5/9 PSIX..PSINet Reports Record Q1 2000 Revenue of $222.9 Million, A 113% Increase Over Q1 1999
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HIGHLIGHTS: * Annualized revenue increases to $892 million * Corporate accounts increased to over 98,000, a 66% increase over Q1 1999 * Hosting center revenue increased 35% quarter over quarter * Continuing aggressive integration of previously acquired companies * Entered into a definitive agreement to acquire Metamor Worldwide, Inc. (Nasdaq: MMWW), a leading provider of information technology solutions
ASHBURN, Va., May 9 /PRNewswire/ -- PSINet Inc. (Nasdaq: PSIX - news), the Internet Super Carrier, today reported first quarter revenues of $222.9 million, a 113% increase over first quarter 1999 and a 20% increase over fourth quarter 1999. The Company's net loss available to common shareholders for the quarter was $204.2 million ($1.35 basic and diluted loss per share), a 9% improvement from $223.5 million ($1.63 basic and diluted loss per share) reported in the fourth quarter 1999. EBITDA for the quarter was negative $15.5 million, an improvement from negative $16.9 million reported in the fourth quarter 1999.
During the past two years PSINet has made significant acquisitions of fiber-based bandwidth and related equipment to enhance its network infrastructure and lower its per unit operating costs. The Company has also acquired more than 65 companies throughout its five geographic operating regions, resulting in overlapping network infrastructure in several markets. During the first quarter of 2000, PSINet completed and approved its plan directed at developing a global brand image, eliminating network redundancies, streamlining operations and product offerings, and taking advantage of synergies created by its integration process.
As a result of these actions, the Company recorded a restructuring charge of $16.9 million ($0.11 per share), and $59.0 million ($0.39 per share) of write-offs of assets and accelerated depreciation and amortization of certain tangible and intangible assets. The cash impact of these charges and write-offs is approximately $16.9 million and will result in annualized cash savings of $19.5 million beginning April 2000.
Additionally, as previously announced, the Company began in February 2000 to consolidate its worldwide retail consumer operations into a new retail business unit named Inter.net Ltd. During the first quarter 2000, the Company incurred approximately $1.1 million ($0.01 per share) of incremental direct costs in conjunction with these efforts.
The net loss available to common shareholders for the first quarter 2000 excluding the above items and also excluding $32.5 million in gains from the sale of certain investments was $159.7 million ($1.06 basic and diluted loss per share) compared to $134.8 million ($0.99 basic and diluted loss per share) in the fourth quarter 1999 which excluded fourth quarter charges of $88.7 million for acquired in-process research and development.
``The three key elements of the first quarter include successful execution of our investment strategy, a strong cash position, and the building of a high quality customer base,'' said William L. Schrader, chairman and chief executive officer. ``First, our investments in fiber, hosting centers, and Internet companies continued aggressively during this quarter. Second, having about $2 billion in cash at a time when the global capital markets are questionable, is a very comforting situation for PSINet as it meets the extraordinary Internet growth opportunities in 28 countries. Third, reaching nearly 100,000 business accounts on five continents, and simultaneously increasing the annualized revenue per customer by shifting our customer mix toward web hosting, has the intended long term positive impact. Together, I think the customers, products, network, facilities and our team are an unbeatable competitive advantage.''
``Over the next 12-18 months, we have two primary objectives,'' said Harold S. ``Pete'' Wills, president and chief operating officer. ``First, we will continue to accelerate selected portions of PSINet's hosting center build-out in key global markets while actively managing our overall hosting space inventory. Second, PSINet's network operating leverage should begin to increase consistently via continued aggressive integration of acquired companies, organic growth, and additional distribution. During the first quarter, we added over 80 new sales representatives in the U.S. for our web hosting business, including a large number of experienced eBusiness salespeople. While these new hires had a negative impact on our first quarter sales and marketing expense, we expect our enhanced sales force will begin generating significant benefits to our hosting business in the second half of the year. Over the next 12-18 months, we expect to complete the deployment of a full field sales force in North America.''
During the first quarter of 2000, to meet the explosive demand for hosting services, PSINet accelerated the opening of its hosting facilities in Amsterdam and Los Angeles. With the addition of these new facilities, PSINet now operates eight centers, comprising approximately 250,000 total square feet of available hosting space that currently generate over $80 million in annualized hosting revenue. PSINet also accelerated the construction of its Atlanta and Toronto facilities, which will add 100,000 square feet of new available hosting space by the end of the second quarter.
Through April 2000, PSINet Ventures, a PSINet subsidiary, has completed over 50 investments in Internet and telecommunications start-up companies. PSINet Ventures is an important part of the Company's technology research and product development strategy, customer lead generation, as well as a source for future revenue that is expected to arise out of commercial relationships with Internet companies in which the Company invests. During the quarter, PSINet realized gains in excess of $30 million from the sale of some of its investments.
