Mpower Communications Reports First Quarter Results
- Core customer revenue increased 12% sequentially
- EBITDA loss reduced to $46.7 million from $50.8 million last quarter
- Capital spending held to $17.1 million in the quarter
- Quarter ending cash balance is $438.0 million
ROCHESTER, NY - May 1, 2001 - Mpower Communications Corp. (AMEX:MPE), a provider of broadband high-speed Internet access and telephony services to business customers, today announced results of its operations for the first quarter ended March 31, 2001.
Mpower reported revenue for the first quarter of $46.6 million, exceeding guidance with an 83% increase over first quarter 2000 revenue of $25.5 million. This record quarterly revenue was attained through strong 12% sequential growth in core customer revenue to $30.5 million for the quarter. The company surpassed 50,000 business customers during the quarter, with just under 10% of its business customers now on Mpower's DSL service delivery platform.
Switched access accounted for only 28% of Mpower's total revenue this quarter, down from 38% in the first quarter of 2000 and 35% in the fourth quarter of 2000. As previously announced, this is due to a step down in switched access rates from agreements the company has reached with its major carriers. The company's quarterly revenue also includes $1.5 million from reciprocal compensation collected and $1.4 million from residential dial-up ISP customers. During the quarter Mpower signed an agreement to sell a portion of its dial-up ISP business to EarthLink, Inc. and does not anticipate a gain or loss from the sale.
Excluding one-time reciprocal compensation revenue, gross margin for the quarter improved 400 basis points to 10% from 6% in the prior quarter. This positive trend in gross margin can be attributed to the company's success in adding scale to the business, reducing network transport costs through volume discounts and term agreements with major carriers, as well as eliminating costs associated with its Northeast and Northwest network build.
By curtailing promotional marketing programs and redirecting investments into growing its direct sales force, Mpower reduced its selling, general and administrative (SG&A) costs as a percent of revenue to 113% in the first quarter, down from 120% in the fourth quarter of 2000. Over the past three months, Mpower also increased its number of quota-carrying sales representatives from 279 to 386.
Mpower posted an EBITDA (earnings before interest, taxes, stock-based compensation, depreciation and amortization and non-recurring network optimization cost) loss of $46.7 million for the quarter, outperforming prior guidance with an 8% improvement sequentially.
The company took a $24.0 million charge in the first quarter associated with its decision to halt expansion into the Northeast and Northwest markets. The switch and collocation equipment slated for these markets will be redeployed throughout Mpower's footprint to support the growing demand for services in the company's existing markets. The decision to cancel these markets allowed the company to reduce its capital expenditures to $17.1 million in the quarter.
"Our continued focus on operational excellence is paying off as we have once again exceeded our guidance," said Mpower Communications President and Chief Executive Officer Rolla P. Huff. "Our ability to grow revenue while simultaneously reducing costs resulted in a significant improvement in EBITDA. That improvement also comes despite the reduction in switched access rates, which we were more than able to offset by growing our core customer revenue. We are pleased with the positive trends in our results in this difficult economic environment."
The company ended the quarter with $438.0 million in cash, cash equivalents and investments. During the quarter, Mpower was successful in converting 1.0 million Series D convertible preferred shares for 1.9 million shares of common stock. The company is evaluating additional opportunities to further strengthen its balance sheet.
"The actions we have taken over the past six months have extended our funding position," added Huff. "However, we are continuing to explore a number of alternatives to further improve our funding position. This may include one or a combination of the following: bank financing, vendor financing, private equity investments, and additional cost management initiatives including further reduction of new markets."
Second Quarter Guidance
Also today, Mpower acknowledged the recent FCC ruling on switched access rates and is currently reviewing the financial impact. The company reiterated its financial guidance for full year 2001 operating results and provided guidance for the second quarter of 2001, exclusive of any impact from this ruling.
|
1Q 2001 |
2Q 2001 |
|
|
(in millions) |
Sequential Growth |
|
|
______________________________
|
| Core Customer Revenue |
$30.5 |
10-14% |
|
| Switched Access & Other** |
$16.1 |
(10)-0% |
|
| Total Revenue |
$46.6 |
3-10% |
|
| EBITDA* |
$(46.7) |
(5)-2% |
|
| |
* Earnings before interest, taxes, stock-based compensation, depreciation and amortization and non-recurring network optimization cost.
** Other revenue includes $1.5 million of reciprocal compensation and $1.4 million of residential dial-up ISP in the first quarter.
