360networks announces record first quarter cash revenue and adjusted EBITDA
Company revises 2001 cash revenue target and capital expenditures
All figures in U.S. dollars
Prepared in accordance with U.S. generally accepted accounting principles (GAAP)
VANCOUVER, May 15 /CNW/ - 360networks today announced cash revenue of $274 million in the three months ended March 31, 2001, an increase of more than 240% over $80 million in the first quarter of 2000. Cash revenue is revenue, as determined by generally accepted accounting principles, adjusted for changes in the cash portion of deferred revenue.
Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and stock-based compensation adjusted to reflect changes in deferred revenue and non-cash cost of sales) in the first quarter of 2001 rose sharply to $167 million, an increase of more than 450% over $30 million during the same period in 2000.
360networks believes cash revenue and adjusted EBITDA are the most appropriate metrics to measure the performance of emerging network service providers as they track a company's success in obtaining sales contracts and delivering services to customers.
GAAP revenue reached $80 million in the first quarter of 2001, compared with $76 million in 2000.
EBITDA in the first quarter of 2001 was a loss of $27 million, compared with a gain of $17 million in the same period of 2000. The decrease is due primarily to higher operating costs and the addition of sales, product marketing and network services personnel as the company shifts its business from dark fiber construction and sales to network services.
Gross profit was $18 million (23% of GAAP revenue) for the three months ended March 31, 2001, compared with $29 million (38%) in 2000.
Selling, general and administrative expenses were $45 million in the first quarter of 2001, compared with $12 million in 2000. These expenses are not expected to increase in the next three quarters of this year.
Net loss for the three months ended March 31, 2001, was $106 million (14 cents per share) compared with a loss of $45 million (11 cents per share) during the same period in 2000.
"360networks had a number of major achievements in the first quarter," said Greg Maffei, chief executive officer of 360networks. "Both the number and size of the sales we made to customers for portable broadband capacity across our network confirm that our extensive footprint and advanced architecture is creating a valuable asset."
"We also completed the installation of our transatlantic network and lit key segments of our North American, European and South American networks," Maffei added. "In addition, we began delivering network services to leading companies such as Deutsche Telekom and Group Telecom."
"Despite the downturn in the telecommunications sector and the overall economy, we booked $274 million of cash revenue in the first quarter and have more than $550 million of committed revenue in the next three quarters," said Vanessa Wittman, chief financial officer of 360networks. "Although we are pleased with these results, we have recently completed an in-depth analysis of our capital expenditures, operating costs and revenue opportunities in order to focus spending and resources where we can achieve the greatest return in the near term. As a result, we have modified our business plan and are revising financial guidance for the year."
Revised 2001 financial guidance
360networks is reducing its planned capital expenditures in 2001 from $3.5-$4 billion to $2.2-$2.4 billion. 360networks is also revising guidance for 2001 cash revenue from $2.4-$2.6 billion to $1.2-$1.4 billion. Consequently, the company is also revising adjusted EBITDA from $1.8-$1.9 billion to $750-$800 million, GAAP revenue from $650-$750 million to $550-$600 million, and EBITDA from $110-$160 million to $20-$30 million.
As part of the reduction in capital expenditures, the company is investigating solutions to delay the development of a transpacific network. In addition, the current plan does not contemplate any further funding to the subsidiary purchasing fiber on C2C, a pan-Asian undersea network.
"We remain committed to operating a global network and providing seamless, portable and scalable broadband services," said Jimmy Byrd, chief operating officer of 360networks. "However, we are building first where we see the highest and earliest returns. In the meantime, we have purchased flexible, portable capacity on other Asian networks to achieve a global footprint and serve our customers quickly and cost-efficiently."
"The development of this revised business plan is due in large part to the current weakness of the capital markets, which makes customers and vendors alike hesitant to make significant financial commitments. As economic conditions improve, we believe we will be able to reaccelerate the growth of our built global network," Byrd added.
Wittman continued: "Under the revised business plan, 360networks will require additional working capital of approximately $300 million over the next four months. We are currently in discussion with existing shareholders to resolve this issue. That funding, if completed, would likely be in the form of additional senior debt. Based on the revised business plan and the incremental $300 million in funding, we would be funded through the point when our business is expected to be cash flow positive in 2002."
Capital expenditures
- Gross capital expenditures totaled $1 billion in the first quarter of
2001.
- Gross capital expenditures are comprised of additions to property and
equipment of $785 million (including $67 million in 360americas), pre-
paid capacity, additions in inventory and investments in other assets.
