corporate earnings related Press Releases

Charter Reports First Quarter Financial and Operating Results

Jim O'Neill — Mon, 12 May 2008 22:35:56 -0400

ST. LOUIS--(BUSINESS WIRE)--May 12, 2008--Charter Communications,
Inc. (NASDAQ: CHTR) (along with its subsidiaries, the "Company" or
"Charter") today reported its first quarter 2008 financial and
operating results.

First quarter revenue of $1.564 billion grew 10.5%
year-over-year on a pro forma(1) basis and 9.8% on an actual
basis, primarily driven by increases in telephone and
high-speed Internet (HSI) revenues.
First quarter adjusted EBITDA(2) of $545 million increased
10.5% year-over-year on a pro forma basis and 9.9% on an
actual basis.
Total ARPU(3) for the quarter increased 13.4% year-over-year
to $100.14, driven by increased sales of The Charter
Bundle(TM), advanced services growth and rate adjustments.
Revenue generating units (RGUs) increased 7% year-over-year,
with 302,300 net additions during the first quarter of 2008,
primarily driven by continued strong HSI and telephone growth.
First quarter 2008 marked the highest video RGU net additions
and video ARPU growth since 2003.

"Our pro forma double digit revenue and adjusted EBITDA growth for
the first quarter was driven by strong RGU additions and ARPU growth,"
said Neil Smit, President and Chief Executive Officer. "Our continued
strong performance into 2008 reflects our focus and execution as we
pursue the right strategies for Charter, including driving bundled
penetration and targeting our operating and capital investments toward
the projects with the highest expected returns."

Key Operating Results

All of the following customer growth and ARPU statistics are
presented on a pro forma basis. Charter added a net 302,300 RGUs
during the first quarter of 2008. As of March 31, 2008, Charter served
approximately 5,598,800 customers and the Company's 12,084,400 RGUs
were comprised of 5,208,000 basic video, 3,023,200 digital video,
2,768,200 HSI, and 1,085,000 telephone customers.

Telephone customers increased by approximately 125,700 during
the first quarter of 2008 and nearly doubled year-over-year.
Telephone penetration is approximately 11% of telephone homes
passed.
Video RGUs increased 90,900 during the first quarter and video
ARPU grew 6.2% - the highest video RGU net additions and video
ARPU growth since 2003. Digital video customers increased by
approximately 102,800 and basic video customers decreased by
11,900.
HSI customers increased by approximately 85,700 in the first
quarter of 2008. HSI ARPU increased year-over-year to $40.08.
First quarter 2008 total ARPU increased 13.4% to $100.14 from
the same period in 2007, driven primarily by an increase in
bundled customers, advanced services growth, and upgrading
customers to higher service tiers.

First Quarter Results - Pro Forma

First quarter revenues were $1.564 billion, a pro forma increase
of $148 million, or 10.5%. The increase resulted primarily from
increases in telephone and HSI revenues.

Telephone revenues nearly doubled to $121 million compared to pro
forma revenue of $63 million in the year-ago quarter. HSI revenues
increased $35 million, up 11.9% year-over-year on a pro forma basis,
due primarily to an increased number of customers. Video revenues
increased $27 million, up 3.2% year-over-year on a pro forma basis,
primarily as a result of digital and advanced services revenue growth
and rate adjustments. Commercial revenues increased $12 million, or
14.8%, on a pro forma basis, as Charter continues to market The
Charter Business Bundle(R). Advertising sales revenue increased $6
million, reflecting a pro forma increase of 9.7% compared to the first
quarter of 2007.

Operating expenses, which include programming, service and
advertising sales costs, increased 8.8% year-over-year on a pro forma
basis, reflecting annual programming rate increases, increased labor
and maintenance costs to support improved service levels, and growth
of the Company's telephone business and other advanced services.
Selling, general, and administrative expenses increased by 13.8% on a
pro forma basis compared to the year-ago quarter, reflecting
expenditures to further improve the customer experience, increases in
bad debt expense, and higher marketing expenditures targeted at
revenue growth and retaining customers.

Adjusted EBITDA totaled $545 million for the first quarter of
2008, a pro forma increase of 10.5% compared to the year-ago quarter.

Net cash flows from operating activities for the first quarter of
2008 were $204 million, compared to a pro forma $263 million for the
first quarter of 2007.

First Quarter Results - Actual

First quarter revenues increased 9.8% and operating costs and
expenses increased 9.7% compared to year-ago results.

Adjusted EBITDA for the first quarter of 2008 grew 9.9% versus the
actual results in the year-ago period.

Income from operations was $205 million in the first quarter of
2008, compared to $156 million in the first quarter of 2007.

Net loss for the first quarter of 2008 was $358 million, or $.97
per common share. For the first quarter of 2007, Charter reported a
net loss of $381 million and net loss per common share of $1.04. The
decrease in reported net loss was primarily related to higher adjusted
EBITDA resulting from higher RGUs and increased ARPU.

Net cash flows from operating activities for the first quarter of
2008 were $204 million, compared to $266 million for the first quarter
of 2007.

Expenditures for property, plant, and equipment for the first
quarter of 2008 were $334 million, compared to first quarter 2007
expenditures of $298 million. The increase in capital expenditures
primarily reflects year-over-year increases in scalable infrastructure
related to network upgrades to support higher HSI speeds and other
advanced services.

As of March 31, 2008, Charter had $20.575 billion in long-term
debt and $467 million of cash on hand. Availability under the
Company's revolving credit facility was approximately $1.4 billion at
March 31, 2008, none of which was limited by covenant restrictions.
Charter expects that cash on hand, cash flows from operating
activities, and amounts available under its credit facilities will be
adequate to meet its projected cash needs through 2009 and will not be
sufficient to fund projected cash needs in 2010 (primarily as a result
of the CCH II, LLC $2.2 billion of senior notes maturing in September
2010) and thereafter.

Use of Non-GAAP Financial Metrics

The Company uses certain measures that are not defined by
Generally Accepted Accounting Principles ("GAAP") to evaluate various
aspects of its business. Adjusted EBITDA, pro forma adjusted EBITDA,
and free cash flow are non-GAAP financial measures and should be
considered in addition to, not as a substitute for, net cash flows
from operating activities reported in accordance with GAAP. These
terms, as defined by Charter, may not be comparable to similarly
titled measures used by other companies.

Adjusted EBITDA is defined as income from operations before
depreciation and amortization, stock compensation expense, and other
operating expenses, such as special charges and loss on sale or
retirement of assets. As such, it eliminates the significant non-cash
depreciation and amortization expense that results from the
capital-intensive nature of the Company's businesses as well as other
non-cash or non-recurring items, and is unaffected by the Company's
capital structure or investment activities. Adjusted EBITDA and pro
forma adjusted EBITDA are liquidity measures used by Company
management and its board of directors to measure the Company's ability
to fund operations and its financing obligations. For this reason, it
is a significant component of Charter's annual incentive compensation
program. However, this measure is limited in that it does not reflect
the periodic costs of certain capitalized tangible and intangible
assets used in generating revenues and the cash cost of financing for
the Company. Company management evaluates these costs through other
financial measures.

Free cash flow is defined as net cash flows from operating
activities, less capital expenditures and changes in accrued expenses
related to capital expenditures.

The Company believes that adjusted EBITDA, pro forma adjusted
EBITDA, and free cash flow provide information useful to investors in
assessing Charter's ability to service its debt, fund operations, and
make additional investments with internally generated funds. In
addition, adjusted EBITDA generally correlates to the leverage ratio
calculation under the Company's credit facilities or outstanding notes
to determine compliance with the covenants contained in the facilities
and notes (all such documents have been previously filed with the
United States Securities and Exchange Commission). Adjusted EBITDA and
pro forma adjusted EBITDA, as presented, include management fee
expenses in the amount of $34 million and $32 million for each of the
three months ended March 31, 2008 and 2007, respectively, which
expense amounts are excluded for the purposes of calculating
compliance with leverage covenants.

In addition to the actual results for the three months ended March
31, 2008 and 2007, we have provided pro forma results in this release
for the three months ended March 31, 2007. We believe these pro forma
results facilitate meaningful analysis of the results of operations.
Pro forma results in this release reflect certain sales and
acquisition of cable systems in 2007 as if they had occurred on
January 1, 2007. Pro forma income statements for the three months
ended March 31, 2007 and pro forma customer statistics as of March 31,
2007 are provided in the addendum of this news release.

Additional Information Available on Website

A slide presentation to accompany the first quarter conference
call will be available on the Investor & News Center of our website at
www.charter.com in the "Presentations/Webcasts" section. Pro forma
data, including disclosure concerning the pro forma data and the basis
upon which it was calculated, for each quarter of 2007 can also be
found on the Investor & News Center in the "Pro Forma Information"
section.

Conference Call

The Company will host a conference call on Monday, May 12, 2008,
at 9:00 a.m. Eastern Time (ET) related to the contents of this
release.

The conference call will be webcast live via the Company's website
at www.charter.com. Access the webcast by clicking on "About Charter"
at the top of the home page. Participants should go to the call link
at least 10 minutes prior to the start time to register. The call will
be archived on the website beginning two hours after its completion.
Accompanying slides will also be available on the site.

Those participating via telephone should dial 888/233-1576 no
later than 10 minutes prior to the call. International participants
should dial 706/643-3458. The passcode for the call is 43490012.

A replay of the call will be available at 800/642-1687 or
706/645-9291 beginning two hours after the completion of the call
through the end of business on May 19, 2008. The passcode for the
replay is 43490012.

