updated 3/14/2011 6:31:51 PM ET 2011-03-14T22:31:51

NORCROSS, Ga., March 14, 2011 (GLOBE NEWSWIRE) -- EasyLink Services International Corporation ("EasyLink" or "Company") (Nasdaq:ESIC) ( www.easylink.com ), a global provider of comprehensive messaging services and e-commerce solutions, reported record fiscal second quarter 2011 revenue of $47.4 million, up 132% from the second quarter of fiscal 2010; record gross profit of $29.9 million, up 103% from the second quarter of fiscal 2010, record cash flow from six months of operations of $12.9 million, up 63% from the second quarter of fiscal 2010, and record adjusted EBITDA of $12.1 million, up 128% from the second quarter of fiscal 2010. These results include the effects of the acquisition of the Xpedite business, which took place in October 2010. 

"We have entered a new era for EasyLink stakeholders that is rooted in our global leadership in cloud-based enterprise messaging, our expanded product portfolio, organizational scale, and international footprint," said Tom Stallings, CEO of EasyLink. "Most notable to EasyLink's shareholders, this new era is marked by an expanding opportunity pipeline and record financial results:

  • Record second quarter revenues of $47.4 million;
     
  • Record second quarter gross profit of $29.9 million;
     
  • Highest cash flow from six months of operations of $12.9 million;
     
  • Record adjusted EBITDA of $12.1 million."

 Financial Review

Revenue for the second quarter of fiscal 2011 was approximately $47.4 million compared to $20.4 million in the second quarter of fiscal 2010. Gross profit for the second quarter of fiscal 2011 was $29.9 million compared to $14.7 million in the second quarter of fiscal 2010. 

On Demand Messaging revenue for the second quarter of fiscal 2011, which includes fax, production messaging, document capture and management, e-mail services, and notifications services, was approximately $37.9 million compared to approximately $10.2 million in the second quarter of fiscal 2010. On Demand Messaging revenue includes all of the revenue from our recent acquisition of the Xpedite companies. On Demand Messaging represented approximately 80% of total revenue for the second quarter of fiscal 2011. 

Supply Chain Messaging revenue for the second quarter of fiscal 2011, which includes electronic data interchange ("EDI") products and services and telex, was approximately $9.5 million compared to approximately $10.2 million in the second quarter of fiscal 2010. Supply Chain Messaging revenue decreased on a year-over-year basis primarily as the result of declining telex revenue. This trend is expected to continue in the foreseeable future. Supply Chain Messaging revenue represented approximately 20% of total revenue in the second quarter.

Net income for the second quarter of fiscal 2011 was approximately $2.9 million, or $0.03 per basic and diluted share compared to approximately $1.3 million or $0.04 in the second quarter of fiscal 2010. Non-GAAP net income ex-items was $5.5 million, or $0.19 per adjusted basic share and $0.17 per diluted share compared to approximately $1.9 million, or $0.07 per adjusted basic and dilutive share in the second quarter of fiscal 2010. Please see the GAAP to non-GAAP reconciliation at the end of this release for details.

Adjusted EBITDA, which includes non-cash compensation expense and acquisition and integration related charges, was approximately $12.1 million for the second quarter of fiscal 2011 compared to approximately $5.3 million in the second quarter of fiscal 2010.

Our cash and cash equivalents at January 31, 2011 totaled $21.2 million.

Non-GAAP Presentation

This press release contains non-GAAP financial measures that are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. This press release should be read in conjunction with the Company's Form 8-K earnings release filed with the Securities and Exchange Commission for the second fiscal quarter ended January 31, 2011.

In addition, these non-GAAP measures: (i) are not based on any comprehensive set of accounting rules or principles; and (ii) have limitations in that they do not reflect all of the amounts associated with EasyLink's results of operations as determined in accordance with GAAP. As such, these measures should only be used to evaluate EasyLink's results of operations in conjunction with the corresponding GAAP measures.

EasyLink believes that the presentation of non-GAAP financial measures, when shown in conjunction with the corresponding GAAP measures, provides useful supplemental information to investors and management regarding financial and business trends relating to its financial condition and results of operations because they exclude certain non-cash charges or items that we do not believe are reflective of our ongoing operating results when assessing the performance of our business.

