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Press Release -- August 3rd, 2011
Source: Cbeyond
Tags: Earnings, Equipment, Ethernet

Cbeyond Reports Second Quarter 2011 Results

Reiterates Full Year Guidance

ATLANTA--(BUSINESS WIRE)--Cbeyond, Inc.(NASDAQ:CBEY, news, filings), ("Cbeyond"), a managed services provider that delivers integrated packages of IT and communications services, including virtual and dedicated servers and cloud PBX, to small businesses, today announced its results for the second quarter endedJune 30, 2011.

Recent financial and operating highlights include:

  • Second quarter 2011 total revenue of$120.6 million, up 7.9% over the second quarter of 2010;
  • Total adjusted EBITDA of$19.3 millionin the second quarter of 2011 (which includes$1.5 millionin expenses related to the Company's Ethernet conversion) compared with$18.4 millionin the second quarter of 2010, and$19.4 millionin the first quarter of 2011 (see page 9 for reconciliation to net income);
  • Net loss of($1.7) millionin the second quarter of 2011, compared with a net loss of($0.1) millionin the second quarter of 2010;
  • Total customers of 59,665 in Cbeyond's 14 Core Managed Services operating markets as of June 30, 2011, reflecting net customer additions of 1,111 in the second quarter of 2011, an increase of 11.5% in total customers year-over-year;
  • Average monthly revenue per Core Managed Services customer location (ARPU) of$660during the second quarter of 2011, compared with$668in the first quarter of 2011 and$708in the second quarter of 2010;
  • Monthly customer churn of 1.3% in the second quarter of 2011 as compared with 1.4% in the second quarter of 2010 and 1.3% in the first quarter of 2011 for the Company's Core Managed Services customers, and;
  • Cash, cash equivalents and marketable securities balance of$9.4 millionatJune 30, 2011, down from the balance of$17.3 millionatMarch 31, 2011.

Financial Overview and Key Operating Metrics

Financial and operating metrics, which include non-GAAP financial measures, for the three and six months endedJune 30, 2011, include:

    For the Three Months Ended June 30,
    2010   2011   Change   % Change
Selected Financial Data (dollars in thousands)                
Revenue   $ 111,753     $ 120,594     $ 8,841     7.9 %
Operating expenses   $ 111,605     $ 122,094     $ 10,489     9.4 %
Operating income (loss)   $ 148     $ (1,500 )   $ (1,648 )   N/M  
Net income (loss)   $ (98 )   $ (1,676 )   $ (1,578 )   N/M  
Capital expenditures   $ 15,168     $ 19,087     $ 3,919     25.8 %
                 
Key Operating Metrics and Non-GAAP Financial Measures                
Customers (Core Managed Services) at end of period     53,518       59,665       6,147     11.5 %
Net customer additions (Core Managed Services)     1,787       1,111       (676 )   (37.8 %)
Average monthly churn rate (Core Managed Services)     1.4 %     1.3 %     (0.1 %)   (7.1 %)
Average monthly revenue per Core Managed Services customer   $ 708     $ 660     $ (48 )   (6.8 %)
Adjusted EBITDA (in thousands)   $ 18,411     $ 19,341     $ 930     5.1 %
     
    For the Six Months Ended June 30,
    2010   2011   Change   % Change
Selected Financial Data (dollars in thousands)                
Revenue   $ 222,268     $ 239,572     $ 17,304     7.8 %
Operating expenses   $ 221,548     $ 242,605     $ 21,057     9.5 %
Operating income (loss)   $ 720     $ (3,033 )   $ (3,753 )   N/M  
Net income (loss)   $ 941     $ (1,817 )   $ (2,758 )   (293.1 %)
Capital expenditures   $ 28,395     $ 40,049     $ 11,654     41.0 %
                 
Key Operating Metrics and Non-GAAP Financial Measures                
Customers (Core Managed Services) at end of period     53,518       59,665       6,147     11.5 %
Net customer additions (Core Managed Services)     3,315       2,693       (622 )   (18.8 %)
Average monthly churn rate (Core Managed Services)     1.4 %     1.3 %     (0.1 %)   (7.1 %)
Average monthly revenue per Core Managed Services customer   $ 714     $ 665     $ (49 )   (6.9 %)
Adjusted EBITDA (in thousands)   $ 36,966     $ 38,727     $ 1,761     4.8 %
                               

Management Comments

"In the second quarter of 2011, we continued to make progress in the key areas of focus we outlined at the beginning of the year," saidJim Geiger, chief executive officer ofCbeyond, Inc."We have made investments in our future growth by strengthening our distribution channels, especially in the cloud services area, and by pursuing our ongoing Ethernet conversion initiative. Both our Core Managed Services and Cloud Services businesses demonstrated sequential revenue growth and adjusted EBITDA margins in line with our expectations."

