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Mpower Communications Reports Record Second Quarter 2000 Results
Strong Operational Performance Results in Nine Consecutive Quarters of Double Digit Growth
- Second quarter revenue increased 21% sequentially and 169% from a year ago.
- Surpassed 200,000 lines in service with 19% growth over first quarter and 124% year-over-year line growth.
ROCHESTER, NY - August 3, 2000 - Mpower Communications Corp. (NASDAQ: MPWR), a leading provider of broadband data, Internet and telephony services to business customers, today announced results of its operations for the second quarter ended June 30, 2000.
Mpower reported record revenue for the second quarter of $30.9 million, a 169% increase over second quarter 1999 revenue of $11.5 million, and a 21% increase sequentially over the first quarter of 2000. Mpower posted an EBITDA (earnings before interest, taxes, stock-based compensation, depreciation and amortization) loss of $32.9 million for the quarter and produced a positive gross margin of $1.6 million, or 5% of revenue. These results outpaced the company’s projections for the quarter.
Voice line equivalents sold in the second quarter were 54,227 and net lines installed increased by 31,986 to total 200,772 lines in service as of quarter’s end, all of which are 100% on-switch and on-net. This growth represents a 19% increase over the 168,786 lines in service at the end of the first quarter 2000, and a 124% increase over the 89,535 lines in service at the end of the second quarter of 1999.
"Our consistent execution and growing momentum is reflected in the fact that we have met or exceeded analysts’ expectations on all key operational and financial projections, all of which we’ve increased three times in the past six months," said Mpower Communications President and Chief Executive Officer Rolla P. Huff. "The positive trends in our business reinforce our fundamental business proposition of being a facilities-based, end-user focused, national provider of integrated voice and data communications over a high-speed two-way SDSL platform."
"Mpower remains an early-adopter and market leader in VoSDSL (Voice over Symmetrical Digital Subscriber Line) services," added Huff. "We are blazing trails for the rest of the industry in terms of technology applications, customer provisioning and working with the incumbent local exchange companies to provide SDSL-capable lines."
Mpower Second Quarter Highlights
National Facilities-Based Network Expansion
Mpower made significant progress in continuing its aggressive build-out of one of the largest facilities-based voice and data networks in the country. The company ended the quarter with 537 revenue ready central office collocations and 9 switches in service, up from 305 revenue ready collocations and 7 switches just three months ago. Its network footprint now reaches 28 major metropolitan areas, which represents an addressable market in excess of 21 million lines.
Looking ahead to its expansion into the Northeast later this year, Mpower announced the appointment of Paul Celuch as President of the Northeast Region. Celuch is building the sales and provisioning infrastructure to support the network build that will add key markets, such as New York City, Boston and Washington, D.C. to Mpower’s service territory by year’s end.
In June, Mpower completed the acquisition of St. Louis-based Primary Network, one of the largest data-centric communication providers in the Midwest. This transaction was value-added and accretive on all measures, bringing more than 400 employees and 100 collocations to Mpower’s footprint.
End User Business Customer Focus
Executing on its vision of delivering the power of the Internet to small and medium-size businesses, 92% of Mpower’s net lines installed in the second quarter were for business customers. This represents a 63% increase in business lines over the second quarter of 1999.
The company attributes this favorable shift to its compelling value proposition for businesses through the aggregation of voice and data services. In only the second quarter of VoSDSL commercial availability, Mpower reported that 6% of its business lines installed in the quarter were on its SDSL platform.
Mpower uses direct sales, service and provisioning teams to market these services to its target customer base. During the quarter, the company’s direct sales and service team was broadened to reach 549 personnel, including 355 quota-carrying sales representatives directly servicing the small and mid-size business market.
Integrated Data Services Strategy
In April, Mpower launched its data services strategy with the introduction of the Mpower business portal, which is designed to be a critical business destination for its customers. The company is populating the site with relevant content and commerce applications, such as payroll and vendor management services, that can increase productivity for its customers.
Mpower announced its initial partnerships with Application Service Providers including Biztro, Bizbuyer and inc.com. Since relaunching its Website as a business portal, the number of user sessions have increased dramatically, from 700 per month as of December 31, 1999 to nearly 13,000 per month as of June 30, 2000. User sessions on Mpower’s Internet site now average 16-19 minutes in duration.
Strong Financial Position
Mpower’s balance sheet remains strong, ending the second quarter with $770 million in cash.
During the quarter, the company completed a tender and exchange of a significant amount of its 2004 bonds for 2010 bonds, which is intended to further strengthen the company’s financial flexibility. Management believes Mpower’s current business plan is fully-funded through 2002, when the company projects to be cash-flow positive as measured by EBITDA for the full year.
On July 21, Mpower announced a three-for-two stock split to shareholders of record on July 31, 2000 and payable on August 28, 2000 in the form of a stock dividend. The split is designed to broaden Mpower’s stock float and encourage broader financial participation.
"We are exceptionally pleased with our overall progress during the second quarter, especially considering that our 20 percent revenue and line growth has essentially come from a ‘same store’ basis and against heightened expectations," added Huff. "With the capabilities we’re deriving from our integration of Primary, our new e-bonding interfaces with the ILECs, and the significant number of new markets we’ll be opening prior to the end of the year, we are very confident in the financial and operating potential for Mpower."
About Mpower Communications Corp.
Mpower Communications (a/k/a MGC Communications, Inc.) 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. The company currently operates in markets within Northern and Southern California, Chicago, Atlanta, Southern Florida and Las Vegas. Mpower ranked 12th in the Bloomberg Tech 100 listing of the fastest growing technology companies in the United States based on sales growth for the 1999 fiscal year. Further information about the company can be found at www.mpowercom.com.
