Wednesday November 8, 7:51 am Eastern Time
Press Release
Winstar Reports Continued Strong Results
NEW YORK--(BUSINESS WIRE)--Nov. 8, 2000--
BROADBAND REVENUE: Double-digit Sequential Increase - 14th Straight
Quarter ON-NET PERCENTAGE: Over 82% for Quarter - Highest in the Industry GROSS MARGIN: Steep Increase - 7th Consecutive Quarter EBITDA: Strong Improvement - 5th Consecutive Quarter
WINSTAR COMMUNICATIONS, INC. (NASDAQ:WCII - news), a leading broadband services company, today reported total revenue of $195.1 million for the quarter ended September 30, 2000, a 63.3% increase over the year-ago quarter. Winstar's broadband services revenue for the quarter rose to $175.9 million, up 80.2% from the prior year and up 15.1% from the previous quarter. The company has now delivered double-digit percentage increases in broadband services revenue for 14 consecutive quarters.
Winstar's stronger than expected revenue performance was augmented by continued sharp improvement in gross margin, which rose to an all-time high of 47.3% in the third quarter. This compares to gross margins of 44.1% in the prior quarter, 30.1% a year ago, and 10.5% as recently as seven quarters ago. The company expects gross margin to continue to improve throughout the balance of the year and beyond.
Driven largely by strong revenue growth and margin improvement, Winstar narrowed its EBITDA loss for the quarter to $32.0 million, a $40.6 million improvement from the year-ago quarter, and a $12.8 million improvement from the prior quarter. This is the company's fifth consecutive quarter of strong improvement since posting its peak EBITDA loss in the second quarter of 1999.
Winstar expects its EBITDA losses to continue to decline until it reaches EBITDA breakeven, which is expected to occur during the first half of 2001. The company's $12.8 million improvement in EBITDA for the quarter was achieved despite a discretionary investment of approximately $6.5 million in sales and marketing initiatives. These initiatives include the launch of the company's Business Essentials marketing program and the related expansion of the company's sales organization.
The company reported a net loss for the quarter applicable to common shareholders of $227.4 million, or $2.50 per share, $0.04 better than consensus analyst earnings expectations.
Winstar added a total of 110,000 customer lines during the quarter, bringing cumulative installed lines to 920,000. Of the 110,000 new lines added, over 82% were fully on-network, versus 73% in the prior quarter, 48% a year ago and only 14% as recently as 9 quarters ago. Winstar has now more than tripled its cumulative on-net percentage to an industry-leading 47% from 15% when the company launched its focused approach of selling primarily on its own network.
``Our strong growth and steadily improving performance are driven by discipline and execution. Implementation of our strategy to build a widely available broadband network and make it useful to customers has enabled us to deliver industry-leading on-net performance.'' said William J. Rouhana, Jr., Winstar chairman and chief executive officer. ``Successful execution of these highly focused initiatives has dramatically improved our financial results over the last six quarters.''
During the third quarter, Winstar added approximately 1,700 new building access rights, bringing its cumulative total to over 13,100, including almost 400 hub sites. A total of 225 of those hub sites are now operational, up from 200 last quarter, and 111 a year ago.
Winstar increased its total number of on-net buildings (those directly connected to its broadband network) by a record 1,000 buildings to a cumulative total of 3,400, an increase of more than 40%. As a result, the company's ``addressable businesses'' (businesses located in on-net buildings, where it can provide its full suite of product offerings) grew 43%, to 95,000, during the quarter.
``Execution is driving our results - pure and simple,'' said Nathan Kantor, Winstar president and chief operating officer. ``With both network expansion and product development on track or ahead of schedule, we continue to broaden and enrich the market for our sales force. The resulting sales momentum has enabled us to deliver strong revenue growth across all channels.''
- Selected Metrics
Weighted Average Revenue Per Customer rose to more than $1,700 per month, up from approximately $1,650 in the preceding quarter.
Percentage of New Customers Ordering Bundled Data Services increased to over 62%, up from 47% in the previous quarter, 40% in the first quarter of 2000 and approximately 5% a year ago.
On-Net Customers Installed increased by over 22% to approximately 11,500, up from approximately 9,400 at June 30, 2000. This reflects an addressable customer penetration rate of approximately 12.1%.
For a full presentation of the company's metrics and other operating data, see the attached table.
Recent Highlights
In early November, Winstar completed a $1.02 billion financing package, composed of $270 million in private equity from Microsoft, Compaq, CSFB, and Welsh Carson, additional vendor financing from Compaq Computer Corporation and Cisco Systems, Inc. and the expansion of its Senior Credit Facility. This financing complements the strategic financing completed earlier in the year, which raised $1.6 billion of high yield debt and established a $1.15 billion Senior Credit Facility. In conjunction with the earlier financing, the company put in place a $2 billion vendor finance facility with Lucent Technologies, of which $1.0 billion is available at any one time. During the third quarter, Winstar drew approximately $250 million of the vendor finance facility, bringing the total drawn to approximately $500 million.
In October, Winstar launched its Business Essentials marketing initiative for small and medium-sized businesses. Business Essentials features seven different flat-rate plans, all of which include ``always-on'' Internet access, unlimited local telephony services, and competitively priced long-distance services. Upgrade packages include other data services such as web hosting, web design, higher speed Internet connectivity, frame, ATM and IP services.
Also in October, the Federal Communications Commission (FCC) issued a ruling that was designed to provide greater and quicker access to multi-tenant buildings. Winstar praised the efforts of the FCC, and reaffirmed its commitment to work with the real estate community to continue to refine the process that promotes the delivery of new, high-speed broadband communications services to all businesses that desire them.
Winstar expanded its application service provider (ASP) offerings to include applications from Bridge, a leading financial services information provider, and Cyntergy, a leading hospitality industry application provider. Previously, the company announced that the applications of industry leaders Oracle, Microsoft and Great Plains Solutions would be hosted in Winstar's enterprise-class data centers and distributed over Winstar's end-to-end broadband network.
During the quarter, Winstar penetrated the Higher Education vertical by hosting an Oracle application as an ASP for a major public university. The $9.2 million multi-year contract includes complex hosting services, such as the management of distance learning applications, as well as the hosting of higher-education solutions using Oracle applications for human resources, financial aid, accounting, and student and employee record-keeping. |
