Exodus Communications Q3 Results - Company Financial Information

Cambridge Telcom Report, Nov 1, 1999

Exodus Communications, Inc. (NASDAQ:EXDS) has reported third quarter revenues of $67.6 million, a 59 percent increase over the second quarter of 1999 revenues of $42.5 million, and a 367 percent increase over the comparable period of the previous year.

Exodus reported a net loss of $24.7 million for the third quarter, or $0.29 per share, before amortization of intangibles and a one-time restructuring charge related to the acquisition of Cohesive Technology Solutions, Inc. The net loss including the charges was $28.8 million for the third quarter, or $0.34 per share, compared to a net loss of $20.9 million, or $0.25 per share, in the second quarter of 1999, and a net loss of $17.7 million, or $0.23 per share in the third quarter of 1998. EBITDA loss (loss before net interest expense, income taxes, depreciation, amortization and other non-cash charges) was $5.0 million for the third quarter of 1999, compared to $7.2 million for the second quarter of 1999.

"Our revenue growth remains very strong, as we have seen and expect to continue to see more enterprises and dot com companies outsourcing their mission critical Internet operations," said Ellen M. Hancock, president and CEO of Exodus. "In the third quarter, we added 416 Internet Data Center (IDC) customers, our largest quarterly increase ever, and our average annualized revenue per IDC customer grew from $157,000 in the second quarter to $176,000 in the third quarter."

"At the same time, managed and professional services increased to 34 percent of revenues in the third quarter, compared to 20 percent in the prior quarter. Through our managed and professional services product offerings, we are able to provide more complex web hosting solutions to our customers," said Hancock.

In the third quarter, 39 percent of total revenues was from enterprises, compared to 30 percent in the prior quarter. Enterprise companies now represent 44 percent of Exodus' customer base.

"In order to meet growing market demand, we opened two IDCs, adding approximately 300,000 gross square feet to our existing base in the third quarter," noted Dick Stoltz, chief operating officer and chief financial officer. "At the end of 1999, Exodus plans to have 19 IDCs and three sites worldwide, with over 1.5 million gross square feet under lease."

"We continue to see astonishing demand for our services across a broad base of industries as well as geographic regions," said Stoltz. "In order to meet this demand, we plan to build 15 new IDCs in 2000, adding an additional two million gross square. We expect to exit 2000 with a total of 34 IDCs and three sites worldwide constituting approximately 3.5 million gross square feet." About Exodus Communications

Exodus Communications is a leading provider of Internet system, network management solutions and technology professional services for enterprises with mission-critical Internet operations. Exodus manages Web sites and its network infrastructure from 15 Internet Data Centers (IDCs), located in the United States and Europe. Exodus currently has IDCs located in the Boston, Chicago, London, Los Angeles (2), New York (2), Seattle (2), Silicon Valley (4) and Washington, D.C. (2) metropolitan areas. Exodus has announced the planned addition of four additional IDCs and three international server hosting sites by the end of 1999, bringing the total number of Exodus sites to 22 worldwide. More information about Exodus can be found at www.exodus.net.

                  EXODUS COMMUNICATIONS, INC.
                    CONDENSED CONSOLIDATED
                   STATEMENTS OF OPERATIONS
             (in thousands, except per share data)

                      Three Months Ended       Nine Months Ended
                     Sept. 30,  Sept. 30,   Sept. 30,   Sept. 30,
                       1999      1998         1999        1998

Revenues             $  67,600  $  14,462  $ 140,186  $  31,638
                     ---------  ---------  ---------  ---------

Costs and expenses:
  Cost of revenues      55,069     16,427    117,775     39,291
  Marketing and sales   17,289      6,887     39,523     20,467
  General and
   administrative        9,938      3,861     24,396      9,518
  Product development    1,774        935      4,610      2,299
  Amortization of
   intangibles           3,242       --        4,674       --
  Restructuring costs      923       --          923       --
                     ---------  ---------  ---------  ---------
Total costs and
 expenses               88,235     28,110    191,901     71,575
                     ---------  ---------  ---------  ---------
Operating loss         (20,635)   (13,648)   (51,715)   (39,937)

Net interest expense     8,180      4,012     20,165      5,120
                     ---------  ---------  ---------  ---------
  Net loss             (28,815)   (17,660)   (71,880)   (45,057)

Cumulative dividends
 and accretion on
redeemable convertible
 preferred stock          --         --         --       (2,014)
                     ---------  ---------  ---------  ---------
Net loss attributable
 to common
 stockholders        ($ 28,815) ($ 17,660) ($ 71,880) ($ 47,071)
                     =========  =========  =========  =========

Basic and diluted net
 loss per share(a)  ($   0.34) ($   0.23) ($   0.87) ($   0.83)
                     =========  =========  =========  =========

Shares used in
 computing basic and
 diluted net loss per
 share                  83,873     78,369     82,427     56,792
                     =========  =========  =========  =========

EBITDA(b)            ($  5,029) ($  9,440) ($ 23,017) ($ 29,502)
                     =========  =========  =========  =========

Note(a): Basic and diluted net loss per share before amortization
of intangibles and restructuring costs for the three months ended
September 30, 1999 is ($0.29).

Note(b): Loss before net interest expense, income taxes,
depreciation, amortization (including amortization of deferred
stock compensation) and other noncash charges.

                EXODUS COMMUNICATIONS, INC.
           CONDENSED CONSOLIDATED BALANCE SHEETS
                      (in thousands)


                                      September 30,   December 31,
                                         1999             1998
                                      -----------     ------------

Assets

Current assets:
   Cash and cash equivalents            $164,215         $150,891
   Accounts receivable, net               53,455           11,174
   Prepaid expenses and
other current assets                      12,229            4,677
                                      -----------     ------------
  Total current assets                   229,899          166,742
Property and equipment, net              241,180           68,306
Restricted cash equivalents
 and investments                          35,444           45,614
Intangibles and other assets             164,873           12,624
                                      ===========     ============
                                        $671,396         $293,296
                                      ===========     ============

Liabilities and Stockholders' Equity

Current liabilities:
   Current portion of equipment loans
 and line of credit facility             $ 7,722         $ 14,367
   Current portion of capital lease
obligations                               14,131            5,140
   Accounts payable                       32,897            9,208
   Accrued expenses                       27,831           18,334
                                      -----------     ------------
      Total current liabilities           82,581           47,049
Equipment loans and line of credit
 facility, less current portion            9,600           15,695
Capital lease obligations, less
  current portion                         30,772           11,401
Convertible subordinated notes           250,000                -
Senior notes                             275,375          200,000
                                      -----------     ------------
      Total liabilities                  648,328          274,145
                                      -----------     ------------
 Stockholders' equity :
  Common stock                                84               80
  Additional paid-in capital             192,424          117,160
  Deferred stock compensation               (541)          (1,080)
  Accumulated deficit                   (168,899)         (97,019)
                                      -----------     ------------
      Total stockholders' equity          23,068           19,141
                                      ===========     ============
                                        $671,396         $293,286
                                      ===========     ============