FWIW, Earnings...
HAMILTON, Bermuda, and NEW YORK, Nov. 9 /PRNewswire/ -- RSL
Communications, Ltd. (Nasdaq: RSLC), a premier provider of data, Internet, and
voice services focused on small and medium enterprises in Europe and the
United States, announced revenues of $382.8 million and normalized EBITDA(1)
of negative $44.6 million for the third quarter 2000. Excluding foreign
currency impacts, revenues would have been approximately $393.1 million,
slightly above revenues in the second quarter of 2000. The Company has
enhanced controls on its cash resources and has reduced its cash burn rate in
the third quarter, primarily through the reduction of non-critical capital
expenditures and working capital management.
Paul Domorski, President and Chief Executive Officer of RSL COM said, "The
quarter was a challenging one, and although our results are consistent with
the expectations we communicated publicly several weeks ago, they are
disappointing. It is critical that we make bold and decisive changes to RSL
COM's current operational profile. Since I arrived at RSL COM, I have been
relentlessly focused on doing just that.
"We have devised a new strategy going forward that has three elements.
The first is to restructure our current business and place us on a path to
profitability. This will involve exiting certain countries, selling some
customer bases or shutting down operations that have no realistic expectations
of achieving reasonable financial returns. The second element is to leverage
our existing assets and competitive advantages, including the licenses,
customer bases, distribution channels and local presence we have in key
markets. The third element is to reposition the company to be a provider of
network applications and solutions to SME customers. This will include
products and services in the data and Internet space, including, for example,
LANs, VPNs, and custom applications.
"We have nearly completed our internal operational reviews and we are now
moving into the next phase of evaluating the implications and costs of the
various alternatives. Once we have completed this process, we will announce
any operations that will be shut down, restructured or sold. At that time we
will also provide guidance for the fourth quarter 2000, which will include a
one time restructuring charge.
"With its European and U.S. presence and its 1.3 million customer base, I
have a clear vision of a future RSL COM as a focused, customer-service
oriented enterprise on a path towards profitability."
RSL COM also announced it has hired the investment banking firm of
Wasserstein Perella & Co., Inc. to assist the company in exploring strategic
alternatives.
Third Quarter 2000 Results
Consolidated revenues for the third quarter 2000 were $382.8 million,
compared to $390.5 million for the second quarter 2000 and $368.8 million for
the third quarter 1999. Excluding foreign currency impacts, revenues would
have been approximately $393.1 million, slightly above revenues in the second
quarter of 2000. Revenues from operations in Europe, RSL COM's largest market
segment, were $222.4 million in the third quarter 2000, a 2.0% decline versus
the second quarter of 2000 and an increase of 19.0% over the third quarter of
1999. After giving effect to foreign exchange fluctuations, third quarter
2000 revenues in Europe increased slightly over the second quarter 2000 and
34.7% over the third quarter of 1999. Revenues from operations in the U.S.
were $87.6 million in the third quarter of 2000, approximately flat versus the
second quarter of 2000 and 27.4% below the third quarter of 1999. The U.S.
revenue decline is consistent with the Company's 1999 decision to de-emphasize
certain marginally profitable wholesale and prepaid card products. Revenues
from Asia/Pacific and Latin America operations were $56.3 million in the third
quarter 2000, a 2.4% decline versus second quarter 2000, and an increase of
17.6% compared to the third quarter 1999.
Cost of services in the third quarter 2000 was $282.3 million, an increase
of 3.4% from $272.9 million in the second quarter 2000 and an increase of
10.2% from $256.1 million in the third quarter 1999. The consolidated gross
margin percentage(2) was 26.3% in the third quarter 2000, compared to 30.1% in
the second quarter 2000 and 30.6% in the third quarter 1999. European
operations reported a gross margin of 28.0% in the third quarter 2000, versus
33.4% in the second quarter 2000, and 37.8% in the third quarter of last year.
U.S. gross margin percentage was 16.8% in the third quarter 2000, versus 21.0%
in the second quarter this year, and 19.2% in the third quarter of last year.
The declines in gross margins are due largely to seasonality and competitive
pressures in certain markets.
Consolidated selling, general and administrative expenses were
$154.3 million in the third quarter 2000, compared to $138.5 million in the
second quarter 2000 and $112.6 million in the third quarter 1999. SG&A
expenses as a percent of revenue was 40.3% in the third quarter of 2000
compared to 35.5% in the second quarter of 2000 and 30.5% in the third quarter
of 1999. Consolidated selling, general and administrative expenses increased
$15.8 million versus the second quarter of 2000 due to business expansion
efforts, primarily in Spain, severance costs in headquarter locations, and
customer acquisition costs in certain markets.
