Skip to main content

Interland Reports Quarterly Financial Results: Quarter Highlighted by Improvement of Net Loss by $3.6 Million; Agreement with R.H. Donnelley; Web.com Acquisition; Addition of Top Management Talent

January 9, 2006

ATLANTA, Jan. 9, 2006 (PRIMEZONE) -- Interland (Nasdaq:INLD), a leading provider of websites and online services for small and medium-sized businesses (SMBs), today reported results for its fiscal quarter ended November 30, 2005.

The quarter was highlighted by the previously unannounced agreement with R.H. Donnelley to provide website and hosting services. Additional highlights of the quarter include the announcement to purchase Web.com and the appointments of Vikas Rijsinghani as Chief Technology Officer and Judy Hackett as Chief Marketing Officer.

Summary of Fiscal First Quarter 2006 Results:


 --  Total revenues for the quarter were $12.1 million, versus $20.6
     million in the fourth quarter. Substantially all of the revenue
     decline was due to the company's sale of its dedicated server
     assets.
 --  Net loss was $2.6 million, or negative $0.16 per share, an
     improvement of $3.6 million, versus a loss of $6.2 million, or
     negative $0.38 per share, in the previous quarter.
 --  Earnings before interest, taxes, depreciation, and amortization,
     ("EBITDA") (1) for the quarter was negative $1.3 million, an
     improvement of $0.8 million from negative $2.1 million, in the
     previous quarter. This included restructuring charges, net of one
     time gains, of roughly $0.8 million and stock-based compensation
     of approximately $0.4 million. 
 --  Cash and investment position, which includes cash and cash
     equivalents of $23.3 million and restricted investments of $9.4
     million, was $32.7 million compared to $26.5 million, an
     improvement of $6.2 million, in the previous quarter.

"Interland executed on its restructuring plan this quarter moving towards a more efficient enterprise poised for growth, highlighted by a $3.6 million improvement in net income," stated Jeff Stibel, President and CEO, Interland. "We made significant inroads in our sales channel and signed deals with R.H. Donnelley, one of the largest Yellow Pages publishers and local online search companies in the U.S., and Ambassador Yellow Pages, the fastest growing directory publisher in New York City. By acquiring Web.com, we now have a strong platform to build a powerful world-class brand. In addition to the tremendous branding opportunity, this acquisition adds revenues, significant direct navigation traffic, and an entrance into the consumer segment of the web hosting market."

"Interland was able to take advantage of significant cost savings during the quarter as a result of the sale of its dedicated server assets and the continued restructuring of the company," stated Gonzalo Troncoso, Executive Vice President and Chief Financial Officer. "I am encouraged with the financial results from the quarter and feel that the company is headed in a favorable direction. By focusing on cost savings and striking deals with leading industry players, Interland is positioning itself for the future and building a strong infrastructure for growth. The company continues to strengthen its team by hiring top talent and its business by focusing on what is core: provide high-quality and reliable websites and online services to the small and medium-sized business market."

For further information on the quarter, please refer to the company's Form 10-Q.

About Interland

Interland, Inc. (Nasdaq:INLD) is a leading provider of websites and online services focused on helping small and medium-sized businesses achieve success by providing the knowledge, services and tools to build, manage and promote businesses online. Interland offers a wide selection of online services, including standardized web hosting, ecommerce, application hosting, website development, online marketing and optimization tools. For more information about Interland, please visit www.interland.com or call at 800-336-9883.

Interland will host a conference call today to discuss its quarterly results at 9:30 AM ET (6:30 AM PT). A live webcast of the call can be accessed on the investors section of the company's website at www.interland.com. A replay of the call will be available on the site for seven days.

(1) EBITDA from continuing operations is a non-GAAP financial measure that is most directly comparable to the GAAP financial measure of Net Loss from continuing operations. Reconciliations of the non-GAAP measure to both Net Loss from continuing operations, as well as to Net Cash Used in Operating Activities follow.

