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Mpower Holding Reports Second Quarter 2002 Results
- EBITDA loss improved by $22.7 million; reduced by approximately 52% year-over-year
- Seventh consecutive quarter of EBITDA improvement
- Gross margin for the quarter nearly tripled over second quarter 2001
- Normalized core customer revenue for the quarter grew by 51% over second quarter 2001
ROCHESTER, NY — August 9, 2002— Mpower Holding Corporation (AMEX:MPE), the parent company of Mpower Communications Corp., a provider of broadband high-speed Internet access and telephone services to business customers, today announced results of its operations for the second quarter ended June 30, 2002.
Mpower reported second quarter revenue of $56.9 million, an 8% increase over the first quarter. Fueling this improvement is growth in the company's core customer revenue, which increased in the quarter to $46.3 million, an 11% improvement over the first quarter and an increase of 36% over the second quarter of 2001. The company's revenue from continuing operations grew 24% over the second quarter of 2001 and core customer revenue from continuing operations improved by 51% over the same period.
Core customer revenue, which includes revenue from the sale of Internet and telephone services, accounted for 81% of the company's total revenue this quarter, up from 69% in the second quarter of 2001. Switched access accounted for the remaining 19% of the company's total revenue in the second quarter.
Gross margin as a percent of revenue has more than doubled compared to second quarter 2001, marking the company's sixth sequential quarter of gross margin improvement. Mpower reported gross margin of 35% in the second quarter, advancing from 25% last quarter and 14% from second quarter 2001.
The company also showed improvement in selling, general and administrative (SG&A) costs, which were $41.4 million in the second quarter or 73% of revenue, compared to 80% of revenue reported in the first quarter of 2002 and 104% of revenue in the year-ago quarter.
Mpower narrowed its EBITDA (earnings before interest, taxes, stock-based compensation, depreciation and amortization) loss in the second quarter by more than $22 million over the second quarter of 2001, a 52% annual improvement and the company's seventh sequential quarter of operating cash flow improvement. EBITDA loss was $21.3 million in the quarter compared to a $28.9 million loss in the prior quarter and a $43.9 million loss in the second quarter of 2001. EBITDA in this quarter excludes network optimization and reorganization costs.
Through a pre-negotiated recapitalization plan completed last month, Mpower successfully reduced its debt by nearly 90% to just over $57 million, which is comprised of the face value of Senior Notes and capital leases. As a result of its recapitalization, Mpower Holding will implement "fresh start" accounting rules in the third quarter. These rules require Mpower Holding to revalue its assets and liabilities on a consolidated basis to current fair value, re-establish stockholders' equity as of the reorganization value determined in connection with the recapitalization plan, and report any differences between the reorganization value and asset values as changes to goodwill. The company expects that the adoption of fresh start reporting will have a material effect on Mpower Holding's consolidated financial statements. As a result, Mpower Holding's consolidated financial statements published for periods following July 30, 2002 will not be comparable with those prepared before July 30, 2002.
Mpower ended the second quarter with $91.5 million in unrestricted cash, cash equivalents and investments. As a result of its recapitalization, certain pre-petition and post-petition liabilities of the company totaling approximately $17 million had not been paid as of the end of the quarter and therefore the associated use of cash is not reflected in its second quarter-ending cash balance. The company expects its accounts payable to be reduced in the third quarter as such liabilities are paid and accordingly reflected in the company's third quarter cash balance.
"We are pleased with our financial results, given the challenging economic and industry conditions and continuing competitive pressures. Our DSL and T1 service offerings have quickly become our most popular and most profitable products with 17% of our business customers on one of our data service delivery platforms," stated Mpower Communications Chief Executive Officer Rolla P. Huff. "Through our recapitalization process, we have proven once again our willingness and ability to make the tough, yet smart decisions and have improved our financial position as a result. Our attention is now fully focused on attracting and retaining customers, pursuing ongoing operational improvement opportunities and exploring additional funding alternatives as we strive to scale our business to profitability."
