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Exhibit 99.1
Media Contacts: IR CONTACTS:
Susan Kraus, 781-262-3511 George Lieb, 781-262-4121
Vaughn Harring, 781-262-4659 Ed Harper, 781-262-3553
INDIVIDUAL INVESTORS:
Arleen Llerandi, 781-262-3544
November 2, 2000
GENUITY DELIVERS STRONG AND ACCELERATING
REVENUE GROWTH OF 70 PERCENT
Burlington, Mass. -- Genuity Inc. (NASDAQ: GENU) today announced third quarter
2000 results with consolidated revenues of $308 million, a growth rate of 70
percent over the third quarter of 1999, reflecting strong performance in Web
hosting, value-added services and network access. Operating margins improved as
expenses grew only 58 percent resulting in a net loss for the quarter of $229
million. Pro forma loss per share, assuming full conversion of Class B common
stock, was $0.24.
"Executing on our business strategy has paid off in an outstanding third
quarter," said Paul R. Gudonis, chairman and CEO of Genuity. "We remain firmly
on track to meet our annual financial targets, as well as consensus analyst
estimates. Our strategy to increase shareholder value is to continue to drive
top line growth, move our revenue mix toward higher margin value-added services,
improve cost efficiency and deploy our capital economically. We made
significant progress in each of these areas in the third quarter, even as we
introduced an innovative new industry solution with the announcement of our
Black RocketTM Network Services Platform (NSP)."
In October, Genuity began selling and provisioning its new Black Rocket NSP,
creating an entirely new industry category. "In the past quarter, we've seen
the industry trying to react to a trend we identified earlier--the customer's
need for integrated eBusiness services including network access, hosting and
security. With the launch of the industry's first NSP, Black Rocket, we have
gained first-mover advantage in this new industry category," said CEO Paul
Gudonis. "In the short time that we've offered this new platform, we've seen
very strong demand from the market and have already provisioned several Black
Rocket platforms, representing millions of dollars in new business."
In addition, Genuity launched its first major brand building effort with its
Black Rocket promotional and advertising campaign, covering TV, newspapers,
magazines, the Web and various outdoor venues. Since the launch of the service
on October 2, Genuity has sold five Black Rocket platforms.
STRONG REVENUE GROWTH IN ALL SERVICE LINES
In addition to the 70 percent year-over-year growth, Genuity drove overall
sequential quarterly revenue growth of 15 percent, or $40 million, reflecting
new revenue producing contracts.
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Genuity's access revenues (excluding AOL) increased 167 percent or $68 million,
in the quarter, reflecting a 155 percent increase in dial-up revenues, and a 104
percent increase in dedicated access. DSL revenues in the quarter were $17
million versus less than $1 million in the prior year quarter. Revenues from
the AOL long-term contract increased 21 percent and now represent 39 percent of
total Genuity revenues, versus 55 percent in last year's third quarter.
Web hosting revenue growth was 151 percent or $18 million over the same quarter
last year, primarily the result of new orders won through Genuity's sales team
and with our ePartners.
Value-added and other services, which includes managed security (Site Patrol),
Virtual Private Networks (VPN's), Voice over IP (VoIP), and international
revenues jumped 83 percent or $9 million. Transport revenues also grew strongly
and increased 57 percent or nearly $10 million, as compared with the same
quarter last year.
OPERATIONAL HIGHLIGHTS
Third quarter operational highlights include:
. Doubled the number of new orders from a year ago with more than 400 new
customers, including: McDonald's, Spinway, Qwest, EMC, Arbella Insurance,
Honeywell and Earthlink DSL.
. Signed new contracts totaling more than $200 million in First-year Contract
Value (FCV), a more than 170 percent increase from the same quarter last
year.
. Added 71 new managed Web hosting customers in the quarter.
. Increased the average annual size of new hosting contracts from $187,000 in
the third quarter of 1999 to $284,000 this quarter, an increase of 52 percent
over the prior year.
. Increased dedicated access connections to 3,950, a 23 percent increase from
the third quarter of 1999, with average annual revenue per connection
increasing 26 percent to approximately $46,100. Increased network service
delivery points in the quarter to 233, a 68 percent increase from the third
quarter last year.
. Increased DSL users to 138,500, an 81 percent sequential increase from the
second quarter of this year.
. Expanded Genuity's position as the leading carrier of VoIP traffic, by adding
341 million Minutes of Use (MOUs) during the quarter. Cumulative traffic for
the year to date now stands at approximately 1 billion MOUs.
