Cbeyond Reports First Quarter 2013 Results

Cbeyond Reports First Quarter 2013 Results

Progressing Towards Transformation Goals

ATLANTA, May 1, 2013 (GLOBE NEWSWIRE) -- Cbeyond, Inc. (Nasdaq:CBEY),
("Cbeyond"), the technology ally for small and mid-sized businesses, today
announced its results for the first quarter ended March 31, 2013.

Recent financial and operating highlights include:

  *First quarter 2013 total revenue of $119.9 million compared with $123.8
    million in the first quarter of 2012 and $118.9 million in the fourth
    quarter of 2012;
  *Adjusted EBITDA of $20.8 million in the first quarter of 2013 compared
    with $23.0 million in the first quarter of 2012 and $18.8 million in the
    fourth quarter of 2012 (see reconciliation tables for reconciliation to
    net income);
  *Free cash flow (defined as adjusted EBITDA less cash capital expenditures)
    of $8.4 million in the first quarter of 2013 compared with $8.1 million in
    the first quarter of 2012 and $4.3 million in the fourth quarter of 2012;
  *Net loss of $0.6 million in the first quarter of 2013 compared with a net
    loss of $1.2 million in the first quarter of 2012 and a net loss of $5.8
    million in the fourth quarter of 2012;
  *Cbeyond 2.0 revenue was 11.4% of total revenue in the first quarter of
    2013, an increase from 9.5% last quarter; 2.0 revenue in the first quarter
    of 2013 increased 99.8% over the first quarter of 2012;
  *Average monthly revenue per customer (ARPU) of $656 during the first
    quarter of 2013 compared with $645 in the first quarter of 2012 and $638
    in the fourth quarter of 2012 (see selected quarterly operating metrics
    table for an ARPU definition); and,
  *Reiterate annual guidance for 2013 of $475 million to $485 million of
    revenue, $75 million to $82 million of adjusted EBITDA, $60 million to $65
    million of cash capital expenditures, and $15 million to $20 million of
    free cash flow.

Financial Overview and Key Operating Metrics

Financial and operating metrics, which include non-GAAP financial measures,
for the three months ended March 31, 2013, include:

                                    For the Three Months Ended March 31,
                                    2012       2013       Change     % Change
Selected Financial Data (dollars in                                
thousands)
Revenue (total)                      $123,843 $119,946 $(3,897) (3.1%)
Operating expenses                   $125,168 $120,164 $(5,004) (4.0%)
Operating income (loss)              $(1,325) $(218)   $1,107   83.5%
Net income (loss)                    $(1,194) $(556)   $638     53.4%
Capital expenditures (total)         $17,236  $15,451  $(1,785) (10.4%)
                                                                  
Key Operating Metrics and Non-GAAP                                 
Financial Measures
(dollars in thousands, except Average Monthly Revenue Per Network     
Access Customer)
Network Access Customers (At Period  62,465    58,434    (4,031)   (6.5%)
End)
Net Network Access Customer          296       (1,258)   (1,554)   N/M
Additions
Average Monthly Churn Rate           1.5%       1.6%       0.1%       6.7%
Average Monthly Revenue Per Network  $645     $656     $11      1.7%
Access Customer
Adjusted EBITDA                      $22,974  $20,833  $(2,141) (9.3%)
Cash capital expenditures            $14,836  $12,434  $(2,402) (16.2%)

Management Comments

"I am pleased with our progress in evolving our business model to provide
services at the intersection of cloud, network and security," said Jim Geiger,
chief executive officer of Cbeyond, Inc."We have achieved several significant
milestones over the past six months.We have continued to build capabilities
of our TotalCloud Data Center^TM and TotalCloud Phone System^TM products;
reached the targeted staffing level for our 2.0 sales channels; launched our
new offering that bundles cloud services with broadband; have lit dark fiber
in over 250 buildings and significantly increased the size of our Metro
Ethernet network footprint."

Geiger added, "We believe the combination of these four milestones provides a
strong foundation for our future growth. As we move through the remainder of
2013, we expect to continue to build on these milestones, gain momentum in
sales productivity and drive further refinement to our service delivery
processes to fulfill the needs of our technology dependent customers."

Geiger continued, "Meeting our financial commitments is very important to us,
so I am pleased to report that we are reiterating our 2013 guidance. We are
very excited about our strategy as we continue to transform Cbeyond to become
the technology ally for small and medium businesses.We believe the actions we
have taken will enable us to improve ARPU and grow revenue in future periods."