Geiger added, "Our Ethernet conversion initiative is an especially significant part of our strategic plan. As ofJune 30, 2011, we have transitioned over 12% of our customer base onto the new technology platform. The ongoing transition provides us the opportunity to improve adjusted EBITDA and free cash flow in future periods, as well as enables higher bandwidth for our customers."

Second Quarter Financial and Business Summary

Revenues and ARPU

Cbeyondreported revenues of$120.6 millionfor the second quarter of 2011, an increase of 7.9% from the second quarter of 2010, including approximately$3.6 millionof revenues generated through theCloud Services Division, an 11.7% sequential quarterly increase. ARPU for the Core Managed Services was$660in the second quarter of 2011, compared with$668in the first quarter of 2011, and$708in the second quarter of 2010. The sequential decline in ARPU in the second quarter of 2011 was at a slower pace than recent quarters, consistent with management expectations.Cbeyondbelieves that ongoing ARPU pressure is related to the sluggish economic environment affecting small businesses and continued competitive pressures.

Cost of Service and Gross Margin

Cbeyond's gross margin was 66.7% in the second quarter of 2011, compared with 66.7% in the first quarter of 2011 and 68.4% in the second quarter of 2010. The first and second quarters of 2011 included elevated transitional costs related to the Ethernet initiative currently under way as T-1 circuits are converted to Ethernet circuits.

Adjusted EBITDA and Net Loss

Total adjusted EBITDA for the second quarter of 2011 was$19.3 million, as compared with total adjusted EBITDA of$18.4 millionin the second quarter of 2010.Cbeyondreported a net loss of($1.7) millionfor the second quarter of 2011 compared with a net loss of ($0.1) million for the second quarter of 2010. Adjusted EBITDA and net loss were adversely affected by results from early stage Core Managed Services Emerging Markets (see Selected Quarterly Financial Data and Operating Metrics, pages 7-9).

Cash and Cash Equivalents

Cash and cash equivalents amounted to$9.4 millionat the end of the second quarter of 2011, as compared with$17.3 millionat the end of the first quarter of 2011. Cash and cash equivalents decreased primarily due to purchases of stock made under the stock repurchase program initiated during the quarter and the prepayment of annual software maintenance from major vendors.

Capital Expenditures

Capital expenditures were$19.1 millionduring the second quarter of 2011, compared with$21.0 millionin the first quarter of 2011 and$15.2 millionin the second quarter of 2010. Capital expenditures decreased from the first quarter of 2011 primarily due to fewer purchases of customer premise equipment. Capital expenditures related to the Ethernet initiative in the second quarter of 2011 totaled$4.9 million, as compared with$8.7 millionin the first quarter of 2011, and cumulative capital expenditures relating to Ethernet totaled$19.3 millionas ofJune 30, 2011.

Business Outlook for 2011

Cbeyondreiterates the following guidance for 2011:

  • Revenue growth of 6% to 8%;
  • Adjusted EBITDA growth of 9% to 12%; and
  • Capital expenditures of$75 million to $80 million.

Share Repurchases

Cbeyond's Board of Directors authorized up to$15.0 millionin repurchases of shares ofCbeyond, Inc.common stock from time to time in open market purchases, privately negotiated transactions or otherwise. ThroughJune 30, 2011,Cbeyondhas spent$3.5 millionon share repurchases.

Conference Call

Cbeyondwill hold a conference call to discuss this press release Wednesday, August 3, 2011, at 5:00 p.m. EDT. A live broadcast of the conference call will be available on-line at www.cbeyond.net. To listen to the live call, please go to the web site at least 10 minutes early to register, download, and install any necessary audio software. The conference call will also be available by dialing (877) 303-9219 (for domestic U.S. callers) and (760) 666-3559 (for international callers). For those who cannot listen to the live broadcast, an on-line replay will be available shortly after the call and continue to be available for one year.

