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Mpower Holding Reports Third Quarter 2002 Results
- EBITDA loss narrowed 48% year-over-year; eight consecutive quarters of improvement.
- Gross margin more than doubled and core customer revenue increased 40% over third quarter 2001.
- Debt restructuring completed, 90% of debt removed from balance sheet.
ROCHESTER, NY—November 7, 2002—Mpower Holding Corporation (NASD OTC: MPOW), 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 third quarter ended September 30, 2002.
On July 30, 2002, Mpower completed its recapitalization plan and reduced its debt by nearly 90%. Effective with the recapitalization plan, Mpower formed a reorganized entity for financial reporting purposes and implemented "fresh start" accounting rules. As a result, Mpower Holding's consolidated financial statements published for the third quarter 2002 have been separately reported under "Predecessor Mpower" for the period of July 1 through July 30, 2002, and "Reorganized Mpower" for the period of July 31 through September 30, 2002. The company's third quarter 2002 operating results are derived by adding the results of Predecessor Mpower and Reorganized Mpower.
Also in accordance with fresh start accounting rules, Mpower recorded a $244.7 million reorganization charge in the quarter to reflect the adjustment in its assets and liabilities on a consolidated basis to current fair value. In addition, the company recorded a $315.3 million gain on the cancellation of bondholder debt under the recapitalization plan.
For the third quarter 2002, Mpower's revenue grew to $57.3 million, a 16% increase over the same period last year. Core customer revenue, or revenue from the sale of Internet and telephone services, improved 40% year-over-year to $49.0 million in the quarter. Core customer revenue represented 86% of the company's total revenue this quarter, up from 71% in the third quarter of 2001, with switched access accounting for the remaining 14% of the company's total revenue in the quarter. Mpower ended the quarter with 16% of its business customers on one of its data service delivery platforms.
The third quarter marked Mpower's seventh sequential quarter of gross margin improvement. Gross margin was 40% in the third quarter, up from 35% last quarter and 23% in the year-ago quarter. Gross margin as a percent of revenue nearly doubled over the third quarter 2001, while the company's selling, general and administrative (SG&A) costs as a percent of revenue continued to decline. Mpower's SG&A costs in the quarter were $40.4 million or 70% of revenue compared to 92% of revenue in the year-ago quarter.
This progress led to the company's eighth sequential quarter of operating cash flow improvement. Mpower's EBITDA was reduced to $17.7 million in the third quarter compared to a $21.3 million loss in the prior quarter and improved by 48% over the $34.2 million loss reported in the third quarter of 2001. EBITDA represents earnings before interest, taxes, stock-based compensation, depreciation and amortization and excludes network optimization and reorganization costs.
Mpower ended the third quarter with $56.8 million in unrestricted cash, cash equivalents, and investments.
"We continue to make progress towards closing our profitability gap and have nearly cut our EBITDA loss in half over the past year. We now have two years of consistent improvements in both EBITDA and gross margin," stated Mpower Communications Chairman and Chief Executive Officer Rolla P. Huff. "We are also pleased with the interest and progress we are making as we continue to diligently pursue additional funding alternatives and strategic options."
