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Mpower Holding Announces Fourth Quarter and Year End 2003 Results
ROCHESTER, NY—February 12, 2004—Mpower Holding Corporation (AMEX:MPE), the parent company of Mpower Communications Corp., a leading provider of broadband Internet access and telephone services to business customers, today announced results of its operations for the fourth quarter and year ended December 31, 2003.
"We are very pleased with the continued progress in our business in the fourth quarter. We reported positive Adjusted EBITDA for the second consecutive quarter as well as record gross margins," stated Mpower Holding Chairman and Chief Executive Officer Rolla P. Huff.
"Mpower has never been financially and operationally stronger than we are today," continued Huff. "I am also extremely pleased with the significant progress we are making in re-tooling our sales organization to drive organic revenue growth. We have increased quota-carrying headcount by 15% over year-end levels and we expect by the end of next month quota-carrying headcount will increase 40% relative to the beginning of the year."
Mpower reported revenue from continuing operations of $36.9 million for the fourth quarter of 2003, slightly higher than the third quarter of 2003 and 3% below the prior year quarter. For the full-year 2003, Mpower's revenue grew to $148.2 million, a 1% increase over the prior year. Core customer revenue was $32.7 million in the fourth quarter of 2003, flat versus the prior quarter and a 4% improvement over the fourth quarter of 2002. Core customer revenue increased 11% on an annual basis from $116.3 million for the full-year 2002 to $129.6 million for the full-year 2003 and represented 87% of the company's total revenue, more than offsetting the expected decline in switched access revenue.
Gross margin from continuing operations was $20.3 million or 55% of revenue in the fourth quarter of 2003, growing 6% sequentially and 14% higher than the fourth quarter of last year. Full-year 2003 gross margin from continuing operations was $72.7 million or 49% of revenue, an increase of 18% over the prior year.
Selling, general and administrative (SG&A) expenses from continuing operations were $18.6 million for the fourth quarter of 2003, slightly higher than the $18.1 million in SG&A reported in the prior quarter and a 20% improvement over the fourth quarter of 2002. SG&A for the full-year 2003 decreased to $77.4 million versus the prior year.
Adjusted EBITDA in the fourth quarter of 2003 increased to $1.6 million, 66% higher than the previous quarter and $7.0 million higher than the fourth quarter of 2002. The company reported a full-year Adjusted EBITDA loss of $4.7 million in 2003, a 90% improvement over the prior year.
Loss from continuing operations was $2.1 million in the current quarter, a 48% improvement over the fourth quarter of 2002. Mpower reduced its full-year loss from continuing operations by 95% to $19.8 million. The company's loss per share before discontinued operations was $0.01 in the current quarter and $0.27 for the full-year 2003.
For the fourth quarter of 2003, the company's net loss was $0.1 million compared to a $1.2 million net loss in the prior quarter. Mpower reduced its net loss for the full-year by 79%, reporting a net loss of $21.1 million. Net loss per share was $0.00 for the fourth quarter of 2003 and $0.31 for the full-year ended 2003.
Capital expenditures were $2.0 million in the fourth quarter of 2003 and $7.8 million for the full-year 2003. Mpower ended 2003 with $29.3 million in unrestricted cash, growing its unrestricted cash position 172% over year-end 2002. Although Mpower has a $7.5 million revolving receivables-based line of credit, it was not utilized at year-end.
Conference Call to Discuss Fourth Quarter and Year-End Results
Mpower will host a conference call to discuss its fourth quarter and year-end 2003 financial and operating results.