The company recorded non-cash compensation expense of $2.2 million in the
third quarter 2000 relating to stock incentive awards previously granted to
employees, primarily at deltathree.com. Normalized EBITDA for the third
quarter 2000 was $44.6 million negative, a decline from negative $8.2 million
in the second quarter 2000 on a comparable basis. EBITDA in the third quarter
of 1999 on a comparable basis was positive $2.7 million. The sequential
normalized EBITDA decline was due to the aforementioned increased selling,
general and administrative expenses as well as the decrease in gross margin.
Net loss in the third quarter 2000 was $146.7 million, compared to a net
loss of $159.4 million in the second quarter of 2000 and a loss of
$118.9 million in the third quarter 1999. The sequential decrease in net loss
is primarily due to a $48.3 million non-cash charge in the second quarter due
to the Company's decision to sell its Canadian operations partially offset by
increased selling, general and administrative expenses in the third quarter as
well as the decline in gross margin. Net loss per share was $2.51 for the
third quarter 2000.
Nine Months Results
Consolidated revenues for the first nine months of 2000 were
$1,149.3 million, compared to $1,076.8 million in the same period of 1999, up
6.7%. Revenues from operations in Europe were $671.3 million, or 58.4% of
consolidated, for the first nine months of 2000, compared to $517.3 million,
or 48.0% of consolidated, for the same period in 1999. Revenues from
operations in North America were $300.8 million, or 26.2% of consolidated, in
the first nine months of 2000, compared to $426.4 million, or 39.6% of
consolidated, in the same period in 1999. Revenues from operations in
Asia/Pacific and Latin America were $166.5 million, or 14.5% of consolidated,
for the first nine months of 2000, compared to $130.8 million, or 12.1% of
consolidated, for the same period last year. Revenues from operations at
deltathree.com represented the balance.
For the first nine months of 2000, the normalized EBITDA loss was negative
$51.3 million compared to a negative $1.8 million in the same period in 1999.
Net loss for the first nine months of 2000 was $391.4 million, compared to
$248.7 million in the same period in 1999.
RSL Communications, Ltd., is a facilities based communications company
that provides a broad range of data/Internet, voice and value-added product
and service solutions primarily to small and medium sized businesses and
residential customers in selected markets around the globe. Through its
subsidiary, deltathree.com, RSL COM also owns and operates a privately managed
Internet Protocol (IP) telephony network with 107 points of presence in over
40 countries around the world. RSL COM is headquartered in Hamilton, Bermuda
with executive offices in New York City. The web address is
rslcom.com.
This press release contains forward-looking statements within the meaning
of the "Safe Harbor" provisions of the Private Securities Litigation Reform
Act of 1995. These statements are based on management's current expectations
or beliefs and are subject to a number of risks and uncertainties that could
cause actual results to differ materially from those set forth in such
statements. Factors which may affect actual results include, but are not
limited to, the Company's capital requirements, general economic factors, the
impact of rapid industry changes, increased competition, pricing pressures,
government regulation, the integration of acquisitions and new operations, as
well as other risks referenced from time to time in the Company's filings with
the Securities and Exchange Commission. For a detailed discussion of these
and other risk factors, please refer to the Company's filings with the SEC,
including the Company's Form 10-K for the fiscal year ended December 31, 1999
and the Company's registration statement on Form S-4 filed with the Securities
and Exchange Commission in July 2000. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by these risk factors.
The company does not undertake any obligation to release publicly any
revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Contact: Jim Magrone, Vice President, Investor Relations and Treasurer,
212-445-7443, or Kathleen Makrakis, Director of Investor Relations,
212-445-7463, both of RSL Communications.
RSL Communications Ltd.
