerings for Windows 2000, NT and UNIX, built on technologies
from Microsoft, Compaq, and Sun, will be launched at the SmartCenter along with
24 x 7 monitoring, maintenance and support. The center, like its US
counterparts, will run a Cisco Powered Network (CPN) and will employ high-speed
connections to the London Internet Exchange (LINX), the major interchange point
for Internet traffic for the UK and Europe.
"We are excited about expanding into Europe. This will allow Digex to meet the
needs of our US-based multinational customers and to participate directly in
what is now a rapidly growing and innovative market for our hosting services,"
said Mark Shull, President and CEO at Digex. "We see opportunities to raise the
bar in managed hosting solutions in Europe for companies who desire improved
speed to market, guaranteed continuous uptime and access to technology advances.
At the same time, we will aggressively pursue areas where Europe is advanced,
such as wireless application hosting."
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According to International Data Corporation (IDC), Internet management and
outsourcing services represent the fastest growth area within European Internet
services. The firm projects European spending on such services to grow from 1998
levels of $201 million to $6.7 billion in 2003.
DIGEX EUROPE SMARTCENTER
The first Digex Europe SmartCenter offers e-business clients a range of
benefits:
- - Managed Hosting services, including Managed Servers, Security Services,
High Performance and Availability Solutions, e-Business Applications and
Client Services.
- - Pre-engineered platforms with security, operating system and Web software
updates continuously applied, monitoring agents, and backup systems
capabilities in place.
- - Multi-level physical and logical security controlled access to protect
key client assets and operations.
- - Environmentals designed to keep continuous operations with
industry-leading fire suppression systems, cooling systems, UPS and
backup generator systems.
- - On-site support personnel, with additional monitoring and management from
US-based primary and backup facilities using state of the art technology
tools.
- - Redundant high-speed links to local Internet exchange points, delivering
rapid content distribution.
ABOUT DIGEX
Digex (Nasdaq: DIGX) is a leading provider of managed Web and application
hosting services for some of the world's leading companies that rely on the
Internet as a critical business tool. Digex also offers value-added enterprise
and professional services, including performance and security testing,
monitoring, reporting and networking services. Digex customers, from mainstream
enterprise corporations, Internet-based businesses and Application Service
Providers (ASPs), leverage Digex services to deploy secure, scaleable, high
performance business solutions, including electronic retailing, online banking,
online procurement and customer self-service applications. Additional
information on Digex is available at www.digex.com.
# # #
All referenced product names are trademarks of their respective companies.
