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NEWS RELEASE
MEDIA CONTACTS: INVESTOR RELATIONS:
Alice Andors Nicole Morodan Tania Almond
Digex, Inc. MS&L, for Digex Digex, Inc.
301.847.6471 212.213.7140 240.264.2237
[email protected] [email protected] [email protected]
DIGEX ANNOUNCES RECORD SECOND QUARTER RESULTS
QUARTERLY REVENUE OF $42 MILLION UP 234%; CONTINUED GROWTH IN CORE METRICS
BELTSVILLE, MD, JULY 31, 2000 - Digex, Incorporated (Nasdaq: DIGX), a leading
managed Web and application hosting service provider for businesses worldwide,
today announced revenue of $42.2 million for the quarter-ended June 30, 2000, a
234% increase over the same period a year ago. Managed servers totaled 3,647, a
record increase of 736 units over the previous quarter, with normalized average
monthly revenue per server reaching a new high of $3,780. Normalized gross
margin was 42% while EBITDA* losses totaled $18.9 million in the second quarter
with a net loss per share of $0.54, as the company continued its planned
investments in infrastructure expansion.
"Digex's robust growth in the second quarter resulted from the addition of
significant new customers as well as through major solution upgrades and
application expansions by existing customers along with the adoption of new
value-added services," said Mark Shull, president and CEO of Digex. "We are
seeing increasing numbers of customers taking advantage of the full range of our
managed products and services and, as a result, we are seeing continued growth
in our average monthly revenue per server, a metric in which Digex leads the
industry."
In the second quarter, Digex extended its leadership position as a top provider
of managed web and application hosting services with the further development of
product sets in the performance, security and high availability areas.
Additionally, the opening of Digex's first European SmartCenter marked the
beginning of the company's international expansion. The London data center
build-out is complete and now houses PeoplePC as Digex's first UK customer. "We
believe European customers will prefer the managed hosting model, and we are
well positioned to take advantage of the expected growth of the Web hosting
market in Europe," Shull noted.
Other key metrics driving the company's strong results in the quarter include:
o Annualized revenue per customer normalized, grew to over $227,000, up 152%
over 2Q99
o Average number of servers per customer rose to 5.4, up 99% over the
year-ago level
o Total customers as of June 30, 2000 were 673, a 20% annual increase
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"We had another strong quarter financially, as we were ahead of expectations for
revenue, gross margin, EBITDA and EPS," said Tim Adams, chief financial officer
for Digex. Within the quarter, the company recorded $5.0 million of revenue
associated with an equipment sale as an accommodation to support a customer
transaction as a one-time event. The Company's planned expansion of its sales
force remains on track. Quota-carrying salespeople grew to 102, out of a total
Digex employee base of 1,073, as of June 30, 2000. Capital investments for the
quarter totaled $63.3 million. Cash and equivalents were $206.1 million as of
June 30, 2000.
"Our model is to provide our customers with the most robust, highest performing
managed hosting platform. This requires the integration of leading hardware,
software, monitoring, system management and backup technologies," said Rebecca
Ward, president, engineering, product management and marketing for Digex. "For
example, we introduced the iPlanet Directory Server software to manage users for
large-scale e-commerce, extranet and intranet applications, as well as for ASPs
who administer and manage multiple customers and applications. We already have
customers using this service."
In the area of security, Digex completed the stringent SAS-70 Type I
certification, which focused on the company's systems for providing the most
reliable and secure environment for conducting online transactions for its
customers. Ward noted that Digex expanded its alliance with Akamai Technologies
to include the company's new FreeFlow Streaming service, the latest addition to
Digex's High Availability and Performance suite of offerings.
"Our customers clearly understand the value in managed hosting services, and
several of our larger customers - including JP Morgan, DealTime.com, Standard &
Poor's and Staples.com - undertook major expansions in the quarter," said Nancy
Faigen, president, sales and service delivery for Digex. "With the expansion of
Digex Sales' presence into two new sales offices in New York and Los Angeles and
additional Channel Representatives to our e-Link and app-Link programs in the
second quarter, we are very pleased with our continued progress in the
development of our distribution channels."
