AboveNet Reports Financial Results for the Fourth Quarter and Full Year 2008

Business Wire, March 16, 2009

Strong 2008 Revenue Growth to $319.9 million

Adjusted EBITDA Increases to $115.9 million

WHITE PLAINS, N.Y. -- AboveNet, Inc. (Other OTC: ABVT), a leading provider of fiber optic connectivity solutions, announced results for the fourth quarter and year ended December 31, 2008. Revenue for 2008 was $319.9 million and Adjusted EBITDA (defined below) increased to $115.9 million.

“Over the last few years AboveNet has focused on becoming a premier provider of connectivity solutions for bandwidth hungry customers. Our 26% revenue growth in 2008 was a direct reflection of our success in executing on that strategy,” said Bill LaPerch, President and Chief Executive Officer.

“The unique combination of our extensive metro footprint and our next generation technology investments allows us to offer a broad suite of services with varying degrees of privacy and speeds ranging from 100Mbs to 10Gbs. These services meet our customer requirements for physically secure, low latency networking,” added Mr. LaPerch. “We believe we are ideally situated to benefit from the continued strong growth in demand for ethernet and wavelength-division multiplexing (WDM)-based services in the high bandwidth enterprise segments we serve.”

"In 2009 we expect to continue to grow despite the challenging economic environment. With $87 million in cash at the end of the year and access to an additional $53 million under our credit facility, we will use our strong balance sheet to continue to invest in our customers by connecting their locations and strategically building network infrastructure. In these tough economic times customers are coming to realize the benefits of migrating from their legacy, expensive, complex and bandwidth constrained networks to a next generation fiber-based network that offers them both economic and bandwidth efficiency," concluded Mr. LaPerch.

Fourth Quarter Financial Results

Consolidated revenue for the fourth quarter ended December 31, 2008 was $89.8 million, up 33.0% from $67.5 million in the fourth quarter ended December 31, 2007, driven in large part by strength in domestic metro services. Included in consolidated revenue was termination revenue of $8.7 million and $0.8 million for the fourth quarters of 2008 and 2007, respectively.

For the fourth quarter of 2008, revenue from domestic metro services was $19.9 million, up 54.3% from $12.9 million in the fourth quarter of 2007. Revenue from domestic fiber infrastructure services was $39.1 million in the fourth quarter of 2008 compared to $35.5 million for the same period last year. Revenue from domestic WAN services was $13.6 million in the fourth quarter of 2008 compared to $10.1 million in the fourth quarter of 2007. Revenue from foreign operations, primarily in the U.K., decreased to $7.3 million in the fourth quarter of 2008 from $7.5 million in the prior year period, primarily as a result of the weakening exchange rate of the British pound compared to the US dollar.

Cost of revenue was $31.5 million for the fourth quarter of 2008 compared to $31.9 million for fourth quarter of 2007. Selling, general and administrative expense (SG&A) was $21.7 million in the fourth quarter of 2008 compared to $20.3 million for the fourth quarter of 2007. Operating income was $25.3 million in the fourth quarter of 2008 compared to an operating loss of $8.4 million in the fourth quarter of 2007. Net income was $17.3 million, or $1.41 per diluted share, in the fourth quarter of 2008 compared to $2.1 million, or $0.16 per diluted share, for the fourth quarter of 2007.

Adjusted EBITDA for the fourth quarter of 2008 was $39.5 million, compared to $6.8 million for the fourth quarter of 2007. Adjusted EBITDA Margin (defined below) was 44.0% in the fourth quarter of 2008 compared to 10.1% in the fourth quarter of 2007. Fourth quarter 2007 results included an $11.7 million loss on litigation.

Capital expenditures in the fourth quarter of 2008 were $34.3 million compared to $29.5 million in the fourth quarter of the prior year.

Full Year 2008 Financial Results

Consolidated revenue for 2008 was $319.9 million, up 26.1% from $253.6 million in 2007, driven in large part by a 59.1% increase in domestic metro services. Included in consolidated revenue was termination revenue of $15.4 million and $8.5 million for fiscal years 2008 and 2007, respectively. Enterprise customers represent over 70% of 2008 domestic revenue. Enterprise customers include business and government customers that are not telecommunications carriers.

Revenue from domestic metro services was $68.4 million in 2008 compared to $43.0 million in 2007. Revenue from domestic fiber infrastructure services was $151.0 million in 2008 compared to $137.0 million in 2007. Revenue from domestic WAN services was $48.8 million in 2008 compared to $36.8 million in 2007. Revenue from foreign operations, primarily in the U.K., was $31.7 million in 2008 compared to $26.1 million in 2007.