About Charter Communications(R)

Charter Communications, Inc. is a leading broadband communications
company and the third-largest publicly traded cable operator in the
United States. Charter provides a full range of advanced broadband
services, including advanced Charter Digital Cable(R) video
entertainment programming, Charter High-Speed(R) Internet access, and
Charter Telephone(R). Charter Business(TM) similarly provides
scalable, tailored, and cost-effective broadband communications
solutions to business organizations, such as business-to-business
Internet access, data networking, video and music entertainment
services, and business telephone. Charter's advertising sales and
production services are sold under the Charter Media(R) brand. More
information about Charter can be found at www.charter.com.

(1) Pro forma results are described below in the "Use of Non-GAAP
Financial Metrics" section and are provided in the addendum of this
news release.

(2) Adjusted EBITDA is defined in the "Use of Non-GAAP Financial
Metrics" section and is reconciled to net cash flows from operating
activities in the addendum of this news release.

(3) Average revenue per basic customer.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:

This release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,
regarding, among other things, our plans, strategies and prospects,
both business and financial. Although we believe that our plans,
intentions and expectations reflected in or suggested by these
forward-looking statements are reasonable, we cannot assure you that
we will achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks,
uncertainties and assumptions including, without limitation, the
factors described under "Risk Factors" from time to time in our
filings with the Securities and Exchange Commission ("SEC"). Many of
the forward-looking statements contained in this release may be
identified by the use of forward-looking words such as "believe,"
"expect," "anticipate," "should," "planned," "will," "may," "intend,"
"estimated," "aim," "on track," "target," "opportunity" and
"potential," among others. Important factors that could cause actual
results to differ materially from the forward-looking statements we
make in this release are set forth in other reports or documents that
we file from time to time with the SEC, and include, but are not
limited to:

the availability, in general, of funds to meet interest
payment obligations under our debt and to fund our operations
and necessary capital expenditures, either through cash flows
from operating activities, further borrowings or other sources
and, in particular, our ability to fund debt obligations (by
dividend, investment or otherwise) to the applicable obligor
of such debt;
our ability to comply with all covenants in our indentures and
credit facilities, any violation of which, if not cured in a
timely manner, could trigger a default of our other
obligations under cross-default provisions;
our ability to pay or refinance debt prior to or when it
becomes due and/or refinance that debt through new issuances,
exchange offers or otherwise, including restructuring our
balance sheet and leverage position;
the impact of competition from other distributors, including
incumbent telephone companies, direct broadcast satellite
operators, wireless broadband providers, and digital
subscriber line ("DSL") providers;
difficulties in growing, further introducing, and operating
our telephone services, while adequately meeting customer
expectations for the reliability of voice services;
our ability to adequately meet demand for installations and
customer service;
our ability to sustain and grow revenues and cash flows from
operating activities by offering video, high-speed Internet,
telephone and other services, and to maintain and grow our
customer base, particularly in the face of increasingly
aggressive competition;
our ability to obtain programming at reasonable prices or to
adequately raise prices to offset the effects of higher
programming costs;
general business conditions, economic uncertainty or slowdown,
including the recent significant slowdown in the new housing
sector and overall economy; and
the effects of governmental regulation on our business.

All forward-looking statements attributable to us or any person
acting on our behalf are expressly qualified in their entirety by this
cautionary statement. We are under no duty or obligation to update any
of the forward-looking statements after the date of this release.

Vonage Holdings Corp. Reports First Quarter 2008 Results

Jim O'Neill — Mon, 12 May 2008 09:03:28 -0400

HOLMDEL,
N.J., May 8, 2008 /PRNewswire-FirstCall via COMTEX News Network/ --
Vonage Holdings Corp. (NYSE: VG), a leading provider of broadband
telephone service, today announced results for the quarter ended March
31, 2008.

Revenue
for the first quarter 2008 grew to a record $225 million, up 15% from
$196 million in the first quarter 2007 and up 4% sequentially, driven
by an increase in subscriber lines and higher average revenue per user.

For the first quarter of 2008, the Company reported a GAAP net
loss of $9 million or $0.06 per share, down from a loss of $72 million
or $0.47 per share reported in the first quarter 2007. Adjusted
operating income(1) was $8 million in the quarter, a significant
improvement from an adjusted operating loss of $58 million in the
year-ago quarter and adjusted operating income of $3 million
sequentially.

Jeffrey Citron, Vonage Chairman, said, "We are
pleased with our results this quarter, as we further strengthened
relationships with existing customers and captured new subscribers
through targeted marketing. Our business fundamentals are improving and
for the second consecutive quarter we reported positive adjusted
operating income. Additionally, we have taken a significant step toward
restructuring our convertible debt.

"We
remain confident in our ability to grow the business profitably and
deliver innovative products and services which enable customers to
control the way they communicate. Today's announcement of a strategic
relationship with Covad to deliver Vonage Broadband is an exciting step
in that direction."

First Quarter 2008 Financial and Operating Highlights

Average
monthly revenue per line in the first quarter 2008 was $28.85, up from
$28.31 in the year-ago quarter and $28.19 reported in the fourth
quarter 2007. Average monthly telephony services revenue per line for
the quarter increased to $27.87, up from $27.36 reported a year ago and
up from $27.42 sequentially.

In
the first quarter 2008, direct cost of telephony services was $56
million, flat versus last year and up slightly from $54 million in the
fourth quarter 2007. On a per line basis, average direct cost of
telephony services was $7.26, down from $8.03 in the year ago quarter
and up from $7.11 sequentially.

Direct cost of goods sold was
$22 million, up from $13 million in the year-ago quarter and $17
million in the prior quarter as the Company utilized a large portion of
its remaining inventory of higher cost CPE devices. Direct margin(2)
remained flat year-over-year at 65% and fell 200 basis points from 67%
in the fourth quarter 2007 driven by the increase in the CPE subsidy.
The Company expects direct margin to improve in the second quarter as
it fully exhausts the remaining inventory.

Selling, general and
administrative ("SG&A") expense was $79 million, down from $91
million in the year-ago quarter, and flat sequentially.

Pre-marketing
operating income(1) ("PMOI"), which represents the cash generated from
the existing customer base, increased to $83 million, from $39 million
in the year-ago quarter and $78 million sequentially. On a per line
basis, PMOI increased to $10.66 in the first quarter 2008, up from
$5.68 in the year-ago quarter and $10.23 sequentially.

Marketing
expense for the quarter was $61 million, or 27% of revenue, down
sharply from $91 million, or 46% of revenue, a year ago, and down from
$63 million, or 29% of revenue, sequentially. Marketing cost per gross
subscriber line addition ("SLAC") was $216 in the first quarter 2008,
down from $273 in the year-ago quarter and $223 sequentially. The
Company expects SLAC to increase in the second quarter, consistent with
prior year seasonal trends. Vonage expects to gradually increase
marketing expenditures in the second half of 2008 to accelerate growth
but continues to expect the cost of acquisition to fall within
$225-$250 for the full year 2008.

Vonage
added 30,000 net subscriber lines in the first quarter 2008 and
finished the quarter with more than 2.6 million lines in service. The
Company is taking steps to strengthen and grow its customer base. To
expand Vonage's competitive position in the marketplace and offer
customers control over how they communicate, Vonage today announced a
relationship with Covad whereby Vonage will offer a DSL service to both
residential and small business customers. The Company expects this new
service, called Vonage Broadband, to be available to customers by the
end of the year.

In addition, the Company is focused on
increasing the quality of its customer base by targeting customers with
low acquisition costs and high lifetime value. This effort, which
involves evaluating media channel investments and returns, will lead to
lower gross line additions in the second quarter, with an expectation
for accelerating growth the remainder of the year. The Company expects
this will increase profitability over time.

Average
monthly customer churn increased to 3.3% in the first quarter 2008 from
3.0% in the fourth quarter 2007. The Company believes it has
implemented process improvements in customer care that will result in
an improved user experience and lower churn. As such, the Company
expects churn in the second quarter to be below first quarter levels.

Cash
and marketable securities and restricted cash on March 31, 2008 was
$190 million. This includes $42 million in restricted cash used as
collateral for routine business operations. The change in cash from the
prior quarter was driven by cash provided from operations of $11
million, capital expenditures of $10 million, and an increase in
restricted cash of $2 million.

Convertible Debt Refinancing Update

On
April 25th, the Company announced that it had signed a non-binding
letter of intent with a third party financing source to provide $215
million in a private debt financing. The letter of intent is a proposal
that will be used as a basis for financing and does not constitute a
commitment. The Company expects that approximately two-thirds of the
financing will be provided through a senior secured credit facility and
approximately one-third will be provided through issuance of
convertible secured notes.

The Company intends to use the net
proceeds from this financing, plus cash on hand, to repay, tender for
or redeem its existing convertible notes, which can be put to the
Company on December 16, 2008 and have a principal amount due of
approximately $253 million.

Negotiations
regarding a financing commitment are ongoing but there can be no
assurance that the financing will be successful. The Company will
provide additional details once a commitment letter is signed.