First Quarter Financial and Business Summary

Revenue and ARPU

Cbeyond reported total revenue of $119.9 million for the first quarter of
2013, a decrease of 3.1% from the first quarter of 2012 and an increase of
0.9% from the fourth quarter of 2012.Managed Hosting and Cloud revenue was
$6.6 million during the quarter, an increase of 14.6% year-over-year.ARPU was
$656 in the first quarter of 2013, compared with $645 in the first quarter of
2012 and $638 in the fourth quarter of 2012.The most significant contributor
to the quarter-over-quarter increase in revenue and the year-over-year and
quarter-over-quarter increase in ARPU during the first quarter was the
increase in fees we charged our customers to recover certain regulatory costs.

Cost of Service and Gross Margin

Cbeyond's gross margin was 67.7% in the first quarter of 2013, an increase of
40 basis points from the 67.3% level in the first quarter of 2012 and 70 basis
point increase from the 67.0% in the fourth quarter of 2012.The sequential
change in gross margin was the result of the higher total revenue and higher
billing recoveries from network partners.

Adjusted EBITDA and Net Income

Adjusted EBITDA for the first quarter of 2013 was $20.8 million, as compared
with adjusted EBITDA of $18.8 million in the fourth quarter of 2012 and $23.0
million in the first quarter of 2012.The quarter-over-quarter increase and
year-over-year decline in adjusted EBITDA were the result of changes in
revenues and gross margins for the respective periods.

Cbeyond reported a net loss of $0.6 million for the first quarter of 2013
compared with a net loss of $1.2 million in the first quarter of 2012 and a
net loss of $5.8 million in the fourth quarter of 2012.The
quarter-over-quarter change in net income was driven predominantly by the
increase in Adjusted EBITDA as well as a $3.3 million impact to income tax
expense in the fourth quarter of 2012 resulting from a write-down of deferred
tax assets.

Cash, Cash Equivalents, and Borrowings

Cash and cash equivalents amounted to $23.8 million at the end of the first
quarter of 2013, as compared with $30.6 million at the end of the fourth
quarter of 2012.The Company currently has $2.0 million outstanding on its
fiber loan while it does not have any outstanding borrowings under its $75.0
million revolving credit facility.The Company also had $9.0 million in
outstanding capital lease obligations on its balance sheet as of March 31,
2013.

Capital Expenditures

Total capital expenditures were $15.5 million during the first quarter of
2013, of which $12.4 million were cash capital expenditures.The Company
incurred $3.0 million in non-cash capital expenditures during the first
quarter, consisting of capital lease obligations related to its fiber
assets.In the fourth quarter of 2012, capital expenditures were $19.5
million, of which $14.5 million were cash capital expenditures.

Free Cash Flow

Free cash flow, defined as adjusted EBITDA less cash capital expenditures, was
$8.4 million in the first quarter of 2013, compared with $4.3 million in the
fourth quarter of 2012 and $8.1 million in the first quarter of 2012. The
quarter-over-quarter increase was due to the increase in Adjusted EBITDA and
lower cash capital expenditures.

Business Outlook for 2013

Cbeyond reiterates the following guidance for 2013:

  *Revenue of $475 million to $485 million
  *Adjusted EBITDA of $75 million to $82 million
  *Cash capital expenditures of $60 million to $65 million; and
  *Free cash flow of $15 million to $20 million

Regarding capital expenditures, it should be noted that the guidance range of
$60 million to $65 million, as well as the resulting $15 million to $20
million of free cash flow (adjusted EBITDA less capital expenditures), relates
to cash capital expenditures. Cbeyond has already and may continue to enter
into agreements for fiber network assets and data center equipment involving
long-term capital leases that will create additional non-cash capital
expenditures this year not included in the guidance range provided above.The
assets acquired under these agreements are excluded from the Company's
definition of cash capital expenditures because they do not require upfront
outlays of cash.

Conference Call

Cbeyond will hold a conference call to discuss this press release Wednesday,
May 1, 2013, at 5:00p.m.EDT.A live broadcast of the conference call will be
available on-line at http://ir.cbeyond.net/events.cfm To listen to the live
call, please go to the web site at least 10 minutes early to register,
download, and install any necessary audio software.The conference call will
also be available by dialing (877) 303-9219 (fordomestic U.S. callers) and
(760) 666-3559 (for international callers).For those who cannot listen to the
live broadcast, an on-line replay will be available shortly after the call and
continue to be available for one year.

