Mpower Holding Announces Adjusted EBITDA Positive Results for Third
Quarter 2003; Net Loss Improves 75% over Second Quarter 2003
ROCHESTER, N.Y., Nov. 6 /PRNewswire-FirstCall/ -- Mpower Holding
Corporation (BULLETIN BOARD: MPOW) , 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 third quarter ended
September 30, 2003. "Achieving positive Adjusted EBITDA results
this quarter is another important step on our path towards
sustainable cash flow growth," said Mpower Communications Chairman
and Chief Executive Officer Rolla P. Huff. "Our financial and
operational progress was recognized during the quarter by a $17.5
million equity investment in our company. We believe this
investment reflects the value in Mpower's facilities-based network
and strong debt-free balance sheet, and directly supports our clear
strategy for profitable growth." Mpower expects to use the new
capital to raise its growth profile primarily by investing in
additional sales, installations and product enhancements to
increase its market share in Los Angeles, San Diego, Northern
California, Las Vegas and Chicago. Mpower's Adjusted EBITDA for the
third quarter of 2003 was a positive $1.0 million, a 225%
improvement over the Adjusted EBITDA loss of $0.8 million in the
second quarter of 2003 and an $11.7 million improvement over the
$10.7 million Adjusted EBITDA loss in the third quarter of 2002.
Adjusted EBITDA represents earnings from continued operations
before interest, taxes, depreciation, amortization and gains or
losses from the sale of assets, and excludes network optimization
costs, reorganization expenses, stock-based compensation and gain
on discharge of debt. Mpower's loss from continuing operations was
reduced to $2.2 million in the third quarter of 2003, marking a 53%
improvement over the second quarter of 2003 and a 99% improvement
over the third quarter of 2002. The company's loss per share before
discontinued operations was $0.03 in the third quarter of 2003. The
company reported a net loss of $1.2 million in the third quarter of
2003, a 75% improvement over the second quarter of 2003. Without
reorganization expenses and the gain on the discharge of debt
recorded in the third quarter of last year, Mpower's net loss would
have improved by 96% over the third quarter of 2002. Mpower's net
loss per share was $0.02 in the third quarter of 2003. Revenue from
continuing operations was $36.8 million for the third quarter of
2003, essentially even with the second quarter of 2003 and the
third quarter of 2002. Offsetting the expected decline in switched
access revenue, Mpower's core customer revenue, which includes
revenue from the sale of data and voice services, increased 2% over
the second quarter of 2003 and 7% over the third quarter of 2002
reaching $32.7 million and representing 89% of Mpower's total
revenue. "We continue to grow the profitability and quality of our
core customer revenue streams with revenue from our high margin PRI
and T1-based data services increasing 20% over the last quarter,"
added Huff. "With the recent investment, we are in the process of
implementing a customer acquisition strategy to accelerate organic
growth. At the same time, we have made significant progress in
maintaining customer revenue with monthly customer retention rates
averaging 98% for the third quarter." Mpower's gross margin from
continuing operations was $19.1 million or 52% of revenue in the
third quarter of 2003 as compared to $18.8 million or 50% of
revenue in the second quarter of 2003 and marked a 12% increase
over the gross margin reported in the third quarter of 2002. The
company continued to reduce its operating expenses with selling,
general and administrative (SG&A) costs declining to $18.1
million in the third quarter of 2003, an 8% improvement over second
quarter of 2003 and a 35% improvement over the third quarter of
2002. The company's capital expenditures were $2.4 million for the
third quarter of 2003. Mpower ended the third quarter of 2003 with
$36.6 million in unrestricted cash, growing its unrestricted cash
position 90% over the second quarter of 2003 and 158% over the
third quarter of 2002. The September 30, 2003 unrestricted cash
balance includes approximately $17.5 million received in connection
with the company's equity private placement plus $1.9 million that
was returned to certain potential investors in October 2003 due to
over-subscription of the private placement. In October 2003, $1.1
million was paid as finder fees for the private placement.
Conference Call to Discuss Third Quarter Results Mpower will host a
conference call to discuss its third quarter financial and
operating results. Date: Thursday, November 6, 2003 Time: 9:00 a.m.
