1999 Results Reveal ProdigyInternet is Fastest-Growing National ISP
February 15, 2000 04:05 PM
WHITE PLAINS, N.Y.--(BUSINESS WIRE)--Feb. 15, 2000--
-- Q4 SUBSCRIBERS UP 197% -- Q4 REVENUE UP 126% -- Q4 GROSS MARGIN IMPROVES 20 POINTS
Prodigy Communications Corporation PRGY reported record results for the fourth quarter and fiscal year ended December 31, 1999:
-- Internet subscribers managed soared 197% to 1.5 million in the
fourth quarter compared to the year ago period, and will climb to
more than 2.4 million on a prospective basis when the pending SBC
Communications SBC and FlashNet Communications FLAS transactions are completed; -- Prodigy Internet revenues increased 126% to $56.2 million in the
fourth quarter compared to the year ago period; -- EBITDA loss decreased 50% to ($6.8 million) in the fourth quarter
compared to the year ago period; -- Gross margins improved 20 percentage points to 55% in the fourth
quarter up from 35% in the year ago period.
"This record performance is a direct result of the turnaround at Prodigy. We have effectively delivered on our promise to make Prodigy into a world-class competitor by growing aggressively and by reducing our EBITDA losses," said Prodigy Chairman and CEO Samer Salameh. "We reached an important milestone this past quarter, becoming EBITDA positive in December 1999. Prodigy is a new company and we have positioned it uniquely for the future to take advantage of the expected dramatic growth in high speed access and the small business hosting market."
"In 2000, Prodigy is committed to being the place to go for high speed Internet access," Mr. Salameh continued. "To further that strategy, as SBC's Internet partner, Prodigy will gain access to SBC's powerful marketing and distribution channels as the largest RBOC in the United States. DSL is the top priority for Prodigy," concludes Salameh.
Prodigy announced in November its plans to form a strategic partnership with SBC Communications, Inc. Prodigy will become the exclusive ISP marketed by SBC, including all 100 million consumers within their current thirteen-state territory. "When the deal with SBC closes," Salameh explains, "Prodigy will have become the nation's largest consumer and small business DSL customer base with over 55,000 DSL provisioned customers."
In order to create a best-in-class, seamless national high-speed footprint for the Prodigy member base, Prodigy began testing `Splitterless DSL' in conjunction with Bell Atlantic in October. Prodigy also finalized a national, wholesale DSL agreement with SBC and will continue to partner with other companies for high-speed access.
Prodigy also announced its plans to acquire FlashNet Communications, Inc., a Texas-based ISP. When completed, the SBC and FlashNet transactions will add nearly one million new Internet subscribers to Prodigy's current managed subscriber base, increasing it, prospectively, to more than 2.4 million Internet subscribers. Both transactions are subject to various conditions and are expected to be completed in 2Q 2000.
Q4 & FY99 Results
In the fourth quarter, Internet subscribers managed grew 197% to 1.5 million compared to the year ago quarter and 24%, or 287,000 on a sequential quarter basis. These results were driven by strong organic growth generated by Prodigy retail and other partner distribution channels and by the acquisition of BizOnThe.Net (www.prodigybiz.com), a small business Web hosting company. Internet subscribers managed include Prodigy Internet subscribers and approximately 364,000 subscribers from Prodigy Internet de Telmex.
Total revenues for the quarter increased $32.5 million, or 94%, to $67.1 million from $34.7 million in the fourth quarter of 1998, while net loss for the quarter increased to ($29.8 million), or ($0.46) per share, from ($17.2 million), or ($0.38) per share. Net loss increased due to amortization of subscriber acquisition costs resulting from the BizOnThe.Net acquisition, the Cable & Wireless Internet subscriber acquisition and Prodigy's contract subscriber acquisition programs. EBITDA loss in the fourth quarter decreased $6.9 million, or 50%, which, on a per share basis, was ($0.11) versus ($.31) in the year ago quarter. On a sequential quarter basis, EBITDA loss improved from Q3 to Q4 by 43% from ($11.9 million), or ($0.20) per share to ($6.8 million), or ($0.11) per share. Weighted average shares outstanding in the quarter increased to 64.1 million from 45.0 million in the year ago quarter primarily due to Prodigy's IPO in February 1999.
For the year, total revenues increased $52.9 million, or 39%, to $189.0 million compared to $136.1 million a year ago. Revenues from Prodigy Internet grew $73.5 million, or 91%, to $154.2 million from $80.7 million a year ago. EBITDA loss decreased 18% to ($40.5 million), or ($0.68) per share, compared to ($49.2 million), or ($1.21) per share, in the prior year period. Net loss increased to ($80.5 million) or ($1.34) per share from ($65.1 million) or ($1.60) per share in the prior year period. As explained above, net loss increased due to amortization of subscriber acquisition costs resulting from the BizOnThe.Net acquisition, the Cable & Wireless Internet subscriber acquisition and Prodigy's contract subscriber acquisition programs. Weighted average shares outstanding during 1999 increased to 60.0 million from 40.7 million during the prior year, primarily due to Prodigy's IPO.
Prodigy is currently negotiating third-party financing of approximately $120 million, using future cash flows generated through the contract customer acquisition program to secure the amounts to be borrowed. When completed, this financing will improve the company's cash position and finance future contract customer acquisition programs.
"We made significant progress in the quarter in executing Prodigy's plan to improve our customer experience and to monetize our subscriber base," said Mr. Salameh. "Prodigy Internet is now available to 90% of the U.S. with just a local phone call. That's up from 83% at the beginning of the quarter. We now also have over 80% of our member base using our new homepage and the latest version of our software, Prodigy V5."
The improved version of Prodigy Internet(R) service has spurred more effective and efficient marketing to Prodigy's growing member base and has allowed the company to gain an increasing share of online commerce from its subscribers. Other non-subscription revenue from e-commerce and sponsorships increased in Q4 1999, growing more than 106% since Q3 1999. Prodigy's growing member base and effective member marketing tools have positioned Prodigy as a successful value-added partner. In December, Prodigy announced its largest multi-year partnership valued at up to $60MM in projected revenue for Prodigy with Metris Companies and MasterCard(R) to offer the Prodigy MasterCard and Metris' fee-based products to Prodigy's members.
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