Prospectus Summary
The information below is only a summary of more detailed information included in other sections of this prospectus. This summary may not contain all the information that is important to you or that you should consider before buying shares in this offering. The other information is important, so please read this entire prospectus carefully.
VIA NET.WORKS, Inc.
VIA NET.WORKS is a leading international provider of Internet access and services focused on small and mid-sized businesses in Europe and Latin America. By targeting these customers and regions, we are positioned to capitalize on some of the most rapidly growing areas of the Internet market. Both of these regions have a relatively low number of total Internet users, and small and mid-sized businesses in each region have a relatively low number of Internet services available to them. By choosing to serve these market segments, we have the opportunity to sell our services to a large number of small and mid-sized businesses who have identifiable Internet needs but little or no Internet experience. Once we have developed relationships with these customers, we can upgrade them from entry-level Internet access services to more sophisticated and higher margin products and services like web hosting, virtual private networks and e-commerce solutions which will allow them to compete in both local and global markets.
Since our founding in late 1997, we have rapidly established our international presence by acquiring, integrating and growing 17 business- focused Internet services providers in 11 European and Latin American countries. As of September 30, 1999, pro forma for an acquisition we made after September 30, 1999, we had 80,600 customers in Europe, of which 44.2% were businesses, and 34,900 customers in Latin America, of which 40.3% were businesses. Pro forma for this acquisition, as of September 30, 1999 we hosted 17,000 web sites and had registered 46,700 domain names. For the nine months ended September 30, 1999, we had pro forma revenue of $42.1 million and pro forma net losses of $30.4 million. To date, our operations have been funded by investments of $181.0 million from our current investors, which include The Centennial Funds, Norwest Equity Capital, Telecom Partners II, HarbourVest International, Providence Equity Partners, Verio Inc. and Boston Millennia Partners.
We are a customer-focused sales, marketing and service organization. We leverage our local marketing, sales and customer care efforts with the benefits of our global scale by providing our local operations international network capacity, marketing support, capital and management resources. We believe that our local focus combined with our global capabilities will allow us to increase both our market share and revenue.
Our Products and Services We offer a suite of bundled and stand-alone Internet products and services which can be tailored to the individual needs of our small and mid-sized business customers. Our products and services include . dedicated high speed and dial-up Internet access . hosting of customer web sites . co-location services, where a customer places equipment in our facilities for the purposes of hosting software, database, web site and other applications . e-mail services . e-commerce solutions including secure electronic payment processing, electronic procurement and business portal design and hosting . Internet virtual private networks which provide individual commercial customers with greater security for their electronic communications over the Internet . domain name registration of Internet addresses, such as www.customername.com . Internet security products, which protect the integrity of customer data and networks, authenticate users and provide secure data transmissions Our Markets Internet access and services markets are among the fastest growing segments of the global telecommunications marketplace. Total spending by businesses on Internet access and services in Western Europe is projected by International Data Corporation to grow 32.9% annually from $3.0 billion in 1998 to $12.5 billion in 2003. According to The Yankee Group, Internet access revenues in Latin America are forecasted to increase from an estimated $750.0 million in 1998 to $6.0 billion in 2002, or 68.2% annually. Favorable trends which should help fuel continued growth in both geographic markets include . increasing availability and affordability of computer hardware . increasing Internet penetration, which is the ratio of World Wide Web users to total population . increasing adoption of the Internet and related technologies to drive productivity and e-commerce revenue . continuing telecommunications industry deregulation, which encourages improved infrastructure and competitive pricing Our Network We own and operate a European and trans-Atlantic network which carries Internet traffic generated by our operating companies. The backbone of this network provides 155 Mbps of redundant capacity on two fiber optic rings. The first ring provides trans-Atlantic capacity between New York City and London. The second ring provides pan-European capacity which we will initially use to establish network connection points in seven European cities. We currently have network connection points in London, Dusseldorf and Amsterdam and plan to establish a Paris connection point by the end of 1999 and connection points in three additional cities during 2000. We believe that combining the transmission capacity requirements of our operating companies onto our network increases efficiency, reduces costs and results in higher service quality than our operating companies could obtain on their own. We manage the European and trans-Atlantic network from a regional network operations center located in Germany. This facility provides network monitoring and service 24 hours a day, seven days a week. We also operate 109 network points of presence throughout Europe and Latin America which provide our customers with access to the Internet. We plan to add points of presence to further expand our international service capabilities.
