Internet America Reports Fiscal Third Quarter Results

Business Wire, May 08, 2009

HOUSTON -- Internet America, Inc. (OTCBB: GEEK) today announced results for the fiscal third quarter ended March 31, 2009. Total revenues for the third quarter decreased by 15.5% to approximately $1.9 million compared to total revenues of approximately $2.3 million in the third quarter of 2008, and the total subscriber count decreased to 27,500 on March 31, 2009 compared to 31,800 subscribers at the end of the same period last year. These decreases were due to the anticipated decline of dial-up Internet service customers from Internet America’s legacy dial-up Internet operations. The Company’s wireless broadband Internet subscriber count of 8,000 as of March 31, 2009, was virtually unchanged from the subscriber count of 8,100 as of March 31, 2008.

Net loss for the third quarter of 2009 was approximately $492,000, or a loss of $0.03 per share, compared to net loss of approximately $485,000, or $0.03 per share, in the same period last year. EBITDA loss (earnings before interest, taxes, depreciation and amortization) was approximately $215,000 in the third quarter compared to EBITDA loss of approximately $183,000 in the third quarter a year ago. Net loss and EBITDA (loss) were positively impacted in the third quarter of 2009 by reductions in all costs associated with connectivity and operations, sales and marketing and general and administrative expenses totaling $555,000 or 20.1%. This was offset by a write-off of direct merger costs of $194,000, recorded on February 19, 2009, when the Company announced its termination of the definitive agreement to merge with KeyOn Communications Holdings, Inc. due to their inability to comply in a material respect with certain of the covenants and conditions to closing. Additional indirect costs of management’s time negotiating and preparing to close the merger and the related travel costs also impacted reported losses.

Internet America is a leading Internet service provider serving the Texas market. Based in Houston, Internet America offers businesses and individuals a wide array of Internet services including broadband Internet delivered wirelessly and over DSL, dedicated high-speed access, web hosting, and dial-up Internet access. Internet America provides customers a wide range of related value-added services, including Fax-2-Email, online backup and storage solutions, parental control software, and global roaming solutions. Internet America focuses on the speed and quality of its Internet services and its commitment to providing excellent customer care. Additional information on Internet America is available on the Company’s web site at http://www.internetamerica.com.

In this press release, the Company refers to a non-GAAP financial measure called EBITDA because of management’s belief that this measure is a financial indicator of the Company’s ability to internally generate operating funds. Management also believes that this non-GAAP financial measure is useful information to investors because it is widely used by professional research analysts in the valuation and investment recommendations of companies in the Company’s peer group. EBITDA should not be considered an alternative to net income, as defined by GAAP.

This press release may contain forward-looking statements relating to future business expectations. These statements, specifically including management’s beliefs, expectations and goals, are subject to many uncertainties that exist in Internet America’s operations and business environment. Business plans may change, and actual results may differ materially as a result of a number of risk factors. These risks include, without limitation, that (1) we will not be able to increase our rural customer base at the expected rate, (2) we will not improve EBITDA, profitability or product margins, (3) we will not form additional partnerships with public entities seeking to participate in grant programs or those partnerships may not be successful, (4) we will not expand our coverage in public-private partnerships with state or local governments, utility providers, or other entities, (5) Internet revenue in high-speed broadband will continue to increase at a slower pace than the decrease in other Internet services resulting in greater operating losses in future periods, (6) financing will not be available to us if and as needed, (7) we will not be competitive with existing or new competitors, (8) we will not keep up with industry pricing or technological developments impacting the Internet, (9) we will be adversely affected by dependence on network infrastructure, telecommunications providers and other vendors or by regulatory changes, (10) service interruptions or impediments could harm our business, (11) we may be accused of infringing upon the intellectual property rights of third parties, which is costly to defend and could limit our ability to use certain technologies in the future, (12) government regulations could force us to change our business practices, (13) we may be unable to hire and retain qualified personnel, including our key executive officers, (14) future acquisitions of wireless broadband Internet customers and infrastructure may not be available on attractive terms and if available we may not successfully integrate those acquisitions into our operations, (15) provisions in our certificate of incorporation, bylaws and shareholder rights plan could limit our share price and delay a change of management, and (16) our stock price has been volatile historically and may continue to be volatile. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our other publicly filed reports and documents.