EasyLink believes that these non-GAAP financial measures also facilitate the comparison by management and investors of results between periods and among our peer companies. However, our peer companies may calculate similar non-GAAP financial measures differently than EasyLink, limiting their usefulness as comparative measures.

Investor Conference Call

The Company plans to hold a conference call on Tuesday, March 15th at 9:00 a.m. EDT to discuss the results for the second quarter of fiscal 2011.

The Company invites all those interested in hearing management's discussion to join the call by dialing 1-888-500-6974 and international callers should dial 1-719-325-2170, participant pass code 1507511. If you are unable to participate and would like to hear a replay of the call, an audio reply will be available on EasyLink's investor relations website at http://ir.easylink.com/events.cfm .

Forward-Looking and Cautionary Statements

Except for the historical information and discussion contained herein, statements contained in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those indicated by such forward-looking statements. These and other risk factors are set forth under the caption "Risk Factors" in the Company's Annual Report on Form 10-K, the Company's quarterly reports on Form 10-Q and the Company's other filings with the Securities and Exchange Commission. These filings are available on a website maintained by the Securities and Exchange Commission at www.sec.gov .

The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein as a result of new information, future events or otherwise.

About EasyLink Services International Corporation

EasyLink Services International Corporation (EasyLink) (Nasdaq:ESIC), headquartered in Norcross, GA, offers a comprehensive portfolio of "any to any" business messaging and transaction services that can bridge the most challenging technology gaps while creating significant cost efficiencies across an organization. From Desktop Fax and Production Messaging to EDI, Managed File Transfer, Document Capture and Management, Secure Messaging and Telex we help companies drive costs out of their operations. With over two decades of servicing customers around the globe, EasyLink has established a proven track record for providing effective, reliable and secure communications. For more information on EasyLink, visit www.easylink.com .

The EasyLink Services International Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7889

EASYLINK SERVICES INTERNATIONAL CORPORATION
Consolidated Statements of Income
 for the three and six months ended January 31, 2011 and 2010
(Unaudited)
(in thousands, except per share data)
         
  Three Months  Six Months 
  2011 2010 2011 2010
         
Service revenue $ 47,425 $ 20,404 $ 70,160 $ 40,902
         
Cost of services 17,494 5,677 24,085 11,763
Gross Profit 29,931 14,727 46,075 29,139
         
Operating expenses:        
Product development and enhancement 3,557 1,757 5,496 3,615
Selling and marketing 6,776 3,228 9,733 6,498
General and administrative 12,399 6,646 19,988 13,869
Acquisition and integration related 817  -- 2,415  --
         
Operating income 6,382 3,096 8,443 5,157
         
Other income (expense):        
Interest expense (1,598) (434) (2,411) (928)
Other income (expense) 23 (104) 334 237
         
Income before income taxes 4,807 2,558 6,366 4,466
         
Provision for income taxes 1,868 1,250 2,460 1,794
         
Net income 2,939 1,308 3,906 2,672
         
Dividends on preferred stock (1,962) (216) (2,012) (432)
         
         
Income attributable to common stockholders $ 977 $ 1,091 $ 1,894 $ 2,239
         
Basic income per common share $ .03 $ .04 $ .06 $ .09
         
Diluted income per common share $ .03 $ .04 $ .06 $ .08
         
Weighted average number of common shares outstanding - basic 29,448 26,280 29,354 26,275
         
Weighted average number of common shares outstanding – diluted 31,563 29,426 30,890 29,413
   
EASYLINK SERVICES INTERNATIONAL CORPORATION   
Consolidated Balance Sheets    
(in thousands)     
     
  January 31,

2011 (unaudited)
July 31,

2010
ASSETS    
Current assets:    
Cash and cash equivalents  $ 21,223  $ 20,475
Accounts receivable, net  31,095  11,480
Other current assets  10,938  8,463
Total current assets  63,256  40,418
     
Property and equipment, net  19,563  5,521
Goodwill and other intangible assets, net  127,613  50,329
Other long term assets  6,759  8,218
Total assets  $ 217,191  $ 104,486
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable and accrued expenses  $ 25,102  $ 11,051
Current portion of long term debt  27,923  15,258
Other current liabilities  3,955  1,497
Total current liabilities  56,980  27,806
     
Long term debt  88,126  9,684
Other liabilities  563  285
Total liabilities  145,669  37,775
     