Date: | Thursday, February 12, 2004 |
Time: | 10:00 a.m. (Eastern time) |
Dial-in Number: | 1-866-769-3706 |
Replay Number: | 1-877-519-4471, PIN #4484777
From February 12 at 1:00 p.m. through February 19 at 5:00 p.m. Eastern |
FINANCIAL STATEMENTS
BALANCE SHEET (amounts in $ thousands) |
|
Mpower Holding
December 31, 2003 |
Mpower Holding
September 30, 2003 |
Mpower Holding
December 31, 2002 |
| Current Assets |
Cash & Cash Equivalents |
|
$29,307 |
$36,629 |
$10,773 |
Restricted Investments |
|
92 |
204 |
84 |
Accounts Receivable, net |
|
14,076 |
13,757 |
13,923 |
Other Receivables |
|
5,039 |
8,335 |
- |
Assets Held for Sale |
|
- |
- |
20,471 |
Prepaid Expenses and Other
Current Assets |
|
4,487 |
3,827 |
5,814 |
| |
|
|
Total Current Assets |
|
53,001 |
62,752 |
51,065 |
Property and Equipment, net |
|
33,762 |
35,597 |
38,497 |
Long-Term Restricted Investments |
|
9,537 |
9,561 |
13,547 |
Deferred Financing Costs, net |
|
- |
33 |
16 |
Intangibles, net |
|
8,948 |
10,094 |
13,530 |
Other Assets |
|
3,781 |
5,203 |
10,768 |
Total Assets |
|
$109,029 |
$123,240 |
$127,423 |
|
| Current Liabilities |
Current Maturities of Long-Term
Debt and Capital Leases |
|
$256 |
$1,460 |
$4,638 |
Line of Credit |
|
- |
3,725 |
- |
Accounts Payable |
|
15,754 |
18,467 |
23,462 |
Accrued Sales Tax Payable |
|
3,647 |
5,745 |
5,753 |
Accrued Property Taxes Payable |
|
2,818 |
3,527 |
3,030 |
Deferred Revenue |
|
4,696 |
4,699 |
3,183 |
Accrued Other Expenses |
|
13,406 |
17,225 |
14,352 |
| |
|
|
Total Current Liabilities |
|
40,577 |
54,848 |
54,418 |
Capital Lease Obligations |
|
- |
2 |
371 |
Long-Term Deferred Revenue |
|
2,211 |
2,064 |
1,497 |
| |
|
|
Total Liabilities |
|
42,788 |
56,914 |
56,286 |
Common stock |
|
78 |
78 |
65 |
Additional Paid-in Capital |
|
103,735 |
103,769 |
87,511 |
Accumulated Deficit |
|
(37,572) |
(37,521) |
(16,439) |
| |
|
|
Total Stockholders' Equity |
|
66,241 |
66,326 |
71,137 |
Total Liabilities and Stockholders' Equity |
|
$109,029 |
$123,240 |
$127,423 |
|
STATEMENT OF OPERATIONS
(amounts in $ thousands,
except share and per
share amounts) |
|
Reorganized
Mpower Holding
Three Months Ended
December 31, 2003 |
Reorganized
Mpower Holding
Three Months Ended
September 30, 2003 |
Reorganized
Mpower Holding
Three Months Ended
December 31, 2002 |
| Operating Revenues: |
Core Customer |
|
$32,655 |
$32,708 |
$31,311 |
Switched Access |
|
4,224 |
4,089 |
6,642 |
| |
|
|
Total Operating Revenues |
|
36,879 |
36,797 |
37,953 |
| |
Operating Expenses: |
|
|
|
|
Cost of Operating Revenues |
|
16,627 |
17,737 |
20,131 |
Selling, General and Administrative |
|
18,635 |
18,084 |
23,271 |
Reorganization Expense |
|
- |
- |
- |
Stock-Based Compensation
Expense |
|
41 |
43 |
57 |
Network Optimization Cost |
|
- |
(954) |
(6,390) |
Gain on Sale of Assets, net |
|
(267) |
(185) |
(16) |
Depreciation and Amortization |
|
3,961 |
4,121 |
4,998 |
| |
|
|
Total Operating Expenses |
|
38,997 |
38,846 |
42,051 |
| |
Loss from Continuing Operations |
|
(2,118) |
(2,049) |
(4,098) |
| |
(Loss) Gain on Sale of Investments, net |
|
- |
- |
(489) |
Gain (Loss) on Discharge of Debt |
|
- |
- |
35,030 |
Other income |
|
1,427 |
- |
- |
Interest Income |
|
63 |
40 |
371 |
Interest Expense |
|
(101) |
(102) |
(1,315) |
| |
|
|
(Loss) Income before
Discontinued Operations |
|
(729) |
(2,111) |
29,499 |
| |
Income (Loss) from Discontinued Operations |
|
678 |
922 |
(29,117) |
| |
Net (Loss) Income |
|
(51) |
(1,189) |
382 |
Accrued Preferred Stock Dividends |
|
- |
- |
- |
| |
Net (Loss) Income Applicable
to Common Stockholders |
|
($51) |
($1,189) |
$382 |
| |
Basic Weighted Average
Shares Outstanding |
|
78,213,486 |
65,762,792 |
64,999,025 |
Diluted Weighted Average
Shares Outstanding |
|
78,213,486 |
65,762,792 |
65,365,420 |
| |
