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Internet America Reports Third Fiscal Quarter Results

Posted on: Friday, 11 May 2007, 15:00 CDT

HOUSTON, May 11 /PRNewswire-FirstCall/ -- Internet America, Inc. (BULLETIN BOARD: GEEK) today announced the third fiscal quarter ended March 31, 2007 net loss of $63,000, or $0.01 per share; revenue of $2.0 million and EBITDA (earnings before interest, taxes, depreciation and amortization) of $141,000. For the same quarter ended March 31, 2006, results were a net loss of $250,000, or $0.02 per share, revenues of $2.6 million and EBITDA of $(15,000).

On April 19, 2007 Internet America announced agreements with three Texas- based entities to acquire wireless Internet service customers and related operating assets. Billy Ladin, Chairman and Chief Executive Officer of Internet America, said, "These acquisitions demonstrate our commitment to adding to our wireless Internet customer base, both through acquisition of numerous regional operators and continuing organic growth. Our wireless customer count has increased to approximately 4,200 as of March 31, 2007 and with the consummation of these three acquisitions, will be between 6000 and 6500 subscribers. Our results are continually affected by ongoing declines in revenue of our non-wireless Internet service. The Company believes that the attrition in its dial-up subscriber base can be offset by wireless growth in the rural markets where broadband services, delivered over wireless networks, are needed and are not subject to the same levels of competition."

Ladin added, "Our continuing efforts in acquiring and integrating regional wireless Internet operators will allow us to stabilize and begin to regain revenue and profits. In addition to the rural market, Internet America anticipates participating in the development and deployment of wireless broadband in the metropolitan markets of Texas by selling its products over wireless systems which are being developed and constructed by cooperation between city and local governments and corporations. This approach will alleviate much of the capital requirement in major metropolitan markets while allowing Internet America to focus on its forte in consumer marketing."

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 be able to identify and negotiate acquisitions of wireless Internet customers and infrastructure on attractive terms; (4) we may not be able to integrate acquisitions of wireless Internet customers and infrastructure into existing operations to achieve operating efficiencies; (5) needed financing will not be available to us if and as needed; (6) we will not continue to achieve operating efficiencies in existing operations; (7) we will not be competitive with existing or new competitors; (8) we will not keep up with industry pricing or technological developments impacting the Internet; (9) 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; (10) service interruptions or impediments could harm our business; (11) we may not be able to protect our proprietary technologies or successfully defend infringement claims and may be required to enter into licensing arrangements on unfavorable terms; (12) 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; (13) government regulations could force us to change our business practices; (14) we may be unable to continually develop effective business systems, processes and personnel to support our business; (15) we may be unable to hire and retain qualified personnel, including our key executive officers; (16) provisions in our certificate of incorporation, bylaws and shareholder rights plan could limit our share price and delay a change of management; (17) our stock price has been volatile historically and may continue to be volatile; and (18) 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.

Internet America, Inc. (BULLETIN BOARD: GEEK) Unaudited Financial Summary (in thousands, except per share data and subscriber count) For the Three Months Ended For the Nine Months Ended 03/31/07 03/31/06 03/31/07 03/31/06 Subscribers 34,000 46,000 34,000 46,000 Internet services $1,972 $2,260 $6,057 $6,659 Other --- 294 --- 1,014 Total revenue 1,972 2,554 6,057 7,673 Connectivity and operations 1,039 1,654 3,068 4,748 Sales and marketing 61 35 155 199 General and administrative 731 880 2,308 2,447 EBITDA 141 (15) 526 279 Depreciation and amortization (204) (233) (617) (662) Interest expense, net --- (2) (9) (29) Net (loss) income $(63) $(250) $(100) $(412) Basic (loss) income per share $(0.01) $(0.02) $(0.01) $(0.03) Weighted average shares -- basic 12,509 12,495 12,509 12,462 Diluted (loss) income per share $(0.01) $(0.02) $(0.01) $(0.03) Weighted average shares -- diluted 12,509 12,495 12,509 12,462

Reconciliation of net income (a GAAP measure) to EBITDA (a Non-GAAP measure)

(in thousands): For the Three Months Ended For the Nine Months Ended 03/31/07 03/31/06 03/31/07 03/31/06 Net (loss) income $(63) $(250) $(100) $(412) Add: Depreciation and amortization 204 233 617 662 Interest expense, net --- 2 9 29 EBITDA $141 $(15) $526 $279 As of 03/31/07 6/30/06 Current assets $1,484 $1,638 Property and equipment, net 886 1,083 Other assets, net 4,610 4,812 Total assets $6,980 $7,533 Current liabilities $2,008 $2,334 Long-term liabilities 187 344 Total stockholders' equity 4,785 4,855 Total liabilities and stockholders' equity $6,980 $7,533

Internet America, Inc.

CONTACT: Internet America, Inc., +1-713-968-2500, orinvestor.relations@airmail.net

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

Source: PRNewswire-FirstCall

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