SOURCE: KeyOn Communications

August 14, 2008 16:01 ET

KeyOn Reports Second Quarter 2008 Financial Results

EBITDA Loss Narrows for Second Consecutive Quarter

OMAHA, NE--(Marketwire - August 14, 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 its financial results for the quarter ended June 30, 2008.

Commenting on the announcement, Jonathan Snyder, President and CEO of KeyOn Communications, stated, "Our focus throughout 2008 has been on streamlining our operations and reducing costs in order to generate positive EBITDA. We began the year by improving our EBITDA margin by 52% in the first quarter of 2008, over the fourth quarter of 2007. We continued this trend by improving our margin another 6.5% in the second quarter through our cost controlling initiatives. Notably, our margin was increased by 26% over the previous quarter."

Mr. Snyder continued, "As part of our strategy to improve operating results, our marketing efforts were focused on targeted areas as opposed to a more broadly-based marketing program employed in 2007, leading to flat revenue growth over our previous quarter. However, in the presence of flat revenue growth, our margin improvement is directly attributable to our cost controlling initiatives. In addition, this was an unusual quarter for the company as we experienced severe weather in many of our Midwestern markets, resulting in higher than expected tower repairs, maintenance and service credits. These costs were responsible for an increase of 6.7% in our network costs over the previous quarter."

2008 Second Quarter Consolidated Results

For the second quarter ended June 30, 2008, the Company reported revenue of $2.0 million, an increase of approximately 7%, as compared to $1.8 million for the second quarter ended June 30, 2007. The Company's GAAP financials incorporate revenue and marketing expense, both net of promotions and/or service credits. Adjusting for these items, revenue for the quarter ended June 30, 2008 was $2.1 million.

The operating loss, which included non-cash stock-based compensation expense of $1.4 million, was $2.5 million for the quarter ended June 30, 2008, as compared to an operating loss of $1.0 million for the quarter ended June 30, 2007. The Company was not a public company in the second quarter of 2007 and therefore did not incur public company related costs and certain personnel.

In the second quarter of 2008, the Company experienced a number of non-recurring charges resulting from weather including an increase in network operating costs of 14.6% over the previous year's quarter. Over 77% of the change in these costs was due to higher than expected tower repair costs and service credits.

The Company reported a net loss of $2.7 million, or $0.33 loss per common share, for the quarter ended June 30, 2008, compared to a net loss of $1.1 million, or $0.21 loss per common share, for the quarter ended June 30, 2007.

Adjusted EBITDA for the quarter ended June 30, 2008 was $(418,086), compared to $(338,573) in the second quarter in the prior year. The Adjusted EBITDA excludes approximately $1.4 million of stock-based compensation expense, but includes approximately $42,000 of what the Company believes are nonrecurring expenses and $9,000 of service credits, which are deducted against revenues, as result of the weather throughout its Midwestern markets.

Annette Eggert, KeyOn's CFO, stated, "We made some great strides toward our goal of generating positive EBITDA. Our two consecutive quarters of EBITDA margin improvement demonstrate that our efforts are materializing. In addition, we believe that the benefits of some of our cost controlling measures implemented in this quarter will be fully realized in the subsequent quarter. As a result, we expect the company to be EBITDA positive in the third quarter."

Outlook

Jon Snyder continued, "KeyOn continues to execute its business plan in spite of the current economic environment and turbulent capital markets. In the first quarter of 2008, we added a third goal of generating positive EBITDA. After completing our last acquisition in October 2007, we have moderated our approach to strategic acquisitions of similar wireless broadband companies until the Company is able to do so with cost-effective capital. Finally, on the strategic new product and service development front, our partnership with Airspan Networks for the deployment of WiMAX in our markets is progressing well and we have been testing this product to offer high-speed data and VOIP in one of our markets for several months."

KEYON COMMUNICATIONS HOLDINGS INC. AND RELATED ENTITIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


                                                                 For the
                          For the      For the      For the      Quarter
                          Quarter      Quarter      Quarter       Ended
                        Ended June   Ended June   Ended March    December
                          30, 2008     30, 2007     31, 2008     31, 2007

TOTAL REVENUES:         $ 1,986,288  $ 1,857,179  $ 2,046,031  $ 1,968,457
                        -----------  -----------  -----------  -----------

OPERATING COSTS AND
 EXPENSES:
  Payroll, bonuses and
   taxes                  1,037,908      853,976    1,007,688    1,098,711
  Depreciation and
   amortization             688,934      658,937      710,380      710,260
  Other general and
   administrative
   expense                  310,697      316,236      366,183      443,345
  Network operating
   costs                    726,876      634,328      743,398      861,291
  Marketing and
   advertising              136,746      169,894      164,334      161,329
  Installation expense      121,535      134,217      121,886      141,752
  Professional fees          56,304       87,101      188,837      827,578
  Stock based
   compensation           1,438,446            -    1,122,386      267,002
  Cost of DISH inventory     14,308            -       16,805            -
                        -----------  -----------  -----------  -----------

    Total operating
     costs and expenses   4,531,754    2,854,689    4,441,897    4,511,268
                        -----------  -----------  -----------  -----------

LOSS FROM OPERATIONS     (2,545,466)    (997,510)  (2,395,866)  (2,542,811)

OTHER INCOME (EXPENSE):    (186,688)    (133,061)    (175,676)    (213,578)
                        -----------  -----------  -----------  -----------

NET LOSS                $(2,732,154) $(1,130,571) $(2,571,633) $(2,756,389)
                        ===========  ===========  ===========  ===========

Net loss per common
 share--basic and
 diluted                $     (0.33) $     (0.21) $     (0.31) $     (0.34)
                        ===========  ===========  ===========  ===========


Reconciliation of Net
 Loss to EBITDA
    Loss from
     Operations         $(2,545,466) $  (997,510) $(2,395,866) $(2,542,811)

    Depreciation and
     Amortization           688,934      658,937      710,380      710,260
    Stock Based
     Compensation         1,438,446            -    1,122,386      267,002
                        -----------  -----------  -----------  -----------

  Adjusted EBITDA       $  (418,086) $  (338,573) $  (563,100) $(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" which is a measurement 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.

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