SOURCE: KeyOn Communications

May 15, 2008 16:00 ET

KeyOn 2008 First Quarter Revenue Grows 37% to Record Levels

Subscribers at Record Levels; Now Surpass 17,000

OMAHA, NE--(Marketwire - May 15, 2008) - KeyOn Communications Holdings, Inc. (OTCBB: KEYO), the second largest provider of wireless broadband, satellite and voice over Internet protocol (VoIP) services in the United States, reported record revenues for the first quarter ended March 31, 2008.

Recent Highlights:

--  Continued strong revenue growth with revenue up 37% over same quarter
    last year
--  Organic customer growth rate increased by 133% over the same period
    last year
--  Customer churn rate per month reduced to 1.49% for the quarter
--  Revenue exceeded $2.0 million for the quarter
--  Adjusted EBITDA loss reduced by 156% over the 4th quarter of 2007
--  Operating loss reduced by 44% from the 4th quarter of 2007
--  Net loss reduced by 42% from the 4th quarter of 2007
--  Executed agreement with Airspan to deploy WiMAX at 3.65 GHz spectrum
    band
    

Commenting on the announcement, Jonathan Snyder, President and CEO of KeyOn Communications, stated, "We continue to execute on our fundamental strategy of accretive and additive growth through acquisitions and organic subscriber increases. During the quarter we surpassed the 17,000 subscriber milestone, ending the quarter with 17,403 subscribers, further solidifying our position as the second largest wireless broadband company in the United States behind only Clearwire Corporation."

"Our revenues grew at a robust 37% compared to the Q1, 2007, demonstrating the effectiveness of combining acquisitions and overall subscriber growth. As a result of our recent agreement with DISH Network, we received positive contribution from our new satellite video service offerings and expect this and other revenue-generating initiatives, such as an equipment protection program, to become more meaningful in future quarters."

Mr. Snyder continued, "While we have been driving top-line growth, we have also been focused on generating positive cash flow. We are pleased to report that in the first quarter of this year, we made great strides toward our goal of achieving operational profitability by Q2, 2008, while continuing subscriber growth and retention. Our operating loss and negative EBITDA, both excluding stock-based compensation, were reduced by 44% and 156% respectively, in the first quarter as compared to the fourth quarter of 2007 as we realized continued efficiencies from our operating leverage. Our EBITDA loss was trimmed to $563,100 which included one-time charges and inflated network operating costs due to an unresolved vendor billing dispute. Excluding those items, we would have been extremely close to EBITDA breakeven in the first quarter."

"We are also seeking to increase shareholder value by offering advanced data services, such as WiMAX, through our partnership with Airspan Networks. Offering new services that include mobility and faster broadband access into our existing markets allow us to expand the breadth of our service offering while leveraging our embedded subscriber base and brand across our existing markets."

2008 First Quarter Consolidated Results

For the first quarter ended March 31, 2008, the Company reported record revenue of $2.0 million, an increase of 37% as compared to $1.5 million for the first quarter ended March 31, 2007. The Company's GAAP financials incorporate revenue and marketing expense, both net of promotions and/or service credits. Adjusting for these items, restated revenue for the quarter ended March 31, 2008 was $2.1 million.

The operating loss, which included a non-cash stock-based compensation expense of $1.1 million, was $2.4 million for the quarter ended March 31, 2008, as compared to an operating loss of $700,000 for the quarter ended March 31, 2007. The Company was not a public company in the first quarter of 2007 and therefore did not incur public company related costs. In addition, KeyOn has since hired additional personnel, including senior executives, in furtherance of its acquisition strategy, public status and the associated growth of the business. Finally, the operating expenses for the first quarter of 2008 include certain one-time expenses and over accrued network operating costs totaling approximately $300,000. The company expects these items will be reversed in the second quarter of 2008.

The Company reported a net loss of $2.6 million, or $0.31 loss per common share, for the quarter ended March 31, 2008, compared to a net loss of $0.9 million, or $0.17 loss per common share, for the quarter ended March 31, 2007.

Adjusted EBITDA for the quarter ended March 31, 2008 was $(563,100), compared to $(162,044) in the prior year. The Adjusted EBITDA excludes approximately $1.1 million of stock-based compensation expense, but includes approximately $300,000 of one-time professional fees and over accrued expenses awaiting a credit.

Annette Eggert, KeyOn's CFO, stated, "We are focused on creating additional operating leverage by overlaying our existing platform and processes on those of the acquired companies. We believe our strategy of combining inorganic growth through acquisitions with organic growth is an extremely cost effective means to accelerate subscriber growth, without a significant outlay of cash."

Outlook

Jon Snyder continued, "Within the past three years we have solidified our leadership position and brand in our target markets, having successfully acquired and integrated four wireless broadband companies with a total of over 10,000 subscribers, while continuing to experience impressive organic subscriber growth. We fully expect to continue our subscriber growth at our historical levels by augmenting the organic subscriber growth in our current footprint with additional planned acquisitions. Our goal is to become the dominant provider of integrated communications services in the markets we serve."