Forward-looking Statements

Except for the historical information contained in this press release, statements in this press release may be considered forward-looking statements. These forward-looking statements include, but are not limited to: the ability to build a more efficient enterprise, grow the business, build a powerful world-class brand, add revenue, enter the consumer segment of the web hosting market and strike deals with leading industry players. Actual results may differ materially from those contained in the forward-looking statements in this press release. Factors which could affect these forward-looking statements, and Interland's business, include but are not limited to: the ability to operate within budgeted expense, the ability of the company to improve customer satisfaction, reduce churn, and expand its customer base as planned, our growing dependence on our reseller and other indirect sales channels, general economic conditions, the impact of competition, quarterly fluctuations in operating results, the loss of customers with failing businesses and customer churn in general, customer acceptance of new products and services, the possible lack of availability of our restricted investments, the retention of key employees, potential liabilities from the sale of our dedicated server assets, possible disruptions due to our data centers being maintained by third parties, higher than expected costs of litigation and the impact of liabilities that could carry over from Micron Electronics' discontinued operations. Certain of these and other risks associated with Interland's business are discussed in more detail in its public filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K, and its proxy statement. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not undertake to update its forward-looking statements.


 INTERLAND, INC.
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)

                                        For the Quarter Ended
                               --------------------------------------
                               11/30/05  11/30/04  11/30/05   8/31/05
                               --------  --------  --------  --------

 Revenues                       $12,148   $23,061   $12,148   $20,618

 Operating costs and expenses:
  Network operating costs,
   exclusive of depreciation
   shown below                    2,131     5,685     2,131     5,642
  Sales and marketing, exclusive
   of depreciation shown below    2,517     3,966     2,517     4,469
  Technical support, exclusive
   of depreciation shown below    1,803     3,813     1,803     2,612
  General and administrative,
   exclusive of depreciation
   shown below                    5,238     7,131     5,238     7,980
  Bad debt expense                  276       440       276       321
  Depreciation and amortization   1,431     5,877     1,431     4,370
  Restructuring costs             1,626        --     1,626       950
  Gain on sale of accounts           --        --        --       705
  Other expense (income), net      (165)      (13)     (165)       (4)
                                -------   -------   -------   -------
  Total operating costs
   and expenses                  14,857    26,899    14,857    27,045
                                -------   -------   -------   -------
 Operating loss                  (2,709)   (3,838)   (2,709)   (6,427)
 Interest income (expense), net     243        41       243       181
                                -------   -------   -------   -------
 Loss from continuing
  operations before income
  taxes                          (2,466)   (3,797)   (2,466)   (6,246)
 Income tax benefit (expense)        --        --        --       850
                                -------   -------   -------   -------
 Net loss from continuing
  operations                     (2,466)   (3,797)   (2,466)   (5,396)
 Income/(loss) from
  discontinued operations,
  net of tax                       (122)      601      (122)     (778)
                                -------   -------   -------   -------
 Net loss                       $(2,588)  $(3,196)  $(2,588)  $(6,174)
                                =======   =======   =======   =======
 Net income/(loss) per share,
  basic and diluted:
   Continuing operations        $ (0.15)  $ (0.24)  $ (0.15)  $ (0.33)
    Discontinued operations       (0.01)     0.04     (0.01)    (0.05)
                                -------   -------   -------   -------
                                $ (0.16)  $ (0.20)  $ (0.16)  $ (0.38)
                                =======   =======   =======   =======
 Number of shares used in
  per share calculation:
   Basic and diluted             16,283    16,016    16,283    16,032

 INTERLAND, INC.
 UNAUDITED CONSOLIDATED BALANCE SHEETS
 (In thousands)
                                                         As of
                                               -----------------------
                                               November 30,  August 31,
                                                   2005         2005
                                                ---------    ---------
 Assets
  Current assets
   Cash and cash equivalents                    $  23,268    $  16,891
   Trade receivables, net of the allowance
    of $34 and $381, respectively                   1,333        1,365
   Other receivables                                  710       11,502
   Prepaids and other current assets                2,056        2,698
   Restricted investments                             276          258
                                                ---------    ---------
  Total current assets                             27,643       32,714