Our Strategy
Our goal is to become the premier international provider of Internet access and services to small and mid-sized businesses in Europe and Latin America. We intend to reach our goal by . maintaining a strong local presence through locally managed operating companies . leveraging our brand name and international network . delivering single-source Internet solutions to our customers . delivering quality customer service supported by continued investment in billing, back-office and customer care systems . continuing investment in network infrastructure and product development . accelerating our growth through strategic acquisitions The Offering Common stock offered by us............. shares Common stock to be outstanding after shares this offering......................... Use of proceeds........................ We intend to use the net proceeds of this offering for general corporate purposes, including funding our operations, capital expenditures, network expansion, working capital and acquisitions of Internet services providers in our target markets. Proposed Nasdaq National Market VNWI symbol................................
Some of our stockholders have the right to purchase up to an aggregate of 5% of the shares offered by us in this offering under a stockholders agreement we entered into with them.
The common stock to be outstanding after this offering is based on the number of shares outstanding as of November 15, 1999 and excludes . 6,770,001 shares of non-voting common stock that will be outstanding after the offering, each of which is convertible into one share of common stock at any time . 4,622,500 shares of common stock issuable upon the exercise of options granted under our 1998 Stock Option and Restricted Stock Plan and outstanding as of November 15, 1999 with a weighted average exercise price of $6.08 per share . 5,000 shares of common stock reserved for issuance pursuant to a purchase right granted under our Key Employee Equity Plan . 100,000 shares of common stock reserved for the exercise of an outstanding warrant at an exercise price of $2.40 per share . any shares we may issue under the underwriters' over-allotment option We were incorporated in Delaware in June 1997. Our principal executive offices are located at 12100 Sunset Hills Road, Suite 110, Reston, Virginia 20190 and our telephone number is (703) 464-0300. Our website can be found at www.via-net-works.com. Information contained on our website is not intended to be a prospectus and is not incorporated into this prospectus.
Summary Consolidated and Combined Pro Forma Financial Data The table below summarizes . our historical consolidated financial data for the period from inception, June 13, 1997, to December 31, 1997, for the year ended December 31, 1998 and for the nine months ended September 30, 1998 and September 30, 1999 . our combined pro forma financial data for the year ended December 31, 1998 and for the nine months ended September 30, 1999
. our pro forma as adjusted balance sheet data as of September 30, 1999,
which give effect to our sale of shares of common stock at an assumed
initial public offering price of $ per share less underwriting fees and
estimated offering expenses
Our historical statement of operations data for the period from inception, June 13, 1997, to December 31, 1997 and for the year ended December 31, 1998 are derived from our audited consolidated financial statements. Our statement of operations data for the nine months ended September 30, 1998 and 1999 and our balance sheet data as of September 30, 1999 are derived from our unaudited interim financial statements and, in the opinion of our management, include all material adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results of operations and financial condition. Operating results for the nine months ended September 30, 1999 are not necessarily indicative of the results that may be expected for the full year.
Our pro forma statement of operations and other financial data for the year ended December 31, 1998 and the nine months ended September 30, 1999 give effect to our acquisition of 15 companies between January 1, 1998 and September 30, 1999 and our acquisition of InfoAcces, which was completed after September 30, 1999, as though these acquisitions had occurred on January 1, 1998. The pro forma balance sheet data and operating statistics as of September 30, 1999 give effect to our acquisition of InfoAcces. The pro forma statement of operations and balance sheet data also give effect to the conversion of all of our outstanding mandatorily redeemable convertible preferred stock into common stock and the pro forma balance sheet data are further adjusted to reflect this offering. The pro forma financial data for the year ended December 31, 1998 and the nine months ended September 30, 1999 are not necessarily indicative of the results that would have occurred if the transactions had been consummated as of January 1, 1998 and are not intended to indicate expected results for any future period.