(Eastern time) Dial-in Number: 1-800-683-1585 Audio Webcast:
http://www.mpowercom.com/ Replay Number: 1-877-519-4471, PIN
#4279528 From November 6 at 11:00 a.m. through November 13 at 5:00
p.m. Eastern Webcast Replay: Available on Mpower's Web site at:
http://www.mpowercom.com/ 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, reorganization expenses
and gain on discharge of debt, 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. 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 (OTC:MPOW) (BULLETIN BOARD:
MPOW) 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
http://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, receipt of all remaining payments from the previously
announced asset sales, 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 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. FINANCIAL STATEMENTS Reorganized Reorganized Reorganized
Mpower Mpower Mpower Holding Holding Holding BALANCE SHEET
September June December (amounts in $ thousands) 30, 2003 30, 2003
31, 2002 Current Assets Cash & Cash Equivalents $36,629 $19,305
$10,773 Restricted Investments 9,765 10,338 13,631 Accounts
Receivable, net 22,092 25,477 13,923 Assets Held for Sale -- --
20,471 Prepaid Expenses and Other Current Assets 5,286 4,800 6,683
Total Current Assets 73,772 59,920 65,481 Property and Equipment,
net 35,597 36,238 38,497 Deferred Financing Costs, net 33 66 16
Intangibles, net 10,094 11,239 13,530 Other Assets 3,744 3,895
9,899 Total Assets $123,240 $111,358 $127,423 Current Liabilities
Current Maturities of Long-Term Debt and Capital Leases $1,460
$1,498 $4,638 Line of Credit 3,725 4,124 -- Accounts Payable 18,467
23,917 21,714 Accrued Sales Tax Payable 5,745 5,807 5,753 Accrued
Network Optimization Costs 393 1,408 1,480 Accrued Property Taxes
Payable 3,527 3,460 3,030 Deferred Revenue 6,763 6,986 4,680
Accrued Other Expenses 16,832 12,748 12,872 Current Liabilities
Subject to Compromise -- -- 1,748 Total Current Liabilities 56,912
59,948 55,915 Capital Lease Obligations 2 59 371 Total Liabilities
56,914 60,007 56,286 Common stock 78 65 65 Additional Paid-in
Capital 103,769 87,618 87,511 Accumulated Deficit (37,521) (36,332)
(16,439) Total Stockholders' Equity 66,326 51,351 71,137 Total
Liabilities and Stockholders' Equity $123,240 $111,358 $127,423
Reorganized Reorganized Reorganized Predecessor Mpower Mpower
Mpower Mpower Holding Holding Holding Holding STATEMENT OF
OPERATIONS Three Months Three Months July 31, July 1, (amounts in $
thousands, Ended Ended 2002 to 2002 to except share and per
September June September July share amounts) 30, 2003 30, 2003 30,
2002 30, 2002 Operating Revenues: Core Customer $32,708 $32,139
$20,312 $10,196 Switched Access 4,089 5,619 4,550 1,809 Total
Operating Revenues 36,797 37,758 24,862 12,005 Operating Expenses:
Cost of Operating Revenues 17,737 18,953 13,283 6,558 Selling,
General and Administrative 18,084 19,587 19,508 8,262
Reorganization Expense -- -- -- 245,681 Stock-Based Compensation
Expense 43 29 219 100 Network Optimization Cost (954) -- -- --
Depreciation and Amortization 4,121 3,984 2,989 4,165 Total
Operating Expenses 39,031 42,553 35,999 264,766 Loss from
Continuing Operations (2,234) (4,795) (11,137) (252,761) Gain
(Loss) on Sale of Assets, net 185 177 24 (4) Gain on Discharge of
Debt -- -- -- 315,310 Interest Income 40 46 593 304 Interest
Expense (102) (184) (1,225) (559) (Loss) Income before Discontinued
Operations (2,111) (4,756) (11,745) 62,290 Income (Loss) from
Discontinued Operations 922 13 (5,076) (4,617) Net (Loss) Income
(1,189) (4,743) (16,821) 57,673 Accrued Preferred Stock Dividends
-- -- -- -- Net (Loss) Income Applicable to Common Stockholders
$(1,189) $(4,743) $(16,821) $57,673 Basic and Diluted Weighted
Average Shares Outstanding 65,762,792 65,022,403 64,999,025
59,465,233 Basic and Diluted (Loss) Income per Share Applicable to
Common Stockholders: (Loss) Income before Discontinued Operations
$(0.03) $(0.07) $(0.18) $1.05 Income (Loss) from Discontinued
Operations $0.01 -- $(0.08) $(0.08) Net (Loss) Income $(0.02)
$(0.07) $(0.26) $0.97 Gross Margin $19,060 $18,805 $11,579 $5,447
Gross Margin (% of Revenue) 51.8% 49.8% 46.6% 45.4% Adjusted EBITDA
$976 $(782) $(7,929) $(2,815) Adjusted EBITDA (% of Revenue) 2.7%
-2.1% -31.9% -23.4% July 31, July 1, 2002 to 2002 to RECONCILIATION
TO GAAP September June 30, September July (amounts in $ thousands)
30, 2003 2003 30, 2002 30, 2002 Adjusted EBITDA $976 $(782)
$(7,929) $(2,815) Depreciation and Amortization (4,121) (3,984)
(2,989) (4,165) Reorganization Expense -- -- -- (245,681) Network
Optimization Cost 954 -- -- -- Stock-Based Compensation Expense
(43) (29) (219) (100) Loss from Continuing Operations (2,234)
(4,795) (11,137) (252,761) Gain (Loss) on Sale of Assets, net 185
177 24 (4) Gain on Discharge of Debt -- -- -- 315,310 Interest
Income 40 46 593 304 Interest Expense (102) (184) (1,225) (559)
(Loss) Income before Discontinued Operations (2,111) (4,756)
(11,745) 62,290 Income (Loss) from Discontinued Operations 922 13
(5,076) (4,617) Net (Loss) Income (GAAP) $(1,189) $(4,743)
$(16,821) $57,673 DATASOURCE: Mpower Holding Corporation CONTACT:
Investor - Gregg Clevenger, Chief Financial Officer,
+1-585-218-6547, , or Media - Michele Sadwick, Vice President,
+1-585-218-6542, both of Mpower Communications, ; Investor
Relations - Lester Rosenkrantz of Cameron Associates,
+1-212-554-5486, , for Mpower Communications Web site:
http://www.mpowercom.com/
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