Forward-Looking Statements
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 as a result of risks and uncertainties including, but not limited to, projections of future sales, returns on invested assets, regulatory approval processes, market conditions and other risks detailed from time to time in Mpower's Securities and Exchange Commission filings.
Mpower Communications Second Quarter Earnings Conference Call
| Date: | August 3, 2000 |
| Time: | 11:00 a.m. (Eastern Daylight Time) |
| Participants: | Rolla P. Huff, President and Chief Executive Officer
Michael R. Daley, Executive Vice President and Chief Financial Officer |
| Conference Call Number: | (800) 734-6471 |
A replay of the conference call will be available from Thursday, August 3, 2000 at 1:00 p.m. (ET) through Thursday, August 10, 2000 at 1:00 p.m. (ET) by dialing (800) 633-8284. The reservation number for the replay is 15667086.
(in thousands, except per share data) |
|
Three Months Ended June 30 |
Six Months Ended Jun 30 |
Statements of Operations (Excluding Primary Network)(1): |
|
|
2000 |
|
1999 |
|
2000 |
|
1999 |
Revenues |
|
|
$ 30,918
|
|
$11,485 |
|
$ 56,376
|
|
$ 19,886
|
Cost of operating revenues |
|
|
29,367 |
|
10,506
|
|
52,598 |
|
18,989 |
Selling, general & administrative |
|
|
34,403 |
|
9,197
|
|
57,543 |
|
16,924 |
Stock-based compensation |
|
|
(97) |
|
- |
|
1,479 |
|
-
|
Depreciation & amortization |
|
|
8,183 |
|
4,182
|
|
14,944 |
|
7,666 |
Loss from operations |
|
|
(40,938)
|
|
(12,400)
|
|
(70,188) |
|
(23,693) |
Net interest income/(expense) and other |
|
|
261 |
|
(3,137) |
|
4,167 |
|
(6,056) |
Net loss before extraordinary item |
|
|
(40,677) |
|
(15,537) |
|
(66,021) |
|
(29,749) |
Extraordinary loss from extinguishment of debt |
|
|
(19,547) |
|
- |
|
(19,547) |
|
-
|
Net loss after extraordinary item |
|
|
(60,224) |
|
(15,537)
|
|
(85,568) |
|
(29,749) |
Accrued preferred stock dividend |
|
|
(4,624) |
|
(729)
|
|
(7,631) |
|
(729) |
Value of preferred stock beneficial conversion feature |
|
|
-
|
|
(47,500) |
|
-
|
|
(47,500) |
Preferred stock accretion to redemption value |
|
(1,053)
|
|
(1,349)
|
|
(4,542) |
|
(1,349) |
Net loss applicable to common stockholders |
|
$(65,901) |
|
$(65,115)
|
|
$(97,741) |
|
$(79,327) |
Basic and diluted loss per share of common stock |
$(1.84) |
|
$(3.73) |
|
$(3.12) |
|
$(4.57) |
Loss per share attributable to extraordinary item |
$(0.55) |
|
-
|
|
$(0.62) |
|
-
|
Basic and diluted weighted average shares outstanding |
35,744 |
|
17,475
|
|
31,341 |
|
17,341 |
| |
|
|
|
|
|
|
|
|
|
|
|
EBITDA (2) |
|
|
$(32,852) |
|
$(8,218)
|
|
$(53,765) |
|
$(16,027) |
| |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
As of |
|
As of |
|
|
|
|
Selected Balance Sheet Data (including Primary Network)(1): |
|
|
June 30, 2000 |
December 31, 1999 |
|
|
Cash, cash equiv. & investments |
|
|
$764,092 |
|
$169,070
|
|
|
|
|
Restricted investments |
|
|
5,593 |
|
20,256
|
|
|
|
|
Property & equipment, net |
|
|
377,060
|
|
191,612
|
|
|
|
|
Current liabilities |
|
|
133,352 |
|
52,363
|
|
|
|
|
Long-term debt, net of current portion |
|
492,770
|
|
161,312
|
|
|
|
|
Redeemable preferred stock |
|
|
240,908 |
|
84,973 |
|
|
|
|
Stockholders' equity |
|
|
480,695
|
|
103,781
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
As of |
|
As of |
|
|
|
|
Selected Operational Statistics: |
|
|
June 30, 2000 |
December 31, 1999 |
|
|
| |
Switches in service (3) |
|
|
9 |
|
7
|
|
|
|
|
| |
Markets Served (4) |
|
|
28 |
|
13
|
|
|
|
|
| |
Collocated facilities revenue ready (4) |
|
|
537 |
|
245 |
|
|
|
|
| |
Number of employees (3) |
|
|
1,827 |
|
849
|
|
|
|
|
| |
Number of sales employees (3) |
|
|
549 |
|
187
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Lines in service (3): |
|
|
|
|
|
|
|
|
|
| |
|
Business |
|
|
149,482 |
|
95,511
|
|
|
|
|
| |
|
Residential |
|
|
51,290 |
|
47,153
|
|
|
|
|
| |
|
Total lines in service |
|
|
200,772
|
|
142,664
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
(1) On June 23, 2000, Mpower acquired Primary Network Holdings Inc. The acquisition was effectively recorded as of June 30, 2000 for accounting purposes, and the balance sheet of Primary as of that date is included herein. The results of operations of Primary will be included in results of operations of Mpower prospectively, effective July 1, 2000.
(2) 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.
(3) Excludes Primary Networks.
(4) Includes Primary Networks. |
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