Mpower Communications Reports Fourth Quarter and Year-End 2000 Results
- Fourth quarter revenue increased 12% sequentially; hits high end of guidance
- EBITDA loss for the quarter reduced to $50.8 million from $55.6 million; substantially surpasses expectations
- Lines in service increased by 36,225 for the quarter; exceeds expectations
ROCHESTER, NY - February 15, 2001 - Mpower Communications Corp. (NASDAQ: MPWR), a provider of broadband high-speed Internet access and telephony services to business customers, today announced results of its operations for the fourth quarter and year-ended December 31, 2000.
Fourth Quarter Results
Mpower reported revenue for the fourth quarter of $44.6 million, a 122% increase over fourth quarter 1999 revenue of $20.1 million, and a 12% increase sequentially over the third quarter of 2000 (excluding the one-time $6.2 million gain in switched access and reciprocal compensation reported in the third quarter). Mpower reported 16% sequential growth in its recurring core customer revenue in the fourth quarter (excluding switched access, reciprocal compensation and dial-up ISP revenue).
In the quarter, the company added a record 36,225 net lines to reach a total of 285,130 lines in service at the end of the year. This growth represents a 15% increase over the 248,905 lines in service at the end of the third quarter.
The company brought 53 central office collocations online in the fourth quarter and reported capital expenditures of $73.1 million in the quarter, $20 million under its guidance due to timing issues. The $20 million will be carried over and is added to Mpower's 2001 guidance. The company's gross margin increased 300 basis points to (1%) from (4%) in the third quarter.
Mpower posted an EBITDA (earnings before interest, taxes, stock-based compensation, depreciation and amortization and non-recurring network optimization cost) loss of $50.8 million for the quarter, an improvement of $4.8 million over third quarter (excluding one-time switched access and reciprocal compensation gain).
At the end of the third quarter Mpower initiated a number of cost control initiatives, including a plan to eliminate 339 collocations and delay its expansion into Northeast and Northwest markets. As a result of these efforts, the company reduced its selling, general and administrative (SG&A) costs as a percent of revenue to 113% in the fourth quarter from 136% in the third quarter.
Year-End 2000 Results
For the full year 2000, Mpower reported $146.9 million total revenue or $140.7 million in recurring revenue (excluding one-time switched access and reciprocal compensation gain), a 156% increase over the $55.1 million in revenue the company had in 1999.
Mpower's EBITDA loss for 2000 was $154.0 million, compared to a $39.8 million loss reported in 1999. The company netted 128,595 line additions for the full year 2000, a 90% increase in lines in service from year-end 1999. Mpower exited 2000 with $503 million in cash.
Mpower's integrated voice and data network now reaches 40 markets with 761 revenue ready central office collocations, 16 voice switches and 18 data switches. Selling into this network today is a direct sales force of 306 quota-carrying representatives who are exclusively dedicated to the small and mid-size business customer segment. Mpower ended 2000 with 82% of its lines from business customers, up from 67% a year ago.
"2000 was a year of dramatic growth in Mpower's network as we truly became a national company, growing from 13 to 40 markets and nearly tripling our addressable market," said Huff. "It's remarkable to note that since the majority of our new markets came online towards the very end of the year, we were able to more than double our revenue largely from the 13 markets we had in service at the end of 1999."
In order to present the company's financial performance in a format more closely aligned with its peers, Mpower has reclassified labor costs from network operations from the "Costs of operating revenues" category to "Selling, general and administrative" in its financial statements. This change results in reported gross margin of 6% for the fourth quarter and 18% for the full year, compared to 24% for the full year 1999.
2001 Focus on Core Business
"While our main focus in 2000 was building and expanding our footprint, in 2001 it is on operational excellence," Huff continued. "To us this means an unwavering commitment to strengthening our customer relationships and adding profitable revenue."
Across the country, Mpower is consolidating provisioning centers and standardizing provisioning processes to continue to improve its cost structure and enhance the service delivery experience for its customers. The company recently announced the addition of Steven A. Reimer as Senior Vice President of Customer Operations to oversee its service delivery operations on a national scale.
In addition, Mpower plans to further bolster its back office support structure with strategic investments in operating support systems that will enhance and further automate its customer relationship management, provisioning flow-through and network monitoring capabilities.
"Rescaling new market growth and adding scale to our existing footprint have enabled us to right-size our cost structure and significantly reduce our operating cash flow loss as a percent of revenue," stated Mpower Communications President and Chief Executive Officer Rolla P. Huff. "Given our focus on profitability and the state of the capital markets, we have made the decision to move the Northeast and Northwest collocations from deferred status to cancelled status. While we continue to see these markets as very attractive for future expansion, our first priority is leveraging the considerable footprint already in place and protecting our strong funding position."