(1) This is a non-GAAP financial measure. Refer below to Table 3 for a
reconciliation to GAAP loss from operations.
(2) Direct margin is defined as operating revenues less direct cost of
telephony services and direct cost of goods sold.
VONAGE HOLDINGS CORP.
TABLE 1. SUMMARY CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
2008 2007
(unaudited)
Statement of Operations Data:
Operating Revenues:
Telephony services $216,980 $189,367
Customer equipment and shipping 7,637 6,573
224,617 195,940
Operating Expenses:
Direct cost of telephony services
(excluding depreciation and amortization
of $4,701 and $4,113, respectively) 56,498 55,566
Royalty - 10,415
Total direct cost of telephony services 56,498 65,981
Direct cost of goods sold 22,072 13,333
Selling, general and administrative 79,392 90,992
Marketing 60,899 90,850
Depreciation and amortization 10,209 7,859
229,070 269,015
Loss from operations (4,453) (73,075)
Other income (expense), net
Interest income 1,400 6,067
Interest expense (5,571) (5,149)
Other, net (164) 17
(4,335) 935
Loss before income tax expense (8,788) (72,140)
Income tax expense (173) (194)
Net loss $(8,961) $(72,334)
Net loss per common share:
Basic and diluted $(0.06) $(0.47)
Weighted-average common shares outstanding:
Basic and diluted 156,034 155,151
VONAGE HOLDINGS CORP.
TABLE 1. SUMMARY CONSOLIDATED FINANCIAL DATA - (Continued)
(Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
2008 2007
(unaudited)
Statement of Cash Flow Data:
Net cash provided by (used in) operating
activities $10,522 $(58,719)
Net cash provided by (used in) investing
activities 25,021 3,877
Net cash provided by (used in) financing
activities (201) 227
March 31, December 31,
2008 2007
(unaudited)
Balance Sheet Data (at period end):
Cash, cash equivalents and marketable
securities $148,278 $151,484
Restricted cash 41,501 38,928
Property and equipment, net of accumulated
depreciation 114,072 118,666
Total assets 458,365 462,297
Convertible notes, net 253,331 253,320
Capital lease obligations 22,994 23,235
Total liabilities 540,597 537,424
Total stockholders' equity (deficit) (82,232) (75,127)
VONAGE HOLDINGS CORP.
TABLE 2. SUMMARY CONSOLIDATED OPERATING DATA
(unaudited)
Three Months Ended
March 31, December 31, March 31,
2008 2007 2007
Gross subscriber line additions 281,329 283,907 332,493
Net subscriber line additions 30,133 56,016 165,646
Subscriber lines (at period end) 2,610,360 2,580,227 2,389,757
Average monthly customer churn 3.3% 3.0% 2.4%
Average monthly revenue per line $28.85 $28.19 $28.31
Average monthly telephony
services revenue per line $27.87 $27.42 $27.36
Average monthly direct cost of
telephony services per line $7.26 $7.11 $8.03
Marketing costs per gross
subscriber line addition $216.47 $223.06 $273.24
Employees (excluding temporary
help) (at period end) 1,722 1,543 1,729
CPE subsidy $51.31 $40.83 $20.33
Direct margin as a % of total
revenue 65.0% 66.7% 64.8%
VONAGE HOLDINGS CORP.

TABLE 3. RECONCILIATION OF GAAP LOSS FROM OPERATIONS TO ADJUSTED INCOME (LOSS)

FROM OPERATIONS AND PRE-MARKETING OPERATING INCOME
(Dollars in thousands)
(unaudited)
Three Months Ended
March 31, December 31, March 31,
2008 2007 2007
Income (loss) from operations $(4,453) $(9,366) $(73,075)
Depreciation and amortization 10,209 11,105 7,859
Non-cash stock compensation 1,886 1,663 6,914
Adjusted income (loss) from
operations 7,642 3,402 (58,302)
Marketing 60,899 63,327 90,850
Customer equipment and shipping (7,637) (5,891) (6,573)
Direct cost of goods sold 22,072 17,484 13,333
Pre-marketing operating income $82,976 $78,322 $39,308
As a % of telephony services
revenue 38.2% 37.3% 20.8%

Use of Non-GAAP Financial Measures

This press release
includes the following measures defined as non-GAAP financial measures
by the Securities and Exchange Commission: adjusted income (loss) from
operations, pre-marketing operating income.

Vonage uses
adjusted income (loss) from operations and pre-marketing operating
income as principal indicators of the operating performance of its
business.

We believe that adjusted income (loss) from
operations permits a comparative assessment of our operating
performance, relative to our performance based on our GAAP results,
while isolating the effects of depreciation and amortization, which may
vary from period to period without any correlation to underlying
operating performance, and of non-cash stock compensation expense,
which is a non-cash expense that also varies from period to period.

Given
that our strategy currently results in operating losses, we believe
that pre-marketing operating income is an important metric to evaluate
the profitability of the existing customer base to justify the level of
continued investment in growing that customer base. In addition, as we
are currently growing both our revenue and customer base, we have
chosen to invest significant amounts on our marketing activities to
acquire and replace subscribers. We provide information relating to our
adjusted income (loss) from operations and pre-marketing operating
income so that investors have the same data that we employ in assessing
our overall operations. We believe that trends in our adjusted income
(loss) from operations and pre-marketing operating income are valuable
indicators of the operating performance of our company on a
consolidated basis and of our ability to produce operating cash flow to
fund working capital needs, to service debt obligations and to fund
capital expenditures.

The
non-GAAP financial measures used by us may not be directly comparable
to similarly titled measures reported by other companies due to
differences in accounting policies and items excluded or included in
the adjustments, which limits its usefulness as a comparative measure.
These non-GAAP financial measures should be considered in addition to
results prepared in accordance with GAAP, but should not be considered
a substitute for, or superior to, GAAP results.

Vonage defines
adjusted income (loss) from operations as GAAP loss from operations
excluding depreciation and amortization and non-cash stock compensation
expense.

Vonage defines pre-marketing operating income as GAAP
loss from operations excluding customer equipment and shipping revenue,
direct cost of goods sold, depreciation and amortization, marketing and
non-cash stock compensation expense.

Conference Call and Webcast

Management
will host a webcast discussion of the quarter's results on Thursday,
May 8, 2008 at 10:00 AM Eastern Time. To participate, please dial (877)
419-6594 approximately ten minutes prior to the call. International
callers should dial (719) 325-4932. A replay will be available
approximately two hours after the conclusion of the call until midnight
May 23, 2008, and may be accessed by dialing (888) 203-1112.
International callers should dial (719) 457-0820. The replay passcode
is: 5532664

The webcast will be broadcast live through Vonage's Investor Relations website at http://ir.vonage.com. Windows Media Player or RealPlayer is required to listen to this webcast. A replay will be available shortly after
the live webcast.

Safe Harbor Statement

This press release contains forward-looking statements regarding the
Company's ability to grow profitably, the Company's ability to complete
a financing with party with whom it has entered a non-binding letter of
intent, the Company's gross line additions and churn in the second
quarter of 2008 and the Company's cost of acquisition for 2008. In
addition, other statements in this press release that are not
historical facts or information may be forward-looking statements. The
forward-looking statements in this release are based on information
available at the time the statements are made and/or management's
belief as of that time with respect to future events and involve risks
and uncertainties that could cause actual results and outcomes to be
materially different. Important factors that could cause such
differences include the Company's ability to consummate the financing
arrangement, which is subject to numerous uncertainties, including but
not limited to completion of due diligence review by the financing
party, successful negotiation between the Company and the financing
party of a commitment for the financing arrangement and successful
negotiation of definitive documentation for the financing arrangement.
Other important factors include, but are not limited to, our damaging
and disruptive intellectual property and other litigation; our
convertible notes, which can be put to us in December 2008; our rate of
customer terminations; our history of net operating losses and our need
for cash to finance our growth; the competition we face; our reliance
on third parties to provide portions of our service; our dependence on
our customers' existing broadband connections; differences between our
service and traditional phone services, including our 911 service;
uncertainties relating to regulation of VoIP services; system
disruptions or flaws in our technology; the risk that VoIP does not
gain broader acceptance; and other factors that are set forth in the
"Risk Factors" section, the "Legal Proceedings" section, the
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" section and other sections of Vonage's Annual
Report on Form 10-K for the year ended December 31, 2007, as well as in
our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
While we may elect to update forward-looking statements at some point
in the future, we specifically disclaim any obligation to do so, and
therefore, you should not rely on these forward-looking statements as
representing our views as of any date subsequent to today.

About Vonage

Vonage
(NYSE: VG) is a leading provider of broadband telephone services with
2.6 million subscriber lines. Our award-winning technology enables
anyone to make and receive phone calls with a touch tone telephone
almost anywhere a broadband Internet connection is available. We offer
feature-rich and cost- effective communication services that offer
users an experience similar to traditional telephone services.

Our
Residential Premium Unlimited and Small Business Unlimited calling
plans offer consumers unlimited local and long distance calling, and
popular features like call waiting, call forwarding and voicemail - for
one low, flat monthly rate.

Vonage's service is sold on the web
and through national retailers including Best Buy, Circuit City,
Wal-Mart Stores Inc. and Target and is available to customers in the
U.S., Canada and the United Kingdom. For more information about
Vonage's products and services, please visit http://www.vonage.com.

Vonage Holdings Corp. is headquartered in Holmdel, New Jersey.
Vonage(R) is a registered trademark of Vonage Marketing Inc., a
subsidiary of Vonage Holdings Corp.

(vg-f)

SOURCE Vonage Holdings Corp.

http://www.vonage.com

Qwest Reports First Quarter 2008 Results

Jim O'Neill — Tue, 06 May 2008 08:34:50 -0400

DENVER, May 6, 2008 Ã¢â‚¬â€ Qwest Communications
International Inc. (NYSE: Q) reported steady operating results for the
first quarter of 2008. Adjusted EBITDA totaled $1.14 billion with
adjusted EBITDA margins of 33.6 percent as data, Internet and video
revenue grew by 9 percent compared to the first quarter of
2007. Reflecting the firstquarter of recording income tax expense at
normal effective rates since 2001, Qwest reported earnings of $157
million, or $0.09 per diluted share in the first quarter 2008, compared
to $240 million, or $0.12 per diluted share, in the first quarter 2007.

