Cbeyond Inc. (CBEY) filed Quarterly Report for the period ended 2009-09-30.
Cbeyond is an Atlanta-based managed services provider in the emerging local voice and broadband services market and manages voice over Internet Protocol facilities-based private local phone network. Cbeyond delivers an integrated package of high quality local and long distance telephony services high-speed Internet access and Internet-based applications including voicemail email Web hosting data backup file-sharing VPN and more to a target market of small business customers in selected large metropolitan areas. Cbeyond Inc. has a market cap of $373.7 million; its shares were traded at around $12.94 with and P/S ratio of 1.1.
Highlight of Business Operations:
Our customers may subscribe to any one of our BeyondVoice I, BeyondVoice II and BeyondVoice III packages. Each BeyondVoice I customer receives all our services over a dedicated broadband T-1 connection providing a maximum symmetric bandwidth of 1.5 Mbps (megabits per second). BeyondVoice II customers receive their services over two dedicated T-1 connections offering a maximum symmetric bandwidth of 3.0 Mbps. BeyondVoice III customers receive their services over three dedicated T-1 connections offering a maximum symmetric bandwidth of 4.5 Mbps. We believe that our customers highly value the level of symmetric bandwidth offered with our services. For certain customers who may need additional bandwidth, we have begun offering increased bandwidth using Ethernet technology and may offer increased bandwidth via other means in the future. As of September 30, 2009, approximately 84.0% of our customer base had BeyondVoice I, 14.7% had BeyondVoice II and 1.3% had BeyondVoice III.
Average monthly revenue per customer location, or ARPU, is impacted by a variety of factors, including customers primarily signing three-year contracts at lower package prices as compared to shorter term contracts, the distribution of customer installations during a period, the adoption by customers of applications for which incremental fees are paid, the amount of long distance or mobile call volumes that generate overage charges above the basic amount of minutes included in customers’ packages, customer promotions, as well as additional terminating access charges and customer usage and purchase patterns. Customer revenues represented approximately 98.2% of total revenues for the three and nine months ended September 30, 2009 as compared to 98.1% and 98.0% for the comparable periods in 2008. Access charges paid to us by other communications companies to terminate calls to our customers represented the remainder of total revenues.
Customer revenues are generated under contracts that run up to three-year terms. Therefore, customer churn rates have an impact on projected future revenue streams. Through mid-2007, we maintained average monthly churn rates of approximately 1.0% (we define average monthly churn rate 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 total number of customer locations on our network at the beginning of that month). Since that time, however, we have experienced elevated churn rates that we believe are attributable primarily to the inability of certain of our customers to meet their payment obligations as a result of deteriorated economic conditions. We cannot predict the duration or magnitude of the currently deteriorated economic conditions, but we expect our monthly churn rate will continue to be more than 1.0% for at least as long as the current economic environment persists.
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