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Internet America Reports Fiscal Year End Results

Posted on: Friday, 6 October 2006, 18:00 CDT

HOUSTON, Oct. 6 /PRNewswire-FirstCall/ -- Internet America, Inc. (BULLETIN BOARD: GEEK) today announced results for its fiscal year ended June 30, 2006, including a net loss of $636,000 for the fiscal year. EBITDA (earnings before interest, taxes, depreciation and amortization) for the fiscal year was $256,000.

For the fiscal year, Internet America reported revenue of $9.9 million compared to $10.6 million a year ago. The Company recorded net loss of $636,000, or $0.05 per share, for the fiscal year ended June 30, 2006 compared to net income of $19,000, or $0.00 per share, a year ago. Internet America's subscriber count was approximately 37,400 at June 30, 2006.

Billy Ladin, Chairman and Chief Executive Officer of Internet America, said, "This fiscal year has been challenging, as we have repositioned Internet America, Inc. as a company providing wireless Internet access services to under-served and non-served markets in suburban and rural areas of Texas. Internet America's base of dial-up subscribers continued to decline, particularly in major metropolitan areas where fierce competition from broadband access service providers continues. However, the Company believes that the attrition in its dial-up subscriber base can be offset by growth in the rural markets where broadband services, delivered over wireless networks, are not subject to the same levels of competition. Our annual results reflect continuing declines in revenue of our non-wireless Internet service products, and increases in General and Administrative Expenses. We incurred severance costs and significant costs for redundant payroll and other moving expense during the relocation of our corporate headquarters from Dallas to Houston, Texas. We believe that most of these non recurring expenses are now behind us."

Ladin continued, "In addition to making three acquisitions in the suburban and rural markets near San Antonio and Houston, we deployed new infrastructure to enable additional growth within markets we presently serve. We believe that we are poised for additional growth as we have targeted areas where competition is less intense and demand for Internet connectivity may be under- served."

Glen Blackmon, President and Chief Operating Officer, said, "We have streamlined operations and resulting expenses through our reduction in staffing and telecommunications costs. Our optimization of network capacity and entering into more favorable agreements with telecommunications service providers is important for our future. The Company has experienced a decrease of $630,000 in connectivity costs in fiscal 2006. Additionally, our reduction-in-force carried out in January 2006 has resulted in an approximate 13% decrease in total salaries and wages, excluding the severance costs of approximately $83,000. We continue to evaluate overall profitability and focus on changes that will help to achieve our goals."

Internet America is a leading Internet service provider serving the Texas market. Based in Houston, Internet America offers businesses and individuals a wide array of Internet services including broadband Internet delivered wirelessly and over DSL, dedicated high-speed access, web hosting, and dial-up Internet access. Internet America provides customers a wide range of related value-added services, including Fax2email, online backup and storage solutions, parental control software, and global roaming solutions. Internet America focuses on the speed and quality of its Internet services and its commitment to providing excellent customer care. Additional information on Internet America is available on the Company's web site at http://www.internetamerica.com/ .

In this press release, the Company refers to a non-GAAP financial measure called EBITDA because of management's belief that this measure is a financial indicator of the Company's ability to internally generate operating funds. Management also believes that this non-GAAP financial measure is useful information to investors because it is widely used by professional research analysts in the valuation and investment recommendations of companies in the Company's peer group. EBITDA should not be considered an alternative to net income, as defined by GAAP.

This press release may contain forward-looking statements relating to future business expectations. These statements, specifically including management's beliefs, expectations and goals, are subject to many uncertainties that exist in Internet America's operations and business environment. Business plans may change, and actual results may differ materially as a result of a number of risk factors. These risks include, without limitation, that (1) we will not be able to increase our rural customer base at a rate that exceeds the loss of metropolitan area customers, (2) we will not improve EBITDA, profitability or product margins, (3) we will not continue to achieve operating efficiencies, (4) we will not be competitive with existing or new competitors, (5) we will not keep up with industry pricing or technological developments impacting the Internet, (6) needed financing will not be available to us if and as needed, (7) we will be adversely affected by dependence on network infrastructure, telecommunications providers and other vendors, by regulatory changes and by general economic and business conditions; (8) service interruptions or impediments could harm our business; (9) we may not be able to protect our proprietary technologies or successfully defend infringement claims and may be required to enter licensing arrangements on unfavorable terms; (10) we may be accused of infringing upon the intellectual property rights of third parties, which is costly to defend and could limit our ability to use certain technologies in the future; (11) government regulations could force us to change our business practices; (12) we may be unable to continually develop effective business systems, processes and personnel to support our business; (13) we may be unable to hire and retain qualified personnel, including our key executive officers; (14) provisions in our certificate of incorporation, bylaws and shareholder rights plan could limit our share price and delay a change of management; (15) our stock price has been volatile historically and may continue to be volatile; and (16) some other unforeseen difficulties may occur. This list is intended to identify certain of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere herein. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our other publicly filed reports and documents included in the Company's most recent SEC filings.

Internet America, Inc. Unaudited Financial Summary (in thousands, except per share data and subscriber count) For the Year Ended 6/30/06 6/30/05 Subscribers 37,400 53,000 Internet services $8,874 $10,063 Other 1,035 584 Total revenue 9,909 10,647 Connectivity and operations 6,080 6,518 Sales and marketing 229 607 General and administrative 3,344 2,886 EBITDA 256 636 Depreciation and amortization (859) (602) Interest (expense) income (33) (15) Net (loss) income $(636) $19 Basic (loss) income per share $(0.05) $0.00 Weighted average shares - basic 12,473,635 10,771,571 Diluted (loss) income per share $(0.05) $0.00 Weighted average shares - diluted 12,473,635 10,835,249 Reconciliation of net income (a GAAP measure) to EBITDA (a Non-GAAP measure) (in thousands): For the Year Ended 6/30/06 6/30/05 Net (loss) income $(636) $19 Add: Depreciation and amortization 859 602 Interest expense (income) 33 15 EBITDA $256 $636 For the Year Ended 6/30/06 6/30/05 Current assets $1,635 $2,766 Property and equipment, net 1,083 712 Other assets, net 4,812 4,905 Total assets $7,533 $8,383 Current liabilities $2,334 $2,661 Long-term liabilities 344 293 Total stockholders' equity 4,855 5,429 Total liabilities and stockholders' equity $7,533 $8,383

Internet America, Inc.

CONTACT: Internet America, Inc., +1-214-861-2550, orinvestor.relations@airmail.net

Web site: http://www.internetamerica.com/

Source: PRNewswire-FirstCall

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