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Technology Stocks : Advanced Radio Telecom (ARTT) -- Ignore unavailable to you. Want to Upgrade?

To: DubM who wrote (1163)	11/16/2000 1:52:16 PM
From: transmission	Read Replies (1) \| Respond to of 1176

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.