Cbeyond Cuts CEO Geigers Pay Again Ahead of Birch Merger

By Josh Long

In a time when most CEOs are getting raises, for at least the second straight year, Cbeyond Inc. cut the total pay of its top executive, James Geiger.

Total 2013 compensation paid out to Geiger by the company he founded in 1999 fell by 16 percent, to $1.21 million, from $1.44 million in the previous year and $1.55 million in 2011, a regulatory filing this week disclosed.

Geiger, chairman, president and CEO of Cbeyond, has received a base salary of $400,000 for the last three years. The value of his stock awards actually grew last year to $475,000 from $220,000, but his non-equity incentive plan compensation was essentially cut in half to $327,000 from $614,000 in 2012. 

The communications company adopted a bonus structure last year that was based on quarterly revenues and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) performance.

Annual revenues and adjusted EBITDA fell short of expectations, falling 5 percent, to $463.4 million, and 16.7 percent, to $78.5 million, respectively. 

With performance lagging expectations, other high-level executives also endured significant pay cuts, including J. Robert Fugate, executive vice president and chief financial officer. Fugate’s total compensation was basically cut in half, from $1.47 million in 2012 to $676,000 last year. His salary remained the same at $300,000, but the value of Fugate’s stock awards plunged to $204,000, from $779,000, while his non-equity incentive plan compensation was chopped to $164,000, from $307,000.

None of the named executives received a discretionary bonus last year, according to the Securities and Exchange Commission filing.

Cbeyond also disclosed the declining annual compensation of three other executives.

Cbeyond last month announced a deal to be acquired by Birth Communications for $323 million in cash. The acquisition will transform Birch, another Atlanta-based company, into a communications provider with $700 million in annual revenues. It had been rumored earlier that Cbeyond might land an agreement with MegaPath.

Helga Ojinmah, a Cbeyond spokeswoman, said the company plans to file “as soon as practically possible” its proxy statement, which is a document filed with the SEC that will solicit shareholder votes and is likely to lay out how the Birch deal came together. 

Cbeyond, whose operations are in 13 major metropolitan markets, has been on a mission to transform itself in recent years.

In early 2012, the company announced plans to focus on delivering cloud-based and advanced network services to small and medium-sized customers — which Cbeyond dubs its 2.0 customers. The strategy is intended, at least in part, to generate higher revenues from customers who need IT services rather than simply traditional communications services.

Last year, Cbeyond generated $69.2 million, or 14.9 percent, of revenue from its 2.0 customers. That figure represented a 91 percent increase over the amount recognized during 2012. Average revenue per customer location for 2.0 customers was roughly 80 percent higher than its other customers.

But Cbeyond also sank further into the red with a net loss of $10.8 million from $2.3 million in the previous year.

In October 2013, Cbeyond formed a committee to explore strategic alternatives. Under the deal with Birch, Cbeyond stockholders will receive between $9.97 and $10 per share, with the latter figure representing a premium of 40.8 percent over the closing price of Cbeyond’s stock on April 17, 2014, Birch said.

Cbeyond intends to release its first-quarter 2014 results on May 7 after the markets close. The company previously forecast 2014 revenues of $410 million to $430 million and adjusted EBITDA of $50 million to $65 million.