Mpower is canceling its plans to enter 12 markets in the Northeast and Northwest, representing an additional 351 collocations. The company expects to take a charge of $20-24 million in the first quarter of 2001 associated with the investment it made in switch sites and collocations for these markets. Equipment will be redeployed for growth in the company's existing network. "This charge will have no impact on revenue, EBITDA or CapEx guidance," explained Huff. "Eliminating rental expenses for these collocations will actually improve our funding position."
Consistent with the company's business customer focus, earlier this month Mpower agreed to sell
its residential dial-up ISP business segment to EarthLink, Inc., a leading Internet Service Provider. Mpower acquired this ISP business through its acquisition of St. Louis-based Primary Network in
June of 2000. The quarterly revenue contribution from this dial-up ISP segment is approximately
$1.6 million. Mpower does not anticipate any effect on previously communicated revenue or
EBITDA guidance.
Long-Term Economic Model
Mpower recently filed an 8-K and has posted on its Website major assumptions and estimates on the economics of its business. This presentation can also be used to gain a better understanding of the fundamentals of the Competitive Local Exchange Carrier (CLEC) industry in general and can be found on the Internet at http://www.mpowercom.com/about/corpinfo/index.shtml.
"We have provided an in-depth view into each of the cost and revenue drivers required to create value in this industry," stated Huff. "After this exhaustive analysis, we believe now more than ever, that this is a great business and we hope that this information will provide investors with a tool to better compare and contrast various companies in our industry."
"As the results we've announced today and our guidance for the first quarter of 2001 will indicate, we have turned the corner on the up-front investments in our expansion and have put Mpower on a path toward positive operating cash flow," he concluded.
First Quarter and Full-Year 2001 Guidance
Also today, Mpower reiterated its financial guidance for full-year 2001 operating results and provided guidance for the first quarter. "We are pleased that while switched access rates will step down in the first quarter, the impact on total revenue will be offset by strong growth in our core customer revenue," said Huff. "We also expect to continue to improve our EBITDA results, even with the switched access step down. There will be no further material decline in switched access rates for the balance of the year."
|
4Q 2000 |
1Q 2001 |
YE 2001 |
|
(in millions) |
Sequential Growth |
(in millions) |
|
_____________________________________________
|
| Core Customer Revenue |
$27.3 |
11-13% |
$163-180 |
| Switched Access & Other |
$17.3 |
(21)-(18)% |
$47-50 |
| Total Revenue |
$44.6 |
(1)-1% |
$210-230 |
| |
| EBITDA * |
$(50.8) |
3-5% |
$(185)-(160) |
| CapEx |
$73.1 |
(32)-(25)% |
$105-120 |
* Earnings before interest, taxes, stock-based compensation, depreciation and amortization and non-recurring network optimization cost
Mpower Communications Fourth Quarter and Year-End Earnings Conference Call
Mpower will host a conference call today at 10:00 a.m. Eastern Standard Time, to further discuss its fourth quarter and year-end 2000 financial and operating results. The call is open to the public. The company's senior management team will also take this opportunity to discuss the operational and financial outlook for the first quarter and full-year 2001. The dial-in and replay information for the call is as follows:
| Date: |
February 15, 2001 |
| Time: |
10:00 a.m. (Eastern Standard Time) |
| Participants: |
Rolla P. Huff, President and Chief Executive Officer
Michael R. Daley, Executive Vice President and Chief Financial Officer |
| |
| Dial-in Number: |
1-800-550-7368, reference Mpower Fourth Quarter & Year-End Results |
| Webcast: |