Consolidated Statements of Operations
(In Thousands, except per share data)
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 % Change 2000 1999 % Change
Revenues $382,843 $368,831 4% $1,149,273 $1,076,812 7%
Operating costs
and expenses:
Cost of
services (282,264) (256,131) 10% (816,480) (765,009) 7%
Selling, general
and administrative
expenses (154,254) (112,573) 37% (412,403) (323,470) 27%
Write-down for
impairment
of assets -- -- N/A (48,267) -- N/A
Special charge -- (30,143) N/A -- (30,143) N/A
Non-cash compensation
expense (2,204) (2,676) -18% (8,329) (5,602) 49%
Depreciation and
amortization (53,496) (46,032) 16% (154,658) (126,115) 23%
Operating costs
and
expenses (492,218) (447,555) 10% (1,440,137) (1,250,339) 15%
Loss from
operations (109,375) (78,724) 39% (290,864) (173,527) 68%
Interest income 2,288 5,408 -58% 11,176 16,502 -32%
Interest
expense (45,007) (35,546) 27% (123,832) (95nse)
income - net (3,221) 326 N/A (7,380) 506 N/A
Foreign exchange
transaction
gain(loss) 7,205 (3,468) N/A 15,879 10,560 50%
Minority
interest 5,338 (4,791) N/A 13,318 (3,969) N/A
Loss in equity
interest of
unconsolidated
subsidiaries (3,477) (1,184) N/A (7,903) (1,560) N/A
Income taxes (459) (918) -50% (1,773) (1,408) 26%
Net loss $(146,708) $(118,897) 23% $(391,379) $(248,716) 57%
Net loss per
share of common
stock $(2.51) $(2.17) 15% $(6.89) $ (4.63) 49%
Weighted average
number of shares
of common stock
outstanding 58,440 54,702 7% 56,835 53,676 6%
Normalized
EBITDA (1) $(44,600) $2,717 N/A $(51,294) $(1,775) N/A
RSL Communications Ltd.
Supplemental Data
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
% %
Revenue:
(in thousands) 2000 1999 Change 2000 1999 Change
North America
- Fixed Wire
/Data $38,762 $50,999 -24% $129,693 $167,510 -23%
- Mobile 15 -- N/A 51 -- N/A
- Carrier
/Card 59,774 81,800 -27% 171,078 258,918 -34%
98,551 132,799 -26% 300,822 426,428 -29%
Europe
- Fixed Wire
/Data 90,983 84,675 7% 275,650 221,391 25%
- Mobile 87,898 77,619 13% 272,099 216,122 26%
- Carrier
/Card 43,544 24,664 77% 123,554 79,858 55%
222,425 186,958 19% 671,303 517,371 30%
Asia / Pacific
and Latin America
- Fixed Wire
/Data 23,630 23,871 -1% 73,762 65,964 12%
- Mobile 30,516 21,705 41% 86,454 57,336 51%
- Carrier
/Card2,155 2,288 -6% 6,317 7,496 -16%
56,301 47,864 18% 166,533 130,796 27%
deltathree.com (3) 5,566 1,348 N/A 10,615 2,355 N/A
Consolidated revenues
per minute (4) $0.11 $0.17 -35% $0.12 $0.18 -33%
Billable Voice Minutes
(in thousands):
North American 786,942 778,603 1% 2,312,496 2,371,999 -3%
European
- fixed wire 796,928 568,199 40% 2,357,507 1,395,184 69%
- mobile 212,738 111,247 91% 591,712 326,704 81%
Asia and Other
- fixed wire 99,795 81,880 22% 287,813 203,463 41%
- mobile 58,935 30,082 96% 151,314 85,786 76%
deltathree.com 23,354 5,602 N/A 85,840 13,952 N/A
Customers as of
September 30, 2000 Business Residential Mobile Total
North American 76,136 45,330 -- 121,466
European 71,547 261,508 558,213 891,268
Asia and Other 9,514 155,281 158,102 322,897
157,197 462,119 716,315 1,335,631
(1) EBITDA, as used herein, consists of loss from operations before
depreciation and amortization. EBITDA has also been normalized to
exclude non-cash compensation expense, the write-down for impairment
of assets in Canada, Japan and Hong Kong and their operating losses,
the special charge in 1999 and to exclude the EBITDA loss of
deltathree.com, the Company's publicly held internet telephony unit.
(2) Gross margin percentage is defined as revenues less cost of services
divided by revenues.
(3) Excludes services provided to other RSL COM operating companies of
$3 million for the third quarter of 2000, $1 million for the third
quarter of 1999, $12 million for the nine months of 2000, and
$4 million for the nine months of 1999.
(4) Consolidated revenue per minute consists of consolidated revenues less
revenues derived from equipment sales, revenues generated from
directory assistance and mobile and data services, divided by total
billable minutes excluding minutes generated from the Company's mobile
and data services.
SOURCE RSL Communications, Ltd.
-0- 11/09/2000
/CONTACT: Jim Magrone, Vice President, Investor Relations and Treasurer,
212-445-7443, or Kathleen Makrakis, Director of Investor Relations,
212-445-7463, both of RSL Communications/
/Web site: rslcom.com
(RSLC)
CO: RSL Communications, Ltd.
ST: New York
IN: CPR MLM
SU: ERN
KF
-- NYTH066 --
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