About Cbeyond

Cbeyond, Inc.(NASDAQ: CBEY) is a leading provider of IT and communications services to more than 59,000 small businesses throughout the United States. Serving growing entrepreneurs, Cbeyondoffers more than 30 productivity-enhancing applications including local and long-distance voice, broadband Internet, mobile, BlackBerry®, voicemail, email, Web hosting, fax-to-email, data backup, file-sharing, virtual private networking and cloud services. In addition, Cbeyond's new Cloud Services division offers virtual and dedicated services and cloud PBX to small businesses worldwide. The Cloud Services division won Microsoft's Hosting Partner of the Year for 2009 and 2010 in connection with Microsoft's Hyper-V virtual server product. Winning over 50 awards for product innovation, growth and providing a quality customer experience, Cbeyond continues to focus on helping small businesses succeed and grow through high-performance technology, superior services and world-class support. For more information on Cbeyond, visit www.cbeyond.net and follow Cbeyond on Twitter: www.Twitter.com/Cbeyondinc.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.Such statements include, but are not limited to, statements identified by words such as "expectations," "guidance," "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "projects" and similar expressions.Such statements are based upon the current beliefs and expectations of Cbeyond's management and are subject to significant risks and uncertainties.Actual results may differ from those set forth in the forward-looking statements.Factors that might cause future results to differ include, but are not limited to, the following: finalization of operating data, the significant reduction in economic activity, which particularly affects our target market of small businesses; the risk that we may be unable to continue to experience revenue growth at historical or anticipated levels; changes in business climate or other factors affecting our customer base; the risk of unexpected increases in customer churn levels; changes in federal or state regulation or decisions by regulatory bodies that affect Cbeyond; periods of economic downturn or unusual volatility in the capital markets or other negative macroeconomic conditions that could harm our business, including our access to capital markets and the impact on certain of our customers to meet their payment obligations; the timing of the initiation, progress or cancellation of significant contracts or arrangements; the mix and timing of services sold in a particular period; our ability to recruit and maintain experienced management and personnel; rapid technological change and the timing and amount of start-up costs incurred in connection with the introduction of new services or the entrance into new markets; our ability to maintain or attract sufficient customers in existing or new markets; our ability to respond to increasing competition; our ability to manage the growth of our operations; changes in estimates of taxable income or utilization of deferred tax assets which could significantly affect the Company's effective tax rate; pending regulatory action relating to our compliance with customer proprietary network information; the risk that the anticipated benefits, growth prospects and synergies expected from our acquisitions may not be fully realized or may take longer to realize than expected; the possibility that economic benefits of future opportunities in an emerging industry may never materialize, including unexpected variations in market growth and demand for the acquired products and technologies; delays, disruptions, costs and challenges associated with integrating acquired companies into our existing business, including changing relationships with customers, employees or suppliers; unfamiliarity with the economic characteristics of new geographic markets; ongoing personnel and logistical challenges of managing a larger organization; our ability to retain and motivate key employees from theacquired companies;external events outside of our control, including extreme weather, natural disasters, pandemics or terrorist attacks that could adversely affect our target markets; and general economic and business conditions.You are advised to consult any further disclosures we make on related subjects in the reports we file with the SEC, including the "Risk Factors" in our most recent annual report on Form 10-K, together with updates that may occur in our quarterly reports on Form 10-Q and Current Reports on Form 8-K.Such disclosure covers certain risks, uncertainties and possibly inaccurate assumptions that could cause our actual results to differ materially from expected and historical results.We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.

Key Operating Metrics and Non-GAAP Financial Measures

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

Adjusted EBITDA is not a substitute for operating income, net income, or cash flow from operating activities as determined in accordance with GAAP, as a measure of performance or liquidity. The Company defines adjusted EBITDA as net income before interest, income taxes, depreciation and amortization expenses, excluding, when applicable, non-cash share-based compensation, public offering expenses, or acquisition-related transaction costs, purchase accounting adjustments, loss on disposal of property and equipment and other non-operating income or expense. Information relating to total adjusted EBITDA is provided so that investors have the same data that management employs in assessing the overall operation of the Company's business.