KEYON COMMUNICATIONS HOLDINGS INC. AND RELATED ENTITIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

                                         For the Three Months Ended
                                  ----------------------------------------
                                    3/31/2008     3/31/2007    12/31/2007
                                  ------------  ------------  ------------
TOTAL REVENUES:                   $  2,046,031  $  1,496,375  $  1,968,457
                                  ------------  ------------  ------------

OPERATING COSTS AND EXPENSES:
 Payroll, bonuses and taxes          1,007,688       635,878     1,098,711
 Depreciation and amortization         710,380       535,355       710,260
 Other general and administrative
  expense                              366,183       538,822       443,345
 Network operating costs               743,398       354,504       861,291
 Marketing and advertising             164,334        60,741       161,329
 Installation expense                  121,886        40,340       141,752
 Professional fees                     188,837        23,549       827,578
 Stock based compensation            1,122,386         4,585       267,002
 Cost of DISH inventory                 16,805             -             -
                                  ------------  ------------  ------------

   Total operating costs and
    expenses                         4,441,897     2,198,359     4,511,268
                                  ------------  ------------  ------------

LOSS FROM OPERATIONS                (2,395,866)     (701,984)   (2,542,811)

OTHER INCOME (EXPENSE):               (175,676)     (159,838)     (213,578)
                                  ------------  ------------  ------------

NET LOSS                          $ (2,571,633) $   (857,237) $ (2,756,389)
                                  ============  ============  ============

Net loss per common share--basic
 and diluted                      $      (0.31) $      (0.17) $      (0.34)
                                  ============  ============  ============

Reconciliation of Net Loss to
 EBITDA
  Loss from Operations            $ (2,395,866) $   (701,984) $ (2,542,811)

  Depreciation and Amortization        710,380       535,355       710,260
  Stock Based Compensation           1,122,386         4,585       267,002
                                  ------------  ------------  ------------

 Adjusted EBITDA                  $   (563,100) $   (162,044) $ (1,565,549)
                                  ============  ============  ============

About KeyOn Communications Holdings, Inc.

KeyOn Communications Holdings, Inc. (OTCBB: KEYO) is the second largest provider of wireless broadband, satellite and voice over Internet protocol (VoIP) services in the United, primarily targeting underserved markets with populations generally less than 250,000. KeyOn offers broadband services with voice over Internet protocol (VoIP) and satellite video services to both residential and business subscribers across 11 Western and Midwestern states. Through a combination of organic growth and acquisitions, KeyOn has expanded its network footprint to reach approximately 50,000 square miles and cover nearly 2,500,000 people as well as small-to-medium businesses. With its successful track record of acquiring companies and growing its core subscriber base, KeyOn has established itself as the second largest wireless broadband company in the United States. Management intends to drive subscriber growth through additional acquisitions as well as organic growth across the company's expanding footprint by offering bundled services including broadband, video and VoIP and related valuable services such as the Bullseye Club. The company also intends to opportunistically build mobile and/or nomadic WiMAX networks in and around its market footprint. More information on KeyOn can be found at http://www.keyon.com.

Non-GAAP Measures

This press release includes disclosure regarding "Adjusted EBITDA" and "Churn" as measurements used by KeyOn Communications to monitor business performance and are not recognized measures under GAAP (generally accepted accounting principles). Accordingly, investors are cautioned in using or relying upon these measures as alternatives to recognized GAAP measures.

"Adjusted EBITDA" is defined as earnings or loss from operations adjusted for depreciation, amortization, and non-cash stock based compensation expenses. Adjusted EBITDA should not be construed as an alternative to operating loss as defined by GAAP. "Churn" refers to the average monthly percent of customers that terminate service.

Safe Harbor Statement

Certain statements contained in this press release are "forward-looking statements" within the meaning of applicable federal securities laws, including, without limitation, anything relating or referring to future financial results and plans for future business development activities, and are thus prospective. Forward-looking statements may include, without limitation, the company's expectations regarding: future financial and operating performance and financial condition; plans, objectives and strategies; product development; industry conditions; the strength of its balance sheet; and liquidity and financing needs. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside of the company's control, which could cause actual results to differ materially from such statements. For a more detailed description of the factors that could cause such a difference, please refer to the company's filings with the Securities and Exchange Commission, including the information under the headings "Risk Factors" and "Forward-Looking Statements" in our Form 10-KSB filed on March 31, 2008. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained herein. The company undertakes no obligation to update or supplement such forward-looking statements.

Contact Information

  • Company Contact:
    KeyOn Communications Holdings, Inc.
    Rory Erchul
    VP of Marketing
    402-998-4044
    Email Contact