Quarterly highlights for Digex include:
o Won key enterprise customers, including Capital One, Cargill Inc., A.G.
Edwards, Houghton Mifflin, Spalding Sports and Elizabeth Arden, and
web-centric customers including ClaimsDesk.com, elogex, ECPayments,
eMarketWorld and WebFamilies.com.
o Continued expansion of Digex's ASP customer base and app-Link program.
Digex added strategic ASP clients in the quarter focused on B2B commerce,
healthcare, ERP and other key business areas, such as Infinity Markets and
Vastera. ASPs are increasingly turning to Digex to manage their technology
infrastructure while they focus on their business solutions and customer
care.
o Completed the stringent SAS-70 Type I certification, which focused on the
company's systems for providing the most reliable and secure environment
for conducting online transactions for its customers. Digex has already
begun the SAS-70 Type II audit.
o Included in the Russell 3000(R)Index that measures the performance of the
3,000 largest U.S. companies based on total market capitalization.
o Established a Customer Steering Committee to guide future product and
service development.
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o Launched a high-visibility advertising and marketing campaign using the
image of NBA basketball star and MVP Shaquille O'Neal. Ads have appeared in
the business and daily press, in trade publications, and in outdoor
campaigns on the East and West coasts.
o Recognized by Cisco Systems as a Cisco-Powered Network Application
Infrastructure Provider (AIP).
o Added the Sun Netra 1405 high-end Web server and entry level database
server as well as the Compaq Proliant 6400R 4-Way Web server. In addition,
the popular SQL Dynamic Fail Over product now includes the Compaq Proliant
8500
o Introduced iPlanet Directory Server for Sun's Solaris operating environment
into the Digex product suite. In the Digex managed hosting environment,
iPlanet Directory Server will manage users for large-scale e-commerce,
extranet and intranet applications, as well as for ASPs who administer and
manage multiple customers and applications.
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 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. Digex also offers
value-added enterprise and professional services, including performance and
security testing, monitoring, reporting and networking services. Additional
information on Digex is available at www.digex.com.
INTERNET USERS: Digex news releases and other useful information are available
on the Digex Web site at WWW.DIGEX.COM. To receive news releases by e-mail or to
request that information be mailed to you, please visit the Investor Relations
section of the site and click on the "Investor Information Request Form" link.
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* 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
Unaudited (In thousands, except share and per share data)
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<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenues $ 42,222 $ 12,629 $ 70,196 $ 22,021
Cost of expenses:
Cost of operations 9,098 2,694 13,038 4,346
Cost of services 16,828 3,478 28,224 7,430
Selling, general and administrative 35,216 18,658 62,992 26,727
Deferred compensation 996 -- 1,990 --
Depreciation and amortization 17,981 5,652 30,552 9,966
------------ ------------ ------------ ------------
Total costs and expenses 80,119 30,482 136,796 48,469
------------ ------------ ------------ ------------
Loss from operations (37,897) (17,853) (66,600) (26,448)
Other income (expense)
Interest expense (429) (239) (872) (239)
Interest and other income 3,901 -- 7,401 --
------------ ------------ ------------ ------------
Net loss before income tax benefit (34,425) (18,092) (60,071) (26,687)
Income tax benefit -- 4,839 -- 4,839
------------ ------------ ------------ ------------
Net loss $ (34,425) $ (13,253) $ (60,071) $ (21,848)
============ ============ ============ ============
Net loss per common share --
basic and diluted (1) $ (0.54) $ (0.27) $ (0.95) $ (0.44)
============ ============ ============ ============
Shares used in computing basic and
diluted net loss per share $ 63,503,516 $ 50,000,000 $ 63,062,198 $ 50,000,000
============ ============ ============ ============
EBITDA(2) (18,920) (12,201) (34,058) (16,482)
</TABLE>
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(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 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 not 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 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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