Mpower Communications First Quarter Conference Call
Mpower will host a conference call at 9:00 a.m. Eastern Standard Time on Wednesday, May 2, to further discuss its first quarter financial and operating results. The call is open to the public. The dial-in and replay information for the call is as follows:
| Date: |
May 2, 2001 |
| Time: |
9:00 a.m. (Eastern Standard Time) |
| Participants: |
Rolla P. Huff, President and Chief Executive Officer
Michael R. Daley, Executive Vice President and Chief Financial Officer
Joseph M. Wetzel, President Operations |
| |
| Dial-in Number: |
1-888-849-9184, reference Mpower First Quarter 2001 Results |
| Webcast: |
A live audio Webcast is also available using Windows Media Player by visiting Mpower's Website at http://www.mpowercom.com/about/corpinfo/index.shtml. |
| |
| Replay Number: |
1-800-633-8284, reservation #: 18518622
Available 11:00 a.m. EST, 5/2/01 through 11:00 a.m. EST, 5/9/01 |
| Webcast Replay: |
The on-demand (replay) audio Webcast will be available on this Website through June 2, 2001. |
About Mpower Communications Corp.
Mpower Communications Corp. (AMEX:MPE) is a facilities-based broadband communications provider offering a full range of data, telephony, Internet access and Web hosting services for small and medium-size business customers. Further information about the company can be found at www.mpowercom.com.
Forward-Looking Statements
Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Mpower Communications cautions investors that certain statements contained in this press release that state Mpower Communications and/or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. Management wishes to caution the reader these forward-looking statements are not historical facts and are only estimates or predictions. Actual results may differ materially from those projected as a result of risks and uncertainties including, but not limited to, projections of future sales, market acceptance of our product offerings, our ability to secure adequate financing or equity capital to fund our operations and network expansion, our ability to manage rapid growth and maintain a high level of customer service, the performance of our network and equipment, the cooperation of incumbent local exchange carriers in provisioning lines and interconnecting our equipment, regulatory approval processes, changes in technology, price competition and other market conditions and risks detailed from time to time in Mpower's Securities and Exchange Commission filings.
| (in thousands, except per share data) |
Three Months Ended
March 31 |
|
| Statements of Operations: |
2001 |
2000 |
| Revenues |
$ 46,602 |
$ 25,458 |
| Cost of operating revenues |
40,572 |
18,935 |
| Sales & marketing |
15,883 |
7,626 |
| General & administrative |
36,886 |
19,810 |
| Stock-based compensation |
933 |
1,576 |
| Depreciation & amortization |
21,569 |
6,761 |
| Non-recurring network optimization cost |
24,000 |
- |
| Loss from operations |
(93,241) |
(29,250) |
| Interest income/(expense), other |
(5,265) |
3,906 |
| Net loss |
(98,506) |
(25,344) |
| Accrued preferred stock dividend |
(9,723) |
(3,007) |
| Preferred stock accretion to redemption value |
- |
(3,489) |
| Net loss applicable to common stockholders |
$ (108,229) |
$ (31,840) |
| |
| Basic and diluted loss per share of common stock |
$ (1.85) |
$ (0.79) |
|
| Basic and diluted weighted average shares outstanding |
58,529 |
40,408 |
| |
| EBITDA (1) |
$ (46,739) |
$ (20,913) |
|
| |
| (in thousands) |
|
|
|
| Selected Balance Sheet Data |
As of
March 31, 2001 |
As of
December 31, 2000 |
| Cash, cash equiv. & investments |
$ 438,034 |
$ 503,241 |
| Restricted investments |
1,357 |
1,065 |
| Property & equipment, net |
467,239 |
482,265 |
| Current liabilities |
136,572 |
134,048 |
| Long-term debt, net of current portion |
475,313 |
476,659 |
| Redeemable preferred stock |
197,464 |
244,886 |
| Stockholders' equity |
269,588 |
316,867 |
| |
| Selected Operational Statistics (1): |
As of
March 31, 2001 |
As of
December 31, 2000 |
As of
March 31, 2000 |
| |
Switches in service |
17 |
16 |
7 |
| |
Markets Served |
40 |
40 |
13 |
| |
Collocated facilities revenue ready |
784 |
761 |
305 |
| |
Number of employees |
2,124 |
2,015 |
1,314 |
| |
Number of direct sales employees |
386 |
279 |
224 |
| |
Lines in service : |
|
|
|
| |
Business |
272,122 |
232,405 |
120,034 |
| |
Residential |
52,365 |
52,725 |
48,752 |
| |
Total lines in service |
324,487 |
285,130 |
168,786 |
| |
|
(1) Earnings before interest, taxes, stock-based compensation, depreciation
and amortization (EBITDA) is a measure commonly used in the communications
industry to analyze operating performance, leverage and liquidity. Non-recurring
network optimization costs are excluded from this measure. |