Basic and Diluted (Loss)
Income per Share
Applicable to
Common Stockholders: |
|
|
|
|
(Loss) Income before Discontinued Operations |
|
($0.01) |
($0.03) |
$0.45 |
Income (Loss) from Discontinued Operations |
|
$0.01 |
$0.01 |
($0.44) |
Net (Loss) Income |
|
($0.00) |
($0.02) |
$0.01 |
| |
Gross Margin |
|
$20,252 |
$19,060 |
$17,822 |
Gross Margin (% of Revenue) |
|
54.9% |
51.8% |
47.0% |
| |
Adjusted EBITDA |
|
$1,617 |
$976 |
($5,449) |
Adjusted EBITDA (% of Revenue) |
|
4.4% |
2.7% |
-14.4% |
| |
RECONCILIATION TO GAAP (amounts in $ thousands) |
|
December 31, 2003 |
September 30, 2003 |
December 31, 2002 |
| |
Adjusted EBITDA |
|
$1,617 |
$976 |
($5,449) |
Depreciation and Amortization |
|
(3,961) |
(4,121) |
(4,998) |
Reorganization Expense |
|
- |
- |
- |
Network Optimization Cost |
|
- |
954 |
6,390 |
Gain on Sale of Assets, net |
|
267 |
185 |
16 |
Stock-Based Compensation Expense |
|
(41) |
(43) |
(57) |
| |
Loss from Continuing Operations |
|
(2,118) |
(2,049) |
(4,098) |
(Loss) Gain on Sale of Investments, net |
|
- |
- |
(489) |
Gain (Loss) on Discharge of Debt |
|
- |
- |
35,030 |
Other income |
|
1,427 |
- |
- |
Interest Income |
|
63 |
40 |
371 |
Interest Expense |
|
(101) |
(102) |
(1,315) |
| |
(Loss) Income before Discontinued Operations |
|
(729) |
(2,111) |
29,499 |
Income (Loss) from Discontinued Operations |
|
678 |
922 |
(29,117) |
Net (Loss) Income (GAAP) |
|
($51) |
($1,189) |
$382 |
| |
STATEMENT OF OPERATIONS
(amounts in $ thousands,
except share and per
share amounts) |
|
Reorganized
Mpower Holding
For the Year Ended
December 31, 2003 |
Reorganized
Mpower Holding
July 31, 2002 to
December 31, 2002 |
Reorganized
Mpower Holding
January 1, 2002 to
July 30, 2002 |
| Operating Revenues: |
Core Customer |
|
$129,563 |
$51,622 |
$64,714 |
Switched Access |
|
18,609 |
11,193 |
18,575 |
| |
|
|
Total Operating Revenues |
|
148,172 |
62,815 |
83,289 |
| |
Operating Expenses: |
|
|
|
|
Cost of Operating Revenues |
|
75,445 |
33,414 |
51,320 |
Selling, General and Administrative |
|
77,434 |
42,779 |
65,627 |
Reorganization Expense |
|
- |
- |
266,383 |
Stock-Based Compensation
Expense |
|
175 |
276 |
442 |
Network Optimization Cost |
|
(954) |
(6,390) |
19,000 |
Gain on Sale of Assets, net |
|
(534) |
(90) |
(91) |
Depreciation and Amortization |
|
16,369 |
7,987 |
28,620 |
| |
|
|
Total Operating Expenses |
|
167,935 |
77,976 |
431,301 |
| |
Loss from Continuing Operations |
|
(19,763) |
(15,161) |
(348,012) |
| |
(Loss) Gain on Sale of Investments, net |
|
- |
(539) |
4,326 |
Gain (Loss) on Discharge of Debt |
|
(102) |
35,030 |
315,310 |
Other income |
|
1,427 |
- |
- |
Interest Income |
|
199 |
963 |
3,237 |
Interest Expense |
|
(526) |
(2,539) |
(18,065) |
| |
|
|
(Loss) Income before
Discontinued Operations |
|
(18,765) |
17,754 |
(43,204) |
| |
Income (Loss) from Discontinued Operations |
|
(2,368) |
(34,193) |
(34,765) |
| |
Net (Loss) Income |
|
(21,133) |
(16,439) |
(77,969) |
Accrued Preferred Stock Dividends |
|
- |
- |
(3,974) |
| |
Net (Loss) Income Applicable
to Common Stockholders |
|
($21,133) |
($16,439) |
($81,943) |
| |
Basic Weighted Average
Shares Outstanding |
|
68,515,811 |
64,999,025 |
59,461,374 |
Diluted Weighted Average
Shares Outstanding |
|
68,515,811 |
65,247,708 |
59,461,374 |
| |
Basic and Diluted (Loss)
Income per Share
Applicable to
Common Stockholders: |
|
|
|
|
(Loss) Income before Discontinued Operations |
|
($0.27) |
$0.27 |
($0.79) |
Income (Loss) from Discontinued Operations |
|
($0.04) |
($0.52) |
($0.59) |
Net (Loss) Income |
|
($0.31) |
($0.25) |
($1.38) |
| |
Gross Margin |
|
$72,727 |
$29,401 |
$31,969 |
Gross Margin (% of Revenue) |
|
49.1% |
46.8% |
38.4% |
| |
Adjusted EBITDA |
|
($4,707) |
($13,378) |
($33,658) |
Adjusted EBITDA (% of Revenue) |
|
-3.2% |
-21.3% |
-40.4% |