Second Quarter Conference Call
Mpower will host a conference call today to discuss its second 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: | August 9, 2002 |
Time: | 10:00 a.m. (Eastern Time) |
Dial-in Number: | 1-888-391-0082, reference Mpower Second Quarter 2002 Results |
Replay Number: | 1-800-633-8284, reservation # 20793439
Available 12:00 p.m. EST, 8/9/02 through 12:00 p.m. EST, 8/16/02 |
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. 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, market makers independent decisions to create a market in the common stock of the recapitalized company, future sales growth, market acceptance of our product offerings, our ability to secure adequate financing or equity capital to fund our operations, network expansion and proposed recapitalization plan, our ability to manage rapid growth and maintain a high level of customer service, the performance of our network and equipment, our ability to enter into strategic alliances, 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. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of future events, new information, or otherwise.
| (in
thousands, except per share data) |
Three Months Ended June 30 (4) |
Six Months Ended June 30 (4) |
| Statements of Operations: |
2002 |
2001 |
2002 |
2001 |
| Operating revenues |
$ 56,907 |
$ 49,225 |
$ 109,728 |
$ 95,431 |
| Cost of operating revenues |
36,802 |
42,191 |
76,377 |
82,763 |
| Selling |
13,368 |
16,886 |
28,281 |
32,768 |
| General & administrative |
27,993 |
34,096 |
55,210 |
70,586 |
| Stock-based compensation expense |
141 |
933 |
342 |
1,867 |
| Reorganization expense |
20,702 |
- |
20,702 |
- |
| Network optimization cost |
- |
209,083 |
19,000 |
233,083 |
| Depreciation & amortization |
17,858 |
22,476 |
35,306 |
44,045 |
| Loss from operations |
(59,957) |
(276,440) |
(125,490) |
(369,681) |
| Net interest income/(expense), other |
(1,961) |
(8,246) |
(10,152) |
(13,512) |
| Net loss before extraordinary item |
(61,918) |
(284,686) |
(135,642) |
(383,193) |
| Extraordinary item |
- |
32,322 |
- |
32,322 |
| Net loss |
(61,918) |
(252,364) |
(135,642) |
(350,871) |
| Accrued preferred stock dividend |
(340) |
(4,696) |
(3,974) |
(14,419) |
| Net loss applicable to common stockholders |
$ (62,258) |
$ (257,060) |
$ (139,616) |
$ (365,290) |
| Basic and diluted loss per share of common stock |
$ (1.05) |
$ (4.32) |
$ (2.35) |
$ (6.17) |
| Earnings per share attributable to extraordinary item |
$ - |
$ 0.54 |
$ - |
$ 0.55 |
| Basic and diluted weighted average shares outstanding |
59,465 |
59,436 |
59,459 |
59,207 |
| |
| EBITDA (1) (2) |
$ (21,256) |
$ (43,948) |
$ (50,140) |
$ (90,686) |
| |
| (in thousands) |
|
|
| Selected Balance Sheet Data: |
As of
June 30, 2002 |
As of
December 31, 2001 |
|
|
| Cash, cash equiv. & investments |
$ 91,451 |
$ 170,280 |
|
|
| Restricted investments |
11,074 |
12,640 |
|
|
| Property & equipment, net |
346,820 |
385,872 |
|
|
| Total current liabilities (3) |
492,916 |
95,338 |
|
|
| Long-term debt, net of current portion |
50,540 |
422,957 |
|
|
| Redeemable preferred stock |
204,379 |
202,830 |
|
|
| Stockholders' deficit |
(249,176) |
(107,478) |
|
|
| |
| Selected Operational Statistics: |
As of
June 30, 2002 |
As of
December 31, 2001 |
As of
June 30, 2001 |
|
| |
Switches in service |
15 |
16 |
16 |
|
| |
Markets Served |
27 |
28 |
28 |
|
| |
Collocated facilities revenue ready |
578 |
594 |
603 |
|
| |
Number of employees |
1,689 |
1,995 |
2,030 |
|
| |
Number of direct sales employees |
351 |
458 |
380 |
|
| |
Lines in service : |
|
|
|
|
| |
Business |
372,194 |
342,459 |
286,385 |
|
| |
Residential |
44,663 |
48,914 |
51,035 |
|
| |
Total lines in service |
416,857 |
391,373 |
337,420 |
|
| |
(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. Network optimization costs and reorganization costs are also excluded from this measure.
(2) For the quarter ended March 31, 2002, G&A included $2.5 million of professional fees associated with our recapitalization and is included in EBITDA. For the quarter ended June 30, 2002, these professional fees are excluded from G&A and are disclosed separately as reorganization expense in accordance with applicable accounting standards.
(3) As of June 30, 2002, $371.0 million of our 13% Senior Notes due 2010 have been classified within current liablities in accordance with applicable accounting standards.
(4) Certain reclassifications, which have no effect on net loss or EBITDA, have been made in the prior period financial statements to conform with current presentation.
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