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

                 
CBEYOND, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
                 
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2010   2011   2010   2011
                 
Revenue:                
Customer revenue   $ 109,922     $ 119,039     $ 218,546     $ 236,515  
Terminating access revenue     1,831       1,555       3,722       3,057  
Total revenue     111,753       120,594       222,268       239,572  
                 
Operating expenses:                
Cost of revenue     35,303       40,208       71,692       79,804  
Selling, general and administrative     61,971       64,390       121,243       128,736  
Transaction costs     -       -       -       107  
Depreciation and amortization     14,331       17,496       28,613       33,958  
Total operating expenses     111,605       122,094       221,548       242,605  
                 
Operating income (loss)     148       (1,500 )     720       (3,033 )
                 
Other income (expense):                
Interest income     1       -       1       -  
Interest expense     (64 )     (127 )     (109 )     (227 )
Other income (expense), net     117       -       1,654       1,210  
Total other income (expense)     54       (127 )     1,546       983  
                 
Income (loss) before income taxes     202       (1,627 )     2,266       (2,050 )
                 
Income tax (expense) benefit     (300 )     (49 )     (1,325 )     233  
                 
Net income (loss)   $ (98 )   $ (1,676 )   $ 941     $ (1,817 )
                 
Earnings per common share                
Basic   $ -     $ (0.06 )   $ 0.03     $ (0.06 )
Diluted   $ -     $ (0.06 )   $ 0.03     $ (0.06 )
                 
Weighted average number of common shares outstanding                
Basic     29,326       29,951       29,213       29,874  
Diluted     29,326       29,951       30,227       29,874  
         
CBEYOND, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
         
         
    December 31,   June 30,
    2010   2011
ASSETS        
Current assets        
Cash and cash equivalents   $ 26,373     $ 9,426  
Accounts receivable, gross     27,238       26,830  
Less: Allowance for doubtful accounts     (2,354 )     (2,084 )
Accounts receivable, net     24,884       24,746  
Other assets     13,552       14,671  
Total current assets     64,809       48,843  
         
Property and equipment, gross     421,173       453,777  
Less: Accumulated depreciation and amortization     (270,482 )     (296,347 )
Property and equipment, net     150,691       157,430  
Other assets     42,467       41,821  
Total assets   $ 257,967     $ 248,094  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities        
Accounts payable   $ 15,193     $ 11,159  
Other current liabilities     53,184       54,490  
Total current liabilities     68,377       65,649  
         
Non-current liabilities     16,469       9,911  
Stockholders' equity        
Common stock     296       298  
Additional paid-in capital     299,501       304,231  
Accumulated deficit     (126,676 )     (131,995 )
Total stockholders' equity     173,121       172,534  
Total liabilities and stockholders' equity   $ 257,967     $ 248,094  
   
CBEYOND, INC. AND SUBSIDIARY
Selected Quarterly Financial Data and Operating Metrics
(Dollars in thousands, except for Other Operating Data)
(Unaudited)
                     
                     
    Jun. 30   Sept. 30   Dec. 31   Mar. 31   Jun. 30
    2010   2010   2010   2011   2011
Revenues                    
Core Managed Services (Established Markets)   $ 104,204     $ 104,734     $ 104,558     $ 104,733     $ 105,180  
Core Managed Services (Emerging Markets)                    
Miami     3,970       4,360       4,672       5,048       5,306  
Minneapolis     1,702       1,863       1,949       2,043       2,097  
Greater Washington, D.C. Area     1,424       1,722       1,970       2,147       2,259  
Seattle     453       769       1,232       1,645       1,953  
Boston     -       8       76       162       260  
Core Managed Services (Emerging Markets)     7,549       8,722       9,899       11,045       11,875  
Total Core Managed Services     111,753       113,456       114,457       115,778       117,055  
Cloud Services     -       -       1,791       3,234       3,612  
Eliminations     -       -       (7 )     (34 )     (73 )
Total Revenues   $ 111,753     $ 113,456     $ 116,241     $ 118,978     $ 120,594  
                     