| |
RECONCILIATION TO GAAP (amounts in $ thousands) |
|
December 31, 2003 |
July 31, 2002 to
December 31, 2002 |
January 1, 2002 to
July 30, 2002 |
| |
Adjusted EBITDA |
|
($4,707) |
($13,378) |
($33,658) |
Depreciation and Amortization |
|
(16,369) |
(7,987) |
(28,620) |
Reorganization Expense |
|
- |
- |
(266,383) |
Network Optimization Cost |
|
954 |
6,390 |
(19,000) |
Gain on Sale of Assets, net |
|
534 |
90 |
91 |
Stock-Based Compensation Expense |
|
(175) |
(276) |
(442) |
| |
Loss from Continuing Operations |
|
(19,763) |
(15,161) |
(348,012) |
(Loss) Gain on Sale of Investments, net |
|
- |
(539) |
4,326 |
Gain (Loss) on Discharge of Debt |
|
(102) |
35,030 |
315,310 |
Other income |
|
1,427 |
- |
- |
Interest Income |
|
199 |
963 |
3,237 |
Interest Expense |
|
(526) |
(2,539) |
(18,065) |
| |
(Loss) Income before Discontinued Operations |
|
(18,765) |
17,754 |
(43,204) |
Income (Loss) from Discontinued Operations |
|
(2,368) |
(34,193) |
(34,765) |
Net (Loss) Income (GAAP) |
|
($21,133) |
($16,439) |
($77,969) |
| |
Use of Non-GAAP Financial Information
The SEC has adopted rules (Regulation G) regulating the use of non-GAAP financial measures. Because of Mpower's use of a non-GAAP financial measure, Adjusted EBITDA, to supplement our consolidated financial statements presented on a GAAP basis, Regulation G requires us to include in this press release a presentation of the most directly comparable GAAP measure, which is Net (Loss) Income, and a reconciliation of the two measures. We have presented a reconciliation of the two measures for each of the periods presented above. The non-GAAP measure we utilize (Adjusted EBITDA) provides an enhancement to an overall understanding of our past financial performance and our prospects for the future as well as useful information to investors because of (i) the historical use by Mpower of Adjusted EBITDA as a performance measurement; (ii) the value of Adjusted EBITDA as a measure of performance before gains, losses or other charges considered to be outside the company's core business operating results; and (iii) the use of the Adjusted EBITDA, or a similar term, by almost all companies in the CLEC sector as a measurement of performance. We have excluded from our presentation of Adjusted EBITDA network optimization costs (which are costs resulting principally from the closure of certain of our markets), stock-based compensation expenses (which are costs related to stock options issued with an exercise price below fair market value), gains on sales of assets, gains or losses on investments, reorganization expenses and gain on discharge of debt, other income because we do not believe that including such items in Adjusted EBITDA provides investors with an appropriate measure of determining Mpower's performance in its core business. Mpower's utilization of non-GAAP measurements is not meant to be considered in isolation or as a substitute for net loss, loss from continuing operations, cash flow and other measures of financial performance prepared in accordance with GAAP. Adjusted EBITDA is not a GAAP measurement and Mpower's use of it may not be comparable to similarly titled measures employed by other companies in the telecommunications industry.
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. A copy of this press release and 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, future sales growth, 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 growth and maintain a high level of customer service, the performance of our network and equipment, our ability to enter into strategic alliances or transactions, 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 our 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.
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