A live audio Webcast is also available using Windows Media Player by visiting Mpower's Website at http://www.mpowercom.com/webcast. |
| |
| Replay Number: |
1-800-633-8284, reservation #: 17539611
Available 12:00 p.m. EST, 2/15/01 through 12:00 p.m. EST, 2/22/01 |
| Webcast Replay: |
The on-demand (replay) audio Webcast will be available on this Website through March 15, 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
December 31 |
Twelve
Months Ended
December 31 |
|
|
|
| Statements of
Operations: |
2000 |
1999 |
2000 |
1999 |
|
|
|
| Revenues (1) |
$ 44,580 |
$ 20,144 |
$ 146,862 |
$ 55,066 |
|
|
|
| Cost of
operating revenues |
42,039 |
15,499 |
119,767 |
42,078 |
|
|
|
| Selling, general
& administrative |
53,329 |
20,431 |
181,058 |
52,770 |
|
|
|
| Stock-based
compensation |
934 |
714 |
3,345 |
714 |
|
|
|
| Depreciation
& amortization |
18,973 |
6,515 |
50,975 |
18,921 |
|
|
|
| Non-recurring
network optimization cost |
- |
- |
12,000 |
- |
|
|
|
| Loss
from operations |
(70,695) |
(23,015) |
(220,283) |
(59,417) |
|
|
|
| Interest
income/(expense) and other extraordinary loss (2) |
(4,917) |
(2,010) |
(24,431) |
(10,352) |
|
|
|
| Net loss after
extraordinary item |
(75,612) |
(25,025) |
(244,714) |
(69,769) |
|
|
|
| Accrued
preferred stock dividend |
(4,614) |
(651) |
(16,889) |
(2,577) |
|
|
|
| Value of
preferred stock beneficial conversion feature |
- |
(25,000) |
- |
(72,500) |
|
|
|
| Preferred stock
accretion to redemption value |
(1,128) |
(3,344) |
(6,765) |
(6,133) |
|
|
|
| Net loss
applicable to common stockholders |
(81,354) |
(54,020) |
(268,368) |
(150,979) |
|
|
|
| |
| Basic and
diluted loss per share of common stock |
$ (1.44) |
$ (1.56) |
$ (5.20) |
$ (5.09) |
|
|
|
| Basic and
diluted weighted average shares outstanding |
56,479 |
34,584 |
51,631 |
29,663 |
|
|
|
| |
| EBITDA (3) |
$ (50,788) |
$ (15,786) |
$ (153,963) |
$ (39,782) |
|
|
|
| |
| (in thousands) |
|
|
|
|
|
|
|
| Selected Balance
Sheet Data: |
As of
December 31, 2000 |
As of
December 31, 1999 |
|
|
|
|
|
| Cash, cash
equiv. & investments |
$ 503,241 |
$ 169,070 |
|
|
|
|
|
| Restricted
investments |
1,065 |
20,256 |
|
|
|
|
|
| Property &
equipment, net |
482,265 |
191,612 |
|
|
|
|
|
| Current
liabilities |
134,048 |
52,363 |
|
|
|
|
|
| Long-term debt,
net of current portion |
476,659 |
161,312 |
|
|
|
|
|
| Redeemable
preferred stock |
244,886 |
84,973 |
|
|
|
|
|
| Stockholders'
equity |
316,867 |
103,781 |
|
|
|
|
|
| |
| Selected
Operational Statistics: |
As of
December 31, 2000 |
As of
December 31,1999 |
|
|
|
|
|
| |
Switches in service |
16 |
7 |
|
|
|
|
|
| |
Markets
Served |
40 |
13 |
|
|
|
|
|
| |
Collocated
facilities revenue ready |
761 |
245 |
|
|
|
|
|
| |
Number
of employees |
2,015 |
849 |
|
|
|
|
|
| |
Number
of sales employees |
279 |
187 |
|
|
|
|
|
| |
Lines
in service : |
|
|
|
|
|
|
|
| |
Business |
232,405 |
95,511 |
|
|
|
|
|
| |
Residential |
52,725 |
47,153 |
|
|
|
|
|
| |
Total lines in service |
285,130 |
142,664 |
|
|
|
|
|
| |
| Impact of Cost of Sale Reclassification (4): |
2000 |
1999 |
1998 |
| |
Q1 |
Q2 |
Q3 |
Q4 |
YTD |
YTD |
YTD |
| |
Gross margin % prior to reclassification |
9% |
5% |
10% |
(1%) |
5% |
9% |
6% |
| |
Gross margin % after reclassification |
26% |
32% |
18% |
6% |
18% |
24% |
42% |
| |
(1) Revenue for the twelve months ended December 31, 2000 includes the impact of $6.2M in one-time adjustments to increase revenue during Q3 2000 for switched access and reciprocal compensation.
(2) Twelve months ended December 31, 2000 includes $20.1M for extraordinary loss from extinguishment of debt, $45.9M of interest expense and $41.5M of interest income.
(3) 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.
(4) The company has reclassified network services personnel related expenses from cost of operating revenues into selling, general and administrative. Gross margin includes the impact of $6.2M in one-time adjustments to increase revenue during Q3 2000 for switched access and reciprocal compensation.
|