While maintaining steady financial performance, Qwest made
significant strides executing on its strategic initiatives. Among the
milestones reached since the beginning of the year were an agreement
with Verizon Wireless that represents a fundamental shift in how Qwest
provides wireless services to its customers; the launch of two new
fiber-optic Internet services for Mass Market customers; and the
continued acceleration of Business Markets revenue growth on a
year-over-year basis. Other accomplishments included an initiative to
further reduce costs through a voluntary separation program, changes to
the companyÃ¢â‚¬â„¢s segment reporting structure and continued progress on the
$2 billion share repurchase program.

Ã¢â‚¬Å“Since the beginning of the year, we have demonstrated notable
progress on our strategies for success, including announcing a new
wireless model and executing on our fiber-to-the-node build-out, which
is ahead of plan for the year,Ã¢â‚¬Â said Edward A. Mueller, Qwest chairman
and CEO. Ã¢â‚¬Å“In addition, we continue to effectively compete for customers
in a challenging economic climate.Ã¢â‚¬Â

FINANCIAL RESULTS

Revenue

Qwest reported total operating revenue of $3.4 billion for the first
quarter 2008. Total revenue declined 1.4 percent year over
year. Results reflect the impact of industry consolidation and
long-distance pricing pressure in Wholesale Markets offset by 3.1
percent growth in Business Markets while Mass Markets revenue was flat.

Continuing customer demand for higher speeds and greater
functionality in data products, such as consumer broadband and
enterprise iQ Networking services, contributed to total data, Internet
and video services revenue growing 9 percent year over year to $1.3
billion. Total data, Internet and video services revenue now represents
nearly 40 percent of operating revenue.

Expenses

Total operating expenses declined by 1.6 percent to $2.9 billion
compared to the first quarter of 2007 while absorbing investments in
brand development and Business Markets sales force. General,
administrative and other operating expenses led expense reductions with
a year-over-year decline of 6.9 percent as a result of lower headcount
and one-time litigation charges in 2007. Depreciation and amortization
for the quarter declined year over year by $36 million, or 5.9 percent,
due to the continuation of disciplined capital expenditures relative to
historic levels.

Adjusted EBITDA and Net Income

Qwest reported adjusted EBITDA of $1.14 billion in the quarter,
which was flat sequentially and down $30 million from the first quarter
of 2007. Adjusted EBITDA margin expanded nearly 50 basis points during
the quarter to 33.6 percent vs. 33.1 percent in the fourth quarter of
2007. Adjusted EBITDA results exclude $45 million in severance charges
mostly related to the voluntary separation plan offered in March to
certain local network employees supporting the traditional telephone
business.

Net income for the quarter was $157 million compared to $240 million
in the prior year. As a result of the reversal of the valuation
allowance against deferred tax assets in 2007, Qwest began recording
income tax expense at normal effective rates in the first quarter
resulting in $99 million of income tax expense compared to $2 million
in the first quarter of 2007. As a result, income tax expense impacts
on net income differ year over year. Income before income taxes was
$256 million for the quarter, an increase of 5.8 percent compared to
the first quarter of 2007.

Ã¢â‚¬Å“I am pleased with our financial progress in the quarter,Ã¢â‚¬Â
said John W. Richardson, Qwest executive vice president and CFO.
Ã¢â‚¬Å“Changes to our reporting segments and cost detail will aid
stakeholders in following our progress as we continue to focus on
selling into our strategic product set, stemming access line losses and
driving costs out of the business resulting in expanded EBITDA margins.Ã¢â‚¬Â

SEGMENT RESULTS

To reflect the way the company now manages its business and
provide increased visibility to results, as of the first quarter, Qwest
changed its segment reporting from legacy segments,
wireline, wireless and other, to three market-based segments Ã¢â‚¬â€œ Business
Markets, Mass Markets and Wholesale Markets.

To summarize, the financial and operating results for the companyÃ¢â‚¬â„¢s three segments during the quarter were:

Business Markets

Business Markets reported revenue of $995 million in the first
quarter, up 3.1 percent year over year as data and Internet revenue
grew 6.9 percent. Data and Internet revenue growth continues to be
driven by QwestÃ¢â‚¬â„¢s strategic products, which grew 29 percent over the
same period a year ago. Sequentially, strategic products were down 3.6
percent due to typical procurement cycle impacts on data equipment
revenue.

Investment in an expanded sales force led to higher Business
Markets segment expenses. As a result, year-over-year segment income
declined by 4.1 percent to $379 million. The year-over-year increase in
facility, network and other expenses tracked with revenue growth at 3.1
percent. Sequentially, segment income expanded by 4.4 percent on lower
expenses associated with lower equipment revenue.

Qwest is serving as the official telecommunications provider
for the 2008 Democratic National Convention to be held in August in
Denver. The company also will be the official communications provider
for the 2008 Republican National Convention to be held in September in
Minneapolis-Saint Paul.

In April 2008 Gartner, Inc., released its, Ã¢â‚¬Å“1H08 U.S. Network
Service Providers Magic Quadrant,Ã¢â‚¬Â in which Gartner positioned Qwest in
the leaders quadrant for national network services.

Mass Markets

Mass Markets revenue was $1.48 billion in the quarter, a 0.7
percent decline compared to the prior year. Data, Internet and video
revenue growth of 20.7 percent was offset by declines in both voice and
wireless services revenue due to competition and economic pressures,
particularly in markets most affected by the housing industry.

Sequential revenue was essentially flat, reflecting similar
trends among voice, wireless and data revenues. Mass Markets segment
income was $717 million for the quarter, up $21 million, or 3.0
percent, sequentially. Segment expenses declined resulting in segment
margins of 48.4 percent, steady to first quarter 2007 results.

Increased bundle penetration and a growing number of customers
taking higher broadband speeds drove improvements in consumer ARPU,
which increased 7.8 percent to $55 from $51 a year ago.

Qwest Broadband subscribers increased 90,000 in the quarter to reach
2.7 million, up 17.2 percent from a year ago. In April, the company
launched Qwest ConnectÃ‚Â® Titanium (connection speeds up to 12 Mbps) and Qwest ConnectÃ‚Â® Quantum (connection
speeds up to 20 Mbps), the latest Internet services powered by Qwest's
ongoing fiber-to-the-neighborhood (FTTN) network expansion. Details
regarding these new services can be found at www.qwest.com/residential/internet/fiber-optics.html. The new services will be rolled-out in 23 of Qwest's top markets across 10 states throughout the year.

Qwest added 50,000 net DIRECTV subscribers in the quarter for
a total of 699,000 video subscribers Ã¢â‚¬â€œ an increase of 42 percent from
the end of the first quarter 2007.

Yesterday, Qwest and Verizon Wireless announced a 5-year
agreement for Qwest to market and sell the complete line of Verizon
Wireless services to QwestÃ¢â‚¬â„¢s consumer, business and government
customers. Beginning this summer, QwestÃ¢â‚¬â„¢s consumer customers will be
able to buy Verizon Wireless products and services via QwestÃ¢â‚¬â„¢s call
centers, retail stores and kiosks and online at Qwest.com.

Wholesale Markets

Wholesale Markets reported revenue of $841 million in the
quarter, down 7.0 percent year over year largely due to long-distance
revenue impacted by industry consolidation and pricing. Data and
Internet revenue was up 3.0 percent year over year, reflecting
WholesaleÃ¢â‚¬â„¢s increased focus on data products. Sequential revenue was
flat as voice services revenue declines stabilized.

Segment income was $493 million, down 2.0 percent year over
year as a result of revenue declines of 7.0 percent during the same
period. Sequentially, segment income was down $28 million largely due
to a favorable one-time settlement in the fourth quarter of
2007. Segment margin improved by more than 300 basis points year over
year, reflecting efforts to maximize Wholesale Markets margin.

In February, Qwest tied for top honors in customer service, network
quality and voice pricing from wholesale customers in Atlantic-ACMÃ¢â‚¬â„¢s
Ã¢â‚¬Å“2008 Domestic Wholesale Report CardÃ¢â‚¬Â survey. This was the fourth
consecutive Atlantic-ACM survey that recognized Qwest Wholesale as
best-in-class for customer service.

CASH FLOW, CAPITAL SPENDING AND INTEREST

Adjusted free cash flow for the quarter was $56 million
compared to $150 million during the first quarter of 2007. Cash flow
contributions by operating activities were offset by higher capital
spending, including the continued deployment of fiber-to-the-node in
targeted markets. Total capital investment for the quarter was $416
million compared to $318 million in the prior year. Sequentially,
capital expenditures were down $89 million due primarily to timing on
real estate construction and IT software purchases.

Interest expense declined 7.4 percent year over year to $261
million for the first quarter as a result of retiring higher coupon
debt instruments during 2007.

Due to the agency nature of our new wireless partnership, we will
recognize revenues on a net basis. As a result, wireless revenue could
be lower than under our previous arrangement. Excluding the impact of
wireless revenues, Qwest expects full-year revenue results in line with
prior guidance. We continue to be comfortable with previously stated
goals for EBITDA, capital expenditures and free cash flow for the year.