As used in the table below, "EBITDA" represents earnings or loss from operations before interest, taxes, depreciation, amortization and non-cash stock compensation charges. The primary measure of operating performance is net earnings. Although EBITDA is a measure commonly used in our industry, it should not be considered an alternative to net earnings, when determined in accordance with generally accepted accounting principles or GAAP, as an indicator of operating performance or as an alternative to cash flows from operating activities, determined in accordance with GAAP. In addition, the measure of EBITDA we use may not compare to other similarly titled measures used by other companies.
The summary consolidated and combined pro forma financial data shown below should be read together with our audited consolidated financial statements, our unaudited interim financial statements, our unaudited pro forma condensed combined financial statements, our acquired companies' financial statements and related notes, and other financial information including "Management's Discussion and Analysis of Financial Condition and Results of Operations," all of which are included elsewhere in this prospectus.
Historical Pro Forma
Period from
Inception Nine Months Ended Year Nine Months
(June 13, 1997) Year Ended September 30, Ended Ended
to December 31, December 31, ------------------- December 31, September 30,
1997 1998 1998 1999 1998 1999
(Dollars in thousands, except per share data)
Statement of Operations Data: Revenues: Europe................. $ -- $ 2,697 $ -- $ 19,378 $ 28,579 $ 28,859 Latin America.......... -- 651 -- 3,988 13,531 13,237 Total revenues........ -- 3,348 -- 23,366 42,110 42,096 Operating costs and expenses............... 336 9,415 2,867 43,090 77,668 75,366 Loss from operations.... (336) (6,067) (2,867) (19,724) (35,558) (33,270) Interest income, net.... 15 1,425 962 1,333 24 1,083 Loss in unconsolidated affiliates............. -- (1,199) (447) (177) -- -- Foreign currency gains.. -- 115 -- 1,269 194 1,109 Loss before minority interest and income taxes................... (321) (5,726) (2,352) (17,299) (35,340) (31,078) Income tax benefit (expense).............. -- 145 -- -- (80) (172) Minority interest....... -- 239 -- 1,087 (232) 852 Net loss attributable to common stockholders..... $ (321) $ (5,342) $ (2,352) $ (16,212) $ (35,652) $ (30,398) Net loss per common share.................. $(10.66) $ (24.29) $ (11.64) $ (20.50) $ (2.84) $ (2.08) Weighted average common shares outstanding..... 30,063 219,964 202,077 790,953 12,549,030 14,620,793
Other Financial Data: Cash flows from operating activities... $ (233) $ (3,784) $ (1,618) $ (6,943) Cash flows from investing activities... (8) (14,383) (3,185) (61,678) Cash flows from financing activities... 1,048 52,187 52,237 125,994 EBITDA.................. (336) (4,763) (2,864) (8,585) Depreciation and amortization........... -- 1,304 3 10,656 Non-cash stock compensation charges... -- -- -- 483 Capital expenditures.... 8 868 45 12,810
As of September 30, 1999 Pro Forma Historical Pro Forma As Adjusted (Dollars in thousands)
Balance Sheet Data: Cash and cash equivalents.................... $ 91,503 $ 40,769 Restricted cash.............................. -- 15,000 Goodwill..................................... 91,507 122,728 Total assets................................. 215,132 219,443 Total long-term debt and capital leases, net of current portion.......................... 10,792 11,162 Mandatorily redeemable convertible preferred stock....................................... 180,933 -- Total stockholders' equity (deficit)......... (13,378) 167,555
Operating Statistics: Number of PoPs............................... 101 109 Number of business customers................. 44,856 49,684 Number of consumer customers................. 54,612 65,844 Number of web-sites hosted................... 16,612 16,981 Number of domain names registered............ 45,947 46,704