Interliant Announces Third Quarter Financial Results; Leading ASP Reports 80 New Customers and 22% Increase in Backlog

Business Wire, Nov 1, 2000

Business Editors

PURCHASE, N.Y.--(BUSINESS WIRE)--Nov. 1, 2000

Interliant, Inc. (NASDAQ:INIT), a leading global application service provider (ASP), today reported revenue of $44.3 million for the third quarter of 2000.

This compares to $12.0 million for the same period a year earlier and represents a 15% sequential gain over the $38.6 million reported in the second quarter of 2000.

Third quarter 2000 EBITDA (earnings before interest, taxes, depreciation, amortization and non-cash charges for compensation and a restructuring charge of $2.5 million) was negative $17.9 million, compared with negative $7.6 million a year earlier and negative $19.1 in the second quarter of 2000.

The Company reported a restructuring charge of $2.5 million in the third quarter financial results in connection with initiatives to reduce duplicative headcount and other expenses from acquired companies. These actions are expected to result in annualized savings of approximately $12 million. The Company will begin benefiting from these initiatives in the fourth quarter of 2000.

Gross margins expanded to 28.4%, up 1.5% from the 26.9% gross margin reported for the second quarter of 2000. This increase was attributable primarily to the revenue increase in the ASP services and Web hosting business segments. These segments have scalable business models with high contribution margins. Expense control associated with the integration of the Company's acquisitions also contributed to the improvement.

Interliant's net loss was $42.3 million or $0.88 per share in the third quarter of 2000. This loss compares with net losses of $15.7 million, or $0.37 per share for the same period a year earlier and $38.9 million, or $0.82 per share, in the second quarter of 2000.

Commenting on the results for the quarter, Herb Hribar, president and chief executive officer, said: "Our performance this quarter provides solid evidence that our business model is working and that we are on track to reach profitability as planned. We are seeing accelerating acceptance of our ASP offerings with 80 new ASP customer wins, revenue growth in all of our ASP practice areas and a 22% increase in our backlog to $77 million.

"Interliant Europe, while still a start-up operation, generated more than $800,000 in revenues from business in France and Germany. More importantly, we ended the quarter there with a back log of more than $3 million."

Hribar continued, "We are seeing increasing success from our `go-to-market' strategy across multiple fronts. Our up-sell and cross-sell approach is proving to be effective, with 40% of our new sales this quarter starting with existing customers. Our direct sales force productivity is improving and our channel partners are contributing to revenue growth in a meaningful way.

"Our cash position remains strong with $113 million in cash and short-term investments as of September 30, 2000," Hribar concluded. "Our solid balance sheet, combined with the integration and rationalization initiatives we set in motion this quarter lead us to believe that we are on target to achieve positive EBITDA by the fourth quarter of 2001."

Conference Call Information

Investors are invited to listen to a live webcast of the conference call at 10:00 a.m., Eastern Standard Time, today through the investor relations section of the Interliant Web site, www.interliant.com. To listen to the live call, please go to the web site at least fifteen minutes early to download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call. Investors may also listen to a telephone replay of the conference call by dialing 800-633-8284, Reservation #16508630, starting at 12:00AM EST today until 5:00PM EST on November 3rd.

About Interliant

Interliant, Inc. (Nasdaq:INIT) is a leading global application service provider (ASP) and pioneer in the ASP market. Interliant's INIT Solutions Suite includes messaging and knowledge management, security, e-commerce, customer relationship management, enterprise resource planning, distributed learning, Web-site hosting and Web-based rental applications. Interliant, headquartered in Purchase, NY, has forged strategic alliances with the world's leading software, networking and hardware manufacturers including Microsoft (Nasdaq:MSFT), Dell Computer Corporation (Nasdaq:DELL), Oracle Corporation (Nasdaq:ORCL), BMC Software (Nasdaq:BMCS), Network Solutions (Nasdaq:NSOL), IBM (NYSE:IBM), Sun Microsystems Inc. (Nasdaq:SUNW), and Lotus Development Corp. For more information about Interliant, visit www.interliant.com.

Interliant is a registered trademark and INIT Solutions Suite is a trademark of Interliant, Inc., in the US, other countries, or both. Other company, product, and service names may be trademarks or service marks of others.

This press release contains forward-looking statements that can be identified by the use of words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "will," "plan," "forecast" and similar words and expressions. Such forward-looking statements involve risks and uncertainties that may cause actual results, performance, achievements and the timing of certain events to differ significantly from the results discussed or implied in the forward-looking statements. Therefore, no forward-looking statement can be guaranteed. Important factors to consider in evaluating such forward-looking statements include changes in external competitive market factors, changes in Interliant's business strategy or an inability to execute Interliant's strategy due to unanticipated changes in its business, its industry or the economy in general, unforeseen difficulties in integrating acquisitions and other factors set forth more fully in Interliant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and other filings with the Securities and Exchange Commission. It is not possible to foresee or identify all factors affecting Interliant's forward-looking statements and investors therefore should not consider any list of factors affecting Interliant's forward-looking statements to be an exhaustive statement of risks, uncertainties or potentially inaccurate assumptions. Interliant does not have a policy of updating or revising forward-looking statements, and thus it should not be assumed that Interliant's silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.