IX)ARTT Posts Weak 3Q00 Results; Downgrading From BUY to HOLD
11/16/0 8:45 (New York)
Frost Securities ARTT
ADVANCED RADIO TELECOM R E S E A R C H N O T E
(NASDAQ: ARTT) T E C H N O L O G Y
RATING: HOLD
November 16, 2000 adam.giansiracusa@frostsecurities.com
L. Katherine Rice
214-515-4467
katherine.rice@frostsecurities.com
Advanced Radio Posts Weak 3Q00 Results;
Downgrading From BUY to HOLD Based on Lack of Visibility and Capital Funding
Risk
Earnings Per Share
FY 1Q 2Q 3Q 4Q Full-Yr P/EPS
1999A ($0.87) ($0.72) ($0.66) ($0.66) ($3.65) NM
2000E ($0.68) ($0.67) ($1.71) ($0.61) ($3.77) NM
KEY POINTS:
Advanced Radio reported 3Q00 revenues of $0.243 million (a 33% sequential
decrease), below our estimate of $0.330 million. The shortfall in revenue was
mainly attributable to customers located in the US West territory that Advanced
Radio lost once US West merged with Qwest Communications (NYSE: Q, Not Rated).
The company reported 3Q00 EBITDA of ($10.4) million, in-line with our estimate
of ($10.5) million. Third quarter 2000 operating costs of $5.1 million were
higher than our estimate of $1.8 million, offset by SG&A expenses of $5.5
million, which were lower than our estimate of $9.0 million.
Advanced Radio reported 3Q00 EPS of ($1.71) compared to our estimate of
($0.80). The difference in our estimate and the actual results is due to
non-cash dividends accrued on the company's Series A convertible preferred stock
of approximately $40.8 million during the quarter compared to our estimate of
$3.0 million, higher than aniticipated shares outstanding of 33.4 million
compared to our estimate of 29.2 million, and lower than expected depreciation
expense of $3.8 million compared to our estimate of $6.0 million.
Advanced Radio had 185 buildings on-net at the end of the 3Q00, significantly
ahead of our estimate of 80. The company added three new markets during the
third quarter, San Diego, Portland and Dallas/Ft. Worth, bringing its total
operational markets to nine.
Although Advanced Radio announced it had retained an investment bank during
the second quarter 2000 conference call, the company did not provide a
meaningful update regarding its attempt to raise capital. The company indicated
that within five to six weeks it would make an announcement regarding further
funding.
As of 3Q00, there was $112 million in cash available to Advanced Radio, its
quarterly cash burn rate was approximately $25 million, and the company believes
it only has enough cash to last it through the second quarter of 2001.
Consequently, the company plans to rigorously conserve capital by trimming
operating costs and focusing only on those markets in which it has launched
commercial services as opposed to its original plan of rapidly deploying its
network into 30 additional markets by the end of 2001. Our model remains under
review.
Based on the lack of visibility the company was able to provide regarding
future quarters and the risk associated with Advanced Radio's ability to attain
capital funding, we are downgrading our rating on Advanced Radio's stock from a
BUY to a HOLD.
Frost Securities, Inc. makes a market in ARTT. |