About Cbeyond

Cbeyond, Inc. (Nasdaq:CBEY), a cloud and communications services provider, is
the technology ally for small and mid-sized business.Our private,
proactively-managed IP network connects customers to voice, data and
enterprise applications hosted in our award-winning cloud data centers.Since
1999, Cbeyond has served the unmet needs of businesses through technology and
service innovation.We were the first company to build an all-IP network
specifically for small businesses and among the few to offer consultative
sales and service professionals onsite.Today, our expanded portfolio helps
customers reduce the burden of outlaying capital and manpower to manage
infrastructure.Creating an exceptional customer experience is in our
DNA.It's why more than a third of our approximately 60,000 customers come
from referrals.For more information on Cbeyond, visit www.cbeyond.com and
follow Cbeyond on Twitter: www.twitter.com/cbeyond.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.Such statements include, but
are not limited to, statements identified by words such as "expectations,"
"guidance," "believes," "expects," "anticipates," "estimates," "intends,"
"plans," "targets," "projects" and similar expressions.Such statements are
based upon the current beliefs and expectations of Cbeyond's management and
are subject to significant risks and uncertainties.Actual results may differ
from those set forth in the forward-looking statements.Factors that might
cause future results to differ include, but are not limited to, the following:
finalization of operating data, the significant reduction in economic
activity, which particularly affects our target market of small businesses;
the risk that we may be unable to continue to experience revenue growth at
historical or anticipated levels; changes in business climate or other factors
affecting our customer base; the risk of unexpected increases in customer
churn levels; our ability to manage competitive pricing dynamics in our
markets; changes in federal or state regulation or decisions by regulatory
bodies that affect Cbeyond; periods of economic downturn or unusual volatility
in the capital markets or other negative macroeconomic conditions that could
harm our business, including our access to capital markets and the impact on
certain of our customers to meet their payment obligations; the timing of the
initiation, progress or cancellation of significant contracts or arrangements;
the mix and timing of services sold in a particular period; our dependence on
third-party vendors who might increase prices or cause service disruptions
beyond our control; our ability to recruit and maintain experienced management
and personnel; rapid technological change and the timing and amount of
start-up costs incurred in connection with the introduction of new services or
the entrance into new markets; our ability to comply with our credit facility
covenants; our ability to maintain or attract sufficient customers in existing
or new markets; our ability to respond to increasing competition; our ability
to manage the growth of our operations; changes in estimates of taxable income
or utilization of deferred tax assets which could significantly affect the
Company's effective tax rate; pending regulatory action relating to our
compliance with customer proprietary network information; the possibility that
economic benefits of future opportunities in an emerging industry may never
materialize, including unexpected variations in market growth and demand for
products and technologies; unfamiliarity with the economic characteristics of
new geographic markets; ongoing personnel and logistical challenges of
managing a larger organization; external events outside of our control,
including extreme weather, natural disasters, pandemics or terrorist attacks
that could adversely affect our target markets; our ability to implement and
execute successfully our new strategic focus; our ability to expand fiber
availability; the extent to which small and medium sized businesses continue
to spend on cloud, network and security services; our ability to recruit,
maintain and grow a sales force focused exclusively on our
technology-dependent customers; our ability to integrate new products into our
existing infrastructure; the effects of realignment activities; the extent to
which our customer mix becomes more technology-dependent; our ability to
achieve future cost savings related to our capital expenditures and investment
in Ethernet technology; and general economic and business conditions.You are
advised to consult any further disclosures we make on related subjects in the
reports we file with the SEC, including the "Risk Factors" in our most recent
annual report on Form 10-K, together with updates that may occur in our
quarterly reports on Form 10-Q and Current Reports on Form 8‑K.Such
disclosure covers certain risks, uncertainties and possibly inaccurate
assumptions that could cause our actual results to differ materially from
expected and historical results.We undertake no obligation to correct or
update any forward‑looking statements, whether as a result of new information,
future events or otherwise.

Key Operating Metrics and Non-GAAP Financial Measures

In this press release, the Company uses several key operating metrics and
non-GAAP financial measures.The Company defines each of these metrics and
provides a reconciliation of non-GAAP financial measures to the most directly
comparable generally accepted accounting principles in the United States, or
GAAP, financial measure.These financial measures and operating metrics are a
supplement to GAAP financial information and should not be considered as an
alternative to, or more meaningful than, net income, cash flow or operating
income as determined in accordance with GAAP.

Adjusted EBITDA is not a substitute for operating income, net income, or cash
flow from operating activities as determined in accordance with GAAP, as a
measure of performance or liquidity.The Company defines EBITDA as net income
(loss) before interest, income taxes, depreciation and amortization. However,
we use adjusted EBITDA, also a non-GAAP financial measure, to further exclude,
when applicable, non-cash share-based compensation, public offering or
acquisition-related transaction costs, purchase accounting adjustments, gain
or loss on asset dispositions and non-operating income or expense. On a less
frequent basis, adjusted EBITDA may exclude charges for employee severances,
asset or facility impairments, and other exit activity costs associated with a
management directed plan. Information relating to adjusted EBITDA is provided
so that investors have the same data that management employs in assessing the
overall operation of the Company's business.

