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Mpower Holding Announces
First Quarter 2004 Results
ROCHESTER, NY—May 6 , 2004—Mpower Holding Corporation
(AMEX:MPE),
the parent company of Mpower Communications Corp., a leading
provider of broadband Internet access and telephone services
to business customers, today announced results of its operations
for the first quarter ended March 31, 2004.
“Today we are reporting yet another quarter of strong
results. We are extremely pleased with the trends we continue
to see in our business and believe Mpower to be in a great position
of strength both operationally and financially,” said Mpower
Holding Chairman and Chief Executive Officer Rolla P. Huff. “We
have improved our profitability even as we have been investing
in our organic revenue growth initiatives. We are seeing early
signs that these initiatives are taking hold, including substantial
T1-based product growth over the past few months. We now have
more quota-carrying sales people that are in the process of coming
up the productivity curve, and as they do, we expect our revenue
growth to continue to accelerate.”
Mpower’s revenue from continuing operations increased
to $37.2 million for the first quarter of 2004, a slight improvement
over the first quarter of 2003 and the fourth quarter of 2003.
Core customer revenue, which includes revenue from the sale of
data and voice services, was $32.8 million in the first quarter
of 2004, up 2% over the first quarter of 2003 and relatively
flat compared to the fourth quarter of 2003.
Adjusted gross margin from continuing operations was a record
$20.8 million or 56% of revenue in the first quarter of 2004,
growing 42% over the adjusted gross margin of $14.6 million in
the first quarter of 2003, and 2% higher than the $20.3 million
in adjusted gross margin reported in the fourth quarter of 2003.
Adjusted gross margin is calculated as gross margin excluding
depreciation and amortization expense. Gross margin including
depreciation and amortization was $18.8 million in the first
quarter of 2004, $12.7 million in the first quarter of 2003 and
$18.2 million in the fourth quarter of 2003.
Selling, general and administrative (SG&A) expenses from
continuing operations, excluding depreciation and amortization,
were $17.5 million for the first quarter of 2004, improving 17%
from the $21.1 million in SG&A expenses reported in the first
quarter of 2003, and 6% from the $18.6 million in SG&A expenses
for the fourth quarter of 2003.
Mpower grew Adjusted EBITDA in the first quarter of 2004 to
a positive $3.2 million, showing a $9.7 million improvement over
the first quarter of 2003 and a 100% improvement over the $1.6
million of Adjusted EBITDA in the fourth quarter of 2003.
Mpower’s loss from continuing operations was $0.5 million
in the first quarter of 2004, a 95% improvement over the $11.0
million loss in the first quarter of 2003 and a 76% improvement
over the $2.1 million loss in the fourth quarter of 2003. Mpower’s
net loss was $0.3 million in the first quarter of 2004 compared
to a $15.2 million net loss in the first quarter of 2003 and
a $0.1 million net loss in the fourth quarter of 2003.
The company’s loss per share before discontinued operations
was $0.01 in the first quarter of 2004 and net loss per share
for the first quarter of 2004 was close to breakeven.
Capital expenditures were $1.3 million in the first quarter
of 2004. Mpower ended the quarter with $29.3 million in unrestricted
cash and saw a working capital increase of 17% from the fourth
quarter of 2003. In addition, Mpower has a $7.5 million revolving
receivables-based line of credit available, although no borrowings
under this line of credit are currently outstanding.
Today Mpower reiterated and updated its revenue and Adjusted
EBITDA guidance for the remainder of 2004 and the full-year 2005. “Given
our Adjusted EBITDA performance in the first quarter and our
current core Adjusted EBITDA run rate, we are raising our full-year
Adjusted EBITDA guidance by $4 million. This guidance does not
reflect any potential cost increases to our company that might
result from proposals presented this week to the California PUC
to adjust wholesale rates in California,” noted Huff.
Mpower is forecasting fourth quarter 2004 revenue of $40.2 million
to $40.9 million. The company’s revenue guidance for the
full-year 2004 is $152.6 million to $155.6 million, and for full-year
2005 is $174.0 million to $180.5 million. In terms of Adjusted
EBITDA, Mpower’s second quarter 2004 guidance is $1.5 million
to $2.0 million, with full-year 2004 Adjusted EBITDA forecasted
in the range
of $8.0 million to $10.0 million and full-year 2005 Adjusted
EBITDA between $16.0 million and $18.0 million.
Company Presentation
A PowerPoint presentation and business model detailing Mpower’s
quarterly results and financial projections can be found on the
company’s Web site at www.mpowercom.com.
Conference Call to Discuss First Quarter 2004 Results
Mpower will host a conference call to discuss its first quarter
2004 financial and operating results.
