Winstar Results Continue Sharp Improvement
May 4, 2000 04:01 PM Eastern Time
NEW YORK--(BUSINESS WIRE)--May 4, 2000--
CORE REVENUE - Steep Increase for Twelfth Straight Quarter GROSS MARGIN - Up Sharply for Fifth Consecutive Quarter EBITDA - Strong Improvement for Third Straight Quarter
WINSTAR COMMUNICATIONS, INC. WCII today reported total revenue of $162.8 million for the quarter ended March 31, 2000, an 84.8% increase over the year-ago quarter. Winstar's core revenue for the quarter was $133.5 million, up 94.6% from the prior year and up 18.1% on a sequential basis from the previous quarter. The company has now delivered double-digit percentage increases in core revenue, which it now calls broadband services revenue, for 12 consecutive quarters.
Winstar's strong financial performance was highlighted by sharp improvement in gross margin, which rose to an all-time high of 40.7% in the first quarter. This compares to a 22.9% gross margin one year ago, and follows on the heels of steady improvement to 24.0%, 30.1% and 35.4% in the intervening quarters. The company expects gross margins to continue to improve throughout the balance of the year.
Driven largely by strong revenue growth and higher margins, Winstar narrowed its EBITDA loss for the quarter to $56.6 million, a $23.1 million improvement from the year-ago quarter. This was the company's third consecutive quarter of strong improvement since posting its peak EBITDA loss in the second quarter of 1999. Winstar's EBITDA improvement for the quarter was accomplished despite the impact of its decision to invest more than $12 million in incremental advertising associated with the launch of Office.com(R), A Service From Winstar. The company reported a net loss applicable to common shareholders of $176.0 million, or $2.06 per share, $0.33 ahead of consensus analyst earnings expectations.
"Strong revenue growth and sharply improving margins have enabled us to deliver impressive results not just today, but for several quarters now," said William J. Rouhana, Jr., Winstar chairman and chief executive officer. "These financial measures are being driven by the emergence of a high capacity broadband network that is both increasingly available to customers, and increasingly enriched by services that set it apart. We now approach the rapid growth stage of our development with a broadband network, a product set and an infrastructure that are capable of turning opportunity into reality."
As part of its ongoing program to expand the reach of its broadband network, Winstar increased its total building access rights by over 20% during the quarter. The company added approximately 1,700 new building access rights, bringing its cumulative total to over 9,700, including over 300 hub sites. The company anticipates that the buildings under these existing leases, when put into service over the next 12 to 18 months, will increase the number of businesses in buildings directly connected to the Winstar network by almost five-fold, to approximately 250,000 businesses. Also during the quarter, the company increased operational hubs to 174, compared to 155 last quarter, and 79 a year ago.
"The combination of network expansion and product development has enabled us to be selective in terms of revenue growth by focusing our sales and installation activity almost entirely on our own network," said Nathan Kantor, Winstar president and chief operating officer. "Notwithstanding our disciplined approach, sales continue to be strong and our progressively higher on-net percentage is having a huge impact on gross margins."
The company's results were driven by the following key metrics:
-- Addressable Customers - businesses that are located in buildings directly connected to Winstar's broadband network, increased over 40% to approximately 50,000, up from 35,000 at year-end.
-- On-Net Customers installed rose over 30% to approximately 7,500, up from approximately 5,700 at December 31, 1999. This reflects an addressable customer penetration rate of 15%.
-- On-Facilities Revenue Percentage - reflective of the portion of revenue that is provided over Winstar's fiber, fixed wireless or switching facilities, increased to 92%, up from 89% in the prior quarter.
-- Customer Metrics
-- Weighted Average Revenue Per Customer rose to over $1,600 per month, up from approximately $1,500 in the preceding quarter. -- Percentage of New Customers Ordering Multiple Services was approximately 72% in the quarter.
-- Line Reporting
-- Total Number of Customer Lines added for the quarter was more than 91,000, bringing cumulative installed lines to approximately 709,000. -- Percentage of Fully On-Net Lines Added was 62% for the quarter, raising cumulative on-net lines to over 38%.
First Quarter Highlights
-- Winstar completed its strategic financing plan by raising $1.6 billion of high yield debt and establishing a $1.15 billion bank facility. In addition, the company put in place a new $2 billion vendor finance facility from Lucent Technologies, $1 billion of which will be immediately available. This funds the company's current business plan through 2001, by which time the company expects to be generating positive EBITDA.
-- In the large account solutions area, Winstar announced it was awarded contracts from the General Service Administration's Federal Technology Service to provide services to Federal government users in seven cities in the United States. Winstar received separate sole source Metropolitan Area Acquisition (MAA) awards in Cincinnati and Baltimore, and a dual source award in Los Angeles. In total, these three awards have a potential value of over $600 million. Subsequently, on April 27, 2000, the company announced that it had been awarded additional dual source contracts in Atlanta, Indianapolis, Miami and St. Louis. The second set of awards have a combined potential value in excess of $1 billion. These awards represent the first time awards of this type have been granted to a competitive broadband services company. The company is currently bidding for MAA contracts in five additional cities.
-- In addition, the large account solutions area continued its strong growth during the quarter, with the addition of a number of new commercial contracts. These solutions provide for a wide range of network design, local connectivity, transport, equipment, software and network deployment. The company has now signed contracts totaling over $1.2 billion from its large account customers, of which $140 million is expected to be recognized as revenue over the next 12 months.
-- Winstar announced a total of 1.3 million unique monthly customer visits to Office.com, A Service From Winstar, a leading online business center for small and medium-sized businesses. Also during the quarter, Office.com was ranked as the number one SMB portal by Fortune Small Business magazine. Previously, Cahners In-Stat named Office.com the number-one overall Online Business Center.
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