Adjusted EBITDA allows the chief operating decision maker to assess the
performance of the Company's business on a consolidated basis that corresponds
to the measure used to assess the ability of its operating segments to produce
operating cash flow to fund working capital needs, to service debt obligations
and to fund capital expenditures.In particular, adjusted EBITDA permits a
comparative assessment of the Company's operating performance, relative to a
performance based on GAAP results, while isolating the effects of depreciation
and amortization, which may vary among segments without any correlation to
their underlying operating performance, and of non-cash share-based
compensation, which is a non-cash expense that varies widely among similar
companies.

Free cash flow represents the cash that a company is able to generate
aftercash expenses and capital expenditures necessary to maintain or expand
its asset base. The Company defines free cash flow as adjusted EBITDA less
cash capital expenditures. Cbeyond believes that free cash flow is an
important metric for investors in evaluating how a company is currently using
cash generated, and may indicate its ability to generate cash that can
potentially be used by the business for capital investments, acquisitions,
reduction of debt, payment of dividends or share repurchases. Internally,
Cbeyond has also begun to focus on free cash flow as an important operating
performance metric and has designed its corporate bonus compensation plan to
utilize free cash flow as a component. However, free cash flow is not a
measure of financial performance under GAAP and may not be comparable to
similarly titled measures reported by other companies. Additionally, the
Company does not present or manage free cash flow on a segment basis.

Historically, we have defined free cash flow as adjusted EBITDA less total
capital expenditures. During the first quarter of 2012, we refined our
definition of capital expenditures for purposes of calculating free cash flow
to distinguish capital expenditures that require the up-front outlay of cash
from those where payment is deferred on a longer-term basis. This distinction
is primarily driven by the significant investments we are making to lease
fiber network assets that have an expected useful life of 20 years, which is
substantially longer than our typical asset lives. We believe this distinction
is warranted and appropriate since these investments are expected to yield
meaningful positive cash flows in future periods when the debt and lease
payments occur. These favorable future cash flows will result from fiber
infrastructure replacing a significant portion of the access and transport
circuits we currently lease from incumbent local exchange carriers (or
"ILECs"). We have recast all historical disclosures of capital expenditures as
well as free cash flow for all periods presented in this Form 10-K to be
consistent with this delineation between cash and non-cash capital
expenditures.

CBEYOND, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
                                                                  
                                                        Three Months Ended
                                                         March 31,
                                                        2012       2013
                                                                  
Revenue                                                 $123,843 $119,946
                                                                  
Operating expenses:                                                
Cost of revenue (excluding depreciation and              40,484    38,788
amortization)
Selling, general and administrative (excluding           65,808    63,771
depreciation and amortization)
Depreciation and amortization                           18,876    17,605
Total operating expenses                                125,168   120,164
                                                                  
Operating income (loss)                                 (1,325)   (218)
                                                                  
Other income (expense):                                           
Interest expense, net                                   (127)     (153)
                                                                  
Income (loss) before income taxes                       (1,452)   (371)
                                                                  
Income tax (expense) benefit                            258       (185)
                                                                  
Net income (loss)                                        $(1,194) $(556)
                                                                  
Net Income (loss) per common share:                                
Basic                                                    $(0.04)  $(0.02)
Diluted                                                  $(0.04)  $(0.02)
                                                                  
Weighted average number of common shares outstanding:              
Basic                                                    29,066     30,175
Diluted                                                  29,066     30,175


CBEYOND, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
                                                                  
                                                      December 31, March 31,
                                                       2012         2013
ASSETS                                                             
Current assets                                                     
Cash and cash equivalents                              $30,620    $23,820
Accounts receivable, net of allowance for doubtful     23,328       23,383
accounts
Other current assets                                   12,423       14,565
Total current assets                                   66,371       61,768
                                                                  
Property and equipment, net                            157,624      155,850
Other non-current assets, net                          31,053       30,078
Total assets                                           $255,048   $247,696
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY                               
Current liabilities                                                
Accounts payable                                       $15,870    $12,203
Other current liabilities                              52,623       45,068
Total current liabilities                              68,493       57,271
                                                                  
Non-current portion of long-term debt                  6,947       9,092
Other Non-current liabilities                          7,722        7,431
                                                                  
Stockholders' equity                                               
Common stock                                           299          306
Additional paid-in capital                             323,584      326,149
Accumulated deficit                                    (151,997)    (152,553)
Total stockholders' equity                             171,886      173,902
Total liabilities and stockholders' equity             $255,048   $247,696