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Date:
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Thursday, May 6, 2004 |
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Time:
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10:00 a.m. (Eastern time) |
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Dial-in Number:
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1-877-780-2271 |
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Replay Number:
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1-877-519-4471, PIN #4718186
From May 6 at 1:00 p.m. through May 13 at 5:00 p.m. Eastern |
FINANCIAL STATEMENTS
BALANCE SHEET (amounts in $ thousands) |
|
Mpower Holding
March 31, 2004 |
Mpower Holding
December 31, 2003 |
|
| Current Assets |
Cash & Cash Equivalents |
|
$29,294 |
$29,307 |
Restricted Investments |
|
24 |
92 |
Accounts Receivable, net |
|
12,196 |
14,076 |
Other Receivables |
|
4,031 |
5,039 |
Prepaid Expenses and Other
Current Assets |
|
2,959 |
4,487 |
| |
|
|
Total Current Assets |
|
48,504 |
53,001 |
| Property and Equipment, net |
|
32,268 |
33,762 |
Long-Term Restricted Investments |
|
9,475 |
9,537 |
Intangibles, net |
|
7,803 |
8,948 |
Other Assets |
|
4,063 |
3,781 |
Total Assets |
|
$102,113 |
$109,029 |
|
| Current Liabilities |
Current Maturities and Capital Lease Obligations |
|
$155 |
$256 |
Accounts Payable |
|
11,520 |
15,754 |
Accrued Sales Tax Payable |
|
3,578 |
3,647 |
Accrued Property Taxes Payable |
|
2,952 |
2,818 |
Accrued Bonus |
|
460 |
2,388 |
Deferred Revenue |
|
4,814 |
4,696 |
Accrued Other Expenses |
|
10,527 |
11,018 |
| |
|
|
Total Current Liabilities |
|
34,006 |
40,577 |
|
Long-Term Deferred Revenue |
|
2,063 |
2,211 |
| |
|
|
Total Liabilities |
|
36,069 |
42,788 |
|
Common Stock |
|
78 |
78 |
Additional Paid-in Capital |
|
103,801 |
103,735 |
Accumulated Deficit |
|
(37,835) |
(37,572) |
| |
|
|
Total Stockholders' Equity |
|
66,044 |
66,241 |
|
Total Liabilities and Stockholders' Equity |
|
$102,113 |
$109,029 |
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STATEMENT OF OPERATIONS
(amounts in $ thousands,
except share and per
share amounts) |
|
Mpower Holding
Three Months Ended
March 31, 2004 |
Mpower Holding
Three Months Ended
March 31, 2003 |
Mpower Holding
Three Months Ended
December 31, 2003 |
| Operating Revenues: |
Core Customer |
|
$32,770 |
$32,060 |
$32,655 |
Switched Access |
|
4,383 |
4,678 |
4,224 |
| |
|
|
Total Operating Revenues |
|
37,153 |
36,738 |
36,879 |
| |
Operating Expenses: |
|
|
|
|
Cost of Operating Revenues (exclusive of
depreciation and amortization shown separately below. See
Note 1.) |
|
16,388 |
22,128 |
16,627 |
Selling, General and Administrative (exclusive
of depreciation and amortization shown separately below. See
Note 1.) |
|
17,549 |
21,128 |
18,635 |
Stock-Based Compensation
Expense |
|
39 |
62 |
41 |
(Gain) Loss on Sale of Assets, net |
|
(198) |
95 |
(267) |
Depreciation and Amortization |
|
3,901 |
4,303 |
3,961 |
| |
|
|
Total Operating Expenses |
|
37,679 |
47,716 |
38,997 |
| |
Loss from Continuing Operations |
|
(526) |
(10,978) |
(2,118) |
| |
Loss on Discharge of Debt |
|
- |
(102) |
- |
Other income |
|
- |
- |
1,427 |
Interest Income |
|
88 |
50 |
63 |
Interest Expense |
|
(66) |
(139) |
(101) |
| |
|
|
Loss before Discontinued Operations |
|
(504) |
(11,169) |
(729) |
| |
Income (Loss) from Discontinued Operations |
|
241 |
(3,981) |
678 |
| |
|
|
Net Loss |
|
($263) |
($15,150) |
($51) |
| |
Basic and Diluted Weighted Average
Shares Outstanding |
|
78,321,851 |
64,999,025 |
78,213,486 |
| |
Basic and Diluted (Loss)
Income per Share: |
|
|
|
|
Loss before Discontinued Operations |
|
($0.01) |
($0.17) |
($0.01) |
Income (Loss) from Discontinued Operations |
|
$0.01 |
($0.06) |
$0.01 |
Net Loss |
|
$0.00 |
($0.23) |
$0.00 |
| |
Adjusted Gross Margin |
|
$20,765 |
$14,610 |
$20,252 |
Adjusted Gross Margin (% of Revenue) |
|
55.9% |
39.8% |
54.9% |
| |
Adjusted EBITDA |
|
$3,216 |
($6,518) |
$1,617 |
Adjusted EBITDA (% of Revenue) |
|
8.7% |
-17.7% |
4.4% |
| |
RECONCILIATION TO GAAP (amounts in $ thousands) |
|
March 31, 2004 |
March 31, 2003 |
December 31, 2003 |
| |
Adjusted Gross Margin |
|
$20,765 |
$14,610 |
$20,252 |
Depreciation and Amortization (allocated to Cost of
Operating Revenues) |
|
(1,939) |
(1,946) |
(2,051) |
Gross Margin (GAAP) |
|
$18,826 |
$12,664 |
$18,201 |
| RECONCILIATION TO GAAP (amounts
in $ thousands) |
|
March 31, 2004 |
March 31, 2003 |
December 31, 2003 |
| |
Adjusted EBITDA |
|
$3,216 |
($6,518) |
$1,617 |
Depreciation and Amortization |
|
(3,901) |
(4,303) |
(3,961) |
Gain (Loss) on Sale of Assets, net |
|
198 |
(95) |
267 |
Stock-Based Compensation Expense |
|
(39) |
(62) |
(41) |
| |
Loss from Continuing Operations |
|
(526) |
(10,978) |
(2,118) |
Loss on Discharge of Debt |
|
- |
(102) |
- |
Other income |
|
- |
- |
1,427 |