QUARTERLY HIGHLIGHTS
* In March, announced entry into a definitive agreement to acquire
Metamor Worldwide, Inc. (Nasdaq: MMWW - news), a leading provider of
information technology solutions. The combination will also give
PSINet a controlling interest in Metamor's publicly traded e-Business
solutions subsidiary, Xpedior Incorporated (Nasdaq: XPDR - news). Completion
of the transaction is subject to a number of conditions, including the
receipt of shareholder approval.
* In February, announced the creation of Inter.net Ltd., a global
consumer Internet service provider with approximately 550,000 users in
20 plus countries, which is anticipated to be spun off, including a
possible initial public offering in approximately one year.
* In January, announced the opening of a new state-of-the-art
50,000 square foot global Internet hosting center in the City of Los
Angeles.
* In January, entered into a broad strategic relationship with Akamai
Technologies (Nasdaq: AKAM - news) for the deployment of Akamai servers and
the development of new technologies for application delivery.
* In February, along with Hicks, Muse, Tate & Furst Incorporated and
Aether Systems Inc. (Nasdaq: AETH - news), made a significant investment in
and established a strategic relationship with Metrocall, Inc.
(Nasdaq: MCLL - news). Metrocall has six million mobile wireless messaging
subscribers, including approximately one million small to medium
enterprise customers.
* During the quarter, continued lighting its 14,000 mile U.S. wide dark
fiber network with advanced Nortel (NYSE: NT - news) equipment.
* Effected a two-for-one stock split on February 11, 2000.
* Completed the sale of 16.5 million shares of the Company's 7% Series D
cumulative convertible preferred stock with net proceeds of
$740.2 million, excluding $57.9 million deposited into a deposit
account, pursuant to Securities and Exchange Commission Rule 144A.
OPERATING RESULTS
* PSINet provided service to over 98,000 corporate accounts at March 31,
2000, an increase of 66% over the 59,700 corporate accounts at
March 31, 1999. Accounts outside the U.S. represented 67% of PSINet's
customer base at March 31, 2000, compared with 60% at March 31, 1999.
* Average annual new contract value for business accounts increased to
$7,300 for the first quarter of 2000 from $7,100 for the fourth quarter
of 1999 and $6,200 for the first quarter of 1999. This continues to
reflect the increasing demand for value-added services and higher
levels of bandwidth.
* Average annual new contract value for managed web hosting accounts in
the U.S. was $123,000 for the first quarter of 2000.
* The business account retention rate remained strong for the quarter at
75%, compared with 81% for the first quarter of 1999 and a full-year
retention rate in 1999 of 79%.
* As of March 31, 2000, PSINet serviced over 1.3 million end users of its
carrier customers around the world.
HISTORIC PERFORMANCE METRICS
Quarter Ended
03/31/00 12/31/99 03/31/99
Business Accounts 98,900 91,000 59,700
Carrier Customers' end users 1,300,000 753,000 634,000
Average New Contract Value -
Business Accounts $7,300 $7,100 $6,200
Corporate Account Retention Rate 75% 79% 81%
Capital Expenditures (in millions) $412.2 $452.0 $127.6
Revenues (in millions):
U.S. and Canada $136.4 $105.0 $ 59.1
% of Total Revenues 61% 57% 56%
Latin America $ 14.1 $ 11.5 --
% of Total Revenues 6% 6% --
Europe $ 33.4 $ 31.7 $ 15.9
% of Total Revenues 15% 17% 15%
Asia $ 38.7 $ 37.2 $ 29.9
% of Total Revenues 17% 20% 29%
IMEA $ 0.3 NA NA
% of Total Revenues 1% NA NA
BALANCE SHEET
At March 31, 2000, PSINet had cash, restricted cash and short-term investments of $2.02 billion, compared with $1.76 billion at December 31, 1999. This includes an escrow of $38.2 million to fund one semi-annual interest payment on PSINet's 10% Senior Notes. Property, plant and equipment, net of accumulated depreciation and amortization, increased to $1.53 billion at March 31, 2000, from $1.16 billion at December 31, 1999. Property, plant and equipment at March 31, 2000 included $670.4 million in fiber assets. The company's debt obligations were $3.28 billion at March 31, 2000, compared with $3.30 billion at December 31, 1999.