. Grew total dial-up modems to 813,000, an increase of 13 percent, or 92,000
modems, from the previous quarter, and a 65 percent increase from the third
quarter of 1999. Genuity operates the second-largest dial-up access network
in the United States.
. Placed in service Genuity's first European Dense Wavelength Division
Multiplexing (DWDM) deployment of its core pan-European Internet Protocol
(IP) network, increasing capacity to 2.5 Gigabits per second (Gbps).
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FINANCIAL HIGHLIGHTS
. Hosting and value-added services grew to 14 percent of overall revenue from 8
percent in the third quarter of 1999.
. Non-AOL revenue increased 129 percent versus the third quarter of last year.
. SG&A expenses increased 42 percent over the prior year as the company
continues to ramp up its marketing and branding efforts and expand sales and
marketing personnel.
. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in
the quarter were a loss of $170 million. Relative to revenues, EBITDA loss
improved from 68 percent in the third quarter of 1999 to 55 percent in the
current quarter.
. Capital expenditures for the quarter were $441 million, 116 percent or $237
million higher than the third quarter of 1999. For the first nine months of
2000, total capital expenditures were $942 million.
. Secured a five-year, $2 billion credit facility from a consortium of ten
blue-chip financial institutions.
. Obtained investment-grade ratings from Moody's (Baa2) and Standard & Poors
(BBB+).
ABOUT GENUITY
-------------
Genuity is a leading Internet infrastructure services provider and the only
company in the industry to offer a Network Services Platform (NSP) that combines
its Tier 1 network with its full portfolio of managed Internet services,
including dedicated, remote and broadband access, Web hosting and Internet
security, to create a platform for creating scalable and repeatable managed
eBusiness solutions. With annualized revenues of more than $1billion, Genuity
(NASDAQ: GENU) is a global company with offices and partnerships throughout the
U.S., Europe, Asia and Latin America. Additional information about Genuity can
be found at www.genuity.com.
# # #
Note: All references above to earnings per share (EPS) reflect pro forma
earnings per share.
A copy of this release and associated tables can be found on the Internet at
www.genuity.com
Genuity will be discussing its 3rd quarter results at 9:00 am (EST) on November
2, 2000. Individual investors may listen in on the call by dialing 212-346-0175,
(a toll call) or via the web by going to www.genuity.com/irevent
FORWARD-LOOKING STATEMENT
-------------------------
This announcement contains forward-looking statements. For each of these
statements, Genuity Inc. claims the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of
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1995. If future events and actual performance differ materially from Genuity's
assumptions, actual results could vary significantly from the performance
projected in these forward-looking statements.
These forward-looking statements are based on the company's current knowledge,
beliefs, expectations and specific assumptions with respect to future business
decisions. Accordingly, the statements are subject to significant risks,
contingencies and uncertainties that could cause actual operating results,
performance or business prospects to differ materially from those expressed in,
or implied by, these statements. These risks, contingencies and uncertainties
include, but are not limited to: significant quarterly and other fluctuations
in revenues and results of operations; the Company's ability to develop and
maintain a successful relationship with significant customers; successfully
maintaining and continuing to strengthen our brand recognition; and expansions
relating to our capacity and network infrastructure.
For a more detailed discussion of the risks and uncertainties of Genuity's
business, please refer to the Company's Quarterly Report on Form 10-Q, as filed
with the Securities and Exchange Commission on August 14, 2000, which discusses
in greater detail the important factors that could cause actual results to
differ materially.