BALANCE SHEET

Qwest reduced net debt by $304 million to $13.5 billion
compared to the first quarter of 2007. Net debt increased $310 million
sequentially as a result of cash and investments declining from $1.1
billion at the end of 2007 to $800 million at the end of the first
quarter.

RETURNS TO SHAREHOLDERS

During the first quarter, Qwest paid its first dividend to
shareholders in six years of $0.08 per share. Total dividend payments
were $142 million. Combined with continued progress on its $2 billion
share repurchase program, Qwest has returned in excess of $370 million
to its shareholders through May 1 of this year.

On April 17, Qwest announced that a dividend of $0.08 per
share will be paid on May 30, 2008, to all stockholders of record at
the close of business on May 9, 2008.

Conference Call Today

As previously announced, Qwest will host a conference call for
investors and the media today at 9 a.m. EDT with Edward Mueller, Qwest
chairman and CEO, and John W. Richardson, Qwest executive vice
president and CFO. A live webcast and replay of the call is available
at www.qwest.com/about/investor/events.

Level 3 Reports First Quarter 2008 Results

Jim O'Neill — Thu, 24 Apr 2008 18:12:48 -0400

BROOMFIELD, Colo., April 23 /PRNewswire-FirstCall/ -- Level 3 Communications, Inc. today reported consolidated revenue of $1.09 billion for the first quarter 2008, an increase of 3 percent from $1.06 billion for the first quarter 2007. Fourth quarter 2007 consolidated revenue was $1.10 billion. The year over year growth rate for Core Communications Services revenue was 10 percent.

The net loss for the first quarter 2008 was $181 million, or $0.12 per share, compared to a net loss of $647 million, or $0.44 per share for the first quarter 2007. In the first quarter 2007, excluding a loss on the extinguishment of debt of $427 million, the net loss would have been $220 million, or $0.15 per share. The net loss for the fourth quarter 2007 was $91 million, or $0.06 per share.
Consolidated Adjusted EBITDA(1) was $211 million in the first quarter 2008, an increase of 24 percent from $170 million for the first quarter 2007. Consolidated Adjusted EBITDA for the fourth quarter 2007 was $246 million.
"Over the last several quarters, a growing number of telecommunications industry participants have noted the growth in the demand for optical and IP services," said James Q. Crowe, president and CEO of Level 3. "We certainly benefited from that trend during the quarter, driven by growth in the delivery of video and other media over the Internet. Additionally, the pricing environment for our Core Communications Services continued to be positive.
"From an operational perspective, we believe we have substantially increased available installation capacity, which was previously a significant constraint on our ability to meet market demand for our services. With these operational improvements, we believe that we are on track to meet our two primary goals for 2008 -- to reach free cash flow breakeven on a run rate basis during 2008, and to increase our sales and installations to rates that match customer demand for our services. With respect to the first goal, our performance has exceeded our earlier expectations and we expect to be free cash flow breakeven for the remaining three quarters of this year."

First Quarter 2008 Financial Results
Metric
($ in millions) First Quarter First Quarter
Revenue 2008 Results 2007 Results
Core Communications $958 $870
Other Communications $51 $84
SBC Contract Services $57 $83
Total Communications Revenue $1,066 $1,037
Other Revenue $26 $19
Total Consolidated Revenue $1,092 $1,056
Consolidated Adjusted EBITDA (1)(2) $211 $170
Capital Expenditures $113 $155
Unlevered Cash Flow (2) $(21) $(69)
Free Cash Flow (2) $(160) $(248)
Communications Gross Margin (2) 56.9% 56.6%
Communications Adjusted EBITDA Margin (2) 19.3% 16.2%
(1) Consolidated Adjusted EBITDA for the first quarter 2008 and 2007
excludes $23 million and $24 million in non-cash compensation expense
and includes $7 million and $4 million of cash restructuring charges
respectively
(2) See schedule of non-GAAP metrics for definition and reconciliation to
GAAP measures
Communications Business
Revenue
Communications revenue for the first quarter 2008 was $1.07 billion, a 3 percent increase from $1.04 billion in the first quarter 2007. In the fourth quarter 2007, Communications revenue was $1.08 billion.

Quarter Quarter
Communications ended ended Quarter ended
Revenue March 31, March 31, Percent December 31, Percent
($ in millions) 2008 2007 Change 2007 Change
Core Network Services $774 $720 8% $783 (1%)
Wholesale Voice
Services $184 $150 23% $172 7%
Total Core
Communications Services $958 $870 10% $955 ---
Other Communications
Services $51 $84 (39%) $56 (9%)
SBC Contract
Services $57 $83 (31%) $73 (22%)
Total Communications
Revenue $1,066 $1,037 3% $1,084 (2%)
Core Communications Services
Core Communications Services revenue, which includes Core Network Services and Wholesale Voice Services, was $958 million in the first quarter 2008, an increase of 10 percent over $870 million in the first quarter 2007. Fourth quarter 2007 Core Communications Services revenue was $955 million.
Core Network Services revenue increased by 8 percent from the first quarter 2007, primarily from increased demand for IP and optical services across the business. Wholesale Voice Services revenue increased by 23 percent from the first quarter 2007, primarily due to growth from cable and wireless customers.
In the first quarter 2008, Core Communications Services revenue by market group was:

First Total Core
Core Communications Services Revenue Quarter Communications
($ in millions) 2008 Services Revenue
Wholesale Markets Group $541 57%
Business Markets Group $240 25%
Content Markets Group $100 10%
European Markets Group $77 8%
Total Core Communications Services Revenue $958
Other Communications Services
Other Communications Services revenue declined 39 percent to $51 million compared to $84 million in the first quarter 2007 as a result of expected declines in managed modem services. For the fourth quarter 2007, Other Communications Services revenue was $56 million.
SBC Contract Services
SBC Contract Services revenue was $57 million in the first quarter 2008, a 31 percent decline compared to the year earlier quarter revenue of $83 million. Fourth quarter 2007 SBC Contract Services revenue was $73 million, which included a $16 million quality of service bonus, the last such bonus for which the company was eligible.
As previously disclosed, SBC announced its intention to migrate the services provided under the agreement to its own network facilities in accordance with terms previously negotiated by WilTel Communications, LLC (WilTel), a company subsequently acquired by Level 3. Under the terms of this agreement, SBC agreed to pay WilTel a minimum amount of gross margin regardless of the actual revenue generated under the contract. Accordingly, while the company expects future SBC Contract Services revenue will be difficult to predict, the gross margin contribution over time is fixed.
As of the end of the first quarter, there was approximately $15 million of gross margin commitment remaining on the contract. The company expects the gross margin commitment to be met in the second quarter 2008 and will evaluate the approach to external revenue reporting under this agreement going forward once the commitment is satisfied.
Deferred Revenue
Communications deferred revenue decreased to $918 million at the end of the first quarter 2008, compared to $939 million at the end of the first quarter 2007 and $929 million at the end of the fourth quarter 2007.
Cost of Revenue
Communications cost of revenue for the first quarter 2008 increased to $459 million, versus $450 million in the first quarter 2007 and $444 million in the previous quarter.
Communications Gross Margin(1) was $607 million, or 56.9 percent in the first quarter 2008, compared to $587 million, or 56.6 percent in the first quarter 2007. For the fourth quarter 2007, Communications Gross Margin was $640 million or 59.0 percent. The fourth quarter gross margin had the benefit of the $16 million SBC performance bonus.
"Actual gross margins in coming quarters will largely be determined by the mix of Core Network Services revenue and Wholesale Voice Services revenue," said Sunit Patel, executive vice president and CFO of Level 3. "Core Network Services revenue has incremental gross margins of approximately 80 percent and Wholesale Voice Services revenue has incremental gross margins of approximately 30 percent. Over the course of the year, we expect to benefit from the growth of higher margin Core Network Services revenue and network optimization."
Selling, General and Administrative (SG&A) Expense
Communications SG&A expense, including non-cash compensation expense, was $418 million for the first quarter 2008, versus $439 million for the first quarter 2007 and $439 million for the fourth quarter 2007. Communications SG&A includes $23 million, $24 million and $50 million for the first quarter 2008, first quarter 2007 and fourth quarter 2007, respectively, of non-cash compensation expense.
Excluding non-cash compensation expense, Communications SG&A was $395 million in the first quarter 2008, a 5 percent decline compared to $415 million in the first quarter 2007. Fourth quarter 2007 Communications SG&A, excluding non-cash compensation expense, was $389 million, which included a $21 million reduction in incentive-based compensation expense.
Adjusted EBITDA
Adjusted EBITDA(1) for the communications business was $205 million for the first quarter 2008, a 22 percent increase compared to $168 million for the first quarter 2007. Fourth quarter 2007 Communications Adjusted EBITDA was $246 million.
Communications Adjusted EBITDA margin was 19.3 percent in the first quarter 2008, versus 16.2 percent in the first quarter 2007 and 22.7 percent in the previous quarter.
Communications Adjusted EBITDA excludes non-cash compensation expense and includes severance and restructuring charges related to integration activities of $7 million, $4 million and $5 million for the first quarter 2008, first quarter 2007 and fourth quarter 2007, respectively.
Other Businesses
The company's other businesses consist primarily of coal mining operations. During the first quarter 2008, the company recognized $6 million in Adjusted EBITDA from other businesses, compared to $2 million in the first quarter 2007 and zero in the fourth quarter 2007. The increase in Adjusted EBITDA was primarily the result of a buyout agreement with one of the coal customers, providing a one-time benefit of $5 million during the quarter.
Consolidated Cash Flow and Liquidity
During the first quarter 2008, Unlevered Cash Flow(1) was negative $21 million, versus negative $69 million in the first quarter 2007 and positive $146 million for the previous quarter. Consolidated Free Cash Flow for the first quarter 2008 was negative $160 million, versus negative $248 million for the first quarter 2007 and positive $41 million for the fourth quarter 2007.
"As expected, our cash flow losses widened during the quarter resulting from negative fluctuations in working capital due to annual bonus payments, declines in payables due to a decline in capital expenditures, prepayments on maintenance contracts, interest payments and property tax payments," said Patel. "For the remaining three quarters of the year, we expect to be free cash flow breakeven on a cumulative basis. Additionally, as we previously disclosed, we expect to be free cash flow positive for the full year 2009."
As of March 31, 2008, the company had cash and marketable securities of approximately $540 million.
Operational Update
The company made several improvements to the service activation processes during the quarter and installed more Core Network Services compared to the previous quarter.
The company also made progress in the implementation of its Project Unity initiative, which remains on schedule. By the end of 2008, Unity processes and systems are expected to support activation of approximately half of the company's order volume, and approximately two thirds of Core Network Services revenue. This increase in operational efficiency, combined with ongoing process improvements, is expected to further increase overall installation capacity over the coming quarters.
2008 Business Outlook
"Our sales funnel growth continues to point to strong sales momentum for the first half of the year," said Patel. "Sales and installs increased in the first quarter and we are aggressively hiring new salespeople to address the strong demand we are seeing in the market. Our installation capacity increased in the quarter, and we expect to continue to increase capacity throughout 2008. We are reaffirming our projection that Core Communications Services revenue will grow 8 to 13 percent for the full year 2008.
"In addition, we expect Consolidated Adjusted EBITDA to increase throughout 2008 as a result of Core Communications Services revenue growth, combined with improvements in gross margin and continued reductions in operating expenses. We are reiterating our 2008 Consolidated Adjusted EBITDA guidance of $950 million to $1.10 billion."
Summary
"Our sales and installation rates increased during the first quarter and we expect that positive trend to continue throughout 2008," said Crowe. "Our financial results for the first quarter and the overall healthy pricing and demand environment give us increasing confidence in our 2008 business outlook, and our ability to be free cash flow breakeven in aggregate for the remaining three quarters of 2008.
"Importantly, we believe our actions over the past six months have greatly improved our customers' experience and that our extensive end-to-end network, coupled with our broad service portfolio, makes us the alternative provider of choice for high bandwidth needs."
Conference Call and Web Site Information
Level 3 will hold a conference call to discuss the company's first quarter results at 10 a.m. EDT today. The call will be broadcast live on Level 3's Web site at http://www.level3.com/. If you are unable to join the call via the Web, you may access the call at 888-724-9520 or 913-312-1272 access code 7889479.
The call will be archived and available on Level 3's Web site at http://www.level3.com/q0108report.html, or you may access an audio replay until 12:00 a.m. MDT on Friday, May 2, 2008, by dialing 888-203-1112 or 719-457-0820 access code 7889479.
The company will post an investor presentation that summarizes the financial and operational progress for the first quarter 2008 on its Web site at http://www.level3.com/investor_relations/index.html.
About Level 3 Communications
Level 3 Communications, Inc. is a leading international provider of fiber-based communications services. Enterprise, content, wholesale and government customers rely on Level 3 to deliver services with an industry-leading combination of scalability and value over an end-to-end fiber network. Level 3 offers a portfolio of metro and long-haul services, including transport, data, Internet, content delivery and voice. For more information, visit http://www.level3.com/.
Level 3 Communications, Level 3, the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC and/or its affiliates in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service, product or company names recited herein are trademarks or service marks of their respective owners.
Forward-Looking Statement
Some of the statements made in this press release are forward looking in nature. These statements are based on management's current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Level 3's control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent Level 3 from achieving its stated goals include, but are not limited to the company's ability to: successfully integrate acquisitions; increase the volume of traffic on the network; defend intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of debt obligations. Additional information concerning these and other important factors can be found within Level 3's filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
1) Non-GAAP Metrics
Pursuant to Regulation G, the Company is hereby providing a reconciliation of non-GAAP financial metrics to the most directly comparable GAAP measure.
The Company provides projections that include non-GAAP metrics that the Company deems relevant to management and investors. These non-GAAP metrics are Consolidated Adjusted EBITDA, Communications Gross Margin, Communications Adjusted EBITDA Margin, Unlevered Cash Flow and Consolidated Free Cash Flow. Certain of the following reconciliations of these non-GAAP financial metrics to GAAP include forward-looking statements with respect to the information identified as a projection. Level 3 has made a number of assumptions in preparing our projections, including assumptions as to the components of financial metrics. These assumptions, including dollar amounts of the various components that comprise a financial metric, may or may not prove to be correct. We caution you that these forward-looking statements are only projections, which are subject to risks and uncertainties including technological uncertainty, financial variations, changes in the regulatory environment, industry growth and trend predictions. Please see the Company's Annual Report on Form 10-K for a description of these risks and uncertainties.
In order to provide projections with respect to non-GAAP metrics, we are required to indicate a range for GAAP measures that are components of the reconciliation of the non-GAAP metric. The provision of these ranges is in no way meant to indicate that the Company is explicitly or implicitly providing projections on those GAAP components of the reconciliation. In order to reconcile the non-GAAP financial metric to GAAP, the Company has to use ranges for the GAAP components that arithmetically add up to the non-GAAP financial metric. While the Company feels reasonably comfortable about the projections for its non-GAAP financial metrics, it fully expects that the ranges used for the GAAP components will vary from actual results. We will consider our projections of non-GAAP financial metrics to be accurate if the specific non-GAAP metric is met or exceeded, even if the GAAP components of the reconciliation are different from those provided in an earlier reconciliation.
Communications Gross Margin ($) is defined as communications revenue less communications cost of revenue from the consolidated condensed statements of operations.
Cost of Revenue for the communications business includes leased capacity, right-of-way costs, access charges and other third party circuit costs directly attributable to the network, as well as costs of assets sold. Cost of revenue also includes satellite transponder lease costs, package delivery costs and blank tape media costs attributable to the video business. Cost of revenue does not include depreciation and amortization.
Communications Gross Margin (%) is defined as communications gross margin ($) divided by communications revenue. Management believes that communications gross margin is a relevant metric to provide to investors, as it is a metric that management uses to measure the margin available to the Company after it pays third party network services costs; in essence, a measure of the efficiency of the Company's network.

Communications Gross Margin Q108 Q407 Q107
($ in millions)
Communications Revenue $1,066 $1,084 $1,037
Communications Cost of Revenue $459 $444 $450
Communications Gross Margin ($) $607 $640 $587
Communications Gross Margin (%) 56.9% 59.0% 56.6%
Consolidated Adjusted EBITDA is defined as net income/(loss) from the consolidated condensed statements of operations before income taxes, total other income/(expense), non-cash impairment charges, depreciation and amortization and non-cash stock compensation expense.
Communications Adjusted EBITDA Margin is defined as Communications Adjusted EBITDA divided by communications revenue.
Management believes that Consolidated Adjusted EBITDA and Communications Adjusted EBITDA Margin are relevant and useful metrics to provide to investors, as they are an important part of the Company's internal reporting and are key measures used by Management to evaluate profitability and operating performance of the Company and to make resource allocation decisions. Management believes such measures are especially important in a capital-intensive industry such as telecommunications. Management also uses Consolidated Adjusted EBITDA and Communications Adjusted EBITDA Margin to compare the Company's performance to that of its competitors. Management has adjusted consolidated EBITDA to eliminate certain non-cash and non-operating items in order to consistently measure from period to period its ability to fund capital expenditures, fund growth, service debt and determine bonuses. Consolidated Adjusted EBITDA excludes non-cash impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Consolidated Adjusted EBITDA also excludes interest income, interest expense, income taxes and gain (loss) on extinguishment of debt because these items are associated with the Company's capitalization and tax structures. Consolidated Adjusted EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the impact of capital investments which management believes should be evaluated through consolidated free cash flow. Consolidated Adjusted EBITDA excludes other, net because these items are not related to the primary operations of the Company.
There are limitations to using non-GAAP financial measures, including the difficulty associated with comparing companies that use similar performance measures whose calculations may differ from the Company's calculations. Additionally, this financial measure does not include certain significant items such as interest income, interest expense, income taxes, depreciation and amortization, non-cash impairment charges, non-cash stock compensation expense, gain/(loss) on early extinguishment of debt and net other income/(expense). Consolidated Adjusted EBITDA and Communications Adjusted EBITDA Margin should not be considered a substitute for other measures of financial performance reported in accordance with GAAP.