Third Quarter Conference Call
Mpower will host a conference call today to discuss its third 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: | November 7, 2002 |
Time: | 10:00 a.m. (Eastern Time) |
Dial-in Number: | 1-800-840-6219, reference Mpower Third Quarter 2002 Results |
Replay Number: | 1-800-633-8284, reservation # 20956373
Available 12:00 p.m. EST, 11/7/02 through 12:00 p.m. EST, 11/14/02 |
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, 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) |
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| Statements of Operations: |
Reorganized Mpower July 31, 2002 to September 30, 2002 |
Predecessor Mpower July 1, 2002 to July 30, 2002 |
Predecessor Mpower Three Months Ended September 30, 2001 (4) |
Reorganized Mpower July 31, 2002 to September 30, 2002 |
Predecessor Mpower January 1, 2002 to July 30, 2002 |
Predecessor Mpower Nine Months Ended September 30, 2001 (4) |
| Operating revenues |
$ 38,485 |
$ 18,843 |
$ 49,477 |
$ 38,485 |
$ 128,571 |
$ 144,908 |
| Cost of operating revenues |
22,799 |
11,847 |
38,282 |
22,799 |
88,225 |
121,045 |
| Selling, general & administrative |
27,830 |
12,555 |
45,396 |
27,830 |
96,045 |
148,750 |
| Stock-based compensation expense |
219 |
100 |
639 |
219 |
442 |
2,506 |
| Reorganization expense |
- |
245,681 |
- |
- |
266,383 |
- |
| Network optimization cost |
- |
- |
- |
- |
19,000 |
233,083 |
| Depreciation & amortization |
3,850 |
6,038 |
15,151 |
3,850 |
41,344 |
59,196 |
| Loss from operations |
(16,213) |
(257,378) |
(49,991) |
(16,213) |
(382,868) |
(419,672) |
| Net interest income/(expense), other |
(608) |
(259) |
(7,982) |
(608) |
(10,411) |
(21,494) |
| Net loss before extraordinary item |
(16,821) |
(257,637) |
(57,973) |
(16,821) |
(393,279) |
(441,166) |
| Extraordinary item |
- |
315,310 |
- |
- |
315,310 |
32,322 |
| Net income (loss) |
(16,821) |
57,673 |
(57,973) |
(16,821) |
(77,969) |
(408,844) |
| Accrued preferred stock dividend |
- |
- |
(3,600) |
- |
(3,974) |
(18,020) |
| Net income (loss) applicable to common stockholders |
$ (16,812) |
$ 57,673 |
$ (61,573) |
$ (16,821) |
$ (81,943) |
$ (426,864) |
| Basic and diluted income (loss) per share of common stock |
$ (0.26) |
$ 0.97 |
$ (1.04) |
$ (0.26) |
$ (1.38) |
$ (7.22) |
| Earnings per share attributable to extraordinary item |
$ - |
$ 5.30 |
$ - |
$ - |
$ 5.30 |
$ 0.55 |
| Basic and diluted weighted average shares outstanding |
64,999 |
59,465 |
59,469 |
64,999 |
59,461 |
59,142 |
| |
| EBITDA (1) (2) (3) |
$ (12,144) |
$ (5,559) |
$ (34,201) |
$ (12,144) |
$ (55,699) |
$ (124,887) |
| |
| (in thousands) |
|
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| Selected Balance Sheet Data: |
As of
September 30, 2002 |
As of
December 31, 2001 |
|
|
|
|
| Cash, cash equiv. & investments |
$ 56,751 |
$ 170,280 |
|
|
|
|
| Restricted investments |
10,769 |
12,640 |
|
|
|
|
| Property & equipment, net |
74,764 |
385,872 |
|
|
|
|
| Total current liabilities |
85,338 |
95,338 |
|
|
|
|
| Long-term debt, net of current portion |
51,094 |
422,957 |
|
|
|
|
| Redeemable preferred stock |
|
202,830 |
|
|
|
|
| Stockholders' equity (deficit) |
70,422 |
(107,478) |
|
|
|
|
| |
| Selected Operational Statistics: |
As of
September 30, 2002 |
As of
December 31, 2001 |
As of
September 30, 2001 |
|
|
|
| |
Switches in service |
15 |
16 |
16 |
|
|
|
| |
Markets Served |
27 |
28 |
28 |
|
|
|
| |
Collocated facilities revenue ready |
568 |
594 |
603 |
|
|
|
| |
Number of employees |
1,673 |
1,995 |
2,024 |
|
|
|
| |
Number of direct sales employees |
373 |
458 |
432 |
|
|
|
| |
Lines in service : |
|
|
|
|
|
|
| |
Business |
370,163 |
342,459 |
310,080 |
|
|
|
| |
Residential |
36,960 |
48,914 |
49,156 |
|
|
|
| |
Total lines in service |
407,123 |
391,373 |
359,236 |
|
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(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 expenses are also excluded from this measure.
(2) For the periods January 1, 2002 to April 7, 2002, and July 31, 2002 to September 30, 2002, SG&A included $2.5 million and $3.7 million, respectively, of professional fees associated with our recapitalization and are included in EBITDA.
(3) Professional fees incurred from April 8, 2002 to July 30, 2002, associated with our recapitalization are excluded from SG&A and are disclosed separately as reorganization expense 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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