# # #
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GENUITY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
(in thousands, except per share amounts) Unaudited
<TABLE>
<CAPTION>
NINE MONTHS ENDED
THIRD QUARTER SEPTEMBER 30,
--------------------------------------- ----------------------------------------------
2000 1999 % Change 2000 1999 % Change
------------ -------------- ----------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Access $230,333 $140,953 63.4% $611,305 $401,425 52.3%
Hosting 30,096 12,004 150.7% 78,910 33,073 138.6%
Transport 26,995 17,250 56.5% 72,482 46,379 56.3%
Value-added services/other 20,718 11,341 82.7% 61,221 23,499 160.5%
------------ -------------- ------------- ---------------
TOTAL REVENUES 308,142 181,548 69.7% 823,918 504,376 63.4%
OPERATING EXPENSES
Cost of goods sold 339,316 206,260 64.5% 931,466 545,656 70.7%
Selling, general & administrative 139,213 97,970 42.1% 372,194 285,271 30.5%
Depreciation & amortization 81,250 49,831 63.1% 196,844 135,071 45.7%
------------ -------------- ------------- ---------------
TOTAL OPERATING EXPENSES 559,779 354,061 58.1% 1,500,504 965,998 55.3%
OPERATING LOSS (251,637) (172,513) 45.9% (676,586) (461,622) 46.6%
OTHER INCOME (EXPENSE)
Interest income (expense), net 27,912 948 n/m 26,966 905 n/m
Other - net (4,442) (336) n/m (11,772) (2,391) n/m
------------ -------------- ------------- ---------------
LOSS BEFORE INCOME TAXES (228,167) (171,901) 32.7% (661,392) (463,108) 42.8%
Income taxes 715 463 54.4% 2,023 1,165 73.6%
------------ -------------- ------------- ---------------
NET LOSS $ (228,882) $ (172,364) 32.8% $ (663,415) $ (464,273) 42.9%
============ ============== ============= ===============
PRO FORMA PER SHARE DATA (1):
Loss Per Share $ (0.24) $ (0.22) n/m $ (0.68) $ (0.58) n/m
Common Shares Outstanding
At the End of the Period 973,913 800,000 973,913 800,000
REPORTED PER SHARE DATA:
Basic and Diluted Loss per
Common Share $ (1.19) $ (9.44) n/m $ (3.45) $ (25.43) n/m
Basic and Diluted Weighted-Average
Common Shares Outstanding 192,169 18,256 192,169 18,256
</TABLE>
-------------------------------------------------
(1) Pro Forma per Share Data is based on the assumed conversion of the Class
B common stock into 800 million shares of Class C common stock at the
end of each period presented. The ability of Verizon to convert its
Class B common stock is limited by an FCC order which addresses, amongst
other things, its ownership in Genuity. See Genuity Inc.'s Form S-1 for
a detailed discussion of the conditions surrounding this conversion.
n/m = not meaningful
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GENUITY INC.
SELECTED FINANCIAL DATA
-------------------------------------------------------------------------------
(in thousands) Unaudited
<TABLE>
<CAPTION>
NINE MONTHS ENDED
THIRD QUARTER SEPTEMBER 30,
------------------------------------- ------------------------------------------
2000 1999 % Change 2000 1999 % Change
----------- ------------- ---------- ------------ ------------ ---------------
Financial data
<S> <C> <C> <C> <C> <C> <C>
EBITDA
Operating loss $(251,637) $ (172,513) 45.9% $ (676,586) $ (461,622) 46.6%
Depreciation and amortization 81,250 49,831 63.1% 196,844 135,071 45.7%
----------- ------------- ------------ ------------
EBITDA $(170,387) $ (122,682) 38.9% $ (479,742) $ (326,551) 46.9%
=========== ============= ============ ============
EBITDA Margin (55%) (68%) (58%) (65%)
=========== ============= ============ ============
Capital Expenditures
Access $ 233,345 $ 32,696 613.7% $310,775 $ 79,669 290.1%
Hosting 53,377 9,924 437.9% 98,008 23,625 314.8%
Transport - 739 -100.0% 828 2,948 -71.9%
GNI 135,810 143,319 -5.2% 433,973 339,010 28.0%
Value-added services / other 18,797 17,807 5.6% 98,517 43,441 126.8%
----------- ------------- ------------ ------------
Total capital expenditures $ 441,329 $204,485 115.8% $942,101 $488,693 92.8%
=========== ============= ============ ============
Depreciation and Amortization
Access $ 13,135 $ 8,371 56.9% $ 34,410 $ 22,508 52.9%
Hosting 7,253 3,237 124.1% 15,214 9,153 66.2%
Transport 1,104 2,021 -45.4% 4,660 5,263 -11.5%
GNI 35,388 19,851 78.3% 82,273 52,415 57.0%
Value-added services / other 24,370 16,351 49.0% 60,287 45,732 31.8%
----------- ------------- ------------ ------------
Total depreciation and amortization $ 81,250 $ 49,831 63.1% $196,844 $135,071 45.7%
=========== ============= ============ ============
International Revenues (1) $ 10,545 $ 6,232 69.2% $ 28,182 $ 15,095 86.7%
---------------------------------------------------------------
(1) Excludes revenue from AOL Japan.
</TABLE>
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