Consolidated Adjusted EBITDA
Three Months Ended March 31, 2008
($ in millions) Communications Other Consolidated
Net Earnings (Loss) ($187) $6 ($181)
Income Tax (Benefit) Expense $2 $1 $3
Total Other (Income) Expense $128 ($2) $126
Non-Cash Impairment Charge $-- $-- $--
Depreciation and Amortization Expense $239 $1 $240
Non-Cash Stock Compensation Expense $23 $-- $23
Consolidated Adjusted EBITDA $205 $6 $211
Consolidated Adjusted EBITDA
Three Months Ended December 31, 2007
($ in millions) Communications Other Consolidated
Net Earnings (Loss) ($89) ($2) ($91)
Income Tax (Benefit) Expense ($20) $-- ($20)
Total Other (Income) Expense $82 $-- $82
Non-Cash Impairment Charge $-- $-- $--
Depreciation and Amortization Expense $223 $2 $225
Non-Cash Stock Compensation Expense $50 $-- $50
Consolidated Adjusted EBITDA $246 $-- $246
Consolidated Adjusted EBITDA
Three Months Ended March 31, 2007
($ in millions) Communications Other Consolidated
Net Earnings (Loss) ($647) $-- ($647)
Income Tax (Benefit) Expense $1 $1 $2
Total Other (Income) Expense $570 $-- $570
Non-Cash Impairment Charge $-- $-- $--
Depreciation and Amortization Expense $220 $1 $221
Non-Cash Stock Compensation Expense $24 $-- $24
Consolidated Adjusted EBITDA $168 $2 $170
Communications Adjusted EBITDA Margin
($ in millions) Q108 Q407 Q107
Communications Revenue $1,066 $1,084 $1,037
Communications Adjusted EBITDA $205 $246 $168
Communications Adjusted EBITDA Margin 19.3% 22.7% 16.2%
Projected Consolidated Adjusted EBITDA Consolidated
Twelve Months Ended December 31, 2008 Range
($ in millions) Low High
Net Earnings (Loss) ($650) ($450)
Total Other (Income) Expense $540 $510
Depreciation and Amortization Expense $940 $900
Non-Cash Stock Compensation Expense $120 $140
Consolidated Adjusted EBITDA $950 $1,100
Unlevered Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures, and adding back cash interest paid, less interest income all as disclosed in the consolidated statements of cash flows or the consolidated condensed statements of operations. Management believes that Unlevered Cash Flow is a relevant metric to provide to investors, as it is an indicator of the operational strength and performance of the Company and, measured over time, provides management and investors with a sense of the growth pattern of the business.
There are material limitations to using Unlevered Cash Flow to measure the Company against some of its competitors as it excludes certain material items such as cash spent on merger and acquisition activity and interest expense. Level 3 does not currently pay a significant amount of income taxes due to net operating losses, and therefore, generates higher cash flow than a comparable business that does pay income taxes. Additionally, this financial measure is subject to variability quarter over quarter as a result of the timing of payments related to accounts receivable and accounts payable. Unlevered Cash Flow should not be used as a substitute for net change in cash and cash equivalents on the consolidated statements of cash flows.
Consolidated Free Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures as disclosed in the consolidated statements of cash flows. Management believes that Consolidated Free Cash Flow is a relevant metric to provide to investors, as it is an indicator of the Company's ability to generate cash to service its debt. Consolidated Free Cash Flow excludes cash used for acquisitions and principal repayments.
There are material limitations to using Consolidated Free Cash Flow to measure the Company against some of its competitors as Level 3 does not currently pay a significant amount of income taxes due to net operating losses, and therefore, generates higher cash flow than a comparable business that does pay income taxes. Additionally, this financial measure is subject to variability quarter over quarter as a result of the timing of payments related to accounts receivable and accounts payable. This financial measure should not be used as a substitute for net change in cash and cash equivalents on the consolidated statements of cash flows.

Unlevered Cash Flow and Consolidated Consolidated
Free Cash Flow Unlevered Free
Three Months Ended March 31, 2008 Cash Flow Cash Flow
($ in millions)
Net Cash Used in Operating Activities ($47) ($47)
Capital Expenditures ($113) ($113)
Cash Interest Paid $145 N/A
Interest Income ($6) N/A
Total ($21) ($160)
Unlevered Cash Flow and Consolidated Consolidated
Free Cash Flow Unlevered Free
Three Months Ended December 31, 2007 Cash Flow Cash Flow
($ in millions)
Net Cash Provided by Operating Activities $194 $194
Capital Expenditures ($153) ($153)
Cash Interest Paid $114 N/A
Interest Income ($9) N/A
Total $146 $41
Unlevered Cash Flow and Consolidated Consolidated
Free Cash Flow Unlevered Free
Three Months Ended March 31, 2007 Cash Flow Cash Flow
($ in millions)
Net Cash Used in Operating Activities ($93) ($93)
Capital Expenditures ($155) ($155)
Cash Interest Paid $200 N/A
Interest Income ($21) N/A
Total ($69) ($248)
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended
(dollars in millions, except per March 31, December 31, March 31,
share data) 2008 2007 2007
Revenue:
Communications $1,066 $1,084 $1,037
Other 26 16 19
Total Revenue 1,092 1,100 1,056
Costs and Expenses:
Cost of Revenue 475 459 466
Depreciation and Amortization 240 225 221
Selling, General and Administrative,
including non-cash compensation of $23,
$50, and $24, respectively 422 440 440
Restructuring Charges 7 5 4
Total Costs and Expenses 1,144 1,129 1,131
Operating Loss (52) (29) (75)
Other Income (Expense):
Interest Income 6 9 21
Interest Expense (135) (136) (165)
Loss on Extinguishment of Debt, net - - (427)
Other Income (Expense), net 3 45 1
Other Income (Expense) (126) (82) (570)
Loss Before Income Taxes (178) (111) (645)
Income Tax (Expense) Benefit (3) 20 (2)
Net Loss $(181) $(91) $(647)
Loss per Share (Basic and Diluted) $(0.12) $(0.06) $(0.44)
Weighted Average Shares Outstanding
(in thousands):
Basic and Diluted 1,541,872 1,536,736 1,469,163
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
March 31, December 31,
(dollars in millions) 2008 2007
Assets
Current Assets:
Cash and cash equivalents $533 $714
Marketable securities 7 9
Restricted securities 8 10
Accounts receivable, less allowances of $22
and $20, respectively 416 395
Other 110 88
Total Current Assets 1,074 1,216
Property, Plant and Equipment, net 6,616 6,669
Restricted Securities 119 117
Goodwill and Other Intangibles, net 2,079 2,101
Other Assets, net 131 142
$10,019 $10,245
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $346 $396
Current portion of long-term debt 7 32
Accrued payroll and employee benefits 73 97
Accrued interest 115 128
Deferred revenue 161 166
Other 129 139
Total Current Liabilities 831 958
Long-Term Debt, less current portion 6,831 6,832
Deferred Revenue 757 763
Other Liabilities 662 622
Stockholders' Equity 938 1,070
$10,019 $10,245
LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
March 31, December 31, March 31,
(dollars in millions) 2008 2007 2007
Cash Flows from Operating Activities:
Net loss $(181) $(91) $(647)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 240 225 221
Gain on sale of property, plant
and equipment, and other assets (1) (38) (1)
Loss on extinguishment of long-term
debt, net - - 427
Non-cash compensation expense
attributable to stock awards 23 50 24
Amortization of debt issuance costs 4 4 4
Accreted interest on discount debt - 1 9
Accrued interest on long-term debt (14) 17 (48)
Deferred income taxes (2) (23) -
Changes in working capital items
net of amounts acquired:
Receivables (20) 43 (35)
Other current assets (22) 19 (18)
Payables (52) 9 (13)
Deferred revenue (17) (7) 38
Other current liabilities (15) (22) (53)
Other 10 7 (1)
Net Cash Provided by (Used in)
Operating Activities (47) 194 (93)
Cash Flows from Investing Activities:
Capital expenditures (113) (153) (155)
Proceeds from sale of property, plant and
equipment and other assets 2 1 2
Proceeds from sale of discontinued
operations, net of cash sold - (2) -
Proceeds from sale and maturity of
marketable securities - 45 280
(Increase) decrease in restricted
cash and securities, net - (3) 16
Acquisitions, net of cash acquired,
and investments - (8) (626)
Net Cash Used in Investing Activities (111) (120) (483)
Cash Flows from Financing Activities:
Payments on and repurchases of long-term
debt, including current portion and
refinancing costs (26) (2) (2,611)
Long-term debt borrowings, net of
issuance costs - - 2,362
Proceeds from warrants and stock-based
equity plans - - 23
Net Cash Used in Financing Activities (26) (2) (226)
Effect of Exchange Rates on Cash 3 - 5
Net Change in Cash and Cash Equivalents (181) 72 (797)
Cash and Cash Equivalents at
Beginning of Period 714 642 1,681
Cash and Cash Equivalents at End of Period $533 $714 $884
Supplemental Disclosure of Cash Flow
Information:
Cash interest paid $145 $114 $200
Total Cash, Current Marketable Securities
and Noncurrent Marketable Securities $540 $723 $892

Avistar Communications Reports Financial Results for the First Quarter of 2008

Jim O'Neill — Mon, 21 Apr 2008 11:17:23 -0400

April 17, 2008 7:00 AM ET

Progress in cost alignment, and go-to-market and product strategies for 2008 growth offsetting patent challenge

SAN MATEO, Calif., April 17 /PRNewswire-FirstCall/ -- Avistar Communications Corporation AVSR, a video collaboration platform provider, today announced its financial results for the three months ended March 31, 2008.

Financial highlights for the quarter included:

-- Total revenue, prepared in accordance with GAAP, was $1.2 million, as compared to $1.9 million for the quarter ended December 31, 2007. -- Income from settlement and licensing activity, which management sees as a key component of the company's "top line" performance, was $1.1 million in both the first quarter of 2008 and the fourth quarter of 2007. -- Net income represented a loss of $3.8 million, or $0.11 per basic and diluted share. The fourth quarter of 2007 posted a similar result of a loss of $3.7 million, or $0.11 per basic and diluted share. -- The cash and cash equivalent balance at the end of the first quarter was $6.0 million.