First quarter sales highlights
- In the first quarter of 2001, 360networks completed sales totaling more
than $450 million to major carriers and network service providers for
services on its undersea cables and North American network.
- The company announced it will provide high-speed optical services to
Verio, the world's largest Web hosting company and a subsidiary of NTT
Communications Corporation. 360networks will provide these services
over the next three years on routes in North America and Europe as well
as on 360atlantic.
- 360networks and Giant Loop Network Inc. announced an alliance in which
360networks becomes GiantLoop's preferred provider of North American
and transatlantic broadband network services.
- Backlog sales revenue totals approximately $1.4 billion.
Service development highlights
- 360networks announced plans to acquire NetRail, Inc., a Tier 1
wholesale IP service provider, in an all-stock transaction. NetRail is
an Atlanta-based independent provider of broadband services in the
United States. This acquisition enables 360networks to accelerate its
attainment of peering arrangements with a number of Tier 1 Internet
backbone providers.
- 360networks and Telseon entered into an agreement to increase the reach
and availability of instantly scalable Internet Protocol (IP) and
Ethernet-based data network services in U.S. metropolitan markets.
360networks has access to Telseon's optical Ethernet services in
metropolitan areas, enabling 360networks to extend its IP transit, IP
transport and backbone services to its customers colocated in points of
presence (POPs) on the Telseon network. Additionally, Telseon is a
preferred provider of GigE metropolitan access services to 360networks
and 360networks is a preferred provider of dark fiber and long-haul
capacity to Telseon.
Network development highlights
North America
- 360networks completed about 35,700 kilometers (22,200 miles) of its
planned 43,000-kilometer (26,700-mile) network. More than 22,000
kilometers (13,600 miles) are lit and in commercial service.
- The company has completed 13 of approximately 20 planned networks in
metropolitan regions in the United States and Canada, including
Seattle, Toronto and Calgary.
Europe
- 360networks has lit approximately 9,800 kilometers (6,100 miles) of its
European fiber optic network. The complete network is expected to span
20,200 kilometers (12,500 miles) and connect 35 major cities in 11
countries.
- The company has completed and is now lighting metropolitan networks in
London, Amsterdam, Frankfurt and Paris, with plans to light an
additional 12 networks in other major cities throughout Europe.
360atlantic
- 360networks completed installation of its 11,700-kilometer (7,300-mile)
undersea transatlantic network in the first quarter of 2001.
360atlantic is now in commercial service, linking the United States,
Canada, Ireland and the United Kingdom.
360americas
- The company completed approximately 18,300 kilometers (11,400 miles)
and lit more than 15,000 kilometers (9,300 miles) of its undersea and
terrestrial network between North America and South America.
360americas now links the United States, Brazil, Venezuela and Bermuda,
and is scheduled to connect Argentina later this year.
Asia
- 360networks is currently reviewing the development of undersea networks
in the Asia-Pacific region.
- The company has purchased $150 million of broadband capacity on
undersea networks in the region.
Most recently:
- 360networks entered into a multi-year agreement with OptiGlobe that
enables the two companies to reach more customers throughout Latin
America. As part of the agreement, 360networks is OptiGlobe's preferred
provider of network services between the United States and OptiGlobe's
Internet Data Centers in Sao Paulo, Rio de Janeiro and Buenos Aires.
360networks will deliver to OptiGlobe dedicated broadband capacity in
increments of up to 10 gigabits per second (STM-64) on 360americas.
- The company announced an agreement to offer its services at Equinix IBX
centers in Los Angeles, Chicago and Dallas, with possible expansion to
IBX centers in New York, Silicon Valley and Washington, D.C.
360networks will offer its optical and IP network services to service
providers, content providers and application service providers
operating in IBX centers.
- 360networks appointed Vanessa Wittman as chief financial officer, Jim
Brennan as president of its European division, Matt Milstead as
president of the Latin American division, Pete Bell as vice-president
of global accounts, Rick Roth as vice-president of marketing and
corporate communications, Ashwin Chitman as vice-president of global
product management and Rob Frasene as vice-president of capital
planning.
About 360networks
360networks (NASDAQ: TSIX and TSE: TSX) offers network services to telecommunications and data-centric organizations. 360networks is developing one of the largest and most technologically advanced fiber optic mesh networks in the world. By early 2002, the planned network will span approximately 140,000 kilometers (86,000 miles) and link approximately 100 major cities in North America, Europe, South America and Asia with terrestrial routes, undersea cable systems and network capacity.
360networks will host a conference call to discuss these results at 5 p.m. Eastern time on May 15. You can listen to the call on a live Webcast at www.360.net.
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