PSINET REPORTS REVENUES UP 74% IN THE FIRST QUARTER (PART 1 OF 2)
03:15pm EDT 21-Apr-98 Corporate Release (Harrington Nemer, K. 703-904-4100) PSI
PSINet Reports Revenues Up 74% in the First Quarter
HERNDON, Va., April 21 -- PSINet Inc. (Nasdaq: PSIX) today
announced record revenues for its first quarter ended March 31, 1998.
Revenues for the first quarter of 1998 were $44.5 million, up 74% over the
$25.6 million reported for the first quarter of 1997. The net loss to common
shareholders for the first quarter was $22.9 million, or $0.51 basic and
diluted loss per share, before the effect of a previously announced
$7.0 million charge for acquired in-process research and development related
to the acquisition of iSTAR internet inc. ("iSTAR"). This compares to First
Call's consensus estimate of a $0.57 loss per share.
"We are pleased to have exceeded earnings expectations again this quarter
and to report strong revenue growth across all business units," said William
L. Schrader, chairman, president, and chief executive officer. "We have
recently completed acquisitions of ISP businesses which will add more than
$30 million of annualized revenue, further expanding our market presence in
Europe and establishing PSINet as the dominant ISP in Canada. During the
quarter, we also completed fiber transactions which will enhance our domestic
network backbone, reduce our cost structure and significantly increase our
transatlantic capacity. We are also delighted to announce that on
April 13, 1998, PSINet received the proceeds from a $600 million debt offering
that will enable us to accelerate our business momentum and further strengthen
our position as a leading global facilities-based communications company."
EBITDA for the first quarter of 1998 was ($10.5) million, compared with
($6.5) million for the fourth quarter of 1997. The additional loss is
primarily due to the operations of iSTAR from the date of acquisition and to
expenditures on PSINet's branding and advertising campaign which will launch
at the beginning of May. EBITDA for the first quarter of 1997 was
($6.8) million.
The net loss to common shareholders for the quarter was $29.9 million, or
$0.67 basic and diluted loss per share, compared with $14.7 million, or $0.36
basic and diluted loss per share, for the fourth quarter of 1997. The
increase is primarily due to the $7.0 million charge for in-process research
and development and $3.6 million of operating losses, both related to the
iSTAR acquisition, and for costs related to the branding and advertising
campaign. The net loss to common shareholders for the first quarter of 1997
was $9.3 million, or $0.23 basic and diluted loss per share.
"Along with the excellent revenue growth during the quarter, we are
excited by the market's response to our $600 million offering of 10% unsecured
notes and the ratings received, endorsing PSINet's credit strength," commented
Edward D. Postal, senior vice president and chief financial officer. "The
proceeds of this offering will enable PSINet to implement its plan to make
strategic investments in and acquisitions of companies that are complementary
to our core business. Additionally, the integration of iSTAR into our
Canadian operations is proceeding on plan, and we are starting to realize
the anticipated synergies that will reduce operating costs and drive EBITDA
profitability."
During 1998, PSINet has:
-- Completed the landmark transaction with IXC Communications, Inc.
(Nasdaq: IIXC) to acquire 20-year noncancelable indefeasible rights of
use ("IRUs") in up to 10,000 equivalent route miles of fiber-based
OC-48 (2,488 mbps) network bandwidth within the United States.
-- Acquired Internet Prolink S.A., the leading commercial ISP in
Switzerland, expanding PSINet's market presence by adding
approximately 1,500 dedicated and dial-up customer accounts and
14 POPs in Switzerland and France.
-- Acquired iSTAR, establishing PSINet as the largest ISP in Canada
with over 3,900 business and Web services customers as well as
over 50,000 dial-up customer accounts through over 35 POPs.
-- Completed a transaction to acquire STM-1 (OC-3, or 155 mbps)
fiber capacity on a transatlantic cable system, which will
significantly increase PSINet's network capacity across the Atlantic to
the United Kingdom and Europe.
-- Completed the placement of $600 million of 10%, unsecured notes
due 2005 resulting in net proceeds of approximately $581 million.
First quarter operational highlights include the following:
-- PSINet provided service to 33,300 corporate customers at
March 31, 1998, an increase of 6,900 customers, or 26%, over the fourth
quarter of 1997.
-- Average new contract value remained strong, at $5,500 for both
the first quarter of 1998 and fourth quarter of 1997.
-- The business account retention rate increased four percentage points to
80% for the first quarter of 1998 from the fourth quarter of 1997.
-- The Carrier and ISP business unit, which provides access to other ISPs,
added 14 new customers during the quarter, bringing the total customer
base to 61 and providing access to more than 252,000 end users.
PSINet
Historical Performance Metrics
Quarters Ended:
3/31/97 6/30/97 9/30/97 12/31/97 3/31/98
Business Accounts 20,900 21,900 23,000 26,400 33,300
Average New Contract Value $4,400 $5,500 $5,500 $5,500 $5,500
Corporate Account
Retention Rate 92% 81% 79% 76% 80%
At March 31, 1998 PSINet had cash and short-term investments of
$39.4 million, compared to $54.0 million at December 31, 1997. Including the
effects of the net proceeds from the notes offering, the Company had over
$600 million in cash and short-term investments as of March 31, 1998, which
include an escrow of approximately $140 million to fully fund the first five
semi-annual interest payments. Property and equipment, net of accumulated
depreciation and amortization, increased $40.0 million to $135.6 million at
March 31, 1998. The increase was primarily attributable to the acquisition of
iSTAR and capital expenditures for the purchase of MAX TNT modems from Ascend
Communications (Nasdaq: ASND) to be deployed to support the Carrier and ISP
business unit.
The Company's debt obligations were $121.9 million at March 31, 1998,
compared with $73.4 million at December 31, 1997. The increase was primarily
attributable to new equipment lease financing and borrowings under an
acquisition credit facility offset by scheduled principal payments. Including
the effects of the notes offering, the Company currently has approximately
$702 million in debt as of March 31, 1998. Additionally, PSINet issued
approximately 10.2 million common shares to IXC Communications, Inc. in
connection with the IRU transaction. During the quarter the Company also
exercised stock warrants it held in Earthlink Network, Inc. (Nasdaq: ELNK),
resulting in an unrealized gain of $3.6 million reported in shareholders'
equity at March 31, 1998. |