                     
Adjusted EBITDA                    
Core Managed Services (Established Markets)   $ 47,970     $ 47,651     $ 46,007     $ 47,029     $ 46,665  
Core Managed Services (Emerging Markets)                    
Miami     (184 )     (151 )     263       444       471  
Minneapolis     (259 )     (166 )     (126 )     119       65  
Greater Washington, D.C. Area     (1,162 )     (1,008 )     (708 )     (316 )     (238 )
Seattle     (1,368 )     (1,333 )     (1,394 )     (1,078 )     (764 )
Boston     (509 )     (994 )     (1,186 )     (977 )     (1,083 )
Core Managed Services (Emerging Markets)     (3,482 )     (3,652 )     (3,151 )     (1,808 )     (1,549 )
Total Core Managed Services     44,488       43,999       42,856       45,221       45,116  
Cloud Services     -       -       569       852       616  
Corporate     (26,077 )     (26,039 )     (25,416 )     (26,687 )     (26,391 )
Total Adjusted EBITDA   $ 18,411     $ 17,960     $ 18,009     $ 19,386     $ 19,341  
                     
                     
Adjusted EBITDA Margin (As % of Market-Level Core Managed Services Revenue)
Core Managed Services (Established Markets)     46.0 %     45.5 %     44.0 %     44.9 %     44.4 %
Core Managed Services (Emerging Markets)                    
Miami     (4.6 %)     (3.5 %)     5.6 %     8.8 %     8.9 %
Minneapolis     (15.2 %)     (8.9 %)     (6.5 %)     5.8 %     3.1 %
Greater Washington, D.C. Area     (81.6 %)     (58.5 %)     (35.9 %)     (14.7 %)     (10.5 %)
Seattle     N/M       (173.3 %)     (113.1 %)     (65.5 %)     (39.1 %)
Boston     N/M       N/M       N/M       N/M       N/M  
Core Managed Services (Emerging Markets)     (46.1 %)     (41.9 %)     (31.8 %)     (16.4 %)     (13.0 %)
Total Core Managed Services     39.8 %     38.8 %     37.4 %     39.1 %     38.5 %
                     
Adjusted EBITDA margin (As % of Cloud Services Revenue)
Cloud Services     N/M       N/M       31.8 %     26.3 %     17.1 %
                     
Adjusted EBITDA margin (As % of Total Revenue)                    
Corporate     (23.3 %)     (23.0 %)     (21.9 %)     (22.4 %)     (21.9 %)
Total Adjusted EBITDA     16.5 %     15.8 %     15.5 %     16.3 %     16.0 %
                     
                     
    Jun. 30   Sept. 30   Dec. 31   Mar. 31   Jun. 30
    2010   2010   2010   2011   2011
Operating Income (Loss)                    
Core Managed Services (Established Markets)   $ 41,517     $ 41,092     $ 39,421     $ 40,550     $ 39,579  
Core Managed Services (Emerging Markets)                    
Miami     (602 )     (576 )     (190 )     (32 )     (59 )
Minneapolis     (518 )     (431 )     (401 )     (156 )     (228 )
Greater Washington, D.C. Area     (1,519 )     (1,368 )     (1,104 )     (698 )     (651 )
Seattle     (1,551 )     (1,549 )     (1,696 )     (1,364 )     (1,101 )
Boston     (516 )     (1,042 )     (1,317 )     (1,105 )     (1,282 )
Core Managed Services (Emerging Markets)     (4,706 )     (4,966 )     (4,708 )     (3,355 )     (3,321 )
Total Core Managed Services     36,811       36,126       34,713       37,195       36,258  
Cloud Services     -       -       (158 )     (63 )     (254 )
Corporate     (36,663 )     (36,897 )     (37,432 )     (38,665 )     (37,504 )
Total Operating Income (Loss)   $ 148     $ (771 )   $ (2,877 )   $ (1,533 )   $ (1,500 )
                     
                     
Capital Expenditures                    
Core Managed Services (Established Markets)   $ 3,719     $ 7,045     $ 7,144     $ 7,825     $ 7,332  
Core Managed Services (Emerging Markets)                    
Miami     306       484       533       736       402  
Minneapolis     204       253       145       136       107  
Greater Washington, D.C. Area     129       233       341       240       211  
Seattle     199       213       636       301       195  
Boston     1,038       39       236       108       10  
Core Managed Services (Emerging Markets)     1,876       1,222       1,891       1,521       925  
Total Core Managed Services     5,595       8,267       9,035       9,346       8,257  
Cloud Services     -       -       413       557       1,482  
Corporate     9,573       7,777       8,945       11,059       9,348  
Total Capital Expenditures   $ 15,168     $ 16,044     $ 18,393     $ 20,962     $ 19,087  
                     
