Digital Island Q3 Results - Company Financial Information

Cambridge Telcom Report, August 9, 1999

Digital Island, Inc. (Nasdaq: ISLD), a leading provider of network services for globalizing e-Business applications, announced Monday its financial results for the third fiscal quarter ended June 30, 1999.

Revenues for the quarter ended June 30, 1999 were $3,699,700, an increase of 53% over revenues of $2,410,700 for the quarter ended March 31, 1999 and representing a 410% increase over revenues of $725,200 for the quarter ended June 30, 1998.

The net loss for the quarter ended June 30, 1999, was $14,063,400, or $3.96 per share (on 3,555,232 weighted average shares outstanding), compared with a net loss for the quarter ended March 31, 1999 of $8,930,700, or $3.67 per share (on 2,431,696 weighted average shares outstanding), and a net loss of $4,286,126, or $1.92 per share (on 2,231,367 weighted average shares outstanding), for the quarter ended June 30, 1998. The increase in weighted average shares outstanding in the most recent quarter resulted from the exercise of options to purchase Common Stock, the conversion of Preferred Stock to Common, and the company's sale of 6,900,000 shares of Common Stock in its June initial public offering. EBITDA loss (loss before interest, taxes, depreciation, amortization and other non-cash charges) was $12,326,800 for the quarter ended June 30, 1999, compared to an EBITDA loss of $7,904,900 for the quarter ended March 31, 1999 and to an EBITDA loss of $4,104,200 for the quarter ended June 30, 1998.

"Our outstanding quarterly results demonstrate significant progress as measured by the main metrics of our business," said Ruann Ernst, president and CEO of Digital Island. "In the quarter we increased our customer base by 31% to 81. We announced customer relationships with EBSCO Publishing, Bidcom, Candle Corporation, and Finjin Software. We added three new countries to our private global network, bringing the total number of countries we serve to 19. Supporting our continued growth, we increased staff by 60% in the quarter to over 230."

"Digital Island made a number of important advances in the quarter toward its key strategic objectives. We accelerated the growth of our sales organization worldwide, increasing the number of sales representatives by 60%. In addition, Rick Schultz, who has 18 years experience in supplying global enterprise networking services, joined as Vice President of North American Sales. We continue to leverage our direct sales efforts with supplemental channels, as evidenced by a global sales and marketing alliance with Compaq Computer and a reseller agreement with Telefonica Data for Spain and South America," said Ernst.

"As a leader in globalizing e-business, Digital Island launched a major expansion of its service offering with the deployment of Local Content Managers," Ernst continued. "These Local Content Managers allow us to intelligently mirror and cache content in-country worldwide. Complementing our existing network and data center infrastructure, this product initiative strengthens Digital Island's outsourcing value to our customers: accelerating time to market, providing superior end-user experience and improving price and performance in global application hosting and content distribution. In the quarter, we deployed seven Local Content Managers, and additional deployment will continue throughout the calendar year."

For the nine months ended June 30, 1999, revenues were $7,495,200, representing a 429% increase over revenues of $1,416,400 for the nine months ended June 30, 1998. The net loss for the nine months ended June 30, 1999 was $28,932,500 (including stock-based compensation of $2,273,900), or $10.31 per share (on 2,806,988 weighted average shares outstanding), compared with a net loss of $11,079,400 (including stock-based compensation of $131,500), or $4.99 per share (on 2,222,463 weighted average shares outstanding), in the nine months ended June 30, 1998. EBITDA loss for the nine months ended June 30, 1999 was $25,501,400, compared to $10,667,300 for the nine months ended June 30, 1998.

"Our initial public offering in June raised gross proceeds of $69,000,000, providing Digital Island with additional resources to pursue our strategic objectives," said Ernst. "The proceeds of this offering will be used primarily for increased sales and marketing activities, the continued expansion of our network, application hosting and content delivery infrastructure, and general working capital purposes."

Digital Island is a leading provider of network services for globalizing e-Business applications. Digital Island serves companies that operate in multiple countries and need to securely and consistently extend business-critical applications for marketing, selling, servicing, or distributing products via the Internet. Digital Island's service includes global content distribution and hosting, the localization of end-user online experiences, and a reliable global Intelligent Network, all of which are designed to deliver the right content, to the right customer, in the right market, at the right time. The Company has regional data centers in New York, Santa Clara, Honolulu and London, connecting directly into 19 countries with Local Content Managers in nine markets worldwide to provide the ubiquity and reach of the public Internet with the quality and functionality normally available only in a corporate wide-area network.