Condensed Consolidated Statements of Operations
(In millions of U.S. dollars, except shares and loss per share)
Three Months Ended
March 31, 2000 March 31, 1999
Amount % of Amount % of
Revenue Revenue
Revenue $ 222.9 100.0% $ 104.9 100.0%
Operating costs and expenses:
Data communications
and operations 163.6 73.4 76.0 72.5
Sales and marketing 38.5 17.3 18.6 17.7
General and administrative 36.3 16.3 17.1 16.3
Depreciation and
amortization 134.5 60.3 26.8 25.6
Restructuring charge 16.9 7.6 -- --
Costs related to planned
distribution and sale of
consumer business 1.1 0.5 -- --
Total operating costs
and expenses 390.9 175.4 138.5 132.1
Loss from operations (168.0) (75.4) (33.6) (32.1)
Interest expense (79.0) (35.4) (29.6) (28.2)
Interest income 24.8 11.1 4.7 4.5
Other income (expense), net 33.6 15.1 (0.2) (0.2)
Loss before taxes (188.6) (84.6) (58.7) (56.0)
Income tax expense (benefit) -- -- -- --
Net loss (188.6) (84.6) (58.7) (56.0)
Return to preferred
shareholders (15.6) (7.0) (0.6) (0.6)
Net loss available to common
shareholders $ (204.2) (91.6) $ (59.3) (56.6)
Weighted average shares
outstanding (thousands) (a) 150,848 106,716
Basic and diluted loss
per share $ (1.35) $ (0.56)
Basic and diluted loss
per share excluding
certain items (b) $ (1.06) $ (0.56)
EBITDA (c) $ (15.5) $ (6.8)
(a) The weighted-average shares outstanding used in all calculations give
retroactive effect to the company's two-for-one stock split to
holders of record as of the close of business on January 28, 2000.
(b) For the three months ended March 31, 2000, excludes a $16.9 million
restructuring charge and $59.0 million in depreciation and
amortization for the write-off and accelerated depreciation and
amortization of certain tangible and intangible assets relating to
implementing a global brand image, eliminating redundancies in our
network, streamlining operations and product offerings, and taking
advantage of synergies created by the Company's integration process.
Additionally, excludes $1.1 million of incremental direct costs
incurred in conjunction with efforts to consolidate the worldwide
retail consumer operations into a new retail business unit named
Inter.net Ltd. and gains of $32.5 million from the sale of certain
investments.
(c) EBITDA is used in the Internet services industry as one measure of a
company's operating performance and historical ability to service
debt. EBITDA is not determined in accordance with generally accepted
accounting principles, is not indicative of cash used by operating
activities and should not be considered in isolation or as an
alternative to, or more meaningful than, measures of performance
determined in accordance with generally accepted accounting
principles. PSINet defines EBITDA as earnings (losses) before
interest expense and interest income, taxes, depreciation and
amortization, other non-operating income and expenses, charge for
acquired in-process research and development, restructuring charge,
and costs related to the planned distribution and sale of the
consumer business. PSINet's definition of EBITDA may not be
comparable to similarly titled measures used by other companies.
Condensed Consolidated Balance Sheets
(In millions of U.S. dollars)
March 31, 2000 December 31, 1999
Assets
Cash, restricted cash and
short-term investments $ 2,023.9 $ 1,755.3
Accounts receivable, net 112.2 103.6
Other current assets 123.3 83.5
Total current assets 2,259.4 1,942.4
Property and equipment, net 1,528.4 1,162.6
Goodwill and other intangibles, net 1,154.8 1,212.0
Other assets and deferred charges 198.9 175.3
Total assets $ 5,141.5 $ 4,492.3
Liabilities and shareholders' equity
Current portion of long-term debt $ 119.9 $ 115.0
Trade accounts payable 143.7 141.5
Other accounts payable
and accrued liabilities 129.6 101.4
Accrued interest payable 73.5 94.7
Deferred revenue 31.9 29.5
Total current liabilities 498.6 482.1
Long-term debt 3,159.7 3,185.2
Deferred income taxes 13.8 17.9
Other liabilities 83.8 84.1
Total liabilities 3,755.9 3,769.3
Shareholders' equity
Preferred stock 938.8 375.2
Common stock and capital in excess
of par value 1,435.6 1,196.3
Treasury stock -- (2.0)
Accumulated deficit (1,065.8) (861.5)
Accumulated other comprehensive income 139.1 125.4
Bandwidth asset to be delivered
under IXC agreement (62.1) (110.4)
Total shareholders' equity 1,385.6 723.0
Total liabilities and
shareholders' equity $ 5,141.5 $ 4,492.3
A joint prospectus/proxy statement was filed by PSINet Inc. (``PSINet'') and Metamor Worldwide, Inc. (``Metamor'') with the Commission on April 14, 2000. YOU ARE URGED TO READ THE PROSPECTUS/PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE COMMISSION. THE PROSPECTUS/PROXY STATEMENT CONTAINS IMPORTANT INFORMATION THAT YOU SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING THE MERGER AND RELATED TRANSACTIONS. You may obtain a free copy of the prospectus/proxy statement and other documents filed by PSINet and Metamor with the Commission at the Commission's web site at www.sec.gov . The prospectus/proxy statement and other documents filed with the Commission by PSINet may also be obtained free of charge from PSINet by directing a request to PSINet Inc., 510 Huntmar Park Drive, Herndon, Virginia 20170, Attn: Corporate Secretary. In addition, the prospectus/proxy statement and other documents filed with the Commission by Metamor may be obtained free of charge from Metamor |
