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Mpower Holding Reports Fourth Quarter and Year-End 2001 Results
- Outperformed guidance on revenue and operating cash flow loss
- Fifth sequential quarter of operating cash flow improvement; EBITDA loss reduced to $30.4 million for the quarter and $155.3 million for the full year
- Core customer revenue increased 71% in 2001 to $135.8 million for the year
ROCHESTER, NY — February 7, 2002— Mpower Holding Corporation, the parent company of Mpower Communications Corp. (NASDAQ: MPWR), a provider of broadband high-speed Internet access and telephone services to business customers, today announced results of its operations for the fourth quarter and year ended December 31, 2001.
Fourth Quarter 2001 Results
For the fourth quarter of 2001, Mpower reported revenue of $49.6 million, a 25% increase from the fourth quarter of 2000 on a normalized basis for continuing operations. This quarterly revenue reflects 3% sequential growth in the company's core customer revenue, which increased to $36.2 million in the fourth quarter. Core customer revenue excludes switched access.
Switched access revenue accounted for 27% of the company's total revenue in the fourth quarter, down from 29% in the third quarter and 35% in the fourth quarter of 2000. The step down in switched access revenue as a percent of total revenue is expected to continue as a result of an FCC ruling last summer and contracts the company holds with major carriers.
Mpower's gross margin for the fourth quarter was 24%, a slight improvement from the prior quarter due to an increase in new customer additions that was partially offset by the reduction in switched access rates. Mpower's selling, general and administrative (SG&A) costs were reduced by $3.3 million to $42.4 million in the fourth quarter or 85% of revenue, compared to 92% of revenue reported in the third quarter.
Contributing to the absolute dollar and percentage improvements in gross margin and SG&A expenses were the company's efforts to align its cost structure with current market conditions as it scaled back to support its 28 core market footprint. These cost efficiencies also reflect the continued acquisition of new customer revenue on higher margin data platforms. Mpower has approximately 14% of its business customers on one of its data service delivery platforms.
During the fourth quarter, Mpower's 15 newer markets accounted for 15% of revenue, up from 10% in the prior quarter. The company expects to continue to build scale in these newer markets and as a result drive even greater gross margin improvements in 2002.
Mpower reduced its EBITDA (earnings before interest, taxes, stock-based compensation, depreciation and amortization) loss to $30.4 million for the fourth quarter from a $34.2 million loss in the third quarter and a $50.8 million loss in the fourth quarter of 2000. This marks the company's fifth sequential quarter of operating cash flow improvement.
"Quarter after quarter we have demonstrated sustained and consistent progress on key metrics in the business over the past year and a half. Since the fall of 2000, we have taken a number of significant steps to size the business appropriately. We are pleased with the positive trend in operational and financial results, especially in light of the difficult economic environment," said Mpower Communications Chief Executive Officer Rolla P. Huff. "Already in 2002, we are excited with the opportunities our new T1 platform affords and see the early product acceptance, growth in new markets and reduction in business churn as positive indicators of the continuing momentum in our business."
During the fourth quarter, Mpower significantly expanded its new T1 platform and augmented a majority of the company's network collocations to support its T1 product, MpowerOffice. T1 overcomes the distance and fiber limitations of DSL, provides guaranteed bandwidth for customers and significantly increases the addressable market of each collocation.
The T1 platform and product set are designed to serve a larger size business customer and improve the company's average revenue per customer and customer retention. Mpower has made progress in the area of customer retention, with churn from business customers reaching its lowest point of the year at 2.8% in the fourth quarter, down from 3.1% in the prior quarter.
Year-End 2001 Results
For the full year 2001, Mpower reported $195.7 million in total revenue, a 33% increase over full year 2000 revenue. Mpower's core customer revenue increased by 71% year over year. The company's gross margin was 19% for the year as it started to recognize the benefits of bringing its newer markets into economies of scale.
SG&A as a percent of revenue declined in 2001 to 98%, versus 123% of revenue in 2000. In conjunction with a number of expense reduction measures, this improvement was accomplished while also increasing the percentage of quota-carrying employees of Mpower. At year-end, 23% of the company's approximately 2,000 employees were commissioned salespeople, up from 14% one year ago.
Mpower's EBITDA loss for 2001 was $155.3 million, compared to a $154.0 million EBITDA loss in 2000.
Despite the positive trends in operational and financial results, Mpower still faces liquidity and cash flow concerns. After capital expenditures of $14 million in the fourth quarter, Mpower ended the year with $183 million in cash, cash equivalents, and restricted and unrestricted investments. Mpower continues to work with its financial advisor, Rothschild Inc., to evaluate additional sources of funding and other financial restructuring strategies to strengthen its balance sheet. Since the fourth quarter of last year, Mpower has been in discussions with an ad hoc committee of certain holders of its 2010 Senior Notes and the committee's legal and financial advisors regarding a potential financial restructuring; however, to date no agreement has been reached.