   Restricted investments                           9,073        9,299
   Securities, held-to-maturity                        53           50
   Property plant and equipment, net                6,003        5,858
   Intangibles, net                                 2,176        3,038
   Other assets                                     5,600        5,600
                                                ---------    ---------
 Total assets                                   $  50,548    $  56,559
                                                =========    =========

 Liabilities and shareholders' equity
  Current liabilities
   Accounts payable                             $   2,518    $   2,355
   Accrued expenses                                 6,287       10,465
   Accrued restructuring charges                    5,425        4,717
   Current portion of long-term debt
    and capital lease obligations                     872          859
   Deferred revenue                                 4,275        4,542
                                                ---------    ---------
  Total current liabilities                        19,377       22,938

   Long-term debt and capital lease obligations     2,269        2,510
   Deferred revenue, long-term                        208          229
   Other liabilities                                  934          939
                                                ---------    ---------
 Total liabilities                                 22,788       26,616
                                                ---------    ---------
 Shareholders' equity
  Common stock, $.01 par value, authorized
   21 million shares, issued and outstanding
   16.4 and 16.1 million shares, respectively         164          164
  Additional capital                              324,581      323,498
  Warrants                                          2,128        2,806
  Note receivable from shareholder                   (735)        (735)
  Accumulated deficit                            (298,378)    (295,790)
                                                ---------    ---------
 Total shareholders' equity                        27,760       29,943
                                                ---------    ---------
 Total liabilities and shareholders' equity     $  50,548    $  56,559
                                                =========    =========

EBITDA is defined as net income (loss) less (i) provision for incometaxes, (ii) interest income or expense, and (iii) depreciation andamortization. EBITDA is not an indicator of financial performanceunder generally accepted accounting principles and may not becomparable to similarly captioned information reported by othercompanies. In addition, it does not replace net income (loss),operating income (loss), or cash flows from operating activities asindicators of operating performance. The effect of taxes and intereston Interland's net loss is not significant, but depreciation andamortization, primarily as a result of acquisitions, is significant.The Company believes that measuring the performance of the businesswithout regard to non-cash depreciation and amortization can maketrends in operating results more readily apparent, and when consideredwith other information, assist investors and other users of theCompany's financial statements who wish to evaluate the Company'sability to generate future cash flows.

The following table reflects the calculation of EBITDA from continuing operations and a reconciliation to net cash provided by (used in) operating activities:


                                       For the Quarter Ended
                             ----------------------------------------
                             11/30/05  11/30/04    11/30/05   8/31/05
                             --------  --------    --------   -------
 Net loss                    $(2,588)   $(3,196)   $(2,588)   $(6,174)
  Depreciation and
   amortization                1,431      5,877      1,431      4,370
  Interest expense (income)     (243)       (41)      (243)      (181)
  Income tax benefit              --         --         --       (850)
  Discontinued operations        122       (601)       122        778
                             --------  --------    --------   -------
 EBITDA                      $(1,278)  $  2,039    $(1,278)   $(2,057)
                             ========  ========    ========   =======
  Interest income/(expense)      243         41        243        181
  Provision for bad debts        276        440        276        321
  Gain on sale of accounts        --         --         --        705
  (Gain)/Loss on the sale
   of assets                      --        (13)        --         (4)
  Goodwill and asset impairment   --         --         --         --
  Other non-cash adjustments     385        158        385         --
  Restructuring charges        1,626         --      1,626        950
  Income tax (expense) benefit    --         --         --        850
  Changes in assets and
   liabilities:
    Cash received from sale
     of dedicated assets      11,267         --     11,267         --
   Receivables, net             (719)      (490)      (719)       548
   Other current assets          642        301        642       (534)
   Accounts payable, accrued
    expenses, and deferred
    revenue                   (4,326)    (2,583)    (4,326)    (5,320)
                             --------  --------    --------   -------
 Net cash provided by
  (used in) operating
  activities                 $ 8,116    $  (107)   $ 8,116    $(4,360)
                             =======    =======    =======    =======

CONTACT: Interland
Investor and Press Contact:
Peter Delgrosso
404-260-2500
pdelgrosso@interland.com