Interest Income |
|
88 |
50 |
63 |
Interest Expense |
|
(66) |
(139) |
(101) |
| |
Loss before Discontinued Operations |
|
(504) |
(11,169) |
(729) |
Income (Loss) from Discontinued Operations |
|
241 |
(3,981) |
678 |
Net Loss (GAAP) |
|
($263) |
($15,150) |
($51) |
| |
| Note 1: Cost
of Operating Revenues is exclusive of depreciation
and amortization of $1,939, $1,946 and $2,051 for
the three months ended March 31, 2004, 2003 and December
31, 2003. Selling, General and Administrative
is exclusive of depreciation and amortization of
$1,962, $2,357 and $1,910 for the three months ended
March 31, 2004, 2003 and December 31, 2003. |
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Use of Non-GAAP Financial Information
The SEC has adopted rules (Regulation G) regulating the
use of non-GAAP financial measures. Because of Mpower’s
use of non-GAAP financial measures, Adjusted Gross
Margin and Adjusted EBITDA, to supplement the Company’s
consolidated financial statements presented on a GAAP
basis, Regulation G requires the Company to include
in this press release a presentation of the most directly
comparable GAAP measures, which are Gross Margin, including
depreciation and amortization expense, and Net (Loss)
Income, and a reconciliation of the measures to GAAP.
The Company has presented a reconciliation of these
measures for each of the periods presented above. The
non-GAAP measure Adjusted EBITDA provides an enhancement
to an overall understanding of the Company’s
past financial performance and prospects for the future
as well as useful information to investors because
of (i) the historical use by Mpower of Adjusted EBITDA
as a performance measurement; (ii) the value of Adjusted
EBITDA as a measure of performance before gains, losses
or other charges considered to be outside the company’s
core business operating results; and (iii) the use
of the Adjusted EBITDA, or a similar term, by almost
all companies in the CLEC sector as a measurement of
performance. The Company has excluded from its presentation
of Adjusted EBITDA network optimization costs (which
are costs resulting principally from the closure of
certain of our markets), stock-based compensation expenses
(which are costs related to stock options issued with
an exercise price below fair market value), gains on
sales of assets, gains or losses on investments, reorganization
expenses, gain on discharge of debt, and other income
because the Company does not believe that including
such items in Adjusted EBITDA provides investors with
an appropriate measure of determining Mpower’s
performance in its core business. The non-GAAP measure
Adjusted Gross Margin provides an enhancement to an
overall understanding of the Company’s past financial
performance and prospects for the future as well as
useful information to investors because of (i) the
historical use by Mpower of this measure as a performance
measurement and (ii) the use of a similar calculation
by almost all companies in the CLEC sector as a measurement
of performance. Adjusted Gross Margin is calculated
as gross margin excluding depreciation and amortization
expense because the Company does not believe that including
such items in the calculation of Adjusted Gross Margin
provides investors with an appropriate measure of analyzing
Mpower’s historical financial performance or
in comparing other similar companies in the CLEC sector.
Mpower’s utilization of non-GAAP measurements
is not meant to be considered in isolation or as a
substitute for net loss, loss from continuing operations,
cash flow, gross margin and other measures of financial
performance prepared in accordance with GAAP. Adjusted
Gross Margin and Adjusted EBITDA are not GAAP measurements
and Mpower’s use of them may not be comparable
to similarly titled measures employed by other companies
in the telecommunications industry.
About Mpower Holding Corporation
Mpower Holding Corporation (AMEX:MPE)
is the parent company of Mpower Communications, 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. A copy of
this press release and 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 Holding Corporation
cautions investors that certain statements contained in
this press release that state 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,
future sales growth, changes in federal or state telecommunications
regulations, 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 growth and maintain a high level of customer
service, the performance of our network and equipment,
our ability to enter into strategic alliances or transactions,
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 our Securities and Exchange Commission filings.
The company undertakes no obligation to update publicly
any forward-looking statements, whether as a result of
future events, new information, or otherwise.
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