"The first quarter of 2008 has been both formative and challenging for Avistar," said Simon Moss, Avistar's President and CEO. "Our first quarter financial results did not reflect the significant progress that has been achieved in our turn-around initiatives. A primary cause for this is simple to identify -- a reduction in revenue and licensing proceeds versus our expectations was caused by an external party's submittal of our entire U.S. patent portfolio into re-examination in the U.S. Patent and Trademark Office, as has been previously communicated. This single, but dramatic, action resulted in delays in our licensing activity, and caused disruption in our product sales channel. We've responded decisively with a set of cost management programs which will provide considerable relief beginning in the second quarter."

Mr. Moss continued, "This development happened at an especially critical time for the company, and as previously disclosed, has impacted a number of strategic and growth initiatives that we were enthusiastically pursuing. As we've previously and frequently stated, our business is "lumpy" and will continue to be as long as technology and licensing proceeds constitute a large portion of our "top line" mix. The process of patent re-examination will make our stated objective of achieving profitable growth in 2008 more challenging. However, Avistar has adapted quickly, and intends to maintain its key strategic goals-- including the delivery of world class product, and the establishment of effective partnerships with large technology companies, in addition to the achievement of positive revenue and licensing growth and profit trends."

Examples of our progress include:

-- Projected operating expense for 2008 will represent a 40% reduction relative to 2007, while delivery on client commitments and product innovations continue. -- We have recently signed important services and funded development agreements, including a project for the development of a potentially market-changing video-enabled supply chain community, linking buy-side and sell-side firms and corporate treasury departments. -- Continuing progress on technology licensing discussions with a large, global IT provider, as one avenue for Avistar to participate in the dynamic growth of the Unified Communications (UC) market, a market that is estimated by Wainhouse Research to reach $16.6 billion by 2012. -- And despite a significant downturn during the first quarter in Avistar's traditional and dominant vertical - that being Financial Services - we maintained historical levels of sales bookings, actually reflecting a modest increase relative to the fourth quarter of 2007, and added multiple new clients.

"We are clear, though, that the action against us represents a significant challenge," Mr. Moss continued, "Our team has acted decisively and quickly, and the company has shown itself to be impressively adaptive as we have set the stage for improvement in the second quarter. Beyond that, we are in a strong position to exploit opportunities that the first quarter identified, progressed or signed."

About Avistar Communications Corporation

Avistar creates technology that provides the missing critical element in unified communications: bringing people in organizations face-to-face through enhanced communications, for true collaboration anytime, anyplace. Its latest product, C3, draws on over a decade of market experience to deliver a single- click desktop or room-based videoconferencing and collaboration experience, that moves business communications into a new era. Available as a stand-alone solution, or integrated with existing unified communications software from other vendors, Avistar's C3 users gain instant messaging-style ability to initiate video communications and collaborate across and outside the enterprise. Patented bandwidth management enables thousands of users to access desktop videoconferencing, Voice over IP (VoIP), collaboration services, and streaming media without requiring substantial new network investment or impairing network performance.

Avistar's desktop videoconferencing and collaboration installations are among the world's largest, including more than 18,000 seats in more than 40 countries. Clients report as much as a 20 percent reduction in travel expense and carbon emissions, 3 percent increase in productivity, and immeasurably improved relationship building within their organizations, as well as with suppliers and customers. Avistar holds a portfolio of 80 patents for inventions in video and network technology and licenses IP to videoconferencing, rich-media services, public networking and related industries. Current licensees include Sony Corporation, Sony Computer Entertainment Inc., Polycom, Inc., Tandberg ASA, Radvision Ltd. and Emblaze-VCON.

For more information, visit www.avistar.com

Forward Looking Statements

Statements made in this news release that are not purely historical, including but not limited to statements regarding Avistar's projected operating expense for 2008, delivery on client commitments and product innovations, the project for the development of a video-enabled supply chain community, progress on technology licensing discussions, sales bookings and new clients, and an improvement in the second quarter of 2008 are forward- looking statements within the meaning of Section 21E of the Securities Exchange Act. Such statements are subject to risks and uncertainties that could cause actual results to differ materially, including such factors, among others, as Avistar's lengthy sales cycle, volatility associated with Avistar's sales and licensing activities, market acceptance of Avistar's products, increased competition in the market for unified communications, technical challenges associated with product development, ongoing technological developments and changing industry standards, and challenges associated with protecting and licensing Avistar's intellectual property.. As a result of these and other factors, Avistar expects to experience significant fluctuations in revenue and operating results, and there can be no assurance that Avistar will become or remain profitable in the future, or that its future results will meet expectations. These and other risk factors are discussed in Avistar's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Avistar disclaims any intent or obligation to update these forward-looking statements.

- financial statements follow - AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS for the three months ended March 31, 2008 and 2007 (in thousands, except per share data) Three Months Ended March 31, 2008 2007 (unaudited) Revenue: Product $249 $1,258 Licensing 154 232 Services, maintenance and support 748 902 Total revenue 1,151 2,392 Costs and expenses: Cost of product revenue* 359 729 Cost of services, maintenance and support revenue* 519 676 Income from settlement and patent licensing (1,057) (13,057) Research and development* 1,851 1,657 Sales and marketing* 1,329 1,489 General and administrative* 1,878 6,463 Total costs and expenses (income) 4,879 (2,043) (Loss) income from operations (3,728) 4,435 Other (expense) income: Interest income 46 113 Other expense, net (85) (55) Total other (expense) income, net (39) 58 Net (loss) income $(3,767) $4,493

Net (loss) income per share $(0.11) $0.13 Weighted average shares used in calculating Basic net (loss) income per share 34,532 34,101 Diluted net (loss) income per share 34,532 35,146

*Including stock based compensation of: Cost of products, services, maintenance and support revenue $7 $60 Research and development 63 204 Sales and marketing (36) 185 General and administrative 113 233 $147 $682 AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS as of March 31, 2008 and December 31, 2007 (in thousands, except share and per share data)

March 31, December 31, 2008 2007 (unaudited) Assets: Current assets: Cash and cash equivalents $5,975 $4,077 Marketable securities - 799 Total cash, cash equivalents and marketable securities 5,975 4,876 Accounts receivable, net of allowance for doubtful accounts of $34 and $24 at March 31, 2008 and December 31, 2007, respectively 1,570 1,385 Inventories 492 428 Deferred settlement and patent licensing costs 1,256 1,256 Prepaid expenses and other current assets 451 462 Total current assets 9,744 8,407 Property and equipment, net 671 767 Long-term deferred settlement and patent licensing costs 799 1,117 Other assets 288 286 Total assets $11,502 $10,577

Liabilities and Stockholders' Equity (Deficit): Current liabilities: Line of credit $4,000 $5,100 Accounts payable 962 1,287 Deferred income from settlement and patent licensing 5,520 5,520 Deferred services revenue and customer deposits 2,071 2,231 Accrued liabilities and other 1,901 1,451 Total current liabilities 14,454 15,589 Long-term liabilities: Long-term convertible debt 7,000 - Long-term deferred income from settlement and patent licensing and other 3,438 4,814 Total liabilities 24,892 20,403 Stockholders' equity (deficit): Common stock, $0.001 par value; 250,000,000 shares authorized at March 31, 2008 and December 31, 2007; 35,733,179 and 35,678,807 shares issued including treasury shares at March 31, 2008 and December 31, 2007, respectively 36 36 Less: treasury common stock, 1,182,875 shares at March 31, 2008 and December 31, 2007, respectively, at cost (53) (53) Additional paid-in-capital 96,128 95,925 Accumulated deficit (109,501) (105,734) Total stockholders' equity (deficit) (13,390) (9,826) Total liabilities and stockholders' equity (deficit) $11,502 $10,577

AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY

THREE MONTHS ENDED MARCH 31, 2008 FINANCIAL RESULTS RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES (in thousands) Reconciliation of Net (Loss) Income to Adjusted EBITDA Three Months Ended March 31, 2008 2007 (unaudited) Net (loss) income $(3,767) $4,493 Interest income (46) (113) Other (expense) income, net 85 55 Depreciation 131 50 EBITDA (3,597) 4,485 Stock-based compensation expense 147 682 Adjusted EBITDA $(3,450) $5,167

AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the three months ended March 31, 2008 and 2007 (in thousands) Three Months Ended March 31, 2008 2007 (unaudited) Cash Flows from Operating Activities: Net (loss) income $(3,767) $4,493 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation 131 50 Stock based compensation for options issued to consultants and employees 147 682 Provision for doubtful accounts 10 (3) Changes in assets and liabilities: Accounts receivable (195) 62 Inventories (64) 78 Prepaid expenses and other current assets 11 65 Deferred settlement and patent licensing costs 318 318 Other assets (2) (2) Accounts payable (325) (373) Deferred income from settlement and patent licensing and other (1,376) (1,375) Deferred services revenue and customer deposits (160) (574) Accrued liabilities and other 450 1,249 Net cash (used in) provided by operating activities (4,822) 4,670

Cash Flows from Investing Activities: Maturities of short-term marketable securities 799 - Purchase of property and equipment (35) (314) Net cash provided by (used in) investing activities 764 (314)

Cash Flows from Financing Activities: Line of credit payments (1,100) - Proceeds of debt issuance 7,000 - Net proceeds from stock option and stock purchase plans 56 129 Net cash provided by financing activities 5,956 129 Net increase in cash and cash equivalents 1,898 4,485 Cash and cash equivalents, beginning of year 4,077 7,854 Cash and cash equivalents, end of period $5,975 $12,339