Cbeyond Communications Announces Third Quarter 2005 Results; Revenues Increase 39% Year-over-Year Driven by Strong Customer Growth

Business Wire, Nov 15, 2005

ATLANTA -- Cbeyond Communications, Inc., (Nasdaq: CBEY), a provider of Internet Protocol-based communications services, today announced financial and operating results for its third quarter and nine months ended September 30, 2005.

Recent financial and operating highlights include the following:

--Strong third quarter revenue growth with net revenues of $41.4 million, up 39.3% over the third quarter of 2004

--Positive net income of $0.9 million during the third quarter of 2005, compared to a loss of $1.8 million in the third quarter of 2004

--Adjusted EBITDA (a non-GAAP measure) of $7.6 million, an increase of 70.1% from the third quarter of 2004. Adjusted EBITDA margin of 18.3%, up from 15.0% in the third quarter of 2004

--Total customers of 18,897 at quarter-end, up 41.0% compared with the prior year quarter-end

--Average monthly churn remained at or below 1.0% for the tenth consecutive quarter

--Completion of $73.6 million initial public offering in November 2005

Financial Overview and Key Operating Metrics

Financial and operating metrics, which include non-GAAP financial measures, for the three months and nine months ended September 30, 2005, and 2004 include the following:

For the Three Months Ended September
                                                 30,
                                -------------------------------------
                                  2005     2004     Change  % Change
                                --------- -------- -------- ---------
Selected Financial Data
 (dollars in thousands)
Revenue                          $41,403  $29,732  $11,671      39.3%
Operating expenses               $40,023  $30,747   $9,276      30.2%
Operating income (loss)           $1,380  $(1,015)  $2,395       N/M
Net income (loss)                   $928  $(1,797)  $2,725       N/M
Capital expenditures              $6,808   $5,162   $1,646      31.9%

Key Operating Metrics and Non-GAAP
 Financial Measures
Customers                         18,897   13,406    5,491      41.0%
Net additions                      1,462    1,332      130       9.8%
Average monthly churn rate           1.0%     1.0%     0.0%      0.0%
Average monthly revenue per
 customer location                  $760     $778     $(18)    (2.3%)
Adjusted EBITDA (in thousands)    $7,563   $4,447   $3,116      70.1%


                                For the Nine Months Ended September
                                                 30,
                                -------------------------------------
                                  2005     2004     Change  % Change
                                --------- -------- -------- ---------
Selected Financial Data
 (dollars in thousands)
Revenue                         $114,761  $81,184  $33,577      41.4%
Operating expenses              $114,787  $86,679  $28,108      32.4%
Operating loss                      $(26) $(5,495)  $5,469       N/M
Net income (loss)                $(1,580) $(8,139)  $6,559       N/M
Capital expenditures             $17,172  $17,698    $(526)    (3.0%)

Key Operating Metrics and Non-GAAP
 Financial Measures
Customers                         18,897   13,406    5,491      41.0%
Net additions                      4,184    3,719      465      12.5%
Average monthly churn rate           1.0%     1.0%     0.0%      0.0%
Average monthly revenue per
 customer location                  $759     $781     $(22)    (2.8%)
Adjusted EBITDA (in thousands)   $17,961  $11,675   $6,286      53.8%

Management Comments

"Cbeyond delivered a solid performance for the third quarter of 2005," said James F. Geiger, chairman, president and chief executive officer of Cbeyond Communications. "We believe these results reflect the strong demand for our managed services offering in the small business marketplace. We delivered 41% year-over-year customer growth and revenues increased by 39% for the same period. By leveraging the capabilities of our 100% IP-based network and our centralized operations, this strong customer growth enabled Cbeyond to increase adjusted EBITDA by 70% year-over-year to 18.3% of revenue on a consolidated basis."

"Cbeyond reached an important milestone with the recent completion of our initial public offering. As a result, we have the financial flexibility to pursue our growth strategy. With the attractive value proposition of our managed services offering, and our ability to replicate successfully our proven business model, we believe we are well positioned to expand our model in select target markets. We will continue to focus all of our efforts on aggressively expanding our customer base while also delivering improvement in annual adjusted EBITDA," added Geiger.

Conference Call

Cbeyond Communications will hold a conference call to discuss this press release Wednesday, November 16, 2005, at 11:00 a.m. ET. A live broadcast of the conference call will be available on-line at www.cbeyond.net. To listen to the live call, please go to the Web site at least 15 minutes early to register, 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 through the close of business on December 16, 2005.