Stockholders' Equity:    
Preferred stock (a) (a)
Common Stock  311  302
Additional paid-in capital  133,356  132,799
Treasury Stock  (2,122)  (2,122)
Accumulated other comprehensive loss  (5,456)  (5,797)
Accumulated deficit  (54,567)  (58,471)
Total stockholders' equity  71,522  66,711
Total liabilities and stockholders' equity  $ 217,191  $ 104,486
(a) less than 1,000    
         
EASYLINK SERVICES INTERNATIONAL CORPORATION        
Reconciliation of GAAP Net income attributable to common stockholders to Non-GAAP Net income attributable to common stockholders        
for the three and six months ended January 31, 2011 and 2010         
(Unaudited)        
(in thousands)        
         
  Three Months Six Months
  2011 2010 2011 2010
GAAP Net Income attributable to common stockholders  $ 977  $ 1,091  $ 1,894  $ 2,239
Non-GAAP Adjustments:        
Amortization  2,484  1,264  3,803  2,537
Stock Compensation  173  219  650  455
Acquisition Expenses  817  --   2,415  -- 
Non-cash Interest  182  136  678  284
Non-GAAP Tax Effect  (1,104)  (792)  (1,983)  (1,317)
Non Cash Dividends  1,929  --   1,929  -- 
         
Non-GAAP Net Income attributable to common stockholders  $ 5,459  $ 1,919  $ 9,385  $ 4,200
         
EASYLINK SERVICES INTERNATIONAL CORPORATION        
Reconciliation of GAAP Basic income per common share to Non-GAAP Basic income per common share        
for the three and six months ended January 31, 2011 and 2010         
(Unaudited)        
  Three Months Six Months
  2011 2010 2011 2010
GAAP Basic income per common share  $ 0.03  $ 0.04  $ 0.06  $ 0.09
Non-GAAP Adjustments:        
Amortization  0.08  0.05  0.13  0.10
Stock Compensation  0.01  0.01  0.02  0.02
Acquisition Expenses  0.03  --   0.08  -- 
Non-cash Interest  0.01  0.01  0.02  0.01
Non-GAAP Tax Effect  (0.04)  (0.04)  (0.06)  (0.06)
Non Cash Dividends  0.07  --   0.07  -- 
         
Non-GAAP Basic income per common share  $ 0.19  $ 0.07  $ 0.32  $ 0.16
         
EASYLINK SERVICES INTERNATIONAL CORPORATION
Reconciliation of GAAP Diluted income per common share to Non-GAAP Diluted income per common share
for the three and six months ended January 31, 2011 and 2010         
(Unaudited)        
  Three Months Six Months
  2011 2010 2011 2010
GAAP Diluted income per common share  $ 0.03  $ 0.04  $ 0.06  $ 0.08
Non-GAAP Adjustments:        
Amortization  0.08  0.04  0.12  0.09
Stock Compensation  0.01  0.01  0.02  0.02
Acquisition and integration related   0.03  --   0.08  -- 
Non-cash Interest  0.01  --   0.02  0.01
Non-GAAP Tax Effect  (0.05)  (0.02)  (0.06)  (0.06)
Non Cash Dividends  0.06  --   0.06  -- 
         
Non-GAAP Diluted income per common share  $ 0.17  $ 0.07  $ 0.30  $ 0.14
         
Weighted average number of common shares outstanding - diluted  31,562,960  29,426,187  30,890,350  29,413,353
         
EASYLINK SERVICES INTERNATIONAL CORPORATION        
Reconciliation of GAAP Net Income to Adjusted EBITDA         
for the three and six months ended January 31, 2011 and 2010         
(Unaudited)        
(in thousands)        
  Three Months Six Months
  2011 2010 2011 2010
Net Income  $ 2,939  $ 1,308  $ 3,906  $ 2,672
Interest expense  1,598  434  2,411  928
Provision for income taxes  1,868  1,250  2,461  1,794
Depreciation and amortization  4,714  2,052  6,922  4,108
Stock compensation  173  219  650  455
Acquisition and integration related   817  --   2,415  -- 
Adjusted EBITDA  $ 12,109  $ 5,263  $ 18,765  $ 9,957
CONTACT: EasyLink Services International Corporation
         Glen Shipley
         678-533-8004
         gshipley@easylink.com

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