Other Operating Data                    
Customers (Core Managed Services) (At Period End)     53,518       55,240       56,972       58,554       59,665  
Net Customer Additions (Core Managed Services)     1,787       1,722       1,732       1,582       1,111  
Average Monthly Churn Rate (Core Managed Services) (1)     1.4 %     1.4 %     1.3 %     1.3 %     1.3 %
Average Monthly Revenue Per Core Managed Services Customer (2)   $ 708     $ 695     $ 680     $ 668     $ 660  
                                         
(1) Calculated for each period as the average of monthly churn, which is defined for a given month as the number of customer locations disconnected in that month divided by the number of customer locations on the Company's network at the beginning of that month.
 
(2) Calculated as the revenue for a period divided by the average of the number of customer locations at the beginning of the period and the number of customer locations at the end of the period, divided by the number of months in the period.
 
CBEYOND, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
(In thousands)
(Unaudited)
                     
                     
    Three Months Ended
    Jun. 30   Sept. 30   Dec. 31   Mar. 31   Jun. 30
    2010   2010   2010   2011   2011
                     
Reconciliation of Adjusted EBITDA to Net income:                  
Total Adjusted EBITDA for reportable segments   $ 18,411     $ 17,960     $ 18,009     $ 19,386     $ 19,341  
Depreciation and amortization     (14,331 )     (14,506 )     (16,185 )     (16,462 )     (17,496 )
Non-cash share-based compensation     (3,932 )     (4,042 )     (3,916 )     (4,286 )     (3,345 )
MaximumASP purchase accounting adjustment     -       -       (213 )     (64 )     -  
Transaction costs     -       (183 )     (572 )     (107 )     -  
Interest income     1       -       1       -       -  
Interest expense     (64 )     (85 )     (87 )     (100 )     (127 )
Other income (expense), net     117       105       108       1,210       -  
Income tax (expense) benefit     (300 )     143       868       282       (49 )
Net income (loss)   $ (98 )   $ (608 )   $ (1,987 )   $ (141 )   $ (1,676 )
                     
                     
    Six Months Ended            
    Jun. 30,            
    2010   2011            
                     
Reconciliation of Adjusted EBITDA to Net income:                  
Total Adjusted EBITDA for reportable segments   $ 36,966     $ 38,727              
Depreciation and amortization     (28,613 )     (33,958 )            
Non-cash share-based compensation     (7,633 )     (7,631 )            
MaximumASP purchase accounting adjustment     -       (64 )            
Transaction costs     -       (107 )            
Interest income     1       -              
Interest expense     (109 )     (227 )            
Other income (expense), net     1,654       1,210              
Income tax (expense) benefit     (1,325 )     233              
Net income (loss)   $ 941     $ (1,817 )            
                     
                     
CBEYOND, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
(In thousands)
(Unaudited)
                     
                     
    Three Months Ended
    Jun. 30   Sept. 30   Dec. 31   Mar. 31   Jun. 30
    2010   2010   2010   2011   2011
                     
Reconciliation of Core Managed Services ARPU:                  
Total revenue   $ 111,753     $ 113,456     $ 116,241     $ 118,978     $ 120,594  
Cloud Services revenue     -       -       (1,791 )     (3,234 )     (3,612 )
Intersegment eliminations     -       -       7       34       73  
Core Managed Services net revenue (A)   $ 111,753     $ 113,456     $ 114,457     $ 115,778     $ 117,055  
                     
Average Core Managed Services customers (B)     52,625       54,379       56,106       57,763       59,110  
                     
Core Managed Services ARPU (A/B)   $ 708     $ 695     $ 680     $ 668     $ 660  
                     
                     
    Six Months Ended            
    Jun. 30,            
    2010   2011            
                     
Reconciliation of Core Managed Services ARPU:                  
Total revenue   $ 222,268     $ 239,572              
Cloud Services revenue     -       (6,846 )            
Intersegment eliminations     -       107              
Core Managed Services net revenue (A)   $ 222,268     $ 232,833              
                     
Average Core Managed Services customers (B)     51,861       58,319              
                     
Core Managed Services ARPU (A/B)   $ 714     $ 665              

CBEY-F CBEY-G

Cbeyond, Inc.
Kurt Abkemeier, 678-370-2887
Vice President, Finance and Treasurer

Source:Cbeyond, Inc.

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