Mpower has also had preliminary discussions with existing and potential equity and debt investors regarding additional capital investments in the company. Due to a number of factors, including the uncertainty regarding the timing and manner of any financial restructuring and current market conditions, Mpower can no longer confirm its prior guidance of having sufficient cash to fund its operations into the first quarter of 2003.
Fourth Quarter and Year-End Conference Call
Mpower will host a conference call at 10:00 a.m. Eastern Standard Time today to discuss its fourth quarter and year-end 2001 financial and operating results. The call is open to the public. The dial-in and replay information for the call is as follows:
| Date: |
February 7, 2002 |
| Time: |
10:00 a.m. (Eastern Time) |
| Participants: |
Rolla P. Huff, Chief Executive Officer
Michael R. Daley, Executive Vice President and Chief Financial Officer
Joseph M. Wetzel, President and Chief Operating Officer |
| |
| Dial-in Number: |
1-888-209-4007, reference Mpower Fourth Quarter Results |
| |
| Replay Number: |
1-800-633-8284, reservation # 20259581
Available 12:00 p.m. EST, 2/7 through 12:00 p.m. EST, 2/14 |
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 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 reduce our outstanding indebtedness, 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 |
Year Ended
December 31 |
| Statements of Operations: |
2001 |
2000 |
2001 |
2000 |
| Revenues |
$ 49,630 |
$ 44,581 |
$ 195,695 |
$146,862 |
| Cost of operating revenues |
37,664 |
42,040 |
158,709 |
119,767 |
| Sales & marketing |
14,487 |
17,024 |
62,352 |
61,969 |
| General & administrative |
27,907 |
36,304 |
129,949 |
119,089 |
| Stock-based compensation |
575 |
933 |
3,081 |
3,345 |
| Depreciation & amortization |
16,922 |
18,972 |
76,118 |
50,975 |
| Non-recurring network optimization cost |
- |
- |
233,083 |
12,000 |
| Loss from operations |
(47,925) |
(70,692) |
(467,597) |
(220,283) |
| Net interest income/(expense), other |
(10,971) |
(4,399) |
(32,465) |
(4,366) |
| Net loss before extraordinary item |
(58,896) |
(75,091) |
(500,062) |
(224,649) |
| Extraordinary item |
- |
(518) |
32,322 |
(20,065) |
| Net loss |
(58,896) |
(75,609) |
(467,740) |
(244,714) |
| Accrued preferred stock dividend |
(3,762) |
(4,614) |
(21,782) |
(16,889) |
| Preferred stock accretion to redemption value |
- |
(1,128) |
- |
(6,765) |
| Net loss applicable to common stockholders |
$ (62,658) |
$ (81,351) |
$ (489,522) |
$ (268,368) |
| |
| Basic and diluted loss per share of common stock |
$ (1.06) |
$ (1.44) |
$ (8.27) |
$ (5.20) |
| Earnings (loss) per share attributable to extraordinary item |
$ - |
$ (0.01) |
$ 0.55 |
$ (0.39) |
| Basic and diluted weighted average shares outstanding |
59,391 |
56,479 |
59,205 |
51,631 |
| |
| EBITDA (1) |
$ (30,428) |
$ (50,787) |
$ (155,315) |
$ (153,963) |
| |
| (in thousands) |
|
|
|
|
| Selected Balance Sheet Data: |
As of
December 31, 2001 |
As of
December 31, 2000 |
|
|
| Cash, cash equiv. & investments |
$ 170,280 |
$ 503,241 |
|
|
| Restricted investments |
12,640 |
1,065 |
|
|
| Property & equipment, net |
383,176 |
482,265 |
|
|
| Current liabilities |
92,642 |
134,048 |
|
|
| Long-term debt, net of current portion |
422,957 |
476,659 |
|
|
| Redeemable preferred stock |
202,878 |
244,886 |
|
|
| Stockholders' equity |
(107,526) |
316,867 |
|
|
| |
| Selected Operational Statistics: |
As of
December 31, 2001 |
As of
December 31, 2000 |
|
|
| |
Switches in service |
16 |
16 |
|
|
| |
Markets Served |
28 |
40 |
|
|
| |
Collocated facilities revenue ready |
594 |
761 |
|
|
| |
Number of employees |
1,995 |
2,015 |
|
|
| |
Number of direct sales employees |
458 |
279 |
|
|
| |
Lines in service : |
|
|
|
|
| |
Business |
342,459 |
232,405 |
|
|
| |
Residential |
48,914 |
52,725 |
|
|
| |
Total lines in service |
391,373 |
285,130 |
|
|
| |
(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. Non-recurring network optimization costs and extraordinary items are excluded from this measure.
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|
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