CBEYOND, INC. AND SUBSIDIARIES
Selected Quarterly Financial Data and Operating Metrics
(Dollars in thousands, except for Network Access Customer Data)
(Unaudited)
                                                                        
               Mar. 31    Jun. 30    Sep. 30    Dec. 31    Mar. 31
                2012       2012       2012       2012       2013
Revenues                                                
Network, Voice  $118,087 $117,674 $115,164 $112,364 $113,352
and Data
Managed Hosting 5,756     6,088     6,327     6,506     6,594
and Cloud
Total Revenue  $123,843 $123,762 $121,491 $118,870 $119,946
                                                       
                                                       
Adjusted EBITDA $22,974  $27,236  $25,207  $18,828  $20,833
Adjusted EBITDA
margin (As % of 18.6%     22.0%     20.7%     15.8%     17.4%
Total Revenue)
                                                       
Cash Capital    $14,836  $14,765  $17,516  $14,488  $12,434
Expenditures
Non-cash
Capital                                                 
Expenditures
Capital Leases $2,400   $957     $--      $4,976   $3,017
Leasehold       $--      $--      $--      $--      $--
Improvements
Total Capital   $17,236  $15,722  $17,516  $19,464  $15,451
Expenditures
                                                       
Free cash flow  $8,138   $12,471  $7,691   $4,340   $8,399
                                                       
Network Access                                          
Customer Data
Network Access
Customers (At   62,465    62,015    60,876    59,692    58,434
Period End)
Net Network
Access Customer 296       (450)     (1,139)   (1,184)   (1,258)
Additions
Average Monthly 1.5%      1.5%      1.6%      1.6%      1.6%
Churn Rate (1)
Average Monthly
Revenue Per     $645     $645     $640     $638     $656
Network Access
Customer (2)

(1) Calculated for each period as the average of monthly churn, which is
defined for a given month as the number of network access customers
disconnected in that month divided by the number of network access customers
on the Company's network at the beginning of that month.

(2) Calculated as the revenue for a period divided by the average of the
number of network access customers at the beginning of the period and the
number of network access customers at the end of the period, divided by the
number of months in the period.Revenue used to calculate ARPU is defined as
the revenue associated with customers where Cbeyond provides network access
and includes all Network, Voice and Data revenue and the portion of Managed
Hosting and Cloud revenue where Cbeyond provides network access.

CBEYOND, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
(In thousands)
(Unaudited)
                                                               
                       Three Months Ended,
                       Mar. 31    Jun. 30    Sep. 30    Dec. 31    Mar. 31
                        2012       2012       2012       2012       2013
                                                               
Reconciliation of Free
Cash Flow and Adjusted                                          
EBITDA to Net income
(loss):
                                                               
Free Cash Flow          $8,138   $12,471  $7,691   $4,340   $8,399
Cash capital            14,836    14,765    17,516    14,488    12,434
expenditures
Adjusted EBITDA         $22,974  $27,236  $25,207  $18,828  $20,833
Depreciation and        (18,876)  (18,370)  (18,172)  (18,605)  (17,605)
amortization
Non-cash share-based    (3,783)   (2,939)   (2,975)   (3,443)   (2,979)
compensation
Realignment costs       (1,640)   (284)     --        (312)     (467)
Interest expense, net   (127)     (144)     (138)     (168)     (153)
Income (loss) before    (1,452)   5,499     3,922     (3,700)   (371)
income taxes
                                                               
Income tax (expense)    258       (2,805)   (1,969)   (2,075)   (185)
benefit
Net income (loss)       $(1,194) $2,694   $1,953   $(5,775) $(556)
                                                               
CBEYOND, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
(Dollars in thousands, except for ARPU)
(Unaudited)
                                                               
                       Three Months Ended,
                       Mar. 31    Jun. 30    Sep. 30    Dec. 31    Mar. 31
                        2012       2012       2012       2012       2013
                                                               
Calculation of ARPU:                                            
Total revenue           $123,843 $123,762 $121,491 $118,870 $119,946
Cloud only revenue      (3,245)   (3,367)   (3,486)   (3,483)   (3,650)
(A) Network access      $120,598 $120,395 $118,005 $115,387 $116,296
customer revenue
                                                               
(B) Average Network    62,317    62,240    61,446    60,284    59,063
access customers
ARPU (A / B / number of $645     $645     $640     $638     $656
months in period)

CONTACT: Investor Contact:
         Cbeyond, Inc.
         Rob Clancy
         Vice President of Investor Relations
         678-486-8023
         rob.clancy@cbeyond.com

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